[insolvency – Yass – reception of English law, insolvency]

In re Low

Supreme Court of New South Wales

Stephen J., 1 January 1841

Source: Sydney Herald, 2 January 1841[1]

INSOLVENT DEBTOR'S COURT.

            Friday, 1st January. – Before Mr. Justice Stephen.

            James Low, settler and grazier, Yass, had petitioned for his discharge, on the ground of inability to realize an adequate sum to discharge the debt for which he was incarcerated, amounting to £67 9s 4d. His opposing creditors, Hynde and Brown, the Yass carriers. It appeared by Mr. G. R. Nichols who opposed his discharge on the ground that he was not insolvent, he having in his schedule disclosed property to a greater amount than that for which he was detained. Mr. Nichols cited the case of Burdekin v. Rolfe, in which his Honor the Chief Justice had decided that any person who showed by their schedule that they had more property than would satisfy the amount for which they were incarcerated, did not come under the term of an insolvent, and therefore the court had no power to discharge him.

            Mr. Goddard, who appeared for the insolvent, submitted that his client was hardly dealt by, as it was Mr. Hughes and not his client who was the real debtor in the present case; he also stated, that the case cited by Mr. Nichols had occurred under the old Act, and therefore could not be used as a precedent; besides he remembered some cases which had been decided under the new Act, in which the parties had disclosed to a large amount, over and above what would satisfy the just claims of their detaining creditors, and who had been discharged; he also submitted that it would be a monstrous hardship on honest insolvents, if after they made an honest disclosure, they were to be returned to prison until their property was sold at a ruinous sacrifice.

            His Honor was of opinion that there was nothing in the new Act to prevent a man from taking the benefit of it, although he could pay forty shillings in the pound. It was his opinion that the detaining creditor had the right of demanding an assignee to be appointed, which he thought was the best plan of getting the present case settled.

            Mr. Nichols informed his Honor that if the affairs were put into hands of Trustees, his clients would never get their claim settled, as the expense of sending an assignee from Sydney to Yass, with the other expenses, would double the present amount of principal and expenses, and therefore he was of opinion that the Court would be doing what might be wrong in discharging a person who did not come under the Act.

            Mr. Goddard in reply, stared to the court, that, after examining his client’s schedule, the difference between the sum claimed and that disclosed was so trifling that, taking into account the probability of some of the items entered as good debts not being fully paid up, his client came within the meaning of the act, and he did not see how it was possible for the court to appoint an assignee from Sydney when one might be found on the spot where the property was.

            His Honor, after enquiring the name of the assignee proposed, who was one of the insolvent’s creditors, said that he would consider as to whether he was a proper assignee, and at the same time, not to stultify the proceedings of the court, he should remand the insolvent until he consulted his brother judges on the objection raised by Mr. Nichols, as to the petitioner not being an insolvent.

Stephen J., January 1841

Source: Sydney Herald, 6 January 1841

INSOLVENT DEBTORS’ COURT.

On this Court being opened His Honor stated that he forwarded the case of the insolvent Lowe, with the arguments adduced on both sides, as to whether the Act applied to Lower or not; he had received the Chief Justice’s reply, in which he adhered to the opinion he had already given. He had not, however, heard from Mr. Justice Willis, respecting the construction to be put on his opinion, and therefore he could not proceed with that part of the case; at the same time, for himself, he could only say that his own opinion had been confirmed by his examination of the books on the case. There was a very strong case in the 1st of Selby, in which the term insolvent was defined “as a person who is unable to pay at the time,” and in his view of the case such was the predicament in which Lowe came before the court, – he had disclosed property to a far larger amount than that for which he was incarcerated for; but it was questionable how far that property was available for the discharge of that debt. He had looked into the Scotch law on the subject, and in Bell’s Commentary, he found that the legal interpretation given to the term insolvent was, that “he is a person who has not the means of paying.” But as it is the English laws which are in force here, he thought that the interpretation given in Bell could be no authority, as the difference between the laws of Scotland and England was a necessary consequence of the different principles which prevailed in each country in regard to Government. In the mean time he saw nothing to prevent Mr. Nichols, who appeared for the opposing creditor, proceeding with the examination of the insolvent as to his schedule; from which it appeared that the insolvent’s claims upon Mr. J. T. Hughes, Mr. Terry, Mr. M’Dermott, and several others, was far more than would answer the demand of the opposing creditor. The only difficulty was, that all of them denied owing him a single farthing, and some of them had brought actions against him; therefore his only remedy was by an Equity suit, which might last for years. His Honor was of opinion that the insolvent was entitled to his discharge, but having submitted the case to his colleagues he should be guided by them. The case he had submitted, and the opinions he had received were as follows:-

CASE. – Mr. Lowe applies to be discharged under the 2nd Victoria, No. 14, as revived and amended by the act of last session. His schedule exhibits property, such as furniture, crockery, apparel, &c., more than sufficient according to the value assigned thereto respectively, to pay the particular debts for which he is incarcerated, he has also claims on an advantageous lease, which would make his assets much more, however, he states that a partnership in it is claimed by Mr. J. T. Hughes which will reduce its available price to a mere trifle. He swears that, in fact, the debts for which he is in gaol, were contracted, on account of that partnership; but that Mr. Hughes has left him as the party who alone ostensibly contracted to pay those and all the other partnership debts. He swears also that he has no money or means actually to pay the debts in question or any of them; though his property, could he sell it, would produce more but he adds that if made to pay the said partnership debts, he will be and is actually insolvent.

            Mr. Nichols for the detaining creditors submits that the act does not apply to the petitioner, as since his assets appear to exceed the only debts for which he is in custody, he must be taken to be “able to pay them,” whereas from the title of the act it appears it was passed to relief only of debtors who were in execution, for debts which they were unable to pay. And for this he cites a case before his Honor the Chief Justice the particulars of which I have not learned.

            Mr. Goddard for the petitioner, submits that first, he really is unable to pay, that his goods are not immediately saleable, that they were valued at their true prices as the act requires, but that at a forced sale they would not fetch one half, and that the act means unable to pay in the practical sense, only of the expression: second, that there is nothing in the act, to support the objections, that its terms are general and apply to all persons in execution for debt; that the object of the law must be taken to be therefore, to relieve all persons from imprisonment, on their disclosing fully and giving up freely all their effects and means.

            I have, in deferance to the opinion cited to me postponed the decision of this question, intending to be guided by the judgment of my learned colleagues. It appears to me, however, that the arguments of Mr. Goddard are well founded, and that the petitioner is entitled to the benefit of the act : the following are my reasons in support of that opinion. The 2nd Victoria, 14, is an act to revive and continue another and to make certain amendments. That other act was the 2 Wm. 4. No. 11, which is intituled “An act for the relief of debtors in execution for debt which they are unable to pay.” But in accordance with this title, the last mentioned act contains a recital in which those words (debts which they are unable to pay) are again introduced, and then there follows a provision, that the debtors petition shall expressly set forth the fact that he is in custody for a debt which he is unable to pay. Under the old act, therefore, there was no room for doubt. The act, however of 2 Victoria, though passed to revise the said Act of 2 Wm. (and for that reason still retaining its title, for purposes of citation) makes “certain amendments therein;” and of these amendments the first is, the omission of the aforesaid detail; and the second, the omission of the words “unable to pay” in the enacting part. The enactment is, that, “any person charged in execution for any debt or sum, may file a schedule, &c. &c.” And I am bound to suppose, that these most important variations were not accidental, or, without an object. Indeed, were the existing law to be construed precisely, in this respect, as the old one, the consequence would follow (as no doubt it did under the old law) that, although a man’s entire debts rendered him utterly insolvent, so that he could not pay one shilling in the pound, yet if he retained enough property to pay the single incarcerating creditor the debtor will not be released on giving up to him that property entire unsacrificed; but he must, at all hazards reduce his assets to within the amount of that single debt, and then, but not till then, he may be relieved from further confinement.

            It is true, that, in common parlance, the act is for the relief of “Insolvents.” But I conceive general insolvency; and that if a debtor be insolvent on the whole he may fairly be so treated under the act, although in reality he has enough to pay the particular pressing debt.

            But lastly, if we construe the term “insolvent” as synonimous with ‘unable to pay” there is (in the case of traders at least) authority for holding that it means, simply, the party’s not being “in a situation to make his payments” although he may ultimately have a surplus on winding up his affairs, it does, not follow that he is not insolvent (Bayley J. and Le Blanc J. in 1st Maule and Scl. 353.) A man may have 5000 acres of land; and yet from the state of the market, he may attempt to sell them in vain, and thus really and truly be “unable to pay,” a shilling though worth far more than he owes in the world. Even though we may not hold such a man to be “insolvent,” (unless where he is a trader on the authority above cited) yet, is he not “unable to pay,” within the bearing of an act which is entitled to a liberal construction? - It has been shown, however, that the existing act does not contain those doubtful words. And the point for present determination therefore, is merely, whether Mr. James Lowe is entitled to the benefit of that act or not."

            The opinion of the Chief Justice was as follows. “I am of opinion, with reference to the objectionable principle of the existing law, that as the debtor Lowe, shows on the face of his Schedule, to which he is sworn, that he is of ability to pay the debt for which he is in execution he does not come within the operation of the act, which is not a general insolvent law, but a law in favour only of execution creditors.

            The following is the opinion of Judge Willis: - “That Act was intended for the benefit of insolvent debtors. Insolvency according to Johnsons meaning ‘inability to pay debts,’ I am at a loss to conceive how there could have been any reasonable doubt entertained on the subject.”

            Mr. Nichols called on his Honor to dismiss the petition, as the insolvent was, in the opinion of the Chief Justice, a person for whose relief the Act was not intended; besides he thought, that although there was some little ambiguity in the opinion of Mr. Justice Willis, yet that opinion was decidedly in favour of the opinion given by the Chief Justice; he could not see how it was possible to give the Act any other interpretation than he had given it.

            Mr. Goddard submitted to his honor that the opinion of Mr. Justice Willis was entirely in favour of the insolvent being discharged; he was unable to pay as he could not get his property rendered available for that purpose.

            His Honor was of opinion that the view of the case taken by his colleagues were identical, and therefore he felt it his duty to bow to their superior judgment; at the same time his private opinions on the subject remained unchanged. He should therefore dismiss the petition; and he considered this decision as being by far the most important of any that had taken place under the new law, and one of the consequences which would flow from it would be, that not one third of the debtors who after this get into gaol would ever be able to get discharged.

            Mr. Nichols though that would be a very good thing for the Colony, as it would be the means of compelling the Legislative Council to pass a proper Insolvent law for the Colony.

            Mr. Goddard submitted to his Honor that the petitioner was insolvent, as the disputed debts entered on his schedule could not be regarded as assets.

            The petition was dismissed, and the insolvent remanded.

Notes