DATES:  1949 Nov. 22, 23, 24.

          

COUNSEL:  Caplan for the appellant.

Sir Frank Soskice K.C. (S.-G.), Sir Andrew Clark K.C., J. H. Stamp and Maurice Berkeley for the Crown.

 

SOLICITORS:  William Foux & Co.; Solicitor of Inland Revenue.

 

JUDGES:  LORD PORTER, LORD NORMAND, LORD MORTON OF HENRYTON, LORD REID and LORD RADCLIFFE.

 

Held, that the debtor, even though he be a foreign national domiciled abroad, committed an act of bankruptcy by remaining out of England “with intent to defeat or delay his creditors” and that he continued “carrying on business in England” until all trade debts were paid, including taxes.

 

In re Dagnall [1896] 2 Q. B. 407, and In re Reynolds [1915] 2 K. B. 186, approved.

 

Decision of the Court of Appeal (sub nom. In re a Debtor, Ex parte His Majesty the King v. The Debtor) [1948] W. N. 310; (sub nom. In re a Debtor, No. 335 of 1947) 64 T. L. R. 446, affirmed.

 

APPEAL from the Court of Appeal (Lord Greene M.R., Asquith and Evershed L.JJ.).

 

Feb. 9, 1950.

 

 

LORD PORTER stated the facts: The appellant was a citizen of Rumania. For some years before the present proceedings he carried on a leather business in England, apparently with success. On January 1, 1946, two notices of assessment for the sum of 10,000l. each in respect of excess profits tax in connexion with this business, covering the two chargeable accounting periods ending March 31, 1943, and March 31, 1945, were issued to him; and on January 10, 1946, a further notice of assessment was issued  [*187]  to him for another sum of 10,000l. for excess profits tax in respect of the chargeable accounting period ending March 31, 1944. On November 14, 1947, a bankruptcy petition at the instance of the Crown was issued in respect of the non-payment of these three sums, amounting to 30,000l. in all, which had not then been paid and remained thereafter unpaid. The petition contained the allegation that the debtor “with intent to defeat or delay his creditors. … being out of England remains out of England. …” He had disposed of his business by the end of 1946, and left England on October 31, 1946, residing in Eire thereafter. The assessments having been confirmed on that day by the Finsbury General Commissioners, letters demanding payment were sent to the debtor on November 9 and November 16, 1946.

 

On December 23, 1947, leave was given to serve the petition out of the jurisdiction, but on April 7, 1948, on the application of the debtor and on the ground that he was not “a debtor” within the meaning of the Bankruptcy Acts, Mr. Registrar Parton set aside the order. The Court of Appeal having reversed this decision, the debtor appealed to the House of Lords.

 

LORD PORTER. My Lords, by s. 1 of the Bankruptcy Act, 1914, it is provided: “(1.) A debtor commits an act of bankruptcy in each of the following cases:— (a) If in England or elsewhere he makes a conveyance or assignment of his property to a trustee or trustees for the benefit of his creditors generally; (b) If in England or elsewhere he makes a fraudulent conveyance, gift, delivery, or transfer of his property, or of any part thereof; (c) If in England or elsewhere he makes any conveyance or transfer of his property or any part thereof, or creates any charge thereon, which would under this or any other Act be void as a fraudulent preference if he were adjudged bankrupt; (d) If with intent to defeat or delay his creditors he does any of the following things, namely, departs out of England, or being out of England remains out of England, or departs from his dwelling-house, or otherwise absents himself, or begins to keep house; …. (2.) In this Act, the expression ‘a debtor,' unless the context otherwise implies, includes any person, whether a British subject or not, who at the time when any act of bankruptcy was done or suffered by him (a) was personally present in England; or (b) ordinarily resided or had a place of residence in England; or (c) was carrying on business in England, personally, or by means of an agent or manager; or (d) was a member of a firm or partnership which carried on business in England."

 

(1) [1892] 1 Q. B. 108, 111, 115.  [*194] 

 

By s. 4, sub-s. 1: “A creditor shall not be entitled to present a bankruptcy petition against a debtor unless. … (c) the act of bankruptcy on which the petition is grounded has occurred within three months before the presentation of the petition, and (d) the debtor is domiciled in England, or within a year before the date of the presentation of the petition has ordinarily resided, or had a dwelling-house or place of business, in England, or (except in the case of a person domiciled in Scotland or Ireland or a film or partnership having its principal place of business in Scotland or Ireland) has carried on business in England, personally or by means of an agent or manager, or (except as aforesaid) is or within the said period has been a member of a firm or partnership of persons which has carried on business in England by means of a partner or partners, or an agent or manager. …"

 

In these circumstances the contention for the Crown is that the appellant has committed an act of bankruptcy because when the petition was issued he was a debtor in that he “was carrying on business in England, personally” at that time, and that, being out of England, he remained out of England with intent to defeat or delay his creditors and so committed the act of bankruptcy defined in s. 1, sub-s. 1 (d). It is not denied that he is remaining out of England nor that there is prima facie evidence of an attempt to defeat or delay the Crown in its endeavour to collect the debt which is claimed to be due; but the appellant maintains that, being a Rumanian subject, he is not a debtor within the meaning of the Act and that he has not committed an act of bankruptcy, inasmuch as he did not carry on business in England at the date of the petition or during any portion of the three months prior thereto. The respondent maintains that the wording of sub-s. 2 in terms embraces-both British subjects and foreigners, provided that either class carried on business in this country at the date cf the act of bankruptcy relied upon or within three months prior thereto, and that there is a long series of cases which establish that a business does not cease to be carried on in this country until all the debts incurred in the course of it have been discharged.

 

As regards the first point, the appellant maintains that, despite its wording, sub-s. 2 has no application save in the case of British subjects or persons domiciled here or in a case where the act of bankruptcy relied upon was committed in this  [*195]  country. In the present case he relies upon the facts that the petition is based upon an allegation that being out of England he has remained abroad, that he is a Rumanian subject, and that the alleged act of bankruptcy by its very nature has not been and could not be committed in this country. It would, he says, be contrary to the comity of nations, and to the ordinary construction of Acts of Parliament, to decide that an act committed out of this country by a foreign national domiciled abroad should be held to come within the mischief of the Act.

 

Section 4, sub-s. 1, limits the circumstances in which a creditor can present a bankruptcy petition but I do not think that it throws any further light upon his right to do so. Before it can be presented, there must be a debtor and he must have committed an act of bankruptcy. If those two prerequisites are established, the petition may be issued subject to the conditions laid down in s. 4, sub-s. 1. The answer, therefore, to the question submitted to your Lordships depends in the first instance upon the true meaning of s. 1, sub-ss. 1 (d) and 2 (c). Interpreted in accordance with its strict wording, the latter sub-section applies to British and foreign nationals alike, and unless some principle to the contrary can be established I should so construe it. If I am right in this an invocation of the comity of nations is irrelevant. If the meaning of an Act of Parliament is ambiguous that doctrine may be prayed in aid, but where an English statute enacts a provision in plain terms no such principle applies. Any foreign nation of which the person affected is a member or with which such person is domiciled is free to disregard the provisions of the English enactment, but the person concerned cannot himself take exception to it, though it may be he will escape from compliance with its terms because he is out of the jurisdiction and cannot be reached by English process. The principle is, I think, accurately expressed in Halsbury’s Laws of England (2nd ed.), vol. XXXI, pp. 508-9, paras. 658 and 659, sub tit. “Statutes": “658. There is a presumption that Parliament does not assert or assume jurisdiction which goes beyond the limits established by the common consent of nations. On the principles already stated, however, this presumption must give way before an intention clearly expressed. 659. Statutes are to be interpreted, provided that their language admits, so as not to be inconsistent with the comity  [*196]  of nations. International law, however, being mainly conventional, can, it seems, only be administered by the courts when it forms part of the law of this country. If, therefore, statutory enactments are clearly inconsistent with international law, they must be so construed, whatever the effect upon the rights of aliens not within the jurisdiction may be.” Lord Halsbury’s observations in Cooke v. The Charles A. Vogeler Co. (1), are to the same effect.

 

In considering the authorities it is not, I think, necessary to refer to any case preceding Ex parte Crispin (2); but before that and the succeeding cases are considered, and before the statements contained in them are appraised, it is essential to bear in mind what the relevant statutory provisions were at the time when they were decided. In Crispin’s case(2) the statute applicable was the Bankruptcy Act, 1869, and that case in terms decided only that “an alien non-trader domiciled abroad, who contracts debts in England. … cannot be made a bankrupt upon an alleged act of bankruptcy committed abroad.” In the course of his judgment, however, Mellish L.J. laid down three considerations as supporting the conclusion at which he had arrived(3). The first two referred to wording which is similar to that which is now to be found in s. 1, sub-s. 1 (a), (b) and (d) of the present Act: (a), he says, is “clearly intended to relate to a conveyance which is to operate according to English law"; (b) “clearly means. … fraudulent by the law of England” and (d) implies “that the person who remains out of England, has his home or place of business in England, and cannot reasonably be held to apply to the case of a foreigner remaining in his own home.” In ascertaining the effect of this case, however, it has to be borne in mind that the Act of 1869 contained no definition of the word debtor, and the court, being unable to find any intermediate meaning for that word between any debtor, whatever his nationality or domicile, who commits an act of bankruptcy anywhere, and a debtor who commits an act of bankruptcy in this country or is otherwise subject to the law of this country, chose the latter. The act of bankruptcy alleged was the going or remaining out of England with intent to defeat or delay creditors, and the headnote is, I think, accurate in saying: “An alien non-trader domiciled abroad, who contracts debts in

 

(1) [1901] A. C. 103, 107.

 

(2) L. R. 8 Ch. 374.

 

(3) Ibid. 380.  [*197] 

 

England, is liable to be made a bankrupt under the Bankruptcy Act, 1869, if he commits an act of bankruptcy in England, although he may have left England before the petition for adjudication is presented. But he cannot be made a bankrupt upon an alleged act of bankruptcy committed abroad.” This language indeed but repeats the observations of the court(1).

 

Ex parte Blain (2) was also decided under the Act of 1869, and in it the court held (1.) that an act of bankruptcy must be a personal act or default and cannot be committed through an agent nor by a firm as such, and (2.) that, to use the words of Brett L.J.(3): “Upon the ground of the limited power of the legislature of England to legislate, all the authorities have held that it is necessary that the act of bankruptcy should have been committed in England, if the person against whom the statute is invoked is a foreigner who is not domiciled in England.” In that case the persons against whom the petition was presented and by order discharged were Chilean subjects who had never been in this country, though they were members of a firm carrying on business here. Undoubtedly the subsequent Bankruptcy Acts have altered the first principle decided; whether they have altered the second is the matter for your Lordships’ consideration. The Act of 1883, like the Act of 1869, contains no definition of debtor, though it increases the number of acts which are acts of bankruptcy. It does, however, contain a fresh section — s. 6 — which enacts that a creditor shall not be entitled to present a bankruptcy petition against a debtor unless — s. 6, sub-s. 1 (d) — the debtor is domiciled in England or, within a year before the date of the presentation of the petition, he ordinarily resided in or had a dwelling-house or place of business in England.

 

In In re Pearson (4) an American citizen who was resident in America but was said to have carried on business in England within a year was served with a bankruptcy notice in America, and it was sought to make him bankrupt thereon. The court held that s. 6, sub-s. 1 (d), made no difference in the law: it did not enlarge the class of debtors but only limited the cases in which a bankruptcy petition could be presented. At the same time it affirmed the principle laid down in Ex parte Blain (5), Fry L.J. saying(6): “I can entertain no doubt

 

(1) L. R. 8 Ch. 374, 379.

 

(2) 12 Ch. D. 522.

 

(3) Ibid. 528.

 

(4) [1892] 2 Q. B. 263.

 

(5) 12 Ch. D. 522.

 

(6) [1892] 2 Q. B. 263, 268.  [*198] 

 

that s. 4 of the Act of 1883 relates only to debtors who are subject, either by birth and natural allegiance or by temporary residence, to English law."

 

Cooke v. The Charles A. Vogeler Co. (1) raised a somewhat different question. In that case two American subjects resided and carried on business in America, but they also carried on a branch of their business in this country and had assets here. In December, 1899, they executed an assignment of all their property to their manager in America in trust to pay their debts. This was said to be an act of bankruptcy under s. 4, sub-s. 1 (a), of the Act of 1883, which is in the same terms as s. 4, sub-s. 1 (a), of the Act of 1914. They had, it was argued, “in England or elsewhere made a conveyance …. of their property to a trustee. … for the benefit of their creditors generally.” The contention failed. Lord Halsbury L. C. said (2): “Thewords ‘debtor’ and ‘creditor’ certainly cannot be sufficient to give jurisdiction to the English Court of Bankruptcy, because if unlimited they would give jurisdiction all over the world in respect of debts, petitions, or acts of bankruptcy committed anywhere. … Once it is admitted that a limit must be placed upon those words, it must follow that the limit must be ‘debtor’ and ‘creditor’ respectively who are subject to the jurisdiction of the English bankruptcy law.” Later he added (2): “The whole argument, I think, depended upon the generality of the word 'debtor'.” Lord Davey, who also spoke, affirmed the decision in In re Pearson (3) to the effect that s. 6 was a limiting and not an enlarging section and had not altered the law in this respect.

 

In these cases no question arose as to the effect of the change in the law brought about by the description of debtor which was inserted for the first time in s. 8 of the Bankruptcy and Deeds of Arrangement Act, 1913, and repeated in s. 1, sub-s. 2, of the Act of 1914; but some discussion as to its effect took place in 1936 in In re Debtors (No. 836 of 1935) (4). The problem in that case was the same as that in Cooke v. The Charles A. Vogeler Co. (1). Two American citizens carried on a financial business in partnership in a number of foreign cities including London and Paris, the London business being managed by an Englishman. In 1935 the London business was wound up and its assets applied, so far as they went,

 

(1) [1901] A. C. 102.

 

(2) Ibid. 108.

 

(3) [1892] 2 Q. B. 263.

 

(4) [1936] Ch. 622.  [*199] 

 

in settlement of English claims. At this time both partners were living in America, and in August of that year, they executed in the State of New York an assignment of their property to trustees for the benefit of their creditors, an assignment which in the case of one partner comprised the whole of his property. Against that partner the petitioning creditor relied upon the execution of the assignment as an act of bankruptcy.

 

The Court of Appeal, following Cooke v. The Charles A. Vogeler Co. (1), held that an assignment executed abroad by a foreign national not domiciled or resident in England, did not constitute an act of bankruptcy unless it was intended to operate in accordance with English law. The court considered itself bound by the decision in Cooke v. The Charles A. Vogeler Co. (1) in spite of the fact that the Act of 1914 had added a definition of or additional meaning to the word “debtor.” In the opinion of the members of the Court of Appeal, Cooke v. The Charles A. Vogeler Co. (1) was decided on two grounds: (1.) that the person petitioned against was not a debtor, and (2.) that the assignment was not an act of bankruptcy. As regards the first point, the court were inclined to think that the provisions of the Act of 1914 had disposed of the difficulty and that the American gentleman who was petitioned against was a debtor. But in their opinion the House of Lords had also decided that a deed of assignment or conveyance executed by a domiciled foreigner in his own country is not an act of bankruptcy within the meaning of the Bankruptcy Acts if it is to operate according to the law of the foreign country in which it is made. Whatever view one may take of this decision, it has no direct bearing on the question now under consideration. It is a decision upon the terms of s. 1, sub-s. 1 (a) not s. 1, sub-s. 1 (d), and deals with the limitation to be placed on the meaning of the word conveyance, not with the width of that class of persons who are included in the word debtor.

 

The appellant, however, relies on the fact that the provisions of s. 1, sub-s. 2, are not definitive: i.e., they do not say what a debtor is but merely add a fresh type or fresh types to those who have been held in law to constitute the category of debtors, and therefore leave it still necessary to put some limit upon so wide a class. Let me assume then, without expressing any opinion as to the validity of the contention, that the sub-section

 

(1) [1901] A. C. 102.  [*200] 

 

should read: “In addition to one who is already subject to the English bankruptcy law, the word ‘debtor’ shall also embrace a non-British subject who, at the time when the act of bankruptcy was committed, was carrying on business in England.” On this wording, if the appellant was carrying on business in England when he failed to pay his debt to the Crown, he would, prima facie, be a debtor, since, as a result of the wording of the section, it is immaterial that he was not a British subject, and from the terms of sub-sub-s. 2 (b) it is clear that residence is only one of four alternative requisites which constitute a debtor within the meaning of the Act: residence may be a factor which brings him within that class, but it is not a necessary element. Whatever limitation may formerly have been put on the meaning of the word “debtor,” a wider sense has now been given to it: it includes not only persons who were in the past subject to the English bankruptcy law, but a new class consisting of persons who are not British subjects or domiciled in this country but carried on business in England at the time when the act of bankruptcy was committed.

 

Whether In re Debtors (No. 836 of 1935) (1) was rightly decided or not, one still has to construe sub-s. 1 (d), and I find it difficult to see what bearing a narrowed construction of the word “conveyance” in s. 1, sub-s. 1 (a), has upon the width of the class of debtors who can commit the act of bankruptcy defined in s. 1, sub-s. 1 (d). As Lord Greene M.R. points out (2), an act within sub-s. 1 (d) can only be committed by someone abroad. That person must of course have been carrying on business in England within three months of the act of bankruptcy alleged, and the factors needed to fulfil this condition will require analysis at a later stage; but, once it is established that these requirements are fulfilled, the sub-section declares in terms that it does not matter whether the person concerned is a British subject or not; he is a debtor provided that he fulfils any one of the four conditions stipulated for in the sub-section. In seeking to say that the provisions are confined to a British national or British domiciled person or to a case where the act of bankruptcy is committed in this country, the appellant seems to me to give the go-by to the words “whether a British subject or not,” and I do not understand what extension of the law he suggests to have been intended by them unless his contention is that

 

(1) [1936] Ch. 622.

 

(2) (1948) 64 T. L. R. 446, 447.  [*201] 

 

they apply to some of the acts of bankruptcy set out above, but not to all — at any rate not to the one relied upon in this case. I cannot find that the wording of the Act makes any such differentiation between what is required to constitute one category of those whom the present Act declares to be included in the class of debtors and another, and I can see no reason for its implication.

 

Out of respect for a strenuous argument presented to your Lordships, I have dealt at some length with this aspect of the case, but in the end I find myself coming back to the judgment of the Master of the Rolls and find myself in complete agreement with its expression and substance. Like him I think the point disposed of if one reads the relevant words of the statute in their appropriate position(1). I repeat them as a convenient method of winding up the view I hold on this question. Section 1, sub-s. 1 (d), will then run: “Any person, whether a British subject or not, who, at the time when any act of bankruptcy was done or suffered by him, was carrying on business in England, commits an act of bankruptcy if, with intent to defeat or delay his creditors, being out of England, he remains out of England.” So reading the sub-section, I find it impossible to add as a limitation the provision that no foreigner is hit by the Act unless he in some way owes allegiance to the law of England or the act has been committed in this country. To adopt this construction is not to limit the meaning of the wording of the section but to contradict it.

 

But the further argument still remains open to the appellant that he was not carrying on business in England within three months of the presentation of the petition and therefore was not a debtor within the meaning of the Act. In a sense it is true that the appellant was not actively carrying on business within three months of the presentation of the petition, but there is a series of cases beginning with In re Dagnall (2) and ending with In re Reynolds (3) which in unbroken sequence have decided that trading does not cease when, as the expression is, “the shutters are put up,” but continues until the sums due are collected and all debts paid. It is true that all the decisions have been given in respect of married women’s trading and that a distinction has been made between the earlier Acts where the expression was

 

(1) 64 T. L. R. 446, 447.

 

(2) [1896] 2 Q. B. 407.

 

(3) [1915] 2 K. B. 186.  [*202] 

 

"as a trader” and the later where the phrase “carrying on trade” is found. But it is the later, not the earlier, phrase which has been adopted in the Act of 1914.

 

It was suggested on behalf of the appellant that the decisions had application to married women only, because the wording was first used in the Married Women’s Property Act, 1882, s. 1, sub-s. 5, and transferred therefrom to the Bankruptcy and Deeds of Arrangement Act, 1913, and thence to the present Act. I cannot follow why the same wording should have one significance when employed of married women and another in the case of all other persons engaged in trade. More particularly I think that the meaning placed upon the words in the cases referred to must be followed when it is remembered that two Acts of Parliament have been passed since In re Dagnall (1) and In re Worsley (2) were decided, and that those cases have been followed and approved in In re Clark (3), In re Allen (4), and In re Reynolds (5) In my opinion those cases were rightly decided and are conclusive of the present question.

 

There is, however, one further matter which requires consideration. In all the cases referred to, the debts which were to be paid or collected were strictly trade debts, and it is maintained that in that respect they differ from the case under appeal in that the debt claimed by the Crown to be due is in respect of excess profits tax and that such a debt is not a trade debt but a sum due for taxes and no more connected with the appellant’s business than income tax or any other tax liability. Whatever else may be said about excess profits tax, however, it is imposed upon the debtor because he has been trading, and I do not see any reason for confining trade debts to those incurred in buying or selling. In re Allen (6) shows that they extend to liabilities incurred in incidental matters which occur during the course of carrying on the trade, including a liability for the careless driving of a servant resulting in an accident. In Dagnall’s case (7) Vaughan Williams L.J. said: “It seems to me that trading is not completed until you have performed all the obligations that the fact of trading imposed upon you"; and this language was quoted with approval by Swinfen Eady L.J. in

 

(1) [1896] 2 Q. B. 407.

 

(2) [1901] 1 K. B. 309.

 

(3) [1914] 3 K. B. 1095.

 

(4) [1915] 1 K. B. 285.

 

(5) [1915] 2 K. B. 186.

 

(6) [1915] 1 K. B. 285.

 

(7) [1896] 2 Q. B. 407, 410-1.  [*203] 

 

In re Reynolds (1). I think it is accurate, and that the payment of excess profits tax was one of the obligations imposed on the appellant by his trading.

 

I would dismiss the appeal with costs.

 

LORD NORMAND. My Lords, I concur in the opinion of my noble and learned friend on the woolsack.

 

LORD MORTON OF HENRYTON. My Lords, I also concur.

 

LORD REID. My Lords, I also Concur.

 

LORD RADCLIFFE. My Lords, I have nothing to say in this appeal except that I agree that the appeal should be dismissed.

 

Appeal dismissed.

 

(1) [1915] 2 K. B. 186, 191.