Scottish Court of Session Decisions

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Cite as: [1867] SLR 4_183, [1867] ScotLR 4_183

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SCOTTISH_SLR_Court_of_Session

Page: 183↓

Court of Session Inner House First Division.

Saturday, July 13 1867.

Lord President

4 SLR 183

Dixon and Others, Appellants.

Subject_1Bankruptcy
Subject_2Bankruptcy Act 1856, § 35–38
Subject_3Bank
Subject_4ruptcy Amendment Act 1860, § 5—Deed of Arrangement—Composition.
Facts:

At a meeting of creditors a resolution was carried by a majority in number and four-fifths in value “that the estate should be wound up under a deed of arrangement to realise the estate and divide it among the creditors.” Held that that resolution was ultra vires of the meeting, which could resolve on a deed of arrangement but could not fix the nature of the deed, that power resting with four-fifths of the creditors in number and value claiming on the estate.

Headnote:

This was an appeal against an interlocutor of the Sheriff-Substitute of Lanarkshire in the sequestration of William Weir, Brothers, & Co., wholesale wine and spirit merchants in Glasgow. At a meeting of creditors held on 20th May it was resolved, by a majority in number and four-fifths in value of those present, (1) that the estate be wound up under a deed of arrangement to realise the estate and divide it among the creditors; and (2) that Mr Dixon be appointed by the meeting to report the foregoing proceeding and resolution to the Sheriff, and to apply for a sist of the sequestration for a period not exceeding one month. Mr Dixon accordingly presented a petition to the Sheriff, craving that the first resolution should be declared duly carried, and craving sist. To this petition it was objected on the part of certain creditors, (1) that under the powers conferred upon creditors by the 35th section of the Bankruptcy Act (1856), 19 and 20 Vict., c. 79, it was not competent for them to do more at said meeting than to resolve that the estate should be wound up by a deed of arrangement, leaving the nature and character of said deed to be subsequently determined when it came to be prepared in terms of section 38, and that the said first resolution was incompetent in respect it prematurely restricted the deed of arrangement to one under which the estate shall be realised and divided among the creditors, thereby excluding an arrangement by way of composition, or otherwise, as declared to be competent by the Bankruptcy Amendment Act (1860), 23 and 24 Vict., c. 33, § 5. (2) Another objection was taken on the ground that the deed of arrangement proposed was not reasonable. The Sheriff-Substitute found that the first objection wits well-founded, for the reasons stated, and because it was ultra vires of the creditors assembled at the preliminary meeting, provided for by § 35, to resolve that the estate should be wound up by a deed of arrangement only on the condition that said deed should be of a particular character, and so prejudging what the general body of creditors have a right to fix as to the terms of the deed after a sist is obtained. He sustained the second objection also. He therefore refused the petition; found that the resolutions were not duly carried, and that the application for a sist was not reasonable; and appointed The sequestration to proceed.

Dixon presented a note of appeal.

A. Moncrieff ( Scott with him) for appellant.

Dean of Faculty ( Moncrieff) and J. Burnet for respondents were not called on.

The Court unanimously dismissed the appeal.

Judgment:

Lord President—These proceedings on the part of the creditors might have been defended as competent under the former Act, because the sort of arrangement that was contemplated by the 36th and subsequent sections of the Act 1856 was a deed of arrangement for winding up, and therefore the creditors at the meeting on 20th May 1867 might not have been going beyond their power in resolving to wind up under a deed of arrangement and divide the estate among the creditors. But the Act of 1860, which was passed after the decision of this Court in the case of Douglas v. Hunter (21 D., 1302), makes it optional to the creditors, when adopting a deed of arrangement, to make it either for winding up and dividing the estate, or a deed of arrangement by way of composition. Now the right of adjusting a deed of arrangement does not rest with the body of creditors empowered to resolve on winding up by such a deed, for it requires the concurrence of four-fifths of the whole creditors both in number and value actually claiming on the estate; and so the effect of this resolution is to tie up the creditors to make a deed of arrangement for winding up and dividing only. It seems to me that that resolution was ultra vires of that meeting; and therefore the whole proceeding is null, and the interlocutor of the Sheriff is right.

The other Judges concurred.

Counsel:

Agent for Appellants— A. K. Morison, S.S.C.

Agent for Respondent— W. Mason, S.S.C.
1867