MEETING OF CREDITORS.
HE J. SHAND. A further meeting in this estate was held this morning. About thirty creditors were j present or represented. Mr Solomon appeared to advise the Assignee ; Mr J. Macgregor for the debtor. The Assignee said that the creditors were called together because he had a rather important question to submit in connection with tho National Bank's security. The bank, it would be remembered, held a security over certain sheep on Traquair for L 3.500, and a wool lien over the same sheep and 2,000 others for L 2.000. Owing to the decision in the Court of Appeal in the case of Somerville, the question arose whether their security over the sheep was good as against the Assignee. He (the Assignee) thereupon took the opinion of his own solicitor, and it was subsequently agreed by the supervisors to refer the matter to Mr Haggitt, who had given an opinion, the essential point of which was that the stock mortgage was not valid as against the Assignee, but that he (the Assignee) would require to get an order for sale under section 81. That order had been obtained by Mr Solomon. Mr Reid remarked that there was r.o mention of the wool lien.
Tho Assignee: Wo; that is held to be good. It was here suggested by several creditors that Mr Haggitt's opinion should be read, and the Aesignee proceeded to read it as follows: — Re James Shand,—ln this ciso tho mortgage of stcck was given in consideration of an advance or loan mado at tho time of the execution thereof, and was duly registered in manner provided by the Chattel Securities Act, 1380. It was executed on the Bth Juno, 1889, and the mortgagor (Shand) was adjudicated a bankrupt on the 22nd July, 1889, only fortyfour days after tho execution cf the stock mortgage. The Court of Appeal has decided in tho ease in re Soaicrvillo (N.Z. L. Rep., July number, 1839) that to make a stock mortgage v.ilid as against tho Official Assignee i.i Bankruptcy it must have been executid at least, sixty days lecture tho dato cf an adjudication of bankruptcy against the mortgager, and the oon(idcration thetfor must have been an advaucc or loon made at the ti.LO of the > xeoution of the security. It U plain that this stock mortgage only fulfils one of thcec conditions, und is therefore not valid as against tho Assignee. Tho Asi-ignee will, I think, require to obtain an order for sals under section 81. I mar add that but for what was decided in the case referred to I should have thought that this mortgage wa9 protecled by section 82 as a bona Arte security. The stele mortgage in Somerville's case was, however, equally a bona tide security, although the consideration a past advance, and not, as in this cise, a contemporaneous cash advanca; and yet its bona Sdes did not protect it, On tho question whether an appeal to the Privy Council would be 1 kely to be successful, ts?uming Buch nn sppeal would lie, I c inonly express an opinion with vei y great diffi Jencc. In common with tho great maj -ritv if not tha whole of the profession, I have always held Ihe opinion that if a mortgage of stock was given in consideration of an advance or losn mado at the time of its execution, it wub a perfectly good and valid security, even if tho mortgagor filed or was made bankrupt on the day after its execution. I cannot help holding the same opinion still, the judgment of the Court of Appeal in Someivillt's oiso notwithstanding. I find myeclf quite unable to appreciate the reasoning of the decision, and it appears to mo that tho caso cf Metropolitan Board < f Works v. Steed (8, Q. 8., Civ., 445) on which it is mainly based, effordg vcrv littJo (if av.y) guide for oonslrunlng cur Chattel .Securities Ac\ 1880. It would serve no good r.urpoee however, to discuss tho question here. Tbe decision in re Somervillo is tho judgment cf the ultimato Court, of Appeal in this colony, and it is tho duty tf the OffioUl Assignee to act upon it, not toquestioti it. I cm only adviso tho Official Assignee th t in rc'ing upon the decision he will be safo frc m any con6o- - whiift if ho disregards it, he may land himself in great rfilficultics, at.d incur great respontlbilitie?. Nothing less than the unanimous consent of all] tho creditors would justify tho Assignee in treating tho decision otherwise than as a conclusive authority against the validity of the stock mortgage. B. C. Haooitt
The Assignee said that since tho opinion had been received he had had an interview with Mr Michie, which resulted in the following proposal being made by the National Baiik :—" Referring to my recent interview with Mr John Roberta and yourself concerning the bank's security in Shand's estate, I have now to sny that the bank will be prepared to treat the wool lieu of stock mortgage held by it only as security for tho actual cash advanced in respect of it, proving as unsecured creditors for certain payments made by Shand to the bank at the time the advance was granted. The offer is made without p r ejuce, and is only to avoid expense of an appeal to the Privy Council, the iasue of which we are advised cannot possibly be other than favorable to the bank." He (the Assignee) understood thi3 to mean that tho bank would pay him L4Ol in caßh ; but tho bank did not mean that. They meant that should the sheer realise no more than L 5,100, the position would be the same aa now ; but if the sheep did realise more than that sum, then they would pay in that amount in excess, and prove for the L4Ol. The L 5.500 was paid over to Smith, Chapmun, and Co. by the bank. L3J6O of that amount was paid to Murray, Roberts, aDd Co. to release their security, and L 1,740 was paid to Shand, and by him paid into tho bank ; and on the same day he gave the bank a cheque forL4ol for Bums due to him by the bank prior to tho security being given. In any case it was a question as to whether this was not a past advance. It was so in effect. It might be held by the Court that, although Shand had the money in his hands, the payment back to the bank of L4OO on the day he received it, it was a past advance.
Mr Solomon: It is either that or a fraudvlent preference. Mr J. Roberts, being appealed to as one of the supervisors to give his view of the position, said he thought the Aesiguee had fairly stated the condition of affairs. The supervisors were present seeking advice. The question was whether the creditors should sit down and occupy their legal position and run the risk of a Privy Council suit, which might mean locking up the estate for a couple of years. Personally he should advise a compromise rather than insist on their pound of flesh, and run the chance of getting nothing. Mr F. R. Chapman asked permission to explain the position of the bank. The facts were before the meeting—viz , that on a i day in June last the bank made an actual cash advance of L 5.500 upon these two securities. These wero held at the time by Murray, Roberts, and Co. The money was placed in the hands of a firm of solicitorsMs (Mr Chapman's) firm—to draw up tho securities, and the balance was paid to Mr Shand, who took it to the bank and paid it into his overdraft account that was partly secured. He was then in a flourishing position, or supposed to be so. The day that the bank took these securities it parted with its cash. It was a portion of these securities that was said to be assailable, because the Court of Appeal had held that unless a man survived his security sixty days it might be assailed. Those present had heard what Mr Haggitt said on the subject being referred to him. That was based on the judgment referred to. Mr Haggitt's own view was to the contrary, and he (Mr Chapman) might tell the creditors that that opinion was shared in by ovcry professional man in town. In view of this, necessarily, if tho decision in Somerville's case governed this one, the Court of Appeal was not likely to go back on its own position ; so that if the matter were contested the case would go to the Privy Council, and in two years' time perhaps we should know what tho law is. He (Mr Chapman) had looked into this matter and taken the best opinion procurable, and was advised that the decision of the Court of Appeal was based on a different case to this one, and therefore that the decision referred to did not govern this case, and it might be that the Court would come to a different conclusion. But what he desired to say was that the bank wished the matter to stand as it did on the day of the security they simply asked that
they should be placed in the same position as they were in then. The creditors might be perfectly certain that tho bauk would not stop short of taking this case to the Privy Council if the creditors contested it. His own opinion was that the L4OO could not be taken from tho bank.
Mr Solomon asked whether the offer did not mean this: that, if the sheep now held by the bank did not realise than L 5.500 the Bank were giving up nothing at all. It seemed to him it was not an offer of compromise at all. Mr Gow thought that the debtor should be put on his oath and asked whether there was any understanding between him and the bank that they should be paid this L 400! Debtor, in answer to questions, said: I think there was an understanding before the bank paid over the money secured on sheep that they should be paid a certain sumabout L4oo then owing. There was a list made out of what was to be done with the money, and I am satisfied the L4OO was mentioned in this list. Thisi3 to the best of my belief. At the time I considered myself solvent'.
Mr D. Reid said that of course those present understood that the position of the | bank was a very hard one. But unfortunately it was a hard one all round, and the creditors were not there simply to ex-' press feelings of sympathy or to act according to generosity either towards the bank or any other creditor. They had the decision of almost a full Bench of Judges to go ou, and that should be sufficient; The Bank, it was said, paid their money on a particular day and took their security, but the mistake they made was in not seeing that the person to whom they advanced the money was in a position to carry on for sixty days. He (Mr Reid) thought this was a very salutary provision, and would like to see the time extended to 100 days. Look at his own case. On tho 4th June ho so\d to Shand sheep oE the value of L2OO, which Shand assured him were to go on to his estatee. These sheep he (Mr Reid) was informed, were transferred to the bank as security on the Bth of June. Was that not as hard a case as tho bank's ? He Eaid the creditors were not in a position to take up cases of individual hardship. There were other persons in the room whose cases wore just as hard as his own. As to the threat of going to the Privy Council, he did not think they ought to be afraid of that.— (Applause.) Perhaps Mr Ashcroft would tell them what the dividend would be after paying expenses already incurred. The Assignee replied that it might be as much as 3s 6d or as little as Is Gd.
Mr Reid thought the creditors should not be chicken-hearted, but go right on. He did not think that sympathy with the bank should persuade them to forget other creditors, who were equally entitled to put forward their cases as hardship?. He had been misled, the inducement held out to him when he parted with his sheep being that they were going into the hands of tho bank as a lien, and would not be realised on until January next; and others might also have been misled. If the bank were prepared to refund half of the whole amount of L 5.000 odd the creditors should aay they (the bank) might retain the other half. If the bank would not do this he would say let the matter take its course and defend the creditors' rights. It was suggested that Mr Reid should formulate his proposition in a motion, and he thereupon moved : " That if the National Bank consent to give up half their security for tho benefit of the estate, the Assignee be authorised to accept this as a compromise of the question in dispute ; failing this, the Assignee and supervisors to take all needful steps to enforce the legal rights ; costs to be costs in the estate."
Mr Chapman : You need not do that, The Bank decline at once.
Mr Reid: Never mind ; it will put the matter on record. Mr David Black seconded the motion.
Mr Bazlett moved ao an amendment—- " That the question of compromise with the bank be left in the hands of the Assignee and supervisors." He would not, however, be inclined to take the bank's offer.
Mr Jago remarked that if the resolution were adopted it would lead to some negotiation between the Assignee and tho bank, in the course of which the bank might, seeing the mind of this meeting, make some further compromise that could be submitted to a further meeting. Recent experience had shown that banks were not much troubled with bowels of compassion or yearnings of sympathy, and when the boot was on the other leg they put down their feet pretty firmly, no matter whose toes they crushed. Mr J. Grindley, one of the supervisors, being asked what view he took of the position, said that speaking as a creditor and not as a supervisor he would mention that he gave his good money a day or two after Shand had met with his principal creditors. He (Mr Grindley) would like to see Mr Re'd's motion modified a little. Personally he thought about LI,OOO would be a fair offer from the bank. Mr Gow seconded Mr Hazlett's amendment, which was put and lost. There were seven voters for it, representing about L7OO, while ono creditor who voted "No" (Mr Hastie) alone swamped the other side with L 769.
Mr Reid's motion was then put and car ried.
The Assignee intimated that after this expression of opinion he would commence fighting at once, and would continue as long as there was anything in the estate. When that was done he would go round for guarantees. The creditors were of course aware of what they were doing, and would doubtless be prepared to back it up. Mr ReiA thought the Assignee would have fundß when he sold the stock. The Assignee had said that the bank were not in possession, and that being so the bank could not, now come into possession. Mr Chapman remarked that it was not yet proved that the Bank were not in possession.
In answer to Mr Jansen, the Assignee explained the sale of eleven young horses to Mr Roberts. The transaction was perfectly legal and could not be assailed, and Mr Roberts had acted most straightforwardly in the matter. Meeting adjourned sine die.
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MEETING OF CREDITORS., Evening Star, Issue 7981, 9 August 1889
MEETING OF CREDITORS. Evening Star, Issue 7981, 9 August 1889
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