1905. exercised the judicial functions thrown upon him by the Act. That is an entirely erroneous statement and in my opinion the certificate is a nullity.

Ex parte MCLAUGHLIN.

The C.J.

It has been argued that the parties waived the irregularity by appearing, and that this point was not taken before the Judge in Chambers, but it seems to me that an absolute nullity cannot be waived, and that as the Court see that the certificate is wholly void, they cannot allow it to stand.

COHEN and WALKER, JJ., concurred.

Appeal sustained-Both orders appealed from set aside with costs of this application but not below-Money received by respondent to be refunded without interest.

COGHLAN v. ALEXANDER.

Fraudulent conveyances-Stat. 13 Eliz. c. 5-Fraud on creditors - Actual notice

Knowledge of the existence of debts.

In order to avoid a sale for good consideration under 13 Eliz. c. 5 it must be shown that the purchaser had actual knowledge of a fraud on the creditors. Mere knowledge of the existence of debts owing by the vendor does not put the purchaser upon an enquiry into the vendor's circumstances.

District Courts Act, 1901 (No. 4), s. 108 -Appeal—Interpleader issue.

An appeal lies under s. 108 from an order made in an interpleader issue.
District Courts Act, 1901 (No. 4), ss. 107, 108-Appeal-Special case abandoned—
Rule nisi obtained.

A party who has had a special case stated under s. 107 and signed by the Judge, may, before the special case has been transmitted to the Supreme Court, abandon his proceeding and appeal by way of rule nisi under s. 108.

District Court-Practice-Appeal-Money paid to party successful below-Refund, Where money had been paid out of the District Court to the party successful, the Supreme Court, having reversed the decision, ordered the money to be refunded.

APPEAL by way of rule nisi from a judgment of the District Court on an interpleader issue.

Coghlan, a solicitor, made an arrangement with one Johnson, also a solicitor, that the latter should go to Cowra and open a branch business for him. Johnson was to have a salary and share in the profits, and Coghlan was to spend 201. in furnishing an office at Cowra. Johnson had some office furniture, and asked Coghlan to buy it, telling him that he owed 5l. on a bill of sale over the furniture, and 7. 18. 6d. to his landlord for rent. Coghlan agreed to take the furniture for the amount of these two debts and to pay the cost of sending it to Cowra. He accordingly gave Johnson cheques to pay the bill of sale holder and the landlord, and considered the furniture his. Coghlan did not make further enquiries as to Johnson's debts and affairs, and Johnson did not tell him that he was indebted to Alexander, who was pressing him. Alexander obtained judgment and

1905.

August 9.

The C.J.
Cohen J.
and
Pring J.

1905. COGHLAN

v.

seized the furniture, which was still in Johnson's office. Coghlan claimed the goods, and an interpleader issue was tried before ALEXANDER, Gibson, D.C.J. Milner Stephen, for the claimant, asked his Honour to rule that the sale to the claimant being for valuable consideration was valid unless it were proved that he had actual and express knowledge that the sale was intended to defeat creditors. His Honour refused so to hold and said, "If I were to hold that this was a bona fide transaction under the circumstances. I should open the door to fraud in all transactions of this kind. As a juryman I find that the evidence points to fraud, and in this way. Coghlan should have made enquiry as to Johnson's other debts before he, in this off-hand way, drew the cheques, and the close connection between the parties should have put him upon enquiry, especially when he found out that Johnson owed these two sums. I do not feel inclined to find actual fraud in Coghlan's behaviour, and do not find that he had direct notice. I do not believe he had, but I believe the law to be that he ought to have taken steps to acquaint himself in a matter of this kind, and if he does not he should suffer before the creditors. Not taking possession of the goods is one circumstance; their being partners; and giving cheques; all these things seem to me to be of a suspicious nature.” And his Honour accordingly barred the claim.

The claimant appealed.

J. L. Campbell and Pitt, for the respondent, took three preliminary objections. First, no appeal lies under s. 108. An interpleader issue is not an "action" within the meaning of that section. In s. 107, which specifies the cases in which an appeal lies, it is called a "proceeding " in distinction to an action: see Beswick v. Boffey (9 Exch. 315); Hamlyn v. Betteley (6 Q.B.D. 63).

Gordon, K.C., and Milner Stephen, for the plaintiff, referred to s. 3 which defines "action" as "cause, suit, or other proceeding."

J. L. Campbell. Secondly, I tender an affidavit to show that the appellant first appealed by way of special case under s. 107. A case was stated and signed by the Judge. That appeal is still pending and undecided. Having elected his method of appeal the appellant is not at liberty to discontinue, and adopt a different procedure.

v.

Gordon, K.C. I object to the affidavit. This is not a preli- 1905. minary objection. It does not appear on the face of the proceed- COGHLAN ings. We cannot now be called upon to argue a point for which ALEXANDER. we were not prepared and of which we had no notice. The proper way to take advantage of this point was to move to set aside the rule nisi. The objection goes to show that the rule should never have been granted.

THE CHIEF JUSTICE. We think we ought to allow the affidavit to be read.

Gordon, K.C. The special case has lapsed. It was never transmitted to the Prothonotary in accordance with rule 305. Abandoning our rights under s. 107 does not deprive us of our rights under s. 108 so long as we are within time. There is nothing to prevent an appellant proceeding by both methods simultaneously.

J. L. Campbell. Thirdly, the goods were sold by consent, and the proceeds paid into Court. After the decision of the interpleader issue the money was paid out to the defendant. This Court cannot now order the money to be refunded, and therefore the discussion becomes purely academic.

Gordon, K.C. As to the main point involved in the appeal, the learned Judge below appears to have confused the Statute of Eliz. with the Bankruptcy Acts. The Judge could not properly decide against the claimant without finding that there was fraud, and that Coghlan was a party to it. The Statute of Eliz. has nothing to do with preferences, it deals with frauds: see the cases collected in May's Fraudulent Conveyances, 2nd ed., pp. 78, 104.

J. L. Campbell. No doubt fraud must be proved, but it may be proved by a number of facts tending to raise the inference that it exists.

THE CHIEF JUSTICE (having stated the facts). The learned Judge held that, having regard to all the circumstances the plaintiff was put upon his enquiry, and that not having made further enquiries as to Johnson's financial position, he showed a want of bond fides. He held, however, that there was no intent

1905. COGHLAN

บ. ALEXANDER.

The C.J.

to defraud on the plaintiff's part, and that he had no direct notice or knowledge of any fraud. I am of opinion that his Honour's decision is erroneous in law. No such duty to enquire as his Honour holds to have been thrown on the plaintiff, is imposed by law. If it were, no one could do business with safety. If that were the law, a man who goes into a shop to buy goods would have to enquire whether the tradesman owed debts. (His Honour cited passages from May's Fraudulent Conveyances, 2nd ed., pp. 7, 8).

With respect to the objections taken by Mr. Campbell, the first is disposed of by the interpretation clause of the District Courts Act. His second point was that as a special case had been signed the appellant was confined to that mode of appeal. If the case had been transmitted to the Prothonotary under Rule 105, it may be that that would be so, though I express no definite opinion. But here, before that was done, the appellant withdrew the case, and gave notice of withdrawal to the other side. Then he obtained a rule nisi. I think he was entitled to abandon his original proceeding and to commence de novo. Of course the respondent would be entitled to any costs occasioned by the special case.

It was further argued that as the money has been paid over to the defendant the present dispute is purely academical, and that the appellant ought, in order to protect himself, to have obtained a stay of proceedings pending his appeal. I think, however, that we can give effect to our present order, and that we can and ought to order the money to be refunded. The defendant cannot be permitted to hold money received under an erroneous judgment.

COHEN and PRING, JJ., concurred.

Verdict entered for the plaintiff with costs

Money to be repaid into the District Court.

Attorneys for the appellant: Lumsdaine & Leibius.

Attorney for the respondent: W. E. Clupin.