Scottish Court of Session Decisions

The estates of John Cruickshank were sequestrated in the Bill Chamber, and John Stuart Gowans, C.A., was appointed trustee thereon on 19th October 1888.

Before applying for his discharge Mr Gowans lodged the following report with the Accountant of Court:—“The trustee has not been able to recover sufficient assets even to pay the expenses of taking out sequestration, and no dividend has been paid to the creditors. The trustee cannot certify that the bankrupt has made a fair discovery or surrender of his estate, and he cannot state whether or not the bankrupt has been guilty of any collusion. The trustee is unable to state that in his opinion the bankruptcy has arisen from innocent misfortune.” Mr Gowans was discharged on 16th June 1892.

In these circumstances the bankrupt on 31st January 1899 presented a petition to the Court setting forth that he was now desirous of being finally discharged, and that Mr Gowans's report was defective in the essentials required by section 146 of the Bankruptcy Act “in so far as the trustee does not certify whether the petitioner made a fair discovery and surrender of his estate, whether he has been guilty of any collusion, and whether the petitioners bankruptcy arose from innocent misfortunes or losses in business, or from culpable or undue conduct.”

The petitioner accordingly craved the Court to ordain Mr Gowans to lodge a report with regard to his conduct in these particulars, and failing Mr Gowans's so doing to remit to the Accountant of Court, or other competent person, to furnish such report in lieu thereof, and thereafter to find the petitioner entitled to his discharge.

Mr Gowans lodged answers, in which he submitted that the application was incompetent.

The Bankruptcy (Scotland) Act 1856 (19 and 20 Vict. c. 79), sec. 146, enacts that “the bankrupt may … petition the Lord Ordinary

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or the sheriff to be finally discharged, … provided that every creditor who has produced his oath … shall concur in the petition,… and the bankrupt may also present such petition on the expiration of two years from the date of the deliverance actually awarding sequestration without any consent of creditors, and the Lord Ordinary or the sheriff, as the case may be [shall after sundry procedure] pronounce a deliverance finding the bankrupt entitled to a discharge, provided that it shall not be competent for the bankrupt to present a petition for his discharge … until the trustee shall have prepared a report with regard to the conduct of the bankrupt, and as to how far he has complied with the provisions of this Act, and in particular whether the bankrupt has made a fair discovery and surrender of his estate, … and whether he has been guilty of any collusion, and whether his bankruptcy has arisen from innocent misfortune and losses in business or from culpable or undue conduct.”

The Bankruptcy (Scotland) Act Amendment Act 1860 (23 and 24 Vict. c. 33), sec. 3, enacts that “the said Court, in either Division thereof, or the Lord Ordinary, or the sheriff, may refuse the application for the discharge of any bankrupt, although two years have elapsed from the date of sequestration.… if it shall appear from the report of the Accountant in Bankruptcy, or other sufficient evidence, that the bankrupt has fraudulently concealed any part of his estate or effects, or has wilfully failed to comply with any of the provisions of the Bankruptcy (Scotland) Act 1856.”

The Bankruptcy and Cessio (Scotland) Act 1881 (44 and 45 Vict. cap. 22), sec. 6, subsec. (1), enacts that “a bankrupt shall not at any time be entitled to be discharged of his debts unless it is proved to the Lord Ordinary or the sheriff, as the case may be, that one of the following conditions has been fulfilled … ( b) that the failure to pay five shillings in the pound … has in the opinion of the Lord Ordinary or the sheriff, as the case may be, arisen from circumstances for which the bankrupt cannot justly be held responsible.” Sub-sec. (2) enacts that “in order to determine whether either of the foresaid conditions has been fulfilled, the Lord Ordinary or the sheriff, as the case may be, shall have power to require the bankrupt to submit such evidence as he may think necessary in addition to … the report made by the trustee under section 146 of the said Act.”

Argued for the petitioner—The report of the trustee was not such as to entitle the bankrupt to his discharge— Campbell v. Brown, February 14, 1855, 17 D. 430. His only course, therefore, was to appeal to the nobile officium of the Court, which in similar cases, where the bankrupt had been unable to get a report from the trustee, had remitted to the Accountant of Court White, March 18, 1893, 20 R. 600. Such a course was indicated by sec. 3 of the Act of 1860.

The respondent founded upon sec. 146 of the Act of 1856, and sec. 6 of the Act of 1881, and argued that the application was incompetent in respect that the trustee, having been for six years functus officio, could not now be called upon to make a report, and that the statutes clearly pointed to the judge who awarded sequestration as the proper tribunal to which an application like this should be presented. In White's case the trustee had never reported at all.