uJ. Iconcur in the judgment of the Chief Justice. v : WEALTH

uJ. Iconcur in the judgment of the Chief Justice. v : WEALTH - [1916] HCA 45 - HCA 1916 case summary — Zoe

[109]

No doubt there are many observations to the effect that the bankrupt has a " qualified property " or some kind of interest. But when the cases come to be closely scrutinized, I can see nothing more in the matter than this - the bankrupt having acquired the property, in the first place as his own, and being undisturbed in the possession of it, has a better right to its possession and enjoyment than any third person. Further, there is introduced into the matter the humane and irrepressible consideration that the bankrupt has a tight to live and to see that his family live ; his property may justly be taken to pay his debts, but he is not to be reduced to servitude, and therefore he is at liberty to trade or otherwise to acquire property, and in addition to the right of retaining for himself all necessary sustenance, he possesses the incidental power of protecting all that trade and property and enforcing as against the world at large whatever rights he possesses as under the ordinary law. But, being so at liberty, it is necessary to protect those who deal with him, and the doctrine of Cohen v. Mitchell (3) applies for their protection. Accordingly, any person who deals with the bankrupt for value even with full knowledge of the bankruptcy can, unless and until the assignee intervenes and intercepts the property (Ex parte Dewhurst (4) ), obtain from or through the bankrupt a good title to the after- acquired property. Inre Behrend's Trust (5) is a recent instance where this doctrine was applied. But that doctrine does not, as I under- stand, invest the bankrupt with any " property " or " interest " in himself in the subject matter. His position enables him to transfer more than he has, provided it is in the course of dealing honestly and for value, and no intervention takes place by which the property is intercepted. He is thus enabled to divest the estate of property he brought into it as after-acquired property, but, if he brings in new property in exchange, it falls under the general rule and passes in turn as new property to the assignee subject to the same rules and doctrine of law as affected the former property.

[125]

is not protected. It is plain that both branches of the inquiry are appropriate in the case of a policy effected before sequestration, and that the answer to each question will be in the affirmative or negative according to the circumstances of the case, but where the policy has been effected after bankruptcy, the answer to either one or other of the questions must always be in the negative. Let us examine the matter a little more closely. It is said that Rygate obtained a "property " or "interest" in the policy of insurance within the meaning of sec. 4 as soon as it was issued to him, and that that "property" or "interest" once acquired could not be affected by the bankruptcy law vesting " after-acquired property " in the official assignee, because sec. 4 in terms protects such " property " or "interest" against the bankrupt law. We agree that if a "property " or "interest" is once acquired independently of the bankruptcy law, it comes within the provisions of sec. 4. But did Rygate acquire any "' property " or " interest " in the policy which was issued, or did the provisions of the bankruptcy law, vesting after-acquired property in the official assignee, prevent him from acquiring any such "property" or "interest '"'? The effect of such vesting provisions has been much debated, and is stated in the judgment of Bigham J. in In re Bennett (1). After reviewing the cases, his Lordship came to the conclusion that the bankrupt acquires such property as agent for the assignee or trustee in bankruptcy and for his benefit, and continues to hold it in that capacity unless and until he parts with it for value or surrenders it to the assignee or trustee. If this be the effect of secs. 10 and 52 (c) of the New South Wales Bankruptcy Act 1898, Rygate never obtained any "property" or "interest" in the policy, and so could not avail himself of the provisions of sec. 4, nor could his personal representative do so, But let us assume that on a true construction of the vesting provisions the bankrupt does take a "property" or "interest" in "after-acquired property," either independently of the bankruptcy law, before it passes to the official assignee, or under the bankruptcy law for his own benefit until the assignee intervenes on behalf of creditors. On the first hypothesis Rygate did obtain a property in the policy, not under, but despite, (1) (1907) 1 K.B., 149.

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3 - the bankruptey law, and it may be conceded that the language of

see. 4, if that section stood alone, would be appropriate to exempt such a property from the operation of the bankruptcy law as soon as it was acquired, and so confirm it permanently and absolutely _ in the bankrupt. The bankruptcy law, not affecting the property _ in the policy, could never take it out of the bankrupt and vest it in the official assignee. But sec. 5 provides that the exemption con- 4 tained in see. 4 shall operate only on policies which have endured for two years, and immediately after Rygate obtained a property in the policy, that property, wanting the protection of sec. 4, became _ subject to the bankruptcy law and passed to the official assignee. On the alternative hypothesis Rygate never had any " property " _ or "interest " in the policy except by virtue of the bankruptcy law _ under which he took a defeasible property in the policy when it was effected. On neither hypothesis was the bankrupt's property in the policy protected, because in neither case was there or could there have been performance of the condition as to endurance of the policy _ for two years; and on the second hypothesis the bankrupt never _ had any absolute property, or indeed any property or interest apart from the bankruptcy law, on which the exemption could operate. 4 Tt has been suggested that this policy might be protected if the _ time for invoking protection could be postponed from the date of 4 effecting the policy to the date when it had endured for two years ; _ that on the first hypothesis the property might have passed to the _ official assignee and remained in him until the policy had endured for two years, or, on the second hypothesis, might have remained in the bankrupt during that period subject to the intervention of _ the assignee, but that when it had endured for two years, an absolute
property to the extent of £200 was restored to the bankrupt, or the _ defeasible property to that extent was converted into an absolute E property, and so on at the termination of each successive period prescribed by sec. 5. Finally it is said that the two sections may be properly construed by postponing the period for invoking their : protection until the money secured by the policy becomes due. On
this construction the official assignee or execution creditor would _ apparently be entitled to deal with the policy as if secs. 4 and 5 did not exist, and when the money became due, if someone considered

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Judgment (129 paragraphs)

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