Scottish Court of Session Decisions

This was an action of count, reckoning, and payment at the instance of Donald Macdonald, Tuach Cottage, Inverness, sometime flesher there, against John Mackintosh, Glenholme, Crown Drive, Inverness. The action was raised in July 1904, and concluded, inter alia, that the

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defender should be ordained to produce a full account of the “intromissions had, or which must in law be held to have been had, by the defender,” as trustee for the pursuer's creditors, with the pursuer's estate.

In 1898 the pursuer executed a trust-deed for creditors in favour of the defender.

In 1899 the trust was superseded by the pursuer's sequestration under the Bankruptcy Acts, and Mr David Munro, Solicitor, Inverness, was appointed trustee in the sequestration.

The pursuer averred—“(Cond. 10)… No dividend was or has been paid by the defender under the trust-deed, and only a dividend of 1½d. per £ was paid in the sequestration. The claims ranked for, however, were unvouched and not due by pursuer. In particular, the defender ranked for £4946, 3s. 4d., which was not due to him, and which was unvouched. The pursuer and the trustee on the sequestrated estate were both discharged by the Sheriff-Substitute at Inverness on 18th April 1902.… No discharge has ever been granted to the defender as trustee under the trust-deed, neither by the trustee in the sequestration nor by the pursuer. Notwithstanding the existence of the sequestration, the defender, as trustee foresaid, with the consent or acquiescence of the said David Munro as trustee on the pursuer's sequestrated estates, was left in possession of the said shop” (the butcher's shop in which the pursuer had carried on business), “stock, and fittings, and continued to carry on the said business, and was never called on to account for his intromissions in connection with the said business. The trustee and the creditors in the sequestration abandoned that asset, and left it to the pursuer to recover it if he cared to.” The other averments of the pursuer, so far as material, are sufficiently set forth in the opinion of the Lord Ordinary infra.

The defender pleaded—“(2) No relevant

On 11th March 1905 the Lord Ordinary ( Dundas) sustained the second plea-in-law for the defender and dismissed the action.

Opinion.—“The pleadings in this case are of inordinate length and great complexity. The pursuer was formerly a flesher carrying on business in Inverness, and on 31st March 1898 he executed a trust-deed for behoof of his creditors in favour of the defender as trustee. The summons contains various declaratory conclusions, and asks ( fourth) that the defender be ordained to produce a full account of his intromissions ‘had, or which must in law be held to have been had,’ by him as trustee for the pursuer, and to make payment to the pursuer of £8000, or such other sum as may be ascertained to be due. It appears that on 19th October 1899 decree of cessio was pronounced against the pursuer, and that the cessio proceedings were superseded by an award of sequestration under the Bankruptcy Acts upon 22nd December 1899. No dividend was paid by the defender as trustee foresaid, and only a dividend of 1½d. per £ was paid in the sequestration. The trustee in the sequestration (a Mr Munro) and the bankrupt were subsequently discharged. The pursuer now alleges that many things were wrongfully and illegally done and left undone by the defender as trustee, and for these he seeks now to call him to account. Some of the charges made are very difficult to understand, although they are set out at great length. For example, throughout the record, and particularly in condescendences 6 and 7, there is alleged against the defender an illegal ‘purchase or appropriation’ of the pursuer's business. I cannot discover any relevant averment of a purchase of the business by the defender as an individual, and though the phrase ‘appropriation’ recurs frequently, its meaning, and the circumstances in which it is said to have taken place, are to me exceedingly obscure, even with such assistance as is afforded by a perusal of the defender's answers. Condescendence 9, perhaps, makes the matter clearer, for it roundly avers that the defender as trustee carried on the business for his own behoof exclusively, and illegally appropriated the profits to his own uses and purposes. Condescendence 11 alleges, inter alia, that the defender appropriated certain book debts. Condescendence 12 sets out an alleged illegal sale by him of heritable property. Other charges are made against the defender in condescendences 13 to 15, including one of failing to realise anything for the goodwill of the pursuer's business. Now, if the defender had obtained from the trustee in the sequestration a formal discharge of his whole intromissions with the estate of the bankrupt, it would, I apprehend, have been hardly possible for the pursuer now to maintain against him any of the allegations Which he puts forward. Unfortunately for himself the defender did not take steps to procure a formal discharge. It appears (Cond. 10) that he made some accounting to Mr Munro, though the pursuer avers that it was a grossly inadequate one. But it is to be observed that the defender was or claimed to be a large creditor of the pursuer, and that he -was in fact ranked by the trustee in the sequestration for £4946, 3s. 4d., upon which he received his dividend of 1½d. per £. It is difficult to conceive that he could have been thus admitted to a ranking unless Mr Munro had been satisfied that he had duly accounted for all his intromissions with the estate, and indeed it appears from a letter dated in January 1903, which the pursuer has incorporated (Cond. 16) as a part of his pleadings, that though no formal discharge was granted to to the defender, he had supplied Mr Munro with ‘the information necessary,’ and the whole tone of the letter so far as it is quoted by the pursuer seems to show that in Mr Munro's view there was and is no good claim against the defender in regard to his intromissions. Moreover, the pursuer, at and before the inception of the sequestration, was admittedly on the alert, and had (Cond. 10) been pressing for information with regard to his affairs. He now denies that the claim for which the defender was ranked was

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a just one (Cond. 10). Yet, so far as appears, he took no objection either to that ranking or to any other step in the sequestration. An appeal was open to him against the deliverances of the trustee under section 169 of the Bankruptcy Act 1856. Nor is any satisfactory explanation forthcoming as to why the present action was not raised until July 1904. These considerations, in my opinion, raise a very adverse impression of the pursuer's case, but I do not find it necessary to decide whether or not they amount to an absolute bar to the present proceedings, for there is another ground upon which, as I think, the case is fatally irrelevant. The theory of the action is that the pursuer is to recover for himself assets belonging to the estate of which the defender was for a time trustee, and which was subsequently sequestrated. But if such assets exist, and could be recovered, the benefit would prima facie enure to the creditors of the pursuer, who have only received a dividend of 1½d. in the £, and the appropriate method of recovery would seem to be by way of a revival of the sequestration. The pursuer was apparently conscious of this difficulty, and he has sought to avoid it by the bare averment (Cond. 16, see also Cond. 10) ‘that the trustee and creditors in the sequestration abandoned any right they had to recover any assets of the pursuer's estates in the hands of the defender as trustee foresaid.’ Now that, in my opinion, is not a relevant or sufficient averment of abandonment. It would require to be stated that the existence of the alleged asset was brought home to the creditors and dealt with at their meetings, and there and then disposed of in one -way or another— Northern Heritable Securities Investment Company, Limited, v. Whyte, 16 R. 100 ( per Lord President Inglis, p. 103, affirmed 18 R. (H.L.) 37, per Lord Watson, p. 30). There must be a transaction with the trustee and creditors. Nothing of the sort is here alleged, nor are any minutes of meetings bearing upon the matter produced, or said to be in existence. It is possible that the pursuer may have some right or claim capable of statement and enforcement against the defender, but for the reasons indicated, I am of opinion that the case, as presented by this summons and record, is irrelevant. I shall, therefore, sustain the second plea-in-law for the defender and dismiss the action, with expenses.”

The pursuer reclaimed, and argued—The Lord Ordinary's ground of judgment would apply if the pursuer's creditors had come forward, but as they had made no claim, abandonment was to be presumed— Northern Heritable Securities Investment Company, Limited, v. Whyte, November 21, 1888, 16 R. 100, 26 S.L.R. 91; June 16, 1891, 18 R. (H.L.) 37, 28 S.L.R. 950. The pursuer was entitled to an opportunity of proving abandonment and of enforcing his radical right to the asset in question— Geddes. v. Quistorp, December 21, 1889, 17 R. 278, 27 S.L.R. 224.

Argued for the respondent—The case of Geddes v. Qxistorp, cit. sup., did not apply.

Abandonment could not be inferred from any facts averred by the pursuer. The deliverance of the trustee in the pursuer's sequestration upon the defender's claim therein was res judicata, to the effect that the defender was the pursuer's creditor.