words must be, that the deed is to be between and for the benefit of all the creditors, inasmuch as it is to bind all the creditors of such debtor." In Rixon v. Emary, 3 L. R. C. P., p. 550, Montague Smith, J., said in giving judgment: "We entirely agree in the decision " of the Lords Justices in the case of Re Glen" (supra) that where "there are distinct classes of joint and several creditors, the deed "must include and bind both sets of creditors;" and Bovill, C. J., in the same case said (p. 551): "I consider the law to be now "settled, that a deed of arrangement by several debtors with their "creditors must, in order to be binding upon non-assenting credi"tors under the 192nd section of the Bankruptcy Act, 1861, 'purport to be made or entered into with and to bind all their "creditors, and must embrace several as well as joint creditors "where any of each class exist." In Buvelot v. Mills, 1 L. R. Q. B., p. 104, Cockburn, C. J., in delivering judgment said: "In order to make a deed under § 192 "binding and effective upon the creditors who are not parties to it "otherwise than so far as the statute compulsorily makes them "parties, the deed must provide for such creditors in the same manner that it provides for those who are assenting parties." In Thompson v. Knight, 2 L. R. Ex. p. 44, Kelly, C. B., said in delivering judgment: "There are, no doubt, a great "number of these deeds executed daily, and daily forming the "subject of discussion, and it is therefore necessary to state clearly "the principle on which they are to be held valid or invalid. Now "I think it absolutely essential that all the creditors should be "placed on an equal footing, especially when I remember that, generally, a great number of them are in these cases bound by an instrument, to which they are not parties and to which they "have not assented." In ex pte. Nicholson in re Nicholson, 5 L. R. Ch. Ap. 335, Lord Justice Giffard in rendering judgment in a case wherein a deed of composition had been attacked, said "I agree that all "deeds of this kind must deal equally with all "thus to put an extreme case, if a deed were simply to provide "that one class of creditors should receive a larger composition "than another, that could not bind dissenting creditors, for it "would be on the face of the deed unfair." In all the cases cited, two principles are recognised as governing deeds of Composition and Discharge. 1. That if the debtor has joint and separate creditors, the majority required to bind the minority must be of the whole mass of his creditors joint and separate. 2. That under the deed perfect equality must reign, so far as the composition is concerned, between all the assenting and dissenting creditors, that is that each creditor should thereby be bound to submit to the same proportionate loss in the pound on his claim. The French authorities, on the subject of equality between the creditors of a bankrupt who has effected a concordat with his creditors, are in accord with the dicta of the English judges. Renouard says: "Et cependant point de concordat s'il ne con"tient pas les mêmes conditions à l'égard de tous." * Gadrat expresses himself more fully on the subject: "Réciproquement, tous les créanciers jouissent des avantages stipulés au "concordat en faveur de la masse, et, à ce titre ils peuvent exercer, "contre les tiers qui ont garanti l'execution du concordat, les "mêmes droits que les créanciers verifiés et affirmés. La situation "de tous les créanciers est identiquement la même; aucun d'eux ne peut recevoir un dividende avant que les autres créanciers le "reçoivent; chacun d'eux n'a droit qu'à sa part proportionelle "dans chaque distribution, et si par événement l'un d'eux avait reçu au delà de sa part proportionelle, il serait tenu de faire à "la masse le rapport de cet excédant.” † No difficulty can be experienced, as a general rule, in the drawing up of a deed of Composition and Discharge between a trader who has never been in partnership and his creditors. It is only when a partnership has been put into insolvency, or has assigned, that difficulties arise if there be joint and separate estates, or joint without separate estates, or separate without joint estates. The cause of the difficulty in such case is the presumed clashing of the general principle of equality with that of distribution of the estates under § 64, and the respective ranking of joint and separate creditors. The provisions of the English Bankruptcy Act of 1861, and those of the Insolvent Act of 1869, with respect to the ranking by partnership creditors on the separate estates of partners, are almost identical (ante p. 172). The general principles, out of insolvency or bankruptcy in England and Quebec, would appear * Faillites & Banqueroutes, p. 9. to be, that the assets of a partner are liable in the first instance for his separate debts, and those of the joint estate for the joint debts. Certain modifications of those principles exist under certain circumstances, but for the purposes of this paper it is unnecessary specially to consider them. From what has already been shewn it is clear that the creditors of a person who has been in partnership are not only his separate creditors, but also the creditors of the partnership-the mere fact of there being no separate assets does not prevent the partnership creditors from being creditors of the partner having no separate property-the liability still exists, although there may be no separate and no joint estate, to the partnership creditors-if the contrary be held, it can only be on the absurd principle of "no assets, consequently no liabilities, consequently no creditors." But it is said in matters of composition effected by partners with their creditors, that, although no doubt the majority signing the deed of composition must be of the mass of their joint and separate creditors, the general rule of equality laid down as governing such deeds may be departed from, and different rates of composition may thereby be made payable to their joint and separate creditors, the same rate to each class, based upon the respective values of the joint and separate estates of the Insolvents. A case presenting these features was recently decided in Montreal by Mackay J. holding the Superior Court. B. H. & E. L. trading in partnership, in the month of March, 1870, made an assignment under the Insolvent Act of 1869; an assignee to their joint and separate estates was in due course appointed, and soon after a Deed of Composition and Discharge was drawn up and signed to the following effect:-For and in consideration of a composition of 7s. in the £ to be paid by B. H. the joint creditors discharged B. H. & E. L. from their partnership liabilities, and ordered the assignee to deliver over the partnership assets to B. H. For a composition of 10s. in the £ the separate creditors discharged B. H. from his separate liabilities, and ordered his private estate to be delivered over to him; and for a composition of cent on the $, the separate creditors of E. L. discharged him from his separate liabilities. The creditors in each class were declared to be, and actually were, the majorities in number, holding three-fourth of the liabilities in such class. The applications for the confirmation of the discharges contained in the said deed of Composition and Discharge were resisted by J. J. & al., creditors of the partnership, on the ground of inequality of the composition: to this the Insolvents answered that the rate payable to each class was fair and just, being proportioned to the value of the assets belonging to each estate. The facts proved maintained the allegations of the Insolvent's answers, but the learned Judge by his judgment rendered on the 30th January, 1871, maintained the contestations, and refused to confirm the discharges. In rendering judgment, he said: MACKAY, J.-I have before me three petitions for confirmation of composition deed-one by B. Hutchins and E. Lusher as the late firm of B. Hutchins & Co.; the second by B. Hutchins as an individual: and the third by E. Lusher as an individual. The petitions are all alike. The one by B. Hutchins and E. Lusher jointly, states assignment by them as the firm of B. Hutchins & Co. to John Whyte, an official assignee, on the 3rd March, 1870, and that on the 22nd of April the petitioners made a deed of composition with their creditors, according to law, and obtained a discharge from them; that the petitioners have done all required by them under the insolvency act; wherefore they pray for a sentence of confirmation of the said composition deed and of the discharge granted by it. The petitions are opposed by Jeffrey & Co., creditors for over $1,900. The reasons of opposition are that the composition deed ts irregular, and does not provide for the creditors of the bankrupts getting equal amounts per £ or $ of composition money; that from the deed of composition it appears that the creditors, joint, and individual or separate, have not agreed for an equal composition for the creditors, as ought to have been. Other reasons of opposition are that the bankrupts appear to have been contracting debts recklessly, and knowing of their being unable to pay; that they have been guilty of wasteful, extravagant living, &c. The discharges referred to are contained in a deed of compo sition of 22nd April, 1870. (His Honor read the Deed of Composition.) This deed provides for three compositions. 1st. One of 7s in the £ to the creditors of the firm of B. H. & Co. 2nd. One of 10s in the £ to the creditors of B. H. as an individual. These compositions are to be paid by B. H. The 3rd one is of half a cent per dollar which E. L. has paid to certain of his individual creditors. Four creditors are named, three sign and get paid. No special provision for the 4th, nor for any others as creditors. I notice that these three who have gotten this half cent, are appointed to get the 7s. composition amount also, and B. H.'s 10s. per pound too. There is in the deed, after the composition, a general reconveyance clause; all the estates, firm and individual, being appointed to be given up to B. H. on the composition being paid. As to the facts connected with this insolvency it may be stated briefly that B. H. & Co. in Feb., 1870, suspended with a deficit of over $50,000. In March, 1870, the assignment was made, one deed of assignment by the firm and individuals. I can imagine the assignment to have been made as it was to prevent such question or difficulty as was in McFarlane's case. That case determined that, whenever a firm became bankrupt, the estates of the individuals of it fell for administration in bankruptcy at the same time by the same assignee. Upon the assignment of March, three meetings were held for appointment of assignees in the cases now before us. One of the firm creditors, at which J. Whyte, the official assignee, was elected assignee to the firm estate; another of the creditors, of B. H. individually. Nobody was at this meeting but J. Whyte, proxy for four persons absent. As proxy for one he moved, seconded by himself as proxy for another, that he himself should be appointed assignee, and it was carried, says his record. The third meeting was of the creditors of Ed. Lusher individually; not even a proxy attended at this meeting, so J. Whyte as having been interim assignee, became the assignee to this estate. These three meetings might have led to extra trouble had different persons been appointed assignees to the different estates. The composition agreements on 22nd April, though in one and the same deed, proceed evidently upon the idea that three compositions had to be paid. The separate creditors generally of B. Hutchins and of Ed. Lusher seem not to have been called to be parties to the 7s. composition of the firm. |