C. A. 1897 NORTH J. Feb. 11. C. A. March 27. In re CARTER AND KENDERDINE'S CONTRACT. Vendor and Purchaser-Voluntary Settlement-Trustee in Bankruptcy of Settlor -Bonâ fide Purchaser for Value-Title-Bankruptcy Act, 1883 (46 & 47 Vict. c. 52), s. 47; s. 48, sub-s. 2. According to the true construction of s. 47 of the Bankruptcy Act, 1883, a voluntary settlement is not void against the settlor's trustee in bankruptcy from its date, but is only void against the trustee from the time when his title accrues; so that if before that time the property comprised in the settlement has been sold, bonâ fide, to a purchaser for value, the title of the purchaser will be good as against the trustee. In re Brall, [1893] 2 Q. B. 381, and In re Holden, (1887) 20 Q. B. D. 43, approved. In re Briggs and Spicer, [1891] 2 Ch. 127, overruled. APPEAL from North J. This was a vendors' summons under the Vendor and Purchaser Act, 1874, asking for a declaration that certain requisitions and objections made by the purchaser had been sufficiently answered by the vendors, and that, notwithstanding s. 47 of the Bankruptcy Act, 1883, the vendors could make a good title to certain freehold property comprised in a contract for the sale thereof for value entered into between the vendors and the purchaser. The vendors derived title to the property under certain conveyances by way of settlement executed by former owners of the property and dated respectively March 17 and 25, 1896; and the purchaser objected that these conveyances, being voluntary, were liable to be avoided under s. 47 of the Bankruptcy Act, 1883, and they asked how the vendors proposed to make a good title to the property. The vendors answered that they were able to make a good title by reason of the decision of Vaughan Williams J. in In re Brall (1); but the purchaser replied that, having regard to the decision of Stirling J. in In re Briggs and Spicer (2), he could not accept this answer; and he suggested that the present summons should be taken out by the vendors, which was done accordingly. The summons was adjourned into court, and came on before North J. on February 11, 1897. C. A. 1897 In re CARTER AND CONTRACT. Borthwick, for the vendors. It must be admitted that the settlement was a voluntary one: Ex parte Hillman. (1) The question is whether by s. 47 (2) of the Bankruptcy Act, 1883, the settlement is made void as against the settlor's trustee in bankruptcy, or only voidable in the event of a bankruptcy and Kenderdine's as from the date of the bankruptcy. Sect. 47 is identical with s. 91 of the Bankruptcy Act, 1869, except that the latter applied only to traders, and that it must now be proved that the settlor's interest in the property passed to the trustee on the execution of the settlement. The cases already decided on s. 47 are conflicting. In In re Briggs and Spicer (3) Stirling J. held that the settlement would be absolutely void ab initio as against the trustee in bankruptcy of the settlor, if he should become bankrupt within two years of the date of the settlement, and also if he should become bankrupt within ten years of that date, unless" the parties claiming under the settlement" (which the learned judge held would include a purchaser from the trustees of the settlement before any bankruptcy) could shew that the settlor when he made the settlement was able to pay all his debts without the aid of the settled property. In In re Vansittart (4) and In re Brall (5) Vaughan Williams J. held that "void" in s. 47 means 66 voidable," and that a bonâ fide purchaser for value from the donee under a voluntary settlement has a good title against the trustee in the bankruptcy of the (1) (1879) 10 Ch. D. 622. (2) Sect. 47: "(1.) Any settlement of property not being a settlement made before and in consideration of marriage, or made in favour of a purchaser or incumbrancer 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 the settlor after marriage in right of his wife, shall, if the settlor becomes bankrupt within two years after the date of the settlement, be void against the trustee in the bankruptcy, and shall, if the settlor becomes bankrupt at any subsequent time within ten years after VOL. I. 1897. 3 I 1 C. A. 1897 In re CARTER AND settlor, even if he purchased with notice of the voluntary settlement, provided that he purchased before the bankruptcy. In In re Holden (1) a Divisional Court held that trustees of a voluntary settlement were, after the bankruptcy of the settlor KENDERDINE'S within the two years, entitled to a lien on the property for their costs incurred in the performance of their duty as trustees in defending an action by the settlor to set aside the settlement. Sect. 47 does not invalidate any dealings with the property which have taken place before the bankruptcy of the settlor. When the settlement is avoided it is not avoided ab initio, but only as from the date of the avoidance. CONTRACT. C. A. In Hance v. Harding (2) the Court of Appeal held, under the Bankruptcy Act, 1869, that a voluntary settlement was protected as against the trustee in the settlor's bankruptcy by s. 94, sub-s. 3, of that Act. The decision of Vaughan Williams J., which is later than that of Stirling J., should be followed. Eustace Smith, for the purchaser, was not called upon. NORTH J. There being this conflict between these recent decisions of two judges of co-ordinate jurisdiction, how can I force the title upon the purchaser, even if I had formed an opinion as to which of the two decisions is right? The purchaser is no doubt willing to take the property if he can get a good title to it. If either of the two cases stood alone I should of course follow it, but I cannot follow them both. And I cannot follow one of them, and force the title upon the purchaser in the face of the contrary decision. I must dismiss the summons, the Court being of opinion that the title cannot be forced upon the purchaser. W. L. C. The vendors appealed, and the appeal was heard on March 27 1897. Cozens-Hardy, Q.C., and Borthwick, for the appellants. What the section says is that the voluntary settlement is to "be void against the trustee in the bankruptcy" of the settlor; but this does not affect the title of a purchaser for value where (1) 20 Q. B. D. 43. (2) (1888) 20 Q. B. D. 732. C. A. 1897 In re CARTER AND CONTRACT. there has been no bankruptcy. "Void" does not mean void as against everybody and from the date of the instrument, but only void as against the trustee in bankruptcy, and from the time when his title accrues. Were it otherwise the effect would be startling, particularly considering that the tendency KENDERDINE'S of legislation is to make property more saleable; for the result would be to make property, which is the subject of a voluntary settlement, unsaleable, and possibly derelict for two or ten years, as the case may be. [In addition to the authorities made use of in the Court below, they referred to the statutes 13 Eliz. c. 5 and 27 Eliz. c. 4; Prodgers v. Langham (1); George v. Milbanke (2); Daubeny v. Cockburn (3); Payne v. Mortimer (4); Ex parte Bishop (5); Halifax Joint Stock Banking Co. v. Gledhill (6); Sanguinetti v. Stuckey's Banking Co. (7); and Alexander v. Mills. (8)] Eustace Smith, for the purchaser. The purchaser is a willing purchaser, but of course desires a title which cannot be upset by the trustee in bankruptcy of the settlor if he should ever come into existence. There is no doubt that this is a voluntary settlement within s. 47; the words of the section are that such a settlement shall, in the event of the settlor's bankruptcy within two years or ten years, as the case may be, after its date, “be void against the trustee in bankruptcy" of the settlor as mentioned in the section. Now, if an instrument is "void," it must come off the title, and, a link in the chain of title being gone, the purchaser has bought from people who have no right to sell. There is nothing whatever in the section to shew from what time the settlement is to "be void," or to qualify the language used; and the primâ facie meaning of an instrument being "void" is that it is to be void throughout its whole existence, i.e., ab initio. There is nothing in the section to protect the purchaser, and his objection is a good one: In re Briggs and Spicer (9); Ex parte Hillman (10); In re Ridler. (11) (1) (1663) 1 Sid. 133. (3) (1816) 1 Mer. 626, 638. (6) [1891] 1 Ch. 31. (7) [1895] 1 Ch. 176. C, A. 1897 In re CARTER LINDLEY L.J. I do not think we need trouble you to reply, Mr. Cozens-Hardy, because we have no doubt about the true construction of this section. The point is an extremely important one, and I do not think its importance has been overKENDERDINE'S rated by the appellants. [His Lordship then shortly stated the facts, and continued:-] AND CONTRACT. The objection taken by the purchaser is a very formidable one if there is anything in it; and one cannot say that there is nothing in it, because the question has arisen already, and Stirling J., in the case of In re Briggs and Spicer (1), has held the objection to be so serious that he could not force a similar title on the purchaser. On the other hand, Vaughan Williams J., who has had to consider the question from a somewhat different point of view, has come to the conclusion that the purchaser would get a good title. (2) The question turns on the construction of s. 47 of the Bankruptcy Act, 1883. That section, first of all, deals with “any settlement," and those words for the purposes of the section include " any conveyance or transfer of property." Then, turning to s. 168, we find a definition of property which is extremely wide and covers property of every description. Therefore, this s. 47 according to its terms hits a conveyance or transfer of property of any sort. [His Lordship then read the section, and continued :-) Looking at that section, and looking at it with no more than ordinary care, we first find that it does not say that these settlements are to be void generally, or anything of the sort. It says that they will be void "against the trustee in bankruptcy," which is a totally different thing. We must then ask ourselves, how can a settlement be void against the trustee in bankruptcy until there is a trustee in bankruptcy against whom it can be void? That remark leads to this question, "Void," as from what time? That is the whole controversy. The section does not say a word about it. You must look at it with reference to the language and the kind of transaction with which the section deals. Looking at the language only, it seems to me that when an enactment says a settlement shall (1) [1891] 2 Ch. 127. 66 (2) In re Brall, [1893] 2 Q. B. 381. |