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(Ex p. Oldham, 32 L. T., 0. S. 181; Ex p. Butler, 28 L. T.,
§ 40. O. S. 375; Ex p. Chipchase, 7 L. T. 290.)
The words, however, of the present section, as has been said, are considerably altered, and it may be doubtful how far the old authorities will be applicable under the new law. It seems clear, at all events, that under the present Act, in the case of a labourer who now gets priority for piece-work, the services need not be due to one master exclusively.
The clerk or servant must be paid by salary, and not by commission. (Ex p. Simmons, 30 L. T. 311; Ex p. Hickin, 19 L. J. Bank. 8; 3 De G. & S. 662.)
As to what constitutes a labourer, or workman, Bacon, C. J., said that the fact that a labourer employed others under him, being paid himself wages calculated by the result of the labour performed, did not necessarily make him a contractor, and not a servant. (Exp. Allsop, re Disney, 32 L. T. 433.)
By section 18, sub-section (14), no composition or scheme shall be approved by the Court which does not provide for the payment in priority to other debts of all debts directed to be so paid in the distribution of the property of a bankrupt.
The corresponding section of the Act of 1869 was held not No applicato extend, under section 10 of the Judicature Act, 1875, to tion to com the case of a company in liquidation. (Re Albion Steelf. Wire pany. Co., 7 Ch. D. 547.) Generally, as to the application of section 10, see Re Railway Plant & Steel Co., 8 Ch. D. 183; Re Richards f. Co., 11 Ch. D. 676 ; Re Withernsea Brickworks Co., 16 Ch. D. 337; Northern Counties Insurance Co., 17 Ch. D. 337.)
The Crown is bound by the provisions of this section as to the priorities of debts : see section 150, post.
“Joint and separate estates.” Section 59 deals with joint and separate dividends. Section Sub-s. (3). 110 gives power to present a petition against one partner alone. Section 112 provides that the property of partners shall in case of different petitions against different members of the partnership be vested in the same trustee. Section 113 deals with joint actions by the trustee and the bankrupt's partners. Section 115 provides that proceedings may be taken by or against partners, or a person carrying on business under a partnership name, in the name of the firm.
In order to sustain a joint petition against two or more Joint petition. persons, it is necessary that some act of bankruptcy shall have been committed by each of them. This may be a joint act of bankruptcy; but it is not requisite that they should have com. mitted a joint act of bankruptcy, or that they should all have committed an act of bankruptcy of the same kind; and in order to support a joint petition against all the members of a firm, the acts of bankruptcy must have been committed during the continuance of a joint debt, and the petition must be
$ 40. founded on a joint debt. (Er p. Clarke, 1 D. & Ch. 544.) It
would seem that a firm can now commit an act of bankruptcy by non-compliance with a bankruptcy notice founded on a judgment against the firm, and by virtue of section 115 can have a receiving order made against it as a firm. This will have the effect of a receiving order against each of the persons who are partners in the firm at the date of the order, Rule 195. No order of adjudication shall be made against a firm in the firm name, but it shall be made against the partners individually, Rule 197. As to what does and does not amonnt to a joint act of bankruptcy see Mills v. Bennett,
2 M. & S. 556; Spencer v. Billing, 3 Camp. 310. Assignments Generally speaking, acts of bankruptcy by partners are the by partners, same as those by separate debtors. With reference to what when acts of assignments by partners constitute acts of bankruptcy, it has bankruptcy.
been held that an assignment by an outgoing partner of his interest in the partnership assets to the continuing partners is not necessarily fraudulent as against creditors, and, as such, an act of bankruptcy. The test, however, in all these cases is the bona fides. (Ex p. Ruffin, 6 Ves. 119; Ex p. Fell, 10 Ves. 347 ; Ex p. Williams, 11 Ves. 3 ; Ex p. Walker, 31 L. J. Bank. 69; Ex p. Mayou, re Wood, 34 L. J. Bank. 25.) The assignment by portners of all their joint estate, or the assignment by a partner of all his joint estate, or of all his separate estate, are not necessarily acts of bankruptcy (Abbott v. Burbage, 2 Bing. N. C. 444; Ex p. Walker, ubi sup.); but where a partner assigned the whole of his separate assets, and gave a power of attorney to assign all his personal property, to secure an existing separate debt, and the partnership was at the time insolvent, the execution of the deed was held to be an act of bankruptcy. (Ex p. Trevor, re Burghardt, 1 Ch. D. 297.) If the assignment by a partner to a co-partner of the whole of his ehare in the joint assets be not an act of bankruptcy, it follows of course that the share which up to the time of assignment had been joint estate is thereby converted into the separate estate of the partner to whom it is assigned; while if the assignment be an act of bankruptcy, the property
remains part of the joint estate. (Ex p. Walker, ubi sup.) Joint adven- Persons may be jointly petitioned against who are not turers. strictly speaking partners, provided they are jointly indebted
in a sufficient amount; and the property, if any, in which they are jointly interested for the purpose of a joint adventure in respect of which the joint debts were contracted will be for all purposes joint estate. (See Ex p. Dewhurst, re Leggatt, L. R.
8 Ch. 965; Lindley on Partnership, 1139, 3rd ed.) Effect of ad. Where there is a joint adjudication, the whole of the projudication. perty of the bankrupts, whether partnership or separate pro
perty, vests in the trustee, and is administered by him, but if only one member of a partnership becomes bankrupt, his
trustee becomes tenant in common with the other partners,
§ 40. subject, however, to an account, for, as Lord Tenterden said, in Holdernesse v. Shackles, 8 B. & C. 612, “It is clearly established as a good principle of law that if one partner becomes a bankrupt his assignees can obtain no share of the partnership effects until they first satisfy all that is due from him to the partnership.” The trustee does not become a copartner with the solvent partners, but the bankruptcy of one partner constitutes a dissolution of the partnership (Fox v. Hanbury, Cowp. 445; Edwards v. Hooper, 11 M. & W. 363), and the trustee is in strictness entitled to put a person in possession of the whole of the property of the firm. This, however, is seldom done, as the solvent partners, either by consent or through the intervention of the Court, make arrangements for securing to the trustee payment of the bankrupt's share in the assets of the firm. (See Lindley on Partnership, p. 1150, 3rd ed.; Christian on Bankruptcy, v. ii., p. 58.)
The administration of the partnership affairs for the pur- Administrapose of ascertaining and paying to the trustee the bankrupt's tion of proshare in the assets will be carried out, as a rule, by the solvent perty. partner, unless there be any misconduct on his part, or he be abroad or dead (Ex p. Gordon, re Dixon, L. R. 8 Ch. 555; Hankey v. Garrett, 1 Ves. 235; Barker v. Goodair, 11 Ves. 78), and he may apply to the Court to restrain the trustee from interfering (Allen v. Kilbre, 4 Madd. 464), but he must furnish the trustee with proper accounts, and allow him to inspect the partnership books (Ex p. Storeld, 1 GI. & J. 185), nor will this right be defeated by any arrangement made by the bankrupt and his partners in anticipation of bankruptcy. (Ex p. Warden, re Williams, 21 W.R. 51.) But it seems that à provision for a valuation in case of the bankruptcy of one partner is valid (Whitmore v. Mason, 2_J. & H. 204), notwithstanding the doubts expressed by Lord Eldon in Wilson v. Greenwood, 1 Swan. 481. In the absence of agreement, solvent partners administering the joint estate must account for the profits made by the employment by them of the capital as constituted at the date of the bankruptcy up to the time, not of adjudication, but of the winding-up of the estate by sale or otherwise. (Crawshay v. Collins, 15 Ves. 218, 229.) A provision in a partnership deed that on the bankruptcy of one of the partners his share, or any part of it, should go over to the other partners is void, as a fraud on the bankruptcy law. (Whitmore v. Mason, ubi sup.) So, too, although rights of action on debts due to the partnership pass
like the rest of the partnership property to the trustee as tenant in common with the solvent partner, yet it would seein from section 114 that, as a rule, a solvent partner may sue for such a debt in his own name, unless the Court think fit to
§ 40. authorize the trustee to bring the action in the names of him
self and of the solvent partner under section 113. Dissolution It is to be observed that the dissolution, in the case of a dates from act partner being separately adjudicated bankrupt, dates from the of bank
act of bankruptcy, and that the authority of the bankrupt to ruptcy.
deal with the partnership assets is determined from that date, and the accounts between the trustee of the bankrupt partner and the solvent partners are made up from the same date, except as to profits made by the solvent partners subsequent to the bankruptcy by employment of the capital existing at the date of the bankruptcy, of which, as has been seen, the trustee is entitled to an account. (Crawshay v. Collins, 15 Ves. 218.) But neither the trustee nor the solvent partners can avoid a bond fide transaction entered into with a person who has no notice of an available act of bankruptcy by the bankrupt partner acting for the firm during the period between act of bankruptcy and receiving order. The former cannot do so on account of provisions in the protective section 49, and the solvent partners cannot do so because they cannot disavow the acts of one whom they have held out as their agent. If the transaction be not bona fide, it may be avoided, and apparently the trustee and the solvent partners may join to avoid it. The estoppel on the bankrupt is not binding on the trustee, and thus, in Heilbut v. Neville, L. R. 5 C. P. 478, it was held that where one of two partners has, in fraud of the other, and by way of fraudulent preference, indorsed bills of exchange of the firm to a separate creditor of his, in payment of a provable debt, and has afterwards become bankrupt, his assignees have a right to recover the proceeds of the bills from the creditor so preferred; but if the indorsement be invalid as against the solvent partner by reason of the creditor having taken the bills with knowledge of the fraud, the assignees and such solvent partner may sue jointly in trover for the recovery of the bills from such creditor.
Where any one partner remains solvent, and in a position to be entitled to deal with the partnership estate, there will be no distribution of the partnership assets in bankruptcy, but in all other cases the partnership assets, to the extent of the interest of the bankrupt, will be administered, as well as his separate estate ; and wherever there is administration of the partnership assets in bankruptcy the administration of
the joint and separate estates will be kept distinct. Distribution Sub-section (3) embodies the rule as to the distribution of of joint and joint and separate estates, laid down by Lord King, in Ex p. separate Cook, 2 P. Wms. 500, which was as follows:
“That joint estates.
creditors shall be first paid out of the partnership or joint
estate, and the separate creditors out of the separate estate of $ 40. each partner; and if there be a surplus of the joint estate besides what will pay the joint creditors, the same shall be applied to pay the separate creditors; and if there be, on the other hand, a surplus of the separate estate beyond what will satisfy the separate creditors, it shall go to supply any deficiency that may remain as to the joint creditors.
It was upon this rule that Lord Loughborough's celebrated Lord Loughorder was founded, which was as follows :
borough's " And I do further order that the commissioner do cause
order. distinct accounts to be kept of the joint estate, and also of Joint and such separate estate or estates; and that what shall be found separate
claims reto belong to the separate estate or estates shall be applied, in
spectively to the first place, in or towards satisfaction of the debts of the be satisfied respective separate creditors; and in case there shall be any out of joint overplus of the joint estate, after all the joint creditors shall and separate be paid and satisfied their whole demands, that the share or shares, interest or interests of the bankrupt or bankrupts, whose separate estate or estates is or are to be applied in manner before directed, in such overplus be carried to the account of his or their separate estate or estates and be applied in or towards satisfaction of his or their separate debts; and in case there shall be any overplus of the separate estate or estates of such bankrupt or bankrupts, after all their separate creditors shall be paid and satisfied their whole demands, that the overplus of such separate estate or estates be carried to the account of the joint estate, and be applied in or towards satisfaction of the joint debts; and that the costs of taking such accounts be paid out of such separate estate or estates, and be settled by the commissioner in case the parties differ about the same. Order, March 6, 1794, 1 Mont. & Ayr. 454 (2nd ed.). And see R. 215.
As to what constitutes satisfaction of the whole of the Exclusive of demands of joint and separate creditors respectively, James, interest since L. J., in the case of Ex p. Findlay, re Collie, 45 L. T. 61, said, adjudication. “The rule in bankruptcy is very clear. When creditor is competing with creditor, interest which has accrued due since the adjudication cannot be claimed till all the creditors, both joint and separate, have received twenty shillings in the pound in respect of the principal sums owing to them.”
The rule, however, that the separate estate of each partner Exceptions, should, in the first instance, be applied to the payment of his separate debts was subject to the following exceptions :
(1.) Joint creditors may prove against and receive divi- (1.) Where dends out of each of the separate estates provided there is no there is no joint estate and no solvent pa er who can be sued. (Ex p.
joint estate. Hayden, 1 Bro. C. C. 453 ; Ex p. Sadler, 15 Ves. 52; Ex p. Bauerman, 3 Dea. 476.)