The debtor had put his solicitor in funds to meet future costs. The solicitor then prepared a deed of assignment for the benefit of the creditors which the debtor executed. The debtor was afterwards adjudicated bankrupt, the act of bankruptcy being the execution of the deed. The solicitor claimed to retain part of the money in his hands as payment for services rendered by him to the debtor after the execution of the deed but before the adjudication.
Held: He was not entitled to the funds. As soon as the deed was executed title passed to the trustee: ‘Then the deed of assignment which had been prepared by the solicitor was executed by the debtor; its execution was an act of bankruptcy, and the solicitor knew that it was. The title of the trustee in the subsequent bankruptcy related back to that act of bankruptcy. What does that mean? The result of the relation back is, that all subsequent dealings with the debtor’s property must be treated as if the bankruptcy had taken place at the moment when the act of bankruptcy was committed. The debtor must be treated as if the bankruptcy had taken place the moment the deed was executed. Then, he being a bankrupt, all the money which he then had, and all the money which was owing to him, passed to the trustee in the bankruptcy for the purpose of being distributed by him amongst the bankrupt’s creditors’ A contrary decision would have the effect of preferring the solicitor to the other creditors.
Judges:
Lord Esher MR, Lindley LJ
Citations:
[1893] 1 QB 455
Jurisdiction:
England and Wales
Cited by:
Cited – Re Dennis (A Bankrupt) CA 22-May-1995
A joint tenancy was severed (under the former law) on the event of an act of bankruptcy, and not only by the later actual adjudication of bankruptcy. The vesting of the debtor’s property in the trustee which occurred on adjudication was automatic; . .
Applied – Re Gunsbourg CA 1920
The debtor transferred his assets to a company formed by him. He later committed an act of bankruptcy on which he was adjudicated bankrupt. The company had sold some of the assets to a bona fide purchaser without notice of the act of bankruptcy. The . .
Lists of cited by and citing cases may be incomplete.
Insolvency
Updated: 08 April 2022; Ref: scu.186755
