1905 Jan. 16. In re FITZGEORGE. Ex parte ROBSON. - Bankruptcy Principal and Surety Debenture of limited Company -- A. guaranteed B. the regular payment of the interest (payable under the debenture of a limited company until the principal sum secured by the debenture was repaid by the company. Some time afterwards the company went into liquidation and was dissolved by virtue of s. 143 of the Companies Act, 1862. Subsequently A. became bankrupt : Held, that, notwithstanding the dissolution of the company, B. was entitled to prove in A.'s bankruptcy for the estimated value of the future interest payable under the guarantee. THIS was an appeal by a creditor against the rejection of his proof by the trustee in bankruptcy. In August, 1892, the debtor, who was a director of a limited company, for good consideration gave to one Robson, the bonâ fide holder of a debenture for 3000l. issued by the company, his written guarantee "for the regular payment of the interest payable in respect of the said debenture until the repayment by the said company of the principal sum of 3000l. due thereon." The debenture was a floating charge and carried interest at the rate of 8 per cent. per annum, payable quarterly, and the conditions indorsed thereon provided (inter alia) that the principal sum thereby secured should immediately become payable if the company made default for twenty-eight days in the payment of any interest thereby secured, or if the company went into liquidation. In 1893 the company made default in payment of interest; and thereupon Robson enforced his debenture, which realized about 9331. In 1894 the company went into liquidation, and on July 25, 1895, the liquidator filed the usual notice under s. 143 of the Companies Act, 1862; so that on October 25, 1895, the company was dissolved. From 1894 to 1902 Robson from time to time recovered judgments against the debtor for arrears of interest payable In re. ROBSON, Ex parte. under the debenture and received payment; but in 1902 the 1905 debtor was adjudicated bankrupt, and the official receiver became FITZGEORGE, the trustee in the bankruptcy. In January, 1903, Robson lodged a proof against the debtor's estate for 1297. 2s. 8d., being the interest due under the debenture to that date; and he also claimed in his proof that the trustee should make an estimate of the liability of the debtor to pay future interest at 8 per cent. per annum on 20677. (the balance of principal due on the debenture), and should admit the proof for the amount of that estimate. The trustee rejected the proof on the ground that the company had been dissolved, and that the debtor was no longer subject to any liability under his guarantee. Robson appealed. It appeared from an actuarial valuation that 8 per cent. on 20677. was equal to an annual sum of 1657., which, if treated as a perpetual annuity, was, on the 4 per cent. tables, of the value of 41357.; while to purchase a Government annuity of 1657. would require 66167.; but if the debenture was treated as an 8 per cent. security the value was 20677., being the same amount as the principal due thereon. Carrington, for the creditor. The company was discharged from all liability in respect of the principal debt, not by any act of the creditor, but by operation of law. The debtor, therefore, is not released from liability under his guarantee. The principle of In re Jacobs (1) and In re London Chartered Bank of Australasia (2) applies. Hansell, for the debtor. The general law is not disputed, but the guarantee must be construed strictly. The debtor only guaranteed "the interest payable in respect of the debenture." The interest can only be payable so long as the principal debt is in existence to support the claim for interest. The "interest payable" means the interest payable by the The effect of the dissolution of the company is company. that the principal and interest are no longer payable by the company. Therefore the guarantee came to an end on the dissolution of the company. The parties could not have (1) (1875) L. R. 10 Ch. 211. (2) [1893] 3 Ch. 540, 546. 1905 intended that the guarantor should take upon himself a FITZGEORGE, perpetual liability. But if his liability continues, it should be valued on the basis of an 8 per cent. security, which on the evidence of the actuary would be 20677. The creditor is not entitled to prove for the value of a perpetual annuity. In re. ROBSON, Ex parte. Carrington, in reply. BIGHAM J. I think in this case that the creditor is entitled to prove for the value of the guarantee that the debtor has given. It is said that, because the principal debt is gone, therefore the liability under the guarantee to pay the interest on the debenture is also gone. I do not agree with that view. The principal debt is gone no doubt, but not by any act of the creditor. It is gone by operation of law. The principal debt will never be repaid, but in my opinion the obligation of the debtor to pay the interest under his guarantee remains. There must be a declaration that the creditor is entitled to prove for the estimated value of his security, and if necessary there must be a reference to the registrar to ascertain the amount. Solicitors: Paice & Cross; Tarry, Sherlock & King. NOTE.-After some discussion the estimated value of the future interest payable under the guarantee was agreed at 20677. H. L. F. In re EASTGATE. Ex parte WARD. Bankruptcy-Sale of Goods-Fraud of Debtor-Vendor's Right to disaffirm Sale and retake Goods after Notice of Act of Bankruptcy-Title of Trustee in Bankruptcy. Where a sale of goods is induced by the fraud of the purchaser, the vendor, on discovering the fraud, is entitled within a reasonable time to disaffirm the sale and retake possession of his goods, although he does so with notice of an act of bankruptcy on which the purchaser is subsequently adjudicated bankrupt; for in such a case the trustee in bankruptcy has no higher or better title than the bankrupt. THIS was an application by the trustee in bankruptcy for the return of certain goods, or the value of them, under these circumstances. In February, 1904, the debtor took a house at Sutton, and during March and part of April purchased goods on credit from the tradespeople in the neighbourhood without the intention (as it afterwards appeared) of paying for them. On April 20 the landlord distrained for rent and was paid out. On the same day a Mr. Bowling, one of the local tradesmen, who had supplied furniture and other articles to the debtor on credit to the value of some 117., issued a county court On April 22 the debtor summons for the amount against him. 1905 Jan. 17. 1905 on the ground that his title as trustee related back to April 22, EASTGATE, and that Bowling had removed the goods with notice of the act of bankruptcy committed by the debtor on that day. In re. WARD, Ex parte. E. Clayton, for the trustee. There is no case in bankruptcy directly in point, and it is submitted that the analogy of the cases in the winding-up of companies applies. It is settled that where a contract to purchase shares in a company has been induced by fraud, the purchaser cannot rescind the contract after the commencement of the winding-up of the company: Oakes v. Turquand (1); In re Hull and County Bank. (2) In the next place, the evidence as to fraud is not conclusive. The mere fact that the debtor bought the goods without being able to pay for them is not a sufficient ground for retaking possession of them; and if the debtor left the goods with the intention of returning them to the creditors, that would be a fraudulent preference: In re Fletcher. (3) S. G. Lushington, for Bowling. The evidence on the whole shews a fraudulent intent on the part of the debtor to obtain goods on credit at Sutton and other places without paying for them. It is settled that where the sale of goods is induced by the fraud of the buyer, the vendor, on discovering the fraud, can disaffirm the contract and recover his goods within a reasonable time: Load v. Green. (4) That is what was done here, and the trustee has no better title than the debtor. The company cases do not apply. E. Clayton, in reply. BIGHAM J. The question I have to determine in this case is whether at the time Mr. Bowling took possession of these goods they formed part of the bankrupt's estate. It appears that the bankrupt in February of last year took a house in the neighbourhood in which Mr. Bowling carries on business. He then began to make purchases in the neighbourhood of this house of the tradespeople round about on credit, and, in my opinion, he never had the least intention of paying for (1) (1867) L. R. 2 H. L. 325. (4) (1846) 15 M. & W. 216, 221; 71 R. R. 627. (2) (1880) 15 Ch. D. 507. (3) (1891) 9 Morr. 8. |