Ex parte CROSSLEY. In re TAYLOR.

Bankruptcy Act, 1869, ss. 55-58, 96-Bankruptcy Rules, 1870, Rules 171,

243-251-Examination of Trustee―Juris liction.

Under sects. 72 and 96 of the Bankruptcy Act, 1869, and rule 171 of the Bankruptcy Rules, 1870, the Court of Bankruptcy has power, on the application of a creditor, to order a trustee to submit himself for examination.

THIS

HIS was an appeal from an order of the County Court Judge of Manchester, dated the 8th of December, 1871, directing Crossley (the appellant), who was one of the trustees appointed under the bankruptcy of Taylor, to submit himself for examination.

Taylor, who was a merchant at Manchester, on the 17th of March, 1871, left England for America, and was adjudicated bankrupt on the 6th of April, and Crossley and Cummins were appointed

trustees.

Prior to the appointment of the trustees Frank Lee, the cashier of the bankrupt, had been appointed receiver, and required to enter into a bond for £500. He never entered into that bond, and was continued in his appointment of receiver by the trustees, and it was alleged by Woodhouse, the Respondent, who was a creditor of the bankrupt, that Lee and Crossley were dealing with the bankrupt's estate in a way disadvantageous to the general body of creditors, and he desired to examine Crossley; the question before the Court was, whether the Court had power, on the application of a creditor, to compel a trustee to submit himself for examination as to his dealings with the bankrupt's estate.

Mr. De Gex, Q.C., and Mr. Winslow, for Crossley :

The words in sect. 96 of the Bankruptcy Act, 1869, "on the application of the trustee," are inserted for the first time in that Act, and are intended to limit the right of examination to the trustee alone; and the scheme laid down in the Act is that the Comptroller should perform out of Court those duties as to the examination of the conduct of the trustee which used to be performed by the Court itself: Rule 251 of the Bankruptcy Rules, 1870. Under the present Act three special modes are

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C. J. B.

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Feb 12. 19.

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In re

TAYLOR.

provided for the examination of the trustee, and for his removal, if necessary: First, any creditor may bring the matter before the Ex parte committee of inspection; secondly, he may summon a meeting CROSSLEY. of creditors under sect. 83, and by special resolution remove the trustee; or, thirdly, the conduct of the trustee may be brought to the notice of the Comptroller under rule 251. It would be most inconvenient, and in many cases very prejudicial to the general body of creditors, if any single creditor could compel a full disclosure in open Court by the trustee of all his dealings with the estate. Rule 171 can only be meant to apply to cases where no trustee has been appointed, and rule 242 is a direct authority to shew that the trustee is not bound to give information to a mere creditor, but only to the committee of inspection.

Mr. Little, Q.C., and Mr. Finlay Knight, for the Respondent:

This appeal seeks to deprive the creditors of the right to have the trustee examined before the County Court Judge. There are two questions to be considered. First: Had the County Court Judge jurisdiction to take such examination before the Act of 1869? Secondly: If so, has that jurisdiction been taken away by that Act? Under sect. 120 of the Bankrupt Law Consolidation Act, 1849, the Court had power to summon before it for examination persons suspected of having any property of the bankrupt in their possession. Cooper v. Harding (1) and Ex parte Alexander (2) prove that creditors as well as trustees might apply to the Court under the above section. And the Court of Appeal will not interfere with the discretion of a Commissioner in requiring the examination of the trustee Ex parte Lawrence (3). And the law was the same under the Act of 1861, sect. 136. Section 96 of the present Act is a re-enactment of the 120th section of the Act of 1849, with the addition of the words, "on the application of the trustee;" but the fact that a power is given to the trustee under this Act does not deprive the creditor of the right which he possessed before the Act was passed. By sect. 78 the right under the old law is preserved to the creditor, unless it can be shewn that it has been taken away by the rules. The fact that there is a new system of auditing (1) 7 Q. B. 928. (2) 1 D. J. & S. 311.

(3) 1 D. J. & S. 307.

accounts under the Act of 1869, and rules 243, 247, does not take away from the creditor the right of examining the trustee: Rule 171. The other side do not object to the examination, but only to the way in which we propose to take it.

Mr. De Gex, in reply :

All the old Acts relating to bankruptcy have been repealed, and all rights conferred by those Acts have consequently been destroyed, and this case must be decided on the present Act alone; and the 120th section of the Act of 1849, although to an extent it is re-enacted, yet is qualified by the insertion of the new words, in sect. 96, "on the application of the trustee. Rule 171 might refer better to sect. 19 than sect. 96, as the former section enacts "that the bankrupt is liable to perform the orders of the Court made on the application of the trustee or any creditor." Under sect. 120 of the Act of 1849 no assignee was ever summoned to give evidence, and sect. 136 of the Act of 1861 expressly provides for the examination of the assignee; and as there is no such proviso in the present Act, it would seem to be an intentional omission on the part of the Legislature.

SIR JAMES BACON, C.J. :—

The Court has full jurisdiction in all questions that may arise in bankruptcy, and it cannot be said that such jurisdiction is only to be exercised in certain ways. In sects. 66 and 72 of the Act of 1869 there is nothing to control or curtail the power of the Court of Bankruptcy; in this case an application in writing has been made under rule 171, and the Court has only to proceed to the investigation.

It has been said that by means of sects. 55-58 and rules 243-251 (which refer merely to audit) the Legislature has provided certain machinery to enable the trustee to be examined; whereas those sections and rules are merely useful provisions to prevent litigation, and are additional to the universal powers of the Court, but they have not the effect of depriving the Court in other respects of the power of exercising its general jurisdiction, or precluding the Court from entering into this common inquiry. [The learned Judge, after stating the facts, continued:-] This is a question

C. J. B.

1872

Ex parte CROSSLEY. In re

TAYLOR.

C. J. B.

1872

Ex parte CROSSLEY.

In re TAYLOR.

between a trustee and a cestui que trust which calls for the interposition of the Court, and an examination is required to ascertain whether justice has been done. The matter to be inquired into may be of vital importance, and because the person to be examined happens to be the trustee, is he to be excluded by virtue of his office from giving all the information in his power? Rule 171 is of just as much importance as sect. 96. It has been said that if this examination is made it will be a precedent for annoying trustees, but it must be remembered that the extent of the examination is under the control of the Court. I see no reason why in these cases the trustee should not answer fully and substantially in every way that the Court may think requisite.

Appeal dismissed with costs.

Solicitors: Messrs. Pritchard & Englefield, agents for Messrs. Grundy & Coulson, Manchester; Messrs. Allen, Colley, & Edwards, agents for Mr. Storer, Manchester.

In re PARNHAM'S TRUSTS.

Will-Clause of Forfeiture-Bankruptcy-Annulment.

By a will a fund was given (subject to a prior life interest) to R. for life, but it was provided that if (amongst other things) by act or operation of law he should be personally deprived of the receipt and benefit of the bequest, then the life interest should cease, and the income should go to the persons entitled in remainder. At the time of the determination of the prior life interest, and for several years afterwards, R. was a bankrupt, and in consequence of such bankruptcy the fund was paid into Court under the Trustee Relief Act. Before any petition was presented for payment of the fund, or application of the income thereof for the benefit of the persons entitled in remainder, R. procured the annulment of this bankruptcy on the terms that the past dividends should be paid to the assignee :

Held, that R. had nevertheless forfeited his life interest.
White v. Chitty (1) and Lloyd v. Lloyd (2) distinguished.

WILLIAM PARNHAM, by his will, dated the 26th of October,
1854, devised his copyhold estates to his brother, John Parnham,
for life, and after his decease empowered Thomas Garniss and
Joseph Muskett Yetts, or the survivors of them, or his heirs, to sell
the same in manner therein mentioned; and the testator gave the
money to arise from such sale, after payment thereout of all ex-
penses attending the sale, unto and equally between the children
of the testator's sister, Elizabeth Ridley; and the testator further
gave and bequeathed unto John Parnham and Thomas Garniss,
their executors, administrators, and assigns, all the stock in the
£3 per Cent. Consolidated Bank Annuities of which he should be
possessed at the time of his death, upon trust, to pay the dividends.
thereof to Elizabeth Green during her life, and after her death to
divide the same equally between the children of his said sister,
Elizabeth Ridley, for their absolute use and benefit.

By a third codicil to his will, dated the 12th of April, 1861, the testator revoked the aforesaid bequests, so far as they related to the sons of Elizabeth Ridley, and directed the trustees of the shares of the proceeds of sale of the copyholds and of the stock, in which, but for that codicil, the sons of Elizabeth Ridley would have (2) Law Rep. 2 Eq. 722.

(1) Law Rep. 1 Eq. 372. VOL. XIII.

M. R.

1872

Feb. 10, 12.