John Cathcart of London, Merchant v. Alexander Blackwood, Merchant, Edinburgh [1765] UKHL 2_Paton_100

UKHL

John Cathcart of London, Merchant v. Alexander Blackwood, Merchant, Edinburgh

[1765] UKHL 2_Paton_100 · 1765-02-26

A company in London became bankrupt, and, under the bankruptcy, obtained a certificate and discharge. Some years thereafter an action was raised by a creditor who had ranked and obtained his dividend out of the estate for payment of his debt, against the surviving partner in Scotland: Held that the discharge and certificate protected him, in terms of the 5 Geo. II. c. 30, § 70; and that concealment of property in Scotland, which did not then belong to him, was no bar to the benefit of the act.

In the year 1726, the appellant, John Cathcart, entered into partnership with John Blackwood of London, brother to the respondent, in a foreign shipping trade, which, from various causes, proving unfortunate, the company was obliged to become bankrupt in August 1745, and a fiat of bankruptcy issued in England. When this event happened, the appellant had no personal effects whatever to hand over to his creditors, under the commission of bankruptcy, except his half-pay.

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Thereafter, having conformed in all respects to the provisions of the bankrupt statute, the company procured the Lord Chancellor's certificate and discharge.

The appellant, out of honourable feelings, and notwithstanding the certificate and discharge, and the dissolution of the company, had, from time to time, paid several of the company debts, arising out of the savings from his half-pay, and his own industry. In this way he had paid, from the date of the certificate to the 7th December 1758, £2479.

The respondent was creditor of the company, and had ranked on the estate, and received his dividends. The appellant would have paid his claim also, had he found it consistent with other preferable demands. It was consequently left to be paid by his partner, John Blackwood, the respondent's brother; but, in the hope of enforcing payment of his claims, the respondent raised the present action.

In defence, the appellant pleaded the certificate of bankruptcy, obtained and allowed by the Lord Chancellor, and the statutes of England, in bar of the action, and, in particular, 5 Geo. II. cap. 30, § 7, whereby it is enacted,— “That all bankrupts, who shall surrender and conform, as by that act directed, should not only be entitled to the allowances out of the neat produce of the estate, as therein mentioned; but shall be discharged from all debts owing at the time that such persons did become bankrupt; and, in case such bankrupt shall afterwards be impleaded for any debt due before he became bankrupt, such bankrupt may plead in general, that the cause of action did accrue before the time he became bankrupt, and the certificate of such bankrupt's conforming, and the allowance thereof by the Lord Chancellor, shall be sufficient evidence, precedent to the obtaining such certificate, unless the plaintiff can prove the said certificate was obtained unfairly, or make appear any concealment by such bankrupt to the value of ten pounds.”

In answer, the respondent pleaded the exception of the statute as to concealment of estate, and offered to prove the appellant's ownership of lands in Ayrshire, and a house in Edinburgh, at the time of his bankruptcy. The appellant replied that these, at the time of his bankruptcy, did not belong to him, but to his father, and were enjoyed by him in fee simple,—and that at the time of his bankruptcy, he had

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Proof being allowed of the value of the farm called Glendusk, being the lands alluded to, it was established, that at the time of the surrender, the farm was let at £9. 3s. 4d. yearly rent.—That he had never made up titles to the house in Edinburgh,—never intromitted with the rents, but that these had been uplifted by an agent after his father's death, to pay his father's debts, and afterwards by his sister, and others for her behoof.—That when sold, the house in Edinburgh would not yield more than £50.

July 7, 1761.

On this proof, the Lord Ordinary pronounced this interlocutor:—

“Having considered the state of the process, affidavit of John Blackwood, which the pursuer (respondent) agrees shall have the same effect as if it had been regularly emitted on oath, on a commission from this court, and having also considered the opinions of counsel learned in the law of England, produced for both parties, with the list of debts alleged by the defender (appellant), and not denied by the pursuer to have been paid by the defender since his bankruptcy, and whole other circumstances of the case; finds it not proved that the defender has been guilty of any such fraudulent concealment as is sufficient to deprive him of the benefit of the certificate granted by the commissioners, and confirmed by the Lord Chancellor; and, therefore, sustains the defence founded on the said certificate, assoilzies the defender, and decerns.”

Nov. 17, 1762.

July 22, 1763.

On representation, the Lord Ordinary made avizandum with the cause to the Inner House; and, upon advising the case, their Lordships, of this date, “repelled the defence founded upon the Lord Chancellor's certificate, and decern.” On reclaiming petition, the Court adhered.

Against these interlocutors the present appeal was brought to the House of Lords.

Pleaded for the Appellant .—In every fraudulent concealment, the bankrupt must have two things in view, 1 st , to conceal a fund, which, if discovered, could be attached by his creditors; and, 2 d , to derive profit by such concealment to himself. Without a prospect of both these, it is impossible to see an object in the concealment, or any fraud as its ultimate end. Neither of these was, in the nature of things, applicable to the present case. Personal effects may be concealed,

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Pleaded for the Respondent .—The 7th sec. of 5 Geo. II. does not require the concealment to be fraudulent, for the purpose of voiding the certificate, and enabling the plaintiff to recover his debt; every concealment to the value of £10, whether arising from negligence, inattention, or misunderstanding the nature of the interest concealed, is equally within the act.—The appellant having been guilty of concealment, beyond the value of £10, in two instances, is not entitled to plead the benefit of the act, in bar of the present action.

After hearing counsel, it was

Ordered and adjudged, that the interlocutors of the Lords of Session, of the 17th of November 1762, and 22d of July 1763, complained of in the appeal, be reversed ; and it is further ordered, that the interlocutor of the Lord Ordinary of the 7th July 1761 be, and the same is hereby affirmed.

Counsel: For Appellant, Tho. Miller, C. Yorke. For Respondent, Fl. Norton, Al. Forrester.

Note .—The grounds upon which this reversal proceeded, rest on the effect due to the Lord Chancellor's certificate, which, as a decree of a supreme Court, must have effect given to it in all other courts, without entering into its merits. It also appeared that the omission was accidental. In the subsequent case of Watson v. Renton , 5th March 1791,