Re A Debtor
[1937] 1 All ER 1No 627 of 1936
(Decision by: Slesser LJ)
Re A Debtor
Court:
Judges:
Slesser LJRomer LJ
Greene LJ
Subject References:
Bankruptcy
Married woman
Debt not in respect of business
Guarantee given in 1933
Payment under guarantee in 1936
Legislative References:
Law Reform (Married Women and Tortfeasors) Act 1935 (c 30) - s 4(1)(c)
Case References:
Morrice v Redwyn - (1731) 2 Barn KB 26; 26 Digest 130, 937
Woffington v Sparks - (1754) 2 Ves Sen 569; Digest Supp.
Re Richardson, Ex p St Thomas's Hospital (Governors) - [1911] 2 KB 705; 5 Digest 673, 5958
Toussaint v Martinnant - (1787) 2 Term Rep 100; 26 Digest 131, 948
Re Mitchell, Freelove v Mitchell - [1913] 1 Ch 201; 26 Digest 128, 915
Batard v Hawes, Batard v Douglas - (1853) 2 E & B 287; 26 Digest 145, 1080
Collinge v Heywood - (1839) 9 Ad & El 633; 26 Digest 241, 1881
Brittain v Lloyd - (1845) 14 M & W 762; 12 Digest 520, 4325
Lampleigh v Braithwait - (1615) Hob 105; 12 Digest 522, 4341
Crampton v Walker - (1860) 3 E & E 321; 26 Digest 138, 1021
Hamilton v Goold - (1839) 1 ILR 171; 6 Digest 40, case c.
Brooks Wharf & Bull Wharf Ltd v Goodman Bros - [1936] 3 All ER 696; Digest Supp.
Angrove v Tippett - (1865) 11 LT 708; 26 Digest 241, 1883
Re Fenton, Ex p Fenton Textile Assocn Ltd - [1931] 1 Ch 85; Digest Supp.
Exall v Partridge - (1799) 8 Term Rep 308; 26 Digest 131, 947
Judgment date: 18 December 1936
Decision by:
Slesser LJ
This case raises a nice question of law. Before the passing of the Law Reform (Married Women and Tortfeasors) Act 1935, a married woman could be made bankrupt only if she were carrying on a trade or business- Bankruptcy Act 1914, s 125-but now, by s 1(d) of the 1935 Act, to which I have referred, a married woman is subject to the law relating to bankruptcy in all respects as if she were a feme sole. By s 4(1), however, it is provided that nothing shall:
- '(c)
- enable any judgment or order against a married woman in respect of contract entered into, or debt or obligation incurred, before the passing of this Act to be enforced in bankruptcy or to be enforced otherwise than against her property.'
In the present case, on 7 September 1933, the petitioning creditor had guaranteed money borrowed from the bank by the debtor. In January 1936, the debtor made default in payment of the amount borrowed from the bank, and the bank called upon the guarantor to pay under the terms of the guarantee. Thereafter, on 21 February, the guarantor discharged the debt due to the bank, and on 20 May 1936, issued a writ against the debtor in respect of the money which had been paid by the guarantor, claiming £523 4s 9d-money paid by the guarantor for the use of the principal. The sum claimed was composed, as to £470, the amount owing under the guaranteed account, and the remainder interest and bank charges. On 28 May 1936, the guarantor obtained judgment by default for this sum, together with costs amounting to some £530 in all. The debtor has failed to comply with a bankruptcy notice in respect of this debt, and the matter now to be decided is whether or not, in the circumstances, she can, on the motion of the petitioning creditor-the guarantor-be made a bankrupt.
The answer to this question depends upon whether under the terms of s 4(1)(c) of the 1935 Act before-mentioned, this judgment against the married woman is or is not in respect of a contract entered into or debt or obligation incurred before the passing of the Act, namely, before 2 August 1935; the guarantee, as I have said, having been given in 1933. On the other hand the date of payment to the bank by the guarantor was 21 February 1936-that is, after the passing of the 1935 Act. The neat problem arises whether in these circumstances, was the judgment of 28 May 1936, given in respect of a contract entered into or debt or obligation incurred before or after the passing of the 1935 Act?
The guarantee, which here must be considered, is in the usual form. The surety undertakes that she will guarantee the bank of payment of, and on demand in writing made pay, all the sums of money which then or thereafter may from time to time become due from the principal, not exceeding £500, and, on this, has to be determined what, in law, is the exact nature of the right of the surety against the principal. There is no doubt that a surety paying a debt is entitled to recover against the principal, as for money paid to his use: Morrice v Redwyn, Woffington v Sparks; in the words of Cozens-Hardy MR, in Re Richardson, at p 709:
'It is settled at common law that, given a contract of indemnity, no action could be maintained until actual loss had been incurred. The common law view was first pay and then come to the court under your agreement to indemnify.'
This is the basis of an implied promise to pay.
As Ashhurst J, says in Toussaint v Martinnant, at p 104,
'There is no doubt but that where a person gives a security, by way of indemnity for another, and pays the money, the law raises an assumpsit.'
And, in the same case Buller J, points out that in ancient times no action could be maintained at law where a surety had paid the debt of his principal, but that now the law raises such a promise where the creditor does not choose to take a security. Parker J, in the case of Re Mitchell speaks to the same effect when he says at p 206:
'Until the surety is called upon to pay and does pay something under his guarantee, there is no debt or right at law at all; until then, a surety's right is confined to a right to come into equity in order to get an indemnity against his liability to the creditor.'
Although no question arises that there is no enforceable debt at law which can be enforced by the surety until the surety, being liable and obliged to pay, does pay the creditor (an event which here happened after the passing of the 1935 Act), it by no means follows that the obligation of the principal does not in appropriate circumstances arise by an implied agreement at the time of the giving of the guarantee that the principal, it and when the guarantor is called upon to pay, will indemnify the guarantor, though the event which gives rise to the enforceability of the promise falls later. Such a request may be "implied by law from the fact of entering into the engagement": per Lord Campbell CJ, in Batard v Hawes, at p 296. It was always within the power of the court in equity to declare a right to indemnity by a guarantor even before the guarantor was called upon to make payment where the guarantor's liability to pay had become absolute. He was entitled to maintain an action against the principal debtor and to obtain an order that he should pay off the creditor and relieve the surety: see Cozens-Hardy MR, in Re Richardson, at p 709; or a declaration that a guarantor was entitled to indemnity could in appropriate cases be obtained.
In the present case, the implied undertaking of the principal debtor to repay the money paid on his behalf to the creditor arose at the time of the guarantee. The contract to indemnify is distinguishable from the cause of action: see Littledale J, in Collinge v Heywood, at p 640. In other cases, it may well be that the implied request which supports the action may arise at a later period; it is a question of fact, but here no request has been or can be suggested other than that which arose at the time of the guarantee. The obligation of the guarantor, though for a time at common law inchoate and unenforceable, had its origin in 1933 before the passing of the 1935 Act.
It follows, therefore, that the contract or obligation in respect of which judgment was given existed before the passing of the 1935 Act, and, therefore, that the married woman debtor, not being a trader, cannot be made bankrupt and that this appeal fails.