Scottish Court of Session Decisions

This was an action at the instance of Francis More, chartered accountant, the trustee upon the sequestrated estates of P. J. F. Graeme of Aberuthven, against Mrs Giersberg, sister of the said P. J. F. Graeme, and her husband, for payment of the sum of £1509, 6s. 2d., the balance of advances alleged to have been made by the bankrupt to his sister.

The defenders were resident in Germany, and in order to found jurisdiction arrestments were used by the pursuer in the hands of the executor of Mrs Oliphant of Gask, by whom a legacy of £4000 had been bequeathed to Mrs Giersberg.

The defenders denied that the arrestments used had the effect of founding jurisdiction against them, Mrs Oliphant's executor having no funds in his hands belonging to either of them. They averred that the legacy bequeathed by Mrs Oliphant fell under their antenuptial marriage-contract, by which Mrs Giersberg had, with consent of her then intended husband, assigned, disponed, and conveyed to trustees, of whom the said Patrick J. F. Graeme was one, “the whole estates, heritable and moveable, real and personal wheresoever situated, then belonging to the said Amelia Ann Margaret Graeme, or which she shall conquest, acquire, succeed to, or become interested in during the subsistence of the said intended marriage.”

The purposes of the trust were to pay the annual income of the trust-estate to Mrs Giersberg, exclusive of the jus mariti of her husband and of the diligence of her creditors, as an alimentary provision. The fee of the trust-estate was to be held for the children of the marriage, if there were any, and failing them for Mrs Giersberg's heirs and assignees.

The pursuer in reply stated that at the date of the execution of the said arrestments Mrs Giersberg's marriage-contract had not been intimated to Mrs Oliphant's executor.

The defenders pleaded no jurisdiction.

The Lord Ordinary ( Kinnear) on 21st February 1888 sustained this plea-in-law for the defenders, and in respect thereof, dismissed the action, and decerned.

“ Opinion.—The question of jurisdiction depends upon the validity and effect of an arrestment by which the pursuer has endeavoured to attach a legacy bequeathed by Mrs Oliphant of Gask to the defender Mrs Giersberg, in the hands of Mrs Oliphant's trustees.

By her antenuptial contract of marriage the defender conveyed to trustees the whole estate then belonging to her ‘or which she should conquest, acquire, or succeed to, during the subsistence of the marriage and the purposes of the trust are to pay the annual income of the trust-estate to Mts Giersberg exclusive of the jus mariti of her husband and of the diligence of her creditors as an alimentary provision,’ and to hold the fee for the children of the marriage. If the trust had been brought into operation therefore so as to affect the legacy in question, it is clear enough that it could not be attached by the diligence which the pursuer has used, on the allegation that as trustee on the sequestrated estate of Mr Patrick Graeme, he is a creditor of Mrs Giersberg. But it is settled by the case of Tod v. Wilson ( 7 Macph. 1100) and Whyte v. Campbell ( 11 R. 1078) that such an assignation in an antenuptial contract must, like any other, be completed by intimation in order to exclude subsequent assignees for onerous causes or the diligence of creditors, and the assignation in question was not intimated to Mrs Oliphant's trustees before the date of the arrestments. The only question therefore is, whether the trustee on Mr Graeme's sequestrated estate was in a position to use this diligence as coming in place of the bankrupt.

The objection is that Mr Graeme was himself a trustee under the marriage-contract, and it appears to me to be well founded. It is not disputed that Mr Graeme had accepted the trust, and it follows that assuming him to be a creditor of Mrs Giersberg, he could not attach for payment of his own debt funds which it was his duty to protect from the diligence of her creditors for the benefit of the children of the marriage. But the trustee takes the personal rights of the bankrupt subject to the conditions under which he himself held them; and if the bankrupt, supposing him to have recovered the fund in question, would have been bound to hold it for the purposes of his trust, it would appear to me to follow that his trustee cannot recover it for payment of a debt due to the bankrupt himself. It is said that the doctrine by which the trustee takes the bankrupt's rights exactly as they stood in him applies only to property actually vested in him so as to be carried by the vesting clauses of the Bankruptcy Act, and not to the property of his debtors, which the trustee may recover independently of him by the use of the diligence which is open to any creditor. But the trustee can have no right independently of the antecedent rights of the bankrupt. He has no title to sue the defenders in respect of their alleged debt to the bankrupt except by virtue of a personal right of action in the bankrupt, which carries with it as an incident the right to use diligence; and if the bankrupt's right of action would not enable him to attach the particular fund in question by the diligence of arrestment, the fund must be equally protected against the diligence of the trustee. The pursuer's argument is that the trustee in a sequestration may recover for payment of debts due to the bankrupt a fund which the bankrupt himself could not have recovered or applied to that purpose without a breach of trust. This appears to me to be inconsistent with the principle laid down by the House of Lords in Fleeming v. Howden. The fund lies open to the diligence of Mrs Giersberg's creditors by reason of the bankrupt's failure to perform his trust, and that is an omission from which neither he nor his trustee can in my opinion take benefit to the prejudice of the beneficiaries whose interests it was his duty to secure.”

The pursuer reclaimed, and argued—The arrestments used had the effect of founding jurisdiction. The bankrupt had a claim against Mrs Giersberg, and that was now vested in the pursuer in virtue of the 102nd section of the Bankruptcy Act. The fund arrested had not passed to the trustees under the marriage-contract as the marriage-contract had never been intimated— Tod v. Wilson, 9 Macph. 1100; Whyte v. Campbell, 11 R. 1098. No doubt that was owing to a failure of duty on the part of the bankrupt

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as trustee on his sister's marriage-contract. But the pursuer did not represent the bankrupt in that capacity. The bar against the bankrupt did not affect the claim, but merely the fund arrested. To exclude the pursuer's diligence the bar must not be personal against the bankrupt, but inherent in the title on which the claim was founded— Bell's Comm. i. 302 (7th ed.) 298; Wylie v. Duncan, M. 10,269; Thomson v. Douglas, Heron, & Co., M. 10,229; Inglis v. Mansfield, 1 Shaw & M'L. 203. Wylie's case showed that in questions of heritable right the trustee could sue where the bankrupt could not. It would be an extension of the principle of Fleeming v. Howden, 6 Macph. (H. of L.) 113, to apply it to the circumstances of this case. An onerous assignee had been held not bound by latent equities affecting his cedent— Jeffrey v. Paul, 1 Shaw & M'L. 767.

The respondents argued—The dicta of the Judges in the case of Fleeming v. Howden—notably those of Lord Westbury—were directly applicable to the present case. The trustee in a sequestration took the estate tantum et tale as it stood in the bankrupt. He was subject to all the exceptions to which an assignee was subject under the rule assignatus utitur jure auctoris— Gordon v. Cheyne, 2 Shaw, 675; Redfearn, 1 Dow, 50, and 5 Paton 707; Scottish Widows Fund v. Buist, 3 R. 1078. In Molleson v. Challis, 11 Macph. 510, a trustee was held barred from taking advantage of the bankrupt's fraud. The principle of that case might equitably be extended to such a case of neglect as the present.

At advising—