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1900.Sept. 27,October 19,and
Re Insolvent Estate of H. G. ANDRIS.
D. C., Colombo, 2,001.
Insolvency Ordinance, No. 7 of 1853, as. 6, 93, 110—Proof of claim—Right
of insolvent to object to claim and appeal against order attorning it.
The right of an ineolvent to object to a claim preferred ie dependentupon his showing that he will be materially prejudiced in regard to hi3allowance or surplus of assets.
S a creditor of the insolvent, one J. E. Aserappa, sought to
prove his claim for a sum of Rs. 21,950.94. The insolvent
admitted the claim to the extent of Rs. 3,487.46, and, uponaffidavit filed, moved that he be heard before the Court acceptedthe said claim. The Court disallowed the motion and accepted theclaim in toto.
The insolvent appealed.
Morgan de Saram, for appellant.—The insolvent appealsagainst the order which admitted a creditor’s claim withoutgiving an opportunity to the insolvent to be heard. [Browne,A.J.—Has the insolvent any right to object to the proof of anyclaim?] Section 93 of the Ordinance No. 7 of 1853 enables himto do so. He is a -necessary party to the insolvency proceedings,notwithstanding the appointment of a provisional assignee (Arch-bald's Bankruftcy, p. 193). He has the right to cross-examine a
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creditor. In D. C., Colombo, 1,762, re insolvency of Buchanan &Bois, the practice followed by the District Court was the rule nowcontended for by the insolvent. Under section 6 of the Ordinance,an order like the one complained of is appealable. Zilva’s case(D. 0., Colombo, 1817), decided in appeal on 25th October, 1895,shows that a creditor or assignee cannot appeal against an orderallowing a claim, for their remedy was under section 110 of theOrdinance. But the insolvent has no remedy under that section,and every claim proved would affect him personally in regard tohis allowance or the surplus of assets.
H. J. C. Pereira, for respondent.—The Court below has notpronounced an order or judgmnet, and therefore no appeal lies.Besides, the admission of proof is an ex parte proceeding, andthe insolvent has no right of appeal. He can appear only whenan order affects him personally. In all other matters the voiceof the assignee is dominant. It is true that the insolvent has theright of cross-examination, but as the estate has yet to vest in theassignee the insolvent can speak only through the assignee, whenappointed, in regard to proof of claims. The proper procedure isto move under section 110 of the Ordinance that the claim beexpunged.
Margan de Saram replied.
Cur. adv. vult.
19th October, 1900. Moncreiff, J.—
We have to determine whether the insolvent in this case has anyright to ask this Court to expunge a creditor’s proof, which wasallowed by the District Judge. We find in the District Judge’sjournal on the 2nd August, 1900, the date of the first meeting ofthe insolvent’s creditors. The following is the entry:—“Case
“ called. Insolvent present. Advocate de Saram for him
“ Mr. Alexander Silva proves claim of J. E. Aserappa & Co. for“ Rs. 21,950.94. Mr. Saram will not accept this, except to the“ extent of Rs. 3,487.46. I admit the whole claim."
According to the appellant he was not allowed to contest theclaim. He says that he had a right to do so, and asks that theorder of the Court below be reversed.
It is said that there was no judgment or order. I cannot agree.The admission of the debt converts it into a judgment debt (Ordi-nance No. 7 of 1853, section 152), so I apprehend there can belittle doubt upon that point.
Then It was urged that the insolvent had no right to intervenein the matter because he had no personal interest in- it. But it wasdecided (Re Petit, Fonblanque B. 0. 6) that a bankrupt under the
1900.Sept. HI,October 19,and!
1900.Sept. 27,October 19,and
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English Act of 1849 had a right to cross-examine upon a proof..In Griffith on Bankruptcy (Ed. 1869, p. 720) occurs the followingpassage:—
“ If a proof is disputed, evidence upon it is subject to the same“ rules of evidence as would be applicable on an action or suit for“ the same demand. Thus, any of the credtors and even the“ bankrupt himself may object to a proof.”
i cannot believe that this right of cross-examination is general.
I understand it only to exist where the insolvent has a directpersonal interest in the matter—for example, where his surplus orallowance is concerned. And I imagine that the admission of asum of Rs. 18,000 would in general affect his allowance or hissurplus.
We were referred to a case (No. 1,817, D. C., Colombo, Insolvency)in which the Chief Justice and Withers, J., held that assignees,even when they had taken part in discussing proof, could notappeal from the District Judge’s decision. The reasons given bythe Court were (1) that the remedy of the assignee was containedin section 110 of the Insolvent Estates Ordinance (No. 7 of 1853);(2) that the assignee was bound to assist the judge, and that if hetook part in the cross-examination, it was not in the capacity of alitigant. For the first of these reasons creditors have no right ofappeal. They must proceed under section 110. But the insolventis in a very different position, and he has no remedy undersection 110.
Then it was Baid that the admission of proofs was an ex parteproceeding, and that the insolvent could have no right of appealfrom the Judge’s ruling, that a claim against his estate amountingto more than Rs. 20,000. but of which he only admits Rs. 3,487.46to be due, may be passed and converted into a judgment debt, notonly without the existence of any right of appeal, but without anyright to contest it on the part of the debtor. But is the proceedingex parte ns regards the insolvent? Surely the answer to thatquestion depends upon whether the insolvent is a litigant. He wasobliged to be present at that, the first-, meeting of creditors; andalthough his presence was not necessary at the following meetings,lie had a right to attend them if he chose, whilst he required nonotice of them if he was a litigant party. It seems to me that thequestion is, Was the insolvent present as a litigant? No assigneehad as yet been appointed; he was represented by counsel, and hehad a right within certain bounds to cross-examine the creditorswho proved their debts. What does this right signify? Not thathe was t-he.re, like the assignee, simply to assist the Court; nor thathe was called upon by the Court for assistance under the powers
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contained in section 93. He was there with a right to cross-examine. Persons who are not parties—such as, for example, triepublic prosecutor on the hearing oi election petitions in England—are allowed by the Court to cross-examine; but I can think of nocase in which a person who is not a party and a litigant has a rightto cross-examine.
In the case of a disputed proof under the Bankruptcy Act of1849 the creditor was cross-examined by the solicitor for theassignees. The bankrupt’s solicitor then proposed -to cross-examine.This being objected to, the Court held that “ the bankrupt has aTight to cross-examine as to a proof, more particularly as under thenew statute debts proved under a bankruptcy may have the forceof judgment debts ” re Petit, Fonblunquc B. G. 6.
This ruling was given in 1849, and it is cited twenty years laterin Griffith on. Bankruptcy (Ed. 1S69, p. 720) as being a correctstatement of the case.
Now, by section 6 of the Insolvent Estates Ordinance, everydecision and order of the District Court under that Ordinance issubject to an appeal to the Supreme Court. I have already statedthat in my opinion there was in this case an order or decision ofthe District Court, and that I am unable to conceive the existenceof a person who has a right to cross-examine and who is not alitigant party. If the insolvent is a litigant party, he certainlyhad a right to appeal from the District Judge's order, at leastwhere he has a direct personal interest.
It appears from a case reported in 1838 (ex parte Pitchforth, 3Deacon, 487) that under the 6th Geo. IV., c. 16, the bankrupt hada right to petition (i.c., appeal to) the Court for the expunging ofa debt proved by a creditor, provided tlmt the admission of thedebt was calculated to affect the surplus or the allowance of thebankrupt. Section 60 of that Act, like section 110 of our Ordinance,gives to the assignee, or two or more creditors, power to apply fortho expunging of proofs. In that case Sir John Cross requiredthat the bankrupt should state tlmt his surplus or allowance wasilkely to be affected.
Perhaps the insolvent should have made some such avermentin this case. If so, I think that lie ought to have an opportunityof amending his petition. On the understanding that that isdone, I should be disposed to allow him to go into the merits ofthe appeal. If he does not do so within n fortnight, he ought tolose any right of appeal he may possess.
Since, at all events, the time of Mr. Ferdinands, D. J., it hasalways been the practice in the District Court of Colombo, when
1900.Scpl. 27,October 1.9,and
Sept. 87,October 19,and
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a creditor tenders proof of a claim and an insolvent is present, toask the insolvent whether he admits the amount to be correct.Seldom, if ever, has there been a dispute.
In the present case, however, the insolvent desired to disputethe amount, but the learned District Judge intimated to him thathis proper procedure to do so would be to have the claimexpunged under section 110 of Ordinance No. 7 of 1853. Possiblyhe had in mind the decision of this Court in 1817, InsolvencyD. C., Colombo (S. G. M., 25th October, 1895), that there is noappeal open to a creditor or assignee against a proof allowed undersection 93, for that the procedure under section 110 is open tothem. But if he did, he forgets that such proceedings undersection 110 are not open to an insolvent. To him, however,the proof of a creditor’s claim may mean that there is enteredagainst him the proof of a debt due by him, of which proof thecreditor can, under the conditions prescribed in section 152,obtain and enforce a warrant for his arrest and detention forsix months, so that without right of appeal he would be withoutremedy were judgment so entered against him for a sum in excessof what he truly owed. Doubtless the contingency in which thereduction of the amount proved to a sum under Bs. 100 wouldprevent arrest may be so infrequent that it may be considered tobe almost non-existent, yet in principle I consider no debtorshould have judgment entered against him without his havingopportunity to be heard.
In that view we can understand bow it may have beenconsidered right in the re Petit, Fonb. 6, and apparently in pro-ceedings under section 164 of the Act of 1849 (12 and 13 Viet,c. 106)—section 93 of our Ordinance—that the insolvent shouldbe allowed to cross-examine a creditor. This, as Messrs. Griffithand Holmes remark (Ed. 1869, p. 720), was before the subsequentBankruptcy Act (24, 5 Viet. c. 134, section 148), which empowersthe Court on the application of the assignee, a creditor, or theinsolvent, or mero motu, to examine on oath any person whotenders or who has made a proof. The same writers show thatthe Court may, after hearing evidence and notwithstanding theoath of the party tendering proof, reject the proof or admit itonly as a claim from which orders the only remedy is by appeal.
This later extension of inquiry into proofs offered of debts Iregard to be only a development of the principle that theinsolvent has a right to be heard against the proof offered ereit is finally accepted, and to appeal from any order thereon. Iwould expet t that in the majority of cases when the Court hasacted on the rule (G. & H., ibid) that it is bound to accept the
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proof on the oath of the creditor, unless there be adverse evidenceor it is attended with circumstances which makes it improper toadmit it, the insolvent, with, as I have said, but very remote ifindeed any prospect of any substantial benefit coming to himselfout of the disputing of the* amount, will be content with the groundhe makes thereby for obtaining his own certificate, especially asagainst any opposition by this creditor, whose claim he disputes.By such cross-examination he will have disclosed to the assignee,the other creditors, and the Court, the true state of his liabilityin such instance, so as to show his own honesty and his dueconformity to the proceedings the certificate whereof he desires.
I would therefore be willing to recognize the right of theinsolvent to be heard in the Insolvency Court itself against theproof of any debt alleged to be due by him, but with the limita-tion that it would be entirely within the discretion of the Court,exercised in regard to the materials placed before it, how far itwould require any further inquiry or evidence ere it should acceptthe proof to be of an amount prima facie due.
At the same time, the possibility of reducing the debt belowBs. 100 being in general so remote, and the material to obtaingrant of certificate of conformity being otherwise adducible,there might not therein appear to be any practical advantage tothe insolvent in the extension of the inquiry beyond the ascer-tainment of what is primd facie due, commensurate with the timeand trouble to the Court and creditor which it might necessitate.As regards, therefore, the preferring of an appeal from anyorder of the Insolvency Court upon proof of a claim, I wouldagree with my brother that the insolvent should show this Courtthere was danger to him that his allowance during the proceedingsor his surplus at their close might be affected if this reduction ofthe proof against himself was not made. No balance sheet has asyet been filed. The claims as yet proved and admitted by theinsolvent amount to Rs. 23,041.56, and the nett proceeds of assetsrealized by the provisional assignee Rs. 882.20. There may befurther claims and assets to be disclosed, and we cannot see forourselves whether any such prejudice is presently possible.
I agree that we should make it a condition precedent to thehearing of this or any such appeal that the petition to us shouldsatisfy us there is danger that the insolvent would be so materiallyprejudiced, and make now the order which my brother hasproposed.
1900.Sept. 27,October 19,and
In pursuance of the order made by the Supreme Court theinsolvent submitted an affidavit wherein he averred that “ by the
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Sopi. 27,October 19,and
'November 1.Browne ,A.J.
“ deletion of the said sum of Bs. 18,462.76 from the aforesaid“ claim, the balance against my estate will be decreased and there“ will be a larger sum to be distributed among my creditors, and“ my estate will be materially benefited by such deletion.”
The Supreme Court, after hearing counsel, held this avermentinsufficient, and refused to entertain the insolvent’s appeal.
M. de Saram, for insolvent, appellant.
H. J. C. Pereira, for creditor, respondent.
1st November, 1900. Browne, A.J.—
The order made by my brother and myself on the 19th ultimomade it a condition, as to the further hearing of this appeal, thatthe insolvent should aver that the admission of so much of hiscreditor’s claim as he disputed was calculated to affect the surplusor the allowance to himself; that is, that he would in all probabilitysuffer pecuniary loss either during the continuance of theinsolvency proceedings by the allowance to him being reducedin amount, or after they were '’’osed by his receiving less surplusassets. The insolvent, however, Juis instead averred only that “ by“ the deletion of the said sum of Bs. 18,462.76 from the aforesaid“ claim the balance against my estate will be decreased and there" will be a large sum to be distributed among my creditors, and“ my estate will be materially benefited by such deletion.” Thisdoes not, to my mind, comply with the requirements of ourorder, and therefore I consider that, he should not be allowed tobe heard further upon his appeal.
I agree. I consider that we are bound by the order made on theprevious occasion when this case was before this Court.