1817.

ARBOUIN

v.

HANBURY

and Another

preference. Thus, in Harman v. Fisher, above cited, Lord 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 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 fortiori, 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,

having resolved to stop payment, informed the defendant that he had repented of what he had done, and had sent express to stop the bills, and would return them; and, three days after, committed an act of bankruptcy: after which, he returned to the defendant all the bills (except one which had been discounted) and also two bank notes, part of the proceeds of such discount; the defendant delivered back the security, and afterwards a commission issued against the trader, and the assignees brought an action of trover against the defendant for the bill and bank notes: It was held in this case, by K. B. that the defendant was entitled to retain them, as the bills were originally obtained under a false pretence of giving a good security; and, under such circumstances, a court of equity would order the property to be restored; and, therefore, it would be useless for a court of law to permit that to be recovered which could not be retained. Gladstone v. Hadwen, 1 M. and S. 517. The distinction of this case from the former is evident. The trader only returned what he had no right to possess. He did not amend his own fraud at the expence of the credi

tors, but declined to benefit the creditors by means of such fraud.

Where a trader, knowing himself to be insolvent, called upon his creditor, and informed him of it, and the creditor thereupon said that he must be paid his debt, which was accordingly done, and the trader immediately afterwards became a bankrupt; this transaction was held to be void. The Court of C. P. very justly concluding, that the circumstance of the trader calling upon his creditor, and disclosing to him his situation, and then acceding to his request of payment, afforded strong grounds to infer a fraudulent preference. Singleton v. Howell, 2 Bos. and Pull. 283. In this case, indeed, it was evident, that a preference was intended by the trader; and the demand of the creditor was a mere pretext in order to make out the circumstance of compulsion.

2. But where a trader gives such a preference under a threat or apprehension of legal process, civil or criminal, or from the pressure and importunity of his creditors, or in any case which derogates from his free will, and does not justify the suspicion of collusion; in such case, the trans

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. Ex parte Scudamore, 3 Ves. Yeates v. Grove, 1 VeHolberd v. sey, jun. 280. Anderson, 5 T. R. 235. Smith v. Payne, 6 T. R. 152. De Tastet v. Carroll, 1 Starkie,

85.

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