Scottish Court of Session Decisions

Lord Justice-Clerk—This is an appeal from a decision of Sheriff-Substitute Boyd refusing sequestration of the respondent's estates. The petition is in common form, and it is based upon a debt of some £433. The Sheriff-Substitute has refused the prayer of the petition, and whatever may be said against his note it cannot be alleged that it is a tedious one. He makes perfectly clear the ground upon which he proceeded. He holds that section 16 of the Bankruptcy (Scotland) Act 1913 applies to the case. He quotes the provision of the section “That no sequestration shall be awarded by any court after production of evidence that a sequestration has already been awarded in another court and is still undischarged;” and adds—“It is admitted that the defender has already been sequestrated. The trustee has been discharged, but the bankrupt has not.”

I think the learned Sheriff-Substitute must have overlooked words in the section which in my opinion are governing words, viz., the words “in another court.” The object of the section, it seems to me, was to prevent competing sequestrations in different courts. Here it is a matter of admission by the respondent's counsel that the previous sequestration was awarded by the same Court. I think that that ends the matter, and that the section on the confession of the respondent has no application.

We were referred to the case of Mellor ( (1919) 2 S.L.T. 68) decided by Lord Blackburn in the Outer House. For myself I agree with the result at which Lord Blackburn arrived in that case and the grounds upon which he reached it. I may further add that that decision appears to me to be consistent with principle and practice. It is consistent with principle, because, as Lord Hunter pointed out in the course of the discussion, a new award of sequestration is the only way in which the new creditors of the respondent—who has been trading apparently for twenty years since His last sequestration—can obtain a ranking. It is also consistent with practice, because it appears, so far as the text-books show, that such a sequestration should be awarded if circumstances warrant. Here I am of opinion that it was perfectly competent for the Sheriff-Substitute if he thought fit to grant sequestration, and that he was in error in thinking that he was precluded from reaching that conclusion by the terms of section 16. I accordingly think his judgment ought to be recalled and the case remitted to the Sheriff-Substitute to award sequestration.

Lord Hunter—I am of the same opinion. The only ground upon which the Sheriff-Substitute proceeds is this, that under section 16 it is incompetent for him to grant sequestration because a sequestration has already been granted and the bankrupt is undischarged. When the terms of section 16 are examined, it is clear that they afford no warrant for that view of the Sheriff-Substitute, unless it be the case that the first sequestration has been granted “in another Court.” Here, however, we have been informed, and the respondent admits, that the first sequestration was in the same Court as is asked to grant the second sequestration.

On the facts it appears that the first sequestration was granted on 3rd April 1900, a first dividend was paid on 4th October 1900, and a final dividend was paid on 4th February 1901. The trustee has been discharged but the bankrupt has not been discharged, and he has apparently been incurring debt since the date of the trustee's discharge. Under those circumstances I cannot help thinking that there is no good reason for a second sequestration not being granted. The second sequestration will enable the creditors who have got claims against the debtor incurred subsequent to the date of the first sequestration to claim in the second sequestration.

I do not think that an absolute rule can be laid down as regards the right of a creditor to a second sequestration if a sequestration is already in existence, although he may have acquired his claim since the date of the first sequestration. There may be cases where it is inexpedient to grant a second sequestration, but, on the face of the facts here, I think the expediency was all the other way. No doubt it is perfectly true, as was contended by Mr Gilchrist, that sequestration is a universal diligence; that the effect of an award of sequestration is that there is a transfer to the trustee of the whole of the property in which the bankrupt is vested; and that there is also, subject to certain exceptions, a transfer of everything he may acquire during the existence of the sequestration. The parties who alone can take benefit in the sequestration are the creditors who have claims as at the date of the sequestration.

The earlier Bankruptcy Statutes were pretty similar in their provisions to the Bankruptcy Act of 1913, and it certainly was not unknown that a second sequestration should be granted. One of the most typical cases of a second sequestration being granted was the case of Fisken v. Thomson, (1845) 7 D. 842. In that case the question was whether creditors who had claims in a first sequestration were entitled to rank along with creditors in a second sequestration. It was held that they were, although it may be right to say that in that case Lord Jeffrey said it might be doubted whether under the 81st section of the Act 2 and 3 Vict., cap. 41, the second sequestration was competent. He, however, held it unnecessary to decide that as it was admitted by both parties to be a valid sequestration. And Lord President Boyle then said (at p. 844)—“The 81st section of the Act vests everything in the trustee for behoof of the creditors which is acquired by the bankrupt between his sequestration and his discharge; and therefore I think there is no doubt the creditors are entitled to be ranked upon those acquisitions although there may have been a second sequestration awarded against the bankrupt.” But the practice, so far as I

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