CHAPTER XXVII. PETITIONING If a debtor, with the requisite intent, deny himself to the holder of a bill on the morning of the day when it is payable, though he pay it the same day, that is an act of bankruptcy (ƒ). A bill of exchange is a chattel, the fraudulent transfer of which was an act of bankruptcy within the 6 Geo. 4, c. 16, s. 3 (g), and within the 12 & 13 Vict. c. 106, s. 67; and a fraudulent transfer of a bill of exchange is also clearly an act of bankruptcy within the Act of 1883 (46 & 47 Vict. c. 52), s. 4 (1) (b). If the creditor after serving a bankruptcy notice on the debtor takes from him a bill for the judgment debt, such bill is a sufficient compliance with the notice to prevent the creditor from founding a petition on the notice during the currency of the bill (h). A bill of exchange of 501. may be a good petitioning creditor's debt, though it be not due, and that against the drawer, though, after the bankruptcy, it be duly presented and paid by the acceptor (i). A bill taken up by the drawer, after the acceptor has committed an act of bankruptcy, but before adjudication, will constitute a good petitioning creditor's debt (k). Interest cannot be reckoned, for this purpose, as part of the debt, unless made payable on the face of the bill (7). Though a bill be for the exact sum of 507., and not due at the time of the act of bankruptcy, the rebate of interest will not make it an insufficient petitioning creditor's debt (m). (f) Colkett v. Freeman, 2 T. R. 59; 1 R. R. 421; and see Bleasby v. Crossley, 2 C. & P. 213. (g) Cumming v. Bailey, 6 Bing. 363; 4 Moo. & P. 36; 31 R. R. 438. (h) In re Mathew, 12 Q. B. D. 506; 1 Morrell, 47. (i) Ex parte Douthat, B. & Ald. 67; Ex parte Raatz, [1897] 2 Q. B. 80; Act of 1883, sect. 6 (1) a. But a bill at maturity must be presented, and due notice given to the drawer, or it will not constitute a good petitioning creditor's debt against him. Cooper v. Machin, 1 Bing. 426; 8 Moo. 536; Ex parte Wolfe, [1896] 1 Q. B. 616, where there was a promise to renew. (k) Ex parte Cyrus, L. R., 5 Ch. App. 177. The release of the bankrupt dates from the order of discharge, and not from (1) Cameron v. Smith. 2 B. & Ald. 305; 20 R. R. 444; In re Burgess, 8 Taunt. 660; 2 Moo. 745; Buck, 412. And though interest is made recoverable as liquidated damages by Code, s. 57 (1) (b), yet the effect of sub-sect. (3) may be to make interest, even when payable on the face of the bill, an uncertain quantity and therefore improper to be reckoned in the debt. On the other hand the effect of the section, as a whole, may be t make interest in all cases prope to be included as a liquidated demand. See Er parte Furber, R King, 17 Ch. D. 191. See also post as to proof of interest, p. 465. (m) Brett v. Lerett, 13 East, 213; 1 Rose, 112. XXVII. Where there is a specific exchange of accommodation CHAPTER acceptances, and before the bills are at maturity one of the parties commits an act of bankruptcy, it has been held that the bankrupt's acceptance is not a sufficient debt to support a commission, until the petitioning creditor has paid his own acceptance (n). The debt must have existed at the date of the act of bankruptcy. Therefore, where an acceptor, for the accommodation of the bankrupt before an act of bankruptcy, paid the amount after an act of bankruptcy, it was held, that this payment, being after an act of bankruptcy, did not support the commission (o). A bill or note which could not be sued on at law (p), or against law proceedings on which equity would enjoin, is not a good petitioning creditor's debt (q). It was at one time doubtful whether, if a bill existing before the act of bankruptcy were indorsed to the petitioning creditor after the act of bankruptcy, the indorsee would be entitled to a bankruptcy commission (r). But it is now clear, that though the debt on which the petition is founded must have existed before the act of bankruptcy, it need not have so existed in the petitioning creditor; the indorsee represents his indorser (s). But it must appear that there was a good petitioning creditor's debt in the petitioner at the time of the petition, and therefore it must be shown that the bill or note was indorsed to the petitioner before he petitioned (t). If, at the time of the act of bankruptcy and at the time of the petition, a bill given to a creditor were outstanding in the hands of an indorsee, neither the original debt due to the creditor, nor the bill, will enable the original creditor to support a petition (u). Prior to the Married Women's (n) Sarratt v. Austin, 4 Taunt. 200; 2 Rose, 112. (0) Ex parte Holding, 1 G. & J.97; see also Er parte Hayward, L. R., 6 Ch. Ap. 546. (p) Richmond v. Heapy, 1 Stark. 202; Buckland v.Newsame, 1 Taunt. 477; 1 Camp. 474. But see now Act of 1883, s. 37. (q) Ex parte Page, 1 G. & J. 100. (r) Er parte Lee, 1 P. Wms. 782. (s) Ex parte Thomas, 1 Atk. 73; Anon., 2 Wils. 135; Bingley v. Maddison, 1 Co. B. L. 32; Glaister v. Hewer, 7 T. R. 498. Before the year 1806, the petitioning creditor's debt must have existed before any act of bankruptcy, on the principle that a man who has committed an act of (t) Rose v. Rowcroft, 4 Camp. 245. (u) Er parte Botten, 1 Mont. & Bl. 412 Er parte Magnus, 11 L. J., Ba..k. 52. XXVII. CHAPTER Property Acts, it was held that when a bill or note was given to the wife dum sola, the husband alone might petition (x). Evidence of the date of a bill. VESTING OF The date appearing on the bill has been held primâ facie evidence that it existed before the act of bankruptcy (7). Assignees producing a bill or note or other written acknowledgment of the bankrupt as evidence of a petitioning creditor's debt must show by extrinsic evidence that the instrument existed before the act of bankruptcy (z). From the date of the drawing or making the date of an indorsement cannot be inferred (a). Immediately on adjudication (b) all the bankrupt's property (c), including bills and notes, but exclusive of trust (r) Er parte Barber, 1 G. & J. 1; M Neilage v. Holloway, 1 B. & Ald. 218. (y) Goodtitle v. Milburn, 2 M. & W. 853; Sinclair v. Baggaley, 4 M. & W. 312; Smith v. Battens, 1 Mood. & R. 341; Taylor v. Kinloch, Stark. 175: Obbard v. Betham, M. & M. 483; Potez v. Glossop, 2 Exch. 195; Daris v. Lowndes, 7 Scott, N. R. 195; Malpas v. Clements, 19 L. J., Q. B. 435; but further evidence may be required, Anderson v. Weston, infra. () Wright v. Lainson, 2 M. & W. 739; 6 Dowl. 146; and see Anderson v. Weston, 6 Bing. N. C. at p. 301; 8 Scott, 583; Fletcher v. Manning, 12 M. & W. 571. (a) Rose v. Rowcroft, 4 Camp. 245; Cowie v. Harris, M. & M. 141. (b) On petition the Court may immediately stay all legal proceedings (Act 1883, ss. 10 (2), 11), and appoint the official receiver an interim receiver, and direct him to take immediate possession of the debtor's property. The next step is the making of the receiving order, under sect. 5, upon the making of which no creditor can sue or have any remedy for any debt provable (sect. 37) in bankruptcy without the sanction of the Court (sect. 9 (1)), though secured creditors may realize or deal with their securities (sect. 9 (2)). The receiving order is gazetted and advertised (sect. 13), and the creditors meet to consider whether composition or arrangement shall be entertained, or whether the debtor should be adjudged bankrupt (sect. 15). The debtor makes his statement of affairs (sect. 16) under pain of being adjudged bankrupt (sect. 16 (3)), and has then four days within which to propound a scheme for composition; he is then publicly examined as to his conduct, dealings, and property, and if no scheme be approved under sect. 3 of Act of 1890, he may, under sect. 20, be adjudged a bankrupt, with the consequences mentioned in the text. (c) "Property" is used in its most extensive sense in the interpretation clause: sect. 168 (which follows the language of sect. 4 of the Act of 1869). And sect. 168 must be read with sect. 44, which specifies certain classes of property, and contains (clause iii.) the important provisions which render goods in the possession, order or disposition of the bankrupt at the commencement of the bankruptcy in his trade or business, by the consent or permission of the true owner, under certain circumstances, divisible as property of the bankrupt among his creditors. See post, p. 476, note (†). XXVII. property (d), and of tools of trade, apparel and bedding, to CHAPTER the value together of 201. (e), becomes divisible among his creditors, and vests in a trustee (f); and the property vests in and passes from trustee to trustee in the proceedings without any conveyance, assignment or transfer whatever (g). The commencement of the trustee's title depends upon Doctrine of the doctrine of relation, which has undergone important relation. changes under the successive Bankruptcy Acts. Under the Act of 1869 (32 & 33 Vict. c. 71), s. 11, the title of the trustee was made to relate back to the act of bankruptcy on which the adjudication was founded. And if there were several acts of bankruptcy, then to the carliest within twelve months before the adjudication; but not to any prior act of bankruptcy, unless the bankrupt were then indebted to a creditor or creditors in a sum sufficient to support a petition for adjudication, and that debt or those debts were still due. And now by the Act of 1883 (46 & 47 Vict. c. 52), s. 43, the title of the trustee has relation back to the committing of the act of bankruptcy on which a receiving order is made; or, if more acts than one have been proved, then to the first of such acts committed within three months next before the presentation of the petition; or, if a receiving order have been made under s. 103, next before the date of that order (Act of 1890, s. 20). DEALINGS: under former Acts. Next, as to protected and void transactions. Convey- PROTECTED ances, contracts and other transactions by the bankrupt, and executions against him, though after an act of bankruptcy, if without notice of it, and more than two months. before the issuing of the fiat, were valid even before the general Bankrupt Act of 1849 (h). Thus, where a bill of exchange was delivered by a bankrupt, with intent to transfer the property, more than two months before the commission issued, though not actually (d) Sect. 44 (1). Where cheques have been paid in to a banker who becomes bankrupt, the test is whether (a) they were paid in to collect and remit, or (b) to use and repay the amount on demand. If (a), then there is a trust and confidence, and the money can be recovered in full; if (b), it is a mere case of banker and customer, and the latter can only prove for dividend. In re Brown, Er parte (e) Id. (2). () That is, the official receiver, by sect. 54, till a trustee is appointed by the creditors or by the Board of Trade, under sect. 21. (g) Sect. 54 (3). (h) See 6 Geo. 4, c. 16, s. 81. CHAPTER XXVII. Under Act of 1869. VOID DEAL- indorsed till within the two months, it was holden to vest in the indorsee, and not in the assignees (i). And all bona fide payments by or to any bankrupt, and all contracts, dealings and transactions with the bankrupt before the filing of a petition for adjudication, without notice of an act of bankruptcy, were protected (k). Purchasers of any property from the bankrupt bonâ fide and for valuable consideration after an act of bankruptcy and with notice thereof, were protected, unless a petition for adjudication of bankruptcy should have been filed within twelve months after such act of bankruptcy (1). The title to property sold under an adjudication of bankruptcy could not be impeached by the bankrupt, or any person claiming under him, unless the bankrupt had commenced proceedings to annul the adjudication within twenty-one days from its advertisement in the "Gazette "(m). By the Act of 1869 (32 & 33 Vict. c. 71), s. 92, all honest payments to a bankrupt for value received, all contracts or dealings with the bankrupt made in good faith and for valuable consideration, before adjudication and without notice of an act of bankruptcy available for adjudication, were protected. On the other hand, if, on behalf of the general creditors, it could be shown that a transaction was fraudulent or contrary to the express provision or policy of the bankruptcy common law. law, it might be set aside either by the common law or by virtue of the specific provisions contravened. under former Acts or at Voluntary settlements. By sect. 47 of the Act of 1883, which reproduces, with some variations, sect. 91 of the Act of 1869, any settle (i) Anon., 1 Camp. 492, n. (k) 12 & 13 Vict. c. 106, s. 133, repealing and re-enacting 2 Vict. c. 11, and 2 & 3 Vict. c. 29. (1) 12 & 13 Vict. c. 106, s. 134; see sect. 86 of 6 Geo. 4, c. 16. (m) 12 & 13 Vict. c. 106, ss. 131 and 233. Further periods were given to him if he were out of the United Kingdom. Sect. 233. Under the Act of 1883, s. 35, and Gen. Rules of 1886 and 1890, r. 130, the time for appealing from an order of adjudication is twenty-one days from the date of the order (subject to enlargement by the Court), and the effect of annulment of the adjudication under that section is that all dispositions of property and payments made or acts done by the official receiver or trustee are valid; but the property of the debtor vests in such person as the Court appoints, or, in default of appointment, reverts to the debtor, on such terms and conditions, if any, as the Court may declare by order. See Bailey v. Johnson, L. R., 7 Ex. at p. 265; per Cockburn, C. J., as to effect of similar provisions in the Act of 1869. |