Judicial. THE BANKRUPTCY LAW.

Otago Witness, Issue 1449, 30 August 1879, Page 19

Judicial.

THE BANKRUPTCY LAW.

rmrscKE of s. bowman v. w. bowma.?t. The following decision of bii Honor Judge. Harvey was delivered at the Pameretoa District Conri; on July 29th. Mr Eraser appeared for the plaintiff, and Mr Catomore fo- the defendant Th« case.was tried, befoa ■ ■ 9, jary of four. The fiadinga appear in the judgment. The Judge is mistiaken in utating . t&ftt tne case of Morris v. Tha Alb'on Com- "> p^uy twaa tried before Mr Justice Williams. On<referring to our oolamas of the d»te men- s tif.nsd, we find that Mr Justice Johaston. : tri«d that ewe. 4 ,v, v , „ •• %.] ' ; , u,,j His Honor gave jadgmenb as follows: — ' This action was brought by the trusted of the estate of Sacaael Bowman against Wnj»

Bowman* to recover from him the sum of £6Qpaid^by the bankrupt to defendant on 26ifi March,' 1879;" The r date when the bankrupt filed his declaration of his inability to pay his debts was on 4th April, 1879. The action was brought under section 64 of the "Debtors and Creditors Act, 1876." I laid issues before the jury who tried the case, and upon these issues both parties claim the verdict. It will be seen that the jury have found that the debt was contracted bona fide, but that the bankrupt paid the debt, without compulsion, within three mouths of the date of the bankruptcy, contrary to good faith, and with a view of Riving the defendant a fraudulent preference; but they also say that the defendant received the money in good faith, and without notice of any act of bankruptcy. In order to ascertain the rights of the parties, it will be necessary to examine rather minutely the Bankruptcy law on the question of fraudulent payments. The "Bankrupt Law Consolidation Act, 1849,", seotion 133, of which section 179 of our Bankruptcy Aoti, 1867, is in alljessentials a copy, after stating what payments by a bankrupt shall be held valid, contains a proviso that nothing therein .contained shall be deemed to give any validity to a payment made by any bankrupt being a fraudulent preference of any creditor of the bankrupt. The first case tinder this section. that I find is, Brown and others, assignees of Tanner and another, bankrupts, v. Kempton (19. L.J., N;S. Ex. Ch. .169). It was an action to recover money paid by bankrupt to a creditor, which plaintiffs alleged was a fraudulent preference. The judge directed the jury that if the bankrupt were induced to make the payment by the pressure of defendant the verdict should, be for ' defendants (i c., it did not amount' to' a fraudulent preference) ; secondly, that if they were not influenced by presßure/but acted voluntarily, and with a view to give ,'a preference to defendant in .- the event of > a bankruptcy, the verdict should be for plaintiffs; and -thirdly, that if the payment was made under pressure, and also with a desire to give the creditor a preference in event of bankruptcy, the verdict should be for the defendant. The jury considered there was sufficient evidence of pressure, and found for. the defendant. Held in Ex. Ch. that direction right. In the present case the jury .have distinctly found a fraudulent preference, and- upon 'the ruling above the plaintiff should be entitled to the judgment. In the case of Hale and others, assignees of Beck,; y,,Allnut (25 L J.,N.5., C.P., 267), wherein defendant had obtained by pressure • mortgage from bankrupt, it was held that the deed; wa'a not void, as a fraudulent pro ferenoe^even if made inn contemplation of bankruptcy; it mot being voluntary. Held also that if the dead had been made with a view to give the defendant & fraudulent preference, bankrupt 'being uninfluenced by the pressure, it would), have been void notwithstanding 'jttie' pressure ; but as the pressure exerqissd Home, influence on tbe bankrupt's mind, there 'was no fraudulent prefereuce,' and 'judgment. went for defen«ent.{ In the. case f of BUIb and another assignees of William Smith* v. Charles Smith {34 L.J., ; - NvS., Q.Bi, 68), where bankrupt borrowed- money from' his brother, who had to borrow -it from his banker, promising to pay it back on a certain day, and he lent the •mount to his .bother on a similar promise, bankrupt .was. held justified in. performing this promise. The learned Judge directed the jury, that if the bankrupt, though he was •ware that bankruptcy was unavoidable, and though no application had been made' for payment; >paid < 'this' debt simple in dis ■charge of the obligation- he had entered into to -pay on a given day without any view of giving a fraudulent preference, the payment would not ba a fraudulent preference within the meaning of the bankrupt' law. Verdict for. defendant, aDd rule to set aside same was 4iaohafgedi It also appeared that defendant knew nothing of his brother's circumstances, and acted in a bona fide manner throughout. There are numbers of other cases decided on similar principles 4 . We have now to conaider' if any and what difference has been made by' the 92nd section of the Bankruptcy Act-, , 1869, 32 and 33, Vie, cap., 71» And our Debtors and Creditors Act, 1875, seotion 75. Both these sections are identical, and very different from the sections we have been considering. They state that every payment made by any person unable to pay his 'debts' as they 'become due from Ms own moneys in favour of any creditor with a view of giving such creditor a preference, shall,' if the person become bankrupt within' three months of the payment, be deemed, fraudulent and, void as against trustees; but that this seotion shall not affect the rights of payees in good faith and for valuable consideration. This proviso is directly > applicable" to the case under consideration,- inasmuch as the jury have found ~that the' defendant is a payee of good faith and for valuable consideration ; and. upon the authority , of re'' Crawford expartc Putman, 22 ; W.R., 569,' Butcher 'v. Meldrum, 22 WIE/, 721, '43 IfcJ.i Bankruptcy, 98, and several others wherein the effect of the above proviso.' is particularly discussed. The defendant' should be entitled to a verdict ; but although there haa'been no subsequent legislation onthe point by; thelmperial Parliament, the Colauial Legislature has repealed the Debtors and Creditors Act, 1875, and enacted the Debtors and Creditors Act, 1876, tinder section 64 of which Apt this action is brought. Section 64 of the Act of 1876 is all /exact, copy of section 75, -Act of 1875, with this exception; that the .proviso contained in the 'Utter is carefully omitted in the former, and the payment now stands, bpth- : by "section" 64 and by section 67, "sabsection 1, entirely jiipon the good faith of the debtor. The ; case' "of s Morris, trustee in estate of John Kuhtze, v. Albion Brewing Company,- tried »io "Duucdin, before hiß Honor Mrf Justice" Williams, oh 15feh April, 1878,- reported in - the Otago Daily Times of 16th April,- 1878,, was decided >n favour of defendant, upon precisely similar grounds to the case of Bills v. Smith, before referred to, and the question' of the good faith of the defendant was never either questioned or interred to, his .Honor leaving it to the jury to.' say whether the bankrupt's intention was to defraud his creditors, or whether they might fyirly come to the conclusion that his intention was a lona fids intention not to do what was detrimental to his creditors, but to carry on big buaineai with the aiuatauoo of

the defendants. As the jury in this case have negatived any buco. conclusion, judgment must be entered np for plaintiff for £60, together with costs of Court and professional costs.