Scottish Court of Session Decisions

The estates of a bankrupt were sequestrated on 17th January 1868. This was a petition by him to the Sheriff of Mid-Lothian in June 1877 praying for his discharge. The Sheriff-Substitute ( Hallard) ordered intimation by advertisement and by circular to each creditor, and further appointed a copy of the petition and of the trustee's report on the bankrupt's conduct to be transmitted to the Accountant in Bankruptcy.

The trustee's report bore—“… The conduct of the bankrupt, however, was such that I cannot certify that he was not guilty of collusion; considerable quantities of goods having been concealed, although afterwards discovered to be in pawn and surrendered to the creditors; and recollecting all the circumstances of this particular case, I am unable to certify that the bankruptcy arose from innocent misfortune or losses in business.”

The report of the Accountant in Bankruptcy was, inter alia, as follows:—“1st, As to whether the bankrupt concealed any part of his estate or effects—The Accountant finds from an examination of the sederunt book, that the trustee, in his report to the second general meeting of creditors, reports, inter alia, as follows:—‘The trustee feels it is his duty to bring under the notice of the creditors that the bankrupt pawned goods when he was hopelessly unable to meet his payments. When pressed by the trustee to say if he had carried away any of his stock and pawned the same, he denied that he had done so.’ …

When called upon to report with reference to the bankrupt's present application, the trustee states in his report as follows:—[ see report above). It would thus appear that there is evidence in the reports of the trustee that the bankrupt fraudulently concealed certain parts of his estates. It also appears from the same evidence that they were afterwards discovered to be in pawn, and surrendered to the creditors. It will be for the Sheriff to consider what effect this evidence ought to have on the bankrupt's application for discharge.

If this evidence had come to the knowledge of the Accountant at an earlier period of the sequestration, it would have been matter for his consideration whether he ought not to have given an information to the proper authorities; but as over nine years have elapsed, he does not do so, as he has found in other similar cases that a criminal prosecution in such circumstances could not be carried through from the loss of evidence and otherwise.

“2d, There is no evidence before the Accountant that the bankrupt has wilfully failed to comply with any of the provisions of the Bankruptcy Statutes.”

The Sheriff-Substitute, on 20th July 1877, nearly ten years after the sequestration, and where no creditors appeared to oppose, refused to grant the discharge, explaining that he would not feel justified in doing so on the Accountant in Bankruptcy's report. The bankrupt appealed to the Lord Ordinary in the Bill Chamber, ( Shand) who reported the case to the First Division of the Court, with the following note:—

Note.—The appeal raises a question of considerable importance in the administration of the Bankrupt Law. If the application had been subject only to the provision of section 146 of the Bankrupt Statute of 1856, the appellant would at once have obtained his discharge, in respect the application was not opposed by any of his creditors. But by section third of the Act of 1860, 23 and 24 Victoria, cap. 33, it is provided that the Court may refuse the application for the discharge of any bankrupt although two years have elapsed from the date of the sequestration, and although no appearance or opposition shall be made by or on the part of any of the creditors, if it shall appear from the report of the Accountant in Bankruptcy, or other sufficient evidence, that the bankrupt has fraudulently concealed any part of his estate, or has wilfully failed to comply with any of the provisions of the ‘Bankruptcy (Scotland) Act 1856.’

In the present case there is evidence that the bankrupt fraudulently concealed part of his estate, and the question arises whether he has thereby forfeited all right to his discharge, and if not, whether the time has now arrived at which his discharge may be granted. The case of Cooper v. Fraser and Scott, Nov. 5, 1872, 11 Macph., 38, cited by the appellant, was of a very special nature, but it may be usefully referred to.

“The points in favour of the bankrupt are that a period of about ten years has elapsed since the date of the sequestration, which was wound up on payment of a dividend of 6s. per pound, and that none of the creditors oppose the application; and it will be for consideration whether in this state of circumstances the discharge may now be granted.”

Authority— Cooper v. Fraser and Scott, Nov. 5, 1872, 11 Macph. 38.

At advising—