Gow and Chambers v White [1908] HCA 17

Gow and Chambers v White [1908] HCA 17 - HCA 1908 case summary — Zoe

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e payments in question were a series of sums of £25 made at tervals of about a fortnight during the six months preceding e insolvency, which occurred in May 1907. The relevant facts of the case lie within a very small compass. The debtor wis a butter buyer and manufacturer, selling the butter to _ other persons for export. The appellants were agents for English buyers, and bought butter for export from the debtor and others. They had been dealing with the debtor for several years. In May 1906 their accounts nearly balanced. In that month the appellants agreed to buy from the debtor about £500 : ~ worth of butter to be delivered at short dates, and advanced the j £500 before delivery. The debtor's business, consisting of buy- ing from creameries and dairymen, naturally required the com-

mand of capital, and there is nothing very surprising in the fact : "that he oceasionally obtained payment in advance from persons zi to whom he was selling to enable him to pay for the butter as he : ight it. Persons are at liberty to carry on business in that way if they like, and it appears that it is not unusual in the butter trade, as, indeed, might naturally be expected. Before _ advancing this large sum of money, however, the appellants took the precaution of inquiring as to the debtor's financial stability from his bankers and received satisfactory answers. They also made other inquiries, the nature of which may not be very clear, 'but, at any rate, they were sufficiently satisfied of his stability to advance the £500. The debtor did not deliver £500 worth of butter, and made excuses for not delivering it. The appellants did not ask for their money back, but they asked for the butter. 7 This went on for some time, and in October it was arranged 'that the debtor should repay the £500 with interest by instal- 'ments, The reason that he gave to the appellants for not deliver- 'ing the butter, and for asking to be allowed to repay in that way, was that he had entered into a contract to supply £8,000 worth of butter a month to another exporter, which was expected to be y much more profitable to him than the contract which he

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to be so until the insolvency. He hesitated, however, to come to the conclusion that under all the circumstances of the case there _ was a fraudulent preference. In the view I take of this case it _ is not necessary to decide that point. As I have pointed out, the mere fact that a debtor, who is unable for the moment to pay "his debts as they become due out of his own moneys, makes a payment is not conclusive, but I think it is unnecessary to decide that point. I think with the learned Chief Justice that there is a good deal to be said on both sides. I turn now to the other question, of good faith. Now the agreement was made in October, more than six months before the insolvency, It was made for a valuable consideration. True, it was not a present consideration, but that is quite irrelevant. _ An agreement made for a past consideration is just as good as any other agreement, unless there is some law that makes it less valid. The relevant dates in this case are the dates when the payments were actually made, and the question as to each of them _ is whether at that date the creditor received the payment in goop faith, that is, to use the language of this Court in Stewart & Walker v. White (1), whether he " knew or had reason to suspect that the effect of it would be to pay him in full and leave other _ ereditors unpaid." In the absence of actual knowledge, there must be circumstances calling for inquiry. If a debtor in appar- ently solvent circumstances, as this debtor was, pays a portion of his debt on the day on which he is bound under a valid agree- ment to pay it, what is there to call for inquiry on the part of _ the creditor? In Tomkins v. Saffery (2) the circumstances were 'such that the creditor knew that the debtor was insolvent, and _ that, if there were any other creditors, they must necessarily be : left wholly unpaid. In the present case, so far as I can see, the only fact that can be referred to, as calling for inquiry, is that an old claim was being paid by instalments. If that fact is suffi- cient to call for an inquiry, a creditor who gives extended credit _ toa debtor for part of a debt could not safely receive any further payments without inquiry as to the debtor's circumstances at the time of each payment, although to all appearances the debtor was

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bond fide in the latter part of the section. As to the former it decides that " with a view of giving" means with an intention to give. It has been said in the course of the argument that the section gets rid of all questions of the state of mind of the person making the payment - the insolvent - but that is not so. The question of intention must always be determined - whether the intention is, or whether the intention is not, to give a preference to the creditor paid. That intention, of course, must be proved, like any other intention, by statements of the insolvent or by inferences drawn from the facts. But Stewart & Walker v. White (1) lays down no hard and fast rule, that it is always necessary to come to the conclusion that there has been a preference under circumstances such as existed in that case. The, statement to which my learned brother the Chief Justice has referred contains these words (2) : - '"I think that when a debtor, knowing that he cannot pay all his creditors in full, deliberately pays one of them, he intends the necessary consequences of his action, i.e., he intends to give him a preference." I think that passage has to be taken in connection with the facts with which the Court was dealing, and it undoubtedly is true that, where you get facts which come within that deseription, the inference may very fairly be drawn that there is an intention to give a, preference to the creditor who has been paid. 'The rule as to good faith laid down in Stewart & Walker vy. White (1) states the position as it has been put in many other cases, and it is concisely summed up in these words in the judgment of the Chief Justice (3): - " In my opinion a payment made by a debtor who is unable to pay his debts as they become due from his own moneys, and which is not made in the ordinary course of business, and is. made under such circumstances that the creditor has good reason to suspect that he is obtaining a preference from an insolvent debtor, is void under sec. 107. That is to say, the case is brought within the first part of the section, and the creditor cannot bring himself within the protective proviso." The law, therefore, applicable to the case is abundantly clear, and the matter for our consideration really is, what is the right conclusion to come to upon the facts.

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the Judge, the Court is sensible of the great advantage he has had in seeing and hearing them, It is often very difficult to estimate correctly the relative credibility of witnesses from written depositions; and when the question arises which witness is to be believed rather than another, and that question turns on manner and demeanour, the Court of Appeal always is, and must be, guided by the impression made on the Judge who saw the witnesses. But there may obviously be other circumstances, quite apart from manner and demeanour, which may show whether a statement is credible or not; and these circumstances may warrant the Court in differing from the Judge, even on a question of fact turning on the credibility of witnesses whom the Court has not seen." As the case was put to us by the appellants' counsel it was suggested that there was no question of fact in dispute - that no question of credibility arose, that it was merely a question of inferences from undisputed facts. I cannot agree with that view. It seems to me that one cannot decide upon any aspects of facts necessary to be considered here, without having regard to the credibility of the witnesses. The matter to be established is principally the knowledge and the state of mind of the creditors when they received these payments. They have made certain statements in regard to their state of mind, and it is impossible to decide the case without coming to some conclusion as to whether they did or did not honestly believe what they said. It seems to me, therefore, that the credibility of the witnesses on both sides is a matter which enters quite as materially into the consideration of the facts to be determined, as do the inferences from facts established or admitted. Under these circumstances I feel bound to give a very great weight to the opinion of the learned Chief Justice who heard the case, and who had the advantage of seeing the demeanour of the witnesses under examination and _cross- examination. Apart from that consideration, indeed, I should be disposed to concur in the view which the learned Chief Justice took in the Court below on the facts as to the bona fides of the receipt of these payments, but, with the addition of that consideration, I have no hesitation in coming to the conclusion that his finding on the facts should be adopted by this Court

At a glance

Court

Decision date

Before

Source

Judgment (73 paragraphs)