Scottish Court of Session Decisions

At advising—

Lord President—It is almost an idle thing to talk of the facts in this case, for nothing has been proved, and scarcely anything is averred. If it were not an affair of about £27 I should be much inclined to order a new record, to enable us to understand the facts to which we are asked to apply the law; but I am unwilling to occasion additional expense in so trifling a case, and we must therefore endeavour to extricate the matter as it stands.

There is no objection on record to the pursuer's title to sue. The action is brought by a Mr Fraser, with concurrence of the landlord of the house occupied by the defender; and he, bringing the landlord with him, avers that he has paid the rent for a certain portion of the year from Whitsunday 1879 to Whitsunday 1880, and has acquired all the landlord's rights in respect thereof. The part of the rent so paid is that applicable to the period from 21st October 1879 to 21st May 1880. That is not rent for a term, but for a fraction of a year, and the reason why the pursuer's claim is thus limited is that 21st October 1879 is the date of the defender's sequestration, and 21st May 1880 is the date when the defender left possession of the house. The Sheriff-Substitute says the rent claimed is the rent of the house occupied by the defender since his sequestration; and he thinks the pursuer is entitled to decree, though the defender is an undischarged bankrupt, for the rent applicable to the period of occupation subsequent to the bankruptcy. Now, in the first place, it is a very curious obligation for a fractional part of the rent payable at two half-yearly terms by equal portions, and I do not understand exactly the ground why the Sheriff-Substitute thinks the claim should be made good against the bankrupt, for it is in respect of his possession of the house at a period beginning prior to his bankruptcy, and it would not be a sufficient claim unless it were for a debt contracted subsequent to that event. But there is no doubt that the debt was contracted prior to the sequestration. Whether the tenure was for a term of years or from year to year we are not told; that, like everything else in this case, is in a state of obscurity; but whether it was for the one or the other, the debt was contracted at the beginning of the year's occupancy, i.e., at Whitsunday 1879. That debt was payable, half at the Martinmas following and half at the Whitsunday after that, but it was all contracted at Whitsunday 1879, and therefore this was a debt of the bankrupt contracted prior to his bankruptcy, and so his discharge will discharge him of all liability in respect of that debt, by the creditor having got a composition in respect of it or a dividend in the sequestration. How in the face of this the landlord can make him liable for a part of the time I fail to see. Mr Dickson ingeniously argued, that although that may be the nature of the debt, yet the occurrence of the bankruptcy introduced an element entitling the landlord to turn out the tenant or to come against him for the rent applicable to the period subsequent to sequestration, on the ground that the lease was practically ended and the bankrupt had come under a new arrangement in consequence of his bankruptcy. I do not see how this can be. Bankruptcy does not bring a lease to an end. If the tenant has an existing lease, it belongs to his trustee, unless there is an express exclusion of assignees, legal and voluntary. This is the case of an ordinary urban subject, and whether the trustee here chose to take up the lease or not does not appear, but the bankrupt continued in possession of the house. Would he not be entitled under his lease, which began before bankruptcy, to continue in possession of it on condition of paying his rent and the other prestations exigible? I think he clearly would be, and the words of Professor Bell on this matter are well worth quoting. He says (1 Comm. 76. M'Laren's ed.)—“Bankruptcy does not of itself annul a lease. The tenant, though bankrupt, may still continue in the possession provided he pay the rent regularly and perform the other stipulations of the contract. All the landlord is entitled to do in case of his tenant's failure to pay the rent is to have recourse to the hypothec and the proceedings prescribed in the Act of Sederunt 1756.” That is to say, the lease not being taken up by the trustee, vests in the bankrupt; he remains as tenant, and the landlord has the ordinary remedies at common law and under the Act of Sederunt. He may use his right of hypothec, or raise an action for his rent, or remove the tenant if he is in arrear with his rent, but nothing else. Now, what is the state of matters here? If the rent for the current year was a debt contracted before bankruptcy and sequestration, then it cannot be claimed against the bankrupt, but can only be made available by a claim in his sequestration. For future rents, of course, the bankrupt will be liable, But as regards every part of the rent for the period from Whitsunday 1879 to Whitsunday 1880 the landlord has no claim against the bankrupt tenant, for it was a debt contracted prior to his sequestration. On these grounds I am for sustaining this appeal and dismissing the action.

Lord Mure—I am of the same opinion. On this record I think it is clear that the judgments appealed against cannot stand. Those judgments repel the defence as irrelevant, that defence being simply a denial that the debt is due. The few facts stated by the pursuer are denied—there had been no proof, and ex facie of the averments the claim should have been made against the trustee, as the debt was undoubtedly contracted prior to the date of the bankrupt's sequestration. I see no ground on which the pursuer can have decree, and I think the proper course is to dismiss the action in default of any specific explanation. Had the amount it states been larger, I think it would have been advisable to allow the record to be opened up and give the pursuer an opportunity of showing any specialties which may be behind in this case to ground his claim as against the present defender. But as it is I am for dismissing the action.

Lord Shand—I agree in your Lordships' observations with regard to the record in this case. It is important to observe that the claim here made is for the rent due for part of the year which was current when the sequestration occurred, for I think a different principle might and would have applied if the circumstances had been different, and the rent claimed had been for a period beginning subsequent to sequestration. In that case there might have been room for holding that the fact of the bankrupt remaining as tenant implied a personal contract for payment of the rent. Keeping this distinction in view, it is to be observed, in the first place, that it is admitted that what is here asked is not merely decree of constitution, and, in the second place, that there is no averment of any special agreement as to this period; it is not said that any new bargain was made between the parties under which this rent is now sued for. Now, I think in a case of this sort, when the subject is an ordinary urban one, and when during the currency of the year's rent the tenant's bankruptcy occurs, and the trustee refuses to take up the lease, and the bankrupt stays on in the house, his obligation in return is for the year's rent, and that obligation was undertaken before the year began to run. There is no other contract in the matter. It was argued that the law will rear up an implied obligation, but I cannot think that is so. It is said the landlord might have brought an action of ejectment against the tenant; I doubt if such an action would have lain—I think it would not. The answer to it would have been—“I have got the occupancy of this house for the year under my obligation to pay the year's rent; that is a good obligation against my estate, and if my trustee does not take it up I shall remain on as tenant.” But the case here is simply one where the bankrupt remains under an obligation for rent contracted before the year began, and I think his possession is to be attributed to that obligation which is good as against his estate, and not to any new or implied one.

Lord Deas was absent.