Scottish Court of Session Decisions

In the fourth article of his condescendence the appellant states—“The prerogative of the Crown in respect of preferential payment of its debts rests upon Statute 33 Henry VIII, cap. 39, which statute was extended to Scotland by 6 Anne cap. 26.” At the hearing, however, the appellant asserted a prerogative right in the Crown independent of the statute of Henry VIII.

The part of that statute which is brought into question is section 74. The first portion of the section appears to be limited to giving the King preference in Court for the hearing and disposal of suits for the recovery of Crown debts. The second portion runs thus—“And that our said Sovereign Lord, his heirs and successors, shall have first execution against any defendant or defendants, of and for his said debts, before any other person or persons, so always that the King's said suit be taken and commenced, or process awarded for the said debt at the suit of our said Sovereign Lord the King, his heirs or successors, before judgment given for the said other person or persons.”

This latter portion of the section is applicable to the case of execution for Crown debts, and it gives the Crown the right to “first execution,” subject to the condition that the King's suit shall have been taken and commenced “before judgment given” for any other person. The parties are not at issue as to what is, on the authorities, the effect of this enactment. The effect of it may be stated generally to be that the Crown's execution has preference if the Crown process has begun before the debtor has been divested of the property against which it is directed.

As already stated, there have been no steps by way of diligence taken by the Crown in the present case, and if the appellant's claim were rested solely on the 74th section of the statute of Henry VIII it would seem to fail. The appellant's case, however, as presented in argument was rested on the view (1) that apart from the statute of Henry VIII the Crown has by the common law of England a prerogative right to prevail for payment of Crown debts over other creditors of the debtor wherever the claim of the Crown and the claims of such other creditors concur and come into competition; (2) that the statute of Henry VIII does not create the prerogative right, but defines it in the case of competing executions; and (3) that this prerogative right prevails in Scotland by virtue of the Statute 6 Anne, cap. 26.

There is not much authority in the law of Scotland on the subject. Such as there is relates to the application of the statute of Henry VIII ( Ogilvie v. Wingate, June 29, 1791, M. 7884; Robertson v. Jardine, July 6, 1802, M. 7891; Burnet's Creditors v. Murray, July 7, 1754, M. 7873; Bell's Com. II, p. 40 et seq.; Tipper v. The King, May 22, 1830, 8 S. 785; The Advocate-General v. Magistrates of Inverness, January 29, 1856, 18 D. 366, per Lord Mackenzie). From the statement of the law in Bell's Commentaries the view taken, so far, would seem to have been that the right to first execution defined in the Statute of Henry VIII represented the whole prerogative rights of the Crown in competition with other creditors.

The first question to be considered, accordingly, is whether by the common law of England the Crown has the general prerogative right claimed by the appellant. If so, the next question is whether under the provision of the Statute 6 Anne, cap. 26, this right extends to Scotland.

As regards the first of these questions, it appears to me that the authorities founded on by the appellant verify his contention that by the common law of England the Crown has the general prerogative right which he asserts. The rule will be found stated by Coke in Quick's case, 5 Coke's Rep. 229. In the leading case of Rex v. Wells ( 1807, 16 East. 278), it is enunciated by Macdonald, C.B., as follows: “I take it to be an incontrovertible rule of law that where the king's and the subject's title concur, the king's shall be preferred.”

This rule has been recognised as operative in the case of company liquidations in England ( in re Henley & Co., 1878, 9 Ch. Div. 469). In bankruptcies the modern English Bankruptcy Statutes have displaced it to some extent by enacting that certain specified Crown debts shall alone have preference. As regards other Crown debts the Crown's right depends on priority in execution under the statute of Henry VIII ( in re Bonham, 1879, 10 Ch. Div. 595). In Ireland, where there are not the same limitations of the Crown's rights as under the English Bankruptcy Acts, the prerogative right of the Crown to preference over ordinary creditors in distributions under bankruptcy has been affirmed ( in re Galvin, Irish Rep. Ch. Div. 1897, vol. i, p. 520; in re Niblock, Irish Rep. 1907, vol. ii, p. 559). Finally, there is the case of New South Wales Taxation Commissioners v. Palmer ( [1907] AC 179). In this case it was held that in the administration of a bankrupt's estate in New South Wales the Crown was entitled to preferential payment over all other creditors. The Bankruptcy Act of New South Wales neither enacted a preference to the Crown nor excluded its inherent rights, and the claim for preference was rested on a general prerogative right in the Crown to preferential payment in competition with other creditors. The claim was rejected by the Colonial Court on the ground that the vesting of the assets in the official assignee for the general body of creditors without execution taken at the instance of the Crown excluded the preference. The Crown's claim was affirmed by the Privy Council. In delivering the judgment of their Lordships, Lord Macnaghten cited the statement of the law made by Macdonald, C.B., in Rex v. Wells, and said that apart from special legislation the rule was of universal application. Lord Macnaghten

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