Scottish Court of Session Decisions

On 17th June 1896 the Sheriff of Aberdeen, Kincardine, and Banff awarded sequestration of the estates of Alexander Walton, cycle manufacturer, Aberdeen, upon the petition of the bankrupt, with concurrence of John Gordon, cycle warehouseman, Banff, a creditor to the extent of £271.

The account signed as relative to the said concurring creditor's affidavit contained no specification of the articles supplied by him to the bankrupt, but merely stated the items under different dates as “to goods.’

Messrs G. & W. Riddell, manufacturers, Aberdeen, and creditors of the bankrupt to the extent of £24, presented a petition to the Lord Ordinary on the Bills for recal of the sequestration on the ground that the above-mentioned account was not sufficiently specific, and did not satisfy the requirements of the 21st section of the Bankruptcy Act 1856.

Mr Walter Galbraith, C.A., the trustee in the sequestration, lodged answers in which he denied that the award of sequestration was invalid, and maintained that the petitioners were barred from insisting in their application by having acquiesced in the sequestration proceedings, inasmuch as they had voted in the election of a trustee.

The Bankruptcy (Scotland) Act 1856 (19 and 20 Vict. cap. 79), sec. 21, enacts that “in all cases the petitioning or concurring creditor shall produce with such petition an oath to the effect hereinafter specified, and also the account and vouchers of the debt as hereinafter provided.”

Section 49 enacts that “to entitle a creditor to vote or draw a dividend he shall he bound to produce at the meeting, or in the hands of the trustee, an oath to the effect and taken in the manner hereinbefore appointed, in the case of creditors petitioning for sequestration, and the account and vouchers necessary to prove the debt referred to in such oaths.”

On 24th July 1896 the Lord Ordinary ( Pearson) pronounced an interlocutor recalling the sequestration and finding no expenses due to or by either party.

Opinion.—“The affidavit itself is ex facie regular, but it describes the debt as ‘being the amount contained in an account for goods supplied by the deponent’ to the bankrupt, commencing on 21st November 1895, and ending on 30th May 1896. This account, which is duly signed as relative to the affidavit, begins with 48 items under different dates, and of varying amounts; hut the only description vouchsafed as to each and all of them consists in the word ‘goods.’ The words ‘to goods’ appear opposite the first item, and they are carried down by the usual marks opposite each of the others. Then follows the credit side of the account, which—allowing for four cross entries—results in reducing the amount charged for the ‘goods’ (£355, 12s. 1d.) to £271, 19s. 10d.

The statutory requisites are set forth in section 21 of the Bankruptcy Act, thus—‘the petitioning or concurring creditor shall produce with such petition an oath to the effect hereinafter specified, and also the account and vouchers of the debt as hereinafter provided; failing which production, the petition shall be dismissed.’ The old statute of 54 George III., required production of ‘the grounds of debt or a certified copy of the account’; but these words do not occur in the Act of 2 and 3 Victoria, or in the subsisting Act. The requisite now is, production of ‘the account and vouchers of the debt as hereinafter provided,’ that is (apparently) as provided in section 49, namely, ‘the account and vouchers necessary to prove the debt referred to in such oath.’

Now, in the case of a claim upon an open account for goods supplied, there are no vouchers in the strict sense of that word. But it is the more necessary that the account itself should be specific, not merely as to date and price, but as to the description of the goods supplied. It was pointed out that here the ‘goods’ were furnished by a cycle warehouseman to a cycle manufacturer; and I was asked to draw the inference that the goods had to do with cycles and their appurtenances. But in my opinion that is not enough. I think that all parties concerned are entitled to more specific information in the account itself, and the tradesman's own books ought to have enabled him to furnish that information. Accordingly, this seems to me not so much a failure to vouch, but rather a failure to lodge a proper account.

The point seems to me to be decided by the case of Ballantyne v. Barr, 1867, 5 Macph. 330. There the concurring creditor's account amounted to £57, 10s. It consisted of five items. The first three were unobjectionable. The fourth was £10 for ‘cash lent you,’ and the fifth was—‘June 18. To amount of goods, £17.’ The Court held that both these were inadmissible, Lord Neaves saying expressly, ‘the £17 which is essential to bring the creditor's claim up to the statutory amount is stated in a form which is quite insufficient and incompetent.’

This being so, the question is not one of discretion but of competency. The objection is one which appears on the face of the claim, and is not within the rule, applicable to cases where the objection is latent, that the Court may recal the sequestration or not upon general grounds of expediency— Mitchell v. Motherwell, 1888, 16 R. 122.

For the same reason I think the plea of acquiescence in the sequestration through Messrs Riddell having voted in the election of trustee must be rejected. This question also arose in the case of Ballantyne v. Barr, and was so decided by the Court, distinguishing it from Ure v. M'Cubbin, 1857, 19 D. 758.

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I therefore recal the sequestration. The expenses of the petition itself cannot be allowed— Smith Brothers & Company, 1860, 23 D. 140, and with regard to the expenses caused by the opposition, I think that in the circumstances none should be awarded.”

The trustee reclaimed, and argued—The case was distinguishable, though doubtless with difficulty, from Ballantyne v. Barr, January 29, 1867, 5 Macph. 330, because in that case the account was a mixed one. Here “goods” could only mean articles connected with the cycle trade. In any event, the defect did not necessarily invalidate the sequestration, and as the petitioners had acquiesced in the proceedings they were barred from insisting in the recal— Ure v. M'Cubbin, May 28, 1857, 19 D. 758.

The petitioners' argument sufficiently appears from the opinion of the Lord Ordinary. In addition to the cases there referred to the following case was cited— Tennent v. Martin & Dunlop, March 6, 1879, 6 R. 786 ( per Lord President Inglis at p. 788).

Lord President—I agree with the Lord Ordinary. I think with his Lordship that the point is decided by the case of Ballantyne cited in the note. It is extremely difficult, as Mr Stewart avowed, to find any distinction; and I do not think, so far as I can satisfy myself, that the distinctions which have been pointed out are substantial. I think they are rather superficial. It seems to me that the view of the Court there was, that inasmuch as an open account cannot be instructed by vouchers in the proper sense of the term, there is the more need for there being such a specification as shall indicate to the body of creditors what is the origin and nature of the claim. Now, in the case there, as here, the use of the general word “goods” does not advance knowledge at all; and accordingly it seems to me that, in reason, the Court had very good ground for holding that that was not an adequate compliance with the rule of the statute, and that they were not furnished with the measure of information which enabled the persons interested to scrutinise and judge of the validity of the claim. Accordingly, treating this as a subject-matter upon which the law ought to be settled by a decision, I for my part am disposed to follow the case of Ballantyne, which disposes both of the question of the sufficiency of the account and also of the legal result. For if this be not a claim vouched in terms of the statute, then the sequestration should not have been granted, and it is not a matter of discretion but of right that the sequestration should be recalled.