Between William Pennell, one of the Official Assignees in
Bankruptcies prosecuted in Her Majesty's Court of Bankrutcy on behalf of Himself and
all Assignees of Bankrupts and Insolvents and Other Persons as having been
Partners with Bankrupts interested in the Monies or Funds sought to be
recovered in this Suit, or any part thereof, Plaintiff; and Heney Deffell
And Harriet Susannah Deffell, Defendants.
BEFORE THE LORDS JUSTICES.
Original Eng. Rep. version,
PDF
Original Citation: (1853) 4 De G M & G 372
English Reports Citation: 43 E.R. 551
June 23, July 16, 1853.
S. C. 22 L. T. (0. S.) 126; 1 W. R. 499; 23 L. J. Ch. 115; 18 Jur. 273.
Considered, Brown v. Adams, 1869, L. R. 4 Ch. 764. See In re European Bank,
1870, L. R. 5 Ch. 362; Great Eastern Railway Company v. Turner, 1872, L. E. 8
Ch. 153; Ex parte Cooper, 1874, 31 L. T. 420'; Lard Provost, &c., of
Edinburgh v. Lord Advocate, 1879, 4 App. Cas. 835. Considered, In re West of
England and South Wales District Bank, 1879, 11 Ch. D. 772. See In re Hallett's
Estate, 1879-80, 13 Ch. D. 696; Allcard v. Skinner, 1887, 36 Ch. D. 164; Lyell
v. Kennedy, 1889, 14 App, Cas. 459.
[372] Between william
pennell, one of the Official Assignees in Bankruptcies prosecuted in Her
Majesty's Court of Bankrutcy on behalf of Himself and all Assignees of
Bankrupts and Insolvents and Other Persons as having been Partners with
Bankrupts interested in the Monies or Funds sought to be recovered in this
Suit, or any part thereof, Plaintiff; and heney deffell and harriet susannah
deffell, Defendants. Before the Lords Justices. June 23, July 16, 1853.
[S. C. 22 L. T. (0. S.) 126; 1 W. E. 499; 23 L. J. Ch. 115; 18 Jur. 273.
Considered, Brown v. Adams, 1869, L. R. 4 Ch. 764. See In re European Bank,
1870, L. E. 5 Ch. 362; Great Eastern Railway Company v. Turner, 1872, L. E. 8
Ch. 153 ; Ex parte Cooper, 1874, 31 L. T. 420'; Lard Provost, Ac., of Edinburgh
v. Lord Advocate, 1879, 4 App. Cas. 835. Considered, In re West of England and
South Wales District Bank, 1879, 11 Ch. D. 772. See In re Hallett's Estate,
1879-80, 13 Ch. D. 696; Allmrd v. Skinner, 1887, 36 Ch. D. 164 ; Lyell v.
Kennedy, 1889, 14 App, Cas. 459.]
When a trustee pays trust-money into a bank to his credit to a simple
account with himself, not distinguished in any other manner, the debt thus
constituted
from the bank to him is one which belongs as specifically to the trust
as the money would have done had it specifically been placed by the trustee in
a particular repository, and so remained; and the case would not be varied by
the circumstance of the bank holding also for the trustee, or owing also to him
money, in every sense his own. But cheques drawn by the trustee in a general
manner upon the bank, would for every purpose be ascribed and affect the
account in the mode explained and laid down in Clayton's case, 1 Mer. 572.
This was an appeal from the decision of the Master of the Eolls upon
exceptions and further directions. The suit was supplemental to one for the
administration [373] of the estate of George Green, deceased, late one of the
official assignees of the Court of Bankruptcy, who died on the 22d of October
1849, intestate. The Defendants were his administratrix and her husband.
Mr. Green had been appointed official assignee shortly after the
establishment of the Court of Bankruptcy; and on the decease of Mr. Follett
(another official assignee), which took place on the 9th June 1849, Mr. Green
was appointed to be the official assignee in all the bankruptcies in which Mr.
Follett was at the time of his death the official assignee.
Mr. Green continued to be such official assignee until the time of his
death, when the Plaintiff was appointed to be an official assignee in
bankruptcies prosecuted in the Court of Bankruptcy, in the place of Mr. Green;
and in particular the Plaintiff was appointed to be the official assignee, and
to act as such, in all the bankruptcies in which Mr. Green was at the time of
his death the official assignee.
Mr. Green was originally attached to the Court of Mr. Commissioner
Merivale, who died in the year 1844, and was succeeded by Mr. Commissioner
Goulburn. From that time Mr. Green, during his life, and afterwards the Plaintiff,
as the successor of Mr. Green, were successively attached to the Court of Mr.
Commissioner Goulburn.
On his first appointment to be such official assignee, Mr. Green opened
in his own name a banking account with the Bank of England, into which account
he paid all the monies he received, whether monies received by him as such
official assignee or his own private monies; and he continued such account
until the promulgation of [374] the order in bankruptcy of the 12th of November
1842.(1)
Immediately after this order was promulgated, Mr. Green set apart his
banking account at the Bank of England as the banker's account to be kept by
him as official assignee in obedience to the 15th section of the order; but as
the Bank of England will not open a banking account with an individual as a
trustee, or in any character qualifying his absolute title, Mr. Green was
permitted by the Commissioners to keep his account at the Bank without such
account being headed "as official assignee."
[375] By the decree dated the 7th of December 1850, it was referred to
the Master to inquire and state whether any or what balances or balance were or
was, at the decease of Mr. Green, due from him to any and which of the
bankrupt's estates of which he was at his decease the official assignee, and
what was at his decease the aggregate amount of all such balances, if any, and
whether any and what balances or balance, if any, were or was at the decease of
Mr. Green due to him from any and which of the bankrupt's estates of which he was
at his decease the official assignee, and what was at his decease the aggregate
amount of all such balances, if any; and the Master was to inquire and state
whether any and what balances or balance were or was at the time of the decease
of Mr. Green due from him. Similar inquiries were directed with respect to
partnerships, the assets of which were received by him, where any of the
members of such partnerships were or was bankrupts or a bankrupt; and also as
to insolvents' estates of which he had been official assignee under the then
existing law. An inquiry was also directed as to what balances were standing to
the credit of Mr. Green in his banking accounts with the Bank of England and
with the London Joint Stock Banking Company respectively, and from what or
whose funds or monies the same balances arose respectively, and under what
circumstances the same were so standing to his credit with the said banks; but
the several inquiries thereinbefore directed were to be without prejudice to
the rights of any of the parties and to any question in the cause.
The Master, by his report, dated the 10th of January 1853, found to the
effect
4DEG. M. &Q.SM. PENNELL V. BEFFELL 553
of the foregoing statement, and set forth the accounts of Mr. Green with
the Bank of England and the London Joint Stock Banking Company, the former upon
the 30th of September 1849 (the date [376] of making up his last quarterly
account), and the latter from the 31st of December 1848, to the day of his
death, in each
case.
The former account was as follows:-
[Table omitted]
With respect to this account, the Master found that the whole of the
monies respectively paid into and drawn out after the 30th of September 1849,
were monies respectively received by him in his official capacity, with the
following exceptions only, viz., that 72, 16s. 3d., part of the above-mentioned
sum of 512, 16s. 3d. paid in on the 5th of October, was received by him on his
private account; and several sums of 6, 5s., 8, 5s., [377] 57, 10s., 25, 10,
18, 18s., 25, 6, 15È. 2d, 31, 5s., and 13, 2s. 6d., making in the whole 202,
Os. 8d., were drawn out and applied by Mr. Green on his private account, so
that during the period aforesaid Mr. Green drew out and applied on his private
account 129, 4s. 5d. more than he had paid in from his private resources. The
Master also found that the sum of 72, 16s. 3d. so paid in by Mr. Green from his
private resources was drawn out by him and applied on his private account in
manner aforesaid, and that the whole balance or sum of 1988, 11s. 8d., standing
to his credit with the Bank of England at his death, arose from and formed part
of the several bankrupts' estates specified in a schedule to the Master's
report. [Table omitted]
[378] With respect to this account, the Master found that the following
items, viz., 642, 15s. 7d., 210, 2, Is. lOd. and 20 arose from Mr. Green's
private monies: that the item 169, 3s. lOd. was composed of sums which, at
various times prior to that date, Mr. Green had received on account of a Mr.
Denvon's estate, and paid into his account at the Bank of England, but had
afterwards drawn out a cheque and paid it to his account with the London Joint
Stock Banking Company. With respect to the item 79, 8s. similar circumstances were stated. The
item 219, Os. 6d. was found by the Master to be composed of 50 received by Mr.
Green on account of Denvon's estate, and 169, Os. 6d. received on account of
another estate, all paid in the first instance into the account at the Bank of
England, but drawn out by a cheque for 219, Os. 6d., and paid to his account
with the London Joint Stock Banking Company. The item 1627, 15s. 8d. was
composed of balances received by Mr. Green from the executors of Mr. Follett
and from various bankrupts' estates, similarly paid in the first instance into
Mr. Green's account at the Bank of England and subsequently transferred to his
account with the London Joint Stock Banking Company. The Master therefore
found, that the balance or sum of 2174, Os. lOd. standing to the credit of Mr.
Green on his account with the London Joint Stock Banking Company arose to the
extent of 2088, 14s. 8d., part thereof, from monies received by Mr. Green, from
and at the date of his death, due to the estates which the report specified;
and that the sum of 85, 6s. 2d., residue of the sum of 2174, Os. lOd., arose
from and formed part of the private monies of Mr. Green. To this report the Defendant took eleven exceptions, which were allowed
by the Master of the Rolls, who, [379] on further directions, decided that the
balances of both accounts formed part of the general estate of the testator.
Against this decision the Plaintiff now appealed. Mr. Roupell and Mr. Hardy appeared in support of the appeal. Mr. Roundell Palmer and Mr. Rogers, for the Respondents. The following cases were cited :-Burdett v. Willelt (2 Vern. 638), Lane
v. Dighton 4DEG. M. &Q.SM. PENNELL V. BEFFELL 555 (Amb. 409), Ryall v. Ryall (1 Atk. 59), Ex parts Chion (3 P. Wms. 187,
n.), Lord Chedworth v. Edwards (8'Ves. 46), Lench v. Lench (10 Ves. 511),
Lupt&n v. Whitt (15 Ves. 432), Taylor v. Ptoier (3 Mau. & S. 562),
Clayton's case (1 Mer. 572), Liebman v. Harcouft (2 Mer. 513), Massey v. Banner
(1 J. & W. 241), Gardner v. .Ron;* (2 Sim. & St. 346), Small v. ^toow/
(3 Y. & C. 105), Grigg v. Cocks (4 Sim. 438), Sims v. Bond (5 B. & Ad.
389), z jwfe ffriJik (3 D. & C. 339), Foley v. Hill (1 Ph. 399; 2 H. of L.
Ca. 28), Manmngford v. Toleman (1 Coll. 670), Pmfoj1/2 v. Wright (2 Hare, 120;
S. C. on Appeal, nom. Murray v. Pinkett, 12 01. & Fin. 764), Trench v.
Harrison (17 Sim. 111). /it/y 16. the lord justice knight bruce. As in this case (subject to the
possible effect on our minds of a reply if one shall be addressed to us) we
have arrived at a conclusion which practically, so far as the particular cause
before us is concerned, approaches nearly [380] that of the Master's report, we
have thought it right now to state our present opinions; and in the event of
the Plaintiff's leading counsel desiring, after hearing these, to reply, he
shall be attentively listened to, if not on this day on some other that may
suit him better. Nor need we assure him of our readiness to own if he shall
effect a change in our views. The matter stands thus:- The late Mr. George Green, as an official assignee in bankruptcy, or in
that character and otherwise, was a trustee for various persons and purposes.
The trusts thus reposed in him were many, and the persons interested
respectively in them numerous. In the course of their performance he received from time to time on
account of them respectively various sums of money, for which, not having
discharged himself of them in hia lifetime, he was accountable at his death. He employed two banking establishments as his bankers, one the Bank of
England, the other the London Joint Stock Banking Company. With each severally
he had but one account, and in each instance the account was kept with him as a
private man merely, without any official designation, without any title of a
trust, without anything to mark that he was not alone interested in the amount
for the time being due to him upon it. On the account with the Bank of England
there was a balance in Mr. Green's favour at his death of 1988, 11s. 8d. On the
account with the London Joint Stock Bank there was a balance then in his favour
of 2174, Os. lOd. He died on the 22d of October 1849. Soon afterwards it was alleged against his executors, but disputed by
them, that of these two sums the whole [381] of the former and the greater part
of the latter belonged specifically to the trusts that I have mentioned,
exclusively of his general creditors. Hence arose this suit, instituted in a
form not under the circumstances incorrect, on behalf of the several persons
interested in those trusts. The points raised being, whether the whole or any
and what part of the balance at the Bank of England, and the greater or some
and what part of the balance at the London Joint Stock Bank do in truth belong
specifically to the trusts, it being certain that Mr. Green was, at his death,
accountable to the trusts in the aggregate for an amount equal to the amount
claimed, or for more. The Master upon a reference to him has found certain facts. It is
admitted, on each side, that some at least of the facts so found are accurately
found and true; and the only question is, what are the just inferences from the
undisputed facts-what are their legal or what their equitable consequences'! In
order to answering this question, it will be convenient, in the first place, to
suppose certain cases, and come to a conclusion upon them. Thus, let me suppose
that the several sums for which, as I have said, Mr. Green was accountable at
the time of his death, had been (that is to say, that the very coins and the
very notes received by him on account of the trusts respectively had been)
placed by him together in a particular repository-such as a chest-mixed
confusedly together as among themselves; but in a state of clear arid distinct
separation from everything else, and had so remained at his death. It is, I
apprehend, certain, that after his death the coins and notes thus circumstanced
would not have formed part of his general assets, would not have been permitted
so to be used ; but would have been specifically applicable to the purposes of
the trusts on accounfof which he had received [382] them. Suppose the case that
I have just suggested to be varied only by the fact, that in the same chest
with these coins and 556 PENNELL V. DEFFELL 4DE 0. M. & 0. 383. notes Mr. Green had placed money of his own (in every sense his own), of
a known amount-had never taken it out again-but had so mixed and blended it
with the rest of the contents of the chest, that the particular corns or notes
of which this money of his own consisted could not be pointed out-could not be
identified. What differÁence would that make 1 None, as I apprehend, except (if
it is an exception) that his executors would possibly be entitled to receive
from the contents of the repository an amount equal to the ascertained amount
of the money in every sense his own, so mixed by himself with the other money.
But not in either case, as I conceive, would the blending together of the
trust-monies, however confusedly, be of any moment as between the various
cestuis que trustent on the one hand, and the executors as representÁing! the
general creditors on the other. Let it be imagined that in the second case supposed, Mr. Green, after
mixing the known amount of money of his own with the trust-monies, had taken
from the repository a sum for his own private purposes, and it could not be
ascertained whether in fact the specific coins and notes, forming it, included
or consisted of those or any of those which were, in every sense, his own
specifically, what would be the consequence 'I I apprehend that, in equity at
least, if not at law also, what he so took would be solely or primarily
ascribed to those contents of the repository which were in every sense his own.
He would, in the absence of evidence that he intended a wrong, be deemed to
have intended and done what was right; and if the act could not in that way be
wholly justified, it would be deemed to have been just to the utmost amount
possible. If these propositions, which I believe to be [383] founded in
principle, and supported by authorities cited during the argument as well as by
others, are true, can the Plaintiff be wholly wrong in his actual contention 1
I apprehend not. In the first place, we are not embarrassed with any statutory question
of order and disposition or reputed ownership. Such considerations are out of
the case. In the next place, there is here no dispute with either of the two
banking establishments -each is indifferent to the contest; nor is there any
dispute among those whose interests are represented by the Plaintiff. The
controversy is merely between them (agreeing and acting together) on one side,
and the executors as representing the general creditors of Mr. Green on the
other; nor do the executors deny that if the Plaintiff is wholly wrong in his
specific claim, those whose interests he represents are general creditors of
Mr. Green for an amount equal to the balance at the Bank of England, and a
further amount equal to as much as the Plaintiff claims of the balance at the
other bank. When a trustee pays trust-money into a bank to his credit, the
account being a simple account with himself, not marked or distinguished in any
other manner, the debt thus constituted from the bank to him is one which, as
long as it remains due, belongs specifically to the trust as much and as
effectually as the money so paid would have done, had it specifically been
placed by the trustee in a particular repository and so remained : that is to
say, if the specific debt shall be claimed on behalf of the cestuis que
trustent, it must be deemed specifically theirs, as between the trustee and his
executors and the general creditors after his death on one hand and the trust
on the other. Whether the cestuis que trustent are bound to take to the
debt-whether the deposit was a breach of trust, is a different question. E 384] This state of things would not, I apprehend, be varied by the
circumstance e bank holding also for the trustee, or owing also to him, money
in every sense his own. It may be, however, and as I think is true, that
cheques drawn by the trustee in a general manner upon the bank, would for every
purpose be ascribed and affect the account in the mode explained and laid down
by Sir W. Grant, in Clayttm's case. The principles there stated would, I
conceive, be applicable, notwithstanding the different nature and character of
the sums forming together the balance due from the bank to the trustee,
whatever the purposes and objects of the cheques. Supposing, however, the bank
to apprise the customer, or the customer to apprise the bank,
conÁtemporaneously or with due dispatch of an intention to ascribe and apply a
cheque, in a manner out of the ordinary course, that, possibly, might make a
difference or raise a question; but a difference not here material, for not
here existing, nor a question here arising. For the actual circumstances of the
present case are thus :- With regard to the balance at the Bank of England, the
account with that establishÁment may, for every present purpose, be considered
as commencing, on one side, with the sum of 648, 3s. 3d. credited to Mr. Green
on the 30th of September 1849, which 4rao.H.*a.È. PENNELL V. DEFFELL 557 was clearly trust-money; and, on the other, with the 8 debited to him on
the 3d of October following. That and the sums afterwards debited to him in the
account appear to amount together to 470, Os. lid., and must, I am
apprehensive, be considered as general and not expressly appropriated drafts,
and, upon the principle of Clayton's case, be set against and accordingly
reduce the 648, 3s. 3d. as the earliest item of credit. The consequence is, I
think, that a sum of 72, 6s. 3d. mentioned in the report, being the only part
of the items of credit which, not specifically belonging to some trust, was in
every sense Mr. Green's own, must be deducted in [385] favour of the Defendants
from the balance of 1988, 11s. 8d. so as to leave of that only 1916, 5s. 5d.
applicable specifically to the demands of those or some of those whom the
Plaintiff represents on the record. With respect to the balance at the bank of the London Joint Stock
Banking Company, the account with that company may, for every purpose at
present material, be considered as commencing on one side with the item of 642,
15s. 7d., standing to Mr. Green's credit at the end of the year 1848; and, on
the other, with the 89, 11s. 3d. debited to him on the llth of January 1849.
That, and the other items of debit against him, appear to be general drafts,
and to amount together to 796, 4s. 7d., from which sum being deducted the 642,
15s. 7d., the earliest item of credit, there remains an amount of 153, 9s. Od. to
be applied in reducing the 210 forming the second item of credit, by which
means that item becomes diminished to 56, lls. Od., and that sum of 56, lls.
Od., the Plaintiff is not, and the Defendants are specifically, entitled to. So
likewise the 2, Is. 10d., and the 20 belong to the Defendants and not to the
Plaintiff. But to the residue, namely, to 2095, 8s. Od. of the balance of 2174,
Os. 10d., the Plaintiff is, I apprehend, entitled specifically against the
Defendants, upon the unquestioned facts found by the report. The Master's conclusions, therefore, are practically, I conceive, to be
but slightly departed from;-and I have said to what extent. As to the
exceptions, I had rather neither allow nor overrule any of them, but make upon
them and the further directions, the declaration and order proper to be made. It has been urged, that to assent to Sir G. Rose's conclusions in any
degree, whether practically or theoretically, [386] will be to contravene some
expressions of opinion attributed, and probably with correctness attributed, to
Lord Eldon in the case of Massey v. Banner (1 J. & W. 241). I am not,
however, satisfied that those expressions ought to be understood and applied,
as the counsel for the Defendants here have contended. Certainly, I may assert
my belief of this, that had the present cause been before that most eminent
Judge, in the circumstances in which it is before us, he would have decided it,
as I have stated that in my opinion it ought to be decided. Had I thought
otherwise, I should, to say the least, have hesitated much and long before
concluding to any extent in the Plaintiff's favour-well knowing how very little
is the chance that a man has of being right who, on a point of law or equity,
differs from Lord Eldon. the lord justice turner. George Green the testator, whose estate is in
the course of administration in this suit, was official assignee under several
bankruptcies, and was also assignee or trustee under several insolvencies and
of several partnership estates, in cases in which one or more, but not all the
partners had become bankrupt. He died 011 the 22d of October 1849. William
Pennell, the Plaintiff in this suit, has succeeded him in all or most of his
offices of assignee and trustee, and he claims to be entitled to certain balances
which at the time of Green's death were standing to his credit in account with
his bankers, upon the ground that such balances belonged to estates of which
Green was and the Plaintiff now is assignee or trustee. No objecÁtion was made
to the title of the Plaintiff to maintain this claim, and after the decision of
Lord Cot-[387]-tenham in Green v. Weston (3 Myl. & Cr. 385), I think that
such an objection, if made, could not have been supported. The testator George Green had two banking accounts ; one with the Bank
of England, the other with the London Joint Stock Bank. To each of these
accounts he was in tke habit of paying in monies belonging to the estates which
he repreÁsented, and also monies which belonged to himself individually ; and
upon each of these accounts he was in the habit of drawing, both on account of
the estates which he represented, and on his own private and individual
account. Upon each of these accounts there was a balance in his favour at the
time of his death. In one respect 558 PENNELL V. DEFFELL 4 DE
Q. M, & 0. 388. there seems to have been a distinction between the two accounts. The
account with the London Joint Stock Bank appears to have contained no receipts
or payments on account of estates of which Green was official assignee under
bankruptcies: and the account with the Bank of England appears to have
consisted mainly of receipts and payments on account of those estates; but I do
not think it necessary to pursue this distinction. It is sufficient for the
present purpose to observe, that each of the accounts embraced monies paid in
and drawn out by Green, partly on account of the estates which he represented,
and partly on his own private and individual account. The balance due to Green at the time of his death on his account with
the Bank of England amounted to 1988, 11s. 8d., and the balance due to him at
the time of his death on his account with the London Joint Stock Bank amounted
to 2174, Os. lOd.; and these balances form the subject of the present
contention. Inquiries [3883 having been directed by the decree upon the subject
of these balances, the Master by his report found that the whole of the 1988,
11s. 8d., the balance on the Bank of England account, and 2088, Us. 8d., part
of the 2174, Os. 10d., the balance on the London Joint Stock account, belonged
to the estates represented by Green as assignee or trustee; but this report
having been excepted to, the Master of the Rolls, upon hearing the exceptions,
decided that the whole of the 1988, 11s. 8d., the balance of the Bank of
England account, and the whole of the 2174, Os. lOcl., the balance of the
London Joint Stock Bank account, belonged to and formed part of the general
estate of Green. The conclusion at which the Master of the Kolls has arrived
rests upon the ground, that the monies belonging to the estates represented by
Green cannot be followed into the banking accounts ; and the first question
which we havo to consider upon this appeal is, whether that conclusion is well
founded. It is, I apprehend, an undoubted principle of this Court, that as
between cestui yne trust and trustee, and all parties claiming under the
trustee, otherwise than by purchase for valuable consideration without notice,
all property belonging to a trust, however much it may be changed or altered in
its nature or character, and all the fruit of such property, whether in its
original or in its altered state, continues to be subject to or affected by the
trust; and from this principle I do not understand the Master of the Rolls to
have in any degree dissented. Several cases illustrating the principle were
cited in the argument, but perhaps it cannot be better illustrated than by
referring to a case of familiar, almost daily occurrence, the case of
trust-monies employed in trade. An executor of a deceased partner continues his
capital in the trade with the concurrence of the surviving partners, [389] and
carries on the trade with them. The very capital itself may consist only of the
balance which at the death of the partner was due to him on the result of the
partnership account. That capital may have no existence but in the
stock-in-trade and debts of the partnership. The stock-in-trade and debts may
undergo a continual course of change and fluctuaÁtion, and yet this Court
follows the trust capital throughout all its ramifications, and gives to the
beneficiaries of the deceased partner's estate the fruits derived from that
capital, so continually altered and changed. We have here, I think, the most
perfect instance of the extent to which the doctrine of following trust
property has been carried by the Court, an instance, too, which exemplifies the
difficulties with which the Court has felt bound to grapple for the purpose of
carrying out that doctrine, for nothing can be more difficult, nothing more inconvenient
than to follow out such a case to its results. But of course in those cases as in other cases the property which is the
subject of the trust must in some manner be ascertained; and it is upon this
point of the supposed impossibility of ascertaining what portion of the
balances at the bankers' belonged to the trust, and what portion to the
separate estate of Green, the judgment of the Master of the Rolls in this case
has proceeded. These balances, it is said, are derived from two sources, the trust
estate and the private estate. How is it to be ascertained what portion of them
is derived from one source, and what portion from the other? Is it, I would
ask, more difficult to ascertain this than to ascertain what part of the
profits of a partnership are to be attributed to the capital of a deceased
partner, with the superadded difficulty, perhaps, of portions of that capital
having been from time to time drawn out? It may be said, that in the case to
which I have referred, the Court has a substratum on which to proceed-the
ascertained [390] 4DEG. M. &O.IM. PENNELL V. DEFFELL 559 amount of the deceased partner's share ; but is there not equally a
substratum in the ease before us, in tie amount of the trust-monies paid into
the banking-house1? Again, it may be said, that in the case to whieh I have
referred there are rules and principles by which this Court is guided, in
determining what belongs to the estates of deceased partners-rules and
principles which are not even yet, perhaps, clearly settled and defined; but
before we part with this question upon that ground, we must inquire whether
there are not also rules and principles by which this Court may be guided in
determining what, in such a case as the present, belongs to the trust estate. In order to test the question, whether it be true that it cannot be
ascertained what portion of the balances at the bankers' belonged to the trust
estate, let us simplify the case. Suppose a trustee pays into a bank monies
belonging to his trust to an account not marked or distinguished as a trust
account, and pays in no other monies, could it for one moment be denied, that
the monies standing to the account of the debt due from the bankers arising
from the monies so paid in would belong to the trust and not to the private
estate of the trustee 1 Then suppose the trustee subsequently pays in monies of
his own, not belonging to the trust, to the same account. Would the character
of the monies which he had before paid in-of the debt which had before
accrued-be altered t Again, suppose the trustee, instead of subsequently paying
monies into the bank, draws out part of the trust-monies which he has before
paid in, would the remainder of those monies and of the debt contracted in
respect of them lose their trust character? Then, can the circumstance of the
account consisting of a continued series of monies paid in and drawn out alter
the principle 1 It may indeed increase the difficulty of ascertain-[391 J-ing
what belongs to the trust, but I can see no possible ground on which it can
affect the principle. We must see, however, whether)the law does'not furnish the means of
meeting even the difficulty arising from such a continued series of monies paid
in and drawn out. I think that it does. I take it to be now well settled, that
monies drawn out on a banking account are to be applied to the earlier items on
the opposite of the account. By every payment which he makes, the banker
discharges so much of the debt which he first contracted. If that debt arose
from trust-monies paid in by the customer, so much of those trust-monies is
paid off, and, unless otherwise invested, on account of the trust, falls into
the customer's general estate and is lost to the trust, because it cannot be
distinguished from the general estate of which it has become part. If, on the
other hand, the earliest debt due from the banker arose from the customer's own
monies paid in by him, that debt is pro tanto discharged, and the trust-monies
subseÁquently paid in remain unaffected. The same principle runs through the
whole account; each sum drawn out goes to discharge the earliest debt due from
the banker which is remaining unpaid ; and thus, when it is ascertained what
monies have been paid in belonging to the trust, it becomes clear to what
portion of the balance which remains the trust estate is entitled. These are the principles which in my opinion-concurring fully in that of
my learned brother-are to be applied to such a case as the present. They are
plain and simple, and furnish, as it seems to me, a ready solution to all the
difficulties which can present themselves. They are the principles which govern
all other) accounts, and I can see no reason why they should not bo held
applicable to the accounts before us. [392] I cannot, therefore, concur in the conclusion at which the Master
of the Rolls has arrived, that these balances belong wholly to the estate of
Green. With deference to the Master of the Rolls I do not think that the case
of Massey v. Banner (1 Jac. & W. 241), on which he has mainly relied, supports
the conclusion at which he has arrived. That case, as I understand it,
establishes no more than this, that a trustee who pays in monies to his own
account at his bankers' is liable to his eestms que trustent for the monies
which he has so paid in, as he well may be. He has no right to mix the
trust-monies with his own, or to subject his cesluis que, trustent to the
difficulty of separating them. It is one thing however to say that the trustee
is liable for monies so paid in, and another that the testing que trust are not
entitled to the benefit of separating the trust-monies, if it be in their power
to do so. The case indeed contains some observations, which, as I read them,
are in direct opposition to the conclusion of the Master of the Rolls. Thus Lord
Eldon says (page 249), "See 560 PENNELL, V. DEFFELL 4 DE 0. M. & 0. S83. what the consequence is: If he had paid the sums in question to the
account of his sister's estate, and the bankers had then become bankrupts,
undoubtedly the trustees would have been entitled to prove the sum against
them. Even now that it is standÁing in his name, the trustees might be entitled
to prove it, by his confession, that it belonged to his sister's estate, and
then they would be in the same situation." If this right of proof would
exist upon the admission of the trustee, it can hardly, I think, be said that
it could not be established by evidence against him in a case where there is no
bankruptcy, and therefore no question of order and disposition. The case of Foley v. Hill (1 Ph. 399; 2 H. of L. Ca. 28) was also relied
upon on [393] the part of the Respondents, but that case again is perfectly
distinct from the present. The question there was between the banker and the
customer, not as in the present case between the customer and his cestuis que
tmstent. The case estabÁlishes merely that the relation of trustee and cestui
que trust does not exist between bankers and their customers, and does not at
all affect the question on which the present case depends, viz., what are the
rights of the cestuis que trustent of the customer against the customer, their
trustee ? These are the grounds upon which I find myself unable to concur in the
opinion of the Master of the Rolls. I differ also from the opinion of the
Master, and it will be right also to state the grounds on which I differ from
his opinion. The Master's opinion appears by his report to be founded upon this
principle- that the sums drawn out by Green on his private account ought to be
attributed to the sums paid in by him on that account, without reference to the
order in which the sums were paid in or drawn out, and the case of Pinkett v.
Wright (2 Hare, 120) was cited in support of that principle; but the case of
Pinkett v. Wright, in which I fully concur, ia I think materially
distinguishable from the present. Pinkett v. Wright was the simple case of a
person having shares in his own right and also as a trustee, and selling some
of the snares, and the Court held that the shares which were sold must be taken
to be those to'which the party was entitled in his own right. There was no
course of dealing, no bankruptcy account to be considered in the case of
Pinkett v. Wright, Now Green opened and kept these banking accounts upon the
usual footing, and [394] the Plaintiff, taking the benefit of the accounts,
cannot, as I think, be entitled to alter their character. Adopting them for the
purpose of establishing his demand against Green's estate he must, I think,
adopt them with all their incidents, one of which is that the monies drawn out
are to be applied to the monies first paid in. Upon any other footing this
consequence would follow, that a debt which had been extinguished at law by the
course of payment would be revived in equity by an alteration in that course.
Indeed it would follow that in all cases where trust-monies were paid by a
trustee into a bank to his own private account, they must be held to have
remained there so long as the trustee may have had monies of his own in the
bank to answer his drafts, whatever may have been the dealings upon the account
and however long it may have continued. To apply the principle of Pinkett v.
Wright to such a case as the present was, in my opinion, an unwarrantable
extension of that principle, and certainly it would be attended with the
greatest inconvenience. I may remark, further, that the conclusion at which we have arrived in
this case seems to me to be in conformity with the view of Lord Eldon to be
collected from the case of Lord Ghedworth v. Edwards (8 Ves. 46). In that case
Lord Eldon, in the first instance, granted the injunction as to the monies in
the bank, but afterwards, upon more mature deliberation, he refused that part
of the injunction, and the ground on which he refused it was that the last
payment, meaning as appears clearly by the context the last payment into the
bank, had been made two years ago, thus indicating that had the last payment
into the bank been recent, so that it could have been inferred that the monies
remained there, he would have maintained [395] that part of the injunction
also. After this indication of his opinion I feel no doubt that Lord Eldon
would in the case before us have gone at least as far as we have gone. My only
doubt is, whether he would not have gone much further. I am therefore also of
opinion that this order must be reversed, and that the true result of the case
is that which my learned brother has expressed. (1) The following are the material sections of the order:- 13. That no official assignee shall keep under his control upon any one
estate 4 DE O.K. AS. 895. TUCKER V. HERNAMAN 561 more than -100, or, in the aggregate of monies of bankrupts' eatate,
more than 1000, and any excess beyond such sum shall be paid by him forthwith
into the Bank of England. 14. That the official assignee, at the time of paying any monies into
the Bank of England, shall state in writing, delivered therewith to the cashier of
the Bank, in the form specified in the schedule hereunto annexed (No. 4), the date
and amount of the payment, the name of the official assignee making it, the name
and description of the bankrupt or bankrupts to whose estate the money belongs, and that
it is to be placed to the credit of the accountant in bankruptcy; and the
official assignee shall take a receipt for the same from the cashier of the Bank, and on
the same day carry or transmit it to the office of the accountant in bankruptcy, who
will give a proper voucher for auch receipt, and that the money is placed to the credit of
the estate of the said bankrupt or bankrupts in the books kept in the office of the
accountant in bankruptcy; such voucher to be produced when called for by the Court. 15. That all monies without exception received by the official assignee,
and not paid by him forthwith into the Bank of England to the credit of the
accountant in bankruptcy, shall be paid by the official assignee, as soon as they
shall amount to 100, into the hands of a banker, with whom such official assignee shall
keep an account as such official assignee, such account to be entitled as official
assignee, and in which account no monies shall be entered except such as are received by
the official assignee in his official capacity.