THE ATTORNEY GENERAL
, in rising to move for leave to introduce a Bill to consolidate and amend the Law of Bankruptcy, said, that whatever might be the successes of modern legislation, among them could not be reckoned the attempts to legislate in respect to bankruptcy. More than sixty years ago Lord Eldon, speaking of the then Bankruptcy Law, said, that in a number of cases its provisions were little more than stock-in-trade for Commissioners, assignees, and other officials, and the present Bankruptcy Law had been spoken of in terms of condemnation no less strong by the highest legal authorities in both Houses, and by the most eminent commercial men. The failure to deal successfully with this question had not arisen from want of attempts, for the Legislature, for the last half-century, had been almost constantly passing Bankruptcy Bills. There was one passed in 1825, and others again were passed in 1826, 1831, 1842, 1844, 1849, and 1861; and yet, notwithstanding all that legislative activity, it might fairly be questioned whether the Bankruptcy Law at the present moment was in a more satisfactory state than in Lord Eldon's time. Indeed, it might be questioned whether in some respects it was not worse. These considerations led to the conclusion that a sufficient remedy was not to be sought in a mere alteration of details. The time for patching up the Bankruptcy Law had passed. They must now go to the very root of the matter, and reform the system altogether. In recent times much thought and attention had been devoted to the subject. In 1863 a Committee of that House was appointed, consisting of men eminently qualified to deal with the question. That Committee took a great deal of evidence, and reported in 1864. The Report contained a number of va- 777 luable suggestions, some of which must form the basis of any satisfactory bankruptcy measure. In consequence of that Report several Bankruptcy Bills were introduced into both Houses of Parliament. In 1866 a Bankruptcy Bill was introduced by the hon. and learned Member for Richmond (Sir Roundell Palmer), at that time Attorney General, and in the following year another Bankruptcy Bill was brought in by Sir John Rolt, then holding the same office. Last year a Bankruptcy Bill, containing 500 clauses, was introduced by Lord Cairns in the other House, but from causes over which their authors had no control, all these Bills experienced an untimely fate. But, though none of them passed the Legislature, they had greatly facilitated the amendment of the Bankruptcy Law, inasmuch as each of them contained a number of valuable provisions, Therefore, the task he now desired the House to enter upon was rendered comparatively easy, though he did not disguise from himself that many difficulties still remained. In dealing with this question it was necessary to recur to first principles, and they had to ask themselves what was the object of a Bankruptcy Law. It appeared to him that the object could be stated in a few words. The object was to collect the proceeds of the estates of bankrupts, and to distribute them among the creditors as fairly, cheaply, and speedily as possible. That appeared to be the sole object of a Bankruptcy Law, and by attempting to do more they had done less. Previous legislation had departed from that simple principle, and had so far done wrong. From the earliest time of the Bankruptcy Law—that of Henry VIII.—until a comparatively recent period, I the main object of the law had been to punish the bankrupt, who was denied his discharge upon any terms, and was treated more as a fraudulent than an ordinary debtor, or rather as a quasi criminal—and, indeed, at one time, a law was in force whereby, if he had not been able to prove that he had incurred his debts honestly, he was put in the pillory and had his ears cut off; but in later times a reaction had occurred too much in favour of the bankrupt, and judging from the effects of recent Bankruptcy Laws their object seemed to have been to protect the bankrupt against the creditor, to enable him to get rid of his 778 debts and liabilities with the least possible trouble or annoyance to himself, to facilitate him in defrauding those to whom he was indebted, and in setting them at defiance; and a witness before a Committee declared that many debtors appeared to think it a duty to their families to take the benefit of the Bankruptcy Law once in seven years. It was right that the House should bear in mind the principal evils of the present system. One of these appeared to be that the Commissioners who administered the affairs of bankruptcy—he alluded principally to those of the principal court of London—though undoubtedly able men and faithful public servants, had failed to obtain the confidence of the public. This arose from various reasons. One was the defective state of the law, which mixed up judicial with administrative functions, which ought to be kept separate. Another reason was that their decisions were not uniform, and, consequently, the result was much uncertainty in the law. Again, they had exercised no sufficient control over their subordinate officers, and scandals had arisen among officials of the bankruptcy courts which were totally unknown in other courts. Then, again, the bankruptcy courts were overloaded by worse than useless officials who have helped to devour bankrupts estates, and the result was that there had been much delay and negligence in collecting the effects of bankrupts, that those effects had been in many cases divided unequally, that in other cases in minute portions and after a long delay. The collection and distribution had been enormously expensive, and the public for these reasons dreaded the Court of Bankruptcy, and creditors were ready to agree to anything in order to avoid that tribunal. Such had been the dread of the Court of Bankruptcy that debtors had held it in terrorem over the heads of their creditors in order to force them into unfair compositions. The necessity for bankruptcy reform was universally admitted; but he would quote one or two figures to illustrate what he had said. The Returns for 1867 showed the total number of adjudications in bankruptcy was 8,994, of which 6,533 were made on the petition of the bankrupt himself. Further, out of these 8,994 cases, there were 5,876 in which, no dividend whatever was 779 paid, and in half of the 1,649 cases in which a dividend was paid that dividend amounted to less than 2s. 6d. in the pound. Exact information as to the cost of collecting and distributing assets was very difficult to obtain; the most favourable estimate he had heard was 33 per cent, but he was inclined to think that that was far too favourable. In the evidence before the Committee of 1864 of Mr. Clarke, the accountant, this is reported—I see by the account that in respect of the sum of £489,911 paid in dividends there have been incurred expenses amounting to £157,299, and in addition all the expenses of the Court, £126,213?—Yes. Making altogether £283,512?—Yes.That was nearly 60 per cent. Referring to a speech of his hon. and learned Friend the Member for Richmond (Sir Roundell Palmer), in introducing his Bankruptcy Bill in 1866, he found this statement with reference to 1865—The total assets realized amounted to £856,955 9s. 8d. It was estimated by good authority that, including all costs, no less than £370,000 odd was expended in collecting and distributing that £856,955; while the whole amount of the dividends was only £434,952 12s. 10d., so that the expenses of collection and distribution amounted to 75 per cent on the sum divided."—[3 Hansard, clxxxiii. 689.]In some cases the expense was even greater; one case had come to his knowledge in which £244 had been spent in collecting £66; and this, he believed, was but one of a great number. Having said sufficient to account for the general dissatisfaction with the present law, he would address himself to the remedy. But before he proceeded to the subject of bankruptcy proper, it was necessary to deal with a preliminary question of much importance—namely, the subject of imprisonment for debt: the weight of authority on this subject was overwhelming. The abolition of imprisonment for debt had been recommended by a Royal Commission in 1832, by the Bankruptcy Commissioners in 1842, and by a Committee of the House of Commons in 1864; each of the Bills also introduced in consequence of the Report of that Select Committee had proposed the abolition of imprisonment for debt. As for the principle of imprisonment for debt, if imprisonment was to be treated as a punishment, it was unjust, because it confounded the innocent with the guilty; if it were treated as a remedy, recent le- 780 gislation had made it quite ineffectual. An imprisoned debtor could immediately appeal to the court and obtain a discharge, and in the case of debtors who did not appeal the Registrar attended periodically and released them whether they willed it or not. To revert to the old system was impossible; nothing remained to be done but to abolish imprisonment for debt altogether. But there was one exception to be made to this, and that had reference to the powers of the County Court Judges, who had power to imprison in cases where a debtor had means and refused to pay, or where he had contracted a debt fraudulently. He confessed he desired the abolishment of this power also, but did not see his way clear to doing so, because almost all the County Court Judges were of opinion that if they were deprived of this power the efficiency of the County Court system would be destroyed. The Government, however, had decided to modify the law in this respect by providing that no warrant for imprisonment should be granted except by the Judge in open court, for there was reason to suppose some loose practice had been carried on in the way of committing persons to prison without sufficient evidence; and that the County Court Judges should make a Return to Parliament every year of the number of committals made, that the system might be amended if it was found to work ill. He should be glad to hear this matter discussed, and especially glad if it could be shown that it would be safe to abolish the exceptional power he referred to altogether. He proposed to deal with the question of abolishing imprisonment for debt by a separate Bill, to be introduced a few days hence; the present Bill would refer only to bankruptcy. The evidence taken before the Committee established distinctly two things. First, that the English system of bankruptcy had substantially failed; and, secondly, that the Scotch system of bankruptcy had substantially succeeded. The conclusion naturally pointed to the adoption of the Scotch system, which had been more or less adopted by every Bill based upon the Report of the Commissioners; but the Bill he was now asking leave to introduce adopted the Scotch system more nearly and completely than any Bill hitherto submitted to Parliament. The great merit of the Scotch, system 781 was its simplicity; the absence of officialism; allowing the creditors to administer the estates in bankruptcy by themselves, and in their own way without interference and with only the necessary supervision of the court, and the separation of the administrative and judicial functions. Those were the principles the Government proposed to adopt in the Bill he was about to introduce, and he would proceed to state in what manner they would work. The first thing they proposed was, when a man committed certain specified acts of bankruptcy, or being called on to pay a debt, he did not come into court and deny it on his oath, nor pay it, he should be adjudicated a bankrupt, and then his creditors would be called together. A preliminary proof of debts would be taken before the Registrar, in order to determine the right of creditors to vote at that meeting. There would then be three courses open to the creditors—They could accept a composition, and then there was an end of the bankruptcy; they could, if they pleased, agree to a deed of arrangement—and there would be provisions in the Bill whereby the Judge of the Bankruptcy Court would finally determine the validity of all such deeds, so that they might not be contested, as they frequently were in other courts—or the creditors might, if they chose, proceed in bankruptcy. If they did proceed in bankruptcy they would elect a trustee. Now, that trustee was not to be an official of the court; he might be anybody whomsoever they might select. Their choice was absolutely unfettered. They would select their own trustee and decide on the terms of his remuneration. That was essentially the Scotch system. In Scotland the effect of the system had been to call into existence a number of persons who made the office of trusteeship a kind of profession, and they succeeded in proportion to their diligence, capability, and trustworthiness. If a trustee did not manage an estate well, and only realized small dividends, he would not get much employment. It was in this as in other professions. The effect of a similar law in this country would, he believed, be to create a similar profession, so that there would be no difficulty in the way of creditors in the choice of able and efficient trustees. The trustee would receive proof of debts, and would determine thereon subject to 782 an appeal to the Judge. He would proceed to realize the estate, to declare dividends, and generally to wind-up the estate. But he would be subject to certain checks and control. One check would be this—The creditors would elect some of their number—in Scotland they were called commissioners, here they would be called inspectors, but the name signifies little—who would keep a watch and exercise some supervision over the trustee: further, his accounts would be audited by the accountant in bankruptcy, and the whole system would be superintended by the Judge. In certain cases where, upon the application of a creditor, the stop seemed to be necessary, power was given to appoint a receiver before the appointment of a trustee, and the Judge would have authority in particular circumstances, if he saw there were no dividends to be realized, to supersede the bankruptcy. Such was an outline of the system they proposed to establish, which he believed was almost entirely in accordance with the Scotch system. In all discussions on Bankruptcy Law certain cardinal questions arose with respect to which he might be fairly asked what course it was proposed to take. One of those questions was, whether or not they should allow a debtor to make himself bankrupt on his own petition. He answered that they did not propose that he should. As long as imprisonment for debt remained, it was but fair that a man should be able to release himself from imprisonment by an appeal to the Bankruptcy Court; but with the abolition of imprisonment for debt it appeared to him that the benefit of any such privilege should cease. Let it be borne in mind that the object of the Bankruptcy Law was not to benefit the bankrupt, but the creditors. It was for the fair distribution of the bankrupt's estate. Therefore, it seemed to the Government that the Bankruptcy Law should not be put in motion by the bankrupt himself, but at the suit of the creditor, and by that provision he believed they should at once get rid of a vast number of bankruptcies in which no dividend was made and by which the Court of Bankruptcy was incumbered. And here he might refer to figures before quoted in order to show that the greater number of bankruptcies, at present, were on the bankrupt's own petition, and scarcely in any of these was 783 any dividend taken. There was another question of very great importance, on which he was aware there was a great diversity of opinion, and that was as to the terms on which a bankrupt should be discharged—whether or not his after-acquired property should be liable to his creditors. Now, it seemed to the Government that his after-acquired property should be liable for his debts, but liable only to a limited extent. Let them consider what was the contract to which a bankrupt was subject. It was to pay his creditors in full; and if they stepped in with the legislation for the relief of that contract they had a right to impose conditions and to insist that the after-acquired property should be liable to some extent. But if they made it liable to an unlimited extent and for an unlimited time, they would crush and paralyze the man and prevent him perhaps from ever succeeding in life. They therefore proposed a course between the two extremes—that the after-acquired property should be liable for a certain time—namely, for six years, unless he had paid a dividend to a certain amount, and that dividend was fixed at 10s. in the pound, subject of course to a certain alteration in the figures. It was provided that it should not be liable at the mere discretion, of creditors, but only upon an order in court; but at the same time any creditor would have the power of releasing his debt, and a large majority of creditors—five-sixths, he believed was the Scotch system—would be able to release the bankrupt altogether. He knew that the fixing of a certain dividend was a very vexed question. The main argument in its favour was this—that by fixing a dividend they encouraged the man to stop before his estate was dissipated, and it was most desirable to do so. It was sometimes suggested that bankrupts would obtain a great quantity of goods on credit for the purpose of swelling their dividends. That was an evil which would sometimes occur, but its possibility did not appear to outweigh the advantages of fixing a certain dividend. The proposition which he made on this point was in accordance with recommendations of the Committee of 1864, and with the authority of the hon. and learned Gentleman the Member for Richmond (Sir Roundell Palmer) as appeared by the Bill of 1866. Besides, he thought they would be able to meet the difficulty by 784 an increased stringency in the criminal law, and that brought him to another part of the subject. It appeared to the Government that the Committee were right when they recommended that the Court of Bankruptcy should not be a criminal court, but that it should be confined to the administration of the bankrupt's estate, and that whatever criminal offences a bankrupt might commit should be tried by the ordinary criminal tribunals. He believed it to be a sound principle, although they had departed from it in 1861, when they gave to the Court of Bankruptcy a sort of quasi criminal—as it were a censorial—jurisdiction. Power was given to the court to punish offences of a semi-legal, semi-commercial character—offences not against the law of the country, but against a certain undefinable code of commercial morality. For instance, a bankrupt was to be punished for living extravagantly, or entering into imprudent speculations. Now, it appeared to the Government that this censorial jurisdiction, which was admitted on all hands to have failed—he believed it had been scarcely ever exercised, or, if so, it had been exercised with no advantage—should be abolished, and there was a general concurrence of opinion to that effect. They gave the Court of Bankruptcy all the powers necessary to deal with the estate of the bankrupt, and to enforce discovery; but they gave the criminal tribunals all the power to deal with any offence he may have committed against the law. They repealed an Act, the wisdom of which he never could see, which prevented the magistrates of quarter sessions from trying offences against the Bankruptcy Act, so that while they took from the Court of Bankruptcy its criminal jurisdiction they rendered more stringent the criminal law. The question was still under the consideration of the Government, but they hoped to submit the House clauses by which offences against the Bankruptcy Law would be clearly defined. He proposed to enact in this Bill the substance of some of the clauses of Lord Cairns' Bill of last year, which were to this effect—Certain acts of the bankrupt—such, for example, as concealing goods or destroying or mutilating books—were made offences without the necessity of proof of intent. As the law now stood, they must prove, not only that the bankrupt did 785 that, but that he did it with intent to defraud, and it was often a very difficult thing to prove such an intent. The Bill proposed that certain acts should in themselves be held to be fraudulent, and to be offences, unless the bankrupt himself showed that they had been done innocently. Although that was, he admitted, to some extent exceptional legislation, he believed it would be effective. But as those provisions would probably come better in a separate Bill, he proposed to bring in another measure, the title of which would be, "A Bill to abolish Imprisonment for Debt and to punish Fraudulent Debtors." There was another matter cognate to that to which he would now refer. Complaints had been made that bankrupts by settlements and postnuptial settlements frequently contrived to cheat their creditors. As the law now stood there was great difficulty in upsetting those settlements, because they had to prove—which it was often far from easy to do—that bankrupts at the time they made them were actually insolvent. He proposed, therefore, that all post-nuptial settlements which should be followed by bankruptcy within two years should be absolutely void, unless the bankrupts could prove affirmatively that they were solvent when they made them. The next question—and it was a very important one—was by whom was the law to be administered?—for the best law, unless well administered, will fail. In the country he proposed that the law should be administered by a County Court Judge, subject to the continuance of the bankruptcy districts as long as the present district Commissioners held their offices, after which time they would be absorbed into the County Courts. He now came to the court in London, which would comprise several County Court districts in itself. It had appeared to the Government desirable that the new system should be set in motion and superintended by a superior Judge of the highest authority. He wished to speak with no disrespect of the present Bankruptcy Commissioners; on the contrary, for many of them he had the highest esteem. Still, he thought it almost impossible that those gentlemen, some of whom were advanced in years, and who had been long accustomed to the present system, could be expected to inaugurate the new system with sufficient energy and authority. It was 786 therefore deemed advisable that a superior Judge should be appointed, and accordingly it was proposed that Her Majesty should have power to appoint one of the Judges of the Superior Courts of Common Law. The Government were in hopes that no addition to the number of Judges would be necessary, for although the whole number—namely, eighteen—were now occupied, three of them being engaged in trying election petitions, yet the present labours of those three, it was to be hoped, would be soon over; and it was also to be hoped that for some years there would be very few election petitions for them to try, in which case they would be relieved of a great portion of that work, and might be better able to attend to the bankruptcy business. At the same time, as the Government had no wish to impose duties too onerous on the Common Law Judges, there would be power given by the Bill to appoint another Judge, if necessary. The functions of the Judge would be these—He would have to frame, with the concurrence of the Lord Chancellor, rules and regulations for the purpose of regulating the practice in the local courts and in his own court. The Government desired to leave as much scope as possible for rules and regulations, and not attempt to legislate for every conceivable case or point of practice, because if they did so their Bill must run to enormous length. It was far better to allow matters of procedure and detail to be settled by general orders, if they had confidence in their tribunal; and if they had not confidence in their tribunal, they ought not to intrust it with these functions at all. They had empowered the Judge of the Probate Court to frame such rules and regulations, and the system had there been found to work exceedingly well. Again, as to the Judges appointed for the trial of election petitions, Parliament had not attempted to fetter them by legislating for every point of practice, but had left them with the power of framing their own rules and regulations; they had set themselves most diligently to work for that purpose, and their rules and regulations answered very well. It was, therefore, proposed to give to the Lord Chancellor and the Judge in Bankruptcy the power of framing rules and regulations for determining the procedure of the Bankruptcy 787 Court. Of course, he would also exercise a supervision over all the officers of his court; and it was to be hoped that none of the fantastic tricks sometimes played by such officials would be again heard of. It was likewise proposed that there should be a power to remove, if necessary, cases of great importance and which would be somewhat too heavy for the County Courts to the court in London; and they further intended to give the Judge the power—and he thought it was a very important one—of summoning juries for the purpose of trying any bankruptcy cause which might arise. For example, sometimes a debtor, on being summoned to court, denied the debt and swore that he had a good defence; in which case the matter was sent to a Common Law Court, and a debtor, by obtaining a special jury, might frequently succeed in delaying the trial for a year. It was therefore proposed to give the Judge in Bankruptcy the power of summoning a jury and trying the question at once. They also proposed to empower the Judges of the Superior Courts of Common Law to send what he might call bankruptcy causes, such as fraudulent preference, and the like, to be tried in the Bankruptcy Court; and in that manner a great amount of relief would be given to what he might term the congestion of causes at Guildhall and Westminster. He now came to the question of appeals. They proposed that appeals should go to the court from which the Judge came, and that its decision should be final, except in cases where the court might think fit to grant a special case, or reserve special points for the House of Lords. Now, of course the plan which he had sketched would involve a certain amount of compensation to those whose services they proposed to dispense with; but he was happy to inform the House, from inquiries which he had made, that he believed the fund of the Bankruptcy Court would be more than sufficient to meet all the claims of that kind which would arise. He would only further say that the Bill which he had to lay before the House would be a Consolidation Bill, containing, he believed, the whole of the Bankruptcy Law, so that the man who held it in his hand would have all the information that was necessary without having to go back to previous statutes. It was also proposed to simplify the Bill as much as 788 possible. The Bill of last year contained upwards of 500 clauses; and another Bill for the abolition of imprisonment for debt contained sixty to seventy, making between the two about 600 clauses altogether. Now, he confessed he looked with dismay on the task of passing a measure of 600 clauses. The Government draftsman had therefore been instructed—and he would, no doubt, obey his instructions—to shorten and simplify as much as possible, and he believed that the measure which he would lay on the table would not be one-third of the length of that introduced last year. In conclusion, he could only thank the House for listening with so much patience to what had been necessarily a long and dry statement, but he had endeavoured to be as brief and as clear as he could. He would only say that the Government had been most anxious in framing the Bill to consult the wishes of the commercial classes, and had put themselves in communication with a number of the Chambers of Commerce throughout the country which represented a great amount of the opinion of those classes. They had received from those bodies a number of valuable suggestions, many of which they had adopted. He was not sanguine enough to suppose that the Bill was entirely without its defects; indeed, he looked forward to its being materially improved when it went before a Committee of the House. And of this he felt assured that the Government, in their attempt to deal with that important and difficult question would receive the candid consideration, and he believed he might say the co-operation of both sides of the House. The hon. and learned Gentleman concluded by moving for leave to bring in the Bill.
§ MR. NORWOOD
said, he had never heard so satisfactory an explanation of a measure for amendment of Bankruptcy Law as that which had just been made by the hon. and learned Gentleman, whom he might almost have imagined to be a commercial man with great experience of the abuses of the present system. Without attempting to go into details he might, he believed, say on the part of the mercantile community that the Bill would, as regards its main provisions, meet with their entire approval. The Scotch Law had worked well, and he was glad that its main principles would be embodied in 789 the Bill, and the more so as the question of assimilating the commercial laws of the United Kingdom was one of the highest importance. The Irish Bankruptcy Law was not satisfactory in the opinion of many Irish Members, and if that were so, he trusted it also would be assimilated to the present measure. With regard to many of the points just referred to there would doubtless be much variety of opinion in the commercial world; but with respect to the subject of post-nuptial settlements, he, for one, entirely concurred in what had fallen from the hon. and learned Gentleman. As to the question of the Judge, however, he confessed it was rather a difficult one. When the present law was enacted Lord Westbury desired that a Chief Judge should be appointed, but he was overruled, and this was certainly a matter which would require the calm and earnest consideration of the mercantile community. He agreed in the broad principle laid down by the Attorney General, that the chief object of Bankruptcy Law should be to enable the assets to be collected and distributed as quickly and as economically as possible. In conclusion, he expressed his opinion with the approval, he believed, of his mercantile friends around him, that this appeared to be one of the most satisfactory measures which had ever been presented to the House of Commons.
§ MR. BARNETT
said, he was anxious to offer his tribute of congratulation to the hon. and learned Gentleman for having introduced this Bill at so early a period of the Session, when there was time to bring it to a successful issue. The existing law had been felt by all persons engaged in trade to be a disgrace to our code for several years past. With regard to the details of the Bill, it would, of course, be premature to offer any remarks at present; but he cordially agreed with those provisions of it which proposed to assimilate the English with the Scotch system of bankruptcy, which, it was admitted on all sides, had worked well. He approved of the abolition of imprisonment, and that the future acquired property of a bankrupt should be made liable. It was desirable that bankrupts' estates should be economically as well as speedily realized, and he hoped the provisions of the Bill were such as would realize both those ob- 790 jects; and the costs be thereby greatly diminished. It appeared to him, however, that if all the cases in bankruptcy were to be taken before one Judge great delay must necessarily ensue. It was rather a satire upon the working of the present system that the funds of the wretched estates that had not been distributed to expectant creditors were sufficient with which to pension the officials of the present Bankruptcy Court.
§ MR. CRUM-EWING
congratulated the country on at last having a measure before it which would assimilate the Law of Bankruptcy in this country to the excellent system of Scotland, and paid a high tribute of praise to the Lord Advocate, to whose efforts they were indebted for the Scotch Law, observing that if he had never done anything else, or did anything more, that act alone would place him as a commercial lawyer on the highest pinnacle of fame.
§ MR. RATHBONE
said, he thought there ought to be an official similar to a public prosecutor in bankruptcy cases, because it not unfrequently happened that the interests of the public did not concur with those of either the creditors or the debtor. The interests of public credit and of public morality were often at stake, and surely the commercial morality of a nation like ours was of the highest importance, for if England were to retain her proud position as the centre of the financial operations of the world there must be no recurrence of the commercial scandals which had come to light during the last few years. He regretted, therefore, that the Government had not seen their way to provide some machinery for the protection of the interests of the public in this respect.
§ MR. HERMON
approved generally of the Bill, but thought that the provision requiring a bankrupt to show a certain amount of dividend ought to specify a limit in point of time prior to the bankruptcy. He was also of opinion that the Bill ought to contain a clause providing that every trader who became bankrupt should show that he had taken stock and made up a balance-sheet once in every year.
§ SIR FRANCIS CROSSLEY
thanked the Attorney General for the very able statement he had laid before the House, and he wished at the same time to express his opinion that the Bill he had 791 brought forth was one which would give great satisfaction to the commercial community. At present it was found that the Bankruptcy Law was so eaten up with officialism and expenses that a debtor had only to threaten his creditors that if they did not accept the composition he offered he would go through the Bankruptcy Court in order to induce them to accept whatever he chose to offer. The plan shadowed forth by the Attorney General was, that a man might not make himself bankrupt, but that his creditors must judge whether they would make him a bankrupt or not, and when they had made him a bankrupt they were not to hand over all his effects to officials, but they were themselves to have the power of handling his effects. He thought that was just what was wanted, and he was sure that the Bill would meet with the hearty support of the mercantile community. He looked on the brevity of the Bill as not the least of its merits.
§ MR. CROSS
also expressed his approval of the measure in general terms, and thanked the Attorney General for the courtesy which he had displayed towards the members of the Chambers of Commerce who had waited upon him on the subject. The main principle of the Bill, that of placing the liquidation of a bankrupt's estate in the hands of mercantile men instead of in the hands of lawyers, would, he felt assured, be hailed with satisfaction by the commercial community. He sincerely trusted that the learned Attorney General would be more fortunate with this Bill than his predecessors had been with the Bills which they had brought forward. One of the great features of the Bill was that it separated the administrative from the judicial functions of the Court of Bankruptcy. At the same time he regretted that no provision had been made for seeing that the bankrupt who committed a fraudulent act should be brought before a court of justice, because he did not at present see whose interest it was that such a person should be punished. He should also like to have some information respecting the County Courts. This Bill would throw a great deal of extra work upon them, but he knew that if the present arrangement were continued the extra work would be a great deal more than they could manage.
§ MR. MORLEY
said, he hoped that 792 the hon. and learned Attorney General would lose no time in placing the Bill in the hands of hon. Members, so that, consistently with a due consideration of the measure, as little delay as possible should take place in the passing of the Bill through that House. He believed that no Bill which the Government had introduced this Session would give so much satisfaction to the country at large as that which had been shadowed out by the hon. and learned Gentleman that evening. He was convinced that the proposal to appoint a Chief Judge would be most acceptable, especially in the City of London, where the judgments of the Commissioners had so varied that the mercantile community would be thankful to have an authoritative decision in Basinghall Street. He likewise rejoiced at the declaration of the Government that the time had come when imprisonment for debt should cease. At the same time he was rather glad to hear that the Attorney General was not prepared to put an end to the power of the County Court Judge, to deal with cases of contempt, and those of traders who should refuse to obey any order he might make in respect to their debts. He approved of the separation of the administrative from the judicial functions of the court, but thought that some means other than those existing were needed for originating proceedings against fraudulent debtors. He believed that the Bill pointed to the appointment of a public prosecutor, and he should be happy if such should be the result of the discussion which would take place upon the measure.
§ MR. CRAWFORD
, on the part of the commercial community with which he was connected, begged to assure the learned Attorney General that his Bill would meet with a very warm reception, and that it would be fairly and candidly considered. He concurred in what had been said by his hon. Friend the Member for Bristol (Mr. Morley), in regard to the Bill, because a very long experience and personal acquaintance with him in business matters had satisfied him that there was no person more capable than he was of forming a correct opinion on the matter of Bankruptcy Law.
§ MR. JESSEL
, as a lawyer, could not coincide with several Gentlemen of mercantile experience who had spoken in praise of the measure. He recog- 793 nized in the lucid statement of the Attorney General many features of the old Law of Bankruptcy which had to be abandoned because they had completely failed. They must recollect that the Bankruptcy Law in this country was very old. From the statute of James down to the statute of William IV. the administration of bankrupt estates was wholly in the hands of the creditors, who appointed assignees, who acted much as they thought fit, and without any official interference whatever. The result was that the place of a bankrupts' assignee became one of great profit. He recollected having heard a story of a boy who, having been asked once in a bank parlour what he would like to be, replied, "a bankrupts' assignee," and that was a class of official on whom checks must be put, if the new system was to succeed. He would not give a decided opinion upon the Bill until he saw what checks were provided in this respect. As to what lawyers called, "the order and disposition" clauses in bankruptcy, they were a law, in short, for enabling the creditors of a bankrupt to take other people's property. If a bankrupt happened to have in his possession property belonging to other people over which with their consent he exercised acts of ownership, the creditors might divide it among them. This had always appeared to him to be a scandal and an abuse. The original pretext for this law was that the bankrupt being in ostensible possession of property which had induced persons to give him credit, those persons had a right to share it. But the Judges interpreted the reason of the law to be something quite different. Moreover, the law was inconsistent, for if the owner of the property took it out of the debtor's possession before he committed an act of bankruptcy, or if the owner took it away afterwards without notice of the act of bankruptcy, the creditors had no remedy. This law had been used for the robbery of innocent and ignorant persons, and he trusted that in Committee it would be wholly swept away. Another point was, the effect of what was called a certificate of discharge. The proposal of the Attorney General, that a man's future-acquired property should not go free, was a very old one. Under the Insolvent Acts, which applied to non-traders, future property of the insolvent became liable to 794 his old debts by an order of the court; but these provisions, as lawyers knew, were an utter failure, and therefore he could not be sanguine of the success of the present proposal in respect of traders. A provision prescribing the amount of dividend to be paid had also been tried. Under the Law of Bankruptcy which existed prior to the change in the reign of William IV. a certificate protected a bankrupt once, but, if he became bankrupt a second time, he had, in order to be protected, to pay a dividend of 15s. in the pound. Again he appealed to the experience of lawyers whether that provision ever had any practical operation. It had been found utterly useless; it did not prevent men from becoming bankrupts three or four times, nor did it enable creditors to become possessed of their after-acquired property. Great results, therefore, could not be expected from an experiment which had been tried, but which entirely failed. As to the discharge of a bankrupt, our law appeared very defective. In modern times that discharge was often illusory. Instead of being a complete discharge from all liabilities arising from contract, it was a discharge only from such liabilities as could be proved as debts under the bankruptcy. Now, in these days men incurred a vast amount of liability which could not be proved as a debt. For instance, in a recent case a bankrupt, who was an honest bankrupt, and had given up every farthing, happened to be a shareholder in several companies. They were supposed to be solvent; at all events, they were going concerns. But the assignees of the bankrupt wisely declined to take to these shares; as the law stood, the bankrupt had no means of freeing himself from them; and the result was that, within a short period of his bankruptcy two of those companies were wound up, and the official liquidator put this unlucky bankrupt on the list of contributories, and gave him the alternative of paying or of going through the Court of Bankruptcy a second time. He hoped the Attorney General would make provision for such a contingency, and would take care that all liabilities arising from contract, whether proveable under the bankruptcy or not, should be barred by the certificate of discharge, subject, of course, to any provision as to future property if the House should determine in favour of 795 such a provision. As he understood the Bill, arrangements were to continue, but under the present law you could not have satisfactory arrangements. The trustees under the deed of arrangement did not, as regarded third parties, stand in the same position as assignees in bankruptcy. The trustees could not take advantage of a fraudulent preference against the man who had been a party to the fraudulent preference, and any Amendment and Consolidation Bill ought to provide that it should not be necessary to make a man a bankrupt in order to defeat the claim of a person who had obtained from him unfairly a preference over the other creditors. It was now necessary, in order to bring an action, to make a man a bankrupt. With regard to settlements by bankrupts, he thought the suggestion of the Attorney General a solid improvement in the law, but it should include all voluntary settlements, and extend to deeds of arrangement, the trustees of which should have the same right as assignees to call on the bankrupt to show that he was solvent when he executed the settlement. Again, it was to be hoped that the whole system of dealing with, the freehold, leasehold, and copyhold estates of bankrupts—a system which was cumbrous, expensive, and annoying in the extreme—would be amended. He would not now go into details upon this point, but hereafter would suggest some clauses which he hoped the Attorney General would consider improvements and would be inclined to adopt.
§ MR. MUNTZ
said, he thought that the remarks of the hon. and learned Member would have been more in order if the Bill had been in Committee. He rose merely to thank the Attorney General for the measure he had proposed. It would meet the wishes of a vast number of the commercial classes, and especially of a large class in the town he represented; and if it passed this Session, which he trusted it would, it would relieve the country from one of the greatest grievances of the day. The present law was nothing but cheating made easy. It was a premium on bankruptcy, and a few weeks after having passed through the court many persons were seen riding in carriages.
THE ATTORNEY GENERAL
, in reply, expressed his thanks for the cor- 796 dial co-operation which had been promised him from both sides of the House. There were only one or two points that required his attention. He had been asked how he supposed that one Judge would be able to deal with all the questions that would come before the court? His answer was, that almost all the business would be conducted by the creditors themselves, and that very little would be left to the Judge, who, he trusted, would not find much employment. It would be the duty of the Judge to exercise a general superintendence and to decide all questions of law that might be submitted to him. He had also been asked how it was proposed to deal with a bankrupt who obtained a quantity of assets immediately before his bankruptcy. Such a case would be met by the provisions of the criminal law, and when it was asked who would conduct the prosecution, he could only reply that that was a part of the great question of the appointment of a public prosecutor—a question which he hoped before long would engage the attention of the House. With respect to the opinion of his hon. and learned Friend (Mr. Jessel), who was entitled to speak with great authority on this subject, he believed that his hon. and learned Friend's fears, on the score of there not being sufficient check upon the trustees, were without foundation. He had adopted those checks which in the Scotch system had been attended with perfect success. One of those checks was the appointment of a committee, another was the liability of the trustee to an accountant, who would audit his accounts; and a third was his own professional character, which would, of course, be at stake. He was inclined to think with his hon. and learned Friend that voluntary settlements should be placed on the same footing as post-nuptial settlements. In conclusion, he could only add that he would thankfully avail himself of the assistance offered him by his hon. and learned Friend in reference to some clauses of the Bill.
§ Motion agreed to.
§ Bill to consolidate and amend the Law of Bankruptcy, ordered to be brought in by Mr. ATTORNEY GENERAL and Mr. SOLICITOR GENERAL.