Scottish Court of Session Decisions

On 3d August 1881 John Adam & Sons, plasterers in Dundee, presented in the Sheriff Court of Forfarshire a petition for sequestration of the estates of J. & W. Kinnes, ironmongers and plumbers there, and of the estates of James Kinnes and William Kinnes, the individual partners of that firm. Adam & Sons were creditors of the firm to the extent of £500, and at the date of its presentation the firm of J. & W. Kinnes was notour bankrupt, having been made so within four months previous to the presentment of the petition.

The oath lodged by the petitioners duly set forth the amount of the debt due to them, and that they held a security for their debt. To that security it stated no value was attached. It did not state that the petitioners held no other security for the sum. The Bankruptcy (Scotland) Act of 1856 provides by section 22 that the petitioning creditor shall in his oath specify any security he holds and “depone that he holds no other obligants or securities than those specified.”

James Kinnes, one of the partners of the firm of J. & W. Kinnes, appeared and opposed this prayer for sequestration.

Among other objections he objected that the oath did not state that no other security for the debt than that mentioned was held by the petitioners. The Sheriff-Substitute allowed the oath to be amended to the effect of adding the averment that the petitioners held no other security for their debt, and thereafter granted sequestration in ordinary form. James Kinnes then presented in the Bill Chamber an application for recal of the sequestration, which proceeded on various grounds, and, inter alia, on the above-mentioned objection to the form of the oath. The Lord Ordinary on the Bills ( M'Laren), proceeding solely on the ground that the oath was as originally produced in the petition disconform to the Bankruptcy Statute of 1856, recalled the sequestration, and his interlocutor became final.

This action for damages against Adam & Sons was then raised by James Kinnes in name of the firm of “J. & W. Kinnes, now or lately ironmongers and plumbers in Dundee, and James Kinnes, lately ironmonger and plumber in Dundee, and presently baker there.” The summons concluded (1) for £5000 in name of damages to the firm for loss sustained “by and through the wrongful, illegal, and unwarrantable application for and awarding of sequestration;” (2) for £5000 in name of damages sustained by James Kinnes for the damage sustained in like manner by him. In the pursuers' condescendence it was averred that the firm was established in 1862, and had since done a very large business, and was possessed of a great amount of heritable property in Dundee, which, though somewhat burdened with debt, would yield a large reversion; that the sequestration obtained was wrongful, illegal, and unwarrantable, and had been found to be such by a final judgment of the Court of Session; and further, that the defenders knew, or ought to have known, such to be the case when they applied for and obtained it.

The first plea-in-law for the pursuers was—“The sequestration condescended on having been obtained by the defenders periculo petentis, and the same and the application therefor having been wrongful, illegal, and unwarrantable, and found to be so by the Court of Session, and the pursuers having by the said sequestration suffered great loss and injury, the defenders are liable to the pursuers in reparation and damages.”

William Kinnes was not a party to the action. He lodged in process a minute disclaiming it.

The defenders pleaded—That in respect of this minute of disclamation for one of the partners of J. & W. Kinnes, the other partner had no title to sue in the company name. They also maintained that the pursuers were, in point of fact, hopelessly insolvent, and had suffered no loss from the application for sequestration. They pleaded, inter alia—“(3) The pursuers' averments are not relevant, and, separatim, are not sufficiently specific to be remitted to probation.”

The Lord Ordinary (M'Laren) repelled this plea, as well as the plea to the effect that the pursuers had no title to sue, and adjusted issues for the trial of the cause, in which the question was put whether the defenders “wrongfully applied for, procured, and maintained sequestration of the estates of J. & W. Kinnes, to their loss, injury, and damage ?”—a precisely similar question being also put as to the application for sequestration of the estates of James Kinnes as an individual.

To his interlocutor allowing the pursuers to lodge issues his Lordship appended this note:—“At this stage I have to dispose of two of the defenders' pleas involving the questions of title to sue and relevancy.

“(1) The objection to the title is that the action is instituted in the name of the firm of J. & W. Kinnes by one of the partners, the other partner having disclaimed.

The objection, in my opinion, is not well founded. I consider that the point is ruled by the case of the Antermony Company v. Wingate, reported in 4 Macph. 1017. In this case Lord President Colonsay observed that one partner has not a right to obstruct litigation at the instance of another partner for the recovery of debts due to the company, and that a partner is understood to have an implied authority to use the name of his copartner when necessary. Lord Curriehill

Page: 479↓

said that the implied mandate of any partner to uplift and discharge debts extended to the institution of actions, and Lord Ardmillan said he would have been prepared to sustain the instance even against the positive disclaimer of the non-acceding partner. It is true that in the case of the Antermony Company there was no disclaimer from the non-acceding partner. But it was admitted that he was absent in Australia and had not assented to the action, and I do not think that the production of a disclaimer would have made any difference. There cannot be degrees of dissent to an action; and in the present case I am of opinion that the instance is good notwithstanding the dissent of one of the members of the copartnery.

(2) The question which is raised by the plea to the relevancy is the question of privilege. The action is brought to recover damages for wrongful use of sequestration under the ‘Bankruptcy Act 1856;’ and the defender, while admitting that the sequestration of the pursuers' company was obtained at his instance, and that it was afterwards recalled by the Lord Ordinary on the Bills, pleads that this was a judicial proceeding, and that it was privileged in this sense, that the injury sustained by the pursuer is not actionable unless it is averred that it was done maliciously and without probable cause. The rule is well settled in its application to actions of damages arising out of contentious proceedings; and by an extension of the rule, depending on a somewhat different principle, it has been held that the right to use arrestment or inhibition on the dependence of an action is as unqualified as the right to bring the action itself, and therefore that in order to succeed in an action of damages for wrongful use of arrestments malice must be established and probable cause negatived. It has not been determined in such an unqualified sense that actions founded on non-contentious proceedings, or proceedings taken ex parte, are relevantly laid without the averment of malice and want of probable cause. But in the cases of this character which have been subjected to the test of decision, the word ‘wrongful’ has been held to be the proper term by which to characterise the injurious act, and it has been held unnecessary to aver malice. To this category I refer actions for wrongful use of diligence against the person or property of a debtor, including sequestration for rent, and also applications for interim interdict granted upon the representation of the applicant without inquiry. I am not sure that the decisions in the miscellaneous cases here grouped together have been based on the same reasons; but I think they may perhaps be brought within the general ground of judgment—that the law does not accord the highest degree of privilege to a party setting in motion the judicial and executive powers of the Courts of Justice, except in cases where the adverse party has an opportunity of stating and proving his case, and where, therefore, the responsibility rests either with the adversary (if he does not bring forward his case), or with the Judge.

The case of an application by a creditor for the sequestration of his debtor's estates does not, in my apprehension, come within the class of privileged cases. No doubt the debtor may appear and oppose the application, but the grounds on which he can successfully oppose are limited. In the debtor's absence the creditor must be held responsible for the correctness of the proceedings to this extent, that a correct statement is laid before the Judge, supported by an affidavit and vouchers, in terms of the statute. In this respect the cases—such as Miller v. Hunter, 3 Macph. 740—with reference to wrongful use of interim interdict, appear to be in point. For though the respondent may oppose, he is not in a position to bring forward his whole case, and therefore the responsibility for error rests with the complainers. Sequestratration in bankruptcy must also be considered under the statute as equivalent to poinding and other modes of execution against the debtor's real and personal estates. It is not easy to see why the creditor using this very comprehensive diligence should be privileged against the consequences of his mistakes in a greater degree than a poinding creditor putting his decree in force in the ordinary way.

“For these reasons, I am of opinion that the action is relevantly laid, and I shall appoint the pursuers to give in issues for the trial of the case.”

The defenders reclaimed, and argued—(1) On the question of title to sue: Any right James Kinnes had to raise an action must be on the principle of implied mandate, which applied only to ordinary actings as a partner. Now, the minute of disclamation showed conclusively that not only was there no mandate, but that the partner was unwilling to have the action raised. In the case of the Antermony Coal Company the partner whose concurrence was held unnecessary was himself the debtor in the obligation he was unwilling to enforce, and the case was no authority for the proposition that one partner could in the teeth of another's wishes raise actions in the firm's name—Mackay's Practice, i., 290; Shotts Company v. Hopkirk, 6 Sh. 399; May v. Matthews, 13 Sh. 94; Clark on Partnership, i., 524. (2) The action was irrelevant. The pursuers did not deny that the defenders were entitled to apply for sequestration. They founded their case on the fact that through a technical defect the sequestration had failed to take effect. No doubt if sequestration were a mere diligence, in which a party proceeds ex parte and periculo petentis, this action might lie, because even an innocent blunder in diligence will ground an action of damages. But a proceeding for sequestration is a judicial proceeding—an action in which the debtor is cited to appear—and in which, in point of fact, this debtor did not appear. The rule applicable to an action, whether the pursuer ultimately succeeded or not, was that a litigant making an honest application to a Court, and stating his grounds of action, is not liable to an action of damages unless malice and want of probable cause be averred. Here the defenders had used their legal right of raising this action, and nothing was alleged against them except that in the end they had failed. Such a ground of action was without precedent.

Authorities— Brodie v. Young, Feb. 19, 1851, 13 D. 737; Wolthekker v. Northern Agricultural Company, Dec. 20, 1862, 1 Macph. 211; Davies & Co. v. Brown & Lyell, June 8, 1867, 5 Macph. 842; Gibb v. Edinburgh Brewery Company, June 19, 1873, 5 Macph. 705.

Argued for pursuers—This was a case of diligence wrongly done, and it was well settled that the person who so used diligence was liable in reparation, even if it might have been rightly done. Sequestration was a diligence none the less that the debtor was summoned to show cause against it. Indeed it was the most sweeping and comprehensive diligence in the law, and it would be strange if the rules as to diligence did not peculiarly apply to it.

The Court made avizandum.