BANKRUPTCY ACT (1861).—RESOLUTION. (Hansard, 30 May 1865)

MR. MOFFATT
, in rising to call attention to the Report of the Select Committee on the Bankruptcy Act of 1861, and the existing state of the Laws in regard to Debtor and Creditor; and to move, that, in the opinion of this House, the Report of the Select Committee on the Bankruptcy Act of 1861 deserves the prompt and serious consideration of Her Majesty's Government, said, that on the former occasion on which this subject was before the House, when the discussion came to a somewhat untimely end, he showed by documents which were before the House the existence of a state of things which fully warranted the complaints which were made on all sides. The affairs of bankruptcy appeared to have always been dealt with in the most unsatisfactory manner for the commercial interests of the country. The state of things previous to the passing of the Act of 1861 was bad enough, but he believed that there was no man who would not gladly return to it rather than maintain the existing law. In the three years previous to 1860 the number of bankruptcies was about 1,200 in each year, the debts proved averaged £5,100,000, and the moneys collected £1,300,000—a sum equivalent to about 5s. in the pound; this it was true was diminished by official charges and by misappropriations, which were described by Sir Richard Bethell in the present Parliament as the "scandal and abomination," of the Act then in force. Under the Act now in force the number of bankruptcies had risen from 1,200 to nearly 7,500 annually; and in from 5,000 to 6,000 of these cases the insolvents were allowed to escape without paying any dividend, while 1110 the cost of whitewashing these insolvents was paid by the State. The first point with creditors connected with commerce always was to avoid an appeal to the Bankruptcy Court; this indisposition to resort to that Court became an engine in the hands of the debtor for the dictation of the terms upon which he would compound his debts. The result was that there had sprung into existence a practice so tinged with fraud that it might fairly be termed a fraudulent system. When a man found it convenient to stop payment he placed his affairs in the hands of an accountant or solicitor, who prepared a circular, which the insolvent signed, informing his creditors of the circumstance, and referring them to these gentlemen for further particulars. Attorneys and accountants were generally honourable men, who would not knowingly make a false statement; but they took exactly what they found upon the insolvent's books, and from them prepared a statement which they laid before the creditors. It was impossible to get any creditor to investigate these accounts merely that he might obtain a larger dividend for himself in common with sixty or seventy other creditors, and the consequence was that the greatest facilities were afforded for fraudulent insolvencies. Last week insolvencies were announced in the public papers to the amount of £5,500,000, and of none of these would anything be heard again. They would commence with a promise to pay 10s. or 15s. in the pound, which would gradually dwindle down to 2s., 3s., or 4s. in the pound. The explanation was to be found in the existing state of the law. A Committee of that House had inquired into the law, and had recommended the abolition of the machinery of the present bankruptcy system and the substitution of a system somewhat similar to that which now existed in Scotland, placing the affairs of the insolvent very much in the hands of the creditors, and establishing a machinery by which estates could be worked without the delays which had resulted from the joint action of the official and creditors' assignees. It had also recommended the abolition of arrest for debt, and the curtailing of the facilities that insolvents now enjoyed for obtaining certificates. He desired to know whether the Government intended to adopt the recommendations of the Committee, and to take measures for the remedy of a state of affairs which was injurious to mercantile interests and discreditable to the Legislature of the coun- 1111 try. The hon. Gentleman concluded by I moving that, in the opinion of this House, the Report of the Select Committee on the Bankruptcy Act of 1861 deserves the prompt and serious consideration of Her Majesty's Government.

§ MR. AYRTON
, in seconding the Motion, said, that on a more favourable occasion he should have felt it his duty to present to the House fully and completely the Resolutions at which the Committee upon this subject had arrived; but as his hon. Friend had now been almost as unfortunate in his selection of a night as he was when the matter was last before the House, he would confine himself to the statement that the changes proposed by those Resolutions were of so fundamental a character, and would so affect almost every section of the statute now in force, that it would be impossible to carry them into effect by any mere amending Act, and that it would be necessary to give effect to the concluding Resolution, and introduce an independent Bill for the amendment and consolidation of the law. It could scarcely be expected that the Government would during the short time which remained of the present Session pass any comprehensive measure on the subject, but he hoped the Attorney General would be able to assure the House that it would receive their serious consideration, with a view to legislation when the new Parliament met. Meantime he had great pleasure in seconding the Motion of his hon. Friend.

§ MR. BASS
thanked the hon. Member for Honiton (Mr. Moffatt) for the constancy which he had displayed in bringing the state of our bankruptcy law under the notice of the House. The question was one which was at the present moment of the greatest interest to the mercantile community. Of course it would be impossible to carry a Bill with respect to it in the present Session; but then the Lord Chancellor, who was as familiar with the subject as with his morning and evening prayers, might without the slightest effort produce a measure which might be laid on the table of the House before the dissolution, and considered by the country during the recess. He hoped, he might add, that the Attorney General would, before the 1112 Session came to a close, make some explanation to the House as to the principle on which, in his opinion, the Government ought to act in effecting any alteration in the existing bankruptcy system.

§ MR. BEECROFT
said, that he believed that hon. Gentlemen on both sides of the House agreed that the present law of bankruptcy was most unsatisfactory. In the Session of 1860 the Government introduced a comprehensive measure for the reform of the law of bankruptcy. Its principle met with general approval; but, though opposed by no one, it did not reach the Upper House. When the House met, the year after, they all supposed that a Bill which had met with so much support would be among the first to he introduced at the commencement of the new Session, and that all parties would unite in perfecting its details. They were all disappointed when they found that the Consolidated Bill was abandoned, and a sort of patchwork Amendment Bill substituted for it. They found, however, that they had Hobson's choice—that or none. That Bill passed with some Amendments. It repealed part of the old law, and altered other parts; amended some clauses, and left others untouched. No course could be taken more likely to lead to confusion and difference of decision; and he heard from those engaged in the administration of it that the law was thrown into such a state of inextricable confusion that some parts of it were really rendered very difficult of interpretation. He scarcely need say that the commercial community was very much dissatisfied with the present law and practice of bankruptcy. A very strong feeling of dissatisfaction generally prevailed, and a thorough change in the entire system was loudly called for; indeed, there were few questions affecting the trading classes of greater importance. He might say that the Leeds Chamber of Commerce was against any attempt merely to amend the law, or any change which would leave the winding up of insolvent estates in the hands of any court or body of officials whatever, and was as decidedly in favour of leaving such winding-up in the hands of the creditors; and that no change would be satisfactory or prevent further agitation of the question which did not altogether take out of the hands of officials the winding-up of bankrupt estates, and transfer it to the creditors themselves, as was the case in Scotland. In fact, what the Leeds Chamber of Commerce really wanted was, that 1113 the insolvent should be in the Court and the estate out of Court.

THE ATTORNEY GENERAL
said, he had no difficulty whatever in stating, as he had stated before, that the Government would undoubtedly recognize the duty of taking into prompt and serious consideration the Report of the Select Committee on the Bankruptcy Acts. He was glad to find that, so far as he had had the opportunity of ascertaining, so many hon. Members concurred in some of the most important recommendations of that Committee. The Committee were quite agreed in the opinion that it was desirable no longer to attempt to patch up a system which had been found not to answer, but that there should be a serious endeavour made to revise, as far as possible, both its principle and its details, and to place them on such a footing as would afford some reasonable ground that we should understand the system on which we were going to proceed in future, and start with a favourable expectation of its success. The Committee had recommended substantially that for which the hon. Member for Leeds (Mr. Beecroft) contended for, with regard to the taking insolvent estates out of the hands of the Court so far as related to the mere collection and distribution of assets, while they had also made the important recommendation that imprisonment for debt should be abolished; but at the same time, and as a necessary sequel to that alteration, that the discharge given to a bankrupt or insolvent debtor should not at once operate, except on the payment of a dividend of a certain amount. They also proposed to remove from the Bankruptcy Court all cognizance of fraudulent acts and to transfer such matters to the ordinary Courts. These were material alterations, and he mentioned them on the present occasion, not for the purpose of entering into a vindication of their merits, hut in order that the attention of the public out of doors might be directed to their consideration. If Parliament were to do anything useful, as he hoped it would in a future Session, it must proceed on the two grounds of endeavouring to consolidate the whole law and of securing the support of public opinion as to those important principles which it was proposed to introduce for the first time into the new system. It was indispensably necessary that the Government in dealing with the subject should be in the possession of the views of the mercantile community upon 1114 it, because it would be useless to endeavour to carry a measure which failed to commend itself to their approval. He trusted, therefore, that before the House met again after the recess the attention of mercantile men would be carefully directed to the Report of the Committee, and that there would be a very general expression of opinion upon the question.

§ MR. GOSCHEN
said, that the mercantile community would receive the statement just made with great satisfaction. He hoped that a measure would be prepared ready for the energies of the new Parliament, and if this were so, then their thanks, which were now due to the hon. Member for Honiton (Mr. Moffatt), would be transferred to the Government. He was sure that the appeal of the Attorney General to the commercial classes would be fully answered, and that the question would be amply discussed by them before the next Session. He agreed that the present system must be entirely re-cast, and he believed that the trading community would be glad to learn that it would not be attempted to patch up the present system, I but that a new one would be introduced to; remedy abuses that were now a disgrace to legislation.