HC Deb 14 March 1867 vol 185 cc1867-87

I rise, Sir, to move for leave to bring in a Bill to consolidate and amend the Acts relating to Bankruptcy in England. The laws relating to debtor and creditor are so important and so varied in character, and their details are so numerous, that to go into a full examination of the subject would require a very lengthened statement. But I am satisfied that the full discussion which this subject has received within the last few years, the evidence taken before the Select Committee of 1864, the Report of that Committee in 1865, and the Bill brought in by my hon. and learned Friend the Member for Richmond (Sir Roundell Palmer) last year, have all made the House so familiar with the question that on the present occasion, and until the Bill is in the hands of Members, I may compress what I have to say into a narrow compass. Indeed, I think I might have followed the example of the hon. and learned Member for Richmond, and laid the Bill on the table, deferring any statement till the second reading; but as the public mind has been so much directed to this matter, it may, perhaps, be as well that I should at once state the leading provisions of the measure. The principle of the bankrupt code is very simple. It is the just distribution of the assets of the insolvent debtor among his creditors. Whatever tends directly to that end ought to form part of the code; but whatever tends only indirectly to it should not form part of the code. There are many parts of the law of debtor and creditor which tend only indirectly to that end. Therefore, though I intend to ask for leave to introduce a Bill to abolish imprisonment for debt, I do not propose that such a provision should form part of the measure which I am now about to bring under the notice of the House. It is unnecessary to go back through three centuries of early legislation on the subject of bankruptcy. It may be sufficient to say, with reference to that legislation, that sometimes it was harsh and unjust to the debtor, and that sometimes it was unjust to the creditor; but after various fluctuations a more fixed character was given to it some thirty years ago. Before Lord Brougham's Act of 1831, in every fresh case of bankruptcy a new tribunal had to be constituted to administer the affairs of the bankrupt. The property was collected and distributed by the creditor's assignee, under the supervision of the Court of Bankruptcy, and the bankrupt's discharge was obtained upon the certificate of the Commissioners of Bankruptcy, on the consent in writing of a certain number of creditors being obtained. Of course, there were other provisions with reference to Acts of bankruptcy with which the House is familiar, and upon which I do not propose to dwell. The complaints that were made of this state of the law were of the following description. It was said that the constitution by commission under the Great Seal of a new tri- bunal every time a person became bankrupt was very clumsy and expensive, and I do not see how it was possible it could be otherwise; that the administration of the estate by assignees chosen by the creditors was found not to work well; that the estate was too much under the supervision of the court; that the assignees were not paid for the work they performed; that the only way to obtain payment for such work was to appoint a paid accountant; that when the estate got into the bands of professional men it was badly managed, and was eaten up by costs. Then, with regard to the certificate of discharge, it was alleged that it was most unfair to the bankrupt, inasmuch as he had to follow his creditors about in order to obtain their signatures, and that it was liable to abuse, and led to buying the consent of the creditors. In 1831 Lord Brougham introduced a measure, the material points of which were that it constituted a now tribunal, consisting of four Judges, six London Commissioners, assisted by registrars and official assignees in London, who were to collect and distribute the assets, the duties of the creditors' assignees, who were retained, being merely nominal. This Act established no local courts, although under it fiats were to issue to country Commissioners. The system introduced by that Act was as loudly complained of as the one it had superseded. There was an over-supply of official force in London, and there was no sufficient supply of official force in the country. Between the years 1831 and 1849 no less than three Acts were passed, with the provisions of which I will not trouble the House further than to state that they abolished the Court of Review and the functions of the four Judges created in 1831, the duties being performed by the Commissioners; that they appointed district Commissioners with district jurisdiction—the appeal from both the London and the district Commissioners being to a Vice Chancellor sitting in the Court of Chancery; and that they appointed official assignees for the country as well as for London. During the interval an attempt was also made to alter the mode of effecting the bankrupt's discharge. Up to that time his discharge had been effected by consent of creditors in writing, and the modification introduced was that the certificate was to be obtained at a public meeting of the creditors, when they had an opportunity of giving their consent verbally, or of making objections to the granting of the certificates, which were weighed by the Commissioners, who granted or withheld the certificate according to the conduct of the bankrupt. Power was also given to the debtor to institute proceedings in bankruptcy against himself. What I have stated will show that there have been considerable fluctuations of opinion during the last thirty years upon the points under consideration. Up to the time I have mentioned no satisfactory provisions were in existence under which the creditors could arrange with their debtors, so that the majority could bind the minority. Since that period this question has been looked upon as a matter of great importance. The point was originally mooted by the merchants and bankers of London in 1848 presenting a memorial to the Lord Chancellor and the Attorney General, asking for some provision to be introduced into the law which would enable the majority of the creditors to bind the minority in any arrangement which they might come to among themselves. The memorial proposed that the requisite majority should be cither six-sevenths of both value and number, or nine-tenths of either number or value. I wish particularly to call the attention of the House to the number of the majority suggested in that memorial, because ever since that period there has been a continual tendency to reduce the proportion of the majority. Following upon that memorial came the Consolidation Act of 1849, which introduced, I think, for the first time carefully considered provisions for enabling creditors to arrange with their debtors and for enabling the majority of creditors to bind the minority. The arrangement clauses were of three sorts—the first enabling an arrangement to be come to before bankruptcy, but under the control of the Court, a proportion of three-fifths being sufficient to bind the minority; the second enabling the creditors of an estate in bankruptcy to take it out of the Court of Bankruptcy by a resolution of nine-tenths of the creditors; and the third enabled the matter to be settled by deed apart from the Court if six-sevenths in number and value of the creditors could agree to such an alternative. The Act reduced the number of Commissioners from six to four. Some special provisions were introduced of a very stringent character to meet offences against the bankrupt laws, and for different kinds of offences imprisonment for life, or for periods of seven years, three years, or one year, was enacted. The discharge was also made more difficult, and certain specific offences, such as gambling and keeping false books, were heavily visited. Then there was a Royal Commission issued shortly afterwards, over which my right hon. Friend the Secretary for the Home Department (Mr. Walpole) presided, containing gentlemen of great eminence in the legal profession and in the mercantile world, and they turned their attention especially to the arrangement clauses, and made their Report in 1854. They pointed out that the business of the Bankruptcy Court had fallen off; they referred to the complaints made of the facilities with which traders were enabled to deceive their creditors; and with respect to arrangements by deed, they showed that, as the law then stood, great facilities were given to the debtor to get up fictitious debts in order to secure an apparent majority of consenting creditors. The Commissioners also pointed out that the stringent character of the penal clauses of the Act of 1849 was very objectionable. So much, then, for what took place in 1854. It would be unpardonable in me if I passed over the attempt at legislation upon this subject made by Lord Derby's Administration in 1859. A Bill was then brought in by the present Lord Chancellor founded, to a great extent, on the Report of the Commissioners of 1854. The Bill was read a second time, and the provisions of that Bill formed the basis of most of the legislation that has since been proposed on this subject. If that Bill had been followed more closely, I should probably not have been troubling the House to-night. That Bill proposed the abolition of imprisonment for debt; it provided a complete scheme of arrangement between debtors and creditors, and power was given to the creditors to dispense with official assignees, and to take the estate into their own hands. That Bill, however, did not come down to this House. Then I come to the measure introduced by Lord Westbury in 1861. It is right to state that that Bill did not pass entirely as it was brought in by Lord Westbury; he did not carry all the provisions he desired, and therefore he is not to be regarded as responsible for every part of that measure. The first part of the measure related to the abolition of the Insolvent Court, and provided for the abolition of the difference between the trader and the non-trader, thus enabling the non-trader to take advantage of the bankrupt laws. Then, jurisdiction was given to the County Courts, in practice found to be a most important improvement; and the provisions for arrangements between debtor and creditor were advantageously modified. There were three classes of provisions—the first enabled the creditors to take the estate out of bankruptcy; the second constituted a change of the whole affair from bankruptcy to an arrangement with the creditor; and the third enabled an arrangement by deed to be come to without bankruptcy, and provision was made by which a proportion of creditors, representing three-fourths in value, were able to bind absolutely the whole of the creditors. The Act, however, has been found to work disadvantageous to dissenting creditors, the powers conferred on whom are insufficient. The difficulties have been these:—There was no sufficient opportunity for dissenting creditors to challenge the deed; secured creditors, notwithstanding their security, ranked equally with the rest in their claims on other portions of the property; and thirdly, there were no moans of making the deed binding and conclusive in the Court of Bankruptcy, so as to prevent future litigation as to the validity of the deed. These three defects deprived the arrangements contemplated and sanctioned by that Act of much of their practical value. Discretionary power is also, by the Act of 1861, given under certain circumstances to suspend the certificate for a time, and power is given to subject the bankrupt to imprisonment. Power is also given to make orders touching the application of the bankrupt's future property for the purpose of payment of his debts. It is necessary also to refer to the state of things which existed previous to 1861 as to the future property of insolvents. Up to that time the Insolvent Court had dealt with non-traders; and on the surrender of all his property the insolvent was discharged from his debts, subject to this, that machinery was introduced which gave power to get at his future property. In practice what was done was this—that one-third of the property acquired by the insolvent either by gift, inheritance, or devolution, exclusive of his actual earnings, was as a general rule appropriated by the Commissioners for the payment of his past debts. I think that that provision was a very beneficial one. The Act of 1861 has now been tried for several years, and an opinion can be usefully pronounced upon it. The main objection made to it has been that it allowed too great an interference on the part of the court, and thereby prevented the creditors from managing the estate themselves, which it was said they would do with greater economy. It was accordingly recommended by a Committee over which the hon. Member for Southampton presided, and which carefully investigated the subject, that the creditors should be allowed to appoint a trustee of their own choice—that the particular estate in question should be handed over to them—that inspectors should be appointed from their own body, and it was considered by the Committee that under such arrangements the estate would be well and cheaply administered. I propose in this Bill unreservedly to adopt that part of the recommendations of the Committee in the fullest and amplest manner. There is an objection raised to this arrangement, founded upon the assertion that the creditors are often so supine that they cannot be got to attend to their own interests or to appoint a trustee. But that is no answer to such a proposition in cases where creditors are willing to appoint their own trustees. At the same time, no doubt in many cases creditors may be found too supine to act for their own interests, and in such cases it would be wrong to leave the estates of bankrupts, as it were derelict because the creditors will not appoint trustees. In respect to the number of cases in which the creditors have not appointed assignees, speaking of London alone, the total number of London adjudications in 1866 was 2,955, of which 1,673 were cases in which the creditors did not choose assignees. Those estates were, no doubt, very small, generally speaking, a large number of them being only from £200 to £300. Nevertheless, some provision ought to be made for such cases. I think, also, that in only about 56 per cent of the country cases have the creditors appointed assignees. I do not propose to create any new office for this purpose, or indeed to create a new office of any kind under the Bill. There will be a necessity for one or perhaps two provisional trustees, in regard to cases in which the creditors will not take the trouble to act for themselves, in whom, also, the property of all insolvents will be vested between the time of adjudication of bankruptcy and the appointment of a trustee. The registrars of the County Courts will perform the func- tions of the provisional trustees in their several districts, and one will probably suffice in the metropolis for all purposes of a provisional character. By a separate Bill I propose to abolish imprisonment for debt, except in cases of gross fraud and outrage. I propose as a consequence of this to extend the operation of the Small Debts Act from £20 to £50. I apprehend that the abolition of imprisonment for debt will greatly reduce the number of bankruptcies, inasmuch as there are at present a large number of cases in which there are no estates where men become bankrupts merely to escape imprisonment or to get out of prison. By placing the estate in the hands of trustees to be chosen by the creditors, the business of the Bankruptcy Court will be considerably diminished. The debts will be proved before the trustees, who will arrange the dividend: in cases of disputed debt only a question I would arise for the interposition of the I Judge or Commissioner. Indeed, the business of the Court will be reduced to these main points—namely, that of adjudication, or of determining whether the insolvent has brought himself within the operation of the bankrupt law; the examination of the bankrupt; the admission to proof of disputed debts; the question of the bankrupt's discharge, and the determination of questions arising under arrangement deeds. There must be opportunity given to creditors to challenge those deeds if they should I be so disposed, and therefore the matter must be examined before a competent tribunal. That being the amount and character of the business to be done, the next question is, what is the best tribunal for the settlement of these questions? It docs appear to me that the business to be disposed of will require to be done in local courts spread throughout the country. It appears to me that the business of this kind—subject, of course, to appeal—may; be well done by the County Courts in London and the country. It may be quite right also to have Commissioners or Judges in London. I see, however, no reason why the County Courts in the metropolis may not have jurisdiction; and I think it desirable that one or more Commissioners in London should have jurisdiction over the whole of England. Their functions will be the same as the Judges of the county courts in bankruptcy. The system will then be as analogous as possible to that of Scotland, where sequestration can be taken out in the Sheriff's Courts all over the country, limited to their respective jurisdictions, and also in the Court of Session for the whole of Scotland. It is desirable that there should be one settled and complete system of local courts. I believe the County Courts are sufficient for all local purposes. There will be no new appointment of district Commissioners. There should not be district courts especially for settling questions between debtor and creditor, district courts for bankruptcy, and district courts for the Admiralty, but there should be one good set of local courts, and if the County Courts are not sufficient for the purpose, they should be made so. I do not propose, therefore, any new appointment of district Commissioners, although it will be convenient to continue existing Commissioners. The whole business of the Bankruptcy Courts will under this Bill be done by local courts, and the Judges in London will act in bankruptcy in the same way as County Court Judges, but their jurisdiction will extend over the whole of England. This departs to some extent from the system proposed by the Committee of 1865, which recommended— That there should be established a Court of Bankruptcy in the metropolis, and the Judges of the Superior Courts of Equity and Common Law should sit as Judges in that court. That there should be an appeal to the Court of Bankruptcy from all orders of a County Court, or of a single Judge in the metropolis, relating to matters above the value of £20, and from all other orders when the court or Judge shall allow a special case for appeal. I am at a loss to conceive how that could be carried into effect. A court composed of Judges of law and equity to sit in bankruptcy would disturb the business of all the courts in the kingdom, and there would be great difficulty in getting the Judges together for this purpose. I am at a loss, also, to conceive what we want with a Court of Bankruptcy in London thus constituted, or, indeed, any court apart from the London Commissioners or Judges, with an appeal to a competent court. The Commissioners or Judges in London would have the whole jurisdiction in bankruptcy, extending over the whole of England, in which they would find important, and I believe ample judicial labour, and which they would ably discharge. I believe, as it now stands, you have the most satisfactory appellate court that could be made, the appeal to the Court of Chancery, I admit that that court is overworked; but I am not proposing to throw additional work upon that court. The appeals in bankruptcy now occupy, it may be, one day a week, and the House would surely not constitute a new court to do business that would only occupy one day a week, and I think that we should leave the Court of Appeal as it now stands. Of course, there is a great change going on in reference to winding-up public companies, and this creates business so vast, that if it continues it may be necessary to constitute some new tribunal. But at present, in considering the nature and character of the business to be transacted, I think that a great portion of business will be taken off the hands of the Court of Bankruptcy by the whole estate being put into the hands of the creditors. Another great part of the business is to be transacted by the registrars, and what remains afterwards will be most satisfactorily discharged by the County Court Judges with Commissioners or Judges in London, who will, however, have a jurisdiction over the whole of England. There is another point of considerable importance. In one of the recent Acts, power is given to the debtor to make himself bankrupt at his own option. At first it was done without any condition, afterwards upon the condition that the bankrupt should show 5s. in the pound. Last year it was proposed to take away the power of voluntary bankruptcy altogether. No doubt the voluntary power was open to abuse, but it was extremely useful in some cases. It will sometimes happen to the honest debtor that to distribute his property fairly he should have the power to prevent any one creditor from having execution against the whole of his property, and I think that this may be done in some such mode as this. Let the debtor petition the Court of Bankruptcy, and upon his petition let his property be protected from execution, and then let the creditors be called together and determine whether he shall be allowed to make himself a bankrupt or not. Then as to those arrangement clauses, which now enable the creditors to take the estate out of bankruptcy, leaving the debtor subject to the bankruptcy law, and the other clauses which take the whole affair out of bankruptcy. These work very well, and I do not propose to alter them. As to the arrangement clauses for preventing the affair going into bankruptcy at all, I have given great attention to this part of the subject, and I hope that part of the law may be considerably improved, If you take the estate out of the debtor and vest it in a provisional trustee, the moment he proposes to arrange with his creditors, he will not come to any such arrangement. His object is to continue his business, and if you take his estate out of him, and also say that no one shall be deemed a creditor until he proves his debt before the court, it would interpose such difficulty that there would be no arrangements at all. On the other hand, there is difficulty in allowing the debtor to make out his own list of creditors, for by so doing he is enabled to commit gross frauds on his bonâ fide creditors. Of course the object is to find some middle course, and what I propose is to this effect: that the debtor shall file a deed within a given number of days, after its execution, six or seven days, in the court having jurisdiction over him in the matter of bankruptcy, and that at the same time that he should file with that deed a list of his debts, and an account of his property, and that the fact of filing shall forthwith be gazetted. The deed is to be deemed completely executed when it is assented to by a majority in number and three-fourths in value of the creditors. Of course, it will be for the House to consider whether this shall be the proportion; but if provision is offered for the creditors satisfying themselves as to the fairness of the arrangement, I think that three-fourths in value will be sufficient. Creditors who are secured must deduct their securities from their debts before they are comprised in the list of consenting creditors. Such a deed when executed can now be challenged in any court in the kingdom; but I propose to remedy that by providing that the Court of Bankruptcy shall within three months declare whether it is or is not completely executed, and whether it is or is not a valid deed. There will be every opportunity of challenging the deed if there be anything wrong in it within the period of three mouths; but it must be challenged in the court where it is filed, and the numerous actions arising in the other courts upon such deeds will thus be put an end to. This, I think, will remove all the objections that now exist to these arrangements by deed; and, if so, I think that we shall have gone a long way in accomplishing an object admitted on all hands to be desirable. Then, as to the discharge of the bankrupt. Hero I admit that there is very great difficulty. The old system looks, at first sight, very plausible; that the bankrupt should be discharged if the Commissioner sees no reason to say that he had not conformed to the law, provided that his creditors assented. But it is impossible to go back to that; it has been, as I have said, found very vague and unsatisfactory, and it is equally difficult to define the particular offences for which certificates should be refused. It is, no doubt, quite right to say that if a bankrupt has got into debt fraudulently he should not have his certificate; but beyond that I find it very difficult to say upon what special grounds the certificate should be refused. The Committee of 1865 recommended that wherever a bankrupt had made a full disclosure and surrender of all his property, and paid 6s. 8d. in the pound to his creditors, he should be free from all claims capable of proof in bankruptcy; and in all other cases where there was a full disclosure and surrender he should be free from all such claims after the expiration of six years from the adjudication. I have had very many objections made to me as to this proposed mode of granting these discharges. A man, it is said, is getting into difficulties, he finds he can pay 4s. or 5s. in the pound, he has credit, and he sees that if he can get some £300 or £400 worth of goods more, or, if he be in a larger way of business, some £3,000 or £4,000 worth, he will be able to pay 6s. 8d. in the pound. Now, gentlemen of experience assure me that a man in this position will very commonly resort to the practice of contracting further debts of this kind. And now the question is what are we to do? If he does not pay 6s. 8d. in the pound he has to wait six years. I know of no way of safely making the payment of 6s. 8d. in the pound a condition of obtaining the certificate, unless to say that in no case shall he have his certificate for less than twelve months, and not then unless he pays 6s. 8d. But this would not be satisfactory, nor is it satisfactory, to say that, as a matter of course, merely because he conforms to the bankruptcy law, he shall be entitled at once to his discharge. I think there is no alternative but to resort to the principle of the Insolvent Debtors' Act—that is, to make his future property liable at the discretion of the Court to his past debts, and let him have his discharge at once. I would not leave the discharge to the discretion of the Judge, except in cases of direct violation of the Bankruptcy Act; in all other cases I would say, "Unless you pay 10s. in the pound your future property shall be liable, subject to the payment, in the first place, of your future debts, until you make up a dividend of 10s. in the pound," or such other sum as may be thought proper. If the matter were I new, if we had not proceeded on a contrary principle of legislation for three or four centuries, I think we might have gone farther than that. The basis of all legislation on the subject of debtor and creditor should be to insure the performance of the contract. In all such legislation the remedy should be cognate with the contract, but it is not so if you propose to imprison the debtor. He has contracted to pay money for money's worth; to imprison him does not necessarily tend to the performance of that contract; to provide that if at any time he has the means of paying he shall pay, does tend directly to insure its performance; and if I do not propose to make him do so to the full, it is because we have legislated on a contrary principle for so long a time. These are the principal outlines of the Bill. The subject is a very large one, and grows under one's hand, the details are so numerous. My hon. and learned Friend the Member for Richmond (Sir Roundell Palmer), whose absence to-night I very much regret, has placed at my disposal all the communications he has received and all his papers upon the subject, and, of course, I have derived great assistance from them. At the same time, there are one or two points on which I have not followed his Bill, especially with regard to the discharge of the bankrupt. I have also had the example of what is done in Scotland. I have had every facility that any one could have in framing my Bill, and it is my fault if it be not a good one. Of course, there are a great many difficulties in the subject—in point of detail, it is extremely hard to realize everything that is desirable; but when hon. Members have the Bill in their hands, as I hope they will in a very short time, I trust it will be found a satisfactory basis for legislation of a permanent character, and not merely one of a series of attempts at legislation, destined in its turn to be shortly swept away by some new measure. Sir, I beg to move for leave to bring in the Bill.

Motion made, and Question proposed, That leave be given to bring in a Bill to consolidate and amend the Acts relating to Bankruptcy in England.


said, that having been a Member of the Select Committee of 1865, and as representing a commercial community, he wished to say that he had listened to the able statement of the hon. and learned Gentleman with a great deal of pleasure. Without being as yet able to judge of the Bill as a whole, he thought that the commercial world would be satisfied with many of the proposals contained in it. The questions connected with bankruptcy fell under two heads—questions of principle and questions of administration. The former related to all matters connected with the discharge and punishment of the debtor, and to such matters as whether a majority of creditors should bind a minority and so on. The question of administration was a subordinate one, which had reference chiefly to the mode in which the assets should be collected and distributed, and to the best kind of tribunal for that purpose. The hon. and learned Gentleman had truly said that the chief element in a bankruptcy law was a just distribution of the assets; but he thought it would be admitted that at the bottom of the whole system was the question of discharge and the future liability of the property of the bankrupt. The hon. and learned Gentleman had stated that he had abandoned the recommendation of the Select Committee of 1858; that the discharge of the bankrupt should only be granted after a payment of a dividend of 6s. 8d. in the pound; and that the bankrupt should remain without his discharge for a period of six years, if the dividend did not reach that figure. He was glad that the hon. and learned Gentleman had abandoned those suggestions. Great difficulties surrounded them, and he did not think that they had met with the favour of the commercial world. He was aware of the objection alluded to by the hon. and learned Gentleman, of the debtor going on, after he was practically insolvent, in the hope of reaching a 6s. 8d. dividend, but that was not the chief objection to the system. The idea of the Committee was, that unless it was made to be the interest of the debtor to pay a certain dividend he would go on trading to the last, and would by so doing swallow up all his assets. It was that consideration that induced the Committee to recommend that his discharge should have relation to a dividend of 6s. 8d. But very often the value of a trader's assets underwent violent fluctuations, from causes beyond his control, and was lessened thereby much more than it would be by a long course of injudicious trading. A crisis like that of last year might render the assets unequal to the payment of a dividend of 6s. 8d,, and that from no fault of the bankrupt, as the blame might be much less than in cases occurring at ordinary times yielding 15s. That criterion, therefore, could not be considered a safe one, though it was difficult to find a better. With regard to the question of the liability of the future property of the debtor, he agreed with the Attorney General that, on public grounds, it would be unadvisable to impede the future progress of a man who had become bankrupt by making him, at all periods of his life, subject to the claims of his original creditors. At the same time, great scandal was unquestionably occasioned when it happened that a man rose to great wealth, and yet failed to pay his creditors a single halfpenny of what he owed them under a previous bankruptcy. Under the Insolvent Debtors' Act the money that a man, under such circumstances, acquired, by bequest or inheritance, was made liable; that which he earned was exclusively his own—a distinction which seemed to him to be a reasonable and proper one. The plan sketched out by the Attorney General might contain the elements of a successful settlement of this question; but until the Bill was before the House it was impossible to express an definite opinion on the point. It was wise to place a bankrupt not at the discretion of individual creditors, but at that of the court, and to make only a portion of his future property liable for his former debts. He was glad that the hon. and learned Gentleman had adopted the plan of placing the administration of the assets of a bankrupt in the hands of the creditors as far as possible; and he was glad also that he proposed to remove the punishment of the debtors, in cases where punishment was due, altogether from the Bankruptcy Law, because at present it frequently happened that the creditors who desired to punish a fraudulent debtor could only do it by wasting a portion of their assets in the prosecution of him. He would also say, in reference to another topic touched upon by the hon. and learned Gentleman, that there was a strong feeling among the mer- cantile classes in favour of the appointment of a Judge of the same rank and standing as the other Judges of the land, who should make these cases—like Admiralty and Divorce cases were—his exclusive department. He did not consider the Court of Chancery a satisfactory Court of Appeal for cases of mercantile bankruptcy; and he thought that the whole question of the tribunal would have to be carefully considered by the House in Committee on the Bill. With regard to the deeds of inspection and assignment, he could not but express the opinion that the system of winding-up under inspection had been a fertile source of every description of fraud, and that it generally meant only a winding-up under a friendly accountant or a friendly solicitor. It would be better, he thought, so to deal with the Court of Bankruptcy as to attract the estates of bankrupts to that court, rather than to encourage the making of deeds of inspection and assignment. As he had said, the creditors were, in his opinion, much better able to collect the assets than anybody else could be; but it was doubtful whether they were equally capable of distributing them equitably under deeds of inspection and assignment, and it might be well that the court should be held, in some degree, in terrorem over them, to take care that the distribution was just. The hon. and learned Gentleman had not alluded to the question of expense; but if the machinery he proposed could be placed in the hands of the creditors, the great cost which now frightened people from having anything to do with the Court of Bankruptcy would, he hoped, be avoided. It was difficult to advance any opinion upon the Bill before it was in the hands of the House; but he thought that, while it would require important modifications in Committee, it contained many valuable suggestions, and many proposals which would be received with great satisfaction by the commercial world.


said, he considered that the Bill would meet with great approval on the part of all interested in it; but he should have been glad if the hon. and learned Gentleman had acted more boldly on the sound principles contained in the latter part of his speech, and if he would explain more distinctly how he proposed to deal with the 600 gentlemen, or thereabouts, who made themselves bankrupts every year, who paid not a-farthing in the pound, and always obtained their discharge. He should also be glad to be informed what was for the future to constitute an act of bankruptcy—whether it was to be involved in the present difficulties that surrounded it, or to consist of some simple act about which no doubt could exist. There were 8,100 bankrupts last year. Of these 170 had paid 10s. and upwards in the pound; 600 paid nothing at all. As a rule it might be said that when a trader was only able to pay 2s. in the pound he must have known for some time that his affairs had not been in a solvent state. When a man became unfortunate the most advantageous method for himself and his creditors was to settle his affairs by a composition deed, for he could better manage his estate for himself and his creditors than any one could do it for him. Of 1,210 compositions 127 paid more than 10s. That showed that the method of composition was the most satisfactory settlement for the creditor. The bankruptcy laws afforded facilities for every kind of fraud, for if the creditors would not accept a composition the man could at once take the benefit of the Act. He believed the present Bill would to some degree obviate the evils of the present system; but he could not entertain the hope that it would effect any material improvement. He hoped the hon. and learned Gentleman would give the matter further consideration, and that some modifications of its provisions would be introduced in Committee.


said, he thought that two or three Resolutions which he submitted to the Committee upstairs had not received from the Attorney General the justice to which they were entitled. One was a proposition that imprisonment for debt should be abolished, instead of which the Attorney General was going to aggravate imprisonment for debt and make it more unjust to numerically the larger portion of Her Majesty's subjects, who had not the advantage of getting into debt to the extent of £20. At present the humbler classes were brought before local courts, were ordered to pay money, and in default were imprisoned again and again, so that in some cases they were kept in prison for two years, while those who owed debts above £20 were waited upon by an officer of the court and invited to go out of prison. The Attorney General now proposed to enlarge the power of imprisonment for debts to £50. He hoped the House would put the poorer classes of society on the same footing as the richer who incurred debts to a larger amount. The next point in the Resolutions of the Committee was, as to what constituted an act of bankruptcy, and the Committee recommended that it should be so simple that it could not become the subject of litigation. They intended bankruptcy to be a substitution for imprisonment for debt—that it should be a formal sort of proceeding, a mere record of the fact—having the effect of transferring the man's property to his creditors. The principle involved in that Resolution was that the legal settlement was to be formal, and that the substantial element was to be commercial, so that the administration of the bankrupt's estate would be the carrying on or winding-up of the business in the ordinary way. The Committee thought that the creditors were the best persons to look after the property. With regard to the Attorney General's method of dealing with the bankrupt, it was the only one that could be adopted—namely, that all his future acquired property should be made available to discharge the debts contracted under the bankruptcy. When the Act of 1860 was under discussion he himself succeeded in introducing into it a provision making the future acquired property of traders, under certain conditions, liable for their past debts; but he believed that in the Bankruptcy Court that provision had hardly ever been put in force. He was glad that the Attorney General had now adopted that principle; but he would ask him whether there was to be no limit of time fixed as to its operation, or whether it was to apply during the whole of the bankrupt's life? If there were no limit it would not be satisfactory. The Select Committee which sat on that subject having determined that the administration of bankruptcies should be a very simple matter, scarcely ever requiring the intervention of the judicial mind, they suggested that the County Courts should have a bankruptcy jurisdiction, but that there should be one court in London with that jurisdiction, though without a Judge specially appointed for it. In that one court the ordinary business of bankruptcies in the metropolis might be transacted; and the aid of the Judges of the land might easily be called in—as was the case in the Central Criminal Court—whenever any legal difficulty arose, or any matter about which there was contention by counsel. The Resolutions of the Committee were not so chimercial or impracticable as the Attorney General seemed to imagine. With regard to deeds of composition, they were very often a cover for fraud and a contrivance of lawyers and others for plundering the bankrupt's estate and cheating the creditors. If the Bill were properly framed those deeds would be rendered wholly unnecessary. The law ought to be extremely comprehensive, giving the greatest power to the creditors for regulating the mode of dealing with the assets, but not enabling them to discharge the debtor from liability to the creditor without the latter's consent—which he thought monstrous. He was glad that the Attorney General had taken up that subject, and believed that he would receive every assistance from that (the Opposition) side of the House in passing his measure in a satisfactory shape.


said, he wished to express his sincere gratification at the attempt of the learned Attorney General to introduce a sound principle into the bankruptcy law of this country, by making the future acquired property of the bankrupt liable for his previous debts. That House would, he thought, be only performing one of its clearest duties by doing something to correct the lax commercial morality of the present age. He knew of nothing which would be likely to cast a greater gloom over our commercial prestige than if one were to go into our large towns, the centres of our industry, and make out a list of all the men living extravagantly who, having failed, had not had the honour or honesty to pay their past debts. The hon. and learned Gentleman, if he could introduce some amendment of the law calculated to alter that state of things, would in his opinion richly deserve the gratitude of his country.


said, he thought the measure which the Attorney General had submitted to the notice of the House was one which was likely to be productive of great advantage in dealing with a very difficult question. He wished, however, to observe that he had not heard the hon. and learned Gentleman make any allusion in the course of his statement to the taxation of the bills of costs of solicitors and assignees in bankruptcy. Unless that taxation was taken out of the hands of local officers and placed in the hands of officers entirely removed from local influences, the hon. and learned Gentleman's meritorious labours would fail to produce their due effect. He suggested the appointment of an accountant in bankruptcy. It had worked most successfully in the Scotch measure of 1856.


said, he thought that many of the clauses of the Bill would operate very usefully. Much scandal arose from the fact that so many persons became bankrupts and again set up immediately in business—living extravagantly and without the slightest wish apparently to pay their just debts. He knew thousands of instances in which that had been done, and he was of opinion that in all cases in which a man failed to pay what was justly and lawfully due from him, he should have some penalty imposed upon him, such as that he should not be permitted to enter into business afresh to repeat perhaps the same conduct. If that were done we should not have one quarter of the bankrupts we now had. The present position of the bankruptcy laws was a disgrace to the country. What they wanted was an administration of the law which would be easy, cheap, and speedy; and no doubt the Bill would tend to that end.


said, he thought the Attorney General had done rightly in departing from some of the Resolutions of the Committee. He approved of the Bill. Much had been said about the facilities offered for, and the frauds which had been committed under, deeds of composition and deeds of assignment. Those frauds, he believed, had been chiefly occasioned by the departure, in 1862, from the principle enacted in 1859, that all those deeds should come under the supervision of the Court of Bankruptcy, and that the court should determine in every case whether it was a proper case for composition. At present those deeds never went before any court, and there was no tribunal to which a creditor could go to prevent a bankrupt from entering into a composition to defraud creditors of their just rights. He approved of the suggestion for having a special court of jurisdiction in London for bankrupts, and he thought the appeal cases could go very well as they did at present—to the Lords Justices.


said, that the objection to utilizing the local County Courts, which was alleged to exist in London, did not prevail in the provinces, which would be glad to obtain through them a ready and cheap access to justice. Their jurisdiction might be extended, if the Judges were adequately remunerated, and that extension would relieve the Superior Courts of much business. Three months was too long to allow a deed to remain open, and it might be closed in one or two months upon due notice being given. The winding-up of the estates of deceased insolvents had not been mentioned. He hoped it had not been lost sight of.


said, it was of unquestionable importance to encourage commerce, but it was equally important to avoid encouraging rash speculation which proceeded upon the calculation, "If I succeed the profit is mine; if I fail the loss is my creditors." The question of what acts constitute a bankruptcy was not referred to at all in the Report of the Committee; but there were, of course, many tests of bankruptcy, such as a debtor's declaration of insolvency, a trader-debtor summons, and the failure to pay a debt or to give security. He did not admit that the Bill aggravated the law of imprisonment for debt; but he would not release a debtor from attachment made by a court of competent jurisdiction after due consideration of the circumstances of his indebtedness, for there were cases in which it would not be right to abolish imprisonment for debt. The expenses which had been referred to by his right hon. Friend the Member for Edinburgh could only be regulated by taxation; but the services of an accountant might be dispensed with. The estates of deceased insolvents were administered so cheaply, and, indeed, were so wholly a matter of administration in the Chambers of the Vice Chancellor, and so far removed from the jurisdiction of counsel and of courts, that he knew little about them, but he believed that new provisions were scarcely necessary. He would consider the remarks that had been made, and do all he could to give effect to the views of hon. Members.

Motion agreed to.

Bill ordered to be brought in by Mr. ATTORNEY GENERAL, Mr. Secretary WALPOLE, and Mr. SOLICITOR GENERAL.

Bill presented, and read the first time. [Bill 74.]

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