Williams v Official Assignee of the Estate of William Dunn [1908] HCA 27

Williams v Official Assignee of the Estate of William Dunn [1908] HCA 27 - HCA 1908 case summary — Zoe

[65]

:- - " Provided that such creditor or the person receiving pay- ment on his behalf shall not at the time of payment have known that the debtor was then insolvent - or was by such payment rendered insolyent - or that he then contemplated the surrender of his estate as insolvent - or that proceedi for causing his estate to be sequestrated had been commenced - or that the pay- ment was a voluntary preference of such creditor to other creditors Thus honest transactions were protected. So the law continued until the year 1887. In that year a new Act was introduced which was founded substantially upon the English Bankruptey Act of 1883, which contained a definition of acts of bankruptey. I will only refer to three, which were specified in sec. 4 (1) and were, (a) if a debtor makes a con- veyance or assignment of his property to a trustee or trustees for the benefit of his creditors generally; (6) if he makes a conveyance, gift, delivery, assignment or transfer of his property, or of any part thereof, with intent to defeat or delay his creditors, or any of them; and (c) if he makes a conveyance or transfer of his property or any part thereof, or creates any charge thereon, which would under this or any other Act be void as a fraudulent preference if a sequestration order were made against him. See. 51 of the Act provided that the bankruptey of a debtor should have relation back to the time of the act of bankruptey upon which the order for sequestration of his estate was founded, or, if he were proved to have committed other acts of bankruptcy, to the first of those acts proved to have been committed within six months of the date of the presentation of the petition. The result, if the Act had stopped there, was this: - The title of the trustee relating back to the first act of bankruptcy proved, from the moment when the bankrupt commenced to commit that act he was dealing not with his own property, but with that of the trustee, and therefore anything that he did afterwards was void and could not confer any right. The purchaser or person dealing with the bankrupt was precisely in the same position as if he were dealing, for instance, with a person who offered for sale a horse which he had stolen. That had been the condition of the bankruptcy law, but it had been modified in New South Wales in 1861 by the Bankruptey Act

[67]

Act of 1883, upon which, as I have said, the New South Wales Act of 1887 was founded. See. 54 of that Act contained certain provisions as to executions. Sec. 55 contained provisions for the avoidance of voluntary settlements, and sec. 56 contained pro- visions as to fraudulent preferences, all of which were declared to be void as against the trustee in bankruptcy. Then followed sec. 57, which was a protecting section and ran thus - following, and in fact being a transcript of sec. 49 of the English Bankruptcy Act 1883, which has been the subject of interpretation in the Court of Appeal in England on more than one occasion: "Subject to the provisions of this Act with respect to the effect of bankruptcy on an execution or attachment, and with respect to the avoidance of certain settlements,and . . . preferences . . . nothing in this Act shall invalidate, in the case of a bankruptcy," amongst other things, "any payment by the bankrupt to any of his creditors,' provided that both the following conditions were complied with, namely, that the payment took place before the date of the sequestration order, and that the person with whom the transaction was made had not at the time notice of any avail- able act of bankruptcy having been committed before that time. The onus of proof was thrown upon the person claiming to uphold the transaction. Payment or delivery for the purpose of this section included the drawing, making, or endorsing of a bill of exchange, cheque, or promissory note. Now, sec. 56 of the Act of 1887 had provided in respect of preferences that "every alienation, transfer, gift, surrender, delivery, mortgage} or pledge of any estate or property, real or personal - every warrant of attorney or judicial proceeding made, taken, or suffered - every bill of exchange or promissory note drawn, made 'or endorsed, and every payment made . . . by a person being at the time insolvent, or in contemplation of surrendering his estate under this Act, or knowing that proceedings for placing the same under sequestration have been commenced, or within sixty days before the sequestration thereof " and whether fraudulent or not, "having the effect in any such case of preferring any then existing creditor to another, shall be absolutely void." Sec. 58, which was not taken from the English Acts, was in these terms: - [His

[68]

Honor read the section and continued] - Shortly after this Act was passed it appears to have occurred to somebody that, as sec. 57 was made subject to the foregoing provisions of the Act with respect to the avoidance of preferences, there was no protection for any transaction which was a preference. Whether that doubt was well founded or not is not material, but the opinion of the Court of Appeal in the case of Bullock y. Ardern (1) seems to suggest that there was no foundation for it. However, whether that is so or not, the legislature struck out the words "and preferences" from sec. 57, leaving absolutely subject to the previous provisions of the Act with respect to the particular matters mentioned - that is to say, executions and attachments and the avoidance of certain settlements - the provision that nothing in the Act should invalidate, amongst other things, any payment by the bankrupt to any of his creditors. Soon after that there came before the Supreme Court of New South Wales a case generally known as Davy's Case; In ve Atlas Engineering Co. (2), in which Owen J., then Chief Judge in Equity, held that sec. 58 operated as an exception from the protection of sec, 57 and as a proviso to that section, so that any transaction of the bankrupt which was an act of bank- ruptey was void as against the official assignee, notwithstanding the provisions of see. 57. The argument in the case is not reported, but it appears to have been assumed or admitted that the word "distribution" in sec. 58 meant or was equivalent to "disposition." The learned Judge apparently did not think that the words "nothing in this Act shall invalidate" in see. 57, which are positive words, extended to the section which followed. Whether he thought they applied to the sections preceding or not Ido not know. We have not the advantage of his reasons. But he came to the conclusion that sec. 58 operated as if it were a part of sec. 57. It may be remarked that it was not necessary for the decision of the case to decide that point, because the transaction in question did not come within the protection of sec. 57, there having been a previous act of bankruptey to the knowledge of the person who received the money.

[71]

real meaning of sec. 58. I would point out, to begin with, that when the Act of 1887 was passed preferences in good faith were protected by law, under the Act of 1861. By sec. 57 they were protected under substantially the same conditions as in the Act of 1861. But, it is said, sec. 58 had the effect of repealing that and going back to the law as it stood before 1861. That con- tention is founded upon two arguments, both of which are, in my opinion, without foundation. It is said, first, that the word "distribution" in sec. 58 is equivalent to "disposition," and, secondly, that the words " nothing in this Act shall invalidate " do not include sec. 58. With regard to the meaning of the word " dis- tribution," distribution of property is an expression not unknown in bankruptey law. A distribution of property ina bankruptcy is made by a trustee or assignee for the benefit of creditors. Sometimes there is a distribution under a deed executed by a debtor amongst his creditors or some of them. Such distributions are made acts of bankruptey by sec. 4 (1) which relates to assignments for the benefit of creditors generally, so that a distribution exactly falls within that sub-section. They are made void as against the assignee. There was, therefore, no necessity to say in sec. 58 that any such transactions should be void as against the official assignee. The initial words of sec. 58 are : - Every distribution of property which is under this Act an available act of bankruptcy shall be void." But the Act had already said so, and saying it twice over did not make any more effectual the invalidation already enacted in sees, 4and 51. Can it be supposed that the legislature would, by language so ambiguous, have gone back upon the legislation of 1861, which was also the Jaw in England, and had been adopted from there by New South Wales. It is suggested that historically the word " distribution " may be a mistake for "disposition." The legislature may, per- haps, have meant to say " disposition," but that is mere con- jecture, and I do not think it ought to be adopted. But this appears historically, that sec. 58 came from the Victorian Insolvency Statute 1871 where it was necessary. The word there was not "distribution," but "conveyance, assignment, gift, delivery or transfer of any property." Under that Act there was

[79]

provides in the plainest terms that nothing in the Act shall invalidate in case of a bankruptey any such dealing or transaction, provided that two conditions are complied with, namely, that the dealing or transaction shall have taken place before the date of the receiving order, and the person with whom it was entered into shall not have had at the time of entering into it notice of any available act of bankruptcy committed by the bankrupt before that time." Then he pointed out that both those conditions existed in the case before the Court, and went on - "That being so, I have no hesitation in saying that I think the legislature meant what they have in plain terms said in this section ; and I do not think it is material to consider what may have been decided upon the terms of other sections in other Acts relating to bankruptey now repealed." And Rigby LJ. in. the same case said (1): - *It seems impossible to say that the words 'nothing in this Act shall invalidate,' literally construed, would not include that portion of the Act which provides what acts shall constitute an act of bankruptcy. The specific exceptions contained in the beginning of the section serve to show the absolute generality of the words that follow them." In my opinion the only possible distinction between that case and the present is that the Act here says in two places that acts of bankruptcy are invalid, while the English Act says so only in one. He went on - 'But I cannot see any foundation for the contention that the legislature did not intend to protect a transaction coming within the term of sec. 49, because but for that section it would have been rendered invalid by a previous section of the Act as constituting an act of bank- ruptey." In this case the words in question are not in a previous section, but in a subsequent section. But the subsequent section that made the act an act of bankruptcy referred to the previous section, and then proceeded to deal with some transactions not falling within sec. 57.

[89]

a different one? Is it that in the context, by which I mean the rest of the Act, it is used generally, or in a similar connection, in asense other than the natural and ordinary one? That is by no means the case. A number of sections were cited in the argu- ment - it is not necessary to mention them now - in every one of which, where the word " distribution" was used, it was used in connection with the notion of division, or as an equivalent for division of property of the bankrupt, whether all the property or among all the creditors is immaterial. Invariably throughout the Act it imported a division of the property of the bankrupt among several persons the creditors of the bankrupt. That, then, is the sense in which it must be understood in this section unless there is some context, other than the context I have pointed out as favouring the natural meaning, to take it out of the natural meaning, and that must be a context as plain or plainer than the context I have pointed out. I have not found in the rest of the Statute, nor has there been indicated during the argument, any such context. I am of opinion, therefore, that the words "every distribution of property" must be read in the ordinary and natural sense, and if they are so read, they do not refer to the kind of transctions that sec. 57 protects. They deal with matters that primd facie are different, and in the ordinary and in no other sense ; thus construed the section cannot operate as a proviso. The class of cases referred to in sec. 57, as is easily seen, are single or isolated transactions with the bankrupt. The class of cases referred to in sec. 58, on the other hand, are dealings, not between an individual standing alone and the bankrupt, but transactions by the bankrupt with more than one person; an additional class of acts to those to which, by the provisions of sec. 57, protection is given. How, then, can it be argued that sec. 58 under these circumstances is a proviso to see. 57? Ithink that the learned Chief Judge in Equity, who first gave the construction now complained of to the section in question, had not had the matter of the meaning of the word "distribution " fully brought before his mind by argument. 'Turning now to sec. 57, we find that it begins with words of refer- ence to other sections of the Act : - " Subject to the provisions of

[90]

this Act with respect to the effect of bankruptey on an execution or attachment, and with respect to the avoidance of certain settlements, and subject to the provisions of this Act with respect to the avoidance of certain preferences except as hereinafter provided." The effect of bankruptey upon an execution or attachment is dealt with in sees. 53 and 54, And I should mention that the group of sections now in question are put with sec. 58 in Division IV. of the Act under the heading "Effect of Bankruptey on antecedent transactions." See. 55 (1), (2) deals with the avoidance of certain settlements, and sec. 56 with the avoidance of certain preferences. But, as some of the transactions to be protected by sec. 57 are preferences, the words are added "except as hereinafter provided," in order that the preferences, which it is intended that sec, 57 shall protect, may be quite safely protected by the addition of those words, The respondent's construction, however, seems to me to attach no weight to the fact that in the Act of 1896, sec, 18, which repeals the old sec. 57 and re-enacts the present one in its place, inserts the words "with respect to the avoidance of certain preferences except as hereinafter provided" in such a way that one takes them to be a coherent phrase in themselves. This, then, is the extent to which antecedent transactions are dealt with as regards the effect of bankruptey upon them in that Division of the Act. Then we go to the remaining part of the section : - " Nothing in this Act shall invalidate in the case of a bankruptcy : - (a) any payment by the bankrupt to any of his ereditors for or on account of any just debt due at the time of payment," and then the other matters which are protected. " Nothing in this Act." That does emphasize, if it is necessary to emphasize it further, any protection which the words standing alone would give. It means that, whether a portion of the Act precedes or follows the section in question, it shall not have the effect of invalidating these transactions. It seems to me difficult to contend that - where you find these strong words "nothing in this Act shall invalidate,' - invalidation should be sought in the very next following section, and that end attained by taking the words of the section out of their ordinary meaning and giving them a meaning not sustained by the rest of the Act. Under

[92]

proviso to sec. 57, and that sec. 57 therefore stands undiminished in force by the other section. If that is so, then Shears v. Goddard (1) applies exactly to this case. The result is that the operation of sec. 49 of the English Act, and of sec. 57 of this Act, must be held to be exactly the same unless we disregard the reasoning of the Court of Appeal. Under the circumstances, what is the duty of this Court? Is it, when certain previous local decisions are pointed out, to disregard the decision of the Court of Appeal and leave matters as they stand? If these previous decisions had been as to some matter of title, the devolution of property, or the course of conveyancing, one could understand that they had so operated upon the transactions of the public that it would be the duty of the Court not to disturb them. But it can hardly be contended that that rule applies to a construction such as that we have been discussing here. I do not think any such rule as would apply in the former case does apply. But we find that the original construction was in truth a dictum, since there the payee was affected with notice. It was arrived at by the Chief Judge in Equity apparently without having the effect of certain words brought to his mind, and it seems to me that this construction should be considered as having been applied by inadvertence. 'That construction was adopted by his successor, and came ultimately before the Supreme Court, and the Supreme Court, in a case in which the transaction was valid without reference to the decision in In re Atlas Engineering Co. (2), expressed itself as satisfied with the construction. Seeing that after all the judgment of the Full Court Zn re Bond (3), decided that the transaction was protected notwithstanding Davy's Case (2), I do not see that the judgment of the Full Court gives such binding authority to it, as representing the course of legal decision in New South Wales, that we are bound to act upon any presumed rule in this respect. If the rule is asserted to be that, where there are no considered decisions on the point at all, Parliament will be presumed to act upon a received judicial interpretation founded on a dictum in all its legislation subsequent to that interpretation, it must always be recollected that Parlia-

[100]

exception to that rule in the case where the words used have acquired a technical meaning which is well known, or where they have acquired a legal meaning by decisions of the Courts. In either of these cases it may be presumed that the legislature used the word in the legal or technical sense, as the euse may be, rather than in the ordinary sense. But before the exception to the general rule can arise, there must be some strong ground for attaching to the words used a meaning different from the ordinary meaning. 'The word upon which the decision as to the meaning of see. 58 turns is "distribution." It is an ordinary word, not one with a technical meaning, nor one that has acquired any legal meaning, and, therefore, in this section it must be construed in its ordinary sense. Now, in its ordinary sense the word " distribution " connotes a division amongst several persons, Sometimes it conveys the idea that there is a separation or division for the purpose of handing over property. The division may be amongst two only, but it is quite clear that in no ordinary sense of the word can it be applicable to the transaction of handing over property of the debtor to one person, There seems to be no reason why the word should not have its ordinary meaning unless there is something in the context to show that the legislature is not using it in that sense. Mr, Gordon has very properly admitted that in the ordinary use of the word it has not the meaning which is relied upon. But he argues that, in connection with the context in sec. 58 and the rest of the Act, the special and peculiar meaning that was placed upon the word by the Supreme Court should be adopted. So far from that being the case, I have come to the conclusion that the use of the word in its ordinary sense carries out the intention of the legislature expressed upon the face of the section itself, whilst its use in the special and peculiar meaning would not. It was clearly intended to provide for the protection of bond fide dealings with property in the special case of assignments. See. 57 protects bond fide transactions on the part of a payee and assignee under the circumstances set out in that section. But the transactions in see. 58 would certainly be open to attack under the other general sections of the Act were it not for the protection given to trust deeds and those who act under them

[108]

within a month of deeds of assignment; but neither having any connection with the interpretation placed upon "distribution of property." After the Act of 1896 came the consolidation in 1898. That is the Act which we have now to interpret. It is not contended that the consolidation involved in the passing of the Act of 1898 added any weight to the facts upon which Mr. Gordon relied. He relied upon the Act of the legislature in passing the Act of 1896. Now, it seems to me impossible to say that because the legislature - assuming, as we are bound to assume, that they knew of these decisions - afterwards used the same language and enacted the same provisions, they must therefore be taken to have approved of the meaning put upon the Act, erroneously as I think, by the Supreme Court in the year before. The utmost extent to which the rule can fairly be stretched cannot cover a case of this kind. Many cases have been decided in which the rule has been laid down. I do not think it necessary to advert to them except to say that they all refer to the decision of the Court upon particular words. For instance, Lord Coleridge C.J. in his statement of the rule in the ease of Barlow v. Teal (1), said : - " Whatever may have been the intention of the legislature we can only decide this case on general principles, and one of those general principles is, that where cases have been decided on particular forms of words, in Courts, and Acts of Parliament use those forms of words which have received judicial construction, in the absence of anything in the Acts showing that the legislature did not mean to use the words in the sense attributed to them by the Courts, the presumption is that Parliament did so use them." To the same effect are the words of James LJ. in Greaves v. Tofield (2); Dale's Case (8); and of Lord Coleridge C.J. in Jay v. Johnstone (4). The limitation I have referred to is in them all. There was one case much relied upon, The Anna (5), but it is quite clear that, when that is read in the light of the comment made upon it by A. Z. Smith LJ. in The Mecca (6), that is not a case in which the interpretation

[115]

directions, and not altering the erucial words now under consideration. I take it that what the Court has to do is to ascertain and enforce the will of Parliament and to enforce that will as discoverable by legislative enactments. If Parliament has so acted as to indicate, in the words of the Privy Council in Attorney-General for Victoria v. Melbourne Corporation (1), either expressly or by clear intendment that it has accepted the interpretation of the words by the Court then in future all Courts have to follow that. But I am unable to see in this instance that Parliament has done this. It certainly has not done it expressly, and I cannot see that it has done it by necessary intendment. Therefore I feel that we are bound, so far as the matter depends upon the expression "distribution of property," to apply our minds to the question as if those words appeared for the first time. It is true that Parliament has passed the section again in a consolidating Act. If it were not for the known circumstances under which these consolidating Acts have been passed in New South Wales, I think I should have felt consider- ably pressed, but having regard to those circumstances and to the fact, which is common knowledge, that Parliament in passing this Act was not holding itself in a situation to consider attentively whether it would accept that particular meaning or not, I do not see how we are able to draw the conclusion that Parliament has deliberately adopted the interpretation put upon the words by the Court. With regard to the effect of the section as a whole, as I shall indicate more precisely presently, I think that what Parliament has done, by reason of one amendment at least, has been to indicate its view of the effect and operation of that section. But that is another matter. Before considering the precise meaning of the term I intend to address myself to the question of the effect of sec. 58. The section begins with a distinct and positive enactment. "Every distribution of property which is under this Act an available act of bankruptcy shall be void as against the official assignee." Primd facie, that is a distinct and affirmative enactment of invalidity. As the section originally stood the word "available" was not there. In 1896 the legislature inserted that word. If Parliament had not looked upon the (1) (1907) A.C., 469, at p. 475.

[121]

as in the case of Attorney-General v. Clarkson (1), cited in the Privy Council case to which I have already referred, the necessary effect of that particular amendment seems to me to be that Par- liament did recognize that sec. 58 had somewhat too large an invalidating operation, too large for the view of Parliament, and, therefore, Parliament limited that operation for the future. Then we find that after that enactment we get the words "save only," indicating, according to ordinary principles of construction, that what follows is an exception from the previous general expression, and if the limited protection thereafter enacted in the section is an exception, it necessarily follows that the previous portion must have an independent effect. To my thinking that section was necessary, having regard to the other portions of the Act, to invalidate acts of bankruptey if Parliament wished to make them in all cases invalid. See. 4 provided what should be acts of bankruptey, and sec. 51 provided that the bankruptcy of the debtor was to have relation back, and to commence at the time of the act of bankruptcy, which is first proved to have been com- mitted within six months preceding the date of presentation of the petition, that is, the first available act. And then sec. 52 provides in sub-see. (c) that all such property as may belong to or be vested in the bankrupt at the commencement of the bankruptcy is property divisible amongst the creditors, that is to say, belongs to the assignee. Therefore, if the Act had not pro- ceeded in some subsequent section to qualify that and to protect some acts of bankruptey, it would have been wholly unnecessary to have put in any invalidating words regarding acts of bank- ruptey. There are many cases which establish that property, which has been passed or which has been purported to pass by reason of an act of bankruptcy, may be claimed by the assignee unless it falls within the protecting terms of subsequent sections, in England sec. 49. I refer only to one or two of them: Jn re

[122]

Pollitt; Ex parte Minor (1); In re Carl Hirth; Ex parte The Trustee (2); and there is a passage in Wace on Bankruptey 4th ed., p. 161, which seems to me to correctly state the law: - "Subject to the protection given to certain transactions by sec. 49, the trustee can sue the person to whom the bankrupt has paid away moneys, which have become the trustee's property by relation back, without showing any ground upon which, apart from the special bankruptcy law, the bankrupt or the trustee could have maintained an ordinary action for money received to his use, just as he can follow goods or recover their proceeds ; Ward vy. Fry (3), where the authorities are collected." In the New South Wales Act, sec. 57 is the protecting section, and Shears v. Goddard (4), as has been pointed out by the Chief Justice, is distinct upon the point that even an act of bank- ruptey may be protected under that section if the necessary facts are proved by the person claiming their protection. And it is put most distinctly by Lopes LJ. that if the terms of sec. 49 apply the transaction is protected. I should refer to the case of Davis v. Petrie (5). There the learned Judge of the County Court had to deal with an application turning upon sec. 43 of the English Act. He thought that the trans- action was protected by sec. 43, though he considered that the language of the section itself was opposed to that view. There was an appeal by the trustee in bankruptey and Lord Alverstone C.J. there pointed out that, unless the case could be brought within sec. 49, it was not protected, and Kennedy J. said (6): - If such a payment is protected, the protective section

sec. 49 - as to payments made without notice would appear to be unnecessary." It therefore appears to me that if you stopped at see. 57 you would be exactly in the position of the English law, namely, that all transactions, unless they can be brought within the protecting provisions of sec. 57 may be invalidated if otherwise obnoxious to the Act, but if they do come within the terms of the protection indicated by that section then, no matter that they are acts of bankruptcy, the section says that nothing in

[125]

particular transactions mentioned, which would include, of course, the same things as are made by the Act acts of bankruptcy, as the section says, "nothing in this Act shall invalidate" them pro- vided that the requisite conditions are complied with. Having reached that point I do not see how it can be said that the invalidating provisions of sec. 58 are unnecessary if Parliament wishes to do anything more. If the transaction is prohibited by sec. 57, the trustee is protected by it, and creditors who act in good faith are protected. You do not want the protecting por- tion of the section at all; you have already got it. And unless some new and independent invalidation was intended by see. 58, then it seems to me that the protecting provisions of sec. 58 are utterly unnecessary. I therefore consider that sec. 58 is an invalidating section. It is the latest exposition of the legislative will, and I must say that, in order to give some effect to it, I do not see my way to differ from the view taken by the learned Judges of the Supreme Court of New South Wales in regarding it as a qualification or modification of see. 57. In other words, Parliament has said that certain acts shall be acts of bankruptcy and shall be invalid as against the trustee or assignee, and I include among acts of bankruptey preferences and other trans- actions, and various voluntary settlements; and then Parliament has said : - " we intend to protect some of these things upon certain conditions"; and then they have said, according to my view, "we will not include in that protection any distribution that is an available act of bankruptcy." And, looking at the context, it seems to me that the predominant idea in the mind of the New South Wales legislature was this, while in other respects we are going to protect bond fide dealings by third persons, still, we are going to see that, so far as we can, there shall be a rateable distribution among the creditors of the property of a bankrupt which would otherwise be distributed by available acts of bankruptcy. It may be hard upon one particular creditor who has taken under a fraudulent preference, considered from the standpoint of the creditor, to have to refund it.

[127]

ought to share equally with him. He has no greater claim upon that money than they have, and, therefore, upon the whole it seems to me that we need not attribute injustice or absurdity or reversal of intention to the legislature in order to apply, if the words will properly lend themselves to it, the meaning which I am now suggesting. Then, having done that, it is necessary to consider what is the meaning to be attached to the expression "distribution of property." The first observation I will make is this, that the meaning of words in a particular context must be ascertained by considering the subject matter and con- sidering the nature of the context in which they are found ; and the first observation that occurs to anyone's mind is this, that this is a bankruptey Act, and being a bankruptey Act we have got to consider the meaning of the words " dis- tribution of property" in bankruptey. If that expression has no definite meaning, no recognized meaning, if in the course of bankruptey administration the term " distribution of property " has not been regarded as a well known term, with a certain signification, then we are thrown back upon the ordinary English meaning of the term, and at first I was much impressed with that view, and however hard it may be and however unreasonably it may work out, for some time I did not see my way to depart from the ordinary meaning of the word "distribution." But subsequent consideration and examination of authorities have led me to change my mind. I should point out that from the very beginning of bankruptcy administration in England the term "distribution" has been used, and used in a sense to include one isolated payment by a debtor. If, therefore, we find that in an Act of this nature that expression has been used in that sense, we are not, I think, driven to adopt necessarily the ordinary dictionary signification of the term in which it may be used in a context of a totally different nature; and before proceeding to refer to those authorities I am going to assume that what I say is correct as to there being an ambiguity in the term, arising, upon the one hand, from the ordinary meaning of the term, and on the other, from its frequent use in bankruptey proceedings. And assuming that, I want to see how the section works out in order to see which construction we should adopt.

[129]

means an assignment forthe benefit of creditors. That is the argument. I am not quite sure whether it means, according to the argument, an assignment of all property for the benefit of creditors generally, or also includes an assignment to some creditors; it does not matter much which view is taken. But, however the argument is intended to be presented, I see in the section itself a clear distinction between "distribution of property " and a conveyance or assignment of property in trust for creditors. If the legislature meant the section to apply only to the case of conveyances or assignments of property in trust, they would have begun the section with those terms. They did use them later on ; why did they not use them at the beginning of the section if they intended them? Therefore, at the very threshold we find the legislature distinguishing between the dictionary or ordinary meaning and a larger sense than conveyances of property on trust. Once you arrive at that you are a long way on the road to giving a fair and reasonable meaning to the whole section. It is said that the word, at all events, must mean something equivalent to a distribution or division. My first answer to that is that you do not find the word " equivalent" in the section, and I do not see why it should be inserted. Then I see how the sec- tion works out. According to the argument, if a debtor transfers land or goods, part of his property, to A. as trustee for six creditors out of ten in consideration of a full release, with intent on the part of the bankrupt to delay and defeat the other four creditors, the trustee taking in perfect good faith, that transac- tion is an act of bankruptcy under sec. 4 (b), and it is void according to the argument because it is a distribution. But if the transfer were to A. as a creditor for himself of the very selfsame property in consideration of a release by him, he taking in good faith and the debtor intending to defeat and delay the other nine creditors, the transfer, though equally an act of bankruptey and an injury to the creditors, is not voidable, according to the argument, because it is not a "distribution." If we take sec. 4 (¢), fraudulent preference, and a debtor divides £1,000, part of his. property, among six creditors out of ten giving them a preference, it is voidable because it is a distribu-

[130]

tion, but if he gives it all to the one creditor it is not. That is the argument. Distribution, it is said, cannot mean giving to one man, and I am assuming that the debtor does not intend to give anything to another creditor, but simply hands over the money to one and says: - " Now I may be made bankrupt, I am not going to follow any process of distribution further than what Thave done." It does seem to me that that is not what the legislature can have intended. Unless we are foreed to the position I am not prepared to accept it. If that be the nature and effect of the argument, if distribution does not mean the disposal of money among several, if it does not mean a scheme of distri- bution, then what becomes of the argument? Am I driven then to the everyday meaning? I think not. I refer with a good deal of comfort to that case of Bowrne v. Graham (1) decided by Wood V.C., a learned Judge on whom, I suppose, one may well place great reliance ; I may say that without presumption. And reading his judgment which was in reference to a fraudulent preference, a case of a single transaction, I do not think, so far as I personally am able to judge of the matter, that his Honor was there using the terms "distribution" and " distribute" in any but the most deliberate sense. I may be wrong in that, but it is the impression that I have, reading it as well as I may, because the word is used time after time in the judgment, and time after time with reference to a single act. And, if so, it affords very strong grounds for believing that in 1856 the leading authorities in English bankruptcy law regarded that word as a well known term in reference to that matter. I now turn to a textbook for a moment, Robson on Bankruptcy, 7th ed., p. 161. There the learned author, speaking about fraudulent preferences and the doctrine which was generally considered to have been intro- duced by Lord Mansfield, says: - 'The object of it was to prevent a trader on the eve of bankruptcy from making a voluntary distribution of his property amongst his creditors, so as to defeat that equal distribution which is contemplated by the bankrupt laws." Of course the doctrine was applied as much to one transaction as to fifty. But I go back for a moment to undoubted authorities to show how the phrase (1) 2Jur. N.S., 1225,

At a glance

Court

Decision date

Before

Source

Judgment (152 paragraphs)

Cited By (2)