Re Debtor (No 66 of 1955) ex parte The Debtor v Waite's Trustee
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE JENKINS,LORD JUSTICE HODSON |
| Judgment Date | 13 July 1956 |
| Judgment citation (vLex) | [1956] EWCA Civ J0713-2 |
| Date | 13 July 1956 |
| Court | Court of Appeal |
[1956] EWCA Civ J0713-2
In The Supreme Court of Judicature
Court of Appeal
The Master of the Rolls, (Lord Evershed)
Lord Justice Jenkins and
Lord Justice Hodson
Mr. Muir Hunter (instructed by Messrs. Nye & Donne, Brighton) appeared on behalf of the Appellant.
Mr. J.K. Wood (instructed by Messrs. Haslewood, Hare, Shirley Woolmer & Co., Agents for Messrs. Dosley & Co. Brighton) appeared on behalf of the Respondent.
The judgment I am about to read is the judgment of the Master of the Rolls,
On the 6th October of last year the Respondent, the Trustee in Bankruptcy of E.E. waite, obtained in the Chancery Division of the High Court judgment against the Appellant, S.H, Clark, for the sum of £133. 14. 0d. plus costs. The sum of £133. 14 0d was the amount paid by the Respondent Trustee in July 1955 to the Appellant's bankers in respect of a Guarantee of the Appellant's account with the bankers entered into by the Bankrupt before his bankruptcy, in circumstances hereafter mentioned. The appropriate sum for costs under the judgment was £16. 16.6d, making with the sum of £ 133. 14. 0d a total amount of £150. 10. 6d. In respect of that figure the Respondent Trustee proceeded on the 16th November to serve the Appellant with a Bankruptcy Notice and on the 21st December last the Respondent Trustee presented to the Brighton County Court a Petition for the Adjudication of the Appellant as a Bankrupt, the Petition being founded on the Appellant's failure to comply with the Bankruptcy Notice. A Receiving Order was made upon the Respondent Trustee's Petition on the 9th February 1956; but a stay was also granted which remains in operation until the determination of the present appeal.
The Appellant took certain objections to the form of the Bankruptcy Notice and of the Petition. These objections were, however, rejected by the Divisional Court, and Mr. Muir Hunter did not pursue them before us. The real question argued in this Court arises out of the provisions as to mutual credits and set off in Sec. 31 of the Bankruptcy Act 1914. It appears that certain business dealings took place between the Appellant and the Bankrupt about the end of the year 1951 or early in 1952, some two and three-quarteryears before the Receiving Order made in the case of Waite. The effect of these transactions was that goods were sold by the Appellant to the Bankrupt (waite) but the latter being unable then to pay for the goods, credit was given to him by the Appellant upon the terms that he should guarantee the Appellant's bank overdraft up to an amount of £200. It was argued by Mr. Muir Hunter that the arrangement then made between the Appellant and the Bankrupt was of a much more complex and precise character, and was to the effect that since the overdraft had (as was suggested) been created exclusively for the purpose of enabling the Appellant to acquire the goods sold by him to the Bankrupt, the latter should discharge his indebtedness to the Appellant by paying off the Appellant's debt to the bank. At the date relevant for the purposes of this appeal, the amount of the price of the goods sold to the Bankrupt by the Appellant remaining undercharged was said to be £101. 14. 6d: and it was contended by Mr. Muir Hunter that, according to the terms of the Agreement made between the Appellant and the Bankrupt, the payment by the latter's Trustee of the amount then remaining due to the Appellant's bankers operated automatically to discharge the debt of £101. 14. 6d. so that the right of the Respondent Trustee arising from the suretyship to recover from the Appellant was limited to the balance of £31. 19. 6d., a sum ever with the figure of £16. 16, 6d, added for costs insufficient to support a Bankruptcy Petition
In my judgment it is clear that the Appellant has failed to prove an Agreement having the terms alleged by Mr. Muir Hunter, and such as to result in the automatic discharge of the Appellant's outstanding claim for the sale of the goods. I add that he also failed to prove that in fact the bank overdraft was exclusively referable to the purchase of the goods by the Appellant.
There remains, however, Mr. Muir Hunter's alternative submission founded on Section 31 of the Act, Assuming (he says) that the Appellant's claim for £101. 14. 6d. or whatever be the correct figure, (for the amount I have stated has only been conceded for the purposes of the present argument), remains undercharged, still the sum of £133. 14. 0d. paid by the Respondent Trustee in discharge of the Appellant's bank overdraft together with the sum for costs, making in all £150. 10. 6d. gives rise to a "contra money claim" (to use the phrase of Lord Hanworth, M.R., in Fenton's case hereafter mentioned) arising out of the mutual dealings of 1951/1952 which must, by the imperative terms of Section 31, be set off the one against the other; and so a balance is left in favour of the Respondent Trustee 24/-d. short of the sum required to support a Petition in Bankruptcy.
The relevant terms of Section 31 of the Act are:— "Where there have been mutual credits, mutual debts or other mutual dealings, between a debtor against whom a receiving order shall be made under this Act and any other person proving or claiming to prove a debt under the receiving order, an account shall be taken of what is due form one party to the other in respect of such mutual dealings, and the sum due from the one party shall be set off against any sum due from the other party, and the balance of the account, and no more, shall be claimed or paid on either side respectively."
It is conceded (and the concession is of the first importance in the case) that the relevant date for the application of the Section is that of the Receiving Order made against Waite on the 1st October, 1954. If, then, it is necessary to apply the terms of Section 31 to the state of affairs as they existed on that date, the question would be: "What on that day (viz, 1st October 1954) was due from the one party to the other, that is, the Appellant and the Bankrupt, inrespect of their mutual dealings" On that day there was indubitably due from the Bankrupt to the Appellant, (for which he was entitled to prove, as I understand he has in fact done) the sum of £101. 14 6d. - or whatever was the proper amount outstanding in respect of the goods sold to the Bankrupt. But was there on that date anything "due" from the Appellant to the Bankrupt? In my judgment there was not. The rights of the Bankrupt against the Appellant were the special but contingent rights of a surety who had not been called upon to make any payment by the principal creditor and had not exercised what has been called the protective right of a surety to require the principal debtor to relieve him of his liability by paying the debt owed to the principal creditor. Nor was the case one in which all that remained to be done was to quantify the extent of an obligation already incurred, the amount of the indebtedness when finally ascertained being exclusively referable to an obligation to pay that sun entered into prior to the relevant date; such as was the ease in Re Daintrey 1900 1 Queen's Bench per Division, page 546, (see per Lord Justice Romer at pages 573 and 574) If and when a sum certain became due from the Appellant to the Bankrupt or his Trustee that debt would be referable to the contact of Guarantee with the bank or to the rights flowing from such contract, entered into by the Bankrupt with the bank subsequently to and independently (albeit in consequence) of the mutual dealings between himself arid the Appellant. Moreover, the sum payable would depend on the state of the Appellant's account with the bankers on the date when payment to the bankers was made.
But Mr. Muir Hunter relied before us and in the Divisional Court upon a number of decisions which (as he submitted) entitled him to say that although in truth on 1st October,1954,there was nothing "due" from the Bankrupt, nevertheless the claim subsequently created by the Respondent Trustee's payment to theAppellant's bankers would be related back, as it were, to 1st October, 1954, so as to entitle treat that claim as if it had been then a claim for payment of a sum certain from the Appellant to the bankrupt I should state that the Bankrupt, at the time when he entered into his contract of Guarantee with the Appellant's bankers, had deposited with the bank by way of security the Deeds of certain property belonging to him and that the Respondent Trustee paid off the sum owing to the bankers in order to obtain a release of such Deeds and to allow him accordingly to sell the property free from the bankers' charge and to the best advantage. It follows that the facts in the present case are somewhat special: for in the ordinary case the Trustee of a surety who had become bankrupt would be likely to await a proof by the principal creditor in the surety's bankruptcy and would not take the unusual step (as has been observed, with the assets of the surety's creditors) of paying off in full and before any demand made the amount due by the principal debtor to the principal creditor.
The cases relied upon by Mr. Muir Hunter were fully considered by the Divisional Court and I find it necessary to refer to two only of them. The first is the case of Ex parte Barrett which undoubtedly at first sight lends support to Mr. Muir Hunter's submission. The case is reported, though nowhere very fully, in 12. Law Times page 193, 13 weekly Reporter page 599 end 34 Law Journal (Bankruptcy) page 41. The facts, so far as relevant, are briefly these. Barrett was a contributor as the registered holder of shares not fully paid, of a Company the predecessor in title of which had mortgaged its principal...
To continue reading
Request your trial
-
Secretary of State for Trade and Industry v Frid
...the liquidator's decision on the ground that he was bound by the decision of the Court of Appeal in In re A Debtor (No 66 of 1955), Ex p The Debtor v Trustee of Waite (A Bankrupt) [1956] 1 WLR 1226. A further appeal to Mr David Mackie QC, sitting as a deputy High Court judge, was dismissed......
- Day & Dent Constructions Pty Ltd (in Liquidation) v North Australian Properties Pty Ltd
- Re Charge Card Services Ltd
- Re West End Networks Ltd (in Liquidation), Secretary of State for Trade and Industry v Frid