BANKRUPTCY AFFAIRS

New Zealand Times, Volume XLVII, Issue 10976, 11 August 1921, Page 3

BANKRUPTCY AFFAIRS

INTERESTING POINTS •QUESTION REFEREED TO TUB supreme Court. DECISION GIVEN. Judgment was given yesterday by ,Hr Justice Hosking in the bankruptcy matter respecting the estate of Thomas Williamson Piiggott Hardy, a bankrupt, in re Wright,-Stephenson and Co., Ltd. In this bankruptcy the Deputy Official Assignee, by notice of motion, filed on July 15th last, initiated proceedings to have certain securities given by the bankrupt to Wright, Stephenson and Co., Ltd., set aside and for other relief in Tegard thereto. At the same time he filed a motion for directions by which he asked

(1) Eor a direction that the parties be at liberty to supplement any evidence on affidavit by calling viva voce evidence at the hearing of the main motion. (2) As to what steps, if any, should be taken, pending the determination of the main motion with regard to the proceeds of sale of stock that were sold since the bankruptcy by Messrs Wright, Stephenson and Company, Limited, under their stock security referred to in the main motion, and which proceeds are now in their hands.

(3) As to what steps should be taken with regard to selling the lease in perpetuity referred to in the main motion, , and in particular whether the Official Assignee can legally consent to a- private sale by Messrs Wright, Stephenson and Company, Limited, under power of eale in their security without prejudicing his rights in the event of such security being declared void, and as to. how any proceeds of such sale should be disposed of pending such determination. \ AN ARRANGEMENT. "With regard to the./second part of the Assignee’s motion,” said His Honour, "it appears that by an arrangement which the Official Assignee with the concurrence of Mr Betts, who had been appointed to represent the unsecured creditors, had made with the company, certain stock and implements, the subject of the challenged securities, were sold by the comnany. The company received the proceeds. The Assignee afterwards seems to have doubted whether it was -not his duty to have required, the proceeds to be paid over to him or placed in neutral custody. The company state that the arrangement was that they should hold the proceeds until the validity or otherwise of their securities had been determined, and in this they are borne out by the admission of the Assignee of the correctness of Mr Betts’s statement on the subject contained in tho affidavit of Mr Steel. Counsel for the Assignee stated that under the second part of his motion it was . desired that the court should, if it‘thought fit, make an ordei that the proceeds should be paid over by the company pending the disposal of the question affecting the securities. In regard to this application the company seem to have deemed it necessary *in the motion, which they filed to ask the court for an order in the exact negative of the Official Assignee’s application on this point* and the jurisdiction of the court to accede to the Assignee’s application was questioned. I Ithink that where goods or money in the hands of a third party as to which there as a question whether they are to form port of the bankrupt’s estate are being wasted or are shown to be in jeopardy, the ootirt has jurisdiction to ord'r that the subject matter be placed in medio or that security be otherwise given that it shall be forthcoming when called for. Now, in the present oase, the company are holding the moneys under an ex-] prees arrangement ■with the Assignee, and there is no suggestion that the subject matter is in any respect in peril. "As to the third part of the Assignee’s motion it is difficult to see how the court could give any useful directions as to what steps should be taken with regard to selling the lease. The Act clothes the Assignee with powers and duties for the realisation or the bankrupt’s property, which lie must * follow out subject to any directions given by resolution of the creditors or by the supervisors. » THE REAL QUESTION.

"The real ' question in which both parties are interested is that put by the Assignee, namely, whether he can legally consent to a private sale by the company without prejudice to his proceedings to invalidate the security? The doubt arises upon the terms of section 63, which sets out' the general powers of the Assignee, which are, in the case of selling the property of the bankrupt, apart from what is perishable, to do so by public auction or private tender, and in case of any property offered for sale by auction or tender to sell the same by private contract. These provisions consequently appear to imply that except as to perishable goods there must *be an auction or a calling for tenders before the Assignee may sell privately. The leasehold in question in this case is subject to three mortgages, the third being that to the company which the Assignee seeks to set aside. An the

Assignee has only the equity of redemption to sell it is difficult to see how uny sale hy auction or tender could be satisfactorily effected by him while the third mortgage remains unremoved and the subject of litigation. The' equity could not be estimated, nor until litigation is ended, or some settlement come to, could the company, apart from the provisions of section 102, venture upon selling under their powers in case the mortgage should be found invalid. Meanwhile, by reason of accruing interest on the prior mortgages and other necessary expenditure such as rent, the chances of realising anything out of the property available for the creditors grow less and less daily. These being the circumstances, it appears to me to be a case in which the Assignee might, subject to any directions given by the supervisors or by a general meeting of creditors, use the discretion conferred by section. €4, subsection 2, by making some arrangement with the company under which they, as mortgagees, should be allowed to sell privately.- The court must leave the nature of the arrangement to him, subject to any such last-mentioned directions."

HIS HONOUR’S CONCLUSIONS. "I do not, however, see/’ concluded Ilia Honofir, "that the court has any power to order, as asked, that the Assignee shall refrain from initiating an examination of the company’s intended witnesses, nor more so on the allegation in Mr Steel's affidavit that he is informed the Assignee does intend to examine certain witnesses, three of whom are employees of the company. No order is therefore made on this part of the motion. "The next part of the company's motion is that they be granted additional time for proving their claim until the .motion to set aside has been finally disposed of. This, I think, reasonable, and an extension is granted for fourteen days aftet judgment on that motion has been pronounced. The company further ask that part four of the motion to set aside, via., the claim that the chattel security be declared null and void, be struck out. This is not an order which should be made at this stage, but be left until the motion to set aside is dealt with. If the retention of that claim has become superfluous, as is suggested, it will be in tbe power of the court on dealing with the motion to set aside, and if it 6ees fit, to provide for any costs which the company may necessarily be put to in consequence."