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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Whyte v. Forbes [1890] ScotLR 28_159 (29 November 1890)
URL: http://www.bailii.org/scot/cases/ScotCS/1890/28SLR0159.html
Cite as: [1890] SLR 28_159, [1890] ScotLR 28_159
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SCOTTISH_SLR_Court_of_Session
Page: 159↓
Court of Session Inner House First Division.
[
v.
Facts:
The claim under an order for interim execution pending appeal is a contingent debt, and therefore, in terms of section 14 of the Bankruptcy Act 1856, it cannot be the foundation of a petition for sequestration.
In an action of reduction by George Whyte against Simon Forbes (reported ante, vol. xxvii., p. 731, and 17 R. 895) the Lord Ordinary on 9th July 1890 pronounced an interlocutor dismissing the action and finding the pursuer liable in expenses, and on 11th June 1890 the First Division adhered, and found the pursuer liable in additional expenses.
Whyte having appealed against these judgments to the House of Lords, Forbes
Page: 160↓
petitioned the Court for execution pending appeal, in terms of the Act 48 Geo. III., cap. 151, sec. 17, and thereafter the Court decerned, and ordained Whyte to make payment to Forbes of the taxed amount of the expenses in said action, and of the dues of extract, amounting in all to £129, 8s. 10d., and allowed the decree to be extracted and execution to proceed thereon, notwithstanding Whyte's appeal, upon Forbes finding caution in common form to repeat the same in the event of the interlocutors being reversed in the House of Lords, and granted warrant to messengers-at-arms to charge Whyte upon the said decree, and to arrest his goods in payment of the said sum, and if Whyte failed to obey the charge, to poind his effects. By section 17 of 48 Geo. III. cap. 151, it is provided—“That when any appeal is lodged in the House of Lords, a copy of the petition of appeal shall be laid by the respondent or respondents before the Judges of the Division to which the cause belongs, and the said Division, or any four of the Judges thereof, shall have power to regulate all matters relative to interim possession or execution, and payment of costs and expenses already incurred, according to their sound discretion, having a just regard to the interests of the parties as they may be affected by the affirmance or reversal of the judgment or decree appealed from.”
Forbes found caution on 1st September, and having extracted the decree, presented a petition for Whyte's sequestration on 29th September, founding on the debt due to him under said decree.
Whyte opposed the petition.
By section 14 of the Bankruptcy (Scotland) Act 1856 it is enacted—“Petitions for sequestration may be at the instance or with the concurrence of any one creditor whose debt amounts to not less than fifty pounds, or of any two creditors whose debts together amount to not less than seventy pounds, or any three or more creditors whose debts together amount to not less than one hundred pounds, whether such debts are liquid or illiquid, provided they are not contingent.”
On 21st October the Lord Ordinary ( Kyllachy) refused the petition and decerned.
“ Opinion. — The petitioning creditor's debt consists of a claim for the expenses of an action in the Court of Session, for which expenses he has obtained decree, and which decree is under appeal to the House of Lords. In such circumstances the Lord Ordinary cannot doubt that the petitioner's debt is prima facie contingent, and as such cannot found a petition for sequestration.
The petitioner, however, maintains that having petitioned the Court for interim execution pending appeal, and having obtained an order for such interim execution, his debt is put in the same position as if it were absolute. In short, he states that the Court, by allowing decree to go out and to be extracted, and execution to proceed thereon, have impliedly authorised sequestration under the Bankrupt Statutes. The Lord Ordinary has given careful consideration to this argument, but he is unable to give effect to it. The process of sequestration is not, in his opinion, a process of execution within the meaning of the Court's order. Although it has in certain respects the effect of a diligence, it is primarily a process of distribution, and is not in any proper sense a process of execution employed by the petitioning creditor for the recovery of his debt.
On the whole, the Lord Ordinary considers that he must refuse the sequestration. He may add that it was admitted at the discussion that no instance can be found of sequestration following upon an order for interim execution pending appeal.”
The petitioner reclaimed, and argued—The decree which constitutes the petitioner's claim was absolute in its terms, the debt was presently payable, and the Court had allowed the execution of diligence to proceed on the decree. These facts demonstrated that the petitioner's claim was not a contingent debt, either in the general sense or in the sense of the Bankruptcy Act, because in both cases a contingent debt meant a debt not presently payable, on which the execution of diligence could not proceed—Bankruptcy Act 1856, sec. 53; Goudy on Bankruptcy, p. 185, et seq. In one case the Court had even allowed interim execution of a warrant of incarceration— Norval v. Smith, June 25, 1828, 6 S. 1017. In allowing execution to proceed upon the decree the Court had excepted no form of diligence, and accordingly the claim under the decree was a proper foundation for an award of sequestration, which was not only a process of distribution but also of execution— Stuart v. Chalmers, June 14, 1864, 2 Macph. 1218; Kinnes v. Adam & Son, March 8, 1882, 9 R. 698. Suppose that the House of Lords were to reverse the judgment of the Court of Session, Whyte's claim against the petitioner would be under the latter's, bond of caution, a different obligation altogether from the claim on which the petitioner founded in applying for sequestration.
The respondent was not called upon.
At advising—
Page: 161↓
It appears to me that the rational way to look at the present question is to ask whether, if an application had been made at the time when the application for interim execution was presented to allow the party to apply for sequestration, it would have been granted? That would have depended entirely on whether the debt constituted by the order for interim execution is a contingent debt or not, and the same question arises now where we are considering the effect to be given to the order there pronounced.
It seems almost beyond the possibility of a doubt that the debt is a contingent debt. Contingency may be of this nature—that the debt may never become due or payable. But surely it can be understood that debts, although not absolutely due, may be payable ad interim, which is the position of the present debt. It is not very easy to conceive cases arising under the ordinary operation of the law illustrating what I say, but I think an illustration may easily be obtained from cases of special agreement, such as are often before us in the transactions of companies—the purchase and sale of estates for company purposes, where the parties are taken bound to pay a sum of money, but in certain events the money will revert to them, and in certain events not one sixpence will be repaid. Is that not a contingent debt though presently payable. That is exactly the position of matters here. Present payment is necessary, but there may be repayments. Whether there will be or not depends on what may be the judgment of the House of Lords in the appeal.
I entirely agree therefore with the Lord Ordinary's judgment.
I think that the decree of the Court of Session ascertained the amount of the debt, and that it was due, but that decree is not final. The effect of the presentation of an appeal to the House of Lords was that it was no longer ascertained by a final judgment that the debt was due, and the matter thus remained in suspension, the question whether any debt was due at all depending on whether the judgment of the Court of Session may be affirmed or reversed. If that judgment is affirmed the debt will finally be ascertained to be due, and its amount will be fixed. If, on the other hand, the judgment of the Court of Session is reversed, it is equally clear that no debt will ever be due. That being so, it appears to me to be beyond question that the debt is a contingent debt, and it is because it is contingent, and for no other reason, that the necessity for an application to the Court of Session for interim execution arises. The Legislature thought it right that a party who has obtained a decree in his favour in the Court of Session should have the use of the money decerned for in the meantime till it was finally ascertained whether the debt was due or not. The object, therefore, of the application for interim execution does not in the least alter the nature of the debt. If in this case the judgment of this Court is reversed, the money for payment of which decree was granted will be repaid, and no debt will be due to the petitioner.
Such being the nature of the debt, I think it is a contingent debt, and I see no difficulty in the fact that the petitioner has been allowed the interim use of the money, and none the less is it a contingent debt because diligence may have been used on it. The debt having been ascertained to be a contingent debt, the Bankruptcy Act is a barrier over which the Court cannot pass to grant decree of sequestration.
We are familiar with the statute under which creditors who hold contingent claims are entitled to be ranked. But while it is allowed that in an existing sequestration the trustee should take cognisance of the contingent debt, it has not been thought proper that a contingent claim should be the foundation of sequestration, and I think the reason must be that the Judge applied to generally knows nothing of any debts excepting the petitioning creditor's debt, and the non-payment of a contingent debt does not constitute prima facie evidence of the debtor's inability to meet his obligations. If that be the reason of the statutory rule, I must say it applies strongly to a case of this description. In a certain sense no doubt this debt is due, because under statutory authority the Court has given decree for it notwithstanding an appeal to the House of Lords. But it is only interim execution, and there may be an order for repayment. I am of opinion that the interlocutor should be affirmed.
The Court adhered.
Counsel for the Petitioner— C. S. Dickson. Agent— Alex. Morison, S.S.C.
Counsel and Agent for the Respondent— Party.