McQuarrie v Jaques [1954] HCA 76

High Court of Australia Dixon C.J. Webb, Fullagar, Kitto and Taylor JJ. McQuarrie v Jaques [1954] HCA 76

ORDER Appeal dismissed with costs.

Cur. adv. vult.

The following written judgments were delivered:—

Dec. 15 Dixon C.J.

The matter at issue in this appeal is a small sum of money but unfortunately to determine its fate it is necessary to enter one of the darker recesses of the bankruptcy law. Long ago it became evident that the doctrine of relation back gave rise to certain conflicts between priorities when an execution had been levied upon the bankrupt's property. There was first the case where, although the execution had not been completed before the act of bankruptcy took place to which the subsequent sequestration related back, yet a levy had been made upon the property of the debtor which at the time of the act of bankruptcy was held by the sheriff. Should the rights of the judgment creditor under his writ of execution be held superior to those of the assignees in bankruptcy or were they overreached by the sequestration? Then there was the case of the levy made upon goods after the act of bankruptcy and completed by sale before the fiat or commission in bankruptcy. How stood the sheriff and the execution creditor then? For, difficult as it might be to say that the possession of the assignees related back so as to make the sheriff a trespasser, certainly the vesting of the property was retrospective and why should not the seizure and sale amount to a conversion?

It is nearly two hundred years since the professional opinion of the day with regard to this latter question was disconcerted by the judgment delivered by Lord Mansfield for the Court of Kings Bench in Cooper v. Chitty [1] . Lord Mansfield held that not only the execution creditor but also the sheriff was liable in trover to the assignees in bankruptcy for the sale of the goods of the debtor seized under a writ of execution before the fiat or commission if the act of bankruptcy to which the sequestration related back occurred before the date as of which the writ was tested. It is true that sixty-five years later Lord Lyndhurst, as Chief Baron of the Exchequer, delivered a judgment for that court which treated Lord Mansfield's judgment with less than customary veneration and confined its operation with reference to the sheriff to the case of a sale after the commission of bankruptcy had issued. Lord Lyndhurst even said: "Unless he (Lord Mansfield) meant to convey the notion of perfect indemnity to the officer where there was perfect ignorance, he made a very useless display of what would appear to be legal knowledge, and was filling up six pages with what might have been expressed in six lines": Balme v. Hutton [2] . But this led to a firm re-establishment by the Exchequer Chamber of Lord Mansfield's doctrine as to the sheriff's liability in trover and to the extension of its application to the case of a sale before issue of the commission of bankruptcy alike with a seizure before it, followed by a sale after it took place. Lord Lyndhurst's words provoked from Alan Park J. a eulogy of Lord Mansfield, who, he said, was not, he believed, remembered by any one then present except himself, and it is for this eulogy that the case is better known than for the point of law it decides: Balme v. Hutton [3] . Shortly afterwards, however, the decision obtained the support of the House of Lords expressed in more conventional form: Garland v. Carlisle [4] . Even before Balme v. Hutton [5] had reached the Court of Exchequer the situation had attracted the notice of the legislature and by 6 Geo. IV c. 16, s. 81 it was provided that executions levied two months before the suing out of a commission of bankruptcy should be valid, notwithstanding a prior act of bankruptcy provided that the execution creditor had no notice thereof at the time of the levy. From that time the legislature has repeatedly given its attention to the conflict of priorities which relation back involves with respect to executions against the debtor's property. Sometimes it has been the situation of the execution creditor seizing after an act of bankruptcy but before actual sequestration that has been regarded by the legislature as too unfavourable and then some measure of relief has been conceded to him. At other times the legislature seems to have regarded the law as too favourable to the execution creditor in placing him in a privileged position when there has been a seizure under the writ before the act of bankruptcy to which the trustee's or assignee's title relates back and the legislative purpose seems to have been to modify or qualify his rights. But whatever the provision in force for the time being, the courts seem always to have experienced a difficulty in working out a clear rationale so that it might be seen with certainty how it applies to the varied but stereotyped situations which must arise when an execution is levied and afterwards a bankruptcy takes place. The provisions which have been transcribed into the present Australian Act and govern this matter form no exception. They come from the English Bankruptcy Acts 1883 and 1890 through that of 1914 and are to be found in ss. 4, 52 (e), 55, 60, 90, 91 (i) and 92 of the Commonwealth Bankruptcy Act 1924-1950. Of these s. 92 is the critical provision. The effect of the other sections mentioned may be briefly given. Available act of bankruptcy is an expression meaning any act of bankruptcy available for a bankruptcy petition at the date of the presentation of the petition on which the sequestration order was in fact made: cf. s. 4. The act of bankruptcy on which a petition is grounded must have occurred within six months before the presentation of the petition: s. 55 (c). In England the period has long been three months. Upon sequestration the property of the bankrupt vests in the official receiver named in the order: s. 60 (1). The bankruptcy of the debtor however is deemed to have relation back to and commence at the time of the first of the acts of bankruptcy, if there be more than that on which the petition is founded, proved to have been committed by the bankrupt within six months next preceding the date of the presentation of the petition, that is to say the first available act of bankruptcy: s. 90. Property which at this commencement of the bankruptcy belonged to the bankrupt is divisible among his creditors (s. 91 (i)) and so vests in the trustee (s. 60 (1)). Again the period in England is three months.