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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Taylor (Watt's Trustee) v. Charteris and Another (Watt's Trustees) [1879] ScotLR 17_46 (1 November 1879)
URL: http://www.bailii.org/scot/cases/ScotCS/1879/17SLR0046.html
Cite as: [1879] SLR 17_46, [1879] ScotLR 17_46
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SCOTTISH_SLR_Court_of_Session
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Court of Session Inner House First Division.
v.
Facts:
A bankrupt acquired new estate subsequently to the discharge of the trustee in the sequestration, and was afterwards discharged himself, but without composition and without the consent of certain of his creditors. He at once assigned it to his marriage-contract trustees. The trustee was then reappointed upon his own petition. The Court held that he was thereupon entitled to reduce the new estate into possession in terms of section 103 of the Bankruptcy (Scotland) Act 1856, the creditors not being barred by lapse of time or by acquiescence.
The estates of Samuel B. Watt &Co., and Samuel Beveridge Watt as sole partner of that firm and as an individual, were sequestrated by the Sheriff of Lanarkshire on the 29th June 1875, and Mr James Taylor, C.A., Glasgow, was confirmed trustee on the 19th July following. The estate yielded a dividend of 4s. 10
d. in the £, and after dividing that sum amongst the creditors the trustee was discharged on 11th October 1878. Subsequently on 7th April 1879 the bankrupt was also discharged, without a composition and without the consent of certain of his creditors, of all debts contracted by him or by his firm before the date of the sequestration. 3 4 Through the death of a relative upon 14th February 1879 the bankrupt had become entitled
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to the sixth part of moveable estate to the amount of £26,000, as one of his next-of-kin. On his becoming aware of this succession Mr Taylor was re-elected trustee on the 18th June following, and he then presented this petition, in which he prayed the Lord Ordinary “to declare all right and interest competent to the said Samuel Beveridge Watt in the estate of the said deceased …. to be transferred to and vested in the petitioner as trustee foresaid as at the death of the said Samuel Beveridge Watt's succession thereto, in terms of the Bankruptcy (Scotland) Act 1856.” To this petition answers were lodged by the trustees under the antenuptial contract of marriage entered into between the bankrupt and his spouse, dated 24th March 1879, which set forth that “By assignation, dated 2 tth, and intimated 25th March 1879, Samuel Beveridge Watt assigned to the respondents All and Whole the rights and interests and claims of every description, present, future, and contingent, then belonging or competent, or which might at any time thereafter belong or be competent, to him in and against the estate of his deceased uncle Patrick Sandeman Beveridge, for the ends, uses, and purposes mentioned in the said contract of marriage entered into between him and the said Miss Grace Hill Moscrip Campbell.
The Lord Ordinary (
Adam ) granted the prayer of the petition, finding “that no sufficient cause had been shown by the respondents why the prayer of the petition should not be granted.”The respondents reclaimed, and argued—It would be said that the bankrupt had been completely divested of his estate and was not reinvested. But how was that consistent with the provision at the end of section 103 of the Bankrupt Act 1856 regarding the mode in which the trustee was to get a title to acquirenda? That plainly showed that acquirenda did not vest in the trustee in the same way that the original estate vested, and consequently the bankrupt had not been divested. The authorities bore out this construction— Fisken v. Thomson; Mein v. Turner. Those were cases of a second sequestration no doubt, but there was virtually a second sequestration here, and the respondents were entitled to rank pari passu therein—or rather preferably—for the succession was assigned as an alimentary fund.
Authorities— Fisken v. Thomson, June 7, 1845, 7 D. 842; Mein v. Turner, Feb. 15, 1855, 17 D. 435.
Argued for the petitioner—The discharge of the bankrupt was without a composition, and consequently he was not retrocessed in his estate. The trustee had been discharged, and that might prevent the active title being in anyone, but that was of no moment—the bankrupt was completely divested and had not been re-invested. The cases cited by the reclaimers went on a different principle, viz., that where the creditors under the first sequestration permitted the bankrupt to trade, they could not be heard to object to later creditors, who had traded on the faith of the bankrupt being free, claiming a share of the trade acquirenda. There were also questions of international law in Mein v. Turner.
Authorities— Thomson, Dec. 17, 1863, 2 M. 325; Trappes v. Meredith, Nov. 3, 1871, 10 M. 38.
At advising—
The sequestration of Mr Watt's estate was awarded in June 1875, and although the trustee was discharged and the bankrupt was discharged, there cannot be the least doubt, I apprehend, that for certain purposes the sequestration was still a subsisting process. The bankrupt succeeded to certain funds in February 1879, and these funds he assigned away by a deed—or rather by two deeds—which he executed in March of the same year. At both dates he was still undischarged.
The 29th section of the Bankrupt Statute 1856 provides that the judge shall “award sequestration of the estates which then belong or shall thereafter belong to the debtor before the date of the discharge, and declare the estates to belong to the creditors for the purposes of this Act.” And in like manner section 103 provides in this way for acquisitions made by the bankrupt after sequestration—“If any estate, wherever situated, shall, after the date of the sequestration and before the bankrupt has obtained his discharge, be acquired by him, or descend or revert or come to him, the same shall ipso jure fall under the sequestration, and the full right and interest accruing thereon to the bankrupt shall be held as transferred to and vested in the trustee as at the date of the acquisition thereof or succession, for the purposes of this Act.” And then follows a provision or machinery for enabling the trustee to reduce the newly acquired estate into his possession for the benefit of the creditors in the sequestration.
Now, the application of these two sections of the statute to the present case does not seem to admit of any doubt. The estate here has come to the bankrupt by succession after the date of his sequestration but before his discharge, and it consequently falls ipso jure under the sequestration, and the trustee is empowered to reduce it into his possession for behoof of the creditors. The fact that Mr Watt was subsequently discharged does not appear to me in the least to affect the question, for all that is necessary to render the application of the statute clear is that the acquisition of the estate should take place before the bankrupt has obtained his discharge.
No doubt if after his discharge the creditors had shown no disposition to avail themselves of their rights by reducing the newly acquired estate into the possession of the trustee, and had allowed the bankrupt to retain possession, there might in these circumstances and by lapse of time have been a bar to their afterwards claiming it. And in like manner there are cases in which it has been assumed that if creditors allow an undischarged bankrupt to enter into trade again, and to acquire stock and induce other persons to transact with him on the footing that he is entitled to go into the markets as if sui juris, they may not be entitled to prevent these new creditors from ranking on the newly acquired estate. Principles of equity come in here to qualify the rules of the bankrupt statutes, which being themselves founded on equity, must yield to stronger equities. But here the facts are quite simple, and no blame can be imputed to the creditors, who presented their petition as soon as they became aware that the bankrupt had succeeded to the property. I am therefore of opinion that the cases quoted have no application, and that the Lord Ordinary's view is perfectly sound.
The Court adhered.
Counsel for Petitioner (Respondent)— Asher— C. S. Dickson. Agents— Morton, Neilson, & Smart, W.S.
Counsel for Respondents (Reclaimers)— Keir— Harper. Agent— George Andrew, S. S. C.