Scottish Court of Session Decisions

Per Lord Stormonth Darling—“The proper way to arrest the funds of a company in liquidation is to arrest the debt as due by the company itself and the liquidator as such.”

The firm of David Gillies & Sons, smiths and engineers, Bonnybridge, of which Archibald C. Gillies was a partner, became incorporated as a limited company under the Companies Acts. The company subsequently went into liquidation, and John Baird, accountant, 173 St Vincent Street, Glasgow, was appointed liquidator thereof. Archibald C. Gillies lodged a claim in the liquidation for sums, partly preferable, due to him by the company, and the liquidator having admitted him to a ranking, he became entitled by way of dividend out of the company's estate to the sum of £49, 18s. 10d.

In 1897 the firm of David Gillies & Sons, and the individual members of the firm, had

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granted a bond and disposition in security for £500, to which bond James Henry Burns, solicitor, Falkirk, had in 1900 acquired right to the extent of £420. At his instance letters of horning were passed on the said bond against the said firm and against the partners as partners and as individuals, and on 11th June 1904, by virtue thereof, Burns used an arrestment in the hands of Baird of sums due by him to Archibald 0. Gillies and to the other partner of the firm of David Gillies & Sons, as partners and as individuals. The schedule of arrestment was in the following terms:—“I, William Brownlie, messenger-at-arms, by virtue of letters of horning on bond and disposition in security, dated and signeted the sixth day of June nineteen hundred and four years, raised at the instance of James Henry Burns, solicitor, Falkirk, complainer, against David Gillies & Sons, smiths and engineers, Bonnybridge, and …and Archibald Cowie Gillies, both smiths at Bonnybridge, the individual partners of said firm, jointly and severally, in His Majesty's name and authority, lawfully fence and arrest in the hands of you, John Baird, accountant, 173 St Vincent Street, Glasgow, the sum of four hundred and seventy pounds sterling, more or less, due and addebted by you to the said … and Archibald Cowie Gillies, both as individuals and as partners of the said firm of David Gillies & Sons; together also with all goods and gear, debts, sums of money, or any other effects whatever lying in your hands, custody, and keeping, pertaining or in any manner of way belonging to the said …and Archibald Cowie Gillies, both as individuals and as partners of the said firm of David Gillies & Sons, or to any person or persons for their or either of their use or behoof, all to remain under sure fence and arrestment at the instance of the said James Henry Burns aye and until he be completely paid and satisfied of the sum of four hundred and twenty pounds.”

On 13th October 1904 Patrick J. Stirling, solicitor, Glasgow, a creditor of A. C. Gillies, having obtained decree for his debt, used arrestments in the hands of Baird as liquidator for £25, having also already on the preceding 30th July arrested on the dependence of his action. And another creditor of Gillies, Alexander Harper, tailor, Falkirk, on 5th August 1904 also used arrestments in the hands of Baird as liquidator for his debt of £4.

In these circumstances Baird, the liquidator of David Gillies & Sons, Limited, as nominal raiser, and Stirling as real raiser, brought an action of multiplepoinding in the Sheriff Court at Glasgow, in which the fund in medio was the £40, 18s. 10d. due to Gillies (the common debtor) out of the company's estate. Burns, Gillies, Stirling, and Harper lodged claims, Gillies, Stirling, and Harper pleading that the arrestments by Burns were inept.

On 30th May 1905 the Sheriff-Substitute ( balfour) found Burns' arrestments invalid to attach the funds in the hands of Baird as liquidator.

“ Note.—This is an action of multiple-poinding connected with the liquidation of David Gillies & Sons, and the first question which has to be decided is whether the arrestment used by Mr James Henry Burns in the hands of the liquidator is valid to attach the funds in Mr Baird's hands as liquidator. Mr Burns' arrestment is the first in point of time used in the liquidator's hands. The execution of arrestment bears that the arrestment is laid in the hands of John Baird, accountant, Glasgow, and it attaches sums of money, &c., belonging to William Bennie Gillies and Archibald Cowie Gillies, both as individuals and as artners of the firm of David Gillies & Sons. There is no reference whatever made to the firm being in liquidation or to the arrestment being used in Mr Baird's hands as liquidator, and the effect of the arrestment is to attach funds in Mr Baird's hands as an individual belonging to the two Gillies's. This appears to be quite clear from the authorities, and I refer to Graham Stewart on Diligence, p. 107, where it is stated that where the defender occupies two positions, arrestment of funds belonging to him in one capacity is of no avail in an action against him in another capacity, so in actions against trustees in their trust capacities, arrestment of the private funds of the trustee is incompetent, the arrestee being due nothing as trustee, and, on the same principle, where the arrestee occupies two capacities, the character in which he is alleged to be debtor must be correctly set forth. I refer to the cases which are cited in Mr Stewart's book, particularly the case of Graham v. Macfarlane & Company, 7 Macph. 640. The case of Carron Company v. Currie & Company, 33 S.L.R. 578, does not introduce a different principle, because the point decided there was that an arrestment in the hands of shipbrokers who had the entire management of the affairs of a shipping company competently attached the cargo of one of its ships which was under the control of the shipbrokers in harbour.”

Burns appealed to the Sheriff ( guthrie), who on 6th July 1905 reversed the judgment of the Sheriff-Substitute, found Burns' arrestment to be effectual, and remitted the cause back for further procedure.

It appeared that the judgment of the Sheriff was based on a misapprehension of the facts of the case, and it was subsequently admitted at the bar that the rounds upon which it proceeded could not be upheld.

The Sheriff-Substitute having thereafter, by interlocutor of 18th July 1905, sustained the claim for Burns and repelled those for Gillies, Stirling, and Harper, Gillies and Stirling appealed, and argued—The claim for Burns should be repelled, as his arrestment was bad in two respects; (1) it was used in Baird's hands as an individual and not as liquidator of the company, whereas the fund arrested was due by him in the latter capacity—Companies Act 1862 (25 and 26 Vict. cap. 89), sec. 94. Misdescription of the arrestee was fatal to the validity of I an arrestment— Graham v. Macfarlane &

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Company, March 11, 1869, 7 Macph. 640, 6 S.L.R. 424; Hay v. Dufourcet & Company, June 19, 1880, 7 R. 972, 17 S.L.R. 669. (2) It described the debt as due to Archibald Gillies as partner of the firm of David Gillies & Sons, which firm in point of fact no longer existed.

The respondent (Burns) argued—The respondent's arrestment was valid. (1) The arrestment in Baird's hands as an individual was good, because he, as liquidator, having ranked Gillies on the company's estate, and having declared a certain dividend as payable to him, became liable to Gillies as an individual for the sum thus earmarked— Ritchie v. M'Lachlan and Others, May 27, 1870, 8 Macph. 815, 7 S.L.R. 500; Hamilton v. Kerr, November 23, 1830, 9 S. 40. (2) The fund was described as due to Gillies both as an individual and as a partner of the firm. Accordingly, if the first part of the designation was correct it did not matter if the second was bad. It was quite competent in one schedule to arrest in the hands of one arrestee two sums due to two separate persons.