Ch. XVIII. operation of the order for a specified time, or grant an order subject to conditions as to the earnings or income or after-acquired property of the bankrupt. But the discharge must be refused if the debtor has committed certain criminal offences in connection with his bankruptcy,1 unless for special reasons the Court otherwise determines; and, on the proof of certain facts, the most important of which is that his assets do not amount to 10s. in the pound on his unsecured liabilities (unless this fact arises from circumstances for which he cannot justly be held responsible), the Court must either refuse the discharge, or suspend it for not less than two years, or suspend it till a dividend of not less than 10s. in the pound has been paid to the creditors, or require the bankrupt to consent to judgment being entered up against him for the balance or part of the balance of the unsatisfied provable debts to be paid out of his future earnings or after-acquired property, but so that execution is not to be issued without leave of the Court.3 Debts. provable. Mutual credits. Priority of debts. Debts provable under the bankruptcy are "all debts and liabilities, present or future, certain or contingent, to which the debtor is subject at the date of the receiving order, or to which he may become subject before his discharge by reason of any obligation incurred before the date of the receiving order." But they do not include "demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise, or breach of trust." A person having notice of an act of bankruptcy available against the debtor cannot prove for any debt or liability contracted by the debtor subsequently to such notice." The debtor is, however, released from such a debt by his discharge, for it is a "debt provable in bankruptcy," although the creditor cannot, under the circumstances, prove.7 Where there have been mutual credits or debts or dealings, there is a set-off, and the creditor may prove for, or pay, the balance, as the case may be.8 Rates and taxes not exceeding one year's assessment, and the wages or salary of a clerk or servant during four months before the receiving order, and not exceeding 50l., and the wages of a labourer or workman during two months before the receiving 1 Re Hedley, [1895] 1 Q. B. 923. 3 Act of 1890, s. 8. + Act of 1883, s. 37 (3). Q. B. 495. 6 S. 37 (2). 7 Buckwell v. Norman, [1898] 1 Q. B. 622. s S. 38. See notes to Rose v. Hart, 2 Sm. L. C. 298. order, and not exceeding 251., are to be paid in full in priority to Ch. XVIII. all other debts. Provision is also made for preferential claims by apprentices or articled clerks with respect to premiums, and as to the preferential right of a landlord to distrain for six months' rent.3 creditors. A "secured" creditor, i.e., "a person holding a mortgage, charge Secured or lien on the property of the debtor, or any part thereof, as a security for a debt due to him from the debtor," may either(1.) Rely on his security, and not prove; or (2.) Realise his security and prove for the balance of his debt; or 6 Acts of Acts of bankruptcy may be divided into three classes: (A.) Personal acts or defaults on the part of the debtor; bankruptcy. (B.) Dealings with his property; (C.) Acts which show the insolvent state of his affairs. (A.) Personal acts or defaults of the debtor, done or made Personal acts with the intention of defeating or delaying his creditors, con- or defaults. sist of 8 (1.) Departing out of England;o (2.) Remaining out of England; 10 1 S. 40, as amended by the Preferential Payments in Bankruptcy Act, 1888 (51 & 52 Vict. c. 62), s. 1. Act of 1883, Sched. II., rr. 9-16. 6 Defined by the Act of 1883, s. 4, as amended by the Act of 1890, s. 1. 7 Baldwin on Bankruptcy, 83. 8 The intention is essential: Re Wood, 7 Ch. 302; it is immaterial whether, as a matter of fact, the creditors are (Ex p. Osborne, 1 Rose, 387) or are not Williams v. Nunn, 1 Taunt. 270; Chenoweth v. Hay, 1 M. & S. 676) delayed. 12 11 9 See Windham v. Paterson, 2 Rose, 466. As to a foreigner returning home, see Ex p. Crispin, 8 Ch. 374; Ex p. Gutierrez, 11 Ch. D. 298. 10 Ex p. Bunny, 1 De G. & J. 309. As to a debtor domiciled abroad, see Ex p. Brandon, 25 Ch. D. 500. 11 See Charrington v. Brown, 11 Moore, 341; Re McKeand, 6 Morr. 240. 12 See Ex p. Meyer, 7 Ch. 188; Chenoweth v. Hay, 1 M. & S. 676; Bernasconi v. Farebrother, 10 B. & C. 549; Russell v. Bell, 10 M. & W. 340; 62 R. R. 639; Re Alderson, [1895] 1 K. B. 183; Re Worsley, [1901] 1 K. B. 309. 13 E. g., a denial to creditors, sanctioned by the debtor; Ex p. Foster, 17 Ves. 416; Muchlow v. May, 1 Taunt. 479; Richardson v. Pratt, 52 L. T. 614. Ch. XVIII. Dealings with property -(1) Con veyance to trustee for creditors, -(2) Fraudu lent conveyances or gifts. -(3) Fraudu lent prefer ences. (B.) Dealings by the debtor with his property.1 (1.) Any conveyance or assignment in England or elsewhere3 Dispositions may be fraudulent either under 13 Eliz. c. 5,7 or under the bankruptcy laws. 10 A mortgage of all, or substantially all, a man's property to secure an existing debt, unless the mortgage is made in pursuance of a bona fide agreement made at the time of the advance," is fraudulent. On the other hand, a mortgage of all a man's property for a substantial present advance, or for a past debt and a substantial present advance, in order to enable the debtor to continue his business, or for a past debt and further advances agreed to be made, and in fact made, is not fraudulent. Of course, a bona fide sale of the whole of a man's property is not fraudulent.13 11 12 (3.) Conveyance or transfer in England or elsewhere by the debtor of his property or any part thereof, or the creation of any charge thereon, which conveyance, transfer, or 1 Act of 1883, s. 4 (1) (a), (b), (c). 2 Re Spackman, 24 Q. B. D. 728; Re Hughes, [1893] 1 Q. B. 595. 3 See Ex p. Crispin, 8 Ch. 374. Re Spackman, 24 Q. B. D. 728; Re 5 Re Phillips, [1900] 2 Q. B. 329. ruptcy, 143, 148. 8 Re Wood, 7 Ch. 302; Re Sinclair, 26 Ch. D. 319. 9 Ex p. Hauxwell, 23 Ch. D. 626; Er p. Burton, 13 Ch. D. 102. 10 Jennell v. Reynolds, 11 C. B. N. S. 709; Morris v. Morris, [1895] A. C. 625. 11 Ex p. Ellis, 2 Ch. D. 797; Ee p. Johnson, 26 Ch. D. 338; Jamaica, Adm.-Gen. of v. Lascelles, [1894] A. C. 135. 12 Er p. Dann, 17 Ch. D. 26. Pritchard, 1 A. & E. 456; 40 R. R. 335; Exp. Stubbins, 17 Ch. D. 58. 14 See Ex p. Crispin, 8 Ch. 374. charge would, under the Act of 1883, or any other Act, Ch. XVIII. A fraudulent preference is " every conveyance or transfer of Definition. 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."2 Every such conveyance, &c., is to be deemed fraudulent and void against the trustee in the bankruptcy of the person making it if he be adjudged bankrupt on a petition presented within three months thereafter.2 a We have already pointed out that the necessary consequence of "View to a conveyance of the whole of a debtor's property as security for prefer." past debt is to delay his creditors, and is therefore fraudulent; but a conveyance of part only of his property for that purpose is not necessarily fraudulent within the provisions above referred to. The main difficulty in cases alleged to fall within these provisions is to ascertain whether the payment, &c. was made substantially with the view to prefer the creditor 3 to whom it was made, as distinguished from a payment, &c. made under real pressure by the creditor, or made in the ordinary course of trade, or according to a promise to pay on a particular day,' or under a threat of proceedings, or in order to correct a mistake made in a former security.9 10 5 8 4 Where a trustee who has misappropriated trust funds replaces them,1o or a person duly applies money given to him for a particular purpose, this is not a fraudulent preference. (C.) Acts which show that the debtor is insolvent. These are:- 12 Acts showing insolvency. (1.) Filing by the debtor in the Court a declaration of his Declaration 1 S. 4 (1) (c). 2 S. 48. 3 Ex p. Griffith, 23 Ch. D. 69; Ex p. Hill, ib. 695; Ex p. Taylor, 18 Q. B. D. 295; Re Vautin, [1900] 2 Q. B. 325. + Re Warren, [1900] 2 Q. B. 138. 5 Re Wilkinson, 1 Morr. 65; Ex p. Jenkins, 2 Id. 71. Tomkins v. Saffery, 3 App. Cas. 235. 7 Bills v. Smith, 6 B. & S. 314. 8 Re Wilkinson, 1 Morr. 65. 9 Re Tweedale, [1892] 2 Q. B. 217. 10 Ex p. Stubbins, 17 Ch. D. 58; Ex p. Taylor, 18 Q. B. D. 295; Sharp v. Jackson, [1899] A. C. 419; Re Lake, [1901] 1 K. B. 710. 11 Ex p. Kelly, 11 Ch. D. 306. 12 Act of 1883, s. 4 (1) (f), (g), (h); Act of 1890, s. 1. of insolvency. Ch. XVIII. inability to pay his debts, or presentation by him of a bankruptcy petition against himself. Execution. Bankruptcy notice. (2.) That execution issued against him has been levied by seizure of his goods1 under process in an action in any Court or in any civil proceeding in the High Court, and the goods have either been sold or held by the sheriff for twenty-one days.3 (3.) That a creditor has obtained a final judgment against him for any amount, and, execution thereon not having been stayed,* has served on him in England, or by leave of the Court elsewhere, a bankruptcy notice under the Act, requiring him to pay the judgment debt in accordance with the terms of the judgment or to secure or compound for it to the satisfaction of the creditor or the Court, and he does not, within seven days after service of the notice, in case the service is effected in England, and in case the service is effected elsewhere, then within the time limited in that behalf by the order giving leave to effect the service, either comply with the requirements of the notice, or satisfy the Court that he has a counterclaim, set-off, or cross-demand which equals or exceeds the amount of the judgment debt, and which he could not set up in the action in which the judgment was obtained. 6 The judgment must have been obtained in England. Any person who is for the time being entitled to enforce the judgment, i.e., an assignee, may serve the notice; and a judgment creditor who has made an equitable assignment may do so. The words "final judgment " have been construed strictly to mean a judgment where there has been a proper litis contestatio, and a final adjudication of it between the parties.8 If the time for payment has expired and no application has been made to set aside the notice, the act of bankruptcy is complete, and it is not safe for the creditor to accept payment. 1 "Goods" are defined, by s. 168, as meaning all chattels personal, and therefore they include choses in action; Colonial Bank v. Whinney, 11 App. Cas. 434. 368. Exp. Caucasian Co., [1896] 1 Q. B. 3 Act of 1890, s. 1; Burns-Burns v. Brown, [1895] 1 Q. B. 324. 4 Ex p. Ford, 18 Q. B. D. 369; Re Connan, 20 id. 690. 5 Re A Bankruptcy Notice, [1898) 1 Q. B. 383. 6 Act of 1890, s. 1; Re Clements, [1901] 1 K. B. 260. 7 Re Palmer, [1898] 1 Q. B. 419. 8 Ex p. Moore, 14 Q. B. D. 627; Re Riddell, 20 id. 512; Re Binstead, [1893] 1 Q. B. 199; Re Boyd, [1895] 1 Q. B. 611. |