Scottish Court of Session Decisions

This was a petition presented under the 62d section of the Bankrupt Act, which provides that where an oath specifying the value of a security held by a creditor has been made use of in voting at any meeting of creditors, or in assenting to or dissenting from the bankrupt's composition or discharge, it shall be competent to the trustee, with the consent of the Commissioners, or to the body of creditors “to require from the creditor making such oath a conveyance or assignation in favour of the trustee of such security, obligation, or claim, on payment of the specified value with 20 per centum in addition to such value, and the creditor shall be bound to grant such conveyance or assignation at the expense of the estate.”

The petitioner in this case was the trustee on the estate of James Reekie, manufacturer, Falkland, and the respondents were Messrs Daniel & Green, merchants, Manchester.

The petition set forth the following statements,—

“The estates of the said James Reekie were sequestrated on the 19th day of December 1867 by the Sheriff of the county of Fife, in virtue of the ‘Bankruptcy (Scotland) Act 1856,’ on the 8th January 1868 the petitioner was declared trustee by said Sheriff, and duly confirmed by said Sheriff on 9th January 1868, conform to act and warrant in his favour, herewith produced.

On 30th December 1867, at the meeting for the election of trustee on said sequestrated estate, Samuel Daniel, merchant in Manchester, produced an affidavit, dated 28th December 1867, to a debt of £1800 alleged to be due by the bankrupt to his firm of Messrs Daniel and Green, merchants in Manchester, and therein deponed that no part of this sum had been paid or compensated; that no security was held for the same, other than a bond and disposition in security by the said James Reekie, dated 11th December 1866, for the sum of £1800 over the power-loom factory and relative grounds belonging to him; and that Messrs Daniel and Green valued the security at the sum of £800, leaving a balance of £1000 unsecured.

At said meeting, there having been a competition for the office of trustee, the said Samuel Daniel voted on said balance of £1000 for the election of Richard Wilson, chartered accountant, Edinburgh, as trustee upon the said sequestrated estate.

By the 62d section of the ‘Bankruptcy (Scotland) Act 1856,’ it is enacted that ‘ it shall be competent to the trustee, with the consent of the commissioners, within two months after an oath specifying the value of a security or obligation or claim in the several cases (therein) before mentioned has been made use of in voting at any meeting, or in assenting to or dissenting from the bankrupt's composition or discharge, and it shall also be competent to the majority of the creditors (excluding the creditor making such oath), assembled at any meeting, and during such meeting, to require from the creditor making such oath a conveyance or assignation in favour of the trustee of such security, obligation, or claim, on payment of the specified value, with twenty per centum in addition to such value, and the creditor shall be bound to grant such conveyance or assignation at the expense of the estate.’

At a meeting of the petitioner and commissioners on the said sequestrated estate, held at Falkland on the 25th day of January 1868, the petitioner brought under notice of the commissioners the said affidavit and claim.

The petitioner and commissioners at said meeting having inspected the factory, were unanimously of opinion that it was for the benefit of the estate that the petitioner should acquire for the estate the bond and disposition in security referred to at £800 plus twenty per centum, as by so doing all questions as to what is covered by the said bond and disposition in security would be removed, and they therefore consented to the petitioner's acquiring the said bond and disposition in security at the said price. A copy of the minute of said meeting is herewith produced.

Upon the same day the petitioner addressed and posted to the said firm of Daniel & Green a letter of requisition in the following terms:—

Falkland, 25 th January 1868.

To Messrs Daniel & Green, Merchants and Manufacturers, Manchester.

Gentlemen,—I, Arthur Russell, banker, Cupar-Fife, as trustee on the sequestrated estates of James Reekie, manufacturer at Falkland in the county of Fife, with consent of the commissioners on said estates, intimate to you that, under the 62d section of the Bankruptcy (Scotland) Act 1856, I require you to assign to me, as trustee foresaid, a bond and disposition in security, dated the 11th, and recorded in the particular register of sasines, &c., for the burgh of Falkland the 12th days of December 1866, granted by the bankrupt in favour of Samuel Daniel and George Green, therein designed as the individual partners of the firm of Daniel & Green, manufacturers and merchants in Manchester, and the survivor of the two, and the heirs of such survivor, and their respective assignees whomsoever, for the principal sum of £1800, payable at the term of Whitsunday 1867, with interest from its date at five per cent., and penalties, all as contained in said bond and disposition in security; and that (1) on payment by me of the sum of £800, being the value put on said bond and disposition in security in a claim and oath bearing date the 28th day of December 1867, emitted by the said Samuel Daniel to a debt of £1800 alleged to be due to you by the bankrupt, which claim and oath were used by the said Samuel Daniel in your name for voting at the meeting for election of trustee, held at Markinch 30th December 1867; and (2) upon payment by me of 20 per centum in addition to such value of £800, all in terms of said section.—I am, gentlemen, your mo. obedt. servt.

(Signed) Arthur Russell.’

Letters of requisition, in the same terms, were, of the same date, addressed and posted by the petitioner to the said Samuel Daniel and George Green.

Following up the said letters of requisition, the petitioner directed his law-agents, Messrs Gibson & Spears, writers, Kirkcaldy, to prepare a draft assignation by the said Samuel Daniel and George Green in his favour of the said bond and disposition in security, in consideration of the said sum of £800, at which it had been valued in the said affidavit, with twenty per centum added in terms of the Act, and to forward the same to Charles Gulland junior, writer, Falkland, the known agent in Scotland of the said Messrs Daniel & Green, and Samuel Daniel, and George Green, for his revisal, on their behalf.

The said Messrs Gibson & Spears accordingly prepared said assignation, and, of this date, sent it to the said Charles Gulland for his revisal,

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accompanied by a letter intimating that, on the execution of the document, they were ready to pay the said sum, as well as all expenses connected with the assignation.

The said Charles Gulland returned to the said Gibson & Spears the said draft assignation unrevised, stating, in the letter returning same (which, with the said draft assignation, is herewith produced), that it appeared ‘to have been framed under a delusion.’

Thereafter the said Messrs Gibson & Spears having threatened legal proceedings for enforcing the petitioner's rights, the said Charles Gulland requested delay until the date of the second general meeting of creditors, which fell to be held on 10th February current. To this delay the petitioner agreed, with a view to having an amicable arrangement with Messrs Daniel & Green, carried through.

Notwithstanding the said delay, the said Messrs Daniel & Green, and Samuel Daniel and George Green, still refuse to grant the said assignation in favour of the petitioner; and with the view of attempting to defeat his rights under the said 62d section of the Act, have served upon him a notarial intimation, requisition, and protest, intimating their intention of bringing the heritable subjects over which the said bond and disposition in security extends to sale, under the powers contained in the said bond. The schedule served upon the petitioner is herewith produced.

At the said second general meeting of creditors, the said Charles Gulland, as mandatory for the said Messrs Daniel & Green, produced a new affidavit by said Samuel Daniel, dated 7th February 1868, to a debt of £1785, 6s. 11d., in which the said firm of Daniel & Green value the said security at £1300, instead of £800, as in their original affidavit, and claimed right to vote for the balance of £485, 6s. 11d.; and a further affidavit and claim, also dated 7th February 1868, against the bankrupt for £2784, 18s. 4d. That upon these affidavits, and again with the view of frustrating the petitioner's rights under the said 62d section of the Statute, the said Charles Gulland, as mandatory foresaid, voted for, and succeeded by means of the said vote in carrying a motion made by Mr John Morton, writer, Cupar, as mandatory for the said Richard Wilson, a creditor claiming to be ranked for the sum of £6, 13s. 11½d., to the following effect:— ‘In respect the bondholders, Samuel Daniel & George Green, have taken proceedings by notarial requisition, intimation, and protest, for selling the heritable property contained in the bond, the trustees be directed to concur with the bondholders in the sale, in terms of the 112th section of the Bankruptcy Act, in order to fortify the title.

Against this resolution certain creditors have, with concurrence of the petitioner, presented an appeal to the Lord Ordinary, as the same, so far as the said Messrs Daniel & Green are concerned, is an illegal attempt on their part to escape from granting the said assignation.”

The petitioner demanded an assignation of this security at the value thus specified, with the statutory addition of 20 per cent., and the question was whether the circumstances were such as to exclude this statutory right. The respondent lodged answers to the petition, in which they pleaded that in the circumstances the right could not be exercised, and they maintained this upon the ground—(1.) That the trustee was bound by his own actings and conduct from taking advantage of the statutory provision; (2) That his requisition was technically defective; (3) That the affidavit and claim founded on had been withdrawn by a letter written of the same date as the requisition; (4) That the creditors, at a meeting on 10th February 1868, had resolved not to enforce the requisition.