[1950] EACA 473

## H. M. COURT OF APPEAL FOR EASTERN AFRICA

Before SIR NEWNHAM WORLEY (President), SINCLAIR (Vice-President) and BRIGGS, Justice of Appeal

## MOHAMEDALI JANMOHAMED, Appellant (Original Accused) $\mathbf{v}$

## **REGINAM, Respondent**

## Criminal Appeal No. 524 of 1955

(Appeal from the decision of H. M. Supreme Court of Kenya, de Lestang, J.)

Bankruptcy—Whether order under section 144 of the Kenya Bankruptcy<br>Ordinance a condition precedent to prosecution under sections 25<br>and 137 (1) (q)—Order impounding future earnings—Kenya Bankruptcy Ordinance, sections 2, 20 (1), 24, 25 (1) and (3), 42, 54 (1) (2) (3) (4) and (5), 137, 140, 141, 144 and 148—Bankruptcy Act, 1883, sections 44 and 53.

The appellant had been convicted on his own plea of guilty by the Resident Magistrate's Court, Nairobi, on four counts of offences against the Bankruptcy Ordinance. The offences were on the first count, failing to make a payment for the benefit of his creditors (section 137 (1) $(q)$ ) and on the other three counts, failing to submit returns to the Official Receiver (section 25 (3)).

Held (12-3-56).—(1) An order under section 144 of the Bankruptcy Ordinance is not a condition precedent to the institution of proceedings against a bankrupt in respect of offences against sections 25 and 137 (1) $(q)$ .

(2) An order impounding future earnings can only be made under section 54 of the Bankruptcy Ordinance. Failure to comply with an order made under section 24 does not constitute an offence under section 137 (1) $(q)$ .

Conviction on first count quashed.

Cases referred to: Gokulchand Dwarkadas Morarka v. The King, 35 A. I. R. (P. C.),<br>Part 415, 82; Abdulla Suleiman El Harthi and others v. The Queen, 22 E. A. C. A. 404;<br>Re Stanlake & Son, ex parte Priestly, (1878) 10 Ch. D. 774; Re Roberts, (1900) 1 Q. B. 122.

O'Donovan and Kapila for appellant.

Munro and Njonjo for respondent.

JUDGMENT (prepared by Sinclair, Vice-President).—This is a second appeal against convictions entered against the appellant on his own plea of guilty by the Resident Magistrate's Court at Nairobi. The appellant was convicted on four counts which are as follows: —

Count 1.—Statement of Offence.

Failing to make a payment for the benefit of creditors contrary to section 137 (1) $(q)$ of the Bankruptcy Ordinance (Cap. 30, Laws of Kenya 1948).

Particulars of Offence.

That Mohamedali Janmohamed, who was adjudged bankrupt on the 13th day of October, 1954, by H. M. Supreme Court at Nairobi, in Bankruptcy Cause No. 8 of 1954, and against whom an order was made on the said 15th day of October, 1954, in such Bankruptcy Cause to pay to the Official Receiver as his trustee in bankruptcy for the benefit of creditors, the sum of Sh. 50 per month, commencing on the 12th day of October, 1954, at Nairobi in the Central Province in the Colony of Kenya, failed to make such payment to the said Official Receiver on the 12th day of December, 1954.

in respect of the offence alleged in the 11th count, since that offence was committed after the order was made, and that in so far as the offences alleged in the remaining counts are concerned, the order was not a valid order. Relying on the principle laid down in Gokulchand Dwarkadas Morarka v. The King, 35 A. I. R. (P. C.) Pt. 415, p. 82, which was applied by this Court in Abdulla Suleiman el Harthi and others v. The Queen, 22 E. A. C. A. 404, he said that where an order to prosecute is a condition precedent to the institution of proceedings, the order must either specify the specific acts alleged against the person charged or, if the facts are not shown on the face of the order, the prosecution must prove by extraneous evidence that the facts were placed before the Court making the order. No extraneous evidence was adduced in this case, and an order which merely named the person to be charged and specified the provisions of the Ordinance which he was alleged to have contravened, as was the case here, was not, he said, a sufficient compliance with section 144.

The short answer to this point is that an order for the prosecution of the appellant under section 144 was not a condition precedent to the institution of proceedings against him in respect of the offences of which he was convicted, nor was it necessary to confer jurisdiction on the Court to try the offences. In the Bankruptcy Ordinance there are various sections creating offences which contain an express provision forbidding the institution of a prosecution thereunder except by order of the Court: examples are sections 140 and 141. There is no such provision in either section 25 or section 137. Section 144 provides merely that an order for the prosecution of the debtor shall be made in the circumstances set out therein and does not forbid the prosecution of the debtor if no order is made. If an order were necessary for all prosecutions under the Ordinance there would be no necessity for an express provision in sections 140 and 141. The object of an order to prosecute under section 144 is twofold. In the first place, when an order is made, the Attorney-General must institute and carry on the prosecution (except where the Official Receiver is authorized to institute a prosecution under the proviso to section 148) thus relieving the estate of the bankrupt of the expense of instituting and carrying on the prosecution. In the second place, if no order is made, the Official Receiver, trustee or other person instituting the prosecution might have to bear the expense of the prosecution personally. Authority for the view we have taken is to be found in Re Stanlake and Son, ex parte Priestly, (1878) 10 Ch. D. 774, and Re Howes, ex parte White, (1902) 2 K. B. 290. In the former case, an order to the trustee in bankruptcy to prosecute for offences under section 11 (4) of the Debtors Act, 1869, having been refused by the Court, and the debtors having, subsequently to such refusal, been prosecuted by the trustee and convicted of offences under that section, it was held that under the circumstances the order to prosecute ought to have been made in the first instance, and that the trustee was entitled to an order to prosecute nunc pro tunc, in order to recover the costs of the prosecution out of the estate. In *Re Howes, ex parte White*, a trustee prosecuted a debtor for offences committed against the bankruptcy laws without first obtaining an order of the Court for that purpose under section 16 of the Debtors Act, 1869, which is in similar terms to section 144 of the Bankruptcy Ordinance. On an application for an order that the costs be taxed and paid out of the estate of the bankrupt, it was held that the trustee will not, as a general rule, be allowed the costs of the prosecution out of the estate, even although the prosecution was expressly sanctioned by the committee of inspection. In his judgment in that case, Wright, J., said: $-$

"I see no ground for making the order that is asked for. It will saddle the estate with costs which, if the trustee had done his duty and had obtained the leave of the Court under section 16 of the Debtors Act, 1869,

would have been paid by the Treasury. It seems to me that under subsection (3) of section 57 of the Bankruptcy Act, 1883, the committee of inspection had no power to authorize the prosecution of the debtor without the sanction of the Court. In Re Stanlake and Son was a very different case to this. In my judgment it is highly undesirable that a trustee should, without obtaining an order of the Court under section 16 of the Debtors Act, 1869, be entitled to embark upon a speculative prosecution of the debtor."

Mr. O'Donovan's first point, therefore, fails on the ground that an order to prosecute was not a condition precedent to the institution of the prosecution. In any event, it is clear from ex parte Levi, 40 L. T. (N. S.) 527, that the order of the Supreme Court in this case was valid in respect of the offences charged in the 1st, 9th and 10th counts. In that case an order to prosecute framed in similar terms to the order made in this case was held to be correct.

This was the only ground of appeal advanced against the convictions on the 9th, 10th and 11th counts, and the appeal, in so far as it relates to those counts, must be dismissed.

As to the conviction on the first count, the question for decision is whether the failure of the appellant to pay the instalment of Sh. 50 alleged to be payable on 12th December, 1954, under the order of the Supreme Court dated 15th October, 1954, constituted a contravention of section 137 (1) $(q)$ of the Bankruptcy Ordinance. Section 137 (1) (q) reads: $\rightarrow$

"137. (1) Any person who has been adjudged bankrupt or in respect of whose estate a receiving order has been made shall in each of the cases following be guilty of an offence—

(q) if he makes default in payment for the benefit of creditors of any portion of a salary or other income in respect of the payment of which the Court is authorized to make an order."

$\overline{2}$

The order of the Supreme Court directed the appellant to pay to the Official Receiver a sum of Sh. 50 per month commencing from 12th October, 1954. The appeal has been argued on the assumption that the payments were to be made out of the appellant's salary or wages. Was the Supreme Court authorized to make such an order? Mr. Munro, who appeared on behalf of the Official Receiver, conceded that if the order was made under section 54 of the Bankruptcy Ordinance, the appellant could not be convicted under section 137 (1) $(q)$ for default in payment. Section 54 provides: —

"54. (1) Where a bankrupt is an officer of the army, navy or air force, or an officer or clerk or otherwise employed or engaged in the civil service of the Colony, the trustee shall receive for distribution amongst the creditors so much of the bankrupt's pay or salary as the Court, on the application of the trustee, with the consent of the head of the department under which the pay or salary is enjoyed, may direct. Before making any order under this sub-section, the Court shall communicate with the head of the department as to the amount, time, and manner of the payment to the trustee, and shall obtain the written consent of the head of the department to the terms of such payment.

(2) Where a bankrupt is in receipt of a salary or income other than as aforesaid, the Court, on the application of the trustee, shall from time to time make such order as it thinks just for the payment of the salary or income, or of any part thereof, to the trustee, to be applied by him in such manner as the Court may direct.

(3) Where a bankrupt is an employee and earning wages, whether or not payment of such wages is made by the day or by any other period of time, the Court, on the application of the trustee, shall, from time to time, make such order as it thinks just, for the payment of any part of such wages to the trustee, to be applied by him in such manner as the Court may direct.

(4) Every such order as aforesaid shall be served upon the head of department or employer, as the case may be, who shall thereafter pay to the trustee the amounts of pay, salary or wages, specified in the order and in conformity with the terms of the order.

(5) Nothing in this section shall take away or abridge any power of the Governor to dismiss a bankrupt."

Sub-sections (3) and (4) were added by Ordinance No. 53 of 1948. Prior to that amendment, the section was almost identical with section 51 of the English Bankruptcy Act, 1914. There are no provisions in the English Act similar to the present sub-sections (3) and (4) of section 54. Under section 51 of the Bankruptcy Act, 1914, the Court may make an order for payment either by a bankrupt or by his employer. At p. 425 of Vol. 4 of Atkin's Court Forms and Precedents the following note to the form of order to be made under section 51 (2) of the Bankrupty Act appears: -

"On the hearing of the application the Court may if it thinks fit and is satisfied that an order for payment should be made, make an order for payment by the bankrupt or by his employer, or on the bankrupt undertaking to make the payment fixed by the Court out of his salary or income, etc., may make no order, and in such case if he makes default in such undertaking the Court may on the further application of the trustee make an order on the employer to pay the said sum out of the bankrupt's salary or income, etc. If the order is in the first place made on the bankrupt to pay and he makes default, the trustee may apply to the Court to vary the order by ordering the employer to pay out of the bankrupt's said salary or income, etc."

Before the enactment of the present sub-section (4) of section 54, therefore, it seems clear that an order could be made for payment by the bankrupt of his salary, or part of his salary, to the trustee, and default in payment would be a contravention of section 137 (1) (q). But sub-section (4) provides that every order made under the section shall be served upon the head of department or employer, as the case may be, who shall thereafter pay to the trustee the amounts of pay, salary or wages specified in the order and in conformity with the terms of the order. Service of the order on the employer and payment thereafter by the employer in terms of the order are mandatory. As the obligation is on the employer to pay it follows that the bankrupt cannot be guilty of an offence under section 137 (1) (q) if default is made in payment. It seems that section 54 as amended by the addition of sub-section (4) does not contemplate an order being made for payment by the bankrupt.

But Mr. Munro submitted that an order for payment by a bankrupt of his salary or wages to the trustee could be made under section 24 of the Ordinance Sub-section (2) of that section provides, inter alia, that every debtor against whom a receiving order is made shall—

"do all such acts and things in relation to his property and the distribution of the proceeds amongst his creditors, as may be reasonably required by the Official Receiver, special manager or trustee, or may be prescribed by general rules, or be directed by the Court by any special order or orders made in reference to any particular case, or made on the occasion of any special application by the official receiver, special manager, trustee or any creditor or person interested."

He argued that under this sub-section the Supreme Court is empowered to make orders in respect of the debtor's property, which includes salary and wages.

Section 2 of the Bankruptcy Ordinance defines property as including-"money, goods, things in action, land and every description of property whether movable or immovable and whether situate in the Colony or else where: also obligations, easements, and every description of estate, interest, and profit, present or future, vested or contingent, arising out of or incident to property as above defined.'

Section 20 (1) of the Ordinance vests in the trustee "the property of the bankrupt", and section 42 gives the particulars of the property of the bankrupt which is divisible amongst his creditors. Paragraph $(a)$ of section 42 provides that such property shall comprise—

"all such property as may belong to or be vested in the bankrupt at the commencement of the bankruptcy, or may be acquired by or devolve on him before his discharge."

We do not think that the definition of the property of a bankrupt divisible amongst his creditors is wide enough to include future personal earnings such as the salary or wages of the appellant which he might never earn. As Cave, J., observed in *Re Jones*, (1891) 2 Q. B., 231, referring to the wages of a working collier: "if the debtor does not choose to go to work he will earn nothing". Although the personal earnings of a bankrupt belong to his trustee except so much as is necessary for the support of himself and his family, and an order can be made in respect of those earnings once they are earned or come into the bankrupt's possession, a prospective order cannot be made impounding future personal earnings unless it can be made under section 54. In *Re Roberts*, (1900) 1 Q. B., 122, Lindley, M. R., said, at p. 129: $\cdots$

"Benwell's case (14 Q. B. D. 31) does not conflict with other cases. That case turns entirely on section 53 (Bankruptcy Act, 1883); and is only an authority for the proposition that a prospective order cannot be made impounding the future personal earnings of a bankrupt. Similar observations apply to in re Shine, (1892) (1 Q. B. 522). Those cases are no authority for the proposition that property of a bankrupt acquired by his personal exertions since his bankruptcy and not wanted for his present support does not belong to his trustee. No such doctrine can be maintained in face of section 44 (Bankruptcy Act, 1883). After bankruptcy, and before his discharge, whatever property a bankrupt acquires belongs to his trustee, save only what is necessary for his support."

Sections 53 and 44 of the Bankruptcy Act, 1883, are in similar terms to section 54 (before it was amended by Ordinance No. 53 of 1948) and section 42, respectively. of the Bankruptcy Ordinance. In our view, therefore, an order could not be made under section 24 for payment by the appellant to the trustee of salary or wages which he had not then earned.

For these reasons we have come to the conclusion that the appellant's default in payment of the instalment ordered by the Supreme Court was not an offence under section 137 (1) $(q)$ and that the conviction on the first count cannot stand. The conviction on that count is accordingly quashed and the sentence set aside.