Scottish Court of Session Decisions

The petitioner was the official liquidator of the Property Investment Company of Scotland, Limited, under an appointment dated 13th August 1890, and he presented this petition to the Court for power under the Companies Acts 1862 to 1886, and particularly under the 95th section of the Act of 1862, to prosecute certain reclaiming-notes either in his own name or in the name of William Albert Davis, as trustee on the sequestrated estates of John Richardson; and in the latter case, to approve of his giving the said William Albert Davis a guarantee or indemnity for expenses incurred or to be incurred of certain actions to which the reclaiming-notes related, or in such other form as the Court might direct.

John Richardson was a registered holder of certain shares in the Property Investment Company, upon which shares calls had been made but without payment, and in the year 1888 the company obtained decree against John Richardson for payment of £660 in respect of said unpaid calls. Upon this decree a charge was made, and thereafter upon 24th April 1889 the company sequestrated John Richardson, and William Albert Davis was appointed trustee in the sequestration. Besides the claim of the Property Investment Company in respect of said calls, the only other claims lodged in the sequestration were two in number, which taken together were considerably less than that of the company. The whole estate recovered by the trustee was insufficient to meet the expenses of the sequestration, and there was no further estate which could be recovered under the sequestration unless the trustee was successful in setting aside certain alienations of property granted by John Richardson between

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the years 1881 and 1886 in favour of his wife and daughter. The value of the property so alienated was about £1200, and the supposed reason of the alienation was that the bankrupt might evade payment of calls in respect of his shares in the Property Investment Company.

The trustee being unwilling to sue an action of reduction from want of funds, Mr Peter Couper, manager of the Property Investment Company, gave, with the knowledge and sanction of the directors, a letter of guarantee or indemnity to the trustee in the following terms, viz.—

“ The Property Investment Company of Scotland, Limited, 37 George Street, Edinburgh, 1st August 1889.

“W. A. Davis, Esq.,

“Trustee on Mr John Richardson's Sequestrated Estate.

“ Richardson's Sequestration.

“Dear Sir,—On behalf of this company I hereby undertake, in the event of your raising proceedings, to reduce the deeds granted by the bankrupt, and generally to ingather the sequestrated estates in terms of the creditors' instructions, to keep you skaithless of all responsibility and liability in the premises, including relief from all disbursements you may personally make in case of there being no funds in the sequestration ingathered by you from which you can obtain payment and relief. I also agree to pay you the usual fee for your trouble as the same shall be fixed by the Commissioners, should no funds be ingathered by you.—Yours truly,

“Adopted as holograph,

“ Peter Couper, Manager.”

Having received this letter, the trustee raised actions in the Court of Session against the wife and daughter of the bankrupt, but after a proof had been led the defenders were in each case assoilzied by decrees dated 25th July 1890. These judgments were under consideration of the directors of the company upon 29th July 1890 with a view to decide whether they should be reclaimed against, but before any decision had been arrived at the present petitioner was appointed official liquidator under a petition for the winding-up of the company.

The official liquidator on entering upon his duties consulted counsel in reference to said proceedings and his duty in the circumstances, and he was advised that he might either move to be sisted as pursuer in room of the trustee in the sequestration, or might give the trustee a further indemnity for expenses, but that in the former case he must undertake to relieve the trustee of all expenses already incurred, and that in the latter the trustee was entitled to require that the official liquidator should undertake to relieve him of all expenses both incurred and to be incurred in the said actions, so that in either case the trustee might, in the event of a deficiency of funds to meet the whole claims against the company, which the official liquidator anticipated might occur to some extent, obtain a virtual preference for the expenses incurred by him prior to the date of the liquidation. At the date of the official liquidator's application to the Court the trustee had no preference over the other creditors of the company for these expenses. The expenses of both sides in said actions to the date of the liquidation were estimated to amount to £300.

The official liquidator was further advised by counsel that the judgments of the Lord Ordinary were such as ought to be brought under review of the Inner House by reclaiming-note, but that his power to guarantee the expenses of an action carried on, not in the name of the company, but in another name in its interest, with the possible consequence of incurring liability for expenses already incurred, was so doubtful as to render it proper for him to lay the circumstances before the Court and ask special direction as to the course which he should adopt. Having full regard to the pecuniary issues at stake, the official liquidator concluded that in the interests of the company and its creditors a reclaiming-note against each of the said judgments should be prosecuted, and accordingly the application was made as above for the Court's sanction in prosecuting the reclaiming-notes.

The Court took time to consider the application, and thereafter—and especially in view of the opinion of counsel—sanctioned the prosecution of the process by the official liquidator in his name.