Fraudulent
Preference.

Execution
Creditors.

24

SECRETARIAL PRACTICE
Another matter must be noticed affecting the getting in
of the assets of the company. S. 265 of the Act provides
that where a company is being wound up, any act which
would have been a fraudulent preference had the company
been an individual trader in bankruptcy is an undue or
fraudulent preference of the creditors of the company and is
invalid. The effect of this provision is to make the bank-
ruptcy law for the time being as to fraudulent preference
applicable mutatis mutandis to companies in liquidation.
In bankruptcy, by virtue of s. 44 of the Bankruptcy Act,
I9I4, any conveyance or transfer of property, or any pay-
ment made by a person unable to pay his debts to any creditor,
with a view to preferring that creditor to other creditors,
is void if made within three months before the bankruptcy.
In the case of voluntary winding up, the period of three
months dates backwards from the resolution for winding up.
It is incumbent upon the liquidator if, on examination of the
company’s affairs, it appears that any such fraudulent
preference has taken place, to take steps, by application to
the Court, under s. 252, if necessary, to have the transaction
set aside and get back the money or property.

The question as to whether a particular transaction does
or does not constitute a fraudulent preference is often a
difficult one. As was stated by Lord Esher in New’s Trustees
v. Hunting (1897), 2 Q.B. 27, ‘the question whether there
has been a fraudulent preference depends not upon the mere
fact that there has been a preference, but also on the state
of mind of the person who made it. It must be shown, not
only that he has preferred a creditor, but that he has fraudu-
lently done so.” It has been held that the preferring of the
creditor must be the dominant view with which the preference
was made, but not necessarily the sole view. A payment
made bond fide under pressure will not be a fraudulent pre-
ference. The burden is on the liquidator, who seeks to set
aside a transaction as being a fraudulent preference, of
showing the insolvency of the company—not as a rule a
difficult task—as well as of showing the intention to prefer.

S. 265 also makes void to all intents and purposes any
conveyance by a company of all its property to trustees for the
benefit of all its creditors. It will be noted that this provision,
anlike the provision as to fraudulent preference, applies only
where the conveyance is of all the property and all the creditors
benefit.

Another matter affecting the getting-in of the assets of the
company must be noticed. Under s. 268 an execution