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Present: Fisher C.J. and Akbar J.
DORASAMY v. FERNANDO.238—D. C. (Inty.) Kandy, 35,005.
Insolvency—Deed in fraud of creditors—Action to set aside brought byproved creditor—Insolvency Ordinance, ss. 51, 71, and 109.
Ao action may be brought, during insolvency proceedings, by .aproved creditor to set aside a transfer made by the insolvent infraud, of creditors.
PPEAL from order of the District Judge of Kandy.. The factsappear from the judgment.
Weerasooria, for first defendant, appellant.
Navaratnam, for plaintiff respondent.
February 28, 1930. Fisher C.J.—
In this case the plaintiff (the respondent) is n creditor of one deSilva, the first defendant, the appellant, is also a creditor of de Silva,and the second defendant is de Silva’s assignee in insolvency. Theplaintiff prayed for a declaration that a transfer by de Silva in favourof the first defendant be declared null and void .and that the landwhich was the subject-matter of the tranfer should be vested in theassignee and be declared liable to be sold to meet the claims of thecreditors of the= insolvent. The date of the transfer is December
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198011, 1926, and on December 16, 1926, the first defendant filed a
Fisher C.J. petition for the sequestration of the estate of William de Silva in.
consequence of which the latter was declared insolvent. Both the
Dorasamy t appellant and the plaintiff-respondent proved their debts in theFernando * insolvency. On March 18, 1927, the present action was brought.
The insolvent subsequently received a certificate, the issue of whichwas suspended for a period of one year which had expired prior tothe hearing of the action. The only point which has so far beenconsidered by the learned Judge, and the only point for our decisionon this appeal, is embodied in the following issue:" Can the
plaintiff maintain this action inasmuch as the insolvency proceedingsof William de Silva were pending at the date of the institution andan assignee having been appointed in such proceedings ? ' ’
The question whether the decision of the learned Judge, which onthe face of it leaves the action still to be tried, is one from whichan appeal lies was not argued before us, and I do not think it isnecessary to express an opinion on the point.
Clearly the plaintiff has an interest in seeing that all assets whichare available or can be made available for creditors should be got in,and the transfer which is impeached is alleged to have been madewith the intention and to have had the effect of putting the propertyin question out of the reach of the general body of creditors. Itwould certainly seem that the plaintiff has a primd facie right tobring this action, and the question is whether there is anything inthe Insolvency Ordinance which precludes him from exercising it.It was said that the plaintiff’s cause of action, if any, vested in theassignee on his appointment by virtue of section 71 of the InsolvencyOrdinance. In my opinion, an action against a transferee to. setaside the transfer on the ground that the transferor acted fraudurlently is not an action which can be brought by the transferorhimself, and therefore could not vest in the assignee under thesection referred to.
It was further contended for the appellant that the case is coveredby section 109 of the Insolvency Ordinance. I do not think thatcontention can prevail. That section contemplates a claim whichcan be expressed or assessed in money, and that cannot be said ofthe present action.
In my opinion, the reasoning set out by the learned District Judgein his judgment entirely justifies the conclusion at which he arrives.
The appeal is dismissed with costs.
The plaintiff-respondent sued the first defendant-appellant tohave a deed of sale executed by one William de Silva set aside on theground that it was executed in fraud of creditors. This William de
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Silva, it appears, had been declared insolvent and the second defend-ant was appointed his assignee. The case went to trial on certainadmissions and arguments of Counsel, no evidence being led. It.was admitted that William de Silva had been given a certificateof insolvency suspended for one year. The material dates areas follows:—The action was instituted on March 18, 1927; thesecond defendant was appointed assignee on January 28, 1927;the Court issued a certificate of the third class to the in-solvent on August 9, 1928, which was suspended for a year. Thedate of the District Court judgment was October 28, 1929; theplaintiff was one of the proved creditors, and the first defendant-appellant was the petitioning creditor for the sequestration of theinsolvent estate; the impugned deed was executed by the insolvent onDecember 11, 1926, in favour of the first defendant, and the seconddefendant petitioned for sequestration of the insolvent estate onDecember 16, 1926, which is just five days after the execution ofthe deed. The case was decided by the District Judge on a point oflaw, namely, whether the plaintiff can maintain this action inasmuchas the insolvency proceedings were pending and an assignee hadbeen appointed. The District Judge held that the action could bemaintained and he has condemned the first defendant to pay thecosts of contention. The appeal is from this order. The plaintiffin his plaint asked for a declaration that the impugned deed bedeclared null and void and that the land mentioned in the deed be'vested in the second defendant as assignee to be utilized by him tomeet the claims of the creditors. One would have thought that, noobjection could possibly be raised to an action of this sort whichwas brought by a creditor at his' own cost, and risk to retrieveproperty which had gone astray for the benefit of all the creditors,but Mr. Weerasooria has taken certain legal objections. His firstpoint is that under section 109 of the Insolvency Ordinance, a provedcreditor had no right to bring an action in respect of his debt. Butsection 109 refers to a creditor who having already brought an actionagainst the insolvent to vindicate his claim afterwards proves, thesame claim in the insolvency proceedings. Clearly this sectiondoes not apply to this case because the subject-matter of this actionis not identical with the debt which the creditor proved in theinsolvency case. The second point was that under section 51 theseproceedings should have been taken in- the insolvency proceedings.
I do not think, however, that that section lays it down that suchproceedings are to be exclusively brought in the insolvency proceed-ings and no authority has been quoted that it has been so laid down.Qn the other hand, the case of Poulier v. Alles 1 shows that suchactions have been brought in the past. Further, it will be noticedthat section 51 refers to a voluntary conveyance without valuable
• 27 N. L. R. 219
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consideration. It does not appear in this case that the impugneddeed was one which was ex facie executed for no consideration. Atany rate thiB objection was not taken in the lower Court, the onlypoint taken being whether the assignee was not the proper person tosue, as the right of action involved in this case was vested in himunder section 71 of the Insolvency Ordinance. On this point I fullyagree with the reasons given by the District Judge, and I fail to seeany reasonable objection to the manner in which this action hasbeen framed, because the assignee was made a party to this case andthe plaintiff asked for a declaration that the land involved in thedeed be vested in him for the purpose of the insolvency case. Inmy opinion, the appeal should be dismissed with costs in both Courts.