M'Causland v O'Callaghan

• Jurisdiction: Ireland
• Judgment Date: 30 June 1904
• Date: 30 June 1904
• Court: Court of Appeal (Ireland)

M'Causland

and

O'Callaghan (1).

Appeal.

CASES

DETERMINED BY

THE CHANCERY DIVISION

OF

THE HIGH COURT OF JUSTICE IN IRELAND

AND BY

THE IRISH LAND COMMISSION,

AND ON APPEAL THEREFROM IN

THE COURT OF APPEAL.

1904.

Administration — Insolvent estate — Judgment creditors — Priority — Judicature Act (Ireland), 1877 (40 & 41 Vict. c. 57), sect, 28, sub-sect. 1.

In the administration of the assets of a person whose estate has proved insufficient to pay his debts, judgment creditors will be paid pari passu, and not in priority of time.

The proceedings in this matter had been instituted to administer the assets of James Carnegie Shee by administration summons. The order for administration was dated on the 2nd March, 1903. The defendant was administrator with the will annexed, and the estate was insolvent. Under the posting for creditors, claims were sent in by two mortgagees.

1. A mortgage, dated the 12th July, 1878, by James C. Shee to Thomas Exham for £850. Thomas Exham died in 1899, and on the 23rd December, 1902, Henry Exham and A. H. Exham, the executors of Thomas Exham, recovered judgment against T. M. O'Callaghan, as personal representative of James C. Shee, in the King's Bench for £1,080, principal and interest due on foot of the mortgage.

2. A mortgage for £5600, dated the 5th June, 1879, by James C. Shee to the plaintiffs. the plaintiffs recovered judgment against the defendant, as personal representative of james c. shee, on the sth january, 1903, for £11,271 2s. 5d., the amount due for principal and interest on foot of the said mortgage.

On the claims coming before the Chief Clerk, he adjourned the case into Court to take the opinion of the Judge, as to whether the judgment obtained by H. and A. H. Exham against the defendant on the 23rd December, 1902, took priority over the judgment obtained by the plaintiffs on the 5th January, 1903.

On the 18th April, 1904, the Master of the Rolls decided that

the judgments ranked in priority according to their respective dates.

The plaintiffs appealed.

H. G. Richards, K.C., and Macrory, for the appellants:—

We submit that the rules of bankruptcy law apply, and that the judgments should be paid pari passu. Prior to the Judicature Act, the rule of Chancery practice was that such debts were payable according to their respective dates: Dollond v. Johnson (1). In Ireland judgment debts took priority, inter se, against real estates, according to their dates: Burroughs and Gresson's Equity Pleader, p. 348.

The question is how far the rules of bankruptcy have been brought in by sect. 28, sub-sect. 1, of the Judicature Act. They do not apply for the purpose of enlarging or diminishing the assets to be administered, but only for governing the mode in which they are to be divided. There are three classes of cases which illustrate this:—1. Whether rates and servants' wages should be paid in priority, as they are in bankruptcy? This is now regulated by the Preferential Payments Acts, 1888 and 1897; but the last decision before those Acts was that they were entitled to priority: Re Association of Land Financiers (2). 2. Whether, when money was lent by a married woman to her husband, she should be postponed to the other creditors by virtue of section 3 of the Married Women's Property Act, 1882. In England it was held that the married woman should be postponed: Re Leng (3). The Irish decision of Moore v. Smith (4) is inconsistent with this; but the question on which the Judges differed was the construction of the section of the Married Women's Property Act, and not the section of the Judicature Act. Lord Chancellor Walker, in giving judgment (p. 518), said that had he been unfettered by decision, he would have been disposed to uphold the contention of the appellant; but he considered the English authorities were the other way. Re Leng (3) was not then decided. 3. The executor's right of retainer is not taken away: Lee v. Nuttall (5).

But it has been held that the section applies, and the bankruptcy rules are brought in, in all those cases which deal with the mode in which the assets are to be divided: Re Leng (1). 1. The rules of set-off in bankruptcy are brought in, so that unliquidated damages may be set off against a liquidated debt: Mersey Steel and Iron Co. v. Naylor (2). 2. Voluntary debts rank with debts for valuable consideration as in bankruptcy: Re Whitaker (3). The decisions of Smith v. Morgan (4), and Re Maggi (5), must be considered as overruled by the decision in Re Whitaker (3). The principle for which we contend was conceded in Re The Leinster Contract Corporation (6).

M'Carthy Mahony (with him Connor, K.C.), for the Messrs. Exham:—

The only division in bankruptcy is between secured and unsecured creditors; but it was not intended that the rights of third parties should be altered, or the rights of a class of creditors inter se. After the Judicature Act a limited construction was given to the section by the English Courts: Smith v. Morgan (4), and Re Maggi (5). These decisions were followed in Ireland. In England they have been, on the general question, overruled by Re Whitaker (3), and the question is whether this Court will follow the English decision. We do not argue this general question, as the present case is not ruled by these decisions. The statute says that the rule in bankruptcy is to apply. To make the section apply there must be a rule in bankruptcy corresponding with the rule of law. There is no such rule in bankruptcy, because there is nothing in bankruptcy corresponding to a judgment against a personal representative; so the section does not apply. Before the Judicature Act, the law was clear that judgments against the personal representative ranked in priority according to the dates at which they were obtained: Williams v. Williams (7). Moreover a judgment having been recovered against a personal representative is an admission of assets by him, on which he could

be made personally liable: Bullen and Leake (3rd ed.), p. 580. If the contention of the appellants be correct, the effect will be either that a third party's right would be affected, or that the plaintiff would be deprived of his rights against the third party.

Harley, for the defendant O'Callaghan.

H. G. Richards, K.C., and Macrory, for the appellants:—

Harley, for the defendant O'Callaghan.

Lord Ashbourne, C.:—

This is an appeal from the Master of the Rolls, and raises a question of importance in administration suits.

Mr. Richards, in opening the appeal, stated that he was seeking to change the Irish practice, and bring it into harmony with the practice now prevailing in England, and with the current of recent English decisions; and he has given the Court every assistance in his clear review of the authorities.

The question depends on the construction of section 28 (1) of the Irish Judicature Act of 1877 (corresponding with section 10 of the English Judicature Act, 1875). That section reads as follows:

“In the administration by the Court of the assets of any person who may die after the commencement of this Act, and whose estate may prove to be insufficient for the payment in full of his debts and liabilities, … the same rules shall prevail and be observed as to the respective rights of secured and unsecured creditors, and to the debts and liabilities provable, and as to the valuation of annuities and future and contingent liabilities respectively, as may be in force for the time being under the law of bankruptcy with respect to the estates of persons adjudged bankrupt in Ireland.”

This section is not very felicitously drawn, and is susceptible of a narrow construction, and also, as pointed out in the authorities, of a wider construction. The earlier authorities before 1895 leaned towards the narrow, and against the wider, construction. In the case of Moore v. Smith (1), decided in December, 1894, this Court followed the case of In re Maggi (2), decided by Fry, J., and the then current of authority; but Lord Chancellor Walker, in giving the judgment of the Court of Appeal, said:—

“I have felt considerable difficulty in this case, and if I considered myself unfettered by decision, I should be disposed to hold that the

contention

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