and above the assessed value remaining unaffected. The Schedules have effect as part of the Act. See section 168 (2). Having regard to this provision, which is new, it will be very important that the proof of a secured creditor be carefully prepared in accordance with the Rules, because in case he should ever desire to take advantage of this provision, his title to the property freed from the equity of redemption will consist of (1) the proof, (2) the notice under rule 12 (c), and (3) evidence of the failure of the trustee to signify his election within six months. It must be observed that if the trustee signifies his election within the time, there is no time prescribed within which he must act upon it.

Rules 13 and 14 of this Schedule provide for the amendment of a proof or a valuation on certain terms and with certain incidents.

As to the old law on this subject prior to and under the Act of 1869, see ante, p. 44. The definition of secured creditor in section 168 (1) of the present Act (ante, p. 353) practically differs only from that contained in section 16 of the Act of 1869 by the addition of the words "from the debtor" to the words" as security for a debt due to him." As to who is and who is not a secured creditor, see note, ante, pp. 44—46.

Having regard to the words in the interpretation clause, section 168 (1), "security over the property of the debtor" (see note to rule 11, ante), the question sometimes arises what securities fall within this description. Clearly not securities over the property of a stranger. Thus, a joint creditor having security over the separate estate is not within the description (Ex p. Peacock, 2 Gly. & J. 27; Ex p. Bowden, 1 D. & Ch. 135), neither, conversely, is a separate creditor holding security over the joint estate. (Ex p. Shepherd, 2 M. D. & D. 204; Re Plummer, 1 Phil. 56.)

The principle upon which the question depends was considered in the case of Ex p. West Riding Union Banking Co., re Turner, 19 Ch. D. 105. In that case Jessel, M. R., said, "The principles of the bankruptcy law are plain enough. A man is not allowed to prove against a bankrupt's estate and to retain a security which, if given up, would go to augment the estate against which he proves.' The same learned judge proceeded to consider the application of this principle to the case of joint and separate estates, and, quoting the words of Lord Lyndhurst in Re Plummer, 1 Phil. 56, said, "In administration under bankruptcy, the joint estate and separate estate are considered as distinct estates; and accordingly it has been held, that a joint creditor, having a security upon the separate estate is entitled to prove against the joint estate

W.B.

BB

2nd Sched.

2nd Sched.

Secured

creditor

may realize security and prove for deficiency: rule 9.

without giving up his security, on the ground that it is a different estate."

As to voting by a secured creditor, see Schedule I. rr. 10—12. The mode of action of the creditor must be determined by the nature of his security. If the security is of such a nature that, had no bankruptcy occurred, he would have been able to have realized the security in order to satisfy his claim, he may still do so, notwithstanding the bankruptcy, for section 9 (2) expressly reserves to creditors holding security their right to realize. Should there be any balance out of the proceeds of the security after satisfying the debt for which it was given, such balance will belong to the trustee, and if he is dissatisfied with the creditor's accounts he may either sue him or apply to the Court under section 102.

Where, however, the security is of such a nature as to give the creditor no right to realize independently of the assistance of a court of equity; or where the trustee contests the validity of the security, he may, in order to get the security realized, apply to the Court under Rule 65. The Court will then proceed to inquire whether he is entitled to such security, and for the purpose of such inquiry may examine such parties as it thinks fit (Rule 68), and if satisfied of this, will take an account of what is due to him upon such security, and will make an order that the security be sold. The trustee will, unless it be otherwise ordered, have the conduct of the sale (Rule 65), and the proceeds arising therefrom after payment of the trustee's costs occasioned by the application and sale, will be applied in payment of the creditor's claim. The surplus, if any, shall be paid to the trustee, and in respect of the deficiency, if any, the creditor may prove. (Rule 67.) The secured creditor may, however, also bring his action in the Chancery Division of the High Court, but in such case the action may be transferred to the judge to whom bankruptcy business is assigned. (See section 102 (5), ante, p. 299.)

Where the existence of the security is the result of the rule in Waring's case (see Ex p. Waring, 19 Ves. 345), and not the result of any contractual right of the creditor, i. e. where it is founded on a necessity of doing justice between two bankrupt estates, the application of the creditor must be made by motion in bankruptcy, and not otherwise, and rule 65 would seem not to apply.

A mortgagee may, however, notwithstanding the bankruptcy of the mortgagor, bring an action for foreclosure, but it would seem that the Court will restrain the mortgagee from proceeding with the action if it appear more convenient that the sale should take place under the bankruptcy. (See White v. Simmons, L. R. 6 Ch. 655.) On the question of jurisdiction, whether exclusive or otherwise, see further note to section 102, ante, p. 304.

2nd

The trustee in bankruptcy of a mortgagee may proceed either in the Chancery Division or in bankruptcy. (Waddell Sched. v. Toleman, 9 Ch. D. 212.)

the whole:

The creditor may, as has been already said, give up his May give security and vote and prove in respect of the whole debt up security (rule 10), and if he do vote in respect of the whole debt, he and prove for will be considered to have elected to give up his security, rule 10. unless the Court on application is satisfied that the omission to value has arisen from inadvertence (Schedule I. r. 10). It was held under former Acts that if the bankruptcy were subsequently annulled, the creditor would be entitled to have the security returned to him, although the debtor were adjudicated bankrupt on some other petition. (Ex p. Morris, re Tyrie, 14 L. T. 606.)

Under the Act of 1869 it was held that the effect of a first mortgagee giving up his security was to simply put the trustee in his place, and not to accelerate the rights of subsequent mortgagees. (Cracknall v. Janson, 6 Ch. D. 735.)

In the case of Ex p. Good, in re Lee, 14 Ch. D. 82, it was held under the Act of 1869, that until a secured creditor has valued or realized his security he has no debt provable in respect of which the trustee, having notice of the debt, is bound to make a reserve on declaring a dividend. There the trustee gave notice to the creditor under Rule 136 of the Rules of 1870 to estimate the value of his security within fourteen days, the creditor failed to comply, and thereupon his proof, in which he mentioned but did not value his securities, was rejected, and a dividend declared and paid. In this case it was also decided that if by reason of any special circumstances a secured creditor is prevented from realizing his security before declaration of dividend, the Court had power under section 72 of the Act of 1869 (which is contained in section 102 of the present Act) to give such directions as may be proper to prevent any injustice being done.

and 15.

Rules 13, 14 and 15 deal with amendment of valuations, rules 13, 14 which the creditor is now to be entitled to do at any time on showing to the satisfaction of the trustee or the Court that the valuation and proof were made bonâ fide on a mistaken estimate, or that the security has diminished or increased in value since its previous valuation. This provision seems to extend the principles laid down in Ex p. Adamson, re Collie, 8 Ch. D. 807 Ex p. Schofield, re Firth, 12 Ch. D. 337; Ex p. Bagshaw, re Ker, 13 Ch. D. 304; Ex p. Whitton, re Greaves, 43 L. T. 480. In Couldery v. Bartrum, 19 Ch. D. 394, the Court refused to allow amendment after a composition had been taken and completed on the faith of the original valuation. The penalty for non-compliance with the rules in the schedule rule 16. is exclusion from all share in any dividend. By Rule 260 rule 17.

2nd non-compliance with the Rules, or with any rule of practice, Sched. renders the proceeding liable to be set aside as irregular, but does not render it void. As to proof for interest, see rule 20, infra. As to interest from the date of the receiving order, see section 40 5). It was held under the Act of 1869 that a creditor was entitled in making the valuation to deduct costs reasonably incurred by him in protecting or upholding the security. Exp. Carr, re Hoffman, 11 Ch. D. 62.)

Election.

The rights of a mortgagee are not affected by section 5 of Bovill's Act, 28 & 29 Vict. c. 86. (Er p. Shiel, re Lonergan, 4 Ch. D. 789.)

Proof in respect of Distinct Contracts.

18. If a debtor was at the date of the receiving order liable in respect of distinct contracts as a member of two or more distinct firms, or as a sole contractor, and also as member of a firm, the circumstance that the firms are in whole or in part composed of the same individuals, or that the sole contractor is also one of the joint contractors, shall not prevent proof in respect of the contracts, against the properties respectively liable on the contracts.

66

This rule is identical with section 37 of the Act of 1869, except that date of the receiving order" is substituted for "date of the order of adjudication."

A similar enactment was contained in the Act of 1861, section 152, which was passed expressly to meet cases like Goldsmid v. Casenove, 7 H. L. C. 785; 29 L. J. Bank. 17, in which case judgment was given against the right of the creditor to double proof. It is to be remarked, however, that that section was limited to bills of exchange and promissory notes, and in construing section 37 of the Act of 1869, James, L. J., said that the only difference between the two sections was, that while the old section was confined entirely to bills of exchange and promissory notes, that limitation was left out of the Act of 1869, and it was made to apply to any other contracts. (Ex p. Banco de Portugal, re Hooper, 11 Ch. D. at p. 320.)

This rule seems to abolish the doctrine of election altogether, for although its application is limited by the express words of the rule to cases where the joint liability is a liability as members of a firm, this will include all cases in which the doctrine of election could have applied, because that doctrine could only have applied where there was a joint estate, and whenever there is a joint estate there is a firm. (Per Mellish, L. J., Ex p. Honey, re Jeffery, L. R. 7 Ch. 179.)

Although the contracts must be "distinct contracts," yet they may be contained in one instrument, e. g. a promissory note made by the members of a firm jointly, and also by some or all of them separately (Ex p. Honey, re Jeffery, ubi sup.); but it is not necessary that such a joint and separate promissory note should purport on the face of it to be made by the partners in the partnership name as a firm. It is sufficient if it is made by all the partners in the firm jointly and separately for a partnership purpose. (Ex p. Stone, re Welsh, L. R. 8 Ch. 914.) Where all the members of a firm sign a joint and separate promissory note, and there is no signature in the partnership name, and the money raised on the joint and separate contract is not intended to be used for partnership purposes, Mellish, L. J., seems to doubt whether the section would apply. (Ex p. Stone, re Welsh, ubi sup.)

2nd Sched.

The fact that a person carries on two businesses in different Distinct firms. names, one in England and one abroad, and that separate proceedings in bankruptcy are taken in each country for the distribution of the property there situate, does not make the bankrupt a member of two distinct firms, since there is really but one estate. (Ex p. Wilson, re Douglas, L. R. 7 Ch. 490; Ex p. Banco de Portugal, re Hooper, 11 Ch. D. 317; affirmed sub nom. Banco de Portugal v. Waddell, 5 App. Ca. 161.)

In the case of Ex p. Corbett, re Shand, 14 Ch. D. 122, Cotton, L. J., said that section 37 of the Act of 1869 only applied to proofs under contracts, and did not apply to a proof for injuries caused by a disclaimer under section 23 of the same Act.

Periodical Payments.

19. When any rent or other payment falls due at stated periods, and the receiving order is made at any time other than one of those periods, the person entitled to the rent or payment may prove for a proportionate part thereof up to the date of the order as if the rent or payment grew due from day to day.

This rule is the same as section 35 of the Act of 1869, with the same alteration as that made in rule 18, supra. In Ex p. Dressler, re Solomon, 9 Ch. D. 252, it was held that where the trustee had become personally liable for a quarter's rent, he was none the less liable for the whole, because section 35 gave the landlord a right of proof for a part thereof.

Interest.

20. On any debt or sum certain, payable at a certain time or otherwise, whereon interest is not reserved or