SECOND READING. (Hansard, 24 July 1890)

§ * LORD MACNAGHTEN
I have to ask your Lordships to give a Second Reading to this Bill which comes from the House of Commons. As your Lordships know, this matter has attracted a good deal of attention in various quarters. In the House of Commons, both in Grand Committee and in the House itself, the Bill has been very fully discussed in all its stages. It has been before all the Chambers of Commerce in the United Kingdom, and it has been approved by them all. I hold in my hand a Petition from the Association of Chambers of Commerce of the United Kingdom, a body which I believe includes all the Chambers of Commerce in the United Kingdom except the London Chamber, praying your Lordships to pass the Bill during this Session, and I am informed that the London Chamber of Commerce is prepared to present a Petition to the same effect. Under these circumstances, I think the Bill comes before your Lordships with a strong claim to the favourable consideration of the House. It cannot be denied, and certainly I am not concerned to deny, that the Act of 1883 has worked fairly well, quite as well in almost every respect, and in some respects certainly better than any one of its numerous and short-lived predecessors. But the Act has now been in operation for six years and a half, and it is not surprising if, in the course of that period, many points have been discovered in which, at any rate, it is reasonable to think that the Act is susceptible of improvement. The Amendments which this Bill proposes are many and various. There are slips in the Act of 1883 which require to be corrected. Here and there in the construction of the Act there has been a view taken or a decision pronounced which is, I will not say erroneous, but which has certainly been unfortunate, and not, I should fancy, in accordance with the in- 675 tentions of the framers of the Act. Perhaps I may give your Lordships one instance by way of illustration. The Board of Trade has power to remove a Trustee for misconduct. That is a very useful and a very wholesome power, and, as far as I know, the Board of Trade have always exercised it with discretion and firmness. But I am told that this has happened: A man is Trustee of several estates; in one he is found to have misconducted himself, and the Board of Trade promptly remove him; but having done that, the Board of Trade, as I understand, are advised they can do no more, and that they cannot remove him from the Trusts of the other estates in which, it may be, he has not yet had an opportunity of misconducting himself or in which his misconduct has not yet been discovered. I cannot think that is satisfactory. I think it is almost scandalous that a man who has committed a breach of trust in regard to one estate should not be immediately removed from other similar Trusts which he holds. On that point I think your Lordships will have no difficulty in agreeing to the Amendment proposed. I only give that instance by way of illustration. There are many other Amendments which are important, no doubt, but yet which do not involve any question of principle. For instance, the Bill deals with the much-vexed question of proxies. It cannot, I think, be disputed that creditors who are unable to attend in person at meetings of creditors ought to be allowed to have an opportunity of expressing their opinions by proxy in as full and ample a manner as is consistent with the due and safe administration of the estate. On the other hand, there is nothing so mischievous as trafficking in proxies. There is nothing, according to my experience, which so much conduced to the discredit which attached to the Act of 1869 as the trafficking in proxies to which that Act gave rise. The consequence of that discredit was that with regard to proxies the Act of 1883 is very severe. Many people think it is unduly strict, and accordingly the Bill deals with that matter. Your Lordships will find there is a greater latitude allowed with regard to proxies, but yet there are restrictions which I should hope would prevent the recurrence of any such abuses as were 676 rife under the Act of 1869. Then, my Lords, there is another point. Your Lordships will find elaborate provisions are made with regard to compositions and arrangements, the object being to make the procedure in compositions and arrangements more expeditious and more in harmony with proceedings in bankruptcy under the Act of 1883. Those are all matters of detail or administration, and it would not be right that I should detain your Lordships now by dwelling upon them; but there are, as it seems to me, some matters which are matters of principle, and perhaps I may be allowed very shortly to refer to two or three of them before I sit down. The most important provision in this Bill, and the one which, it seems to me, will be the most far-reaching, and I should hope the most beneficial in its effect, is a provision with regard to the discharge of the bankrupt. Your Lordships may perhaps remember that, under the Act of 1869, it was made a condition of the bankrupt obtaining his discharge either that he had paid 10s. in the £1, or that the creditors—and I ask your Lordships to note that the power was by that Act given to the creditors—should pass a special Resolution stating that, in their opinion, the bankruptcy or the failure to pay 10s. in the £1 was due to circumstances for which the bankrupt was not justly responsible, and that they were desirous that the bankrupt should obtain his order of discharge. At first sight that seems a very reasonable provision, and, one would think, not specially open to abuse. But, unfortunately, there are creditors who care more for their pockets than for an abstract idea of commercial morality; and it was found that when the creditors had obtained all they could get in the bankruptcy, they were supremely indifferent as to what became of the bankrupt—whether he got his discharge or not. That led to various abuses. It led to bribery. Many a bankrupt obtained his discharge by means of bribery, and sometimes by fictitious votes, who, if the matter had rested with the Court or with an official body, such as the Board of Trade, would have been severely dealt with. The consequence of those abuses was that there is no similar provision to be found in the Act of 1883. 677 Under the Act of 1883 a bankrupt is in precisely the same position with regard to obtaining his discharge, other matters being equal, whether his estate pays a dividend of 6d. or 15s. in the £1. That, again, has led to abuses. A trader in a bankrupt condition, hoping against hope, goes on long after there is any possibility of retrieving his position, and the consequence is that, under the present Act, dividends are miserably small. On this point there is a very strong feeling among the commercial community. They think a man ought to know the state of his affairs, and they think he is bound to stop as soon as he finds it is impossible for him to retrieve his position. They think he is not justified in going on and wasting money, which, in reality and in truth, is not his own, but which belongs to his creditors, either in keeping up appearances or in a hopeless adventure. The Bill, therefore, proposes in this matter to return to the principle of the Act of 1869; but with this important difference: that the power which, in the Act of 1869, was rashly confided to the creditors is placed in the hands of the Court. Under this Bill the fact that a bankrupt estate has not paid 10s. in the £1 is one of the facts on proof of which the Court has power cither to refuse the discharge or to suspend the discharge, or to grant the discharge under certain conditions. I trust that that alteration, which is a very important one, will commend itself to your Lordships' judgment. Then there are two other provisions which, in some respects, certainly touch on a question of principle, to which I will very shortly refer. There is one which deals with so much of the debts provable in bankruptcy as consists of interest. That provision is directed against a class of persons who have very few friends. I do not think that even the Liberty and Property Defence League will take up the cudgels on their behalf. It is directed against the class of money-lenders. Money-lenders trade, of course, upon the necessities of mankind, and they protect themselves in this way: as regards the principal, they advance in cash as little as they can; and as regards interest, they demand a rate which is certainly liberal, if not exorbitant. Now, the Bill proposes to deal with that matter in this way: It proposes that, as regards debts provable 678 in a bankruptcy, so much as consists of interest should be calculated as between the creditors and in the administration of the estate at a rate not exceeding 5 per cent., leaving the money-lender as regards any balance to look to the estate after all the other creditors have been paid in full. I think, under all the circumstances, that is not an unjust provision. The only objection that one feels to it is that it seems rather like paying money-lenders in their own coin, in holding out to them the some what illusory hope that, after all, the bankrupt estate will prove to be solvent. There is just one other provision, and I mention it with some diffidence, because I have heard it said that this House will not fairly consider it—I do not in the least degree believe that—and that is the provision with regard to distress. Your Lordships will find the power of distress, which, under the Act of 1883, was available for the recovery of 12 months' arrears of rent,is, under this Bill, to be available for six months' arrears only. No doubt that is an important change, and some people think it an unwise one. But I am sure your Lordships will consider it fairly. Your Lordships will bear in mind that it only applies to cases of distress levied after the commencement of the bankruptcy. You will also remember that the Act of 1883, as originally introduced, proposed to do away with the right of distress altogether; and perhaps this is a case in which your Lordships may think it better, in view of the present current of legislation, to secure one-half instead of standing out for the whole. My Lords, with these observations I leave the Bill in your hands, and I beg to move the Second Reading.

§ * LORD MACNAGHTEN
With regard to the Committee to which the Bill should be referred, perhaps your Lordships may think it right that it should be referred to a Committee of the House. The time of year is getting very late, and there are only one or two matters of principle which must, as it seems to me, be decided by the House, and it would be no advantage to pass a preliminary judgment in one of the Standing Committees. I therefore move 679 that it be referred to a Committee of the whole House.

§ LORD HERSCHELL
If my noble and learned Friend will tell me that he has considered all the details of the Bill so as to be able to vouch for it, then I should not oppose the Motion; but, judging from other measures which we have had before us, although they have come up after consideration by the other House, they have not been without the necessity of careful revision.

§ * LORD MACNAGHTEN
I think this Bill stands in rather a different position. I may say that 'I have gone carefully through it, and I think it is one which your Lordships might deal with in Committee of the whole House.

§ THE PRIME MINISTER AND SECRETARY OF STATE FOR FOREIGN AFFAIRS (The Marquess of SALISBURY)
I hope the House will think twice before it makes so great a breach in its custom of referring such Bills to a Committee. Of course, we all place the greatest possible confidence in the assurance of the noble and learned Lord, but if it is to be a rule that simply upon the assertion or upon an assurance on the part of a noble Earl who brings in a Bill that it is of no use for the Bill to go to a Standing Committee, then I think the use and value of Standing Committees will be greatly diminished.

§ * LORD MACNAGHTEN
I need not say that I was not in the least claiming anything of the sort for myself. It was only in consequence of the late period of the Session that I ventured to suggest it.

§ THE MARQUESS OF SALISBURY
We have still got a good three weeks, I think.

§ THE LORD CHANCELLOR
I would only point out that this Bill involves important questions upon the Bankruptcy Law, and I think if a Bill dealing with somewhat delicate and difficult subjects of that nature is not to go to a Standing Committee it would be very difficult to say what Bills ought to be so referred.

§ LORD BRABOURNE
In regard to referring the Bill to a Committee I think this is one of the instances in which a 680 very important Bill would be practically withdrawn from the cognisance of the House by being referred to one or other of the Committees. This practice, I think, is really becoming exceedingly unpleasant. We never know to which Committee a Bill is going to be referred; and if such a Bill as this, at the present period of the Session, is to be referred to a Select Committee, the practical effect will be that it will not receive the consideration of the House, and I do not think really that a Bill of so much importance ought to be withdrawn from your Lordships' cognisance.

§ LORD HERSCHELL
I cannot at all agree with the noble Lord who has just sat down. The House is just as much cognisant of the details of the Bill after it has gone, and in spite of its having gone, to Committee, as before. And, more than that, I will venture to say that I can prove that Bills after they have gone through Committee, have been more discussed in this House than, according to former precedent, they would ever have been before.

§ LORD BRABOURNE
What I meant was that they are withdrawn from the cognisance of the public by being withdrawn from the consideration of the House. They have not the public eye upon them, as they would have if discussed before the Committee of the House.

EARL BRAUCHAMP
I must say, in a matter like this, affecting the interests of the great commercial community throughout the country, that a Bill of such importance should not be referred to a hole-and-corner Committee upstairs. It is very important indeed that the public should know not only what is actually done by this House, but also the grounds of our decision; and though our Debates may not be as fully and perfectly reported in the public journals as we may desire, I would point out to your Lordships that there is still a complete record of our Debates in the imperishable pages of Hansard. There, at least, a Report of whatever may have been said in this House will be found. Small Bills, like the Public Libraries Act, may, no doubt, be very properly and effectually discussed in Committee, but when we are dealing with great interests affecting the whole commercial community, I 681 think it is very desirable that the deliberations upon them should not be withdrawn from the cognisance of the public, as they certainly are when such deliberations take place in a small Committee upstairs, and not in full Committee of this House.

THE EARL OF KIMBERLEY
I would point out to the noble Lord that this "hole-and-corner" system, as he describes it, was adopted by the other House in reference to this very Bill, and I apprehend that there must be there at least as many Members as in this House who have regard to the commercial interests of the country. I think, therefore, we shall be at least pursuing a course which has a very good precedent in what has been done elsewhere.

§ EARL BEAUCHAMP
I am very glad to find that the noble Lord is so fond of precedent.

§ * LORD MACNAGHTEN
I propose, then, that the Bill should be referred to Committee of the Whole House.

THE EARL OF CAMPERDOWN
My Lords, I beg to move, as an Amendment, that it be referred to the Grand Committee on Law.