Life Assurance Policies and the Bankruptcy Law.

Star (Christchurch), Issue 5608, 3 May 1886, Page 3

Life Assurance Policies and the Bankruptcy Law.

THIS DAY.

AN INTERESTING CASE.

A case involving some points of interest in fonuection with life assurance policies, the Act which deals with them and tho Bankruptcy Act, was heard before Mr Beetham, R.M., to-day. The. Official ; Assignee in the estate of G. B. Philp, a ' bankrupt, brought an uction against Mrs M. A. Raphael to recover JE37, being the "surrender value" of a life assurance policy assigned to her by the bankrupt. Mr Stringer appeared for the plaintiff, and Mr Slater for the defendant. It was admitted by both sides that Philp was adjudicated a bankrupt on May 15, 1885 j that at the time he had effected a policy in the Mutual Life Association of Australasia, for .£SOO, he was indebted to Mrs Raphael for J214 money lent, and on August 17 (two days after his bankruptcy) he assigned his interest in the policy to Mrs Raphael. On August 22, defendant surrendered the policy and received J237 as the surrender value. It was this amount that the plaintiff claimed to recover for the benefit of the creditors. Mr Stringer admitted that the policy was one which, under ordinary circumstances, would be protected under section 34 of the Life Assurance Act, 1884. He pointed out ' that Mrs Raphael had received £23 over and above her claim. He contended that the Official Assignee should receive the whole of the JE37, and that Mrs Raphael should prove on the estate for her JEI4. He knew that the Official Assignee had no right to any interest in a life assurance policy which was protected by the Life Assurance Act, but that Act also provided (section G) that no holder of a policy that had been so protected had any right to assign it for three years after the bankruptcy, except in consideration of another policy of equal value. The "policy," as defined by the Act, however, meant any contract of this nature, " so long as such contract remains in force ;" but, the policy havtog been surrendered, the money obtained by Mr 3 Raphael could not be money defendant was entitled to receive under a policy in terms of the Act. If the policy had been untouched, it would have remained in force, notwithstanding the bankruptcy, for

the benefit of Philp's wife and family. But, he submitted, tbat if a man, after paying up under a policy for years, becomes j bankrupt and surrenders his policy in order i that he may obtain money lor himself by i the transaction, he departs from the in- , tention and scope of tho Act, and is not | entitled to its protection, nor to withhold i from the creditors tho money he receives for I the surrender. And, if tho bankrupt himself j cannot hold tlie money, his policy-assignee I (Mrs Raphael) cannot hold it. Moreover, ; an assignment for debt antecedent to the j bankruptcy was void under the Bankruptcy Act ; and when the assurance policy ceased to bo a policy under the Act after its surrender, the money became vested in the Official Assignee. If Mrs Raphael had obtained the money lawfully, ie, had there been no breach of the Life Assurance Act, the money would have belonged to the Official Assignee ; a fortiori, defendant could not say that because the money was obtained unlawfully, the Assignee was not entitled to it. For the defence, Mr H, A. Raphael, solicitor, deposed: I prepared the assignment. The policy was left with me some days before Philp filed— perhaps a week before. After the bankruptcy, the policy waß assigned. When the policy was left for what it was worth, there was also an arrangement made that if he wanted a further advance, Philp should have such advance. I attended the first meeting of creditors. It was resolved Philp should J have £50 worth of furniture, and he was i asked for this policy. He replied, it was left for a loan. Nothing was said then, about the assignment. Mr Latter then looked at the statute to ascertain whether the policy belonged to the bankrupt's estate, and said it did not belong to the creditors. Then it was suggested that as bankrupt had assigned the policy he shonld pay £10 in order to get the £50 worth of furniture. I paid this £10 and got a receipt (produced). Cross-examined: This money was borrowed by Philp several months before the bankruptcy. He did not consult me about filing till two or three days before he did so. When ha deposited the^ policy of insurance with Mrs Raphael, I did not know he was going tv file. I had heard of a deed of arrangement with creditors dated August 1, 1885. I did not know that the deed had been executed. I heard he waa going to do it before I received the policy. I will swear that I had not the deed of arrangement in my ! possession before he left the policy. Philp ■ told me the policy waß worth about £15. 1 1 acted for Philp in his bankruptcy, and did j •not return Mrs Raphael ac a creditor. The policy was deposited for what it was worth. Mr Stringer : On what principle do you | claim to hold the balance of the £37. j Witness : Both the Official Assignee and Philp have claimed the balance, and we ' don't know whom to pay. Moreover my mother claimed to be entitled to hold the money because the policy was assigned for what it was worth ,- if it had been worth less than the amount it waß deposited for we should have had to be content with that. I have been practically repaid the £10 I paid to enable Philp to get his furniture. Mr Slater submitted that, as the act of assigning tho policy was an illegal act on the part of Philp, the assignment was void. The Inaurance Company could still recover the money back from Mrs Raphael, and the policy would be again in force, as tha scope of the Life Assurance Act was that the policy should be kept alive as long as possible for the benefit of the insurer's wife and family. There was a provision in the Act for such a case as Mr Stringer had put, in which a person took out a policy with the intention of defrauding his creditors ; but there was no evidence that such had been the case here. His Wo«6hip did not see that defendant had any equitable right to tbe balance of the £37. If she had not been repaid the £10 she might have had. He thought that defendant was entitled to her £14. That was hi 3 opinion in equity and good conscience ; at the same time he agreed with Mr Stringer that such a transaction as Philp's was an entire departure from the intention and scope of the Life Assurance Act. Judgment (in equity and good conscience, which does not leave the right of appeal) for £23. Each party to pay own costs.