§ Mr. J. Smith, in rising to move the second reading of this bill, said, that in calling the attention of the House to the principal points of the bill, it would be necessary to allude to the steps which had been taken upon the same subject in the two last sessions of the last parliament. There were at that time petitions presented from various parts of the country, complaining of the grievances which existed under the bankrupt laws as they then stood. These petitions were referred to a committee, which was appointed in 1817. From the report of that committee, who had taken the greatest pains to make themselves acquainted with the subject, very valuable information had been derived. The committee of 1818 had added very materially to this information by their labours, and the result of both having gained publicity, had attracted great attention in every part of the country. The bill which he now held in his hand was not the same as the measure which had been proposed on a former occasion. It adopted, it was true, many of the improvements which were then suggested; but there were others added, calculated to obviate many grievances which were not fully entered into at that time. The principal grievances arising from the bankrupt laws, as they now stood, were kept in view, and would be met by what he thought appropriate enactments in the bill. The first great object would be to take such a proper care of the bankrupt's property, as to ensure the creditors, as well as the bankrupt himself, against that loss which they now so frequently sustained from the manner of proving debts. Another object would be to prevent the loss of many debts which it was found difficult to prove under the present system. A great object would also be, to do away the facility with which fraudulent bankrupts could at present obtain their certificates, to alter the law which inflicted 1381 the punishment of death in many instances of fraud under these acts, and to ensure an adequate allowance to the bankrupt himself on the dividend. The want of such regulations had been complained of in several petitions, and were proved before the committee in 1817. At that time the committee had called before them several Irish gentlemen, engaged in very extensive commercial dealings in the sister country. The examination of these occupied the committee eight or ten days; and in the end, it appeared to them, that it would be very difficult to introduce any measure which would be applicable in the same manner in both countries. This would, if it could be effected, be most desirable; but from the difference of the laws and practice in the two countries, it would be almost impossible to introduce into one bill, the regulations which, might be necessary for both. However, he was not without the hope that a bill applicable to the exigencies of the bankrupt laws in Ireland would be speedily introduced, as a right hon. friend of his had promised, that if this bill was passed, he would give his assistance in framing one which might remedy the evils experienced from those laws in Ireland. After the examination of the gentlemen alluded to, the committee of 1817 proceeded to examine several respectable merchants and traders of the metropolis, and also several eminent solicitors, a great part of whose business was connected with bankrupt commissions; and from all they received the concurring opinions, that the present state of the bankrupt laws was wholly inefficient to their object. In the next year the committee had the testimony of some of the most experienced of the commissioners, Mr. Montague, Mr. Cullen, and some others, who all agreed that the laws were totally inapplicable. Mr. Cullen, in addition to his direct concurrence in this opinion, stated, that not only the laws were inefficient, but also the entire constitution of the commissioners themselves.—After thus stating generally the acknowledged defects of the laws as they now stood, and an outline of the remedies which they called for, he begged the attention of the House while he offered a few observations upon some points in detail. The first enactment went to point out what; was the description of persons who might become subject to the bankrupt laws. Upon this point there had 1382 existed heretofore a great deal of difficulty and obscurity. In fact, it was not with any accuracy defined, who might, or might not, be declared bankrupts. It was known that many persons had been so declared, had commissions issued against them, and received certificates, who had never exercised any trade, or who only did one act of bankruptcy, and that often by accident. The story of the country gentleman against whom a commission of bankruptcy was issued was well known; but as it served strongly to illustrate his argument, he should repeat it. This gentleman kept a pack of fox hounds, and, as food for them, was in the habit of buying dead horses, and selling their skins; becoming embarrassed, a commission was issued against him, and it was held from that, that he was a trader within the meaning of the act, though his only act of trade was the buying the bodies of a few dead horses, and selling their skins. There were many other cases equally strong, and many instances where persons absolutely exercising trades (for instance, the trade of a dyer), were declared not to be subject to the bankrupt laws. To remedy this, he would define, as nearly as possible, all who were subject to, and all who should be exempt from, the operation of those laws. Among the exceptions he would class artisans, handicraftsmen, artists, sculptors, painters, schoolmasters, attornies and solicitors, scriveners, farmers, in respect of farming-stock of any description, butlers or servants to the inns of court, receivers or collectors of king's taxes; and, in general, all persons whose subsistence was wholly or principally dependent Upon manual, or mental labour, and whose usual dealings did not require or occasion credit by means of bills of exchange. As to some of these, as well as to others mentioned in that part of the bill which enumerated those who were subject to the bankrupt laws, there might, he had no doubt, exist a difference of opinion. The next enactment to which he wished to call the attention of the House was a new one, and, in his opinion, much called for by the defects in the present system. It declared, that any person coming under the description of those who were liable to the bankrupt laws, who after the passing of the present act, should, for seven successive days, stop payment, not being disabled through severe or sudden illness from attending to business, or who during 1383 that time generally refused or were unable to pay his or her debts, or who during thirty successive days should be absent from his usual place of residence or counting-house, or warehouse, without having made provision for his bills, notes, or any Other demands at the time of their becoming due; or who, having any writs of Action for debt issued against him, and notice of such left at his usual dwelling place, and who in nine days after such notice, (seven days being allowed to elapse between each notice) should not put in sufficient bail for such action; or who being arrested for a debt, should remain in prison for 14 days or more, for such or any other debt; such person should be liable to be declared, by any such act or acts, to have committed an act of bankruptcy, and be liable to have a commission issued against him, provided such commission be issued within twelve calendar months after any such act or acts. It was necessary that such guards should be placed upon the issuing of a commission; for the refusal in many cases to have a commission issued, was one of the greatest sources of fraud. Indeed, in 99 cases out of 100, the issuing of a commission was the result of a concert between the friends or creditors of the bankrupt. This was not the effect of fraud; the object was, to prevent the bankrupt from wasting the property of himself and the creditors until it would be too late. It frequently happened, that when a commission was so issued, the assignees met, and came to a division of the property, which was beneficial for all parties; but then, if the creditor was dishonest, and wished to defraud the whole of them, he might turn round and say, that the commission was illegal, that it was the result of a previous concert, and that he would apply to have it set aside. It frequently happened, that such proof lay in his power; and the consequence was, the commission was set aside, and the assignees might be made to pay back the whole of the money which he might have so collected. The result of this was, that of late years very few respectable persons could be got to act as assignees. In order to remedy this, he would have a clause, by which assignees should be protected from such abuses as he had alluded to. One thing which he conceived the House ought not to lose sight of was, the giving additional power to the commissioners. As at present constituted, they had scarcely sufficient power to regulate and 1384 keep order in their own court. It was disgraceful to witness such scenes of tumult and confusion as were of daily occurrence in those courts, where property to so large an amount was concerned. He begged to be understood as not intending to cast any imputation upon the conduct of the commissioners. Nothing was farther from his intention, and they themselves knew it. They were aware of the evils to which he alluded, and with a heavy responsibility, they stood as it were with their hands tied up. One additional power which he wished they should have, would be that of expunging the proof a debt, if they should afterwards see occasion. At present a debt, when once proved, could not be expunged, though it should be found that it was most erroneous, except by application to the chancellor, and that was attended with so much expense, that the creditors seldom found they would gain any thing, even if they should succeed. He would have a clause, giving the power to the commissioners to expunge a debt whenever they should see occasion, leaving it still open to any party objecting to appeal. He would also give them the power of enforcing the attendance of witnesses. He knew there was a great difference of opinion on the subject of adding to the power of the commissioners in town. He conceived that such an addition should be made, but he would by no means add to the power of the commissioners in the country. The country commissioners were, he might almost say, self-elected. The person issuing the commissions had only to give instructions to his solicitor, and he appointed any five persons he pleased, they being solicitors. It often happened, in consequence, that the immediate friends and connexions of the party were made commissioners. Sometimes the relatives or partners. He had heard of one instance of three partners, two of whom were made commissioners, and the third, assignee to the same commission. So fully sensible was the late chancellor Loughborough, of the serious evils and great abuses which were committed through this system, that he struck out several lists of commissioners in several parts of the country, who atone had the power to hear and determine upon bankrupt commissions. The practice was not followed up by the present lord chancellor, nor even were the vacancies in the two lists which still remained. The reason 1385 assigned for his lordship's non-interference was, a motive of delicacy, as such a proceeding would be giving to the solicitors in the country an advantage over their brethren in town. He (Mr. Smith) confessed he could not see how that reason ought to operate, or why any greater difficulty should exist in appointing commissioners in Yorkshire than in London. Indeed, so great was the evil arising from the manner in which many of those country commissions were at present worked, that it seldom happened that a shilling was received by the assignees.—One other point which he wished to remark was a new one: it was new, and one to which, though there were many objections, he confessed he was quite partial. In the second meeting of the commissioners, as the practice at present stood, the assignees were appointed, but it was impossible for the assignee, let him be ever so well inclined, to give his constant attendance; so numerous were the meetings, and so various the delays incidental to those commissions. The assignees, it was known, acted gratuitously; it was not to be expected, therefore, that they would pay that very diligent attention where they had no very great interest. The consequence was, that though he had known many who at the commencement of the business were very diligent, yet he found, that before it was half concluded, they got tired, and left the whole matter to be managed by the solicitor or his agents. Chance made him acquainted with the practice of the Scotch, in their working commissions; and he could not avoid remarking, that in this, as well as in many other instances, our northern neighbours had the advantage of us in good sound sense. In Scotland, it was the practice to appoint an agent to the commission, who kept the accounts of the bankrupt, examined his books, collected his debts, and did many other acts which was the duty of the assignees among them, but a duty, from the neglect of which the bankrupt's estate too frequently suffered. He would propose, that such an agent should be appointed to each commission, with duties nearly similar. With regard to that part of the law which inflicted capital punishment upon any bankrupt who concealed his property from his creditors, he would merely refer to the evidence which had been given in the last session by his lamented friend, sir Samuel Romilly, to show that this extraordinary rigour defeated the purpose for which it 1386 was intended, by preventing any prosecutions being instituted at all. There was also another point of great importance, to which he must call the attention of the House. He intended to give the commissioners of bankrupt authority to inquire into the conduct of the bankrupt previous to his bankruptcy. Under the present enactments, the commissioners had not the power to refuse their signature to the commission, however profligate and extravagant the bankrupt might have been, if he has conformed himself to the regulations of the law; neither had the lord chancellor himself any right to object to the certificate, if it was signed by a regular proportion of creditors. He recollected an instance in which a bankrupt, on his examination, had been asked to explain in what manner he had expended the large sum of 23,000l. in seventeen months. The man answered very honestly, that he had expended it in wanton extravagance, having kept a mistress at Hampstead, and a large establishment both in town and country. The creditors, though highly exasperated by this statement, had notwithstanding signed his certificate; and the individual, if he was rightly informed, was now carrying on business with the greatest success. The clause which he had inserted into his new act was to punish such unwarrantable extravagance, by entitling the commissioners to inquire into the past life of the bankrupt, and by empowering them to grant or to withhold his certificate, as might to them seem just and proper. He was very anxious that this clause should pass into law, because it was of the very highest importance to the interests of the community. He was also inclined to propose a clause—which, though proposed by a man whose memory no man could help revering, and which no man revered more than he himself did, had been lost in another quarter—that it should be requisite that four-fifths, and not three-fifths only of the creditors should sign the certificate. He could wish also to say something on the proceedings at Guildhall, and the scenes of perjury which so frequently occurred there, It had been proved by the evidence of Mr. Montague and Mr. Courtenay, that perjury was there reduced to such a system, as no honest man could think of without shuddering. Mr. Montague had said, that on those days when numerous meetings of creditors were expected, individuals plied at the hall- 1387 door to be hired to perjure themselves in the proof of fictitious debts; and that these individuals were afterwards employed to sign the bankrupt's certificate, just as if they had been bonâ fide creditors. This system was mentioned by other witnesses, and a respectable solicitor had even gone so far as to assert, that there was a regular house in Doctors' Commons, where men might at any hour be met ready to prove debts for a certain per centage. Mr. Montague on one occasion had been employed to object to the claim of a man who had come forward to prove it under very suspicious circumstances—he was unsuccessful in his opposition, and the debt was in consequence established. Mr. Montague thought no more of the man after he had left the commissioners, until he met him on the afternoon of the same day, in his road to his house in Bedford-square, selling old cloaths, and exercising an employment, which though mean, was far more respectable than the trade which be had been pursuing in the morning. He thought that there was no occasion to add any further observations to such a disclosure—There was another point, to which he anticipated much opposition, but which was likely to be attended with great advantages—he meant the granting of an allowance to bankrupts on the dividends which they paid over to their creditors. At present no allowance was granted to them, unless the dividend amounted to a certain value. This he conceived to be improper; and should therefore propose, that when a bankrupt bad not dealt in accommodation paper, and had not been guilty of any fraudulent conduct, he should receive a considerable per centage on his dividend. Now, when it was considered that a bankrupt gave up all his property, and was liable to death, if he concealed property of more than 20l. value, it was quite evident that he might be reduced to the greatest possible distress, if some such relief were not administered to him. Besides, in case of that individual lending his assistance to his assignees to collect the debts due to his estate, it was not common humanity and true policy to allow him to share in the sums so obtained for the creditors. It was maintained in former times, but he was glad to see that the idea, was now abandoned, that the only way to prevent crime was to enact excessive punishment; he thought a more efficient way to prevent it would be found 1388 in any plan that should give men an interest not to commit it; inasmuch as there were few who did not behave well, when it was made their interest to do so. He acknowledged, that when a bankrupt was not allowed to retain any property, the temptation to conceal some portion of it; was almost irresistible; and he therefore wished to diminish this temptation, by giving them a certain allowance, which would make them contemplate bankruptcy with very different feelings to those with which it was at present contemplated. A man in such a situation would then consider "what is it my interest to do?" and his reason would answer, "to behave like an honest man." There was another subject which he wished to impress on the notice of the House, that protection ought to be given to the commissioners in the discharge of their public duties—a protection which recent events had proved to be essentially necessary; and also to the messengers, who at present, contrary to all rule and principle, were completely, under the control of the solicitors. In the bill which had been prepared last year, there was a clause proposing that a certain fixed salary should be given to the commissioners. From the observations which had been made to him since that time, he had discovered that all parties objected to it, and he had therefore withdrawn, it. The hon. member then moved the second reading of the bill.
§ Mr. Abercrombyobserved, that though there were no questions more important than those which proposed alterations in the existing law, there were none into which the House entered with greater reluctance, or which it was more difficult to carry in the affirmative, owing to the small but compact body which regularly opposed them. As his hon. friend had devoted hours, days, and months to this subject, as he had given up to it the whole of his time, which might have been applied to more profitable speculations, be trusted the House would pay the utmost attention to the various clauses and enactments of his bill. As he had no objection, to the greater part of them, he should reserve the observations which he had to make upon them, until the House went into a committee. He was, however, inclined to make a suggestion to his hon. friend, without which he was, perfectly convinced that the bill could not possibly pass. He would, separate it into two bills, and would embody in the first all that was matter of 1389 regulation in the practice; and in the second all that was matter of improvement in the existing law. It was his opinion, that if his hon. friend carried the first of these bills, he would carry all that he ought; for, paradoxical as it might appear, the bill seemed to him to go too far, and not to go far enough. It went too far in imposing new duties on the commissioners; but it did not go far enough, because it was impossible to render the bankrupt law such as it ought to be, unless there was a total and radical change in those who have to administer it. He made this Statement in the spirit of candour, and not with a view of impugning the conduct of the commissioners, of whom he himself formed a part. On the contrary, he felt assured that those gentlemen discharged their duties in the most creditable manner it was possible that they could be discharged, under the circumstances in which they were placed. He thought, however, that fresh duties ought not to be imposed upon them, because the businesses in which they were already involved, were of a nature sufficiently complicated. The law could never be properly administered until the commissioners devoted their whole time to the administration of it; because it was too much to expect of any men, that they should neglect their own private clients, in order to attend a commission of bankruptcy, from which they derived inferior emoluments. To add, therefore, fresh duties to those which the commissioners already had to perform, would be to impose upon them duties which would clog the machine much more than it was clogged under the present system. The learned gentleman then animadverted on a clause proposed to the House in the bill then before it, allowing a man to make himself a voluntary bankrupt, and said that it would open a door to a species of fraud which would be attended with the greatest inconveniences. He agreed with his hon. friend upon the propriety of repeating that part of the bankrupt law which inflicted capital punishment, and expressed a hope that, whatever the fate of the bill itself might be, the sanguinary enactments of the present system might at least be obliterated from the statute book.
§ Sir J. Newportbore testimony to the unwearied assiduity of the hon. gentleman who had prepared this bill. Whatever benefit might arise from it, the country would be indebted for it to his hon. friend.
§ Mr. Alderman Waithmanhad some objections to different clauses in the bill, but agreed with the principle of it as far as it went.
§ The bill was then read a second time.