to pay his debts in full by instalments, and the creditors agreed to insure his life, and he was to be entitled on payment of his debts and repayment to the creditors of the premiums paid by them, to have an assignment to himself of the policy. Before the payment of the last instalment the creditors offered to assign the policy to the debtor on payment of the premiums they had already paid, but the offer was declined. Shortly after the payment of the last instalment of their debts the creditors, without again offering it to the debtor, sold the policy.

On the death of the debtor, which happened soon after the sale of the policy, his widow claimed to be entitled to the insurance money on paying the premiums paid by the creditors:

Held (reversing the decision of Malins, V.C.) that the creditors were under no obligation to offer again to assign the policy to the debtor after he had paid the last instalment, and a demurrer to the widow's bill was accordingly allowed.

THIS was an appeal from a decision of Malins, V.C. The hearing in the court below is reported in 31 L. T. Rep. N. S. 571, where the facts of the case are fully stated.

The plaintiff's husband being entitled to a life interest in certain property, and being pressed by his creditors, agreed to pay his debts in full by instalments, and the creditors were to insure his life, and he was to be entitled, on payment of his debts and repayment of the premiums, to have an assignment to himself of the policy. Before the payment of the last instalment the creditors offered to assign the policy to the debtor on payment of the premiums they had already paid, but he declined their offer. Shortly afterwards he offered 101. for the policy, but his offer was declined. After the payment of the last instalment of their debts the creditors, without again offering the policy to the debtor, sold it. The debtor soon afterwards died, and his widow filed a bill praying for a declaration that, on payment of the premiums which the creditors had paid, she was entitled to the amount assured by the policy.

The defendants, the creditors' representatives in whose names the policy had been effected, demurred for want of equity.

The Vice-Chancellor having overruled the demurrer, the defendants appealed.

J. Pearson, Q.C. and Whitaker, for the appellants.-The debtor having refused to pay us the amount we had paid for premiums, we were entitled to sell the policy, and his widow cannot come now and claim the assurance money. There can be no doubt that we were entitled to drop the policy, when he, through his solicitors, declined to take it. We contend that we were equally entitled to sell it.

Glasse, Q.C. and Chapman Barber, for the respondent, referred to Drysdale v. Piggott (8 De G. M. & G. 546) where a debtor and a surety entered into a bond to secure payment by instalments of a debt, and the expenses of effecting a policy on the debtor's life in the creditor's name, as a collateral security; the policy was effected, but after a time neither the debtor nor his surety paid the premiums on the policy, though required to do so by the creditor who paid them himself, and it was held, on the death of the debtor, that he and his surety had not abandoned the policy, but that it was redeemable by the surety on payment of the premiums paid by the creditor. In the present case by the terms of the

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agreement the creditors were bound to offer the policy to the debtor after he had paid the last instalment of the debts.

Without calling for a reply,

Lord Justice JAMES said that he was of opinion that the demurrer ought to have been allowed. He quite agreed that if this policy had been the property of Mr. Lewis and had been pledged by him to the creditors, and they, though under no obligation to keep it alive, had chosen to do so, it would still have been the property of the pledger, and would have retained its original character of a redeemable pledge. But the policy in this case had no resemblance whatever to property of a debtor pledged to a creditor. The creditors effected it with their own money, without there being any obligation on the part of the debtor to repay them anything which they paid for it. They might at any time have dropped the policy if they had pleased. Their only bargain with the debtor was that when he had paid the whole of the debts, with interest, he should be entitled to the option of having the policy assigned to him on payment of the premiums which had been paid with interest. This was a right given to him, and it was his duty to ask for the policy. There was no obligation on their part to tender it to him. He was bound to exercise his option within a reasonable time. It was like a lottery ticket for which the creditors had paid, and it was his duty to have applied for the policy within a reasonable time after the 31st May 1874. He did not do this, but he waited till the chance had become a certainty-till the lottery ticket had drawn a prize. He was not entitled to do this. It could not now be averred in a court of law or in a court of equity that he had always been ready and willing to make the payment. The correspondence strengthened this view of the case. After the letter of the 27th May 1874, his Lordship thought it was absolutely incumbent on Mr. Lewis, if he meant to insist on his right to the policy, to have written by return of post and to have said: Don't sell it at all; I am willing to pay the money; keep the policy for me." It was too late to make the claim now, after the accident had happened which had made the policy a valuable property.

Lord Justice MELLISH was of the same opinion. The first question arose upon the construction of the letters, namely, whether the policy was to be considered the property of Mr. Lewis or of the creditors. As they were to pay the premiums, prima facie it would be their property; and this his Lordship thought was the true construction of the letters. Then came the question whether he had exercised his option in due time. There were some negotiations before the third premium became payable and Mr. Lewis might then have said: I decline to exercise my option at all until all the instalments of the debts have been paid.” But he did not do so. He declined to take the policy at the price asked. Then afterwards he offered 107. for it. This was not accepted, and one of the creditors paid the third premium. Perhaps even then Mr. Lewis was not absolutely precluded from his option. But nothing was more natural than that the creditors should suppose that he had abandoned it altogether. Then came the letter of the 27th Jan. The meaning of that letter plainly "We take it for granted that you do not intend to exercise your option under the original agreement. But you have offered us 101. for the

was:

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policy. If none of the creditors will give more for it, we will let you have it for that sum." On receiving such a letter he was bound to answer it at once, and if he meant to insist upon his original option he should have said: "I have changed my mind, and I am ready to take the policy on the original terms." He did not do so, and this amounted to an admission on his part that the policy was the creditors' property. The Vice-Chancellor's judgment must therefore be reversed and the demurrer allowed.

Solicitors for the appellants, Whitakers and Woolbert.

Solicitors for the respondents, Pilgrim and Phillips.

Jan. 22, and Feb. 12. (Before the LORD JUSTICES.) Ex parte Sir W. RUSSELL; Re Sir W. RUSSELL. Bankruptcy-Liquidation-Discharge of debtor -Close of liquidation-Release of after-acquired property Powers of trustee Committee of inspection - Debtor without assets - Discharge granted from motives of kindness-Bankruptcy Act 1869, ss. 15, 20, 25, 27, 47, 48, 49, 125. A debtor filed a petition for liquidation. His creditors resolved on a liquidation and appointed a trustee; and they also resolved that the debtor should have his discharge upon 40001. being paid on his behalf to the trustee within a month of the registration of the resolutions, and upon his executing within the same time a covenant to pay to the trustee the further sum of 5000l. by five equal annual instalments; if default was committed in payment of any one of the instalments, the whole balance of the 5000l. was to become immediately due, and the trustee, on the request of any of the creditors, was to take proceedings in bankruptcy against the debtor. The resolutions were registered, the 4000l. was duly paid, and the covenant was executed. The debtor resumed business and contracted new debts. He paid two instalments of the 5000l. but failed to pay the others. The debtor then filed a second petition for liquidation, under which his statement of affairs showed that his assets were practically worthless, though he was in the receipt of 2001. a year half-pay, as an officer in the army. Under this second petition the creditors resolved on a liquidation, and also that until full payment of all the debts provable under the liquidation the debtor should pay the excess of his income beyond 600l. a year to the trustee, and that upon his executing a deed to carry out this arrangement, he should have an immediate discharge:

Held, that the effect of the resolutions under the first petition was to release all the debtor's afteracquired property, upon payment of 40001., and upon his executing the covenant; that the proceedings under the first liquidation were, therefore, no longer pending, and that there was nothing to render the resolutions under the second petition invalid on that ground; but that, inasmuch as the state of the debtor's assets showed that the second resolutions were passed solely from motives of kindness to the debtor and for his benefit alone, they could not bind the dissentient creditors, and were therefore invalid and ought not to be registered.

The trustee under the first liquidation proved as a

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creditor for 30001. (the amount of the unpaid instalments of the 50001.), and voted in favour of the resolutions under the second petition, without the authority of the committee of inspection, and but for his vote the resolutions would not have been carried:

Held, that the provisions of the Bankruptcy Act 1869, as to the powers of a trustee, did not apply to the case of an arrangement like that made under the first petition; and that therefore the trustee under the first petition was entitled to vote like any other creditor under the second petition.

Decision of Mr. Registrar Spring Rice affirmed on different grounds.

THIS was an appeal from a decision of Mr. Registrar Spring Rice, sitting as Chief Judge in Baukruptcy.

The facts of the case were as follows:

Sir William Russell filed a petition for liquidation of his affairs by arrangement in 1870.

On the 26th May 1870, the creditors duly passed resolutions in favour of liquidation by arrangement, and appointed C. F. Kemp trustee. They also passed a resolution that the discharge of the debtor should be granted to him upon payment being made on his behalf to the trustee of 40007. within one month after the registration of the resolutions, and upon the debtor executing within the same period a deed of covenant or a bond for payment to the trustee of 5000l., by five equal annual instalments; but the deed or bond was to provide that if default should be made in payment to the trustee of any of the instalments for twentyone days, the whole of the then unpaid instalments should at once become payable; and in case default should be made in payment of the 4000l., any of the creditors was to be at liberty to present a petition for adjudication of bankruptcy, or to make such application as he might think fit against the debtor, to the intent that he might be adjudicated a bankrupt under the 12th sub-section of the 125th section of the Act of 1869, and the debtor and the trustee were to consent to such adjudication being forthwith made. And in case default should be made in payment of any of the annual instalments of the 5000l., the trustee, on being required by any creditor, was to institute and duly prosecute proceedings in bankruptcy against the debtor in respect of the balance of the instalments then remaining unpaid.

These resolutions were registered, and the 40007. was duly paid, and the deed of covenant to pay the 5000l. to the trustee was duly executed by the debtor.

Sir William Russell subsequently went into business again, and contracted fresh debts.

He paid the first two instalments of the 50007., but made default in payment of the other instal

ments.

In June 1874, he filed a second petition for liquidation of his affairs by arrangement.

His statement of affairs under the second petition showed that his debts were over 50,000l., and that his assets were practically of no value, the only property available for the creditors being his half-pay as an officer in the army, which amounted to 2001. a year.

On the 30th July 1874, the creditors passed certain resolutions, by the first of which they resolved that the affairs should be wound-up in liquidation by arrangement and not in bankruptcy; by the

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second they appointed C. F. Kemp trustee; by the third they resolved that until full payment of all the debts provable under the liquidation, the debtor should pay to the trustee, by equal half yearly payments (commencing six months from the date of the registration of the resolutions), such portion of his income as should exceed 6001. per annum; and by the fourth they resolved that as soon as a deed embodying the terms of the resolutions should have been executed by the debtor he should be discharged, without any further resolution of the creditors, from all debts provable under the liquidation; such discharge to be null and void in case of failure by the debtor to perform the covenants contained in the deed, on such failure being certified by the trustee to have been, in his opinion, wilful.

The trustee under the first liquidation voted in favour of these resolutions, having proved for the unpaid balance of the 5000l., and without his vote the resolutions would not have been carried.

No creditor had required the trustee under the first liquidation to take proceedings in bankruptcy against the debtor.

The registrar refused to register the resolutions under the second petition on the ground that the first liquidation was still pending, that all the debtor's property vested in the trustee under it, and that, till it had been closed, no valid resolutions could be passed under a second petition.

The Registrar, in giving judgment, read the resolutions, and then continued: Under the notice I held that it was competent for Mr. Linklater (who appeared in the court below for an opposing creditor) to allege that inasmuch as the debtor had filed a previous liquidation petition, the proceedings under which were still pending, all his assets passed to the trustee under the first petition, under the 3rd sub-section of the 15th section of the Act. In reply to this it was first argued that it was premature to investigate the question of assets at the hearing of the application to register the resolutions. No such question could arise on a second petition in bankruptcy; and the analogy between a bankruptcy petition and a petition for liquidation in this respect was complete. I do not concur in this view. I think the decision in Re Ash (16 Sol. J. 574) has rendered it proper that the inquiry whether there are assets to be administered should be raised at this time. I admit that it may be difficult to go into the question where there is an averment of such assets by the debtor; yet such averment must not, on the face of the proceedings, be open to challenge; and this, I think, is the case here, where prima facie, such assets as the debtor had would pass to the trustee under the first liquidacion, unless by the conduct of such trustee he had forfeited his right to them. Before going into the question whether there has been such conduct in this case, I must say that I do not accede to the argument of Mr. Munns (who appeared for the debtor in the court below), that the 9th sub-section of the 125th section, by which it is enacted that the provisions as to the close of a bankruptcy, and the discharge of a bankrupt, shall not apply to a liquidating debtor, renders inapplicable the 3rd sub-section of the 15th section, with regard to the property which is to devolve upon the trustee during the continuance of the liquidation proceedings. It is to my mind clear from the Act that the law on this point in

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regard to a debtor adjudicated bankrupt, or whose estate is in liquidation, the proceedings being still pending, is precisely the same. Mr. Munns also argued that the effect of the resolutions under the first liquidation was to entitle the debtor to his order of discharge. Without giving an opinion whether this be so or not, it is clear that the order of discharge does not bar the right of the trustee to the property devolving on the debtor. It is the close of the proceedings alone which has this effect. There is no question that the proceedings in the first liquidation are still pending. I now come to the question whether the conduct of the trustee in regard to the debtor and his estate, has been such as to disentitle him to the property as against the new creditors. I have had much more difficulty on this part of the argument; and it is not without hesitation that, on the evidence of the debtor, I have come to the conclusion that it does not show connivance by the trustee at his trading, nor such neglect or laches on his part as can be held to create a new liability in respect of the new debts. According to my view, therefore, all the assets set forth by the debtor in his second liquidation petition belong to the trustee under the first petition; and there being no assets to administer under the second petition, it ought not to have been presented, and no resolutions under it ought to be registered. As it may be intended to take the opinion of a higher tribunal in regard to this point, I thought it well to hear arguments in respect to the other objections that have been raised to the registration of these resolutions, in order that the parties may have my opinion on these also, and so be able to bring the whole matter, if they so desire, before the Court of Appeal. The first objection raised was that no creditor under the first liquidation could, by virtue of a renewal of his old debt, be allowed to vote on the resolutions under the second. Now I believe it to be admitted that none of such creditors did vote on the resolutions actually passed; and if this were disputed, I should require, before dealing with their votes, a report from Mr. Penn on this point, for I am clearly of opinion that the votes of no such creditors should be allowed. It was argued, that as the Act of 1869 contains no section similar to the 164th section of the Act of 1861, avoiding contracts made by bankrupts after adjudication, such contracts must be regarded as legal and binding under the Act of 1869. But I should have hesitated to come to such a conclusion, the effect of which would be to enable old creditors with renewed debts to come in competition with new creditors whose debts were provable only under a second fiat or liquidation as the case might be. But a decision of the Chief Judge, which is of course binding upon me until reversed on appeal (Jones v. Phelps, 20 W. R. 92), covers the point. His Lordship there held, that when a debtor was discharged from a debt by bankruptcy, a promise by him to pay it was a mere nudum pactum, and would not, therefore, sustain an action. The case of Marshall v. King (31 L. T. Rep. N. S. 511), referred to by Mr. Munns, seems to me no authority the other way. According to the statement of that case, it arose in respect of a bill given by a bankrupt in regard to work done under a contract, doubtless entered into before, but partly executed subsequent to, the adjudication. But though I think it is admitted that none of the creditors under the first liquida