123, the case was this :shortly before his bankruptcy, drew a bill; and having procured it to be discounted, gave B. (a creditor) au order to receive the amount, which he directed C., who discounted the bill, to transmit to B., by a carrier. An act of bankruptcy was committed on the 17th of May; the money ar rived in London on the 18th ; and, on the 19th, it was received by B.'s porter. Lord Ellenborough ruled that, whilst the money remained in the hands of the carrier, the property remained unaltered, and therefore the assignees were entitled to it. In Rust v. Cooper, Cowp. 629, where a pretended sale was made of a part of a trader's goods to a particular creditor, a bill of parcels made out, and the goods delivered before an act of bankruptcy committed, it was held fraudulent and void. Here, it will be observed, was the jus disponendi, because the transfer was before the bankruptcy: but the equitable right of disposition in preference was gone, because made under a state of affairs indicative of insolvency. The good consideration, as respects the individual creditor preferred, is nothing. He is presumed to be a bona fide creditor, and the

debt to be due to him. As respects the bankrupt and himself, there may be the strongest moral and honourable reason for such preference. But this is not sufficient. There are, in fact, three parties concerned in the transaction; the bankrupt, the favoured creditor, and the remaining creditors.The fraud is against the last party; and the two former shall not consult their honour or feeling from a stock which belongs in common to the whole. Thus, in Martin v. Pewtress, 4 Burr. 2477, where a trader made an absolute sale of goods, but at prime cost, it was held to be a fraudulent sale; perhaps a fraudulent return of goods, which, having come into the stock of the bankrupt, were equitably divisible amongst his whole creditors. So, where the bankrupt indorsed and sent a promissory note, by the post, to a creditor, in contemplation of bankruptcy, the assignees were held entitled to the note.Alderson v. Alderson v. Temple, 2235.

But where the preference is consequential, that is to say, is not directly intended by the bankrupt, but only incidentally becomes such, in this case, as the free will of the bankrupt is wanting, it will not be held a fraudulent

1817.

ARBOUIN

v.

HANBURY

and Another

1817.

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HANBURY and Another

preference. Thus, in Harman v. Fisher, above cited, Lord ARBOUIN Mansfield said, that if a preference were only consequen tial, the case might be different; as if a payment were made, or an act done by a trader, in pursuance of a private à agreement. As in the following case:-A., whilst he was solvent and resident at Calcutta, directed B. at Bombay, to transmit certain proceeds to C. in England, who acted as the agent of A., under a power of attorney, and was in the habit of accepting bills for him. The proceeds were remitted by B. to C. after an act of bankruptcy committed by A. But Lord Ellenborough held, that as the remittance was made in pursuance of an order given by A. whilst he was solvent, and without fraud, C. was entitled to retain the amount for his balance. Jamieson v. Hodson, 1 Starkie, 150.

But in a case where bankers had fraudulently sold out stock which belonged to a customer, but stood in their names, and applied the proceeds to their own use, and whilst they remained solvent wrapped up certain bonds belonging to them in an envelope, inscribed with the customer's name, and enclosed a memorandum, stating that they had

deposited the bonds with him as a collateral security for his stock, which they promised to replace: they then deposited the parcel amongst securities belonging to other persons who dealt with them, but did not give any information of the circumstances to the customer, until the evening before their bankruptcy, when they sent him the parcel with the bonds, saying, they must stop payment next morning; Lord Ellenborough, in this case, held, that the customer could not retain the bonds against the assignees of the bankrupts; and the Court of King's Bench afterwards confirmed his direction. Wilson v. Balfour, 2 Campb. 599. The reason of ' this case is evident upon the principles above stated. For, as a claim of the highest degree upon the part of the creditor could not justify such preference; so neither, à for tiori, would the strongest honourable obligation of the trader. He could not amend his own fraud at the expence of his general creditors. But, where a trader obtained bills of exchange from the defendant upon a fraudulent representation, that a security given by him to the defendant (which was void) was an ample security, and on the next day,

action is valid; the law, holding the creditor to have used only his fair right in outstripping others, and the trader not to have given a voluntary preference, but to have consulted his immediate personal safety. Thompson v. Freeman, 1 T. R. 155. Cosser v. Gough, 1 T. R. 15. Exparte Scudamore, 3 Ves. 85. Yeates v. Grove, 1 Vesey, juu. 280. Holberd v. Anderson, 5 T. R. 235. Smith v. Payne, 6 T. R. 152. De Tastet v. Carroll, 1 Starkie,

88.

3. The question, as we have said in all these cases, will be, Was the free will of the bankrupt left to him or not?--If the transfer be voluntary, bankruptcy, of course, being in contemplation, it cannot stand; but if the preference be given to a creditor, under an apprehension, however groundless, of legal process (as this is a sufficient indication that the act is not fraudulent), such preference will be valid; for, per Lord Mansfield, in Thompson v. Freeman, 1 T. R. 155.—“ A bankrupt, when in contemplation of his bankruptcy, cannot, by his voluntary act, favour any one creditor; but if under fear of legal process he give a preference, it is evidence that he does not do it voluntarily.

And though the defendant in this case had taken no steps to secure himself in case he was called upon, yet the bankrupt acting from mistake was under the same apprehensions of legal process, as if the defendant had actually threatened her; so that her executing the warrant of attorney was not a voluntary act, but the effect of fear, however groundless that might be." But where the acceptor of a bill of exchange, two days before the expiration of the time for which the bill was originally drawn, called upon the indorser, and informed him privately that he was insolvent; the indorser insisted on being paid the amount of the bill, offering at the same time to become security to the creditors for so much as the estate should produce; whereupon the acceptor paid it, and four days after became bankrupt; and it also appeared that the bill had been altered so as to make it fall due before this transaction, but without the defendant's knowledge: the Court of C. P. held, that this was sufficient proof of fraudulent preference to defeat the payment of the bill. Singleton v. Butler, 2 B. and P. 283. But where a creditor, in contemplation of bankruptcy, and

without solicitation, sent three checks into the hands of his clerk, to be delivered to a creditor at the counting house of the latter; but before they were delivered the creditor called upon the trader, and demanded payment of his debt, Lord Ellenborough held, that though there was an intention of giving a voluntary preference, that intention not having been consummated, the payment stood good. "The intermediate demand," says his Lordship, "takes it out of the cases hitherto decided upon this subject." Bayley v. Ballard, 1 Campb. Rep. 416. See likewise Starkie, 150, and Alley v. Hotson, 4 Campb. 325.

But if a debtor, at the instance of his creditor, gives goods out of his shop, in part payment of a bond not then due, and shortly afterwards become bankrupt, the mere circumstance of the bond not being due will not alone vitiate the part payment, on the ground of fraudulent prefer

changes the complexion of things both in civil and criminal cases. "Thus, (per Heath, Just.) if thieves, under pretence of legal process, persuade those within the house to open the door, and then rush in and rob the house, it is nevertheless burglary, for the law will supply the breaking, because the device by which they entered was in fraudem legis." But it is not sufficient to impeach a payment, that the debtor voluntarily pay his creditor, unless at the time he so pay him he has an act of bankruptcy in contemplation. a father advance portions to his children, such advance is voluntary, but not fraudulent, unless in contemplation of bankruptcy. Id. ibid.

If

So, where a trader delivered a quantity of goods to the defendant, who was under acceptances for such trader payable at a future day, which delivery of goods was, clearly, not voluntary by the trader, but made in consequence of the urgency of the defendant to be indemnified in case of the non-payment of the acceptances; the transaction being bona fide, and not colourable, was held not to be such a voluntary preference on the part of the trader (who afterwards became bankrupt) as would ren

1817.

ARBOUIN

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HANBURY

and Another