CHAPTER IV.

THE PRIORITY OF CROWN DEBTS.

In Distress and Execution.

By 33 Hen. VIII. c. 39, s. 51, the King's suit or process is to be preferred before the suit of any other person, and he is to have the first execution for his debt before any other person, provided that the King's suit is taken and commenced or process awarded for such debt before judgment given for such other person.

As to land, apparently the effect of this statute and the common law was to give the subject precedence if he had completed his execution before process issued for the King, as in A.-G. v. Andrew (1655), Hard. 23, Curson's Case (1590), 3 Leon. 239, and Hungate and Hill's Case (1590), 3 Leon. 240. See R. v. Mann (1726), 2 Stra. 749 (arguendo). But this must now be taken subject to the statutes imposing on the King the necessity of registration, before his judgment, &c. can bind the land. (See above, p. 152.)

25 Edw. I. (9 Hen. III., Ruff.), c. 18, provides that in the case of a Crown tenant who dies a debtor to the Crown the sheriff may attach and enrol all his goods and chattels as found in the fee of which he was tenant, to the value of the debt as determined by a jury, and after the debt is satisfied the residue is to remain to the

executors.

See also the Crown Suits, &c. Act, 1865, s. 51 (p. 701), which saves the priority of the Crown against the creditors of any Crown debtor or accountant.

Generally, "in case of an execution for a subject, whether it be an elegit, or fieri facias, or an extent, the goods and chattles of the party were bound from the teste of the writ, before the Statute of Frauds and Perjuries, by virtue of which statute the property of the goods of the party against whom a writ of execution is sued out, is not bound, but from the time that such writ is delivered to the sheriff, &c. to be executed. But this statute does not extend to the case of the Crown . . . . Executions for the Crown have relation to the time of the execution awarded, and the goods and chattles of the party are bound from that time into whose hands soever they come." (R. v. Arnold (1710), Vin. Abr. Creditor and Bankrupt (z), per Price, B.)

But in the case of a debtor to a Crown debtor, the debt of the former is not bound from the teste of the extent, but only from the caption of the inquisition finding the debt. (R. v. Green (1729), Bunb. 265.)

The meaning of 33 Hen. VIII. c. 39, s. 51, is discussed in West on Extents, p. 154. He appears to be of opinion that "suit taken and commenced" refers to lands, and "process awarded" refers to goods. But it seems more reasonable to take "execution" as used both of land and goods, and to regard "suit taken and commenced " in its natural meaning, and "process awarded" as referring to process by immediate extent, where there has been no previous suit. If this be so, then the King takes priority in all cases except where the subject's judgment has been obtained before the commencement of the King's suit or the issue of his extent, or where it has been obtained after the commencement of the King's suit, but before process issued upon it or before process by immediate extent, and has been completely executed by sale of the goods before the teste of the King's process, or perhaps before its delivery to the sheriff. See Manning, Exch. Pr. (ed. 2), p. 44, and the cases which now follow, especially R. v. Sloper (1818), 6 Price, 114, and Butler v. Butler (1801), 16 East, 339.

The prerogative right of the Crown to priority is not limited to proceedings by writ of extent, but equally attaches to proceedings by distress (A.-G. v. Leonard (1888), 38 Ch. D. 622; 57 L. J. Ch. 860) or to the recovery of the amount found due to the Crown on a scire facias on a bond, with costs. (In re Corley (1889), 23 L. R. Ir. 249.) These principles must be read into the decisions which follow.

An extent tested after the delivery of a fi. fa. to the sheriff, or even after the distress, but before sale, prevails against the distress. (R. v. Cotton (1751), Park. 112; 2 Ves. Sen. 288; R. v. Allnutt (1807), 16 East, 278; R. v. Giles (1820), 8 Price, 293; Giles v. Grover (1832), 1 Cl. & F. 72; R. v. Sheriff of Devon (1819), 1 Chit. 643; A.-G. v. Leonard (1888), 38 Ch, D. 622; 57 L. J. Ch. 860.) This rule applies equally to an extent in chief and an extent in aid (Giles v. Grover, ubi sup.) and to a landlord's hypothec in Scotland. (Ogilvie v. Wingate (1792), 3 Pat. App. 273; Robertson v. Jardine (1802), Mor. Dict. 7891.) It is the sheriff's duty under the extent to seize the goods which have been taken under the fi. fa., where the judgment has been obtained and the goods seized under it prior to the King's judgment but after the commencement of the King's process. (R. v. Sloper (1818), 6 Price, 114; Butler v. Butler (1801), 1 East, 338; A.-G. v. Aldersey (1785), 1 East, 341; see also Thurston v. Mills (1812), 16 East, 254.) But the Court has enlarged the time for making a return to the fi. fa. on the sheriff's

application, where there was a reasonable doubt whether or not the goods seized were covered by an extent. (Wells v. Pickman (1797), 7 T. R. 174; R. v. Sheriff of Devon (1819), 1 Chit. 643.)

See also, as to the King's priority on an extent, Addlington v. Cann (1744), 3 Atk. 142, 154, cited more fully below, p. 575.

In Scotland the Crown's privilege has been held even to extend to a case where the goods had been sold, but a warrant for payment to the landlord had not been granted. (R. v. Johnston (1809), 2 Bell, Comm. (ed. 7) 58.)

Secus, if the goods taken under the fi. fa. have been sold. The property in the goods has been completely altered, and it is the sheriff's duty on the Crown levy to return nulla bona, except as to those of the goods on which the Crown has an indefeasible lien by statute. (A.-G. v. Fort (1804), 8 Price, 364, n.; Grove v. Alaridge (1832), 9 Bing. 428.) This is the case even where the extent is tested on the day of the sale and delivered to the sheriff on that day after the goods have been delivered to the purchasers. (Swain v. Morland (1819), 1 B. & B. 370.)

A simple contract debt seized into the King's hands is to be preferred to bonds not paid before such seizure; secus, if the bond debts are paid by an administrator before seizure or notice of the King's debt. (R. v. Allanson (1687), Park. 260.) But the King's simple contract debt is to be preferred to a bond creditor's judgment which was obtained after suit taken or process awarded by or for the King. (R. v. Dickenson (1692), Park. 262.)

The Crown's title, however, is commensurate only with that of its debtor, and therefore, where in a lease there was a proviso for re-entry in case of extent or execution, the forfeiture was held to terminate the interest of the Crown as well as that of the debtor. (R. v. Topping (1825), M'Cle. & Y. 544.)

In Bankruptcy.

Under the old law it was settled that the bankruptcy statutes did not bind the Crown. (R. v. Pixley (1725), Bunb. 202; Brassey v. Dawson (1734), 2 Stra. 978; Anon. (1745), 1 Atk. 262; E. p. Russell (1812), 19 Ves. 163, 165; E. p. Temple (1814), 2 V. & B. 391; Craufurd v. A.-G. (1819), 7 Price, 1; R. v. O'Donnell (1844), 1 Jo. & Lat. 271; 6 Ir. Eq. R. 639; though it was doubted in the earlier case of A.-G. v. Stannyforth (1721), Bunb. 97.)

It is, however, provided by the Bankruptcy Act, 1883 (46 & 47 Vict. c. 52), s. 150, that "save as herein provided the provisions of this Act relating to the remedies against the property of a debtor, the priorities of debts . . . shall bind the Crown." The latter class of

provisions referred to are to be found in sect. 40, as amended by the Preferential Payments in Bankruptcy Act, 1888 (51 & 52 Vict. c. 62), ss. 1, 2; the Preferential Payments in Bankruptcy Amendment Act, 1897 (60 & 61 Vict. c. 19), ss. 2, 3; and the Workmen's Compensation Act, 1906 (6 Edw. VII. c. 58), s. 5 (3). These sections provide for the payment in priority to all other debts of not more than one year's assessment of parochial and local rates and assessed taxes, and the wages of certain servants and workmen, and that, subject to the provisions of the Acts, all debts proved in the bankruptcy shall be paid pari passu. So far, therefore, as actual proof in the bankruptcy goes, the Crown would appear to be on the footing of an ordinary creditor, and in particular the limitation of priority in the case of assessed taxes to one year's assessment specially limits the right, which it previously had, to prove for taxes to any extent in priority to other creditors. But it must be observed that the provisions as to the relation back of the trustee's title (sect. 43) are not applied to the Crown. (See E. p. Postmaster-General, In re Bonham (1879), 10 Ch. D. 595; 48 L. J. Bk. 84.)

The provisions relating to "the remedies against the property of the debtor" appear to be sects. 9, 42, 45, and 55, but the general effect of sect. 150 on the rights of the Crown is by no means clear in every respect, and it is therefore necessary to set out the decisions prior to the Act of 1883 with regard to the Crown's priority, and these must be read subject to the provisions cited above.

In A.-G. v. Capell (1687), 2 Show. K. B. 480, it was held that an extent in aid was barred by a previous assignment of the debtor's goods under a commission of bankruptcy, but not by the issuing of the commission only. Compare A.-G. v. Alston (1678), 2 Mod. 247, and R. aux. Braddock v. Watson (1816), 3 Price, 6. By R. v. Earl (1718), Bunb. 33, where an extent and a commission of bankruptcy issued the same day, the extent had the preference; secus, if the extent was tested on a subsequent day. Lord Eldon, L. C., stated in Wydown's Case (1807), 14 Ves. 80, 87, that he once got out of bed in the country in the middle of the night to seal a commission, following the previous example of Lord Loughborough, L. C., in order to anticipate the issue of an extent. These authorities seem to be still good law, since the Act of 1883 does not apply the provisions as to relation back to the Crown, and they do not, apart from statute, apply to the Crown; and, indeed, in a much more recent case, prior, however, to the Act of 1883, it was held that property was bound by an extent issued between the filing of the petition and the appointment of a trustee. (E. p. PostmasterGeneral, In re Bonham (1879), 10 Ch. D. 595; 48 L. J. Bk. 84.) The fact that the Crown can now prove in the bankruptcy, though

formerly, it may be, it could not (see Manning, Exch. Pr. (ed. 2) pp. 33, 48), makes no difference to this. Now, semble, a Crown debtor's property would be bound by an extent tested after the making of a receiving order under sect. 9, but not by an extent tested after the vesting of the debtor's property in a trustee under sect. 54, of the Bankruptcy Act, 1883.

Where an extent was issued against a bankrupt for a Crown debt on the same day as the adjudication in bankruptcy and the appointment of an official assignee, though at a later hour, the Crown's title was held to prevail. (Edwards v. R. (1854), 9 Ex. 628; 23 L. J. Ex. 165.) In Tipper v. R. (1830), 8 S. 785, counsel for the Crown obtained an adjournment of the adjudication to the next day, solely that an extent might be issued; but the Court, on this being pointed out to them, refused to interfere.

In In re Bentinck, [1897] 1 Ch. 673; 66 L. J. Ch. 359, a testator died insolvent after 1870, owing specialty and simple contract debts, including a simple contract debt for death duties to the Crown. The assets were more than sufficient for payment of the Crown debt after satisfying the specialty debts. It was held that, regard being had to the Administration of Estates Act, 1869 (32 & 33 Vict. c. 46), the assets ought first to be apportioned between the specialty and simple contract debts, and the Crown debt ought then to be taken out of the amount apportioned to the simple contract debts. Stirling, J., observed that in his opinion the Intestates Estates Act, 1884 (47 & 48 Vict. c. 71), s. 3 (p. 735), was not intended to take away the priority of the Crown.

In In re Galvin, [1897] 1 I. R. 520; [1898] W. N. 140, it was held that a Crown debt for legacy duty was entitled to priority over the general creditors of the bankrupt, and that such priority could be asserted by motion in the bankruptcy, and existed notwithstanding the vesting of the bankrupt's estate in his assignee; but the Court pointed out that the Irish Acts did not contain any provision equivalent to the English provision that all provable debts shall be paid pari passu, and expressed its opinion that that provision plainly extinguished the prerogative right of preference in respect of all debts not specifically excepted. (See above, p. 165; see also In re “Nation" Newspaper, Ltd. (1900), 35 I. L. T. R. 130.)

A similar case was Commrs. of Taxation for New South Wales v. Palmer, [1907] A. C. 179; 76 L. J. P. C. 41. The New South Wales Act, like the Irish Acts, contains no provision corresponding to sect. 150 of the Bankruptcy Act, 1883, and the Court, discussing the matter at large, decided again in favour of the general prerogative of priority possessed by the Crown where its claim was in competition