Scottish Court of Session Decisions

The Bankruptcy (Scotland) Act 1856 (19 and 20 Vict. cap. 79), sec. 146, provides—“The bankrupt may at any time after the meeting held after his examination petition the Lord Ordinary or the Sheriff to be finally discharged of all debts contracted by him before the date of the sequestration, provided, &c ….. And the bankrupt may also present such petition on the expiration of two years from the date of the deliverance actually awarding sequestration, without any consents of creditors.”

The Bankruptcy and Cessio (Scotland) Act 1881 (44 and 45 Vict. cap. 22), sec. 6, provides—Notwithstanding anything contained in the Bankruptcy Acts, the following provisions shall have effect with respect to bankrupts undischarged at the commencement of this Act, and to bankrupts whose estates may be thereafter sequestrated—that is to say, (1) a bankrupt shall not at any time be entitled to be discharged of his debts unless it is proved to the Lord Ordinary or the Sheriff, as the case may be, that one of the following conditions has been fulfilled: ( a) That a dividend or composition of not less than five shillings in the pound has been paid out of the estate of the bankrupt, or that security for payment thereof has been found to the satisfaction of the creditors: or ( b) That the failure to pay five shillings in the pound as aforesaid has, in the opinion of the Lord Ordinary or the Sheriff, as the case may be, arisen from circumstances for which the bankrupt cannot justly be held responsible.”

This was a petition for discharge presented to the Sheriff Court of Lanarkshire by Patrick Clarke, formerly merchant in Glasgow. The petitioner's estates were sequestrated on 3d December 1866, in terms of the Bankruptcy (Scotland) Act 1856, Mr Mitchell, accountant, being thereafter confirmed as trustee. The trustee was discharged on 21st March 1873. The dividend paid was 2s. 2 1 2. per £1. The petition was presented without any consents of creditors. Objections were lodged by Crockatt and others, creditors of the petitioner, to the discharge. They were creditors to the amount of £1009.

There were produced in process the following reports by the trustee and by the Accountant in Bankruptcy:—I. Report by the trustee, dated 22d December 1881—“The trustee has to report, in terms of the Bankruptcy (Scotland) Act 1856, that the aforesaid Patrick Clarke has complied with all the provisions of the statute; that he had

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doubts that the bankrupt did not make a satisfactory discovery and surrender of his estate; that the bankrupt has attended the diets of examination, and has not, so far as known to the trustee, been guilty of any collusion; but that the trustee is unable to say whether his bankruptcy has arisen from innocent misfortunes or losses in business, or from culpable or undue conduct.” II. Report by the Accountant in Bankruptcy —“The Accountant in Bankruptcy acknowledges intimation of the petition, interlocutor, and report by the trustee on the bankrupt's conduct …. and he has examined the Sederunt-Book. He now respectfully reports to the Sheriff as follows—(1) As to whether the bankrupt has fraudulently concealed any part of his estate or effects. The Accountant observes that the trustee states in his report upon the conduct of the bankrupt, ‘that he had doubts that the bankrupt did not make a satisfactory discovery and surrender of his estate.’ The Accountant does not find from the bankrupt's examination any direct evidence of concealment, but he considers the bankrupt's examination unsatisfactory, in so far as he does not properly account for his deficiency (£4927, 9s. 7d.); and the Accountant may note the following statement by the bankrupt—‘At that time (July 1866) I think I had about £500 at my credit with the National Bank of Scotland, under the name of Strang & Company. The invoices of Pattons & Company and the Cartsburn Sugar Refining Company were at that time overdue and unpaid. The balance of this sum was received by the trustee. The examination is also unsatisfactory in so far as the bankrupt declined to answer certain questions put to him on the ground that they were connected with certain criminal charges made against him. It appears from the trustee's letter to the Accountant dated 4th March 1873, that ‘the Procurator-Fiscal could not substantiate the the charges of forgery and fraud, and the case was dropped.’ In a letter from the trustee to the Accountant the following passage occurs—‘Clarke (the bankrupt) did not make a fair surrender of his estate, much of which had to be traced through officers, consequently I was obliged to refuse him a certificate.’ (2) There is no evidence before the Accountant that the bankrupt has wilfully failed to comply with any of the provisions of the Bankruptcy (Scotland) Act 1856. This sequestration was awarded so long ago as 18th December 1866, and the trustee was discharged on 21st March 1873. In the absence of objections on the part of creditors, it may be for the consideration of the Sheriff whether after a lapse of 15 years it is now necessary or proper in the ends of justice to withhold the discharge.” The assumption in this report that no objection was made by any creditor was erroneous, as will appear from the narrative above given.

On 31st October 1883 the Sheriff-Substitute ( Erskine Murray), after a proof, pronounced this interlocutor:—Finds (1) that the bankrupt Patrick Clarke about 1863 commenced, without any capital, a business, which consists mainly in purchasing sugar and tallow at Greenock, consigning it to Belfast, and drawing on consignees, which business rose to a large amount, his purchases in the last six months before his failure in 1866 amounting to £30,000: Finds (2) that he kept almost no books, at least no books which could be used by anyone but himself: Finds (3) that a year previous to his failure he found he was £2500 short, but still carried on till he got £6000 short, and proceedings were taken against him, and he was apprehended when attempting to evade apprehension in female attire, and being sequestrated, his estates only paid 2s. 2 1 2d. the pound: Finds (4) that he depones that his failure to pay 5s. in the pound arises from his having made, in the last six months previous to his sequestration, losses to extent of £800 through great depreciation in the value of sugar and tallow: Finds (5) that his evidence on this head is uncorroborated, and his trustee reports that he is unable to say whether his bankruptcy has arisen from innocent misfortunes or losses in business, or from culpable and undue conduct: Finds (6) that the bankrupt alleges that if the trustee had looked after and realised a property in Belfast to which he was entitled, he would have paid more than 5s. in the pound, but that the correctness of this statement of the bankrupt is also not sufficiently proved: Finds, on the whole case that, the bankrupt has failed to prove that his failure to pay 5s. in the pound arose from causes for which he cannot justly be held responsible: Therefore refuses the craving of the petition: Finds no expenses due, &c.

“ Note.—The sole evidence adduced of the bankrupt's non-responsibility for his failure to pay 5s. in the pound is his own unsupported statement. The trustee's report is that he cannot give an opinion one way or the other. This can never be taken as proving what the bankrupt has to prove. No doubt after seventeen years the proof must be difficult, but the delay arises from his own choice. No expenses have been given, because the Sheriff-Substitute has not sustained any objections except the statutory one.”

The petitioner appealed to the Court of Session, and argued the case in person.

At advising—