Scottish Court of Session Decisions

On the 1st October 1883 a petition was presented to the Sheriff of Forfarshire at Dundee by Robert Yeaman of The Lea, in the county of Edinburgn, for sequestration of the estates of Alexander Gilruth Fleming, of 57 Commercial Street, Dundee. The petitioner produced (1) an oath to an alleged debt of £1060, 13s. 8d., of which £1000 was said to be an advance by the deponent to Fleming, conform to a bill drawn by Fleming on the firm of J. & W. Kinnes, and endorsed in blank by him to the deponent, and produced with the oath, the remainder being interest thereon; (2) an oath to £1591, 12s. 11d., being the balance on an account-current between Fleming and the deponent from 21st May 1879, conform to thirteen holograph acknowledgments of debt or I O U's granted by Fleming to the deponent, and constituting the vouchers of the debit side of the account. The Sheriff having common form granted commission to recover evidence of Fleming's notour bankruptcy and of the other facts necessary to be established in order to obtain his sequestration, there were recovered extract decrees in a petition for recovery of calls at the instance of the liquidators of the Pant Mawr Slate and Slab Quarry Company

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(Limited), dated 20th March and 16th May 1883, with execution of charge thereon dated 8th June 1883. This charge expired on June 14, 1883. There was also recovered a trust-deed for creditors granted by Fleming in May 1879 in favour of Mr R. F. Hunter, solicitor, Dundee, on which a dividend of 1s. 6d. per £1 had been paid. This trust for creditors was still in existence.

Fleming having entered appearance to oppose the petition, parties were heard by the Sheriff.

With regard to the decrees for calls it appeared that on 13th June 1883, the day before the charge expired, informal intimation of an appeal to the House of Lords was made by Fleming's agent, but the order for service of the appeal was not obtained till 18th, or served till 20th June, six days after it expired. The liquidator had obtained an order for interim execution pending appeal on condition of finding caution for repayment to the petitioner in case the appeal succeeded. By agreement between the parties, in place of said interim execution, Fleming had consigned in bank, in name of the agent for the liquidators, and of another person, the amount in the decrees.

With regard to the oath for £1591 there was produced a letter (signed by Yeaman, but not holograph of him or tested) to the following effect—“Dear Sir,—Referring to the agreement betwixt you and me, dated 9th May 1881, by which I agreed to advance you £1000 on certain conditions, I hereby declare that although it is mentioned in said agreement that I had advanced you £1000 on an I O U, that said £1000 has been advanced or is to be advanced to you at various times on I O U's on an open current account betwixt you and me, and the first advance on said open current account in connection with said loan of £1000 was made on 28th February 1881, and so on thereafter from time to time. Referring also to the £500 originally advanced by Mr David Stewart for your furniture, and latterly by me, and for which I ultimately accepted a bill signed by your brothers James and David Fleming, with interest thereon added, and in order to pay this advance and any balance which may be due me on said open current account before referred to, over the above said £1000, under the said agreement, which falls to be deducted from said current account before said balance can be declared, I hereby acknowledge having received a deposit-receipt of the Scottish Banking Company (Limited) for £1000, dated 22d January 1883, and lodged for a period of five years, with interest payable at overdraft rates six monthly—£600 of said deposit-receipt being from David Fleming in payment of said bill for furniture, and £400 from you, which £400 is in excess of any balance due me, which can be charged against you, and for personal advances under said open current account, and interest due under said agreement after £1000 under said five years' agreement has been deducted. The I O U's granted or to be granted by you in connection with said current account, shall, until final adjustment, be retained by me as vouchers of said current-account, upon which I cannot sue you nor use diligence for them against you. In the adjustment of said account sums fall to be credited said current account for bills lodged with me at various times as against any of these I O U's, and also other payments made by you on my behalf. Likewise on said adjustment, all advances on IOU's against the High Street stance belonging to me shall not be chargeable against you in said account, are null and void. Also any advances on I O U's which were made in connection with a joint adventure with J. & W. Kinnes' estates and properties shall fall to be adjusted, and shall not be included in said current account, but shall be charged against the account for the joint adventure.”

The Sheriff ( Cheyne) (before whom insolvency I was not disputed by Fleming, it being maintained for him that notour bankruptcy had not been constituted) granted sequestration.

This was a petition by Fleming for recal of the sequestration, which was opposed by Yeaman.

The petitioner pleaded—“(1) The petitioner not being, and not having been, at the date of presenting the said petition for sequestration notour bankrupt, the sequestration ought to be recalled. (2) Under the agreements before referred to, the respondent having stipulated that he should not be entitled to sue or do diligence on the documents founded on in the oaths produced with the petition for sequestration, the said proceedings were inept. (3) The alleged debt deponed to in the second oath produced with said petition having been unascertained and contingent could not form a ground for sequestration.”

The Lord Ordinary on the Bills ( Kinnear) dismissed the petition.

Opinion.—The petitioner seeks to have the sequestration recalled upon two grounds—(1st) That he is not notour bankrupt; and (2d) that the debt upon which the petitioning creditor claims is not sufficiently vouched, or at least is not a debt upon which he can obtain sequestration.

“1. Notour bankruptcy is said to be constituted under the 6th section of the Debtors Act 1880, ‘by insolvency concurring with a duly executed charge for payment, followed by the expiry of the days of charge without payment.’ The charge, which proceeded upon extract decrees for calls, expired upon the 14th of June 1883. It is not disputed that it was duly executed, not that the days of charge expired without payment. But it is said that on the 13th of June the petitioner intimated to the agent of the liquidator, who had obtained the judgments on which the decrees in question proceed, that he was about to appeal to the House of Lords, that an appeal was presented accordingly, and that the usual order of service of appeal was duly served upon the 20th. A petition for interim execution was thereafter presented to the Court by the liquidator, the prayer of which was granted on condition of the liquidator finding caution for repayment to the petitioner in the event of the appeal being successful. Payment has not been made in terms of this order, but by agreement between the parties the sum due under the decree has been consigned in bank to await the result of the appeal, and that consignation must be taken as equivalent to payment under the order for interim execution.

If there were no other evidence of insolvency I should have difficulty in holding that in these circumstances notour bankruptcy had been constituted by non-payment within the days of charge. But it is not alleged that the petitioner is solvent, and his insolvency is proved by the production of a trust-deed which he has granted for behoof of his creditors, and which proceeds

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upon the narrative that his affairs had become embarrassed, and that he is unable to pay his debts. The insolvency of the petitioner was not disputed either in this Court or, as I understand, before the Sheriff when sequestration was awarded. But if insolvency is proved there can be no question as to the notour bankruptcy. The new mode of constituting notour bankruptcy differs from the methods for which it has been substituted in this respect, that the conditions required by the 7th section of the Bankruptcy Act 1856, in cases where imprisonment was competent, were such as in themselves afford a very much stronger presumption of insolvency than the mere expiry of a charge, but if insolvency be otherwise established, then, under the statute of 1880, the lapse of the days of charge without payment operates in precisely the same manner in the constitution of notour bankruptcy as incarceration concurring with insolvency under the Act of 1856. The petitioner, therefore, was undoubtedly notour bankrupt before he presented his appeal, and if notour bankruptcy has once been constituted it cannot be affected by any proceeding for bringing the decree under review — Sutherland v. Sutherland, 5 D. 544; Ker v. Scot, 7 S. 438. Nor does it appear to me that the arrangement under which the debt has been satisfied affects the question. For the reasons given by the Sheriff it does not take off from any presumption of insolvency which might have arisen from the fact of a charge having expired without payment, but it is hardly material to consider how far such a presumption might have been affected, since the insolvency is established otherwise and independently of the charge.

2. I think the Sheriff right in sustaining the debt of £1591, which forms the subject of the second oath, as a sufficient qualification to apply for sequestration. The claim is for a balance said to be due to the petitioning creditor on an account current, the debit entries of which are duly vouched by I O U's. The true balance is said not to have been ascertained. But no ground was suggested for holding that the oath and vouchers would not be a perfectly sufficient qualification were it not for the very peculiar terms of the stipulation quoted in the petitioner's condescendence.

By this stipulation the creditor undertakes that ‘until final adjustment of the account by you’—that is, by the bankrupt—the I O U's ‘shall be retained as vouchers of said current account, upon which I cannot sue you, nor use diligence for them against you.’ No doubt sequestration is a diligence, but it is not in my opinion a diligence of the kind contemplated by the agreement, or that can possibly operate in the way which the agreement was meant to prevent. The meaning appears to me that although I O U's are to be granted, which will ex facie be liquid documents of debt, they are not to be used as grounds of diligence for enforcing payment of the sums contained in them until the true amount of the balance due shall have been ascertained. But they are nevertheless to be available as vouchers, and even if the debtor had remained solvent, I do not think it doubtful either that the petitioning creditor might have used them as vouchers in any process which he might have found it necessary to raise for the purpose of ascertaining the balance, or that when the balance had been so ascertained, he might have enforced payment by decree obtained in that process. But now that the debtor is notour bankrupt I think he is entitled to use them, not as grounds of direct diligence for immediate payment, but as vouchers of a debt upon which he may obtain sequestration as the only process of liquidation binding upon all parties. The sequestration will not enable the petitioning creditor to obtain payment, either of the I O U's or of a dividend upon the sums contained in them, until the true balance shall have been ascertained, and it will not enable him in any way to defeat the stipulation because he is using the I O U's only for the purpose for which they were granted, and which is expressly reserved to him by the terms of the agreement—that is, as vouchers to prove a debt. It may not be a liquid debt, but in the course of the sequestration it will be liquidated, and in the meantime it is a perfectly sufficient qualification. Agreeing with the Sheriff that the claim for £1591 is sufficient, I do not think it necessary to consider the question as to the sufficiency of the other debt for £1000 also.

“On the whole matter I think that the sequestration was properly awarded, and that it cannot be recalled.”

The petitioner reclaimed, and argued—(1) That there was no notour bankruptcy in the present case, but even if there was, the petitioning creditor was not duly qualified, because the debt with which he supported the petition was contingent, and proceeded upon vouchers which he (the petitioning creditor) had barred himself from using. (2) There was no expired charge on the decree for calls, owing to the appeal to the House of Lords, by which appeal also any effect the decree might have to constitute notour bankruptcy (assuming insolvency) was prevented. But (3) the petitioner was not insolvent, and should be allowed a proof to that effect.

Counsel for the respondent were not called upon.

At advising—