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