1891.

In re
BELL

AND

DAVIS.

value thereof, on the ground that the said goods were goods at the commencement of the bankruptcy in the control, order and disposition of the bankrupts within the meaning of s. 52 of the Bankruptcy Act of 1887.

The respondents were A. Cohen, H. Cohen, and H. Bornstein, trading as "Cohen and Bornstein."

The bankrupts (D. C. Bell and S. Davis, trading as "Bell and Davis") were merchants and contractors, carrying on business in Sydney, and on 3rd July, to secure an advance then made of 2000l., gave a bill of sale over all their stock-in-trade, &c., to the respondents, who were money lenders. This money was to be repaid within three weeks, the interest charged being 100l. In the bill of sale there was a covenant for quiet enjoyment until default, and there were also covenants that the bankrupts would insure their stock-in-trade, and that they would deliver and endorse to the respondents the policy of insurance, and the receipts for the premiums payable for such insurance, and also that they would produce or deliver to the respondents the receipts for the rent of the premises on the Monday in every week during the continuance of the security.

On July 4th, the respondent Bornstein, who was the managing partner of the respondents' firm, and who, after the advance was made, acted alone on behalf of his firm, went to the bankrupts' warehouse, saw Davis, and asked him for the policy of insurance. Davis said that the goods were insured and that he would see that the policy was endorsed over to the respondents. On July 8th, 9th and 11th, Bornstein again called, and was informed that neither Bell nor Davis was in. On Saturday, the 11th, he again called and was informed that Bell had gone to Melbourne. on business. On Monday, Tuesday, and Friday, of the following week, he again called, and was informed that Bell was still in Melbourne, and Davis in Goulburn-both on business-that they were expected back every day, and that Bell on leaving for Melbourne had told his salesman that he had telegraphed to his partner in Goulburn to come back to the warehouse, as he (Bell) was leaving for Melbourne. On the Friday, Bornstein was informed by the manager that Mrs. Bell was at her house, and that she had received a telegram from her husband from Melbourne.

Bornstein then asked for Mrs. Bell's address, and on Monday, July 20th, he went out to ask her if she had received the telegram. Mrs. Bell was too ill to see him. He saw her sister, Miss Burn, who informed him that Mrs. Bell had received a telegram from her husband from Melbourne, and that she supposed he was in Melbourne. Miss Burn swore that Bornstein then stated that it was rumoured in town that the bankrupts had “cleared,” and that he then asked her if she would be in town on any particular day during the week, and in response she said that she would go in if he particularly wished to see her. This was denied by Bornstein.

On the following morning Bornstein registered the bill of sale, and then with a bailiff went to the bankrupts' warehouse. He saw the manager, produced the bill of sale, and demanded the policy of insurance and the rent receipts. He had not at any of the previous interviews with the manager asked for the policy or rent receipts, or if the goods were insured. These were not forthcoming, and after a demand for the whole amount secured by the bill of sale was made, the respondents immediately seized and transferred the stock to other premises situated in Bathurst-street. On that day Miss Burn went to the premises at Bathurst-street. She swore that she then asked Bornstein if it were true what he had told her the day before, and he said it was true and everyone knew it. This was denied by the respondents Abraham Cohen and Bornstein, the latter of whom said, "Miss Burn asked me 'where's Dave?' (meaning Bell); I said, it is rumoured he has gone away." Shortly after the seizure Bornstein told the bankrupts' manager that it looked as if they had cleared out right enough.

It was not an unusual thing for Bell to be away on business, but the bankrupts had never before both been away together for a fortnight, or even for two consecutive days.

The business had always been a flourishing one, and at and up to the time of seizure was going on as usual, there being no appearance of anything wrong. The respondents were not aware of any judgments against the bankrupts or of any pressure by their creditors, nor was there anything from their style of living to make the respondents believe they were in difficulties Bornstein swore that at the time of the seizure he knew of no circumstances which led him to believe nor did he believe that

1891.

In re

BELL

AND

DAVIS.

1891.

In re

BELL AND DAVIS.

the bankrupts had committed any act of bankruptcy. During the three years previous to the bankruptcy the respondents had discounted for Davis bills amounting to 12,000l. or 13,000l., and every one had been satisfactory.

On July 27th the estate of the bankrupts was sequestrated, the act of bankruptcy being under s. 4, sub-s. 1 (d) of the Bankruptcy Act, 1887, and dated July 13th. By arrangement the goods had been sold after the seizure, and realised more than the amount secured by the bill of sale.

Gordon and Wise, for the official assignee, cited Ex parte Snowball, In re Douglas (1).

Pilcher, Q.C., and Sly, for the respondents. There were no facts from which the respondents should infer or ought to have known that the bankrupts had levante d. The respondents may have been of opinion that they had levanted, but to constitute knowledge of an act of bankruptcy the facts must justify the opinion. If the Court is of opinion that Bornstein did make the statement to Miss Burn, then, inasmuch as the facts did not justify the opinion that the bankrupts had levanted, it is immaterial whether he believed they had or not.

The bill of sale being a valid one, the respondents had a right to seize, notice or no notice.

They cited Evans v. Hallam (2).

Gordon in reply.

MANNING, J. In this case the bankrupts, on the 3rd July, 1891, gave a bill of sale over their stock-in-trade to the respondents, to secure the sum of 2000l.; and under the bill of sale they were to take out, and hand over to the respondents, an insurance policy over the goods, and to give the respondents all receipts for rent. It was very desirable that the security holders should have a policy over the goods, because, if there were a fire, the whole of the security would be gone; and, therefore, it is easy to understand why they were desirous of getting it. It appears that they did not get it up to 8th July, and as a matter of fact did not get it at all. On that day one of the partners in the business (2) L.R. 6 Q.B. 713.

(1) 7 Ch. 534.

1891.

In re BELL

AND

DAVIS.

went away into the country, and he has never since returned. For the purposes of this case it was enough that he had not returned by 21st July. On the 10th, he was followed by the other partner, who also had not returned by 21st July. The business, which was in the hands of a manager, went on all the Manning J. same; everything was conducted, so far as the place of business is concerned, just the same; for that purpose neither of the principals being required. On the 21st a demand was made for the policy of insurance on the manager (neither of the partners being there), and in default possession was immediately taken under the bill of sale by a bailiff, who was taken there for that particular purpose, the bill of sale having been registered that morning. Subsequently, on application to this Court, the estate of these two people-these bankrupts, Bell and Davis-was sequestrated, on the ground that, on a date prior to this seizure, the 13th, they had committed an act of bankruptcy by departing from their dwelling house, or going out of the colony for the purpose of defeating and delaying their creditors. My construction of this Act, which has been upheld by the Full Court, is, that goods included in a valid bill of sale, pass under the 52nd section to the official assignee of the grantor if they are, with the consent of the grantee, in the order and disposition of the grantor, as reputed owner at the commencement of the bankruptcy. To meet this point Mr. Pilcher claimed for his clients the benefit of the 57th section, by which any transaction, such as a seizure under a valid bill of sale, is protected under certain circumstances. For that purpose it was necessary for the respondents to shew that at the time they seized they had no notice of any act of bankruptcy committed by the bankrupts. The onus of proving that position rests on the person who sets it up, that is, on the bill of sale holder, and the only question I have to consider in this case is whether the bill of sale holders have proved to my satisfaction that on the 21st July they had no notice of any available act of bankruptcy.

First of all, I have come to the conclusion that at the time of seizure the respondents believed that Bell and Davis had in fact levanted, and that their belief was the real and to my mind the only justifiable ground of the seizure. No doubt they

1891.

In re BELL AND Davis.

had the technical ground that the policy and receipts of rents had not been handed over; they had that to protect them and it would protect them whatever happened, if afterwards it had turned out that these people were innocent of any act of bankManning J. ruptcy. I was very much impressed with Mr. Pilcher's argument, urged with his usual clearness and ability, but I think Mr. Gordon's answer to it is the right one, and that I should be going too far if I were to say that I should look now simply on the facts, and say whether or not-supposing I were now hearing an application for a sequestration order-I should feel myself justified on these facts in making the sequestration order; whether if on the 21st (the time of the seizure), I had before me the facts which were proved in evidence independently of the seizure itself, I should have been satisfied, or required further evidence before making the order. It is a fact that the Court has decided that these people did indeed go away on that day, and that their leaving was a leaving with intent to defeat and delay creditors.

The respondents are in this position: they come to Court and say we undertake to satisfy the Court that we had no notice of that; true, we knew they had gone away, but we did not know they had gone away in order to defeat and delay their creditors, and we had no idea of this until after the time we seized. I must take it that they knew what they admitted, and what others have sworn they were told, because I see no reason to disbelieve the independent witnesses who have given evidence in the case. Their contention, shortly, is, that these are facts from which no reasonable man would conclude that Bell and Davis had levanted. The answer to that is, "Who are you to say that no reasonable man would come to this conclusion? You came to that conclusion yourselves. If you were to set up these facts as justifying yourselves, it might be open to some other person to say, 'I do not think you were justified.' But, how can a man, who has acted on these facts, justify his position; how can he afterwards be listened to when he says, 'I did not believe I had any notice; I did not believe, I ought not to have believed, I was an unreasonable man for believing, that they committed this act of bankruptcy'?" It is a very difficult issue, difficult for one to prove and to be met by the other side. There may be a thousand and one things which