Scottish Court of Session Decisions

Section 9 of the Bankruptcy and Cessio (Scotland) Act 1881 (44 and 45 Vict. c. 22) provides—“If the debtor fail to appear in obedience to the citation under a process of cessio bonorum at any meeting to which he has been cited, and if the Sheriff shall be satisfied that such failure is wilful, he may in the debtor's absence pronounce decree of cessio bonorum.”

Messrs Rowan & Borland, drapers, Newton-Stewart, on 20th January 1905 presented a petition for cessio in the Sheriff Court of Dumfries and Galloway at Kirkcudbright against James M'Lauchlan, dairyman, craving the Court to appoint a trustee to take the management and disposal of his estate for behoof of his creditors, and to ordain him, if so required, to execute a disposition omnium bonorum in favour of such trustee for their behoof. Messrs Rowan & Borland were creditors of M'Lauchlan for the sum of £15, 0s. 6d. with 16s. 1d. of expenses conform to extract decree of the Sheriff of Dumfries and Galloway dated 6th January 1905. In the condescendence annexed to the petition the petitioners set forth the names of two persons as being the only other creditors of the debtor so far as known to the petitioners.

On 20th January the Sheriff-Substitute ( Napier) made the usual first order in a petition for cessio in terms of section 9, sub-section 1, of the Debtors (Scotland) Act 1880, requiring, inter alia, the defender and his creditors to appear in the Sheriff Court-House, Kirkcudbright, on 3rd February for public examination.

On 3rd February the Sheriff-Substitute pronounced the following interlocutor:—“Present William Nicholson jr., solicitor for creditors. The respondent failed to appear after having been duly cited. The Sheriff-Substitute holds his failure to appear wilful: Ordains the defender to grant a disposition omnium bonorum to Mr J. E. Milligan, solicitor, Dalbeattie, who is hereby appointed trustee for behoof of the defender's creditors: Dispenses with caution, and appoints all funds belonging to the defender's estate to be lodged in the Union Bank at Dalbeattie: Further, appoints the defender to appear for public examination within the Court-House here on the 10th inst. at 10 o'clock forenoon.”

The debtor appealed to the Court of Session, and before the case came on for hearing lodged a minute in the following terms:—“Macmillan, for the respondent and appellant James M'Lauchlan, stated to the Court that … on the morning of the said 3rd February 1905 the appellant's agent Mr W. M. Kelly, solicitor, Newton-Stewart, on behalf of the appellant, made payment to Mr J. R. Saunders, solicitor, Castle Douglas, the agent for Rowan & Borland, the petitioning creditors, of the full amount of their debt and expenses, and received a receipt in settlement thereof. Mr Kelly had also on the appellant's behalf settled or arranged with all the other creditors of the appellant known to him, including Richard Ker and Mitchell Davidson, the only two persons mentioned as creditors of the appellant besides the petitioners in the petition for cessio. Mr Saunders thereupon promised to withdraw the petition, and in reliance on this settlement the appellant's agent informed the appellant that he need not attend the Court, and accordingly neither he nor his agent, who thereupon left to fulfil a business engagement in another part of the country, attended at the calling of the case. Mr Saunders duly intimated to the Sheriff-Clerk that the matter had been settled, and on the case being called in Court stated to the Sheriff-Substitute that his client's claims had been satisfied and that he withdrew the petition.

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Mr William Nicholson junior, solicitor, Kirkcudbright, however, then appeared, and stated that he represented a creditor to the extent of £2 10s. 6d., and desired the petition to be proceeded with. On his motion the Sheriff-Substitute pronounced the interlocutor now appealed against, holding the appellant's failure to appear to be wilful, and ordaining him to grant a disposition omnium bonorum to a trustee for is creditors. The appellant is willing and able to pay the claim of Mr Nicholson's client, and his agent would have settled the same had he known thereof before the calling of the case.”

At the hearing the respondents, the trustee and certain unpaid creditors of the debtor, objected to the competency of the minute, maintaining that the Court could look at nothing except the note of appeal. The Court repelled the objection, and the case was continued to allow the respondents to lodge answers. In their answers they admitted that Mr Kelly settled the claim of the petitioners; that Mr Saunders, the petitioners' agent, intimated to the Sheriff-Clerk that the petitioning creditors' claim had been settled, and stated this to the Sheriff-Substitute when the petition was called. They averred, however, that the debts due to them were known all along by the appellant and his agent to have been due and unpaid.

Argued for the appellant—The interlocutor of the Sheriff of 3rd February was appealable—Sheriff Courts (Scotland) Act 1876, sec. 26 (4); Adam & Sons v. Kinnes, February 27, 1883, 10 R. 671, at p. 674, 20 S.L.R. 436; Meikle v. Wilson, May 31, 1884, 11 R. 867, 21 S.L.R. 577. It was open to objection on two grounds—(1) At the time when the Sheriff pronounced the interlocutor the process in which he professed to pronounce it had ceased to exist. The petitioning creditors had withdrawn, and no other creditor had entered the process by any of the methods known to the law—as, for example, by lodging a minute or getting sisted as a petitioner. The petition accordingly had fallen, it being impossible for a process of any kind to continue to exist without a pursuer. Had there been a process in existence it was true that non-petitioning creditors could have appeared and stated their claims and moved for cessio without the existence of a process, but they had no locus standi. The Bankruptcy (Scotland) Act 1856, section 34, was referred to as illustrating the point. (2) In any event, the Sheriff had erred in holding that the appellant's failure to appear was wilful. To entitle the Sheriff to pronounce decree of cessio under section 9 it must have been proved that the debtor was “contumaciously absent”— Reid v. Somerville & Co., June 6, 1889, 16 R. 751, 26 S.L.R. 274—whereas in the present case he had absented himself in all good faith, having been informed by his agent that the matter was settled and that he did not require to attend.

Argued for the respondents—The appeal was incompetent, the decision of the Sheriff being in a matter of this kind final. But assuming its competency the interlocutor should be upheld. Proceedings in cessio were entirely statutory, and there was nothing in any of the statutes making it necessary for a creditor to sist himself formally in order to become a party to the process. The mere fact that he was a creditor and convened as such by the Sheriff-Substitute's deliverance of 28th January entitled him to move for decree of cessio under section 9— Smith v. Marquess of Lothian, November 4, 1884, 12 R. 58. Further, the appellant's failure to appear was “wilful.” He had received a distinct order from the Sheriff to be present, and that order had never been officially recalled, and if he chose to disobey it he did so at his own risk.