property acquired during the coverture, although it be not so §§ 47, 48. expressly limited (h). Where an intended wife and husband covenanted with the trustees of their marriage settlement to bring into settlement "all property to which the wife, during the coverture, or her husband in her right, should become entitled by devise, bequest, or otherwise, for any estate or interest whatsoever," it was held that the covenant bound her residuary estate given her for her separate use by her father's will during the coverture (i). A wife is at liberty to elect during coverture to confirm or disaffirm a settlement executed by her while an infant, and if she becomes of unsound mind without doing so the Court has jurisdiction to elect on her behalf (k). And where by settlement on marriage it was covenanted that any property over 5007. "as to which the wife then was or should, during the coverture, become entitled," was to be brought into the settlement, it was held that an unascertained share of residuary estate given to the wife by a will which came into operation before the marriage was not within the covenant, the value of the share having only reached 500l. after the determination of the coverture (1). Act, 1869, s. 92. 48. (1.) Every conveyance or transfer of property, or Avoidance of charge thereon made, every payment made, every obliga- certain cases. preferences in tion incurred, and every judicial proceeding taken or Bankruptcy suffered by any person unable to pay his debts as they become due from his own money 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 is adjudged bankrupt on a bankruptcy petition presented within three months after the date of making, taking, paying, or suffering the same, be deemed fraudulent and void as against the trustee in the bankruptcy. (h) Dickinson v. Dillwyn, L. R. 8 Eq. 546; Carter v. Carter, L. R. 8 Eq. 551; In re Edwards, L. R. 9 Ch. 97. (i) Re Allnutt, Pott v. Brassey, 22 Ch. D. 275. See as to setting aside settlement, Dutton v. Thompson, (k) Wilder v. Pigot, 22 Ch. D. (1) Re Welstead, Welstead v. Leeds, 47 L. T. 331. 8 48. What is deemed a fraudulent preference. Transfer of the whole of property. Advances. Ex parte Ellis. (2.) This section shall not affect the rights of any person making title in good faith and for valuable consideration through or under a creditor of the bankrupt. We have already seen that all fraudulent dispositions of property are acts of bankruptcy, and as such are void as against creditors within Sect. 4; but it does not follow that transactions, which may be impeached as fraudulent preferences under this section, are also at the same time acts of bankruptcy. There is no doubt that at common law a debtor (provided the transaction does not amount to a fraudulent preference under the bankrupt laws) may openly prefer one creditor to the rest, and transfer property to him, even after the others have commenced their actions (m), and on that footing stands a deed for the benefit of creditors so soon as any creditor knows of and assents to it (n). And it is broadly laid down that a sale of property for good (i.e., valuable) consideration is not, either at common law or under the statute of Elizabeth, void merely because it is made with intent to defeat an expected execution (o). A conveyance to a creditor, however, by a debtor of the whole of his property, or of the whole with a nominal exception in consideration of a bygone and pre-existing debt, though not fraudulent within the Statute of Elizabeth (p), is fraudulent under the Bankrupt Act and an act of bankruptcy (9). And so likewise even where there is a small fresh advance, for though the smallness of the fresh advance does not necessarily make the conveyance an act of bankruptcy, it affords strong evidence that the principal object of the parties in the whole transaction was, not to enable the bankrupt to continue the trade, but to secure the grantee the repayment of his past advances. In the words of Mellish, L.J., in Ex parte Ellis (r): (m) Holbird v. Anderson, 5 T. R. 235; Eastwick v. Caillaud, 5 T. R. 420; Goss v. Neale, 5 B. & M. 19; see, however, Owen v. Body, 5 A. & E. 28. (n) Wolverhampton and Staffordshire Banking Co. v. Marston, 7 H. & N. 148; 30 L. J. Ex. 402. (0) Wood v. Dixie, 7 Q. B. 892; Hale v. The Saloon Omnibus Co., 4 Drew. 492; but see Bott v. Smith, 21 Beav. 511. (p) Alton v. Harrison, L. R. 4 Ch. 622. (q) Lindon v. Sharp, 7 Scott, N. R. 730; Hutton v. Crutwell, 1 E. & B. 15; Pennell v. Reynolds, 11 C. B. N. S. 709; Lomax v. Buxton, L. R. 6 C. P. 107; Ex parte Norton, L. R. 16 Eq. 397. (r) 2 Ch. D. 797; 45 L. J. Bank. 159; see also Ex parte Fisher re "It is not a question whether the further advance is great or small, but whether there is a bona fide intention of carrying on the business." But though rendered fraudulent as contrary to the spirit of the bankrupt laws, even in the absence of actual fraud, such conveyances did not become fraudulent in fact and for all purposes, so that where, under the then existing law, there was no relation back of the assignee's title, such an assignment could not be treated as an act of bankruptcy so as to be voidable by the assignees (s); but if such transaction came within the meaning of a "fraudulent preference" it could be so avoided, although not an act of bankruptcy (t). Under Sect. 92 of the last Act, and also under the present section, certain conditions have been prescribed under which such transfers by bankrupts to creditors on the eve of bankruptcy may be avoided as contrary to the spirit of a fair and equitable distribution of the bankrupt's property amongst the creditors generally. § 48. perty. A transfer of even a part of the debtor's property to a Transfer of creditor in consideration of a bygone and pre-existing debt, part of prothough not fraudulent within the Statute of Elizabeth, was, even before the Bankruptcy Act, 1869, fraudulent and an act of bankruptcy, if made voluntarily and in contemplation of bankruptcy, or if it otherwise had the effect of defeating or delaying creditors (u). This doctrine, known as "fraudulent preference," and which was so well established by a series of decisions originating in the time of Lord Mansfield, was not embodied in any Bankruptcy Act prior to 1869. There was much conflict of opinion as to what, in the particular case, was necessary to constitute in law a transaction a fraudulent preference within the meaning of Sect. 92 of the Act of 1869, and it was contended in one case that as the word "voluntarily," which was formerly used as the received definition of a fraudulent preference, had been substituted by Ash, L. R. 7 Ch. 636; 41 L. J. Bank. 62; Ex parte Winder, 1 Ch. D. 290; Ex parte Greener re Vane, 46 L. J. Ch. 76. And see Ex parte Wilkinson ré Berry, 22 Ch. D. 788, in which the Court of Appeal held that it was not necessary that the agreement to make advances should be binding at law or in equity. It need only be bona fide. (8) Jones v. Harber, L. R. 6 Q. B. 77; Mercer v. Peterson, L. R. 2 Ex. 304. (t) Marks v. Feldman, L. R. 5 Q. B. 275. (u) Smith v. Cannan, 2 E. & B. 35; Young v. Fletcher, 3 H. & C. 732, S. C.; Bills v. Smith, 34 L. J. Q. B. 68. 8 48. Necessary elements of fraudulent preference. It must have been voluntary. the words in the 92nd section of the 1869 Act, "with a view of giving such a creditor a preference over the other creditors," the section avoided a payment made partly under pressure and partly with a view to prefer a particular creditor; but this contention was held not tenable, and that a payment in order to be void was still to be voluntary in the sense of being given without pressure, inasmuch as the law of fraudulent preference remained unchanged in this respect (x). The several elements necessary to be proved so as to constitute a transaction void as a fraudulent preference, under the last Act, as far as they can be deduced from the cases, are these. The transaction must necessarily have been made, (1.) Voluntarily, and with the sole object (of which knowledge on the part of the person so preferred was requisite) of giving that particular creditor a preference over the rest. (2.) That the debtor was, when he gave such preference, unable to pay his debts as they became due out of his own moneys. (3.) That the debtor should become bankrupt within three months from the date of the transaction. And it would seem that in these several respects the law remains unaltered, save that the above section has added to the language of Sect. 92 of the 1869 Act, the words " or any person in trust for any creditor," in describing such transfers, and has rendered more clear the meaning of the words (which was somewhat obscure) at the end of Sect. 92 of the 1869 Act (y), operating in favour of "purchaser, payee, or incumbrancer, in good faith and for valuable consideration" by the enactment in lieu of the above words that the section shall not "affect the rights of any person making title in good faith and for valuable consideration through or under a creditor of the bankrupt.” 1. The transfer must have been a voluntary act. In a recent case (2), Jessel, M.R., said, that in considering what is a fraudulent preference within Sect. 92 of the Act of 1869, regard must be had simply to the words of that Act, and that the decisions prior to the Act of 1869, although useful as (x) Ex parte Craven, L. R. 10 Eq. 648; affirmed on appeal, Ex parte Tempest, L. R. 6 Ch. 70; 40 L. J. Bank. 33; Smith v. Pilgrim, L. R. 2 Ch. D. 127; Strachan v. Barton, 11 Ex. 647. (y) And see Butcher v. Stead, L. R. 7 H. L. 839; sub nom. Meldrum, 43 L. J. Bauk. 198, in which it was held that a creditor was within the protection of the words of the section as well as a third party. (2) Ex parte Griffith re Wilcoxon, 23 Ch. D. C. A. 69; W. N. February 24, 1883. guides, should not be substituted for the words of the Act, so in the particular case it was held, that although there was in some sense pressure by the creditor, who had made repeated requests for payment and had been often refused by the debtor, yet there having been evidence of an intention to prefer, the transaction was held to have been voluntary within this section. Under the old law, it had been held that if the act were done in pursuance of a previous contract which in itself did not amount to a fraudulent preference (a), or to deliver the debtor from legal process (b), or in consequence of a threat or apprehension of legal proceedings, whether civil or criminal, even though groundless (c), or to avoid the enforcement by the creditor of some legal right, such as abstaining from levying a distress (d), the transaction could not be regarded as purely voluntary, and therefore was not a fraudulent preference. And most recently it was held that an assignment of all effects for a present advance, as well as after-acquired property arising from such advance, was not in itself fraudulent (dd). Sect. 25, sub-s. (2) of this Act declares, that upon the arrest of a debtor no payment or composition made or security given after arrest shall be exempt from the provisions of this Act relating to fraudulent preferences. An agreement to withdraw an execution by the creditor and to make an advance to the debtor to pay his bankers, upon having a bill of sale of all the property to cover the old debt and future advances, was held void upon the creditor taking possession as a device to defeat creditors, but the payment to the bankers was protected as having been made bona fide (e). § 48. Pressure or importunity on the part of the creditor, it was Pressure. said, also negatived the voluntary nature of the act, although no threat was used (ƒ). On the other hand, and more recently (a) Harman v. Fishar, Cowp. 117; Hunt v. Mortimer, 10 B. & C. 44; Vacher v. Cocks, 1 B. & Ad. 145; Bills v. Smith, 34 L. J. Q. B. 68; Thayer v. Lister, 30 L. J. Ch. 427. (b) Alderson v. Temple, 4 Burr. 2233. (c) De Tastet v. Carroll, 1 Stark. 88; Thompson v. Freeman, 1 T. R. 155; Cosser v. Gough, ib., 156; Ex parte Scudamore, 3 Ves. 85; Ex parte Ainsworth, 3 M. & A. 451. (d) Stevenson v. Wood, 5 Esp. 200; Mavor v. Croome, 1 Bing. (dd) Ex parte Hauxwell re (e) Ex parte Clater re Wilkinson, 48 L. T. 648. (f) Rust v. Cooper, Cowp. 629; Smith v. Payne, 6 T. R. 152; Crosby v. Crouch, 2 Camp. 166; Wainwright v. Clement, 4 M. & W. 385; Van Casteel v. Booker, 2 Ex. 691: Johnson v. Fesemeyer, 3 De G. & J. 13. |