Scottish Court of Session Decisions

The Debtors (Scotland) Act 1880 (43 and 44 Vict. c. 34) provides by section 6 that “in any case in which under the provisions of this Act imprisonment is rendered incompetent, notour bankruptcy shall be constituted by insolvency concurring with a duly executed charge for payment followed by the expiry of the days of charge without payment.” …

Section 8—“Any creditor of a debtor who is notour bankrupt within the meaning of the Bankruptcy (Scotland) Act 1856, or of this Act, may present a petition to the Sheriff of the county in which such debtor has his ordinary domicile, setting forth that he (the debtor) is unable to pay his debts, and praying that he may be decerned to execute a disposition omnium bonorum for behoof of his creditors, and that a trustee be appointed, who shall take the management and disposal of his estate for such behoof, and such process shall be taken and deemed to be a process of cessio. In the petition there shall be inserted a list of all the creditors of the debtor, specifying their names, designations, and places of residence so far as known to the petitioner, and with the petition shall be produced evidence that the debtor is notour bankrupt.”

Section 9—“On such petition being presented the following provisions shall have effect:—The Sheriff, if he is satisfied that there is prima facie evidence of notour bankruptcy, Shall issue a warrant appointing the petitioner to publish a notice in the Edinburgh Gazette intimating that such petition has been presented, and requiring all the creditors to appear in Court on a certain day.. and the Sheriff shall further ordain the debtor to appear on the day so appointed for the compearance of the creditors in the presence of the Sheriff for public examination.”…

The Bankruptcy and Cessio Act 1881 (44 and 45 Vict. c. 22), by section 14, is to be read and construed together with the Debtors (Scotland) Act 1880.

This was an action of damages for alleged wrongous use of diligence. The pursuers were J. B. Smith & Co., grain merchants, Leith, and James B. Smith, sole partner of that firm. The defenders were Thomas Burton Taylor, corn merchant, Sunderland (against whom arrestments had been used in order to found jurisdiction), and Paterson, Cameron, & Co., S.S.C., Edinburgh. The pursuers in the course of business had certain transactions with the defender Taylor, and a dispute having arisen, a litigation, involving a claim by the present pursuers and counter claim by Taylor, took place between them in the Durham County Court, which ended in Taylor getting a verdict for £39, 10s. 10d., with costs. This judgment he removed to the High Court of Justice (Queen's Bench Division) under the Act 19 and 20 Vict. c. 109 (County Courts Amendment Act), sec. 49, which provides for the removal of certain judgments for sums above £20 into one of the Superior Courts. On it he obtained, on 23d January 1882, a certificate of judgment, which he thereupon had registered under the Judgments Extension act 1868, sec. 2, in the Books of Council and Session. This registration took place on 1st February 1882. He then, through his local agents, instructed the other defenders, who were his agents in Edinburgh, to give a charge upon the registered decree.

The Act of Sederunt of 11th July 1871, passed in pursuance of the Judgments Extension Act 1868, provides by section 1 that “in the extract of a certificate of any judgment obtained or entered up in any of the Courts of Queen's Bench, Common Pleas, or Exchequer at Westminster or Dublin respectively, for any debt, damages, or costs, and registered in the Books of Council and Session under the powers contained in the 2d section of the said statute” ( i.e., The Judgments Extension Act 1868), “the inducice of charge shall be fifteen days, as in an extract of a decreet pronounced in the Court of Session.”

The pursuers averred (Cond. IV.) that on Feb. 6,1882, a charge of payment was served upon J. B. Smith & Co. upon an extract of the foresaid certificate of judgment, and again on 21st February a similar charge was served upon J. B. Smith. “By the foresaid charges the said J. B. Smith and J. B. Smith & Co. were required to make payment of the sum claimed by the said Thomas Burton Taylor within a period of six days respectively from the date upon which same were given, as above mentioned. The said charges, even assuming the validity of the said certificate [the certificate of judgment above referred to], were wholly unlawful, fifteen days, and not six days, being the legal induciœ upon a well-obtained certificate of judgment of the High Court of Justice at Westminster duly registered under the Act of Sederunt of 11th July 1871 and the said Judgments Extension Act. The said charges … were illegal and inept, and the pursuers were in no way bound to concern themselves therewith.” In answer to this averment the defender Taylor stated that he believed it to be true that such charges were given, while Paterson, Cameron, & Co. admitted that they gave general instructions to a messenger to give the pursuers a charge, but were not at the time made aware of the terms of the charges given.

The pursuer further averred—“(Cond. 5) The days of said charges having expired, the defenders, without any further application to the pursuers for payment, and without any inquiry as to the pursuers' solvency (which they well knew to be undoubted), on or about 8th March 1882 caused a petition for cessio to be presented in the Sheriff Court of the sheriffdom of the Lothians at Edinburgh, at the instance of the

Page: 218↓

said Thomas Burton Taylor against the pursuers, praying that pursuers be decerned to execute a disposition omnium bonorum for behoof of their creditors, and to have a trustee appointed, who should take the management and disposal of pursuers' estate for such behoof, and to appoint the said Thomas Burton Taylor to publish a notice in the Edinburgh Gazette intimating that such petition had been presented, and requiring all the creditors to appear in Court, and the pursuers to appear for public examination, and for warrant to take possession of and put under safe custody any bank-notes, money, bonds, bills, cheques, or drafts, or other moveable property belonging to or in the possession of the pursuers; and, if necessary for that purpose, to grant warrant to open lockfast places, and to search the dwelling-house and person of the pursuer the said J. B. Smith; and to make such other order and to do all the other acts as to the Court should seem proper. (Cond. 6) In support of the prayer of said petition the defenders stated, or caused it to be stated, therein that the pursuers were unable to pay their debts, and that they had become notour bankrupts by reason of insolvency concurring with the following steps of diligence—(1) The said extract registered certificate of judgment; (2) execution of the charges of payment above set forth, and expiry of the respective days without payment. The statements in question, that the pursuers were unable to pay their debts, and that they were insolvent, and that they were notour bankrupts, were each and all of them utterly false and calumnious, and were made by the defender the said T. B. Taylor, or the defenders the said Paterson, Cameron, & Co., maliciously and without probable cause. Further, the steps of diligence set forth in said petition were illegal and invalid, in respect that the charges of payment founded on in said petition were contrary to the provisions of section 1 of the Act of Sederunt of 11th July 1871, being on a six days' charge instead of on a fifteen days' charge, as before mentioned. (Cond. 7) The defenders having produced, or caused to be produced, along with the foresaid petition—(1) Extract of the said invalid certificate of judgment; (2) execution of the foresaid illegal and inept charge given the pursuers the said J. B. Smith &Co., dated 6th February 1882; and (3) execution of the foresaid illegal and inept charge given the pursuer the said J. B. Smith, on 21st February 1882—the Sheriff-Substitute, on the strength of said documents, and on the allegation by the defenders, or those for whom they are responsible, that the pursuers were insolvent and unable to pay their debts, on 8th March 1882 granted a warrant in terms of the prayer of the petition. The said warrant, which is referred to for its terms, was illegally, wrongfully, and unwarrantably obtained by the defenders. The application for said warrant was made, and the whole of the proceedings complained of were taken, recklessly and maliciously and without probable cause, by the defender the said T. B. Taylor or the defenders, the said Paterson, Cameron, & Co., and they are liable to the pursuers for any loss, injury, or damage resulting therefrom. (Cond. 8) Copies of the said petition and warrant were not served on the pursuers till the afternoon of Friday, 10th March 1882. On the same day the defenders caused a notice to be inserted in the Edinburgh Gazette of that date to the following effect, viz., that the foresaid petition for cessio had been presented to the Sheriff of the sheriffdom of the Lothians at Edinburgh under the Debtors (Scotland) Act 1880, and the Bankruptcy and Cessio (Scotland) Act 1881, at the instance of the said Thomas Burton Taylor against the defenders, praying that they be decerned to execute a disposition omnium bonorum for behoof of their creditors, and that a trustee should be appointed who should take the management and dispose of their estates for such behoof, and that the Sheriff-Substitute had issued a warrant upon said petition requiring all the creditors of the pursuers to appear within the Bankruptcy Court-house” at Edinburgh on 27th March for the public examination of the pursuers.

In answer to these averments the defender Taylor merely referred to the document mentioned for their terms.

The other defenders admitted the presentation of the petition for cessio on the 8th, which date they explained to be the thirtieth day from the date of the first charge, and the fifteenth from the date of the second. The service of the petition and the insertion of the Gazette notice they stated to have been two days later. They explained that prior to the presentation of the petition the pursuers had taken no notice of the charge, and made no communication to them, the first exception taken to the proceedings being subsequent to the Gazette notice, when, on their attention being called to the terms of the charge, they were immediately withdrawn. They averred that the statement made by them in the proceedings complained of were made in bona fide, and in the reasonable belief, based on the information they had, and on the pursuers' own actings, that they were true.

The pursuers averred that they had always done a large business, and had enjoyed good credit, and had never been insolvent. They averred that they had suffered great injury in their feelings and credit. Damages were laid at £2000.

The pursuers pleaded—“(l) The petition for decree of cessio bonorum and the resulting warrant were illegal and unwarrantable, the pursuers not having been rendered notour bankrupt under the Debtors (Scotland) Act 1880, because (1st) the charges founded on were illegal, not being on an induciceœœ of fifteen days; and, separatim, (2d) fifteen days had not expired from the date of the said charges. (2) The pursuers not having been insolvent, the said proceedings were illegal, nimious, oppressive, and wrongful. (3) Separatim, the said proceedings having been taken by the defender the said T. B. Taylor, or the defenders the said Paterson, Cameron, & Co., maliciously and without probable cause, to the loss, injury, and damage of the pursuers, they are entitled to decree as concluded for. (4) The said proceedings having been wrongful and illegal, and to the loss, injury, and damage of the pursuers, they are entitled to reparation from the defenders as concluded for.”

The defender Taylor pleaded that the pursuers' statements were irrelevant, and that they were unfounded in fact.

The defenders Paterson, Cameron, & Co. pleaded, inter alia—“(1) The allegations of the pursuers are irrelevant and insufficient to warrant

Page: 219↓

the conclusions of the summons. (2) The proceedings in the petition for cessio being judicial in their nature, and the statements in support thereof having been made in bona fide and without malice, the defenders are entitled to absolvitor.”

The Lord Ordinary ( Fraser) adjusted for the trial of the cause as against the defender Taylor the following issues:—“(1) Whether on or about the 8th day of March 1882 the defender Thomas Burton Taylor, wrongfully, maliciously, and without probable cause, presented, or caused to be presented, in the Sheriff Court of the sheriffdom of the Lothians at Edinburgh, a petition praying that the pursuers the said J. B. Smith & Co. be decerned to execute a disposition omnium bonorum for behoof of their creditors, and having obtained the Sheriff's warrant thereon, published, or caused to be published, a notice of said petition in the Edinburgh Gazette to the pursuers' loss, injury, and damage? Damages laid at £500. (2) Whether on or about the 8th day of March 1882 the defender Thomas Burton Taylor, wrongfully, maliciously, and without probable cause, presented, or caused to be presented, in the Sheriff Court of the sheriffdom of the Lothians at Edinburgh, a petition praying that the pursuers the said J. B. Smith & Co., and the pursuer the said J. B. Smith, be decerned to execute a disposition omnium bonorum for behoof of their creditors, and having obtained the Sheriff's warrant thereon, published, or caused to be published, a notice of said petition in the Edinburgh Gazette, to the loss, injury, and damage of the said J. B. Smith? Damages laid at £500.”

The words printed in italics were not in the issues as proposed by the pursuers, but were inserted by the Lord Ordinary.

As regarded Paterson, Cameron, & Co., his Lordship sustained their plea-in-law that the action was irrelevant as against them, and found them entitled to expenses.

“ Opinion.—There is no averment in this record to justify the action as against the law-agents who happened to be employed by their client to conduct the proceedings complained of. The client is responsible for the agents' proceedings, and for the blunder that was committed by the messenger or officer who gave the charge, but no action lies directly at the instance of the party injured against the agents for any damage which the pursuers may have suffered. The client is liable in damages to the third party injured, but not the agent who carried out his orders. If the client be found liable he may have his right of recourse or relief against his agent, but to this extent, and no more, is the agent liable.

As regards the other defender Taylor, the Lord Ordinary cannot hold this to be the same case as that of Kinnes v. Adam & Sons, March 8, 1882, 19 Scot. Law Rep. 478, where the First Division held an action irrelevant in which damages were claimed for having applied for and obtained sequestration under the Bankruptcy Acts, which was afterwards, upon a technical objection to the oath of the petitioning creditor, recalled. There was no averment that the proceedings were taken maliciously and without probable cause, but merely that they were wrongful, illegal, and unwarrantable. In the present case Taylor applied to the Sheriff for a decree ordaining the pursuers to execute a disposition omnium bonorum, and to have a trustee appointed to take the management of their estate, and to publish a notice in the Gazette requiring creditors to appear; also warrant was granted ordaining the pursuers to appear for public examination. This proceeded upon a narrative that the pursuers had become notour bankrupts, and this, by reason of the defender Taylor having obtained a judgment against the pursuers in the High Court of Justice at Westminster, and of the execution of charges thereon, as set forth in the record. Now, Taylor was not warranted in making such a statement. The Debtors (Scotland) Act 1880 (43 and 44 Vict. cap. 34), sec. 6, enacts that ‘in any case in which under the provisions of this Act imprisonment is rendered incompetent, notour bankruptcy shall be constituted by insolvency concurring with a duly executed charge for payment followed by the expiry of the days of charge without payment.’ The present case was one where imprisonment was incompetent. But then there was no duly executed charge. The Act of Sederunt of 11th July 1871, section 1, provides ‘that in the extract of a certificate of any judgment obtained or entered up in any of the Courts of Queen's Bench, Common Pleas, or Exchequer, at Westminster or Dublin respectively, for any debt, damages, or costs, land registered in the Books of Council and Session, under the powers conferred by the second section of the said statute, the induciœœ of charge shall be fifteen days, as in an extract of a decreet pronounced by the Court of Session.’ The charge that was given to the pursuers was not upon fifteen days, but upon six, and the case is the same therefore as if no charge at all had been given. The pursuers lay bye and took no exception to the charge, and gave no hint to Taylor of the discovery of the blunder. They allowed him to proceed as if the whole steps taken had been in due and regular form, and it was only after he had applied to the Sheriff, under the 8th section of 43 and 44 Vict. cap. 34, for a decree ordaining the pursuers to execute a disposition omnium bonorum that they made known the blunder they had discovered.

“There is an averment in the record that the defenders' proceedings were malicious and without probable cause, thus distinguishing the case from that of Kinnes, and making the action relevant. These words, however, must be inserted in the issue.”

The pursuers reclaimed against the Lord Ordinary's interlocutor dismissing the action so far as laid against Paterson, Cameron, & Co. They also moved the Court to vary the issue allowed by the Lord Ordinary against Taylor by the omission of the words “maliciously and without probable cause.” They moved the Court to approve of two issues as against each of the defenders, one applicable to J. B. Smith & Co., the other to J. B. Smith as an individual. The issues proposed as against Paterson, Cameron, & Co. were precisely similar to those proposed as against the defender Taylor.

Argued for pursuers—The defenders had used a very stringent diligence, calculated to do very serious injury to any mercantile business, and had blundered it, and for that they were responsible. They had done so without inquiry as to the pursuers' solvency. The three questions for the determination of the Court were (1) The liability of Paterson, Cameron,

Page: 220↓

& Co.; (2) Whether the pursuers were bound to disclose to the defenders the blunder which had occurred, assuming them to have discovered it? (3) Must the issue contain the words “maliciously and without probable cause?” Taking the last of these points first, the case was one of wrongous use of diligence, and in such case no such words ought to be put in the issue. The process of cessio introduced by the Act of 1880 was a diligence and not a judicial proceeding. It was not a case of proceeding in foro contentioso, but a case in which the party against whom the application was made had in the first instance no opportunity of opposing the diligence, and the judge on ex parte statement granted the warrant applied for. In this respect it was like a landlord's sequestration, or a meditatio fugœ warrant, or a process caption. This distinguished the present from the case of Kinnes referred to by the Lord Ordinary, which was the case of a judicial proceeding in foro contentioso, being a case of mercantile sequestration in which the debtor may from the first moment appear and object to the sequestration being granted— Wolthekker, 1 Macph. 211; Gibb, 11 Macph. 705 (Lord Cowan's opinion). As to the first question, the liability of the defenders Paterson, Cameron, & Co., the case against them was one of a positive wrongful act done to the pursuers by them, and the Lord Ordinary had applied the rule applicable to mere omission. In such a case a third party cannot sue the agent, because he has no contract with him. But this was a case of delict, and the wrongdoer's agentand client were liable conjunctly and severally— Pearson, 11 Sh. 1008; Carne, 13 D. 1253; Inglis, 23 D. 1240. As to the second, and only remaining question. The pursuers were not bound to give notice of the blunder. That was at best only a ground of mitigation of damages ( Gibb, supra), but not a relevant ground of objection to an issue being allowed in the terms proposed. The pursuers were not bound in law to take any notice of proceedings which were totally inept. As a matter of fact, however, it would be proved that the pursuers had taken notice of the error— Bell v. Gunn, 1859, 21 D. 1008, founded on by the other side, was not hostile to the pursuers.

Other authorities on the question of agents' liability— Lorain, M. 13.949; Stewart, M. 13,989; Cowan, 11 S. 999; Wilson, 1846, 9 D. 379; Strang, 1849, 11 D. 379; Robertson, 23 D. (H. of L.) 8, and 33 Jur. 691; Inglis, 1861, 23 D. 1240; Watt, 1868, 8 Macph. (H. of L.) 77; Henderson, 1871, 10 Macph. 104; Begg on Law Agents, 296, 301; Addison on Torts, 5th ed., 211; Johnson, 1871, L.R. 329, 40 L.J. Ex. 201; Story on Agency, cap. xii. secs. 308–9.

Argued for defender Taylor—The question was not whether a petition craving to have a debtor ordained to execute a cessio was a diligence at some stage, but at what stage it becomes one? In its initiatory stage it was a judicial proceeding. No doubt it was a proceeding in the debtor's absence, but the Judge was directed by section 9, sub-sec. 3, to make “such order as the justice of the case requires.” The charge was indeed irregular, but the objection was technical. The proceedings were of the nature of an action. Even though an unfounded statement had been made, that was a case analogous to a case of damages for judicial slander, in which malice and want of probable cause must be averred— Bell v. Gunn, June 21,1859, 21D. 1008; Ormiston v. Redpath, Brown, & Co., Feb. 24, 1868, 4 Macph. 488.

Argued for defenders Paterson, Cameron, & Co.—This was a case where a technical error had occurred in a judicial proceeding to recover a just debt. The validity of the claim had been indeed established by decree of the English Courts. A law-agent in the circumstances of those defenders was bound to carry out his instructions in good faith, and no further bound. It would need wilful wrong or gross negligence to render him liable. The maxim cuipa tenet suos auctores tantum protected him. Bell v. Gunn, supra cited, was clearly in point. At all events, the pursuers should have given notice of the irregularity, and not have lain bye as they had done. Vigilantibus non dormientibus jura subveniunt.

At advising—