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SMITH

v.

CANNAN.

[ *38 ]

[39]

away no part of his stock in trade; and in fact the business of the Bank went on as before.

(PARKE, B.: The question raised on this point is, What is the definition of the transfer of the whole, or nearly the whole, of a trader's goods which constitutes an act of bankruptcy? In the present case the conveyance was not fraudulent in fact; the trade was not stopped; nor were the trade creditors delayed. If, therefore, it is an essential ingredient in the definition of such an act of bankruptcy that the conveyance should be such as necessarily to have the effect of stopping the trade, the plaintiff in error is entitled to succeed. The words of stat. 12 & 13 Vict. c. 106, s. 67 (1), which do not in this respect differ from those of the former Bankrupt Acts, are, “That if any trader liable to become bankrupt" "make or cause to be made," "any fraudulent grant or conveyance of any of his lands, tenements, goods, or chattels," every such trader making such a deed, "with intent to defeat or delay his creditors, shall be deemed to have thereby committed an act of bankruptcy." Do you say that creditors in that enactment means trade creditors ?) The assignment of so much of a trader's effects as disables him from carrying on his trade, though not fraudulent in the proper sense of the word, is held to be fraudulent within the meaning of the bankrupt laws. But the cases are confined to assignments disabling the trader from carrying on his trade. [He cited Compton v. Bedford (2), Law v. Skinner (3), Baxter v. Pritchard (+), Carr v. Burdiss (5), Wedge v. Newlyn (6) and Siebert v. Spooner (7).] There is a further point in the present case. The assignment is by way of security only; and there is an express resulting trust for the benefit of Garnham. And, as the surplus is here substantial, amounting to two-thirds of the value, this cannot be taken as an assignment of all the trader's effects. It is true that the equitable interest could not be taken in execution under a fi. fa. : Scott v. Scholey (8); but a creditor could take it in equity: Greenwood v. Churchill (9). Again Smith, to whom the security was given, was ignorant that Garnham was a trader.

(PARKE, B.: If the transaction is
(1) See now Bankruptcy Act, 1883
(46 & 47 Vict. c. 52), s. 4 (1) (b).—A. C.
(2) 1 W. Bl. 362.

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itself an act of bankruptcy, it is
(5) 1 Cr. M. & R. 443, 447.
(6) 4 B. & Ad. 831.

(7) 46 R. R. 471 (1 M. & W. 714).
(8) 9 R. R. 487 (8 East, 467).
(9) 1 My. & K. 546.

not protected, though there is no notice of the act of bankruptcy *to those claiming under it.)

In Lindon v. Sharp (1) it was considered material to show that the transferee had notice of the facts making the transfer an act of bankruptcy. It is pointed out in the judgment (2).

(CRESSWELL, J.: In Hall v. Wallace (3) the defendant took the goods of a trader in execution. He bona fide believed that he was acting hostilely to the trader; but it appeared that he was induced to issue the execution by a person acting at the secret request of the trader. It was held that this was a procuring by the trader that his goods should be taken in execution, and an act of bankruptcy ; and that the defendant, though innocent and ignorant, was not protected.)

Byles, Serjt., was desired by the COURT to confine himself to
the questions whether the reservation of the shares, and
the existence of a substantial surplus beyond the amount
secured, prevented the assignment from being an act of
bankruptcy:

The question is as to the construction of stat. 12 & 13 Vict. c. 106, s. 67 (4). The words of the enactment do not materially differ from those of the former Bankrupt Acts. And the question is, whether this deed, conveying all the trader's property except 35l., was not a deed necessarily defeating or delaying the creditors. If so, the trader must be taken to have intended the necessary consequence of his own act. There is nothing in the words of the Act to confine it to an intent to defeat or delay the trade creditors. In fact the Bank creditors are delayed and defeated by the removal of a shareholder's general property: for they *could, by a circuitous process, procure satisfaction out of that general property, after the property of the Bank was exhausted. The trade in this case was, indeed, not stopped; and, if the words of the Act were "with intent to stop his trade," that would be important. But stopping trade is no act of bankruptcy: Young v. Waud (5). In Baxter v. Pritchard (6) the sale of the whole stock in trade for ready money must have stopped the trade.

(POLLOCK, C. B.: A solvent trader, leaving off business, disposes

(1) 6 Man, & G. 895.

(2) 6 Man. & G. 906. (3) 7 M. & W. 353.

(4) Bankruptcy Act, 1883 (46 & 47

R.R.-VOL. XV.

Vict. c. 52), s. 4 (1) (b).

(5) 8 Ex. 221.

(6) 40 R. R. 335 (1 Ad. & El. 456).

27

SMITH

t.

CANNAN.

[ 40 ]

[ *41 ]

SMITH

v.

CANNAN.

[*42]

of his whole stock with the express intent to stop his trade: but no one would say that was an act of bankruptcy.)

The language used in the cases cited may be explained by reference to the particular facts: in all of those cases the conveyance was such that it did in fact stop the trade; and indeed it is seldom that a conveyance of nearly all a trader's property can fail to produce that effect. Then as to the effect of the resulting trust of the surplus. In many of the cases, in which a conveyance has been held an act of bankruptcy, the conveyance was by way of security and in all pledges, even if there is no express resulting trust, there is an implied one. In Newton v. Chantler (1) and in Porter v. Walker (2) there was an express trust of the surplus.

(CRESSWELL, J.: But do you find any case in which there was a substantial surplus? I do not recollect any in which the effect of that has been discussed.)

In Graham v. Chapman (3) the conveyance was of stock in trade to the value of 1,200l. to 1,500l., by way of security for 4391. 18s.

(JERVIS, Ch. J.: The facts seem to have raised *the point in that case; but I think the point was not argued.)

Worlledge, in reply:

In Graham v. Chapman (3) the point was not brought to the notice of the Court.

66

(CRESSWELL, J.: I see, however, that it is noticed in the judgment; it is said that it was contended that the deed necessarily delayed creditors, even with respect to the balance after the defendant had been paid, the trader's equitable interest not being seizable under a fieri facias." My brother Byles therefore is justified in quoting the case as an authority for his positions.)

JERVIS, Ch. J.:

I am of opinion that the ruling which is stated on this bill of exceptions is correct, and consequently that the judgment should be affirmed. The points made were disposed of in the course of the argument, with the exception of two. Both those points arise on the one question, whether there was any evidence to be left to (1) 7 East, 138. (3) 12 C. B. 85; 21 L. J. C. P. 173; (2) 1 Man. & G. 686. see 92 R. R. 632,

the jury that the transfer was an act of bankruptcy. For, if there was any such evidence, it must be taken that such evidence was property left to the jury, and that they have found that this was a deed made by the trader with intent to defeat or delay his creditors. The facts are that Garnham, being a trader, conveyed all his property with the exception of two shares of little value. Had the case stopped there, that would clearly have been evidence on which. the jury might find that he intended to delay his creditors. Indeed I am inclined to think that, as the delay of his *creditors was almost a necessary consequence of the deed, and a man must be taken to intend the necessary consequences of his acts, it was scarcely a question to be left to the jury. Then does the reservation of these shares make any difference? I think it does not. It is conceded that it makes no difference to the general creditors of Garnham; but it is contended, and on the facts possibly correctly, that the trade creditors of Garnham, being all creditors of the Bank, were neither in fact delayed or defeated, nor were in any jeopardy in consequence of the transfer, which could not have the effect of stopping his trade as a banker. But we must construe the Bankrupt Acts, like all others, in the ordinary sense of the words. When we find that the Legislature says a deed shall be an act of bankruptcy, if made by a trader "with intent to defeat or delay his creditors," not saying "with intent to stop his trade," or "to defeat or delay his trade creditors," we must say that, even if all the trade creditors were amply secured, so that they could not be defeated or delayed, a deed intended to defeat or delay his other creditors is within the enactment. It is very true that, if the language used in the earlier cases is taken without reference to the facts under discussion in the Court when that language was used, it would afford ground for saying that a judicial interpretation had been put upon those words confining them to deeds of which the effect was to stop the trade: but in all these cases the facts were such that the trade was stopped, and the minds of the Judges were directed to that effect only. If then we take the expressions used with reference to the facts concerning which they were used, the effect is not to controul the larger terms of the Act, which is unambiguous in itself. I therefore think that the word *" creditors" embraces the general creditors, and that a conveyance delaying the general creditors, even though all the stock in trade is excepted, and the trade creditors are not delayed, is an act of bankruptcy. There are in this case the additional facts, that the property is

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conveyed by way of security, and exceeds the value of the liabilities for which it is pledged by two thirds; and that there is an express trust of the surplus for the benefit of Garnham. I think these facts make no difference. The whole property is conveyed and put out of the immediate reach of the trader and of his creditors: the fact that there is a substantial surplus may prevent the deed from ultimately defeating the creditors; but it does delay them; for they are deprived of the power of taking that surplus under a fieri facias. In equity, it is true, the debtor's interest in the surplus may be taken; but I think the real test is, Has the trader by the deed put his property out of his controul so as to deprive himself of the present power to satisfy his creditors, as but for the deed he might do?

POLLOCK, C. B.:

I am of the same opinion. The difficulty arises from the fact that Garnham's property which he held as a farmer, a character in which he was not liable to the bankrupt laws, bears so large a proportion to the shares which made him a trader. Perhaps it is hard that he should be liable to the bankrupt laws on such a trading; but there can be no distinction made between one trader and another. Now there is no doubt that, if a trader made an assignment of part of his private property, with the actual fraudulent intent to delay a particular creditor, whether that creditor was a trade creditor or not, it would be an act of bankruptcy. *All the trader's property is equally liable to be taken by the assignees. The fact therefore that this deed necessarily delayed the general creditors, was evidence to go to the jury that it was an act of bankruptcy.

PARKE, B.:

I am of the same opinion. The only question is, whether there can be such a complete assignment of the trader's property as necessarily to delay his creditors, when the assignment does not include his trade effects. There can be no doubt that, when the whole of the trader's property passes, that is evidenes that the assignment is an act of bankruptcy. I am clearly of opinion that the exception in this case makes no difference. The supposition that it does is founded on a misapprehension of the reasons given by the Judges in the older cases, founded on expressions used by them with reference to the particular circumstances under discussion in

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