BANKRUPTCY COURT.

New Zealand Times, Volume XXXII, Issue 5029, 7 May 1877, Page 3

BANKRUPTCY COURT.

Saturday, May 6. (Before his Honor the Chief Justice.) EX PARTE POLL IN RE TONK 3. Mr. Allan (instructed by Mr. Moorhouse) for the arranging creditors ; Mr. Barton for dissenting creditor, Poll. The Court delivered judgment in this case as follows: The question which I have to deal with first is whether the person for whom Mr. Barton appears is a creditor who can be heard in opposition to the application, which is for the declaration of complete execution of a deed of arrangement under the Debtors and Creditors Act, 1876. It appears that one Poll commenced an action against the debtor for damages for injuries received through the debtor’s negligence, and in December last had a verdict in his favor for £270. The defendant subsequently obtained a rule nisi for a new trial, which rule was not

discharged till a few days after the date and filing of the deed of arrangement, that being dated and having been filed on the 12th January. There had been no taxation of costs, nor entry or signing of judgment prior to the deed, and there has been none since. I think that the term “creditor,” where used in the sections of the Debtors and Creditors Act, 1876,

relating to “arrangements by deed,” must be taken to mean a person having a claim which could be proved in bankruptcy, whether it is strictly a debt or not. It is true that there is no provision in the Act of 1876 similar to the 265th section of the Act of 1867, expressly dealing with this matter, nevertheless I think that the necessary inference from the various provisions in the Act of 1876 relating to deeds of arrangement, 'is that such is the true meaning of the word, and this is in accordance with the decision in Wood v. De Mattos, L.li. 1 Exch. p. 100, on a similar question arising on the English Bankruptcy Acts, 1849 and 1861. The 75th section of the Debtors and Creditors Act, 1876, defines generally the creditors who may prove in bankruptcy. By that every person with whom the debtor has before the bankruptcy contracted a debt, and every person to whom the debtor has before that time become liable in respect of a demand, may prove the amount of such debt or demand. By the interpretation clause, section 4, “bankruptcy” means the “date of adjudication;” and by section 154, with regard to arrangements by deed, the date of the execution of the deed is to be taken as corresponding with the date of adjudication. Therefore the question is whether before the 12th March (the date of the deed) the debtor had become liable to Poll in respect of a demand within the meaning of the 76th section. It seems clear that the claim was not a “debt contracted” unless there had been a judgment prior to the date of the deed. See per Lord Westbury ex'parte Griffiths, 33 L. J. Bky., p. 46 ; ex parte Charles 16 ves. 256 ; Buss v. Gilbert, 2M. and S. 70; ex, parte ButterfiU, 1 Bose, p. 195. If not a “ debt contracted ” can it be said that a verdict for damages without judgment creates a liability to a demand ? It seems to me that it dees not. A demand must mean something capable of being legally demanded—something which is capable of being at once enforced by an action or execution. If this be so, then, as the debtor in this case was not in respect of the verdict not followed by judgment liable to any action, his claim is not one which would be provable under the 75th section. The language of the 75th section so far as relates to the present question is, I think, in effect the same as that of the 165th section of the English Bankruptcy Act of 1849, and it was never considered, under that Act, that a s. verdict not followed by judgment before the baiKruptcy created a provable claim. The Chief Judge in Bankruptcy, in re Langridge 19, W.K. p. 951, held under the English Bankruptcy Act, 1869, that damages liquidated by verdict were claims capable oi proof ; but he founds his decision upon the peculiar language of the 31st section, by which it is expressly provided that all demands in the nature of unliquidated damages, arising otherwise than from breach of contract, are not to be admitted to proof. Inferentially, therefore, damages liquidated by verdict are to be admitted to proof. Various other provisions of the Debtors and Creditors Act, 1876, tend to prove that this is the true construction of the 75th section, and that damages for a tort, though liquidated by verdict before bankruptcy, do not create a provable claim, unless also converted into a debt or enforceable demand before bankruptcy by judgment. Thus section 81 provides for liquidation and

proof of damages for breaches of contract ; but there is no such provision with regard to the liquidation of damages for torts. This shows that the Legislature did not intend to exonerate debtors from damages for torts, unless converted into debts before bankruptcy. Section 88 is restricted to “ debts” payable on a contingency. The provision in section 89, as to a liability to pay money “ on a contingency contracted before bankruptcy, does not apply to the case of a verdict. The liability to pay the damages found by verdict contingent upon judgment following, is not the kind of contingent liability meant. Section 135, which provides that after notice of the filing the deed no execution against the arranging debtor’s property shall be available, is restricted to the case of an execution in respect of a debt. . . It seems to me, therefore, that the provisions of the Debtors and Creditors Act, 1876, as to provable claims do not, any more than did the English Bankruptcy Acts before that of 1869, make a verdict for damages for a tort, not followed by judgment before bankruptcy, a provable claim, There is one provision which at first sight would seem to show a different intention on the part of the Legislature ; that is the provision in section 94 as to costs. The provision is similar to that in section 201 of the Act of 1867. If by this section a plaintiff in the Supremo Court who has obtained before bankruptcy a verdict in his favor

for damages against the debtor, carrying costs, is enabled upon taxation after bankruptcy to prove for such costs, though no judgment has been entered up or signed before bankruptcy, then there would be strong reason to conclude that not tho costa only, but oho the damages in such a case, would be a provable claim. But a plaintiff in the Supreme Court is not under a verdict entitled to recover costs ; he is entitled by the judgment to recover the costs. Tho provision was not, I think, intended to have any more extensive operation than the 181st section of the English Bankruptcy Act of 1849 ; and seems intended to meet the case of a right to costs perfected before the bankruptcy, but tho amount by which had not then been ascertained by a taxation. I think therefore that Poll was not a creditor within tho meaning of the Debtors and Creditors Act either in respect of the damages or the costs, consequently he had no right to be heard in opposition to the application o have the deed declared completely executed, and it follows, if I am correct in my judgment, t 1 at he is not affected by the deed, but may proewed to judgment and execution. But as the debtor had inserted Poll a name in tho list of creditors, and as if he was not a creditor he ought not to have been heard, there will bo no order as to costs. If the objection as to Pol I* 9 right to oppose had not prevailed, I should nevertheless have come to the conclusion that both the requisite number of creditors had assented to the deed, and that they who assented represented the requisite value. I think it clear that the assent is to be by the majority of those creditors who are present or aro represented at the meeting, and that such majority is to represent three-fourths in value of tho same creditors, namely, those present or represented at the meeting. I incline to think, though it is by no means clear, that it is necessary that creditors should prove their debts in order to take part by voting at the meeting. It is true that the not a “ general meeting” of creditors within the meaning of section 98, nevertheless I think that the meeting is regulated by the provisions in that section so far as applicable. I think that the rules 22, 23, and 24, of the rules of December, 1876, apply to all meetings of creditors under the Act, whether general meetings or not, consequently Poll s claim even if provable was not represented within the meaning of the Act, for no proxy in writing was produced in accordance with rule 22, and there was no proof of debt as contemplated by rule 2. If Poll’s claim was excluded, either because it was not a provable claim or because he had not proved and was not represented, the deed was (assented to by the majority of those present, and that majority represented three-fourths in value of the debts of those present, and consequently the deed was completely executed. Mr. Barton’s contention as to the parties whose names ought to have appeared in the list of creditors. The names of secured as well as unsecured creditors should appear, and the names of holders of bills of exchange. Under the circumstances, I think it unnecessary now to express any opinion as to tho question of whether or not the deed might not on the application of a creditor have been declared an act of bankruptcy by reason of tho insufficiency and inaccuracy of the statement of assets and the omissions from the list of names of creditors, and also by reason of the very peculiar position of two of tho creditors who formed part of the majority assenting to the deed, one of whom was chairman. I may however point out that it is evident that as the creditors who exercise the statutory power and form part of such majorities should be actuated by perfect fairness to the general body of creditors, they ought not to be subject to influences which may affect their judgment ; and further, that if the list of creditors and statement of assets is not accurately prepared, the object of the legislative provision is not met, they are calculated to deceive and mislead, and the deed of arrangement, on that account, may be set aside and be declared an act of bankruptcy. As it appeared that there were certain other dissentients beside Poll, and they may have abstained from coming forward by reason of Poll’s opposition, I shall not make the order declaring the deed completely executed until Tuesday next, when, if they should think fit to do so, they will have an opportunity of making an application. Ido not encourage them to do so ; I take this course merely to prevent them from being taken by surprise.