OF AUSTRALIA. 645, Tagree with what has been said by the learned H. C. or A. 1916. aL EY WATERSIDE, Powers J. I also agree. = Workers' Bs ae FEDERATION oF AUSTRALIA uJ. Iconcur in the judgment of the Chief Justice. v : WEALTH Question answered in the negative. "On ae SOCIATION. for the Waterside Workers' Federation of Australia, v & Barker. . B. L. {HIGH COURT OF AUSTRALIA.) APPELLANT ; AND PUBLIC TRUSTEE 4 3 . | RESPONDENT. ON APPEAL FROM THE SUPREME COURT Or NEW SOUTH WALES. cy—Life assurance policy effected by bankrupt—Protection from ereditors— yy ©, op A. acquired property—Life, Fire, and Marine Insurance Act 1902 (N.S.W.) 96, ro. 49 of 1902), secs. 4, 5, 7—Bankruptey Act 1898 (N.S.W.) (No. 25 of 1898), . 3, 10, 52. Sypyey, Aug. 7, 8, 31. "See. 4 of the Life, Fire, and Marine Insurance Act 1902 (N.S.W.) provides nat "The property and interest of every person who has effected, or shall Gritith ©... or effect, any policy for an insurance bond fide upon the life of himself "Quvag Dutly" . ,orfor any future endowment for himself. . . ,and the property Cetera aah interest of the personal representatives of himself . . . in such ey, or in the moneys payable thereunder or in respect thereof, and in the H. C. or A. 1916. eS) PaLMeR v Pusiic 'TRUSTEE, HIGH COURT [1916. contributions made towards the same, shall be exempt from any law now or hereafter in force relating to insolvency or bankruptcy, or from being seized or levied upon by or under the process of any Court whatever." See. 5 provides that "A policy for life insurance or endowment or the contributions made towards the same shall not be protected under the last preceding section until such policy has endured for at least two years, after which period such pro- tection shall be afforded to the extent of two hundred pounds of insurance or endowment, and after an endurance of five years to the extent of five hundred pounds, and after an endurance of seven years to the extent of one thousand pounds, and after an endurance of ten years to the extent of two thousand pounds." Held, by Isaacs, Gavan Duffy and Rich JJ. (Griffith C.J. and Barton J. dissenting), that sec. 4 of that Act has no application to a policy of life assur- ance effected by a bankrupt after his adjudication of bankruptcy, and therefore, that in the case of a policy so effected the whole of the policy moneys payable on the death of the bankrupt while still uncertificated belonged to his official assignee notwithstanding that the policy had endured for more than ten years. Decision of the Supreme Court of New South Wales (Street J.): Re Rygate, 6 S.R. (N.S.W.), 129, reversed. Appar from the Supreme Court of New South Wales. ° Jn the Supreme Court of New South Wales, in its bankruptey jurisdiction, a motion was heard whereby William Harrington Palmer, official assignee of Robert Edward Rygate, deceased, a bankrupt, asked for an order declaring that he, the official assignee, was entitled as against the Public Trustee, who was the administrator of the deceased, to the proceeds of a certain policy effected by the deceased while bankrupt on his own life, and for an order directing the Public Trustee, to whom the proceeds had, by arrangement, been paid, to pay the amount of such proceeds to the official assignee, or in the alternative for an order declaring that the official assignee was entitled as against the Public Trustee to be paid out of the proceeds of the policy the amount of the premiums paid by the deceased in respect of the policy and directing the Public Trustee to pay the amount of such premiums to the official assignee out of such proceeds. The motion was heard by Street J., and was dismissed: Re Rygate (I). (1) 16 S.R. (N.S.W.), 129, "21CLR] OF AUSTRALIA. The material facts are stated in the judgments hereunder. _ Marine Insurance Act 1902 does not apply to a policy of life assur- _ance taken out by an uncertificated bankrupt. That section only "protects the " property " or "interest "" of the panera in a policy, 2 but the bankrupt has no beneficial " property" or "interest" in a _ policy effected after his bankruptey. Property which a bankrupt acquires after his bankruptcy he acquires as agent for his official assignee: Herbert v. Sayer (1); In re Roberts (2); In re Clark; Ex parte Beardmore (3). It is not necessary for the assignee to _ intervene in order to entitle him to the policy moneys on the death of the bankrupt: In re Bennett; Ex parte Official Receiver (4) ; _ Inre Phillips (5). A bankrupt is under a duty to the official assignee to pay to him all after-acquired property except such as is necessary _ for the bankrupt's maintenance, and the bankrupt in this case committed a breach of the bankruptcy law when he made payments in respect of the policy. He is also under a duty to disclose all after-acquired property. _ [Ricu J. referred to R. v. Michell (6) ; Halsbury's Laws of England, vol. 1., p. 346.] the policy was an investment made with money which belonged the assignee, and therefore the investment belonged to the assignee. investment made by a bankrupt in this way is not bond fide _ within the meaning of sec. 4. The provisions of sec. 5 show that 'sec. 4 was intended to apply not to policies effected after bankruptcy ut only to those taken out before bankruptcy. The Legislature st have had in mind some point of time at which the period two, five, seven and ten years mentioned in sec. 5 ended. The only point of time must be the date of the sequestration. The icy then becomes the property, of the official aaa subject (1) 5 Q.B., 965. (4) (1907) 1 K.B., 149. iy sto) 1 Oe, 122. (5) (1914) 2 KB. 689. (8) (1894) 2 Q.B., 393. (6) 50 L.J.M.C., 76. From that decision the official assignee now appealed to the High H.C. or A. 1916. —_~ PatMer Pusuic Clive Teece, for the appellant. Sec. 4 of the Life, Fire, and Troster. H. C. or A. 1916. aie Parater Pusrac Trustex Aug. 31. HIGH COURT [1916. Jordan, for the respondent. The protection afforded by secs. 4 and 5 extends to a policy taken out after bankruptcy. A bankrupt has an interest in such a policy within the meaning of sec. 4. With regard to after-acquired property a bankrupt has definite rights. As regards third parties he is the owner until intervention by the official assignee, and even as against the assignee he has definite rights of enjoyment-and possession until intervention. A bank- rupt is not an agent of his official assignee in any real sense, and he has a beneficial interest in after-acquired property: Fowler v. Down (1). Sec. 52 of the Bankruptcy Act 1898 recognizes that a bankrupt may acquire property after bankruptcy. Sec. 4 of the Life, Fire, and Marine Insurance Act intends that the assets of a person shall be protected from his creditors notwithstanding his bankruptcy, and it is consistent with that intention that he should be permitted to take out a policy of life assurance. In the case of a policy taken out before bankruptey the point of time at which the periods mentioned in sec. 5 ends is the date of the sequestration, and in the case of a policy taken out after bankruptcy that point of time is the date of the intervention by the assignee. [He also referred to Mutual Life Insurance Co. of New York v. Pechotsch (2).} [Ric J. referred to Attorney-General for New South Wales v. Curator of Intestate Estates (3).} Clive Teece, in reply. Cur. adv. vult. The following judgments were read :— Grirrity C.J. The appellant is the official assignee of Dr. Rygate, who was adjudged bankrupt in 1892, and in February 1905 effected a life assurance policy for £500 on his own life with the Mutual Life Insurance Company of New York. He died in 1915, and administration of his estate has been granted to the respondent. Sec. 4 of the Life, Fire, and Marine Insurance Act 1902 (which is, so far as regards life insurance 4 re-enactment of the Life Assurance (1) 1 Bos. & P., 44, at p. 48. (2) 2 C.LR., 823. (3) (1907) A.C., 519, at p. 523. LS ae OF AUSTRALIA. interest of every person who has effected, or shall hereafter effect, any policy for an insurance bond fide upon the life of himself . -and the property and interest of the personal representatives ofhimself . . . in such policy, or in the moneys payable there- under or in respect thereof, . . . shall be exempt from any law __ now or hereafter in force relating to. . bankruptcy, or from : seized or levied upon by or under the process of any Court hatever."" 'The words of the section are clear and unambiguous. It applies terms to all policies of the kind specified effected by any person omsoever. What then is its operation? This question is to answered by inquiring what operation the bankruptcy law vould have upon the policy if it were not exempt from that law. simple answer is that it would divest the property and interest ich at common law the insured would have in the policy from and vest it in his official assignee. It follows, if any clusion can follow from clear premises, that the property of a pt in a policy of life insurance is not divested from him but ins in him. And this consequence follows equally whether _ the policy is effected before or after bankruptcy. In my opinion reasoning of the four very learned lawyers who constituted Court of Appeal in the case of In re Ball (1) is conclusive to show that until intervention by the official assignee the bankrupt s the absolute owner as against all the world except the assignee of property acquired by the bankrupt during the continuance of bankruptcy. The acquisition of property may, in this case, as in y other, be by gift, operation of law or purchase. Whatever pro- y the official assignee acquires in it he takes not directly but ly by operation of law. If, therefore, the decision of the case ed solely upon sec. 4 the respondent would be entitled to policy moneys. No question is raised as to the policy itself within the Act. _ The only answer that can be made to this argument is by denying hat the bankrupt acquires any property in a policy effected by m during the bankruptcy, so that in such a case there is nothing (1) (1899) 2 LR., 313. iragement Act of 1862) is as follows :—'The property and H. ©. or A. 1916. ew] PaLMER v Posric 'TRUSTEE. Griffith C.J. HIGH COURT 1916. H.C. or A. upon which sec. 4 can operate, the reason suggested being that the 1916. "w Patmer v Pusric TruostER. Griffith C.J bankruptcy law has already stepped in and operated before sec. 4 can operate. Put in its :aked form, the argument is this: The enactment that the bankrupt's property in the policy shall be exempt from the bankruptcy law does not apply because that law has already operated upon it. It cannot operate upon it before its existence. I am irresistibly reminded of the old puzzle "One thing is certain" &e. But the effect of any enactment, however plain on its face, may be controlled by an equally plain context, and it is contended that the apparently plain meaning of sec. 4 is controlled by sec. 5 of the Act, which is as follows :—" A policy for life insurance or endowment . . . shallnot be protected under the last preceding section until such policy has endured for at least two years, after which period such protection shall be afforded to the extent of two hundred pounds of insurance or endowment, and after an endurance of five years to the extent of five hundred pounds, and after an endurance of seven years to the extent of one thousand pounds, and after an endurance of ten years to the extent, of two thousand pounds." This section is in substance, as it was in form in the Act of 1862, a proviso to section 4. If there is any apparent inconsistency between the two sections they must, if possible, be so construed as to give effect to both enactments. It is suggested that the effect of sec. 5 is to exclude for all purposes the operation of sec. 4 as to all policies that have not existed for a period of at least two years. In that view, sec. 4 must be read as if, instead of the words " be exempt " were substituted the words " from and after the expiration of two years from the effecting of the policy become exempt." This construction is, of course, directly at variance with the express language of see. 4, which speaks de presenti, and is in terms unquali- fied. The result of it would, however, be the same for the period of two years as that of secs. 4 and 5 construed literally. There is no more dangerous, nor, I fear, more seductive, fallacy than to substitute for the actual language of an enactment some formula which would in some cases lead to the result which one is a priori disposed to arrive at, and then to construe the actual C.L.R.] OF AUSTRALIA. ss seems to be an unconscious application of the mathematical If the suggested construction is adopted, it follows that a policy s not come within the provisions of sec. 4 until it has endured ity to the subject matter have not arisen. The distinction is ometimes lost sight of, as in the argument I am now considering. t merely postpones the supposed difficulty without solving it. I will take the case of a policy which has endured for two years Jess than five years before bankruptcy. Then, in any view of Statute, the policy comes within the operation of sec. 4. In yable under it vest? There is no difficulty as to the beneficial , but the property must either vest in the bankrupt or in official assignee, or in both jointly. The third alternative is Either, therefore, the property still vests wholly in the la pt, or vests in the official assignee. Sec. 4 expressly denies to the latter. The only alternative is that it is still vested in the 'expiration of five years, the amount of the trust fund diminish- time passes and possibly becoming altogether extinguished. considerations show that sec. 5 has nothing to do with the ting of the property in the policy itself, which is governed by 4, but relates only to the extent of the beneficial ownership of bankrupt in a policy which is always vested in him. Again, the limitation of the protection given by sec. 5 is " to the ent of" a specified amount, which words can only refer to the m ount insured or a part of it. This provision is apt as applied tment as equivalent to the substituted formula. The mental H.C. or A. 1916. YN PALMER v. Pusric TRUSTER. Griffith 0.J. H.C. or A. to a sum of money assumed to be presently payable ; but the idea 1916. VN ParMER v. Pusiie TrusTEE, Griffith C.J. HIGH COURT [1916. of the protection of a policy, of which, in all but very rare cases, the surrender value or saleable value is (as it must be for the first two years) nominal, to the extent of £200 as distinet from the protection of the amount payable under it is incongruous, and to my mind nonsensical. Further, the mere use in sec. 5 of the words "* protected under" implies that the policy is already affected by sec. 4, but that a limit is to be set to its full operation. The extent of the protection is then defined. The same provision implies that the becoming payable of the policy moneys is the event upon which both the coming into operation of sec. 5 and the extent of its opera- tion are to depend. This is inconsistent with the idea that sec. 4 does not affect the property in the policy from its inception. If, however, we read both sections together, we get a clear and consistent provision, which is that, while the property in the policy and policy moneys, being exempt as such from the bankruptey law, is always vested in the policy holder, his right and that of his representatives to retain the policy moneys as against his official assignee are nevertheless subject to a condition subsequent, to the effect that, if a claim is made against the policy moneys by his official assignee within the prescribed periods, then, except to the extent prescribed, the immunity or protection shall either not attach at all or shall attach to a limited extent only. The grant of such a limited and contingent protection is a very different thing from a proviso that the Act shall not for a time apply to the case. It is true that, as I have pointed out, the effect of both constructions would for two years be the same. '4 The key to the suggested puzzle, if there is one—I confess I have more difficulty in finding than in solving it—is that the meaning of the word " exempt" as used in sec. 4, which in its ordinary and strict sense means " absolutely excluded," is qualified by sec. 5 so as to mean only a conditional exclusion. Such a use of the word may be unusual and inexact, but that is no reason for refusing to admit it. Even, however, if the suggested argument is accepted it does not help the appellant. For, in that view, the case is analogous in principle to that of a person who is in possession of land without title. He has at first no right as against the true owner, but at the 1 CLR.| OF AUSTRALIA. ms the title of the true owner is extinguished and his title becomes absolute. So here, even assuming (against the words of sec. 4) that _ the official assignee is the true owner of the policy, yet if he does not t his title within the times limited by sec. 5 the imperfect and ible possessory title of the bankrupt becomes absolute. "Similar words might be inaccurately but intelligibly used with regard to the analogous case I have put. A Statute of Limitations ht provide that a certain class of persons in actual possession land should be exempt from the laws relating to the recovery of ion by the true owner, with a proviso that this protection ould not operate until after the expiration of a prescribed number of years after entry, and then only to a limited extent. No one rue owner waited too long his title would not avail him. The result is that when the time has arrived for claiming the of sec. 4, that is, when the amount insured becomes payable, her in the lifetime of the insured person or at his death, the mount which can be retained by him or his personal representatives limited to the sums mentioned in sec. 5. At that period, and no er, sec. 5 comes into effect. As to the surplus, if any, since c. 4 has no application to it. the operation of the bankruptcy law is not excluded, and the surplus passes to the official assignee. In e present case, therefore, as the amount of the policy moneys is that the protection of sec. 4 can be claimed for the whole of t no question arises under it. The same result will be arrived at, though by a different road h was that followed by the learned Judge from whom this is brought), if sec. 5 is regarded as altogether suspending two years the operation of sec. 4. For, in that view, a policy d after bankruptcy is after-acquired property of the bankrupt, d as such becomes subject to the bankruptcy law. According that law the bankrupt may enjoy after-acquired property and dispose of it until his official assignee intervenes. In the ence of such intervention, therefore, the bankrupt might, but for express provisions of sec. 7 to the contrary, assign the policy ation of the period prescribed by the relevant Statute of Limita- H.C. or A. 1916. a PAuMER v Pusuice 'TRUSTEE. Griffith C.J. H. ©. or A. 1916. ee PALMER v. Posie TRUSTEE. Griffith C.J, HIGH COURT (1916. 3 to a purchaser. It is true that this right of enjoyment and disposi- tion does not, by English law, prevail as against the trustee in bank- ruptcy. But the Act now before us lays down, in the plainest terms, this at least—that after the policy has endured for the prescribed period the official assignee shall not intervene. Whatever perils may threaten the infant policy, when it arrives at the prescribed age it is safe from the bankruptcy law. * In the present case the policy has so endured, and the appellant's right to intervene, if it ever existed, is at an end. I fear that I have occupied too much time in a demonstration of the obvious, when I might have been content to rest upon the plain meaning of the words of sec. 4, which are not to any relevant extent controlled by sec. 5. I have not thought it necessary to examine the operation of the Act in favour of execution creditors, which gives rise to questions of a different character. The Judicial Committee has several times of late emphasized the importance of giving effect to the plain language of enactments of the Legislature in accordance with their express provisions instead of construing them according to a supposed intention gathered from extrinsic sources. In this case the Court is invited to enter the forbidden path. I respectfully decline to do so. In my judgment the appeal should be dismissed. Barron J. The protection in question must, in my opinion, be regarded as absolute so far as sec. 4 is concerned. Its provisions are perfectly unambiguous in themselves. Since the " property and interest" of the insured are " exempt," in the terms expressly laid down, from laws relating to bankruptcy or executions, it is plain that in construing sec. 4 no consideration founded on the Bankruptcy Act can be admitted as affecting Dr. Rygate's "property and interest." If in the absence of a Bankruptcy Act it would be abso- lute, as necessarily it would be, then it was in fact absolute. It is sec. 4 which seems to me to deal with the vesting of the property, and sec. 5 must be taken to affect, not that vesting, but only the application of the proceeds of the policy as money in the event of their becoming payable or distributable. To deal with the x "2 CLR.) OF AUSTRALIA. nd therefore I think that the property and interest must, in con- ing that section, be considered as if Dr. Rygate had never become nkrupt, whatever claim sec. 5 might have given to the official gnee in the event of death when the policy had endured for only uch a period as might call the restrictions of sec. 5 into operation. Thaye no doubt that the terms of the Act are wide enough and se enough to cover the case of a policy of life insurance acquired y a "person" after the sequestration of his estate just as they the case of a policy acquired before that event. There is no reason to suppose that the aim of the Legislature did not extend the one case just as certainly as it does to the other. Sec. 4 the protection, subject to the modifications to be mentioned, as if the person who acquired the policy had never become krupt. To my mind the only question is as to the extent of protection. On the face of sec. 4 the protection is, as has n said, absolute. But sec. 5, which in the Act of 1902 is in effect, ough not in mere form, a proviso (it appears as in form, as well effect, a proviso in the Act consolidated, namely 26 Vict. No. : 3), modifies the protection in some cases. Not in all, however. [t is true that by it the protection of the benefits by sec. 4 is deferred atil it has been in existence for two years, and that after that the protection extends only to £200 of insurance. But we not at present dealing with either of those two cases. We are ing with the further portion of the same proviso which enacts the protection "shall be afforded . . . after an endur- ce of five years to the extent of five hundred pounds." The policy at presert in question was for that amourt, and where a y secures £500 or more, and has endured five years, the words are overriding, and the proviso does not diminish by a le the completeness of the protection accorded by sec. 4. The y is relegated to the unhampered operation of that section—but protection is iterated in terms. might stop at this point, because it seems to me that for a case ch as the present the Act is explicit. In such a case the policy smpt from any bankruptcy law, or from seizure or levy, and so exempt cannot be touched. It does not appear to be at ptcy laws would be to run counter to the provisions of sec. 4; H.C. or A. 1916. PALMER v. PuBnic 'TRUSTEE. Barton J. 656, H Cor A. 1916. ee PALMER Punic TRUSTEE. Barton J HIGH COURT (1916. all to the purpose to inquire as to the effect of the proviso during — any interval between the acquisition of the policy for £500 or more and the expiration of five years. Whether during the two years it vested in the official assignee and revested in the bankrupt at any later period is beside the present question, because it is to me quite certain that it belonged to Dr. Rygate for good and all after the five years. I speak of the beneficial interest. It is not material to discuss whether or not the official assignee became a trustee for the bankrupt after two years to the extent of £200 or after five years to the extent of the whole £500 assured, because here, if after five years he was a trustee for the bankrupt as to the whole, he could not bring — this action, which obviously relates to the beneficial interest, to which he has and had no claim. And if he was not a trustee he was a stranger to this policy and its proceeds. My view is that quacumque vid he has no interest in the policy moneys, which are protected in the hands of the defendant, who is the personal repre- i sentative of the bankrupt; and therefore the appellant has no right to maintain this action. It is as well to point out that the protection accorded by 26 Vict. 7 No. 13, sec. 2, and therefore by the later Act, is reinforced by sec. 125 of the Bankruptcy Act of 1898, which prescribes that nothing in that Act shall affect the operation or prejudice the provisions of the Life Assurance Encouragement Act of 1862 or any Act amending or consolidating the same. The Legislature who passed that section were not dealing with a mere illusory protection. I am of opinion that the appeal should be dismissed. Isaacs J. The policy in this case was effected by a person who was then an uncertificated bankrupt and who has since died, and when the official assignee in his bankruptey intervened and claimed the policy moneys, £500, the policy had endured nearly ten years. The claim of the official assignee is rested on two grounds, which, in view of their importance on the general question of after-acquired property, I shall consider separately. It seems to me plain to demonstration that if, at the moment when the statutory protection is declared to operate, any "property" — or "interest" whatever in the policy or its proceeds then exists in the -R.] OF AUSTRALIA. vy or interest would, by force of sec. 4 read alone, be completely ted from any operation of the bankruptcy law which would se affect it. And it is scarcely necessary to say that one of provisions of the bankruptcy law which would otherwise affect is that which vests after-acquired property in the official assignee. it must always be remembered that the Act does not say the ry is to be exempt, but it is the " property and interest " of bankrupt or his personal representatives in the policy or its s that are protected. official assignee now contends, as his first point, that sec. 4, taken alone, cannot protect such a policy as the present, he says, an uncertificated bankrupt can never for a single have any " property " of his own; that though he may mire " it, he does so at the very instant of acquisition, not in is own right, but as the "agent" or "trustee" of the official Tn my opinion that argument is fundamentally unsound. urged that such is the effect of the vesting provisions of the Act, But lay aside artificial doctrines as, e.g., reputed , the only " property of the bankrupt " that vests or can in anyone else is that which the bankrupt has acquired in his ht. "* After-acquired property" is nothing more or less property which the bankrupt acquires as an ordinary member ety, and apart from the Bankruptcy Act. The Bankruptey declares rights and duties, but does not declare the bankrupt either the agent or the trustee of the official assignee to acquire perty. The doctrine of " agency " in the sense now urged is ntrary to what was said in In re Clark (1). "The relation of and agent requires the consensus of both parties" v. Hardingham (2)). The notion of peateene in ra, true statutory direction ait after-acquired property of the upt in the official assignee ex necessitate requires for its operation . 404, (2) 15 Ch. D., 339, at p. 349. gE aeataa 8 24 Q.B.D., 658, at p. 662. person who effected the policy or his personal representatives, that H- ©. or A. 1916. Sw PatMER v. Pusu Trust Tsaacs J. H. C. or A. 1916. Sw PALMER v Posrie TRUSTEE. Isaacs J. HIGH COURT (1916. — the prior acquisition of the property. In Herbert v. Sayer (1) Tindal C.J. observed : " There must be property in the bankrupt, or contracts with him, before such property or contracts can vest in the assignees." The genesis of this provision is found ultimately in the system of equitable assignments of future property. (See Callender, Sykes & Co. v. Colonial Secretary of Lagos (2).) But, as Jessel M.R. said in Collyer v. Isaacs (3), "a man cannot in equity, any more than at law, assign what has no existence." And even an Act of Parliament which makes a title at law, as well as in equity, in respect of the subject matter dealt with must for that result await the creation of the subject matter itself, which is stated to be "the property of the bankrupt " himself. The cases of Holroyd v. Marshall (4) and Tailby v. Official Receiver (5) are founded upon this natural and essential fact. Consequently, if we had nothing to guide us except sec. 4 we should be compelled to interpret its language as excluding the Bankruptcy Act in all cases from the earliest moment it could in the given circumstances operate ; in other words, as applying to after- acquired policies as well as to those effected prior to bankruptey. In that case the decision appealed from would be clearly right. The terms of sec. 4 would have been satisfied, because the bankrupt would have acquired " property," namely, the policy of insurance, and immediately on its acquisition, which would be the earliest moment the Bankruptcy Act could operate, but before it did operate, to transfer it to the assignee—for vesting in him is simply a " trans- fer" (see per Erle C.J. in Morgan v. Knight (6) ) or a " divesting" of the bankrupt (see per Lord Esher M.R. in Cohen v. Mitchell (7))— sec. 4 of the Life, Fire, and Marine Insurance Act would interpose, and exempt that property from such operation. Then comes the second point relied on, namely, the effect of sec. 5 "» as limiting the generality of the language of sec. 4 and confining its construction so as to exclude after-acquired property. It was said for the official assignee that the period of two years' endurance meant two years ending with some event, either bankruptcy or (1) 5 Q.B., 965, at p. 981. (5) 13 App. Cas., 523. (2) (1891) A.C., 460, at p. 466. (6) 15 C.B. (N.S.), 669, at p. 677. (3) 19 Ch. D., 342, at p. 351. (7) 25 Q.B.D., 262, at p. 266. (4) 10 H.L.C., 191, at p. 211. So ee 210LR) OF AUSTRALIA, might be bankruptcy or intervention or execution, as the case might be. It was also said for the respondent that whatever _ happened, once the period of two years was reached, the policy or ot, for it is the language of the Act itself read as a whole which must Sec. 5 makes it perfectly plain to me that whatever nd solitary enactment, yet, except sec. 5 is complied with, the protection contemplated by the Legislature in sec. 4 is not to be bankruptey law or execution law. If exemption exists at all, it is instantly operative, and never dormant ; it is absolute, and not _ cond oer The only protection' 3 is the exemption tele If the 'enable an official assignee to dispose of an after-acquired policy of 0 or £500 or £2,000 for value immediately: it was effected, but the Act would compel the transferee to hand it over to the bankrupt hen it was two or five or ten years old, as the case might be. In my riew no exemption, or, in other words, no protection, is given unless can be given in conformity with both sec. 4nd sec. 5. Apart from the application of these and other sections of the Act, the rights to the e, are governed by the bankruptcy law. Now, sec. 5 fixes the moment of protection at two years after the creation of the surance or his personal representatives. Is it possible, taking the hole enactment into consideration and reading each section by e aid of the other, so as to be consistent, to say that sec. 4 does e after-acquired policies ? The problem of reconciling sec. 4 with sec. 5 resolves itself into is question : What interest has an uncertificated bankrupt in a icy of insurance which has endured two years? The policy is erta inly " property " within the meaning of sec. 3 of the Bankruptcy tion. On the other hand, it was answered that the event H-C. or A. 1916. a) PALMER: v. Pusiic its proceeds would be protected according to the strict language of T"UsTe®. HIGH COURT [1916. H.C. or A. Act because it is a "thing in action" (Bx parte Ibbetson (1)). The 1916. eS PaLMER Pusric Tru: Isaacs J. Life, Fire, and Marine Insurance Act does not, in my opinion, contemplate the policy holder's death as an essential condition before protecting the policy. This is shown both by the fact that, as already stated, the policy itself is " property " from the beginning, and also by the circumstance that sec. 4 of the Life, Fire, and Marine Insurance Act protects the property of the person effecting the policy, that is, during his lifetime, and also — as a separate consideratior the property of his personal representa- tives, which must be after his death. Now, the interest which an undischarged bankrupt has in his after-acquired property is nowhere definitely stated. The law has to be gathered rather from a series of examples and subsidiary rules formulated in decisions than in any express authoritative standard laid down, and the bankrupt's position with respect to his after-acquired property is not referable to any specific classification. He is not strictly a trustee or an agent. He has rights and duties and powers and obligations which are peculiar to his special status, and to a large extent they have, where unexpressed in the Statute, been evolved from the necessity of the case. As to presently acquired property existing at the moment of bankruptcy, the position is clear enough, and the contrast it affords may help. That class of property is by force of the Statute at once transferred absolutely and completely to the official assignee. No dealings with it by the bankrupt can alter the rights of ownership (2x parte Cooper (2); Hx parte Rabbidge (3)). It all passes absolutely except that which the Statute expressly exempts. But though future acquired property also " vests," the literal words of the Statute are qualified by exemptions and reservations « read into them by a long course of decisions and practice which evolved side by side with the line of enactments, and which may, in the language of Grose J. in Kitchen v. Bartsch (4), be termed " land- marks " of the law of bankruptcy. Ihave already indicated that future property is in the first instance acquired by the bankrupt as his own. The question which we have ) 8 Ch. D,, 519. (3) 8 Ch. D., 367, at p. 370. 2) 39 L.T., 2 (4) 7 East, 53, at p. 63. ee Will 8 win tthe pee" pill 3S ta aR ies c : 21 C.L.R.J OF AUSTRALIA. tion? Putting aside the question of real estate considered strictly as such, and certain recognized exemptions of personal property such as reparation of personal wrong, and the means necessary for the support of the bankrupt and his family (these exceptions proving 3 that for a notional though not measurable period the bankrupt does _ acquire property as his own and not as the slave of the official assignee), the decided cases, notwithstanding their diverse language _ and sometimes embarrassing expressions, establish that, as between - bankrupt and assignee, the bankrupt's personal property acquired er bankruptcy and before discharge vests at once in the assignee. Tn any oe veey between die ae, the ete s title is clear. krupt divests him and transfers it to his official assignee. No vention is necessary for this purpose. In Holroyd v. Marshall the point which the House of Lords had to determine was ether a novus actus interveniens was needed to complete the title 'of the mortgagee of future machinery of the mortgagor. The House d (2) that no such act was necessary, and that, in equity, "immediately on the acquisition of the property described " the nortgagor held it in trust for the mortgagee. So in Tailby v. Official er (3). And this principle has been recently enforced in In re Lind (4), where Swinfen Eady LJ. said (5) "an assignment for value of future property actually binds the property directly it is acquired—automatically on the happening of the and without any further act on the part of the assignor." See also per Bankes L.J. (6). The Statute, when it divests the bankrupt, passes both legal and equitable rights to the assignee, and the result is that as between the two the assignee is the com- e owner of the property and the bankrupt has no fragment of 1) 10 H.LC., 191. (4) (1915) 2 Ch., 345. . ry 10 H.L.C., at p. 211. (5) (1915) 2 Ch., at p. 360. (3) 13 App. Cas., 523. (6) (1915) 2 Ch., at p. 373. VOL. XXI. 44 "now to determine is : How does he hold it immediately on its acquisi- H: C. or A. 1916. oe, PatMEeR vw Pusric TRUSTEE. Isaacs J. HIGH COURT [1916. i. C. or A. ownership in it. The cases which perhaps show this most distinctly 1916. -~ PartMER v Pousiie TRUSTEE. Isaacs J. are In re Clark (1) and In re Roberts (2). No doubt there are many observations to the effect that the bankrupt has a " qualified property " or some kind of interest. But when the cases come to be closely scrutinized, I can see nothing more in the matter than this—the bankrupt having acquired the property, in the first place as his own, and being undisturbed in the possession of it, has a better right to its possession and enjoyment than any third person. Further, there is introduced into the matter the humane and irrepressible consideration that the bankrupt has a tight to live and to see that his family live ; his property may justly be taken to pay his debts, but he is not to be reduced to servitude, and therefore he is at liberty to trade or otherwise to acquire property, and in addition to the right of retaining for himself all necessary sustenance, he possesses the incidental power of protecting all that trade and property and enforcing as against the world at large whatever rights he possesses as under the ordinary law. But, being so at liberty, it is necessary to protect those who deal with him, and the doctrine of Cohen v. Mitchell (3) applies for their protection. Accordingly, any person who deals with the bankrupt for value even with full knowledge of the bankruptcy can, unless and until the assignee intervenes and intercepts the property (Ex parte Dewhurst (4) ), obtain from or through the bankrupt a good title to the after- acquired property. Inre Behrend's Trust (5) is a recent instance where this doctrine was applied. But that doctrine does not, as I under- stand, invest the bankrupt with any " property " or " interest " in himself in the subject matter. His position enables him to transfer more than he has, provided it is in the course of dealing honestly and for value, and no intervention takes place by which the property is intercepted. He is thus enabled to divest the estate of property he brought into it as after-acquired property, but, if he brings in new property in exchange, it falls under the general rule and passes in turn as new property to the assignee subject to the same rules and doctrine of law as affected the former property. The consequence is that when the two years or five years or (1) (1894) 2 Q.B., 393. (4) 7 Ch., 185. (2) (1900) 1 Q.B., 122. (5) (1911) 1 Ch., 687. (3) 25 Q.B.D., 262. 21C.L.R.) OF AUSTRALIA. bankrupt had, as against the assignee, no property or interest in it. _ His property and interest had long since disappeared. And it is all- _ important to remember that the Life, Fire, and Marine Insurance _ Act is intended to operate only as between the bankrupt and the _ assignee as representing his creditors. There was, therefore, nothing to under see. 5. And, as sec. 4 is dependent on sec. 5, it follows that the subject matter upon which alone sec. 4 as controlled by sec. 5 could operate did not at the given moment exist. In other words, sec. 4 when read with sec. 5, while perfectly applicable to policies effected before raat cannot be construed so as a refer to - see, 7 as confirming this view. They exclude assignees of the insured _ from the benefit of the exemption. But as a bankrupt can always Ishould add that I regard this as a very hard case, and it is with greatest reluctance I arrive at my conclusion. It is extremely to be forced to so decide, when the facts are that a struggling ical practitioner in poor circumstances by careful economy anaged to save £5 8s. 4d. a quarter out of his personal earnings, to provide £500 for five children, the eldest of whom, when the policy was effected, was about 19. But a Judge has no option ;_ he has only to declare the law. The hardship of such a case is for the consideration ¢ bankrupt on the 2lst July 1902, and remained an uncertificated bankrupt until his death in January 1915. During that period he continued to practise his profession, and in February 1905 he effected policy of life insurance on his own life for the sum of £500, and : ten years had expired after the policy in this case was effected, the H.C. or A. 1916. Sw PALMER v Pusic 'TRUSTEE. Isaacs J. H.C. or A. 1916. a PALMER v Pusric TRUSTEE. Gavan Duffy J. Rich J. HIGH COURT (1916. paid the premiums falling due from time to time out of professional fees subsequently received by him. , The question for our consideration is whether the official assignee is entitled to the moneys secured by the policy. He is so entitled if his claim is not defeated by the provisions of secs. 4 and 5 of the Life, Fire, and Marine Insurance Act 1902. In our opinion these sections, and all the sections contained in Part II. of the Act, have reference to policies effected before, and not to those effected after, « the sequestration, and are intended to encourage the practice of life insurance by protecting bond fide investments of this nature against the claims of creditors under subsequent sequestration or executions. The sections of Part IT. are collected under the title " Life Insurance Encouragement," and are preceded by the following preamble :— " For the encouragement and protection of life insurances and other like provident arrangements for the benefit of insurers, their wives, and families, be it enacted as follows:—". It is suggested that these words apply to the case of a bankrupt purchasing a policy with money acquired by him, after sequestration, which the Bank- ruptcy Act declares to be divisible among his creditors. One would imagine that what was to be encouraged and protected was the investment of a man's own money, not that of his creditors, and the language used in secs. 4 and 5 seems appropriate for that purpose, and for no other. The relevant portions of the sections are as follows :—'' (4). The property and interest of every person who has effected, or shall hereafter effect, any policy for an insurance boné fide upon the life of himself . . ., or for any future endowment Z in such policy, or in the moneys payable thereunder or in respect thereof, . . . shall be exempt from any law now or hereafter in force relating to insolvency or bankruptcy, or from being seized or levied upon by or under the process of any Court what- ever." ''(5). A policy for life insurance or endowment. . - shall not be protected under the last preceding section until such policy has endured for at least two years, after which period such protection shall be afforded to the extent of two hundred pounds of insurance or endowment, and after an endurance of five years to the extent of five hundred pounds, and after an endurance of CER.) OF AUSTRALIA. n years to the extent of one thousand pounds, and after an endurance of ten years to the extent of two thousand pounds." Sees. 4 and 5 are taken substantially from sec. 14 of the Mutual | Provident Society's Act of 1857, and it can hardly be supposed that the Legislature intended to favour the transactions of that Society __ by taking from creditors moneys actually divisible among them at the time when such moneys were invested by a bankrupt in the , "purchase of a policy from the Society. The provisions of the original Act have been applied to insurance companies generally, not only in New South Wales, but throughout the Commonwealth and New and, and it is noticeable that though, as might be expected, the e of the various enactments differs they all seem to protect es effected before, and not those effected after, sequestration. e general effect of secs. 4 and 5 may be stated thus. They _ apply only to a property or interest in a policy which has endured for at least two years, and they protect such a property or interest gainst the effect of accruing bankruptcies ai executions. Sec. 4 assumes the existence of a " property" or "interest " not under but independent of the bankruptcy law to which the provisions _ of the section are to apply; it does not give to the bankrupt or _ execution debtor anything which he does not possess, but merely protects a " property " or " interest " which he has already obtained, nd does so by making it exempt from the bankruptcy law and from "executions, To be "exempt" mears "to be free or clear of," "to be holly unaffected by," and therefore the protection of the section must be invoked at the instant when, but for the section, some law _ relating to bankruptcy or qpeglyeney; or the pee of some Court, ened affect the existing * "property " or "interest." Sec. 5 'The inquiry, to be made at the instant the protection of the section _ is invoked, is twofold :—(1) Has the person saa the benefit of _ the section then got an existing " property " or "interest " in the - policy? ? (2) Has the policy then endured iS at least two years ? "If either of these questions is answered in the negative, the policy 'H.C. or A. 1916. yw PALMER v. Pusiic 'TRUSTEE. Gavan Duffy J. Rich J. H.C. or A. 1916, =~) PatMeR v Pustic TRUSTEE. Gavan Duffy J. Rich J. HIGH COURT : (1916. is not protected. It is plain that both branches of the inquiry are appropriate in the case of a policy effected before sequestration, and that the answer to each question will be in the affirmative or negative according to the circumstances of the case, but where the policy has been effected after bankruptcy, the answer to either one or other of the questions must always be in the negative. Let us examine the matter a little more closely. It is said that Rygate obtained a "property " or "interest" in the policy of insurance within the meaning of sec. 4 as soon as it was issued to him, and that that "property" or "interest" once acquired could not be affected by the bankruptcy law vesting " after-acquired property " in the official assignee, because sec. 4 in terms protects such " property " or "interest" against the bankrupt law. We agree that if a "property " or "interest" is once acquired independently of the bankruptcy law, it comes within the provisions of sec. 4. But did Rygate acquire any "' property " or " interest " in the policy which was issued, or did the provisions of the bankruptcy law, vesting after-acquired property in the official assignee, prevent him from acquiring any such "property" or "interest '"'? The effect of such vesting provisions has been much debated, and is stated in the judgment of Bigham J. in In re Bennett (1). After reviewing the cases, his Lordship came to the conclusion that the bankrupt acquires such property as agent for the assignee or trustee in bankruptcy and for his benefit, and continues to hold it in that capacity unless and until he parts with it for value or surrenders it to the assignee or trustee. If this be the effect of secs. 10 and 52 (c) of the New South Wales Bankruptcy Act 1898, Rygate never obtained any "property" or "interest" in the policy, and so could not avail himself of the provisions of sec. 4, nor could his personal representative do so, But let us assume that on a true construction of the vesting provisions the bankrupt does take a "property" or "interest" in "after-acquired property," either independently of the bankruptcy law, before it passes to the official assignee, or under the bankruptcy law for his own benefit until the assignee intervenes on behalf of creditors. On the first hypothesis Rygate did obtain a property in the policy, not under, but despite, (1) (1907) 1 K.B., 149. Fo 21C.L.R.] OF AUSTRALIA. 3 - the bankruptey law, and it may be conceded that the language of - see. 4, if that section stood alone, would be appropriate to exempt such a property from the operation of the bankruptcy law as soon as it was acquired, and so confirm it permanently and absolutely _ in the bankrupt. The bankruptcy law, not affecting the property _ in the policy, could never take it out of the bankrupt and vest it in the official assignee. But sec. 5 provides that the exemption con- 4 tained in see. 4 shall operate only on policies which have endured for two years, and immediately after Rygate obtained a property in the policy, that property, wanting the protection of sec. 4, became _ subject to the bankruptcy law and passed to the official assignee. On the alternative hypothesis Rygate never had any " property " _ or "interest " in the policy except by virtue of the bankruptcy law _ under which he took a defeasible property in the policy when it was effected. On neither hypothesis was the bankrupt's property in the policy protected, because in neither case was there or could there have been performance of the condition as to endurance of the policy _ for two years; and on the second hypothesis the bankrupt never _ had any absolute property, or indeed any property or interest apart from the bankruptcy law, on which the exemption could operate. 4 Tt has been suggested that this policy might be protected if the _ time for invoking protection could be postponed from the date of 4 effecting the policy to the date when it had endured for two years ; _ that on the first hypothesis the property might have passed to the _ official assignee and remained in him until the policy had endured for two years, or, on the second hypothesis, might have remained in the bankrupt during that period subject to the intervention of _ the assignee, but that when it had endured for two years, an absolute - property to the extent of £200 was restored to the bankrupt, or the _ defeasible property to that extent was converted into an absolute E property, and so on at the termination of each successive period prescribed by sec. 5. Finally it is said that the two sections may be properly construed by postponing the period for invoking their : protection until the money secured by the policy becomes due. On - this construction the official assignee or execution creditor would _ apparently be entitled to deal with the policy as if secs. 4 and 5 did not exist, and when the money became due, if someone considered H.C. or A. 1916. ee Pater eae Trustee. Gavan Dutty J. Rich J. H.C. or A. 1916. a PALMER Pusiic 'TRUSTEE. Gavan Duffy J. Rich J. HIGH COURT [1916. it advisable to pay the premiums and it ultimately did become due, the claim of the bankrupt or his personal representatives would supersede all dealings with the policy under the bankruptcy or execution to the extent provided by sec. 5. The answer to these suggestions is to be found in the meaning which we have already attributed to the word "exempt" in sec. 4. A postponement is not consistent with the language of that section, which provides for a total exemption from the bankruptcy law, not for an exemption or a series of exemptions from its further operation accompanied by avoidance of prior partial operation, nor for the creation by fluxion pf time of a property in the bankrupt such as he never before had. It cannot be invoked either to restore and protect an absolute property which has been lost by the past operation of the bankruptcy law, or to create an absolute property in a bankrupt who has never had more than a defeasible property. Appeal allowed. Order appealed from discharged except as to costs. Order as in the first alternative of the notice of motion. Solicitors for the appellant, Fisher & Macansh. Solicitors for the respondent, McDonell & Moffitt. B. L.