SUPREME COURT.

Lyttelton Times, Volume XXIX, Issue 2341, 24 June 1868, Page 2

SUPREME COURT.

Tuesday, June 23, (Before Mr Justice Gresson.) His Howr sat in the Court Chambers, at 11 o'clock. In Bankruptcy/, re james wlllwat trbadwell. Mr Joyut applied for an order confirming the choice of trustee, and fixing a day for last examination. His Honor confirmed the trustee's appointment, and fixed the last examination for lhursday, the 13th August next.

RE CHARLES WALTER SCOTT PURDIE. The bankrupt, in persou, applied for an order of adjudication and meeting of creditors. His Honor made the order as prayed, and fixed the meeting of creditors to take place at the Registrar's Chambers, at 11 o'clock on Saturday, the 4th July.

BE RICHARD MABON. Mr Joynt applied for an order of adjudication and meeting of creditors. His Honor made the order as prayed, and fixed the meeting of creditors to take place at the Registrar's Chambers, on Saturday, the 4th July, at one o'clock. In Bmo. TWENTYMAN V. WALTON AND ASOTHERMPOBTANT JUDGMENT. His Honor, in delivering judgment, saidIn this case a motion was made some weeks ago on the part of the defendants, to dissolve a provisional injunction by which they were in effect restrained from applying to their own use the estate of Thomas Tennant, a bankrupt, which had been assigned to them by bill of sale upon trust, to realise for payment of themselves and two other creditors. Upon the hearing of the motion, it was stated that the principal points on which the case would turn, were about to come on for argument on a demurrer which had been taken to plaintiff's declaration. I thereupon deferred giving judgment on the motion until after hearing the demurrer, which was argued just before the commencement of the June session, and which, as it involves substantially the same questions as were raised on the motion, I propose to dispose ot by the present judgment. The declaration states that by an order of the Court dated 28th February, 1868, made in the matter of the petition of the bankrupt, he was adjudged a bankrupt, and that plaintiff was chosen trustee of his estate, and the choice confirmed by order of the Court dated 13th March, 1S68; that previously to the order of adjudication, a deed of mortgage and bill of sale, dated 2nd December, 1867, was executed between the bankrupt and the defendants, by which the bankrupt conveyed and assured to the defendants certain real and porsonal property therein specified, and all other articles, stock-in-trade, furniture, and other effects then upon or belonging to, or which, during the continuance of the security, should be upon or belonging to the said premises of the bankrupt, or any premises thereafter to be occupied by him, subject to redemption on the payment to the defendants of the money then due, and of such further, and other sums as should be due to them by the bankrupt for unmatured and current bills of exchange, and of all such further and other sums as the bankrupt might at any time thereafter become liable to pay to them for goods sold, cash advanced, dishonoured bills, or on any other account whatsoever; nnd on payment to two other creditors therein named in like manner of all moneys due, or to become due to them, with a proviso empowering the bankrupt to retain possession of the property assigned until default, or until the property for the time being on the premises of the bankrupt should be removed, or the management thereof altered without the consent of the defendants, or until the ownership or right of redemption thereof should be transferred or altered by sale, further pledge, or otherwise without the like consent, or until there should be at any time subsisting and unsatisfied any judgment, decree, or order of some court of law or equity, by means whereof the property of the bankrupt might be attached or taken in execution, or until the bankrupt should do, or threaten, or attempt, or permit some act bringing his estate within the operation of any insolvent or bankrupt law, with power to the defendants, in case of default in any of the foregoing conditions, to enter into possession of all the property thereby assigned, or which should then be in the bankrupt's possession, and to sell and exercise all the powers of an absolute owner, until the monies thereby secured, and costs, should he fully paid. Tlic declaration then states that the property assigned by the deed comprised all the property then belonging to the bankrupt, as well us such further property as therein specified ; that the bankrupt was, to the knowledge of defendants, in insolvent circumstances at the time of executing the deed, and w«s thereby disabled from carrying on business, and in fact that he made default in payment to defendants of the amount due to them immediately after the execution of the deed, nnd that they thereupon on or about the 10th December, 1867, entered and took possession, and proceeded to sell and collect the debts; that the defendants have applied, and intend to apply, the proceeds realised in discharge of the monies secured to them and the two other creditors named, in exclusion of the general body of the creditors of the bankrupt; that the property ought of right to have been included by the bankrupt in bis list of property and assets filed by him in Court in the matter, and of right ought to pass to and vest in plaintiff as such trustee as aforesaid. It prays that the deed may be declared fraudulent and void as against the creditors of the bankrupt, and that defendants maybe ordered to deliver it up to be cancelled, and that an account may be taken of the real and personal estate of the bankrupt come to the hands of defendants by virtue of the deed, and of all dealings of the defendants therewith, and that defendants may be ordered to give up to plaintiff, as such trustee, possession of aU such of the estate and effects as are still in their possession and undisposed of, and to pay to plaintiff the amount of all monies received by them, or which, withont wilful default, might have been received; and for injunction as to property undisposed of and monies uncollected. Several objections were made to the frame of the declaration, founded on the vagueness of its allegations, and its omission to aver that there were other creditors than those mentioned in the bill of sale, or that there was fraud, or that the deed was voluntary. The principal argument against the relief claimed was founded on the authority of Stevenson v. Newnham, 13, C.8., 283 (sc. 22 L.J.C.P., 110), in which it was held by the Court of Exchequer Chamber, that where a debtor becomes bankrupt on his own petition, there can be no relation to any act of bankruptcy prior to the filing of the declaration of insolvency. It was said that as no case had been made for impeaching the deed, either as a fraudulent preference in bankruptcy, or as being void under the Statute of Elizabeth, the plaintiff's equity failed, inasmuch as even if the Court should hold that the bill of sale of itself amounted to an act of bankruptcy, the plaintiff's title could not relate back to it, the bill of sale being prior in date to the filing of the declaration of insolvency, on which the debtor was adjudged bankrupt. In Newnham v Stevenson, 10, C.8., 713, a transfer had been made before bankruptcy, and the transferee, after, the appointment of assignees, had brought an action for an excessive distress upon the goods made shortly before the bankruptcy, and the jury fouid that the transfer to the plaintiff was a fraudulent pre-

ference; but as the assignees had not taken any step to avoid the transfer, it was held that the defendant could not set up the title of the assignees against the plaintiff, In the same case, in error, it was said that as a fraudulent delivery of goods, with intent to defeat or delay creditors, is an act of bankruptcy, the property in the goods would have vested in the assignees from the fraudulent delivery, if the fiat had been issued on the petition of a creditor who had a sufficient debt to make him a good petitioning creditor, but that the adjudication having proceeded on the declaration of insolvency, there could be no relation back further than to that act; although Stevenson v Newnham was criticised by Cresswell, J., in Young v. Billiter, 25 L. J., Q. 8., 181, its authority has been fully recognised by many eminent judges. But the doctrine, that a plaintiff suing in a court of law cannot successfully claim to be clothed with legal righto flowing from an act of bankruptcy prior in date to that on which the adjudication of the petitioner was founded, does not seem to me to be inconsistent with the equity on winch plaintiff's claim is based. The action is one for specific relief, founded on fraud, and if the operation of the deed be such as to deprive creditors whom the plaintiff represents, of their rights, and that the Court can clearly infer from the statements in the declaration that the deed is fraudulent ngninst them, I don't see how a Court of equity can refuse the relief claimed. The statement in the declaration that the deed comprised the whole of the bankrupt's property, and that the bankrupt was, to the knowledge of the defendants, insolvent at the time of his executing the deed, must, for the purposes of the demurrer, be taken as true, and such a deed is beyond doubt a fraudulent conveyance, with intent to defeat or delay creditors within the meaning of Section 27 of our Bankruptcy Act. Lindon v. Sharpe, i M. and G., 895 (s. c. 13 L. J. n. g. C. P 4 67.) Graham v. Chapman, 21 L. J. C. P.,l 173. In the latter case, the bankrupt assigned the whole of his stock-in-trade to a creditor to secure an old debt' and a further advance. The jury found that the deed was executed by the bankrupt bond fide in consideration Of the old debt and the further advance, and that the further advance was the moving cause of the deed. The case therefore was not so strong as the present case, where there was no further advance, and the bankrupt was insolvent at the time, to the knowledge of defendants; yet Jervis, J., referring to the language of the Imperial Statute 12 and 13 Victoria, c. 106 s. 67, which is similar in terms to that of section 27, sub-section 1 of our Act, uses the following language. " This deed is, notwithstanding the finding of the jury, a fraudulent transfer of the goods and chattels of the trader, with intent to defeat or delay his creditors. Every person must be taken to intend that which is the necessary consequence of his own act j and if a trader make a deed which necessarily has the effect of defeating or delaying his creditors, he must be taken to have made the deed with that intent." It is immaterial whether the trusts of the deed be for one or more particular creditors, or for all the creditors ; because, by the assignment of his whole property, he becomes utterly insolvent, and if the trust be for one or more particular creditors, it is a fraud upon the rest, and if it be for all the creditors, it is a fraud on the bankrupt laws, which require the bankrupt's, estate to bounder the management of trustees appointed by the Legislature. I admit that there is no express statement that there were any other creditors to be excluded, and that the allegations in the declaration are much less distinct and specific than they might have been; but I think the fact of there being other creditors, may be inferred from the statement that the defendants had applied the proceeds realised under the deed in discharge of the monies secured to them and to the two other creditors, in exclusion of the general body of the creditors of the said bankrupt, and from the prayer that the deed may be declared fraudulent and void as ngainßt the creditors of the said bankrupt. If it be objected that the plaintiff, or someOther creditor whose debt was prior in time to the execution of the deed, might havo petitioned for adjudication and so have obtained control over tho property comprised in tbedeed, without having to resort to the present action, I think the answer is, that under the circumstances, some legal proceedings against the defendants could have been avoided, and not only is the jurisdiction of equity concurrent, but it affords the' only complete remedy in a case like the present, where an account is required of tho proceeds received by the defendants. Upon the whole, therefore> I am of opinion that there is sufficient equity founded on the fraudulent character of the deed and the circumstances under which it was executed, to sustain the plaintiff's claim, nnd that the demurrer must be overruled, with costs. Defendants may have leave to plead on the usual terms as to costs; otherwise, judgment for the plaintiff. There is one fact which was much relied on by counsel for the defendants, upon the motion to dissolve the injunction, of which, however, no use could be made upon the argument of' the demurrer. 1 allude to the alleged suppression, on the part of the plaintiff, in having omitted, both from the declaration and verifying affidavit, tho preliminary recitals of the bill of sale, which would have shewn that it was executed by the bankrupt under presflure of legal proceedings, nnd would thereby have negatived the inference of fraudulent preference which it was contended the Court must draw from the terms of tho deed. There is no doubt that a party moving for an ex-parte injunction should itate the facts of the cuse fully and fairly, and that a wilful suppression or misstatement of facts in any material particular of itself affords ground for dissolving an injunction. Hilton v. Lord Granville, 4 Beavan, 132. In that case Lo.'d Langdale, M. R., expressed an opinion that had he known the facts when granting the injunction, it would not have been granted ex-purte. In the present case I don't think that the knowledge of the recitals in the deed would hare affected my decision, and it appears to me, for the reasons already set forth, that the plaintiff's rights might be seriously endangered were I to dissolve the injunction. I must therefore refuse the motion, with costs.

Mr Garrick applied for ten days' time to consider whether or not his clients would plead on the usual terms.

His Honor acceded to the application,