Asset Adjustment
In re Beattie, a Bankrupt.
Court of Appeal.
13 February 1907
[1907] 41 I.L.T.R 42
Sir S. Walker, Bart. L.C. Holmes L.J.
In his examination Tate was asked: Having issued this writ, did you call on Mr. Beattie? I did. And did you threaten him with various pains and penalties? I either wanted money *42 or goods. And you took goods? I would rather have had the money, and I told him I would take whatever he could give me. He told me he could not give me the money at that time. Did he agree then to give the goods to you? Yes, he told me he would give me goods to satisfy the amount of the account. The bankrupt in his examination was asked: After having been served with the writ did you go to see him? Yes. And you had a conversation with him about the claim? Yes. Did he propose to take away some of the goods? I offered to give him some. Before you offered to give him the goods had he made any threat as to what he would do? No; I said I would give him some goods, and he came next day and removed the goods. Did he remove all the goods? Well, practically all I had; a couple or three pounds’ worth were left. Before he served this writ on you had he any conversation with you? Yes, and he said he must have his money or the goods.
After this evidence had been obtained the Official Assignee (no creditors’ assignee having been appointed as the estate was very small) brought by motion on notice an application to the Judge of the Belfast Local Bank-ruptcy Court for an order on Tate to return the said goods or to pay the price of same on the ground that the transaction constituted a fraudulent preference, and also on the ground that it constituted an act of bankruptcy, inasmuch as it was a fraudulent transfer of the bankrupt’s estate. On behalf of Tate it was contended that the sole question for decision was whether or not there had been sufficient pressure brought to bear on the bankrupt to prevent the removal of the goods from being regarded as a fraudulent preference. The Recorder took the latter view and refused the motion of the Assignee. Subsequently, a creditors’ assignee was appointed, and the present appeal was brought on behalf of the Official Assignee and the creditors’ assignee to have the Recorder’s order reversed, and for an order that John Tate do hand up to the Official Assignee the goods obtained by the said John Tate from the bankrupt on or about Nov. 7, 1906, being within three months prior to the adjudication of the bankrupt, or, in the alternative, that the said John Tate may be ordered to pay to the said Official Assignee a sum of £28 15s., being the value of the said goods, upon the grounds that the transferring of same by the bankrupt to the said John Tate constituted a fraudulent preference within the meaning of s. 53 of the Bankruptcy (Ir.) Amendment Act, 1872, and also on the grounds that the said transfer constituted an act of bankruptcy within the meaning of s. 21 (2) of the said Act.
R. Doyle for the appellants.—The transfer of the goods was a fraudulent preference within s. 53 of the Bankruptcy Act, 1872; it was also an act of bankruptcy within s. 21 (2) of that Act. The evidence entirely displaces the contention that the goods had been lent. The entire property was handed over for a past consideration: In re Wood, L. R. 7 Ch. 302; Smith v. Cannan, 2 El. & Bl. 35; Young v. Fletcher, 3 H. & C. 732.
D. M. Wilson for the respondent.—The evidence is that the goods were lent. It was an ordinary honest transaction, and there is no suggestion of collusion. There is abundant evidence that the goods were handed over under pressure, and, therefore, there was no fraudulent preference. To be an act of bankruptcy there must be a fraudulent transfer of property. That is not so here.
Sir S. Walker, L.C.
We shall reverse the order of the Recorder and make an order that this gentleman bring in the sum of £28 15s., being the value of the goods. The case is made that they were a loan from Tate to Beattie, but that is negatived by the documents and by the acts of the parties. The account furnished is in respect of “goods sold,” and it affords the strongest evidence of the real nature of the transaction. It is an ordinary demand in respect of goods sold and delivered. On Nov. 6, a writ was issued claiming £22 10s. “for goods sold and delivered,” and on the very next day the goods were removed. The receipt also treats the case as one of goods sold and delivered. On the evidence, I come to the conclusion that the whole of the property was handed over except a nominal amount of £3, and that this was done in respect of a past debt. On that very day he practically closed up his shop, and it was an act of bankruptcy. Tate must pay in £28 15s., which is his own measure of the value of the goods he got.
Holmes, L.J.
On the first question, as to whether this was an ordinary transaction of goods sold and delivered, I have no doubt whatever. The contention that is sought to be made—that it was a case of a loan—is contrary to all ordinary ideas and usage, and the documents themselves remove any doubt on the point. No steps were taken in the matter until Nov. 6, when the writ was issued as for “goods sold and delivered,” and on Nov. 7 he went and asked for the money or the goods, and the goods were given. I think the pressure brought to bear on Beattie would be a very good reason for not allowing this application, if the amount removed was only a small portion of the property. But here it was sweeping away practically all the man’s stock. Under the circumstances, it was an act of bankruptcy. The application of the *43 Assignees must be allowed, and Tate must bring in £28 15s.
Re Lavender, a bankrupt
Bankruptcy.
14 December 1894
[1895] 29 I.L.T.R 106
Miller J.
Dec. 14, 1894
Bankruptcy—Fraudulent payment—Preferential payment—Costs—35 & 36 Vic., c. 58, s. 53.
A payment made by an insolvent person on the verge of bankruptcy will be sustained if made in the ordinary course of business transactions between payer and payee; provided that the payee had no notice of the insolvent circumstances of the payer. Though such a payment be made under suspicious circumstances which justify the interference of the assignees, yet the court will allow a successful payee his costs where he was not reponsible for the suspicious circumstances.
Butcher v. Stead, 17 H. of L. Cas. 846, followed.
Charge and discharge. The bankrupt was a flax and tow merchant, carrying on business at Belfast and Ballymena, and he attended at various towns for the purposes of buying tow and flax on commission, and on his own account. He had a banking account in the Ballymena branch of the Belfast Banking Co., but had the privilege of having his cheques honoured to an agreed amount in several other branches of the Bank in towns which he attended to buy flax and tow. On the 24th of June, 1893, bills of the bankrupt’s for £978 were due in London. On the 23rd June, 1893, the bankrupt attended at the head office of the Bank in Belfast, and drew his own cheque for this sum, and lodged it with the Bank to meet the bills, and the cheque was duly forwarded to the Ballymena office. On the morning of the 24th June, 1894, the bankrupt went to the Ballymena office, and stopped this cheque. He then drew a cheque for £427, of which he directed £210 to be sent by Bank draft to Adams at Strabane, which was done. Adams was in the habit of buying flax and tow at Strabane and in the vicinity, which he kept for Lavender, who purchased large quantities, and for twenty years this practice existed, and these dealings were always for cash. On the 20th June, 1893, Adams had an interview with the bankrupt at Strabane, and asked for a cheque for £210, for flax and tow bought for the bankrupt, and the bankrupt promised to pay on his return home. Adams at this time thought that the bankrupt was perfectly solvent. The bankrupt subsequently drew a cheque for over £1,200 to meet the London bills, but it was dishonoured by the Bank, as the bankrupt’s limit of £4,000 credit was exceeded. Had the payment not been made to Adams, it would not *106 have exceeded the credit. The assignees filed a charge in the bankruptcy which ensued, charging that the payment to Adams was not bona fide, that it amounted to a fraudulent preference, and that it should be repaid to the estate.
Judge Miller held that on the evidence he should decide for the dischargeant. Section 53 of the 35 & 36 Vict., c. 58 (1872), dealt with fraudulent payments which are made preferentially to the prejudice of the creditors. This section was copied from s. 92 of the English Act of 1869, and both sections had been frequently under consideration, and the law is well settled. Where a payment is bona fide made in the ordinary course of business, it is not a preferential payment, though it may be one which is prejudicial to the interests of other creditors. Nor is it such where it is made in answer to threats of legal proceedings, or under duress, where the creditor is paid bona fide. Upon the evidence he found that the payment was one made in the due course of business, and in accordance with a long practice of cash settlements; and though the bankrupt was steeped in difficulties, he thought that Adams was within the words of s. 53 of the Act of 1872, and was a “payee in good faith,” and he followed the decision in the case of Butcher v. Stead. He therefore declared Adams entitled to retain this money. Though the case was a suspicious one, yet Adams did nothing to disentitle him to his costs, which he should have.
Re Lavender, a Bankrupt
Bankruptcy.
14 December 1894
[1895] 29 I.L.T.R 128
J
Judge Miller held that it was clear that Lavender was insolvent at the date of the payment. It had been argued that no injury was done to the estate by this payment, since it merely decreased the debts by that paid to Hyndman out of money advanced by the bank, to whom Lavender was already largely indebted, and the only difference made was that one creditor was substituted for another. But what he had to con *128 sider was how and why the payment was made, and he could not consider that argument; the point was outside the question. If the payment was a fraudulent preference, then the money should be repaid, irrespective of how it was obtained, and justice should be done the bank if the payment was made with money obtained from them unfairly. If the section of the Act of 1853 had not been introduced into the Act of 1872, he would not have hesitated to declare the payment bad, as made without pressure and in contemplation of bankruptcy. The mere request for payment was not such pressure; pressure meant the threat and intent of legal proceedings to enforce payment, or some other means of enforcing it, combined with an ability to make the threat good. He was of opinion that Hyndman came within the words of the 53rd section of the Act of 1872, and that the payment was made “with a view to give a preference” to Hyndman over his fellow-creditors, and he was not “a payee in good faith.” He would order that Hyndman & Co. be admitted to proof of their debt, and, with the assignees’ consent, they should be allowed to deduct from the repayment of the £217 the amount of the dividends already declared, and the balance, or whole if the assignees demanded it, of the £217 should be lodged in the matter. The dischargeants must pay the assignees their costs, and bear their own.
Re Rachael Gordon;
Local Bankruptcy.
1 February 1897
[1897] 31 I.L.T.R 87
His Honor, Judge FitzGibbon Recorder of Belfast.
Jan. 25, Feb. 1, 1897.
Bankruptcy—Charge and discharge—Mortgage prior to petition—Fraudulent preference—Act of bankruptcy.
A married woman, the owner of a public-house, executed a mortgage of the house and licence on Aug. 19, 1896, to a person who was her security to a bank for an advance of £60, and to whom she was indebted in the sum of £10 for cash lent. On Sept. 19 she consented to the immediate sale by the mortgagee of the premises; this sale took place on Sept. 28. On Sept. 25 she sold by auction all her goods and chattels, and on Oct. 1 a petition was filed by a creditor. On Oct. 2 the security paid the £60 to the bank. The bankrupt alleged that the mortgage and sale were under pressure:
Held, that the bankrupt’s allegations were negatived by the conduct of herself and the mortgagor—e.g., in withholding certain letters; that the pressure was only apparent; and that the mortgage was fraudulent and void; and being substantially of the whole of the bankrupt’s estate, was an act of bankruptcy.
The following facts appeared on a motion to hear the charge and discharge:—The bankrupt, a married woman, in 1892 became the owner of a public-house, held from year to year, with a licence attached to it. Alex. Bell, the chargeant, who was her brother-in-law, became her surety for £60 to the Northern Bank, and, in addition, she was at that time indebted to him in the sum of £10 for money lent. In July, 1896, she asked him in a letter, which was not produced, to increase the guarantee to the bank. He refused, on the alleged ground that he had heard her husband was doing badly. On Aug. 7, in pursuance of a letter, which was not produced, he came and asked her for the licence of the publichouse as security, and on pressure she endorsed it over to him. On Aug. 18, in pursuance of a letter, which was not produced, she went to the office of the chargeant’s solicitor, and signed a mortgage. This she alleged was done under pressure. The mortgage was dated Aug. 19, and, after reciting that she was indebted to the mortgagor, A. Bell, in the sum of £70, contained in a covenant by her to pay same, with interest at 5 per cent., on Feb. 19 then next, and a legal conveyence of the premises. At the time she executed the mortgage she had no property of any kind except the public-house and licence, and the stock and chattels on the premises. On Sept. 19 she signed a document, sent to her by the chargeant’s solicitors, consenting to an immediate sale of the premises. On her examination the bankrupt said she did not want to sell, that the chargeant put *87 up the premises against her wish, and that she gave no instructions about the sale. On Sept. 20 she instructed Mr. Shooter, an auctioneer, to sell her goods and chattels. This he did on Sept. 25, and realised £19 6s. 7d., out of which he paid, by her direction, £10, the half-year’s rent of the premises due on Sept. 1. The auctioneer subsequently sent a communication to the official assignee to the following effect:—“When I was instructed to sell for her it was chiefly to realise what would pay some rent overdue, and to avoid likely a distress for same. A person, on behalf of the landlord, along with Mrs. Gordon, instructed me, and attended the sale until we had realised what would pay the rent and expenses.” The bankrupt returned the balance in the auctioneer’s hands as amounting to £10; on Jan. 4 the registrar ascertained it to be £8 16s. 7d.
On Sept. 28, on the instructions of the solicitors for the mortgagor, the public-house and licence were sold by auction for £155, of which the sum of £46 10s. was paid as deposit and auction fees. The sale was made subject to a condition that it should be completed at once, or not later than Oct. 5. On Oct. 1 a petition was filed by a creditor. The £60 due to the bank by the chargeant was not paid until Oct. 2.
Representation
W. Martin M’Grath appeared for the chargeant.
T. Harrison appeared for the assignees.
His Honor.
The non-production of Bell’s letters of August to the bankrupt, which might show what was going on between them; the signing of the mortgage after her statement why she would not sign it, and her shortly afterwards signing a consent to an immediate sale; the voluntary sale of her stock and chattels by the bankrupt on Sept. 25, to enable her to pay the half-year’s rent, due Sept. 1, in relief of, and for the benefit of, Bell, who was liable to pay it under his legal mortgage; the non-production of some of the letters which passed between him and the bankrupt, referred to in his depositions, which he explains by saying he did not keep private letters; the contradictory statements appearing in the depositions of the bankrupt and of Bell, and their entire proceedings suggest that the pressure of Bell was only apparent, and that, if the bankrupt was not a voluntary assenting party, she was ready and willing to comply with any request of her brother-in-law for the purpose of securing him. It is not, however, necessary to decide the case on the ground of fraudulent preference, as I have no doubt the execution of the mortgage was an act of bankruptcy. No substantial part of the bankrupt’s estate was unaffected by it. The case is not distinguishable from Re Wood, L. R. 7 Ch. 302. To prevent such a deed being an act of bankruptcy, the exception of property must be substantial, as was decided in Ex parte Hawker, L. R. 7 Ch. 214, while in Re Parker, 26 Ch. D. 26, and Re Porter, 9 Ir. L. T. R. 149, pressure is immaterial. In Re Wood, the chief judge says: “It has been proved beyond doubt that the debt for which the security was given was actually due, and that there was a very large amount of pressure used before the security was obtained. The evidence was all the one way.” And yet the Court of Appeal declared the security fraudulent and void. Nor is it material that the parties were acting bona fide. In Re Sinclair, 26 Ch. D. 331, Cotton, L.J., says: “I do not mean to say, indeed I do not think, that the creditors would not have been paid, and I cannot say that this would not have been a good way of paying them. Still, in my opinion, if persons will take from a man who is in difficulties a deed of this description, which has the effect of withdrawing, and is intended to withdraw, all the property of the debtor from the legal process which his creditors have a right to enforce against him, and bankruptcy ensues, the deed is void under the bankruptcy law. It is fraudulent as well as void, whatever may have been the view of those engaged in the transaction that it might be the best thing for the debtor, or that it might afford an effectual way of paying the creditors.” Declare the mortgage of Aug. 19, 1896, fraudulent and void as against the assignees, and let Alex. Bell pay to them their costs of the charge and discharge when taxed and certified.
In the Matter of Ursula Radcliffe, a Bankrupt
Supreme Court of Judicature.
Court of Appeal.
22 May 1916
[1916] 50 I.L.T.R 81
Sir Ignatius O’Brien, L.C.
Has the Local Bankruptcy Court any jurisdiction to tax costs incurred in the High Court?
Tobias. —I have made enquiries and find it is the general practice in cases like this.
Molony, L.J.
The order under which the bill is taxed says the costs are to be taxed by the Taxing Master—that means the taxing officer of the High Court.
McGonigal, K.C. (with him Robb ).—It is certainly the present practice for the Registrar of the Local Bankruptcy Court in Belfast to tax these costs.
Sir Ignatius O’Brien, L.C.
This Court decided years ago that the local Court had no jurisdiction.
McGonigal, K.C.—The Court reporter has referred me to the case: In the Matter of Jeremiah A. Hanafin, a Bankrupt, [1907] 2 I. R. 109.
Sir Ignatius O’Brien, L.C.—It is most unsatisfactory for the local Court to disregard that case. If the practice is as counsel say, it is wrong.
The Court made the following order: “It appearing to the Court that the costs in this Matter should have been taxed by the Taxing Master as directed by the order of this Court, and that the taxation which has taken place was made without jurisdiction; and counsel for the appellant undertaking to withdraw the costs lodged for taxation, and which purport to have been taxed by the officer of the Local Bankruptcy Court: Discharge order and in lieu thereof direct that all the said costs be in accordance with the order of this Court taxed by the Taxing Master, and let each party abide his own costs here and below.”
In re M’Cue: Whelan and Others v M’Cue
Court of Bankruptcy.
19 February 1878
[1878] 12 I.L.T.R 37
Miller J.
The bankrupt had for many years held a farm in the Queen’s County of about 27 acres, as tenant from year to year, at £31 18s. 4d. The bankrupt was adjudicated on the 25th of May, 1877, and Edward Whelan was, on the 22nd of June, 1877, appointed creditors’ assignee. The assignees filed their charge on the 28th of July, 1877, seeking to have a sale of the said farm—therein stated to have been had on the 27th of November, 1876—declared fraudulent and void, as against the chargeants, with other consequential relief. The charge, after a statement of the particulars of the said bankrupt’s farm and the property upon it, alleges, in paragraph 4, as follows:—“Before and during the time of the transactions hereinafter mentioned Patrick M’Cue, a brother of the bankrupt (and hereinafter described as the dischargeant), lived with the bankrupt, and helped the bankrupt in the management of the said lands, and was intimately acquainted with all bankrupt’s affairs. ” That paragraph is not anywhere denied or controverted. The charge then states, with some detail, the following facts, which are not controverted, namely:—That the bankrupt had seduced the daughter of the trade assignee, who, on the 28th of October, 1876, caused a writ to be served on the bankrupt in an action for damages in respect thereof, which came on for trial on the 13th of February, 1877, when the bankrupt did not appear to defend such action, and the trade assignee recovered judgment therein marked for £112. Paragraph 8 states that—“Shortly after the service of the writ, and before the sale hereinafter mentioned, the bankrupt sold off all the stock and horses he had on said lands.” The facts, as alleged in that 8th paragraph (whatever their value may be) have been abundantly proved out of the mouth of the bankrupt, on his examination, on the 27th of June, 1877. Paragraphs 9 and 10 are respectively admitted by the discharge, and state that—“On the 27th of November, 1876, the bankrupt caused to be set up and sold the interest of the bankrupt in said farm, and all the hay, oats, potatoes, and other farm produce on said lands, farming implements, utensils, and furniture, and that the entire of the property sold at said auction was purchased by dischargeant.”Paragraph 11 is not controverted—viz., “That the property sold at said auction comprised the entire of the bankrupt’s esta t e and effects.”Paragraph 12 alleges that—“The bankrupt, as he well knew, had no defence, in truth or in fact, to the action, and that the sale by auction was had by the bankrupt with intent to defeat and delay the assignee as plaintiff in that action, and to prevent the property of the bankrupt from being made available to meet the judgment to be recovered by him in the said action.” The dischargeant does not deny the allegations contained in that 12th paragraph, even on his belief, but his answer to it in his discharge is contained in the 4th paragraph, as follows:—“Dischargeant requires the chargeants to prove the several averments in the 12th, 13th, 14th, and 15th paragraphs.” Accordingly, for that purpose reference is made to the examination of the bankrupt on the 27th of June, 1877, where he is asked—at Question 125—“Would you have sold the place only the action was brought?” Answer—“ The chances are I would not. ” Question (126)—“Don’t you know you would not?” Answer—“A man don’t know what he may do.” (127)—“Before you were served with the writ did you intend to sell the place?” Answer—“No; for I thought I would get time to pay my debts.” And reference was, also, made to the affidavit of the bankrupt filed the 13th of December, 1877, as follows:—“That two actions were brought against me in October, 1876, by Edward Whelan (subsequently appointed creditors’ assignee as aforesaid), claiming £200 in each action, at the time I was in embarrassed circumstances and indebted to various persons and in banks. When the report went about that I was served with writs, everyone to whom I owed money applied to me for payment; and, to relieve myself and those who went security for me, I instructed Odlim to sell my farm, &c.” Thus, the allegations in that 12th paragraph, which relate to the bankrupt alone, and so far as relates to the bankrupt, have been fairly established out of the mouth of the bankrupt himself. But the remaining 13th, 14th, and 15th paragraphs, which the chargeants were thus required by that 4th paragraph of the discharge to prove, are directed against the dischargeant, and for the purpose of establishing complicity on the part of the dischargeant with the acts of the bankrupt. And, accordingly, that 13th paragraph commences by charging—“ That the dischargeant before and at the time of the sale was well aware of the pending of the said action. ” That fact, as thus charged, is admitted by the dischargeant upon his examination on the 27th of June, 1877, when he is asked at Question (176)—“Did you know anything about this action against him, i. e., the bankrupt.” Answer—“I did not know anything until for some time.” Question (177)—“Did you know the time he was served with the writ.” Answer—“ Of course I did. ” But that 13th paragraph of the charge goes on to allege and charge—“ That he, the dischargeant was, before and at the said time well aware that the object of the said sale was to defeat and delay the said trade assignee in the payment of any sum he might recover in said action. ” The dischargeant purports to meet that very specific charge by the general and vague denial contained in the 4th paragraph of his discharge, as follows:—“ Dischargeant denies that he was aware that the bankrupt ever *37 intended, or that he intended to defeat or delay the assignee, or that he was other than a bona fide purchaser at an open market and public auction. ” And the dischargeant has allowed that denial as contained in that 4th paragraph of his discharge to stand as the only answer (such as it is), although it does not purport to be any answer to the further paragraph numbered (23) which charges very specifically—“ That the said sale was not bona fide but was, to the knowledge of the dischargeant, a contrivance to delay, hinder, and defraud the said trade assignee of his said lawful action, and of the damages to be recovered therein. ”
Thus, upon these pleadings themselves the fact stands confessed, that, the sale was, to the knowledge of the dischargeant, a contrivance to hinder and defraud the trade assignee of his lawful action, and of the damages to be recovered therein.
But the case against the dischargeant does not rest there. However, before stating the 14th paragraph of the charge, it is necessary to observe that an auctioneer was employed to conduct that sale of the farm of the bankrupt—which was held within one month from the service of the writ upon him, and without any application having been made either to the landlord or his agent on the part of the bankrupt for permission to sell his interest in his farm, or on the part of the dischargeant to be accepted as the tenant thereof—who, in his answer to Question (No. 5) of his examination had on the 27th of June, 1877, stated—“ That he did not walk those 27 acres, and could not tell the value of them. ” And at Answer (22) he stated—“ There were three bidders—Salter, dischargeant, and Dowling ” (who has been proved to be a cousin of the bankrupt, with whom the bankrupt is at present residing). Paragraph 14 of the charge is as follows:—“ The said dischargeant, before said sale stated and made known to persons intending to attend said auction, that he intended to purchase the entire of the property that was to be offered for sale. ” That specific charge is not and could not be denied, as Salter—one of the three bidders at the auction—had proved upon his examination on the 27th of June, 1877, that the dischargeant had made such statement to him, who was a farmer living on the same townland with the bankrupt, on the day previous to the auction, and the dischargeant on his examination, upon the same occasion, has fully admitted that fact. But that (14th) paragraph goes on to charge “ That the dischargeant did this with the view and object of deterring intending purchasers from attending or bidding at said auction. ” The only answer given by the dischargeant to that very specific charge, as contained in that 14th paragraph, is contained in the 4th paragraph of his discharge, as follows:—“Dischargeant wholly denies that he in any way interfered to deter any one from buying or bidding at said auction. ” The 15th paragraph, which the chargeant is likewise required to prove, charges that “ The aforesaid statements and conduct of the said dischargeant did, in fact, deter intending purchasers from attending and bidding at said auction. ” The dischargeant does not deny that such statements and conduct of his, as laid to his charge and admitted by him, had the effect of deterring purchasers as alleged, and the only answer which he purports to give to that paragraph is contained in the 4th paragraph of the discharge, as follows:—“ That said auction was duly and fully advertised. ” And the chargeant, as required by the discharge, has filed an affidavit of a farmer named Robert Wills, on the 26th of November, 1877, which, among other statements, contains the following:—“I attended the said auction, as I live close to M’Cue ( i.e., the bankrupt); I was present when dischargeant became the purchaser of the interest of bankrupt’s farm for £18. I believe there would have been more competition had dischargeant not bid for bankrupt’s farm; there was hardly any competition for bankrupt’s farm; I believe people did not like bidding against dischargeant. ” And Salter, who did bid for the farm, also made an affidavit on the same 26th of November, 1877, with the significant paragraph—“ I consider £18 a small sum for the interest of the bankrupt under such a landlord as Mr. Wells Sandford. ” The case against the dischargeant does not even rest there, as paragraph 17 charges that—“ The prices at which said property was sold to dischargeant were grossly inadequate. ” And paragraph 19—“ The hay which was purchased for £2 per ton was well worth from £4 to £4 10s. ”Paragraph 4 of the discharge alleges, by way of answer, that “ It is untrue that the prices paid by dischargeant were inadequate, or that the goods there mentioned were of the value there stated. ” The evidence offered on behalf of the chargeant in support of these 17th and 19th paragraphs is that of George Vanstan, examined on the same 27th of June, 1877. 43 and 44—“That he is an auctioneer residing at Maryborough.” 45—That he knew the farm and saw it on the previous Monday. (46)—“That he walked it and valued it as held from year to year.” (47)—“ He would give £ 300 for the interest, if sold with the landlord’s consent. ” (48)—“ He would give £150 for it without the landlord’s consent. ” (49)—“ In his opinion it was worth that. ” He is equally emphatic in his depositions as to the hay at the said auction having been sold at a great undervalue. The evidence of the trade assignee, and his examination on the same 27th of June, 1877, as to the value of the property sold at said auction, is substantially to the same effect as that given by Vanstan. And the dischargeant himself, when cross-examined, on the same 27th of June, 1877, is asked at Question (203)—“Would you sell your interest in your farm for £150?” Answer—“ I would not have power to sell it.” (204)—“ Suppose you were offered £150 for it to-morrow, would you take it, and walk out of it? ” Answer—“I should get the consent of my agent before I could do these things.”“Don’t mind the agent.” No answer. And the dischargeant gives the best evidence as to the hay having been sold at an undervalue by deposing to the fact that a rick and a cock of the hay offered for sale was his (the dischargeant’s) own property, and was bought in by himself at £2 per ton, which was afterwards sold by him in the spring at £3 10s., and there is the additional element of value in the opinion of the bankrupt himself that he authorised his auctioneer to state in his advertisement of the auction. “ That the farm was held under an excellent landlord. ” That evidence, which would have appeared conclusive in its character as to the sales being at an undervalue, is encountered by the statement of the dischargeant that he had paid a year’s rent of £31 odd in addition to the £18; and by the affidavits of Patrick Kelly, holding a considerable farm immediately adjoining, and of Fayle, also a farmer, and the bailiff on the estate, stating that £18 was the full value of the interest in the farm. It is impossible to reconcile those statements with what I have already set forth in any other way than by supposing that their opinion was in some respect influenced by their partiality for an old neighbour and tenant; but some closer estimate may be formed of the statement by Fayle when he is found introducing into his affidavit an allegation—“That it was not the practice on the estate to permit the sale of tenants’ interests in their farms.” He is, however, careful not to state there, what he could not with truth state—viz, that the landlord never permitted the tenants to sell their interests; and it is perfectly consistent with his (Fayle’s) statement that if the bankrupt had applied to his landlord for permission to sell his interest, he could have obtained such permission, accompanied with proper safeguards as would have enabled him properly to dispose of such his interest to advantage, and I might call in aid of that view the records of this Court of a not distant date as to the conduct of Mr. Sandford, the landlord of the bankrupt, in that respect. The dischargeant also relied, as a circumstance accounting for the low price of £18, upon the fact that a notice had been served, on the part of the agent of the landlord, by Fayle, the bailiff, upon and read by the auctioneer, as stated by the affidavit of Kelly—“That it was contrary to the practice of the estate to sell the farm, and that a purchaser would not be accepted as tenant.” But, it is plain that the service of such a notice was the natural result of the bankrupt not having asked from the landlord or his agent previous permission to dispose of his interest in his farm, as being a necessary and unavoidable notice under such circumstances on the part of the landlord in order to protect him from the penal consequences of the Tenantry Act, and it would not be inconsistant with the other facts *38 in this case to suppose that the service of such notice was not unacceptable to the actors at the sale. The discharge further relies for a like purpose on the further fact as stated in the affidavit of Kelly—“That a notice was served on the part of the trade assignee (which is produced) cautioning all persons against buying the interest in the farm.” Such a notice may have had the effect as alleged of depreciating the price that could have been obtained for the interest in the farm when sold under such circumstances as stated, and, if so, it goes far to establish that £18 was not the value of the interest as alleged, if such interest had been disposed of as it ought to have been; but, however that may be, some such step on the part of the trade assignee was rendered necessary by the manner in which the bankrupt, with the full knowledge of the dischargeant, forced on and brought his farm to sale, as otherwise the trade assignee residing in the immediate neighbourhood, having a knowledge of the sale being thus carried on, would, very naturally, have been charged with acquiescence in all such proceedings, and thus estopped from impeaching them. It only remains to state that the whole money (including the price alleged to have been bid by the dischargeant for his own hay) was paid by the dischargeant, and that dischargeant was put into possession of the farm of the bankrupt and everything about it on the same day on which that auction was held. The application of the money which thus purported to have been realised at such sale by auction, was such as might have been expected to follow from the course which was adopted, inasmuch as £50 of such proceeds found its way to another brother of the bankrupt, residing at Ballinakill, alleged to have been paid in discharge of old debt; £30 more of those proceeds to the Bank of Ireland, in respect of a debt for which it may be assumed from the affidavit of the bankrupt that some other friend was liable; and the bankrupt concluded his examination as to the application of such money in his answer to Question 155:—“I was paid for everything except £21. That is all the money I have on the globe, if I ever get it.”
From what I have stated it is plain that I must declare the sale, as had on the 27th November, 1876, not to have been a bona fide transaction, and further, not only that the dischargeant knew, but, that also, from the very nature of the transaction the necessary and inevitable inference must be that the dischargeant must be taken necessarily to have known that the object of the bankrupt was to defeat and delay the trade assignee in his action and damages, which object would be fully obtained, if this transaction was permitted to stand. This is not the first occasion on which this court has found parties resorting to the expedient of having a public sale by auction as a cloak for all the inherent infirmities of their proceedings, but it cannot be too soon or too publicly proclaimed that the seeming solemnity of a sale by public auction will not of itself obscure or shield from their natural consequences in this court contrivances such as have been resorted to in the present case by the bankrupt and the dischargeant. A brief reference to the authorities cited on the argument will here be necessary in order to show that the opinion which I have expressed in the present case is consistent with them. The case of Wood v. Dixie, 7 Q. B. 892, decided so far back as the year 1845, was cited for the purpose of establishing that an individual creditor cannot avail himself of the statute of 13th of Elizabeth, corresponding with our statute of 3rd Charles, for the purpose of setting aside a sale. No person upon the present state of authorities could impeach what Lord Denman has there said—namely, “The jury were given to understand that, although the conveyance was made bona fide and with full intention that the property should be parted with, it would yet be fraudulent if made with intent to defeat the execution. Such a motive does not defeat the assignment. We are clearly safe in going so far as to say that a mere intent to defeat a particular creditor does not constitute a fraud. We do not say that many considerations may not exist which would induce a jury to come to the conclusion which they have arrived at, but we held the direction wrong.” And I cannot better illustrate the reason of the rule stated by Lord Denman than by referring to the case of Alton v. Harrison, as cited and reported in L. R. 4 Ch. 622, which was also a case under the statute of 13th of Elizabeth. In that case, on the 29th of Oct., 1868, a deed was executed by Harrison in favour of five of his creditors; on the 18th of December, 1868, a sequestration was issued at the suit of the plaintiff. Lord Justice Gifford (at page 625) says:—“There can be no doubt that Harrison executed this deed at a time when he knew that a writ of sequestration would be issued against him.” (626)—There is no question that under this deed the five creditors are to have the property, and are secured by means of it. Only two arguments have been raised upon the deed. (I need not advert to the first point.) 2ndly. Upon the fact that the deed comprised the whole of the debtor’s property—“With respect to the second point, it must be remembered that we are not now dealing with a case in bankruptcy. I asked during the argument why proceedings in bankruptcy had not been taken, and the only answer was that it was desired to try the validity of the deed. If the appeal were to succeed, the result would be that one creditor would be paid in full, and the other creditors entirely left out, which is exactly that which the appellants now complain of as unjust. ” The answer in the present case as regards both of the cases mentioned is, that the present is a case of bankruptcy, and that the charge has been filed on the part of the assignees in bankruptcy, and that the result, if successful, would be to distribute the proceeds, if any realised thereby, rateably among the creditors of the bankrupt, and the material element of bona fides in the transaction is wanting in the present case. But there were further authorities referred to on the argument, as to the contention that the transfer by the bankrupt to the dischargeant on the 27th of Nov., 1876, was an act of bankruptcy within the meaning of the 2nd subsection of the 21st section of the Bankruptcy (Ireland) Amendment Act, 1872, namely—“That the debtor has in Ireland or elsewhere made a fraudulent conveyance, gift, delivery, or transfer of his property or any part thereof.” The earliest case referred to was the case of Hanna v. Fisher, Cowper 123, where the policy of the bankrupt law is very correctly stated as follows:—“No trader—( i.e, now a debtor)—can do an act of fraud contrary to the spirit of the bankruptcy law and to the injury of his creditors. He cannot assign his effects to all his other creditors in exclusion of one whom he thinks dishonest or unjust, nor even to be equally divided among all his creditors, because he cannot take his estate out of that management which the law puts it into. If any act of this sort is done by deed, it is not only void, but in itself an act of bankruptcy from the date of the deed. If without deed it is void in respect of those whom it prejudices. ” The next case in point of date cited is Baxter v. Pritchard, 3 Nev. & Mann. 638 (in the year 1834). It was an action of trover by assignees for goods. The bankrupt, who was greatly indebted, intended to abscond with the proceeds. The defendant was aware of his intention, and had paid a fair price for his goods. It was contended it was a fraudulent transfer. The jury found fraud on the part of the bankrupt, and the absence of it on the part of the defendant. Lord Denman says:—“The question is whether an assignment by a trader of his whole stock with an intent to abscond and carry off the purchase money is an ‘act of bankruptcy,’ as a fraudulent transfer and delivery of his property with intent to defeat and delay his creditors, where the purchaser pays a fair price for his goods, and is ignorant of the trader’s design. ” (643)—“If the language of the clause be construed with strictness, it is not the transfer and delivery of the goods that can be called fraudulent in any sense. The trader is bound to deliver the goods which he has sold for valuable consideration, receiving in return for them a fund of equal value which might be made available for the benefit of his creditors. ” (645)—He concludes, “For these reasons we are of opinion that the sale of a tradesman’s stock to a bona fide purchaser, who pays the fair price of it in ignorance of any fraudulent intention of the seller, is no act of bankruptcy. ” But, in the case before me, instead of negativing fraud on the part of the dischargeant, I have *39 already declared that the sale, had in this case, was not made to a bona fide purchaser at a fair price for it, in ignorance of any fraudulent intent of the seller,2 and the case referred to has not, therefore, any application to the present case. In re Colemere, L. R. 1 Ch. 128, which was also referred to on the argument, and was a case in bankruptcy, on a similar provision as to fraudulent conveyances, Lord Cranworth says—at page 132—“Now, in this case, I think, upon the facts, I must come to this conclusion certainly that Crossley— i. e., the assignee under the deed—did not know that he was lending this money for any fraudulent purpose of defeating creditors. ” Page 133—“A person lending money on an assignment, is a transaction which the party lending has a right prima facie to suppose is perfectly honest and will, or, at all events, may conduce to the interest of the creditors instead of defeating them. I assent to the doctrine as laid down by Mr Justice Willis in Pennell v. Reynolds, which appears to me to be very correctly put—‘A person dealing bona fide with the bankrupt, would be safe unless he knows, or from the very nature of the transaction must be taken necessarily to have known, that the object was to defeat and delay the creditors, the deed cannot be impeached. ’” I can fully assent to all that has been there stated, and I have already declared that the sale in the present case, tried by that test of Mr. Justice Willis, could not be maintained. The case of Ex parte Halliday, in re Liebert, L. R. 8 Ch. 283, has also been referred to. In that case Liebert, on the eve of his bankruptcy, drew out his balance at his bank, and, without any pressure, paid it over to one creditor. Liebert admitted that he drew out the money lest the creditor should attach the balance at his bankers. It was held an act of bankruptcy as a fraudulent preference. There does not appear to me any necessity for discussing that authority, or the reasons assigned for it. If the contrivances resorted to in the present case could receive the sanction of this Court, it would speedily be found that a debtors summons in this Court, and other process, would serve as little more than a note of warning to the debtors and their friends to make convenient disposition of his property, such as would place it out of the reach of such of his creditors as such debtor desired should not receive any portion of it, and thus frustrate the whole policy of the bankruptcy law.
Upon the evidence and facts, as presented in this case, I have no difficulty, either as regards the statute of 3rd of Charles, or as regards the enactments in bankruptcy referred to,3 in declaring the sale of the 27th of November, 1876, fraudulent and void against the assignees, and that any assignment of the lands sold thereat, which may have been executed by the bankrupt to the dischargeant, may be delivered up to be cancelled, and I direct that possession of the said farm, thereby alleged to have been sold, shall be forthwith delivered up to the assignees; and I further direct that the dischargeant shall be charged with a fair occupation rent of the said farm since he took possession thereof under such alleged sale, and with the fair value of the other property of the bankrupt likewise taken possession of by the dischargeant under such alleged sale, and shall refer it to the chief officer to fix and ascertain the same respectively, and the amounts respectively due on foot thereof; and I declare the dischargeant entitled, as against such sum as may be found due by him under the accounts as above directed, to credit for rent and arrears of rent, and other proper and necessary outgoings in respect of said farm, paid by dischargeant, or out of his own moneys; and I shall also declare dischargeant, upon previously indemnifying the assignees in that behalf, at liberty to take such proceedings as he may be advised in the names of such assignees, for the recovery back of any moneys alleged to have been paid out of the purchase-money of the dischargeant, under such alleged sale, to parties who were creditors of the bankrupt, at the date of such alleged sale, 4 or in default of the recovery back of any of such moneys, or so far as the dischargeant may not be able to recover the same back, I declare the dischargeant entitled to prove for dividend against the estate in this matter for the amount of all such debts of the bankrupt as shall be found to be properly due and owing by the the bankrupt at the time of such alleged sale, and to have been since paid out of the purchase-money under such alleged sale; and let the chief officer take all necessary accounts for giving effect to the above directions. And I declare the assignees entitled to their costs of their charge, and of all proceedings thereunder, against the dischargeant. I reserve further directions, with liberty for all persons to apply.
Ex parte Lamkin
in re Uppington
Court of Bankruptcy.
4 February 1876
[1876] 10 I.L.T.R 66
Miller, J.
This case comes before the Court on the charge of Mrs. Grace Lambkin, filed the 14th of October, 1875, by which she claimed to be entitled to the entire property of the bankrupt, under a deed of assignment and bill of sale made by the bankrupt to her, dated the 30th of July, 1875, and upon the discharge of the assignees in this matter to that charge, filed the 29th of October, 1875, by which they impeach that assignment and bill of sale— 1st. Because the bill of sale was in itself an act of bankruptcy. 2nd. Because that bill of sale was executed and given by the bankrupt when in insolvent circumstances and voluntarily to the chargeant, with the view of giving her a preference over his other creditors. 3rd. Because the bill of sale was executed, made, and given by the bankrupt mala fide, and for the purpose and with the intent of delaying and defrauding his general creditors, and that the bill of sale was a mere cover to protect the property of the bankrupt.
The broad question presented to this Court is, whether that assignment and bill of sale of the 30th of July, 1875, from the bankrupt to the chargeant, can prevail against the assignees in this matter, having regard to the relative positions of the parties to that instrument at its date— and in that word “positions” I include the facts in evidence connected with that instrument, or what has been perhaps better termed as “the surrounding circumstances.”
It is necessary here to state the facts and circumstances leading up to the execution of that instrument of the 30th of July, 1875.
The bankrupt was, in the year 1873, engaged in carrying on the business of a butter merchant in Cork, and having required an advance from the Munster Bank, at Cork, he, the bankrupt, jointly with the chargeant, John Uppington and Thomas Uppington, passed their promissory note, dated the 9th of December, 1873, to the Munster Bank, by which three days after date they jointly and severally promised to pay the Munster Bank, Limited, or order, at the office thereof, Cork, the sum of £4,000 sterling. From the expiration of three days after the date of that note, the bankrupt, as the principal, with the chargeant, John Uppington and Thomas Uppington, as his sureties, became hable to the Munster Bank for the amount which might be from time to time advanced or due upon it, and the execution of that note in December, 1873, by the chargeant was the original foundation of the liability of the chargeant, which led to the execution of the instrument of the 30th of July, 1875.
The bankrupt continued to carry on the business of a butter merchant after the making of that note of the 9th of December, 1873, and in the month of June, 1875, a sum of upwards of £3,000 was due to the Munster Bank on foot of that promissory note, and the Munster Bank, knowing that the bankrupt was their principal debtor, on the 17th of June, 1875, caused a summons and plaint to be served on the bankrupt alone on foot of that promissory note, and no defence having been taken on the part of the bankrupt to that summons and plaint, the Munster Bank became shortly afterwards entitled to enter up a judgment against the bankrupt upon that summons and plaint, and then to issue forth with execution upon such judgment when entered against the property of the bankrupt liable to such execution.
If the Munster Bank had, when entitled to do so, issued execution, and seized and sold thereunder the bankrupt’s goods, a complete act of bankruptcy would have been established under the 5th sub-section of the 21st section of the Bankruptcy (Ireland) Amendment Act, 1872, of which act of bankruptcy any person who was then a creditor could have availed himself, and thereby obtained a rateable equal distribution of the proceeds of the property of the bankrupt amongst his unsecured creditors.
The chargeant had about the 19th of July, 1875, in that Munster Bank, at Cork, a very considerable amount of her own money on deposit receipts, and when examined, on the 13th of August, 1875, in reference to the proceedings adopted by the Munster Bank against the bankrupt, was interrogated (at Question 51): “Did he— i.e., the bankrupt—not apply to you?”, And stated (at Answer 51), “Except for the security to the Bank, I was security for him for that much, and the manager, Mr. Bolton, pressed hard upon him. I asked Mr. Bolton to delay the matter for a month, knowing that Mr. Uppington— i.e., the bankrupt— had plenty of value, which would more than doubly pay what was due to the Bank, and I considered I was good security for it myself, so Mr. Bolton did allow the time I asked for to the 19th of August, and in the meantime 1 paid it, to prevent Mr. Bolton pressing on him. I took deposit receipts I had myself, and I paid the amount.”
There were at the date of that arrangement between the chargeant and the Munster Bank referred to in that deposition two creditors of the bankrupt who were actively engaged in the prosecution of their claims—Thomas Large, admitted by the bankrupt’s statement of affairs to be a creditor for a sum of £124 19s. 6d. (a debt contracted for saddlery from 1873 to 1874), who had on the 10th of July, 1875, served upon the bankrupt the notice of demand necessary to obtain from this Court a debtor’s summons, and thereby apprised the bankrupt that if the amount demanded was not paid on or before the 14th of July he, Large, would proceed in bankruptcy against him. And also Richard Porter and George Fordham, creditors for the sum of £735, the price of a racehorse called “Pilgrim,” which had not been paid for, and for which they had issued their summons and plaint against the bankrupt. From *66 that deposition of the chargeant it is apparent that she must have known, not only of the proceedings which had been adopted on the part of the Munster Bank against the bankrupt, but also the liability which had been attached to her by reason of the failure on the part of the bankrupt to pay the amount due to the Bank, and by her arrangement with the Munster Bank the chargeant warded off from the bankrupt until the 19th of August, 1875, any act of bankruptcy by means of any seizure and sale of the goods of the bankrupt, at the suit of the Munster Bank, being established against the bankrupt, of which these creditors who were then active, or any other creditors of the bankrupt, could avail themselves.
And there was the further consequence of that arrangement between the chargeant and the Munster Bank— namely, that the Munster Bank having, at the instance of the chargeant, and necessarily with the privity of the bankrupt, given to the bankrupt a month’s time, up to the 19th of August, 1875, for payment of the sum due by him on the promissory note of December, 1873, as the principal debtor to the Munster Bank, the right of the chargeant in case she should afterwards be forced to pay the sum due on that promissory note, to any contribution from the Messrs. Uppington, as her co-sureties, was gone and at an end, and the chargeant thenceforth made herself solely liable to the Munster Bank on failure of payment thereof by the bankrupt, by reason of that contract for time, for the debt of the bankrupt upon that promissory. note. At the time when that arrangement was entered into with the Munster Bank, referred to in that 51st deposition, the bankrupt was the owner of nine racehorses, which appear, from the deposition of the bankrupt, from 209 to 217, as taken on the 13th of August, 1875, to have been known under the following names, viz:—(1) Lancet, (2) Palmer Colt (3) Plato, (4) Rufina, (5) Acrostic, (6) Adina, (7) Pegasus, (8) Pilgrim, (9) Brother to Forest Flower—and for which considerable sums, as there stated, had been paid.
Those nine horses had been for some time previously at livery at the stables of a trainer named Ryan, in Prussiastreet, Dublin, and on the 20th July, 1875, the bankrupt gave to that Ryan a bill of sale of three of these horses then in his possession—namely, Pilgrim, for which he had not paid, and for the price of which proceedings were then pending against him; 2ndly, Rufina; and 3rdly, Plato—as security for the amount then due to Ryan, and it was ascertained that there was then a sum of about £330 due to Ryan by the bankrupt.
A person named Patrick Timmoney having likewise some time previously taken proceedings against the bankrupt, had, previous to the 24th of July, 1875, obtained a judgment therein against the bankrupt on foot of his promissory note, and having on that 24th of July issued execution thereon, caused the remaining six horses, which had not been included in Ryan’s bill of sale, to be seized under that execution on that 24th of July, 1875.
On the 26th of July, 1875, the bankrupt was thus the owner of nine racehorses, subject as to three to the bill of sale to Ryan, and as to the remaining six horses, to Timmoney’s execution, and was also entitled to a chattel interest in a house and a small quantity of ground known as Clifton Lodge, subject to a head-rent, and the chattels therein. He was also entitled for his life, under his marriage settlement, to a rent-charge of about £40; also to a profit rent out of certain lands specified in that settlement of about £100 yearly, and to the interest arising from a sum of about £1,300 included therein, subject, however, to a proviso contained in that settlement, that the interest of the bankrupt in the property contained therein should cease upon his bankruptcy. In order to remove the execution from the six horses which had been seized on the 24th of July, 1875, at the suit of Timmoney, a telegram was forwarded by the bankrupt, who was then in Dublin, to the chargeant, who was then in Cork, and in consequence of that telegram a sum of £324 4s. 5d., as the amount payable under that execution, was forwarded by the chargeant from Cork by the post of the 26th of July, and was paid by the hands of the bankrupt on the 29th of July, and thereupon the execution of Timmoney was removed from the six horses of the bankrupt already referred to.
The chargeant must have known the purposes for which she, on that 26th of July, forwarded from Cork to the bankrupt, in Dublin, the amount as required by the telegram of that 26th of July, as when asked, on her examination of the 13th of August, (Question 54)—“Did you hear anything of a sheriff’s sale in respect of one of the racehorses?”—stated (at Answer 54)—“About that time there was a notice in one of the papers, and I think that money I gave the cheque for was to stop that.”
That telegram is not produced, and there is not any very clear statement of its contents. On that same 26th of July the bankrupt addressed a letter from Dublin to his wife, who was then residing with the chargeant at Cork, which was received in Cork on the 27th of July, and which, so far as is material, is as follows:—“You must excuse my letter of this morning being so short, but I have been so occupied and worried I had not time to write you sooner. I have been consulting some friends with regard to my affairs, as the fact is, ——– conduct has been so outrageous there is no knowing when he has stopped or how he has robbed me; people are now claiming money I gave him to pay three months ago. I may blame myself; I should have done my own business, and not left it in the hands of such a fellow.” Thus far the bankrupt in that letter described with candour the situation of his affairs to be such as to render it necessary for him to consult his friends about them, and as the result of that advice, the bankrupt proceeds to state in that letter his proposal as entirely emanating from himself, as follows:—“I have been thinking over and decided on giving to your mother ( i.e., the chargeant) a bill of sale of all my property, provided she pays the Bank, who, you know, are pressing me hard, and I cannot expect any indulgence from my friend Bolton ( i.e., the manager of the Munster Bank). There is also due to Ryan, I think, about £320. This, with the £350 sent to pay Timmoney, and the Bank debt, will in all come to about £3,700. Before doing this she should consult with Gillman ( i.e., a solicitor in Cork), and be guided by whatever he advises, and should he coincide with counsel’s opinion to such a proceeding on my part, she may, on receipt of the deed, which will go to Gillman for his approval, pay the Bank, and send me the amount of Ryan’s bill. Then everything is hers, and she may act with all as she pleases, and as her own property. ”
There was no ambiguity about that proposal—namely, to assign every portion of his property to the chargeant, who was at that time liable as surety to the Munster Bank for the debt of the bankrupt there referred to, which that Bank would have the power of levying by execution, on the 20th of August, on the property of the bankrupt. And the bankrupt annexes to that proposal a proviso, that the chargeant should discharge that liability of the bankrupt and the chargeant to the Bank, and the bankrupt then points out the only (2) liens which attached upon a portion of the property of the bankrupt thus proposed to be assigned, and which it would be necessary to remove, in order to give effect to that assignment; and the bankrupt then says, when these specific matters are done everything would belong to the chargeant, and she might act with all as her own property.
The bankrupt, in that letter of the 26th July, then proceeds: —“I would have written to herself on this matter, but I knew how excitable she is and how easily upset. You will explain the matter to her, and do not let her be put about; she has been on all occasions our fast friend, and I shudder at the idea of causing her any trouble or uneasiness, as I know she will be imagining all sort of things.”
The bankrupt there discloses that the proposal as contained in that letter was intended for the chargeant, and that his first notice was that the chargeant should receive the proceeds of all his property in discharge of her personal liability, to the exclusion of all the other creditors of the bankrupt. And the bankrupt then proceeds as follows in that letter:—“Amongst other monies now claimed from me is the bill of a man named Large; it is only a few days *67 since I gave directions to have this account settled, and was informed it was made all right. Notwithstanding, Large has given the matter into the hands of a man named O’Connell, but whoever he is I am not going to pay money twice over until I know for what.”
The bankrupt there expressly names Large, who, as a creditor for £124 odd, had on the previous 10th of July served on the bankrupt a notice of demand with a view to proceedings in bankruptcy, as one of his creditors whom he intended to defeat by his plan as proposed by that letter of the 26th of July.
On the receipt of that letter of the 26th of July, in Cork, it was found necessary to make immediate provision against any interference with their plan by, or on the part of Porter and Fordham, who were then actively prosecuting their action for the price of the horse called “Pilgrim,” then covered by the bill of sale to Ryan, and which horse, with all the other property of the bankrupt, it was proposed by the letter of the 26th of July to assign to the chargeant; and accordingly, on that 27th of July, 1875, Edward O’Connor and Sons, the attorneys for the bankrupt, in that action by Porter and Fordham on behalf of the bankrupt signed a consent for judgment, which was filed on the 28th of July, 1875, but they introduced in that consent, as the condition upon which that consent was given, “ That there should be a stay of execution until the 10th day of August, 1875. ” It will now be seen what took place in that interval between the 27th of July, when that consent was given, and the 10th of August, over which that stay of execution extended.
On the 28th of July, 1875, a debtor summons which had been issued out of the Court of Bankruptcy at the suit of Large, the creditor named in the letter of the 26th of July, was served upon the bankrupt in Dublin, which warned him correctly that unless he, the bankrupt, within seven days after service paid, compounded, or secured the claim of Large, he would have committed an act of bankruptcy, in respect of which he might be adjudicated a bankrupt in the manner there pointed out.
By the 3rd paragraph of the affidavit of Mary O’Connell, the wife of the bankrupt, filed the 30th of November, it appears that “on receipt of that letter of the 26th of July she communicated the proposal contained therein to the chargeant.” No information has been supplied by Mr. Gillman, who is a solicitor of eminence in Cork, as to the nature of the interviews which he had with the chargeant on the subject of the proposal contained in the letter of the 26th of July, or as to the documents or materials placed before him, which enabled him to advise his client at once to pay so large a sum as £3,500 or thereabouts; nor can any reason well be assigned which would account for such a proposal as that contained in the letter of the 26th of July being acted upon or carried out with such unusual hurry, at a time when the Munster Bank could not have taken any hostile step before the 20th of August, and Porter and Fordham were likewise under restraint until the expiration of their stay of execution until the 10th of August, unless it was under the apprehension of the debtor summons at the suit of Large, to whose proceedings reference was made in that proposal.
However, a draft deed was forthwith prepared in Dublin under the directions of, and by the solicitor for the bankrupt, for the purpose of carrying out his proposal as contained in the letter of the 26th of July, and was forwarded by the bankrupt to Cork for approval on the part of the chargeant; and it appears from the affidavit of T. A. French, filed the 30th of November, 1875, that the proposal of the bankrupt of the 26th of July was so promptly acted upon by the chargeant, or those acting on her behalf, that before, or on the 29th of July, the chargeant paid in Cork £3,123 0s. 4d. to the Munster Bank, discharging her liability to that bank, returned the draft deed approved of to Dublin, and sent her son to Dublin to pay the livery due to Ryan, who had the bill of sale over three of the racehorses, and to take over possession of the whole nine racehorses for and on behalf of the chargeant. The draft thus returned to Dublin was engrossed and executed by the bankrupt, and purports to bear date the 30th of July, 1875, and to be made between the bankrupt of the one part and the chargeant of the other part; and, after reciting the property to which the bankrupt was entitled, further recited that the chargeant was security for the bankrupt to the Munster Bank, Limited, for a sum of £3,122 3s. 4d, and had paid the said bank the said sum; and also reciting that Patrick Timmoney lately obtained a judgment against the bankrupt, under which the sheriff of Dublin seized certain horses belonging to the bankrupt, and that chargeant had paid the sum of £350, the amount of the said judgment; and further reciting that the chargeant had paid to the bankrupt a further sum of £320—making together £3,793 3s. 4d.; the bankrupt by that deed, in consideration of that sum, purported to assign over what appears upon the evidence, and is admitted to have been all the property of every kind of the bankrupt to the chargeant, with a clause of redemption for one day.
I must assume upon the affidavits that the formal legal possession of the property of the bankrupt necessary to give completion to that deed of the 30th of July ( if it could be otherwise sustained ) was taken by and on the part of the chargeant, but it must be especially observed, as the result of that possession passing in respect of a portion of that property between the bankrupt and the chargeant, that the nine racehorses of the bankrupt, which had been for some time at livery with Ryan in Dublin, were removed out of the jurisdiction of this court on the day following the execution of that deed; and it would appear from the affidavit of T. A. French, already referred to, that those racehorses would have been in all probability removed on the day preceding if it had not been for the accident that the letters of Mr. Gillman had been posted at Cork too late on the 29th of July, 1875.
On the 6th of August Large obtained the adjudication of the bankrupt, as being a trader in the capacity of a butter merchant, and that adjudication is still in full force, and Large has been appointed assignee therein.
Upon such a state of facts as I have detailed with unavoidable minuteness, there is not to be found one single feature which would save that deed of the 30th of July, 1875, from condemnation as a violation of the bankruptcy law, which this Court is called upon to administer, and as necessarily constituting an act of bankruptcy, and therefore void as against the assigness inasmuch as—
Firstly. At its date the bankrupt was—upon his own confession, as contained in his letter of the 26th of July, and made at a time when he had been pressed by the Munster Bank, also by Large, and also by Porter and Fordham, as well as by Timmoney and Ryan, and irrespective of the evidence supplied by his statement of affairs— in a state of hopeless insolvency.
Secondly. At the date of that deed of the 30th of July, immediate bankruptcy must have been in the contemplation of the bankrupt, from the notice of demand by Large, of the 10th of July, followed by the service of the debtor summons on the 28th of July, Large being described in that letter of the 26th of July as having given the matter into the bands of a man named O’Connell, from whom he (the bankrupt) did not expect much quarter.
Thirdly. That the deed of the 30th of July originated with, and was the purely voluntary act of the bankrupt, he being a trader, without any pressure whatever, or even solicitation on the part of the chargeant, as is demonstrated by that letter of the bankrupt of the 26th of July.
Fourthly. It is an assignment by a trader of the whole of his property of every kind to the chargeant for the purpose of protecting her from a liability on behalf of such trader of so old a date as the year 1873, and must necessarily have the inevitable effect of putting an absolute stop to his trading.
Fifthly. That deed of the 30th of July could not be said to have been in any manner for the benefit of the general creditors of the bankrupt, inasmuch as the property comprised in that assignment is placed wholly beyond the reach or control of all the general creditors of the bankrupt, including Large, the assignee in this matter, and Porter and *68 Fordham, who were active in the assertion of their claims at the date of that deed .
Sixthly. There is no equivalent of any kind whatever given by that deed of the 30th of July to the general creditors for the diminution of the property of the bankrupt caused by that deed of the 30th of July, or, in other words, there was not one shilling advanced by which there was any increase whatever in the stock or property of the bankrupt which the general creditors could have seized on his bankruptcy, equivalent to the diminution which was caused by that assignment of the 30th of July, inasmuch as it is clear upon the evidence that the recital contained in that deed as to the payment by the chargeant to the bankrupt of £320 is untrue, as a matter of fact, and referred to the past transaction of the payment by the chargeant of the amount of Timmoney’s execution.
And lastly. That it was executed by the bankrupt in order to protect the chargeant, as the assignee thereunder, from an old liability incurred by the chargeant on behalf of the bankrupt, which he the bankrupt was then unable to discharge out of his own moneys.
What more could be required by this Court when it has before it the expressive and significant letter of the 26th of July, so promptly acted upon and adopted by the chargeant to establish that the deed of the 30th of July, executed by the bankrupt (being a trader), was a fraudulent transfer by the bankrupt, within the meaning of the bankruptcy law, as preventing an equal distribution of the property of the bankrupt among all his creditors, and as producing the necessary and inevitable result that all the other creditors of the bankrupt, including those whom I have named and who were then active in the assertion of their rights, would be thereby defeated and delayed —or to satisfy this Court that it had been established further upon the evidence as a matter of fact (if necessary) that the deed of the 30th of July was executed by the bankrupt with the direct intent to defeat and delay his other creditors, in obtaining such an equal distribution of the property of the bankrupt as would have taken place under the bankruptcy law. And further, that the chargeant had full knowledge of that intent on the part of the bankrupt, having regard to the cross-examination of the chargeant upon the hearing of the charge and discharge on the 13th of January from Question 428, which I need not here detail.
An attempt has been made, on the part of the chargeant, to lead away this Court from the well-recognised principles and positions which would thus render the execution of that deed of the 30th of July by the bankrupt (being a trader) under such circumstances as stated—and without the slightest evidence on the part of the chargeant either that the bankrupt then intended to continue, or had, in fact, continued his trading —an act of bankruptcy, by references to a class of authorities which in the main go to show that if a third person, or, indeed, a surety should pay off an old debt in relief of the debtor’s estate, or with the object or intention that the debtor being a trader should continue his trading, or by which such debtor was enabled, in fact, to continue his trading, such a payment or advance by such third person or surety would be considered such a present advance of such a nature as might prevent an assignment, to the party making that advance, of the whole of that trader’s property necessarily an act of bankruptcy. But the fallacy in attempting to apply any of such principles to the facts of the present case lies in the assumption that any such relief or benefit whatever to such trader’s estate was, or could have been intended, or was, in fact, in any way conferred or effected by the execution of the bankrupt of the deed of the 30th of July, which could in any manner whatsoever benefit the other creditors of the bankrupt. And no ingenuity, by means of any authority, can make out that the payment or advance of any sum for the discharge of an old liability by the chargeant as surety for the bankrupt to the Munster Bank, which had its commencement in 1873, and in respect of which an immediate levy by execution on the goods of the bankrupt was then imminent, or the further advances by the chargeant for the sole purpose of removing specific liens than specifically affecting a portion of the debtor’s property out of the way of the chargeant, to whom that property was intended to be assigned by the deed of the 30th of July as thus affected by those specific liens, was or could be in any manner a relief to the debtor’s estate which could be of any benefit to the bankrupt’s estate, and thus constitute a present advance, or an equivalent to a present advance, where the chargeant making such advance required, as the consideration of making an advance, an assignment, and the immediate actual possession of all the property of the bankrupt clear of these liens which thus affected portions of that property, but with which the chargeant (to use the language of the bankrupt in the letter of the 26th of July) might do as she pleased and as her own property, instead of allowing the Munster Bank, to which the chargeant was surety for the bankrupt, to proceed to execution against the property of the bankrupt, which would have caused an act of bankruptcy under the Bankruptcy (Ireland) Amendment Act of 1872, of which any of the creditors of the bankrupt could have availed himself, and thereby obtain an equal distribution of the property of the bankrupt.
Notwithstanding that expression of opinion, which would of itself invalidate that deed of the 30th of July, this Court may not be relieved altogether from expressing some opinion upon the second ground put forward by the assignees as impeaching that deed of the 30th of July as an act of bankruptcy. By the 53rd section of the Bankruptcy (Ireland) Amendment Act, 1872, it is enacted that “from and after the commencement of that Act every conveyance or transfer of property, or charge thereon made, every payment made, every obligation incurred, and every judicial proceeding taken or suffered by any person unable to pay his debts as they become due from his own moneys, in favour of any creditor or any person in trust for any creditor, with a view of giving such creditor a preference over the other creditors, shall, if the person making, taking, paying, or suffering the same be deemed fraudulent and void as against the assignees, but this section shall not affect the rights of a purchaser, payee, or incumbrancer in good faith and for valuable consideration.” It is not necessary on this head of impeachment to repeat the evidence, which has incontrovertibly established that the bankrupt was, and to his own knowledge, in insolvent circumstances. Also, that the deed of the 30th of July was the voluntary act of the bankrupt, and also that it was executed by the bankrupt in contemplation of immediate bankruptcy; and it may be well added that, as part and in furtherance of the fraudulent purpose for which the deed of the 30th of July was executed—namely, of transferring to the chargeant the whole of the property of the bankrupt, to the exclusion of all his other creditors— the chargeant had anticipated her liability on behalf of the bankrupt by the payment by her in Cork, on the 29th of July, of the sum of £3,123 odd, for the payment of which by the bankrupt the chargeant had obtained time from the Munster Bank until the 19th of August then following. But, nevertheless, the facts should not be evaded—namely, that the bankrupt, by his letter of the 26th of July, stated expressly as the ground for his decision of assigning all his property to the chargeant in terms as follows:— “Provided she (the chargeant) made that payment of that sum of £3,123 to the Munster Bank.” And that in the same letter the bankrupt only treated the payment of Timmoney’s execution (which was not, in fact, paid until the 29th of July) as a means of perfecting a transfer, as part of his property proposed to be thus assigned, of these horses seized under that execution as an equivalent for that advance, along with any surplus value in the horses so seized under that execution; and further, that at the date of that letter of the 26th of July the chargeant was only a surety and not a creditor of the bankrupt. It might, therefore, be contended that there was apparently one element wanting to enable this Court, upon the evidence, to pronounce the deed of the 30th of July a fraudulent preference of the chargeant within the meaning of that section—namely, that the words used in that section, as descriptive of the person in whose favour *69 the assignment specified in that section must be made, is “a creditor or a trustee for a creditor.” And that the chargeant, being only a surety for a debt which was not payable by the bankrupt until the 19th of August following, could not be regarded upon the evidence in this case as a creditor within the strict terms of that 53rd section. But, on the other hand, the fair construction to be put upon the proposal by the bankrupt, as contained in his letter of the 26th of July, must be understood as being that the chargeant (being a surety with a liability then imminent) should make herself, in terms, a creditor of the bankrupt by the immediate payment at once of the sum of £3,123 odd, for the payment of which she, the chargeant, was already liable as his surety, and which she, the chargeant, as such surety, would be obliged to pay in the event of the bankrupt not paying the amount before the 19th of August then following; and that he, the bankrupt, would assign all his property to the chargeant as an indemnity against such the liability of the chargeant, and such payment; and it would appear that such proposal by the bankrupt, as contained in his letter of the 26th of July, was so understood in that sense by the chargeant, inasmuch as she, the chargeant, made that payment of that sum in Cork on the 29th of July in anticipation of the assignment by the bankrupt, which was not executed by him until the 30th of July in Dublin. I have thus far entered upon the consideration of the question arising upon the 53rd section for the purpose of showing that such 53rd section is very specific in its terms, and of an entirely different nature from the 2nd sub-section of the 21st section of the Bankruptcy (Ireland) Amendment Act, 1872, and as the portions of the evidence in this case applicable to the questions arising, as well upon the 2nd sub-section of the 21st section, and also upon the 53rd section above referred to, would be, for the most part, the same. It may be sufficient for me here, upon the first question as presented by the assignees, after having already stated, with minute detail, most of that evidence, to add that, if it was necessary, I should have been prepared to hold that the execution of the deed of the 30th of July constituted a fraudulent preference by the bankrupt of the chargeant upon the facts and under the circumstances appearing in this case; and I may further add, that I should have been prepared upon the evidence, which it is not necessary to repeat or give in more detail, to hold, also, that the chargeant was not entitled to the protection extended by the proviso at the end of the 53rd section.
These considerations, arising upon that 53rd section, do not in any manner trench upon or interfere with the opinions already expressed as to the execution by the bankrupt of the 30th of July, 1875, constituting an act of bankruptcy by the bankrupt in the manner as already stated.
But, a further ground of impeachment of that assignment of the 30th of July, 1875, has been put forward on the part of the assignees—namely, “Because the deed of the 30th of July was executed, made, and given by the bankrupt mala fide, and for the purpose and with the intent of delaying and defrauding his general creditors, and that the said deed was a mere cover to protect the property for the bankrupt.” However, upon this much narrower ground for impeaching that deed of the 30th of July, as thereby presented, and to which a large portion of the evidence by affidavit has been directed, it is difficult to understand upon what ground the deed of the 30th of July could be considered as a mere cover to protect the property of the bankrupt, having regard to the evidence in the case, and more especially to the large payments in cash made by the chargeant on behalf of the bankrupt about the time of the execution of that deed of the 30th of July, and in the absence of any evidence of any cash having been supplied for such purpose by the bankrupt to the chargeant, or as to the value of the properties assigned by the deed of the 30th of July to the chargeant of such a nature as this Court could act upon, and therefore it may be sufficient to pass over that ground of objection with the observations already made.
Upon the general aspect of the evidence, as presented to this Court in this case, it would be strange, indeed, if the general creditors of a trader could not find protection under the bankruptcy code against a transaction such as has been established in this case—namely, a debtor, being a trader, and unable to pay his debts, assigning away the whole of his property to a near relative, in order to protect her from an inevitable liability on his behalf then imminent, to the exclusion of all his other creditors. And I shall only add that, although that protection may not be found in the specific form to which I have last adverted, yet, having carefully considered the authorities referred to, and to which I shall not refer in more detail in consequence of the great length to which this judgment, by reason of the necessary detail of facts, has already extended, I cannot come to any other conclusion than that, upon the grounds which I have first stated, the execution by the bankrupt of the deed of the 30th of July, 1875, must be held to have constituted an act of bankruptcy on the part of the bankrupt; and that the charge, as filed by the chargeant, must be, therefore, disallowed with costs.
Harrison, J.
I, also, am of opinion that the execution of the deed of the 30th of July, 1875, was an act of bankruptcy, and that same is void as against the assignees in this matter.
By that deed the bankrupt purported to assign all his estate and effects to the chargeant, Mrs. Grace Lambkin, to secure a sum of £3,793 3s. 4d, which amount was made up by three several sums, viz. :—1st, a sum of £350 advanced by chargeant to the bankrupt on the 26th of July, 1875, to pay off Patrick Timmoney, an execution-creditor of the bankrupt; 2ndly, a sum of £3,123 3s. 4d. paid to the Munster Bank on the 29th day of July, by the chargeant, in d scharge of a debt of the bankrupt for which she was surety; and 3rdly, a sum of £320, advanced to the bankrupt likewise on the 29th day of July, to pay the debt of one J. Ryan.
As far as the first of these sums is concerned, it was clearly an antecedent debt at the time the agreement was entered into between the bankrupt and chargeant, which led to the execution of the bill of sale, and as such could not form a valid consideration as against the assignees, bankruptcy having ensued immediately afterwards. Again, the 3rd sum of £320 was paid to release property then covered by a bill of sale to J. Ryan, with the object of having same handed over, when released, to chargeant, as was in fact done, and from which payment the general creditors of the bankrupt derived, and could derive no advantage. And the larger sum of £3,123 3s. 4d. was a payment in discharge of a debt due to the Munster Bank, for which the chargeant was a surety for the bankrupt, and on foot of which debt the Bank, in the month of June, 1875, had sued the bankrupt, the principal debtor, when chargeant interfered, and induced the Bank to suspend further proceedings thereon until the 19th of August, 1875.
When the proposal contained in the letter of the 26th of July, from the bankrupt to his wife, was made, which proposal was forthwith communicated to and accepted by the chargeant, and was carried into effect by the deed in question, the bankrupt was hopelessly insolvent, and must have contemplated bankruptcy as imminent. He had no intention of further carrying on his trade, which he would appear to have given up in the month of November previous. The proposal itself was entirely his voluntary act, unsolicited by chargeant, and without any pressure whatever on her part. When carried into effect, to use his own words in that letter, “then everything became hers, and she might act with all as she pleased, and as her own property.”
The transfer effected by the deed of the 30th July, 1875, was complete, and covered all his estate and effects, and from that time no other creditor was in a position to recover any portion of his demand by execution or otherwise. Such a deed, in my opinion, independent of the question of whether the bankrupt, in fact, intended thereby to defeat or delay his creditors, was a fraudulent transfer within the meaning of the 2nd sub-section of the 21st section of the Bankruptcy (Ireland) Amendment Act, 1872, *70 the necessary result of the deed being that the other creditors of the bankrupt were defeated and delayed, and its execution by the trader being a fraud against the policy of the bankrupt law, which is that there should be an equal distribution amongst all the creditors. There is, however, abundant evidence in the present case to show, and I am of opinion that it has been shown, in fact, that the deed of the 30th of July was executed by the bankrupt with the intent of defeating and delaying his other creditors, and of preventing the equal distribution of his effects, which would have taken place had bankruptcy ensued. The bankrupt’s position when he wrote the letter of the 26th of July has been fully detailed by my colleague, in the judgment just pronounced. Porter and Fordham had sued him for £735, and Large was pressing for immediate payment, and on the 10th of July had served him with a notice of demand to ground an application for a debtors summons. That notice is headed “The Bankruptcy (Ireland) Amendment Act, 1872,” and apprises the bankrupt that if the amount demanded was not paid on or before the 14th day of July the creditor would proceed in bankruptcy against him. He was, also, largely indebted to other parties besides Large and Porter and Fordham, the statement submitted to his creditors on the 23rd of August showing his unsecured debts to amount to £2,579 9s. 6d., irrespective of the debt due to the Munster Bank, which had been paid by chargeant on the 29th day of July.
Having regard to these considerations, I think it impossible to come to any other conclusion than that the bankrupt, when he voluntarily proposed to assign everything to chargeant, provided she paid the Bank and Ryan, intended to defeat his other creditors, and to prevent his assets being rateably divided amongst them in an open bankruptcy, which he then knew was imminent.
As regards the knowledge of chargeant of such intent of the bankrupt, she states, indeed, in her affidavit, made on the 29th of November, paragraph 5, that she was wholly unaware, until after the bill of sale had been executed, “that the bankrupt was in embarrassed or insolvent circumstances, or indebted to any person but the bank and said Ryan.” On her cross-examination, however, in this Court, on the 14th day of January, she is asked:— Q. 416. “Didn’t you know from that letter ( i.e., the letter of the 26th July) that he was largely indebted?” A. “Then I did; that letter did not come until the 27th, and the money went on the evening of the 26th. I sent the cheque on the evening of the 26th” (evidently referring to the cheque sent to pay off Timmoney). Again, at Q. 422. “You knew, when you heard that letter read, that he was in embarrassments?” A. “Yes” She is then taken seriatim through the different paragraphs of the letter, and she admits, at Q. 436, “that she knew the bankrupt was in difficulties on the 27th July, and that all his property, whatever he had, was to become her property;” QQ. 444, 445, 446, and 447, that after she got all his property he would have nothing to carry on his own trade with; and, after admitting that she heard the paragraph read, in reference to Large claiming money from the bankrupt, she is asked, at Q 452, “Though full knowledge may not have reached you before, you then perfectly knew the state of his circumstances?” and she replied, “Then, of course, I did, as far as I could understand it.” Having regard to the contents of that letter and its urgency, the statements in it that “ people ” were then claiming money which the bankrupt alleged he had given “——” money to pay three months before, the reference to Large as one of these claimants, who had placed the matter in the hands of an attorney, from whom he did not expect much quarter, and of the admission made by chargeant, in her cross examination, particularly in reference to her knowledge that all his property was to become hers, and that he would then have nothing to carry on his trade with—I have come to the conclusion that the chargeant did know the bankrupt had other creditors when she agreed to pay off the bank and take a bill of sale of all his “property,” and that the effect of that deed was to leave him nothing to carry on his trade with or pay his other creditors; and the necessary result of that deed was to defeat and delay such creditors, and she must, I think, be held to have known that such was its effect, and that by its execution such other creditors were defeated and delayed.
It has, however, been contended that the payment by chargeant of the debt to the Munster bank, amounting to the large sum of £3,123 3s. 4d, was in effect a present advance to the bankrupt, and that the case is thus brought within the authorities which establish that where an equivalent is given to the debtor, of which he the debtor or his creditors do or may participate, an assignment, although comprising all a debtor’s estate and effects, is not an act of bankruptcy. The authorities mainly relied on by the plaintiff’s counsel in support of this proposition were Lomax v. Buxton, L. R. 6 C. P. 107, and Whitmore v. Claridge, 33 L. J. C. P. p. 87. Pennell v. Reynolds, 11 C. B. N. S. p. 709 was also referred to.
There are, however, in my opinion, material points of distinction between the facts disclosed in these cases respectively, and what has been proved in the present case.
In Lomax v. Buxton the consideration of the deed was in part an antecedent debt for £161, and in part the advance by the defendant of a sum of £250 to pay off a person named Harwood, who held a bill of sale over all the debtor’s property to secure £750; the defendant was not, as in the present case, a surety for Harwood’s debt, and the payment of the £250 freed the debtor’s property from Harwood’s bill of sale, which secured £750. Again, and what I consider a material point, the debtor would appear to have carried on his business from the 19th of January to the 26th of October, when the seizure under the bill of sale was made, whereas here possession was taken under the bill of sale almost immediately, one day for redemption only being inserted in the bill of sale, and it never was contemplated that the bankrupt should continue one moment in trade, or pay a single creditor besides the chargeant. The court appear to have treated the release for a sum of £250 of property seized by a creditor, who held a bill of sale to secure £750, as a substantial advantage in which his other creditors might participate. In Pennell v. Reynolds a substantial present advance of £250 was made by a person named Cheeseman to pay off an execution creditor, and the assignment, which was of all the debtor’s effects, was given to secure this sum, and also to cover liabilities under certain contracts of the debtor, in which Cheeseman was surety. The court sent the case down for a second trial. Willes. J., stating, at the conclusion of the argument, that the real question was, “ whether there was such an equivalent here as fairly to prevent the deed from having the effect of withdrawing the property from the reach of the creditors. ” This the court held to be a question for the jury, and as the learned judge who tried the case had directed a verdict subject to the opinion of the court, and the court did not agree on the question of fact, a new trial was directed. So far as the deed purported to secure Cheeseman in his position of surety, the court appeared to have been clearly of opinion that consideration was invalid. “If,” said Williams, J., during the argument at page 717—“if the deed is given as a security for a debt which may accrue, I must confess I do not see why it the less operates to delay and defeat creditors, than if it were a security for a past debt.” And again at page 719:—“When the assignment is by way of security for future advances, the trader will have the money in his pocket. But what the better is he for the suretyship.” See also on this point Leake v. Young, 5 El. & Bl. 955. In Whitmore v. Claridge, a trader being pressed by two of his creditors—one of whom had a Bill of Sale on part of his property, and the other creditor an execution on the residue of his goods—applied to the defendant to assist him, and in consideration of the defendant agreeing to pay off the two creditors assigned to him all his estate and effects; and it was held that the assignment was not an act of bankruptcy on the ground stated by Pollock, C.B., in his judgment “that the assignment is not an assignment of all the person’s property to pay a past debt only, but it is an assignment with a view to release and relieve the property from a charge already laid upon it. The money in this case in effect is advanced for the *71 benefit of the estate. ” The bill of sale in that case was given on the 5th of December, 1859, and the adjudication in bankruptcy did not take place until the 25th of April, 1860, and counsel in the argument pointed out to the Court (before whom all the facts were laid, as appears from the reports of the case in the Court below, 31 L. J., Q. B., 141, and 8 Jur, N. S., 1059) that there was in fact no intent to defeat or delay creditors, and that the arrangement was for the very purpose of continuing the business and with the view of paying every creditor. On reference to the report of the case in the Court of Queen’s Bench, as reported in the 8th Vol. of the Jurist, N. S., in setting forth the facts as they appeared at the trial, it is stated:—“At the time” (viz, when the loan was made by the defendant to his brother, the bankrupt, for the purpose of paying off the two creditors who were pressing him) “Henry Claridge (the defendant), although aware that the bankrupt was labouring under pecuniary difficulties, believed, as did the bankrupt himself, that the satisfaction of these creditors would enable him to carry on business until the succeeding harvest, and the proceeds of which would enable him to pay his debts in full;” and,in giving judgment, Blackburn, J., says:—“Where a bill of sale is given for a bygone debt, it cannot be said to be given for the benefit of the creditors, inasmuch as the property forming the security is thereby placed beyond their control, but there is a marked distinction between such a case and that of the advance of money by a third person upon the security of a bill of sale to satisfy pressing debts of the grantor and enable him to continue his business ;” and further on he adds, after citing Hutton v. Cantwell, 1 El. & Bl. 15, “It seems, therefore, that, in accordance with this view of the law, we must treat this advance as a new loan to the trader for the benefit of his creditors rather than as tending either to delay or defeat their claims upon the bankrupt.” In the present case, however, there is no pretence that either the bankrupt or chargeant ever thought of his continuing his business or paying any of his other creditors.
A number of other authorities (including James et al. v. Moriarty,18 Ir. L. T. R. 177) were cited in the argument, but I think it needless to refer to them. There is, however, one case which was not referred to, in which the law applicable to the assignment by a trader of all his property is fully explained by Cockburn, C.J. The case is Woodhouse v. Murray, L. R., 2 Q. B. 634. There an execution for a debt over £50 had been levied by seizure of the goods of a trader, and he, being then insolvent, in consideration of the judgment-creditor withdrawing the execution, assigned to the creditor the whole of his property, and ceased to carry on his trade. The jury having found the transaction bona fide, it was held that, as the creditors at large could have interfered and take the proceeds of the execution under sec. 73, there was no sufficient equivalent for the assignment to the execution creditor, which was therefore void and an act of bankruptcy. [His Lordship read the judgments of Cockburn, C.J., Mellor and Shee, JJ.] That case lays down the general rule of an assignment of all a trader’s effects being an act of bankruptcy, and the exception that where the trader gets something which to him and his creditors is an equivalent such is not the result. It is, also, valuable as deciding that, where an execution has been levied on the goods of a trader by seizure and sale, it must be assumed the general creditors could have taken advantage of this, which now constitutes an act of bankruptcy, and have made the debtor a bankrupt, in which case his estate would have been equally distributed amongst his creditors. In the present case, if either the Munster Bank or Messrs. Porter and Fordham had levied the amount due to them respectively by seizure and sale, it must be assumed that bankruptcy would have resulted, as it eventually did, on the proceeding by debtor summons taken by Large. By the contrivance, however, carried into effect between the bankrupt and Mrs. Lambkin, the bankrupt’s effects were withdrawn from the equal distribution which the bankruptcy law affords, and were all handed over to one creditor, in contravention of the other’s rights, and without any equivalent passing, of which they, the creditors, could obtain the advantage. I am, therefore, of opinion that the contention of Mrs. Lambkin cannot prevail in this Court, and that the execution of the bill of sale of the 30th July, 1875, was an act of bankruptcy.
Having come to this conclusion on the main question in this case, I do not think it necessary to make any lengthened observations on the several heads of objection relied on by the assignees in their discharge, as grounds for impeaching this bill of sale. The first and third grounds have been dealt with in the observations I have already made. As regards the second head—viz., that the bill of sale was executed and given by the bankrupt when in insolvent circumstances, and voluntarily, to the chargeant, with a view of giving her a preference over his other creditors, I think, as I have already stated, that it has been clearly proved that same was given when the bankrupt was in insolvent circumstances, and was given voluntarily on his part. There is, however, difficulty in holding that when the agreement was made, which resulted in the execution of the bill of sale, the chargeant was a creditor of the bankrupt for any greater sum than the sum of £350, the sum sent to pay off Timmoney’s execution, and as the consideration for the bill of sale was one and entire, I think, although with some doubt, that the deed can scarcely be avoided, on the ground of being a fraudulent preference of a creditor, within the terms of the 53rd section of the Bankruptcy (Ireland) Amendment Act—except, possibly, so far as said deed purported to secure said sum of £350; my opinion, at the same time being, that if it could be avoided on this ground, the chargeant is not protected by the saving clause at the end of that section. The transaction, however, I conceivef to be clearly one which is against the spirit and intention o the section in question. When the agreement was entered into both chargeant and the bankrupt, in my opinion, believed that he could not pay off the bank, and that the obligation of discharging the sum due would eventually fall on chargeant in the event of his default; and I think the contrivance then arranged by which that liability was accelerated, and chargeant, by paying off the bank, became a creditor of the bankrupt for the sum so paid, getting all his property as her security, is a material element in the impeachment as fraudulent of the bill of sale by which such contrivance was consummated, and any equal division of the bankrupt’s assets amongst all his creditois completely frustrated.
As regards the objection that the bill of sale was a mere cover to protect the property, I am entirely against the contention of the assignees. I think the deed was intended to pass the property, and that there was no cover or secret trust in the transaction.
Nolan v Neill and Others
High Court of Justice.
Chancery Division.
1 December 1897
[1899] 33 I.L.T.R 129
Chatterton V.-Ch.
Chatterton, V.-Ch.
This was not merely a colorable transaction, but was a real transaction, and intended to operate as such. No doubt the fact that the action had been brought in the Queen’s Bench Division may have been the motive of the deed, but on the authority of Wood v. Dixie there must be something else of a covinous or fraudulent nature in the transaction besides a mere desire to defeat an anticipated judgment. The statute says that such a transaction must be for valuable consideration, and bona fide. In this case there was a valuable consideration, which, no doubt, was small, but still sufficient to support the transaction. Besides the £20 there was an undertaking on the part of Pierce to discharge the legacy charged on the land, and a guarantee that the year’s rent, then almost due, would be paid by him. With reference to the bona fides, I lay great stress on the fact that under their father’s will the brothers had to give to each other the preference in case of a sale of the share of either. Now land is only worth what it will bring, and in the face of such a provision in the will it would be hard to get a purchaser for it other than Pierce. On the whole, therefore, I think this action must be dismissed with costs.
Deering and others v Roberts and Gillespie
in re Sir Charles Compton Domvile
Court of Bankruptcy.
18 May 1878
[1878] 12 I.L.T.R 118
Harrison J.
Harrison, J.
In this case a charge has been filed by the assignees, praying to have two indentures of mortgage, bearing date the 29th day of May, 1874, declared fraudulent and void as against the assignees, and that same may be delivered up and be cancelled, and the registry thereof vacated. One of those mortgages is executed by Sir C. Domvile, the bankrupt, to Robert Roberts, and purports to convey all his estate and interest in the lands and premises mentioned therein to secure the sum of £1,650, with interest at £6 per cent. per annum. The other mortgage is executed by Sir C. Domvile to James Gillespie, and is a conveyance of the same lands and premises to secure £1,000, with interest at £6 per cent. per annum. By said respective indentures the bankrupt, also, assigned certain policies of assurance on his own life to Roberts and Gillespie respectively, and covenanted to pay the premiums, by way of further security for the sums stated to be due, and charged the lands and premises comprised in the said mortgages with the payment of such premiums. The assignees set forth in the ninth and subsequent paragraphs of their charge the grounds on which they impeach such mortgages respectively—viz., that on the 30th May, 1874, Sir C. Domvile departed out of Ireland with intent to defeat and delay his creditors, and was duly adjudged a bankrupt on the 16th June, 1874; that Robert Roberts had been for many years his confidential servant, and was in his service at the date of the mortgage, and accompanied him on his departure as his servant and attendant, and has since continued with him, the assignees being unable to discover his place of abode; that James Gillespie admits that no money was paid or advanced by him at any time to the bankrupt, and that he was named in the deed as a trustee for Roberts, and that no money was paid by Gillespie or Roberts to the bankrupt at the time of the execution of the said deeds; and the assignees, in paragraph 18 of the charge, deny that at the time of the execution of said deeds any sum whatever was due by the bankrupt to Roberts, and refer to such proof of any money being due as Roberts may be able to make. The assignees, in the 19th paragrarh, charge that for some time previous to the execution of said mortgages the bankrupt, with the knowledge and connivance of Roberts, had been removing his property at Santry Court so as to place it beyond the reach of his creditors, and had, with such knowledge and connivance, removed great quantities of valuable furniture to London and to various brokers in the city of London, and with same fraudulent intent and motive had executed transfers of furniture and other property as well to Roberts as to other persons in his employment; and they further charge that on the 23rd day of May, 1874, being six days before the execution of said alleged mortgages, the bankrupt fraudulently parted with certain of his property to the said Roberts by means of an alleged lease, which was afterwards set aside by reason of such fraud by an order of this Court, which order was confirmed upon appeal.1 The assignees then charge that said two indentures of mortgage were not executed bona fide, or *118 to secure any existing debts, but as a mere cover and with intent to defeat and delay the bankrupt’s creditors. They further charge that Roberts was, at the date of the execution of said indentures, well aware of the embarrassed circumstances of the bankrupt and of the fraudulent intent and motive with which same were executed, and of the immediate intent of the bankrupt to depart out of Ireland with intent to defeat and delay his creditors; and further, that if Roberts should be able to show that the bankrupt was indebted to him at the date of the execution of said indentures, they charge that at that date the bankrupt was unable to pay his debts as they became due from his own moneys, and that said indentures were executed with a view of giving Roberts a preference over his other creditors, and that same were void as fraudulent preferences, and that by said indentures bankrupt made a fraudulent conveyance or transfer of his property or of some part thereof, and that the execution of said indentures was an act of bankruptcy. Roberts, by his discharge, after stating that the mortgage for £1,650 was made direct to himself and the other to Gillespie as his executor, states that the respective sums of £1,650 and £1,000 thereby secured were due to Roberts by the bankrupt before the execution of said indentures. In paragraph 3 he alleges that said indentures, were executed by the bankrupt, who was required to execute them by the said Robert Roberts, bona fide, and to secure the existing debts due by him to Roberts, and were executed with the intent of securing the said debts and of being acted upon, and were executed bona fide and with the intent to secure the said debts to him the said Roberts, and not with any intent of defeating or delaying the other creditors of the bankrupt, and not by way of giving the said Roberts any undue or fraudulent preference over the other creditors of the bankrupt. In paragraph 4 the discharge alleges that Roberts was not aware of the bankrupt’s alleged embarrassments as stated in the charge; the said statements are greatly exaggerated; and at the date of the execution of the mortgages the said Sir C. Domvile could have paid his lawful debts in full out of his own proper moneys if reasonable time had been afforded him; the claims made against him required time for investigation; many of them were brought forward and pressed for at the same time, and were and are of an exorbitant character. The discharge further denies that the said mortgages are fraudulent, and submits they are valid and subsisting mortgages, and denies that either was an act of bankruptcy, and further that Roberts had any knowledge of any fraudulent intent or motive as alleged on the part of the bankrupt; the existence of any such motive or intent is further denied. The discharge then states the time Roberts was valet and house steward to Sir C. Domvile being twenty years, and mentions other services he had previously been in; and further that he kept a book while in Sir C. Domvile’s service, in which he entered an account of moneys expended for Sir C. Domvile, and that there were balances from time to time from 1864 due him by Sir C. Domvile which he did not pay; that he lent money from time to time to Sir C. Domvile, and received his bills and promissory notes and his bonds therefor, upon the first of which bonds judgment was entered in the Court of Common Pleas for the penal sum of £1,000 in July, 1865, and another of said bonds was executed by Sir C. Domvile at Santry in the presence of Mr. Froste, solicitor. The discharge then states that Sir C. Domvile requiring further advances from Roberts in 1872, the same were made to him through Mr. James Gillespie under the belief that Sir C. Domvile would be more punctual in paying interest and renewing his acceptances than when dealing with Roberts; and that Mr. Froste then acted as solicitor for Roberts, and now holds the said bonds and account book and several of said bills. That in 1874 the said Sir C. Domvile was indebted to dischargeant Roberts in sums amounting to £1,650 for moneys bona fide advanced and interest at 6 per cent., to secure which Sir C. Domvile executed the mortgage of 29th May, 1874; and being also indebted in further sums amounting to £1,120 15s. 6d., for which Mr. Gillespie held five several acceptances as a trustee for dischargeant (the said acceptances are here identified and marked, and the name of Sir C. Domvile as acceptor stated to be his genuine signature), the said Sir C. Domvile executed the mortgage for £1,000 of the 29th May, 1874, to the said J. Gillespie, the balance of £120 6s. 5d. being omitted. The discharge then repeats that the moneys so advanced through Gillespie were the proper moneys of dischargeant: and states that he had money invested in New 3 per cent. Government Stock, which was sold out through Messrs. Boyle, Low, Murray, and Co., stock-brokers, for the express purpose of lending it to Sir C. Domvile; and that the several sums so advanced were dischargeant’s accumulated savings during his whole life. The discharge is verified by Roberts at Boulogne-sur-Mer on the 17th October, 1877. The assignees rely, in support of the allegations of fact in their charge, on the depositions which were used on a former occasion in this Court, when the lease executed by the bankrupt to Roberts on the the 23rd May, 1874, was impeached, and declared to be an act of bankruptcy and fraudulent as against the assignees, which decision was affirmed in the Court of Appeal, and also upon the evidence of Mr. J. Gillespie and Mr. Froste, taken in Court on the 12th day of June, 1877, and an affidavit of Mr. Deering, official assignee, in which he deposes to the amount of debts proved in the bankruptcy of Sir C. Domvile—viz., £26,932 15s. 6d., and to the amount of assets realized. These, as Mr. Deering states, consist solely of the balance of the rents of his real estates in the county and city of Dublin and the sums received for the letting of the demesne and garden at Santry Court, and of a sum of £4,858 11s. 6d. realized by the sale of the furniture and chattels at Santry Court. Mr. Deering also states that, to the best of his information and belief, the bankrupt was not possessed of any property, real or personal, other than what was comprised in the indentures of mortgage of the 29th May, 1874, except what had been so realized as aforesaid, and except certain equities of redemption in certain policies of assurance which are of no present marketable value. An affidavit was made by Sir C. Domvile in support of the case of dischargeant. It was made at Rouen on the 23rd November, 1877. The assignees having required the production of Sir C. Domvile and of Roberts for cross-examination at the hearing, neither of them attended, and the assignees in consequence objected to the admissibility of this affidavit. I allowed same to be used, following the course I adopted under similar circumstances on the occasion of the hearing of the charge to set aside the lease of Santry Court, and for the reasons stated in my judgment on that occasion. 2 Having regard, however, to the non-attendance of the parties for cross-examination and the nature of this case, I repeat the observations then made, that I attach no weight to any statements made therein which is not supported by other independent evidence. Sir C. Domvile in his affidavit deposes to the existence, on the 29th of May, 1874, of the debts of £1,650 to Roberts and £1,120 15s. 6d to Gillespie, as stated in the discharge, and to his having had many money transactions with Roberts, and executing bonds to secure moneys due, one of such bonds being stated to bear date in 1868 to secure £500. He also deposes to the several bills of exchange accepted by him, the drafts of James Gillespie, amounting to £1,120 15s. 6d., which he states Roberts told him he had got cashed by Gillespie, and that he only recently understood Gillespie was a trustee for Roberts. Sir C. Domvile then deposes to the execution of the mortgages of the 29th May, 1874, and concludes thus, in the fifth and sixth paragraphs:—“Both said mortgages were executed by me bona fide and with the intention of securing the said several debts so due by me to the said Robert Roberts, and of being acted upon, and were not executed with any intent of defeating or delaying any other creditor, nor for the purpose of giving any undue or fraudulent preference over them. The statements in the said charge with regard to my bankruptcy are exaggerated, and I say that at the date of the execution of the said mortgages I could have paid all my lawful debts in full and of my own proper moneys had time been afforded me for the investigation of *119 the usurious demands and exorbitant accounts of many of my creditors.”
The charge and discharge having come on for hearing, it appeared to me, when same were opened, that the charge did not sufficiently rely on the invalidity of the mortgages in question, by reason of the execution of same after the committing by the bankrupt of an act of bankruptcy—the execution of the lease of Santry Court and demesne to Roberts, on the 23rd of May, 1874, of which Roberts had notice—and I, accordingly, allowed same to stand over for amendment. The assignees, thereupon, filed a short supplemental charge, in which they specifically rely on this ground of objection to the validity of the mortgages. Robert Roberts filed a discharge to said supplemental charge, and in it he says—“The execution of the lease of the 23rd May, 1874, was not the act of bankruptcy upon which the order of adjudication of the 16th June, 1874, was made, and the execution of the said lease and the notice with respect thereto, in the supplemental charge mentioned, are not available against the said Robert Roberts by relation to the mortgages in the charge mentioned. The act of bankruptcy on which the order of adjudication was obtained was that the debtor had departed out of Ireland with intent to defeat and delay his creditors, and which departure was after the execution of said mortgages. All the real and personal estate of the debtor was vested in the assignees on the 16th June, 1874, and not before; and, at the time of the execution of said mortgages, the assignees had not, by relation or otherwise, any estate, right, title, or interest in the real or personal estate of the bankrupt.” This supplemental charge was filed on the 31st March, and on the 2nd April Roberts, for the first time, made an affidavit in support of his case. This affidavit is verified at Calais, and is a mere echo of the discharge to which I have already fully referred. Roberts, as I have already stated, although required by notice, has not attended for cross examination. The case again came on for hearing on the 9th inst., and the counsel for Roberts produced a certified copy from the Bank of Ireland of Roberts’s account of Government New Three per cent. Stock, from the 31st December, 1859, to August 5, 1875. The bills referred to in the charge and affidavits of Sir C. Domvile and of Roberts were also produced. The Stock account shows that Roberts had dealings in the Funds to a considerable extent for a person in his position, during the dates covered by it, through Messrs. Boyle, stock brokers; and, at the conclusion of the case I expressed my opinion that the assignees had failed to prove the part of the case which alleged that the mortgages were not executed to secure any existing debts due by Sir C. Domvile to Roberts at the time of the execution of said mortgages, and that same were a mere cover. In holding this I do not mean to decide that Roberts has established the amount of debt actually due to him, or to preclude the assignees from questioning same in case Roberts shall hereafter file an ordinary proof of debt as an unsecured creditor. The relations of the parties, their conduct before and since the bankruptcy, and their persistent refusal to submit to any cross-examination in this Court, render it necessary that this should be distinctly understood.
The two points, however, remain—viz., first, whether, assuming for the purpose of the argument the existence of the debts secured by said mortgages respectively, same were not executed by way of fraudulent preference; and, second, whether same are not invalid as against the assignees, having been executed after the committing of an act of bankruptcy by Sir C. Domvile, of which Roberts admittedly had notice, to wit, the execution of the fraudulent lease of the 23rd May, 1874. On these points, also, I expressed my opinion to be in favour of the assignees; but, as I had some doubt whether my judgment should not be based on the latter ground alone, I allowed the case to stand until to-day, more carefully to consider the evidence. I now again state that, on both the grounds relied upon, my opinion is that the assignees are entitled to succeed. As regards the first ground—viz., that of fraudulent preference, the 53rd section of the Irish Bankruptcy Act of 1872 (similar to the 92nd section of the English Bankruptcy Act of 1869), is as follows:—[His Lordship read section 53]. Now, in the present case, it is established that Sir C. Domvile was at the time of the execution of the said mortgages “unable to pay his debts as they became due from his own moneys.” He, indeed, himself admits this, as his affidavit merely insists that he could have paid his lawful debts “ had time been afforded him for the investigation of the usurious demands and exorbitant accounts of many of his creditors. ”3 And Mr. Deering’s affidavit shows that debts amounting to £26,932 have been established as due at the date of the bankruptcy—the assets realised being under £5,000, irrespective of the balances of the rents and profits of the real estate. That such mortgages did, in fact, give Roberts a preference over the other creditors is likewise indisputable; and as Roberts cannot rely on the saving qualification at the end of the 53rd section, protecting “a purchaser, payee, or incumbrancer, in good faith and for valuable consideration,” he being himself a party to a former act of bankruptcy, to wit, the execution of the lease of Santry Court, and being, in my opinion, clearly shown to have had knowledge of Sir C, Domvile’s embarrassments, and also being presumably aware of his intention to leave the country the following day, when he was accompanied by Roberts—the only point remaining for the assignees to establish, to bring the case within the provisions of the section in question, is that Sir C. Domvile executed the said respective mortgages “with a view of giving Roberts such preference as they, in fact, did give him, if valid.” Now, to establish this, the Court (or a jury, if one had been empannelled) must be satisfied that this motive—and not any pressure or demand exercised by Roberts—was the sole motive actuating the bankrupt when he executed the deeds. Several cases in the Court of Chancery Appeal in England decided since the passing of the English Bankruptcy Act of 1869, having established that there is no substantial difference between the present law of fraudulent preference, and that which prevailed before the enactment in that statute on the subject. See particularly the cases of Ex parte Tempest, re Craven, L. R. 6 Ch. Ap. p. 70, and the case of Ex parte Topham, re Walker, L. R. 8 Ch. Ap. p. 614. If, then, the evidence in this case showed any pressure or demand exercised by Roberts on Sir C. Domvile which the Court or a jury could reasonably hold influenced or actuated him in the execution of these mortgages, Roberts might contend that on this ground of invalidity the assignees had failed to prove their case. But, I am of opinion that no evidence on which I can act of any such pressure or demand has been shown by Roberts; and, further, that having regard to the facts proved and the circumstances of the present case, I am at liberty to hold that, as every one must be assumed to know the effect of his own acts, Sir C. Domvile—embarrassed as he was on the 29th of May, intending to leave the country the following day in company with Roberts, and, as has been held, with the intention of defeating his creditors, having executed a fraudulent deed to this same Roberts six days before, through the intervention of the same solicitor, and of his own motion, as was established on the hearing of the charge to set aside that deed—must be presumed to have executed, and did, in fact, execute said mortgages, in the words of the section, with a view of giving Roberts a preference over his other creditors. That there is no reliable evidence to displace this presumption is, I think, clear. In a case so fraught with suspicion as this, and having regard to the relationship and conduct of the parties, the strongest and most reliable evidence should have been adduced by Roberts of any fact or circumstance he intended to rely upon. What, then, is the evidence to show any pressure or demand on the part of Roberts which could have actuated Sir C. Domvile in executing these mortgages. The charge of the assignees having insisted that same were executed by way of fraudu *120 lent preference, and the spontaneity or voluntary nature of the act on the part of the debtor being an essential element in any case of “fraudulent preference,” the third paragraph of the original discharge of Roberts contains the following sentence:—“The said two indentures were executed by the said Sir C. Domvile, who was required to execute them by the said Robert Roberts, bonâ fide, and to secure the existing debts due by him to Robert Roberts, and were executed with the intention of securing the said debts, and of being acted upon, and were executed bonâ fide, and with the intention to secure the said debts to him the said Robert Roberts, and not with any intention of defeating or delaying the said executors of the said Sir C. Domvile, and not by way of giving Roberts any undue or fraudulent preference over the said executors of the said Sir C. Domvile.” When the case first came on for hearing, Roberts, as I have already said, had made no affidavit in support of his discharge. Sir C. Domvile did, however, make an affidavit, but it contains no reference whatever to the above-mentioned allegation in the discharge, as to his having been required to execute said mortgages by Roberts, and on this most cardinal matter, so far as this branch of the case is concerned, Sir C. Domvile is perfectly silent. He does depose to Mr. Froste having, as solicitor, prepared the deeds (see paragraph 4 of his affidavit). And in paragraph 5 he says: “Both said mortgages were executed bonâ fide, and with the intention of securing the said several debts so due by me to the said Robert Roberts, and of being acted upon, and were not executed with any intention of defeating or delaying any other creditors, nor for the purpose of giving any undue or fraudulent preference over them.” Now, this paragraph is an echo of the 3rd paragraph in the discharge— omitting the allegation that Sir C. Domvile was required to execute them by the said Robert Roberts—and is it not a reasonable inference that this was purposely omitted, and that Sir C. Domvile could not truly have deposed thereto? It is true that Roberts, when he comes to make an affidavit on the 2nd of April—after the absence of any evidence on his behalf had been commented on at the original hearing—does depose to the truth of the entire of the 3rd paragraph of the original discharge, including this parenthetical expression—of his having required Sir C. Domvile to execute said mortgages; but I attach no weight whatever to this statement, so introduced into this affidavit—especially having regard to the non-attendance of Roberts for cross-examination, as required. I, therefore, hold that no evidence has been adduced on which the Court can rely to show any pressure or demand whatever on the part of Roberts which led to the execution of said mortgages, and that same are fraudulent and void as against the assignees, as having been executed by Sir C. Domvile within three months of his being adjudged a bankrupt—he being at the time unable to pay his debts as they became due from his own moneys—and in favour of Roberts, with the view of giving him a preference over his other creditors.
The other ground relied on by the assignees remains—viz., whether these mortgages are not invalid as against the assignees, having been executed after the committing by Sir C. Domvile of an act of bankruptcy of which Roberts had notice—the supplemental discharge raising the point that the said act of bankruptcy (to wit, the execution of the fraudulent lease of the 23rd May) was not the act of bankruptcy on which the bankrupt was adjudged bankrupt, and that the title of the assignees had no relation back to the prior act of bankruptcy. This being a bankruptcy on the petition of a creditor and not of the bankrupt himself, and the petitioning creditor’s debt being admittedly in existence at the date of the commission of the earlier act of bankruptcy relied upon, by the execution of the fraudulent lease of the 23rd of May, 1874, of which the creditor had notice at the time of the execution of the respective mortgages of the 29th of May, 1874, I acknowledge I was a little surprised that such a point as that relied upon in the supplemental discharge should be raised or argued, being of opinion that it was now settled law that on such a state of facts the assignee’s title had relation back to the earliest act of bankruptcy which might be proved to exist, and which could have been made available for adjudication by the petitioning creditor, although not the act of bankruptcy on which the debtor was actually adjudicated.4 As the point, however, has been raised and argued it is necessary to give my views upon it. Now, so far as text books of authority can be held to enunciate the law, there is no proposition more clearly laid down than the one in question. To establish this it will be sufficient to refer to three authorities—1st, Mr. Justice Lindley in his Treatise on Partnership, vol. ii., p. 1112, second edition, says “When a debtor is made bankrupt on his own petition, the title of his assignees to his property dates from the time of adjudication (Monk v. Sharp, 2 H. & N. 540; Stevenson v. Newnham, 13 C. B. 285); but, when a bankrupt is adjudged bankrupt on a creditor’s petition, then the title of the assignees to the bankrupt’s property dates, not from the time of adjudication, but from a time anterior thereto—viz., from the time of the commission of the earliest act of bankruptcy subsequent to the accrual of the petitioning creditor’s debt [citing a number of authorities referred to in a note]. As regards the bankrupt’s personal property, whatever he was entitled to at that time, or has acquired subsequently (and before he has obtained his certificate) becomes legally vested in his assignees; and as regards his real property, although the legal estate in it only vests in the assignees from the time of their appointment, still they can recover whatever may have been conveyed away by the bankrupt after the commission of an act of bankruptcy subsequent to the accrual of the petitioning creditor’s debt.” In Deacon on Bankruptcy (a text book of high authority), vol. i., p. 861, it is stated—[His Lordship having read from the words “It was enacted,” down to the word “bankrupt,” continued:—] “The time of becoming bankrupt is the time when the party commits an act of bankruptcy, although the adjudication may be founded not upon that, but upon a subsequent act. But the relation to the act of bankruptcy cannot be carried further back than the accruing of the petitioning creditor’s debt, for the assignees could not avail themselves of any act of bankruptcy beyond that time without destroying their title as assignees. Where the adjudication is obtained upon the application of the bankrupt himself, though the bankrupt may have committed an act or acts of bankruptcy the title of the assignees could not relate back to it.” And in Smith’s Leading Cases, in the note to Cooper v. Chitty, vol. i., p. 437, fifth edition, it is stated—“That the right of the assignees to the bankrupt’s property dates prima facie from the act of bankruptcy is so perfectly well known and elementary a position that it would be a mere waste of time to enlarge on it.” It is only necessary, I conceive, after such statements from such authors, to refer to one or two authorities in support of the proposition in question. In Stansfield v. Cubitt (2 De Gex & Jones, p. 222) it was held by the Court of Appeal in England, consisting of Lords Justices Bruce and Turner, where a bankrupt had committed several secret acts of bankruptcy by the execution of bills of sale in and previous to July, 1856, and was eventually adjudged bankrupt on an entirely different act of bankruptcy, by executing an assignment to a trustee for his creditors, on the 23rd August, 1856, on which act he was declared bankrupt in December, 1856, that the assignees in that bankruptcy could impeach the bills of sale previously executed. Stuart, V.C., having made a decree setting aside such bills of sale, on appeal his decision was affirmed. Knight-Bruce, L.J., says, at p. 227—“It is plain that in the month of July, 1856, Glover, the bankrupt, committed one or more act or acts of bankruptcy capable of supporting the adjudication in bankruptcy which took place in the following December, the petitioning creditors’ debt having been due from a time preceding July, 1856.” He then holds that the creditors whose security was impeached could not rely on the protecting clause of the statute (sec. 133 of the English Bank, similar to sec. 328 of the Irish Act of 1857 now in force here) on the ground of the transaction impeached being a contract or transaction with the bankrupt bona fide entered into, and affirms the decree. This case was decided when the English Bankruptcy Act of 1849 was in force, which is similar in its provisions as to the vesting of the bankrupt’s estate, &c., in the assignees with the Irish Act of 1857. Vide and compare ss. 141 and 142 of the English Act of 1849 with ss. 267 and 268 of the Irish Act of 1857. So, in Ex parte Jackson (De Gex, Bankruptcy Cases, p. 609), cited during the argument, also before V.C. Knight-Bruce, it was held, where traders had executed an assignment of all their effects in trust for their creditors, and afterwards sued out a fiat against themselves, but did not apply for adjudication, and two creditors who could have sued out a fiat against the bankrupts, and who could under it have impeached the deed, applied for and obtained an adjudication—that the assignees could successfully impeach the deed. That case proceeded upon the distinction of an adjudication upon the debtor’s own petition, and one upon the petition of a creditor, in the former case, there being no relation back to a prior act of bankruptcy; and it was held that, although the traders themselves sued out the fiat, yet, as they did not proceed to obtain an adjudication, and creditors afterwards intervened and did so, they could by relation impeach the prior trust deed. The case of Stevenson v. Newnham (13 C. B. 285) establishes that there is no relation back on a petition filed by the debtor himself. Parke, B., at p. 299, says—“And if the fiat had been issued on the petition of any of those creditors to whom the bankrupt was indebted at the time of the transfer of the goods to the plaintiff in a sufficient time to make them good petitioning creditors, the assignees under that fiat would have had a title to the goods by that very transfer. But on the 8th October, 1849, when the fiat issued, the old bankrupt law (the 7 & 8 Vic., c. 96) was in force. The new statute, 12 & 13 Vic., c. 106, did not come into operation until the 11th October, 1849; and under the former statute, s. 41, the Lord Chancellor can grant a fiat on the petition of a trader himself only when he has filed a declaration of insolvency, which is made an act of bankruptcy by the 6 Geo. IV., c. 16, s. 6. It may be collected from the bill of exceptions in this case that the adjudication in bankruptcy proceeded on the bankrupt’s own application, not on that of creditors to the amount sufficient to constitute a petitioning creditor’s debt, who might have obtained that adjudication. It seems to us that in such a case the act of bankruptcy on which the petition is to proceed is the declaration of insolvency; and that there can be no relation back further than to that act. It might, perhaps, have been otherwise if the adjournment had taken place on the application of creditors, though the fiat had issued on the petition of the bankrupt; for then, as in the case of an ordinary commission or fiat, there may, perhaps, be a relation back to any act of bankruptcy which can be proved subsequent to the petitioning creditor’s debt.” In like manner, there is no relation back when a debtor is adjudged bankrupt by the court in the course of arrangement proceedings instituted by himself, under the arrangement clauses of the Act of 1857: Monk v. Sharp, 2 H. & N. 540. On this point of the case it is only further necessary to refer in addition to section 328 of the Act of 1857, by which certain bonâ fide contract dealings and transactions are protected if they have taken place before the filing of the petition, notwithstanding any prior act of bankruptcy by such bankrupt committed, provided the person dealing with the bankrupt had not at the time “notice of any prior act of bankruptcy by him committed”—implying that if the party had such notice, the transactions would not be protected. During the argument, however, it was contended that the Irish Bankruptcy Act of 1872 had changed this law, and that now the doctrine of relation back must be deemed no longer to exist; and, in support of this contention, the recent decision of the Master of the Rolls, in the case of The Merchant Bank v. Spotten (11 Ir. L. T. Rep. 153; Ir. R. 11 Eq. 586), was relied upon. That case decided, amongst other matters, that where an adjudication in bankruptcy is procured on the presentation and dismissal of a petition for arrangement, the act of bankruptcy is only complete on the dismissal of the petition, and there is no relation back to the day of its presentation. That case has not, in my opinion, any bearing upon the contention raised in the present case. It turned entirely on the construction of the recent Irish statute, as to when the act of bankruptcy, on which the petition was presented, was complete—viz., whether it was the date of filing the arrangement petition or its dismissal —and has no bearing on the point now before me, as to whether there is relation back in an adjudication on a creditor’s petition to a different and complete act of bankruptcy—available for adjudication committed after the accrual of the petitioning creditor’s debt. The Master of the Rolls in his judgment, on this branch of the case, confines his observations altogether to the case before him. “I have,” he says, “examined into this question of relation back with all the care and anxiety which its great importance demands, and I have come to the conclusion, that on the true construction of the Irish Statutes there is no relation back under an adjudication in Bankruptcy such as the one now before me, and that the act of bankruptcy in this case was consummated only on the 7th March, 1876, and that, therefore, the title of the assignees must be taken to have only accrued as and from that day.” I think it unnecessary further to refer to this case, or to the recent Irish Statute of 1872, which is a mere addition to the larger code, enacted by the Act of 1857, and leaves untouched the broad principle of well recognised and long established bankruptcy law—viz.: that on an adjudication in bankruptcy, on a creditor’s petition, the title of the assignees relates back to the earliest act of bankruptcy shown to have been committed after the accrual of the petitioning creditor’s debt. The mortgages in question, therefore, were on this ground also, in my opinion, invalid as against the assignees, and must be so declared. The dischargeant is to pay the assignees their costs of the charge and proceedings thereunder, save so far as same have been increased by the supplemental charge—such costs, I declare them entitled to as part of the costs in the matter. I declare said respective indentures of mortgage of the 29th day of May, 1874, are fraudulent and void as against the assignees, as having been executed by the mortgagor, Sir C. C. W. Domvile, with a view of giving the said Robert Roberts (the mortgagee) a preference over his other creditors, the said Sir C. C. W. Domvile being unable to pay his debts, as they became due, out of his own moneys, and having been declared a bankrupt within three months of the date of the execution of said indentures; and declare, also, that said respective indentures of mortgage are invalid as against the assignees, as having been executed after the committing, by the said bankrupt, of an act of bankruptcy, by the executing of a fraudulent lease to the said Robert Roberts, bearing date the 23rd day of May, 1874, of which the said Robert Roberts had notice at the date of said respective mortgages—said mortgages to be delivered up to be cancelled and registry vacated (as in order of 14th May, 1875), Robert Roberts to pay assignees’ costs and charges, and proceedings therein, &c., save any costs occasioned by supplemental charge, which they are to have as part of their costs in the matter.
In re Sir Charles Compton Domvile, a Bankrupt.
Court of Bankruptcy.
24 July 1874
[1874] 8 I.L.T.R 196
Harrison J.
Harrison, J.
The adjudication in this matter was made on the 16th day of June last. Cause was shown against it and disallowed, on the 3rd day of July. It appealed that the bankrupt on the 23rd day of May, 1874, executed to Robert Roberts a lease of Santry Place and Demesne, for his own life, at the yearly rent of £60. On the 14th of July a notice was served, on behalf of the assignees, for an order that this lease might be set aside as fraudulent and void, as against the assignees, on the grounds stated in the notice. [His Lordship read same.] On the 17th of July an affidavit was filed by Mr. Froste, solicitor for Mr. Roberts, in which he refers to an action which has been brought against Mr. Freeman, the messenger of this Court, by Mr. Roberts, for alleged trespass quare clausum fregit, upon the lands comprised in said lease, and to the defences pleaded in said action, which is now pending and for trial at the approaching Wicklow Assizes. In that affidavit (paragraph 4th) Mr. Froste submits that the plaintiff in the action, Mr. Roberts, is entitled to have the validity of his lease tried at common law, and that, as he declines to appear and submit to the jurisdiction of this Court, this Court has not jurisdiction to declare his lease invalid, or to exercise the power of a court of equity in relation thereto. On the 18th the motion came on for hearing, and the objection raised in the affidavit filed by Mr. Froste, which was in the nature of a demurrer to the jurisdiction of the Court, was argued— the merits of the case not being discussed.
On the 21st inst. a motion was made, on behalf of the official assignees, for an injunction to restrain the proceedings in the action pending for the Wicklow Assizes. Mr. Roberts appeared by counsel, again, to protest against the jurisdiction of the Court, and, after entering such formal protest, his counsel withdrew. Mr. Jackson, the counsel for the assignees, admitted that, unless the Court had jurisdiction to entertain the application to set aside the lease, the injunction could not be granted; but, assuming that the Court had such jurisdiction, he contended it was a proper case for granting the injunction.
The objections which were urged by Mr. Roberts’ counsel to the jurisdiction of the Court, to entertain the motion to set aside the lease, are twofold.—1st, founded on the construction of the Irish Bankruptcy Acts of 1857 and 1872, and the distinction between their provisions and the analogous ones of the English Statutes of 1849 and 1869; and 2nd, founded on the construction of the 72nd section of the English Statute of 1869, similar to the 66th section of the Irish Act of 1872, which, it was contended, upon the recent decisions of the English Courts, does not confer the jurisdiction here sought to be enforced, even if the Irish legislation on the subject had been similar to the English. Upon the best consideration which I have been able to give to the case, I am of opinion that neither of these objections should prevail, and that this Court has jurisdiction, which it is bound to exercise when so required, to decide the question raised here, although the party sought to be affected refuses to come in and submit to its jurisdiction. As regards the first objection raised there is no doubt that a difficulty arises, owing to the different frame of the English and Irish Statutes. When the Bankruptcy Act, 1869, which now regulates the procedure in England, was passed, all preceding Bankruptcy Statutes were on the same day repealed, and the English Statute was thus left to form a distinct code applicable to bankruptcy administration. Now, section 12 of the Act of 1849 in England is similar in its terms to section 24 of the Irish Act of 1857, and there is no doubt that under these clauses the jurisdiction of the Court, as regards third parties, is confined to those who appeared and submitted to the jurisdiction of the Court. The jurisdiction, to use the words of Gifford, L.J., at page 479 of the report, in the case of ex parte Anderson (L. R. 5 Ch. 473), “is there in terms confined to persons actually within the bankruptcy, or coming and submitting to the jurisdiction;” and he then contrasts the 72nd section of the Act of 1869, analogous to the 66th section of the Irish Act, with the section he referred to. “If,” he says, “we then turn to the 72nd section, the contrast in the terms is very strong., With respect to the word ‘parties’ there used, Mr. Roxburgh argued that it meant parties to the bankruptcy; but, in my opinion, it means parties to the litigation. The terms of this clause, in my opinion, give the Court complete jurisdiction to decide every question that it may be considered necessary to decide, with a view to the distribution of the bankrupt’s estate.” In that case it was held that, under the 65th and 72nd sections of the English Act, almost similar to the 6th and 66th sections of the Irish Act of 1872, the Court had power to restrain the sale of some property transferred by a deed which was impeached as fraudulent, and to decide upon the validity or invalidity of that deed against the party claiming it, notwithstanding his objecting that the Court had not the jurisdiction claimed. Now, turning to the Irish statutes, it is true that the 24th section of the Act of 1857 is left unrepealed by the Act of 1872, and by it the jurisdiction is confined, as regards third parties, to those “who appear and submit.” The Act of 1872 is then passed, and section 66 enacts that, “subject to the provisions of the said Act— i.e., of 1857—and of this Act, and in addition to the powers conferred by the said Act, the Court shall have full power to decide all questions of priorities, and all other questions whatsoever, whether of law or fact, arising in any case of bankruptcy or arrangement coming within the cognizance of such Court, or which the Court may deem it expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of property in any such case; and the Court shall not be subject to be restrained in the execution of its powers under the said Act or this Act by the order of any other Court, nor shall any appeal he from its decisions except in the manner directed by the said Act; and if in any proceeding in bankruptcy or arrangement there arises any question of *197 fact which the parties desire to be tried before a jury instead of by the Court itself, or which the Court thinks ought to be tried by a jury, the Court may direct such trial to be had, and such trial may be had accordingly, before one of the Judges of the said Court, in the same manner as if it were the trial of an issue in one of the Superior Courts of Common Law,”—using the very same words as occur in the 72nd section of the English statute. If the true construction of the words in the 72nd section of the English statute is to confer the power of binding third parties in regard to all questions necessary to be decided, for the purpose of doing complete justice or making a complete distribution of property, I am of opinion that the words of the section of the Irish statute which provide, that this Court shall have the powers conferred by that section, “ in addition to the powers conferred by the said Act, ” also enable this Court to exercise the same full jurisdiction, and by necessary implication extend the power of binding all parties who might be necessary to be bound, notwithstanding the restrictive words contained in 24th section of Act of 1857. Do, then, the words in the English statute confer the power on the Court of Bankruptcy of deciding such a question as is raised here—viz., whether this lease is or is not a valid instrument, the party claiming under it refusing to submit to the jurisdiction of the Court? On this point I am of opinion, that the case of ex parte Anderson is an express authority that the Court of Bankruptcy in England (and, for the reasons I have stated, I consider this Court has the like authority) has jurisdiction to decide the validity or invalidity of the lease which is impeached, in the present case, as fraudulent and void as against the assignees, upon the proper proceedings being instituted for that purpose. In ex parte Anderson, the deed sought to be impeached was an assignment for value, of certain pictures and other property belonging to the bankrupt, by deed dated the 18th of December, 1869. On the 24th of December the bankrupt was adjudicated, on his own petition. The pictures were advertised for sale on the 18th March, 1870 The creditors’ assignee alleged that the assignment was fraudulent, and made at an undervalue; and on the 11th of March he obtained the injunction ex parte to restrain the sale, which order was appealed from direct to the Lord Justice. The Lord Justice was of opinion that section 65 (analogous to section 6 of the Irish Act of 1872) clearly gives the Chief Judge complete jurisdiction—a jurisdiction, at least, as extensive as if he were sitting in the Court of Chancery, and dealing with a suit instituted by proper plaintiffs. After referring to the 72nd section in the terms I have before alluded to, he continues:—“The terms in this clause, in my opinion, give the Court complete jurisdiction to decide every question that it may be considered necessary to decide, with a view to the distribution of the bankrupt’s estate. Is or is not the question, in the present case, one which it is necessary to decide with a view to the distribution of the bankrupt’s estate? I am clearly of opinion that it is. I have no doubt it was the intention of the Legislature that the Bankruptcy Courts should be complete and sufficient in themselves; and that they should, for the purpose of making a complete distribution of the bankrupt’s property, exercise, at least, all the powers possessed by any Judge of the Court of Chancery. Now, beyond all doubt, if the assignee had filed a bill, the Court of Chancery might have granted an injunction and afterwards decided the question whether the purchase was valid; and, that being so, I am of opinion that there was jurisdiction to make the order appealed from.”
Now, in the present case, it appears that the lease was executed on the 23rd of May—seven days before the bankrupt left the country with the intent, as the Court has neld, of defeating and delaying his creditors. The lease purports to be a lease of the mansion-house, demesne, and lands of Santry Court—[His Lordship read the parcels]— at the rent of £60 per annum, for the bankrupt’s life. The lessee is the bankrupt’s confidential servant, who left the country with him, and has not since resided on the premises. The annual value of the place is sworn to amount to £686 per anuum; and, on the motion for an injunction, it was proved that, the bankrupt having mortgaged his property to the Standard Insurance Company, in the month of June, 1872, a receiver over the property was appointed by the mortgagees, and he then attorned and became tenant to the mortgagees, at a rent of £686 per annum, for the premises comprised in this lease—the description in the receiver-deed of the premises being, “The mansion-house of Santry, with its outbuildings and appurtenances, and the demesne lands of Santry, containing, in the whole, 214a. Ir. 14p.,” words almost similar to those contained in the parcels in the lease. The bankrupt is sworn to have been, at this time, indebted to the extent of £25,000 over and above the mortgage to the Standard Company, his surplus rental, for his life, being £3,000 per annum. The day after the adjudication, the present action is commenced against the messenger of the Court, for alleged trespass on the premises comprised in the lease, by the lessee thereunder, the trespass being the entry of the messenger, under his warrant in Sir. C. Domville’s bankruptcy, on the lands of Santry. Upon these facts being set out in a bill filed in Chancery to set aside the lease, and substantiated by primâ facie evidence, the Court would, in my opinion, have granted an injunction to stay that action, upon proper terms, until the validity of the lease was decided. In the case of Ex parte Cohen, in re Sparke, L. R. 7 Ch. 20, it was decided that the Court of Bankruptcy had jurisdiction to restrain a creditor from bringing an action against the trustee under a liquidation—an action upon a bill of sale given by the debtor, the validity of which was disputed by the trustee, and the execution of which was eventually held to amount to an act of bankruptcy—and that the question as to the validity of the bill of sale must be determined in the Court of Bankruptcy. [His Lordship referred to the judgments of the L.JJ.] It is contended, however, that the case of Ex parte Anderson, which was cited in the last case, has been overruled by Selborne, L.C., in the case of Ellis v. Silber, L R. 8, Ch. 83, and that that case decides that the Court of Bankruptcy has no jurisdiction to decide such a question as is raised here; and, undoubtedly, there are expressions in the Lord Chancellor’s judgment which do appear to favour this contention, and certainly his observations in reference to Anderson’s case would appear to show that he held that the jurisdiction in bankruptcy only attached, in that case, because the person claiming under the bill of sale had made certain arrangements with the bankrupt’s creditors, and had, therefore, brought the matter, by his own acts and submission, under the administration in bankruptcy. I acknowledge that I cannot see the force of these observations in reference to the facts established in Anderson’s case, although they do, undoubtedly, show the disinclination of the Lord Chancellor to extend the jurisdiction of the Court so as to bind third parties, unless under special circumstances. What was really decided in Ellis v. Silber was that the jurisdiction of the Court of Chancery was not taken away by the Bankruptcy Act of 1869, where a suit would, but for the fact of a bankruptcy, be fit to be entertained by the Court of Chancery; and I do not find that the Lord Chancellor professes to overrule Ex parte Anderson, although he does use the expressions I have referred to. The other case referred to of Re Motion, Maule v. Davis, L. R. 9. Ch. 192, before Lord Selborne and the Lords Justices, does not, in my opinion, conflict with Anderson’s case. It was there held that section 72 of the Bankruptcy Act of 1869 does not enable the Court of Bankruptcy to draw within its jurisdiction property, or the owners of property, not vested in the trustee, and not originally subject to the administration in bankruptcy, and a fortiori does not authorise that Court to work out a decree which has been made in Chancery against such persons. But here the question is, whether or not this property really belongs to the assignees or to Mr. Roberts; and I think this Court is bound to hear and pronounce its decision upon that question as one essential for the proper purposes of the administration in bankruptcy of the bankrupt’s estate. Nothing can be stronger than the expressions of the Lords Justices James and Mellish, in the case of Ex parte Cohen, re Sparke (L. R. 7, Ch. 20), in support of this view. There the grantee under bills of sale brought his *198 action against the trustee in the debtor’s liquidation, for the goods comprised in the bills of sale. The county court judge restrained the action, and his decision was approved by the chief judge; and, on appeal to the Lords Justices, “I am clearly of opinion,” says James, L.J, “that this is just the case to which the Act is intended to apply.” [His Lordship read both judgments to the end.]
As the action now pending, which it is sought to restrain, is confessedly brought, against the messenger of the Court, merely for entering under his-warrant on the lands comprised in the lease, which were ostensibly the bankrupt’s property at the time of the adjudication, and as no special damage is alleged beyond the mere fact of such entry, I think such action should be restrained until the validity of the lease is determined—a proper undertaking being given by the assignees to institute proceedings by charge in this Court to raise this question, and to prosecute such proceedings, subject to the order of the Court, and also to abide any order the Court may make as to the payment of damages and costs, in case it should eventually be held, on appeal, that this order should not have been made, or in case the validity of the lease is upheld.
As regards the first motion which was heard, to set that lease aside, on the hearing of which the question of jurisdiction was raised and argued, I shall rule that the Court has jurisdiction to hear and determine the question ; but that the Court pronounces no rule on the motion, being of opinion that the proceedings should be by charge and discharge. And, having regard to the very serious question which has been raised as to the jurisdiction of the Court, I think that in case an appeal is lodged, as it was stated it would, against this order and the order granting the injunction, then the proceedings on the charge should not be prosecuted pending the decision of the Court of Appeal on these questions.
The order upon the first motion was as follows :—“The Court being of opinion that it has jurisdiction to make such order, but it appearing to the Court that the case for impeaching the said lease of the 23rd of May, 1874, should be put forward by the assignees in a charge to be filed for that purpose, the Court doth make no rule on the said motion; and the assignees so undertaking, the Court doth order that they do file a charge for the purpose of impeaching the said lease of the 23rd of May, 1874, within one month from this date, to be discharged by the said Robert Roberts, if so advised, within ten days after the Court of Appeal in Chancery shall have pronounced judgment in any appeal from this order, or within one fortnight after the first day of next Michaelmas Term.”
The order upon the second motion was as follows 3:—
“The said assignees, by their counsel, undertaking to abide by any order this Court may make as to damages, in case this Court hereafter should be of opinion that the said Robert Roberts has sustained any, by reason of this order, which the assignees ought to pay: It is ordered that the said Robert Roberts, his attorneys and agents, he and they are hereby restrained from further prosecuting the action commenced by the said Robert Roberts against the said Richard Deane Freeman, in Her Majesty’s Court of Queen’s Bench in Ireland, in the notice of motion referred to, and from commencing any other action at law. or taking any other proceeding against the said Richard Deane Freeman for the cause of action in the said summons and plaint mentioned, until the further order of this Court It is further ordered that the service of this order be substituted upon the said Robert Roberts by serving therewith Mr. Richard Pope Froste, the attorney for the said Robert Roberts in the said action.”
In the Matter of T. F. O’Neill, a Bankrupt
Court of Bankruptcy.
21 November 1873
[1873] 7 I.L.T.R 199
Miller J.
Miller, J.
Upon the 11th of March, 1873, Mary Charlotte Hamilton obtained, in an action for breach of promise of marriage against the bankrupt, a verdict with damages for £500 and costs. That action had been pending for some time previously; and whilst it was pending the bankrupt, on the 22nd of February, 1873, preceding, executed a lease of that date of a portion of the lands of Annesboro’, containing, as therein described, thirty-one Irish acres, with the dwelling-house and offices thereon, to his sister Miss Anne O’Neill, at the yearly rent of £62, for the life of the bankrupt. This lease does not appear to have been registered until the 14th of March, 1873; and, upon that same 14th of March, the bankrupt closed up his premises in which he had carried on his trade up to that date, and thereby committed the act of bankruptcy on which he was *199 subsequently adjudicated a bankrupt, on the 18th of March, 1873. The premises demised by the lease of the 22nd of February, 1873, did not include or comprise the mill-premises of Annesboro’, which were held in fee by the bankrupt, and which adjoin the premises comprised in that lease; and the title-deeds of the mill-premises would appear to have been deposited with the National Bank, in order to secure some balance due by the bankrupt to that bank, which claims to have a lien thereon. The bankrupt would appear to have actively carried on his business as a miller and corn-merchant, subsequent to the execution of the lease of the 22nd of February-and the date of the verdict against him (11th of March), and up to the 14th of March, 1873, previously referred to.
On the 15th of August, 1873, in conformity with the practice adopted in the Court of Bankruptcy in England (exercising a similar jurisdiction since the year 1869), and according to the practice hitherto adopted in this Court, a notice of application on the part of the assignees was served upon Miss O’Neill, claiming the benefit of the lease of the 22nd of February, 1873, to the effect that such lease of the 22nd of February, 1873, might be declared void as against the assignees, and that the interest of the bankrupt in the premises comprised in that lease might be sold discharged from said lease. There is at present in this Court, to the credit of this matter, a sum of £481 in cash, applicable for dividend among the general creditors, and, so far as the mill-premises upon which the National Bank claim to have a lien may be insufficient to meet that lien, the National Bank would be entitled to prove for a dividend against the general estate of the bankrupt, including that sum of £481; and, on the other hand, it is possible that the mill premises, if sold to advantage, may produce a surplus, after discharging any specific lien which the National Bank may establish, available for dividend among the general creditors of the bankrupt; and the assignees, as representing the general creditors, are thus directly interested in making the mill-premises as productive as possible, with a view to relieving the general estate of the bankrupt, as far as may be practicable, from the claim for dividend on the part of the National Bank, or, in the other event, of procuring a surplus out of the mill-premises for the benefit of the general creditors, after discharging any specific lien upon the mill-premises which the National Bank might establish.
Miss O’Neill, claiming as lessee under the lease of the 22nd of February, 1873, in her affidavit of the 3rd of August, 1873, has stated distinctly that, up to the time of the proceedings in the action for breach of promise, the bankrupt was in perfectly solvent circumstances; and there can be little doubt, looking to the circumstances and dates to which I have referred, that the motive of the bankrupt, in executing that lease of the 22nd of February, 1873, was primarily to defeat any verdict which might be obtained against him in the action for breach of promise—a verdict which was, at that date, imminent, although the damages, subsequently fixed at £500, had not been then ascertained.
Under such circumstances as stated, an abstract right exists in the assignees, subject to the control of this Court, to put any such instrument, so executed, out of the way, if it be for the advantage of the creditors that such a course should be adopted. And it is in that respect that the ancillary question, viz., Whether the lease of the 22nd of February, 1873, was made at an under-value, or under circumstances which this Court ought not to recognise? incidentally arises, as assisting this Court in determining whether or not it would be of advantage to the general creditors that such an instrument should be thus set aside. With a view to obtaining guidance in that respect, this Court directed that the parties should agree upon an independent valuator, for the purpose of ascertaining the value of the premises thus demised; but, on the 29th of August, 1873, it appearing that the parties had not agreed upon an independent valuator as directed, they were on that day empowered to produce evidence of value on either side, as they might be advised (see In re O’Neill, 7 Ir. L. T. R. 170). It might possibly be difficult to determine the abstract question of the sufficiency of the rent reserved by the lease of the 22nd of February, 1873, upon the conflicting affidavits in this matter, but, independently of all affidavits as to value, there is the substantive fact that the whole premises comprised in the lease of the 22nd of February, 1873, had been in the personal occupation of the same persons, including the bankrupt, for many years, up to so late a period as the 14th of March, 1873, and this furnishes strong evidence of the reciprocal advantage of the mill-premises and the premises demised by the lease in question to each other when occupied together. But, even in estimating the relative weight to be attached to the affidavits as to value on either side, it must be further borne in mind that the trade-assignee in this matter was selected by the general creditors (including the lessee under the lease of the 22nd of Feb., 1873, who alleges that she is a creditor of the bankrupt for a considerable sum), as the fittest person to represent and protect the interests of the general creditors, and that one of the strongest qualifications of that assignee would appear to have been the fact that he was resident in the town of Carrick-on Suir, where the bankrupt principally transacted his business, and in the immediate neighbourhood of the lands demised by the lease of the 22nd of February, 1873; and it is only necessary to say that the affidavit of the assignee thus selected, if acted upon, leaves no course open to this Court except to remove every difficulty out of the way of the premises being sold in the same state in which they had been occupied by the bankrupt previously, up to the time of the execution of the lease in question, and whilst he was in solvent circumstances as described.
The ruling of the Court must be in the terms of the notice of motion.
Freaney v. Bank of Ireland
Kenny J. [1975] IR 377
H.C.
Kenny J.
30th July 1975
Tailteann Freight Services Limited (“the company”) were carriers, and import and export agents. They had their current bank account with the Rathmines branch of the National Bank of Ireland (“the bank”). Customs offcials are reluctant to accept cheques in payment of import duties and this was a serious inconvenience to the company. So the company asked the bank to write to the Customs and Excise authorities undertaking that the company’s cheques would be honoured when they were presented for payment. On the 29th December, 1969, the bank wrote to the officer in charge of Customs and Excise: @”Tailteann Freight Services Limited Dear Sir, kindly accept as cash cheques drawn by the above mentioned company to the extent of £250 in any one day until the 30/6/70.”# The bank continued to write similar letters each six months.
A strike or lock-out began in all the associated banks on the 1st May, 1970, and continued until the 17th November but, although the banks opened for business on that day, the work of clearing cheques and bringing payments up to date was not completed until the 22nd January, 1971. This strike or lock-out was responsible for the failure of many businesses.
On the 3rd December, 1970, the bank heard that the company was about to be wound up and immediately opened a suspense account (in the name of the company) to which the bank debited all the cheques drawn by the company and presented after that date. There were no lodgments to the credit of this account. On the 14th December, 1970, the company resolved that it be wound-up voluntarily and the applicant was appointed liquidator. The company is insolvent. When the suspense account was opened, the company’s ordinary account was £14,472 in credit.
The liquidator notified the bank immediately of his appointment but, despite this, the bank paid a number of cheques in favour of the Customs and Excise authorities and debited these to the suspense account; all these cheques were drawn before the 14th December, 1970, but were presented after that date. The bank’s officials took the view that, having committed themselves to the Customs and Excise authorities to meet the company’s cheques for import duties, they were bound to honour the cheques although the company was in liquidation. The bank paid 48 cheques for £2,884 which were dated prior to the 30th June, 1970, but presented after the 14th December, 1970. When the company resolved on liquidation, the amount due on the suspense account was £7,578.85. The bank also debited to the suspense account cheques which had been lodged to the company’s current account but which had not been honoured when presented for payment; some of these debits to the suspense account were not made for a considerable time because of the enormous volume of work involved in clearing all the cheques presented after the 17th November, 1970. After the last debit had been made to the suspense account there was £8,329.15 due on this account. This consisted of £2,884.75 in respect of Customs and Excise cheques, £4,087.05 being the company’s own cheques drawn in favour of @”cash,”# £1,207.25
being cheques presented by the company and drawn by other persons and not honoured, and £150.10 for interest.
The liquidator requested the bank to open a current account and on the 12th January, 1971, a new account entitled @”Tailteann Freight Services Limited in Voluntary Liquidation”# was opened and some days afterwards the credit balances in the current accounts of the company prior to the date of the commencement of the liquidation were transferred to this account without any deduction for the amount due on the suspense account. The bank asked the liquidator on a number of occasions to send instructions to them to debit his current account with the amount to debit of the suspense account. On the 9th February, 1971, at the request of the liquidator and without prejudice to the claim to debit the liquidator’s current account with the amount owing on the suspense account, the amount standing to the credit of the liquidator’s current account was transferred to a deposit account designated @” Tailteann Freight Services Limited in Voluntary Liquidation.”# The purpose of this was that the sum to the credit of the liquidator’s current account would earn interest. On the 11th February, 1971, the liquidator instructed the bank to pay the entire sum standing to the credit of his deposit account to the Hire Purchase Company of Ireland. The bank refused to do this and again asked for instructions to debit the deposit account with the sum due on the suspense account. A long correspondence followed in which the bank claimed the right to set off the amount due on the suspense account against the amount due by the bank on the liquidator’s deposit account.
The first contention was that the bank had no authority to pay the cheques in favour of the Customs and Excise authorities after the commencement of the winding-up. Section 254 of the Companies Act, 1963, provides that in case of a voluntary winding-up the company shall, from the commencement of the winding-up, cease to carry on its business except so far as may be required for the beneficial winding-up thereof. It was emphasised that the cheques presented by the company to the Customs and Excise authorities had not been marked good. However, it seems to me that, having committed themselves to the Customs and Excise authorities to honour cheques of the company presented in respect of import duties, the bank was bound to pay cheques issued before the 14th December, 1970. I think that the Revenue Commissioners could have successfully sued the bank on any cheques accepted by them in payment of import duties before the 14th December, 1970. The bank’s authority to debit the account of the company in respect of cheques drawn after the 14th December, 1970, ceased when the liquidation commenced but, in my view, the bank had authority to pay cheques drawn before that date and given to the Customs and Excise authorities.
The next contention was that, when the associated banks re-opened for business, the bank was bound to pay the Customs and Excise cheques as guarantors only, and not as bankers to the company. The effect of this, it was said, was that the bank would be ordinary creditors of the company. I think the true view is that the bank, as bankers, guaranteed that the cheques accepted by the Customs and Excise authorities would be paid by the bank in any event. They gave the guarantee as bankers and it was their commitment to honour the cheques which induced the Revenue authorities to accept them. In my view their claim in respect of these cheques can validly be made as bankers of the company and not as guarantors only.
The next contention was that the liquidator’s current account and his deposit account were trust accounts and that the bank could not claim to set off any sum against such an account. The liquidator’s deposit account consisted in part of sums standing to the credit of the company’s current account before it went into liquidation and, of the total sum standing to the credit of the liquidator’s deposit account, the sum of £14,472 represented moneys which had stood to the credit of the company’s account before the commencement of the liquidation. While a bank has no authority without the consent of the customer to debit a deposit account, they have a right of set-off so that they may set off the amount due on one account to them against an amount due by them on another account: see the decision of the Supreme Court in Bank of Ireland v. Martin 4 and see Flanagan v. National Bank .5 The bank did not lose this right of set-off when they opened the liquidator’s current account or his deposit account. The funds standing to the credit of these included moneys which had stood to the credit of the company’s current account before the company resolved to go into liquidation. Accordingly, the bank are entitled to set against the amount due by them on the liquidator’s deposit account the amount due to them on the suspense account.
It was argued for the liquidator that the claim by him was to a sum standing to his credit. However, the liquidator cannot have a better claim than the company had because the corporate status of the company remains until it is dissolved: see s. 254 of the Act of 1963. The liquidator cannot have a better claim than the company had to any asset which came into existence before the 14th December, 1970.
It was also argued for the bank that the effect of s. 284 of the Act of 1963 was to give it a right of set-off, which right was in addition to the right to set-off given to the bank by s. 27, sub-s. 3, of the Supreme Court of Judicature Act (Ireland), 1877. Section 284 of the Act of 1963 provides that in the winding-up of an insolvent company, the same rules shall prevail and be observed relating to the respective rights of secured and unsecured creditors and to debts provable and to the valuation of annuities and future contingent liabilities as are in force for the time being under the law of bankruptcy relating to the estates of persons adjudged bankrupt. Section 251 of the Irish Bankrupt and Insolvent Act, 1857, provides that where there has been mutual credit given by the bankrupt and any other person or where there are mutual debts between the bankrupt and any other person, the court shall state the account between them and one demand may then be set against another. It has been established by decisions of the highest authority that the corresponding section in the British Companies Acts import the law as to set-off contained in the Bankruptcy Acts: see Mersey Steel and Iron Co. v. Naylor, Benzon & Co .6 In the Irish decision of Deering v.Hyndman 7 it was conceded that the right of set-off given by the Act of 1857 was imported into the winding-up of an insolvent company. Although s. 251 of the Act of 1857 is very different in its terms to the English Bankruptcy Acts of 1869, 1883 and 1914, the effect of s. 284 of the Act of 1963 is to import s. 251 of the Act of 1857 into the liquidation of an insolvent company: see the decision of the House of Lords in National Westminster Bank Ltd. v. Halesowen Presswork Ltd .8 It follows that the bank has a right of set-off under s. 284 of the Act of 1963 in addition to its right of set-off given by the Act of 1877.
There was no discussion in argument about whether the bank were entitled to debit the suspense account with interest when the current account seems to have been in credit and, therefore, I express no opinion on this question. The Governor and Company of the Bank of Ireland are the respondents on this summons because they subsequently took over the assets and liabilities of the bank.
The first question in the summons will be answered by saying that the National Bank of Ireland were entitled to make payments to the Customs and Excise authorities of the amount of cheques drawn by the company before the 14th December, 1970, but presented for payment after that date as bankers to the company. The second question will be answered by stating that the Bank of Ireland are entitled to set off the total amount due to them on the suspense account against the amount due by them on the liquidator’s deposit account.
In the Matter of Thomas O’Neill, a bankrupt
[1989] IR 544
[1989
[No. 2051]
High Court 21st September 1988
Hamilton P.
21st September 1988
The bankrupt in the title hereof, Thomas O’Neill, formerly of No. 1 Ardilea Downs, Mount Anville Road, Mount Merrion in the County of Dublin, was adjudicated a bankrupt on the 9th February, 1987, upon a petition for adjudication presented on behalf of Thomas O’Sullivan of TÃr na n Óg , Cranny in the County of Clare.
As appears from the affidavit of the Official Assignee sworn herein on the 25th May, 1987, the bankrupt has at all times since the said adjudication failed or refused to make himself available to the court for the purpose of furnishing information regarding his affairs and the said Official Assignee is not aware of the bankrupt’s present whereabouts.
This is an application made on behalf of the Official Assignee for an order:
Setting aside the indenture of conveyance and assignment made on the 31st December, 1985, and made between the bankrupt and his wife Jean O’Neill of the one part and Susan O’Neill of the other part whereby the bankrupt and his wife assigned to the said Susan O’Neill all their interests in the premises described as “all that and those, the house and premises known as Site No. 1, Ardilea Downs, Mount Anville Road, Mount Merrion in the County of Dublin” in consideration of the payment by the said Susan O’Neill of £48,000.
As appears from the affidavits filed herein and the documents exhibited therein, the facts relevant to this application would appear to be as follows:
1. The bankrupt was the managing director of a limited liability company, Central Financiers Ltd. having its registered office at 22A South Richmond Street in the City of Dublin.
2. The petitioning creditor did on the 6th July, 1984, cause to be issued in the High Court proceedings entitled: “The High Court 1984 No. 5255P Between: Thomas O’Sullivan, plaintiff and Central Financiers Ltd. and Thomas O’Neill, defendants’ in which he claimed, inter alia, an injunction restraining the defendants and each of them from transferring, disposing, charging or agreeing to dispose, charge or transfer their assets so as to reduce such assets below £54,000, and damages for fraudulent misrepresentation and deceit by the defendants and each of them.”
3. On the 23rd July, 1984, an order was made by Barrington J. whereby, inter alia, it was ordered that the defendants and each of them be restrained until after the trial of the action from transferring, disposing, charging or agreeing to dispose, charge or transfer their assets so as to reduce such assets below £54,000.
4. On the 17th October, 1985, when the said action was listed for hearing, the court was informed that a settlement had been reached in the terms of a consent dated the 17th October, 1985, executed by the plaintiff therein and the solicitor for the defendants, he being authorised in writing in that behalf by the second defendant, the bankrupt herein, the said consent was received and made a rule of court and deemed to be part of the order made by the High Court on the 17th October, 1985.
5. The said consent provided that:
(1) The plaintiff to have judgment against the defendants jointly and severally in the amount of £63,000.
(2) A stay of execution provided the following sums are paid:
(a) On or before the 1st December, 1985, the sum of £35,000.
(b) On or before the 17th April, 1985, the sum of £28,000.
In default of any payment execution to issue forthwith for the full balance outstanding on foot of the judgment.
(3) The injunction granted herein on the 25th July, 1984, to continue in full force and effect until the judgment is discharged in full (whether in accordance with the terms of this consent or otherwise) save and except:
“(a) liberty to sell premises at Richmond Street, Dublin on condition that the sum of £35,000 mentioned at 2 (a) hereof be forthwith paid to the plaintiff on completion of sale if not already paid by that date.
(b) liberty to take all steps necessary to realise security on premises Beach House Bar and Restaurant, Lahinch, County Clare on condition that the sum mentioned at 2 (b) hereof be forthwith paid to the plaintiff on completion of sale or realisation if not already paid by that date.”
6. No monies were paid to the plaintiff the petitioning creditor herein in accordance with the terms of the said consent or at all.
7. On the 31st December, 1985, the bankrupt purported to dispose of his interest in the premises, No. 1 Ardilea Downs to his daughter Susan and on the 15th January, 1986, purported to dispose of his interest in an apartment situate at No. 12 The Orchard, Grove House, Milltown in the City of Dublin to his daughter Jacqueline O’Neill.
8. On the 21st July, 1986, the High Court ordered that the said Thomas O’Neill be attached on the ground that he was in default and that he had not complied with the orders of the High Court made on the 23rd July, 1984, and the 17th October, 1985, whereby it was ordered that he be restrained (until the discharge in full of the judgment for £63,000 in favour of the plaintiff contained in the said order dated the 17th October, 1985) from transferring, disposing, charging or agreeing to dispose, charge or transfer his assets so as to reduce such assets below £54,000 and the plaintiff was given liberty to issue an order of attachment against him to have him before the court on Tuesday, 29th July, 1986, at 11.00 o’clock in the forenoon to answer for the contempt which by reason of such default it was alleged he had committed against the court and to show cause why he should not be committed to prison for such contempt.
9. On the 25th May, 1987, I made orders in the course of the bankruptcy proceedings restraining Susan O’Neill and Jacqueline O’Neill from disposing of their interests in the aforesaid premises and on the 2nd June, 1987, that the said orders be continued until further order.
10. In her affidavit sworn on the 30th September, 1987, Susan O’Neill averred at paragraph 10 that:
“Throughout the period leading up to the sale aforesaid, I was not living with my parents on a full-time basis, although there was accommodation available for my occupation in their house whenever I required it. In the circumstances, my opportunities to observe my father’s general demeanour or discuss his affairs with him were rather limited. In any event, it was not my father’s practice to discuss his business affairs with me or with any other of his children at all. I had no knowledge of my father’s financial position. So far as I was concerned, his bills appeared to be paid, he drove a Rolls Royce motor car, my mother drove her own car and the family had all the outward signs of middle-class prosperity. In these circumstances, it would never have occurred to me, prior to the sale aforesaid and up to the time when I became aware of his bankruptcy, to question my father’s solvency. I was not served with, nor was I aware, prior to the completion of the sale aforesaid, of the High Court proceedings referred to at paragraphs 3 and 5 of the applicant’s affidavit and the orders made therein. I first became aware of these proceedings and the said orders when I received the applicant’s said affidavit herein. Further, I believe that my said solicitor, having made the enquiries usually made in conveyancing matters, was not aware of the said proceedings or orders and that had he been so aware, he would not have completed the sale or continued to act for both parties therein. I believe that my said solicitor took the statutory declaration referred to at paragraph 13 of the applicant’s said affidavit merely out of an abundance of caution and neither he nor I had any cause whatever at the material times to question the truth of the contents of the said declaration.”
Having regard to the contents of the affidavits of Sean Hogan, Margaret O’Sullivan, Thomas O’Sullivan and Joseph G. Chambers, all sworn on the 15th October, 1987, which deal with the presence of Susan O’Neill in court on the 5th July, 1985, and the 9th October, 1985, and her contribution to the proceedings, I cannot accept her averment of her lack of knowledge of the nature of the proceedings against her father, the bankrupt herein, and I am satisfied that she was at all times fully aware of the proceedings, the orders made and the injunction granted.
The fact that she was so aware is confirmed by the sworn testimony of Mr. William Bradshaw, solicitor, given in the course of an examination in bankruptcy on the 30th November, 1987, that she was aware of the interim injunction granted in 1984 and the sworn testimony of Mr. Gerard Collins, solicitor in the firm of Collins, Crowley and Company, who acted for the bankrupt from October, 1985, and who negotiated the settlement of the High Court proceedings hereinbefore referred to, that she was aware of the terms of the order made on the 17th October, 1985, and the payments to be made in respect thereof.
In her affidavit sworn on the 30th September, 1987, Susan O’Neill deals at paragraphs 4, 5 and 6 thereof with the circumstances in which she agreed to purchase the premises, No. 1, Ardilea Downs and averred that:
“4. In or about the month of November, 1985, I raised with my father the possibility that I might purchase the said house. He indicated to me that the best offer he had received was in the order of £65,000. However, he agreed that in the event he was selling to me, the price to be fixed should reflect the facts that I had given sums of £7,000 and £5,000 to my mother and father in May and June, 1985, respectively and that I had guaranteed my father’s liability of approximately £16,000 to Lombard and Ulster Banking Limited by way of letter of lien over my deposit account with that company and that I had already suffered a loss of some £3,738 upon the giving of that guarantee.
5. Having regard to the matters aforesaid and to my continuing liability on foot of the said letter of lien, my father and I agreed that £48,000 would be a fair price for a sale to me. We agreed that my solicitors, Messrs. Daniel C. Maher, Allen and Company should act for both parties and accordingly, we signed a sale contract on or about the 27th November, 1985, in the presence of Stephen Maher of the said firm.
6. In order to fund the purchase of the said house, my accountants arranged a loan with Ansbacher and Company, bankers, in the sum of £36,000, the balance of the purchase price coming from my own resources.”
In his sworn testimony given in the course of the examination in bankruptcy on the 22nd March, 1988, the said Stephen Maher stated that he advised the bankrupt and his wife to seek independent legal advice when they informed him that they intended to sell the property to their daughter for a consideration which he thought was under the market value and that he was aware that the consideration was below what the market value of the property would be but this advice was not taken.
Despite efforts made in that regard, Susan O’Neill at no stage made herself available to the court for examination in connection with this transaction and did not attend at the hearing of this application.
I am, however, satisfied by the evidence of Mr. Maher and the terms of her affidavit that the consideration of £48,000 was paid by her to the vendors in respect of the sale to her of No. 1, Ardilea Downs.
In the absence of evidence to the contrary, I must accept Miss O’Neill’s averment that she had, in May and June, 1985, paid to her father and mother the sums of £7,000 and £5,000 respectively and that she had guaranteed her father’s liability of approximately £16,000 to Lombard and Ulster Banking Limited by way of letter of lien over her deposit account with that company and that she had suffered a loss of £3,738 upon the giving of that guarantee and that these payments were reflected in the purchase price, though these facts would appear to be at variance with the averment contained in paragraph 10 of her affidavit that:
“It would never have occurred to me, prior to the sale aforesaid, and up to the time when I became aware of his bankruptcy, to question my father’s solvency.”
I am satisfied that at the time of the transaction sought to be set aside by the Official Assignee:
(1) The bankrupt was insolvent;
(2) Judgment against him in the sum of £63,000 had been obtained by the petitioning creditor;
(3) The terms upon which the stay of execution had been granted had not been honoured.
(4) The injunction granted on the 23rd July, 1984, and continued by the order made on the 17th October, 1985, remained in force;
(5) The said Susan O’Neill was at all times fully aware of the action by the petitioner against Central Financiers Ltd. and the bankrupt, her father; of the injunction granted by the High Court; of the terms of the order made on the 17th October, 1985; of the amounts payable in accordance with the consent executed by the parties, the dates of such payments and, at least in a general way, of her father’s financial position.
In support of his application, the Official Assignee relies on the provisions of three Irish Statutes namely, the Fraudulent Conveyances Act, 1634 (10 Chas. 1, sess. 2, c. 3), s. 1, the Irish Bankrupt and Insolvent Act, 1857, and the Bankruptcy Ireland (Amendment) Act, 1872.
By the statute of 10 Chas. 1, sess. 2, c. 3, s. 1 it is enacted that every feoffment, gift, grant, alienation, bargain and conveyance of lands, tenements, hereditaments, goods and chattels, or of any lease, rent, common or other profit out of the same or any of them, by writing or otherwise; and every bond, suit, judgment and execution made for the purpose and intent to delay, hinder or defraud creditors and others of their just and lawful debts, rights and remedies shall be henceforth deemed and taken (only against that person or persons, his or their heirs, successors, executors, administrators and assigns whose debts, rights and remedies are, shall or might be in any way disturbed, hindered, delayed or defrauded) to be clearly and utterly void.
But it is further provided that this Act shall not extend to any estate or interest in any lands, tenements, hereditaments or chattels assured upon good consideration and bona fide to any person not having, at the time of such conveyances or assurances to them made, any manner of notice or knowledge of the intended fraud.
Section 314 of the Irish Bankrupt and Insolvent Act, 1857, provides:
“If any bankrupt or insolvent, being at the time in insolvent circumstances, shall (except upon the marriage of any of his children or for some valuable consideration) have conveyed, assigned, or transferred to any of his children or to any other person any hereditaments, offices, fees, annuities, leases, goods or chattels or have delivered or made over to any such persons any bills, bonds, notes, or other securities, or have transferred his debts to any other person or into any other person’s name, the Court shall have power to order the same to be sold and disposed of for the benefit of the creditors; and every such sale shall be valid against the bankrupt or insolvent and such children and persons, and against all persons claiming under him.”
Section 52 of the Bankruptcy (Ireland) Amendment Act, 1872, provides that:
“Any settlement of property made by a trader after the commencement of this Act, not being a settlement made before and in consideration of marriage, or made in favour of a purchaser or incumbrancer in good faith and for valuable consideration, or a settlement made on or for the wife or children of the settlor of property which has accrued to the settlor after marriage in right of his wife, shall, if the settlor becomes bankrupt within two years after the date of such settlement, be void as against the assignees or trustee of such bankrupt under the said Act or this Act, and shall, if the settlor becomes bankrupt at any subsequent time within ten years after the date of such settlement, unless the parties claiming under such settlement can prove that the settlor was at the time of making the settlement able to pay all his debts without the aid of the property comprised in such settlement, be void against such assignees or trustee . . .
‘Settlement’ shall for the purposes of this section include any conveyance or transfer of property.”As I am satisfied that the conveyance sought to be set aside was made for some valuable consideration, the provisions of s. 314 of the Irish Bankrupt and Insolvent Act, 1857, do not apply or assist, in any way, the application of the Official Assignee in this case.
The provisions of s. 1 of 10 Chas. 1., sess. 2, c. 3, and s. 52 of the Bankruptcy (Ireland) Act, 1872, do not extend to conveyances made in good faith and upon good or valuable consideration. Both statutes protect conveyances if they have been made for valuable consideration and bona fide and to secure this protection it is necessary that the conveyance should be both for valuable consideration andbona fide.
I am not for the purposes of this application concerned with the adequacy or otherwise of the consideration, save and in so far as the adequacy or otherwise of the consideration is relevant to the question whether the transaction sought to be impugned was made in “good faith” as I am, as already stated, satisfied that the sum of £48,000 was paid by Susan O’Neill to the bankrupt and his wife in consideration of the assignment of the premises to her. Susan O’Neill must, in my opinion, be regarded as being a purchaser for valuable consideration and consequently the fundamental issue for determination by me in this case is whether in entering this impugned transaction Miss O’Neill acted in “good faith” because it is sufficient if Miss O’Neill acted in good faith and for valuable consideration.
In the course of his judgment in Mackintosh v. Pogose [1895] 1 Ch. 505 at p. 509, Stirling J. stated:
“But was the settlement made in good faith? Here I have not the same clear guidance. In Hance v. Harding the Court were unanimously of opinion that all the parties had acted in good faith, and it is said that here one of the parties at least (Mr. Pogose) did not so act, and that, consequently Mrs. Pogose is not a ‘purchaser in good faith’ within the meaning of the Act. Now, I am of opinion that a person is a ‘purchaser in good faith’ within the meaning of section 47 of the Bankruptcy Act of 1883, if he himself acts in good faith, and it is not necessary that both parties should act in good faith.”
Though this statement dealt with the interpretation of “purchaser in good faith” within the meaning of s. 47 of the Bankruptcy Act, 1883, I am satisfied that it applies with equal validity to the terms of the two Irish statutes which I have quoted.
In the course of his said judgment, Mr. Justice Stirling further stated at p. 510 that:
“Lastly, in the case of Butcher v. Stead Law Reports 7 H.L. 839, the House of Lords held that the words “in good faith” in sect. 2 of the Bankruptcy Act of 1869 must be taken to mean without notice that any fraud or fraudulent preference is intended.”
With regard to the use of the term “bona fide” or “in good faith” in the statute of 10 Chas. 1, sess. 2, c. 3, s. 1, I am satisfied that the use of the term must be taken to mean without notice of the intention to delay, hinder or defraud creditors of their lawful debts, rights and remedies.
As stated by Mr. Robb in his book “The Law and Practice of Bankruptcy and Arrangements in Ireland” at p. 19:
“It will be noticed that the element always necessary to avoid any conveyance under this statute is, that it should have been made ‘with intent to delay, hinder or defraud creditors of their just debts’. Now where such intent can be established by direct proof the conveyance or settlement can always be set aside, notwithstanding that it has been made for valuable consideration for in this latter case it has not been made bona fide, although there is valuable consideration, for both are necessary. But in most cases it is not possible to give direct proof of the fraudulent intent, and those impeaching the deed, bill of sale, or other transaction have to ask the Court to presume the intent from the circumstances.”
The onus is on the Official Assignee to establish as a matter of probability that the conveyance sought to be set aside was made by the bankrupt with intent to delay, hinder or defraud creditors of their lawful debts, rights and remedies. It is impossible to expect the Official Assignee to provide evidence by way of direct proof of such intent and it is open to the court to infer such intent from the circumstances.
Due to the failure of the bankrupt to disclose his whereabouts and to file a statement of affairs or otherwise co-operate with the Official Assignee, I am not in possession of all the circumstances relevant to this transaction. However, on the basis of the facts established by the Official Assignee, I have no doubt whatsoever that the intention of the bankrupt in executing the deed of conveyance sought to be impugned and set aside was to hinder, delay and defraud his creditors including the petitioning creditor herein. The circumstances upon which I rely in being satisfied as to this intent are as set out in the course of this judgment, and it is not necessary for me to repeat them.
I am, as I have said, satisfied that the intention of the bankrupt in entering into this transaction and the subsequent transaction entered into on the 15th January, 1986, whereby he conveyed to his daughter Jacqueline his interest in the other premises of which he was joint owner with his wife, namely, the apartment situate at No. 12 The Orchard, Grove House, Milltown in the City of Dublin, was to hinder, delay and defraud his creditors.
These transactions were entered into at a time when there was due and payable by him a sum of £63,000 to the petitioning creditor and when he was subject to the terms of an injunction granted by the High Court on the 23rd July, 1984, and continued by the terms of the order made by the High Court on the 17th October, 1985.
As the conveyance was made within two years of the adjudication of Thomas O’Neill as a bankrupt, the Official Assignee is entitled by virtue of the provisions of s. 52 of the Bankruptcy (Ireland) Amendment Act, 1872, to a declaration that the conveyance dated the 31st December, 1985, is void unless the conveyance was made in good faith and for valuable consideration.
The finding by me that the conveyance was made by the bankrupt with intent to hinder, delay and defraud his creditors does not decide the matter.
It must be established that the conveyance was not made in good faith and for valuable consideration.
It is submitted on behalf of the Official Assignee that the onus in this regard rests on Susan O’Neill and it is submitted on her behalf that the onus rests on the Official Assignee.
In Halsbury’s Laws of England (4th ed.) Vol. 3, para. 901 it is stated that:
“A purchase for value, but not made in good faith, that is, where the purchaser is privy to an intention to defeat creditors, is voidable. The onus of proof that the transaction was not made in good faith and for valuable consideration lies on the trustee in bankruptcy.”
Without deciding finally on whom the onus on this issue rests, I am prepared to deal with this particular case on the basis that the onus is on the Official Assignee to establish the lack of good faith on the part of Susan O’Neill in this transaction because I am satisfied from the evidence available to me that Susan O’Neill must have been aware of the financial position of her father, the terms of the order made by the High Court on the 17th October, 1985, the obligations of her father on foot thereof and that the object of the transaction was to hinder, delay and defraud his creditors particularly the petitioning creditor. She has failed to make herself available for examination by the court in connection with this transaction though a subpoena was served on her through her solicitor to attend such examination and she further failed to attend at the hearing of this application.
No affidavit was filed by her in reply to the grounding affidavit of the Official Assignee. In fairness to her, I have had regard to the affidavit sworn by her on the 30th September, 1987, grounding an application to set aside an injunction made by me restraining her from dealing with or disposing of the property, No. 1, Ardilea Downs.
Consequently, I am satisfied that:
1. The conveyance was made by the bankrupt with intent to hinder, delay and defraud his creditors including the petitioning creditor.
2. Susan O’Neill had due notice of his intention in that regard.
3. The purchase of the premises was not made by her in good faith.
Being so satisfied, the Official Assignee is entitled to a declaration that as regards the interest of the bankrupt in the said premises, the conveyance of such interest is void and should be set aside.