Trustee and a solvent

partner suing together.

When

payment to a person having committed an act of bank

ruptcy

and the defendant agreed to pay interest at the rate of 5 per cent. per annum on all the said moneys.

The following are the particulars:

[Here follow particulars.]

fraudulent transfer under s. 4, and is not protected either by the 45th or 46th section, so that the trustee is entitled to recover them or their price. (Ex parte Pearson, L. R. 8 Ch. 667; 42 L. J. Bk. 44; 28 L. T. 796; 21 W. R. 688.) And the trustee is entitled to goods seized by the sheriff, if on the sale of them he would be entitled to the proceeds under the 46th section. (Er parte Rayner, L. R. 7 Ch. 325; 41 L. J. Bk. 26; 26 L. T. 306; 20 W. R. 456.) The corresponding section of the Act of 1869 (the 87th section) was held not to apply to cases where before seizure the debtor delivered bills to the sheriff, which the execution creditor accepted in satisfaction of the judgment, and such payment was valid (Er parte Brooke, L. R. 9 Ch. 301; 43 L. J. Bk. 49; 30 L. T. 103; 22 W. R. 395); nor where the money was paid after seizure and before sale, and the creditor agreed to take it on account of the debt. (Stock v. Holland, L. R. 9 Ex. 147; 43 L. J. Ex. 112; 31 L. T. 121; 22 W. R. 661.) But now such payments would almost certainly be held to be fraudulent preferences under s. 48 of the Bankruptcy Act, 1883.

This section very much extends the law of fraudulent preferences. Formerly, under the Act of 1869, many payments made by way of fraudulent preference by the debtor were saved because the creditor was ignorant of his insolvency. (Butcher v. Stead, L. R. 7 H. L. 839; 44 L. J. Bk. 129; 33 L. T. 541; 24 W. R. 463.)

Suits by trustee and solvent partner of bankrupt.]—By s. 113 of B. A. 1883, "Where a member of a partnership is adjudged bankrupt, the Court may authorize the trustee to commence and prosecute any action in the names of the trustee and of the bankrupt's partner; and any release by such partner of the debt or demand to which the action or suit relates, shall be void; but notice of the application for authority to commence the action shall be given to him, and he may show cause against it, and on his application the Court may, if it thinks fit, direct that he shall receive his proper share of the proceeds of the action, and if he does not claim any benefit therefrom he shall be indemnified against costs in respect thereof as the Court directs.'

It sometimes happens in cases of fraudulent preferences that the trustee and a partner of a bankrupt may maintain an action which the partners could not. These are cases where the trustee avoids the preference. (Heilbut v. Nevill, L. R. 5 C. P. 478; 39 L. J. C. P. 245 ; 22 Ì. T. 662; 18 W. R. 898, Ex. Ch.)

Claims by a trustee in bankruptcy as such shall not, unless by leave of the Court or a judge, be joined with any claim by him in any other capacity. (Judicature Rules. 1883, Order XVIII. r. 3.)

DEFENCES.-Denial of official character.]-By Order XXI. r. 5, if either party wish to deny the right of any other party to claim as trustee whether in bankruptcy or otherwise, he must deny it specifically.

Payment.]-By the 49th section, payments made in good faith and for valuable consideration to a bankrupt before the date of the receiving order by a person not having at the time of such payment notice of any act of bankruptcy committed by the bankrupt and available against him for adjudication are valid.

Mutual credits and set-off.]—By sect. 38, where there have been mutual credits, mutual debts, or other mutual dealings between a debtor, against whom a receiving order is made, and any other person proving or claim

good.

The plaintiff claims £

and interest on the above balance

from June 1st, 1882, till payment or judgment.

ing to prove a debt under the receiving order, an account shall be taken of what is due from the one party to the other in respect of such mutual dealings, and the sum due from the one party shall be set off against any Set-off. sum due from the other party, and the balance of such account and no more shall be claimed or paid on either side respectively; but a person shall not be entitled under this section to claim the benefit of any set-off against the property of a debtor in any case where he had, at the time of giving credit to the debtor, notice of any act of bankruptcy committed by such bankrupt, and available against him.

It has been held that this section includes a claim for unliquidated damages. (Booth v. Hutchinson, L. R. 15 Eq. 30; 42 L. J. Ch. 492; 27 L. T. 600; 21 W. R. 116.) The expression "mutual credit," applies to cases where the credits are such as must from their nature end in debts. (See Naorogi v. Chartered Bank of India, L. R. 3 C. P. 444; Astley v. Gurney, L. R. 4 C. P. 714, Ex. Ch.) And, therefore, where there is a mere deposit of property without authority to turn it into money the section does not apply. The section applies, although the bankrupt has a lien for the amount of the debt due to him (Er parte Barnett, L. R. 9 Ch. 293; 43 L. J. Bk. 87; 29 L. T. 858; 22 W. R. 283); and notwithstanding an unknown act of bankruptcy. (Elliott v. Turquand, 7 App. Cas. 79.) The section only applies with reference to claims between the bankrupt himself and his creditor. (Turner v. Thomas, L. R. 6 C. P. 610; 40 L. J. C. P. 271 ; 24 L. T. 879; 19 W. R. 1170.) It does not apply to cases where one only of several joint debtors becomes bankrupt. (New Quebrada Co. v. Carr, L. R. 4 C. P. 651.)

What

may be

set off.

trustee in liquidation.

Actions by trustee under liquidation will disappear with liquidations, Actions by ss. 169, 170, of Bankruptcy Act, 1883; but as proceedings under pending liquidations are to continue, it may be noted that the title of a trustee under a liquidation relates back to the filing of the petition (Ex parte Duignan, 40 L. J. Bk. 33; L. R. 11 Eq. 604; 24 L. T. 237; 19 W. R. 711; affirmed in L. R. 6 Ch. 605; 40 L. J. Bk. 68; 25 L. T. 286; 19 W. R. 1127); and his title will relate back to an act of bankruptcy prior to the filing of the petition, in analogy to the case of bankrupts under ss. 11 and 17 of the Act of 1869. (Ex parte Eyles, L. R. 16 Eq. 99; 42 L. J. Bk. 55; 21 W. R. 574; Ex parte Schulte, 9 Ch. 409; 39 L. T. 478; 22 W. R. 462.) His title, therefore, is good against an execution creditor, who seizes the goods with notice of filing of the petition. (Ex parte Duignan, supra.) Property acquired by the debtor during the liquidation proceedings until he has obtained his discharge, or until the liquidation is closed, vests in the trustee. (Ebbs v. Boulnois, L. R. 10 Ch. 479; 32 L. T. 650; 23 W. R. 822; 44 L. J. Ch. 691.)

Actions by or against bankrupts.]—See ante, p. 157, as to what causes of action do not pass to the trustee on his appointment.

If a debtor obtains an order of discharge he is thereby released from all debts provable in the bankruptcy (with certain exceptions), and to an action upon any of these debts he may plead that the cause of action accrued before his discharge, and the bankruptcy. The excepted debts are those due (1) on recognizances; (2) Crown and revenue debts; (3) on bail bonds; (4) in respect of fraud or breach of trust to which the bankrupt was a party; (5) in respect of which he has obtained forbearance by any fraud to which he was a party. (Bankruptcy Act, 1883, s. 30.) But, apart from the order of discharge, on the making of a receiving order (s. 9) the official receiver is thereby constituted receiver of the property of the debtor, and thereafter, except as directed by the Act, no creditor to whom the debtor is indebted in respect of any debt provable in bank

When a composi tion is a defence.

Action by a Trustee in Bankruptcy for Damages for Breach of
Contract made with the Bankrupt.

1. The plaintiff has suffered damage by breach of contract for sale and delivery by the defendant to A. B. of 1000

ruptcy shall have any remedy against the property or person of the debtor in respect of the debt, or shall commence any action or other legal proceedings unless with the leave of the Court, and on such terms as the Court may impose. Any creditor so proceeding might be summarily restrained by injunction.

A discharge granted to a debtor who is a member of a firm, in his separate bankruptcy, releases him from his joint as well as his separate debts. (Ex parte Hammond, L. R. 16 Eq. 614; 42 L. J. Bk. 97; 29 L. T. 72; 21 W. R. 865.)

Where a verdict for breach of contract is obtained against the bankrupt before the commencement of the bankruptcy, but judgment is not signed or costs taxed until afterwards, the whole claim is barred, as it is provable. (Ex parte Peacock, L. R. 8 Ch. 682; 42 L. J. Bk. 78; 28 L. T. 830; 21 W. R. 755.)

Defence of composition, &c., under Bankruptcy Act, 1869.]-A resolution for a composition duly passed under s. 126 of the Bankruptcy Act, 1869, is a bar to any creditor bound thereby, so long as there has been no default on the part of the debtor to perform his part of the agreement. (Slater v. Jones, and Capes v. Ball, L. R. 8 Ex. 186; 42 L. J. Ex. 122; 29 L. T. 56; 21 W. R. 815.) But upon such default or upon his failing to pay an instalment of the composition, the creditor may sue for the whole balance of the debt remaining due, whether or not he has assented to the resolution. (Edwards v. Coombe, L. R. 7 C. P. 519; 41 L. J. C. P. 202; 27 L. T. 315; 21 W. R. 107; Goldney v. Lording, L. R. 8 Q. B. 182; 42 L. J. Q. B. 103; 21 W. R. 543.)

On an action to recover a debt of £50, the defendant pleaded that as to £27 168. 10d, it was the balance remaining due on a joint and several promissory note, made by the defendant and H. carrying on business as co-partners to secure a debt due from them to the plaintiffs, that defendant and H. instituted proceedings under ss. 126, 127 of the Bankruptcy Act, 1869, and that an extraordinary resolution of the creditors was passed for accepting a composition payable by instalments, to be secured by joint and several notes. Held, Kelly, C. B., dissentiente, that assuming the plaintiffs were not parties to the resolution, and had not adopted it or received any instalment under it, the facts alleged offered no defence to the action. (Simpson v. Henning, 44 L. J. Q. B. 143 ; L. R. 10 Q. B. 406 ; 33 L. T. 508, Ex. Ch.) A creditor who has attended the meetings under sect. 126 of the Bankruptcy Act, 1869, and who has voted for the resolulutions, is bound thereby, though his debt is omitted from the debtor's statement. (Campbell v. Im Thurn, 45 L. J. C. P. 482; 1 C. P. D. 267; 35 L. T. 265; 24 W. R. 675.) Secus, if he does not adopt the composition. (Macdonald v. Chesney, 50 L. J. Q. B. 87.)

In order that a resolution to accept a composition should be a bar to an action against the debtor, the statement must show a definite amount admitted to be due; and therefore where after the amount of the creditor's (the plaintiff's) claim, it was stated to be disputed under legal advice, and referred to arbitration, this debt was held not to be barred. (Melhado v. Watson, 46 L. J. C. P. 502 ; 2 C. P. D. 281 ; 36 L. T. 724; 25 W. R. 562, on Appeal, reversing the decision of the Court below; Burliner v. Royle, 5 C. P. Div. 354.)

These stringent rules do not apply to compositions under the Act of

quarters of best red wheat at 50s. per quarter, to be delivered on the wharf at Liverpool in the month of March, 1883.

2. The defendant did not deliver 500 quarters of the said wheat.

3. 100 quarters delivered were not merchantable, and 180 quarters delivered were white wheat.

4. In the month of May, 1883, the said A. B. was adjudicated bankrupt, and the plaintiff was appointed the trustee of his estate.

1883, for by s. 18, sub-s. 8, a composition or scheme adopted and approved in pursuance of the section shall be binding on all the creditors so far as relates to any debts due to them from the debtor, and provable in bankruptcy, and (sub-s. 9) the certificate of the official receiver that a composition or scheme has been duly accepted and approved is made, in the absence of fraud, conclusive as to its validity. (Cf. s. 19.)

Where a debt was contingent and was omitted from the debtor's statement, it was held not to be barred by a resolution to accept a composition. (Wilson v. Breslauer, 46 L. J. C. P. 593 ; 2 C. P. D. 314; 37 L. T. 24; 25 W. R. 818; 3 App. Cas. 672; 47 L. J. C. P. 729 ; 39 L. T. 67; 26 W. R. 536.)

The release of a debtor by resolution for composition does not release his co-debtor. (Ex parte Jacobs, L. R. 10 Ch. 211; 44 L. J. Bk. 34 ; 31 L. T. 345; 23 W. R. 251.)

In liquidation by arrangement under s. 125 of the Bankruptcy Act, 1869, a creditor is, in the absence of fraud, bound by the resolutions passed, if duly registered under s. 127, though he has no notice of the proceedings, and though his name and debt be omitted from the list of creditors; and no subsequent promise to pay will support an action founded on a debt from which the debtor is released by virtue of the Bankruptcy Act, 1869. (See Heather v. Webb, 46 L. J. C. P. 89; 2 C. P. D. 1; 25 W. R. 253.)

By sect. 15 of 32 & 33 Vict. c. 62 (Debtors Act, 1869), where a debtor makes any arrangement or composition with his creditors under the provisions of the Bankruptcy Act, 1869, he shall remain liable for the unpaid balance of any debt which he incurred or increased, or whereof before the date of the arrangement or composition he obtained forbearance by any fraud, provided the defrauded creditor has not assented to the arrangement or composition otherwise than by proving his debt and accepting dividends. (See Ex parte Halford, L. R. 19 Eq. 436; 44 L. J. Bk. 73; 32 L. T. 103; 23 W. R. 442.)

Where a composition a

defence.

A bankrupt after his discharge

remains

liable for

debts in

curred by

fraud.

1. He did not contract to sell or deliver 1000 quarters of wheat, or any other quantity of wheat, to A. B.

2. Alternatively if he did, on March 21, 1883, he duly tendered 1000 quarters of best red wheat to A. B., and A. B. refused to pay for it.

3. The contract was rescinded before breach. Particulars are as follows: An arrangement between A. B. and the defendant, by letter from the defendant to A. B., dated the 22nd of March, 1883, and a letter in answer from A. B. to the defendant, dated the 23rd of March, 1883.]

4. By an order of the London Bankruptcy Court of the 29th of June, 1883, the bankruptcy of A. B. was annulled, and a scheme of arrangement of the affairs of A. B., under section 28 of the Bankruptcy Act, 1869, approved, whereby all rights of action vested in the plaintiff as the trustee of the estate of A. B. were revested in A. B.

Action by Trustee under a Scotch Sequestration Registered in London Bankruptcy Court for Debt due to Sequestered Estate.

1. The plaintiff is trustee of the sequestered estate of Messrs. W. & Co., and of the several estates of the partners of the said firm, by virtue of a warrant made in the Scotch Sequestration on 1875, and duly registered in the London

1882, and the

Bankruptcy Court. 2. On the day of 1883, in consideration that the plaintiff would compromise a claim, which as such trustee he was making on the defendant, the defendant offered the plaintiff, in writing, to agree to admit a liability of, and to pay £500 to the plaintiff, and the plaintiff accepted these terms.

The plaintiff claims £500, and interest thereon, from the of 1882, until payment or judgment.