Important Judgment.

Thames Star, Volume XV, Issue 4860, 7 August 1884, Page 2

Important Judgment.

The following important decision with respect to the execution creditor and other creditors in bankruptcy was recently delivered by Mr Justice Eichmond at Picton:—"ln this case I am bonnd as well by previous decisions as by the unmistakeable language of section 57 of the present Bankruptcy Act to decide in favour of the claim of the trustee,. It is plainly intended that the lien of the execution creditor, at any time before a sale under the writ, shall be defeated by an order of adjudication, unless the Court should sco reason to interfere in bis favour. It was argued that the debt of an execution creditor after seizure is not a debt provable, under the bankruptcy, because he is then, a creditor-holding security. This is* a strange contention; because,'according to the every-day use of terms, nothing can be-clearer than that security may be held for private debts. Section: 107 of the present Act positively requires that a secured creditor shall prove for his whole debt* although from the amount so proved he is to deduct the value of his security. The whole debt is private and must be proved, although a dividend is payable only on the balance not covered by the security. Nothing can be plainer than the term "provable under the bankruptcy,"in section 57, which refers to the nature of the debt, and does not signify that the debt is unsecured. It was further,,, attempted to show that a grave inconvenience must attend any construction of section 57 which deprived execution creditors of the benefit of their writs after seizure. By section 41, subsection 3, possession taken under execution constitutes an fact of bankruptcy. Then by section 53 the. title of the trustee relates back to the seizure. Therefore, it is said, unless section 57 controls these sections, every|execution may bo. avoided, even after a. sale under the writ and payment of the proceeds to the execution creditor, by bankruptcy •■supervening within 12 calendar months. If this be actually the effect of the statute, great injustice may no doubt arise. But the inconvenience, if it exists, is the result of the provisions of sections 41 and 53; and if the [omission from the statute of any clause protecting executions bona fide levied by seizure and sale from being avoided by prior acts of' bankruptcy, the inconvenience cannot possibly be at> tributed to section 57, ia.whatsoever way that section may be construed, but would remain if the section were struck out of the Act. The language of section 57, may, it is true, supply an argument in favour of execution creditors against the absolute operation of sections 41 and 43. It can scarcely have been intended that every execution should be avoided by the mere effect of relation, for in that case section 57 would be wholly unnecessary. It is absurd and contradictory to declare that what has been by previous provisions made absolutely void v shall be merely " not available, without leave of the Court." The benefit of this argument may, however, be conceded to the plain* tiff.; It is unnecessary to decide the point, but I am disposed to think that an execution under which the sheriff seizes is not absolutely avoided by a subsequent adjudication founded on jthat particular seizure ex parte, Villars, L.R., 9 eh. 432, favours that {view, although it is ; by : no means a conclusive authority;. ■ B,ut, though perhaps the right of the execution! creditor is hot absolutely: defeated ex poste facto by. sections 41 and 53, it;is clear enough that after adjudication nothing further can be done by virtue of the writ without leave of the Coiict ;iand the whole of this discussion respecting the effect of sections 41 and 53 has no relevancy to the clafm of .the trustee in the present : case, which ia \. founded iipbn section 57. r As my attention has been drawn to the operationi ofM-besiß; tiriqsseotions, 41 aridjs3; I may remark that they create great doubt as to tilei effect of, an adjudication founded on an act of bankruptcy prior. -toVthe! geizure. There >is gromnd to contend that such an adjudication will retroipectivffly a void the execu-

lion, even when the sheriff has sold under ■ the writ and has paid over the proceeds in complete ignorance; of any such act of , ban k ruptcy. Section 84 appears to be a. transcript of t'e first sub-section of section 95 of the English,, Bankruptcy Act of 1869. Bnt our Act contains (as has been pointed out in the argument of this case) no provision corresponding, with •he 2nd and 3rd sub-seciions of section 95 Consequently there is reason to fear that the absurd and utterly Unjust state of the law which prevailed in England prior to the 6, George ; IV., c. 16, and 2 and 3 Vie., c. 29, "may exist for the present in this colony—that is to say~the sheriff who levies after a: seoret ■ act , ot bankruptcy of which he';is ignorant, may be liable to an action for conversion at the suit of the trustee.;;->.-;-L«wy.erßi'.-vhiß?e^ : borrowed in relation to this matter, and haye greatly abused; a tormrof divinity}: and it is solemnly laid down that V inyincible ignorance" which may excuse^the heretic, or the unbeliever, absolve the unfortunate officer the sheriff. —Balme y. Hutton, 9.Bing. <