The court ruled that a creditor who is not party to a legal assignment cannot substitute their proof in bankruptcy proceedings, emphasizing the necessity of statutory authority and clear assignment.

The applicant in this case seeks to obtain payment of $35,938 out of the assets of the bankrupt in the hands of the Official Assignee before any payments are made to creditors who have proved in the bankruptcy.The Official Assignee recognises the merits of the applicant's claim but contends that this Court, sitting in bankruptcy and therefore limited in its jurisdiction by the statutory provisions governing bankruptcy proceedings, has no power to make the orders granting the relief sought by this motion.

The facts, so far as they are material, can be briefly summarised.In 1952 the Asia Construction Co., of which the two bankrupts, Kho Chong Nee and Zee Chi Mai were the partners, was in grave financial difficulties.The only asset the firm had was a claim for damages for breach of contract against a building owner, Mizrahie by name, but it was a very important claim as it was for approximately $170,000.The Asia Construction Co., however, did not have the funds to meet the legal expenses involved in prosecuting the claim and therefore in March 1953, one of the partners approached the applicant for a loan for this purpose.The applicant agreed to advance $18,250 on the understanding that if the claim was successful, he should be repaid out of the proceeds in top priority over the creditors' claims and that the claims of the latter should be paid pro rata of the balance which remained after paying him in full.The substance of this agreement was communicated to the creditors, 31 in all, in a circular letter dated 13 March 1953 and all of them signed it. Unfortunately the initial loan of $18,250 proved insufficient to meet all legal expenses, and two months later, on 7 May 1953 the applicant made a further advance of $15,000 to meet additional costs. A second circular letter was sent to the creditors seeking their concurrence to this further advance on the same terms as the original advance, but only 26 out of 31 creditors signed it, later there was yet another advance, on this occasion for a comparatively small amount of $2,688 which was approved ex post facto at a meeting attended by 20 creditors on 22 September 1953.The total sum thus loaned by the applicant for the purpose of enabling Asia Construction Co. to prosecute their claim for damages for breach of contract against Mizrahie was therefore $35,938.The claim was referred to arbitration, and in September 1953 the arbitrator made an award in favour of Asia Construction Co. of $1m; this award was later varied by an order of the High Court and eventually the claim was settled for $53,000.Subsequently, in October 1954 the partners of Asia Construction Co. were adjudicated bankrupt and this sum of $53,000 was paid to the credit of the debtors' account in bankruptcy.It is out of the money which thus became available in the bankruptcy that the applicant now seeks to be paid the sum of $35,938.

There can be no doubt on these facts that the applicant is a creditor of the Asia Construction Co. for the sum of $35,938, but for some reason which was not explained to the Court he has not proved as a creditor in the bankruptcy.Instead he has put forward a claim in the bankruptcy which falls under two separate beads.First, he claims that the Official Assignee should be ordered to pay $35,938 to him direct out of the assets of the bankrupt; and secondly, in the alternative, that he, the applicant, should be substituted for the creditors who have proved their debts in the bankruptcy, in such a way as to ensure that he receives $35,938 before any dividends are paid to the creditors.

As regards the first head, it is to be remembered that the jurisdiction of the Court sitting in bankruptcy is a statutory jurisdiction and consequently the Court cannot order payments to be made by the Official Assignee out of the assets of a bankrupt to a third party, however reasonable and proper it may seem that they should be made, unless there is statutory authority for doing so. The Official Assignee contended

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