Scottish Court of Session Decisions

The estates of Mr J. L. Bruce were sequestrated in the Sheriff Court of Lanarkshire, and by the interlocutor awarding sequestration personal protection was also awarded until the first meeting of creditors. At that first meeting the creditors refused to grant it any longer. The bankrupt then applied to the Sheriff for liberation from prison under the 45th section of the Bankruptcy

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* Decided September 20, 1878.

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(Scotland) Act 1856. This application was opposed by Messrs W. Lorimer and D. L. Stevenson, two of the creditors of the bankrupt, and on September 3d, 1878, the Sheriff-Substitute ( Spens) pronounced a deliverance refusing the application, on the ground that as personal protection after the first meeting of creditors was by the “Bankruptcy Act 1856” entrusted to the discretion of the creditors, and as the creditors had not granted personal protection, he was not entitled to interfere with their discretion. He further found, upon the authority of the case of Summers v. Marianski, that the application was incompetent. He added this note—

“ Note—As I read the Bankruptcy Act of 1856, the matter of personal protection to bankrupts is intended to be left entirely in the discretion of the creditors. I see that the terms of the 45th section of the Act are perhaps in one sense not quite in strict accordance with this view, for it is there provided that if protection has been refused by the Lord Ordinary or Sheriff, that an application shall only be entertained if the trustee and commissioners consent thereto, but virtually the trustee and commissioners may be said to represent the body of creditors. While even assuming that such an application was made, I take it that the Sheriff's duty would be confined to ascertaining whether the requisite majority in number and value of the creditors consented to protection. Only to that extent I take it is the Sheriff entitled to make an inquiry. He cannot review the discretion of the creditors nor set up his discretion as against theirs. In the case of Hodge, December 4, 1856, 18 D. 135, Lord Ivory expressly states the view above set forth—“If the question had been whether the vote had been illegally or collusively obtained, then the Sheriff would have had right to inquire into it, but personal protection to a bankrupt is a matter left to the discretion of the creditors.” In a note upon this case Mr Murdoch remarks, under the 169th section of the Act providing for appeals of resolutions of creditors—“It does not necessarily follow because an appeal is competent from the decisions of the creditors or trustee or commissioners that the Court can review the decision on the merits. On the contrary, it has been held in an appeal against a resolution of creditors to renew the bankrupt's protection that the Sheriff could only judge if there was a statutory majority. Mr Borland's argument, that if in the minute of meeting of creditors a refusal to grant protection had been formally recorded he would have been entitled to appeal that resolution to the Sheriff, is, I think, only sound to this extent, that if there is a question as to whether in point of fact there is the requisite majority in number and value the Sheriff can be appealed to to decide the question; but if that requisite majority has either granted or refused protection the Sheriff cannot interfere, or can only interfere to carry out the creditors' decision.

In the case of Summers v. Marianski, Dec. 29, 1862, 35 Jur. 157, Lord Ardmillan held that it was incompetent to appeal to the Sheriff against a resolution of creditors dealing with the matter of personal protection. That case is on all fours with the present so far as I can see, with this exception, that it is not minuted admittedly that personal protection was refused to the bankrupt. I have come to be of opinion that this makes no difference. From the statements made I have no doubt that there was a discussion at the meeting as to whether personal protection should be granted or not, and that it was only because it was apparent that protection would not be granted that no reference is made to it in the minute. Mr Borland said that the minute must be looked at as the sole record of what took place, and I am inclined to concur in the view, but as I read the statute the power is conferred upon the creditors of granting personal protection, and if they do not grant it they must be held to have exercised their discretion in refusing to grant it. Of course if there was any reason to believe that the majority in number and value of the creditors were willing to grant protection, the bankrupt's friends should see that a division takes place. If there is reason to believe this in the present case I do not doubt that a meeting for considering the point can easily be arranged to be held, but I suspect there is no question that the majority of creditors in this case have definitely made up their mind to refuse protection.”

The bankrupt appealed to the Lord Ordinary on the Bills, and his Lordship ( Lord Shand) on September 20, 1878, pronounced an interlocutor finding that the protection against diligence granted to the bankrupt when sequestration was awarded was not renewed by the creditors at the meeting for appointment of a trustee, and had not been renewed at any subsequent meeting of the creditors; and further, finding that in these circumstances, and in the absence of any consent to the present application by the trustee and commissioners, the provisions of the Bankrupt Statute founded on by the petitioner did not warrant his liberation, and therefore dismissing the appeal. His Lordship added this note:—

“ Note.—The bankrupt remains liable to the diligence of his creditors except in so far as he is entitled to protection or liberation under the statute. The power of protection against diligence is given to the Judge, who awards sequestration only till the meeting for the election of trustee, and thereafter to the creditors, and to them only.

It is said, however, that, although personal protection depends on the Judge in the first instance, and on the resolution of the creditors in the next, notwithstanding what the Judge or the creditors may have determined as to personal protection as soon as the bankrupt is incarcerated the Court has power under section 45 of the statute, on which the present application is founded, to grant liberation. I cannot so construe the statute. If the petitioner's view were correct, it would follow that even after the creditors had expressly declined to renew the protection, and incarceration had followed, the Court might immediately grant liberation, and repeat this in the case of successive creditors, who would of course each be entitled to incarcerate the bankrupt because of the absence of any personal protection. The practical result would be to render nugatory the provision of section 77 of the statute, which leaves it to the creditors to fix whether personal protection should be given, and to give that power or discretion to the Lord Ordinary or the Sheriff. It is, I think, obvious that this would be contrary to the policy and intention of the statute, and I think it would be contrary to its true meaning. The first part of

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section 45 appears to me to apply to the time before the appointment of a trustee, and to that time only. Liberation granted under that part of the section, would, I think, be effectual only till the meeting for appointment of a trustee, and would, I think, only be given in circumstances in which a personal protection against diligence for civil debt generally would be granted. The second branch of section 45 refers to applications after the meeting of creditors for appointment of a trustee, for the consent of the trustee and commissioners is a condition of the application. As from the date of the trustee's appointment the creditors alone are vested with the power of giving protection against diligence, it seems to me that unless that power has been exercised by a resolution, and at least unless the trustee and commissioners concur in the application, the Lord Ordinary or the Sheriff has no power under section 45 to grant an application for liberation.

The judgment of Lord Kinloch in the case of Marianski, 1 Macph. p. 214, seems to support the contention that even if the creditors should now resolve to give personal protection, an application under the second branch of section 45 of the statute could not competently be granted. That question does not arise here, but I think it right to say, with deference to the view expressed by Lord Kinloch, that if it should again occur, it appears to me to be worthy of reconsideration.”