§ Order for Second Reading read.
THE ATTORNEY GENERAL
, in moving that the Bill be read the second time, said, that it was founded upon the recommendations of the Select Committee which sat in 1864–5, and was drawn up with the intention of reducing the whole of the bankruptcy laws of this country into one code, and also of effecting some very important alterations, both of principle and detail. As the plan proposed was intended to settle upon a sound basis the whole system of the law of bankruptcy in this country, it was necessary that the House should clearly ascertain how the question stood at the present time, and that they should take a retrospect of previous legislation upon the subject. The law of bankruptcy in England originated as far back as the time of Henry VIII.; and from that period down to 1705, in the reign of Queen Anne, it proceeded upon a principle which, whatever might be its defects, was in all respects consistent with itself—namely, that of regarding the bankrupt trader as criminal and fraudulent in contradistinction to other debtors. The law as it then stood was framed exclusively for the benefit of the creditors, and gave no discharge whatever to the bankrupt for any portion of his debts. The severity of that code was well illustrated by a clause in the Act of 21 James I., which provided that any bankrupt who could not prove to the satisfaction of the Commissioners that his debts were the result of unavoidable loss and misfortune was to be placed in the pillory and to have his ears cut off. In the year 1705, however, commenced a 674 series of temporary Acts, which were renewed from time to time, but the general principle of which was ultimately made permanent in 1798. Those Acts were principally intended to prevent frauds by bankrupts; but they were the first in which was introduced the principle of the discharge of the bankrupt, for they gave upon certain terms a discharge to the bankrupt who had conformed to the law, and who did not appear to have been guilty of any criminal offence. That system continued in force without material alteration until the year 1825, when an Act was passed with the intention of consolidating all the previous Acts upon the subject, and some important modifications of the law were introduced. There must, however, have been something unsatisfactory in the operation of that Act, for it was repealed by another Act in 1826, and another consolidation statute was substituted. The most material difference in principle introduced by those Acts was, that they for the first time departed from the mode in which discharge had been previously granted; because from 1706 to 1825 nothing more was necessary for the discharge of the bankrupt than that he should have conformed to the law, and that a certain proportion of the creditors should consent to it, when his right to his discharge became absolute. A modification in that system was made in 1825–6, when it was provided that any creditor might oppose the granting of the certificate of discharge notwithstanding the assent of the other creditors had been obtained, and the Commissioners might then allow or disallow the discharge as they thought fit. No further alteration was made in the law until 1831. He should here state to the House that up to 1831 the Lord Chancellor appointed a separate commission for each bankruptcy, that the whole of the debtor's property was placed in the hands of the creditors assignees, who administered it subject to no effective supervision, and that then in all questions of law or cases of abuse there was an ultimate resort to the Lord Chancellor. That was the system respecting assignees from the 13th of Elizabeth down to the beginning of the reign of William IV. By an Act passed in 1831, the present Court of Bankruptcy was first established, and in that year the system of the appointment of official assignees for London was first introduced, and this principle was afterwards, in 1842, extended to the country districts. It was thought expedient in 675 that way to apply a remedy to the abuses which had sprung up through the system of creditors' assignees, who were often practically irresponsible, and who unquestionably had often been guilty of gross frauds. The principle of the official assignee system was that all the debtor's estate was collected by the official assignee, and it was then dealt with by the creditors' assignee, subject to official interference at every step, and almost everything to be done took the form more or less of a proceeding in court. In 1842 another very important change was introduced. The system of certificates discharging bankrupts by consent was abolished, and the matter was referred to the Court, which was judicially to inquire into the title of the bankrupt to receive his discharge, and a provision was introduced into the Act, that in determining that question the Court should not only see that the bankrupt had conformed to the bankruptcy law, but should have regard to his conduct as a tradesman before as well as after bankruptcy. In 1844 there was another alteration, a trader was then enabled on certain conditions to make himself bankrupt. And then, for the first time, it seems to have been considered by the Legislature that the bankrupt law should be directed to the relief of the debtor as much as to the benefit of the creditor. So matters continued until 1849, when what was called a Consolidation Act was passed, although, in point of fact, it was not a Consolidation Act, inasmuch as a great deal of the former law remained untouched: by that Act, however, some very important alterations were introduced. In the first place the censorial jurisdiction of the Court, as regarded certificates, was not only retained and enlarged, but a classification of certificates was introduced, under which the Court had power to examine into the conduct of the trader, and to ascertain whether his losses were due to unavoidable misfortune. If they were found to be wholly due to that cause, he was to have a first-class certificate; if only partially, a second class certificate; and if they were not owing in any degree to that cause, then his certificate was to be of the third class. The Court was empowered to refuse altogether in certain cases the bankrupt's certificate, to withhold from him, or to suspend for a limited time, protection against arrest, or to adjourn his examination sine die. It was worthy of notice that the Act of 1825 had introduced the principle of allowing a composition to be effected with the cre- 676 ditors, whereby the affairs of a debtor might be withdrawn from the administration of the Court of Bankruptcy, and this power was considerably enlarged and extended by the Act of 1849. It might be advisable for a moment or two to refer to the parallel legislation which had been going on upon a kindred subject, the case of insolvent non-traders, from the time of Queen Anne downwards. Almost at the same time that the principle of discharge by certificate was first adopted in relation to trader debtors, the legislation bearing upon the case of insolvent debtors commenced, the object of that legislation being to afford insolvent debtors relief from imprisonment by presenting a petition to the Insolvent Court. By that legislation an insolvent debtor was enabled to claim protection against personal arrest and imprisonment on giving up his existing property for the benefit of his creditors; and he was obliged to confess a judgment under which his future estate might be made available by an order of the Court for the payment of his debts—that was, theoretically, he did not obtain a discharge in respect of his future estate; but practically the result was during his life the same as if he had obtained such a discharge, although on his death his creditors were entitled to payment out of any property which he might have left. The distinction between traders and non-traders continued till the time of the Act introduced by Lord West-bury, when Attorney General, in 1861. By that Act the distinction between traders and non-traders was abolished, and non-traders who could not pay their debts became liable to be made bankrupts as well as traders; and the principle which had been introduced originally in 1844, when traders were first enabled under certain conditions to make themselves bankrupt, was still further expanded to the extent that any one was permitted to make himself a bankrupt without any conditions whatever being imposed. There was also another important alteration effected by that measure. That provision of the law which vested the administration of a bankrupt's estate in official assignees had proved very unacceptable to the mercantile community. It was therefore proposed to restore a considerable part of their former power to the creditors' assignees, to empower them to receive as well as to administer the more valuable parts of the estate, while the debts below £10 were placed under the care of the official as- 677 ignee. By this means a double administration was established. The official assignee had to make his report to the creditors' assignee, who, in turn had to account to the official assignee. But by neither plan did the body of the creditors exercise any check, superintendence, or control over the receipts and administration. The working of this change was not found to be satisfactory. The great merit of the Act of 1861 was that it got rid of the distinction between traders and non-traders; but there were other matters on which it was not altogether successful. By that Act there was a further enlargement and expansion of what he (the Attorney General) had denominated "censorial jurisdiction." The Court of Bankruptcy was authorized to try a large class of cases which by one section of the Act were constituted misdemeanours. In addition a large number of mercantile offences were created, and of these offences the Court was empowered in considering the bankrupt's claim to his certificate to take cognizance, and to sentence him, if guilty, to a term of imprisonment not exceeding one year. The principal instances, he might add, of improper mercantile conduct were trading with fictitious capital, contracting debts without a reasonable expectation of being able to satisfy them, rash or hazardous speculation, and unjustifiable extravagance in living. These developments of the censorial jurisdiction were perfectly new in 1861, and were attended with considerable difficulty, inasmuch as they involved considerations of a retrospective character. Further provisions with respect to compositions were also introduced. But the system did not, on the whole, work well. Even the clauses relating to trustees, which seemed to work the best, were seriously defective. In the year 1864 his hon. Friend the Member for Southampton (Mr. Moffatt), whose services in relation to the subject he now took the opportunity of acknowledging, obtained the appointment of a Select Committee, who bestowed a great deal of time and attention upon the subject. That Committee made several important recommendations, and the object of the measure before the House was to carry those recommendations, almost without exception, into effect. One branch of those recommendations might, perhaps, appear not to have been absolutely followed; but the object of the Bill was to carry into effect the more important of the recommendations of the Committee. One of the re- 678 commendations of the Committee was that the whole of the bankruptcy laws should be brought together and consolidated. The fact that the law in relation to this subject was dispersed through a considerable number of statutes was undoubtedly extremely inconvenient. Whatever opinions, therefore, might be entertained concerning the changes which the Bill before the House proposed to effect, there could, he believed, be scarcely any difference of opinion as to the advisability of consolidating those portions of the law which related to this subject. It was unavoidable, under these circumstances, that the Bill should contain many clauses relating to existing enactments which it was not proposed to alter; and the number of them might prevent persons not giving very close attention to the subject from ascertaining what changes in the law it was really proposed to make. He would therefore inform the House of the nature of these changes; and first, as to imprisonment for debt. The leading recommendation of the Committee was that imprisonment for debt should be abolished. It would, he confessed, have given him pleasure to be able to state that a general concurrence of opinion existed upon that subject; but he regretted that even to this time a not inconsiderable portion of the mercantile community still clung to that small fragment of the old barbarous law of imprisonment for debt which remained upon our statute book, as if it were really useful. But he (the Attorney General) was satisfied that the effect of imprisonment, for any purpose useful to creditors, was already nullified. The House would recollect that arrest on mesne process was abolished in 1838, but arrest on final process still remained part of our law. The existing law, however, enabled every debtor to make himself bankrupt whenever he pleased, and by so doing to nullify whatever advantage the creditor might be supposed to derive from the power of imprisonment for debt. The Act of 1861 proceeded still further, and provided for an official visitation of prisons at short intervals, and for making all prisoners for debt bankrupt, whether they desired it or no. So, notwithstanding a very estimable witness had spoken of imprisonment for debt as a great constitutional remedy, he did not think the House would be of opinion that the remedy was of much value, or that creditors would lose any substantial benefit, if it were not suffered to remain. But it should not be forgotten that important 679 considerations were connected with the principle of imprisonment for debt. It influenced the old law of bankruptcy more than anything else, and, as a matter of course, the moment it was determined to get rid of it, the various questions it was supposed to close were immediately thrown open, and it became necessary to deal with them from a new point of view. It was not a new recommendation, either of the present Bill or of the Committee of 1864, that imprisonment for debt on final process should be abolished. The Commission of 1832 appointed to inquire into the practice of the Courts of Common Law described in glowing terms the painful and pernicious effects of imprisonment for debt; and the Commissioners of Bankruptcy in 1842, recapitulating that description, strongly recommended the abolition of the practice. Nevertheless, all that had been done up to the present time was to deprive it of its practical value to creditors. He hoped that the House would feel that the time had at last come when the practice might be safely done away with; at all events, he proposed the change, and thought he could show that it was recommended by sound reason and expediency. The recommendation was based on sound reason, because nothing more ought to be desired than that the property of the debtor should be dealt with properly, and that the creditors should have proper and equitable remedies against it. To say in addition to this that punishment should be indiscriminately inflicted upon a debtor whether culpable or not was certainly barbarous. The abolition was also desirable on the ground of expediency, because it cleared the way and enabled them to place the law of bankruptcy upon a sound and satisfactory basis. Imprisonment for debt had led to enabling debtors on their own motion to effectually rid themselves of liability to their creditors; and it appeared to him that the moment an end was made of imprisonment for debt no necessity existed for permitting a debtor to rid himself of his liabilities purely at his own will and pleasure. Accordingly, the Bill proposed that creditors alone should put the law in motion against an insolvent person; and that from the moment imprisonment for debt was abolished no debtor should be permitted voluntarily to make himself a bankrupt. Desiring to show the actual conseqences resulting from the present law he would quote from the evidence given by Mr. Commissioner Holroyd, who had said— 680The consequence of retaining imprisonment for debt on final process has been that a multiplicity of petitions for adjudication of bankruptcy on the debtor's own petition are filed when there are no assets whatever, and these are resorted to mainly either for the purpose of being released from prison, or to avoid being put into prison. In most of these cases a certain expense is incurred without the least utility to the creditors. The following are the number of cases where there were no dividends in the years 1862 and 1863, and, therefore, where there were little or no assets; in 1862, 6,910 out of 9,663; in 1863, 5,630 out of 8,470.This showed that the law had drifted so far away from sound principles that debtors were actually allowed to come into court without having anything to offer their creditors, or the wherewithal to do them the least justice. He (the Attorney General) apprehended that no good reason whatever could be offered in support of such a practice; and when the state of the law permitting it was abolished the true principle of the law of bankruptcy might be restored. The true principle was stated by Mr. Holroyd when he said—I take the principle of the bankrupt law to be that a man has property to distribute. A commission of bankrupt being regarded as a species of execution, it was formerly considered to be no further authorized by the law than as a proceeding for the purpose of obtaining a fair distribution of the bankrupt's property among his creditors. If, therefore, a commission of bankrupt was issued by a creditor solely to serve the purposes of the bankrupt and not with any view whatever of benefiting the creditors, it was regarded as a sort of contempt of the Great Seal, or in other words, an abuse of the process of the Court.And it might be said it was not the debtor's right, and no debtor should have it offered to him so as to interfere, at his option only, with any legal rights a creditor might have. By getting rid of a vicious system which gave occasion to these consequences, they would get rid of the consequences also.
He now came to the subject of discharge, and the House would excuse him if he dwelt upon it at some length. He would remind the House of what he had already said with reference to the history of legislation in bankruptcy—that from its commencement in the reign of Henry VIII. to the fourth year of the reign of Queen Anne, 1705, there was no discharge whatever of debtors in bankruptcy, and that in that year it was introduced. The order of discharge was made dependent upon a certificate signed by a certain number of the creditors; and from that date till 1842 the law upon this subject remained stationary. 681 He would here state what he forgot to mention earlier—that it was not proposed by the present Bill to take away the power vested in the Judges of the County Courts of ordering a debtor to prison for a limited time, when it was satisfactorily proved that he was able to pay instalments ordered by the Court, and he refused to do so. Reverting to the point of discharge, having swept away imprisonment for debt, the first question that arose was, should there be any discharge at all? He knew that some Gentlemen, the hon. Member for Southampton (Mr. Moffatt) among them, had argued with great ability that there should be no discharge. He confessed that he had not been able, nor was the Commit tee, to arrive at such a conclusion. He was far from saying that reasons of considerable force might not be adduced against the discharge of any debtor; but his hon. Friend must be sensible that the general opinion of the country was not in favour of that conclusion; nor was the analogy of similar laws in other countries in its favour. He would now give some reasons why the House should not adopt it. In the first place, he doubted whether the result of adopting that extreme conclusion—enacting that no discharge should be granted, ought not to be the abolition of the law of bankruptcy altogether; for the question might be asked, under these circumstances—if there was to be no discharge of the debt, but the debtor was to remain liable to his creditor to all future time, why should the law interfere at all between the debtor and creditor? Be cause, it is not a contract between them that all the property of the debtor should be seized, his business broken up by the strong hand of the law, and that the creditors should take the administration of his estate into their own hands. That was the necessary operation of the bankrupt law; and the effect of this peculiar sys tem of administration which the law had introduced was obviously in many cases—perhaps, not in all—to interfere most materially with the chances of his ever being able to pay his debts in full: whereas, if a man was permitted to retain his property in his own hands, submitting to such pressing demands as he could not avoid, and if he could keep his business going by hook or by crook, in many cases the turn of the wheel of fortune might be such as to enable him to pay everything—or at least to pay more than he could do if all he had in the world 682 was taken out of his hands and the goodwill of his trade destroyed, he being at the same time required by law to give assistance to those who took away from him the administration of his own affairs. It was reasonable to say when the creditors obtained that property which was deemed a fair amount for the basis of a composition, that at the end of the time necessary for that operation the bankrupt should have his discharge in order that he might start again in the world. It was, no doubt, extremely important that the terms on which a bankrupt might obtain his release should not be made too easy, seeing that there were rights of creditors as well as lights of debtors, and it was for the benefit of the creditors that such a proceeding was instituted. If those terms were to be made easy the bankrupt would not exert himself so much as he otherwise might to discharge his liabilities, nor would his friends be so anxious to help him in that endeavour; they ought to be such that no man would wish to put himself in the situation they involved. But that was a question as to the terms of discharge; not whether a discharge upon any terms should be wholly refused. If discharge was not to be given at all to a bankrupt it would then be necessary to choose whether all his future property should or should not be vested in assignees. If it were to be so vested the debtor would, in the words of Mr. Commissioner Fonblanque, be subjected to "perpetual mercantile excommunication," he would be made a sort of outcast, an outlaw, incapable of ever doing anything for himself, and without any proportionate prospect in ordinary cases of benefiting the creditor. Unless he happened to get what was called a "windfall," he could never earn anything, to pay his creditors, for he would have no motive, no inducement to work. He would be cut off from the menus of earning anything, and any inducement to his friends to give him those means would be removed. But if the bankrupt's property were not to be so vested, it would be necessary to revert to the process called cessio bonorum, his future property being left free subject at the same time to the ordinary legal remedies. And then would arise the question, what was to be the position of the creditors. If the property were not vested in assignees there would be a kind of scramble among the creditors by which it might be made very probable that no one would get anything; and inequalities would be introduced be- 683 tween those who had proved on an equal footing, and received equal dividends out of the bankrupt estate. It would also be necessary to consider the claims of subsequent creditors. If a man were permitted to acquire future property, subsequent creditors ought to have their claims satisfied before those of creditors who got all the former property. All these considerations tended to the same conclusion—namely, that there should be some discharge. As he had before stated, it was not only the general opinion of the whole mercantile community of this country that on some reasonable terms discharge should be granted, but he believed it was in conformity with the general practice of all European States. It was quite true that it was not the general law of Europe that there should be exactly what we called a certificate of discharge; but there were powers given to a certain majority of creditors to make compositions, which amounted to the same thing, for when those compositions were made they put an end to the bankruptcy and discharged the bankrupt from his debts. It might perhaps be suggested that there was a step short of discharge which while it protected the debtor nevertheless allowed his future property to be got hold of—such a system as formerly prevailed under the Insolvent Court. That court had the means, if it thought fit, of taking in execution the future estate of an insolvent; though it was rarely exercised. There were very great objections to such a course. If a kind of sword of Damocles were suspended over the head of the insolvent, but were not actually to fall, it would be of no benefit to the creditors, while it was vexatious and harassing to the debtor. He had been informed on good authority that the working of the Scotch bankruptcy law tended to confirm that view. There, when a man became bankrupt, the creditors were able by a majority at the outset of the proceedings to determine whether the estate should be worked in bankruptcy, or sequestration as they called it, or whether it should be limited to cessio bonorum, and, like the Insolvent Court, leave the future estate liable; and as he was informed that the latter course was hardly ever adopted in Scotland, it tended to show that it was not thought of substantial value to creditors. The next question was, whether it would be proper to return to the old system, which was, to a certain extent, retained still in Scotland, of making the discharge depend upon the consent of a 684 certain proportion of the creditors. But that system, when formerly tried in this country, had signally failed. The creditors were always tormented with the inquiry, whether they would enforce their power of keeping the debtor from the benefit of a discharge without the prospect of benefiting themselves. All sorts of experiments were tried upon creditors to induce them to sign, and a great many underhand agreements, which the law prescribed and rendered illegal, were nevertheless entered into; and, independently of these agreements, such canvassing was used, such pressure was put upon them, that it was almost as much as the comfort of their lives was worth to refuse to sign. The consequence was that consents were nearly always obtained or extorted; the system in that respect failed, and the Government therefore thought it right to recommend the House to adopt the advice of the Committee, and to endeavour to fix certain terms upon which the discharge may be obtained. Before he adverted to those terms he ought to say something with regard to the present system. It was a half-criminal, half-censorial system, which proceeded upon the assumption that Courts of Bankruptcy were to review the whole mercantile life of the individual trader, and the moral or legal propriety of the way in which he had carried on his business, and to decide upon questions such as whether he had spent too much money in household expenses, and a great number of other questions depending upon what he might call the laws of imperfect, not of perfect obligation, with regard to which the opinions of no two men were the same. The result had been an amount of dissatisfaction and complaint greater than that provoked by anything else in the whole law of bankruptcy except the attendant expenses. The evidence taken before the Select Committee on Bankruptcy in 1864 was full of expressions of opinion to the effect, among other things, that it ought to be part of the system of bankruptcy to enforce a strict code of commercial morality, taking cognizance not merely of matters which at law would constitute misdemeanors, but of everything else which, in the estimate of mercantile men, was otherwise than commendable in the merchant. But what was this mercantile law of morality? Where would they find the rules for thus measuring the conduct of individuals? How could they have a reasonable ground for believing that, in all cases, they 685 could arrive at a satisfactory solution of matters in which men's prejudices, passions, feelings, and judgments were so strongly roused and affected? Things which solvent prosperous men were every day in the habit of doing without the least imputation on their characters or motives might become crimes if they were followed by failure. He would take an instance from the Act of 1861—the part which related to rash and hazardous speculation. Every day in the City of London a great deal of money was made by persons of high character and probity in speculations which nevertheless were frequently hazardous and in some degree marked by rashness. Not merely in London, but in other great cities, immense fortunes were made in speculations, which were highly applauded when successful, but which, if they happened to fail, assumed a very different aspect. Was it a sound principle that they should attempt to establish a judicature which, not proceeding upon the ordinary notions of criminal law, or estimating acts according to the legal character which they bore at the time when they were done, afterwards endeavoured to pass a species of semi-moral, semi-commercial judgment upon them, and to make the discharge or non-discharge of the debtor dependent upon the result? Experience showed the impossibility of succeeding in such an effort. Ever since the year 1842 that bad been the very thing most complained of. Somehow or other the Judges had never managed to discover this commercial code of morality. One Commissioner or one Vice Chancellor had taken an entirely different view of the subject from another. A case had been cited as one of signal hardship, in which a young man having no monies of his own, but having very great confidence in a house of business to which he was under obligations, put his name to a considerable amount of accommodation paper; and afterwards, being called upon to pay, had no assets to do so, and his protection and discharge were absolutely refused. In the opinion of a very competent witness that was an extremely hard case. He (the Attorney General) did not know whether it was or not, but he did know that, according to experience, the attempt to discover a satisfactory rule for every particular case bad been found impracticable. The Courts had endeavoured to do so, and they had broken down in the effort. They gave no satisfaction to the mercantile community, and certainly none to themselves. There 686 could be little doubt that, while some traders got first-class certificates, the certificates of others were refused altogether whose losses had been suffered under circumstances not at all more censurable. Fie felt as strongly as any one that, when they had got at the real definition of a crime, it ought to be punished; but he thought it should be punished in the ordinary Courts of Law. It should not be treated as a crime on account of something that happened afterwards, and which had changed its aspect, but according to its character at the time; it should be treated like other crimes, not by what persons were pleased to call commercial tribunals, but by the ordinary tribunals of the land. When you get a crime of this kind, prosecute and punish it, and let it be a good reason for refusing the discharge in bankruptcy; but do not attempt to impose upon the Judges of any tribunal, you may create an arbitrary discretion to make those crimes or not, according to their own particular judgment of the moral complexion of each particular case. If they were to attempt to do so, they would fail to give satisfaction to every one, and in making the attempt they deviated from sound principle. The Committee recommended that, keeping in view the leading principle that discharge in bankruptcy was to be on the footing of a composition by law, they should fix a certain not inconsiderable dividend as a condition which, in addition to the absence of proved criminality, should entitle the bankrupt to be discharged; or in the alternative of there being no assets to pay that amount, should retain the hold of the creditors over the future estate for a reasonable and not too short period of time. The period they took was six years, by analogy to the Statute of Limitations, in case of simple contract debts. That was not so long a period as to make it equivalent to a life-long commercial excommunication of the bankrupt, and not so short as to make it a light matter to be subjected to the bankruptcy laws. After that time, if the legal composition had not been paid, then let the bankrupt obtain his discharge, provided there was no case of criminality proved against him in proper legal form, and that he had in all respects conformed to the law. It was impossible to fix any sum as the amount of the composition without its being necessarily open to the objection that it was an arbitrary amount. He had taken for the purpose what be considered would 687 be adequate—the amount of one-third, or 6s. 8d. in the pound. They were not without precedents on this point in former legislation. For nearly a century, from 1732 till 1840, it was the law that a bankrupt, or an insolvent, or a person who had compounded with his creditors, and who became bankrupt a second time, should not get his discharge on a certificate unless he paid 15s. in the pound; and in 1844 and 1849 the Legislature made it a condition that a person who made himself a bankrupt should at the outset satisfy the Court that he had sufficient available assets to pay a clear dividend of 5s. in the pound to all his creditors after providing for the expenses of the administration of his estate in bankruptcy. While men were subject to imprisonment for debt, there was, of course, a strong objection to leaving a man in prison, or liable to be put in prison, till he had paid a certain amount; but when it was proposed to relieve men from liability to such imprisonment, there was no longer anything unreasonable in saying that the law would withhold from a bankrupt the control over his future assets for a period of six years, unless in the meantime he, or friends Over whom he might exercise influence, could make up the dividend to 6s. 8d. in the pound. The effect of the proposed change would be to sweep away altogether all those small bankruptcies in which the debtor had no assets at all. Such cases would be left to the operation of the ordinary law of debtor and creditor, because there would be nothing to make it worth the while of the creditor to invoke the aid of the Bankruptcy Court; and, on the other hand, there would be no inducement for the debtor to go into that Court, if he knew that he would have to remain for six years subject to the law. Those debtors only who were able to pay the substantive dividend required by the Bill could be regarded as legitimate subjects for the operation of the relief offered by the bankruptcy law. There was one objection which he felt it to be his duty to take notice of, because there would be a good deal of force in it if it were not met by another provision. It was urged that the change might in some cases act as an inducement to persons contemplating bankruptcy to order goods on credit and increase their stock on fraudulent pretences, in order that they might have property to pay a greater dividend than could otherwise be got out of their assets. 688 But that objection was intended to be fully met by other provisions of the Bill, which, if thought insufficient for that purpose, might be amended and made more effective in Committee; for if a trader ordered goods under circumstances which showed that he had no intention of paying for them, his act ought to be, and in this Bill was regarded as a criminal offence. They proposed to guard against that in the most effectual manner, because the person acting in that manner came within the category of those who had committed a crime and forfeited the right to a certificate. He thought, therefore, the objection was entirely met. There were those who held the opinion that the principle on which the Bill was founded went too far in the way of relaxation, and that persons guilty of fraudulent or reckless trading ought to be more severely dealt with, and that they should not abolish altogether that species of censorship which the Court of Bankruptcy now exercised over the conduct of bankrupts. He (the Attorney General) could not but think the most legitimate mode—he would not say of inflicting punishment, but of doing that which practically operated as a punishment—in such cases, was to interpose that disability which this Bill provided, by making it difficult for persons who had misconducted themselves to obtain their certificates; and if they put a man under six years' disability, which they would do if (as would generally happen in the cases contemplated) he could not pay the required dividend, they would subject him to an amount of inconvenience which would be no Blight mercantile punishment—though punishment was not the object of the framers of the Bill—they sought to do what was just to the creditor without confounding debt with crime.
He would now pass to the other branch of the subject—that which related to the management and distribution of the bankrupt's property. It appeared to him that the principle which had been in operation previously to 1832—that of as far as possible leaving the creditors to manage their own affairs—was a sound principle. In order to remedy what were considered to be defects, official interference was then substituted for that principle; but he thought the remedy should have been sought for in a different direction. The Acts of 1849 and 1861 involved a confession of the error which had been committed in departing from the sound principle of allowing creditors to manage bankruptcies as they 689 would their own affairs. The change made in 1832 introduced official interference and a confusion between judicial and administrative functions. A safety-valve for that confusion was therefore sought to be applied by means of the trust deeds, the arrangement deeds, and the other forms of composition introduced in 1849 and 1861, and under which a certain majority of the creditors had the power of withdrawing the case from the court, and of putting in charge of inspectors of their own choice under arrangements made by themselves. Now, to illustrate the working of that system, he would just refer to certain statistics furnished in the Return of the Chief Registrar of the Court of Bankruptcy for the year ending the 11th of October, 1865. This Return showed that during the year there had been in the Court in London, in the district courts in the country, and in the County Courts. 8,305 adjudications, of which 769 proceeded on the petition of creditors, 5,937 on the petition of the debtor, 1,091 by the registrars in prisons, and 500 on petitions in formâ pauperis. The total assets realized amounted to £856,955 9s. 8d.—£524,486 19s. 4d. by the creditors' assignees, and £332,468 10s. 4d. by the official assignees. It was estimated by good authority that, including all costs, no less than £370,000 odd was expended in collecting and distributing that £856,955; while the whole amount of the dividends was only £434,952 12s. 10d., so that the expenses of collection and distribution amounted to 75 per cent on the sum divided. Now, what were the statistics referring to the transactions of trustees during the same period? While during that year the Courts of Bankruptcy and the County Courts acting in matters of bankruptcy divided only £480,000 at a cost of £370,000, the Return showed that under deeds of assignment, deeds of composition, and deeds of inspectorship, the gross value of the estates dealt with was upwards of £9,000,000. [Mr. MOFFATT: That was for six months only.] Those figures spoke for themselves, and they strikingly showed that the attempt to supersede the direct control of the general creditors in the Court of Bankruptcy drove nearly the whole of the business elsewhere, and they proved also that the creditors were able to manage those matters themselves under their own trust deeds, and under their own inspectors. The House would have observed from the figures which he 690 had quoted that a very large proportion of the petitions were presented by the debtors themselves, and he might observe that in 5,727 of the cases there was no dividend whatever.
Now, what was the remedy which occurred to the Government? It was a very simple one, and had been recommended by the Committee. It was one suggested by the facts, such as those which he had just mentioned, and one which, fortunately, was recommended by the experience of the system which had been tried in Scotland since 1856. Those facts and that experience told us that to put bankruptcy on a right footing we ought to assimilate it as much as possible to that deed system, which the mercantile world approved, and which worked well. The principles on which the deed system proceeded were three—that there ought to be an economical collection of the assets of the estates, a speedy and equal distribution of them, and a release of the debtor on the payment of a certain composition. There was not a principle in the law of bankruptcy which was not present in those deeds. The only difference between the two systems was that by one system the creditors dealt with the bankrupt's assets through trustees and inspectors who represented the creditors, while by the other an official assignee was brought in, who knew nothing about the bankrupt's affairs, and who, consequently, failed to deal with them in a mercantile way. The superiority of the former system was proved by figures. That was the law of bankruptcy in Scotland, and it was in all substantial matters the same as had prevailed in that country since 1856. The mode in which bankruptcy was conducted there, and which the Government proposed to adopt in substance in the present Bill, was this. The Court is to have as little as possible to do in the matter. You must go before the Sheriff or some other easily accessible Judge, in order to start the bankruptcy by seeing that the necessary original steps are taken, and you must be able afterwards to go back to the Court if appeals are required to be made on questions of law which deserve or require judicial interference; but you should only go to a judicial officer to superintend the mere procedure when you cannot start the proceedings without him, and afterwards you should only go to the court when some question of law is to be determined. That was the Scotch system. The Sheriff recognized the primâ facie 691 claims of persons presenting themselves before him, not for the purpose of finally determining their status or their rights as creditors, but for the necessary purpose of choosing a trustee; who, when chosen, receives the proofs, takes the vouchers and the evidence, settles all questions of administration, receives the assets, and realizes and divides them. But the trustee does not do this without responsibility, and not without inducement to do the work well. He is fairly remunerated upon reasonable terms agreed upon between himself and the creditors, which terms vary in Scotland from 5 to 2 per cent, This gives the trustee an inducement to realize everything he can. Then the creditors name inspectors, under whose advice, control, and observation the trustee is to act. These inspectors have themselves no interest except that of the general body of creditors. Over all these is an Accountant in Bankruptcy, who exercises a general supervision, and to whom reports are made, and who interferes if he sees anything going wrong. That system had been tried in Scotland for a good many years; and what was the evidence as to its working? The Committee which was moved for by his hon. Friend behind him (Mr. Moffatt) examined several witnesses from that part of the kingdom who had the closest experience of the system—mercantile men, accountants, and officers engaged in the working of the system—and he believed that the testimony they all gave was consistent with that given by one from whose evidence he had selected certain answers. Mr. J. W. Guild was asked—Will you tell the Committee generally how, in your opinion, the Act of 1866 has worked?He replied—Remarkably well; most effectually.He was then asked—Do you think it has given satisfaction to the commercial community generally?His answer was—Generally; indeed I may say universally. I use that term advisedly. I believe it has given the very highest satisfaction to the commercial community.The next question was—Have you the means of telling the Committee what proportion, on the average, of the amount realized is paid over to the directors in dividend?Answer—I have.He was then asked—Will you be kind enough to give us any details upon that matter?692 He replied—The average amount divided among the creditors, taking the experience of the first six years since the passing of the Act, is 78 per cent of the whole sum realized.Of the gross assets? it was asked, and Mr. Guild replied that he referred to the gross assets. In answer to other questions he stated that he took the figures from the Returns of the Accountant in Bankruptcy and from statements made out by him. 21⅛ was the exact amount of the expenses and was thus made out—¼ per cent allowance to the bankrupt, trustees' commission 4¾ per cent, law charges 7 per cent, miscellaneous ordinary expenses, 2⅞ per cent, extra miscellaneous expenses 6¼ per cent. The law charges and the trustee's allowance were altogether 11¾ per cent. Such was the statement made by Mr. Guild, and what a contrast it presented to the figures relating to bankruptcy in England! But it seemed to understate the matter, because Mr. Esson, the Chief Accountant in Bankruptcy, who was in fact the head of the system in Scotland, told them that the average of the dividends given by Mr. Guild was much lower than that which was paid in ordinary cases, because it included cases in which the expense had been unusually high; and he said that if you excluded cases in which, from special circumstances, there was an extraordinary amount of expenditure, the figures were as follows—88 per cent dividend and 12 per cent expenditure. He thought the conclusion to be drawn from the experience of Scotland was obvious, and that the House would not hesitate to adopt the recommendation of the Committee that our system of administration should be in all essential particulars assimilated to that of Scotland—for that is what the Committee meant when it recommended the establishment of substantially the same officers in this country, and the sweeping away altogether of official assignees, and messengers, and all their train. That would effect a saving of five-sixths, at least, of the expense of the official staff under the present system.
While on this part of the question, he was naturally led to mention to the House what was proposed by this Bill with respect to trust deeds. The Government regarded the administration of bankruptcy and compositions by trustees as being all one thing rather than two matters essentially differing from each other, and therefore they thought it right to apply to trust 693 deeds some of the same rules which would be applicable in bankruptcy, and the want of which had been found to be a serious imperfection of the present law. The main proposals on that subject were as follows:—First, that the debts of creditors claiming to rank under trust deeds should be required to be proved in the same way as debts are proved in bankruptcy; secondly, that all the property should be ceded; and lastly, that persons should not have their debts discharged unless 6s. 8d. dividend were paid under the trust deed. There were also other provisions relating to trust deeds, the nature of which it was not at present necessary to explain to the House,
The last branch of the subject with which he should trouble the House was the only part of the case in which the Bill did not in all respects adhere to the recommendations of the Committee. He referred to the question of the Court. Now, before he stated what the Committee proposed, and how far the Bill agreed with or differed from their recommendations, he wished to ask the House to notice the effect of the changes which the Bill proposed on the work which the Court would have to do. In the year 1861, as everybody knew, the Government proposed to create a Chief Judge in Bankruptcy. It was thought by many that the want of a Chief Judge would lead to a failure with respect to several of the changes then introduced. Indeed, many mercantile men wore still of opinion that it would be highly desirable to establish a Chief Judge in Bankruptcy. The other House of Parliament differed from this House on that subject in 1861, and as the point was not thought to be one on which it was right to stake the success of the measure, the opinion of the other House was acquiesced in. And he (the Attorney General) was bound to say that the present Lord Chancellor had not seen any reason to alter his opinion in regard to that matter. But, whether the opinion of the other House with reference to the Bill of 1861 was or was not a sound one was not now the question, because they did not propose the same system that was proposed in 1861. Under the Bill of 1861 the whole administration of bankruptcy was, as far as possible, brought into contact with the Court. Now the present Bill proposed to take altogether out of the Court everything except the determination of questions of law which arose between debtor and creditor, and ministerial acts 694 which they did not repeat, though, in the first instance, it was necessary to perform them. Therefore, they had reason to believe that a Chief Judge would not be required. The real truth was that the main object and purpose of the Chief Judge under the Act of 1861, and the great reason why the existing system did not give satisfaction to the mercantile community, was connected with the censorial jurisdiction which it was now proposed to abolish. As long as the discharge and certificate of a bankrupt was to be in the discretion of the Court, which discretion was to be exercised on a general view of the whole mercantile life of the bankrupt, then no doubt the apparent differences between one Judge and another and the contrariety of administration operated as scandals to the mercantile community. It was, therefore, felt to be necessary that there should be one mind to reduce the system into order, and regulate it throughout. But now it was proposed to withdraw the administration from the Court, to put an end to the censorial jurisdiction, and to confer no criminal jurisdiction upon the Court. There consequently seemed no reason at all to doubt that the existing machinery would be amply sufficient to deal with the questions of law which from time to time might arise, but which he thought would not very frequently arise; because, in regard to most of the questions between debtors and creditors the law had been settled by a series of decisions, so that under the present system these questions did not arise to any considerable extent. Having thus explained the nature of the change which would be made, he (the Attorney General) would state what it was that the Committee recommended in 1865. They were in favour of sweeping away the Court of Bankruptcy altogether, with all its Judges, Commissioners, and officers of every kind, and of throwing the judicial business upon the ordinary Courts of Law. Under what arrangements and by what division of labour this was to done the Committee did not explain, but the principle was laid down that the ordinary courts were to be relied on. Now, if you abolish the existing Commissioners and Registrars, and all the other officers, you will have to pay them all life pensions, while you will be dispensing with those services which you have a right to demand from them. That kind of thing had been done somewhat too often, and it might be greatly doubted whether Parliament would not require to be satisfied 695 by cogent reasons that it was necessary to pension those gentlemen for life without their rendering any services in return for what they received. On examining into the matter it appeared that as far as the official assignees were concerned the new system would supersede them altogether; but with regard to the Commissioners it was not obvious that they might not still usefully render to the public such services as under this Bill would be required of them, bearing in mind that the judicial duties were reduced to a minimum, and that the question resolved itself very much into one of administration. The Bill did not, however, propose to continue these Commissioners for ever. It was proposed to reduce their number in London to two, and to allow the Commissioners in the country gradually to die off, leaving the duties discharged in Scotland by the Sheriff to be eventually discharged by the County Courts, and by the Registrars in such of the bankruptcy districts in the country as experience had shown it would be convenient to allow to continue. The continuance of some of these Courts of Bankruptcy in the country would be a matter of mercantile convenience; and there seemed to be no reason, as long as they had the present officers to pay, why the mercantile community should not have the benefit of their services in the centres of industry where the chief Courts were now established. The County Court Judges already had very onerous duties to perform, and he thought they might safely retain the services of these officers, reducing them in number as opportunity offered. He ought to say that it had been suggested that one of the Vice Chancellors might be appointed to discharge practically the duties of a Chief Judge; but, if he (the Attorney General) rightly anticipated that the amount of judicial business would be very moderate, he thought it could be conducted by the Court of Appeal in Chancery. Such a course would be obviously preferable to that of annexing it to the Court of any one Vice Chancellor, because then it must take its turn with the other business; and it was desirable that the bankruptcy business should be disposed of as quickly as possible.
Having now explained this measure, he thanked the House for having listened with so much attention to his long explanation. He had only to add this—his hon. Friend behind him (Mr. Moffatt) had put on the paper a Notice of Motion that this 696 Bill be referred to a Select Committee. He was sure his hon. Friend was as anxious as he (the Attorney General) was that this Bill should be made as perfect for its purpose as possible, and that being made as perfect as possible it should as soon as possible pass into law. If these objects were in the opinion of the House likely to be attained by referring the Bill to a Select Committee, he should be perfectly willing to agree to such a course being taken. Upon that point the Government desired to defer to the sense of the House as it might he expressed by those hon. Members who took an interest in and understood this subject.
§ Motion made, and Question proposed, "That the Bill be now a read second time."—(Mr. Attorney General.)
said, he would not trespass on the attention of the House by following the hon. and learned Attorney General through all the details of the Bill; but there were two or three important points to which he desired to draw the attention of the House. In the first place, he wished to point out the wide difference between the recommendations of the Committee and the provisions of the Bill. It was true that the recommendations of the Committee had been acted on in two or three very important points—such, for instance, as the abolition of the power of arrest for debt; but several other recommendations of equal importance had been disregarded. The Committee meant that there should be an entire abolition of the old administration of bankruptcy, and if there were one question more clearly defined than another by the evidence given before the Committee, it was that the whole system of the administration of bankruptcy had so excited the distrust and contempt of the mercantile classes by the delay, uncertainty, and malversation which attended all its proceedings, that every trader would rather suffer wrong and robbery from his debtor than have recourse to the Court of Bankruptcy. The only alleviation of that state of things proposed by this Bill was, not the adoption of the Scotch system, but only of a small fraction of it. The Committee recommended that the existing administration of bankruptcy should be abolished, that the Scotch system of one court of appeal should be adopted, that a Chief Judge in Bankruptcy, with one Registrar, or two if necessary, under him, should be appointed, and that the Court 697 should be a Court of Record, and cheap and speedy in its operations. Those recommendations had been entirely disregarded. He would point out where, in his opinion, his hon. and learned Friend had entirely failed. The Scotch system was as bad as the English prior to the introduction of the present system by the Lord Advocate. But now in Scotland the trustee was made to give security in a fixed and definite manner, and besides this he was subjected to a constant supervision. This Bill followed the Scotch plan in a very feeble manner. There was, indeed, a power to take security, and there was the office of Comptroller, but this would be a nominal officer with scarcely any power of influencing the trustee. In fact, all the checks and safeguards of the Scotch system were wanting. The main value, indeed, of the Scotch system was the thorough stringency with which the trustee was held in hand. That, in fact, was the main question of bankruptcy administration. There was no need of a whole host of officials, but all that was required was a machinery by which the creditors could collect and distribute the assets. The Scotch system had been a success; but he could augur no success for the scheme now proposed with all its array of officials. What was the use of retaining all the Registrars, to be paid at the rate of £1,000 a year, to perform anomalous and uncertain duties? They would have nothing to do, for the trustees would transact all the business, and yet the Registrars were to be continued as well as the Commissioners. The Bill was constantly providing two officials to do the same business. There was no such official in the Scotch system as a Registrar; if there had been the system would not have worked so well, and he could not see anything to warrant their retention. If the Scotch system was to be adopted, let it be taken in its entirety. One deviation from that system was the non-appointment of accountants. The office of Comptroller would be a purely nominal one, and the object in proposing it seemed to be to create a place at £1,500 a year. He had not estimated the cost of all the new machinery, but it would amount to a heavy charge upon the assets of bankrupts. All the heavy fees now charged in bankruptcy were to be continued; there was scarcely a modification of them, and the Bill was a consolidation and continuation of the chief part of the existing system. The hon. and learned Gentleman said he had abolished 698 the offices of official assignee and messenger; but that statement did not seem reconcileable with Clause 35, which proposed to continue all ushers. It came out before the Committee that these were gentlemen with nominal salaries of from £180 to £200 a year, but whose incomes in many instances amounted to £1,000 a year, owing to their appropriation of fees and perquisites which were to be continued. It was objected that it would be too expensive to pension off those gentlemen; but the Chancellor of the Exchequer ought to know that pensions need not come from the Consolidated Fund, because they could be paid out of the £1,350,000 of fees which had accumulated since the reign of William IV. Therefore, if it was necessary to get rid of officials, there was a means of paying them. His hon. and learned Friend had not said much about the efficiency of the officials it was proposed to continue; but a good deal of evidence on this head was given before the Committee. It was complained against the Commissioners that they disregarded public opinion, that they were irregular in their attendance at the Courts over which they presided, that they gave contradictory decisions, and that they neglected their duties in a thousand different ways. One Commissioner in the country, with a salary of £1,800 a year, attended his Court three or four hours a fortnight. All the witnesses complained of the law as it stood, and of its administration in the Courts; and no one could go into a Bankruptcy Court to see how the business was done, without seeing that there was abundant cause for dissatisfaction. The Court of Bankruptcy in London was described as being "the filthiest" of all the courts, and he believed it to be so. The Bill would not, as was represented, prevent men making themselves bankrupts, for Clause 104 simply said that no debtor should be entitled to petition for adjudication against himself, and they all knew how an I O U might be given as a merely colourable pretext for a petition; while Clause 126 adopted such collusion by declaring that no petition for adjudication should be dismissed, nor any adjudication annulled, by reason only that the petition or adjudication or act of bankruptcy had been concerted or agreed upon between the bankrupt, or any person on his behalf, and any creditor or other person. With such provisions in the Bill he had little confidence in its working. He was also a little disappointed with the pro- 699 visions affecting the discharge of a bankrupt. He wished his hon. and learned Friend had shown that there was any reason why the law should step in and confiscate the property of a creditor. He maintained that the law had no right to interfere between a debtor and creditor in regard to the settlement of the claims of the latter, and this was exclusively a matter between man and man, between trader and trader, with which the law had nothing to do. Although the Bill took a step in the right direction, it proposed a scheme fraught with many evils, the most apparent of which was that it would induce a man to go on as long as he could pay 6s. 8d. in the pound. He had long been convinced that the only way to diminish business in bankruptcy, and to insure honesty, was to give an inducement to the debtor to be honest; but if he knew that he could be acquitted of a debt on certain conditions, after paying 6s. 8d. in the pound, he would take care to comply with those conditions, but would go on until he could pay no more than the required 6s. 8d. in the pound. The only satisfactory rule would be to offer inducements to every man to declare himself insolvent the moment he became so. Instead of doing this the Bill tempted a man to go spending 8s. or 10s. in the pound of the money of his creditors. This was essentially wrong in principle, and was a substantial invitation to fraud. The creditor had a right to the assets of the debtor to the full extent of the claim; and there was nothing in the recognition of this claim to prevent a man starting in business again, and maintaining his status in society. He would go so far as to allow a man who had paid 6s. 8d. in the pound to start again by giving new creditors a preference over those who were creditors before the bankruptcy. While thus giving every facility to a man to start again, it would be only proper to require that his accumulated profits should be liable for his previously incurred liabilities. He could not see that the Bill offered any inducement to a man to stop while he could pay more than 6s. 8d. in the pound, but it allowed him to go as long as he could make any arrangements to his own advantage. There was another point with respect to Scotland which his hon. and learned Friend seemed to have misunderstood, because he argued that, though they have the right there under cessio bonorum, they do not exercise it. But the reason was this—because they have that right the 700 bankrupt's estates are more readily given up, and the law works more satisfactorily and more smoothly. There were cases occurring every day in which the insolvency was known to various members of the firm, but the fact was suppressed; but if the suggestions which he had made were carried into effect it would be the interest of the parties always to declare their insolvency as early as possible. He had hoped that the Bill which the hon. and learned Gentleman had brought in would have minimized the evils of bankruptcy by making it to the interest of the debtor to have recourse to bankruptcy without undue delay. That expectation had not been realized. He trusted, however, that they would be able to improve the Bill, and it was with that object that he had given notice of the Motion which now stood on the paper. He knew very well that in the present state of the public business they could not settle questions of this nature in debate across the House, and he would therefore persevere with his Motion that the Bill be referred to a Select Committee. While he acknowledged the great pains that had been taken with the Bill, he could not help expressing his disappointment that more had not been done.
§ MR. BARNETT
quite agreed with the hon. Member for Southampton (Mr. Moffatt) that it would be wise to have this Bill referred to a Select Committee. Bills of this kind, which it was desirable to make acceptable to the commercial classes, should be watched clause by clause—a thing which it would be difficult to do if the discussion was carried on upon the floor of the House. He took it for granted that the wishes of the commercial community were in favour of a measure of this kind. He did not profess to be well versed in the Scotch law; but he had seen the rapid way in which bankrupt estates under that law were wound up in comparison with our tedious process. Nobody who had any acquaintance with the commercial body would gainsay him when he stated that the present Act was most unsatisfactory, and that persons were most unwilling to have recourse to it, owing to the great uncertainty and expense of the process. The subject of penal censorship attached to our Bankruptcy Acts was a difficult one, but he was disposed to assent to the view taken by the hon. and learned Attorney General. The fact was that circumstances very often occurred which made it desirable that some sort of penal censorship should exist. In 701 consequence of reckless trading, over-speculation, and other reprehensible proceedings persons often got involved in difficulties, and he had seen the most miserable results produced from estates which if properly managed would have given very handsome dividends. The consequence of the present state of the law was often this—the bankrupt having got absolved from his liabilities started again in a commercial capacity; in the course of a year or two, perhaps, he was rolling in his carriage, while a number of persons who had suffered by his failure might never recover the injury which he had entailed upon them. Difficulties of this kind might, perhaps, be overcome by the measures now proposed for the continuance of the bankrupt's liability. He feared one could not help saying, after an experience of some years, that the moral sense of our commercial community was not higher than it used to be, and that it was absolutely necessary that every possible means should be devised to save creditors from undue losses at the hands of their debtors.
§ MR. AYRTON
said, that having taken part in the preparation of the Resolutions of the Committee upon which the Bill was founded, and having examined the measure under discussion, for the purpose of ascertaining whether his hon. and learned Friend the Attorney General had done justice to their recommendations, he felt bound to say that he had formed a very different estimate of it from that which his hon. Friend (Mr. Moffatt) had expressed, So far from its being a feeble effort to give effect to those Resolutions, it was to his mind a very strong and very satisfactory effort. He should be sorry if it went forth to the public that the hon. and learned Gentleman the Attorney General had in any degree failed to give effect to the general spirit and scope of the Resolutions at which the Committee had arrived. These Resolutions were over thirty in number, and they only embodied certain general principles. To the first Resolution with reference to the administration of the estate of bankrupts, his hon. and learned Friend had given full effect. The Bill carried out all that was suggested by the Committee in that respect—it entirely withdrew the bankrupt's estates from legal supervision and control, and placed them at the disposition of the creditors, to whom they belonged, and by so doing relieved our Bankruptcy Law from the scandal of making the bankrupt's estates a godsend to the 702 lawyers. The next great principle embodied in the Resolutions of the Committee had reference to the discharge of the bankrupt. His hon. Friend (Mr. Moffatt) differed from the Committee on that subject, and he was, no doubt, disappointed at the manner in which the Bill was framed; but then it was framed entirely in accordance with the conclusions of the Committee, which it carried out in spirit and almost to the letter. The next great branch of the subject was the condition of the courts by which the law was at present administered. Upon that point the Committee undoubtedly came to the conclusion that the existing courts should be abolished; but in doing so they expressed a general view, and he believed he was only stating their opinion when he said that they rather recorded a principle than undertook the practical task of dealing with the proposition which they enunciated. They did not undertake to deal with that proposition, and why? Because they knew it involved a very important question of finance—a charge upon the public; and they were aware that it was for the executive Government who would be responsible to take that subject into consideration. The Members of the Committee had, therefore, no right to complain that their Resolution had not been carried out in the Bill. It was enough if the Bill were so framed that it tended to the abolition of the existing tribunals, and the substitution of that authority which the Committee wished to see set up, and the Bill certainly contained ample provisions for these purposes. The Bill had been described as a long and complicated measure, involving a number of questions, which could never be properly examined, except by a Committee upstairs. The fact, however, was, as anyone would see who took the trouble of examining it, that a large portion of the Bill merely consisted of the reproduction of clauses of the existing law which were to be retained. He regretted that these clauses were not distinguished from the rest, but those who were familiar with the law of bankruptcy, would recognize many old friends in the clauses of the present Bill. If the Bill were so printed as to show what were old, what were new, and what amended clauses, the House would not regard the Bill as such a formidable work of legislation as it had been represented. If the Bill were referred to a Select Committee upstairs, it must either be sent to the Committee of last Session or to a new Committee. But 703 as the Committee of last Session agreed to the Resolutions which had been substantially adopted as the basis of the Government Bill, and as they must rely upon the acumen of the Attorney General in carrying them out, they would practically have nothing to do. If the noble Lord the Member for King's Lynn (Lord Stanley), the right hon. Member for Calne (Mr. Lowe), and other Members of the Committee had any complaint to make of the Government Bill, they would have stated their objections on the present occasion. Then of what use would it be to refer the Bill to another Committee? Suppose they differed from the Committee of last Session, would the Attorney General consent to begin his work over again upon their recommendation? It would be only a waste of time to have a new Committee with a different set of ideas. Every Member who entertained an opinion on the subject would be just as much entitled to bring his views before them in a Committee of the Whole House, as if the Bill had not been sent upstairs, and nothing would be gained. Besides, the Bill was one of general application, and if there was any doubt as to the principle of the Bill, it would be much more satisfactory to the trading community that it should be solved by public discussions rather than by a private inquiry upstairs. Should there be any difficulty in setting aside an evening for the discussion of the clauses, he thought it might be considered at a morning sitting. The better plan would be for Members to put their Amendments on the paper, but he doubted whether half-a-dozen substantial questions would be raised during the progress of the Bill through Committee. In his opinion the Attorney General would neither do justice to himself nor to the labours of the Committee of last Session if he consented to refer the Bill to another Select Committee. If it were to pass into a law at all, the Attorney General must proceed with it at once, in which case he had no doubt it would be passed during the present Session with the general assent of Parliament.
§ MR. FRESHFIELD
said, there could be no doubt that the present Bankruptcy Law was entirely inefficient. Arrangements were made in regard to all the larger insolvencies, which entirely removed them from the pale of the Court of Bankruptcy—they were in fact administered by private agency, and deprived of the protection of any adequate tribunal. The 704 legislation of this country on the subject of bankruptcy during the last century had been very unsatisfactory. Up to the time of Lord Brougham's Act, 1 & 2 Will. IV., the law was administered by a Commission directed to about seventy members. They were a body who were at all events easily accessible, and they did their business, if somewhat rudely, upon the whole well and satisfactorily. Lord Brougham's Act established a Court of Review, consisting of three Judges; and there were likewise fourteen official assignees, besides registrars and other officers. That Court appeared at first to administer its law satisfactorily. The reason for that probably was that the official assignees then had to collect a large amount of money which had accumulated in the hands of assignees who had neglected their duties; and, being paid by commission, the work was exceedingly profitable to them. But the defectiveness of the law very soon manifested itself, and the result was that by common consent the Court of Review was first allowed to lapse and then abolished; the Commissioners were permitted to dwindle down to their present number—three; the official assignees also, he thought, dwindled to three; and their payment and that of the messengers being altered from payment by commission to payment by salaries, those officers ceased to discharge their duties well. Then came the legislation fusing, or rather confusing, the law of insolvency with the law of bankruptcy; and the Court of Bankruptcy became what might be called a bear-garden—a place alike odious and intolerable to the Judges themselves, to the practitioners, the suitors, the debtors, and the public. The result was that matters at last came almost to a deadlock. In that state of things a Committee was appointed last Session, which had made its Report; and, as he understood, the Government now sought to carry out that Report by the present Bill. The Report appeared to have had great attention bestowed upon it, and he only wished he could see in the draught of the Bill evidences of the artistic skill of the hon. and learned Attorney General; and he would venture to suggest to the Government that it would be a prudent arrangement to appoint from three to five persons who should act as a Committee, to whom Bills of that character should be submitted before passing the ordeal of a third reading. It was impossible for the House itself to deal with a Bill of that kind, containing more than 300 clauses, in 705 a satisfactory manner. It was notorious that the Bill of Lord Brougham dragged on through the Session until just upon its close, and then clauses of the crudest and most discordant description were hurriedly inserted, until the measure lost all its reasonable homogeneousness. The same result would again follow if the House attempted to deal with the present Bill; and it would be impossible to make its provisions workable. He was sure the hon. and learned Attorney General would give them the advantage of all his great learning and ability in passing the Bill through; but he thought that valuable assistance would be better rendered in a Committee upstairs He was not expressing merely his own opinion, but many persons interested in the subject had communicated with him on the point, and they had all declared their belief that it was impossible to put the Bill in a working condition without it underwent a calm and quiet consideration in a tribunal much more able to discuss its details than the House ever could be. After all that they had heard regarding the pressure of the other business before the House, they could not expect to have sufficient time to devote to the fair and proper consideration of that measure, and therefore he hoped the Attorney General would consent to its being sent upstairs to a Committee.
§ MR. CRAWFORD
thought the observations made by his hon. Friend the Member for the Tower Hamlets (Mr. Ayrton) were really conclusive on that subject, and that the House was in a condition to deal satisfactorily with the measure. The object of the hon. Gentleman who spoke last (Mr. Freshfield) seemed to be to re-open the whole question in a Committee upstairs. The Bill appeared to carry out the principal recommendations of the Select Committee of last year, and nothing but delay would ensue if it were now sent to a Committee upstairs. He believed the general feeling of the mercantile community was that the Bill should be proceeded with as soon as possible, and that it should be passed, subject to such modifications as might suggest themselves to the House when they got into Committee.
§ MR. ALDERMAN LUSK
thanked the Government, as a mercantile man, for bringing in this Bill, which he thought would effect an enormous improvement on the present system. Men seemed to have an inveterate tendency to get into debt, and the existing law seemed to facilitate the operation of that tendency as much as 706 possible. The law was as bad as it was possible to be, and he thought this Bill would be an immense improvement upon it, and that the sooner they got it into operation the better it would be for the community. He hoped the Bill would not be referred again to a Committee, as it would be needless delay, causing this House to go over again on a future occasion the ground upon which they had already travelled. The measure was needed very much, and he hoped the Government would get it passed into law with all convenient despatch.
§ MR. BAZLEY
said, that probably the provisions in the Bill for the conduct of the Court of Bankruptcy might be more extensive than judicious, but he saw nothing in the Bill which might not be corrected in Committee of the Whole House without being sent upstairs. The hon. Member for Southampton (Mr. Moffatt), in reference to the provision that a bankrupt should be compelled to pay 6s. 8d. in the pound before he could obtain his discharge, had taken the creditors' view of the subject; he (Mr. Bazley) thought the debtors' view ought also to be taken. There had been on that very day an unfortunate catastrophe in the City of London, and very great losses would ensue from the suspension of the business of our largest money-dealing establishment. Let them take the case of some person who, in his ignorance of how matters were, had deposited a very large sum of money in the hands of that establishment, involving not only his own capital, which established his bonâ fides in the transaction, but his creditors' capital as well, and he might be rendered unable to pay 6s. 8d. in the pound. It would be a very great hardship if he should be held to be ineligible for his discharge if he could not realize the amount required by the provision in the Bill, owing to having intrusted his money to a firm which was then enjoying the highest credit. If the Bill were considered by the Whole House, and a morning sitting were devoted to it, it would pass through Committee very rapidly.
§ MR. SAMUELSON
also objected to the provision requiring the bankrupt to pay 6s. 8d. in the pound. There was no provision whatever for the protection of the creditors of a bank, and the effect of that would be that in such a case as that put by the hon. Member (Mr. Bazley), a man who, through ignorance or mis- 707 fortune, might be involved in difficulties, would become pauperised and be simply a burden upon the country. He also believed it would be in the interests of trade that some arrangement should be made by which precedence should be given to the creditors subsequent to a bankruptcy so that they might be satisfied before the other creditors. There would, of course, be some difficulty about that, and it might involve a debtor being constantly subjected to judicial investigation in order to ascertain whether he possessed a surplus; but he felt convinced that unless the clause under which a bankrupt would not be freed from the claims of his creditors until after six years from the date of his adjudication were modified to meet certain circumstances, it would be utterly impossible to work it.
thought it would be very mischievous to refer the Bill again to a Committee, and that it would cause great and unnecessary delay. He strongly recommended that the measure should be proceeded with as speedily as possible.
§ MR. LOWE
thought the House had more than ordinary security for dealing with the Bill as a well-considerd measure. The subject was one which had been fully investigated by a Committee upstairs composed of some of the ablest Members of the House, among whom was the Attorney General. The Government had reviewed the decision of that Committee, and had, after mature consideration, adopted substantially the whole of their Report. To send back the Bill, therefore, to a Committee upstairs, which would not be the same Committee—for he did not suppose anybody who had had experience of the labour of the previous inquiry would be willing to undertake it a second time—and which would, in all probability, be a less informed tribunal than its predecessor, appeared to him to be a course which it was not expedient to adopt. The principles on which the Bill was based were, no doubt, debateable and difficult enough, but there was no good reason why a decision should not be pronounced upon them by the House. As to the drawing of the measure, hon. Members could not, he thought, pursue a better course than to place confidence in the Attorney General, who was much more likely to prepare the technical parts of it well than any Committee, because he possessed an amount of technical knowledge to which a Committee could scarcely pretend, and 708 because he was a single individual and would feel a sense of responsibility in discharging the task which no one Member of a Select Committee would be likely to entertain. The House would by that means have a better chance of obtaining a good measure; and hon. Members had, in his opinion, reason to be thankful to his hon. and learned Friend, who, from his eminent position and great learning, so well deserved the trust which they might repose in him, for the pains which he had taken in preparing a Bill which was in some respects a very bold one, but which he hoped the House would address itself to passing with as little delay as possible, inasmuch as some amendment of the existing law was absolutely required.
§ MR. LEATHAM
said, that the Chambers of Commerce generally had expressed themselves in favour of the Bill, except as to a few points relating for the most part to the discharge of bankrupts, and the winding up of the estates of deceased insolvents. Those, however, were matters which could be considered and adjusted in Committee of the Whole House.
§ Motion agreed to.
§ Bill read a second time accordingly.
THE ATTORNEY GENERAL
said, he would fix the Committee pro formâ for to-morrow week, and he would then state on what more remote day he should propose to take the Committee. As he had collected, the opinion of the House was in favour of the Bill being dealt with in Committee of the House itself. That was also his own opinion. He should therefore propose that the Bill be so considered, leaving it to his hon. Friend the Member for Southampton (Mr. Moffatt) to recommend a different course if he thought fit.
signified his readiness to withdraw his Motion for referring it to a Select Committee, although he still, he said, retained the opinion that it might be made more perfect by the adoption of that course, and reserved to himself the right of renewing his Motion on a future occasion if he should think fit.
§ Bill commuted for Friday, 18th May.