Scottish Court of Session Decisions

These advocations were from the Sheriff-court of Inverness-shire, and the questions arose out of the following circumstances:—

The advocator Calder, who was a farmer at Crannich, in Strathspey, was indebted to the respondent in the sum of £47, contained in a bill for that amount. On 19th April 1865, Calder was charged at the instance of the respondent to make payment of the contents of the said bill. On 21st April, Calder executed a trust-deed in favour of John Grant, messenger-at-arms, Grantown, for behoof of his creditors. On 27th April, he was incarcerated under Mackenzie's diligence; and, having applied for and obtained the benefit of the Act of Grace, he, on 3d May, at the request of the said John Grant, executed a disposition omnium bonorum in his favour. This not satisfying the provisions of the Act, on 11th May 1865, Calder executed in favour of Mackenzie, the incarcerating creditor, a similar disposition omnium bonorum as provided for by the Act.

John Grant having advertised the stock on the farm of Crannich to be sold, Mackenzie presented an application to the Sheriff to interdict the said sale. This forms the subject of the process first above mentioned.

Mackenzie, being unable to obtain possession of the effects conveyed to him in the disposition omnium bonorum of 11th May 1865, presented an application to the Sheriff for warrant to take possession thereof. This forms the subject of the process second above mentioned.

After this last application was presented, John Grant sold the stock on the farm of Crannich to Macgregor and Cruickshanks. Mackenzie then poinded the effects, and Macgregor and Cruickshanks presented an application to the Sheriff for interdict against any sale under the said poinding. This forms the subject of the third process above mentioned.

The question for the determination of the Court was, Whether the disposition omnium bonorum of 11th May 1865, in favour of the incarcerating creditor Mackenzie, superseded the trust-deed of 21st April and the disposition omnium bonorum of 3d May 1865 in favour of John Grant,—these having been granted after Mackenzie's diligence had begun, and within sixty days of Calder's bankruptcy.

The Sheriff-substitute ( Thomson) held that the trust-deed and the first disposition were good and effectual. His Lordship observed, in a note to his interlocutor:—

“Taking the two deeds as in competition with each other, the Sheriff-substitute can discover no authority for holding that the disposition executed in prison is entitled to supersede the voluntary trust, which is prior to it in date; and it is only on the ground of fraud, or of its falling under some of the classes of deeds struck at by the Act 1621, or the Act 1696, that the deed in favour of the respondent Grant can be held inoperative. As already observed, there is no reason to be found in the evidence for holding that the whole transaction is not real and in good faith. The trust-deed is not a gratuitous alienation, nor an alienation of a special subject, after diligence suitable for the attachment of that subject has begun in the sense of the Act 1621. It is no doubt a deed granted within sixty days of notour bankruptcy, and might, at some former period in the history of the law, have been held to be reducible under the first branch of the Act 1696. All the more recent authorities and decisions, however, support the view that deeds of this kind, if their bona fides be undoubted, and there is no reason to hold that the trustee ( he being fairly invested) will manage the estate for the equal benefit of all concerned, will be allowed to operate, unless superseded by actual sequestration under the Bankrupt Act. That the trust-deed in favour of Grant is in this position, the Sheriff-substitute sees no reason to doubt.”

The Sheriff ( Ivory) altered this interlocutor. His Lordship explained his judgment in the following note:—

“It was not disputed at the debate that the respondent was rendered notour bankrupt on the 29th April 1865, and that the two dispositions granted by him in favour of John Grant were executed within sixty days of his bankruptcy. The respondent, however, maintained that as these deeds were granted for the purpose of an equal distribution of his estate among his whole creditors,

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and not for the satisfaction or security of any particular creditor or creditors, they were not reducible under the Act 1696, cap. 5. The Sheriff is of opinion that this contention is unsound. It has been repeatedly held that a trust-disposition granted by a bankrupt within sixty days of his bankruptcy to a trustee for behoof of his general creditors, is ineffectual against, and may be reduced at the instance of, non-acceding creditors ( Mudie, M. 1217; Peters, M. 1218; Johnson, M. App. Bankrupt, No. 5). The Sheriff is not aware of any recent decisions to a contrary effect. A trust-disposition granted by an insolvent who was not bankrupt in terms of the Statute has, no doubt, been held to be in a different position; but the distinction between the two classes of cases is clearly brought out in the decisions ( Snodgrass, M. 1209; Hutchison, M. 1221). The case of Ker v. Graham's Trustees, C. S. 73 and 270, does not appear to the Sheriff to be against the above view. In that case the trustees were infeft under the trust-disposition of a life interest of an heir of entail in an entailed estate, and a reduction of that deed under the Act 1696, cap. 5, having been brought by the non-acceding creditors, on the ground that the granter had been made bankrupt within sixty days of its date, and the creditors having also obtained decree of adjudication of the life interest, the Court refused, while the action of reduction was pending, to prevent the trustees from cutting the wood on the estate, the same being thought to be for the advantage of all parties, and the trustees being considered sufficiently responsible for the price.

If the two deeds in question are void and null under the Act 1696, cap. 5, it seems to be settled that the petitioner is entitled to have them set aside in the present action in the Sheriff-court, by way of exception, including reply ( Dickson, 4 Macph. 797). No objection was stated by the respondent to the relevancy of the petitioner's averments in regard to the Act 1696, cap. 5, and the Sheriff was unwilling, therefore, where there had been already so much delay by both parties, to open up the record at this late stage in order that the petitioner's averments might be made more precise. These deeds being set aside, it appears to the Sheriff that the petitioner is, in the circumstances, entitled to interdict as craved.”

The bankrupt and Grant advocated.