Property assigned by Bankrupt.-In divisible property is also included property already assigned by the bankrupt, which under certain circumstances may be recovered by the trustee. This is considered under the head of Recoverable Property. (x)

PROPERTY NOT DIVISIBLE (Excepted Articles) comprises(1) Property held by the bankrupt in trust for any other person.

(2) The tools (if any) of his trade, and the necessary wearing apparel and bedding of himself, his wife and children, to a value, inclusive of tools and apparel and bedding, not exceeding twenty pounds.

(3) Goods in respect of which a vendor's lien and right of stoppage in transitu has been exercised.

(4) Moneys payable under policies of insurance. (5) Any property or income to which the bankrupt is entitled on the condition that it is vested in another person on his bankruptcy. Such a settlement cannot be made by the bankrupt himself; it would be void.

(6) So much of the salary, pension or income of Crown servants or clergymen as cannot be acquired by the trustee as mentioned under the head of Divisible Property.

It should also be noted that where a married woman, who has been adjudged bankrupt, has separate property, the income of which is subject to a restraint on anticipation, (y) the court has power, on the application of the trustee, to order that during such time as the court may order, the whole or some part of such income be paid to the trustee for distribution amongst the creditors; but, in the exercise of such power, the court will have regard to the means of subsistence available for the woman and her children.

Protected Transactions.

By Section 45 of the Act, subject to any of the provisions of the Act with respect to the effect of bankruptcy on an execution or attachment, and with respect to the avoidance of certain settlements, assignments and preferences, considered hereafter, nothing shall invalidate

(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,

(x) See post, p. 312.

(y) See ante, p. 35.

provided that the following conditions are complied with(a) That the payment, delivery, conveyance, assignment, contract, dealing, or transaction, as the case may be, takes place before the date of the receiving order; and (b) That 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, has not at the time notice of any available act of bankruptcy committed by the bankrupt before that time.

By Section 46, protection is given also to a payment of money or delivery of property made to the bankrupt or his assignee without notice of the presentation of a petition and before the actual date of making the receiving order.

Transactions between the bankrupt and his banker are deemed transactions for value. But if the banker ascertains that the customer is an undischarged bankrupt, unless he is satisfied that the account is for some other person, he must inform the Board of Trade or the trustee and make no further payments without an order of the court or the instructions of the trustee, unless by the expiration of a month from the date of giving the information he has received no instructions from the trustee.

Enquiry as to the Property.

The court may, on the application of the official receiver or trustee, at any time after a receiving order has been made, summon before it the debtor or his wife, or any person who is known or suspected to have in his possession any of the estate or effects belonging to the debtor, or who is supposed to be indebted to the debtor, or any person whom the court may deem capable of giving information respecting the debtor, his dealings or property, and such persons may be required to produce any relevant documents in their possession. If any person on examination admits that he is indebted to the debtor or has any property in his possession belonging to the debtor, the court may order him to pay the amount or deliver up the property, or any part thereof, to the official receiver or trustee.

Further, the court may order that letters and telegrams addressed to the debtor shall be re-directed to the official receiver or trustee.

Recoverable Property.

In some

cases and under certain circumstances property already assigned by the debtor, or otherwise not in his possession

or ownership, can be recovered by the trustee for the benefit of the creditors. Such cases are―

(1) Against Execution Creditors.

(2) Avoidance of Voluntary Settlements.

(3) General Assignment of Book Debts, unless registered. (4) Fraudulent Preferences.

Against Execution Creditors.-By Section 40 of the Act, where a creditor has issued execution against the goods or lands of a debtor, or has attached any debt due to him, he is not allowed to retain the benefit against the trustee, unless he has completed the execution or attachment before the date of the receiving order, and before notice of the presentation of the bankruptcy petition, or of the commission of any available act of bankruptcy by the debtor. And by Section 41, where goods are taken in execution, and before the sale thereof or the completion of the execution by the receipt or recovery of the full amount of the levy, notice is served on the sheriff that a receiving order has been made against the debtor, the sheriff must deliver up the goods and any money seized or received to the official receiver, but the costs of the execution are a first charge on the goods or money so delivered. Further, where, under an execution in respect of a judgment for a sum exceeding twenty pounds, the goods of a debtor are sold or money is paid in order to avoid sale, the sheriff must deduct his costs from the proceeds or the money paid and retain the balance for fourteen days and, if within that time, notice is served on him of a bankruptcy petition having been presented by or against the debtor and a receiving order is eventually made thereon, he must pay the balance to the official receiver or trustee, who is entitled to retain it against the execution creditor. But a person who purchases the goods in good faith under a sale by the sheriff acquires a good title to them against the trustee.

Avoidance of Voluntary Settlements.-A voluntary settlement is one which is made without valuable consideration having been given. It may be a valid settlement in every respect; but, if made within certain periods of time before the bankruptcy, it will be void as against the trustee.

By Section 42 of the Act, a settlement made before and in consideration of marriage, or made in favour of a purchaser or incumbrancer (i.e., mortgagee or chargee) 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 him after marriage in right of his wife, is a valid settlement and cannot be avoided by the trustee. But in any other case, if the settlor becomes bankrupt within two years of the date of the settlement, such

settlement is void against the trustee. Further, if the settlor becomes bankrupt within ten years of the date of the settlement, it is void against the trustee, 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 such property passed to the trustee of the settlement on its execution. The section also makes similar provision as to the settlement of future-acquired property. A "settlement" includes any conveyance or transfer of property. But it was held in In re Plummer (1900) that if a gift of money is made to be employed in a business which is not itself settled, such gift cannot be avoided as a settlement if the money has been so employed or spent.

General Assignment of Book Debts.-Section 43 of the Act provides that where a person engaged in any trade or business makes an assignment of his existing or future book debts or any class thereof, and he is subsequently adjudicated bankrupt, the assignment is void against the trustee as regards any book debts which have not been paid at the commencement of the bankruptcy, unless the assignment has been registered as if the assignment were a bill of sale given otherwise than by way of security for the payment of a sum of money. This provision does not render void any assignment of book debts due from specified debtors, or growing due under specified contracts, or any assignment of book debts included in a transfer of a business bonâ fide and for value, or in any assignment of assets for the benefit of creditors generally.

Fraudulent Preferences.-It is provided by Section 44 of the Act that if a person is unable to pay his debts as they become due, 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 such person, in favour of any creditor, or of any person in trust for any creditor, with a view of giving such creditor, or any surety or guarantor for the debt due to such creditor, a preference over other creditors, shall, if the person making, taking, paying or suffering the same is adjudged bankrupt on a bankruptcy petition presented within three months thereof, be deemed fraudulent and void as against the trustee in bankruptcy.

This rule applies only where the intention has been to prefer one creditor over the others; and, in any case, it does not affect the rights of any person making title in good faith and for valuable consideration through or under the preferred creditor. Further, the transaction must have been voluntary, not by compulsion. For example, in Ex parte Taylor (1887), where the creditor

threatened legal proceedings and the debtor paid up, it was held that there was no fraudulent preference. Again, in In re Lake (1901), a trustee had committed a breach of trust which was known only to himself. On the eve of the bankruptcy he deposited amongst the trust papers certain securities which were his own property, together with a memorandum reciting his breach of trust and that he had deposited the securities in order to repair the wrong that he had committed. It was held that, in the circumstances, there was no view to prefer and that this was, therefore, not a fraudulent preference.

Disclaimable Property.

As opposed to property which may be recovered by the trustee, there is also certain property which he may disclaim or “wash his hands of," viz., property which would be a burden and not an advantage to the estate, such as land burdened with onerous covenants or shares with a heavy liability for uncalled capital attaching thereto. Section 54 of the Act, and the Rules thereunder, empower the trustee as follows:-Where any of the property consists of land of any tenure burdened with onerous covenants, of shares or stock in companies, of unprofitable contracts, or of any other property that is unsaleable or not readily saleable by reason of its requiring the performance of any onerous act or the payment of money, the trustee may disclaim the property at any time within twelve months of the first appointment of a trustee, by writing signed by him.

If the trustee has no knowledge of the property within a month of his appointment, then he may disclaim at any time within twelve months of becoming aware of it.

Disclaiming Leases.-The trustee may not disclaim a lease without leave of the court, unless the property has not been sublet or mortgaged, and

(1) The value is less than £20 per annum, or

(2) The estate is being administered summarily, or

(3) The lessor does not, within seven days of being served with a notice of the intention to disclaim, bring the matter before the court.

Where the property has been sub-let or mortgaged the trustee cannot disclaim without applying to the court unless, after notice has been served on the lessor or mortgagee or sub-lessee, the matter is not required by one of them to be brought before the court.

Restrictions on Disclaimer.-The trustee may not disclaim where an application has been made to him in writing by any person interested in the property requiring him to decide