was made the settlor was solvent without the aid of the property settled (n). And further, that any covenant or contract made by a trader, in consideration of marriage, for the future settlement on his wife or children of property wherein at the date of his marriage he had no estate or interest, and not being property coming to him in right of his wife—shall upon his becoming bankrupt before such property has been actually transferred or paid pursuant to such contract or covenant, be void against his trustee (o).

Such being the leading rules with respect to what becomes vested in the trustee in right of the bankrupt, it is next to be observed that the bankruptcy being set on foot for the benefit of the creditors at large, it is to them (distributively) that the pecuniary produce in his hands is at length handed over; so that we are now to consider in what manner this result is secured-which leads us to the subject of Audit and Dividend.

The trustee, then, is required to call a meeting of the committee of inspection once at least every three months, and to submit to them a statement of his accounts to be by them audited (p); and after such audit he is further required to forward such statement duly certified to an officer in London, called the comptroller in bankruptcy, on pain of being guilty of a contempt of court and punishable accordingly (9).

He is, moreover, required (under a similar penalty), as often as may be prescribed, and at the least once in every year during the bankruptcy, to transmit to the comptroller a statement showing the proceedings of the bankruptcy in a prescribed form, up to the date of such statement; and it is the duty of the comptroller to examine the statements thus transmitted to him, and to call on the trustee to account for any misfeasance, neglect or omission which he

(n) 32 & 33 Vict. c. 71, s. 91. See Ex parte Dawson, Law Rep., 19 Eq. Ca. 433.

(p) Sects. 20, 55; Gen. Rules, 1870, r. 246; Rules, 1871, rr. 14-16.

(0) Sect. 91.

(2) Sect. 55...

shall detect therein, and require the trustee to make good any loss to the bankrupt's estate thereby occasioned. And if the trustee shall fail to comply with such requisition, he may be reported to the court, and such order obtained against him as the court, after hearing his explanation (if any), shall think just (r).

It forms, moreover, part of the duty of the trustee, from time to time when the committee of inspection so determines, to declare a dividend amongst the creditors (s); that is, to declare what payment shall be made to them out of the balance then at the bank to the credit of the trusteefor he is required to pay in all sums from time to time received by him into such bank as the majority of creditors present at any general meeting shall appoint, and, failing such appointment, into the Bank of England (t). This payment is made, at so much in the pound, to all creditors who have previously proved, or shall then prove, their debts; that is, after making allowance for creditors who are too distant to have had time to establish their proofs, or who may have made claims not yet determined by the court (u).

The payment made by the dividend is made equally, and in a rateable proportion to all the creditors, according to the quantity of their debts, no regard being in general had to the quality of them. Hence judgments and recognizances, and other debts by record or specialty, are all put

(r) 32 & 33 Vict. c. 71, ss. 56, 57; Gen. Rules, 1870, rr. 250, 251; Rules, 1871, r. 9. Independently of these statements the comptroller has power to call on the trustee to answer such inquiries as he may think proper, and may cause him to be examined on oath (sect. 58).

(8) Sect. 41. In the event of the trustee not declaring a dividend for the space of six months, he must summon a meeting of the creditors

and explain the reason. (Ibid.)

(t) Sect. 30. If at any time the trustee keeps in his hands for more than ten days any sum exceeding 50%., he must pay interest on the same at the rate of 201. per cent.; and is liable moreover (unless he can satisfy the court as to the retention) to be dismissed from his office without remuneration. (Ibid.) (u) Sects. 41-43.

on a level with debts by mere simple contract; and equit able are placed on the same footing as legal debts (v).

On the other hand, however, the principle of equality is in some particular cases either wholly or partially departed from. Thus, a creditor, who has a specific security on the property of the bankrupt (such as a mortgage or chattel held in pledge) is entitled, notwithstanding the bankruptcy, either to give up his security and prove for his whole debt; or else to realize such security, or give credit for its value, and to prove and receive a dividend pari passu with the other creditors in respect of any surplus remaining unpaid (x). So a landlord, who, after the commencement of the bankruptcy, distrains for rent on the bankrupt's goods, is entitled to make such distress available for his separate payment to the extent of one year's rent prior to the order of adjudication (y); though for the remainder he must come in pari passu with the rest of the creditors (2). And to this we may add, that a priority is given to parochial and other local rates, and to any assessed, land, property, or income tax due from the bankrupt, to the extent of one year's assessment; and also to what is due as wages or salaries to any of his clerks or servants to the extent of four months and not exceeding 501., or to any of his labourers or workmen, not exceeding two months' wages (a). The debts above specified are to be paid in full if the property of the bankrupt is sufficient, and in priority to all others (b); but with these

(v) As to debts arising on voluntary engagements by the bankrupt, see Ex parte Pottinger, In re Stewart, Law Rep., 8 Ch. D. 621.

(x) 32 & 33 Vict. c. 71, s. 40; Gen. Rules, 1870, rr. 99–101.

(y) Sect. 34. See Ex parte Birmingham and Staffordshire Gas Light Co., Re Fanshaw, Law Rep., 11 Eq. Ca. 615; Ex parte Hill, In re Roberts, ib. 6 Ch. D.

(z) Sect. 34. See Briggs v. Sowry,

8 Mee. & W. 729; Newton v. Scott, 10 Mee. & W. 471; Paull v. Best, 3 B. & S. 537.

(a) Sect. 32.

(b) Ibid. As to the effect of the bankruptcy of an officer of a registered friendly society, having money or property of the society in his possession, see 38 & 39 Vict. c. 60, s. 15, subs. (7).

exceptions, all debts proveable under the bankruptcy are to be paid pari passu.

With regard to the distribution of the bankrupt's assets, it may be observed, in addition to what has already been said, that demands in the nature of unliquidated damages arising otherwise than by reason of a contract or promise are not proveable in bankruptcy (c); and that no person having notice of any act of bankruptcy available for adjudication against the bankrupt, can prove for any debt or liability contracted by the bankrupt subsequently to the date of such notice having been received (d). But, with these exceptions, all debts and liabilities, present or future, certain or contingent, to which the bankrupt is subject at the date of the adjudication, or to which he may become subject during the continuance of the bankruptcy by reason of any obligation incurred previously to such date, may be proved (e); and where the debt or liability does not bear a certain value, by reason of its being subject to any contingency, or for any other reason, the same shall be estimated by the trustee, and, in case of dispute, according to the order of the court, either with or without the intervention of a jury, and the proof shall be for the sum thus assessed (f). And it may further be observed, that the term "liability" is to include any compensation for work or labour done, any obligation or possibility of an obligation to pay money or money's worth on the breach of any covenant or agreement, whether likely or not to occur before the close of the bankruptcy, and generally any engagement or undertaking to pay money or money's worth, whether fixed or unliquidated, present, future or contingent, and whether capable of being ascertained by fixed rules or by a jury only, or as matter of opinion (e).

(c) See Ex parte Baum, Law Rep., 9 Ch. App. 673; In re Meede, ib. 3 Ch. D. 119; In re Newman, ib. 494.

(d) 32 & 33 Vict. c. 71, s. 31. (e) Ibid.

(f) Ibid. See Ex parte Blakemore, Law Rep., 5 Ch. D. 372.

Where all the bankrupt's estate is not exhausted by the first dividend (as where some of the property has not been got in or remains unsold, no purchaser having yet been found), the like proceedings for the declaration and payment of a dividend, as have been already mentioned, are to be had from time to time, until the whole are divided among the creditors, and a final dividend declared; and if any surplus remains after paying every creditor his full debt, together with the costs, charges and expenses of the bankruptcy, it shall be restored to the bankrupt (i).

Having now given such an account of the existing system under which the law of bankruptcy is administered as is consistent with the limits of this work, we will conclude the chapter by some explanation of an alternative method of proceeding, which, under the name of liquidation (either by way of arrangement or composition), has become of very extensive use, being found in many respects more convenient than a bankruptcy. And we may premise that, although the machinery adopted for liquidation by arrangement differs in some of its details from that which has been devised for a bankruptcy, the principles of the law of bankruptcy, as the general rule, attach to it—it being in particular enacted, that the trustee under a liquidation by arrangement shall have the same powers and perform the same duties as a trustee under a bankruptcy, and that the property of the debtor shall be distributed in the same manner as in a bankruptcy; and that, with certain modifications, the provisions of the Act of 1869, in reference to bankruptcy, shall also apply to the case of a liquidation by arrangement (k).

Under the system which was in force prior to the Act of 1869, it was competent (as we have seen) for a debtor him

(i) 32 & 33 Vict. c. 71, ss. 44, 45. Interest on the debts may be paid by the trustee to the creditors, in cases where it would have been

allowable by a jury, had an action been brought (sect. 36). Vide sup.

p. 96.

(k) Sect. 125, subs. (7).