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Decisions of the Superior Courts of New South Wales, 1788-1899

James v Raine [1830] NSWSupC 11

promissory notes, fraud, promissory notes, lack of consideration, insolvency, Attorney General, insolvent

Supreme Court of New South Wales

Dowling J., March 1830[1 ]

Source: Sydney Gazette, 11 March 1830

This was action brought by Mr. Thomas Horton James, against Mr. Thomas Raine, to recover the amount of two promissory notes for £80 each, drawn in favour of Mr. John Raine, and endorsed by him to the plaintiff.

Counsel for the plaintiff called one witness, who proved the notes in question to be in the handwriting of the defendant.

On behalf of the defendant, it was contended that the plaintiff was not entitled to recover, inasmuch as the notes on which the action was brought were fraudulently obtained without consideration.  Early in the year 1829, the defendant called a meeting of his creditors to whom he submitted the state of his affairs, and proposed to them a dividend of six-and-eight pence in the pound, which a friend, (the late Mr. E. M. Scott) had consented to advance.  Several of the creditors accepted the proposal, and signed a paper to that effect, preliminary to a regular deed of composition being drawn up.  The plaintiff, however, who was a creditor refused to accede to those terms, and sometime after, sued out process against the plaintiff, on which he was arrested, for the amount of his debt.  Previous, however, to the return day of the writ, though the intervention of the plaintiff's attorney (Mr. Poole) an arrangement was entered into by which that gentleman agreed, on behalf of his client, to take the dividend, which he accordingly obtained from Mr. Scott; but, without his knowledge, had subsequently received the notes in question from the defendant, taking his own security for the remainder of the debt at three years.  Upon this state of facts, the defendant's counsel contended that the transaction on the part of the plaintiff was a fraudulent one; inasmuch as, Mr. Scott would not have consented to pay the dividend had he been aware that the plaintiff was exacting security for the residue of his claim; and that the plaintiff, having, with a full knowledge that the defendant was paying a dividend to his creditors, accepted of it, had concluded himself by recovering it, and was not entitled to recover in the present action.

The principal witness called to support this case was Mr. Poole, the plaintiff's attorney; but that gentleman, in the course of a lengthy examination, expressly declared that the plaintiff never did consent to receive any thing short of his full demand; and that the arrangement entered into for the full discharge of the debt was made by him (Mr. P.) from a desire to accommodate the defendant, and with his full concurrence.  Mr. Poole further stated, that in coming to an agreement to receive six-and-eight-pence in money down, and the residue in bills, he had departed from the instructions of the plaintiff, who had repeatedly declared that he would take nothing short of his full demand, which he was sure would be paid if Mr. Poole persevered.

After a reply by the plaintiff's counsel.

The learned Judge told the assessors that the defendant had not made out his case.  If it had appeared, that the plaintiff had consented to a composition, he would have been bound by his act; but, from the evidence before the Court, it appeared that he had all along refused to accept of less than the full amount of his claim, and was therefore entitled to recover in the present action.  Verdict for the plaintiff, damages £165, being principal and interest.

Counsel for the plaintiff, Mr. Foster; for the defendant, Mr. Foster; for the defendant, Mr. Keith.

 

Notes

[1 ] The newspaper does not give the date of trial.  See also In re Raine, 1830; Loane v. Bunn, 1830; and see Australian, 24 March 1830.

A new insolvency Act, 11 Geo. 4 No. 7, was passed by the Legislative Council on 2 April 1830.  This was the first insolvency Act of the New South Wales Legislative Council.  The Australian thought it was too open to fraud: for comments, see its issues of 16 April 1830; 1 May 1830; 11 June 1830; 3 September 1830; 4 February 1831; 12 February 1831; 4 March 1831; 27 May 1831; 22 July 1831.  This was a true bankruptcy law, one which allowed a debtor to be released from the obligation to pay past debts.  That required the agreement of a majority in number and value of the creditors, and did not apply to crown debts, nor to judgment debts for personal torts or those involving malice.  The Act also included an insolvency law, one which merely allowed an imprisoned debtor to be released from gaol rather than the debts; the decision in these cases was in the hands of the courts.  On the distinction between bankruptcy and insolvency, see B. Kercher, "The Transformation of Imprisonment for Debt in England, 1828 to 1838", (1984) 2 Australian Journal of Law and Society 60.  On bankruptcy and insolvency laws in these years, see J.M. Bennett, A History of the Supreme Court of New South Wales, Law Book Co., Sydney, 1974, ch. 6, noting that this 1830 Act, which had been drafted by Forbes, was allowed to lapse in 1832, when it was replaced by 2 Wm 4, No. 11.  On this Act, see also C.H. Currey, Sir Francis Forbes: the First Chief Justice of New South Wales, Angus and Robertson, Sydney, 1968, ch. 32.

In 1830, many people were found insolvent, including Carter, the Master of the Supreme Court: Forbes C.J. to Governor Darling, 22 October 1830, Chief Justices' Letter Book, 1824-1835, Archives Office of New South Wales, 4/6651, p. 270. John Macarthur claimed that Carter owed £15,000, and that the Attorney General (Baxter) had been obliged to sell all of his property and assign away two thirds of his salary to avoid imprisonment for debt: Macarthur to his son John, 9 August 1830, Macarthur Papers, Mitchell Library, Vol. 15, A 2911, Reel CY 752B, p. 187.  Macarthur went on, "Our virtuous judges are as troublesome as ever, the lawyers increasing by new importations, and as they increase the evils of law are multiplied.  I hope you manage these things better in England, for here a lawyer is never named but with a deserved execration.  Even that worthy Mr. Wentworth declared to me some months since, that nothing could save the colony but closing the Supreme Court and the Court of Requests."  Baxter was declared insolvent on 31 January 1831: Darling to Murray, 10 February 1831, Historical Records of Australia, Series 1, Vol. 16, p. 77.  In this despatch, the governor also attacked Baxter's personal habits, including drunkenness and ill-treatment of his wife.  Viscount Goderich, for the British government, criticised the Attorney General's love of pomp and splendour while on circuit with the courts: Goderich to Darling, 10 March 1831, p. 105.  See also p. 95 on Carter's insolvency.

The debtors' prison, which at this time was the Sydney Gaol at the bottom of George St., had 309 admissions during 1830: Darlinghurst Gaol Debtors Books, Archives Office of New South Wales, 4/6446.

In another 1830 case, Raine v. McDonald, Dowling, Select Cases, Archives Office of New South Wales, 2/3466, p. 14, the Supreme Court decided under the same legislation that "Where a debtor compromised with his Creditors for a rateable composition of their claims, and afterwards, voluntarily and without compulsion paid one of his Creditors who had seized the composition in full in fraud of his other creditors  Held that he could not maintain action in his own name to recover the money back."  Raine was imprisoned for debt, after which he sued the sheriff: see Raine v. McQuoid, Australian, 25 June 1830.

For other 1830 cases on the new Act, see Dowling, Select Cases, Vol. 2, Archives Office of New South Wales, 2/3462, pp 320-321; Australian, 11 June 1830; and see Vowels v. Gough, 1830.

Published by the Division of Law, Macquarie University