[COURT OF APPEAL]

GEORGE LEE & SONS (BUILDERS) LTD. v. OLINK

AND ANOTHER

Practice - Garnishee proceedings - Deceased 's estate - Garnishee order nisi against estate funds held by solicitors - Application for order to be made absolute - Registrar not convinced estate insolvent - Whether garnishee order should be made absolute - Procedure to be adopted until solvency of estate ascertained

In March 1969 the plaintiffs, a building company, were awarded judgment against the defendant, the executrix of her deceased husband's estate, for £1,243, the balance of an account owed by the deceased for the building work on his house. In January 1971 a sum of £340 was still owing on the judgment debt and the plaintiffs were granted a garnishee order nisi

against funds held by the garnishee, a firm of solicitors, as part of the deceased's estate. In July 1971, on the plaintiffs' application for the order to be made absolute, the garnishee contended that the estate was insolvent and that a garnishee order should not be granted if the effect would be to prefer one creditor over another. The district registrar was not convinced from the evidence that the estate was insolvent and made the garnishee order absolute.

On appeal by the garnishee:-

Held, allowing the appeal, that since there was serious doubt as to whether the estate was solvent, the appropriate order would be that the garnishee order absolute be set aside the garnishee be ordered to pay into court the sum in question and that there should be an inquiry by the district registrar as to whether the estate was solvent or insolvent; if insolvent the garnishee order should be set aside and the funds in court paid out to the garnishee but, if solvent, the garnishee order should be made absolute and the funds paid out to the judgment creditor.

Roberts v. Death (1881) 8 Q.B.D. 319, C.A. applied.

The following cases are referred to in the judgments:

Martin v. Nadel [1906] 2 K.B. 26, C.A.

Prichard v. Westminster Bank Ltd. [1969] 1 W.L.R. 547; [1969] 1 All E.R. 999, C.A.

Roberts v. Death (1881) 8 Q.B.D. 319. C.A.

The following additional cases were cited in argument:

Kennett v. Westminster Improvement Commissioners (1855) 11 Exch. 349.

Pink, In re, Elvin v. Nightingale [1927] 1 Ch. 237.

APPEAL from the Southampton district registrar.

In December 1968 the plaintiffs, George Lee and Sons (Builders) Ltd., issued a writ against the defendant, Margaret Olink, claiming £1,243, the balance due in respect of building work done to her deceased husband's house. In March 1969 the plaintiffs received judgment for that sum with costs under R.S.C., Ord. 14, r. 3. In January 1971, the plaintiffs applied to the Southampton district registry for and were granted a garnishee order nisi against Edward Moeran & Partners, solicitors, for the payment out of moneys held by them as the proceeds of sale of part of the deceased's estate, of the sum of £341 still unpaid on the judgment debt. In July 1971 the plaintiffs applied to make the garnishee order absolute. The registrar found that he was not convinced that the estate was insolvent and that the plaintiffs were entitled to a garnishee order absolute and costs.

The plaintiffs appealed on the ground that the estate should not be treated as solvent and that an equitable remedy such as a garnishee order should not be given if the effect would be to prefer one creditor over another.

Peter Langan for the garnishee.

Bruce Coles for the defendant.

RUSSELL L.J. This is an appeal from an order of the district registrar at Southampton who, on the application of a judgment creditor, made a garnishee order absolute in respect of funds in the hands of the garnishee, a firm of solicitors. The firm of solicitors acts in the administration of the estate of a Mr. Olink deceased, for his widow, the executrix. They have in their hands moneys belonging to the estate, resulting from the sale of

a house that formed part of the estate. The district registrar made the garnishee order absolute, and the question is whether, in the circumstances of this estate, he was right in doing so.

Mr. Olink died in June 1967, and his widow was granted probate of his will. In December 1968 the judgment creditor issued a writ against the widow as executrix for a balance due of an account in respect of the building of the house belonging to Mr. Olink; and in March 1969 there was judgment given under R.S.C., Ord. 14 for a sum of £1,243 and some £22 costs. In December 1970 the judgment creditor was paid two sums of £932 and £82, and at the end of 1970 there was still about £340 owing; on the basis of that outstanding amount an application was made and granted in January 1971 for a garnishee order nisi. In July 1971, after considering the evidence, the district registrar made the garnishee order absolute. Perhaps I might just add this, that although before the district registrar and before us the garnishee, the firm of solicitors alone appear, nevertheless it is right to regard them as also informally representing the executrix of the estate.

We were taken in some detail through the particulars of the estate so far as they are known, and I do not think for present purposes that I need go into those particulars in great detail. The district registrar in giving the reasons for his judgment said

"I am not convinced that this estate is insolvent. It is not at present being administered under section 34 of the Administration of Estates Act 1925 or otherwise under the rules of bankruptcy. This being so, find that the judgment creditor is entitled to his garnishee order absolute with costs."

On the facts the substance of the matter in this case is, that here, on the evidence, there is a very serious doubt whether this estate is solvent, and on full inquiry it may well be that it is insolvent. And the evidence at present is not, in my view, such as really enables us now to come to a definite conclusion.

Prichard v. Westminster Bank Ltd. [1969] 1 W.L.R. 547 in this court, to which our attention was drawn, shows that where an estate is insolvent, never mind precisely under what rules or how it has been administered, then a garnishee order nisi should not be made absolute, because an equitable remedy such as a garnishee order should not be given if the effect will be to prefer one creditor over another. But as I have said, it is not established whether this estate is insolvent or whether it is solvent.

So what is the right course to adopt in such a case as the present where there is on the present evidence a very serious doubt whether this estate is solvent? One solution in such a case might be to say that unless it is shown that the estate is insolvent then the garnishee order should be made absolute. But it seems to me that where there is a doubtful case such as the present that would be to run the grave risk of preferring one creditor over others, which would be wrong. Another solution might be to refuse to make the garnishee order absolute unless it is shown at the time of the application that the estate is solvent. But this might place an undue obstacle in the way of the judgment creditor when he seeks his garnishee order absolute.

In this field it seems to me that it is proper to seek an equitable and fair answer: for example, in Martin v. Nadel [1906] 2 K.B. 26 it was

not thought proper to make the garnishee order absolute when it might be unfair to the garnishee because there was a risk that the garnishee might in that case have to account a second time for the same sum in the courts of another country. In Roberts v. Death (1881) 8 Q.B.D. 319, the order was not made absolute because there was a suggestion that the money due from the garnishee to the judgment debtor was due to the latter as trustee for another.

In my view the proper course in a case such as this is one which is analagous to that adopted in Roberts v. Death, where the money due from the garnishee was ordered to be paid into court to abide the outcome of an inquiry into the suggestion that the sum was due to the judgment debtor as trustee for another. Accordingly, in my view in this case the order absolute should be set aside; the garnishee should be ordered to pay into court the sum in question; there should be ordered an inquiry by the district registrar for his decision whether this estate is solvent or insolvent, the inquiry to be conducted with all speed - and when I say "with all speed" I wish to indicate this also: that of course the full facts about the estate are in the hands of the garnishee and his client and it would be possible for them no doubt, if they wished, to drag their feet about producing the full facts on the inquiry to the prejudice of the judgment creditor. But that possibility can readily be avoided, because if it is appreciated by the district registrar that conduct of that kind was taking place he would be well entitled to say: "Since I am not getting the information which I should get from the personal representative and the garnishee about the condition of the estate I will conclude that the estate is in fact solvent, and therefore I will make the garnishee order absolute."

If the district registrar decides that the estate is insolvent, then the garnishee order nisi should be set aside and the funds in court paid out to the garnishee. If the district registrar decides that the estate is solvent, then the garnishee order nisi should be made absolute and the funds in court paid out to the judgment creditor.

There is, however, one point that I think must be mentioned. It is, I suppose, conceivable that, for example, another creditor may start proceedings for the administration of this estate. If that were to happen before the conclusion of the inquiry by the district registrar, clearly there should not be a duplication of the investigation, and the outcome as to the garnishee order absolute and payment out of court would in those circumstances have to abide the ascertainment of the solvency or insolvency in the administration proceedings.

PHILLIMORE L.J. I agree.

BUCKLEY L.J. I also agree.

Solicitors: Edward Moeran & Partners; James Weeks, Southampton.

J. W.