Scottish Court of Session Decisions

John Sturrock, solicitor, Edinburgh, pursuer, brought an action against George Henry Carphin, C.A., Edinburgh, trustee on the sequestrated estate of the late John Logie Robertson, W.S., Edinburgh, and of the firm of Wylie & Robertson, W.S., of which Mr Robertson was sole partner, and also against William Robertson, F.F.A., Edinburgh, as Mr Robertson's cautioner for any interest he might have, defenders, for declarator that the defender Carphin had adopted a memorandum of agreement between Mr Robertson and the pursuer dated 30th December 1907, providing for the dissolution as at 10th November 1907 of the firm of which Mr Robertson and the pursuer were then partners, and that the pursuer was bound as trustee and also as an individual to implement the obligations therein undertaken by Mr Robertson, and in particular to free and relieve the pursuer of all claims and liabilities to which he was subject or which he had paid as a partner of the dissolved firm.

The memorandum of agreement for the dissolution of the copartnery provided, inter alia—“4. In respect that the said John Logie Robertson is to continue the business of Wylie & Robertson for his own behoof, the partners agree as follows:—The said John Logie Robertson will take over the whole assets and liabilities of the firm, conform to balance-sheet as at tenth November nineteen hundred and seven, and signed as relative hereto, it being expressly stipulated that the said John Sturrock shall not be liable for any of the liabilities which may be shown in the said balance-sheet, but subject always to clause sixth hereof; the said John Sturrock on the other hand agreeing not to make any claim on the firm of Wylie & Robertson in respect of capital, accounts outstanding, goodwill, or any other claim which he could make, with the exception of the furniture to be delivered to him conform to inventory annexed, and signed as relative hereto.… 6.… [ Arrangement as to a cash-credit bond.] … 7. The said John Logie Robertson, as principal, and the said William Robertson, as cautioner and as taking burden on him for the said John Logie Robertson, hereby discharge and free and relieve (subject to the agreement mentioned in article sixth hereof) the said John Sturrock of all claims and liabilities of every kind against the said firm of Wylie & Robertson as partner of the said firm.”

The pursuer averred—“(Cond. 5) On 20th March 1909 the defender George Henry Carphin, as trustee foresaid, raised an action in the Court of Session against the present pursuer, in which he sued for payment to himself, the said George Henry Carphin, as trustee foresaid, of the sum

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of £458, 13s. 6d., which he alleged to be due to him as trustee foresaid under said memorandum of agreement of dissolution in name of profits overdrawn by the present pursuer. The sum sued for in said action was subsequently increased by an amendment to the sum of £1000. The ground of action was that the sum sued for being a debt due by the present pursuer to his said firm of Wylie & Robertson was one of the assets of that firm to which the said John Logie Robertson acquired right under said memorandum of agreement of dissolution. The said defender founded in said action upon said memorandum of agreement of dissolution and thus adopted it, and he has become liable for the obligations therein undertaken by the said deceased John Logie Robertson.”

The pursuer pleaded, inter alia—“(1) The defender Carphin having enforced the provisions of said memorandum of agreement of dissolution against the pursuer, has thereby adopted it, and is now liable to implement the obligations therein undertaken by the said John Logie Robertson, and in particular to free and relieve the pursuer of all claims and liabilities which remain outstanding against said firm, and the pursuer is accordingly entitled to decree as concluded for.”

On 29th June 1912 the Lord Ordinary ( Ormidale) dismissed the action.

Opinion.—“… Every case which involves the question whether a trustee in bankruptcy has adopted an onerous contract must be decided according to its own particular circumstances. The circumstance I chiefly go on here is that the trustee's right to vindicate as for the bankrupt's creditors the sums due to the late firm of Wylie & Robertson by the defender seems to me to arise solely out of the minute of dissolution whereby that firm's assets were vested in the bankrupt. But for that minute he has no right of action at all. His act and warrant gives him a right to take possession of all the bankrupt's estate, but not the assets of an unsequestrated firm of which the bankrupt had at one time been a partner. Accordingly the pursuer is compelled to seek elsewhere for a title to sue, and finds it only in the minute of dissolution. If that be so, then the ratio of the decision in Craig's Trustee v. Malcolm, 2 F. 541, covers the present case. It is only by adopting the minute that the trustee can show that what was once an asset of the firm of. Wylie & Robertson had become a part of the bankrupt's estate.…

“With regard to the action Sturrock v. Carphin and Another, I cannot hold that it is of the same nature as Doig v. Lawrie, 5 F. 295. In that case there was a definite liability as cautioner resting on the pursuer, clearly ascertained by a letter of guarantee, which also bore that the guarantee was to remain in force until recalled in writing. The pursuer had so recalled the guarantee, but the defender took no steps to have his name removed from the cash-credit bond under which the bank had already made advances to nearly the amount of the guarantee. In those circumstances the pursuer was held to be entitled to call in aid an order of the Court. Here the circumstances are totally different. I cannot give relief when there has not been and may never be distress, and as I read the pursuer's averments that is the position of matters with regard to the majority of the claims which are enumerated in the summons. To the extent of claims actually made I should have been prepared to pronounce such an order as is asked if the conclusions of the summons had been so restricted, or indeed capable of being so restricted. This action in my judgment falls to be dismissed.”

The pursuer reclaimed, and argued—The trustee had adopted the minute of dissolution by suing on it— Torbet v. Borthwick, February 23, 1849, 11 D. 694; Makessack & Sons v. Molleson, January 15, 1886, 13 R. 445, 23 S.L.R. 301; Craig's Trustee v. Malcolm, January 31, 1900, 2 F. 541, 37 S.L.R. 398. The test of his liability was whether he had taken up the contract, and not whether it had proved profitable to the trust estate. Whenever a trustee attempted to enforce a personal obligation, under a contract, of the bankrupt he adopted the contract as being his own contract, and thus bound himself personally—Goudy on Bankruptcy, 2nd ed., p. 375. Such personal liability of a trustee in bankruptcy was clearly recognised in the law of Scotland by a number of decisions— Ross v. Monteith, February 5, 1786, M. 15, 290; Nisbet & Company's Trustee, December 10, 1892, M. 15, 268; Kirkland v. Gibson, May 17, 1831, 9 S. 596, aff. 6 W. & S. 340; Dundas v. Morison, December 4, 1857, 20 D. 225. These were cases of leases, but the rule was not confined to leases but was put on general grounds, e.g., by Lord Fullerton in Torbet v. Borthwick (cit. sup.) There was a distinction between realising property and enforcing contract rights. In the former case the trustee was not affected by the bankrupt's personal obligations, but where contract rights were concerned he must either take the contract up wholly or let it alone. The pursuer was entitled to decree of declarator without waiting till he had suffered distress at the hands of the creditors of the dissolved firm— Doig v. Lawrie, January 7, 1903, 5 F. 295, 40 S.L.R. 247; Cunningham v. Montgomerie, July 19, 1879, 6 R. 1333, 16 S.L.R. 801.

Argued for the defender—The defender had not adopted the minute of dissolution by suing the pursuer thereunder so as to render himself personally liable. His actings were done solely in discharge of his duty of realisation of the estate, and this did not constitute adoption— M'Gavin v. Sturrock's Trustee, February 27, 1891, 18 R. 576, 28 S.L.R. 414; Imrie's Trustee v. Calder, October 21, 1897, 25 R. 15, 35 S.L.R. 14. In the present case if the trustee had omitted to sue on the minute of dissolution, he would have rendered himself liable to an action of damages at the instance of the creditors for negligence. The cases cited contra in support of the trustee's personal

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liability were not in point, because they were cases of running contracts, whereas in the present case the contract was a completed one, and adoption therefore did not apply.

At advising—