AN INVERCARGILL BANKRUPTCY.

Otago Witness, Issue 2894, 1 September 1909, Page 33

AN INVERCARGILL BANKRUPTCY.

SUPREME COURT JUDGMENT. The following is his Honor Mr Justice Wiiliams's judgment in the matter of the bankruptcy of Thomas Leslie Walton:— It is only if the execution of the sale note and the sale to Mrs M'Natty was an act of bankruptcy by Walton that the sale to Mrs M'Narry can be set aside. The sale was a genuine sale for valuable and sufficient consideration to a person who had no notice of anything- wrong; 'It is' clear that M'Kay Bros, were not agents or trustees for Mrs M'Natty. It cannot- be said that the execution of the sale note or the sale was an act of bankruptcy, although it may have included practically the whole of Walton's assets (see Baxter, v. Pritehard, lA. and E., 456)". The^notice t>f motion was based mainly on tlie ground that' the execution of the sale note was an act of bankruptcy. If, however, Walton committed an act of bankruptcy it was not the selling of the property to Mrs M'Natty, but the order for distribution or the improper distribution of the proceeds- of the sals which would constitute such an act. If Walton has committed an act of bankruptcy it is because, >'n contravention of subsection (b) of section 26 of the Bankruptcy Act, he has made a fraudulent conveyance, gift, delivery, or transfer of his property or some part thereof. The casa of in re Spackman, ex parte Foley (24 Q.8.D.. 728), shows that section (a) of section 26 does not apply, and subsection (c) does not apply, as it was stated by counsel at the hearing that fraudulent preference was not claimed against anybody. No doubt a creditor was in fact preferred, but the evidence did not show ttoat such preference was fraudulent within the m.aningof section 79 of the Bankruptcy Act. Three hundred pound was received by Messrs M'Kay from Mrs M'Natty. Of this, £178 14s wa3 paid to Me Kingsland, jun., by Messrs M'Kay by direction of Walton, it is undisputed that when Walton bought the business originally he had borrowed £395 from Kingsland, and that £178 14s remained due to Kingsland in respect of the balance due on this loan. Walton, who has no object in stating what is untrue in this respect, says that; when ttte money' was leut he gave Kingslaud an undertaking to • give security over the shop, etc., and over his wife's property, signed by himself and his wife. Meek, who acted as Kingsrand's agent when the< loan was effected, says that there ■was a document so signed >wllich he received" from "Walton and handed to Mr Kingsland, but which , cannot' now be found He says : " The document said, that iri consideration of the advance made they would undertake, when called on, to give a bill of sale over the plant and stock-in-trade that had been bought, and the goodwill of the lease." Meek says that fie would not have allowed the sale unless the amount due to Kingsland had been ordered to be paid out of the proceeds. The probabilities are all in favour of the truth of the evidence given by Walton and by Meek as to the existence of this undertaking, as it is exceedingly unlikely that the money would have been advanced to complete the purchase unless the property purchased hacl been part of the security for the advance. If Walton had given a bill of sale to Kingsland over the property in nur&uance of his undertaking it could not nave been impeached by the assignee as being an act of bankruptcy (Harris v. Rickett, 28 L.J., Ex., 197). Kingsland had in effo?t an equitable charge on the property, and he had a right to insist that if the property were sold his clairr-. should he paid out of the proceeds. Nor would his direction to pay or the payment of the claim be an act of bankruptcy on Walton's part. Wa3, then, the disposition of the balance of £121 5s of the £300 an act of bankruptcy. -Of this £121 6s, £35 was paid to the bankrupt himself, and £15 was charged by M'Kay Bros, for a commission on the sale As there was a genuine sale through M'Kay Bros, to Mn M'Natty they would be entitled to commission on thft sale, and they would certainly be justified in paying to the bankrupt himself any balance in their hands. The wrong, if any, on the part of the bankrupt or on the part, of M'Kay Bros was in the disposition of the balance after deducting the £35 and tho £15 from £121 6s— namely, £71 6s. That sum, with the exception of £10 paid to Meek, was retained by M'Kay Bros, in satisfaction of a debt previously <Jue to them by Walton. Does then tie ! direction by Walton that iM'Kay Bros. | should, retain their debt out of the pro- j ceeds of th>e sale, and the subsequent re- J tsniion oi it in pursuance of such direc- j tion, constitute an act of bankruptcy on the )

part of Wa&toir ac- beiny fraudulent trans* fe,.' of a part of his property Hisf property •thsn consisted of the amount thus retained, of the- £35 be received in cash, aiid of about £15 worth of boot debts. I think also the furniture, which -belonged originally to has wife, tnxjst be taken into account as being part of his available ■ assets.^ He dealt with it as hie <>wn, aiMj directed M'Koay Bros., to sell it, whrob>-Btej' did -later^. and, by his directions-paid - €h< ' proceeds to' Messrs Rattray and "SJistf- . donald. He claims the proceeds (£Bl 9e 6d) as his^'OWD in has statement of assets filed in his bankruptcy. Waltop's liabilities were considerably "in 'excess of these assets. I£ Walton had amply put the property in M 'Kay's bands for sale, with a direction to satisfy Kongslamd's claim out of it, -.and had said nothing as to M,'Kay Bros, retaining -their, \febfc out of it; the£& can be no doubt M'Kay Bros., 'as againefe Walton, would have been entitled to retain it! The direati^in to retain, gave no right .to M'Eay", ]o»^>4hAfe -they^wcgiild not have had without ' its. ■ The posh^oft; then is -' that . Walton, being pressed ' £©r paymen^ by -'M'Kay Bros, for- a-- debt-" owing to them, pot - his property into their nandj^ for sale,- -and .authorised them to - receive the purchase money, knowing- they would retail their, own .debt oufc of* i*, WaHbn beidg then uttable, ' to 'the 'knoW ledge of M'Kay Bros., to* pay all bis debts apa^ft. from, the ixnded property ..which, ho alleged belonged to hie wife, and to be available 'foe; his creditors. Jf the result of the retention had "been to.'twaisf^r to;31'Kay Bros, substantially the whole of Walton's assets the case would have been . ~ different. It left him, however, with assefcsr ooni|idj?irably exoeed'sng .ixi r «tv» the retamed.'" 'Ir? /such /^olxQttB^mee^' HMfee&~ the payment can be impeached as a fraudulent 'preference and as an act' of bank* ruptcy as being -a. fraudulent- preference, the creditor is entitled to retain the money 1 against the official assignee in a subse-quent--bankruptcy. Fraudulent preference was -not relied on, and was not, in my opindoo, made out. If rooney is claimed by relation back to a prior, aot of bankr ruptcy it must clearly appear that an act of ftankruptcry has been committed upon which a creditor's petition could have been founded, and upon which, the court would have' adjudicated, the debtor bankrupt. I* must also be shown, either that the money was received after the act of bankruptcy or that the payment of the money itself was an act of bankruptcy. In the present . case I am not satisfied that a prior act of bankruptcy by Walton has been proved. Motion dismissed, with costs against *h*. estate.