Re Schebsman (Deceased) Ex parte Official Receiver
Court of Appeal
Citations:  Ch 83;  2 All ER 768.
The deceased had lost his employment. The employers agreed to pay him compensation for this in instalments. The contract provided for certain payments to be made to his widow if he died before all payments were complete. The deceased became bankrupt, but died a month later.
The employers indicated that they would begin making payments to the widow. The deceased’s official bankruptcy receiver made a claim for these sums. The widow opposed this, claiming those sums were now due to her under trust. The receiver argued that the deceased always had the right to intercept the payments. This made them part of his estate for the purposes of bankruptcy.
- Was the receiver entitled to claim the payments due to the widow?
The Court of Appeal held in favour of the widow. While the contract did not create a ‘trust of a promise’ in her favour, the receiver could not claim the sums. This was because the deceased’s estate had no power to claim the sums without being in breach of contract. Similarly, the debtor had no right to unilaterally change his mind in his lifetime and ask for the payments to be made to someone else after his death. The receiver could only claim sums which the deceased himself would have been able to claim.
This Case is Authority For…
Receivers in bankruptcy have no power to claim sums which the debtor himself could not have claimed.
Lord Greene noted that the wife had no power to sue for the payments if the employers had decided not to pay them to her. This was because she was not a party to the deceased’s contract. Any payments the employers made to her would be voluntary gifts.
This case shows the limits of the old ‘trust of a promise’ mechanism for escaping the effects of privity of contract. The court explained that they could not turn a contract into a trust where there was no evidence that the parties intended to create a trust. In the modern era, the wife could claim the sums under the Contracts (Rights of Third Parties) Act 1999.