Bills and Another, Assignees of W. Smith, against C. Smith
| Jurisdiction | England & Wales |
| Judgment Date | 28 January 1865 |
| Date | 28 January 1865 |
| Court | Court of the Queen's Bench |
English Reports Citation: 122 E.R. 1211
IN THE COURT OF QUEEN'S BENCH AND THE EXCHEQUER CHAMBER
S. C. 34 L. J. Q. B. 68; 12 L. T. 22; 11 Jur. N. S. 154; 13 W. R. 407. Applied, Ex parte Hodgkin, 1875, L. R. 20 Eq. 755; In re Vantin [1900] 2 Q. B. 327.
[314] bills and another, Assignees of W. Smith, against C. smith (a). [Saturday, January 28tb], 1865. Bankruptcy. Fraudulent preference. Demand by creditor. - 1. A payment made by a debtor on the eve of bankruptcy, out of a fund which would otherwise be distributable among his creditors, without a demand by the particular creditor, is not necessarily a fraudulent preference. - 2. (a) This case was decided during the Term, and has been accidentally misplaced. 1212 BILLS V. SMITH B. & S. 315. In an action by the assignees of a bankrupt to recover back a sura of money alleged to have been paid by way of fraudulent preference, the Judge left to the jury as a question of fact whether at the time of the payment to the defendant bankruptcy was contemplated by the bankrupt, and that, if the payment was in contemplation of bankruptcy and voluntary, they ought to infer that it was intended to prevent the equal distribution of the property amongst the general creditors, in which case it would be void as against the assignees: that if the bankrupt, though he was aware that bankruptcy was unavoidable, and though no application had been made for payment, paid the debt simply in discharge of the obligation he had entered into to pay on a given day, without any view of giving a preference to that particular creditor at the expense of the rest, the payment would not be a fraudulent preference within the meaning of the bankrupt law. Held, a right direction. [S. C. 34 L. J. Q. B. 68; 12 L. T. 22; 11 Jur. N. S. 154; 13 W. R. 407. Applied, Essparle HodgUn, 1875, L. R. 20 Eq. 755 ; In re Fantin [1900] 2 Q. B. 327.] This was an action by the assignees of William Smith, a bankrupt, against Charles Smith, the brother of the bankrupt, to recover back a sum of money alleged to have been paid to him by the bankrupt by way of fraudulent preference. It was tried before Blackburn J. at the Lincolnshire Summer Assizes, 1864, when, a verdict having been returned for the defendant, Hayes Serjt., in Michaelmas Term, 1864, obtained a rule for a new trial on the ground of misdirection, citing Marshall v. Lamb (5 Q. B. 115). This rule was argued in the present Term, on the 13th January; before Cock-burn C.J., Blackburn and Mellor JJ., and Crompton J. (who left the Court before the close of the argument). [316] Macaulay and J. F. Stephen shewed cause, and Hayes Serjt. and Wills were heard in support of the rule. The nature of the case, together with the arguments upon it, fully appear in the judgment of the Court. It will be sufficient to add that The Bankrupt Law Consolidation Act, 1849, 12 & 13 Viet. c. 106, s. 133, and the following authorities, were referred to. Aklersonv. Temple, (4 Burr. 2235, 2240), Norman v. Fishar (Cowp. 117), Thompson v. Freeman (1 T. R. 155), Hartshorn v. Slodden (2 B. & P. 582, 584), Crosby v. Crmch (2 Camp. 166, 168, per Lord Ellenborough), Gibbins v. Phillipps (1 B. & C. 529, 534), Hunt v. Mortimer (10 B. & C. 44), Father v. Cocks (1 B. & Ad. 145), Morgan v. Brundrelt (5 B. & Ad. 289), Cook v. Rogers (7 Bing. 438), Atkinson v. Brindatt (2 Bing. N. C. 225), Gibson v. Boutts (3 Scott, 229), AMI v. Darnell (1 Moo. & M. 370), Ogden v. Stow* (11 M. & W. 494), Fan Casteel v. Booker (2 Exch. 691), Strachan v. Barton (11 Exch. 647, 650), Edwards v. Glyn (2 E. & E. 29) (r). Cur. adv. vult. The judgment of the Court was now delivered by. Cockburn C.J. This was an action by the assignees of William Smith, a bankrupt, to recover back a sum of money paid to the defendant, as it was alleged, by way of fraudulent preference. On the trial, evidence was given that William Smith became a bankrupt on the 14th of September, 1862. Before his bankruptcy, and at the end of April, 1862, [316] he had applied to the defendant, Charles Smith, who was his brother, for a loan of money. Charles Smith, according to the evidence, which the jury must be taken to have believed, told him that he had not the money, but that he thought he could procure it from his bankers on pledging himself to repay it on a particular day, and he asked his brother William when he would be able to repay the money, and was told on the 1st July then next. The defendant then went to his bankers and obtained from them an advance of the sum required, on the deposit of some title deeds, on the express contract that he, the defendant, would repay the money on, the 1st of July. He returned to William Smith, and informed him of the terms on which he had obtained the money ; and the money was lent by the defendant (r) See also Flook v. Jones, 4 Bingh. 20, Abbott v. Burbage, 2 Bingh. N. C. 444, Poland v. Glyn, 2 D. & Ry. 310, 4 Bingb. 22, note (a), Outline v. Crossley, 2 C. & P. 301, Aldred v. Constable, 4 Q. B. 674. 61. & S. 317. BILLS V. SMITH 1213 to William Smith, on the 29th of April, on the security of a promissory note payable on demand. A few days before the 1st of July the brothers again met, when William Smith, without any fresh application, told the defendant that he should ba prepared to pay him on the 1st of July, and requested to know the amount of the banker's commission and other charges, that he might pay the whole sum at once. He was told what they were, and on the 1st of July, without any further application, brought the money to the defendant and paid him. William Smith was in good general credit till some time after this payment; but the fact was that he was, during the whole period of this transaction, and had long been, in very embarrassed circumstances; and the money he thus obtained was wanted to pay off a creditor then pressing him for payment. But the defendant was not at all aware of these facts, and it was admitted at the trial that the [317] whole transaction was perfectly bona fide on his part. The evidence shewed that the affairs of William Smith continued to get worse, and that on the 1st of July they had become hopeless. On the 22nd of August, he issued a circular to his creditors, and on the 22nd of September became a bankrupt. It was left to the jury as a question of fact whether, at the time of the payment to the defendant bankruptcy was contemplated by William Smith, and they were told that if the payment was in contemplation of bankruptcy and voluntary, they ought to infer that it was intended to prevent the equal distribution of the property amongst the general creditors, in which case it would be void as against the assignees. So far no complaint is made of the direction ; but my brother Blackburn, who tried the cause further told the jury that if the bankrupt, though he was aware that bankruptcy was unavoidable, and though no application had been made for payment, paid this debt simply in discharge of the obligation he had entered into to pay on a given day, without any view of giving a preference to this particular creditor at the expense of the rest, the payment would not be a fraudulent preference within the meaning of the bankrupt law. The jury having found for the defendant, we must take it as a fact that the payment was made by the bankrupt botia fide and without any intention of giving an undue preference to the defendant. And the question is, whether the direction of the learned Judge to the jury was wrong in telling them that a payment made under such circumstances was good as against the assignees, on bankruptcy supervening. On the part of the plaintiffs it was contended that [318] the payment, having been made by the bankrupt without any application from the defendant, must be taken to have been purely voluntary on his part; and it was urged that as the effect of such a payment must necessarily be to prevent the rateable distribution of his effects among his creditors, and so to defeat the bankrupt law, and as a man must be taken to intend that which is the necessary consequence of his acts, a payment made spontaneously by a debtor on the eve of bankruptcy must necessarily be a fraudulent preference. The cases were also relied upon in which the question discussed had been whether the payment had been made voluntarily, or on the demand of the creditor; and the language of the Judges, in pointing out this distinction as the criterion of the validity of the...
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Re Matthews (F P and C H) Ltd
...of the Bankruptcy Act 1914 substantially re-enacts section 92 of the Bankruptcy Act 1869. That statute was enacted after the decision in Bills v. Smith and made a substantial alteration in the law. In Butcher v. Stead (1875) LR 7 HL at p. 846Lord Cairns (in a passage cited with approval by ......