Scottish Court of Session Decisions

The estates of John Todd, manure merchant, Stranraer, were, on his own petition, with concurrence of the Royal Bank as a creditor, sequestrated by the Lord Ordinary on the Bills in November 1883. At the first meeting of creditors Andrew M'Fadyean, solicitor, Newton-Stewart, was, after a competition with William M'Harrie, accountant, Stranraer, elected trustee, and three creditors residing in or near Stranraer were at the same time elected commissioners. The election was duly confirmed by the Sheriff, who on 21st December fixed the 31st December as the diet for the bankrupt's examination. On the date of the Sheriff's deliverance the trustee received a letter from Mr W. G. Belford, solicitor, Stranraer, dated the previous day, as follows:—“ John Todd's Segn.—Dear Sir,—As agent for, and authorised by the three commissioners on this sequestrated estate, I send you on the other side copy of a notice which will appear in the Edinburgh Gazette to-morrow.”—and enclosing a copy of a notice which appeared in the Edinburgh Gazette on 21st December, signed by the three commissioners, intimating that a general meeting of the creditors was to be held within the Court-house, Wigtown, on 29th December 1883, “for the purpose of removing Andrew M'Fadyean, solicitor, Newton-Stewart, from his office as trustee on the above sequestrated estate, in terms of section 74 of the Bankruptcy (Scotland) Act 1856.” The meeting was held accordingly, and the motion to remove the trustee was negatived by a majority in value of the creditors present.

On 10th January 1884 Mr M'Fadyean received from Mr Belford, as agent for Mr M'Math, one of the commissioners, the following letter dated 9th January:—“ John Todd's Segn.—Dear Sir,—At the request of Mr M'Math, one of the commissioners on this estate, I send you annexed copy of a notice that appeared in yesterday's Gazette, to which you will no doubt attend.” The Gazette notice, which was signed by M'Math, intimated that a general meeting of Todd's creditors would be held on 16th January for the purpose of removing M'Fadyean from his office of trustee in terms of section 74 of the Bankruptcy (Scotland) Act 1856.

The Bankruptcy (Scotland) Act 1856 provides (section 74)—“A majority in number and value of the creditors present at any meeting duly called for the purpose may remove the trustee or accept of his resignation.”… Section 98 provides—“The trustee, or any commissioner, with notice to the trustee, may at any time call a meeting of the creditors.” … Section 99 provides—“Notice of the day, hour, place, and purpose of all meetings of creditors under this Act shall be advertised in the Gazette seven days at least before the day of the meeting.”…

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Mr M'Fadyean thereupon presented a note in the Bill Chamber craving the Court to interdict M'Math, “or anyone on his behalf, or acting under his instructions, from holding, constituting, or taking part in a meeting of the creditors of the said John Todd at Stranraer on Wednesday the 16th day of January 1884.” On 14th January the Lord Ordinary on the Bills granted interim interdict in these terms. Notwithstanding the interdict a meeting of creditors was held on the 16th. The minute of meeting bore that there was laid on the table by the clerk of the meeting the following letter addressed to him:—“ Stranraer, 16 th January 1884.—Dear Sir,—I beg to enclose service copy interdict prohibiting me from taking part in the meeting to-day. I enclose you copy of Edinburgh Gazette, and certificate of postage, as they are of no use to me. You will at once understand that it is impossible for me, or anyone in my behoof, to attend the meeting. — Yours faithfully (Signed) William M'Math,”—The minute further bore that a motion for the removal of the trustee was made and carried unanimously. The creditors who composed, the meeting were all creditors for small amounts in or near Stranraer. Certain other creditors outside of Stranraer, who formed a majority in value, were not represented at the meeting.

Mr M'Fadyean then appealed to the Lord Ordinary on the Bills against the resolution of the meeting, craving that it might be recalled.

He averred—The commissioners were nominees of the bankrupt's relatives, and their object in desiring to have him removed was to put in his place Mr M'Harrie, who had been supported as candidate for the office at the first meeting by certain relatives of the bankrupt who alleged themselves to be creditors. The creditors, forming a majority in value of the whole, who supported his (appellant's) nomination as trustee relied on the interdict of the meeting of 16th January being respected, and so absented themselves. The creditors who attended were those who were co-operating with the bankrupt and his relatives, and whose object was to impede the winding-up of the estate.

The respondents averred—The bankrupt estate was wholly situated in Stranraer, and the great majority of creditors were resident there, while the appellant resided twenty-four miles away. They desired a trustee where the estate was situated, but Mr M'Harrie was not a candidate for the office. The appellant's removal would lead to a more economical and expeditious procedure in the winding-up. They also averred that they had really a majority in number and value of the creditors, but that they had deemed it more economical and expedient to proceed by way of removing the appellant than to enter on a litigation with regard to the rejection of the vote tendered by one creditor who would have voted with them if his vote had not been rejected.

The appellant pleaded—“(1) The meeting at which the resolution appealed against was adopted having been called without notice to the trustee, in terms of the 98th section of the Bankruptcy (Scotland) Act 1856, the said resolution ought to be recalled. (2) The said meeting not having been properly constituted, or separatim, having been constituted and held in breach of an interdict of Court, the said resolution ought to be recalled. (3) The appellant and the creditors who desire that he should remain trustee having absented themselves from the said meeting, in reliance on and in respect of the interdict there-against, and having been entitled to rely on the said interdict being observed, the said resolution ought to be recalled, as having been passed ex parte by creditors conjunct and confident with the bankrupt or his friends, and not by a properly constituted meeting of creditors. (4) The resolution appealed against, and the other proceedings for the appellant's removal, having been nimious, oppressive, and an abuse of the provisions of the Bankrupt Statute, and there being no legitimate ground existing or alleged for the removal of the appellant from the office of trustee, the resolution ought to be recalled. (5) The sole object of the said resolution being to prevent or obstruct the proper conduct of the sequestration, the same should be recalled with expenses.”

The respondents pleaded—“(1) The appeal is incompetent. (3) The meeting having been duly called and held in terms of the statute, the appeal should be refused.”

The Lord Ordinary sustained the appeal and recalled the resolution of creditors appealed against.

“ Note.—The appellant was elected trustee in November 1883, and was duly confirmed. On the 21st of December he received notice that a meeting had been called by the commissioners for the 29th of that month, for the purpose of removing him from office. The meeting, which appears to have been duly called, was held accordingly, and the result was that a statutory majority of the creditors resolved that he should not be removed.

On the 10th of January following the appellant received a notice from one of the commissioners, Mr M'Math, that he had called another meeting for the same purpose by an advertisement in the Edinburgh Gazette, which had been published on the 8th. This second meeting was called for the 16th January, and the appellant maintains that the notice which he received on the 10th was not sufficient to satisfy the requirements of the 98th section of the Bankruptcy Act 1856.

I cannot assent to the appellant's argument that no meeting can be validly called by a commissioner without previous notice to the trustee. I think the enactment would be satisfied by giving notice to the trustee simultaneously with the calling of the meeting by advertisement. But the statute requires, by the 99th section, that notice shall be given by advertisement in the Gazette seven days at least before the day of the meeting, and by the 98th section, that besides the public notice by advertisement, special notice shall be given to the trustee; and there appears to me to be great force in the appellant's contention that the trustee is entitled to the same notice as the statute requires to be given by advertisement to the creditors. He would thus be entitled to at least seven days' notice, and he only received five days' notice, if the period is to be reckoned in terms of the 5th section of the statute. But if I were prepared to hold that the notice to the trustee was sufficient, I should still be of opinion that the proceedings were irregular, and that the resolution complained of could not be sustained.

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The appellant, conceiving that he had not received due notice of meeting, presented a note of suspension and interdict, and on the 14th of January he obtained interim interdict in the terms stated in the condescendence. The application for interdict was based upon averments that the meeting had been called by relatives of the bankrupt for indirect purposes, and particularly for the purpose of obstructing the examination of the bankrupt, for which a diet had been fixed; and it was urged (and I thought with reason) by the counsel for the complainer, that if these averments were unfounded in fact, no prejudice could arise from the granting of the interdict, because it was at least questionable whether the meeting had been duly called; and if the creditors really desired to remove the trustee, it was plainly for the interest of all parties concerned that the question of his removal should be considered at a meeting to which no such objection could be taken. The commissioner could have no difficulty in calling a meeting, with due notice to the trustee, and it might be anticipated that this course would be followed, if there were no indirect motive for pressing on the meeting called for the 16th.

It appears, however, that certain of the creditors, assuming that the interdict was effectual only to prevent Mr M'Math from taking part in the meeting, persisted in holding it, and passed the resolution of which the appellant complains. I do not think it necessary to consider whether that construction of the interdict was technically correct, nor to inquire into the truth of the appellant's averments as to their motives in holding the meeting, or as to the part which Mr M'Math may have taken in enabling them to do so. Assuming that they acted in good faith, I am of opinion that the resolution complained of is ineffectual. The appellant avers that he, and the creditors who desired that he should continue in office, abstained from attending the meeting because they knew of the interdict, and relied upon it being respected. I think they were entitled to assume that the meeting would not be held, and were justified in absenting themselves. It is averred by the appellant that the respondents who support the resolution are a minority in value of the creditors, and I did not understand this to be disputed at the bar.

I am of opinion that the appeal must be sustained, not only because of a technical irregularity in the proceedings, but because it would be unjust to the trustee, and the absent creditors, to hold them bound by a resolution passed in such circumstances. But this judgment will not prevent the commissioners from bringing the question, if they think fit to do so, before a meeting, duly called, and which all parties interested may have an opportunity of attending.”

The respondents reclaimed, and argued—The resolution was valid and regular. All that the Act directed was “notice” to the trustee, without specifying when it should be made with reference to the Gazette notice. Here it was to all intents simultaneous, and was reasonable and sufficient notice to the trustee to prepare himself for the meeting, and that was all he could ask. The interdict should therefore not have been granted, and even if it should, it did not apply to the creditors who attended the meeting, but only to

M'Math. The absenting creditors remained away at their own risk.

The appellant replied—The trustee was entitled under section 98 to notice apart from and prior to the Gazette notice. The public notice was meant for the body of creditors, and was a separate enactment from that prescribed for the trustee. The meeting was held in breach of interdict; but even if it were not in breach of interdict, it was otherwise irregular, in respect that certain creditors who were justified in absenting themselves were not represented.

At advising—