Supreme Court of Judicature.

COURT OF APPEAL.

Jan. 20 and 22.

(Before LINDLEY, SMITH, and RIGBY, L.JJ.) Re ISAAC; CRONBACH v. ISAAC. (a)

APPEAL FROM THE CHANCERY DIVISION.

Practice-Costs- Administration action-Defendant trustees-Severance of defence-Deprivation of costs-Discretion of court-Unreasonable carrying on of proceedings-Right of appeal— Judicature Act 1873 (36 & 37 Vict. c. 66), s. 49— Order LXV., r. 1.

In Dec. 1886 an action was brought to administer the estate of a deceased testator. The defendants were A. and B., two of the executors and trustees of the will. Until Nov. 1892 the defendants were represented by the same firm of solicitors. A. then severed the defence, and for some time appeared in person, but in Jan. 1894 he appointed another solicitor to act for him. On the further consideration of the action, Kekewich, J. made an order that one set of costs only should be allowed to the executors and trustees out of the estate, and that those should be paid to B. On appeal:

Held, that the evidence before Kekewich, J. did not justify the view that A. had unreasonably carried on the proceedings; that an opportunity ought to be afforded him of explaining his conduct in having severed the defence; and that, therefore, the appeal was competent.

Held also, that, on the evidence now adduced, there was no ground for judicially depriving A. of his costs; and that therefore the order of Kekewich, J. must be varied by directing that one set of costs only should be allowed, but that the same should be apportioned by the taxing master between A. and B., so, nevertheless, as only to give A. costs for work actually done by him.

THE will and codicil of Samuel Isaac, dated the 3rd July 1886 and the 10th Nov. 1886 respectively, were proved by two of the executors named therein, Saul Isaac and Solomon (who were also appointed trustees), power being reserved to the others to come in and prove.

On the 15th Nov. 1886 the testator executed a voluntary settlement in favour of practically the same persons as were beneficiaries under the will. He died on the 22nd Nov. 1886.

The testator was a contractor to a railway company, and it was stated that shortly after his death his brother Saul Isaac had taken steps to get the contracts transferred to him for his own benefit.

An action was commenced by writ, issued on the 14th Dec. 1886, for the administration of the trusts of the testator's will.

Judgment in the action was delivered on the 30th April 1887.

The chief clerk's certificate was filed on the 12th Aug. 1895, and the further consideration of the action came on for hearing on the 20th March 1896, when Kekewich, J. made an order that one set of costs only should be allowed to the exe(a) Reported by W. C. Biss, Esq., Barrister-at-Law.

[CT. OF APP.

cutors and trustees out of the estate, and that those should be paid to Solomon.

It appeared that, on the 14th Nov. 1887, Isaac changed his solicitors, and from that date until the 22nd Nov. 1892 the executors were represented by Grover, Humphreys, and Son.

Isaac being dissatisfied with the long delay withdrew his retainer on the latter date, and put his own name on the record.

On the 24th Jan. 1894 he appointed Ernest Bevir as his solicitor, who had continued to act for him ever since.

No further evidence was before the court to explain why the trustees had severed in the course of the proceedings.

Isaac now appealed from the decision of Kekewich, J. as to the costs of the proceedings.

Farwell, Q.C. and A. W. Rowden, for the appellant, argued that, unless severance per se was misconduct, the trustees were, under rule 1 of Order LXV., entitled to their costs in their proper shares; and that, if the appellant were deprived of his costs, the curious anomaly would arise that, as the estate was not yet fully wound-up, and as the appellant was ordered to get in some of the outstanding assets, he would have to give his services in that respect gratuitously. They relied upon

Course v. Humphrey, 26 Beav. 402;

Attorney-General v. Wyville, 28 Beav. 464. Warrington, Q.C. and Borthwick for the respondent Solomon.

A. H. Jessel for the respondents, the beneficiaries under the will.

Jan. 22.-The following judgment of the Court (Lindley, Smith, and Rigby, L.JJ.) was delivered by

LINDLEY, L.J.-This is an unfortunate appeal about costs, and the first question which arises is whether the appeal is competent. The case is this: His Lordship shortly stated the facts, and continued:] In the order on further consideration the costs were dealt with by the learned judge in the court below in this way: One set of costs only was given to the trustees, and they were to be paid to Mr. Solomon to the exclusion of Mr. Isaac. Mr. Isaac appeals from that order, and the appeal is based on that part of Order LXV., r. 1, relating to costs, which says: "Subject to the provisions of the Acts and these rules, the costs of and incident to all proceedings in the Supreme Court, including the administration of estates and trusts, shall be in the discretion of the court or judge. Provided that nothing herein contained shall deprive an executor, administrator, trustee, or mortgagee who has not unreasonably instituted, or carried on, or resisted any proceedings, of any right to costs out of a particular estate or fund to which he would be entitled according to the rules hitherto acted upon in the Chancery Division." On this order as it stands the effect is to deprive Mr. Iaaac of all his costs because only one set of costs was allowed, and the whole of them is to go to one trustee. The question is, whether the evidence before the learned judge justifies the view that Mr. Isaac had unreasonably carried on these proceedings. The facts as to that are as follows: Messrs. Isaac and Solomon severed

forthcoming if the company was ordered to be wound-up.

From that decision John Oakden Swift, a debenture-holder, appealed, and his appeal was supported by debenture-holders, including the appellant, holding debentures to the extent of 16,0501. out of 19,9001. A debenture-holder to the extent of 6001. had expressed his intention of remaining perfectly neutral, and the holders of the remainder of the debentures were not represented.

The hearing of the appeal stood over from time to time to enable the company to complete its negotiations with reference to the Canadian property, but nothing definite had been done.

The appeal now came on to be heard.

Grosvenor Woods, Q.C. and George Cave for the appellant. If a winding-up order is made there is no doubt that nothing will be obtained for the debenture-holders, but if no winding-up takes place there is a chance that they may get something. The authorities show that, where no assets of a company can be reached by a windingup, no order for a winding-up ought to be made. In Re The St. Thomas Dock Company Limited (34 L. T. Rep. 228; 2 Ch. Div. 116, at p. 121), Sir George Jessel, M.R. said: "I have in this instance a case where the petitioner does not allege or pretend he can get any money out of the winding-up order, and does not even allege there will be assets to pay the costs of the winding-up." That is precisely the case here. No allegation is made that there are any assets which would be obtainable if a winding-up order were made. In Re The Chappel House Colliery Company Limited (49 L. T. Rep, 575; 24 Ch. Div. 259) it was laid down that although as a general rule an unpaid creditor of a company which cannot pay its debts is entitled to a winding-up order, that order will not be made when it is shown that the petitioning creditor cannot get anything by a winding-up order; and à fortiori it will not be made under those circumstances if the other creditors oppose it." [LINDLEY, L.J.-Here is a company which is apparently of no use to anyone, and the only way of getting rid of it is by a winding-up.] The court might do what was done in Re The Olathe Silver Mining Company Limited (27 Ch. Div. 278), that is, direct an inquiry in chambers whether the company has any and what assets, or else direct a meeting of the debenture-holders. [LINDLEY, L.J.-There is no object in doing that, it seems to me.] It has been held that, where debentures have been issued by a company covering the whole of its assets, including its uncalled capital, and there are insufficient assets to meet the claims of the debenture-holders, the court will refuse to make a winding-up order upon the petition of an outside creditor:

Re The Edgbaston Brewery Company Limited, 68
L. T. Rep. 341.

We submit that the winding-up order ought not to have been made in the present case by Romer, J., as there is nothing on the evidence to justify the assumption that such an order will have any good result, whereas the evidence shows that if no order is made there is a chance that the attempt to secure the Canadian property will be successful. It was thought by Romer, J. that something indirectly might accrue; but it is clear

[CT. OF APP.

upon the uncontradicted evidence that there are no assets which can be reached by a winding-up.

Neville, Q.C. (with him A. L. Ellis) for the respondent, the petitioner.-The respondent takes the decision of Romer, J. as his authority, and is not satisfied that there are no assets which can be reached by a winding-up. It would not be in accordance with the practice of the court to reverse the decision of the learned judge in the court below, he having on the facts come to the conclusion that something may be recovered if a winding-up takes place. The respondent is a judgment creditor, and has his winding-up order, which cannot hurt the appellant as it stands.

At this stage of the argument, a gentleman from the office of the official receiver, who was present in court, was requested by their Lordships to state to them in confidence what he knew as to the assets of the company, and what in his opinion were its prospects if no winding-up order was made.

Grosvenor Woods, Q.C. in reply. - [LINDLEY, L.J.-We have had a confidential conversation with an official from the office of the official receiver, and we find that there is good ground for the order made in this case.] It seems strange that, if a creditor on the evidence is not entitled to a winding-up order, he should become so after a communication by an official who has acquired information in consequence of that winding-up order which has been improperly made. The reasonable course for the petitioner to have adopted would have been to cross-examine on theaffidavits filed in opposition to the petition. According to the evidence no good result will come from the winding-up, and it is on the evidence that if no winding-up order is made there is a chance that the negotiations concerning the Canadian property will be successful. No evidence to the contrary is adduced by the other side. I ask the court to decide on the evidence, and not on the confidential communication of an official whose statements there is no opportunity of answering, as they are confidential. All that the court can deal with is the evidence before it. If the winding-up machinery was improperly put in motion it ought to be stopped, in spite of what the representative of the official receiver has to state.

LINDLEY, L.J.-I think that this is a case in which the court ought not to disturb the order which has been made. It is a peculiar case. The company has no tangible assets. The petitioner is a judgment creditor. It appears that a great majority of the debenture-holders do not want a winding-up, hoping that something may be got for, them out of a claim of the company in Canada. But in March 1896 Romer, J., on the then state of the evidence, made a winding-up order, not satisfied that there were no assets. There was an application to stay proceedings to give the company a chance of establishing its claim in Canada. The appeal to this court stood over from time to time, and came on on the 5th May last, and again stood over-all in the hope that something tangible would result. Nothing, however, has resulted. In the meantime the official receiver is not satisfied that the company has no assets; he thinks that there are assets which can be got at in the winding-up. Under these circumstances I am of opinion that it would be wrong to interfere with the order that has been

made. The appeal must, therefore, be dismissed with costs.

SMITH and RIGBY, L.JJ. concurred.

Appeal dismissed. Solicitors for the appellant, Powell and Rogers. Solicitors for the respondent, Norris, Allens, and Chapman.

Jan. 11, 12, and 30.

(Before LINDLEY, SMITH, and RIGBY, L.JJ.) Re THE ROUNDWOOD COLLIERY COMPANY; LEE V. THE ROUNDWOOD COLLIERY COMPANY. (a)

APPEAL FROM THE CHANCERY DIVISION.

Bill of sale-Mining lease Power of distress extending to chattels of lessee on premises other than those demised by lease-Bills of Sale Act 1878 (41 & 42 Vict. c. 31), ss. 4, 6-Bills of Sale Act (1878) Amendment Act 1882 (45 & 46 Vict. c. 43), 88. 3, 8-Company-Debentures-Validity of distress against debenture-holders. An express power, in the ordinary form, in a mining lease which reserves rents and royalties, to distrain for rent in arrear on goods and chattels of the lessee on premises other than those demised, is not a licence to take possession of personal chattels as security for a debt," within the meaning of sect. 4 of the Bills of Sale Act 1878, and is not therefore invalidated by that Act when unregistered.

Pulbrook v. Ashby and Co. (56 L. J. 376, Q. B.) considered.

Decision of Stirling, J. (75 L. T. Rep. 508) reversed.

A distress made on the goods of a company before the commencement of a winding-up thereof, and before a receiver is effectively appointed, is valid as against the debenture-holders of the company whose debentures create a floating charge on the goods and chattels of the company.

Biggerstaffe v. Rowatt's Wharf Limited (74 L. T. Rep. 473; (1896) 2 Ch. 93) and Re The Opera Limited (65 L. T. Rep. 371; (1891) 3 Ch. 260) applied.

APPEAL by the Earl of Effingham from a decision of Stirling, J. (75 L. T. Rep. 508).

Graham Hastings, Q.C. and Upjohn for the appellant. The question raised by this appeal turns on the true construction of the Bills of Sale Act 1878, sects. 4, 6—namely, whether a power of distress in a mining lease makes the lease a bill of sale. In an ordinary lease a power of distress is a bill of sale:

Re Willis; Ex parte Kennedy, 59 L. T. Rep. 749; 21 Q. B. Div. 384.

If a power of distress is a bill of sale it is absolutely avoided under sect. 8 of the Act when unregistered. Here, however, the lease is an ordinary mining lease containing the usual power of distress which has been inserted by conveyancers in mining leases for nearly half a century. Sect. 6 of the Act of 1878 excepts a mining lease, and it is immaterial that sect. 4 does not exclude such a lease. It would be absurd to say that it is a bill of sale within sect. 4

(a) Reported by E. A. SCRATCHLEY, Esq., Barrister-at-Law.

although not so within sect. 6. But a power of distress may be good in certain circumstances:

Daniel v. Stepney, 27 L. T. Rep. 380; L. Rep. 9 Ex. 185.

It is true that that was not a case under the Bills of Sale Acts, but it has an important bearing upon the present case. Stirling, J., in deciding this point, relied on

Pulbrook v. Ashby and Co., 56 L. J. 376, Q. B. But that authority cannot be regarded as governing the present case. [RIGBY, L.J. referred to Ex parte Jackson; Re Bowes (43 L. T. Rep. 272; 14 Ch. Div. 725]. According to the general practice a power of distress in mining leases, though limited to the goods of the lessee, extends over any adjoining or neighbouring collieries, and this is so in the present case. [LINDLEY, L.J.-Is this power of distress a common form in the books of conveyancing precedents?] Yes; an express power of distress is a common form in mining leases as appears from the volumes of precedents in which such forms are contained. See Davidson's Conveyancing Precedents, 2nd edit. (1864), vol. 5, pp. 311, 395, 396. Those are precedents in a book of very considerable authority, and there is no suggestion as to any doubt about this clause. The book was published ten years after the Bills of Sale Act 1854 was passed. In Key and Elphinstone's Precedents in Conveyancing, 2nd edit. (1883), vol. 1, p. 771, there is a collection of provisoes which may find their way into a mining lease, and there is a note thereon. The book was published after the decision in

Daniel v. Stepney (ubi sup.).

In the next edition (1890) of that work (vol. 1, p. 878) attention is drawn to Pulbrook v. Ashby and Co. (ubi sup.), and the note is more extensive. In the 4th edit. (1894), vol. 1, p. 901, there is the same note. [LINDLEY, L.J.-We gather that it is a common form when mines are worked together.] Daniel v. Stepney (ubi sup.) seems to rest to some extent on Co. Litt. 146 (b), s. 221. Short of a decision precisely in our favour, we cannot see what decision we could cite more conclusive on the point now before the court. In that case the Bills of Sale Act was not referred to, and yet, having regard to the number of eminent judges and counsel engaged, it could not have been overlooked if it had been material. The point was apparently not raised. Sect. 6 of the Act of 1878 grew out of

Re The Stockton Iron Furnace Company, 40 L. T.
Rep. 19; 10 Ch. Div. 335.

That section was passed to cure the defect in the Act of 1854. As Bowen, L.J. said in Re The Standard Manufacturing Company Limited (64 L. T. Rep. 487; (1891) 1 Ch. 627, at p. 645) you cannot really understand the Bills of Sale Acts without understanding the express and avowed design of the Legislature. Stirling, J. has given no effect to the exception of mining leases from the purview of sect. 6. Sects. 4 and 6 are really in pari materia, and should be read as one consistent whole. They are both, in fact, definition sections, and why in separate sections only the scheme of the Legislature can explain. [LINDLEY, L.J. referred to Morton v. Woods (L. Rep. 4 Q. B. 293).] Then we say that if Stirling, J. was right in his decision, and this

mining lease is a bill of sale, then it is like a debenture, within Re The Standard Manufacturing Company Limited (ubi sup.), and should have been registered under sect. 43 of the Companies Act 1862. This point was raised before Stirling, J., but was not dealt with. [LINDLEY, L.J.-We are not impressed by this point.]

an

Buckley, Q.C. and Eustace Smith (with them Younger) for the respondents. A power of distress in a mining lease makes the lease a bill of sale, and the exception of a mining lease in sect. 6 of the Act of 1878 simply means ordinary mining lease without a power of distress. That section is addressed to fictitious rents, not a bona fide price for occupation. It has nothing to do with this case, for here there is real rent. Here the power of distress extends in effect not only to the goods and chattels on the demised premises, but to all the goods and chattels of the lessees wheresoever situated. Sect. 6 was not intended to except a mining lease containing such a power from the operation of the Act. See

Coltness Iron Company Limited v. Black, 6 App.
Cas. 315, at p. 335.

Stirling, J. did not decide this case on the authority of Pulbrook v. Ashby and Co. (ubi sup.), but on sect. 4, although Pulbrook v. Ashby and Co. assist to a certain extent. It aids in the reasoning for holding that sect. 4 is applicable to a power of distress of this kind. As to Daniel v. Stepney (ubi sup.) the point was not raised. Then we say that, assuming the power of distress to be valid, it was exercised too late to prevail against the debenture-holders of the company:

Re The Opera Limited, 65 L. T. Rep. 371; (1891) 3 Ch. 260;

Re Marriage, Neave, and Co.; The North of England, &e, Corporation v. Marriage, Neave, and Co., 75 L. T. Rep. 169; (1896) 2 Ch. 663. Upjohn in reply. As to the second point taken. by the respondents, the case of Re The Opera Limited (ubi sup.) does not apply here. The appellant claims as an incumbrancer, and he is in exactly the same position as the debentureholders. The granting of debentures to debentureholders creates a floating charge on goods, but does not prevent them from being still the goods of the company:

Re Marriage, Neave, and Co.; North of England, &c., Corporation v. Marriage, Neave, and Co., 75 L. T. Rep. 169; (1896) 2 Ch. 663.

[RIGBY, L.J.-There is no doubt that these goods are the goods of the company, subject to the rights of the debenture-holders.] A floating charge does not prevent the company from dealing with its property until a winding-up takes place, or until a receiver is appointed:

Wheatley v. Silkstone and Haigh Moor Coal Com
pany Limited, 52 L. T. Rep. 798; 29 Ch. Div.
715;

Biggerstaffe v. Rowatt's Wharf Limited, 74 L. T.
Rep. 473; (1896) 2 Ch. 93.

There is a distinction between the exercise of a power of distress and seizure by a sheriff. Distress is better than seizure by a sheriff. I rely on

Krehl v. The Great Central Gas Consumers' Company Limited, 23 L. T. Rep. 72; L. Rep. 5 Ex. 289.

Younger, in reply, on the second point.-First, the company had no right to create a specific security in priority to the debenture-holders. Secondly, if this was a security given by the company it was not given for the purpose of carrying on its business. Cur. adv. vult.

Jan. 30.-The following written judgments were delivered:

LINDLEY, L.J.-This is an appeal from an order of Stirling, J. restraining a lessor of a seam of coal in Yorkshire from selling under a distress for rent goods of his lessee, but which goods were seized on lands not comprised in the lease. Stirling, J. held that the power to distrain for rent off the premises demised was a bill of sale within sect. 4 of the Bills of Sale Act 1878 (41 & 42 Vict. c. 31), and that as the lease was not registered as a bill of sale the distress was invalid. Another question was raised before us, which was that, assuming the power of distress to be valid, it was exercised too late to prevail against the debenture-holders of the company, which was the lessee. This latter question turns upon circumstances which have no bearing on the decision on the Bills of Sale Act, and for the present it will be convenient to consider those facts only which are material to the extremely important question to which that Act gives rise. The Roundwood Colliery Company Limited is a company which at the date of the lease under which the distress was made was working a colliery at Rotherham, in Yorkshire, under a lease from a gentleman named Foljambe. This colliery had a shaft of its own through which the coal was raised; and which, of course, could be used for working any adjoining minerals which the company might acquire and properly work through Foljambe's colliery. By a lease dated the 20th Nov. 1891 the Earl of Effingham demised to the company a seam of coal adjoining Foljambe's colliery at rents varying with the acreage worked. Although these rents were in the nature of royalties payable for the coal won, they were rents which could be distrained for at common law on the property demised without any express power of distress. This point was settled in Daniel v. Gracie (6 Q. B. 145). The lease, however, contained a power in case of non-payment of the rent to distrain upon and sell the goods and chattels of the company in or about any of the premises hereby demised or any adjoining or neighbouring collieries." These last words give rise to the difficulty which has arisen. The seam of coal demised by this lease has always, in fact, been worked through the adjoining mine held by the company under Mr. Foljambe. It is plain, moreover, that this was always contemplated. The lease contained no demise of any surface lands; no provision was made for sinking any pit or shaft, and only one seam of coal was comprised in the lease. The words "neighbouring colliery" are large enough to apply to collieries in the neighbourhood not worked with the seam of coal demised. I am, however, of opinion that to construe those words in that wide sense would be unreasonable and extravagant. The power of distress must, in my opinion, be construed to apply to those neighbouring mines only which, though not actually adjoining the seam of coal demised, might be or become connected with it by underground workings. This is a matter of some importance; for