fact was only a nominal composition, and wholly disproportionate to the assets of the defendant of which he at the times aforesaid was possessed, and had, and which could, and might, and ought to have been, and were available towards the payment of the defendant's creditors, their debts and demands. Seventh replication to the second plea, on equitable grounds, that the allegations in the sixth replication are true, “wherefore the plaintiffs refused to accept the alleged tender and offer of payment of the composition in the second plea mentioned." Eighth replication to the third plea, on equitable grounds, that the allegations in the sixth replication are true, "wherefore the plaintiff's discharged the defendant from tendering the composition, and waived such tender as in the third plea mentioned." Demurrers to first, second, and third pleas, and joinder. Demurrers to third, fourth, fifth, sixth, seventh, and eighth replications, and joinder. H. James, for the plaintiffs. The first plea is bad because it does not allege that the defendant has paid the composition or tendered it to the plaintiffs: Fessard v. Mugnier. (1) The plea in that case contained an averment that the defendant was ready and willing to pay the composition, and also contained a general averment of conditions precedent. Erle, C.J., said: "The plea states that the defendant was ready and willing to pay to the plaintiff the composition, but it contains no averment that the composition was paid at the time when it was stipulated to be paid, or anything equivalent to averring that it was tendered, it only states that the defendant was ready and willing to pay it: that is not enough;" the Court, therefore, held the plea bad. The release in the present deed is not absolute but conditional; the defendant ought to shew a performance of the condition on which the release becomes binding; the plea ought to aver that there has been no default in the payment of the composition to any one of the creditors. If the plea and replication are read together they show that the condition has not been fulfilled, and therefore that the plea is no answer. Reading, also, the release and condition together, the true construction is that if default in the payment of the composi(1) 18 C. B. (N.S.) 286; 34 L. J. (C.P.) 126. 1868 HART V. SMITH. 1868 HART v. SMITH. tion be made to any one creditor, the whole body of creditors are remitted to their original rights; and then, under the previous proviso, any one creditor can have the leaseholds which are assigned to the trustee sold and the proceeds divided rateably among all the creditors. Taking together the covenant to pay the composition, and the proviso that in default of payment the leasehold property shall be sold, and the release and the condition which follows, it is clear that the debtor is bound to pay or tender the composition to every creditor, or else the release cannot be pleaded in bar to an action by any one of them.. [COCKBURN, C.J. I think the word "respectively" in the condition to the release ought not to be read as suggested by the plaintiffs; I think the meaning of the condition is that if any creditor does not get his instalment paid, he only is at liberty to treat the release as a nullity.] The latter objections apply to the 2nd and 3rd pleas also; and if the construction of the condition to the release contended for by the plaintiffs is right, the 3rd, 4th, and 5th replications are good. The 6th, 7th, and 8th replications are good. It is true that they do not contain an averment of fraud, but they allege a want of good faith. They are pleaded on the authority of Ex parte Cowen.(1) According to that case, although the Court will not review the decision of the majority of the creditors as to the quantum of composition they may agree to accept, yet the power to bind the minority must be fairly exercised, and there must be a bonâ fide bargain between the creditors and the debtor. The allegations in these replications bring the case within that decision. If these replications are held to afford no answer to the pleas, a majority of the creditors from motives of benevolence might accept the smallest composition to benefit the debtor; and this would be contrary to the whole scope of the Bankruptcy Act, by which it was only meant to give a power to the majority to be exercised for the benefit of the whole body of creditors. (2) [LUSH, J. In Dauglish v. Tennent (3), we held that there must (1) Law Rep. 2 Ch. App. 563. (2) James further intimated that if the case went to a court of error, he should contend that the release amounted only to a covenant not to sue; and that the pleas were bad, because the composition was not paid into court: see Bamford v. Clewes (Law Rep. 3 Q. B. 729). (3) Law Rep. 2 Q. B, 49. be perfect good faith between all the creditors to make a deed binding on the non-assenting minority, and that if a creditor was induced to sign the deed in consequence of receiving some benefit beyond the rest, it was void.] Sir G. Honyman, Q.C. (Lucius Kelly and Schalch with him), for the defendant. By s. 57 of the Common Law Procedure Act, 1852 (15 & 16 Vict. c. 76), the performance of conditions precedent may be pleaded generally; but neither under that act nor at common law is it necessary to negative or aver performance of conditions subsequent when pleading a deed: Notes to Thursby v. Plant. (1) The release takes effect on the execution of the deed on the 5th of December, 1866; the condition is, that if the instalment is not paid on the 1st of January, the release shall be void, so that the release is cut down by matter subsequent, that ought to be replied. The Court, by the construction they have put on the release and condition, have already disposed of the 3rd, 4th, and 5th replications. The 6th, 7th, and 8th replications are bad. A deed, executed by the requisite majority of creditors, and as to which all the requirements of the Bankruptcy Act, 1861, have been complied with, is primâ facie unimpeachable. It can only be vitiated by fraud, and there is no allegation of fraud in the replications. [COCKBURN, C.J. I cannot distinguish this case from Ex parte Cowen. (2) I feel bound by that case.] From the general mode in which the replications are framed, great inconvenience would arise in submitting the question to a jury. [COCKBURN, C.J. The question for the jury would be, is this a deed entered into for the benefit of the whole body of creditors, or is it a deed entered into by the majority of creditors for the benefit of the debtor only ?] H. James, in reply. COCKBURN, C.J. As to the objections taken to the first plea, the distinction seems to me to be this. Suppose there had been no release in the deed except a release by implication; suppose the creditors had simply assented to take so much in the pound, there (1) 1 Wm. Saund. 233 a, n. (2). (2) Law Rep. 2 Ch. App. 563. 1868 HART v. SMITH. 1868 HART V. SMITH. then would have been what would be equivalent to a release by implication, that is, the instalments of the composition on the debt due to any creditor having been paid he would be debarred from any right to insist upon the payment of the remainder; and then the payment of the instalments would have been a condition prece dent, and must have been averred by the defendant. But instead of a release by implication there is here an express release taking effect from the execution of the deed; and then there comes a condition that in the event of the covenants entered into by the debtor not being performed, that release shall become inoperative; and what Sir George Honyman says, therefore, is justified, that if by matter ex post facto the creditor wants to get rid of the release, it is for him to reply the facts avoiding it. As to the 6th, 7th, and 8th replications, I think we are bound by Ex parte Cowen (1), and I must say that I entirely concur in the grounds on which the decision is based by the Lords Justices. It seems to me that what the statute intended to do was to substitute a species of commercial domestic forum for the proceedings in bankruptcy. As it was known that proceedings in bankruptcy ate up a very large proportion of an insolvent's assets, it was thought better that the winding-up of his affairs and the liquidation pro tanto of his debts should be left to the more economical management of his creditors. Whenever this was proposed to be done the majority of the creditors were to have power to bind the minority, with the intention that whatever the majority might think advantageous to the whole body of the creditors ought to be made binding upon the minority: so that an obstinate creditor might not stand out and insist upon the payment of his entire debt, and swallow up by proceedings at law the debtors' assets, to the disadvantage of the general body of the creditors. But I never could bring myself to think that it was intended that the majority of the creditors should be enabled to relieve the debtor of his liability to pay his debts as far as his assets would go, at the expense of those creditors who were not disposed to take the same benevolent view of the position of the debtor as the majority of the creditors. I quite concur in thinking that the bona fides of such an arrangement depends upon its being entered into by the (1) Law Rep. 2 Ch. App. 563. majority of creditors with an honest intention to take into account that which is most beneficial to the common interest of all, and not to the interest of the debtor as distinguished from that of his creditors. Therefore, I have no hesitation in saying that I entirely concur with the reason of that decision independent of its authority; but its authority is binding upon us sitting here as a court of co-ordinate jurisdiction. LUSH, J. I am of the same opinion. I bow to the opinion of the Lords Justices as the opinion of a court of co-ordinate jurisdiction. But beyond that, if this point had come before us for the first time, I should be of the same opinion. The statute assumes (it is to be implied from the provisions) that the majority of the creditors who are acting in making an arrangement with the debtors, are acting as creditors, that is, as persons looking after their own interests. The statute gives them credit for making the best arrangement under the circumstances for the benefit of those concerned; but if they act not with any view to their own benefit, but solely with a view to release the debtor, that is not acting within the meaning of the statute, and their proceedings do not bind the minority. HANNEN, J. I am of the same opinion. I think we are bound by the decision of the Lords Justices, this being an equitable question. If it be thought necessary, this case must be reviewed in a court of error, and it is extremely likely that all the reasons given in that judgment would then meet with my assent. I have not examined them so carefully as I should before expressing a positive opinion that I agree with them; but it is right to say that I do not think that the legislature did intend to exclude motives of benevolence and kindness from the minds of those persons who were enabled to make a binding deed under the statute. I do not think the legislature ever would have thought it necessary to guard against an excess of benevolence and kindness. The mischief from which the commercial community suffers is not an excess of kindness and benevolence on the part of creditors, but actual fraud. Persons are represented to be creditors who are not creditors. If the principle really be that benevolence and kindness are not proper motives to induce a creditor himself to give up and 1868 HART V. SMITH. |