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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Galbraith (Buchanan's Trustee) v. Campbell's Trustees [1885] ScotLR 22_602 (7 March 1885)
URL: http://www.bailii.org/scot/cases/ScotCS/1885/22SLR0602.html
Cite as: [1885] ScotLR 22_602, [1885] SLR 22_602
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SCOTTISH_SLR_Court_of_Session
Page: 602↓
Court of Session Outer House.
v.
Bankruptcy — Diligence — Poinding — Sequestration — Pari passu Ranking — Bankruptcy Act 1856, secs. 12 and 108.
Facts:
On 14th April 1884 a petition for decree of cessio bonorum against a debtor was presented by a creditor, and the Sheriff pronounced a deliverance on the same date. On 9th May, on a motion made in the cessio process the Sheriff awarded seqestration of the debtor's estates in terms of sec. 11 of the Bankruptcy and Cessio Act 1881. Held that 9th May and not 14th April was in the winding up of the debtor's affairs to be held as the date of sequestration.
Decree was obtained by a creditor against a debtor on 15th February 1884. The days of charge on the decree having expired without payment, the debtor, who was insolvent, was rendered notour bankrupt, and a poinding was executed on 1st March, the poinded effects being afterwards sold. On 14th April a petition for cessio was presented by another creditor, and in the cessio process on 9th May the Sheriff awarded sequestration. Held that the 9th May being the date of the sequestration, the creditor's poinding was effectual, because it had been executed more than sixty days prior thereto, but that the sequestration being equivalent to an executed poinding fell by operation of sec. 12 of the Bankruptcy Act 1856 to be ranked pari passu therewith in the proceeds of the sale of the poinded effects.
A. G. Buchanan, distiller, was tenant, under the trustees of the late Sir George Campbell of Succoth, of (1) the farm of Tambowie near Milngavie, at a rent of £280; (2) of Tambowie Distillery there, at a rent of £20.
On 29th January 1884 Campbell's trustees pursued Buchanan in the Sheriff Court of Stirlingshire for payment of (1) £596, 10s., with interest from Martinmas 1883, that sum being made up of rent and arrears of rent; (2) £140, with interest from Whitsunday 1884, but superseding extract till said term of Whitsunday.
On 15th February 1884 decree was obtained for the £596, 10s. and interest amounting to £12, 9s. 9d. This decree was extracted, and Buchanan charged to pay it on 22nd February 1884. He did not pay it, and on 1st March 1884, the charge having expired, Campbell's trustees executed a poinding of his stock and other effects, which was reported on 5th March.
On 5th April the poinded effects were sold. According to the roup roll the proceeds were £587, 17s. 7d., out of which expenses and preferable charges fell to be paid. Campbell's trustees maintained in this action that the sum received amounted, after proper deductions, to £503,18s. 5d.
Page: 603↓
On 14th April 1884 Hugh Baird & Co., brewers, Glasgow, presented a cessio petition, under the Cessio Act 1881, against Buchanan, to have him ordained to execute a disposition omnium bonorum for behoof of his creditors. They held a decree against him for £16, 10s. The deliverance of the Sheriff of the same date (14th April) appointed creditors to appear in Court on 9th May for the public examination of the debtor. On 9th May the agent for Baird & Co., the agent for Campbell's trustees, the agent for the bankrupt and his sister, who alleged herself to be a creditor, and the agent for ten other creditors to whom Buchanan owed small sums, attended the meeting. Buchanan's agent moved that in respect of the poinding and sale by Campbell's trustees the distribution of the estate should be under the Bankruptcy Act 1856, in order that the trustee should have the power of reducing the preference thereby obtained or attempted. This motion was concurred in by the agent for the ten creditors, and the Sheriff, after hearing the agent for Campbell's trustees in opposition to it, pronounced this interlocutor:—“The Sheriff-Substitute having considered the said motion and heard the agent for the late Sir George Campbell's trustees in opposition thereto, and in respect it appears from the state of affairs in the process that the liabilities of the debtor exceed the sum of £200 sterling, and that it would be expedient, having regard to the whole circumstances of the case, to give effect to said motion, therefore, and in terms of section 11 of 44 and 45 Victoria, chapter 22, sequestrates the estates which now belong, or shall hereafter belong, to the debtor and defender Alexander Graham Buchanan, distiller, Tambowie, by Milngavie, before the date of his discharge, and declares the same to belong to his creditors, for the purposes of the Bankruptcy (Scotland) Act 1856, and Acts explaining and amending the same.” He appointed 20th May as the date of the meeting to elect a trustee.
This notice was advertised by the bankrupt's agent in the Gazette, the advertisement stating that the first deliverance was dated 9th May 1884.
On 20th May the meeting was held (the agent for Campbell's trustees not attending), and W. B. Galbraith, accountant, was elected trustee.
This was an action by him, as trustee, against Campbell's trustees, for decree against them to exhibit an account of their intromissions with the proceeds of the sale under the poinding, and for payment of £600 as the balance thereof.
He averred that Buchanan was insolvent when the charge on the decree obtained by Campbell's trustees expired, and that therefore by insolvency concurring with expiry of the charge he was rendered notour bankrupt as on 1st March 1884, in terms of the Debtors (Scotland) Act 1880 (43 and 44 Vict. c. 34), the 6th section whereof provides—“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.”…
In answer to this averment the defenders denied that Buchanan was insolvent at the date of the expiry of the charge, and averred that he had estate of sufficient value to satisfy the charge and meet the other bona fide claims then competent against him, which it was averred did not amount to more than £120.
The pursuer also founded on sec. 42 of the Bankruptcy (Scotland) Act 1856, which enacts, that “in all questions under this Act, or preceding Acts, regarding sequestration of the estate of debtors, the sequestration shall be held to commence and take effect on and from the date of the first deliverance on any petition for sequestration, which shall be held to be the date of sequestration although the sequestration be not actually awarded until a later date;” and on sec. 108, which enacts that “the sequestration shall, as at the date thereof, be equivalent to an arrestment in execution, and decree of forthcoming, and to an executed or completed poinding; and no arrestment or poinding executed of the funds or effects of the bankrupt on or after the sixtieth day prior to the sequestration shall be effectual; and such funds or effects, or the proceeds of such effects if sold, shall be made forthcoming to the trustee, provided that any arrester or poinder who shall thus be deprived of the benefit of his diligence shall have preference out of such funds or effects for the expense bona fide incurred by him in such diligence;” and on sec. 12, which enacts inter alia, “that arrestments and poindings which shall have been used within 60 days prior to the constitution of notour bankruptcy or within four months thereafter shall be ranked pari passu as if they had been all used of the same date.”
He averred and maintained that the poinding by Campbell's trustees was used and executed after the completion of the notour bankruptcy of Buchanan; that the date of Buchanan's sequestration was the 14th April, which was the date of the first deliverance in the cessio process, and that the poinding being thus executed after the 60th day prior thereto, was ineffectual; or at all events, even if effectual to any extent, that the sequestration fell to be ranked pari passu with it under sec. 12 above quoted, and that the proceeds of the sale must be made forthcoming to him as trustee, subject to any other preference which Campbell's trustees could instruct.
Campbell's trustees maintained that the poinding having been used on 1st March, and the date of sequestration being 9th May, the poinding was executed 69 days before the sequestration, and was effectual, and further, that on a sound construction of the Bankruptcy Act 1856 the sequestration was not equalised with it, and that they were entitled to retain the proceeds of the sale.
Authorities—2 Bell's Comm. 5th ed. 79, 80 (7th ed. 75, 76); Bell's Comm. on the Sequestration Statutes, 49 and 67; Burton on Bankruptcy, 104 and 366 et seq.; Kinnear on Bankruptcy, 18, 20, 52; Adam & Son v. Kinnes, 10 R. 670; M'Farlane v. Greig (1831), 9 S. 529; Nicolson v. Johnston & Wright, December 6, 1872, 11 Macph. 179; M'Ewan v. Young, May 27, 1817 F.C.
The Lord Ordinary pronounced this interlocutor:—“Finds that in terms of the Bankruptcy Act 1856 the Sequestration is equivalent to a poinding executed of the same date, and entitled to be ranked pari passu with the poinding at the instance of the defenders on the proceeds of the sale mentioned in the libel: Finds that the defenders
Page: 604↓
“ Opinion.—The action is maintained upon two separate grounds:—(1st), that the defenders' poinding is ineffectual by reason of its having been executed within sixty days of sequestration; and (2d), that if it be effectual the sequestration is equivalent to a poinding executed within four months of notour bankruptcy, and is therefore entitled to be ranked pari passu with the defenders' poinding as if both had been used of the same date.
The first question depends upon the date of the sequestration. The poinding was executed on the 1st of March 1884. A petition for decree of cessio bonorum was presented on the 14th of April, and on the 9th of May the Sheriff, on a motion to that effect in the process of cessio, awarded sequestration in terms of the 11th section of the Act 44 and 45 Vict. cap. 22. The effect of this deliverance was that thereupon the provisions of the Bankruptcy Acts applied as if sequestration had been awarded upon a petition in terms of section 29 of the Bankruptcy Act 1856. But the deliverance awarding sequestration, and the motion upon which it was pronounced, were both subsequent to the sixtieth day after the execution of the poinding, and it follows that the 108th section of the Act of 1856 which thereupon came into operation cannot have the effect of cutting down the poinding unless some earlier date can be taken as the date of the sequestration in the sense of that section. The pursuer maintains that the first deliverance in the process of cessio is to be taken as the first deliverance in the sequestration, and therefore as the date of the sequestration under the 42d section of the Bankruptcy Act. I cannot assent to this contention. The process of cessio bonorum differs from a sequestration in many respects, and particularly in this, that it has not the same effect in cutting down preferences which individual creditors may have obtained by the use of diligence, and it is just because of this difference that it may be expedient or necessary in such a case as the present that the cessio should be dismissed—to use the words of the marginal title—and sequestration awarded. The process of cessio may thus be superseded by a sequestration, but they are not one and the same but two different processes. If it had been intended that the award of sequestration should have a retroactive operation so as to give to the previous proceedings in the cessio the same effect in law as if they had been proceedings in a sequestration with the result of cutting down rights already perfected and untouched by the cessio, this must in my opinion have been expressly enacted. I conceive therefore that the deliverances before the 9th of May, when the Sheriff was for the first time asked to sequestrate, were deliverances in a process of cessio bonorum. and not in a sequestration, and that the first deliverance in the sense of the 42nd section was that by which sequestration was awarded.
But although the poinding is not cut down, I am of opinion that under the 12th section of the Bankruptcy Act the sequestration must be regarded as a poinding to be ranked pari passu upon the proceeds of the sale. The enactment of the 108th section that the sequestration shall be equivalent to an executed poinding is absolute and unqualified. It is not for any limited or special purpose, but generally for the purposes for which a poinding may be effectual, that the sequestration is made equivalent to a poinding. There appears to me, therefore, to be no sufficient ground for denying to the sequestration the effect which the 12th section of the same statute gives to poindings in general. The result is that the defenders' poinding is not cut down by the sequestration, but that since it was used at the same date when notour bankruptcy was established, all other poindings within four months thereafter, including the sequestration, are brought up to the same level, and must be ranked pari passu on the proceeds of the sale. This is in accordance with the opinion expressed by Lord Deas in Nicolson 11 Macph. 179, and although the point was not decided his Lordship's opinion on the construction of the statute is of high authority. It is said that the bankrupt was not insolvent at the expiry of the charge, and therefore that notour bankruptcy was not duly constituted. But the notour bankruptcy is conclusively established by the proceedings in the cessio and by the award of sequestration.
The form of action is in conformity with the provisions of the 12th section of the Bankruptcy Act.”
Counsel for Pursuer— Pearson. Agents— Cairns, Mackintosh, & Morton, W. S.
Counsel for Defenders— Trayner— Macfarlane. Agents— Tait & Crichton, W.S.