HC Deb 09 February 1865 vol 177 cc120-6

said, it would be in the recollection of the House that last Session he called attention to the state of the bankruptcy system, and obtained the appointment of a Committee to inquire into and report upon it. He would not go over the ground he then traversed, or state at any length the result of the deliberations of the Committee. He would not trouble them with the weary details of the evidence as to the utter inefficiency of the old system of bankruptcy; how they found Commissioners irregular in their attendance, negligent of their duties, loose and uncertain and frequently contradictory in their judgments, and giving the greatest dissatisfaction to suitors; how the official assignees, who were paid under a wrong system, were also careless and indifferent to the interests confided to their care, and some of them guilty of still graver offences; how the system of creditors' assignees resulted in still greater failure, they being really no protection to those whom they represented, and their audit of the official assignees' accounts being too generally worthless; and how even the subordinate officers of the courts, the messengers, and others, extracted large sums for their own use out of the bankrupt estates. From a recent Return showing the operation of the Bankruptcy Act for the year ending the 11th October, 1864, he learnt that the total amount of money collected under bankruptcy was £677,000 out of which the official charges were upwards of £140,000, or about 20 per cent, exclusive, of course, of the solicitors' and other expenses which could not be avoided. Out of 7,200 bankruptcies, 600 were at the instance of the creditors, and 6,600 at the instance of the debtors. A very large proportion of the estates, upwards of 5,300, yielded no dividend at all, the debtors obtaining their discharge at the public cost; only 350 paid more than 5s. in the pound, and only 165 more than 7s. 6d. in the pound. He had lately attended the Bankruptcy Court for half an hour, and had been much edified by what he saw and heard. The first case was that of a cornchandler, who was indebted to the amount of £84, and had no assets. The Commissioner asked what he had done with his furniture, and on his replying that his landlord had got it, the debtor received a discharge. The next man had incurred a debt of £680 in Scotland, and here again the assets were nil. The chief creditor, however, had engaged counsel, and the bankrupt was, after much equivocation, obliged to confess that he had quitted Scotland because there was a writ out against him, and had got himself arrested in London on a friendly suit for a fictitious debt in order that he might obtain the protection of the English law. The counsel submitted that this was an offence under the Act, but the Commissioner did not so view it, and said he should like to have further evidence, although the bankrupt had fully convicted himself by his own admissions. The third case was that of a small tailor in the east of London, who had put his name to accommodation bills for a large amount, and had no assets. His furniture had also been surrendered to the landlord. The Commissioner admonished him as to the impropriety of giving acceptances without value received, and granted a discharge. Now, he could only say that such a system was a direct encouragement to knavery, roguery, and every offence which could disgrace and corrupt a mercantile community. The Act of 1861 authorized settlements under composition or by assignment. The first method had not been inoperative. About £1,100,000 was dealt with in that way last year. But during the last three months of 1864, there were 304 compositions for less than 5s. in the pound, and of that number 250 paid less than 3s., and several only 3d. to 6d. in the pound. The fact was, that creditors were ready to accept almost anything rather than go into the Bankruptcy Court, as it now existed. The law as to settlements by assignment, however, seemed to invite fraud. The insolvent was permitted to make out his own list of creditors, and there were no means of testing the list, except by a tedious process after the assignment was made, and at the expense of the creditor who demanded it. The result was that the debtor often inserted the names of assenting creditors who did not exist, in order to obtain the settlement. The consequence was that fraud flourished, and luxuriated under the system. There were many defects in the Act of 1861, for which the author of that measure was not responsible. Had the Bill passed as it left that House, it would have worked very differently; but it was unfortunately emasculated in another place. In his opinion, no measure based upon the principle of the existing system would satisfy the requirements of the country. That system undertook to do two things—firstly, to interpose State machinery for the collection and distribution of the assets of bankrupts; and secondly, to deprive the creditor of all control over the assets, and of his power to absolve the debtor, and further to set up a tribunal to judge the honesty or dishonesty of debtors. The latter object was quite beyond the scope of a sound and useful bankruptcy system, and he should be glad to see it abandoned. He thought it was altogether an error for the State to undertake those duties, and was of opinion that it would be of great advantage to the commerce of the country if the old bankrupt law was altogether eliminated from the statute-book, He would suggest the propriety of entirely abolishing the bankruptcy law as effete, and thought it would not be difficult to introduce some self-acting machinery which would establish a simple and sound system of action between debtor and creditor. He should establish some such system as that which had worked so well in Scotland, where official interference was of the slightest kind. The creditors named one person to collect and secure the debts, and that person worked for the creditors and no one else. That system had been in operation ten years, and had worked with entire satisfaction, so far as he was informed, both to debtor and creditor. He thought that system might, with a few modifications, be advantageously established for this country. He would suggest that, at the same time, there might be a tribunal to which all the larger cases—all questions as to the right of the creditor to prove against the estate, and disputes amongst creditors as against each other—might be referred as to a court of final appeal of the highest authority. In regard to the discharge of debtors, those creditors who agreed to accept the estate of an insolvent in lieu of their debts should render to the insolvent a discharge of their claims, the remaining creditors who refused to agree to this arrangement granting no release, and retaining their claim against the future property of the bankrupt. By this plan the debtor would frequently be induced, immediately on finding himself insolvent, to summon his creditors and offer a large dividend while in his power to do so, the release being entirely at the will of the creditors. If this arrangement were permitted by the law, he did not think that there would be any holding back on the part of the creditors where there was a good dividend. Under this plan, too, a dividend of 14s. in the pound would, he believed, be no rarity; but, under the present system, such an amount was very unusual. He felt convinced that the establishment of some such system Would bring the law of debtor and creditor into a sound, intelligible, and satisfactory state. The same thing had been at work in France for a very long period. In that country the law of bankruptcy, cruel and harsh as it undoubtedly was in some respects, still possessed some small merits. One of its peculiarities was, that an insolvent never became absolved from his debts as regarded property subsequently acquired. This he believed to be unwise, the right plan being to leave the arrangement entirely to the parties themselves. Finally, the abolition of the present bankruptcy law could be done without any cost to the country, as there was an income of upwards of £45,000 a year, accruing from undivided assets, at the disposal of the Government, and this amount would enable the present officials to be liberally and fairly pensioned.

Moved, That a Select Committee be appointed to inquire into the workings of the New Bankruptcy Act, and to report thereon.—(Mr. Moffatt.)


said, that he had no intention of following his hon. Friend into the particulars of the statement which he had made, nor did he think the House would wish him to do so, especially as the terms of the Motion were sufficient to show that the time for its discussion had not yet arrived. No doubt the matter was one which would receive full attention from the Committee, resulting in extensive and important changes, and he felt sure that the House would recognise the valuable services which his hon. Friend had rendered in connection with the subject.


said, that he did not rise to oppose the Motion of his hon. Friend, but for the purpose of mentioning a few circumstances to the House in connection with the subject. The Committee of last year had been unwittingly made the means of doing a great injustice to very innocent and deserving persons. The Lord Chancellor sent down certain papers which were the results of an inquiry made by a commission issued by himself, the Commissioners being Mr. Ayrton and Mr. Harding. Those papers, containing certain stigmas on the character of five official assignees in the country, were published. One of those official assignees was Mr. Frederick Whit-more, a gentleman, he believed, who was known to many hon. Members. Mr. Whitmore had once occupied a marked position as a merchant in the City of London, but having become bankrupt at length occupied the comparatively humble post of an official assignee. He was eighty years of age, and as the result of the remarks contained in the report of the Commission was now the inmate of a lunatic asylum. The other four gentlemen were Mr. George Kinnear, Mr. George Young, Mr. John Harris, and Mr. T. Carrick, and charges equivalent to asserting that they were defaulters were made against all those persons. In the case of Mr. John Harris decision had already been given, but upon the others he would say nothing, as they were still sub judice. He held in his hand a report of the Commissioners' judgment in the case of Mr. Harris, from which he would read, and he desired to direct to that report the particular attention of the House and of his hon. Friend, who would preside over the Committee, because it was a matter very much affecting a body of honest, industrious, and active officials, who had been, he might say, vilified by the reports of those persons, and his only surprise was that the commissioners had neither been indicted nor had any action brought against them. He might add, that he had no doubt that this was one of the cases to which his hon. Friend had alluded— At the Nottingham Bankruptcy Court yesterday Mr. Commissioner Sanders delivered judgment in the case of Mr. Harris, official assignee of the Birmingham District Court of Bankruptcy, at Nottingham, who was charged by Mr. Chief Registrar Miller with having kept in hand more than £100 in one bankrupt's estate, or above £1,000 in the aggregate of estates, as the case might be, for more than one week, whereby he had become chargeable under the 169th section of the Bankruptcy Act of 1861, and rendered liable to a penalty of 20 per cent on the sums so detained. Mr. Harris was also charged with using the money for his own private purposes. The learned Commissioner gave a detailed account of Mr. Harris's quarterly returns from 1861 (when the new Act came into operation) down to 1864. He said he had closely examined the accounts, and found that there were only two instances in which the official assignee had had in hand more than £1,000 on the aggregate of estates for above a week; one was on the 16th of August, 1863, when there was an excess of only £1 3s. 10d, and the other was on the 16th of September, 1863, when he had in hand £271 14s. above the sum mentioned in the Act. The first mentioned sum was too small to be taken into consideration, and the retention of the latter sum was accounted for by the absence of Mr. Harris from home during the long vacation; for during his absence no- payments could be made, but after his return the sum was reduced to its proper amount. He complained that the conduct of Mr. Commissioner Ayrton and Mr. Commissioner Harding was too precipitate, inasmuch as they jumped at conclusions and made statements in their report for which they had no legal grounds. Their report dwelt in generalities; it stated that sums had been retained for more than seven days, contrary to the Act; but it did not say when the offence was committed, nor upon what amount the 20 per cent was to be charged. By the Bankruptcy Act of 1861, the manner of remunerating the official assignee was entirely changed. Before that time he received fees, out of which he had to defray all office expenses; but by the new Act he ceased to receive fees and was limited to a salary free of all such expenses. No rules or orders were made under the new Act as to how the office expenses were to be paid, and Mr. Harris accordingly paid these, together with other expenses, out of money in hand received from bankrupts' estates. These payments would reduce the balance to the amounts mentioned in his cash-book. With reference to the £1,803 11s. 2d., which Mr. Harding and Mr. Ayrton said the official assignee ought to return, he having received it in fees and not entered it in his accounts, the Commissioners said that they had not sufficient grounds for calling upon Mr. Harris to refund it. Mr. Harris might not unreasonably suppose that he was entitled to those fees, as they were from estates under the old Act. He might here observe, that of every sum which according to these gentlemen ought to be refunded, the Commissioners had not received one farthing except upon the actual command and decision of the Commissioners— The practice in the London Courts under the old Act was for the official assignee to receive four-fifths of the fees, and the other fifth was paid into court. This sum of £1,803 was made up of fees so obtained. The conduct of Mr. Chief Registrar Miller was indefensible. As soon as Chief Registrar Miller had heard of the decision of Messrs. Ayrton and Harding, he wrote peremptorily to this unfortunate assignee, requiring him to pay up the sum for which he was said to be a defaulter. He had in his hand a statement which had been sent to him by a friend, and which he thought would rather interest the House, as affording a specimen of the manner in which men's characters had been dealt with by those commissioners. It was as follows:— The accounts of one of the London messengers, named Cooper, were investigated by a person appointed by the Lord Chancellor to that duty, named Butler. Butler reported a deficiency in Cooper's accounts of £1,330. Cooper was suspended on the 27th of April, 1864. Cooper employed an accountant to look into the accounts, who reduced the deficiency to £350. He reported this result to the Chief Registrar. Mr. Harding was appointed to re-examine the accounts. He allowed all Cooper's figures, and continuing the account down to the 27th of April, 1864, found a further sum of £68 as due from him. The sum thus shown to be due from Cooper was not defalcation at all, but simply an amount that Cooper had supposed his own under the old Acts, and from some small mere clerical mistakes. He was reinstated in his office, and all his back salary was paid to December, 1864. Another messenger of the London Court was charged with a deficiency of £1,800 by the Chief Registrar, on the report of Mr. Butler. This messenger had his accounts looked into, and convinced Mr. Butler that Mr. Butler was totally mistaken, and on Mr. Butler's second report, the Chief Registrar ceased to write to him (the messenger), who has been allowed since to retire from work, retaining his full salary. Mr. Butler's charges for investigating the accounts of three messengers (the two named, and another whose accounts must be taken as regular, for nothing has been said to him) were £550, which sum has been paid by the three messengers. Cooper has also paid a further sum of £80 to Harding for the charges for re-investigation. This statement made it clear that there had been undue and precipitate conduct on the part of those Commissioners who had been appointed by the Lord Chancellor. It was well known what that noble and learned Lord's feelings were, and they wanted to curry favour with him; and, in entire ignorance of the facts, made an unjust report against individuals. He hoped the Committee about to be appointed would inquire into the proceedings of those two Commissioners appointed by the Lord Chancellor, and see on what grounds they had made their report, and on what grounds they could justify it.

Motion agreed to. Select Committee appointed, "to inquire into the working of the New Bankruptcy Act, and report thereon:"—Committee to consist of sixteen Members:—Mr. ATTORNEY GENERAL, Mr. MOFFATT, Mr. MURRAY, Mr. MALINS, Mr. WEGUELIN, Mr. GATHORNE HARDY, Mr. KIRKMAN HODGSON, Mr. CRUM-EWING, The LORD ADVOCATE, Mr. LOWE, Mr. VANCE, Mr. CAVE, Mr. GOSCHEN, Mr. ROEBUCK, Mr. TAVERNER JOHN MILLER, and Mr. AYRTON:—Power to send for persons, papers, and records; Five to be the quorum.—(Mr. Moffatt.)