Scottish Court of Session Decisions

The following circular to creditors and trustee's deliverance was on 12th August 1874 issued by William Mackinnon, trustee on the sequestrated estates of Hannay & Sons, and of the individual partners of that firm:—

“Sir,—As trustee on the sequestrated estates of Hannay & Sons, ironmasters in Glasgow, as a firm or company, and of Robert Hannay, of Rusco, residing in Ulverston, Lancashire; Robert Hannay jun., ironmaster in Glasgow; and Thomas Hannay, ironmaster there, the individual partners of said firm or company of Hannay & Sons, as such partners and as individuals, I beg to intimate—

(1) That an account of my intromissions with the funds of the estates, brought down to the 28th ult., and states of the funds received and of those outstanding as at the same date, have been made up and examined by the commissioners in said estates, in terms of the statute.

(2) That I have examined the claims of the several creditors who have lodged their oaths and grounds of debt on or before the 28th ult., and made up lists of those creditors entitled to be ranked on the funds of said estates. and also of those whose claims have been rejected in whole or in part.

(3) That the commissioners have postponed the declaration of a dividend until the next statutory period.

“Of all which intimation is hereby given in terms of the statute.

Annexed I beg to hand you copy of my deliverance on your claim.—I am, Sir, your obedient servant,

William Mackinnon, Trustee.

Copy of Trustee's Deliverance.

D. L. M'Allum & Co., iron and commission merchants in Newcastle-upon-Tyne, per affidavit and claim, dated 2d June 1874, claiming to rank for

Acceptance by Hannay & Sons, dated 10th March 1873, at four months, for	£326	9	10
Difference between contract price and price agreed upon to repurchase 4170 tons No.4 pigiron at 29/ a ton.	6046	10	0
Carry forward,	£6372	19	10
Brought forward,	£6372	19	10
Difference between contract price and price agreed upon to repurchase 264 4 tons puddled bar at 47/6	627	9	6
	£7000	9	4
Less contra account	692	10	7
	£6307	18	9

Remarked by Trustee.

The trustee admits this claim to a ranking on the funds of the estate under deduction of £4, 15s. 7d., being the rebate of interest at 5 per cent. from the date of sequestration, 28th March, till the due date of bill.

William Mackinnon.”

On 7th June 1880 Mackinnon as trustee pronounced another deliverance, which was in the following terms:—“In respect that the claim by the National Bank of Scotland, amounting to £4436, ls. 5d., for acceptances of D. L. M'Allum & Co. to Hannay & Sons, has not yet been withdrawn, the trustee rejects this claim to that extent, and ranks the claimant only for the balance of £1867, ls. 9d., said acceptances being the true obligation of D. L. M'Allum & Co.; and the same not yet having been retired by them, the same falls to be deducted from their claim as lodged.”

M'Allum & Co. had been rendered bankrupt, and G. B. Monkhouse, their assignee in bankruptcy, appealed to the Sheriff against this second deliverance, pleading—“The trustee on the said sequestrated estate having admitted and duly ranked the appellant's claim to the extent of £6303, 3s. 2d., he is not now entitled to alter or modify his judgment, and the deliverance complained of tight to be recalled with costs.”

The respondent Mackinnon pleaded, inter alice—“No dividend having been declared or paid by respondent, he was entitled and bound to issue the deliverance appealed against, and the same being competent and well founded, the appeal should be dismissed with expenses.”

The provisions of sections 126 and 127 of the Bankruptcy Act of 1856 (19 and 20 Vict. cap. 79), upon which the question mainly turned, are quoted in the opinion of the Lord President, infra.

The Sheriff-Substitute ( Erskine Murray) pronounced this interlocutor—“Finds that the respondent Mackinnon, trustee on the estate of Hannay & Sons, pronounced at the time required under the 126th section of the Bankruptcy Act 1856 a deliverance in terms of that section, admitting the present claim to a ranking: Finds (2) that the dividend was, however, postponed, and has been indeed postponed for several years, and when at last it has been announced, and the notification under the 127th section fell to be made, the respondent has notified a rejection, for grounds stated by him: Finds (3) that appellant has raised the plea of res judicata: Finds in law that on the whole that plea is not well founded; therefore repels the same, allows to both parties a proof of their averments, and to appellant a conjunct probation; grants diligence against witnesses and havers, and assigns the 28th day of January next, at 10.30 a.m., as a diet of proof.”

He appended this note:—“The question raised

Page: 285↓

by the first plea of the appellant, which has been repelled, raises a very difficult point indeed. The difficulty arises from the fact that the statute is at variance with itself. In the course of its progress through the Legislature alterations have apparently been made, the effect of which upon other sections has not been contemplated, and thus arise incongruous results.

“Under the old Act the trustee was not bound, as in the 126th section, to examine the oaths and grounds of debt, and admit or reject them in writing, and draw up lists of the creditors admitted or rejected, unless a dividend was to be made. A difficulty like that in the present case could not have arisen. But under the Act of 1856 the words ‘if a dividend is to be made’ having been omitted, it became the duty of the trustee, irrespective of the declaration of a dividend, to reject or admit each claim at the time provided for in the 126th section, irrespective of the declaration of a dividend. If the dividend is not postponed, then the trustee's judgment becomes final and conclusive, so far as that dividend is concerned, in fifteen days from the date of the Gazette notice of the dividend under the 127th section. But what is the case when, as here, the dividend is postponed? According to the appellant's contention, the admission or rejection of a claim in these circumstances is a deliverance of the trustee,’ under the 169th section, appealable, and possibly (though of this there may be doubts) even amendable, by the trustee himself within fourteen days, but after that date becoming final. What, then, is the effect of that finality? According, at first sight, to common sense, the trustee's first decision must mean something, and must have some effect; it cannot be mere empty air. It appears to be a judgment applicable to the first dividend, the declaration of which is only postponed. And in this view what is subsequently to be done by the trustee at the time of the actual declaration of the dividend is simply to send a recapitulation or copy of the judgment already pronounced to the claimant. According, on the other hand, to the respondent's contention, the first decision can have no effect at all; the only real admission or rejection being the notification of admission or rejection which under the 127th section the trustee is bound to make to each claimant when he is actually announcing the dividend. There is a great deal to be said for this argument, for it rather appears that under the statute when a dividend is postponed the admission or rejection of each claim falls practically to be made twice; and it would seem strange if it was intended that the decision should be appealed twice with regard to the same dividend. The presumption would certainly be that it was intended that such an appeal should only be made once. If, therefore, it comes to be inquired which of the two is the proper time for an appeal, the Sheriff-Substitute is, on the whole, led to the conclusion that the latter admission or rejection is the proper time, as the Act distinctly lays down that if that second admission or rejection is not appealed, the judgment of the trustee becomes final quoad that dividend, while no such statement is included in the 126th section. And if the later period is the real period when any appeals are to be taken, it rather seems that up to that final notification by the trustee he should have power to modify the conclusions at which he had formerly arrived, just as he has in the case of a second dividend. There are some awkward points involved. For instance, if a claim is originally rejected under the 126th section, would the claimant be entitled to lodge a new claim for the postponed dividend? Apparently under the respondent's contention he could, as the first judgment did not really fix the parties entitled to a dividend. But, again, this seems impossible, as the list of the creditors entitled to draw the first dividend is made up by him at the earlier period even though the dividend is postponed; and he apparently has no right to add thereto. Perhaps a solution of the difficulty may be found in the fact that section 126, while providing for admission or rejection, does not provide for any notification of the admission or rejection to the claimant; and it may thus be fairly maintained that the admission or rejection under section 12G is a matter only for the consideration of the trustee and commissioners, with a view to the expediency of the declaration of a dividend, and is not a matter regularly intended for the cognisance of the individual claimant, who is not regularly notified of the fact till the dividend comes to be declared. He has, in fact, nothing to do with the matter till he receives notification under section 127, which he can appeal even though he has taken no notice of an adverse deliverance given under section 126. No doubt it may be answered, that though the later period is the appealing time, all that the trustee should then have done was simply to notify the decision formerly made, and that he has no right under section 127 to examine the oaths at that time at all, or either to admit or reject them. But, on the whole, it seems that if till that time the trustee is not bound to notify his decision to the claimant, he must be held also to retain the power of modifying it. The Sheriff-Substitute has therefore, although with very great hesitation, repelled the plea of res judieata and allowed a proof.”

Monkhouse appealed to the Court of Session.

The arguments of parties sufficiently appear from the opinions of the Court, infra.