MOTION FOR LEAVE. (Hansard, 8 April 1881)

§ MR. CHAMBERLAIN

said, that in asking the House to assent to the introduction of a Bill to amend the Law of Bankruptcy, he must confess that the history of past attempts to deal with that subject was such as to discourage anything like exaggerated or over-sanguine expectations. It was a history of continual, and he might say periodical changes, involving very considerable vacillations on the part of Parliament, following the current of public opinion in this country, each in turn the subject of great expectations, and each in turn also doomed, after a few years' experience, to disappointment and failure. He supposed he might say that, of all that legislative work, the Act of 1869 had been the most unsatisfactory and the most unfortunate. It was the object of the almost unanimous condemnation of all classes. At the present time, Committees of the House of Commons; Chambers of Commerce, representing the commercial interests of the country; the Judges, who had to administer the law; the officials, who had to supervise its execution; bankers; lawyers; accountants; all the representatives of the commercial classes, joined in swelling the universal chorus of dissatisfaction and disapprobation. In those circumstances it was not surprising that since 1869 there had been no fewer than 13 proposals before the House for amending that Act. Six of those proposals had been Government Bills; but, owing to circumstances into which he need not enter, none of them had gone beyond the preliminary stages. He did not think, however, that the delay which had occurred had been altogether without some compensating advantage. In coming to his task he found that the road had, in a large degree, been cleared 1057 for him. He would avail himself, with out hesitation, to a very considerable extent, of the labours of his Predecessors; and it would be seen by the provisions of the Bill which he was about to explain that he had largely taken advantage both of the suggestions which he had gathered from the Bills of the late Government, and also from those introduced from time to time by private Members. He had thought it desirable to make himself acquainted with the opinions, sometimes inconsistent, of the different organizations dealing with the subject, and of persons who, from their representative character or from special study, were entitled to be considered as authorities; and he had, as far as he possibly could, to satisfy the desires which their experience had led them to express. He had accordingly had the advantage of communicating with numerous persons who were greatly interested in the subject, and he desired at once to acknowledge the services which many of them had rendered him. He had especially to thank his hon. Friend the Member for Bristol (Mr. S. Morley), who had put into his hands a Bill which he had drafted and had intended to introduce, and which contained many useful suggestions. He had likewise had the opportunity of consulting with the experienced County Court Judge of Birmingham, where, perhaps, more bankruptcy cases came up for decision than at any other local Court in the Kingdom; and he was, moreover, indebted to the experience and advice of the President of the Incorporated Law Society; to Mr. John Smith, who was a high authority on that particular subject; to the President of the Institute of Accountants; whilst he had likewise to acknowledge suggestions received from an influential deputation which waited upon him from the Institute of Bankers. On one point there was a concurrence of opinion among the authorities on this subject—all agreed in condemning the Act of 1869. That Act had only been in operation two or three years when discontent began to manifest itself with its working. In consequence of that, the late Lord Chancellor (Earl Cairns) appointed a Committee, experienced in the subject, to consider the matter, who, in 1875, made a Report, in which they said— We find a general concurrence of opinion that the Act of 1869 has not, in its working, 1058 satisfied the expectations of the public, inasmuch as it affords great facilities for a debtor to relieve himself of his liabilities, while there is great extravagance in administering and long delay in winding-up estates. No legislation followed; but the objections continued to grow; and, in 1879, a Memorial from bankers and merchants of the City of London, one of the most influential ever presented to any Government, was presented to the late Primo Minister. In that Memorial it was said that the defects of the Bankruptcy Law might be stated as follows:— First, it affords new and vicious facilities to insolvent persons to escape from the reasonable control and supervision of their creditors by private arrangements wholly beyond the jurisdiction of any public Court or Judge. And by reason of these facilities it is the fact that every year there is an increasing number of cases in which the grievous and dangerous scandal is exhibited of men failing for vast liabilities, and finding it easy, in consequence of the defects of the present law, to get their speedy discharge by the payment of no dividend, or a dividend of some small fraction of a pound, or even shilling, and without being subjected to any efficient investigation of their affairs, or of the conduct and proceedings which have led to their insolvency-Second, that the present law is rendered practically nugatory by leaving to those who have already incurred losses the investigation of the bankrupt's affairs, and has laid upon them the obligation of exposing the misconduct of bankrupts, which, in the plain interests of public morality and commercial policy, should be dealt with, not as a private matter, but by a public Court and Judge. Experience has amply proved that reliance on creditors to perform these onerous and costly functions is entirely futile. The Bankruptcy Act of 1861 did contain, in Clause 159, provisions for the interference and action of the Court in all cases of misconduct on the part of the bankrupt, with a view to his exposure and punishment; but, in consequence of the failure of legislation to provide an efficient Court and Judge, these most salutary provisions were never enforced. These statements were the strongest possible condemnation of the operation of the Act, and they were fully justified by the Reports which had been published from time to time by the Controller General in Bankruptcy, to whom he thought the thanks of the commercial classes were justly due, inasmuch as he was, if not the first, at all events the most prominent person to call attention, not merely to scandals under the Act, but also to the direction in which remedies might be found. From these Reports it appeared that the total bankruptcies and arrangements under insolvency proceedings had increased from 5,002 in 1870, to 13,132 in 1879. The 1059 liabilities, during the same period, had increased from £17,456,429 to £29,678,193. The estimated assets had increased from £5,381,533 to £10,193,617, from which it resulted that the loss during the same period had increased. from £12,074,896 to £19,484,576. When he said the loss, he called the attention of the House to the fact that the deficiency was between the estimated assets and liabilities; and inasmuch as the realized assets never came up to anything more than a proportion of the estimated assets, it was probably not too much to say that the loss at the present time under bankruptcy insolvencies was not less than £25,000,000 a-year, and that did not include the losses caused by the failure of Companies, which were administered under a different system. He understood that there was some reduction in the figures for the present year; but he quoted only the published figures coming down to 1879. He found from these same Reports that the bankruptcies proper had diminished from 1,351 to 1,156, while during the same time the liquidations and compositions outside bankruptcy, and which did not come under the control of any judicial authority whatever, had increased from 3,651 to 11,976. A few figures would show what was the character of these arrangements, and why it was that they were so frequently resorted to. He would take the case of compositions, because they had no information on which reliance could be placed as to liquidations. The compositions between 2s. 6d. and 5s. in the pound, in the period he had named, had remained nearly the same in proportion to the total number of compositions; in fact, they had fallen from 30 per cent to 28 per cent of the whole. But the compositions under 2s. 6d. in the pound had increased from 17½ per cent to 50 per cent of the whole; while the compositions above 5s. had decreased in almost equal proportion—namely, from 52½ per cent to 22 per cent of the whole. So it might be asserted that the compositions and liquidations under the Insolvency Acts had rapidly increased in number, and, at the same time, had rapidly deteriorated in quality; and the reason was not far to seek. Of the 1,156 bankruptcies 149 were annulled for some reason or other, and that left 1,007 bankruptcies that had been dealt 1060 with in open Court. Therefore, only 7 per cent of the whole of the cases of insolvency were subject, under the present system, to public control, while 93 per cent were left without supervision, and naturally presented the widest possible field for every kind of fraud and abuse. It was, of course, this absence of proper control which tempted and induced debtors who feared it, and professional agents whose gains would be diminished by it, to resort to liquidations and compositions in preference to bankruptcy. The question arose, under what provisions of the existing law this state of things had been permitted to exist? Under Section 125 of the Act, it was possible for a debtor who found himself unable, or who might be unwilling to pay his debts, to have a meeting of creditors summoned on his behalf, at a time and place convenient to himself, and certainly, in very many cases, inconvenient to the majority of the creditors. At that meeting, the creditors present, either by themselves or by proxies, creditors, in some cases, in friendly collusion with the bankrupt, in other cases fictitious, in not a few cases fraudulent, might, by the requisite majority in number and three-fourths in value, elect a trustee, agree to a liquidation, dispense with the security which the Act required the trustee to give, get rid of all investigation of the previous conduct and affairs of the bankrupt, and discharge the debtor, even although he might be guilty of fraud or scandalous negligence, and even although the assets showed no dividend whatever; and this arrangement they were competent to impose upon a dissenting minority of bonâ fide creditors. Under this system there was absolutely no public inquiry whatever, no examination on oath, and no security for the protection of the public interests which were involved in every insolvency. The position of a trustee elected under these circumstances was an exceedingly enviable one, provided he was not troubled with any moral scruples whatever. He was practically uncontrolled as to his disposition of the estate and its administration. He could, and very often did, appoint his own committee of inspection, from whom he was bound to take his instructions. The accounts of the trustee had been in more than one instance audited by persons who could not write 1061 their own names. The trustee could make any arrangement for the discharge of the debtor; he could dispose of the funds, he could vote his own remuneration, he could tax his solicitor's bill or not, as he thought proper; he could audit the bills of the other professional persons he employed or not, as he preferred; he could audit his own accounts, and finally grant himself a release, and retire to the bosom of his family, satisfied that he had complied with all the legal requirements of the statute. He might, if he liked, declare a dividend, or he might delay doing so. He might keep the creditors' money in his own hands, and use it for his own purposes; he might appropriate undivided balances and unclaimed dividends; he might assist in the creation of fictitious claims, certain that in such circumstances dividends could not be claimed; and in 50 different ways he might rob the creditors to his own personal advantage. A trustee, fitly named H. J. Sharpe, was tried at the Central Criminal Court on the 3rd of February; and the report of the case was so suggestive that he would read a part of it to the House. The facts of the case were stated by counsel for the prosecution as follows:— Prisoner had formerly been clerk in a solicitor's office, and was well acquainted with the details of the Bankruptcy Law, especially in matters of liquidation. He appeared to have been in the habit of searching The London Gazette for notices of liquidations, and then communicating with solicitors engaged in such cases, representing himself as being interested in the proceedings. By that means he obtained a list of the creditors in several instances. Having noted the names of some of the largest creditors, he informed them that he was a member of a firm of accountants, that he had obtained the proxies of a number of the principal creditors, and was in a position to secure a dividend of 10s. if the parties to whom he applied would entrust him with their proxy, and allow him to act on their behalf. The prisoner, by those means, armed with the proxies in question, had no difficulty in getting himself appointed trustee by the creditors, and acting for them in recovering the debts of the liquidating debtor. Having succeeded in collecting the debts, he appeared to have kept every farthing of the money, and, by way of delaying the creditors, he caused advertisements to be inserted in the country newspapers to the effect that a first and final dividend of 2s. 6d. in the pound on the petitioner's estate would be payable by a firm of accountants at Peterborough. It was ascertained that no such firm was in existence, and the creditors were unable to get their dividend. The learned counsel stated that the prisoner had been engaged in this system of fraud for several years, and that creditors were perfectly helpless to 1062 protect themselves. In his opinion, some amendment in the Bankruptcy Law was required to provide against such proceedings. He agreed with the statement of the learned counsel for the prosecution; and although Mr. Sharpe appeared to be in the position of the pitcher that went too often to the well, and though he was finally convicted and sentenced to 12 months' imprisonment, yet, if he came out of prison and found the law the same, he would be able to secure the same pecuniary benefits to himself without incurring the danger which by a slight imprudence he incurred on the last occasion. That the law, the operation of which was illustrated by this case, might be declared, and truly so, to be a direct incentive to fraud was apparent from the number of estates that were now wound up with no assets at all, and in which the expenses of liquidation swallowed everything up. Such a state of things fully justified the conclusion the Controller General arrived at in the Report, in which he said— Having regard to the state of trade during the last 10 years, and its apparent effect on bankruptcy proper, on Scotch sequestrations, and on the better class of compositions, there should have been in the year 1873 about 2,700 arrangements and compositions, instead of 6,574; and about 5,000 instead of nearly 12,000 in the year 1879. I am unable to suggest any reasonable causes for the excessive numbers attained, except the tendency of easy liquidation to encourage at all times the growth of a too-rapidly growing opinion that it is unnecessary, or even foolish, to pay debts in full, and, in times of commercial prosperity, a large amount of hazardous speculation and consequent insolvency; whatever the cause, the financial result may be represented as a continually increasing tax on English commerce, averaging during the last five years about £20,000,000 per annum from losses by bad debts, exclusively in the class of insolvencies which are at present dealt with under the English Bankruptcy Act. There was another clause of the Act of 1869 which was also the source of much abuse; that was the 126th section, which dealt with compositions. In compositions, the stimulus to fraud on the part of professional persons was not so great as in liquidations; because when the composition was accepted the matter was at an end, and there was not the same opportunity of making costs and charges. The increase in the number of compositions, although very large, had accordingly not been so large as in liquidations. The compositions increased from 1,616 in 1870, to 4,809 in 1879; 1063 the increase being 3,193, or over 200 per cent. The liquidations increased in the same period from 2,035 to 7,167, an increase of 5,132, or 256 per cent. Under the composition system many abuses prevailed, because there was no public examination of the bankrupt, no security was taken against collusion or fraud, and there was no proper security for the composition that might be promised. He did not wonder that, in these circumstances, it had become customary amongst a certain class of people to say that it was not necessary, and it was foolish, to pay debts. It was not surprising that a learned Judge should have sarcastically observed that no man who was properly conscious of his duty to his family would ever think, under the existing law, of paying 20s. in the pound. This scandalous state of things had arisen entirely from the assumption underlying the Act of 1869 that insolvency was a matter which solely concerned the creditors in each particular case, and that they could, and would, not only look after their own interests, but could, and would, also protect the interests of the public, which were sometimes quite different from, and inconsistent with, their own. He could show that that assumption was not justified by the facts. In the first place, in a great number of bankruptcies, the interests of creditors were too divided and too minute for them to take anything like complete and organized care of their own interests. They were generally too ready to write off their bad debts at once; and they were not inclined to throw good money after bad, especially under a system which gave them no practical assistance. The Controller General, in his supplemental Report to the Lord Chancellor for 1875, said— Again, the theory that creditors desire to take any active part, either in managing the debtor's affairs, or in choosing a fit and proper person to manage them, is distinctly contradicted by their own evidence, almost daily recorded during the last 14 years in the minutes of proceedings at meetings, which show that, generally speaking, they will do no more than prove their debts and give their proxies to persons whom it is impossible they could have spontaneously chosen. As a rule, to which there are comparatively few exceptions, every creditor considers his own pecuniary interest, and finds it better to write off the amount of his debt to loss; to hand his proof and proxy to a solicitor, or accountant—who sends him forms and instructions, and whom he commonly supposes to be connected with the Court or 'acting in the matter'—and to consider any dividends he may 1064 receive as profit. The pecuniary question for a creditor is whether the amount he would gain by such reduction of expenses as he could hope to bring about by close supervision of proceedings during their three or four years' average continuance would remunerate him for his trouble and loss of time. If by the action of creditors present expenses could be reduced one sixth of their amount, the average advantage to each creditor would be about £1 more to a few, and less to the large majority in number. All experience under the present and former Acts proves that whatever is left to the creditors is, as a rule, left undone, even in bankruptcy proper; for example, nothing could be more important under the present system of electing trustees than that they should give security, and Section 14 of the Act provides that the creditors, 'when they appoint a trustee, shall by resolution declare what security is to be given, and to whom, by the person so appointed before he enters on the office of trustee;' but general Rule 106 explains that, 'where no security is specified to be given by the trustee he shall be deemed to be personally responsible,' &c.; and in the last 2,500 bankruptcies security was required to be given by six trustees in one County Court, twice by one person in another Court, and in only six other cases in all the rest of England and Wales. A still more important consideration was that the interests of creditors were sometimes inconsistent with the public interests, which it was the duty of Parliament to protect. For instance, it was quite possible that the friends of a debtor might offer a larger composition than the estate would justify in order to avoid exposure; and although he would admit that the estate of a debtor was the property and concern of the creditors, and that they would be benefited by entering into such an arrangement, yet he did not admit that they had the right to compound with felony in order to increase the amount they might receive. There were a great number of cases in which a creditor desired the continuance of business relations with the bankrupt, and was, therefore, disposed to take a favourable view of his proceedings and to avoid inquiry. Even if they could suppose that the creditors were in every case willing to protect their own interests, and patriotic and spirited enough to protect the interests of the public, he would say still that the law as it stood gave them no assistance in the task they would undertake sufficient to enable them to do so successfully. A creditor with the best intentions might find himself powerless. He might be outvoted at meetings by proxies in the hands of the debtor's solicitor, or held by persons 1065 interested in the concealment of fraud, or the waste of the estate. Among other abuses of the proxy system, it appeared to be a common custom for certain professional trustees to seek for proxies, and to buy and sell them in order to obtain the control of estates; and the Controller General said that the practice prevailed of holding "knockouts," as they were called, or auctions of proxies, in which they would buy from each other the numbers they required to give them the control of certain estates. The result was that if a bonâ fide creditor attempted to interfere, with the object of securing a thorough investigation, he found himself outvoted and discomfited; and after one or two such experiences he was discouraged and resolved to take no trouble in the future. Having described what were the chief objections and defects of the present system, he would call the attention of the House to the provisions of the Bill by which they hoped to remedy those defects. But before doing so he must say the Bill would apply to England and Wales only. It did not apply to Ireland, for in that country it was doubtful whether the necessity existed for reform to anything like the same extent. He had received an application from the Chamber of Commerce of Dublin that Ireland might be included in the Bill; and, in reply, he had suggested that the Chamber should wait and see its provisions. If they then wished that the Bill should extend to Ireland, the Government would be glad to consider, and, as far as possible, to comply with their wishes. The Bill did not apply to Scotland, because the Scotch had a system with which they appeared to be generally satisfied, and upon which, indeed, the Act of 1869 was professedly based; but the Scotch system differed from the Act of 1869 in many important particulars, and it accordingly had not given rise to anything like the scandals which prevailed under the English system. It was suggestive to consider the main distinctions between the English and the Scotch systems. He did not consider that the Scotch system was theoretically a perfect one, though it was far better than their own. He believed it was much more costly than it was generally supposed to be, on the faith of certain evidence given before the Select Committee of 1869. The idea that the costs of bankruptcy in Scotland 1066 were less than in England was chiefly due to the fact that the method of calculating the proportion of the costs to the estates was different from what it was in England. In Scotland, they excluded several charges included in the English calculations, and they took account of the payments to secured creditors in reckoning the percentage of expenses to assets divided, which was not the case in England. There was very little difference between the legitimate cost of bankruptcy in Scotland and in England taken on the same basis; what difference remained arose from the fact that the average of Scotch estates was larger than the average of English estates. The main differences were these:—In the first place, under the Scotch system, a debtor was allowed to petition in bankruptcy; but in England the debtor was compelled to petition for liquidation or composition. Next, the first meeting of creditors under the Scotch system must be held not later than 12 days after the notice of adjudication, and the creditors were put in possession and control of the estate at a much earlier period than was usual in England. At the first meeting in Scotland, the creditors were at liberty either to entertain a deed of arrangement by a majority in number and four-fifths in value, in which case the deed had subsequently to receive the approval of the Court, after hearing any objection that might be made against it on the part of the creditors, or the creditors might entertain a composition. As a matter of fact, the advantages of a deed of arrangement under this system appeared so trifling that only 6 per cent of the Scotch bankruptcies were dealt with in this manner. If they entertained a composition it was to be by a majority in number and nine-tenths in value. The composition had to be confirmed at a second meeting of the creditors, which was held after the public examination of the bankrupt in every case, and after a report which was presented to the Court and to the creditors by the trustees, as to the general character of the composition. The composition had to be approved by the Court, and the Court was authorized to grant or withhold the discharge of the bankrupt, and could only grant it after hearing the objections which creditors took to it, and also the report of the trustee. The 1067 general effect of these provisions, as contrasted with the provisions of the English law, was that the Scotch creditors had the fullest information as to the position of the estate, and the conduct of the debtor previous to the insolvency; and, further, the Court had full and efficient control over both the arrangements for the winding up of the insolvency and the discharge of the bankrupt. On consideration of the facts both of the English and Scotch systems, he ventured to ask the assent of the House to three principles, which appeared to him to be essential to a good Bankruptcy Law. In the first place, he said that the assets of the debtor in each insolvency belonged to the creditors, and they should therefore have the promptest and fullest control over those assets, subject to the least possible interference. In the second place, he said that, as it was clear that in many cases the creditors could not give sufficient personal attention to the administration of the estate, and as they must, of necessity, appoint to represent them some person in the position of trustee, it had been proved to be desirable and necessary that this trustee should be subject to official supervision and control as regards his pecuniary administration, and that his accounts should in every case be audited by authority; and, lastly, it appeared to him that, in the interests of the public generally—in the interests of the creditors, not of each separate bankruptcy, but as a class—and in the interest of public morality, which had suffered by those bankruptcy scandals, it had been proved to be necessary that there should be some independent examination into the conduct of the debtor and the circumstances attending his insolvency, and some proper provision for the punishment of fraud and negligence, and of rash and unjustifiable speculation and extravagance. It should be recollected that the public had a direct interest in the great losses which were suffered under the existing system. The £25,000,000 a-year now lost on the profits of business were paid for in the long run by increase of prices, and thus the public paid for the frauds of trustees and bankrupts. Turning from these topics, he would now state the main provisions of the Bill. In the first place, he proposed that Sections 125 and 126 of the Act of 1869, with regard to com- 1068 position and liquidation, should be repealed, as they had been the source of the greatest evils. That was recommended by the Committee of the House of Commons which sat last year; it was supported by the opinion of the Incorporated Law Society, by the Bankers' Institute, by the Chambers of Commerce, and, indeed, by all who took an interest in the subject. The Bill proposed next that all proceedings should be commenced by bankruptcy petition, and that the petition should be presented either by the debtor or by a creditor. Some objection had been taken to the debtor being allowed to petition; but it was felt to be very desirable to offer some inducement to the debtor to come at the earliest possible moment to his creditors, and not to postpone his coming until he had little or no assets left. That provision was also approved by the Committee of the House of Commons, and was recommended by the Incorporated Law Society and the Bankers' Institute, and it was a provision existing in the Scotch Act. Then, immediately on adjudication, they proposed that the property should vest in an official receiver, who would be an officer attached to each Bankruptcy Court; and who would be appointed by, and responsible to, the Board of Trade Department of the State. It was provided that this official should not incur any expenses without express authority, and was to consult the creditors as to the administration of the estate. He had also a Proviso in the Bill to meet a case which was brought to his knowledge on behalf of the Association for the Protection of Wholesale Traders, who said it was of the utmost importance that the control of the creditors should begin at the earliest possible moment after the adjudication, so that the free assets or goodwill of the business should not evaporate. It was therefore provided that on the application of the creditors, or any one of their number, the Court might, if it saw fit, appoint a special receiver, who should act as the manager of the estate under the direction of the creditors, in cases where special knowledge was required to preserve the interests of the estate. It was next provided that the bankrupt should make out a full statement of his affairs and a list of his creditors within three days, but without throwing costs on the estate by the em- 1069 ployment of professional assistance. This would provide against a bankrupt being thrown into the hands of a professional person before coming to Court at all. The Court, however, might authorize professional assistance, if it was shown to be necessary; but without the authority of the Court the bankrupt was not to incur any such expense. If he did so, the payment of the cost incurred would be in the discretion of the creditors. It was further provided—and he believed the provision would meet with the approbation of the commercial classes—that the first meeting of creditors should be held within seven days after the adjudication. At that meeting proxies might be used, as it would be a great hardship to creditors living at a distance to be forced to attend in person. But the proxies must be on official forms, and be available only for the meeting specified on the form, and must not be given to the solicitor for the bankrupt, or to any of his partners; nor were they to be used by any person for the purpose of voting for the appointment of himself as trustee, unless it were so stated on the face of the proxy. At that meeting the creditors would have two alternatives—either to entertain a composition, or a scheme of arrangement, by resolution passed by a majority in number and three-fourths in value. If a composition was taken, it must not be loss than 5s. in the pound, and the composition or liquidation arrangement must be confirmed at a second meeting of creditors to be specially called with due notice, and at this special meeting there would have to be presented a report by the official receiver as to any proposition that was made. Then the Court would have to approve the composition or liquidation after hearing objections, as in the case of the Scotch law; and if the Court was of opinion that the proposal for liquidation or composition was not in the interest of the creditors generally, or if it was of opinion that the bankrupt had been guilty of fraud, or such misconduct as would justify the Court in withholding his discharge, it might accordingly withhold it. If, however, the first meeting of creditors did not decide to entertain the proposal for a composition or arrangement, they must then, as a second alternative, appoint a trustee who must give security, and might be objected to, and, if necessary, removed by the 1070 Board of Trade, on the ground of unfitness or probability of collusion with the bankrupt; and he might also be subsequently removed by the creditors by an ordinary resolution, or he might be removed by the Board of Trade for misconduct; but if he was rejected in the first instance, or dismissed afterwards at the instance of the Board of Trade, he might appeal, or any person interested might appeal, against that decision to the Court. The remuneration of a trustee would be in accordance with a Schedule to the Act in all cases under £3,000. It might be increased in special cases, and in all cases above £3,000 it would be fixed by special resolution, subject to approval by the Board of Trade. The trustee would not be allowed any additional remuneration for the performance by others of services which he ought to perform by himself. In addition to this, all bills—solicitors', auctioneers', accountants', brokers', and others—were to be taxed, and all monies over £50 must be paid into the Bank of England, and the accounts of the trustee were to be audited half-yearly by the Controller General. The effect of these proposals would, he believed, be very beneficial. The Controller reported that in liquidation proceedings only a small proportion of these bills were now taxed; and he estimated that, with the bills of receivers, auctioneers, and other agents, about £100,000 would probably be saved to the creditors by direct taxation alone, besides the probability that many charges were now made and paid which would never be attempted if taxation were the rule. He (Mr. Chamberlain) was also sanguine as to the good results that would follow from the payment into the Bank of England of monies in the hands of trustees. It was estimated that, at the present moment, there were no less than £5,000,000 in the hands of professional trustees, in many cases wrongfully, and in some fraudulently, withheld by trustees from the estates to which they belonged. It had been stated, and he had no doubt upon the matter, that if they were all called upon to produce the money, many of them would find it to their advantage to leave the country if the Bill became law. The next provision of importance to which he called attention was that every bankrupt was to be publicly examined in Court as to his conduct and affairs. 1071 On the close of the bankruptcy, or before with the assent of the trustee and a majority of the creditors, the bankrupt might apply for discharge, and the Court would have power to grant, refuse, or suspend such discharge, or to qualify it by any conditions as to after-acquired property—a provision which ran on all fours with one of the proposals contained in the Bill of the late Attorney General (Sir John Volker). The Court might also order a prosecution, if it thought fit, and commit the bankrupt for trial, without applying to a magistrate. These were clauses which, in his opinion, were vital to the Bill. Nothing else would secure the punishment of misconduct or provide a sufficient inducement to honest dealing, and to a full disclosure of his affairs by the debtor. The only objection which he thought could be suggested was that this enforced publicity would press hardly upon the man whose insolvency was entirely the result of misfortune. Let them consider, however, for a moment, what was the position of an insolvent. He was a man who sought relief from obligations which he had voluntarily contracted, and who asked the Courts to impose on a minority of his creditors the acceptance of terms less than their just and legal rights. Surely a person in this position was one from whom explanation and information might be most properly demanded. It was right that he should be compelled to show how he had got into a position which compelled him to ask for this exceptional relief. He (Mr. Chamberlain) had always thought that the position of a bankrupt might in some respects be compared to that of a man who had lost his ship. In all such cases a public inquiry was held, and if the loss were duo to misconduct or negligence the captain was properly punished. If it was shown that the calamity was the result of unavoidable misfortune, his sword was returned to him if he were in the Navy, or his certificate if he were in the Merchant Service, and he left the Court acquitted and absolved in the face of all men. It was, no doubt, desirable that the bankrupt who had been unfortunate, or who had suffered, without any fault of his own, from the fraud of others, should not carry with him in after life anything in the nature of a stigma on his character. But surely the honest debtor would be the 1072 first to rejoice at the opportunity of showing in the most open manner that he was not to blame; the more public the inquiry the more complete would be his exoneration, and the only man who had cause to fear such an inquiry was the man whom it would show to have been guilty of misconduct, in which case a stigma would properly attach to him. Under existing arrangements, where there was no sufficient investigation, there would always be a suspicion of improper conduct; and he (Mr. Chamberlain) believed that the provisions of the Bill would be hailed with satisfaction by all who were in a position to prove their innocence as making a distinction between them and the fraudulent or speculative trader. But, as a further provision, and as a premium on good conduct, it was provided that the Court might also, if it was proved that the debts of the bankrupt were fully paid, or when the Court was satisfied that the bankruptcy had been caused by misfortune and not by misconduct, annul the adjudication, and thereby rehabilitate the bankrupt, and relieve him from the stigma and effects of bankruptcy as regarded civil disabilities. In cases where this was not done, bankruptcy would involve civil disabilities. In the case of a Peer, he would be disqualified from sitting in the House of Lords until his bankruptcy was ended. In the case of a Member of the House of Commons, a mayor, an alderman, a member of a local corporation or school board, a town clerk, or clerk of the peace, or any other person holding an official or municipal office, he would at once have to vacate his office, and he would not be re-eligible for the term of seven years afterwards. Magistrates were dealt with by the Crown. He must now draw the special attention of the House to the duties and position of the official receivers created by the Bill, whose functions were somewhat novel and most important. They were to be officers of the Court, but would be appointed by, and subject to, the authority of the Board of Trade. Where possible, the existing Registrars might be utilized for this office; and their duties would be, firstly, to protect the interests of the public by inquiring into and exposing and providing for the punishment of fraud, recklessness, and extravagance; secondly, to protect the interests of the creditors at 1073 an early stage by obtaining and giving information which experience showed that the creditors were often unable to obtain for themselves; and, lastly, to act as interim receivers until a trustee was appointed. As the Bill provided for the first meeting to be held in seven days, it would be obvious that the shortest possible time would elapse before the creditors had full control through their own trustee of the property and estate. Where, however, the creditors did not desire to appoint a trustee of their own, they might elect the receiver to continue the winding-up and to act as trustee. These were the ordinary duties of the official receiver in all those cases in which it might be hoped that the assets would be sufficient to induce the creditors to take some interest in the matter, and to be willing to look after their own affairs. In such circumstances, the official receiver might be compared to the Queen's Proctor in divorce cases, intervening only when necessary to protect public interests. But the statistics of insolvency showed that there was a large number of estates with no assets, or with assets so small as not to induce the least trouble on the part of any creditor. It was here that the greatest scandals arose, for those estates fell an easy prey to the professional wreckers, who took everything in costs and expenses. It seemed desirable to deal with them separately; and accordingly it was proposed that in the case of small estates, under £300, where the interests of individual creditors were necessarily exceedingly small, the receivers should act as trustees, and wind up the estates as quickly as possible, unless the creditors, by resolution, decided to elect a trustee of their own. The position, then, was this—that in the case of ordinary estates the creditors were to elect their own trustee, unless they specially desired to have the receiver; while in small estates the receiver was to act as a matter of course, unless the creditors specially desired to appoint someone else. The recommendations of the Committee of the House of Commons and of the trading community in favour of the allocation of a special commercial Judge to bankruptcy business would be provided for by the Bill. The London Court was to be merged in the High Court of Justice, and the Registrars would act as chief clerks. The appeal in London cases 1074 would be from the Bankruptcy Judge to the Court of Appeal, and in country cases from the County Courts to the Court of Appeal, with the Judge in Bankruptcy sitting as one of its members, so that his special experience might be available for all cases. There were some further incidental provisions in the Bill limiting the rights of bill holders, providing for the administration in bankruptcy of the estates of deceased persons, amending the law with regard to onerous property, and others to which he need not on that occasion more specifically refer. He feared that he had dwelt at too great length upon this Bill, the details of which, however, he hoped he had made sufficiently clear to the House. Perhaps, in conclusion, the House would permit him to estimate the results of the changes which this Bill, if it became law, would bring about in the future. In the first place, with regard to economical administration, it would be seen that it throw upon the bankrupt estate a new charge—namely, the cost of the official receiver, and the increased charge of the Controller's audit department. They provided for that, in the first place, by the interest which would accrue upon the balance which, under existing circumstances, was detained by the trustees; but under the new system would be lodged in the Bank of England. They expected dividends would be more quickly paid, so that the unpaid balances would not be so large as at present; but, on a moderate estimate, the payments by trustees into the bank on that account would always amount to something like £800,000 or £1,000,000, and the interest on that would be at least £25,000 a-year, which they could always rely upon. The remainder of the amount necessary would be provided for by a fixed fee charge in the case of small estates, and by a small percentage in the case of large estates, varying from 5 per cent on estates under £300, but gradually decreasing until it amounted to only ½ per cent on estates of £3,000 and over. When it was remembered that the actual cost of administering bankrupts' estates, which varied according to their amount, was, on an average, in 1871 31½ per cent, and in 1879 44.9 per cent, it would be seen that the small percentage in question would be merely nominal, for the sum was so small that it would not increase in any 1075 appreciable way the burden upon estates. Against this small increase they had to set the following—that the bankrupt would not be allowed to incur unnecessary charges before he brought his estate before the Court, the trustees would have to do their own work, and not pay others; and the charges would be on a fixed scale, and would not be left to their own discretion. Every bill would be taxed by the Court, and not left to the discretion of a trustee. They would be able to save considerably by consolidating the advertisements, and the expenses under that head. They would do away with certain proceedings, and save fees which were at present leviable in Bankruptcy Courts; and altogether he was confident they would reduce the legitimate expenses by 10 to 15 per cent. This would be the saving on legitimate expenses; but the gain would be much larger by putting an end to the illegitimate expenses, which, under the present system, swallowed up so large a percentage of the estates. To show the evil of the present system, he might inform the House that, whereas in 1871 the number of estates where there was no dividend was 34 per cent of the whole number of bankruptcies, that number had risen to 46 per cent in 1878, and that the number of estates where the dividend was under 1s. in the pound had risen from 45 per cent in 1872 to 61 per cent in 1879. It was impossible to doubt that the amount of the dividend would have been very much larger in a vast number of cases had it not been for the illegitimate expenses incurred by the trustee. He was afraid that it was not possible to make bankruptcy a satisfactory proceeding under any circumstances; but, by a judicious amendment of the law, fraudulent trading might be largely checked and the tone of commercial morality might be greatly raised, while honest traders would be induced to look after their own interests. He claimed for this Bill that it was at least an honest and a practical attempt to deal with a great and increasing evil. He put it to the House that the matter was not in any sense a Party question, for the interests of commerce affected all of them, and were too great to be subordinated to Party interests. This was not a Party Bill, as he had shown in acknowledging the assistance which he had derived with regard to it from the 1076 labours of the late Administration. He trusted, therefore, that the proposals this Bill contained would obtain not merely a fair, but even a favourable consideration at the hands of the House. On behalf of Her Majesty's Government, he should adhere to the main principles of the Bill as he had explained them; but he should welcome suggestions from all sides of the House that the experience of hon. Members might enable them to suggest as in any way tending to amend the details of the measure. He ventured to hope that even that Session, crowded as it was with other and important and urgent Business, would not be suffered to pass without something being done to meet the convenience and the pressing claims of the commercial classes in respect of this subject. They boasted, not without reason, that they were the greatest commercial nation in the world; but they had the worst commercial legislation of any civilized country. He appealed to the House, therefore, to make a beginning of reform on this important subject, so that this Parliament might do something to remove a just cause of national discredit and a fruitful source of unnecessary loss and suffering.