(5.) Any person aggrieved by any estimate made by the trustee as aforesaid may appeal to the Court.

(6.) If, in the opinion of the Court, the value of the debt or liability is incapable of being fairly estimated, the Court may make an order to that effect, and thereupon the debt or liability shall, for the purposes of this Act, be deemed to be a debt not provable in bankruptcy.

(7.) If, in the opinion of the Court, the value of the debt or liability is capable of being fairly estimated, the Court may direct the value to be assessed, before the Court itself without the intervention of a jury, and may give all necessary directions for this purpose, and the amount of the value when assessed shall be deemed to be a debt provable in bankruptcy.

(8.) "Liability" shall for the purposes of this Act include any compensation for work or labour done, any obligation or possibility of an obligation to pay money or money's worth on the breach of any express or implied covenant, contract, agreement, or undertaking, whether the breach does or does not occur, or is or is not likely to occur or capable of occurring before the discharge of the debtor, and generally it shall include any express or implied engagement, agreement, or undertaking, to pay, or capable of resulting in the payment of money, or money's worth, whether the payment is, as respects amount fixed or unliquidated; as respects time, present or future, certain or dependent on any one contingency or on two or more contingencies; as to mode of valuation capable of being ascertained by fixed rules, or as matter of opinion.

or refrained from by the payee. But when the annuity is subject to a condition (as, for instance, when it is payable to a wife during widowhood), the contingency of cesser must be fully taken into account in estimating its value.

38. Mutual Credit and Set-off*-Where there have been mutual credits, mutual debts, or other mutual dealings between a debtor against whom a receiving order shall be made under this Act, and any other person proving or claiming to prove a debt under such receiving order, an account shall be taken of what is due from the one party to the other in respect of such mutual dealings, and the sum due from the one party shall be set off against any sum due from the other party, and the balance of the account, and no more, shall be claimed or paid on either side respectively ;†

*This clause re-enacts clause 39 of the Bankruptcy Act, 1869, except that for "bankrupt," in that clause we now have ". a debtor against whom a receiving order shall be made under this act," and for "under the bankruptcy," we now have, "under such receiving order." These alterations, we need hardly say, are strictly consequential from the principle of, and necessary in order to meet the procedure under, the present act.

The cross claims, which are the subject of settlement under this clause, need not be of the same kind. All that is requisite in this point of view, is that they should on both sides be debts or claims provable in bankruptcy. Thus a secured debt can be set off against one that is not secured; a debt on a bond against a debt on a simple contract; a charge for unliquidated damages under a contract against a liquidated sum on the other; a cash balance against an outstanding acceptance, and so on. But, in order that they may be set off under this clause, "the mutual credits, mutual debts, or other mutual dealings,' must be between the same parties. Therefore, a joint debt cannot be set off against a separate debt, or a debt due from three partners against a debt due to two or the like. Nor can a debt due to or from one party in his own right, be set off against a debt due to or from the other as an executor or trustee to some one else. Thus, a debt due to an executor, qua executor, cannot be set off against a debt due to him in his own right. Nor can a debt due to or from, the trustee in bankruptcy, and arising after the bankruptcy in the management of the estate, be set off against a debt due to or from the bankrupt before the bankruptcy. To this rule that debts to be set off must be between the same parties and on the same rights there is, however, an apparent,

but a person shall not be entitled under this section to claim the benefit of any set-off against the property of a debtor in any case where he had at the time of giving credit to the debtor, notice of an act of bankruptcy, committed by the debtor, and available against him.

39. Rules as to Proof of Debts.—With respect to the mode of proving debts, the right of proof by secured and other creditors, the admission and rejection of proofs, and the other matters referred to in the though not a real, exception in the case of an agent for an undisclosed principal. A debt due to an agent on a contract on behalf of a concealed principal, may be set off by him against a debt due from him in his own person. And brokers, on a del credere commission, effecting policies in their own name as apparent principals, are, in some cases, allowed to set off premiums due to bankrupt underwriters on such policies against unpaid losses due from the same underwriters. When cross-accommodation bills have been given between two parties, and one only becomes bankrupt, the solvent party can prove against the estate of the other for the amount for which he could have sued the bankrupt had the latter remained solvent. If both parties become bankrupt, such bills as are outstanding in the hands of the respective trustees, are excluded from proof, and the cash balance merely, i.e., the balance of the sums paid by the bankrupts respectively for the bills they had taken up, may be proved by the trustees of the bankrupt to whom it is due. If a bill of exchange or note, which is in existence at the date of the bankruptcy of a party primarily liable upon it, be paid by another party liable upon it in case of the bankrupt's default, the latter party may prove upon it, whether he has paid it before or after notice of an act of bankruptcy, and he may, therefore set off the amount so paid against a claim by the trustee in bankruptcy. But if a person not liable on a bill or note retires it after the bankruptcy of a party who is liable, he will not be allowed to prove against the bankrupt's estate. A surety who pays off the debts of his principal after the latter has become bankrupt, has a right to stand in the creditor's place, and may set off any securities held by such creditor against a claim by the trustee.

Second Schedule, the rules in that schedule shall be observed.*

40. Priority of Debts.†—(1.) In the distribution of the property of a bankrupt there shall be paid in priority to all other debts,

(a.) All parochial or other local rates due from the bankrupt at the date of the receiving order, and having become due and payable within twelve months next before such time, and all assessed taxes, land tax, property or income tax, assessed on him up to the fifth day of April next before the date of the receiving order, and not exceeding in the whole one year's assessment;

(b.) All wages or salary of any clerk or servant in respect of services rendered to the bankrupt during four months before the date of the receiving order, not exceeding fifty pounds; and

(c.) All wages of any labourer or workman, not exceeding fifty pounds, whether payable for

time or piece-work, in respect of services

* See this schedule, post, p. 236.

This clause covers the matters dealt with by clause 32 of the Bankruptcy Act, 1869, and by General Rules 76 and 137. With one exception it makes no change in their provisions. But it alters the provisions of rule 137, by giving all creditors who have proved, in the event of a surplus, interest on their debts at the rate of four per cent., whereas under the rule we have mentioned, creditors, whose debts are by law entitled to carry interest, were entitled in priority to other creditors to interest at the rate reserved, or by law payable or provable thereon. The last sub-section (6) of the clause is new.

It will be remarked that the words here used are wages or salary." A clerk paid by commission cannot claim under them.

rendered to the bankrupt during four months before the date of the receiving order.

(2.) The foregoing debts shall rank equally between themselves, and shall be paid in full, unless the property of the bankrupt is insufficient to meet them, in which case they shall abate in equal proportions between themselves.

(3.) In the case of partners the joint estate shall be applicable in the first instance in payment of their joint debts, and the separate estate of each partner shall be applicable in the first instance in payment of his separate debts. If there is a surplus of the separate estates it shall be dealt with as part of the joint estate. If there is a surplus of the joint estate it shall be dealt with as part of the respective separate estates in proportion to the right and interest of each partner in the joint estate.

(4.) Subject to the provisions of this Act all debts proved in the bankruptcy shall be paid pari passu.

(5.) If there is any surplus after payment of the foregoing debts, it shall be applied in payment of interest from the date of the receiving order at the rate of four pounds per centum per annum on all debts proved in the bankruptcy.

(6.) Nothing in this section shall alter the effect of section five of the Act twenty-eight and twentynine Victoria, chapter eighty-six,* "to amend the Law

The act in question provides that the advance of money on contract to receive interest varying with share of profits, shall not of itself constitute the lender a partner; and also that the receipt of a share of profits in consideration of a sale of good-will, is not of itself to make the vendor a partner." Then the fifth clause provides that :"In the event of any such trader as aforesaid, being adjudged a bankrupt, or taking the benefit of any act for the relief of insolvent debtors, or entering into an arrangement to pay his creditors less than

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