LIABILITY OF FIRMS AND RIGHTS OF CREDITORS.

New Zealand Herald, Volume XXV, Issue 9030, 17 April 1888, Page 3

LIABILITY OF FIRMS AND RIGHTS OF CREDITORS.

IMPORTANT JUDGMENT. At the Snpreme Court sittings in Bankruptcy jurisdiction yesterday, the important question raised at the previous sitting of the Court was again brought on. In the matter of the bankruptcy of G. S. Jakins and G. V. Jakine, Mr. Coleman moved that the Official Assignee be ordered to admit proof of debt of the Bank of New South Wales. The matter had been argued in some of its phases at the last sitting of the Court, when Mr. Hesketh, instructed by Mr. Coleman, appeared for the Bank of New South Wales, and Mr. Thco. Cooper, instructed by Mr. Cave, for the Official Assignee, and Mr. Alexander for other creditors. Hie Honor now delivered judgment as follows :■ —In my opinion the adjudication of G. S. Jakins, trading as Jakins and Son, was an adjudication in bankruptcy of both the individual and the firm. Whether G. V. Jakins was a-partner of the firm of Jakins and Son is immaterial, or if it were the subsequent adjudication of G. V. Jakins would supply any defect. If G. V. Jakins was a partner in the firm of Jakins and Son, then the Official Assignee was perfectly right in treating the estate in the three-fold manner in which he has done. From the evidence before me it seems to me beyond doubt that G. V. Jakins was an ostensible partner, and I am inclined to think an actual partner, of the firm of Jakins and Son. The facts in this case, so far as ostensible partnership is concerned, are remarkably like, although not identical with, those in ex parte, Hayman (L.R., 8 chap., div. 11). From this it follows that thefpartnei'ship assets must in bankruptcy be first distributed amongst the partnership creditors. If any surplus remains, it must be distributed amongst the separate creditors of the partners, in proportion to the interests of the partners. Then comes the question, who are partnership creditors ? And to that I answer, those creditors who have either in the first instance contracted with the firm of Jakins and Son, or those who, having been creditors of G. V. Jakins or of G. S. Jakins, have accepted the liabibility of Jakins and Son in release of the liability of either of them individually. I eay accepted, for although the contract between G. S. Jakins and G. V. Jakins was, no doubt, that each in turn, as the business was handed over, should be responsible for the previous liabilities ; still, until the creditors assented to that transfer of liability, there was no privity between the creditors and the proposed new debtor. The remarks of Mr. Justice Williams in re Guthrie 2 N.Z.L.R., Supreme Court, 429, are very much to the point. If, therefore, the firm of Jakins and Son, either by renewal of bills given by G. V. Jakins, or by G. S. Jakins, assumed the liability previously attached to the individuals respectively, or if the creditors of G. S. Jakins or G. V. Jakins, by any act, showed their acceptance of Jakins and Son as their debtors, then, in either case, they have a right to prove on the estate of Jakine and Son. If, however, an original creditor of G. S. Jakins, or G. V. Jakins, has not in any way accepted the firm of Jakins and Son as his debtors, then he is only entitled to prove on the individual estate, not upon the joint estate. At present there is not sufficient evinence before me to satisfy me as to whether the Bank has or has not accepted the firm as its debtor, instead of the individual. On that subject I must have more evidence to enable me to determine whether, and to what extent, the bank has a right to prove on Jakins and Son's estate. The further affidavits filed do not satisfy me on the subject, but probably the principles I have laid down now may be sufficient to guide both the Assignee and the bank in determining their respective positions. Mr Cooper said the only question was whether or not the bank haa diβcharged the liabilities of G. S. Jakins and G. V. Jakins, and accepted the liability of the firm of Jakins and Son instead.

Mr. Hesketh said be did not expect that any judgment would have been given today. What was asked at the previous eitting was that His Honor should say whether the case should be tried by evidence on affidavit only, or by viva voce evidence. What he tried to establish was that there was no partnership in fact, and in ostensible partnership, and whether or not the bank had accepted the partnership security. His Honor said it was quite clear from the evidence before him that there was an ostensible partnership ; and then the question came that there was not sufficient evidence to show whether the bank had transferred the liability of an overdraft due by G. V. Jakins, and guaranteed by G. S. Jakins, to the firm. That would altogether depend on the evidence. Mr. Hesketh said since they last met three affidavits had been filed, only one of which, however, touched the point. The first was by the Official Assignee, which, with that filed by Mr. Cave, were very useful, and furnished all the information required, but the third, filed by Mr. Ivey, went to the point at issue. In it he alleged that he did not prove against the firm of Jakins and Son until he had been informed by the Official Assignee that he had created this third estate, and he pointed out that at the meetings of creditors it was always understood that the whole of the estates were to be treated as one. He read the affidavit, including the correspondence which had passed between Mr. Ivey and the Official Assignee, also between Mr. Ivey and G. S. Jakins. His Honour asked how much the Bank's claim wa> ?

Mr. Hesketh replied £3500 in all. Mr. Cooper said they admitted £700 of this, but the balance, the overdraft referred to in the letter, was the overdraft of G. V. Jakins guaranteed by G. S. Jakins, and this had not been transferred to the firm in the books of the Bank.

His Honor said the letter showed the reason why it had not been done. It was an agreement that Jakins and Son would give a cheque for the amount, so as to release G. V. Jakins, and in equity it must be taken that what was agreed to be done was done. It was at the express request of G. S. Jakina that the overdraft was allowed to stand as it was, he undertaking to give the cheque of Jakins and Son upon realising the securities of the barque Notero, which were to be given to the bank as additional security. Mr. Cooper said they contended that it was the bank's own fault that the bank never accepted the condition, and that it was never carried into effect. It was a mere proposal, which had never been given effect to, and evidence would be adduced to prove this. His Honor said that both parties were responsible to the bank, the one as debtor, the other as guarantee, and the bank was asked to allow the overdraft to stand over until certain securities were realised, and then they would give a cheque of Jakins and Son to release the overdraft of G. V. Jakins.

After some further argument, Hie Honor said there was sufficient in the affidavits to satisfy him that the bank knew that G. S. Jakitiß was taking over the liabilities of G. V. Jakins, and assented to Jakins and Son being substituted, and it was clear that the bank would make no objection to such an arrangement, as both the parties were separately liable already, and this made them jointly liable. It seemed to him that although the arrangement for getting the cheque of Jakins and Son was not oarried out, it was a matter of convenience. It was agreed to be done. It was arranged that Jakins and Son were to give a cheque to close the account of G. V. Jakins. Hβ thought, therefore, the bank was entitled to rank as a creditor on the joint estate, but not against the separate estates. Mr. Cooper asked that all costs, those of the bank, the Official Assignee, and Mr, Alexander's clients, should come out of the estate.

His Honor said that the costs must come, not out of the joint estate, but the three estates, and he suggested that counsel should arrange the amount, On the application of Mr. Hesketh, liberty was granted to mention the question of costs again in the event of their not coming to an agreement