1907. the principle had been well established as Lord Ellenborough H. C. or A. recognized. He said in Crosby v. Crouch (1), " Strictly, only the acts of a trader subsequent to his bankruptcy are void. Pre- BANK OF cedent acts supposed to be in contemplation of bankruptcy have AUSTRALASIA likewise been invalidated; but this is an excrescence upon the bankrupt laws." The subsequent history of the bankruptcy law shows a gradual extension by the legislature of the nature of the obligations which could be proved in bankruptcy, participate in the distribution of the bankrupt's property, and be released by his discharge. The contemplation of bankruptcy" was the dominant idea; and this, whether in the later form of "view of preferring" or the actual effect as in sec. 108, always appears to bring together the debts which the debtor is unable to pay, and the persons to whom they are owing, in relation to the ultimate result of the bankruptcy law upon the indebtedness. These considerations all, in my opinion, conclude the law in favor of the respondent's contention on this point. In the result, the two sums of £700 and £968 11s. 11d. ought for this purpose to be included in the debts of Robertson on 8th July, and they, independent of Phillipson's costs, establish his insolvency on that date. It then becomes necessary to consider whether the trustee has proved that the securities were not executed "for a reasonable and sufficient consideration given at the time of making or giving the same." The consideration was £937 7s. 6d., actually given at the time--because the agreement “and advance of the 7th July" and the consequent signing of the documents on the 8th were all one transaction and may justly be regarded as contemporaneousand £954 18s. previous overdraft, and an indefinite arrangement to make current advances which without any breach of contract could be and has terminated shortly afterwards. What is meant by "reasonable and sufficient consideration?" Can it be said as was argued by Mr. Feez that it merely means "reasonable and sufficient" as between a creditor and a debtor, who hopes and expects thereby to re-establish his solvency, and that " sufficient " means of sufficient value to the debtor, or, so to speak, worth the (1) 2 Camp., 166, at p. 168. v. HALL. Isaacs J. H. C. OF A. sacrifice, in the circumstances in which he is placed? I do not 1907. BANK OF v. HALL. Isaacs J. feel able to accept that definition. The object of the section must be borne in mind. As already indicated, it was not enacted for AUSTRALASIA the debtor's protection, for he, like every other man of sound mind and full age, may be left to make his own bargains, nor to enable him to run risks with property already insufficient to meet his liabilities. It was designed for the protection of the general body of his creditors once he is in fact insolvent. It was recognized by the legislature that such a man ought not to alter the condition of his assets so far as either to appreciably lessen them in value or to render them more difficult to satisfy his creditors' claims. Reading the words "reasonable and sufficient" with this object in view, I think they mean what an honest and prudent man in the position of an insolvent debtor, anxious to retrieve his position if possible, and yet careful not to lessen his present means of discharging his obligations in any way, would think a reasonable and sufficient consideration. In other words "sufficient means of substantially equal value, and "reasonable" means substantially as available for realization. The form of his property may be changed, but he may not materially diminish its capacity to satisfy his creditors' just demands. The section was intended to absolutely prevent one creditor obtaining more than his just and proportionate share of an insolvent debtor's property, whether by design or accident; the result of the transaction, instead of the contemplation, intention or purpose of the debtor being the test. If, then, the result of the transaction be substituted for the debtor's contemplation of bankrutcy, the case of Linton v. Bartlett (1) is much in point. There a bankrupt had given a preference to a creditor, and the question was whether it was an act of bankruptcy. The Court said:"The deed and the transaction may have been very fair as between the parties; but in all these cases the object to be attended to is, quo animo the transaction is done. Now the single question is, whether a man shall be allowed to commit a fraud upon the whole system of the laws concerning bankrupts, by giving a preference to one creditor in prejudice to the rest? Clearly he shall not.” (1) 1 Cowp., 120. 1907. Having regard therefore to the result of the transaction, it is H. C. OF A. not enough to say that the bargain was very fair as between the parties. The Act, in such circumstances as here exist, stamps it as a fraud. That is sufficient without more to avoid the securities, and it is not actually necessary to deal with the further questions of law raised by the respondent. As to one of them, however, that of good faith under sec. 109, it is desirable to state my views. The burden of proving good faith by the section itself is expressly placed upon the person supporting the validity of the transaction. I have come to the conclusion that the evidence does not support the finding of the learned Judge that the securities were take in good faith. I do not refer to good faith as a matter of morality but as within the meaning of sec. 109. James L.J. in In re Tate (1), after quoting from Butcher v. Stead (2), said of a person who had received money from a bankrupt:The person receiving the money must show that he took it in good faith, and that he did not know that the person paying the money was doing anything injurious to his other creditors." BANK OF AUSTRALASIA In this case the bank knew as much of Robertson's affairs as he did, and therefore knew that he was sued by Phillipson upon a claim which, if substantiated, would leave Robertson unable to meet his liabilities. The bank, in effect, threw all the risk upon the other creditors, securing to itself a preference in case of Robertson's insolvency. In these circumstances the words of Lord Hobhouse in delivering the judgment of the Privy Council in National Bank of Australasia v. Morris (3) apply with great force :-"Their Lordships conceive that if the creditor who receives payment has knowledge of circumstances from which ordinary men of business would conclude that the debtor is unable to meet his liabilities, he knows, within the meaning of the Act, that the debtor is insolvent." The Act there referred to was 25 Vict. No. 8 of New South Wales, and sec. 2 of that Act provided that certain payments before sequestration to a creditor should be protected, if inter alia the creditor did not know at v. HALL. Isaacs J. (1) 35 L.T., 531, at p. 532. H. C. OF A. the time of payment that the debtor was insolvent or would by the payment be rendered insolvent. 1907. BANK OF AUSTRALASIA V. HALL. Isaacs J. Taking this view of the facts and the law, I have no doubt the securities are invalidated by force of sec. 109 as well as sec. 108. The ground upon which the bills of sale were attacked under the Bills of Sales Act is one which relates to the construction of the particular documents rather than of the Act itself, and therefore I do not find it necessary in this case to enter upon its consideration. In my opinion the appeal must be dismissed. HIGGINS J. This is a case in which the learned Judge below has reluctantly found himself compelled, according to a certain view of the Queensland Insolvency Act of 1874, to treat an honest transaction as fraudulent. He does not doubt "in the smallest degree, the bona fides of the bank manager in requiring immediate security." It is true that Phillipson's action for either damages or rescission of a contract was pending against the debtor; but His Honor is satisfied that the bank manager "had not the slightest notion that the defendant in that action would not be successful, The defendant told him (and truly) that he was advised by his counsel, after the evidence on commission had been taken, that he had a good case. The action was one in which fraud was alleged against the defendant. Well, he had known the defendant in the action for a considerable time, and apparently had every respect and esteem for him as a man of high character, and not likely to be a man who would be guilty of fraud." The learned Judge expressly finds also:-“I do not think that Robertson had the slightest idea, in giving the security, of preferring the bank "; and so promising was the defendant's bank account that the bank was willing and anxious to keep him as a customer, and not let his account go elsewhere. It was a healthy account of a going business. The question is, does the law of Queensland compel the Court to say, notwithstanding such findings, that Robertson fraudulently preferred the bank. The trustee in the insolvency mainly relies on sec. 108 of the Insolvency Act of 1874. To succeed under that section, he has to show (a) that Robertson was, at the time of giving the 1907. BANK OF v. HALL. Higgins J. securities, "unable to pay his debts as they became due out of his H. C. OF A. own moneys"; and (b) that the securities were not given " for a reasonable and sufficient consideration given at the time." The Judge has found, as to (a), that Robertson had on 8th July, the date AUSTRALASIA of the securities, credit which would have enabled him to pay his debts if and when they should be demanded; and that he had, apart from other assets, good book debts-book debts such that he could have got the money from his debtors if he had asked for it-exceeding the amount of his then existing engagements. "But still," His Honour says, "it appears to me that the Act requires, and I am bound to hold, that he must have moneys of his own, in his actual possession or at call, to pay his debts as they become due "; and adds, " technically, it appears to me that he was insolvent, and I have reluctantly come to the conclusion that I must answer the first question in the affirmative-that Mr. Robertson, when he gave the securities, was not able to pay his debts as they became due from his own moneys and was insolvent." If this view, that only moneys in his actual possession or at call are to be considered in applying the words of sec. 108, "unable to pay his debts as they become due out of his own moneys," is correct, it will follow that a Rothschild or a Rockefeller will often be liable to be treated as coming within the words, even if his debts are a few thousands, and his assets and resources many millions. On question (b) also the learned Judge finds against the bank, following in this, not his own view as to the reasonableness and sufficiency of the consideration as a matter of business, but what he conceives to have been treated as the effect of sec. 108. The debtor, a colliery proprietor, had £954 18s. overdraft at his bank on 7th July. This was the day for paying the June wages to the employés at the colliery, £937; and the bank manager consented to advance the wages on getting security, covering both debts, over assets valued, on a mercantile basis (not a banker's basis), at £4,800. It is said that the £937 was not a "reasonable and sufficient consideration given at the time." These words are treated, in the argument for the trustee, as if they meant that the amount of the consideration given at the time must be equal, or nearly equal, to the amount secured. The |