Keet, Re, ex parte Official Receiver
| Jurisdiction | England & Wales |
| Date | 1905 |
| Year | 1905 |
| Court | Court of Appeal |
Bankruptcy - Adjudication - Annulment - Debts - Release - “Payment in full” - Cash payment - Jurisdiction - Discretion -
Sect. 35 of the Bankruptcy Act, 1883, which requires, as a condition precedent to the exercise of the jurisdiction to annul an adjudication in bankruptcy, proof “that the debts of the bankrupt are paid in full,” is not satisfied by an unconditional release given to the bankrupt by his creditors. To satisfy the section the “debts” – including at least all debts which have been actually and properly proved in the bankruptcy — must have been fully paid in cash.
The bulk of a bankrupt's creditors who had proved their debts in the bankruptcy executed a deed releasing him absolutely, without any consideration, from his debts owing to them, and agreed to withdraw their proofs; the few remaining creditors he paid in full in cash. He then applied, under s. 35 of the Bankruptcy Act, 1883, for the annulment of his adjudication on the ground that his debts had been “paid in full”:—
Held (reversing the decision of the Divisional Court, Bigham and Darling JJ.), that there had been no “payment in full” within the meaning of the section.
Per Stirling L.J.: The jurisdiction conferred upon the Court by s. 35 to annul an adjudication is discretionary; and, in the absence of special circumstances, it would not be a good exercise of that discretion to make an order for annulment where, if the bankrupt were applying for his order of discharge, an order of discharge would not be granted.
APPEAL by the official receiver against the decision of a Divisional Court (Bigham and Darling JJ.) sitting in Bankruptcy.
An order had been made by the registrar of the county court at Leeds annulling the bankruptcy of the above debtor, W. H.
Keet, in these circumstances. The debtor was an outside broker, and on September 24, 1903, a receiving order was made against him on a creditor's petition. On October 1, 1903, he was adjudicated a bankrupt. His liabilities were 9630l., and, his assets being only 189l., an order was made for the summary administration of his estate, and the official receiver became the trustee in the bankruptcy.
Only one dividend of 2d. in the pound had been declared, but, pending the decision of the present question, had not been actually paid.
On September 20, 1904, all the creditors, except a few whose debts amounted to 41l., being desirous of helping the debtor to start again in business, executed a deed whereby, without any consideration, they absolutely released the bankrupt from their debts and agreed to withdraw their proofs. In a report made by the official receiver at the request of the Court of Appeal on the conclusion of the arguments on the present appeal, it was stated that the bankrupt personally obtained all the signatures to the release, and at the same time obtained the consents of the creditors to their proofs being expunged: that the release and the consents were taken to the registrar's office by the bankrupt personally or by his solicitors, along with the application to annul and his affidavit, the consents being exhibited as annexed thereto: that the object of filing the consents with the proceedings appeared to be to explain the fact that the dividend had not been paid, and under what circumstances the proofs of the debts remained on the Court file: and that no application to expunge the proofs to which the consents related had been made.
With regard to the remaining creditors whose debts amounted to 41l., those were paid in full. Thereupon, on September 24, 1904, the bankrupt applied to the county court to annul his adjudication, putting in evidence the deed of release and proving by affidavit payment of the 41l. in full; and the registrar made the order.
The official receiver then appealed to the Divisional Court on the ground that the bankrupt had not complied with s. 35 of the Bankruptcy Act, 1883 (46 & 47 Vict. c. 52), which provides, by sub-s. 1, that “Where in the opinion of the Court a debtor ought not to have been adjudged bankrupt, or where it is proved to the satisfaction of the Court that the debts of the bankrupt are paid in full, the Court may, on the application of any person interested, by order, annul the adjudication.” The Divisional Court dismissed the appeal, holding that the requirements of the section had been complied with. In delivering judgment Bigham J. said that, in his opinion, “the debts of the bankrupt” had been “paid in full,” or that which was equivalent to payment in full had happened. He did not agree that the payment must necessarily be in coin: he thought it might be in anything that the creditor chose honestly to take in satisfaction of his claim. In the present case there was no reason to suppose that what had been done had not been honestly done, nor did he see any reason to suppose that the bankrupt had misbehaved himself in such a way as to disentitle him to the exercise of the discretion of the Court in his favour.
Darling J. said the words of the statute were not very grammatical and not logical, but he thought that the section meant to apply to debts existing as debts until they were paid, and did not apply to those which were destroyed by another process.
The appeal was accordingly dismissed.
The official receiver appealed to the Court of Appeal.
The appeal was heard on May 19, 1905.
The Attorney-General (Sir R. Finlay, K.C.), and S. G. Lushington, for the Board of Trade. The question is whether there has been here such a “payment in full” of the debts of the bankrupt as entitles him to an annulment of his adjudication under s. 35, sub-s. 1, of the Bankruptcy Act, 1883 (46 & 47 Vict. c. 52). It is submitted that the present case is not covered by the sub-section; it deals with a bankrupt against whom no debts are any longer existing, and they can only cease to exist by their having been “paid in full.” That distinguishes the present case from In re E. A. B.F1, which related to a scheme of arrangement submitted under s. 3 of the
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