SECOND READING. (Hansard, 17 August 1883)

THE LORD CHANCELLOR
, in moving that the Bill be now read a second time, said, that this was a most important Bill; and, though he regretted the lateness of the time at which it had reached their Lordships' House, he did not think it was a case in which they should hesitate to pass the measure with such Amendments as might be required. It was a difficult subject, and one which, from the time of William 941 IV. down to the present, had seen many attempts at revision. That, perhaps, might be partly owing to some inherent and unavoidable difficulties on the subject itself, and partly to causes removable by better legislation. He Would not do more than simply mention the legislation of the time of Lord Grey, the legislation of 1849, or that of the year 1854; but in the year 1869 a General Act was passed, founded very much upon the apparent success of the Scotch system, which it was then sought to adopt. After the experience of 14 years, however, that Act had been found in many respects seriously defective, and particularly in relation to the administration of the bankrupt's estates by the trustees, and other persons entrusted with the management of the affairs of the bankrupt, and also in respect to the system of liquidation by arrangement, which it permitted as an alternative to bankruptcy. From time to time efforts had been made, among others by the noble and learned Earl (Earl Cairns), with a view to remove the defects of the Act of 1869; but none of them had proved successful, and the present Bill was introduced with full knowledge of the evils which had preceded it, and with a determination to endeavour to go to the root of those evils which existed in the present system. The Bill had been carefully prepared and considered by the Government, and especially by Mr. Chamberlain, who, in his own Department, he must say, had been as industrious and efficient as any Minister could be. It was introduced in the House of Commons, and passed through a well-selected Grand Committee of Trade, presided over by his right hon. Friend Mr. Goschen, who conducted their labours with patience, judgment, and ability. The consequence was that the Bill, from its consistency, and from its well-considered details, would be found to deal boldly with the difficulties of the situation. Turning to the Bill itself, he would point out that considerable differences of administration were introduced by it. It separated the judicial arrangements for bankruptcy business from the administrative business in a way never before attempted. The judicial business was to be conducted by the High Court. One particular Judge, selected by the Lord Chancellor, would be specially charged with bankruptcy business. Under him there were to be 942 the Registrars in London and County Courts, with their Registrars, in the country. The administrative control was to be vested in the Board of Trade; the Controller and other administrative officers, with the Official Receivers, would all be officers of the Board of Trade. The Bill abolished the debtor's summons, and, instead, made suffering execution to issue under any judgment, or nonpayment of a judgment debt after a certain notice. With respect to the initiation of proceedings, the Bill restored the right which formerly existed, but which was taken away in 1869, for a debtor himself to petition that he might be brought under the law, admitting his own insolvency. When a petition was presented, either by the creditors or by the debtor himself, it would go to the Court; and the Court issued, if it found that there had been an act of bankruptcy, what was called a receiving order, placing the bankrupt's estate in as much security as if there were an immediate adjudication of bankruptcy. Under that receiving order the Official Receiver—an officer of the Board of Trade—would at once have the powers of a trustee in bankruptcy, and would take possession of the property, would appoint a manager in certain cases, and would take the necessary preliminary steps to convene the creditors, and put the Act in operation. Next, the creditors were to meet, proofs were to be taken of their debts, and there was to be a public examination of the debtor, who was to make a full disclosure of his affairs. The meeting of the creditors was to have an option whether they would proceed by way of composition, if a composition were offered, or by way of bankruptcy; but it would depend upon the decision of the Court whether their option should be confirmed or not. Under the present law, in regard to proxies, it had been found that persons with no interest in the bankruptcy could get a sufficient number of votes to carry the appointment of the trustee or other appointments; and that system had been much and justly complained of. Under this Bill there were safeguards provided against the abuse of proxies. The meeting of creditor's would choose the trustee, and the Court would then have to determine whether it would approve of a composition, or whether the debtor was to be adjudicated a bank- 943 rupt; and it would be the duty of the Court to reject the composition if it found that it would not be beneficial to the creditors generally, or that the debtor had been guilty of acts of that kind which might deprive him, if bankrupt, of the right to his discharge. Again, if the composition were allowed, and if anything afterwards appeared to show that it ought not to have been sanctioned, there was a power to revoke the composition, and to proceed as in the case of bankruptcy. The Bill abolished the system of liquidation by private arrangement, which was established under the Act of 1869—a system which had proved to be one of the greatest defects of that Act. Under the Act of 1869 the proportion of liquidations to bankruptcies became enormous; and debtors had by those means too great facilities for evading proper inquiry into their affairs, and of making such arrangements as suited their own purpose and convenience. Under the present Bill they could not escape a public examination into their affairs. Then, with respect to discharge, when the debtor had fulfilled the duties that were required from him by the Act, he would, after a certain time, be able to apply for his discharge. If he had committed any acts of fraudulent bankruptcy, or carried on trade in an improper way, then his discharge either must or might be refused. If he had done any of these things, his discharge might also be granted on conditions. The Act of 1869 made it a condition of the discharge that a dividend of a certain amount should be paid. It had not been thought necessary in the present Bill to retain that provision; but it substituted a power for the Court, in the exercise of its discretion, to make the discharge conditional, so that, if there should be reason for it, after-acquired property might be reached. By the Bill bankruptcy was made a disqualification for offices of trust and importance, and, among other things, for sitting or voting in this or in the other House of Parliament. Under the law, as it now stood, there were some differences between the case of a Peer and that of a Member of the House of Commons who had the misfortune to be made a bankrupt, and as to the conditions on which he was to recover his former position. Those differences were removed 944 by the Bill; and the conditions on which a Peer or a Member of the House of Commons who had become disqualified by an adjudication of bankruptcy would now be the same—namely, if the bankruptcy was annulled he was restored to his former status; and, again, if he was discharged with a certificate that his bankruptcy arose from misfortune, and not from misconduct. Turning to the subject of administration, certain debts were, under the Bill, to have a preference. These were rates and taxes due for not more than 12 months; clerks' and servants' wages not exceeding £50; labourers' and workmen's wages not exceeding two months, and a landlord's distress for not more than one year's arrears of rent. Then, certain short periods were fixed for declaring dividends, subject to enlargement. When the bankrupt's estate was not more than £300, there would be a summary administration, the Official Receiver was to be the trustee; and the functions of the Committee of Inspection, who, in other cases, might be appointed by the creditors, were then to be exercised by the Board of Trade. Again, when the total debts did not exceed £50, the County Courts were to have powers of administration, and might provide for payment by instalments. The estates of deceased persons who died insolvent were also brought within the purview of the Bankruptcy Law. He would now mention the functions the Board of Trade was to exercise. In the first place, in all cases the trustee in bankruptcy must give security, to be approved by the Board of Trade. Then the Board of Trade was to have power, subject to the opinion of the Court, to reject the trustee chosen by the creditors, if it appeared that the creditors voting at the meeting at which he was chosen had acted in bad faith, or if the person chosen were unfit to act as trustee, or had shown partiality. If the creditors appointed no trustee, the Board of Trade was to appoint one; and if the creditors did not appoint a Committee of Inspection, then the Board of Trade might exercise the powers of a Committee. The costs of all solicitors, and the charges of all managers, accountants, auctioneers, brokers, and other persons acting professionally in a bankruptcy, were to be taxed, and the accounts of the trustee were to be audited by the Board of 945 Trade. All balances were to be paid into the Bank of England, or into a country bank, authorized by the Board of Trade, unless, for special reasons, power was given to retain the whole or part of any balance; and, besides these provisions, the Board of Trade was to exercise over the trustee general powers of superintendence and inquiry. He thought he had stated the provisions of the Bill sufficiently to show their Lordships that it proposed a reform likely to be very beneficial in the Law of Bankruptcy. The most novel feature in that proposal was giving the superintendence of a bankruptcy to the Board of Trade, which possessed this advantage—that it entrusted the administration of bankrupts' estates to a public officer, who would be answerable to Parliament, who would have a sufficient staff for the purpose, and who was incapable of being actuated by partial or interested motives. He believed that the Bill, as a whole, was approved by the mercantile community. It had been passed through the House of Commons with great care and great skill; and he hoped it would commend itself to their Lordships. He begged to move that the Bill be now read a second time.

§ THE MARQUESS OF SALISBURY
merely wished to say a few words respecting the introduction of the Bill into their Lordships' House at this period of the Session. He thought that the introduction of such a Bill at such a time was a practice against which their Lordships should enter their protest; and if he had observed that there had been any disposition on the part of the House to differ from the principle of the Bill, he would have been inclined to suggest that they should take even some stronger action. They had, besides the noble and learned Earl on the Woolsack, nine Law Lords in the House; but he observed only one present in addition to the Lord Chancellor. He took it that the silence of that noble and learned Lord meant consent to the second reading, and that the opinion of the very strong body of Legal Authorities, which it was the pride of the House to possess, was in harmony with the proposals and provisions of the Bill. The question of the Bankruptcy Law had been before their 946 Lordships more than once, and both sides of the House had had their share of legislation upon it. He believed it would be generally admitted that the noble Earl was correct when he said that the consideration given to the Bill in the other House had been most careful and exhaustive; and, therefore, notwithstanding the somewhat scandalous time at which the Bill appeared in their Lordships' House, he would not oppose the second reading.

§ EARL FORTESCUE
said, he must complain of the mode in which the House had been treated. His opinion was that the discredit cast upon the House was as nothing compared with the public injury caused by withholding from so large a number of eminent Legal Authorities as had seats in that House the opportunity of bringing their great knowledge and long experience on the Bench to bear on the measure, and so making it more perfect in its details. The noble Leader of the House had, on several occasions, declared, no doubt with sincerity, the deep interest which he felt in the honour and credit of that House. He (Earl Fortescue) would be sorry to believe that his noble Kinsman, after all his services to the Liberal Party, had less influence in the Cabinet than his right hon. Colleague in the other House, who had made no secret of his contempt for their Lordships' House, or even for Royalty itself. He, therefore, believed that the Prime Minister himself had thrown his strong authority into the scale, and had deliberately kept back from this House the many important measures which had been crowding into it during the last week or so. The House had on various occasions, and, he believed, with the approval of the country, set itself in opposition to the right hon. Gentleman. Their Lordships would remember that they appointed a Committee to inquire into what they believed was the injustice perpetrated in many instances on landowners under the Irish Land Act. The Prime Minister then induced the House of Commons to pass a Vote of Censure on their Lordships for so doing, after having wasted a week in the discussion; and the only result was that the Vote of Censure was never mentioned by any Member of either Party without a smile—in fact, it fell dead upon the country. Their Lordships had not been forgiven the 947 obstacles they had placed in the right hon. Gentleman's way; and the consequence was that a number of important measures were brought up to a certain stage in the House of Commons, and none of them were finished in time for convenient consideration by their Lordships' House. During the 40 years he had sat in Parliament he had seen several Bankruptcy Bills passed, and many more brought in by different Governments. The question was confessedly one of great difficulty as well as importance. But, at the present moment, the noble and learned Earl on the Woolsack was the one Law Lord who was here to initiate, carry on, and close the discussion on this Bill, with regard to which the judicial experience and high legal knowledge of the other Law Lords would have been of the greatest advantage.

LORD DENMAN
said, that what he objected to, as to this Bill, was that it had been too little discussed. A Bankruptcy Bill, in 1832, had been brought in by his noble Relative, when Attorney General, and he had been much blamed in reference to it, and it had been greatly altered since; and yet it inaugurated a far better system than previously was administered by Commissioners of Bankruptcy. In order to obtain full discussion, he would remind their Lordships that it was in their Lordships' power to adjourn the consideration of the Bill to any period they might think fit.

§ LORD FITZGERALD
said, that, as he had been appealed to as one of the Law Lords, he wished to say that the Bill had only reached him at 1 o'clock that day; and he could not, on such short notice, take upon himself the responsibility of criticizing its provisions. He thought it was extremely unreasonable to ask the House to read the Bill now. He felt himself in some degree humiliated in being asked to assent to the second reading of the most important Bill that had come down to their Lordships' House this Session, and which affected the interests of the whole community, without having had an opportunity of considering its principles. What seemed to be the main principle of the Bill was one of a perfectly novel character—namely, the transference of the superintendence from the creditors to the Board of Trade. There was no doubt that some alteration was necessary, and it was very likely that this would prove a very efficient 948 measure; but he must say that none of them there—unless, perhaps, those who had followed the debate in the Grand Committee of the House of Commons, if those debates had been published—were in a position to pass judgment upon the Bill. Their Lordships were, therefore, placed in this position—either they would be passing a measure with which they were unacquainted, or if they rejected it they might be destroying what would be a very wise and beneficial measure. In the circumstances, he could only agree to the second reading in the hope that if any alterations were necessary to make the Bill acceptable to their Lordships, Amendments would be introduced in Committee with that object.

§ THE EARL OF REDESDALE (CHAIRMAN of COMMITTEES)
said, he would remind their Lordships that some time ago he asked the Government whether this and other Bills, which had been before Grand Committees, could not be brought up and printed, so that they might be considered by their Lordships. If that had been done, there would have been no cause for complaint. He had always protested against the manner in which that House was treated at the end of the Session.