Scottish Court of Session Decisions

This was an action of reduction on the ground of fraud and essential error of an assignation, and other deeds following upon it, relating to certain subjects in Larkhall, Lanark.

The pursuer John Fleming, residing in Lark-hall, in 1851 became lessee for ninety-nine years of a piece of ground in Larkhall, on which he erected premises of the value, he averred, of £3000. He borrowed money for that purpose, and gave an assignation of the subjects in security to Alexander Walker, merchant, Larkhall, and others for behoof of his creditors. That assignation turned out to be an absolute conveyance, as no back letter was granted to Fleming. It was alleged that no adequate consideration was given, and that the deed was signed in essential error as to its nature and effect, induced by the representations of Walker. The deed was dated 21st January 1863, and on 17th July following the pursuer was obliged to take out sequestration. A trustee was appointed upon his estate, and a minute of meeting of creditors on 11th September 1863 stated—“The principal item in the bankrupt's assets is the reversion which may accrue to the estate from the heritable property after payment of the bonds preferably secured thereon. … It appears that the property thereon.… It appears that the property was assigned to Mr Alexander Walker, merchant, Larkhall, and others, ex facie absolutely, but actually in trust for certain purposes enumerated in the deed ef assignment. A back-letter should have been granted in favour of the bankrupt, but somehow it was never done. The trustee has applied to Mr Walker, the only trustee who acted, for an account of his intromissions under the trust, but this has been refused. There is no doubt Mr Walker will be bound to denude himself of the trust, and to reconvey the property to the reporter on payment of his just claims against the same.” A valuation of the property was obtained, and a minute of meeting of creditors, dated 17th March 1864, bore as follows:—“The (heritable) property, some months before the sequestration, was assigned to certain trustees for behoof of the bankrupt's creditors. The assignation was ex facic absolute,

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but actually in trust for payment of the bankrupt's debts. A back-letter should have been granted to the bankrupt, but this was not done. The only acting trustee under this deed has been repeatedly called upon to denude in favour of the trustee under the sequestration, but this he refuses to do. Law proceedings were instructed to be raised against the assignee; but there being no funds on hand belonging to the estate to meet the expenses, and the creditors declining to become security for them, the trustee does not feel himself in a position to proceed with the action.”

The bankrupt was discharged on 8th November 1866 without composition, and no further proceedings took place in the sequestration till 9th December 1875, when a meeting of creditors was held. The following is an excerpt from the minute of that meeting:—“The meeting expressed itself satisfied with the conduct of the trustee and the statement of accounts submitted, and empowered the trustee to apply for his discharge. The meeting also approved of the trustee giving a letter to the bankrupt John Fleming abandoning his right on behalf of the estate to the property in Larkhall, consisting of shops and dwelling-houses.”

The pursuer thereafter received this letter from the trustee, dated 3d February 1876 —“Sir, In terms of instructions received from your creditors at a meeting held at Glasgow on 9th December 1875, it is my duty as trustee in the sequestration to intimate that, on behalf of the sequestrated estate, I abandon all claim to the property in Larkhall, consisting of shops and dwelling-houses; and that, so far as the creditors are concerned, you are now at liberty to prosecute your right thereto in any action which you may see fit to raise.” The trustee's discharge followed on 21st March 1876.

This action was directed against (1) Alexander Walker's trustees for reduction of the assignation above named; (2) the Commercial Bank, who had advanced money to Walker on the security of the property; and (3)William Sibbald, Royal Hotel, Lanark, who on 23d July 1875 purchased at a sale by public roup one lot of the subjects in question. Other parties were called as defenders, but those named were all who lodged defences. The pursuer alleged that he had given each of the defenders sufficient notice of his claims, and that a letter intimating the action had been read at the sale above mentioned.

The defenders (Walker's Trustees) pleaded, inter alia—“(1) The pursuer having been discharged without composition, and not having been reinvested in his estate, he has no title to sue the present action.” And there was, inter alia, the following plea by the Commercial Bank:—“The defenders are not bound to satisfy the production, and they ought to be assoilzied, or the action should be dismissed, in respect (1) the pursuer having been sequestrated, and not having been re-invested in his estates, has no title to sue.”

The Lord Ordinary pronounced the following interlocutor:—“The Lord Ordinary having considered the summons and preliminary defences,, and heard counsel thereon, dismisses the action, and decerns: Finds the defenders entitled to expenses, allows accounts thereof to be given in, and remits the same to the Auditor to tax and report.

“Note.—The pursuer maintained that he was in effect retrocessed in the estate to which this action relates by virtue of the resolution of creditors at the meeting on 9th December 1875, and the letter written by the trustee by their authority. But in calling the meeting no notice was given that any such business was to be taken up, and the Lord Ordinary thinks that the resolution was beyond the power of the creditors. The cases cited were Marshall, 22 D. 926; Galbraith, 1 Macph. 644; Graham, 9 Macph. 798; and Gavin, 5 D. 1191.”

The pursuer reclaimed.

At advising—