Scottish Court of Session Decisions

This was a petition and complaint raised in the Bill Chamber by William Paterson, stationer and merchant in London, against George Robson, accountant in Glasgow, trustee on the sequestrated estate of George Lambie, grocer and wine merchant, Glasgow. The petition narrated that the respondent had obtained an order from the Sheriff of Lanarkshire to examine certain persons in London, and, among others, Edward Gellatly. In regard to these examinations the complaint was, in the first place, that in contravention of the 84th section of the Bankruptcy Scotland Act 1856, the respondent had not recorded any of these examinations in the Sederunt Book, and had not proved them to be signed by the Judge and witness in the Sederunt Book, according to the invariable usage in Scotch sequestrations, and had refused even to make the examination patent to the petitioner as part of the sequestration papers. The 84th sec. of the Bankruptcy Act here founded on provides that “the trustee shall keep a Sederunt Book in which he shall record all minutes of creditors and of commissioners, states of accounts, reports, and all the proceedings necessary to give a correct view of the management of the estate; and he shall also keep regular accounts of the affairs of the estate, and transmit to the Accountant in Bankruptcy before each of the periods herein assigned for payment of a dividend, a copy certified by himself of such accounts, in so far as not previously transmitted, and such copies shall be preserved in the office of the Accountant, and the Sederunt Book and accounts shall be patent to the commissioners, and to the creditors or their agents, at all times, provided always that when any document is of a confidential nature (such as the opinion of counsel on any matter affecting the interest of the creditors on the estate), the trustee shall not be bound to insert it in the Sederunt Book, or to exhibit it to any other person than the commissioners”

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The second ground of complaint—in regard to these examinations—was that they were not for the benefit of the sequestrated estate, but for the benefit of third parties in London, and in particular of Smith & Co. The averment in support of this statement was that the bankrupt had contracted large debts to these parties for fitting up a ship which he had bought, and that when the ship was sold under mortgage these parties had lost their accounts, and that the object of the examinations was to enable them to make out claims against the mortgager and his broker the said Edward Gellatly. It was also averred that the examinations were for the further purpose of supporting a case depending in the Court of Queen's Bench, at the instance of Smith & Co., for recovery of claims which they had for furnishings of the ship as above mentioned, and that there was an agreement that the respondent was to get commission from Smith and the other contractors on what was recovered from Gellatly.

The petitioner therefore prayed his Lordship “to ordain the respondent to insert copies of said examinations into the Sederunt Book, and to make said Sederunt Book, containing said copies, patent to the petitioner, or at least to make said examinations or copies thereof patent to the petitioner. As also to ordain the respondent to desist and cease from using his powers as trustee foresaid, or employing the funds of said sequestrated estate, in assisting or furthering the claims of the said John Smith and the other contractors before mentioned. Farther, to censure said respondent in the premises, in such way and manner as to your Lordship may seem meet, and to prohibit him charging the expenses of the foresaid examinations, or any expenses connected with or arising out of the same, against the said sequestrated estate.”

In answer, the respondent objected, in the first place, to the competency of the petition and complaint, and, in the second place, averred that in examining the persons in London, the trustee had acted in discharge of his duty, and for the behoof of creditors.

The Lord Ordinary pronounced the following interlocutor:—

“ Edinburgh, 29 th October 1872.—The Lord Ordinary having heard the counsel for the parties, and considered the petition and complaint, and answers thereto—Dismisses the petition; Finds the petitioner liable to the respondent in expenses, of which allows an account to be given in; and remits the same to the Auditor to tax and report.”

In a note to the interlocutor, the Lord Ordinary, inter alia, said “that such an application to the Lord Ordinary on the Bills is not competent under the Bankrupt Act, and that the proper form of procedure is that prescribed in the 159th section of that Statute. By that section it is provided that the Accountant in Bankruptcy shall take cognisance of the conduct of the trustee and commissioners; and ‘in the event of their 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 shall inquire into the same, and if not satisfied with the explanation given,’ he shall report to the Lord Ordinary in time of vacation, or to either Division of the Court in time of session, who, after hearing ‘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.’ It seems to the Lord Ordinary that the petitioner's complaint (which is not presented at common law with the concurrence of the Lord Advocate, but under the Statute) is one of those which by the Statute falls in the first instance within the cognisance of the Accountant in Bankruptcy, and that the Court in time of session, or the Lord Ordinary in time of vacation, is not entitled to decide, and cannot decide thereon, unless the Accountant shall not be satisfied with the explanations of the respondent as trustee, and shall report the matter for decision.”

The petitioner reclaimed.

It was argued for the respondent, that as the petition was of a penal nature—the whole of the application being laid upon the delinquency of the trustee,—it was not competent either under the statute or at common law, and should therefore be dismissed— Bell v. Gow, Nov. 28, 1862, 1 Macph. 84.

For the petitioner, it was proposed to amend the petition by withdrawing that part of the prayer asking for censure of the trustee. In support of this proposal it was argued, that the application had two perfectly separate purposes—(1) to enforce against the trustee a statutory duty, and to obtain for the petitioner a statutory right; and (2) for censure of the trustee. The first of these two purposes was the principal one, and quite distinct from the conclusion for censure, and it was only this latter conclusion which contained anything of a penal nature, and therefore by withdrawing it the respondent's objection would be entirely removed.

The respondent opposed the proposed amendment on the ground that the whole of the application was of a penal nature.