Wellington Independent "NOTHING EXTENUATE; NOR SET DOWN AUGHT IN MALILCE" SATURDAY, 18th APRIL, 1868.

Wellington Independent, Volume XXII, Issue 2669, 18 April 1868, Page 4

Wellington Independent "NOTHING EXTENUATE; NOR SET DOWN AUGHT IN MALILCE" SATURDAY, 18th APRIL, 1868.

That a trader should be able to mortgage what does not belong to him, is a legal doctrine of modern growth, which has been productive of very serious evils. Yet, under the existing law relative to bills of sale, this can be done with comparative facility, and almost absolute secresy. This stale of aftairs .has long been a sub- ! ject of complaint in New Zealand, and | some time ago the matter was discussed , in the Canterbury Chamber of Commerce, and a very able report on it brought for- I ward.. As a general rule, the reports of i I bodies constituted like Chambers of Com- i mcrce, are not of much value on subjects I involving complicated questions of law ; but in this instance, competent legal assistance was obtained, and the report is therefore a very clear and comprehensive review of the whole subject. We shall j therefore givo a brief resume of its contents, at the Eame tiuio pointing out the few alterations which have been made in the law relative to bills of sale, by the I New Zealand Bankruptcy Act of last j session. At common law, all persons can pass their property in goods, either by | delivery, or by deed, without delivery. It is, however, obvious, that for traders to dispose by deed of the property in their stock-in-trade, while still retaining the ostensible control of it for trade purposes, affords great facilities for fraud, and to prevent this an act was passed in England which rondered void, as against creditors, deeds executed with intent to defraud, and made the parties accepting them liable to penalty. This enactment was, however, defective in limiting the right to proceed, to parties who in a legal sense were directly aggrieved, and in requiring it to be decided in each case upon view of all the circumstances, whether the debtor when he executed the deed really intended a fraud. The necessity of proving fraud was got rid of by the English Bankruptcy Act of G George IV., cap. G, by the 72nd section of which was introduced what has since become well known as the law of ' reputed ownership.' The effect of this enactment is to enable tho assignee in bankruptcy to realise for the benefit of the creditors generally property, which in point of fact does not at the time belong to the debtor at all, and which he has disposed of without any imputation of fraud in respect of his so doing. The law proceeds on the principle that any one who has acquired a property in goods, and leaves them in the ostensible control of the person from whom he acquired the property, thereby enables the oilier to maintain a false credit, by which those who deal with him ought not to be prejudiced. "Whenever, therefore, the debtor at the time of his bankruptcy has under his ostensible control, with the consent of tho true owner, goods, which at the time belong to another person, however innocent on both sides tho transaction may be, it has been tho law in England since the act of George IV., that the assignee in bankruptcy "can sell [ the goods for the benefit of the creditors generally. It is only now that this important principle forms part of the law of New Zealand, the 145th section of the recent Bankruptcy Act being taken from the section of the English Act which refers to reputed ownership. That section of the New Zealand Act, provides that if ihc bankrupt at the lane of his becoming insolvent had in his possession, with the consent of the real owner, any goods of which he was the reputed owner, and which he had tried to dispose of, the court may order the said goods to be sold for the benefit of the creditors under tho bankruptcy. This, however, only availed in case of the debtor's bankruptcy. An execution creditor could not seize the goods, the actual ownership not being in the debtor. Further legislation has however, materially modified this. By tho Bills of Sale Act, ISO7, passed last session, it is required that a complete copy of every bill of sale be filed in the Supreme Court for public inspection within ten days of the execution by the debtor, together with an affidavit by the attesting witness verifying the execution. Failing compliance with the Act, the deed is still good as between tho parties to it ; but as against tho trustee in bankruptcy, or under a creditor's deed ; and also as against an execution creditor, the deed is void to all intents and purposes in respect of goods which, after ten days from its execution, lire in the possession, or apparent possession of the debtor. We do not, however, think that theso provisions relative to the registration of bills of ealc, arc effective to prevent unfair preferences being given by an insolvent, or to render it impossible for a dishonest trader to make away with his properly. So far as giving information to tho whole of a man's creditors, that he has transferred a portion of his property by a bill of sale, tho registration of the deed is practically of little use. Creditors cannot always be visiting the Supremo Court to ascertain whether any of their debtors have made away with their properly in this manner, and in practice, the knowledge that a bill of sale has actually been registered, comes too late to be of ; any use to the person whose security for • payment has thus been vitiated. The j registration of the deed is not sufficient ; | '. it is necessary, besides, that the fact of j ■ its having taken place should be published ; in the Gazette. If every bill of sale"given i were published in the Gazette, with the j i name of the person giving it, as well as the i holder, and the amount which the deed <

covered, then creditors would obtain proper information as to what their debtors were doing with the goods which had been supplied to them, and could take such measures as the circumstances rendered advisable. At present, it is quite possible for a trader to buy stock on ordinary credit, which immediately afterwards shall be swept oft' by another creditor on a previous security. On more than one occasion this has been done in Wellington, aud the great body of tho creditors of the trader doing it, have had to submit to see one person paid in full, while they either received a nominal dividend or none at all. A partialreinedy for this evil is found in England and Scotland, in the existence of Trade Protection Societies, which issue weekly circulars to members, containing a list of all the bills of sale registered, with the jinnies of the parties, the amount of the bills, and other particulars given at length. As New Zealand is divided into provinces, each of which has a commercial centre, and as mail communication only exists at comparatively long intervals, this plan might not work well here. But if the registration of each bill of sale granted throughout the colony, were published in the General Government Gazette, tho newspapers of each province could copy the list, and thus extensive publicity would be attained and many frauds prevented. The new Bankruptcy Act, so far as it goes, does to a certain extent prevent bills of sale continuing to be as good securities, under almost any circumstances, as they have hitherto been. Clause 146 of that act. provides, that any assignment by a person in insolvent circumstances, not being for valuable consideration or on a child's marriage, may be set aside if the insolvent is afterwards adjudged bankrupt. The difficulty, however, would bo to prove " the insolvent circumstances" at the time- the deed was given, and inmost cases, tho creditors of a bankrupt would bo chary of going to law for such a purpose. We are not aware whether the report from which we have quoted, has yot been adopted, but its practical recommendations aro as follows : — " 1. In addition to the registration of bills of sale, as" at present required, notice of evory bill of sale shall forthwith be gazetted. " 2. Bills of sale within tho meaning of the Registration Act shall not be valid as to goods which, at the time of their execution, are not the property of tho person giving them. "3. Bills of sale comprising station property only shall still require registration, and to bo gazetted, but shall be exempted from the 2nd article and also from tho operation of tho 145th clause in the new Bankruptcy Act, which enacts tho law of s reputed ownership.' " After all, theso are only partial remedies for a very serious evil, which nothing short of the abolition of bills of sale as trading securities would completely extinguish. " The legal doctrine," concludes this excellent report, " by virtue of which a trader can mortgage that which does not bolongtohim, is of modern growth ; and your committco think it does deserve consideration, whether in view of the soiious evils which it has mainly tended to produce, tho Legislature might now be urged to declare that this novel expansion of the right of contract should no longer be legal. Let tho trader, like everybody else, mortgage all that he has at the time when he makes his mortgage, and to this right let him for the future be confined."