1. This is an application, brought by three creditors against the Official Assignee. The insolvent, one Archibald Gilchrist Peace, was adjudicated on the 7th August 1918, and on the same day filed his schedule of affairs in which he disclosed the number of his creditors as two. The first creditor, Bijoy Singh Duduria, was put down as a creditor for Rupees 12,340-11-0, and the consideration was this: Sent to the insolvent's late firm of Gilchrist Peace and Ross.' The second creditor is Kathleen Irene Marie Paul Ghose. The amount is Rs. 27,800 and the consideration is stated in the same words as in the case already mentioned. The present applicants filed their several proofs of debts by the 7th May 1919. What happened thereafter was that Mr. Faulkner, as Official Assignee, being told by the insolvent that a friend would provide money to enable these two creditors to be paid off to their satisfaction, did in fact utilise the assets of the estate which had come to his hands, together with a further sum of money obtained from the friend in question, to pay off the two creditors after arranging a small abatement from these considerable debts. Payment was made about the 26th August 1919. The present applicants complain, first of all, that their proofs of debt filed in May 1919 were in no way noticed; they were neither admitted nor rejected nor dealt with in any way. Before distributing the sum of about Rs. 40,000 to the two scheduled creditors, no notices such as the Statute requires before the payment of a dividend were issued to the public: None were issued to the applicants or to any one else. The suni obtained from the insolvent's friend was sufficient not only to pay off the two creditors to their satisfaction, but also to pay a commission to the Official Assignee of 5 per cent, upon the full amount. Under these circumstances, the excluded creditors bring this application and they say that they are not only within general principles of law in view of the fact that Mr. Faulkner is a trustee', but they are within an express provision in the Presidency Towne Insolvency Act, viz., Section 82.
2. I have to enquire, first of all, whether this is a case of misfeasance, neglect or omission within the meaning of that section or a case of breach of trust within any other principle that may be applicable. I quite agree that under Section 82 this Court would not hold the Official Assignee personally liable if in any matter which he could reasonably take it upon himself to decide he, while proceeding regularly under the Statute, made a decision oh a point of law for which there was a reasonable case. At the same time, this Court cannot accept the principle that any mistake if only it can be put as a mistake in law is such as to leave the person damnified without a remedy. I regret to say that, in the first place, I think it was in this case negligent for the Official Assignee with the insolvent's schedule before him to treat the two scheduled creditors as personal creditors, or what Section 70 calls 'Separate creditors' of this insolvent as distinct from joint creditors. The language of the schedule itself is too plain for argument. It seems, moreover, that two suits had been brought each against both Peace and Ross, in respect of these debts. In the one case they were described as carrying on business as Messrs. Gilchrist Peace and Ross: in the other case they were not so specifically described; but were sued as for a partnership debt as persons who had been partners but had dissolved partnership. In each case both persons were sued and judgment was recovered for one and the same sum against both. Now, the Official Assignee says that execution had been levied against some of the separate property of Mr. Peace. What there is, either in that fact or in the form of the decrees, or in the constitution of the suits to warrant or even to assist the suggestion that these were fact provable in Peace's insolvency as being debts due in the first instance upon the joint estate, I am unable to make out. However, that was only the first step. The secorid thing which happened was this: the proofs filed on the 7th May 1919 were in no way dealt with until after the whole estate and the monies coming from the friend had been distributed. Now, upon that, Mr. Faulkner says that it is not for him to deal with these proofs unless he is moved to do so by creditors. That is entirely wrong. If further evidence, further vouchers, further materials are desired by the Official Assignee he can say so and call for such additional particulars as he thinks right but a creditor who lodges his proof in the statutory form is entitled that it should receive attention without doing anything more. I do not find that in our Rules in this Court there is the same rule as there is in England giving a limited time in which a proof must either be admitted or rejected or further particulars demanded, but there can be no doubt that a creditor who lodges a proof should have his proof dealt with upon such lodgment. In any case, the Official Assignee had notice on the 7th May. that certain persons were claiming to be creditors in this insolvency by reason of debts due to them from the firm of Messrs. Gilchrist Peace and Ross. He says that the insolvent had professed to be unable to give any particulars about the debts of the firm. With that knowledge the Official Assignee took it upon himself to distribute the money which had come into his hands as part of the insolvent's estate together with other monies provided for that purpose, in the payment of certain costs or charges and then in payment of the two scheduled creditors alone. It, is suggested that because these creditors had not moved some body to put their names into the insolvent's schedule this in some way furnishes an excuse or warrant for what was done by the Official Assignee. That is an entire misconstruction of the Act. But in any case, how with notice of these claims the Official Assignee thought it reasonable, safe or permissible to distribute the whole estate ignoring them, I do not profess to follow. He had not rejected the proofs. I do not gather that he had any intention at that time to reject or to admit them. It is said by Mr. Faulkner that if his action was not strictly within the dividend provisions of the Statute, nevertheless he acted in a manner analogous and suitable to the particular circumstances of the case. I cannot say too plainly that it is quite impossible to administer a bankrupt's estate unless that course of conduct is to be discontinued finally and altogether. It is not possible for this Court even to pretend to distribute a bankrupt's estate with reasonable certainty unless the rules as to distribution of dividends are regarded by the Official Assignee as absolutely sacro sanct. It will be difficult enough even then, but it is not possible to tolerate such a course of conduct as acting by way of analogy giving no notice and taking the risk.
3. In this matter I have to make up my mind whether what has happened has been an excusable, mistake in viewing the facts, an excusable mistake in law, or a course of conduct that is well over the line which marks such mistakes of judgment from what the Statute calls misfeasance, negligence and omission of duty. I regret to say that I think I should be taking Section 82 out of the Statute altogether if I failed to hold that the Official Assignee in this case has thrown over all the rules laid down for his guidance in so far as procedure is concerned, and has taken risks which there was no need to take. Even in so doing he has acted without reasonable care and has made mistakes in judgment which are not excusable. In my opinion it is a case in which the Court cannot help itself, but must make the Official Assignee personally liable for the sums of money which are now no longer at the credit of this estate and of which these three creditors have in fact been deprived.
4. The question is, what sum of money is that? I cannot take it that the money provided by the insolvent's friend was money belonging to the estate. That is to assume, on no evidence at all, that the insolvent was committing fraud which the Official Assignee should have found out. The only view warranted by the evidence is, that some friend of the insolvent for the purpose of paying off those two creditors, thinking that they were the only ones, provided the necessary money. It is not possible for me to say whether, had he known that there were other, creditors he wojild have refused to part with any money or would have provided more. The fact that the Official Assignee's commission was taken on the money in fact provided does not for this purpose make any difference. All I am concerned with is the question, how much money belonging to this insolvent' estate has been put by the Official Assignee's conduct into an improper course of distribution. Now, the three debts of the present creditors before me amount to some Rs. 13,551. The two scheduled creditors got over Rs. 40,000. The total sum realised from assets of the insolvent by the Official Assignee amounted to Rs. 7,718 from which has to be deducted, first of all, 5 per cent. 1 upon that sum and then something like Rs. 150 for costs that would come in front of any unsecured creditors. There is, therefore, a sum of some Rs. 535 that has to be deducted from the amount belonging to this estate. That leaves a sum of Rs. 7,183 which on this footing would have to be rateably distributed between the Rs. 13,000 worth of creditors before me now and the Rs. 40,000 worth of scheduled creditors. The result of that method of calculation is that the Official Assignee must be ordered to replace a sum of something like a third of Rs. 7,183 but the exact figures I am not settling now, I am only mentioning figures as illustrations of the method by which I think his liability is to be assessed. I will refer it to the Registrar in Insolvency to: take the necessary account on the lines which I have indicated and the only matters that remain are the questions of costs.
5. Now, the costs of this application the Official Assignee must also pay personally A I have come to the conclusion that the best order with regard to the costs of the previous application in the circumstances is this while I shall not give him any costs I shall not award the applicant any costs. There was some question of interest having to be knocked off. The proofs as filed were not quite in order and although I did allow them at certain figures, it is to be remembered that the Official Assignee though not entitled to reject them altogether or for the reasons given, was within his rights in demanding strict proof and further particulars. For these reasons, I will confine myself to an order that the Official Assignee must pay the costs of the present application.
6. Costs to be as of a bankruptcy motion in Court.