Rffect of disclaimer.

trustee (»), or where the property does not come to the knowledge of the trustee within one month after such appointment, at any time within twelve months after he becomes aware of it (o). This enactment enables the trustee to get rid of the bankrupt's leaseholds, but does not entitle him to disclaim a contract by the bankrupt for the sale of his leasehold property without disclaiming the lease (p). A Crown lease can be disclaimed (q). The trustee can disclaim, notwithstanding that the lease has been determined by expiration of time or by forfeiture between his appointment and the disclaimer; and, perhaps, also, where it has been determined before his appointment (). The disclaimer should be signed by the trustee in person (s).

The disclaimer operates to determine, as from the date of disclaimer, the rights, interests, and liabilities of the bankrupt and his property in, or in respect of, the property disclaimed; and also discharges the trustee from all personal liability in respect of the property disclaimed as from the date when the property vested in him; but does not, except so far as is necessary for the purpose of releasing the bankrupt and his property and the trustee from liability, affect the rights or liabilities of any other person (t). Indeed, as a general rule, bankruptcy does not affect the rights and liabilities of persons not parties to the bankruptcy, except so far as may be necessary in the interests of the trustee and creditors and the administration of the bankrupt's estate in bankruptcy (u).

Partners (1886), 32 Ch. D. 337.

(t) Sect. 55, sub-sect. (2). This provision states explicitly the construction placed on sect. 23 of the Bankruptcy Act, 1869: Er parte Walton (1881), 17 Ch. D. 746; Hill v. E. & W. India Dock Co. (1884), 9 App. Cas. 448 (where an assignee became bankrupt, and the liability of the original lessee was held to remain, notwithstanding trustee's disclaimer).

(u) Per Romer, L.J., in Stein v. Pope, [1902] 1 K. B. at p. 599. In that case a lessee assigned the lease to the defendant by a deed which was an act of bankruptcy, on which the lessee was afterwards adjudicated bankrupt. Before the adjudication the reversioners sued the defendant for rent which had become due since

In Stacey v. Hill (x), Hill had become surety for the rent Surety. payable by Chapman under a lease. Chapman became bankrupt, and his trustee disclaimed the lease. It was held by the Court of Appeal that Hill's liability, as surety, to the lessor ceased upon the determination of the lease by the disclaimer.

Under the disclaimer the trustee gives up to the lessor the entirety of the property comprised in the demise. Hence, if land and chattels are leased at an entire rent, the trustee cannot retain the chattels under the reputed ownership clause (y). And since the lease is at an end so far as the bankrupt and his estate are concerned, the trustee cannot take advantage of provisions relating to the determination of the tenancy (2); thus he cannot remove trade buildings and machinery under a provision authorizing such removal (a), unless the Court permits the removal under sub-sect. (3). But the trustee cannot rely upon the disclaimer as justifying acts which he has previously committed in violation of the tenant's obligations, as the removal of hay, where this is forbidden by the custom of the country (b). In general, however, the disclaimer relieves the trustee from all liability (c), and he is not liable for rent prior to the disclaimer, either as assignee, or on an implied contract of tenancy, or as trespasser (d).

Other conse

quences of

disclaimer.

Where a sum becomes due from the landlord to the tenant for Set-off. allowances at the determination of the tenancy, the landlord cannot, as against the trustee, set off arrears of rent accrued due before the bankruptcy (e); unless, indeed, by the custom of the country, the landlord pays only the amount of the valuation less. arrears of rent (ƒ). Similarly the landlord cannot set off sums due for breaches of covenant by the bankrupt (g).

the assignment; but the trial did not take place until after adjudication and disclaimer of the lease by the trustee in bankruptcy. It was held by the C. A. that the defendant was liable to pay the rent sued for, although the adjudication related back to the act of bankruptcy.

(x) [1901] 1 K. B. 660, 664. Distinguish Harding v. Preece (1882), 9 Q. B. D. 281, which was a case under the Bankruptcy Act, 1869.

(y) Ex parte Allen (1882), 20 Ch. D.

341.

(2) Ex parte Dyke (1882), 22 Ch. D.

410.

Leave to disclaim.

Terms of disclaimer.

Save in cases prescribed by general rules, the trustee cannot disclaim without the leave of the Court, and the Court can impose terms as to fixtures and other matters arising out of the tenancy (). The cases so prescribed are as follows:-(1) Cases where the bankrupt has not sublet or mortgaged, and (a) the rent is less than 20l., or (b) the estate is being administered under sect. 121 of the Act, or (c) the lessor does not, upon notice to disclaim being served upon him, require the matter to be brought before the Court; and (2) where the bankrupt has sublet or mortgaged, and neither the lessor nor the sublessee or mortgagee, upon notice to disclaim being served upon them, requires the matter to be brought before the Court (i).

In such cases, since the trustee disclaims without leave, there is no opportunity for terms to be imposed on him, and he cannot be called upon to pay rent to the lessor, notwithstanding that he may have been in beneficial occupation of the premises for the purpose of the bankruptcy (k). But where the Court grants leave to disclaim, and the trustee's occupation has resulted in benefit to the bankrupt's estate (1), or, although no actual benefit has resulted, if the occupation was with a view to benefit (m), the trustee is required, as a condition of disclaiming, to pay rent in respect of the occupation (n). Under the Act of 1869 the disclaimer was valid as between the trustee and the lessor, notwithstanding the failure to obtain leave (o); but, under the existing practice, a disclaimer without leave, where leave is required, is for all purposes void (i).

(h) Sect. 55, sub-sect. (3). As to granting leave, see Ex parte E. & W. India Dock Co. (1881), 17 Ch. D. 759; Ex parte Buxton (1880), 15 Ch. D. 289; and as to appeal, Re Woods (1876), 3 Ch. D. 459; Ex parte Sadler (1881), 19 Ch. D. 122; Ex parte E. & W. India Dock Co., supra; as to applying for leave after lapse of twelve months, Re Baker (1891), 8 Morr. 116; as to including several properties in same application, Re Whitaker (1888), 21 Q. B. D. 261; as to trustee's costs, Re Proctor (1891), 8 Morr. 251. Notice of motion may be served out of the jurisdiction : Re Rathbone (1887), 56 L. J. Q. B. 504. As to lease of chattels, see Sheffield Wagon Co. v. Stratton (1878), 48 L. J. Q. B. 35.

() Bankr. Rules, r. 320.

(k) Re Sandwell (1885), 14 Q. B. D.

960.

(1) Ex parte Izard (1883), 23 Ch. D. 115; Re Zaffert (1884), 1 Morr. 72; Re Brooke (1884), 1 Morr. 82.

(m) Ex parte Isherwood (1882), 22 Ch. D. p. 395; Ex parte Arnal (1883), 24 Ch. D. 26; Ex parte Good (1884), 13 Q. B. D. 731, 735.

(n) For refusal of leave where the trustee has acted for parties with opposing interests, see Re Crowther (1887), 4 Morr. 100; and for the considerations applicable where the bankrupt was tenant under an attornment clause in a mortgage deed, see Ex parte Isherwood (1882), 22 Ch. D. 384.

(0) Reed v. Harvey (1880), 5 Q. B. D. See Ex parte Ladbury (1881), 17 Ch. D. 532.

184.

disclaim.

Any person interested in the property may call upon the Notice to trustee to decide whether he will disclaim or not, and the trustee must then within twenty-eight days, or within such extended period as may be allowed by the Court, give his decision (p). The notice calling on the trustee to decide may be given by the landlord (q), and it must be actually received by the trustee (r). The trustee, if he requires an extension of time, should, in the absence of special circumstances (s), apply to the Court before the twenty-eight days have expired (t).

order.

If the trustee disclaims, any person claiming any interest in Vesting the property, or under liability in respect of it, may apply for an order for the vesting of the property in or delivery thereof to any person entitled thereto, or to whom it may seem just that the same should be delivered by way of compensation for such liability as aforesaid, or a trustee for him, and on such terms as the Court thinks just (u). An underlessee or mortgagee of the bankrupt, taking under a vesting order, must take the property on the terms of being subject to the same liabilities and obligations as the bankrupt was subject to at the date when the bankruptcy petition was filed. If he declines to accept such an order, he is excluded from all interest in the property. The lessor is, for the purpose of this provision, a person claiming an interest in the disclaimed property (x), and, although he may not be in a position to ask for an order vesting the property in himself, still he may put the statutory machinery in motion for the purpose of ascertaining whether a sublessee is willing to accept an order vesting the property in him subject to the bankrupt's liabilities in respect of it, or, if not, to give up his interest in the property (y). In other words, he may apply for an order requiring an underlessee or mortgagee to take the

(p) Sect. 55, sub-sect. (4) of the Bankr. Act, 1883.

(1) Ex parte Mackay (1884), 14 Q. B. D. 401.

(r) Reed v. Harvey, 5 Q. B. D. 184. (8) Ex parte Lovering (1874), L. R. 9 Ch. 586; Ex parte Moore (1876), 2 Ch. D. 802.

(t) Re Richardson (1880), 16 Ch. D. 613.

(u) Act of 1883, s. 55, sub-s. (6). Payment of rent by a mortgagee in possession may create a tenancy from year to year, although the lease has

Liability

order.

property with the liabilities and obligations of the lease, or to be excluded (2).

The registrar has a discretion as to the persons to be served with notice of an application under this sub-sect. (6) of sect. 55 of the Act of 1883; and if the lessee, for instance, is not served, he will not be prejudiced by an order made in his absence (a).

Before the passing of the Bankruptcy Act, 1890, it was conunder vesting sidered doubtful whether the person in whom the lease was thus vested was liable as an original lessee, or only as an assignee (b). Under sect. 13 of the last-mentioned Act he may be made liable as an assignee only. But this power will be exercised only under special circumstances, and in general the vesting order requires the person in whose favour it is made to take upon himself the burden of the unperformed obligations, both past and future, to which the bankrupt was liable (c). A mortgagee cannot escape liability by the device of assigning to a nominee who is a bare trustee for him (d).

Damages.

A person injured by the operation of a disclaimer can prove in the bankruptcy for the amount of his loss (e). The measure of damages in respect of future rent is the difference between the rent due under the lease for the residue of the term and the rent that now can be obtained (ƒ); it includes also the sum required to leave the property in the same state as if the covenants had been properly performed (g). Where the assignee of a repairing lease had become bankrupt, and his trustee had disclaimed the premises, which had become depreciated in letting value, the assignor was allowed, under his covenant of indemnity, to prove as damages (i) two quarters' rent from the date of disclaimer to give time to repair and relet, (ii) the diminution in letting value for the residue of the term, and (iii) the amount of the dilapidations (h). Where the lease is determinable at any of several periods, it is to be taken, for the purpose of assessing