Scottish Court of Session Decisions

William Scott, solicitor, Dundee, died on January 30, 1881, and thereafter a judicial factor was appointed on his estates under the 164th section of Bankruptcy Act 1856 (19 and 20 Vict., cap. 79). On 18th May the Lord Ordinary on the Bills ( Fraser) pronounced a first deliverance in a petition at the instance of Simpson, a creditor of Scott's, for the sequestration of Scott's estates. The judicial factor, Myles, appeared and opposed this petition, which was on 8th August refused, the Lord Ordinary ( Fraser) adding the following note to his interlocutor:—“The estates of the deceased debtor Scott are now administered by the judicial factor David Myles, accountant, Dundee, who was appointed to that office under the 164th section of the Bankrupt Statute. No averment is made against the mode in which the factor has hitherto managed the estate, and if the Court had any discretion in granting or withholding sequestration this would be a circumstance of essential importance. In the case of Campbell v. M'Farlane, 24 D. 1097, Lord President M'Neill gave it as his opinion that ‘the Court has an equitable jurisdiction, and it does not always follow that sequestration should be awarded where it is competent if it appears that that course involves a defeating of the ends of justice.’ But there are other authorities in a contrary sense that seem to sanction the doctrine that the Court have no discretion where a competent application for sequestration is presented to it—See Newal's Trustees, June 13, 1840, 2 D. 1108. The petition therefore is not dismissed upon the ground that the estate is well managed under a factor appointed by the Court, who is subject to the control of the Accountant

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in Bankruptcy, and who is to ‘exercise the like powers and discharge the same duties with regard to him (the factor) as he is empowered and required to exercise and discharge with regard to a trustee under a sequestration, but subject always to the control of the Lord Ordinary or the Court’ (section 164). The ground upon which the petition has been dismissed is that the creditor has not produced with his oath the ‘vouchers necessary to prove the debt.’ The only voucher produced is a cash account, which brings out a balance in the claimant's favour; but there is no voucher of any sort produced to establish any one of the items in the claim. The whole of the entries in this account were cash transactions, with the exception of two, which are for fees claimed by the creditor for valuing properties. But these two items are counterbalanced by a heavy business account admitted to be due to the deceased's estate. Now, it is no doubt true that by the 14th section of the Bankrupt Statute a creditor may petition for sequestration of his debtor's estates, whether the debt due to him be liquid or illiquid, provided it be not contingent. But this provision does not dispense with the production of those documents which are necessary and appropriate to establish the items of the account founded on. An open account does not require to be supported by vouchers, because no such vouchers in the usual case exist, and such an account extracted from the books of the petitioning creditor was held sufficient in the case of Knowles, 3 Macph. 457. But the case is totally different with cash transactions, in reference to which parties (unless in very exceptional circumstances) ought to have vouchers for their disbursements. In the absence of these the Court have held the account and the oath not to be the ‘necessary proof of the debt,’ so as to warrant sequestration.—See Ballantyne v. Barr, January 29, 1867, 5 Macph. 330; Scott v. Scott, June 23, 1847, 9 D. 1347.”

Simpson reclaimed, but on August 17, before his reclaiming note came on for hearing, the Bank of Scotland, also a creditor of Scott's, presented another petition for sequestration of Scott's estates, which was granted by the Lord Ordinary on the Bills ( Shand) on September 12, and was followed by the ordinary steps of bankruptcy procedure.

At the hearing on the reclaiming note in the first petition for sequestration, the reclaimer argued on the merits that the Lord Ordinary's interlocutor refusing the petition was wrong.

The respondent objected to the competency of the reclaiming note, founding on the 31st section of the Bankruptcy Act 1856, which provided that “the deliverance awarding sequestration shall not be subject to review; but any debtor whose estate has been sequestrated without his consent, or the successors of any deceased creditor whose estate has been sequestrated without their consent, unless on the application of a mandatory authorised by the deceased debtor, or any creditor, where the sequestration has been awarded by the Lord Ordinary, may within forty days of such deliverance present a petition to the Lord Ordinary setting forth the grounds for recall, and praying for recall;” and on the 32d section, which provided that “no petition for recall of the sequestration, excepting as hereinafter provided. shall be competent after the expiration of the said forty days, or after the advertisement for payment of the first dividend, provided that nine-tenths in number and value of the creditors ranked on the estate as herein directed may at any time apply for recall by petition to the Lord Ordinary.” It appeared that Simpson had not applied for recall within the forty days above provided.

The reclaimer argued that it was a case of great hardship that the same parties (the Bank of Scotland) who, as the chief creditors of the deceased, had been the real opponents of the first petition for sequestration, should themselves present a petition with the same object within ten days. Further, if the second sequestration were to override the first, preferences might in certain cases (though not in the present) be acquired which the first deliverance in the first petition would have cut down.

At advising—