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^Assignments

AND PREFERENCES

UNDER THE LAWS OF THE PROVINCE
OF ONTARIO.

COMPILED BY

A R T H U R C?^^^ o M AS-TUR

TCyRONTO.

PUBLISHED BY DAVID BLACKLEY, TORONTO.

Entered according to Act of Parliament, in the Office of the

Minister of Agriculture.

TORONTO :
W. 8. Johnston & Co'y. Printers and Binders.

■ / , /

1 1« » al»0l:^il l mfi t *i.Mff^ ^y

ii^^ajUHKH

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DAVID BLACKLEY
Assignee and Accountant
80 Bay Street, 1^ King St. W.,

Toronto,: Hamilton.

Tf will hP noticed that I have the exceptional advantage of having an
It will t)y oticea tnat 4 ^ ^^^ Hamilton, so that estates may he

dea?t with with equal facility from either point, and

creditors' meetings held In which evei

citj"^ may be most convenient.

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PREFACE.

Feeling that merchants intrusting their business to an
assignee would find satisfaction in the use of a book containing
a short and clear statement of the law relating to assignments
and preferences, by which they might not only be advised of
their own rights but have the means of judging whether the
assignee is acting strictly in accordance with legal requirements
and in the interest of the estate intrusted to his care, I have re-
quested Mr. A. C. McMaster, Barrister-at-law of the legal firm
of McMaster, Scott & Geary, to prepare the following work
which I am confident will be found accurate and of considerable

service to those requiring to use it.

DAVID BLACKLEY.

Toronto, 5th of April, 1895.

^iMii

ASSIGNMENTS AND PREFERENCES.

Under the Laws of Ontario.

Chapter 1. THe Assignment.

** 2. Duties of Assignee, etc.

** 8. Rights and Powers of Creditors.

" 4. Preferences.

** 5. Recovery of Debts

CHAPTER 1.

the assignment.

When the phrase Assignment for Benefit of Creditors, or
Assignment under the Statute is used, the assignment referred i
to is one presumed to be made in accordance with the
provisions of Sec. 4 of Cap. 124 R.S.O. 1887, which section is
m the following words : —

" Section 4. Every assignment made under this Act
for the general benefit of creditors shall be valid and
sufficient if it is in the words following, that is to say ; •
" All my personal property which may be seized and sold
under execution, and all my real estate, credits and effects "
or if it is in words to the like effect ; and an assignment
so expressed shall vest in the assignee all the real and'
personal estate, rights, property, credits and effects,
whether vested or contingent, belonging at the time of the
assignment to the assignor, except such as are by law
exempt from seizure or sale under execution; subject
however, as regards lands, to the provisions of the
Registry Law as to the registration of the assignment.
4S v., c. 19, S. 4."

^''■■^ttffi'-i

The assignment may be in the words given in the above
section, or in words to the like effect, but an assignment con
fined in terms to personal property only is not within the Act.
(Blain V. Peaker, 18 O.R., 109.) And it appears that if the
assignment omits any part of the debtor's property in such a
way or to such an extent that the intention to reserve a part of
his estate is apyjarent, it will not be within the Act. McLean
V. Garland, 13 S. C. R. 386. The more recent authorities are not
yet reported.

A safe form of assignment under the Act is as follows : —

•'This indentut^e made the day of

in the year of our Lord one thousand eight

hundred and ninety in pursuance of the Revised

Statutes of Ontario, 1887, chap. 124, being im act respecting

assignments and preferences by insolvent persons.

Between

the Debtor, of the First Part,

the Assignee, of the Second Part,

And the several Firms, Persons and Corporations who are

Creditors of the said Debtor, hereinafter called the Creditors,

of the Third Part.

WheKeas the said Debtor has heretofore carried on busi-
ness at as

and being unable to pay Creditors in full has agreed to
CDnvey and assign to the said Assignee all estate, real

and personal, for the purpose of paying and satisfying the
claims of Creditors rateably and proportionately, and

without preference or priority.

flouu this indenture uiitnesseth, that in consideration
of the premises and of the sum of One Dollar the said Debtor
doth hereby grant and assign to the said Assignee, his heirs,
executors, administrators c-nd assigns, all
personal property which may be seized and sold under execu-
tion, and all real estate credits and effects
TO HAVE AND TO HOLD the Same unto the said Assignee, his
heirs, executors, administrators and assigns, respectively,
accordmg to the tenure of the same.

Upon tKust that the said Assignee, his heirs, executors,
administrators and assigns, shall sell and convey the real and

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personal estnte and convert the same into money and collect
and call in the debts, dues and demands of the said Debtor.

And it is het<eby deelai«ed that the said Assijj^nee, his
executors, administrators and assij^^ns, shall stand possessed of
the moneys derived from the sale of the real and ])ersonal
estate, and of the moneys collected and called in, and all other
moneys which the said Assii^nee, his heirs, executors, adminis-
trators and assiij^ns, shall receive for or on account of the
premises hereinbefore assigned.

Upon tpust, in the first place, to pay the costs of an
incidental to the preparation and execution of these presents ;
Secondly, to deduct and retain such lemuncraton as shall be
voted or fixed for him, the said Assignee, under the provisions
of the said Act, and thirdly, to pay off the debts and liabilities
of the said Debtor

to the said Creditors, respectively, rateably and proportionately,
and without preference or priority, and the surplus after pay-
ment of all claims, costs, charges and expenses in full, to
hand over to the said Debtor.

The said Debtor appoint the said Assignee, his executors,
administrators and assigns, lawful Attorney irrevocable

in name to do all matters and things, make,

sign, seal and execute all deeds, documents and papers neces-
sary to more fully perfect in him the title to the said lands,
premises, goods and chattels, debts, dues and demands hereby
assigned or intended so to be, and to do all other acts, matters
and things necessary to enable him, the said Assignee, to carry
into effect the intents of these Presents.

And the said parties of the Third Part, being a majority of
the Creditors, hereby assent ta this Assignment and direct that
it be made to in the

place and stead of the Sheriff of the County of

In uiitness caheiteof the said parties have hereunto set
their hands and seals, the day and year first above written.

Sign«d, sealed and deliveited )

In the pres^ce of )

County of ) I,

To Wit ; ) make oath and say : —

1. That I was personally present and did see the within

Tnstriuiicnt and Duplicate thereof duly sii^ned, scaled and
executed by

the parties thereto.
2. That the said Instrument and Duplicate were executed
at

8. That I know the said part

4. That I am a subscribing witness to the said Instrument
and Duplicate.
Sworn before me at the
of in the

of this

day of in the year j

of our Lord 189 J

A Commissioner for taking Affidavits in H.C.J.

The Affidavit of Execution, as any other Affidavit under
the Act, may be made before any person authorized to
administer affidavits in the Hijjh Court, or before a Justice of
the Peace, or, if sworn out of Ontario, before a Notary Public.

Where an assignment is to be made by a firm, the better
practice is to have it execu^tfd in the firm name, and also by-
each member of the firm in his own name, for one partner can-
not assign the assets of the firm without the consent of his co-
partner. It is not probably, necessary for one partner, execut-
mg in the firm name, to have authority by deed from his co-
partners so to sign, but an express request will be sufficient.
(Nolan V. Donelly, 4 O.R., 440.) At any rate, it would be
sufficient as far as the assignment affected goods of which the
assignee had taken actual possession. Nelles V. Maltby, 5
O.R., 263.

It seems that the directors of an incorporated company
may authorize an assignment for benefit of creditors without
consulting the shareholders of the Company. Whiting V.
Hovey, 13 A. R., 7 ; 14 O.R., 515.

The property which will pass under the assignment iticludes
" rights vested or contingent." A right of action, therefore,
passes to the Assignee, but if an action is^ctually pending at
date of assignment, it will require to be revived if the Assignee
desires to carry it on, and if he does so, he will be liable for the
costs. The defendant may move for an order that such an
action be revived or dismissed.

Blifejl«»«',W^f.*'>»

It appears that a mere covenant of indemnity as to which
there had been no breach at the time of the assii^^nmcnt, and
so no cause of action at that time, woukl not pass unless the
Assiijnee did some act to shew an election to take the benetit
of it; or, if it did pass, would be a mere legal interest and
would not prevent the debtor suing as equitably entitled in the
absence of active interference on the part of the Assignee. See
Ball V. Tennant, 21 A.R., (102.

As to after acquired i)roperty, and as to rights to the
benefit of contracts, see Herbert V. Sayer, 5, Q.B. 9()5, Gibson
V. Carruthers, 8 M. & W., 321.

Bu/ does not include, goods exempt from execution under
R.S.O., 1887, Cap, 64, Sections 2 and 3 which are as follows : —

Sub-Sec. 1. The bed bedding and bedsteads (including a
cradle) in ordinary use by the debtor and his family.

" Sub-Sec. 2. The necessary and ordinary wearing apparel
of the debtor and his family :

Sub-Sec. 3. One cookmg stove, with pipes and furnishings,
one other heating stove, with pipes, one crane and its append-
ages, one pair of andirons, one set of Cv oking utensils, one pair
of tongs and shovel, one coal scuttle, one lamp, one table, six
chairs, one washstand with furnishings, six towels, one looking
glass, one hair brush, one comb, one bureau, one clothes press,
one clock, one carpet, one cupboard, one broom, twelve knives,
twelve forks, twelve plates, twelve tea spoons, twelve saucers
one sugar basin, one milk jug, one tea pot, twelve spoons, two
pails, one wash tub, one scrubbing brush, one blacking brush,
one wash board, three smoothing irons, all spinning wheels and
weaving looms in domestic use, one sewing machine and
attachments in domestic use, thirty volumes of books, one axe,
one saw, one gun, six traps, and such fishing nets and seines as
are in common use, the articles in this sub-division enumerated
not exceeding in value the sum of S150."

(5.5.4) All necessary fuel, meat, fish, flour and vegetables,
actually provided for family use, not more than sufficient for
the orainary consumption of the debtor and his family for thirty
days, and not exceeding in value the sum of S40.

(5.5.5) One cow, six sheep, four hogs, and twelve hens,
in all not exceeding the value of $75, and food therefor for
thirty days, and one dog.

(5.5.6) Tools and implements of or chattels ordinarily used
in the debtor's occupation, to the value of $100.

(S.S.7) Bees reared and kept in hives to the extent of
fifteen hives.

S2C. 3. The debtor may in lieu of tools and implements
of or chattels ordinarily used in his occupation referred to in
sub-division 6 of section 2 of this Act, elect to receive the pro-
ceeds (^f the sale thereof up to $100, in which case the officer
executinjr the writ shall pay the net proceeds of such sale if the
same shall not exceed SlOO, or, if the same shall exceed $100,
shall pay that sum to the debtor in satisfaction of the debtor's
rij^ht to exemption under said sub-division 6, and the sum to
which a debtor shall be entitled hereunder shall be exempt
from attachment or seizure at the instance of a creditor.

Sjc. 4. The chattels so exempt from seizure as against a
debtor, s'.iall, after his death, be exempt from the claims of
credit )rs of the deceased, and the widow shall be entitled to
retain the exempted goods for the benertt of herself and the
family of the debtor, or, if there is no widow, the family of the
debtor, shall be entitled to the exempted goods and the goods
so exempt shall not be liable to seizure under attachment
against the debtor as an absconding debtor.

Sec. 5. The debtor, his widow or family, or, in the case of
infants, their guardian, may select out of any larger number
the several chattels exemjjt irom seizure.

Sec. 6. Nothing herein contained shall exempt any article
enumerated in sub-divisions 3, 4, 5, 6 and 7 of section 2 of this
Act from seizure in satisfaction of a debt contracted for the
identical article.

The assignment also includes lands, but subject to the
provisions of the Registry Laws. Hence it is necessary to
register the Assignment with the Registrar of Deeds for the
proper County or Registration Division, otherwise a bona fide
purchaser for value might gain priority over the Assignee.

Section 3, SS. I, amongst other things, provides as follows :
''Nothing in the preceding section shall apply " (i.e., as avoid-
ing the assignment etc.) " to any assignment made to the
Sheriff of the County in which the debtor resides or carries on
business, or to another assignee, resident within the Province
of Ontario, with the consent of the creditors as hereinafter
provided, for the purpose of paying rateably and propor-
tionately, and without preference or priority, all the creditors of
the debtor their just debts."

The purpose should be the rateable payment of all

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liabilities generally, and if this be the purpose or intent, an
accidental omission of creditors names trom the schedule
would not invalidate nor take the assignment out of the Statute.
See McLean V. Garland, 13 S.C.R., 886 nor, it seems, would
accidental omission of some property.

The assignee mavbe given authoritv to run the business for
a time so as to sell as a going concern. See Slater V. Ba-
denach, 10 S.C.R., 296, and cases there referred to.

SS. 2 reads : *' Every assignment for the general
benefit of creditors which is not void under section 2 of
this Act, but is not made to the Sheriflf, nor to any other
person with the prescribed consent of creditors, shall be
void as against a subsequent assignment which is in con-
formity with this Act, and shall be subject in other
respects to the provisions of this Act until and unless a
subsequent assignment is executed in accordance with
this Act."

The consent of creditors, in case of an assignment other
than to the Sheriff is prescribed by S.S.5. " The debtor may,
in the first place, with the consent of a majority of the creditors
having claims of $100 and upwards, computed according to the
provisions of Sec. 19, make a general assignment for the benefit
of his creditors to some person other than the Sheriff, and
residing in this Province." This consent may be obtained
subsequently to the time of the assignment, and in practice the
usual course is to have the assignment ratified, and the assignee
confirmed in his position, at the first creditors' meeting.

In Anderson V. Glass, 16 O.R., 592, the meaning and
effect of the above sub-section is discussed, and it seems that
an assignment made under this Act, executed without the con-
sent of the requisite number of creditors, has the same effect as
if it were so executed, unless and until superseded by an assign-
ment executed with that consent, or made to a Sheriff, and a
Sheriff who seizes goods the subject of an assignment defective
for want of consent only, is not justified in refusing to give
them up to the assignee under it, there being no subsequent
assignment to supersede it under the Statute.

Section 9 of the Statute provides, that '' An assign-
ment for the general benefit of creditors under this Act

r-it'ff^U

shall take precedence of all iudgments and oi* all execu-
tions not completely executed, by payment, subject to
the lien, if any, of an execution creditor for his costs,
Avhere there is but one execution in the Siieriff' s hands, or
to the lien, if any, of the creditor, for his costs, who has
the first execution in the Sheriff's hands."

A judgment for alimony, in spite of the words " all judg-
ments " used in the Act, is not within this section. See
Abraham V. Abraham, 19 O.R., 256.

The first execution creditor's lien extends to the entire
costs of the action, and is not limited to the costs of his execu-
tion as was contended. See Regan V. Clarkson, 16 A.R., 311.

The words ** in the Sheriff's hands " excluded executions in
the Division Court from the benefit of this section, being in the
bailiff's hands, out this is provided for by the Division Court
Act ; so that where the defendent in an action in that Court
"' makes an assignment for general benefit of his creditors " the
bailiff will, until his fees and disbursements upon the writ of
execution are fully paid and satisfied, have a lien therefor
upon so much of tne goods as will reasonably satisfy the same,
but in the event of a dispute as to the proper amount of said
fees and disbursemer-cS, the amount claimed therefor may be
paid into Court urtil the proper amount shall be certified by the
Judge, and on such payment into Court the said lien shall cease
and determine.

Garnishee proceedings in the Division Court are not super-
seded by Section 9, and the Garnishee must pay the primary
creditor who obtains judgment, not the assignee, the words
"** all judgments " in this section meaning all judgments against
the debtor. Wood V. Joslin, 18 A.R., 59.

See Clarkson V. Severs, 17, O.R., as to the meaning of
'* executed by payn jnt," being executed by payment to the
Sheriff.

The assignee is the proper person to distribute funds
realized in a Mortgage action where creditors had not proved
their claims before the Master at the date of assignment.
Carter V. Stone, 20 O.R., 340.

No advantag^e shall be taken or gained by any cre-
ditor of any mistake, defect or imperfection in any
assignment under this Act for the general benefit of credi-

'lymt

i mvW£>itaBidhi

tors if the same can be amended or corrected, and if
there be any mistake, defect or imperfection therein, the
same shall be amended by any Judge of the High Court
or of the County Court aforesaid, on application of any
creditor of the assignor, or of the assignee, on such notice
being given to other parties concerned as the Judge shall
think reasonable, and the amendments, when made, shall
have relation back to the date of the assignment.

That the assignment only extends to personal property is
not such a mistake as can be corrected under above section.
See Blain V. Peaker, 18 O.R., 109. See McLean V. Garland
as to omission of creditors' names.

An Assignment under this Act is not rendered voidable by
reason of non-filing with Clerk of County Court See section
15, which is as follows : —

** Sec. 15. The omission to publish or register as a
foresaid, or any irregularity in the publication or registra-
tion, shall not invalidate the assignment."

See also section 12, which takes it out of Act respecting
mortgages and sales of personal property, but the filing of the
assignment and publication of the notice is enforced by penalty.
See Chapter as to assignee's duties.

CHAPTER 2.

DUTIES OF ASSIGNEE, ETC.

An assignment, as we have already seen in the preceding
chapter, may be made to a Sheriff of the County in which the
debtor resides, or to a private individual, with the requisite
consent of creditors, but S3c. 3, S.S. 6 limits the right to act as
assignee as follows : —

Sec. 3, S.S.6 No person other than a permanent
and bona fide resident of this Province, shall have power
to act as assignee under an assignment within the provi-
sions of this Act, nor shall any such assignee have power
to appoint a deputy, or to delegate his duties as assignee
to any person who is not a permanent and bona fide
resident of this Province ; and no charge shall be made or

■....,^.«»«-^^^>«.».««ij<i>«

recoverable against the assignor, or his estate, for any
services or other expenses ot any such assignee, deputy or
delegate of any assignee, who is not a permanent and
bona fide resident of this Province.

(a). The property and assets of any such estate
shall not be removed out of the Province without the
order of the County Court Judge of the County in
which the assignment is registered, and the proceeds of
the sale, and all moneys received on account of any
estate, shall be deposited by the assignee in one of the
incorporated banks within this Province, and shall not be
withdrawn or removed without the order of such County
Court Judge, except in payment of dividends and other
charges incidental to the winding up of the estate, and
any assignee or other person acting in his stead, or on his
behalf, violating the provisions of this section, shall be
liable to a penalty of $500, which may be recovered
summarily before a Judge of the High Court or of the
County Court of the County in which the assignment is
by the said Act required to be registered, and one-half of
the said penalty shall go to the person suing therefor, and
the other half shall belong to the estate of the assignor ;
but in default of payment of the said penalty, and all costs
which may be incurred in any action or proceeding for
the recovery thereof, such assignee or other person may
be imprisoned for any period not exceeding thirty days,
and shall be disqualified from acting as assignee of any
estate while such default continues."

It is the duty of the assignee, having received an assign-
ment, to register a copy of it, within five days, in the office of
the Clerk of the County Court of the County in which the
assignor resides, and also, as soon as conveniently may be, to
publish at least once in the Ontario Gazette, ana in a news-
paper having a general circulation in the County in which the

ffl)^:y^<miH*^V>!^4

property assigned is situated a notice of such assignment not
less than twice."

As we have seen before, the omission to so record the
assignment does not invalidate it, as in the ease of a chattel
mortgage or bill of sale, but, under section 12, renders the
assignee liable to a penalty. The provisions of Section 12 are
as follows : —

"Sec. 12. S.S.I. No assignment made for the
general benefit of creditors under this Act shall be within
the operation of the Act respecting mortgages and sales of
personal property, but a notice of the assignment shall, as
soon as conveniently may be, be published at least once
in the Ontario Gazette, and in one newspaper at least
having a general circulation in the County in which the
property assigned is situate, not less than twlc^

S.S.2. A Counterpart or copy of every such assign-
ment shall also within tive days from the execution thereof,
be registered (together with an affidavit of a witness
thereto of the due execution of the assignment, or of the
due execution of the assignment of which the copy filed
purports to be a copy) in the office of the Clerk of the
County Court of the Counfy, or union of Counties,
where the assignor, if a resident in Ontario, resides at the
time of the execution thereof ; or, if he is not a resident,
tlien in the office of the Clerk of the County Court of
the County, or union of counties, where the personal
property so assigned is, or v/here the principal part thereof
(in case the same includes property in more Counties than
one) is at the time of the execution of the assignment,
and such Clerks shall file all such instruments presented
to them respectively, for that purpose, and shall endorse
thereon the time of receiving the same in their respective
offices, and the same shall be kept there for the inspection
of all persons interested therein. The said Clerks, re-
spectively, shall number and enter such assignments, and

■H

^.^■w>,fa^!^^m^flt^*i

be entitled to the same fees for services, in the same
manner, as if such assignments had been registered under
the Act respecting Mortgages and Sales of personal
property.

S.S.3. In provisional judicial districts and territorial
districts and in the temporary judicial district of Nipissing,
the counterpart or copy of the assignment shall be filed
in the same offices and within the same time, respectively,
as mortgages and other instruments are directed to be filed
in such districts, under the provisions of the Act respect-
ing Mortgages and Sales of personal property, and the
Clerk shall perform the same duties, and have the same
fees as Clerks acting under the preceding sub-section."

Under the above sub-section, the time in which the counter-
part or copy of the assignment should be registered is extended
to the time required by the Act respecting Mortgages and sales
of personal property for chattel Mortgages in provisional
judicial districts, that is to say, ten days ; and the places of
registration are respectively as follows ; Algoma, Clerk of the
District Court at Sault Ste. Marie, under R.S.O., 1887, Ca;. 125,
Sec. 21 ; Haliburton, Clerk of the Division Court at Minden,
under R.S.O., 1887, Cap. 6, Sec. 23; Manitoulin, Deputy
Clerk of Manitoulin, Gore Bay, 54 V., c. 21 ; Muskoka, C:lerk
of the Division Court at Bracebridge, R.S.O., 1887, Cap. 125,
Sec, 22 ; 51 v., cap. 13, Sec. 12 ; Nipissing, Clerk of Division
Court at North Bay, 51 V., Cap. 18 ; Parry Sound, Clerk of
Division Court at Parry Sound, R.S.O., 1887, Cap. 125, Sec.
22; 51 v.. Cap. 13, Sec. 12; Rainy River, Clerk of Division
Court at Rat Portage, R.S.O., 1887, Cap. 125, Sec. 21 ; Thunder
Bay, Clerk of District Court at Port Arthur, R.S.O., 1887, Cap.
125, Sec. 21.

The notice required by Section 12 to be inserted in . the
Gazette and local paper is a mere notice of the fact of an
assignment having been made, but it is usual for the assignee
to include in such notice a notice to the creditors to file proofs
of their claims with him before a certain date, and that after
that date he will proceed to distribute the estate without regard
to any claims of which he shall not then have had notice. A
good form of such notice is as follows :

■ t.<l7T'"-'*'1'10

le
ler
jal

ial
1^^

in the County

NOTICE TO CREDITORS.

In the rnattet* of

isiotiee is hereby given that
of the of

of carrying on business as

at the said of has made an

assignment under R.S.O., 1887, Cap. 124, and Amending Acts,
of all his estate, credits and effects, to
of the of for the

feneral benefit of creditors. A meeting of creditors will be
eld at the office of in the

of on the day

of 189 , at the hour of o'clock in the

noon, to receive a statement of affairs, to appoint inspectors,
and for the ordering of the affairs of the estate generally.
Creditors are requested to file their claims with the said Trustee,
with the proofs and particulars thereof required by the said
Acts, on or before the day of such meeting.

And notice is faitthei* given that after the day of
189 , the said trustee will proceed to distribute the
assets of the said debtor amongst the parties entitled thereto,
having regard only to the claims of which notice shall then
have been given, and that he will not be liable for the assets,
or any part thereof, so distributed to any person or persons
of whose claim he shall not then have had notice."

The object of the last clause of this notice is, to protect the
assignee frona liability to account for the estate to any person
of whose claim he was not advised at the time of distri^Dution.
This secures him the protection of the Act respecting Trustees
and Executors, R.S.O., 1887, Cap. 110, Sec. 36, which is as
follows :

" Where a trustee, or assignee, acting under the trusts of a
Deed or Assignment for the benefit of creditors generally, or a
particular class or classes of creditors, where the creditors are
not designated by name therein, or an executor or an adminis-
trator has given such, or the like notices, as in the opinion of
the Court in which such trustee, assignee, executor c adminis-
trator is sought to be charged, would have been given by the
High Court m an action for the execution of the trusts of such
deed or assignment, or an administration suit (^is the case may

•f \

--•-:-'<ar», AW,'j"l^*'J||lJM i W ' ' i '!i ||li |l§. ! ii^

be), for creditors and others, to send into such trustee, assignee,
executor or administrator, their claims against the person for
the benefit of the creditors of whom such deed or assignment is
made, or the estate of the testator or intestate (as the case may
be), the trustee, assignee, executor or administrator shall, at
tlie expiration of the time named in the said notices, or the last
of the said notices, for sending in such claims, be at liberty to
distribute the proceeds of the trust estate, or the assets of the
testator or intestate (as the case may be), or any ])art thereof,
amongst the parties entitled thereto, having regard only to the
claims of which the trustee, assignee, executor or administrator
had notice at the time of the distribution thereof or a ]mrt
thereof (as the case may be) but nothing in this Act contained
shall prejudice the riglu of any creditor or claimant to follow
llie proceeds of the tuist estate or assets (as the case may be),
or any ])art thereof, into the hands of the ncrson or persons who
may Have received the same respectively. '

This protection, however, will not extend to save the
assignee from liability for a claim of which he has notice, or is
aw;\rc, altliough it may not he formally [)roved. He should
r;ill upon the creditor to [)rove it. (Sje Carling Brewing &
M. thing C ). V. Black, O.K., 111.)

A creditor who sends in his claim after the payment of the
iirs:; dividend, but before the estate is wholly distributed, is
caUtled to be paid out of the balance, so far as it goes, as much
per cent, on his claim as has been paid to other creditors
before any further distribution is made to the creditors whose
claims have been received in due course ; and a creditor who
h:"^ delayed putting in his claim until the whole estate is dis-
trilnil6d, altiiou.fa he has no recourse as^ainst the assignee if

-II' ' • *" ■*

he has given the proper notices may yet call upon each of the
creditors who have been paid to contribute a pro rata amount
suffiaent to make up the share to which the said creditor is
entitled. Sjc Chamberlin V. Clark, 9 A.R., 273.

Section IP) ])rovides a penalty for both assignor and as-
signee in case of omission to give the pro])er notice, or record
tlie assignment in proper time, and is as follows : —

• "Sec. 13, (S.S.I). If the said notice is not published
in the regular number of the Ontario Gazette, and of such
.newspaper as aforesaid, which shall respectively be issued

k^Tm^^imam&Ml

first after five days from the execution of the assignment
by the assignor, or if the assignment is not registered as
aforesaid within five days f'om the execution thereof,
the assignor shall be liable to a penalty of $25 for each
and every day which shall pass after the issue of the number
of the newspaper in which the notice should have appear-
ed until the same shall have been published ; and a like
penalty for each and every day which shall pass after the
expiration of five days from the execution of the assign-
ment by the assignor until the same shall have been
registered.

(S.S.2). The assignee is to be subject to a like penalty
for each and every day which shall pass after the expiration
of five days from the delivery of the assignment to him, or
of five days after his assent thereto, the burden of proving
the time of such delivery or assent being upon the
assignee.

(S.S.3.) Such penalties may be recovered summarily
before a Judge of the High Court, or of the County
Court of the County in which the assignment ought to be
published or registered ; one-half of the penalty to go to
the party suing, and the other half for the benefit of the
estate of the assignor.

(S.S.4). In case of an assignment to the sheritT, he
shall not be liable for any of the penalties imposed in this
section, unless he has been paid or tendered the cost
of advertising and registering the assignment, nor shall he
be compelled to act under the assignment, unless his costs
in that behalf are paid or tendered to him.

Sec. 14. In case the assignment be not registered,
and notice thereof published, an application may be made
by any one interested in the assignment to a Judge of
the High Court, or of the County Court aforesaid, to
compel the publication and registration thereof ; and the

li-i

V" %'--.- ■t'W*'-'--

Judge shall make his order in that behalf, and with or
without costs, or upon the payment of costs by such
person as he may in his discretion direct to pay the same."

I'hc next duty of the assij^nce is to inform himself, as far as
possiljle, of the creditors, and to notif>^ them of the date of the
creditors' incetin;j^, as provided by the following section :

** Sec. 16. It shall be the duty of the assignee to
immediately inform himself, by reference to the debtor
and his records of account, of the names and residences
of the debtor's creditors, and within five days from the
date of assignment to convene a meeting of the creditors
tor the appointment of inspectors and the giving of
directions with reference to the disposal of the estate, by
mailing pre-paid and registered to every creditor known
to him, a circular calling a meeting of creditors, to be held
an his ofhce, or other convenient place to be named in the
notices, not later than twelve days after the mailing of
such notice, and by advertisement in the Ontario Gazette ;
and all other meetings to be held shall be called in like
manner."

Under Section 17 the assignee may be required to
call a special meeting, as provided in sub-section one.

(S.S.I). In case of a request in writing signed by a
majority of the creditors having claims duly proved of
$100 and upwards, computed according to the provisions
of Section 19 of this Act, it shall be the duty of the
assignee within two days after receiving such request, to
call a meeting of the creditors at a time not later than
twelve days after the assignee receives the request. In
case of default the assignee shall be liable to a penalty of
$25 for every day after the expiration of the time limited
for the calling of the meeting until the meeting is called.

(S.S.2). in case a sufficient number of creditors do
not attend the meeting mentioned in section 16 of this

l uM

Act, or fail to give directions witli reference to the dis-
posal of the estate, the Judge of the County Court may
give all necessary directions in that behalf."

'* Sec. 21. Upon the expiration of one month from
the first meeting of creditors, or as soon as may be after
the expiration of such period, and afterwards from time
to time at intervals of not more than three months, the
assignee shall prepare and keep, constantly accessible to
the creditors, accounts and statements of his doings as
such assignee, and of the position of the estate ; and iie
shall declare dividends of the estate whenever the amount
of money in his hands will justify a division thereof, and
also whenever he is required by the inspectors."

As a general rule, trustees are not obli£,red to prepare
copies of accounts for parties interested, but only to have their
accounts ready, and to afford all facilities for their inspection ;
though, where a creditor lives at a distance from where the
trust affairs are being carried on, it would be the duty of the
trustee to give all reasonable information by letter, and, if
requested, ]but at the expense of the creditor, even to prepare
and transmit accounts and statements. See Sanford V. Porter
16 A.R., on this point, and also on the creditors' right to tax
the bill of costs rendered by the assignee's solicitors ; although
the assignee is entitled, as appears from in re- Lamb, 17 C.P,,
173, to choose his own solicitor.

" Sec. 22. So soon as a dividend sheet is prepared,
notice thereof shall be given by letter posted to each
creditor, enclosing an abstract of receipts and disburse-
ments, shewing what interest has been received by him
for moneys in his hands, together with a copy of the
dividend sheet, noting thereon the claims objected to,
and stating whether any reservation has or has not been
made therefor ; and after the expiry of eight days from
the day of mailing such notice, abstract and dividend
sheet as aforesaid, dividends on all claims not objected
to within that period shall be paid.

Sec. 2). Tlie law of set-off shall apply to all claims
inaJe against the estate, and also to all actions instituted
by the 'assignee for the recovery of debts due to the
assignor, in the same manner and to the same extent as if
the assignor were plaintiff or defendant, as the case may
be, except in so far as any claim for set-off shall be affect-
ed by the provisions of this or any other Act respecting
frauds or fraudulent preferences."

'I'hc l:i\v of set-off would not permit a debt due by an
individu;d |)artner to l)e set-off a»(ainst a claim by a ]mrtnership
estate, for the debt must be ])ayable and owing to a person in
the same capacity ; so a debt owing to a person as trustee
C(ni!d not be set off against a debt owing by him in his private
capacity. vSce Graham W Toms, 25 G.R., 184, and Moody V.
Canadian liank of Commerce.

The assignee, when distributing the estate, will of course
do so pro rata, except as to certain claims known as privileged
or preferential claims, which, apart from the priority for costs
provided for by section " 9 " are chief! v as follows :

(1st.) Rent. R.S.O., 1887, Cap. 148, Sec. 28, (S.S.4.)

"In case of an assignment for the general benefit of
( ""ditors the ])refcrential lien of the landlord for rent is
restricted to the arrears of rent due during the period of one
year last ])revious to the execution of such assignment, and
irom thence so long as the assignee shall retain the premises
leased."

Under this section the landlord has not got a preferential
claim strictly so-called, as many persons suppose, but merely a
lien on the goods of the insolvent debtor, it there are any, so
that if the goods had been removed from the premises prior to
the execution of the assignment, the landlord would stand in no
better p isition than any other creditor. See Linton V. The
Montreal Motel Co., K) A.R., 837 ; and in re-McCraken, 4
A.R., 18^).

(2ndly.) Wages. R.S.O., 1887, Cap. 127, Sec. 1.

" Whenever an assignment is made of any real or personal
property for the general benefit of creditors, the assignee shall
pay in ])riority to the claims of the ordinary or general creditors
of the person making the same, the wages or salary of all per-
sons in the employment of such person at the time of the

n ^'**'

Tym

makin<^ of such assi^iu:"'cnt, or within one inonlli before the
makin.LC thereof, not cxceedini^ three month's wai^a^s or sahirv,
and such persons shall be entitled to r;'.rik as ordinary or
general creditors for the residue, if any, of their claims."'

All wages or salary are to come under diis section, whetlicr
the employment in respect of which the same shall be payal;le
be by the day, by the week, by the job or piece, or olhciwisc.

Section 5 makes special provision as to partnership and
individual debts, as follows :

" Sec. 5. If any assignor or assignors executing an
assignment under this Act for the general benefit of his or
their creditors, owes or owe debts, both individually and
as a member of a co-partnership, or as a member of two
different co-partnerships, the claims shall rank first upon
the estate by which the debts they represent were con-
tracted, and shall only rank upon the other after all the
creditors of that other have been paid in full/'

See Bank of Toronto V. Hall, 6 O.K.. ()44 ; McDonogh V.
Jefiferson, 16 A.R., 107, and Kenyon V. Hamilton.

But creditors of a partnership a member of whicli su!)se-
quently carries on the business alone are entitled to rank ecjually
with the creditorsof that member in the winding ui)of his estate.

It is the duty of the assignee to contest any claim which he
believes is being improperly or fraudulently preferred against
the estate ot his assignor, and provision is made by sub-section
5 of section 20 for such a case.

*' (S.S.5). At any time after the assignee receives
from any person claiming to be entitled to rank on the
estate, proof of his claim, notice of contestation of the
claim may be served by the assignee upon the claimant.
Within thirty days after the receipt of the notice, or such
further time as a Judge of the County Court of the
County in which the assignment is registered may on
application allow, an action shall b^ brou;;iht by the
claimant against the assignee to establish the claim, and a
copy of the writ in the action served on the assignee ;
and in default of such action being brought and writ

Sti^jiMi't^MKiiMf.'

served within tlu time aforesaid, the claim to rank on the
estate shall be forever barred.

(a) The not'ce by the assignee shall contain the
name and place of business of one of the solicitors of the
Supreme Court of Judicature for Ontario, upon whom
service of the writ may be made ; and service upon such
solicitor shall be deemed sufficient service of the writ/'

The folIo\vini( is a form of the notice of contestation
required as abov j :

••In the tnattct* of an Act respecting Assignments and
Preferences by Insolvent persons, being R.S.O., 1887, Cap. 124,
and In the matter of the Amending, Acts, and In the matter of
the estate of

You arc hereby notified, pursuant to the provisions of the
above Acts, and under the authority and direction of the
creditors and inspectors of this estate, that I dispute your ri^ht
to rank on the estate, of the above named Insolvent for
$ the amount of your claim filed with me, or

for any part thereof (or for $ being a part of your

claim hied with me.)

And you are hereby further notified that unless within thirty
days after the receipt by you of this notice, or within such
further time as may be allowed on application to the proper
Judge in that behalf, an action is brought against me to
establish your claim, and within the same time a copy of the
writ or process is served upon me, or my solicitor herem named,
your claim to rank upon the estate shall be forever barred.

And you are hereby farther notified, that service of any
writ or proc(^ss to enforce your said claim, may be made upon
my solicitor,

Dated at the day of

A.D., 180 ."

S2ction 20 requires all claims against an estate to be veri-
fied by affidavit and vouchers, and makes provision for the
barring of any claims which are not proved satisfactorily within
a reasonable time after notice of the assignment.

*' Sec. 20. (S.S.I). Every person claiming to be
entitled to rank on the estate assigned shall furnish to the

assignee particulars of his claim proved by affidavit and
such vouchers as the nature of the case admits of.

(S.S.2). In case a person claiming to be entitled to
rank on the estate assigned does not within a reasonable
time after receiving notice of the assignment and of the
name and address of the assignee, furnish to the assignee
satisfactory proofs of his claim as provided by this and
the preceding sections of this Act, the Judge of the
County Court of the County wherein the debtor at the
time of making the assignment resided, or carried on
business, may, upon a summary application by the assignee,
or by any other person interested in the debtor's estate
(of which application at least three days' notice shall be
^iven to the person alleged to have made default in
proving a claim as aforesaid), order that unless the claim
be proved to the satisfaction of the Judge within a time
to be limited by the order, the person so making default
shall no longer be deemed a creditor of the estate assign-
ed, and shall be wholly barred of any right to share in the
proceeds thereof ; and if the claim is not so proved within
the time so limited, or within such further time as the said
Judge may by subsequent order allow, the same shall be
wholly barred, and the assio:nee shall be at liberty to dis-
tribute the proceeds of the estate as if no such claim
existed, but without prejudice to the liability of the debtor
therefor.

(S.S.3). The preceding sub -section is not 'intended
to interfere with the protection afforded to assignees by
section 36 of the Act respecting Trustees and Executors,
and the Administrators of Estates/''

By section 7 it is prDvided as follows:

''Sec. 7. (S.S.I). Save as provided in the next
succeeding subsection, the assignee shall have an exclusive
right of suing for the rescission of agreements, deeds and

!i'

instruments or other transactions made or entered into in
fraud of creditors, or made or entered into in violation of
this Act.

For the cases in whicli a creditor is entitled to sue, see the
chapter on the rit^^hts of creditors.

An assij^nce may compromise any action which he has
br(ui:^dit, or adjust any claim, in j^^ood faith, and no creditor will
thereafter be j^ermittcd to assert the right which has been
settled by the assi.^-ncc.

The remuneration of the assignee is provided for as follows
in Section 11.

*' (S.S.I). The assignee shall receive such remuneration
as shall be voted to him by the creditors at any meeting
called for the purpose after the first dividend sheet has
been prepared, or by the inspectors, in case of the creditors
failing to provide therefor, subject to the review of the
County Court of the County in which the assignment is
regii>tered, or the Judge thereof, if complained of by the
assignee or any of the creditors.

(S.S.2). In case no remuneration is voted to the
assi,^nee by the creditors or the inspectors, the amount
shall be fixed by the said Judge.''

The assignee's fee is ^Lccne'\'illy about five per cent., that
being the renumeration of ordinary trustees, and it is to be
presumed that the Judge on being applied to to settle the
amount of the assignee's remuneration, would be governed by
that allowed an ordinary trustee.

Under Section 6 an assignee may be removed and
another appointed, as follows : —

" Sec. 6, (S.S. 1) — A majority in number and value of
the creditors who have proved claims to the amount of
$100 or upwards, may at their discretion substitute for
the sheritf or for an assignee under an assignment to which
S.S. 2 of Sec. 3 of this Act applies, a person residing in
the ^ County in which the debtor resided, or carried on
business at the time of the assignment. An assignee may

T^f*^

also be removed, and another assignee may be substituted,
or an additional assignee may be appointed by a Judge of
the High Court or of the County Court where the
assigment is registered.

(S.S. 2) — When a new assignee is appointed the
estate shall forthwith vest in him without a conveyance
or transfer. The new assignee may register an affidavit
of his appointment in the office in which the original
assignment was filed. Such affidavit may also be registered
under the Registry Act. The registration of the affidavit
under the Registry Act shall have the same etfect as the
registration of a conveyance."

A special case of unfitness for his position would require to
be made out in order to induce the Court to remove an assignee,
but a majority of the creditors may, as appears from the above
section, rem ive the assignee in their sole discretion withcuit any
cause assigned and appoint another in his place, in whom the
])roperty will, by the mere ai)p(Mntment, vest under the above
sections without any conveyance or transfer, but the assignee,
in order to avoid the risk of the former assignee dealing with
the {)roperty, must record the affidavit nrc vidcd for in S.S. 2,
as to personalty, with the County Court Clerk, and as to realty,
in the Registry Office.

It should, however, be noted that although tlie creditors
are unlimited as to their right to remove an assignee, yet they
can only a])point in his place some person residing in the
County in which the debtor resided or carried on business at
the time of the assignment ; whereas, if the assignee is removed
by the Court, on cause shown, tlic Court may in its discretion
appoint any person in the Province as trustee of the estate.

•27

CHAPTER 3.

"**«-. {

RIGHTS AND POWERS OF CREDITORS.

We have seen in the preceding chapter that creditors may
under section 6 of this Act change the assignee if they are dis-
satisfied with the person to whom the debtor has assigned his
estate. If however, the creditors have confidence in the person
to whom the assignment has been made, they will proceed to
file their claims with him as required by the notice to creditors,
and will see that they are duly verified by affidavit so as to
entitle them to vote at the creditors' meeting. They may
also, in case it is inconvenient to attend the meeting in person,
appoint a representative by proxy, in writing, under section 18,
' which provides as follows :—

'* Sec. 18. At any meeting of creditors the creditors
may vote in person, or by proxy auttiorized in writing,
but no creditor whose vote is disputed shall be entitled to
vote until he has filed with the assignee an affidavit in
proof of his claim stating the amount and nature thereof /'

It will be seen from the above that a Statutory Declaration
is not sufficient proof of claim, the Act requiring an Affidavit,
which may be in the following form :—

AFFIDAVIT OF CLAIM.

of the
in the County of

I,
of

[a] The above
named "Claimant,
or a partner in the
a'^ove named
(Claimant's firm or
the duly authorized
agent of the above
named Claimant."

fb] "No securi-
ty w hatever for the
said claim, or any
part thereof, or the
loll'jwing security,
that is to say, xxxx
which is of the
value of f."

In the ttiattei* oi an Act respecting Assign-
ments and Preferences by Insolvent personi--,
R.S.O., 1887, Cap. 124, and Amending Acts, and
In the Matter of of the

of
in the County of Debtor,

and of
of

Claimant,
of the

in the County of ,

make oath and say : —

(a)

1. I am

2. The above named debtor is justly and truly
indebted to the said claimant in the sum of S

3. The particulars of the said indebtedness are
set out in the Statement hereto annexed marked
"A."

(b)

4 The claimant holds

Sworn before me at the
of in the
of this

day of
A.D. 189 .

This Affiidavit should be sworn before a Notary Public, or

Commissioner authorized to take Affidavits, or before a Justice

of the Peace in Ontario. If taken before a Commissioner

outside of the Province of Ontario, he must be one authorized

•to take Affidavits for use in Ontario.

'■*^. t

Tlie foll()\vin<( is a sufficient form of Proxy

PROXY.

Vs'c, the above named Claimants, hereby authorize and
cmjxAvcr to represent us at ail meet-

in.i^.s of creditors of the estate of

and to vote and act for us at such meetings in respect to our
claim in tlie above affidavit set out, and in all respects to
represent us as if we were })resent and acting in the premises.

Dated at this day of

A.l). 18:) .

Signed in tiic ])rcscncc cf

Having duly ])roved his claim in this manner, the creditor,
or lii^; representative, will be entitled to vote, as provided in
the following Section, Xr. 19: —

" Sec. 19. (S.S.I). Subject to the provisions of
section 6, all questions dis:iissed at meetings of creditors
shall be decided by the majority of votes, and for such
purpose the votes of creditors shall be calculated as
follows : ■ '

For every claim of or over

$100, and not exceeding $ 200, 1 vote
200, " '' " 500, 2 votes

500, " •* *' 1,000, 3 votes

For every additional $1,000, or fraction thereof, 1 vote.

(S.S.2). No person shall be entitled to vote on a
claim acquired after the assignment unless the entire
claim is acquired, but this shall not apply to persons
acquiring notes, bills, or other securities upon which they
are liable.

(S.S.3 ). In case of a tie, the assignee, or if there are
two assignees, then the assignee appointed by thfe

itr-'»rf^-'*i'"-^' '■■■■

. ^- .j,.,^. ■-.-„-..,■--_:» ^^

creditors, or by the Judge if none lias been appointed by
the creditors, shall have a casting vote.

(S.S.4). Every creditor in his proof of claim shall
state whether he holds any security for his claim, or v.ny
part thereof ; and if such security" is on the estate of the
debtor, or on the estate of a third party for whom such
debtor is only secondarily liable, he shall put a specified
value thereon, and the assignee under the authority of ihe
creditors may either consent to the right of the creditor
to rank for the claim after deducting such valuation, or
he may require from the creditor an assignment of the
security at an advance of ten per cent upon the specified
value, to be paid out of the estate as soon as the assignee
has realized such security ; and in such case the difference
between the value at which the security is retained and ihe
amount of the gross claim of the creditor shall be the
amount for which he shall rank and vote in respect of the
estate/'

(S.S.5). If a creditor holds a claim based upon
negotiable instruments upon which the debtor is only
indirectly or secondarily liable, and which is not mature
or exigible, such creditor shall be considered to hold
security within the meaning of this section, and shall put
a value on the liability of the party primarily liable thereon
as being his security for the payment thereof ; but after
the maturity of such liability, and its non-payment, he
shall be entitled to amend and re-value his claim.

Formerly, a creditor, as long as he did not ultiniatcly
obtain more than one hundred cents on the dollar of his claim,
might retain his security and still rank on the estate of the
debtor for the whole debt. This was considered to work
unfairly to the other creditors, and, under the present section,
if the creditor desires to retain his security without valuing it,
he must forego his right to share in the estate. This provision
is not unfair, as the creditor is entitled to place his own value

: i

*^r

on his security, and tlie assij^^nee must pay ten per cent, over
that value if lie desires to acquire the security ; and it has been
held that the assij^nee must act without delay if he intends to
take over the securitv, as otherwise the creditor will be entitled
to consider himself the absolute purchaser of it, and that his, so
to speak, statutory offer to sell had been refused. See Bell V.
Ross, 11 A.R., 458. The security of a third person for the
debtor need not be valued, and such j^uarantor could not, and
cannot now, rank on the estate as a creditor until he has
actually paid the debt, so as to, in effect, substitute himseif for
the original creditor, and formerly such a guarantor, not having
made a payment, was not considered a creditor so as to debar
him from taking a Vcdid security from an insolvent debtor,
even though it were clearly apparent that he would ultimately
be called ui)on for a payment under his guarantee. This anomaly
has now been remedied by 55 Vic, Cap. 25.

The personal guarantee of an individual member of a firm
is in the same position as a stranger's, and therefore need not
be valued. See re- Jones, 2 A.R., 626.

It appears that if a creditor were to obtain from a debtor
customers' notes, payable, say, to bearer, or otherwise, so that
the debtor did not endorse them, it would be very doubtful,
reading sub-sections 4 and 5 together, whether the creditor
would be compelled to value them or not.

Sub-section 2 of Section 7 provides, that, " If at
any time a creditor desires to cause any proceeding
to be taken which, in his opinion, would be for the
benefit of the estate, and the trustee under the
authority of the creditors or inspectors refuses or
neglects to take such proceedings, after being duly
required so to do, the creditor shall have the right
to obtain an order of the Judge authorizing him to
take the proceedings in the name of the trustee, but
at his own expense and risk, upon such terms and
conditions as to indemnity to the assignee, as the
Judge may prescribe, and thereupon any benefit
derived from the proceedings shall belong exclusively
to the creditor instituting the same for his benefit,

^.r

■■'•"~™" -^™'-

'■ -■'■'-■--■ -^'-- -■' ^' '-■■

ii II II ■ ii I rt I' igi

USdOilHaMkil

but if, before such order is granted, the assignee shall
signify to the Judge his readiness to institute the
proceedings for the benefit of the creditors, the order
shall prescribe the time within which he shall do so,
and in that case the advantage derived from the
proceedings, if instituted within such time, shall
appertain to the estate."

This is a qualification of the first sub-section of section 7
which, as we saw in the preceding chapter, provided that the
assignee should have the sole and exclusive right of suing for
th*^ rescission of agreements, deeds and instruments or other
transactions, made or entered into in fraud of creditors or in
violation of the Act. If a creditor had begun proceedings
before the assignment to set aside a fraudulent transaction,
they would not abate by reason of the assignment, but the
assignee should be joinea as a party plaintiff, or else an order
should be obtained allowing the creditor to sue for his own
benefit. See Gage V. Douglas, 14 P.R., 126.

It should be remembered that no person can be joined as a
plaintiff in an action without his consent, and the assignee's
consent in writing should therefore be obtained.

Section 8 provides, that '* If the person to whom
any gift conveyance, assignment, transfer, delivery
or payment as in section 2 of this Act is mentioned,
has been made shall have sold or disposed of the
property which was the'subject of such gift, convey-
ance, assignment, transfer, delivery or payment, or
any part thereof, the moneys or other proceeds
realized therefor, may be seized or recovered in any
action under the last preceding section as fully and
efifectually as the property if still remaining in the
possession or control of such person could have been
seized or recovered."

See Harvey V* McNaughton, 10 A.R., 616, and Ross V.
Dunn, 16A.R., 552. Also see Masuret V. Stewart, 22 O.R..
290, in which money arising from a feigned sale which was
fraudulent and void against creditors was at the time of the

i 1

cornnicnccment of the action in the hands of a nominal pur-
chaser, and lie was ordered to pay it into Court for distribution
ainon^^st tliose |)roperly entitled.

Tiie words "fraudulent and void as af^^ainst creditors"
have been extended In' 55 \'ic., Cap 20, Sec. 2, so as to include
simple contract creditors suin<^ on behalf of themselves and
otlier creditors, and to the assii,mee under the Statute, who can
now attack securities which do not comply with the require-
ments of Chapter H7 of 57 Victr)ria.

Prior to this extension, such an action could only be
brouj^dit Ijy an execution creditor. It has been recently held
in Talhnan V. Smart, 15 O.R , p. (]<>!, that this extension would
not be sufficient to entitle an assit,mee to attack a chattel
mort<:^aj^a\ on the .i,^round that it had not been renewed in
accordance with the requirements of the Statute, and therefore
apparently only extends to enable a simple contract creditor
suinj]^ as above, or an assij^nee, to attack a security which has
not, in the first instance, complied with the requirements of
the Act.

CHAPTER 4.

PREFERENCES.

Advantages <^ained by one creditor over others by means
of collusive f)roceedings are sous^ht to be put an end to by
section 1 of the Statute under consideration. The following are
the words of the section : — "

"Sec. I. In case any person, being at the time

in insolvent circumstances, or unable to pay his debts

in full, or knowing himself to be on the eve of

insolvency, voluntarily or by collusion with a creditor

or creditors, gives a confession of judgment cognovit

actionem or warrent of attorney to confess judgment

with intent, in giving such confession, cognovit

actionem or warrant of attorney to confess judgment,

to defeat or delay his creditors wholly or in part, or

with intent thereby to give one or more of the

creditors of any such person a preference over his

other creditors, or over any one or more of such
creditors, every such confession, cognovit actionem
or warrent of attorney to confess judgment shall be
deemed and taken to be null and void as against the
creditors of the party giving the same, and shall be
invalid and ineffectual to support any judgment or
writ of execution."

For an instance of such an advanta^^e, see Herman V.
S^alc, 29 Grant 278.

Since the Creditor's' ReHef Act came into force but little
advanta^^e can be <(ained under ordinary circumstances by
confessions of jud^i^ment or other collusive proccedini^s, as
under. that Statute all execution creditors are to share equally.

Sec. 4 of the said Act, being Cap. Go R.S.O., 1887, is as
follows : —

*'Sec. 4. (S.S.I). In case a sheriff levies money upon an
execution against the property of a debtor, he shall forthwith
enter in a book to be kept in his office, open to public inspec-
tion without charge, a notice stating that such levy has been
made, and the amount thereof ; and the money shall thereafter
be distributed ratably, amongst all execution creditors and
other creditors whose writs, or certificates given under this Act,
were in the sheriff's hands at the time of the levy, or who shall
deliver their writs or certificates to the said sheriff within one
month from the entry of notice ; subject, however to the pro-
visions hereinafter contained as to the retention of dividends
in the case of contested claims, and to the payment of the
costs of the creditor under whose writ the amount was made.

(S.S.2). The notice shall state the day upon which it was
entered, and may be in form A given in the schedule hereto.

(S.S.3). Where proceedings are taken by the sheriff or
other officer for relief under any provisions relating to in-
terpleader, those creditors only who are parties thereto and
who agree to contribute pro rata (in proportion to the amount
of their executions or certificates) to the expense of contesting
any adverse claim, shall be entitled to share in any benefit
which may be derived from the contestation of such claim
so far as may be necessary to satisfy their executions or
certificates. The Court or Judge may direct that one creditor
shall have the carriage of the interpleader proceedings on

1 ;

bcli.ilf fif all creditors interested, and the costs thereof, as
between solicitor and ( lient shall be a first char<^^c upon the
nH)nevs or ^^oods which may be found by the proceeuingr to
be n|»i»licable upon the executions or certificates.

(S.S.I). In case the sheriff shall, subsequently to the
entry « f the notice, but within the month, levy a further amount
from the jirojicrty of a debtor, the same shall be dealt with as if
such amount had been levied prior to the entry of the notice,
but if after the month a further amount is levied a new notice
shall be entered ; and the distribution to be made of the
amount so levied and of the further amount levied within a
month of the entry of the last mentioned notice shall be
governed by the entry thereof in accordance with the fore<(oing
provisions of this section ; and so on from time to time."

It is far more likely now that creditors will endeavor to
obtain a preference by the means intended to be covered by
the followini,^ sections:

"Sec. 2. (S-S.i). Subject to the provi.sions of
the 3rd. section of this Act, every gift, conveyance,
assii^nment or transfer, delivery over or payment
of goods, chattels or effects, or of bills, bonds,
notes or securities, or of shares, dividends, premiums
or bonus in any bank, company or corporation, or of
any other property real Or personal made by a per-
son at a time when he is in insolvent circumstances,
or is unable to pay his debts in full, or knows that he
is on the eve of insolvency, with intent to defeat,
hinder, delay or prejudice his creditors, or any one
or more of them, shall as against the creditor or
creditors injured, delayed or prejudiced be utterly
void.

(S.S.2). Subject also to the said provisions of
the 3rd. Section of this Act, every gift, conveyance,
assignment or transfer, delivery over or payment of
goods, chattels or effects, or of bills, bonds, notes or
securities, or of shares, dividends, premiums or bonus
in any bank, company or corporation, or of any other

u
o
ir
h

iBH

property real or personal, made by a person at a
time when he is in insolvent circumstances, or is
unable to pay his debts in full, or knows that he is
on the eve of insolvency, to or for a creditor with
intent to give such creditor an unjust preference over
his other creditors, or over any one or more of them,
shall as against the creditor or creditors injured,
delayed prejudiced or postponed be utterly void.

(a) Subject to the provisions of Section 3
aforesaid, if such transaction with or for a
creditor has the effect of giving that creditor
a preference over the other creditors of the
debtor, or over any one or more of them, it
shall in or with respect to any action or
proceeding which within 60 days thereafter,
is brought, had or taken to impeach or set
aside such transaction be presumed to have
been made with the intent aforesaid, and to
be an unjust preference within the meaning
hereof, whether the same be made volun-
tarily or under pressure.

(b) Subject to the provisions of Section
3 aforesaid if such transaction with or for a
creditor has the effect of giving that creditor
a preference over the other creditors of the
debtor, or over any one or more of them, it
shall, if the debtor within 60 days after the
transaction makes an assignment for the
benefit of his creditors, be presumed to have
been made with the intent aforesaid, and to
be an unjust preference within the meaning
hereof, whether the same be made voluntarily
or under pressure."

T^^-mf

The first Statute to be referred to in relation to fraudulent
conveyances or jjreferences is, of course, 13 Eliz. (although now
practically superseded by our present, so to speak, broader,
and, more extensive Act). 13 E'iz. affected all property real
and [)ersonal which was subject to execution, and as the con-
stant tendency of the law has been to increase the classes of
property so exijL^iblc, the Statute of Elizabeth has consequently
cx;)anded also. Under this Statute it was held that if an
adequate valuable consideration was driven it mattered nothing
tliough all parties entered into the transaction for the very
purpose of dcfcatinij^ the creditors of the Grantor. See
Dalglcish V. .McCarthy, 19 G.R., 578.

Our lci,nshitui'c, probably induced by this decision, enacted
a Statute dcalinj.^ with fraudulent conveyances and preferences,
which was first consolidated m C.S. U.C., Cap. 26, then in
R.S.O., IS77, Cap. 18, and again, with certain amendments,
in Sections 1 6V 2 of R.S.O., 1887, Cap. 124. The section in
question as it appears in R.S.O., 1887, Cap. 124, is as follows :
V Every gift, conveyance, assignment or transfer or delivery
over or payment of goods, chattels or effects, or of bills, bonds,
notes, securities, or of shares, dividends, premiums or bonus in
any bank, company or corporation, or of any other property,
real or i)ersonal, made by a person at a time when he is m
insolvent circumstances, or is unable to pay his debts in full, or
knows that he is on the eve of insolvency, with intent to defeat,
dehiy or prejudice his creditors, or to give to any one or mure
of them a ])reference over his other creditors, or over any oiie
or more of them, or which has such effect, shall, as against
them, be utterly void. " Before this section was passed in 1885
it was necessary to show, in order to have a transaction voided
as a preference, not only that the debtor intended to prefer the
creditor to the detriment of hi? other creditors, but also that
the creditor so pieferred was, so to speak, a party to the fraud,
colluding with the debtor, and any presumption of such
collusion was held to be rebutted if the debtor acted in any way
under what was called pressure; e.g., if he made the transfer
in view jf the creditor's threat to take proceedings, or in view
oi an intimation that his purchases would not otherwise be
shipped, or, in fact, unless his act was absolutely voluntary, or
as the phrase was, ex mero motu.

As to this, see Meriden V. Lee, 2 O.K., 451 ; Davidson V.
Ross, 24 G.R., ()4; Brayley V. Ellis, 9 A.R,, 5G5 ; Long V.

}

Handcock, 12 A.R., 137

■ For a time after the passing of the Statute of 1885, which
was subsequently R.S.O., 124, it was held that it was only
necessary to show two things ; (1) That the debtor was in-
solvent when the transaction took place ; (2) That the creditor
by means of the transaction gained a preference ; and that the
transaction must thereupon be avoided.

But this was soon departed from, and in Johnson V. Hope,
17 A.R., 10, the Court of Appeal decided that the knowledge
by the creditor at the time of the transaction of the debtor's
insolvency must be proved. Then followed Gibbons V.
Macdonald, 18 A.R., 159, and Molson's Bank V. Halter, 18
S.C. R., 188, reinstating the doctrine of pressure, and Chief
Justice Armour in Davies V. Gillard, 21 O.K., 431, and 19 A.R.,
432, said, these cases seem in their logical result to have effect-
ually repealed R.S.O., 1887, Cap. 124, Sec. 2, except as to cases
which have never yet arisen, and he there declined to set aside
a mortgage on the sole ground, that it was given under
pressure, although all parties knew that the mortgagor was
msolvent and that the necessary effect of the mortgage would
be to prejudice and delay the creditors of the mortgagor, and
to give the mortgagee a preference over the other creditors.

Immediately after the case last referred to, 5^4 Vic, Cap.
20 was passed, amending Cap. 124. Sections 1 & 2 are given
above as amended by this Act. An interesting article on the
probable effect of this amendment will be found in 11 C.I.T, at
page 61. It seems that, apart from S.S. (a) and (b) a^-iecting
transactions within the 60 days limit, there are only two
changes requiring notice.

(1) The word " preference " is qualified by the word
"unjust," which instead of strengthening the clause would
appear almost to weaken it. (2) The section is made to extend
not only to transfers to a creditor, but to transfers made for a
creditor, meaning, probably, at the instance of a creditor with
the intent to give him a preference, and being directed against
such cases as Gibbons V. Wilson, 17 A.R.I., where a debtor,
at the instance of his creditor, mortgaged his stock to a third
person, the money being paid to the creditor. It is now, there-
fore, more than doubtful, in case of such a mortgage or sale, even
though the mortgage money, or purchase money, were handed
to the debtor, and then by him to the creditor, whether the
transaction could be supported as a mere payment of money if
the two payments are in fact one transaction, the creditor in

any degree keeping -thfe debtor under his contrx)! atlke^time.
The effect of sections (a) and ■(b) is probably only to shifit tkec
onns of proof as to the validity of the transaction in questioa i
onto the person seeking to support it ; the presumption which^i
these sections give rise to being rebuttable, or, at any rate^:,
being rebuttable in all cases except those sought to be suppprt-.-
ed on the ground of the doctnne of pressure solely. See
Lawson V. McGoech. 20 A.JI., .464. And it was held in thev:
above case, that a mortgage given within sixty days, and >
having the effect of preferrng the creditor, was not open t<y:
attack when it "was proved to oe made in pursuance of a prioi:.
agreement made more than sixty days before it was questioned,^
at which time the mi^rtgagce nad no notice. of the debtor's s
insolvency.

It should also be noted in considering these- sections, thatt
they do not apply to transactions having the effect of defeating;^,
delaying or prejudicing creditors, but only to those which have j
the effect of preferring a creditor, the words used being that*
it shall be ''presumed to be an unjust preference." To set':
aside a transaction by a person in insolvent circumstances, at:
any rate, after the sixty day limit is passed, it is necessary to.
show that the creditor had actual notice of the incolvency.
See Ashley V. Brown, 17 A.JI. In Hope V. Grant, 20, O.R., ,
623, it was held that a surety who had!^ not paid the debt for.
which he was surety was not a creditor within the meaning of
the Statute, and that a security ^iven to him could not be a .
preference within the Act. As this would have left an opening
for an ingenious method of avoiding the Statute, 55 Vic, Cap.
25 was passed to meet the case, and provides as follows : —

** Sec. 1. Where the word ** creditor " occurs in the ninth
line of sub-section (2) of section 2 of the Act, respecting Assign-
ments and Preferences by Insolvent Persons, as the said Act is .
amended by the Act passed in the 54 year of Her Majesty's
reign chaptered 20, and in the second and third lines of clause
(a) of said sub-section and in the second and third lines of
cbause (b) of said sub-section, the same shall be deemed to
include any surety and the endorser of any promissory note or
blii of exchange, who would upon payment by him of the debt,
promissory note, or bill of exchange, in respect of which such
suretyship was entered into or such endorsement given become .
a.' creditor of the person giving the preference within tae.
meaning of said sub-section 2.

In case of -a fitst mortgage bein^. set aside as a fraud upon
creditors, or as giving a preference to a creditor, the advantage
would accrue for the benefit of a second mortg^agee.

As to agreements to give security, see, in addition to
Lawson V. McGoech referred to above, Embury V. West, 16
A.R., 357, in which it was decided that where an advance is
made upon the faith of an absolute promise to give security, it
is to be considered as a present. actual advance on. the security
of the mortgage. In a mortgage to secure future advances,
the advance need not be a pecuniary one, but can be made in
goods or otherwise. See Golding V. Deeming, 15 O.R., 201.
In Smith V. Lawrence, 27 C.L.J., 116, it was held, that
the giving of a lease by the debtor to his creditor was not a
prcrerence, even though the debt was agreed to be repaid by
the rent ; and it appears that a debtor may properly make a
payment to a creditor for the very purpose of reviving a Statute
barred debt, re- Lane, 23 Q. B. D. , 74.

A bona fide sale or jmyment in the ordinary course of trade
is not a preference nor a payment of money to a creditor, nor a
bona fide transfer of any goods or other property made in con-
sideration of a present actual bora fide payment in money.
Provided that the property sold and the consideration for it
bear a reasonable relative value.

Where the debtor handed his creditor a third persons
cheque upon a Bank in the place where the creditor lived the
maker of the cheque having funds there to meet it Held a
payment of money. See Armstrong V. Hemstreet, 22 0.R., 336.

The Criminal Code makes provisions for taking criminal

proceedings
follows : —

against

a debtor in certain , cases ^ of frajid, as-

55-56 Vic. (Dom.), Cap. 29.

Sec. 368. Every one is guilty of an indictable offence andl
liable to a fine of eight hundred dollars and.t0;0ne year.'s.»
imprisonment who

(a) with intent to defraud his creditors^ or any of them*,

(1) makes, or causes to be made, any gift, convey, -
ance, assignment, sale, transfer or delivery^ of his pror
perty :

(2) removes, conceals or disposes, of any of his:.
property ; or

41^

*' (b) with the intent that any one shall so defraud his creditors,
'• or any one of them, receives any such property.
"Sec. 369. Every one is guilty of an indictable offence and
" liable to ten years' imprisonment who, with intent to defraud
•'his creditors or anv of them, destro>^s, alters, mutilates or
" falsifies any of his oooks, papers, writings or securities, or
"makes, or is privy to the making of, any false or fraudulent
•• entry in any book of account or other document."

It will be seen that both these sections extend to third
persons who are parties to fraudulent transactions either by
receiving the property or by conniving at or making false
entries in the books, etc. Section 368 is a re-enactment of the
former Statute, and the decision in Reg. V. Henry, 21 O.R.
113, that a creditor whose debt is not due might take advantage
of the former Statute, would apply to the present one. It is to
be noticed that section 369 increases the punishment for the
offences therein referred to to ten years ; a very considerable
increase, the former punishment having been only six months.

CHAPTER 5.

RECOVERY OF DEBTS.

In Ontario all proceedings for the recovery of debts can
with great facility be conducted in Toronto. In all cases in
the High Court and County Court, actions can b3 commenced
and carried on there, and execution can thereupon issue to any
Sheriff ih the Province. There are three courts having juris-
diction in such cases, the High Court, the County Court and the
Division Court. The jurisdiction of the Division Court is
limited to cases where the debt is not over $100, except where
it is ascertained by the signature of the defendant, as in the
case of an accepted draft or a promissory note, in which case
the jurisdiction would be increased to $200 ; the jurisdiction of
the County Court is similarly limited to $200 and $400 ; and
actions for larger demands must be brought in the High Court.
It will be found much more satisfactory to take proceedings in
the High Court where that can be done, as in that case the
plaintiff is enabled to recover from his debtor the amount of
his solicitor's charges as well as the mere disbursements. In
the Division Court the jurisdiction is to some extent limited to

the residence of 'the defendent, but if the claim be over 8100
and payable by, the contract of the parties at a particular place
action may be brought in the court holden for the Division in
which the place of payment is situated, and the defendant can-
not then have it removed to his place of residence or to any
other Court without giving notice of his intention to object to
the jurisdiction, and shewing a bona fide defence to the action,
within eight days. It should be noted that in case an assignee
disputes a creditor's claim to be entitled to recover on an
estate, the action for a declaration of the right to rank must be
brought in the High Court, as it is an action for equitable
relief. See Whidden V. Jackson, 18 A. R., 439.

In very few cases where the claim is a mere money demand
is it found necessary to go down to trial, provided the writ of
summons issued be properly endorsed, as the practice gives
great facility for obtaming speedy judgment in case of dispute
on serving notice of a motion for that purpose and proving the
claim by affidavits ; and in case the deiendant files an affidavit
contradicting that of the plaintiff, the motion may be enlarged
for the purpose of cross-examining him upon his affidavit, and
the plamtiff may then s^bsequehtly move for judgment upon
the admissions obtained on such cross-examination.

When judgment is pbtai'fted,- it may be enforced by issuing
execution against the goods and lands of the judgment debtor,
and, if thought advisable,, the creditor may examine the judg-
ment debtor upon oath as to the means which he had at the time
of contracting the debt, as to his subsequent disposition of
them, and as to what means he now has to enable him to pay
the same. Since the recent Statute relating to executions, by
which it is provided that they shall remain in force for three
years without the expense of renewing them, it is often satis-
factory, in view of the small expense of obtaining judgment, to
take judgment for the purpose of issuing the execution, and
keep it in the Sheriff's hands, so that in case it is at any sub-
sequent time discovered that the defendant is possessed of
property which might not have been known to the judgment
creaitor at the time he obtained his judgment, it may be
seized without delay. It often happens that within a few
years after a judgment has been obtained the judgment debtor
will be found to have gone into business, thinking that his
creditors have abandoned all intention of proceeding further
against him, and the creditor who then has an execution can
make his debt.

In case the creditor's claim amounts to 8100 or more, and
. the debtor can be shewn to be abot^ to leave the province
with intent to defraud his creditors,- he. .may be-arrestedasw4m
absconding debtor.