Bankruptcy-s-Fraudulent preference-Transfer of goods in part settlement of
antecedent debt under threat of proceedings-Insolvency-Intent to prefer

Where it is claimed tbat a transfer of property is voidable as a .fraudu-
lent transfer under section 50, Bankruptcy Ordinance 1918, it is not enough
for the trustee to show that at the time of the transfer the debtor was
insolvent, but the onus is also on him to show that the dominant object of
the debtor in making the transfer was to prefer the transferee to his other
creditors. Where there was an antecedent trade obligation with a promise
to pay on a certain date, which was not carried out, and was followed by
pressure from the creditor coupled with a threat of legal proceedings, it may
be that the debtor's intention in making the transfer was merely to fulfil
his obligation and avoid proceedings, and not to make any preference of
the transferee.

Bankruptcy Ordinance 1928, S. 50.

Appeal

December 4, 1933. Owen C.J.: The facts in this appeal are
shortly as follows: in or about December, 1932 Aristotelli David
purchased goods to the value of £E.132 from the appellant against
a bill expressed to fall due on January 31, 1933. On maturity the
debtor, David, found himself unable to meet it, and on February 10
or 12, 1933, the appellant informed the debtor that the bill would
be protested and an action brought upon it if he did not pay. David
therefore undertook to transfer to the appellant three cases of cig-
arettes of the value of £ E.119 in part satisfaction of the amount due,
and, shortly afterwards, put his creditor in a position to take possession

* Court: Owen C.1., Halford and Germann JJ.

of the cigarettes. This the appellant did on February 15. At the
time when this transaction took place there is evidence to show, and
no doubt it was the fact, that David was insolvent. A creditor's
petition for bankruptcy was presented on April 22, and he was ad-
judicated bankrupt on June 8. In the course of the bankruptcy pro-
ceedings the district judge, Gedaref, set aside the above transaction
on the ground that it was a fraudulent preference within the meaning
of section 50 (i) of the Bankruptcy Ordinance of 1928,1 and the
sole question to be determined by this court is whether or not there
was evidence upon which this order could be made.

I am of opinion that there was not. It is not enough merely
to show that at the time of the transfer the debtor was insolvent.
The trustee, or person seeking to set aside the transaction, must show
that the desire to prefer (i.e., to the exclusion of his other creditors)
was the debtor's dominating impulse, that the transaction was carried
out with the substantial view of giving one creditor a preference over
the others. Preference implies an act of free will; therefore, whether
or not-the payment was voluntary is relevant in considering the ques-
tion of the state of mind of the debtor. A voluntary payment is
an act moving from the debtor; it is payment by the act and will
of the party making it, and if therefore there is anything to interfere
with or control this will, it cannot be a voluntary payment. The
debtor and creditor in this case were merchants. The goods the
debtor bought from his creditor were bought in the ordinary course
of business, and it was in the ordinary course of business that the
debtor was called upon to meet the bill on it's maturity. Here was
an antecedent obligation, a promise to pay on a certain date, and,
further, pressure by the creditor, coupled with a threat of legal pro-
ceedings, when the debtor failed to discharge that obligation on the
date fixed for ii. It does not follow that these circumstances make
it impossible that the transaction was fraudulent, but the point is
that it is the duty of the trustee to show that, in spite of all this,
the dominant view or object of the debtor was the intention to prefer
this creditor to the others. I can find no evidence of it at all. The

1 Section 50 (i 1 of the Bankruptcy Ordinance 1928 reads: "Every transfer
of property. _ . made ... by any person unable to pay his debts as they be-
come due from hi, own money. in favour of any creditor, ... with a view of
giving that creditor a preference over the other creditors shall, if the person
making ... the same is adjudged bankrupt on a petition presented within three
months after the date of making ... the same, be deemed fraudulent and
voidable against the receiver and may be annulled by the court.