CASES IN BANKRUPTCY

ARGUED AND DETERMINED

IN

The Court of Review, &c.

Ex parte SHUTE and others.-In the matter of

SHUTE.

THIS was the petition of the bankrupt's wife and children, for the proof of a sum of 12007., under the following circumstance

1833.

Westminster,

January 26. A bankrupt had, on

his marriage, entered into

a bond to trus

tees to pay them 1200l., upon trust for

The bankrupt, upon his marriage, executed a bond to R. Watson and H. Davy, conditioned to pay to them, when required, 1200/., which, with the consent of life, if he should the bankrupt and his intended wife, or the survivor of

himself for

not become a bankrupt, with remainder to his

usual limita

them, was to be placed out at interest, and applied ended wife upon the following trusts: first, the whole interest to for life, with the go to the bankrupt for life, if he should so long con- tions to children; and on tinue in good and solvent circumstances, and not be- the faith of the bond, he was come a bankrupt, or make any assignment of his effects permitted to apply to for the benefit of his creditors; remainder to his in- his own use his wife's marriage

portion, amounting to 1501.: Held, that the trustees were entitled to prove for the 1200.; the dividends to be invested in stock, the dividend of which was to be subject to the payment of interest to the wife on the 150l., and the remainder to the bankrupt's creditors for his life, and after his death, upon the trusts of the bond.

1833.

tended wife and her assigns during her life, with the Ex parte usual limitations to the children of the marriage. The SHUTE and others. marriage afterwards took effect; and, on the faith of

the bond, the bankrupt was permitted to receive and apply to his own use the sum of 150%., as the marriage portion of his wife.

The infant petitioners were the only issue of the marriage. Watson, one of the trustees, on the 30th June 1832, wrote to the bankrupt as follows:-" As the trustee for your wife and family, I request you to make immediate payment of a sum of 12007., secured to myself and co-trustee by your bond, dated the 3rd December 1816." This letter was delivered to the bankrupt on the 2d July, at his own house, before eleven o'clock in the morning. On the same day the fiat was issued; but it did not appear, that the 12007. had been previously demanded. The trustees applied to prove the amount under the fiat, but the commissioners rejected the proof, holding that the bond was a fraud upon the bankrupt laws.

The prayer was, therefore, that a proof might be admitted for the 12007. secured by the bond, in the name of some person appointed by the Court on behalf of the petitioners and the surviving trustee; and that the dividends in respect of such proof might be invested according to the trusts of the bond, or might be otherwise paid and secured as the Court should direct.

Mr. Swanston, for the petitioners. The decision of the Commissioners cannot be supported. The question is, whether the dividends upon this sum are to be paid and applied for the benefit of the wife, according

to the equitable provision she is entitled to under the bond, or to the assignees, for the benefit of the creditors. We ask for an order that the dividends upon the whole sum may accumulate, until the provision for the bankrupt's wife shall be secured. Ex parte Turpin (a) is an authority that proof may be made for the whole sum.

Mr. Twiss, for the assignees. This case is distinguishable from that of Ex parte Turpin (a), inasmuch as the first part of this settlement is bad, and is a fraud upon the bankrupt laws. There were no such terms as these in Ex parte Turpin. In this case the wife is only entitled to the dividends arising from the 1507.; the settlement as to the remainder of the 12007. being bad. [Sir J. Cross. As the limitation is not to pay the interest to the separate use of the wife, it must go to the husband.] Even if the limitation had been to the separate use of the wife, the limitation would have been bad, as it was contingent on the husband's bankruptcy; Ex parte Meaghan (b), Ex parte Oxley(c). [Erskine, C.J. The question is, whether the dividends on the 10507. are to go to make up the full sum of 150%., to which the wife is clearly entitled; or whether this case is not in that respect distinguishable from Ex parte Turpin.] [Sir G. Rose referred to the case of Ex parte Hodgson (d), and observed, that wherever there is a breach of trust by a bankrupt as to a trust fund, the whole fund must be made good before any thing can be divided among the creditors.] The wife cannot

1833.

Ex parte SHUTE and others.

1833.

Ex parte SHUTE and others.

take any interest out of that which was her husband's, but only out of that which was her own; Ex parte

Hill (a). If the settlement as to the 10507. is void, then the limitation for the benefit of the wife can take no effect. There is this distinction between this case and that of Ex parte Turpin; in that case the limitation was good, but in this it is wholly void. It is proposed, therefore, that the interest on the dividends of the 150%. should accumulate for the wife; and that the interest on the dividends of 10507. should be paid to the assignees during the life of the bankrupt, and upon his death should accumulate and be applied upon the trusts of the settlement.

Mr. Swanston, in reply. It is conceded, that the trustees must prove for the 12007.; and it is also not disputed, that the settlement is good for the 150l. belonging to the wife, though bad for the remainder; the limitation in the event of bankruptcy being good to the extent of the fortune brought by the wife. Whether the consideration for the bond was the wife's fortune, or the husband's,-as the bond was executed before the marriage, it was a good consideration. The principle I contend for is, that those who claim under a defaulting debtor shall not claim more than he could himself; and therefore that there ought to be a sequestration of the dividends on the 1050l. The assignees can only claim the life interest of the husband. There is here no default in the wife, but there is in the husband; and the Court will therefore intercept the beneficial interest of the defaulting debtor to the trust fund. The wife is entitled, at all events, to the extent of the for

(a) 1 C. B. L. 212.

1833.

Ex parte

SHUTE

tune she brought the bankrupt, namely, to the sum of 150%.; she has a right therefore to ask that this sum shall be at once made good out of the assets, by proof and others. upon the whole debt; and that only the remainder of the dividends on the sum proved shall be applied towards the payment of the interest upon the sum of 1050l., for the benefit of the bankrupt's creditors during his life. The equitable provision to which the wife is entitled is not subject to the doctrine of accumulation.

ERSKINE, C. J.-There is no dispute in this case, as to the right of proof upon the whole sum of 12007., but only as to the application of the dividends on this sum. On one side it is contended, that only the dividends on 1501., part of the debt, should be paid to the trustees under the settlement, in order to be applied by them to the payment of interest on that sum to the wife during the life of the bankrupt; and that the dividends on the remaining portion of the debt, namely, the 1050., should be applied to pay interest on that sum to the assignees during the life of the bankrupt, to be administered as assets usually are in bankruptcy; and after the bankrupt's death, then that the remainder of the dividends on both these sums should be applied for the benefit of the wife and children, according to the trusts of the settlement. On the other side it is insisted, that the dividends upon the whole sum, to the amount of 1507., should be paid to the trustees, to be applied by them towards the payment of interest on that sum to the wife during her life; and that only the residue of such dividends should be retained by the assignees, and be applied by them towards the payment of the interest on the 1050%., for the benefit of the