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It must, however, be noted that the mere fact that the estate of a defendant, who has a Colonial domicile as well as an English one, has been sequestrated in England, is no bar to an action against him in the Transvaal (3 E.D.C. 304).
32. Any action commenced by any insolvent for any debt or demand due to the said insolvent's estate, and all proceedings therein, after an order of sequestration has been made, shall be stayed until a trustee shall have been elected.
The trustee shall make election to prosecute or discontinue the action which has been begun within six weeks after having been called upon by the defendant in any such action so to do, or other vise shall be deemed to have lost his right to the same.
The insolvent shall, however, remain competent to continue in his own name, and for his own benefit, any action commenced by him previous to his insolvency for any injury or personal wrong done to himself or any of his family.
Any damages which may be recovered in any such action shall not be considered to belong to the sequestrated estate.
33. Every alienation of, or any mortgage or pledge of any portion of his estate, made or confirmed by the insolvent at a time when he might (reasonably) have expected the sequestration of his estate, shall, unless the same shall have been made bonâ fide and for lawful consideration, be null and void.
Whenever the effect of any such act as hereinabove stated shall be to cause an excess of liabilities over assets, then the same, to the extent to which such excess shall have been thus produced, shall be null and void.
NOTES. Contemplation of sequestration denotes expectation of insolvency, and not merely the probability of a future sequestration. Consequently, a payment made by a debtor at a time when he was already hopelessly insolvent, but before he contemplated the sequestration of his estate, does not constitute an undue preference (Daly's Trustees vs. Rocher H. 106).
The same rule applies to a company which goes into liquidation. The fact that a company, which is charged in an action with granting an undue preference, granted a mortgage upon its unissued capital within six months before being placed in liquidation, in order to be rescued from financial difficulties in which it suddenly became involved, is no proof in itself that the company at that time contemplated liquidation. "If a mortgage bond is attacked on the ground that it constitutes an undne preference, regard must be had to the circumstances and to the time when it was agreed to give a mortgage (Liquidators Republican Loon ('0. vs. Vatal Bank, O.R. 1894, pt. 4, p. 99).
In an action under the 83rd section of the Cape Insolvent Ordinance (corresponding to $ 33, above), to set aside an alienation of property made before insolvency, it is for the plaintiff to prove that at the time of the transaction challenged the insolvent's liabilities fairly calculated exceeded his assets fairly valued, and then the onus is upon the person upholding the transaction to show bonâ fides and just and valuable consideration (McLeod's Trustees vs. Benjamin, B. o1877, p. 152).
If a party purchasing property from an insolvent actually pays a fair price for it, thereby showing his bonâ fides and valuable consideration, the Court will ordinarily refuse to set aside the transaction (Smith's Trustees vs. Smith, F. 106).
An intended husband and wife, before marriage, entered into a sale of land valued at £100, the wife taking over a mortgage on the land for £300, and paying £36 interest thereon, the price thus being £336. Transfer of the property to the wife was only passed a year after the marriage, when the value of the property had increased to over £600, and when the husband's debts fairly calculated exceeded his assets fairly valued. An action was brought by the husband's trustees against the wife to have the transfer set aside as null and void. The Court held the sale to have been made bonâ fide, for just and valuable consideration, and at a time when the husband was not in insolvent circumstances. It was decided that the mere fact that formal transfer was not passed till shortly before the insolvency, and at a time when his liabilities exceeded his assets, would not work a cancellation of such transfer, as it was bonâ fide passed in completion of the previous sale (Cilliers' Trustees vs. Cilliers, 13 J. 68).
34. Every alienation of any part of his estate, and every payment made by any insolvent to any creditor, and every mortgage or pledge made by him for the benefit of any creditor on any portion of the estate, in the ordinary course of trade, although such insolvent might at the time reasonably have expected the sequestration of his estate, shall primâ facie be held and taken to have been made or given bonâ fide, and as having been made without intention to prefer such creditor.
It shall be necessary for the trustee seeking to set aside any such transaction to show such an intention to prefer on the part of the insolvent.
NOTE. To protect a transaction by $ 86 of the Cape Ordinance (corresponding to $ 34, above), it must be shown to have taken place in the usual and ordinary course of trade or business, as among men of business and repute in the commercial world ; and it is not enough to show that in the village in which the parties carried on their business such transactions were common, or that as between themselves they had had similar dealings before (Du Plooy's Trustee vs. Plewman, 7 J. 332).
" What is the usual and ordinary course of trade or business' within the meaning of g 86? It is, I apprehend, that which is suitable to the nature of the particular business, and might reasonably and probably, and in ordinary course, have taken place without reference to a contemplated sequestration” (Tucker vs. Austen's Trustees, B. 1868, p. 167).
35. Every payment obtained by any creditor before the making of the order of sequestration, whereof proof shall have been made that such payment has been obtained or facilitated by the fraudulent assistance of the insolvent, or by collusion with the insolvent, who while he might (reasonably) have expected the sequestration of his estate, intended thereby to give such creditor a preference above the other creditors, shall be null and void.
36. All acquittances or discharges of any lawful debt, or of any security for any lawful debt or other matter, payment or satisfaction of which has not been actually and bonâ fide received, granted by any insolvent at a time when he might (reasonably) have expected the sequestration of his estate, having the effect to prejudice his creditors, shall be null and void.
In every case in which the person accepting from the insolvent any such acquittance or discharge had knowledge, or might reasonably have suspected that the effect would be to prejudice the creditors of such insolvent, such person shall be bound not only to make good such debt, but also to pay the trustee in addition for the benefit of the creditors the value of the amount unlawfully remitted to him.
37. Every alienation of any part of his estate, and every payment made by an insolvent to any creditor, and any mortgage or pledge made by such insolvent in favour of a creditor upon any part of his estate or effects, at a time when he might (reasonably) hare expected the sequestration of his estate, with the intention to benefit such creditor, directly or indirectly, in preference to his other creditors, constitutes an undue preference, and shall be consequently null and void.
Every alienation made by the insolvent as above, and every mortgage or pledge passed by him in favour of any person whatsoever as above, with the intention thereby to prefer one of his creditors, directly or indirectly, above the others, shall constitute an undue preference, in so far as such creditor is thereby actually so benefited.
The trustee shall be entitled to demand and recover the amount or value of such undue preference from the creditor so benefited, or from any other person.
NOTES. By this section, the question of intention, in making an alienation or payment, is left open, to be determined upon all the circumstances and facts of the case, by the Court or a jury, as well with respect to
pressure by a creditor to induce a debtor to give security to him in preference to the general body of creditors, as in other respects (Smith vs. Carpenter, B. 1869, p. 206). This section does not require that, in order to constitute fraudulent preference, the transaction should be voluntary.
In actions of undue preference it is necessary to state the exact section of the Law on which the claim is founded (Du Toit's Trustee vs. Wege & Bosman, B. 1869, p. 135). A declaration to set aside a bond as an undue preference must specifically aver expectation of sequestration” when the challenged bond was given (Pocock's Trustees vs. Harris's Erecutors, B. 1869, p. 153).
The delivery of assets by a debtor in difficulties and unable to meet his liabilities, shortly before the sequestration of his estate, to a creditor, is not such an undue preference in favour of such creditor as to be null and void under the 84th section of the Cape Insolvent Ordinance (corresponding to $ 37, above), where such delivery was not made in contemplation of sequestration (Stratford's Trustees vs. Mosenthal & Co., B. 1874, p. 65).
“If the creditor takes a bond, or receives payment of his claim when the debtor is clearly on the verge of insolvency, and the insolvent contemplates that the giving of the security or the payment will inevitably result in sequestration, then the law steps in and says, not that it is necessarily a fraudulent act, but that it is an undue preference” (De Il'et's Trustees vs. Krynauw & Co., B. 1879, p. 179).
Even if the trustee fails to set aside a sale as null and void under § 33 (above), he may yet succeed in establishing that the transaction is an undue preference under § 37 (Smith's Trustees vs. McCaig, F. 108).
In actions of undue preference, in order to answer the question whether or not the insolvent contemplated sequestration, the Court looks at the whole of the evidence, and carefully considers all the circumstances under which the challenged payment was made. If these circumstances lead to the irresistible conclusion that the contemplation did exist, the Court would attach little weight to the insolvent's denial of such a contemplation. But the words of the Cape Ordinance “contemplating sequestration” do not mean "being in such a position that you ought to contemplate sequestration." The question of “contemplation” is a question of fact, to which an answer must be found in the evidence or in such reasonable inferences as may be drawn from the evidence (Goosen vs. Goosen's Trustee, 1 A.C.R. 414). The words "
contemplation of sequestration” in § 84 of the Cape Ordinance mean "expectation of sequestration” (the words used in § 37 of the Transvaal Law), and there can be no undue preference, unless at the time the insolvent made payment he expected the sequestration of his estate, and made the payment in view of insolvency with the intention of preferring the creditor to whom payment was made (Hugo's Trustee vs. Lindenburg, 2 J. 184).
If a woman, married by ante-nuptial contract, reserving to her free control over her property as fully and effectually as if no marriage had taken place, chooses to lend her husband money to assist him in his business or otherwise contracts with him, she can claim no greater rights upon his insolvency than any other creditor with whom he has dealt; and if she receives payments from him at a time when he contemplated the sequestration of his estate and intended to prefer her before his other creditors, the payments thus made will be set aside as an undue preference (Ruperti's Trustees vs. Ruperti, 4 J. 22).
With regard to actions for undue preference, as also in other insolvency proceedings, it must be noted that “it is not the creditors who should sue on behalf of the estate, or for any injury done to the estate, or for any fraud committed upon the estate, but it is the trustee who should sue (S.A. Bank Trustees vs. Wilson, 4 J. 172).
In actions under this section, “if the Court is of opinion that the , insolvent did not pass the bond, to use the language of Lord Cairns in Thorburn vs. Steward (3 L.R., P.C., 518), 'in the view and in the expectation of a supervening bankruptcy, and in order to disturb what would be the proper distribution of assets under that bankruptcy,' the Court would still have to find that there was no undue preference. The question of contemplation still remains, as was decided in Goosen vs. Goosen's Trustee, a question of fact' to which an answer must be found in the evidence and in such reasonable inferences as may be drawn from the evidence'” (S.A. Loan Co. vs. Cape of Good Hope Bank, 6 J. 188).
A Resident Magistrate's Court has jurisdiction in actions for undue preference under $ 37, if the case falls within his ordinary jurisdiction in other respects (Gie vs. Le Roux's Trustee, 10 J. 253).
If the trustee declines to take action to set aside as an undue preference a bond in respect of which proof has been made, an objecting creditor will be allowed by the Court to take such action on condition that he is personally liable for costs (Pienaar's Trustee vs. Pritchard, 10 J. 381).
Some time before his insolvency an insolvent pledged certain goods for an advance of money. Subsequently, shortly before his sequestration, and at a time when he was hopelessly insolvent, he handed certain carts to his creditor, to be sold by him. The proceeds were to be devoted to the debt. The proceeds of the carts were considerably in excess of the value of the stock pledged. An undue preference was held to exist to the extent of the difference between the value of the carts and the value of the pledged goods returned to the insolvent (l'an der Westhuison's Trustee vs. Steyn, 12 J. 313).
The taking shortly before the sequestration of a promissory note for a due debt is not of itself an act of undue preference (In re Du Toit, 16 J. 416).
38. Every alienation of any portion of the estate, and every payment made by the insolvent, and every mortgage or pledge passed upon any portion of his estate at a time when the insolvent might (reasonably) have expected the sequestration of his estate, and with the intention of thereby benefiting any person who would otherwise have become liable, either in the character of a surety, or in any other character by law analogous thereto, for such amount, shall constitute an undue preference.
The trustee shall he entitled to claim and recover from the ferson 0 preferred the amount or the value of such undue freference.