Scottish Court of Session Decisions

Now, it appears to me that under the Act of 1862 there was no power whatever given to the liquidators to accept a compromise at all, if it were not for the 160th section of the statute; and the power and jurisdiction of the Court in this matter are also settled by the same clause. I need not read the words. The clause is a purely enabling enactment, which gives the liquidators power to accept compromises if they thought them reasonable, and it is clearly shown that the compromise is to be matter of agreement, for that is the word in the Act, between the liquidators and the contributory—such compromises to be effectual only if sanctioned by the Court. But the only interposition by the Court contemplated by the statute is either to sanction or to refuse to sanction compromises made by the liquidators. Now, that being the nature of the statutory provision upon the subject, I think that this petition is incompetent, and ought to be refused. I do not think that liquidators can be compelled by any judicial authority to accept a compromise of which they themselves disapprove.

Now that is sufficient for the disposal of this petition, but I am bound to say further, that as far as I have heard the merits of this petition discussed, even if the Court had the power to order the liquidators to accept such a compromise; this is not a case in which I should be disposed to exercise that power, because the prayer of the petition seems to me to come simply to this, that this gentleman insisted upon having a discharge upon surrendering, not the whole, but a part only of his estate; and the part which he wishes to reserve is a claim of relief against the bank and his fellow shareholders, in respect that he was induced to purchase his shares by the fraud of the bank. Now if that claim is well founded both in fact and in law, it clearly forms a valuable portion of his estate, and there cannot be the smallest doubt that in a mercantile sequestration it would vest in the trustee by force of the Bankrupt Acts. It is a claim which may be disposed of in the market for the benefit of the entire body of creditors, and chiefly, as we are told, for the benefit of the liquidators as representing the creditors of the bank. In these circumstances to compel the liquidators to give up their right to this claim would just be to deprive the creditors of part of their property.

Lord Deas—In the course of this liquidation we judicially know that the liquidators have agreed to discharge shareholders upon a surrender of their whole existing assets; and it is not disputed on the part of the petitioner that the liquidators are prepared to do the same thing so far as he is concerned—that is, if he surrenders his whole estate they will give him his discharge. But he insists for an exception in his case, that he should be discharged without making a complete surrender—that is to say without surrendering this claim against the bank. That is the compromise which he insists upon, but it is not the sort of compromise which liquidators are in the habit of giving. I agree with your Lordship that the substance of this petition is that the liquidation should be compelled to grant a discharge upon the terms proposed by the petitioner, and not upon the terms proposed by themselves. That being so, I have, to say the least, the greatest possible doubt whether it is competent for us to compel the liquidators to accept this surrender

But I do not think that it is necessary to decide this point, because even if such a petition be abstractly competent, I am not prepared to grant the petition now before us. A good deal was said regarding the sale of this claim. I do not express any opinion upon that. I do not know whether in the course of a fair and just administration of this estate it will be necessary to sell the claim. The whole question is whether we are to compel a compromise on the footing proposed by the petitioner and not on the footing proposed by the liquidators.

Lord Mure—Although the first part of the prayer of this petition asks the Court to restrain diligence, the prayer, when read with reference to the 10th article of the statement appended to the petition, shows that the object, and apparently the sole object, which the petitioner has in view is to compel a compromise. He seeks to have diligence stayed because the liquidators will not accept the compromise offered by him, and are unreasonable in so doing. Now this application, in the view I take of it, would, if granted, be an interference with the liquidators in matters as to which, by section 160 of the Act, they are vested with authority to deal, in the first instance, in their own discretion; and it is only when they have come to the conclusion that any particular compromise is a proper one, and apply to the Court to sanction it, that the Court would be entitled to interfere. I therefore concur with your Lordship that this petition should be refused as incompetent.

Lord Shand—-I am of the same opinion. It is evident that the Court is asked to restrain diligence solely for the purpose of enabling the petitioner to effect a compromise; and I am of opinion that under the Act the Court has no power to compel a compromise. But I am bound to add that I agree with your Lordship as to the merits of the application. This claim is an asset of the estate: and if the petition was granted it is not disputed that on the sale of the claim the petitioner would put the price into his pocket. But I think that the creditors are entitled to the price, and therefore that the petition must be refused.