Scottish Court of Session Decisions

On 5th March 1870 the estates of John Cooper, corn merchant in Dundee, were sequestrated under the Bankruptcy (Scotland) Act 1856, and on 17th March a trustee was appointed on the estate. On November 16th, 1871, the bankrupt presented a petition for discharge to the Sheriff of the county of Forfar ( Cheyne), in which he stated that eighteen months have now expired from the date of the deliverance actually awarding sequestration, and the petitioner is desirous of being finally discharged of all debts contracted by him before the date of the sequestration, and has accordingly procured the concurrence in this petition of a majority in number and value of the creditors who have produced oaths in the sequestration, all conform to the trustee's certificate and consent of the creditors. That the trustee has, in terms of the statute,

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prepared a report with regard to the conduct of the petitioner, and as to how far he has complied with the provisions of the said Act. The report of the trustee was to this effect:—“I hereby certify and report that the bankrupt has complied with the provisions of the Bankruptcy (Scotland) Act 1856; and, in particular, that he has made a fair discovery and surrender of his estates, has attended the diet of examination, has not been guilty of any collusion, and that his bankruptcy has arisen from innocent misfortunes or losses in business.”

To this petition A. Fraser and J. Scott, two creditors, lodged objections, in which they stated that the bankrupt had embezzled certain trust funds, in consequence of which they had been defrauded, and they pled that the petitioner's conduct had been such as to disentitle him to a discharge from his debts.

On 6th January 1872 the Sheriff allowed parties a proof. From the evidence led it appeared that Cooper had accepted the office of trustee on the estate of a Mrs Fraser, by whose trust-settlement she, inter alia, appointed her trustee, as soon as convenient after her death, to invest the sum of £600 sterling on heritable or personal security, railway debentures, or otherwise, as to her said trustee might seem best, and to pay the annual produce to be derived therefrom, half-yearly, quarterly, or at such other times as her said trustee might consider best, to David Fraser, her son, as an alimentary provision during all the days of his life, which should not be assignable, or subject to his acts or deeds, or liable to be attached by the diligence of his creditors, but paid to himself, on his own receipt therefor; and at the death of the said David Fraser, or as soon thereafter as convenient, £100 of said sum to be invested should be paid to David Fraser, son of the said David Fraser; and the balance of £500, or, failing the said David Fraser junior, the said sum of £600, to be equally divided betwixt the objector Andrew Fraser, her son, and Jessie Fraser, now wife of the objector James Scott, her daughter, or their issue.

It also appeared that this sum of £600 had never been secured by the petitioners, but that although the interest at 5 per cent. had been regularly paid to the beneficiary, the principal sum had been invested in his own name in house property, so that on the sequestration the subjects formed part of the bankrupt's general estate for division amongst his creditors. In consequence of this, the objectors, who by the death of the original beneficiary were vested in the principal sum, did not succeed in obtaining more than an ordinary ranking on the estate, which yielded them a smaller sum than otherwise they would have obtained.

On 16th January 1872 the Sheriff deferred consideration of the petition for three months, and appointed the Sheriff-clerk to transmit the proceedings to the Lord Advocate, for his consideration.

The proceedings were accordingly transmitted, and a criminal charge was preferred against the petitioner for breach of trust and embezzlement.

The trial on this charge took place before the Circuit Court of Justiciary held at Dundee on 24th and 25th April last, before a jury. After evidence had been led, and addresses delivered by the counsel for the Crown and the petitioner, the jury, after retiring, returned with a verdict finding, by a majority of five, that the petitioner was guilty of breach of trust, but without felonious intent.

The presiding Judge stated that he could not take that verdict; and having read over the libel to the jury, he asked them to retire again and reconsider their verdict. They did so, and returned to the Court with a verdict unanimously finding the petitioner guilty as libelled, but recommending him to the leniency of the Court; and thereupon the presiding Judge sentenced the petitioner to three months' confinement.

On 7th August 1872, after having undergone his sentence, the petitioner lodged a minute with the Sheriff, craving him to resume consideration of his petition for discharge. This was opposed by the same creditors who had previously objected in respect of the objection previously lodged.

The Sheriff pronounced the following interlocutor:—

“ Dundee, 16 th September 1872—The Sheriff-Substitute having heard parties' procurators, and at avizandum considered the process,—in respect it is in his opinion proved that the petitioner has been guilty of breach of trust, and embezzlement in connection with the sum of £600 of trust-funds referred to in the objections, Finds that he is not entitled to a discharge under the Bankruptcy Statute: Therefore, dismisses the petition and decerns: Finds the objecting creditors, Andrew Fraser and James Scott, entitled to their expenses, whereof allows an account to be given in. and remits the same when lodged to the auditor of Court for taxation.

Note.—As the petitioner's agent did not, at the recent debate, dispute the justice of the conclusion arrived at by the jury in the criminal proceedings which the Crown authorities saw fit to institute, the Sheriff-Substitute may content himself, so far as the merits of the objections are concerned, with saying that, after perusing the evidence led before him in January, he is unable to reach any other conclusion than that the serious charge made against the petitioner in the objections has been established. But if he is right in this, it seems to him that his duty is a plain and simple one. ‘It is,’ as is well said by Professor Bell (Com. ii. 367, 7th ed.),‘the policy of mercantile bankruptcy, in so far as regards the person of the bankrupt, to give encouragement, on the one hand, to honesty and fair mercantile enterprise, by affording him a reasonable relief against those misfortunes to which every man exposed to the chances of trade is liable; and, on the other hand, to restore to the public the exertions of a trader or manufacturer who has, without his own fault, become a bankrupt.’ In other words, the discharge provided by the Bankruptcy Statute is a privilege conferred upon the honest and innocent debtor, who has complied with all the statutory requirements; and the dishonest debtor cannot claim the benefit of it. Applying these principles here, the Sheriff-Substitute feels constrained to find that the petitioner is not entitled to a discharge.”

The petitioner appealed.

Authorities cited—Bell's Com. II. 367, 1st Ed; Wilson v. Wilson's Creditors, 5 D. 346; Dickson v. Campbell, 5 Macph. 757.

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