Re a Judgment Summons (No. 25 of 1952)ex parte Henlys Ltd

JurisdictionEngland & Wales
Judgment Date26 January 1953
Judgment citation (vLex)[1953] EWCA Civ J0126-2
Docket NumberIn re a Judgment Summons No. 25 of 1952
CourtCourt of Appeal
Date26 January 1953

[1953] EWCA Civ J0126-2

In The Supreme Court of Judicature

Court of Appeal


The Master of the Rolls (Sir Raymond Evershed)

Lord Justice Jenkins


Lord Justice Morris

In re a Judgment Summons No. 25 of 1952
Ex Parte the Judgment Creditors
The Judgment Debtor

MR PATRICK O'CONNOR (instructed by Messrs Hewitt, Woollacott & Chown) appeared on behalf of the Appellants (Judgment Creditors).

MR CLAUDE DUVEEN (instructed by Messrs Isadore Goldman & Son) appeared on behalf of the Respondent (Judgment Debtor).


I will ask Lord Justice Jenkins to deliver the first Judgment.


This is an appeal from an Order of Mr Justice Harman dated the 20th October, 1952, dismissing a Judgment Summons under section 5 of the Debtors Act, 1869, issued against the Debtor on the application of theJudgment Creditors in respect of £290. 3s. 11d., being the unsatisfied balance of a judgment debt and costs amounting to £449. 16s. 6d.


The Judgment Debt in question had previously been the subject of abortive proceedings by the Judgment Creditors against the Debtor in Bankruptcy, and the issue in the appeal is in effect whether the learned Judge was right in holding as he did that in view of the course and outcome of those proceedings he ought not in the exercise of his discretion to entertain the Judgment Creditors' application under the Debtors Act, 1869, in respect of the same debt.


The Judgment to which the Summons relates was dated the 25th April, 1951, and remained wholly unsatisfied on the 16th November, 1951, when a Bankruptcy Notice in respect of it was served by the Judgment Creditors upon the Debtor. The service of this Bankruptcy Notice was followed by negotiations between the parties, the upshot of which was that the Judgment Creditors agreed to withdraw it upon terms that the Debtor should pay £100 forthwith and the balance of the debt by monthly instalments of £50 payable on the 1st December, 1951, and thereafter on the 1st of each calendar month until the whole amount was satisfied. These terms were offered on behalf of the Judgment Creditors by a letter from their Solicitors to the Debtor's Solicitors dated the 20th November, 1951, which concluded: "If your client accepts the proposition we shall be glad to receive cash for £100 or a draft or your cheque by return, and confirmation that the monthly arrangement will be adhered to".


This offer of the terms I have mentioned was accepted on behalf of the Debtor by his Solicitors on the following day (21st November, 1951) both orally and by a letter enclosing their cheque for the initial payment of £100.On the 22nd November, 1951, the Judgment Creditors' Solicitors replied acknowledging the Debtor's Solicitors' cheque and insisting upon the introduction into the bargain embodied in the two earlier letters of the following new term: "We must also insist that our additional costs of the Bankruptcy Notice and these arrangements be paid by your Client, and as we have had to instruct Messrs Flowerdows to serve and we have incurred expense thereby in addition to the expense of preparing and issuing the Bankruptcy Notice and the subsequent correspondence with you; out costs will be 12 guineas which must be added to the amount of the debt". To this new demand the Debtor's Solicitors replied on the 23rd November, 1951, enclosing the 12 guineas with the following comment: "… as our client cannot afford to commit an act of bankruptcy or run the risk of having a bankruptcy petition presented against him it is with great reluctance that we enclose you cash for the 12 guineas demanded by you in the last paragraph of your letter".


In the course of the hearing before us it was argued (though perhaps somewhat faintly) on behalf of the Judgment Creditors that inasmuch as the agreement for payment of the debt by instalments was concluded before the demand for the 12 guineas costs was made, the payment of that sum by the Debtor was a purely voluntary payment forming no part of the conditions upon which the Bankruptcy Notice of 16th November, 1951, was withdrawn.


I cannot accept this argument. It is plain from the Debtor's Solicitors' letter of the 23rd November that they regarded the Debtor as having no option but to comply with the demand for the 12 guineas if he was to stave off the prospect of being after all made bankrupt on a petition by the Judgment Creditors. It is also plain from the peremptory terms of the demand for the 12 guineascontained in their letter of the 22nd November that this was precisely the impression which the Judgment Creditors' Solicitors intended to produce, or in other words that they were using the threat of bankruptcy proceedings based on the Notice of the 16th November as a means of exacting payment of the 12 guineas. The threat having been successfully applied, it can hardly lie in the mouths of the Judgment Creditors to say that the payment was a purely voluntary payment on the part of the Debtor, inasmuch as the threat was an empty one which could not have been carried into execution in view of the agreement previously reached for payment of the debt by instalments. It may be that this agreement, which outside bankruptcy would have been a mere nudum pactum from which the Judgment Creditors could have resiled at any time, might have been relied on by the Debtor as a compounding for the judgment debt to the satisfaction of the Judgment Creditors within the meaning of section 2 of the Bankruptcy Act, 1914, and as constituting accordingly a compliance with the Notice of the 16th November; but it was clearly not so treated by either side when the additional demand for the 12 guineas was made and acceded to, and if the point had been raised at the time on behalf of the Debtor it would, I think, have been at least open to argument.


In my view, therefore, the matter must be judged on the footing that as a condition of withdrawing the Bankruptcy Notice of the 16th November the Judgment Creditors exacted from the Debtor 12 guineas in respect of costs which were not lawfully due from him.


The Debtor failed to pay the instalment of £50 due on the 1st January, 1952, and the Judgment Creditors served upon him a second Bankruptcy Notice in respect of that amount, erroneously described as the balance of the judgment. The Debtor complied with this notice, but oncemore failed to pay the instalment due on the 1st February, upon which second default the Judgment Creditors served upon him a third Bankruptcy Notice in respect of the whole balance of the judgment debt and costs. The Debtor failed to comply with this third Notice, and a Bankruptcy Petition founded upon such failure was presented against him by the Judgment Creditors.


The Petition was resisted on the part of the Debtor on the ground that the exaction of the 12 guineas costs as a condition of the withdrawal of the first Bankruptcy Notice amounted to "extortion" within the meaning of the authorities referred to, and therefore, in accordance with those authorities, disqualified the Judgment Creditors from founding a Bankruptcy Petition upon the debt to which the offending bargain related.


This objection was upheld by the Registrar, who on the 2nd May, 1952, dismissed the Petition with costs.


The papers before us include no note of the Registrar's reasons for his decision, but it is not in dispute that this was the ground upon which he proceeded.


The rule applied by the Registrar is well-established so far as proceedings in Bankruptcy are concerned. There have been numerous decisions bearing upon it, but I only find it necessary to refer to two of them.


In Re Shaw (1901) 83 Law Times, page 754, a creditor had fraudulently proposed to the debtor that he (the creditor) should consent to a composition offered by the debtor to his creditors, the debtor secretly paying him the balance of his debt. This fraudulent scheme was rejected by the debtor, and thus frustrated. It was nevertheless held in the Court of Appeal (reversing a decision of the Divisional Court) that the creditor who had made the dishonest proposal (albeit without success), had by his conduct disqualified himself from presentinga Petition founded upon the act of bankruptcy constituted by the debtor's declaration of his insolvency at the meeting of creditors at which the composition had been offered; such conduct constituting "sufficient cause" for refusing a Receiving Order within the meaning of section 7, sub-section 3 of the Bankruptcy Act, 1883. The Petition had been presented jointly by the offending creditor and an innocent one, but inasmuch as the debt owing to each of them taken alone was below the statutory minimum of £50, the innocent creditor could only succeed if the offending creditor was entitled to do so. The facts in In re Shaw were, of course, widely different from those in the present case, but the following passages from the Judgment of Lord Justice Rigby are of assistance: "The question therefore, and I think the sole question in substance in this appeal, is whether the other creditor, Gill, has so conducted himself that he has no right in accordance with the rule in bankruptcy to avail himself of an act of bankruptcy committed on the 23rd July, 1899, that act of bankruptcy being a declaration of insolvency made at a meeting of creditors, or whether he has, within the meaning of cases that have already been decided or according to the principle on which those cases have been decided, precluded himself from relying upon that act of bankruptcy. Now, it was admitted, and could not be denied, that if a creditor goes to his debtor and says: 'You owe me so much, I can proceed in bankruptcy against you; you will not like that; pay me something extortionate, something altogether beyond what you owe me at law, or I will file a petition,' that petition cannot be made the basis of a receiving order;...

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