been controverted or qualified, it is idle to suggest that you must have an actual threat or the actual pressure of a creditor. He then applied the principle laid down by Lord Mansfield to the case under consideration and drew the conclusion that, although no one had threatened the bankrupt with criminal proceedings, the facts indicated that what was in the bankrupt's mind was that he might probably be prosecuted for an act of misconduct of which he had been guilty. Lord Halsbury then proceeded: If what the Legislature had in view was the exercise of a voluntary right on the part of debtors to do what they pleased, the mere voluntary deciding (I will not use the word "preferring") to pay one creditor and to leave another creditor unpaid, if that is really what the Legislature intended to prohibit by positive enactment, then can it be said that it was a mere voluntary decision on the part of this particular bankrupt that he would favour one set of creditors rather than the other, when in truth and in fact it was an endeavour to save himself from a criminal prosecution which induced him to do the act in question? It becomes then no longer a voluntary act, but an act under pressure-pressure not the less because it is pressure upon his own mind and his own consciousness from an apprehension of what will happen if bankruptcy takes place; not a pressure by threats of creditors to assert their rights. The above passage deals with actual pressure, where the debtor yields to threats by his creditor, and, secondly, with the impulse which arises in the mind of the debtor through apprehension of prosecution or other drastic proceedings against him, although there was no threat or request by the creditor. If the security was given by the debtor under the influence of either of these motives it was not given voluntarily. Because either would have the same effect they were both spoken of as pressure. But the secret fear which arises in a man's own mind, not induced by anything another person says or does, and which operates as the dominant motive for doing the act, can only be called "pressure" in a figurative sense. I would take the word as used in sec. 31 (2) to mean actual pressure in its original sense, the pressure which is brought to bear by a creditor upon his debtor, and not some secret motive under the impulse of which the debtor acts, but which is not actual pressure. In the case in which Lord Halsbury was giving judgment, Prance, a solicitor, had misapplied moneys of estates of which 1922 Judgment. PERDUE, C.J.M. 1922 he was trustee. The breaches of trust might, when disJudgment. covered, render him subject to various penal consequences. On the eve of his bankruptcy he made a settlement in favour of his cestuis que trust, without any request from them. It was held that this was not a fraudulent preference, the debtor's object being to shield himself. PERDUE, Sec. 31 (2) declares in effect that if any such conveyance, transfer, etc. (referring to the first part of the section) was made within three months before the commencement of the bankruptcy proceedings there is a prima-facie presumption that it was made with a view of giving a preference. As this is only a prima-facie presumption evidence is admissible to rebut it: Codville v. Fraser, 14 Man. R. 12; Craig v. McKay, 12 O.L.R. 121. Subsec. (2) also purports to exclude pressure as an element and to declare that evidence of pressure shall not be receivable or avail to support the transaction. But the question with what view the security was given is one of fact: Bills v. Smith, supra. The evidence offered to rebut the prima-facie presumption might disclose a dominant motive impelling the debtor to give the security, such as fear of prosecution or disgrace, although no actual pressure whatever had been used upon him. I do not think that it would be proper to exclude such evidence. It appears to me that this is a further reason why the word "pressure" should be confined to its natural meaning. The affidavits made by Procter show the means by which Bell obtained the money from him. Procter's affidavit of October 7 states positively that Bell obtained the $1,200 from him under false pretences. Bell in his affidavit admits this statement (along with others) to be "substantially correct;" but says that at the time he had no apprehension as to the possible consequences. It was easy for Bell after becoming bankrupt to make an affidavit as to his motive for giving the mortgage but it would be safer to infer that motive from the facts that occurred at the time and are not disputed. Bell, unknown to Procter, had been in the practice of borrowing from one person to pay another. We can infer that such a practice would become more difficult as it went on. Procter, unfortunately for himself, became a late, if not the very last, victim. A mortgage had been offered by Bell in the first instance, and it could not safely be refused when Procter became anxious and asked for it. To refuse it then might bring serious consequences. He must conciliate Procter and so the mortgage was given. In this, as in the New, Prance & Garrard Case, supra, the debtor was not actuated by "any feeling of bounty" towards the person to whom the security was given, but the real object was to conciliate him, to quiet him for the present and to gain time. The mortgage I would infer was given, not for the purpose of preferring Procter, but for the benefit of Bell himself. Mr. Justice Macdonald appears to have drawn the same inference. He says: What was in his [Bell's] mind at the time of giving the security might most reasonably be the false pretences under which he secured the friendly assistance of Mr. Procter and the carrying out of his offer of the security at the time. I agree with the view my brother Dennistoun takes of the plaintiff's claim upon the debtor's exemption. If the mortgage is good as against the assignee it can be enforced against the land. If the mortgage is not good as against the assignee I do not see how it could be enforced against such an intangible interest as the debtor's right to exemption. That right might be terminated at any time by the debtor moving out of the house. The $1,500 representing the exemption must, in case of a sale by the assignee, be paid to the debtor before he can be compelled to give up possession. It would be difficult for the creditor to intercept this money if the debtor refused to give it up. For the reasons I have given in the earlier part of my judgment I would dismiss the appeal. CAMERON, J.A. (dissenting)—This is an appeal from the judgment of Mr. Justice Macdonald on a motion to set aside a certain mortgage made by Allan B. Bell, the insolvent, to Percy J. Proctor, dated July 14, 1921, to secure the sum of $1,200, under The Bankruptcy Act. The motion was heard on affidavits and the facts are set out in the reasons for judgment of Mr. Justice Macdonald, who held the mortgage valid and dismissed the motion. 1922 Judgment. PERDUE, C.J.M. 1922 By sec. 8, ch. 34, 10-11 Geo. V., sec. 31 of The Bankruptcy Judgment. Act, ch. 36 of the statutes of 1919 was repealed and the following substituted therefor: CAMERON J.A. 31. (1) Every conveyance or transfer of property or charge thereon made, every payment made, every obligation incurred, and every judicial proceeding taken or suffered by any insolvent person in favour of any creditor or of any person in trust for any creditor with a view of giving such creditor a preference over the other creditors shall, if the person making, incurring, taking, paying or suffering the same is adjudged bankrupt on a bankruptcy petition presented within three months after the date of making, incurring, taking, paying or suffering the same, or if he makes an authorized assignment, within three months after the date of the making, incurring, taking, paying or suffering the same, be deemed fraudulent and void as against the trustee in the bankruptcy or under the authorized assignment. (2) If any such conveyance, transfer, payment, obligation or judicial proceeding has the effect of giving any creditor a preference over other creditors, or over any one or more of them, it shall be presumed prima facie to have been made, incurred, taken, paid or suffered with such view as aforesaid whether or not it was made voluntarily or under pressure and evidence of pressure shall not be receivable or avail to support such transaction. (3) For the purpose of this section, the expression "creditor" shall include a surety or guarantor for the debt due to such creditor. The decision in Benallack v. Bank of B.N.A., 36 S.C.R. 120, turned on the construction of the Yukon Ordinance, the text of which is to be found in the judgment of Mr. Justice Craig, who delivered the judgment of the Territorial Court affirming the judgment of Dugas, J. at the trial dismissing the plaintiff's action, at p. 126. Sec. (1) of the Ordinance resembles subsec. (1) of sec. 31 of The Bankruptcy Act, except while the latter has the words, "with a view of giving such creditor a preference over the other creditors," the former has the words "with intent to defeat or delay or prejudice his creditors or to give one or more of them a preference, etc." Also the words "which has such effect" are found in the first section of the Ordinance but not in subsec. (1) of The Bankruptcy Act. There are other differences not very material. Sec. 2 of the Ordinance is as follows: 2. Every such gift, conveyance, assignment, transfer, delivery over or payment, whether made owing to pressure or partly owing to pressure or not, which has the effect of defeating, delaying, or prejudicing creditors or giving one or more of them a preference, shall, as against the other creditors of such debtor, be utterly void. The apparent effect of that subsection is to make every conveyance to a creditor prejudicial or preferential as to other creditors whether or not made owing to pressure or partly owing to pressure utterly void. Under subsec. (2) of the Act a similar situation merely purports to create a presumption that the conveyance was made with a view to a preference whether it was made voluntarily or not or under pressure. Mr. Justice Idington, who gave the judgment of the Court in the Benallack Case says of subsec. (2) of the Ordinance, which was passed after the decision in Molsons Bank v. Halter, 18 S.C.R. 88: Does it do more than remove the question of pressure out of consideration in arriving at a proper conclusion in a case falling within the first section which was practically passed upon by the decisions referred to? I think not. "Every such gift, &c." evidently means that class or those classes designated by the preceding section. The decisions he refers to are Molsons Bank v. Halter, supra; Gibbons v. McDonald, 20 S.C.R. 587, and Stephens v. McArthur, 19 S.C.R. 446. It does not appear in that case, Benallack v. Bank of B.N.A., that the securities impeached were defended as having been obtained under pressure, but rather as having been taken by the bank in the ordinary course of business without knowledge by the bank of the debtor's insolvent circumstances. It was on the ground of want of concurrence by the bank in the fraudulent intent that the securities were upheld. Mr. Justice Idington says that there has been a long line of decisions to the effect that such concurrence is necessary to avoid a transaction under the ordinance and though there had previously been no express decision of the Supreme Court he adopts the dictum of Chief Justice Sir William Ritchie in Gibbons v. McDonald, supra, that there must be a concurrence of intent on the one side to give and on the other to accept a preference over the other creditors. He adds that until the Legislature obliterates the element of intent and plainly declares that the result of the transaction 1922 Judgment. CAMERON, I.A. |