Scottish Court of Session Decisions

The estates of Lord Napier and Ettrick, who succeeded his father in the title, and in the entailed estates of Thirlestane and others, on December 19th 1898 were sequestrated on December 7th 1894, and Robert Cockburn Millar, C.A., was thereafter confirmed trustee thereon.

On 21st December 1898 the trustee presented a petition under sec. 103 of the Bankruptcy Act 1856, craving the Court “to declare all right and interest in the said entailed estate to which the said … Lord Napier and Ettrick became entitled as aforesaid to be vested in the petitioner as trustee foresaid as from the date of the succession thereto of the said Lord Napier and Ettrick.”

Answers were lodged by Baron de Saumarez, who averred that he was a creditor on the estate of the bankrupt for £1800 or thereby, and in particular for a sum of £1500 which he had lent to the bankrupt in 1889 on security of a bond and disposition in security granted by the bankrupt to him, dated 12th and recorded in the Register of Sasines 16th January 1889. The respondent also averred that there were presently pending before the Sheriff of Chancery two petitions at the instance of the trustee, one in his own name for infeftment in the entailed estate, and one in that of the bankrupt for service as heir of entail, and a third petition at the instance of the bankrupt himself for service as heir of entail. In these circumstances the respondent submitted “that the petitioner's claim is excluded by the said bond and disposition in security, and by the publication thereof in the Register of Sasines. He further submits that the petitioner is not entitled to insist in this petition in view of the proceedings presently pending before the Sheriff of Chancery, or at all events that said proceedings must be first disposed of. In any view, the respondent maintains that in any procedure to follow upon said petition, or in any order to be pronounced therein, his rights under the said bond and disposition in security should be secured in priority to the petitioner, and that his said rights should be saved and reserved entire.”

The bond founded on by the respondent contained an obligation on the part of the granter, immediately on the succession to the lands opening to him, “to make up and establish in my person complete titles thereto.” There was also a declaration that “all titles that may be thus or otherwise expede in any person shall ipso facto accresce to this bond and disposition in security, which shall be as valid and effectual to all intents and purposes as if granted or renewed after the opening of the succession, or after the completion of such titles.” There was a further declaration that the bond should not affect the lands in any way not consistent with the deed of entail under which they were held.

The Bankruptcy Act 1856 (19 and 20 Vict. c. 79), sec. 102, enacts that “The act and warrant of confirmation in favour of the trustee shall ipso jure transfer to and vest in him or any succeeding trustee for behoof of the creditors, absolutely and irredeemably, as at the date of the sequestration, with all right, title, and interest, the whole property of the debtor to the effect following: … 2nd, The whole heritable estate belonging to the bankrupt in Scotland, … subject always to such preferable securities as existed at the date of the sequestration, and are not null and reducible.”

Section 103 enacts that “If any estate, wherever situated, shall after the date of the sequestration, and before the bankrupt has obtained his discharge, be acquired by him, or descend or revert or come to him, the same shall ipso jure fall under the sequestration, and the full right and interest accruing thereon to the bankrupt shall be held as transferred to and vested in the trustee as at the date of the acquisition thereof or succession thereto for the purposes of this Act.” The section further enacts that upon a petition by the trustee the Lord Ordinary “shall declare all right and interest in such estate which belongs to the bankrupt to be vested in the trustee … to the same effect as is hereinbefore enacted in regard to the other estates.”

Mr William Cargill, S.S.C., to whom the Lord Ordinary remitted the petition and answers, reported as follows:—“It humbly appears to the reporter that the pending petitions before the Sheriff of Chancery have no bearing on the present petition, and that it is unnecessary to qualify the proposed interlocutor as suggested. The petitioner can only take the property tantum et tale as it stood upon record; besides, the vesting order bears to be granted in terms of the Bankruptcy Act 1856, under which the rights of creditors are sufficiently protected.”

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On 28th January 1899 the Lord Ordinary ( Pearson) dismissed the petition.

Note,—… “As the compearing creditor's title is a security writ, and the reversion is in the trustee, I should have been disposed to think that the petition might have been granted under reservation (if necessary) of the question of priority, so as to enable the trustee to obtain an active title to what is undoubtedly vested in him, and to try the question of preference in some more convenient process. The argument before me, however, was not conducted upon this footing on either side.

The petitioner does not assent to such a reservation, and indeed it would not suit his avowed purpose. His object is not to obtain an active title to the reversion, nor even to obtain an active title to the whole, subject to such right as the creditors may be found to have, but to obtain a declaration which he will be able to use in the Chancery proceedings to cut out the creditor by obtaining himself first infeft. In his view it is a race of diligence, his duty to the general body of creditors being to prevent by every means in his power the title of the creditor from being validated accretione through the infeftment of the bankrupt.

Accordingly I address myself to the merits of the question, which were fully argued.

It seems clear that the sequestration did not carry any interest in the entailed estate to the trustee until the succession opened. Further, the bond and disposition in security was duly published to all concerned by its registration in the sasine register, even although the registration did not operate as an infeftment. It follows that when the trustee on the opening of the succession became vested in the bankrupt's personal right, he did so in the knowledge of the right (still personal) of the creditor in the bond. Now that right was not merely a right to a spes successionis. It was that and something more, for it was constituted by a deed which is habile not merely to carry the expectancy, but to carry the eventual right as soon as the succession opened, though that right would remain personal until the bankrupt should be infeft. Further, this is not a case where the creditor has omitted any step which he could have taken to render his right more complete.

The creditor's case does not depend upon the fact that he holds the bankrupt's obligation to procure himself infeft. If it did, it might be a good answer to him to say that that was a collateral personal obligation, which could not stand against a trustee in bankruptcy. His case is, that he, having a right from 1889 under a deed which the trustee cannot challenge, and the trustee having no right at all until December 1898, when the succession opened, the trustee takes the personal right of the bankrupt under burden of the prior personal right of the creditor. In this view it is not a race of diligence between persons having independent rights, but a restriction on the bankrupt's own interest, which the trustee cannot disregard, and which indeed, on the principle of tantum et tale, affects the interest of the trustee. This it is said either bars the trustee from obtaining himself first infeft, which is his object in this petition, or at least furnishes a reason why the Court should not aid him in doing so, and therefore amounts to cause shown why the petition should not be granted.

But the creditor carries his argument further. He points to the publication of his right in the register of sasines as inferring knowledge on the part of the trustee that this prior title existed; and he maintains that even if the trustee should succeed in procuring himself first infeft, he could not hold to the advantage, on the principle of those cases where a disponee first infeft was obliged to yield to a prior personal right of which he had knowledge.

To all this I have heard no satisfactory answer on the part of the trustee. It might have been sufficient for him to deprecate the introduction of these questions, and to content himself with moving for such a declaration as would put him in a position to have them decided in another process. But this, as I have said, is very far from being his contention. He objects to any reservation of the question of preference, and asks for a decision of it in his favour now, on the ground that in this way alone can his purpose be effected. Indeed, he goes the length of contending that he already has a real right preferable to the creditor, and merely seeks to have that right declared. This contention is based on the terms of the 102nd section, whereby the heritable estate is vested in him to the same effect as if the several decrees of adjudication there mentioned had been pronounced in his favour, ‘and recorded at the date of the sequestration,’—that is (in the present case) at the date of the succession. But this cannot, I think, refer to recording the decrees in the register of sasines, since, as is noted by Professor Goudy in his work on bankruptcy (p. 270), such decrees were not registrable therein for the purpose of infeftment and completion of title until after the date of the Bankruptcy Act 1856.

The question then is, how is this position to be dealt with? If it had been clear that the petition would result only in the trustee obtaining an active title to enable him to try conclusions with the creditor, I should have granted the prayer. If parties had been agreed as to this, there would have been no difficulty. If the petitioner had so put his case, I should have decided the point—possibly in his favour. But no doubt for sufficient reasons he repudiates this construction of his petition, and will not consent to what (on this hypothesis) would have been the harmless reservation of the question of preference. Nor does the petitioner ask for a sist of the petition if I should not be prepared to grant it hoc statu. The creditor indeed suggests, as an alternative to his main argument, that it should be sisted until the issue of the proceedings before the Sheriff of Chancery. But the petitioner does not assent to this, as he desires to use the declaration obtained under the petition as a ground for

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getting a warrant from Chancery to procure himself infeft. This being so, and dealing with the petition as importing all that the petitioner says it does, I have no alternative but to dismiss it.

I think the creditor has shewn cause why it should not be granted hoc statu, and the petitioner does not move (even alternatively) that it should be sisted.”

The petitioner reclaimed.

The arguments of parties were almost wholly directed to the questions whether the respondent held a good preferential security over the bankrupt's interest in the entailed estate, and whether that security would be ousted by the Court granting decree in terms of the prayer of the petition without any qualification. The petitioner cited Inglis v. Mansfield, August 10, 1835, 2 S. & M'L. 203, per Lord Brougham, 332; Miller v. Wright, July 5, 1836, 14 S. 1087; Taylor v. Charteris and Andrew, Nov. 1, 1879, 7 R. 128; and Reid v. Morison, March 10, 1893, 20 R. 510. The respondent cited Edmond v. Gordon, Feb. 26, 1858, 3 Macq. 116; Fleming v. Howden, July 16, 1868, 6 Macph. (H.L.) 113; Trapes v. Meredith, Nov. 3, 1871, 10 Macph. 38; and Stodart v. Dalzell, Dec. 17, 1876, 4 R. 236.