Markus v Czeczowiczka (C.A. 34/1933.) [1937] EACA 34 (1 January 1937)

### COURT OF APPEAL FOR EASTERN AFRICA.

# Before ABRAHAMS, C. J., Ag. P. (Uganda), SIR JOSEPH SHERIDAN, C. J. (Tanganyika), and HORNE, J. (Kenya).

#### OTTO MARKUS (Appellant) (Original Applicant No. 2)

# BRACIA CZECZOWICZKA (Respondent) (Original Respondent). C. A. $34/1933$ .

- Kenya Bankruptcy Ordinance, 1930, section 3 $(g)$ —Acts of bankruptcy—Judgment creditor placing difficulties in debtor's way of satisfying debt—Equitable interpretation of Ordinance. - $H$ cld (10-1-34).—That the bankruptcy notice must equitably be set aside as the respondent has prevented the appellant from discharging the debt found to be due by the former.

Atkinson for Appellant.

### Ross' (Burke with him) for Respondent.

An application was made to the Supreme Court of Kenya by appellant to set aside a bankruptcy notice served by respondent on his firm under section 3 $(g)$ of the Bankruptey Ordinance, 1930. Prior to issuing the bankruptcy notice, debtor had obtained (on 13th February, 1925) a final judgment against the German Government before the Mixed Arbitral Tribunal at Geneva for Sh. $271,227/42$ , including principal, interest and costs. The bankruptcy notice issued in respect of Sh. $231,802/98$ . The debtor in asking that the bankruptcy notice should be set aside relied on In re Sedgwick, 60 L. T. 9. On 26th January, 1925, at the instance of the respondent, the German Courts granted a stop order in respect of appellant's firm's claims against the German Government, and on 12th December, 1932, the appellant's claims arising from the judgment of the Mixed Arbitral Tribunal were assigned to the respondent for collection. The trial Judge found that the failure to pay to the respondent was due to the German Government's contention that the amounts found due were merged in the Dawes and/or Young Plans, and found that there was no sufficient cause to set aside the bankruptcy notice.

From that decision that appeal was brought on the ground, <sup>th</sup>inter alia, that the trial Judge erred in finding (1) that it was not the action of the respondent which prevented appellant from $f$ paying the judgment debt; (2) that it was the German Government which prevented payment owing to the merger of the moneys found due by the Mixed Arbitral Tribunal in the Dawes and/or Young Plans; (3) that the debtor's claims arising in the Mixed Arbitral Tribunal judgment were assigned to the respondent for collection.

Atkinson.—An equitable ground exists for setting aside the bankruptcy notice. If a judgment creditor who issues a bankruptcy notice has by his own conduct prevented debtor from paying, the Court will set aside the notice-In re Sedgwick, 60 L. T. 9: 5 Morrell 262: In re Remson ex varte Greaves (1913). 2 K. B. 300. Respondent has made it impossible for appellant to obtain money from the German Government. The right to that money, which is greater than the amount mentioned in the bankruptcy notice, has been transferred to him. Having failed to obtain that money and deprived appellant of the possibility of. recovering it in Germany, he has issued a bankruptcy notice here.

Ross.—This appeal is from a finding of fact. Bankruptcy Rules, 99-104. No evidence that respondent could recover on the Mixed Arbitral Tribunal claim. No motive for trying to recover in Kenya if recovery in Germany were possible. In re Bond (1911), 2 K. B. 988.

*Burke* (in reply).—There is nothing to show that the German Government is preventing payment. In re Connan ex parte Ryde, 20 Q. B. D. 690. The appellant has no longer any claim. Such claim as he had was taken away in 1932 and vested in respondent.

ABRAHAMS, C. J., Ag. P.—This is an appeal from a decision of Mr. Justice Lucie-Smith refusing to set aside a bankruptcy notice served by the respondent on the appellant.

As the result of a decision of the Court of Appeal for Eastern Africa in June, 1933, the respondent obtained a decree for the payment by the appellant and his partner, Loy, of the amount of Sh. 231,802/98. This was the outcome of a long-standing claim against these parties, and in anticipation of a favourable outcome to litigation the respondent had obtained in the Courts of Berlin on the 26th January, 1925, what may not improperly be described as an attachment before judgment on the sum of Sh. 271,227/42, shortly afterwards found due from the German Government to Messes. Markus and Loy by the Mixed Arbitral Tribunal at Geneva.

On the 12th December, 1932, shortly after the judgment of the Supreme Court, Mombasa, which was varied by the decision of the Court of Appeal above referred to, the respondent obtained in the Berlin Courts a further order prohibiting Markus and Loy from obtaining payment from the German Government of the amount found due to them by the Mixed Arbitral Tribunal, and also transferring their claim to the respondent.

It was argued before Mr. Justice Lucie-Smith that, by the two above-mentioned orders issued by the Berlin Courts, the creditor had prevented the debtor from complying with the notice, and that in obedience to the principles of equity enunciated by the Master of the Rolls (in In re Sedgwick, 60 L. T., p. 9) the bankruptcy notice ought to be cancelled. Concerning this contention; the learned Judge observed as follows: "If the evidence before the Court (that is to say, the proof of the two Berlin orders) stopped there. I should be inclined to agree, but an anxious consideration of the affidavits filed and the exhibits produced makes it quite clear that it is the German Government who are preventing the payment by the contention that the amounts found due by the Mixed Arbitral Tribunal are merged in the Dawes and/or Young Plans.".

Now it is not disputed that certain high officials of the German Government have stated, both to the respondent and the appellant, that Markus and Lov's claim cannot be entertained on account of merger in the Young and Dawes Plans. On the other hand, the appellant has asseverated in his affidavits that Czechoslovakia, of which State he and Loy are now subjects, does not participate in the arrangements made by those plans, and that a German Treasury official admitted this to him, but said that his Government must refuse to pay because other claims of a similar nature would follow. Production before this Court of official copies of these plans shows that Czechoslovakia does not participate.

The question, in my opinion, is this: Has the respondent done all he reasonably can to obtain from the German Government payment of the sum found due by the Mixed Arbitral Tribunal, and which by virtue of the transfer order of the 12th December, 1932, he and he only now can claim? In my opinion, he has not. He says he has approached German officials, to be met with a refusal on the strength of the Dawes and Young Plans: he has approached Austrian officials and the Secretary of the Mixed Arbitral Tribunal, but has met, as one might expect, with the answer of non-competence. He says he has endeavoured to take action in Prague against the German Government, and has been baffled by extra-territoriality. One step, however, he has not taken. He has not resorted to the Berlin Courts. This is obviously the proper authority to decide whether the German Government can lawfully refuse payment, and until the Berlin Courts decide that the two orders issued by them have no validity against the German Government, or until the German Government refuses to respect the decision of its own Courts, in my opinion the respondent has not done all that he can fairly be asked to do to show that it is not he but the German Government that is preventing payment of the decretal amount. In my opinion therefore the appellant is entitled to the assistance of the equitable principle stated by Mr. Justice Lucie-Smith. I would allow the appeal with costs.

SIR JOSEPH SHERIDAN, C. J.—The decision in this case does not turn on the learned Judge having had the advantage of seeing and hearing the witnesses, and this being so, I consider that this

Court is at no disadvantage in approaching the question as to what inference should be drawn from the facts. It was held in the Court below that the German Government and not the respondents were preventing the appellant from paying the debt found to be due to the respondents. This finding was based on the learned Judge holding that the German Government contended that certain amounts found due to the appellant and his partner by the Mixed Arbitral Tribunal at Geneva, which amounts were attached in the Berlin Court by the respondents, were merged in the Dawes and/or Young Plans. The Dawes and Young Plans were not produced before the Supreme Court, but were produced before us. There is nothing in these documents to support any claim in favour of the German Government. Meantime, the respondent has obtained an attachment on the moneys decreed in favour of the appellant and his partner in the Berlin Courts, and it has been argued by Mr. Atkinson for the appellant that this attachment must be presumed to be of some value to the respondent and that its effectiveness as against the German Government must also be presumed, as otherwise why should the German Court make orders firstly attaching the moneys and subsequently assigning them to the respondent?

The respondent not only retains the order of attachment in his favour but subsequent to the judgment of the Supreme Court of Kenya against the appellant and his partner obtained an order from the German Court (Exhibit D to the affidavit of Otto Markus of 28-8-33), the effect of which is that the German Government must no longer pay any part of the moneys attached to the appellant or his partner, that the appellant or his partner must refrain from disposing of or collecting any of these moneys, and finally transferring those moneys to the respondent. The question is whether, these being the facts, the respondent can be said to be preventing the appellant from discharging the debt found to be due by him and his partner to the respondent by the Supreme Court. In my opinion, the one inference to be drawn from the facts is that there is such a prevention on the authorities as to render it inequitable that the respondents should be allowed to serve a bankruptev notice on the appellant, and for that reason I would allow the appeal with costs in this Court and the Court below.

HORNE, J.—Judgments read by Abrahams and Sheridan, C. J. $\Gamma$ agree. Appeal allowed with costs.

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