Scottish Court of Session Decisions

The Central Motor Engineering Company, Glasgow and Edinburgh, and Gordon Houston Boswall Preston and Alistair Houston Boswall Preston, the only partners thereof, as such partners and as individuals,

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petitoners, brought a petition against Sylvia Mary Gibbs and others, of whom Mrs Euphemia Constance Gibbs and her husband Antony Edmund Gibbs as her administrator-in-law and as tutor and guardian of the said Sylvia Mary Gibbs, his daughter, respondents, lodged answers. The petition craved the Court to find and declare that the warrant of confirmation and whole sequestration proceedings by which the petitioners had been sequestrated were void and of no effect ab initio, and to repone and restore the petitioners in integrum.

The petition as amended set forth—“The estates of the petitioners were on 14th January 1915 sequestrated on petition at the instance of creditors by the Sheriff of Lanarkshire at Glasgow.

That William Brodie Galbraith, chartered accountant, 87 St Vincent Street, Glasgow, was appointed the trustee on the sequestrated estates of the petitioners conform to Act and warrant of confirmation in his favour by the said Sheriff of Lanarkshire dated 27th January 1915.

That in August 1914, on the outbreak of the present war, both of the present petitioners joined the Army, and at the date of the presentation of the said petition for sequestration the present petitioners Gordon Houston Boswall Preston and Alistair Houston Boswall Preston were furth of Scotland on active service.

That the said petition for sequestration was presented without the consent of the present petitioners

A copy of the petition for sequestration and the warrant thereon were left at the place of business of the present petitioners in the hands of a servant under section 26 of the Act [ i.e., Bankruptcy (Scotland) Act 1913 (3 and 4 Geo. V, cap. 20)], but the present petitioners were not cited edictally as section 25 prescribes. These petitioners accordingly were not cited to appear in the manner prescribed in the last-mentioned section. Moreover, the presentation of the said petition for sequestration was not brought to the notice of these petitioners owing to their absence from Scotland on active service as above narrated until after said award of sequestration had been made, and they believe and aver that had said petition come to their knowledge prior to said award of sequestration said award would not have been made. Further, the claim produced by the creditors on whose petition the sequestration was awarded was not deponed to in terms of section 24 of the statute. These creditors (the Anglo-American Oil Company, Limited) are a company incorporated under the Companies Acts. Their principal office is in London, and they have branch offices at various places in England and Scotland. Their said claim was deponed to by a Mr Joseph Patterson, who is described in his affidavit as an ‘accountant and principal officer’ of said company. The present petitioners believe and aver, however, that the said Joseph Patterson is simply in the service of the said company as an accountant and book-keener in their branch office in Glasgow under the local manager there, and is not ‘the secretary, manager, cashier, clerk, or other principal officer’ of the said company within the meaning of said section 24 of the Act.

In these circumstances the present petitioners are desirous of having it declared that the said proceedings and the pretended award of sequestration following thereon are and were ab initio void and of no effect, and they submit to the Court the following facts to show that it would be greatly to the interest both of the present petitioners and of their creditors that the said sequestration should be held as reduced ab initio.

Mrs Alice Mary Houston Boswall Preston, the mother of the said Gordon Houston Boswall Preston and Alistair Houston Boswall Preston, by her will made certain provisions in their favour whereby the liferent of certain trust funds of considerable value was conferred upon them under the proviso that at the date of her death her said sons should be living and no act or event should have been done or have happened by reason whereof the liferent or any part thereof if held upon trust for them absolutely would be vested in or charged in favour of or be payable to any other person or persons or any corporation. The said will provided that in the event of the doing or happening of any such act or event the income to the said Gordon Houston Boswall Preston and Alistair Houston Boswall Preston was to cease, and in such event the said Mrs Alice Mary Houston Boswall Preston appointed that the capital and income comprised in said trust funds should be held upon trust for her granddaughter, Sylvia Mary Gibbs, daughter of Antony Edmund Gibbs of Winsor Manor, Bilbury, in the county of Gloucester, and residing there, should she survive her and attain the age of twenty-one years, then from and after her attaining that age or the death of the testatrix, whichever of such events should be the later, the capital and income of the trust fund should be held upon trust for her absolutely, but if she should die under the age of twenty-one years then the said trust fund should be held upon trust for her daughter Mrs Euphemia Constance Gibbs, wife of the said Antony Edmund Gibbs, and residing with him at Winsor Manor aforesaid absolutely. The said Mrs Alice Mary Houston Boswall Preston died on 9th July 1916. The capital value of the said trust funds was at that date £40,435 or thereby. If the petitioners were bankrupt at that date their rights under the said will ceased and determined. If the said sequestration proceedings be held void ab initio they will be entitled to the provisions in their favour made by the said will.

By deed of appointment dated 4th December 1913 the said Mrs Alice Mary Houston Boswall Preston, mother of the said Gordon Houston Boswall Preston and Alistair Houston Boswall Preston, exercised in favour of her said sons a power of appointment conferred on her by her marriage settlement dated 5th May 1883 over funds therein mentioned (being part of the said trust funds) to the extent of a sum of £20,000, with compound interest at the rate

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of five per cent. per annum, from 4th December 1913 until the date of her death.

By mortgage dated 10th February 1914 the said appointees assigned their reversionary interest under the said marriage settlement to the Equitable Life Assurance Society in security of a loan of £12,000 made by that society to them. By assignment dated 25th June 1915 the Equitable Life Assurance Society, in consideration of the sum of £13,476, 19s. 10d., sold the said reversionary interest in the appointed sum of £20,000 and compound interest to the Scottish Amicable Life Assurance Society.

By letter, dated 18th June 1915, the said William Brodie Galbraith as trustee foresaid consented to the sale mentioned in the last paragraph, and by letter of undertaking or memorandum of agreement, dated 25th June 1915, the Scottish Amicable Life Assurance Society undertook, in consideration of the said trustee's consent thereto, provided the said Mrs Alice Mary Houston Boswall Preston, the tenant for life of the property, should die on or before 25th June 1918, which as above stated she did, to pay to the said trustee one-half of the net profit which the Scottish Amicable Life Assurance Society might realise from the property so purchased, all on the terms and conditions set forth in the said letter of undertaking or memorandum. Litigation is proceeding in the Chancery Court, London, in connection with the said sum of £20,000 dealt with by the said deed of appointment, and litigation is also proceeding in the Court of Session at the instance of the said trustee against the Scottish Amicable Life Assurance Society in connection with the reversionary interest in the said sum of £20,000. It is in the interest of the creditors of the petitioners that both these litigations should be brought to an end, as they will be if the prayer of the present petition be granted.

Further, the father of the petitioners, who is a claimant to a large extent in the sequestration, is agreeable to discharge his claims against the petitioners' estate in the event of the sequestration proceedings being held as reduced. The claims of the petitioners' father in the sequestration amount to more than £3000 out of total claims amounting to £6028, 17s. 4d.

The present petitioners have been advised that the said Bankruptcy (Scotland) Act 1913 contains no provision to enable the Court to find and declare an award of sequestration to be void and of no effect ab initio, and that the present petition is the only competent process by which the result may otherwise be obtained.

In these circumstances the petitioners make this application to the Court to grant in exercise of its nobile officium the prayer of the petition.

The creditors of the present petitioners to the extent of £5901, 2s. 10d. out of a total amount of £6028, 17s. 4d. concur in asking your Lordships to grant the prayer of the present petition.”

Argued for the petitioners—There had been no proper service of the petition for sequestration, for the partners of the firm had been sequestrated as individuals, but they had not been cited edictally as required by the Bankruptcy (Scotland) Act 1913 (3 and 4 Geo. V, cap. 20), sec. 25. Further, the claim of the creditor petitioning for sequestration was not properly vouched, as it had not been deponed to by one of their principal officers, but by their accountant and bookkeeper in a branch office—section 24; Anderson v. Monteith, 1847, 9 D. 1432; Campbell v. Myles, 1853, 15 D. 685; Dow & Company v. Union Bank, 1875, 2 R. 459, 12 S.L.R. 339. Accordingly sequestration should not have been awarded. The only remedy which would exclude prejudice to the petitioners was declarator that the sequestration was null and void ab initio Recal of the sequestration even if competent was useless, for it proceeded on the hypothesis that the sequestration had been valid, and that was sufficient to cause forfeiture of the petitioners' rights. Reduction of the sequestration did not appear to be competent— Gibson v. Munro, 1894, 21 R. 840, 31 S.L.R. 706; Whitlie v. Gibb & Son, 1898, 25 R. 412, 35 S.L.R. 355. Accordingly as there was no other remedy the petitioners were entitled to proceed by petition to the nobile officium. The petition was competent, and the circumstances were analogous to those in Anderson, 1866, 4 Macph. 577; Macleish's Trustees, 1896, 24 R. 151, 34 S.L.R. 93; A B, 1842, 5 D. 74; and Ballantyne, 1900, 2 F. 1077, 37 S.L.R. 798, where the Court had exercised the nobile officium to provide a remedy where there was no other competent.

Argued for the respondents—The petition was incompetent, for the Court would not exercise its nobile officium if another remedy was competent—Mackay's Practice, vol. i, p. 214. Here reduction of the sequestration was competent— Gibson's case ( cit.), per Lord Young at 21 R. p. 848; Whitlie's case ( cit.), per Lord Low (Ordinary) at 25 R. p. 419; Goudy, Bankruptcy, pp. 140 and 147. Further, a summary petition was incompetent if another remedy was available— Carter-Campbell v. Lamont-Campbell, 1894, 21 R. 614, 22 R. 260, 32 S.L.R. 203. Further, litigations were in progress in connection with the £20,000, and the nobile officium had never been exercised in the course of a litigation, to stay it. In any event the provisions of sections 24 and 26 of the Bankruptcy (Scotland) Act 1913 had been complied with.

At the close of the debate counsel for the petitioners offered to amend the prayer by inserting after the words in integrum the words “subject to any right acquired under the sequestration by the said Scottish Amicable Life Assurance Society.”