custody of the sheriff of Lancashire under a writ cf ca. sa. issued in the above cause, and that I was arrested thereunder on the 13th of January *instant: That, on the 23d of December last, I duly signed and delivered a certain deed or instrument, bearing [*822 date the same 23d of December last, and made between myself of the first part, Joseph Walton, therein described, of the second part, and the *several other persons whose names and seals are thereunto [*823 subscribed and affixed (being my creditors in their own right. solely or in copartnership with others, or agents of such creditors), of the third part, being a deed of assignment of all my real and personal estate to the said Joseph Walton as a trustee, in trust for [*824 the equal benefit of all my creditors: That such deed was after the execution thereof by me, and before the registration thereof on the 12th of January instant, as hereinafter mentioned, duly signed or in *writing assented to and approved of by three-fourths in number and value of my creditors whose debts respectively [*825 amount to 107. and upwards: That the statement thereunto annexed contains a true and correct list of all my creditors whose debts respectively amount to 107. and upwards, and it is therein stated truly and correctly whether the said creditors assent to or dissent from the said deed or instrument: That the said Joseph Walton, the trustee appointed by the said deed or instrument, duly executed the same in my presence on the 24th of December last: That the execution of such deed or instrument by myself was duly attested by Mr. R. H., an attorney and solicitor in Stockport, in the county of Chester: That within twenty-eight days from the day of the execution of such deed or instrument by myself, viz. on the 12th of January instant,. the same was produced and left (having been first duly stamped) at the office of the chief registrar of the Court of Bankruptcy, for the purpose of being registered: That, together with such deed or instrument, there was delivered to the chief registrar an [*826 affidavit by myself and a certificate by the said trustee, that a majority in number representing three-fourths in value of my creditors whose debts amounted to 107. and upwards had in writing assented to or approved of such deed or instrument, and also stating the amount in value of my property and credits comprised in such deed: That such time being; and that all checks or orders for drawing thereout any moneys shall be signed by the trustees or trustee for the time being: Provided always and it is hereby agreed and declared that every resolution signed by the majority in number and value of the creditors parties hereto shall be binding on all the parties hereto, and shall be effectual for the allowance and passing the accounts of all trustees acting hereunder, and for discharging them from the trusts hereof and from all claims and demands in respect thereof: And, lastly, that all powers and questions relating to contracts by the said debtor, or to the compounding of debts or the submitting disputes to arbitration, or the payment of wages or salaries to clerks, servants, labourers, workmen, or to apprentices, or powers or questions relating to the discharge of apprentices, or to creditors having securities for their debts, or to the allowance to the said debtor, or dividends under this deed, or powers or questions relating generally to the trust-estate and creditors or their debts, and not herein expressly provided for, shall be exercised and dealt with by the trustees according to the English bankrupt law. "JOSHUA PENDLEBURY, "J. WALTON.

"Signed, sealed, and delivered by the said Joshua Pendlebury and Joseph Walton in the presence of "RALPH HOWARD, Solicitor, Stockport."

Then followed the signatures and seals of several creditors, with the amounts of their respective debts.

C. B. N. S., VOL. XV.-31

deed or instrument did before registration bear such ordinary and ad valorem stamps as are required by the Bankruptcy Act, 1861: That, immediately after my execution of the said deed or instrument, possession of all the property comprised therein of which I could give or order possession was given to the said trustee: That the date. names, and descriptions of the parties to such deed or instrument not including the creditors, together with a short statement of the nature and effect thereof, was duly delivered to the chief registrar, to be en tered by him in the book kept for that purpose: That such entry was made within forty-eight hours after the said deed had been left with the chief registrar as aforesaid, and a copy of such entry was published in the London Gazette within four days after the making such entry: And that the certificate of the registration of the said deed is signed by the person who on the 14th day of January instant, the date thereof, was acting for and on behalf of the chief registrar of the Court of Bankruptcy."

Russell.--The formal preliminaries of the statute seem to have been complied with: but the deed itself is open to several objections. It is not for the equal benefit of all the creditors of the defendant, and it contains covenants which are unreasonable. First, there is a clause that all the creditors who execute the deed shall verify their debts by solemn declaration or otherwise to the satisfaction of the trustee, under the penalty of losing all benefit under the 827] deed. That clearly is a condition to which creditors are not bound to submit. The second objection is, that the deed contains a covenant on the part of the creditors not to sue, such as this court in Legg v. Cheesebrough, 5 C. B. N. S. 741, and the Court of Exchequer in Dell v. King, 2 Hurlst. & Colt. 84, held to render the deed void. The third objection is, that it provides for the payment in full of all creditors whose debts shall be under 107. The fourth objection is, that the deed contains a clause by which the majority of the executing creditors might bind the minority, and discharge the trustee from all the trusts. It may be that the payment in full of the 107. creditors will render the estate valueless to the other creditors: and there is nothing in the bankrupt laws to warrant it. Ex parte Spyer, In re Josephs, 32 Law J., Bankruptcy, 62, it was held that a power in a deed of assignment for the benefit of creditors enabling the trustees to make such arrangements with the creditors whose debts are under 107. as they may deem expedient, is inconsistent with the Bankruptcy Act, 1861; but that, where the deed showed a clear intention that the estate should be administered as in bankruptcy, the particular power might be rejected as repugnant to the general tenor of the deed, and that its existence formed no objection to the validity of the deed, nor to the capacity of registering it under the statute. "If," said Lord Westbury, C., "it had been a trust or absolute direction to pay, there might have been ground for the objection; but, inasmuch as the deed proposes only to give liberty to the trustees, if the execution of that liberty be at variance with the duty and obligation of the trustee as declared by the rest of the deed and the law applicable to it, then, the liberty being repugnant to the higher duty, is simply a power which the trustee has no right to exercise."

*Milward, in support of his rule.-It is not contended that the deed would be good, if it contained clauses which it would [*828

be unreasonable to ask a creditor to assent to, or affected to introduce conditions to which creditors under a bankruptcy would not be subjected. But the 197th section subjects all questions upon the deed to the law and practice in bankruptcy: it enacts, that, "from and after the registration of every such deed or instrument in manner aforesaid, the debtor and creditors and trustees, parties to such deed, or who have assented thereto or are bound thereby, shall in all matters relating to the estate and effects of such debtor be subject to the jurisdiction of the Court of Bankruptcy, and shall respectively have the benefit of and be liable to all the provisions of this act in the same or like manner as if the debtor had been adjudged a bankrupt, and the creditors had proved, and the trustees had been appointed creditors' assignees under such bankruptcy: and the existing or future trustees of any such deed or instrument, and the creditors under the same, shall, as between themselves respectively, and as between themselves and the debtor and against third persons, have the same powers, rights, and remedies, with respect to the debtor and his estate and effects, and the collection and recovery of the same, as are possessed or may be used or exercised by assignees or creditors with respect to the bankrupt, or his acts, estate, and effects in bankruptcy." Ex parte Spyer, In re Josephs, is an express authority to show that a mere power to the trustee to pay 107. creditors in full does not invalidate the deed, inasmuch as that would be controlled by the general law of bankruptcy. Dell v. King, 2 Hurlst. & Colt. 84, has no analogy to this: that was the case of a composition deed; whereas, this is an absolute assignment for the general benefit of creditors. As to the clause [*829 enabling the trustee to require the claims to be verified, that clearly is not unreasonable: there must be some power of inquiry. The objection that the deed contains a covenant that the minority shall be bound by the decision of the majority of the executing creditors is unreasonable and bad, is without foundation: it is a universal rule in bankruptcy, as in all matters which are to be determined by a majority, that the minority are bound.

ERLE, C. J.-I am of opinion that this rule should be discharged. It is a rule for discharging the defendant out of custody, on the ground that he has executed a deed of assignment according to the 192d section of the Bankruptcy Act, 1861, assented to by the requisite number and value of creditors of the defendant, and so the plaintiff, a non-executing creditor, is bound, and consequently that the certificate of registration under s. 198 operates as a complete protection against arrest. The rule is opposed, on the ground that the protection which was given to the defendant was founded upon an invalid deed and thus we are called upon to decide incidentally, upon a motion to the discretion of the court in regulating the conduct of its officer, without any power of appeal, as to the validity or invalidity of an important deed which regulates the rights of a debtor and a large body of creditors. I think we are bound by the decision we already have come to in the case of Ilderton v. Jewell, 14 C. B. N. S. 665 (E. C. L. R. vol. 108),(a) to hold that the certificate alone, if the (a) Affirmed in error, sittings after Hilary Term, 1864.

court be satisfied that it is founded upon an invalid deed, does not entitle the debtor to his discharge. It becomes therefore necessary to go into the question whether this deed can be impeached upon any of the grounds which have been urged before us; and I feel *830] *bound to say that the objections urged by Mr. Russell are sufficient to satisfy me that the deed does contain provisions which are unequal and unreasonable. I think the clause giving the trustee power to admit or reject a debt which he might deem insufficiently proved, is most unreasonable if carried out in terms. I must take the covenant, sitting in a court of law, according to its legal effect. I cannot modify or alter it. It seems to me to be altogether unreasonable to call upon a creditor to submit his claim to the decision of the trustee. The clause which declares the debt forfeited if the creditor shall seek to substantiate his claim by an action, is also unreasonable. So also the clause enabling the trustee to pay in full creditors whose debts are under 107., is unequal and unreasonable. It gives the trustee the option of doing that which may leave nothing to be distributed amongst the rest of the creditors. We are bound by Woods v. Foote 1 Hurlst. & Colt. 841, and several other cases, to go into these considerations, because it has been held, that, if the deed contains covenants which it is unreasonable to call upon a creditor to consent to be bound by, it affords no answer to a claim by a non-executing creditor. If we were to hold the defendant to be entitled to his discharge, we should in effect be giving a judgment in his favour upon the validity of the deed. For the reasons I have stated, I think the deed is not a valid deed, and consequently that the certificate of registration under the 198th section affords the defendant no protection.

WILLIAMS, J.-I am of the same opinion. The defendant is legally in custody under a writ of ca. sa. We are asked to direct our officer to discharge him, because he has obtained a certificate of the due *831] registration of a deed of arrangement under the 192d *section

of the Bankruptcy Act, 1861, 24 & 25 Vict. c. 134. It seems to me that we are not bound to discharge the defendant, unless satisfied that the certificate is founded upon a valid deed. I think that that is not sufficiently made to appear, and consequently that the rule must be discharged.

WILLES, J.-I am of the same opinion. The certificate of the registration of the deed is in a general form. I cannot look upon it as an act of the Court of Bankruptcy to which implicit credence is to be given. I think it is the duty of this court to look at the deed in order to satisfy itself as to whether or not it is such a one as ought to have led to a certificate of protection, under section 198. The deed contains, amongst others, the following clause,-"Provided, nevertheless, that it shall be lawful for the trustees or trustee. for the time being to require the amount of any debt or debts of any of the several creditors, or any security for the same, to be verified by solemn declaration, or in such other manner as to such trustees or trustee shall seem expedient:" and, in the event of a refusal to submit to this, the creditor so refusing is to lose all benefit under the deed. Is that reasonable? I must say I think it is not. There is nothing in any of the decisions to justify a non-executing creditor being thus placed at the mercy of the trustee. In Ex parte Spyer,

66

which has been referred to, the verification was to be at the expense of the trust estate. The words of the covenant there were,—" Provided always, and it is hereby covenanted and agreed by and between the several parties hereto, that it shall be lawful for the said James Spyer (the trustee), at the expense of the said trust estate, to require the amount of any debt or debts of any or either of the several creditors parties hereto to be verified by solemn declaration or in such other manner as to the said trustee shall seem expe- [*832 dient;" and "in the event of any such creditor or creditors refusing or failing so to verify his or their debt or debts, or declining to execute these presents, then such creditor or creditors so refusing or failing or declining as aforesaid, shall lose all benefit, dividends, and advantage to be derived from or otherwise claimed under these presents, anything herein contained to the contrary notwithstanding." This clause was rejected by the Lord Chancellor as being nonsense, because it enabled the trustee to require the amount of debt of any of the creditors parties thereto to be verified; and, in the event of such creditor or creditors refusing to execute, such creditor or creditors so refusing, &c., should lose all benefit." That case, therefore, is no authority in favour of the defendant here. I agree with my Lord in thinking that this clause, as well as the others which he has referred to, is unreasonable. Then arises the question, what is to be the effect of a deed containing clauses which are unreasonable and not authorized by the statute, so that non-executing creditors are not bound by it? Are we to excise them, and read the deed without them? or are we to treat it altogether as a void and unauthorized deed? Ex parte Spyer seems to be an authority for the excision of the void covenants. But I own I feel great difficulty in applying that authority here. The objection goes to the very essence of the deed; dealing with the mode in which the debts are to be ascertained and the dividend paid. Further, there is the authority of the Court of Exchequer in Woods v. Foote, 1 Hurlst. & Colt. 841, that a clause that is unreasonable cannot be rejected, and the rest of the deed held good; but that the whole must be held void. Upon the authority of that case I think we are bound to hold that this deed cannot be sustained. The silence of the certificate upon the subject does not prevent us from inquiring whether or not the requisites of s. 192 have been. complied with.

[*833

KEATING, J.-I am of the same opinion. The case of Ilderton v. Jewell is an authority to show that the certificate of the registrar, to have any avail, must appear to be founded upon a valid deed under s. 192. This deed, for the reasons already given, is not a valid deed, and therefore the certificate which the defendant has obtained does not entitle him to be discharged from custody.

ERLE, C. J.-There being some difficulty about the application of this new law we think there should be no costs of this rule.

Rule discharged, without costs.