Scottish Court of Session Decisions

Lord Advocate ( Gordon) and Skelton for Accountant in Bankruptcy.

Brand for trustee.

After hearing counsel on the case, the Court desired information as to (1) whether penal interest had been paid; (2) whether the creditors wished the trustee to be retained or dismissed; (3), what had been done in previous cases; and continued the case.

The case was again called.

Lord Advocate ( Gordon) and Skelton explained that penal interest had not been paid. They cited M'Cubbin, 29th June 1861, 2 Macph.. 1293, and Ac countant in Bankruptcy v. A.B., 9th Dec., 1865, 1 Scottish Law Reporter, 67. They craved the Court to censure the trustee, and find him liable in expenses.

Trayner, for a creditor, who was also a commissioner on the estate, craved the Court to find that the trustee had contravened the 83d section of the Act; to remove him from office; to find him liable in expenses; and to order a meeting of creditors for appointing a new trustee.

Brand for trustee.

Lord President—My Lords, this case comes before us on a report by the Accountant in Bankruptcy under the 159th section of the statute, and it is necessary for us to consider, in the first instance, what we can do under that section. The report is to be made by the Accountant when he sees cause to make it, or finds that a trustee or Commissioners are not faithfully performing their duties, and duly observing all rules and regulations imposed on them by statute, Act of Sederunt, or otherwise, relative to the performance of those duties; or, in the event of any complaint being made to him by any creditor in regard thereto, he is to inquire into the same, and, if not satisfied with the explanation given, he is to report thereon to the Lord Ordinary in time of vacation, or, during time of session, to either Division of the Court of Session, who, after hearing such trustees or commissioners thereon, and investigating the whole matter, shall decide, and shall have power to censure such trustees or commissioners, or remove them from their office, or otherwise to deal with them as the justice of the case may require. (Sec. 159.) It appears to me that when anything of this kind is brought before us by report by the Accountant in Bankruptcy, we may do anything in the matter which we have power to do under the statute, even though under other circumstances we could only act on a petition or some other process; in short, that the report brings the whole matter up, and leaves us to deal with the matter. That being so, we come back to the charge made against this trustee under the 83d section of the Act—and it is a very serious charge—because the Accountant reports it to be, and I cannot help dealing with it as, a flagrant violation of a trustee's duty, very gross and long-continued, by means of which monies belonging to the bankrupt estate have been kept in the trustee's own hand instead of in bank, and it is not disputed by the trustee that this charge is in the main well founded. The first consequence of such a charge against a trustee is, that he becomes bound to pay interest to the creditors at the rate of 20 per cent. per annum on the excess of such sum above fifty pounds as he shall keep in his own hands more than ten days for such time as the same shall be in his hands beyond ten days. But then there is a farther provision which devolves a particular duty on the Court. It enacts that unless the money has been so kept out of bank from innocent causes, the trustee shall be dismissed from his office upon petition to the Lord Ordinary or Sheriff by any creditor, and have no claim to remuneration, and shall be liable in expenses. Now, the first thing to be determined is, whether the money has been kept out of bank from innocent causes, and I must say I don't see the slightest ground for thinking that it has. Then, is not the clause imperative? I think it is, and that it is binding on us under this clause to dismiss the trustee from his office; to find that he has no claim for remuneration; and to find him liable in expenses. It is almost an inevitable consequence of a trustee being in such circumstances liable to pay penal interest, and not having paid it, that he should be dismissed from office, because otherwise there would be no one to recover that penal interest for the creditors. But it is not necessary to go into that, because the provision of the statute is imperative. Our course is the same as if a petition for dismissal of the trustee had been presented. I would only suggest that perhaps in the circumstances of this case, as we have had more than one discussion on this report, there may be room for some modification of expenses.

Lord Curriehill—I take precisely the same view of the case as your Lordship.

Lord Deas—I am of the same opinion. I think we have power to do every thing in the matter as if a petition had been presented to us; and I think that the things to be found against the trustee are imperative. It is the policy of the statute to make them so, for otherwise a trustee could reckon on appealing to the Court ad misericordiam.

Lord Ardmillan—I concur, and have nothing to add.

Trayner moved for expenses of a single appearance.

The Court granted modified expenses.

The Court appointed a meeting of creditors for electing a new trustee.