BANKRUPTCY COURT.

New Zealand Times, Volume XXXII, Issue 5027, 4 May 1877, Page 5

BANKRUPTCY COURT.

Wednesday, May 2. (Before his Honor the Chief Justice.) EX PARTE POLL IN RE TONKS.

1 John Sawers, manager of the Bank of Australasia, called : I produce a statement showing the bills of H. E. Tonks under discount, either on his own account or that of Beck and Tonks, on the 29th March. There were then under discount to H. E. Tonks a bill due 26th April, £297 15s. 10s.; Ist May, £195 17s. 10d.; 26th May, £l2l lis. 6d.; 29th May, £304 7s. 4d. To Mr. Allan : I knew generally of the proceedings, and what was going on in the matter. I-knew this from Mr. William Tonks. I knew of the proposal of William Tonks to give up Beck and Tonks' bills of sale and take the estate, paying ss. in the £to the creditors. I knew generally there were meetings. I was consulted confidentially by Mr. Tonks, otherwise I did not take very much interest in it. I knew of a meeting of creditors, called for the 29th March, for the purpose of assenting to a deed by which the creditors were to accept of William Tonks ss. in ths £. I knew thi3 before the meeting, but I cannot say how I knew. I don't remember seeing the Gazette. I did not attend any of the meetings. My line of conduct would have been just the same whether I had or had not had a notice. I did not prove in respect of the bills, because I was satisfied with the endorsements. _ Mr. Barton : I have a recollection of getting some notice from Moorhouse and Stafford through the post, but I don't know what it was. I should not have attended. Ido not think we weie pressing ths debtor, but I have no doubt that had the debtor had an unsecured overdraft, we, knowing of the circumstances, would have asked him to cover the overdraft. I don't think we received £SO after debtor had stripped himself of all his property. No sum of £SO was placed to his credit up to 31st January. I cannot say whether £SO was placed to his credit immediately after the date.

Mr. Allan: I presume that the £SO was paid into the Bank of New Zealand to take up a bill discounted for Mr. O'Shea. The B:mk of New Zealand probably pressed H. E. Tonks to take up this bill. I do not know this, but should think it probable. To Mr. Barton : I knew Beck and Tonks had some security. T do not keep a diary. Some bankers do, and some do not. William Tonks told me the bills of H. E. Tonks which I had discounted were trade bills. _He gave me no further particulars. I was satisfied with the answer, and did not ask particulars. _ I was under the impression I was discounting good trade bills. I perfectly relied upon the solvency of the endorsees, Messrs. Beck and Tonks, and do so still. To Mr. Allan : There was no arrangement a 3 to getting a sum not to prove. To Mr. Barton : The bills for £l3oß—the bills mentioned in the deed—were discounted during a period extending from October to December.

Mr. Allan proceeded to state the facts of the case a 3 it seemed to him they had been brought out in evidence. Some time in October last, arranging debtor became indebted to Beck and Tonks in respect of goods obtained from them, and in respect of bills curre.it. That he then wished to borrow £SOO or £6OO from the same firm, but they refused to advance such a sum unless he gave them a document by which he bound himself to give them a bill of sale over all his property when they should desire it. This he agreed to do, and they advanced a considerable sum on this security, which they would not otherwise have done. He was not now going to argue on the validity of this deed, subsequently duly given, in accordance with the written agreement. That might be a_ question for ■ consideration afterwards, y?h6», if ifwere attacked, he should no doubt be perfectly able to establish its validity. Well, the next thing was the action brought against Tonks by Poll, to whom a jury awarded the Bum of £270 as damages, and in addition y to this, very heavy costs were cast upon debtor. Mr. Barton said he did not see how his friend arrived at the conclusion that there were heavy costs. As yet there had been no taxation of costs.

Mr. Allan: Then I object that Mr. Barton has no right to appear here in respect of a sum for which judgment has not been signed. We do not know what his costs may be. He could not prove in respect of such a claim. The Chief Justice : What is to prevent him. Is the law so absurd that a man "who has got a verdict for £3OO or £4OO cannot appear and prove that debt in case defendant should become a bankrupt. I think he would be entitled to prove both in respect of verdict and perhaps costs. Mr. Allan: Very well, your- Honor, I do not lay great weight on the objection which, however, I make. At this time, several creditors were pressing Tonks, and he disposed of his reversionary interest in certain property for £250; the bills for which amount were discounted, and the proceeds appli ed to payingthecreditorswho were more argent. Mr. O'Shea then has one or two bills dishonored by debtor, and he writes to William Tonks to say he will certainly interfere, and take out a judgment against his brother's property if he (William Tonks) does not call a meeting and arrange that the property shall be divided amongnt all the creditors. Messrs. O'Shea and Tonks met, and after some discussion a meeting of the creditors was called, and certain propositions laid before them. It was then agreed by the creditors that Mr. Carroll should make inquiry into the bankrupt's affairs, the value of hiß assets and liabilities, and find out what the property was likely to realise. That was done, and at a second meeting of creditors Mr. William Tonkß then offered to give up his security, in order that the creditors might all save something, a course of conduct which, for fairness and honesty, he had never in the history of these deeds of arrangement found anything to equal. The meeting was attended by men of business who had great experience in these matters, and almost unanimously it was agreed to accept a of sb. in the £, Captain Williams being the! only person who did not sign the deed. '■ The Judge : What about Mr. Plimmer 1 ! Mr. Allan : He did net prove, and he cannot be taken into account. No person has a loom eland) unless he proves bio debt. Mr. Williams

/ was the only person present who did not sign. These were the general facts. Now, the first point raised by the other side was that, m order to make a resolution accepting the composition valid, there must be a majority in '■ number representing three-fourths m value not of the creditors present at the meeting, but ot all the creditors, whetherpresentor absent, whether Becured or unsecured ; consequently, that inasmuch as there were some twenty-nine or thirty creditors to the estate, and only ten or twelve assented, there was not the required majority in number. Mr. Barton had endeavored to support this by citing Turquand v. Moss, and Whitaker v. Low; but these cases were decided' under an English Act, which as expressly provided that the majority should be of all the creditors as the New Zealand Act of 1877 as expressly provided it-should be a majority of those present and represented. The Chief Justice suggested that there was no provision as to whether a " creditor for the purposes of bankruptcy proceedings was to be regarded as a " creditor" for purposes of arrangement and composition. Mr. Allan referred to clauses 154, 146, and 144 of the Act, to Bhow that there was no distinction ; and contended that as a person's debt would not be recognised m bankruptcy unless it were proved, neither would it ma deetl of assignment. However, he thought there could be no doubt that the majority spoken of must be a majority of those present at the meeting. ~' _ " ' The Chief Justice : I do not think I need trouble you for further argument on that point. I think it is clear that the elause must mean a of those present and represented at the meeting. Mr. Allan : That being so, the resolution in that respect is valid. About the majority in number thtre could be no doubt. As to the value, he contended that the persons who actually proved had a right to vote, and assuming that to be the case, and that Messrs. Beck and Tonks and O'Shea hid a right to prove thv whole of their debts, then there could be j no doubt as to the three-fourths in value.' The Chief Justice : Supposing the banks had come to prove. Do you contend that for one debt two persons can prove ? Mr. Allan said it was possible both might be allowed to prove; one for a contingent debt, the other for the actual debt. _ Of course only one person could receive a dividend. The Chief Justice : Have you any authority for saying that where a bill of exchange is in the hands of one person, another person can come and prove in respect of it? Mr. Allan had no authority. However, the debts of those present amounted to £2106 in all; the fourth of this was £526; but there were present or represented, looking at the case in the most favorable light for Pall, £641, thus the assenting creditors' value should have amounted to. £I4BO, instead of £1465. But Poll had never proved his debt, and he (Mr. Allan) submitted that although there were no clauses nor any rules expressly defining who was a creditor under deeds of arrangement, yet, according to the general policy of the Act, a person who had not proved his debt would not be allowed to deal with the property of the arranging debtor. If this were so, then Poll's debt must be withdrawn from the list. As to the next point, he contended that there had been no culpable negligence or fraud shown; certainly there had been no culpable negligence in having omitted toput the bank down as a creditor in respect of the bills under discount. The fact that there was such a debt had not been suppressed, and, as was natural, the bankrupt had scheduled the person upon whom the loss would fall, and to whom he was primarily liable. The bank would lose nothing, and if scheduled as a creditor would not have acted, as by so doing it might possibly have lost its recourse against the solvent endorsees. As. to culpable negligence in the preparation of the list of assets, he would remind the Court that, as a matter ef fact the debtor had not prepared the list; that had been done by Mr. Carroll, an impartial person, who had acted as the representative not of debtor only, but of the creditors themselves, and had been in the first place nominated by Mr. Williams. In order to establish culpable negligence in this respect, it would be necessary to show that he had done something to unduly influence Mr. Carroll's valuation. The objections to the list of assets and liabilities were —Ist, that the holders of the bills were not set down as creditors; 2nd, that the book debts were set down at what it was thought they would realise, and not at their nominal amount; and 3, that no mention was made of the bills of sale in favor of Messrs. Beck and Tonks, covering the whole of the assets. To the first of these objections he would reply that, it required so much consideration and looking up of cases to decide whether it was right to adopt such a course or not, it could scarcely be. contended that a layman was guilty of negligence in choosing the one of the two courses which might ultimately turn out the wrong one, although he did not for one moment admit that the wrong course had been pursued in this instance, as the cases cited were upon theJSnglish Acts, which (or the rule 3 under which) provided for the point in question. As to the book debts, the Act provided that the estimated value of ; the property should be stated, and surely it would Lave been manifestly wrong. to set down book debts at their Dominal value, instead of that which it was thought they would realise. In this particular he thought there could be,no doubt of the propriety of the course pursued. The third ground of objection seemed to him equally untenable, for it was the very essence of the arrangement that the bills of sale Bhould be abandoned; and if, therefore, the list of assets had shown the bills of sale over the property, it would mani-. festly have been calculated to mislead the oreditors into assuming that the estate was worthless, and so far rendered them willing to accept the composition upon a wrong assumption. The compiler of the list, therefore, in the spirit of the composition, treated the assets as if unencumbered and open for realization, in order that the creditors should have the most ample opportunity for appreciating the benefit (if any) that the purchaser might be likely to reap from his bargain. On the whole he did not see how the list could. have been prepared much better, especially as it must be boruein mind that what might constitute negligence under the English Acts and their rules giving directions in the minutest particulars, should' not certainly be deemed so under our Act and rules.

• The Chief Justice having ruled that the right of reply had belonged to Mr. Allan, and that Mr. Barton could not again address the Court, Mr.. Barton (by leave) cited ex parte Brooke, 33'L. J. Bank, 41; re Delamain, 31 L. J. Bank, 35 and 67; Graham v. Chapman, 21 L. J. C. P., 173; Smith v. Cann, 2 E. and 8., 35, as cases bearing upon the points at issue. The Chief Justice said he should have to give the case careful consideration before he delivered his judgment ; but he might say at once it did not strike him as a case in which there had been fraud. Still he could not but think with reference to the action of some of the creditors that it had been scarcely_ proper. When the deed came up for consideration they were !n the position of judges; but a judge was supposed to be impartial, and not personally interested in the transactions upon which he had to decide. He was also inclined to think the list of creditors filed was not such a one as was contemplated by the Act, and though there might not have been fraudulence in its preparation, he could not help coming to the conclusion that there had not only been negligence but default. However, he should reserve his decision.

Thursday, Mat 3. (Before his Honor the Chief Justice.) IN RE KDMONDSON AND SELLAIt, EI PARTE CASELBERG. Mr. Brandon appeared to appeal against the refusal of the trustee in the estate of Edraondaon and Sellar to accept Caselberg's proof of debt in respect of a bill of exchange for £6OO, and was proceeding to state the facts of the case, when Hiß Honor inquired whether the facts hod not been reduced to writing ? Mr. Brandon said not; but_ the facts were agreed upon between the parties. Mr. Stafford, who represented the trustee, • said no facts had been agreed upon ; and he was not disposed to accept whatever Mr. Brandon might state.

Mr. Brandon said the facts were so simple that he was sure his friend would not dispute them, and he then proposed to inform the Court, from the draft of a deed, what the arrangement between certain parties had been. His Honor inquired where the deed itself was ? Mr. Brandon said it was not in town. Mr. Stafford said the paper Mr. Brandon proposed to read might be correct enough; but he knew nothing about it. His Honor pointed out that unless the parties were agreed upon the facts, it was no use to come to him. Mr. Brandon said the point really at issue was whether Caselberg, who had given a promissory note in security for a smaller amount, was entitled to piove on tho whole value, and obtain dividends on that amount, so long as he did not receive in dividends a larger sum than was actually due to him. He (Mr. Brandon) contended he was, and cited re Magnus ex parte Hodges and Hart, 12 L.J. (N.S.), 241. That was the abstract law point, but he wished to show, by the transactions j leading up to the making of the bill, that Caselberg had an equitable as well as a legal j claim to prove on the whole amount. His Honor said he could listen to no statement - of facts; The parties had better a"Tee as to the facts, and then come and argue the law, unless Mr. Stafford were of opinion the case cited put him out of Court. This course was adopted, and the Court then adjourned.' ' -' " "'■