Scottish Court of Session Decisions

On 21st September 1888 Duncan Robertson & Sons, hat manufacturers, Glasgow, in virtue of a decree obtained in the Sheriff Court of Elgin on 25th July 1888, charged Alexander Falconer, tailor in Elgin, to pay to them the sum of £25, 6s. 7d. of principal and expenses contained in that decree. The days of charge having expired without payment, Robertson & Sons presented a petition in the Sheriff Court of Elgin for decree of cessio against Falconer, and served notice thereof upon him on 25th September 1888. The defender deponed that he had got into difficulties about four years before; these had been tided over for a time, but more than a year before he had found it necessary to grant a trust-deed for behoof of his creditors in favour of Mr Craig, C.A., Edinburgh, who was acting for him at the time. His creditors had acceded to the deed, and he had arranged to pay them 15s. or 16s. per £, and had signed bills payable at three, six, and nine months for payment of that composition. He had paid the first instalment, and part of the second, but none of the third. The pursuers were not creditors under that trust-deed.

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In June or July 1888 payment had been demanded of certain debts due to the pursuers and two other creditors, and these creditors had subsequently sued him therefor. The agent for the creditors subsequently asked him to grant a trust-deed in favour of William Stephen, accountant in Elgin, but he had declined to do so. On 26th September, however, he granted a trust-deed in favour of Mr Craig, the trustee under the previous trust-deed, and Mr Craig had disposed of his stock-in-trade, fittings, and book debts.

In the state of affairs produced by the defender, and deponed to as correct, the value of the assets belonging to him was set down at £108, 19s. 4d., and the amount of the liabilities at £294, 14s. 9d., of which £14 was a preferable claim. The claim of the pursuers and of two other creditors whom he represented amounted in all to £64.

By the Debtors Act 1880 (43 and 44 Vict. c. 34), sec. 9, sub-sec. 3, it is provided that on a petition for cessio being presented at the instance of a creditor, “the Sheriff shall, on such examination being taken, allow a proof to the parties if it shall appear necessary, and hear parties viva voce, and either grant decree decerning the debtor to execute a disposition omnium bonorum to a trustee for behoof of his creditors, or refuse the same in hoc statu, or make such other order as the justice of the case requires.”

The Sheriff-Substitute ( Rampini) on 2nd November 1888 pronounced the following interlocutor:—“Finds that the defender executed a trust-deed on 26th September last in favour of Mr James Craig, C.A., Edinburgh, for behoof of his creditors: Finds that his estate is in process of being realised, and is in fact almost realised under said deed: Therefore refuses the prayer of the petition, dismisses the same: Finds the petitioners liable in expenses, &c.

“ Note.—The Sheriff-Substitute has no difficulty in refusing the prayer of this petition. The estate is all but wound up under the trust-deed of 26th September 1888, and not a word has been said against the manner in which the trustee under that deed has done or is doing his duty. Looking to the fact that cessio is a mere distributive process, and that distribution has already taken place, or nearly so, by another process equally as effectual, and apparently more agreeable to the debtor and the majority of his creditors, the present application is a mere abuse of the process of this Court, and accordingly the Sheriff-Substitute has felt bound to exercise the discretion allowed him by the statutes.”

The pursuers appealed to the First Division of the Court of Session.

Argued for the appellants—No doubt the Sheriff had a discretion to grant or refuse cessio, but in this case he should have granted it. The defender had abused the privilege of granting a trust-deed by first refusing to grant one in favour of a person in whom the creditors had confidence, and then granting one behind their backs to a person in whom they had no confidence. It was a device on his part to prevent decree of cessio being granted. Questions were to be raised as to Mr Craig's administration under the previous trust-deed, and it would not be proper for him to be in a position where he might have to decide questions in which he was interested as a party. The creditors were entitled to have the advantages which decree of cessio would give them, and these were considerable, as the trustee in a cessio might be ordered by the Sheriff to find caution, and his accounts were subject to supervision by an officer of the Court—Act of Sederunt anent Process of Cessio, December 22, 1882, secs. 3 and 18. In the case of a trust-deed there might be difficulty in supervising the conduct of a trustee—Bell's Com. (7th ed.) ii. 392–397, (5th ed.) 495–502.

Argued for the respondent—In the circumstances of this case the Sheriff-Substitute had rightly exercised the discretion given him by the Debtors Act 1880, in refusing decree of cessio. The pursuers had no objection to a trust-deed if they had obtained the trustee they wished. The creditors represented by the pursuers only represented a small part of the claims against the defender. The allegations against Mr Craig's management should have been made before the Sheriff, who had the discretion in the matter. Even sequestration, it had been said, need not be granted if there were equitable considerations of weight to the contrary—Opinion per Lord President MacNeill in Campbell v. Dunlop, June 11, 1862, 24 D. 1103. Here the estate had been almost all realised, and only a very small sum was left for distribution which would be swallowed up by expenses if decree of cessio were granted— Ross v. Hanstead. November 16, 1885, 13 R. 207.