U.D.I. (H.K.) Ltd v. Fantana Ltd

Case No.HCCW 19/1976

Court

High Court CFI

Date—

Judge—

Case Document

100%Judiciary

HCCW000019/1976

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

COMPANIES WINDING UP NO. 19 OF 1976

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BETWEEN
	U.D.I. (H.K.) LIMITED	Applicant
	and
	FANTANA LIMITED	Respondent

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Coram: Li, J. (in Court as Chambers)

Date of Judgment : 3rd May, 1978 at 12:15 p.m.

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JUDGMENT

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1. This is an application by the U.D.I. (H.K.) Limited (hereinafter referred to as the applicant) for an Order that the jewellery set out in a list exhibited as AD-8 of Alexander DOMER's affidavit dated the 13th of January, 1978 and now in the hands of the liquidator of the FANTANA LIMITED to be declared the property of the applicant.

2. The FANTANA LIMITED. which I shall refer to as THE FANTANA, is a limited company in jewellery business practically wholly owned by the late SOLOMONIK. On the 2nd of April, 1975 an agreement was signed between the applicant and THE FANTANA exhibited in AD-1 of Mr. DOMER's affidavit. It reads as follows:

The parties agree that the Working Capital that will be required for the jewellery business shall be up to US$400,000 (Four Hundred Thousand US Dollars) This Working Capital will be invested by the parties as follows:

	(a)	UDI will provide US$280,000(Two Hundred & Eighty Thousand U.S.
	(b)	FANTANA will provide US$280,000 (One Hundred & Twenty Thousand US LOLLLARS).

	2.	FAMTAMA will provide its share in the Working Capital, as stipulated in Paragraph I above, by jewellery which FANTANA already has in its stock estimated according to their invoice not value plus ten percent (10%) for covering all overhead expenses, commission, insurance, etc.
	3.	FANTANA hereby declares and confirms that it has in its stool, Jewellery with value of US$239, 606. 11 (Two Hundred and Thirty-Nine Thousand, Six Hundred and Six U.S. Dollars and Eleven Cents) and it was represented accordingly in the Stock Book and Financial Statements as at 31st march, 1975.
	4.	Jewellery from the stock of FANTANA equivalent to the value of US$120,000 (One Hundred & Twenty Thousand U.S. Dollars) shall be deemed to be FANTANA'S share in the investment, UDI shall pay FANTANA the amount of US$119,606.11 (One Hundred and Nineteen Thousand, Six Hundred and Six U.S. Dollars and Eleven Cents) for the balance on the Jewellery in FANTANA's stock and for UDI's share in the investment, The balance of US$160,393,89 (One Hundred & Sixty Thounsand Three Hundred and Ninety-Three U.S. Dollars and Eighty- Nine Cents) shall be invested by UDK whenever required to pay for new Jewellery purchased and against documents arriving at a bank in Hong Kong.

5.	(a)	Upon payment by UDI of its share of investment, the Jewellery will be considered to be in joint ownership of UDI and FANTANA.
	(b)	The stock of Jewellery shall be covered by separate insurance policy covering all risks including burglary inside and outside of FANTANA's office, as well as other losses during the sales. The beneficiaries under this policy will be FANTANA and UDI.
6.	(a)	FANTANA shall bear full responsibility for the actual purchasing of the Jewellery in Italy and selling in Hong Kong. FANTANA shall keep separate books for stock and for invoices of the Jewellery business.
	(b)	Every sale invoice for the Jewellery shall bear consecutive numbers, and be signed by an authorized person of FANTANA with a copy at UDI's disposal.
	(c)	UDI shall have the right to check, from time to time, upon its request, the remaining stock, operations, sales, books, etc.
	(d)	A separate account for the Jewellery business will be kept by FANTANA.
7.	(a)	For the financial assistance in FANTANA's operation of Jewellery, FANTANA shall pay to UDI a commission of ten percent (10%) on all gross turnover of the Jewellery operation.
	(b)	The payment of the commission shall be made every three (3) months calculated and based on the results of the sales during same period according to the books showing the gross turnover. Payment should be effected in cash within seven (7) days as of termination of said three (3) months.

	8.	In order to secure and guarantee the investment and the commission due to UDI, FANTANA LIMITED and Mr. B. SOLOMONIK shall issue and sign a trust confirmation for all the money invested by UDI, and as additional guarantee, Mr. SOLOMONIK shall issue his personal cheque drawn on UNION BANK OF SWITZERLAND, GENEVA, for the sum of US$280.000 (Two Hunderd & Eighty Thousand U.S. Dollars) due on 30th April.1976.
	9.	This Agreement is concluded for a minimum period of one year. After nine (9) months as of the date of signature of this Agreement, it can be annulled by each party with three (3) months' advance notice, by one party informing the other party of its decision to bring this Agreement to an end.
		Upon receiving or giving such notice, as the case may be, FANTANA shall repay to UDI all its investment and the commission due. Such repayment should be finalised during such three (3) months' period."

It was signed by three parties viz: the applicant, THE FANTANA and SOLOMONIK.

3. Mr. SOLOMONIK died in March, 1976. As it happened, The FANTANA's business failed. There was a petition to wind up The FANTANA on the 9th of April, 1976. On the 27th of April, 1976 the official receiver was appointed the provisional liquidator of The FANTANA, on the 11th of May, 1976 an Order for THE FANTANA to be compulsorily wound up and the official receiver was appointed the liquidator. In his capacity as liquidator, the official receiver quite properly started to take in all the assets of The FANTANA, amongst which were certain items of Jewellery listed in AD-8 of Mr. DOMER's affidavit.

4. At this stage perhaps I should add that in pursuance of the bargain enumerated in the Agreement in AD-1, the applicant paid The FANTANA two cheques exhibited in AD-2 and AD-3 in compliance with clause 4 of the Agreement, These two cheques represent the sums which come to a total of approximately an equivalent of US$119,606.11 (One Hundred Nineteen Thousand, Six Hundred and Six U.S. Dollars and Eleven Cents).

5. After the execution of the document on the 2nd of April Mr, DOMER of the applicant checked with Mr. SOLOMONIK the items of Jewellery listed in what is called a trust receipt. The value of such Jewellery amounted to US$124,709.17 (One Hundred Twenty Four Thousand, Seven Hundred and Nine U.S. dollars and Seventeen Cents). This trust receipt was prepared and signed on the 1st of April, 1975 which was somewhat in advance of the checking and the payment of the cheques. The trust receipt for these items is exhibited in AD-4 of Mr. DOMER's affidavit. It is in a form addressed to the applicant dated the 1st of April, 1975 and it reads:

"	Dear Sir,
	In consideration or your handing over to us the goods specified in the schedule hereto and/or documents of title relative thereto which are pledged to you for facilities and/or advances: -

	(1)	We will hold such documents and all goods represented by the same as Trustees for you (without thereby incurring any liability on your behalf) for the purposed only of landing, storing, manufacturing, processing, selling and/or delivering the said goods to bona fide buyers and pay to you immediately upon receipt thereof the proceeds of sale of the said goods and every part thereof without any deduction whatsoever.
	(2)	You shall be at liberty to demand and receive from any person or persons liable to pay the same, the purchase money for the said goods and give valid receipts therefor without prior reference to us.
	(3)	Until the said goods are sold, all property therein and in the said documents shall remain vested in you and the pledge thereof shall remain fully effective.
	(4)	Prior to the sale of the said goods, we will re-deliver the same to you or the part for the time being unsold together with the said documents of title on demand, or alternatively place such goods in storage in such manner as you shall direct.
	(5)	We will keep the said goods covered by insurance with a reputable insurance company to the full insurable value thereof against fire and marine risks where applicable and hold the insurance policies and cover notes on your behalf as Trustee and deliver the same to you duly endorsed with your interest therein at any time on demand.
	(6)	In the event of any claim arising under such insurance forthwith we will give you notice thereof and pay to you forthwith on receipt thereof the full amount of any such insurance claim. Notwithstanding the foregoing, you shall be at liberty if you see fit to do so, to make any such claim in your own name against the insurers and to receive payment direct from them and we will sign all documents necessary for such purpose.
	(7)	You or your representative (s) shall be at liberty at any time to enter in any manner any place in our possession, occupation or control in which you believe the said goods may be and inspect and/or take samples thereof and/or give directions as to place and mode of storage and /or remove and/or resume possession of the same or any part thereof or otherwise exercise your rights as pledgees thereof by taking such measures as you may consider expedient, for the protection of your interests therein."

6. From time to time, the applicant advanced money to The FANTANA whenever the latter ordered Jewellery from Italy on delivery against payment terms. The procedure was that the exporter in Italy would send the invoices and the list of goods to the banker. Based on this invoice the banker advised The FANTANA. SOLOMONIK of The FANTANA would approach the applicant for advancement of money. A sum of money would be advanced to The FANTANA to the value of the goods as stated in the invoice in return for a trust receipt to be executed by The FANTANA. That is a procedure that had been meticulously followed in every transaction of such import, The FANTANA then would pay the bank the value of the goods as stated in the invoice and the bank would hand over the document of title to The FANTANA. The document of title is a misnomer. As I understand the facts of the case the banker would only give the FANTANA the Airway Bill together with other documents. The Jewellery would be consigned invariably to The FANTANA in any way upon payment. The FANTANA would take delivery and keep the goods in their possession. In the meanwhile, a trust receipt had already been given to the applicant.

7. There is an agreed list of Jewellery collected and purchased in this way and they were all identifiable and serially marked. Part of such Jewellery, were found now in the hands of the liquidator of The FANTANA and the liquidator is claiming that as part of The FANTANA's assets. The applicant, however, claims these identifiable items of Jewellery so listed not only in the trust receipts but also in AD-8. I should mention there was a schedule following the trust receipt in AD-4 identifying every item of the Jewellery.

8. The applicant claims that these Jewellery are their properly and identifiable property. Hence this application. These facts are not seriously disputed except for one point to which I shall mention. The plaintiff relies practically entirely on the trust receipts. It is the applicant's case that these trust receipts are valid without registration because they are outside the meaning the term "Bills of Sale" as governed by the Bills of Sale Ordinance.

9. The liquidator however, attacked this application on three points. I shall deal with them one by one. The first point is that relying on Mr. DOMER's affidavit, there is in fact a partnership business between the applicant and The FANTANA. In paragraph 3 of Mr. DOMER's short affidavit dated the 25th of April, 1978 he said that:

"I am a member of the committee of inspection of FANTANA and I have repeatedly made known in meetings with various receivers that U.D.I.(H.K.)'s involvement with FANTANA is registered to importation of Italian jewellery for sale in the local market."

10. The liquidator also relies on the terminology in the Agreement in AD-1 By referring to the words like "investment, "commission", and in clause 6 of the Agreement in AD-1 which gives a right to check the stocks, the invoices, sales and operations and for the account books to be kept separately. It is also contended that by this Agreement, the applicant was allowed to share the profits and loss of The FANTANA and that clause 5 reads:

"Upon payment by UDI of its share of investment the jewellery will be considered to be in joint ownership."

Such are the forms of the relationship between the applicant and The FANTANA.

11. It is in this context that a dictum by Lord Halsbury in the case of Adam v. Newbigging, 1888, 13 Appeal Cases at page 315, Lord Halsbury has been cited to support the existence of a partnership. It states:

"If a partnership in fact exists, a community of interest in the adventure being carried on in fact, no concealment of name, no verbal equivalent for the ordinary phrases of profit or loss, no indirect expedient for enforcing control over the adventure will prevent the substance and reality of the transaction being adjudged to be a partnership; and I think I should add, as applicable to this case, that the separation of different stipulations of one arrangement into different deeds will not alter the real arrangement, whatever in fact that arrangement is proved to be."

Adopting this dictum as I understand it in the less graceful language as that used by the learned and noble Lord Chancellor, I say that one invariably, in the construction of any documents would look at the substance of the transaction rather than to the form. Having considered the Agreement at AD-1, I am of the opinion that it is in substance an agreement to advance money albeit in very stringent terms.

12. The applicant, under clause 7(a), gets ten percent (10%) of the gross turnover of The FANTANA's sales. Reference to the term "gross turnover" does not mean a profit. In other words, the applicant would take a ten percent (10%) commission anyway even if The FANTANA sold the items at a loss. Clause 9 of the Agreement entitled the applicant to the return of the whole of his investment. This can be envisaged when The FANTANA sold the lot of Jewellery, the existing stock of The FANTANA, including the stock that was under a trust receipt in AD-4 given to the applicant. The FANTANA, at the end of the period, was still obliged to return the whole of the capital, the whole investment, at the end of the year, to the applicant, The applicant was not really sharing the profit. Nor was the applicant taking any risk whatsoever. The applicant was assured by the end of the year the return of his capital. Finally there was this trust receipt for the protection of the applicant in that the goods were declared to be held in trust for the applicant. The climax was to be found in clause 8 of the Agreement where the later Mr. SOLOMONIK signed a personal guarantee to guarantee the due performance of the Agreement, by the FANTANA, namely, the payment of the ten percent (10%) commission on the gross turnover and the return of the capital by the end of the contract. Looking at the substance of the transaction, I am of the opinion that there was no partnership between the applicant and The FANTANA.

13. I now come to the trust receipts. It is alleged that the trust receipts are in fact bills of sale of the existing stock as well as the future implements. It is contended that they are invalid against the other creditors or they are void or at least ineffective as against the liquidator in the circumstances.

14. Let us then look at the definition of the term "Bill of Sale". Section 2 of the Bills of Sale Ordinance provides that:

"	In this Ordinance unless the context otherwise requires - 'bill of sale' includes bills of the sale, assignments, transfers, declarations of trust without transfer, inventories of goods with receipt thereto attached, or receipts for purchase moneys of goods and other assurances of personal chattels and also powers of attorney, authorities, or licences to take possession of personal chattels as security for any debt, and also any agreement, whether intended or not to be followed by the execution of any other instrument, by which a right in equity to any personal chattels, or to any charge or security thereon, is conferred, but does not include the following documents; that is to say, assignments for the benefit of the creditors of the person making or giving the same, marriage settlements, transfers or assignments of any ship or vessel or any share thereof, transfers of goods in the ordinary course of business of any trade or calling, bills of sale of goods in foreign parts or at sea, bills of lading, India Warrants, warehouse keepers' certificates, warrants or orders for the delivery of goods or any other documents used in the ordinary course of business as proof of the possession or control of goods, or authorizing or purporting to authorize, either by indorsement or by delivery, the possessor of such document to transfer or receive goods thereby represented:
	Provided that an instrument charging or creating any security on or declaring trusts or imported goods given or executed at any time prior to their deposit in a warehouse, godown, factory or store, or to their being reshipped for export, or delivered to a purchaser not being the person giving or executing such instrument, shall not be deemed a bill of sale."

And then it goes on to say:

"but nothing in this paragraph shall affect the operation of section 43 of the Bankruptcy Ordinance, in respect of any goods comprised in any such instrument as is hereinbefore described, if such goods would but for this paragraph be goods within the meaning of that section."

15. No argument has been advanced on the provision of section 43 of the Bankruptcy Ordinance. I will take it that the definition would rest in the words "shall not be deemed a bill of sale". For the argument on the definition of this section if the Ordinance, learned counsel for the liquidator suggests that there must be different treatment to the imported goods which were imported to Hong Kong subsequent to the Agreement having been executed on the 2nd of April 1975. His argument is that as far as the proviso to the section is concerned, the trust receipts can only be exempted and deemed not to be bills of sale if and when the trust receipts were executed before the Jewellery were deposited in a warehouse. He refers to the affidavit of Mr. DOMER in paragraph 8 and the affidavit dated the 13th of April 1978. Paragraph 8(b) and 8(c) of Mr. DOMER's affidavit reads that:

	"	In some cases, before the jewellery arrived in Hong Kong, the Italian exporter would send to a local bank an invoice (which was copied off to FANTANA) covering the purchase together with instructions to the said bank to present various documents of title e.g. air-way bill which 'will follow by next mail' to FANTANA for payments, Upon receipt of such invoices, Mr. SOLOMONIK would approach me. I would write him a cheque on U.D.I. Hong Kong's account for the full amount of invoice. In exchange of UDI's cheque, Mr. SOLOMONIK would hand me the invoice which he received together with a trust receipt covering the shipment due to arrive in Hong Kong. U.D.I. Hong Kong's cheque would then be paid to a FANTANA's account and upon arrival of the jewellery in Hong Kong the documents of title would be handed to the FANTANA by the bank who will be paid by FANTANA.
	(c)	In other cases the Italian exporter would send the invoice together with other documents to the local bank. The local bank would send the invoice to FANTANA and thereafter a similar procedure as outlined in sub-paragraph (b) above would follow. There is therefore a trust receipt executed by FANTANA in relation to each specific consignment of imported jewellery and such receipts were executed by FANTANA prior to the deposit of such consignment of imported jewellery and such receipts were executed by FANTANA prior to the deposit of such consignments in its store or warehouse."

16. It is contended that there is no evidence when the trust receipts were executed before the arrival of the goods or before they were warehouse anywhere. The only evidence is that the trust receipts were executed prior to the goods being deposited into The FANTANA's warehouse or store. That has been admitted and not in dispute. On that score, Mr. DOWNEY invites me to hear oral evidence as to the practice at the Airport. I find that this is a fact which if necessary, should have been dealt with by affidavit. It is too late at this stage for me to hear fresh evidence. Therefore I rule that I shall receive no real evidence on this point. For this reason I accept the evidence that the trust receipts were executed before the goods were in the warehouse.

17. The second ground of attack by the liquidator is that the trust receipts were not a true reflection of the goods being pledged at all. As far as the existing stocks are concerned, the goods had never been pledged to the applicant. Nor had the applicant physically handled the goods and returned them to The FANTANA. For this reason, the trust receipts are not really a true reflection of the facts. As far as the imported goods are concerned, there is no evidence that the goods had been deposited to the warehouse after the trust receipt had been executed.

18. As to the first point, I do not find authority from the proposition that in order for the trust receipts to be exempted from the provisions of the Bills of Ordinance there must be physical handling of the goods, that it must be delivered by the pledgor to the pledgee and returned y the pledgee to the pledgor.

19. As I understand the argument correctly, Mr. Wong was relying entirely on the fact that the trust receipts are just a record of a charge having been created in the ordinary course of business and that they are documents in the ordinary course of business. I will repeat certain portions of section 2 of the Bills of Sale Ordinance which exclude certain documents. They exclude "documents used in ordinary course of business as proof of possession or control of goods or authorising either by indorsement or by delivery they possessor of such documents to transfer or receive goods thereby represented."

20. The second proviso again refers to "instrument charging or creating any security on or declaring trusts of imported goods given or executed at any time prior to their deposit in a warehouse". As to the contention that the imported goods were deposited in a warehouse before the execution of the trust receipt, I hold that as a matter of fact, the trust receipt, in all probability, were executed at he time when the applicant paid the FANTANA the cheque and before the arrival of the goods. As I understand paragraph 8 of Mr. DOMER's affidavit, the invoices would be sent at least a week ahead of the goods and the applicant would have given The FANTANA a cheque to pay the bank and to take delivery of the goods when it arrived. Even if the goods were deposited in the warehouse when the trust receipt were executed. It falls in my opinion within the main provision of section 2 in that they were documents used in the ordinary course of business as proof of possession or control of the goods. Clause 4 of the trust receipts reads:

"The goods were held on trust for the applicant and the applicant could call for it, dispose of it or get the proceeds of sale if they were sold at any time on demand."

21. Much reliance was placed on the case of re David Allester Limited by the applicant. But I do not feel that is a typical example. In the case of David Allester Limited, the question was that the bills of lading having been handed to the banker was equivalent to goods having been pledged with the banker. When the banker returned the bill of lading to the borrower, the trader, in exchange for a letter or trust it was held that the handing over of the bill of lading was the same as returning the goods to the borrower for a letter of trust.

22. The judgment in that case, it referred to the case of re Hamilton Young & Co. which is relied upon by the present applicant as well. In the case of David Allester Limited, Mr. Justice Astbury said that:

"	In my judgment these letters of trust do not fall within the bills of sale definition at all. The pledge rights of the bank were complete on the deposit of the bills of lading and other documents of title. These letters of trust are mere records of trust authorities given by the bank and accepted by the company stating the terms on which the pledgors were authorized to realise the goods on the pledgee's behalf. The bank's pledge and its rights as pledgee do not arise under these documents at all, but under the original pledge: see Ex parte Hubbard, The bank as pledgee had a right to realize the goods in question from time to time, and it was more convenient to them as is common practice throughout the country, to allow the realization to be made by experts, in this case by the pledgors. They were clearly entitled to do this by handing over the bills of lading and other documents of title for realization on their behalf without in any way affecting their pledge rights: see North Western Bank v. Poynter.
	If I am right about this it is unnecessary to consider the exception in the Bills of Sale Act but if it were necessary to deal with it, it seems to me that in re Hamilton Young & Co is an authority for saying that these letters of trust are documents used in the ordinary course of business as proof of the possession or control of the goods in question."

This dictum is directly on point.

23. I shall now refer to re Hamilton Young reported in 1905, 2 King's Bench Division, 772 where at page 784 Lord Justice Vaughan Williams said as follows:

"The result of the practice detailed seems to be that, in respect of the matter and preparation and shipment of the goods, the management and direction of these goods, for the purposes of bleaching, dyeing and shipping until the bills of lading were handed over, rested entirely with Hamilton Young & Co. and that no property, other than by way of lien or charge, would pass to the bank until the bills of lading were handed over, but that the bank had in equity a right to an injunction restraining Hamilton Young & Co. from doing anything inconsistent with their holding the goods on account of the bank and under lien to the bank. The bank had also such rights as the possession of the bleachers' receipts might give them, but there is nothing in the special case to show that the bleachers would have given up the goods to the bank on the production of the receipts."

24. The circumstances of that was a trader borrowed money from a bank and never physically handed over the goods to the bank. The trader would have to have the goods bleached, dyed and shipped to the East. As far as the bank was concerned there was never physically handling the goods at all. The document of title to the goods were never given to the bank. What was given to the bank was a letter of lien with a list of the goods. The letter reads:

"We beg to advise having drawn a cheque on you for L____, which amount please place to the debit of our loan account as a loan on the security of goods in course of preparation for shipment to the East. As security for this advance we hold on your account and under lien to you the undermentioned goods in the hands of (here followed list of goods and names of bleachers) as per their receipt enclosed. These goods when ready will be shipped to Calcutta, and the bills of lading duly indorsed will be handed to you, and we then undertake to repay the above advance ......"

25. Thus the facts in the Hamilton Young case, are practically on all four. The so called pledgor, the borrower of the money, had the goods in his possession, delivered the goods to a third party to be processed but, in lieu of delivering the goods to the pledgee or the lender, gave the pledgee a letter of lien. The language of the letter was such as to place the lender in control and in possession of the goods. The lender would have a right to control the goods. In other words, the goods were held in trust for the lender.

26. For this reason, I am of the opinion that the applicant is entitled to rely on the trust receipts and the trust receipts are not bills of sale within the meaning of the Bills of Sale Ordinance. As such The FANTANA, at all material times after the execution of the trust receipts, were holding the goods in trust for the applicant.

27. Having decided on this point in favour of the applicant, it is not necessary for me to indulge in deciding whether there was a resulting trust as advanced by learned counsel for the applicant. If it is necessary for me to do so, I would hold that, having regard to the substance of the transaction, there was no question of any resulting trust.

28. There is a third argument raised by learned counsel for the liquidator. It is that the transaction is one falling within sub-section 4(c) of Section 4 of the Partnership Ordinance in that the applicant is in fact one advancing money by way of a loan to a person engaged or about to be engaged in any business on the contract and that the lender shall receive a rate of interest varying with the profits of the borrower. He says that the lender should become a deferred creditor by virtue of the wording in section 5 of the Partnership Ordinance.

29. I have already held that the transaction was a loan which would enable the applicant to receive a ten percent (10%) commission of the gross turnover. There need not be the profit made by the borrower. As such it is not within the meaning of an advance of money of within the meaning of Section 4 of the Partnership Ordinance. However, counsel cites the case of Edward Sheil reported in 1877 saying that :

"As a result of the change of language -difference in language between the Partnership Act and our Partnership Ordinance that if the arrangement can fall within paragraph 4 of sub-paragraph C of section 4 of Partnership Ordinance then the applicant should be a deferred creditor."

The wording of the two sections are this in sub-section 5 of the Partnership Act in refers that :

"In the event of any such trader as aforesaid being adjudged a bankrupt, ..... the lender of any such loan as aforesaid shall not be entitled to recover any portion of his principal, or of the profits or interest payable in respect of such loan ..... until the claims of the other creditors of the said trader for valuable consideration in money or money's worth have been satisfied."

Our Section 5 of the Partnership Ordinance reads that :

"In the event of any person to whom money has been advanced by way of loan upon such a contract as is mentioned in section 4, or of any buyer of a goodwill in consideration of a share of the profits of the business, being adjudged a bankrupt, entering into an arrangement to pay his creditors less than twenty shillings in the pound, or dying in insolvent circumstances, the lender of the loan shall not be entitled to recover anything in respect of his loan."

30. In short, Mr. DOWNEY's point is that as the Jewellery were something in respect of this loan, the applicant was not entitled to recover anything unless and until the other creditors had been fully paid. With due respect, I am not able to come to this conclusion. In my opinion that even if the relations were the same, they are well covered and well illustrated by the dictum in the judgment of the learned Master of the Roll. In that case he said:

"There is not a word in the 5th section inflicting any penalty or disability or any confiscation upon him in respect of the mortgage which he has so taken. He is not seeking to recover anything in the shape of money. He only says: 'I have or can obtain the legal possession of the house. I have that for a legal term of years. I do not ask to recover anything from the bankrupt or his estate.' That being so, it does not appear to me that the section applies to him at all, He still retains the possession of the house, subject to redemption, as before the bankruptcy, and if the trustee in the bankruptcy thinks fit to say. 'I will take the house from you,' he is at liberty to do so upon the terms of the mortgage deed."

31. Taking the same example, the applicant in this case who said, "Well, the Jewellery were held in trust for me. I could take possession of it at any time. I have it with me. I do not take anything from the estate of the bankrupt. I am taking back the property that has been held in trust for me. I do not have to touch any property that belongs to the assets of the company." For these reasons, having disposed of all the objections raised against the application I am of the opinion that the application must be allowed.

Representation: