Page images

the money backwards and forward*." Brett, L.J., who concurred the Lord Chancellor, observed that the effect of what had taken place was to wipe out the old debt, which was payable at once, and constitute a new one which was payable only after a written demand. The only distinction, indeed, between this case and Ex parte National Mercantile Hank was that there the adTance was greater than the debt deducted.

In Exyarte Andrews, He Allison [ante, p. 336), Mr. Registrar Murray held, in accordance with the above principles, that the consideration of a bill of sale expressed to be " £235 owing to, and £75 paid by, the mortgagee" was truly stated, although the £235 formed part of the consideration of a former bill of sale repayable by instalments, some of which were not due at the date of the second bill of sale.

The last reported case on the subject is Hamilton v. Clmine (29 W. R. 488), where the consideration for a bill of tale was stated to be £700. Of this sum £271 had been previously paid by the grantee to the holder of a prior bill of tale. A cheque for the balance, £429, was, at the time of execution, handed to the grantor, and, at her request, cashed and applied as follows:—£350 to one of her creditors, £21 5s. 6d. to the attesting solicitor for prepaiingthe bill of sale, and for inc idental expenses, and £7 10s. was paid to, or retained by, the grantee for commission on the loan and expenses in connection therewith, in respect of which he also received from the grantor her promissory note for £10. The balance of the £700 was paid to the grantor. Upon these facts the court held that the consideration was not truly stated. Lindley, J., after refening to Ex parte The Charing Cross Hank and Ex parte Challinor, observed, " We have to see to which of those two cases this case belongs; to my mind it is most like Ex parte Charing Cross Bank, as the principle seems to be the same. The deduction here was not for a pre-existing debt, nor was it for costs contracted in relation to this advance, and, that being so, it comes within the principle of Ex parte Charing Cross Bank." This decision has recently been affirmed by the Court of Appeal.

The real question in every case of this description appears to be whether the consideration is 6o stated as to make the transaction virtually a fraud, or, in the words of Lord Justice James, -,a sham." When this is the case, it follows that the bill of sale is void und< r section 8 of the Act, but, as was remarked by Lindley, J., in Hamilton v. Chaine, the consideration is truly stated "if the whole of the money for which the bill of sale is given is paid for the grantor's use, and for expenses incurred by the lpnder in rendering his services."

From th'i cases above noti :ed the following rules may be laid down :—

(1) It is not essential that the whole or, indeed, any part of the money mentioned as the consideration should actually pass from the grantee to the grantor; it is sufficient (provided the transaction be not a sham) if the consideration money is paid to third persons with the privity and consent of the grantor, it being unnecessary that a collateral arrangement as to the application of the consideration should be set out in the bill of sale.

(2) It appears from the decision in Credit Company . v. Pott that a consideration expressed to be " now paid"

is sufficiently set forth, although, in fact, it consists of previous advances. The decision of the Chief Judge in Ex parte Berwick must therefore, it is submitted, be considered as virtually overruled.

(3) The retention of a sum for the costs of the preparation of the bill of sale, and for an auctioneer's charges for valuing the goods comprised in it, is allowable.

(4) The retention of part of the consideration money by the grantee to meet securities on which the grantor is liable to him, will not invalidate the deed, although the securities are not due at the time it is executed. This was clearly established with regard to negotiable instruments in Ex parte National Mercantile Bank, and

with respect to instalments under a former bill of sale in Ex parte Andrews.

(5) The retention of part of the consideration money for interest iu advance or commission will avoid the bill of sale.



Since we la^t wrote on this question, the House of Commons has gone into committee on the Bill, and has made progress to the extent of a part of the 1st clause. Small ns this progress is, it has already afforded a conspicuous illustration of the complete state of fog in which both sides of the House are enveloped, both as to the provisions of the Bill itself, and the probable results of its working. Mr. Brand moved, from the Government side of the House, an amendment excluding "future" tenancies from the right of free Bale given by the 1st clause. This was opposed by the Government, on the ground that, aB the present tenants were to be enabled to sell, it would be unjust that a purchaser from them should not be able to sell iu his turn, Mr. Gladstone himself saying, among other things, that the object of tho Act was that the tenant's interest should pass freely from hand to hand "for all generations to come." The amendment was, on the other hand, supported from the Conserva'ive benches on the ground that the purchaser would know that he had only bought a tenancy, not a right of sale, and that the Act of 1870, on the lines of | which the Bill professed to go, contemplated the extinction of the tenants' interests by purchase by the owners. It was in vain that Mr. Brand and Mr. Gibson (who alone, among the speakers on either side, seemed to understand the point) showed that, uuder the interpretation clauses of the Bill, a purchaser of a tenant's interest would be a "present" tenant himself, and unaffected by the amendment. Even the AttorneyGeneral for Ireland, who, if anyone, ought to know what the Bill means, declared that the amendment would be fatal to its principle, immediately after which Mr. Gladstone promised to assent to a clause which will effect, in a somewhat cumbrous form, exactly what would have been neatly effected by the amendment and the interpretation clause taken together.

But this is not all: the amendment was introduced avowedly in the landlords' interest, and wa.", as such, supported by the Conservatives, and opposed by the Government, and yet the Liberal members for Ulster must have known (what some of the Conservatives may certainly kuow, but, as they did not wish to defeat the amendment, it was not their interest to say it) that the amendment was really for the benefit of the tenants; anyone the least conversant with the management of land in Ulster (and the avowed object of the Bill is to assimilate the rest of the country to Ulster in this respect) must have known of the practice which has lately (since the Act of 1870) been adopted by such of the landlords as look merely to their pecuniary interest in dealing with their estates—a class greatly on the increase since other interests have been so considerably shaken—of requiring intending tenants of farms in possession to purchase the tenant-right from them for money down, just as if they had bought from au outgoing tenant. The practice is an inconvenient one to both parties, but it has been found the only effectual means of getting rid of the provision in the 1st clause of the Act of 1870, which prevents a tenant from agreeing to waire his tenant-right. If the extension of the right of free sale to "future" tenancies should be—as we anticipate —to extend this practice to them also, the practical result will be to preclude a landowner, who might desire to merge the tenant's interest in his own, from doing so, and to compel him to require this interest to be separately purchased, in order to prevent the <

of a new tenant's interest, without consideration, which he might have to buy over again.

This practice, however, might easily, and in bad huuds would inevitably, grow so as to revive the old, exploded, and most pernicious custom of lettings at low rents in consideration of exorbitant fines; on this ground, if on no other, we think that the interests, not only of the tenantry, but of the public at large, are opposed to any provisions likely to produce or foster it. The practical remit of " free sale," however, will obviously be in the same direction: it would, indeed, seem that whatever benefit it may prove to "present" tenants to enable them to sell that which, out of Ulster, few or none of Them have given any value for, it can make very little difference—except us a matter of class-feeling—to any one hereafter taking a farm whether he pays a full rent !-> the landlord, or a lower rent, plus a sum of money equal to, often greater than, the capital necessary to produce the difference, paid to his predecessor in occupation under the right of free sale, and, therefore, it might, at first sight, be supposed that the course which is obviously the best for the tenant, that by which he keeps his capital in hand to work his farm, paying the equivalent in rent, would, in the long run, prevail over the less profitable one: experience, however, proves rhe contrary to be the case, even under the existing law; the tendency of the tenants, where tenantright prevails, has always been to prefer to pay heavy sums for low-rented lands rather than comparatively small sums and heavier rents, and it is only where the landlords—who have hitherto considered this detrimental to their interests—have intervened to check them that the payments for tenant-right (which are obviously iu tb»ir nature fines for entry) have been kept within moderate limits. But although it may have been the interest of those owners in fee simple who looked rather to the good of their estates than the benefit of their private pockets, to discourage any attempt to "fine down " rents, and therefore, when land "in hand " was to be let, to exact full rents without premiums, the contrary was always the interest of limited owners, who could only, as a rule, be kept from the practice by stringent provisions: if now the law, by limiting the extent to which rent can be raised while placing no limit on the flues which may be exacted, makes it the pecuniary interest of any owner having land in hand to fine down his rents, and by recognizing the occupancy as having a separate saleable existence, enables limited owners to evade the provisions against fines (because a letting from year to year would not be touched by them), it is not difficult to foresee the time when the possession of a farm in Ireland, even though the rent reserved may sound most moderate, will not be to be had without a preliminary payment which will leave the average tenant hopelessly in debt for the rest of his life, not indeed to the landlord, who will have taken care to get his money down, but the local usurer, the character who has, in the past, obtained the largest benefits from the legislation of 1870, and for whose benefit especially this part of the present Bill seems to have been framed. Nor is this opinion based wholly upon inference, however logical; the experience of "free sale" in Ulster has ever been that it tended to impoverish the tenants and prevent improvements upon the estates, but that it nowhere inflicted any ptcuniury injury upon the owner: insomuch so that we have known more cases than one of well-managed estates in which the owners have offered to introduce free sale if the tenants desired it, and iu which the majority of the tenants preferred the continuance of the restrictive rules. [Of course, the rules in question were really judicious, not arbitrary or oppressive.] Logic, common-sense, and experience all point in the same direction: the first thing that ought to be done is to determine what the tenant's interest is, and to regulate its amount, and, when that is properly done, there will be little difficulty in making proper rules for its transmission. But this is

precisely what this Bill does not do, what Mr. Gladstone, so late as Tuesday last, directly refused to do, being no doubt supported in this refusal by those whose object is uot so much to benefit the tenantry as to injure the landowners—an object of which we entirely acquit Mr. Gladstone himself—but to the great disappointment o£ every man, be his party politics what they may, who desires to see, in the present Bill, some alleviation at of the existing difficulty in Ireland.

It would not, however, be sufficient to fix aud value the tenant's interest once for all: whether this were done as proposed by the minority on Lord Bessborough's commission, by fixing now "fair rents" to be paid in perpetuity—which would hand over all future accretions to the tenant—or by the introduction of terminable leases in purchase of tenant-right, as attempted upon the Duke of Leinster's estates—which practically reserves these accretions to the laudlord. Under the existing circumstauces of Ireland, the tenant's interest, if fairly fixed, ought to rise and fall with, and in some proportion to, the total agricultural value of the laud; we cannot see any ground whatever for handing over to him any portion of any exceptional value which the land may acquire, as building or accommodation land, or otherwise, but if its valne aa an agricultural machine increase or diminish in the future, even though the tenant may not have, by any action of his own, contributed to such increase or diminution, we think that he ought to be so far recognized as a partner in the farm, as to share alike the benefit and the loss. The Bill before us recognizes this right, but refuses—or at any rate fails—to adopt the proper means for giving effect to it. There was offered to the notice of the tranters of the Bill a simple, self-acting arrangement by which, if the value of the tenant's interest were at any moment agreed or determined, it would be equitably regulated for all time to come merely by the mutual action of the parties themselves, and they have deliberately preferred, as we remarked in a former article, to leave the parties with no better remedy than litigation, perpetually renewing at intervals of fifteen years, before a court of which the spokesmen of both parties concerned have expressed the most profound distrust.

The arrangement in question has been explained more than once in these columus, but we propose to describe it again when we come to the consideration of section 7, for which it would be the actual substitute. In the meantime, it may be necessary, for avoiding of misapprehensions, to reiterate, that we fully concur in the object of the 1st section, so far as it means to create, in every tenant, a saleable interest, the amount of which it shall not be in the power of the landlord to control, but that, in order that this should work otherwise than disastrously to both parties (but especially to the tenant), its amount ought to be capable of ascertainment at any moment, without litigation and without actual sale, and further, that if the tenant, from any cause whatever, aud whether voluntarily or by operation of law, parted with his interest, the landlord ought to be entitled to the preemption, at the full price, either on his own behalf or for any other tenant then in occupation of a holding on the same estate. Careful provision, however, ought to be made to prevent a landlord from compelling an unwilling tenaut to part with his interest so long as he observed the "statutory conditions" of his tenure.

A Connecticut lawyer at Bridgeport, the other day, says the Western Jurist, took exception to a judge's ruling that some evidence was inadmissible. He said, "I know that it is proper evidence. Here I have been practising at the bar forty years, and now I want to know if I am a fool?' "That," replied the court, " is a question of fact and not of law, and so I won't pass upon it, but will let the jury decide."



The Practice Of Banking, Emuuacino The Cases At Law And In Equity. By John Hutchinson. Effingham Wilson.

This book belongs to a class of works which it is difficult for a lawyer to criticize fairly, because when a bank manager has the courage to write what is in substance, if not in name, a legal treatise, it is almost inevitable that his work should be disfigured by defects perhaps more distressing to the mind of the professional lawyer than important as regards the class of readers for whom the book is intended.

From the author's constant injunction to "refer to head office," and the very elementary truths as to caution and credit which he inculcates, we presume that his work is intended as a guide for very young bank managers. Thus, for instance, at p. 50, he lays down the rule that "with account holders of small means, great caution should be exercised in allowing overdrafts," and again, at p. 88, he says that "The manager should exercise very great care and discretion in the reception of bills, and none but those of the most unexceptionable character should be discounted by him." On the other hand, cases are sometimes cited at a length quite unnecessary for lay purposes, and more than half the book is devoted to a purely legal resume of the law of bills of exchange, for which the inquirer would find a guide quite as practical and much more reliable in Byles on Bills. Indeed, the defect of the whole work seems to us to be that it is neither one thing nor the other. We took up the book expecting, from its title page, some valuable information as to the practical internal working and organization of a bank. But we confess to have risen from its perusal unsatisfied in this respect, whilst, as a book of reference for lawyers, we fear that it is not, by any means, exhaustive, and sometimes not altogether exact. Thus, to give an instance or two, the rule in Clayton's case (1 Her. 608), perhaps one of the most cardinal decisions in banking law, though mentioned in a long judgment of Jessel, M.R., which is set out in a foot-note, is nowhere explained or discussed in the text. Again, though Rothschild v. Currie (L. R. 1 Q. B. 43) is cited, no reference is given to the more recent and important cases of Rouquette v. Overmann (L. R. 10 Q. B. 525); Uirschfield v. Smith (14 W. R. 455, L. R. 1 C. P. 340); and Home v. Rovquelte (26 W. R. 894, L. R. 3 Q. B. D. 514) on kindred points. The term "negotiable securily" is used without any adequate explanation of the meaning of that expression in law; •whilst, except by a casual reference in a foot-note to the judgment of the Exchequer Chamber, the important decision of Goodwin v. Robnrls is not in any way dealt with, the judgments in that case in the House of Lords being altogether ignored. An example of inaccuracy will be found in the rule laid down on p. 372 as to estoppel by negligence, that common pitfall to lay expositors of the law.

It is, no doubt, a thankless task to pick faults of this kind in a book which certainly reflects no little credit upon the author's knowledge and industry. But we certainly cannrt view it as an addition of much value to the list of our legal text-books or handy books. At the f.'imf time it contains a gre;it deal of information, and is written in an easy style, which would make it more readable for the beginner in the legal or the banking profession than many works of the kind. The patience, however, of the legal student will be taxed by tbe author's practice of giving in many, if not the majority, of the cases which he cites, the dates upon which they were decided, without any reference to the reports by which his statement of them may be verified. The suggestions on p. 85 as to the improvement of the law in bankruptcy seem to be sensible and practical.


THE ATTORNMENT CLAUSE IN A MORTGAGE. [To the Editor of the Solicitors' Journal.]

Sir,—I should be glad to know whether other convey, aucers were as little prepared as I was for the doctrine lately put forward on the highest authority, that the mere insertion of un attornment clause in a mortgage had mado the mortgagees " as much mortgagees in possession for all purposes of taking the account of what was due on the mortgage as if they had granted the lease to some new lessee, and had given notice to that lessee to pay the rent to them "; and that "one of the consequences would be this—to give a second mortgagee a right to charge them with the rent they might have received." So say Lords Justices James and Bramwell, in Re Stockton Iron Furnace Company (27 W. R. 433, L. R. 10 Oh. D. 335, 356-7); and the Master ol the Rolls adopts their view in Ex parte Punnett, 29 W. R. 129, L. R. 16 Ch. D. 226, 235).

The previous understanding of the profession appears clearly enough in the treatise on Mortgages by the late Mr. Waley, prefixed to the second volume of Davidson's Conveyancing (2nd ed., pp. 567-8), where the following occurs:—

"Almost the only case in which an attornment is made in modern practice is that of a mortgagor being in the actml possession of the property mortgaged or a material part of it In this case it is not unusual to insert a clause of attornment by the mortgagor to the mortgagee, so as to enable the latter to treat the former aa his tenant and to distrain for rent. . . In the absence of special provi-ion, the mortgagee would bain a worse position where the property is in band than where it is occupied by a tenant; as, in the former case, he conld not enter into possession without ejecting tbe mortgagor, whereas, in the latter case, he would entitle bimself to the rents by merely giving notioe to the tenants. /' U obvious Hut tU right of distress incidental to thi tenancy thus crtaled may » exercised without incurring the liabiiittes of a mortgagu possession."

Mr. Waley then explains that the advantage of an attornment over a mere power of distress lies in the fact that the attornment gives a true legal right to distrain, attaching on the land, and binding the goods of strangers; while the mere power, when the mortgagor has parted with the estate, appears to rest on contract only, aud to be no more than a licence or covenant operative between the actual parties. The attornment was in fact looked on as the formal way of creating a complete power of distress, to be exercised or riot exercised from time to time as the mortgagee might see fit, aud without any thought of its exercise, much less its mere existence, condemning the mortgagee to the purgatory of " possession."

It would be rather alarming to those who have a wholesome reliance on " common forms" to have logic pushed so far as to be told that even a distraint under an attornment clause would put the mortgagee into possession, a situation (be it remembered) fram which he cannot extricate himself without the consent of everybody interested in the equity of redemption; but do not recent utterances go beyond logic? Why should the mere attornment, with no further attempt on the mortgagee's part to assume the position of laudlord, putjbim into possession more than the mortgagee of any ordinary reversion who has not given notice to have tho rents paid to him? Does the mortgagee's concurrence in a lease do so too by parity of reason P If it does, tie common clause directing payment of rent to the mortgagor till notice, is imperatively required to protect him from the perils of "wilful default,"

Even if, npon an attornment, a rent exactly equal to the interest is reserved, it is not usual to say in so many words that the payment of the interest is to discharge the rent, and, therefore, if interest is paid voluniarily it would teem the mortgagee may be liable to have the rent which he has not exacted debited against his principal.

Or, if he agrees to diminish the rate of interest, he is at all events liable to be debited with the difference between interest and rent should a subsequent incumbrancer take his accounts.

On the whole, it seems questionable whether strict legal logic hus not had a rather troublesome triumph, and unquestionable that a mortgagee had better dispense with an attornment clause.

Lincoln's-inn, May 27. A Conveyancer.


PracticeBankruptcy PetitionAllegation Of Act Of BankruptcyTraderDeparting From Dwki.lingHocse With Intent To Defeat Or Delay Creditors— BiiiKKtPTCr Act. 1S69, s. 6, Sob-section 3 — BankRuptcy Rules, 1870, R. 65.—In a case oiExparte Palmer, before tbe Court of Appeal on the 26th ult., the question arose whether the act of bankruptcy alleged in a bankruptcy petition had been sufficiently alleged. The petition alleged that the debtor "carries on business " at a place specified, " aa a licensed victualler." It then alleged, in the ordinary way, that the debtor bad committed an act of bankruptcy within six months before the presentation of the petition, the act of bankruptcy being "that he has, with intent to defeat or delay his creditors, departed from his dwelling-house and place of business, or otherwise absented himself." The petition was, under rule 65 of 1870, heard at once, and an adjudication was made against tbe debtor in his absence. He afterwards applied to hare the adjudication annulled, on the ground (inter alia) that, tho particular art of bankruptcy being one which can only be committed by a trader, the petition ought to have shown on its face that the debtor was a trader at the time when the act was said to have been committed, and that the allegation should have been in the precise words of sub-section 3 of section 6 of the Act, "that he, being a trader, hap, with intent, ttc." In the present case, it was said it was quite consistent with tbe allegations that the act alleged had been committed before the debtor had commenced trading, for it might have been committed at any time within six months before the presentation of the petition, and there was nothing to show that he was at that time a trader. Tbe court (jesskl, M.R., and James and Lush, L.JJ.) overruled the objection. Jesskl, M.U., said that the act alleged would not have been an act ol bankruptcy at all unless tbe debtor was a trader, and the petition did allege that he was a trader. It would be a straining of form to get rid of substance if such an objection was allowed to prevail.—Solicitors, Maples, Tettaale, it Co.; Munton § Morris,

Trustee In BankruptcyDisclaimer Of LeaseLeave or CourtPower To Impose ConditionsBankruptcy Act, 1869, 8. 23—Bankruptcy Rules, 1870, R. 28.—In a case of Ex parte Ladbunj, before the Court of Appeal on the 26th nit., a question arose as to the power of the Court of Bankruptcy to impose terms upon a trustee in bankruptcy in giving him leave lo di-claim a lease of the bankrupt, in a case where no third party has acquired from the bankrupt any interest in the lease or in the demised property. Rule 28 of 1871 says that, upon any application to the court for leave to disclaim a leasehold interest of a bankrupt, "such order shall be made as the court shall think fit." Tbe registrar, in giving leave to the trustee in a bankruptcy to disclaim a lease of the bankrupt, bad Imposed the condition that he shoald pay to the lessor tbe rent of the demised property up to the date of the disclaimer. The trustee appealed from this order, and it was urged on bis behalf that the object of rule 28 was only to protect the rights of third persons who had acquired an interest in the lease from the bankrupt, and that the court had no power, as between the trustee and the lessor, to impose any fetter on the absolute power of disclaimer given to the trustee by section 23 of the Act. Tho rule, it was said, could not repeal the Act. The court (jkssel, M.R., aud James and Lush, L.JJ.) held that tbe registrar was right in imposing the condition. Jessel, M.R., said that, if tbe rule was valid, tbe applicant

must submit to its terms. It gave the court a discretion to do that which was just, though not to act upou mere caprioe. The trustee had, very properly no doubt, kept the property since the adjudication, in order to see if he could get any benefit from it for the bankrupt's estate, and hud deprived the lessor of the possession of it during that period, and the court had simply said that he should have leava to disclaim only upon the terms that he should not get a benefit for the bankrupt's estate at the expense of the lessor. The order was not only right, but was required by justice. If, however, rule 28 was ultri vires, the trustee should not have ccme to ask the leave of the court. James, L.J., thought that rule 28 was intended to mitigate the injustice which might be caused by section 23. The court ha 1 power to impose terms, and it ought to impose such terms as would secure justice. Whatever might be the effect of a disclaimer without the leave of the court, his lordship would recommend any trustee in bankruptcy to think once, twice., and thrice before he ventured to disclaim a lease without leave.— Solicitors, i'. IP. Cwles ; John Eraser.

Trustee In Bankruptcy Disclaimer Op Onerous Property Of BankruptEffect On Rights And Liabilities Of Third Parties—LeaseUnderleaseStatute—Construction—Bankruptcy; Act, 1869, a. 23 — Bankruptcy Rules, 1871, R. 28.—The important question ol the construction of section 23 of the Bankruptcy Act, 1869, and the effect of the disclaimer by a trustee in bankruptcy of a lease of the bankrupt upon the rights of tbe lessor against an underlessee of the bankrupt, was at last decided by the Court of Appeal (jessel, M.K., and James and Lush, L.JJ.), on the 26tb ult., in a case of Ex parte Walton. Section 23 provides that, " when any property of the bankrupt acquired by the trustee under this Act consists of land of any tenure burdened with onerous covtnants, of unmarketable shares in companies, of unprofitable contracts, or of any other property that is unsaleable, or not readily saleable, by reason of its binding the possessor thereof to the performance of any onerous act or to tbe payment of any sum of money, the trustee, notwithstanding he has endeavoured to sell, or has taken possession of such property, or exercised any act of ownership in relation thereto, may, by writing under his hand, disclaim such property, aud upon the execution of such disclaimer tho property disclaimed shall, if the same is a contract, be deemed to be determined from the date of the order of adjudication, and if the same is a lease be deemed to have been surrendered on the same date, and if the same be shares in any company be deemed to be forfeited from that date, and if any other species of property it shall r vei; to the person entitled on the determination of the estate or interest of the bankrupt; but if there shall be no person in existence so entitled, then in no case Bhall any estate or interest thereiu remain in the bankrupt. Any person interested in any disclaimed property may apply to the court, and the court may, upon such application, order possession of the disclaimed property to be delivered up to him, or make such other order as to the possession thereof as may be just. Any person injured by the operation of this section shall be deemed a creditor of the bankrupt lo the extent of such injury, and may accordingly prove the same as a debt under the bankruptcy." And rule 28, of 1871, provides that "where any property of a bankrupt acquired by a trustee under the Bankruptcy Act, 1869, shall consist of a leasehold interest, the trustee shall not execute a disclaimer of the sinie without the leave ol the court being first obtained for that purpose, and upon any application to the court for such leave, notice of the desire of the trustee to disclaim such interest shall be given to such person or persons as the court shall diroct, aud such order shall be made thereon as the court shall think fit." A lease of a house had been made at a rent of £70 lor a term of ten years. The lessee made an underlease for the residua of the term (less Beven days) at a rent of £55, the underlessee paying a premium of £100. The lesseo entered into no covenant with the underlessee, except the ordinary covenant for quiet enjoyment, limited to the acts of the lessee and persons claiming through him. The lessee afterwards hied a 1 quidation petition, the trustee in the liquidation applied to the court fur leave to disclaim the lease, and the registrar gave leave without imposing any condition. The lessor appealed, and it was urged that some condition ought to be imposed, because, the disclaimer having the effect of a surtender of the lease, the lessor would have no remedy against tbe undeil> ssee by distress or re-entry for breach or covenant, and, as was held by tbe Court of Appeal in Sinallcy v. Bardinge (29 W. R. 554), tbe lessor could not after tbe disclaimer tject tl>e underlessee, and, consequently, the underlessee would be able to bold tbe prorerty fiee from the payment of any rent to tho lessor. And thn 1 ssor offered to undertake not to Bue <be trustee on the covenants in tbe lease, and not to prove against tbe debtor's esta'e, thus giving the trustee and the e-tnte every ben fit which they would get by a disclaimer. The court h»l 1 th«t t1 is was not u rrMrv, for that the unconditional disrlaimer would not affect the rights of tbe lesser as against the ui derlets»e. Jessi.l, M.R., rtferred to tbe rule lor tbe construction of statutes, as expntsrd by \j> rd Selborne in the recent esse of The Caledonian Ra'lwoy Company v. The North British Railway Cvmpnny (L. E. 6 App. Ca». 104), "that the mote literal c ustnicti'ti ought not to prevail, if i> is opposed to the inten ion of tbe Leg stature ss apparent by the statute, and if the words are sufficiently tl x-blr to admit of S"me otber construction by which that intention will be bett-r eff-rtuated.,'' ai d as thus laid d"wn by Loid AV«ns'eydale in Orcy v. 1'eorton (6 H. L. Cus. 106), "that in construing wills, and, indted, statutes, aid ull written instruments, the grammatie 1 and ordinary sense of the words is to be adhered t •, unless that would lead to s me absurdity, or some repugnance or inc< nsitt-ncy wi h the r-ft of th* instrument, in wbith c«se the giammatical and ordinsry s n-e o' the words in v be modified, so as to avoid that absurdity aDd inconsistency, but no further.'' jEasfcL, MR., said that the objects of section 23 were plain—viz., to set the hanktupt free from personal obligations attaching to his property, and that the trust** should mt be compelled to a<qu re tbe bankrupt's property subject to tbe liat ilities which affected it, and to which he would become personally liable,but tint, if the property was not worth more tban tbe liat ilities attaching t > it, the trustee should be able to disclaim it and the liabilities. He was not to keep the property and get rid of the liabilities. His lordsbip thought thst th'Se were tbe only oljects of tbe Legislature. It could not be supposed that they inttndtd to confiscate any man's propel ty without any reason vhatever. A construction of thestcion which would lead to such a result might well te desctibed as an absurdity. But that would be the result of a literal construction. Suipose that a building contract between a landowner and a tuil'ier was pledged by the builder as security for a debt of himself or of tome ether person, and the contract «as cot worth more than the room y advanced np< n it, rou'd the Legislature have intended that the lender of tbe money should lose bis security because 'he trustee in the bankruptcy of the bi.ilder chose to disclnim tbe contract? Could anything be more absurd tban that, and yet that would be the result of a literal construction of the section. And, in tie case of a contract, there was no provi-ion made, as there was in tbe case of a lease, that tbb trustee should nrt disclaim without the leave of the court. If the Bection was to be construed literally, tbe Disclaimer of a lease by tbe tru-tie would deprive an equitable mortgagee of the U.i-e of bis secuiity; it would, it tbe lessee had made a legal mortgage by way of onderltase, deprive the It ssor of his property for the benefit of the mortgagee; and it valuable shares in a c< mpany bad been pledged as security for a debt, tbe disclaimer by tbe trustee of tbe shareholder would woik a forfeiture of the shares for the benefit of the company. The results of a literal construction of tbe section would te so noostrous that it must te coneidend absurd. It might le said that the provision that the court might order possession of the disclaimed pn peny to be delivered up to any person interested in it, or might make such other order us to the possession a* beju-t, shows that tbe Lugislstnre was dealing only with property over which tho Court of Bankruptcy had power, end of which it coul I dispose. But, if tbe a<ction w;re restricted to case- of that bind, the full relief intended would not be given. The section must, therefore, be read as meaning that the obligation ot the bankrupt was to be put an end to by the disclaimer so far ooly as it created rights and liabilities as between the trustee and the bankrupt and his estate and the other party to the contract —so far, that is, as was necessary to relieve tbe bankrupt and his estate and tbe trustee fiom liability, the persons who were injured by this having a right given to tjbem to prove against the bankrupt's estate ia respect of the injury.

Construing the section in this way, the result would be that the disclaimer of the lease would not affect the right of the lessor to distrain on the underlessee for tbe rent reserved by the original lea*, and to re-enter on the property for breach of the covenant" in that lease. James, L.J., said that when i sub-demise is made, the sub-tenant took the property subject to all the original lessor's rights in rem, though he was not liable upon tbe personal covenants of the original l'ssee wiih tie lessor. It would be a violation of every principle of law and justice, and against all common sense, to permit two men, by bargaining with each other, to affect any rig'tt of property of another man, particularly any right of the owner from whom they hotb derived title. And it would Be> m to be equally against principle and a?ain-t common honesty that a lessee, by becoming bankrupt, sbould deprive the lessor of his remedies in rem, or release a sub-lessee from tbe legal liabilities and obligations to which the property was liable in bis hands before the bankruptcy. If the lessee were insolvent, but not nutlet bankrupt; if the lessee had died insolvent, the lessor's remedies as against the estate itself, and the tab-lessee's HaHlity to distress and forfeiture wonld remain. Wis it possible to conceive that the insolvency resulting in bankruptcy shon'd confiscate the lessor's right, and give tbe sablessee an absolute immunity from snch distress and forfeiture? Tbe object of the bankrupt law was merely to regulate the distribution of the bankrupt's assets among bis creditors, and to relieve the bankrupt and his estate from future liability to his creditois. But it was never intended to affect lights and liabilities as between the creditor and i third party. 1 he consideration of the hardships which would result from a literal construction of tbe word "surrender" in s'ction 23 might perhaps lead to the conclusion that, when it sail that the disclaimer shcnld operate as a surrender, there must be an implied condition that tbe trustee bad lull right to surrender, sot only the lease, but tbe property itself, freed and diecharged from all estates and interests; that rale 28 «tu cbligatory on tbe trustee; and the cenrt ought not to give it* assent, unless satisfied that it could do to without injustice to the lessor or to anyone else, and witboot prejudice to any right* or remedies of or against any third person. But aa that con-truction would not give the trustee the immunity whioh it was intended that he should have, the more complete and satisfactory solution of tbe riddle might be found in the principle that when a statute enact* that something sbould be deemed to have been done, which in truth was not done, the court was entitled and bound to ascertain for what purposes and between what persons tbe statutory fi tion was to be resorted to. Having reg«rd, therefore, to the object of the bankruptcy law, when tbe Act said that a lease which was never surrendered in tact was to be deemed to have been surrendered, tbe words must be read with thi« qualification (whioh was absolutely necessary to prevent the most grievous injustice, and the most revolting absurdity), "shall, as between the lessor on tbe one hand, and tbe bankrupt, his trustee, and estate on the otber hand,"*bo deemed to have been surrendered. Lusb, L.J., said that he had felt very great difficulty in oomiog to a satisfactory conclusion; but, after moeh consideration, be bad come to the ootid us on that the words of the section must be qualified in order to carry out its object. It seemed impossible to construe tbe eeetwn literally without defeating its object and creating a manifest absurdity. Tbe word "surrender" must be read ia a qualified sense, tbe object being merely to pnt the trustee in the same position as if tbe lease had never become vested in him. Any qualifying words that might be necessary so to restrict the literal meaning of the section might be inserted. Tbe point was not present to the minds of the court whioh decided Smalley v. Bardinge; bnt it did not affect the decision. His lordsbip said tbat be thought the object of rule 28 of 1871 was to secure thst the trustee Bhould not waste valuable pioperty of the bankrupt. Jesskl, M.R., added tbat the under-lessee was entitled to prove in the liquidation for the difference between tbe rent reserved by tbe under-lease and tbat reaeived by the original lease, whioh be would now have to pay.—ficUCiToss, Henderson 4; Btuklc; H. Montagu.

« PreviousContinue »