The Northern Daily Times.
Liverpool, Merseyside, England, 1856-12-05 00:00:00

BANKRUPTCY COURT

BEFORE MR. COMMISSIONER STEVENSON

Re Lkwroun.—His Honour delivered judgment on the
certificate yesterday. He said : The bankrupt's certificate
is onposed on the part of the assignees upon two grounds
—first, that of reckless trading, and, secondly, fraudu-
lent preference. It is also opposed on the part of the
Rev. Mr. Hesketh, a creditor, upon the like grounds,
and also, as far as I can collect from the examination in
reference to Mr. Hesketh's debt and the remarks made
upon it, upon the ground of the bankrupt having failed
to give Mr. Hesketh a security which had been promised
to him, and to this objection I will first refer. This
security appears to have been one that was originally
suggested by the bankrupt himself long after the loan
was contracted, and when Mr. Hesketh became uneasy
about the repayment of his advances, and, alth ,ugh the
bankrupt's premises in Norfolk street, whi,:h were
offered as this security, were subject to an agreement for
a mortgage to a Mr. Ames for the sum of £1,500
yet,
rapt

rom the correspondence oank-
and Mr. Ames on the subject, in which
d latter consented to relinquish his security
on these premises, upon his having a second charge
given to him upon the bankrupt's premises and
property in Kent street, the bankrupt considered himself
justified in offering the Norolk street premises as the
proposed security to Mr. Hesketh, and upon the faith of
which he made the offer of this security, and this offer
seems to have been followed up by the preparation of the
draft seeurity, but for some reasom which does not appear
the securiry was declined on the part of Mr. Hesketh.
Under these circumstances, I do not think that any
objection can be made to the bankrupt's conduct in this
respect. With regard to the objection on the ground of
reckless trading, it does not appear that the bankrupt is
charged with having engaged in any speculation not
connected with his business, or in any transactions
to an extent beyond the ordinary course of traders
carrying on a similar business, but this objection
is, as I collect, chiefly founded upon the circumstance
of the bankrupt having entered into and carried on
the trade entirely upon burrowed capital. lint this
circumstance alone does not appear to me to (urns an
objection. It may be considered to impose a greater
obligation upon the trader to act with prudence and
caution in the carrying on of his business, and to add
considerably to any objection arising from speculations or
overtrading. The bankrupt, however, in this case, does
not, as I have before observed, appear to have rendered
himself open to this olijection, although there would
seem to be a want of prudence on his part in entering
into this business in Kent street, attended with such
heavy outlay, and with which, as he himself admits, he
was not much acquainted. I do not collect, however,
that his loss is to be attributed so much to this want of
knowledge, and certainly not to any want of care or
diligence on his part, but that it has arisen principally
from a heavy loss which he sustained in one transaction,
and also from the great depreciation in his stock arising
from the late war having so suddenly ceased, which
materially affected such description of property. It seems,
however, that he has, during the whole course of his trad-
ing, been much hamperid for want of capital, and by the
constant necessity of borrowing money, to enable him to
meet his engagements, and to which, I think, his failure
must also be partly attributed ; and, in such a state of
things, it beelines a question, whether the bankrur.,
ought not, at some period long prior to the presenting of
his petition to this court for an arrangement, to have
stopped carrying on his business, and to have made some
arrangement with his creditors. It may be doubted
whether, at the period of the dissolution of partnership be-
tween him and Mr. Y. Lace, he ought not tohave donethis
instead of taking upon himself the whose burthen of the
liabilities of the partnership, and the repayment of Mr.
V. Lace's capital. It is difficult to sa •at what time a
trader, who cannot meet his engagements—but is not
hopelessly insolvent—ought to stop. It was observed by
the Vice Chancellor, in the case of ex parte Johnson, 4
D. G. and Sm, 27, that it could not be contended that
a man must leave off trade because he is in difficulties ;
they might be surmounted. In the present instance the
bankrupt appears to have been sanguine, up to a very
recent period of his failure, that the business would
succeed ; so much so, as to have entered into negotiations
with a Mr. Smith, for a partnership, so recently as in
May last; and the bankrupt positively asserts that it
was not until the latter part of the month of June that
he became aware of his affairs having become so deranged
that he should have to stop, and I feel hound to say that
from the very straightforward and candid answers that
he has given to every question put to him, and his evident
disposition to be explicit in the elucidation of his affairs,
he is, I think, entitled to have full credit given to
him for any assertion that he makes thus deliberately.
Under all the circumstances, therefore, of this case
which I have very carefully and anxiously considered,
I feel warranted in coming to the conclusion that
the charge of reckless trading is not substantiated. With
respect to the charge of fraudulent preference, this applies
to the security given to Mr. Lee, his brother-in-law, by
means of which he has received a considerable portion of
his advances. This security was, in the first instance, an
agreement, dated the 27th May last, to make a mortage of
the bankrupt's premises in Kent street, and the machinery
and effects ther. in, and the good will of the business
carried on therein, subject to a prior charge in favour of
Mr. V. Lace, by way of agreement to mortgage, for securing
the payment of the portion of his capital remai fling unpaid,
and which agr2empt of the 27th of May was carried
into execution by a deed of assignment, dated the 12.11
of June last, being the same date at which a similar deed
of assignment was executed in favour of Mr. V. Lace, in
performance of his agreement for a mortgage before
referred to, and under which deed the property was sold, a
short time before the bankrupt presented his petition for
arrangement. The bankrupt positively states that no
promise was ever made by him to give Mr. Lee any
security before the date of the agreement of the 27th of
May. It is contended, therefore, that this agreement,
and the assignment made in pursuance of it, was a
fraudulent preference, and an offence against the bank-
rupt laws falling within the fourth division of offeeces
under the 256th section of the Consolidation Act. His
Honour read the section and then proceeded
:
Now, in the first place, I think it extremely doubtful
whether the clause applies to a case like the present,
where the bankruptcy has not arisen under a petition for
adjudication, but by an adjudication under the arrange-
ment clauses in the Consolidation Act. But supposing
this clause should be considered applicable to this case ;
then, I apprehend, the date of the adjudication would be
the period within which the two months there mentioned
should be calculated. Now, the period between such
adjudication and the agreement of the 27th May, which
must be considered the time when the preference was
made, would be more than two months ; and, again,
this agreement was not given wholly voluntary and
without pressure, on the part of Mr. Lee ; as, from the
bankrupt's testimony, it appears that Mr.'Lee urgently
pressed for a security ; and, under all these circum-
stances, I cannot consider that this provision is ap-
plicable to the present case But, although this case
may not fall within such provision, it is another question
whether, the giving this security, may not amount to
such a preference as to constitute misconduct in the
bankrupt as a trader, to be dealt with by the court
under the discretionary clause in the act, and which
I propose to consider, without reference to the question,
whether this constitutes a legal fraudulent preference,
rendering it void as such, and to which I wish it
to be understood, I give no opinion. Now, although
it may be very natural that the bankrupt should have
felt grateful to Mr. Lee for the material and oppor-'
tune assistance that he had afforded him, in enabling
him to establish himself in business, and to
meet his engagements, and that he should have
thought himself justified in acceding to his request
fur a security ; yet, he should not have forgotten
that he had a duty he owed to his other unsecured cre•
ditors, and that before he gave Mr. Lee a security which
had not been stipulated for on his advances, and which
security, being over the machinery and other effects by
which he carried on his business, as well as the goodwill
thereof, involved his very power and means of carrying
it on, he ought to have first fully satisfied himself that
his affairs were in such a satisfactory state as to entitle
him to consider that he was not prejudicing his unsecured
creditors by giving such a security, and until he was so
satisfied he ought to have resisted, however painful it
might have been to him to have done so, all importunity
for such a security ; and that the bankrupt's affairs were
not then in such a satisfactory position seems to be
evident, and although he may not have perhaps been
aware until June that they were in so deranged a state
as to require him to stop, yet I apprehend that the
knowledge he had of them, which enabled him to make
out the rough balance-sheet in April for Mr. Lee's
inspection, ought to have been sufficient to s.how. him
satl
uoilateibi;il liabilities,
although
, Kent w
that the liabilities there mentioned, added to his private
tiyd rewde
were
esroe
farno not
beyondapji ca bh
is
assets that he was not in a solvent state, and that
not in
ed s t
ahavete
as . t
destroy considered
his hopes
affairshopes
e
hsitcrheetheprocopncrs
o
himself, yet it is a question whether, in
still beinegmheabbainlroraaytsos carry
differenton his business and recovering
such a position of his affairs,. what he might or
ought to have known, he was not Justified in giving Mr
Lee the security in question, and particularly of shell
nature, involving the power of continuing
Under all these circumstances, I ha, e felt bound to"col -
Y s
to the conclusion that the giving of this security must t 1)13e
regarded as an act of misconduct in the bankrupt ac a LIVE
trader, and such as this court never overlooks, as it tends

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