1514 ee ae Reiaice,, HIGH COURT v 34 FCR 280 ye 1 Fo Fett

BRISBANE, consideration given at the time" - Good faith" - Debts, liquidated and

May 1, 2, tingent liabilities - Assets, realizable property, credit - Bills of Sale Act

(Qd.), sec. 4 - True statement of consideration - Secret defeasance.

Isaacs and q Higgins JJ. Where the validity of a conveyance by a debtor to a creditor is qu é under the Insolvency Act 1874 (Qd.), the words in secs, 107 and 108, un

• , to pay his debts as they become due from his own moneys," mean that' ] July 29, 30, debtor must at the time in question have had sufficient cash in hand or b Ang. 1,19. able to obtain, by sale or pledge of his available assets, command of ogee money to satisfy all debts that were anticipated to fall due and Barton, ascertained in the reasonably immediate future. Conner, Telos 3. Held, per Curiam (Higgins J. dissenting). - ' Debts" in the above

include any liabilities that would have been provable in insolvency if debtor had been adjudicated insolvent at the time in question, a

Under sec, 108 the words " reasonable and sufficient consideration" that the debtor shall, in return for the property conveyed or pledged, from the creditor such consideration in money or realizable value as w make up to his estate substantially what the conveyance or pledge has t from it.

Under sec. 109, the words "' in good faith" mean that the creditor té a conveyance or security from the debtor must prove that he took knowing, or being put upon inquiry which would disclose, that the co ance or security taken would or might defeat the claims of other cred

R. on 7th July 1905, being in need of money to pay wages to the his colliery, applied for an advance from the A. Bank, which had

affairs. 'The bank made him an advance of £937, and took a security for an 1907. 'amount comprising that sum and an old overdraft of £954. This, with a ©s - - further advance of about £200 which was contemplated, but not stipulated Pert for, would, it was stated, have been a full advance upon the assets assigned, sp, stated as worth £4,800. At that time R. had other assets, including book - Hatt. debts worth £1,250, and furniture, an office, and small allotments of land, 'worth £350 in all; and there were debts then due of £450 and other debts soon aceruing due of £600, In August a further sum of about £200 would fall due for current wages. Besides these assets R. was conducting a colliery Dusiness at a slight profit, and had a claim against P. for £1,800 as balance of purchase money of a ship, which, however, had since March 1905 heen the subject of an action by P. against R. 'The action resulted in August 1905 in a judgment against R. for the rescission of the sale, the repayment of £700 deposit of purchase money, and the payment of damages and costs ~ amomuting to over £1,500, R. then presented a petition for liquidation.

Held, per Curiam (Higgins J. dissenting), that the security given to the bank was invalid under secs. 108 and 109 of the Insolvency Act 1874 (Qd.) ; that the debtor at the time of giving the security was unable to pay his debts as they became due out of his own moneys, and did not obtain a reasonable __ and sufficient consideration ; and that the bank did not take the security in good faith,

Per Higgins J. : - Vhe word '' debts" in secs. 107 and 108, in the expression "unable to pay his debts as they become due from his own moneys," does not include contingent or other mere liabilities, but means debts in the ordinary 'commercial and legal sense, whether payable presently or in the future.

'The words in sec. 108, requiring for the validity of a dealing before insol- -vency "a reasonable and sufficient consideration given at the time," do not, 'a8 applied to a security given by the insolvent, mean that the present advance

• inust be equal, or nearly equal, or equivalent, or nearly equivalent, in amount to the amount secured. he object of the section was to prevent the favouring of certain creditors at the expense of the others. The test is, was the dealing atrue bargain, each of the parties straining for his own benefit. On the facts, the trustce has not satisfied the burden of proof by showing that on the 7th and 8th July R. was-unable to pay his debts,

Judgment of Real J.: In re Robertson ; Ex parte Hall, 1907 St. R. Qd., 76, affirmed,

'AL from a judgment of the Supreme Court of Queensland.

trustee in insolvency of the estate of James Robertson wed the Insolvency Court to set aside certain securities given the insolvent to the appellant bank as invalidated by sees.

The sections of the Insolvency Act, and the circun under which the debtor gave the securities to the appellant are fully set out in the judgments.

In the Insolvency Court Real J. declared the securities iny holding that the requirement of sec. 108 that the debtor shall } able to pay his debts as they become due "out of his oy moneys" meant that he shall have not merely credit, but mi available in ready cash or at call sufficient to pay the debts when they become payable ; and that the requirement of sec. 108 "reasonable and sufficient consideration" must be given for the security meant that an amount equal to the value of the seeurit must be advanced : In ve Robertson; Ex parte Hall (1). 0 this decision the bank appealed to the High Court. .

The case was twice argued, first at Brisbane before Grigith OJ. Isaacs and Higgins JJ., and afterwards at Sydney before th Full Bench.

Feezand Shand, for the appellants. The giving of the seeurit was not a fraudulent preference under sec. 108 of the Znsolven Act 1874. On that date, 7th July 1905, the debtor had ampk assets to pay his debts "as they became due."

The total property was worth over £7,000; and of this hi pledged £4,800 worth to secure the bank in a charge of £1 and some small further advances; while the debts then oy were £430 and a debt accruing for railage of his coal. Apart from the Kingswear transaction it is clear that the debtor well able to pay his debts at the time of giving the securi which is the only date to which the inquiry as to his ability t pay debts is to be directed. The Kingswear transaction i excluded from any reasonable definition of the word "debts"; it created at most a mere contingent liability to be muleted i damages and costs. No reasonable man, knowing that Rober had a bond fide defence to Phillipson's claim, could on 7th Ju J consider the £2,260 ultimately lost upon the Kingswear action "debt" that would be coming due. "Debt" must mean a pre liquidated claim.

[Isaacs J. - You cannot claim to exclude bills of exchange

missory notes, shortly becoming payable, from the category of s." Phillipson had already, on 22nd March 1905, rescinded tract and claimed his £700 back again.]

e contract was not rescinded till 10th August, when Phillip-

'ived. He claimed in the alternative for unliquidated damages w fraud ; it could not be said that on 7th July he would not for damages. Such an inchoate and indeterminate liability uld not be termed a "debt" on 7th July. Under the English mparnies Act 1860 debts "as they become due" mean debts are actually due at the time: Iu re European Life Asswr- Soviety (1).

debtor is able to pay his debts "out of his own moneys" has such resources that in the ordinary course of business able to make enough profits or raise enough money on to pay the debts when they become payable; he is not

Phillipson's action against the debtor did not disclose any lawful torescind ; furthermore the findings of the jury against the ebtor, and the judgment for rescission, which was bad at law, re not in any way binding on the bank in the present question : p parte Pearse (2); Urquhart v. Macpherson (3); Kerr ow mul, Ind ed., pp. 367-8; Taylor on Evidence, 9th ed., s 1682. Inder sec. 108, "debt" does not include " liabilities," as under he Act of 13 Eliz.¢.5. ©

any ease the Kingswear transaction set up only a contin- liability : Insolvency Act 1874, sec. 140. A " liability" may "debt provable in insolvency" under sec. 140 in common other debts ; but that does not make it a "debt" within the

J. referred to In re Charles (4); Jones v. Thompson Hardy v. Fothergill (6); Ex parte Broadhurst; In re

(5) 27 L.J.Q.B., 234. (6) 13 App. Cas., 351. (7) 2 LJ. Bk., 21.

H.C.or A. "Due" in sec. 108 means " presently payable." A man is 1907. bound by this section to provide for debts that he knows

Bank or accrue due; if it is solvendum in futuro, it must still be debit SURTERLANT, in praesenti ; Ex parte Sturt & Co.; In ve Pearcy (1). Hatt. "Reasonable and sufficient consideration" under sec. 1 satisfied if, at the time and under the circumstances of the trar action, the debtor obtained fair value for what he gave. advance of £950 to meet a pressing liability, and an arrange for further advances, enabling the debtor to safely carry on lucrative business, is ample value for a charge of £1,850; le stone v. Cook (2); Dixon v. Todd (3); In ve Donaldson (4). [Isaacs J. referred to Zn re Colemere (5). Hicarns J. referred to Hx parte Fisher (6).| It is clearly wrong to hold that sec. 108 requires that property hypotheeated must be only the exact value of t advance; the property and the advance need, at most, be re ably proportionate. . (Grireira C.J. - The objection taken is that the £1,850 charge was given, not only for the present advance of £950, but also for the past overdraft of £900.] : But if the debtor had gone to another bank and raised £1,8 upon the securities, thus paying off the overdraft and wages, transaction would be clearly valid ; it can make no difference hi the debtor borrowed from the same bank to which he owed | overdraft; the result is the same. This disposition of prop does not fall within see. 108, but is, of course, liable to be eat by sec. 107 and the Statute of 13 Eliz. ¢. 5, if it was mi order to avoid the consequences of a verdict certain to go agail , the debtor; at that time the verdict in the Kingswear acl was hardly even a probability, and could have been set asi Robertson had not given up the fight and filed his schedule. honest transaction, in which a fair equivalent was obtained the debtor, to enable him to benefit the creditors by carrying good business, should not be brought within the mischief at by sec. 108, if the debtor is made insolvent within six mon

(1) L.R. 13 Eq., 309. (4) 1 Q.L.J., 105. (2) 6 El. & BL, 296, at pp. 309-311. (5) LR. 1 Ch., 128. (3) 1 C.L.R., 320, at p. 324. (6) L.R. 7 Ch., 636.

tlie consequences of an action for tort to which he had a good

¥itH C.J. - The debtor's honest belief that he is bargaining fair equivalent can hardly be made the measure of " sufficient ideration"" under sec. 108, which did away with all these of intention and bona fides, and substituted a test of

e onus is on the trustee to prove that the consideration was ta fair equivalent: Mercer v. Peterson (1); Wace on Bank- , 1904 ed., pp. 22, 252; Kx parte King; In re King (2): wurte Johnson ; Inve Chapman (3) ; Jamaica (Administrator- eval) v. Lascelles, De Mercado & Co.; In ve Rees' Bank- ptey (4); Ex parte Wilkinson; In re Berry (5); Ex parte ster; In re Marsden (6).

109 does not touch this transaction, as Real J. found that.

Macgregor and Graham for the respondent (Macgregor at sbane only.) This legislation in insolvency was framed to eal more stringently with fraudulent preferences. The Queens-

ion in see. 92 of the English Act of 1869 where there had n pressure by the creditor. Sec. 108 was enacted to do away ith the whole question of intention or bona fides, and to sub- for that the test of two facts, ability to pay debts, and ifficiency of consideration. " Preference" in this Act does not mnote any state of mind in the debtor, but merely denotes the +t of giving the creditor an advantage. The phrase "debts as » become due" in sec. LO8 indicates the continuous falling ue of various debts in succession ; and the period contemplated

t be the six months named in the Act within which these etions are liable to impeachment. - It is not necessary to n that a transaction can be impeached if the debtor is ruined

LR, 3 Ex., 104. (5) 22 Ch, D., 788. ce 6. (6) 25 Ch, D., 311.

H.C. or A. by some catastrophe within the six months; the position 6f th as debtor on 7th July discloses sufficient to invalidate the securit Bank or then given to the bank, if the facts then developing are loo rena at in the proper light. The Kingswear liability was always | Hat. provable debt, which ripened into a judgment before insolve The claim for return of £700 was a debt actually due on 7

July, as Phillipson had then elected to reseind the contract sale, and was willing and able to return the ship in the sam

There was total failure of consideration here. The fact th the debtor thinks he can successfully defend a claim properly brought against him, does not make that claim not a " debt." The £700 was immediately recoverable as money had and received, or, at any rate, as an immediate equitable debt money obtained by fraud.

[Feez - This money was rightly treated throughout the case as not so recoverable : Jack v. Kipping (2). é

Isaacs J. - Phillipson had an election to sue in tort damages, or to waive the tort and prove in the insolveney on th contract : Ea parte Read ; In ve Paine (3) ; In re Blackpool Moto Car Co. Ltd.; Hamilton v. Blackpool Motor Car Co. Ltd. (4).\ -

The remedies were interchangeable, but both rights of actio were equally provable in insolvency as arising out of contract. -

The verdict obtained for damages, although for a tort, was "debt provable in insolvency" under sec. 140, which means th same as debt in sec. 108: Ex parte Adamson; In re Collie (3 Insolvency Act 1874 (Qd.), sec. 140, There is no distinction mad in sec. 108 between the various kinds of debts, so long as they v on 7th July liabilities which were provable as debts in the super- vening insolvency : Peat v. Jones (6); In re British Gold Fiel of West Africa (7). The fact that the amount was notasce by judgment before 7th July did not make the Kingswea liability unliquidated, any more than in a case where a judgm has been obtained for such an amount as may be found to be du

(1) 2B. & Ad., 456. (5) 8 Ch. D., 807, at p. 819. (2) 9 Q.B.D. (6) 8 Q.B.D., 147.

| 1 accounts being taken ; the amount was always definite, though yet formally ascertained. The continuous succession indicated they become due" shows that the debts are not to be cal- ed on any particular day. The place of sec. 108 would not equately filled by the Statute 13 Eliz. ¢. 5; the two enact- s treat the matter quite differently ; knowledge, intention, a fides, and all other states of mind are, under sec. 108, quite mmaterial ; the only transactions that are exempted are payments Jide made in the ordinary course of business.

the facts, there were so many debts accruing due from day ) diy, apart from the Kingswear liability, that the debtor was

or can enforce immediate liquidation of ; it cannot include debts or the probability of being able to raise more credit upon his assets: Jn re Washington Diamond Mining Oo. (1). The debtor's position depends on whether he can pay his debts, not m whether a balance-sheet will show a surplus of assets over ities.

he Kingswear was on 7th July the subject of a lawsuit, and been condemned as unseaworthy, and was an eminently ealizable asset; while the coal business was not a paying ern, but always in arrears.

'Reasonable and sufficient consideration" in sec. 108 is an olute bar to giving security to cover an old debt as well as a it advance.

Hiaains J. - Any consideration that is legal and not illusory been treated as "sufficient"; adequacy of consideration

That applies only in the law of contract; whereas the nsol- ey Act treats the word " consideration " in an entirely different Tt aimed to secure the equal distribution of assets among creditors without diminution; hence the consideration ed must under sec. 104 be "a contemporaneous equivalent," "the creditors must lose nothing by the assignment": v. Todd (2).

he transaction is also assailable under secs. 107 and 109, (1893) 3 Ch., 95. (2) 1 C.L.R., 320.

"Out of his moneys" in sec. 108 means such resources as the

because it was not made in " good faith." This does not requi proof of actual fraud, but merely fraud in law, ie., the prefer creditor does not take in good faith if he takes knowing that, recklessly without inquiring whether, the preference given t him will prejudice other creditors ; "mere passive good faith js not enough :" Butcher v. Stead; In re Meldrwm (1); Tombins Saffery; Ex parte Saffery, In re Cooke (2); the bank man should have made better inquiries, but preferred to take f chance, although he knew well that there was some danger.

'The trustee is entitled to the costs of this appeal, as he would be liable to pay costs personally, even if he is the respondent; Ex parte Angerstein (3); Ha parte Stapleton ; Inre Nathan (4); In re Mackenzie; Kx parte Hertfordshire (Sheriff of) ( Williams on Bankruptcy, 1904 ed., p. 312.

Feez in reply. The trustee should protect himself as to cost by taking indemnity from the creditors: Ex parte Brown ; Inv Smith (6).

The onus is not on the appellants to prove the presence of faith in order to satisfy sec. 109 of the Insolvency Act. The ban were satisfied on 7th July after careful inquiry that the deb position, apart from a possible liability, which could neither b estimated nor guessed, was thoroughly solvent ; and Real J. fou that the debtor and the bank's manager acted with absol honesty. " Debts" do not include all kinds of provable liabili under sec. 108, which has no connection with sec. 140: Zr pa t Kelly & Co.; In ve Smith, Fleming & Oo. (8).

See. 108 is not concerned merely with a state of facts; it al: has regard to intention : In re Mills (9); In re Warren; Ex parte Trustee (10); In re Blackpool Motor Car Co.; Hamilton v. B

(2) 3 App. Cas., 213, at p. 227. @) LR. 9 Ch (4) 10 Ch.

(6) 17 Q.B.D., 488. (7) 6 App. Cas., 482. (8) 11 Ch. D., 306.

Motor Cur Co. (1); Ex parte Lancaster ; In re Marsden (2); H- ©. or A-

AUSTRALASIA v. irrita OJ. This is an appeal from a decision of Real J., Haut.

on a motion of the respondent, the trustee in liquidation of gue. w. Robertson, for a declaration that certain securities dated h July 1905, given by the debtor to the appellants by way of i e, were invalid under the provisions of the Jnsolvency ict of 1874, and also, as to one of them, under the Bills of Sale 7 Sees. 107, 108, and 109 of the Insolvency Act are

"107. Every conveyance assignment gift delivery or transfer f property or charge thereon made every payment made every ition incurred and every judicial proceeding taken or xed by any debtor unable to pay his debts as they become ue from his own moneys in favour of any creditor or any person ntrust for any creditor with a view of giving such ereditor a nee over the other creditors shall if a petition for adjudi- min insolvency be presented against such debtor within six jonths after the date of making taking paying or suffering the une and adjudication of insolvency be made on such petition be emed fraudulent and void as against the trustee of the insolvent ppointed under this Act but this section shall not affect the ghts of a purchaser payee or incumbrancer in good faith and for luable consideration Provided that pressure by a creditor shall ot be sufficient to exempt any transaction from the operation of section.

"108. Every conveyance assignment gift delivery or transfer [ property or charge thereon made executed or given by any lebtor unable to pay his debts as they become due from his own oneys in favour of any creditor or any person in trust for any not being for a reasonable and sufficient consideration at the time of making or giving the same shall if a petition lor adjudication of insolvency be presented against such debtor vithin six months after the date of making executing or giving

(1901) 1 Ch., 77, at p. 81. (2) 25 Ch. D., 311, at p. 318. ; (8) (1893) 2 Ch., 514.

the same and adjudication of insolvency be made thereo deemed a fraudulent preference and shall be void as against tl trustee of the insolvent under this Act and shall not be ava to the creditor as against the trustee.

"109. Every conveyance assignment gift delivery or tra ns! of property or charge thereon made executed or given by an debtor unable to pay his debts as they become due from his moneys and the effect whereof is to defeat or delay the cred of such debtor or to diminish the property to be divided amo his creditors shall if a petition for adjudication of insolveney presented against the debtor within six months thereafter } deemed fraudulent and void as against the petitioning credito and if adjudication of insolvency be made on such petition sha also be deemed frauduleny and void as against the trustee in th insolvency unless in either case it shall be proved that such eon- veyance assignment gift delivery transfer or charge was in fae made in good faith proof whereof shall be upon the party alleg the validity of the transaction "

"Provided that pressure by a creditor shall not be sufficient t protect any such transaction nor shall any such transactio acquire any validity by reason only that it was made or done in pursuance of an antecedent agreement."

Sec. 107 corresponds to sec. 92 of the English Bankruptey A of 1869. Sees. 108 and 109, under which the questions fi decision arise, are peculiar to Queensland. The duty of Court is to give effect to these enactments according to the expressed intention of the legislature. a

The first subject for inquiry is whether on 7th July 1905 debtor was able to pay his debts as they became due from his o moneys within the meaning of secs. 108 and 109. Robertson a colliery proprietor at Torbanlea, near Maryborough, and th appellants had for some years been his bankers. His account was overdrawn and unsecured. In April 1905 he had been formed that the aecount could not be further carried on unless hi gave satisfactory security, which he promised to do. On 7th Ju 1905 the account was overdrawn to the extent of £954 18s. that day he had to pay a sum of £937 for wages due for t month of June to the employés in the colliery. At that tim

debts were owing to him to the amount of about £1,250, H. C. or A. were regarded as good. The debtor in his evidence said 1:

it he was unable to pay the wages without getting an advance Baye or om his customers who were indebted to him, which, I suppose, Ar eans without getting them to pay sooner than they would do in Hau. ordinary course of business. On 3rd July the appellants' Gritin cs « had informed him that before paying, é.¢., honouring a

for, the wages he must ask that the necessary securities

Robertson thereupon agreed to give the securities now in ques- p, and on 8th July they were executed. They comprised the ery and colliery plant, a half share in some land adjacent to

these properties were respectively valued at £4,000, £640, nd £160. The appellants' manager deposed on an examination

full advance on these securities. He said, when examined upon ie hearing of the motion, that he had not considered whether he ould make any further advance upon them, but added, "I id say about £200 limit."

les the property comprised in this security the debtor had following assets: - Book debts, as already stated, to the mount of £1,250, some household furniture which he valued at it £100, an office with furniture which he valued at the same nt, and sundry shares and small pieces of land which he in the whole at £159. He had also a claim against one ipson for £1,800, the balance of the purchase money upon 'sale of a steamship named the Aingswear, which the debtor sold to Phillipson in the preceding December for £2,500, iving £700 in part payment and a bill of mortgage over the el to secure the balance. An action had, however, been com- by Phillipson against Robertson in the Supreme Court on March, in which the plaintiff alleged that the contract had obtained by fraud, and claimed a return of the £700, cancel- n of the mortgage, and £1,000 damages for deceit, or in the native £3,500 for breach of warranty. On 7th July the had been set down for trial and was to come on for trial

H.C. or A. on the 24th. 'The debtor's other obligations on 7th July amor 1907.

to about £435 due to sundry creditors, £399 15s. 3d. due >t) Commissioner of Railways for the carriage of coal, but not pa able until the 21st, and a further sum of £251 due to the Co missioner of Railways which was to be paid by a set-off of price of coal to be delivered. He was also under a liability the current wages accruing to the men employed in the collig and amounting to about £200 a week, although by usage th were not payable until the Friday after the 4th of each mon which in August would fall on the 11th. In addition to th debts Robertson had to provide during the month of July or £300 for his solicitor's costs in Phillipson's action. '

The respondent contends that under these circumstances t debtor was unable to pay his debts as they became due from i own moneys, even without regard to any question arising wy Phillipson's claim, and he further contends that in any event thi claim must be taken into consideration in determining why Robertson was or was not unable to do so. 'The appellants e tend that this claim ought to be altogether disregarded in mating the debtor's financial position on 7th July, and they that if it is disregarded he was then solvent. a

Apart from the Kingswear element of the case, it appears th the debtor was unable to pay out of any money then at immediate disposal the wages payable on 7th July, and improbable that he could have collected a sufficient sum respect of the book debts (£1,250) to enable him to make

, due to the appellants, which was payable on demand. other hand, he was able, by mortgaging his unencumbered propert to satisfy the bank and to raise enough money to pay the w and possibly £200 more. In order to meet his other liab presently payable he had nothing available but the getting in a sufficient amount of the book debts. It was probab anticipated that a sufficient amount would be collected to Railway Commissioner's claim on the 21st July (as a happened), and the claim for £259 was to be satisfied by a

Phillipson's action came on for trial in July, and resulted verdict, given on 10th August, for the plaintiff for £700, tl

of the instalment of purchase money paid, and £968 for fraud, with costs of action. The judgment was in evidence without objection, and was treated as lence against the appellants of the actual facts as existing on h July. It may be doubtful whether it was, strictly speaking, ible evidence for this purpose, but no objection was taken in the Supreme Court or this Court. It appears, then, that

This was a debt provable in insolvency; that is to say, debtor had on that day become insolvent Phillipson could proved in his estate for the amount of his claim which ld have been ascertained in due course: Jack v. Kipping (1). Moreover, Phillipson, his creditor in respect of that debt, was a reditor in whose favour a fraudulent preference might have been wade by payment of his claim with an intention to prefer him: Inve Paine; Ex parte Read (2); In re Blackpool Motor Car Ltd.; Hamilton y. Blackpool Motor Car Co. Ltd. (3). It was

sted that these cases are not good law, but I have no doubt s to the accuracy of the law as laid down in them. It follows since Phillipson was a creditor of Robertson within the ing of sec. 107, the debt in respect of which he was such a editor was also a debt within the meaning of secs. 108 and 109, was one of the debts to be taken into consideration in deter-

came due from his own moneys. It is impossible to contend acreditor who can be preferred is not a creditor to whom s can be preferred. It was argued that only debts then tually payable and the amounts of which were then actually

ained should be taken into consideration. One answer to argument is that the matter for determination is the ability

that the debts referred to are not his debts " then" payable, but his debts "as they become due " - a phrase which looks to e future. No doubt, only the reasonably immediate future is to be looked to, but the anticipated verdict was not beyond this

9Q.BD., 113, (2) (1897) 1.Q.B., 122. : (8) (1901) 1.Ch., 77.

limit. It is not seriously contended that the debtor was, or h any prospect of being, able to pay this debt when it became dt i.e. when the amount was definitely ascertained, from his moneys. But, even if Phillipson had not been a creditor in the s sense of the term, and if the obligation to him had not debt strictly so called, it would still, in my opinion, be imp to apply the tests prescribed by secs. 107, 108, and 109 wit taking it into consideration. The words "as they become du require, as already pointed out, that some consideration sha given to the immediate future ; and, if it appears that the debto will not be able to pay a debt which will certainly become due i say, a month (such as the wages payable by Robertson for th month of July) by reason of an obligation already existing, an which may before that day exhaust all his available resources, ho can it be said that he is able to pay his debts "as they becor due," out of his own moneys ?
It was suggested, but the argument was not pressed, that t debtor's affairs should be regarded from the point of view of balance sheet of assets and liabilities. This is not what the Statut says. It has always been interpreted in Queensland to mean it says, and the only English reported case on the point, Zn 1 Washington Diamond Mining Co, (1), is to the same effect. question is not whether the debtor would be able, if time y given him, to pay his debts out of his assets, but whether h presently able to do so with moneys actually available. Then favourable construction that can be put on the words "his 0 moneys" is that they include any moneys of which the debto can obtain immediate command by sale or pledge of his assets. Applying these principles to the present case, it is clear that 0 7th July Robertson was not able to pay his debts as they became due from his own moneys. Apart from his obligation to P! son, the payments which he had to make during July were of su an amount that he probably would have been unable to pay th July wages in August without borrowing on the security of hi assets, as indeed proved to be the case. When the time came that payment he had no money in hand, and applied to the ap

its for assistance. Their manager was apparently disposed to it on the security of an assignment of Robertson's book s, but his principals refused to sanction the advance. If made, would have left him without any available moneys to pay his er current debts. It was suggested that he might have raised ney upon the other property already mentioned, but it is idle to il that the mortgage of the Kingswear was, pending an ction to set it aside on the ground of fraud, an asset on which money could be raised. 'The other small pieces of property were qually unlikely sources for providing the necessary funds. All facts throw a reflected light as to the actual state of the ebtor's affairs on 7th July. And when they are taken into con- ideration, even without Phillipson's claim, they afford strong round for contending that Robertson was then unable to pay debts as they became due from his own moneys. When ipson's debt is taken into consideration the respondent's case comes overwhelming.

e next subject of inquiry is whether the charges now im- ched were made for a reasonable and sufficient consideration at the time within the meaning of sec. 108. On that estion sec. 109 affords very material assistance. The charge n was for a sum substantially double the amount of the tadvance. It would, if valid, obviously have had the effect \inishing the property divisible among Robertson's creditors he extent of the charge for the past debts, i.e, £954. The trans- ction was therefore primd facie fraudulent under sec. 109. In y opinion a very heavy onus is undertaken by anyone who pts to maintain that a consideration, the smallness of which sa transaction primd facie fraudulent, is nevertheless rea- ible and sufficient. The appellants, however, contend that the fides of the transaction was found by the learned Judge of rst instance, and was established by the evidence. In my opinion bona fides affirmed by the learned Judge was not that which neant in see. 109. I think that a creditor, who takes a security a past debt from a debtor whom he knows to be in such ry circumstances that the security will defeat the debtor's creditors, does not act in good faith within the meaning of

section. If he has no knowledge of any other creditors, Hi. C. or A. 1907.

and no reason to suspect their existence, a different ] would be drawn: Butcher v. Stead (1). But if he does kno of them, the case of Tomkins v. Saffery (2) shows that th transaction cannot have the benefit of any protection by the existence of good faith. The transaction in that ca was void as an act of bankruptey unless made in good fai So, here, the transaction is void under sec. 109 unless proved t have been made in good faith. If the creditor knows of a trai action between the debtor and another person which may hay resulted in a debt, although the debtor denies the existence of a such debt, and if the creditor knows that the seeurity which is taking will defeat that other person's claim if it exists, the ea just cited shows that the same rule is to be applied as if th existence of the debt were known, and that the security is taken in good faith. he creditor takes his chance, and

is being actively asserted. In the present case it is admitted th the appellants were fully aware of Robertson's financial positir and of Phillipson's claim. I am therefore of opinion that th appellants have failed to prove that the transaction impea was made in good faith within the meaning of sec. 109. learned Judge of first instance thought that both the b manager and the debtor honestly believed that Phillipson's acti would fail, and it was in this sense that he found that the p acted in good faith. For the reasons already given, I think t this belief was irrelevant - just as irrelevant as if the action ha been on a promissory note, and a defence had been pleaded as which the debtor was sanguine of success. Independently of sec. 109, I think that the securities imp were not made for a reasonable and sufficient consideration g at the time. The object of this group of sections is to prote creditors, and ensure an equal distribution of a debtor's a among them. 'The term "reasonable and sufficient " therefore, bear the same meaning as if it were used with referen to a transaction between two free and independent contracti parties, neither of whom owes any duty to other persons wil

to that transaction. In the ease of Dixon v. Todd (1) ¥- ©. oF A. mrt, expounding sec. 108, said : - " The effect is that a person aa vent circumstances cannot make away with his property Bawx or for a contemporaneous equivalent. If he receives such an AUSTRALASIA juivalent, his creditors, of course, lose nothing by the assignment." - Hatt. T see no reason to depart from that exposition. In my opinion, Grimtn os. er that a consideration may be reasonable and sufficient

n the meaning of sec. 108, it must be such that the property

debtor presently available for the payment of other

editors is not substantially diminished by the transaction.

er it is or is not so diminished must always be a question of

In the present case the effect of the transaction impeached

18 to leave the debtor with substantially less property available

itisfy his other creditors than he had before. It is true that

e was a promise to make further advances of an undefined

ount, but the promise was not capable of enforcement, and it

certainly not worth more than the £200 mentioned by the

'iable value. I think, therefore, that the transaction is

t within both see. 108 and sec. 109. I do not express any

ton J. I have very little to add to the judgment just ered, with which I entirely agree. But I would refer to the se of Kx parte Griffith; In re Wilcoxon (2), the headnote of is as follows : - 'In determining whether a transaction unts to a fraudulent preference the Court ought now to have d simply to the statutory definition contained in sec. 92 of Bankruptcy Act 1869. The decisions on the subject before Act may be useful as guides, but the standards laid down in must not be substituted for that which is laid down in the Bowen L.J., expressing more fully an opinion in which two other members of the Court of Appeal were agreed (3): - " Everybody knows that originally there was no

IC.LR., 320, at p. 324. (2) 23Ch. D., 69. (3) 23 Ch. D., 69, at p. 74.

express statutory enactment in regard to fraudulent prefe But from the time of Lord Mansfield down to 1869 the

considered that certain transfers of property were frauds the bankruptcy law, though there was no statutory en: upon the subject. Then came the Bankrwptey Act of 1869, in that Act it was for the first time explained what was m by fraudulent preference, and the Act uses very definite langu Now what is the method which has been pursued by j decisions since? I think it is very unfortunate. I do not: that it has led to any wrong decision, but I think that it has h a tendency to draw one's mind away from the true questio The first thing which the Courts did was to discuss the qu tion whether the Act had altered the old law and introdueed a entirely new law, and they came to the conclusion that it had n altered the old law. Then began what I may call the old m¢ physical exploration of the motives of people. The Courts fi adopted a supposed verbal equivalent for the words of the St and then pursued the old inquiries as to what were thi tions which followed from the adoption of this verbal equiva And so we have been drawn into questions of pressure a volition, and at length in the present case we have got ii discussion as to what is the motive of a motive, whatever may mean. I think it is a wiser policy to go back, as I do, in humble spirit to the words of the Statute, and, without dis motives of motives, inquire whether the transaction was e1 into with a view to give the one creditor a preference over t others." 'This opinion amounts to a clear statement of f principles on which sec. 92 of the English Act of 1869 equivalent of which is sec. 107 of the Queensland Act of 187; I- is to be construed; and those principles are to be applied equal to secs. 108 and 109. I think the Chief Justice has, if I may a so, justly applied them. I have only toadd that, with refere the judgment in the action relating to the sale of the Kings I should have thought it more than doubtful whether the of the jury contained in that document could have been rij admitted as evidence against the appellants if objection had taken before Real J. But the whole document was admitted consent and was treated as evidence of all that it contained, an

such circumstances it is before us for the purposes for which then allowed to be used. I agree that the appeal must be

O'Coxnor J. I do not propose to deal with all the different

ects of the facts which were presented for our consideration. he case is of general importance, not by reason of its facts, but se of the questions of law raised on the interpretation of . 108 and 109 of the Queensland Jnsolvency Act of 1874. It to these questions that I propose to address myself. An assign- of a debtor's property comes under the sections mentioned , if at the time the debtor "is unable to pay his debts as become due out of his own moneys." For the purpose of nfining my judgment to the most important matters of law I ull assume that, but for the Kingswear transaction, the debtor d, at the time in question, have been able to pay his debts as became due from his own money, though that is probably | assumption more in the appellants' favour than the facts ould justify. In finding for the trustee under sec. 108 Mr. e Real took into consideration the debtor's liability under transaction as it stood at the date of the assigment to the The appellants contend that that could not legally be inasmuch as the liability did not come within the meaning [ the word "debts" as used in the sections mentioned. We have ermine whether that contention is right. The position of Kingswear transaction at the date of the assignment was The ship had been sold some short time before by the btor to Phillipson for £2,500 with a warranty of seaworthiness. latter had taken possession of her and had sent her to another w overhaul and repairs. In course of the repairs the unsea-

hs in possession of the ship, on making the discovery notified btor of his intention to rescind the contract, and to claim a m of the £700 paid under it and damages for breach of war- and fraudulent representation. The debtor disputed the im, and Phillipson began his action in April 1905. Towards the nd of the following June witnesses examined in Sydney on ion gave evidence on Phillipson's behalf in support of his

complaint of unseaworthiness, and the debtor attended the com sion. The case was set down for trial on the 24th July followit These facts were all known to the debtor and to the bank on date of the assignments. It is no doubt true that if the facts such that Phillipson was in a position at that time to rescind contract and demand return of the £700 as on a total failure of eo sideration, the debtor's liability to pay that amount would complete without the aid of any finding of a Court, and would then have existed a liquidated debt, due by the del Phillipson for that amount. But I am satisfied that the were not such as to put Phillipson in that position. His sion of the ship for many months and his dealings with her wh in his possession made it impossible for him to take up the posit that, on rescission of the contract the parties could be placed ii statu quo, and that there had been a total failure of considerat His right against the debtor was therefore a right to recover, 1 a liquidated amount, but an unliquidated amount by way damages for breach of warranty and fraudulent misrep tion arising out of the contract. Until determined by jud of a Court no amount would be actually payable, and no "

• using that word in its narrow sense - would be in existe But there can be no doubt that Phillipson's claim would be a li bility provable in the administration of the debtor's estate sec. 140 of the Act, and the question is, can such a liability! taken into account in considering the debtor's position under : 108? During the argument the controversy turned upon is the proper interpretation of the word "debts." Like all gi expressions it is capable of a narrow and a wide interpre

fixed, liquidated, and payable at the material date. The would include such a liability as that of the debtor to PI before the damages had been awarded. The case of Bw part Kemp; In re Fastnedge (1) illustrates how the word "di will be held to have been used in a wider or a na sense according to the object of the enactment. In that ¢ the meaning of "debts due to him," in the order and dis clause of the Bankruptcy Act of 1869 was under conside

LJ. says (1): - * Now, the words 'debts due to him' H.C. or A. re certainly words which are capable of a wide or a narrow es ion. I think that priméd facie, and if there be nothing Bayx or

e context to give them a different construction, they would ADHERENTS de all sums certain which any person is legally liable to Hatt. y, whether such sums had become actually payable or not. ovconnorJ. the other hand, there can be no doubt that the word ' due' is

antly used in the sense of 'payable,' and if it is used in that

, then no debts which had not actually become payable when

he act of bankruptcy was committed would be included. Lastly,

he expression 'debts due' is sometimes used in bankruptey pro-

edings to include all demands which can be proved against a

ipt's estate, although some of them may not be strictly

where an ambiguity arises as to whether the legislature has d a general expression in its narrow or in its wider sense, the

will place that meaning upon the expression which will ost effectually carry out the object of the section, In such it becomes necessary to examine the context, the subject

ul (2) it became necessary to interpret the word "creditor" as d in see. 48 of the Bunkruptcy Act of 1883, a similar provision

sec, 107 of the Queensland Znsolvency Act of 1874. It was con- tended that that word "creditor" meant an actual creditor, a person 0 whom money was actually payable at the time of the alleged rence, and did not include the person to whom money would due on the happening of a contingency, a surety, for instance, 0 might be, but had not yet been called upon to pay. But han Williams J. decided against that contention. After ing to the object of the section he said (3): - *I think the ture in enacting the section intended to prevent a pay-

LR. 9 Ch., 383, at p. 387. (2) (1897) 1 Q.B., 122. (3) (1897) 1 Q.B., 122, at p. 124.

judgment of Vaughan Williams LJ. in Read's Case in full a f

ment to anybody who, but for such payment, would share in th administration of the bankrupt's estate. I think, therefore, th the word 'creditor' means any person who, at the date of t) payment to him, would have had to come in and prove and ran with the other creditors in the bankruptcy. A surety would by such a person. I hold, therefore, that you may make a lent preference by a'payment to or for the benefit of a s who has not yet been called upon to pay as surety. It is not puted that at the date of the payment into the bank Barnard a person who had a right of proof under sec. 37 in respect of h contingent liability as acceptor of the bill. He had a right, there fore, to share in the distribution of the bankrupt's assets; an l under the circumstances I hold that the payment into the ban was a fraudulent preference of Barnard by the bankrupt." : That case was followed in In ve Blackpool Motor Cur Co, Ltd.; Hamilton vy. Blackpool Motor Car Co. Ltd. (1). 1 same question was raised on the same section, and Buckley J. after considering all the other cases on the point, quotes

follows it. These cases apply not only to sec. 107, but are direct authority that the word "creditor" in sec. 108 means not only a person to whom money is then actually due by debtor, but also a person to whom money is not then actua due, but who, by reason of the facts then existing, will entitled to prove in the debtor's estate if bankruptey superv It does not, of course, follow that, because it is necessary for effective operation of the section to interpret the word "credit in the wider sense, it must therefore be held that the word "debtor" was also intended to have the wider interpretation put upon it. But bearing in mind the general object of the section it is difficult to see why, if any liability of the debtor afterwards _ provable on his bankruptcy constitutes the person to whom he is liable a creditor within the meaning of the section, the liabilit itself should not constitute a debt for the purposes of the section.

Turning now to a general consideration of the enactment, its purpose is to secure the equal distribution of the debtor's assets amongst his creditors, and as a safeguard to their interests it

in effect provided that any alienation of his property by the H.C. or A. btor during six months preceding the adjudication is open to the way rutiny of the Court if it takes place under the circumstances Bayx or nentioned in secs. 107, 108 and 109. The governing circum- are in all three sections is the same, namely, that the debtor Hat. the time of the transaction was unable to pay his debts as oconnor4. y became due out of his own moneys. Such a condition of

might well be described as impending insolvency, and the

y of the sections would appear to be that at such a crisis the

ebtor should not be allowed to so deal with his property as to

dice the interests of those who, in the event of his subse-

ent insolvency, would be entitled to a share of it in distribution.

charging the Court with the duty of determining whether

debtor's affairs had reached that crisis at the time of the

action impeached, it surely must have been intended that it

hould make as real an inquiry into the existence of the debts

nd of the moneys available to pay them as they became due as

n of business would make if he had to determine the same

ue for himself, having due regard to the interests of all those

sho would be entitled to claim against his estate in the event of djudication. It becomes apparent on reading the section that

ie word " debts" cannot be construed so literally as to include

ily amounts then actually due. It is conceded that the survey

of the debtor's affairs must take into account debts for liquidated

mnounts, such as on promissory notes then maturing but not yet

It must also be conceded that, even if "debts" is to be

ken in its narrower sense, its meaning could not be restricted

as to include only the debts which the debtor admitted to be

or believed to be due. The elements of intent or belief do

arise under the section. The debtor's affairs are to be

taken as they are, not as he believes them to be. It is obvious

i these admissions must be made if the section is to be con-

so-as to involve any effective consideration of the debtor's

position. For the same reason it is difficult to see how

his position could in any business sense be ascertained without

having regard to liabilities pending and provable as debts in the

nt of bankruptcy, but not yet fixed as liquidated amounts, as

al as the debts then actually due. The Kingswear trans-

action itself is a good illustration of the necessity for so extendin, the inquiry if effect is to be given to the object of the legisl At the date of the transfers impeached in these proceedin Phillipson's claim, although one which would be provable in insolvency, was unliquidated and disputed by the debtor. it was then evident that in three weeks' time it would be either a liquidated amount or at an end. If determined in Phillipson's favour there would be a judgment debt against the debtor £700 at least, which would, beyond all question, put it out of power to pay his liquidated and ascertained debts as they became due out of his own money. The Court no doubt must look al the facts of the transaction as they stood before the verdict, and judge them reasonably. But any fair examination of the debto position might well be expected to extend to the takings and obligations of his business for the ensuing month, and to account of liabilities, which, although not yet liquidated and payable, must in all probability become so within a few w in cases where their discharge would be likely to seriousl; diminish the funds available for payment of the debtor's actu debts as they become due. That was exactly the case with the Kingswear transaction in relation to the debtor's affairs, I find it difficult to understand how any examination intend to ascertain the real state of his business could leave that trans- action entirely out of consideration. I have, therefore, come to the conclusion that, in order to give any real effect to object of the enactment, it is necessary to interpret the word "debts" in the wider sense which would include the Kingswear transaction.

Questions both of law and of fact have been raised as to the second issue under the section (108), namely, whether the debtor received "reasonable and sufficient consideration given at the time " for "making" the mortgage and transfers. I do not know of a clearer way of expounding the meaning of "reasonable and sufficient " in that section than in the words of my learned bi the Chief Justice with reference to them in Diaon v. Todd (1) - " The effect is that a person in insolvent circumstances cannot make away with his property except for a contemporaneous equivalent."

object of the section is to ensure that, if a debtor unable to his debts as they become due from his own moneys wishes sfer or mortgage to any creditor any portion of his pro- y which would otherwise, in the event of adjudication, be ibutable amongst all his creditors, he can do so validly only y then getting from that creditor some consideration, either in money or other tangible value, which will make up to his estate 'business substantially what the mortgage or transfer has taken it. The section would certainly fail to achieve that object if mable and sufficient" were held to mean no more than what sconveyed in the well known legal phrases " good consideration " "valuable consideration." in this case then, the learned Judge, as he properly might, took ecount of the bank's undertaking to make further advances for ying on the debtor's business as part of the consideration. It s for him to estimate its value, as well as to compare the mount of the advance then made with the fair mortgage value f the properties assigned, and I can see no reason to differ from the conclusion that, under all the circumstances, the mortgages

sideration given at the time. It follows that, in my opinion, the gment on the whole section in favour of the trustee in insol- vency must stand.

Now as to sec. 109, If the circumstances of a transfer to a reditor are such as to render it liable to be declared void under 108, it is clear that the good faith of the parties cannot make it valid. But even if it should be found that the consideration for » mortgage and transfer given at the time was reasonable and ient, and that the respondent therefore fails under sec. 108, 'ithin see. 109 in all other respects and the appellants have failed y establish the existence of that good faith which alone would e the section inapplicable. Whether or not the appellants have lished that "good faith" on the part of both parties, proof of h the section has expressly imposed on those who allege the dity of the transaction, is a question of fact. But the eases ave laid down rules for the guidance of Judges in dealing with t issue which it appears to me have made the conclusion

proper to be arrived at in this case abundantly clear. In But: v. Stead (1) the House of Lords considered the meaning of

of 1869 which protects "a payee in good faith and for val consideration." That was succeeded by Tomkins v. Saffery involving the construction of the same section, which upheld adopted the law as laid down in Butcher v. Stead. Oairns LO, in the course of his judgment in Tomkins v. Sagfery (3) said: - " But are they to be taken as payees 'in good faith, within the meaning of this section? Of course I do not speak of good faith in a moral point of view. They may have believed the statement and I am willing to take it that they did believe the statement ¢ the bankrupt as to his having no other creditors. But are they payees in good faith according to the test which is laid down in this section, a test derived from the operation of the bankruptey" law? I take it that in order to give any meaning to the word 'in good faith' at the end of the section, your Lordships must hold those words to apply to the matters which are ment in the earlier part of the section. If you find a person recei ing a payment in complete ignorance of, or without any of getting information with regard to, the matters mentio! in the earlier part of the section, he may be a payee in g faith." Again, Lord Blackburn says (4) : - " It comes round to this, that I think (I am stating it in my own words, but it is very nea what the Lord Chancellor has already said) that when they k that the man was insolvent and unable to pay his debts, w they knew that this money was given them to prefer a particu body of creditors to all the other creditors, if there were oth they were then fixed with the knowledge of an infringement of the Statute, and although they were told by the man who after- wards became a bankrupt that he had no other creditors, thi cannot get gut of it; they took their chance. If he had told them the truth, and there had been in fact no other creditors, this trans action would have stood and been perfectly good ; if he had any other creditors it would not stand. They knew all that it was"2 2 ih ) Sapp Cass 218, (8) SABE Cae 8 aps

wy for them to know, and I think they took their chance, H. ©. or A. they must take the consequences." bel my opinion these passages apply directly to the expression Baxx or ood faith" as used in sec. 109. It is immaterial that there AUS™*A™S™ is no want of "good faith" in a moral sense in either party. Hat. order to succeed the transferee must go far beyond that and - oconnor J. rove that there was that good faith which the bankruptcy law

requires in such transactions as explained in the judgment I have

The transfers and mortgages impeached are clearly within the ection unless the bank can establish the defence of good faith. pplying the principle laid down by Lord Cairns and Lord Blackburn to the facts proved in this case it is difficult to see how hat defence can be established. The bank had a full knowledge Fall the debtor's business. Indeed it would be carried on only their aid, and they necessarily kept thenselves informed of the condition of his affairs, and had at all times either the know- e or the means of obtaining knowledge of his exact position all his transactions. Having regard to his financial position at the time of the impeached securities, the effect upon his estate and his other creditors of giving the bank the securities, and the po ition of advantage as compared with other creditors in which the holding of the securities placed the bank, I find it impossible to say that the transfers were made in good faith within the mn ning of sec. 109.

'Holding these views it becomes unnecessary for me to refer to e questions raised by the bill of sale. On the whole case, efore, I agree that the judgment of Real J., must be upheld

Isaacs J. The securities have been challenged by the trustee on various grounds. He contended that they are invalidated by sees, 107, 108, and 109 of the Queensland Insolvency Act 1874, nd also by the Bills of Sale Act 1891.

See. 107 of the Znsolvency Act prescribes as one of the condi- of avoidance that the act of the debtor shall be with a view f giving a creditor a preference over the other creditors ; and was negatived by an express finding of the learned Judge

whose judgment is appealed from. That issue depends toag

dant evidence to sustain it, 1 do not see my way to reverse tinding on this point.

Sec. 108 lays down among the essentials for avoiding assignment that the debtor was unable to pay his debts as

reasonable and sufficient consideration given at the time of making the assignment.

The onus of establishing both essentials is upon the trus who seeks to invalidate the assignment : Hx parte Lancaster ; re Marsden (1); and Ex parte Green: In ve Laurie (2). question is whether he has satisfied this burden.

Real J. has held that the insolvent was on 8th July 1905, he date of giving the securities, in fact unable to pay his debts as they became due from his own moneys, but he has done so w a view of the law, which, with deference to the learned Judg appears to me to be erroneous.

His Honor says : - '" The total amount of his liabilities, includ ing these sums but excluding the action, was £1,085, and the total amount of the debts due to him was £1,200 odd- - as good or eq to nearly £1,200 cash, for in substance all these debts were paid But still it appears to me the Act requires, and I am bound t hold, that he must have moneys of his own or at call to pay debts as they become due. 'They were in fact due and he had the money in hand or at call, and therefore on that ground I ho that he was unable to pay his admitted debts from his own moneys. . His debtors were so good for their liabilities that I think he could have got the money from them if he had asked for it. Yet te nically it appears to me he was insolvent."

The action referred to in the passage quoted ended in the est lishment of a liability of £700, the amount of part of the pureh money of a vessel called the Kingsweas paid and ordered to returned, and also £968 11s. 11d. damages for fraudulent m representations as to the condition of the vessel by which th purchaser was induced to make the contract.

His Honor considered that, although money to the credit of a

banking account at call is practically his own money, yet H- ©. oF A. y owing to him by private individuals and payable immed- Resi ,and which if asked for would be immediately paid, is not Baxx or ey of the debtor. In my opinion both classes of assets are on ee 'same footing, and no legal distinction can be drawn between - Hatt.

Tf a man by asking his debtor can get paid what is owing eases J. him, there is no difference in law between a debtor who is a

and another debtor who is a merchant, or whatever his

occupation may be. If the moneys so available are sufficient

The Act requires the debtor to be able to pay his debts as they become due. This does not mean that he is always bound to p by him in cash a sum sufficient to meet all his outstanding indebtedness however distant the date of payment may be. If at time he makes the assignment, the debtor's position is such he has property either in the form of assets in possession or debts, which if realised would produce sufficient money to pay his indebtedness, and if that property is in such a position as title and otherwise that it could be realized in time to meet

on, as the claims mature, with money thus belonging the debtor, he cannot be said to be unable to pay his debts as y become due from his own moneys. In other words, if the tor can, by sale or mortgage of property which he owns at the ne of the eee change the form of the property into cash

i ee insane ae, that panne of the section is satisfied. Bibfisctartinancisl position on 7th July, that is just before the assignment, was as follows. His liabilities consisted of bank overdraft £954 18s. and a further' bank advance of (937 7s. 6d. for wages ; sundry ereditors £1,085, from which had to deducted £243 payable according to agreement in coal, leaving a st sundry indebtedness of £842. So far, the total is £2,734 5s. 6d. this Mr. Graham claimed to add the pe gant Riise of

H.C. or A. would be payable very shortly afterwards - amount eld £4,652 17s. 5d.

eerie As against this, the greatest possible amounts procurable by t AUSTRALASIA debtor to pay his liabilities by means of his own assets, what

Hatt. - the ultimate value of the assets may have been, were £2,2

Isaacs J. amount which could have been drawn from the bank as agai

security, and £1,280 book debts, and also by a very fair cone

on the part of Mr. Graham, say £172, being two-thirds of

the stated value of some additional assets mentioned in the sta

ment of affairs. This would bring the total amount of cash

able for the due satisfaction of the above mentioned liabilities

£3,652, and would leave a deficiency of £1,000. The only oth

possible asset was the Kingswear, which it was contended fi

the respondent ought not to be taken into consideration as a me

of meeting Robertson's liabilities. For some time, while

nizing the probability of Robertson's insolvent position on

July, I was greatly pressed by the want of some direct evidene

on the part of the trustee to countervail the sworn statement 0

the debtor in his statement of affairs that the vessel was or

Harbour. But further reference to the evidence does, I think lead to the conclusion that at all events the vessel was no available as a present means of paying Robertson's debts as the became due. The debtor's petition presented on 12th Aug only two days after the adverse judgment - states that he admit his inability to pay his debts on that date. There was since July no new debt of extraordinary amount, and besides the b debt of £1,400 17s. 7d., and the ordinary trade debts which co tinued and amounted to £1,182 6s. 8d., the only outside debt: were apparently his own solicitors' costs, £250, and the Ki swear judgment and costs, £2,260, in all £5,093 4s. 3d., or only £440 6s. 10d. more than on 8th July.

Schedule H of his statement of affairs, dated 30th Aug 1905, sets out as one of the causes of insolvency that the adver ¢ judgment rendered it impossible to obtain the necessary finanel accommodation to pay his wages, which on the day after verdict were something over £800. It appears from the evidence of Mr. Ridley, the bank manager, that he offered to pay the w

railage, in all about £1,100, on the security of the book debts, apparently no one then thought of the Kingswear asa present ble means of raising money, even to pay the wages. s appears by schedule C the vessel was in fact held by ipson as security until Robertson's liability of £700 to him s paid. The only fair conclusion from these facts is, that hatever its actual value might ultimately be, it was as an diate money-raising asset worth nothing to Robertson, and ht to be excluded from commercial considerations on 8th July the purpose of paying his debts. The main question on this branch of the case is whether the sums of £700 and £968 11s. 11d. in respect of the Kingswear ity should be included amongst Robertson's debts on 8th ily within the meaning of sec. 108. If not, his debts on that date ould jbe reduced to £2,984 5s. 6d., and would be amply met by he book debts and the amount procurable from the bank on his ree assets, which together would exceed £3,000. If either of them is to be taken into account as a debt, the liabilities would exceed the power of the debtor to meet them. is necessary therefore to consider whether these two sums, or ther of them, ought to be included as debts on 8th July. is contended for the appellant that the sums, and particu- the sum of £968 11s. 11d., became debts only when Phillip- on obtained judgment, namely, 10th August 1905. The trial of ve action began 24th July, and ended on 10th August, and the idgment rested upon a finding of fraud inducing the contract, ind upon that finding the plaintiff obtained judgment rescinding

• contract and ordering the defendant to pay £700 which had paid to him in terms of the contract " now rescinded," and also he further sum of £968 11s. 11d. already mentioned, with costs. Undoubtedly the Act in some sections recognizes a clear dis- nm between "debts" and " liabilities." It is quite clear, too, on authority, that Phillipson's claims were not, until after the judgment, debts that would have supported a tition for insolvency: La parte Charles (1); Ex parte Broad- (2); Jones v. Thompson (3). And the appellants' case is

(I) 14 East., 197. (2) 22 L.J. Bkey., 21. f (3) 27 L.J.Q.B., 234.

H.C. or A. that, where the Act in secs. 107, 108, and 109 speaks of a deb eee inability to pay his debts as they become due, it refers to liq Bank or dated sums which have or will certainly become payable. eae At first sight this contention has much force. But in Haw. - Poland (1) the words " any creditor" were restricted to ere Isaacs J. under the bankruptcy, being construed as was said by LJ., "in accordance with the circumstances to which the Act w intended to apply." Upon the same principle have been deei the cases of In r@ Paine; Ex parte Read (2), and in In ve Bla pool Motor Car Co. Ltd.; Hamilton v. Blackpool Motor Car Lid. (3), which determined quite clearly that the word " credit in sec. 48 of the English Bankruptey Act 1883 means any who at the date when the charge or payment is made is en if bankruptcy supervenes, to prove in the bankruptey under: 37, and share in the distribution of the bankrupt's estate. It was argued in regard to these two cases that the interpre tion they give to the word "creditor" is not sound law, and al that, even if it be well founded in law, it does not affect the me ing of the word "debts" in the earlier part of the sections. to the correctness of the decisions, I agree with the lea Judges who determined them that the history of the fraudul preference section shows that the word "creditor" in that ¢ nection must receive the signification they attach to it. The doctrine of fraudulent preference was rested by L Mansfield in 1768 in the case of Alderson v. Temple (4), fraud upon the law, and he said inter alia (5) : - "It is defe the equality that is introduced by the Statutes of bankrupt The judgment of Cockburn C.J., in Bills v. Smith (6), in 18t traces the decisions down to that time and takes the same v He says (7): - 'For, it must be borne in mind that the true que in all these cases is whether the intention with which the p ment was made was to defeat the operation of the bankrupt la It is this intention to act in fraud of the law which stamps t preference of the particular creditor, however morally eae i the character of fraud."

(1) L.R. 1 Ch., 356, at p. 358. (2) (1897) 1 QB., 122.

e authorities apply directly to sec. 107, and in secs. 108 H. C. or A. 109 the same words must have the same meaning, because all eae ose sections are framed for the same object and levelled at the Baxx or ie thing, though with possibly different effect according to the AUS™ar4s!* ng circumstances. Han. But assuming the correctness of this construction of the word - jsaacsa. reditor," it was maintained by Mr. Feez that debts in these ections were only such as were debts in the strict sense and uld in their nature support a petition for insolvency. donot think this contention can be upheld. It would lead to nfusion of terms in the sections themselves. The enactments e to regulate the duties between the person who is called mly the debtor, and the persons who are with equal iiformity called his creditors. The moneys which are payable y him to them are called debts. Whatever meaning is properly tributable to "creditor" must, as it seems to me, correlatively y to "debtor," and therefore of necessity to debts. Reverting to the history of the fraudulent preference sections, I think can be distinctly discerned in the cases that the equality intro- by the Statute of Bankruptey referred to by Lord Mans- and the cardinal question in eases of this kind as to whether the debtor intended to defeat the operation of the bankruptcy ws, determined not merely the quality of the act impeached e he nature of the obligation affected. The same reasoning s to interpret both "debtor" and "creditor," and the indebted- if the one to the other. The section operates, it is true, only i the case of an adjudication of insolvency within six months, but sumes that the debtor is already insolvent in fact. 'There n be no valid reason for differentiating the relations of debtor litor, or the meanings of debtor and debt. extensive meanings to be given to such words in order to ite the objects of the legislature in relation to bankruptey well gathered from the cases of Hardy v. Fothergill (1), Flint v. Barnard (2). urning to the Act itself we find indications that distribution id discharge are the main objects aimed at by Parliament. The itl is: - "To provide for the distribution of the Estates

of Insolvent Debtors amongst their creditors, and their re from their debts, and for the punishment of fraudulent deb and for other purposes." Here, then, we have the three words debtors, debts, creditors all used in correlation at the threshold of the Statut In see. 47 it is expressly provided that the debt of a petitio creditor must be a liquidated sum due at law or in equity, - appellants' argument would render this qualification unnei In sec. 140 there is no doubt of the extensive nature of debt provable in insolvency : Jack v. Kipping (1), following Pe Jones & Co, (2), as well as Ex parte Adamson ; In re Collie (3 show that damages, even though unliquidated, arising from debtor's fraudulent misrepresentation inducing the creditors enter into a contract with the debtor, are provable. The actu cause of the damage is entering into the contract, though the rig to be relieved from the loss would not exist but for the fraud, wh in such case is a violation of the debtor's obligation of good in relation to the contract, and therefore provable. In see. 152an some following sections under the head " Dividends" the "creditors" is obviously employed to denote all persons w have proved in the insolvency in respect of provable debts. they who are to be entitled to dividends in the distribution the estate. Secs. 173 and 174 provide for the insolvent's relea from all debts provable in insolvency with certain specif exceptions. In view of these provisions it appears to me that secs. 107, 1 and 109 are merely for the purpose of effectuating the mai objects of the Act as already mentioned. They must be read a construed with reference to those objects and as iustrun aid the ultimate intention of the legislature. So reading it appears to me impossible to separate the terms creditor, debt and debt, as Mr. Feez has invited us to do. v It may not be out of place to observe that the significa the word "debt" in relation to fraudulent preference ap have gradually extended. In Lord Mansfield's time only strictly so called were provable, and so were the only one8 s to the doctrine he is said to have originated. By the year 18

inciple had been well established as Lord Ellenborough H. ©. ov A. zed. He said in Crosby v. Crouch (1), " Strictly, only the we of a trader subsequent to his bankruptcy are void. Pre- Rawk or acts supposed to be in contemplation of bankruptey have AVS™*™st e been invalidated ; but this is an exerescence upon the Hatt. pt laws." Isaacs J. subsequent history of the bankruptey law shows a gradual

d be proved in bankruptcy, participate in the distribution of e bankrupt's property, and be released by his discharge. The mplation of bankruptcy " was the dominant idea ; and this, er in the later form of " view of preferring " or the actual

lich the debtor is unable to pay, and the persons to whom they re owing, in relation to the ultimate result of the bankruptcy upon the indebtedness. These considerations all, in my on, conclude the law in favor of the respondent's contention

In the result, the two sums of £700 and £968 11s. 11d. ought this purpose to be included in the debts of Robertson on 8th , and they, independent of Phillipson's costs, establish his olvency on that date. It then becomes necessary to consider whether the trustee has that the securities were not executed "for a reasonable sufficient consideration given at the time of making or giving he same." The consideration was £937 7s. 6d., actually given at he time - because the agreement "and advance of the 7th July" the consequent signing of the documents on the 8th were all tion and may justly be regarded as contemporaneous - '£954 18s. previous overdraft, and an indefinite arrangement e current advances which without any breach of contract d be and has terminated shortly afterwards. What is meant reasonable and sufficient consideration?" Can it be said as sargued by Mr. Feez that it merely means " reasonable and nt" as between a creditor and a debtor, who hopes and ects thereby to re-establish his solvency, and that " sufficient " of sufficient value to the debtor, or, so to speak, worth the

sacrifice, in the circumstances in which he is placed? I feel able to accept that definition. The object of the section be borne in mind. As already indicated, it was not enacte the debtor's protection, for he, like every other man of sound and full age, may be left to make his own bargains, nor to e him to run risks with property already insuflicient to meet | liabilities. It was designed for the protection of the body of his creditors once he is in fact insolvent. It was nized by the legislature that such a man ought not to alter condition of his assets so far as either to appreciably lessen th in value or to render them more difficult to satisfy his eredito claims. Reading the words " reasonable and sufficient" with object in view, I think they mean what an honest and pi man in the position of an insolvent debtor, anxious to retrieve h position if possible, and yet careful not to lessen his present m of discharging his obligations in any way, would think are able and sufficient consideration. In other words " suffici means of substantially equal value, and "reasonable" means stantially as available for realization. The form of his pro, may be changed, but he may not materially diminish its capacit to satisfy his creditors' just demands. The section was intended to absolutely prevent one ere obtaining more than his just and proportionate share of insolvent debtor's property, whether by design or accident result of the transaction, instead of the contemplation, inte or purpose of the debtor being the test. If, then, the result the transaction be substituted for the debtor's contemplation bankrutcy, the case of Linton v. Bartlett (1) is much in poi There a bankrupt had given a preference to a creditor, and tl question was whether it was an act of bankruptey. The said : - *The deed and the transaction may have been very fair as between the parties; but in all these cases the object to attended to is, guo animo the transaction is done. Now single question is, whether a man shall be allowed to com fraud wpon the whole system of the laws concerning ba Y by giving a preference to one creditor in prejudice to the re Clearly he shall not."

faving regard therefore to the result of the transaction, it is H.C. or A. jough to say that the bargain was very fair as between the wii

'The Act, in such circumstances as here exist, stamps it Bay or

AUSTRALASIA 'That is sufficient without more to avoid the securities, and it Hat. snot actually necessary to deal with the further questions of - jascss. w raised by the respondent. s to one of them, however, that of good faith under sec. 109, jis desirable to state my views. 'The burden of proving good faith by the section itself is essly placed upon the person supporting the validity of the tion. I have come to the conclusion that the evidence not support the finding of the learned Judge that the ies were take in good faith. Ido not refer to good faith matter of morality but as within the meaning of sec. 109. es LJ. in Inve Tate (1), after quoting from Butcher v. Stead ) said of a person who had received money from a bankrupt: - The person receiving the money must show that he took it in od faith, and that he did not know that the person paying the mey was doing anything injurious to his other creditors." this case the bank knew as much of Robertson's affairs as id, and therefore knew that he was sued by Phillipson upon im which, if substantiated, would leave Robertson unable to et his liabilities. The bank, in effect, threw all the risk upon he other creditors, securing to itself a preference in case of ertson's insolvency. In these circumstances the words of rd Hobhouse in delivering the judgment of the Privy Council | National Bank of Australasia vy. Morris (3) apply with great : - "Their Lordships conceive that if the creditor who eives payment has knowledge of circumstances from which y men of business would conclude that the debtor is ble to meet his liabilities, he knows, within the meaning 'the Act, that the debtor is insolvent." 'Che Act there referred to 25 Viet. No. 8 of New South Wales, and sec. 2 of that Act provided that certain payments before sequestration to a creditor be protected, if inter alia the creditor did not know at

581, at p. 532. Q) LR. 7 HLL, 839. (3) (1892) A.C., 287, at p. 290.

the time of payment that the debtor was insolvent or woul the payment be rendered insolvent. Taking this view of facts and the law, I have no doubt the securities are invalidate by force of sec. 109 as well as sec. 108.

The ground upon which the bills of sale were attacked r the Bills of Sales Act is one which relates to the construction | the particular documents rather than of the Act itself, and the fore I do not find it necessary in this case to enter upon its con sideration.

Hicerns J. This is a case in which the learned Judge bel has reluctantly found himself compelled, according to a certs view of the Queensland Jnsolvency Act of 1874, to treat an hi transaction as fraudulent. He does not doubt "in the smalle degree, the bona fides of the bank manager in requiring imme ate security." It is true that Phillipson's action for either dan or rescission of a contract was pending against the debtor His Honor is satisfied that the bank manager "had not 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 h been taken, that he had a good case. The action was one it which fraud was alleged against the defendant. Well, he h known the defendant in the action for a considerable time, a apparently had every respect and esteem for him as a man high character, and not likely to be a man who would be g of fraud." The learned Judge expressly finds also: - 'I do not thi that Robertson had the slightest idea, in giving the security,

customer, and not let his account go elsewhere. It was a heal account of a going business. The question is, does the law Queensland compel the Court to say, notwithstanding such fin ings, 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 é to show (a) that Robertson was, at the time of giving the

, "unable to pay his debts as they became due out of his H. ©. oF A. moneys"; and (b) that the securities were not given "for a id onable and sufficient consideration given at the time." The Bawx or e has found, as to (a), that Robertson had on 8th July, the date A""™A¥ss™* 'the securities, credit which would have enabled him to pay his = Haut. s if and when they should be demanded ; and that he had, izgi from other assets, good book debts - book debts such that could have got the money from his debtors if he had asked it - exceeding the amount of his then existing engagements. still," His Honour says, "it appears to me that the Act requires, nd I am bound to hold, that he must have moneys of his own, in 1is actual possession or at call, to pay his debts as they become due"; and adds, " technically, it appears to me that he was insol-

nt, . . . andI have reluctantly come to the conclusion that I must answer the first question in the affirmative - that Mr. obertson, when he gave the securities, was not able to pay his debts as they became due from his own moneys and was insol- " If this view, that only moneys in his actual possession or it call are to be considered in applying the words of sec. 108, nable to pay his debts as they become due out of his own moneys," is correct, it will follow that a Rothschild or a Rocke- feller will often be liable to be treated as coming within the words, enif his debts are a few thousands, and his assets and resources y millions. On question (b) also the learned Judge finds the bank, following in this, not his own view as to the sasonableness and sufficiency of the consideration as a matter of isiness, but what he conceives to have been treated as the effect if sec. 108.

'The debtor, a colliery proprietor, had £954 18s. overdraft at

to the employés at the colliery, £937; and the bank er consented to advance the wages on getting security,

H.C. or A. learned Judge cannot see - nor can I - why, if these words meg

equality in amount, it should not be complete equality. security, on this theory, ought to be given for the amount the present advance only. But, in Zn re Donaldson (1), the Com held that a present advance of three-fifths of the amount se was "sufficient"; and here, it did not exceed one half, Honor, in deference to this decision, would have gone so as to treat the consideration as sufficient if five-eighths « the amount secured consisted of a present advance; but a was only four-eighths, it is to be treated as insufficient. I coneu with the learned Judge in his view that it is impossible to unde stand on what principle we are to determine the inquiry, wl proportion the advance should bear to the charge so as to b valid, and to give business men confidence that their transaeti will not be regarded as fraudulent. But I do not think that s 108 of the Act involves any such inquiry.

As for the meaning of the phrase "unable to pay his debts | they become due from his own moneys," it has to be remem! that it is taken from the British Bankruptcy Act of 18 that the Bankruptey Acts used to apply to traders only, and th: this very Act applied in great part to traders only ; and that th phrase was meant to be used by commercial men in regulat their dealings. The critieal words are "as they become due

debts immediately payable, but his debts which will becom payable ; and on the other hand, he is not obliged to keep always in hand to meet debts not immediately due. It is suf cient if he see to it that he will be in a position to get enoug! moneys of his own to pay each debt as and when it becomes d For instance, if he get money by sale or by mortgage of h assets, they are "his own moneys." But he does not satisfy tl phrase by showing merely that his father, or his aunt, woul for him. Again, no mercantile man would be treated as to pay his " debts," for the mere reason that he had not re wherewith to pay the full uncalled liability on shares that holds in prosperous companies, or the contingent liability un

wantee given by him for the due administration of an 4. ©. or 4. by a wealthy and reputable administrator against whom aa

e is no shadow of a charge. These are not "debts"; pas oy

are contingent liabilities. A call is not a "debt" until A°STALss s made. The test used to be, was a man in a condition ay his debts, in ordinary course, as persons carrying trade usually do: De Tastet v. Le Tavernier (1). The ex- on used in a long line of cases, and incorporated in he Bankruptcy Act 1849 was "unable to meet his engage- its"; but this expression was changed, in the Bankruptcy Act of 1869 to " unable to pay his debts as they become due out of his own moneys" - I presume in the belief that the word ements" was too vague. This very Queensland Act, ng the British Act, makes, in section 140, a marked dis- ion between "debts" and "liabilities." "Liabilities" are ble as well as "debts," if capable of estimation. The ion is headed "proof of debts"; but this is only a brief spression to cover all that is more accurately defined in he section itself. It is a rude sign-post for the guidance of vellers through the Act. It is urged upon us that what- r is provable in the insolvency is a "debt" within the ing of the expression " unable to pay his debts" ; but that

be proved in insolvency ; but this is by virtue of the express pro- 'isions allowing the proof of mere liabilities. They are not "debts" ; and there is no provision in the Act that they are to be d to be debts. These provisions of the Bankruptcy Acts are nt for the guidance of commercial men in their conduct. A n can regulate his conduct so far as regards things known and n, such as debts; but not even the cautious merchant of nice could regulate his conduct so as to avoid disaster when all

'ible contingences turn out adversely. I see no reason for

| the ordinary legal meaning, if it be understood that debts ble in the future as well as debts now payable, such as ssory notes not yet payable, are included. It is not neces-

it sary that they should be actually payable so as to be capab supporting a petition for insolvency. 'This is the meaning gi to "debts due" in the converse case, of debts due to the insolvent at insolvency, for the purposes of the order and disposition clau (Queensland Act, sec. 87). As Mellish LJ. said in Ew pa Kemp; In ve Fastnedge (1): - * Until a sum certain has be due, and is to be paid in all events, there is, in my opini no debt due. The clause does not relate to demands wh may be proved against the estate of a bankrupt, but to debts due to him." My opinion, therefore, is that a debtor is not

or because he does not always keep money in his box, or at call ina bank, sufficient to meet all his present and future debts, much less his contingent liabilities. That this is the true meaning of words "from his own moneys" is apparent from the language the Court of Appeal in Jn re Washington Diamond Mining (2); where the moneys that a company could get in by ma calls were treated as its own moneys for the purpose of tl words. There is, therefore, no foundation for the view that th debtor " must have moneys of his own in his actual possession or at call, to pay his debts as they become due"; or for the vie that contingent liabilities are to be regarded as debts.

Now, to apply this view of the phrase to the facts of the cas On 8th July, the day that he executed the securities, Rober owed the bank £954 in addition to the present advance of £ Taking the view of the facts which is most favourable to tl trustee, Robertson owed £1,085 to other creditors; but of sum £243 was only payable out of coal to be supplied, and was payable on 21st July. He owed even less than £1,0! according to the Judge's finding; for his Honor treats these tw debts as being only £239 and £311 respectively, and the other debts as amounting to £403 12s, (see Ex. 2); but the difference i not very material. Taking the figures which are the m favourable to the trustee, Robertson's actual debts, present a : future, were £2,733, including the £1,891 owing to the bank 5

(1) L.R. 9 Ch., 383, at p. 390, (2) (1893) 3 Ch., 95, at pp. 101, 109. Q

e was no one asking for payment. He was also defend-

vear, for fraudulent representation, and for consequent sion of the contract of purchase, or damages; but this was a "debt," according to the view expressed above ; and neither bank manager nor Robertson had any idea that the action mild be successful. So the learned Judge has found; and his

(with the incidental order to repay the £700 purchase money already paid) is by no means an order as of course on proof of d, and it may be fenced in with unforeseen conditions and s; and who could foretell the damages which would be varded by the jury for deceit? There were costs payable to Robertson's own sol rs at the time that he filed his schedule, h August ; but the trial extended over several days at the end July and the beginning of August, and there is no evidence to how much, if any, of these costs, were due on 8th July. On e other side Robertson's assets, as estimated at the time, were t7,410. This amount would have been even greater, but for the fact of the pending action as to the Kingswear. he full pur- money was £2,500; £700 were already paid, and the value the balance was treated as £1,000 net instead of £1,800, se the purchaser disputed his liability to pay it. The ets included £1,251 absolutely good book debts - as the banker 8 "his debtors were so good for their liabilities that I think

These book debts alone would have been ample to satisfy Il debts due or becoming due to Robertson's other creditors ; and in addition, there were about £550 other book debts as to which,

is right, and if the contingent liability in respect of the sweet is not to be treated as a debt. By the judgment in » action, dated 10th August, it was ordered that the contract of "be rescinded," that Robertson repay the £700 already ] that Phillipson on such payment put the Kingswear

'the same condition as at the date of the contract and de-

liver her to Robertson; and that Robertson pay £968 11 11d. " by way of damages." I do not understand this judginen awarding both rescission and damages; but there has been 1 appeal, and Robertson filed his schedule within two days, ing now at the figures as they stood on 8th July, the assets and liabilities are as follows : - Assets £7,410. Debts (present and future) £2,833, Adding the Kingewear liability 08 5 orang f ultimately ascertained - treating + Liabilities it as a debt; and omitting costs. | inbilities £4000 Still adding the Kingswear liability, but treating the ship as worth nothing to Robertson.

Even on the last basis there was a surplus of £1,909. I say nothing about the July wages; from the 8th July only abot one week's wages had accrued due; and if we are to take in account wages to be earned in the future, we ought to take into account the handsome earnings of the business and the fruit of those wages. There is no evidence that £842, the other debts, could not have been paid by means of this surplus; and, the fore, I am of opinion that the appellants have not discharged their burden of proof, as they have not shown that Robertson was 8th July unable to pay his debts, even assuming that the Kings wear liability is to be treated as a debt on that date, and that the Kingswear itself was of no value. It is alleged that Robertson was unable to raise money to pay his wages and debts after judgment on 10th August. But his financial position after adverse verdict is no fair test of his financial position on 8th July yet even after the judgment the bank manager was ready to advance the month's wages and more - about £1,600 - on the security of the book debts, if Robertson would give it. But, course, the Kingswear was worth something. She had been sold, _ as seaworthy, for £2,500. She stood at that value in the books of the bank. I shall assume (though I doubt it very much) that the finding of the jury, (recited in the judgment), of unsea- : worthiness is to be treated as evidence of the fact of unsea- - worthiness against the bank; yet even after the action she is

y evidence on the subject. On 8th July, the initial date, the ae had not given Phillipson any security on the Kingswear: ax« or dthe jury had not found that she was unseaworthy. It is, Ae fore, obviously unfair to treat the Kingswear, or the purchase - Haut. money payable therefor, on that date, as being worthless for higgins. cing purposes. In this part of the case I am assuming,

my own view, that the possible liability in respect of the Kingswear is to be treated as a debt as on 8th July ; but, of course,

if my view is right, the appellants' failure to satisfy the burden

T ought, perhaps, to allude to the argument that, because the

of ereditors who may be treated as preferred includes those

vho are to become, or may become, creditors in the future, by virtue

of contracts already existing: Jn re Paine; Kx parte Read (1);

In ve Blackpool Motor Car Co. Ltd.; Hamilton vy. Blackpool Motor

Cur Co. Ltd. (2), so the class of debts in the phrase " unable to pay

his debts " must include all liabilities of all kinds that may become

lebts in the future. No one, I think, has urged that these cases

e not good law. It seems, for instance, that a man may "prefer"

his surety by giving him a security by way of indemnity against possible loss. But why should these cases bind us in the inter-

tion of the other phrase? There is really no analogy

een the cases. To "prefer" a creditor means to put him in

'ition that he will be better off than other creditors in the ministration in insolvency. It involves a mental state as to

future; and in preferring a creditor the mind is necessarily

on the state of things at the time of insolvency, and on the

bts or liabilities that may be proved at that time. But in the

se "unable to pay his debts as they become due out of his moneys " there is no mental state involved ; and the question

pecne of external facts as they exist at the time of the security

ing given. The phrase " unable to pay his debts as they beeome

due" is not to be explained by the rule of thumb method of find-

g what liabilities are provable on an insolvency. The true correlative of debts due by the insolvent is debts due to the insol-

vent, and the meaning of this is given by Mellish LJ, in passage which I have quoted above.

The next question is, what is the meaning of "a reas and sufficient consideration given at the time?" What is " reasonable and sufficient consideration" for giving a securi over an existing debt and a present advance? The ph read by the respondent trustee as if it were "a consideration j money equal in amount to the amount secured." But there nothing whatever about equality, or even equivalence, in tl section. At the time when this sec. 108 was first enacted - in t Insolvency Act of 1864, sec. 74 - there were frequent cas England and elsewhere in which the want of a reasonable a1 sufficient consideration, given at the time of the security by tl creditor secured, was held to be evidence, but not conel i evidence, of an intention to defraud the other creditors. For was a common occurrence to give satisfaction or security to favoured creditor, and to conceal the real motive by taking fror him at the time some colourable fresh payment, and then to that the consideration for the transaction was this fresh payment There were endless struggles as to what was the real motive. Ii seems to me that the Queensland legislature merely meant th what had hitherto been mere evidence should hereafter be cot clusive demonstration of a fraudulent intent to prefer, in the ¢ of a man unable to pay his debts. But there is no reason wh the same tests should not be applied in finding whether there wa or was not such a consideration. In Allen v. Bonnett (1) the ol debt was £450; the fresh advance was only £300; and yet security for the whole sum of £750 was upheld. In He part Fisher; In ve Ash, the cases are reviewed, and Mellish L.J. said (:

his trade, but to secure to Mr. Wells the repayment of his p advances." This was said in an extreme case in which security covered the whole of the debtor's property. The ides

the present advance must be equal, or even nearly equal, H. ©. or A. the amount secured, was never suggested in these cases. The ie rds used in the Act are not "equal in amount," but "reasonable - Baxx or sufficient." A secured creditor cannot get more than his debt, Jae hatever the value of the property mortgaged may be. He Hat. ly gets a priority of payment so far as regards certain tigginss. ; and if he be paid from these assets, the other assets are able for the other creditors. The amount available for other itors is not diminished if by means of the advance obtained debtor could maintain or retrieve his position, even if he is ly unable to pay his debts at the time. This case was das if the bank got, for its £937, assets of the value of 0, or, at the best, got assets of the value of £1,891 (the

mount secured) ; but this is a mistake. This is not the case of an absolute assignment. In the case of an absolute assignment : comparison of the property assigned with the amount of the bt discharged is often very material. If aman on 7th July has to pay £937 for wages, or else shut up his business in ruin, is it worth his while to give priority as to part - even the greater part - of his property to the extent of covering an existing debt of £954 and the present advance of £937? Is there not here a . mable and sufficient consideration ?" Another part of the nsideration is to be found in the contract of the bank (recited

many years been familiar in cases and text writers in con- ction with "consideration." It does not refer to the amount, but to the nature of "consideration." Any damage to the person whom the promise is made, as well as any advantage to the on by whom the promise is made, is "sufficient" consider- n to support a contract. A widow promises to pay her late d's ereditor if he will prove the debt to be owing. He it; and the trouble that he takes in doing so is " sufficient" tion to support the contract: See Williamson vy. ts (1). There is no necessity to show anything like ality. In this section there is added the word "reasonable." robably this means such consideration as a man could reasonably

expect, under the circumstances, to obtain by way of b where each party is straining for his own benefit. At the tir the words were first put into the Queensland Act of 1864, the t was, is ita transaction by way of genuine bargain, not a favour| the creditor: Shelford Bankruptey Acts 1862, p. 323; Alders Temple (1). In this case the bank had long been promised security

the precise force of this word " reasonably," it certainly does n mean "equal in amount to the debt secured." There is evidence whatever tending to show that the consideration unreasonable ; and the learned Judge evidently thought the action was the most natural, honest, business-like one in the work But he felt compelled by decisions to find that no reasonable ' sufficient consideration was given at the time. I am of opin that sec. 108, in prescribing that these two conditions - inal to pay debts &e., and the want of a reasonable and sufficient co sideration given at the time - shall be conclusive evidence of

• while other sections of the Act gave an opportunity to impe r the transaction on the ground that there was an actual (sec. 107) or that the transaction was fraudulent in effect

109. • meant to prescribe substantially that if a man, in finanei difficulties, choose to (practically) make a gift to, instead of bargain at arm's length with, the creditor, the Court need m no further inquiry as to motive or effect, but treat the action as a fraud.

An attempt has been made by Mr, Graham, who has cei been unsparing of pains in working at the case, to show that if sec. 108 does not invalidate the transaction, the securities a invalid under sec. 109; and for this purpose he seeks now t show that the bank has not proved that the security was , in good faith. There is no express finding on this subject in thi judgment ; and I donot find in the Judge's notes of the argum which are full, any reference to sec. 109, although there is ence to secs. 107 and 108. It is not fair, therefore, to com

d, if this section 109 was not pressed before the Judge, this H.C. or 4 rt ought not to be asked to give a finding of fact under that exe now. Reliance is principally placed on the remarks of Bayx or

¢ LJ. in Tomkins v. Saffery (1), but in that case the AUSTA™AS™4 ors alleged to have been preferred were obviously put Hat inquiry by facts which were fully within their knowledge. knew, as Lord Cairns said, "that there was a person with hom the bankrupt had had pecuniary dealings to a considerable

y not amounting to debt." The bankrupt was "the person ho of all others upon a matter of this kind would be their t untrustworthy informant." But Robertson is found to be

quite see of whom the bank manager could effecti e made further inquiries. But perhaps the simplest answer e contention is that, if my interpretation of the phrase mable to pay debts &e." is right, neither Robertson nor the manager had any need to concern themselves, for the ses of the section, with possible liabilities which were not This is one of several answers which seem to me to be ifficient as regards the new charge under sec. 109. As for the ical point taken before the Court - not in the notice of m - that the bill of sale does not truly state all its con- s, I do not agree with it at all. But, in view of the turn the case has taken, I do not feel called upon to take up er time and space in elaborating my reasons on a point of ral importance. I have felt it incumbent on me to state ome length the reasons why I venture to dissent on the main e meaning and application of sec. 108 - from my learned

olicitors, for appellants, Flower & Hart. citors, for respondent, Althow & McGregor.