Scottish Court of Session Decisions

Grantly Developments & Ors v. Clydesdale Bank Plc & Ors [2002] ScotCS 66 (14th March, 2002)

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Marnoch Lord Hamilton Lord Emslie	P396/00 OPINION OF LORD MARNOCH in RECLAIMING MOTION in PETITION of GRANTLY DEVELOPMENTS AND OTHERS Petitioners and Respondents; against CLYDESDALE BANK plc AND OTHERS Respondents and Reclaimers: for RECALL OF SEQUESTRATION _______

 

 

Act: Glennie, Q.C., I.F. Maclean; Robsons, W.S. (Petitioners and Respondents)

Alt: Howlin; Dundas & Wilson, C.S. (First Respondents and Reclaimers)

14 March 2002

1. This is a reclaiming motion by the Clydesdale Bank against an interlocutor of the Temporary Judge dated 6 November 2001 whereby he allowed a proof before answer in respect of a petition by Grantly Developments and Others to recall the sequestration of the firm of Grantly Developments and the consequential sequestrations of the two individuals comprising that firm. Answers were lodged by the Clydesdale Bank, a creditor in the sequestrations, and they were sent to proof along with the petition. The petition was presented under Sections 16 and 17 of the Bankruptcy (Scotland) Act 1985.
2. It is necessary to note at the outset a certain peculiarity in the procedure which took place before the case came before the Temporary Judge. On 15 November 2000 the case was sent, not to a Hearing on the Petition and Answers (which would be the more normal course) but, on the motion of both parties, to the "Procedure Roll". I do not doubt that this was a competent procedure but it may, I think, have led to a certain misunderstanding as to the purpose of pleadings in a case such as the present. Most petitions - and certainly this petition - constitute an application to the court for some discretionary remedy. Any pleadings involved are thus only relevant to an exercise of that discretion. What is more, in deciding how to exercise that discretion, it will often be necessary for the court to look at the overall position as disclosed by the pleadings of both parties. For these reasons the exercise is very different from, for example, an examination of a pursuer's pleadings in an ordinary action where the question is the relevancy or otherwise of a claim based on right or entitlement. Unfortunately, in the present case, that distinction was not, I think, recognised in the submissions made to the Temporary Judge and adjudicated on by him. As will be seen presently there has, in any event, been a considerable change in circumstances since the case was before the Temporary Judge and for that reason, also, I consider that this court has no alternative but to look at matters de novo.
3. When I do that I find that, despite what appear to be lengthy and complex pleadings, there are only two grounds averred in support of the motion for recall. First, it is averred that the Bank is using the sequestrations as a means of preventing the petitioners from insisting in a commercial action against the Bank. In point of fact, the petitioners have recently been granted legal aid to insist in that action (that being the change of circumstances referred to above) so that this ground of complaint has, on any view, lost much of its force. In my opinion, however, there never was enough in the petitioners' pleadings to justify the making of this serious accusation. The only basis for it, it seems, is that, in the course of earlier "re-financing" negotiations, the Bank, as a condition of its support, sought a waiver of any claims which the petitioners then thought they might have against the Bank. In my opinion, there is nothing obviously unreasonable about seeking a waiver in such circumstances and I according regard this averment as being a wholly inadequate foundation for inferring mala fides on the part of the Bank. Second, it is averred by the petitioners that the Bank's debt is very largely, if not entirely, secured and that, apart from whatever proceeds might result from the commercial action referred to above, there are no assets available for unsecured creditors. The difficulty about this, it seems to me, is that the Bank, for its part, avers that there is doubt as to the extent to which their debt is secured and that they have no means of knowing what, if any, other assets are owned by the petitioners. It is, they say, precisely the job of the permanent trustee in the sequestrations to enquire into that matter. The Bank further avers that there are concerns regarding the validity of a substantial claim in the first petitioners' sequestration advanced by Grantly Construction Limited which is a company closely associated with the petitioners. The only document so far seen by the Bank in this connection is a letter from the third petitioner to the interim trustee dated 23 May 2000 (No. 6/76 of Process) which, it is said, is largely incomprehensible.
4. In all the foregoing circumstances it seems to me, as it did to the Temporary Judge, that there can be no question of recalling the sequestrations at the present time. What is more, it is, in my opinion, wholly inappropriate to send this case to proof on the matters to which I have referred. Any such proof would largely duplicate the work of the permanent trustee and would give rise, not only to considerable additional expense, but also to continuing uncertainty regarding the whole future of the sequestration processes. As it is, we were advised that the existing trustee was presently without funds and had no intention of adjudicating on any claims pending the outcome of the commercial action. He, for his part, consented to the recalls sought but it was the Bank's position that this was, to say the least, premature in the absence of a full investigation of the affairs of the petitioners. So far as this last matter is concerned, it is certainly to be hoped that, if and when it is made clear by this court that the sequestrations are not to be recalled - at least on the grounds presently before the court - the trustee will then be put in funds sufficient to allow the sequestrations to proceed as accords. In any event, if the commercial action against the Bank is successful it seems to me that there will undoubtedly be a need for his services.
5. For the reasons given above I have been able to reach a clear view in this case without regard to the finer points of law which were canvassed before us. However, out of deference to counsel's submissions I shall briefly summarise my understanding of what lay between them. There was, of course, no dispute but that the provisions of Section 17 of the Bankruptcy (Scotland) Act 1985 confer a wide discretion in the matter of recalling sequestrations. However, Mr. Howlin, for the Bank, was anxious to carry the proposition that, having regard to the context of the Act as a whole, one indispensable requirement for a proper exercise of that discretion in a case like the present was that bona fide creditors should not be prejudiced. Mr. Glennie, Q.C., for the petitioners, on the other hand, took his stance simply on the wording of the section and, while accepting that the interests of bona fide creditors would always be very important, submitted that in certain circumstances even the existence of some prejudice to them might not be determinative. Strangely enough, while there are a large number of cases of recall arising out of some irregularity in the award of sequestration, there are, it seems, relatively few reported authorities which deal with recall for reasons unrelated to such irregularity. In the event, we were referred to only three of these. The first, in chronological order, was Ure v. McCubbin (1857) 19 D. 758. That case was, of course, decided under the provisions of what was then section 31 of the Bankruptcy (Scotland) Act 1856 (subsequently re-enacted, almost verbatim, by section 30 of the Bankruptcy (Scotland) Act 1913). It is to be observed at once that these provisions were in markedly different form from those of section 17 of the 1985 Act. Nonetheless, the discretion given to the court appears to have been understood, even then, as very broadly based. The facts of the case are relatively unimportant but what may be of significance is some of the dicta. The Lord Justice-Clerk (Hope), at p. 760, says this:

"Now, the petitioner has stated no ground of recall on the score of irregularity or informality in the granting of the sequestration, which he admits to have issued validly. That being so, it becomes very important to consider whether grounds are alleged for the advantage of the estate? What injury does the petitioner allege to the estate?.............Now, here we have a creditor going on for a certain time, and wanting to be elected trustee, but having failed in that, he tries to get the sequestration recalled. I think it would be an abuse, at his instance, to recall the sequestration on grounds which are all competent to be stated and discussed at a future stage in the sequestration itself............ But I can conceive many cases where sequestration is unnecessary, as where the estate is small, and one creditor has an overwhelming claim. That, however, does not seem to be the case here."

The next case referred to was Gardner v. Woodside (1862) 24 D. 1133. Again the facts are, I think, immaterial since the decision, in the end, was to the effect that the petition for sequestration had been an abuse of process. However, Mr. Howlin relied on a passage in the Opinion of Lord President McNeill, at p. 1135, to the effect that, in general, the lack of any "visible" estate was not of itself a sufficient ground for recall. And, lastly, reference was made to an unreported Opinion of Lord Prosser in Button and Others v. The Royal Bank of Scotland plc and Others dated 22 July 1987 in the course of which Lord Prosser said this:

"I am satisfied that I have a broad discretion under section 17 of the Bankruptcy (Scotland) Act 1985. Moreover, I am satisfied that if a recall of sequestration can be granted without apparent prejudice to creditors, sequestration should in general be recalled..."

It is, however, right to record also that, at a later stage in his Opinion, Lord Prosser went on to describe the attitude taken by the respondents as being justifiable "and indeed probably inevitable in the absence of a finalised agreement by which all creditors could be as well protected after recall as they are in the context of a sequestration."

6. Having looked at the three cases cited to us I am of opinion that none provides a conclusive answer on the particular point focused by counsel's submissions. The point, as such, is not without importance but, since it is possible to resolve this case without deciding it, I think it best to reserve my own opinion on it.
7. In the result, my motion to your Lordships is that the reclaiming motion be allowed, that the Lord Ordinary's interlocutor dated 6 November 2001 be recalled and that the prayer of the petition should now be refused.

Grantly Developments & Ors v. Clydesdale Bank Plc & Ors [2002] ScotCS 66 (14th March, 2002)

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Marnoch Lord Hamilton Lord Emslie	P396/00 OPINION OF LORD HAMILTON in RECLAIMING MOTION in PETITION of GRANTLY DEVELOPMENTS and OTHERS Petitioners; against CLYDESDALE BANK plc and OTHERS Respondents and Reclaimers: for RECALL OF SEQUESTRATION _______

 

 

Act: Glennie, Q.C., I.F. Maclean; Robsons, W.S. (Petitioners and Respondents)

Alt: Howlin; Dundas & Wilson, C.S. (First Respondents and Reclaimers)

14 March 2002

1. Like your Lordship in the chair I have some concern about the procedure which has to date been followed in this case. The first order in the proceedings was made on 5 May 2000. After several periods of adjustment of the petition and answers had been allowed, the Lord Ordinary on 15 November 2000 appointed the cause to the Procedure Roll. It is not recorded what representations were made to him by parties nor in relation to which pleas in law this step was taken; the Bank, the sole respondent, had a general plea to the relevancy and specification of the petitioners' averments and the petitioners at that stage had a general plea to the relevancy and specification of the respondent's averments in answer, subsequently adding a specific plea directed to a claimed absence of relevant and specific averments of any interest on the part of the respondent to oppose the recall of the sequestrations. After sundry further procedure (including discharge of a Procedure Roll hearing, amendment in terms of a minute of amendment by the petitioners and answers thereto by the Bank and authorisation of the printing of a Record) the case appeared at a further diet of Procedure Roll on 6 July 2001. After certain argument had been heard that diet was on the petitioners' motion adjourned; it appears from the Temporary Judge's opinion that at that stage the petitioners wished to consider whether a scheme to protect the creditors could be devised. In the event this appears to have come to nothing. The Procedure Roll discussion was resumed on 2 October and continued on 3 October when the Temporary Judge made avizandum. On 6 November 2001 the Temporary Judge pronounced the interlocutor now reclaimed against which, among other things, allowed to parties "a proof on the Petition and Answers". (The Temporary Judge's opinion indicates an intention to reserve the respondent's first plea in law, their sole preliminary plea, but that intention is not reflected in the order pronounced; nor is there any disposal of any of the other preliminary pleas). The procedure up to that point accordingly was spread over some 18 months.
2. Rule of Court 14.8, which appears in the chapter specifically concerned with petitions, provides that on an appropriate application "the court shall make such order for further procedure as it thinks fit". Rule 22.3 envisages that, where there is a closed record (as there is in ordinary actions generally and where in petition proceedings the printing of a record has earlier been authorised), the court may, as a form of further procedure, "appoint the cause to the Procedure Roll for consideration of all the preliminary pleas of parties or such of the pleas as may be specified". Among other options it may make "some other specified order". Rule 60.5 (which applies to petitions for suspension and the like) also contemplates a petition and answers at some stage proceeding as an action. However, in relation to petitions generally, a common order for further procedure will simply be one for "a hearing". Such a diet will not, or will not necessarily, be limited to consideration of the relevancy and specification of parties' respective pleadings but will allow the court to consider more broadly the contentions of parties, including the significance of any documents and the state of the pleadings of parties taken as a whole. Such procedure is in many cases likely to be more apt for an expeditious disposal of the cause, particularly where, as is generally the case in petitions, the applicant seeks to invoke the exercise by the court in his favour of some power or discretion.
3. Although the dependence of proceedings for recall under section 16 of the Bankruptcy (Scotland) Act 1985 does not prevent the relative sequestration proceedings continuing (section 16(5)), the former proceedings seem in general apt for expeditious procedure. The court may, for example, wish to exercise its power under section 17(6) to impose conditions before the sequestration proceeds too far. Unless there is a deferment the debtor will be entitled to a discharge on the expiry of three years from the date of sequestration (section 54). The fact that, subject to certain exceptions (which do not apply here), a petition for recall requires to be presented within 10 weeks after the date of sequestration (section 16(4)) suggests that the issues raised are of a kind which should be resolved promptly. Unduly protracted proceedings accordingly seem undesirable. It may, of course, be that there are critical issues of fact in dispute which make it appropriate to appoint the cause to a proof or to a proof before answer. Issues of fact in petition proceedings may, however, be addressed by affidavits or by a remit to a reporter. The sending of proceedings of the present kind to Procedure Roll, while it may be appropriate in some circumstances, carries, in my view, the risk of undue concentration on the relevancy and specification of a particular party's pleadings and tends to militate against the final disposal of the proceedings on the basis of a broader view. If the result of the Procedure Roll is the allowance of a proof at large (because it cannot be said, looking at a petitioner's pleadings alone, that he is bound to fail after evidence is led to persuade the court that the sequestration should be recalled) this may result in very protracted proceedings. In my view, while proceedings under section 16 should not be conducted with such haste as to risk injustice being done, they should nonetheless be advanced with expedition.
4. I fear that the procedure adopted in this case may not, up to this stage at least, have been best designed to achieve that end. The formal motion made in opening by Mr. Howlin for the reclaiming Bank was that the Temporary Judge's interlocutor be recalled, the respondent's general plea to the relevancy sustained and the petition on that basis dismissed. This might prima facie suggest that the Bank was again perilling its contention for disposal of the proceedings in its favour on the proposition that the petitioners' averments, looked at in isolation and without regard to any documents other than those expressly incorporated in the petitioners' pleadings, were so irrelevant or lacking in necessary specification that the allowance of further inquiry would achieve nothing. In the event as the discussion proceeded before us both parties relied on material external to the petitioners' pleadings. In these circumstances, if this court is persuaded that the Temporary Judge was in error, or if there has been a material change of circumstances since the case was before him, it is, in my view, open to us to dispose of the case on broader considerations than the petitioners' pleadings alone.
5. The petitioners at Procedure Roll moved the Temporary Judge there and then to recall the sequestrations. He was not prepared to accede to that motion. It was not renewed before us. The petitioners' counsel, however, resisted the reclaiming motion on the basis that the making of an order for a proof (or a proof before answer) was within the discretion of the Temporary Judge and remained appropriate.
6. The pleadings of both parties are elaborate but in substance there are two particular factors on which the petitioners seek to rely with a view to persuading the court (ultimately) to exercise its discretion under section 17 to recall the sequestrations. The first concerns whether the continued dependence of the sequestration proceedings prevents or hinders the prosecution by the petitioners of a commercial action in this court raised by them against the Bank some months prior to the dates of the sequestrations. In that action they sue the Bank for £3m on contractual and delictual grounds. It is not clear, at least from the petitioners' averments, how they were prevented or hindered by the dependence of the sequestrations from pursuing that action; but, however that may be, an event of material importance has occurred since the present proceedings were before the Temporary Judge. That event is the granting of legal aid to the petitioners for the purposes of that commercial action. It was not suggested before us that in these circumstances the petitioners were now prevented or seriously hindered by the dependence of the sequestration proceedings from pursuing the commercial action.
7. Associated with that factor is a suggestion that the Bank, in presenting the petitions for the relative sequestrations and in resisting their recall, was acting mala fide, it having an intention to hinder the prosecution of the commercial action against it. That appears, from the petitioners' pleadings, to be founded largely on an allegation that in the latter months of 1999, when the petitioners were seeking the support of the Bank in relation to a re-financing arrangement, the latter sought to insist, as a condition of its support for such an arrangement, on the petitioners waiving any and all of their claims against it. Like your Lordship in the chair I see no warrant, in the event of such an attitude towards its support being proved, for an inference that the Bank subsequently acted mala fide in presenting the petitions for sequestration or in thereafter acting as it has.
8. The remaining particular factor concerns the petitioners' claim that the sequestration proceedings serve no useful purpose. This proceeds on an assertion that apart from (1) the heritable properties over which the Bank holds security for at least part of the debt payable or which will be payable to it (the extent of any unsecured debt being not as yet exactly calculable but which may yet be substantial) and (2) the claim in the commercial action, there are no other funds which could fall into any of the sequestrations. But a mere assertion by a sequestrated person that he has no further funds is not, unless admitted by all interested parties or otherwise reasonably plain, good reason of itself for recalling a sequestration. Ascertainment of the extent of the bankrupt's estate is one of the purposes of a sequestration (Gardner v. Woodside (1862) 24 D. 1133, especially per Lord Deas at pp. 1135-6). The permanent trustee is invested with powers specifically designed to allow him to investigate that matter. It would be a most unusual course to remit such a matter to proof at large in proceedings for recall. I can see no warrant for doing it here.
9. In allowing a proof the Temporary Judge said -

"I consider that the petitioners have averred enough to entitle them to a proof in an attempt to persuade the Court that [the] sequestration should be recalled, either on the basis that no purpose can be served by the sequestration, or else that in some way the bank is barred from objecting to recall because it is truly using the sequestration as a means of blocking the action against it. While I consider that to succeed in such a proof would be exceedingly difficult, I am not prepared at this stage to prevent the petitioners from making the attempt".

That approach, in so far as it refers to an entitlement to proof, may have been influenced by the way the matter was presented to the Temporary Judge. But, while recognising that the interlocutor reclaimed against was procedural in nature and accordingly involved the exercise of a discretion, I am satisfied that for the reasons expressed above such a course was quite inappropriate and that the interlocutor falls to be recalled.

10. I should add that reference was made in the course of the discussion to the circumstance that, despite having been elected to office in June 2000, the permanent trustee had achieved no significant progress in the sequestrations. In particular, he had not, it was said, taken steps to explore whether the firm or the partners had any other assets or to adjudicate on the claims of debtors. He had, with other interested parties, now intimated his concurrence in the sequestrations being recalled. One at least of the reasons for total lack of progress was said to be that the permanent trustee had not been put in funds to allow him to proceed. A factor contributing to this regrettable state of affairs appears to be that, although one insolvency practitioner had acted as interim trustee, a different insolvency practitioner had been elected as permanent trustee, that election having been carried through by the vote of Grantly Construction Limited (a company associated with the petitioners) on the basis of a very substantial claim made by that company against the first petitioners. That company, however, appears to have no monies available to it to fund the permanent trustee's fees and expenses. The permanent trustee has presumably given in each case an undertaking to act as such (section 24(2)(e)). That imports responsibilities to progress the sequestrations. If for any reason the present incumbent is unable to discharge that responsibility steps will require to be taken to secure his replacement. We were not invited to continue the reclaiming motion with a view to parties exploring whether or not the sequestration processes might with appropriate funding be put on a more active footing. I express no view on whether that would have been appropriate.
11. There was some discussion before us of the scope of section 17 of the 1985 Act. In the event it is unnecessary to reach any decision on the competing arguments. For my part I am content, without reaching a concluded view on the point, to proceed in the present case on the approach urged by Mr. Glennie. On that approach, however, there are in my view no circumstances averred by the petitioners which, if established, would justify recall of the sequestrations under section 17. While on one view that might suggest that dismissal of the petition was the appropriate disposal, in light of the wider discussion before us, which addressed the substance of parties' position taken as a whole, I agree with your Lordship in the chair that the reclaiming motion should be allowed, the interlocutor of the Temporary Judge recalled and the prayer of the petition refused.

Grantly Developments & Ors v. Clydesdale Bank Plc & Ors [2002] ScotCS 66 (14th March, 2002)

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Marnoch Lord Hamilton Lord Emslie	P396/00 OPINION OF LORD EMSLIE in RECLAIMING MOTION in PETITION of GRANTLY DEVELOPMENTS and OTHERS Petitioners; against CLYDESDALE BANK plc and OTHERS Respondents and Reclaimers: for RECALL OF SEQUESTRATION _______

 

 

Act: Glennie, Q.C., I.F. Maclean; Robsons, W.S. (Petitioners and Respondents)

Alt: Howlin; Dundas & Wilson, C.S. (First Respondents and Reclaimers)

14 March 2002

1. Section 17(1) of the Bankruptcy (Scotland) Act 1985 provides as

follows:

"The Court of Session may recall an award of sequestration if it is satisfied that in all the circumstances of the case (including those arising after the date of the award of sequestration) it is appropriate to do so and, without prejudice to the foregoing generality, may recall the award if it is satisfied that -

(a) the debtor has paid his debts in full or has given sufficient security for

their payment;

(b) a majority in value of the creditors reside in a country other than

Scotland and that it is more appropriate for the debtor's estate to be administered in that other country; or

(c) one or more other awards of sequestration of the estate or analogous

remedies (as defined in section 10(5) of this Act) have been granted."

Notwithstanding the inclusion of the three specified grounds on which the court may grant an application for recall, and the fact that, by virtue of section 16(4)(a), these grounds define the whole extent of the court's powers in respect of applications presented more than ten weeks after sequestration, it is clear that this subsection confers on the court a very wide discretion indeed.

2. In Ure v. McCubbin and Others (1857) 19 D. 758, referring to the equivalent legislative provisions then in force, Lord Justice-Clerk Hope (at p. 760) said:

"It is not provided in that section - and, in fact, could not be - on what ground the Court are bound to recall a sequestration; the matter is left entirely to the discretion of the Court".

Lords Murray and Wood made observations to the same general effect. Since then, the width of the court's statutory discretion in these matters has been affirmed on a number of occasions, notably by Lord President Clyde and Lord Skerrington in Nakeski-Cumming v. Gordon and Others 1924 S.C. 217 (at pp. 221-2) and by Lord President Hope in Wright v. Tennent Caledonian Breweries Limited 1991 S.L.T. 823 (at pp. 826-7). As the Scottish Law Commission made clear at paragraphs 8.8 to 8.12 of their Report on Bankruptcy and Related Matters (1982), to which the Bill later to be passed as the Bankruptcy (Scotland) Act 1985 was appended, the scope of the new section 17(1) was intended to be even wider than that of its various predecessors. There was, moreover, nothing in that Report, or in section 17(1) itself, to suggest that the discretion conferred on the court should be any narrower with respect to post-sequestration grounds than with respect to grounds arising at an earlier stage.

3. Against that background, senior counsel for the petitioning debtors submitted that the statutory wording spoke for itself and required no judicial interpretation. He acknowledged that the presence or absence of prejudice to creditors must inevitably be an important factor to be considered by the court in the exercise of its statutory discretion, but demurred to the suggestion canvassed earlier in the hearing that the absence of prejudice to creditors must be seen as a sine qua non of recall, even in cases where grounds arose subsequent to the sequestration itself. I am inclined to think that he was well-founded in these submissions, although resolution of this issue (which was not fully argued before us) is perhaps not strictly necessary to the disposal of the present reclaiming motion. As it seems to me, oppressive or unreasonable conduct on the part of one or more creditors opposing recall, unfair prejudice to the debtor in the event of the sequestration being maintained in place, or consideration of the conflicting interests of different creditors, may all conceivably warrant an order for recall even though certain creditors may thereby suffer prejudice in the sense of losing such prospect of recovery as the sequestration process might have offered.
4. Turning to the circumstances of the present case, I am in respectful agreement with your Lordships that matters have taken an unfortunate procedural turn. Allowance of a procedure roll debate in petition proceedings is no doubt competent, but it must always be borne in mind that the parties' pleadings and contentions in a case such as the present bear upon the exercise of a wide judicial discretion and not upon any strict question of legal rights or entitlements. In an ordinary action, a party may be entitled to an inquiry where his pleadings (including any documents incorporated therein) pass the fairly undemanding test of relevancy. As explained by Lord Normand in Jamieson v. Jamieson 1952 SC. (H.L.) 44 (at p. 50), "...an action will not be dismissed as irrelevant unless it must necessarily fail even if all the pursuer's averments are proved". However, while an approach of this kind may perhaps assist the court in determining, in the exercise of its discretion, that a petition for recall of sequestration must be refused, it is in my view quite inadequate as a guide to whether such an application should be allowed to proceed to a full-blown proof.
5. Accordingly, like your Lordships, I have reached the conclusion that the Temporary Judge fell into error in acceding to the petitioners' motion for a proof by reference to ordinary considerations of relevancy, whereas the real issue on which his attention should have been focused was how, on a broad assessment of the pleadings and contentions for both parties, the court should exercise its discretion under section 17(1) of the statute. The Temporary Judge having thus proceeded on a wrong basis, the matter is now at large for this court upon an assessment of the whole circumstances disclosed by the pleadings and contentions on both sides.
6. In that context, there is little that I would wish to add to the opinions delivered by your Lordships, with which I find myself in broad agreement. On the information currently before this court, I am unable to accept that the petitioners have put forward sufficient justification for the recall which they seek. In the first place, it does not seem to me that mala fides on the part of the respondents can properly be asserted on the basis of their having previously sought to impose conditions on a commercial offer to refinance the petitioners, particularly where the mala fides alleged has been overtaken by events since the matter was before the Temporary Judge. The petitioners have now been granted legal aid for their proposed action of damages against the respondents, and are therefore no longer able to characterise the respondents' opposition to the recall of the sequestration as an illegitimate device to prevent that action from being raised. And in the second place, I do not consider that the petitioners can properly use recall proceedings to place upon the court the burden of investigating and determining the very issues which the sequestration was designed to resolve, such as the true extent of the bankrupt estates, the legitimate value of creditors' claims and the sufficiency of any securities held. As Lord Justice-Clerk Hope put it in Ure, supra (at p. 760), "I think it would be an abuse...to recall the sequestration on grounds which are all competent to be stated and discussed at a future stage in the sequestration itself".
7. The only real concern that I have arises from the admitted fact that, due to lack of funds and the absence of any apparent prospect of a dividend for ordinary creditors, the Permanent Trustee has for nearly two years taken no steps to adjudicate on claims and securities, to investigate the true extent of the bankrupt estates, or otherwise to progress these sequestrations. For how long must the petitioners submit to the significant burdens and restrictions of sequestration when it appears that the major creditors, including the respondents, are content to sit by while nothing happens over an extended period? For my part, I would have been inclined to refuse in hoc statu the petitioners' motion to grant the prayer of the petition, and to continue the cause for a period of (say) eight weeks to afford the major creditors an opportunity, if so advised, to fund the Permanent Trustee and enable him to make some progress with the sequestrations and assess the practical worth of the exercise. I understand, however, that your Lordships favour the alternative course of refusing the present petition outright at this stage, in which case it will be open to the petitioners to raise fresh proceedings in the event that the current situation of stalemate and inaction is not satisfactorily resolved in the immediate future. In all the circumstances, I am content to concur with your Lordships as to the manner in which this reclaiming motion should be disposed of.