Adams v Sworder
| Jurisdiction | England & Wales |
| Judgment Date | 22 December 1863 |
| Date | 22 December 1863 |
| Court | High Court of Chancery |
English Reports Citation: 46 E.R. 291
BEFORE THE LORDS JUSTICES.
S. C. 4 Giff. 287; 32 L. J. Ch. 567; 33 L. J. Ch. 318; 9 L. T. 621; 10 Jur. (N. S.), 140; 12 W. R. 294. See Luddy's Trustee v. Peard, 1886, 33 Ch. D. 521.
[44] adams . swobdeb. Before the Lords Justices. Nov. 21, 23, Dec. 22, 18G3. [S. C. 4 Giff. 287 ; 32 L. J. Ch. 567 ; 33 L. J. Ch. 318; 9 L. T. 621 ; 10 Jur. (N. S.), HO; 12 W. R. 294. See Lttddy's Trustee v. Peard, 1886, 33 Ch. D. 521.] A purchase was made from the assignees of a bankrupt, in which their solicitor was interested, so as to invalidate the transaction. Afterwards the bankruptcy was by arrangement annulled, without prejudice to any sale or other act done by the assignees, and the bankrupt by deed, to which he and the assignees alone were parties, ratified their acts, relieved them from all claims in respect of them, and agreed to execute all further deeds necessary for confirming them. After this the bankrupt filed a bill against the purchasers to impeach the sale to them. The Defendants alleged that the Plaintiff had obtained the annulling order by fraudulent suppression. Held, that by virtue of the annulling order the Plaintiff had the right to impeach all sales on any grounds on which they might have been impeached if the bankruptcy had not been annulled, and that the deed executed by him did not affect this right. Held, also, that the annulling order being in force, this Court must treat it as valid, and could not enter into the question whether it was obtained by fraud. Held, therefore, that the sale must be set aside, but without prejudice to the question whether the creditors, or the late assignees on their behalf, were not entitled to claim the benefit arising from setting it aside. Held, also, that the purchaser must account, as a mortgagee in possession, for rents received or which but for his wilful default he might have received, though no case of wilful default was made by the bill. This was an appeal by the Plaintiff from an order of the Vice-Chancellor Stuart dismissing his bill. On the 24th of July 1856 a petition for adjudication was filed against Samuel Adams, under which he was adjudicated a bankrupt on the following day. The property to which this suit related, being a life interest of the bankrupt in certain real estates, and a policy of assurance on his life, was put up for sale by auction on the 21st of October 1856, and was bought in at 2980. The property was put up again on the 23d of December 1856, and was bought by the Defendant Eee, for 2020. This was under an arrangement by ftee with the Defendant Sworder, who was a member of the firm of solicitors who acted for the assignees, that the purchase should be made for the joint benefit of Ree and Sworder. The sale was completed on the 6th of 292 ADAMS V. SWOEDEB J DB 0. J. * 8.45. August 1857. There was evidence to shew that Adams knew throughout of Sworder's interest in the transaction. [45] The bankrupt passed his last examination ; but on the 18th of June 1858 his certificate was refused without protection, on the ground of his having been guilty of fraudulent concealment of parts of his property. On the 6th of January 1860 the bankrupt, who was still uncertificated, made an offer of compromise to his creditors, which, on the 10th of February, was accepted by them under the provisions of the "Bankruptcy Law Consolidation Act, 1849," sect. 230. The substance of the proposal was, that Adams should pay to the credit of the bankruptcy 500, to be distributed among his creditors in full satisfaction of all their claims, this sum being provided by a friend for that purpose; and that thereupon the adjudication should be annulled and the petition for adjudication dismissed, without prejudice to anything that had been done under the adjudication, and without prejudice to the right of the creditors to the 500. The 500 was paid into the bank to the credit of the bankruptcy in the same month of February 1860. By indenture, dated the 14th of March 1860, made between the bankrupt of the one part, and the assignees of the other part, reciting the proceedings in bankruptcy and the arrangement for composition; and after further recitals shewing that 500, the amount of the composition, had been paid, and that the assignees since the adjudication had made various sales of the bankrupt's property ; and reciting "that it had been agreed between and by the Plaintiff and the said assignees, that in order fully and effectually to protect and indemnify the said assignees, their heirs, executors, administrators, estates and effects, and all persons claiming under them, from and against all loss, liability and risk of what nature or kind soever, which might at any time thereafter be [46] sustained or incurred by them or any of them, their or any of their heirs, executors or administrators, estates or effects, by reason or on account of any acts or things whatsoever done or authorized to be done by them the said assignees or any of them, in their character as such assignees, and in order to ratify and confirm all such acts and things," the Plaintiff should execute the now stating indenture in manner thereafter mentioned; and reciting that it waa intended that immediately after its execution, application should be made to the Commissioner to supersede or dismiss the petition for adjudication: it was witnessed, that in pursuance of the recited agreement, the Plaintiff ratified and confirmed all and singular the sales, purchases, &c., made, done, &c., by or with the order of the assignees or any of them, in their character as such assignees, of, in, about, or in relation to the estate and effects of the Plaintiff. And the Plaintiff declared " that every such sale, purchase, &c., should be thenceforth as binding on him as if the said bankruptcy had not taken place." The indenture then contained a general release by the bankrupt to the assignees of all claims against them in respect of any sale, purchase, contract or act done, authorized or sanctioned by the assignees, and a covenant by him to indemnify them against all consequences of their sales, contracts and acts; and if the bankruptcy should be annulled, to make, execute and perfect all necessary deeds, acts and conveyances for confirming the now stating indenture, and the transactions, matters and things to-which it related. On the 4th of May 1860 an order was made in the bankruptcy as follows:-- "Upon application this day made to me by the above-named bankrupt, and upon reading an order of this Court bearing date the 25th of July 1856, whereby the [47J said bankrupt was adjudged bankrupt; also my certificate bearing date this dayv made in pursuance of the general rules and orders of this Court relating to compositions after bankruptcy; also a certificate dated the 23d of February last, of the-payment into the Bank of England by the said Samuel Adams of the sum of 500, in pursuance of his proposal; also an indenture of release and indemnity to the assignees. bearing date this day (NoTE.-An erroneous reference to the deed of 14th March), and made between the said bankrupt of the one part, and William Whitmore, John Green Elsey and Joseph Lawrence, assignees of the estate and effects of the said Samuel Adams, of the other part, and which indenture has been executed by the said bankrupt; and Mr. Lawrence, solicitor to the assignees, appearing and consenting to this order: it is hereby ordered that the said adjudication of bankruptcy be and the-game is hereby annulled, and that the petition for adjudication be and the same is. SDEO.J.ftS.48. ADAMS V. SWORDER 293 hereby dismissed; but this order is expressly without prejudice to any sale made, or or any other act, matter or thing done, by the assignees or otherwise under the said adjudication; and also without prejudice to the right of the creditors to receive the said sum of 500, and any other sum in the hands of the official assignee by way of dividend or composition on their said debts." In July 1861 Adams filed his bill against Sworder and Ree to have the purchase of December 1856 set aside. The Vice-Chancellor dismissed the bill without costs in March 1863. After this decision the assignees applied to the Court of Bankruptcy to have the order of the 4th of May 1860 discharged, on the ground that it appeared from the cross-examination of Adams in this suit that he had [48] concealed property to a considerable extent, of which they were not aware when they consented to the making of that order, and that their consent had thus been obtained by fraud. The Commissioner made an order directing an examination into the circumstances, but the Lord Chancellor on appeal reversed this decision on the ground that the assignees having been well aware before May 1860 that the bankrupt had been guilty of fraudulent concealment of property, could not be heard to say that they had consented to the order then made on the faith of hia having made a full disclosure of his property. It having thus been settled that the assignees could not impeach the order annulling the bankruptcy, Adams appealed against the order of the Vice-Chancellor dismissing his bill. Mr. Malins and Mr. Herbert Smith, for the Appellant. The sale in this case is one which cannot stand, being made at an undervalue to an agent of the solicitor of the vendors, the vendors not knowing that the solicitor had any interest in the transaction. According to all the authorities such a transaction cannot be supported ; Ex parte James (8 Ves. 337); Ex parte Reynolds (5 Ves. 707); Exparte Baije (4 Mad. 459); Ex parte Bennett (10 Ves. 381); Ex...
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