CHAP. XI. PART VII. but the last bill of sale was registered, and a petition for liquidation was shortly afterwards filed, it was held, that the bill of sale was void, as a device for the benefit of the debtor, it being obvious that the debtor did not agree to give a fresh bill of sale for the benefit of the creditor (s). Avoidance of fraudulent preferences. § 8.-AVOIDANCE of Fraudulent Preferences. "The Bankruptcy Act, 1869," enacts that "Sect. 92. "Every conveyance or transfer of property or charge thereon made, every payment made, every obligation incurred, and every judicial proceeding taken or suffered by any person unable to pay his debts as they become due from his own monies in favour of any creditor, or any person in trust for any creditor, with a view of giving such creditor a preference over the other creditors, shall if the person making, taking, paying, or suffering the same become bankrupt within three months after the date of making, taking, paying, or suffering the same, be deemed fraudulent and void as against the trustee of the bankrupt appointed under this act; but this section shall not affect the rights of a purchaser, payee, or incumbrancer in good faith and for valuable consideration." Although the preceding section is new, "The Bankruptcy Aet, 1869," being the first statute containing any enactment as to fraudulent preference, it introduced no new principle into the law. Long before the passing of that act there had been rules relating to fraudulent preference clearly laid down; and those rules were not in any substantial degree modified or altered by the act. Before the act it had been laid down that in order to constitute fraudulent preference it was essential that two things should concur. First, there must be a voluntary payment; secondly, the payment must be made in contemplation of bankruptcy. As to the first point, it had been decided that an earnest bonâ fide threat would deprive a payment made under it of that voluntary character which made it impeachable. With regard to the second point, it had been held that when the payment had been made by a person in a hopeless state of insolvency, it had been made in contemplation of bankruptcy. There were numerous instances of cases in which payment, in the ordinary course, of a bill of exchange which had been presented at maturity, or the payment of debts which had become due in a particular manner or time, had been held not to be open to objection on the ground that they were voluntary payments. To hold them to be otherwise would impede and embarrass the ordinary transactions of commerce. If sect. 92 had merely enacted that "every payment made to a creditor shall, if the person making the same become bankrupt within three months after making the same, be deemed fraudulent and void," it would have put an end to any question that could be raised as to contemplation of bank(8) Ex parte Cohen, Re Sparke, 41 L. J. (N. S.) Bankr. 17. ruptcy. But a qualification has been added, namely, that in order to be fraudulent, the payment must have been made "with a view of giving such creditor a preference over the other creditors." These words are the very life and essence of the provision, and, therefore, unless it is made clear that the object of the payment was the preference of one creditor over another, the payment cannot be impeached. If the act of the debtor can be referred to any other motive than that of giving one creditor preference above another, the payment would not be fraudulent or void. That this is the meaning of the act is made clearer by the proviso at the end of the section, to the effect that the section shall not affect the rights of a purchaser, payee, or incumbrancer "in good faith and for valuable consideration." As a matter of construction, it may be doubtful to what persons the words "for valuable consideration" were meant to apply; but the payee must clearly act in good faith (†). Therefore to bring a case within the new section it must be within the old law (u). The law is thus stated by Lord Mansfield in the earliest case on the subject: "If a man about to become bankrupt, and knowing that the law intends that the creditors shall share equally in the property, voluntarily, and not upon pressure, does an act which contravenes the spirit of those bankrupt laws, the goods, or the money delivered or paid over, can be recovered back from the person to whom he may have only paid a just debt" (x). The law, as thus defined, was recognized and adopted in the latest case previous to "The Bankruptcy Act, 1869" (y). (t) See judgment of Bacon, C. J., In re Cheesebrough, Ex parte Hitchcock, 40 L. J. (N. S.) Bankr. 81; see also judgments of the Lords Justices, In re Craven, Ex parte Tempest, 40 L. J. (N. S.) Bankr. 22. (u) James, L. J., In re Craven, Ex parte Tempest, 40 L. J. (N. S.) Bankr. 24. (x) Alderson v. Temple, 4 Burr. 2235. (y) Marks v. Feldman, in the Exchequer Chamber, Law Rep., 5 Q. B. 283; 39 L. J. (N. S.) Q. B. 107. In some of the cases exception has been taken to the direction given to the jury by the judge; in others it has been contended that the inference drawn by the jury was not justified by the evidence. But the courts in dealing with these questions seem never to have departed from the rules originally established, and although it is true that in some of the earlier cases a stronger case, or rather a stronger degree of pressure, appears to have been required in order to de prive the debtors' act of that spontaneity which is requisite in order to set aside the transaction, it is no less true that in later cases it has been held that a demand or request made by a creditor although not accompanied by any threat or expressed in angry, or even any urgent terms, is still sufficient to deprive the act of a voluntary character. In Hurst v. Mortimer (10 B. & C. 44), Lord Tenterden said that some of the previous cases had gone too far as against the creditor; and in Edwards v. Glyn (2 E. & E 29; 28 L. J. (N. S.) Q. B. 350) two of the judges referring to the same point, and contrasting the more recent with the former decisions, observed that the tide had turned." Bacon, C. J., Ex parte Craven, 39 L. J. (N. S.) Bankr. 35 (affirmed on appeal, 40 Id. Bankr. 22), where most of the authorities will be found. See the law applied to the mortgage of ships, The Heart of Oak, 39 L. J. (N. S.) Adm. 15. PART VII. CHAP. XI. PART VII. Question of fact for a jury. Protection of certain transactions with bankrupt. The following cases have been expressly decided under sect. 92: A mortgage to secure a previous debt, executed upon a demand for security and considerable pressure, although accompanied by a desire on the part of the debtor to make the creditor, who was a personal friend, secure, was upheld, as well on the ground that it was not voluntary as that it came within the proviso as being executed in good faith and for a valuable consideration (z). Where traders in a hopeless state of insolvency, three days before they suspended payment, paid in the ordinary course of business, and without any motive for favouring the payee, a considerable sum to a creditor, who received it bonâ fide, the payment was upheld (a). It is to be observed, that the question whether what is alleged to have been a preference, was voluntary or not, is one of fact, and has been at all times so stated and considered. It is for a jury, if the question arises before them, to say whether or not the just inference from the evidence is that the act done was voluntary on the part of the debtor; and if the like duty is to be discharged by the judge, the same rules must guide his judgment as ought to influence a jury in pronouncing their verdict (b). § 9.-PROTECTION OF CERTAIN TRANSACTIONS. "The Bankruptcy Act, 1869," enacts that Sect. 94. "Nothing in this act contained shall render invalid- (2.) Any payment or delivery of money or goods belonging to a bank- (z) In re Craren, Ex parte Tempest, 40 L. J. (N. S.) Bankr. 22 (Lords Justices), affirming judgment of Bacon, C. J., 39 L. J. (N. S.) Bankr. 33. In this case the ruling, under the former Act, in Brown v. Kempton, 19 L. J. (N. S.) C. P. 169; was cited approvingly. (a) In re Cheesebrough, Ex parte Hitchcock, 40 L. J. (N. S.) Bankr. 79. (b) Judgment of Bacon, C. J., Ex parte Craven, Re Craven, 39 L. J. (N. S.) Bankr. 37. The former rule in bankruptcy that if a bankrupt fraudulently deliver goods to one of his creditors, the assignees may disaffirm the contract and recover the value of the goods in trover, but that if they affirm the contract, then the creditor may set off the debt, still holds good. See the rule in the notes to Smith v. Hodson, 2 Smith's Leading Cases, 5th edition, pp. 118—123, and post, Chap. XIII. PART VII. CHAP. XI. of certain transactions entered into lation to the property of the bankrupt. by or in re (3.) Any contract or dealing with any bankrupt, made in good faith and for valuable consideration before the date of the order of adjudication, by a person not having, at the time of making such contract or dealing, notice of any act of bankruptcy committed by the bankrupt, and available against him for adjudication." Sect. 95. "Subject and without prejudice to the provisions of this act Protection relating to the proceeds of the sale and seizure of goods of a trader (d), and to the provisions of this act avoiding certain settlements (e), and avoiding, on the ground of their constituting fraudulent preferences, certain conveyances, charges, payments, and judicial proceedings (f), the following transactions by and in relation to the property of a bank rupt shall be valid, notwithstanding any prior act of bankruptcy,(1.) Any disposition or contract with respect to the disposition of property by conveyance, transfer, charge, delivery of goods, payment of money, or otherwise howsoever made by any bankrupt in good faith and for valuable consideration, before the date of the order of adjudication, with any person not having at the time of the making of such disposition of property notice of any act of bankruptcy committed by the bankrupt, and available against him for adjudication: (2.) Any execution or attachment against the land of the bankrupt, executed in good faith by seizure before the date of the order of adjudication, if the person on whose account such execution or attachment was issued had not at the time of the same being so executed by seizure notice of any act of bankruptcy committed by the bankrupt, and available against him for adjudication: (3.) Any execution or attachment against the goods of any bankrupt, executed in good faith by seizure and sale before the date of the order of adjudication, if the person on whose account such execution or attachment was issued had not at the time of the same being executed by seizure and sale notice of any act of bankruptcy committed by the bankrupt, and available against him for adjudication" (g). The provision of sect. 95, which declares the validity of conveyances, &c. made in good faith and for valuable consideration before the date of the order of adjudication, is subject to, and not in contravention of, the existing law (h). There is, for example, nothing inconsistent between it and the provision of the Partnership Act, 28 & 29 Vict. c. 86 (i). (d) See sect. 87, post, p. 324. (e) See sect. 91, ante, p. 317. (f) See sect. 92, ante, p. 318. (g) As to the corresponding provisions of former bankrupt acts, see the notes to Cooper v. Chitty, 1 Smith's Leading Cases, 5th edition, pp. 436-449. (h) Ex parte Macarthur, In re (i) Id. D. VOL. II. PART VII. CHAP XI. § 10.-EFFECT OF BANKRUPTCY ON PROPERTY TAKEN IN The effect of bankruptcy on property taken in execution, and where the process has been partially or wholly executed, has been a fruitful source of litigation (k). Sub-sects. (2) and (3) of sect. 95 (ante, p. 321) relate to cases where the seizure is after the act of bankruptcy. A consequence of the doctrine that the title of the trustee has relation back to the time of the act of bankruptcy, was, that if a sheriff levied after the act of bankruptcy under an execution against the bankrupt, he levied, not upon the goods of the bankrupt, but upon the goods of the assignee, and was a wrongdoer as against him and liable to an action for the value of the goods. Provisions were introduced into the bankrupt acts to meet the injustice resulting from the liability of the sheriff for levying an execution when he was ignorant of the circumstance rendering him liable to an action; and sect. 95 of the present act accordingly gives protection to the seizure and sale, before the order of adjudication, but after an act of bankruptcy of which the creditor had no notice (1). This special protection does not apply to where the seizure is before the act of bankruptcy, for no protection is required in that case, as the act of bankruptcy could not have any effect on the execution; and notice of an act of bankruptcy after the seizure could have no more effect than the act of bankruptcy itself (m). (k) The seizure of goods by the sheriff does not vest any property whatsoever in the creditor under whose writ the seizure is made. The property which is vested in the sheriff by seizure is merely that which results from his being appointed officer of the law, and to enable him to sell the goods and raise the money, not that thereby the property is taken out of the debtor. The goods are, in substance, in custodiá legis; the seizure by the officer is for the benefit of those who are by law entitled; it is made against the will of the debtor, and no property is transferred by any act of his to the sheriff. Giles v. Grover (House of Lords), 1 Cl. & F. 72; 9 Bing. 128; 6 Bligh, N. S. 277; see judgment of Bacon, C. J., Ex parte Rayner, In Re Johnson, 41 L. J. (N. S.) Bankr. 26. (7) See judgment of Martin, B., in Slater v. Pinder, 40 L. J. (N. S.) Ex. 146. (m) Edwards v. Scarsbrook, 3 B. & S. 280; 32 L. J. (N. S.) Q. B. 45; Ex parte Todhunter, Law Rep., 10 |