§ 55. Comparison of law. Onslow v. Corrie. Wilkins v. Fry. Trustee may assign to pauper. ought to be paid (q); but the important word "rent" has not found a place in the paragraph by express reference, although so much turns upon the liability to pay rent (r). Land of any tenure burdened with onerous covenants. Many of the Acts, earlier than the Act of 1869 (s), contained special provisions in reference to the case of a bankrupt tenant, but the material difference between the former Acts and the Act of 1869 was that, whilst under the former Acts a lease involving obligations which might exceed in value the benefits to be derived from it, did not vest in the bankrupt's assignees until they did some act manifesting their acceptance, under the Act of 1869, all leases whatever, together with the rest of the bankrupt's property vested in the trustees until they did some act manifesting their disclaimer (t). And even so as to render the trustee, in the absence of such valid disclaimer, personally liable for the rent accruing due after his appointment, and on the covenants of the lease (u). But upon his executing a valid disclaimer it related back to the date of the adjudication to relieve him of liability, unless his occupation was beneficial, but the trustee could assign over. In Onslow v. Corrie (x), which was a case decided under 49 Geo. III. c. 121, s. 19, it was held (and the decision seems not to have been questioned) (y), that the assignees of a bankrupt having elected to take to the lease, like any other assigns might assign over to a pauper. And in Wilkins v. Fry (2) this principle was followed. The M.R. in that case said: "With respect to assignees in bankruptcy, they do not obtain the property of a bankrupt by any contract between them and the bankrupt, they take it by the operation of law, and enter into no covenants to indemnify the bankrupt against the covenants (q) The Court under rule 28, could on giving leave impose conditions, such as the payment of the rent in full up to the date of disclaimer. Ex parte Ladbury, supra; but see Ex parte Isherwood, infra. () And see sub-s. 5, 6, and 7. Rule 28 of the 1869 Act, was held not to have applied to a lease of personal chattels (Sheffield Waggon Co. v. Stratton, 48 L. J. Q. B. 35; 27 W. R. 120, C. B.), such lease not being a leasehold interest." (8) See 49 Geo. III. c. 121, s. 19; 6 Geo. IV. c. 16, s. 75; 12 & 13 Vict. c. 106, s. 145; 24 & 25 Vict. c. 134, s. 131. (t) Woodfall's Landlord and Tenant, 12 ed., p. 252. (u) Wilson v. Wallani, 5 Ex. D. 155; 49 L. J. Exch. 437; 42 L. T. 375. (x) 2 Mad. 330. (y) See Woodfall, L. & T., 12 ed., p. 255. (z) 1 Mer. 265. in his lease. They may waive his leases, and so not become liable to the landlord at all; they may take to them subject only to such liability as attaches upon all assigns, that is, a liability to be sued on such covenants as bind assigns during the time they retain that character; but when they cease to retain it, their liability ceases, the privity of estate, which alone makes them liable to be sued, being determined. The assignees, therefore, of a bankrupt, after they have parted with the possession of their lease, are not liable to be sued at all, they stand in no need of an indemnity, and there is no principle on which they can require it from the vendee of their estate." But where the lease was deposited with an equitable mortgagee, the trustee was held not to be entitled to disclaim so as to prejudice the mortgagee; but on the other hand, if he assigned the lease to the mortgagee he was entitled to be indemnified (a). And so it seems that under the Act of 1869, and notwithstanding the spirit of Sects. 23 and 24, the rule above laid down was the same, although it often did result in great hardship upon the landlord where the trustee occupied for a time and then assigned over (b). § 55. claim. re Solomon. The principle laid down also (c) that where a trustee is called When trustee upon to decide whether he will disclaim a continuing contract does not disof the bankrupt and does not disclaim it, but carries it on for the benefit of the estate, and is still at liberty, when he finds it unprofitable to cease to perform it, leaving the other party to the contract to his right of proof for damages, has been held inapplicable to the case of a lease, so in Ex parte Dressler, re Ex parte Dressler, Solomon (d) it was held that a trustee who takes actual possession of leasehold property of the bankrupt and does not, when called upon by the landlord to disclaim, do so, is personally liable for the rent which accrues due after he takes possession, and the right of proof which the landlord had was only as to the proportionate part of the rent due up to the date of the adjudication, but did not relieve the trustee from his personal liability. "They are liable," said James, L.J., "as assignees of the estate, to pay the rent, and as between themselves and (a) Ex parte Buxton re Muller, 15 Ch. D. 289; and see Re Wilson, L. R. 13 Eq. 186; and as to applications by mortgagees, see Ex parte Woods re Ditton, 3 Ch. D. 459. (b) Woodfall, L. & T., 12 ed., p. 254. This principle as to the trustees' right to assign over has again (c) Ex parte Davis re Sneezum, 3 § 55. Three months now limited. the landlord they are personally liable, though they are entitled to any indemnity out of the debtor's assets, and no injustice will be done to them, for they ought to have retained out of the assets a sum sufficient to answer the rent." "A trustee," said Brett, L.J., "ought to make up his mind speedily whether he will disclaim a lease or not." Referring also to the words "lands of any tenure burdened with onerous covenants," Jessel, M. R., said: "They apply not only to ordinary leaseholds, but they will include also freeholds, subject to perpetual rentcharges, which are common in the north of England (e). By the present Act a limit of three months has been fixed as the period within which the trustee is to disclaim (and apart from any request which the lessor may make, under the 4th sub-s. of this section). It is submitted that the effect of his not electing to disclaim within the statutory period of three months will only be evidence of his having elected to hold until the determination of the lease, and subject to all its liabilities and obligations; for under the Act of 1869 it was clear that if not called upon to elect whether he would or would not disclaim (as in Ex parte Dressler), his personal liability for rent was theoretically the same, that is, it continued till the end of the lease (ƒ), with this distinction, that he could under the Act of 1869, terminate the liability at his pleasure, for he could (if not called upon to disclaim), execute the disclaimer at any time (g). It will henceforth be a question to be decided, if the doctrine in Onslow v. Corrie be still law (viz., that a trustee can relieve himself from liability by assigning the lease over to a pauper on finding it to be unprofitable), whether the effect of the three months' limit, for the first time introduced into the section, will be to make the trustee liable at all events, and whether he assigns over or not after the expiration of such three months. It is submitted that the effect of this limitation should not be to place the trustee in a worse position than an assignee by contract, who clearly could relieve himself of liability by such assignment over, and that the intention of the framers of the Act has been to limit a time (apart from any act of the lessor), within which it will be manifest that the trustee has elected to take to the lease as a statutory assignee, and that his right exists, whether before or after the three months have Dressler, supra. (e) Ex parte Walton re Levy, 17 Ch. D. 746. (f) See Brett, L.J., in Ex parte (g) See Woodfall, L. T., 12 ed., p. 255. expired to assign his interest over, and to relieve himself as such assignee of all liability (h). lease. § 55. Smyth v. As to the rights and liabilities of third parties arising out of Rights and such disclaimer, and statutory surrender of the lease, there have liabilities of third parties. recently been some most important decisions, which, notwithstanding the more elaborate provisions of this Act in respect of such third persons, may tend to throw some light upon this section. In Smyth v. North (i), for instance, Barons Martin Assignee of and Pigott (Baron Bramwell dissenting), were of opinion that when the original lessee has assigned his lease and the assignee North. becomes bankrupt, not only might the lessor sue the original Bankrupt lessee for rent payable under a covenant (so far as it was due assignee. before disclaimer though after adjudication) (k), but even for rent due after the disclaimer by the assignee's trustee, and that Sect. 23 of the 1869 Act did not apply to cases in which the lease had been assigned and the assignee had become bankrupt (1). At common law the voluntary surrender of a lease does not Under lessee. affect the rights of a sub-tenant (m). Gillott. In Taylor v. Gillott (n), it was held that a sub-lessee, where Taylor v. he was in occupation under an agreement for a lease from the bankrupt lessee (the trustee having disclaimed) had no right to compel the lessor to grant him a lease in accordance with the terms of his agreement with the lessee. The words in the 23rd section of the 1869 Act (but which have been omitted from the present section, and have been substituted by the words appearing in sub-s. 2)" and if the same Effect of disis a lease be deemed to have been surrendered on the same date" claimer. (ie., date of the adjudication), were fully considered in Ex Ex parte parte Walton, re Levy (o), in which many of the older cases were (h) See Onslow v. Corrie, 2 Mad. 330. The restriction of sub-s. 4 (as in the Act of 1869), is against disclaimer, and not assignment by the trustee, and see Jessel, M.R., in Ex parte Walton, infra; and see affirmation of this principle in Hopkinson v. Lovering, 11 Q. B. D. 92. (i) L. R. 7 Exch. 242; 41 L. J. Ex. 103. (k) As decided in Mills v. Auriol, 1 Smith's L. C., 7 ed., p. 838; Barnard v. Godscall, Cro. Jac. 309. () And see under 49 Geo. III. c. Walton, re Levy. 121; Taylor v. Young, 3 B. & Ald. 521. See also Harding v. Preece, 9 Q. B. D. 281, and Ex parte Paterson, 11 Ch. D. 908; but see Ex parte Morrish re Dyke, 22 Ch. D. 410; 47 L. T. 26; and Ex parte East and West India Dock Co. re Clarke, 50 L. J. Ch. 789. (m) Woodfall's L & T., 12 ed., p. 256, and cases cited. (n) L. R. 20 Eq. 682; 44 L. J. Ch. 740. (0) 17 Ch. D. 746; 50 L. J. Ch. 657. § 55. discussed, as to the effect of disclaimer, first, as regards the . |