DEBTOR THREATENED.

Dominion, Volume 5, Issue 1442, 17 May 1912, Page 2

DEBTOR THREATENED.

IMPROPER PRESSURE APPLIED. JUDGE'S COMMENTS; ABUSE <}F PROCESS OF COURT. Some strong comments wore made by Mr. Justice Cooper in the Supreme Court yesterday afternoon in dismissing a petition for fho adjudication of one W. F. '<ggers, estate agent, of Wellington. It appeared that Wilholm F. Jiggers, of Daniel Street, Newtown, assigned his estate io Messrs, Gold and Arens, accountants, tcatherston Sheet, Wellington, on March. 't. At the first, meeting of creditors the assignees presented a lengthy statement, trom whicli it appeared that Fggors was carrying on three distinct businesses under different names, viz., W. F. Jiggers, land and estate agent, 31 Johnston Street; Jiggers Uros., builders, 8t Rintoul Street; and the Newtown Painting Co., s,'j and !i(i Jiintonl street. A motion was carried at tho second meeting of creditors that the estate should bo privately assigned to trustees for the benefit of tho creditors. Owing to the complicated nature of the accounts, together with the fact that the assignees proposed to treat as preferential creditors certain persons, who it was submitted were not legally entitled to bo so 'treated, the petitioning creditors' (tiiggs and Tyler) preferred that the estate should be administered in bankruptcy. An application to this effect was made to Mr. Justice Cooper in the Supreme Court last week,

Mr. J. M'L. Ilogben appeared for tho petitioning creditors. Mr. M. Myers, with Mr. J, S. Harton, opposed the application on behalf of tho debtor and the assignees.

Jtoughly, tho liabilities amounted to ,£47,000, of which .£7OOO was unsecured. The amount owing to secured creditors was .£39,000, the securities being; estimated at .£41,000. Tho other assets were set down at ,£SOOO.

In giving judgment his Honour said;— "The net? of bankruptcy alleged in tho petition are: (!) Th'at the debtor, on or about March 4, 1912, mado an assignment of his property (o trustees for tho benefit of his creditors; and (2) that on April 3, 1912, a return of nulla bona was made by tho bailiff of the Magistrate's Court, Wellington, to a warrant of distress issued on March 14, 1!!12. Tho grounds stated in tiio notico of opposition for opposing tho petition are: (1) That on March 12 tho petitioning creditors assigned tho whole of the debt duo by ilio debtor to them to Charles Pratt and Company, of Wellington, commission agents; and f2) that the ]ietitioning creditors have assented to the deed of assignment referred to in the petition, and have become bound thereby. A third ground has fen argued at the hearing before mo, namely, that the proceedings taken by tho petitioning creditors arc for the purpose of cxereish-g improper pressure over the debtor, that they aro vexatious or oppressive, and that they also constitute an abuse of the process of the Court. The facts- upon which this third ground is based appear in the affidavits. The faets arc practically undisputed. The matters relating to the assignment by the petitioning creditors to Messrs. Pratt and Company are also crntained in those, affidavits. . . . On the

day of the date of tho deed tho petitioning creditors obtained judgment against the debtor. They were also lienees .under the Wages Protection and Contractors' Liens Act, l!) 08, in respect of the judgment debt,but tho uncontradicted evidence is that they considered the so-called security worthless. On March 12, 11*12, they executed an instrument purporting to assign the debt duo to them to Charles Pratt and Company, and at least verbal notice of this assignment was given io the debtor, "Tho rent reason for this assignment is, however, stated by Mr. Dunn, who prepared it, in extraordinarily candid terms. He says that it was brought into existence as a 'formal document only, 'mainly to enable tho said Charles Pratt to dem.ind payment in his own name with the tbject of frightening .the debtor, and not. with tho object of securing the contingent commission payable to the said Charles Pratt.' A.s to the means to be .employed for 'frightening' the-debtor, ■■Pratt- had a. free harid. . . . On March 18 (tho day the assignment of the debt was executed), Pratt invited the debtor to his (Pratt's) office, and informed liiin that Biggs and Tyler had assigned tho debt to him (Pratt). He produced the document, but did not hand it to tho debtor, but the debtor was able to seo that it was an instrument of assignment signed by the petitioning creditors, and Piatt asked him if he recognised the signatures, and the debtor said he did. When asked by Pratt what he (the debtor) proposed to do, the debtor told Pratt that the estate was being assigned to Gold and Arcus as trustees and that Pratt must communicate with them. Pratt said: "Gold and Arcus be damned. I will not go near them. Let them come to me," and he added, "If you do not moke m offer of soijio sort settling the debt I will make yon bankrupt, and I will move heaven* and earth to do it, too." . Tho debtor replied: "I can do nothing except through Gold and Arcus." On March 13 tho debtor received from Dunn awr't-' ten notico stating that Pratt held assignments of debts totalling dC6.il) due by the debtor, and that Dunn had received instructions to have the debtor made bankrupt at once and asking him to make a proposal. On March 13 Pratt sent a Mr. Venables to the debtor, who intimated that he thought Pratt would fake 12s. (id. in tho £, and ho asked the debtor to go with him to Pratt's office. Tho debtor refused, and told Venables that nothing could bo done except through Gold and Arcus."

Ilis Honour then referred to what took place- at ft subsequent interview, where Eggors was threatened with gaol. Tho judgment then proceeded:— "Dunn in his affidavit filed on Jfay S, to which I have already referred, states that he did press for the payment of £75, that Arcus said he could not treat any creditors preferentially, that he (Dunn) said chat Biggs and Tyler had just started business, that they worked with their hands, and that morally they were entitled to consideration, and that their claim to preference was equal to that of th(< landlord?, whose proofs for rent collected by the debtor were to be given priority under the deed; and that any objections of tho other creditors to preferential treatment would be met by the debtor or his friends buying up for £7.5 the claim and security of the petitioning creditors and then proving under tho assignment for the amount of the claim. Tho 'security' was, however, stated to be worthless. He does not in any way deny that tho threats referred to by Arcus were in fact used by Pratt. He may not have known the actual terms of tho deed of assignment, but he certainly knew of its existence. There are two other relevant circumstances which it is necessary to state. (1) The petition was in fact prepared signed and verified by the petitioners on April 4, but it was not filed until April 12. (2) At some period, the date of which does not appear, a clerk in Mr. Dunn's office, with the consent of Iho petiiioniiij,' creditors and Pratt and acting under Mr. Dunn's instructions drew ink lines across the assignment to Pratt, cancelled the date of the deed, and the signatures of Biggs and Tyler, and of tho attesting witness. This is cogent evidence that tho assignment of tho debt was not intended to bo a real transfer of the debt, but was onlv a moans for exercising pressure on the debtor on behalf of the petitioning creditors. ... If the propery in the debt is in Pratt the. petitioners have no status. Tf it is not, then as it is admitted by the petitioners that throughout Pratt 'acted as their agent they are responsible for Pratt's conduct. It is in my opinion quite clear that the petitioners and Pratt and Mr. Dunn, their solicitor, knew that the debtor had prior to April i agreed to assign his estate to trustees for the benefit of bis creditors in accordance with the resolution nns'ed nt the meeting of February 21. I think that ,Mr. Dunn knew that he had actually assigned his estate. The petitioners and Pratt and Dunn knew that the condilinn of the debtor's affairs was such that ho could not possiblv, legitimately, pay any substantial part of the debt due. They also knew that if bankruptcy took pmce the probability was that the unsecured creditors would get practically nothing, for the full position of the dentins affairs wai made, known to Biggs, who has in fact, produced a enpv of (he report nl the committee adnpted by the ineeliiiß of I'cwuarv 21, at which he was present, 1 hoy also knew that, their so-called security wa« worthless. The deed ol assignment of the debt to Pratt and Co. was brought into existence, nol as an honest deed, but. for the express purpose of enabling Prau bv frightening the debtor to force him into obtaining either from his friends or the trustees a. payment of ft sum of money which would place the petitioners

in a much more advantageous position than the neutral body of (lis other unsecured creditors, -The means used to thus 'frighten* (ho debtor were that the petitioners would make him a bankrupt, ami that thus he would be open to prosecution and liable to imprisonment. '1 ho w;iy of escape from the-e consequences pointed out to him was to persuade Ids trustees to pay the amount demanded by Pratt, or if his trustees would not do so, to persuade his friends to find the money. Tho thwat was that if lie didn't do one or the other ho would bo made a bankrupt, and would probably have to go to gaol. . . . Tho question 'is., whether these circumstances constitute sufficient cause why no order should bo made, and justify the Court, in dismissing the petition," His Honour then referred to the cases that had been quoted by opposing counsel, and, after stating Iho principle upon which tho eases had been decided, said:— Tho reason why a petition is tainted by such conduct is (tie pressure which 13 placed upon tho debtor to (jive to the particular creditor, under threats, an unfair advantage over tho general body of creditors. Theso threats, even if ineffective, taint n subsequent petition founded on tho same debt, and especially is litis the ease if Hie presentation of the petition is tiro.fulfilment of the threat. '

This Court will iiot allow its process io bo used by a. creditor who wishes thereby to carry into effect the. threats which tho creditor has used for the purposes cf inducing a debtor to commit, a fraud upon his other creditors by giving to the threatening creditor an unfair advantage. Hero tho system of improper pressure, commencing with the calling into existence of an assignment of tho debt due faille debtor for tho main purpose of enabling Pratt to frighten the debtor into giving tho petitioning creditors a most unfair advantage over the other creditors, was continued right up to the date cf tho petition bv threats to prevent this petition, and a veiled throat of a subsequent nrosecution under tho Bankruptcy Act, Had tho debtor given way to the threat*, or had his trustees agreed to do so, a. fraud upon the other creditors would have been committed, and tho petition which lias boon filed in further-?.-ice of these threats is a tainted petition. This is sufficient cause for refusing to adjudicate tho debtor bankrupt, and the petition must be dismissed with cosh. % ft is therefore unnecessary ior me tc determine the other questions in the case