Scottish Court of Session Decisions

On 18th October 1878 William Tough, builder in Edinburgh, having become insolvent, granted a trust-deed for behoof of his creditors in favour of the appellant Mr Thomson, a chartered accountant in Edinburgh. At the time this deed was granted Tough had a current contract with John and James Hutton, Slateford, for the mason work of tenements which they were building at Slateford. Mr Thomson took up this contract, and the work was concluded by Tough under his supervision. Messrs Hutton paid to Tough, and after the date of the trust-deed to Thomson, as his trustee, the instalments of the price at the dates agreed upon in the contract. Besides the original contract price, certain extra work to the amount of £180, 3s. 8 1 2d. was ordered by Messrs Hutton in consequence of a change in the plans, and Mr Thomson rendered to them an account for the execution of this extra work, having paid the accounts incurred to the different tradesmen therefor as the work proceeded. On 14th June 1879 Tough was sequestrated under the Bankrupt Statutes, and Hugh Miller, C.A. in Edinburgh, was thereafter confirmed trustee on his estate.

The appellant Dempster, a painter in Edinburgh, had been employed by Mr Thomson to execute certain work on some houses in Edinburgh which had been built by Tough, and he held a decree obtained in the Debts Recovery Court for the sum of £26, 10s. 8d., being the balance of his account after deducting payments by Mr Thomson. Dempster after obtaining this decree used arrestments to that amount in the hands of Messrs Hutton, as debtors to Thomson. Mr Thomson and Mr Miller both claimed from Messrs Hutton the sum due for extra work as above narrated. Messrs Hutton thereupon raised this action of multiplepoinding.

Mr Thomson claimed the whole fund in medio, and pleaded—“(1) The work libelled having been carried on and completed by the claimant as trustee and as contractor in room and place of the bankrupt, with the funds of the claimant, he is entitled to be ranked and preferred in terms of his claim.”

Mr Miller, as trustee in bankruptcy, also claimed the whole fund, and pleaded—“(1) The claimant, as trustee for the creditors, is entitled to be preferred to the sums in medio in terms of his claim, subject to such claims of preference as may be instructed in the ranking in the sequestration proceedings.”

On 3d March 1880 the Sheriff — Substitute ( Hallard) issued this interlocutor—[ After narrating the facts] … “Finds, in these circumstances as above set forth, that the trust constituted in the person of the claimant Thomson, being separated by an interval of more than seven months from the subsequent sequestration of the truster, is protected against the retrospective operation thereof: Therefore ranks and prefers the said claimant Dempster primo loco over the fund in medio: Ranks and prefers the claimant Thomson secundo loco over said fund, but subject always to any liability to account which the claimant Miller, as trustee foresaid, may instruct against him: Repels the claim of the claimant Miller, but reserving his right to call the claimant Thomson to account as aforesaid, and decerns.” He added this note:—

“ Note.—It was contended by the counsel for the trustee in bankruptcy that a sequestration supersedes a prior private trust, whatever may be the interval between them. Perhaps, as a question of general jurisprudence, it would be better that the law were so. Meantime, the Sheriff-Substitute does not understand the law so to be. Separated from the bankruptcy by such an interval as here occurs, the private trust, it is thought, must be dealt with as subsisting, but subject, of course, to such liabilities in accounting as the trustee in bankruptcy may instruct.”

Miller appealed to the Sheriff, who on 23d March recalled the interlocutor of his Substitute, and preferred Miller to the whole fund in medio, adding this note:—

“ Note.—The rights of the other claimants could not be disposed of under this record as it stands, for there are statements made which the trustee in the sequestration has not had an opportunity of meeting. But the case is decided as above on a very plain ground. The fund in medio belongs or relates to the estate of the bankrupt; and the management of that estate, and of all claims on it or against it, falls to the

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trustee on the sequestration, who necessarily supersedes a trustee previously appointed under a voluntary trust.”

Thomson and Dempster appealed, and argued—Subsequent sequestration supersedes a voluntary trust only as to management. Anyone claiming payment for what was done under the contract was bound to repay the appellant Thomson what he had laid out in carrying it on. The trustee in bankruptcy could only take tantum et tale as the bankrupt, and against Thomson he had no claim.

Argued for Miller—A voluntary trust is superseded by sequestration. The trustee was entitled to the sum as representing creditors, and Thomson must claim for the amount in the sequestration.

Authority quoted— Murray v. Palmer, 15th Dec. 1864, 3 Macph. 250.

At advising—