Scottish Court of Session Decisions

The petitioner in this case was the trustee on the sequestrated estate of John Mitchell, English master in the Elgin Academy. The petition was under the 103d section of the Bankruptcy Act of 1876 (19 and 20 Vict. c. 79), which provides—“If any estate, wherever situated, shall, after

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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 for the purposes of this Act; and the trustee shall, on coming to the knowledge of the fact, present a petition setting forth the circumstance to the Lord Ordinary, who shall appoint intimation to be made in the Gazette, and require all concerned to appear within a certain time for their interest, and after the expiration of such time, and no cause being shown to the contrary, the Lord Ordinary shall declare all right and interest in such estate which belongs to the bankrupt to be vested in the trustee as at the date of the acquisition thereof or succession thereto, to the same effect as is hereinbefore enacted in regard to the other estates; and the proceeds thereof, when sold, shall be divided in terms of this Act.”

The petitioner averred—“Since the date of the said sequestration the bankrupt has acquired right to the portion of the said salary and emoluments which have fallen due since that date, and he will further have right to the said salary and emoluments so long as he holds the said office of teacher in the said school. Under the foresaid section of the said statute, the right to the said salary and emoluments has been transferred to and vested in the petitioner as trustee foresaid for the purposes of the said Act, until the debts due by the bankrupt at the date of the said sequestration are satisfied and paid, and the present application is accordingly presented to your Lordship in order to have his right thereto declared in terms of the foresaid section of the said statute. The petitioner is quite willing to make a reasonable allowance to the bankrupt out of the said salary and emoluments for his maintenance and support.”

The petitioner therefore prayed the Court—“To declare all right-and interest which belongs and may belong to the bankrupt in the salary and emoluments attaching to the foresaid office held by him to be vested in the petitioner as trustee foresaid as at the date when the same has or may become payable, to the same effect as is provided by the said statute in respect to estates vested in the bankrupt as at the date of the sequestration, and that until the debts due by the bankrupt as at the said date are duly satisfied and paid, or until your Lordship shall make order to the contrary, but subject always to the payment by the petitioner to the bankrupt of said salary and emoluments of such reasonable allowance for his maintenance and support as to your Lordship may seem proper.”

The respondent, the bankrupt, averred—“That in January 1866 the respondent was appointed by the Town Council of Elgin, then patrons of Elgin Academy, English master thereof, at a salary of £40 per annum, with a right to collect the fees of his department. At first these fees did not average over £100 per annum, but they gradually improved, till in 1874 they came to £170. Since 1874 they have decreased, and they are now not more than £160 per annum, making the respondent's salary £200—a sum barely sufficient for the maintenance of the respondent and his wife and family in a condition becoming his position as English master of one of the few high-class schools in Scotland.

The respondent's house rent is	£35	0	0
Income-tax and other taxes	10	0	0
Servant's wages.	9	0	0
	£54	0	0

leaving only £146 to feed and clothe himself, wife, and four children, and to feed his servant.” He held office ad vitam aut eutpam.

The respondent pleaded, inter alia—“(2) The respondent not having acquired rights to any ‘estate,’ in the sense of the section quoted in the petition, the same should be dismissed. (3) In any event, the respondent's income not being in excess of a reasonable aliment for himself and family, the prayer of the petition should be refused.”

The Lord Ordinary ( Fraser) refused the petition, adding this note:—“The petition is presented under the 103d section of the Bankrupt Act 1856, to have it declared that all right and interest which belongs or may belong to the bankrupt in the salary and emoluments accruing to him as one of the teachers of the burgh schools of Elgin, shall be vested in the trustee upon the sequestrated estate at the dates when the same may become payable, to the same effect as is provided in respect to estates vested in the bankrupt as at the date of the sequestration.

“The bankrupt since the sequestration has, in order to obtain a subsistence for himself and family, continued to teach in the Elgin school, and has obtained thereby an income amounting to £200 per annum. The question now is, Whether this is an estate’ which can be declared vested in the trustee under the 103d section? the words of which are as follows:—[ ut supra]. It is further declared by this section, that if the bankrupt do not immediately notify to the trustee that such estate has been acquired, or has come to him as aforesaid, he shall forfeit all the benefits of the Act.

The word ‘estate’ is defined as follows in the interpretation clause (sec. 4)—’ The words “property” and “estate” shall, when not expressly restricted, include every kind of property, heritable or moveable, wherever situated, and all rights, powers, and interests therein capable of legal alienation, or of being affected by diligence, or attached for debt.’

It appears to the Lord Ordinary that the fees from the personal labour of a bankrupt are not the kind of estate which is here contemplated. The trustee in the sequestration has no right to direct that the bankrupt, say a professional man—an advocate, a physician, or dentist—shall proceed to labour and earn money to be handed over to him, the trustee, for the payment of creditors; and if he has no such right to order the bankrupt so to labour for the creditors’ behoof, it seems logically to follow that if the bankrupt voluntarily does so the trustee cannot demand from him the produce of his brains. In the present case the petitioner, the trustee, is willing, as he states in the petition, to allow the bankrupt to retain as much as will be a subsistence to himself and his family,

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and only claims the surplus not required for that purpose. This implies, if it be a sound position, that the trustee has a right to insist upon the bankrupt continuing his profession for the benefit of his creditors—a doctrine for which under the present bankrupt laws there is no authority whatever.

Cases similar to this must have frequently occurred in Scotland, where professional men, in order to live during the pendency of the sequestration, continue in the exercise of their profession. But there is no instance of any demand having been made, or at all events successfully made, by the trustee, to claim a vesting order in the fees which the bankrupt earns. The question, however, seems to have occurred frequently in England. The result of the decisions there seems to be this, that the trustee has no right to seize the profits of the bankrupt's personal and daily labour. In one of these cases ( ex parte Vine, 28th Mar. 1878, 8 Chan. Div. 366), Lord Justice James said—The general principle always has been, that until a bankrupt has obtained his discharge all his property is divisible among his creditors. But an exception was absolutely necessary in order that the bankrupt might not be an outlaw—a mere slave to his trustee; he could not be prevented from earning his own living. This was only following up the leading case in the time of Lord Mansfield of Chippendall v. Tomlinson, 4 Dougl. 318. But this case has been distinguished in England from other cases where the bankrupt continues to carry on his business by means of servants and skilled workmen, and the Courts have held that the returns here must be accounted for to the trustee. Thus, a bankrupt, acting as a furniture-broker, employing men and vans, and an apothecary supplying medicines, were not considered as merely using personal labour in this sense ( Crofton v. Poole, 1 B. and ad. 568; Elliott v. Clayton, 16 Q.B. 581); and Mr Justice Fry, in a recent case dealing with the estate of a bankrupt architect, held that his trustee was entitled to sue for remuneration due in respect of professional work done in the bankrupt's office since his bankruptcy, for plans there prepared, and for damages for breach of an alleged contract to employ the bankrupt in his professional capacity ( Emden v. Carte, 11th April 1881). This class of cases, however, differs essentially from those where a professional man, such as a teacher, a dentist, an advocate, by his own brains or hands earns fees, and which if taken from him would simply, in the words of Lord Justice James, constitute the bankrupt a slave to his trustee.

But apart altogether from the light cast upon the subject by these English cases, the Lord Ordinary is opinion that the word estate,’ in the 103d section of the Scottish Bankrupt Act, never was intended to apply to anything else than some tangible property which has come to the bankrupt by succession, bequest, donation, or other means irrespective of the labour of the bankrupt himself.”

The petitioner reclaimed, and argued—The Court as a condition of freeing the bankrupt will oblige him to give up so much of his salary as exceeds what is required for the subsistence of himself and his family. A clergyman's stipend has been held to fall under his seguestration— A. B. v. Sloan, Bell's Comm. i. 127. There was no distinction in Scotland between a bankrupt's personal earnings and the profits he makes in trade. [ Lord Mure—How can a salary which is in a man's possession at the time of his sequestration be arrestable under the 103d section, which refers to future estate?] The salary has become due since— Moniet v. Hamilton.

Authorities— A. B. v. Sloan, June 30, 1824, 3 S. 195; Moniet v. Hamilton, Feb, 2, 1833, 11 S. 318; Jackson v. M'Kechnie, Nov. 13, 1875, 3 R. 130; Bell's Comm. i. 127.

Replied for respondent—The passage cited from Bell shows that the decisions have not proceeded on any principle; and there is no case in which a schoolmaster's salary has been held to be arrestable. It was not estate’ within the meaning of the 4th section of the statute. The mere fact that it is capable of alienation is not enough, for a apes successionis possessed that character yet it was not attachable by creditors— Trappes v. Meredith. Personal earnings are in England clearly distinguished from other estate, and the English statute was quite as comprehensive as the Scotch. The petitioner proposed to give the respondent the beneficium competentiœ, but under the 103d section he must take the whole estate if he was entitled to take any at all. He had no discretion. In any event the salary was not excessive.

Authorities— Laidlaw v. Wylde, June 9, 1801, Mor. App. Arrest. No. 4; Smith v. Inner, May 29, 1855, 17 D. 778; Trappes v. Meredith, Nov. 3, 1871, 10 Macph. 38; ex parte Darling, Feb. 12, 1877, L.R. 4 Chan. Div. 689, and the cases cited by the Lord Ordinary; 1 and 2 Vict. cap. 110, sec. 37; 2 and 3 Vict. cap. 41, secs. 3 and 81.