Scottish Court of Session Decisions

Subject_1 PART I.

BANKRUPT.

Richmond and Freebairn's Trustee,
v.
The Pelican Insurance-Office

Date: 26 June 1805
Case No. No. 21.

Payments by bills of exchange, made within sixty days of bankruptcy, good in the case of a running account, operated upon to an equal extent, on both sides of the account.

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The Directors of the Pelican Insurance-Office, in 1798, appointed Richmond and Freebairn their agents in Edinburgh. The instructions required “the agent to remit immediately all sums received for new polices, or renewals, when the payment exceeds 250 on one number, and is to transmit the balance of his account quarterly, within one month after each quarter-day, either in money, in bank-bills, or in good bills, at a short date.”

Of this date, (5th September 1801), Richmond and Freebairn were rendered bankrupt.

The account with the Pelican Office at this time stood thus:

Dr.—Pelican Life Office, London, in Account with Richmond and Freebairn, Insurance-Brokers, Edinburgh. Cr .

1801.		£.	s.	d.
March 4.	To Sundries,	135	14	0
July 11.	To cash,……….	13	19	8
Aug. 31.	To profit and loss for commission,	16	19	7
-:	To James have ridge, for drft. on him,….	465	0	0
		£631	13	3
1801.		£.	s	d.
Feb. 9.	By cash, …………	6	9	0
12.	By ditto, ………………	2	5	0
April 1.	By ditto, ………………	7	7	9
May 21.	By ditto, …………………	8	12	9
June 10.	By ditto, ……….	5	13	6
July 6.	By Charles Freebairn, ……	127	0	0
11.	By cash,…………………	107	18	0
14.	By ditto,………………	4	13	9
22	By ditto,………………	41	10	0
	By ditto, ………	86	19	0
Aug. 6.	By ditto, ……….	188	2	6
31	By J. Richmond, for Life Policy,	£30	18	4
	By Charles Free bairn,	12	14	0
		43	12	4
	By balance to new account,	1	8	8
		£631	13	3

The trustee for Richmond and Freebairn's creditors brought a reduction of the two bills for £13. 19s. 8d. and £465. as having been remitted within sixty days of the bankruptcy, contrary to the provision of the act 1696.

On the 16th December 1802, this interlocutor was pronounced: “The Lord Ordinary having heard parties' procurators on the libel, reasons of reduction and defences, sustains the defences; repels the reason of reduction; assoilzies the defenders from the conclusions of the libel, and decerns.”

The trustee reclaimed; and

Pleaded: The spirit of the bankrupt-act 1696, is to incapacitate the debtor from hurting some of his creditors, by preferring others, at a time when his approaching insolvency might lead him not to do equal justice to all. In order to accomplish this purpose, it does not inquire into the bona fides of the favoured creditor, nor the nature of the debt, but annuls whatever the debtor has done for the purpose of discharging it, for sixty days preceding bankruptcy, unless it be by a payment in money. The debt contracted by the agent to his employer, is in no different situation from any other debt . If it had been known that he was to become bankrupt, and could not discharge this debt, he certainly would not have been employed; but neither would a creditor have lent his money, if it had been conceived, that, on the stipulated day of payment, the debtor would be incapacitated from discharging the debt. In both cases, the personal credit of the debtor has been trusted; and in both, every assignation or other deed, in security or satisfaction of the debt so contracted, must be set aside, if within the statutory period; Campbell against Graham, 16th January 1713, No. 192. p. 1120; Manson against Angus, 1771, Appendix, Part I. No. 7. p. 15. h. t.; Machutcheon against Welsh, 29th January 1794, (not reported, See Appendix, Part II.)

Answered: The statute was never intended to regulate cases such as this, where the transactions have been carried on down to the date of bankruptcy, on both sides of a current account. The question here is not about a security given for an antecedent debt, but it is a case of mutual debit and credit, under a running account, which must be taken altogether as one transaction; the different articles hinc inde being counter parts of one another, and not to be disjoined. It would be great injustice, if, in such a case, all the indorsations of bills and transmissions of securities during sixty days were reduced; while all the engagements undertaken on the faith of these securities, already deposited, or of their being sent at some future time, are held effectual obligations. It has been already found, that such was not the intention of the act 1696; Stein's Trustee against Sir William Forbes and Company, 1st March 1791, No. 204. p. 1142; and this must hold, so long at least as no preference is granted within sixty days, that is, as long as the payments made are not more than those received; by which the fund for the other creditors is not more diminished, but remains just as it did, at the period of sixty days previous to the bankruptcy. If it were otherwise, the agent would be allowed to receive money, which he cannot repay to his employers residing at a distance; and, by doing so, he commits a fraud against his employer, if the law will not allow him to send it to its real proprietor. By such conduct, the agent himself could not profit; neither can those who derive right from him. If the creditors seek equity, they must give equity; they cannot convert an equitable rule to an unjust purpose.

The Court adhered.

Lord Ordinary, Glenlee. Act. H. Erskine, Wolfe Murray. Agent, Tho. Scotland, W. S. Alt. Solicitor-General Blair, Forbes. Agent, W. Molle, W. S. Clerk, Pringle. Fac. Coll. No. 215. p. 178.