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Insolvency Law

Expert guidance on all aspects of corporate and personal insolvency

10 JUN 2011

Bankruptcy - some definitions

We have discussed the historical derivation of the term bankruptcy before. I thought it might be useful in this post to include some further definitions of the term. These examples are drawn from both primary and secondary sources in this jurisdiction and elsewhere. This post will be updated with further definitions as and when the shelves bear fruit.


"Bankruptcy is a proceeding by which the State takes possession of the property of a debtor by an officer appointed for the purpose, and such property is realised and, subject to certain priorities, distributed rateably amongst the persons to whom the debtor owes money or has incurred pecuniary liabilities." (2 Bl Com 472)

'"Bankrupt' includes any person whose estate is vested in a trustee or assignee under the law for the time being in force relating to bankruptcy." (Bills of Exchange Act 1882, s 2)

"'Bankruptcy' includes liquidation by arrangement; also in relation to a corporation means the winding up thereof." (Law of Property Act 1925, s 205)

'That section [the Bankruptcy Act 1869, s 72 (repealed; see now the Insolvency Act 1986, s 363)] enacts that “Every Court having jurisdiction in bankruptcy under this Act shall have full power to decide all questions of priorities and all other questions whatsoever, whether of law or fact, arising in any case of bankruptcy coming within the cognizance of such Court, or which the Court may deem it expedient or necessary to decide for the purpose of doing complete justice” under the provisions of the Act. It appears to me very clear that “bankruptcy” does in this section include “composition.” The word “bankruptcy” is a general term, and is used to include all the three modes of settling the debts of a debtor with his creditors which are included in the Act; and the words, “Every Court having jurisdiction in bankruptcy,” include, surely, every court having jurisdiction in a composition. In my opinion, therefore, bankruptcy does clearly include composition.'" Re Thorpe, ex p Hartel (1873) 8 Ch App 743 at 745, per Mellish LJ


"[By a codicil to a will a testator bequeathed a sum of money, upon trust to pay the income thereof to his son 'during his life, or! until he shall become bankrupt'.] 'He has become bankrupt according to the law of Scotland…. In default of evidence I shall assume that bankruptcy in Scotland is a bankruptcy within the meaning of the words “shall become a bankrupt”…. We all know what a bankruptcy means. It means shortly a cessio bonorum for the benefit of all the creditors of the person who makes that cesser, and unless it were proved to me that by the municipal law of a particular country there was some such unfairness or some such departure from what is sometimes called “natural law” that I ought not to regard it as a bankruptcy within our law, and within the meaning of this clause, I should certainly regard bankruptcy according to the law of any civilised country as a bankruptcy within the meaning of the instrument before me.'" Re James, Clutterbuck v James (1890) 62 LT 454 at 455, per Kekewich J


"'Bankruptcy is a well understood procedure by which an insolvent debtor's property is coercively brought under a judicial administration in the interests primarily of the creditors. To this proceeding not only a personal stigma may attach but restrictions on freedom in future business activity may result. The relief to the debtor consists in the cancellation of debts which, otherwise, might effectually prevent him from rehabilitating himself economically and socially…. Insolvency, on the other hand, seems to be a broader term that contemplates measures of dealing with the property of debtors unable to pay their debts in other modes or arrangements as well. There is the composition and the voluntary assignment, devices which, in appropriate circumstances, may avoid technical bankruptcy without too great prejudice to creditors and hardships to debtors. These means of salvage from the ravages of misfortune are of the essence of insolvency legislation, and they are incorporated in the Bankruptcy Act."' Canadian Bankers Assocn and Dominion Mortgage & Investments Assocn v A-G of Saskatchewan [1956] SCR 31 at 46, SCC, per Rand J

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