Scottish Court of Session Decisions

William Montague Baillie, residing at Oban, became bankrupt, and his estate was sequestrated in the year 1877. The Credit Company of London claimed to be ranked as creditors on the estate for a sum of upwards of £33, 000, for money lent on various securities. At the statutory examination of the bankrupt before the Sheriff of Midlothian, on the 3d September 1877, Delvoitte, Dever, Griffiths, & Company, also creditors on the estate, proposed to ask the following questions:—“What is the amount of the Credit Company's claim against you? What value did you receive, and what security do the Credit Company hold for it?” These questions were objected to on behalf of the trustee, in respect that the answer to the first was contained in the state of affairs and affidavits, and that the second and third questions amounted to an investigation of a particular claim, and so were contrary to the purpose of the statute.

The Sheriff sustained the objection, and the Messrs Delvoitte, &c., appealed to the Lord Ordinary in the Bill Chamber. His Lordship adhered to the deliverance of the Sheriff, and added the following note to his interlocutor:—

“ Note.—The Lord Ordinary agrees with the Sheriff that the question objected to, or rather the three questions objected to, are incompetent in the present statutory examination of the bankrupt.

Although it may sometimes be difficult exactly to define the limits within which the statutory examination of a bankrupt, under section 87 and subsequent sections of the Bankrupt Act, ought to be confined, and although in dubio the Lord Ordinary would be disposed to allow considerable latitude to the examining creditors, still there seems to be no reasonable doubt that the examination ought not to be converted into a precognition of the bankrupt upon oath, with the view either of setting up or of cutting down the individual claims of particular creditors who propose to rank upon the estate. See Bell's Com., vol. ii. p. 325 (M'Laren's edition).

The primary object of the examination undoubtedly is to enable the trustee and creditors to discover and realise the bankrupt's estate for distribution, and although this may occasionally involve questions regarding the validity of the claims of particular creditors, that is not the primary purpose of the examination. At an after period, when the trustee is required to examine the claims of the creditors, and to reject or admit them to a ranking, special power is given to the trustee by another clause of the Act (the 126th) to examine the bankrupt and others relative to the claim, in order to enable the trustee to decide upon their validity. The Lord Ordinary holds therefore that, without attempting to draw the line too finely, the present examination should be confined to explanations regarding the bankrupt's estate and conduct generally, and this for the benefit of the whole creditors; at least that it should not include a precognition at the instance of one creditor specially directed to cut down or to discover grounds for cutting down the claim of another creditor. There would be no limit to the examination if, in the presence of the Sheriff, every creditor were to be allowed to interrogate the bankrupt, not for the purpose of discovering estate or assets, but solely for the purpose of setting up his own claim, or of setting aside the claim of any other creditor in the future ranking. The words of the statute are perhaps a little ambiguous, but a strong indication is given in section 90 of what was intended, for the persons who may be examined other than the bankrupt, are described as those ‘who can give information relative to his estate;’ and in section 91 they, as well as the bankrupt, are required to answer all lawful questions relating to the affairs of the bankrupt. The Lord Ordinary does not think that this includes questions relating merely to the ranking of the creditors upon the estate when finally realised. It was not averred by the appellants that the bankrupt had refused to be precognoseed extrajudicially, and it was stated on the bankrupt's behalf that he was quite ready to give extrajudicially to the appellants any information which they required.

If the third question objected to had been framed so as to elicit whether the bankrupt had empledged any property either to the appellants or to others, which property is not mentioned or disclosed in the state of affairs, the Lord Ordinary would have allowed that question, and questions to this effect may be put yet.”

The appellants reclaimed.

Authorities— Barstow v. Hutchison, Feb. 21, 1849, 11 D. 687; M'Kay v. M'Laughlan, Feb. 24, 1863, 1 Macph. 440.

At advising—