Scottish Court of Session Decisions

On 25th August 1859 the estates of Donald Douglas, wright and builder, Tarbert, were sequestrated, and Dugald Campbell appointed trustee thereon. Miss Christina and Miss Margaret Campbell were creditors of Douglas for £400, with £8, 4s. 4d. of interest, in security of which he had granted them a bond and disposition in security, dated 28th March 1859, over certain heritable subjects in Tarbert which belonged to him, and were known as Arbuthnot's Feu, and an assignation of same date to certain building materials on the ground. They lodged an affidavit and claim in the sequestration, in which it was stated that the security over the land was valued at £250, and that over the building materials at £50; and they therefore claimed to rank in the sequestration for £108, 4s. 4d., being the unsecured balance of the debt due to them. On 13th October 1859 a memorandum of agreement was drawn up between the trustee and Mr Dugald Maclachlan, as agent for the Misses Campbell, which contained the following heads—“(1st) In consideration of the trustee allowing Mr Maclachlan's clients to retain Arbuthnot's Feu and buildings thereon, and the materials included in the assignation by the bankrupt to Misses Campbell, they are to withdraw the claim lodged by them in the sequestration, and are to have no ranking on the estate. (2d) The stones on the pier not being included in the assignation, Misses Campbell are to purchase them from the trustee at the price of ten pounds sterling, on payment of which delivery is to be given. (3d) The trustee to grant Mr Maclachlan or his clients, as he may prefer, a conveyance, to the feu, or any right of property or reversion the bankrupt may have therein, the title to be taken as it at present stands, but the trustee not to be bound to produce any of the titles except the act and warrant in his own favour. The trustee to relieve Mr Maclachlan or his clients, the disponees, of all feu-duties, public and parochial burdens, due and exigible at and preceding Whitsunday last, which is to be the term of entry, the disponees relieving the trustee of fen-duties and burdens exigible after that term, and repaying to the trustee the proportion of feu-duty charged against the bankrupt by Mr Campbell of Stonefield up till Martinmas next. (4th) A mutual discharge to be granted by the parties.” … This agreement was approved of by the trustee and commissioners in the sequestration, as authorised by

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a meeting of the creditors, and the memorandum was engrossed in the sederunt-book of the sequestration. The Misses Campbell accordingly withdrew their claim in the sequestration and received no dividend. They entered into possession of the subjects, paid the £10 for the stones as stipulated by the second head of the agreement, expended about £500 in completing the building on the subjects, and continued in possession, Mr Maclachlan drawing the rents for them till 28th January 1869, when they assigned the said bond and disposition in security to him; thereafter Maclachlan drew the rents for himself. A draft disposition in terms of the memorandum of agreement was, with approval of the trustee and commissioners, prepared but never executed. Douglas obtained his discharge without composition on 26th December 1862; a dividend of Is. 6d. per £ being subsequently paid by the trustee on his estate, who was not discharged till 24th May 1866.

In February 1879 Douglas raised an action against Mr Maclachlan and against the Misses Campbell for their interest, to have it declared that the said bond and disposition in security was legally extinguished by the intromissions of the defenders with the rents of the lands and others therein contained, and that the said lands and others were duly and lawfully redeemed from said bond, and freed and disburdened from it as fully as if it had never been granted. The summons further sought an order on the defenders to deliver up the writs and title-deeds of said lands, including the said bond and disposition in security, and the assignation in favour of Maclachlan, and to grant pursuer a discharge of said bond; and it contained further a conclusion for count and reckoning by Maclachlan of his whole intromissions as agent for the bondholders from 25th August 1859 to 28th January 1869, and thenceforward as heritable creditor on his own account. Mr Maclachlan raised a counter action of declarator and adjudication in implement against Douglas and his creditors, to have it declared that his rights as bondholder had, by the agreement and subsequent actings of the parties, become rights of absolute property. The two actions were conjoined. In the leading action Mr Maclachlan pleaded—“(1) The pursuer has no title to sue.”

The Lord Ordinary ( Adam) pronounced an interlocutor sustaining the defender's first plea in the leading action, and finding and declaring in the other action, that by virtue of the said memorandum of agreement and subsequent actings, Mr Maclachlan, as assignee of the Misses Campbell, was vested in the absolute right of the subjects in question.

This note was added—“The said Donald Douglas was sequestrated on the 25th August 1859. Dugald Campbell, accountant in Greenock, was thereafter duly confirmed trustee on his sequestrated estates.

“The effect of the confirmation of the trustee was, under the 102d section of the Bankruptcy Act, to vest in him for behoof of the creditors, absolutely and irredeemably as at the date of the sequestration, the whole property of the debtor Donald Douglas as regards the heritable estate, to the same effect as if a decree of adjudication in implement of sale, as well as a decree of adjudication for payment and in security of debt subject to no legal reversion, had been pronounced in favour of the trustee and recorded at the date of the sequestration. It appears, accordingly, that the pursuer Donald Douglas was thereby divested of all right of property in the heritable subjects which he now claims, and the same were vested in the trustee on his sequestrated estates.

The pursuer was discharged without payment of a composition on 26th December 1862, and consequently was not retrocessed in his estates.

It is no doubt true that if the trustee and creditors abandon a claim to property, the bankrupt's radical right may revive to the effect of entitling him to sue therefor— Fleming v. Duncan, Nov. 16, 1876, 4 R. 112. But there is no such case here. What took place is this—The Misses Campbell held an heritable bond over the subjects for £400, and an assignation to certain building materials on the ground. They value this security at £300, leaving an unsecured balance of principal and interest of £108, 4s. 4d., for which they claimed in the sequestration. Thereafter in October 1859 they entered into an agreement with the trustee, by which it was, inter alia, agreed, that in consideration of the trustee allowing them to retain Arbuthnot's Feu and buildings thereon, the subjects in question and the materials included in the assignation, they should withdraw the claim lodged by them in the sequestration, and have no ranking on the estate. It was further agreed that the trustee should grant the defender Mr Maclachlan, or his clients (the Misses Campbell), as he might prefer, a conveyance to the feu, and any right of property or reversion the bankrupt might have therein, the title to be taken as it stood, and the trustee not to be bound to produce any of the titles except the act and warrant in his own favour. This agreement was submitted to the commissioners and creditors, and approved of by them, and recorded in the minute-book of the sequestration. It has been acted on by all concerned, and in respect of it the Misses Campbell, and the defender who is now in their right, have been in possession of the subjects ever since. Had the defender obtained from the trustee the conveyance specified in the agreement, the Lord Ordinary does not see what possible ground of claim to the subjects the pursuer could have had. Unfortunately, however, the defender neglected to do so. The proceedings in the sequestration were brought to an end, and the trustee discharged, on 24th May 1866 without having granted a conveyance of the subjects. This may create some difficulty in the way of the defender now getting a title from the trustee; but the Lord Ordinary does not see how it should revive any right to the subjects on the part of the pursuer, who was absolutely divested of them as at the date of the sequestration.”

Douglas reclaimed, and argued—He was the real proprietor of the subjects, his radical right in them reviving as from the date of his discharge. This was a pure question of heritable title. His charter and sasine must be held preferable to the agreement founded on by the other side, which was an informal document, not holograph nor tested, nor even dated. The alleged ret interventus was inadequate to validate it. The possession might be ascribed to the respondent's security title. The trustee and creditors had practically abandoned their claim. To establish that it was

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not necessary to show any active step by the trustee or the creditors. It was sufficient if they did not deal with the property, or, trying to do so, failed. (2) If the transaction founded on was anything at all, it was a sale by private bargain. If so, it was not in conformity with the provisions of sec. 115 of the Bankruptcy Act, which requires “concurrence of a majority of the creditors in number and value, and of the heritable creditors, if any, and of the accountant.” (3) Nor was the transaction one of the nature contemplated by the provisions of sec. 176 of the Act, as to “compromises.”

The respondent replied—Though the conveyance to be granted in terms of the memorandum of agreement had never been executed, that agreement had been acted on for 20 years with consent of all parties and in the knowledge of the bankrupth imself. The actings indicated quite the reverse of an intention to abandon. (2) The objection under sec. 115 of the Act might have been a good one if raised by the creditors, but the bankrupt had no title to plead it. (3) This was a transaction of the nature contemplated by sec. 176 of the Act. Dalziel's case was a direct authority.

Authorities— Dalziel v. Dennistoun, & c., Dec. 12, 1876, 4 R. 222; Fleming v. Walker's Trustees, Nov. 16, 1876, 4 R. 112; Smith v. Smith, March 7, 1879, 6 R. 795; Thomson v. Threshie, June 7, 1844, 6 D. 1106.