on any contingency, or on two or more contingencies; as to mode of valuation, capable of being ascertained by fixed rules, or as matter of opinion" (sect. 37, sub-s. 8).

In the Bankruptcy Act, 1869, although unliquidated damages arising otherwise than by reason of a contract or promise were expressly excluded from proof, nothing was said as to "breach of trust." As a matter of fact, however, an exception was always held to exist in such a case (see Ex parte Westcott, L. R., 9 Ch. 626), and proof might be made against the defaulting trustees' estate. In the present Act it will be noticed "breach of trust" is especially mentioned.

A sum found due from a promoter in an action on behalf of a company to recover secret profits, was held under the old Act not to fall within the words "unliquidated damages arising otherwise than by reason of a contract or promise" (Emma Silver Mining Co. v. Grant, L. R., 17 Ch. Div. 122); nor an amount found due on taking an account of profits in an action for infringement of patent (Watson v. Holliday, L. R., 20 Ch. Div. 780); nor a claim for damages for fraudulent representation by a vendor on a sale of shares (Jack v. Kipping, L. R., 9 Q. B. 113).

In deciding what debts and liabilities are capable of being estimated for proof, however, the Court under the old law construed the section of the Bankruptcy Act, 1869, which was similar in effect to the new Act, in a very liberal manner. Thus a claim for untaxed costs was held to be provable (see Ex parte Peacock, L. R., 8 Ch. 682); and the value of an annuity payable to a person for life was held to be capable of being estimated for proof (Ex parte Naden, L. R., 9 Ch. 670). And in

the same way the value of an annuity payable to a woman during her life, but defeasible in the event of her marrying again (Ex parte Blakemore, L. R., 5 Ch. Div. 372). In making the estimate every contingency must be taken into account.

Mutual Debts. Where there is a debtor and creditor account between the bankrupt and any person claiming to prove a debt in the bankruptcy, it would be clearly unfair to compel such creditor to pay his debt in full and then permit him to receive only a dividend on the amount due to him. The account is therefore adjusted and a balance struck between them. Sect. 38 provides that "where there have been mutual credits, mutual debts, or other mutual dealings between a debtor against whom a receiving order shall be made under the Act and any other person proving or claiming to prove a debt under such receiving order, an account shall be taken of what is due from the one party to the other in respect of such mutual dealings, and the sum due from the one party shall be set-off against any sum due from the other party, and the balance of the account, and no more, shall be claimed or paid on either side respectively; but a person shall not be entitled under this section to claim the benefit of any set-off against the property of a debtor in any case where he had, at the time of giving credit to the debtor, notice of an act of bankruptcy committed by the debtor, and available against him.”

As in the corresponding section of the Bankruptcy Act, 1869, it is presumed the words, mutual credits, mutual debts, and mutual dealings are all of importance. Mutual debts means simply that two persons owe each other debts now payable. Mutual credits goes somewhat further, and applies to a case where a debt is

immediately due from one party and only due at a future day from another (Ex parte Prescot, 1 Atk. 229). The term mutual dealings is applicable to cases where an unliquidated claim in contract is set-off against a liquidated sum (Booth v. Hutchinson, L. R., 15 Eq. 30). And see also Jack v. Kipping (L. R., 9 Q. B. 113), where unliquidated damages for a fraudulent representation on a sale were allowed to be set-off.

The manner in which debts are to be proved will be found clearly laid down in the rules contained in the Second Schedule of the Act (post, p. 221), to which reference should be made.

Proof in Ordinary Cases. It will there be seen that in ordinary cases every creditor must prove his debt as soon as may be, by delivering or sending through the post, in a prepaid letter, to the official receiver or to the trustee if one has been appointed, an affidavit verifying the debt, made by the creditor himself or by some other person authorised on his behalf. This affidavit must contain or refer to a statement of

accounts, and must specify any vouchers by which the debt can be substantiated, production of which may at any time be demanded by the official receiver or trustee. It must further state whether the creditor is a secured creditor or not. Unless the Court specially orders, a creditor must bear the cost of proving his debt; and every creditor who has lodged a proof is entitled to examine the proofs of other creditors before the first meeting, and at all reasonable times. A creditor proving his debt shall deduct therefrom all trade discounts, but he shall not be compelled to deduct any discount not exceeding 5 per cent. on the net amount of his claim, which he may have agreed to allow for payment in cash (see Schedule 2, Rules 1-8).

Proof by Secured Creditors. A secured creditor —that is, a person who holds any specific security on the debtor's property-may in the first place take one of three courses. He may either (1) give up his security and prove for the whole debt; or (2) realise his security and prove for the balance; or (3) assess the value of his security, and giving credit for it, prove for the balance. Where a security is so valued, the trustee may at any time redeem it on payment to the creditor of the assessed value. And by Rule 12 (post, p. 222), if the trustee is dissatisfied with the value at which a security is assessed, he may require that the property comprised in any security so valued be offered for sale, at such times and on such terms and conditions as may be agreed on between the creditor and the trustee, or as, in default of such agreement, the Court may direct. If the sale is by public auction both the creditor and the trustee are at liberty to bid for and become the purchaser of the property: "Provided that the creditor

may at any time, by notice in writing, require the trustee to elect whether he will or will not exercise his power of redeeming the security and requiring it to be realised; and if the trustee does not within six months after receiving the notice signify in writing to the creditor his election to exercise the power, he shall not be entitled to exercise it; and the equity of redemption, or any other interest in the property comprised in the security which is vested in the trustee, shall vest in the creditor, and the amount of his debt shall be reduced by the amount at which the security has been valued.” Power is given to a creditor at his own expense to amend a valuation and proof on good cause shown, as to which and the effects of such amendment, see Rules 13 and 14 (post, p. 222). If a secured creditor does not comply with the foregoing rules, he will be excluded from all share in any dividend; and, subject to the provisions of Rule 12 above set out, a creditor shall in no case receive more than 20s. in the pound, and interest at 4 per cent., as provided by the Act.

Proof in Distinct Contracts. If a debtor is, at the date of the receiving order, liable in respect of distinct contracts as a member of two or more distinct firms, or as a sole contractor, and also as member of a firm, the circumstance that the firms are in whole or in part composed of the same individuals, or that the sole contractor is also one of the joint contractors, shall not prevent proof in respect of the contracts against the properties respectively liable on the contracts. Thus, under the Bankruptcy Act, 1869, in Ex parte Honey (L. R., 7 Ch. 178), where a joint and several promissory note was signed by two members of a firm, by the firm, and by several other persons, and the firm became