Scottish Court of Session Decisions

Under a small debt decree for £4 the effects of Miss Elizabeth Forbes, residing at Gateside, in the parish of New Monkland, were poinded. The only thing attached by the poinding was a cow. Miss Forbes's mother, Mrs Elizabeth Maclean Blair or Forbes, who resided with her daughter at Gateside, brought an interdict in the Sheriff Court of Airdrie against the sale of the said cow under the poinding, on the ground that it was her property. In this action decree was given against the pursuer, and she was found liable in expenses, amounting, as taxed, to £16, 2s., for which, on 5th June 1900, decree was given in the name of Messrs J. M. & T. A. Macfarlane, solicitors, Airdrie, as agents' disbursers. The cow had meanwhile died.

On 11th July 1900 Messrs Macfarlane charged Mrs Forbes for payment, and at the same time gave her notice that they intended to apply for cessio of her estates. On 28th July the petition for cessio was presented, and served on Mrs Forbes on the 31st. On 8th November William Hugh Jardine, accountant, Coatbridge, was appointed trustee, and on 7th February 1901 Mr Forbes executed a disposition omnium bonorum in the trustee's favour.

On 3rd July 1900 Mrs Forbes had assigned to her daughter the said Elizabeth Forbes the lease of certain leasehold subjects in Gateside belonging to her.

Mr Jardine, the trustee in the cessio, brought the present action against Miss Elizabeth Forbes and Mrs Forbes, concluding for reduction of the said assignation. Miss Forbes lodged defences.

In this action the pursuer, after narrating the facts above mentioned, made the following averments:—“The said Mrs Forbes became notour bankrupt in terms of the Bankruptcy Act of 1856 and Acts explaining and amending the same on the 11th day of Jnly 1900. On the 3rd of July 1900, when she executed the said assignation in favour of the defender Elizabeth Forbes her daughter, she was, as she and the other defender then well knew, hopelessly insolvent. The said Mrs Forbes is conjunct and confident with the defender her daughter, and the said assignation was granted by Mrs Forbes without true just and necessary cause, and without a just price really paid, and same was done after the contracting of lawful debts from true creditors, and in particular of the debt due to the said Messrs J. M. & T. A. Macfarlane, decerned for against her on 21st May and 5th June 1900. The said assignation was moreover a gratuitous alienation by the bankrupt in favour of her daughter the defender Elizabeth Forbes of her sole asset, she being at the time, as she and her said daughter then well knew, hopelessly insolvent, and the same was to the prejudice of her creditors, and was fraudulent at common law. The pursuer, as trustee foresaid, represents the foresaid Messrs J. M. & T. A. Macfarlane and others, prior creditors of the said Mrs Forbes, as well as the general body of her creditors. In any view the said deed was a voluntary assignation within sixty days of the notour bankruptcy of the said bankrupt for the satisfaction or further security of her said daughter in preference to the other creditors of the bankrupt, and is accordingly reducible under the Act 1696, c. 5.”

The pursuer pleaded—“(1) The assignation in question was a gratuitous alienation by the bankrupt in favour of the defender Elizabeth Forbes, and was in fraudem of the bankrupt's creditors, and falls to be reduced at common law. (2) The bankrupt having assigned her property to her daughter without true just and necessary cause, and without a just price really paid, the assignation is contrary to the Act 1621, cap. 18, and falls to be reduced accordingly, with expenses. (3) The deed under reduction falls to be reduced, in respect it is contrary to the Act 1696, cap. 5.”

The defender pleaded, inter alia—“(1) No title to sue.”

On 5th December 1902 the Lord Ordinary ( Pearson) pronounced an interlocutor by which he repelled the first plea-in-law for the defender, and allowed a proof.

Note.—“In this action the trustee in a process of cessio, who holds a disposition omnium bonorum granted by the debtor, seeks to reduce an alleged illegal preference granted by the debtor to her daughter in prejudice of prior creditors. The petition for cessio was presented by a creditor on 28th July 1900. The present pursuer was appointed trustee on 8th November, and the debtor granted the disposition omnium bonorum in his favour on 7th February 1901.

“The averments are relevant to infer reduction provided the trustee has a title to sue for it. His title is challenged on the ground that this is truly a competition of two voluntary deeds granted by the same person, and that the trustee has no better title to reduce preferences than if he were a trustee under a voluntary trust-deed for creditors. In the latter case the trustee has no title to reduce illegal preferences unless he holds a right derived from creditors who had themselves a good title to reduce— Fleming's Trustees, 1892, 19 R. 542. It is said that this view of the position of the trustee in a cessio is supported by the case of Thomas v. Thomson, 3 Macph. 1160, 5 Macph. 198, where in the final decree the Court found ‘that the action was incompetently raised and insisted in, in so far as the same was raised and insisted in by the pursuer in his capacity of trustee for the creditors appointed in the process of cessio bonorum.’ The action was accordingly dismissed in so far as raised or insisted

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in by the pursuer in that character, though it was sustained at his instance as a creditor of the pursuer under cessio. But it is clear from the first report of the case that a disposition omnium bonorum had not been granted by the debtor, nor even demanded from him, and on that ground the argument on the question of title was stopped, so far as the pursuer was insisting in the action in his capacity of trustee.

The right of a trustee holding such a disposition to reduce preferences seems never to have been directly affirmed, and if it could be said that the disposition omnium bonorum was a purely voluntary disposition, there might be ground for holding that the trustee was in no better position than a trustee under a voluntary deed for creditors. Professor Bell ( 2 Com. 485) describes the conveyance as being ‘nothing more in competition than a voluntary deed for creditors,’ but the context makes it plain that he is speaking only of a competition with diligence begun for attaching the estate, and it is clear that a process of cessio is of no effect in a competition of diligence. It is to be kept in view that the process of cessio itself was at first purely voluntary on the part of the debtor. It was nothing more than a process to relieve the debtor from the hardship of diligence against his person; the debtor alone could petition, and the result of his not granting a disposition omnium bonorum was that his person remained open to diligence. But the character of the process has been entirely changed by the provisions of the Debtors Act 1880 and subsequent legislation. It is now open to a creditor to petition for cessio, as was done in the present case. The debtor can be compelled to execute the general disposition, and provision is now made for the debtor obtaining discharge, which was not previously open to him. The provisions of the Act of Sederunt of 1882 show how nearly the process now approaches to a sequestration as regards the position of the debtor and the creditors. It still differs from a sequestration in important particulars. It does not carry to the trustee estate subsequently acquired. Nor does it operate to equalise diligences, or to vest the estate in the trustee as if he had done complete diligence, as is the case under the sequestration statute. The effect of the trustee succeeding in the present action of reduction may be to throw the subject of the illegal preference open to the diligence of the individual creditors. But it appears to me to be the duty of the trustee as acting for the creditors to enlarge the estate available to them by challenging illegal preferences, and his relation to the creditors in this process of distribution gives him, in my opinion, a title to sue, if he relevantly avers that he represents creditors who have themselves a title to bring a reduction.”

The defender reclaimed, and argued—Prior to the Debtors' Act 1880 the trustee in a cessio had no title to reduce preferences unless he had the right to sue conferred upon him by creditors who could themselves have brought a reduction—Bell's Commentaries (M'L. ed.) ii. 485; Thomas v. Thomson, July 20, 1865, 3 M. 1160, and December 19, 1866, 5 M. 198. Although the Debtor's Act 1880 had changed the procedure of cessio in many respects, it did not enlarge the rights of the trustee. Thus it was still competent for an individual creditor to execute diligence— Simpson v. Jack, November 23, 1888, 16 R. 131, 26 S.L.R. 76; Reid v. Graham, July 3, 1894, 21 R. 935, 31 S.L.R. 779. The trustee's right was only that of a disponee in heritage and assignee in moveables as at the date of the interlocutor of the Sheriff ordaining the debtor to grant a disposition omnium bonorum. He had no higher right than any other disponee or assignee would have. He was thus in the same position as the trustee in a private trust for behoof of creditors, who had no title to reduce illegal preferences— Fleming's Trustees v. M'Hardy, March 2, 1892, 19 R. 542, 29 S.L.R. 483. The grounds of judgment there were applicable to the present case.

Argued for the respondent—The question as to the right of a trustee in cessio to reduce illegal preferences under the Act 1621, c. 18, or 1696, c. 5, had never been decided. The passage cited by the defender from Bell's Commentaries related to the right to cut down competing diligence, not to the present question. Thomas v. Thomson, cit. supra, was not in point, because there there was no disposition omnium bonorum in favour of the trustee, and the case was decided before the Debtors' Act 1880, which altered the process of cessio. The trustee in cessio, provided that, as here, there were prior creditors, had an inherent title to reduce preferences, just as a trustee in sequestration had before the Bankruptcy Act 1856 gave him a statutory title— Edmond v. Grant, June 1, 1853, 15 D. 703.

At advising—