Again the Act provides that 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 money, 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 is adjudged bankrupt on a bankruptcy petition presented within three months after the date of making, taking, paying, or suffering the same, be deemed fraudulent and void as against the trustee in the bankruptcy. It is, however, provided that the section shall not affect the right of any person making title in good faith and for valuable consideration through or under a creditor of the bankrupt (1). The question now arises, given that the transaction between Fraudulent the bankrupt and his creditor takes place within the time fixed preference. by the law, is it an act of fraudulent preference or no? In order to determine this problem the Court must in each case consider, as a matter of fact, what was the substantial, effectual, or dominant motive (not necessarily the sole motive) of the bankrupt in making the payment or transfer, to prefer the creditor (2). If the Court comes to the conclusion that the tion of the petition on which the receiving order is made (Bankruptcy Act, 1883, sect. 168), i.e., one committed within three months prior to such presentation; see, as to order and disposition, Re Tillett, 60 L. T. 575; Re Davis, 37 W. R. 141. (1) Bankruptcy Act, 1883, sect. 48. Under the Act of 1869 it was necessary, in order to avoid the preference, that the debtor should actually become a bankrupt within three months after. According to the decision of the House of Lords, in Butcher v. Stead, L. R. 7 H. L. Ca. 839, on the corresponding section of the Bankruptcy Act, 1869, sect. 92, which attracted much attention, a creditor paid by the bankrupt himself, who could show that he was a payee in good faith and for value, and that he had no notice or knowledge of anything to invalidate the transaction, was entitled to retain the money paid him; but the present section has altered the law upon this subject, and protects not creditors but only persons who make title in good faith and for value under a creditor of the bank- "Where a receiving order is made (2) Ex parte Griffith. Re Wilcoxon, 23 Ch. D. 69. Fraudulent bankrupt's real motive was not to prefer the creditor, but, e.g., preference. to save himself from exposure or from a criminal prosecution, or to prevent a surety for the bankrupt being required to pay, the payment or transfer is not a fraudulent preference (1). Settlements. Covenants for future settle ments. In yet another instance the trustee may take property which has passed to persons other than the bankrupt, for in the case of any settlement of property with the three exceptions of: (1) A settlement made before and in consideration of marriage, or; (2) A settlement made in favour of a purchaser or incumbrancer in good faith and for valuable consideration, or; (3) A settlement on or for the wife or children of the settlor of property, which has accrued to the settlor after the marriage in right of his wife, it is provided by sect. 47 of the Act that the settlement shall be void against the trustee in bankruptcy if the settlor becomes bankrupt within two years after the date of the settlement. The same section provides that in case the settlor becomes bankrupt at any subsequent time within ten years after the date of the settlement, the settlement is to be void against the trustee in the bankruptcy, unless the parties claiming under the 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 the settlement, and that the interest of the settlor in the property had passed to the trustee of the settlement on its execution. Again "any covenant or contract made in consideration of marriage, for the future settlement on or for the settlor's wife or children, of any money or property wherein he had not at the date of his marriage any estate or interest, whether vested or contingent, in possession or remainder, and not being money or property of or in right of his wife, shall, on his becoming bankrupt before the property or money has been actually transferred or paid pursuant to the contract or covenant, be void against the trustee in the bankruptcy" (2). (1) Ex parte Taylor. Re Goldsmid, 18 Q. B. D. 295; Re Mills. Ex parte Official Receiver, 5 Mor. 55. Formerly the principal question considered was whether there was real pressure by the creditor, but the substantial question now is as above stated, and the old cases are of little avail, now that the doctrine of fraudulent preference has been put into definite statutory shape: Ex parte Griffith, Re Wilcoxon, ubi sup. It must further be noted that in order to constitute a fraudulent preference the person preferred must be strictly a creditor of the bankrupt : Ex parte Taylor, Re Goldsmid, ubi sup.; and see Re Lane, 23 Q. B. D. 77. (2) Bankruptcy Act, 1883, sect. 47; see Ex parte Mercer, 17 Q.B. D. 290 ; Re Lowndes, 18 Q. B. D. 677; Re It must be borne in mind that the provisions of this important section are not, like those of the corresponding provision in the Act of 1869, confined to traders. It was decided under the former law that a general covenant to pay a sum of money, not specifically ear marked" to trustees of a marriage settlement (1) or to settle a vested share of property liable to be divested by the exercise of a power of appointment, were not invalid (2), and these decisions apply to the present law. 66 The law as to what is a settlement within the meaning of What is a the Act, has been judicially summed up as follows: "A settle- settlement. ment in the ordinary sense of the word is intended. The transaction must be in the nature of a settlement, though it may be affected by a conveyance or transfer. The end and purpose of the thing must be a settlement, that is, a disposition of property to be held for the enjoyment of some other person. Thus a purchase by the father of shares, which are registered in the son's name, and upon which the son receives the dividends, is within the statute. But where the gift is of money to be expended at once, the transaction is not within sect. 47 of the Act of 1883" (3). Gould, 19 Q. B. D. 92; and see as to whether the provisions of this section are retrospective, Re Ashcroft, 19 Q B. D. 186; and as to the costs of the trustees of the settlement, Re Holden, 20 Q. B. D. 43. (') Ex parte Bishop. Re Tonnies, L. R. 8 Ch. 718. (2) Re Andrews, 7 Ch. D. 635; and see Holt v. Everall, 2 Ch. D. 266; Ex parte Huxtable. Re Conibeer, 3 Ch. D. 54. (3) Cave, J., in Re Player. Ex parte Harvey, 15 Q. B. D. (C.A.) 687. Commencement of bankruptcy. Relation back of bankruptcy. CHAPTER IV. COMMENCEMENT OF BANKRUPTCY-DISCLAIMER. It will have been observed that the phrase "the commencement of the bankruptcy" has been used, and it now becomes necessary to inquire when a bankruptcy commences. It has long been an established principle in bankruptcy, that in order to protect creditors against dealings by the bankrupt with his property which might defeat their just claims, the bankruptcy is not to be dated as from the order of adjudication, but is to relate back," or, in other words, its commencement is to date from some prior point of time when an act of bankruptcy had been committed. Under the Act of 1869, this period might be twelve months. Under the Bankruptcy Act, 1883, the bankruptcy of a debtor, whether the same takes place on the debtor's own petition or upon that of a creditor or creditors, is to be deemed to have relation back to, and to commence at, the time of the act of bankruptcy being committed, on which a receiving order is made against him, or, if the bankrupt is proved to have committed more acts of bankruptcy than one, to have relation back to, and to commence at, the time of the first of the acts of bankruptcy proved to have been committed by the bankrupt within three months next preceding the date of the presentation of the bankruptcy petition (1). It is also provided by the Bankruptcy Act 1890 (sect. 20), that where a receiving order is made against a judgment debtor in pursuance of sect. 103 of the Act of 1883, (ante, p. 900), the bankruptcy of the debtor shall be deemed to have relation back to and to commence at the time of the order, or, if the bankrupt is proved to have committed any previous act of bankruptcy, then to have relation back to and to com (1) Bankruptcy Act, 1883, sect. 43. The section, however, goes on to provide that no bankruptcy petition, receiving order, or adjudication shall be rendered invalid by reason of any act of bankruptcy anterior to the debt of the petitioning creditor. The doctrine of relation back does not affect the Crown: Ex parte Postmaster-General. Re Bonham, 10 Ch. D. 595; and see sect. 150, Bankruptcy Act, 1883. mence at the time of the first of the acts of bankruptcy proved to have been committed by the debtor within three months next preceding the date of the order. It is also provided that sect. 48 of the Act of 1883 (with regard to fraudulent preference, ante, p. 921) shall apply as if the debtor had been adjudged bankrupt on a bankruptcy petition presented at the date of the receiving order. As in engineering, a datum line is assumed from which all the heights and depths are calculated, so, as was stated by the Court of Appeal, the legislature has for the general convenience of the administration of the bankrupt's estate, fixed the act of bankruptcy on which the adjudication is founded, as a datum line for the commencement of the trustee's title, leaving it open to the trustee to enlarge his title by proving, if he can, earlier acts of bankruptcy (1). actions. The principle of the relation back of the bankruptcy is, how- Protected ever, very materially qualified by the provisions of a subsequent transsection, which "protects" certain specified transactions if they take place bona fide and without notice before the date of the receiving order. These protected transactions are: (1.) Any payment by the bankrupt to any of his creditors; (2.) Any payment or delivery to the bankrupt; (3.) Any conveyance or assignment by the bankrupt for valuable consideration; (4.) Any contract, dealing, or transaction by or with the bankrupt for valuable consideration Provided that both the following conditions are complied with, namely― (1.) The payment, delivery, conveyance, assignment, contract, dealing, or transaction, as the case may be, must take place before the date of the receiving order; and (2.) The person (other than the debtor) to, by, or with whom the payment, delivery, conveyance, assignment, contract, dealing, or transaction was made, executed, or entered into, must not have had at the time of the payment, delivery, conveyance, assignment, contract, dealing, or transaction, notice of any available act of bankruptcy committed by the bankrupt before that time (2). (1) Ex parte Learoyd, Re Foulds, 10 Ch. D. 11; Brett's Bankruptcy, p. 90; and see Sharp v. McHenry, 38 Ch. D. 427. (2) Bankruptcy Act, sect. 49. An available act of bankruptcy is one available for a petition at the date of the presentation of the petition on VOL. IL which the receiving order is made 3 P |