Re Schebsman, deceased [1944] Ch 83
Bankruptcy; agreement for payments to be made to debtor’s wife and daughter; whether trustee could claim funds.
Facts
Schebsman was employed by a company until 1940. He entered into an agreement with his employers under which he was to receive six annual payments as compensation for the loss of his employment. If Schebsman died before all six payments were made, the sums would be payable to his wife or daughter. Schebsman was declared bankrupt in March of 1942 and died in May of 1942. The trustee in bankruptcy sought a declaration that the sums payable to the wife and daughter formed part of the deceased’s estate.
Issues
The trustee argued the compensatory payments could be recovered by him from the widow because the deceased could have at any time have released the contract, and prevented the widow from receiving payment. As the trustee is in the same position as the deceased, it follows, he argued, that the trustee could recover the compensatory payments. The widow argued the contracting parties were bound by the terms of the contract. Under the agreement, the payments were to be made to herself or her daughter, and there was no term of the contract which could be construed as having conferred any right for the trustee to recover the monies. If the trustee did sue, he would hold the monies for the party who was beneficially entitled, i.e. herself or her daughter.
Held
The declaration was not granted. The deceased could not have directed his employer to make the payments to anyone other than his wife or daughter without breaching the contract. There is no principle in equity which would allow the trustee to claim funds which the debtor could not obtain without breach of contract.
Updated 21 March 2026
This article accurately summarises the facts and decision in Re Schebsman (deceased) [1944] Ch 83. The case remains good law and is still regularly cited in discussions of privity of contract and third-party rights. Readers should note, however, that the broader legal landscape surrounding third-party rights has since changed significantly. The Contracts (Rights of Third Parties) Act 1999 now allows third parties to enforce contractual terms in certain circumstances, which would be highly relevant to a scenario of this kind arising today. While the 1999 Act does not alter the decision in Re Schebsman itself, students should consider the case alongside the Act and the extent to which the Act might affect the outcome of similar facts in a modern context. The article does not address this statutory development, which is a material limitation for readers researching the current law.
