[CHANCERY DIVISION]

In re LAWLEY.

JACKSON v. LEIGHTON.

[1911 L. 1219.]

Executor - Liability - Testator's Leaseholds - Assignment by Executor to a "Purchaser" - Meaning - Payment to Assignee - Covenant by Assignee to indemnify - Law of Property Amendment Act, 1859 (22 & 23 Vict. c. 35), s. 27 - Lord St. Leonards' Act.

An assignment by an executor of his testator's leasehold property to an assignee who is paid money for taking over the lease and indemnifying the executor is not an assignment to a "purchaser" within s. 27 of the Law of Property Amendment Act, 1859.

The word "purchaser" in this section means a person who buys the lease and pays a price in money for it.

Dodson v. Sammell (1861) 1 Dr. & Sm. 575, 579; Dean v. Allen (1855) 20 Beav. 1, 4; and Waller v. Barrett (1857) 24 Beav. 413, 420, applied.

ORIGINATING SUMMONS.

By her will dated July 7, 1908, a testatrix appointed the plaintiff and defendant her executors, and devised and bequeathed her residuary real and personal estate to the defendant.

The testatrix died on November 21, 1910. Her estate included (inter alia) a leasehold house which was demised to her by a lease dated July 26, 1902, for twenty-two years less ten days from Lady Day, 1902, at the rent of 234l. and subject to repairing and other covenants.

After the testatrix's death the executors made efforts to find a purchaser or lessee of the house, through various estate and house agents, but these efforts were fruitless.

By an assignment dated May 22, 1911, and made between the executors of the one part and certain surveyors and co-partners in Sloane Street, thereinafter called the assignees, of the other part, the executors, in consideration of the covenants by the assignees thereinafter contained, assigned the premises comprised in the lease to the assignees subject to the payment of the rent and performance of the covenants, and the assignees covenanted to pay the rent and perform the covenants and to indemnify the

assignors and the estate of the testatrix against all claims and demands in respect thereof.

The executors in fact paid the assignees 500l. out of the assets as consideration for taking over the lease, though this was not mentioned in the assignment. The debts and legacies had been paid, and the executors were now ready to complete the administration of the estate.

This summons was issued to determine whether the executors ought to set aside any and what part of the residuary estate to answer the future liabilities under the covenants of the lease, or whether the above assignment constituted the assignees purchasers within s. 27 of the Law of Property Amendment Act, 1859 (Lord St. Leonards' Act), so that the executors' personal liability was gone and the plaintiff could release the residuary estate to the defendant without making any such provision.

J. G. Wood, for the plaintiff. Sect. 27 of the Law of Property Amendment Act, 1859, so far as material hereto provides that where an executor, liable as such to the rents, covenants, or agreements contained in any lease or agreement for a lease granted or assigned to the testator whose estate is being administered, "shall have assigned the lease or agreement for a lease to a purchaser thereof" he shall be at liberty to distribute the residuary personal estate without appropriating any part to meet any future liability under the said lease or agreement for a lease, and the executor so distributing the residuary estate shall not, after having assigned the said lease or agreement for a lease, be personally liable in respect of any subsequent claim thereunder; but nothing therein contained shall prejudice the right of the lessor or those claiming under him to follow the assets.

This section only applies where there has been an assignment by an executor to a purchaser: In re Nixon. (1) An assignment to a residuary legatee on a covenant to indemnify is not within the section: Dodson v. Sammell. (2) It follows that a mere covenant to indemnify does not make an assignee a purchaser within the section, a fortiori where he is paid for taking the assignment.

(1) [1904] 1 Ch. 638, 644.

(2) 1 Dr. & Sm. 575, 579.

In cases before the Act the Court did not set aside an indemnity fund where the lease itself coupled with the assignee's indemnity formed a sufficient security, secus if the lease was valueless: Dodson v. Sammell (1); Dean v. Allen (2); Waller v. Barrett. (3) Having regard to this practice, s. 27 was clearly only intended to apply to a lease of sufficient value to find a purchaser in the strict sense.

Wright Taylor, for the defendant. The assignees were purchasers within s. 27. The covenant for indemnity was valuable consideration and they would clearly have been purchasers within 27 Eliz. c. 4 - Price v. Jenkins (4) - or within the definition clause of the Conveyancing and Law of Property Act, 1881 (44 & 45 Vict. c. 41), s. 2, clause viii. The assignees acquired the lease plus 500l. and the consideration they gave for the lease and the cash together was their covenant to indemnify. This was valuable consideration and they were purchasers within the section.

An assignment to a residuary legatee is on an entirely different footing from an assignment to a stranger. The residuary legatee takes under the will and is in no sense a purchaser, though of course he has to give the usual covenant for indemnity.

J. G. Wood in reply.

SWINFEN EADY J. The question is whether the assignees of the lease were purchasers within s. 27 of the Law of Property Amendment Act, 1859. The lease was an onerous lease at a heavy rent of 234l. a year and the executors were unable to dispose of it through the usual channels. With the consent of the residuary legatee, who was one of the two executors, they assigned the lease to assignees who in consideration of receiving a payment of 500l. were prepared to take it over and indemnify the executors. This payment does not appear on the face of the assignment, but it is not disputed that the 500l. was in fact paid to the assignees as consideration for their taking over the lease.

In my opinion the assignees were not purchasers within s. 27.

(1) 1 Dr. & Sm. 575, 579.

(2) 20 Beav. 1, 4.

(3) 24 Beav. 413, 420.

(4) (1877) 5 Ch. D. 619.

They were not really purchasers at all. They were paid 500l. to take the assignment and indemnify the assignors.

The object of s. 27 is to enable an executor to distribute the residuary estate without appropriating any part to meet any future liability under the lease. It is true that the lessor or those claiming under him can still follow the assets, but the executor, after having assigned the lease to a purchaser, is no longer personally liable.

The meaning of the word "purchaser" in this section can be gathered by reference to the decisions on the practice prior to the Act. Under that practice an indemnity fund was set aside where the property comprised in the lease did not of itself furnish a sufficient security; but where the lease was valuable, the ground rent being small compared with the rack rent, that circumstance coupled with the indemnity of the purchaser was considered sufficient protection because it would be more for the advantage of the lessor to eject than to bring an action on the covenant, and therefore it was not necessary to set anything aside for an indemnity. See Dodson v. Sammell (1); Dean v. Allen (2); Waller v. Barrett. 2v(3)

In this case the lease was onerous and no purchaser was forthcoming. An assignment was only effected by paying 500l. to the assignees. This fact shews that there was no value in the lease. Now, although the word "purchaser" is used in many senses and might in some cases include an assignee who merely gives a covenant for indemnity, I am of opinion that as used in s. 27 it means a person to whom the lease is sold, and who pays a price in money for it. The plaintiff is therefore entitled to have a fund set aside by way of indemnity to answer any claim that may arise. The amount will be settled in chambers.

Solicitors: Corbin, Greener & Cook.

G. R. A.

(1) 1 Dr. & Sm. 575, 579.

(2) 20 Beav. 1, 4.

(3) 24 Beav. 413, 420.