Scottish Court of Session Decisions

The estates of Captain J. A. L. Campbell were sequestrated on 28th August 1888, and R. C. Millar, C.A., was appointed trustee thereon. The bankrupt had retired in the previous April from the service, and had then received a gratuity of £1200 from the War Office. That sum had at first been put to his credit with Messrs Cox & Company, and subsequently, after deduction of £67, 11s. 10d., the balance due to Messrs Cox & Company by the bankrupt, the remainder, amounting to £1132, 8s. 2d., had been transferred to the account of the bankrupt's brother Captain E. P. Campbell.

On 3rd October the trustee wrote to Captain E. P. Campbell's agent, Mr Greig, for an account of the disbursements made by Captain E. P. Campbell from that sum, and relative vouchers. In reply Mr Greig sent (1) an account showing that Captain E. P. Campbell had disbursed £891, 2s. 7d. of the above sum in payments on behalf of Captain J. A. L. Campbell; and (2) an account of previous payments made by Captain E. P. Campbell to or for Captain J. A. L. Campbell amounting to £1042. He also sent the relative vouchers.

On 15th November the trustee, with the consent of the only commissioner then acting on the estate, wrote to Mr Greig as follows—“I beg to acknowledge receipt of your letter of 14th inst. with the vouchers therein referred to, with the further exception of the £5 paid W. Gordon on 9th February, of which only a memorandum without any account has been produced. I have very carefully considered the accounts sent to me by you, and I am advised that I must claim payment of the balance of the £1200, the gratuity paid on Captain Campbell's retirement, under deduction only of the sums legally paid thereout of by Captain E. P. Campbell. Without prejudice to my right to sue for a larger sum, I am disposed to accept the balance of the …. .	£1200	0	0
Less—
Retained by Cox & Co.	£67	11	10
and paid per account	801	2	7
	958	14	5
Balance, .	£241	5	7

if paid to me within five days, as a full accounting by Captain E. P. Campbell with said sum of £1200. I hope you will be able to advise Captain E. P. Campbell to pay over that amount, and should I not receive payment within five days, this letter is to be held pro non scripto.”

On 22nd November Mr Greig replied in the following terms—“Referring to your letter of

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15th inst., and my interview with you yesterday, I now beg to enclose, on Captain Edward P. Campbell's behalf, a cheque for £241, 5s. 7d. in full of all your claims as trustee against him in connection with his brother's sequestration, except the value of the clothes in his possession, of which, as we arranged, he is to send me a list. Please acknowledge receipt.”

On 23rd November the trustee wrote again to Mr Greig as follows—“I duly received your favour of yesterday's date with cheque for £241, 5s. 7d., for which I enclose receipt, which I hope will be satisfactory as I cannot accept the money on the broad terms you state, but only in respect of the matters covered by my letter of 15th inst. You are to obtain and send me a letter by Captain E. P. Campbell, stating any other effects under his control belonging to the estate, and which I understand are only the clothes you mentioned.”

On the same date Mr Greig replied in these terms—“I have received your letter of to-day and receipt for the £241, 5s. 7d. It must be understood that that payment is in full of all claims on Captain Edward P. Campbell, except the value of the clothes, which he wishes to retain. It was on that footing that he agreed to pay the money, and if you have any other claim on him I must ask you now to intimate it to him through me.”

A special general meeting of creditors was held on 25th March 1889, the minute of which meeting bore—“Mr Christie and Mr Dickson were unanimously appointed commissioners on the estate. Mr Christie proposed, and Mr Dickson seconded, that the meeting approve of the conduct of the trustee in settling with Captain E. P. Campbell. Mr Tait, on behalf of Messrs Marshall & Aitken, creditors, moved with reference to the correspondence between his firm (Messrs Tait & Johnston, S.S.C.) and the trustee, that in respect Messrs Marshall & Aitken are prepared to guarantee the expenses in an action to be instituted against Captain E. P. Campbell in connection with his alleged illegal intromissions as agent for the bankrupt, that he, the trustee, be requested to give his consent as such trustee to the said action, the said guarantee to be delivered to the trustee before service of the summons. The preses put the motion to the meeting, but declared that it was not seconded, and that the former motion, approving of the trustee's conduct in settling, was duly carried.”

Messrs Marshall & Aitken then appealed against the above resolution to the Lord Ordinary on the Bills, under the 169th section of the Bankruptcy Act 1856, craving the Court to recal the resolution, and in respect of the motion made at the said meeting on their behalf, to ordain the trustee to grant his consent, as concurring pursuer, to an action proposed to be raised by the appellants against Captain E. P. Campbell.

At the suggestion of the Lord Ordinary on the Bills ( Kyllachy) the following minute was lodged for the trustee—“ Goudy, for the respondents, stated with reference to the negotiations between Mr R. C. Millar, the trustee in the sequestration, and Captain E. P. Campbell, the bankrupt's brother, for payment of the sum of £1132, 8s. 2d. received by him on behalf of his brother from Cox & Company, being the balance of the ‘gratuity’ payable to the bankrupt on his leaving the service, that the trustee brought the matter before the second meeting of creditors, conform to report herewith produced, but no directions were given to the trustee at that meeting; that thereafter the trustee, with the consent of the only commissioner acting in the sequestration, entered into communication with Captain E. P. Campbell and his agent, Mr Somerville Greig, W.S., Edinburgh, and made a claim for payment of the whole of said sum of £1132, 8s. 2d.; that Mr Greig thereupon submitted to the trustee duly vouched accounts, two in number (herewith produced and referred to), and which showed disbursements by Captain E. P. Campbell on his brother's behalf amounting to £1933, 10s. 5d., including the sum of £1042, 7s. 10d. due to himself personally for advances made by him to or for his brother between 1879 and 1884, and claimed to set off the whole of said sum of £1132, 8s. 2d. as against these disbursements; that the trustee and commissioner, after examining said accounts, admitted £891, 2s. 7d. as proper deductions from said sum of £1132, 8s. 2d., but declined to admit the said sum of £1042, 7s. 10d., and claimed payment of the balance of said sum of £1132, 8s. 2d., which amounted to £241, 5s. 7d.; that Mr Greig at first refused to admit liability for said last-mentioned sum, but ultimately, after certain negotiations, and having obtained the opinion of counsel, he agreed to pay over the said sum of £241, 5s. 7d. in full of all claims by the estate against his client, and this sum was accepted by the trustee and commissioner in terms of this arrangement. A copy of the letters between the trustee and Mr Greig, and of the receipt granted by the trustee, are produced and referred to.”

The Lord Ordinary on 4th June 1889 refused the appeal.

“ Opinion.—This is an appeal against a resolution of creditors approving of the conduct of the trustee in a sequestration in settling certain claims against Captain E. P. Campbell, the bankrupt's brother. The appellants contend that the settlement approved of involves the renunciation of a claim competent to the estate which ought to be enforced, and they desire to be allowed to prosecute the same at their own expense, and to obtain the trustee's instance to enable them to do so.

Had the transaction complained of been of the character alleged I should have thought the appellants were right. Neither the trustee nor the other creditors would in that case have had any legitimate interest to prevent the claim being prosecuted at the appellants' expense. But I am satisfied upon the documents produced, and upon the minute which has been lodged for the trustee, that the transaction was truly of the nature of a compromise whereby the trustee waived certain claims against Captain E. P. Campbell, and on the other hand Captain Campbell waived certain claims of retention which, if well founded, would have extinguished the trustee's claims altogether. I have not the means of judging how far the claims thus mutually waived were well founded. That is a matter on which it appears to me that the trustee and the creditors were entitled to judge. It is enough for the present purpose that by the settlement in question the bankrupt estate obtains payment of a sum of £241, 5s. 7d., to which, according to Captain Campbell's contention, they were not entitled, and which, if the

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question were re-opened, as the appellants propose, might be ultimately lost to the estate. It cannot, I think, be said that in these circumstances the body of creditors have no legitimate interest to prevent the matter being re-opened. I therefore refuse the appeal, and find the appellants liable in expenses.”

The appellants reclaimed, and argued—The transaction between the trustee and Captain E. P. Campbell was not of the nature of a compromise. It was not a valid compromise, having been made by the trustee and only one commissioner—Bankruptcy Act 1856, secs. 75 and 176: Bell's Comm. (5th ed.) ii. 415, note; Dennistoun v. Dennistoun's Trustee, June 4, 1853, 1 Macph. 869; Gray v. Fraser, February 6, 1850, 12 D. 684. The appellants desired to proceed against Captain E. P. Campbell on account of his actings. He was aware of the debt due to them and of his brother's insolvency, and while paying them nothing had paid a number of other creditors in full. If one was entrusted with money for behoof of the creditors of an insolvent, he was not in the same position as the insolvent himself— Allan v. Marquis, February 23, 1828, 6 S. 595. Captain E. P. Campbell could never have been entitled to pay himself in full, and assuming that he would be entitled to an equal dividend with the other creditors, the trust-estate would still be a large gainer. The appellants were content to sue merely for their own dividend.

The respondents argued—No doubt there was a power in the Court to interfere with the discretionary powers of creditors—Bell's Comm. (7th ed.) ii. 321. But where there had been a compromise creditors were barred from proceeding against an alleged debtor of the trust-estate. In the case of Spence v. Gibson, December 13, 1832, 11 S. 212, the compromise was inchoate, and the creditor offered to pay the whole sum guaranteed to the trust-estate thereby as well as the expenses of the action.

At advising—