Rex v Valabhji (Cr. App. No. 30/1936) [1936] EACA 141 (1 January 1936)

APPELLATE-CRIMINAL

Before SIR JOSEPH SHERIDAN, C. J., and WEBB, J.

REX, Respondent $\mathbf{v}$

JAGJIWAN VALABHJI, Appellant (Original Accused)

Cr. App. No. 30/1936

Bankruptcy Offence—Trader disposing of property obtained on credit and not paid for otherwise than in the ordinary way of his trade—Bankruptcy Ordinance, 1930, section 134 (1) (o),

The appellant, a retail trader, who presented his own petition in bankruptcy on 17-4-1934, was convicted on two counts charging him with having, within twelve months next before the presentation of the petition by him, disposed of goods obtained on credit and not paid for, otherwise than in the ordinary way of his trade.

Held (3-4-36).—That the effect of section 134 (1) (o) of the Bankruptcy Ordinance, 1930, is that if a trader, within the period mentioned, disposes of property<br>obtained on credit and not paid for, he has committed an offence unless<br>(1) it appears that such disposal was in the ordinary way of his trade, a appears that the disposal was not in the ordinary way of his trade the offence<br>is complete and the question of intent to defraud does not arise.

(Ex parte Brett, re Hodgson (1 Ch. D. 151) distinguished.)

Burke for the appellant.—The disposal of the goods was in the ordinary course of business: even if it was not there was no intent to defraud. The magistrate never considered the latter question: (He referred to Ex parte Brett, In re Hodgson (1 Ch. D. 151), Ex parte Stallard (L. R. 3 Ch. App. 408), R v. Thomas (11 Cox C. C. 535).

Figgis, K. C. for the Official Receiver.—The appellant failed to discharge the onus of proof cast upon him. He is a retail trader and these sales were not in the ordinary way of his business. His explanations in his Public Examination were inconsistent and unsatisfactory.

JUDGMENT.—The appellant was convicted on two counts under section 134 (1) (o) of the Bankruptcy Ordinance and from that conviction has appealed. The section reads: "Any person who has been adjudged bankrupt or in respect of whose estate a receiving order has been made shall $\ldots$ be guilty of an offence: —If, within twelve months next before the presentation of a bankruptcy petition by or against him. or in the case of a receiving order made under section 99 of this Ordinance, before the date of the order, or after the presentation of a bankruptcy petition and before the making of a receiving order, he pawns, pledges, or disposes of any property which he has obtained on credit and has not paid for, unless, in the case of a trader, such pawning, pledging, or disposing is in the ordinary way of his trade, and unless in any case he proves that he had no intent to defraud."

The charges against the appellant were framed as follows:-

"Statement of offence—First Count.

Jagjiwan Valabhji, a bankrupt so adjudged in Bankruptcy Cause No. 14 of 1934 of the Supreme Court of Kenya Colony at Nairobi, within twelve months next before the presentation of the Bankruptcy Petition by or against him and before the making of a Receiving Order disposed of property which he had obtained on credit and had not paid for, which disposal was not in the ordinary way of his trade contrary to sub-section $1$ (o) of section 134 of the Bankruptcy Ordinance.

Particulars: On the 24th November, 1933, the Bankrupt obtained from F. Adrian Taylor three bales of blankets at the price of Sh. 502 on the representation that he intended to deal with them in his ordinary way of trade as a retail trader. On the 5th December, 1933, he transferred the said goods in bulk to his relative Shamji Kala of Mombasa for the same price of Sh. 502 and he has not paid the said F. Adrian Taylor for these goods.

"Statement of offence—Second Count.

Jagjiwan Valabhji, a Bankrupt so adjudged in Bankruptcy Cause No. 14/1934 of the Supreme Court of Kenya at Nairobi, within twelve months next before the presentation of the Bankruptcy Petition by or against him and before the making of a Receiving Order disposed of property which he had obtained on credit and had not paid for, which disposal was not in the ordinary way of his trade, contrary to sub-section 1 ( $o$ ) of section 134 of the Bankruptcy Ordinance.

Particulars: On the 9th January, 1934, the Bankrupt obtained from F. Adrian Taylor three bales of blankets at the price of Sh. 501 on the representation that he intended to deal with the same in his ordinary way of trade as a retail trader and on the 26th January, 1934 the Bankrupt transferred these goods for Sh. 400 to Ismail Nathoo c.i.f. Mombasa and he has not paid the said F. Adrian Taylor for the said goods."

The appellant presented his own petition on 17-4-1934. In our opinion the effect of section 134 $(1)$ (o) is that if a trader, within the period, disposes of property obtained on credit and not paid for, he has committed an offence unless he proves two things—

(1) that it was in the ordinary way of trade, and,

(2) that he had no intent to defraud.

If he proves the first but fails to prove the second he can be convicted: similarly if he proves the second but fails to prove the first. Therefore, if the evidence establishes that the disposal was not in the ordinary way of trade, the offence is complete and there is no need to consider the question of intent to defraud.

But if it appears that the disposal was in the ordinary way of trade then, to clear himself, he must go further and prove that there was no intent to defraud.

In other words the law says that, if a trader disposes of goods obtained on credit and not paid for otherwise than in the ordinary way of trade, he takes the risk of being convicted if within twelve months after the disposal a bankruptcy petition is presented, or a

receiving order is made under section 99, or if he does it between date of the presentation of a bankruptcy petition and the date of the receiving order.

The appellant was a retail trader and the facts of the case admit of no other conclusion than that he disposed of the goods in the manner and at the times alleged otherwise than in the ordinary way of his trade and we are clear that the fact of his so disposing of property within the prescribed period which he had obtained on credit and had not paid for was, on our construction of the section, sufficient to warrant his conviction.

Even had it appeared that the disposal of the goods was in the ordinary way of his trade, he would then have had thrown upon him the burden of proving an absence of intent to defraud. It is but common sense that a person who can prove that what he did was in the ordinary way of his trade, is less open to challenge than one who acts otherwise than in the ordinary way of his trade.

Although, on the view that we take of the meaning of section 134 (1) (o), it is unnecessary for our decision, we would add that in our opinion the appellant failed to prove that he had no intent to defraud. It is not sufficient, in our opinion, for him to prove something which raises a doubt as to what his intent was; he must affirmatively prove absence of intent to defraud, and it matters not whether he does so by reference to the prosecution evidence or the defence evidence of both: But if, looking (as we are entitled to look) at the record of his public examination, we find him giving a series of unsatisfactory and inconsistent accounts of the manner in which he disposed of the goods, and if before the Magistrate he declines to give any explanation, can it be said that he had discharged the onus of proof?

Mr. Burke has quoted passages from the judgments in Ex parte Brett In re Hodgson (1 Ch. D. 151) in support of his case, but what $Ex$ parte Brett decided, so far as is material, was that the transaction impugned having been carried out in the ordinary way of the bankrupt's trade no prosecution could lie. The application was for the prosecution of the bankrupt for an offence inter alia contra section 11, sub-section 15 of the Debtor's Act, 1869. This sub-section provides that an offence is committed,

"If within four months next before the presentation of a bankruptcy petition against him or the commencement of the liquidation, he, being a trader, pawns, pledges, or disposes of otherwise than in the ordinary way of his trade any property which he has obtained on credit and has not paid for, unless the jury is satisfied that he has no intent to defraud."

James, L. J. in his judgment at p. 153 said, "but the question is whether there is evidence of the particular offences mentioned in the sub-sections on which the application is based—whether there is any evidence that these goods were obtained or disposed of otherwise than in the ordinary course of business. In my opinion they were dealt with in the most ordinary course of business', and Mellish, L. J. at pages 153 and 154 said, "But here the trader only bought goods on credit and raised money on them when he exported them, by pledging

the bills of lading, which is the ordinary course pursued by export merchants". Considering the plain words of sub-section 15 in the light of the passages quoted from the judgments it is clear that once it became established that the disposal had been in the ordinary way of the bankrupt's trade, there could be no prosecution. For the above reasons ex parte Brett is not an authority. The sub-section on which the prosecution in the case before us was based is materially different from section 11 sub-section 15 of the Debtor's Act.

We agree with the inference drawn by the Magistrate that the transactions complained of in this case were not in the ordinary way of trade. Had it been necessary for him to consider the question of intent we are of opinion that he must have held that the appellant had failed to prove that he had no intent to defraud. The appeal is dismissed.