Scottish Court of Session Decisions

The Right Hon. James Caldwell, objector, appealed from a deliverance of the Sheriff-Substitute at Glasgow ( Fyfe) in an application by John Hamilton, sometime shipbuilder and residing at 22 Athole Gardens, Glasgow, applicant, for his discharge.

Mr Hamilton's estate had paid 5s. per pound; two years had elapsed since the date of sequestration; the bankrupt was in receipt of a salary of £500 per annum, which he received from a large firm of shipbuilders, his duties being to organise social functions and to take important personages about; and the trustee in the sequestration had lodged the following report—“The reporter is of opinion that the bankrupt has made a fair discovery and surrender of his estates. With regard to the examination of the bankrupt a diet of examination was fixed for 2nd December 1913 within the Sheriff Court-House, Glasgow, at which the bankrupt appeared and answered all the questions which were put to him. So far as the reporter has been able to ascertain the bankrupt has not been guilty of any collusion. The reporter is of opinion that the bankruptcy has arisen owing to the depreciation in the value of the bankrupt's house, 22 Athole Gardens, Glasgow, on which a bond for £1300 existed.”

The Sheriff-Substitute, on 22nd March 1916, issued the following interlocutor—“…Repels the objections: Finds the bankrupt John Hamilton entitled to his discharge, but before granting the same appoints him to appear and emit the statutory declaration: Finds the objector liable in expenses,” &c.

Note.—“This is an application for the discharge of a bankrupt who was sequestrated on 3rd November 1913, and whose creditors have received a dividend in excess of 5s. per pound. I think the policy of the Bankruptcy Statute is that after the lapse of two years from the date of his sequestration a bankrupt who pays 5s. per pound is to be discharged, unless some substantial reason is adduced why the Court should exercise the discretion with which it is invested, to refuse or postpone the discharge, or to attach conditions to the granting of it.

In the present case I do not think that the note of objections sets forth any relevant consideration which would induce me to exercise my discretion in this way.

Only one creditor opposed the discharge, and he was a secured creditor. His claim is based upon the personal obligation in a bond and disposition in security over a heritable property which the bankrupt possessed.

Unfortunately at the date of sequestration the value of that heritable property had greatly depreciated since the objector lent his money upon the security of it in 1893, and the objector's claim in the sequestration was for the amount of his Dbnd (£1300) less the then value of the heritable property, which the objector put at only £500.

I am afraid that the objector's position was simply that of all bondholders who twenty years ago had lent money upon residential and heritable property in the West End of Glasgow. It cannot be suggested that the bankrnpt is in any way responsible for the depreciation in the value of the heritable property, for it is notorious that in the district where the property is situated depreciation has been universal.…

The last contention of the objector is that the discharge should be refused unless the bankrupt gives up a portion of his present earnings, to be applied in ultimately paying his creditors of 1913 in full. This is the only apparently relevant element in the objections, but this is just the element which is peculiarly a matter for the discretion of the Court.

Even assuming that the objector can prove all that he states, that would not induce me to exercise my discretion to the effect of refusing discharge or attaching conditions to it.

In exercising that discretion I always take into consideration the whole circumstances, one of the most important of which is that there is no body of creditors supporting the objector. He alone held a security for his debt, and he alone objects to the discharge. When he lent his money the Athole Gardens house was presumably regarded as a heritable security with a sufficient margin of safety. He has unfortunately been disappointed with it owing to a universal fall in the value of property. But whilst sympathising with

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any creditor who has made a bad investment, I do not think that his having done so is a sufficient reason for my requiring a bankrupt to make a payment out of his present earnings as a condition of being discharged. I have no great sympathy at any time with creditors going back on a man years after his sequestration when he has worked himself back into earning a livelihood, and asking him to give up his present earnings for his old debts. Where a large body of creditors are pressing for a bankrupt's present earnings being thus appropriated there may be something to be said for its being considered, but the theory of the Bankruptcy Act is that a bankrupt's creditors take his estate as it stands at the date of sequestration, and the bankrupt is discharged of his debts as at that date. No doubt the actual declaration of discharge is not immediately made, but when it is made it harks back to the date of the sequestration. What the bankrupt may do after the date of his sequestration is his affair. If he goes under his creditors have no responsibility. If he is fortunate enough to relieve himself and get into the way of earning an income I do not as a rule interfere with it, certainly not at the instance of one creditor. As no other creditor supports the objector I infer that no other creditor wants to interfere with the bankrupt's present earnings, and I am not going to exercise any discretion I may have in this matter on the motion of a solitary creditor, especially one who belonged to the class known as secured creditors. I do not therefore think that even if the last objection is relevant there is in the circumstances any need to incur the expense of a proof.

I therefore repel the objections and find the bankrupt entitled to his discharge.”

The objector appealed, and argued—The Court had the right to make a discharge conditional on an assignation of part of future income. This was clear from statute— e.g., Bankruptcy Act 1856 (19 and 20 Vict, cap. 79), sec. 146; and 1913 (3 and 4 Geo. V, cap. 20), secs. 146 and 148—and the right had often been exercised in practice— Leslie v. Cumming & Spence, 1900, 2 F. 643, 37 S.L.R. 444; Hurst v. Beveridge, 1900, 2 F. 702, 37 S.L.R. 501; Learrnanth v. Paterson, 1858, 20 D. 418; Scott v. Macdonald, 1823, 1 Sh. App. 363; A B v. Sloan, June 30, 1824, 3 S. 195. There was no difference between a person drawing a stipend or emolument from holding an office and a person receiving a fixed salary under a contract of service.

Argued for the applicant—The bankrupt was entitled to his discharge without conditions as long as he had paid 5s. per pound and had complied with the statutory rules. The Court had never before made it a condition of discharge that the bankrupt should assign part of his income. It was admitted the Court could impose conditions, but only on relevant objections being made. The objection made here by one only of the bankrupt's creditors was not relevant— Barron v. Mitchell, 1881, 8 R. 933, 18 S.L.R. 668. The matter was in any event a matter of discretion, and the Sheriff had rightly used his discretion here— Barron v. Mitchell ( supra). If the Court decided to impose conditions the amount to be assigned should be small— Scott v. Macdonald ( supra); Simpson v. Jack, 1888, 16 R. 131, 26 S.L.R. 76; Learmonth v. Paterson ( supra); Bankruptcy Act 1883 (46 and 47 Vict. cap. 52), sec. 53, sub.-secs. 1 and 2; ex parte Benwell (1884), L.R., 14 QBD 301; Belly. Bell's Trustee, 1908 S.C. 853, 45 S.L.R. 699.