Scottish Court of Session Decisions

The pursuer in this action granted, on 11th August 1862, a trust in favour of Mr M'Clelland, accountant in Glasgow, as trustee for behoof of his creditors. All the creditors acceded to this trust, and a committee of their number was appointed to act along with the trustee. This committee had full power to advise and control the trustee in his administration of the trust. It was one of the conditions in the trust-deed that the truster should be discharged of all debts due by him at the date thereof upon making a full, fair, and complete surrender of his estate. The pursuer averred that an arrangement had been entered into on 9th September 1862 whereby he should be discharged on condition of making payment of £700 to the trustee, that he had made that payment, and that accordingly, on 14th December 1864, a discharge was executed by the trustee and the said committee, and duly delivered to him. This discharge was, however, afterwards got back from him, and never again returned: but notwithstanding, it was averred that the deed had been finally delivered, and that an attempt to cancel it by deletion of the

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signatures of the granters thereof was invalid, such deletion being without the authority or consent of the pursuer.

The pursuer was afterwards sequestrated, and the defenders, who were also creditors under the private trust prior to the granting of the said discharge, in debts due prior to the date of the trust, claimed to rank and vote in the sequestration. The pursuer insisted in this action, not only as an individual, but also as trustee of the late John M'Alister, and sole executor of the late Peter M'Alister, both of whom were creditors in the sequestration. In support of his title as trustee the pursuer produced an extract trust-deed in his favour by the said James M'Alister. In this action he sought to have it declared that in respect of the said discharge, and of the payment by the pursuer of the consideration therefor, the debts of the defenders were extinguished, and that they had therefore no right to claim or rank in the sequestration.

On 1st July 1873 the Lord Ordinary ( Gifford) pronounced the following interlocutor:—“The Lord Ordinary having heard parties' procurators, and having considered the closed record, writs produced, and whole process—Finds that the pursuer has no title to sue the present action, either as sole surviving trustee of the late John M'Alister, Dumbarton, or as sole accepting and acting executor of the late Peter M'Alister, ironmonger in Dumbarton; and to this extent sustains the first plea in law stated for the defenders: Finds that the pursuer as an individual, and for his own right and interest, has a sufficient title to sue the present action, and to this extent repels the said first plea stated for the defenders; but finds that the pursuer, being a sequestrated and divested bankrupt, and the sequestration of his estates still subsisting, is not entitled to insist in the present action to the effect of excluding the defenders from ranking upon or voting in the sequestration of the pursuer's estates, without finding caution for the whole expenses of the present process: Therefore ordains the pursuer to find caution for the whole expenses of the present process in common form, and that by the first box-day in the ensuing vacation, and to this extent sustains the fourth plea stated for the defenders, reserving meantime all questions of expenses.”

Note.—… The present action is a formal action of declarator to have it found and declared that the pursuer stands exonered, acquitted, and discharged of the whole debts claimed and ranked upon by the six defenders, either in virtue of an alleged discharge already delivered, or alternately in virtue of an obligation to grant such discharge, which is concluded for accordingly; and the last conclusion of the action is, that the whole defenders shall be prohibited and interdicted from voting or ranking in the pursuer's sequestration, or from interfering therewith in any way.

The pursuer is at present a sequestrated and divested bankrupt. The sequestration of his estates still subsists, and the trustee is no party to the present action. Nor are the other creditors parties thereto, unless in so far as the bankrupt himself, in a trust capacity, claims to be creditor in his own sequestration.

There has been a good deal of discussion on the preliminary pleas stated for the defenders. The pursuer mainly relied as his title to sue on his right as creditor, as sole surviving trustee of John M'Alister, and as sole accepting and acting executor of Peter M'Alister. The defenders disputed his title to sue in any capacity, and the pursuer asked for an extensive diligence in order to prove the title. This the Lord Ordinary granted, and it was thought expedient at the same time, and in order to save expense (the havers being the same), to embrace in the diligence any writs which the pursuer required bearing on the merits of the case. A arge recovery has been made, and the Lord Ordinary has heard parties on the preliminary pleas and whole cause.

The Lord Ordinary is of opinion that the pursuer has failed to show that in any representative capacity he is a creditor on his own sequestrated estate. Indeed, in regard to this matter the case is substantially just where it was when the pursuer's appeal was disposed of by the Lord Ordinary and the Court in April and May 1871. The Lord Ordinary refers to the interlocutor and note, and to the opinions of the Inner House as reported in the Scottish Law Reporter, vol. viii. 602. No vouchers whatever have been recovered by the pursuer instructing any debt either in the late John M'Alister or in the late Peter M'Alister. As representating John and Peter M'Alister, the pursuer claims to be a creditor in his own sequestration for no less than £4295, 2s. 3d. The bulk o this sum is for cash said to have been advanced to or on account of, the bankrupt. Debts of this kind can only be proved scripto, and it was hardly contended by the pursuer's own counsel that any of the documents recovered and in process instruct such debt against the bankrupt, or any part thereof. The Lord Ordinary's note of 14th April 1871 notices the leading objections, and it is needless to go more into detail.

The only point which the pursuer made, apart from vouching, is that the trustee in the sequestration has sustained the pursuer's claim as sole trustee of John M'Alister to the extent of £250, and that this deliverance not being appealed against is final. There is some force in this, if this had been a simple question in the sequestration; but then, unfortunately for the pursuer, the whole of the defenders' claims have also been ranked by the trustee, and these deliverances are also final in the sequestration. It seems plain that one creditor cannot found upon the finality of the trustee's deliverance in his own favour, and at the same time repudiate the finality of precisely similar deliverances in favour of other creditors. If the trustee's deliverance conclusively settles in the present process that John M'Alister's estate is a creditor, then it equally conclusively settles that all the defenders are creditors, and there is an end of the present process.

On the whole, the Lord Ordinary repels the title of the pursuer, as John M'Alister's trustee and as Peter M'Alister's executor, to insist in the present action.

There only remains the pursuer's own title as a bankrupt to insist that certain alleged creditors shall not rank upon his estate. The Lord Ordinary sustains this title, because he thinks that the radical right which is always left in the bankrupt, not with standing sequestration, gives the bankrupt a sufficient interest to challenge a pretended creditor.

But then, as neither the trustee in the sequesration nor any of the other creditors are objecting to the defenders ranking and voting, the Lord

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Ordinary thinks that the bankrupt cannot be allowed to litigate, to the effect of excluding the defenders, without finding caution for expenses. The question relates solely to the defenders ranking and voting in the sequestration, and the distribution of the estate therein. The very object of this action is to exclude the defenders from the sequestration, and this would only enlarge the rights of other creditors, and would not, so far as appears, affect the bankrupt himself. The Bankrupt Act places the distribution of the estate in the hands of the creditors, and they are all satisfied that the present defenders are entitled to rank. The bankrupt cannot attempt to invert this without finding caution for the expenses of the litigation.

If, indeed, there had been any question as to the bankrupt's personal protection or liberation from jail, the Lord Ordinary would have allowed such question to be raised without caution—at least this is the general rule, although the matter is always one of discretion. But there is no such question here. The bankrupt's person is not threatened or said to be in danger, and the only averments on record are made in the interests of the other creditors. The Lord Ordinary has therefore ordered the bankrupt to find caution, and he has given him very ample time for doing so.

… The only averment which appears relevant for probation is, that the deed No. 167 of process was finally delivered to the pursuer as a discharge, and that it was thereafter wrongfully cancelled without the pursuer's consent or authority. The Lord Ordinary rather thinks that a proof of these averments might be allowed, without the necessity of a separate process of proving the tenor. The deed itself is extant, although the signatures have been deleted, and the Lord Ordinary inclines to think that it would be pressing a point of form beyond its legitimate effect to insist on a separate process of proving the tenor.”

The pursuer reclaimed.

Argued for the defender—(1) The pursuer has no title to insist in the action, either as trustee or executor, or as an individual. (2) The pursuer being an undischarged bankrupt, is not entitled to sue the present action without finding caution for expenses incurred and to be incurred in this process.

At advising—