Cornell University Law Library The Moak Collection PURCHASED FOR The School of Law of Cornell University And Presented February 14, 1893 IN nenoRY of JUDGE DOUGLASS BOARDMAN FIHST DEAN OF THE SCHOOL By his Wife and Daug:hter A. M. BOARDMAN and ELLEN D. WILLIAMS Cornell University Library KD2145.D311874 Reports of bankruptcy appealsheard and d 1924 017 873 237 Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924017873237 EEPOETS BANKEUPTOY APPEALS HEARD AND DETERMINED THE LORD CHANCELLOR ©ourt ot ^3?]p«al in ffijancerg. BY J. P. DE GEX, H.'CADMAN JONES, AND E. HOKTON SMITH, OF LINCOLN'S INN, ESQUIRES, BARRISTEKS- AT- LAW, 1862—1865. LONDON: STEVENS & SONS, 119, CHANCERY LANE, MDCCCLXXIV. LONDON; PRINTED BY C. ROWORTH AND SONS, NEWTON STREET, HTOH HOLEOEN. Lord Westbury Lord Cranworth Lord Chancellors. Sir John Romilly Master of the Rolls. Sir James Lewis K-mGijT Bruce' .j ' > Lords Justices. Sir George James Turner . . . ) Sir Richard Torin Kindersley . > Sir John Stuart Sir William Page Wood . . - Vice- Chancellors. Sir William Atherton . Sir Roundell Palmer Sir Roundell Palmer ... .1 Sir Robert Porrett Collier . .J > Attorneys- General. Solicitors- General. TABLE op THE NAMES OF CASES REPORTED IN THIS VOLUME. Page Alexander, Ex parte. In re Thin and Flett's Trust Deed , . . .87 Anderson's Trust Deed, In re, Ex parte Dobson . 167 Attwater, In re. Ex parte Cole . . . .214 Watts . 228 B. Barker, In re. Ex parte Gorely . . . .265 Barrett's Case, In re The Moseley Green Coal and Coke Company Limited . 259 (No. 2). 346 Barron, In re. Ex parte Potter . . . .178 Beale's Assignment, In re. Ex parte Lawrence. . 83 Brooks, Ex parte. In re Brooks . . . .150 Canwell, Ex parte. In re Vaughan . , .295 Page Chavasse, Ex parte. In re Grazebrook . . .329 Churchill, Ex parte. In re Griffiths . . , .222 Clunn's Trust Deed, In re. Ex parte Morrison . . 170 Cockburn, Ex parte. In re Smith and Laxton . .113 Cole, Ex parte. In re Att- water .... 214 Collinge, Ex parte. In re Holdsworth . . .289 Currie's Case, In re The Great Northern and Mid- land Coal Company Li- mited . . . .201 D. Darlington District Joint Stock Banking Company, Ex parte. In re Riches and Marshall's Trust Deed 321 Davis, Ex parte, In re Harris . . . .279 Dobson, Ex parte. In re An- derson's Trust Deed . 167 Downman, Ex parte. In re Downman . ., .251 •n TABLE OF CASES REPORTED. Page Dudley and West Bromwicli Banking Company, Ex parte, In re Hopkins . 236 E. Edwards-Wood, In re, Ex parte Mayou . . . 338 EUerton, Ex parte, In re Leech . . . .193 F. Flood, In re. Ex parte Lub- bock . . . .272 Fox's Case, In re The Mose- ley Green Coal and Coke Company Limited , , 245 G. Gibbins, Ex parte. In re Gibbins' Trust Deed . 196 Gleaves, In re. Ex parte Paine . . . .238 Godden, Ex parte. In re Shettle .' . . .36 Gorely, Ex parte. In re Barker . . . .265 Grazebrook, In re. Ex parte Chavasse . . . 329 Great Northern and Midland Coal Company Limited, In re, Currie's Case . 201 Griffiths, In re. Ex parte Churchill . . .222 Groome, Ex parte, In re Groorae's Trust Deed . 187 H. Harris, In re. Ex parte Davis 279 Holdsworth, In re. Ex parte CoUinge. . . .289 Page Hopkins, In re, Ex parte Dudley and West Brom- wich Banking Company - 236 J. Jones, Ex parte. In re M'Turk. . . .168 Josephs' Assignment, In re. Ex parte Spyer . . 94 K. King, Ex parte. In re King's Trust Deed . . .185 Lawrence, Ex parte. In re Beale's Assignment . 83 Leech, In re. Ex parte Ellerton . . , .193 Levey, In re. Ex parte Topping . . .307 Lubbock, Ex parte. In re Flood . . . .272 M. ]\I'Turk, In re. Ex parte Jones .... 168 Mayou, Ex parte. In re Edwards- Wood . . 338 Mendel, Ex parte. In re Moor's Assignment . 106 Middleton, Ex parte. In re Middleton . . .139 Miller, Ex parte. In re MiUer .... 229 Moor's Assignment, In re. Ex parte Mendel . . 1 06 Morgan, Ex parte. In re Woodhouse . . .64 TABLE OF CASES REPOETED. S. Page Morrison, Ex parte, In re Clunn',s Trust Deed . 170 Moseley Green Coal and Coke Company Li- mited, In re, Barrett's Case . . . .259 (No. 2). 346 Fox's Case 245 •N. Neal, In re. Ex parte Page . 59 O. Oldfield, Ex parte. In re Oldfield . . . .188 Page, Ex parte. In re Neal . 59 Paine, Ex parte. In re Cleaves . . . .238 Potter, Ex parte. In re Barron .... 178 E. Eawlings, Ex parte, In re Eawlings ... 1 Eiches and Marshall's Trust Deed, In re. Ex parte The Darlington Dis- trict Joint Stock Banking Company . . .321 Page Shelley, In re. Ex parte Stewart 299 Shettle, In re, Ex parte Godden . . . .36 Skinner, In re . . .176 Smith, Ex parte. In re Smith's Trust Deed . 156 and Laxton, In re, Ex parte Cockburn . . 113 Spyer, Ex parte. In re Josephs' Assignment . 94 Stewart, Ex parte. In re Shelley . . . .299 Still, Ex parte, In re Still .216 Thin and Flett's Trust Deed, In re. Ex parte Alexander 87 Topping, Ex parte, In re Levey . . . .307 V. Vaughan, In re. Ex parte CanweU . . . .295 W. Watts, Ex parte, In re Att- water .... 228 Wensley, Ex parte. In re Wensley. . . .49 Wollheim, Ex parte. In re Wollheim . . .223 Woodhouse, In re, Ex parte Morgan . . . .64 OASES BANKRUPTCY. T Ex parte SAMUEL BAGLEY RAWLINGS. In the matter of SAMUEL BAGLEY RAWLINGS, 18G2. a Bankrupt. ^£-f^f HIS was a motion on the part of Samuel Bagley Before The Rawlings, the bankrupt, by way of appeal from an tices. order of Mr. Commissioner Goulburn, confirming an ad- A conditional iudication of bankruptcy against the Appellant, and to "s^^"' «" *-^^ •> r J o rr> part ot a cre- liave the adjudication annulled. ditor to a deed intended to The petition for adjudication was filed on the 16th of t^wlnf^' October, 1862; the act of bankruptcy upon which it section of the proceeded being the failure on the part of the Appellant ^^j isei to pay, secure or compound for a sum of 2501. 9s. 3d., cannot, so admitted by him on the 7th of the same month, under a condition re- trader debtor summons, to be due from him to the Re- "jams unful- filled, be spondents, the petitioning creditors. reckoned in The calculating the statutory majority of creditors mentioned in the first of the conditions specified in that section. Per L. J. Knight Bruce. — The question whether all those conditions have been complied with may be raised, notwithstanding the certificate of registration, and with- out setting it aside. Per L. J. Turner. — The 192nd section extends to deeds of composition, although there may be no cessio bonorum. But the composition must be with all the creditors ; and where a deed recited an agreement that sureties, parties to the deed, should pay the creditors a specified money composition to be accepted in discharge of the debts by instalments, and the delivery to the creditors, parties to the deed, of promis- sory notes for securing the instalments; and the creditors, parties to the deed, cove- nanted that the composition should be accepted in discharge of their respective debts, the amounts of which were specified in the schedule to the deed: — Held, per L. J. Turner, that the composition was not with all the creditors, there being no means afforded to non-assenting creditors of obtaining payment of the composition, or any note for securing sucli payment. Per L. J. Knight Bruce. — Where there is only a doubt as to the validity of an adjudication, the proper course still is not to annul. Vol. I-l. B D.J.s. 1862. Ex parte Kawlinos. In re Rawlings. CASES IN BANKRUPTCY. The cause shown against the adjudication and the ground on which it was sought to annul it were, that on the 11th of October, 1862, the bankrupt had executed a deed, which was in the following terms : — "This indenture, made the 11th day of October, 1862, between Samuel Bagley Rawlings, of &c. of the first part; Martha Rawlings, of &c. and John Brown, of &c. of the second part ; and the several persons whose names are contained in the schedule hereunder written, and who by themselves, their partners or agents respec- tively, have executed these presents, being creditors c)f the said Samuel Bagley Rawlings, of the third part. Whereas the said Samuel Bagley Rawlings has for some time past carried on business as a maltster and corn, seed and coke merchant, at Oakham aforesaid, and now stands indebted to the several persons parties hereto of the third part in the several sums of money set opposite to their respective names in the schedule hereunder written, which he is unable to pay in full ; and whereas the said John Brown is a large creditor of the said Samuel Bagley Rawlings, and it has been agreed by and between the several persons, parties to these presents, that the said Martha Rawlings and John Brown shall pay to the several creditors of the said Samuel Bagley Rawlings a composition of Is. 6d. in the pound on the amount of their respective debts, which is to be accepted by thera in full satisfaction and discharge of the same debts, and that such composition should be paid by three equal instalments of 2s. 6d. each at the several periods following (that is to say), the first of such instalments at the expiration of three months from the date hereof; the second of such instalments at the expiration of six months from the date hereof; and the last of such in- stalments at the expiration of nine months from the date hereof, and be secured by the joint and several promis- sory CASES IN BANKRUPTCY. 3 sory notes of the said Samuel Bagley Rawlings, Martha 1 862. Rawling.i, and Jolin Brown; and whereas the said „ promissory notes have been respectively delivered to the Rawlings. several creditors of the said Samuel Bagley Rawlings, '" ^^ . , P,,.i ,.p, Rawlings. parties hereto of the third part, at the time of the ex- ecution of these presents by the said creditors respec- tively, as they the said creditors do hereby severally acknowledge and declare ; and whereas, in order to enable the said Martha Rawlings and John Brown to meet the said promissory notes, it has been agreed by and between the several parties hereto, that all the stock in trade, moneys, trade efifects, and all other the estate and effects whatsoever of the said Samuel Bagley Raw- lings shall be assigned unto the said Martha Rawlings and John Brown in manner hereinafter expressed : Now this indenture witnesseth, that in pursuance of the said agreement and for effectuating the same, and in con- sideration of the premises and of 10s. sterling to the said Samuel Bagley Rawlings now paid by the said Martha Rawlings and John Brown, the receipt whereof is hereby acknowledged, he the said Samuel Bagley Rawlings, with the full consent and approbation of the said creditors (testified by their severally executing these presents), doth hereby bargain, sell, assign, transfer and set over, and the said creditors do hereby severally so fe.r as they may or can ratify and confirm, unto the said Martha Rawlings and John Brown, their executors, ad- ministrators or assigns, all the stock in trade, money, credits, securities, goods, merchandise, books, books of account, and all other the estate and effects whatsoever and wheresoever of or belonging to his said trade or business, and all other the estate and effects of the said Samuel Bagley Rawlings whatsoever (the wearing ap- parel of himself only excepted), and all the title, interest, possession, claim and demand whatsoever and howsoever of the said Samuel Bagley Rawlings therein and thereto, B2 to CASES IN BANKRUPTCY. 1862. Ex parte Rawlings. In re Rawlings. to have, hold, receive and take the said estate and effects and premises hereinbefore assigned or intended so to be unto and by the said Martha Rawlings and John Brown, their executors, administrators and assigns. And the said Samuel Bagley Rawlings doth hereby constitute and appoint the said Martha Rawlings and John Brown, their executors, administrators and assigns, the true and lawful attorneys, irrevocable, of him the said Samuel Bagley Rawlings, his executors and administrators, to ask, demand, sue for, recover and receive the debts, moneys and premises hereby assigned or intended so to be, and on payment or delivery thereof, or of any part thereof respectively, in the name of the said Samuel Bagley Rawlings, his executors or administrators, to give good and effectual receipts and discharges for the same ; and also in his or their name to adjust or settle all accounts and transactions whatsoever relating to the said hereby assigned premises, as fully and effectually to all intents and purposes as he the said Samuel Bagley Rawlings, his executors or administrators could have done if these presents had not been executed. And in consideration of the premises, they the said creditors parties hereto of the third part, do hereby for themselves severally and respectively, and for their several and re- spective heirs, executors and administrators, covenant and agree to and with the said Martha Rawlings and John Brown, their executors and administrators, and also separately with the said Samuel Bagley Rawlings, his executors and administrators, that the said composition so agreed to and secured as aforesaid shall be, and the same is hereby taken and accepted by them, the said creditors respectively, in full satisfaction and discharge of their several and respective debts and demands against the said Samuel Bayley Rawlings, the full amount of which said debts and demands are set opposite to the respective names of the said creditors executing these presents CASES IN BANKRUPTCY. - presents in the schedule hereunder written. And the 1862. said Samuel Sagley Rawlings doth herehy for himself, „ ^^^ his heirs, executors and administrators, covenant and Rawlings. agree with the said Martha Rawlings and John Brown, In ^^ 1 ■ 1 1 • ■ 111 ■ 1 Rawlings. their executors and administrators, that he the said Samuel Bagley Rawlings, his executors or adminis- trators, will at the request and expense of the said Martha Rawlings and John Brown, their executors or administrators, do and execute all such further acts and deeds as may be necessary for better or more satisfactorily assigning or otherwise assuring the effects and premises hereby assigned unto the said Martha Rawlings and John Brown, their executors, administrators and assigns, according to the true intent and meaning of these presents, as by the said Martha Rawlings and John Brown, their executors, administrators or assigns shall be reasonably required. Provided always, and it is hereby declared, that any creditor who has any bill or bills of exchange or other security, for the payment whereof the said Samuel Bagley Rawlings and any other person or per- sons is or are liable, either as drawer, acceptor or in- dorsee, may execute these presents without prejudice to his claim against any other person or persons liable thereto in like manner as under an adjudication in bank- ruptcy. In witness" &c. None of the Appellant's creditors actually executed this deed, it being executed only by himself and the parties of the second part. The latter did not take pos- session of any of the property comprised in it, of which the Appellant could have given or ordered possession. According to the account of debts delivered together with the deed to the Chief Registrar in obedience to the General Orders in Bankruptcy of the 22nd of May, 1862, CASES IN BANKRUPTCY. 1862. 1862 (a), it appeared that Ex parte Rawlings. In re Rawlings. (o) The material sections of the Acts of 1849 and 1861 and other matters, to which the arguments in the present and several of the following cases had reference, are as follows : — Bankrupt Law Consolidation Act, 1849, ss. 224, sqq. " And with respect to arrange- ments by deed, be it enacted, " CCXXIV. That every deed or memorandum of arrangement now or hereafter entered into between any such trader and his creditors, and signed by or on behalf of six-sevenths in number and value of those creditors whose debts amount to ten pounds and upwards, touching such" trader's liabilities, and his release there- from, and the distribution, inspec- tion, conduct, management, and mode of winding-up of his estate, or all or any of such matters, or any matters having reference thereto, shall (subject to the con- ditions hereinafter mentioned) be as effectual and obligatory in all respects upon all the creditors who shall not have signed such deed or memorandum of arrangement as if they had duly signed the same; and stich deed or memo- randum, when so signed, shall not be or be liable to be disturbed or impeached by reason of any prior or subsequent act of bank- ruptcy : Provided always, that every creditor shall be accounted a creditor in value in respect of such amount only as, upon an account fairly stated, after allow- ing the value of mortgaged pro- perty and other such available the total number of creditors was securities or liens from such tra- der, shall appear to be the balance due to him. " CCXXV. That no such deed or memorandum of arrangement shall be effectual or obligatory upon any creditor who shall not have signed the same, until after the expiration of three months from the time at which such cre- ditor shall have had notice from such trader of his suspension of payment, and of such deed or memorandum of arrangement, unless such trader shall within such time obtain from the court an order or certificate of the said court declaring or certifying that such deed or memorandum of arrangement has been duly signed by or on behalf of such majority of the creditors as aforesaid ; and it shall be lawful for the court within the district of which the trader shall have resided or carried on business for six months next immediately preceding his sus- pension of payment to make such order or certificate on the petition of any such trader, and to exer- cise jurisdiction in and over the matters of any such application ; and no creditor who shall not have had fourteen days' notice of any intended application for such order or certificate as aforesaid shall be bound thereby. "CCXXVI. That when the trustee or inspector under any such deed or memorandum of arrangement, or, if there shall be no such trustee or inspector, when any two of the creditors, shall be satisfied that six-sevenths in num- CASES IN BANKRUPTCY. was twenty-six, of whom sixteen assented, and ten did not; ber and value of the creditors whose debts amount to ten pounds and upwards have signed such deed or memorandum, it shall be lawful for such trustee or inspec- tor, or for such two creditors, as the case may be, to certify the same to the court in writing, and such certificate shall be filed with the registrar of the Court, and shall thereupon be primd Jacie evidence in all Courts of law and equity that such deed or memo- randum of arrangement has been so signed. "CCXXVir. That every such certificate as last aforesaid shall have appended thereto a full ac- count of the debts of such trader, together with the names, resi- dences, and occupations of his creditors, and shall be accom- panied by an afiidavit by such trader verifying the same ; and any omission in such account or the insertion therein of any debt not really existing, or of any larger amount of debt than that really existing, and which shall appear to the court to have been made through the culpable negli- gence or fraud of such trader, with intent to defraud any of his creditors, shall deprive him of the benefit of the provisions of this act with respect to arrangements by deed, and of the discharge proposed in any such deed or memorandum of arrangement : provided always, that any omis- sion, insertion or incorrectness in such account which shall not have been made through such culpable negligence or fraud as aforesaid, shall not defeat or otherwise afiect such deed or memorandum of arrangement. "CCXXVIII. Thatthecredi- tors of every such trader shall have the same rights respectively as to set-off", mutual credit, lien, and priority, and joint and sepa- rate assets shall be distributed, in like manner as in bankruptcy ; and no creditor shall be prejudiced or aifected by being a party to any such deed or memorandum of arrangement as aforesaid, or by the same being obligatory upon him as to his right or remedy against any person other than such trader; and every person who would be entitled to prove in bankruptcy shall be deemed a creditor within the meaning of the provisions of this act with respect to arrangements by deed. " CCXXIX. That if any cre- ditor of any trader shall be desi- rous to show that the administra- tion of the estate of such trader has not been duly conducted in conformity with such deed or memorandum of arrangement, it shall be lawful for him to apply to the Court by petition, support- ed by afiidavit, stating any facts or circumstances to show that such administration has not been duly conducted, and thereupon the court shall have full power and it is hereby fully authorized to consider the subject matter of such application, and if it shall think fit may direct any inquiry, and in such manner as it shall 1862. Ex parte Rawlings. In re Rawlings. CASES IN BANKRUPTCY. 1862. not: that the total amount Ex parte Rawlings. Tn re Rawlings. think proper, into the subject of such application, and generally may make such order and exer- cise such jurisdiction in or over the subject matter of such appli- cation and the costs thereof as to the said court shall appear just." The Bankruptcy Act, 1861, ss. 192, sqq. are as follows : — " As to trust deeds for benefit of creditors, composition and inspectorship deeds executed by a debtor. " 192. Every deed or instru- ment made or entered into be- tween a debtor and his creditors, or any of them, or a trustee on their behalf, relating to the debts or liabilities of the debtor, and his release therefrom, or the dis- tribution, inspection, manage- ment, and winding-up of his estate, or any of such matters, shall be as valid and effectual and binding on all the creditors of such debtor, as if they were parties to and had duly executed the same, provided the following conditions be observed : that is to say — " 1. A majority in number re- presenting three-fourths in value of the creditors of such debtor whose debts shall re- spectively amount to ten pounds and upwards, shall, before or after the execution thereof by the debtor, in writing assent to or approve of such deed or instrument: " 2. If a trustee or trustees be appointed by such deed or of debts was 4,949Z. 5s. 2c?., three-fourths instrument, such trustee or trustees shall execute the same : ' 3. The execution of such deed or instrument by the debtor shall be attested by an attorney or solicitor : ' 4. Withjn twenty-eight days from the day of the execution of such deed or instrument by the debtor the same shall be produced and left (having been first duly stamped) at the office of the chief registrar, for the purpose of being registered : '5. Together with such deed or instrument there shall be de- livered to the chief registrar an aflSdavit by the debtor or some person able to depose thereto, or a certificate by the trustee or trustees, that " majority in number, representing three- fourths in value, of the credi- tors of the debtor whose debts amount to ten pounds or up- wards have in writing assented to or approved of such deed or instrument, and also stating the amount in value of the property and credits of the debtor com- prised in such deed : ' 6. Such deed or instrument shall, before registration, bear such ordinary and ad valorem stamp duties as are hereinafter provided : ' 7. Immediately on the execu- tion thereof by the debtor, possession of all the property comprised therein, of which the debtor can give or order pos- session, shall be given to the trustees. CASES IN BANKRUPTCY. three-fourths of which amount was 3,71 H. I8s. lOid.; and " 193. The date, names and descriptions of the parties to every such deed or instrument, not in- cUiding the creditors, together with a short statement of the nature and effect thereof, shall be entered by the chief registrar in a book to be kept exclusively for the purposes of such registration. Such entry shall be made within forty-eight hours after the deed shall have been left with the re- gistrar as aforesaid, and a copy of such entry shall be published in the London Gazette within four days after the making of such entry. " 194. Every deed, intrument or agreement whatsoever, by which a debtor, not being a bankrupt, conveys or covenants or agrees to convey his estate and effects, or the principal part thereof, for the benefit of his creditors, or makes any arrange- ment or agreement with his creditors, or any person on their behalf, for the distribution, in- spection, conduct, management, or winding up of his affairs or estate, or the release or discharge of such debtor from his debts or liabilities, shall, within twenty- eight days from and after the execution thereof by such debtor, or within such further time as the court in London shall allow, be registered in the Court of Bankruptcy ; and in default thereof shall not be received in evidence. " 195. No deed or instrument whatever required to be registered as aforesaid shall be registered unless, in addition to the ordinary stamp duty, it also be impressed with or have affixed to it a stamp denoting a duty computed at the rate of five shillings upon every hundred pounds, or fraction of an hundred pounds, of the sworn or certified value of the estate or effects comprised in, or to be col- lected or distributed under, such deed or instrument: Provided, that the maximum of ad valorem duty payable in respect of any such deed or instrument shall he two hundred pounds. " 196. Every such deed, on being so registered as aforesaid, shall have a memorandum thereof written on the face of such deed, stating the day and the hour of the day at which the same was brought into the office of the chief registrar for registration. " 197. From and after the registration of every such deed or instrument in manner aforesaid, the debtor and creditors, and trustees, parties to such deed, or who have assented thereto or are bound thereby, shall in all mat- ters relating to the estate and effects of such debtor be subject to the jurisdiction of the Court of Bankruptcy, and shall respec- tively have the benefit of and he liable to all the provisions of this Act, in the same or like manner as if the debtor had been ad- judged a bankrupt, and the credi- tors had proved, and the trustees had been appointed creditors' assignees under such bankruptcy ; and the existing or future trustees 1862. Ex parte Rawlings. In re Eawlings, 10 CASES IN BANKRUPTCY. 1862. Ex parte Rawlings. In re Rawlings. and that the aggregate value of the debts of the sixteen assenting creditors was 4,304:1. 12s. 2d. Among the hand of the chief registrar and the seal of the court shall be available to the debtor for all pur- poses as a protection in bank- ruptcy. " 199. In case any petition shall be presented for an adjudi- cation in bankruptcy against a debtor after his execution of such deed or instrument as is herein- before described, and pending the time allowed for the registration of such deed or instrument, all proceedings under such petition may be stayed, if the court shall think fit ; and in case such deed or instrument shall be duly regis- tered as aforesaid, the petition shall be dismissed. " 200. If a debtor cannot ob- tain the assent of a majority in number representing three-fourths in value of his creditors, by reason of his being unable to ascertain by whom bills of exchange, pro- missorj' notes, or other negotiable securities accepted, drawn, made or endorsed by him are holden, or by reason of the absence of creditors in a foreign country, or other similar circumstances, it shall be sufficient if he obtain the consent of a majority in number representing three-fourths in value of all his other creditors to such deed or instrument as aforesaid ; provided that notice shall have been inserted by or on behalf of the debtor in one or more news- papers published in the county or place at which he shall have carried on business immediately of any such deed or instrument, and the creditors under the same, shall as between themselves re- spectively, and as between them- selves and the debtor and against third persons, have the same powers, rights, and remedies, with respect to the debtor and his estate and effects, and the collec- tion and recovery of the same, as are possessed or may be used or exercised by assignees or credi- tors with respect to the bankrupt, or his acts, estate and effects in bankruptcy ; and except where the deed shall expressly provide otherwise, the court shall deter- mine all questions arising under the deed according to the law and practice in bankruptcy, so far as they may be applicable, and shall have power to make and enforce all such orders as it would be authorised to do if the debtor in such deed had been adjudged bankrupt, and his estate were ad- ministered in bankruptcy. "198. After notice of the filing and registration of such deed has been given as aforesaid, no execu- tion, sequestration, or other pro- cess against the debtor's property in respect of any debt, and no process against his person in re- spect of any debt, other than such process by writ or warrant as may be had against a debtor about to depart out of England, shall be available to any creditor or claim- ant without leave of the court; and a certificate of the filing and registration of such deed under CASES IN BANKRUPTCY. 11 Among the assenting creditors, however, were placed the names of Messrs. Eaton, Cayley 8f Co., bankers of Stamford, as unsecured creditors for 1,400Z., with the following note appended : — " They hold the bond of Mrs. Bowlings for 2001., and of Mr. Bennett for 500Z. and a policy for 1,000Z. on my life, but claim to be en- titled to the composition upon the whole debt." The 1862. Ex parte Rawlinos, In re Rawlings. prior to the date of such deed or instrumeut, requiring his creditors to signify their assent to or dissent from such deed or instrument by notice in writing addressed to tlie trustee or trustees thereof within fourteen days from the insertion of such notice, and that the affi- davit or certificate of the trustee or trustees shall state the circum- stances of the case, and the same shall be allowed by the Court, and provided the deed or instrument he in such form as is expressed in schedule (D.) to this act an- nexed, which shall vest all the estate and effects of the debtor in the trustees of such deed, and provided that all such other con- ditions as are hereinbefore re- quired be duly complied with," The scheduled form referred to in the last of these sections is the following : — " This deed made the day of between A. B. [the debtor] and C. D. and E. F. [the trustees] on behalf and with the assent of the undersigned creditors of A. B., witnesseth that A. B. hereby conveys all his estate and effects to C. D. and E. F. abso- lutely, to be applied and adminis- tered for the benefit of the creditors of A. B. in like manner as if A. B, had been at the date hereof duly adjudged bankrupt. In witness &c. " Schedule of creditors." The General Order of the 22nd of May, 1862, referred to in the text and during the arguments of the present and several of the subsequent cases, is, so far as it is material, with the schedule ap- pended to it, as follows : — " 1. Together with every deed or instrument left, after the fifth day of June next, at the office of the chief registrar, for the purpose of being registered under sect. 192 of the Bankruptcy Act, 1861, and in addition to the affidavit or certificate required to be delivered to the chief registrar under the 5th condition of the s^d section, there shall be delivered to the chief registrar a copy of such deed or instrument, certified by the attorney or solicitor attesting the execution of the same by the debtor, to be a true copy, and also, and as near as may be, in the form in the schedule hereunder written, a full account of the debts of the debtor, which shall respec- tively amount tolO/. and upwards, together with the names, in alpha- betical order, and the residences of his creditors, distinguishing 12 1862. Ex parte Rawlings. In re Rawlings. CASES IN BANKRUPTCY. The deed accompanied by this account of debts and also by an affidavit of the Appellant, sworn on the 11th of October, 1862, that a majority in number re- presenting three-fourths in value of his creditors whose debts amounted to 101. or upwards, had in writing assented to or approved of the deed, and otherwise in accordance those who liave, in writing, as- sented to or approved of the deed, and such account shall be accom- panied with an affidavit by such debtor verifying the same." * In cases of partnership all the debts of the partnership and the separate debts of each partner are to be given in separate lists. " SCHEDULE. "The Bankruptcy Act, 1861. " Form of the Account to be delivered to the Chief Registrar with Trust Deed, Composition or Inspectorship Deed. Sect. 192. " N.B. — This is to be an account to the best of the debtor's know- ledge, information, and belief, of all the debts of the debtor* which shall respectively amount to iOl. and upwards, and including debts secured and showing the estimated value of any security. " A full account of the debts of amounting to 101. and upwards, together with the names and residences of his creditors, to the best of his knowledge, information, and belief. Names Secured. Unsecured. Nature Value or No. and If Assenting. estimated Value of Residences. Amount. £ s.d. of the Security to be deducted. £ s. d. Amount. £ B. d. Security. 1 Anderson, John, 5, Fore Street, London, Brush Maker, Assenting 1200 450 750 Mortgage dated 1st July, 1861, of two freehold houses at Hen- 2 Hopkinson, Joseph, 65, Cornhill, London, Jeweller, 360 don, for secur- ing 600^.— The estimated value is the Security 3 Watson, Henry, 45, strand, London, Grocer. Assenting 200 of450;. No. of Creditors Assenting Not Assenting 36 Amount of Debts i/£24,000 iji 6,000 3 £18,000 Amount of Debts of Creditors Assenting £21,300 CASES IN BANKRUPTCY. accordance with the requirements of the fifth of the con- ditions specified in the 192nd section of the Bankruptcy ^^'^''7 Act, 1861, was delivered to the Cliief Registrar, and the Rawlings. deed was registered on the 13th of October, \%G2, and a I" ""s certificate of registration delivered to the Appellant. The Commissioner thought the 198th section of the Bankruptcy Act, 1861 had no application to this state of circumstances, and afibrded no bar to the proceed- ings in bankruptcy, and from this decision the Appellant, having been adjudged bankrupt, appealed. Mr. Bacon and Mr. Ernest Reed for the Appellant. The certificate of registration of the deed is conclusive evidence that the formalities required by the statute in order to render it binding upon all the Appellant's cre- ditors have been fulfilled. The question, therefore, is whether or not this is such a deed as is within the meaning of the 192nd and following sections of the Bankruptcy Act, 1861, and we submit that it is. The only cases in which there has been any discussion of the enactment contained in these sections, so far as the essentials of a deed intended to operate under them are concerned, are those oi Walter v. Adcock(a), and In re Castleton (b). In the former of those cases, some of the learned Barons of the Exchequer seem to have con- sidered themselves at liberty to speculate upon the in- tentions, rather than bound to interpret the language, of the legislature, and in a position to adjudicate upon the general requisites to the validity of deeds intended to operate under the sections in question, rather than called upon to express an opinion upon the terms of the par- ticular deed before them. And in respect of that case, we submit that the opinion of Mr. Baron Wilde is more correct (o) 7 H.Sr N. 541. (6) 31 L. J., N. S. Bank. 71. 14 CASES IN BANKRUPTCY. 1862. Ex parte Rawlings. In re Kawlings. correct than those of the Lord Chief Baron and Mr. Baron Martin. In re Castleton seems to show that your Lord- ships, when that case was argued, entertained the same view. With the exception of these two cases, the ques- tion may be said to be really unaffected by authority, and must be discussed on general principles ; and the plain language of the legislature, when so dealt with, clearly admits within its scope composition deeds, providing for the release of a debtor upon the payment of a composition upon his debts. The words " and the distribution, inspection, conduct, management and mode of winding-up of his estate," contained in the now repealed 224th section of the Bankrupt Law Consolidation Act, 1849, were made the ground-work of a decision of the Court of Exchequer Chamber in Tetley v. Taylor (a), subsequently followed in Ex parte Wilkes {b) and other cases, that a deed to be a valid deed of arrangement under that section, and as such binding upon non-assenting creditors, ought to pro- vide for the absolute distribution of all the debtor's pro- perty in all events amongst all his creditors as in bank- ruptcy. But the language of the 192nd section of the Act of 1861 affords no similar ground-work, and in- deed expressly excludes the possibility of its existence, by the change advisedly made (during the passage of the bill into law) of the words just cited from the 224th section of the Act of 1849 into the words " or the dis- tribution, inspection, management and winding-up of his estate" in the 192nd section of the Act of 1861. Even therefore were it admissible, as we submit it is not, to look to the repealed sections of the Act of 1849 for an analogy to guide us in construing the enactment contained (a) 1 Ell. 4 Bl. 532. (6) 5 De G., M. the better execution of any powers given to the Court thereby, to summon, and to examine, upon oath or otherwise, the bankrupt, and any party to the deed, and any creditor or person claiming to be a creditor, and any person known or silspected to have any of the estate in his possession, or any person supposed to be in- debted to the estate, or whom the Court may deem capable of giving any information material to the full disclosure of the debtor's transactions and affairs, or to the carrying into effect the provisions of the deed ; and Jhe Court may exercise, as to the examination of such persons, and the production by them of such books, papers, deeds or documents as it shall deem requisite, the same powers that are vested in the Court with relation to the examination of per- sons and witnesses, and the pro- duction of books, papers, deeds and documents, in matters of bankruptcy. " 190. If the resolution afore- said shall not be duly reported, or if the Court shall refuse the ap- plication to stay proceedings, or if the deed of arrangement shall not be duly produced, or if upon its production the Court shall not think fit to approve thereof, the bankruptcy shall proceed as though no such resolution had been passed ; and the Court may make all necessary orders for re- suming the proceedings in bank- ruptcy, and the period of time which shall have elapsed between the date of such resolution and the date of the order for resuming proceedings shall not be reckoned CASES IN BANKRUPTCY. 19 the Act of 1861. Such then being the policy governing 1862, the introduction of the I92nd and following sections of ^^T'^''"^'^ Ek parte the last-mentioned act, does their language or not carry IUwlinqs. into effect the presumable objects of its framers ? We I" ''« submit that it does. The heading which is prefixed to these sections as contrasted with that prefixed to the 224th and following sections of the Act of 1849, clearly includes within its ambit deeds providing for the release . of debtors upon the payment of a money composition under which they retain possession of their property, equally with trust deeds which contemplate a cession of property to trustees for the benefit of the debtors' cre- ditors, and with inspectorship deeds under which, as in the case of composition deeds, the debtors retain the control of their property, although subject to uispection. The guarded language of the second and seventh con- ditions specified in the 192nd section shows, as do also the words " every deed" in that section itself, referring as they clearly do to every deed of either of the classes mentioned in the preceding heading, that the legislature in passing this enactment had it in contemplation to ex- tend its benefits to deeds which should not afiect property belonging to debtors, as indeed might have been ex- pected to be done in an act which fuses the proceedings in insolvency with those in bankruptcy, and therefore brings within its provisions (as by its 98th and 99th sec- tions) debtors who have no property. Even the language of the 194th section shows that the legislature contem- plated the existence of cases in which the whole of the debtor's property might not be dealt with. The deed in the in calculating periods of time pre- order annulling the same shall be scribed by this act. filed with the proceedings, and " 11. If the bankruptcy be notice thereof shall be given in annulled, as herein provided, the the London Gazette." C2 20 1862. Ex parte Rawlings, In re Rawlings, CASES IN BANKRUPTCY. the present case is not nor was meant to be a trust deed. There is no trust created, no trustee, no assignment. To it consequently such of the conditions specified in the 192nd section as point to deeds which deal with the debtor's property, and among them the 7th condition, are inapplicable. But as a composition deed of the nature contemplated by the act, we submit that it is . valid by virtue of the act, and binding upon all the Ap- pellant's creditors. [The Lord Justice Knight Bruce: Would the course of proceeding which in the case of -Er parte Sower {a) was held to be right under the Act of 1849, be wrong under the Act of 1861 ?] Mr. Bacon, Such a course of proceeding would be impracticable here, as the composition deed could not be set up at law against the title of assignees under the adjudication. They also referred to Re Shettle (b), before Mr. Com- missioner Holroyd. Mr. Giffard and Mr. Clement Swanston for the Re- spondents, It was not competent for the Appellant, having ad- mitted the Respondents' demand under the 79th and 81st sections of the Act of 1849, to take advantage within the seven days mentioned in the 81st section of the provisions contained in the 192nd and following sections of the act of 1861 against the Respondents. The principles which guided this Court in the cases of Ex parte (fl) 1 De G., M. Sr G. 468, 475 ; S. C, De G., M. ^ G. Bey. App. 68. iSee aho Ex parte Burnett, i De G.^ S. 54. (t) 11 W. R.45, CASES IN BANKRUPTCY. gl Ex parte Walker (a) and Ex parte Dales (6) are appli- cable to the present case. Moreover, the proceedings initiated by the Respondents are attempted to be stayed by the execution of this deed, with, as it is alleged, the due fulfilment of all the conditions imposed by the statute. The onus is upon the Appellant of affirmatively proving this allegation ; and to produce simply the cer- tificate of registration, and his own affidavit upon which that certificate was founded, is not enough. The assents of the creditors who are alleged in that affidavit to have in writing assented to or approved of the deed should be produced. [The Lord Justice Knight Bruce : Speaking only for myself, I think that you are entitled to have the assents produced, or their absence accounted for.] [Upon this intimation of opinion of the Lord Justice, the assents were produced on the part of the Appellant. It appeared thereby that, with respect to the assent of Messrs. Eaton, Cayley Sf Co., those creditors on the 27th of October, 1862, gave through their solicitors, Messrs. Thompson Sf Phillips, merely an assent con- ditional upon the creditors being unanimous, which was exchanged, but not until the 30th of October, 1862, for an unconditional assent ; and that, consequently, the affidavit of the debtor made on the 11th of that month was incorrect, in so far as it referred to Messrs. Eaton, Cayley 8f Co. as assenting creditors at that time ; and that although the unconditional assent of these creditors was obtained before the expiration of the twenty-eight days mentioned in the fourth condition specified in the 192nd section, such assent was not obtained within the forty-eight hours mentioned in the 193rd section.] The .1862. £x parte Rawlings. In re RAWLINOa. (fl) 6DeG., M.ls G. 752; S. C, Be G., M. 4- G; Bey. App. 532. (6) 2 De G. 4- J. 206; S. C, De G. ^ J., Bey. App. 152. 22 CASES IN BANKRUPTCY. 1862. Ex parte Rawlings. In re Bawlinqs. The certificate of registration, then, it appears was given, although the registrar was powerless to do other- wise than give it, on a false assumption of facts, which the production of these assents makes clear ; and we are entitled to remove the names and debt of Messrs. JEfjiton, Cayley Sf Co. from the list of assenting creditors. [The Lord Justice Turner : Must you not apply to discharge the registration ?] We submit not ; the act gives effect to the deed, subject to the performance of the conditions imposed; and it is incumbent on the Ap- pellant moving here to stay proceedings in bankruptcy to support his case by all proper affirmative evidence. Removing, then, these names and this debt, we have a majority of fifteen assenting to ten non-assenting credi- tors, and representing in value the sum of 2,904Z. \2s. 2d. only, less than the majority in value required by the statute. But even if we are not entitled to production of the assents, and the certificate of registration is to be assumed to be conclusive so long as the registration itself remains unirapeached, still the assent must be reckoned as extending only to the balance of the amount due to these creditors, after deduction of the value of the securities held by them. . This is clear from the form of the schedule to the order of the 22nd of May, 1862, which order being made under the authority of the 45th and 47th sections of the Act of 1861 (a), must have (o) The schedule to the order referred to is set out above, p. 12, note. The sections of the act referred to are respectively as follows: — "45. The Lord Chancellor shall, with the assistance of two commissioners, and subject to the provisions of this act, frame general orders for the following purposes : . ' For regulating the practice and procedure of the Courts of Bankruptcy, and the several forms of petitions, orders, and other proceedings to be used in the said Courts, in all matters under this act ; ' For regulating the duties of the various officers of such Courts ; ' For regulating the fees payable and the charges and costs to CASES IN BANKRUPTCY. 23 have due weight attributed to it in construing the act itself. This appears also from the 97th section of the act (a). That section applies, it is true, in strictness only to the computation of debts for the purposes of petitions under the act ; but the legislature must have intended a similar course of procedure to be fol- lowed in cases of arrangements by deed, the object of which was to provide for an administration as in bank- ruptcy, but without the necessity of actual resort to the Court of Bankruptcy ; and that no creditor should come in under a deed of arrangement who could not also come in under a bankruptcy. The statutory form of deed too given in the schedule (D) to the act clearly recognises the principle that the administration must be in all respects as in bankruptcy. It follows, therefore, that creditors coming in under a deed must come in only for such part of their debts as would be proveable in the case of an actual bankruptcy, that is, for the whole amount minus the value of securities held by them. Now, it appears that Messrs. Eaton, Cayley Sf Co. are creditors be allowed with respect to all proceedings before such Courts, and before the County Courts acting in bankruptcy ; " For regulating the practice and procedure upon appeals ; " For regulating the filing, custo- dy, and inspection of records ; "And, generally, for carrying the provisions of this act into effect. " 47. After such general orders shall have been so framed they or any of them may be rescinded or varied, and other general orders may be framed in manner afore- said. . . ." (a) Which enacts as follows: — '• 97. In the computation of debts for the purposes of any petition under this act there shall be reckoned as debts, — "1. Sums due to creditors hold- ing mortages or other available securities or liens; after deduct- ing the value of the property comprised in such mortgages, securities, or liens : " 2. Such interest and costs as shall be due in respect of any of the debts : " But there shall not be reckon- ed, — " 1. The amount of the debts in respect of which the petitioner has already taken the benefit of insolvency, protection, or bankruptcy : " 2. Debts barred by any statute of limitations." 1862. Ex parte Rawlings, In re Rawlings. 24 CASES IN BANKRUPTCY. 1862. Ex parte Rawlincs. In re Rawlings. creditors for 1,400?. and hold securities amounting in the aggregate to 1,700Z. Even therefore if they are to be retained amongst the assenting creditors in point of number, the amount of their debt must be entirely re- moved from the computation of the amount in value of the debts of assenting creditors, and the statutory majority is not made up. On any of these grounds, therefore, the appeal must fail. We submit, however, that it must fail equally on general grounds. It vrould be strange if a deed such as this should be held within the protection of the 192nd and following sections of the Bankruptcy Act, 1861. It is a deed which not only is expressed to be made with and for the benefit of those creditors only who have exe- cuted it (a thing which no creditor has in fact done), but which, by its form and by the effect of its recitals, showing the relative positions of John Brown and thp Appellant, and the object of the assignment made by the deed to Martha Rawlings and John Brown, creates an irrevocable trust in those persons of the property as- signed to them for the benefit of the Appellant's cre- ditors. The omission, therefore, on the part of Martha Rawlings and John Brown to take possession of the property comprised in the deed, is in contravention of the seventh condition of the 192nd section, and the deed consequently out of the protection of the statute, and no bar to the proceedings taken in bankruptcy by the Re- spondents, to whom indeed promissory notes of the na- ture comtemplated by the deed have never been either given or tendered. It is urged however on the other side that this is not, nor was meant to be, a trust deed, but that under the 192nd and following clauses of the Act of 1861 a composition deed will, upon the fulfilment of the statutory conditions, be binding upon non-assent- ing creditors equally with those who have assented, and that CASES IN BANKRUPTCY. 25 that this deed is one within the scope of these sections. But we submit that the policy of the Act of 1861 has been to increase, rather than to relax, with respect to deeds intended to operate under the 192nd and following sections, the stringency of the requisites to deeds of arrangement under the Act of 1849, as established by the decisions of the Exchequer Chamber in Tetley v. Taylor (a), of this Court in Ex parte Wilkes (J), and of the Court of Exchequer in Irving v. Gray (c), and re- cognised by the House of Lords in Larpent v. Bibby (d), and which must be supposed to have been present to the mind of the legislature when engaged in passing the Act of 1861. Whilst under the former act the most general kind of deed was contemplated, and one safe- guard alone was added, viz., the execution by six- sevenths in number and value of the creditors, the new act, in language substantially the same, contemplates deeds not more general in intrinsic character, Walter v. Adcock {e), and requires compliance with seven conditions instead of one. The change of the conjunc- tive " and " into the disjunctive " or " is relied upon as evidencing an altered intention of the legislature. Had however such an alteration been intended, express lan- guage would have been used, and a change of principle so fundamental would not have been left to be inferred from a change of language so small. [7%e Lord Jus- tice Knight Bruce : According to the words of the present enactment, would not a gratuitous release be within it?] It would, if the construction contended for on the other side is the right one, and this would be so unreasonable a consequence as to forbid such an inter- pretation. The heading prefixed to these sections, upon which stress has been laid, simply introdifces that por- tion (a) 1 Ell. ^ Bl. 532. (r) Z H.Ss N. 34. (6) 5 De G., M. If G. 418; (d) 5 H. L. Cas. 481. S. C, De G., M. Is G. Bcy.App. (e) 7 H. Sf N. 541. 458. 1862. ^— ^-»-/ Ex parte Rawlinqs. In re Rawlinos. 26 CASES IN BANKRUPTCY. 1863, Ex parte Bawlings. In re Rawlinos. tion of the act in which the legislature has gathered together its enactments relative to all kinds of deeds of arrangement, so that, although it may be true that the 192nd section refers to different kinds of deeds, among which the second condition specified in the section con- templates the possibility of there being some in which there is no intervention of trustees, this merely shows what the cases oi Ex parte Wilkes (a), Irving v. Gray (h) and Ex parte Calvert {d) showed with respect to deeds of arrangement under the former act, viz., that inspectorship deeds, in which as a rule there is no intervention of trus- tees properly so called, are within the scope of the present act. The fifth condition applies to cases where there are trustees, and cannot be read as if the words " if any " fol- lowed the words " by the trustee or trustees." The 194th section, larger in its terms, and not meant as a mere idle repetition of the 192nd, is merely a fiscal provision, and includes all the deeds mentioned in the heading, in- cluding therefore deeds operating under the 192nd sec- tion amongst others. It shows, however, that the legis- lature did not contemplate an entire absence of the debtor's property from the operation of these deeds, and the 197th section clearly contemplates an administration of property. But even if the policy of the new enact- ment be thought to differ from that of the Act of 1849, still a deed framed as this is cannot operate under the act so as to bind other creditors than those who assent to it ; for it is not a mere composition deed, but a deed which, by assigning all the debtor's property to the sureties for their own benefit, places that property out of the creditors' reach. Mr. Bacon in reply. The intentions of the legislature must be gathered from (a) 5 De G., M. Sf G.4]8; (6) 3 H. Sf N 34. S. a, De G., M. 4r G., Bey. (c) 3 De G. ^ J. 95 ; S. C, ^PP- 458. De G. 4- J., Bey. App. 275. {Iawlinos. CASES IN BANKRUPTCY. 27 from the language which it has used. The heading pre- 1862. fixed to the 192nd and following sections of the act ap- ^T'^''^ ... 1 1 f. Ex parte pnes to three several classes of deeds, each .of which is Rawunos. dealt with in the subsequent sections of the act upon the In re principle of reddendo singula singulis. The first of the conditions specified in the 192nd section, when it speaks of "such deed," clearly comprehends composition deeds, which are among those mentioned in the heading. The second deals with one only of the classes of deeds mentioned in the heading. The seventh cannot apply to a composition deed where there are no trustees. By the 193rd and 194th sections, the legislature requires the registration not only of each of the three classes of deeds mentioned in the heading and the opening of the 192nd section, but also of others then for the first time men- tioned. And if anything more were wanting to show that the scope of the law is enlarged rather than restricted, the creditors are no longer required actually to execute the deed, but may content themselves with written assent or approval. \_The Lord Justice Tur- ner : Do not the words in the 193rd section, " the names and descriptions of the parties to every such deed or in- strument, not including the creditors,"seem to imply that the legislature was dealing with deeds to which creditors are actually parties?] No doubt the words apply to deeds to which some creditors are actually parties. But with regard to composition deeds, the act construed according to its terms comprehends them : nor is it unreasonable so to construe it, for creditors best know their own interests, and composition deeds are at once reasonable and in common use. As to the assent of Messrs. Eaton, Cayley Sf Co., the Appellant knew when making his affidavit that they were then satisfied upon the points reserved by them, and that therefore their assent had become at that time in fact unconditional. But, 28 CASES IN BANKRUPTCY. 1862. Ex parte Rawlings. In re R&WLINOS, But, if necessary, there may be further inquiry into the matter. Then, it is said, that Messrs. Eaton, Cayley is Co. were secured creditors, and that the amount due to them for the purposes of computation was the balance only of the 1,400Z. after deduction therefrom of the value of securities held by them, for which argument reliance is placed upon the General Orders of the 22nd of May, 1862. But those Orders cannot consistently with the 45th section of the act, under the authority of which they are made, enlarge the words of the act itself. The 97th section of the act is also relied upon, but its very language shows its inapplicability. Moreover, of the securities in question, the policy of assurance is value- less, and the others are not part of the Appellant's estate. There should, therefore, be no deduction. If, however, the value of these securities be assumed to exceed the amount secured, and to be wholly to be deducted to the amount of 1 ,400/., the aggregate amount of all the debts after such deduction will be 3,549Z. 5s. 2d., and three-fourths of that sum, 2,661Z. 18s. lO^rf. The aggregate in value of the assents being after a like de- duction equal to 2,904Z. 12s. 2d., the statutory majority is obtained with a margin of 242/. 13s. S^d. The same result is obtained if the value of the securities from third persons is deducted, which however would be contrary to the rule in bankruptcy. For according to that mode of reckoning, Messrs. Eaton, Cayley Sf Co. are, in fact, secured only to the extent of 700/., the policy of assurance for 1,000/. being valueless. From the total amount of debts therefore, 4,949/. 5s. 2d. there would have to be deducted 700/. the secured portion of Messrs. Eaton, Cayley Sj" Co.'s debt of 1,400/., and there would remain 4,249/. 6s. 2d., three- fourths CASES IN BANKRUPTCY. fourths of which sum is 3,186/. 18s. lOjd On the other hand, if from the total amount in value of assent- ing creditors, 4,304/. 12s. 2d., there be deducted the same 700Z., there remains 3,604/. 12s. 2d., showing even on this calculation assents greater in value than are required for the purposes of the statutory majority. 29 1862. Ex parte Rawlinqs. In re Rawlinqs. Judgment reserved. The Lord Justice Knight Bruce. Whether the deed on which the Appellant relies in this case as invalidating the adjudication is an instru- ment so worded, an instrument such in its provisions as to come, or be capable of being brought, within the 192nd section of the Bankruptcy Act of 1861, I decline expressing an opinion at this time, but I assume, for the present purpose, that it is so. I assume too in his favor, but without asserting, that the seventh condition at the end of that section is not applicable in the present instance. Dec. 6. I think, however, that he fails as to the first and fifth conditions with respect to the assent or approval re- quired. It seems to me neither established nor probable, that before the end of the forty-eight hours mentioned in section 193, or before the entry there mentioned, or registration, the assent in writing, or approval in writing, necessary, was obtained. Especially it is not I think shown, or likely, that as to the debt of Messrs. Eaton, Cayley S; Co. (1,400/. or more 30 CASES IN BANKRUPTCY. 1862. Ex parte Rawling3. Ill re Rawlings. more), the conditions mentioned in the letter of Messrs. Thompson &; Phillips, dated the 27th September, had before or at either of those periods been complied with ; and I am of opinion, that neither the deed nor the regis- tration affects the adjudication; which cannot, as I con- ceive, be properly (now at least) (a), annulled. But if the Appellant shall desire to adduce further evidence before us, or if he or the persons to whom the assign- ment was made shall desire to bring an action to try the validity of the adjudication, I have no objection to either course being taken, though I am not for now staying proceedings under the adjudication. The Lord Justice Turner, This is an application on the part of Samuel Bagley Rawlings, the Bankrupt, to discharge an order of Mr. Commissioner Goulhurn, confirming an adjudication of bankruptcy against him and to annul the adjudication. The application proceeds upon this ground, that before the adjudicationof bankruptcy the Bankrupt had executed a deed which it is contended was a deed of composition with his creditors within the meaning of the 192nd section of the Bankruptcy Act, 1861, and the deed had been, as it was contended, assented to in writing by the requisite proportion of the creditors both in number and value, and had been registered according to the provi- sions of the statute upon the affidavit of the Bankrupt verifying the fact of such assent, whereby, as it was in- sisted, the deed had become valid and binding upon all the creditors of the Bankrupt, including the creditor at whose instance the adjudication was made. No (a) See Ex parte Burnett, 4 De G. Is Sm. 54; Ex parte Bower, 1 De G., M. Sf G. 468, 475 i S. C, De G., M. ^ G., Bey. App. 68. CASES IN BANKRUPTCY. No question appears to have been raised before the learned Commissioner, as to the deed having been J . • . . , , . . . _ , Ex parte assented to in writing by the requisite proportion of the Rawlings. creditors in number and value ; but in the course of the In re argument before us, the written assents of the creditors aw^-'ngs. were called for on the part of the Respondents, and were produced on the part of the Bankrupt: and upon the production of them it appeared to my learned Brother, and I fully agree with him upon the point, that a creditor for 1,400/. or upwards, who had been reckoned by the Bankrupt as an assenting creditor, had at the time of the registration given a conditional assent only and not an absolute assent, and that this debt of 1,4001. or upwards being deducted, there was not the requisite proportion in value of creditors assenting to the deed. It was, indeed, attempted to be made out on the part of the Bankrupt, that after deducting this debt of 1,400/. there would still be the requisite proportion in value of assent- ing creditors ; but this result was arrived at by deducting the amount of this debt from the aggregate amount of all the debts, and not from the amount of the debts of the assenting creditors only, a course of proceeding which is plainly wrong. Assuming, therefore, these facts to be properly before us, it would be impossible, as it seems to me, to maintain this deed; but I am by no means satis- fied that we ought to take notice of these matters whilst the registration stands unimpeached, and at all events these matters arise upon new evidence, and the Bankrupt therefore was well entitled to ask for liberty to adduce further evidence with respect to them. This application was made on his part and if it be persisted in, I am willing to accede to it ; but at the same time I think it right to state my opinion upon the substantial points of the case, which were adjudicated upon by the learned Commis- sioner, and were fully argued before us. This 32 CASES IN BANKRUPTCY. 1862. Ex parte Kawlinos. In re Rawlings. This appeal raises two questions, one a general ques- tion extending to all cases, the other a particular question applying to this particular case. The general question is this : whether the 192nd section of the Bankruptcy Act, 1861, applies to a mere deed of composition where the deed does not contain and is not accompanied by any cessio bonorum. Before the passing of this act, the law was well settled that in order to validate an arrange- ment between a debtor and his creditors under the Con- solidation Act, there must be a complete cessio bonorum. And it was argued in this case on the one hand on the part of the Bankrupt, that it was intended by this act to alter this state of the law, and on the other hand on the part of the Respondents that there was no such intention, the provisions of the Consolidation Act and of this act upon the subject being, as it was insisted, substantially the same. The principle on which this act is framed seems to me to determine this question in favor of the Appellant's view. This act is not framed upon the prin- ciple of repealing and re-enacting. Where no altera- tion is intended to be made, the Consolidation Act is left in force. Where alteration is intended, the enactment of the Consolidation Act is repealed. Seeing, then, that the enactments of the Consolidation Act upon this subject are repealed we must, I think, conclude that an alteration in this respect was intended. The question then must be, to what extent was the 192nd section intended to effect the alteration. This must of course depend on the terms of the section. It is in these terms: — [His Lordship read it.] The terms of this section, therefore, are perfectly general; they extend to every deed or instrumenj; between a debtor and his creditors relating to the several matters which are mentioned in the section, or any of such matters ; and I do not see how it can be said, that a deed of compo- sition CASES IN BANKRUPTCY. 33 sition providing for the release of the debtor from iiis debts upon payment, either by him or any person on his behalf, of a composition upon those debts, although it may not contain any assignment of his estate or any part of it, does not fall within those terms. It was said how- ever, that the conditions specified in the section and other parts of the act which were referred to in the ar- gument, proved that no deed or instrument which did not comprise or affect the property of the debtor was contemplated as being or intended to be within the ope- ration of the section. But, it is to be observed, that the section is not limited in its operation to composition deeds, but extends, generally, to trust deeds for creditors, which ordinarily do, and to composition and inspector- ships which may or may not, affect the property of the debtor. There are deeds, therefore, pointed at by the section, to which all the conditions specified in it and the other enactments referred to would apply, and I do not think it would be a sound construction of the section to hold that it was not meant to apply to any deed unless all the annexed conditions would also apply to it. The argument would, as it seems to me, go too far. It would exclude from the operation of the section, not only re- leases founded on covenants to pay at a future day, but all deeds and instruments of arrangement with debtors having no available property ; and this, too, notwith- standing the act, in terms, extends to insolvents of every class and description. The better conclusion, I think, is, that these conditions are to be read with refe- rence to the subject matter to which they are applied, reddendo singula singulis. 1862. Ex parte Rawlinqs. In re Rawlings. On the general question, therefore, my opinion is, that this section extends to deeds of composition, although there may be no cessio bonorum ; but I desire to be understood as expressing this opinion, with all possible Vol. I— i.. D D.J.s. deference 34 CASES IN BANKRUPTCY. 1862. Ex parte Rawlinqs. In re Rawlinqs. deference to the contrary opinion expressed by one or more of the learned Barons of the Court of Exchequer, for whose opinion I entertain the highest respect. Having said thus much upon the general question, I proceed to consider the particular question arising in this case. Although the section, in my opinion, extends to deeds of composition where there is no cessio bonorum, it does not, in my judgment, extend to deeds of com- position of every description. I agree in the opinion expressed by one of the learned Barons of the Court of Exchequer, that in order to bring a case within the sec- tion the composition must be with all the creditors. I read the section thus: — Every deed or instrument relat- ing to the debts and liabilities of the debtor and relating also to his release therefrom or to the distribution, &c., of his estate or to any of such matters, shall be valid, &c. In effect, the deed must relate to the debts and liabilities, and to some one or more of the other specified matters ; and, I think, that the words " debts " and " lia- bilities," as used in the section thus read, must be taken to relate to all the debts and liabilities ; for not only is this, as I conceive, the ordinary meaning of the words, but it is scarcely possible to suppose that the Legisla- ture could intend that all the creditors should be bound by an arrangement which was partial and confined in its operation to some of them only. In all these cases, therefore, I think, the question to be considered must be. Does the deed or instrument extend to all the creditors ? Now, the deed before us in this case is as follows : — [His Lordship read it.J This deed is not, as it seems to me, a trust deed for the benefit of creditors. There is no trust fixed upon the property assigned by it. It is, as it seems to me, a mere deed of arrangement between the Bankrupt and the parties to whom the property is as- signed, by which those parties come under the obliga- tion CASES IN BANKRUPTCY. tion of paying the creditors of the Bankrupt to whom promissory notes were given, but no others of his creditors. No creditor of the Bankrupt could, as I Rawlings. understand this deed, insist in his own right, or other- I" re wise than through the Bankrupt, on his debt being paid, or any promissory note being given to him for the pay- ment of it. I agree, therefore, with the learned Commissioner, that this is not a deed of composition within the mean- ing of the 192nd section ; and, subject to the option on the part of the Bankrupt to adduce further evidence as to the assent, if it shall be desired on his part to do so, I think this application must be refused and with costs, to the extent of the deposit. Mr. Bacon stated that there was no desire to exercise I^ec. 10. the option reserved by the Court, and the appeal was consequently dismissed. D2 36 CASES IN BANKRUPTCY. 1862. Ex parte WILLIAM GODDEN and JOHN GODDEN. ^f-2f- In the Matter of THOMAS SHETTLE. Dec. 6. Before The HpHIS was an appeal by Messrs. William and John ^TcEs!"" Godden, from an order of Mr. Commissioner The word Holroyd, discharging Thomas Shettle out of the custody ''creditors" in ^^ ^.j^^ ^^^^^-^ff ^f Southampton, on the ground of his xtic nrst coil— dition specified having executed a deed of composition with his creditors, iectioVoT"*^ within the meaning of the 192nd section of the Bank- the Bank- ruptcy Act, 1861. niptcy Act, 1861, means ciedilors "ifold" '^^^ ^^^^ ^" question was in the following terms :— good or bad', " This indenture made the 12th day of August, 1862, sufficient or Between Thomas Shettle of, &c., of the one part, and the insumcient, as ' ' l ■well as ere- several other persons whose names and seals are here- withoutsecu- ^^^° subscribed and set, being severally creditors in rity ; and in their own right, Or in copartnership, or being agents or proportion of attorneys of creditors of the said Thomas Shettle (and here- assenting ere- inafter called the creditors) of the other part. Whereas, ditors under . ot ? i ■ • i i that section, the said Thomas Shettle being indebted unto the said the debts due ggyeral persons whose names and seals are hereunto sub- well as unse- scribed and set, or their respective principals, in the cured creditors . must be taken several into account. Per L. J. Knight Bruce. — It is not necessary to apply to set aside the registration and certificate of registration of a deed intended to operate under the ]92nd section of the Bankruptcy Act, 1861, before questioning the fulfilment of the conditions imposed by that section. Per L. J. Turner. — In order to be binding on all the creditors under the provisions of the 192nd section of the Bankruptcy Act, 1861, composition deeds must extend to all the creditors. Semble, per L. J. Knight Bruce, that under the Bankruptcy Act, 1861, the Court of Bankruptcy has jurisdiction to discharge out of custody a debtor who, after having executed a deed of composition in conformity with the 192nd section, is arrested by a creditor without the leave of the Court of Bankruptcy. CASES IN BANKRUPTCY. 37 several sums of money set opposite their respective 1862, names in the schedule hereunder written, and being ^•"^^"^ ' ° Ex parte unable to pay the same in full, he has lately proposed to Godden. the said creditors, and it has since been mutually agreed In le between the parties hereto, that the said Thomas Shettle should pay to the said creditors, and that they should accept from him a cash composition of 4s. in the pound on the full amount, and in full discharge of their respec- tive debts, and that upon payment thereof, the said creditors should execute the release and indemnity here- inafter contained : Now this indenture witnesseth, that in pursuance of the said agreement, and in considera- tion of the premises and of the payment to each of the said creditors aforesaid of a composition of 4s. in the pound, upon and in discharge of their said respective debts and claims, the receipts whereof they do hereby respectively acknowledge, they, the said several cre- ditors, do and every of them doth, by these presents fully and absolutely acquit, release and discharge the said Thomas Shettle, his heirs, executors and adminis- trators, of and from all and singular the debts, sums of money, bills, bonds, notes, accounts, reckonings, costs, charges, damages, expenses, judgments, executions, actions, suits, claims and demands whatsoever, either at law or in equity, which they the said several creditors respectively, or their or any of their partner or partners respectively, now have or shall or may or otherwise could or might hereafter have, claim, challenge or de- mand of, from or against the said Thomas Shettle, his heirs, executors or administrators, or his or their lands or tenements, goods or chattels, estate or effects, or any of them, for or by reason or on account of the debts, claims and demands of them or any of them respectively, due or owing from the said T'homas Shettle, and set forth in the said schedule to these presents, and all interest and arrears of interest for or in respect of the same several 38 CASES IN BANKRUPTCY. 1862. Ex parte GOODEN. In re Shettle. several debts and premisesj or any of them, or for or by reason of any other matter, cause or thing whatsoever relating thereto ; provided always, that the release here- inbefore contained shall be without prejudice to and not extend, or be construed to extend, to prevent any of the said creditors from claiming or realising any secu- rity now held by them or any of them, or from suing any person or persons (other than the said Thomas Shettle) liable to payment thereof for recovery thereof. In wit- ness," &c. In the account of debts delivered together with the deed to the Chief Registrar, and verified by the affidavit of the debtor, in obedience to the General Orders of the 22nd of May, 1862(a), no mention was made of the assent or dissent of fifteen secured creditors, the aggre- gate amount of the sums due to whom was 8,085Z. ; and the total amount of the sums due to the debtor's unse- cured creditors (twenty-four in number) was stated as 1,816Z. 17s. lJ.,of which three-fourths was 1,362/. 12s. 9|rf. All the unsecured creditors, to an aggregate amount of 1,407Z. 2s. \0d., were represented as assenting to the deed, with the exception of the Appellants, Among the unsecured creditors was placed the name of William Aldridge as assenting for 300/. On the 21st of August, 1862, the deed was registered under the 192nd section of the Bankruptcy Act, 1861. On the 25th, the certificate of registration under the 198th section (6) was granted to the debtor, and notice that such certificate had been granted was given on the 26th to the Appellants, to whom, at the same time, there was tendered on the part of the debtor a composition, calculated (a) Stated above, p. 11, note. will be found stated above, pp. (6) The sections in question 8, 10, notes. Shettle. CASES IN BANKRUPTCY. calculated at the rate of 4s. 6d. in the pound, upon the sums due to them. On the 24th of October, 1862, the J i_ 1 • 1 ^^ parte debtor was arrested upon a judgment obtained agamst Godden. him at their suit, without leave of the Court, pursuant to In re the 198th section of the act. The debtor applied to the Commissioner to be dis- charged, and from the order made upon the application the present appeal was brought. In opposition to the application an affidavit was filed, made by one William H. Mackey, which stated in effect, that the deponent had been attorney for a creditor named Aldridge in an action in which a verdict had been obtained for 2501. and costs ; that, when the verdict was given, Aldridge had the security of a deposit of deeds of pro- perty belonging to the debtor ; that subsequently to the verdict, Aldridge had, at the debtor's request, executed the composition deed for 300?., being an aggregate of 250/. debt and 50Z. costs, on an agreement that he, Aldridge, should receive the composition upon the whole 300Z., notwithstanding the deposit, which would realise the whole or greater part of his claim ; that the securi- ties were partly realised by him, and the debt. thus re- duced before he signed the deed; that the realisation had produced 120/. or thereabouts, and that the remaining part mAldridges hands would realise 100/. and upwards. In answer to this affidavit the debtor made an affi- davit denying that at the time of the action brought or at any other time Aldridge had security on property of the debtor, and stating that the security referred to was on property of another person named Watts; and that the deponent believed that Aldridge, before signing the deed, had stipulated that his consent thereto should not 40 CASES IN BANKRUPTCY. 1862. not prejudice his right on the securities in his hands j"^""*"^ deposited by Waits. Ex parte -^ •' GODDEN. Shettle. ^J"' Giffard and Mr. Ernest Meed tor the Appellants. There was no power vested in the Commissioner to make the order under appeal. But even if the question of jurisdiction were conceded, the case of the Respondent would not be advanced, for the evidence shows that the conditions imposed by the 192nd section in relation to deeds intended to operate under it have not been com- plied with. For what is the meaning to be placed upon the expression " the creditors" found in the first of those conditions ? There is nothing in the act analogous to the provisions of the 224th section of the Bankrupt Law Consolidation Act, 1849 (a), to render it necessary or proper to construe it as meaning, so far as it applies to secured creditors, such creditors after deducting the value of the property comprised in their securities ; excluding therefore from consideration in the computation of the statutory majority fully secured creditors altogether. The omission in the present act of all words leading to that interpretation shows that the expression is used in its largest sense, and that by the majority in number representing three-fourths in value of the creditors of the debtor mentioned in the 192nd section, the legislature contemplated a majority of all such creditors secured and unsecured. The principle of bankruptcy was to apply, and every creditor was intended to have the option of coming in and being heard with respect to the deed. Even the General Order of the 22nd oiMay, 1862, which will probably be relied upon on the other side, by its schedule (5), requires from the debtor a statement of the "number of creditors," an expression which clearly in- cludes (a; Stated above, p. 6, note. (6) Stated above, p. 12, note. CASES IN BANKRUPTCY. 41 eludes secured creditors. \^The Lord Justice Turner. The consequence of your argument will be, that the secured creditors might determine that the debtor should be released upon payment of nothing. J That may be so, but the language of the statute is clear here, equally as it is clear in the 1 85th and 1 87th sections (a), where the expression " the creditors" must include secured creditors and unsecured creditors alike. But even laying out of consideration the secured creditors of the Re- spondent, the requisite majority of assenting creditors is not made up, for Aldridge, as it appears by evidence, which disproves the correctness of the debtor's account, had at the time of his assent, which was reckoned in respect of a debt of 300/., received from the realisation of some of the securities which he held upon Watts' pro- perty, 120Z. or thereabouts, and it is calculated that he will receive from the realisation of the rest lOOZ. and upwards ; and if 220Z. be deducted from the aggregate amount of debts of assenting unsecured creditors, there will remain 1,187/. 2s. 10c/., and if the same sum be deducted from the aggregate amount of unsecured debts, there will remain 1,596/. 17s. \d., three-fourths of which sum is 1,197/. \2s. 9|«/. ; so that the assents are not in value equal to three-fourths of the debts. 1862. Ex parte GODDEN. In re Shettle. Again, the deed in itself cannot, even upon the as- sumption of the fulfilment of the statutory conditions, bind non-assenting creditors. To have had that effect it should have been made with all the debtor's creditors, or with some on behalf of others, have been for the benefit of all the creditors, and have related to all the debts due from the debtor ; Walter v. Adcock (b). As it is, its operation, advantages and obligations are alike by its very terms restricted to those of the creditors who exe- cute (a) Stated above, pp. 16, 17, notes. (6) 7 H. ^ N. 541. 42 CASES IN BANKRUPTCY. 1862. Ex parte GODOEN. In re SUETTLE. cute it, in which category there is not to be found any secured creditor, nor could such a creditor in the event of his security proving insufficient obtain any benefit under the deed. It may be too that the deed is invalid by reason of its containing no cession of any part of the Respon- dent's property, on which point we will not repeat, but claim the benefit of, the arguments recently addressed to the Court on behalf of the Respondents in £Jx parte Rawlings (a). They also referred to the Bankrupt Law Consolida- tion Act, ss. 112, 113. Mr. Baggallay and Mr. Doria for the Respondent. It is said that the order under appeal was beyond the jurisdiction of the Commissioner to make. The jurisdiction, however, was exercised in In re Castle- ton (6). [The Lord Justice Knight Bruce : Was the point raised ?] At any rate the concluding words of the 198th section of the present act afford ample authority for what has been done. The Court, which according to the explana- tion to be found in the interpretation clause of the Act, sect. 229, is the Court of Bankruptcy, and which by the 1st section of the Act is to exercise all the rights of the superior courts at Westminster, has inherent jurisdiction to enforce its own orders. Assuming therefore the deed to be of the nature contemplated by the 192nd section, it IS (a) See above, pp. 1, 24, sqq. The present case, and that of Ex parte Rawlings, were argued, the latter partially, and the former wholly, upon the same day, the case of Ex parte Rawlings havhig the precedence. (6) 31 L.J., N.S., Bank.7l. CASES IN BANKRUPTCY. is idle to say that the Appellants could not have obtained their rights in bankruptcy. They should have applied to '^^^^ the Commissioner for leave to bring an action, had they Godden. wished so to do. But not having made such an applica- ^" ™ tion, and having brought their action without making its they have been guilty of a contempt of Court. Then it is sought to question the validity of the assents given to the deed ;' but whilst the registration remains unimpeached, the certificate of registration is conclusive upon the point. If, however, the Court should be of a contrary opinion, still we have the requisite assents on the part of the unsecured creditors, and more is re- quired neither by the terms nor by the scope of the act. The act contemplates the case of composition deeds, as the terms of the heading prefixed to the 192nd and following sections and the language of the 136th and 185th sections(a) show, and cannot be construed as re- quiring the assent of fully secured creditors to a com- position dividend. The changes made during the passage through the legislature of the bill which afterwards be- came law as the Bankruptcy Act, 1861, in the 185th and 192nd sections, completely displace the observations of the Lord Chief Baron and Mr. Baron Martin in Walter V. Adcock (b), as to the absence of clear enunciation of change (a) See above, pp. 8, 16, be lawful for the court to deter- notes. The 136th section is, so mine the same, and to summon far as it is material, as follows : — and examine upon oath the ... . " In case of any claim, dispute or trustee or any other person whom- difference between .... any soever, as to any matters and persons claiming under a trust things concerning the ... . trust deed, deed of composition or ar- estate, and to direct such inquiries rangeraent, relating to any .... and to give such directions and debtor's estate, or to any money make such orders relative thereto or property claimed as part of as shall to the court seem just and the estate of any .... debtor, expedient . . . ." either party may apply .... to {b) 7 H. Sf N. 541. the court in London ; and it shall 44 CASES IN BANKRUPTCY. 1862. Ex parte GoDDEN, In re SuETTLE. change from the policy of the former Act, at the same time that they demonstrate the fact of the change. As to the question whether it was necessary for the validity of this deed, as one intended to operate under the 192nd and following sections of the act, that a cession of the debtor's property should have been part of the arrange- ment contemplated by it, we also are content to rely upon the arguments adduced for the Appellant in Ex parte Rawlings, with this additional argument, that in this case property is ceded in the shape of present payment to the creditors upon execution of the deed of the stipulated composition. They also referred to the Bankruptcy Act, 1861, s. 97 (a). Mr. Giffard in reply. Contempt of Court implies the existence of an order of Court in respect of which the contempt is committed ; but no such order exists in the present case, and the Appellants consequently cannot have been guilty of such an offence in prosecuting their action against the Re- spondent, who should, if desirous of stopping such action, have applied to the Court at Westminster whence process issued. As to the nature of a composition deed intended to operate under the 192nd section, and as to the 136th and 185th sections of act cited on the other side, those sections point to property of some description being comprised in such a deed, a condition which a mere composition deed ex hypothesi does not fulfil. More- over, this deed is partial in its operation, and contains no provision extending to the cases, for example, of con- tingent (a) Slated above, p. 23, note. Shbttle. CASES IN BANKRUPTCY. 4 tingent debts or debts payable in future, or whereunder 1862. creditors whose securities fail will be, in the event of ^'^^^'^^ loss, able to participate in the contemplated composition. Godden! As to the necessity of reckoning the secured creditors in In re calculating the majority required by the statute, it is material to observe that where the legislature meant to exclude them, as in the cases of petitions, provided for by the 97th section (a) of the Bankruptcy Act, 1861, it has expressly said so ; and its silence on the point in the present instance is evidence of contrary intention : ex- pressio unius exclusio alterius. Judgment reserved. The Lord Justice Knight Bruce. In this case, one of appeal from an order made by a Dec 6. very able and experienced Commissioner, several points have been argued. The first is as to jurisdiction, with regard to which it was contended that the learned Com- missioner had not by law authority to make the order or entertain the application upon which it was made. There having not been in the present instance actual bank- ruptcy, the point is, I think, reasonably open to a diffe- rence of opinion. But my impression from the 197th and 198th sections and other parts of the Bankruptcy Act of 1861 is, that the Commissioner had the jurisdic- tion — that it was not necessary to apply to a Judge of one of the Courts at Westminster — and that the Appel- lants' objection as to this point is not well founded, though I do not feel confident upon it. I assume how- ever the Respondent to be so far right. The second point relates to the meaning of the word " creditors," 46 CASES IN BANKRUPTCY. 1862. Ex parte GODDEN. In re Shettle. " creditors," as used in the first of the conditions forming part of the 192nd section of the Bankruptcy Act of 1861. Does that word where it occurs in that first condition mean and extend to creditors holding security good or bad, sufficient or insufficient as well as creditors wholly without security? The Respondent contends that it does not, the Appellants that it does. If it ought not to be read as the Respondent contends,— if the word "cre- ditors " in it ought not to be limited as his counsel argue — but ought to be construed as the Appellants insist, then the majority in number representing three-fourths in value required by the first condition of the 192nd section has not in writing assented to or approved of the instrument of the 12th oi August, 1862, in question. Con- sequently, if the Appellants' reading is right, there was no bar against the Appellants from executing their judg- ment, and the application to the learned Commissioner was, in my judgment, groundless, — unless, indeed, the argument for the Respondent, founded on the supposed eflfect of registration and of the certificate mentioned in the 198th section, is well founded. But it appears to me not well founded. I conceive that neither the regis- tration nor the certificate improves or assists the case of the Respondent for any present purpose. What, then, is the meaning of the word " creditors" as used in the first condition of the 192nd section? If construed literally — construed according to grammar — construed according to idiom — the word must certainly, I apprehend, be read and understood as the Appellants contend. But does the context, does the general inten- tion, does the purview, of the statute to be collected from the whole of its contents, demand or justify a departure from that reading, from that understanding ? I find my- self unable to answer that question in the affirmative, and especially Shettle. CASES IN BANKRUPTCY. 47 especially unable to say that the Respondent's case is 1862. advanced or assisted by the 97th section or the interpre- ^•"'n^'*^ tation clause. It seems to me, that the word " creditors" Godden. in the first condition of the 192nd section ought to In re receive a literal interpretation, an interpretation in con- formity with grammar and idiom, and that the Respond- ent's case therefore (whether on any other, or not on any other ground also) feils. It has been said that this interpretation is likely to produce inconvenience. It may be so; but I believe that» if it is material or relevant to consider the greater or less amount (if any) of inconvenience likely to follow from either construction, the Respondent's interpretation is likely to produce at least as much inconvenience as that of the Appellants, though (it may be) of a different kind. I do not declare or intimate an opinion as to any point raised on the appeal, but those on which I have expressly stated an opinion, DiflFering most re- spectfully from the learned Commissioner, I think that the order under appeal should be discharged. Let me add, that if, as I am informed, the hope of a legislative revision of this Act taking place was expressed lately by one of the superior courts at Westminster, I join in that hope, nor will the revision, I trust, be narrow in its range or long delayed. The Lord Justice Turner. I am also of opinion that this order cannot be sup- ported. The learned Commissioner could not, as it seems to me, have any jurisdiction to make the order, unless the 48 CASES IN BANKRUPTCY. 1862. the deed, executed by the Respondent was valid and ^llT''"'^^ binding on all the creditors, under the provisions of Ex parte ° . GoDDEN. the I92nd section of the Bankruptcy Act, 1861 ; and in In re niy opinion this deed, like the deed in Mawlings' case, was not so valid and binding, primarily, I think, for the same reason as in that case, that the deed does not extend to all the creditors ; for the deed is in this form : — [His Lordship stated it.J I do not see how any creditor, not a party to the deed, could insist on coming in under it, and being paid the composition provided by it ; but beyond this there is, as it seems to me, another objection which is fatal to this deed. I think it has not the assent of the necessary proportion in value of the creditors ; for, according to the best opinion which I can form upon the point, I think that, in reckoning the proportion of assenting creditors under this section, the debts due to secured as well as unse- cured creditors must be taken into account. Other- wise, creditors imperfectly secured would be left at the mercy of the unsecured creditors. The Order of May, 1862, referred to in the argument, may probably have been intended to meet this difficulty, but I do not think that the construction of the Act can be altered or affected by any General Order. CASES IN BANKRUPTCY. 49 * 1862. Ex parte JOHN WENSLEY. In the Matter of JOHN WENSLEY, a Bankrupt. Dec. 19. rriHIS was an appeal from an order of Mr. Commis- Before The sioner Perry, of the Liverpool District Court of Chancellor Bankruptcy, confirming an adjudication of bankruptcy 1'°"° • i. xi, A 11 1 Westbuky. agamst the Appellant. , * -^ An assignment of the princi- The act of bankruptcy on which the adjudication was assignor's prc^ made was the execution by the Appellant of an inden- P"'y ™ay be ,,,.,-^ ,„„ , ,, anactofbank- ture, dated the 4th or June, 1862, and expressed to be ruptcy, al- made between the Appellant of the first part, Thomas *°"g'> 5°' '^'^ "^ executed by Sagot of the second part and the several persons whose the assignor names and seals were thereunto subscribed and affixed, jf ""appear^ ^' by themselves or their several attorneys lawfully ap- that the pro- pointed for that purpose, being respectively creditors of jeed must ne- the Appellant of the third part. cessarily have ^^ ^ the effect of de- laying and de- The deed recited that the Appellant was seised of or ¥^'"^ *^ ^^ ^^ _ _ signor s ore- otherwise well and sufficiently entitled to the piece of ditors. And land messuages and hereditaments thereinafter firstly asskni^ent^" described, for an estate of inheritance in fee-simple, was made to subject to certain incumbrances thereinafter mentioned ; of whom was that by an agreement of the 9th of January then last, ^" accountant J ° ' employed with expressed a view to and under the as- signment, upon trust out of the proceeds of the assigned property in the first place to pay all costs, charges and expenses due or to become due to the assignor's solicitor, and the professional charges of the accountant-trustee, and other expenses, and subject thereto to divide the proceeds rateably among the creditors who should execute the deed, and the deed recited that the assignor was not prepared to pay his debts in full : — Held, that the necessary effect of the deed was to defeat and delay the creditors, and that it was an act of bankruptcy. An assignment of the principal part of the assignor's property for the benefit of creditors may be given in evidence as an act of bankruptcy, although not registered under the Bankruptcy Act, 1861. Vol. I — 1. E D.J.S. so CASES IN BANKRUPTCY. 1862. Ex parte Wensley. In re Wenslby. expressed to be made between Thomas Yates of the one part and the Appellant of the other part, the Appellant agreed to purchase (along with other land) the piece of land secondly thereinafter described for an estate of in- heritance, and Thomas Yates agreed to make him cer- tain advances to enable him to build on the land con- tracted for ; that the Appellant, without having taken up his conveyance to the land thereinafter secondly described, had recently erected thereon five dwelling- houses, and had become indebted to I'homas Yates in a considerable sum of money; that the Appellant was indebted to the said several persons parties to the deed of the third part in the several sums of money set opposite their respective names in the schedule there- under written, and was not prepared to answer or pay the same ; and that the Appellant had agreed to grant and convey the hereditaments thereinafter described to Thomas Bagot, his heirs and assigns, upon trust for the benefit of the said persons, parties to the deed of the third part, in manner thereinafter expressed. By the first witnessing part, the Appellant conveyed to the use of Thomas Bagot his heirs and assigns two pieces of land, with certain buildings thereon, at Everton, in Lancashire, subject nevertheless, as to the hereditaments firstly described, to a mortgage and other incumbrances thereon, and as to the hereditaments secondly described, to Thomas Yates' lien for the residue of the purchase-money then owing by the Appellant to him, and also to certain advances made by him to the Appellant for the purpose of enabling the latter to build on the land. It was declared that Thomas Bagot, his heirs or assigns, should hold the premises upon trusts for sale; and should out of the proceeds discharge all costs, charges and expenses then already or thereafter to become due to the Appellant's solicitor therein men- tioned. CASES IN BANKRUPTCY. 61 tioned, and the professional charges of Thomas Bagot in his capacity of accountant therein, and the costs and charges attending the sale or sales, and the money which the trustees might disburse for the interest due to the solicitor, taxes and repairs of the said premises, and the insurance of the buildings thereof, &c. or otherwise in carrying the trusts contained in the deed into execution, and should pay to the solicitor, his executors, adminis- trators and assigns, all principal and interest moneys then or thereafter due and owing to him ; and apply the residue of such proceeds in payment of all the debts or sums of money owing by the Appellant to such of the creditors as should execute the deed, rateably and in proportion to the amount of the debts or sums of money owing to them respectively ; and if, after payment of the same, any surplus should remain, should pay such surplus to the Appellant, his executors or assigns, or as he or they should direct. There was a further witnessing part, whereby in consideration of the conveyance made by the Appellant and of the trusts of the deed, the said several and respective creditors who by themselves or the persons respectively authorised by them had sealed and de- livered the deed, covenanted with the Appellant, his heirs, executors and administrators, that the present covenant should operate and enure, and might be pleaded as a release ; and that creditors taking proceedings against him should thereby incur a forfeiture of their debts. The deed was executed by the Appellant and Thomas Bagot, and by seven of the Appellant's creditors, but not registered as required by the Bankruptcy Act, 1861 (a). The (a) See sect. 194, set out above, p. 9, note. E 2 1862. Ex parte Wensley, In re Wensley, Wensley. m CASES IN BANKRUPTCY. 1862. The solicitor, in his examinations before the Commis- ^^'^''^^ sioner, stated that, besides the property comprised in Wensley. the deed, the Appellant, who was a builder, had house- In re hold furniture and trade utensils, and two or three pieces of land in the same neighbourhood with those comprised in the deed, under a contract for purchase from Thomas Yates, upon one lot of which he had commenced laying foundations. The deponent further stated, that he be- lieved some debts to be due to the Appellant, but could not say to what amount; but he believed that Thomas Yates was one of the debtors to the extent of 60Z. He did not know of any other property of the Appellant. He stated that he had prepared the deed of the 4th of June, in consequence of a meeting of the Appellant's creditors held on the 31st of Maj/ previously for the purpose of gaining time to arrange with the Appellant's creditors. He further deposed, that the incumbrances mentioned in the first recital in the deed as existing upon the property first therein described consisted of a mortgage to himself, executed in the preceding March, for 1,350/., and a memorandum of further charge of about 40/. executed in the following April. On cross-exami- nation he stated that the circumstances which led to the preparation of the deed of the 4th o? June, 1862, were these, that the meeting of the Appellant's creditors, held on the 31st of May, was adjourned to the 4th of June; that on the 2nd of June the deponent attended several of the creditors, of whom he mentioned five, and that they insisted on an assignment, one of them stating, that unless the Appellant gave up all control over the property, he would file a petition in bankruptcy against him. The deponent said that this was commu- nicated to the Appellant on the 3rd, and that the draft was drawn, in accordance with the creditors' wishes and after communication with some of them, on the same day ; he said that he was, to the knowledge of the cre- ditors. CASES IN BANKRUPTCY. 58 ditors, to be the solicitor to carry the trusts of the deed 1863. into effect, and that the costs, charges and expenses j, . mentioned in the deed or thereafter to become due to Wensley. him were those of carrying the deed into effect: and In re , , •111- 1 Wensiev. that those mentioned as already mcurred were the ex- penses of an attempted sale made upon the instructions of the Appellant, and some preliminary charges in refer- ence to the Appellant's affairs, altogether amounting to about 321. The Appellant in his examinations stated, that at the date of the deed of the 4th of June, the amount of his unsecured debts was about 4401., and that the property assigned by the deed was sufficient to pay on that day 40s. in the pound ; that the deed was executed in con- sequence of pressure put upon him by the creditors. That on the 4th of March, 1862, he had had an offer of 2,0001. made to him for the property in mortgage to the solicitor, also an offer of 1,600Z. for one house out of the four comprised in that mortgage ; that the value of the remaining three houses had been valued in JVovem- ber, 1861, by an architect, and should be worth at least 6501., they bringing in 611. a year ; that the Appellant estimated the value of the property mortgaged to the solicitor at 2,6001. By the certificate of the architect mentioned by the Appellant as having valued the pro- perty in Novemher, 1861, it appeared that this architect had estimated its value at 2,2801. Tliomas Bagot in his examinations proved that, upon the occasion of an attempted sale on the 14th of October, 1862, he was authorised by three of the Appellant's cre- ditors to place a reserved bidding on the first lot at 1,800Z. On cause being shown against the adjudication the Commissioner 54 CASES IN BANKRUPTCY. 1862. Commissioner held, that the execution by the Appellant ^'*'~*'*^ of the deed of the 4th oi June, 1862, constituted an act Wensley. of bankruptcy, and confirmed the adjudication. In re Wensley. Mr. De Gex, for the Appellant, took a preliminary objection that, the deed not having been registered as directed by the statute should not have been received in evidence, the terms of the act being positive and express ; and he contended, that by admitting the unregistered and unstamped document in evidence for the purpose of founding an adjudication upon it, the Commissioner had admitted it for the purpose of giving effect to it, and not for a merely collateral object, so as to bring its admis- sion within the exceptional cases decided under similar enactments. The Lord Chancellor said, that although the deed could not have been received in support of any title or release under it, as for example against any creditor suing the debtor, or taking proceedings against him in trover or ejectment, yet, as the act of and as against the debtor, and for the purpose of undoing the effect of the deed, it was receivable in evidence (a). Mr. De Gex. Upon the merits of the case this deed does not, according to the evidence, comprise the whole or substantially the whole of the debtor's property. It is therefore not on the face of it an act of bankruptcy, and in order to prove that it is one, the Respondents must prove that it was a dealing in the nature of a fraudulent preference (6). But in order to make out a case (a) See, on the Stamp Acts, De G., M. ^ G. 572; Pur- Coppock V. Bower, i M. Sf W. miter v. Parmiter, IJ. 4- H. 1 35. 361, and cases there referred to. (fr) See Balme v. Mutton, 2 See also Rex v. Hall, 3 Stark. Y. ^ J. 108, 109; Hale v. All- 67 ; Rex v. RecuUst, 2 Leach, nutt, 18 C. B, 526. 706 ; Evans v. Prothero, 1 CASES IN BANKRUPTCY. 55 a case of fraudulent preference two things must be shown; first, that the deed was executed spontane- ously, and secondly, that it was executed in contem- plation of bankruptcy. In Van Casteel v. Booker {a), Mr. Baron Parke said, " To defeat a payment or transfer made to a creditor, the assignees must show it to be fraudulent as against the body of creditors by proving it to be voluntary and in contemplation of bankruptcy, and if it is made in consequence of the act of the creditor, it is not voluntary." In that case, Mr. Baron Rolfe who had tried the cause said, " If the law be that anything which emanates from the creditor is sufficient, then my ruling was incorrect, for it was calculated to convey the impression that there would be a fraudulent preference, unless payment was demanded with importunity and pressure, and not requested as a matter of favour," and the Court held that this was a misdirection, and made the rule absolute for a new trial. Gibhins v, Pkillips{h), was also a case on a rule for a new trial on the ground of misdirection, the Judge having said to the jury " The most important thing to be considered is whether this was a voluntary deed and done in contemplation of bank- ruptcy, for then it would be a fraudulent deed." It was in that case contended in the argument, that the learned Judge had erroneously put to the jury two things as necessary, that the deed was voluntary and in contem- plation of bankruptcy : whereas it should have been in the alternative, viz., whether it was voluntary with intent to defeat or delay creditors, or in contemplation of bank- ruptcy. But Mr. Justice Bayley in giving the judgment of the Court said, " There does not appear to have been any misdirection on the part of the learned Judge." ... It was 1862. Ex parte Wensley. In re Wensley. (ffl) 2 Exch. 706 ; see what is said by C. J. Ikle on these cases in Edwards v.Glyn, 2 El. Sr El. 49. (b) 7 B. 4- C. 729. Wenslet. 56 CASES IN BANKRUPTCY. 1862. was necessary that there should be two ingredients in '""^'■'•^ the transaction of the bill of sale in order to make it an Wensley. act of bankruptcy, viz., fraud and the delay of creditors." In re Johnson v. Fesemeyer (a), is to the same effect, and in many respects resembles the present case. Not only have the Respondents failed to prove either of these requi- sites, but the evidence shows clearly that the deed was executed at the instance of the creditors, and that the Appellant had good reason for believing that his estate would pay 20s. in the pound and leave a surplus. [TAe Lord Chancellor : Must not such a deed have ne- cessarily delayed and defeated the assignor's creditors in their proceedings ?] Not in the circumstances of this case. But as the deed does not comprise all the pro- perty, it would not be enough that it to some extent de- feated some of the creditors, for this may be said in every case in which there has been a conveyance or assignment of part of the debtor's property made to some or one only of the creditors upon a request, and not spontaneously, and in which the debtor cannot pay his debts in full. But here the creditors have not been in fact defeated or delayed, the arrangement made by the deed being one under which every creditor will certainly receive a much larger and more speedy dividend than he will under the bankruptcy, should it proceed, and will in all probability be paid in full ; whereas the expenses of a bankruptcy, and the disadvantageous mode of realis- ing the property under it, render such a result in the latter event very unlikely. Mr. Bacon for the Respondents was not called upon. The (a) 25 Beav. 88 ; 3 De G. ^ J. 13. CASES IN BANKRUPTCY. 57 The Lord Chancellor. v-^vO The case before me is that of a man, who being in in- Wensley. solvent circumstances, admitting indeed under his hand I" ''^ and seal that he is not prepared to pay his debts, makes a conveyance of what upon the evidence appears to be the principal part of his property, the primary object of that conveyance being to give a general sweeping charge in favor of his solicitor, a charge framed so as to extend not merely to debts due at the time of the execution of the conveyance, but to debts thereafter to become due ; and in the next place to give a similar charge in favor of the trustee, an accountant. Then come directions for the sale of the residue of the property comprised in the deed, and for the application of the proceeds of the sale after satisfaction of the general charges to which I have adverted in favor of such creditors as come in and exe- cute the deed. Now there may be an act of bankruptcy committed by voluntary payment of money in preference of a particular creditor on the part of a man who knows himself to be so insolvent, that he must expect bankruptcy to be the necessary consequence of the payment. There may be an act of bankruptcy committed by a fraudulent gift of part of a man's property to a particular creditor under like circumstances. But there may also be an act of bankruptcy committed by the execution of a conveyance so framed, and accompanied by such circumstances, as that the general body of creditors will be thereby de- feated or delayed in their proceedings for the purpose of having the debtor's property administered according to the law in bankruptcy. The question in the present case is, whether the Commissioner was not right in holding the present deed to come under that category. The Appellant's counsel argues that in the circumstances of the 58 CASES IN BANKRUPTCY. 18f)2. Ex parte Wensley. In re Wensley. the case this was not a probable consequence of the deed, inasmuch as it appears upon the evidence that the Appellant's property was so large that he might well place it in its present situation, and yet reasonably enter- tain the belief that the consequence of his so doing would be to promote the interests of his creditors rather than to delay them. I cannot come to that conclusion. The deed seems to me a very improper one. The evidence as to the value of the Appellant's pro- perty fails to satisfy me that the property was of such value as to justify its being placed in that position. I think that the deed, made as it was under circumstances of avowed insolvency, was made merely for the purpose of keeping the management, conversion and distribution of the property entirely in the hands of the Appellant's solicitor, and is not such a deed as can be supported ; and if it cannot be supported, it is an act of bankruptcy within the meaning of the statute. I think that the learned Commissioner's conclusion was correct, and I shall not disturb his order. CASES IN BANKRUPTCY. 59 1862. Ex parte THOMAS PAGE and GEORGE PAGE. ^«<^- 5- In the matter of WILLIAM COOPER NEAL. ,^^^?\ Jan. 11. rr>HIS was an appeal from an order of Mr. Com- Be/ore T/ie missioner Sanders of the Court of Bankruptcy for Chancellor the Birmingham district, refusing to adjudicate the ^^°'''' , o .; WeSTBURY, Respondent William Cooper Neal a Bankrupt, under j,^^ „„. , circumstances and upon grounds stated in the Commis- the General sioner's judgment to the following effect : — Bankruptcy of 6 Nov. 1861, " Thomas and George Page, carrying on business in {Jo°ne^"fyi. * partnership as iron founders, have on the 29th of October, dence shall be received on 1862, presented a petition for adjudication of bankruptcy ^ny appeal against W. C. Neal, now out of business, but lately ""'ess the , - , • , ^ ,^ . Court of Ap- carrymg on busmess in partnership with T. Martin as peal shall, on bedstead manufacturers, and the petition has been ad- ^l"^ tearing '^ _ thereof, so journed till this day. The act of. bankruptcy on which direct, applies it was intended to rely is a deed dated the 22nd of August, „ the mat- 1862, by which Neal and his late partner Martin con- ters in issue, veyed and assigned all their estate, real and personal, to dence as to three trustees, N. Fellows, R. Hill and W. Batson, on ^,''»* ^°°\ place in the trusts for division among their joint and several creditors. Court helow. The deed being in the possession of the trustees, a sum- /. " '^ mons was sent by the Petitioners to the solicitors of the some ground trustees to produce the deed, which was accordingly f^^ ^^^ admis- done : but upon its production, it appeared by an indorse- s'o" of the new evidence* ment upon it to have been registered under the Bank- n is not ne- ruptcy Act, 1861, on the 18th of September, 1862. The "^^^^^^^^^ solicitor tion by way of appeal, on the ground, among others, of the rejection of evidence should state that ground. The certificate of registration of a deed of arrangement with creditors under the 192nd section of "The Bankruptcy Act, 1861," is only primft facie evidence of the fulfilment of the requisites of that section to which the certificate extends, and may be controverted without a separate proceeding to set it aside. 60 CASES IN BANKRUPTCY. 1862. solicitor producing the deed proved to me in the form ^T"'"^^ required by the General Orders that the conditions re- Page. quired by the act had been fulfilled, and he produced to In re me the certificate of the due registration of the deed signed by the chief registrar in the form pointed out by the General Order. It was proved to me also that the soli- citor on producing the deed to the registrar had delivered to him the memorandum required by Order 19 of General Orders, and that the affidavit required by the same Order and the certificate of the- trustee thereby also required had been duly made in the form there propounded. The memorandum of registration already mentioned to have been indorsed on the deed was also in the proper form, I considered that, so far as the matters referred to in the Certificate of the chief registrar are concerned, that cer- tificate was intended by the act to be evidence at least prim^ facie of the truth of them. But as according to the form of the certificate and the other documents re- ferred to, there appeared to be no distinct proof or recog- nition of the performance of the provisions required in articles 2, 3 and 7 of s. 192 of the Act of 1861, I re- quired proof to be made of them : and evidence having accordingly been laid before me that the trustees had executed the deed, that the execution of the deed by the debtor was attested by a solicitor, and that imme- diately upon the execution thereof by the debtor all the property comprised therein had been given to the trus- tees, who, as it was stated to me and not denied, have since sold and realised a considerable portion thereof and are ready to make a dividend thereout, I declined to make the adjudication of bankruptcy sought by the petition." From this decision Messrs. Thomas and George Page appealed. Mr. De Gex, in support of the appeal, tendered in evidence CASES IN BANKRUPTCY. 61 evidence an affidavit, which had not been before the 1862, Commissioner, and which stated that the petitioning p**"^ creditors had tendered before the Commissioner evidence Page. to show that the conditions specified in the 192nd section In re of the Act of 1861 (a) had not been complied with, but that the Commissioner declined to receive such evidence, holding that while the certificate remained undischarged it must be accepted as evidence of the fulfilment of those conditions which were certified by it to have been fulfilled. Mr. Little, for the Respondent, objected that consis- tently with the 32nd of the General Orders in Bank- ruptcy of the 6th o{ JYovember, 1861, the affidavit being new evidence could not be received on the present appeal unless the Court should now so direct. The Lord Chancellor. The rule applies only to evidence as to matters in issue, and not to evidence as to what took place before the Commissioner. With regard to the former the leave of the Court is required, and will not be given as a matter of course merely for the asking. The latter description of evidence could not be requisite if the proceedings contained a note of all that took place. Do the Respondents desire an opportunity of answering the affidavit, remembering that it will be at their peril in respect of costs if they do not displace what is stated in the affidavit ? Mr. Little said that he desired to have such an oppor- tunity, but contended that the notice of motion by way of appeal ought to have stated that it was on the ground of the rejection of evidence, and that as it did not so state, the point could not be raised. The (a) Stated above, p. 8, note. Neal. 62 CASES IN BANKRUPTCY. 1862. The Lord Chancellor, without calling on the Ap- ^'^''^ pellants' counsel, overruled the objection, and said that Page. the Respondent in this case might have time to answer In re the affidavit, but that his Lordship desired it to be un- derstood in future that the order only applied to evidence upon the matters in issue, and that it would not go to the extent of excluding evidence as to what took place before the Commissioner. In the present case, it was material to know whether the petitioning creditors did request the Commissioner to give them an opportunity of con- troverting the things stated in the certificate. Mr. Little. I submit that the registrar's certificate ought to be received as sufficient evidence of the facts which it certifies, unless the person who disputes its correctness takes some proceedings for the purpose of discharging it. The Lord Chancellor. Has not a creditor a right to go before the Com- missioner and to say, " I rely on that deed as an act of bankruptcy ?" and if the trustees of the deed thereupon say to the Commissioner, " We are in a condition to show that the requisites of the statute have been com- plied with," and produce the certificate, cannot then the creditor say, " I can show by evidence that the state- ments in the certificate, which are founded upon the representations of the parties to the deed, are incorrect," and ought he not to have an opportunity of so doing ? Mr. Little. What I submit to the Court is, that as the certificate is issued and filed and the consequent statutory effect has accrued to the deed, the proceedings of the person who seeks to impeach the validity of the certificate ought to be directed to some process to set aside CASES IN BANKRUPTCY. aside the certificate. Such a course would be analogous to the practice with regard to an order in chancery e''^^^ which had been improperly enrolled. So here the Page. proper proceeding would be one in the nature of a I" re motion to take the certificate off the file. The Lord Chancellor. That would be an unnecessary formality, because the same thing is involved in making an application to treat the deed as an act of bankruptcy, and the statute does not provide any process for discharging the certificate. The certificate is only prima facie proof. It cannot pre- clude the right of any one to challenge the facts which are stated in it. The matter had better stand over, and if the Respondent finds the statements of the Appellants incorrect, he will answer the affidavit; if otherwise, he may go to the Commissioner with a renewed appli- cation to enter into the question — whether this deed was or was not an act of bankruptcy. If duly registered, it was not ; if not duly registered, then it may have been. 1863. On this day the matter was mentioned again, afii- Jan. 14. davits having been filed on both sides, differing in their representations of what had taken place before the Com- missioner, and after some discussion the matter was again ordered to stand over, with liberty for the Appellants to go before the Commissioner and renew their application for an adjudication of bankruptcy against the Respon- dent, with the intimation of his Lordship's opinion that the certificate of the registrar did not exclude the testi- mony proposed to be adduced on the part of the Ap- pellants. The matter was afterwards, as it is understood, arranged between the parties. 64 CASES IN BANKRUPTCY. 1863. Jan. 28, 30. Before The Lord Chancellor Lord Westbury. The registra- tions of trust deeds under the 192nd and under the 194th sections of the Bank- ruptcy Act, Ex parte CHARLES MORGAN, FRANCIS BRYANT ADAMS, FRANCIS BRYANT ADAMS the younger, and CHARLES MORGAN the younger. In the Matterof WILLIAM HENRY WOODHOUSE, a Bankrupt. rr^HIS was an appeal from an order of Mr. Commis- sioner West, of the Court of Bankruptcy for the Leeds district, dismissing the Appellant's petition for an adjudication of bankruptcy against the Respondent. By an indenture dated the 25tli of October, 1862, and expressed to be made between the Respondent of the first part, Richard Brook, Joseph Woodhead and George Milthorp, trustees for themselves and the rest of the ere- in practice"^ ditors of the Respondent, parties thereto of the second performed by p^vt and the several other persons whose names and the same i -i i i i ■ officer, are dis- seals were thereunto subscribed and set, being respec- tinct, and have tj^ej creditors of the Respondent, of the third part, dinerentopera- ■^ '^ ' r ' after reciting that the Respondent being justly and truly indebted papers re- quired by the orders registration under the former section had been refused by the officer, and the applicant had registered the deed under the 194th section: — HeW, that the registration did not prevent the deed, which was an assignment of all the debtor's property, from being an act of bankruptcy. The 192nd section applies only to deeds which contain provisions for the benefit of all the debtor's creditors, and this requisite is not fulfilled by a deed the trusts of which are for the benefit of such of the debtor's creditors as shall execute the deed within a limited time. Semble, that a deed, to be entitled to the benefit of the provisions of the 192nd sec- tion, need not comprise the whole of the debtor's property. Semble also, that the creditors under a trust deed are placed in eodem statu with cre- ditors under a bankruptcy, and that as the latter cannot prove, without allowing for the value of their securities, the former are subjected to the same obligation. tions; and where for the want of the CASES IN BANKRUPTCY. 65 indebted unto the said parties thereto of the second and 1863. third parts in the several sums set opposite to their re- spective names in the schedule thereunder written which Morgan. he was unable to pay in full, had therefore proposed I" re and agreed to assign all his estate and effects unto the said trustees for the benefit of his creditors, as therein- after mentioned, the Respondent assigned unto the said trustees, their executors, administrators and assigns, all and every the stock-in-trade, goods, wares, merchandises, household furniture, fixtures, plate, linen, china, books of account, debts, sum and sums of money, and all securi- ties for money, vouchers, and other documents, and writings, and all other the personal estate and effects whatsoever and wheresoever of him, the Respondent, in possession, reversion, remainder or expectancy, upon trust to collect, receive or sell and dispose of the said thereby assigned premises and every part thereof, either by public sale or private contract, and in one or more lot or lots, with liberty to give any credit for the same, or to take any security for the purchase-money or any part thereof, as to the said trustees, their executors or administrators should seem proper ; and, upon trust, out of the moneys to be received by virtue of the deed, to pay all costs and expenses of proposing, preparing, in- grossing and executing the deed, and attending or relat- ing to the said thereby assigned premises or the trusts created by the deed; and in the next place to pay, re- tain and satisfy, rateably and proportionably, and with- out any preference or priority to themselves, the said trustees and their partners, and the other persons, parties to the deed, of the third part, who should execute the deed within twenty-eight days from the date thereof, the several debts or sums set opposite to their respective names in the said schedule to the deed, subject to the covenant thereinafter contained for verifying the amounts thereof, and to pay the residue (if any) of the said Vol. I — I. F D.j.s. moneys 66 CASES IN BANKRUPTCY. 1863. itloneys unto the Respondent, his executors, adminis- ^"-"'^^ tratofs and assigns : provided always, that it should be Ex parte ,„,„,., , , n 1 MdRGyis. lawful for the said trustees to make to the Kesponclent In re such allowance or return to him such part of his house- hold furniture or effects not exceeding the value of 20/., as they might deem expedient ; and also to employ the Respondent, or any other person or persons, in winding- up the aflFairs of the Respondent, and in collecting and getting in his estate and effects thereby assigned and in Carrying on his trade, if thought expedient by them, and to allow to the Respondent, or any other person or persons So employed as aforesaid, out of the said trust estate, such sum and sums as to the said trustees should seem proper. Then followed a power of attorney from the Re- spondent to the trustees, and a clause empowering them to give receipts, which were follovred by a proviso, covenant and agreement by and between the said several parties to the deed that it should be lawful for the said trustees, at the expense of the said trust estate, to require the amount of any debt or debts of any or either of the several creditors parties to the deed to be Verified by solemn declaration, or in such manner as to the said trustees should seem expedient ; and in the event of any such creditor or creditors refusing or failing so to Verify his, her or their debt or debts, then such creditor or creditors so refusing or failing as aforesaid should lose all benefit, dividends and advantage to be derived from or otherwise claimed under the deed, anything therein contained tO the contrary notwithstanding ; and there- upon the said trustees were thereby authorised and efiapowered to pay such last-mentioned dividends or dividend unto the Respondent. And the trustees vi'ere authorised and empowered to pay or make such arrange- ments with the creditors whose debts were under 101., as they the said trustees might deem expedient. It CASES IN BANKRUPTCY. 67 It was then provided, declared and agreed, that any 1863. resolution signed by the majority in number and value y""*"^*^ of the creditors, parties to the deed, should be binding Mobgan. on all the several parties thereto, and should be eflfectual In re for the allowance and passing of the accounts of the trustees, and for discharging them from the trusts thereof, and from all claims and demands in respect thereof; and that all questions relating to the trust estate should be decided according to English bankrupt law. Then followed a trustees' indemnity clause, and pro- visions for the deposit of the trust moneys in bankers' hands and for drawing cheques; and the.deed closed with a general release of the Respondent by the " said several creditors, parties" to the deed, " of the second and third parts," subject to the proviso next thereinafter con- tained, being a proviso for avoidance of the release in case the Respondent had concealed or kept back any part of his estate and effects to the value of 201., except the linen and wearing apparel of himself and his family. All the formalities required by the General Order of the 22nd oi May, 1863, for the registration of a deed under the 192nd section (a) of the act, not having been complied with, the deed was registered — as was stated, both in the memorandum of registry filed in Court and on the face of the memorandum of registration written on the deed in pursuance of the 196th section — under the 194th section of the act; and in the short statement of its nature contained in the former memorandum, it was described (a) The sections and General the arguments and in the Lord Order in question, and the sed- Chancellor's judgment, will be tions of the Acts of 1849 and foOnd set out above, p. 6, si]q. 1861, referred to in the course of F 2 68 1863. Ex parte Morgan. In re WOODHOUSE. CASES IN BANKRUPTCY. described as " an assignment of personal estate and effects of the said William Henry Woodhouse, in trust for the general benefit of all his creditors." The Appellants filed a petition for adjudication of bankruptcy against the Respondent ; and upon an appli- cation by the Respondent for the dismissal of the petition, the learned Commissioner — being of opinion that the requirements of the statute had been so far complied with as to bring the case within the 198th section — dismissed the petition. The present appeal was from the order so made. Mr. Bacon and Mr. Clement Swanston for the Ap- pellants. The execution by a debtor of a deed of this nature is an act of bankruptcy on his part, unless the deed exe- cuted can operate as a valid deed, under the Bank- ruptcy Act, 1861, sect. 192. The deed now before the Court cannot, however, so operate, for several reasons. In the first place, its benefits, instead of being extended to all the Respondent's creditors, are restricted to such of them only as shall execute it within an arbitrarily prescribed number of days from its date ; and are not even extended to such of that limited class of creditors as may not, in addition, consent to verify the amount of the moneys due to them in a manner equally arbi- trarily prescribed in the deed ; and upon non-com- pliance with this requirement a penalty is imposed in the shape of an authority to the trustees to forfeit the dividends, which otherwise would have belonged to the defaulting creditors, in favor of the Respondent him- self. No statutory majority of creditors, and no debtor, in whose favor alone such clauses can operate, can be held to be able to bind the minority by them. Walter CASES IN BANKRUPTCY. 69 Walter v. Adcoch{a), Ex parte Rawlings (b), and Ex 1863. parte Godden (c), «how that a deed so framed as Z"^'"'"'^ ■^ ' _ Ex parte to benefit some only of a debtor's creditors, to the Morgan. exclusion of others, is not within the protection of I" re the act. Secondly, the deed does not even purport to bind non-assenting creditors ; the release being, by its terms, made capable of being pleaded against executing or assenting creditors only. Thirdly, the policy of the legislature, as evidenced in the enactments of 1849, with respect to the essential provisions of deeds of this nature required in them, as decided by the Court of Exchequer Chamber in Tetley v. Taylor (d), a dealing with the whole of the debtor's estate, and that policy, which has not been changed by the enactment contained in the Bankruptcy Act, 1861, is contravened by the provision contained in this deed for making allowances to the debtor and returning to him household furniture and effects to the value of 201. ; Cooper v. Thornton (e). Lastly, this deed can be no bar, under the 198th section of the act of 1861, to the Appellant's proceedings in bankruptcy ; for that section gives such an effect only to deeds within the pro- tection of and registered under the 192nd section. This deed was not registered according to the provisions of the General Order of the 22nd of May, 1862, as to leaving a copy of the deed with the Chief Registrar, but under the 194th section only, — a section introduced for fiscal purposes, and not intended to have any effect in barring proceedings in bankruptcy. The words, " given as aforesaid," used with reference to the notice spoken of in the 198th section, which is to have the effect of barring such proceedings and excluding sub- sequent adjudication, refers to the provisions as to notice under the 193rd section ; and the notice by advertise- ment (o) 1 H.SsN. 541. {d) 1 mi. 4 Bl. 521. \b) Supra, p. 1. (e) 1 Ell. Sf Bl. 544. (c) Supra, p. 3. 70 CASES IN BANKRUPTCY. 1863. ment in the London Gazette, required in the 193rd ^■'^^-^ section, apphes only to deeds answering the description Morgan, given in the 192nd section, in which category the pre- In re sent deed is not. WoODHOUSE. Mr. De Oex for the Respondent, With reference to the objection that this deed does not effect a complete cession of the Respondent's pro- perty, the present act differs essentially from that of 1849, by the substitution of the word "or" in the 192nd section of the former for the word " and" in the 224th section of the latter, thus taking away one of the princi- pal grounds on which Tetley v. Taylor (a), followed by Irving v. Gray (S) and other cases, was decided, — a difference which can only be accounted for by supposing it to have been introduced for that purpose. The altera- tion may have been made with reference to reasons such as were adverted to by Lord Campbell in the original judgment in Tetley v. Taylor, where his Lordship in delivering the judgment of the Court of Queen's Bench, and speaking of the language of the 224th section of the Bankrupt Law Consolidation Act, 1849, said:— "It is impossible to contend that these words necessarily require that the deed should provide for the distribution of all the trader's effects among his creditors ; or that they exclude a deed which allows him to remain in pos- session of them, on payment of such a composition as is satisfactory to six-sevenths of his creditors, and on the performance of such other stipulations as they consider more for their advantage than forcing hira into Bank- ruptcy, or requiring that his trade shall be stopped, that all his property shall be sold, and that they shall accept a dividend from the fund produced by the sale. The section, cautiously and anxiously, guards against the supposition (a) 1 Ell. Sf Bl. 521. (6) 3 H. S; N. 34. CASES IN BANKRUPTCY. 71 supposition that the deed to be protected must embrace 1863. all the matters which it enumerates. We can see no •-^-"w/ absurdity in supposing that composition deeds are meant Moboan. to be included in the enactment. We know that they In i-e are very common in practice, and are frequently very ^"odhoose. advantageous both for the creditors and the debtor. The composition offered may be considerably more than would be the dividend on an immediate sale and distri- bution of his effects ; and he may be enabled to pay this composition from the assistance of friends, and from being permitted to avail himself of his position in the commercial world, which would be utterly lost if he were made a bankrupt. A great power is certainly given to the six-sevenths in number and value of the creditors, but they can only place the remaining seventh in the same situation in which they have placed themselves ; and it surely would not be imputing any absurdity to the legislature, the words employed by them naturally bear- ing such a meaning, if we suppose that they consider the risk of the six sevenths in number and value of the creditors agreeing to accept a composition less than they could obtain by resorting to their legal remedies, was so small as not to deserve consideration ; or, at least, to outweigh the risk of fair and beneficial deeds of arrange- ment being defeated by the refusal of one or two creditors to join in the arrangement, or of dissenting creditors ob- taining a preference by refusing to concur until, by a, clandestine bargain, their claims are fully satisfied. Our books of reports abound with cases which have arisen out of such fraudulent transactions, and an attempt to put an end to them might be considered not unwise or unbecoming." But, besides the language of the 192nd section of the Act of 1861 being framed in the disjunc- tive, whilst that of the 224th section of the Act of 1849 was framed in the conjunctive, the 7th condition speci- fied in the former section assumes that there need not be now 72 CASES IN BANKRUPTCY. 1863. now a distribution of the whole of the debtor's estate; ^— ^z"*^ Walter v. Adcock (a). No derogation from the enactment Ex parte .... „ , ,. . . . i- i • i i_ •, Morgan. Contained in that /th condition isimphed in the authority In re given by this deed to the trustees to return a portion of WooDHousE. ^^^^ ^^^^^^ ^^ jj^g Respondent.— [TAe Lord Chancel- lor : This deed relates to the whole of the debtor's estate, for that is the subject of the assignment to the trustees. Consequently the 7th condition requires the delivery of the whole of that estate to the trustees. Is that consistent with the trustees returning a part of it to the debtor ?] There appears to be no inconsistency between the condition and the power which assumes the condition to have been fulfilled. It is not to be assumed that the trustees would exercise the power in any manner contrary to the interest of the creditors or the intention of the act; while if the proposition be pushed to its extreme limit, the Respondent must have delivered up everything, even to his wearing apparel. The more enlarged provisions of the present act were no doubt introduced to obviate the absurdity of such decisions as that in Snodin v. Boyce (b), where a trust for the distribution of all the debtor's property ex- cept such portions as would have been retainable by him under a bankruptcy was held invalid under the Act of 1849, — an absurdity thus adverted to by the Lord Chief Baron Pollock in his judgment in that case : — " Whatever may have been decided as to a power to retain or to give back a part of the property, I cannot assent to this — that when in a statute providing for the distribution of a debtor's property according to certain rules in bankruptcy we find facilities .given for arrangement without recourse to the bankrupt law, we should hold that arrangement bad, which in the dis- tribution and division of the property follows the very law to which these provisions for arrangement are ap- pended (a) 7 H. 4- iV. 541, 561. (6) 4 li. 4 N. 391. WOODHOUSE. CASES IN BANKRUPTCY. 73 pended in the statute in which we find this mode of doing 1863. without the bankrupt law. This arrangement is made ^•""•^'^ in the pure spirit of the bankrupt law to divide all that Morgan. a bankruptcy would divide ; and I cannot think that In re when the act of parliament intended that arrangements should have effect given to them, a deed of this kind, which professes to follow the very result of the bank- ruptcy code, is in point of law void. I am sorry to differ from the rest of the Court, but I cannot come to this conclusion, that what the statute says in the former part of it should become wrong when carried out by deed of arrangement or inspection." As to the argument that this is a deed operating not upon all the Respondent's creditors, but upon such of them only as shall execute within a specified time, the limitation of time for execution by the creditors is not in cases of this nature of the essence of the contract, and creditors can come in and execute the deed after Ijie ex- piration of the stipulated time; Dunch\. Kentifl); Spot- tiswoode v. Stockdale (b) ; Broadhent v. Thornton (c) ; Nicholson v. Tutin {d) ; Raworth v. Parker (e). And in Whitmore v. Turquand (f) it was held, that a trust so framed was a trust for all the creditors of the debtors. Harris v. Pettitt {g), and Re a disputed Adjudication (h), are to the same eflTect, and the prin- ciple is recognised by legislative enactment in the Bankrupt Law Consolidation Act, IS'M, sect. 68, which remains still in force. The deed, therefore, is in effect, as it was intended to be, a deed for the benefit of all the Respondent's (a) 1 Vern. 260. (/) IJ S^ H. 444 ; 3 De G., (6) G. Coop. 102. F. Sf J. 107. (c) 4 Ue G. 4- Sm. 65. (g) 31 L. J., N. S., Ch. 552. {d) 2 K.S[ J. 18. (A) 3 L. T., N. S. 634. (e) Ibid. 163. 74 CASES IN BANKRUPTCY. 1863. Ex parte MOEOAN. In re WODDHOUSE, Respondent's creditors. As to the registration, it is at least primi facie evidence that all the conditions re- quired by the statute have been complied with ; Ex parte Page{a); and the onus is consequently upon the Appellants to show, which they have not yet done, that the facts are otherwise. The act makes no distinction between registration under one section or the other, and the addition by the officer of the words "under section 194" cannot alter the statutory effect of regis- tration. If some of the documents required by the General Order were wanting, the deed should have been sent back to have them supplied. The General Order in question is a very recent one and not generally known in the country, and in so early a case, when the statutory requisites have really been complied with, the Court would give an opportunity to the persons interested under the deed to supply the formalities required by the order. The use of the word "such" in the 198th sec- tion, .ijj reference to the deed, the certificate of the filing and registration of which is by that section made avail- able to the debtor as a protection in bankruptcy, gram- matically construed, refers to the class of deeds mentioned in the 194th section as the last antecedent, at least as much to any other class. \_The Lord Chancellor: Treating this deed as one registered under the 194th section, what statutory effect is given to it so as to prevent a creditor who is not a party to it from treating it as an act of bankruptcy ?] Mr. Bacon replied. Judgment reserved. («) Supra, p. 59. The CASES IN BANKRUPTCY. 75 The Lord Chancellor. n#.s^^ < It was the object oi the legislature in passing the Moboan. 192nd section of the Bankruptcy Act, 1861, and the In re seven or eight subsequent sections, to give security to a private administration of an insolvent's estate against process at common law, and also against proceed- ings in bankruptcy. The case of Tetley v. Taylor, as decided in the Exchequer Chamber, had in effect nul- lified a great part of the benefits wh'ich would have re- sulted from the sections relating to deeds of arrangement contained in the Bankrupt Law Consolidation Act, 1849. As those sections are repealed, and it is therefore a de- cision which applies only to the construction of a portion of the statute law which is no longer in force, I may be permitted to say, with all respect, that I entirely dissent from thaf decision and that I think it was attended with unfortunate consequences. It seems to have been the intention of the framers of the 192nd section of the Act of 1861 to avoid the same result as that which was the consequence of Tetley v. Taylor. The case of Tetley v. Taylor was decided on this ground, that words of release, being conjoined with words of distribution, and winding up of an estate, ren- dered every deed void which did not contain in it pro- visions for the distribution of the entirety of a debtor's estate. The effect was, that deeds of composition, — which are very frequently proceedings or dealings with part only of the debtor's estate, and which sometimes may proceed upon the acceptance of security given by third persons for the payment of instalments in satisfaction of the insolvent's debt, — were completely taken out of the operation of the Act of 1849. It will, therefore, be ob- served that in framing the 192nd section the disjunctive conjunction " or" is used before the words " the distri- bution," Jan. 30. 76 CASES IN BANKRUPTCY. 1863. Ex p!(rte Morgan. In re WooDHOusir. bution," for the very purpose of arriving at a different conclusion with regard to the deeds, which were to be vahd and effectual under the 192nd section. But I shall advert to that more fully hereafter. In order to entitle the debtor to the benefit of the pro- tection given by the subsequent clauses of this act, it became necessary to impose certain conditions. Those conditions are embodied in the latter part of the 192nd section, and one of the most material of those pro- visions is that relating to the registration of deeds. The principle that the majority of the creditors should be able to bind the minority was continued, with an alteration, from the Bankrupt Law Consolidation Act, 1849, in which six-sevenths in number and value of the creditors were required in order to constitute the statutory majority : whereas by the 192nd section of the Act of 1861 a majority in point of number and three-fourths only in point of value are sufficient to bind the minority, provided certain conditions be observed. As I have said, one of the most material of those condi- tions is tlie condition respecting registration. And the registration required is in a peculiar form. The deed is to be brought into the office of the chief registrar for registration. The manner in which that registration is to be effected is described in the 193rd section. An ab- stract is to be made of the deed and entered in a book kept in the chief registrar's office for inspection, and the abstract so made is required to be advertised in the London Gazette. It will be found that all the subse- quent sections giving protection to a deed of this descrip- tion are sections dependent entirely upon that peculiar form of registration having been pursued. Accordingly it will be found that the 196th section relates to registration only in the office of the chief registrar. In like manner, the 197th section, a most important CASES IN BANKRUPTCY. 77 important one, plainly relates only to such deeds as come 1863. within the 192nd section — that is, deeds registered in TT"^^"^ the office of the chief registrar. Again, the 198th sec- m6roan. tion begins thus, " after notice of the filing and registra- In re tion of such deed has been given as aforesaid." There is no antecedent direction on the subject of notice, ex- cept the direction that " the deed registered in the office of the chief registrar shall be advertised in the London Gazette" The benefit, therefore, of the 198th section, which is most material, is given exclusively to those deeds which have been advertised in the manner I have mentioned. The 199th section, in like manner, refers entirely to deeds which have been duly registered in the manner prescribed by the 192nd section. The 200th sec- tion also plainly refers to a deed of a similar description. It is plain, therefore, that the protection intended by the statute to be given to a deed under the 192nd section was a protection extending only to such deeds as should be duly registered in the manner and form required by that section and the 193rd, which is consequent thereon. The immediate question which I have to determine is, whether the deed before me is a deed which has been so registered. To determine that question it is necessary to observe, that in addition to the registration prescribed by the 192nd and 193rd sections, it appeared to the legislature expedient to require another form of registration for deeds which did not exactly comply with the require- ments, of the 192nd section, and accordingly the 194th section gives the power and imposes the obligation of registering any deed of composition or deed for the bene- fit of creditors, which has not been registered under the 192nd section, in the Court of Bankruptcy; and the words are material. A deed under the 192nd section is to be registered by the deed being brought into the office of the 78 CASES IN BANKRUPTCY, 1863. the chief registrar and the solemnities attending its regis- Ex parte tration are distinctly defined. A deed under the 194th Morgan, section is directed to be registered simply in the Court In re gf Bankruptcy. For convenience' sake, by a General WOODHOUSE. . Order, J have given both forms of registration to the same officer and to the same office ; but the registration under the one section is very different from the registra- tion under the other section. The 194th section was introduced with a double view. First, because it was apprehended that many deeds of composition might still be made which would not be brought under the 192nd section and which might have an injurious effect by reason of their being secret deeds of arrangement. The obligation, therefore, was imposed upon all persons, par- ties to such a deed, of bringing it in to be registered within twenty-eight days after its approval in the Court of Bankruptcy, and a penalty is attached in case of de- fault, that the deed shall not be receivable in evidence. Another object of the enactment was this — it was felt that possibly many a deed of composition might not b6 perfected in the manner required by the 192nd section within the twenty-eight days, and yet that all the credi- tors might afterwards be willing to accede to such a deed ; and therefore power was given to register, under the 194th section, a deed which did not exactly comply with the requirements of the 192nd section. These two forms of registration, therefore, being very different, the consequences of the one form do not attach to the other. The consequence of an observance, in every respect, of the terms of the 192nd section is, that the deed is bind- ing on the minority of the creditors who do not execute or assent to it. No such consequence is attached to registration under the 194th section. The deed with which I have here to deal was brought into the office within twenty-eight days after the date of its CASES IN BANKRUPTCY. 79 Ex parte MOKOAN, In re WoouHousB. its execution, but not in a manner which admitted of its 1863. being registered under the 192nd section, and accordingly the person having charge of the deed elected to register Morgan, it under the 194th section. The memorandum of the I" f" registrar endorsed upon it accordingly is that the deed has been registered pursuant to the provisions of the Bank- ruptcy Act " under section 194." It is impossible, there- fore, that that deed can now be set up as having been duly registered under the 192nd section ; and if it be not duly registered under that section, it is not binding upon the creditors who are not parties or do not assent to it. The practical result therefore is, that any creditor who is not a party to it, or did not assent to it, may deal with that deed as an act done by the debtor, not affected by section 192 ; and if that deed constitutes an act of bankruptcy, it is com- petent to a creditor, not bound by it, not being a party to it, actually or constructively, to treat it as an act of bank- ruptcy. The deed before me plainly is an act of bank- ruptcy, if it be not protected from that consequence by the enactment of section 192, because it is a deed con- veying the whole of the debtor's property to trustees for the benefit of his creditors. That is unquestionably an act of bankruptcy, and therefore it was perfectly com- petent to the petitioning creditors, not being parties to that deed, not having assented to it, to avail themselves of it as an act of bankruptcy, and to require an adjudi- cation of bankruptcy to be founded thereon. But the matter does not rest entirely there. I regret to see the variety of determinations not consistent with one another that have taken place upon this 192nd sec- tion. I think it is perfectly clear to any person who will examine the language of that section, that it was intended to be applicable only to deeds which contain provisions for the benefit of all the creditors. I entirely agree 80 CASES IN BANKRUPTCY. 1863. Ex parte Morgan. In re WoODHOUSE. agree with those determinations which have decided that if the trust deed excludes any creditor, or the deed of composition excludes any creditor, the deed is not entitled to the benefit of the provisions contained in the 192nd section. The question therefore is, whether this deed may be properly denominated a deed which, in its ope- ration may exclude creditors of the debtor. I think that that is the result of the particular form of the trust which is here declared ; because the trustees are not to hold the property in trust for all the creditors, with a subsequent proviso imposing upon the creditors the obligation of coming in within a given time ; but the trust is for such creditors as shall execute this deed within twenty-eight days from the date thereof: a form of trust which confines its operation to the class of creditors who shall come in and execute the deed within that period. I am of opinion, that even had the deed been regis- tered in conformity with the 192nd section, this particu- lar form of trust would have been inconsistent with its sustaining that character which, in my judgment, it is necessary that it should have to entitle it to the benefit of the 192nd section. Another point was urged before me, but which, for the reasons which I have given to support the conclusion at which I have arrived, it will not be necessary for me absolutely to determine. The point was this, that inasmuch as this deed contains a proviso that it should be lawful for the trustees to give up to the debtor pro- perty to the amount of 201., it was not a deed for the distribution of the entirety of the estate, and therefore was not a deed coming within the 192nd section. That argument CASES IN BANKRUPTCY, 81 argument proceeded entirely upon a repetition of the 1863. grounds taken in the Court of Exchequer Chamber as ^— ^/-"*^ the basis of the decision in Tetley v. Taylor. I am not Morgan. of opinion that the argument would have been valid or In re that I could have accepted that ground of determination Woodhouse. if it had been the only ground on which this deed was assailed, because I think it clear that it is not required by the 192nd section that a deed to be en- titled to the benefit of that provision should be a deed comprising the whole of the property of the debtor. It is a strange thing to observe that the whole of the bene- ficent operations of the clauses relating to these deeds in the Act of 18t9 was completely defeated by the determi- nation in the Exchequer Chamber, involving as it did this consequence — that there was no possibility of making a valid arrangement by a deed, unless the debtor was stripped of the entirety of his property. But the very object of these powers and of transactions of this kind is to render it unnecessary to break up the debtor, to save the debtor from the necessity of having the whole of his property sold and converted into money, his trade establishment broken up, and the power of continuing his existing status as a trader entirely taken away. The language of the 192nd section appears broader and to have been framed probably with the intention of meeting that decision. At all events, I am of opinion that what is called in that decision in the Exchequer Chamber the cessio bonorum — that is, the assignment of the entirety of a debtor's property — is not necessary for the validity of a deed of composition or trust under the 192nd section. The points which I decide for the purpose of the pre- sent motion are these — that this deed was not registered under the 192nd and 193rd sections ; that it was inten- Vol. I— 1. G D.J.s. tionally 82 CASES IN BANKRUPTCY. 1863. tionally and by the submission of the parties registered ^^'^^ under the 194th section; that validity, as against the Morgan, use now attempted to be made of the deed, is not given In re ^y |.j,g 194th section ; that the present petitioning credi- WoODHOUSE. tors, therefore, are not bound by that deed, but may treat it as an act of bankruptcy, to which I think it amounts ; and further, I am of opinion that the fact of the particular trust being in very terms confined only to a certain class of the creditors gives the deed an exclu- sive character, which deprives it of the right of being treated as a deed which would have come within the operation of the 192nd section if it had been registered in conformity therewith. It appears that in the present case an adjudication of bankruptcy was originally made on this deed as an act of bankruptcy. The learned Commissioner afterwards, on examining the deed, was of opinion that the case was taken out of the reach of his power to adjudicate, and he therefore dismissed the petition for adjudication. I think that I must reverse that order of dismissal; and the consequence will be that the adjudication of bank- ruptcy originally made will stand. — [His Lordship then, with reference to all the circumstances of the case, directed the costs of the appeal of both parties to be paid out of the estate, and proceeded as follows :] — What I have decided is entirely consistent with the view taken by the Lords Justices. It should be particularly observed,- as reference has been made to the Order of May last, which has a schedule drawing the distinction between the secured and unsecured creditors, that that distinction is most necessary by reason of the particular language of the 197th section, because as soon as a deed is entitled to the benefit of the 192nd section it was the object of the legislature by the 197th section to CASES IN BANKRUPTCY. 83 to give to all parties under the deed the power of re- sorting to the Court of Bankruptcy whenever it might be necessary so to do. The object was to remedy the inconvenience which arose under trust deeds, which but for that enactment might, in case of any error or mis- feasance, have had to be construed or dealt with by a suit in Chancery. Accordingly the 197th section causes the state of things under a trust deed to be precisely the same as it would have been had there been a bank- ruptcy instead of a deed, and therefore the creditors under a trust deed are placed in eodem statu with creditors under a bankruptcy. But creditors under a bankruptcy cannot prove without allowing for the value of their securities, and the creditors under a trust deed are subjected to the same obligation. 1863. Ex parte Morgan. In re WoODIIOUSE. Ex parte LAWRENCE LAWRENCE. In the matter of a Deed of Assignment, filed &c., by WILLIAM BEALE, of, &c. May 22. Before The Lord Chancellor Lord Westbury. The commis- sioner has power either under the 136th section of the Bankruptcy Act, 1861, or irrespectively of that section by virtue of his authority over the trustee appointed by a trust deed within the act, to direct the trustee to be examined as to his deahngs with the debtor's estate : and although it will be a good practice not to direct such examination without some ground being shown for it, the Court of Appeal will not in general entertain an appeal as to the sufficiency of such ground. G 2 rXlHIS was an appeal from an order of Mr. Commis- sioner Fane, directing a warrant to issue to commit the Appellant to the Queen's debtors' prison for London and Middlesex, there to remain without bail until he should submit himself to the Court to be sworn. By 81 CASES IN BANKRUPTCY. 1863. By an indenture dated the 11th oi January, 1862, and j"**"*^ duly registered, William Beale assigned his property to Ex parte pi f» p i • t i Lawrence, trustees upon trusts for the benefit of his creditors, the In re trustees being Thomas William Hunt and the Appellant. Assignment. Certain Creditors of the debtor being dissatisfied with the proceedings of the trustees applied for and obtained from the Registrar an order requiring them personally to be and appear before him on the 23rd of February, 1863, " then and there to be examined by virtue of the statute in such case made and provided." Hunt appeared and was examined accordingly : the Appellant did not, explaining his absence through his solicitor. A second summons was issued ^y the Registrar, requiring the Appellant personally to be and appear before him on • the 2nd of March, 1863, " then and there to be examined by virtue of the said petition (a) and the statute in such case made and provided." The Appellant then attended, but objected to be sworn, principally on the ground that the summons ought to have alleged some " claim, dispute or difference" between the creditors at whose instance it was issued and himself as trustee, such as might give the Court jurisdiction to interfere under the 136th section of the Bankruptcy Act, 1861 {b). The matter was referred to the Commissioner, who upon the Appellant persisting in his refusal to be sworn made the order under appeal. To negative an objection on the part of the Appellant, that he had not been apprised of the matters on which it was proposed to examine him, it was in evidence on behalf of the creditors at whose instance the summonses were issued, that on the 20th oi February, 1863, notices were served upon each of the trustees, requiring them to pro- duce at the time and place fixed by the summons, all books, papers, accounts and reckonings between them and each of them and the creditors of William Beale ; also, all (a) There was, in fact, no petition. (6) Stated above, p. 43, note. CASES IN BANKRUPTCY. 85 all vouchers for payments of money made by them in re- 1863. spect of the estate, and also a statement of the receipts in _ relation to the same, and more particularly a full state- Lawrence. ment of account showing the disposal and realisation of I" ™ 1 1 1 • 1 11 Beale's the property belonging to the estate, and also an account Assignment of goods supplied for the carrying on of the business since the deed of assignment, together with their ledger, cash book, day book, purchases and sales book, waste book and invoices. Reference was also made with the same object to a correspondence on the subject which had passed between the solicitors of the respective parties, and to the form in which the application for the examina- tion had been made to the Court, and which stated that it was intended to examine the trustees " touching the statement of accounts and disposal and realisation of the estate of the said William Beale." Mr. Swanston for the Appellant. The terms of the summons were insufficient, as the Appellant should have been informed by it upon what points it was proposed to examine him. The circum- stance of the summons having been signed by the Regis- trar only, and not by the Commissioner, shows that the Commissioner, who alone, if any one, is entitled to exer- cise a discretion to issue it, never exercised his discretion in the matter. Moreover, an examination could only be " as to any matters and things concerning the bankruptcy or trust estate;" Bankruptcy Act, 1861, sect. 136; and in the present case there was no "claim, dispute or difference," to justify interference under that section. Mr. Bagley, for the three creditors at whose instance the summons had been granted, was not called upon. The 86 CASES IN BANKRUPTCY. 1863. Ex parte Lawrence. In re Beale's Assignment. The Lord Chancellor. A trustee under a trust deed stands in the same rela- tion to creditors under the deed as that in which an as- signee stands under an adjudication of bankruptcy to creditors who have proved. It was the bounden duty of this trustee to submit to the required examination under the 136th section. It would be better, possibly, in practice that a suramoijs for the examination of a trustee should not be granted by the Commissioner without some bonS, fide ground being shown for the application. If, however, the Commissioner thought it right that the Appellant should be examined, I will not undertake to determine the sufficiency of the grounds on which the Commissioner came to that conclusion. Some limits must be set to applications of the present nature, and some distinction drawn between appeals where the Com- missioner arrives at conclusions upon matters of conten- tion between parties and cases where he arrives at conclu- sions upon matters of discretion. It is not at all neces- sary to rest the order made in the present case upon the words in the 136th section of the Bankruptcy Act, 1861, although that section contains abundant authority for what the Commissioner has done. For it is enough that the relation of trustee and cestui que trust has been created, and that the latter desires information respecting the trust estate. If a summons were taken out as of course, and upon its coming before the Commissioner he were to think the case one in which the creditors' as- signee or trustee summoned ought to be examined, the Commissioner's decision would operate retroactively ; and the assignee or trustee cannot be allowed to fence with the Court and to obstruct its procedure. He must, at any rate, be ready to do at the bidding of the Commis- sioner that which he is bound to do at all times. The present CASES IN BANKRUPTCY. present application is groundless and must be refused with costs. T Ex parte Lawkence. In re Bbale's Assignment. Ex parte WILLIAM ALEXANDER. In the matter of a Trust Deed between ROBERT THIN and WILLIAM HEDDLE FLETT and their Creditors. i^^f«; HIS was an appeal from an order of Mr. Commis- Before The sioner Perry, of the Court of Bankruptcy for the Chancellor Liverpool district, discharging a summons issued by the 'i--o^v _^ WESTBURYi Registrar at the request of the Appellant, who was trus- Trustees and tee of a deed executed in the form of Schedule D to the creditors Bankruptcy Act, 1861. By the summons, the Respon- deed operating dent Lawrence Joyce was required personally to be and ""•J^r '^le " 1 tr J Bankruptcy appear before the Court of Bankruptcy at Liverpool on Act, 1861, &c., then and there to be examined by virtue of the j P^' ''."'^ •' duly regis- statute in such case made and provided ; and then and tered, are there to bring with him and produce all books of ac- same^powers^ count, accounts, invoices, sale notes, contracts, letters, rights and 1 ... . . , , . , , . privileges as papers and writings m anywise relating to or showing a^e possessed the transactions between him and the late partners, or by assignees • 1 /• 1 Till- T . , , . and creditors either ol them, and the dealings and transactions by him under an ad- with and in respect of the goods and property of the late J"'l''^ation in partners, or either of them, in his possession or power at including the the time when the trust deed was executed. ST.^,^!,,? Jit™' nesses. It appeared that the ground of the decision under ap- the jurisd'ic- peal was, that there was no evidence, except the certifi- 'i°"°'^*!l? , '■ Court of Bank- cate ruptcy to sum- mon persons under the 197th section of the Act of 1849, for the purposes of discovery, should be exercised with care, circumspection and judicial discretion, and not in amerely minis- terial way. 88 CASES IN BANKRUPTCY. 1863. cate of the Chief Registrar, to show that the deed had ^•"^■'^^ been executed or assented to pursuant to the provisions Alexander, of the Bankruptcy Act, 1861. Thin AND Mr. W. M. James and Mr. BardsweW for the Ap- Flett's pellant. Trust Deed. " The Commissioner thought that the Chief Registrar's certificate was not sufficient evidence of the fulfilment of the conditions specified in the 192nd section of the Bankruptcy Act, 1861 (a), to enable him to exercise jurisdiction in the matter, and summon the Respondent as a witness. That was a conclusion which, pressed to its legitimate extent, would require that on every occa- sion when a witness is summoned there should be a preliminary issue joined and tried between the witness and the trustees as to the existence of the requisites to the validity of the deed, for the purpose of binding non- assenting creditors, — an issue which would thus have to be tried over and over again (the result in the case of one witness not binding another), at the expense of so much time and money as to render the provisions of the act unavailable. This could not have been intended by the legislature, and, we submit, is not according to the true interpretation of the act. The scope of its 192nd and following sections is to substitute for an ad- ministration in Court an administration out of Court merely: and under the 197th section the registration of a deed confers upon the Commissioner similar powers, including that of summoning witnesses, to those which an actual adjudication of bankruptcy would have con- ferred upon hira. Mr. North for the Respondent. If it be said that the scope of the 192nd and following sections (n) The material sections re- judgment, will be found set out ferred to during the arguments, above, pp. 6, sqg., note; p. 18, and in the Lord Chancellor's note, and p. 43, note. CASES IN BANKRUPTCY. 89 sections of the Bankruptcy Act, 1861, is to substitute an 1863. administration out of Court for an administration in ^■^^'■«-' _ . . Ex parte Court, that is an admission which brings with it ground Alexander. for the argument, that trustees of a deed operating under In re the 192nd section are not intended to be placed in the Flett'b same position with assignees in bankruptcy. But even Trust Deed. assuming, that, under the 197th section of the act, the trustees of such a deed could set in motion this extra- ordinary power of the Court of Bankruptcy, it cannot be said that such authority is vested in the trustees of a deed not falling within that category. It is incumbent therefore upon the Appellants to show, and the Re- spondent has a right to require that the Court shall be satisfied of, the due fulfilment of all the conditions specified in the 192nd section of the act. Of this the registration of the deed could be at the utmost primS, facie evidence ; Ex parte Page (a) ; and is not, I sub- mit, even that. For not only is the Bankruptcy Act, 1861, silent as to the effect of registration as evidence, and not only does it, by providing in its 198th section that the certificate of the filing and registration of the deed shall be available to the debtor for all purposes as a protection in bankruptcy, virtually imply that such certificate shall not be available for any other purposes, but it contains no provision such as that which was contained in the 226th section of the Bankrupt Law Consolidation Act, 1849, making such certificate primS, facie evidence of the facts to which it relates. No attempt therefore having been made in the present case to offer other proof of the matters to which the certificate related than the certificate itself, the summons was properly discharged. He also referred in support of his argument to the 136th, 194th, 197th and 198th sections of the Bankruptcy Act, 1861. The (o) Supra, p. 59. 90 CASES IN BANKRUPTCY. 1863. The Lord Chancellor, during the argument, referred ^'^'^'^^ to the terms of the 120th section of the Bankrupt Law Alexander. Consolidation Act, 1849, and adverted to the successive In re changes vrhich had been made in the bankrupt law as Flett's '° the necessity of proving on every occasion the validity Trust Deed, of tjjg adjudication. And his Lordship having desired to hear further argument as to the course of practice of the Court of Bankruptcy with respect to granting summonses for the examination of persons suspected of having the Bankrupt's property, &c., the case stood over for that purpose. July 18. Mr. James and Mr. Bardswell for the Appellant. The power of causing witnesses to be summoned in bankruptcy has been given to creditors from the earliest times, having been so given originally by the first Bank- rupt Act, 34 8r 35 Hen. VIII. c. 4, s. 2, and it has been continued through the subsequent bankruptcy statutes, 13 Eliz. c. 7, s. 5 ; 1 Jac. I. c. 15, s. 10; 6 Geo. IV, c. 16, s. 33, and the Bankrupt Law Consoli- dation Act, sect. 120, to the present time. It is a suffi- cient ground for the issue of such a summons that the assignees suspect the person against whom the summons is sought of having part of the Bankrupt's estate in his possession, and the issue of such a summons is ex debito justitise and not in the discretion of the Commissioners ; Cooper v. Harding (a). Mr. North for the Respondent. The jurisdiction of the Court of Bankruptcy to issue summonses for the examination of persons suspected of having (o) 7 Q. B. 928. CASES IN BANKRUPTCY. 91 having parts of a Bankrupt's estate in their possession, 1863. otherwise than on the motion of the Court of Bankruptcy J'"'^''^'^ • li- • . 1 • *^ ^ Ex parte Itself, IS one capable of being made the instrument of Alexander. great oppression, vexation and injustice, and ought not In re to be extended to other cases than those of actual bank- Flett's ruptcy. At any rate, I submit that the Court, before Trust Deed. allowing its process to be set in motion at the instance of the trustee of a deed, should itself exercise some dis- cretion in the matter, which it has not done here. He also referred to the Bankruptcy Act, 1861, ss. 136 and 189, and argued that the introduction into those sections of express enactments, conferring the powers now in question, showed that the omission of similar pro- visions in the case of deeds operating under the 192nd and following sections was intentional on the part of the legislature, and could not be supplied under the terms of the 197th section. The Lord Chancellor. I have always thought that the power which is here brought in question was one of a singular and anoma- lous character, and but little reconciieable with the prin- ciples upon which EngHsh jurisprudence and the ad- ministration of justice in this country usually proceed. Still if it is a power which has been possessed by assignees in bankruptcy, — if it is a right of the as- signees or a remedy of creditors under an adjudication to call for the exercise of such a power, I think that as a matter of course a corresponding power, right and remedy are given to the trustees of a registered deed and to the creditors entitled to the benefit of the deed. It was, therefore, with a desire of ascer- taining how far the power of summoning persons sus- pected of having part of the estate of the Bankrupt in their possession, or of being indebted to him, to appear in the 92 CASES IN BANKRUPTCY. \8e3. Ex parte Alexander. In re Thin and Flett's Trust Deed. the Court of Bankruptcy without the ordinary protection which in a suit filed for discovery is afforded to the De- fendant, was the right of assignees or creditors under a bankruptcy that I desired the matter to stand over. The 197th section of the Bankruptcy Act, 1861, pro- vides [His Lordship read it. J — It would, I think, have been much better if the bankrupt law had made this particular power exerciseable by the Court alone, and only after the existence of sufficient grounds to warrant its exercise had been judicially ascertained. The prece- dents, however, in the Court of Bankruptcy, confirmed as they are by the decision in the Court of Queen's Bench, to which reference has been made, show that according to the present practice in bankruptcy (which is nothing more than a continuation of the practice which has existed for a very considerable time) this right or power is considered as an ordinary " right or remedy" of assignees or creditors. The decision in Cooper v. Harding goes to the length of holding that the Com- missioner not only is warranted but is required to grant a summons almost as a matter of course, upon being informed that an assignee or a creditor, or the solicitor who has acted in obtaining the adjudication, entertains the suspicion or the supposition that the person whom he wishes to summon has property of the Bankrupt in his possession, or is indebted to the Bankrupt. I should be glad if in future this power should be exercised by the Court alone, and if the Commissioner, instead of acting in a merely ministerial way, should think it his duty to require some evidence upon oath to be laid before him, upon which a prim&, facie case may be made, warranting such a suspicion or supposition, and upon which the application may be justly granted. It is intolerable that a power of this kind should exist by which CASES IN BANKRUPTCY. 93 which the liberty of the subject may be invaded, and that 18G3. a man may be summoned and tortured by questions in IT'^'""^ a Court of limited jurisdiction, a Court sitting solely for Alexander. the benefit of persons whose interests are adverse to his In re own, and that he should be compelled to answer those Flett's "questions without the protection which other Courts Trust Deed. afford to persons in his position. I am bound, however, to hold that trustees or creditors under a trust deed have the same rights as assignees and creditors in the case of a bankruptcy ; whence it follows that the Commissioner is bound to grant a summons at the instance of persons claiming under a trust deed just as he is bound so to do at the instance of assignees and also creditors under an adjudication. I say also credi- tors, having regard to the language of the Bankrupt Law Consolidation Act, 1849, sect. 120, which enacts that " after adjudication it shall be lawful for the Court to summon," &c., — that is to say, before the appointment of assignees, and as soon as adjudication has been made. The power is, I repeat, one which, in my judgment, should be exercised with more care and circumspection and with more of judicial discretion than have hitherto apparently attended its exercise; although I am bound to say that the existing practice is justified by the lan- guage attributed to the Judges of the Court of Queen's Bench in the case of Cooper v. Harding. The order of the Commissioner must be discharged and the matter remitted back to him, with a declaration that the trustees and creditors under the trust deed, it having been duly registered, are entitled to the same powers, rights and privileges, including that of summoning wit- nesses, as are possessed by assignees and creditors under an adjudication in bankruptcy. 94 CASES IN BANKRUPTCY. 1863. JWay 6. July 30. Before The Lord Chancellor Lord Westeury. Ex parte JONES SPYER. In the matter of the Assignment of WALTER JOSEPHS. rpHE Appellant was the trustee of a trust deed regis- -*- tared under the 192nd section of the Bankruptcy Act, 1861, and the appeal was from the decision of Mr. Commissioner Fane, dismissing the Appellant's petition, A trust deed i , . i i ti i for the benefit which sought a declaration that the Respondents were of creditors ^^^ entitled to a specific lien on part of the trust containing ^ ' provisions for property. the application of the whole of . i i i ^ i /■ the estate of 1 he trust deed was an indenture, dated the otn or the debtor in September, 1862, and made between Walter Josephs of payment ol his ' _ ' debts as in the first part, the Appellant therein described as " trustee bankruptcy, contained a clause purport- ing to empower the trustee to pay or make such arrangements with the creditors whose debts were under lOi., and to pay thecosts, if any.of the creditors proceeding against the debtor for the recovery of their debts, as the trustee might deem expedient : — Held, that the clause did not in either of its branches prevent the deed from binding non- assenting creditors under the Bankruptcy Act, 1861, s. 192 : not in the former branch, as it only purported to give a power which, being repugnant to the rest of the deed and the law, could not be exercised : nor in the latter, as that branch might afford the means of preserving the assets for equal distribution amongst the creditors. Sembte, that the whole effect of the 197th section is to give to a trust deed when duly registered a comprehensive effect upon all the estate and effects of the debtor comprised in the deed and the particular operation of making the position and relative rights of the trustees and creditors claiming under it the same as the rights of assignees and creditors under an adjudication in bankruptcy. Setnble also, that secured creditors under such a deed rank for the amount remaining after deduction of the value of their securities. Semble also, that the words in the 197th section, " except where the deed shall ex- pressly provide otherwise," refer to the insertion in the deed of a pi'ovisofor questions being settled by arbitration, or for the adoption of some different rule of administration from that adopted in bankruptcy, as, for example, with respect to joint and separate creditors. lONMENT. CASES IN BANKRUPTCY. 95 for himself and the rest of the creditors of the said 1863. Walter Josephs" of the second part, and the several ^T*"^^^ ^ ^ ' Ex parte other persons whose names and seals were thereunto Spyer. subscribed and set, being, respectively, creditors of I" re Walter Josephs of the third part. It contained a recital Assig to the effect, that Walter Josephs had lately carried on business under the style of Walter Josephs & Co. ; and another recital, which was in the following terms : — " And whereas the said Walter Josephs has become, and is now, justly and truly indebted unto the said several persons parties hereto of the second and third parts, in the several sums of money set opposite to their respec- tive names in the schedule hereunder written, which he is unable to pay in full ; and he hath therefore proposed and has agreed to assign all his estate and effects unto the said Jones Spyer, for the benefit of his creditors, as hereinafter mentioned." By the witnessing part of the deed, Walter Josephs assigned to the Appellant, his executors, administrators and assigns, all and every the stock-in-trade, goods, wares, merchandises, books of account, debts, sum and sums of money, and all securities for money, vouchers and other documents and writings, and all other the per- sonal estate and effects whatsoever and wheresoever of Walter Josephs, except leasehold estates and shares in any company or undertaking, in possession, reversion, re- mainder, or expectancy, upon trusts of the ordinary kind for collection and realisation. The proceeds were to be held upon trusts thus expressed: — "in the first place, to retain and reimburse himself all costs, charges and ex- penses of preparing, and making such sales respectively and attending the recovery, collecting, and getting in the said debts and other trust moneys, together with commissions and allowances usual among merchants ; and also all costs, charges and expenses of proposing, preparing. 96 CASES IN BANKRUPTCY. 1863. £x parte Sfyer. In re Josephs' Assignment. preparing, engrossing and executing these presents, and incident thereto, including therein the costs, charges and expenses incurred in respect of meetings and other business preliminary thereto ; and also to pay all sala- ries, wages, charges and allowances to be made to clerks, accountants, agents and subordinates ; and, in the last place, shall pay, retain and satisfy rateably and propor- tionately, and without any preference or priority, to the said Jones Spyer, and the other persons parties hereto of the third part who shall execute these presents, the several debts or sums of money set opposite to their respective names in the said schedule hereto, and all other the creditors of the said Walter Josephs, subject to the cove- nant hereinafter contained for verifying the amounts thereof, and to pay the residue (if any) of the said moneys unto the said Walter Josephs, his executors, ad- ministrators or assigns." Then followed a provision, enabling the Appellant to employ Walter Josephs, or any other person or persons, as managers, accountants, clerks, agents, or collectors, in winding-up the affairs of the estate, and in collecting and getting in the trust estate and effects, and in carrying on the business if thought expedient by him, and to allow Walter Josephs, or any other person or persons so employed, out of the trust estate such sum and sums as to the Appellant should seem proper. Then came ordinary trustee clauses, and a power of attorney from Walter Josephs to the Appellant, expressed to be given "with the 'consent of the said several creditors parties hereto of the third part." The deed proceeded to the following effect : — " Provided always, and it is hereby covenanted and agreed by and between the several parties hereto, that it shall be lawful for the said Jones Spyer, at the expense CASES IN BANKRUPTCY. 97 expense of the said trust estate, to require the amount of 1863. any debt or debts of any or either of the several cre- Ex parte ditors, parties hereto, to be verified by solemn declara- Spyer. tion or in such other manner as to the said trustee shall I" re ,. 1 • 1 /. IT Josephs' seem expedient, and in the event ot any such creditor or Assignmbnt. creditors refusing or failing so to verify his or their debt or debts, or declining to execute these presents, then such creditor or- creditors so refusing or failing or de- * dining as aforesaid shall lose all benefit, dividends and advantage to be derived from or otherwise claimed under these presents, anything herein contained to the contrary notwithstanding. And, thereupon, the said Jones Spyer is hereby authorised and empowered (but it is not in- cumbent on him) to pay such last-mentioned dividends or dividend unto Walter Josephs, his executors, adminis- trators or assigns : and the said Jones Spyer is hereby authorised and empowered to pay or make such arrange- ments with the creditors whose debts are under \0l., and to pay the costs, if any, of the creditors proceeding against the said Walter Josephs for the recovery of their debts, as he the said Jones Spyer may deem expedient." The deed contained a proviso and agreement, that any resolution signed by the majority in number and value of the creditors, parties to the deed, should be binding on all the several "creditors hereto," and should be effectual for the allowance and passing of the accounts of the Appellant, and for discharging him from the trusts of the deed, and from all claims and demands in respect thereof: and that all ques- tions relating to the trust estate should be decided ac- cording to English bankrupt law; followed by further trustee clauses. Then came a general release on the part of the creditors, parties thereto " of the second and third parts," but without prejudice to securities and rights against persons other than Walter Josephs. Vol. I— 1. H D.J.S. There 98 CASES IN BANKRUPTCY. 1863. There was also a covenant on the part of Walter ^"^'"^^ Josephs, at the request of the Appellant, and at the ex- Spyer. pense of the trust estate, to convey, surrender, assign, In re or otherwise assure all freehold, copyhold and leasehold Assignment, estates and shares of or to which Walter Josephs was then seised, possessed, interested or entitled in posses- sion, reversion, remainder, or expectancy, subject to any •■ incumbrances affecting the same or any part or parts thereof, to the Appellant, upon the trusts aforesaid, or in such other manner as he should direct. And there was a proviso avoiding the release, in the event of Walter Josephs having concealed or kept back any part of his estate or effects to the value of 20Z. The deed was assented to by the requisite majority, including the Respondents, whose several assents, how- ever, were as follows: — "We object to execute such deed, as we claim a specific lien upon the proceeds of certain goods, which constitute a considerable part of our debt ; but, subject and without prejudice to our claim to be paid specifically out of such proceeds, we assent to and approve of such deed of assignment." The deed having been registered under the 192nd section of the Bankruptcy Act, 1861 (a), the Appellant Jones Spyer, the trustee, presented the above-mentioned petition to the Court of Bankruptcy, for the purpose of contesting the Respondent's claim to a specific lien. On this petition, the Commissioner expressed his opinion that several of the provisions of the Act of Parliament had not been observed, and that he was therefore unable to (a) The material sections of the judgment, in the present case, the acts of parliament referred are set out above, p. 6, sqq,, to during the arguments, and in notes, and p. 43, note. CASES IN BANKRUPTCY. 99 to proceed further in the matter, and made the above- 1863. mentioned order of dismissal, with costs; which, how- ^-^'^v^ ever, the Commissioner thought, ought to be paid out of Spyek. the trust estate. In re Josephs' Mr. Bacon and Mr. Roxburgh for the Appellant. The objections urged against the case of the Appellant on the part of the Respondents in the Court below were these. It was said, that the deed was not one within the protection of the 192nd section of the Bankruptcy Act, 1861 : — first, because a portion of the debtor's property was excluded from the assignment; secondly, because the trustee Was authorised to return a part of the debtor's property to the debtor; thirdly, because the trustee was empowered to pay creditors under 10^. in full, and to pay the costs of creditors pro- ceeding against the debtor ; and fourthly, because cre- ditors who did not execute the deed were excluded from its benefits. In the next place, it was argued that secured creditors should have been reckoned at the full amount of the sums due to them, in computing the statutory majority of creditors executing, assenting to or approving the deed : and, lastly, it was contended that as the Respondents had not, as was contended, submitted and did not submit to the jurisdiction of the Court of Bankruptcy, that Court had no jurisdiction to decide, as against them, the question of lien. [Mr. Sargood, for the Respondents, admitted that after deducting the values of securities held by secured cre- ditors, the majority of creditors required by the first con- dition of the Bankruptcy Act, 1861, sect. 192, had been obtained. He also stated that, after Ex parte Morgan (a), he (a) Slipra, p. 64. H 2 CASES IN BANKRUPTCY. he did not intend further to press the objection that secured creditors were not reckoned at the full amount of Ex parte . . Spyer. the sums due to them, or the objection, that the lease- In fe hold property and shares of the debtor were improperly Assignment, excepted from the assignment.] Then the trust here is not for some only of the cre- ditors as it was in Ex parte Morgan, but is for all. The subsequent provision, that creditors declining to execute the deed shall be excluded, cannot invalidate it. For no application for them to execute the deed would be made, their assent or approval being suffi- cient- even for the purpose of constituting a majority; and even where a time is fixed for the execution of the deed, a creditor is not excluded who comes in afterwards; Whitmore \. Turquandih). As no creditor is excluded, the deed is within the terms of the 192nd section; and any of this debtor's creditors could, by application to the trustee, or, if necessary, by applying under the Bankruptcy Act, 1861, to the Court of Bank- ruptcy, have obtained his dividend. There remains the objection as to the jurisdiction ; but that is answered, if not by the enactment contained in the 136th section of the Act of 1861, by the enactment contained in the I97th section. — [TAe Lord Chancellor: Is not this question involved in the other ? If the deed is a valid deed within the 192nd section, are not the Respondents bound by it in their capacity of creditors ? If they are bound by the deed, the Court has jurisdiction over them. J — Quite so : and it cannot be worth the Respondents' while to upset the deed in bankruptcy, simply for the purpose of having the question of their specific liens determined by a suit in equity. But, however that may be, the Respondents have, as a matter of fact — save with respect (i) IJ. 4- H. 444 ; 3 De G., F. If J. 107. CASES IN BANKRUPTCY. 101 respect to this one question of their specific liens — 1863. assented to this deed. ^IT"^''^'^ Ex parte Spier. Mr. Sargood for the Respondents. In re Josephs' This is a deed for the benefit of the debtor, not for ssignment. the benefit of the creditors ; and it is open to several objections. It is true, that the division is to be made amongst the trustee and the creditors who shall execute, and all other the debtor's creditors ; but that is subject to a proviso and covenant by the parties to the deed, that they must verify the amounts due to them as the trustee may require, and that any creditor vpho fails so to verify or declines to execute the deed shall be excluded, and that the dividend of such creditor may be paid to the debtor. — \_The Lord Chancellor: The clause being of the nature of a clause of forfeiture should be construed strictly. So construed, it is nonsense ; for it is to ope- rate in the event of some of the parties to the deed, of the third part, declining to execute it; those parties being expressed to be persons whose names and seals are subscribed and set to the deed.] — Again, the trustee is authorised to make such arrangements with the cre- ditors the debts due to whom are under lOZ., and to pay the costs of the creditors proceeding against the debtor for the recovery of their debts, as the trustee may deem expedient. Each of these provisions contravenes the spirit of the act of parliament by subverting that due equality amongst the creditors which, as it was required in the case of arrangements by deed under the Bankrupt Law Con- solidation Act, 1849, Gardner v.Chapman(a), so should obtain in deeds of the like nature under the Bankruptcy Act, 1861. Finally, the Court of Bankruptcy had no jurisdiction in the matter, whether the deed was good or (a) 8 C. B., N. S., 317. 102 CASES IN BANKRUPTCY. 1863. or bad, for it is the case both of the Appellant and of the ^*"''"*^ Respondents, that the latter are, as regards the securities, Spter. which they claim, and their rights to them, strangers to In re the deed, who have not in any way submitted to the Assignment, jurisdiction of the Court of Bankruptcy, and over whom that Court, consequently, has no controul. Neither the 1 36th nor the 197th section, relied on on the other side, gives that controul ; the former applying only to persons claiming under a trust deed ; and the latter to creditors bound by the deed : and the Respondents prefer to try any questions which may arise in connection with their specific liens before the ordinary tribunals of the country. Mr. Roxburgh (who was desired to confine his reply to the argument, as to the inequality created amongst the creditors by the provision in the deed empowering the trustee to make arrangements with creditors, the amounts due to whom were respectively under lOZ.) in reply. With regard to the argument that this provision is contrary to the spirit of the act, and creates an inequality amongst the creditors, the answer is, that the language of the 192nd section of the Bankruptcy Act, 1861, in the seventh condition specified in that section, does not mean an equal distribution, necessarily, but a distribution according to the contract between the par- ties; as appears from the 197th section, which shows that the Legislature contemplated the case of a deed operating under these sections, although it may provide, that the distribution should be otherwise than as in bankruptcy. The introduction, therefore, of the clause, which is a contract between the parties, does not invali- date the deed, as one intended to operate under the 192nd section. The CASES IN BANKRUPTCY. 103 The Lord Chancellor. 1863. Ex parte The only difficulty I feel is upon the clause providing Spyer. for arrangements with creditors the amounts due to lu re whom are respectively less than lOi. The power given Assionment, to the trustee of paying the costs of creditors proceed- ing against the debtor for the recovery of the amounts due to them, I do not think objectionable. It might be the means of preserving the assets for equal distribution. Judgment reserved. The Lord Chancellor. This was an objection to the validity of a trust deed, founded upon the circumstance that in -the deed is a power given to the trustee of paying in full creditors under lOZ. It is a power without any obligation to exercise it, — a power committed entirely to the discretion of the trustee. It was said, that to pay these creditors in full was at variance with the rule of administration in bankruptcy, and that, therefore, the deed was avoided. If it had been a trust, or absolute direction to pay, there might have been ground for the objection ; but, inas- much as the deed professes only to give liberty to the trustee, if the exercise of that liberty be at variance with the duty and obligation of the trustee, as declared by the rest of the deed and the law applicable to it, then the liberty, being repugnant to the higher duty, is simply a power which the trustee has no right to exercise. I must, therefore, hold that the power is no objection to the July 30. 104 CASES IN BANKRUPTCY. 1863. the validity of the deed ; but that the power being re- ""■^"v^ pugnant to the duty of the trustee cannot be exercised Spyer.^ ^y the trustee. In re Assignment Much misapprehension has arisen, with regard to these trust deeds, from not attending to the full effect and meaning of the 197th clause of the Act of 1861. There is, undoubtedly, some obscurity in the antecedent enactments of the section 192, arising in a great degree from amendments and alterations that were made in the language of the original bill; but, nevertheless, it is clear that the operation and effect of a trust deed, duly registered in conformity with the 1 92nd section, are de- fined with accuracy by the 197th section. If such a deed has been duly and completely registered under the 192nd section, that deed has the full operation and effect attributed to it by the 197th section, and it subjects the whole estate and effects of the debtor comprised in the deed to be applied for the benefit of his creditors ; and the rights of the creditors are defined by and must be collected from the 197th section. Creditors, under a deed of trust, are put in the same position as that in which creditors under an adjudication are placed by the bankrupt law. Secured creditors therefore rank under the deed of trust for the amounts remaining after de- duction of the value of their securities. With regard to the doubt that has been suggested, whether the deed of trust aflfects the whole of the estate of the bankrupt, it is positively declared by the 197th section, that the creditors shall have the benefit in like manner as if the debtor had been adjudged a bankrupt ; and that the trustees and the creditors shall in all matters relating to the estate and eflfects of such debtor (words which are used without any qualification or deduc- tion) CASES IN BANKRUPTCY. 105 tion) be subject to the jurisdiction of the Court of Bank- 1863. ruptcy, and shall have the benefit of the provisions of p"^"^ the act, in the same or like manner as if the debtor had Spyer. been adjudged bankrupt and the trustees had been ap- I" ^^ pointed assignees. Then follows a provision, that except Assignment. the deed directs otherveise, with respect to jurisdiction, the Court in bankruptcy shall have plenary jurisdiction to decide every question. Now, that exception refers to what may very naturally be put into a deed, a proviso for questions being settled by arbitration. It may be also possible, that some different rule of administration may be adopted, as, for example, that there should be no dis- tinction between joint and separate creditors ; but the whole effect of this 197th section, if it be properly attended to, construed and appreciated, is to give to the deed the moment it attains the character of being a duly registered deed a comprehensive effect upon all the estate and effects of the debtor comprised in the deed, and the particular operation of making the position and relative rights of the trustees and creditors claiming under it the same as the rights of assignees and creditors under an adjudication in bankruptcy. This is still fiir- ther exemplified by the 200lh section : for where it is not competent to have a deed that shall answer entirely the requisites of the 192nd section, the model deed which is given by the schedule conveys all the estate and effects of the debtor in like manner as if he had become a bankrupt. It is fiirther illustrated by the 198th section, which deprives the creditor, who has as- sented to the deed of trust, or is bound by the deed of trust, from having recourse to any process whatever against either the estate or the person of the debtor. I am, therefore, of opinion in the present case, that the objection is not well founded. The deed of trust states 106 1863. Ex parte Spyeb. In re Josephs' Assignment. CASES IN BANKRUPTCY. states an intention to have the whole estate of the debtor administered as if it were a case of bankruptcy, and that the debts shall be paid to the creditors and all questions relating to the trust estate decided according to English bankrupt law. The particular power or liberty given to the trustee is, therefore, repugnant to and inconsistent with the general tenor of the deed, and with the enactments under which the deed now comes. I therefore hold, that that power cannot be exercised, and that it forms no objection to the validity of the deed and the capacity of registering it under the statute. 1864. Jan. 20. Feb. 10. Before 2'Ae Lord Chancellor Lord Westbury, The 153rd section of the Act of 1861, providing for the admission of a proof when a bank- rupt is, at the date of the adjudication, liable to a de- mand in the nature of Ex parte SAMUEL MENDEL. In the Matter of JOHN MOOR'S ASSIGNMENT. rpHIS was an appeal from an order of Mr. Commis- -*- sioner Ayrton, of the Court of Bankruptcy for the Leeds district, rejecting a proof under a trust deed. John Moor, who was a seed crusher, entered on the 28th of July, 1862, into a contract with Samuel Mendel for the sale to him of ten tons of oil at 36s. Qd. per hundred weight, good iron bound casks included, to be delivered free to craft or trucks, during the month of January, 1863, and also into similar contracts with Mr. Mendel, for the sale and delivery to him of similar quantities of oil, during each of the months oi February, damageV which March, April, May, and June, at prices specified in the are unliqui- contracts. dated, only applies to On cases in which the cause of action is complete before the adjudic?.tion. The date of a trust deed in the form set out in scheduleD. to the Act of 1861, is that of the supposed adjudication to which the 197th section refers. CASES IN BANKRUPTCY. 107 On the 30th oi January, 1863, Mr. Moor executed to 1864. the Respondents a deed of assignment for the benefit of ^-^v-"*^ his creditors, in the form given in schedule D. to the Mendel. Bankruptcy Act, 1861 (a), and did not fulfil any of the In re contracts for the delivery of oil into which he had Assignment. entered vpith Mr. Mendel. On the 26th of February, 1862, the deed was registered under the Bankruptcy Act, 1861, s. 192. Mr. Mendel claimed under the 153rd and 197th sections of the Bankruptcy Act, 1861, to be admitted to prove against the trust estate under the deed, in respect of unliquidated damages for the breach of Mr. Moor's contracts, deposing that he had been by the non-delivery of the oil compelled to purchase and had purchased other oil at prices which he stated, and that his consequent loss had been 1,646/. 16s. 6d. He now appealed from the rejection by the commissioner of the proof so tendered. Mr. Daniel (Mr. Sargood with him) for the Appellant. The question is, whether, under the 153rd section of the Bankruptcy Act, 1861 (6), this is a proveable debt. The law as it stood previously to the passing of the Bankrupt Law Consolidation Act, 1849, was not suffi- ciently extended by the 178th section of that act, which provides (a) See it and the other sec- prosecution of such bankruptcy to tions of the Bankruptcy Act, direct such damages to be as- 1861, referred to in the argu- sessed by a jury, either before ments and judgment in the pre- itself or in a Court of law, and to sent case, stated above, pp. 8 give all necessary directions for sjj., note, and in note (A) below. such purpose; and the amount (i) Which enacts as follows: of damage, when assessed, shall — " If any bankrupt shall at the be proveable as if a debt due at time of adjudication he liable, by the time of the bankruptcy : pro- reason of any contract or pro- vided that, in case all necessary mise, to a demand in the nature parties agree, the Court shall of damages which have not been have power to assess such da- and cannot be otherwise liqui- mages without the intervention dated or ascertained, it shall be of a jury or a reference to a lawful for the Court acting in Court of law." 108 CASES IN BANKRUPTCY. 1864. provides for the admission of proofs for contingent ^•^^^'^ liabilities, and which came in question in Ex parte Mendeu Todd (a) and JEx parte Barwisijb). The 153rd section In re of the present act was intended to comprehend cases Assignment. ^^'^^ ^® ^''°^^ '" Green V. Bicknell{c), where a contract was broken before the bankruptcy, and also such as arose in Boorman v. Nash {d), where a contract was entered into before, but was broken after, the bankruptcy of one of the contractors. In neither of those cases was the demand held to have been proveable. The defect in the state of the existing law in this respect having been often complained of, it is presumable that the legislature in applying itself to the question of de- vising a remedy by the 153rd section of the Bankruptcy Act, 1861, meant that remedy to be full and complete. The presumption being in favour of a liberal construc- tion of the provision, I submit that that presumption is not contravened by the language of the section. The statute does not require the demand to be in respect of a contract broken. Liability exists under a contract although it has not been broken, and the word " liable " should be construed to include demands actual or possible, present or future. Again, the date of the supposed adjudication of bank- ruptcy in the 197th section is not, as the commis- sioner has assumed, the date of the execution of the deed, the 30th of January, 1863, but the date of its registration, the 26th of February, 1863. Otherwise, if it should be held that the present is not a case within the 153rd section, the Appellant will lose all benefit under the deed, and at the same time be debarred by the effect of the 199th section from taking other proceedings. Mr. (a) 6 T>e G., M. 4- G. 744; 769; S. C, Be G., M. Sr G., S. C, De G., M. if G., Bey. Bey. App. 642, 549. -^PP- S24. (c) 8 Ad. 4- EU. 701. (6) 6 De G., M. &; G. 762, (d) 9 B. 4- C. 145. CASES IN BANKRUPTCY. 109 Mr. Bacon and Mr. De Gexfor the Respondents, the 1864. trustees of the deed of assignment. ^.^^^-^^ . Ex parte The object of the provision appears clearly from its Mendel. terms. It was to remove the objection arising from the In re damages not being liquidated, not that arising from their Assignment. not having been incurred. When the legislature has attempted to provide for the proof of future or contingent demands, it has accompanied the pi'ovision with machi- nery for the purpose of doing justice to other claimants, and prevent the administration of the assets being delayed by the newly introduced species of proof. Thus, when future debts were first made proveable, a rebate was directed to be made ; next, when contingent debts were introduced by the 6 Geo. 4, c. 16, s. 56, which was repeated in the 177th section of the Bankrupt Law- Consolidation Act, 1849, a provision for valuation was also introduced, which now forms part of the last-men- tioned section, and so essential a part was the machi- nery considered of the provision, that contingent debts not capable of being valued were at first held not prove- able. Although that was not followed, yet In re Gales (a), and the cases there referred to, show with what care the provision was applied. The contingent liability clause of the act of 1849 (s. 178) is also framed so as to exclude indefinite claims by authorising the Court to expunge a claim not matured into a proof within six months. If the Appellant is right, a claim in respect of a contingent unliquidated liability would be retained, when one for a contingent liquidated liability might not. The Lord Chief Baron said in one case, that less mischief would arise from repealing than from ex- tending provisions of this kind. The section in the present act contains no such machinery or safeguard. The result of construing it as the Appellant contends would be that the trustees or assignees would hasten to make (a) De Gex, 100. no CASES IN BANKRUPTCY. 1864. make a distribution for the purpose of shutting out possible ^T^""^ unliquidated claims, so that the possible claimant would tx parte ^ p i • j i Mendel, be the first and most frequent sufferer : lor, his demand In re being proveable, it would be barred by the order of dis- AssiGNME^NT. charge, and yet he would get no part of the assets ; for the effect of the order of discharge does not and could not be made to depend on the existence of assets at the time when the damage actually occurred. No contractor can be said to be "liable" within the meaning of the section until a breach of the contract ; and this reason- able interpretation is supported by a consideration of the object of a bankruptcy and of a trust deed, viz., a present distribution of the balance of the debtor's assets amongst existing creditors. Whereas, if the con- struction submitted on behalf of the Appellant is correct, no distribution could take place for an indefinite period. On the second point, we submit that the Commissioner is also right in the view which he has taken of the date to be attributed to the supposed adjudication of bank- ruptcy. The language of the statutory form of deed settles this. It is " as if he had been adjudicated bankrupt at the date hereof," nor is this at all inconsistent with any other part of the act. It would be impossible to make the aflSdavit required by the 5th condition specified in the 192nd section prospectively and with a reference to what might be the state of circumstances at the time of the registration of the deed, or consequently to know what ad valorem stamp the deed must, under the 4th condition previously to being produced and left for re- gistration at the office of the chief registrar, have been impressed with or have had affixed to it. [The Lord Chancellor : Resort has not apparently in the present case been had to the statutory form of deed, by reason of the existence of the circumstances under which the 200th section requires that form to be used.] That does not appear. But as the form is given in the schedule CASES IN BANKRUPTCY. schedule to the act, it must be assumed not to be con- trary to the provisions of the act itself, and its language ,..-., Ex parte IS distinct and unequivocal. Mendel. . In re Mr. Daniel in reply. Moor's Judgment reserved. Assignment. The Lord Chancellor (after stating the nature of Feb. lo. the case and the alteration of the law made by the sec- tion) proceeded as follows : — The learned Commissioner appears to have thought that the construction which he has put upon the section was not according to the intention of the framers of it. I do not agree in that opinion. But I agree in thinking that, according to the true construction of the Act, and, I think that, according to the intention of its framers, de- mands of this nature should be limited to cases in which the cause of action is complete at the time of the adju- dication, and that consequently the 153rd section only applies to such demands in the nature of damages as are capable of being enforced against the bankrupt at the date of the adjudication. In this case there has been no bankruptcy but a trust deed in the form given by one of the schedules to the Act, and I think that the date of the deed is by the Act rendered equivalent to that of an adjudication of bank- ruptcy. The question therefore is, whether the debtor in this case was at the date of the deed liable by reason of any contract or promise to a demand in the nature of damages. Now the contract might be performed at any time during the month of January. The date of the deed was the 30th of January, so that at the date of the deed there was an interval of time during which the debtor 112 CASES IN BANKRUPTCY. 1864. debtor might have delivered the oil. I am unable to ^-"^■^^^ say that the debtor was, at the date of the deed, liable Ex parte ' . i 3 • t Mendel, by reason of any contract or promise to a demand in the In re nature of damages. And I agree with the argument Assignment, which has been addressed to me, that it would not be desirable, if it were possible, by construction to extend this interpretation of the statute ; for then it would be very difficult to define the limit to which it might be ex- tended, and great confusion would be introduced into the administration of the law of bankruptcy by the admission of new demands arising at indefinite periods subsequent to the adjudication. It was argued ingeniously enough by Mr. Daniel, in opposition to the argument as to the date of the deed being equivalent to that of the adjudi- cation, that inasmuch as, if the Appellant had filed a petition for adjudication subsequent to the date of the trust deed, but before the expiration of the time for its registration under the 1 92nd section, his petition would, by the operation of the 199th section, when the deed was so registered, have been dismissed, it must be in- ferred that a creditor who was thus deprived of his remedy must have been intended to be admitted under the trust deed. But I think that no such consequence follows. The 199th section no doubt protects the trust deed from being upset by an adjudication between its date and its registration. But the remedies of creditors are left in other respects untouched, and the remedy of the present Appellant will remain, subject to this observation, that by reason of this enactment he is unable to interfere with the validity of the trust deed. I think, therefore, that no such inference can be drawn from the 199th section as would warrant any other construction of the 163rd section than that which the Commissioner has put upon it, and of which I entirely approve. I affirm the Commissioner's order and dismiss the appeal with costs. CASES IN BANKRUPTCY. 113 Ex parte ARCHIBALD COCKBURN, HENRY iggg. SMITHES and JOHN BLACK. J^o«.l 1,12,18. Dee. 12. In tbe Matter of JOHN BENJAMIN SMITH and i864. THOMAS LAXTON, Bankrupts. -M'f. 5. ' '^ Apr. 13. ^T^HIS was an appeal from an order of Mr. Com- Before 7%e missioner Fane annulling a joint adjudication of f-etlor Lord bankruptcy against the Respondents John Benjamin Westbury. Smith and Thomas Laxtan, on the ground of their T" under'the having respectively executed deeds of composition with Bankruptcy their respective creditors. , gg^ ^f ^ ^'^. position deed executed by Messrs. Smith §• Laxton had carried on business in a single partnership as wine merchants, and during the sub- Sis^ivedfirm sistence of this partnership, viz. : — on the 10th of No- after the disso- - lution, objec- vember, t;on ^^^ taken on the part of creditors of the firm, on the ground that the joint creditors were insufficiently represented in the computation of the majority of assenting creditors required by the statute. Held, that the objection could not be entertained in the absence of evidence showing the existence of joint estate at the date of the execution of the deed, and that tte onus lay upon the objectors to produce such evidence. ^^ An assignment of a debtor's estate and effects is not necessary for the validity of a composition deed under the 192nd section of the Bankruptcy Act, 1861, but to render such a deed binding on non-assentients, they must stand under the deed in the same situation and with the same advantages as the assentients. A composition deed purported to be made between a debtor of the first part, certain creditors whose names and seals with the amounts of their debts were set forth in a schedule and who executed the deed of the second part, and all other (if any) the creditors of the debtor of the third part. It recited that the executing creditors had agreed to accept a composition of three pence in the pound on their debts and to release the debtor. It witnessed, that in consideration of the composition paid to the executing creditors and of the covenant thereinafter mentioned, the executing creditors released the debtor from the debts placed opposite to their names. It further wit- nessed, that the debtor covenanted with the parties of the second and third parts to p9y on demand to all his creditors the above composition unless it should have been already paid. Held, that the deed placed the assentients and non-assentients in a posi- tion of undue inequality, and that on this ground the deed was not binding on the latter. Vol. 1—2. I D.J.s. 114 CASES IN BANKRUPTCY. 1863. Ex parte CoCKBURN. In re Smith and Laxton. vernier, 1862, they had become jointly indebted on their acceptance at six months' date to the Appellants Messrs. Cochburn §• Company in a sum of 195Z. 3s. The partnership was dissolved in November, 1862, and on the acceptance arriving at maturity on the 13th oi May, 1863, it was dishonoured. On the 19th oi May, 1863, a trader debtor summons was served on behalf of the Appellants upon the Re- spondents, and resulted in the commission of acts of bankruptcy on the part of the latter on the 24th of June, 1863, by reason of their failing to pay, secure or compound for the amount of the debt which had been admitted by them on the 7th-of the same month. In the interval between the 7th and the 24th oi June (viz. on the 22nd) the Respondent John Benjamin Smith executed a deed, which was in the following terms : — " This indenture made the 23rd day of June, 1863, between John Benjamin Smith, of &c., of the first part, the several persons whose names and seals are hereunto subscribed and set in the schedule hereunder written (being severally creditors in their own right or in co- partnership of the said John Benjamin Smith) of the second part, and all other (if any) the creditors of the said John Benjamim Smith of the third part : Whereas the said John Benjamin Smith is indebted to the said several persons parties hereto of the second part and to other persons in divers sums of money, and being unable to pay his said debts in full, has proposed to pay unto the whole of his creditors a composition of three pence in the pound on the amount of their re- spective debts : And whereas the said several persons whose names and seals are hereunto subscribed and set have agreed to accept the said composition and to release the said John Benjamin Smith from their respective debts. CASES IN BANKRUPTCY. 115 debts, and from all other sums of money (if any) which are now due and owing from him to them respectively or to them and their respective partners : Now this in- denture witnesseth, that in pursuance of the said agree- ment and in consideration of the composition of three pence in the one pound on the amount of their respective debts (as mentioned in the said schedule) in hand well and truly paid by the said John Benjamin Smith to the said several persons parties hereto of the second part respectively, the receipt whereof they do hereby re- spectively admit and acknowledge and of and from the payment thereof do and each of them doth hereby re- spectively acquit, release and for ever discharge the said John Benjamin Smith, his heirs, executors and adminis- trators, and also in consideration of the covenant here- inafter contained by or on the part of the said John Benjamin Smith they the said parties hereto of the second part for themselves severally and respectively, and for their several and respective executors or admi- nistrators, partners and assigns, but every of them so far only as concerns his own respective acts and deeds and the respective acts and deeds of his own respective exe- cutors, administrators, partners and assigns, their and every of their executors and administrators, and not further or otherwise, do and each of them doth hereby acquit, release and for ever discharge the said John Senjamin Smith, his heirs, executors and administrators, and bis and their present and future lands, tenements, goods, chattels and eflFects, of and from the payment of the sums of money set opposite their respective names or the names of their respective firms in the said schedule and of and from all other sums of money (if any) which at the time of the sealing and delivery of these presents (the same being sealed and delivered on or after the date of these presents) by the said parties hereto of the second part is or are due or owing by the said I 2 John 1863. Ex parte COCKBURH. In re Smith and LaxtoN' 116 CASES IN BANKRUPTCY. 1863. Ex parte COCKBUEN. In re Smitu and Laxton, John Benjamin Smith to them respectively, or to them and their respective partners, and of and from all and all manner of actions, suits, cause and causes of actions, debts, accounts, bonds, covenants, judgments, execu- tions, claims and demands whatsoever both at law and in equity vphich they the said parties hereto of the second part, or any of them, their or any of their heirs, exe- cutors, administrators, partners or assigns, or any person or persons claiming by, from, through, under or in trust for them, or any of them, now have or hath or hereafter can, shall or may have, claim or demand against the said John Benjamin Smith, his executors or administrators for or on account of any such sum or sums of money as aforesaid, or any cause, matter or thing in anywise re- lating thereto : And the said John Benjamin Smith for and in consideration of the premises doth hereby for himself, his heirs, executors and administrators covenant, promise and agree with and to the said several parties hereto of the second and third parts and their respective executors, administrators and assigns, that he the said John Benjamin Smith, his executors or administrators shall and will upon demand well and truly pay unto all and singular the existing creditors of him the said John Benjamin Smith (including the said parties hereto of the second part, unless the same shall have been paid to them on the day of the date of these presents), or their respective executors, administrators or assigns a compo- sition of three pence in the one pound on the amount of the respective debts or sums of money now due and owing by him (either alone or jointly with any other person or persons) to them respectively. In witness," &c. On the 23rd of June the Respondent Thomas Laxton also had executed a deed, which mutatis mutandis was identical in terms with that executed by Smith. The two deeds were left for registration on the 30th of June, and CASES IN BANKRUPTCY. 117 and the certificate of registration was given on the 1st of July, on which day also the Appellants issued a joint petition in bankruptcy against the Respondents, under which they were adjudged bankrupts. On the 31st o^ August, 1863, the Commissioner, upon the application of the Respondents, and upon having the composition deeds produced to him, made the order under appeal annulling the adjudication. It appeared from the account delivered to the Chief Registrar, in obedience to the General Order in Bank- ruptcy of 22nd May, 1862, with Smith's deed, that the aggregate amount of his liabilities was 35,764/. 10s. 9d., three-fourths of which sum was 26,823Z. 8«. Ofrf. The number of creditors was forty-one, of whom twenty-five were stated to be assenting creditors, with an amount of debts to the value of 29,283Z. \2s. \d. ; but among these were placed the names of Messrs. Overend, Ourney Sf Company for 20,000Z-, whose names were also placed in the schedule to the deed as creditors for that amount, but with the marginal note " subject to all necessary consents." Smith, in his affidavit as to the requisite majority having been obtained, deposed that the deed had " been executed or in writing assented to or approved of by a majority in number representing three-fourths in value of the creditors of me the said John Benjamin Smith, whose debts amount to lOZ. and upwards ;" aijd that he believed that the amount of the composition to be distri- buted under the deed was 447/. Is. In Laxtoris case the facts were similar, the aggregate amount of liabilities being stated as 27,196/. 8s. 4rf., three-fourths of which was 20,397/. Qs. 3d. ; the number of creditors eighteen ; ten assenting with debts equal to an 1863. Ex parte COCKBURN. In re Smith and Laxton. 118 CASES IN BANKRUPTCY. 1863. Ex parte CoCKBURN. In re Smith and Laxton. an aggregate in value of 22,9971. 4s. Id., amongst whom Messrs. Overend, Gurney Sf Co. were reckoned as cre- ditors for 20,000Z., for which sum they had signed the schedule of the deed with the same reservation as in Smith's case ; and the affidavit of Laxton being couched in the same language as that of Smith, except that the amount of the composition to be divided was calculated to be 338Z. 14s. There was no evidence as to any material facts other than that above stated. Mr. Druce for the Appellants. These deeds have not received such a majority of assents of the nature contemplated by the 192nd section of the Bankruptcy Act, 1861, when properly construed, as to bring them within the protection of that section. For the adjudication of bankruptcy against the Respondents being joint, the deeds to have had the effect attributed to them by the Commissioner should have been each in writing assented to or approved of by a majority in number representing three-fourths in value of the joint creditors of the Respondents. It is true that the partner- ship between the latter had been dissolved. Still it was not competent for each of them as an individual after the dissolution of that partnership to bind non-assenting joint creditors by the execution of deeds carrying into eflFect arrangements entered into with the separate credi- tors of either Respondent only. The principle involved in allowing a majority of creditors to bind a minority would be violated, unless the majority and minority each belonged to the same class of creditors. Had either of the Respondents executed a trust deed on one day and the other executed a trust deed on the following day, the joint and separate estates would have been duly ad- ministered. Had it been a case of bankruptcy the two petitions CASES IN BANKRUPTCY. 119 petitions would have been consolidated with a similar result. But in cases of composition the case is other- wise. The debtor in those cases is freed from his liabilities from the moment when the deed has fulfilled the statutory requirements, and in the present instances that freedom is purchased, so far as it is obtained from others than assenting creditors, in consideration of a mere personal covenant. It is perhaps too late after the dicta in ^30 parte Rowlings (a) and Ex parte Godden(b), to argue against the validity of a deed of composition as a deed of the nature contemplated by and within the pro- tection of the statute ; but, assuming that validity, greater vigilance is required than perhaps would be required in the case of a trust deed to prevent grievous wrong being done. Otherwise a case might arise of this nature : — a firm consisting of two partners might be under liabilities, as also might be each of the two partners composing the firm. The joint assets might produce nineteen shillings and six pence in the pound, and the liabilities of the partners and the firm be so circumstanced that the separate creditors of either debtor might be sufficient to satisfy tiie statutory requirements as to majority. Then, if the view sanctioned by the Commissioner is correct, it would be quite possible for the separate creditors to appropriate, as in the present case, to themselves the bulk of the joint assets, and so defeat the just claims of the joint creditors. Or a case might arise where the parts would be changed, and an overwhelming majority of joint creditors might in like manner defraud the separate creditors. 1863. Ex parte CoCKBURN. In re Smith and Laxton. But, irrespectively of the consideration of results, the language of the act when properly construed is sus- ceptible of no serious doubt. The (a) Supra, p. I. (6) Supra, p. 36. 120 CASES IN BANKRUPTCY. 1863. Ex parte COCKBURN. In re Smith and Laxton. The act is in terms drawn in the singular number, and is therefore to a certain extent elastic. The words " his creditors" in the 192nd section mean, I submit, when the case is one of a debtor engaged with another in partner- ship, "all his creditors." The words "the creditors of such debtor" in the first condition specified in that section, mean when applied to the case of an insolvent firm, "the joint creditors." The seventh condition is inapplicable, as has been decided, to the case of a com- position deed. The words "in case any petition shall be presented for an adjudication in bankruptcy against a debtor after his execution of such deed or instrument as is heretofore described" in the 199th section, upon which the Commissioner proceeded in the present case, when adapted to the case of partners, must be read as "in case any petition shall be presented for an adjudication against the joint debtors after the execution by them of a deed executed or in writing assented to or approved of by a majority in number representing three-fourths in value of the joint creditors." The principle of the case of Ex parte Oodden {a), where the question arose with reference to the assents of secured creditors, is not inapplicable to the present. [7%e Lord Chancellor. I expressed an opinion in Ex parte Morgan (6), that creditors under a trust deed are placed in eodem statu with creditors under a bankruptcy, and that as the latter cannot prove without allowing for the value of their securities, the former are subjected to the same obli- gation. Upon this principle you would take the value of such debts after deducting the value of securities in the hands of creditors.] Mr. (a) Supro, p. 36. (6) Supra, p. 64. CASES IN BANKRUPTCY. 121 Mr. Druce. Ex parte Morgan was the case of a trust deed to which the principle of a valuation of securities may have a proper application, but it can have none to the case of composition deeds, and in the present cases the composition of three pence in the pound is offered to creditors secured and unsecured alike. In Ex parte Spyer {a), where a power to pay creditors under lOl. in full was held to be incapable of being exercised, an opinion was intimated that had there been a trust or an absolute direction for that purpose the case would have been diflFerent. That seems to point to the validity of such a deed only as provides for a distribution in accordance with the bankrupt law. The decision in Ex parte Godden was intended to obviate the startling results which would have followed from a contrary decision. And if it be true that the assent of all the creditors is necessary, there must be a majority of each class in order to bind the creditors of that class. In the present case, notwithstanding that the onus is upon the Respondents of making out these facts, they have offered no further proof than their respective affidavits — which are copied servilely from the common form, instead of being extended, together with the language of the statute, to the circumstances of the particular case — to show that the requisite majority of joint cre- ditors has executed or in writing assented to or ap- proved of either of the deeds. The language of the affidavits is insufficient to raise even prim^ facie proof to that fact. 1863. Ex parte COCKBURN. In re Smith and liAXTON. So, again, the certificates of registration of these deeds being, according to the decisions in Ex parte Page (b) and Ex parte Spyer, nothing more than prima facie evidence (ja) Supra, p. 94. (6) Supra, p. 59. 122 CASES IN BANKRUPTCY, 1863. Ex parte COCKBURN. In re Smith and Laxton, evidence of the fulfilment of the statutory requisitions, it might be argued, although I do not press the point, that there is nothing to show that the assents of Messrs. Overend, Gurney Sf Co. to the deeds were given other- wise than conditionally. Those creditors actually appear in the schedule to each deed as creditors for the same debt, 20,0001., and in the case of the Respondent LaxtorCs deed even the Appellants are scheduled in the account delivered to the Chief Registrar for their debt. For all these reasons the present appeal ought to be allowed. Mr. Bacon and Mr. Sargood, for the Respondents, were stopped by the Court. The Lord Chancellor. Two traders, Messrs. Smith ^ Laxton, were wine merchants in partnership together, a partnership which lasted till November, 1862. Upon the evidence it is not clear when that partnership was dissolved, but it was on some day after the bill of exchange was given to the Ap- pellants, the petitioning creditors. From and after the date of the dissolution, of course, the joint property, if there was any, of these partners might have been divided and distributed between them, and there might have been a total annihilation of the joint property of the partnership. The argument on behalf of the Appellants has pro- ceeded on the great inconvenience which would ensue if the provisions of the statute were to be held to apply to all creditors, joint and separate, without distinction ; and it is argued that the word " creditors" ought to be taken as indicating the several classes of creditors, and that CASES IN BANKRUPTCY. that the words of the statute ought to be taken distri- butively as to the majority in number and value of each class, the object being to show, that unless there is a majority of each class assenting, the provisions of the statute have not been sufficiently complied with, and the result being represented to be, that by a skilful union on the part of the separate creditors, the joint estate might be rendered distributable amongst the separate creditors. 123 1863. Ex parte CoCKBUnN. In re Smith and Laxton. But, on the other hand, if there be no joint estate, the assets will be distributed pari passu amongst all the creditors, joint and separate. In that case the joint creditors are not distinguished from the separate credi- tors, and have the right of proving against each estate. I am obliged, in the present case, to assume that there is no joint estate. It lies at the very root of this ob- jection that there should be a joint estate. Had there been any, its existence would, no doubt, have been proved. On the assumption, therefore, that there is no joint estate, the joint and separate creditors are not distin- guishable in any respect, and primS. facie evidence is adduced showing the existence, in the present case, of the assents of the requisite statutory majorities in number and value of the creditors to these deeds. So far, therefore, as the objections pressed upon me go, these deeds are not wanting in validity. It was competent indeed to the Appellants to show that the majorities actually obtained were in fact insuffi- cient. CASES IN BANKRUPTCY. cientj because the evidence adduced before the Registrar was prima facie only ; but this they have not done. Ex parte ^ ■' ' ■' COCKBURN. Smx^ "^^^ learned Commissioner has, in my judgment, arrived and at a correct conclusion. The appeal must be dismissed, AXTON. ^^j ^jjj^ costs. 'Nov. 12. On this day the Lord Chancellor desired that the case should be re-argued with reference to the frame of the deeds, and as to their being as favourable to absent cre- ditors as to those creditors who were named, and espe- cially with reference to the question whether creditors who were not named in and did not execute or in writing assent to or approve of them could sue upon the cove- nants contained in them, or might be obliged to prove the amounts due to them respectively before admission as creditors under the deeds. Nov. 18. The case accordingly now came on to be re-argued upon these points. t Mr. Druce for the Appellants. Neither of these deeds can be held to be within the protection of the 192nd and following sections of the Bankruptcy Act, 1861. It is a rule of law well settled by decision that no one who is not a party to a deed expressed to be made between parties can sue upon it ; Gilby v. Copley (a) ; Metcalfe v. Rycroft {b) ; Berkeley v. Hardy (c). This rule is recognized and remedied — but (a) 3 Levinz, 138. (c) 5 B. 4 C. 355. (fr) 6 M.Sr S. 75. CASES IN BANKRUPTCY. 125 but only in one particular, for the present purpose im- . 1863. material — ^by the legislative enactment contained in the ^^^'^"^'^ •' " Ex parte 8 & 9 Vict. c. 106, s. 5. No creditor therefore of these Cockburn. debtors who is not actually a party to these deeds of In re , , , . T 1 Smith the second part, — that is to say, no creditor, whom as and a non-assenting creditor it is sought to bind by these Laxton. deeds merely by the terms of the act of parliament — can sue upon them. Even assuming that there \?ould be on no other ground any objection to an unnamed creditor suing on the deed, the very want of the name leaves a patent ambiguity, to remove which parol evidence is inadmissible. And supposing that both these objections could be removed, the burthen of adducing such evidence and the want of an estoppel, in the case of unnamed creditors, against their status as creditors being altogether denied, which might render in their case long litigation necessary to establish their claim, places them at such a disadvantage and creates such inequality as would alone be enough to invalidate the deeds. Even assuming the Court to be against me upon these points, the deeds are bad, inasmuch as their benefits are not accorded with an even hand to the creditors who are parties to them of the second part, and to the creditors who do not assent to them. The former receive their composition dividend at once and release the debtors. The latter are remitted to the shadowy benefit of an insolvent's covenant to pay a composition dividend at the same rate at a future day. A mere covenant to pay a composition cannot, I submit, in any case be a composi- tion with creditors of the nature contemplated by the Act. Of that opinion seems to have been the Court of Exchequer 126 CASES IN BANKRUPTCY. 1863. Ex parte COCKBURN. In re Smith and Laxton. Exchequer in Walter v. Adcock (a), and although it may now be too late to argue that a cession of all a com- pounding debtor's property is requisite, still there must be actual payment or some substantial security in order to validate a proposed composition arrangement as one within the range of the 192nd section of the Act. If less will suffice, a fraudulent debtor with assets sufficient to produce ten shillings in the pound might enter into an arrangement in the manner pursued in the deeds now before the Court for payment of a composition dividend of twelve shillings and six pence in the pound. His favoured creditors who are admitted to execute the deed might receive their full composition dividend at that rate upon execution ; the result being that for the payment of non-executing creditors, whose remedy would be under a covenant for payment of the twelve shillings and six pence in the pound at a future day, the remaining assets would not suffice. Moreover, as these deeds are framed the debtors will obtain no release from such of their respective creditors as will be only by virtue of the Act bound by them. The execution of the respective deeds by the majority of creditors required by the statute, although it may by virtue of the Act bind a non-assenting minority, will not, as appears from the principle deducible from Ux parte Morgan (b), make them actually executing parties of the respective deeds of the second part, who alone by their terms are releasing parties. The recitals show that it is because the persons made parties to the respective deeds of the second part have agreed to the respective arrange-r ments that they are so made parties. Into this category the Appellants, who are not among such parties, have not agreed to the arrangement, and will execute no release, (a) 7 H. 4- N. 541 (i) Supra, p. 64. CASES IN BANKRUPTCY. 127 release, cannot by construction of the Act be said to be brought, even had not the point been rendered clear by the distribution of the creditors into different classes in the deeds themselves. Again, it is clear that under the Bankruptcy Act, s. 192, no deed was intended to be in itself a final bar to proceedings on the part of non- assenting creditors until the due fulfilment by the debtor of all obligations imposed upon him by the deed. This appears from the reservation of process given by the 198th section against a debtor who seeks to depart out of England. 1863. Ex parte CoCKBURN. In re Smith and Laxton. If there had been a trustee appointed by the deed and the aggregate amount of the composition dividend had been placed in his hands for the benefit of all the debtor's creditors, that might have had the effect of placing all his creditors in a similar position, and have met the suggestion thrown out by the Lord Chief Baron and Mr. Baron Martin in Walter v. Adcock, that some pro- perty must be dealt with in the arrangement. Mr. Bacon and Mr. Sargood for the Respondents. The objection founded on the common law authorities cited on the other side, that the arrangement being worked out through the medium of indentures, the credi- tors should have been but are not actually named as parties to the deed, is an objection analogous to and equally futile with a demurrer or plea to a declaration on the ground of the Plaintiff not having proved his own identity. It is sufficiently answered by the fact of the practical impossibility of inserting the names of all those creditors who do not execute in a separate schedule. — [ The Lord Chancellor : Does not the word compo- sition in the ideas which it suggests involve knowledge on the part of the debtor of all his creditors and of the amount 128 CASES IN BANKRUPTCY. 1863. Ex parte COCKBURN. In re Smith and Laxton. amount of his debts?]— Not of his creditors, for he may not know in whose hands bills of exchange or pro- missory notes may be. It may be impossible to name every creditor in the deed, and the Act does not require as a condition to the validity of a deed that the debtor should know or remember with perfect accuracy and set forth the name and debt of every creditor. As to the distinction between the creditors of the second and third parts, which is made an objection, it is one created not by the debtors but by the circumstances of the case. Had there been no covenant to pay such creditors as did not execute the deed, the Appellants might have had just cause of complaint ; but the deed must be held to be within the protection of the 192nd section of the Act, unless any creditor can show an unfair or unnecessary inequality created amongst the creditors under it, which is not the case here. To an actual payment there must be two voluntary parties. What more can a debtor do than covenant to pay such of his creditors as refuse actual payment ? Under these deeds it is at the option of any creditor to accede or not. In the event of his adopting the one course, he becomes a party of the second part and has the benefit of the actual payment; in the event of his adopting the other, he has the benefit of the debtor's covenant. The words "in consideration of the payment and covenant" with which the releases in these deeds are respectively prefaced are mere surplusage. The possible frauds which it has been suggested might result if a covenant for payment should be held a sufficient compliance with the provisions of the act with respect to composition deeds would if perpetrated bear their fruits in the exposure of the debtor to a consequent indictment, to say nothing of the jurisdiction given, as we submit, by the 197th section to the Commissioner to deal with the matter in case of failure on the part of the debtor in the ob- servance CASES IN BANKRUPTCY. servance of the obligations imposed upon him by the deed, and even to proceed to an adjudication of bankruptcy against him. But be that as it may the possibility of fraud cannot invalidate the deed, if it be in fact a deed of the nature contemplated by the act. {The Lord Chancellor: Why might not the com- position dividends of non-assentients be made payable to a trustee ?] — The act does not contemplate or require the interposition of a trustee, for whose solvency indeed there would be no guarantee whatever. The decisions up to the present time have proceeded on the ground that deeds of this nature must be for the equal benefit of all the creditors. The act provided that such deeds are upon the fulfilment of the statutory provisions to be read as if every one of the debtor's creditors had been party to and actually executed them. If the deeds in the present case had been so executed, every creditor would have actually received his composition dividend. 129 1863. Ex parte COCKBURN. In re Smith and Laxton. Mr. Druce in reply. Judgment reserved. 2%e Lord Chancellor. In this case I am desired to hold that two deeds of composition and release, executed one by John Benjamin Smith and the other by Thomas Laxton, are not binding on creditors who have not executed or assented to them, and therefore that the deeds have not been duly registered under the 192nd and subsequent sections of the Bank- ruptcy Act of 1861. These deeds of release do not contain any assignment or make any surrender of the estate and effects of the Vol. I — 2. K D.j.s. debtors. Dec. 12. 130 CASES IN BANKRUPTCY. 1863. Ex parte COCKEURN. In re Smith and Laxtok. debtors. But it is in my opinion well settled, and is the clear intent of the Bankruptcy Act, 1861, that an assign- ment or surrender of the debtor's estate is not necessary for the validity of a deed of composition or release under the 192nd section. The provisions of the Act appear to have been in- tended to prevent the necessity of breaking up in every case a debtor's business, or bringing his property to a forced sale. The legislature appears to have supposed, and I think with reason, that in many cases the power of escaping this necessity might lead to results more beneficial to the creditors than would follow from the breaking up of the debtor. But to render a deed of composition and release binding on the minority of the creditors, who have not executed or assented to or approved of it in writing, it is necessary that the non- assenting creditors should stand under the deed in the same situation and with the same advantages as the creditors forming the majority. The 192nd section enacts that the creditors who have not assented are to be bound " as if they were parties to and had duly executed the deed." It follows that the provisions of the deed must be such as will apply to all the creditors equally and without distinction or difference. To apply these rules to the deeds in question (each of which is a counterpart of the other), and taking Laxtons deed as an example, I find that it is made between Laxton of the first part and the several creditors whose names and seals are subscribed and set in the schedule thereunder written (being severally creditors in their own right or in co-partnership of Laxton) of the second part, and all other (if any) the creditors of Laxton of the third part. In the schedule are included the names and debts of various creditors, some of whom have signed CASES IN BANKRUPTCY. 131 signed and sealed the deed and others who have neither executed nor assented to or approved of the deed. It appears also from the account of debts which in con- formity with the regulations was produced to the registrar when the deed was left for registration, and which is verified by affidavit, that there are several other creditors whose names do not appear at all in the schedules to the deeds, and that the number of creditors in each case who have neither assented to nor approved of the deeds is considerable, in Smith's case amounting to sixteen. A distinction is thus drawn between those of the creditors named in the schedule who Have not executed the deed and those who have executed, and further, a distinction is drawn between the creditors who have not executed, but are named in the schedule, and those who are not so named. The deed recites to the effect that Laxton had proposed to pay to the whole of his credi- tors a composition of three pence in the pound, and that the several persons whose names and seals were there- unto subscribed and set had agreed to accept the compo- sition, and to release Laxton from their respective debts; ~ and it is witnessed, that in pursuance of the recited agreement, and in consideration of the composition of three pence in the pound on the amount of their respective debts, as mentioned in the schedule, in hand well and truly paid by Laxton to the several persons parties of the second part, and also in consideration of the covenant by Laxton thereinafter contained, the parties of the second part did thereby acquit, release and discharge Laxton, his heirs, executors and administrators and his and their estate and effects from all the sums of money set opposite to their respective names or firms in the schedule, and from all sums of money (if any) which at the time of the execution of the deed by the several parties thereto of the second part were due and owing K2 by 1863. Ex parte CoCKBURN. In re SuiTii and Laxton. 132 CASES IN BANKRUPTCY. J 863. ^jy £axton to them respectively or to them and their Ex parte respective partners and from all and all manner of actions, CocKBURN. and so on, following [the words of a general release ; Smith ^"'^ Laxton for and in consideration of the premises did and thereby for himself, his heirs, executors and administra- tors, covenant, promise and agree with and to the several parties thereto of the second and third parts, that he Laxton would on demand pay unto all and singular the existing creditors of Laxton, including the parties thereto of the second part (unless the same should have been paid to them on the day of the date of the deed), a com- position of three pence in the pound on the amount of their respective debts then due and owing by Laxton either alone or jointly with any other person or persons to them respectively. It appears from this statement of the deed that the creditors who have not executed the deed and those who are not named in the schedule, are placed by the deed in a situation very inferior to that of the majority of the creditors. To the latter the composition is paid down in hand, whereas the former have to rely upon the covenant. But further, it is clear that the creditors who have not executed the deed could not sue upon the covenant of the debtor. The covenant is with the parties to the deed of the second and third parts, and as the deed is between parties, no person who is not a party could sue upon the covenant (a). This clearly follows from the settled principles of law, which are illustrated by the cases cited in the argument. Again, (o) It has been since held 4 H. 4- C, 28; L. R. 1 Exch. that a general description is 112; Reeves v. Watts, L. R. sufiBcient to make the creditors 1 Q. B. 412. parties. See Gresty v. Gibson, CASES IN BANKRUPTCY. 133 Again, the creditors whose names and debts are not 1863. set forth in the schedule are under a great disadvantage „ '"^ • 1 ■ ■ ■ , f ^^ P"''*^ in this respect, namely, that there is no admission by tiie Cockburn. debtor of the debts due to them respectively. Even, In re therefore, if any one of such creditors could now come g„j in and execute the deed and sue upon the covenant, Laxton. he would be under the necessity of proving the fact and ^mount of his debt. But the deed to be binding must be complete at the time it is registered, and it can- not be subsequently executed by any creditor who had not previously assented to or approved of it in writing. Therefore it is plain that there are several creditors in each case who are in a situation of great disadvantage. The deeds have been framed in an imperfect manner. If the names and debts of all the creditors who are not parties to or have not assented in writing to the deeds had been included in distinct schedules written under the deeds, and the amount of the composition on such last-mentioned debts had been deposited in a bank or with a trustee for such last-mentioned creditors re- spectively, with directions to pay the amount on demand, and if the debtors had also respectively covenanted with the persons named in such schedules, that they or the trustees respectively should and would pay such compo- sition on demand, it might perhaps have been reasonably contended that all the creditors were, as far as possible, placed in a situation of equality. The power given by the act to a certain majority of creditors to bind, and in fact to release, the debts of the minority, in cases where there is no cessio bonorum, is no doubt a great and extraordinary power. It of course rests on the assumption, that terms which so large a proportion of creditors, both in number and value, are willing to accept from an insolvent, must be advantageous to 134 CASES IN BANKRUPTCY. 1863. Ex parte COCKBURN. In re Smith and Laxton. to the whole body of creditors, and this assumption ne- cessarily implies that the terms agreed to are the same for all, and that those who bind and those who are bound are in a situation of equality. Where this is not the case, it seems to me that non-assenting creditors are not bound according to the true intent and meaning of the statute. I must, therefore, declare that these deeds of compo- sition are not binding on the creditors who a,re not parties or have not assented thereto, and that the order of the Commissioner annulling the adjudication, which is founded on these deeds of composition, must be discharged. 1864. Mitrcli 5. On this day the whole case came on again to be re- argued by permission of the Lord Chancellor, his Lordship's attention having been called, subsequently to the delivery of the foregoing judgment, to the fact that in reality it had been too hastily assumed on former oc- casions that as the deeds executed by Smith and Laxton respectively so also the circumstances of their respective creditors were the same; whereas in reality they differed thus, that the state of circumstances relative to creditors, supposed in the foregoing judgment to exist in LaxtorCs case, actually existed in the case of Smith only, there being in the case of Laxton two classes of creditors only, namely, those who had executed the deed, and those who were named and described in the schedule but had not executed it. Mr. Druce for the Appellants. Mr, Bacon and Mr. Sargood for the Respondents. In addition to the authorities cited on previous occa- sions, CASES IN BANKRUPTCY. sions, reference was made to Ex parte Ruffin{a) ; Ilderton V. Jewell (b); The Bankrupt Law Consolidation Act, ^ ' ' ^ 'Ex parte 1849, s. 97 ; The Bankruptcy Act, 1861, ss. 192, sqq. Cockburn. lure Mr. Druce replied. a„j Judgment reserved. Laxton. The Lord Chancellor. April 13 In this case a re-argument was directed in consequence of it having been stated to me that there was an error in the statement of the facts of the case in my former judgment. There are two deeds of composition and release, one executed by Mr. Smith, the other by Mr. Laxton. Smith and Laxton were partners. It was originally stated to me that the deeds were perfectly alike, being in fact counterparts one of the other. I assumed, therefore, that the circumstances as to the creditors were the same in both cases. In Smith's case I find three separate classes or di- visions of creditors ; first, creditors who had executed the deed ; secondly, certain creditors who were named in the schedule to the deed but had not executed it; thirdly, certain creditors included in the account of debts brought into the Registrar's office, but who had neither executed the deed nor were included in the schedule. I assumed in my former judgment that the same state of facts existed as to Laxton's deed ; but this was a mistake. In Laxton's case there are only two classes of creditors, (a) 6 Ves. 119. (6) 16 C. B. (JV.S.) 142. 136 CASES IN BANKRUPTCY. 1864. Ex parte COCKBURN. In re Smith and Laxton. creditors, those who have executed the deed, and those who are named and described in the schedule, but have not executed it, I willingly permitted the whole case to be re-argued ; but there was in fact no ground for change of my opinion with respect to the case of Smith. The question there- fore is, whether there should be any alteration in my judgment with respect to the case of Laxton. The insufficiency oi Laxton' s deed arises entirely from the form of its construction. The creditors are divided into two classes upon the face of the deed, those who have executed it, and those who have not executed it. The latter are not in any way named or described in the deed. It is expressed to be made between Laxton of the first part, the several persons whose names and seals are thereunto written, being severally creditors in their own right or in co-partnership of Laxton, of the second part, and all other (if any) the creditors of Laxton of the third part. There are only three references to the schedule in the deed. By one of them the schedule is incorporated in the deed for the purpose only of ascertaining the persons who have executed the deed. The second re- ference to the schedule is immediately after the witness- ing part, by which it is witnessed that " in pursuance of the agreement, and in consideration of the compo- sition of three pence in the pound on the amount of their respective debts, as mentioned in the schedule, paid by Laxton to the several persons parties to the deed of the second part," that is, the creditors who have executed the deed. The third and only remaining reference to the schedule is in the release, by which the parties who had executed the CASES IN BANKRUPTCY. 137 the deed released Laxton from payment of the sums of money set opposite to their respective names or the names of their respective firms in the schedule. The only reference made by the deed to the schedule, therefore, is, for the purpose of ascertaining who are the individuals who have executed the deed, and accord- ingly the schedule specifies the creditors who have exe- cuted, their signatures being given under a separate column headed " signatures of the creditors," and there is another column for " witnesses," and the third re- maining column for the seals of the parties. 1864. Ex parte COCKBURN. In re Smith and Laxton. The consequence, therefore, is, that the creditors who have not executed the deed are by no means named and described in the deed itself. They appear in the sche- dule ; but the schedule is incorporated in the deed only so far as it contains the names of the parties who have executed the deed. There is not, therefore, in fact even a statement in the body of the deed of the persons or of the debts due to the persons who have not executed. That being the state of the case, there is upon the face of the deed, by reason of the form of its construc- tion, a most material difference in the situation and in the legal right between the creditors who have executed and those who have not executed. The deed proceeds upon a recital that the several persons whose names and seals are thereunto subscribed and set (that is, the parties who have executed) have agreed to accept the composi- tion and to release Laxton from their debts ; and then it witnesses, that in consideration of the composition being paid by Laxton to those persons, those persons (viz. the creditors who have executed the deed) release Laxton from their debts. As 138 CASES IN BANKRUPTCY. 1864. Ex parte COCKBURN. In re Smith and Laxton. As I explained on a former occasion, in my view of the statute, a deed to bind creditors who have not exe- cuted it must be a deed which places the parties who execute, and the parties who do not execute, upon an equal footing in point of law. That is not the case upon this deed ; for upon this deed, according to the autho- rities cited upon the former occasion, and which settle the principle of law, no one of the creditors^ who has not executed the deed could sue Laxton upon the cove- nant contained in that deed {a). I mean by the covenant, that in the latter part of the deed, by which Laxton covenants with the several persons, parties thereto of the second and third parts (there being in reality, for the reason I have already given, no persons who are parties of the third part), that he will, upon demand, pay to all and singular creditors the composition of three pence in the pound. There is, therefore, this vice in the deed, that it is so framed as not to give the creditors who have not exe- cuted the deed es.en the benefit of that covenant: but for the reasons that I previously gave I adhere to the opinion, that if the deed had been framed with greater skill, and had given to the creditors who had not executed it a clear right of suing upon the covenant, yet a remedy upon the covenant, being contrasted with immediate payment, would place those creditors in a situation of disadvantage and inequality as compared with the other creditors, and consequently that it would be impossible, upon the prin- ciple of constructive execution, to make' the deed binding on the creditors who have not actually executedJt. The statute provides that it shall be binding upon creditors who have not executed as if they were parties to and had duly executed the same. If they were parties to the same (a) See ante, p. 132, note. CASES IN BANKRUPTCY. 139 same and had executed it, it would still place them in a station of inferiority as compared to those parties to whom the money had been paid previously to the regis- tration of the deed. I see no reason, therefore, for departing from the opinion which I have already expressed. The invalidity of the deed for the purpose of binding non-assenting creditors arises not from the facts of the case, which clearly would have admitted of the deed being so framed as to bring the case within the operation of these sections; the fault lies entirely in the want of sufficient care and skill in the preparation of the deed. I must adhere in both cases to my former judgment. 1864. Ex parte COCKBURN. In i-e Smith and liAXTON. Ex parte GEORGE MILWARD MIDDLETON. In the Matter of GEORGE MILWARD MID- DLETON, a Bankrupt. rilHIS was an appeal from an order of Mr. Com- missioner i^anc confirming an adjudication of bank- ruptcy against the Appellant George Milward Middleton. March 12. June 4. Before The Lord Chancellor Lord Westbury. Goods were On contracted to be sold, with a condition that they should not be delivered unless the vendors chose or the goods were required bj' the purchaser for the actual purposes of his business until pay- ment of a bill of exchange which was given by the purchaser for the full value of the goods. The bill of exchange having been dishonoured and the goods nearly all remain- ing undelivered, the purchaser executed a trust deed under sect. 192 of the Bankruptcy Act, 1861, and the vendors assented thereto for a sum which included the value of goods contracted to be sold; — Hehl, that upon the facts of the case the contract for sale and purchase was absolute and not conditional, and that the retention of the goods was to operate as a security for the payment of the bill of exchange, and that the vendors cQuld if they chose assent to the deed for an amount of which the sum so secured formed part. Semble, however, that by so assenting they forfeited their security. The debt of a non-assenting creditor entered by the debtor in the schedule of debts required by the General Orders in Bankruptcy of 22 iliuj/, J862, hut therein marked " disputed," cannot, in the absence of the creditor, be disregarded in calculating the statutory majority of assenting creditors. 140 CASES IN BANKRUPTCY. In re MiDDLETON. 1864. On the 9th of November, 1863, the Appellant exe- ^•"^■^^ cuted a trust deed for the benefit of his creditors under MiDDLETON. tlie Bankruptcy Act, 1861, section 192, and it was duly registered. The schedule of debts, made out to accompany the deed, showed the total amount of debts to be 11,615^. 17s. 6d., and the amount of the debts of assenting creditors to be 8,7 2il. Us. M. A debt of 284/. part of a debt of 2,087/. 3s Od., entered as due to Messrs. Hodgson 8f Bibbins, wine merchants, who were assenting creditors, had been con- tracted under the following circumstances. The Appellant purchased from Messrs, Hodgson Sf Bibbins a quantity of wine, the price of which was 284/., subject to a stipulation that Messrs, Hodgson 8f Bibbins should not be under any obligation to deliver the wine before the payment of a bill of exchange for 284/. held by them, unless the Appellant absolutely required any part of the wine for the purposes of his business; in that case he was to be at liberty to insist on its delivery. Only a small part of the wine was delivered, and the bill of exchange was dishonoured. On the 24th of December, 1863, the Appellant was adjudicated a bankrupt. On showing cause against the confirmation of the adjudication it was contended before the Commissioner on behalf of the Appellant, that the previous regisl;ration of the trust deed avoided the adjudication. To this several objections were taken on behalf of the petitioning credi- tors. It was objected first, that in the schedule of debts filed in pursuance of the General Order in Bankruptcy of CASES IN BANKRUPTCY. of 22nA May, 1862, together with the deed upon its registration, the creditors had not been arranged in psrtc alphabetical order. The Commissioner however thought Middleton. that the provisions of the order were directory only, and In re , , ,, , . . Middleton. overruled the objection. It was then objected that in the same schedule a blank had been lefl; for the amount of the debt due to one of the Unsecured creditors. The objection however was not pressed, it appearing that even with the addition of the amount of the debt no variation would be caused with reference to the assent of the requisite statutory majority of creditors. A third objection was raised in the Court below, and was renewed on the present appeal on the ground that Messrs. Hodgson Sf Bihhins were secured creditors for the 284Z. above-mentioned, that the amount of their debt ought consequently to be diminished by that amount, and that if that were done the total amount of debts would be reduced to 11,331Z. 17s. 6d., three-fourths of which was 8,498Z. 18s. \^d., thus reducing the amount of the debts of assenting creditors to 8,440/. 14«. 4c?., and invalidating the deed. The Commissioner was of opinion that the debt of 284Z. was a secured debt, and afBrmed the adjudication. The present appeal was from that decision. On the opening of the appeal, Mr. Sargoodhr the Re- spondents, the petitioning creditors, asked leave to put in evidence an affidavit showing that there existed a creditor of the debtor whose name was wholly omitted from the schedule of debts filed in pursuance of the General Order. U2 CASES IN BANKRUPTCY. 1864. Ex parte MiDDLETON. In re MiDDLETON. Ordei-. He submittetl that as the order required a faith- ful statement of debts, of which the proposed evidence disproved the existence in the present case, and as the admission of this nevif debt vyould turn the scale against the majority, evidence showing that the debtor had filed a false statement of debts should, in vievr of the public interests and for the prevention of frauds on the part of debtors, be received at any time, and that at any i-ate the debtor could not raise any objection to its reception. [The Lord Chancellor declined to receive the affidavit, and said that the evidence should have been adduced in the first instance. The utmost that could be done would be, at the suggestion of the opposing creditors, to refer the matter back to the Commissioner in the manner in which his Lordship afterwards on hearing the case on its merits did refer it. J The appeal then proceeded on the merits. Mr. Bacon and Mr. Reed for the Appellant, relying upon Ex parte Solomon, lie Aubusson{a) ; Bankrupt Law Consolidation Act, 1849, s. 104(6); Bankruptcy Act, 1861, ss. 192, 198, 199(c); and the General Orders in Bankruptcy of 22nd May, 1862, argued that the contract between the Appellant and Messrs. Hodgson 6f Bibbins was an absolute contract for sale, and that therefore a debt existed here, and that such debt was properly reckoned at its full amount, the wine in question having been retained by those gentlemen as a security not for the purchase-money but for the bill of exchange. Even assuming however, as they did not admit, that the present (o) 1 G. 4- J. 25. ib) \2Sf 13 Vicl.c. 106. (c) 24 4- 25 Vict. c. 134, CASES IN BANKRUPTCY. was a case of a security, a creditor who assented to a trust deed under the Bankruptcy Act, 1861, was in the same position as a creditor in bankruptcy who had proved, and therefore in the present case Messrs. Hodgson 8f Bibbins by executing the deed for the full amount of their debt had waived all right to their security, and that, tlierefore, even on this assumption the debt was properly reckoned at its full amount, and the statutory majority of assenting creditors obtained. 143 1864. Ex parte MlDDLETON, In re MlDDLETON. Mr. Sargood, for the Respondents, contended that as the wine was not delivered and the bill of exchange was dishonoured, no sale had in fact taken place, and the right of Messrs. Hodgson Sf Bibbins to retain the wine as yet undelivered was clear, Bishop v. Shillito (a). Therefore there was no debt to the extent of this 284Z. But that if there was a debt Messrs. Hodgson Sj' Bibbins were in the position of creditors holding security for it, and their debt ought not to be reckoned unless they consented to give up that security. The Lord Chancellor who during the argument observed, with reference to the words " other process" in the 198th section of the Bankruptcy Act, 1861, that they meant other process ejusdem generis with the other matters there mentioned, and did not apply to proceedings in bankruptcy, said at its close, without calling for a reply,— The facts of this case do not enable me to say that there was not a debt amounting to 2,087Z. due from the Appellant to Messrs. Hodgson &; Bibbins at the date of the execution of this deed. The (a) 2 B. <5- Aid. 329, note (a). 144 CASES IN BANKRUPTCY. 1864. The question turns upon an alleged contract for the ^ '"^^ purchase of wines amountinsr to 284Z. Had the facts Ex parte ^ ° MiDDLETON. warranted the deduction that this contract was only con- In re ditional, a contract only to arise and become binding upon a certain bill of exchange being paid, there would have been nothing to transfer the property in the wine to the Appellant or make him liable for the price. But the examination of the debtor himself, however, which is before me, clearly shows that the contract was an absolute contract for purchase and not a conditional one. That contract was, however, accompanied with a stipulation that Messrs. Hodgson &; Bibbins should be under no obligation to deliver the wine until a certain bill had been paid, unless they chose so to do ; but with this further exception accorded to the Appellant, that if he absolutely required for the purposes of his business the delivery of a part of the wine, he should have the right of requiring that delivery. Accordingly we find, as a fact, that some of that wine was delivered. I must assume, therefore, that there was a contract passing the property in the wine, and at the same time creating a debt subject only to an engagement that if the creditor elected to claim such a right he might retain the wine as a species of security to continue until a particular bill might be paid. That in effect amounts to this, that the retention of the wine was to operate in the nature of a security to the creditor for the payment of that bill. It differs very materially from the case of Bishop v. Shillito, for that was a contract to exchange iron for bills of exchange ; that is to say the purchase-money of the iron was to be paid, and the contract of purchase was CASES IN BANKRUPTCY. was to be completed by the delivery of certain bills of exchange as the purchase-money, and the seller of the iron having on the faith of that contract delivered part of the iron without receiving the bills, which in reality were never handed over to him, the consideration for that contract failed altogether, and the person who had delivered the iron was held entitled to recover it. 145 1864. Ex parte MiDDLETON. In re MiDDLETON. But here the contract is complete with respect to the engagement made to deliver, subject to a collateral undertaking with respect to retaining possession of the wine until the bill was paid, unless the seller thought proper to deliver or unless the buyer should show that he actually required the goods bought for the exigencies of his trade. In my judgment, therefore, the sum of 284Z. did form part of the debt due to Messrs. Hodgson ^ Bibbins at the date of the deed, and they were at liberty to treat themselves as creditors of the debtor to that amount if they thought fit so to do, and to prove in effect, that [is to execute the deed in respect of that amount. They released by virtue of that proof the right of insisting upon the retention of the wine. I think, therefore, that the 284/. must be considered as a valid part of the 2,087/. due to Messrs. Hodgson ^ Bibbins, and that the exigencies of the statute with respect to the required majority in value of the debts has been satisfied by the signature of Messrs. Hodgson Sf Bibbins in respect of the 2,0811. That signature is complete for all purposes. I think that it would not be competent to Messrs. Hodgson Sf Bibbins to alter that signature or to withdraw that amount ; and as between them and the debtor they were. Vol. I— 2. L D.j.s, in 146 1864, Ex parte MlDDLETON. In re MlDDLETON. CASES IN BANKRUPTCY. in my judgment, in reality creditors of the debtor for that amount. The case therefore is brought back to the materials that are contained in Mr. SargoocCs additional affidavit, and on that I think the most convenient course and the one best for all parties will be to make a reference back to the Commissioner to make the inquiry which has been already suggested in the very terms of the first paragraph of the 192nd section of the statute, whether at the time of the registration of the deed a majority in number representing three-fourths in value of the creditors of the debtor whose debts respectively amounted to \Ql. and upwards had before or after the execution thereof by the debtor, in writing assented to it or approved thereof. Let the case stand over pending that inquiry. June 4. On this day the matter again came before the Lord Chancellor on the appeal of the bankrupt from the report of the Commissioner which negatived the alleged fact of the requisite statutory majority of creditors having in writing assented to or approved of the deed. The schedule of debts had received the addition of two debts due to creditors, who were unnoticed in the former schedule, and this addition, together with that of the debt due to the unsecured creditor opposite to whose name in the former schedule a blank had been left, had the effect above mentioned of avoiding the statutory majority of assenting creditors and turning the scale against the debtor. To restore the balance it was sought on the present appeal to expunge from the list of debts a debt of 700Z., which was entered by the debtor as due CASES IN BANKRUPTCY. due to a Mr. Walter Scott of Hull, a non-assenting cre- ditor, but with the addition to the entry of the word ' •' Ex parte "disputed ;" inasmuch as if such debt could be expunged, Middleton. the requisite majority was obtained. In re Middleton. It appeared that an action in respect of this debt, brought by Mr. Scott against the Appellant, was still pending. Mr. Bacon and Mr. Reed, for the Appellant, adduced evidence to show that the claim was groundless; and contended that the statute required only real debts to be set forth, and not matters in dispute ; and that the entry of the claim in the schedule was proof of the scrupulous honesty of the debtor in the matter. Mr. Sargood, for the Respondents, was not called upon. The Lord Chancellor. I am sorry that I cannot entertain the application so as to sustain this deed. The question arises as between the debtor and the act of parliament. The debtor sets up the act of parlia- ment against opposing creditors, who wish to make him a bankrupt, and he undertakes to prove that the require- ments of the act have been complied with. If such compliance be established, the opposing cre- ditors are bound by the deed. — [His Lordship then re- ferred to the various proceedings which had taken place with reference to the deed, and proceeded thus :] — Under the inquiry before the Commissioner upon the refeH^ce back to him, it might have been competent to L 2 the 148 CASES IN BANKRUPTCY. 1864. the Appellant to proceed to strike out the debt of VOO/. '"■""^''^ claimed as being due to Mr. Walter Scott of Hull ; but MiD^DLETON, to do that effectually, Mr. Scott should have been brought III re before the Court. It was however attempted to be done MiDDLETON. .j,,jj,j^Qyj summoning Mr. Scott. I cannot listen to the ex- cuse that Mr. Scott could not be found ; more especially as an action has been brought by that gentlemen against the Appellant, which is still pending. The deed therefore comes back to me with Mr. Scott's name remaining on it unerased, but with the addition of certain other debts, which turn the scale against the debtor, by showing that the act of parliament has not been complied with. I am then pressed by the Appellant, in the absence of Mr. Scott, to try the question myself, and to strike out his debt in order to restore the balance. I cannot do so. On a question between the Appellant and the act of parliament, the Appellant's own repre- sentations must bind him. The debt having been entered by him as a debt, he cannot now get rid of it by inserting the qualification which he has added, otherwise it would be an easy way for debtors to bring themselves within the act and to obtain a majority in number and value of their creditors, if they could get rid of the non-assenting creditors by putting the word " disputed " opposite their debts. I cannot listen to the argument. Here I have not only 700Z., the amount of the debt put down, but I actually find that 700Z. entered in the total of debts as cast up by the debtor himself and sworn to in his affidavit. If the question be tried, as it must be, upon the face of the documents handed in by the debtor himself, the debtor's statement must be taken prima facie against him, and the debt as stated taken .into ac«fount in CASES IN BANKRUPTCY. 149 in ascertaining whether or not there has been a com- 1864. pliance with the act of parliament. The addition made ZT'^''*'^ ^ . ^ . Ex parte to the list by the report must be taken into account Middleton. for the purpose of ascertaining whether the act of par- In re liament has been complied with. It had not been taken into account ; and when taken into account, turns the scale against the debtor. I cannot qualify the state- ment of the debtor by giving effect to his allegation that Mr. Scott's debt is disputed ; the debt must be taken as the debtor has stated it. In that state I find the case ; in that state I adjudicate upon it. J find that the deed does not comply with the act of parliament. His Lordship then dismissed the appeal with costs of the present hearing, and ordered the remaining costs of the appeal to be paid out of the estate. CASES IN BANKRUPTCY. Ex parte EDGAR BROOKS. May 25. In the Matter of EDGAR BROOKS. June 8. Before The rpHIS was an appeal from an order of the Commis- Lord T Chancellor sioner of the Birmingham District Court of Bank- LoRD ruptcy, by which he directed that the Appellant, who WeSTBURY. 11. Ill Tr-,^ 1 • /• „,, had executed and registered under the ly^nd section ot Where a " debtor has the Bankruptcy Act, 1 861, a deed of composition with deed under the ^'® creditors, should be committed for contempt for re- Bankruptcy fusing to submit to examination at the summons of the s. 192, any Respondent JbsepA Wilson, a creditor who did not assent creditor, ^Q j-jjg Jggj ^f composition, altnough.de- '■ nying the deed' h en-*^ ^he Appellant had stated in his affidavit, filed upon titled to ex- the registration of the deed, that amongst the creditors bankrupt. assenting to the deed was the Birmingham Banking But such ere- Company; that their entire debt was 8,602Z. 15s. lid., ditor must sub- > i, . i , , ^^m mit to the juris- and that they held security valued at 4,200/. diction in bankruptcy. The Respondent took out a summons against the Ap- pellant in the District Court of Bankruptcy for him to attend the Court and be examined touching his estate, with a view, as the Respondent admitted, to disprove, by the examination of the debtor, the truth of the alle- gation as to the value of the security, and thus by showing the invalidity of the deed by reason of its non-compliance with the statutory conditions as to the requisite majority of assenting creditors to support certain proceedings at law then pending at his suit against the Appellant. Upon the return of the summons it was objected on the CASES IN BANKRUPTCY. 151 the part of the Appellant that the Respondent, not having 1864. assented to the deed, had no right to examine the Ap- pellant. The Commissioner overruled the objection, and upon the debtor persisting in his refusal to be sworn unless the creditor would execute the deed, made the order under appeal ; suspending its execution, however, with a view to an appeal. Mr. Sargood, for the Appellant, referred to Anony- mous {a) ; Ex parte Abbott {b) ; Ex parte Lawrence {c) ; Ex parte Collins {d), before the Court of Bankruptcy, . and admitted that if the immediate object of the pro- posed examination by the creditor had not been to show that the deed was invalid, but had been a purpose beneficial to the creditors claiming under the deed, it ought not to be checked, although the indirect conse- quence of the examination might be the destruction of the deed. But he contended that if, as avowedly here, the proposed examination was not for the purpose of benefiting the creditors under the deed, but was merely for the purpose of destroying the deed, it could not be permitted, since it would be at variance with the rule in bankruptcy to permit such an examination. The creditor here was in fact bound by the deed, and could not be in a better position than that of a creditor who had proved under a fiat ; and a creditor who had proved under a fiat was not permitted to pursue an examination of the bankrupt having for its immediate object not a result beneficial to the rest of the creditors, but the destruction of the fiat itself. He (a) 6 L. T. {N. S.) 166. (c) 76. 559. (i) lb. 195. ( of the act, . ~. , . . I • 1 1 , mustshowsuch insumcient was an athdavit in which the deponents, one circumstances of whom was the debtor, deposed that certain bills of "'''^ greater '■ _ certainty than exchange which had been accepted or indorsed by them by merely (according to the exigency) in respect of certain specified t^e'd'^jonent debts referred to in the affidavit had been (as the depo- is informed nents had been informed and verily believed) indorsed believes them and paid away by the original holders, and that the "> ^^ ^ stated. deponents were unable to ascertain by whom such bills or certain other negotiable securities in the affidavit referred to were holden. The Lord Chancellor thought the affidavit in- sufficient, and dismissed the appeal. 168 CASES IN BANKRUPTCY. 1864. Ex parte JOSEPH JONES In the Matter of ROBERT MURRAY M'TURK, a Bankrupt. And in the Matter of ROBERT MURRAY M'TURK'S Assignment. July 30. Before The ri^HIS was an appeal by the petitioning creditor from Chancellor a" order of Mr. Commissioner Ayrton, made on 1'°''° the 30th of June, 1864, refusing, with costs, a motion The Court has ^'^'^ ^" order upon the trustees of a deed in the form of no jurisdiction the statutory deed given in the schedule (D) to the hTtheVJutty Bankruptcy Act, 1861, to pay the petitioning creditor's form given in gogts of a dismissed petition for adjudication out of the to the Bank- debtor's estate in their hands, ruptcy Act, 1861, and exe- The deed was executed by the debtor on the 31st of debtor to make March, 1864. an order upon the trustees of The Appellant, who was a dissentient from the arrange- the deed for i i . i i i />i i ■ • p payment out of ment contemplated by the deed, tiled a petition tor *jj®.^^'^'^ '" adjudication of bankruptcy against the debtor on the 4th a petitioning of April, 1864, under which the latter was adjudicated oraii'adkidr'^ bankrupt on the 6th oi April, 1864; but proceedings in the cation of bank- adjudication were, in consequence of the existence of the the debtor AeeA. and the probability of its ultimate registration under made after tlie section 192 of the act, stayed from time to time, until on the execution of the deed, but 6th of May, 1864, the deed having then been registered subsequently up^g^ section 192, and the Commissioner being of opinion annulled in . ' or consequence of that all the requirements of the Act had been complied of^h?deed'°" with, annulled the adjudication made on the 6th of under the April, 1864, and dismissed the petition for it. Bankruptcy Act, 1861, 8. 192. The order thus made by the Commissioner was silent altogether CASES IN BANKRUPTCY. altogether as to the costs; nor were they asked for on behalf of the Appellant at the time when the order was made. The Appellant, on the 10th of June, 1864, made a separate application to the Court for an order upon the trustees of the deed for payment of his costs up to the adjudication out of the debtor's estate in their hands; and from the refusal, with costs, by the Commissioner (who had taken time to consider his judgment) of the application thus made, the Appellant now appealed. 169 1864. Ex parte Jones. In re M'TURK. Mr. Sargood for the Appellant, relied upon the Bank- ruptcy Act, 1861, ss. 197 and 213. The Lord Chancellor, without calling upon Mr. Charles Hall, who appeared for the trustees, thought that the 213th section of the act only gave jurisdiction to the Court to award costs in a subsisting bankruptcy or under a deed. In the present case the annulling order and dismissal of the petition for adjudication had done away with the bankruptcy ; and the Court had no jurisdiction under the deed to make an order upon the trustees of the deed for payment out of the estate in their hands of costs incurred in the bankruptcy, which had been so done away with. The want of such a pro- vision might be an unintentional omission in the act ; but if so, it was one which the Court had no power to supply, whilst if the Court acceded to the argument of the Appel- lant, it would be encouraging every dissentient from a deed of arrangement to petition for an adjudication of bankruptcy against the debtor for the sake of costs. The appeal must be dismissed. Mr Charles Hall, for the trustees, asked for the costs of 170 CASES IN BANKRUPTCY. 1864. ^-^--^ ■ Ex parte Jones. In re M'TURK. of the appeal, urging that the Appellant ought to pay them, he having made no application for his costs on the occasion of the application to dismiss the petition for adjudication. The Lord Chancellor was of that opinion and ordered accordingly. Ex parte CHARLES MORRISON, JOHN DILLON, GEORGE BROWN and ROBERT SLATER. In the Matter of a Trust Deed made between EDWIN JOHN HENRY CLUNN and Trustees for his Creditors. T^HIS was an appeal by Messrs. Morrison, Dillon b; Co. from the refusal of Mr. Commissioner Fane to allow them to issue process against the Respondent Edwin John Henry Clunn, notwithstanding the execu- tion and registration by him under the Bankruptcy Act, 1861, s. 192, of a trust deed for the benefit of his creditors in the form given in schedule (D) to the Act. July 30. Before The Lord Chancellor Lord Westburt. Where a debtor, being sued by a creditor on a dishonoured bill of ex- change, and having no present assets, and only the deferred pos- sibility of the accruer of a trifling sum on a balance of accounts between the debtor and his late partners, such possibility being dependent upon the result of legal proceedings taken by the partners to obtain relief against payments made by them, executed a trust deed in the form given in schedule (D) to the Bankruptcy Act, 1861, which was registered under the 192nd section of that act : — Held, that the deed was invalid as a fraud upon the act, and that a dissentient creditor ought to have leave to issue process against the debtor, notwithstanding the registration of the deed. At the date of the deed the Respondent was, and at the date of the application to the learned Commissioner he remained, indebted to the Appellants in the sum of 2331., the amount of two bills of exchange dated re- spectively CASES IN BANKRUPTCY. 171 spectively the Z2ni oi May, 1863, and payable respec- 1864. tively six and eight months after date. These bills were „ JO Ex parte drawn by the Respondent upon and accepted by one Morrison. Joseph Davison, and were made payable to the order of I" "^^ the drawer, by whom they were indorsed to the Appel- Trust Deed. lants. They were received by the Appellants in part compromise on the part of the Respondent of an action brought by them against a certain firm of Clunn Sf Co., the members of which consisted (down to the 2ist of Novemher, 1862, when it was dissolved as to the Re- spondent) of the Respondent, his father Thomas Clunn and his brother Thomas John Clunn, The other part- ners defended the action on the ground that the guarantee of the firm, which constituted the ground of the action, had been given by the Respondent without authority. The Appellants, thinking it probable that the facts were as alleged, discontinued their action against the other partners, but continued it against the Respondent, who eventually, after some further and (as was alleged) vexatious resistance, compromised it on terms, part of which consisted of the delivery of the two bills above mentioned. During the pendency of these proceedings and on the 17th of February, 1863, the Respondent by an indenture of that date made an absolute assignment of certain household furniture and effects to Thomas Clunn, Thomas John Clunn and George Richard Clunn, which was registered as a bill of sale. This indenture was not, however, particularly referred to in the evidence on the present application, except by a statement in the afiidavit in support of the application on the authority of the trustees of the trust deed of the 12th of De- cember, 1863, before mentioned, that the furniture in- cluded in the bill of sale was all that the Respondent possessed at the time. The CASES IN BANKRUPTCY. The first of the two bills given to the Appellants in compromise of their action against the Respondent Morrison, arrived at maturity on the 25th oi November, 1863, and In re was then dishonored. Clunn's Trust Deed. On the 5th of December, 1863, the Appellants com- menced proceedings against the Respondent in respect of the bill so dishonored. On the 12th oi December, 1863, the Respondent exe- cuted the trust deed, upon which the decision under appeal was founded. The trustees named in it were Thomas CLunn and one Alfred John Clunn, another of the Respondent's brothers. The affidavit filed with the deed in pursuance of the General Order of 22nd May, 1862, stated that the total amount of the Respondent's debts was 15,453Z. 2s. \d., and the total amount in value of assenting creditors (thirteen in number out of twenty-two in all) was 12,164Z. 5s. 4(3?. Among the assenting creditors were reckoned T. Clunn and T. J. Clunn for 8,078Z. 5s. M., T. Clunn for 2,350Z. and A. J. Clunn for 48Z. 18s. Id. The Appellants were dissentients. On the 4th oi March, 1864, the solicitors of the Ap- pellants wrote to the solicitors of the trustees of the trust deed, making inquiries as to the progress of the realisation of assets under the deed. The last-mentioned gentlemen on the 10th of March, 1864, replied simply that the trustees had no assets ; and again on the 22nd of March, 1864, in reply to a further letter of the Appel- lants' solicitors, they wrote as follows ; — " We repeat that there are no assets at present ; but we hope that on the estate being finally wound up (an event which . CASES IN BANKRUPTCY. which cannot happen for a considerable time), there will be a fund to divide among the creditors. We are „ .Ex parte of opinion that the bill of sale to which you allude is Morrison. good against the trustees, and would be good against In re assignees in bankruptcy. Trust Deed. The bill of sale alluded to in this letter was that of the 17th of February, 1863, above mentioned. The solicitors of the Appellants were subsequently in- formed by the solicitor of the trustees of the deed, that the only assets which could come to the estate of the Re- spondent, would arise in the following manner, viz : — that the debtor had improperly accepted bills in the name of his partnership firm, which bills he for his own private purposes had handed to persons from whom it was alleged he received no consideration ; that the remaining partners had been called upon to pay these bills, and that they had either paid or compromised all of them, and that they were then seeking to recover from the persons who had received the bills from the Respondent the amount which they had been called upon to pay, and that it was possible on that amount being received and the accounts taken between the partners a small sum might be coming to the Respondent. Under these circumstances the Appellants made an application to Mr. Commissioner Fane for leave to issue process against the Respondent, notwithstanding his execution and the registration of the trust deed, and from the refusal of the learned Commissioner to accede to the application, the present appeal was brought. Mr. Sargood appeared for the Appellants. Mr. Giffard and Mr. Bagley for the Respondent. For 174 CASES IN BANKRUPTCY. 1864. For the Appellants, it was urged that this was a case ^-"^'"^ of precisely the nature contemplated by the legislature, lyfo'^RR^sM. when, by the 198th section of the act, it reserved to the In re Court the power to permit the issue of process not- Trust Deed, withstanding the existence of the deed ; that the deed in the present case was in reality a mere sham and a fraud on the act of parliament, and that if such a deed executed under such circumstances were to be held valid, the penalties imposed by the Bankrupt Law would be rendered futile. For the Respondent, it was contended that such deeds were very common and really gave up to creditors all the debtors had, whether much or little or nothing; that the want of assets in a bankruptcy, especially under the present state of the law, whereby bankruptcy and in- solvency had been fused together, was no ground for refusing to release or discharge a debtor, and that the same principle ought equally to hold good in the case of a deed ; that in the present case it was in evidence that there might be some assets, and that nothing could be gained by the present proceeding, the only object of which was not to impeach the validity of the deed, but to imprison the debtor, an object contrary to the policy of the law. The Lord Chancellor. This is a fraudulent attempt to obtain a release of a debtor from his debts by an abuse of the act of parlia- ment. It is stated at the bar by the counsel for the Re- spondent that many deeds of this kind have been exe- cuted. If so, whenever a similar fraudulent attempt to abuse the provisions of the act is brought before me, I shall not be slow in applying a remedy. It CASES IN BANKRUPTCY. 175 It is argued on behalf of the Respondent that a man 1864. may have himself made a bankrupt, although not worth „ a penny, and that the condition in which the law is allows Morrison. that to be done. But a man who so applies the pro- '" ""e visions of the act does so openly and without fraud, Trust Deed. that is to say, without falsehood, without an attempt to pervert a section of the act of parliament given for one purpose to another and a different purpose. That con- stitutes fraud, and that makes the distinction between the two cases. The learned Commissioner's order must be reversed and the order made which was sought from him in the first instance. The deposit must also be returned to the Appellants. They have done service to the trading world by opposing this attempt to abuse the provisions of the act, and I am sorry that I cannot make an order to give them immunity from the expenses which they have incurred. 176 CASES IN BANKRUPTCY. 1864. Nov. 16. Before The Lord Chancellor Lord Westbury. The 194th sec- tion of the Bankruptcy Act, 1861, gives no juris- diction to the Court of Bank- ruptcy to dis- pense with the fourth condi- tion of the 192nd section requiring re- gistration of a deed intended to hind a non- assenting mi- nority of cre- ditors within twenty-eight days from its execution by the debtor or to extend the time therein mentioned. In the Matter of SKINNER. rilHIS was an appeal on the part of a debtor, who had executed a trust deed for the benefit of his credi- tors, and the trustee of the deed, from the refusal of the Commissioner to allow the deed to be registered under the Bankruptcy Act, 1861, s. 192, nunc pro tunc, the twenty-eight days from the day of the execution of the deed by the debtor, limited by the 4th condition of that section, having expired. The deed had been presented in due time for regis- tration under the 192nd section, but had been refused by the officer whose duty it was to attend to the regis- tration of deeds, on the ground that in the account of debts required by the General Order in Bankruptcy of 22nd May, 1862, to accompany the deed when left for registration, and which in this particular case was com- prised in more than a single sheet, only the first sheet had been marked as an exhibit to the affidavit of verifi- cation required by the same general order to accompany the account. The affidavit was resworn, and each sheet of the ac- count properly marked as an exhibit to it ; but in the meantime the twenty-eight days in question had elapsed, and registration of the deed nunc pro tunc was subse- quently refused by the Court below as above mentioned. From this refusal the present appeal was brought. Mr. CASES IN BANKRUPTCY. Mr. Charles Russell, for the Appellants, contended that the 194th section of the act gave power to the Court to extend the time for the registration of deeds within, Skinner. not merely the 194th section, but also the 192nd section, and that the present case was on its merits one for an order for extension of the time for registration, or an order for registration nunc pro tunc. He cited Me a Trust Deed (a) ; Wishart v. Fowler (i); He Simpson (c). The Lord Chancellor said he was clearly of opinion that the 194th section of the act gave no jurisdiction to the Court to dispense with the 4th condition of the 192nd section, and his Lordship refused the application but allowed the Appellants to take back the deposit and to have an order for registration of the deed under the 194th section of the act. (a) 10 L. T. {N. S.) 245. (c) 12 W. R. 351. (6) 4 B. 4- S. 674. Vol. 1—2. N D.j.s. 178 CASES IN BANKRUPTCY. 1864. Nov. 23. Dec. 7. Before The Lord Chancellor Lord Westbury. An instrument purporting to be a deed of assignment of all a debtor's estate and effects for the benefit of his creditors, and signed by the debtor, is in- Ex parte THOMAS BAYLEY POTTER and FRANCIS TAYLOR. In the Matter of EDWARD GEORGE BARRON the younger, a Bankrupt. rpHIS was an appeal on the part of Messrs. Thomas -'- Bayley Potter and Francis Taylor, who carried on business together in co-partnership, and as such co- partners were creditors of the Respondent, the bank- rupt, from an order of Mr. Commissioner Goulburn dismissing a petition presented by them for the annul- ment of the existing adjudication of bankruptcy, and the dismissal of the petition on which it was founded (such petition being the bankrupt's own), the Appellants under- taking immediately upon such dismissal to present a petition by themselves and apply for an adjudication fiUtniSSlDlG clS 'IT evidence of an of bankruptcy against the bankrupt, act of bank- ruptcy on his part, if un- \>arte\^enslai i^a i i Potter. veyance of the debtor s property, and consequently as In re proof of an act of bankruptcy committed by him anterior to the adjudication which the Commissioner had made. But under those circumstances and by virtue of the statutes to which I have referred the absence of the stamp deprived the Commissioner of the power of looking at the instrument; and upon the proposition submitted to him, I think he was right in refusing to recognise any such conveyance, or any such effect or operation, and in ignoring the instrument. The Appellants consequently failed in limine in proving any act of bankruptcy. And it is, therefore, unnecessary for me to refer to the language of the Bankruptcy Act, 1861, ss. 192, 194', in connection with this subject. I am not, hovirever, satisfied as to the correctness of the decision in Ex parte W^ewsZey which has been cited. I think that I should require considerable argument before I should be prepared to support it (a). The- present appeal must be dismissed with costs. (a) See, however, Ponsford v. above reported, was referred to. Walton, L. R., 3 C. P. 167, See also Uobson v. Thelluson, where Ex parte Wcnsley was fol- L. R., 2 Q. B. 642. lowed, although Ex parte Potter, CASES IN BANKRUPTCY. T Ex parte KING. In the Matter of KING'S Trust Deed. Dec. n. HIS was an appeal from the refusal of Mr. Regis- Before 'ihe trar Winslow, acting as Commissioner, to direct chancellor the registration of a trust deed for the benefit of ere- Lord "yf ESTBUR Y. ditors under the Bankruptcy Act, 1861, s. 192, although j, ^ , - only executed by two of the three trustees appointed by Bankruptcy tne aeed. to dispense with the exe- m, 1 , , , 1 , T 1 • cution ofadeed 1 he deed nad been executed by debtors m pur- intended for suance of the resolution of a meeting of their creditors, registration - under the and the name of a Mr. Booth had been mserted in the Bankruptcy deed as that of one of the trustees, in consequence of ,'^'^f^' ' ^ _ _ s. 192, by one a suggestion to that eflFect made by his solicitor in his out of several absence at and adopted by the meeting. pointe^d by" the deed. A ■ii.--i-.il 11 ■ !• !•• AeeA imperfect Mr. Booth, however, had not given his solicitor any i„ that respect authority to make the suggestion in consequence of ^^^ ""' '"'fil which his name was so inserted in the deed as that of a requirements trustee, and he refused to execute the deed when pre- °^ ^}^ section ' ^ and cannot be sented to him for the purpose. registered thereunder. Two Other gentlemen whose names had been as- sociated with that of Mr. Booth in the deed as those of trustees had both executed the deed. In that condition, so far as regarded the persons appointed by it trustees, the deed was presented for registration under the 192nd section of th© act, Tbe officer, however, whose duty it was to receive it, con- ceiving that the 2nd condition of the 192nd section had CASES IN BANKRUPTCY. had not been complied with, declined to receive it; and the Deputy Commissioner, on application made to him to K.ING. dispense with Mr. Booth's execution of the deed, took In re the same view of the matter, and refused to accede to Trus'/deed. *e application. From this refusal the present appeal was presented. Mr. Reed appeared in it on behalf of the debtors, the two trustees who had executed the deed, and certain creditors. The Lord Chancellor. I cannot do anything in this matter. It is unfortunate that the creditors entertained the suggestion made to them at the meeting by Mr. Booth's solicitor, without first ascertaining whether that gentleman had given his assent. As it is, they merely assumed that something would be done which has not been in fact done. The provisions of the act of parliament must be followed expressly, and were I to accede to this application I should be simply repealing one of those provisions. Under them, until a trustee or trustees appointed by a deed intended for registration under the 192nd section has or have executed the same, it does not fulfil the requisites imposed by the legislature. The deed, there- fore, in the present case is not such a deed as the legis- lature contemplated ; it has not been registered and its registration would have been improper. I must refuse this application, but the deposit will be rGturned. CASES IN BANKRUPTCY. Ex parte GROOME. In the Matter of GROOME'S Trust Deed. Dec. 17. ri^HIS was an appeal from the decision of the Com- Before The missioner refusing to allow as sufficient an affidavit chancellor stating the circumstances relied upon as grounds for dis- Lord ... /.Ill ii Westbury. pensing with the assent oi the whole statutory three- !,,„, ,. , ■, o ^ \ n The affidavit fourths 01 the creditors to a trust deed tor the benent required by the of creditors executed by a debtor in the form given in ?^"'^™P'''^ ■' ° Act, 1861, 3. schedule (D) to the Bankruptcy Act, 1861. The affi- 200, should davit is required by the 200th section of that act to partlcullrity state the circumstances of the case whereby the debtor the matters to cannot obtain the assent to the deed of the statutory directed, majority of creditors prescribed by the 192nd section. The affidavit in the present case stated that the debtor was unable to obtain that majority by reason of his being unable to ascertain by whom bills of exchange accepted by him were holden, but did not give the par- ticulars of the bills. Mr. Bacon on behalf of the debtor. The Lord Chancellor held that the affidavit was insufficient, and dismissed the appeal (a). (a) See Ex parte Dobson, supra, p. 167. 188 CASES IN BANKRUPTCY. 1865. Ex parte PHINEAS ALEXANDER RYRIE OLDFIELD, HAROLD LITTLEDALE and EDWARD GREY. In the Matter of PHINEAS ALEXANDER RYRIE OLDFIELD, a Bankrupt. ri^HIS was an appeal on the part of the bankrupt and Messrs. Littledale and Grey, who were the trustees Jan. 19. Before Tlie Lord I Ctuincellor Lord ^f ^ trust deed which had been executed by him and his Westbury. /• 1 r t\t /^ A tr st deed Partner William Thomson, from the refusal of Mr. Com- for the benefit missioner Perry to stay all proceedings under the petition tended to be fo'^ adjudication, and to dismiss the petition. executed by debtors in busi- ness together as copartners and to be * On the 5th oi November, 1864, Willidm 7V«omsonand the bankrupt as partners executed a deed of that date, brought witliin which was expressed to be made between them of the the provisions of the Bank- ruptcy Act, ]861, s. 192, is properly framed when its terms em- brace all poS' first part, the Appellants Littledale and Grey of the second part, and the several other persons, firms and companies whose names were thereunto subscribed, and all other persons, firms and companies being at the date of the deed creditors jointly or severally of William poperiilihich Thomson and the bankrupt and who would be entitled not only does to prove under an adjudication of bankruptcy against them or either of them founded on a petition filed on the day of the date thereof, of the third part. It contained no recitals, and by its terms the debtors and but also may or might be- long to the partners jointly or to either of them separately. The non- existence in point of fact of any separate estate of either debtor is no objection to the validity under the Bankruptcy Act, 1861, s. 192, of a trust deed so framed, even as against a non- assentient separate creditor. Stumble tnai m computing the statutory majority of assenting creditors to a deed under the Bankruptcy Act, 1861, s. 192, executed by debtors in trade in copartnership the separate creditors are not to be consulted separately in respect of the separate estate but that the whole body of the creditors is to deliberate and decide together and that separate creditorg might constitute a majority even if there were no separate' estate ' CASES IN BANKRUPTCY. 189 and each of them conveyed and assigned all their and 18G5. each of their estate and effects to the Appellants Little- ^^ dale and Grey absolutely, to be applied and administered Oldfield. for the benefit of the joint and separate creditors of I" re Oldmeld, William Thomson and the bankrupt in like manner as if they had been at the date thereof duly adjudged bank- rupt ; and this operative part was follovtfed in the deed by a release of the debtors, with a reservation of the rights of creditors as regarded securities. On the 18th of November, 1864, the bankrupt- signed an admission of a debt in respect of which one Kenneth Powles, one of his separate creditors, had obtained a trader debtor summons against him. The bankrupt did not within seven days after such admission dis- charge or secure the debt, and was consequently upon the petition of Mr. Powles, founded on such default as an act of bankruptcy, adjudicated bankrupt by the Court of Bankruptcy for the Liverpool district on the 28th of November, 1864. In the meantime, however, and on the 24th of No- vember, 1864, and before the presentation of the petition for adjudication, the trust deed of the 5th of November, 1864, was registered under the Bankruptcy Act, 1861, s. 192. From the accounts and affidavits and declarations filed with the deed in pursuance of the General Order in Bankruptcy of Mai/ 22nd, 1862, it appeared that there was a statutory majority of assenting creditors to the deed of each description, viz. of the joint creditors of William Thomson and the bankrupt, and of the separate creditors of each of them. Mr. JVMffosjike petitioning creditor, was the only one out of six separate creditors of the bankrupt who did not assent to the deed. It 190 CASES IN BANKRUPTCY. 1865. It further appeared from the same documents that ^1'^''"^'^ neither of the debtors had any separate estate or property Oldfield. whatever. In re Old|^eld. Under these circumstances, and on the ground of the execution by the bankrupt of the trust deed and its registration in manner aforesaid prior to the presentation of the petition for adjudication, the application, of which the purport is stated above, was on the 13th. of December, 1 864, made to the learned Commissioner and refused ; the reason for such refusal stated in his Honor's order as drawn up being that the trust deed was invalid as against the petitioning creditor, on the ground that by the terras of it the separate property of the bankrupt was assigned and directed to be administered for the benefit of the separate creditors in like manner as if the bankrupt had been at the date of the deed adjudged bankrupt, when in point of fact there was no separate property to be assigned or administered. The bankrupt was examined before the Commissioner on behalf of Mr. Powles, and admitted that he knew that he had no separate property at the time when he made the assignment. Mr. BardsweU (with him Mr. Bacon), in support of the appeal, was stopped in his argument. Mr. North, for the Respondent Mr. Powles, supported the view of the learned Commissioner, arguing that there having been no separate property of the bankrupt to his knowledge at the date of his executing the trust deed, the assignmcn* of hXs separate property purported to be made by such deed was a mere pretence, and the deed consequently a mere vehicle for a false representa- tion, CASES IN BANKRUPTCY. tion, and within the principle of the decision in Ex parte Morrison (a), and invalid against the petitioning creditor as a non-assentient separate creditor. It was further contended that the absence of separate estate deprived the separate creditors of any substantial stake in the matter, in respect of which stake their assents as those of separate creditors and in respect of the separate estate could be reckoned with a view to the constitution of the requisite statutory majority. 191 1865. Ex parte Oldfibld. In re Oldfield. A reply was not heard. The Lord Chancellor. I am at a loss to understand the grounds of the learned Commissioner's decision. An objection has been urged with much ingenuity at the bar turning upon the frame of the deed. It is said that there is a statement in the deed of the existence of a separate estate belonging to the partner who has been adjudged a bankrupt, whereas in reality there is no such separate estate, and that consequently the deed contains a false representation. The deed, however, contains no allegation as to the existence of separate estate, and I think that its frame in this respect is correct. Its terms are framed so as to embrace all possible estate and property which might belong to the partners jointly or to either of them sepa- rately. It may be that either partner is possessed in some manner, possibly unknown to himself, of separate estate, and it would be wrong to adopt any form of words which (a) Supra, p. 170. 192 CASES IN BANKRUPTCY. 1865, which would not embrace that existing, or possibly Tr^"^"^"^ existing, present or future interest. Oldfiei.d. In re Another objection to the validity of this deed, grounded also upon the absence of separate estate in the present case, is, that the separate creditors could not in such cir- cumstances have exercised any deliberation which could tend to bind a minority. But the act of parliament does not in a matter of this kind contemplate separate creditors being consulted sepa- rately in respect of the separate estate. By the provi- sions of the statute the whole body of the creditors is to deliberate and decide together ; nor is there anything to warrant the conclusion that separate creditors might not constitute a majority, even if there were no separate estate. The learned Commissioner's decision appears to me to be unsustainable, and I must reverse his order and grant the relief which was sought at his hands. By his Lordship's order as drawn up the learned Commissioner's order was discharged ; and the Re- spondent by his counsel not objecting, the adjudication against the bankrupt was annulled, and the deposit ordered to be returned. CASES IN BANKRUPTCY. 193 1864. Ex parte JAMES ELLERTON. In the Matter of JOHN ANGELL LEECH, a Bankrupt. ri^HIS was an appeal on the part of the creditors' assignee from an order of Mr. Commissioner Fane, under the Bankrupt Law Consolidation Act, 1849, s. 194, for an allowance to the bankrupt out of his estate for the support of himself and his family prior to his passing his last examination. The first meeting of creditors had been held, but the power given by the Bankruptcy Act, 1861, s. 109, to a majority in value of the creditors present thereat to determine whether any or what allowance should be made to the bankrupt up to the time of passing his last examination had not been exercised. Under these circumstances the learned Commissioner made the order under appeal. Mr. De Gex for the Appellant. The objects of the legislature in passing the enact- ment contained in the concluding words of the 109th section of the Bankruptcy Act, 1861, sufficiently appear from one of the notes to Hazlitt and Roche's Bankruptcy Act, 1861 (a). One of the learned Commissioners in bankruptcy has indeed held that the Court still has the power of making an allowance to the bankrupt out of his Apr. 30. Before The • TiOrd Chancellor Lord Westbury. The power given to the Court of Bank- ruptcy by the Bankrupt Law Consolidation Act, 1849, s. 194, of making an al- lowance to a bankrupt out of his estate for the support of himself and his family prior to his passing his last exami- nation, still exists, subject only to be dis- placed by the exercise by a majority of creditors pre- sent at the first meeting after adjudication of the control- ling power given by the Bankruptcy Act, 1861, s. 109. Vol. 1—2. (a) Page 108, note. o D J.S. Leech. 194 CASES IN BANKRUPTCY. 1864. his estate previously to his passing his last examina- "^-^^ tion ; Re Smith{a). And it is true that the 194th section Ellerton. of the Bankrupt Law Consolidation Act is not ex- ^In re pressly repealed by the Act of 1861 . But the inference therefrom is not that the Court is to retain for an in- definite time concurrent authority with the creditors in these matters, but that the object of the legislature was to allow things to remain on their former footing until the first meeting of creditors had been held, and that after that time the new state of things was to come into operation. Mr. Horsey, for the Respondent the bankrupt, was not called upon. The Lord Chancellor. The 194th section of the. Act of 1849 not being included in the schedule to the Act of 1861 as repealed, but left still operative, it was plainly the intention of the legislature that that section should be acted upon in some cases. The reasonable interpretation of the two enact- ments when taken together is, that the power given to the Commissioner by the 194th section of the Act of 1849 is subjected to the controlling power given to a majority of creditors present at a meeting directed to be held by the 109th section of the Act of 1861 ; so that if those creditors come to any determination on the subject, their determination supersedes the authority of the Com- missioner. The matter, in fact, then becomes res judicata, and there is no longer any room for the exercise of the Commissioner's judicial authority. But I cannot accept the fact of the creditors having given (o) 7 L. T. {N. S.) 225. CASES IN BANKRUPTCY. 195 given no opinion as equivalent to their having come 1864. to a determination in the negative. If they had ex- ^T^'""*^ tj\ pciri6 pressly resolved to make no allowance or an allowance Kllerton. of any specified amount, the case would no longer have In re fallen within the scope of the 194th section of the Act of 1849. But as they have been silent on the matter, as they have not exercised the power of control given to them by the 109th section of the Act of 1861, the case is left to be dealt with, in accordance with what I must take to have been the intention of these creditors, by the law which still remains unrepealed, and, therefore, in full operation. It was not thought desirable to take away altogether the power given to the Commissioner by the 194th section of the Act of 1849. But it was thought desirable to subordinate its exercise to the judgment of the creditors, which in the present instance has not been exercised. « That being so, I think that the learned Commissioner had the power to make the order under appeal, and that having the power, he has exercised it in a moderate way. I think, therefore, his order should not be disturbed. V It was right, however, to bring the matter before the Court; and, consequently, while dismissing the appeal I do so allowing the costs of both parties out of the estate and the return of the deposit. Note. — See Ex parte Lovell, L. R., 1 Cli. App. 134. 02 196 CASES IN BANKRUPTCY. 1865. Ex parte GIBBINS. In re GIBBINS' Trust Deed. rpHIS was an appeal on the part of a debtor, Mr. Gibbins, who had executed and registered, under the Bankruptcy Act, 1861, s. 192, a trust deed in the July 26. Before The Lord Chancellor LOKD CrANWOETH. 111T-. lAP IT-- A deed for the '°'™ given in schedule (D) to the Act, from the decision benefit of ere- of Mr. Commissioner Holroyd holding the Appellant ditors operat- , • i t ^ n • i i ing under the "ot to be entitled to an allowance proportioned to the Bankruptcy jjg(. pj-oduce of his estate realised under the deed in Act, 1861, s. ^ . 192, is~to be accordance with the 195th section of the Bankrupt Law SghlTi" Consolidation Act, 1849. contract be- tween the debtor and his creditors, and stipulations not made by the parties them- selves cannot be imported into it by the Court, Therefore if it is intended that an allow- ance shall be made to the debtor out of the net pro- duce of the realisation of his estate in proportion to the amount of dividends yielded by it, a stipulation to that effect must be inserted in the deed, and cannot be imported into it under the Bankrupt Law Consolidation Act, 1849, s. 195, by any incorporation with the deed of the provisions of the Bankruptcy Act, 1861, s. 197. To obtain an allowance under the 195th section of the act of 1849 a bankrupt must not only have a sufficient estate but must also have obtained his certificate. Mr. De Gex for the Appellant. The 197th section of the Bankruptcy Act, 1861, provides thus : — " And the existing or future trustees of any such deed or instrument and the creditors shall as between themselves respectively, and as between them- selves and the debtor and against third persons, have the same powers, rights and remedies with respect to the debtor and his estate and effects, and the collection and recovery of the same, as are possessed or may be used or exercised by assignees or creditors with respect to the bankrupt or his acts, estate and effects in bankruptcy ; and, except where the deed shall expressly provide otherwise, the Court shall determine all questions arising under the deed according to the law and practice in bankruptcy CASES IN BANKRUPTCY. 197 bankruptcy so far as they may be applicable, and shall 1865. have power to make and enforce all such orders as it J^^'"*'^ _ liX parte would be authorized to do if the debtor in such deed Gibbins. had been adjudged bankrupt and his estate were ad- I" re . . I'll tj mi ■ • 1 • 1 Gibbins' ministered m bankruptcy. 1 his is a new and inde- Trust Deed. pendent sentence, and applies not only to the debtor's estate and effects but also to his person ; and where, as the Appellant has done here, he has ceded everything to his creditors, as in bankruptcy, he is entitled to all a bankrupt's rights, one of which is an allowance under the Bankrupt Law Consolidation Act, s. 195, pro- portioned to the net produce of his estate realised under the deed. It will be argued, perhaps, that that section requires the bankrupt who seeks an allowance under it to have obtained a certificate, following the older law on the subject. Ex parte Grier (a) ; Ex parte Gregg (5), and that as certificates have been abolished, so that even bankrupts cannot obtain them, it follows that neither bankrupts nor debtors who have executed and registered deeds under the 192nd section of the Act of 1861 are entitled to an allowance. But it has been held that the 194th section of the Act of 1849 is not impliedly repealed by the 109th section of the Act of 1861, Ex parte ELlerton{c), and so neither is the 195th section of the Act of 1849 impliedly repealed by the 174th section of the Act of 1861. Effect must therefore be given to it in the case of trust deeds, so far as may be ; and as the qualification with regard to the certificate is not in form applicable to trust deeds or required under them, but is replaced by different and equivalent provisions, that formality should be dispensed with. The legislature evidently intended in passing the Act of 1861 to assimi- late the position of a debtor under the circumstances of the Appellant here to that of a bankrupt. Mr. (a) 1 Atk. 207. (c) Supra, p. 193. (6) 6 Ves. 238. 198 CASES IN BANKRUPTCY. 1865. Mr. SargoodioT the Respondents, the trustees of the ^■^"^""^ deed. Ex parte iBBiNs. rpj^^ 195th section of the Bankrupt Law Consolidation GiBBiNs' Act, 1849, requires for its application the fulfilment of Trust Deed. ^^^ conditions, neither of which has been fulfilled here, viz: — the existence of a bankruptcy, and of a certificate; and with the abolition of certificates, the grant of one of which is a condition precedent to the grant of an allowance under the section in question, the section itself is virtually repealed, not, however, without giving the means of giving an allowance to a bankrupt who deserves it under the 174th section of the Act of 1861. But even while the enactment of the former section was in force in cases of bankruptcy the allowance was not simply an indefeasible right of the bankrupt, as from the report of the case in Ex parte Grier might have been the case under the statute then in force, but it was subject to reduction under the concluding words of the 195th section of the Act of 1849 according to the class of certificate obtained by the bankrupt ; in other words, according to his conduct, upon which depended the nature of his certificate. But in the case of a debtor arranging by deed who might, if he had been a bankrupt, have failed altogether in obtaining a certificate of any class, the Act of 1861 provides no means for conducting an inquiry into conduct, the 197th section having nothing to do with his conduct but merely with the Court's jurisdiction in the administration of his estate for the benefit of his creditors. In point of fact, in the case of an arrangement apart from bankruptcy, the grant of an allowance is a mere element in the contract between the debtor and his creditors, a contract defined by the deed. And the contract in the present case is the acceptance by the creditors of an assignment of the whole estate, and not an assignment of that estate lessened CASES IN BANKRUPTCY. lessened by payments to be made thereout to the debtor by way of allowance, which being a matter „ relating to the debtor personally is not within the scope Gibbins. of the 197th section, which relates to his estate and I" re Gibbins' ettects merely. Trust Deed. Mr. De Gex in reply. The grant of an allowance to the debtor is a question relating to the administration of the estate under the deed, and falls consequently within the scope of the 197th section of the Act of 1861. The Lord Chancellor. I should have been glad to accede to this application, had I been able to see my way to do so. But I think a deed of this kind must be looked upon in the light of a contract between the debtor and his creditors, and that stipulations not made by the parties themselves cannot be imported into it by the Court. [His Lordship then adverted to the terms of the Bankruptcy Act, 1861, ss. 194 and 197, and the argu- ment founded thereon advanced on the part of the Appellant, and continued thus :] — Even assuming that the second branch of the 197th section extends to the person as well as to the estate of the debtor, it is a matter not of mere form but of sub- stance, that a person subject to the bankrupt law who is to obtain an allowance under the Bankrupt Law Con- solidation Act, 1849, s. 195, must not only have an estate the net produce of which has paid the prescribed divi- dend, but he must also have obtained his certificate. I cannot believe it to have been the intention of the legislature, that if a debtor's estate under a trust deed realises 200 CASES IN BANKRUPTCY. 1865. Ex parte GiBBINS. In re GiBBINs' Trust Deed. realises the requisite amount in the way of dividend, the debtor is to be entitled, in the absence of any contract to that effect, to an allowance proportioned to the net produce of the realisation of the estate under the deed. I think that the legislature rather intended to leave it to the parties themselves to make their own arrangments upon such points. The deed would possibly have been equally good had it contained such a stipulation as is here contended for. But to construe the act otherwise than I have said, would be to import a new term into the trust deed, to impute to these parties an intention which they have not expressed. I must therefore aiRrm the learned Commissioner's order and dismiss the appeal. CASES IN BANKRUPTCY. 201 Nov. 7, 8, 13, 22. 1863. Apr. 24. 1% 1, 8, 22. Before The Lords Jus- In the Matter of THE GREAT NORTHERN AND MIDLAND COAL COMPANY (LIMITED). CURRIE'S CASE. rr^HIS was an appeal by Captain Mark John Currie and Messrs. Henry Jeffreys Longcluse, Walter tices. Fitzpatrick, George Cyprian Hacker and William Directors of a Ricketts Parker from an order of Mr. Commissioner '=?'"P*"y/^" gistered in Goulburn settling the Appellants on the list of con- I860 took a tributories in the winding-up of the above-mentioned paid-up shares company, and making under a general call order a call f'°™ 3" ^''^'^ / • P , f ,, , , . , tee who had upon them in respect oi shares held by them respectively had them under each of the following categories, viz.: — allotted to him ° =" ' by the com- (a) One hundred shares transferred to each of them by payment of one George Butcher out of a larger number of shares pui^chase- ° _ money in originally respect of property purchased by the company. The same directors were holders of other paid-up shares taken by them for attendance fees. The validity of the purchase in the one case and the allowance of attendance fees in the other were impugned: — Held, that the transactions could not be affirmed in part and repudiated in part, and that consequently the directors, if treated as shareholders at all, must be treated as paid-up shareholders, and not placed on the list of contributories in either case. Prior to the formation of the company the directors in question had agreed each to take 100 shares in the company and to execute the articles and memorandum of association when ready and to act as directors of the company, and the articles provided that the subscribers of the memorandum should be deemed to be directors until others were appointed, and that each director should hold at least 100 shares: — Held, (1.) That their obligation to take the qualification shares could not be satisfied by their taking the uupaid-for shares. (2.) That the case was distinguishable from Lord Abercorn's Case, In re The National Insurance and Investment Association, 4 De G,, F. Sf J. 78. (3.) That the directors were liable to be put on the list as contributories for their respective qualification shares. (4.) That they were also held liable to be put on the list as contributories in respect of the shares for which they had respectively subscribed the memorandum of association, but that these were to be taken as part of the qualification shares. Vol. 1—3. P D.j.s. 202 CASES IN BANKRUPTCY. 1862. originally allotted to him under the authority given by ''"'T'^^^ the articles of association of the company as paid-up Great shares, in part of the consideration of a purchase made .J^o^M^o by the directors from him. „ ,' (b) Shares taken by each of them in respect of Case. attendance fees which they, with others, as de facto directors of the company, but without any authority under the articles of association or resolution of general meeting of the shareholders, voted to themselves by a resolution dated the 15th of JaniLary, 1861, and paid practically, in default of money, by appropriating paid-up shares in the company to the required amount, the form of the transaction being that cheques were drawn upon the company's bankers for the amounts of the fees, which the recipients paid again to the company's bankers to its credit, taking in exchange for so doing an allot- ment made by themselves and their colleagues of a pro- portionate number of paid-up shares in the company. (c) Shares for which the Appellants who were five out of the seven subscribers of the memorandum and articles of association of the company had signed the memorandum. The company was registered on the 31st oi August, 1860. The winding-up petition was presented in December, 1861. The validity of the purchase from Butcher was in dis- pute, as was also the legality of the payment of directors' attendance fees, without the sanction of a general meet- ing of the company, which had never been obtained. 'i'he 3rd clause of the articles of association authorized the CASES IN BANKRUPTCY. 203 the company to purchase a business from Butcher, and 1862. to pay him in part of his purchase-money a certain ^^""^^ number of fully paid-up shares in the company. Great Northern AND Midland The 21st clause exempted from forfeiture for non- Coal Co. payment of calls (amongst other shares) the shares CaYe^.^ to be given to Butcher; and it was declared, that the shares so exempted were to be fully paid-up shares and not to be subject to any call or liability in respect thereof. With respect to the shares in category (c), each of the Appellants had signed the memorandum of association for twenty-one shares, but Captain Currie had parted with some of those for which he had so signed. Mr. Daniel and Mr. Hardy for the Appellants. As to the shares in category (a), they are paid-up shares; and even if the Appellants are properly con- sidered to be contributories in respect thereof, still the 3rd and 21st clauses of the articles of association prevent any call being made in respect of them. As to the shares in category (b), they stand on the same footing, being paid-up shares. As to those in category (c), the Appellants are entitled to set-ofF against them the shares in categories (a) and- (b) respectively which have been transferred and allotted to and accepted by them. Mr. Bacon and Mr. Roxburgh, for the official liquidator, in support of the Commissioner's order. They contended that the purchase from Butcher, under all the circumstances of the case, was invalid, and that the payment of attendance fees was illegal. And with reference to the shares in category (c), they con- tended that the circumstances of the case precluded any P 2 such 201. CASES IN BANKRUPTCY. 1862. such right of set-ofF as had been contended for on the ^^'^ other side. In re Great Northern Mr. Daniel in reply. AND Midland Coal Co. The Only equity (if any) which the company can have Currie's j^ respect of the purchase from Butcher must be sought by a bill framed with the view of having the purchase set aside, and the shares paid as part of the consideration thereof delivered up. The attendance fees were voted by resolution of the Appellants as directors. Judgment reserved. Nov. 13. The Lord Justice Turner. This case has been so recently argued that it is un- necessary to recapitulate the facts. There are three points to be considered: 1st. As to the 100 shares. 2ndly. As to the shares taken for attendance fees ; and Srdly. As to the shares for which the memorandum of association was signed. As to the 100 shares, subject to any further argument which the official liquidator may desire to bring forward on the point to which I shall advert, I am of opinion that the Appellants are not liable to contribute in respect of those shares. Contribution is to be made according to the liabilities of the parties at law or in equity. These shares were allotted to Butcher under the authority given by the articles as paid-up shares in part of the consideration of the purchase made by the directors from him. That purchase was either valid or invalid. If valid it is clear that neither he nor his alienees can be called upon to contribute in respect of these CASES IN BANKRUPTCY. 205 these shares. If invalid, I cannot see my way to hold 1862. that either a Court of law or a Court of equity could do ^T^"^"^ ' •' In re more than treat the purchase as void, and undo the Great transaction altogether. It could not, as I apprehend, and°Midland be competent either to a Court of law or to a Court of Coal Co. equity to alter the terms of the purchase, and treat as t-uRR'E's , . . . Case. shares not paid up shares which were given as paid-up shares in part consideration of the purchase. Fraud, assuming there was fraud, would of course warrant the Court in treating the purchase as void, or in undoing it ; but it could not, as I conceive, authorize any Court to substitute other terms. As to the shares taken for attendance fees, I am also of opinion that the Appellants are not liable to contribute in respect of those shares. They were taken, and, as it seems to me, improperly taken, as paid-up shares, but the same principles which apply to the 100 shares apply, as I think, to these shares also. The transaction might be undone but could not be modelled. It was argued for the Appellants, that these shares ought to be taken in part of the shares for which the memorandum of asso- ciation was subscribed. But it is evident that to permit this would be to sanction a mere evasion. As to the twenty-one shares for which the memorandum of association was subscribed, the Appellants are of course liable to contribute, subject as to Captain Currie to his discharge in consequence of his having parted with some of his shares, which discharge is absolute as to some of the shares parted with beyond the year, contingent as to those parted with within the year. The case is thus disposed of so far as it was argued before us, but, on looking through these papers, I have found that at a meeting held on the 10th August, 1860, at 2Q6 CASES IN BANKRUPTCY. 1862. at which these parties were present, the following reso- ^"T'^'*^ lution was passed. It is thus, so for as it is material, stated In re ^ Great on the minutes : " Present — Mx.Longcluse, Mr. Parker, ato^MiTland Captain Currie, Mr. Fitzpatrick, Mr. Hacker, Mr. Pat- CoAL Co. tison, Mr. Rochussen and Mr. jBw^c^er— Resolved, that Currie's ^ company be incorporated to carry out the undertaking as detailed in the prospectus. Each of the gentlemen present agreed to hold 100 shares in the company, and also to execute the articles and memorandum of associa- tion when ready, and to act as directors to the company. (Signed) M. J. Currie." Nothing was, I think, said in the course of the argument as to the effect of this reso- lution, and it may admit of argument whether this reso- lution ought not to affect our decision as to the 100 shares, either upon the ground that those shares, though nominally taken as paid-up shares, ought to be held to have been taken by way of qualification, and therefore ought to be held to be unpaid shares, or upon the ground that the above resolution distinguishes this case from that of Lord Abercorn (a), and that the Appellants, not- withstanding that case, are liable in respect of these shares. Upon these points we think that, if it be de- sired on the part of the official liquidator, further argu- ment ought to be admitted. The Lord Justice Knight Bruce concurred, and the case accordingly stood over for further argument upon the point suggested by the Lord Justice Turner in his judgment. Nov. 22. On this day it was further argued accordingly by the same counsel as before for the same parties, and an order (a) In Re The National In- tion, 4 De G., F. If J. 78. surunce and Investment Associa- CASES IN BANKRUPTCY. 207 order was made whereby in effect their Lordships re- 1862. tained the Appellants on the list of contributories as ^'^ In re to the twenty-one shares, and struck them off the Grea? list as to the paid-up shares accepted by them for .^j," Midland fees. And they referred it back to the Commissioner, Coal Co. without prejudice to any question, to inquire and deter- Cuerie's mine whether or not the said Appellants as being sub- scribers for twenty-one shares each to the memorandum, and also being subscribers of the articles of association of the said company, or any or each of them, should be placed on the list of contributories of the said company, and be ordered to pay on 100 shares each (inclusive of the said twenty-one shares subscribed for by them respec- tively) for their qualification as directors of the said com- pany. The order also reserved the consideration of the costs of the original application, and gave the parties liberty to apply. On the reference directed by this order, the Com- missioner decided that the Appellants were liable to be placed on the list and ordered to pay on 100 shares each as above mentioned. From this decision the Appellants presented a further ^^''■^• , ^^ April 24. appeal. Mu^ 1. The grounds, in addition to those mentioned above, upon which the Commissioner arrived at his decision, as also the arguments of counsel upon the present appeal, sufficiently appear from the judgment of the Lord Justice Turner. The same counsel appeared for the same parties as before, and at the close of their argument their Lord- ships reserved their judgments. The 208 CASES IN BANKRUPTCY. 1861 y_^^J^ The Lord Justice Turner. Great This is an appeal from an order of Mr. Commissioner ^"mhTland Goulburn, by which order the Appellants respectively Coal Co. have been put on the list of contributories of the com- Currie's pany for seventy-nine shares in addition to twenty-one J, , o shares for which they were previously on the list. The Appellants were originally on the list for twenty- one shares for which they had subscribed the memoran- dum of association of the company. They were also originally on the list for certain paid-up shares which they had accepted for fees payable to them as directors of the company. They were also originally on the list for 100 paid-up shares which had been transferred to them by a gentleman of the name of Butcher, the originator of the company, and which had been given to Butcher in part payment of the purchase-money for property which the company had purchased from him ; and they were fur- ther on the list for 100 other shares for their qualifica- tion as directors of the company. The learned Commissioner afterwards struck the Ap- pellants off the list as to the 100 qualification shares on the authority of Lord Abercorri's Case {a), and the case having subsequently come before us as to the other shares, we made an order by which in effect we retained the Appellants on the list as to the twenty-one shares, struck them off from the list as to the paid-up shares accepted by them for fees, and referred it back to the learned Commissioner without prejudice to any question to in- quire and determine whether or not the said Appellants, as being subscribers for twenty-one shares each to the memorandum, (a) In re The National In- Hon, 4 De G., F. fy J. 78. suranc.e and Investment Associa- ND CASES IN BANKRUPTCY. 209 memorandum, and being also subscribers of the articles 1863. of association of the said company, or any or each of ^''^^ them, should be placed on the list of contributories of Great the said company, and be ordered to pay on 100 shares Northern , ^ AND MiDLAN each (inclusive of the said twenty-one shares subscribed Coal Co. for by them respectively) for their qualification as Currie's directors of the said company; and we also reserved the consideration of the costs of and occasioned by the original application and gave the parties liberty to apply. It is under this order that the learned Commissioner has put the Appellants upon the list for the seventy-nine shares which are now in question, making, with the twenty-one shares, the 100 shares for their qualification as directors, and it is the learned Commissioner's decision upon this point which is brought under review by the present appeal. The circumstances under which the learned Commis- sioner arrived at this decision are these: — At a meeting of the promoters of this company, held on the 8th of August, 1860, it was resolved that the company should be formed. At another meeting, held on the 10th oi August, 1860, ai; which all the Appellants were present, the following resolution was passed, after referring to the preliminary matters : — " Resolved, that a company be incorporated to carry out the undertaking as detailed in the prospectus, and that Mr. Butcher be the manager of the company ;" and then the solicitor and the secretary are appointed, and they come under certain resolutions; and then this resolution was passed: — " Each of the gentlemen present agreed to hold 100 shares in the company, and also to execute the articles and memorandum of association when ready, and act as directors to the company." That resolution was passed on the 10th of August, 1860. On 210 CASES IN BANKRUPTCY. 1863. On the 25th of August, 1860, the memorandum of ^'^T^"^ association of the company was signed by the Appellants Great respectively, and by this memorandum of association they a»d°Midl'"' ^'g"^<^ fo'^ twenty-one shares, stating the objects for Coal Co. which the company was formed with a nominal capital of Currie's 50,000Z., and " we, the several persons whose names and Case. ^ . addresses are subscribed, are desirous of being formed into a company in pursuance of this memorandum of association, and we respectively agree to take the number of shares in the capital of the company set opposite our respective names." Then there are twenty-one shares set opposite to the names of each of these gentlemen. On the same 25th of August, 1860, the company's articles of association were also signed by the Appellants respectively. By these articles of association it was agreed amongst other things, that " no person shall be deemed to have accepted any share in the company unless he has testified his acceptance thereof by writing under his hand in such form as the company from time to time directs.'' Article 60 is in these terms—" The number of direc- tors, and the names of the first directors, shall be deter- mined by the subscribers of the memorandum of asso- ciation, but so that there shall be not less than three nor more than nine." The 61st is — " Until the directors are appointed, the subscribers of the memorandum of association shall, for all the purposes of this act, be deemed to be directors/' The 62nd is—" That no shareholder shall be entitled to be a director unless he holds at least 100 shares in the company." The CASES IN BANKRUPTCY. 211 The 72nd clause of the deed, which was also referred 1863. to in the course of the argument, was, that " the directors ^-*^''^-' In TB appointed by the subscribers to the memorandum of asso- Great ciation and these articles remain as directors of this com- Northern AND Midland pany for the term of three years." Coal Co. These are the circumstances under which the learned Commissioner has put these gentlemen on the list, and the question is whether, under these circumstances, they ought to be put upon the list of contributories and be )rdered to pay on 100 shares each (including the twenty- one shares for which they signed the memorandum of association) for their qualification as directors. It was not contended on the part of the Appellants, that if they were under an obligation to take 100 shares as directors, the obligation could be satisfied by their having taken these unpaid shares ; nor could it have been so contended with any prospect of success, for it would be a mere delusion to hold that the obligation could be satisfied without any liability being incurred. Nor was it contended on the part of the Appellants that this case could be governed by Lord Abercorn's Case; and it is plain it could not be so governed, the cases being in every respect distinguishable. But it was insisted on the part of the Appellants that they were under no liability to take 100 shares in the company; that the agreement contained in the resolution of the 10th of August, 1860, was a mere agreement between the parties, and not an agreement by them with the company, which in truth at that time had no existence; that that agreement was superseded, so far as it could have any effect, by the memorandum of associa- tion, by which the Appellants took twenty-one shares only, and that under the articles of association the Appellants Currie's Case. 212 CASES IN BANKRUPTCY. 1863. Appellants were under no liability to take the 100 ^^""^ shares. It was insisted, that under the 61st clause of Great these articles, the Appellants, as subscribers to the Northern niemorandum of association, were appointed directors AND MIDLAND '^'^ Coal Co. until directors should be appointed by the shareholders ; Currie's then that, no appointment having been made by the Case. shareholders, the Appellants continued directors on the footing of the memorandum of association, and that they were in no way affected by the 62nd clause of the articles ; that that clause did not reach the Appellants at all, but applied only to shareholders ; and the Appel- lants held their office of directors, under the 61st clause, as being subscribers to the memorandum of association. I am not of opinion that the argument can be at all maintained, that these gentlemen are not affected by the 62nd clause of the articles of association. I think that by the 60th clause of those articles it became the duty of these Appellants themselves to appoint directors, and that the 62nd clause was meant to extend and would extend to directors so appointed ; and it having been the duty of these Appellants so to appoint, and default having been made by them in so appointing, I am of opinion that they were chargeable in equity as if they had so appointed, and in effect that they must be consi- dered in equity to have appointed themselves and to be chargeable accordingly. The 72nd clause of the articles was relied on on the part of the Appellants. But I think that, so far from assisting the Appellants' case, that clause favours the view which I have taken of the articles ; for it refers to directors appointed by the subscribers and the articles, and shows therefore that it was the duty of the Appel- lants to make the appointment. On CASES IN BANKRUPTCY. 213 On these grounds therefore I concur with the opinion 1863. of the learned commissioner. , In re Great As to the costs which were reserved and the costs of jiND°MiDLAND the present Appellants, I am of opinion that the Appel- ^^oal Co. lants should pay all the costs from the date of the order Currie s *^ •' _ Case. of reference, but that no costs should be given up to that time, the Appellants in truth having in part succeeded in the previous contest. The Lord Justice Knight Bruce. I think it unnecessary to give any opinion in this case independently of the proceedings of the 8th and 10th of August, 1860. Taking those proceedings and the arti- cles of association together, I agree with the learned Commissioner, and I also concur with my learned Bro- ther's conclusion as to the costs. Ordered accordingly, the official liquidator taking his costs out of the estate, and, Upon the application of Mr. Roxburgh on his behalf May 22. on this day, the deposit as part of his costs. 2U< CASES IN BANKRUPTCY. 1862. Dec. 2. Before The Lord Chancellor Lord Westbury. Where upon the application of the solicitor for the as- signees, the Court below made an order which it had no jurisdiction to make, the Court of ap- peal ordered the assignees personally to pay the costs. Ex parte JOHN COLE and JAMES THOMAS ATTWATER. In the Matter of JOHN WILLIAM ATTWATER, a Bankrupt. npHIS was an appeal from an order of Mr. Espinasse, the County Court Judge sitting in bankruptcy at Sheerness, in Kent, which was expressed in the following terms : — "Upon the application of the solicitor for the assignees, and upon hearing the evidence of James Thomas Att- water and others, and the statement of the said solicitor that the bankrupt did, by indenture dated the 25th day of June, 1862 (which the said James Thomas Attwater produced and submitted to the Court), convey four houses and other property situate in the parish of Minster, in the Isle of Sheppey, in the county of Kent, to the said James Thomas Attwater, when he (the said bankrupt) was known to be insolvent, and without valuable consideration, it is ordered that the said houses and other property comprised in the said indenture be given up to the assignees, and taken possession of by them, and be sold and disposed of for the benefit of the creditors under the bankruptcy : And it is further ordered that the said indenture, dated the 25th day of June, 1862, be retained by the registrar, and be disposed of as the Court shall direct." This order was made on the attendance of the Appel- lant John Cole (who held the indenture referred to in it on behalf of the other Appellant) and James Thomas Attwater, in obedience to a summons issued under the Bankrupt CASES IN BANKRUPTCY. Bankrupt Law Consolidation Act, 1849, s. 120. There was nothing to show that either of the Appellants had submitted to the jurisdiction of the Court. Cole. In re Mr. Daniel and Mr. Clement Swanston appeared for the Appellants. Mr. Foohs for the assignees. The Lord Chancellor discharged the order under appeal, remarking that it was quite beyond the power of the Court to make such an order; and his Lordship ordered the indenture to be delivered up to the Appel- lants without prejudice to any question as to its validity. With regard to the costs of the appeal, his Lordship directed the assignees to pay them, and declined to allow them their costs out of the estate, the order under appeal having been made on the application of the assignees. 216 CASES IN BANKRUPTCY. 1862. Dec. 3. Before The Lord Chancellor Lord Westbury. Mere sus- picion of the commission of one of the offences de- scribed in the Bankruptcy Act, 1861, s. 221, is not sufficient to warrant a di- rection for the prosecution of a bankrupt for misdemeanor. Ex parte WILLIAM STILL and GEORGE STRICK- LAND STILL. In the Matter of WILLIAM STILL and GEORGE STRICKLAND STILL, Bankrupts. npmS was an appeal of the bankrupts against two orders of Mr. Commissioner Goulburn, by the first of which he directed the indictment of the bank- rupts under the Bankruptcy Act, 1861, s. 22\, rules 2 and 5 (a) ; and by the second of which he postponed their final examination sine die. The bankrupts were a father and son, partners in business. (a) The section and rules in question are as follows : — "221. From and after the com- mencement of this act, any bank- rupt who shall do any of the acts or things following, with in- tent to defraud or defeat the rights of his creditors shall be guilty of a misdemeanor, and shall be liable, at the discretion of the Court before which he shall be convicted, to punishment by im- prisonment for not more than three years, or to any greater punishmentattached to the offence by any existing statute." "2. If he shall not upon his examination fully and truly dis- cover, to the best of his know- ledge and belief, all his property, real and personal, inclusive of his rights and credits, and how and to whom and for what considera- tion, and when he disposed of, assigned or transferred any part thereof, except such part as has been really and bonS, fide before sold or disposed of in the way of his trade or business, if any, or laid out in the ordinary expense of his family, or shall not deliver up to the Court, or dispose as the Court directs of all such part thereof as is in his possession, custody or power, except the necessary wearing apparel of him- self, his wife and children ; and deliver up to the Court all books, papers and writings in his pos- session, custody or power relating to his property or affairs." " 5. If he shall, with intent to defraud, wilfully and fraudulently omit from his schedule any effects or property whatsoever.'' CASES IN BANKRUPTCY. 217 business. They borrowed a sum of 8001. from a banking 1862. company, giving as security for its repayment the gua- ^T^""*^ ... rt ^^ parte rantee of a Mr. Benthams. To secure him in respect or Still. his liability upon this guarantee, they executed to him In re on the 17th of January, 1862, a bill of sale of all their property, including their plant and stock-in-trade. The particulars of the property comprised in the bill of sale were given in a schedule thereto, together with their estimated values, which amounted in the aggregate, so far as the plant and stock-in-trade went, to 3,046/. In the month of April, 1862, Mr. Benthams entered into possession of, and on the 5th of May, 1862, pur- porting to act in pursuance of a power contained in the bill of sale, sold for 9001. the property therein comprised to Joseph Still, a brother of the elder bankrupt ; and Joseph Still thereupon placed in possession as his agent a boy named Thomas Still, a son of the elder bankrupt. The debt due from the bankrupts to the banking company was paid off out of the consideration money received by Benthams. On the 17th of May the bankrupts were adjudged bankrupts on their own petition. In their first accounts under the bankruptcy they showed indebtedness to a large amount and no assets. They estimated the value of their plant and stock-in- trade on the 1st of January, 1862, at 3,046/., a valua- tion corresponding with that contained in tlie bill of sale to Benthams. On the balance of subsequent sales and purchases they showed a reduction of value to the extent of 1,1 lOZ. 15s. 4>d., leaving a difference of 1,9357. 4*. 8d. to be accounted for ; whilst it was alleged that the property taken by Joseph Still would scarcely produce on realization the 900/. for which it was sold. Vol. 1—3. Q D.j.s. It 218 CASES IN BANKRUPTCY. 1862. It was upon these materials that the Commissioner „ , made the first of the orders under appeal. hx parte '^^ Still. in re Further accounts were subsequently furnished by the bankrupts wherein they reduced their estimate of the value of their stock-in-trade, exclusive of their plant, on the 1st of January, 1862, to 1,926Z. Mr. Hart, an accountant, appointed by the Court under the Bank- ruptcy Act, 1861, s. 143, to assist the bankrupts in making out the accounts, estimated it at 1,983/., but he arrived at this amount by comparing the amounts of sales and purchases as shown by the bankrupts' books, and by the assumption that 20/. per cent, of the produce of sales represented profits, — this assumption swelling his estimate by a sum of 1,021/., which, if deducted, would reduce his estimate to 962/. Mr. Hart, however, as the result of his investigation, reported that the state of the accounts could only be explained in one of two ways, viz., that either the value of the bankrupts' stock- in-trade was greatly over-estimated in January, 1862, or that the bankrupts must have connived at the abstraction of a very large amount of their property ; and he recom- mended further inquiries. Mr. E. K. Karslake and Mr. Robertson Griffiths, for - the Appellants, having opened their case. The Lord Chancellor called upon the counsel for the assignee to support the Commissioner's order. Mr. Bacon and Mr. Little for the assignee. They contended that the case was one of the gravest suspicion, and one which warranted the Commissioner in making the order for indictment. With that order so made the Court of appeal would be slow to interfere. Benthams CASES IN BANKRUPTCY. 219 Benthams had paid no money upon the occasion of the 186'!2. giving of the bill of sale, which was in fact a deed of J*""'^''^ ^ ° ' Ex parte hidden trust for the bankrupts ; so that the property Still. therein comprised must be looked upon as property of In re the bankrupts, and should have been returned by them in their accounts on that footing. For not having done so, they were liable to indictments under the 221st sec- tion of the act. The 222nd section showed that a primi facie case only was necessary to be made out to warrant an order of the Court for an indictment under sect, 221. A reply was not heard. The Lord Chancellor. This is a case the determination of which is no doubt attended with anxiety. It presents elements from which a conclusion of fraudulent conduct against the bankrupts might prima facie be reasonably entertained. The posi- tion however in which the question before me stands is, as if, pending a civil suit to set aside the deed of sale to Joseph Still as fraudulent, and whilst the matter of the civil right was still sub judice and undetermined, the Court were to direct a criminal prosecution. To do this is to incur great responsibility, especially where the expense of the prosecution, if directed, will fall on the public. Whilst therefore on the one hand it is the duty of the Court to give effect to the spirit of the bankrupt law for the suppression of fraudulent prac- tices, it is equally incumbent on the Court, on the other hand, to proceed in the matter of directing prosecutions upon something more than mere suspicion. The present is, as I have said, a case warranting grave suspicions of fraud, yet the investigations into Q 2 which Still 220 CASES IN BANKRUPTCy. 18G2. which have been unduly abridged. [His Lordship then "^^'^"^ went into the facts of the case prior to the intervention Ex parte Still. of Mr. Hart, remarking that the nature of the purpose In re for which Joseph Still was brought upon the scene had not been accurately shown, but that, ex evidentia rei, he came forward as a friend of the bankrupts and for their benefit. His Lordship then proceeded thus :] But, then, a difficulty arises. A Mr. Hart, an ac- countant, is employed, and his investigations, which, except in one particular, appear to have been accurately conducted, and which there is nothing to discredit, throw doubts upon the accuracy of the estimate appended to the bill of sale. Mr. Har(s statement amounts to this : that the whole account appended to the bill of sale, as also the accounts filed in bankruptcy, are erroneous, and that there was no such property as that represented to be of the value of 3,046Z. Again, Mr. Hart debits the bankrupts with 1,02 IZ., which he says represents profits — that is to say, he con- siders that the diflference between the cost price and the amount at which the goods were sold ought to be con- sidered as so much additional stock. But that is mere conjecture: he thinks it probable that the bankrupts would get 20Z. per cent, profit out of their sale. I cannot act upon that as a foundation for a criminal prosecution. Then, throwing out this item, the 3,046/. is reduced to such an amount as that, if the property handed over from Benthams to Joseph Still had been worth l,OO0Z. or 1,100Z., the whole of the bankrupts' property would have been accounted for. The The order on the appeal was, that the order directing the prosecution should be suspended till further order of the Court of Appeal ; that the adjournment sine die should be discharged ; that the assignee should forthwith prosecute inquiries as to the dealings with the property included in the conveyance to Still, and that all the other Still. CASES IN BANKRUPTCY. 22 The question, therefore, is narrowed to this, whether 18G2. the transaction between Benthams and Joseph Still was ^--^--•-^ bona fide or collusive and fraudulent. If the latter, the Still. fact of notice on the part of the bankrupts of the fraud In re would at least require to be established before they could be brouglit within the rigour of the Bankruptcy Act, 1861, s. 221, on the ground of the arrangement being a contrivance with the intent to defraud or defeat the rights of their creditors. If I were now in the posi- tion of hearing a suit in equity to set aside the sale to Joseph Still as fraudulent, and for a declaration that Benthams had a lien only, and that the bankrupts ought to have accounted for the residue, I should direct further inquiries. This being the state of the evidence, I shall not discharge the order for indictment because I think doubts may be entertained whether this was not a mere fraudulent sale. I suspend the order for the purpose of having the deficiency of evidence in that respect made good, and of affording an opportunity of still further examining the bankrupts, and I discharge the order, postponing their final examination sine die. Let the appeal stand over till further order, and the assignee will have the right and will be under the obligation of prosecuting inquiries in order to arrive at a certain conclusion. If it should appear that the conclusion as to fraud is supported, I shall discharge the suspen- sion, and direct these bankrupts to be taken into a criminal Court. 222 CASES IN BANKRUPTCY. 1862. Ex parte Still. In re Still. 1863. Mai/ 1. Other matters of the appeal should stand over, with liberty to apply. On this day the matter was mentioned again, and the sanction of the Lord Chancellor given to a compromise arrived at by the parties before the Commissioner. 1862. Dec. 5. Before The Chancellor Lord Westbury. The costs of an ofBcial assignee who appears by counsel on the hearing of an appeal merely to consent to the reversal of the order ought not to be allowed out of the estate. Ex parte J. G. CHURCHILL. In the Matter of SAMUEL GRIFFITHS, a Bankrupt. And in the Matter of SAMUEL GRIFFITHS and E. B. THORNEYCROFT, Bankrupts. rX^HIS was an appeal from an order of the Registrar of the Court of Bankruptcy for the Birmingham district directing that a separate petition for adjudi- cation against one of the bankrupts should be im- pounded and all proceedings under it stayed. Mr. Bacon and Mr. De Gex appeared for the Ap- pellant Mr. Churchill, who was the petitioning creditor for the separate adjudication. Mr. Clement Swanston appeared for the bankrupts in support of the order under appeal. Mr. E. K. Karslake for creditors, and Mr. Eyre Lloyd for the official assignee, appeared to consent to the discharge of the order. The CASES IN BANKRUPTCY. 223 The Lord Chancellor discharged the order under 1862. appeal, with liberty to the parties, or any of them, to '^^"^ apply to the Court of Bankruptcy with reference to the Churchill. consolidation of the proceedings or any part thereof under In re the petitions for adjudication, and said that where the official assignee's only duty in the matter was to give his assent to the reversal of an order, no costs of his ap- pearance could be allowed to him out of the estate. Ex parte SOLOMON WOLLHEIM. In the Matter of SOLOMON WOLLHEIM, a Bankrupt. ^,«f;f4_ r j iHIS was an appeal by the bankrupt from the refusal Dec. 6. Before T/ie of Mr. Commissioner Goulburn to annul the ad- Lords Jus- ■ J- .• TICES. judication. An appeal by the bank- When the appeal came on to be heard their Lordships "^"P' , "J * ^^ '■ refusal or a made an order in the usual form (a), directing the appeal Commissioner to stand over, with liberty to the Appellant to bring an adiudieation action against the petitioning creditors for the seizure of of banltruptcy the bankrupt's goods, in order to test the validity of the England by adjudication. residents in T Scott/ina, as petitioning («) See Ex parte Watson, 5 Be G., M. 4- G. 396 ; S. C, De G., creditors, M.Sf G. Bey. App. 436. against a trader whose trade was wholly in Scotland, was directed to stand over, with liberty to the banlcrupt to bring an action to try the validity of the adjudication. On the failure of tlie petitioning creditors to appear to the action within a time limited by the Court for the purpose, the Court annulled the adjudication. Pending the proceedings the goods of the Appellant seized by the messenger had been sold by arrangement: — Held, that the official assignee was entitled to deduct from monies received by him from the sale monies expended in warehousing and selling the goods, but not his costs of proceedings in Court ; the Court directing that these should be paid by the petitioning creditors, who, like the official assignee, were Respondents to the petition, and ordering that the petitioning creditors should pay to the bankrupt the monies to be deducted by the official assignee. CASES IN BANKRUPTCY. In pursuance of this liberty the Appellant brought an „ action against the petitioning creditors. Ex parte & ^' & WoLLHEIM, In re To this action, notwithstanding service upon them, the WOLLBEIM. ... ,. , petitioning creditors entered no appearance. The facts of the case, so far as they are material to the present report and as they appeared on the affidavits, were these : — The Appellant was resident and carried on business in Scotland only. His creditors for the most part, the petitioning creditors amongst the number, also resided in Scotland. The adjudication was obtained in England. An official assignee was appointed, who took possession of goods belonging to the Appellant and warehoused thera at some expense, until, by arrangement and under an order of the Commissioner, they were sold. Of the proceeds of this sale, some portions had been advanced to the Appellant in order to enable him to meet ex- penses connected with the proceedings in bankruptcy, and the remainder was still in the hands of the official assignee. Under these circumstances, Nov. 14. Mr. De Gex, on behalf of the Appellant, applied for the annulling order sought by the appeal. He contended that the petitioning creditor had no right to take and reject English procedure at his pleasure, to resort to the English jurisdiction in bankruptcy, and decline the same jurisdiction at law, when the object of the legal proceed- ings was to test the validity of those in bankruptcy, and that, CASES IN BANKRUPTCY. 225 that, on the merits of the case, such an adjudication as 1862. that here in question could not be supported, Scotland "■"^''^^ P „ 1 P , fv y Ex parte being, as ior all the purposes of the case, it was necessary Wollheim. to regard it, a foreign country. In re Wollheim. Mr. Reed, for the petitioning creditors, contended that, under the circumstances of the case, the action, if brought at all, ought to have been brought in Scotland. Mr. Bagley for the official assignee. Their Lordships ordered that the adjudication should be annulled unless within ten days from the date of the order the petitioning creditors should appear to the action, and their Lordships gave general liberty to apply as to costs or otherwise. The monies in the hands of the official assignee were ordered to remain there until further order, and the matter was to be mentioned again. No appearance having been put in to the action by the petitioning creditors within the ten days' grace ac- corded by the order of the Court, Mr. De Gex, on behalf of the Appellant, on this day, Dec. 6. under the general liberty to apply reserved by the former order, applied for a return of the deposit and also for the payment to the Appellant by the official assignee of the full proceeds of the sale of the Appellant's goods, and for payment of the Appellant's costs by the petition- ing creditors. Mr. Bagley appeared for the official assignee. The petitioning creditors did not appear. Their 226 CASES IN BANKRUPTCY. 1862. Their Lordships made their previous conditional ^r""""^^ order for annulling the adjudication absolute. Ex parte ° "' WOLLHEIM. In re A question then arose with reference to the costs of WOLLHEIM. ,, ~, . , the omcial assignee. On the part of the Appellant, it was contended, that the bankruptcy having been annulled, any claim which the official assignee had to make in respect of costs must be made against the petitioning creditors, and that no part of such costs could be paid out of the property of the Appellant. And In re Scott Russell (a), as a decision in point in bankruptcy, and In re Windham (b), and JEx parte Harding (c), as analogous authorities in lunacy and under the Joint Stock Companies Act, 1856, respectively, were referred to. On the part of the official assignee, it was contended, that his position diifered from that of Mr. Harding in Ex parte Harding in two respects — first, in that as the officer of the Court he could not have declined to deal with the Appellant's goods ; and, secondly, that he was not a stranger to the proceedings, nor was there here any absence of a fund in Court out of which his costs might be paid. That the Appellant, by sanctioning the sale which had been made, had precluded himself from objecting to the allowance of the expenses incidental to it J that it would be irregular, as well as probably in the present case, regard being had to the abode of the pe- titioning creditors, nugatory to order the petitioning creditors, as Respondents, to pay the costs of the official assignee, who was another Respondent {d) ; and that (a) 31 L. J. (N. S.), Bey. (c) 32 L. J. (JV. S.) Ch. 145. 37, 47. ((/) See however the Bankrvplcy (b) 4 Be G., F. 4- J. 53. Act, 1861, s. 213. CASES IN BANKRUPTCY. 227 that the proper order would be, as in Chancery, to make 1862 the Appellant pay them, and have them over against the ^T^^* petitioning creditors. Their Lordships made an order to the following effect : — Annul the adjudication. Let the petitioning creditors pay the costs of the Appellant and of the official assignee of the proceedings in the Court of Bankruptcy and in the Court of Appeal. Let the official assignee be debited with the proceeds of the sale and have credit for all sums paid by him to or on account of the Appellant and for all payments properly made in respect of the cjistody and sale of the goods, and let him pay over any surplus to the Appellant. Let the petitioning creditors pay to the Appellant the amount for which the official assignee shall have credit in respect of the last-mentioned pay- ments. The order to be without prejudice to any pro- ceedings which may be taken against the petitioning creditors in Scotland. WoLLHEIH. In re WOLLHEIM. 228 CASES IN BANKRUPTCY. 1862. Dec. 12. Before The Lord Chancellor Lord Westbury. Assignees in bankruptcy may in a proper case be ordered to pay costs per- sonally, and not be allowed them out of the bankrupt's estate, not- withstanding they act pursuant to a resolution of creditors. Ex parte ROBERT WATTS. In the Matter of JOHN WILLIAM ATTWATER, a Bankrupt. rpHIS was an appeal of Robert Watts from an order -*- of Mr. Espinasse, the County Court Judge sitting in bankruptcy at Sheerness, by which he directed a barge, as being in the bankrupt's reputed ownership, to be delivered up to the assignees by the Appellant, who claimed a charge upon it under an agreement. The Lord Chancellor, upon the election of the assignees not to redeem the barge, reversed the decision below. The only point on which the case deserves a report is the question of costs. Mr. Bacon and Mr. Martindale appeared for the Appellant. Mr. Foohs (Mr. Baggallay with him), for the as- signees, stated that the question was raised in the Court below by the assignees in accordance with a resolution of creditors. The Lord Chancellor said that the creditors who passed that resolution must indemnify the assignees against their costs incurred in giving effect to it. His Lordship said he should not make the assignees pay the costs of the appeal; but he should direct that the assignees should pay the costs of the application to the Court below personally, and should not be allowed them out of the estate. CASES IN BANKRUPTCY. Ex parte HENRY MILLER. In the Matter of HENRY MILLER, a Bankrupt. Nov. 19. Dec. 19. Before The rpHIS was a motion on behalf of the bankrupt, who Lords Jus- had been so adjudged by the Liverpool District tices. Court of Bankruptcy, seeking to have the adjudication to'annul'an'"" annulled for want of a good petitioning creditor's debt adjudication or act of bankruptcy, or, in the alternative, for liberty ^^jg by a to show cause before the district Court against the adju- bankrupt, whether before dication. or after the time has elapsed for The date of the adjudication was the 9th of September, Lainst^the"^^ 1862, that of the advertisement the 23rd of the same adjudication, month, that of the notice of the present motion the Bankrupt Law 7th of November, 1862, that of its service the 8th of Consolidation Act, 1849 November, and such service was made upon the petition- (12 & 13 Fict. ing creditors, whose solicitors also accepted it on behalf j^j ^^ appeal ' of the ofScial assignee. from the order of adjudica- tion, and is T r 1 • 1 n 1- • T properly made In support 01 the motion and of an application made by way of mo- together with it on behalf of the bankrupt for leave to ^°" '" J!"^ add to the evidence, an affidavit of the bankrupt was peal at any filed, wherein he stated that he had gone to Ital^ on [},"^i^ifo? business in April, 1862, and returned to England in two months August; that he was not aware of any proceedings 233rd section in bankruptcy having been taken against him until the °^ ""^ ^'''> ^' amended by 25th the Bank- ruptcy Act, 1854 (17 & 18 Vict. c. 119), s. 24. Circumstances under which the Conrt of Appeal allows new evidence to be adduced. 230 CASES IN BANKRUPTCY. 1862. £x parte Miller. In re Miller. 25th of September, when he accidentally became aware of the fact by reading a list of bankrupts in the Daily Telegraph newspaper; that shortly afterwards notice was given on his behalf of an application to be made to the Commissioner to annul the adjudication on the ground of surprise ; but that the Registrar refused to receive afBdavits which were on the 23rd of October tendered in support of the application, on two grounds, 1st, that an application to annul could only be made on the ground of the want of some or one of the legal requisites; 2ndly, that the application must be not to the Commissioner, but to the Court of Appeal. Nov. 19. Mr. De Gex, for the bankrupt, in support of the application for leave to adduce further evidence, referred to General Orders in Bankruptcy, 6 November, 1861, Order 32 {a), and submitted that this was a proper case for the admission of further evidence, the bankrupt having (o) The General Order in question and the sections of the acts of Parliament referred to in the argument and in the judg- ment of the Lord Justice Kniglit Bruce, are respectively, so far as they are respectively material, as follows : — General Orders in Bankruptcy, 6 November, 1861.— Order 32. "All appeals to the Court of Appeal shall be brought on by motion, and no new evidence shall be received on any appeal unless the Court of Appeal shall, on the hearing thereof, so direct." Bankrupt Law Consolidation Act. 1849, s. 12.— "That the Court, in the exercise of its primary jurisdiction by virtue of this act, shall have superintend- ence and control in all matters of bankruptcy, and shall hear, de- termine and make order in any matter of bankruptcy whatever, so far as the assignees are con- cerned, relating to the disposition of the estate and effects of the CASES IN BANKRUPTCY. 231 having had no opportunity of meeting the case alleged 1862, against him by the petition. Mr, bankrupt, or of any estate or effects taken under the bank- ruptcy, and claimed by the as- signees for the benefit of the cre- ditors, or relating to any acts done or sought to be done by the as- signees in their character of as- signees by virtue or under colour of the bankruptcy, and also in any matter of bankruptcy what- ever as between the assignee and any creditor or other person ap- pearing and submitting to the jurisdiction of the Court ; and also in any application for a cer- tificate of conformity, and in any other matter (whether in bank- ruptcy or not), where the Court by virtue of this act has jurisdic- tion over the subject of the peti- tion or application, save and ex- cept as may be by this act other- wise specially provided, and sub- ject in all cases to an appeal to such one of the Vice-Chancellors of the High Court of Chancery as the Lord Chancellor shall from- time to time be pleased to appoint to sit in bankruptcy; provided always, that if no such appeal shall be entered within twenty- one days from the date of any decision or order of the Court, and be thereafter duly prosecuted, every such decision or order shall be final; and that every appeal shall be subject to such regulation in regard to deposit of costs as shall, by any general rule or order to be made in pursuance of this act, be directed." Ex parte Miller. In re The appeal is, by the H & 15 Miller Vict. c. 83, s. 7, directed to be presented to the Lords Justices. Bankrupt Law Consolidation Act, 1849, 3. 104.— "That, before notice of any adjudication of bankruptcy shall be given in the London Gazette, and at or before the time of putting in execution any warrant of seizure which shall have been granted upon such adjudication, a duplicate of such adjudication shall be served on the person adjudged bankrupt, personally, or by leaving the same at the usual or last known place of abode or place of business of such person ; and such person shall be allowed seven days, or such extended time, not exceed- ing fourteen days in the whole, as the Court shall think fit, from the service of such duplicate, to show cause to the Court against the vahdity of such adjudication," &c. lb. s. 233.—" That if a bank- rupt shall not (if he were in the United Kingdom at the date of the adjudication), within twenty- one days after the advertisement of the bankruptcy in the London Gazette, or (if he were in any other part of Europe at the date of the adjudication), within three months after such advertisement, or (if he were elsewhere at thedate of the adjudication) within twelve months after such advertisement, have commenced an action, suit or other proceeding to dispute or 232 CASES IN BANKRUPTCY. ISC2. Ex parte Miller. In re Miller. Mr. Clement Swanston, for the petitioning creditors, objected that this Court could not entertain the matter at all. It was either an original motion which the Court would not hear ; or, if an appeal, was out of time. He referred in support of his objection to The Bankrupt Law Consolidation Act, 1849, s. \2; and Ex parte Stuhbs (a). Their Lordships said that they would dispose of the objection at the same time with the application on the merits, and directed the case to stand over till the first bankruptcy day after term, with liberty to either side to adduce further evidence as they might be advised. The annul the fiat or the petition for adjudication, and shall not have prosecuted the same with due diligence and witli effect, the Gazette containing such adver- tisement shall be conclusive evi- dence in all cases as against such bankrupt; and in all actions at law or suits in equity brought by the assignees for any debt or de- mand for which such bankrupt might have sustained any action or suit had he not been adjudged bankrupt, that such person so ad- judged bankrupt became a bank- rupt before the date and suing forth of such fiat, or before the date of filing of the petition for adjudication, and that such fiat was sued forth, or such petition filed on the day on which the same is stated in the Gazette to bear date.'' The Bankruptcy Act, 1854, s. 24.— "The section of The Bankrupt Law Consolidation Act, 1849, numbered ccxxxiii, limit- ing the time within which a per- son adjudged bankrupt may dis- pute the adjudication, shall, in the case of every person who shall be adjudged bankrupt on or after the first day of September, one thousand eight hundred and fifty-four, be construed and acted upon for all purposes whatsoever as if the words ' two calendar months ' were therein inserted, in lieu of the words ' twenty-one (a) Mont. If Chitty, 511. CASES IN BANKRUPTCY. 233 The application was renewed accordingly on tliis day 1862. upon the old and also upon new evidence, but it is not *'^'~''"*' , . , ... Ex parte necessary here to enter into the merits of the case. Miller. Mr. /)<;;(;>/ and Mr. Dc Gf.r, in support of ihe motion, and with reference to the preliminary objection, con- tended that the present application was in time, the ad. judication iuiving been made on the 9th of Scptnnhcr, and notice of the present application served on the 8th of Aorfitihfr : The Bankrupt Lair Consolidation Act, 181'9, .<. 2',]'3, as amended by The Bankniptcij Act, 1854, .<. ;J4. They also insisted that the Court of Appeal was the proper Court; Carter v. Diiiniiock{a). Mr. Baron and INfr. Clement Swanston for the peti- tioning creditors. The application is out of time, if it is an appe.il ; The BankruptLaw Consolidation Act, s. 12. Section 233 does not touch the question. Speaking, as it does, of the bankrupt having within a limited time " eonuneneed an action, suit, or other proceeding to dispute or annul the fiat or the petition for adjudication," it must be held to apply only to the commencement of other proceed- ings ejusdem generis, as actions or suits. But the jurisdiction of this Court is appellate and not original, and no such proceeding can consequently be com- menced in it. Tlic course which should have been adopted by tlio bankrupt is that pointed out by the Bankrupt Law Consolidation Act, 1849, s. 104, viz., a recourse to the Commissioner in the first instance ; or, failing (.,) 1 m G., M. .■) Gor. 2V2; 4 II. if L Cas. 337. Vol. 1—3. R D.j.s. In re Miller. Dec. 19. 234 CASES IN BANKRUPTCY. 1862. failing that, an appeal to this Court within the time ^■'^'^^ limited by the 12th section. Carter v. Dimmock de- Ex parte Miller, cides nothing to the contrary. In re Miller. A reply was not heard. The Lord Justice Knight Bruce. This application was presented on the 7th oi November, for the purpose of annulling an adjudication made on the 9th of September last, and advertised some few days after in the same September, and was, therefore, of course within the two months mentioned in the 24th section of the Bankruptcy Act, 1854. I think that the alleged bankrupt was not bound to go before the Commissioner for the purpose of disputing or questioning the validity or sufficiency of the adjudication made by the Commis- sioner, whether upon the same evidence only as that upon which the Commissioner proceeded, or upon that and additional evidence. The proceeding, therefore, questioning the adjudication was not, I think, a proceed- ing necessarily to be brought before the Commissioner. It was a proceeding by way of appeal, which the alleged bankrupt was entitled to bring before this Court. It has been contended, however, that the period of limitation of twenty-one days is applicable to this case — a time which it may be assumed has been exceeded, for I do not regard the vain endeavour which was made to bring the Commissioner's attention to the subject. It has been said that the period of two months specified in the alteration made by the Bankruptcy Act, 1854, is not applicable in this instance. It would be, in my judg- ment, CASES IN BANKRUPTCY. ment, unreasonable, as well as inconvenient and mis- chievous, to hold that the period of two months is not „ . . Ex parte applicable to this case. Such a decision would, I think, Miller. be productive of infinite mischief. The language of In re the act admits the extension, and the necessity of the case requires it ; so that, upon the question of time, the objection wholly fails. His Lordship then examined the merits of the case, and came to the conclusion that there was no good petitioning creditor's debt. The Lord Justice Turner. I agree, and for the same reasons. The adjudication was accordingly ordered to be annulled with costs. R2 236 CASES IN BANKRUPTCY. 1863. Apr. 15. Before The Lord Chancellor Lord Westbury. The twenty- one days from the date of a decision or order of the Court of Bankruptcy, within which, according to the Bankrupt Law Consoli- dation Act, 1849 (12 & 13 FiW.c 106), a. 1 2, an ap- peal from such decision or order must be entered, date from the day when the de- cision or order sought to be appealed from is pronounced, and not from that on which it is drawn up, although the latter date ap- pears on the order. Ex parteTHE DUDLEY AND WEST BROMWICH BANKING COMPANY. In the Matter of WILLIAM HOPKINS, a Bankrupt. nX/FR. DANIEL and Mr. Little appeared in this case on behalf of the Dudley and West Bromwich Banking Company in support of an appeal from an order of the Birmingham District Court of Bankruptcy. The order was pronounced on the 18th of February, 1863, and it was so dated on the file of proceedings. It was not, however, drawn up till the 26th of Feb- ruary, 1863, as appeared by the initials of the registrar appended to that date at the foot of the order ; and it was stated that the date, the 18th, had been filled in upon a blank space left for the purpose. The appeal was not entered until the 1 7th oi March, 1863. Mr. Bacon and Mr. De Gex, for the Respondent William Hopkins, took a preliminary objection that the appeal was too late (a), citing Ex parte Hookey, In re The (u) The Bankrupt Law Con- solidation Act, 1849 (12 & 13 Viit. c. 106), a. 12 requires an appeal to be entered within twenty-one days "from the date of any decision or order of the Court." CASES IN BANKRUPTCY. 237 The Risca Coal and Iron Company (a), and Ex parte Sanderson ifi), Mr Daniel and Mr. Little submitted that Ex parte Heslop (c) was an authority in favor of the appeal being in time, the 26th oi February, 1863 being the day from which the order sought to be appealed from ought to be held to speak. 1863. Ex parte The Dudley AND West Bbomwich Bankino Company. In re Hopkins. The Lord Chancellor said that the date of the order must be taken to be the 18th of February, 1863, and that the appeal was too late. His Lordship dis- missed the appeal with costs. (a) 4 De G., F. Sf J. 456. lb) 1 Mac. 4- G. 306. (c) 1 De G., M. 4- G. 477 ; S. C, De G.,M.Ss G., Bey. App. 77. 238 CASES IN BANKRUPTCY. 1863. Ex parte WILLIAM PAINE and JOSEPH LENTON. In die Matter of WILLIAM GLEAVES, a Bankrupt. April 15. Before The Lord Chancellor Lord Westbury. A husband and wife mort- gaged in fee land of which they were seised in right of the wife, to whom the equity of re- demption was reserved by the mortgage deed. The husband be- came bank- rupt, and in a suit by the wife for a settlement of the equity of redemption on her and her children, and for redemption as against the mortgagee, and for foreclosure against.the assignees and the husband, the assignees disclaimed, and a decree was made giving the wife the right to redeem as against the mortgagee and settling the whole fee upon herself and her children, the husband not objecting. The mortgagee afterwards applied in the bankruptcy and was there allowed to prove the whole amount of his mortgage debt against the bank- rupt's estate. Held: — 1 . That the disclaimer of the assignees was intended only to accelerate the wife's right to redeem, if she elected so to do ; but that if she elected not to redeem, and her bill was consequently dismissed with costs against the mortgagee, the assignees would no longer be bound by their disclaimer, their interest in the bankrupt's estate would remain unaffected by the dismissal of the bill, and they would be restored to their right to the bankrupt's life interest in the property in question. 2. That the proof must be varied by the addition of directions that in the event of the Plaintiff's bill being dismissed with costs the life estate of the bankrupt, which had been transferred to the assignees in bankruptcy, should be sold, the proceeds deducted from the amount of debt proved, and proof admitted only for the residue; but iu the event of the Plaintiff redeeming the mortgage in the manner expressed in the decree, that the proof should he admitted without prejudice to any question as to the right to expunge the same either wholly or partially, or to keep the same alive for the benefit of the person paying the debt to the mortgagee. rpmS was an appeal by William Paine and Joseph Lenton, the assignees of the above-named bank- rupt, from an order of Mr. Commissioner Holroyd, who, after the decree made by the Lord Chancellor in the suit of Gleaves v. Paine (a), admitted the Defendant Thomas Pyke, the mortgagee, to prove in the bankruptcy for the full amount of his mortgage debt. The nature of the suit of Gleaves v. Paine, and the interests of the various parties thereto, and the Lord Chancellor's decree in question appear from the former Report. Briefly (a) 1 Be G., J. 4- S. 87. CASES IN BANKRUPTCY. 239 Briefly recapitulated they were as follows : — 1863. The bill was that of the wife of the bankrupt, by her gx parte next friend, as Plaintiflf against her husband's assignees, Paine. Thomas Fyke above mentioned and the bankrupt as Gleav^es Defendants, The bankrupt and his wife had mortgaged in fee to Thomas Pyke, for 1001. advanced by him to the bankrupt, real estate belonging originally to the wife in fee, and wherein (no settlement having been made upon the marriage) the bankrupt had a life estate by the cur- tesy. By the mortgage deed, the equity of redemption was reserved to the wife, her heirs and assigns. The wife alleged that she had only joined in the mortgage as a surety for her husband, and filed her bill seeking a settlement of the equity of redemption on her and her children, and redemption against the mortgagee, and foreclosure against the assignees and her husband, the bankrupt. The decree made by the Lord Chancellor upon an appeal from the Master of the Rolls was to the effect that, the Defendants William Paine and Joseph Lenton by their counsel disclaiming all right to redeem the mortgaged premises, his Lordship declared that the Plaintiff was entitled to redeem them. An account was then ordered to be taken of what was due to the mort- gagee for principal and interest and costs ; and upon the Plaintiff paying the same within six calendar months, the mortgagee was ordered to reconvey the premises to the trustees to be appointed of the settlement thereinafter mentioned ; and upon the Plaintiff redeeming the mort- gaged premises as aforesaid, it was ordered that the same should be settled (the Defendant, the bankrupt, by his counsel consenting) upon certain trusts for the benefit of the Plaintiff and her children; but in default of the Plaintiff redeeming the mortgaged premises as aforesaid, it was ordered that the Plaintiff's bill should be dismissed as 240 CASES IN BANKRUPTCY. 1863. as against the mortgagee with costs to be taxed and paid ^■^'-'''^ by the Plaintiff's next friend. Ex parte ZTe ^•■- •^- ^- Calmer and Mr, E. F. Smith for the Ap- Gleaves. pellants. To admit this proof for the full amount of the mortga- gee's debt without requiring him to give up his security, or at any rate putting him on some terms, is, we submit, a miscarriage of justice. The Commissioner ought at least to have required him to realize his security, per- mitting him only on those terms to prove for the balance of his debt. The security would remain merely a se- curity although the Plaintiff should elect not to redeem, for then her bill would be dismissed with costs as against the mortgagee, and he would become entitled to the estate free from any equity of redemption so far as the Plaintiff is concerned : but in that event the disclaimer of the assignees would fall equally with the Plaintiff's rights, with reference to which and to which only that disclaimer was made. If the Plaintiff on the other hand should exercise the right of redemption given her by the decree, the mortgagee having been paid w^ould have -no right to prove on his own behalf, and the only question would be whether the wife would be entitled to stand in his place. With a view to that question, a proof for the full amount of the debt may be proper, but then it should be limited to the event of the Plaintiff exercising her right to redeem, and should be without prejudice to the question whether the proof should be expunged wholly on the ground of the mortgage debt having been by redemption paid off, or whether it ought to be wholly or partially retained for the benefit of the Plaintiff, paying such debt as surety. They also referred to Robertson v. Norris (a) ; Lock- hart (a) 11 Q.B.,N.S.9\6. CASES IN BANKRUPTCY. 241 hart V. Hardy (a); and the General Orders in Bank- iooo. ruptcy,\Sb2: Orders 55 sqq. Ex parte Paine. Mr. Cole and Mr. Rigby, for the Respondent Thomas i„ re Pyhe, in support of the Commissioner's order. Gleaves. The wife has under the decree the option of either redeeming or not. If she redeem, the disclaimer by the assignees, which was absolute and not qualified, places her out of the category of a secured creditor, whilst, if she do not redeem, the same argument would apply to Mr. Pyke himself, for the rule as to a mortgagee not being allowed to prove for the full amount of his debt in bankruptcy without giving up his security only applies to securities which would, when given up, enure for the benefit of, and produce some advantage to, the general body of creditors. The effect of the decree, however, in the present case is such, that even if Mr. Pyke were to give up all his interest in the bankrupt's life estate as the price of being allowed to prove for the full amount of his debt against the bankrupt's estate, there would be nothing which the assignees could make avail- able for the benefit of the creditors. The case there- fore falls within the exception to the rule, and not within the rule itself; and the proof was properly admitted for the full amount of the debt. They also referred to and commented on Ex parte Shepherd (b). A reply was not heard. The Lord Chancellor. The proof cannot be lefl in the simple and unqualified form in which it now stands. There has been a misap- prehension, I think, of the nature and effect of the decree. Every (a) 9 Beav. 349. (6) 2 M.D. S/- Be G. 204. 242 CASES IN BANKRUPTCY. 1863. Every decree for redemption may be denominated in a ^^^'^"^ sense an optional decree, inasmuch as it leaves it in the Ex parte Paine. power of the Plaintiff either to pay the money due on the In re security and redeem it, or to submit to have the bill dis- missed with costs against the mortgagee, which it is said — how accurately I do not stay to inquire — has the effect of a decree of foreclosure against the mortgagor. The present decree follows the usual form with one exception> namely, that inasmuch as the Defendants are several, and one set of them, being the assignees of the husband and therefore entitled to the first life estate and to the first right of redemption, has declined to redeem, the decree gives the first right of redemption to the wife, the person second in order. It is clear, as well upon the language of the decree, as upon the nature of the facts, that all that the dis- claimer of the assignees was intended to do and has in fact done was, and is, to accelerate the wife's right to redeem. To the wife, therefore, is given the first right of redemption. Redemption however by her is optional. And should she hereafter deliberately elect not to exercise her right to redeem, the disclaimer of the assignees cannot, after the cesser of the purpose for which it was first intended, be considered as amounting either to a contract or to a repudiation of the estate. It is urged however for the Respondent that in the event of the wife refusing to exercise the right of redemption given to her by the decree, the other part of that decree will take effect by which her bill will be dismissed with costs as against the mortgagee ; and it is said that in that event on the ground either of the disclaimer being equally operative, or on the ground of the general principles CASES IN BANKRUPTCY. 243 principles of the Court, the antecedent right of the 1863. assignees in respect of the bankrupt's estate would be ^T'^'^^ extinguished. Paine. But the effect of the decree in that contingency would only be to dismiss the bill and probably, by preventing any further bill by the wife, to annihilate her equity of redemption. For that equity of redemption being a thing claimable only in this Court, the dismissal of the bill out of the Court would extinguish the equity of redemp- tion, which would consequently be no longer enforceable. That however applies only to the individual who has filed the bill ; and I do not think that, because the Plain- tiff fails to redeem, therefore any right of redemption belonging to the Defendants is equally lost. It follows therefore that should the wife fail to redeem, and her bill be consequently dismissed, the assignees would no longer be bound by their disclaimer, their interest in the bankrupt's estate would remain unaffected by the dismissal of the bill, and they would be restored to their right to the bankrupt's life interest in the property in question. In this state of things, nothing having been done, and it being very uncertain what will be done under the decree, Mr. Fyke, the mortgagee, applies in the bank- ruptcy to be allowed to prove his debt. The assignees contend that the ordinary rule should have been applied, and that the proof should, if admitted for the full amount, have been so admitted subject to the contingency of this decree coming into operation. The decree may come into operation in either of two ways, viz., either by way of redemption or by dismissal of In re Gleaves. 244 CASES IN BANKRUPTCY. 1863. Ex parte Paine. In re Gleaves. of the bill. In the former alternative, the life interest of the bankrupt is annihilated by the effect of the decree, and any direction for the sale of such interest would require to be made subject to the contingency of the election by the Plaintiff to exercise her right to redeem. In the latter alternative, the life interest would remain intact, and in that event the order should direct the sale of the life interest, and allow proof for the balance after deduction of the proceeds of sale. A further question will arise if the wife redeems the mortgage, whether she will become entitled to the benefit of the mortgagee's proof; but that is a question which will arise in the bankruptcy. I think the proof should be varied in the following way, viz. — by adding to it directions that in the event of the Plaintiff's bill being dismissed with costs, the life estate of the bankrupt which has been transferred to the assignees in bankruptcy shall be sold, the proceeds de- ducted from the amount of debt proved, and proof ad- mitted only for the residue; but that in the event of the Plaintiff redeeming the mortgage in the manner expressed in the decree the proof shall be admitted subject and without prejudice to any question as to the right to ex- punge the same, either wholly or partially, or to keep the same alive for the benefit of the person paying the debt to the mortgagee. CASES IN BANKRUPTCY. 246 1863. In the Matter of THE JOINT STOCK COMPANIES ACTS, 1856 & 1857, and In the Matter of THE MOSELEY GREEN COAL AND COKE COMPANY LIMITED. FOX'S CASE. April 18. npHIS was an appeal by Sir Charles Fox from the Before The refusal of Mr. Commissioner Goulbvrn to vary the ni. n •' Chancellor list of contributories of the above-named company, which Lord West- was being wound up under the above-mentioned acts, ^„, . p mi Where a per- by striking out the Appellant's name therefrom. The son's name list had been settled in the unavoidable absence of the fPPeared as that 01 a share- Appellant, and the object of the application to the Com- holder in a missioner was to obtain a reviewal of that settlement so company's far as it regarded the insertion of the Appellant's name register, and , ,. minute and m the list. other books, and had been so included in The facts on which the official liquidator based his the yearly claim to include the Appellant in the list were, that his r*''i™rar°of ^ name appeared as that of a shareholder in the register, joint stock journal, ledger, share ledger, share certificate book and jj appeared on minute books of the company, and that it had been in- 'he evidence ^ that he had eluded in the returns of the years 1861 and 1862 to the never agreed, registrar of joint stock companies. °'' ^"^'^^ '" ° " ' such a manner The as to induce others to be- lieve that he had agreed, to become a shareholder in the company, and that he had promptly repudiated an attempt on the part of the secretary of the company to place him in the position of a shareholder :—HcW, that upon an application in Chancery under the Joint Stock Companies Act, 1856, s 25, and in bankruptcy in the matter of the winding up to remove his name from the register and from the list of contri- butories, he was entitled to the relief sought. The books of a company are, under the Joint Stock Companies Act, 1856, s. 40, only evidence as between shareholders, and cannot be accepted as evidence on the question whether a person is or is not a shareholder. Fox's Case. 246 CASES IN BANKRUPTCY. 1863. The facts on which the Appellant relied as entitling ^■^"•^"^ him to have his name removed from the list of contri- MosELEY butories as settled were, in effect, that he was the com- Green Coal pony's consulting engineer, in which capacity the com- CoMPANY pany was in his debt, and that he was not otherwise Limited. connected with the company, save that he had been employed in getting it up ; that he had never applied for or accepted any shares in it, and that his name had been wrongfully inserted as that of a shareholder in the various places in which it so appeared in the company's books ; that he had been often pressed to take shares in the company and had as often refused so to do, nor had he ever paid any money in respect of shares ; that he had received a notice by a letter of the secretary dated the 30th of October, 1861, of an allotment of shares to him, and that the certificate was a form of receipt for signature ; that he had not signed it but had written a letter in reply and carried that letter with the receipt to the secretary himself telling him it was a " try on," and that the letter was as follows : — " I am sorry to say that I do not think I should be justified in complying with your request to sign the receipt for twenty shares in the Moseley Green Company inclosed in your note of yesterday, as doing so would, in the event of the company being wound up, make me a contributory, which was certainly never intended. What I undertook to do was, to receive twenty shares (paid up) in part payment of my professional charges spread over the execution of the whole work ; but I carefully explained that I should not place myself in a position to be subject to calls, and this arrangement, in the event of the works going on under my charge, I am willing to carry out. From this you will perceive that I am of opinion that should the com- pany now break up, I am in no way bound to incur any responsibility in respect to shares. I accordingly return the certificate for twenty shares and the receipt you sent me ; CASES IN BANKRUPTCY. 247 me;" that he had attended the meetings of the company, if at all, always as engineer, and never as a shareholder, and that he had never taken the chair at any meeting. Mr. Amphlett and Mr. Doria for the Appellant. Before the Appellant can be put upon the list of contributories he must be shown to have been a share- holder; Joint Stock Companies Act, 18.56, ss, 61, 65. His name is on the register of shareholders it is true, but that alone is not enough to constitute him a share- holder: his acceptance of the shares endeavoured to be saddled upon him must also be shown ; lb. s, 19. But any such acceptance in the present case on the part of the Appellant is clearly negatived by the evidence. The Commissioner, having regard to the Joint Stock Com- panies Act, 1856, ss. 25, 60, and the Joint Stock Com- panies Act, 1857, s. 9, and also the dicta in Birch's Case (a) and fVhittefs Case (b), thought that the Appellant should have applied with all speed after hearing that his name had been put on the register to have it removed therefrom, and that as he did not do so the register was, under the 26th section of the Act of 1856, conclusive evidence of his status as a shareholder, and his consequent liability to be placed on the list of con- tributories. But the entry in question is at most prima facie evidence only and capable of being rebutted, and is in the present case actually rebutted by positive evidence to the contrary. And as the Appellant never was in fact a shareholder it was never incumbent on him to apply, under the 25th section of the act of 1856, for a rectifica- tion of the register by the omission therefrom of his name. 1863. In re MOSGLEY Green Coal AND Coke Company Limited. Fox's Case. [ The Lord Chancellor asked the counsel for the official (a) 2 De G. If J. 10. (6) lb. 577. 248 CASES IN BANKRUPTCY. 1863. official liquidator, with reference to the cases which had ""^■"^ been cited, whether they were willing that the present MosELEY application should be considered as made as well in Green Coal Chancery as in Bankruptcy.] Company Limited. «. • i i- Fox's Case ^^' ^"^^ ^^^ ^^' ^oxhurffh, for the official liquidator, having signified their consent, were then called upon on his behalf. Their argument was to the following effect: — The Commissioner could not with the authorities which have been cited on the other side before him have made any other order than that which he has made. He had no jurisdiction to amend the register by striking the Appellant's name off" it, and consequently no power to exclude him from the list of contributories. Burnes v. Pennell (a) disposes of the argument raised upon section 19 of the Act of 1856, upon the point of acceptance of shares by the shareholder, by showing that as between the Appellant and the company the acceptance must be treated as a requisite imposed upon him for the benefit of the company, and the absence of such acceptance no ground for allowing him to retire from his contract. Moreover, here the entries in the various books -of the company are, under the 40th section of the Act of 1856, evidence as to the fact of the Appellant's status as a shareholder. [ The Lord Chancellor remarked that the section in question applied only as between share- holders, and had no effect in making the books of the company evidence on the question whether a person was a shareholder or, not.] A reply was not heard. The («) 2 H. L Cas. 497. Fox's Casc. CASES IN BANKRUPTCY. 2iQ The Lord Chancellor. ^^s,^ I think that after the two cases which have been Moseley referred to by the Appellant's counsel the Commissioner Green Coal AND Coke could not have taken any otiier course than that which Company he has taken. At the same time I think that there is Limited. nothing upon the evidence to show that the Appellant ever agreed, or acted in such a manner as to induce other people to believe he had agreed, to become a shareholder in respect of these shares. On the contrary it appears. to have been a misunderstanding on the part of the secretary, for which the conduct of the Appellant gave no warrant, to enter him in the company's register. It is said that he attended meetings of the company. Perhaps he did ; but he states, and his statement remains unquestioned, that it was his duty to attend the meetings of the company in his capacity of its engineer. The books of the company cannot be received as evidence that he attended those meetings in the capacity of a shareholder. Nor can any imputation of want of promptitude be laid to his charge in his mode of dealing with the ingeniously devised plan of the secretary for making him out a shareholder. And if the secretary's action arose from misconception of facts, the whole thing ought to have terminated upon the misconception being dispelled. If, therefore, this had been an application to the Court of Chancery anterior to the winding-up of the company, the Appellant would in my judgment have been entitled to have his name removed from the register. The proper mode of dealing with the whole matter as it now comes before the Court will be, — counsel for the Vol. 1—3, S D.j.s. official 250 CASES IN BANKRUPTCY. 1863. official liquidator consenting, — to allow the amendment of ^•"^^^^ the present notice of motion by entitling it in Chancery MosELEY ^s ^^11 ^s in Bankruptcy, and making it extend to an Green Coal application, under the 25th section of the Act of 1856, AND Coke i a h /• i • c Company to remove the Appellants name from the register of Limited. shareholders, as well as an application to remove that name from the list of contributories. Upon the notice so amended I shall declare that the Appellant never became or intended to become a share- holder in the company, and direct the removal of his name as well from the register as from the list of con- tributories. Fox's Case, CASES IN BANKRUPTCY. Ex parte HENRY RIDOUT DOWNMAN. In the Matter of HENRY RIDOUT DOWNMAN, a Bankrupt. Jpril 18. rT"^HIS was an appeal of the bankrupt from an order of Before T/ie Mr. Commissioner Goulbiint suspending the Ap- ^.^"""L pcliant's order of discharge for twelve monlhs, and re- Loud fusing protection until the Appellant had undergone six estbury. .... , 1 o 1 11.1" considering months , imprisonment; the ground ot the order being the question of that the Court was of opinion that the Appellant could » bankrupt's •^ _ '^'^ discharge with not have had, at the time his debts were contracted, any reference to the reasonable or probable ground of expectation of being fiJeBanTniptcv able to pay the same, and that his insolvency was attri- Act, 1861, butable to a long course of, and continuance in, rash and ^^^^ „,|j (;^,^,j, hazardous speculation, and also to unjustifiable extrava- so'ne amount . . or severity, la gance in living. properly brought to bear by the The Appellant was described as a promoter of public tribunal comiianies, and the unsecured debts which appeared V . j '."^ '" upon his balance-sheets imd which amounted to 1,141/., question. had been incurred in respect of the promotion of a com- ti,g contract-' pany called " The If'itnithii Collier ii and Spvltcv Works ing of which ' , ,..,,, -^ •' ^ by the bank- iompain; Lnintrd. ,.„pt_ witliout This reasonable or probable ground of expectation of being able to pay the same, is made condemnatory by the section and rule in question, nuist be debts incurred by the bankrupt and within the scope of the existing proceedings in bankruptcy. In construing tlio words " raali and hazardous speculation" in the same section and rule, " nisli" is the important word, that is to say, tlie speculation made condemnatory by tlio section and rule must be such as no reasonably prudent man would have entered into. Circumstancca under which a bankrupt was hehl, within the meaning of the section ond rule above mentioned, neillu-r to have contracted debts without reasonable or probable ground of expectation of being able to pay the same, nor to hi'.ve been guilty of rash and hazardous speculation conducing to his insolvency, nor of unjustifiable extruvaganco iu living. S2 DOWNMAN. 253 CASES IN BANKRUPTCY. 18G3. This company, although eventually dissolved for insuf- ^-^^^-^ ficiency of subscriptions, was actually formed and regis- D^wnmIn. tered, and thereupon the Appellant became entitled to In re two sums, amounting respectively to 5,000Z. and 3,000/., from two gentlemen named Marsden and Jones respec- tively, the former the owner of a colliery the latter of a mine, which if the business of the company had been carried on were to have been taken over by it ; and for the assurance of which colliery and mine respectively to the company accordingly Messrs. Marsden and Jones were respectively under contract with the Appellant. The two sums of 5,000Z. and 3,000Z. were to be paid respectively in certain proportions in cash and shares of the company; and upon the dissolution of the latter, Messrs. Marsden and Jones respectively declared their contracts determined, leaving the Appellant to his remedy against them by way of an action for damages, and a quantum meruit for his services in connection with the negociation of the sales to the company, or otherwise as he might be advised. No proceedings had been in fact taken against Messrs. Marsden and Jones, or either of them, by reason of want of assets in the bankruptcy, but they were described as responsible persons. The Appellant was arrested in May, 1862, upon a writ of execution founded on a bill of exchange, and was adjudged a bankrupt on his own petition on the 20th of the following month. His failure he attributed to the non-payment of the above-mentioned sums of 5,000Z. and 3,000/. There were entries of 126/. for liabilities, but none for personal expenditure in the balance-sheet. On the 27th of June, 1862, the Appellant applied for his release from prison, but it was refused, as it was also on CASES IN BANKRUPTCY. 253 on the 20th of the July following, unless he could find bail. The 18th of August, 15th of September, and 27th oi November, 1862, were devoted to the question of his last examination, which he passed on the last-mentioned day, and the question of his discharge was adjourned to the 26th of January, 1863. Thence it was again ad- journed to the 2nd of March, upon which day, after the Appellant had been examined vivS, voce, the learned Commissioner took time to consider his judgment. 1863. Ex parte DoWMMAN. In re DOWNMAN. This he delivered on the 9th of March, 1863, in the terms set out below (a) (whence and from the judgment of (a) " The bankrupt asks for an order of discharge. He is not so much opposed by the assignee who opposed him in the first instance; but the case has been left in the hands of the Court, This is the bankrupt's third failure. Under his first failure the debts were 1,700/., and there were no assets. Under the second insolvency the debts were 3,500i., with a similar result as to assets ; and under the present failure the debts are 1,2001., and the bank- rupt does not produce a single shilling for his creditors. The bankrupt, it appears, has resided at Boulogne, a place much fre- quented by persons of his descrip- tion; at the Upper Mall, Hammer- smith; at Notting-hill ; at Wil- lesdon, near Barnes, Surrey ; and other places ; his ofiices being in Copthallbuildings, and in Size- lane. Although the bankrupt has twice before failed, he does not seem to have been by any means chary in his expenditure. The outlay is stated at 600/. per year. When the case came before me I asked the bankrupt to state what reasonable orprobable expectation he had of being able to pay his present debts ; but the only ex- planation given was, that he made certain contracts, and that he expected them to be fulfilled, thus hoping to be enabled to pay his creditors. The bankrupt having, in right of his wife, a separate income of 500/, per year, was en- abled to keep up a certain appear- ance in the world, and people were deluded into giving him credit upon the supposition that he was a man of property — the fact being, that his wife's income could never be available in any way for the payment of the cre- ditors. It is not to be endured that men like the bankrupt, who are constantly making their ap- pearance in this Court, should be allowed to defy their creditors. I cannot do less than suspend the order of discharge for twelve months, and I shall not allow protection until the bankrupt has suffered six months' imprison- ment.'' 254 CASES IN BANKRUPTCY. 1863^, Ex parte DoWNMAN. In re DOVTNMAN. of the Lord Chancellor the other material facts of the case will appear), and made the order now under appeal. Mr Bacon, for the Appellant, who, notwithstanding the Commissioner's refusal of protection, was still at large, read the Coraraissioner'sjudgment, and commented on the terms of the Bankruptcy Act, 1861, ss. 158, 1 59 (a). He contended that the Appellant's conduct did not deserve the censure passed upon it by the Commis- sioner, that his claims against Messrs. Marsden and Jones were independent of, and did not fall with, the collapse of the company ; and that upon the whole case he was entitled to his discharge. Mr. and under which his debts have been contracted; and if the Court shall be of opinion that the bank- rupt has .... or that he could not have had at the time when any of his debts were contracted, any reasonable or probable ground of expectation of being able to pay the same or, whether trader or not, that his insolvency is attributable to rash and hazard-, ous speculation, or unjustifiable extravagance in living, . . , the Court may refuse an order of dis- charge, or may suspend the same from taking eifect for such time as the Court may think fit, or may grant an order of discharge subject to any condition or con- ditions touching any salary, pay, emoluments, profits, wages, earn- ings or income which may after- wards become due to the bank- rupt, and touching after-acquired property of the bankrupt, or may sentence the bankrupt to be im- prisoned for any period of time not exceeding one year from the date of such sentence.'" (fl) These, so far as they are niaterial, are respectively as fol- low : — -" 158. After the bankrupt has passed his last examination, un- less an order of discharge shall have been previously made as hereinbefore provided, the Court shall appoint a sitting for the purpose of considering the ques- tion of granting the bankrupt such order. Fourteen days' no- tice of such silting shall be given in the London Gazette, and such newspapers as the Court shall direct. The assignees or any creditor who has proved may be heard against such discharge. " 159. In granting orders of discharge the following rules shall be observed : — "3. If . . . there shall be made, or shall appear to the Court to exist, objections to the grant- ing of an immediate discharge, the Court shall proceed to con- sider the conduct of the bankrupt before and after adjudication, and the manner and circumstances in CASES IN BANKRUPTCY. Mr. Roxburgh, for the assignee, left the case in the hands of the Court. „ Ex parte DoWNMAN. In re The Lord Chancellor. Downman. The learned Commissioner is much to be commended ft)r the strict examination which he has made of this case, especially as there was no opposing creditor before him. I think he was right in referring to the bankrupt's position at the time when he incurred these debts, and that his reference in this respect was correct under the 159th section of the statute. Still it is incumbent upon the Court, with regard to that statute, to look only to debts which actually appear to have been incurred by the bankrupt and which come within the reach of the present insolvency. The learned Commissioner charges the bankrupt in the first place with contracting these debts without any reasonable or probable ground of expectation of being able to pay them. But the only transactions in which the bankrupt appears to have been engaged during the period of time in which the debts were contracted were transactions relating to the purchase of two large concerns, one a colliery, the other a mine. What may have been the prudence of these transactions may be considered hereafter, but certainly they appear to have been bon& fide contracts. They seem to have been likely to afford the bankrupt a considerable sum of money. Supposing, therefore, that these were bona fide transactions and not deserving the name of rash and hazardous speculations, and supposing the debts specified in the balance sheet to have been incurred only or chiefly by reason of these transactions, I should be unable to come to the conclusion that the debts were incurred without DOWNMAN. 256 CASES IN BANKRUPTCY. 1863. without any reasonable or probable ground of expecta- ^"^^^'^ tion of being able to pay them. I have no reason to Ex parte , , , . , , t ^ DowNMAN. believe but that the assignee and the creditors have In re stated to the Court what they believe to be the facts, and that in the honest discharge of their duty they have given their opinion to the Court without any im- proper collusion or connivance with the bankrupt. Thfe proceedings taken by the assignee also confirm the supposition that these transactions of the bankrupt were bon& fide transactions. I must say, therefore, that, although I am very unwilling to come to any different conclusion from that of the learned Commissioner, 1 do not agree with him in his first conclusion, that these debts, amounting to about the sum of 1,100Z. and which, with the exception of 70/., are wholly attributable to the expenses incurred by the bankrupt about the transactions in question, are clearly proved to have been incurred without any reasonable or probable ground of expecta- tion of being able to pay the same. If either of the transactions in which the bankrupt was engaged had succeeded, he would have received a sum of money which would have much more than covered the amount of the debts he had incurred. The next consideration is whether the contracts in question, although bona fide contracts, deserve the name of rash and hazardous speculations. It is difllcult to assign the limits to be placed upon language so general in its character and description as that found in this clause of the act. Its terms must be obeyed, but they are so indefinite as to leave to the judge who has to interpret them a larger amount of discretionary power than in a statute of this nature ought to be entrusted to any tribunal— a discretionary power the existence of which may occasionally lead to the CASES IN BANKRUPTCY. 257 the conclusions of one tribunal being at variance with the conclusions of another. A gentleman contracts with the owner of a mine to give him a certain sum of money for that mine, the con- tract to a certain extent being made dependent upon the formation of a company. These are transactions which occur with frequency. Frequently flourishing and beneficial interests have had their commencement in arrangements and contracts of that description. I cannot say that a transaction of that nature, apparently a boni fide one in this ^ense, that it is entered into between the bankrupt and the mine owner with a belief on the part of both that it is a practicable contract, a thing capable of being brought into operation fairly and honestly, comes under the denomination of being rash. Hazardous it is no doubt in this sense, that there may be danger and uncertainty attending its success; but in order to come within the condemnatory clause of this statute, the transaction must be a speculation, a rash speculation and a hazardous speculation. Probably the important word here is "rash," that is to say, it must be a speculation in which no reasonably prudent man would have engaged. I cannot say, having regard to these contracts and to what has taken place respecting them, that I think they can be judicially denominated " rash and hazardous speculations " within the meaning of the statute. 1863. Ex parte DOWNMAN. In re DoWNMAN. There then remains a third point which has been ad- verted to. There is undoubtedly considerable truth in the learned Commissioner's remarks with regard to the bankrupt having traded upon false credit, owing to the existence of his wife's separate estate. But that rather points to the state of the law which allows such a separate estate to exist, and I do not think that the fact can be ad- Vol. 1—3. T D.J.s. duced 258 CASES IN BANKRUPTCY. 1863. Ex parte UoWNMAN. In re DOWNMAN. duced to prove unjustifiable extravagance of living on the part of the bankrupt. That ought to appear from the balance sheet. But the characteristic of the balance sheet in the present instance is that there is not apparently here a single debt that does not come under one or other of these two descriptions, namely: — debts having imme- diate relation to the tv^o contracts upon which the bank- rupt was depending, and debts, two or three in number only, which appear to have been contracted for the pur- chase of a share in a Canadian railway, and for the pur- chase of a share in a mining claim, which is the subject of a counter claim, from a Mr. De Castro, who has neither proved under the bankruptcy nor in any way contributes to oppose the bankrupt's discharge. Therefore, upon a proper review of the whole circum- stances of the case, and limiting the inquiry to the case of debts coming within the immediate scope of the present bankruptcy, those being the debts to which the attention of the judge must be confined in dealing with the 159th section of the statute, it is not in my judgment fit to brand the bankrupt judicially with the mark that his debts have been contracted without reasonable or pro- bable ground of expectation of his being able to pay them, or that debts have been contracted by him by reason of contracts which must be held to be rash and hazardous speculations. I agree with the learned Commissioner in his view of the necessity for examining these cases with care and, even, I may add, with some amount of severity; but after that has been done, in the present instance I cannot bring the case within the fair meaning of the act, and I think, therefore, the order of discharge ought to have been and must now be granted to the bankrupt in the usual way. [Some CASES IN BANKRUPTCY. 259 [Some discussion then took place as to the deposit, which was stated at the bar to have been contributed by the bounty of the Appellant's friends, and as to the costs of the assignee, it being alleged at the bar that there were no assets in the bankruptcy.] 1863. Ex parte DoWNMAN. In re DoWNMAN. The Lord Chancellor. With regard to deposits made by a bankrupt, they must be treated as the bankrupt's monies, and dealt with ac- cordingly. In the present case the deposit may be re- turned to the bankrupt. The appearance of the assignee here is, I think, under the circumstances of the case, right, but I must leave him to get his costs out of the estate. In the Matter of THE JOINT STOCK COMPA- NIES ACT, 1856 and 1857; and In the Matter of THE MOSELEY GREEN COAL AND COKE COMPANY LIMITED. 1864. June 8. Before The Lord Chancellor Lord Westbury. Shares in a BARRETT'S CASE. nnHIS was an appeal motion in bankruptcy by Mr. Osman Barrett seeking the reversal of an opd^r made by Mr. Commissioner Goulbourn, in whose Court the Moseley Green Coal and Coke Company Limited wsis being wound up under the above-mentioned joint-stock Arts company were ^^^^> allotted to and registered in the name of a person on the application in his name of another person to whom the former had lent the use of his name for the purpose, on condition that he was to be exposed to no liability in consequence, and who paid the deposit on the shares. The company being subsequently ordered to be wound up under the Acts of 1856 and 1857, and nothing having been done which could bind the company towards releas- ing the registered shareholder from his liability: — Held, that whatever equities in the shape of right to indemnity might exist between him and the person applying in his name and the directors who had entered into an arrangement for his release, which was ultra vires and had not been sanctioned by the company, his name was properly placed on the register and list of contributories. Vol. 1-4. U D.j.s. 260 CASES IN BANKRUPTCY. 1864. Acts, settling the Appellant's name on the list of contri- '"'"-'''^ butories for 250 shares, or a reference back to the Com- In re , . . , . MosELEY missioner to resettle the list ; and also an original motion Green Coal j^ Chancery under the Joint Stock Companies Act, 1856, AND Company s. 25, for rectification of the register by erasing therefrom the Appellant's name as a shareholder (a). Barrett's Case. The facts of the case, as also the scope of the argu- ments on the part of the Appellant, sufficiently appear from the Lord Chancellor's judgment. Mr. Giffard and Mr. C. T. Swanston, for the Appel- lant, relied upon Cox's Case{b), and Whittefs Case{c). Mr. E. F. Smith for Mr. Corbett, was willing that his name should be put on the lists in lieu of that of the Appellant, if the Court should think that course proper; but Mr. Willcock and Mr. Roxburgh, for the Official Liquidator, declining to accept that offer, they were not called upon. The Lord Chancellor. The first question is, whether the Appellant's name was placed upon the public register of shareholders in this company in such a manner as to make him liable to the consequences of being so placed as between himself and the shareholders. What took place between Mr. Corbett and the Appel- lant undoubtedly warranted the placing of the Appellant's name (a) See Fox's Cine, 3 De G., (6) 4 De G., J. fy S. 53. J.Sf S. 465 ; S. C, supra, p. 245 ; (c) 2 De G. ^ J. 577. Bird's Case, i DeG,, J. 4 S. 200. CASES IN BANKRUPTCY. 261 name upon the list of shareholders for 250 shares. It is immaterial to the shareholders of the company what secret agreement may have been made between the per- son so registered and any other person with regard to his liability. The shareholder has a right to be put on the register in respect of his shares. All the other share- holders have a right as between themselves and him to look to and depend upon the register and to take the register as evidence of his liability, unless that liability has been determined in a conclusive and binding manner by transactions on the pan of the directors, which are legally valid and good to bind the company. 1864. In re MOSELEY Green Coal AND Coke Company Limited. Barrett's Case. The transactions in the present case are these: — The Appellant consented to his name being put on the register at the instance of Mr. Corbett, Mr. Corbetfs position with regard to the company was — under articles of agreement dated the 31st oi January, 1861 — that of vendor of certain tracts or seams of coal which the company was formed to work. The purchase-money was to be a large sum, and was to be in part paid or accounted for to Mr, Corbett in shares of the company. The powers of the directors are defined by the articles of association. The powers of the general meetings of the company are also there defined. The directors were anxious to start the company, as the expression is, and for that purpose they wished to obtain a certain amount of subscriptions. They told Mr. Corbett that if he would subscribe for 250 shares in addition to the shares which were to be handed over to him in part payment of his purchase money, a third person would subscribe for another named number of shares, and that that subscription would enable them to start the Company. U2 Mr. 262 CASES IN BANKRUPTCY. 1864. In re MOSELEY Green Coal ANO Core Company Limited. Barrett's Case. Mr. Corhett says that it was suggested to him that it would be better, and would give an appearance of greater solidity to the company if this subscription for 250 shares was made by him in another name. He accordingly suggested the name of the Appellant, and applied to him for that purpose ; and what passed between them, although it was coupled with a personal engagement on the part of Mr. Corbett that the Appel- lant should not be exposed to any liability, yet did, as I have already mentioned, so far as the company was concerned, give authority to Mr. Corbett from the Appellant to put down the Appellant's name as a sub- scriber for 250 shares. Subsequently disputes arose between Mr. Corbett and the directors. Mr. Corbett complained that he had been induced to obtain this subscription for 250 shares by the representation as to the subscription on the part of the third person for a given number of shares, which repre- sentation had not been fulfilled. An action was brought and a bill was filed, and it ended in Mr Corbett recover- ing judgment for 250/., being the deposit of \l. per share which he had paid on the shares taken in the Appellant's name, and in his also getting a decree for a large amount from the company. The result was, that a new arrange- ment and compromise was made between the directors and Mr. Corhett, and that under that new arrangement the relations between Mr. Corbett and the company were placed upon an entirely different footing, the result of the indenture whereby it was carried into eflFect being that Mr. Corbett was to be treated as entitled to recover the 2501. in the action; that one of the pleas in that action setting up misrepresentation on the part of Mr. ■ Corbett should be withdrawn ; that the subscription made in respect of the Appellant's shares should be regarded as annulled; and that Mr. Corbett should get back CASES JN BANKRUPTCY. 263 back and deliver up to the company all shares which had been transferred to him in pursuance of the agree- ment of the 31st of January, 1831, other than certain 2,030 shares already transferred by him. Under this agreement he states that he did give up to the company 1,230 shares. If these transactions which are thus stated to have taken place between Mr. Corbett and the directors were transactions which bound the company, the result would be that the company acknowledged Mr. Corbett as the true subscriber — agreed to annul the Appellant's sub- scription — agreed to put an end to Mr. Corbetfs equit- able subscription — and agreed that Mr. Corbett should have the money repaid. But I do not find that any one of these transactions which the directors took upon themselves to carry into eflect as between themselves and Mr. Corbett in any respect bound the company or were within the compass of the powers and authorities of the directors. Although therefore there is an entry in the share ledger made by the authority of the directors, by which 260 shares are expressed to be transferred from the Appellant's name, yet there is no single act, no single dealing of release or alteration of agreement as between Mr. Corbett and the company made by the directors which is shown to be, or even attempted to be shown to be, within the powers and authorities of the directors. 1864. In re MOSELEY Green Coal AND Coke Company Limited. Barrett's Case. The original contract of subscription . made by the Appellant through the agency of Mr. Corbett therefore remains still available to the company, and these illegal transactions between Mr. Corbett and the directors do not bind it or in any respect avail to release the Appel- lant from his liability. It 264 CASES IN BANKRUPTCY. 1864. It is said that there cannot be an ownership of the ^■^"•'''^^ same shares in two persons. In re MoSELEY Green Coal There is an ownership here on the part of the Appel- CoMPANY lant which makes him liable to the shareholders. There Limited. ^^^ ^te contracts and dealings between him and Mr. '^Case!^ ^ ■ Corbett which may give the Appellant an equity to call upon Mr. Corbett to indemnify him, which indemnity might involve the transfer of the shares; but the question to be considered is not who is the person who was the owner, but who is the person who was liable to the share- holders in respect of legal tenancy at the time when the tree was cut down — at the time of the winding-up order? That was the Appellant. The dealings and transactions to which I have adverted, whatever validity they may have in creating personal contracts and personal equities as between the Appellant and Mr. Corbett and the directors, are not available to the Appellant as a shield wherewith to protect himself from the claims of the shareholders in this company who were innocent of any participation in those dealings and transactions, and who are not legally affected by the result of these irregular dealings of the directors which they had no legal autho- rity from the company to enter into. The learned Commissioner has, therefore, in my judg- ment, arrived at a right conclusion with respect to the list of contributories, and the Appellant's name must re- main thereon. His motion to rectify the register must also be refused, and he must pay the costs of the appeal and of the motion. CASES IN BANKRUPTCY. 265 1864. Ex parte CHARLES BENJAMIN GORELY. In the Matter of JOHN BARKER, a Bankrupt. Nov 9, 10. ^I^HIS was an appeal by Charles Benjamin Gorely, Before The the owner of certain property at Dover, of which chanc II r the bankrupt John Barker was the lessee, and by certain Lord \y F C X R U R Y mortgagees of the lease, from the decision of Mr. Com- ^, . . ^ The 83rd sec- missioner Goulburn on certain questions submitted to tion of the the Court upon a special case under the provisions of the 73 °' H Bankruptcy Act, 1861, S. 56. universal and not of locally circumscribed The precise terms of these questions it is not necessary application, tor the purposes 01 this report to reter to in detail. It is piies to insu- sufficient to say that they had reference to the mode in ranee moneys •' ■" _ upon houses which, as between the various parties to the appeal, were and buildings. to be applied certain moneys which had been paid by ^^ resaectof^ certain insurance companies partly in respect of the de- the insurance mised property which had been burnt down, and partly a^e not within in respect of certain trade fixtures upon the property ''s application. which had been burnt with it, such fixtures having been provided by the bankrupt, and he being, under one of the covenants in his lease, bound to deliver them up to the lessor on the determination of the lease. The main question argued was upon the construction of the preamble to and the 83rd section of the stat. 14 Geo. 3, c. 78, which are respectively set out below (a), and the statt. (a) Stat. 14 Geo. 3, u. 78, pre- jesty's reign, intituled, An Act for amble : " Whereas an act of par- the better regulation of buildings liament, made and passed in the and party-walls within the cities of twelfth year of his present Ma- London and Westminster, and the 266 1864. Ex parte GOKELY. In re Barker. CASES IN BANKRUPTCY. statt. 7 & 8 Vict c. 84, and 18 & 19 Vict. c. 122, so far as they respectively except from the general repeal of the statute of 14 Geo. 3 the 83rd section thereof. Mr. liberties thereof, and other the parishes, precincts, and places in the weekly bills of mortality, the parishes of Saint Mary-le-bon and Paddington, Saint Pancras, and Saint Lvke, at Chelsea, in the county of Middlesex, and for the better preventing of mischiefs by fire within the said cities, liberties, parishes, precincts and places : and for amending and re- ducing the laws relating thereto into one act, and for other pur- poses, hath been found insuffi- cient to answer the good purposes intended thereby : and whereas it may tend to the safety of the inha- bitants and prevent great incon- veniencies to builders and work- men employed in buildings within the said cities, liberties, parishes, precincts and places, if the regu- lations contained in the said act were repealed, and other regu- lations and provisions respecting such buildings were established by law :".... Sect. 83 : " And in order to deter and hinder ill-minded per- sons from wilfully setting their house or houses, or other buildings, on fire, with a view of gaining to themselves the insurance money, whereby the lives and fortunes of many families may be lost or en- dangered ; be it further enacted by the authority aforesaid, That it shall and may be lawful to and for the respective governors or directors of the several insurance offices for insuring houses or other buildings against loss by fire, and they are hereby authorised and re- quired, upon the request of any person or persons interested in or entitled unto any house or houses or other buildings which may here- after be burnt down, demolished, or damaged by fire, or upon any grounds of suspicion that the owner or owners, occupier or oc- cupiers, or other person or per- sons who shall have insured such house or houses or other build- ings, have been guilty of fraud or of wilfully setting their house or houses, or other buildings, on fire, to cause the insurance money to be laid out and expended, as far as the same will go, towards re- building, reinstating or repairing such house or houses or other buildings so burnt down, demo- lished, or damaged by fire ; un- less the party or parties claiming such insurance money shall, within sixty days next after his, her, or their claim is adjusted, give a sufficient security to the governors or directors of the insurance office where such house or houses, or other buildings, are insured, that the same insurance money shall belaid out and expended as afore- said ; or unless the said insurance money shall be, in that time, settled and disposed of to and amongst all the contending par- ties, to the satisfaction and appro- bation of such governors or di- rectors of such insurance office respectively." CASES IN BANKRUPTCY. 267 Mr. F. Meadows White for the Appellants, referring 1864. to Stat. 12 Geo. 3, c. 73, s. 34, and Filliter v. Phip- ^"^ ' _ . ^ Ex parte pard (a) ; Simpson v. The Scottish Union Insurance Gorely. Company (b), and Richards v. Easto (c), contended that. In re notwithstanding the locality of the property, they were entitled to the benefit of the stat. 14 Geo. 3, c. 78, s. 83, which he argued was of universal and not of locally circumscribed application, and thereunder to have the whole of the moneys in dispute laid out in rebuilding the property. Mr. Holl, for the Respondents the creditors' assignees, referring to statt. 14 Geo. 3, c. 78, s. 84, and 7 ^ 8 Vict. c. 84, and to Vernon v. Smith (d) ; Dumergue v. Rum- sey{e); Poole's Case{f); and Amos on Fixtures (g), in support of the order under appeal, contended that the section in question had no application beyond the metro- politan district, and that the moneys in dispute belonged to the bankrupt's estate. Mr. Meadows White, in reply to a question of the Lord Chancellor, who drew a distinction between the moneys paid by the offices for the insurance of the house and buildings, and the moneys paid by them for the in- surance of the fixtures, and in support of the right of the Appellants to the latter moneys also, referred to Gibson V. hammersmith and City Railway Company {h); Walmsley v. Milne (i) ; Fx parte Broadwood (k) ; Ex parte Loydil) ; and Leader v. Homewood (m). The (a) 11 Q. B. 347. (g) Page 321, erf. 2. (6) 1 H.Sf M. 618. (A) 2 Dr. Sf Sm. 603. (c) 15 M. Sf W. 244. (i) 7 C. B. (N. S.) 115. (d) 5 B.Sf Aid. 1. \h) \ M. D. 8; De G. 631. (e) 2H.SrC. 777. (l) 3 Deac. S C. 765. (/) 1 Salk. 368. (m) 5 C. B. (JV. S.) 546. 268 1864. Ex parte GORELY, In re Barker. CASES IN BANKRUPTCY. The Lord Chancellor. The first question depends upon the inquiry whether the 83rd section of the 14 Geo. S, c. 78, is of universal apphcation, or whether it is to be limited to houses and buildings standing within the limit of what is commonly called the metropolitan district. This 83rd section is not re-enacted as an integral part of the more recent Metropolitan Building Acts, but whereas those Acts repeal the former Act, they except and take out of the operation of that repeal certain sec- tions of the previous Act, and among them the 83rd. That 83rd section therefore remains in all its integrity by virtue of that Act. This is material, because power is given by the Metropolitan Building Acts to apply them to other districts than the metropolitan district — a power which, so far as I am aware, has not been exercised with regard to the district in which this house is situated ; — and consequently, where a house falls within the description of a house within the meaning of the statute 14 Geo. 3, c. 78, it must be by force of that particular enactment taken by itself. The construction, then, of the statute of the 14 Geo. 3, must be considered. A preamble affixed to the whole statute limits its applicability within certain local boundaries, and the sections which precede the 83rd almost all contain enact- ments, carefully worded, to extend only to the districts within the limits defined in the preamble. But when we approach the 83rd section, we find, in the first place, that the enactment therein contained is heralded by a particular preamble of its own, which recites CASES IN BANKRUPTCY. 269 recites a general and universal evil as being the occasion 1864. of its being passed. We should be prepared, therefore, „ to infer, from the statement in that preamble of a general Gobely. evil which the legislature was desirous to redress, this I" ■'^ , , 11./., Barker. consequence, viz., that the enactment would, m tact, be co-extensive Vith the evil stated to have been intended to be redressed ; and, in point of fact, that general inference is confirmed by the language of the enactment itself, which is in itself general, and does not contain the words, " within the limits aforesaid ;" words which were evidently omitted, and omitted designedly. In my judgment, therefore, this particular section is intended to be of general and universal application ; nor does it lose its universality because it does not happen to contain the words found in the 84th section, " whether within the limits aforesaid or elsewhere, within the king- dom of Great Britain," words redundant and pleonastic, but the insertion of which in the 84th section and the non-insertion of which in the 83rd section furnished ground for one portion of Mr. HoWs argument. This conclusion, however, I need not labour, settled as I think it has, in effect, been by the case of Filliter v. Phipfardia). And having arrived at the conclusion that the 83rd section of the Act of 14 Geo. 3, c. 78, applies to the present case, it follows that I must hold the insurance money upon this particular house applic- able, for the benefit of the lessor, to the purpose of reinstating the premises. But there still remains another and a somewhat difficult question, what is to be done with reference to the insur- ance moneys paid in respect of fixtures. The (a) 11 Q. B. 347. 270 CASES IN BANKRUPTCY. 1864. Ex parte GORELY. In re Barker. The demise of this public house to the lessee was accompanied by a covenant, on the part of the latter, that he would leave upon the premises the fixtures put up by him during the terra. The covenant would relate only to those fixtures which might be found upon the pre- mises upon the determination of the term. The term is so created as to determine either by expiration of time or by a particular event, namely the bankruptcy of the lessee. The facts are these ; viz., that, pending the lease, the tenant not only insured in the manner to which I have already adverted, but he eflPected a separate and distinct insurance upon the fixtures. A fire took place whilst the lease was subsisting, and the fixtures then upon the premises were destroyed. The act of parliament which we have to construe only applies to insurance money and losses with respect to houses and buildings, and the extent of these words, " houses and buildings " may be in some measure col- lected from the rest of the section, which gives to the insurers the right, and puts them under the obligation, of applying the money in the " rebuilding, reinstating or repairing" of " houses or other buildings." The ques- tion, therefore, comes. to this: when this fire happened were the fixtures in such a state in the eye of the law, as that, if the lessor had made a conveyance of the freehold and the deed had used only such parcels as these, "all those houses and buildings," the fixtures in question would have passed under that conveyance. These fixtures were admittedly trade fixtures and would, therefore, by the ordinary rule have been remov- able by the tenant at the time when the fire took place. The only mode in which the right to remove them could have CASES IN BANKRUPTCY. 271 have been affected was by the operation of the covenant of the tenant himself, who had covenanted to deliver up the premises with the fixtures upon the determination of the lease. The lessor, therefore, had a contingent future right, which would arise to him by virtue of present contract, to the possession of these fixtures ; and, inas- much as the ownership of the fixtures, at the time when the event happened which gave rise to the intervention of the power contained in the statute, remained in the lessee, the right of the lessor at that time was a personal right depending upon contract and not a real right de- pending upon ownership. 1864. Ex parte GoRELY. In re Barker. In my judgment, therefore, if, at the moment before the destruction took place, the lessor had made a con- veyance of the house, the fixtures in question would not have passed as being a member thereof or appurtenant thereto; and that being so, I think that this insurance money does not fall within the operation of the 83rd section, but has constantly remained the personal property of the lessee, and therefore passed to the assignees. 272 CASES IN BANKRUPTCY. 1863. Ex parte SIR JOHN WILLIAM LUBBOCK, Bart. In the Matter of SAMUEL FLOOD and HARRY BUCKLAND LOTT, Bankrupts. ri^HIS was an appeal by Sir John William Lubbock, Bart., the surviving partner in a firm of bankers, against an order made on the 17th oi April, 1863, by The language Mr. Biggs Andrews, the Commissioner of the Court of Bankruptcy for the Exeter district; whereby the Appellant was ordered in effect to refund to the assignees of the bankrupts a sum of money which had been paid out of the estates of the bankrupts in respect of interest accrued due subsequent to the date of the fiat — November, being the ^^^'^ — °" certain equitable securities held by the Appel- settled practice lant and his late partners, of the Court, May 22. Before the Lord Chancellor Lord Westbury. of the orders of the Court of Bankruptcy must be con- strued with reference to the settled rules of the Court; and it that where a security con- sists of an equitable mort- gage, and the mortgagee after a bank- ruptcy pre The facts of the case were exceedingly complicated, but for the purposes of this report the following short statement of them is sufficient : — On April 13th, 1849, the Appellant's firm presented a sents a pe^'tion petition in bankruptcy, setting forth their securities, which for the realisa- ^ere by deposit of title deeds of estates some of which tion of the .... , <. /. security, he is constituted jomt estate, others separate estate ot one oi not entitled to any interest subsequent to the date of the fiat : — Held, that where securities by way of equitable mortgage comprised joint property of bankrupt partners, separate property of one partner, and property of a stranger, and the mortgagees being joint and separate creditors elected to prove against the separate estates, an order made on their petition and directing an account of principal and interest due to them without express limitation of the calculation of the interest to interest due at the date of the fiat, did not entitle them to a calculation of, or to retain out of the proceeds of the securities, interest subsequent to the date of the fiat. Dividends paid upon an erroneous principle ordered to be refunded after a con- siderable lapse of time and change of circumstances. the partners, and others property of a surety, and claiming to be creditors of the bankrupts " under and by virtue CASES IN BANKRUPTCY. 273 virtue and upon the security of the before-mentioned deeds, securities and documents so deposited with the Petitioners, and of the hereditaments, &c., respectively comprised therein, for the sum of 7,643Z. 13s. for prin- cipal and interest at the rate of five per cent, per annum, calculated to the 31st day of December, 1848, exclusive of subsequent interest thereon ;" and praying (amongst other things) for a declaration that the Petitioners were equitable mortgagees of the several estates, messuages, lands, tenements, hereditaments, &c., comprised in the several deeds and securities so deposited ; for an account of what was due from the bankrupts to the Petitioners for principal and interest upon and by virtue of the said several securities ; for a sale, and for payment out of the moneys which should arise from such sale and out of the rents and profits of the said hereditaments of the costs of the sale in the first place, and for the application of the surplus of the sale moneys in payment to the Petitioners of the said sum of 7,64'3Z. 13s. and subse- quent interest ; but if the same should not be sufficient to satisfy and pay the said sum of 7,643i 13s. and subsequent interest, then for liberty to the Petitioners to make such proof for the remainder of the said sum of 7,643Z. 13s. and subsequent interest under the fiat against the joint estate or the separate estates of the bankrupts as the Petitioners might be advised or might be able to make. 1863. Ex parte Lubbock. In re Flood and LOTT. An order was made upon this petition on the 6th of August, 1849, by the Chief Judge Sir J. L. Knight Bruce, whereby (amongst other things) it was declared " that the Petitioners were equitable mortgagees of certain messuages, &c., set forth in the schedule thereto annexed." And it was referred to the Commissioner to take " an account of the principal and interest due to the Petitioners in respect of their said securities ;" and the hereditaments 274 CASES IN BANKRUPTCY. 1863. hereditaments were directed to be sold, and the moneys '^'"^ applied, after payment of costs and expenses, "in pay- LuBBocK. ment to the Petitioners of what should be found due to In re them as aforesaid," and the surplus, if any, to the official LoTj,^ assignee ; and after providing for the case of the moneys not being sufficient to pay to the Petitioners "the amount of what should be so found due to them," and in that event giving the Petitioners liberty to go in under the fiat and prove for the deficiency, and directing them to be admitted as creditors thereunder for what they should so prove, with a right to receive dividends rateably with the other creditors, the petition was ordered to stand over in all other respects, with liberty to the parties to apply, touching the matters in question, as they might be advised. Under the reference to him contained in this order, the Commissioner, in June, 1850, found that the sum of 7,179Z. 18«. 6c?. was due to the Appellant's firm by virtue of the securities set forth in the schedule annexed to the order for principal and interest, " calculated to the date of the said fiat, together with a further sum of 834Z. Is. 6d, for interest thereon, calculated to the 31st of May, 1850, making together the sum of 8,014Z., and not including interest accruing and to accrue due subsequent to such last-mentioned date." The Appellant's firm had in the first instance entered a claim against the joint estate of the bankrupts, but afterwards (in August, 1851) by the leave of the Court they withdrew this claim and in 1856 and 1857 proved against the separate estates of the bankrupts, and received dividends under such proofs. The portions of the pro- perty not forming part of either of the estates against which the proofs were made were subsequently sold and the proceeds paid to the Appellant's firm, who, by means of CASES IN BANKRUPTCY. 275 of these payments and by the dividends paid on their 1863. proofs, had received altogether 5,854/. 16s. 3d. If the ^l*'"''*'^ accounts were to be taken on the principle of not allowing Lubbock. even as against the securities any interest beyond the In re date of the bankruptcy, this amount was in excess of Loxt. that due by 41 6Z. lis. 6d., and the Commissioner ordered the Appellant to refund that amount. Mr. Daniel and Mr. De Gex for the Appellant. There is no such universal rule as that interest cannot as against a security be allowed beyond the bankruptcy; Ex parte Ramsbottom {a). Such a rule would contra- vene the well-settled principle that a security for a debt, part of which is provable and part not, may be applied by the holder of it to. the latter part ; Ex parte Ha- vard (h) ; Ex parte Arkley (c) ; Ex parte Johnson (d). In this case the dispute is settled by the terms of the order which directs the computation of interest without restriction. If, when the Court made the order of 1849, it had intended to restrict the right of the then Peti- tioners in respect of interest to interest due at the date of the fiat, it would have so expressed its order, as was done in the cases oi Ex parte Wardell{^e), and Ex parte Hercy {f). The restriction cannot on any sound principle of construction be implied, and, regard being had as well to the frame of the petition on which the order was made as to the terms of the order itself, the question must be regarded (o) 2 M. 1^ A. 79, and see 2 to be confined to the state of the M. ^ A., App. A. account at the date of the adjudi- (A) 1 Cooke, B. L. 124. cation, and that the provable por- (c) lb. 126. tion of the debt could not be (d) SDeG.,M.S,G.2l8;S.C., afterwards increased. See Re De G., M. Sf G. Bey. App 179. Savin, L. R., 7 Ch. Ap. 760. In a later case decided on the (e) 1 Cooke, B. L. 181 ; 2 authority of that above reported, M. ^ A., App. A. it was ingeniously argued, that the (J) lb. application of this principle ought Vol. 1—4. X D.j.s. 276 CASES IN BANKRUPTCY. 1863. regarded as res judicata. At all events as against our ^T"""^ securities on the ioint estate and on the estate of the Ex parte •' Lubbock, surety, we may, notwithstanding our proof, apply those In re securities towards payment of all that is due to us {£x LoTT. parte Shepherd, In re Plummer {a) ; Ex parte Pea- cock{b) ), including therefore interest up to the date of payment ; and as we cannot prove for interest subse- quent to the date of the fiat, we have a right to apply our securities in discharge of that part of the amount due to us for which we cannot prove, viz. : — interest accrued due subsequently to the fiat, and to apply the dividends which we have received to that part of our debt which we can prove. Even if the dividends had been paid to us not according to the course of bankruptcy practice, which we deny, still, as we really lose part of the interest to which in the Court of Chan- cery we should without doubt be held entitled, the Court will not at this distance of time, and after the death of one of the Appellant's firm and the adjustment of accounts with his estate on the footing of the order, direct the Appellant to refund money paid to his firm under and according to the Court's own order ; Ex parte Soper (c) ; Ex parte Wilson {d). In Ex parte Sanderson {e) the Court refused in such circumstances even to rectify a miscalculation, though there was no question of refund- ing, no dividend having been declared. Mr. Bacon and Mr. Bevir for the Respondents, the assignees, were not heard. The Lord Chancellor. The Appellant's firm had at the date of the bankruptcy due to them from the two bankrupts, who were partners as («) 2 M., D. Sr De G. 204; (c) 2 M. Sr A. 55. ^ -P''- 56- (d) 1 M., D. Si- Be G. 586. (6J 2 Gl. 4- J. 27. (e) 8 De G., M. Sf G. 849. CASES IN BANKRUPTCY. 277 as bankers, a debt amounting to upwards gf 7,000Z., and in respect of that debt they held several securities as equitable mortgagees. The securities consisted, first, of property belonging to the bankrupts jointly ; secondly, of property belonging to one of the bankrupts, Mr. Flood, severally; and thirdly, of deeds relating to property belonging to a Mr. Miles, who in this respect may be assumed to have acted as a surety. 1863. Ex parte Lubbock. In re Flood and LOTT. Nothing can be better settled by the practice of the Court for the last sixty years than that where securities consist of an equitable mortgage, and the mortgagee, after a bankruptcy, presents a petition for the realisation of that security, he is not entitled to any interest subse- quent to the date of the fiat. Again : The language of orders made by the Court must be construed with refer- ence to the settled rules of the Court. Apply these two observations to the order made by the Court in this matter m August, 1849, and the construction of which is in reality all that we are now concerned with. — [His Lordship here referred to the terms of the order in question, and pro- ceeded thus :] — I cannot assume that the Court in using the language which it did intended to depart from the ordinary rule, nor are any special circumstances brought before the notice of the Court which can be used for the purpose of setting aside that ordinary rule. Under the direction, therefore, contained in the order, to compute principal and interest, interest is to be com- puted in conformity with the ordinary rule of the Court, which must apply where there is no direction to the contrary, namely, that interest is to stop at the date of the fiat. That being so, the form of the order settles the whole question as to the security, giving, as it does, the whole proceeds over to the assignee after payment of costs, principal and interest so computed. The finding X 2 of 278 CASES IN BANKRUPTCY. 1863. of the Commissioner in June, 1850, so far as it had refer- ''^'•■'''^^ ence to interest accrued due subsequent to the date of the Ex parte ... , ■ -n i -l i Lubbock, hat, was arrived at in error, and was not justifaed by the In re order. An argument was founded on the circumstance LoTT. °^ ^^^ Petitioner's firm having by leave of the Court withdrawn their claim against the joint estate, and elected to prove against the separate estates. But that argument only applies to 6,000/. which was proved against the separate estate of Lott, leaving the Petitioner entitled to the benefit of the order of August, 1849, as against the separate estate of Flood, to the extent of the dividends, which he has received from that estate under the order. The claim is therefore simply to retain interest subse- quent to the date of the fiat, although the order of the Court is required for the purposes of proof. The order under appeal is right, and the appeal must be dismissed with costs. CASES IN BANKRUPTCY. 279 1863. Mai/ 30. July 18. Before The Lord Chancellor Lord Westbuet. rpHIS was an appeal by Matthew Soulton jDavis, the A power given Ex parte MATTHEW BOULTON DAVIS. In the Matter of JOHN HARRIS, a Bankrupt. executor of Richard Francis Davis, deceased, from a decision of Mr. Commissioner Hill, rejecting a proof against the estate of the bankrupt John Harris, to an indivi- dual of nomi- nating himself or any other person a part- who was adjudged bankrupt in 1863, on the ground of nerm a busi- the existence of a partnership between the Appellant s constitute him testator, who is hereinafter for the sake of brevity called ^ Partner. ■'An agree- the testator, and the bankrupt. ment was entered into between A. and B., where- by in effect A. was to carry on a certain busi- ness in the name of "^. 4- Co." for the benefit of cre- There was no person who claimed to be a joint ditor of the testator and the bankrupt, and the question was, in substance, whether or not as between themselves the testator and the bankrupt were partners. This question depended upon the conclusion to be drawn from an agreement between the parties, which was ex- himself and pressed in the shape of recitals in the defeasance to a ^^m^g"" bond, dated the 7th of January, 1855. might at any time within These eight years nominate : B. was to make certain advances to A. for the purpose of the business and become surety for him to a certain company : A. was to give JB. promissory notes for his advances and any sums he might pay as surety, and to carry on the business in partnership with B.'s nominee for twenty-one years on certain specified terms : the profits of the business were to be for the first eight years applied in paying A. 100/. a-year, and then in paying B. his advances with interest ; and the residue was to be divided between A. and B.'s nominee in certain specified proportions, and losses were to be borne in the same proportions. The agreement gave B. a right to see the accounts relating to the business, and contained other special clauses under which B. might at any time within the eight years have nominated himself as a partner. Before the eight years had elapsed, and before any nomination had been made by B., A. became bankrupt, being indebted to B. for advances. There being no person who claimed to be a joint creditor of A. and B. : — Held, that B.'s executor was entitled to prove against A.'s estate for the advances, the agreement not having constituted A, and B. partneis as between themselves. 280 CASES IN BANKRUPTCY. 1863. These were to the effect that the bankrupt had agreed ^•^"^""^ to take a lease of certain premises belonging to the Blaen- Ex parte „ Davis. avon Iron and Coal Company for twenty-one years, and In re to carry on there the business of a general shopkeeper, in the name of John Harris §• Co. ; that he had pro- posed to the company that they should accept his drafts upon them in the above names, with which he was to pay for goods, and that the company had agreed so to do on having a sufKcient surety; that the bankrupt had proposed to the testator that the latter should advance to the bank- rupt capital to assist him in providing goods and fur- niture, such advances not to exceed 1,200?. ; that the bankrupt, as a consideration to induce the testator to become such surety, had further proposed to him that the business should be carried on by the bankrupt and such other person or persons as the testator should, at any time within the space of eight years from the date of the bond, nominate or appoint; and that the bankrupt and the said nominee or nominees of the testator as aforesaid should be partners in the business on the terms therein- after contained; that the bankrupt had further proposed, as a further consideration, that the bankrupt should deliver to the testator, if required by him so to do, the promissory notes of the bankrupt, payable to the testator on demand, for the amounts of the drafts of the bankrupt on the company, and for the amounts of the advances made by the testator, such notes to be a security for the payment by the bankrupt of the said drafts, and for the repayment to the testator, his executors or administrators, by the bankrupt, his executors or administrators, of the advances of the testator ; that the testator had consented to the proposals and had become surety as aforesaid, and that the company had agreed to grant a lease of the pre- mises and to accept the drafts ; that it had been stipulated and agreed between the bankrupt and the testator that the bankrupt, his executors and administrators, should during CASES IN BANKRUPTCY. 281 during the term carry on the business for the benefit of 1863. himself and the person or persons to be nominated by ^■■*•^'-*-' the testator as co-partners with the bankrupt upon the Davis. terms after mentioned ; that the bankrupt, his executors In re or administrators, would immediately upon the nomina- tion by the testator, his executors or administrators, of a person or persons to be a partner or partners in the said business, admit and receive the said nominee or nominees of the testator, his executors or administrators, to be a partner or partners in the said business ; that the said partnership should commence and take effect immediately on the nomination in writing of such person or persons as aforesaid by the testator, his executors or adminis- trators ; that the said partnership should remain and con- tinue for the term of tvifenty-one years from the date of the bond ; that the clear profits should be applied in the following manner, viz.: — lOOl. per annum during the period of eight years from the date thereof should be paid to the bankrupt for the services of himself and his wife, the bankrupt should have board and lodging for himself and family, and the remainder of the said profits should be applied annually in or towards paying to the testator, his executors or administrators, the amount that should be from time to time due to him for his advances to the bankrupt or the said co-partnership, with interest at 51. per cent. ; and after full payment to the testator the stock-in-trade and profits of the business were to belong to the said co-partners in the following proportions, viz. : — One-third to the bankrupt, his executors or ad- ministrators, and the remaining two-thirds to the nominee or nominees of the testator, his executors or adminis- trators, and all losses, damages and expenses to be in- curred or occasioned in or about the carrying on of the said business were to be borne by the said co-partners in the same proportions as the profits of the said business were to be divided between them ; that the bankrupt, until 282 CASES IN BANKRUPTCY. 1863. until such nomination by the testator as aforesaid, should _ provide and keep books, such books to be always kept XiX p3.l't6 Davis. in the several counting-houses or other places vi^here the In re business should be usually carried on, and where the tes- HaRRIS. t . . Ill tator, his executors or administrators, and each and every of the partners, should, at all convenient times in the day, have free access to them ; that moneys and bills of ex- change should be deposited or lodged with the cashier for the time being of the company, and were to be applied in taking up the drafts of the bankrupt and for the purposes of the business, in reimbursing the testator, and the paying the 100/. a-year to the bankrupt ; that after payment of the advances by the testator, with in- terest as aforesaid, the profits of the business should be divided at the end of every year between the said part- ners in the proportions aforesaid ; that the bankrupt should not, either before the nomination by the testator, his executors or administrators, of a person or persons to be a partner or partners in the said business, or during the continuance of the said co-partnership, except with the permission in writing first obtained of the testator, his executors or administrators, or the said co-partner or co-partners, carry on any business on his own account or any other business ; that the bankrupt should use his best endeavours to promote the success of the co-part- nership business thereby agreed to be established ; that he should, until such nomination as aforesaid, and after such nomination of the said co-partners, every year during the continuance of the said co-partnership, make out accounts of all moneys received and paid by and on account of the said co-partnership, and of all gains or losses which should have accrued or been sustained in the said business, and of all debts, and of all other the joint stock or effects then belonging thereto, so that the precise state of the business might be clearly ascertained ; the estimate to be signed or subscribed by each and every CASES IN BANKRUPTCY. 283 every of the said partners ; that previously to ascertain- 1863. ins the state and condition of the said ioint trade in ^T'"''"*^ *= . _ •> Ex parte manner last mentioned, no division of the profits of the Davis. preceding year was to be made ; that the bankrupt, until In re the nomination of such person or persons as aforesaid by the testator, his executors or administrators, and after such nomination of the said partners, was to give to the testator, his executors or administrators, his promissory note, or their joint promissory note, as the case might be, payable on demand, for the amount of each and every draft so to be made by the bankrupt, or by the bankrupt for himself and partner or partners, or by his said part- ner or partners, on the company ; and also a like pro- missory note for every sum of money so to be advanced by the testator as thereinbefore mentioned ; that the bankrupt, his executors or administrators, was to stand possessed of the term as a trustee for the purposes of the said co-partnership, and should not, without the con- sent in writing of the testator, his executors or adminis- trators, or of the said partner or partners, give notice to the company to determine the lease ; that if at any time during the said co-partnership, and after the determina- tion thereof, any dispute should arise of and concerning the true construction and meaning of the document now in statement, it should be referred to arbitration in manner therein mentioned ; that the person or persons to be nominated by the testator, his executors or admi- nistrators, as partner or partners in the said business, might at any time thereafter sell and dispose of his or her share or shares in the said business to any person or persons, who should thereupon become a partner or partners with the bankrupt in the said business ; that if the bankrupt were to die in the lifetime of his then wife, his share in the business was to devolve upon and be enjoyed by her for the benefit of either herself alone, or if she should have children, for the benefitof herself and children. CASES IN BANKRUPTCY. 1863. children, but the management of the business was to be ^"'^'"^ vested in such person or persons as the said partner or Ex parte . . _ . Dav;s. partners entitled to the largest share in the said business In re should direct ; that if (as in fact happened) the wife died in his lifetime, his share in the business should on his death cease, and the partnership thereby covenanted to he entered into by him should, so far as related to him, his executors or administrators, be at an end, but his executors or administrators should be entitled to be paid by the surviving or continuing partner or partners such a sum of money for the share of the bankrupt as should be fixed by arbitration; that, subject to the last proviso, the bankrupt should be at liberty to sell his share, pro- vided that before such sale he should have given a notice in writing of his intention to each of the said partners, and in such notice should offer to sell his said share to the other or others of his said partners at a specified price ; that if the bankrupt should die before the nomination by the testator, his executors or adminis- trators, of a person or persons to be a partner or part- ners in the said business, the interest of the bankrupt, his executors or administrators, in the said business and the capital and stock-in-trade should cease ; that if the bankrupt died in the lifetime of his wife, his one-third was to devolve on her, and the testator, his executors or administrators, was to be at liberty to nominate a person or persons to carry on the business with the wife for her benefit as to one-third of the business, and for the benefit of such nominee or nominees as to the other two-thirds, subject as aforesaid ; that if the death of the bankrupt, previous to the nomination by the testator, his executors or administrators, of a person or persons to be a partner or partners as aforesaid, should happen after the death of his then present wife, the testator, his executors or administrators, might nominate a person or persons to carry on the said business for the benefit of such nominee or CASES IN BANKRUPTCY. 285 or nominees solely, but subject to the conditions and pro- 1863. visions thereinbefore contained. ^^T^""^ tx parte Davis. Mr. TV. M. James and Mr. Bagshawe for the Harris. Appellant. There was no present partnership between the parties, and no partnership at all was intended to be created until the testator exercised his power of nomination. Even if there were a present partnership between the parties the testator's estate was a creditor of the bankrupt for ad- vances made by the testator to the bankrupt, and as such entitled to prove against his estate for the amount of the debt, where, as here, there is no person claim- ing to be a joint creditor of both the testator and the bankrupt. They referred to Waugh v. Carver (a), and Cox v. Hickman (b). Mr. Lindley for the Respondents, the assignees of the bankrupt's estate, in support of the judgment in the Court below. The Commissioner's decision is right. On the true construction of the agreement between the parties they were present partners, a construction borne out if need were by their course of dealing. The bond and its defeasance were mere attempts to disguise the actual existence of a present partnership between the parties, and the present is a mere attempt to prove an item in an unsettled partnership account. Even if there were no present partnership between them, the moneys sought to be (o) 2 H. BL 235. (6) 8 H. L. Cos. 268. 286 CASES IN BANKRUPTCY. 1863. be proved for were by the agreement itself to be paid out of the business, and not by the bankrupt personally. At the conclusion of his argument the Lord Chan- cellor directed the matter to stand over in order that his Lordship might satisfy himself, by an examination of the proceedings in the bankruptcy, on the question whether, independently of the bond and its defeasance, a present partnership had been created between the parties by their course of dealing. The Lord Chancellor. July 18. Mr. Richard Francis Davis was the manager or managing director of an iron and coal company in Wales, called the Blaenavon Iron and Coal Company. It occurred to him that it would be a profitable speculation to establish general shops in three localities in Wales, for the purpose of supplying the goods that would be required by the miners and other persons employed by the company, and he accordingly made an arrangement with the bankrupt John Harris, who had married his sister, that John Harris should carry on that business. The terms of the arrangement are embodied in a cer- tain bond dated the 7th of January, 1855, which is an ingenious piece of mechanism, and the provisions of which are very peculiar. The terms to which I refer are to the following effect: — [His Lordship here referred to the terras of the defeasance to the bond in question and proceeded thus :] — The result of the arrangement was, that until the partnership should be created by Davis, there might be, if there were sufficient profits for the CASES IN BANKRUPTCY. 287 the purpose, a sum of money, the division of which 1863. would be suspended until the formation of that partner- '-^■"^ ,. Ex parte snip. Davis. The learned Commissioner appears to have considered that the terms of the agreement amounted to a present partnership. In my judgment that is not the effect of the agreement. No partnership can arise until the person to become partner has been nominated by Davis ; and there is not, in my judgment, any present contract of partnership between Harris and Davis. The criterion that there is not, may be taken to be this, that had Harris become bankrupt before Davis had nominated a partner, any money reserved as profits to be hereafter distributed between the partners when the partnership was formed would, by the operation of that bankruptcy, be the pro- perty of Harris, the power of creating the partnership being put an end to by the event of such bankruptcy. All the provisions of the bond on which the learned Commissioner has relied as indicating the creation of a present partnership, ought, in my judgment, to be con- strued with reference to the general intent of the bond, as provisions which shall become operative only subject to the condition and after the nomination of a partner by Davis, an event which never took place. The bank- ruptcy of Harris took place before there was any nomi- nation of a partner, and there was therefore no contract of partnership, for there was no individual to answer the description and to fulfil the capacity of partner with Harris. I cannot hold that the power of nominating a partner given to an individual constitutes that indi- vidual himself a partner. It is true that the arrange- ments which are contained in the deed would probably absorb the whole of the profits before the possibility of any In re Harris. 288 CASES IN BANKRUPTCY. 1863. Ex parte Davis. In re Harris. any division between the co-partners. But that is the result of the contract between Harris and Davis, which I think is well constituted by the bond, and is not at all affected by, or merged in, the power that Davis reserved to himself of hereafter creating, if he should think fit, a partnership between some nominee of his own and Harris, I must, therefore, take the only subsisting contract between Harris and Davis, at the time of Harris's bankruptcy, to have been the contract of debtor and creditor in respect of the advances made by Davis to Harris, and the payments made by Davis on account of Harris; and, consequently, I think the proof ought to have been admitted, subject to any adjustment of the figures which may be required. It has been suggested that Harris was in reality only the agent of Davis, but I do not think there is any foundation in fact for that suggestion. Mr. Harris had a substantive and independent interest. In truth, he would be entitled to the whole of the profits after the payment of Mr. Davis, in the event of no partnership (as has been the fact) having ever been created by Danis nominating a person to become a partner. I must, therefore, reverse the order under appeal, and declare that the executor is entitled to prove in respect of the debt due from Harris to his testator at the time of the bankruptcy. CASES IN BANKRUPTCY. 289 1863. Ex parte JOHN COLLINGE, SAMUEL FOX, j^^^ ^ HENRY BAGSHAWE, MATTHEW HENRY gefore The HABERSHON, and DAVID DAVY. Lord Chancelto In the Matter of HARRY HOLDSWORTH, a Bank- Lord Westbury. •^"P*- The Court re- fused to relax HIS was the appeal of John Collinge, Samuel Fox, the rule in T Henry Bagshawe, Matthew Henry Habershon ^]^"t''™^the and David Davy, trustees of a deed of assignment of bankruptcy of the 14th of November, 1862, from the refusal by Mr. cannot be a Commissioner West to admit a proof tendered by them pioof on be- against the estate of the bankrupt Harry Holdsworth. estate of one partner against The question was brought before the Court on a special a^otjj^g^ un°il case, and, so far as it is necessary to refer to the facts, all the joint , p „ debts are paid, they were as follows : — although, in the ... _, T-i77. ^77 1 circumstances Major George ±,uiot Ashburner became a partner of the case and with the bankrupt in 1861. The partnership was dis- having regard to the amounts solved in September, 1862, under an arrangement by of the estates, which the bankrupt and William Holdsworth gave the 'K^ ffsult of ^ ° relaxing the major a bond to secure 10,000/. and interest, and the rule would major transferred and released to the bankrupt all his increase the estate and interest in the partnership. The bankrupt and proving estate William Holdsworth covenanted within nine months to extent that it discharge the joint debts of the firm. would have ° ■' yielded a larger surplus On the I4th of October Harry Holdsworth was ad- to the joint judged bankrupt, there being at that time unsatisfied would arise several large joint creditors of the dissolved firm. from the estate ^ ■" sought to be proved against In November, 1862, a meeting of creditors was held — if the rule were observed '^°f> and the proof excluded. The rule in question enures for the benefit of the separate creditors as well as of the joint creditors. 290 CASES IN BANKRUPTCY. 1863. not, however, in pursuance of any statutory powers — J^^^""*"^ whereat certain resolutions were passed, which resulted in bx parte i /> t»t CoLLiNGE. the execution by Major Ashburner, on the 14th oiNovem- In re ler, 1862, of a deed of that date, which was expressed to ' be made between the bankrupt of the first part. Major Ash- burner of the second part, the Appellants of the third part, and the several other persons, being creditors in their own right or in co-partnership of the bankrupt and Major Ashburner, or of one of them, whose names were thereto affixed or set, and all other the creditors of the bankrupt and Major Ashburner, or either of them, of the fourth part. By this deed Major Ashburner assigned to the Appellants all his real and personal estate and effects upon the trusts thereinafter declared; and it was de- clared that the Appellants should stand possessed of the effects of the bankrupt and of the property thereby as- signed by Major Ashburner for the benefit of the creditors of the bankrupt and Major Ashburner in a like course of administration in all respects as if the existing bank- ruptcy had been annulled, and a joint adjudication in bankruptcy had taken place against the bankrupt and Major Ashburner, and as if the estate and effects of the bankrupt and the property assured by the deed had been vested in the Appellants as the assignees under such joint adjudication. The deed reserved to the Appellants and to the parties of the fourth part all rights and privileges to which they would be entitled by virtue of the law and practice in bankruptcy, and contained a release to, and an indem- nity in favour of, Major Ashburner by the Appellants and the parties of the fourth part in respect of their respective debts. This deed was registered under the 194th section of the Bankruptcy Act, 1861. On CASES IN BANKRUPTCY. 291 On the 17th of November, 1862, a meeting of the 1863. bankrupt's creditors was held, whereat the Appellants ^■^^z"*-' , . , 1 . , . , n Ex parte were chosen assignees, and a resolution, which was alter- Collinge. wards confirmed by the Court, was passed with reference In re to the deed of the 14th Novemler, 1862, that there should "'"■^^^''■'th. be reserved to the creditors of the bankrupt and Major Ashburner all rights and privileges to which they were respectively entitled under or by virtue of the law or practice in bankruptcy. In working out the administration of the estates of the bankrupt and Major Ashburner under the above circum- stances, and in the events which happened, there was but one creditor, viz., the Sheffield and Rotherham Banking Company, who claimed to prove against the separate estate of Major Ashburner, and the amount of their claim was about 1,000^. The joint estate was insolvent ; but the separate estate of the bankrupt showed a surplus of 5,937Z. 14s. \Qd., if the debt, the right on the part of the Appellants to prove which formed the subject of the present appeal, was excluded. The Appellants, in their capacity of trustees of the deed of the 14th of November, 1862, claimed to prove against the bankrupt's separate estate upon the bond of September, 1862, and also upon certain cheques and promissory notes given by him on the occasion of the dissolution of partnership for interest and share of profits. The amount of the, proof so tendered was upwards of 11,000Z. Mr. Commissioner West decided against the Appel- lants' right to prove, and it was this decision which was under appeal. Vol. 1—4. Y D.j.s. Mr. 292 CASES IN BANKRUPTCY. 1863. Mr. Bacon and Mr. Swanston for the Appellants. Ex parte No doubt the rule, as laid down by Lord Eldon in CoLLiNGE. j^^ jgarie^ SilUtoe (a), that "a partner in a firm against HoLDswoRTH. whlch A comniission of bankruptcy issues, shall not prove in competition with the creditors of the firm, who are in fact his own creditors, shall not take part of the fund to the prejudice of those who are not only creditors of the partnership but of himself," is against the admission of this proof. But that rule, as Lord Eldon goes on to observe, is subject to one exception, viz., in the case where a partner becomes a creditor in respect of the fraudulent conversion of his separate estate to the use of the partnership. That exception Lord Eldon speaks of as manifestly founded in justice. On not dissimilar grounds we now press for the admission of this proof, even if its admission go to make another exception to the rule. The rule exists solely for the benefit of the joint creditors, and in order that the surplus which may be coming to them from any separate estate may not be intercepted or diminished by a proof on that separate estate on behalf of a partner or of his separate creditors. But the admission of the proof in the present case will not only not damnify the joint creditors, but it will positively benefit them. If the proof be admitted, it will, it is true, absorb the present surplus of the bankrupt's separate estate, and so prevent it from falling into the joint estate ; but it will, on the other hand, bring into the separate estate of Major Ashburner a large amount which, after satisfying the claim of the Sheffield and Rotherham Bank, will leave to go over to the joint estate a larger surplus than would, if it had not been intercepted, have come over from the bankrupt's estate. To apply the rule here would be to work injustice to the joint (fl) 1 Gl. S,- J. 374, 382. CASES IN BANKRUPTCY. 293 joint creditors, and the case is one for an exception to 1863. the rule. >— "r^-w* Ex parte COLLINGE. Mr. Giffard and Mr. Hamilton Humphreys, for the j„ ,.g Respondents, were not called upon. Holdsworth The Lord Chancellor. I cannot allow this proof to be entered. The rule is, that a partner cannot prove for a debt so as to compete with the joint creditors, who are, in fact, his own creditors. Another rule is, that no joint creditor can make a claim against, or be paid out of, the separate estate until the whole of the separate creditors have been paid. It is a mistake to suppose, as has been argued, that the objection to a proof against the separate estate of a partner, on behalf of another partner or his estate,' can be only sustained by joint creditors or for their benefit. _ The rule enures for the benefit of separate creditors also. But it having been erroneously supposed that the ob- jection lay in the mouths of the joint creditors only, it was thought that the objection might be met by the inge- nious argument which has been here resorted to. The rule, however, remains, that so long as there are joint debts, a partner who is liable for those joint debts shall not make any claim against the separate estate, because, by possibility, he may come into competition with his own creditors. That principle is the foundation of the rule, and this ingenious argument does not touch upon its ground in the slightest degree. The fact that after the bankruptcy an assignment was made of the separate estate of Major Ashburner, (including this debt due from the bankrupt,) for the benefit Y 2 of HoLDSWORTH. 294 CASES IN BANKRUPTCY. 1863. of the joint creditors— probably so far converting his '"■"""•^"^ separate assets into joint assets — is of no avail, unless Ex parte ... , •,,. i CoLLiNGE. the joint creditors are wilhng to accept that assignment In re as payment in full and to release the joint liability. If that were done, and there were no longer any joint liability to which Major Ashburner was exposed as partner, there would remain no objection to his proof against the separate estate. The resolutions of the creditors are out of the question, unless, as is not pretended, the meeting was held under some statutory powers, whereunder the resolutions would be binding upon all the creditors. In my judgment, therefore, the learned Commissioner came to a right conclusion, and this appeal must be dis- missed. I dismiss it, however, without costs, and the deposit may be returned. CASES IN BANKRUPTCY. 295 1864-. Ex parte WILLIAM CANWELL. In the Matter of THOMAS VAUGHAN. rr^HIS was the appeal of William Canwell, the official liquidator of the Waterloo Life, Education, Casualty, Self-Relief Assurance Company, from the refusal by Mr. Commissioner Goulhurn to adjudicate the Respondent Thomas Vaughan a bankrupt on the Appellant's petition. The company was registered in 1851 under the stat. 7 & 8 Vict. c. 110, and its deed of settlement was dated in November, 1851. His Honor was of opinion that there was no sufficient petitioning creditor's debt within the meaning of the Bankruptcy Act, 1861, s. 90, the terms of which, so far as they are material, are set out below (a). March 16. April 20. Before The Lord Chancellor Lord Westbury. The liability of a contribu- tory under tlie Companies Act, 1862, s. 75, com- mences at the date when he enters into the contract under which he becomes a member of the company which is being wound up. The question turned upon the construction of the Companies Act, 1862, s. 75, the terms of which, so far as they are material, are also set out below (b) ; and it arose in this way : — The Respondent, who was a non-trader, was an ori- ginal shareholder in the company, which was being wound up (fl)The Bankruptcy Act, 1861, 24 & 25 Vict. c. 134, ». 90. "The debt of the petitioning cre- ditor of any debtor not being a trader , . . must be a debt contracted after the passing of this Act." The Act received the Royal Assent on the 6th of August, 1861. (A) The Companies Act, 1862, 25 & 26 r«,^i i i i i • missory note In January, 1861, the company had entered into a of the com- contract for the purchase of certain mines upon which pany, — Held, ' that the surety there was a mortgage of 7,000?. The Appellant was was entitled to ^ ^^^^. set ofFagamst , _ .,. •' a debt due from («) P«ge 259. him to the company an equal amount of the money due from the company on the promissory note. July 22. A contributory of a joint stock company (which was being wound Before The "P ""der the Acts of 1856 and 1857), in respect of shares purchased l^ord '" ''■' """"fi by another, — Held, not entitled to set ofT against a de- Chancellor mand of the company the amount due from the company upon its Lord promissory notes made in favor of the person who was tlie real pur- Cranworth. chaser of the shares, and who had, after the date of the winding up order, indorsed and deposited the notes with the nominal purchaser's solicitors as an indemnity in respect of bis liability on the shares. CASES IN BANKRUPTCY. 347 a surety to the mortgagee for the payment of the moit- 1864. gage money. By a deed between the company and the *■*•^''^ mortgagor, who was their vendor, the company con- Moseley tracted to pay off the mortgage on Mmj 7th, 1862. Green Coal '^ ■' ° ° J ' yiND Coke Company This contract the company failed to perform, and in Limited. consequence of that failure the mortgagee required the isAR^ETx s company to give, and the company did, on the 5th of (No. 2.) September, 1862, with the assent of the Appellant as surety, accordingly give to the mortgagee their promis- sory note for 7,000Z., being the amount due to him, payable in March, 1863. At the date of the winding-up order in October, 1862, the mortgagee was the bona fide holder of the note. On the 23rd o{ February, 1863, the Appellant's sister paid ofif the mortgage, and took from the mortgagee a transfer of his security, and at the same time the pro- missory note in question was indorsed and delivered over to her. On June 13th, 1864, she agreed with the Ap- pellant to transfer the mortgage security to him, and at the same time to hand over to him the promissory note, in consideration of receiving from him his own promis- sory note. This agreement having been carried into effect, the Appellant claimed before the Commissioner, and now under appeal, credit for the company's note in his account with them. Mr. Cole and Mr. C. T. Swanston appeared for the Appellant ; and Mr. Willcock and Mr. Roxburgh for the ofBcial liquidator in support of the judgment of the Court below. In the course of the argument the Joint Stock Com- panies Amendment Act, 1858 (Stat. 21 & 22 Vict. c. 60, s. 17), 348 CASES IN BANKRUPTCY. 1864. s. 17), the provisions of which are set out below (a) ; ^'^"•'''*^ Hawkins v. Whitten {b) ; Collins v. Jones (c) ; Ex MosELEY parte Stephens (d); Marsh v. Chambers {e); Dickson V. Evans (/) ; Ex parte Hale (g), and Ex parte (No. 2.) Green Coal AND Coke Company Blagden {h), were referred to. Limited. Barrett's /S*^^\ "^^** Lord Chancellor said that one question was, whether the agreement between the Appellant and his sister was a dealing and transaction then for the first time created and made, or whether the Appellant, in respect of his antecedent suretyship for the 7,000Z. due to the mortgagee, was entitled, by paying off the charges, to claim the benefit of the possession of the mortgagee's securities. His Lordship was at present disposed to attribute the payment made by the Appellant to his sister, the assignee of the mortgage, to that liability to the mortgagee which the Appellant had originally contracted as a surety prior to the date of the winding-up order. His position appeared to his Lordship to be that of a person who, being surety to a creditor of a company prior to the order for winding it up paid the debt, after that order was made, in respect of that suretyship, and (a) " In fixing the amount said, shall be deemed to be the payable by any contributory, in sum due." pursuance of the Joint Stock As to the question of set-off in Companies Acts, or any of them, connection with limited companies he shall be debited with the under the Companies Act, 1862, amount of all debts due from see GrisseU's Case, L. R., 1 C. A. him to the company, including 528. the amount of the call, and shall (A) 10 B. Sj- C. 217. be credited with all sums due to (c) Ibid. 777. him from the company on any (t/) 1 1 Ves. 24. independent contract or dealing (e) 2 Stra. 1234. between him and the company, (J") 6 T. R. 67. and the balance, after making (g) 3 Fes. 304. such debit and credit as afore- (h) 19 Ves. 465. CASES IN BANKRUPTCY. 349 and thereby became entitled to the benefit of the secu- 1864. rilies in the hands of the creditor, among which secu- '•^^■/■'^ rities there happened to be a promissory note of the Mosei.f.y company validly and duly given ; and the question was, Green Coal . , , . » , ANo Coke whether he was or was not entitled, in respect of the Company holding or the ownership of that promissory note, to set L'mited. it off against a demand that might be made against him Case. by the company. (No. 2.) His Lordship at present thought that the Appellant's position in this respect was precisely the same as if he had been the holder of the note at the time when the winding-up order was made ; and if the Appellant were remitted to that position, his claim to set-ofF was refer- able to a state of things existent at the date of the wind- ing-up order, and not to a state of things arisen out of any contract or dealing which had taken place subse- quently to the winding-up order. His Lordship would hear counsel on this one point when they had had time to look further into the autho- rities. He decided now that the contract was within the power of the company, and that they had power to give the promissory note : the matter to stand over for a week, and to be then mentioned again. The matter was accordingly on this day again men- Nov. 23. tioned, and the cases of Collins v. Jones (a), and JEx parte Stephens (6), were again referred to : and further reference was made to Dobson v. Lockhart (c). The Lord Chancellor said that the official liqui- dator could not contend that if the Appellant had been the holder of the note at the date of the winding-up order, (a) 10 B 4" C 777. {h) 11 Ves. 2t. (c) 5 T. R. 133. 350 CASES IN BANKRUPTCY. 18G4. In re MOSELEY Green Coal AND Coke Company Limited. Barrett's Case. (No. 2.) order, he would not have been entitled to set-off its amount against the company's claim against him. It would be an injurious thing under a winding-up order, as it had been held to be an injurious thing in bank- ruptcy, that a debtor to the estate should be permitted subsequently to the winding-up order, or subsequently to a bankruptcy, to purchase up claims upon the estate for the purpose of making a case of set-off; but the question really was, whether there was not a substantial exception to that principle in a case where, as here, there was an actual ownership of a counter claim, which, though con- stituted subsequently to the winding-up order, yet was the result of a liability incurred or of a contract entered into antecedently to the bankruptcy or the winding-up order. That distinction was recognised in some of the cases cited, and particularly in Collins v. Jones (a). Then came the material question, did the contract of suretyship entered into, as it had been, by the Appel- lant prior to the date of the winding-up order, with its attendant rights, give such retrospective operation to the Appellant's possession and ownership of the note as to entitle him to refer it to that contract ? His Lordship's present impression was that it did ; and that, as the Appellant had got possession of the note as the legitimate consequence of a bona, fide contract of suretyship made anterior to the winding-up order, he was a bona fide possessor of the note, and therefore had the right of set-off against the demand of the company. His Lord- ship said, that if he retained this impression, what he had said must be taken as the expression of his opinion. If his Lordship changed his view he would hear Mr. Cole. 1865. March 25. On this day the matter was again mentioned, and the Lord Chancellor said that the impression which he (a) \0 B.Sj C. 777. CASES IN BANKRUPTCY, 351 he had previously formed remained unchanged, and 1865. directed the order to be drawn up. »— ^/-^.^ In re MoSELEY Green Coal AND Coke Company The order not having yet been finally settled, the Limited. Appellant now, in pursuance of leave granted for that (^^gg purpose, moved, before the Lord Chancellor Lord Cran- (No. 2.) worth, that the order made by the Lord Chancellor Lord -^"'i/ 22. Wesibury might be varied by declaring the Appellant entitled to set-ofF against the 1,000Z. call the principal money due on two other promissory notes, each for 500Z., instead of that due on the promissory note for 7,000Z., and that, so far as might be necessary for that purpose, the appeal might be reheard. As appears by a reference to the report of the case in its earlier stage above (a), the Appellant was a trustee of the shares in respect of which he had been placed on the list of contributories for the vendor of the mines ; and this gentleman had, after the date of the winding-up order, deposited the notes now in question with the Appel- lant's solicitors to indemnify the Appellant in respect of his liability, if any, on the shares. The notes were those of the company given against part of the purchase-money to the vendor. They were both dated the 6th of March, 1862, and were made payable at eighteen and twenty-four months after date respectively, and they were both in- dorsed by the vendor when deposited, with the Appel- lant's solicitors. Mr. Cole and Mr. C. T. Swanston, for the Appellant, contended that, as the Appellant held the 500/. notes in resjiect of a liability incurred antecedently to the winding-up (fl) Supra, p. 259. 352 CASES IN BANKRUPTCY. 1865. winding-up order, the case was governed by the Lord ''^"•''^'' Chancellor Lord Westbury^s decision as to the 7,000?. In re MosELEY promissory note. Green Coal AND Coke Company Mr. Willcock and Mr. Roxburgh, for the official iMiTED. liquidator, contended that it was not; the antecedent ^3 A R R. E T T S Case. liability not having been incurred on behalf of the (No. 2.) company as it had been in the other case. Mr. Cole, in reply, contended that the authorities in bankruptcy as to set-ofF had no application in a case of winding-up. The authorities referred to were the same as those referred to on the prior hearing. The Lord Chancellor (Lord Cranavorth). The winding-up of a company only takes place when the company has become insolvent, and the principle is the same as that which exists in bankruptcy. What the Appellant is here in reality contending for is the right to payment in full, whilst the other creditors of the company have not been paid 5s. in the pound. Lord Westbury s decision went upon a principle plainly inapplicable to the case of these notes. In the case before him, the Appellant, previously to the date of the winding-up order, was surety for the company, and the Lord Chancellor held that to be the same thing as if the company were indebted to him. Then the com- pany being indebted to the Appellant in a sum of 1,000/., and the Appellant being indebted to the company in a sum of 1,000/., the Lord Chancellor, considering that the company was in equity liable to pay the Appellant, allowed the set-ofiF. But CASES IN BANKRUPTCY. 353 But in respect of the two sums of 500^. now in ques- 1805. tion, tliere was no debt or liability from tlie company to ^-^''^' the Appellant. The relation of trustee and cestui que Moseley trust might have existed between the Appellant and Green Coal ■ ' AND Coke the company's vendor, but as between the company and Company the holders of these notes the latter was a complete' ... „ Barrett s stranger, and it would be most mischievous if a person Case. were enabled thus to satisfy the demands against him by (No. 2.) purchasing up debts due from the company. So far, therefore, as these two notes are concerned, the Appellant in my judgment stands precisely in the situation in which every other creditor stood at the time when the winding-up order was made. I assent to what fell from Lord Westbury on the former occasion, but I think that the principle of his decision does not apply to these notes, and I therefore refuse this application with costs. The order accordingly, as finally drawn up, declared that the Appellant was entitled to set off against the 1,000/. mentioned in the Commissioner's order an equal amount of 1,000Z. due on the promissory note for 7,000/. made by the company and dated the 5th of September, 1862, and that to the extent of the sum so set off the mortgage mentioned in the proceedings in these matters was to be deemed satisfied (a). (fl) Reg. Lib. Vol. 20, p. 181. Vol. 1—5. C C D j.s. AN INDEX TO THE PRINCIPAL MATTERS CONTAINED IN THIS VOLUME. ACKNOWLEDGMENT. See Statute of Limitations. ACT OF BANKRUPTCY. An assignment of the principal part of the assignor's property may be an act of bankruptcy, although not executed by the assignor spon- taneously, if it appear that the provisions of the deed must neces- sarily have the effect of delaying and defeating the assignor's cre- ditors. And where such an assignment was made to trustees, one of whom was an accountant employed with a view to and under the assignment, upon trust out of the proceeds of the as- signed property in the first place to pay all costs, charges and ex- penses due or to become due to the assignor's solicitor, and the pro- fessional charges of the accountant- trustee, and other expenses, and subject thereto to divide the pro- ceeds rateably among the creditors who should execute the deed, and the deed recited that the assignor was not prepared to pay his debts in full -.—Held, that the necessary effect of the deed was to defeat and delay the creditors, and that it was an act of bankruptcy. Ex parte Wenslei/, In re Wensley. Page 49 See Arranging Debtor, 4. Evidence, 2, 3. ADJUDICATION. See Annulling. Evidence, 3. c c 2 3J6 INDEX TO THE PRINCIPAL MATTERS. AFFIDAVIT. See Arranging Debtor, 9, 10. ALLOWANCE. 1. A deed for the benefit of creditors operating under the Bankruptcy Act, 1861, s. 192, is to be looked upon in the light of a contract be- tween the debtor and his creditors, and stipulations not made by the parties themselves cannot be im- ported into it by the Court. Therefore if it is intended that an allowance shall be made to the debtor out of the net produce of the realization of his estate in proportion to the amount of divi- dends yielded by it, a stipulation to that effect must be inserted in the deed, and cannot be imported into it under the Bankrupt Law Conso- lidation Act, 1849, s. 195, by any incorporation with the deed of the provisions of the Bankruptcy Act, 1861, s. 197. To obtain an allowance under the 195th section of the Act of 1849, a bankrupt must not only have a sufficient estate but must also have obtained his certificate. Dx parte Gibbins, In re Gibbins' Trust Deed. Page 196 2. The power given to the Court of Bankruptcy by the Bankrupt Law Consolidation Act, 1849; s. 194, of making an allowance to a bank- rupt out of his estate for the sup- port of himself and his family prior to his passing his last exa- mination, still exists, subject only to be displaced by the exercise by a majority of creditors present at the first meeting after adjudication of the controlling power given by the Bankruptcy Act, 1861, s. 109. Ex parte Ellerton, In re Leech. Page 193 ANNULLING. 1. An application to annul an adju- dication of bankruptcy made by a bankrupt, whether before or after the time has elapsed for showing cause against the adjudication under the Bankrupt Law Consoli- dation Act, 1849 (12 & 13 Vict, c. 106), s. 104, is an appeal from the order of adjudication, and is properly made by way of motion to the Court of Appeal at any time within the limit of two months specified in the 233rd section of the act, as amended by the Bank- ruptcy Act, 1854 (17 & 18 Vict. c. 119), s. 24. Circumstances under which the Court of Appeal allows new evi- dence to be adduced. Ex parte Miller, In re Miller. 229 2. An appeal by the bankrupt from a refusal of a Commissioner to annul an adjudication of bank- ruptcy obtained in England by re- sidents in Scotland, as petitioning creditors, against a trader whose trade was wholly in Scotland, was directed to stand over, with liberty to the bankrupt to bring an action to try the validity of the adjudica- tion. On the failure of the peti- tioning creditors to appear to the action within a time limited by the Court for the purpose, the Court annulled the adjudication. INDEX TO THE PRINCIPAL MATTERS. 357 Pending the proceedings the goods of the Appellant seized by the messenger had been sold by arrangement:— ^e/rf, that the offi- cial assignee was entitled to deduct from moneys received by him from the sale moneys expended in ware- housing and selling the goods, but not his costs of proceedings in Court; the Court directing that these should be paid by the peti- tioning creditors, who, like the official assignee, were Respondents to the petition, and ordering that the petitioning creditors should pay to the bankrupt the moneys to be deducted by the official as- signee. Ex parte fVollheim, In re Wollheim. Page 223 See Akhanging Debtob, 1. Costs, 4. Evidence, 3. APPEAL. The twenty-one days from the date of a decision or order of the Court of Bankruptcy within which, ac- cording to the Bankrupt Law Consolidation Act, 1849 (12 & 13 Vict. c. 106), s. 12, an appeal from such decision or order must be en- tered, date from the day when the decision or order sought to be ap- pealed from is pronounced, and not from that on which it is drawn up, although the latter date ap- pears on the order. Ex parte The Dudley and West Brom- wich Banking Company, In re Hopkins. 236 See Annulling, 1. Costs, 1, 2, 3. Evidence, 1. Examination, 2. ARRANGING DEBTOR. 1. A conditional assent on the part of a creditor to a deed intended to operate under the 192nd sec- tion of the Bankruptcy Act, 1861, cannot, so long as the condition remains unfulfilled, be reckoned in calculating the statutory ma- jority of creditors mentioned in the first of the conditions specified in that section. Per L. J. Knight Bruce. — The question whether all those con- ditions have been complied with may be raised, notwithstanding the certificate of registration, and without setting it aside. Per L. J. Turner.— The 192nd section extends to deeds of com- position, although there may be no cessio bonorum. But the com- position must be with all the creditors ; and where a deed re- cited an agreement that sureties, parties to the deed, should pay the creditors a specified money composition to be accepted in dis- charge of the debts by instalments, and the delivery to the creditors, parties to the deed, of promissory notes for securing the instalments; and the creditors, parties to the deed, covenanted that the com- position should be accepted in dis- charge of their respective debts, the amounts of which were speci- fied in the schedule to the deed: — Held, per L. J. Turner, that the composition was not with all the creditors, there being no means affiarded to non-assenting creditors of obtaining payment of the com- 358 INDEX TO THE PEINCIPAL MATTERS. position, or any note for securing such payment. Per L. J. Knight Bruce. — Where there is only a doubt as to the validity of an adjudication, the proper course still is not to annul. Ex parte Rawlings, In re Rawlings. Page 1 2. The word " creditors" in the first condition specified in the 192nd section of the Bankruptcy Act, 1861, means and extends to cre- ditors holding security, good or bad, sufficient or insufficient, as well as creditors wholly without security; and in reckoning the proportion of assenting creditors Tinder that section, the debts due to secured as well as unsecured cre- ditors must be taken into account. Per L. J. Knight Bruce.— It is not necessary to apply to set aside the registration and certifi- cate of registration of a deed in- tended to operate under the 192nd section of the Bankruptcy Act, 1861, before questioning the ful- filment of the conditions imposed by that section. Per L. J. Turner. — In order to be binding on all the creditors under the provisions of the 192nd section of the Bankruptcy Act, 1861, composition deeds must ex- tend to all the creditors. Semble, per L. J. Knight Bruce, that under the Bank- ruptcy Act, 1861, the Court of Bankruptcy has jurisdiction to discharge out of custody a debtor who, after having executed a deed of composition in conformity with the 192nd section, is arrested by a creditor without the leave of the Court of Bankruptcy. Ex parte Godden, In re Shettle. Page 36 3. To the validity under the Bank- ruptcy Act, 1861j s. 192, of a composition deed executed by a single member of a dissolved firm after the dissolution, objection was taken on the part of creditors of the firm on the ground that the joint creditors were insuffi- ciently represented in the compu- tation of the majority of assenting creditors required by the statute. — Held, that the objection could not be entertained in the absence of evidence showing the existence of joint estate at the date of the execution of the deed, and that the onus lay upon the objectors to produce such evidence. An assignment of a debtor's estate and efiects is not necessary for the validity of a composition deed under the 192nd section of the Bankruptcy Act, 1861, but to render such a deed binding on non-assentients, they must stand under the deed in the same situa- tion and with the same advan- tages as the assentients. A composition deed purported to be made between a debtor of the first part, certain creditors whose names and seals with the amounts of their debts were set forth in a schedule, and who exe- cuted the deed, of the second part, and all other (if any) the creditors of the debtor of the third part. INDEX TO THE PRINCIPAL MATTERS. 359 It recited that the executing cre- ditors had agreed to accept a com- positiou of three pence in the pound on their debts and to release 4;he debtor. It witnessed, that in consideration of the composition paid to the executing creditors and of the covenant thereinafter mentioned, the executing creditors released the debtor from the debts placed opposite to their names. It further witnessed, that the debtor covenanted with the parties of the second and third parts to pay on demand to all his creditors the above composition unless it should have been already paid : — Held, that the deed placed the assentients and non-assentients in a position of undue inequality, and that on this ground the deed was not binding on the latter. £x parte Cockburn, In re Smith and Laxton. Page 113 4. The registration of trust deeds under the 192nd and under the 194th sections of the Bankruptcy Act, 1861, although in practice performed by the same officer, are distinct, and have different opera- tions ; and where, for the want of the papers required by the orders, registration under the former sec- tion had been refused by the officer, and the applicant had registered the deed under the 194th section : — Held, that the registration did not prevent the deed, which was an assignment of all the debtor's property, from being an act of bankruptcy. Tlie 192nd section applies only to deeds which contain provisions • for the benefit of all the debtor's creditors, and this requisite is not fulfilled by a deed, the trusts of which are for the benefit of such of the debtor's creditors as shall execute the deed within a limited time. Semble, that a deed, to be entitled to the benefit of the pro- visions of the 192nd section, need not comprise the whole of the debtor's property. Semble also, that the creditors uuder a trust deed are placed in eodem statu with creditors under a bankruptcy, and that as the latter cannot prove without allow- ing for the value of their securities, the former are subjected to the same obligation. Ex parte Mor- gan, In re JVoodhouse. Page 64 5. A trust deed for the benefit of creditors intended to be executed by debtors in business together as copartners and to be broughtwithin the provisions of the Bankruptcy Act, 1861, s. 192, is properly framed when its terms embrace all possible estate and property which not only does but also may or might belong to the partners jointly, or to either of them sepa- rately. The non-existence in point of fact of any separate estate of either debtor is no objection to the va- lidity under the Bankruptcy Act, 1861, s. 192, of a trust deed so framed, aven as against a non-as- sentient separate creditor. 360 INDEX TO THE PRINCIPAL MATTERS. Semble, that in computing the statutory majority of assenting creditors to a deed under the Bankruptcy Act, 1861, s. 192, executed by debtors in trade in copartnership, the separate cre- ditors are not to be consulted se- parately in respect of the separate estate, but that the whole body of the creditors is to deliberate and decide together, and that separate creditors might constitute a ma- jority, eyen if there were no sepa- rate estate. Ex parte Oldfield, In re Oldfield. Page 188 6. Where an application had been made in Chambers to a judge of a Court of Law for the release from custody under a ca. sa. of a debtor •who had previously to his arrest registered a deed purporting to be a deed under the Bankruptcy Act, 1861, s. 192, and obtained thereon the Chief Registrar's certificate under s. 198, and the judge had decided that the deed was not within the provisions of the 192nd section of the Bankruptcy Act, 1861 -.—Held, that the Court of Bankruptcy had properly refused to release the debtor. The proper course in such a case is to apply to the Court out of which the judgment issued. Whether the Court of Bank- ruptcy would have had jurisdiction if the deed had been valid within the 192nd section of the Bank- ruptcy Act, 1861, queer e. In calculating the statutory ma- jority of assentient creditors re- quired under the Bankruptcy Act, 1861, s. 192, to render a deed under that section binding on non- assentient creditors, secured cre- ditors must be taken in account in the computation of the number of creditors constituting the ma- jority. But semble, that the amounts of their securities should be deducted in calculating the majority on the question of value. Ex parte Smith, In re Smith's Trust Deed. Page 156 7. A trust deed for the benefit of creditors, containing provisions for the application of the whole of the estate of the debtor in pay- ment of his debts as in bankruptcy, contained a clause, purporting to empower the trustee to pay or malie such arrangements with the creditors whose debts were under \0l., and to pay the costs, if any, of the creditors proceeding against the debtor for the recovery of their debts, as the trustee might deem expedient : — Held, that the clause did not, in either of its branches, prevent the deed from binding non-assenting creditors under the Bankruptcy Act, 1861, s. 192 ; not in the former branch, as it only purported to give a power which, being repugnant to the rest of the deed and the law, could not be exercised; nor in the latter, as that branch might afford the means of preserving the assets for equal distribution amongst the creditors. Semble, that the whole effect of the 197th section is to give to INDEX TO THE PRINCIPAL MATTERS. 361 a trust deed when duly registered a comprehensive effect upon all the estate and effects of the debtor comprised in the deed, and the particular operation of making the position and relative rights of the trustees and creditors claiming under it the same as the rights of assignees and creditors under an adjudication in bankruptcy. Semble also, that secured cre- ditors under such a deed rank for the amount remaining after de- duction of the value of their se- curities. Semble also, that the words in the 197th section, " except where the deed shall expressly provide otherwise," refer to the insertion in the deed of a proviso for ques- tions being settled by arbitration, or for the adoption of some diffe- rent rule of administration from that adopted in bankruptcy, as, for example, with respect to joint and separate creditors. Ex parte Spyer, In re Josephs' Assign- ment. Page 94 8. The date of a trust deed in the form set out in Schedule (D.) to the Act of 1861, is that of the supposed adjudication to which the 197th section refers. Ex parte Mendel, In re Moor's As- signment. 106 9. The affidavit required by the Bankruptcy Act, 1861, s. 200, should state with particularity the matters to which it is directed. Ex parte Groome, In re Groome's Trust Deed. 187 10. An affidavit made in support of an application to dispense with the requirements of the Bankruptcy Act, 1861, s. 192, on the ground that the circumstances of the case are within the 200th section of the act, must show such circumstances with greater certainty than by merely stating that the deponent is informed and verily believes them to be as stated. Ex parte Dobson, In re Anderson's Trust Deed. Page 167 See Act of Bankedptcy. Allowance. Costs, 4. Evidence, 3. Examination. Fraud on Act of Parliament. Rkgistration. ARREST. See Arranging Debtor, 2, 6. ARTICLES. See Partnership, 1. ASSENT. See Arranging Debtor, 1. ASSENTING CREDITORS. See Arranging Debtor, 3, 5, 6. Secured Creditors. Majority. ASSIGNEES. See Costs, 1, 2, 3. Mortgage. ASSIGNMENT. See Act of Bankruptcy. Arranging Debtor, 8. Evidence, 2, 3. 362 INDEX TO THE PEINCIPAL MATTERS. AUTHORITY. See Pabtnership, 4. BANKER. See Partnership, 4. BLOCKADE. A joint adventure between the sub- jects of a neutral power for run- ning a blockade established by one of two foreign belligerents against the ports of the other with a cargo of arms and ammu- nition is not an unlawful contract, but one from which the ordinary rights of property result. International law subjects a neutral merchant who transports contraband of war to the risk of having his ship and cargo captured and condemned by the belligerent power for whose enerrty the con- traband is destined ; but the com- merce which was lawful for the neutral with either belligerent country before the war is not made by the war unlawful or capable of being prohibited by both or either of the belligerents. If a British shipbuilder builds a vessel of war in an English port, and arms and equips her for war bona fide on his own account as an article of merchandise, and not under or by virtue of any agree- ment, understanding or concert with a belligerent power, he may lawfully, if acting bona fide, send the ship so armed and equipped for sale as merchandise in a belli- gerent country, and will not in so doing violate the provisions or incur the penalties of the Poreign Enlistment Act (59 Geo. 3, c. 69). The object of a proclamation is to make known the existing law, and it can neither make nor un- make law. Ex parte Chavasse, In re Grazebrook. Page 329 BOOKS OF COMPANY. See Contributory, 3. BUILDING ACTS. The 83rd section of the 14 Geo. 3, c. 78, is of universal and not of locally circumscribed application, but only applies to insurance moneys upon houses and build- ings. Moneys paid in respect of the insurance of trade fixtures are not within its application. Ex parte Gorely, In re Barker. , 265 CALL. See Set-off. CERTIFICATE. See Registration, 1 . COMPANY. See Contributory. Order and Disposition. Set-off. COMPOSITION DEED. See Arranging Debtor, 1, 2, 3. INDEX TO THE PRINCIPAL MATTERS. 363 CONDITIONAL ASSENT. See Arranging Debtor, 1. CONSTRUCTION. See Building Acts. CONTRIBUTORY. 1. Directors of a company registered iu 1860 took a transfer of paid-up shares from an allottee who had had them allotted to him hy the company in part payment of pui'- chase-moneyin respect of property purchased by the company. The same directors were holders of other paid-up shares taken by them for attendance fees. The validity of the purchase in the one case, and the allowance of attendance fees in the other, were impugned: — Held, that the trans- actions could not be affirmed in part and repudiated in part, and that consequently the directors, if treated as shareholders at all, must be treated as paid-up shareholders, and not placed on the list of con- tributories in either case. Prior to the formation of the company the directors in question had agreed each to take 100 shares in the company, and to execute the articles and memorandum of asso- ciation when ready and to act as directors of the company, and the articles provided that the sub- scribers of thememorandum should be deemed to be directors until others were appointed, and that each director should hold at least 100 shares : — Held, (1.) That their obligation to take the qualification shares could not be satisfied by their taking the unpaid-for shares. (2.) That the case was distin- guishable from Lord Abercorn's Case, In re The National Insur- ance and Investment Associalioii, 4 De G., F. Sf J. 78. (3.) That the directors were liable to be put on the list as con- tributories for their respective qualification shares. (4.) That they were also liable to be put on the list as contri- butories in respect of the shares for which they had respectively subscribed the memorandum of association, but that these were to be taken as part of the qualifi- cation shares. In re The Great Northern and Midland Coal Com- pany (^Limited), Currie's Case. Page .^01 2. Shares in a joint-stock company were allotted to and registered in the name of a person on the appli- cation in his name of another per- son to whom the former had lent the use of his name for the pur- pose, on condition that he was to be exposed to no liability in con- sequence, and who paid the de- posit on the shares. The com- pany being subsequently ordered to be wound up under the Acts of 1856 and 1857, and nothing having been done which could bind the company towards releasing the registered shareholder from his liability : — ^eW, that whatever equities in the shape of right to indemnity might exist between him and the person applying in his name and the directors who 364 INDEX TO THE PRINCIPAL MATTERS. had entered into an arrangement for his release, which was ultra vires and had not been sanctioned by the company, his name was properly placed on the register and list of contributories. In re The Moseley Green Coal and Coke Company Limited, Bar- rett's Case. Page 259 3. Where a person's name appeared as that of a shareholder in a joint stock company's register, and mi- nute and other books, and had been so included in the yearly returns to the registrar of joint stock companies, but it appeared •■ on the evidence that he had neveu agreed, or acted in such a manner as to induce others to believe that he had agreed, to become a share- holder in the company, and that he had promptly repudiated an attempt on the part of the secre- tary of the company to place him in the position of a shai'eholder: — Held, that upon an application in Chancery under the Joint Stock Companies Act, 1856, s. 25, and in bankruptcy in the matter of the vrinding-up to remove his name from the register and from the list of contributories, he was en- titled to the relief sought. The books of a company are, under the Joint Stock Companies Act, 1856, s. 40, only evidence as between shareholders, and cannot be accepted as evidence on the question whether a person is or is not a shareholder. In re Moseley Green Coal and Coke Company Limited, Fox's Case. 245 4. The liability of a contributory under the Companies Act, 1862, s. 75, commences at the date when he enters into the contract under which he becomes a member of the company which is being wound up. Ex parte Canwell, In re Vaughan. Page 295 See Set-off. CONVERSION. See Fraudulent Deed. COSTS. 1. Where, upon the application of the solicitor for the assignees, the Court below made an order which it had no jurisdiction to make, the Court of Appeal ordered the as- signees personally to pay the costs. Ex parte Cole, In re Attwater. 214 2. Assignees in bankruptcy may in a proper case be ordered to pay costs personally, and not be al- lowed them out of the bankrupt's estate, notwithstanding they act pursuant to a resolution of cre- ditors. Ex parte Watts, In re Attwater. 228 3. The costs of an official assignee, who appears by counsel on the hearing of an appeal merely to consent to the reversal of the order, ought not to be allowed out of the estate. Ex parte Churchill, In re Griffiths. 222 4. The Court has no jurisdiction, under a deed in the statutory form given in Schedule (D) to the Bankruptcy Act, 1861, and executed by a debtor, to make an order upon the trustees of the deed for payment out of the estate INDEX TO THE PRINCIPAL MATTERS. 365 in their hands of a petitioning creditor's costs of an adjudication of bankruptcy against the debtor, made after the execution of the deed but subsequently annulled in consequence of the registration of the deed under the Bankruptcy Act, 1861, s. 192. Ex parte Jones, In re M^ Turk. Page 168 See Annulling, 2. CREDITORS. See Arranging Debtor, 3, 5, 6. Costs, 4. Fraud on Act of Parlia- ment. Majority. Secured Creditors. CUSTODY. See Arranging Debtor, 2. DAMAGES. See Proof. DATE. See Arranging Debtor, 8. DEBT. See Majority. Proof. DEBTOR AND CREDITOR. See Act of Bankruptcy. Allowance. Arranging Debtor. Costs, 4. Evidence, 3. Secured Creditors. DEED. See Act of Bankruptcy. Allowance. Arranging Debtor. Costs, 4. Evidence, 2, 3. Examination. Fraud on Act of Par- liament. Registration. Statute of Limitations. DIRECTORS. See Contributory. DISCHARGE. In considering the question of a bankrupt's discharge with refer- ence to the provisions of the Bankruptcy Act, 1861, s. 159, rule 3, care, and even some amount of severity, is properly brought to bear by the tribunal which has to decide the question. The debts, the contracting of which by the bankrupt, without reasonable or probable ground of expectation of being able to pay the same, is made condemnatory by the section and rule in ques- tion, must be debts incurred by the bankrupt, and within the scope of the existing proceedings in bankruptcy. In construing the words "rash and hazardous speculation " in the same section and rule, "rash" is the important word, that is to say, the speculation made con- demnatory by the section and rule must be such as no reason- 366 INDEX TO THE PRINCIPAL MATTERS. ably prudent man would have entered into. Circumstances under which a bankrupt was held, within the meaning of the section and rule above mentioned, neither to have contracted debts without reason- able or probable ground of ex- pectation of being able to pay the same, nor to have been guilty* of rash and hazardous speculation conducing to his insolvency, nor of unjustifiable extravagance in living. Ex parte Downman, In re Downman. Page 251 DISCHARGE FROM CUS- TODY. See Arranging Debtor, 2, 6. DISCLAIMER. See Mortgage. DIVIDEND, REFUNDING. See Interest. EVIDENCE. L The 32nd of the General Orders in Bankruptcy of 6th November, 1861, providing that no new evi- dence shall be received on any appeal, unless the Court of Ap- peal shall, ou the hearing thereof, so direct, applies to evidence upon the matters in issue, and not to evidence as to what took place in the Court below. In the former case some ground must be shown for the admission of the new evidence. It is not necessary that a notice of motion by way of appeal, on the ground, among others, of the rejection of evidence should state that ground. Ex parte Page, In re Neal. Page 59. 2. An assignment of the principal part of the assignor's property for the benefit of creditors may be given in evidence as an act of bankruptcy, although not regis- tered under the Bankruptcy Act, 1861. Ex parte Wensley, In re Wens ley. 49 3. An instrument purporting to be a deed of assignment of all a debtor's estate and effects for the benefit of his creditors, and signed by the debtor, is inadmissible as evidence of an act of bankruptcy on his part, if unstamped. Ex parte Wensley {supra, 49) doubted. Remarks as to the nature of the case which should be made by a creditor of a bankrupt who seeks (by petition) without the consent of any party interested to annul an adjudication made on the bank- rupt's petition, and to obtain an adjudication of his own relating to an act of bankruptcy earlier than the debtor's petition. Ex parte Potter, In re Barron. 178 See Annulling, 1 . Contributory, 3. Registration, 1. EXAMINATION. 1. Trustees and creditors under a trust deed operating under the Bankruptcy Act, 1861, s. 192, and IXDEX TO THE PRINCIPAL MATTERS. 367 duly registered, are entitled to the same powers, rights and privileges as are possessed by assignees and creditors under an adjudication in bankruptcy, including the power of summoning witnesses. Semble, that the jurisdiction of the Court of Bankruptcy to sum- mon persons under the 197th sec- tion of the Act of 1849, for the purposes of discovery, should be exercised with care, circumspec- tion and judicial discretion, and not in a merely ministerial way. Ex parte Alexander, In re Thin andFlett's Trust Deed. Page 87 2. The commissioner has power either under the 136th section of the Bankruptcy Act, 1861, or irrespectively of that section by virtue of his authority over the trustee appointed by a trust deed within the act, to direct the trustee to be examined as to his dealings with the debtor's estate ; and although it will be a good practice not to direct such examination without some ground being shown for it, the Court of Appeal will not in general entertain an appeal as to the sufficiency of such ground. Ex parte Lawrence, In re Beale's Assignment. 83 3. Where a debtor has executed a deed under the Bankruptcy Act, 1861, s. 192, any creditor, although denying the validity of the deed, is entitled to examine the bank- rupt. But such creditor must submit to the jurisdiction in bank- ruptcy. Ex parte Brooks, In re Brooks. 150 EXECUTION. See Registration, 2. FIXTURES. See Building Acts. FOREIGN ENLISTMENT ACT. See Blockade. FRAUD. See Partnership, 4. FRAUD ON ACT OF PARLIA- MENT. Where a debtor, being sued by a creditor on a dishonoured bill of exchange, and having no present assets, and only the deferred pos- sibility of the accruer of a trifling sum on a balance of accounts be- tween the debtor and his late partners, such possibility being dependent upon the result of legal proceedings taken by the partners to obtain relief against payments made by them, executed a trust deed in the form given in Schedule (D) to the Bankruptcy Act, 1861, which was registered under the 192nd section of that act : — Held, that the deed was invalid as a fraud Upon the act, and that a dissentient creditor ought to have leave to issue pro- cess against the debtor, notwith- standing the registration of the deed. Ex parte Morrison, In re Clunn's Trust Deed, Page 170 368 INDEX TO THE PRINCIPAL MATTERS. FRAUDULENT DEED. A partnership of two was dissolved, the outgoing partner assigning to the continuing partner all his share in the partnership assets, and the latter covenanting to pay the partnership debts. At the date of the assignment the firm was insolvent, as was also each of the partners. The firm being shortly afterwards adjudged bank- rupt : — Held, that the transaction was void ; that it did not operate as a conversion of the outgoing partner's property into the sepa- rate estate of the continuing part- ner; and that the whole of the property, as it existed, belonging to the bankrupts at the date of the assignment, must still be con- sidered as remaining the joint property, and must be adminis- tered and distributed as such under the bankruptcy among the joint creditors. Ex parte Mayou, In re Edwards- Wood. Page 338 GENERAL ORDERS. See Evidence, L HUSBAND AND WIFE. See Mortgage. ILLEGAL DEALING. See Blockade. IMPRISONMENT. See Arranging Debtor, 2. INEQUALITY. See Arranging Debtor, 3. INSPECTORSHIP DEED. See Statute of Limitations. INSURANCE. See Building Acts. INTEREST. The language of the orders of the Court of Bankruptcy must be con- strued with reference to the settled rules of the Court ; and it being the settled practice of the Court, that where a security consists of an equitable mortgage, and the mortgagee, after a bankruptcy, presents a petition for the realiza- tion of the security, he is not entitled to any interest subsequent to the date of the fiat : — Held, that where securities, by way of equitable mortgage, .comprised joint property of bankrupt part- ners, separate property of one partner and property of a stranger, and the mortgagees being joint and separate creditors elected to prove against the separate estates, an order made on their petition, and directing an account of prin- cipal and interest due to them without'express limitation of the calculation of the interest to in- terest due at the date of the fiat, did not entitle them to a calcula- tion of, or to retain out of the proceeds of the securities, interest subsequent to the date of the fiat. Dividends paid upon an erro- neous principle ordered to be re- INDEX TO THE PEINCIPAL MATTERS. 369 funded after a considerable lapse of time and change of circum- stances. Ex parte Lubbock, In re Flood. Page 272 JOINT AND SEPARATE ESTATE. See Arranging Debtor, 5. Fraudulent Deed. Interest. Partnership, 2. JURISDICTION, ^ee Arranging Debtor, 2, 6. Costs, 1, 4. Examination. Registration, 2, 3. LIMITATIONS. See Statute of Limitations. MAJORITY. The debt of a non-assenting creditor entered by the debtor in the schedule of debts required by the General Orders in Bankruptcy of 22nd May, 1862, but therein marked " disputed," cannot, in the absence of the creditor, be disregarded in calculating the statutory majority of assenting creditors. Ex parte Middleton, In re Middleton. 139 See Arranging Debtor, 1, 5, 6, 7. Vol. 1—5. METROPOLITAN BUILD- INGS. See Building Acts. MISDEMEANOR. Mere suspicion of the commission of one of the offences described in the Bankruptcy Act, 1861, s. 221, is not sufficient to warrant a di- rection for the prosecution of a bankrupt for misdemeanor. Ex parte Still, In re Still. Page 216 MORTGAGE. A husband and wife mortgaged in fee land of which they were seised iu right of the wife, to whom the equity of redemption was reserved by the mortgage deed. The husband became bank- rupt, and in a suit by the wife for a settlement of the equity of re- demption on her and her children, and for redemption as against the mortgagee, and for foreclosure against the assignees and the hus- band, the assignees disclaimed, and a decree was made giving the wife the right to redeem as against the mortgagee and settling the whole fee upon herself and her children, the husband not object- ing. The mortgagee afterwards applied in the bankruptcy and was there allowed to prove the whole amount of his mortgage debt against the bankrupt's estate. Held,— (1) That the disclaimer of the assignees was intended only to ac- celerate the wife's right to redeem, if she elected so to do ; but that if she elected not to redeem, and D D D.j.s. 370 INDEX TO THE PEINCIPAL MATTEES. herbill was consequently dismissed with costs against tlie mortgagee, the assignees would no longer be bound by their disclaimer, their interest in the bankrupt's estate would remain unaffected by the dismissal of the bill, and they would be restored to their right to the bankrupt's life interest in the property in question. (2) That the proof must be varied by the addition of directions that in the event of the Plaintiff's bill being dismissed with costs the life estate of the bankrupt which had been transferred to the assignees in bankruptcy, should be sold, the proceeds deducted from the amouat of debt proved, and proof admitted only for the residue; but in the event of the Plaintiff re- deeming the mortgage in the man- ner expressed in the decree, that the proof should be admitted with- out prejudice to any question as to the right to expunge the same either wholly or partially, or to keep the same alive for the benefit of the person paying the debt to the mortgagee. Ex parte Paine, In re Gleaves. Page 238 See Interest. NEUTEAL. See Blockabe. NOTICE. See Order and Disposition. NOTICE OF MOTION. See Evidence, 1 . OFFENCE. See Misdemeanor. OFFICIAL ASSIGNEES. See Costs, 3. OEDEE AND DISPOSITION. The object of the Joint Stock Com- panies Act, 1856, s. 19, was that the company itself should not be bound by any trust, and that no notice should have any effect as against the company, but there is nothing in the Act which pre- cludes an equitable mortgage of shares in a company, or renders an equitable mortgagee incapable of perfecting his title as against the mortgagor and his assignees in bankruptcy by giving notice of the mortgage to the company. The managing director, who was also the sole secretary of a company registered under the above Act, joined with all his co- directors in making an equitable mortgage of their shares to a bank, as a security for an advance to the company. The bank gave no no- tice to the company. On the bankruptcy of the managing di- rector : — Held, that his shares were not in his order and disposi- tion with the consent of the bank as the true owners thereof, but that the bank were entitled to INDEX TO THE PRINCIPAL MATTERS. 371 them as mortgagees. Ex parte Stewart, In re Shelley. Page 299 ORDER OF DISCHARGE. See Discharge. ORDER WHEN MADE. See Appeal. PARTNERSHIP. 1. A power giveu to an individual of nominating himself oi- any other person a partner in a business does not constitute him a partner. An agreement was entered into between A. and B., whereby in effect A. was to carry on a certain business in the name of " A. Sf Co.'' for the benefit of himself and any person whom B. might at any time within eight years nominate : B. was to make certain advances to A. for the purpose of the busi- ness and become surety for him to a certain company : A. was to give B. promissory notes for his advances and any sums he might pay as surety, and to carry on the business in partnership with B.'s nominee for twenty-one years on certain specified terms : the profits of the business were to be for the first eight years applied in paying A. \QOL a-year, and then in pay- ing B. his advances with interest ; and the residue was to be divided between A. and B.'s nominee in certain specified proportions, and losses were to be borne in the same proportions. The agree- ment gave B. a right to see the accouuts relating to the business, and contained other special clauses under which B. might at any time within the eight years have nomi- nated himself as a partner. Be- fore the eight years had elapsed, and before any nomination had been made by B., A. became bank- rupt, being indebted to B. for ad- vances. There being no person who claimed to be a joint creditor of A. and B. -.—Held, that B.'s executor was entitled to prove against^.'* estate for the advances, the agreement not having consti- tuted A. and B. partners as be- tween themselves. Ex parte Davis, In re Harris. Page 279 2. The Court refused to relax the rule in bankruptcy that on the bankruptcy of a firm there cannot be a proof on behalf of the estate of one partner against the estate of another until all the joint debts are paid, although, in the circum- stances of the case, and having regard to the amounts of the es- tates, the result of relaxing the rule would have been to increase the proving estate to such an ex- tent that it would have yielded a larger surplus to the joint estate than would arise from the estate sought to be proved against if the rule were observed and the proof excluded. The rule in question enures for the benefit of the separate creditors as well as of the joint creditors. Ex parte Collinge, In re Holds- worth. 289 3. A firm of two became bankrupt, D D 2 372 INDEX TO THE PRINCIPAL MATTEES. one partner being indebted to the other. The debt arose from a con- tract apart from the co-partner- ship, and was in existence at the time of the adjudication. It was admitted that there could not be any surphis of the debtor-partner's estate for the joint creditors, whether the debt was allowed to be proved against that estate by the creditor-partner or not : — Held, to be a proper case for re- laxing the general rule, and that the creditor-partner might prove against the debtor-partner's estate, and it was so ordered with a de- claration that the proof must be subject to be expunged, and the dividend refunded, if any surplus of the debtor-partner's estate should arise for the benefit of the joint creditors. Ex parte Top- ping, In re Levey. Page 307 4. Generally speaking, a partner has full authority to deal with the partnership property for partner- ship purposes. If the business of the partnership is such as ordi- narily requires bills of exchange, then, unless restrained by agree- ment, any one partner may draw, accept and indorse bills of ex- change in the name of the partner- ship for partnership purposes. All persons may give credit to his acts and his authority unless they have notice or reason to believe that the thing done in the partner- ship name is done for the private purposes or on the separate ac- count of the partner doing it. In that case authority by virtue of the partnership contract ceases, and the person dealing with the individual partner is bound to in- quire and ascertain the extent of his authority. If he do not so act he must depend upon the right of the partner or on circumstances sufficient to repel the presumption of fraud. The unexplained fact that a partnership security has been re- ceived from one of the partners in discharge of a separate claim against himself is a badge of fraud, or of such palpable negligence as amounts to fraud, which it is in- cumbent on the party who so took the security to remove by showing either that the partner from whom he received it acted under the au- thority of the rest, or at least that he himself had reason to believe so. Where the bankers of an indi- vidual member of a firm, knowing that the firm banked elsewhere, received from and discounted for their customer bills of exchange, purporting to be drawn and in- dorsed by the firm and also in- dorsed by the customer, the sig- natures of the finn as drawers and indorsers and of the customer as indorser, as well as the whole of the bills, with the exception of the signatures of the acceptors, being in the customer's h&aA- ■viviting: — Held, that the trans- action showed on its face a con- version by the customer of part- nership property to his own pur- poses ; that the bankers had been INDEX TO THE PKINCIPAL MATTERS. 373 guilty of great negligence in ab- staining from inquiry ; and that they could only claim as against the customer's co-partners so far as the customer himself might have claimed compensation from them in respect of moneys paid by him out of his private account for part- nership purposes. Ex parte The Darlington and District Joint Stock Banhing Company, In re Riches and MarshalFs Trust Deed. Page 321 See Arranging Debtor, 5. Fraudulent Deed. Interest. PETITIONING CREDITOR. See Costs, 4. PROCLAMATION. See Blockade. PROOF. The 153rd section of the Act of 1861, providing for the admission of a proof when a bankrupt is, at the date of the adjudication, liable to a demand in the nature of damages which are unliquidated, only applies to cases in which the cause of action is complete before the adjudication. Ex parte Men- del, In re Moor's Assignment. 106 See Interest. Mortgage. Partnership. PROSECUTION. See Misdemeanor. PROTECTION FROM ARREST. See Arranging Debtor, 2, 6. PUBLIC COMPANY. See Contributory. Order and Disposition. Set-off. QUALIFICATION. See Contributory, 1. REDEMPTION. See Mortgage. REFUNDING DIVIDEND. See Interest. REGISTRATION. 1. The certificate of registration of a deed of arrangement with cre- ditors under the 192nd section of the Bankruptcy Act, 1861, is only prima facie evidence of the ful- filment of the requisites of that section to which the certificate extends, and may be controverted without a separate proceeding to set it aside. Ex parte Page, In re Neal. Page 59 2. The Court of Bankruptcy has no power to dispense with the execu- tion of a deed intended for regis- tration under the Bankruptcy Act, 1861, s. 192, by one out of several trustees appointed by the deed. A deed imperfect in that respect does not fulfil the statutory re- quirements of the section and can- 374 INDEX TO THE PEINCIPAL MATTERS. not be registered thereunder. Ex parte King, In re King's Trust Deed. Page 185 3. The 194th section of the Bank- ruptcy Act, 1861, gives no juris- diction to the Court of Bankruptcy to dispense with the fourth condi- tion of the 192nd section requiring registration of a deed intended to bind a non-assenting minority of creditors within twenty-eight days from its execution by the debtor or to extend the time therein men- tioned. In re Skinner. 176 See Act op Bankkitptcy. Arranging Debtor, 1, 2, 4. Evidence, 3. REPUTED OWNERSHIP. See Order and Disposition. RESOLUTION. See Costs, 2. RUNNING BLOCKADE. See Blockade. SCOTLAND. See Annulling, 2. SECURED CREDITORS. Goods were contracted to be sold, with a condition that they should not be delivered unless the vendors chose, or the goods were required by the purchaser for the actual purposes of his business, until pay- ment of a bill of exchange, which was given by the purchaser for the full value of the goods. The bill of exchange having been dis- honoured and the goods nearly all remaining undelivered, the pur- chaser executed a trust deed under sect. 192 of the Bankruptcy Act, 1861, and the vendors assented thereto for a sum which included the value of goods contracted to be sold : — Held, that upon the facts of the case the contract for sale and purchase was absolute and not conditional, and that the retention of the goods was to operate as a security for the payment of the bill of exchange, and that the ven- dors could if they chose assent to the deed for an amount of which the sum so secured formed part. Semble, however, that by so assenting they forfeited their secu- rity. Ex parte Middleton, In re Middleton. Page 139 See Arranging Debtor, 6, 7. SET-OFF. A surety for a debt of a joint stock company, paid the debt after the date of an order for winding up the company, under the Joint Stock Companies Acts, 1856 and 1857. Among the securities for the debt in the hands of the cre- ditor, was a promissory note of the company : — Held, that the surety was entitled to set off against a debt due from him to the company an equal amount of the money due from the company on the promissory note. INDEX TO THE PRINCIPAL MATTERS. 375 A contributory of a joint stock company (which was being wound up under the Acts of 1856 and 1857), in respect of shares pur- chased in his name by another : — Held, not entitled to set off against demand of the company the amount due from the company upon its promissory notes made in favour of the person who was the real purchaser of the shai-es, and who had after the date of the winding-up order indorsed and deposited the notes with the no- minal purchaser's solicitors as an indemnity in respect of his liability on the shares. In re The Moseley Green Coal and Coke Company Limited. Barrett's Case (No. 2). Page 346 SHAREHOLDERS. See CONTEIBTJTORT, 2. SHARES. See CONTKIBLTOEY, 1. Ohdek and Disposition. SHIP. See Blockade. STAMP. See Evidence, 3. STATUTE. See Building Acts. STATUTE OF LIMITATIONS. A debtor executed a deed of in- spectorship which was intended to operate under the Bankruptcy Act, 1861, s. 192, and which pro- vided for payment of the debts by instalments, and the avoidance of the deed in certain contingencies, one of which hnppened, and for tlie revivor of the debts in that event, deducting dividends re- ceived under the deed. A certain creditor was mentioned as such in one of the schedules to the deed. The debt of this creditor was also mentioned in the statutory account of debts of the debtor, which was verified by his affidavit; and the creditor received a divi- dend on his debt from the in- spectors under the inspectorship : — Held, that the debt, being otherwise barred by the Statute of Limitations, was not by any of these circumstances taken out of the operation of the statute. Ex •parte Topping, In re Levey. Page 307 SUFFICIENCY. See MlSDEMEAKOR. SUMMONS. See Examination, 1 . SURETY. See Set-off. TIME. See Appeal. TRADE FIXTURES. See Building Acts. 376 INDEX TO THE PEINCIPAL MATTERS. TRUST DEED. See Allowance. Arranging Debtor, 4, 5, 6, 7, 8, 9, 10. Costs. Evidence, 2, 3. Examination. Fraud on Act of Parlia- ment. Majority. Registration. Secured Creditors. UNLIQUIDATED DAMAGES. See Proof. UNREASONABLE PROVI- SIONS. See Arranging Debtor, 3, 7. ULTRA VIRES. See Contributory, 2. VENDOR AND PURCHASER. See Secured Creditors. WINDING-UP. See Contributory. Set-off. WITNESS. See Examination. / tONDON : e. ROWORTH AND SONS, PRINTERS, NEWTON STREET, HIGH HOLBORN.