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(1860) 1 Paterson 927
REPORTS OF SCOTCH APPEALS IN THE HOUSE OF LORDS.
No. 136
Subject_Bankruptcy — Sequestration, Competency of — Acts 2 and 3 Vict. c. 41; 16 and 17 Viet. c. 53 — Winding up Acts, 11 and 12 Viet. c. 45, and 12 and 13 Viet. c. 108 — Call on Contributories — Debt—
A party in Scotland having died, holding shares in an English joint stock company, his representatives confirmed to his estate, including these shares. After his death, the joint Stock Companies? Winding up Acts ( 1848 and 1849), 11 and 12 Vict. c. 45, and 12 and 13 Viet. c. 108, came into operation. The official manager made a demand against the executor of the deceased shareholder, for payment of a large sum in name of a call, in terms of the acts, and particularly under the 83d section of the act of 1848; but the executor did not pay the call. The official manager then applied, by direction of the Court of Chancery in England, in terms of the acts 2 and 3 Viet. c. 41, and 16 and 17 Vict. c. 53, for sequestration of the estate of the deceased shareholder in respect of the call.
Held (affirming judgment), That the claim made under the call was not a “debt” in the sense of the act 2 and 3 Vict. c. 41, and sequestration refused as incompetent. 1
This case, which was reported by the Lord Ordinary to the First Division, was virtually disposed of by the Court on 18th July 1856; but doubts having occurred whether the Court could, in the first instance, pronounce an interlocutor, they remitted to the Lord Ordinary to do so, and his Lordship thereafter pronounced an interlocutor refusing the application for sequestration. On a reclaiming note by the petitioner, the Court adhered on the grounds previously expressed by their Lordships.
The petitioner appealed to the House of Lords on the following grounds:—1. The proceedings for winding up the affairs of the bank in the Court of Chancery conclusively established that the estate of Sir Francis Walker Drummond was liable to the appellant, as official manager, for the sum of £14,000, the amount of the call, and that this sum formed a debt against his estate. 2. Even if the proceedings in Chancery under the winding up were not conclusive, and could be examined by the Court of Session, the respondent, as representing the estate of Sir Francis Walker Drummond, was rightly inserted in the list of contributories, and the estate of Sir Francis was liable for the sum of £14,000, the amount of the call in question. 3. The liability for a call constituted a debt against the estate of Sir Francis Walker Drummond, in respect of which it was liable to be sequestrated under 2 and 3 Vict. cap. 31. 4. The proceedings of the appellant in the Court of Session, as well as in the Court of Chancery, were in all respects regular and proper; and the Court of Session ought to have directed the Lord Ordinary on the Bills to grant sequestration of the estates of Sir Francis Walker Drummond.
The respondents supported the judgment of the Court of Session on the following grounds:—I. The appellant, as official manager, had no right or title to apply for sequestration of the estates of the deceased Sir Francis Walker Drummond. As official manager, he could adopt no steps excepting those authorized or warranted by the Statutes, and these did not warrant an application for sequestration in Scotland. 2. The call, in respect of which the appellant sought sequestration to be awarded, was not such a debt as under the Scotch Bankrupt Statutes warranted sequestration. It was in its nature contingent, and did not necessarily imply that any debt whatever would ultimately be found due by the party upon whom the call was made. 3. Even supposing the appellant's title and the debt claimed to be unexceptionable, the debt was
_________________ Footnote _________________
1 See previous reports 19 D. 55: 28 Sc. Jur. 660. S. C. 3 Macq. Ap. 772: 32 Sc. Jur. 360.
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Daniell Q.C., Anderson Q.C., and Roxburgh, for the appellant.—The Winding up Act 1848, and the order of the Court of Chancery, enabled the appellant to apply for sequestration of the estate of the deceased Sir Francis Drummond. The order of the Court of Chancery constituted the estate of Sir Francis a contributory and the appellant a creditor; and, accordingly, he was entitled to the ordinary remedies of creditors— North of England Banking Co. 1 De G. & Sm. 545; Thomas' Case, 1 De G. & Sm. 579; Hamer's Case, 2 De G. M. & G. 366; Robertson's Case, 6 De G. M. G. 586; Crossfield's Case, 2 De G. M. & G. 288; Connell's Case, 25 L. J. 649, Ch.; Macdonald v. Auld, 2 D. 1104; Newall's Trustees, 2 D. 1108.
Rolt Q.C., and Sir H. Cairns Q.C., for the respondents.—The appellant had no title to apply for sequestration of the estate of any party in Scotland. There was no debt, but merely a claim, and a claim upon Sir James', and not Sir Francis', estate. The application did not comply with the requirements of the Statute 2 and 3 Vict. c. 41, § 9, inasmuch as it did not set forth the securities in respect of which the alleged debt arose.
This is a most peculiar remedy that is given by the 4th section of the 2 and 3 Vict. c. 41; and the question is, whether this is a case coming within that enactment. It enacts, that sequestration may be applied for the estates of any deceased debtor, who, at the time of his death, resided, or had a dwelling house, or carried on business, in Scotland, and was at that time owner of heritable or moveable estate in Scotland, provided that such sequestration shall be applied for by one or more creditors qualified as hereinafter mentioned. This, then, is a most peculiar proceeding, whereby the whole of the real or personal property of the deceased is to be sequestrated for the benefit of all his creditors. The question is, whether this enactment has been framed so as to meet the case of an application by this official manager upon the property of a deceased shareholder, the proceedings having been taken against the representative of that shareholder. Now, in order to bring this case within the act of parliament, it seems to me quite clear, that there must be the relation of debtor and creditor subsisting between the petitioner and the person against whose estate the sequestration is sought. It must be shewn that Sir Francis Walker Drummond was the debtor of Wryghte, the petitioner. The properly qualified persons to apply for the sequestration are described in the 8th section of this act of parliament. Does that description in the slightest degree accord with the situation of Wryghte, the official manager acting under the order of the Court of Chancery? I am clearly of opinion that it does not. It is for the petitioner to shew, that this debt does arise necessarily from the engagement into which Sir Francis entered, binding his estate; but it is unnecessary now to decide that question. The reason is enough to authorize the refusal of the sequestration, that the relation of debtor and creditor never subsisted between Mr. Wryghte and Sir Francis Walker Drummond. It is quite certain that that relation never subsisted. And it seems to me equally certain, that, according to this act of parliament, the relation of debtor and creditor must subsist between the petitioner and the party against whose property the sequestration is sought. On that ground I am of opinion, that the sequestration was properly refused by the Court below, and that this appeal ought to be dismissed.
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The doubt which occurred to my mind for some time during the argument was this—Whether or not, throwing overboard altogether the order of the 9th August 1854, and all which followed upon it in Scotland in the way of registration, the proceedings might have been sustained simply by the order of the Master of the 8th of March 1856, directing this application for sequestration grounded upon the previous order to pay the call. That was a view that for some time I thought possibly might have been sustained; but, upon further consideration, I think that also fails upon the same grounds upon which my noble and learned friend thinks it fails.
With reference to the order that was registered, the Master, of course, could not validly direct the sequestration unless the Statute authorized it. The Statute authorizes the application for the sequestration of the estate of a deceased person at the instance of a creditor of that person. Now Wryghte certainly was not a creditor; and although, by means of the English act of parliament, he is put in loco creditoris, so that it cannot be gainsaid as against him, that he is not a creditor in whose place he is substituted, that is purely English machinery, which is not introduced into Scotland at all. And if the judgment of the Master, establishing the fact that Sir Francis Walker Drummond was a debtor, may be taken as a judgment not conclusive—at least, a foreign judgment valid primâ facie in Scotland—you cannot import into Scotland, with that primâ facie judgment against the estate of Sir Francis, the machinery of English law, whereby that is to be enforced. Upon that short ground, (I do not mean to say that there may not be other grounds,) it appears to me, that no sequestration could be granted under the Statute of 2 and 3 Vict. cap. 41, and consequently that the interlocutor was right.
Mr. Daniell.—Would your Lordships think it right to make an addition to the order with regard to costs, that the costs of all parties should be paid out of the estate?
Sir Hugh Cairns.—There is an absolute order of the House for the payment of costs.
Mr. Daniell.—What I suggest does not interfere with the order of the House.
Lord Chancellor.—Out of what estate do you mean?
Mr. Daniell.—Out of the estate of the Royal Bank of Australia.
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Mr. Daniell.—It will be a personal order upon the official manager, without prejudice to any application he may make under the Winding up Acts.
Interlocutors affirmed, and appeal dismissed with costs, without prejudice to any application which the appellant may make under the Joint Stock Companies' Winding up Acts, in respect of the payment of costs out of the assets of the said Bank and the calls under the said Acts.
Solicitors: For Appellant, H. Harris, Solicitor, London.— For Respondents, Robertson and Simson, Solicitors, London.