Caldwell v Hamilton
| Jurisdiction | Scotland |
| Judgment Date | 01 June 1918 |
| Date | 01 June 1918 |
| Docket Number | No. 66. |
| Court | Court of Session |
Lord Sands, Lord Justice-Clerk, Lord Dundas, Lord Salvesen, Lord Guthrie.
BankruptcySequestrationEstate falling under sequestrationSalary earned under contract of serviceBeneficium competentiPayment of surplus income to trustee in sequestrationBankruptcy (Scotland) Act, 1913 (3 and 4 Geo. V. cap. 20), secs. 2, 28, 97 (1), 98 (1) and (2).
A bankrupt at the date of his sequestration was earning and thereafter continued to earn, under a contract of service terminable on notice, a fixed salary of 500.
Held (rev. judgment of Lord Sands) that the salary as received from time to time was property of the bankrupt falling under the sequestration, and that, as such, it must be paid over by the bankrupt to the trustee for behoof of creditors in so far as it was not required for his reasonable maintenance.
Circumstances in which the Court fixed the amount so payable at 150, the total annual income of the bankrupt being 670.
Barron v. MitchellSC, (1881) 8 R. 933, discussed, and opinion of Lord Fraser (Ordinary), at p. 935, disapproved.
(VideHamilton v. Caldwell, 1916 S. C. 809 and Hamilton's Trustee v. Caldwell, supra, p. 190.)
The Right Honourable James Caldwell, 12 Grosvenor Terrace, Glasgow, a creditor and commissioner in the sequestration of John Hamilton, 2 Kelvinside Terrace, Glasgow, with the consent and concurrence and in name of Henry Moncreiff Steele, chartered accountant, Glasgow, trustee on the sequestrated estates of the said John Hamilton, presented a petition to the Lord Ordinary on the Bills craving his Lordship first, to find that John Hamilton was in the enjoyment of an income of 700 per annum, made up of (a) a fixed salary of 500 per annum as an employee of William Beardmore & Company, Limited, Glasgow, (b) a right to an alimentary provision of 100 per annum under his marriage-contract, (c) a right to 100 per annum from the estate of his deceased father; second, to find that this sum of 700 was in excess of a suitable aliment to him in view of his circumstances; and third, to fix the amount of the excess, and to order the amount so fixed to be paid by John Hamilton, as and when received by him, to the trustee as part of the property falling under the sequestration.
From the petitioner's averments it appeared that the estates of John Hamilton were sequestrated on 3rd November 1913. For many years prior to his sequestration he was employed by William Beardmore & Company, Limited, at a fixed salary of 1000. In 1908 that salary was reduced to 500, at which figure it remained up to and subsequently to the sequestration. At the date of the petition the bankrupt was still in the employment of Messrs Beardmore at that salary. It was further averred that the bankrupt was entitled to the sum of 100 per annum as an alimentary provision under his antenuptial marriage-contract and to the sum of 100 per annum from the estate of his deceased father. The petitioner suggested that 400 per annum would be a suitable aliment.
The respondent in his answers stated that the income from the marriage-contract funds was only 90, and that from his father's estate only 80. He referred to the ill-health of his wife, and to the impossibility of selling his house with a view to the reduction of his expenses, and contended that the whole income was required for his suitable aliment.
On 1st February 1918 the Lord Ordinary (Sands) dismissed the petition.
Lord Sands'sopinion.This is a peculiar and, so far as I am aware in relation to the special circumstances, a novel application. The petitioner relies both upon the common law and the Bankruptcy Act, 1913. In regard to the latter, whilst basing his application upon the general provisions of the Act, he points specifically to section 98 (2). That section deals with alimentary provisions. In my view, however, if the small alimentary provisions to which, along with his wife, the bankrupt is entitled under his marriage-contract and his father's settlement be left out of account, that subsection does not apply to the circumstances of the present case. The object of that subsection, as I understand it, is to enable the trustee to get hold of an alimentary fund, so far as excessive, which, but for the circumstances of its being alimentary, would have vested in him in virtue of his act and warrant. But a man's earnings, whether in the form of wages, salary, or profits, are not an alimentary provision, The bankrupt has at present a salary of 500 per annum from Messrs Beardmore. It may be, as the petitioner concedes, that, if the trustee is entitled to attach this salary, the bankrupt is entitled to an alimentary provision out of it. But that is quite a different matter from treating the whole salary to begin with as an alimentary provision to be dealt with under section 98 (2). The petition must therefore proceed upon more general grounds than the special provision of section 98 (2).
Questions similar to that which is raised in the petition are not unfamiliar in connexion with applications for discharge. But the considerations in that case are different. There the Court has a discretion as to the conditions under which the bankrupt shall obtain the privilege of a discharge. On the other hand, so long as the bankrupt is undischarged, and the question is one of the claim of the trustee to funds as forming part of his estate, the Court has no discretion; it is a question of legal right.
Under the sequestration the estate of the bankrupt passes to the trustee, including all quasi-vested rights to salary or emoluments for a period long or short, such as the stipend of a minister, or the salary of the holder of a like office, or, as I take it, a contractual salary for a term of years under a private contract. It is not suggested, however, that the salary which the bankrupt here earns is on that footing. He had no continuing contract or right to salary from Messrs Beardmore. As it appears to me no right to salary from Messrs Beardmore fell under the sequestration, and the present salary is on the same footing as if the bankrupt had entered into the employment of Messrs Beardmore after the sequestration.
The question whether a trustee in bankruptcy has any claim to the earnings of the bankrupt after sequestration has been a good deal canvassed.
There are obviously considerations of public policy both ways. On the one hand, it is undesirable that people who are able to earn considerable emoluments should be encouraged to contract debt in the expectation of being able to find relief in sequestration, and immediately to resume enjoyment of a substantial income. On the other hand, it is undesirable that people who have been unfortunate should be encouraged to idle and to sorn upon their relations, and discouraged from seeking work and working with full efficiency. I am not called upon, however, to weigh up these considerations. I must be guided by the authority of the law, if I can find it. It appears to me that there is authority which, though not technically binding, is of such concurrent weight that it must be followed by a Judge of first instance. The authorities are Lord Fraser in Barron v. MitchellSC, 8 R. 933; Lord Kyllachy in Carrick v. Edinburgh and Glasgow Property Investment CoUNK., 10 S. L. T. 105, and Lord Stormonth-Darling in Mason v. PatersonUNKUNK, 12 S. L. T. 511. The purport of the opinions of these learned Judges is thus stated by Lord Stormonth-Darling (12 S. L. T., at p. 514)The opinion of Lord Fraser went on the general principle that, where creditors allow a bankrupt to earn money by his personal exertions, which they could not compel him to do, they have no right to seize the fruits of his labour. I am not quite sure that I appreciate the phrase about allowing the bankrupt, but it does not appear to me to affect the principle. The petitioner conceded that the fees of a professional man could not be touched. If the bankrupt here were a medical consultant, earning 2000 a year by fees, it would be incompetent to present an application to have him ordained to pay so much of these fees over to his trustee. I have difficulty, however, in seeing how any logical distinction can be drawn according to the form in which the remuneration is earned. It is curious if a bankrupt solicitor, who earns 1000 a year in fees, cannot be ordained to pay over part of that to his trustee; while his bankrupt clerk, who has a salary of 300 a year, can be ordained to pay part of that salary to his trustee.
The petitioner, however, relies upon certain provisions of the Bankruptcy Act as putting a salary in a different position from fees. He points to section 28 of the Bankruptcy Act, by which there falls under the sequestration the estate which shall belong to the debtor before the date of the discharge, and he points to the definition of estate in section 2. 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 or voluntary alienation, or of being affected by diligence or attached for debt. He lays particular stress upon attached for debt. I do not, however, quite appreciate this reasoning as marking off the distinction between fees and salary paid by an employer. It is quite true that the salary can be attached for debt, but the fees in a bankrupt's pocket are property and are capable of legal or voluntary alienation, and I have never heard it suggested that a bankrupt can withhold money from his trustee by keeping it in his pocket. It appears to me that, both upon general principles of statutory construction and in view of the qualification when not expressly restricted in the definition, regard is to be had rather to the particular enumeration in sections 97 and 98 than to the general words of section 28. The provisions in regard to acquirenda in section 98 are: If any estate, wherever situated, shall, after the date of...
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Inglis's Trustee v Inglis
...ClaremontUNK, (1896) 4 S. L. T. 144; Craig v. Pearson's Trustees, 5 1915, 2 S. L. T. 183, Lord Hunter, at p. 184; Caldwell v. Hamilton, 1918 S. C. 677, 1919 S. C. (H. L.) 1 1918 S. C. 677, 1919 S. C. (H. L.) 100. ...