HC Deb 26 July 1849 vol 107 cc992-1004

On the Motion for considering the Amendments to this Bill,


observed, that by the 256th Clause certain acts were set down as offences—there were nine of them—and if the court—that was, a single Judge—should he of opinion that the bankrupt had been guilty of any one of these nine offences, he might refuse the certificates, and then all the debts proved under the commission became judgment debts, and any one of the creditors might take the bankrupt in execution, and incarcerate him in gaol for a year, the court having the power to release him within that time. He was aware that in the present bankrupt law something like the same principle was established, but he was anxious it should not be extended. He had several objections to the present clause. The first was, that they thereby deprived every bankrupt of the power to be tried by a jury of his country, and gave the right to every single bankruptcy Judge to decide that the debtor was guilty of the offences named in the clause—not upon the issue joined on the question, not upon a solemn trial, but they allowed the comment' or dictum of the Judge to determine whether a man was a fraudulent debtor or not. They not only gave this power to the Judge, but they enabled the creditor to imprison the debtor for a year; thus authorising the pound of flesh to be taken from the debtor, and imprisoning him besides, for having, it might be, incurred the anger of a creditor. He must say that he was very unwilling to trust the kindness of those who laid it down as a principle that every debtor was, of necessity, a rogue, and every creditor an honest man. A creditor, it should be remembered, very often gave a man money, well knowing that he was giving it to a person who was incapable of refunding; and, therefore, the creditor ought not to be given a power which the criminal law ought only to exorcise, that of imprisoning a man for a year. What did the debtor do at present? When he came into court, he gave up all that he had. The bankruptcy law was not a criminal law. It administered the assets of an unfortunate debtor. He was of opinion that the House ought to make a civil judge a criminal judge; and he asked of them to make a slight alteration in Clause 256, to meet the views he had taken the liberty of propounding. He had no objection to the court saying to the bankrupt—"I believe you to have been guilty of destroying a hook, paper, or document fraudulently, and I will order the assignee to institute a prosecution against you in the criminal courts." They had made a proviso to this effect in another clause, and he moved that they do the same in Clause 256.


was Sony to be obliged to oppose the suggestion of his hon. and learned Friend. He believed the general feeling of the Committee was in favour of this provision in the Bill. The hon. Member for Leominster, although he objected to some of the provisions of the Bill, did not oppose this. It had also received the universal assent of the trading classes. He knew that the gentleman to whom the commercial classes in the city of London had intrusted this Bill were favourable to it, as well as the deputations which had come up from various parts of the country. Under such circumstances he was justified in saying that the commercial and trading classes were favourable to these provisions of the Bill. He would shortly point out what was their effect. As the law now stood, a Commissioner of Bankrupts had the power of withholding a certificate without protection. Therefore, for any one of these offences, or for some not nearly so great, the commissioners would suspend the certificate. This, therefore, was in the shape of a specific notice to traders as to the punishment to which they would be liable if they were guilty of certain acts. Many of these offences were now defined by the law as it stood as misdemeanors, and might be punished accordingly, and they were merely specially pointed out in this Bill. The object was to leave the course of law in full force.


conceived it highly inconvenient that one of the most important measures which could come under the attention of the House should come down at the end of the Session. This code of laws, in the shape of a Bill, was of greater importance than any other that had been before the House during the Session, for upon the state of the law of debtor and creditor the prosperity of the country depended. They were now asked to pass a Bill of this nature within two or three days of the prorogation. He declared that he had been positively afraid to read such a long-Bill, and be believed that many of his hon. Friends entertained the same opinion. He agreed altogether in the opinion expressed by his hon. and learned Friend the Member for Sheffield as to the objectionable nature of the provisions of the Bill alluded to by him, which called for the serious attention of the House. He most strongly objected to their adopting such a measure merely because it came down backed with the recommendation of a Select Committee. If the House, as a legislative assembly, was to depute such powers to a Select Committee, it might as well abandon its functions. In the course of the Bill going through Committee yesterday, many of the anomalies of the bankrupt law, as described in that Bill struck him with amazement. The 125th Clause appeared to him to be one of the most tyrannical enactments he had ever met with. It empowered the court to issue an order to the Postmaster General to direct that all letters addressed to the bankrupt should be transmitted to the official assignee and opened by him. [The ATTORNEY GENERAL said, this was only a part of the old law.] He knew this; but when this Bill was sent to the Committee it was their duty to consider the whole extent of the bankrupt law as embodied in the Bill, for what was bad in the old law they were bound to rescind. The clause, however, to which he alluded empower ed the court to direct the Postmaster General to withhold all correspondence from the bankrupt, and authorised the official assignee to open all letters for him for a period of three months, and the court might renew such order for a similar period from time to time. The object of this was in consequence of a suspicion that the bankrupt was likely to be guilty of fraud, and a concealment of his property from the assignee of the court. This proceeding was in his mind most objectionable. He believed such an enactment must have escaped the notice of the House, and then, on the 26th of July, it was too late perhaps to put an end to such a state of things. He would not encourage his hon. and learned Friend to persevere in his Amendment, for he would find other parts of the law besides that which he had alluded to, to be so bad that a change must be made in them. Much as he valued the labour and attention bestowed on the Bill by the Members of the Committee, he was not one to say, because they had allowed and approved of the 125th Clause, and other parts of the bankrupt law, that he was bound to give in his adhesion to them.


felt called upon to make some observations after what had fallen from the hon. and learned Member for Sheffield. He would, in the first place, shortly explain the particular alteration in the law of bankruptcy proposed to be made by this Bill to which the hon. and learned Member had referred. The House was aware, that upon the refusal or the suspension of a certificate, the consequence to the bankrupt was twofold—'first, in reference to his property, and next, in reference to his person. Any property which the bankrupt might acquire, whether by his own industry or by inheritance or gift, passed at once to the assignees, and was distributable among his creditors. His person also was liable to be taken in execution on a judgment obtained by any creditor who had chosen not to come in under the bankruptcy. But all creditors who had proved their debts under the bankruptcy, were considered to have elected not to proceed at law, and were barred from so proceeding, whether the bankrupt obtained his certificate or not. What the Bill proposed to do, was to make every debt proved under the bankruptcy a judgment debt; and the assignees were to be judgment creditors for the aggregate amount of the debts proved. The effect would be, that on the refusal or suspension of the certificate, any creditor, or the assignees on behalf of the whole body of creditors, would be at liberty to take out execution against the person of the bankrupt, and put him into prison. As the exercise of this power of imprisonment depended upon the refusal or suspension of the certificate, this Bill contained certain provisions upon the subject of the certificate; the general effect of which, he thought, would be to limit the discretion of the commissioners. At present the discretion the commissioners possessed to withhold or grant a certificate, was without control. The Bill, after enumerating certain acts of misconduct, most of which were already indictable offences, proceeded to enact that upon satisfactory proof that the bankrupt had been guilty of any of those offences, the commissioner should refuse or suspend the certificate for a limited time; and the consequence of such refusal or suspension would be, that the bankrupt would be liable to be imprisoned by any of his creditors or the assignees. That was the proposed alteration of the law; an alteration which he believed to be called for, because considerable dissatisfaction was felt at the insufficiency of the present law of bankruptcy to check acts of misconduct on the part of fraudulent bankrupts. Complaint was made, that the present law held out a positive encouragement to the breach of mercantile engagements among the trading community, and that, for want of proper restrictive laws, persons entered upon improvident speculations and extravagant adventures with other people's capital. The bankrupt law, from its origin, had, he thought, been open to this reproach. The principle of that law was this—that a person, when he became embarrassed, might, by surrendering all his property, and conforming to the bankruptcy law in every respect, get discharged of all his debts as completely as if he had paid them in full, however fraudulent his conduct as a trader might have been, or how little soever his insolvency might be owing to accident or misfortune. But while the law thus overlooked altogether the conduct of the bankrupt previously to his bankruptcy, it was immoderately severe against any acts of misconduct of which he might be guilty after the fiat in bankruptcy was awarded; and the punishment even of death was at one time inflicted upon the trader who did not surrender and make a full disclosure of all his effects in conformity with the bankrupt law. But the law was mitigated, and those offences which once were capital were made felonies or misdemeanors, punishable by transportation or imprisonment. That was the state of the law down to the 5th and 6th of Victoria. In that year a new principle found its way into the bankrupt law. The power was taken from the creditors to dissent from the granting of the certificate; and the law conferred upon the court a discretionary power of withholding or granting the certificate. The only question till then had been, whether the bankrupt's inability to pay was real or fictitious—was it a pretence or not? If his inability to pay was fictitious, he (Mr. Peel) had already shown with what severity the law punished such misconduct; but if his inability to pay was real, then the certificate was granted as a matter of right, however fraudulent his conduct as a trader and in the course of his trade might have been. But even admitting his inability to pay to be real, another question now remained behind. That question had reference to the cause of this inability to pay. The commissioner had the power to trace the course of his insolvency, and see whether it had its origin in accident or misconduct, in misfortune or in overtrading; and, if the latter, the commissioner might refuse the certificate altogether. With regard to this proposed power of imprisonment, he understood one object of it was to give the court a more efficient control over the conduct of the bankrupt anterior to his insolvency, rather than a mere power to refuse or suspend the certificate now afforded. Another object, he thought, was to provide a cheap and expeditious mode of punishing misconduct which could now only be punished through the medium of a prosecution at law. He believed, also, it would check that facility with which the uncertificated bankrupt now embarked again in trade, and obtained advances and goods from persons who had no means of ascertaining his real position, and who discovered too late that all property in his possession was liable to be taken by his assignees for the satisfaction of his antecedent liabilities. This was the purpose for which this power was introduced; and he thought it was a method for carrying out that object the least open to objection of any that had been suggested for that purpose. The hon. and learned Member for Sheffield seemed to object to imprisonment for debt altogether; and perhaps it might seem to be unjust against a bankrupt, all whose property had been taken from him. But it ought to be remembered, that in the use which it was intended to make of imprisonment for debt, its scope and object as a civil process (which is to get at a man's property through his person) was entirely overlooked, and it was intended to be used only as an instrument of punishment. He admitted, that, in so doing, they were straining a process which the law had given to the creditor with a different view; but he thought, on the whole, that, under the checks provided by this Bill, the power of imprisonment was less open to objection than any other mode which, might have been adopted for attaining the same object would have been. He, therefore, gave this provision of the Bill his support, because it gave the creditor the protection which he really required, and which it had been the tendency of recent legislation to deprive him of, and because he thought they ought to aim at checking the annual sacrifice of bad debts which took place in this country under fiats of bankruptcy and deeds of composition, which, according to a calculation he had seen, actually amounted to no less than 50,000,000l. Seeing, moreover, the importance of the functions of credit in a commercial country like Great Britain, they should do all they could to extend credit by diminishing the risk to which all capital invested in the form of debt was liable, and hereby placing credit upon a just and firm foundation. He thought, therefore, that the power of imprisonment for debt at the suit of the creditor, subject to the control and discretion of the court, was not too extensive a power to grant in the circumstances.


had heard the speech of his hon. and learned Friend with great pleasure, and also with pain. As a warm and sincere Friend of his hon. and learned Friend, he had heard him address the House with so much perspicuity with pleasure, and with regret, because he could not agree with the doctrines which his hon. and learned Friend had laid down. He (Sir J. Graham) was unlearned in these matters; but still he had taken part in former revisions of this branch of the law. His hon. and learned Friend thought it was a great public object of the highest importance to promote the security of credit, and his learned Friend added, to extend credit. He (Sir J. Graham) doubted the latter; but when credit was withheld in consequence of the great losses attending the trade of the country, if it could be traced to fraud, it should be checked by punishment, but not of an extremely heavy description. The question was, whether the policy which had recently been acted upon with regard to credit was within equitable limits, or whether there should be a great change after the short experience they had had of the law, and arm the creditors with more summary powers, to be exercised either by themselves or the commissioners on their behalf. The law had been most accurately stated by his hon. and learned Friend, and it was quite true that all the offences enumerated in the 256th Clause were indictable offences. The real question was, whether, admitting that some of these offences were felonies and others of them misdemeanors, and which the creditors were entitled to proceed against by indictment as the law stood, they should now be brought under the summary jurisdiction of a judge in the shape of a commissioner of bankrupts. The law of bankruptcy was distinctly for the purpose of securing the assets of a bankrupt, and distributing them amongst his creditors, and incidentally there was the power of withholding the certificate permanently, or suspending it for a time. At present, a bankrupt, for such acts as were enumerated in the clause, must be proceeded against by indictment, and for this purpose the creditors must go before a grand jury, and before a petty jury, and before a judge of high station, while an intelligent bar was present to watch the proceedings. Thus the greatest possible checks were given by the law against abuses. It was now proposed to give to a single commissioner jurisdiction over the bankrupt in such cases; and in case the commissioner should adjudge against the party, he was liable to imprisonment. Thus he was without any of the former checks under the law as it stood, which secured a calm and dispassionate consideration of the case. He would not speak disparagingly of the Commissioners of the Court of Bankruptcy; but it was well known that the commissioners, in consequence of the limited amount of salary which they received, were not taken from those who occupied at the bar a high station. He said it with pain; but still if they looked at the conduct of some of the commissioners, it would not only suggest to their minds that they might not be far from prejudices, but that that course might be taken which might tend to the ruin of the future prospects and character of a bankrupt. This should make them very cautious in giving such large powers to an individual commissioner. Then, again, those persons would be examined without the check of the bar, for there was no such check in that court. In all criminal suits, not only had they this check of the bar, but public opinion operated largely; but no such opinion operated with regard to the Court of Bankruptcy. All the great securities which he had enumerated, were wanting before the Bankruptcy Court. There was the case of a man overwhelmed with misfortunes; and when exposed to the most severe trials in life—at that moment, when he was visited with a double attack, on his person and property, and when he was making every effort in his power, to be exposed to the attack of a creditor who, he would not say, was excited with angry feelings, but labouring under a feeling against the bankrupt. If any party ever wanted protection, this was a case for it. The Bill as it was drawn deprived the bankrupt of it. He entertained the greatest doubts on the subject, and entertaining such doubts he was bound to exercise his judgment in favour of the weaker party. He thought the distinction had been judiciously drawn by the hon. and learned Member for Sheffield. All the property of the bankrupt should be placed under the control of the Court of Bankruptcy; but if he had committed a criminal offence, he should be tried before the ordinary tribunals of the country; for he doubted the justice of confiding this jurisdiction to any other tribunal, and above all to the Court of Bankruptcy, as it was constituted. Was this such a case in which they should set aside the general mode of proceeding, and allow the ordinary course of criminal jurisdiction to be forced into new channels? Under his experience of the bankruptcy law, he did not think that a power should be given to a single creditor to imprison a debtor for a criminal act on the decision of a single judge, and in the absence of a jury and a bar. On these grounds he should object to the alteration of the present law, and he perfectly agreed in the view taken by the hon. and learned Member for Sheffield on the subject.


was aware of the difficulty of legislating properly upon the subject; but was also aware that the trading interest were so anxious for it that he would not undertake the responsibility of opposing its further progress. He believed, however, that the alterations it would effect in the present law were, upon the whole, exceedingly inconsiderable, for provisions in favour of the bankrupt, on one hand, were counterbalanced by provisions of a contrary character on the other.


objected to the clause. There were other fraudulent debts contracted besides bankrupt debts; and penalties ought not to be inflicted upon one class of the community which were not provided for another. If the hon. and learned Member divided, he should divide with him.


said, that the clause was intended to operate only against fraudulent debtors. During his mercantile career he had witnessed so many certificates obtained by fraud, that he felt the absolute necessity of instituting some check upon the system. It was most desirable that a line should be drawn between the fraudulent debtor and one who honestly gave up his property to his creditors. The latter, he hoped, would receive every consideration from the House.


agreed that a line should be drawn between the honest and the dishonest bankrupt; but he thought several clauses in the Bill went beyond the intention of the promoters of it.

Amendment proposed, in page 89, Clause 256, to leave out the words "the Court shall refuse to grant the bankrupt any further protection from arrest."

Question, "That the words proposed to be left out stand part of the Bill," put, and agreed to.

On the Schedules being proposed,


objected to that part of the form for the certificate of conformity (Schedule Z), by which, after declaring that the bankrupt was entitled to his certificate, the commissioner certified in the words following, to what "class" of certificate the bankrupt was entitled:— And I further certify that his bankruptcy has arisen from unavoidable losses and misfortunes, and that he is entitled to, and I do award him, this certificate as of the first class; or that his bankruptcy has not wholly arisen from unavoidable losses and misfortunes, and that he is entitled to, and I do award him, this certificate as of the second class; or, that his bankruptcy has not arisen from unavoidable losses or misfortunes, and that he is only entitled to, and I do only award him, this certificate as of the third class. He should beg to move that the above words be left out, objecting to the power thus to be conferred upon the Bankrupt Commissioner.


observed, that the commissioner now pronounced, or might pronounce, his judgment in public—in open court—in a bankruptcy case, and it might be reported and read by the whole world. The Bill only proposed to enable the commissioner to append his judgment in an authentic form to the certificate—a judgment he now delivered in open court—for the guidance and satisfaction of those who were going to deal with the bankrupt in future. It was clearly the intention of the Bill, that in a ease where bankruptcy had wholly arisen from unavoidable loss and misfortune, the bankrupt would be entitled to a perfect and absolute release. If there was no misconduct, then the bankrupt would have his certificate of the first class. He repeated, that the commissioner now gave his judgment and reasons publicly; and if he were to put them upon record in the certificate, it would at all events make the bankrupt more cautious in his future dealings.


said, that if the hon. and learned Gentleman the Member for Sheffield persevered in the Amendment, he should feel it his duty to divide with him. He had already stated the nature of his objections to this particular operation of the measure, and the grounds upon which he entertained them. He would just recapitulate what the House had already, and without a division, adopted. They had given this judge of the Bankrupt Court a considerable amount of criminal jurisdiction; they had given him a most ample power over the property of the debtor; they had given him, under certain limits, power over the person of the debtor; and now they were going deliberately to give him a most fearful power, as it appeared to him, over the character of the debtor. The hon. and learned Gentleman the Attorney General defended this provision upon the principle that it would be for the benefit of future creditors that the true character of the bankrupt should be ascertained, and should appear upon the certificate, and this certificate was to be an enduring record, and to be published in the London Gazette. But it appeared quite possible that there might be a case in which a bankrupt had sustained unavoidable losses and unavoidable misfortunes, but in which the commissioner might arrive at an erroneous judgment in consequence of a false impression having been conveyed to his mind. Yet this power over the character of the bankrupt was to be entrusted to a single judge, having no assistance from any other judge, or from a jury, or a bar, to check any error of judgment into which he might fall from a false impression on his mind; and he was to act at once, and peremptorily—it might be hastily—in a matter upon which his judgment might have been so formed upon a false impression. To one only of these judges was thus to be given the power of inflicting a permanent brand upon a man, and of blasting for ever his character. That, he must say, was a power too fearful to be entrusted to any single judge. If he was not much mistaken, there had been considerable division of opinion upon this question in the Committee, and that one of the highest authorities upon such a point, the Judge-Advocate, had taken the same view which had been advocated by the hon. and learned Member for Sheffield. Such a power was quite alien to the jurisdiction of this country. But if it was to be given at all, there was no doubt it should be given in the clearest and most definite manner. Yet in how capricious a form was it cast—" unavoidable losses and misfortunes?" Could there be a term much more indefinite, even if it were known to the law? But was it a term known to the law? Was it not new? If new, must not constructions be put upon it; and if constructions were put upon it, would not conflicting decisions be given by these Judges all over the country? Again, what could be more arbitrary than the second-class certificate, provided for cases where the bankruptcy was adjudged to have arisen, not wholly, but partially, from "unavoidable losses and misfortunes?" He could understand a positive line of demarcation between two cases of loss or misfortune and of dishonesty; but this medium appeared to him the most capricious and, at the same time, arbitrary line ever at tempted to be drawn. He should be sorry, at this period of the Session, to do anything to retard the public business; but it seemed to him that they were about to make an alteration in commercial law, which it was now impossible for the representatives of the people duly to consider. Whatever their desire to uphold commercial credit in this country, they ought not hastily to deal with a principle in criminal jurisprudence which was new, and which might operate most injuriously upon the credit and characters of men. He should be sorry, in the extreme, if any false step in legislation was made in this matter; and he must conclude by repeating, that to give this great power, affecting both the person and character of a man, to be wielded by a judge, solely from impressions drawn by himself, in the absence of a bar, and un checked by public opinion, did undoubtedly appear to him most objectionable and dangerous.


said, in his opinion the distinction in grades of bankruptcy would very much reduce the stigma of bankruptcy to an honest trader. And he could assure the House, on the part of the mercantile community, that they were not the hardhearted people they had been represented to be, but that they were most anxious to protect the honest trader, whilst, at the same time, they punished the fraudulent.


said, the votes of a good many Members would depend upon the answer they should receive to the question, whether there was to be a power of appeal after a certificate had been given? and if so, whether each class of certificates would be entitled to an appeal?


It appeared to him that the appeal clause did not give an appeal to each class of certificates.


said, the right hon. Baronet would find, by reference to the 12th Section, page 5, that it gave the appeal. If there were any doubt, however, he would take care that it should be made quite clear upon the third reading of the Bill.


said, he should give his vote in favour of the schedule as it stood. In the first place, he did it for the sake of the really honest, but unfortunate, man, who was entitled to have from the commissioner or the court that certificate of his conduct to which one who was not free from blame would not be entitled. And, in the next place, because the Attorney General had assured the House that he would take care to make provision for allowing a good and effectual appeal.


said, that the object of his proposition had been simply to induce the House to mitigate the severity of the law.

Another Amendment proposed, in page 113, Schedule Z, line 30, to leave out from the word "same," to the end of line 3, page 114.

Question, "That the words proposed to be left out stand part of the Bill," put, and agreed to.

The Bill was subsequently read a Third Time, and passed, with Amendments.