Scottish Court of Session Decisions

James Baillie, surgeon, Motherwell, was in right both of a promissory note of William Young, of the Omoa ironworks, for £76, 14s, 6d., and also of a note by Young for £50, which was held by John Grindlay, writer in Hamilton, for Baillie's behoof. He was thus the creditor of Young for £126, 14s. 6d. (besides certain expenses), when Young was sequestrated in 1827. Young offered to his creditors a composition of 3s. per pound, which they accepted, and the Court pronounced a decree approving of the composition, and discharging Young, in common form. Baillie and Grindlay obtained the composition on their debts, and granted receipts and discharges to Young. By a subsequent action against Baillie, Young established that Baillie owed him a debt of £84 for certain ironrails which had been furnished to him prior to the sequestration, and which debt was Still unpaid. Baillie and Grindlay then raised a reduction of the decree of approval of composition and discharge obtained by Young in his sequestration, and also of the receipts granted by them for the composition on their debts, as having been fraudulently obtained. The action also concluded that the pursuers should be restored, in integrum, against the judicial discharge, and their own receipts. They called the trustee under the sequestration, and all the creditors as parties. The action was ultimately insisted on by Baillie alone, as the party interested in both notes. After a trial by jury, a verdict was found, that the discharge and receipts were obtained by fraud, or fraudulent concealment, on the part of Young. ¹ In the question as to the effect of this verdict, Baillie pleaded that the discharge in the sequestration, as well as the receipts for composition, must now be reduced absolutely, quoad him; that he must be restored thereagainst, in integrum; and that the accounting between the defender and him must take place precisely as if no composition had ever been approved of by the Court. The defender was indebted to him in £126 (besides certain expenses), at the date of the sequestration. He was indebted to the defender in £84. After imputing this latter sum against the first, there remained a balance of £42 (besides the expenses), from which the sums received in name of composition fell to be deducted, and the remainder was a debt still due by the defender to the pursuer, and which he was liable to pay in full, as the discharge under the sequestration, must be wholly set aside, in any question with the pursuer. It was not necessary in this action to consider the effect of the reduction, as to the defender's other creditors; but if it were so, it was clear that the discharge, quoad them, must remain until they themselves should reduce it, as the pursuer's title to reduce the discharge was necessarily limited by his own interest, and the reductive conclusions therefore could not affect the other creditors, either for good or evil.

The defender answered, that the utmost extent to which the pursuer could insist, was to have the benefit of setting off his debt of £84 against the sum of £126 (and the expenses) due to him, and obtaining a composition of 3s. per pound on the balance. If he got more than this, he would be

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¹ March 23, 1837 (ante XV., 893, which see).

obtaining a preference over the other creditors, as to whom the discharge remained binding notwithstanding the present action. If any thing more were allowed to him, the other creditors might maintain that the discharge was absolutely set aside, not only as to the pursuer, but as to the whole body of creditors, which the Court could not do in this action.

The Lord Ordinary “having heard parties’ procurators on the import of the verdict of the jury, and on the judgment craved by the pursuer thereupon, made avizandum with the cause to the First Division of the Court.” ^*

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^*“ Note.—It appears to the Lord Ordinary, both from the averments on record, and from the uncontradicted statement as to the res gesta at the trial, that, although the verdict in this case is apparently general, it must be viewed as intended not to annul in toto (even in a question with the pursuer) the composition contract and discharge of the defender, William Young, but merely to entitle the pursuer, James Baillie, now to have the account stated in the same manner, and on the same principles on which it, ought to have been struck when the accounts were first settled between the pursuer and defender at the close of the sequestration. This is the Lord Ordinary's view; but it is proper that the case should be reported to the Court, that the parties may have the benefit of the Lord President's opinion, as his Lordship presided at the trial. The facts seem to stand thus:—The pursuer, Baillie, averred fraud and deceit generally as the ground for reducing the defender, Young's, discharge; but the fraud consisted in this, that the defender concealed or kept back a certain claim of £84 which he held against the pursuer, for the price of iron–rails received by him from the defender prior to the sequestration of the latter, and that while the pursuer, Baillie, and Grindlay, his agent for his behoof, accepted of a small composition of 3s. per pound on two bills of £50 and £76 odds held by them on Young, the latter, after he got his discharge, attempted to claim that £84 in full. In point of fact that claim, though only constituted by the verdict of a jury in October, 1835, was due in July, 1826, the date of carrying off the rails, while the composition was accepted of in 1831.

“The specific ground of complaint by the pursuer is thus stated in his own summons:—‘Having obtained this verdict, the bankrupt maintains that he is entitled to payment of the price with interest, without reference to the state and concourse of debit and credit between him and the pursuer, James Baillie; in other words, that the pursuer, James Baillie, is to be paid by a composition, and that he the bankrupt is entitled to receive payment in full. But this plea is contrary to the justice of the case, and the bankrupt is not entitled thus to take advantage of his own fraud and deceit.’ Now, the pursuer having obtained a verdict ascertaining that there was fraudulent concealment as he alleged, the question comes to be as to the effect of it. Ought the pursuer now to get the account stated between the defender as it should have been from the first, in equity and on legal principle, by deducting the defender's counter claim of £84 from the pursuer's claim of £126, and allowing the latter a composition on the balance? or, ought the composition to be set aside in toto, so as to enable the pursuer now to claim from Young full payment of the balance after the said £84 is deducted?

“The Lord Ordinary is clearly of opinion, that the first alternative is that which meets the justice of the case, and that the discharge ought only to he reduced to the effect of enabling the accounts to be adjusted as they should have been from the first, leaving the pursuer only entitled to a composition on the balance.

“In truth, if the accounts are corrected, so as to remedy the particular error or

fraud which the pursuer himself specifies in the summons, it is all that can be legitimately asked or given.

“To enable the defender to demand payment of his balance in full, while the other creditors get only 3s. per pound, would be giving a preference to the pursuer which the law cannot readily sanction.

“If these views are adopted, the pursuer will be entitled to expenses down to the date when the defender offered to settle as now suggested, and it will be for the Court to consider whether the pursuer is not liable to the defender in subsequent expenses.”