CHAP. XXXI. Validity of fraudulent conveyances as against assignor. Subsequent creditors. who advanced his money without notice that the settlement was fraudulent, it was held that the mortgage was protected by sect. 5, and was accordingly good as against the creditors of the settlor (e). iii.—Against what Creditors a Fraudulent Conveyance will be Avoided. The statute renders void conveyances made with intent to defraud creditors only as against persons whose actions, &c., may be defrauded or hindered, and the representatives of such persons. An assurance, though fraudulent under the statute, will therefore be valid as against the assignor himself, and as against strangers other than creditors; it will also be valid as against creditors who are cognisant of and take part in the arrangement under which the assignment is made (f). It has been held at law that an assurance cannot be void against a person who only became a creditor after its date (g). But in equity an assurance is void if made with a view to defeat future debts (h); and when an assurance is once avoided under this statute, subsequent creditors may be let in together with antecedent creditors (i); and a subsequent creditor may himself bring an action to avoid the assurance, if any antecedent debt remains due (). An assurance may be made under such circumstances as to be void against subsequent creditors, although all the antecedent creditors are paid off (1); as where it is made to defeat a plaintiff in an action (m); or where the grantor immediately afterwards realizes all the rest of his property and denudes himself of everything ("); or where he makes the assurance on the eve of entering into an hazardous trade, in (e) Halifax Joint Stock Banking Co. v. Gledhill, (1891) 1 Ch. 31. (f) Steel v. Brown, 1 Taunt. 381; Robinson v. McDonnell, 2 B. & Ald. 134; Bessey v. Windham, 6 Q. B. 166; White v. Morris, 11 C. B. 1015; Olliver v. King, 8 De G. M. & G. 110. (9) Oswald v. Thompson, 2 Exch. 215. (h) Stileman v. Ashdown, 2 Atk. 481; which case the onus would fall on him to show that he was in a position to make it (o). A creditor under a voluntary post obit bond is as much entitled to the benefit of this statute as any other creditor (p). It is not necessary for a creditor to have a lien or charge on the property the subject of the settlement to entitle him to a decree to set it aside (2). Where the settlor has subsequently mortgaged all his personal estate, the chattels which are the subject of the fraudulent settlement do not, upon its being declared void, vest in the mortgagee (r). He has only the right of a general creditor, and must take independent proceedings to have execution of the property (s). CHAP. XXXI. ancestor or The statute applies where the debts were contracted not by Debt of the party making the conveyance, but by the ancestor from testator. whom he derived the estate (t); and a fraudulent conveyance may be made by an executor as well as by an heir (u). aside con veyance. An action by a creditor to set aside a settlement under this Action to set statute is not affected by the insolvency of the settlor subsequent to the commencement of the action (). If the settlor has become bankrupt, the trustees in bankruptcy are the proper persons to bring the action (y). The trustees in bankruptcy are parties grieved" within the statute (z). Any particular creditor, including a mortgagee, whether legal Who may bring action. or equitable, may take proceedings to set aside a voluntary settlement (a); but it does not appear to be free from doubt whether a creditor, even if he is a mortgagee, can after the bankruptcy of the debtor maintain an action to set aside a conveyance made by the debtor prior to the bankruptcy, on the ground that such conveyance is fraudulent within the statute, or whether the right of such action in such a case is in the trustee in the bankruptcy only (b). (0) Mackay v. Douglas, 14 Eq. 106; Exp. Russell, 19 Ch. D. 588, C. A. (p) Adames v. Hallett, L. R. 6 Eq. 468; Dening v. Ware, 22 Beav. 184. (q) Reese River Silver Mining Co. v. Atwell, 7 Eq. 347; Goldsmith v. Russell, 5 De G. M. & G. 547. But see Lister v. Turner, 5 Ha. 281; Collins v. Burton, 4 De G. & J. 612. (r) Barton v. Vanheythusen, 11 Ha. 126. (8) Reese River Silver Mining Co. v. Atwell, sup.; Lister v. Turner, sup. (t) Apharry v. Bodingham, Cro. Eliz. 350; Gooch's Case, 5 Rep. 60. See Richardson v. Horton, 7 Beav. 112. (u) Doe v. Fallows, 2 Cr. & J. 481; 2 Tyrw. 460. (x) Goldsmith v. Russell, 5 De G. M. & G. 547. (y) Collins v. Burton, 4 De G. & J. (z) Butcher v. Harrison, 4 B. & Ad. (b) Lister v. Turner, 5 Ha. 281. CHAP. XXXI. Form of decree. Costs. The form of the decree is that the deed be declared void against the creditors, and that the defendants join in all necessary acts for raising the money for the creditors (c); and the decree must be on behalf of all the creditors (ɗ). In one case (e) Lord Cranworth gave the trustees and infant cestuis que trust their costs; but this case has not been followed, and the utmost that can be done is to make the decree without costs (f), and if they appeal and fail they will be fixed with costs (g). Fraudulent conveyances are acts of bankruptcy. Conveyance unimpeach able in bankruptcy after three months. SECTION II. OF THE AVOIDANCE OF MORTGAGES IN BANKRUPTCY. i. Introductory Remarks.-A conveyance by way of mortgage which is "fraudulent" within the meaning of the statute 13 Eliz. c. 5, is also void under the Bankruptcy Act, 1883 (h), and such conveyance will be liable to be set aside accordingly in favour of the general creditors of the mortgagor if any proceedings in bankruptcy should be founded upon such act or any other act of bankruptcy committed either before or after the conveyance within the limit of time to be presently stated. But a conveyance may be good as against an execution creditor under the statute of Elizabeth, but may, nevertheless, be bad as against the trustee in bankruptcy of the mortgagor. If a deed executed by a debtor is liable to be set aside on the ground that it is within the mischief of the bankrupt law, it will apparently become valid and unimpeachable as against the trustee in bankruptcy after the lapse of three months from its execution, if during that period no proceedings in bankruptcy are taken against the debtor (i), independently of the question whether or not it may be void as against an execution creditor (c) Bott v. Smith, 21 Beav. 511; affirmed, L. J. p. 517. See Darvill v. Terry, 6 H. & N. 807. (d) Strong v. Strong, 18 Beav. 408; Reese River, &c. Co. v. Atwell, L. R. 7 Eq. 347. (e) Goldsmith v. Russell, 5 De G. M. & G. 547. (f) Elsey v. Cox, 26 Beav. 95. (g) Exp. Russell, 19 Ch. D. 588, C. A. (h) 46 & 47 Vict. c. 52. (i) Ibid. ss. 6, 48. The period was formerly twelve months prior to adjudication. See Allen v. Bonnett, L. R. 5 Ch. App. 577. See also Mercer v. Peterson, L. R. 2 Ex. 304; S. C., 3 ibid. 104; Jones v. Harber, L. R. 6 Q. B. 77. under the statute of Elizabeth, or generally as fraudulent against CHAP. XXXI. creditors. property. It has been seen that a conveyance by way of mortgage of a Mortgage of person's whole property, or of the whole with a merely colour- debtor's whole able exception, and à fortiori such a conveyance of part only of his property to secure an existing debt, is not necessarily void under the statute of Elizabeth (j); but any such conveyance, if "fraudulent," or amounting to "fraudulent preference" within the meaning of the bankruptcy law, is an act of bankruptcy and liable to be avoided accordingly. ii.-Fraudulent Conveyances are Acts of Bankruptcy.-The Bankruptcy enactments governing the question how far mortgage securities Act, 1883. given by a debtor are voidable in the event of the subsequent bankruptcy of the mortgagor by his trustee, are the following sections or parts of sections of the Bankruptcy Act, 1883 (k). Sect. 4. "A debtor commits an act of bankruptcy in each of the Acts of following cases:— bankruptcy. (a) If in England or elsewhere he makes a conveyance or assignment of his property to a trustee or trustees for the benefit of his creditors generally; (b) If in England or elsewhere he makes a fraudulent conveyance, gift, delivery, or transfer of his property, or of any part thereof; (c) If in England or elsewhere he makes any conveyance or transfer of his property or any part thereof, or creates any charge thereon, which would under this or any other Act be void as a fraudulent preference if he were adjudged bankrupt." Sect. 6. "A creditor shall not be entitled to present a bankruptcy Conditions on petition against a debtor unless: which creditor (b) The act of bankruptcy on which the petition is grounded has may petition. occurred within three months before the presentation of the petition." of trustee's title. Sect. 43. The bankruptcy of a debtor, whether the same takes Relation back place on the debtor's own petition or upon that of a creditor or creditors, shall be deemed to have relation back to, and to commence at, the time of the act of bankruptcy being committed on which a receiving order is made against him, or, if the bankrupt is proved to have committed more acts of bankruptcy than one, to have relation back to, and to commence at, the time of the first of the acts of bankruptcy proved to have been committed by the bankrupt within three months next preceding the date of the presentation of the bankruptcy petition; but no bankruptcy petition, receiving order, or adjudication shall be rendered invalid by reason of any act of bankruptcy anterior to the debt of the petitioning creditor." (j) See ante, p. 573. VOL. I.-R. (k) 46 & 47 Vict. c. 52. PP CHAP. XXXI. Conveyance not avoided unless fraudulent by English law. Fraudulent conveyance is an act of and void. It will be observed that sect. 4 renders void the conveyances and assignments specified in clauses (a), (b), and (c) if made by a debtor "in England or elsewhere." Such instruments will, therefore, amount to acts of bankruptcy if made anywhere abroad by a person subject to English law (7). But a conveyance of property situate abroad out of the jurisdiction of the English Courts cannot defeat or delay creditors so as to constitute an act of bankruptcy; and a conveyance of property in England by a domiciled foreigner in his own country which can operate only according to the law of that country, is not within the section. "The section clearly means, and has always been interpreted as meaning, fraudulent by the law of England, and, therefore, cannot properly apply to a conveyance which is executed in and is to operate according to the law of a foreign country” (m). Sect. 4, though it makes "fraudulent conveyances" available acts of bankruptcy, does not, nor does any other section of the bankruptcy, Act, expressly render such conveyances void as against the trustee, as is the case with regard to conveyances amounting to "fraudulent preferences" within the meaning of sect. 48. But the result of the decisions is such as to make it clear that, if a conveyance by a debtor is a "fraudulent conveyance" so as to constitute an act of bankruptcy, it will be invalid as against the trustee, unless saved by lapse of time (»). Fraudulent conveyance not avoided if made three months before petition. Further, the Act nowhere expressly says that a "fraudulent conveyance," to be impeachable as being an act of bankruptcy, must have been made within three months before presentation of a petition on which the debtor is adjudicated bankrupt, as is provided by sect. 48 with regard to "fraudulent preferences." But, having regard to the language of sects. 6, 43, as to the time after an act of bankruptcy within which a petition may be presented, and as to the relation back of the trustee's title to such act, it seems a necessary inference that a conveyance made before the commission of such act will be unimpeachable as against the trustee; and the question has been so determined by judicial decision. So, where a debtor assigned all his estate and effects by way of security for a sum then due, and a small |