RESERVED JUDGMENTS.

Dominion, Volume 1, Issue 261, 28 July 1908, Page 4

RESERVED JUDGMENTS.

i . . - - - . ■ WILLIAMS AND KETTLE V. OFFICIAL. , ASSICNEE., • QUESTION-OF INSTRUMENT. "• The Court then ■ proceeded to deliver rer . served judgments, tho first, of which related to the ease of. Williams and Kettle, Ltd., -.stock and station agents and auctioneers, Napier (appellants) v. the -Official Assignee, in bankruptcy of tho property . of Henry George Harding, stock- dealer, near Dahiio.virko, (respondent). The- facts in . this caise werts briefly-as follow:—On August 9, 1907; Harding Was in--1 debted to tho company sum of £1171 14s. lid; On that date ho',.wroto to. tho company stating i that as ho found he owed; it | a considerable sum he was giving it the sole right'-io,2oo : cattle, -the' only'-',condition being that he was• to' bo allowed-to ."jockey" tjio cattle off through the firm., On Septemberfs, •1907, Harding was adjudged - a bankrupt. The company, which had taken possession of the cattle on August 20, refused to hand them ' over, to the iOfficial Assignee on October .4,\ 'and on.October 15! sold them by auction for£9o3 lis. Gd. The' Official Assigneo then brought an potion (which 'wa's r heard.\by Mr. • . Justice Cooper) to recover from tho company / the proceeds of the sale. His Honour held that the letter sent by Harding to the com- : pany was an instrument within tho mean-, ing of the Chattels Transfer Act, and: that it whs intended to give to the company tho right to take. possession of thecattle/ aiul; • .after' first consulting - Harding, to ,sell _ theni ' and-placd the proceeds to tho, credit of tho. debt, duo by him- to. the firm./ Tho. instrument was,-, however,, held .to,'bo . void, as against the. Official Assignee .under Section 27 of the Chattels Transfer Act,"-1889, "and: nnder Subsection 2 "of Section 79 of the . Bankruptcy Act, 1892 ( it being: an instru- . ment 'by ' way of security -for- a" past;'dobt, . and- executed 'within. four months ;prior.' to tho adjudication. It was 'held also that the company was; not protected: under Section 82 of tho Bankruptcy Act. Further, the transaction was not one the dominant motive- of which'was in: the debtor's "mind an intention, to. prefer, tho • company. His Honour deducted the .trade' commission aud cost of advertising the sales, and gave judg- • ment for -the Official Assignee , for . the bal- / arice, ..£B7l 195., with 'costs ' totalling £.61 lis. 9d. The company appealed ■ from the; . judgment (save' that •: pbrtion which ' determined that'the-transaction was not a'.fraud-.-

ulerit preference) upon the grounds .tha'tthb . transaction was. protected in. view of the fact', that it was completed. by .tho company taking . possession of the,,'cattle notice'' of any act of'bankruptcy: on the, part of Harding; that the letter/was not an "''instrument," but constituted a' transfer of chattels ; in the ordinary course of business ;• that the company had a 'lien, upon the stock which they were authorised, to'sell for'tho amount of their advances. to ■ Harding; and " (as to!' part, of ; the judgment) that the consideration' for the. letter was to the extent of £514 12s'. The" Official Assignee cross-appealed- from" that portion of the judgment which deter'r! mined that the' giving of the letter was not a fraudulent preference; also from that portion which adjudged that the company was' entitled to trade commission and the, costs' of advertising the sale, it not having received authority . from! the Official Assignee to sell the cattle. Mr. Justice Williams, who presided at the", hearing of'the case, said that he considered. the construction which Mr. Justice Cooper, had given to tho .letter in the 'Court below' was the true one. The sale authorised would be a sale,in thfc usual way!either,by auction or privately. .%• . Therequest that - Harding should be allowed to "jockey", off tho cattio thrQugh tho appellant firm 'meant simply,, that he should bo.allowed :as; agent, for this firm to dispose of them to the best advan-. ; tage. Subsection 2 of section 79 of the Bankruptcy Act, .1892, enacted that every.. instrument by way of security under tho - Chattels Transfer Act, 1889, or'any Act repealed thereby over any proporty of a bankrupt would bo null and void, as against thoassignee of tho bankrupt's estato if it had 1 been executed within four months prior >to the adjudication except as to money actually advanced or paid or tho actual prico or value of goods or chattels sold or supplied'by thegrantee;of tho security to. the grantor contemporaneously with or at any tiriio after the' execution thereof. Section, 82 of tho Bankruptcy Act, which protects ccrtain trans-; actions, did not protect such instruments, as that section was expressly .made subject to -the provisions of the Act with respect to tho avoidance, on bankruptcy of the conveyances and dispositions mentioned in the. Act. :It : had also" been'held by this Court that the third subsection of Section 79 did . not apply to protect the grantees tinder the instru--1 ments avoided by tho second subsection; If, therefore, the letter was an instrument by way.- of security '• _under the Chattel's Transfer Act, 1889, it was void as against tho assignee in bankruptcy. It was an instrument as defined by Section 2 of tho Chattels Transfer Act,' unless it was a document which comes, within one of tho exceptions mentioned in'that section. If it was an instrument it was 1 certainly ,an"instrument by Way of security as defined, by the Act as it • was given to secure the payment of money. It-.was contended, however,-that it was not an instrument under tho Act as it camo ffithin subsection e of Section 2, which excepted transfers of chattels in tho ordinary 'course' of business of any trade or calling, and within subsection h, which excepted bills of lading, warobouse-koeper's certificates, warrants, or orders for the delivery of chattels or any other document used in tho ordinary .course of business as proof of the possession or control of goods, or authorising or purporting to authorise cither by indorsement or delivery, the possessor of such document to transfer or rcceivo the goods thereby represented. Apart from any authority it; was perfectly clear that the document was not within exception (h). As to exception (e) there was no evidence at all that the letter was a transfer of the stock in the ordin-

ary;. course of business. The execution of isuch : a'documorit: might bo of frequent occurrence, but it must bo shown to bo tho common-practice'before it could bo said to bo a transfer in. the. ordinary courso of business. JEv.en if. itinera shown.to he the common practice, - it did .not follow that it was in the-- -. ordinary -•■ courso of business. If Jthelilett&E in question canlo within exception (c), becausij it was given in the ordinary courso ,pf lousiness, it was difficult to sco why any letter from a customer to his banker, or from a retail to a wholesale, dealer undertaking to give security over goods to secure a debt' due, should not be within the exception. If "befpro'tho adjudication tho cattlo had been 'sold 'and tho money received by tho appellants, -the appellants would have been ontitled to' : retain tho money, for tho instrument would havo ceased to exist beforo the adjudication. Tlio Court would not revivo an extinct.instrument.for tho purposo of avoid■inf" it/ Hero, howovor, tho cattlo were not sofd. The only authority the appellants had from. Harding to retain possession of and deal,, with the cattle was by virtue of tho letter. They cotild not hoM or sell without relying on the letter. But the letter became a void instrument wlion tho ordor of adjudication was made. . The result-was that tho appellants at the time of-the .adjudication had property in their handsbelonging- to the bankrupt over which they/had- no rights, either of possession or -disposition. It appeared from tho judgment of Mr.- Justico Cooner in tlie Court below 'that'tlie suiniof £514 125., part, of tho total indebtedness of Harding to the appellants; wiis 'for sheep purchased from the appellants on'July-23. ,It was contended that as ,this was less than'2l. days'before August 9, the letter ,waß ,a,, valid security over, the -cattlo, at any rate, for this sipn by virtue of the concluding part of subsection 2 of Section 79 of tlio Bankruptcy Act. Tho term "any property " in the latter portion of tho subsection referred ;to the liko _ term ' in' tho earlier part^of l the-■■seetion-j-i.e., it meant property over which the instrument, by. way of ..security • \yas given, and_ was limited to such: property. The sheep in question were not pqrt.■. ofthe property over which the. security i was given. His Honour thought, therefore, that the appeal should bo dismissed/and'it became unnecessary, therefore, to. consider, the_crqss.appeal. As was intimated at the hearing, the Court agreed with' Mr. Justice Cooper that there was no fraudulent- and-the minor point on tho cross appeal was abandoned by the rcsponJustices Denniston, Edwards,, and Chapman concurred. ■ ■ ;' ; The appeal : was. dismissed with costs on tho" highest scale as from a distance, appellants being alloived- to set off as -against respondent's costs the sum of five guineas. Mr. Myers, on behalf of the appellants, asked , for loavo to appeal to tho Privy 'Council,"wliich' was 1 granted. . At the hearing/Mr. H. D. 8011, K.C. (with him' Mr.' E.'Williams, of -Napier) appeared on behalf of appellants, and Mr. Martin Chapman, K.C. (with him Mr. W. C. Sproulo, of Napier) for respondent.,