Re Cohen, A Bankrupt
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE UPJOHN,LORD JUSTICE PEARSON |
| Judgment Date | 13 January 1961 |
| Judgment citation (vLex) | [1961] EWCA Civ J0113-2 |
| Court | Court of Appeal |
| Date | 13 January 1961 |
[1961] EWCA Civ J0113-2
In The Supreme Court of Judicature
Court of Appeal
The Master of The Rolls
(Lord Evershed),
Lord Justice Upjohn and
Lord Justice Pearson
Appellant
Mr MUIR V.S. HUNTER (instructed by Messrs E.B.V. Christian & Co., Agents for Messrs Joseph Lester & Co., Leeds) appeared on behalf of the Appellant.
Mr DOUGLAS S. FORRESTER-PATON (instructed by Messrs Paisner & Co., Agents for Messrs J.S. & P. Walsh & Co., Leeds) appeared on behalf of the Respondents.
: Like the learned Judges in the court below we feel that we should not render any assistance in this case, or in other cases, by reserving Judgment. As Mr. Justice Danckwerts (as he then was) observed, he thought that the route through the jungle would not be further illuminated by consideration, and I venture to share that view, though I would say at once that the case is a difficult one, and rendered more difficult by decisions extending over nearly a century; and we have been much indebted to Mr. Muir Huntor for putting the point before us clearly, and referring us to many of those decisions on a point which has never in fact come in this form for decision before the court before.
The appellant, the bankrupt, for whom Mr. Muir Huntor appears, is one who, under his father's will, enjoys a life interest in what represents the residuary estate of his father. As we understand, the estate is at the moment invested partly in real property, which has been lot, and partly in shares in a building society. So that the income to which the bankrupt was entitled (subject to the bankruptcy) consisted in part of the rent, less proper deductions, including presumably schedule A. tax, and in part of dividends on the shares.
It has been the contention of the bankrupt that the income which I have described is income vested, it may be, in the trustee, but which none the less the trustee cannot deal with in any way save by application under the terms of what is now section 51, sub-section (3) of the Bankruptcy Act 1914.
It will be desirable that I should road the substance of both that sub-section and its predecessor. Sub-section (1) is as follows: "(1) Where a bankrupt is an officer of the army or navy, or an officer or clerk or otherwise employed or engaged in the civil service of the Crown, the trustee shall receive for distribution amongst the creditors so much of the bankrupt's pay or salary as the court, on the application of the trustee, with the consent of the chief officer of the department under which the pay or salary is enjoyed, may direct, (2) Where a bankrupt is in receipt of a salary or income other than as aforesaid, or is entitled to any half-pay, or pension, or to any compensation granted by the Treasury, the court, on the application of the trustee, shall from time to time make such order as it thinks just for the payment of the salary, income, half-pay, pension, or compensation, or of any part thereof, to the trustee, to be applied by him in such manner as the court may direct".
It may be taken (and it has certainly been conceded in argument before us) that if a subject-matter is within the scope of sub-section (2) - that is to say, if it is a salary or pension, by way of example - then albeit that the subject-matter vests in the trustee, the trustee's right or power to deal with the subject-matter is qualified or limited by the terms of sub-section (2). It follows in the present case, if Mr Muir Hunter is right, that the trustee in bankruptcy could not dispose of the life interest of the bankrupt; his only right and only power would be to make application to the court that the whole, or such part as the court might think fit, of this revenue or source of income should be applied by the trustee towards meeting the bankrupt's debts.
The problem being as I have stated it from the facts resolves itself, for a reason which I hope to justify, to this short point: Is this income, are these dividends and rents, income in the nature of salary that is, income possessing the same or similar characteristics as salary? I fully accept, of course, that in posing the question thus I am assuming a premise, namely, that the word income has a limited significance in this sub-section. That premise I hope to justify shortly; but assuming it for the moment, then for my part I answer the question (and I answer it without hesitation, as did the learned Judges in the court below) negatively; that is to say in my view the income here the subject of debate is not income of the kind I have mentioned, and therefore is not within the scope of section 51, sub-section (2).
I arrive at that conclusion as a matter of common sense and common use of language. Mr Muir Hunter in his reply suggested that this income, these dividents and rents, could be regarded as truly analogous to a pension. I cannot accept that argument. As a matter of sense and of language, I do not think the income is so analogous. If that view is right, it is, of course, the conclusion of the case, and for my part I attempt no further definition of this phrase "income other than as aforesaid". I rest my conclusion on the significance of the word "income" which I have already indicated, and which I derive from the cases which I shall presently mention.
The result (and particularly my unwillingness further to expand the meaning of this subsection) may perhaps be unfortunate; but I think it is, as the law has developed over the past century, inevitable. Certainly so far as this case is concerned I am, I confess, satisfied in my own mind that the answer which I have given is in accordance with the intention of Parliament in the legislation now before us.
There has been some discussion of the matter of public policy, the unruly horso referred to in Lord Parker's Speech in one of the cases to which I shall later allude. I certainly prefer not to attempt any riding of that horso in this case; but if you look back over the history of this legislation, as we were invited and assisted to do by Mr Forrester-Paton, I am much confirmed in the view I have formed that to hold otherwise than I do in this case would be to defeat the intention of Parliament; and, as I have mentioned public policy, to defeat also that element of public policy referred to by Lord Atkinson in the same House of Lords case, namely, that prima facie if a man becomes bankrupt, his assets should be available for the discharge of his debts.
If you go back to the Bankruptcy and Insolvency Act of 1861, (the first Bankruptcy Act, we were told, to affect non- traders) you find there, as the clearest possible and Inevitable conclusion that a life interest actually enjoyed by a bankrupt is something which it would be the duty of the trustee in bankruptcy to realise for the benefit of the creditors. I do not think I need take time in lengthy citation, but that view seems to me to flow beyond a peradventure from the terms of sections 115 and 127 of that Act. To illuminate it a little further, it was by section 115 that provision was made preventing a trustee from disposing of a life interest until it had fallen into possession. Section 127 laid down the suty of the trustee to realise the assets for the benefit of the creditors, and the Act itself makes it quite clear that the property of the debtor included property of every nature and kind. That Act contains in section 134 the ancestor of what is now section 51, sub-section (1). Though the language was not the same, it was directed to deal with the pay, half-pay, salary etc. of persons in the service of the State; and it may well be that the subject-matters that section 134 dealt with were subject-matters which by common law were not assignable.
In 1869 the bankruptcy legislation was further amended and consolidated, and there was then added to the successor of section 134, namely, section 89, what is the ancostor of section 51, sub-section (2), namely, section 90 providing for the case where the bankrupt is in receipt of a salary or income "other than as aforesaid", the language corresponding in other respects with what is now section 51, sub-section (2). But I note that in section 90 there is no such catalogue as you now find in section 51, sub-section (2), that is to say, no reference to items such as half-pay, pension or compensation. The matter stood with the more general language, "salary or income other than as aforesaid". In the Act of 1883, you find in sections 15 and 17 language substantially corresponding to the present two sub-sections of section 51.
That is a brief sketch of the legislation, and I only add this, that the present sections of the Bankruptcy Act relative to property vesting in the trustee, and so on, are in the widest possible terms as were the corresponding terms in the earlier legislation; and it has been inherent in Mr Muir Hunter's argument (and accepted, of course, by Mr Forrester-Paton) that section 90 is not to be limited to cases in which the subject-matter - the salary or income - is a subject-matter not so vesting in the trustee.
Looking back over the history of the decided cases, it seems to me, if I may say so, that there has boon some confusion on this head. When I come to the case of re Landau, which is of some importance, this court appears to have assumed that the subject-matter there before the court, namely, a maintenance award under an order of the divorce court, was not a subject-matter vesting in the trustee. It may be that (as a matter of historical interest) the special provision which I mentioned in section 134 of the Act of 1861 was intended to be and...
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