Scottish Court of Session Decisions

By bond and disposition in security, dated 13th and recorded 14th October 1876, David Wilkie Clarke and David Crabb, both residing in Dundee, bound themselves as trustees and individuals, and also conjunctly and severally, and their heirs, executors, and representatives whomsoever, also conjunctly and severally, and without the necessity of discussing them in their order, to repay the sum of £2000 to Jane M'Nab, Martha M'Nab, John M'Nab, and James Cuthbert, and to pay interest thereon at the rate of 4 1 2 per cent. till payment, and in security of repayment they further disponed certain lands.

The bond was registered in the Books of Council and Session on 12th January 1888, and on 24th January Clarke was charged to make payment of the sum due thereunder within six days, with interest from the term of Martinmas till payment was made. On 31st January Clarke raised a suspension of the charge, and on 14th March the Lord Ordinary on the Bills refused the note of suspension, and on 26th May the First Division adhered.

The present petition was thereafter presented in the Sheriff Court of Forfarshire at Dundee by the creditors in the above mentioned bond, viz., Jane M'Nab, Martha M'Nab, John M'Nab, and James Cuthbert, for the cessio of the said David Wilkie Clarke.

The pursuers, after setting forth the fact of the charge having been made, and the proceedings in the suspension, averred, inter alia, as follows—“Since the term of Whitsunday (15th

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May) 1888 the half-year's interest due on the said sum of £2000 at that term has been paid or accounted for to the pursuers, and sundry sums have also been received by them of sundry dates, all subsequent to the last-mentioned term, to account of said sum of £2000, amounting in cumulo to £92, 5s. 8d., being £13, 2s. 4d. of net proceeds of goods which belonged to said defender sold under poinding, and £79, 3s. 4d. of balance of rents, after deducting fire insurance premium, interest, and other outgoings. The said principal sum of £2000, with interest thereon at the rate of £4, 10s. per centum per annum from the said term of Whitsunday, is still due, under deduction of the said sum of £92, 5s. 8d. and interest corresponding thereto, as from the said term, all as more fully set forth in copy state of debt herewith produced and referred to, showing the debt at the date of the presentation hereof to be £1944, 8s. 10d., including therein interest to said date, and £1, 13s. 1d. of expenses. The days of charge have expired, and the debt has not been paid or satisfied to a greater extent than that above mentioned. Said extract bond and disposition in security, and the execution of said charge thereon, are herewith produced and referred to. Upon the 4th day of October 1888 notice of the pursuer's intention to present this petition was duly given to the defender in terms of the Act of Sederunt of the Lords of Council and Session, of date the 22nd day of December 1882, and section first thereof, entituled Act of Sederunt anent Processes of Cessio. A certificate of the posting of the said notice to the defender, and the Post Office official receipt therefor, are herewith produced. The defender is insolvent, and unable to pay his debts.”

The pursuers pleaded—“(1) The defender is, in the circumstances stated, notour bankrupt within the meaning of the Debtors (Scotland) Act 1880, and the Bankruptcy and Cessio (Scotland) Act 1881 amending the same. (2) The pursuers, being creditors of the defender, are, in respect of his notour bankruptcy, entitled to obtain decree as craved.”

Section 6 of the Debtors (Scotland) Act 1880 provides that “in any case in which, under the provisions of this Act, imprisonment is rendered incompetent, notour bankruptcy shall be constituted by insolvency concurring with a duly executed charge for payment, followed by expiry of the days of charge without payment, or, where a charge is not necessary or not competent, by insolvency concurring with an extracted decree for payment, followed by the lapse of the days intervening prior to execution without payment having been made. Nothing in this section contained shall affect the provisions of section 7 of the Bankruptcy (Scotland) Act 1856 (19 and 20 Vict. c. 79).” Section 8 of the same Act provides as follows—“Any creditor of a debtor who is notour bankrupt within the meaning of the Bankruptcy (Scotland) Act 1856 (19 and 20 Vict. c. 79), or of this Act, may present a petition to the sheriff of the county in which such debtor has his ordinary domicile, setting forth that he (the debtor) is unable to pay his debts, and praying that he may be decerned to execute a disposition omnium bonorum for behoof of his creditors, and that a trustee be appointed who shall take the management and disposal of his estate for such behoof, and such process shall be taken and deemed to be a process of cessio. In the petition there shall be inserted a list of all the creditors of the debtor, specifying their names, designations, and places of residence, so far as known to the petitioner, and with the petition shall be produced evidence that the debtor is notour bankrupt.”

In anticipation of the presentation of the petition a caveat had been lodged and the parties were heard before the Sheriff-Substitute ( Smith).

On 21st November the Sheriff-Substitute having made avizandum found “that the pursuers' averments and relative documentary evidence do not sufficiently warrant the granting of the petition; in respect, and separatim … that the inference deducible from the documents does not amount to prima facie evidence of insolvency, therefore dismisses the petition.”

“ Note.—The respondent and David Crabb are debtors under bond to the pursuers, and are bound conjunctly and severally, and as individuals, to pay to the pursuers the sums of £1600 and £400, and for these two sums, amounting to £2000, they have granted heritable security with the usual power of sale over three separate properties in Dundee. The pursuers have taken no steps to exercise their power of sale. They have charged the respondent and his co-obligant, be he co-partner or joint-adventurer, or whatever kind of colleague he may be, and without waiting to see whether the charge would be obeyed by this respondent or not, two days after its date they made intimation that they were to institute processes of cessio. The days of charge have, however, eventually expired, and payment has not been made. The petitioners aver that the respondent and his co-obligant are insolvent, but they tender no evidence of insolvency except the expired charge, and they plead that the expired charge by itself constitutes both prima facie evidence of insolvency and notour bankruptcy according to the 6th section of the Debtors (Scotland) Act 1880. They maintain that under said section and the 8th they are entitled to have the first order in a process of cessio pronounced against the respondent in each of the two processes… .

There is no evidence of insolvency except the expired charge, and I am not disposed to hold that every expired charge for every debt, however small, is proof of notour bankruptcy against any debtor, however rich, more especially when the creditor has a power of sale, be it under a bond or a poinding, and shrinks at the same time from taking payment of his own debt in the readiest way, and also in proving his averment of insolvency if that averment be really true. But I am satisfied in this case the petitioners' own state of debt contains prima facie evidence of solvency. This state shews that within the last six months, or rather five months, the rents of the property exceeded the interest and outlays by £80, and that in that time the petitioners' debt had been reduced from £2000 to £1907. Therefore it seems to me that the petitioners can be under no reasonable and honest apprehension about the ultimate payment of their debt, and about the regular and termly payment of interest, that there is no prima facie evidence of insolvency, and that there is prima facie evidence that the process is attempted for some other and less justifiable object than the mere payment of debt.”

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he petitioners appealed, and argued—The process of cessio at the instance of a creditor was introduced by the Debtors Act 1880. By that Act imprisonment for debt was abolished save in certain specified instances and it was necessary to have “notour bankruptcy” constituted in some other way. Section 6 of the Act showed how that was to be done. Insolvency was presumed when the other requisites concurred—Bell's Comm. 5th ed. 317, 7th ed. 334; Knowles v. Balgarnie, February 1, 1865, 3 Macph. 457. In the present case there had been an inhibition and a poinding of the ground, both of which processes had been resisted by the defender— Clarke v. M'Nab, March 10, 1888, 15 R. 569; Clarke v. M'Nab, May 26, 1888, 15 R. 670. These proceedings gave some evidence of continued insolvency. Having got an expired charge, an inhibition and poinding of the ground, it was difficult to see what more could be got to constitute “notour bankruptcy”— Black v. Watson, November 29, 1881, 9 R. 167; Teenen's Trustee v. Teenen, March 19, 1886, 13 R. 833.

The respondent argued—The inference deducible from the documents did not amount to prima facie evidence of insolvency, and insolvency had to be established as a requisite of notour bankruptcy. A mere expired charge was not sufficient. Insolvency had to be established. The practice under the old law afforded no ground for the proposition now maintained which was that the absence of an offer to pay the debt coupled with an expired charge constituted notour bankruptcy. Here there was no prima facie evidence of insolvency as the rents more than met the interest on the bond. The question to be decided involved the further question whether it was possible to get cessio and then sequestration as following thereon, when on the evidence of insolvency presented sequestration could not have been obtained—44 and 45 Vict. cap. 22, sec. 11.

At advising—