873 



BANKRUPT. 



BANKRUPT. 



874 



for adjudication be filed within twelve months, all bonft fide purchases 

 for value are protected. 



When none of the above statutory exceptions and qualifications tiike 

 effect, the general rule applies, with all its consequences, that the 

 assignees are invested with the property of the bankrupt, by relation, 

 back to the act of bankruptcy. The doctrine that the adjudication 

 when made, has relation back to the act of bankruptcy, has no applica- 

 tion against the crown ; and therefore intermediate seizures by the 

 crown of the bankrupt's goods are valid. And as a party who is sued 

 at law by a bankrupt cannot defend himself, by showing that the 

 bankrupt, before the action, has committed an act of bankruptcy, it 

 follows that all payments actually enforced at law by the bankrupt, 

 before the adjudication, are good payments, since it would be a glaring 

 injustice to allow the assignees to recover them a second time. 



Not only is all the property to which the bankrupt himself has a 

 right applicable towards the payment of his creditors, but there are 

 instances in which effects of other parties in his custody, which could 

 not have been retained by the bankrupt had he not become bankrupt, 

 will vest in his assignees under the fat. The present enactment on 

 this subject, the Bankrupt Law Consolidation Act, 1849, 125, is 

 levelled at the mischief occasioned by allowing the use of other per- 

 sons' property to be granted with impunity to a failing trader, who is 

 thereby enabled to assume a deceitful appearance of wealth, and obtain 

 factitious credit with the world. Accordingly, if any bankrupt, by 

 the permission and consent of the owner, shall have in his possession, 

 order, or disposition, any goods or chattels whereof he was reputed 

 owner, or whereof he had taken on himself the sale, alteration, or 

 disposition as owner at the time of his bankruptcy, the court may sell 

 the same for the benefit of the creditors. This provision applies only 

 to goods and chattels, such as furniture, utensils in trade, stock, bills 

 of exchange, &c. Ships are specially provided for by the Merchant 

 Shipping Act, 1854, 72, which enacts that no registered mortgagee 

 of any ship, or of any share therein, shall be affected by any act of 

 bankruptcy by the mortgagor subsequent to the date of the record of 

 such mortgage. Interests in property of a real nature, including 

 fixtures, are not affected by it. The main difficulty, which has occa- 

 sioned much litigation as to the cases within this clause, is in deciding 

 whether the bankrupt was or was not the reputed owner of the property 

 at the time of his bankruptcy, which is a question of fact determinable 

 by a jury, according to the circumstances of each particular case. 

 Where the bankrupt has once been the real owner, but has sold or 

 disposed of the goods, the circumstance of his still remaining in 

 possession of them raises generally a presumption that he possesses 

 them as reputed owner ; but where the bankrupt has the possession of 

 the goods without ever having been the real owner, it will require 

 stronger evidence to show his reputed ownership at the time of the 

 bankruptcy. The distinctions upon the subject are some of the nicest 

 which occur in the decisions of the courts. Where the purchaser of 

 wines transferred them to a particular bin in the vendor's cellar, had 

 each bottle sealed with his own seal, and had an entry made in the 

 vendor's books, it was held that these precautions prevented the 

 wines from falling within the operation of the clause. But in a case, 

 where the purchaser simply marked certain casks in chalk with his 

 initials, and gave no notice to the warehouseman, the decision was to 

 the contrary. If a bond is assigned over by the obligee, it must be 

 delivered to the party to whom it is assigned, and notice must be given 

 to the debtor, otherwise it will pass to the assignees of the obligee in 

 case of his bankruptcy. And it is the same as to the assignment of a 

 policy of insurance or other chose in action. Bills discounted by a 

 banker are in effect purchased by him, and they therefore pass with 

 the rest of his property to his assignees in the event of his bankruptcy ; 

 but bills which are not due, and are entrusted by a customer to his 

 banker for collection (entered short), though indorsed, remain the 

 property of the customer, since the banker is a mere agent for the 

 purpose of receiving the amount when they become due. But it is 

 otherwise if the bills, though not due, are paid in by the customer, and 

 treated absolutely as cash. Property which the bankrupt holds merely 

 as trustee, or as executor or administrator, or as a factor, or which is 

 placed in his hands merely for some particular purpose, will not pass 

 to his assignees as being in his reputed ownership. Goods which a 

 bankrupt receives on the terms of sale or return are held to be in his 

 reputed ownership, and to pass to the assignees ; but where the bank- 

 rupt had received goods the evening before his bankruptcy, and in 

 fact never unpacked them, it was held the owner might reclaim them. 

 If a trader have mortgaged his goods, but remain in possession of 

 them, they will pass to the assignees ; and this used to be the law with 

 respect to the mortgage of a ship. 



8. Arrangement between Bankrupts and their Creditors under tjie 

 control of the Court, or by deed ; and composition of bankruptcy. 



a. Under the control of the Court. A trader unable to meet his 

 engagements may, by petition to the Court of Bankruptcy within the 

 district of which he has resided or carried on business for the previous 

 six months, set forth the reasons of such inability, and pray that his 

 person and property may be protected from process until further 

 order. This petition must be in the form provided by the Bankrupt 

 Law Consolidation Act, 1849, Schedule Aa, and be supported by 

 affidavit. Thereupon the court may make such protecting order, and 

 if li.- 1* already in custody for debt may, except in certain specified 



cases (Bankrupt Law Consolidation Act, 1849, 211), order his release. 

 The court then appoints a private sitting and an official assignee ; and 

 if sufficient cause be shown, may direct the petitioner's estate and 

 effects to be seized by the messenger of the court, or to be held and 

 received by such official assignee. Fourteen days' notice in writing of 

 this private sitting must be given to every creditor ; and ten days 

 before it is held the petitioner must file a full account and statement 

 of his affairs, and therein set forth such proposal as he is able 'to make 

 for the payment or compromise of his debts and liabilities. At the 

 sitting the creditors are to prove their debts, and the petitioner is to 

 attend and be sworn to his account and statement, and may be ex- 

 amined thereon. If three-fifths in number and value of the creditors, 

 who have proved for amounts exceeding 10/., assent to the proposal or 

 to any modification of it, the court appoints another sitting for its 

 confirmation, to be held not earlier than fourteen days from the first 

 sitting. Of this second sitting seven clear days' notice in writing must 

 be served upon every creditor not present in person or by agent at the 

 first sitting ; and if at such second sitting the proposal assented to at 

 the first sitting be accepted by three-fifths in number and value of those 

 creditors who have debts to the amount of 10J., the terms of the pro- 

 posal are reduced into writing, and the creditors are to sign the same. 

 The court after hearing any opposing creditor who desires so to be 

 heard, may, if the resolution or agreement appear to the court to be 

 reasonable and proper, approve and confirm it. It is then filed and 

 entered of record, and a certificate is issued by the court to the peti- 

 tioner ; whereupon is endorsed from time to time a protection from 

 arrest binding upon all creditors who had notice of the sittings. Upon 

 this approval and confirmation the petitioner's estate vests in the 

 official assignee as fully as in bankmptcy, either solely or conjointly 

 with any persons that may be named for that purpose in the resolution. 

 When the terms of the resolution or agreement have been fully carried 

 out, the court gives to the petitioner a certificate thereof, that has the 

 same effect as a certificate of conformity under a bankruptcy, except 

 as to debts contracted wholly or in part by reason of any manner of 

 fraud or breach of trust, or without reasonable probability at the 

 time of contract of being able to pay the same, or by reason of any 

 judgment in any prosecution for breach of the revenue laws, or in any 

 action for breach of promise of marriage, seduction, criminal conversa- 

 tion, libel, slander, assault, battery, malicious arrest, malicious trespass, 

 maliciously suing out a fiat in bankruptcy, or maliciously filing or 

 prosecuting a petition for adjudication of bankruptcy. If the peti- 

 tioner does not attend the sittings of the court, or if he fails duly to 

 file a true and complete account, or if neither his proposal nor any 

 modification thereof be assented to at the first sitting, or any adjourn- 

 ment thereof, or if it appear that any debts have been contracted under 

 such circumstances as would exclude the operation of the certificate as 

 above-mentioned, or that the petitioner's affidavit was wilfully untrue, 

 or that his proposal was unreasonable, or that his petition was 

 unduly delayed, or if within three months of its presentment he 

 wrongfully assigned or made away with any portion of his estate 

 and effects, or voluntarily allowed his goods to be taken in execution, 

 the coxart may adjudge him thenceforth a bankrupt and proceed 

 accordingly. 



6. By Deed. Any deed or memorandum of arrangement between a 

 trader and his creditors, signed by or on behalf of six-sevenths in 

 number and value of those creditors whose debts amount to 10/., 

 touching such trader's liabilities and his release therefrom, and the 

 distribution of all his estate among all his creditors rateably, is obliga- 

 tory upon those creditors who have not signed it, and is not liable to 

 be disturbed by any prior or subsequent act of bankruptcy. But 

 such deed or memorandum does not thus bind a creditor until the 

 expiration of three months from his receiving from the trader notice 

 of his suspension of payment, and of the deed or memorandum, unless 

 the court for the district in which the trader has resided or carried on 

 business for six months next preceding his suspension, shall in the 

 meantime certify that the deed or memorandum has been duly signed, 

 and the creditors had fourteen dciys' notice of the trader's intention to 

 apply for such certificate. When the trustees or inspectors under the 

 deed or memorandum (if any be appointed thereby), or in the absence 

 of such appointment, when any two creditors are satisfied that the 

 deed or memorandum has been duly signed, and certify the same to 

 the court in writing, their certificate is filed with the registrar, and 

 becomes prima facie evidence of such due signature. This certificate 

 is to have appended to it a full and particular statement of the trader's 

 debts and of his creditors, verified by the trader's affidavit; and if 

 there be in it, through fraud or culpable negligence, any false state- 

 ment or omission, the trader will be deprived of all benefit to be 

 derived by him under the arrangement. The rights of the creditors 

 are adjusted as in bankruptcy. 



c. Composition of Bankruptcy. If any bankrupt, after passing his 

 last examination, call a meeting of his creditors, giving twenty-one 

 days' notice thereof in the ' London Gazette,' and then make an offer 

 of composition that nine-tenths in number and value of his there 

 present creditors agree to accept, and if such proposal be again so 

 accepted at a second meeting similarly convened, the court, upon such 

 acceptance being notified to it in writing, and upon payment of such 

 sum as it may direct, annuls the adjudication and dismisses the peti- 

 tion, and every creditor is bound by the composition. Special regula- 



