Kanagaratne v. Yapa.
1®34Present;Drieberg, Akbar, and Poyser JJ.
KANAGARATNE v. YAPA
C. R. Galle, 13J51
Insolvency—Right of assignee to sue—No leave of Court necessary—OrdinanceNo. 7 of 1853, s. 82.
The right of an assignee in insolvency to sue does not depend on leaveof Court previously obtained for the purpose.
ASE referred by Maartensz J. to a Bench of three Judges. Thefacts are stated in the reference as follows:—
This was an action by the assignee of the insolvent estate of S. D. Siyadorisand K. D. Sedris to recover from the defendants a sum of Rs. 134.07 withfurther interest on a sum of Rs. 120 at 18 per cent, per annum.
The defendant did not deny the claim in his answer, but took the objectionthat the plaintiff had not obtained the leave of Court to bring the action asrequired by section 82 of Ordinance. No. 7 of 1853.
The action was tried on the following issues :—
1. Did the assignee obtain permission of the District Court to bring thiscase?
If not,s^an the action be maintained ?
Can the action be maintained without a special averment that leave wasobtained ?
The learned Commissioner answered all the issues in the affirmative and enteredjudgment for plaintiff as prayed for with costs.
It was contended in appeal by the defendant that the Commissioner waswrong in holding that P 1 was a compliance with the provisions of section 82of the Insolvency Ordinance.
P 1 is a motion by the assignee in paragraph 2 of which he moves “thathe be permitted to take steps for the recovery of the debts due to the insolvent ”,on which the District Judge made the following order : “ His appointment asassignee is sufficient authority
The contention must be upheld. The object of section 82 is to preventan assignee bringing an action in which he has no hope of succeeding andrendering the insolvent estate liable in costs. That object will not be obtainedby a general application that the assignee may be- permitted to take steps torecover the debts due to the estate,, nor is the order made by the District Judgethe “ leave of the Court ” contemplated by the section.
The first issue should, in my opinion, have been answered in the negative,and if the ruling in the case of Phebus v. Fernando1 is followed, the plaintiff'saction must fail. In that case the assignee of a legatee sued the executor ofthe testator’s estate to recover the amount of the legacy without applying foror obtaining the leave Of the Court to bring the action and succeeded in theDistrict Court.
In appeal Burnside C.J. said, “ There are, in- my opinion, several objectionsfatal to this action, but I shall content myself with deciding the case on onealone ". He then went -on to hold that the assignee was in no better positionto recover the legacy than the insolvent himself and that a legatee cannotsue an executor to recover from him the amount of a legacy unless it is shownthat the executor has so dealt with the corpus of the legacy as to make him apersonal debtor to the legatee, whi(jh. was neither alleged nor proved. Hewas of opinion that the action must fail on-this ground alone, but added that“<even if that defect did not defeat the action, by section 82 of the Ordinance,before an assignee can commence an action which an insolvent might havecommenced, he must have first obtained the leave of Court to do so. The
11 C. L. R. 26.
Kanagaratne v. Yapa.
assignee’s title therefore to sue depends upon leave obtained for the purpose,and not upon the fact that he is the assignee, and his title must be alleged inthe pleadings. The allegation that he is an assignee standing alone is thereforevalueless. It was urged that the defendant should have taken the objectionby plea or demurrer. No doubt it would have been better if he had, but thefact that he has not done so cannot give plaintiff a right which the statuteexpressly takes from him. The prohibition is a negative one: “ he shall notsue without leave ”. The objection is not a mere defence : it takes away thelocus standi of the plaintiff to sue altogether. The action must be dismissedwith costs
Dias J. held that the plaintiff had no status and this was a defect whichcould not be waived even if the defendant wishes to do so.
I think I am bound by this decision, particularly as the judgment of Dias J.indicates that his decision is based on the fact that the assignee had broughtthe action without the leave of the Court.
1 am, however, of opinion with due deference that the learned Judges havegiven greater effect to the provisions of section 82 than was intended; andmy opinion is supported by the two English authorities cited by respondent’scounsel.
The first case (Lee and others v. Songster and another *) was an action by theassignees to recover from the defendant a debt due to the bankrupt, whichcommenced without the leave of Court as required by section 153 of theBankruptcy Act (12 & 13 Vic. c. 206). On November 18 the defendants wereserved with a summons from the Commissioner to appear before him onDecember 2 ; on the same day they paid the assignees the amount of the debt.Thereafter a summons was taken out to stay proceedings.
The assignees showed cause and contended, and succeeded in the contention,that the only persons who can take advantage of section 153 are the creditors.
Section 82 is a verbatim reproduction of section 153 of the English Act.
The judgment of the Court consisting of Cockburn C.J., Crosswell, Williams,and Crowder JJ. was delivered by Williams J. After stating the argumentsof Counsel he said “ On consideration, however, we are satisfied that thestatute intended to make the obtaining of the requisite leave a matter onlybetween the assignees and the Court of Bankruptcy, and not at all betweenthe assignees and the other party to the suit. The enactment, it must beobserved, extends to the defence by the assignees of actions which thebankrupt might have defended, as well as to the commencement andprosecution of actions which he might have commenced and prosecuted. Andif the assignees were to defend such an action, without having obtained theleave of the Court of Bankruptcy, it is difficult, if not impossible, to suggesthow the Court of common law in which the action was pending could interferewith the defendant’s proceedings. If the assignees neglect to obtain therequisite leave to sue or defend, the act provides that the costs to which theymay be put shall not be allowed out of the bankrupt’s estate; and the Courtof Bankruptcy may, it should seem, under the general powers conferred by .the act, make such orders on the assignees, with respect to the cause, as theCourt may deem right. But it appears to us that no recourse can be had tothe Court of common law in which the cause is pending. We, therefore,think this rule must be discharged, but without costs ”.
In the second case (In re Branson, ex parte The Trustee *) the trustee, withouthaving obtained the consent of the committee of inspection! as required bysection 57 of the Bankruptcy Act of 1883 (46 & 47, Vic. c. 52), moved for anorder that the debtor’s solicitors should deliver up to him all books, papers,and documents in their possession belonging to the bankrupt and for a cashaccount showing their dealings for and on behalf of the bankrupt and fordelivery of all their bills of costs. Section 57 provides that “ the trustee may,with the permission of the committee of inspection …. bring,institute, or defend any action or other legal proceeding relating to the1 (1857) 26 L. J.-C. P. 151.2 (1914) 2 L. R. K. B. 701’.
Kanagaratne v. Yapa.
property of th«> bankrupt Objection was taken to the motion on theground that this permission had not been obtained. In support of the objectioncounsel relied on section 15, sub-section (3), of the Bankruptcy Act of 1890,which says that the sanction required under section 73 of the Bankruptcy Actof 1883 for the employment of a solicitor “ must be a sanction obtained beforethe employment, except in cases of emergency, and in such cases it mustbe shown that no undue delay took place in obtaining the sanctionHorridge J. held that "Section 22, sub-section (9), and section 57 of theBankruptcy Act, 1883, and section 15 of the Bankruptcy Act, 1890, whichrequire a trustee in bankruptcy, before taking any proceedings or employing asolicitor, to obtain the sanction of the committee of inspection or of the Boardof Trade, are provisions for the protection of the estate, as between the trusteeand the estate, on matters relating to his costs, .charges, and expenses, andafford no defence to any proceedings which the trustee, without such sanction,may institute against other parties
In view of these decisions I am of opinion that the ruling in the case ofPhebus v. Fernando (ubi supra) should be reconsidered, and I reserve this casefor consideration by a fuller Bench.
Choksy (with him D. W. Fernando and B. P. Peiiis), for defendant,appellant.—No application has been made for permission as contemplatedby section 82 of the Insolvency Ordinance. “The failure to get per-mission takes away the locus standi of the plaintiff altogether.”—PerBurnside C.J. in 2 C. L. Rep. 26. The action cannot be maintainedwithout an express averment that sanction has been obtained. Theassignee would not be entitled to his costs if he has not obtained suchsanction.
If the assignee obtained leave of Court to defend, then the claim ofplaintiff would be binding on the estate. Plaintiff would then be entitledto issue writ and seize property of the insolvent in the hands of theassignee for his claim and costs. Where the assignee does not apply toCourt for such leave, then the plaintiff can ask that defence be struck?out and get judgment entered against the insolvent estate.
From sections 70 and 71 of the Insolvency Ordinance it can be saidthat an assignee of an insolvent is a representative and not a trustee.It cannot be said that where he obtains sanction of Court an assigneesues in a representative capacity, and where he sues without such sanctionthen he does so in his personal capacity.
Section 82 is designed not only to protect the defendants, but also theinsolvent estate. The law, while vesting the assignee with the rightto the recovery of the debt, controls the method of exercising this right.There is an implied distinction between section 82 of the local Ordinanceand section 153 of the English Bankruptcy Act.
The construction to be placed on the words ** but not otherwise ”in section 9 of the Matrimonial Causes Ordinance, No. 15 of 1876, hasbeen considered in Marie Cangany v. Karuppasamy Chetty
H. E. Amerasinghe, for plaintiff, respondent.—Whether assigneeobtains leave of 'Court or not, he is the only person liable for costs.There is always a personal liability for costs, with a chance of re-imbursement—see Ramen Chetty v. Munasinghe et ai *.
The case of Lee v. Sangster * has been followed in Dublin City Distillery,Ltd. v. Doherty *—a case based on Statute 8 Edw. VII. c. 69, s. 151.
i10 N. L. R. 87.• • ® (1857) 26 L. J. C. P. 151.
s * f*» o4r< (1914i A n cooimo swA «4.9
AKBAR J.—Kanagaratne v. Yapa.
In construing an Ordinance which is in the same terms as an ImperialStatute, the Supreme Court here has to follow the decisions of the EnglishCourt of Appeal—see Trimble v. Hill1, which has been followed in a localdecision reported in 25 N. L. R. 13 at p. 22.
Cur. adv. wit.
December 17, 1934. Akbar J.—
This case has been reserved for consideration by a Bench of threeJudges by my brother Maartensz, who has set forth fully in his judgmentthe point for decision and his reasons for the reference. The only pointit seems to me which has to be decided by us is the question whether theruling of the Supreme Court in Phebus v. Fernando 1 was correct. In thatcase the assignee of an insolvent legatee sued the executor of the testa-tor’s estate to recover the amount of the legacy without applying foror obtaining the leave of the Court to bring the action. It was heldby the Supreme Court in that case that the assignee had no " title ”(according to the Chief Justice) or " status ” (according to Dias J.) tosue until and unless he had obtained the leave of the Court to sue undersection 82 of Ordinance No. 7 of 1853. The relevant portion of section82 is as follows : —“ The assignees, with the leave of the District Courtfirst obtained, upon application to such Court, but not otherwise, maycommence, prosecute, or defend any action which the insolvent mighthave commenced and prosecuted or defended, and in such case the coststo which they may be put in respect of such action shall be allowedout of the proceeds of the estate and effects of the insolvent
In the English case of Lee and others v. Sangster and another3 where anexactly similar section (section 153) of the Bankruptcy Act (12 & 13Vic. c. 106) had to be interpreted, a Bench of four Judges came to theconclusion that the obtaining of the requisite leave was a matter whichaffected only the assignee and the Court of Bankruptcy and was not- one which affected the assignee and the other party to the suit.
In my opinion the ruling in this case seems to be the correct one andshould be adopted by us. In the first place the English case was notcited to the Judges who decided the case of Phebus v. Fernando (supra).In the second place it was held by the Privy Council in Trimble v. Hill *that in construing an Ordinance which is in the same terms as an ImperialStatute this Court is under an obligation to follow the decisions of theEnglish Court of Appeal (see also The Government Agent, WesternProvince v. Kalupahana*.)
If the section is interpreted in the sense contended for by the appellantone can conceive of a case where an assignee will be in a position to defeatthe. just claim of a plaintiff in an action which was commenced againstthe insolvent before the insolvency proceedings and which is continuedafter adjudication.
As stated by Wood-Renton J. “ the effect of section 82 of the InsolventEstates Act, 1853, is to render the assignee primarily liable for the costs of
i (1879) 5 A. C. 342.3 (1857) 26 L. J. C. P. 151.
* 1 C. L..R. 26.* (1879) 5 A. C. 342.
* 25 .V. L. R. 22.
AKBAR J.—Veeravagoopillai v. So;bo.
any action which he institutes or defends with the leave of the Courtsubject to a right on his part to have such costs allowed out of theinsolvent’s estate”. (Ramen Chetty v. Munasinghe and others)
The words “ but not otherwise ” in section 82 are meant, I think, to referto the words ” first obtained The appeal therefore fails and is dismissedwith costs.
Drxeberg J.—I agree.
Poyser J.—I agree.
KANAGARATNE v. YAPA