§ Order for Second Reading read.
§ MR. CHAMBERLAIN
said, that, in asking the House to assent to the second reading of the Bill, it was quite unnecessary for him to dwell at any length on the defects of existing legislation relating to the subject. In the Session of 1881, when he introduced a similar measure, upon the main lines of which the Bill now before the House was based, he had had the opportunity of pointing out that there was general concurrence amongst all the authorities upon the subject, both as to the nature of the defects in the existing law, and also to a very large extent as to the cause of those defects; and all that he need do then was to summarize the results of their experience of the existing law. He would say, then, that the Act of 1869 had favoured the debtors at the expense of the creditors, and had favoured that class of the community which lived by preying upon bankrupt estates at the expense of creditors and debtors alike. It had made it easy for debtors, by paying a small dividend, or no dividend at all, to escape absolutely from all their liabilities, without anything in the nature of an effective examination of the circumstances which had brought them into that position; while, at the same time, it had stimulated extravagant, and even fraudulent, administration of assets by giving opportunities to interested parties to deal with them in an entirely irresponsible and uncontrolled way. The causes for those defects were almost as much on the surface as the defects themselves. They were, in the first place, that there had been, under the present law, no sufficient provision for an impartial or independent examination into the causes of each bankruptcy, and the conduct of each bankrupt. Secondly, such investigation as had been undertaken, perfunctory and inadequate as it generally was, had been thrown upon the creditors; and, contrary to all sound policy and principle, they had been invited to throw good money after bad, and undertake a public duty at their private charge. In 817 the third place, the provisions for the punishment of misconduct, however grievous, had been altogether inadequate; and, moreover, the application of those provisions, instead of being left with responsible authorities, had been left almost entirely to the creditors, who, in many instances, might be interested in hushing up questions which they were expected to investigate. And, lastly, the arrangements for the supervision and control of persons entrusted by the law with the administration of bankrupts' estates were so inadequate and insufficient that they could, practically, do what they liked. So far, he would have the general voice of the House with him; and before he proceeded further, he had to ask the House to keep in mind two main, and, at the same time, distinct objects of any good Bankruptcy Law. Those were, firstly, in the honest administration of bankrupt estates, with a view to the fair and speedy distribution of the assets among the creditors, whose property they were; and, in the second place, their object should be, following the idea that prevention was better than cure, to do something to improve the general tone of commercial morality, to promote honest trading, and to lessen the number of failures. In other words, Parliament had to endeavour, as far as possible, to protect the salvage, and also to diminish the number of wrecks. His next point was that, with regard to those two most important objects, there was only one way by which they could be secured, and that was by securing an independent and impartial examination into the circumstances of each case; and that was the cardinal principle of this Bill. It was the principle by which all its proposals must be tested, and by which the Bill must stand or fall. He was quite sure that such an independent examination as he had proposed was absolutely of the essence of any satisfactory reform in the Law of Bankruptcy. What happened when a bankruptcy took place which might easily cause misery to thousands of people, and bring ruin on many homes? It was treated as if it were entirely a matter of private concern, and was allowed to become a scramble between the debtor and his advisers—who were very often his confederates—on the one hand, and the cre- 818 ditors on the other. Meanwhile, the great public interests at stake in all these questions were entirely and absolutely ignored, as there was nobody to represent them, and the practice which was followed in the case of other calamities was, in that case, entirely absent. In the case of accidents by sea and by land—railway accidents, for instance—it was incumbent upon a Government Department to institute an inquiry. There were inquiries in the cases of accidents in mines, and of boiler explosions; and, sad as those disasters were, they did not, in the majority of cases, cause so much misery as a bad bankruptcy, which brought ruin to many families by carrying off the fruits of their labour and industry. Who was to object to inquiry? Certainly not the honest debtor. There might be many men reduced to bankruptcy by circumstances beyond their own control, by unavoidable misfortune, and without their having been guilty of any misconduct. Men in such a position ought to be the first to desire and claim full inquiry into the circumstances of their cases, in order that they might go again into the world, acquitted, by the verdict of a competent Court, of anything which would cast a stigma upon their character. No objection was likely to be taken by creditors generally, or by the commercial community as a whole. It was their desire, at all events, that bankruptcy should not be the easy and profitable mode of escape from all liabilities which it was at present; and they had come to the conclusion that, although insolvency was not necessarily a crime, yet it indicated a state of things which required explanation and inquiry. The only people who were likely to object were the creditors in the cases of particular estates. There had been cases in which creditors had desired to hush up transactions which did not do them much credit, or where they had the hope that they might, in some small degree, increase the dividends they were to receive by compounding for the misconduct, or condoning the negligence, or the rash and wilful extravagance, of which the bankrupt might have been guilty. But those were cases which, it seemed to him, did not deserve the sympathy of the House; and it was not for the benefit of creditors in such a position that it would interpose to pre- 819 vent inquiry which, on other grounds, was clearly desirable. If those principles wore granted, the machinery of the Bill would be found to follow as a matter of course. The hon. Member for Mid Lincolnshire (Mr. E. Stanhope) had given Notice of an Amendment to the effect that the House was not prepared to entrust the powers proposed in the Bill to any Department of the Government. Until lie had heard the speech of the hon. Member, he did not like to put any interpretation upon the Amendment; but it seemed to be inconsistent with the urgent pressure put upon the Government to establish a Ministry of Commerce. It appeared to be desired, on both sides of the House, that everything should be done to give importance, authority, and influence to the Department which was charged with the control of commercial interests; and yet the House was asked, practically, to pass a Vote of Want of Confidence in this Department, and to declare that it was totally unfit to be trusted with ordinary matters of commercial administration. The hon. Member was in this dilemma—either he was in favour of impartial and independent inquiry, or he was not; if he was not, he was setting himself against what was almost the unanimous opinion of all the great authorities on the subject. It was the opinion of those who had had most experience of the administration of the Bankruptcy Law—of the Controller in Bankruptcy, who, in his admirable Reports, had called attention to the scandal of the present system. It was the opinion of the Incorporated Law Society, and, he believed, of the Institute of Accountants. It was the opinion of the Committee recently appointed by the Associated Chambers of Commerce; of the London Chamber of Commerce, and of the London merchants and bankers generally, who, in an influentially-signed Memorial presented to the late Prime Minister in 1879, said that one of the great defects of the present system was the ability of bankrupts to get a speedy discharge without being subjected to any efficient investigation of their affairs, or of the conduct and proceedings which had led to the bankruptcy. They added that the present law was rendered practically nugatory, because it threw on those who had already incurred losses the investigation of the bankrupt's affairs, and the obligation of exposing 820 misconduct which, in the interest of public morality, should be dealt with, not as a private matter, but by a public Court and Judge. Either the hon. Member was in favour of such inquiry as was proposed, or he was not. If he was not opposed to inquiry, he would hardly find any way of carrying it out effectively and to the satisfaction of all concerned, except the way proposed in the present Bill. The conduct of such inquiry could not be left to the creditors. Nothing was more clear, as they had found by their experience of the present law, than that creditors would do hardly anything, even where their own immediate pecuniary interests were concerned. That was the constant complaint of the Controllers. Traders had told him that they were no more likely to attend to the business of administering bankrupts' estates than they were to carry their own parcels. It was not worth their while to undertake these duties on their own account; and, à fortiori, it was not worth their while to undertake them on the part of the public. Then the business could not be left to the Court without assistance. A Court sat to decide questions that were brought before it; but it had no initiative power of its own. It must be set in motion. It could not originate; it arbitrated and decided on the matters brought before it. Unless the initial proceeding was entrusted to a public official, the work could not be done. He ventured to say that the failure of certain provisions in the Act of 1831, and of subsequent Acts preceding the Bankruptcy Act of 1869, to secure anything like an adequate investigation into the affairs of a bankrupt was due entirely to the fact that what inquiry there was was left to the Court and the creditors. In throwing the duty upon a public official, who would be under the directions of a responsible Department, which acted in the full light of publicity, and was responsible to the public and to that House at every stage of its proceedings, the House would be acting according to analogy in the case of other inquiries like those relating to accidents at sea and on railways, and to boiler explosions. It was made incumbent on the Board of Trade to see that inquiry was held in every case of accident on railways and at sea in which evidence could be collected. In the case of accidents in mines, the 821 responsibility was thrown upon the Home Office; and in none of these cases was the duty and responsibility of initiating the inquiry thrown upon private individuals or upon a Court of Law. The experience of those inquiries, he ventured to say, was entirely satisfactory. They had thrown floods of light on the questions raised; and, as far as he knew, no one had impugned the discretion of the Departments that had conducted them. In the Bill the official upon whom this important responsibility was to be cast was called the Official Receiver. He had had a careful examination made into the probable number of bankruptcies which might be expected under the now system. They had been obliged to assume—he hoped he had not been too sanguine—that there would be a considerable reduction in the number. He had also had calculations made showing what proportion of these bankruptcies was likely to occur in every district throughout the Kingdom, and he thought it was not probable that more than 60 of these officials would, on the whole, be required; and that included the Inspectors of districts, who would have to be appointed to control and supervise the operations within a considerable radius. It must not be supposed that all these officials would be now officials, because he believed, in very many cases, it might be found that the existing Registrar or the High Bailiffs already attached to the Bankruptcy Court would have ample time to attend to this business, and at the same time, from their peculiar experience, would make admirable officers for the purpose; and their interest in both their present positions and the new one offered security for their efficient administration of the new scheme. The new appointments would probably be few in number, and the expense of these officers was estimated at about £50,000 per annum, exclusive of some additions to the cost of the Board of Trade, and of the Audit Department under the Controller in Bankruptcy. The cost of these appointments, and of the general administration, would be met from several sources. In the first place, the fee in the case of every bankruptcy petition would be the same as now levied in cases of bankruptcy—£5 for each case, and there would also be an addition of a small percentage 822 to the sum already charged upon the assets collected. He would not pledge himself to exact figures; but his belief was that the requirements of the case would be satisfied by some fractional addition—say a quarter per cent—at all events, so small an amount in comparison to the total costs in bankruptcy that he need not take it into account. In addition to those sources of revenue, he expected to obtain in the shape of interest on the aggregate balance that would remain in the hands of the Government if the amounts now paid to trustees were paid to the Bank of England—an aggregate balance of something like £1,000,000—from £25,000 to £30,000 more; and that, with the other sources of income to which he had referred, would amply provide for all the now expenses that he contemplated under the Bill. Now, the duties of the Official Receiver would be of a very important character. The primary duty of this Receiver would be—first, to investigate the conduct of the bankrupt, and the circumstances that had led to the bankruptcy. In the second place, he would have to conduct the examination of the debtor before the Court, and, in the third place, to report to the Court when the Court was called upon to consider the question of discharge, both as to any proposition for the settlement of the debtor's affairs which might be before the Court at the time, and also as to any misconduct on the part of the bankrupt which might have been disclosed in the course of the proceedings. He anticipated that this officer, who would in some way be a public investigator, and to a slight extent also a public prosecutor, would probably be the receptacle of anything in the nature of special information which might be possessed by any honest creditor who desired full investigation. If any suspicious circumstances should come to the knowledge of any person concerned in the administration of the estate, and if he was himself unwilling to prosecute an inquiry into them, he would only have to communicate the facts to this officer, and it would be his bounden duty to see that a full and complete investigation was made into the matter. Those duties to which he had referred were the primary duties, and those for which in particular he asked that this officer should be appointed. They were duties which the 823 officer would be called upon to perform in the interests of the public, in the interests of commercial morality, and in the interests of the commercial community generally. Having got an officer of this kind, an officer who, by the very necessities of the case, must be well-informed—they had thought that they might be able to utilize him for the benefit of the creditors in each particular case; and, accordingly, it would be his business at the first meeting to receive from the bankrupt a statement of his affairs, to send a copy to all the creditors, to issue forms of proxy on a prescribed form for this first meeting, and, above all, what was extremely important, to issue to all the creditors a report on any proposal for composition or liquidation which might be made by the bankrupt. Now, it would be seen that the provision which he had described constituted a system which he thought they might fairly call a system of official inquiry, and which went on all fours with a similar system in the matters of accident to which he had referred. He did not think that without some such limited officialism as this any satisfactory inquiry was even possible. No investigation could be worth anything unless it was conducted by an independent and impartial officer. This officer would not only be subject to the Board of Trade, but he would also be under the control of the Court, because in every case it was proposed that the Official Receiver should be made an officer of the Court. The proposal was a new one, so far as Bankruptcy legislation was concerned; but he was convinced that any attempt to do without him, and to throw on the Court unassisted the duties which it was proposed should be discharged by this officer, would only make the Bill nugatory; and he could not be a party to propose legislation which would, he thought, turn out to be nothing less than a farce. He now came to consider the second of the two objects which he had said they must have in view in Bankruptcy legislation—the honest and economical administration of the bankrupt estates. There he had had to consider a very important question, and it was whether this limited officialism which was proposed in the Bill should have given to it a very much wider scope. It was admitted, he believed, on all hands, that 824 there must be in the administration of estates something in the nature of official supervision of the trustees and of the persons employed; but the question he had to consider was, whether they could confine themselves to official supervision, or whether they could go as far as official administration. There were, undoubtedly, a great number of authorities who were in favour even of official administration. It had often been stated that officialism had been tried in Bankruptcy in connection with previous legislation, and that it had entirely failed. But he was sure that everyone who knew anything of the subject would agree with him that the officialism of previous Bills differed altogether from the officialism now proposed; and, therefore, the fact that it had previously failed was no argument for assuming that it would fail in this case. It would be really instructive at this stage to see what had been the history of previous legislation in reference to this part of the subject. Before 1831 creditors might be said to have had full control of the administration of bankrupt estates. On all hands the most general dissatisfaction was expressed with that state of things, which was no other than a chaos. In 1831 an Act was passed, which was known as Lord Brougham's Act, and which, for the first time, introduced a system of official administration. In the first instance, it introduced it in a very limited form, and to a very limited extent. It introduced a class of officials who were known as Official Assignees attached to the London Bankruptcy Court, and not to the Courts in country districts; and to those officials was given, practically, the control of the administration of bankrupt estates. In 1840, after this official system, which, as he had already pointed out, went very much further than this Bill, and was, in fact, different in its object, had been in existence for nine years, a Royal Commission was appointed to consider the subject of Bankruptcy; and this Commission recommended the extension of official assigneeism to the country generally. In 1842 the system was accordingly extended with general approval; indeed, there was a chorus of congratulations on the extension of the system, which was now said to be universally condemned. In 1847, 16 years after the first introduction of the system, there was a Select Committee, which, 825 reported unanimously in its favour; and they stated that all the opinions and all the evidence were in favour of the new system as a great improvement, and it was universally approved of by the mercantile world. In 1849 there was another Select Committee of both Houses, which dealt with other branches of the subject, but which, in reference to this matter of official administration, made no complaints whatever, and the Act which followed on their Report confirmed those officers in their functions. It was not until 1861, 30 years after the first institution of those Assignees, that the system was generally condemned, and an Act was passed which very much limited their duties, and practically reduced them to nonentities. In 1864 there was a celebrated Committee which reported entirely against the system, and advised that Official Assignees should be totally abolished; and in 1869, to complete the history, they were accordingly totally abolished, and the public entered once more on a system of voluntaryism, which again led to absolute chaos and gave general dissatisfaction. What he pointed out to the House as significant and as worthy of observation was this—that the only system which gave any satisfaction at all, and that only for a limited term of 20 years, was the official system. He had been led to make inquiry in order to ascertain how it was that this system, which was so popular at first, which was shortly afterwards extended, and which was confirmed and approved by repeated Committees and Commissions, should yet, in a period of 20 years, have fallen into disrepute, and, after a period of 30 years, should have been universally condemned. The reason was this. In the first place, the system was under the Courts, and not under a responsible Department; and if the hon. Member for Mid Lincolnshire (Mr. E. Stanhope) had thought that it would be possible that the official duties connected with this Bill should be placed under the Courts, he would beg him to give consideration to the experience which was to be derived from the working of the Act of 1831. Under the Courts it was found impossible to exercise anything like a proper supervision either over the appointment of the Official Assignees or over the performance of their duties. The Courts were not a department which could possibly, with any credit to them- 826 selves, or with any satisfaction to the public, supervise a complicated administration. What happened was this—in the first instance, the Assignees, who, he must say, were always too numerous, were selected with the greatest possible care. The Judges, who were also appointed and selected with great care, took an immense interest in the new measure, and went altogether outside their ordinary duties—the ordinary scope of the functions of a Judicial Court—and they watched most carefully the operation of the new measure. But in course of time things became relaxed. The appointments were much less scrupulously looked after; indeed, he believed it was not too much to say that they were, in some cases, notoriously obtained by jobbery. The result of that naturally was great carelessness and negligence. The Assignee was allowed to do what he thought proper with the funds; he kept the money in his hands without being properly called to account, and in one or two flagrant cases there was gross peculation. And under these circumstances there arose a public scandal, which contributed, undoubtedly, to the unpopularity of the system, and led to its abandonment. But after having studied the matter very closely, and after having estimates of the results of legislation on the returns in the case of bankruptcies, and having found that the dividends were larger, on the whole, under that system than they ever were before or since, he thought it was open to question whether it would not have been advisable in 1869, instead of abolishing this system of officialism altogether, to have contrived to reform it and purify it from its abuses. It might be said, under these circumstances—"Why, then, do you not restore this official system of administration in the proposals which you have brought before the House?" Well, one strong reason that weighed with him had been that, in his view, public opinion was not ripe for such a change. There was a prejudice, not altogether founded on good reasons, against a system of officialism; and he believed the public would reject, or would not receive with favour, any proposal to go back completely to the system instituted by the Act of 1861. He was further confirmed in this opinion by the reflection that at all events it was not an obligation which was cast upon the State 827 to assist to save the pockets of creditors in this matter. The Government were bound to secure, if they possibly could, honest dealing on the part of all persons engaged in this administration; but, having taken all the precautions they could for that purpose, he was not aware that they were called upon to go further and to benefit creditors, in some cases, perhaps, against their will. Therefore, the principle which he had adopted was that the collection and distribution of the assets of a bankrupt estate were primarily the duty of the creditors themselves; and he had accordingly limited official interference to the supervision which was necessary for the protection of a minority of creditors, and in order to secure honest dealing on the part of all the persons employed in the administration of the estate. But, so far from having gone back, whether for good or evil, to the official system of 1831, he ventured to say it would be found by anyone who would carefully examine the provisions of the Bill now before the House that under it creditors would have more complete and effective control over the management of their estates than ever they had before. What he had said would make clear to the House the main principles of the measure, and he would now summarize the three points to which he would ask the assent of the House. The first point was that there should be in every case a public inquiry into the circumstances that placed a man in a position in which he came to the law and asked to be relieved from obligations which he had voluntarily undertaken; the second proposition was that there must be a public official to conduct this inquiry; and his third was that if you want to have any hold over this public official and make him fully responsible you must place him under the direction of one of the Departments of State, which was, in its turn, responsible to public opinion and that House. He would ask the House next to consider the procedure in detail under this Bill. In the first place, he called attention to a very important change which distinguished this Bill from that which he put forward in 1881. In the Bill of 1881 there was only one proceeding—in every case, an insolvent would have to be declared bankrupt, although a power was reserved to the Court to annul the bankruptcy at a subsequent stage, if it 828 should be of opinion that the bankruptcy had been caused by misfortune, and not by misconduct on the part of the bankrupt. But objections of great weight and importance were urged that this was rather too harsh; it applied the stigma which must of necessity attach in all cases to the title of bankrupt to persons whose only fault was their misfortune. It was urged that there were certain liabilities scattered up and down the law with reference to leases and other matters which would follow on adjudication of bankruptcy; while it was true that abroad the title of bankrupt carried with it a stigma much more serious than it did in this country. Taking all these matters into consideration, he had thought it desirable to provide a preliminary stage, which he called the making of a receiving order, which might or might not ripen into bankruptcy according to the circumstances of the case. On proof of the facts stated in a creditor's petition, or on the presentation of a petition by the debtor, the Court was to make a receiving order. The receiving order would have the effect of an adjudication in bankruptcy as far as regarded the staying of all proceedings, but, as he had said, would not necessarily eventuate in bankruptcy. The debtor was called upon immediately to submit a statement of his affairs to the Receiver, who was instructed to forward a copy to all the creditors, and to summon the first meeting of creditors. At the first meeting, which must take place within 14 days, and after seven days' notice, the creditors might at once decide to make the debtor a bankrupt, or, as an alternative, they might resolve to entertain a proposal from the debtor to offer a composition or a scheme of arrangement. If this proposal was entertained, it would be submitted to a second meeting, which, however, could not be held until after a public examination of the debtor, which was imperative in every case. And to that second meeting the Official Receiver was instructed to make a report upon the terms of the composition or scheme of arrangement which the debtor had submitted. The determination at either meeting must be by a special resolution carried by a majority in numbers, and of three-fourths in value, of the creditors present, or by proxy. The next step was that the proposition approved of by the cre- 829 ditors must be submitted to the Court, which stood there as the guardian of the interests of the minority of creditors who might disapprove, and of the interests of the public generally, whom it profited to have a full investigation into the circumstances. The Court, which would have before it all the facts and a special report from the Official Receiver, would be entitled to refuse the proposal altogether, either if it thought it to be in itself unreasonable, or if it held that it was not for the benefit of the general body of creditors; or, lastly, if the conduct of the debtors had been such as to justify the refusal, or the suspension of his certificate of discharge. So that the House would see that, under these circumstances, both the Court and the creditors would only be called upon to give their decision when they were put in possession of the facts of the case. If the creditors or the Court should decline the proposal for a composition or scheme of arrangement, or if the creditors should have decided that the debtor should be made a bankrupt, in either of those cases the adjudication of bankruptcy would be made. There followed upon this that the bankrupt would be disqualified within 12 months for sitting in either House of Parliament. He would be disqualified immediately from acting as a Justice of the Peace. He would also be disqualified from acting in many public and municipal offices; and he confessed it was a fair question for consideration in Committee whether, as in some foreign countries, he should not likewise lose his electoral rights. But all those disqualifications might be removed if at any subsequent period the bankruptcy should be annulled, or if he should obtain from the Court a certificate that his bankruptcy had not been caused by misconduct, but was entirely due to misfortune. After the bankruptcy was resolved upon the creditors would be called upon to appoint a trustee. The trustee must give satisfactory security, and the Board of Trade might object to the trustee whom the creditors selected; but they must only do so on the following grounds:—That the appointment had not been made in good faith; that the person selected was an unfit person to be a trustee; or that he was connected with the bankrupt and his estate in such a way as to make it difficult for him to act impartially in the matter. In all 830 these cases of objection, there would be an appeal allowed from the Board of Trade to the Court if the trustee desired it. There were a number of provisions intended to secure the proper administration of the estate by the trustee. He was not to be permitted to employ a solicitor or other agent without the consent of the Committee of Inspection; and he was bound to declare a first dividend, if any, within four months of the first meeting, and subsequently at intervals of not more than six months. As to the remuneration, there was a change in the present Bill from what had been proposed in 1881. In 1881 he had followed the Bill of the late Attorney General, Sir John Holker, who introduced a scale of remuneration applicable to every case. He found it impossible to provide a scale which should be adequate in all cases without being excessive in some. There was not only a difference between small and large cases, but there was a difference between simple cases and those which involved complicated questions of law. He had, therefore, resolved to leave that question to the creditors, subject to two provisions—first, that part of the remuneration should be by way of commission, partly on the amount realized, and partly on the dividend paid; and, secondly, that one-fourth of the creditors, or the bankrupt himself, should have an appeal to the Board of Trade in cases where they thought the remuneration extravagant. No costs were to be allowed to a trustee for duties performed by other persons which lay ordinarily within his province. All bills of costs, of every kind, were to be taxed, and all moneys paid into the Bank of England, except in special circumstances—where the business was to be carried on, and a local banking account was necessary or convenient. The accounts of the trustees were to be sent to the Board twice a-year, and were to be audited by them. Then came a provision to which some exception had been taken; and that was that the creditors might, if they chose, appoint the Official Receiver their trustee. It would be a hard thing if the creditors were to be precluded from appointing the Official Receiver, who might enjoy their confidence, and be specially qualified to deal satisfactorily with the winding up of the estate. No doubt, in the great majority of cases, the creditors would prefer to choose a 831 trustee whom they knew, and who, from local and other circumstances, was specially suitable for the office. But in small estates it might often be desirable to appoint the Official Receiver. A very important part of the Bill related to the discharge of the bankrupt. He might at any stage of the proceedings apply for his discharge; but the application was not to be heard till the examination of the bankrupt was concluded; and at the time of hearing the Court must have before it the report of the Receiver to which he had referred, which was to contain a statement with regard to the conduct of the debtor. The Court, having those particulars before it, might refuse or suspend the certificate of discharge, or grant it, subject to any conditions, both as to after-acquired property, and other matters which it might think right to impose; and regard was especially to be had to the following circumstances:—First, whether or not the dividend had been less than 10s. in the pound; secondly, if the bankrupt had kept proper books; thirdly, if he had continued to carry on trade after he knew himself to be insolvent; fourthly, if he had engaged in rash speculation or lived extravagantly; fifthly, if he had put forward frivolous defences to actions by creditors; sixthly, if he had shown undue preference to particular creditors; seventhly, or if he had, on any previous occasion, paid less than 20s. in the pound to his creditors. The general effect would be that the Court must, in every case of failure, be informed of and consider every circumstance calling for its notice. And if the Court should be of opinion that the debtor had been guilty of misconduct, amounting to misdemeanour, it would be enabled, as a Court of First Instance, to commit the debtor, or make an order for his prosecution. In the latter case, the Director of Public Prosecutions would be required to take up the prosecution, and to maintain it on behalf of the public, and not to leave it to the action of individuals. When the offence committed by the bankrupt was less serious the Court might refuse or suspend his discharge. With reference to this, it was necessary to consider what would be the position of an undischarged bankrupt. Under the present law, it seemed to be a matter of perfect indifference whether an insolvent obtained his 832 discharge or not. In the Controller's Report for 1881, it was stated that out of 5,207 bankrupts, only 606 had applied for their discharge. Of those who were absolutely entitled to their discharge, owing to their having paid 10s. in the pound, only about one-third thought it worth their while to go through that form. That state of things was a disgrace and a scandal to our law; and the Bill would be really nugatory unless the refusal of a discharge could be made a real terror to delinquents. Accordingly, it was proposed to make it a misdemeanour for an undischarged bankrupt to obtain credit to the extent of £20 without stating what his position was; and if this provision were maintained, there would in future be every inducement to a trader to fulfil the conditions without which he could not obtain his discharge. There were a number of minor provisions which he need not notice at any length. In the first place, the proposals of the Bill of 1881, with regard to the London Bankruptcy Court, and, generally, with reference to the methods of appeal, were practically renewed in the present measure. There was a change, however, which he believed would be satisfactory, and would excite a large amount of interest in a technical matter—that was the valuation of securities in the case of bills of exchange. By the Bill of 1881, the value of all the endorsements other than that of the debtor was to be estimated. Now, only those endorsements which were antecedent to those of the debtor were to be taken into account. The principle was clear, and it was this—that all securities on the estate were to be valued; but securities external to the estate need not be so valued. Thus, if A lent money to B, and C guaranteed the debt, A was not to be called upon to put a value upon C's guarantee. But if A lent money to B, and B gave as security a mortgage of his house or manufactory, A must value this mortgage before proving his debt. All he had done with respect to Bills was to assimilate them to all other kinds of securities. He had been largely influenced on that question by a deputation which had waited upon him of London and country bankers; and he believed the alteration would be found generally satisfactory. There was another question upon which he expected there would be considerable difference of 833 opinion, and that was the question of certain preferential claims. In some small estates the assets were swallowed up by those preferential claims, which were of four classes—First, for wages due for a certain period prior to the bankruptcy; secondly, the landlord's claim for rent; thirdly, Imperial taxes; and, fourthly, local rates. He proposed that all those preferential claims should be done away with, except the first. He would submit that all the three latter claims ought to stand on the same footing. He did not think that the State could be expected to forego the advantage it now enjoyed in favour of the landlord or the local authority. He was much gratified, although somewhat surprised, that the Treasury made no objection to his suggestion. But he could not but feel that in the case of bankruptcies, the claim of the individual creditor, to whom the bankruptcy was a very serious matter, ought to be regarded before that of the State, or a local authority. It also appeared unfair to other creditors that there should be sprung upon them, after the bankruptcy, preferential claims of which they could by no possibility have had notice. In the last place, he had adopted this proposal because it seemed to him that the preferences now granted tended to bad and negligent administration by all the three classes to whom he had referred. For these reasons, he had thought it right to raise this matter for discussion. It was not a question of principle, and the decision upon it would be in the hands of hon. Members when the Bill was in Committee. He hoped he had now made clear to the House the general scope and operation of the measure in all ordinary cases, and it only remained for him to call attention to one important provision which was entirely new. He alluded to the provision which would affect the procedure of Courts of Law with regard to small debts, and which had a very important bearing on the interesting question of the total abolition of imprisonment for debt. He had retained in the Bill the provisions of the Bill of 1881 for the summary administration of small estates having less than £300 of assets. But what he now desired to call attention to was the clause which followed, and which dealt with the case of debtors who owed less than £50. That was the class of debtors who filled our County Courts 834 with plaints, and added very considerably to the number of the occupants of our gaols. It had always been felt to be a great hardship that while a large debtor could with ease relieve himself of all his liabilities, he or his trustees might be prosecuting a poor man for 30s. or 40s.; and the latter might be sent to prison without having any means provided for him to make a composition with his creditors, and when, after satisfying this debt, he came out of gaol, he was still liable in full to all his other creditors. That inequality of the law was the subject of much complaint, and what the Bill proposed to do was to redress this inequality in two different ways. In the first place, by the provisions to which he had already called attention, he had made it more difficult for a large debtor to escape from his liabilities; and, his discharge being made conditional with regard to after-acquired property, he would stand in exactly the same position as the workman, whose wages might be arrested for the payment of his debt, and he would be liable to go to prison if it were proved that, having money to pay, he had refused, or neglected, to pay. But the more important provision which he had made for dealing with this subject was that under which a County Court Judge might, in future, make an order for the payment by a debtor who owed less than £50, by instalments or otherwise, of all or any part of his debts. A debtor, who was brought up on a judgment summons or a County Court plaint, might state that he was indebted to other persons, might give in a schedule of his debts, and propose an arrangement for discharging them, and if the Court thought it reasonable it might at once confirm it, so that a small debtor would then be in exactly the same position as a large debtor, who had succeeded in making a composition with his creditors, or in arranging for a scheme of liquidation. Although he had not abolished in all cases imprisonment for debt, yet, if these provisions became law, it could be no longer said that any inequality existed in the law as between rich and poor. The resort to imprisonment to secure payment would be much rarer, and a large discretion would be vested in the Judges to arrange for the relief of the small debtor by a reasonable composition. He did not think there was anything else at this stage to which he 835 need call the attention of the House. He had to thank the House for the patience with which they had listened to his statement. This was not a matter? which could be considered as a very exciting one, or one which was generally interesting. It did not lend itself to flights of eloquence; but it was a question which had a deep interest for great masses of our people, and especially for the great body of industrious tradesmen, who saw, with natural indignation, that under the present system swindling was made so easy, so safe, and so profitable, that they often found their hardly-won earnings wrested from them by the fraud and culpable misconduct of others, and who felt a somewhat natural impatience that the Legislature should have done so little to remedy a grievance which had been so long and so universally felt. He claimed for this Bill, that it was, at all events, a carefully considered attempt to deal with these great evils, which, in his opinion, had done much to undermine our commercial reputation, and to discredit our commercial capacity; and he bespoke for the measure what he felt assured it would receive at the hands of the House—a fair, a full, and even a favourable consideration.
§ Motion made, and Question proposd, "That the Bill be now read a second time."—(Mr. Chamberlain.)
§ MR. E. STANHOPE
said, it would, be unnecessary for him, in moving the Resolution which stood in his name—namely,That this House, while anxious to remedy the proved defects in the existing Law and practice in Bankruptcy, is not prepared to entrust the powers proposed in the Bill to any department of the Government,to discuss the details of Bankruptcy administration and practice, for which he was hardly competent. He might remark, however, that it appeared to him that the right hon. Gentleman had offered very weak arguments in support of his proposal to abolish three of the four priorities established by law in the distribution of the estate of a bankrupt. There was only one reason why the right hon. Gentleman should not have abolished the fourth priority—namely, that he was afraid to do so. ["Oh, oh!"] He must say that if the right hon. Gentleman seriously intended upon these proposals, they would undoubtedly 836 lead hereafter to considerable discussion, and would introduce into the consideration of this measure strong Party feeling. He would not, however, dwell on the details, as he desired rather to deal with the question of principle. There were a good many points on which he and the right hon. Gentleman would undoubtedly be agreed. The right hon. Gentleman had stated the objects of his Bill to be to enable the property of the debtor to be distributed as quickly and as cheaply as possible; and, secondly, the vindication of commercial morality. He entirely agreed with both objects. But whether the present Bill would accomplish either of them could hardly, after past experience, be confidently predicted. But his objections to the Bill were shortly these—that it went a long way beyond the proved necessities of the case; and that it introduced into our Bankruptcy system the curse of officialism, and especially the officialism of the Board of Trade. Anyone who read the debates in 1869 would see that the main feature of the speeches on both sides was the condemnation of the officialism existing before that day. In 1875 a Committee was appointed to inquire into the evils affecting Bankruptcy legislation, and that Committee in its Report said—The special policy of the Act of 1869 was to give creditors the right to administer its provisions with the least possible official assistance.The principle of it undoubtedly was the abolition of officialism as it then existed. He quite admitted that the officialism now proposed was of a slightly different character; but the question was, what had happened since 1869 to induce the House so largely to modify its principles of legislation and to go back to a system which was then condemned? The Committee of 1875 was one of great authority, and it had suggested that no proper investigation now took place with the state of a bankrupt's affairs, and also that something should be substituted for Sections 125 and 126 of the Act of 1860. Accordingly a Bill was proposed in the time of the late Government which was intended to effect that purpose. There was nothing in the Bill with regard to going back to the old system; but the difficulties were met by remedies of a simple and moderate character. The Bill was much dis- 837 cussed in both Houses of Parliament, and in the House of Lords, Lord Hatherley said that—The principle on which all Bankruptcy Laws ought to be framed was to leave everybody to manage their own affairs, taking every precaution against abuse.That was the opinion of the House of Lords. What was the opinion of the commercial bodies in the country? Nothing had struck him more than the Bill introduced by the hon. Members for the University of London (Sir John Lubbock), the City of Bristol (Mr. Samuel Morley), and the City of Liverpool (Mr. Whitley), than the fact that all the proposals in it seemed to be put forward mainly for the extension of the powers of creditors. But they had also to consider this fact. They had the Petition which was presented to Lord Beaconsfield by the commercial men of the City of London, to which the right hon. Gentleman had referred. That Petition drew attention to these evils in the existing system—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. Second, that the present law is rendered particularly 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 or Judge.The way to meet these, they said, was by extending the powers of the Courts of Law. The right hon. Gentleman had asked whether he was prepared to say that these powers could be properly exercised by Courts of Law without assistance? He did not think that he was called upon to answer that; but what he did say was, that so far as they had any experience it was abundantly proved that the proposals of the right hon. Gentleman were open to the gravest objections. And there was another consideration, and that was whether those powers of Courts of Law could not be improved by extending the powers of the Public Prosecutor. The reason why these insolvent persons escaped so often was because there was no effective system of public prosecution. The right hon. Gentleman had said that one of the evils of the present 838 system was the small amount distributable among the creditors. But he began by making new charges on the bankrupts' estates, and by establishing a host of officials. He did not understand what the right hon. Gentleman meant by saying that the question involved the appointment of a Minister of Commerce; and he ventured to think that if a Minister of Commerce were to interfere in commercial affairs to the same extent as it was now proposed that the Board of Trade should interfere in Bankruptcy, the country was not prepared for any such appointment. He confessed that he was of the same opinion as Mr. Mill, when he urged that—The tendency on the part of public authorities to stretch their interference ought to be watched with unremitting jealously.And he was satisfied that that consideration became of more importance when they came to examine the provisions of the present Bill. What was the number of cases with which the Board of Trade would, in all probability, have to deal? The Return for 1881 showed that the number of bankruptcies was 1,005; of liquidations, 5,216; and of composition, 3,506; so that, on the whole, there were something less than 10,000 cases a-year. To meet that number of cases what were the proposals of the right hon. Gentleman? He thought the House had hardly gathered the enormous variety of the functions to be conferred on the Board of Trade lie would endeavour to give them a summary. The Board was required to appoint 60 Official Receivers, and to remove them; to direct what reports they should make as to the bankrupt; what part they should take, either with or without the assistance of counsel, in the public examination of every bankrupt; what part they should take in the distribution; and what expenses they might incur. Then, as to trustees. The trustees, it would be remembered, were to be generally appointed by the creditors, and might often be very unfit persons. The Board of Trade was at any time to investigate the conduct of any trustee in the minutest detail, taking evidence on oath and holding local investigations, if necessary; to direct his proceedings as to paying money into the estate's account, or as to retaining money in his hands; to audit his accounts; to call him to account for mistakes; to require him to 839 give security; to decide on his remuneration, and to remove him; to consider his final report; to hear any objection any person might make against it, and to decide as to the release of any trustee, and all that they might have to do in the case of every one of the 10,000 debtors. The Board of Trade was also to appoint all the Official Receivers, controllers, solicitors, clerks, and officers; to examine the yearly statement of every bankruptcy in the country; to keep a bankruptcy estate account, and authorize any payment out of it; to prepare books, summarizing the returns of all local Courts for the information of the public; to consult with the Lord Chancellor and the Court upon rules of business, and other endless details; and to report yearly to Parliament upon all their proceedings; and, lastly, every Official Receiver in the country was to act under the direction of the Board of Trade, and the Government thus became distinctly responsible for the due performance by him of the duties of investigating the conduct of every debtor, taking part in his public examination and prosecution, and of reporting on him to the Court, of acting as interim receiver, special manager of the estate, and interim trustee; of summoning all meetings of the creditors, presiding at the first meeting, issuing forms of proxy, advertising, and of reporting to the creditors on proposals for liquidation. That was a summary which was very imperfect, because he had only attempted to enumerate those duties and powers which had caught his eye; but they appeared to show a very considerable desire on the part of the Board of Trade to interfere. But the right hon. Gentleman said he was not at all satisfied with that amount of interference, and that it was only because public opinion was not ripe on the question that he did not claim much larger powers for the Board of Trade. Now, he did not know what feeling those proposals might excite in the House; but they suggested to him two or three questions of a very grave and serious character. In the first place, did the House approve of that enormous amount of patronage being given to any Government Department? It seemed to him to be the first step in the Americanization of our Civil Service; and it would require the strongest possible argument to justify 840 it. Then those proposals must necessarily introduce into Bankruptcy administration very great confusion. He could quite understand those officials acting under the direction of the Board of Trade; it was easy also to understand their being under the special order of the Court; but it was difficult to understand that they should act under both; and anybody who looked at the Bill would find that those officials were to act under both authorities, and that they must necessarily be in considerable doubt whom they were to obey. By Clause 61, relating to the appointment of Official Receivers of debtors' estates, those officers were to act under the general authority and direction of the Board of Trade; but that they were to be officers of the Court to which they would be respectively attached. That was one instance of confusion. Then there was the ease of the trustees. Throughout the Bill they were to be placed directly under the Board of Trade; they were to obey it in almost all their duties; yet by another provision of the Bill—Section 81—in spite of that, the trustee had the power, acting as he was under the authority of the Board of Trade, of applying to the Court for directions in relation to any particular matter arising under the bankruptcy. But he came to the main objection which he entertained to that proposal—namely, that it made a State Department responsible for every detail in the administration of every bankrupt estate in the Kingdom. Every precedent in this country was entirely against such a principle; and although, as the right hon. Gentleman said, the present proposal was somewhat different from any that had preceded it, it only differed from them in being much worse, because the Department which was to interfere had a political head. He could not better state his own opinion on that proposal than in the words of Lord Sherbrooke, who said—It is a very bold and startling innovation to mix up a political office like the Board of Trade with the duties of a Court of Law, so as to make the conduct of purely judicial proceedings an element in the stormy arena of politics.The right hon. Gentleman had thought to justify his proposal on the analogy of the case of accidents. It was hardly necessary to point out the essential differ- 841 ence between the two things. The interference in those cases was only accepted by the House on the ground that danger to human life was involved; and the utmost extent to which interference had gone was giving a Government Department the power of inspection and inquiry. The right hon. Gentleman would not venture to compare the powers which the Board of Trade now possessed in regard to casualties to ships with the powers he desired to give it in respect to bankruptcies. The Board of Trade had a discretionary power of saying in the case of the loss of a ship whether an inquiry should be held. That was an important power, and one which was exercised with great prudence; but here they were to have an inquiry into every bankruptcy, and there was no necessity for the Department exercising a discretion in the matter. But his great objection to the proposal was that the duties were wholly unsuited to the Board of Trade, and the Board of Trade was wholly unsuited to the duties. They were going to add to the duties of a thoroughly overburdened Department; they had given enormously increased powers to the Board of Trade from time to time, and, on the whole, the public verdict would be that with certain exceptions it had administered those powers with prudence and a good deal of care; but that Department had always been most careful in resisting responsibilies where it could say they ought to be fairly left to individuals. It must be shown that they could be safely taken from individuals, and intrusted to the Board of Trade, before they came to the conclusion that, because the Board was likely to administer bankrupt estates better than the creditors, therefore they would transfer the work to it. Under the provisions of the Bill, the Board of Trade would have obviously to deal over and over again with purely legal questions. The 83rd section, for example, provided that the Board of Trade should take cognizance of the conduct of trustees; and in the event of any trustee not faithfully performing his duties, and duly observing all the requirements imposed on him by Statute, rules, or otherwise, with respect to the performance of his duties, the Board should inquire into the matter, and take such action thereon as might be deemed expedient. Could anybody doubt that that was taking on themselves 842 functions that had been hitherto solely intrusted to a Court of Justice, and that it was now proposed to give them to a Department which had had no experience of such duties, and the present constitution of which made it singularly disqualified for discharging them? They were about to make the President of the Board of Trade responsible for the administration of ever bankrupt estate in the country, and for all the proceedings from beginning to end, except those that were purely legal; and how could they possibly do that without being certain that that House would intervene at every stage? They would have constant Questions addressed in the House to the President of the Board of Trade as to particular bankrupts and to particular trustees, and why the did not do this or do that; and they would have to go much further than the simple exercise of purely administrative functions by the Board of Trade, because the administration of the various authorities under the Act would become so inextricably mixed up that it would be impossible, if the House was to intervene, to separate questions relating to judicial proceedings from those relating to other matters. Another objection to the Bill was that they could not possibly stop there. If they were going to protect individuals against the consequences of lending money to each other, on what logical grounds could they refuse to protect them from the consequences of lending money to Companies and other bodies? The question of public Companies and Assurance Companies would be viewed in a different spirit from that which had hitherto prevailed, and they would also have to deal with foreign loans. And when interference in those matters was pressed on the House, as he felt certain it would be, they would not have a logical answer to offer if they once accepted this measure. In short, the result of the Bill would simply be to make the President of the Board of Trade the great detective in all the commercial proceedings of the country. They were going to give him power entirely alien to his proper duty—powers which the Presidents of the Board of Trade in the abstract were not qualified to discharge, which would be mischievous in themselves, and which he was afraid must fail. And if they failed, they would not only bring discredit on the legislation of the House, but their failure 843 would have far-reaching evil effects, because they would have taught men to rely for protection in their commercial dealings, not on their own prudence, but on the watchfulness of a paternal Government. The hon. Gentleman concluded by moving his Amendment.
To leave out from the word "That" to the end of the Question, in order to add the words "this House, while anxious to remedy the proved defects in the existing Law and practice in Bankruptcy, is not prepared to entrust the powers proposed in the Bill to any department of the Government,"—(Mr. Stanhope,)
§ Question proposed, "That the words proposed to be left out stand part of the Question."
§ MR. DIXON-HARTLAND
said, he was sorry he could not agree with the right hon. Gentleman who had just sat down, who, fortunately for himself, did not appear to be practically acquainted with the working of the Bankruptcy Laws. As a member of one of the oldest banking establishments in the Metropolis, and partner in a country bank, he unfortunately had had frequent cases of bankruptcy under his notice; and he had not the slightest hesitation in saying that the principle of the Bill now before the House would be of great advantage to the commercial classes. Last Session he had himself introduced a Bankruptcy Bill, and the right hon. Gentleman the President of the Board of Trade, in supporting the second reading, said he did so because that Bill had adopted his principle, and such imitation was the sincerest flattery. He quite admitted he had adopted the Government principle because he approved it, and also because he considered the Government could not oppose their own principle in any Bill; but its details were so different as practically to make it another Bill altogether. But if he flattered the right hon. Gentleman last year, he had this year returned the flattery, for in the Bill he had introduced he had adopted no less than 16 clauses of the Bill he (Mr. Dixon-Hartland) had introduced, and modified 12 others; but to him it was a matter of indifference who was the first to initiate reform in the Bankruptcy Laws, as long as the country obtained the benefit of it. Since the Act of 18 69 was passed there had been no less than 105,000 bankruptcies, liquida- 844 tions, and trust deeds, involving a sum of £245,000,000, and the interests of 5,000,000 of their fellow-countrymen—that was a population almost as large as that of Ireland. He hoped, under these circumstances, this would not be made a Party question; but that all would do their best to pass a Bill which would be of so much benefit to the community. The present Brankruptcy Law was a gigantic failure, and successive Ministries had deplored its uselessness; but of all Acts that had been passed relating to Bankruptcy, the Act of 1869 was the worst, and it was a public scandal that a nation like England should have been willing for 12 or 13 years to have submitted to a law which in any other country would not have been allowed to exist for a single year. He admitted that previous to that measure the action of the Courts was dilatory and the costs excessive, and, therefore, the system of private arrangement was resorted to before it was known how it would serve as a screen for fraudulent debtors, and be made the means of dissipating the property of the creditors. Solicitors and accountants were, as a class, a high-principled body of men; but, like every other class, it had its black sheep—men who could only be described as wreckers. So well had these men learnt their work that it was stated in the Memorial presented by the bankers and merchants to the Prime Minister in 1880, which had already been twice alluded to—That whereas bankruptcies proper had descended from 1,351 in 1809 to 1,156 in 1879, yet liquidations and compositions had risen from 3,651 to 11,976, with total liabilities as to the latter class alone of the enormous sum of £25,379,172;and, what was even more important, that 93 per cent of all insolvent estates were administered so as to escape those provisions of the Act which referred to the examination of the debtor or of the trustee's accounts, charges, and conduct. The annual Report of Mr. Mansfield Parkyns, the Controller in Bankruptcy, was a recurring indictment against the Act of 1869, and showed how the dishonest debtor got out of his liabilities and the honest creditor was cheated. He should himself prefer, with Lord Sherbrooke, there being no Bankruptcy Law at all; but, in the present state of things, that could not be hoped for. The law, however, should be al- 845 tered so as to diminish and not to increase the means of escaping from liabilities, and should not be used merely as a means of whitewashing a debtor. At present a debtor unwilling, but not unable, to pay his debts had no difficulty in calling a meeting of his creditors, at a time and place most inconvenient to attend them, and by means of his friends and by proxies, some friendly and some fraudulent, elect a friendly trustee, have a liquidation agreed to, and, stifling all investigation, could obtain his discharge without paying a single penny to his creditors. Although every bankrupt was not necessarily dishonest, yet very few came into bankruptcy without going through a course of demoralization; and having found the result profitable they would be tempted to recur to it again and again. A case came under his notice only two or three days ago in which a man, having become insolvent, had called his creditors together. He had commenced a business with a borrowed capital of under £300, and carried it on under three separate names, not one of which was his own, and by means of fictitious bills. He had even gone so far as to give a bill of sale on his furniture to one of his clerks. He had in his pocket a friendly petition in bankruptcy; and a few minutes after the meeting was over the petition was filed and everything was done to smother up the whole affair. It was perfectly illusory to suppose that creditors, with very few exceptions, would prosecute fraudulent bankrupts. Men did not like to throw good money after bad; and if a debtor had only sufficient cunning to distribute his risks in such a manner that it was no man's interest to follow him he would escape altogether. Creditors expected little and got less. It was not the interest of the trustees to raise any questions; as was shown by the fact that at the present moment there were thousands of estates in liquidation under the Act of 1869 where an account had never been rendered, and all the creditors knew was that the estates had gone into the hands of trustees and never came out again. Our present system of credit made it easy for one man to speculate with the money of another; and the fact that it was not his own money he was speculating with did not make a man more careful of the risks he ran. It must be borne in mind that the an- 846 nual loss to the nation by insolvencies and bankruptcies was not less, probably it was even more, than £15,000,000, and that loss was borne in reality by the general public. He agreed with the President of the Board of Trade as to the great danger of social demoralization created by the acts of these fraudulent traders; and he regretted to say that this kind of dishonesty was greatly on the increase, and would continue to increase unless something were done to check it. Proceedings in bankruptcy were generally a campaign against knavery, and to prevent the spread of fraudulent bankruptcies a good law should see that fraudulent bankrupts were severely and speedily punished. The Comptroller General stated that the tendency of easy liquidation was to encourage the growing opinion amongst a certain class that it was unnecessary and even foolish to pay debts in full at all, and, unless checked, the feeling would spread that was enunciated lately by one of the learned gentlemen of the Law, that no man properly conscious of his duty to his family would ever think of paying 20s. in the pound. A debtor should be made to feel that he was upon his trial, and that the onus lay upon him to prove clearly his inability to pay. Bankruptcy should be made as disagreeable as possible; it should be made a disgrace, instead of being, as it now was, a means of whitewashing a man and enabling him to recommence a career of bankruptcy and fraud. It was with great satisfaction that the commercial public saw the question taken up by the great commercial Department of the Board of Trade, and a measure introduced by its President; because they felt that the Board of Trade had the means of obtaining information as to the real defects of the present system, and could, if it liked, deal with the matter in a comprehensive and impartial manner. The great fault of previous amendments, or attempted amendments, of the Bankruptcy Law was that they had been introduced by lawyers, who from their training were not qualified to judge of or to know the wants and necessities of the commercial community, and who were not sufficiently conversant with the working of the details of the measures they wished to initiate or reform. The Bankruptcy Bills introduced by Attorney Generals never had a chance of success, 847 because they were crowded out by other business, in which the Law Officers took more interest; but now that the subject bad been taken up by the Board of Trade, there was some hope of its being carried through. The transfer of the subject from a legal Department to an administrative one should be valuable as insuring a greater continuity of attention, and being open to the control of this House, instead of confined to legal functionaries who were practically beyond its influence. He sincerely trusted that the Bill would be passed, although there were one or two points in it with which he could not agree. The President of the Board of Trade stated that he hoped to have in hand £1,000,000 belonging to creditors; that he intended to keep it in the Bank of England and pay the expenses of the administration of the Act out of that money. The object of that was to prevent fees being increased. But if, as the President of the Board of Trade stated, the Bill was to facilitate the speedy distribution of assets of creditors, it was not right that the property of the creditors should be kept in that way. It should be honestly put that the fees must be increased; they should not pretend to pay the expenses from the fees of suitors, when they really paid them from the property of the creditors. The next point as to which he disagreed with the right hon. Gentleman was the question of rent. He thought this was the thin edge of the wedge to destroy the right of Distress all over the country. At any rate, the question should be brought forward in a comprehensive manner, and dealt with as a whole, and not treated by this negative sort of legislation, which, nevertheless, was very effective. The argument of the President of the Board of Trade might be applicable to the back rent, but not to the rent of the current half-year. Although he should oppose in Committee a great many of the details of the Bill, still he could not help thinking it was a most valuable measure on the whole.
§ MR. W. H. WILLS
said, that, notwithstanding the speech of the hon. Member for Mid Lincolnshire (Mr. E. Stanhope), he could not but regard the Bill before the House for second reading as a sound and well-considered endeavour to remedy a great evil, which, to the mercantile community, had become well nigh intolerable. A reform 848 in the Bankruptcy Law had been very much wanted, and had been too long delayed; but the importance to the country of a really good Bankruptcy Law was so great that it was worth while waiting for the satisfactory Bill now under consideration. In the year 1878 the loss to the commercial community by debtors in bankruptcy amounted to £25,000,000 sterling; and even in a country with so large a trade as the United Kingdom, that was a very serious diminution of profits. This question, as had been remarked by the hon. Member for Evesham (Mr. Dixon-Hart-land) was not a Party question at all. Both sides of the House were largely interested in putting it on a footing satisfactory and sound; and he hoped, therefore, that the Bill of the President of the Board of Trade would receive careful and impartial consideration. When the present Bankruptcy Act was passed, in 1869, it was hoped that it would remove abuses, and many looked forward to it with this expectance; but they found that it was costly in operation and cumbersome in its working, and the only thing, as they had learned from experience, was to keep out of Bankruptcy Courts, because the assets were swallowed up under the present law in a proportion far beyond what would be the case if the law were a good one. Over 75 per cent of the bankruptcies in the country realized less than 5s. in the pound; and therefore it was obvious that the assets should be dealt with as economically as possible. Under the existing law a system of liquidation by private arrangement had sprung up, and had proved disadvantageous to trade. There had been collusion between the insolvent and his friends, fictitious claims had been set up, and creditors had been robbed in the most flagrant manner. What creditors really desired was that there should be a prompt division of the salvage, and that that partition should be coupled with a certain cheapness. If a man could not pay 20s. in the pound, what he could pay should be divided among his creditors as fairly as possible. Where a man had been guilty of recklessness and fraud, it was necessary in the interests of business that he should be punished severely. Creditors had not the time to look after such cases; and when a man in a large way of business 849 had made a bad debt, he found it better to look for new business than to throw good money after bad in the hope of realizing a dividend. The first Bankruptcy Law he recollected was that in force in 1864. It was founded, no doubt, upon officialism. There was a searching investigation under that law, and a bankrupt had to pass three examinations before he was entitled to his discharge. After that measure had been in operation for some time it was not so well administered as at a former period, and general dissatisfaction arose. Then they had the Law of 1868. The affairs of the insolvent were left mainly to the creditors themselves, and the power of the official assignees was largely diminished. The Bankruptcy Act of 1869 was a combination of officialism on the one hand, and private and voluntary effort on the part of the creditors. The process had not proved cheaper than when legal advisers were required. The public had now fallen into the hands of accountants, who, it had been found from experience, took as much of the assets as the lawyers formerly did. The Bill of the President of the Board of Trade reverted to a kind of officialism; but it was in connection with his own Department, and he (Mr. Wills) thought this proposal would be more satisfactory than the officialism of the High Court of Justice, because there would be a readiness of access to the Board of Trade, which would shorten the proceedings in bankruptcy, and which could not be expected in connection with the High Court. If he had the choice between officialism on the one hand and creditors' management on the other, he should be inclined to adopt officialism, because then there would be an opportunity of punishing fraud; whereas, if creditors' management were adopted, the bankrupt would always get off and receive no punishment. He had often thought that the trading community would be better off without any Bankruptcy Law at all. He should himself prefer a Bill which dealt only with the distribution of assets, except in cases of gross fraud on the part of the debtor. There were clauses in the present Bill with regard to the debtor's discharge which were complicated and would be difficult to work. If creditors desired to let a man free they should have power to bring about his release, Clauses 25, 850 26, and 27 of the Bill provided that the debtor should be discharged unless he was proved to have done certain things. He thought that the onus of proof for discharge should be thrown upon the debtor, and that it should not be left for him to get off if he could not show that he had properly done certain things. From the joint action of the Board of Trade and the Local Courts he expected there would be difficulties; but nothing but experience would show what friction there would be between the two authorities. He was strongly in favour of the public examination of the debtor, which would prevent a great deal of fraud, because it would enable the creditor to put any question he liked to the debtor. There was a provision which stipulated that all money should be paid into the Bank of England. That might be found difficult and inconvenient in some cases; but in the country the money would be paid into the local banks, and he believed that those banks would be largely used for the purpose. He thought that the principle of the Bill, though it might not be perfect, was based on fairness to all, and as the President of the Board of Trade, who had introduced the measure, was a man of large experience of the present law and the way it affected business, he was sure to win the confidence of commercial men. Whatever blots or drawbacks there might be in the Bill could be removed in Committee, and to that the right hon. Gentleman who had introduced the Bill would not raise any objection. He did not suppose the present Bill, or any future Bill, would ever save the time and expense which business men would lose in attempting to recover their share of assets; but if it succeeded in punishing fraud, wherever discovered, it would accomplish much. If the Bill did succeed, the President of the Board of Trade would be entitled to the thanks of all classes of the community; and even if it should prove unsuccessful, he would at least deserve credit for having made an earnest attempt to remedy a state of things of which all were thoroughly ashamed.
§ MR. ARTHUR O'CONNOR
said, that he could not join in the chorus of commendation which had come from every part of the House with regard to this Bill. This Bill was a signal instance of the utter groundlessness of the charge 851 as to the evil effects produced by alleged Obstruction in Parliament. This Bill was brought in by a right hon. Gentleman who, two years ago introduced a totally different measure, and who, before that, had his name on the back of a Bill also totally different. That showed that the delay which had taken place had proved advantageous to the community, for it had given the right hon. Gentleman an opportunity of maturing his views. If that process of enlightenment had not gone on, and the measure introduced two years ago had passed, the right hon. Gentleman would probably; have felt himself bound now to bring in an amending Bill to remedy the defects of his former measure. Seeing how much depended on exact phraseology, it appeared to him that the right hon. Gentleman had needlessly departed from the well-known and well-understood phraseology which was borrowed from the Bill of 1869. He thought also, on examination, it would be found that the Bill bore evidence of hasty work. Rules of Court, ridiculously and inexcusably inaccurate, were quoted in support of matters to which they did not refer, and it was impossible to verify the references. Some of the clauses also were incompatible with one another, as in the case of Clauses 9 and 10. Similar defects were also to be found in Clauses 16 and 20.
§ MR. SPEAKER
The House is now engaged in discussing the second reading of the Bill. The hon. Member is entitled to refer to any clause in order to support his argument; but he is not entitled to go through the Bill clause by clause.
§ MR. ARTHUR O'CONNOR
said, he had merely wished to base an argument on the fact that the hasty drafting of the Bill was of such a nature that it would only be reasonable to have a further postponement of the consideration of the Bill. He had placed on the Paper a Notice of his intention to move that the Bill be read a second time on that day six months; and he wished to support that Motion by showing that a delay of six months, or even more, might be of considerable advantage in affording time for the redrafting and reconstruction of the Bill. In order to do so, he had been anxious to show that the Bill, from beginning to end, presented such marks of haste and inconsiderateness that the argument in favour of a postponement was 852 irresistible. But after the ruling of the Chair he would not dwell further upon that branch of the argument. In introducing the Bill, the right hon. Gentleman had professed his anxiety to save honest men from the stigma of bankruptcy, and yet he wished to do away with liquidation by arrangement, and was unfriendly to arrangements generally. In the Report of the Controller in Bankruptcy for 1881, which the right hon. Gentleman had quoted, he found statistics showing comparatively the amount of assets distributed in a number of bankruptcy cases, and in a like number of composition cases; and the figures showed that in 29 per cent of the cases dealt with by the former process, and in 28 per cent by the latter, the dividends were less than 1s. in the pound. With regard to liquidation by arrangement, there was a rule providing that the Court, if it held the creditors' interests to be promoted by proceedings in bankruptcy proper, might order such proceedings to be taken; but the right hon. Gentleman had carefully abstained from telling the House in what percentage of cases this had been done. He presumed, therefore, that, in the majority of cases, liquidation was not much worse for the interests of the creditor than bankruptcy. An important change would be introduced by the clause that handed over to Government officials the distribution of the assets. The country had already had some experience of this system in the tedious case of the Banda and Kirwee Booty, and in the distribution of other prize money by Government Departments, and he ventured to say that the Board of Trade would not be found to do its work more speedily or more efficiently than the Admiralty and the War Office. An income was to be derived from fees, which were to cover the expenses of this new system; but he could not suppose that an adequate fund would thus be obtained, and he felt tolerably sure, on the other hand, that a very serious annual charge would by this means be placed upon the Exchequer.
MR. JOSEPH COWEN
said, he did not agree with his hon. Friend the Member for Queen's County (Mr. A. O'Connor) in his general criticisms of the Bill. He thought the President of the Board of Trade had lucidly and ably explained the principles and procedure of the measure, and that the House re- 853 cognized that. He also thought the Bill itself was to he commended. He would not follow his hon. Friend opposite in his detailed criticism; but, in his judgment, the Bill was a model that might be with advantage followed. It was both an amending and a consolidating measure. Many Bills were introduced into that House which were legislative puzzles. They could only be understood by experts, and even experts had to have at their elbow a Law Library before they unravelled their meaning. They contained endless references to other Acts, or clauses in Acts. This was both confusing and inconvenient. Now, the Bill before them comprised, in a comparatively short compass, all the law respecting civil procedure in Bankruptcy. When a man got possession of it he could learn all the restraints, powers, and protections that Bankruptcy Law provided. But, whatever opinions might prevail about the President of the Board of Trade's speech, or about the Bill itself, they were all agreed that the law as it stood needed reformation. On that point there was no difference amongst them. The law as it now existed was bankruptcy made easy. It was a gentlemanly way by which a man, who so wished it, could get rid of his liabilities. There were two chief abuses in the existing law. The first was the facility with which a fraudulent and reckless trader could laugh at his creditors. By going through a ludicrously easy set of forms, he could defy the man who had trusted him, rid himself of his responsibility, and start afresh, as if nothing-had taken place. The second abuse was the readiness with which trustees could get possession of a bankrupt's estate and keep it. [A laugh.] Yes; keep it for a length of time—sometimes altogether—but always keep it until a very large proportion of it had been dissipated in unnecessary expenses. The Bill before the House aimed at remedying these two grave scandals. The principle that lay at the base of the proposal was that the community, as well as the creditors, were interested in a debtor's affairs—that was, they were all interested in seeing that reckless speculation and fraudulent trading were stopped. In future, if the Bill passed, debtors would be subjected to searching examinations, not by fragmentary in- 854 quiries from an incohesive body of creditors, but by trained officials, who would ascertain whether the bankrupt had been trading beyond his capital, gambling, or living above his means. If he had been engaged in any of these practices, his discharge would be withheld, and his powers of trading afterwards would be largely curtailed, if not, in some instances, prevented. The trustees would not be allowed to retain in their possession vast sums of money, nor would they be allowed to charge the estate with all manner of expenses. These examinations would be conducted, and this control would be got, by trained officials acting under the direction and supervision of the Board of Trade. Whether this machinery would succeed in accomplishing the end which the pro-motors of the Bill had in view experience alone would show; but the intention of the measure was to bring about this result. The Bill itself did not largely alter the procedure of the present Act; but it lent it operative force. The law would be, with sundry alterations, the same in future as it was at present; but the Act would be enforced, not by creditors—sometimes in collusion with the debtors—but by experts. They might call them receivers, or inspectors, or detectives, or inquisitors—it was matterless what name they gave them—but those officials would really be charged with the supervision of the commercial honesty of the country. It was a debatable question whether the advantage that would be conferred by making the Bankruptcy Laws operative would not be counterbalanced by the disadvantages that might be caused by the extension of the injurious system of Government officialism. That point was legitimately and fairly raised by the hon. Member for Mid Lincolnshire (Mr. E. Stanhope). He (Mr. Cowen) confessed he had great sympathy with the proposal. He viewed with great apprehension the ever-widening network of officialism which was being thrown over the doings of private life. It was little use uttering barren protests against the evident bent of public opinion; but he had said often, and he said again, that he distrusted this incessant and rapidly-spreading practice of State interference. The President of the Board of Trade, he thought, was too sanguine as to the re- 855 sults of his measure. He very much doubted whether it would effect all the benefit he looked for. There was nothing more remarkable in the long history of Bankruptcy legislation than the small changes that had been produced by the endless Bills that had been prepared on the subject. If they compared the present state of affairs with the position 40 years ago, they would be struck with how little practical improvement had been made in this very difficult branch of legislation. It was not 20 years since the late Lord Westbury—in his characteristically cynical manner—came down to the House and submitted a Bankruptcy Bill. He described the evils existing then much as they described them now. He said the Bill he introduced was the combined production of the highest legal skill and the ripest commercial experience; and that if Parliament passed it, it would put an end, once and for ever, to the recklessness and rascality that disgraced British trade. The Bill did pass, and, in a period of time not longer than it took to pass, it was found, in practice, to be a complete failure. With that, and with other equally conspicuous disappointments, it was not wise for them to indulge in too hopeful expectations as to the result of the present measure. The reason for the failure was not in the Acts nor in their administration, but it was to be found in human nature. The truth was that when a man in business made a bad debt, he got angry, and said hard things of the debtor. He might attend the first meeting of creditors, and swear in spirit, if not in words, at the loss he had sustained; but in a few days, certainly in a few weeks, his ill-temper simmered down, and he submitted to the inevitable. Before a few months were over, he had nearly forgotten what had taken place, and did not wish to be reminded of it, as it was only a source of irritation and annoyance. This was the case, had been the case, and would be the case, however clever the Bankruptcy Bills were that they might pass. He contended that there were only two ways of effectually dealing with the subject. The first and best way was to abolish the Bankruptcy Laws altogether. If a man was foolish enough, weak enough, or careless enough to make a bad debt, let him suffer. If he broke the physical laws, he suffered 856 in his body; if he broke the commercial laws, let him suffer in his pocket. If they would only put on one side the vast monetary loss by bankruptcy—adding to it the loss of time and temper—and then put on the other side the small results which accrued through all the power the Bankruptcy Laws supplied, they would find the balance was very heavily against the law. But England was a country of compromises; and although English merchants and tradesmen knew this, they could not screw their courage up to take so bold a step. They would go on tinkering, in the hope that they would ease matters. Possibly they might; but they would never cure them. Trade might be reduced by such a change as he advocated; but reckless speculation and unsound commerce would be abolished, and what was left would be healthy and profitable. Another mode of dealing with the Bankruptcy Laws was to follow the example set them in France. That oft-decried body, the French Convention, passed a Resolution with respect to debts that this and other countries might copy with advantage. It declared that any man who contracted a debt should never be freed from his liability to pay until it was paid. That declaration was made the basis of French commercial law, and what was the result? That French trade, as a whole, was sounder than any trade in Europe, and the French Bankruptcy Law was more effective than that of any other nation. But he supposed neither the House nor the country was prepared to take these drastic and democratic steps. The Bill before them had many provisions that might be useful. But the essence of the scheme lay in the establishment of a body of supervisors; and, as he said before, he viewed such a plan with great misgivings. They had far too much supervision and inspection. It was being carried into every department of political, social, civil, commercial, and even private life. It was contrary altogether to his conceptions of Liberal government. The former theory of English Liberals—and the one which he was old-fashioned enough to believe in—was that the less State meddling they had, the better for the community. Their effort should be to encourage individuality and independence, even if it went to the extent of eccentricity. That used to be the 857 theory of the Party which sat on that side of the House; but it had fallen in with an entirely different policy now, and it was the special supporter of officialism and centralization. Such procedure could only end in emasculating and enervating the population. It took all its elasticity and flexibility from it. They might not see the effects immediately; but they would be felt afterwards. The President of the Board of Trade had cited the case of State interference in factories, mines, and ships. That was quite true. But interference in this case was justifiable. The State was warranted in interfering when any section of society was too weak to protect itself. Then the Executive ought to come to its relief. Women, children, and young persons required this assistance. Sailors, too, who laboured under exceptional conditions, required exceptional legislation. But these rules did not apply in this case. What the Government were going to do now was to protect grown men from the consequences of their own folly and carelessness. He repeated his distrust and objection to this system of legislation; but, at the same time, he recognized that the law required altering, and that the present attempt to alter it was an honest and conscientious one. While he sympathized with the spirit of the Amendment of the hon. Member for Mid Lincolnshire, he could not go the length of voting against the second reading of the Bill.
§ MR. LEWIS,
after speaking of the confidence with which former measures had been brought forward, and the disappointment produced by their operation, said, that the Acts of 1849 and 1869 ranged between the two poles of excessive officialism and excessive creditor's power. The Act of 1869 was essentially a creditor's measure. It gave the commercial community all they asked for in the way of power to creditors to deal with the estates of debtors; and now it was said to have been a signal failure. This was owing to the indifference of the trading community. At first a creditor might be full of determination to realize all he could for himself and others; but he soon said he must carry the debt to profit and loss, and make up for it in some other way. Now the commercial community said they wanted some official Govern- 858 ment assistance which would turn bad debts into good ones. From the creditor's point of view, the first clause of a Bankruptcy Bill should be that every debtor should pay 20s. in the pound; and the second, if he failed to do so, that the public should pay it for him. It was they themselves, however, who were chiefly to blame; for it should be understood that the chief cause of bankruptcy was the over-trading of the community. The travellers, the agents of the creditors, pressed upon a man more goods than he was able to dispose of, and hence his insolvency. In his opinion, the Act of 1849 was the best that had ever been passed on the subject; and had Lord Westbury taken it as the foundation for his own measure, he would have produced the best result of which the subject was capable. Lord Westbury attributed the failure of his attempt to the refusal of Parliament to give him a Chief Judge. The Act of 1869 contained provision for a Chief Judge; but he sat in Lincoln's Inn, and all the work was done by the Registrars; and one of the worst features of the present measure was that it did not assume to fix any Judge of the High Court with the responsibility of administering it. He thoroughly sympathized with the hopeful spirit which marked the speech of the President of the Board of Trade that night; but he could not help remembering that, in all probability, there was no Member of the House whose commercial career had been so short and so successful as that of the right hon. Gentleman, or who had had so little experience of bad debts. If the Bill passed in its present form, there would arise before the next six months elapsed an indignant howl from the trading classes, and they would declare that King Log with his weight was not less formidable than King Stork with his bill. It was somewhat amusing to note the weight given by the President of the Board of Trade to the public examination of the debtor. He had seen a good deal of such public examination, and he would venture to say that a more perfunctory, more purposeless, more uninstructive ordeal, when conducted by a public official, could not be devised. What was wanted was the spur of personal interest on the part of the creditor examining, or the spur of professional prestige on the part of the man examining for the trustee. He objected, too, to the clause 859 which would enable a creditor to make a man a bankrupt before it was known whether the creditors desired him to be a bankrupt or not. He would take the instance of a gentleman's son who had been extravagant, but from whom his father wished to avert the stigma of bankruptcy. Under this Bill he would not have any opportunity of doing so, inasmuch as the young man would be gazetted a bankrupt before he could have the opportunity of saving the family credit. That certainly would not be for the benefit of the young man's creditors. The right hon. Gentleman had indeed attempted to grapple with the difficulty of securing an efficient trustee by making him removable at the discretion of the Board; but by so doing he introduced fresh complications. Each particular case would be liable to be brought before Parliament, and the result could not fail to be embarrassing. He had observed in the Bill a provision that the debtor should be granted his discharge only on payment of 10s. in the pound. That was an old friend; and the only effect of it had been found to be to tempt traders, when their business was going to the bad, to purchase freely and make fat stocks, in order to obtain the necessary dividend. Indeed, he might say, generally, that every provision outside those which enabled the creditors to deal with their own property as they pleased only added to the expense of administering the estate and raised hopes which proved delusive. He would like to draw the attention of the House to Clause 16, the clause dealing with composition, and he would ask the House whether such a description of the material to form part of a judicial document ever found its way into an Act of Parliament? He must say that he thought that the Composition Clause very hard on an honest debtor. What did the House think of this—Provided that if at any subsequent time facts are brought to the knowledge of the Court which satisfy it that its opinion as to the cause of the bankruptcy is erroneous,then it may annul the composition? He hoped that while the House would be active and desirous to protect honest creditors against dishonest debtors, it would also protect honest debtors against the mistakes of the Court. So, again, with reference to the limitation to 5s. in the pound. He believed that all 860 those hard-and-fast rules were absolutely beside the question and indiscreet. Creditors, as a rule, were perfectly well able to understand the value of an estate; and it seemed to him that the provisions were unduly hard on the honest debtors, and therefore likely to work badly. He thought those who were supporters of women's rights had better look at that Bill. Women were to trade under the advantages of that munificent Bill, passed in the small hours last Session, and he thought they would very probably be seen figuring in the Bankruptcy Court; but not only with reference to them, but in reference to all persons likely to be affected by the Bill, he could not withhold his protest against what he considered the severe and reckless provision of Clause 27. That clause was to the effect that where an undischarged bankrupt obtained goods of the value of £20 on credit without stating that he was an undischarged bankrupt, he should be guilty of a misdemeanour. In this practical community, where it was well known that there were thousands of men walking about as undischarged bankrupts, such a suggestion was monstrous. There were offences so heavily punished as to become obnoxious to one's moral sense, which made one feel punishment should ordinarily follow speedily on the guilty; but such efforts as those to patch up a Bill were evidence of its weakness, and seemed to him only to excite indignation. One other subject he wished to refer to was that of the Official Receivers, of whom they were told 60 would be sufficient. If so, there would be no efficient public examinations. The right hon. Gentleman (Mr. Chamberlain) was in this dilemma—if these Official Receivers were to be of the smallest value, there must be a large number of them, otherwise all the work would be done by deputy. They were going to have an ineffective official system, which, for the sake of economy, was so narrow in its number and effect, that the work must necessarily be done not only by deputy, but by deputy's deputy. It was proposed to make the Registrars of the County Courts Official Receivers. Now, there were a vast number of cases whore the Official Receiver would be placed in possession of, perhaps, a largo mill, employing some hundreds of hands, or of a bank with 80 or 90 employés. How was he to 861 control and manage the whole business?
§ MR. CHAMBERLAIN
said he did not wish to interrupt the hon. Gentleman; but the creditors might apply to the Official Receiver to appoint an official manager, and no doubt in such a case they would apply.
§ MR. LEWIS
said, he was obliged to the right hon. Gentleman for the suggestion; but the Official Receiver was not likely always to submit to the creditors. He was of opinion that 60 of these officials were not, in the least degree, adequate. He wished to say something of the old official system, and the right hon. Gentleman would, perhaps, pardon him if he said he did not think he quite understood the position of the old official assignees. They were expressly prohibited by Act of Parliament from interfering with the creditor's assignee in realizing the estate. They had to receive the money, and the creditor's assignee had to manage the conduct of the bankruptcy. The right hon. Gentleman had said that there had been jobbery in the appointment of the official assignees under the old system; but was he aware that the appointments were made by the Lord Chancellor? Did he wish the House to understand that previous Lord Chancellors had been guilty of jobbery in regard to those appointments? If so, he made a very serious attack, and ought to say to whom it referred. There were, no doubt, two or three cases of defalcation on the part of certain persons, whose names, however, he would not mention. One case occurred in a man's declining years, and no doubt the case was a very distressful one. He was a man who had had the respect of the commercial classes in the City of London; and during the last experience of the Acts of 1849 and 1861 the unfortunate effect of such cases was to give the finishing blow to that semi-official system that had been in vogue for many years. He believed the Bill paltered with the question with which it professed to deal. The Act of 1869 had undoubtedly failed, it was said, and the ignominous result was that the trading community came there and asked to be delivered from their own idol. It should not be forgotten, when they heard the complaints of the trading community, that they had the whole lollipop they asked for given to them in 862 1869; that everything the commercial child asked for was given without stint by the Government; and now the trading community came forward and said it did not suit their purpose. He contended that the semi-official system suggested would prove an obstruction in the management of business, and that the Board of Trade was already too much overburdened with business to take into its hands the duty which this Bill would impose upon it. The Bill would be infinitely improved, as cpmpared with that suggested system, if it were turned entirely into an official management Bill, placing everything in the hands of some Official Representative of the community, who should have the entire matter in his hands. The Bill, if passed as it stood, would only lead to further disorder and dissatisfaction, and in 12 months it would be generally condemned. This was the first Bill that was to be sent to a Grand Committee. It was a highly technical measure, and he wanted to know what probability there was that it would be fully and satisfactorily considered by that Committee? The public would not be satisfied unless there was a full and complete discussion of all the salient features of the measure: and, under the circumstances, he believed they would have to discuss it over again when it came back to the House, because of the great complexity, the difficulty, and the marvellous importance of all its provisions.
§ MR. H. H. FOWLER
said, he would not follow the hon. Member for Londonderry (Mr. Lewis) in all the points he had raised; but he would remind him that the public had the chief right to be considered in this matter, for there was no small amount of dissatisfaction in the present day at the scandalous administration of the Bankruptcy Law. Some hon. Members, in addressing the House, talked about the foreign competition with which our home manufacturers had to contend; but in the present day the home manufacturer and the honest trader had to contend with a greater competition. They had to face the competition of dishonesty. The man who paid his 20s. in the pound was exposed, to the competition of the man who did not intend to pay 5s. He firmly believed that one of the causes of the depression in trade at the present time, was the losses created by the unfair competition of dis- 863 honest traders. They found, from the Returns of the official Comptroller in Bankruptcy, that in 1878 the losses from bad debts in this country amounted to something like £25,000,000 sterling, and at the lowest computation for the past year it must have been £20,000,000. He thought it was high time that some satisfactory effort should be made to grapple with this unsatisfactory state of things, no matter what difficulties the Legislature might have to contend with. An hon. Member (Mr. A. O'Connor) had said that he would not join in the general chorus of congratulation. Well, he (Mr. Fowler) should do so; he thought that this was a banâ fide and a statesmanlike attempt to deal with the question, although saying that would not deter him from criticizing what he deemed to be its weak points. The trading community and the country generally would also recognize it to be such, notwithstanding the unfair and inaccurate criticisms of the hon. Member for Londonderry. One of the great evils they had to grapple with in dealing with this question was to prevent dishonest men really making a business of bankruptcy—making themselves bankrupt over and over again for dishonest purposes—and unless they sought, in a strong and determined way, to put a stop to this practice they would only perpetuate the evils they were trying to destroy. The hon. Member (Mr. Lewis), with great adroitness had endeavoured to convey to the House an impression of the Act which he (Mr. Fowler) certainly did not think was to be found in the four corners of it. He had dwelt with great force and power on the hardship and great injustice that would accrue from a debtor getting a receiving order, and the terrible consequences that would result from the failure of Government contractors, for example; but his hon. Friend seemed to have forgotten the circumstances under which this receiving order was to be made. Under existing circumstances, he would be actually adjudicated bankrupt; but now there must be an act of bankruptcy proved, and a Petition presented before that was done. The hon. Member for Nowcastle-on-Tyne (Mr. J. Cowen) pointed out what was likely to be the result in the end. That was the abolition of all bankruptcy. He could quite understand a Bankruptcy Law which prevented a man 864 from being treated as a felon, consigned to capital punishment or perpetual imprisonment; but he was at a loss to understand why if a man had contracted with his creditors to pay 20s. in the pound, he should be allowed to tender them, say, 7s. 6d., or may be 2s. 6d., without their leave. There were one or two points of detail to which he would invite the attention of the Board of Trade. The difference, to begin with, between this Bill and the Bill of 1881 was, in his opinion, a difference not for the better. He found no fault with the proposition as to composition; but the scheme of arrangement would be the old scheme of liquidation over again, and liquidation had been the curse of the present Bankruptcy Law. He wished the President of the Board of Trade would reconsider that point, and either let a man make a composition with his creditors or become a bankrupt, without admitting any intermediate course. The proposal that a creditor could only make a debtor bankrupt by a judgment of a Court of Law was, he thought, open to objection, on the ground that there were so many means of setting up fictitious defences, so that this provision would be a serious impediment in the way of making a man a bankrupt when he ought to be declared one. With reference to the receiving order, everything in the Act would depend on the class of men who were made Official Receivers. The Official Receiver must be engaged in no other trade or business. If they appointed either' a lawyer or an accountant, they invested him with certain judicial powers; and if this officer was to be a representative of a Government Department, he should be like the Inspectors of the Board of Trade or Home Office, totally separate and distinct from all other business. The Government should be his only masters; he should serve them exclusively, and they should find him a proper and sufficient salary. He was aware that his right hon. Friend thought that County Court Registrars and bailiffs should in a majority of cases be appointed. He only wished the President of the Board of Trade would turn his attention to the interesting question of the remuneration paid to Registrars of County Courts. Did he know what was done in the town he himself represented (Birmingham), where the position of the Registrar was more lucrative than that of the 865 Judge? That was a state of things which ought not to continue. With reference to the permissive appointment of a Committee of Inspection, Lord Cairns and Sir John Holker required that the Committee must be appointed; but in this Bill it was only "may be appointed." He (Mr. Fowler) thought that a Committee of Inspection should be appointed in every case, if there was to be satisfactory supervision of the estate over the trustee. He submitted that no man should be in a position to apply for his discharge until after his first dividend had been paid. There was another omission in this Bill, and that was with regard to civil disabilities. Under the existing law, if a man compounded with his creditors, or went into liquidation, he had incurred the same disabilities as if he became a bankrupt. Any person who had compounded with his creditors was disqualified from sitting in a Municipal Corporation. He regarded it as a great blot in the Bill that there was power given to the Lord Chancellor to appoint a special Judge. All attempts in the direction of special jurisdictions had failed, and he thought bankruptcy jurisdiction should be merged in the High Court. One of the main questions involved in this Bill was that of the abolition of the law of undue preference. His right hon. Friend's speech and argument went exclusively to rates and to taxes; but what he (Mr. Fowler) contended was that, if it were intended to abolish the Law of Distress, it should be done in a plain manner, and not by a side-wind. This Bill was evidently a first step towards the abolition of the Law of Distress. Subject to these few remarks, he could not help expressing his great admiration of the manner in which the Bill had been prepared; for he believed it capable of being made to constitute, in greater measure than any similar Bill submitted to Parliament for many years, a wise and permanent settlement of the Bankruptcy Law.
§ MR. GREGORY
said, that, in the first place, he took it that they were not there to discuss the general question of bankruptcy or no bankruptcy. What they had to deal with was the Bankruptcy Law as it at present stood; and the question was, whether they were to make any improvements or alterations in it or not? Taking the Bill as a whole, it did appear to him that it was 866 a very considerable improvement and advance on the present law. Speaking personally, he could not help feeling that the Bill of 1869 was, in the abstract principle, correct; but there was no doubt that, owing partly to negligence and indisposition on the part of the creditors for whose benefit it was intended, and of those called upon to administer it, and partly to defects in the Act itself, it had in practice not worked in a manner satisfactory to the public, or adequate to meet the claims of justice. The present Bill avoided the disadvantages of the old Bill to a considerable extent. With regard to the question of composition, he thought the provisions of the new Bill, so far as they went, were very satisfactory; but they required some little addition, which, with the permission of the House, he would venture to suggest. This was a very important part of the Bill; because, no doubt, a composition would nearly always be attempted by a debtor in the first instance; and the question, therefore, was whether what he held out to his creditors was fair and reasonable? It should be seen that the creditors had a fair and reasonable opportunity of considering whatever offer was placed before them. What he would venture to suggest was that a creditor should have the power of dissenting, in writing, from any proposition put forward by the debtor, and that he should not be called upon to attend personally at a meeting of the creditors. What he wanted, of course, was to make these propositions by debtors difficult of acceptance; and, in order to do that, the creditors ought to be given a full opportunity of ascertaining and determining the position of the debtor and of his estate As to the question of the control over bankrupts, the main question was, whether it should be given to the Board of Trade, or to the ordinary Courts of Law. Now, it appeared to him that the system of control by the creditors, as well as that by the Court, had both been tried, but had practically failed, and that few required the introduction of some other authority For this reason he was for giving some powers of investigation and administration to the Board of Trade and officers appointed by it; but he would like to see some qualification imposed by the Bill upon the Official Receivers, who might be appointed under the Act. With respect to 867 composition, he thought that if it was not accepted within a certain time it ought to fall through, as a matter of course, and bankruptcy ensue. The proposed abolition of preferential charges was a question of very considerable importance. He did not desire to enter upon the question generally now; but he trusted that it was a matter that would not be overlooked in Committee. He must say that he quite agreed with the hon. Gentleman the Member for Wolverhampton (Mr. H. H. Fowler) that if distress for rent was to be abolished it should be done in a direct way, and not by a side-wind, such as this appeared to be. He did not wish to enter into a discussion of the reasons for or against the abolition of the Law of Distress, although he flattered himself that the reasons in favour of the maintenance of the law were predominant. He thought the Bill was capable of some amendment in reference to leases held by bankrupts, so as to provide for the interests of parties holding under the bankrupt on the one side, or for a complete surrender to the lessor on the other, freed from all intermediate tenancies. The Bill in its provisions with respect to the estates of deceased debtors was also objectionable. There was no necessity for throwing these estates into bankruptcy. They had an admirable system in operation, by which the estates of deceased persons were administered in Chancery. Whether they died solvent or insolvent, the administration was conducted on the same principles, for the advantage of the persons interested in the property. The provisions of the Bill might lead to considerable embarrassment, for it frequently happened that an administrator of the estate of a deceased person was not able to ascertain for some length of time whether the debts could be paid in full or not, and was obliged to get the Court of Chancery to relieve him from the pressure of creditors until the estate could be realized. An estate might be solvent in the long run, which would have been unable to pay off the debts at first. It would be very hard to throw such an estate into bankruptcy, nor was there any object to be gained by it. The debtor required no discharge, and he certainly could not be examined in bankruptcy. He trusted that, in Committee on the Bill, that portion of it would be rejected. He cordially ap- 868 proved of the provision with reference to judicial administration through the medium of the High Court of Justice, by which this administration might be assigned by the Lord Chancellor to any Judge of that Court. He would have preferred power being given to a creditor to take a case before any Judge, without an assignment at all; but he presumed that it was felt that it was necessary to continue the present Registrars in Bankruptcy, and that you could hardly alter their status; but if from any cause they ceased to act, or were utilized in some other way, he would suggest that they should be preceded by those admirable officers who, in the Chancery Division, assisted the Judge. He meant the Chief Clerks, a body in whom the Legal Profession had every confidence. This would bring the whole jurisdiction, both in Bankruptcy and Chancery, into harmony and juxtaposition. Seeing that he had been appointed to the Grand Committee, which would deal with this Bill, he would enter into no further criticism of its details at present, but would place on the Paper such Amendments as he thought advisable for the consideration of the Committee.
§ MR. SERJEANT SIMON
Sir, I cannot join in the strictures which the hon. Member for Londonderry (Mr. Lewis) has passed on this Bill; and though there is one part of it from which I strongly dissent, and though I may add that I have not much hope of any Bankruptcy Legislation whatever, I do recognize in the Bill an earnest and able attempt to grapple with a very difficult and complicated subject. An hon. Member opposite, in an earlier part of the evening, spoke of the despair of the commercial community with respect to Bankruptcy Law—a despair which made them ready to accept this, or any other Bill, so long as they had a chance of escaping from the present state of the law. I hope my right hon. Friend the President of the Board of Trade will not think that I am in any way disparaging him when I say that this Bill seems to me to fulfil the condition expressed by the hon. Gentleman, and that it may be described as a desperate attempt to deal with a desperate case. My right hon. Friend, in the course of his able and lucid speech, referred to the many alterations that have taken place in our Bankruptcy Legislation since 869 1831. The House will be surprised to hear that from the time of the first Bankruptcy Act in this country, in the Reign of Henry VIII., we have had Bankruptcy Legislation of one sort or another, on an average, every 10 years; and that for the last 40 years we have had Bankruptcy Legislation—to say nothing of the numerous Bills introduced and dropped, or which have failed to pass—on an average of between five and six years. We have oscillated from the extreme penal legislation of the olden time, when a bankrupt was treated as a criminal, and was liable to have one of his ears cut off; we have oscillated from that system to the extreme leniency which prevailed in 1831, when the whole management of a bankrupt's estate was in the hands of his creditors. Lord Eldon described it as a system of abuse, as one in which "there was no mercy to the creditor;" as a system that existed only for the benefit of assignees and lawyers. Sir, I am afraid I must digress from the subject for a short time to refer to the opinion of the great commercial community on the other side of the Atlantic, which may be supposed to know something of the matter. There is a Report of the Judges of the Supreme Court of the Legislature of the State of New York. They said that—Judging from their former experience, and from observation in the course of their judicial duties, they were of opinion that the Insolvency Laws were the source of a great deal of fraud and perjury. They apprehended that the evil was 'incurable,' and arose principally from the 'infirmity inherent in every such system.' A permanent Insolvent Act, made expressly for the relief of the debtor, and held up daily to his view and temptation, had a powerful tendency to render him heedless in the creation of debt, and careless as to payment. It induced him to place his hopes of relief rather in contrivances for his discharge than in increased and severe exertions to perform his duty.I believe that that inherent difficulty is the cause of the failure of every attempt which the Legislature has made to enact a Bankruptcy Law which should protect creditors and punish dishonest debtors. I know not, in the whole history of Bankruptcy Legislation, a single instance of a Bankruptcy Law which has fulfilled either one or the other of those requirements. I know of no creditor who has benefited by legislation; I know only of dishonest or unscrupulous debtors who have escaped from their 870 liabilities. There is one feature in the Bill to which I will call attention—it is the power given to the debtor himself to petition the Court. Now, on the face of it, it seems to be a reasonable thing that when a man is unable to pay 20s. in the pound he should go to his creditors and say so; and if they refuse to release him, that he should apply to the Court. But theory says one thing, and practical experience teaches another. Lord Hatherley, in 1877, in "another place," showed the result of the right of petition by the debtor under the Act of 1861. It appeared that for the year ending October, 1869, out of 10,000 adjudications, 7,530 were adjudicated on the bankrupt's own petition. The results as regards creditors in the same year were that 1,695 paid dividends, and 7,346 paid no dividend. The House, therefore, will see that, however theoretically right this power proposed to be given to the insolvent debtor might appear to be, in practice it is anything but favourable to the interests of the creditors, or to commercial morality. But I confess I have no hope whatever from Bankruptcy Legislation. I expressed this opinion in 1879, when Lord Cairns' Bill came down to this House, and I am glad to find that I am corroborated in that view by so high an authority as my hon. Friend the Member for Wolverhampton (Mr. H. H. Fowler); and though public opinion is not yet ripe for it, I believe with him that we are approaching the time when public opinion will repudiate this system of special legislation, and will call upon Parliament to repeal it. I believe that commercial morality and the interests of creditors would stand much higher if creditors were left to their Common Law rights. You would then find that creditors would be more careful how they gave credit. They would not be inclined then to do what the competition of trade induces many to do now—to push trade by giving undue credit; and that, when a debtor failed to pay his debt within a reasonable time, the creditor would have recourse to his legal remedy. The debtor, knowing that he would be discharged from his debt only by payment, would be more careful how he contracted debt. At the present time, what is the practice? You have a law for the relief of the debtor, not for the benefit of the creditor. The whole theory of our Bank- 871 ruptcy Legislation rests on the supposition of the possible or probable inability of the debtor to meet his engagements; you have thus, then, a law to enable him to get rid of his liability. That is the whole theory of our Bankruptcy Legislation; that is the theory on which it rests; and I say that the sooner you get rid of it the better. Let the relations of debtor and creditor stand upon the Common Law, which is the right of a creditor to recover his debt, and the obligation of the debtor to pay it. Now, having made these general remarks, let me say this—that if this Bill should fail it will not be for want of ability on the part of the right hon. Gentleman in grappling with the subject. It is a difficult and a complicated subject; and though I differ from him in some of his remarks, and as to one part of the Bill to which I shall presently advert, I say all credit is due to him for the way in which he has dealt with it. A good deal has been said about the appointment of Official Receivers. I look on that as one of the best features of this Bill. It is a necessary feature. You cannot leave the control of a bankrupt's estate wholly in the hands of the creditors. This has been proved by the failure of the present Bankruptcy Law, which gave all the power to the creditors. Creditors, it has been proved, will not look after their interests in bankruptcy, and my right hon. Friend has taken on himself the unpromising task of trying to take care of them. I think the attempt will fail; but it is a chivalrous endeavour on his part. You have had officialism and non-officialism. My right hon. Friend said the officialism of the Act of 1849 was the cause of its failure. To some extent that is true. The Act of 1849 was a cumbrous Act. It mixed up penal enactments with administrative functions. But, Sir, even under that system of extreme officialism, my right hon. Friend admits that there were larger dividends paid than had ever been paid before. You have had anon-official system since 1869, and what has been the result? We all know what a wretched failure it has been. The hon. Member for Evesham (Mr. Dixon-Hartland) said that all previous Bankruptcy Legislation had failed because it had been introduced by lawyers. I do not know if he was in the House of Commons in 1869, when the present law was introduced. 872 If he was not, I will refer him to Hansard, and I can tell him this—that, if ever there was an Act free from the interference of lawyers, the present Act was that Act. It was the offspring of the Associated Chambers of Commerce; it was the creation of commercial men; not a lawyer had a voice or a hand in it. I cannot forget that when it was introduced there was one chorus of praise from all the commercial Gentlemen in the House. My hon. Friend the Member for Bristol (Mr. S. Morley), in particular, was loud in his praise, because we had got rid of the trammels of officialism, and the dominion of the lawyers, and had taken commercial wisdom and experience as our guide. And yet, two years afterwards, this very Act was denounced as the greatest failure of any attempt which had been made at Bankruptcy Legislation. Now, perhaps, I may be supposed to speak with the partiality of my Profession, when I say that I dissent from the proposal to introduce into Bankruptcy administration a political Department of the State. I object to it on practical, as well as theoretical grounds. I think that we ought not to introduce a political Department of the State into matters of private and individual concern. My right hon. Friend says there is an analogy between this case and accidents at sea, in mines, and on railways, and so on. I fail to recognize the analogy. I know there was great misgiving as to the propriety of that legislation; but it is one thing to inquire into an accident in which human life is involved, and it is another thing to ask that a political Department of the State shall undertake the supervision of at least 10,000 cases affecting simply private and individual interests. We are to have 60 Official Receivers. Does my right hon. Friend think that 60 Official Receivers will be able to discharge all the duties that will be thrown upon them by this Bill? We have it shown by the Controller's Returns that there are, on an average, at least 10,000 insolvencies in each year, and, no doubt, that will continue. There have never been less, sometimes more. Are you to have an official inquiry into every one of these cases, conducted by a responsible officer, amenable to the Board of Trade, with the Head of that Department amenable to this House? My right hon. Friend commends his proposal on the ground 873 that the Board of Trade is amenable to the public, and to this House. What does that mean? Are we to understand that, in every case of the 10,000 bankruptcies or insolvencies which annually occur, with at least 100,000 creditors, whose interests are to be taken care of, every creditor who has a grievance is to instruct his Member to put a question here to the President of the Board of Trade, to know why certain things have been done, or others left undone? We had 58 Questions this afternoon. What are we to expect under this system of Board of Trade administration, if every creditor is to have a right to come here, through his Member, and interrogate my right hon. Friend, or his Successor on the administration of a bankrupt's estate? But the statement of the right hon. Gentleman as to the Board of Trade being amenable to the public and to this House means that, or nothing. If it does not mean that, I want to know what redress the creditor will have for any neglect of duty, or any misfeasance, or neglect of any official acting under the Board of Trade? Well, my right hon. Friend will soon, we hope, occupy the position which the House and the country desire to be instituted, of a Minister of Commerce and Agriculture. He will have all these duties added to his already very considerable functions, and yet he would have Bankruptcy administration as well. I object to it also on the ground that there would be a divided responsibility. If you are to have a thing well managed, a duty well performed, place it in one hand; do not divide it between two persons, one of them responsible in one place, the other responsible in another, or not responsible at all. You will find this to be the case in many clauses to which reference has been made—the appointment of a trustee, for instance. The trustee's conduct is to be under the supervision of the Board of Trade, through the Official Receiver. The Board of Trade, or the Official Receiver, is to consider what the conduct of the bankrupt has been, and whether he has, complied with the law or not. He has quasi-judicial functions to perform, and no one to control him, or to say that he has acted rightly or wrongly. Then there is a clause, saying that the Receiver is to be appointed, subject to the refusal of the Board of Trade, and if the Board refuse to appoint him, 874 the creditor can appeal to the Court. Here is thus the jarring of two authorities one with another, the Court and the President of the Board of Trade. I think that such a system cannot work well. In saying what I have felt it my duty to say on these parts of the Bill, I recognize what I may call the chivalrous endeavour of my right hon. Friend to overcome a great difficulty, and to efface a crying evil. Now, many people are taken with a name, and I rather fear that the sound of "The Board of Trade" has tickled the ears of commercial men. There is a commercial ring about it; and, as bankruptcy concerns commerce, it is taken for granted that the administration of bankrupt estates by the Board of Trade must be the right thing. But the commercial world may find that this system, however fine it may sound to the ear, will not fulfil their expectations. I have said that I approve of the appointment of a Receiver. I think that, as the non-official system has so completely broken down, you must have some kind of officialism to look after the interests of the creditors, who, experience has shown, will not do so themselves. In fact, what may be called the gist of the Bill is to effect this object by appointing persons to look after the interest of the creditors. But when you look at the functions which the Official Receiver has to discharge, functions requiring vast ability, some legal knowledge, and great experience of business, you will see that you cannot appoint inferior men; you must have men of position, persons who will inspire confidence, and you will not find such persons, as a rule, among those with whom it is intended to lodge this great trust. I think that if the Official Receivers had to discharge their functions under the supervision of the Court, and not under the supervision of the Board of Trade, it would have been better; it would have introduced just the amount of officialism necessary, and no more. But I think this improvement is very much curtailed and modified by placing the Official Receivers under the Board of Trade. There are other matters of detail in the Bill to which I shall not advert, as they have been mentioned already by others who have spoken. I shall not oppose the second reading. I look upon it as a desperate attempt to meet a desperate case. I will, on that ground, 875 give it such support as I can. I have expressed my dissent from the new feature which it introduces into Bankruptcy Legislation; but, so far from opposing the Bill, I will say—"Give it a trial, even under this new system," although I am by no means sanguine of its success.
§ MR. EDWARD CLARKE
expressed regret that only one conspicuous Member of the English Bar—the Solicitor General—appeared on the Grand Committee to which this Bill was to be referred. He wished to say a word in enforcement of the protests made in the Amendment of the hon. Member for Mid Lincolnshire (Mr. E. Stanhope) against the officialism that was connected with this Bill. There was no doubt that the measure was a reversal of their system of Bankruptcy Law and of the principle that was adopted in 1869, and pressed strongly by the commercial classes; and he hoped that there would now be a resolute stand made against the association of Bankruptcy Law with a political institution and a political Department. The right hon. Gentleman (Mr. Chamberlain) had told them that there were two objects to be aimed at in a Bankruptcy Law; the one being the honest administration and speedy distribution of bankrupt estate, and the other the improvement of the tone of commercial morality. He (Mr. Clarke) did not recognize it as one of the duties of legislation to improve the tone of commercial morality. If commercial morality had been so low that its negligence and carelessness had defeated the operation of the present system, he did not see why they should pass a different Act of Parliament for the purpose of improving that tone. The immediate and legitimate object of the Bankruptcy Law was to distribute fairly among the creditors, and as economically and speedily as possible, the assets of men who had failed, and that anything beyond that seemed to be unnecessary for the purpose of the law. It was not punishment but a privilege that they gave to a man under the Law of Bankruptcy; it allowed a man who could not pay his debts to clear himself by surrendering his property. With regard to this Bill, he confessed he did not believe it would achieve the principal object—namely, the speedy distribution of assets. There was never anything speedy about a public office. If the creditors 876 set about a proper administration of the bankrupt's estate they would succeed much better. Creditors were well represented in that House; the insolvent debtor had a limited representation there; but there was reckless trading just as much on the part of the creditor as on the part of the debtor. Creditors often forced their goods on the debtor, and made him the instrument of their speculation. It was really to enable reckless creditors to be protected by a public body that the whole hierarchy of officials was to be called into existence. It was said that 60 Official Receivers would be sufficient. In his opinion, that was a ridiculously inadequate number, considering that among other duties they would have to examine and report upon each bankruptcy, to examine debtors, and to report whether those debtors ought to be punished or not. A moment's reflection would show that such duties would take up a great deal of time. Moreover, the Receivers would, in a large number of cases, have to act as trustees. He did not, therefore, share the favourable views which had been expressed of this Bill. A great many trustees had been defaulters, careless, and inefficient in the discharge of their duties; but there were very many trustees in the City of London who were far better qualified to realize a bankrupt's estate honestly for the benefit of the creditors than any Government officer; and what they wanted, he was persuaded, was not to set up a system which would supersede them by another and costly public organization, but to put some pressure upon them to make them competently discharge their duties. This large Bill, this large system was unnecessary. There were three great defects in the administration of the Bankruptcy Laws—first, the Composition Clauses, which had been the means of the greatest number of frauds; secondly, the trustees had not sufficient control exercised upon them; and, thirdly, the mischievous system of general proxies. As to the first defect, this Bill, he was sorry to say, brought back upon them the mischief complained of. With respect to trustees, all that was wanted was to pass a law that every trustee should file half-yearly accounts, deposit his moneys in some recognized bank, and distribute them when they came to one-twentieth of the amount of 877 the debts. No general proxies ought to be allowed, and no proxy used except for the purpose specified upon its face. There was no occasion for heroic legislation in regard to this matter. This Bill was a stupendous job, creating an enormous amount of patronage to be exercised by a Government Department, and in no way assisting the object which hon. Members had at heart.
§ SIR JOHN LUBBOCK
said, the hon. Member for Mid Lincolnshire (Mr. E. Stanhope) had referred, in his able speech, to a Bill which he (Sir John Lubbock) had introduced on behalf of the Institute of Bankers. That Bill, however, only dealt with certain points, upon which he believed there was practically very little difference of opinion; and although he thought it would be a great improvement in the law, and introduce amendments upon which there was practical unanimity of opinion, it did not profess to deal with the whole subject of Bankruptcy. So far, indeed, as the realization of assets was concerned, he believed it would meet the requirements of the case. It did not, however, touch the conduct of the bankrupt himself. On the other hand, the Government Bill dealt fully with the question. The Law of Bankruptcy fell into two extremely distinct parts—that which related to the bankrupt, and that which dealt with the assets. The conduct of the bankrupt was a matter which concerned, not the creditors only, but the whole mercantile community. It was quite right to make bankruptcy as difficult as possible, and in the general interest to fence it round with the strictest rules. No doubt, though many an honest trader had been ruined by causes beyond his own control, on the other hand, in most cases, insolvency was due to reckless extravagance, to speculation, or was a fraudulent mode of robbing creditors. The portion of the Bill which dealt with the bankrupt himself seemed to be an improvement on the present law. But when they came to the second part of the measure—that which dealt with the realization of the assets—he could not help hoping that in regard to that portion of the Bill his right hon. Friend the President of the Board of Trade would listen to the remarks which had been made in the course of the debate from both sides of the House? In point of fact, the 878 great tendency of the Bill was to revert to officialism. If they examined the Bill they would see in it a great deal about the powers of the Board of Trade, the powers of the Court, of the trustees, and of the Official Receivers, but very little indeed about the powers of the creditors. Here, he thought, the Bill went entirely in a wrong direction; and he was sorry that his right hon. Friend had paid so little attention to the representations made to him when a corresponding measure was before the House last year. Why should the Board of Trade assume a right to manage a part of a man's property because it had formed part of a bankrupt's estate? The reason which his right hon. Friend gave last year for this extraordinary proposal was that the creditors did not look after their own interests, and the same reason had been repeated over and over again that night by various speakers. It was said that the creditors would not attend to their own interests and look after a bankrupt's assets. But he ventured to maintain that they had never really given the creditor the opportunity of doing so. First of all, they had the rule of the Official Assignee, under which the creditor was powerless; while, under the existing system, the trustee was almost equally omnipotent. The right hon. Gentleman told them that the Official Assignee was introduced in 1842 with a general chorus of approval, but that, after having been tried for 20 years, they were glad to get rid of him. He was afraid they would have history repeating itself before another 20 years were over, and that they would be very glad to get rid of the system the present Bill proposed to introduce. The hon. and learned Gentleman who had just sat down (Mr. E. Clarke) said that the creditors would never be taught to look after their own affairs. But they never had had power to do so. The creditor had no power of calling for a list of his fellow-creditors; and, therefore, he was unable to know who he had to act with. He had no power to insist on a division of the assets, and no power to call for accounts. It was perfectly true that if they were dissatisfied with the trustees they might get rid of them by an extraordinary resolution; but that resolution must be passed at a meeting, and the meeting could not be called except by the trustee. Therefore, the creditors found that it was of no use to do 879 anything, because they were absolutely powerless in the matter. They might look at the books; but that came to very little. Moreover, even if one creditor made out the accounts for himself, it would be very difficult for him to convince his brother creditors. What, then, could he do? In fact, under the existing system, creditors were powerless. He would ask the House—Was not the realization of the assets of a bankrupt something similar to the realization of the assets of a Joint Stock Company? Yet what a contrast the powers possessed by the shareholders of a Joint Stock Company presented from those of a creditor in bankruptcy. Shareholders had a right to have a list of all the shareholders in the Company; they could insist upon periodical accounts; if they were dissatisfied they could call a meeting, and could insist upon the Directors giving an explanation of all that was done; if they were still dissatisfied they could get rid of the Board of Directors altogether and appoint another; and it was a constant practice to change Directors who were considered inefficient, and whose policy was disapproved of. The creditors in bankruptcy had none of those powers; and so long as they were withheld from them he maintained that they could not tell what the creditors would do if they had the opportunity. Let them take this Bill and see what it did. In the first place, when a man became bankrupt the Court appointed an Official Receiver; the Official Receiver called a meeting; this Official Receiver had to take the chair at such meeting, the creditors not being allowed to appoint their own Chairman. The Bill determined the number of the Committee of Inspection; it did not allow the creditors to determine the number of their own Committee, or to select their banker; they had no right to copies of accounts or lists of fellow-creditors; and if they were allowed to appoint a trustee, when they had done so the Board of Trade, under Clause 78, was enabled to remove him and to appoint an Official Receiver in his place, and if the creditors disapproved of this they were kindly allowed to appeal to the High Court. He did not complain that, in the first instance, the Board of Trade should have the power of removing the trustee in bankruptcy under the provisions of the Bill; but he did think that after 880 the matter had been brought before the creditors, if they wished to re-appoint the trustee, and thought that he would be more likely to act in their interests than the Official Receiver, it was too bad not to allow them to do so. Then, again, he must say that he viewed with grave apprehension the proposal to hand over all funds above £50 to the Government. The Bill made an elaborate provision for enabling this to be done; but he did not see any corresponding arrangement for getting the money out of the hands of the Board of Trade and distributing it to the creditors. He was very much afraid that if the money once got into the hands of the Government, the unfortunate creditors would find it a very difficult matter to get a dividend. His right hon. Friend said the Government expected to get something like £30,000 a-year from this money in the shape of interest. But surely the interest of the money belonged to the creditors, and not to Her Majesty's Government. One of two things must happen—either the money would remain in the hands of the Government, and there was no reason why the dividends should be withheld, or it was intended for distribution; and in that case why, in the name of wonder, should funds be transmitted from Penzance or Newcastle up to London in order that it should be immediately sent back again? Was the Board of Trade merely to receive and repay; or was it to exercise any discretion? If it were merely to hold the funds and get interest on the money, that interest clearly ought to belong to the creditors; if it was to exercise any discretion, then there was a new and needless barrier between the unfortunate creditor and his dividend. If the Government wanted money it would be much better to take what they wanted in the shape of fees, rather than get it in the shape of interest. It would be to the advantage of the Board of Trade to hold it in order, as long as possible, to obtain interest. No doubt it was an important thing to have a dividend; but it was equally important to have it as quickly as possible. It was very undesirable that the Government should have an interest in delay. There was nothing sacred or mysterious in the assets of a bankrupt, and the creditors were entitled to the fullest information concerning them, and the amplest powers of 881 dealing with their own property. It was proverbially difficult to get money out of the Court of Chancery; and he feared it would not be easy to extract it from the Board of Trade, who would be receiving interest on it themselves and paying none. In pressing this point upon the Government he was by no means representing the opinions of bankers only. At a large meeting of the Association of Trade Protection Societies of the United Kingdom, held at the Westminster Palace Hotel, two years ago, to discuss the Bill then brought forward by the right hon. Gentleman the President of the Board of Trade, which in this respect was the same as the present, a resolution was unanimously passed protesting against this clause, and declaring that the trustee should be allowed to keep the account at any bank which the creditor might select. His right hon. Friend recognized in the same clause that, in many cases, it might be necessary to keep an account at a local bank; but that was not to be done unless the Board of Trade, on the application of the trustee, were satisfied that it was necessary. He was very much afraid, however, that while the trustee was making the application, and the Board of Trade were making up their mind whether it was really necessary, in a great many cases the business would be ruined, and a heavy loss be involved on the creditors. Then the Board of Trade was to audit the accounts. He could not see why the Board of Trade should audit these accounts more than the accounts of every Joint Stock Company in the United Kingdom. It was no slight undertaking; and if they accepted the responsibility it would necessarily require a very large and increasing staff of officials, and he could not help thinking that his right hon. Friend very considerably under-estimated both the number and the expense. They knew that a great increase in the army of Government officials was already a great evil and danger to the country, and he thought the Bill very unnecessarily proposed to add to the number. Several hon. Members, who had spoken more or less in support of the Bill, seemed to be of opinion that it would not be long before there would be no Bankruptcy Law at all, and then this staff of officials would become unnecessary; but, whether they were to have 882 a Bankruptcy Law or not, there must be some mode of realizing the assets of a bankrupt. Other hon. Members objected to these clauses of the Bill altogether; and, personally, he objected to it, because it was a piece of centralization, because it would create a now and unnecessary host of officials—Official Receivers, Official Auditors, Official Accountants, Official Registrars—many of whom the Government would inevitably have to pension off, before many years were over; and, secondly, he objected to it because it did not seem to him to take that which was the true method of dealing with the matter—namely, by giving the creditors power, and enabling them to look after their own interests. It appeared to him that these were important points in which the Bill would require amendment. Hon. Members seemed to be under a misapprehension in regard to the provisions of the Bill of 1869. Though they had established a system of trustees, they had never yet tried a system of enabling the creditors to manage their own affairs. There were other points of the Bill to which he should have been glad to allude; but, while thanking the House for the patience with which they had listened to him, he felt that he ought not to occupy their time further. He would only say, in conclusion, that while he had ventured to criticize some portions of the Bill, he hoped it would not be inferred that he was attacking it as a whole. He had thought that it would be useless to waste the time of the House by referring to those clauses of the measure with which he agreed. He had, therefore, only ventured to criticize those with which he differed, and he hoped that he had not produced an erroneous impression. He believed that the Bill, on the whole, contained a great deal that was good; and although he sympathized, to a considerable extent, with much of the spirit of the Amendment of the hon. Member for Mid Lincolnshire (Mr. Stanhope), still he could not vote for it, because he believed there was much that was good in the Bill, and he hoped to see the measure modified in those parts that were objectionable. He trusted that when the Bill got into Committee his right hon. Friend would consider these points, and endeavour to meet those who desired a modification. If the right hon. Gentleman would consent to do so, he believed 883 the measure might be so framed as to place the Law of Bankruptcy on a satisfactory footing. He did not share in the despair of his hon. and learned Friend the Member for Dewsbury (Mr. Serjeant Simon); but he believed that a good Bankruptcy Bill, satisfactory to the commercial community, might be passed; and if his right hon. Friend succeeded in accomplishing that object he would, undoubtedly, earn the gratitude of all those engaged in commerce.
§ SIR HARDINGE GIFFARD
said, that, in order to ascertain whether the present mode of meeting the difficulty was the right one, it was necessary to consider what had been the causes of the failure of the existing system, that failure being an undoubted fact admitted by all. Certainly, there was this ground for legislation—no one denied that the present state of the Bankruptcy Law was unsatisfactory. There could be no doubt that it encouraged fraud; that under it creditors did not get their own; that the very things which ought to be encouraged by the law—namely, prudence, thrift, and accuracy of trading—were all discouraged by the present state of the Bankruptcy Law. Under these circumstances, he thought the right hon. Gentleman the President of the Board of Trade had a right to ask for the assistance of the whole House in doing all that in it lay to aid him in what was conceded to be a very difficult task. He wished to say, on his own behalf, that be recognized, all throughout, in what the right hon. Gentleman had said a real desire to remedy what was undoubtedly a great grievance—a grievance on the part of the Government as well as of the commercial community. But he could not help saying also that that which was the key-note of the present Bill was also its worst feature—namely, that the administration of a defaulting debtor's affairs was to be committed to a Department of the Government. In point of fact, the entire administration of the debtor's affairs was to be so committed. No one, as yet, had adequately stated the extreme difficulty it was necessary to contemplate. What was to be the number of what were called "Official Receivers," and what was to be the expenditure on them? In order to take an adequate view of that question, it must be remembered what the previous legislation had 884 been. To go no further back than the Act of 1849—by that Act the obligation was placed on the bankrupt of exhibiting to the creditors and to the Court what had been the course of his trading. He was bound to give a complete statement of his affairs; and if, in his last examination, as it was then called, he failed to disclose all his property, real and personal, he was held to be guilty of a felony, for which he was liable to be transported for life. That was one of the objects for which the Act of 1849 was passed. It would be observed, in the case of that Act, that under a severe penalty the obligation was placed on the bankrupt. The creditors were not required to search out what the bankrupt had been doing; but the bankrupt was obliged to state, under a penalty of transportation for life, what had been the truth in regard to the whole course of his trading. The Acts of 1881 and 1869 reversed the whole of this extremely penal enactment; and from being a system which involved the trader in penalties of this very severe character, they swept away the very felony created by the former Bankruptcy Law, and made everything a misdemeanour, imposing a comparatively mild punishment. Then also, in 1869, came what was substantially the abolition of imprisonment for debt. Then, could it be wondered at that when the penalty which had fortified the due performance of the debtor's duties were taken away—unless something was substituted in its place—those who were dishonest availed themselves of the state of the law, and thought it rather a discreditable thing to pay 20s. in the pound, and contended, as though it were a joke, that a man who had a wife and family ought not to pay 20s. in the pound? Now, what was the alteration in that state of things—which was, undoubtedly, a scandal in the law as it existed at present—what was the alteration the right hon. Gentleman proposed in this respect? He found there wore no less than four different systems of nomenclature introduced, as if different things were specified by merely altering the names. The right hon. Gentleman proposed to create a body of Official Receivers under the Board of Trade; and he should like to call the attention of the right hon. Gentleman to the manner in which the proposal was to be carried out. What was 885 the first duty cast upon the Official Receiver? It was not the duty of the Court; it was not what would be the function of the creditors; and it was not an obligation cast upon the bankrupt himself; but, forsooth, the first duty of the Official Receiver was to investigate the conduct of the debtor. What was to be the means of investigating the conduct of the debtor in connection with his trade? How was it to be done? The debtor, at the time of the investigation, would be under no such obligation as was created by the Act of 1849. It was true that he might be called upon to give an account of what he had been doing, and that was to be fortified by the fact that he would be committing contempt of Court if he did not give a true account; but what was such an investigation, without any obligation upon the bankrupt, fortified by penal consequences, likely to lead to? The right hon. Gentleman somewhat misstated the effect of the section when he spoke of a public examination of the debtor. He spoke as if it were to be the act of the Official Receiver; but that was not quite correct. The Official Receiver was only to take such part in the public examination of the debtor as the Board of Trade might direct; and he wanted to know what examination was to be held by the Board of Trade? What were they to do? How were they to acquaint themselves with the circumstances of the debtor, and his course of trading, so as to enable them to give directions to this Investigator or Receiver, or, as one of his friends described him, this great detective, in order to show him what part he was to take in the public examination of the debtor? Then, again, he was to give such assistance in the prosecution of a fraudulent debtor as the Board of Trade might direct. Was it not obvious, when they came to look at this collection of duties cast on the Receiver, that if there was to be anything like a real examination, and such an investigation of the bankrupt's affairs as was necessary under the former state of the law, the number of Official Investigating Receivers was totally inadequate for the purpose? If there was to be anything like a thorough investigation of the bankrupt's affairs the number of 60 Receivers, not mentioned in the Bill, but suggested by the right hon. Gentleman, was utterly and hopelessly in- 886 adequate. In what way were all the 10,000 bankruptcies per year to be investigated? How many times were the Receivers to go through the bankrupt's books, in order to discover whether he had been engaged in reckless trading, and incurring debts without adequate means of payment? These were proper and desirable matters to investigate, and ought to be investigated; and they were matters which, when the bankrupt was under an obligation to make a full and complete disclosure to the Court, and was liable to be transported for life if he failed to make such disclosure in his last examination, enabled the Court to understand the nature of his trading. But all that was now to be done away with by the original act of the Receiver of the Board of Trade. It was quite obvious that neither 60 nor 600 Official Receivers would be adequate to perform the functions inquired. It was suggested that the creditors might, if they thought proper, be allowed to employ persons to act for them, or even solicitors to aid and assist them, in investigating the affairs of the debtor. He thought the complaint was that it was necessary to supplement the creditor's duty by Government interference; and, if so, that was not done now by this Bill; and the only reason for the Bill was the supposed reluctance of the creditors to interfere in such matters, or consent, to use a common phrase, to throw good money after bad. Therefore, they would do this now; and why it should be supposed, under the provisions of this Bill, they would be more disposed to do it hereafter than they had hitherto been seemed to him to be absurd. Another cause which led to the failure of the Bankruptcy Act of 1869 was the abolition of the only fortifying power then existing to ensure a complete investigation, by subjecting the creditors to penal consequences if they did not. But the only cause which accounted adequately for that absolute failure was the system of composition and arrangement which the right hon. Gentleman preserved. Why was that? He could not concur with the hon. Member for the University of London (Sir John Lubbock) that no one would have the same opportunity of interfering as the creditors, because the real creditors found themselves outvoted and outnumbered by sham creditors. They were 887 met with this difficulty. Conspiracies were entered into and brought to bear against them for the purpose of defeating an honest endeavour to get the bankrupt's affairs satisfactorily investigated or acquiesced in. As it was a course which necessarily involved sacrifices, expense, trouble, and annoyance, it was obvious what the conduct of the creditor would generally be. Men would shrink from making additional sacrifices, and they would allow the bankrupt, his confederates, and his fraudulent friends, to do what they would rather than interfere further. But then what security had they now? What provisions were there in the present Bill to get rid of this difficulty? He confessed that he failed to find any. Even the offence, or that which ought to be an offence, and which, in a roundabout way, might be made an offence in law, was not glanced at in the Bill. Why should it not be made an offence, severely punishable, for a man to pretend to be a creditor, or a greater creditor than he was, and voting in that capacity in regard to any composition or arrangement? In a roundabout way he did not deny that it might be made an offence now; but why should there not be some specific penal legislation against that which, undoubtedly, had been the commonest offence since 1869. That was what was practically done. The creditors were met by persons, some of whom made a trade of it, who offered to appear as sham creditors, and to aid and assist them in withdrawing from the real and bonâ fide creditors a greater proportion of the assets which ought to be distributed among them. In truth and in substance this was the cardinal blot which ruined all the good in the Act of 1869, and it was preserved in the present Bill. Nor did he find that even in the investigation of the Board of Trade the Receiver was to be called upon to examine what was the real state of the assets, and there were no means of testing whether alleged creditors were really so or not. The matter was simply left to a proof or an affidavit of debt; and when dishonest debtors entered into a combination with sham creditors, as they did now, in order to prevent a real and bonâ fide creditor from knowing the facts, what, under the powers of this Bill, were to be the functions of the Official Receiver to find out the fraud 888 that had been committed? Under these circumstances, it seemed to him that the Bill of the Government went in an entirely wrong direction. Instead of giving to a Department—if it was to be a Department—the power of investigation and punishment, either as a Court, or as an auxiliary to a Court, they proposed to throw the power into an overcrowded Government Office; and the only way in which they could make that overcrowded Government Office do its work was by delegating to somebody else the work which, in point of form, they remitted to it. He had said that the right hon. Gentleman was entitled to all the assistance the House could give him in rendering the measure as perfect as possible; and he was only pointing these things out, not for the purpose of making a general criticism on the Bill, but for the purpose of suggesting to the right hon. Gentleman, and to the Committee to which the Bill was to be referred, that it was of the utmost importance, in the administration of any bankruptcy procedure, that they should provide, not for cases in which everybody intended to do what was right, and to give up all that ought to be given up for general distribution among the creditors, but against fraud. If everybody did what was right it would not be necessary to have any Bankruptcy Act at all. What they had to provide against was intentional fraud; against those who, availing themselves of the state into which a bankrupt's affairs had got, desired to divert into their own pockets, by various schemes and expedients, many of which were known now, and more of which would grow out of a measure like this, money that ought to go into the pockets of the creditors. He failed to see, in the present Bill, any provision calculated to prevent that absorption of the creditors' money which had, undoubtedly, been going on to a degree which had created a scandal. He wished to call the attention of the right hon. Gentleman to another matter which had been referred to in regard to the smaller bankruptcies. He had always been of opinion that the present state of things in regard to the power of committal was very undesirable. He presumed that the power of committal was to remain, although nothing was said about it in the Bill. It was highly objectionable and improper, he thought, that 889 there should be a good many people in gaol who had never been convicted of any crime. His right hon. Friend the late Home Secretary (Sir B. Assheton Cross) and himself had earnestly desired to get rid of so undesirable a state of things. Personally, he thought that nobody should be in prison unless he had committed a crime. That was one of the great difficulties of the administration of the County Courts. It was said that unless they gave the County Court Judges the power of commitment, where a man had the means of payment and would not pay, the effect would be to destroy the value of the County Courts altogether. Now, he thought the true view of the question was this—that if the County Court Judges, sitting judicially, came to the conclusion that a man had the means of payment and would not pay, then that was a crime; and instead of commitment for contempt, which simply meant the confinement of the offender, leaving him at full liberty to pass his time in reading the newspaper, or in otherwise amusing himself, as if he had been sent to prison for the benefit of his health, he should be treated as a criminal and punished as a criminal. If it could not be established that such persons were criminals, then they ought not to be punished at all. The right hon. Gentleman had made an effort in this direction; but he (Sir Hardinge Giffard) did not quite see that he had altered the conditions of the law, because the Bill, if passed as it now stood, would leave the law in the same state as that in which it was now found. If the debtor made default in the payment of any instalment of the debt he was required to pay in pursuance of an order of the Court, he was to be deemed, unless the contrary were proved, to have had the means of payment. The words of Section 6 of Clause 114 were—If the debtor mates default in payment of any instalment payable in pursuance of any order under this section, he shall, unless the contrary is proved, he deemed to have had since the date of that order the means to pay the sum in respect of which he has made default, and to have refused or neglected to pay the same.That was exactly the state of the law which sent him to prison now. The Bill of the right hon. Gentleman gave the power of summary jurisdiction in the case of small bankruptcies; but that 890 was the case now. The County Court Judges had power now to make an order for the payment of a debt by instalments, and all the Bill did was to add the term "bankruptcy" to the small instalments ordered by the County Court Judges to be paid. That was the state of the law now; and he should like to hear from his hon. and learned Friend the Solicitor General in what respect it differed from the condition of the law which at present the County Court Judges had to administer? It certainly seemed to him (Sir Hardinge Giffard) to be precisely the same thing. If the County Court Judges found now that, as a matter of fact, a man had had the means of payment since the date of the order, and had been contumacious, they could commit him to prison with the consequences which had already been pointed out. What followed here?If a debtor makes default in payment of any instalment payable in pursuance of any order under this section, he shall, unless the contrary is proved "—that was, unless he was able to prove that he had not had the means of payment at or since the time the order was made—be deemed to have had, since the date of the order, the means to pay the sum in respect of which he has made default, and to have refused or neglected to pay the same.And then, although nothing was said about it, he presumed the debtor was to be committed to prison in default. He should be glad to hear if that was meant or not? If it was meant, he should like to hoar if it was to be a distinct offence or not? Certainly, there was no provision for dealing with it; and it seemed to him that while an honest and fair attempt was made to get rid of many of the difficulties surrounding bankruptcy administration, yet there was some confusion of thought prevailing throughout the Bill by which it was sought to do at one and the same time two totally different things—first of all, to improve commercial morality by dealing with the conduct of the debtor; and, secondly, by dealing with the administration of the effects and assets of the bankrupt. If the conduct of the debtor was discovered to have been such as to render him fit for a criminal prosecution, why not invest the Public Prosecutor with power to prosecute him? On the other hand, the mere administration of the 891 effects and assets of the bankrupt debtor might, he thought, be left entirely to the creditors. Why should the Board of Trade absorb both of these functions? It might well be, as the hon. Member for the University of London (Sir John Lubbock) said, that the creditors should be trusted to divide property and look after their own interests in the division of what might be found after the bankrupt's assets had been investigated. It might well be that there was another person to be considered—namely, the public. If a person was proved to have been fraudulent in his conduct, let him be prosecuted for it; but why the Board of Trade should absorb both of these functions—why the Board of Trade should insist on acting for the creditor on the one hand, and as Public Prosecutor on the other—he failed to see. Would it not be much better to divide functions so essentially different? Let them leave the Act as it was in other respects; but it was most undesirable, in such a question, to give the enormous patronage which the Bill would undoubtedly give to a Government Department in respect of the appointment of those officers, and to take away from the Public Prosecutor the vindication of the law wherever a fraud was committed. The creditors might be fairly trusted to look after their own interests, and to find out the best way in which the assets of the bankrupt could be realized. He had only one word more to say, and it had reference to a somewhat minute matter—namely, the proof of debts. But although a minute point, in respect of what might be called the general machinery of the Bill, it was not minute in its consequences. As he understood the Bill, they might have a meeting of creditors, consisting, perhaps, of two creditors only, who were to be in a position to accept proof of debts, for the purpose of an arrangement for composition prior to bankruptcy. He thought this was a provision which would afford easy access to bankruptcy, and enable a fraudulent trader to concoct any number of schemes to the prejudice of the creditors. He observed, in the provisions contained in the Schedule at the end of the Act, that the only limit as to the number of creditors competent to form a meeting was, that it was—Not to be competent to act for any purpose except the election of a chairman, the proving of 892 debts, and the adjournment of the meeting, unless there are present, or represented thereat, at least three creditors, or all the creditors, if their number does not exceed three.Consequently, two creditors would constitute a meeting for accepting proof of debts. The word "meeting" under this provision involved, he presumed, that there must be two. The only proviso was that there must be three in all other cases. He was not quite Certain that he was right; but he presumed that a meeting for proof of debts must necessarily consist of two; but such a meeting would not be competent to act for any purpose except the election of chairman, proof of debts, or the adjournment of a meeting. The power thus given to every creditor who should have proved his debts seemed to him a very serious matter indeed, seeing that proof of debts was to have so vital and serious an operation in reference to the power conferred on the creditors in regard to the rest of the Act. Although, as he said, the point was a minute one in the machinery of the Bill, it might become a very serious matter unless the provision were very substantially altered. He had only thought it right to make these observations with reference to some of the details of the Bill, because he recognized the Bill itself as a real and honest attempt to meet a great and crying evil. He had said nothing upon the provisions of the measure, in which he concurred; but he had thought it right to say what he had said, because, not being on the Committee to which the Bill was to be referred, he thought it necessary to point out the defects of the measure, and to guard against a recurrence of that optimism which had been so disappointed in the case of the Act of 1869, and which would be again disappointed by the present Bill if its shortcomings were not remedied. That which looked very well in theory often presented a very different appearance when the hard rules of practice and experience came to be applied to it. The machinery of the Bill was intended to aid and assist the creditor, and care must be taken that it should not be used to aid and assist those who desired to defeat and defraud him.
§ THE SOLICITOR GENERAL (Sir FARRER HERSCHELL)
said, that his right hon. Friend the President of the Board of Trade was to be congratulated upon 893 the reception and general support which had been accorded to the Bill. There had been criticism, no doubt, and objections very forcibly raised against certain portions of the measure; but he thought he was right in saying that such opposition as it had met with had centred chiefly in the details rather than the principle of the measure. The principal objection had been to the officialism which was supposed to be introduced by the Bill. He thought, however, he should be able to show that, although as to the mode in which that officialism was to be introduced, there had been some controversy—namely, who was to appoint the officials, and, to some slight extent, even as to what their functions were to be when appointed—yet, in the main, there seemed to be a general agreement that some system of officialism must be introduced if they were to make the system any better than it was at present. He could not help thinking that there had been a good deal of exaggeration as to the extent of officialism introduced by the Bill. It was said that the Bill took the administration of the bankrupt's estate out of the hands of the creditors, and put it into the hands of Government officials. Now, there was no such provision to be found within the four corners of the Bill at all. The creditors were left, he might almost say unfettered in the administration of the bankrupt's estate. They appointed their own trustee; their own trustee collected the assets; their own trustee distributed the dividends; and substantially the whole administration of the assets collected and distributed was in the hands of the trustee appointed by the creditors. It was said—"Why not leave the matter entirely to the creditors?" His right hon. Friend said, in answer, that if they were to deal effectively with the conduct of the bankrupt—and almost every hon. Member who had spoken in the debate agreed that they must do so—they could not leave that matter in the hands of the creditors, because the public interests would be felt to be no concern of theirs; and, instead of taking steps to protect the public interests, they would concern themselves only with the administration of the assets of the bankrupt. There was also another thing. They proposed by the Bill to enable a certain number of creditors to force a minority of their fellow-creditors against 894 their will. Hitherto there had been in this respect grave abuses, because there was no one in a sufficient position to safeguard the interests of the minority. That had been the great defect of the existing law, because there had always been a number of creditors—many of them creditors to a comparatively small amount—who could not give the time, or take the trouble necessary for the investigation of the affairs of the debtor. And what was the result? A certain number of creditors, influenced by this motive or that, influenced even, though real creditors, by some side motive, did not consider what was the best thing to be done for the general body of the creditors, but were induced, by one motive or another, to consent to a scheme, often against the indignant protest of a minority who had no opportunity of upsetting their decision. It was proposed in future to prevent such an abuse by dealing with these matters by an official whose duty it would be to see that the minority were not bound by the majority, without full knowledge of all the circumstances of the case, and those circumstances, if necessary, being brought fairly before the Court. His hon. Friend the Member for the University of London (Sir John Lubbock) said he approved of those clauses of the Bill which dealt with the conduct of the bankrupt. But he (the Solicitor General) contended that those clauses would become a dead letter, unless they had officials appointed under a measure such as this, whose business and duty would be to secure that there was a proper examination into the conduct of the bankrupt. Therefore, unless they were content to leave the matter absolutely in the hands of the creditors, and to take no care about the conduct of the bankrupt, some system of officialism they must have, not merely as guardians of the creditors, but whose duty it would be, independent of the creditors, to examine into the conduct of the bankrupt, and see, where that conduct had been fraudulent, that it was brought properly before the Court to adjudicate in the matter. But then came the question, how were these officials to be appointed? His hon. and learned Friend the Member for Dewsbury (Mr. Serjeant Simon), while strongly protesting against what he called Board of Trade officialism, was quite as strong in his encomiums of the system of officials as the Government 895 themselves. The hon. Member for Newcastle (Mr. Cowen) declaimed against the increase of officialism; but, at the same time, the hon. Gentleman said he did not see how it could be avoided, if they were to have a Bankruptcy Law, and to require any examination into the conduct of the bankrupt. It was impossible to do that without having a certain amount of officialism. Every Government Service was an officialism. The police were officials, and it was a kind of officialism they would be very glad to do without, if it were not impossible. So, in this case, if they were to have an examination, they could not do without a certain amount of officialism. Then the question was, who were to appoint the officials? Objection was taken to their appointment by the Board of Trade, because it was said that that would be leaving it to a political Department of the Government. Now, he did not understand what was meant by that. Was the Post Office a political Department? The Postmaster General was a Member of the Government, who came in and went out with the Government of the day; but could the argument that it was a political Department apply in the case of the Post Office? He could not agree that the Board of Trade was a political Department. It had nothing whatever to do with politics; it was the one Department from which, of all others, politics were excluded. There had been a great cry raised for the appointment of a Minister of Agriculture. Would the same objection be taken to placing administrative powers in the hands of that officer—namely, on the ground that the Department was political? If such a Minister were appointed, he supposed it would be thought desirable that he should have something to do; and it would be absurd to protest against administrative powers being placed in his hands, on the ground that his Department was an Office of State, because it would be altogether outside what were called political Departments. Another objection to the Government proposal was that there would always be questions asked in the House as to the administration of bankrupts' estates. He should be sorry to do anything in the way of legislation which would lead to more questions being asked unnecessarily in that House; and he could not help thinking that a somewhat 896 exaggerated view had been taken of this matter. But if hon. Members believed that questions of the kind indicated would be constantly asked in the House, might not the same objection have been taken to the Office of the Postmaster General? On the some principle it might have been urged that every day there would be inquiries in the House as to missing letters, letters not delivered at the right time, and telegrams that had gone wrong. But they found that the common sense of the House did not admit of questions of detail being put, nor did he think they would be admitted in the case of the Board of Trade in the matter of bankruptcy. No doubt questions of principle would be asked, and it was well that they should be. If there was to be this supervision by the Board of Trade, and if it was shown that Amendments might be introduced which would make the Act work better, the House would have more chance of getting those improvements effected through the Board of Trade than they would have under any other system. What was the alternative? Would it be better that the Official Receiver should be appointed by the County Court Judge? He believed that those who had experience of these matters would say that this system was not likely to work well. If they desired the examination and supervision which he himself believed to be requisite, he did not think it would be best secured by a system of divided responsibility. He thought it objectionable that the matter should rest in the hands of a number of persons, of different views and without any kind of control, who would, in consequence, develop contradictory or opposite systems throughout the country. But if the House came to the conculsion that it must have officers appointed, then he said there was more safety in the appointments being left to such a Department as the Board of Trade, and the machinery would work better, than if it was left to the County Court Judge to appoint his own Official Receiver. Again, it had been said that the adoption of the proposed plan would cause an increase of patronage. He could not, however, understand anyone who had experience of patronage desiring an increase of it. He once heard a gentleman say—"If I had a number of sinecures to give away, and if I could give them to my relations without any ques- 897 tions being asked, patronage would be delightful." But in regard to these appointments, the Department could not fail to be embarrassed, to a great extent, by the applications that it would have to decide upon; and to suppose that any Minister would propose a scheme of this kind for the love of patronage, when he did not believe it to be the best possible scheme, seemed to him a complete hallucination. He would now deal, very briefly, with two or three specific points to which attention had been called. It had been stated by the hon. Member for East Sussex (Mr. Gregory), and echoed by the hon. Baronet the Member for the University of London (Sir John Lubbock), that the proposal to have in the Bank of England £1,000,000 sterling, or a sum approaching that, was wrong in principle, because it was said that if that amount was in hand it ought to be divided amongst the creditors. But, again, what was the alternative? If it were not in the hands of the Government it would be in the hands of other bankers, and the creditors would get no interest on the money at all. Dividends could not be divided every week, although it was the intention that, under the proposed system, dividends should be declared much more rapidly than hitherto. There would be, in the meantime, an accumulation of very small accounts, which would bear interest of which the creditors would get some benefit; whereas now there were much larger sums than £1,000,000 in the hands of trustees from which the creditors derived no benefit whatever. Therefore, if there must be an accumulation of small accounts, which would produce no benefit to the creditors under the present system, it was obvious that they should be utilized for the benefit of the creditors, and he did not think the result would be to deprive the creditors of anything whatsoever. They would, on the other hand, be paid their dividends rapidly under the provisions of the Bill, and something would be made of this money for the benefit of the estates in Bankruptcy, which would not be made by any other arrangement. Another objection was urged by the hon. Baronet the Member for the University of London, when he said that the Board of Trade would undertake the administration of the defaulting debtor's affairs. Now, he altogether disputed that statement. The administration of the debtor's 898 affairs was not left to the Department at all; it was left in the hands of the creditors, who could appoint a trustee; and all the Department did was to exercise afterwards supervision with reference to the conduct of the debtor, and it was only in that way that the Official Receiver intervened. If it were shown that the trustee was unfit, owing to certain misconduct, the Board of Trade would remove him, and the creditors could appoint another trustee in his place. It was, thefore, a mistake to suppose that it was the intention of the Bill to take the estate and the appointment of the trustee out of the hands of the creditors. Again, it was said that the Bill would lead to the establishment of an enormous staff of officials. He did not share that opinion; because, in a great number of bankruptcies, the Official Receiver's work would be very light indeed. No doubt, at times it would be far more labourious; but, as a rule, he thought the Official Receiver, without much personal observation, would get to know a great deal, especially if something were wrong. It was a great deal to have someone to whom a discontented creditor could give information; and the existence of a person in the position of Receiver, who had his ear open to the complaints of creditors, would, he ventured to think, be of great importance in the investigation of the bankrupt's estate and conduct. For these reasons he did not think the number of officials required would be very large. In confirmation of this view he appealed to the fact that in Liverpool a comparatively small number of trustees administered a very large number of estates; the business was in that city confined to a few persons, who were found perfectly competent to do the whole of the work. If, then, the administration of so many estates could be performed by a limited number of persons in such a place as Liverpool, he thought hon. Members need not apprehend that a very extensive band of officials would be required. One official would be found sufficient to perform the duties connected with a great number of ordinary bankruptcies, although, of course, there might arise occasional exceptions to that rule. His hon. and learned Friend the Member for Launceston asked for information as to the mode of dealing with debtors for small amounts. No doubt, the Bill did not 899 propose to make any alteration in the existing law so far as these were concerned, which permitted a Judge to commit a person to prison for not paying when ordered and able to do so. At present, however, a small debtor could not make any arrangement with his creditors; and the County Court Judge, in making an order, looked at what he could pay with reference to one particular debt alone, whatever his other liabilities might be. But this Bill proposed that a man who owed only a small sum of money, made up of a large number of amounts, should be able to make that arrangement with his creditors which would clear him of all his liabilities, which the man who owed a large amount could now make. His hon. Friend would, therefore, see that this would have the effect indirectly of relieving the small creditor from the consequences of the disability he now experienced. Some other points had been referred to; but as they related to questions of detail, he did not think it desirable to enter upon them at this stage. After listening to the discussion which had taken place, he ventured to say that, on the whole, it had been favourable to the Bill. He believed he had shown, with regard to the question of the appointment of Official Receivers, some good reasons for believing that the system proposed by the Government was likely to be more satisfactory than any other that had been suggested.
§ MR. R. N. FOWLER
said, he hoped his hon. Friend the Member for Mid Lincolnshire (Mr. E. Stanhope) would not press his Amendment to a division, because in that case he should feel it his duty to vote against it. He believed the Bill had, on the whole, the approval of the commercial community; and although he was not sanguine as to the success of the measure, he should heartily support the second reading. The hon. and learned Member for Dewsbury (Mr. Serjeant Simon) had remarked that a Bankruptcy Bill was brought forward every six years. He (Mr. R. N. Fowler) recollected the Bills introduced by Sir Richard Bethel, afterwards Lord Chancellor, and by Sir Robert Collier, and there was now just such a cry for improvement in the Bankruptcy Law as there was when Lord Westbury's Bill was brought in. He should support the Bill, on the ground that while it could do no harm, it might do some good; 900 but, as he had already said, he was not sanguine of its results. The President of the Board of Trade, much as he differed from him politically, was a man of great ability, and a very admirable head of the Department; and if he were to remain in that position some good would probably result from the measure. But the right hon. Gentleman, like other Ministers, was liable to change of position, and probably he would some day become a Secretary of State. It appeared to him that the cry for improvement in the Law of Bankruptcy gave Parliament credit for greater powers in the matter than it possessed; because the evils complained of were not so much defects in the law as defects inherent in, and inseparable from, the position on which bankruptcy rested. For instance, a man failed; his estate, properly administered, would yield 3s. in the pound. Well, under the present system, and perhaps under the system which was now proposed, this 3s. in the pound would be reduced to 2s. 6d. As a rule, a creditor did not take much trouble in these matters. He said—"I have lost so much money; it is a bad debt, and it is not a very material matter whether, by good management, I can make the £600 I have lost into £500." The sooner he wiped it off and had done with it the better. He was not disposed to take much trouble to reduce his loss. And that seemed to him to be the reason why all previous Acts of Parliament had failed. The trading public, having made losses, did not want to take much trouble and sacrifice much time in the attempt to reduce their proportions; and he had no doubt that under this Bill, if it became an Act, there would be just as much complaint of the Bankruptcy Law as there was under the present system. At the same time, the right hon. Gentleman the President of the Board of Trade had given very great attention to the subject, and had brought in what was admitted on all hands to be a very able Bill; and he thought the best thing the House could do would be to read it a second time and send it to the Grand Committee. Under the circumstances, he should give a very cordial assent to the measure.
§ MR. W. FOWLER
said, he wished to support the view of his Relative in regard to this Bill. The chief fear he had was that the Board of Trade would 901 become completely blocked. The number of applications made would be so enormous, and the mass of details so great, that it would be extremely difficult to carry through the work successfully. He was afraid the delay would be almost greater in the Board of Trade than in the offices of the accountants In Committee this question would require very grave consideration; but he also wished to say that he was not sanguine of the success of any bankruptcy scheme whatsoever. The right hon. Gentleman the President of the Board of Trade, he thought, was a good deal too sanguine about the good effects of the Bill. People did not go into business in order to fail. They went into business to make money; but presently got into difficulties, and then defrauded and tried to cheat their creditors. In this country, where so much money was invested in business, and where so much money was made, no Act of Parliament would prevent people from speculating and venturing, and no Act of Parliament would prevent some of them from being foolish and imprudent, and failing in their undertakings. The only question was, how they were to wind up the affairs of such people when they had failed? He must say he had often wondered why it was so enormously difficult to invent a decent way of dividing men's assets. They could not depend on the creditor. They had tried him over and over again. The hon. Baronet the Member for the University of London (Sir John Lubbock) held that they had not given him a fair trial, and that might be so; but, so far as their experience went, they could not depend upon the creditor. An hon. Member behind him had said the first time he met him was when he (Mr. W. Fowler) was engaged in looking after a large estate which owed about £500,000—an estate from which he ultimately got 3d. in the pound. He took a great deal of pains in connection with the winding up of this estate; but he got no thanks for it. He did the best he could, and the thanklessness of the task grieved and disgusted him. This sort of thing happened on several occasions—he took a great deal of pains, but never got any good whatever from what he did, only as a rule some abuse; and, in the end, he made up his mind that he would have nothing whatever to do with the winding up of estates. He resolved that, for the 902 future, he would take just what was given him; and he was sure that his feeling was the common feeling of creditors. He did not believe in trusting to the creditors; and he agreed with the right hon. Gentlemen who had brought in the Bill, that no reliance should be placed upon the activity of the people personally interested, for these persons were interested in the progress of living businesses, and could not devote much of their time to looking after dead ones. Lord Overstone had told him that he had been asked whether he would not be of great use in bankruptcy matters; and he had replied—"Of no use whatever; whenever I have a bad debt I write it off in my books, and will not see anyone about it at all." And that sort of thing was going on in regard to estates all over the country. It was necessary, therefore, to bring in the official element to look after what the creditors themselves were indisposed to look after. But when they came to the question of what the machinery was to be, they certainly found themselves encumbered with difficulties. They had tried all sorts of plans, but did not seem to have arrived yet at any satisfactory solution of the problem. He wished to express again grave doubts as to whether the Board of Trade was not overweighted with business, and whether, if they handed over all this work to that Department, they would not have a cry of despair coming from the country as to the entire failure of the Bankruptcy Law. He remembered, years ago, having a conversation with the Prime Minister, in the course of which the right hon. Gentleman said he had a horror of law reforms, because they almost all meant some new officials and some new pensions. That was very much the fear he (Mr. Fowler) had in this proposal. They were entering into a wide sphere of official appointments, and they were all very doubtful as to what the result might be. He could not help thinking that they would have to appoint a great many more men than they had any idea of; and though they might succeed in getting a good deal of money from the estates of unfortunate debtors, he feared the results they would attain as a whole would not be so good as they hoped.
§ MR. GRANTHAM
said, he, like the hon. Member for Cambridge, was anxious to retain the official part of the Bill; 903 and he was inclined to agree entirely with that hon. Member as to the advantage of extending the principle of officialism in this matter. Whether they went back 10, 40, or 100 years, they found the same state of things—bankruptcy was never properly conducted when the creditors were intrusted with its management. The reason had been given by the hon. Member who had just spoken. Commercial men did not find it worth their while to look after dead concerns, especially when they got more kicks than halfpence for their trouble, and found themselves associated only with those whose object was to plunder the estate, and not to get the most they could for the creditor. They did not, as a rule, make the debt due to them any the less by turning their attention to the winding up of a bankrupt's estate. They lost the time which might be devoted to the making of fresh profits and fresh transactions by looking after that which, at the best, would only bring them in but little. Under the circumstances, he did not think it would be possible to frame any Bill to induce creditors to devote their time and attention to business which did not yield them profit, for they knew they could make more money by giving up that which was gone, and looking more to the future. He did not in any way, however, approve of the system introduced for the first time by the right hon. Gentleman the President of the Board of Trade—to place the Law of Bankruptcy under the control of the President of the Board of Trade. It was well to develop the principle of officialism in this matter; but it was not well to hand over the administration of the affairs of bankruptcy to a Government Department. He could not agree with the right hon. Gentleman in this matter; nor could he agree with him that the old system had failed, because the Court—that was to say, a Court of Law—could not look after the business in the same way that a responsible Department could. Though it might be difficult to say in whose hands the patronage of the appointments should be placed, he did not think they should be in the control of a Government Department. They had had some experience of the inconvenience of this sort of thing in connection with the Railway Commission. It was thought they would have a better chance of getting disputes affect- 904 ing Railway Rates and Pares decided satisfactorily by a special tribunal; but, without being invidious, he was, he believed, justified in saying that that tribunal had not in any way given satisfaction either to the public or to the Railway Companies. There had been attempts made to altogether destroy the influence of the Railway Commissioners; and there was certainly not sufficient reason for them to attempt to form another Department, which would be more objectionable than the Railway Commission. Where an enormous amount of patronage was placed in the hands of a Department controlling any tribunal so important as that of Bankruptcy, the tribunal operations of that Department would soon become tinged with the suspicion that they were guided by political expediency. Again, many of the clauses of the Bill would lead to grave complication, owing to what might be called the dual control established under them—by the fact of having, on the one hand, the Board of Trade to consult, and, on the other, the Courts or the Judicial authorities of the country. Although he regarded, therefore, the official part of the Bill as a great improvement on the existing law, yet that part of it dealing with the control he considered extremely dangerous.
§ MR. CROPPER
said, he would not detain the Committee at that late hour; but as he was not a Member of the Committee to which this Bill was to be sent, he desired to say a word or two on the subject before the House. He agreed with what had fallen from the hon. Member for Cambridge (Mr. W. Fowler); and though he was somewhat hopeless about any Bankruptcy Bill, knowing how business men regarded bankruptcy proceedings, yet it must be confessed that the speech of the right hon. Gentleman had warmed the House towards his measure. He (Mr. Cropper) trusted that the various clauses, when they had gone through Committee, would come down to the House improved, and in some way slightly altered. So much had been said about officialism, and the complicated machinery to be created in the various clauses of the Bill, that he would confine himself to one matter about which very little had been said, and which he hoped would have full consideration in Committee. The 36th clause, which dealt with preference 905 claims, might, in the main, be just; but it would have to be carefully considered in Committee. Three claims had preference at present—the claim of the rate collector, the claim of the tax-gatherer, and the claim of the landlord. All who had house property knew that landlords pressed more lightly upon a debtor, because they had a preference charge; but if the rate collector, the tax-gatherer, and landlord had to secure themselves beforehand, the small householder would suffer more than the creditor would benefit by the sudden change made in the law. If the landlords of the vast house property of our growing boroughs and towns, and especially of the Metropolis, had no preference claim, they would have to come on their tenants for the rent beforehand, and the tenants would be hardly pressed to satisfy the landlords, who now waited for their money as no other creditors could do. The landlord, under this Bill, would have to stand his chance with the tradesman, the grocer, and the provider of machinery; and if he were not quick in obtaining his rent beforehand, he would very often receive nothing. What would be the result of this? Why, there would be very much less inducement to build houses. He trusted this clause would receive careful attention at the hands of the Committee upstairs; because he felt that unless great alteration was effected in it, it would cause great suffering to tenants of houses in the Metropolis, besides the injury it would do to landlords and owners of property throughout the country.
§ Motion made, and Question proposed, "That the Debate be now adjourned."—(Mr. Tomlinson.)
§ MR. CHAMBERLAIN
said, he hoped, in view of the general feeling on both sides of the House—this matter having been fully, though he would not say exhaustively, discussed—and in view of the general circumstances they found themselves in, it would be thought desirable to send this Bill to the Standing Committee before the Easter Holidays. There might be difficulties in the way of securing that end if they adjourned the matter until to-morrow, for there were other subjects, of which Notice had been given, to be discussed. If anything were to occur now to prevent the second reading, and delay in- 906 definitely the further progress of the measure, there would be great disappointment. He hoped the hon. Member (Mr. Tomlinson) would be disposed to make his remarks now, and would not persist in asking the House to postpone the consideration of the Bill.
§ MR. RAIKES
asked the right hon. Gentleman the President of the Board of Trade what course he intended to take in the event of the Bill being read a second time that night? There was no disposition on the Opposition side of the House to unduly protract the debate; but there was, no doubt, an important question following the second reading of the Bill which, perhaps, it might not be desirable to entertain at so late an hour as the present (1 o'clock). Although the right hon. Gentleman in charge of the measure had given no Notice, he was supposed to entertain the idea of sending the Bill to one of the Standing Committees after it had been read a second time. In the absence of any actual Notice, he did not know whether he was quite in Order in attributing to the right hon. Gentleman any such intention; but, if it was intended to refer the Bill to a Standing Committee, perhaps the right hon. Gentleman would be good enough to say, before the debate was adjourned, whether he proposed to go forward with such a Motion that night, in the event of the Bill being read a second time, or whether he would put a Notice of such a Motion on the Paper for another occasion? It was well that the House should be informed on the point, because it might possibly have a great effect upon the action of many hon. Members.
said, if the second reading were carried, a Motion would be made that the Bill be referred to the Standing Committee appointed to consider Bills on Trade. He had in the clearest manner, on many occasions during the present Session, given a list of the Bills it was proposed to send to the Standing Committees; and only that day, in reply to a Question, he had enumerated the Bankruptcy Bill as one of four Bills which the Government proposed to refer to the new Committees. It was a surprise to him that the right hon. Gentleman (Mr. Raikes) should seem to cast any doubt on the matter, for on many occasions the intentions of the Government had been distinctly announced. If 907 they were to make any progress with I Business, he earnestly hoped the House would dispose of the matter that night.
SIR E. ASSHETON CROSS
said, the Government had always said this was a Bill which would be referred to one of the Standing Committees, and for that reason the present would not be an inopportune time to ask the Speaker's ruling as to whether, in matters of this kind, the Government should not give Notice on the Paper of their intention to refer any particular Bill to a Standing Committee? He asked the question in regard to this particular Bill, because it was the first Bill in which the question arose, and he merely asked the question so that the House might have a guide to their action in future. This was such a Bill that there could be no doubt as to the desirability of referring it to a Standing Committee. If the Speaker ruled that Notice should be given, he would suggest to the Prime Minister that the Motion should be put down tomorrow. He quite agreed with the right hon. Gentleman that the Bill ought to be referred to the Committee before the Easter Holidays; but there would be no difficulty in doing that, even if the Motion were taken to-morrow.
§ MR. SPEAKER
As the House is aware, when a Bill has been read a second time, the hon. Member in charge of it is entitled to inform the House when he proposes to take the Committee on the Bill, or whether he proposes to refer a Bill to a Select Committee. The proceeding now in contemplation of referring a Bill to a Standing Committee is analogous to referring a Bill to a Select Committee. No Notice is required to refer a Bill to a Select Committee; and therefore I conceive no Notice is necessary to refer a Bill to a Standing Committee.
§ SIR R. ASSHETON CROSS
said, that, on the Motion for adjournment, he only wished to say that no one opposite could say there had been the slightest desire to discuss the Bill in anything but a fair spirit. There were certain Members who had not yet spoken, and whose opinions on matters of this kind were very valuable. He would instance the hon. Member for Liverpool (Mr. Whitley) and the hon. Member for Leeds (Mr. Jackson), whom the House might probably be disposed to hear if the night were not so far advanced.
§ That the views of such hon. Members should be known, it might be well to adjourn the debate till to-morrow.
§ Question put.
§ The House divided;—Ayes 45; Noes 89: Majority 44.—(Div. List, No. 38.)
MR. STAVELEY HILL
said, that in moving that the House do now adjourn, he did so for the purpose of asking a question of the right hon. Gentleman the Prime Minister. A great many hon. Members thought it was very necessary they should have an opportunity of discussing the Motion concerning Standing Committees which stood in the name of the right hon. Gentleman the Member for the University of Cambridge (Mr. Raikes), and it was quite impossible that Motion could be fully discussed now. It was very right the House should understand what the Rules were which were to guide the Standing Committees in the transaction of Public Business. If the Bill were read a second time that night, would the Motion to refer it to a Standing Committee stand over till to-morrow?
§ [The Motion, not being seconded, could not be put.]
§ Original Question again proposed.
§ MR. WHITLEY
said, he was at a great disadvantage in having to address the House at that hour (1.15); but the Bill was one of such great importance, and affected so materially the great constituency he had the honour to represent (Liverpool), that he hoped the House would bear with him while he made a few observations. Whatever might be the opinions of hon. Gentlemen with regard to the Bill, they all felt indebted to the right hon. Gentleman the President of the Board of Trade for the clear manner in which he had introduced it. The more he studied the Bill, the more he was convinced that the appointment of Official Receivers by the Board of Trade would be found a very dangerous precedent indeed. The longer he was in the House the more he was persuaded that the Board of Trade had more work on its hands than it could possibly accomplish, and that the less they 909 mixed officialism with trade and commerce, the better it would be for trade and commerce. It had been alleged, during the debate, by the right hon. Gentleman the President of the Board of Trade, and by other hon Members, that the present Bankruptcy Law did net work well. He (Mr. Whitley) had great experience, years gone by, in connection with the working of the Act of 1869. He was free to admit there were many great defects in that Act; but, at the same time, he believed those defects could be cured by an amendment of that Act, rather than in the crucial manner proposed by the present Bill. If greater powers were vested in the creditors of removing trustees; if the obnoxious system of proxies were abolished; if greater powers were given to the Court, as in the Bill introduced by the hon. Baronet the Member for the University of London (Sir John Lubbock), he was satisfied that many of the objections to the present Bankruptcy Law would disappear. They were told that the only way of remedying the existing evils was by appointing Official Receivers. He could not help feeling that the House ought to very jealously watch any proposal in favour of a Department of State being intrusted with the management of private affairs or private enterprizes. The more the right of persons to manage their own affairs was interfered with, the more gradually was the country being brought into a condition which all would deplore—namely, a condition in which every branch of trade was managed by a Department of the State. It had been said, and very truly said, that the appointment of so many Receivers by one Party in the State was very objectionable; and it had also been pointed out that the Post Office was managed by the State. That Department was, no doubt, well managed by the present Postmaster General; but a few nights ago it had been conclusively shown that the Post Office was not managed so well as it would be under private enterprize. Here it was proposed to take from those who were interested in estates the management of those estates; and also to vest in the Public Prosecutor the power of prosecution even against the creditors. What creditors feared was, that by combination on the part of the solicitor and accountant and a few interested creditors, the estates might not be tho- 910 roughly investigated. It was very important that there should be some control; but he did not see why that control could not be exercised by the Judges in the Court of Bankruptcy, and by greater power in the hands of the creditors to appeal to the Court in reference to any malfeasance. Such a course, he felt persuaded, would recommend itself far more to the mercantile community of this country than this Bill would. The more this Bill was threshed out, the more would it be found to be detrimental to the best and the truest interests of the mercantile community. He had always felt that the great object should be to free the control of mercantile interests, as far as possible, from Departmental interference. Again and again had the evil effects of such interference been seen; and he could not imagine anything more detrimental, in the long run, to the interest of creditors than to have affairs in bankruptcy supervised by Receivers appointed by the Board of Trade. The Solicitor General had appealed to him as to the way in which estates were managed in Liverpool, and he mentioned that the majority of the estates fell to three or four accountants. Those accountants, generally speaking, were men of high character, who discharged their duties with satisfaction to creditors; but cases could be found in which a few men combined to shelter defaulting debtors. In those cases he thought the creditors ought to have power to appeal to the County Court Judge to appoint new trustees. That might be met, he thought, in the way suggested by the right hon. Member for the University of Cambridge (Mr. Raikes); and he did not see why the Act of 1869, with improvements such as he had suggested, might not be adopted. He was persuaded, if that course was followed, it would meet far more with the approval of mercantile men than the changes proposed by the President of the Board of Trade, against which every hon. Member of mercantile and legal experience had spoken. He hoped that the Bill would be well considered by the Committee, for he was satisfied that the more it was examined and investigated the more certainly would it be found to be untenable and unworkable.
§ SIR CHARLES W. DILKE
rose to Order, and stated that the hon. and learned Member had seconded the Amendment, and, therefore, was not competent to speak.
§ SIR CHARLES W. DILKE
said, he had always understood that a Member who was called as a Teller was taken as a Seconder.
§ MR. SPEAKER
When the Motion for the adjournment of the debate was made, I did not call for the Seconder. The hon. and learned Member for Bridport offered himself as a Teller, but did not second the Motion. I do not think, under those circumstances, that the hon. and learned Member is out of Order.
§ MR. WARTON
said, there were three reasons why he claimed the right to speak. The first reason was his ordinal-}' right as Member for Bridport; the second was that the fact of these Bills being sent to the Grand Committees gave every Member an additional right to speak, because their opportunities wore being cut away from them, and when Bills came back from these Committees, the Government would, no doubt, try to prevent discussion; and the third reason was that when he was canvassing his constituents he pledged himself to oppose any Bankruptcy Bill whatever. Having given that pledge, he was now present to fulfil it. His experience as a lawyer satisfied him that all Bankruptcy Bills were ineffective, and, therefore, ridiculous; and gradually a sense of that was dawning upon the House. The hon. Member for Newcastle (Mr. J. Cowen) had expressed the same thing, although he said he should vote for the Bill. The hon. Member for Wolverhampton (Mr. H. H. Fowler) and the hon. and learned Member for Dewsbury (Mr. Serjeant Simon) spoke in the same way; and the more a man reflected upon the Bill the sooner they would come to the conclusion that all Bankruptcy Bills were doomed to failure. They had only to go back to 1861 and 1869, to see that whatever principle was tried, and whichever way the pendulum was swung, the result was the same. Practical men kept away from the Bankruptcy Court, and the money was swallowed by attorneys and accountants. That was his 912 objection to Bills in general; but he objected to this Bill in particular, because it introduced the system of officialism in its worst form. Nothing could be more ridiculous than the calculation of the President of the Board of Trade. MR. E. STANHOPE said, he had obtained his object by eliciting opinions from the House, and ho, therefore, would not put the House to the trouble of dividing.
§ Amendment, by leave, withdrawn.
§ Bill read a second time.
§ MR. CHAMBERLAIN
I think that, after what has been said by the right hon. Gentleman opposite, it will probably be most convenient to the House that I should not now, as I originally proposed, move that this Bill be referred to the Standing Committee. I will only give Notice that I will make that Motion tomorrow. I do so in the full expectation that right hon. and hon. Gentlemen opposite will assist me.
§ SIR R. ASSHETON CROSS
I am very glad to hear the announcement of the right hon Gentleman. I think he has taken a very wise and prudent course, and he may take it that the debate will be finished to-morrow.
§ MR. RAIKES
said, he should be most happy, as far as he could, to assist the Government in coming to a decision of the question to-morrow.
§ Further Proceedings after the Second Beading deferred till To-morrow, at Two of the clock.