Bailey and Others v Edwards

JurisdictionEngland & Wales
Judgment Date13 January 1864
Date13 January 1864
CourtCourt of the Queen's Bench

English Reports Citation: 122 E.R. 645

IN THE COURT OF QUEEN'S BENCH AND THE EXCHEQUER CHAMBER

Bailey And Others against Edwards

S. C. 34 L. J. Q. B. 41; 9 L. T. 645; 11 Jur. N. S. 134. Applied, Ewin v. Lancaster, 1865, 12 L. T. 633. Referred to, Phillips v. Foxall, 1872, L. R. 7 Q. B. 680; Oriental Financial Corporation V. Overend, Gurney & Company, 1871-74, L. R. 7 Ch. 145; L. R. 7 H. L. 348.

[761] bailey and others against edwards. Wednesday, January 13th, 1864. -Principal and surety. Discharge of surety. Deed of arrangement. Equitable plea.-1. By a deed of arrangement under The Bankruptcy Law Consolidation Act, 1849, it was proposed that P. should carry on his business under inspectorship for the benefit of all his creditors; that the plaintiffs, creditors of P., who held various securities for their debt, should be paid a certain sum in full, and a composition on the residue of their debt by instalments, they covenanting not to (a) The defendant brought error on this judgment, but the case was afterwards settled. 646 BAILEY V. EDWARDS 4 B. & S. 762. enforce claims against any parties to the bills in their hands who, as between themselves and P., were not then liable on the bills ; but the rights of the plaintiffs against all parties to the bills in their hands (whether liable or not to P. as between him and such parties), were not to be prejudiced in the event of the proposals not being carried into effect. It was provided that the creditors (except as mentioned in the proposal) who ahould execute the deed, atid who should hold any securities upon which any other persons should be liable, should not be prejudiced as to their rights and remedies against such persons: and that the deed should not extend to prevent the creditors parties thereto, other than as provided for in the proposal, from enforcing or otherwise obtaining the full benefit of any mortgage, &c., upon any estate or effects, whether belonging to P. or any other person, or from suing any other persons who might be liable or accountable for th& payment of all or any part of their debts either as drawers, indorsers or acceptors of any bills of exchange, &c. Under this deed, which was in force for more than two years, time was given to P. the principal debtor ; ha then made default in paying the first instalment. In an action against the acceptor of one of the bills of exchange, of which the plaintiffs were holders at the time when the deed was executed, and which the defendant had accepted for the accommodation of P., though the plaintiffs had no notice of that fact: held, that the effect of the deed was to discharge the defendant in equity, and therefore there was an equitable defence to the action.-2. Qusore, whether, in order to enable a surety to raise at law a defence on the ground that time has been given to the principal, it is necessary to shew that the original contract between the plaintiff and defendant was that of creditor and surety? [S. C. 34 L. J. Q. B. 41; 9 L. T. 646; 11 Jur. N. S. 134. Applied, Ewin v. Lancaster, 1865, 12 L. T. 633. Referred to, Phillips v. Foxall, 1872, L. R. 7 Q. B. 680; Oriental Financial Corporation v. Overeml, Gurney & Company, 1871-74, L. R. 7 Ch. 145; L. R. 7 H. L. 348.] Declaration by the plaintiffs, as indorsees of a bill of exchange, dated June 4th, 1857, payable four months after date, drawn by John Price and accepted by the defendant, indorsed by John Price to certain persons, designated by the name and style of T. P. & D. Price, and indorsed by them to the plaintiffs: with counts for interest and on accounts, stated. Sixth plea to the first count, for a defence on equitable grounds, that there never was any value or con-[762]-sideration for the acceptance of the bill of exchange by the defendant, or for the making or indorsement thereof by John Price, or for John Price or T. P. & D. Price holding the same ; that at the time of the indorsement of the bill by T. P. & D. Price to the plaintiffs, the defendant and John Price were merely sureties for any value given or to be given by the plaintiffs to T. P. & D. Price for the bill; whereof the plaintiffs had notice when the bill was first indorsed to them, and they took the bill from T. P. & D. Price, on the terms that the defendant and John Price should be liable to them on the bill as sureties only for T. P. & D. Price : and after the indorsement of the bill to the defendants, and whilst they were holders thereof, and after the bill had become due, to wit, on the 17th November, 1858, by an indenture then made between T. P. & D. Price, by their names of Thomas Prothero Price and David Price, of the first part, the said Thomas Prothero Price of the second part, T. G., C. L. and W. M. C. of the third part, the plaintiffs and one W. W. of the fourth part, J. P. de Winton, D. Evans, J. Evans and W. de Winton of the fifth part, and the several persons whose names and seals were thereunto subscribed and set in the first schedule thereunder written, being creditors of the said Thomas Prothero Price and David Price, of the sixth part, and the several persons whose names and seals were thereunto subscribed and set in the second schedule thereunder written, being separate creditors of the said Thomas Prothero Price, of the seventh part ; After reciting, according to the facts, a petition and proceeding for arrangement, between the said Thomas Prothero Price and David Price, under The Bankruptcy Law Consolidation Act, 1849, it was proposed and agreed by the parties thereto that certain collieries and [763] works of Thomas Prothero Price and David Price should be carried on under inspection for a certain time therein mentioned, and that the plaintiffs and W. W. should be paid 87001. in full and a composition on the residue of their debt, 4B.&S.764. BAILEY V. EDWARDS 647 in the manner therein mentioned, they thereby engaging not to enforce claims against any parties to the bills in their hands, who as between themselves and Thomas Prothero Price and David Price were not then liable on such bills; and it was thereby provided that the rights of the plaintiffs and W. W. should in no way be prejudiced in the event of certain proposals made by Thomas Prothero Price and David Price, not being carried into effect. Averments. That the deed was executed by Thomas Prothero Price and David Price, and by the plaintiffs and W. W., and by divers other creditors of Thomas Prothero Price and David Price; and that the bill of exchange iti the first count mentioned was one of the bills referred to in the deed, and was then in the hands of the plaintiffs and W. W., and the defendant was then a party to the bill, who was not liable to Thomas Prothero Price and David Price thereon ; that the proposals of Thomas Prothero Price and David Price in the deed mentioned had been fully carried into effect, and that the deed was made and entered into between the plaintiffs and Thomas Prothero Price and David Price, without the consent of the defendant. Issue. On the trial, before Blackburn J., at the Middlesex Sittings iti Hilary Term, 1863, a verdict waa directed for the defendant on the sixth plea, with leave to move to enter a verdict for the plaintiffs for 1261. 6s. 10d., on the ground that the substance of that plea was not proved. The facts proved and admitted at the trial are fully [764] stated in the judgment of the Court, post, p. 766. Power was also reserved to the Court to amend the plea if necessary. In the same Term, Coleridge obtained a rule accordingly. The caae was argued in Michaelmas Term, 1863 (November 3rd and 21st), before Cockburn C.J., Wightraan, Blackburn and Mellor JJ. Lush and Gibbons shewed cause.-The clauses in the deed of arrangement by which the plaintiffs bound themselves so long as the deed continued in force not to enforce claims against any parties to the bills in their hands, who, as between themselves and the petitioning debtor were not then liable on such bills, and by which they reserved their rights against parties to the bills in their hands in the event of the deed not being carried out, shew that they knew that some of the bills were accommodation bills, and put them in the same situation as if they knew that the defendant was surety. Then the plaintiffs, by giving time to the principal debtors without the knowledge of the surety, placed the latter in the position of having no remedy against the principal debtors until they had been divested of their property; and therefore the defendant is discharged. [They cited Poaley v. Harradine (7 E. & B. 431); Strmig v. Fouler (17 C. B. 201, 219), per Williams J.; Rees v. Berrington (2 Ves. Jun. 540, 543), per Lord Loughborough ; Ex parle Glendinning (Buck's Ca. in Bankruptcy, 517, 519-520), per Lord Eldon ; Smith v. Winter (4 M. & W. 454); Moss v. Hall (5 Exch. 46, 49), per Parke B.; Fmzer v. Jordan (8 E. & B. 303).] [765] Coleridge and Gray, contra.-The surety is not discharged by this composition deed, as it expressly reserves the remedies of all the creditors against him, and prevents the rights of the surety against the debtor being impaired; Ke&rsley v. L'ole (16 M. & W. 128, 135), per Parke B.; Owen v. Haman, in D. P. (4 H. L. Ca. 997, 1037-8), per Lord Cranworth C., who did not acquiesce in the opinion of Lord Truro (3 Mac. & G. 378), that in a contract to give time to the principal a reservation against the sureties was not effectual. Whenever in the contract between the creditor and debtor it is expressed that the surety is not to be discharged, the law construes a release to the principal debtor as only a ^covenant not to sue. And such a covenant will not discharge the surety, if there is, a stipulation against that discharge ; Price v. Barker (4 E. & B. 760, 779, 780). [Cockburn C.J. In that case the Court only said what the legal effect of the deed was. But what was the equitable effect? Blackburn J. In Orme v. Young (Holt N. P. C. 84, 86), Gibbs C.J. said, "This defence is borrowed from a Court...

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    ...but I should, I think, refer to a passage in the judgment of Mr. Justice Blackburn in Bailey v. Edwards (1864) 4 B. & S. 761 and Volume 122 E. R. 645. Addressing himself to the question of principle Mr. Justice Blackburn said at pages 770 and 649 respectively as follows: "The principle upon......

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