Re A Debtor

[1937] 1 All ER 1
No 627 of 1936

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(Judgment by: Greene LJ)

Re A Debtor

Court:

Judges: Slesser LJ
Romer LJ

Greene LJ

Subject References:
Bankruptcy
Married woman
Debt not in respect of business
Guarantee given in 1933
Payment under guarantee in 1936

Legislative References:
Law Reform (Married Women and Tortfeasors) Act 1935 (c 30) - s 4(1)(c)

Case References:
Morrice v Redwyn - (1731) 2 Barn KB 26; 26 Digest 130, 937
Woffington v Sparks - (1754) 2 Ves Sen 569; Digest Supp.
Re Richardson, Ex p St Thomas's Hospital (Governors) - [1911] 2 KB 705; 5 Digest 673, 5958
Toussaint v Martinnant - (1787) 2 Term Rep 100; 26 Digest 131, 948
Re Mitchell, Freelove v Mitchell - [1913] 1 Ch 201; 26 Digest 128, 915
Batard v Hawes, Batard v Douglas - (1853) 2 E & B 287; 26 Digest 145, 1080
Collinge v Heywood - (1839) 9 Ad & El 633; 26 Digest 241, 1881
Brittain v Lloyd - (1845) 14 M & W 762; 12 Digest 520, 4325
Lampleigh v Braithwait - (1615) Hob 105; 12 Digest 522, 4341
Crampton v Walker - (1860) 3 E & E 321; 26 Digest 138, 1021
Hamilton v Goold - (1839) 1 ILR 171; 6 Digest 40, case c.
Brooks Wharf & Bull Wharf Ltd v Goodman Bros - [1936] 3 All ER 696; Digest Supp.
Angrove v Tippett - (1865) 11 LT 708; 26 Digest 241, 1883
Re Fenton, Ex p Fenton Textile Assocn Ltd - [1931] 1 Ch 85; Digest Supp.
Exall v Partridge - (1799) 8 Term Rep 308; 26 Digest 131, 947

Hearing date: 27 November 1936
Judgment date: 18 December 1936

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Judgment by:
Greene LJ

By a document in writing dated 7 September 1933, the petitioning creditor guaranteed the debtor's banking account with Barclays Bank up to the sum of £500. Upon the hearing of the petition, the learned registrar found that this guarantee was given at the request of the debtor, and this finding is not challenged. On 21 February 1936, the petitioning creditor paid the amount then due from the debtor to the bank as she was bound to do, and on 28 May 1936, she recovered judgment against the debtor in the King's Bench Division for the amount so paid with costs. It is upon this judgment debt that the petition is founded.

The debtor is and was at all material times a married woman. Between the date when the guarantee was given and the date when the petitioning creditor paid the bank, namely, on 2 August 1935, the Law Reform (Married Women and Tortfeasors) Act 1935, came into force. By s 1(d) of this Act a married woman is made subject to the bankruptcy law in all respects as if she were a feme sole, but s 4(1) provides as follows:

'Nothing in this part of this Act shall ... (c) enable any judgment or order against a married woman in respect of a contract entered into, or debt or obligation incurred, before the passing of this Act, to be enforced in bankruptcy or to be enforced otherwise than against her property.'

It is contended by the debtor that the case is covered by this saving clause in that the judgment was "in respect of a contract entered into or debt or obligation incurred" before the passing of the Act, namely, on 7 September 1933, when the guarantee was given. It is contended by the petitioning creditor on the other hand, that the relevant date is the date of payment to the bank, namely 21 February 1936. The learned registrar held that the debtor's contention was well founded upon the ground as stated by him:

'that immediately a surety assumes liability to a creditor under a guarantee entered into by him at the request of the principal debtor, an obligation to indemnify the surety is incurred by the principal debtor.'

I will state my reasons for agreeing with the decision of the learned registrar. It is, in my opinion, settled beyond possibility of dispute that where "A" at the request of "B" guarantees payment of "B's" debt to "C," the law implies an undertaking by "B" to indemnify "A" in respect of any sums which he properly pays to "C" under the guarantee. This is merely a branch of a wider rule which is laid down in numerous authorities. I may quote as examples Brittain v Lloyd, where, at p 773, Pollock CB, says:

'It is clear, that, if one requests another to pay money for him to a stranger with an express or implied undertaking to repay it, the amount, when paid, is a debt due to the party paying from him at whose request it is paid, and may be recovered on a count for money paid ... the request to pay, and the payment according to it, constitute the debt; and whether the request be direct as where the party is expressly desired by the defendant to pay, or indirect, where he is placed by him under a liability to pay, and does pay, makes no difference.'

and Batard v Hawes, at p 296, where Lord Campbell CJ, said:

'To support the action for money paid, it is necessary that there should be a request from the defendant to pay, either express or implied by law. Where one party enters into a legal liability for and at the request of another, a request to pay the money is implied by law from the fact of entering into the engagement; and, if the debt or liability is incurred entirely for a principal, the surety, being liable for him at his request, and being obliged to pay, is held at law to pay on an implied request from the principal that he will do so.'

(See also 1 Smith's Leading Cases notes to Lampleigh v Braithwait (13th Edn), p 155, et seq.) Now it is said in the present case, and said truly, that until the petitioning creditor had paid the bank, no debt became due to her from the debtor. But this is beside the point. The implied undertaking to indemnify is an undertaking to re-imburse the guarantor upon the happening of a contingency, viz, payment by the guarantor to the creditor, and until that contingency happens, there is no debt. But the question here is:

'When was the contract entered into, or the debt or obligation incurred, in respect of which the judgment was obtained.'

The only answer to this question (apart from the actual debt), in my opinion is, when the implied undertaking to indemnify was given, and this was at the date of the request. To quote again the words of Pollock CB, in speaking of the general rule, in Brittain v Lloyd, at p 773:

'The request to pay, and the payment according to it, constitute the debt.'

In the case where the request is to enter into an obligation, the request to pay is implied from the fact of entering into the obligation. This appears from the passage already cited from Batard v Hawes, a case which brings out the point in a particularly neat manner. Twelve gentlemen, including the plaintiff, became co-guarantors. The plaintiff had been compelled to pay the whole debt and he sued the defendant, one of the other eleven, for contribution. Two of the co-guarantors died before the payment by the plaintiff. The question which arose for decision was whether the defendant was liable to contribute 1/12th or 1/10th of the amount which the plaintiff had paid. It was held that the liability was to contribute 1/12th only. Lord Campbell CJ, puts the point at p 296:

'If the right to contribution is to be considered as arising merely from the fact of payment being made, so as to relieve a party jointly liable from legal liability we should have to look to the number of co-contractors actually liable at law at the time of making the payment which relieved them from liability. But we think that it is not merely the legal liability to the creditor at the time of the payment that we are to regard, but that we must look to the implied engagement of each, to pay his share, arising out of the joint contract when entered into.'

Then follows the passage which I have already quoted, and Lord Campbell CJ, proceeds:

'In a joint contract for the benefit of all, each takes upon himself the liability to pay the whole debt, consisting of the shares which each co-contractor ought to pay as between themselves; and each, in effect, takes upon himself a liability for each to the extent of the amount of his share. Each, therefore, may be considered as becoming liable for the share of each one of his co-contractors at the request of such co-contractor, and, on being obliged to pay such share, a request to pay it is implied as against the party who ought to have paid it, and who is relieved from saying what, as between himself and the party who pays, he ought himself to have paid according to the original arrangement.'

The rule as to the right of contribution among co-sureties laid down in this case which was a case at law, is, of course, no longer to be followed for the reason that equitable principles are now applicable in all courts, and these are based in this matter of contribution, not on the terms of the contract implied between the co-sureties, but upon equitable considerations. But the case is, in my opinion, still an authority for the proposition that where an obligation is entered into on request, the ultimate payment made in pursuance of that obligation is to be referred to the original request and the rights of the parties determined accordingly. The position of co-sureties inter se and the position of a single surety giving a guarantee at the request of the principal debtor, are treated in the case as being the same from the point of view of the contractual obligations to be implied from the entry into the obligation.

I should myself have thought that once the contractual basis of the relationship is appreciated, the question raised in this appeal would only admit of one answer. But I have thought it right to refer to the authorities above cited in view of an argument of this nature which was addressed to us. It was said that the claim in the action was a claim for money paid and that it was competent for the petitioning creditor to frame her claim in this way without reference to any implied obligation to indemnify. It is true that in the old form of pleading an action of indebitatus assumpsit was a proper form of action in such a case, and it was with actions of this nature that the two cases to which I have referred were concerned. But it was of the essence of the claim that the payment was made on request: see 1 Smith's Leading Cases (13th Edn), at p 155. Now where, as in the present case, the implied request for payment is referable to a request to give a guarantee, the contractual basis of the action is apparent, and the difference between the old form of action of indebitatus assumpsit and an action on a special contract to indemnify disappears for all practical purposes. The question whether or not the subsection applies cannot, in my opinion, be affected by the fact that it would have been open to the plaintiff to bring his action on an indebitatus assumpsit instead of declaring on the implied undertaking to indemnify (compare Crampton v Walker and Hamilton v Goold). A question may arise as to the application of the sub-section in a case where a guarantee is given without any antecedent request on the part of the debtor. That case is merely one example of a number of cases where the law raises an obligation to indemnify irrespective of any actual antecedent contractual relationship between the parties. A quite recent example of a case where the law raises such an obligation irrespective of antecedent contract is to be found in a case decided in this court of Brooks Wharf and Bull Wharf Ltd v Goodman Brothers. Where a guarantee of a married woman's debt is given before the Act without any request from her, and the payment which gives rise to the obligation to indemnify is made after the Act, it might be argued that the obligation was not incurred before the passing of the Act. But that is not this case, and I express no opinion upon it. In this case, the guarantee having been given at the request of the debtor, I am clear that the judgment was one in respect of a contract entered into and an obligation incurred before the passing of the Act, and I agree that the appeal should be dismissed with costs.