TMI Blog1943 (5) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit of certain policies belonging to him. The company, admittedly, was insolvent for at least three months before the date of the winding up resolution, which was May 23, 1941. The notices calling the meeting of shareholders to pass a resolution for voluntary winding-up were sent out on May 14, and on the same day notices were sent out convening a meeting of creditors. The summons asked for a declaration of fraudulent preference in respect of all payments made into the bank which went to extinguish the overdraft, between February 23, 1941, and May 23, 1941 that is to say in respect of the whole of the three months period. Bennett, J., in addition to negativing the whole of the claim, referred to that particular aspect of it which is concerned with the length of the period and the payments during that three months period into the bank. He took the view that, whatever might be the case with regard to a later date, there was no evidence at all from which it could be inferred that there was an intent to prefer during the whole of that three months period. I am in entire agreement with that view. It seems to me that the original claim to go back to that early date is one which the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . But these are far from being the only facts. A trade creditor, namely, Messrs. Debenhams, had been pressing for payment of their account, which was overdue, ever since April 2; they had written on April 2 and 15, in reference to their February account of 88 Is. 6d., and no notice was taken of those two letters until, on April 22, Mr. Kushler called at Debenhams and saw their deputy credit manager. He then took up an attitude which was quite an unnecessary one, having regard to the state of the overdraft, because he could have met this bill. He asked for the account to stand over; he said what a lot of difficulty he had in getting in his own accounts, and was very presistent, and wanted the creditors to leave the account over. Messrs Debenhams declined to do that, although they were prepared to give him some indulgence if he was prepared to pay one-half of their account by the end of April. They pressed him again on May 1, and they pressed him again on May 9. Being under that pressure from a creditor whom there was plenty of money to pay, in the sense that the overdraft was sufficient for the purpose, on May 12 the company had in its hands two cheques which belonged to it, am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account, stated that the guarantors of the banking account were two gentlemen named Cohen and Waldstein, and he did not say that he was himself a guarantor. Now Cohen and Waldstein had never had anything to do with this guarantee. The statement made by Mr. Kushler to the creditors at that meeting was entirely untrue ; he not only gave the names of persons as guarantors who were not guarantors at all, but suppressed the fact that he himself was a guarantor, and indeed the sole guarantor. One may ask why he made a statement of that kind, and it is quite fairly said that if he made that statement with a view to concealing the fact that he had been arranging a fraudulent preference, he must have been extremely stupid and short-sighted to think that it would not in very short time, be found to be untrue. One of the remarkable things about people who start going wrong is the childish attempts at deceit which they sometimes make. I myself cannot draw from this untrue statement any inference save that it was intended to conceal the fact that he was a guarantor, and I can see no object in attempting to conceal that fact, unless it be that he was wishing to throw the creditors off the scent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstrued as laying it down as a matter of law that where there is no "direct" evidence, no Court is entitled to find that a debtor, in making a payment, had a view of giving the creditor a preference, where, on the evidence before it, there is any other possible explanation of his conduct. I must confess, looking at the matter quite apart from authority, that the language of the statute does not seem to me to warrant any such interpretation. The statute is directing the Court to ascertain the state of mind of the payer in relation to a particular transaction; a state of mind is as much a fact as a state of digestion; the method of ascertaining it is the ordinary familiar method of evidence and inference, and I can see nothing in the language of the section which justifies the view that this particular problem which the Legislature sets the Court is one which is to be dealt with on any principles different from those which are commonly employed in drawing inferences of fact. There is always this to be remembered, of course, that the particular inference which falls to be drawn in this case is an inference of something which has about it, at the very least, a taint of dishonesty, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the argument, and now Lord Tomlin sets about to show why it was wrong : "My Lords, I do not accept this contention. In my opinion, in these cases the onus is on those who claim to avoid the transaction to establish what the debtor really intended, and that the teal intention was to prefer". That paragraph, if I may venture to say so, puts very much more concisely what a moment ago I said appeared to me to be What the section was contemplating. He goes on : "The onus is only discharged when the Court, upon a review of all the circumstances, is satisfied that the dominant intent to prefer was present". There again, that appears to me to be a statement of what one would expect to be the principle, that upon a review of all the circumstances the Court must be satisfied as to the dominant intent. That is, of course, indisputable. He goes on to add this: "Where there is not direct evidence and there is room for more than one explanation, it is not enough to say, there being no direct evidence, the intent to prefer must be inferred". The words "there being no direct evidence" appear to me to be a repetition of what he has said above, "where there is not direct evidence", and to mean no mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R. 174 . That was a case where the guarantor for the debtor's overdraft was his own father, and an attempt was made to show that, as from a certain date, the payments which the debtor made into the bank were made with intent to prefer his father by securing the release or diminution of the debt for which the father stood surety. There was something very artificial about the case, for this reason, that the date as from which the fraudulent payments into the bank were said to have begun was fixed at the date when the overdraft had been reduced to 2,000, which was the limit of the father's liability under his guarantee. The only evidence from which it was sought to build up the case of fraudulent preference was that since that date there was a progressive diminution of the overdraft, and that was the only circumstance of evidence which was before the Court. Very naturally in that case the Court of. Appeal (although Clauson, J., as he then was, had taken a different view) said that was not enough. There might be many explanations of the reason why the flow of payments into the account since that date exceeded the flow of payments out, and there was not sufficient evidence there on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible, and it would be dangerous, if one attempted to lay down any particular circumstance or set of circumstances from which the Court was always not justified in drawing that inference, save and except the fact that the mere fact that a preference is shown is not sufficient. For the rest, the matter stands as it does in any matter relating to a state of mind before any criminal or civil Court, if the person upon whom the onus lies proves no more than a state of facts which is equally consistent with guilt or innocence (using the expression "guilt" for convenience, because, in bankruptcy, there is no question of crime or criminal intent)., If it is equally consistent with guilt or innocence, you are not entitled to draw the one unfavourable inference and find the payment was a guilty rather than an innocent preference, and if the Court is left in doubt as to the inference then the trustee has not proved his case. When one talks about giving a person the benefit of the doubt it only means that the case is not proved beyond reasonable doubt, and therefore the case is not proved, and fails, and I do not think the cases intend to lay down any different principle than that which appli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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