Scottish Court of Session Decisions

In March 1891 John M'Carter, whose estates had been sequestrated on 21st February 1889, presented a petition to the Sheriff of Lanarkshire for his discharge in terms of the Bankruptcy (Scotland) Act 1856 (19 and 20 Vict. c. 79), sec. 146.

Patrick Hamilton Aikman, the bankrupt's trustee, opposed the petition, on the ground that the law account incurred by him in the sequestration proceedings and his own fee had not been paid.

The facts of the case are detailed at length in the interlocutors and notes of the Sheriff-Substitute.

On 4th June 1891 the Sheriff-Substitute ( Erskine Murray) pronounced the following interlocutor:—“Finds (1) that the bankrupt J. M'Carter, a rag and metal merchant, Glasgow, acquired a number of years ago a property for £900, on which he expended about £330 in improvements and in the purchase of a right-of-way which had interterfered with its value: Finds (2) that recently, he getting into difficulties, petitions

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for his sequestration were taken out both by himself and by the objecting creditor, but the sequestration was ultimately carried out on the latter's petition, and the property in question, which had fallen to the value of £1000, was taken over by the principal creditor, who held an absolute disposition over it for advances made and to be made: Finds (3) that 5s. in the pound has not been paid, but that had it not been for the fall of £250 in the value of the property this could have been done: Finds (4) that the trustee appearing at the last minute objects to the discharge, as the expenses of the sequestration for the law account in which he is liable are unprovided for: Finds, on the whole, that before getting his discharge the bankrupt must pay to or arrange with the trustee for these expenses to the extent of, say £20: Finds that the failure of the bankrupt to pay a dividend of 5s. in the pound has arisen from circumstances for which he cannot justly be held responsible: In respect of the objections taken by the trustee, defers further consideration of the petition till future orders of Court.

“ Note.—The law account, untaxed but restricted to £20, and the trustee's fee, £5, 5s., amount together to £25, 5s. But it must be remembered that originally the bankrupt had a concurrent petition for sequestration, which was rendered useless by the present being adopted. It seems hard to say therefore that the bankrupt is taking advantage of these expenses up to the date of the meeting of creditors, though he clearly must be held to have done so for the subsequent period. Further, the trustee is only personally liable for the expenses incurred from the date of his appointment. It seems therefore that in considering the amount of the bankrupt's liability the antecedent expenses should be deducted. These amount to between £13 and £14, and deducting them from the original total, and adding on the trustee's fee of £5, 5s., and deducting £1 or so for taxation, the £20 is brought up. Of this no doubt the bankrupt in getting his discharge will have got the advantage, and he should pay it or arrange for it with the trustee. Nor can he say that sequestration was unnecessary, as his own petition showed that he considered it proper and advisable. On the other hand, the objecting creditor cannot successfully object to the bankrupt's discharge in respect of the portion of the expenses antecedent to the trustee's appointment, as the proceedings under the bankrupt's own petition would have been equally available for the purpose.”

On 17th June 1893 the bankrupt presented to the Court the following minute—“In respect (1) that the bankrupt is unable from circumstances over which he has no control to pay or arrange with the trustee for the payment of the expenses as stated in the said interlocutor; (2) that it is usual in mercantile sequestrations for the expenses of the sequestration to be paid out of the bankrupt estates, and that the trustee in this sequestration took up the trusteeship on these terms; and (3) that the bankrupt is sixty-eight years of age, and can only earn his livelihood by dealing in his own particular line of business, and as he cannot get goods on credit so long as he remains an undischarged bankrupt, he is thus, while his discharge is withheld, prevented from earning a livelihood; the bankrupt respectfully craves the Court to grant him a hearing on his said petition, and thereafter to resume consideration of the same, and to grant him his discharge.”

On 29th June 1893 the Sheriff-Substitute pronounced the following interlocutor:—“Refuses in hoc statu the bankrupt's petition for discharge, deferring further consideration of the petition till future orders of Court.

Note.—There is no change in the circumstances since the case was up two years ago. No attempt appears to have been made to arrange with the trustee for the expenses of sequestration, and the trustee still opposes. The bankrupt says he cannot pay them. But why should he get the benefit of sequestration if he cannot pay the expenses of it? The case of Napier, 13 D. 222, is clear on the point, and is backed up by the opinion of all the Judges in the more recent case of Mather, 8 R. 952. No doubt in these cases the sequestration was one at the bankrupt's own instance. Here the petition on which sequestration proceeded was at the instance of creditors. But, as the Sheriff-Substitute has previously pointed out, the bankrupt by himself also presenting a petition showed that sequestration was necessary or desirable. No serious distinction can therefore be drawn between the present case and those of Napier and Mather.

It seems to the Sheriff-Substitute that the bankrupt's friends should rather direct their attention to making some arrangement with the trustee by which his opposition could be withdrawn.”

The bankrupt appealed to the Court of Session, and argued—In view of the special circumstances set forth in his minute, he was entitled to his discharge. The case of Napier v. Paterson, December 3, 1850, 13 D. 222, did not apply, as in that case the trustee was appointed on the bankrupt's own petition.

Argued for the trustee—Non-payment of the trustee's account was sufficient ground for refusing the bankrupt's discharge— Mather v. M'Kettrick, July 14, 1881, 8 R. 952. In the present case the bankrupt himself had petitioned for his discharge, which showed that in his opinion sequestration proceedings were necessary, and he alone had derived any benefit from these proceedings. It was in the discretion of the Sheriff to refuse or grant a discharge— Buchanan v. Wallace, February 3, 1882, 9 R. 621.

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