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Present: Ennis and .Garvin JJ.
POULIER et al v. ALLES et al.
81—D. C. Colombo,' 8,346.
Insolvency—Fraudulent preference—Transfer by father to daughter—Agreement to provide settlement at marriage—Ordinance No. 7 of1853, s• 58.
Where a person* in insolvent circumstances transferred propertyto his daughter ten years after her marriage to fulfil a promisemade to settle property on her before her marriage.
Held, that the transfer amounted to a fraudulent preferencewithin the meaning of section 58 of the Insolvency Ordinance.
CTION to set aside a deed on the ground either that it was
-*■ executed in fraud of creditors or that it was void as afraudulent preference under the Insolvency Ordinance. OneMassillamany, being in insolvent circumstances, by his deed No. 146of March 2, 1922, conveyed a coconut estate, his only real asset,to his daughter the first defendant. The transfer, it was alleged,was made in pursuance of an undertaking given by him at the timeof her marriage some ten years previously that he would conveythirty acres of coconut land to her before her marriage. Thelearned District Judge found that there was no fraudulent preferenceas the defendants were not creditors of the insolvent, but' set asidethe deed on the ground that it was executed in fraud of creditors.
Samaravnckreme (with him Ferdinands), for defendants, appellants.
Drieberg, K.C. (with him Bartholomeusz and Navaratnam), forplaintiffs, respondents.
November 4, 1924, Ehnis J.—
This was an action to set aside a deed either on the ground thatit was executed in fraud of creditors, or on the ground that it wasvoid as a fraudulent preference under the Bankruptcy Ordinance.The learned Judge found that there was no fraudulent preference'sthe defendants were not the creditors of the insolvent;. He how-ever, found that the conveyance by the insolvent was executed infraud of creditors and he accordingly set aside the dfced. Thedefendants appeal.
I am not prepared to hold, as found by the learned Judge, thatthe conveyance in this case was executed in fraud of creditors. Itseems to me that the plaintiffs have not proved the matters, which
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they have to prove beyond any question, to succeed in the Paulianaction. This point was discussed in a recent case, Muttiak CkeUyv. Mohamoodo Hadjiar.1 There can be no doubt that the defendants- took a conveyance of the land in question in pursuance of an earlieragreement which had been entered into by the insolvent when theinsolvent’s daughter contracted a marriage with the second defend-ant. That marriage agreement must be considered in decidingwhether there was fraud, and it seems to me that it negatives anyquestion of fraud, which would have to be established to succeed ina Paulian action. On the other question, also, as to whether or notthere was a fraudulent preference within the Bankruptcy Ordinance,I am not in agreement with the learned Judge. It seemB to methat the defendants were the creditors of the insolvent by virtue ofthe earlier agreement. It was strenuously urged that this was notso, and that they had no claim which they could prove in thebankruptcy. Section 94 of the Insolvency Ordinance is, however,wide enough to cover a demand for the conveyance^of land. Ifthen the defendants were the creditors of the insolvent is there anyreason why they should be put in a better position than the othercreditors ? The evidence does not disclose that they took anysteps to compel the insolvent to carry out his agreement. Itmerely shows that they were complaining that he had not carriedout the agreement. In the absence of any compulsion by thecreditors forcing the debtor to act, the conveyance by the debtorto one of the creditors would be a fraudulent prefence under theBankruptcy Ordinance, and the conveyance in question is avoluntary conveyance.
Without therefore adopting the reasons of the learned Judgethe conclusion he has come to is right, and I accordingly dismissthe appeal with costs.
It has been clearly established that one A. F. Massillamany, beingthen in insolvent circumstances, by his deed No. 146 of March 2,1922, conveyed a certain coconut estate being his only real* asset tohis daughter the first defendant.
This transaction is impeached for the following reasons :—
(а)That it is in fraud of creditors ;
(б)That it is a fraudulent preference of a creditor, vide section 58
of Ordinance No. 7 of 1853 ;
(c) That it is obnoxious to the provisions of section 51 ofOrdinance No. 7 of 1853.
i 25 N. L. P. 1S5.
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. I agree that there is no evidence that the first defendant took thistransfer in conspiracy with Massillamany for the purpose of defraud-ing his creditors. But there can be no doubt that Massillamanywhen he found himself in insolvent circumstances decided to passto his daughter title to his only real asset. It is contended thathe did so in discharge of an obligation undertaken by him at thetime of her marriage which took place some ten years previously.By the ante-nuptial agreement referred to Massillamany did under-take to convey thirty acres of coconut land to his daughter prior to hermarriage. He did not do so then and everything indicates that hisdaughter and her husband had accepted the situation, and thatthere was no pressure brought to bear on Massillamany at the timeof the execution of the transfer the validity of which is in question*
These would seem to be all the elements present to entitle theplaintiff to impeach the transaction as a fraudulent preference.It is contended however that the first defendant was not a creditorwithin the meaning of section 58. Counse) for the appellantwould limit the word " creditor ” to those persons to whom theinsolvent was under liability to pay money. Persons to whomthe insolvent was under a primary liability to deliver goods orchattels or transfer land are not it is contended “ creditors/’ evenwhere there had been a breach of such an obligation by the insolvent,because the liability to pay money was secondary and by way ofdamages.
If this contention is to prevail, it follows that the provisions ofthe law relating to fraudulent preferences will apply where theindividual so favoured is a person to whom the insolvent owedRs. 1,000 for goods purchased by him but not when he is a personto whom the insolvent has sold Rs. 1,000 worth of goods which hefailed to deliver.
In the absence of specific authority in support of this contentionthere does not appear to be sufficient reason so to restrict theordinary meaning of the word “ creditor.” *
For the purpose of considering Counsers argument, it has beenassumed that at the date of the transfer the first defendant, if she Sodesired, was still in a position to claim her right under the agreementas alleged by the defendants.
’ For these reasons I agree that this appeal should be dismissedwith costs.
POULIER et al v. ALLERS et al