§ Order for Committee read.
THE ATTORNEY GENERAL
said, he wished to state shortly some two or three points in which the Bill had been amended, leaving the smaller details of Amendments for explanation when they came to the clauses in Committee. The Bill had been re-printed with his proposed Amendments and largely circulated among those who were interested in the subject. There was one point, however, upon which no alteration was proposed, and as it was a matter of much importance, and had been greatly misunderstood, he should like to explain the position in which it stood. It was said that what he was proposing to do was to extend the power of arrest on final process instead of abolishing it, but that was not the case. The matter stood thus. After the abolition of imprisonment for debt on mesne process there still remained a power of arrest on final process on judgment debts to any amount, even down to £5. That was thought a great evil, and by the 7 & 8 Vict. c. 96, it was enacted that arrests upon action for debt on final process should be abolished in every case under £20. So that the judgment creditor under £20 had no remedy except execution against the debtor's goods, which, in many cases, was of course no remedy at all. In the next year the 8 & 9 Vict. c. 107 was passed. It was now generally known as "The Small Debts Act." The portion of that Act to which he was about to call attention related to judgment debts under £20. The County Courts were not then in existence. The Act gave this additional remedy to that of execution against the debtors' goods. It enabled the judgment creditor to summon the judgment debtor before any Small Debts Court, and power was given to these courts to examine into the nature of the debt, to inquire into the debtor's means of payment, and to make order for payment by instalments according to his means. If the judgment debtor refused to attend, or to answer as to the circumstances under which the debt had been incurred, or as to his means of payment, or to pay the instalments ordered, the Court had power to employ coercion, which was clearly requisite under the circumstances 1557 supposed. A power of imprisonment for a period not exceeding forty days was therefore given simply as a punishment of recusancy, and it was provided that it should not operate by way of satisfaction of the debt. In the next year the first County Courts Act was passed—for the three Acts were passed in three successive years—and the original jurisdiction then given to County Courts was in like manner limited to £20. In the last-named Act similar provisions were made as to enforcing payment. The operation of the County Courts Act was afterwards extended to £50. Now none of these provisions was it proposed to alter, but it was proposed to abolish imprisonment for debt simpliciter on final process, except in certain cases, such as libel, slander, &c, which had nothing to do with the matter in hand. Under these circumstances the question arises for what amount, when a judgment had been recorded against a debtor, should there be power to summons the debtor before a Court of Bankruptcy and make him bankrupt if he did not answer. Hitherto the amount had been £50. It was a question of policy whether persons should be made bankrupts on a debt of £20, or whether £50 would not be the proper limit. That was a matter upon which there was a difference of opinion. After the best consideration he had been able to give to the subject he thought it would be wise to keep the sum at £50. If the House thought differently it could be altered to £20. Then the case stood thus:—If they took £50 as the amount at which they made a debtor bankrupt, and the power of enforcing payment under the Small Debts' Process was limited to £20 upon judgment, there would be a gap between £20 and £50, as to which there would be no means of enforcing payment except by execution against the goods. What he proposed to do therefore was to extend to the Small Debts Courts the power of summoning the judgment debtor for judgments amounting to £50, and giving the remedies already existing of examining the debtor, and committing him in cases of refusal to obey the orders of the Court. That was not an extension of the power of imprisonment for debt, but was a necessary remedy in cases of contumacy. It would be for the House to say whether they preferred that a man should be made a bankrupt for so small a sum as £20. If that should be thought right it would not be necessary to make this extension. It 1558 might be useful in connection with this subject to give the number of plaints and summonses ordinarily issued, and in general to show the way in which the jurisdiction of the County Courts had been exercised. This would prove the necessity of a remedy for debts of small amount. From Returns which had been presented to the House of Lords in 1864, and which related to the two years preceding—namely, 1862 and 1863—it appeared that the average number of plaints was 822,000 for each year. These resulted in about 450,000 judgments, and the summonses issued upon these judgments were 121,000. Of the summonses issued, one half were heard, the remainder having been settled out of court. About 61,000 were heard, which resulted in 27,000 warrants issued, and the number of persons actually taken to prison was 8,900 and odd, or within a fraction of 9,000. The average number of days during which persons were actually imprisoned was fourteen; the average amount of debts was £3 12s. The present policy had been to give powers for the recovery of small debts, seeing that credit was taken to a large extent by the labouring classes. But it was an error to say that there was any intention in this Bill to extend the power of imprisonment for debt. Therefore he had not altered that part. Having explained his reasons for retaining this part of his original scheme, he would mention two or three particulars in which he had modified it. A complaint was made on his introducing the Bill that it provided no effectual system of auditing trustees' accounts, on which it was said the success of the Scotch system of sequestration materially depended. His attention was called to it by his hon. Friend the Dean of Faculty (Mr. Moncreiff), who pointed out that the system in Scotland very much depended on an effectual system of audit. He (the Attorney General) had consequently introduced some new provisions to meet this objection. In the 20th, 54th, and 283rd sections of the new Bill he had provided that an accountant should be appointed, who should be a person versed in mercantile accounts, and that the system of audit should be worked out by general orders of the Court, so that changes might be made whenever they were required. A copy of these orders would be laid on the table of the House. Another point to which he wished to refer was the protection of an estate between the date of the adjudication of bankruptcy 1559 and the appointment of trustees by the creditors. By the system now proposed the creditors would be able to take the estate into their own hands, to appoint trustees for the management of the estate, and to have the entire control in their hands. There must always be an interim of from ten days to a fortnight at least between the adjudication and the time at which the trustees could be appointed by the creditors. That could not be avoided, for there mast be time to call the creditors together. He had not followed the Scotch system in this point. In Scotland, it was said, they were able to dispense with any interim protection; but all the communications which he had received from persons and commercial bodies of great experience went to show that such protection was necessary. He proposed, therefore, to retain the official assignee, changing his title to that of provisional trustee, who would perform this and various other necessary duties. He would act, for instance, when there were vacancies in the office of creditors' trustee; and when the work of the latter was substantially over, there remained duties which the provisional trustee would discharge—such as with reference to the after-acquired property of the bankrupt. Provisions were also contained in the Bill for making the future-acquired property of the bankrupt—acquired, perhaps, years afterwards—subject to the payment of his debts, and here again it would be found that the existence of a provisional trustee would often be necessary. There was a purely legal question on which he proposed to legislate. It often happend that there were goods in the possession of a bankrupt in reference to which there was a question whether they belonged to him. According to the existing law, though he were merely the reputed owner, if he had obtained credit by means of having them in his possession, he was to be deemed the owner. The procedure for determining this point was unnecessarily complicated. The adjudication did not vest the property in the assignee, but he had to obtain an order of sale from the Commissioners in Bankruptcy, and had then to meet an action on the part of the claimant. The Legislature had of late years shown a disposition to give to all Courts power to determine all questions of fact or law necessary for the exercise of their jurisdiction. He proposed that it should be competent for the Court of Bankruptcy to do so in questions 1560 of order and disposition, thus saving parties the inconvenience of resorting to one Court to ascertain the law, and to another to have it administered. He also proposed a slight addition to the order of discharge. The Bill, as originally framed, provided that notwithstanding such order the future property of the bankrupt should be liable, so as to make up the dividend to 10s. in the pound. To this, Amendments had been given notice of, some favouring the bankrupt, and others dealing with him more severely. Retaining this clause as it stood, he proposed that a condition might be attached to an order of discharge with respect to any income or salary which the bankrupt might at the time be in the receipt of, setting aside a portion to meet his debts. At present a Commissioner had this power under clauses relating to fraud, but he saw no reason why the condition should be necessarily connected with fraud. These were the chief alterations which he had made in the Bill. With regard to the existing interests which were affected, he hoped the arrangement which had been made by the Government would be deemed satisfactory. It was thought equitable that when an officer had served fifteen years and upwards, if his office were abolished he should receive full salary, but if he had served a less period he should be entitled to two-thirds only. Most of the Amendments suggested by the new point of the Bill were formal merely, and he had no doubt that in Committee the Bill might be so framed as to give general satisfaction to the House and to the country.
§ Motion made, and Question proposed, "That Mr. Speaker do now leave the Chair."—(Mr. Attorney General.)
said, he regretted that the hon. and learned Gentleman had not stated the principle on which this Bill was founded. Was it a creditor's remedy, or a debtor's escape from responsibility? He found it difficult to answer the question. The whole course of modern legislation had been in the direction of freeing the debtor from the obligations he had deliberately incurred. This immunity had increased the difficulty of the creditor recovering his debt. For the last thirty or forty years this tendency of the law was to be traced in Lord Brougham's Bill, in the Bill proposed by Lord Lyndhurst, and subsequently and still more clearly in the Act of 1861, on which the present measure 1561 was based. The result of the last Parliamentary inquiry was a recommendation by the Committee that the rights of creditors should be more cared for, and that the assets of persons unable to meet their engagements should be more readily available for distribution than under the present law. So strong was the opinion of the Committee that they recommended the abolition of all the present machinery of bankruptcy. The present Bill, however, while it modified that machinery in some respects, maintained its injurious action in others. The creditors special and individual interests were so small that they could not be expected to take any trouble in looking into the insolvent's affairs. The insolvent had no object but to make the arrangement as quickly as he could, and as advantageously as possible to himself. The assets were not collected as they ought to be. The creditor wrote off the debt as a bad debt, and ceased to trouble himself about the matter. This was a grievance and a hindrance of the gravest character to the commerce and trade of the country. The greater facilities they gave to bankrupts and insolvents to settle with their creditors without a thorough investigation of their affairs, the more they encouraged fraud and lowered the mercantile character of the country. When a man stopped payment, and declared himself unable to pay 20s. in the pound, he had from that moment no more right to the assets than any gentleman walking in the streets had to the watch of the Attorney General. Those assets ought to pass immediately to the creditors by the simple process of the Scotch law, and not into the hands of costly and obstructive officials. He thought they had got rid of their old friend the messenger in bankruptcy; but in the present Bill he cropped up again to take possession of the assets. He really did not know why this official should be resuscitated. The Scotch system provided for the prompt security of the assets. The English system, as laid down by the hon. and learned Gentleman, did not make such provision, or at all events did so in a very imperfect manner. He objected to the spirit of officialism which pervaded the Bill. In Scotland there was no such thing as a Court of Bankruptcy. When a man became insolvent the law vested his assets in the creditors, who appointed a trustee. The assets were distributed as between the trustee and the creditors themselves. The 1562 hon. and learned Gentleman provided a trustee, but wrapped him up in officialism to such an extent as to prevent the creditors from getting at the assets which were their property. There were fraudulent creditors as well as debtors. One valuable point in the Scotch system was that the trustee had the power to check the fraudulent proofs of that class of creditors. The English system, contrary to that of Scotland, and in defiance to common sense and honesty, allowed a creditor to prove the full amount of his debt, although he might hold collateral securities for the whole of that amount. [The ATTORNEY GENERAL said, that the Bill made a change in this respect.] Did the Attorney General intend to reduce the cost of bankruptcy? The average charge on estates in England varied from 20 to 40 per cent on the assets collected. In Scotland the average cost was only from 12 to 14 per cent on the assets. There were in the London Court three Commissioners, who were to be Judges, in regard to whose salaries there was a suspicious blank in the Bill. Those salaries, he believed, were to be raised to £3,000 a year. Who paid these heavy sums? They were not paid out of the Consolidated Fund, but out of the proceeds of estates in bankruptcy. In the London Court only there were to be three Judges, say at £3,000 per annum each; a chief registrar at £1,400; seven registrars at £1,200 each; a taxing master at £1,400; an assistant taxing master at £1,000; three new provisional trustees and three new messengers. These were valuable pieces of patronage for the Lord Chancellor, but very valueless and costly appointments for the creditors. In Scotland there were none of these charges. There was collected altogether in bankruptcy in this country little more than £600,000, and for the collection of that sum they proposed to inaugurate several new officers, and to pension others out of property of estates in bankruptcy. He challenged his hon. and learned Friend to point out where, in his numerous series of clauses, he proposed to reduce the expenses connected with the working of the system of bankruptcy, or to simplify the procedure. He must protest against the right given to the debtor to make himself a bankrupt. It ought to be left entirely at the option of the creditors, whether the debtor should go into bankruptcy, or whether his affairs should be settled by composition or other arrangement. Another point most onerous 1563 against the creditors was, that the order of adjudication was to be conclusive against all the world. As the law stood at present, with all its imperfections, there were constantly cases in which deeds of assignment that had been fraudulently made were not detected till months or years afterwards. Under this Bill the rights of creditors who now obtained justice would be expressly barred. The Committee on the Bankruptcy Law had recommended that the insolvent should obtain his discharge when he paid 6s. 8d. in the pound to his creditors. He had not himself been enamoured of that provision. It was open to two objections. First, it might operate as an inducement to debtors to defraud their creditors of the other 13s. 4d. in the pound; next, it might induce them to exaggerate the amount of debts immediately before suspension of payment, and swell the assets in order to bring them up to the limit which would entitle them to their discharge. The provision proposed with reference to the order of discharge offered the feeblest remedy to the creditors. His hon. and learned Friend had started with the announcement that he proposed to make the after-acquired property of the insolvent liable for his previous debts. He now cut down that principle to this. By an onerous and clumsy process, the creditors was to have power of going against the debtor's after-acquired property up to 10s. in the pound. To obtain this partial remedy an individual creditor must first prove that the debtor had enough to pay him and every other creditor the 10s. in the pound. It was very improbable that any single creditor would encounter the trouble, the cost, the risk, and the obloquy attending such a proceeding. This part of the Bill would be a practical shield to a debtor against his creditors. The Select Committee had recommended that the non-assenting creditors should have the right of questioning the validity of any deed of assignment or deed of composition. He looked in vain through that ponderous Bill for any provision of the kind. The measure would not restore public confidence in the administration of the estates of insolvents. It had the taint throughout which attached to every Bankruptcy Bill that had been introduced. It was almost all in favour of those gentlemen who wished to make bankrupts of themselves. There were only about 600 petitions to the Court coming from creditors in the year, whereas 1564 there were between 6,000 and 7,000 petitions made at the instance of debtors. That circumstance clearly showed what little confidence the public and creditors had in the existing system. Practically, the only remedy creditors at present possessed was in assignments. That remedy would be materially weakened by the Bill. He traced a good deal of the imperfections in our bankruptcy system to the sources from which it had emanated. Since Lord Brougham introduced his measure the Bankruptcy Law had been a pet subject with Lord Chancellors and Chancery lawyers. He should be glad if bankruptcy reformers would consult mercantile men. If the House wished to appreciate what had been the effect of their legislation on that subject, it could not do better than look at the operation of the law during the three years before the passing of Lord Westbury's Act. During the first of those years (1858) the amount of money collected by the Court was £1,780,000; in the next year £1,057,000; in the third year £1,249,000. The average for those years was £1,364,000. The number of bankruptcies in those three years were as follows:—In 1858 the number was 1,520; in 1859 it was 1,054; in 1860 it was 1,430. The amount of assets collected in 1864 was £677,536; that collected last year was only £730,361. The number of bankrupts in 1863 was 8,470; in 1864 it was 7,224; in 1866 it was 8,126. From the time of the passing of the Reform Act the Bankruptcy Laws had engaged the attention of Chancery authorities, practitioners, Lord Brougham, Lord Lyndhurst, Lord Chelmsford, Lord Westbury, and the two distinguished Chancery barristers (Sir Roundell Palmer and the Attorney General), who were now applying themselves to the subject. He wished his two hon. and learned Friends could go among mercantile men and hear from them how extremely injurious the present elaborate system of our Bankruptcy Laws was to business operations, how it facilitated the commission of fraud and defeated creditors. His hon. and learned Friends would arrive at the conclusion that what was wanted in this country was a simple and plain system like that which was in operation in Scotland. There had been a long experience of the Scotch plan. The Scotch people would not give it up for the English system. He had to express his regret that the Bill of his hon. and learned Friend was not more efficient. 1565 He trusted that his hon. and learned Friend would carefully re-consider the subject. His enormous Bill required great alteration. He hoped the hon. and learned Gentleman would subject it to extensive revision and simplification, and trusted that it would not be pressed in its present shape, as so far from being of service to the country, it would perpetuate the evils of the existing system.
§ MR. SELWYN
said, that in 1861 he had raised the question of making the after-acquired property of the insolvent chargeable with his debts. Though the opinions he then advanced did not prevail, subsequent experience had given great force to the observations made by those who concurred with him. Under the old law a marked distinction was drawn between bankrupts and insolvents. The latter after passing their examination obtained a protection and a discharge. But they were obtained only on condition of a warrant of attorney being entered up, giving the Court, at all times and under all circumstances, an opportunity of making their after-acquired property available for the discharge of their debts. This power could only be exercised at the discretion of the Judge, and could any one allege that it had ever been used in a harsh or unjust manner? Why should such a provision be given up? He was told that it was desirable to have "uniformity." The bankrupt, under the old law, was not fettered in the future, because it was assumed that he had proved that he had honestly endeavoured to discharge his obligations, and that he had been unable to do so owing to losses in his trade. But that was not the case with an insolvent. There the debtor, knowing his means, chose to exceed them and spend the property of others. Anything such a man acquired belonged to those whose property he had expended until his debts were discharged. The acquittance given to the bankrupt was a sort of premium to encourage trade. It could not be regarded in that light when extended to the insolvent. The system of uniformity had been attended with very mischievous results. He repeated now what he had stated before, that for every article we purchased we paid an enhanced price by reason of the bad debts of persons who did not pay for what they had; and he believed that the sums we paid in this way amounted to more than any tax we paid to the Imperial Exchequer. The question was in what manner ought the 1566 evil to be remedied? The Bill of last year proposed to free the insolvent after a limited time on his paying a dividend of 6s. 8d. in the pound. The present Bill went a little further in the creditor's favour, but it was open to exactly the same objection in point of principle. There was a general concurrence of opinion that the present state of the law was extremely unsatisfactory; and the evil would not be remedied by the provisions of this Bill. A man under these provisions might contract a debt of £10,000 without any reasonable expectation of paying it, and by fraudulent means obtain a further sum of £10,000. The utmost penalty the Bill would impose upon him was the suspension of his certificate for three years; and supposing he should be able to pay a dividend of 10s. in the pound he might set all his creditors at defiance, protect all property he might afterwards acquire, and live in luxury, while the man whom he had wronged might perhaps be in penury. Therefore, a man who had acquired £10,000 by fraud, and had thereby succeeded in paying 10s. in the pound, would go scot free after three years. The law enabled an honest debtor to charge all his future property with his debts; and why should a man be in a better position because he had given all the security he could to his creditors? Until a debtor repaid the sum due by him, the after-acquired property was not his own, but came to him subject to the payment of the debts he had previously incurred. That was an answer to the objection that they should not tie a millstone about a man's neck all his life. If a clause were introduced in reference to the case of an honest trader, who had failed in consequence of the unavoidable risks of trade, giving to him the same indemnity as he would have obtained under the old Bankrupt Law, he (Mr. Selwyn) would not object to such a claim; but it should not be universally applied. He hoped his hon. and learned Friend would consider the points to which he had referred. He (Mr. Selwyn) did not wish to press his Amendments hostilely, and would rather see them incorporated by his hon. and learned Friend in his Bill.
§ SIR ROUNDELL PALMER
said, that if this Bill did not give complete satisfaction to the House and the country that would not be owing to any want of ability or care bestowed on the subject by his hon. and learned Friend, but solely to the great difficulties it involved. It would not be 1567 easy to exaggerate those difficulties. One of the chief was to reconcile the different opinions entertained by those who took a judicial and those who took a commercial view of it. The attempts made last year, and in the present Session, to consolidate and amend the Bankruptcy Law, if they did not show how to remove all anomalies from it, at least tended to put it in a much more satisfactory condition than it was in before. The House would naturally expect that he should address his observations to those points of the Bill which involved questions of principle, and more particularly to the deviations from the Bill of last year. Notwithstanding the remarks of the hon. Member for Southampton (Mr. Moffatt), he thought that the Attorney General had proceeded on the correct idea of administering the property of a bankrupt for the benefit of his creditors. But there were some points in the arrangements which it might be desirable to amend. As to the means to be taken to make a man a bankrupt, there were one or two deviations from the Bill of last year. He was by no means satisfied that the changes were improvements. Now that imprisonment was to be abolished and bankruptcy was to remain the creditor's only remedy, it did not seem expedient to retain the provisions of the present law, which required that the debt of one petitioning creditor must be £50, those of two petitioning creditors £70, and those of three or more £100. He did not see on what principle of justice the power to make the debtor bankrupt could be refused to a creditor whose claim was £49 10s., when it was given to one to whom the debtor owed £50. The answer to the objection that if there were no limitation creditors might lodge petitions for trifling sums was, that if a debtor would not pay a small sum, it was so much the clearer that he was a person who ought to be made bankrupt. If the sum were small, and he had the means, he ought to be made to pay. He was sorry the hon. and learned Gentleman had reversed the decision arrived at last year as to debts of non-traders contracted before August 6, 1861. In 1861 non-traders were for the first time made liable to bankruptcy, all other legal remedies being then left untouched. It was enacted that debts contracted before the day on which that Act came into operation should not be debts in respect of which a non-trader might be made bankrupt. 1568 But six years had since elapsed; and there could be no reason for continuing the exemption if such debts still re-remained unpaid, especially as the remedy against the person was now to be taken away. He had understood the Attorney General, when he introduced the Bill, to say that he proposed to allow a debtor to call his creditors together and to enable them, on a declaration of insolvency by him, if they thought it necessary, to take measures for making him bankrupt. That would not be objectionable. But the Bill empowered the debtor himself to make a declaration of insolvency and afterwards to obtain an adjudication as a matter of course. What right could a trader have to take away at his own option the legal remedies of his creditors? If they did not think it their interest to make him a bankrupt, and preferred to rely on ordinary common law remedies, the debtor had no right to take away their common law remedies, and to force them at his own time and in his own way into the Court of Bankruptcy, to take what they could get. What sound reason could be given, under such a Bill as this, for allowing the debtor to make himself bankrupt? By abolishing imprisonment for debt they took away the only sound reason which ever had been given for enabling a debtor of his own motion, and against the wish of his creditors, to make himself bankrupt. He hoped that that point would be carefully considered by the House. As to the steps between bankruptcy and discharge, he was glad that effect had been given in the present measure, as it was in that of last year, to the recommendation that the Scotch system should be in the main adopted. The benefit of the Scotch system was that it removed the administration of a bankruptcy as far as possible from the Courts of Law, and made it as much as possible a self-acting system, under the management of those to whom the property virtually belonged. It placed the matter as nearly as possible on the same footing as administration under trust deeds. He objected, however, to the proposal that the Court of Bankruptcy should have jurisdiction to determine whether property found in the hands of the bankrupt was to be treated as part of his estate on the ground that it was placed in his apparent ownership with the consent of the real owner. It seemed very much like a departure from sound principle to say that a Court intrusted with the administration of the bankrupt's 1569 property for the benefit of his creditors should be empowered to determine the adverse title of a third party. Supposing the question to be the right to land, he was sure that his hon. and learned Friend would say that that was a question to be decided by another court. Why should not the same principle hold good in the case of personal properly which might be worth thousands of pounds? The question of discharge was a most difficult one, and he was by no means satisfied with the proposal in his own Bill for a dividend of 6s. 8d., and a limitation of six years. On the other hand, there were great difficulties in the view taken by his hon. and learned Friend (Mr. Selwyn), that there should be no limitation at all to the claims of creditors as against after acquired property. In substance, this was a proposal that there should be no discharge. It was doubtful whether, if that was a sound system, it would not be well to abolish the law of bankruptcy altogether. In analogy to the provision contained in the Bill of last year were the Statutes of Limitation, whereby debts which in conscience were due became extinguished after a certain term if legal steps were not taken to keep them alive in the interval. The principle of discharge appeared to be in the nature of a compulsory composition. Trust deeds prescribing a voluntary composition were found to be a common and convenient mode of settling questions between debtor and creditor. They justified the Legislature in saying that there should be a compulsory composition upon certain terms, putting bankrupts in the same position as those who had voluntarily compounded. To keep this perpetual liability hanging over a man would diminish his chance of paying his former creditors. Under the Bill of last year it was proposed that a bankrupt who had committed no offence under the Act might receive his discharge if he paid a dividend of 6s. 8d. in the pound; if not, then at the end of six years. His hon. and learned Friend raised the amount to 10s., getting rid of the six years' limitation, and making the bankrupt's after-acquired estate always liable for the remaining sum. It was doubtful whether this provision would be of much value to creditors. In the case of after-acquired property the court was to have power to make an order for the payment of the balance due from the bankrupt. If the money were not paid there was to be a second bankruptcy, the new 1570 creditors being paid first and then the old ones. That would be a difficult remedy, and one that probably would not work. If so, the terms of the discharge, though apparently stricter than those proposed last year, would really be easier, and would also operate very unequally. The Bill of last year proposed not to give a discharge to bankrupts convicted of a misdemeanour under the Act. It was wrong not to make an exception in this case. With regard to the penal clauses, he would not at present inquire how far it was right to extend the amount to which, under the Small Debts Act, the power of imprisonment would apply in cases of contumacious non-payment on the part of persons able to pay. It would be always very difficult by satisfactory proof to get at the fact of ability to pay, and, looking to the arbitrary power already given to the courts, he felt unwilling to extend it. A distinction might, no doubt, consistently with sound principle, be drawn between those who contumaciously would not pay, and those who really could not. In certain cases—such, for instance, as that of persons earning weekly wages, and in general where there might be a difficulty in putting by money—some power of this kind must be relied on. It was desirable therefore to retain that power, provided it was not carried beyond due limits, which he did not menu to say his hon. and learned Friend intended to exceed. He could not, however, entirely approve some of the extensions which he found in the Bill. Last year he had endeavoured to impress upon the House that they should not avail themselves of the law of bankruptcy in order to treat things as criminal which, apart from bankruptcy, would be treated differently. There were things which were open to a certain amount of censure in se, which they did not think fit to treat as criminal by the general law. These things ought not to be so treated, merely because the person guilty of them had become bankrupt. If that principle were sound, certain exceptions which were made in the Bill ought not to be retained. His hon. and learned Friend proposed that imprisonment for debt should still remain where more than £20 had been recovered for damages in actions for slander, assault, battery, seduction, breach of promise, malicious trespass, and so forth. These things were either punishable under the law as it stood, or they were not. If they were, it was not necessary to make them the 1571 subject-matter of penal enactment under this Bill. If they were not, he objected that things which were not criminal under the general law should be made so under the law of bankruptcy. He did not see upon what sound principle a man should be imprisoned for debt resulting from a judgment upon a particular course of action, if he were not liable to imprisonment for the thing which was the cause of action itself. Take the instance of a libel. On what conceivable grounds should a man, not sentenced to imprisonment as a libeller, be imprisoned when he was declared a bankrupt? To make the law of bankruptcy an indirect method of punishing adultery, libel, or any such offences, should not be allowed. To say that the suspension of a man's discharge for three years might take place because he had had judgment against him for libel, slander, assault, adultery, and so forth, seemed to his mind as opposed to sound principle as anything could be. These things had nothing to do with bankruptcy. His hon. and learned Friend also proposed to suspend the discharge for three years for various other causes. The first was, if the bankrupt had committed any act of the nature of a misdemeanour, but had not been convicted thereof. If a man was convicted à fortiori they should punish him. To say that conviction gave a man a right to discharge, when he would not have that right if he had not been convicted, seemed unintelligible. With regard to the judicial arrangements, he had proposed last year to utilise the services of existing officers as far as he could, so as to avoid saddling the country with unnecessary compensations. It was reasonable that a period of fifteen years' service should entitle to full compensation, leaving other cases to a quantum meruit. But he did not see why the services of the existing bankruptcy officials should not be made available, so far as practicable, for County Courts, or otherwise, in the country districts. He was an advocate for making as much use of them as possible, and for paying nothing that he could help out of the public purse, without receiving a quid pro quo. He looked with a little alarm upon the reappearance of official assignees and messengers. He deprecated the harpies of the law seizing upon property as soon as the bankruptcy took place. Strong evidence was given before the Committee of 1864, that it was their too frequent practice to hurry on sales in a ruinous 1572 way. The proper principle was to leave the property, so far as possible, under the power of the creditors. As to an interim receiver, he should prefer not to make such an appointment an invariable rule, but confine it to cases where it was specially required. He was surprised to find it proposed that superannuations should be granted by the Lord Chancellor. That system was abolished by an Act of last Session, and it would be unwise to revert to it. In conclusion, he would only repeat that his hon. and learned Friend the Attorney General deserved the thanks of the House and of the country for the contribution he had made towards the settlement of this question. He should be happy to render him any assistance in his power.
§ MR. J. STUART MILL
The laws of this country on the subject of debt have passed, not suddenly, but by a succession of steps, from one bad extreme to another. After having continued the old savage treatment of debtors far into an advanced state of civilization, we have now gradually lapsed into such a state that the debtor may be guilty of any kind of misconduct, short of actual fraud, and escape with practical impunity. Last year, for nearly the whole of the Session, I had a Notice on the Paper for an Instruction to the Committee, that it have power to remedy this evil by introducing provisions for the punishment of such debtors as might be shown on inquiry to have, with culpable temerity, risked and lost property which belonged to their creditors. The Bill of last year never reached such a stage that I could move that Instruction. The present Bill has passed the stage when a similar Instruction could be proposed. Under these circumstances I shall give my best support to the Amendments to be proposed by the hon. and learned Member for Cambridge (Mr. Selwyn), and I shall move other clauses going further in the same direction.
said, he agreed with the hon. Member for Westminster (Mr. Stuart Mill) that the commercial immorality practised during the last few years, and which had occasioned incalculable suffering, required legislation. What was wanted was to draw a line between the barbarity of the old law and the laxity of modern times. They had all had experience during the last few years of the enormous evils that had been occasioned by persons in commerce dealing unjustly with the property of others. Every one felt that some remedy 1573 was required. The hon. Gentleman had almost copied the words of Lord Coke, who said that—"we had taken the name as well as the wickedness of bankrupt from foreign countries." This Bill — subject to improvements in Committee—to some extent accomplished the difficult task of remedying these evils. With regard to after-acquired property, it would be better to provide, not that it should be all seized, but that a competent tribunal should investigate the matter. If there were no equities interfering with the primâ facie rule that a man who had the means should pay his debts, they should make that property liable. The old law was very stringent in regard to after-acquired property. The statute of Elizabeth somewhat relaxed that of the 34 & 35 Henry VIII., but it proceeded on the same footing, and made the debtor liable to the extent of his after-acquired property. It gave stringent powers to the Lord Chancellor or Lord Keeper to seize the bankrupt's person or property. The statute of Anne was more lenient, and freed the person after the cession of his property. A more lenient view was afterwards taken on this subject. The tendency of modern legislation had been perhaps too much in the opposite extreme. The problem for the House to solve was to reconcile two conflicting principles—that applied to traders and that applied to non-traders, on the one side not to be so harsh us to ruin a man who had been unfortunate, and on the other side not to allow a man to ruin others. The present Bill seemed to hit the medium between too great severity on the one hand and too much leniency on the other. He agreed with his hon. and learned Friend (Sir Roundell Palmer) that the principle of the present Bill was to place the administration of the law of bankruptcy as little as possible upon a curial footing. The best source of information on this subject was to be found in the Report of the Commissioners appointed to consider the Law of Bankruptcy in 1854. The Report of that Commission contained the soundest and most prudent views, and the present Bill would be found to be based on their recommendations. He could not conceive a Commission better calculated to represent the opinions of all classes on this subject. It contained the right hon. Gentleman the Member for the University of Cambridge (Mr. Walpole), who had given much time to the study of bankruptcy, and also the hon. Member for 1574 Kendal (Mr. Glyn), whose name stood as high as that of any man in the commercial world. In proceedings for winding up companies, under the Act of 1862, the question had been long considered whether there should be compulsory liquidation, or whether there should be a winding up under the supervision of the Court. The present Lord Chancellor consulted the Judges on this subject last July, and the decision to which they came was that where it was possible it was advisable to hand over the assets to the creditors and let them administer their own estate. The main principle of the Bill was to let those who were above all interested in dealing with the estate take it into their own hands and deal with it as they preferred. He failed to discover any better remedy for the evils of which the hon. Gentleman (Mr. Moffatt) complained, than was provided by the present Bill. It seemed as if it were the want of more honesty on the part of the commercial world of which the hon. Gentleman complained, rather than the want of a better system. As to the objections of his hon. and learned Friend the Member for Richmond (Sir Roundell Palmer), who was a most able critic on this subject, they appeared to be objections of detail rather than of principle, and not likely to stop the progress of the measure. Many hon. Members must regard with apprehension so cumbrous and ponderous a Bill; but he was glad to find that at least four-fifths of the Bill of 105 printed sheets did not refer to any alteration in the law. It frequently embodied the clauses of existing Acts, often couched in improved language and taking advantage of the decisions of the Courts where the law had been clearly laid down. He did not know why because a man could not pay his debts they were to look back. The matters of principle involved in the Bill lay within a very narrow compass. In the points suggested by the hon. and learned Member for Richmond he (Mr. Karslake) did not think there was one likely to involve much discussion except that relating to after-acquired property. As to the observations which had been made relating to special cases that might have to be met, no system of law could avoid anomalies, nor could they expect to avoid overstepping now and then the laws of logic. The more the Bill was looked into the more satisfactory it would appear. He was able to say that without any indelicacy, because he had had nothing to do with its preparation. 1575 Viewing it fairly and impartially, it was a comprehensive measure, and one that effected a very considerable improvement in the law. At present lawyers did not know where they were in respect to the law of bankruptcy. The Act of 1861 repealed all former Acts as far as they were inconsistent with its provisions. That left the law very uncertain. Now they would have a clean sweep made, and anybody who wished to know what the existing law was would have a document to inform him, long, no doubt, but complete in itself, and easy of reference. If, in addition to the other achievements of that Session, they could pass a Bill of that importance, and one which would remove a serious blot on our commercial morality, it would be a source of great satisfaction both to the House and the country.
§ MR. GOSCHEN
said, he hoped that as so few commercial men had as yet addressed the House, he might be allowed to say a few words upon it. No one could have listened to the debate without having become fully aware of the difficulties which surrounded the subject, and the almost hopeless task of arriving at a settlement that would be satisfactory to all classes. The hon. Member (Mr. Moffatt) believed that bankruptcy consisted above all in taking the estate of the bankrupt into the charge of the creditors, and in rapidly and equitably distributing the assets. On the other hand, the hon. Member for Westminster (Mr. Stuart Mill) intended to move clauses to render acts of commercial immorality penal. He would thus embody with the question of distributing assets, a code of commercial morality involving an investigation to see whether or not there had been acts of culpable temerity on the part of the bankrupt. Points of such a character were most difficult to determine. That which, when it was successful, might be regarded as a legitimate venture, might, when it failed, be called culpable temerity. The commercial classes were themselves the persons most interested in commercial morality, for they were the chief sufferers by any laxity in it, and they were therefore most interested in seeing fraudulent acts made penal, and treated as such by the criminal courts. But how could the Court of Bankruptcy, which had to collect and distribute a debtor's assets, deal satisfactorily with those penal offences? The hon. and learned Member for Cambridge University (Mr. Selwyn) had given cases where certain 1576 people were said to have committed fraud, but those people ought to have been punished quite irrespectively of whether they became bankrupt or not, their criminality being independent of their bankruptcy. The collection and distribution of assets was not so simple a process as was often assumed. Nothing was attended with more difficulty than a liquidation. The business was taken out of the hands of those who knew most of, and had most interest in it, and placed in the hands of those who had small interest, and sometimes conflicting interests, in the matter. The smallness of the assets of bankrupt estates as frequently occurred from the difficulty of realizing as from fraud. The House had to consider whether creditors could deal satisfactorily with an estate, without the intervention of a Court of Law and a system of checks and counter-checks. It would be found very difficult for creditors to manage the affairs of a bankrupt without some machinery provided to maintain supervision over them. There were many questions which required some impartial man to solve them, especially those in reference to preferential claims. The hon. Member for Southampton (Mr. Moffatt) rather underrated the necessity of legal supervision over the realization of the assets of insolvent estates. The needy creditors might wish to force a sale at a great sacrifice, while the wealthier creditors might prefer to wait till the markets improved. The creditors of a bankrupt estate were much in the same position as the shareholders of a limited liability company with no Articles of Association to regulate their relations. They were sure to get into difficulty unless some proper legal machinery existed for assisting them in the realization of the assets. If a trustee under a will had doubts how he was to act, he put the estate into Chancery. Something very analogous would take place in cases of bankruptcy if the creditors elected a trustee. The creditors were to be empowered to elect trustees and inspectors. But who would act as trustee if there was not some fixed rule as to how he was to deal with the various creditors. The advantages to the creditor under bankruptcy must be placed in juxtaposition with the disadvantages. The disadvantages were principally that the creditors lost their title to after-acquired property. But they had the advantage of the law stepping in to give them a speedier, cheaper, and safer realization of 1577 the debtor's estate than they would have under common law, or if left to take their own remedy. If the bankruptcy, law failed to give this, it failed in what was its chief object. Sometimes the question was asked whether the bankruptcy law should not be abolished altogether, and the creditors retain their right to after-acquired property, but lose their right of dividing the debtor's property at once. He thought that the difficulty and expense of each man proceeding for himself would be so great that a bankruptcy law was preferable to that. If, as the hon. and learned Gentleman (Sir Roundell Palmer) suggested, no man should be able to make himself bankrupt, then the creditors would be able to determine whether there should or not be bankruptcy. A question was raised whether the Bill was right in providing that after-acquired property should not be responsible to the full extent. The hon. and learned Member (Mr. Selwyn) argued as though the present and natural idea was that such property ought to be liable. But for a long time it had been almost universally held that it was for the public good that such property should not be liable. There would be great difficulty in carrying out the suggestion of the Committee of 1865 as to the dividend of 6s. 8d. As to the proposal to render after-acquired property responsible to the extent of 10s. in the pound, it was desirable if practicable. But there would be great difficulty in carrying it out. A bankrupt would feel as though he was always liable to be made bankrupt over again by means of the provisional trustee pouncing down upon him and taking his after-acquired property. He did not know but that it would be better that a bankrupt should be liable to the whole 20s., with a proviso that a certain portion only of his after-acquired property should be taken at any one time. Such a system would not deprive a man of all inducement to work on to acquire property. The question, however, was surrounded with difficulties, and perhaps the compromise suggested in the Bill might be the right thing to try. If a creditor were able at any time to demand his debt of the bankrupt it would be impossible for the bankrupt to acquire property under such circumstances, because the creditors would not allow him time to do so. No doubt the proposal in the Bill was a most important change. If it were carried out, it 1578 would go far to get rid of fraudulent bankruptcies. He could not view with satisfaction that part of the Bill which introduced again into the Bankruptcy Court inquiries into the conduct of the bankrupt, and mixed this question up with that of the administration of the estate. The hon. and learned Gentleman who had spoken last had alluded to those as time-honoured provisions. But the question was whether they had been successful. Had they led to the punishment of fraudulent bankrupts? The Commissioners had been allowed a discretion in every case, and they had exercised it by letting everybody off. If it were not possible to make those clauses efficient, it would be better to strike them out and look to other means for doing what they had been intended to effect, but had not effected. He was glad the Government had followed the recommendation of the Committee of 1865, that prosecutions for misdemeanours should take place not at the expense of the creditors, but should be paid for as prosecutions for felony were paid for. The creditors of a particular bankrupt were no more interested in punishing him for misdemeanour than were the commercial public generally. The Bill before the House did something for the debtor and something for the creditor. It improved the position of the debtor by the abolition of imprisonment for debt. Imprisonment for debt having been ineffectual to prevent fraud, public opinion generally was against it. At the same time, he had received a good many communications in which the writers protested against such abolition, unless the greatest precautions were taken, so that fraud should still be punished. But it must be remembered that there was a great difference between a debt and a fraud. Imprisonment for fraudulent debt was a very different thing from imprisoning a man because he could not pay. On the other hand, the creditors would obtain several advantages by the Bill. The subject-matter of the bankruptcy would be more in their hands. He approved of some official machinery being still proposed to be retained. Some official machinery was necessary to which the creditors might appeal in case of need; but the less necessity there was for such appeal the better. He did not think it could be said that the Bill went too far in the direction of officialism. Some sort of official machinery was necessary to prevent the abuses of creditors among themselves 1579 and to assist in the speedy and effectual realization of the assets. He was glad that legal Gentlemen took such an interest in this subject. A satisfactory settlement would only be obtained by a free interchange of opinion between those who were practically engaged in commercial matters and those who, knowing the desires and the wants of the commercial classes, could put them in such a legal shape that they would carry out their views without giving rise to new evils in the place of those which it was intended to remedy.
§ MR. FRESHFIELD
said, that after the exhaustive criticism the Bill had undergone, it would be wrong if he were to occupy the time of the House for more than a few minutes. He agreed with many of the observations of the hon. and learned Member for Richmond (Sir Rouudell Palmer), and with none more than his last, in which he expressed his sense of the obligations the House was under to the hon. and learned Attorney General for the time, attention, and labour he had bestowed upon the subject. He might add, what the hon. and learned Member for Richmond could not, that that hon. and learned Member himself had also rendered most important services to the cause of bankruptcy reform. He had listened to the speech the hon. and learned Gentleman made on this subject last year, which was one of the most profound and lucid that he had ever heard, even from him. But the Bill to which that speech was the preface was scarcely worthy of its author. It was modelled upon the Scotch Bankruptcy Law, and seemed to have been drawn by some one who was unable to adapt its principles to the modes of English law. The measure betrayed the defects which might thus have been anticipated. The Bill of the hon. and learned Attorney General had not these defects. It was an able measure, and ably drawn. The Bill of last year proposed to reduce the number of Commissioners from three to two. It also had a provision that the bankrupt should not be discharged from further responsibility except on condition of his paying 6s. 8d. in the pound. There was no principle in that stipulation. The Bill of the present Session proceeded on the proper principle of a consolidation of the Bankruptcy Law. It also abolished that last remnant of barbarism, the imprisonment for debt on final process. It continued the three Commissioners, and it gave them the title of Judges. 1580 He trusted, notwithstanding what had been said by the hon. Member for Southampton (Mr. Moffatt), that it was the intention of the Government with their new name to increase their salaries. They were fairly entitled to it. No one had rendered more important services to the Bankruptcy Law than the senior Commissioner Mr. Holroyd. The arrangements for settling estates out of the Bankruptcy Court were most useful. He agreed with the suggestion of the hon. and learned Member for Richmond that some official connection with the Court ought to be associated with these arrangements. The deed of arrangement ought to be final. But it ought to be brought in the first instance under the cognizance of the Court. It would be well that such an officer as the official assignee should be appointed to superintend these arrangements. They all knew how often it happened in those private arrangements that liberty amounted to license. The great desire was to spare the feelings of the bankrupt. The solicitor of the creditors was his solicitor; the inspectors were his friends, and thus there was great laxity in the inquiry. If one of the official assignees were appointed, who would not be actuated by these feelings, and who would be careful to inquire into such matters as post-nuptial arrangements and preferential payments, much good might be effected for the creditors. The hon. Member for Southampton need not be afraid that this would lead to any outrageous expense, for the official assignee was already paid, and by a salary. It would lead to a more proper administration and a fairer division of the assets than often took place under the present system. There was another provision which he thought well entitled to a trial. That was that the after-property of a bankrupt should be liable for his debts to the extent of 10s. in the pound. It might be said that this was a retrogressive step; to a certain extent it was so. Parliament had entertained the hope that, though a bankrupt was legally free from his debts, his own sense of morality would step in and induce him to pay them when he had the power. But as it was now proved that private morality was lax in this respect, it was right that Parliament should step in and enfore the claim. The particular object he had in rising was this. The Attorney General proposed to constitute a central court of the three Commissioners, who were to be called Judges. The Bill 1581 gave them power to sit together. It gave an appeal from their decisions, as now, to the Lords Justices. It constituted fifty or sixty independent and separate Courts—the County Courts were all of them to have original jurisdiction in bankruptcy. The danger of this arrangement was that there would not be uniformity in the practice or in the legal views of these independent courts. Each Judge would take his own view, and the danger would be that there would arise a conflict of authority and practice. It was true that an appeal would lie from each of these Courts to the Lords Justices. But a Court of Appeal was not the place to settle small questions of practice or of law. It appeared to him that all the County Court Judges should be placed in close and immediate communication with the Central Court in London, and that all appeals in matters of practice and law should be made to the Central Court in London. The Judges would have ample time to deal with these questions. He hoped the Attorney General would accept this suggestion, as he thought it would be a great improvement in the Bill.
§ MR. AYRTON
said, he regretted that his hon. and learned Friend the Attorney General had not been a member of the Committtee from which the idea of this Bill had come; if he had been he never would have fallen into such a misapprehension of the views of the Committee. The most glaring misapprehension of the views of the Committee was shown in this, that the Bill related to bankruptcy rather than to imprisonment for debt. The Committee considered that before taking any step with reference to bankruptcy they ought to determine what they would do with reference to imprisonment for debt. His hon. and learned Friend had not grappled with that fundamental question. Instead of abolishing the punishment of imprisonment for debt he had re-produced all the old abuses. One of the worst of them was making a distinction between the pretended rich bankrupt and the unfortunate poor. He said pretended rich, for no bankrupt could be really rich; but he was presumed solvent till the discovery was made that he was deluding mankind. If a man by his family connections or by making pretences in trade became bankrupt for a larger debt than £50, he would be free from obligation. But if his debt was less than £50 he must go before the County Court, must appear there from time 1582 to time, would be liable to be ordered to pay by instalments, and if he did not he might be sent to gaol from time to time. This might be done at the instance of creditors, however humble, while the pretended rich were exempted from these proceedings. So unjust was the law, that if a man owed a number of debts to the amount of £10 or £15 each, if he could induce a friend to lend him a sum of money in order to contract a larger debt, he might then go before the Court and wipe out all the small debts, so that he would not be liable to the County Court process. On what principle did the Attorney General defend these proceedings? The Committee to which he referred had better appreciated their duty, and they declared emphatically that imprisonment for debt should cease altogether. The Committee would allow of no exemption for the poor, or any benefit for those who were in a higher position. Now the poor were placed in the same category with those a little above them it was possible the poor might be saved by this association.
§ Committee deferred till To-morrow.