The trustee in bankruptcy disclaimed an agreement for a lease under Section 23. The landlord claimed to prove as creditor under the section.
Held: Where one party has repudiated a contract and the other party has accepted that repudiation as terminating the contract and he then exercises his secondary right to claim damages ‘Surely he is to prove for the damage which could be recovered for the breach of the contract.’ ‘I am satisfied that the injury referred to in the sub-section means the legal wrong that is done him. He is deprived of a certain contract, under which he was to recover a certain sum of money, and he is to prove against the estate for that which he would have had a right to recover or to sue for if he had not been deprived of that right by the bankruptcy.’ and ‘A landlord who has made a contract for andpound;500 a year, to be paid to him for the use of the land, is entitled to claim andpound;500 a year, minus what he can get for the land from another tenant.’
Mellish LJ said: ‘It is quite plain that the object of these sections is that the bankrupt should be absolutely relieved from any liability under any contract he has ever entered into. And the bankrupt being so relieved, it is plainly also the intention of the Legislature that the person deprived of the right of action against the bankrupt, and of the benefit of the contract which he made with the bankrupt, should be turned into a creditor in respect of what the Act describes the injury he has received. That, I think, must mean in respect of what he would have been entitled to recover against the bankrupt if the bankrupt had remained solvent. It would be contrary to every principle that in assessing the damages which could have been recovered against the bankrupt if he had not been made bankrupt, and for which proof is made, you are to take into consideration the fact of the bankrupt being insolvent, so that the amount of the proof is to depend upon the extent of his insolvency.’ and ‘In estimating the amount of damages, you are to take into consideration that the landlord regains possession of the property, and if he can get as much rent for the property afterwards as before, then the damages would be nil:if he gets less, it will be the difference.’
Sir G Mellish LJ, James LJ
(1871) LR 7 Ch App 28,  UKLawRpCh 133
Bankruptcy Act 1869 23
England and Wales
Cited – In Re Park Air Services Plc; Christopher Moran Holdings Ltd v Bairstow and Another HL 4-Feb-1999
The tenant company went into liquidation, the receiver disclaimed the lease, and the landlord claimed compensation under the Act. The question concerned how the compensation was to be calculated.
Held: Where a solvent tenant under an onerous . .
Cited – Park Air Services Plc; Christopher Moran Holdings Limited v Bairstow and Ruddock CA 1-May-1997
If a lease is determined or treated as determined in a winding up or in a bankruptcy, the landlord is entitled to prove in principle for all the rent and other payments which he would have been entitled to recover from the tenant for the residue of . .
Cited – In re Nortel Companies and Others SC 24-Jul-2013
The court was asked as to the interrelationship of the statutory schemes relating to the protection of employees’ pensions and to corporate insolvency.
Held: Liabilities which arose from financial support directions or contribution notices . .
Lists of cited by and citing cases may be incomplete.
Updated: 08 October 2021; Ref: scu.197009