The Gazette 1961 - 64

the goods for twenty one days under process or order of the court amounts to an act of bankruptcy. Section 45 of the same Act provides (inter alia) that nothing shall invalidate an assignment by the debtor for valuable consideration prior to the date of the receiving order provided that the person to whom the assignment is made has not at that time any notice of the act of bankruptcy. Section 46 provides that a payment by any person of money to a person subsequently adjudicated a bankrupt or to a person claiming under an assignment from the bankrupt is a good discharge if the payment is made prior to the date of the receiving order and without notice of the presentation of a bankruptcy petition and is either pursuant to the ordinary course of business or is bona fide. The facts of this case were as follows : On September iyth, 1959, a judgment creditor levied •execution under three judgments for a total sum of .£1,447 4s - 3d- on trie goods of D who was a grocer D signed a " walking possession agreement" under which he undertook not to remove any of the goods seized in order that he could continue trading. •On October 9th, D entered into a contract for the sale of the shop which was to be completed on November znd. On that day the purchaser paid to D's solicitor £7,625 for the premises fixtures and goodwill and £1,101 95. 6d. for the stock in trade. The solicitor had been acting for D all along and had notice of the execution order and the possession by the sheriff of D's stock in trade. The solicitor received a total of approximately £9,000 and out of this he paid £4,412 to the mortgagees of the premises who had joined in the sale and between November 2nd and November i}th, he paid out about £4,500 to various creditors including the balance due to the judgment creditor in pursuance •of instructions given to him by D. On November 2nd, D had informed his solicitor that there were no debts other than those of which the solicitor knew and there were sufficient funds to meet them. By November 2jth, the solicitor discovered that the •debtor had not disclosed all his debts to him and that there were further debts amounting to £4,000 which the debtor was unable to pay. On December nth, 1959, D was adjudicated a bankrupt on his own petition. The trustee in bankruptcy applied to the County Cork for an order for an account from the solicitor of the proceeds of the sale and the payment of the sum found due and the judge ordered (i) that the title of the trustee related back to October, 9th 1959, (twenty one days after the sheriff had taken possession) and (2) that the solicitor 'was accountable to the trustee for the sum of £4,114 195. 6d. received by him on the bankrupt's behalf subsequent to and with notice of an act of bankruptcy. It was also ordered that this sum should

be paid by the solicitor to the trustee. On appeal to the Divisional Court it was held (i) that the oral permission given to D after seizure of the goods to deal with them in a limited way without further reference to the sheriff was not inconsistent with his possession of the goods and that accordingly an act of bankruptcy occurred on October 9th, 1959. (ii) That the payments made to the creditors by D's solicitor out of the money in his hands were pay ments made " to " the bankrupt and being bona fide they fell within the meaning of section 46. Accord ingly they were a good discharge to the solicitor, (iii) That certain of the payments were made pur suant to an assignment by the bankrupt for valuable consideration within the meaning of section 46 (/) and were therefore validated by that section by reason of the fact that the payees had not notice of the act of bankruptcy. The fact that the solicitor (the person making the payments) had such notice did not bring them within the section. It was there fore ordered that the County Court judge's order be set aside except in so far as it ordered that the act of bankruptcy occurred on October 9th. The remarks of Russell J. in giving judgment are of interest to the profession because he held that the payments made by the solicitor were not made in the ordinary course of business and, therefore, in order to bring them within the section they would have to be made bona fide. The learned judge said that a solicitor (or any person) paying money on behalf of a debtor in a situation like this owes a duty to the debtor's creditors and the good faith to be shown to such person went beyond mere personal honesty and involved more than absence of a conscious attempt to defraud. The learned judge said: "If Mr. Bennett (the solicitor) had made the payments with the knowledge that the process would result in some creditors being paid in full and others whistling for their money we do not consider that the payments would have been made bona fide. It might well be that if a person in Mr. Bennett's position had a strong suspicion that the process of his payments would have the result mentioned above but took pains to avoid finding out the truth he could not be said to make them bona fide. But the situation in the present case was otherwise." The learned judge went on to point out that though the solicitor knew that his client had committed an act of bankruptcy and was generally insolvent the situation at the time when the purchase money came into his hands was that he thought he had sufficient to pay all the client's debts and the client had told him expressly that there were no further debts. The judge continued, " All the payments now thought to be recovered were made before he found out that Dalton had not told him the truth. There