Scottish Court of Session Decisions

Pursuer: Middleton; Russell Jones Walker

Defender: MacColl; Anderson Strathern LLP

9 December 2011

[1] In this action the pursuer seeks damages for personal injuries allegedly sustained in an accident on 14 March 2008. It is a matter of admission that at the material time the pursuer was working in the course of his employment with the defender. The case called before me for discussion on the procedure roll where the defender's motion was for decree of absolvitor. The pursuer sought a proof before answer of all averments.

[2] The factual circumstance which gave rise to the debate was that on 24 September 2008, subsequent to the incident with which this action is concerned, the defender was sequestrated. The defender was discharged from his sequestration on 24 September 2009. Extracts relevant to the defender' sequestration and discharge were produced and those facts were not is dispute.

[3] The defender's submission was that the discharge of an individual from sequestration discharges them from all debts and obligations binding in the United Kingdom, be these present, future or contingent, for which the sequestrated person was liable at the date of his sequestration. This was said to arise by reason of operation of Section 55 of the Bankruptcy (Scotland) Act 1985 ("the 1985 Act"). An obligation to make reparation for personal injuries was said to be a present, albeit illiquid, obligation. It was not a contingent obligation. As a consequence of the foregoing it was submitted that a person who is under an obligation to make reparation for personal injury suffered by another will be discharged from that obligation to make reparation if, subsequent to becoming the debtor in such an obligation, he is sequestrated and then discharged from his sequestration.

[4] In elaboration of these propositions counsel for the defender drew my attention to the provisions of Section 55 of the 1985 Act which provides:

"Subject to sub-sections (2) and (3) below, on the debtor's discharge under Section 54 of this Act, the debtor shall be discharged within the United Kingdom of all debts and obligations contracted by him, or for which he was liable, at the date of the sequestration."

My attention was drawn to the language of that provision and in particular that point which provides that when a person is discharged from sequestration they are discharged from "all debts and obligations" owed by them when they were sequestrated. This was said to be one of the essential features of the scheme of sequestration, that it was a process which freed a bankrupt from their pre-sequestration debts. It was also observed that, other than by way of the provisos contained in sub-sections (2) and (3) of Section 55, there was no restriction upon the nature of the obligations that were so discharged. The express language of the statute was sufficient to include all future and contingent obligations, as well as present obligations. The list of obligations which were excluded from these general discharge provisions was provided for by Section 55(2) of the 1985 Act. It was submitted that none of those were relevant to the circumstances of the present action.

[5] The final strand of the defender's submissions was, in anticipation of submissions which were anticipated to be made by the pursuer, that an obligation to make reparation was not a contingent obligation on debt. Counsel submitted that "a contingent debt is one which depends on the occurrence of an uncertain future event - an event which may or may not happen" (Wilson, The Scottish Law of Debt (2nd Ed.), paragraph 1.11). Support for that definition of a contingent obligation was further found in the Opinion of Lord Drummond Young in Liquidator of the Ben Line Steamers Limited, Noter 2011 SLT 535 (at paragraph [24]). Correctly characterised the right of a person injured by a delictual action to obtain payment of damages for loss caused by that delictual claim was not a contingent debt, but rather a present debt. This was plain because the right accrued at the moment the delict was committed. Authority for this proposition was found in Riley v Ellis 1910 SC 934.

[6] In response to these submissions counsel for the pursuer had three arguments. First, that the defender's obligation to make reparation was preserved by the express operation of Section 55 of the 1985 Act. Second, that the defender's obligation to make reparation was a contingent obligation, which was not discharged by virtue of Sections 54 or 55 of the 1985 Act. Third, that by application of the normal rules of statutory interpretation Sections 54 and 55 ought not to be applied so as to discharge payment of damages for personal injuries.

[7] So far as the first of those arguments was concerned the pursuer's proposition was that there required to be full disclosure of all debts by the debtor to his trustee before Section 55 of the 1985 Act could operate. It was submitted that Section 55 only operated to discharge a debtor from those debts and obligations which were known to and accounted for by the trustee as part of the sequestration process. Attention was drawn to the fact that the equivalent English provision to Section 55, Section 281(1) of the Insolvency Act 1986, provided only for discharge of "bankruptcy debts", which were debts known by the trustee to exist. Counsel argued that the same consideration should apply in Scotland to what he termed as "sequestration debts". He accepted that the terms "sequestration debt" did not appear in the 1995 Act and was, in fact, his own invention. By it he meant debts which were disclosed to the trustee by the bankrupt person on his sequestration. It was submitted that this class of debt was comparable to the English concept of "bankruptcy debts". Beyond this proposition it was also submitted that the obligation was expressly saved by operation of the terms of Sections 55(2) and 64(1) of the 1985 Act.

[8] The second argument advanced by the pursuer was that contingent obligations were not discharged by Section 55 of the 1985 Act and that a debt to make payment for an obligation incurred as a result of a delictual action was contingent in nature. This argument plainly depended upon the obligation in the present action being of a contingent nature. It was submitted that an obligation was contingent if its enforceability was dependent on either (a) an event which may or may not happen or (b) although initially exigible or prestable, a debt which will cease to be so on occurrence of some uncertain event. The contingency in the present case was said to be an event which might render the currently excisable obligation unenforceable such as the outcome of an appeal.

[9] The pursuer's third argument was that to adopt a straightforward construction of Section 55 of the 1985 Act, that is by reading it in plain English, would result in an unfair result and deprive the pursuer of the remedy for an injury they had sustained as a result of a delictual act. This would also, it was said, infringe the pursuer's human rights under Section 3 of the Human Rights Act 1998. A statutory construction other than the normal cannon of construction was justified in this case because to proceed in any other way would result in what was described as "an absurd result".

[10] The starting point for consideration of the issues before the Court is plainly a consideration of the relevant statutory provisions. In this regard consideration must be given to the scheme for personal sequestration of which Section 55 of the 1985 Act is an integral part. Following sequestration there are obligations placed upon a sequestrated person to provide information relative to his debts to his trustee (Section 19, 1995 Act). It is important to note that failure to provide such information to the trustee is an offence with a criminal sanction (Section 19(3), 1995 Act). The trustee has, of course, obligations to ingather the sequestrated person's estate administer that estate and, ultimately, distribute the same in accordance with statutory provisions (Section 3(1), 1995 Act). At the end of this process the sequestrated person is entitled to a discharge (Section 54, 1995 Act). It is at this stage that Section 55 of the 1985 Act, the critical section so far as the present action is concerned, comes into operation. It is plain, in my view, from the language of this section that the intention of the statutory scheme is, save for the exceptions set forth in sub-sections (2) and in (3), to discharge the debtor from "all debts and obligations ... for which he was liable at the date of sequestration". The language is plain and easily intelligible. There is, in my view, no scope for misunderstanding or ambiguity in the statutory language. Unless an obligation falls into one of the categories set forth as an exception in sub-sections (2) and (3) the debt will be discharged on the date of the discharge from sequestration.

[11] Turning to the present case it is plain, and indeed the contrary was suggested by counsel for the pursuer, that the debt in question does not expressly fall within any of the exceptions set forth in Section 55(2) or (3). Arguably this itself, is sufficient to dispose of the case in favour of the defender I should however deal with the other arguments advanced by counsel for the pursuer. In my view the debt in the present case cannot be regarded as contingent. The nature of a contingent debt has recently been fully and comprehensively considered by Lord Drummond Young in Liquidator of Ben Line Steamers Limited, Noter (supra). Lord Drummond Young's definition, already quoted, appears to me to be fully justified on the authorities and authoritative. I respectfully adopt it. It seems to me to be beyond doubt that an obligation to make reparation as a result of a delict is created at the moment the declict is committed. The obligation is not dependent upon the occurrence of any future event the occurrence of which is in doubt. It is not, in my view, correct to submit as counsel for the pursuer did that the existence of the obligation is dependent upon some judicial determination. Put simply, if in any Court action arising out of the delictual action the Court find in favour of the pursuer, then the Court is simply declaring that the delict occurred and came into existence at the point it was committed. If the Court, on the contrary, rules in favour of the defender then that is a declaration that no delictual action was committed. On the same rationale the possibility of a future appeal is not a future event of the sort envisaged by Lord Drummond Young. In my view a future appeal lies in exactly the same category of event as a judicial determination at first instance. Accordingly I am of the view that the obligation in the present action is not a contingent obligation.

[12] The pursuer's second argument proceeded on the basis that the debt in the present action was not covered by Section 55 of the 1985 Act because it was not declared by the trustee by the defender, its existence was therefore unknown to the trustee throughout the process of sequestration, and it therefore was not a "sequestration debt" habile to be extinguished on the debtor's discharge from sequestration. In my view this argument fails for the simple reason that there is no statutory justification for it. The concept of a "sequestration debt" was, on his own admission invented by counsel for the pursuer himself without statutory authority or justification. The fact that there is, apparently, a category of "insolvency debts" in the comparable English proceedings under the Insolvency Act 1986 is of no relevance or consequence. The argument is, quite simply, untenable as a matter of statutory construction. I of course accept that it appears to be the case that the defender failed to disclose a debt of which he was aware to his trustee. This would appear to be a breach of statutory obligation incumbent upon him (Section 19(3), 1995 Act). That matter may have consequences for him but that is neither relevant nor germane to the matter under consideration in the present action.

[13] The last argument advanced by counsel for the pursuer depended, on his own submission, on an approach to statutory construction other than the normal rule of construing a statue by its plain or ordinary meaning in the English language. In fairness counsel recognised that there could only be a departure from that normal rule in special, limited, circumstances. No such circumstances exist in the present case. Furthermore, as I have already said, the language used in Section 55 is, in my view, plain and unambiguous. I see no need to resort to other than the normal rules of construction.

[14] For the foregoing reasons I am satisfied that the arguments of the defender are well founded. Counsel for the defender invited me to pronounce decree of absolvitor and that on the grounds that any obligation incumbent upon the defender to make reparation to the purser has been discharged by operation of Section 55 of the 1985 Act. I consider that proposition to be well founded. Since there is no obligation the appropriate decree is one absolvitor.