Cay's Trustee v Cay
| Jurisdiction | Scotland |
| Judgment Date | 18 March 1998 |
| Date | 18 March 1998 |
| Docket Number | No 72 |
| Court | Court of Session (Inner House - Second Division) |
SECOND DIVISION
Lady Cosgrove
Practice—Bankruptcy—Sequestration—Gratuitous alienation—Reduction—Undertaking to maintain or pay debts on behalf of husband subsequently sequestrated—Whether “adequate consideration”—Whether set-off available—Bankruptcy (Scotland) Act 1985 (cap 66), sec 34(4)(b)1
Where a gratuitous alienation is sought to be reduced under the Bankruptcy (Scotland) Act 1985, sec 34(4) of the Act enacts, inter alia, that: “[T]he court shall grant decree of reduction for such restoration of property to the debtor's estate or other redress as may be appropriate, but the court shall not grant such a decree if the person seeking to uphold the alienation establishes:…(b) that the alienation was made for adequate consideration.”
The appellant trustee on the sequestrated estates of a debtor brought an action seeking reduction of certain alienations made by him to his wife, the defender. The defender alleged that those alienations were made for adequate consideration in terms of sec 34(4) (b) of the Act and were accordingly not liable to be reduced. She averred that in return for the payments made by the debtor to her she undertook to pay his income tax liability, which she did do, and a particular debt to a company. She also informed the debtor that she would continue to pay all household bills out of the sums alienated to her after the house was transferred into her name and also to support the debtor and their children. The defender also averred that as she had, in any event, paid some of the debts referred to, she was entitled to set-off those debts against any sum due to the trustee. The Lord Ordinary (Lady Cosgrove) excluded the averments relative to the defence from probation and dismissed the action. The defender reclaimed.
Held (affg judgment of Lady Cosgrove) (1) that the legal rights of the debtor and the defender inter se in relation to the obligation to aliment the debtor and the children remained after the transfer of funds exactly as they had done before so that it could not be said that the transfer of funds, even coupled with an undertaking by the defender to devote some of those funds to the future aliment of the debtor, constituted a consideration in the form of a newly created legal right to be enjoyed by the debtor against the defender; (2) that all that happened was that resources belonging to the debtor consisting of the funds in question had been transferred from the debtor to the defender and the absence of any change in the character of the legal rights and obligations of the debtor and the defender was critical as, by the transfer, the debtor acquired no new legal right which he could vindicate in a legal process and nothing of material or patrimonial value that he did not have before and achieved no right or entitlement which could properly be described as a “consideration” within the meaning of sec 34 (4)(b); (3) in relation to the undertaking to pay debts, the debtor had received in exchange for the payments he made to the defender, a right which had a material patrimonial value, one which he might vindicate in a court of law so as to fall within “consideration” within the meaning of the subparagraph, but what the defender was entitled to prove on the averments was that the debtor had given her a sum in exchange for an undertaking worth some 60 per cent or less of that sum, which could not be said to be “adequate consideration” in terms of the
legislation; and (4) that the doctrine of set-off did not apply as there was nothing in sec 34(4) to warrant the view that there was conferred upon the court in certain limited circumstances a general equitable jurisdiction; and where reduction or restoration was the appropriate remedy, the court was enjoined to grant decree of reduction or to make restoration of the identifiable property there being no hint of any equitable reduction; and reclaiming motion refused.Gordon Malcolm Maclure, the permanent trustee on the sequestrated estates of John George Cay, brought an action against Mrs Elaine Cay, the debtor's wife, in which he sought production and reduction of a pretended disposition of the matrimonial home by the debtor and the defender in favour of the defender; payment of £12,175.80 with interest; payment of £34,885.11 all alleged to be gratuitous alienations within the terms or the Bankruptcy (Scotland) Act 1985.
The cause called before the Lord Ordinary (Lady Cosgrove) on procedure roll.
At advising, the Lord Ordinary excluded certain averments from probation in respect of the defences and dismissed the action.
The defender thereafter reclaimed.
Cases referred to:
MacFadyen's Trustee v MacFadyenSC 1994 SC 416
Rae (John E) (Electrical Services) Linlithgow Ltd v Lord Advocate 1994 SLT 788
Short's Trustee v Chung 1991 SLT 472
The cause called before the Second Division, comprising the Lord Justice-Clerk (Cullen), Lord McCluskey and Lord Morison, for a hearing on the summar roll.
At advising, on 18 March 1998, the opinion of the court was delivered by Lord McCluskey.
Opinion of the Court—The pursuer and respondent, an insolvency practitioner, is the permanent trustee on the sequestrated estate of John George Cay (“the debtor”), who was sequestrated on 27 August 1993. The defender and reclaimer is, and was at all material times, the wife of the debtor. In the first conclusion annexed to the summons the pursuer seeks production and reduction of a pretended disposition of the matrimonial home by the debtor and the defender in favour of the defender. In the second conclusion the pursuer seeks payment of £12,175.80, with interest. No question concerning these matters was raised in the reclaiming motion. In the third conclusion the pursuer seeks payment by the defender to him of the sum of £34,885.11. It is not in dispute that on or about 14 October 1991 the debtor received from Caley Fisheries (Peterhead) Ltd his share of the proceeds of sale of a fishing licence relating to the MFVEclipse. It is further a matter of admission that part of those proceeds were transferred by the debtor to the defender on or about 22 November 1991. The effect of the transfer was that a sum of £34,000 was lodged in one account held by the defender with the Leeds Permanent Building Society, Peterhead branch, and a further sum of £885.11 was paid into another account held by the defender with the same branch of the same building society. The total of the two payments is the sum contained in the third conclusion.
The pursuer and respondent maintains that the transfer by the debtor to the defender on 22 November 1991 of the total sum of £34,885.11 was an alienation falling within the provisions of sec 34 of the Bankruptcy (Scotland) Act 1985. It is not disputed by the defender and reclaimer that the transfer of the total sum of £34,885.11 would be a challengeable alienation by the debtor in terms of sec 34 unless the defender could establish a defence under sec 34(4). The defender has always accepted that the onus lay upon her to establish such a defence. The defence which she seeks to establish is that allowed under sec 34(4)(b), “that the alienation was made for adequate consideration”...
To continue reading
Request your trial
-
Matthew Purdon Henderson V. Foxworth Investments Limited+3052775 Nova Scotia Limited
...to Goudy, Bankruptcy page 50; Matheson's Tr v Matheson 1992 SLT 685; MacFadyen's Tr v MacFadyen 1994 SC 416 at page 421; Cay's Tr v Cay 1998 SC 780. The only enforceable consideration was clearly inadequate (being £248,100 in respect of property worth £1.8 million). The 2001 disposition was......
-
MacDonald v Carnbroe Estates Ltd
...Ltd v McCombe 1994 SLT 858 and Kerr v Aitken[2000] BPIR 278considered and Short's Tr v Chung (No 1)1991 SLT 472 and Cay's Tr v Cay1998 SC 780disapproved. Cases referred to: Abram Steamship Co Ltd and the Liquidator v Abram 1925 SLT 243; 21 Ll L Rep 167 Accountant in Bankruptcy v Walker [201......
-
Accountant In Bankruptcy Against Pauline Farrell Or Walker And The Lord Advocate
...or restoration of the property is not a remedy which is available.” That decision had been affirmed in the case of Cay’s Trustee v Cay 1998 SC 780, at 788B-D, and 788G. [15] With reference to the defender’s submission that section 34 should be read down so as to include the effect of the te......
-
The Accountant In Bankruptcy Against Leigh Dorothy Reid Or Urquhart
...jurisdiction such as would enable decree in a lesser sum to be pronounced (Short’s Trustee v Chung 1991 SLT 472; Cay’s Trustee v Cay 1998 SC 780). 16 [25] If the waiver of spousal aliment was to be relied on as part of the consideration for the alienation considerably more detail would requ......