Claim by trustee for debt due to bankrupt. Protected transactions in bank ruptcy : Effect of above sections. When an execution creditor is protected. 3. The said sum remained due at the date of the said adjudication. intention to prefer, disaffirm the transaction nor sue for the price of the goods if sold. (Jones v. Harber, L. R. 6 Q. B. 77.) The following transactions are protected by the Bankruptcy Act, 1869, viz., by sect. 94, sub-sect. 3, "any contract or dealing with any bankrupt made in good faith and for valuable consideration before the date of the order of adjudication by a person not having, at the time of making such contract or dealing, notice of any act of bankruptcy committed by the bankrupt and available against him for adjudication;" and sect. 95, subsect. 1," any disposition or contract with respect to the disposition of property by conveyance, transfer, charge, delivery of goods, payment of money, or otherwise howsoever, made by any bankrupt in good faith and for valuable consideration before the date of the order of adjudication, with any person not having at the time of the making of such disposition of property, notice of any act of bankruptcy committed by the bankrupt and available for adjudication." The effect of these provisions is to limit the relation of the title of the trustee in those cases to which they apply, to the order of adjudication instead of to the act of bankruptcy as in ordinary cases. The authorities above cited, as to the right of the trustee to disaffirm certain transactions and treat others as absolutely void, have been with one exception decided subsequently to the passing of the Act, and do not apply to those cases where the person dealing with the bankrupt has acted bonâ fide and in ignorance of the act of bankruptcy, such as are contemplated by these provisions. Questions not unfrequently arise as between the trustee in bankruptcy and execution creditors. On this subject, the 95th section (sub-sections 2 & 3) provides that any execution or attachment against the land or goods of the bankrupt executed in good faith by seizure in the case of land, and by seizure and sale in the case of goods, before the date of the order of adjudication, if the person on whose account such execution or attachment was issued, had not at the time of the same being so executed by seizure, or seizure and sale as the case may be, notice of any act of bankruptcy committed by the bankrupt and available against him for adjudication shall be valid notwithstanding any prior act of bankruptcy. It has been held under this section that where the seizure is made after an act of bankruptcy, but without notice thereof, the execution creditor is entitled to the proceeds of the sale, as the words "notice of any act of bankruptcy" mean notice prior to the seizure. (Ex parte Schulte, L. R. 9, Ch. 409.) An execution protected under these provisions may be an act of bankruptcy which may avoid a subsequent execution levied by the same creditor. (Ex parte Dawes, L. R. 19 Eq. 438.) Where the seizure of the debtor's goods is prior to any act of bankruptcy to which there is relation, the right of the execution creditor to obtain payment of his debt by sale is not under the Act (1869), in general affected by a subsequent act of bankruptcy followed by adjudication, for he is "a creditor holding security" under sect. 12, and there is nothing in this Act as in that of 1849 to avoid such security. (Slater v. Pinder, L. R. 7 Ex. 95 (Exch. Ch.); and see Ex parte Rocke, L. R. 6 Ch. 795; and Ex parte Lovering, L. R. 17 Eq. 452.) Such "security" is not acquired by the mere delivery of the writ to the sheriff, and not until seizure. (Ex parte Williams, L. R. 7 Ch. 314.) The fact of a seizure and sale amounting to an act of bankruptcy under sect. 6 of the Act does not affect the execution creditor's right under sect. 95, unless the case falls within the 87th section. If it fall within 4. The defendant has not paid the same or any part thereof Claim by to the plaintiff. The plaintiff claims: trustee The rights execution that section the sheriff may still sell, and if he receives no notice within A private sale by the debtor, being then in insolvent circumstances, to the execution creditor of goods seized to avoid a sale by the sheriff, is a fraudulent transfer under sect. 6, and is not protected either by the 87th or 95th section, so that the trustee is entitled to recover them or their price. (Ex parte Pearson, L. R. 8 Ch. 667.) And the trustee is entitled to goods seized by the sheriff, if on the sale of them he would be entitled to the proceeds under the 87th section. (Ex parte Rayner, L. R. 7 Ch. 325.) The 87th section does not apply to cases where before seizure the debtor delivers bills to the sheriff, which the execution creditor accepts in satisfaction of the judgment, and such payment is valid (Ex parte Brooke, L. R. 9 Ch. 301); nor where the money is paid after seizure and before sales, and the creditor agrees to take it on account of the debt. (Stock v. Holland, L. R. 9 Ex. 147.) creditor Suits by trustee and solvent partner of bankrupt.]-By sect. 105 of Trustee and B. A., 1869, "Where a member of a partnership is adjudged bankrupt, a solvent the Court of Bankruptcy may authorize the trustee, with consent of the partner creditors, certified by special resolution to commence and prosecute any suing action or suit in the names of the trustee and of the bankrupt's partner; together. and any release by such partner of the debt or demand to which the action or suit relates, shall be void; but notice of the application for authority to commence the action or suit shall be given to such partner, and he may show cause against it, and on his application the Court may, if it think fit, direct that he shall receive his proper share of the proceeds of the action or suit, and if he does not claim any benefit therefrom he shall be indemnified against costs in respect thereof as the Court directs." It sometimes happens in cases of fraudulent preferences that the trustee and a partner of a bankrupt may maintain an action which the partners could not. These are cases where the trustee avoids the preference. (Heilbut v. Nevill, L. R. 5 C. P. 478, Exch.) Claims by a trustee in bankruptcy as such shall not, unless by leave of the Court or a judge, be joined with any claim by him in any other capacity. (Judicature Rules, Order XVII., rule 3.) DEFENCES.-Denial of official character.]-By Order XIX. r. 11, if either party wish to deny the right of any other party to claim as trustee whether in bankruptcy or otherwise, he must deny it specifically. Payment. By the 94th section, sub-section 1, payments made in good faith and for valuable consideration to a bankrupt before the date of the order of adjudication by a person not having at the time of such payment, notice of any act of bankruptcy committed by the bankrupt and available against him for adjudication are valid. Claims by trustee shall not be joined with claims in any other capacity. When pay. ment to a person having Mutual credits set-off.-By sect. 39, where there have been mutual committed credits, mutual debts, or other mutual dealings between the bankrupt an act of and any other person proving or claiming to prove a debt under the bankbankruptcy, an account shall be taken of what is due from the one party ruptcy to the other in respect of such mutual dealings, and the sum due from the good. one party shall be set off, and the balance of such account and no more Set-off. shall be claimed or paid on either side respectively; but a person shall not be entitled under this section to claim the benefit of any set-off Claim by trustee in liquidation for money lent by debtor. Set-off. What may be "set-off." Action by Trustee in Liquidation. 1. The above-named A. M. and L. M. (hereinafter called the debtors), in the years 1871 and 1872, carried on busi against the property of a bankrupt in any case where he had at the time Actions by Action by trustee under liquidation.]—The title of a trustee under a trustee in liquidation relates back to the filing of the petition. (Ex parte liquidation. Duignan, 40 L. J. Ch. 33; and his title will relate back to an act of bankruptcy prior to the filing of the petition in analogy to the case of bankrupts. (Ex parte Eyles, L. R. 16 Eq. 99; Ex parte Schulte, 9 Ch. 409.) His title therefore is good against an execution creditor, who seizes the goods with notice of filing of the petition. (Ex parte Duignan, supra.) Property acquired by the debtor during the liquidation proceedings until he has obtained his discharge vests in the trustee. (Re Jones' Estate, 10 W. N. (1875), p. 47.) When bankruptcy is a defence. When a composition is a defence. Actions by or against bankrupts.]-See ante, p. 154, as to what causes of action do not pass to the trustee on his appointment. Bankruptcy is no defence to an action against the bankrupt until after he has obtained his order of discharge, as sect. 12 only prevents the enforcement of any remedy against the person and property of the bankrupt except in accordance with the Act, but does not prevent his being sued for a debt provable under his bankruptcy. (Marshall v. King, 31 L. T. N. S. 511. If the bankrupt obtained his discharge after action it could only be pleaded in bar to the further maintenance of the action. (Jones v. Hill, L. R. 5 Q. B. 230.) In such a case now, if the defence arises after the statement of defence has been delivered it can be pleaded with leave by way of amendment (see pp. 87, 88, ante). If it arises after action and before the delivery of the statement of defence, it will be set out like any other ground of defence. A discharge granted to a debtor who is a member of a firm, in his separate bankruptcy, releases him from his joint as well as his separate debts. (Ex parte Hammond, L. R. 16 Eq. 614.) Where a verdict for breach of contract is obtained against the bankrupt before the commencement of the bankruptcy, but judgment is not signed or costs taxed until afterwards, the whole claim is barred, as it is provable. (Ex parte Peacock, L. R. 8 Ch. 682.) Defence of composition, &c., under Bankruptcy Act, 1869.]-A resolution for a composition duly passed under sect. 126 of the Bankruptcy Act, 1869, is a bar to any creditor bound thereby, so long as there has been no default on the part of the debtor to perform his part of the agreement. (Slater v. Jones, and Capes v. Ball, L. R. 8 Ex. 186.) But upon such default or upon his failing to pay an instalment of the composition, the liquida ness as financial agents at in the City of London. They Action by filed their petition in the London Bankruptcy Court for the trustee in liquidation of their affairs by arrangement or composition with tion. their creditors on the 2nd day of December, 1874, and the plaintiff was duly appointed trustee of their property. 2. On and between the 2nd October, 1871, and the 27th August, 1872, the said debtors lent and advanced divers sums of money to the defendant, and paid divers sums of money for the defendant at his request, and the defendant became in creditor may sue for the whole balance of the debt remaining due, whether or not he has assented to the resolution. (Edwards v. Coombe, L. R. 7 C. P. 519; Goldney v. Lording, L. R. 8 Q. B. 182.) On an action to recover a debt of £50, the defendant pleaded that as to £27 168. 10d. it was the balance remaining due on a joint and several promissory note, made by the defendant, and H. carrying on business as co-partners to secure a debt due from them to the plaintiffs, that defendants instituted proceedings under ss. 126, 127 of the Bankruptcy Act, 1869, and that an extraordinary resolution of the creditors was passed for accepting a composition payable by instalments, to be secured by joint and several notes. Held, Kelly, C. B., dissentiente, that assuming the plaintiffs were not parties to the resolution, and had not adopted it or received any instalment under it, the facts alleged offered no defence to the action. (Simpson v. Henning, 44 L. J. Q. B. 143, Ex. Ch.) A creditor who has attended the meetings under sect. 126 of the Bankruptcy Act, 1869, and who has voted at the resolutions, is bound thereby, though his debt is omitted from the debtor's statement. (Campbell v. Im Thurn, 45 L. J. C. P. 482.) In order that a resolution to accept a composition should be a bar to an action against the debtor, the statement must show a definite amount admitted to be due; and therefore where after the amount of the creditor's (the plaintiff's) claim, it was stated to be disputed under legal advice, and referred to arbitration, this debt was held not to be barred. (Melhado v. Watson, 46 L. J. 502, on Appeal, reversing the decision of the Court below.) Where a debt was contingent and was omitted from the debtor's statement, it was held not to be barred by a resolution to accept a composition. (Wilson v. Breslauer, 46 L. J. 593, App.) The release of a debtor by resolution for composition does not release his co-debtor. (Ex parte Jacobs, L. R. 10 Ch. 211.) In liquidation by arrangement under sect. 125, a creditor is, in the absence of fraud, bound by the resolutions passed, if duly registered under sect. 127, though he has no notice of the proceedings, and though his name and debt be omitted from the list of creditors; and no subsequent promise to pay will support an action founded on a debt from which the debtor is released by virtue of the Bankruptcy Act, 1869. (See Heather v. Webb, 46 L. J. 89.) By sect. 15 of 32 & 33 Vict. c. 62 (Debtors Act, 1869), where a debtor makes any arrangement or composition with his creditors under the provisions of the Bankruptcy Act, 1869, he shall remain liable for the unpaid balance of any debt which he incurred or increased, or whereof before the date of the arrangement or composition he obtained forbearance by any fraud, provided the defrauded creditor has not assented to the arrangement or composition otherwise than by proving his debt and accepting dividends. (See Ex parte Halford, L. R. 19 Eq. 436.) When a composi tion a defence. A bankrupt after his discharge remains liable for debts incurred by fraud. trustee in Action by debted to the said debtors for interest upon moneys due from the defendant to the said debtors. The defendant also became indebted to the plaintiff, as trustee as aforesaid, for further interest on the said moneys. liquidation. Action by trustee for breach of contract. 3. The following are the particulars of the plaintiff's claim against the defendant (the credit side of the account showing the amounts which the plaintiff admits to have been received in reduction of the claim): [Here follows a balance-sheet.] 4. The said balance of £10,000 has not, nor has any part thereof, been paid to the said debtors, nor to the plaintiff as trustee as aforesaid. The plaintiff, as trustee as aforesaid, claims :— Action by a Trustee in Bankruptcy for damages for breach of a Contract made with the Bankrupt. 1. The defendant is a general merchant at M. 2. On the 3rd of October, 1874, C. F., of Y., agreed to buy, and the defendant agreed to sell to him, fifty bags of flour, to be delivered within three months at the warehouse of the said C. F., and to be paid for at the rate of £5 per bag, by promissory notes, payable three months after date, and to be made by the said C. F. and given to the defendant one month after the said 3rd of October, 1874. 3. All things happened and times elapsed necessary to entitle the said C. F. to a performance by the defendant of his said contract, and to receive delivery of the said fifty bags of flour, yet the defendant has not delivered the same or any part thereof. 4. After the making of the said contract C. F., being a debtor unable to pay his debts within the meaning of the 125th and 126th sections of the Bankruptcy Act, 1869, presented a petition according to the form in the schedule to the Bankruptcy Rules, 1870, made in pursuance of the said Act, to the County Court of Y., holden at C., having jurisdiction in that behalf, and the plaintiff was duly appointed trustee of the property of the said C. F. The plaintiff, as such trustee, claims: £200 damages for the defendant's breach of the contract set out in the 2nd paragraph of this claim. |