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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Nicholson v. Wright [1872] ScotLR 10_104 (6 December 1872) URL: http://www.bailii.org/scot/cases/ScotCS/1872/10SLR0104.html Cite as: [1872] ScotLR 10_104, [1872] SLR 10_104 |
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Page: 104↓
(Before seven Judges.)
A executes a trust-deed for behoof of creditors within sixty days of notour bankruptcy, and subsequently is sequestrated more than four months after the date of notour bankruptcy. arrestments duly used by non-acceeding creditors in the hands of the private trustee held to give a preferable claim in the sequestration.
The estates of Joseph Gracie, grocer, Dumfries, were sequestrated on 18th April 1871. On 22d May 1871 Johnston & Wright lodged a claim to be ranked preferably for the sum of £48, 15s. 10d. The grounds of the claim were these:—On 22d November 1870 the bankrupt Gracie had executed a trust-disposition omnium bonorum for behoof of his creditors in favour of William Gordon as trustee. Gordon accepted office and proceeded to wind up. On 26th November and 5th December 1870, arrestments were laid on by Johnston & Wright (two creditors who, it was admitted, had not acquiesced
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in the private trust-deed) in the hands of Gordon, the trustee and of Wilson, solicitor, Dumfries. These arrestments were respectively for the sum of £15, due on a bill drawn by the arresters upon and accepted by Gracie, and £50 on the dependence of an action between them and Gracie in the Sheriff Court at Dumfries. The bankrupt having been charged on an extract registered protest and decree, and having failed to make payment, on 3d December 1870 a search was made for him under a warrant of imprisonment, but he was not found. The execution of this search was admitted to be, in the circumstances, sufficient to create notour bankruptcy. On 19th December 1870 the bankrupt was incarcerated. On 2d March 1871 the arresters raised a summons of forthcoming before the Sheriff of Dumfries. On May 30th 1871 the Sheriff pronounced the following interlocutor in the foresaid action of forthcoming:—“Finds that the estates of the said Joseph Gracie were sequestrated on 18th April 1871, and that a trustee has been appointed on the sequestrated estates: Finds in law (1) That under the 102 section of the Bankruptcy (Scotland) Act 1856. the moveable estate and effects of the bankrupt, wherever situated, so far as attachable for debt, have been transferred and vested in the said trustee for behoof of the creditors. (2) That therefore any moveable estate or effects belonging to the said Joseph Gracie which may have been arrested in the hands of the defenders Robert Wilson and William Gordon are now vested in the trustee in the sequestration; and (3) That any claim which the pursuers may have against the common debtor by virtue of their diligence above set forth, must be prosecuted by way of affidavit and claim in the sequestration: Therefore dismisses the action quoad the merits, and decerns; and quoad the question of expenses, sists the process until the pursuer's claim in the sequestration has been finally disposed of.”
On September 1st 1871 the trustee in the sequestration issued the following deliverance on the foresaid claim:—“The trustee admits this claim to the extent of £38,5s. 1d. as an ordinary debt. The arrestments used by the claimants in the hands of William Gordon and Robert Wilson being inept; and not having attached any funds belonging to the bankrupt in their hands, the balance of their claim, amounting to £10,10s. 9d., is not chargeable against the estate. The arrestee William Gordon at the date of these arrestments was not debtor to the bankrupt and held no funds of his, but held the trust-estate of the bankrupt under a disposition in his favour qua trustee for behoof of the bankrupt's creditors, and was therefore accountable to them alone and not to the bankrupt. The arrestee Robert Wilson, at the date of the arrestments, held no funds belonging to the bankrupt, and was not debtor to him. Alternatively, the trustee holds that the claimants, subsequent to using the arrestments, acquiesced in that trust-deed, and from their mora in raising the action of forthcoming are barred from acquiring a preference over the other creditors.”
On appeal, the Sheriff ( Hope) pronounced the following interlocutor and note:—
“ Dumfries, March 6, 1872—Having considered the note of appeal, with revised minutes for the parties, and the whole process and debate thereon, for the reasons contained in the subjoined note, sustains the appeal, recals the deliverance of the trustee therein complained of, and ordains the trustee to rank the appellants on the sequestrated estate as preferable crditors to the extent of their claim, with interest thereon: Finds the trustee liable in expenses to the appellants: Allows an account thereof to be given in, and remits the same, when lodged, to the Auditor to tax and report, and decerns.
Note—The first question to be considered is, would the debt due to the appellants have been a preferable one on the estate, if there had not been a private trust-deed? The trustee says that it would not, on the plea that ‘the estates of the bankrupt having been sequestrated within four months of the date of notour bankruptcy, the appellants cannot claim a preference.’ On what this plea is founded the Sheriff-Substitute has been unable to discover. He can neither see reason in it, nor find authority for it. If the arrestments had been within sixty days prior to sequestration, then it might have been pleaded with success that the debt was not preferable, but that was not the case. The next question is, what difference (if any) does the fact of the bankrupt having executed a private trust-deed for behalf of his creditors make?
The trustee says that as the bankrupt had divested himself of his estate before the arrestments were used, and the trustee under the private deed held funds not belonging to the bankrupt but to the creditors, the arrestments were inept; and further, that ‘the appellants having acquiesced in the foresaid trust, or otherwise led the arrestees to believe that they were acceding creditors, and barred from prosecuting separate measures to obtain a preference over the other creditors’ It appears to the Sheriff—Substitute that none of these pleas would have been good before sequestration, and that they cannot be any better now.
In the first place, the private trust-deed having been granted when the truster was insolvent, and within sixty days of notour bankruptcy, was null and reducible, and therefore could not place the debtor's funds beyond the reach of a non-acceding creditors diligence; and in the second place there is not only no evidence in process of the appellants having acceded, but the averments on the subject are not relevant and sufficient to be sent to proof.
An action was in dependence in this Court in which these points would have been settled when the arrestees and the bankrupt, or one or other of them, took steps for having the estate sequestrated with the view of defeating the preference which the appellants were endeavouring to secure. If this step has had any result at all, it has been favourable to the appellants, for it immediately put an end to the trust-deed, at least Mr Gordon has acknowledged this by handing over the estate, so far as undisposed of, to the trustee in the sequestration.
It seems to the Sheriff-Substitute that if the trust-deed has been set aside to some effect, it must be set aside for all purposes; but whether that be so or not, the trustee in the sequestration under sections 10 and 11 of the Bankruptcy Act is entitled to set aside, either by way of action or exception ‘all alienations of property by a party insolvent or notour bankrupt which are voidable by statute, or at common law,’ and ‘in so doing, shall be entitled to the benefit of any presumption which would have been competent to any creditor’ It appears to the Sheriff-Substitute that if a trustee is entitled to do this, he is also bound to do it in the interests of any creditor who might have done it himself but for the sequestration; and therefore the trustee in this
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case ought to have given effect to the appellant's contention, set aside the trust-deed and all its effects by way of exception, and ranked the claim preferably on the estate.” The trustees appealed.
Authorities cited—Bell's Com. ii, pp. 172, 173, 487; Semper, M. 744; Stalker, M. 745; Globe Insurance Co. 11 D. 618; Sutherland, M. 1199; Smee Co. M. 1206; Sinclair, M. App. ix., p. 1798; Peters v. Speirs, M. 1218.
At advising—
The facts of the case, as they ultimately appear on the admissions of parties, are very few and simple. This man, Gracie. when in a state of insolvency, executed a trust-deed for the distribution of his estate among his creditors, dated 22d November 1870. This trust-deed fell under the operation of the Act 1696, in respect that the granter was rendered notour bankrupt within sixty days after its date. It was consequently voidable under that statute, and therefore, by the recent statute, its nullity can be pleaded without a process of reduction. The result was, that the private trustee ceased to hold the goods for behoof of the creditors who were intended to be benefited by the trust-deed, and held for the bankrupt and his creditors. The debts of Johnston and Wright are not disputed, and it is quite ascertained that the arrestments were duly used in the hands of the private trustee, one on 26th November, and the other on 5th December. The question, whether in these circumstances they are entitled to a preference, depends upon the date of sequestration in reference to the date of notour bankruptcy. The date of sequestration was 18th April 1871, four months and more after one date of bankruptcy (3d December), and less than four months after the other (19th December). I allude to the contentions of parties in the earlier stages of this litigation. It seems that the bankrupt, after being charged, and after the days of charge had expired, left the country. On 3d December 1870 a sheriffofficer made the usual and necessary search for him without success. Gracie returned after a short time, and was incarcerated on 19th December. The 3d December has ultimately been admitted at the bar as the true date of notour bankruptcy. Had it not been for this admission, there might have been some doubt as to this point, and some proof might have been required—the question being whether the execution of search, taking into consideration the admission that the debtor had left the country, afforded sufficient presumption that he had absconded to avoid the diligence of his creditors. But the matter has been set at rest, for although proof might have been asked to show that there was no absconding, the trustee has not asked to be allowed proof, but has admitted that the date of bankruptcy was 3d December. In consequence of that admission, all doubt is removed, for the sequestration not having followed within four months of notour bankruptcy, it cannot be alleged that there is any arrestment which can compete with those of Johnston and Wright. Although they were used within sixty days of notour bankruptcy, that notour bankruptcy was not within four months of the sequestration. Consequently the equalisation of these arrestments, with the general arrestment effected by the sequestration, did not take place.
Another material point has been admitted, viz., that these creditors had never acquiesced in the private trust-deed, and were therefore not barred from pleading its nullity.
I therefore arrive at the conclusion that the interlocutor of the Sheriff-Substitute is right. His decision is in terms of a provision of the Bankruptcy Statute—that wherever a preference has once been obtained over any part of the bankrupt estate, that part of the estate passes into the hands of the trustee in the sequestration, under burden of that preference.
That this admission should have been made did not surprise me, having regard to the terms of the execution of search giving rise to the presumption of notour bankruptcy. That execution proceeded on the warrant of the Sheriff's decree, and his fiat ut petitur issued in terms of the Personal Diligence Act, and executed by a sheriff officer. which is declared by that Act to have the same effect as if the diligence had been used on letters of horning and caption. This being so, the execution contains all the essential facts to be found in those executions of search on which the Court proceeded in the cases referred to by Mr Bell in his Commentaries (7th edition) vol. ii, p. 162. These executions are now before me, having caused an examination of the Session Papers to be made in order to ascertain their precise terms. And Mr Bell lays down the doctrine established by the decisions in these words—“The messenger's return of execution stating that, after a thorough search, the debtor could not be found, is good evidence, prima fronte, that he has absconded; and, unless opposed by contrary evidence, is sufficient proof of bankruptcy.” In this case the debtor was notoriously insolvent, having executed a trust-deed for behoof of his creditors; and although, in the record, notour bankruptcy was denied, and it was competent for the trustee to have asked for probation to redargue
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The next question regards the effect of the arrestments used by the arresting creditors on 26th November and 3d December 1870. Is it to be held that their effect could be destroyed by the prior execution of the private trust-deed for behoof of the whole creditors on 22d November 1870? It is now admitted that there was no accession to the private trust by the arresting creditors. And this being so, their diligence was perfectly legal. But, assuming that the private trust-deed took full effect, and that the trustee had obtained possession of the debtor's estate, an arrestment used by a non-acceding creditor in his hands subsequent thereto must have the effect only of attaching whatever residue should remain with the trustee after full payment to the other creditors. This result, however, is obviated by the debtor in this case having been made notour bankrupt, as aforesaid, on 3d December 1870. The effect of this notour bankruptcy was to render reducible the trust-deed under the Act 1696, as a voluntary deed within sixty days. A reduction at the instance of the arresting creditors might therefore have been at any time instituted to the effect of setting aside the private trust, so as to enable them to make effectual their arrestments.
The arresting creditors have not instituted a reduction. The necessity for their doing so has been superseded by the sequestration of the debtor's estate in April 1871. The effect of that proceeding is, as regards the administration of the debtor's estate, to transfer it entirely to the statutory trustee, and to render void the private trustdeed under the 10th section of the Act. The private trust has been thereby brought to an end; and the whole effects of the debtor remaining in the hands of the private trustee now belong to the statutory trustee, and have been transferred to him. But, in asserting his right to these effects he can take them only subject to such preferences as have been created over them by lawful diligence. And in this case the arresting creditors have attached, by their diligence in the hands of the private trustee, the effects of their debtor which he held at the date of their diligence, and which the statutory trustee is now entitled to have delivered to him.
This result appears to me to flow necessarily from the various decisions which were referred to in the debate, and which culminated in that of Johnston, 1779, D., App., “Bankrupt,” No. 5.
On these grounds I concur in the opinion of Lord Benholme.
It thus becomes a vital matter whether notour bankruptcy took place on 3d December. The only proof offered is the execution of search by the sheriff-officer. There is no doubt that such an execution raises prima facie evidence that the debtor has absconded. But the execution here bears that the officer went to the debtor's dwelling house, between eleven and twelve o'clock in the forenoon, and looked through the house, and did not find him. The proper form is given in Darling's execution of an officer, pp. 179 and 180 — “Upon the day of one thousand eight hundred and years, and between the hours of and afternoon, by virtue of letters of caption, dated , and signeted , raised at the instance of A.D., merchant in E., against E.F., grocer in G. I, A.B., messenger-at-arms, passed to the dwelling-house occupied by the said E.F., and to the shops warehouse occupied by him in , and then and there, at each of the said places, having my blazon displayed upon my breast, and holding the letters of caption and my wand of peace in my hands, in Her Majesty's name and authority, made diligent and strict search for the said E.F., by looking and searching carefully and attentively in and through every part, corner, and apartment of each of the said dwelling-house, shop, warehouse, and cellars capable of containing a man, and where it was possible the said E.F. might be concealed, in order to apprehend and incarcerate his person in terms of said letters. But, notwithstanding the most strict, diligent, and minute search at each of the said places, as said is, he, the said E.F., could not be found, he having absconded, as I believe, for his personal safety. All this I did before and in presence of Y.Z., residenter in witness and assistant at the whole premises, and hereto with me subscribing.”
There must be proof of flight or absconding, and it is a question whether the execution at the dwelling house raises any such presumption, especially as at the time when the search was executed it was to be expected that the debtor would be at his shop or warehouse, and not in his dwelling-house. Mr Bell (Com. ii, p. 172 and p. 173) says “Two questions may arise concerning absconding—(1) The messenger's return of execution, stating that after a thorough search the debtor could not be found, is good evidence, prima fronte, that he had absconded; and, unless opposed by contrary evidence, is sufficient proof of bankruptcy. But what facts will entitle a messenger to return such an execution. In a man of good credit mere absence from home is nothing, but in a debtor notoriously insolvent such absence is more suspicious, and, indeed, has been found to infer presumptione juris an absconding under the Statute 1696. It seems reasonable, however, to require some other circumstance than mere absence—as the lateness of the hour, or the apparent concealment or ignorance of the domestics of what has become of the debtor. From such circumstances absconding may fairly be inferred.” I have always understood that to be sound law. Some other circumstance besides absence from home is required to infer that the debtor has absconded. It is by no means clear from the statements of the creditors that he did abscond, for we find from the statements on the record that he went to Liverpool and returned on the 19th.
But the counsel for the trustee has admitted that notour bankruptcy did take place on 3d
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He was not apprehended till the 19th December, and the sequestration was on 18th April 1871, within four months of the date of that apprehension. which, if he did not abscond, was the date of notour bankruptcy. Taking these two dates as the date of notour bankruptcy, and the date of sequestration, a question of importance, and not free from difficulty in regard to the effect of the sequestration on the arrestments, would have arisen. It is enough for me now to say, that, taking the dates according to that state of the facts, and as the case was argued in the First Division, and is presented on the record by the trustee who denied the absconding, I felt difficulty on that question of the effect of the sequestration on the arrestment, and I do not now venture to express any opinion on it.
I understand it to be now admitted on the part of the trustee, though it was formerly denied, that Gracie had absconded when the search was made; and that therefore the 3d of December 1870 is the date of notour bankruptcy. That important admission, in regard to the matter of fact, changes the aspect of the case. We could not take an admission in point of law. Taking that view of the fact as it is now admitted, I do not differ from the judgment which is proposed.
Lord President—I concur in the conclusion arrived at by the majority of your Lordships, and will only add a few words in reference to the proof of notour bankruptcy, upon which point there has been some difference of opinion.
If the notour baukruptcy was on the 19th and not on the 3d December, a question of great importance would arise. For all arrestments within sixty days before, and four months after, notour bankruptcy rank pari passu, and if notour bankruptcy occurred on 19th December, the sequestration is within four months after bankruptcy; and if it is an arrestment, ranks pari passu with prior arrestments. But I do not think that we are here called upon to decide whether sequestration is an arrestment within the meaning of the statute, for there is no doubt that the bankruptcy was on the 3d and not the 19th December. There was a search for the bankrupt on the 3d of December, and the execution of search raises a presumption of absconding. That presumption may be redargued, but until it is so redargued the execution of search is conclusive proof of absconding. This is established by numerous decisions. It is to be kept in mind that this effect of the execution of search is not a statutory matter. The thing to be established is the absconding, and by common law the execution of search is a proof of absconding. But from this execution it seems to me that the search in this case must have been an unusually strict one, and I cannot agree with Lord Deas in his remarks on that subject.
But it is said that the trustee might have redargued the absconding. No doubt he might, but he had to make an admission which materially hampered him in this respect, viz., the admission that, at the time of the search; the bankrupt had left the kingdom. Having made that admission, I do not feel surprised that the trustee did not attempt to maintain that notour bankruptcy did not take place on 5th December.
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It is said that notour bankruptcy is not a matter of fact but of law, and that therefore it is not a matter for the trustee to deal with. Now I don't think so. Notour Bankruptcy is a matter of fact, and a matter of fact with which the trustee is very well fitted to deal. But if it had been a matter of law, could the trustee not have dealt with it? I think he could. It is no reason to exclude the trustee that there are points of law involved, for as is shown, by the fact that when a trustee admits claims, he deals both with fact and law. But I don't think that this matter of notour bankruptcy is a matter of law at all, but purely of fact. And matter of fact, the notour bankruptcy in this case occurred on the 3d December.
I therefore concur with the majority of your Lordships, that we should affirm the interlocutor appealed against.
Counsel for Appellant:—Solicitor-General ( Clark) and Harper. Agent— R. P. Stevenson S.S.C.
Counsel for Respondent— Watson and Strachan. Agent— J. Mack, S.S.C.