Waller v. Barrett.

ROLLS COURT

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Original Citation: (1857) 24 Beav 413

English Reports Citation: 53 E.R. 417

Nov. 21 24, 1857.

S. C. 27 L. J. Ch. 214; 4 Jur. (N. S.) 128.

[413] Waller v. Barrett. Nov. 21, 24, 1857

An executor fairly stating the facts, and paying over the assets under the direction of the Court, in an administration suit, is fully indemnified against all existing or contingent demands on the estate.

Principles on which the Court acts in giving an indemnity to executors against the outstanding leasehold covenants of their testators.

Executors held, under the circumstances, entitled to no further indemnity against tha leasehold covenants of the testator than the recognizance of the parties bene¡ficially entitled to his estate.

The testator Scarman died in 1816, having, by his will, given his property to his wife for life, and afterwards on trust for his three daughters and their children. His executors proved his will.

The testator, at his death, was possessed of some leaseholds, and by the decree made in 1854, in a suit for the administration of his estate, an inquiry was directed " whether the testator's estate and effects, or his personal representative, were subject to any and what liabilities in respect of his leasehold estates, and whether any and what indemnity against such liabilities ought to be provided or made, and in what manner,"

The Chief Clerk's certificate found that the testator was, at the time of his death, assignee of a lease, dated the 28th of February 1793, granted by lessees under the City of London to James Melvin, of a house and premises, No. 68 New Bond Street, for a term of ninety years, which would expire at Midsummer 1883, at the yearly rent of 78, 15s.

The lease contained covenants by the lessee to pay the rent and taxes, to insure the premises against fire, to rebuild in case of fire, to keep the premises in repair, not to carry on any noisome or offensive trade, &c. And by the assignment the testator covenanted to pay the rent, to perform the covenants of the original lease, and to indemnify the assignor, his heirs, &c., against such rent and covenants, and all actions, &c., damages, costs, [414] by reason or means thereof, or the non-payment or non-perfonnanca thereof.

The testator had under-let his property for a term which would expire at Christmas 1872, at the yearly rent of 105, being an improved rent for the house and premises of 26, 5s. per annum.

The testator was also, at the time of his death, assignee of a lease, dated 21st October 1793, of the stables, &c., at the rear of the house in New Bond Street, from Lady Day 1809, fora term which would expire in 1883, at the yearly rent of 13, 13s. This was under-let at a total improved rent of 63, 7s. a year. This lease con¡tained similar covenants, and the testator had entered into the like covenants to indemnify the assignor.

By an order in this suit, made in 1854, the leaseholds were ordered to be sold. They were accordingly sold and assigned to the purchasers, who covenanted, in the usual way, to indemnify the assignor and the estate of the testator against the rent and the covenants in the original lease.

The residue of the testator's estate now undisposed of consisted of a sum of 755 3 per cents, in Court, and 308 3 per cents, in the names of the legal personal representatives.

The Chief Clerk found that " the indemnity given by the respective purchasers of the testator's leasehold estates by the assignments, together with a recognizance to be

418 WALLER V. BARRETT 24 BEAV. 415.

entered into by the parties beneficially entitled to the testator's personal estate, to refund, as the Court should direct, any part of such personal estate which the Court might order to be paid to them respectively, in the event of any claim being hereafter established [415] against the estate and effects of the testator, or against his personal representatives, in respect of such contingent liabilities, would be a proper and sufficient indemnity against the said contingent liabilities."

The Defendants, the executors of the last surviving executrix of the testator, took out a summons to vary the certificate, by finding that the above sums or a com¡petent part thereof ought to be retained and set apart as an indemnity against the liabilities, or that some other proper and sufficient indemnity might be provided against them.

Mr. Selwyn and Mr. Sheffield, in support of the adjourned summons, argued that the rule of the Court in such cases was, to afford the executors, who were liable at law to the extent of the assets, a substantial indemnity, by retaining a reasonable portion of the funds, and that the circumstances of the present case required such a retainer, for the position of the parties beneficially entitled was such as to render their personal obligation of no value. They argued that the Chief Clerk had proceeded on a wrong principle in holding that the covenants of the purchasers were a sufficient indemnity. They referred to Dean v. Allen (20 Beav. 1) and Brewer, v. Pocock (23 Beav. 310).

Mr. R. Palmer and Mr. Martelli were not called on.

the master of the rolls [Sir John Romilly]. I will communicate with my Chief Clerk, and read the papers. At present I think the indemnity sufficient.

[416] Nov. 24. the master of the rolls [Sir John Romilly]. I have read through these papers, and have considered the question with some pains. The title is involved, but I am of opinion, upon the facts of this case, that sufficient indemnity is afforded to the executors by the certificate. The only way in which the executors, or the testator's estate, could be affected, would be by an action brought by the ground landlord; and upon the facts of this case, it would be obviously more for his interest to eject the persons in possession, than to bring any action on the covenants. I am, therefore, of opinion, that the proposed indemnity is sufficient.

I think it necessary to make one or two further observations. I wish to express the view which I take of these cases, in order not only that it may be clearly under¡stood, but that if it be wrong, my judgment may be set right in another place. The view I take of these cases is expressed in Dean v. Allen (20 Beav, 1), and which is this: that where executors have fairly placed all the circumstances before the Court, and act under its orders, they will be indemnified against all future liabilities. I will refer to one or two authorities on the subject, in order to make the grounds on which I proceed plain. In the first place, I hold this to be established by the authorities, that if breaches of covenant have been committed at the date of the decree, and the covenantee do not come in and prove under the decree, he will be barred of all remedy against the executors, and that the executors will be perfectly safe. It is the case of an existing debt, which the creditor does not come in and prove under the decree, and the Court having administered the assets protects the executors against all future [417] claims. The creditor, however, is not left without his remedy, but that remedy is not against the executor. That principle is so fully established in this Court, that it is unnecessary to cite many authorities on the subject; but this is what Lord Eldou says in Gillespie v. Alexander (3 Russ. 136) on the subject:-"If a creditor does not come in till after the executor has paid away the residue, he is not without remedy, though he is barred the benefit of that decree. If he has a mind to sue the legatees to bring back the fund, he may do so; but he cannot affect the legatees except by suit, and he cannot affect the executor at all."

The dicta and authorities on this are exceedingly numerous. They are to be found in Brooks v. Reynolds (1 Bro. C. C. 183), David v. Frowd (1 Myl. & K. 200), Williams v. Jones (10 Ves. 77), and in Knatchbull v. Fearnhead (3 Myl. & Cr. 122), in which Lord Cottenham makes these observations :-ò" Where an executor passes his accounts in this Court, he is discharged from further liability, and the creditor is left to his remedy against the legatees; but if he pays away the residue without passing his accounts in Court, he does it at his own risk." That is the principle upon which the Court proceeds in such cases. So in Low t. Carter (1 Beav. 431), Lord Langdale

24BEAV. 418. WALLER V. BARRETT 419

makes this observation :-" It is to be regretted that the jurisdiction of the Court, in. such cases, cannot be exercised at a less expense, but when we so frequently see suits instituted against executors, after a considerable lapse of time, and find them held personally responsible for acts done by them in mistake, but with the most honest intention, the necessity of giving them every opportunity of exonerating them¡selves by passing their accounts in this [418] Court is obvious." These are only some of the observations to which it is possible to refer, to shew that in the case of an existing debt the executors are perfectly exonerated, if they bring all the facts which are within their knowledge before the Court, and pay away the assets under its direction.

I am at a loss to conceive on what principle a debt which may arise hereafter, but which is not now existing, is to be treated on a footing different to an existing debt. The creditor, although advertised for, may be abroad at the time, he may be ignorant of the whole proceeding, and yet if he do not come in and claim, his only remedy in this Court ia against the legatees. In the case of March v. Russell (3 Myl. & Cr. 31), Lord Cottenham made this observation :-" Formerly, when legacies were paid, it seems to have been the practice to oblige the legatee to give security to refund, in case any other debts were discovered. That practice has been discontinued, but the legatee's liability to refund remains. The creditor has not the same security for the refunding as when the legatee was obliged to give security for that purpose, but he has the personal liability of the legatee." I hold that this, in fact, is the principle which governs these cases, that it is for the purpose of giving a greater degree of security to the executor (in case a creditor should arise hereafter), that the Court requires what is called " an indemnity to the executor " to be given ; but if he has stated the facts to the Court, and has acted under its direction, I apprehend that his indemnity is complete and perfect, so far as he is concerned.

In Fletcher v. Stevenson (3 Hare, 360, 370), Sir James Wigram, who certainly took very great pains with these cases, makes [419] these observations in a case in which he ordered a sum of money to be retained in Court as an indemnity :-" So far as the executor is personally concerned, he would, I apprehend, be safe in acting under the direction of the Court, but in considering what degree of protection is due to the absent covenantee, I am bound to consider whether the Court, taking the fund out of the handa of the executor, can do less than it would expect the executor to do if the fund remained in his hands." In that case he ordered a sum of money to be retained in Court, but stated that to be the principle on which he proceeded. In Dean v. Allen (20 Beav. 1), I made the same observations and referred to those cases, stating that it appeared to me, that if the executor acted under the direction of the Court, and laid everything he knew full and fairly before the Court, he would be protected for the future, and that the Court would prevent him from being sued and from sustaining any injury, in case a creditor should afterwards arise.

There are some dicta on the point which would perhaps wear a different construction, but I am unable to find any dictum, and certainly no decision, which bears directly against that view of the case, and which appears to me to be the principle and good sense of the matter. In Dean v. Allen, the case of Simmons v. Holland (3 Mer. 547) was referred to, where Sir William Grant says that the decree of the Court is no protection to the executor, but Mr. Beavan has given in a note, (20 Beav. 5), as I think, the proper answer to that observation :-" It appears from the argument in Simmons v. Holland, that that suit was not for the general administration of the estate, and this circumstance might therefore justify the [420] observations of Sir William Grant, that the decree would not protect the executors."

This must be guarded against in my observations: I do not mean to say that where an executor is ordered to pay a sum of money in a suit which is not for the administration of the assets, it would protect him from creditors. But, I apprehend, that if, in a suit for the administration of assets, the Court orders him to pay the money, that is a perfect security to him personally; for unless that were so, it would paralyse the functions of this Court. This Court in fact acts on the same principle with respect to non-existing debts which may hereafter arise, as it would in the case of existing debts not proved. The indemnity given is only for the sake of

420 READE V. WOODROOFFE 24 BEAV. 421.

effecting a security, in case the Court sees a reasonable probability that a creditor who is now unable to establish his case may afterwards come forward. My opinion does not interfere with, but rather carries out, although in a different form, that which Lord Cottenham, in March v. Russell, stated was the old practice.

This being the view which I take of these cases, I have thought it desirable to state it, although it does not at all affect my judgment in this particular case, which proceeds on the facts. I think they afford a sufficient proof that the ground landlord would proceed by ejectment rather than by an action of covenant against the original lessee, by which alone this testator's assets could be affected.

I think the case of the executors fails and that the Chief Clerk's certificate must be confirmed.