recovery of their several debts or demands; but, nevertheless, if any such security shall be enforceable against the said debtor or his estate or effects, then and in that case such creditor (unless he shall consent to abandon his said security) shall be entitled to receive payment *246] of his secured debts under these presents upon so much only of his said secured debt or debts as may remain after such security shall have been realized, or after credit shall have been given for the full value thereof, such value to be ascertained as in bankruptcy. And, moreover, it is hereby lastly agreed and declared by and between the said parties that these presents are intended to operate, and shall (so far as lawfully may be) operate to all intents and purposes whatsoever as a deed of composition within the provisions of the 192d section of The Bankruptcy Act, 1861, in that behalf, and that, so soon as a majority in number representing three-fourths in value of the creditors of the said debtor whose debts shall respectively amount to 107. and upwards shall have executed or in writing assented to or approved of this deed, it is intended that the same shall be registered in the Court of Bankruptcy under the provisions of the said Act, and the general orders made thereunder in that behalf, in order that the said debtor may obtain the protection of the said Court granted under the said Act, for the purpose of being available to him for all purposes as a protection in bankruptcy, and that all the creditors of the said debtor who would be bound by this deed in case it were a deed of composition or trust deed for the benefit of creditors within the true intent and meaning of the 192d section of The Bankruptcy Act, 1861, and in case all the conditions mentioned in the said Act in that behalf had been observed, shall be equally bound by and entitled to the benefit of this deed, and that any provision herein to the contrary shall be void and of none effect. IN WITNESS, &c." Averment. That the deed had become and was as valid, effectual and binding on all the creditors of the

*247] defendant as if they had duly executed the same, and that all

the conditions in the Act in that behalf mentioned had been observed; [then followed other usual averments of performance of the conditions prescribed by the Act]; and that the plaintiff became and was bound by the deed, with respect to the debt sued for as if he had been a party thereto and had duly executed the same; and that the defendant was released and discharged from the claim in the declaration by the deed, and by the provisions of the Act and of the deed having been complied with by him.

Demurrer, and joinder.

Replication. That at the time of making the indenture divers of the creditors held securities for debts then due from the defendant; and that persons other than the defendant were liable to payment of some of those securities; and that divers persons other than the defendant were liable as joint debtors with and sureties for the defendant for divers of the debts then due from him.

Demurrer, and joinder.

The case was argued, November 15, 18, and judgment was given on the latter day.

Cleasby, for the plaintiff.-First. The deed is unreasonable, and therefore not binding on a non-assenting creditor. It has been decided that there need not be a cessio bonorum of the debtor; but here the

debtor does not covenant to pay a certain sum by way of composition: the covenant is no more than to set apart a portion of a future fund which may never exist. If the debtor should die, having acquired property within the first eighteen months, or should be struck off the rolls within that time, the deed would have the effect of preventing the creditors from deriving any benefit. [CROMPTON, J. [*248 -The deed amounts to an accord and satisfaction in consideration of the debtor agreeing to carry on his profession and keep the accounts of his professional income, and pay one half to a trustee for the benefit of his creditors, until the composition of 58. in the pound is paid.] How could it be shown that he had exercised diligence in his profession? That depends on his own option, and the creditors have no power of controlling it. [COCKBURN, C. J.-Suppose the debtor had no assets; it might be the only chance of his creditors getting any portion of their debts that he should be released from them and continue his profession.] The deed does not recite that he had no assets. [CROMPTON, J.Suppose a debtor has a vested remainder, and a deed of arrangement contains an agreement by him to pay a composition to his creditors when the remainder takes effect, would it not be reasonable? MELLOR, J.-Suppose an actor or singer who has nothing but the prospect of realizing something by the exercise of his talents, enters into a deed such as this with his creditors. Here no creditor is excluded. CockBURN, C. J.-The Legislature have not empowered the majority of the creditors to impose unreasonable conditions on the non-assenting creditors. But we are not satisfied that this deed is unreasonable.]

Secondly. The deed does not operate as a release of the debtor, but only as a covenant not to sue, and therefore is not pleadable in bar. Though it purports to release the defendant from all debts and demands against him, it afterwards contains a proviso that it shall not operate to prevent any of the creditors from claiming or realizing any security held by them, or from suing any person *other than the debtor liable for payment of such security. There is an inconsistency [*249

in these clauses which can only be reconciled by construing the release as a covenant not to sue; for a release of one joint debtor is a release of all, and if the deed were held to operate as a release no effect would be given to the proviso: Price v. Barker, 4 E. & B. 760. [MELLOR, J. -This is a release under statute, and sect. 192 of The Bankruptcy Act, 1861, speaks of a deed relating to the debts and liabilities of the debtor "and his release therefrom."] Even if it is a release it is not pleadable in bar to an action by a non-assenting creditor. In Ipstones Park Iron Ore Company v. Pattinson, 2 H. & C. 828, the Court of Exchequer held that in the absence of express words of release a deed under sect. 192 does not operate as a release, and that the remedy for the debtor was either by application to the Court of Bankruptcy under sect. 197 to stay the proceedings, or after judgment to a Court of law to stay execution under sect. 198. In Eyre v. Archer, 16 C. B. N. S. 638, it was held that a deed in the form given by sect. 200 and Schedule D, assented to and executed by the required number of creditors, could not be pleaded in bar to an action by an assenting creditor. [COCKBURN, C. J. A deed in that form contains no release, it only conveys all the estate and effects of the debtor to trustees to be applied and administered for the benefit of his creditors, as if he had been adjudged bankB. & S., VOL. V.—10

rupt.] On performing the conditions in that deed he is discharged. [COCKBURN, C. J.-The whole effect of such a deed is to bring the debtor before the Court of Bankruptcy.] The deed is only a personal disqualification on the creditor who has executed it. [CROMPTON, J.— No: all the creditors are *bound to each other ex contractû.] *250] The only ground on which a covenant not to sue is pleadable in

bar to an action is to avoid circuity of action; but that reason does not apply here, for the majority of the creditors could not make a creditor covenant not to sue so as to be liable to an action if he sued: Dell v. King, 2 H. & C. 84, Hidson v. Barclay, 3 H. & C. 9.(a) These considerations were not brought before the Court in Clapham v. Atkinson, 4 B. & S. 722 (E. C. L. R. vol 116).(6)

Mellish, for the defendant.-The deed is pleadable in bar to the action. If the plaintiff had executed it there would have been an absolute release by him; and by sect. 192 of the Bankruptcy Act, 1861, the deed binds the plaintiff as if it had been executed by him. The proviso which follows the release has no application to persons in the position of the plaintiff, but only applies to those creditors in respect of whose debts there is a joint debtor or surety with the defendant. The effect of the proviso is to turn the release into a covenant not to sue, and that is at all events a good equitable plea: Clapham v. Atkinson, 4 B. & S. 722 (E. C. L. R. vol. 116);(b) for a Court of equity would grant an unconditional and perpetual injunction against an action brought by the party bound by that covenant. There is difficulty in framing a composition deed under sect. 192 of the Bankruptcy Act, 1861, so as not to discharge sureties. It would be unjust that creditors who hold security for their debts should be obliged to release a solvent surety, as well as contrary to the principles acted upon in the Court of Bankruptcy, and to the provisions of The Bankrupt Law Consolidation Act, *251] 1849, 12 & 13 Vict. c. 106, s. 200, according to which, by sect.

197 of stat. 24 & 25 Vict. c. 134, these deeds are to be construed. The inequality between creditors who have security for their debts and those who have not exists before the execution of the deed. The replication does not aver that there was any joint debtor or surety as regards this debt. [He was then stopped.]

COCKBURN, C. J.-We are agreed that our judgment ought to be for the defendant. We do not proceed upon the ground of overruling the decision in The Ipstones Park Iron Ore Company v. Pattinson, 2 H. & C. 828. It is not necessary to say whether the effect of the composition clauses in The Bankruptcy Act, 1861, in the case of a deed in which there is no release or covenant not to sue, would be to enable the debtor to plead the deed in bar to the action, or to send him to seek relief in the Court of Bankruptcy. I entertain some doubt as to the decision in The Ipstones Park Iron Ore Company v. Pattinson, 2 H. & C. 828, and should not regret if it were made the subject of further consideration in a Court of error. But our judgment steers clear of that case, because in this deed there is a release by the creditors which did not exist in the deed there; and for the purpose of considering Mr. Cleasby's argument, I treat it as a release qualified by the reservation of the rights of creditors against the co-debtors and sureties of the principal debtor. Mr.

(a) The judgment was reversed by the Exch. Chamber in Hil. Vac. 1865; see 4 B. & S. 361. (6) Affirmed in error, 4 B. & S. 730.

Cleasby says that, according to legal principles, such a qualified release of the debtor does not operate as a release, but only as a covenant not so sue. He admits that such a release might be pleaded in bar to an action brought by any creditor who was a party to the deed, *but he denies that effect of the release as against a creditor who is [*252 only a party to the deed by virtue of sect. 192 of The Bankruptcy Act, 1861. I find however in that section a statutory enactment which amounts to this, that if the required conditions are observed the execu tion of the deed by some of the creditors shall be considered as an execution by all, and that one who does not choose to execute it shall be in the same position as if he had set his hand and seal to it. It follows that this deed, which it is conceded would be pleadable in bar to an action brought by a creditor who executed it, is also pleadable in bar to the action brought by a person in the position of the plaintiff. We ought to express our opinion on this point, because we entertain no doubtupon it.

But it is not necessary to decide that point, for Mr. Mellish is well founded in saying that there is here a release to the debtor, and not merely a covenant not to sue. It is an absolute release by all the creditors, with the exception of those who happen to have a co-debtor or surety to resort to, for to such their right to proceed against the codebtor or surety is reserved. The plaintiff is in the position of not having any co-debtor or surety, and therefore, being bound by the deed executed by the requisite majority of creditors as if he had himself executed it, he has released the defendant from the debt.

It is said that the above reservation creates inequality between one class of creditors and another; but sect. 192 says nothing about inequality between creditors. The true construction of the section is, that the deed shall be binding if it contains no terms which are unreasonable as against creditors who do not execute it. *To make the deed unreasonable on the ground of inequality between the creditors, [*253 there must be some substantial inequality. Here is an absolute release by one class of creditors, and with regard to the other class the release operates as a covenant not to sue. But in either case it is substantially the same; inasmuch as in both the deed may be set up as a plea in bar to an action against the debtor, and the creditor is estopped from pursuing his ordinary remedy at law.

Therefore there is nothing unreasonable in this deed or which prevents it from having full effect under sect. 192.

CROMPTON, J.-I have arrived at the same conclusion. The deed does not create an inequality among the creditors; the assenting and nonassenting creditors are in the same position and bound by the same terms. The first question is, whether the deed contains an absolute release. I was struck by one part of Mr. Cleasby's argument as to the apparent inconsistency in the deed if it was construed as a release. But, looking at it altogether, I think it does not operate as a release by way of destruction of the debt; for such a release would be unfair on nonassenting creditors who had joint debtors or sureties against whom their claims could be enforced. The deed is in the form in which such deeds are usually drawn,-a consideration to which sufficient weight was not given in Tetley v. Taylor, in error, 1 E. & B. 521, 532 (E. C. L. R. vol. 72). The present case is different from The Ipstones Park Iron

Ore Company v. Pattinson, 2 H. & C. 828, for in that case there was no agreement that the deed should be pleaded as a release nor covenant not to sue the debtor, *but only an assignment of his estate to a *254] trustee for the benefit of his creditors. The question here arises entirely on the clauses of the deed; and the non-assenting creditors are bound by it and by nothing else. I have some difficulty in giving the clause of release one construction as to one set of creditors and a different construction as to another; but, taking this release to be only a covenant not to sue, I think the plea is good as showing an equitable, if not a legal, defence to the action. In effect, the creditors say to their debtor, "we will take the agreement in this deed as discharging an satisfying the debts due to us from you, so far as this, that we will never bring an action against you in respect of any of those debts ;" and, having so agreed, they execute a release. After such an agreement, entered into by the creditors for a good consideration, a Court of equity would restrain them from bringing an action against the debtor; and we can now administer equity partially. It is not necessary to say whether, if a creditor brought an action, an action would lie against him on the covenant not to sue; but it is absolutely necessary to hold that a deed, which contains a release of the debtor, should contain a provision reserving to the creditors their rights and remedies against sureties, and this seems to be a fair deed in that respect.

Then, what is the effect of the deed? I cannot doubt, after the deci sion in Clapham v. Atkinson, 4 B. & S. 722 (E. C. L. R. vol. 116),(a) though in that case the point was rather assumed than argued, that the creditors take the agreement for the composition in the deed as an accord and satisfaction of their claims, and that the deed operates to bar the action. In that case the creditors agreed to accept a composition, and they severally undertook and agreed to execute to the *255] debtor a good and sufficient release in the law of their several and respective claims and demands on him. The deed there did not go so far as this deed, for it did not contain a positive release, but only an agreement to execute a release, yet the plea pleading it was held to be a good equitable plea under sect. 192; although such an agreement would perhaps not be a defence at law. In the present case the creditors agree not to sue their debtor, which appears to me to be practically the same as in Clapham v. Atkinson, 4 B. & S. 722 (E. C. L. R. vol. 116), (a) and if we were to decide in favour of the plaintiff we should decide against the decision of the Exchequer Chamber in that case.

MELLOR, J.-The object of the 192d section of The Bankruptcy Act, 1861, is to allow the debtor and a large majority of his creditors to make such arrangement as appears most likely to be beneficial to all; but as the majority who assent to the deed are empowered by the sta tute to bind the others who do not assent to it, the condition has been necessarily implied that the deed by which the arrangement is carried out should be a reasonable deed. As soon, however, as such a deed has been executed by the required majority all the creditors assenting and non-assenting are equally bound by it; and if the remedies against sureties were not preserved, a majority who have only claims against the debtor without any responsible surety might inflict upon the minority, who had claims also against sureties, the greatest injustice in binding.

(a) Affirmed in error, 4 B. & S. 730.