Banking

"[After narrating the terms of the bond and back-letter]-On 1st September 1890 intimation was made on behalf of the company to the defender, that in consequence of default having been made in payment of the instalments, and of the deaths or bankruptcy of the other co-obligants, they required him to pay £421, 11s. 3d., that being the balance due on the assumption that the bond was one for £631, 5s., and not merely for £500, with interest to be calculated thereon at a certain rate, and with the amount of interest payable depending on the time when the bond was called up and paid.

"The pursuers maintain that the bond bears the former construction. The defender says that the latter is its true meaning and effect.

"I am of opinion that the pursuers' contention is right, and that they are entitled to succeed in this action. The undertaking in the bond is to pay at Whitsunday 1889, not £500 with interest calculated at a certain rate up to that or any other particular date, but the sum of £500, with a named sum of interest in addition, viz., £131, 5s., and that has accumulated with the principal into the specified sum of £631, 5s. It appears by calculation from the note of instalments, and indeed is admitted, that the interest has been fixed on the basis of a 10 per cent. rate, but that is an element which seems to me not to have a legitimate bearing on the question as to the extent of the defender's liability, or on the construction to be given to the bond. Willing as one might be to modify the stringency of the obligation, I think that the language used is too clear to admit of a condition being imported to the effect that a deduction should be made from the stipulated lump sum of interest, if the bond should be called up before the five years allowed for payment by the back-letter. The obligation which each of the obligants undertook was for the payment, at Whitsunday 1889 of the specified amount of £131, 5s., in name of interest, in addition to the principal sum of £500 which had been borrowed; and the conditions of indulgence allowed in the back-letter not having been complied with, the unpaid balance of the aggregate of these sums must, in my opinion, be held now to have become exigible."

The defender appealed to the Court of Session, and argued-That he was not bound to pay the interest which would have accrued upon the £500 in five years when he had only had the use of the money for two years. The contract was to repay £500 and the interest which had accrued thereon at the high rate of 10 per cent., not to repay £631, 5s. The right was to call up "the loan or balance thereof" in certain emergencies instead of having to allow it to lie for five years. That did not involve the payment of the extravagant interest of £131 for £500 for four months, which would have been the case, upon the pursuer's contention, if any of the co-obligants had died or become bankrupt immediately after Whitsunday 1889, and the bond had been

then called up. If there was dubiety as to the meaning of the contract, a fair and equitable construction should be put upon it.

Argued for the respondents-Even a hard contract, if clear, must be enforced according to its terms. If the bond stood alone, there could be no doubt it was repayment of a lump sum of £631, 5s. which was stipulated for. All distinction between principal and interest had been purposely obliterated. The only condition under the back-letter was that unless certain circumstances occurred the repayment of the £631, 5s. was to be spread over five years. But these circumstances had emerged, and consequently the back-letter was to be regarded as pro non scripto, and the balance of the £631, 5s. could be at once called up.

At advising

LORD JUSTICE-CLERK-This case is one of a somewhat peculiar nature. The defender Pettigrew and his friends were in 1889 under the necessity of accepting a loan from the pursuers upon very stringent terms, and for that loan they granted a bond and received a back-letter qualifying its terms. The bond bears to be for a sum of £500, and that sum, together with an addition of £131, 5s. of interest on the said advance, making together the aggregate sum of £631, 5s., the defender and his friends bound and obliged themselves to repay to the company at Whitsunday 1889. That of course is a most stringent and heavy obligation, because it amounted to paying £131 within five months for the loan of only £500. These gentlemen got £500 in loan in January, and for that, according to the terms of the bond, they would require to repay £631 at Whitsunday. But then, simultaneously with granting the bond, they got a back-letter which brings out how the sum of £631 was arrived at. That back-letter declares that notwithstanding the terms of the bond, five years were to be allowed for the repayment of the money lent, and that that was to be in quarterly instalments, and it shows that what was practically demanded was 10 per cent. interest, £631 being just £500 repaid in twenty quarterly payments, with interest at that rate added. At each quarter what was demandable was the proper proportion of the loan of £500 still unpaid with 10 per cent. interest. But then the back-letter also stipulates that this declaration is to have no force "or effect whatever unless the said instalments are regularly paid as they become due." And then comes the declaration which has led to the present case-[His Lordship read the last sentence of the back-letter, supra]. Upon that clause the present question arises. The banking company maintain that the circumstances there figured having occurred, they are entitled to insist upon calling up all that remains unpaid of the £631, while the appellant says that he is only bound to pay the remaining part of the loan of £500, with interest at 10 per cent. up to date. It is rather a difficult question, and I am

Banking

not surprised at the difference between the Sheriffs.

It is quite plain that if the contention of the Banking Company is sound, it amounts to this, that if one of the obligants had died three days after Whitsunday 1889 they would have been entitled to exact at once the £500, with £131 as interest for five months. Now, such would be a very extraordinary bargain. It might be made. Such a thing is conceivable; but if there is any reading of the contract possible which does not lead to so monstrous a result, without straining the terms used, I should prefer it. Let us see what under the back-letter it is in the power of the Banking Company to call up. It is "the loan or balance thereof." What was the loan? It was not £631, but £500. The interest was added to give the Banking Company full hold upon the borrowers, but the back-letter states the intention of the parties as to the working of that out. I read the stipulation in the case of the death or bankruptcy of any of the debtors to be, that instead of being bound to allow the remaining debtors to pay by instalments, the respondents were to be entitled to demand what was still due of the loan at once with 10 per cent. up to date. I agree with the opinion of the Sheriff-Substitute as expressed in his note, and I move your Lordships that we should revert to his judgment or recall that of the Sheriff.

LORD RUTHERFURD CLARK-I am of the same opinion. The right of the pursuers to recover is, I think, regulated by the back-letter. The debtors are to pay the loan, together with £131, 5s. as interest, in twenty quarterly instalments. An easy calculation shows that the rate of interest is 10 per cent. per annum. In the bond the £131, 5s. is stated as interest, and the instalments are calculated so as to cover principal and interest.

On the occurrence of any one of certain specified events, the pursuers are to be entitled to call up "the loan or balance thereof... as fully and freely as if the letter had not been granted.' It is not disputed that one of the specified events has happened, and that the pursuers are entitled to exercise the right which has thus opened to them. The question is, whether the pursuers are entitled to demand the full sum of £631, 5s. less such instalments as have been paid, or so much of the capital as has not been paid, together with interest at 10 per cent. to the date of payment.

It will be observed that one of the events in which this reserve power may be exercised is the death of any one of the debtors. It is not easy to believe that it was the intention of the parties that if this event happened on the day after the loan the pursuers should be entitled to demand within four months after the loan had been made the full sum of £631, 5s., or in other words, that they should be entitled to the same interest for a period during which the money was not lent. I would certainly be desirous to avoid a construction

of the back-letter which would lead to so inequitable a result. But I do not think that it is consistent with the terms of the document.

The pursuers are entitled to call up the "loan or balance thereof." The loan was £500 and no more. Interest cannot be a part of a loan; it is due only so long as the money is in the hands of the debtor. Accordingly the back-letter in its initial sentence uses the expression, "In reference to the loan of £500;" and I think that in construing the claim in question I am bound to read the same word in the same sense-which is its only natural sense. The pursuers are therefore, in my opinion, entitled to demand only the balance of the loan, or in other words of £500, remaining unpaid at the date of the action, together with interest at 10 per cent. For though nothing is said in the clause in reference to interest, I think that the pursuers are entitled to interest on the loan so long as it is outstanding, and that the interest must be calculated as the agreed-on rate.

It is said that the back-letter speaks of the bond as amounting to £631, 5s. in the clause which specifies the instalments in which it is to be paid. I do not think so. It speaks of the "said loan," which as I have shown was stated as £500. The instalments are calculated so as to include the interest. But in my opinion this fact would not justify us in holding that the interest is included in the loan as that word is used in the clause which I am now considering.

The pursuers are contending for a very harsh and inequitable construction. They are bound to make it clear that the backletter will bear no other reasonable interpretation. I do not think that they are able to do so. They are met, besides, by this consideration, that if it had been intended that they should recover interest for

a period during which the money was not in the hands of the borrower, they should have stipulated for a right to call up, not the loan, but £631, 5s., or the balance hereof remaining unpaid.

LORD TRAYNER-I agree with the Sheriff. Under the bond founded on there is no doubt the appellant was bound to make payment to the respondents of the sum of £631, 5s. at the term of Whitsunday 1880, and that obligation, absolute in itself, was in no way affected by any consideration as to how that sum was made up-how much of it was principal and how much of it interest.

The question therefore is, to what extent has that obligation been qualified by the back-letter granted by the respondents? By that letter the respondents agree to spread the payment of the £631, 5s. over five years, accepting quarterly payments during that period instead of insisting on full payment at Whitsunday 1889. But it is a condition of the back-letter that in the event of any of the co-obligants in the bond becoming bankrupt or insolvent, or in the event of any of them dying (both of which events have admittedly happened), then the respondents should be entitled to "call

up the loan or balance thereof if they think proper, and that as fully and freely as if this letter had not been granted." I cannot read that back-letter as meaning anything than this, that if the events (or any of them) contemplated should occur, then the back-letter and the privilege thereby conferred of postponed payment of the money due under the bond should fly off, and that the respondents should be entitled to insist on payment at once of everything due under the bond. The reason given by your Lordships for reading the back-letter unfavourably to the respondents' claim is, that by the language used it is "the loan or balance thereof" only which the respondents are entitled to call up, and in the outset of the back-letter reference is made to "the loan of five hundred pounds sterling.' But the same language is used in the back-letter to designate the £500 and the £131, 5s. together, for it is provided that the co-obligants are to get five years "to pay off the amount of said loan, and that by quarterly instalments," as specified; and the specified instalments are not of £500 but of £631, 5s. The clause therefore in the conclusion of the back-letter authorising the respondents to call up "the loan or balance thereof" may just as well be read as referring to the £631, 5s. as to the £500, so far as the mere language of the backletter is concerned. But in my opinion it is not doubtful that what was intended and understood by the parties was that on the occurrence of any of the events provided for, the respondents should then be entitled to enforce their bond just as if the backletter had never been granted.

LORD YOUNG was absent.

The Court sustained the appeal.

Counsel for Pursuers and RespondentsH. Johnston-A. S. D. Thomson. AgentA. B. C. Wood, W.S.

Counsel for Defender and AppellantDickson-Watt. Agents-J. & A. Hastie, Solicitors.

Tuesday, February 23.

FIRST DIVISION.

[Sheriff of Lanarkshire. STEELE AND OTHERS v. STRATHIE. Bankruptcy-Sequestration - Meeting of Creditors Called by Commissioner "with Notice to the Trustee"-Notice not Timeous-Bankruptcy (Scotland) Act 1856 (19 and 20 Vict. cap. 79), sec. 98.

The Bankruptcy (Scotland) Act 1856, by section 98, provides that "any commissioner, with notice to the trustee, may at any time call a meeting of the creditors." A commissioner called a meeting by a notice in the Gazette, which is published in the evening. Upon the afternoon of the day of publication he sent notice to the trus

tee by a registered letter, which was not delivered until the following morning.

Held that the requirement of the statute had not been complied with, as the notice to the trustee had not been timeously given.

The Bankruptcy_(Scotland) Act 1856 (19 and 20 Vict. cap. 79) provides by section 98 that "any commissioner, with notice to the trustee, may at any time call a meeting of the creditors."

Edward Cruickshank, one of the commissioners in the sequestration of R. S. Lang, manufacturer, Glasgow, inserted a notice, dated October 26th 1891, in the Edinburgh Gazette, published on the evening of October 27th, calling a general meeting of creditors to be held on November 4th 1891, "to, if so resolved, remove the trustee, David Strathie, C.A., Glasgow, from office."

Upon the afternoon of October 27th he sent a registered letter addressed to the trustee at his office giving notice of having called said meeting. When the postman I went his rounds it was after office hours, and the letter was not delivered to Mr Strathie until the next morning.

The meeting of creditors was held upon November 4th, and a resolution for the removal of the trustee was carried.

The trustee appealed to the Sheriff to have the resolution recalled, and upon 9th December 1891 the Sheriff-Substitute (ERSKINE MURRAY), for reasons assigned in his note, recalled the resolution complained of.

"Note.-The Bankruptcy Act 1856 provides that a majority of creditors present at any meeting duly called for the purpose may remove a trustee. Section 98 provides that any commissioner, with notice to the trustee, may at any time call a meeting of the creditors.' In the present case one of the commissioners sent to the Gazette a notice, dated 26th October, to be published in the Gazette of 27th October, calling a meeting for 4th November. The Gazette was published on the 27th between 6 and 7 p.m. On the afternoon of the 27th the same commissioner sent by registered letter a notice to the trustee, addressed to his place of business. It was not delivered till 10 a.m. on the 28th, as, being registered, it could not be delivered after business hours on the 27th, the trustee's office being then shut.

"In these circumstances the SheriffSubstitute must hold that notice to the trustee was not given till the 28th. But as the advertisement in the Gazette was published on the evening of the 27th, it must also be held that the intimation to the trustee did not precede, nor was even simultaneous with, but was subsequent to the date of the calling of the meeting, even if that date be taken to be the date of the publication of the Gazette. Still more so would this be the case were the date of the calling of the meeting to be held to be the date annexed to the notice in the Gazette, being that of the day previous, the 26th October.

"In these circumstances the Sheriff

& Ors. v. Strathie

23, 1892

Substitute cannot hold that the provision of the 98th section, that a commissioner, with notice to the trustee, may at any time call a meeting of creditors, has been complied with. That provision seems necessarily to imply that the notice must be, if not precedent to, at the very least simultaneous with the calling of the meeting. Indeed, the former of the two interpretations seems the most reasonable. But certainly it cannot be said that a commissioner is within his statutory power if he calls a meeting not only without having given previous notice, but without even giving simultaneous notice to the trustee. He is clearly not at the time when he calls the meeting calling it with notice to the trustee.

"The above views are strongly confirmed by the judgment of the Second Division on 11th March 1884, adhering to a judgment of Lord Kinnear in the case of M'Fadyean (Todd's Trustee) v. Campbell, 21 S. L.R. 479. In that case two of the Judges held that the notice to the trustee must precede the calling of the meeting, while the Lord Justice-Clerk and the Lord Ordinary considered that simultaneous notice might do."

Robert Steele, manufacturer, Leeds, and others, creditors in the sequestration, appealed to the First Division of the Court of Session against the deliverance of the Sheriff-Substitute, and argued―The letter containing the notice was duly posted, and would have been delivered to the trustee the same evening as the notice appeared in the Gazette had he been at his office. That would have been sufficient-see Lord Kinnear's opinion in the case of M'Fadyean, referred to by the Sheriff-Substitute. the trustee absented himself from his office, he must just suffer any inconvenience thereby occasioned. The commissioner was not bound to know the hours he kept, and arrange the delivery of letters accordingly. He had taken an unnecessary precaution to ensure that he received the notice by registering the letter.

If

Argued for the respondent - The precaution taken necessarily occasioned delay of delivery until the next day. Posting was not enough. Notice to the trustee must be received by him at latest simultaneously with the appearance of the Gazette, and probably, looking to the opinions of the Lord Young and of Lord Craighill in M'Fadyean's case, before the Gazette notice appeared. The trustee was not expected to be in his office after ordinary business hours.

At advising

LORD PRESIDENT-The 98th section of the Bankruptcy Act of 1856 enables a commissioner to call a meeting of the creditors, but that power is qualified by the words, "with notice to the trustee." I take it as quite clear that these words qualify the call, making it a good call if "with notice," and a bad one if without notice.

Mr Watt told us that the calling of the meeting was done by a Gazette notice, and

the question before us is, whether that Gazette notice took place with or without notice to the trustee? The Gazette containing the notice was published on the evening of the 27th of October, and the trustee did not de facto receive notice until the 28th. Prima facie, therefore, the Gazette notice was bad. The trustee received notice posterior to the appearance of the notice in the Gazette, and that could not have the effect of rehabilitating the Gazette notice. But then it was argued that means had been taken to give the trustee notice upon the evening of the 27th. At best that was only giving him notice at the same time as the notice appeared in the Gazette. Now, what were the means taken to apprise the trustee of what was going to appear in the Gazette? A registered letter was despatched upon the afternoon of the 27th, to be placed in the hands of Mr Strathie himself, and if he was not found, delivery would necessarily be delayed until the following day. Steps were taken therefore to ensure that the delivery should be personal, but in such a way as to render postponement of delivery possible. De facto, then, the trustee did not receive notice until the 28th, and that will not suffice to validate the Gazette notice.

Mr Watt argued that we should decide the matter upon what is before us. Well, the Sheriff-Substitute sets out in a distinct narrative that the letter "could not be delivered after business hours on the 27th, the trustee's office being shut." I take it that when the postman came to the office it was after business hours, when the trustee might reasonably be expected to be away. No offer was made to displace that fact by evidence, and indeed I doubt if any evidence would suffice to make up for the commissioner not giving notice before the appearance of the notice in the Gazette.

I am of opinion that we should dismiss the appeal.

LORD ADAM-The question here depends upon the construction of the 98th section of the Bankruptcy Act, which provides that "any commissioner, with notice to the trustee, may at any time call a meeting of the creditors." In this case the appellant, who is a commissioner on a sequestrated estate, called such a meeting, and gave notice to the trustee, but the question is, whether that notice was given in time? As matter of fact the Gazette notice appeared upon the evening of the 27th of October, and it is admitted that in point of fact notice to the trustee did not reach him until the next morning. Therefore, if there is nothing to make this case exceptional, it is clear that the notice to the trustee was given after the publication of the Gazette-that is, after the calling of the meeting-and accordingly bad. The question of whether the calling of the meeting simultaneously with giving notice to the trustee is effectual was raised in the case referred to. But a trustee's receiving notice at the very moment of the publication of the Gazette

&. 23, 1992

is so unlikely to occur that I think the consideration of such a possibility would be unprofitable discussion. In any case, notice to the trustee must not be after publication of the Gazette. It will be time enough to consider the question of simultaneity when it occurs. Here the notice was given after the Gazette notice appeared, and that, I think, is sufficient for the decision of this case.

But then it was said that although the actual delivery of the letter containing the notice was not until the 28th, that was owing to the trustee's own actings, and it was said that if the trustee had happened to be at his office when the registered letter was brought the notice would probably have been in time. The facts however were different. The effect of registering the letter was to make it necessary that it should be delivered to him personally, and as he had left his office that was postponed. There was nothing here unusual in the actings of the trustee. Had the letter been brought at ten o'clock in the forenoon, and the office had then been found shut, it might have made a difference. There was no such case here, and I agree with your Lordship in thinking that the appeal should be dismissed.

LORD KINNEAR-I agree with Lord Adam that the Act cannot mean notice is to be given to the trustee simultaneously with notice to the world, and that was never seriously suggested in the argument or in the previous case. The only thing there suggested was that notice might have been sufficient if given at the same time as the publication of the Gazette, and that if it so happened that might be enough. I thought at the time that there was a great deal to be said in support of the stricter view expressed by Lord Young and Lord Craighill, to the effect that that would not be enough, but that notice to the trustee must precede the notice calling the meeting. It is not necessary to consider that question here, and it is enough to say that the notice to the trustee must not be later than that calling the meeting. The fact here is that the meeting was called by a notice in the Gazette upon the 27th, and the notice was not given to the trustee until the 28th, therefore the notice to the trustee was later than that calling the meeting. It was said that the failure to give timeous notice was owing to the absence of the trustee from his place of business. I think we cannot give effect to that view implying that it is the duty of a man of business to be at his office at all hours. Where the duty of giving notice is sufficiently discharged by sending a letter through the post, it may be enough if the letter is addressed to the office of the person receiving the notice, without the necessity of proving that the addressee was at home, or did not receive it through failure to open his letters. But here the precaution was taken of sending a registered letter, to be delivered only to the addressee personally, with the inevitable consequence that if it was after business hours delivery

FIRST DIVISION.

[Lord Kincairney, Ordinary. VALENTINE (ONCKEN'S JUDICIAL FACTOR) V. MACDOUGALL (REIMERS' CURATOR).

Parent and Child-Aliment of Bastard.

Held that a bastard incapable of supporting himself was entitled to aliment out of the estate of his deceased father, and that a sum must be set aside for payment of this aliment before division of the estate in terms of the father's settlement.

Paul Gerhard Oncken, merchant in Leith, died in June 1888 leaving a trust-disposition and settlement by which he conveyed his whole estate to trustees, whom he directed (1) to pay his debts; (2) to pay legacies of £250 to his brother and his eldest son; (3) to convey his business to his eldest son, subject to a condition that he should bind himself to pay a sum of £50 a-year to each of the testator's three younger children; and (4) to divide the residue of his estate among his said younger children on their attaining the age of 25.

The testator was survived by his brother and the four children mentioned in the settlement.

On July 15, 1890, William John Valentine, C.A., was appointed judicial factor on the trust-estate. After the estate had been realised and the legacies paid, there remained in the hands of the judicial factor a balance of £1296.

On 18th November 1891 the judicial factor, with the concurrence of two of the testator's younger children, and of William Walker, who had been appointed curator bonis to the third younger child, presented a petition to the Court for special powers and for discharge.

The petitioner stated "The judicial factor is ready to divide the estate, but a difficulty stands in the way of a division being made by the existence of an imbecile illegitimate son of the testator, named Alexander Gerhard Reimers, who is twenty years old, and is at present boarded at Bonnyrigg, Midlothian, at a cost to the estate of £30 per annum. There can be no doubt that the testator recognised the paternity and maintained the child, and