Scottish Court of Session Decisions

On 7th September 1896 the estates of David Neilson, Coatbridge, were sequestrated, and Mr John Wishart, accountant in Glasgow, was elected trustee. In 1898 Neilson presented a petition for discharge in the Sheriff Court of Lanarkshire at Airdrie No dividend had been paid on the estate.

Objections were lodged by Messrs Murray, timber merchants, Coatbridge, who were creditors of Neilson, for the sum of £230 lent to him. They alleged (1) that he had not paid five shillings in the pound; (2) that his failure to do so arose from circumstances for which he was responsible; and (3) that he had obtained from them a loan of £230 by falsely representing that he was negotiating for the sale of his business (the lease of a coal mine), that he was solvent and merely wanted a temporary loan, whereas he was insolvent at the time and used the loan to pay off other creditors.

The trustee reported that the bankrupt had complied with all the provisions of the statute, that he had made a fair discovery and surrender of his estate, that he had attended the diets of examination, and had not been guilty of any collusion, but that his bankruptcy had arisen from innocent misfortune and not from culpable or undue conduct. The Accountant of Court reported that the bankrupt had not fraudulently concealed any part of his estate, and that he had not wilfully failed to comply with any of the provisions of the Bankruptcy (Scotland) Act 1856.

On 23rd November 1898 the Sheriff-Substitute ( Mair) allowed Neilson a proof that his failure to pay five shillings in the pound had arisen from circumstances over which he had no control, and to the objecting creditors a proof of their objections.

On 16th December 1898 proof was led. Neilson deponed that for about five years before his bankruptcy he had been carrying on business as lessee of Gartsheugh Colliery, and had during that period lost his whole means, amounting to about £1500. He attributed his loss to the fact that the mine had a bad roof, and was much troubled in the strata, and with water. He admitted that other people had previously tried to work the pit, and had been unsuccessful. With reference to the loan obtained from Messrs Murray he deponed that he had obtained it about eight months before his bankruptcy, and that he was pressed for money at the time, but did not consider his position hopeless. He also deponed that he was now assisting in a business carried on by his son, but that he got little from his son except his food.

After hearing parties on the proof the

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Sheriff-Substitute adjourned the case until 6th October 1899, to give the bankrupt an opportunity of offering and providing for a dividend of 5s. in the pound. By interlocutor dated 6th October 1899 the case was again continued until 8th December 1899, to give the bankrupt a further opportunity of offering and providing for 5s. per £ to his creditors. Both these interlocutors contained an intimation that failing such offer and provision of 5s. in the pound the petition would be refused.

On 17th October 1900 the Sheriff-Substitute pronounced the following interlocutor:—“The Sheriff-Substitute … Finds that the creditors on the petitioner's sequestrated estate have received no dividend whatever: Finds that the petitioner has failed to adduce satisfactory evidence that his failure to pay five shillings in the pound, or indeed any dividend whatever, has arisen from innocent misfortune or from circumstances over which he had no control, and accordingly refuses the prayer of the petition in hoc statu, and decerns.”

Note.—“When the proof in the present application was led before me I was not favourably impressed by the petitioner's demeanour when under examination, nor was I satisfied with his explanation as to the business alleged to be his son's, and in which he stated he was assisting, but was receiving ‘very little from my son except my food.’ So much was I dissatisfied that on 24th March 1899 I pronounced an interlocutor deferring consideration of the petition to give the petitioner an opportunity of offering and providing for 5s. in the £ to his creditors, failing which I had in view to refuse the present application. When the case again came before me at the expiry of the period mentioned, it was only at the urgent request of the petitioner's agent that I again continued the case to give the petitioner a further opportunity of offering or providing for 5s. in the £ to his creditors. When the case was again called on 8th December 1899 the petitioner appeared and stated that he could not offer or pay 5s., or indeed any sum whatever, and in order to give him a further opportunity of satisfying me that he was really unable to make any offer to his creditors I again ordered parties to be heard. No additional facts were, however, elicited through the debate, but in other proceedings before me in the Court here in connection with the business said to be carried on by petitioner's son, and in which the petitioner alleges he only assists, my previous unfavourable impression has been confirmed, and I am reluctantly, but in the interests of the creditors, compelled to refuse the present application for discharge hoc statu.”

Neilson appealed to the Court of Session. Messrs Murray, the objecting creditors, did not withdraw their objection, but were not represented at the hearing of the appeal.

Argued for the appellant—The petitioner was entitled to his discharge. He had now been an undischarged bankrupt for four and a half years, and it was not the policy of the Bankruptcy Laws to keep a man in that position until he paid a dividend which he might never be able to pay. It was a strong point in his favour that he had favourable reports from the trustee and from the Accountant in Bankruptcy, and that his sequestration had arisen from losses in legitimate trade. Discharge had been granted under circumstances like the present in Boyle, June 20, 1885, 12 R. 1147; Philipps, October 29, 1885, 13 R. 91; and Bremner; June 30, 1900, 1 F. 1114. In Shand, April 14, 1882, 19 S.L.R. 562, the discharge was suspended for a year. These cases were to be contrasted with Clarke v. Crockatt & Co., December 8, 1883, 11 R. 246, where the petition was refused. In that case the reports of the trustee and Accountant in Bankruptcy were unfavourable.