CHAP. XXIV. Title of O.A. Position of bank after an act of But it does include:- All property which belongs to the bankrupt at the commencement of bankruptcy or is acquired by him before his discharge. And powers over property which, but for the bankruptcy, might be exercised by the bankrupt for his own benefit. And all goods being at the commencement of the bankruptcy, or at any time between that time and the date of the order of sequestration in the possession, order, or disposition of the bankrupt, by the consent and permission of the true owner, under such circumstances that he is the reputed owner thereof; provided that things in action other than debts due or growing due to the bankrupt in the course of his trade or business shall not be deemed goods within the meaning of this section. The official assignee's title to the debtor's property, when obtained, dates back to the date of the act of bankruptcy upon which the petition and sequestration order were founded. It is therefore highly dangerous for a bank to honour its customer's cheques after it has had notice of an availbankruptcy. able act of bankruptcy committed by him; for if he have a current account in credit, it will be thereby depleted, and if a sequestration order be made, the official assignee can claim the amount which stood at the bankrupt's credit at the date when the bank first had notice, and if he be overdrawn the debt would be increased; and the bank would be barred by the statute from proving for that increase, which might thus be wholly lost. On the other hand, the bank, when it has refused such cheques is not in a very comfortable position; for, if the drawer had as between himself and the bank the right to have the cheque paid, the refusal to pay is a breach of contract and actionable. In the ordinary case that does not matter much, but in the exceptional case, where the customer's estate is not in fact sequestrated, and he recovers his position and uses his right of action, the position of the bank is a very hard one. Protection, however, is extended by the Act to bona fide transactions, payments or advances, &c., to or with the bankrupt which take place before the sequestration order, and where the party dealing with the bankrupt had not notice of any available act of bankruptcy. Protected Transactions.-Certain preferences and certain settlements, &c., which are fraudulent or even so reckless as to have a ring of dishonesty about them, are carefully legislated against by the Bankruptcy Act; but, subject to the provisions of the Act in those cases, it is expressly provided that nothing shall invalidate, in the case of a bankruptcy (1) Any payment by the bankrupt to any of his (2) Any payment or delivery to the bankrupt; (4) Any contract, dealing, or transaction by or Provided that in each of the above cases, first, the pay- It is to be noted in this connection that payment will include the drawing, making, or indorsing of a bill of CHAP. XXIV. СНАР. XXIV. Notice. Actual. Constructive. exchange, cheque, or promissory note. What is Notice.-The reader will already have observed that the presence or otherwise of "notice" of an act of bankruptcy committed is the most material point in deciding the goodness of a claim in contest with the official assignee. This is the test which is applied to find out the soundness of securities, and which is applied to distinguish a bona fide transaction, entitled to protection from what would otherwise be a preferent transaction tainted with fraud. It will, therefore, be as well to observe that notice may be of two kinds-actual and constructive. Actual notice is given to a man himself a principal to the transaction. Constructive notice arises out of the doctrines of law controlling the relations of principal and agent and of master and servant, and the general rule of law is, that notice to the principal is notice to all his agents, at any rate if there be reasonable time for the principal to communicate that notice to his agents before the event which raises the question happens. It will be seen from this, that without great care on the part of a head office, it would be very easy for a branch manager to seriously involve the bank, while acting in perfect good faith. For instance, B, who has an account with the Wilcannia CHAP. XXIV. branch, let us say, arranges to deposit further security for an overdraft which he has there, as well to add security to what he has already given for past advances as to secure a further sum; the transaction is approved by head office, and Wilcannia is instructed that it may be carried out. Soon after, notice of an act of bankruptcy, committed by B in Sydney, reaches A, a responsible officer in head office; he reflects that his own bank is secured, and thinks no more of it. There would really have been time to countermand the instructions given to Wilcannia, but, no such message reaching him, the Wilcannia manager in good faith concludes the business. What happens? The security is useless against the official assignee: valid against everyone else, no doubt, but there would not be much profit in that. To show the importance of this illustration, a case which actually happened to the Bank of England with respect to notice given to the London office and a transaction in good faith by the Gloucester branch may be referred to; there, the trans- Willis v. Bank of Engaction was a payment of £1,000 in gold for two of the land, 1835, bank's post bills, but as regards liability for acts of an 4 A. & E. agent after notice to the principal, the case is exactly on all fours with the one I put about securities. It is said See also Morris v. that the doctrine of constructive notice is one which has National Bank. been carried far enough, and it ought not to be carried 13 N.S. W. one single step further. 21. L.R., 93. With regard to sufficiency of notice, it is not neces- Sufficiency of.. sary that there should be notice of some specific act of bankruptcy; general notice that the debtor has committed an act of bankruptcy will be sufficient. Notice of an intention to commit an act of bankruptcy is not sufficient, but if the transaction itself is an act of bankruptcy, the person dealing with the bankrupt must be taken to have notice. Knowledge of facts sufficient to inform a person that an act of bankruptcy has been committed, or from which any impartial person would infer that an act of CHAP. XXIV. Of "avail able" act of bankruptcy. Assignment bankruptcy has been committed, will be held to be notice; but a notice stating circumstances, which may or may not amount to an act of bankruptcy, is insufficient. It is sufficient if the notice comes in any way or from any quarter. It should be observed that the notice required is notice of an act of bankruptcy, not of insolvency; and also that "an available act of bankruptcy" means any act of bankruptcy available for a bankruptcy petition at the date of the presentation of the petition on which the sequestration order is made; the act of bankruptcy on which the petition is grounded must have occurred within six months before the presentation of the petition. Therefore, a creditor, who has contracted a debt with the bankrupt with notice only of an act of bankruptcy committed by him more than six months before the presentation of petition, is not precluded from proving in the estate. Nature of Acts of Bankruptcy.-A list of the various acts which are by the statute declared to be acts of bankruptcy, and upon which a petition can be founded, was given in an abbreviated form at page 322. Briefly it may be said that these acts may be divided into two classes-viz., acts which unmistakably indicate insolvency, and acts which unmistakably indicate fraud. And it will be seen that the list of acts is so comprehensive that any of such a nature must fall into one or other of the categories given, and, therefore, give a creditor immediate rights in bankruptcy against the perpetrator. To print in full the statutory terms in which the various classes of acts of bankruptcy are set out, and to offer any discussion of them is beyond the scope of this work; but the following short notes should be read in connection with the list at page With regard to (a) making an assignment to trustees for creditors. for the benefit of creditors generally: This has always |