§ Order for Second Reading read.
§ LORD JOHN RUSSELLmoved that the Bill be now read a second time.
§ MR. BAINESsaid, that as the representative of a very large mercantile community, he wished to express shortly what he understood were their feelings and views with regard to this subject, and not only theirs, but those of the commercial communities in the north of England, as far as they could be ascertained. Their opinion was, that the Bill which now stood for second reading was likely to be an extremely valuable measure, as supplying a defect in the law under which the mercantile classes in the north of England, particularly, had for a long period been suffering. He could truly say that be had never visited his constituents since he had bad the honour of representing them without hearing from quarters which were entitled to the greatest possible respect and confidence, the loudest complaints with regard to the existing Bankruptcy and Insolvency Laws. He did not think there was a point upon which they were more perfectly unanimous than that; and he believed that the defects pointed out in the petition which he had presented to-day, were exactly those which it was the object of the Bill to remedy, and which, if the Bill went into Committee, it might be made effectual to remedy. When he stated that in the district which he had the honour to represent, it had been proved by a gentleman of the highest character—one of the Bankruptcy 199 Commissioners—that under the present system there was a waste of no less than about 50 per cent of the whole of the assets proceeding from bankrupt estates, the House would see that it was high time that some remedy should be applied to that state of things. It had been stated distinctly by those who were most competent to form an opinion on the subject, that no less than 50 per cent on the average was waste, arising from the mode of working bankruptcy under the present system, and the litigation which was almost naturally and necessarily engendered by that system. They were decidedly of opinion that the preposterous distinction which had hitherto existed between insolvency and bankruptcy should be done away with for ever. They were also of opinion that the complications of the present Bankruptcy Law should be got rid of, and that it was of the utmost importance that the code should be made simple, plain, and intelligible, instead of being, as it was now, complicated, obscure, and unintelligible. The Bill of the noble Lord, and the schedule, repealed not less than twenty-eight different Acts and portions of Acts of Parliament, in which, besides a great variety of decisions upon the subject, the existing law was to be found. One great recommendation of the Bill in the view of those whom he (Mr. Baines) represented was, that it proposed to bring to an end this complicated system of law, and reduce to one Act of Parliament what would henceforth be the statutory law of England upon the subject. In the Bill which had been introduced into the House of Lords by the Lord Chancellor, this had been unwisely lost sight of. That proposed to add one more to the existing Acts upon the subject; whereas the Bill of the noble Lord had this great merit, of a first-rate character, that it reduced into one Act of Parliament the whole of the statute law respecting bankruptcy and insolvency. It would have the effect of doing away with the distinction between bankruptcy and insolvency, and of supplying a remedy which had hitherto been greatly wanted with regard to the mode of rendering productive the estates of insolvents or bankrupts after their death. It would facilitate those voluntary arrangements which it was the very essence of every bankruptcy and insolvency system should be in the power of the creditors. At present there were so many difficulties thrown in the way of arrangements of that kind, that in many in-stances they became absolutely imprac- 200 ticable. Moreover, the Bill would have the effect of lessening materially the expense of the system—an evil under which the commercial community were everywhere groaning from one end of the country to the other. He apprehended that the Bill, with such Amendments as might hereafter be introduced into it, would supply an ample remedy for these evils. There were, then, two points upon which those whom he represented wished to insist, and which he humbly considered deserving the serious attention of the House. The first was that the law should be consolidated into one Act, and made simple, clear, and intelligible; and secondly, that there should be no unnecessary delay in introducing a remedy for the state of things under which the commercial community were now so generally suffering.
THE ATTORNEY GENERALsaid, he was inclined to concur in much that his right hon. and learned Friend had said; and certainly in nothing more than in the statement he had made of the urgent and over whelming necessity for some extensive alteration in the laws of bankruptcy and insolvency. He conceived, however, that it would be somewhat premature at that moment to say more than that, to this extent he quite agreed with his right hon. Friend; and he thought that with regard to the main principles of the Bill of the noble Lord the Member for London, to whom the House and the country were indebted for its introduction, there could be no doubt they were entitled to the favourable consideration of Parliament. Upon the first point to which his right hon. Friend had particularly alluded, namely, the great and useless expenses which were now incurred in bankruptcy, he would merely observe that while a serious evil was sought to be remedied by the Bill, he could not but hope that when the measure which was now before the House of Lords came down to this House and both Bills went before it, a great deal more would be effected. Much difference of opinion prevailed with regard to a number of points which were involved in that important question, the expenses incurred in bankruptcy. Whether they should diminish these expenses by doing away altogether with the percent-ages; whether they should confine themselves to the reduction of fees; or in what particular way they should diminish those expenses which his right hon. Friend bad certainly not exaggerated when he said that in many instances they were full 50 201 per cent on the total amount of the assets —all these were questions which it would be premature to consider now, but to which no doubt the attention of the House would be called whenever the Bill went into Committee. Another point to which his right hon. Friend had alluded was the total abolition of the present distinction between traders and non-traders, bankrupts and insolvents. In reference to that point he agreed with the noble Lord (Lord J. Russell) and his right hon. Friend, that that Amendment ought to be embodied in any Bill which should receive the sanction of Parliament. With respect to the consolidation of the law of bankruptcy, to which his right hon. Friend had also adverted it would hardly be supposed that he (the Attorney General), who was anxiously awaiting the opportunity of bringing before the House a scheme for the consolidation of the entire statute law of the United Kingdom would raise any objection on principle to the consolidation of the bankruptcy laws; but as to this particular measure, when the Bill went into Committee, by which time he hoped the other Bill would have come down from the House of Lords, he should have an opportunity of stating the views he entertained upon the question. By that time he hoped that a series of Bills for the consolidation of one great branch of the statute law would have been laid before the House, and that he should be in a position to go into the whole subject and dealing with this Bill as a part only of that subject, submit to the House the question whether this should be merely an Amendment or a Consolidation Bill. He would take the liberty of suggesting to the noble Lord that, after the second reading of the Bill, to which he (the Attorney General) of course offered no objection, no further step should be taken until the other Bill alluded to was before the House, which, he expected, would be within a very few days. Then both Bills could he brought at once under the consideration of the House, and he hoped the result would be the completion of a Bankruptcy and Insolvency Bill which would give entire satisfaction to the House and the country.
§ MR. VANCEsaid, that from personal knowledge, he was able to confirm what the right hon. Gentleman (Mr. Baines) had stated respecting the opinions of the mercantile community both in England and Ireland, with regard to the present state of the bankruptcy and insolvency laws He believed it was perfectly true that the 202 expenses in bankruptcy were as much as 50 per cent of the assets, and that at least one half in that amount was owing entirely to the forcible system of realisation of assets which was unavoidable. He must, however, mention a few objections to the provisions of this Bill, which had occurred to him. There was a strong feeling in favour of the jurisdiction in bankruptcy being given to the County Court Judges; but when they considered that those Judges possessed little previous knowledge of the law, and had had little opportunity of practising in the Bankruptcy Courts, it must be admitted that they were entirely inexperienced in bankruptcy matters, and that they would not for a long time be able to adjudicate to the satisfaction of the public. We had already a large number of Commissioners of great experience in bankruptcy, and to them he confessed he would prefer leaving the management of these questions. He was also sorry to observe in the noble Lord's Bill a clause which excepted from the provision as to the distribution of estates of deceased insolvent's cases in which the administration was disputed. The clause took away all power of control by the Bankruptcy Court where there was a dispute relative to the proper administration of the deceased's effects—that was as to who might be his executor or administrator. The consequence would certainly be that, for the purpose of preventing the assets being divided by the Bankruptcy Court, suits would be got up, and that they would always find a dispute about the administration in order to evade the operation of the Bill. Another clause to which he objected was the 284th, which enacted that the creditors were to meet and pass a resolution with regard to the conduct of the assignee, after which the said assignee was to apply to the Court for his discharge. Why, there was not a mercantile man of standing in the country who would consent to be a creditor's assignee, if a judgment was to be passed upon his conduct by the general body of creditors, who might have interested motives in passing an adverse judgment, whilst he was not, to be discharged from the liability of his office until he had obtained the sanction of the Court. He was satisfied that that would prevent many persons from being trade assignees at all. Another clause to which he objected was the 261st, by which Friendly Societies would have a preferential claim on a bankrupt's estate to be paid in full. He (Mr. 203 Vance) did not see why Friendly Societies who entrusted their property to a bankrupt should have such a preference. In his opinion it would be the introduction of a very false principle. He also objected to the clause which proposed to allow a person to become a petitioning creditor whose claim amounted to £20. This he (Mr. Vance) considered to be much too low. It would enable any hostile creditor to involve all the other creditors in the expense of a commission of bankruptcy. He noted also in the Bill a long list of superannuations which were to be paid out of the Consolidated Fund. Now he did not object to these charges being placed on the Consolidated Fund; but he really thought that House ought to know what it was about before it consented to pass this Bill. The aggregate amount of the compensations would be exceedingly heavy. Further, he observed a long list of penalties for crimes in bankruptcy, respecting which he would suggest that wherever a debtor entered into a composition by deed, or his estate was wound up in bankruptcy, there should be a registry of the transaction, and the means of ascertaining how much every insolvent's estate paid in the pound. He believed that if by the payment of a small fee the public could ascertain whether a bankrupt had failed for 1s. in the pound or 15s. there would be no need for any other punishment, as future credit would be given to him exactly in proportion to the realization of his estate, and the strongest inducement would be held out for men when they got involved in difficulties to call their creditors together without delay.
§ MR. J. D. FITZGERALDwished to say a few words on this question, having devoted a good deal of attention to it, and having two years ago introduced a measure somewhat similar for Ireland, on which, however, he admitted the present Bill was a very great advance. With some Amendments, which could only he made in Committee, he thought this Bill would be a great improvement on the present state of the law. The Bill which he had passed for Ireland, like the present Bill, abolished the Insolvent Debtors' Court and fused insolvency and bankruptcy, and the result had been most remarkable in simplifying the state of the law, in consolidating the courts, and in reducing the expense. It was a remarkable fact, that whereas in 1818 the petitions for relief in insolvency in Ireland amounted to 3057, in 1858 they were only 450; while the business proper to the 204 Court of Bankruptcy had increased fourfold from what it was the year before the Bill passed. There was one clause in the Bill from which he anticipated great benefit, by which suitors in the Court were enabled to wind up the estates of deceased debtors. At present that could only be done by a petition to the Court of Chancery, which was both a tedious and expensive process, which would be greatly simplified and reduced in expense by this clause. The abolition of the Insolvent Debtors' Court was a large step towards an object which he hoped soon to see wholly accomplished— the abolition of arrest for debt, except in cases of fraud. Another great advantage was the facilities offered for friendly arrangements accompanied with a due regard for publicity, which would enable the public to know what was done. He hoped that as the Bill proceeded through Committee it would receive some improvements which it still needed, and he would particularly suggest that the punishment of dishonest debtors, while it was mitigated in amount, should be rendered still more certain. As a proof of the advantages derived from the Irish Bill, he might state that the banks and great mercantile companies now considered that it was better to take estates into the Bankruptcy Court than to wind up by a friendly arrangement.
§ MR. CRAWFORDsaid, he did not intend to enter into the general question, but he wished to state to the House that he was present at a large meeting of all the great trades of the country, held yesterday in the City of London, and the conclusions at which that meeting arrived he believed were entitled to great weight with the House. A committee of these bodies had been appointed to consider the two Bills now before the country —that of the Lord Chancellor, and that of the noble Lord now before the House. That Committee, representing the great mercantile interests of the country, considered both Bills, and the conclusion at which they arrived was that the Bill of the Lord Chancellor ought to be opposed, and that the Bill of his noble Colleague, with a few Amendments, ought to receive the support of the country. The meeting held yesterday concurred in the opinion of the Committee, and he thought that conclusion was entitled to great weight with the House.
§ MR. COWANthought the noble Lord was entitled to great credit for the immense labour and trouble he must have 205 encountered in the preparation of this important measure. As a trader who had a good deal to do with England and Ireland, as well as Scotland, he hoped the day was not distant when there would be a great assimilation, if not a complete amalgamation of the bankrupt law of the three kingdoms. As an instance of the necessity that existed for this, he would instance to the House the cases of certain swindlers who had perpetrated their frauds on this side the Tweed, and then took refuge from their creditors in Scotland, often in the Hebrides, a kind of sanctuary where they set their creditors at defiance, on a pretext that they had been traders in Scotland for six or eight weeks. Large bodies of creditors were put to enormous expense and inconvenience by this course, and the learned Lord Advocate knew well how much of the time of the Scotch Courts had been occupied by these disgraceful proceedings. He hoped this Bill would be so altered in Committee as to prevent those villains—for they deserved no other appellation—thus fleeing from justice and cheating their creditors. He also thought the Bill should contain some provision to punish those traders who adopted what was now a growing evil, of keeping no books—very often for the direct purpose of perpetrating fraud.
MR. MOFFATTsaid, that the mercantile body must feel grateful to the noble Lord for the introduction of this measure. No doubt it was a comprehensive, and some might think it a cumbrous scheme; but it had to deal with a very extensive and defective system which had grown up in the lapse of time. That which was wanted was not a resuscitation of the old law but an entire and total renovation, so as to meet the exigencies of trade and provide a cheap and summary mode of punishing fraudulent debtors, and this Bill, though it had many good points, was susceptible of much amendment. It was proposed to assimilate bankruptcy and insolvency, and mix them up before a common tribunal. But to attempt to do so was to attempt to mix up two things of dissimilar nature, and if the plan were persevered in, he predicted that the present bankruptcy Bill would be as great a failure as the last. In the main it perpetuated the old administration. The mercantile community were unanimous in thinking that the Courts of Bankruptcy ought to be raised to the dignity and importance of the other courts of 206 justice. The present system, which might be useful in winding up large estates, was utterly useless in dealing with small ones, he considered that powers ought to be introduced to punish, in cases of fraud, similar to those given to the Commissioners in Insolvency who could imprison a fraudulent debtor for three years. Looking to the many objections which had been taken to the Bill out of doors, he thought the best course to adopt would be to refer it to a Select Committee, as the House could not possibly deal with a measure of this sort containing 480 clauses.
§ MR. AKROYDcontended that the Bill had already been subjected to the test of Select Committees out of doors, for it had been examined by legal gentlemen and men of business, who had themselves suffered by the present law. It had been discussed in the Chambers of Commerce of all the great towns throughout the country, and they were all in favour of the Bill. One of the evils of the present law was that 90 per cent of all cases of insolvency were settled out of court, and not more than 10 per cent came before the proper tribunals, so that the law as it stood was practically inoperative. One of the advantages of the noble Lord's Bill was that it gave the creditors the power of self-management, and another was that it greatly reduced the expense — in this respect following the Scotch system, which in all matters of economy was greatly ahead of the English system. He looked also with great satisfaction on those provisions which allowed certain cases to be submitted to the County Courts, where they would be examined by tribunals in the locality, and by which the various classes of trade frauds would most certainly meet with their appropriate punishments. He regretted to say that a class of traders were making their appearance who could only be described as gamblers in trade, who were more like gamblers on the turf than men engaged in mercantile transactions, and to moot their case, he thought it was desirable the Bill should authorise an examination as to the past conduct of the bankrupt or insolvent, and then the law, while it gave protection to the prudent man who had been really unfortunate would stigmatize the trader who had conducted his affairs in a fraudulent manner, and had gambled with the money of other persons. He would give the noble Lord his cordial support, and he could assure him that the 207 feeling of the north of England was in favour of his Bill in preference to that of the Government.
MR. HEADLAMwas anxious to say a few words on this subject, as representing a large trading community in the north of England, where they were most anxious for an amendment of the present law. It appeared that they were all agreed upon the main principles of this Bill. The hon. and learned Attorney General said that the Bill did not go far enough in the way of diminishing the expense. He (Mr. Headlam) thought they had gone as far as possible; but if the Government could suggest any further diminution the promoters of this Bill would be glad to adopt it. He had reason to know that the Amendments which had been suggested at the meeting in the City yesterday would be adopted by the promoters of the measure, and every effort would be made to make the Bill as perfect as possible.
§ MR. CROSSLEYagreed with the hon. Member fur Huddersfield, and others, that this was a question of the deepest interest to the whole community. At present there was a dread of going into the Bankruptcy Court, and if a creditor appeared and threatened to take the estate there he was often paid more than the estate would justify to get him out of the way. He would support the second reading of this Bill, as he believed that it was better than the measure introduced in "another place."
§ LORD JOHN RUSSELLthanked the House for the general expression of favour with which they had received his Bill. He was happy to hear from the Attorney General that he approved of many of the principles of the Bill, and he was happy to hear from his own Colleague (Mr. Crawford) and others that the commercial classes, as far as they were acquainted with its provisions, approved of the Bill. He had no objection to the proposition of the hon. and learned Attorney General that this Bill should not go into Committee till the House were in possession of, and had time to consider the provisions of the Bill that was coming down from the other House of Parliament. At the same time he hoped his hon. and learned Friend would not be led by any party affection to take part with that Bill against the present one, because he thought he could see that if loft to his own unbiassed judgment his hon. and learned Friend would prefer this Bill to the other. The hon. Member for Dublin (Mr. Vance) had urged va- 208 rious objections which, for the most part, referred to matters of detail, except one provision, which he thought was of great importance—the power of sending a certain class of cases to the County Court. But the Bill provided that that could only be done by a majority in value of the creditors; and while he admitted the force of the objection that some of the County Court Judges might not have experience, on the other hand he thought it was of great advantage to be able to refer to a tribunal near at hand, and which would he productive of less expense and inconvenience. The hon. Member for Huddersfield (Mr. Akroyd), said, that not more than 10 per cent, of the bankruptcy cases came before the courts, and that the other ninety were settled by private arrangement. He thought no greater proof than this was needed of the inadequacy of the present state of the law. The hon. Member for Ashburton (Mr. Moffat) proposed to send this Bill to a Select Committee, at the same time that he objected to almost all the principles. The hon. Member should introduce a Bill of his own. For his part he should despair if the Bill were sent to a Committee up stairs, where they would waste probably three months, and then find that the judgment of the gentlemen composing it did not coincide with that of the House or the country. He thought that the House itself, having the advantage of the Attorney General to enlighten them, together with so many commercial men, would be able to decide fairly and impartially on all the questions involved. There was nothing political involved in this question, and, when the trade of this country was disgraced by gambling traders, he thought it of importance that the principles of the bankruptcy law should be authoritatively settled by the House itself. The hon. Member for Edinburgh (Mr. Cowan), had complimented him on the great labour he had taken in the preparation of this Bill. He could not appropriate that praise. The part he took was more consonant to his capacity with respect both to the law and the trade of the country. Persons connected with the trade of the country in all parts of the kingdom met together and consulted what the law ought to be; they submitted to him what they had agreed upon, and explained the principles on which they had proceeded; and when he convinced himself that their proposals were thoroughly rational he pro- 209 ceeded to frame the Bill, for their kind reception of which he had again to thank the House.
§ Bill read 2à, and committed for Wednesday, 30th March,