1866. GIDDINGS v. PENNING. POLLOCK, C. B.-I agree with my brothers Bramwell and Channell, that this clause, by which, in a certain event, a creditor forfeits his debt, is unreasonable, and consequently the deed is void. The ground of my opinion is, that apparently the spirit and intention of the law on this subject is founded upon the application of the principles of the bankrupt law to arrangements amongst creditors themselves, when a specified proportion in number and value unite and effect an arrangement for the benefit of all the creditors, without the expense of proceedings in bankruptcy. It seems to me that the object of the law was to produce, through the medium of a majority in number and value of creditors, what may be called a bankrupt arrangement, and to give effect to the bankrupt law without an appeal to the Court of Bankruptcy. The clauses in the Act by which the minority of creditors are bound by the majority are in accordance with the bankrupt law, which confers on a certain majority in number and value of creditors the power of granting a certificate, which operates as an effectual release to the bankrupt from all his debts. But in no part of the bankrupt law is there anything which appears to me to justify the introduction of this penal clause, that because a creditor does not, within a certain time, verify the amount of his debt by a solemn declaration he shall absolutely forfeit it. I think such a clause extremely unreasonable. I do not agree with my brother Martin, that because a similar clause is found in a deed of composition which binds no one but the creditors who are parties to it, this clause cannot be said to be unreasonable. Such a clause may not be unreasonable quoad creditors who consent to it, and who, on becoming parties to a composition deed, agree that any creditor who does not verify his debt shall lose all benefit under the deed. But that is not the case here. This is a statutable provision for the purpose of producing the effect of bankruptcy through the medium of the creditors themselves. A certain majority in number and value of creditors binds the rest, and it seems to me most unreasonable that non-assenting creditors should forfeit all their rights under the deed because they do not within a certain time verify their debts. This view is supported by the judgment of the Court of Exchequer Chamber in Coles v. Turner (a), where it was held that in a deed of assignment a clause which empowered a trustee to require any creditor to verify his debt, but which had not the effect of depriving the creditor who failed to do so of all benefit under the deed, was not unreasonable. That was the unanimous judgment of six Judges, reversing the judgment of the Court of Common Pleas who held the deed unreasonable and therefore void. Blackburn, J., in delivering the judgment of the Court of Exchequer Chamber, said:-"It will be found that the provision in this deed, perhaps, requires no more from the creditor than would be required if the deed were silent. At all events it requires nothing unreasonable beyond what would be thus required. It does not make the trustee arbitrator, finally to decide whether there is any debt, or what is the amount of that debt; nor does it impose any penalty on those creditors who fail to produce what the trustee thinks sufficient proof of the debt." This conclusion follows, that if the deed had contained the provision now under consideration, namely a forfeiture of the debt, it would have been pronounced unreasonable, and the deed void. I am not now called upon to decide what provision would have been reasonable, but only to decide whether a forfeiture of all right to participate under the deed is or is (a) 18 C. B. N. S. 736. 1866. GIDDINGS v. PENNING. 1866. GIDDINGS V. PENNING. not unreasonable in the case of a creditor who does not assent to the deed and is only bound by force of the act of parliament. Had the deed provided that any creditor who failed to verify the amount of his debt should forfeit all share in the distribution about to take place, and that if he afterwards proved he should participate without disturbing former dividends, that would have been in accordance with the bankrupt law; but I think that the provision in this deed is unjust and contrary to the spirit of the bankrupt law, and therefore unreasonable. Judgment for the plaintiffs. June 6. A marine policy of insurance contained the following clause:"The usual deduction of one-third of the amount of repairs will not be made by this Company in the case of ships built within the limits of the United Kingdom until after eighteen months, or in BYRNE V. THE MERCANTILE INSURANCE COMPANY, LIMITED. THIS It has been for many years a custom amongst underwriters, in cases of losses under policies which have not contained the special clause set out in the policy hereinafter mentioned, to make a deduction of one-third, new for old, only in respect of repairs made after the first voyage of a vessel. the case of Colonial built ships until after twelve months from the date of the builder's certificate; but after such dates respectively the deduction will be made." By custom, underwriters make a deduction of one-third, new for old, only in respect of repairs made after the first voyage of a vessel.-Held, that the expression "usual deduction" had reference to the quantum only, and that in the case of a Colonial built ship the underwriters wee entitled to make the deduction of one-third, after twelve months from the date of the builder's certificate, although the ship had not completed her first voyage. By a policy of insurance effected with the defendants, dated the 9th day of December, 1864, the plaintiff, who is the owner of the ship "Melmerly," insured that vessel at and from Bombay to Liverpool. : The policy contains the following clause :"N.B.-The usual deduction of one-third of the amount of repairs will not be made by this Company in the case of ships built within the limits of the United Kingdom until after eighteen months, or in the case of Colonial built ships until after twelve months, from the date of the builder's certificate, but after such dates the deduction will be made." The " Melmerly" was a Colonial built ship and the voyage insured was her first. During the voyage insured, but after twelve months from the date of the builder's certificate, the ship received damage and was repaired; and the plaintiff claims from the defendants the full amount of the repairs as a particular average loss. The defendants have paid 6697. 2s. 2d., being the amount of the claim after deducting 3337. 1s. 6d., being the allowance they claim in respect of new for old materials. The question for the opinion of the Court is, whether the defendants are liable to the plaintiff for the full amount of the repairs without any deduction of new for old. If they are, judgment is to be entered for the plaintiff for 3331. 1s. 6d. with costs. If they are not, judgment is to be entered for the defendants with costs. Mellish, for the plaintiff.-The defendants are liable for the full amount of repairs. If the policy had not contained this special clause, it is clear that no deduction could have been made, because the insurance was on the ship's first voyage. Then does the clause mean that the deduction will, at all events, be made after the expiration of the periods 1866. BYRNE V. MERCANTILE MARINE INSURANCE COMPANY. 1866. BYRNE v. MERCANTILE MARINE INSURANCE COMPANY. specified, or does it leave the custom still applicable? It The Milward (Herschell with him), for the defendants.-The bargain between the parties excludes the custom. intention was that at the expiration of the periods mentioned the defendants should have an absolute right to make the deduction, which, under ordinary circumstances, was subject to the condition of the vessel having made her first voyage. The words "but after such dates respectively the deduction will be made" shew that the right to make the deduction attaches upon the expiration of the eighteen months and twelve months, although the ship may then be on her first voyage. On the other hand, if the ship made several voyages within the twelve months, during all that time the defendants would be bound to pay the full amount of repairs without any deduction. Mellish replied. MARTIN, B.-I am of opinion that the defendants are entitled to judgment. Whatever may have been the intention of the parties we must give a construction to the words |