Re A Debtor (No. 21 of 1950) (No. 2)ex parte the Petitioning Creditors v The Debtor
| Jurisdiction | England & Wales |
| Date | 1951 |
| Court | Divisional Court |
Bankruptcy - Receiving order set aside - Petitioning creditors ordered to pay costs - Amount of debt greater than that of costs - Notice of intended execution by debtor to recover costs - Intimation by creditors of intention to present fresh petition - Application by creditors for stay of execution of order to pay costs -
R. S. C., Ord. 65, r. 14, provides: “A set off for damages or costs between parties may be allowed notwithstanding the solicitor's lien for costs in the particular cause or matter in which the set-off is sought”.
The Divisional Court allowed a debtor's appeal against a receiving order made in the county court, set aside that order because the bankruptcy proceedings had been defective, and ordered the petitioning creditors, a company, to pay the debtor the costs of the county court proceedings and of the appeal, amounting to about 72l. The petitioning creditors were judgment creditors of the debtor for 409l. 1s. 4d., the balance of a larger sum (for which they had obtained judgment). The debtor's solicitors told the petitioning creditors that it was intended to issue execution against the petitioning creditors for the sum owing in respect of the order to pay costs. The petitioning creditors applied to the Divisional Court for a stay of execution in respect of that order and stated their intention to present a fresh bankruptcy petition. For the debtor it was contended that to grant a stay would amount to allowing a set-off and that it was contrary to bankruptcy practice to allow a set-off in the case of a sum owing for bankruptcy costs except in the case of sums owing for other costs in bankruptcy.
Held, (1.) that the court had a discretion to allow a set-off and therefore power to grant a stay of execution if it thought fit; and (2.) that the case was one in which a stay of execution ought to be granted.
Reid v. Cupper [
APPLICATION by petitioning creditors.
On November 13, 1950, an appeal by the debtor to the Divisional Court against a receiving order which had been made in Windsor county court was allowed. The receiving order was set aside on account of detects in the bankruptcy proceedings and the petitioning creditors, a company, were ordered to pay to the debtor the costs of the proceedings in the county court and of the appeal, amounting to some 72l. The company (the applicants) were judgment creditors of the debtor for 409l. 1s. 4d., the balance of a larger sum (for which they had obtained judgment). The debtor's solicitors notified them of an intention to issue execution against the applicants to recover the sum owing in respect of the order for costs.
The applicants now applied to the Divisional Court for a stay of execution in respect of the order for payment of costs and intimated that they were proposing to present a fresh bankruptcy petition against the debtor.
K. G. Jupp for the applicants. In this case the court certainly ought to grant a stay of execution, notwithstanding that the view may be taken, on behalf of the debtor, that to do so would be tantamount to allowing a set-off, and that a set-off of bankruptcy costs against anything save other bankruptcy costs is against practice. Even formerly it was only the fact that the solicitor had a lien for costs that precluded set-off, though it must be admitted that that was a very strong bar indeed: Ex parte ClelandF1; Ex parte GriffinF2. Sixteen years later, Vaughan Williams, J., in In re BassettF3, protested against his inability to allow costs of an appeal from a county court to the High Court in a winding, up to be set off against costs of an appeal between the same parties from the county court to the High Court in bankruptcy proceedings. He saidF4: “I do not think that I ought to allow this appeal. I should much like to allow it here, because it would be a most just thing to do”. In In re A DebtorF5, Bigham, J., held that there could be no set-oft, in bankruptcy proceedings between a creditor and his debtor where creditor made costs payable to him part of the debt on which he based his bankruptcy petition against his debtor. In In re DrummondF6 a creditor's bankruptcy petition based on a judgment debt was dismissed because he failed to establish the act of bankruptcy alleged. The creditor failed to comply with an order to pay the debtor's taxed costs of the petition, and, on the debtor's taking out, under the
Against this line of cases beginning with Ex parte ClelandF7, however, which were based on rules prohibiting interference with a solicitor's lien by set-off, there developed another line. Thus, in Blakey v. LathamF8, Kay, J., said that the supposed equity of the other party's solicitor was the most extraordinary equity he had ever heard of.
Order 65, r. 14, which replaced the rules that forbade the interference, is conclusive in favour of the applicants in the present case. The Annual Practice, 1950, Vol. 1, at p. 1460, describes it as not applying to the costs of independent proceedings — which, of course, does not make it inapplicable in the present case — and cites Blakey v. LathamF9 and David v. ReesF10. The Annual Practice, however, immediately goes on to state that “in independent actions the court has discretion to allow the set-off either subject to or notwithstanding the lien …” for which it cites Reid v. CupperF11, and quotes the statement of Younger, J., in Puddephatt v. Leith (No. 2)F12, that “the old views as to the sanctity of a solicitor's lien no longer obtain”, which view the Court of Appeal accepted in Knight v. KnightF13.
Thus, in the present state of the authorities, the court certainly has discretion to allow a set-off and, therefore, power to order a stay of execution where it thinks fit to do so. A solicitor has other means than a lien of being sure of his costs: for example, it is quite open to him to make certain that the client will be able to pay the costs and, if he finds that he will not, to refuse to take his case: Pringle v. GloagF14.
This case is pro-eminently one in which it would be proper for the court to order a stay of execution. To allow execution to proceed would work an injustice, especially in view of the applicants' expressed intention to present a fresh bankruptcy petition.
Claud Duveen for the debtor. A stay of execution ought not to be granted. In Williams on Bankruptcy (16th ed. 1949), at pp. 198–199, the effect of Ex parte GriffinF15, In re BassettF16 and In re DrummondF17 is set out, and there follows the statement “Costs given in bankruptcy can therefore only be set off against other bankruptcy costs”. That holds good whatever be the effect of Ord. 65, r. 14. In the present case, all that the applicants ought to be allowed to do is to have their debt rank with the debts of other creditors. If a stay of...
To continue reading
Request your trial