No part of the law of bankruptcy is more intricate, or has been the subject of more litigation than this, and any detailed view of the effect of legal decisions can only be gathered by a perusal of the cases; but the following general principles may be stated: - The term "property" includes not only property of which the bankrupt is the true owner, but property in his possession, order or disposition in his trade or business with the consent of the true owner, in such circumstances that he is the reputed owner thereof. The application of the doctrine of reputed ownership has been considerably restricted in recent years by the growth of alleged trade customs, in accordance with which property is frequently lent under a contract of "hire and purchase" or otherwise; and by the decisions of the courts that where such custom is sufficiently proved the doctrine does not apply. Further, the trustee's title not only includes property in the actual possession of the bankrupt, but relates back to the date of the first act of bankruptcy committed by him within the three months preceding the presentation of the bankruptcy petition, and thus invalidates all payments and assignments to creditors made during that period with knowledge on the part of the creditor or assignee of the commission of the act of bankruptcy.
In such cases the trustee may, therefore, require the money or property to be restored to the estate. And even where no prior act of bankruptcy is proved, any payment made to a creditor with the view of giving such creditor a preference over the other creditors, within the three months preceding the presentation of the petition on which the payer is made bankrupt, is rendered void as against his trustee. Settlements of property within the two years preceding the bankruptcy, unless made before and in consideration of marriage, or made in good faith for valuable consideration, are also void, as are similar settlements within ten years, unless it is proved that the settlor was (independently of the settled property) solvent at the date of the settlement, and that the interest in the property passed to the trustees on the execution of the deed. The same rule applies to covenants to settle in consideration of marriage future-acquired property in which the debtor had no interest at the date of the marriage (other than property acquired by the bankrupt through his wife), if such property is not actually transferred before the bankruptcy.
Executions by a creditor not completed at the date of the receiving order are also void, and the proceeds of an execution in the hands of the sheriff must, with certain exceptions and subject to deduction of costs, be handed over to the trustee. But all property held by the bankrupt on trust, and tools of trade, wearing apparel and bedding to a total value not exceeding £20, are excluded from the property divisible among the creditors. With respect to property acquired by the bankrupt, whether by gift or legacy, or consisting of accumulations of business or other profits after the commencement of the bankruptcy, and before he obtains his discharge, the trustee's title also prevails; but bona-fide transactions by the debtor for value, other than transactions relating to freehold property, appear to be valid. Where the bankrupt is a beneficed clergyman the trustee may, subject to certain provisions for the due discharge of the duties of the office, apply for the sequestration of the profits of the benefice; and where he is in receipt of a salary, income or pension, etc., the court may order any part thereof to be paid to the trustee, but where he is an officer of the army, navy or civil service, such order is only to be made with the consent of the chief of the department concerned.