ORDER AND DISPOSITION doctrine of reputed ownership is peculiarly a part of the law of bankruptcy, and was introduced so far back as the reign of James I. Section 44 of the Bankruptcy Act, 1883, specifically describes what property of a bankrupt is available for distribution amongst his creditors, and clause iii. thereof, known very generally as the Order and Disposition Clause, contains the statutory reference to the doctrine of reputed ownership already referred to. Section 44 of the Act declares that " the property of the bankrupt divisible amongst his creditors, and in this Act referred to as the property of the bankrupt, shall not comprise . . . property held by the bankrupt on trust for any other person . . . but it shall comprise ":— (iii.) "All goods being, at the commencement of the bankruptcy, in the pos session, order, or disposiiion of the bankrupt, in his trade or business by the consent and permission of the true owner, under such circumstances that lie [the bank rupt] is the reputed owner thereof; provided that things in action [see CHOSE IN ACTION] other than debts due or growing due to the bankrupt in the course of his trade or business shall not be deemed goods within the meaning of this section." The object of the doctrine of reputed ownership is to prevent a. man obtaining credit, to the detriment of his creditors, by a false pretence of the ownership of property. The effect of the doctrine is to make the owner of goods practically liable for a proportion of the debts of another if he—by his consent—allows his goods to remain in the " possession, order, or disposition " of that other person, so that the latter obtains a credit in consequence thereof which eventually brings him into the bankruptcy court. The owner of such goods must then be content to resign them to the trustee of the bank rupt in order that they may be applied for the benefit of the creditors. And in the term " owner" is included a limited or qualified owner, such as a tnort gagee or a person who lets out goods on the hire system, regard being had, however, in this connection to the restrictive application of the doctrine—of its non-application to bankrupts who are not in trade or business or do not use the goods in their trade or business. " If goods are in a nian's possession, order, or disposition, under such circumstances as to enable him by means of them to obtain false credit, then the owner of the goods who has permitted him to obtain that false credit," said Lord Justice James in Ex parte Wivg fleld," is to suffer the penalty of losing his goods for the benefit of those who have given the credit." In the case of goods let on hire, it is possible for a custom for this practice to obtain in certain trades, and so for the doctrine of reputed ownership to be excluded by the fact of that custom (Ex parte Powell ; Craweour v. Salter). In the last-mentioned case Lord Justice James said : "It is very common for hotel keepers to hire furniture in this way; and if it is a common practice it negati yes the foundation of the rule in bankruptcy as to reputed ownership, that the person who has the goods obtains false credit by the possession of them. He does not in this case, because everybody knows that it is so common for a hotel keeper to obtain furniture in that manner. I do not believe that any one gives credit to a hotel keeper on the assuniption that the furniture in his hotel is his own property." So there is a recognised custom in their respective trades
for printers to hire machinery (In re Thaekrah); farmers to keep cattle as agisters (In re Woodward); and hop merchants to keep hops belonging to customers (In re 'Taylor).
A consideration of the above clause will at once show that the only goods to which the doctrine of reputed ownership applies are those which are used by a trader bankrupt as part of his trading goods. Goods in the mere possession of a trader, as his household furniture, and other chattels ab solutely unconnected with and distinct from his trade, are clearly not within the scope of the doctrine. In the case of In re Jenkinson ; Es parte The Nottingham and Nottinghanuhire Bank, one Jenkinson who carried on busi ness as a stockbroker, silversmith, and watchmaker, deposited with his bankers the certificates of thirty shares in a company as security for the balance of his overdrawn account, no formal transfer thereof being made to the bank. Jenkinson being subsequently made a bankrupt the trustee in bankruptcy unsuccessfully endeavoured to recover the shares from the bank on the ground that they were " in the possession, order, or disposition of the bankrupt in his trade or business." In giving judgment against the trustee, Mr. Justice Cave pointed out particularly that the clause is confined to all goods in the possession, order, or disposition of the bankrupt in his trade or business. If a wine merchant carrying on business in the city lives, say at Stzthiton, the furniture in his house at Surbiton cannot be said to be in his possession in his trade or business. And so, if a silk mercer in St. Paul's Churchyard were to keep a yacht for his amusement, it could Itsrdly be said that it was in his possession in his trade as a silk mercer. Nor did the shares come into the reputed trading or business ownership of Jenkinson by reason of his having deposited them to secure a business debt. " Why because the bankrupt got the money on the security of his shares to use in his business therefore the shares, which he parted with t.o get the money which he wanted to use in his business, were themselves in his order and disposi tion in his business, pa.sses comprehension. Let us take again the case of the silk mercer who has a yacht for purposes of pleasure; if he mort gages the yacht to secure his banking account, but continues to sail about in it for his pleasure, does the yacht Cefltie to be in his possession for purposes of pleasure, and begin to be in his possession in his trade ? So long as it is in his possession unmortgaged, no reputation of ownership arises; nor does any such reputation arise if he mortgages the yacht to secure a debt which is not a trade debt. 13ut it is said that the moment he mortgages it to secure his trade account with his bankers this reputation of ownership arises, and arises, be it remembered, among people who are utterly ignorant of the mortgage; for if they knew of the mortgage which is said to give rise to the reputation of ownership, it is clear that that reputation could never arise." Though this decision is valuable from the clear manner in which the principle of the doctrine is illustrated, yet it must be remembered in reading it that