RE RUSSELL.

Insolvent Act, 1875, secs. 56, 64 and 65-Application for discharge under secs. 64 and 65, after refusal to confirm deed of composition and discharge under sec. 56— Voluntary settlement-Payment to creditor to induce him to execute deed of composition and discharge-Retention and concealment of property by insolvent-Omission to keep proper books of account.

It is no objection to an application by an insolvent for a discharge under secs. 64 and 65 of the Act, that a previous application under sec. 56 to confirm a deed of composition and discharge had been refused, where it appeared that the ground of refusal was that the deed was not executed by a sufficient number of creditors who had proved claims.

Quere, whether an assignee would be justified in reconveying the estate to the insolvent under the directions contained in a deed so insufficiently executed.

A post nuptial settlement upon his wife made by an insolvent at a time when he was not aware of his inability to meet his liabilities, and while he had contracts on hand from which he might reasonably have expected to make a profit, though they afterwards proved unsuccessful: Held, no ground for refusing the insolvent his discharge. Upon the arrangement for a deed of composition and discharge, the creditors required security for payment of the composition, and one Meikle, a creditor, agreed to indorse the composition notes upon receiv ing a mortgage upon the property settled upon the insolvent's wife, securing him in respect of his indorsations, and on payment of $250 in addition to his composition :

Held, not a fraudulent preference within the meaning of the Act.

Upon his appointment the assignee took an inventory of the property, but owing to the execution of the deed of composition and discharge, afterwards declared inoperative, did not remove it:

Held, not a retention or concealment by the insolvent, so as to disentitle him to his discharge; in such a case the retention and concealment necessary to disentitle an insolvent to his discharge must be wilful and fraudulent.

In order to absolutely disentitle an insolvent to his discharge on the ground of failure to keep proper books of account, where the case is not one of a commercial business, the party opposing the discharge must shew that there were no books; or, if there were, in what respect they were defective.

THIS was an appeal by a creditor from the judgment of the Judge of the County Court of Stormont, Dundas and Glengarry, whereby he granted to the insolvent a discharge under sections 64 and 65 of the Act, but suspended its operation until the 1st of July, 1882.

The grounds of appeal were:

1. That the insolvent was guilty of fraud and fraudulent preference within the meaning of the Insolvent Act, and was guilty of fraud and evil practice in prccuring creditors of the insolvent to sign a certain deed of composition and discharge.

98-VOL. VII A.R.

(a) By deed dated 11th September, 1876, he conveyed to trustees for his wife certain real estate at Morrisburgh, at a time when he had many heavy contracts on hand; when he was unable to meet his liabilities, and when he either was aware of such inability or had reason to believe he was about to become financially embarrassed.

(b) To induce one Gordon Casselman, a creditor, to execute a deed of composition and discharge he promised Casselman to pay him in full, and did afterwards pay him nearly the full amount of his claim.

(c) At or about the time he became insolvent he paid to J. & A. Meikle, creditors, the sum of $400, whereby they procured a preference over the other creditors.

2. The insolvent was guilty of fraudulent retention and concealment of a portion of his estate and effects.

(a) The lands granted to trustees for his wife. (b) A debt due him from one Chamberlain.

(c) He did in fact retain and apply to his own use the whole of his assets and effects.

Besides other acts of retention and concealment appearing in the evidence.

3. The insolvent did not keep an acconnt-book shewing his receipts and disbursements.

4. The insolvent did not give up his assets and effects to the assignee of his estate, but, on the contrary, after his insolvency, retained them in his own hands and disposed of them for his own benefit.

5. The insolvent having procured the execution of a deed of composition and discharge, and dealt with the estate himself, taking it out of the hands of the assignee, is now precluded from obtaining his discharge under section 64 of the Act.

It appeared that the insolvent made an assignment in insolvency on the 17th of January, 1878.

Soon afterwards, at a meeting of creditors, at which the appellant was present, the creditors, including the appellant, agreed to accept a composition of thirty-three cents in the dollar, to be secured by the promissory notes of the

insolvent, indorsed by J. H. Meikle, one of a firm who were creditors of the insolvent. In order to induce Meikle to agree to indorse, the insolvent and his wife agreed to give, and did give to him a mortgage upon the property comprised in the conveyance, of the 11th September, 1876, whereby the insolvent settled the said property on his wife. The mortgage was to secure Meikle against his indorsations, and also in the payment of $250 over and above the amount of the composition notes receivable by his firm as creditors under the deed of composition.

In pursuance of the above arrangement a deed of composition and discharge was prepared and signed by what both the insolvent and the assignee considered to be the majority of the creditors under the Act, and the creditors, including the appellant, received their composition notes, which were subsequently paid by Meikle.

The insolvent applied to the Judge for an order confirming the deed of composition and discharge. This was opposed by the appellant alone. It then appeared that a number of the creditors who had signed the deed had not proved their claims before the assignee, and that it was not signed by a sufficient number of those who had proved. The Judge consequently refused to confirm it.

After the expiration of more than a year from the assignment, the insolvent applied for his discharge under sec. 64 of the Act. The application was opposed by the appellant, upon the grounds above set forth, and the Judge thereupon made the order now appealed from.

The other facts sufficiently appear in the judgment.

S. H. Blake, Q.C., for the appellant.

C. Moss. Q.C., contra.

The following authorities were referred to:

Vinden v. Fraser, 28 Gr. 503; Boustead v. Shaw, 27 Gr. 280; Re Thurbar, Shaw, Young, & Co., 11 L. C. Jur. 46; Re Gooding, 5 A. R. 643; Buckland v. Rose, 7 Gr. 440; King v. Keating, 12 Gr. 29; Black v. Fountain, 23

G. 174; Re Rathbone, 2 Bank. Reg. 260; Re Goodfellow, 3 Bank Reg. 452; Re Lamb, 4 Prac. R. 16; Re Smith, 5 Prac. R. 89; Re Parr, 17 C. P. 621; Re Wallis, 29 U. C. R. 313; Re Jones, 4 Prac. R. 317; Re Holt, 13 Gr. 568; Re Thomas, 15 Gr. 196; Smith v. Hutchinson, 2 A. R. 405; Re Wainwright, L. R. 19 Chy. Div. 140.

September 23, 1882. BURTON, J. A.-Among other objections taken to the order granting the insolvent's discharge, it is urged that he cannot apply under sec. 64, inasmuch as a deed of composition and discharge was executed, and that the application should have been for an order to confirm the discharge effected by that deed. It is not necessary in this, as I found it unnecessary in another case just decided, (Re Hill, ante 693), to consider that objection, inasmuch as the instrument purporting to be a deed of composition and discharge was never operative as a valid deed of composition and discharge, not having been executed by the insolvent, and upon the authority of in re Garrett, 28 U. C. R. 273, never became operative, and could not have been confirmed.

The assignee probably was not justified under it in reconveying the estate, but with that we are not concerned at present.

The insolvent applies after the expiration of upwards of three years from the execution of the deed of assignment for his discharge, and is opposed by one of his creditors who executed that instrument proposing a composition, and which composition has been in fact paid.

The first objection is, that a deed given in September, 1876, as a post nuptial settlement in favour of his wife was so given when he was unable to meet his liabilities, and when he either was aware of such inability, or there was reason to believe " he was about to become financially embarrassed." I quote the words used in the grounds of appeal.

The question is not whether the deed in question is valid against creditors, but whether it was fraudulent within the meaning of the Insolvent Act.

I think that this objection is disposed of by the finding of the learned Judge, in which I agree, that the insolvent was not at the time of its execution aware of his position: that he had large contracts on hand, from which he may reasonably have expected to make a profit in place of the serious losses which he afterwards met with.

It may be questionable how far it is open to a creditor opposing the discharge under the 64th section, to object that some of the signatures to the deed of composition and discharge which he is not seeking to have confirmed, were obtained by any promise of payment, gift, or preference, as a consideration or inducement to consent to the discharge, or execute such deed of composition; but I see no reason for differing from the conclusion arrived at by the learned Judge, as the insolvent declares on oath, and is supported by one of the witnesses, that there was no special promise to pay any one as an inducement to execute the deed, but a mere expression on the part of the insolvent of his intention, notwithstanding the composition to pay every one in full.

The payment to Meikle is one which he had a right, legally to exact as a consideration for incurring the responsibility, and cannot, I think, be regarded as a fraudulent preference within the meaning of the Act.

The retention and concealment necessary to deprive him of his discharge, must be a wilful and fraudulent retention and concealment. I do not think the evidence establishes such a state of things here. The assignee was entitled to take possession; he evidently refrained from doing so, with the knowledge that a deed of composition was being prepared, and although he may have erroneously conveyed back the estate, there is nothing to shew that that was not done in good faith.

Dr. Chamberlain's debt, it is true, was not stated in his schedule of assets, but the accounts were disputed, and according to the insolvent's statement it was of no value.

The most formidable objection is the omission to keep proper books of account. This is not the case of a com