In Re: Aleixo Conceicao Fernandes (Bankruptcy Cause No. 20/1936) [1936] EACA 143 (1 January 1936)

## BANKRUPTCY JURISDICTION

## Before LANE, AG. J.

## In re ALEIXO CONCEICAO FERNANDES

## Bankruptcy Cause No. 20/1936

Bankruptcy—Creditor's petition—Act of bankruptcy—No stay of execution by reason of order attaching debtor's salary on which nothing has been paid—Receiving order on failure to comply with bankruptcy notice—Bankruptcy Ordinance, 1930, section 3 (1) (g).

**Held** (3-9-36)—(1) That, the existence of an order in favour of a judgment creditor attaching half the debtor's salary each month, on which nothing has been realized or paid, does not act as a stay of execution.

(2) That, the debtor having failed in other respects to comply with a bankruptcy notice, a receiving order could be made against the debtor.

The petitioning creditor had two decrees against the debtor; he had obtained from the Court an order on each decree attaching half the debtor's salary each month; nothing had been paid upon these orders or otherwise in satisfaction of the decrees; the debtor's salary was already attached by other decree-holders and the petitioning creditor would have been obliged to wait for a considerable period before he received anything in order of priority; the petitioning creditor had not in fact moved the Court to serve the orders upon the debtor's employer, consequently they had not been implemented. The creditor issued two bankruptcy notices upon the debtor who took no steps to comply with them by payment or by satisfying the Court that he had any equivalent set-off or counterclaim. The creditor then issued a petition praying for a receiving order; the debtor sought to resist it by arguing that the petition was premature because of the existence of the orders attaching his salary, and that there had been no act of bankruptcy on his part.

Hopley for the debtor.

Phadke for the creditor.

JUDGMENT.—This is a creditor's petition praying that a receiving order be made against the debtor A. C. Fernandes on the ground that he has committed the following acts of bankruptcy, namely, failure to comply with the requirements of two bankruptcy notices served on 29th May, 1936; one notice is exhibited in this file and the other in the record of Bankruptcy Cause No. 1 of 1936. The notices called upon the debtor to pay the amount of two judgment-debts against him due to the creditor, or alternatively to secure or compound them or satisfy the Court that he had a counter-claim or set off sufficient to satisfy the judgment-debts.

It is resisted by the debtor, who admits that the judgmentdebts are still unpaid and due to the creditor, on the ground that the petition is premature and that a receiving order cannot be made because in the two civil cases in the Resident Magistrate's Court, Nairobi, in which the decrees were passed from which the judgmentdebts arise, there are orders stating that half the debtor's salary is

to be attached in execution of the decrees. The cases are Civil Cases Nos. 4483 and 4592 of 1932; the petitioning creditor is the decree-Nothing has been paid upon either decree. holder in each case. There are a number of other decrees in civil cases against the debtor: several of the decree-holders have obtained orders attaching half the debtor's salary each month; under our present law such orders fall to be complied with in order of priority and not by means of rateable distribution; it appears that this petitioning creditor's order of attachment could not be paid off for a lengthy period because of the priority of a number of other creditors' orders.

Several other points have been raised in the debtor's affidavit resisting the petition but it has been agreed that the point whether this petition is premature because of the orders in the two cases referred to be taken on a preliminary point to be decided now.

The decrees in the two cases are dated 6th September, 1934. The creditor on $22-9-34$ applied for the issue of a notice to show cause why the debtor's salary should not be attached. On the hearing of the application on 22-10-34, the creditor asked for the application to stand over, on the ground that the debtor's salary was already attached for a long period in advance; and on 30-10-34 he withdrew the application.

Next on 17-3-36 the creditor caused the issue of a fresh notice to show cause why the salary should not be attached; on 8-4-36 the Magistrate ordered this; in each case the debtor's offer of Sh. 10 p.m. being refused. The creditor has however not caused the order to be put into execution because he has not paid the requisite Court fee in order to have the necessary order made out and served upon the debtor's employer, the Municipal Council of Nairobi. Thus the orders are in abevance. Admittedly nothing has been paid upon these decrees. Half the debtor's salary is being paid into Court in satisfaction of other decrees. There has been no order by the Court staying execution or staying proceedings against the debtor.

Does the existence of these two orders preclude a receiving order?

It has been explained that the creditor's object in taking this step is if possible to secure the inclusion in the bankrupt's estate (should there be one) of any sum of money which the debtor may secure from his present employers in the event of his retiring from his present employment and becoming eligible for some kind of pension; as well as any other assets which may be available.

At the moment the creditor has only the chance of being paid out of the debtor's salary in the distant future, provided of course that the debtor remains in employment.

Section 3 (1) $(g)$ of the Bankruptcy Ordinance provides that an act of bankruptcy has been committed if a creditor has obtained a decree against the debtor, and, execution thereon not having been stayed, has served upon the debtor a bankruptcy notice, and the latter does not comply with the notice or satisfy the Court he has a counter-claim or set-off which equals or exceeds the amount of the judgment debt, and which he could not set up in the action.

The notice has been issued and served and the debtor has not complied with it or satisfied the Court as to any counter-claim or setoff. The decrees were passed and execution on them has not been staved.

There are no exact parallels in English law since the latter has no provision for attachment of salary. It has, however, been held that where execution has issued, as by the issue of a writ of $f_1$ , $f_2$ , by a creditor, and where no goods have been seized under it, a bankruptcy notice may issue before return is made to the writ: Re a Debtor (1902 2 K. B. 260). In fact where the execution proceedings instituted by the attaching creditor have resulted in some thing being attached, a notice cannot issue. Where they have been abortive or ineffective, a notice can issue.

To quote Williams 14th Edition, p. 25, "The words, 'execution thereon not having been stayed' are not confined to cases where there has been an express stay of execution, but exclude all cases where the creditor at the time when the bankruptcy notice is issued is not in a position to issue execution upon his final judgment or order."

In this case the creditor has not applied to the Magistrate to enforce his rights under the order: he has not implemented the order: he could have done so, but the prior attachments by other creditors would prevent anything being realized for a long time to come. It would have been fruitless to attach the debtor's salary at the present juncture.

Has the order of the Resident Magistrate, which has not been implemented by the creditor, the effect of a stay of execution?

The position in regard to attachment of goods by $f_1$ . fa. has already been alluded to. In the case of a garnishee order absolute on which nothing had been paid, and which a creditor had obtained, it was held that a bankruptcy notice could issue: Re Renison Ex parte Greaves (1913 2 K. B. 300). And in the case of a garnishee order nisi, that it did not operate as a stay: Re H. B. (1904 1 K. B. 94).

The test would seem to be, as Mr. Phadke has stated, whether the creditor had in execution done anything which in fact prevented his debtor from paying the debt. This is not the case here.

Does the fact that other creditors had attached the debtor's salary operate as a stay? It has not been argued that it does and I can find no authority to this effect. It is the action of the petitioning creditor which is in point, and the creditor here has not done anything to prevent the debtor paying.

Therefore on the preliminary point raised, I hold that bankruptcy notices rightly issued and that as they have not been complied with, the receiving order can be made. $\cdot$

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