Re Schebsman, deceased [1944]

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.