[BILL 37.] SECOND READING. (Hansard, 12 February 1880)

§ SIR HENRY JAMES
said, that, although the Bill had only been in their hands 36 hours, yet, as it was substantially the same as that brought before the House last Session, he 561 should not delay the Second Reading by asking for time to consider it. The only material alteration in the Bill, as compared with that of last Session, was that a debtor was not allowed to be made a bankrupt on his own petition, which he regarded as a great improvement. As he understood it to be the intention of his hon. and learned Friend (the Attorney General) to have the Bill referred to a Select Committee, he did not think it desirable to enter into a discussion of its provisions in detail on the present occasion. He should give his hon. and learned Friend all the assistance in his power to pass this measure and the Criminal Code Bill, because the character, not so much of the Government, as of the House, was at stake, and he hoped they would do something to redeem their character during the present Session.

MR. OSBORNE MORGAN
said, he should have been inclined, on an ordinary occasion, to ask for further time; but the matter was so urgent and time had become so precious that he did not think he would be justified in doing so. He agreed with the remarks of his hon. and learned Friend, and said that by the Controller's Report it appeared that £25,000,000 was lost annually in this country by bad debts in bankruptcy alone, a sum nearly equal to the interest on the National Debt. Such a state of affairs was a disgrace, he would not say to the Government, but to Parliament, and he looked upon the Bill as a step towards a better state of affairs. He contemplated with satisfaction the fact that the Bill was to be referred to a Select Committee.

§ MR. SAMPSON LLOYD
believed that the best way of getting some measure on bankruptcy passed in the present Session was to send the Bill to a Select Committee, as the Government proposed to do. He was of opinion that it would be useless to attempt to introduce any very ambitious innovations in Bankruptcy Law, and believed that the fundamental principle of the Act of 1869 was a right one. What was wanted by business men was not to sweep the Act of 1869 away, but to amend its blots, and he believed that these could be amended by a very short Statute. The principal evils from which they suffered under the existing law were, after all, 562 but few. They suffered, in the first place, from an absolute want of control over liquidations; and, in the second place, it would be well if the costs of all officers connected with liquidations were officially taxed. Then they wanted what the Government Bill did not provide for—namely, the Scotch system of making trustees pay dividends periodically, and he trusted the Select Committee would come to that conclusion. He should also like to see some provision to prevent fraudulent men who had failed disgracefully three or four times from going into business again and underselling the honest tradesmen; and he hoped some of the legal Members of the House would be able to provide some that would be found effectual in preventing that evil. He concluded by expressing his satisfaction that the Bill was going to a Select Committee.

§ MR. GOSCHEN
expressed a hope that the Bill might be taken in hand without any delay. He could say, on behalf of his constituents, that they took a deep interest in the matter, and were most anxious that there should be some legislation in reference to it this Session. He agreed that it would be unwise to enter into a discussion of the details at the present time, but thought it might be convenient to hon. Members if the hon. and learned Gentleman the Attorney General would point out in what important particulars, if in any, the Bill differed from that of last year.

§ MR. GREGORY
said, he had looked through the Bill, and could say that it differed from the Bill of last year in being a supplementary Bill, instead of a consolidating one; but that, like the Bill of last year, it provided that all liquidations should be by deed of arrangement, instead of resolutions of shareholders. Of this he very much approved; the execution of a deed being a deliberate act and giving a man time for reflection; whilst, generally speaking, at a meeting of creditors, the resolutions to be passed and the appointment of the trustee were a foregone conclusion. He was glad that the Bill was to be referred for consideration to a Select Committee, as some of its details required attention; for instance, those referring to the discharge of the bankrupt. He also thought it was a defect in the Bill as it stood that the onus of showing the cause of failure 563 should be thrown on the creditors. It ought, in his opinion, to be thrown on the Court. There were several other points that would require serious consideration; but he did not think it necessary to enlarge on them, as it was intended to refer the measure to a Select Committee.

§ MR. WHITWELL
said, that the hon. and learned Gentleman the Attorney General had shown himself anxious that the country should possess a really good Law of Bankruptcy. He fully approved the course which had been accepted by the hon. and learned Member for Taunton (Sir Henry James), that the Bill should be referred to a Select Committee. It was just the kind of measure the country wanted, being not a reversal or change of the law, but an amendment of the law, and he trusted it would soon become the law of the land.

§ MR. MUNTZ
expressed a hope that no time would be lost in appointing the Committee, whose duty it would be to consider the details of the measure. There were several clauses of the Bill which would require special consideration; but he would refrain from discussing them until they had been dealt with in the manner proposed.

§ THE ATTORNEY GENERAL (Sir JOHN HOLKER)
said, he felt that the appeal which had. been made to him by the right hon. Gentleman the Member for London (Mr. Goschen) was a perfectly reasonable one, and he should briefly explain the leading provisions of the measure. The Bill of last Session was not designed to sweep away the Act of 1869, but rather to amend it, at the same time repealing the Act and consolidating the law upon the subject—a more ambitious design than that of the present Bill. On reflection, and considering the difficulty of passing through the House of Commons—at all events of this day—a Bill consisting of 150 or 160 clauses, upon every one of which a discussion might be raised, if any hon. Member thought proper to raise it, he thought it best to bring in a Bill not to amend and consolidate the law, but to attempt merely to amend the law, leaving its consolidation for some future period. The Bill of last year proposed to amend the Act of 1869 in several respects—in the first place as to liquidation by arrangement, in the next as to compositions under the Act, and to substitute for liquidation by ar- 564 rangement, deeds to be entered into between the debtor and a majority in number and three-fourths in value of his creditors. After providing certain minor amendments, especially with regard to the audit of accounts and the action which the Controller might take in regard to the accounts of trustees, last year's Bill provided that a debtor should not, in the first instance, be absolutely declared a bankrupt, but that there should be made against him a provisional order, and that he should not be made a bankrupt until the creditors had been called together and had decided that he should be made one. The present was an amending Bill; but not a consolidating and an amending Bill. It did not adopt provisional orders; but it allowed adjudication in bankruptcy to be declared at once, as under the present system. The Bill of last Session enabled a debtor to petition against himself and to cause himself to be declared a bankrupt. Upon consideration it had been determined that that provision should not now be inserted, as it would be taken too much advantage of by debtors. What this Bill did was to provide certain amendments in the Act of 1869. One of these was the entire abolition of liquidations by arrangement. There were provisions for compelling trustees to pay all monies they might receive from time to time into the bank, and to provide for the taxation of all costs and, the audit of all accounts, not only in bankruptcy, but under deeds of arrangement as well. There were a variety of smaller provisions designed to protect estates from waste and to preserve them for the benefit of the creditors. He was not at all inclined to differ from the hon. Member for Plymouth (Mr. Sampson Lloyd), when he said that the Act of 1869 was founded on a right principle. At all events, it was one which was perfectly intelligible, because it did away with the system of officialism which had existed to a considerable extent before, and it vested the administration or management of a debtor's estate and the dealing with the debtor in the creditor. He dared say the Act of 1869 would have worked well but for two circumstances. One was that the creditors would not let the Act work well; they would not look after their own affairs. In Scotland it was different; creditors were more canny than in England, where they were apathetic, put the pen through 565 au account as a bad debt, and would not trouble themselves to look after their own interests. It was difficult to legislate for people who would not exert themselves on behalf of themselves; but it must be done. Creditors must be protected against their own apathy and supineness, and this might almost be called a Bill to protect creditors in spite of themselves. There were restraints proposed by the Bill for the purpose of rendering it difficult that an estate should be wasted, notwithstanding that the creditors would not look after a debtor's estate. Another reason why the Act of 1869 had not worked well was that it provided what might be called a gentlemanly way of getting rid of a man's liability. It was then thought desirable that every case should not go into Court; that, in certain circumstances, a man should not be exposed to the stigma of bankruptcy; and that he should not be subjected to the disagreeable ordeal of a public examination. It was therefore enacted that a man might liquidate by arrangement and offer to make a composition with his creditors. For some reason, Parliament forgot that it was necessary to have checks and restraints in these cases as well as in ordinary bankruptcies. There was no provision for taxing bills or auditing accounts. So if the debtor and his friends could get a sufficient number of proxies, they did pretty much what they liked. The Report of the Controller showed the disastrous working of this system. There could be no doubt that liquidations had worked badly, and that there had been enormous waste in dealing with estates. He proposed to do away altogether with these liquidations and with compositions as well, and to substitute for them arrangements by deed. His opinion was that, as a rule, a man who was not able to pay his debts ought to go through the Bankruptcy Courts, and be subjected to a public examination as to the mode in which he spent his money, and how it had happened that he had fallen into embarrassment. There were many oases in which it was desirable that there should be no adjudications in bankruptcy, but that men who were unable to fulfil their engagements should be allowed to proceed in business in order that they might subsequently pay their debts without the stigma attached to them of having been adjudicated bank- 566 rupts and passed examinations as bankrupts in public Courts. In order to meet cases of this kind, it was proposed by the Bill to allow debtors in such circumstances to compound with their creditors; but it also provided that this should only be done with the consent of a large proportion of such creditors, both with regard to number and value. Furthermore, it was proposed that this consent should be given personally, and not by means of proxies. He, for one, thought it important that the system of proxies in bankruptcy proceedings should be abolished as far as possible. This was most important as far as arrangements by deed were concerned; and the proposal in reference to it contained in the Bill would, he thought, have a satisfactory result as far as the commercial world was concerned. As far as compositions were concerned, it was proposed to enact that they should not be accepted unless the debtors offered 5s.in the pound, or any similar sum was accepted by four-fifths in number and value of the creditors. His intention was—when the Bill got before a Select Committee, to take such steps and to secure the calling of such witnesses, mercantile as well as legal, as would enable the Government in the course of the present Session to pass an Act which would amend the Bankruptcy Law in a satisfactory manner, and a manner superior to the Scotch system, of which they had heard so much.

§ MR. NORWOOD
said, there was almost an unanimity of opinion that the Government had shown great judgment in introducing an amendment Bill instead of a consolidation of the law. The Act of 1869 was a consolidating Act; and under the existing Act the trustee was invested with too much power, being practically the master of the creditors, instead of their servant. Speaking for the other commercial Members of the House, he would say that they would endeavour to associate themselves thoroughly with the legal Members, and would endeavour to turn out, as soon as they possibly could, an amendment of the Bill satisfactory to the whole House.