Scottish Court of Session Decisions

Subject_1 PART I.

BANKRUPT.

Macminn, Petitioner

Date: 10 July 1804
Case No. No. 19.

The whole sum offered by the bankrupt as a composition, and accepted by his creditors, must be with caution; otherwise the Court cannot approve of it.

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Thomas Macminn having become bankrupt, the usual steps in such cases were taken. Soon after his examination, he offered to his creditors a composition of five shillings in the pound, for four of which he offered caution, and his own bill for the remaining one shilling.

The meeting were “unanimously of opinion, that the offer of composition and caution made by the bankrupt ought to be accepted, as being for the interest of all the creditors.”

Macminn, accordingly, and his trustee, with concurrence of the whole creditors who had produced grounds of debt and oaths of verity, made an application to the Court to have this approved of, and to declare the sequestration at an end.

But as caution had not been offered for the whole composition, the Court (June 2, 1804) thought that this case was not authorised by the bankrupt act, and that they could not therefore interpone their authority.

The petitioner reclaimed, and

Pleaded: All the proceedings under the bankrupt act being intended to deprive the debtor of the power of management of effects now belonging to his creditors, are declared to be for the benefit of all the creditors. But though they are intended for the benefit of the whole, every individual creditor is not bound to take share in the management: This, in most instances, would be impracticable, and in many would be unnecessary. The act, therefore, vests the management either in a majority or in a certain number of creditors who attend; and where all have the same interest, these is little fear of the rights of those who are absent being compromised. With regard to the offer of composition, the act provides (§ 48.) that if at the meeting so “appointed, it shall be the opinion of nine-tenths of the creditors there, assembled, both in number and value, that the offer should be accepted, a report of the proceedings “relative thereto shall be forthwith made up by the trustee, and transmitted to the clerk of the sequestration in the Court of Session, for the approbation of the Court; and if the Court, upon hearing any objections that may be stated by opposing creditors, shall find the proposition reasonable,” &c. Against this approbation no opposition has been made on the part of any of the creditors; but the Court is there called upon to consider the reasonableness of the proposition, only in the case of objections being offered by opposing creditors.

Had the composition offered been only the 4s. in the pound, not a doubt could have existed, that, if this had been accepted by nine-tenths of the creditors, the approbation, of the Court must have followed of course. How can this be prevented by the bankrupt offering, and his creditors accepting, the promise of payment of something in addition to the composition?

The Court adhered, (26th June 1804), without prejudice to the petitioner to reclaim if he shall be so advised.

And, upon a reclaiming petition, again adhered, (July 10.)

The Court was much divided; but it occurred to the majority, that this composition clause was liable to be abused, and ought to be strictly construed; that the acceptance of the bankrupt's own obligation for a part of what he owed was contrary to the nature of the business, and not founded in the meaning of the act, as he ought either to remain bound in whole, or be discharged altogether; and that the requisite of caution would, in a great measure, be rendered nugatory, if any other plan were to be adopted.

For Petitioner, W. Erskine. Agent, R. Ayton, W. S. Clerk, Terrier. Fac. Coll. No. 175. p. 395.