Scottish Court of Session Decisions

This was an appeal of the trustee against a deliverance of the Sheriff in the process of sequestration of the estates of H. C. Coupland, hotelkeeper, Langham Hotel, Buchanan Street, Glasgow, under the Bankruptcy (Scotland) Act 1856. The question “Will you hand me the certificate of license for the Langham Hotel?” was put to the bankrupt by the agent for the trustee, and objected to by the agent for the bankrupt “(1) on the ground that it was hypothecated

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to him, and (2) that it had been acquired by the bankrupt subsequent to his sequestration, and therefore did not fall to be handed over except by order of the Lord Ordinary on the Bills.” The Sheriff repelled the first objection, and sustained the second.

The trustee appealed to the Court of Session. He stated that the goodwill of the Langham Hotel, Glasgow, which was the only asset in the sequestrated estate known to him, had been sold by him publicly for £120, and that the certificate of license which was held by the bankrupt, and was of no value to him without possession of the hotel, was an accessory of the goodwill, and should be delivered to the appellant. The trustee therefore prayed the Court to recal the deliverance of the Sheriff-Substitute, and to ordain the bankrupt to deliver to him the certificate of license.

The trustee in argument founded on sections 91 and 93 of the Bankruptcy (Scotland) Act 1856, and also on the case of Selkirk v. Service, Oct. 22, 1880, 8 R. 29.

The bankrupt appeared in person and resisted the application.

The Court then pronounced this interlocutor:—“Ordain the bankrupt, on or before the first sederunt day in January next, to produce the certificate referred to in the appeal; and appoint the trustee to state in a minute the terms of the sale of the business of the Langham Hotel, and the use he proposes to make of the said certificate.”

The trustee in obedience to this interlocutor lodged a minute stating the following facts:—(1) That he was confirmed as trustee on 31st August 1885. The hotel had been let furnished to the bankrupt in 1883, under a lease for a period of years expiring in 1895, at rents rising gradually from £550 per annum to £1000 per annum. The lease to the bankrupt contained a clause excluding his assignees and subtenants without the written consent of the landlords. (2) At the date of the sequestration the bankrupt was carrying on business without a formal cartificate or licence, having omitted to apply in time before the April Court for a renewal of his certificate, which expired in May 1885. The bankrupt, however, obtained from the Excise authorities a permit to carry on the hotel temporarily, and the business was being carried on under this permit at the date of the sequestration. (3) With the view of obtaining the best price for the goodwill of the hotel, the trustee delayed exposing the same to sale till after the October Licensing Court. At that Court, with the sanction and approval of the trustee, an application for a certificate was made by the bankrupt, and as the application was, though technically for a new certificate, truly for a renewal of a certificate formerly granted, the magistrates gave the certificate referred to in the appeal without any difficulty. (4) The trustee, with consent of the commissioners on the estate, thereafter exposed the goodwill of the business for sale publicly after due advertisement, and conform to articles of roup. (5) The goodwill was sold to Mr Charles Macrae, hotel-keeper, Glasgow, on 1st December 1885, at the public exposure, for £120. By the articles of roup it was provided that the price was, within twenty-four hours after the sale, to be consigned on deposit-receipt in joint names of the trustee and the purchaser. It was also provided by said articles as follows:—“ Sixthly, The exposer shall not earlier than the 11th day of December 1885 hand to the purchaser the certificate of licence relating to the said business, in exchange for which the purchaser shall endorse the deposit-receipt for the price, and deliver the same to the exposer, and the purchaser shall at the same date be entitled to entry to the said hotel (so far as the exposer is entitled to give him such entry). It is understood, however, that the purchaser shall take the risk of obtaining the consent of the landlords to his tenancy of said hotel, and shall also take the risk of obtaining a transfer of the said license. Seventhly, In the event of the exposer being unable to deliver the said certificate of licence within the period of two months from the date of the exposure, the sale shall be at an end, but the exposer shall not be liable in any damages to the purchaser.” (6) In selling the goodwill and undertaking to deliver the certificate the trustee followed the course invariably followed by trustees in the sequestration of the estates of hotel-keepers and spirit merchants, with this difference, that in the ordinary case the sale is carried out at once after the sequestration, but in this case, through the bankrupt's failure to apply in time for a renewal of his certificate, the trustee had to wait till a certificate was got.

The trustee further stated:—“On obtaining the certificate the appellant proposes to hand it to the purchaser Mr Macrae in exchange for the indorsation of the said deposit-receipt for £120. The certificate will be endorsed by the appellant to the effect that Mr Macrae is purchaser. This is in accordance with the usual practice followed in the sales of the goodwill of hotel businesses, and the indorsation enables the purchaser to get a transfer more readily than it would be for him to get a new certificate altogether. On Mr Macrae getting the certificate he must, before carrying on business, make application to the magistrates for a transfer of it to himself as the present tenant of the hotel; and if the magistrates consider him a fit and proper person the transfer will be granted forthwith, but with the steps ulterior to the delivery of the certificate to the purchaser endorsed and the payment of the price the appellant has no concern. No other certificate will be granted during the currency of the one in question, which in ordinary course will endure till May next, and no transfer of said certificate to the purchaser will be granted unless the said certificate is produced to the magistrates endorsed by the appellant. But for the obligation to deliver the certificate the goodwill would not have sold so readily, or realised as much as it did. The bankrupt has not been in possession of the hotel premises since 21st December 1885. He has no interest to retain the certificate. The goodwill of the hotel was given up by him as an asset in his state of affairs. The Excise authorities will not grant a permit to the purchaser, as no permit is given where a certificate has been granted by the magistrates, and is current. In consequence of the want of said certificate, Mr Macrae and the appellant are prevented from carrying on the business of the hotel in question.”

Parties were heard on this minute. Coupland appeared personally to oppose the appeal.