Official Receiver v Barreto (Civil Appeal No. 22 of 1938) [1939] EACA 25 (1 January 1939)

## COURT OF APPEAL FOR EASTERN AFRICA

BEFORE SIR JOSEPH SHERIDAN, C. J. (KENYA), WHITLEY, C. J. (UGANDA) AND SIR LLEWELYN DALTON, C. J. (TANGANYIKA)

## THE OFFICIAL RECEIVER of the Estate of J. Meghji Ahmed and Co. and the Colonial General Stores, Ltd., Appellants (Original Respondents)

versus

## NICOLAU BARRETO, Respondent (Original Applicant) CIVIL APPEAL No. 22 OF 1938

## (Appeal from decision of Lucie-Smith, J. (Kenya))

Effect of bankruptcy on antecedent transactions—Execution of judgment for more than four hundred shillings-Bankruptcy Ordinance, 1930 (Kenya), section 43 (2).

On 13-9-38 a debtor's goods were sold in execution of a decree for more than Sh. 400, which had been passed in respondent's favour. On 14-9-38 a bankruptcy petition was presented against the debtor and on the same day notice thereof was given to the bailiff. On 15-9-38 an interim receiver was appointed and on 4-10-38 a Receiving Order was made on the petition. Meanwhile on 27-9-38 the execution creditor applied for an order for the payment to him of the moneys received by the Official Receiver from the bailiff in respect of the proceeds of the sale in execution. The application. was granted. The Official Receiver appealed.

Held (22-2-39).-That the moneys were receivable and retainable by the Official Receiver as against the execution creditor under section 43 (2) of the Bankruptcy Ordinance, 1930. (Appeal allowed.)

$\mathbf{A}$

Anderson for the appellants.

*Trivedi* for the respondent.

SIR JOSEPH SHERIDAN, C. J.: If as Mr. Anderson cogently argued. the construction contended for by Mr. Trivedi were to prevail, viz. that on execution by seizure and sale being completed the proceeds became the property of the execution creditor as against the trustee in every case then there would be no reason for the enactment of section 43 (2). That section could not be expressed more clearly. It states what is to happen under an execution in respect of a judgment for a sum exceeding £20 and in doing so expressly refers to the proceeds of the sale, the connotation being that execution has been completed by seizure and sale. Applying the provisions of that section to the facts of this case. The goods were sold on the 13th September (completing the execution). Thereafter as the sum exceeded £20 the bailiff had to retain the proceeds for 14 days. On the 14th September a bankruptcy petition was presented and on the same day notice thereof was given to the bailiff (well within the prescribed 14 days).' An Interim Receiver was appointed on the 15th September and a Receiving Order made on the 4th October. Nothing could be clearer than that the case fell within the section and that it was imperative on the bailiff to hand over the proceeds to the Official Receiverthat is the proceeds less his costs of the execution. There is no support whether in the language of the section or on the authorities for

the argument of Mr. Trivedi that the Receiving Order had to be made within 14 days of the sale: vide Latter v. Juckes and Page (1927, 1 K. B. 17). The case of In re Pearce ex parte Crossthwaite (14 Q. B. D. 966) is an authority in point for the decision turned on the construction of section 46 subsection 2 of the Bankruptcy Act, 1883, which for the purpose of this case does not differ in any material respect from section 43 (2) of the Bankruptcy Ordinance. In that case it was decided that "Where the Sheriff sells under an execution for more than £20 and within fourteen days afterwards receives notice of a bankruptcy petition, the effect of section 46 subsection 2 of the Bankruptcy Act, 1883, is not to render the sale absolutely void, but to deprive the execution creditor of the fruits of the sale, and to transfer them to the Trustee in the Bankruptcy for the benefit of the general body of the creditors." And in the Bankruptcy Act, 1869, section 87 in substance enacted the same provision except that the sum was £50 and not £20. The case of Figg v. Moore Brothers (1894, 2 Q. B. D. 690) was cited as an authority in the judgment of the Supreme Court, but it referred to a different set of facts from those in the present case. In that case there was no question of a sale having taken place. The Sheriff had held the<br>goods that were seized in execution for 21 days, this constituted<br>an act of bankruptcy and it was not until 2 days later that the execution was completed when the Sheriff was paid out. It was held that the creditors had notice of this act of bankruptcy and that consequently the execution creditor could not retain the amount of the levy received by the Sheriff when he was paid out against the Trustee. A case of this kind does not fall within the provisions of section 43 (2) which as I have said deals with what is to happen to the proceeds of a sale. To revert to the case of In re Pearce ex parte Crossthwaite (supra) the words of Cave, J. at page 972 of the report sum up the meaning of section 46 (2) of the 1883 Act (section 43 (2) Kenya); they are "Where the judgment is over £20 the Legislature has thought fit to take from the execution creditor the benefit of the execution and give it to the creditors at large". Lord Cairns in Ex parte Villars in re Rogers (L. R. 9 Ch. 432 at page 444) with reference to section 87 of the 1869 Act which is in substance the same as section 43 (2) said, "The Act of 1869 has expressly provided by the 87th section that in the case of such a sale the Sheriff is to hold the proceeds of sale in his hands for fourteen days, and if he has notice during that time of a bankruptcy petition presented against the trader he is to hold the proceeds, after deducting expenses for the trustee in bankruptcy, and it is only in cases where during these fourteen days he has no such notice, that he may at the end of the time hand over the proceeds to the execution creditor". Mr. Trivedi made a final effort to support the judgment by referring us to the case of $Re$ Andrew, Official Receiver $v$ . Standard Range Foundry Co. (1936, 3 All. E. L. R. 450), but a perusal of that case disclosed that it dealt with a completely different point.

I would allow the appeal with costs in this Court and the Court below in favour of the Official Receiver and set aside the order for costs made against the Colonial General Stores, Ltd. The order for costs should not have been made against them in any event as. they were wrongly joined, a receiving order having been made against the debtor.

WHITLEY, C. J.: I have had the advantage of reading the judgment of the learned President with which I am in entire agreement. This case seems to fall exactly within the provisions of section 43 (2). There has been an execution in respect of a judgment for over Sh. 400, the goods of the debtor have been sold; within 14 days notice was served on the bailiff of a bankruptcy petition having been presented against the debtor and a receiving order was made against the debtor on that petition. All the requirements of the subsection have thus been complied with and accordingly the bailiff must pay the balance, after deducting his costs of the execution, to the Official Receiver who is entitled to retain it as against the execution creditor.

The way in which Mr. Trivedi seeks to take the case out of this subsection is by arguing that section 42 must be read as introducing an exception to section $43$ (2). The answer to this contention would seem to be that if such had been the intention of the Legislature it would have been a simple matter to have added words to that effect. In the absence of any such words of limitation it seems to me that the only reasonable reading of the two sections is to treat section 42 as laying down a general rule as to what a creditor must do in order to retain the benefit of an execution and section 43 (2) as going on to provide specific consequences which shall ensue where an execution has been in respect of a judgment for over four hundred shillings. Such is the view which has been taken by the Courts in England when construing the corresponding sections of the Bankruptcy Act and the law must in my opinion clearly be the same in this Colony. I agree with the learned President that the cases relied upon by the respondent in the Court below turn upon different sets of facts. I would allow the appeal and agree with the proposed order as to costs.

SIR LLEWELYN DALTON, C. J.: I concur and have nothing to add.