8 8. Effect of debtor's petition. Court, submits to its jurisdiction, and is entitled to its protection; and becomes at the same time amenable to the requirements and obligations imposed by the statute, just as if the receiving order had been made adversely and on a hostile petition, including the right and title of the trustee by virtue of relation back (Sect. 43). It is evident this petition, instituted in the place of the liquidation petition of the 1869 Act, will play an important part in the administration of the present Act. Taken in conjunction with the fact that title by relation, so as to avoid antecedent transactions, goes back first to the act of bankruptcy on which the order is made (in this case the debtor's petition), and has been materially shortened and limited, for the purposes of relation to prior acts of bankruptcy, to a period of three months preceding the date of the presentation of the petition, it becomes important to observe that the effect may be, in many cases, to enable the debtor, after some secret act of bankruptcy, to postpone until the expiration of such limited time the presentation of his petition, so as to afford a particular creditor the protection of the lapsed time, and, it is submitted, will necessitate greater vigilance on the part of creditors generally, particularly so when it is borne in mind that under the recent Act it was held, as to "fraudulent preference," that the meaning of Sect. 92 of the Act of 1869 (which also had the three months' limit), was that an act of bankruptcy, which would otherwise have been a fraudulent preference, could not be impeached unless a bankruptcy followed within three months (a), so that, if this case was rightly decided, the introduction of that section into the Act of 1869 was, in effect, a limitation of the more extended right under Sect. 11 of the same Act, to a period of twelve months prior to the date of the order of adjudication. But it is submitted where there is actual mala. fides or fraud in the transaction, the lapse of time, even on the debtor's part, in presenting his petition will afford, to the creditor, no such protection (b). The Court is bound to make the order upon the debtor filing his petition, and it seems unnecessary to require any creditor's application or petition founded upon the act of bankruptcy (a) See Re Liverpool and London Guarantee and Accident Insurance Co. ex parte Gallagher, &c., 46 L. T. Rep. N. S. 54. (b) See remarks, supra, and case cited, thus committed, but still it seems by inference, from the lan- §§ 8, 9, 10. guage used, having committed an act of bankruptcy, the debtor may "purge," or get rid of, such act of bankruptcy, with the sanction of the Court, which may grant leave to withdraw the petition; but having regard to the imperative language of paragraph 1, this discretion to grant leave will be extremely limited. Act, 1869, ss. 12, 13. 9. (1.) On the making of a receiving order an official Effect of receiver shall be thereby constituted receiver of the pro- order. receiving perty of the debtor, and thereafter, except as directed by Bankruptcy this Act, no creditor to whom the debtor is indebted in respect of any debt provable in bankruptcy shall have any remedy against the property or person of the debtor in respect of the debt, or shall commence any action or other legal proceedings unless with the leave of the Court and on such terms as the Court may impose. (2.) But this section shall not affect the power of any secured creditor to realise or otherwise deal with his security in the same manner as he would have been entitled to realise or deal with it if this section had not been passed. powers as to 10. (1.) The Court may, if it is shown to be necessary Discretionary for the protection of the estate, at any time after the pre- appointment sentation of a bankruptcy petition, and before a receiving of receiver and stay of proorder is made, appoint the official receiver to be interim ceedings. receiver of the property of the debtor, or of any part Bankruptcy thereof, and direct him to take immediate possession s. 13. thereof or of any part thereof. (2.) The Court may at any time after the presentation of a bankruptcy petition stay any action, execution, or other legal process against the property or person of the debtor, and any Court in which proceedings are pending against a debtor may, on proof that a bankruptcy petition has been presented by or against the debtor, either stay the proceedings or allow them to continue on such terms as it may think just. Act, 1869, §§ 9, 10. Effect of appointment. Sects. 9 and 10 have for convenience been coupled together, as they relate to the restraint of proceedings by creditors. Official Receiver and Restraining Orders. A receiving order having been made, it appears to be obligatory upon the Court under Sect. 9 to " nominate " the "official receiver" to be receiver of the debtor's property. And for this purpose no application would seem to be necessary, for the official receiver, virtute officii, becomes receiver. The nomination mentioned in the section appears to be nothing more than formal direction at the instance of the Court. Upon such nomination the creditor's remedy against the person or property of the debtor is at once suspended (except with the leave of the Court, or as directed by the Act), saving the rights of secured creditors. But even prior to the hearing of the petition, before the receiving order is made, the Court, under Sect. 10, may also appoint the official receiver to be interim receiver, and direct him to take immediate possession of the estate. In such cases the Court will require to be satisfied that his appointment is necessary for the protection of the estate, and the appointment should only be made in cases of urgency. Under Sect. 10 probably a formal application will have to be made on behalf of the creditor or creditors, and good cause shown for such appointment. Stay of Proceedings. Upon the making of a receiving order and the nomination of the official receiver to be receiver of the property of the debtor under Sect. 9, the remedies of all creditors, save such as are secured, are at once suspended, and both the person and property of the debtor are under the protection of the Court, which alone can grant leave to such creditors to commence actions or take proceedings. Before, however, the receiving order is made, that is to say, after the filing of the petition, where it is shown to be necessary for the protection of the estate, the Court can appoint the official receiver to be interim receiver of the property of the debtor. After the presentation of the petition also, and it seems whether or not it has become necessary to appoint the interim receiver under Sect. 10, the Court has power to stay any execution or other legal process against the property or 88 9, 10. person of the debtor. These provisions are in substance the same as the provisions of Sects. 12 and 13 of the 1869 Act; but, after some hesitation, a new power has been given by the concluding words of Sect. 10 to any Court in which proceedings are pending against a debtor, upon proof that a bankruptcy petition has been presented by or against him, either to stay the proceedings or to allow them to proceed. Thus it would appear that in lieu of the restraining order, which was under the 1869 Act granted upon the receiver's appointment, there is now the two-fold right, either to apply to the Bankruptcy Court to grant an injunction or restraining order, or to give evidence to the Court in which the proceedings are being taken of the filing of the petition. And, with the further view of saving cost, in lieu of the former practice of serving the creditor or sheriff with a copy of the injunction, under Sect. 11, the order staying the proceedings is to be served by post, sent to the plaintiff's address, for service, the receipt of which is to operate as a stet processus. The official receiver is not merely the officer of the Board of Trade, but an officer of the Court (see Sect. 66 and Sect. 70, Sub-sect. 2), and he will come under the ordinary obligations of a receiver of the Court (c). Under the Act of 1869, when a receiver was appointed and Receiver's application made to restrain creditors, it was the practice to obligations. require the receiver and debtor to undertake to answer in such damages as the person restrained might be put to because of the injunction. Probably under these sections, the Court will in all cases, and without any such undertaking, have under its general jurisdiction power to give damages to the creditor or other person improperly restrained. See as to the status and duties of the receiver, Sects. 68, 69, 70, and infra (d). Questions may arise as to whether the status of the "interim receiver" under Sect. 10 and before a receiving order is made, and the status of the official receiver after such receiving order has been made under Sect. 9, is in any respect different. Under the Act of 1869 the receiver's appointment for the protection of (e) Ex parte Jay re Powis, L. R. 9 Ch. 133, 136. (d) Russell v. East Anglian Rail way Co., 3 Mac. & G. 104; and 88 9, 10. the estate only lasted until adjudication in bankruptcy took place, when the estate vested in the registrar as trustee until the first meeting or the appointment of the creditor's trustee (dd), when the title to the estate became absolutely vested in the trustee. Under the present Act the effect of a "receiving order," though not tantamount to actual adjudication (the petition only prays for "a receiving order" and not "adjudication" as formerly), is, as already stated, for many purposes substituted for adjudication (e). And yet, it is submitted, upon the making of the receiving order the estate only is protected by the interim receiver, and remedies are suspended and the order possesses no wider effect so as to change or in anywise affect titles and the relative rights of parties (ƒ). And only when adjudication takes place, followed by the trustee's appointment, does the estate vest in such trustee, and his title accrues and rights become permanently affected (f). From the earliest moment of such appointment of the receiver until the appointment of trustee, there appear to be four distinct periods, as follows: (1.) The period after presentation of petition and upon the (3.) The period after adjudication (or in the absence of adju- As regards the estate and during the period (No. 1) he is an overseer or custodian, and only entitled to protect the estate (g). As to the periods both 1 and 2, he is a receiver of the High (dd) See s. 17, Act, 1869. (e) See s. 5, and notes. (ƒ) Ib. (f) See s. 21, as to trustee's appointment; and see s. 54. (g) But see s. 70, Interim Receiver. |