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Colonial Cases

Ex parte Shaw, 1880



Ex parte Shaw

Supreme Court for China and Japan, Shanghai
Wilkinson A.A.J., 17 March 1880
Source: The North China Herald, 18 March 1880




Shanghai, 17th March.

Before H. S. WILKINSON, Esq., Acting Assistant Judge.

In Bankruptcy.

Ex-parte SHAW in re KRAUSS.

   Mr. ROBINSON appeared for Mr. Shaw.

   Mr. MYBURGH appeared for the Trustee.

   In this case the Court, today, delivered the following


   This is an application, under section 74 of the General Rules made in pursuance of the Bankruptcy Act, 1869, to reverse or vary the decision of the Trustee of the estate of Alfred Adolphus Krauss, a bankrupt, rejecting a proof tendered against the separate estate of the bankrupt for a debt incurred by him to his co-partner Charles Shaw.  Shaw presented a petition to the London bankruptcy Court for the liquidation of his affairs by arrangement or composition, and the proof in question was originally tendered on behalf of the Trustee of his estate.  But the consideration of the question having been adjourned by consent, it had been ascertained that since the proof was sworn to the situation has changed, and, to avoid further expense, it has been arranged that the decision of the Court should be taken upon the facts as they at present stand by the admission of the parties and not as they were believed to be when the proof was tendered.

   It is admitted that the creditors of Shaw have, by an extraordinary resolution under section 126 of the Bankruptcy Act 1869, resolved upon the acceptance of a composition in satisfaction of the debts due by him to them, that such resolution has been duly registered, that the composition has been paid, that his creditors have thereupon released him personally from all his debts whether joint or separate, and that all the estate which he possessed prior to the bankruptcy and which had not been realized has been re-vested in him, and I am to consider the case - except as to costs - as if Shaw himself had not tendered the proof and that the proof so tendered had been rejected.  It is admitted that the debt was incurred by the bankrupt and that the only ground for rejecting the proof is that Shaw, having been a partner of the bankrupt, cannot prove against his partner's estate in competition with the creditors of the partnership.

   It is admitted on behalf of Shaw that he was a partner, that the partnership debts have not been paid in full, and that the partnership creditors have a right of proof against the separate estate of the bankrupt for such debts, but it is claimed that, he having been released from liability for those debts, the partnership creditors are no longer his creditors, and that in competing with them he is no longer competing with his own creditors, and that therefore the rule which, if he had not been so released, would have prevented him from proving no longer applies.  It has also been urged that even if the Rule does still apply so as to prevent him receiving a dividend, he is entitled to have his proof admitted so far as to enable him to vote.

   I am of opinion that neither of these contentions can be upheld.  As to the first point, it appears top me to be concluded by the case of ex parte Collinge re Holdsworth, reported in 33 L.J. Ba 9; 9 Jur., N.S., 1,212, and 9 L. T. N.S., 309, which is indistinguishable in any essential circumstance from the present and in which the rejection of the proof was sustained.  In that case, as in this, the partner whose claim it was sought to have proved against the separate estate of his co-partner had been released from liability by his joint creditors, and it appears from the report in the Law Times that the same argument was put forward with which we have now to deal.  Counsel in support of the claim are there reported to have said,

The rule only applies where the partner's proof was in competition with his own creditors, which was not the case here.

   It is true that in that case the debt which it was sought to have proved had been assigned by the partner to whom it was due, along with the rest of his estate to Trustees for the benefit of his creditors, and it would seem from the judgment that was relied upon when it was urged that he was not entering into competition with his own creditors.  But this argument was rejected, and by its rejection the facts upon which the decision was founded were brought into harmony with the facts relied upon in the present case, and it was held that upon those facts the proof could not be allowed.  Lard Westbury, L.C., in his judgment said:-

It appears that after the bankruptcy, an assignment was made of the separate estate of Major Ashburner" - the partner top whom the debt was due - "including this debt of Holdsworth for the benefit of the joint creditors, probably so far converting his separate assets into joint assets.  But that circumstance is of no avail whatever, unless the joint creditors are willing to accept that assignment as payment in full, and to release the joint liability. If that were done, and there were no longer any joint liability to which Major Ashburner was exposed as partner, there would remain no objection to the proof against the separate estate.

But this debt must be brought forward as a bond debt due to Major Ashburner, not to the joint estate, and the objection still remains that a partner is not to be permitted to prove whilst there is any portion of the joint liability remaining.

   The decision, therefore, was grounded upon the assumption that the claim must be looked upon as one put forward by the partner to whom it was due, and that is the case here.  That partner, moreover, had been released from all personal liability for the joint debts, and the release of Shaw from personal liability for the joint debts is all that is put forward as entitling him to prove in the present case.  The fact of the personal release from the joint  debts appears from the statement of the case, and, although not specifically referred to by the Lord Chancellor in his judgment, was evidently not overlooked by him, when he lays it down that to entitle the proof to be admitted the joint liability must be released.  There has been no such release in the present case, and the objection to the proof therefore still remains.

   The second point was raised in the case of Ex Parte Bass in re Motion, 36 L.J., Ba. 39, which was a claim by a solvent partner against the separate estate of his bankrupt co-partner and in which Counsel for the claim are reported to have said,

We are quite willing that the dividend should be kept in suspense, but the proof ought to be admitted; otherwise this will be a debt for which the creditor will have no remedy whatever although when all the joint debts have been paid, nothing whatever will distinguish it from any other debts.

This argument was thus disposed of by Lord Justice Turner in his judgment where he said:-

It is suggested that the proof might be admitted in order that the dividend might be declared, and set aside to await the result of the administration of the joint estate.  But I think this cannot be done; it might hinder the carrying over a surplus in the joint estate; and another inconvenience would arise, that a creditor of this kind, if his proof were admitted, might be creditor to so large an amount as to carry the choice of assignees and might appoint himself or a nominee so as to oppose the claim of those who are primarily entitled to the property.  I cannot break the general rule, and I think this proof must be expunged.

   The motion must therefore be dismissed, but following the course observed in the two cases I have cited, it will be dismissed without costs on either side.

   Motion dismissed without costs.

Published by Centre for Comparative Law, History and Governance at Macquarie Law School