1897

undervalue. Lastly, there has been unconscionable delay in In re coming to the Court. It is impossible now to replace the GALLARD. parties in the position they were in in 1889, and there is no Ex parte GALLARD. evidence of damage before the Court.

Ashton Cross, for the representatives of Joseph Stretton. There has been such acquiescence and lapse of time as to bar relief against Stretton, the purchaser, who died in 1889. He was a stranger to the bankruptcy and held in no sense a fiduciary position, and there is no evidence of fraud, or collusion, or conspiracy on his part. Since 1891 Miss Gallard has stood by, and it is inequitable after the lapse of time that her application should be granted: Soar v. Ashwell. (1)

E. C. Willis, Q.C., in reply, cited Metropolitan Bank v. Heiron. (2)

VAUGHAN WILLIAMS J. The first point which I have to decide is whether the sale by the trustee to Stretton was contrary to the provisions of rule 316 of the Bankruptcy Rules, 1886. In my judgment, it was not. The rule runs thus: "Neither the trustee nor any member of the committee of inspection of an estate shall, while acting as trustee or member of such committee, except by leave of the Court, either directly or indirectly by himself or any partner, clerk, agent, or servant become the purchaser of any part of the estate. Any such purchase made contrary to the provisions of this rule may be set aside by the Court on the application of the Board of Trade or any creditor." I am of opinion upon the evidence before me that Mr. Hilliard, the partner of Mr. Stretton in the firm of Newman, Stretton & Hilliard, who was the purchaser, had no interest, directly or indirectly, in the purchase of the property. It seems to me to have been a purchase by Mr. Stretton on his own account, and I do not think that the partnership firm had, as between themselves and Mr. Stretton, any interest in this purchase. I think that the purchase was a purchase by Mr. Stretton on his own account, and not in any way for the benefit of the firm. In my judgment such purchase does not fall within the words of rule 316. The ground upon which it (1) [1893] 2 Q. B. 390. (2) (1880) 5 Ex. D. 319.

is suggested that the sale comes within the rule is that Mr. Hilliard, a member of the committee of inspection, was at the time of the sale a partner of Mr. Stretton, the purchaser. I think that the rule only covers cases where the purchase is directly or indirectly a purchase by a trustee, or a member of the committee of inspection. The words of the rule, according to their natural meaning, seem clearly only to include cases of purchases directly or indirectly by the trustee or member of the committee of inspection. It is urged against this that so to construe the rule would be inconsistent with the established rule in bankruptcy that there cannot be a sale to a partner of a trustee. This seems to have been the rule at one time, at all events: see Ex parte Moore (1); but I do not think that this entitles me to amplify a rule of which the words are clear. Secondly, it is urged that the words of the rule are not clear. It is said that the words "by his partner, clerk, agent, or servant," are unnecessary, if they are only instances of indirect purchases, and that the meaning is that a purchase by a partner, clerk, agent, or servant, or by a person standing in such relation to a trustee or member of a committee of inspection, should be deemed to be an indirect purchase by the trustee, even though there is no proof that the purchase was in any way for his benefit. I cannot come to this conclusion, even though the rule so construed might be, as I think it would be, a salutary rule, and in accordance with previous bankruptcy practice. I hold, therefore, that the sale does not come within the rule. But the case was also argued on the basis that the sale was a fraudulent sale at an undervalue. Now, I have come, with great regret, to the conclusion that this charge is made out. [The learned judge then dealt with the evidence on this point at length, and held that the sale was made at an undervalue to the knowledge of all parties concerned, and continued:-]

The only matter that remains to be dealt with is the Statute of Limitations, or rather the equitable analogy to the Statute of Limitations. It is not suggested here that the statute itself applies; but it is said that the case is one of those in which equity follows the law, and will not allow the action after a (1) 51 L. J. (Ch.) 72; 45 L. T. 558.

1897

In re GALLARD.

Ex parte GALLARD.

Vaughan Williams J.

1897

lapse of these years to succeed. Now it is admitted that in so far as express trustees are concerned the statute would afford no answer that is, it is not really argued that the lapse of Ex parte GALLARD. time affords any defence to Mr. Harris, who is one of the

In re GALLARD.

Vaughan Williams J.

66

respondents in his capacity as trustee in bankruptcy; but it is
said that Mr. Stretton was not a trustee, was not in a fiduciary
capacity, and that the utmost that can be said in relation to him
is that he was a constructive trustee, and that in the case of a
constructive trustee the analogy of the Statute of Limitations
can be successfully set up. But when I refer to the case of
Soar v. Ashwell (1) I find Lord Esher in his judgment says (2) :
The cases seem to me to decide that where a person has
assumed, either with or without consent, to act as a trustee❞—
then he goes on to say that such a person will be treated as if
he were an actual trustee, and continues: "There is another
recognised state of circumstances in which a person not nomi-
nated a trustee may be bound to liability as if he were a
nominated trustee, namely, where he has knowingly assisted a
nominated trustee in a fraudulent and dishonest disposition of
the trust property. Such a person will be treated by a court
of equity as if he were an express trustee of an express trust."
Lord Esher, when he makes that observation, was dealing
expressly with the point when in equity the lapse of time can
be set up in answer to a claim for breach of trust; and both
Bowen and Kay L.JJ. arrived at the same conclusion, and in
every way confirmed that observation of Lord Esher. I am of
opinion, therefore, that under the circumstances the lapse of time
affords no answer to the claim that is made here. No doubt in
equity the Courts are accustomed not to lay down any hard and
fast rule, but in each case, where it is sought to answer a claim
by the lapse of time, to take into consideration the whole of
the circumstances and say whether, having regard to those
circumstances, the balance of justice is in favour of allowing
lapse of time to be set up as an answer, or whether it is not.
But in the present case I have arrived at the conclusion that
the balance of justice is against allowing the lapse of time to be
set up. I know that Miss Gallard has been engaged in years
(1) [1893] 2 Q. B. 390.
(2) [1893] 2 Q. B. at p. 394.

of litigation with the trustee and others connected with this bankruptcy; but I am of opinion that there is nothing to shew that she, until quite recently, was aware of the valuation, or at all events of the contents of the valuation, by Mr. Jenkinson. I know also that it is said that Miss Gallard ought to have made further inquiries than she did, having the information which she had got. She plainly knew of the sale to Stretton as early as March, 1891, and I daresay that if she had traced the matter out she would have arrived at Mr. Jenkinson's valuation, and possibly would have arrived at other information pointing to a sale at an undervalue. But still, notwithstanding this, in my judgment the balance of justice is in favour of not allowing the lapse of time to be set up here as a defence. I should like to quote from the judgment in Rochefoucauld v. Boustead (1) the portion of the judgment of Lord Blackburn in Erlanger v. New Sombrero Phosphate Co. (2), which is there cited by Lindley L.J. It is this (3): "I have looked in vain for any authority which gives a more distinct and definite rule than this; and I think, from the nature of the inquiry, it must always be a question of more or less, depending on the degree of diligence which might reasonably be required, and the degree of change which has occurred, whether the balance of justice or injustice is in favour of granting the remedy or withholding it. The determination of such a question must largely depend on the turn of mind of those who have to decide, and must therefore be subject to uncertainty, but that I think is inherent in the nature of the inquiry." I have tried to apply that rule to this case. I have tried to put on one side and the other the due weight that ought to be given to such facts as those which I have just been speaking of. Having done so, I have come to the conclusion that I ought not to allow the lapse of time here to bar the remedy, and that under the circumstances this application ought to be granted. But I do not feel disposed to order the sale to be set aside, having regard to the lapse of time and the changes of interest and negotiations that have been going on, but to give damages instead of setting

(1) [1897] 1 Ch. 196.

(2) (1878) 3 App. Cas. 1218, at p. 1279. (3) [1897] 1 Ch. at p. 211.

1897

In re GALLARD.

Ex parte GALLARD.

Vaughan Williams J.

1897

In re GALLARD.

Ex parte GALLARD.

aside the sale. I think the proper course will be to direct the usual inquiry of what damage, if any, the estate has sustained by reason of this sale.

Solicitors for applicant: Sawyer & Ellis, for J. C. Buckwell, Brighton.

Solicitors for respondents: Ashurst, Morris & Co.; Turner, Rogers & Myers.

H. L. F.

1897 May 11.

In re EATON & CO.

Ex parte VINEY.

Bankruptcy-Fraudulent Preference-Payment of overdue Acceptance-Onus of Proof-Bankruptcy Act, 1883 (46 & 47 Vict. c. 52), s. 48.

When a bill of exchange is not presented for payment at maturity but is held over at the request of the acceptor and subsequently paid, such a payment is not within the principle of In re Clay & Sons, (1895) 3 Manson, 31, and may be a fraudulent preference within s. 48 of the Bankruptcy Act, 1883.

When a trustee in bankruptcy proves that the debtor was insolvent at the time when he made the payment that is impeached as a fraudulent preference, the onus of proof shifts, and the party supporting the payment must shew that it was not made with the view of preferring him.

THIS was an application that raised the question whether the payment by the debtors of an overdue acceptance was a fraudulent preference.

On April 27, 1896, A. and P. Eaton, trading as "Eaton & Co.," gave F. Wigley, their brother-in-law, an acceptance dated April 23, 1896, for 700l. payable six months after date. The consideration for this acceptance was the sum of 7007. advanced by F. Wigley to them in July, 1895.

In October, 1896, shortly before the bill fell due, F. Wigley consented, at the debtors' request, to hold over the bill for a few days. At the same time the debtors made a written application to him to lend them the further sum of 2000l., which, after consideration, he declined to do. On November 12, on an intimation from the debtors, he sent the bill forward through his bankers in the usual way, and it was paid.