Re Cao, L.T. v Dixon, T.W.F

The case of Re Cao, L.T. v Dixon, T.W.F, involved a dispute over the control of a bankrupt's property and the voidability of a settlement of property prior to the act of bankruptcy. The central issue was whether the settlors' potential tax liabilities should be considered as part of the bankrupt's debts at the time of the settlement. This determination was crucial for the purposes of s.120(2)(a) of the Bankruptcy Act, which pertains to the ascertainment of "all his debts" at the time of the settlement.

The court was required to decide whether the debts of the husband and wife at the time of the making of the settlement included their respective tax liabilities. The legal issue was whether potential tax liabilities should be included in the calculation of debts under the Bankruptcy Act. The court had to interpret the provisions of s.120(2)(a) and consider the implications of including or excluding potential tax liabilities in the settlement.

The court reasoned that for the purposes of s.120(2)(a), the debts of the husband at the time of the making of the settlement did indeed include the husband's tax liability, and similarly, the debts of the wife at the time of the making of the settlement included the wife's tax liability. The court found that potential tax liabilities should be considered as part of the bankrupt's debts. This interpretation was based on the broad language of s.120(2)(a), which requires consideration of all debts at the time of the settlement.

The court ordered that the question regarding the inclusion of the husband's and wife's tax liabilities as part of their debts at the time of the settlement be answered in the affirmative. Counsel were instructed to submit within five days minutes of the orders they proposed with respect to the remaining issues in the proceedings. The settlement and entry of orders were governed by Rule 124 of the Bankruptcy Rules.