HC Deb 09 July 1890 vol 346 cc1197-221

As amended, considered.

*SIR A. ROLLIT (Islington, S.)

I beg to move, after Clause 14, to insert the following clause:— There shall be repealed so much of Subsection one of Section fifty-five of the principal Act as limits to a period of three months the time within which a Trustee may disclaim onerous property; but nothing under this section shall affect the provisions of Sub-section four of that section. The object of the Amendment is to restore the law to the position in which it stood in 1869, by reducing the very great costs which are incurred in consequence of the numerous disclaimers which are almost inevitably made under the existing law.

A Clause (Disclaimer)—(Sir Albert Rollit,)—brought up, and read the first and second time, and added.

*(12.37.) MR. J. KELLY (Camberwell, N.)

I have now to move the clause which stands on the Paper in my name, namely, Section forty-two of the principal Act, relating to power of landlord to distrain for rent, shall be read and construed as is the words 'six months' rent' were substituted for the words 'one year's rent.' The law of distress was quite lately greatly modified, and whereas a landlord was able, some years ago, to distrain for two years' rent, he is now limited to one year. It is said that, in some measure, this is an attack upon the rights of the landlord. I am not concerned to answer that allegation, for I only ask the House to deal with the rights of landlords in the event of bankruptcy. It does seem to me that a landlord, at the present moment, enjoys very unfair rights as compared with those enjoyed by other creditors. I would ask the House to remember what the position of the landlord is, as distinguished from that of an ordinary creditor. What does the landlord part with and risk? He risks, in the shape of rent, simply the interest of his money. An ordinary creditor risks a portion of his capital, and under circumstances which are to the great advantage of the landlord, because if the landlord allows his tenant to get into arrear he can always pay himself his interest out of the capital of the unhappy creditor. In this clause I propose to provide that the landlord shall only have such rights as are reasonable. If he chooses to allow his rent to get into arrear for 12 months that is his business. There is not the smallest reason why he should allow his rent to get into arrear at all; on the contrary, he could adopt the system prevalent abroad by which rents are paid in advance. By this clause I provide that the landlord may get six months' rent, and if there is any balance of rent due to him then he will only come in for that with the other and by far the more important creditors. When this Bill was before the Standing Committee this Amendment was moved in a lengthy and, I am afraid, somewhat technical form by myself for the hon. Member for Northampton (Mr. Brad-laugh). No real attempt was then made to go into the merits of the question, and although acting for the hon. Member I thought it wiser to offer to abandon part of the clause in order to secure a moderate change in the law his proposal met with a very cool reception. Under these circumstances, and in order not to weary the House, I have placed a new clause on the Paper which will, I think, effectually carry out the real object of the longer clause drawn up by the hon. Member for Northampton. All I desire is that the unfair privileges which the landlord at present enjoys shall be restricted.

Clause (Amendment of s. 42 of the principal Act,)—(Mr. John Kelly,)—brought up, and read the first time.

Motion made, and Question proposed, "That the Clause be read a second time."

(12.41.) THE ATTORNEY GENERAL (Sir R. WBBSTEE,) Isle of Wight

I hope the House will not enter upon this question. I may remind my hon. and learned Friend that in Committee an attempt was made to extend the interest of the landlord by giving him his rent in full, even after proceedings in bankruptcy had been commenced. That proposal was resisted, and resisted successfully, and this is an attempt to cut down the right of the landlord to get his rent prior to bankruptcy. If we are to enter into the matter, it will undoubtedly raise other and very difficult questions as to what the rights of the landlord are, and will lead to a long discussion and Amendments, if not here, certainly in another place, and the result may be that other and more valuable provisions in the Bill will not be passed. It may be possible on some other occasion to deal with the question of what the landlords' rights are, and to see how far they ought to be altered; but I would respectfully submit that in regard to this particular question the cutting down of the right to recover rent from 12 to 6 months cannot be properly dealt with without taking, counter proposals into consideration, and seeing whether in other respects the rights of the landlord ought not to be altered, and in some respects slightly improved. My right hon. Friend the President of the Board of Trade strongly resisted in Committee the proposition that the landlord should be put in a better position. He was successful, and I think it is not desirable that we should now place the landlord in a worse position.

(12.45.) MR. J. CHAMBERLAIN (Birmingham, W.)

I am sorry that the Attorney General should oppose this-Amendment, which appears to me to be an extremely reasonable one. The position is not exactly the same as it was when the Bill was before the Grand Committee. The Amendment is objected to on the ground of its complicated character, and the fact that it might raise a number of other questions which neither the Standing Committee nor the House have had time to consider. Now, the proposal is an extremely simple and intelligible one. It deals with the existing law, and it proposes to substitute six for 12 months. The Bankruptcy Bill of 1868 proposed to do away altogether with the preferential rights of the landlord, but in deference to the opinion then expressed, the present clause was inserted. The argument then was that the landlord was in a different position from all other creditors, because he was unable to refuse the credit which constituted his case. He could not turnout his tenant, and although he might become aware in the course of the term that the tenant was a bad tenant he was obliged to allow him to remain until, at all events, there was an arrear of rent. It is said that he ought always to proceed to collect. That is a valid argument, in regard to a certain amount of arrears; but the question is, what is the amount of arrears that should be taken into consideration in order to justify the landlord being placed in a different position from that of an ordinary creditor, and to entitle him to a preferential claim. I may remind the House that the law was altered in regard to the preferential claim of the landlord from two years to one, and the alterations which are now proposed certainly justify a further change from 12 to six months. I do not think that the acceptance of this Amendment would in any way prejudice the passing of the Bill in another place. If the House of Lords choose to throw out the clause, it will then be for this House to say whether they will insist upon it or not. I certainly think that the principle is a just and a sound one, and I do not think that the landlord ought to have any preferential claim which should extend beyond six months.

*(12.48.) SIR A. ROLLTT

I do not think anyone can doubt the last point of the right hon. Gentleman who has just addressed the House, namely, that this question raises, a matter of principle, and one that is well worthy of discussion. Under ordinary circumstances, I confess that my own leaning would be in that direction, but at the present moment we are only considering one part of a very wide and important question. When the matter came before the Standing Committee it formed part of a number of clauses which dealt effectually with the whole subject; but I think the present proposal is inferior to that which was submitted by the hon. Member for Northampton, who proposed to give to the landlord, not the right of distraint, but the substitution for it of a limited preferential payment. Now, I think that of the two modes the preferential payment is much the better. For the question is whether a man shall be allowed to be the judge in his own case, and it is perfectly well known that in the administration of the bankruptcy law some landlords may exercise their right of distraint in an arbitrary way by forcing an undesirable and hasty sale of the estate, and the like, and when the hon. Member for Northampton introduced his proposals I certainly thought that they were well worthy of consideration. But at the present moment there is only one part of those proposals left, and it is one which is likely to raise very debateable matter, not only here but elsewhere. It will certainly be seriously contested in the House of Lords, and, notwithstanding the view of the right hon. Gentleman opposite, who has done so much to amend the bankruptcy law, I venture to hope that the proposal will not at the present moment be pressed. I hope that my hon. Friend the Member for Camberwell (Mr. J. Kelly) will be content with having raised the question again, and that, with the consent of the right hon. Gentleman opposite, he will now accept the decision of the Standing Committee.

(12.50.) MR. P. M'DONALD (Sligo, N.)

I am altogether in favour of an Amendment in this direction, and I should be very glad to see a similar alteration made in the Irish Bankruptcy Law. I believe that the rental rights of landlords are far too much considered in all matters of this kind. I do not think that a landlord ought to have a priority of claim over a general and ordinary creditor, and I entirely agree that instead of the right of distraint a preferential right would be more equitable. But, at the same time, I do not admit that a preferential right is a right that ought to be conceded to a landlord, because I think that his claim should be on all fours with that of all other creditors.

*(12.52.) MR. CHILDERS (Edinburgh, S.)

If there were any fear that the House of Lords would throw out this Bill in consequence of this clause I should feel inclined to take the same view as the Attorney General; but I am of opinion that the worst thing that could happen would be the rejection of the Amendment, and the House would have plenty of time when the Bill came back to consider whether they would insist upon it or not. The Amendment is certainly a good one, and I hope the House will adopt it.

Question put, and agreed to.

Clause added.

*(12.55.) MR. J. KELLY

The next Amendment I have to move is the insertion of the following clause:— A deed of arrangement to which 'The Deeds of Arrangement Act, 1887,' applies, and which has been, or is intended to be, duly registered under the Act, and has been, either before or after such registration, assented to by a majority in number and throe-fourths in value of the creditors, as shown by the affidavit as to liabilities filed in accordance with section six, sub-section one, of the said Act, shall not be deemed to be an act of bankruptcy under the principal Act or this Act, and when registered under 'The Deeds of Arrangement Act, 1887,' shall be binding on the minority in number and in value who have not signed or assented to the said deed. Provided that, in estimating the majority in number, creditors for any amount less than ten pounds shall not be reckoned. One of the great difficulties under the Bankruptcy Act in respect of deeds of arrangement has been to obtain the assent of all the creditors, owing to the rapacious and unscrupulous requirements of the smaller creditors. The power they have of extorting the payment in full of a debt by refusing to assent to an arrangement has been one of the greatest possible difficulties which commercial men in this country have had to deal with. I would ask the House seriously to consider the question. How is it possible that the large creditor can act in a manner prejudicial to the claims of the small creditor? The larger creditor wants to get as good a dividend as possible, and the more he gets the greater will be the dividend for the small creditor. All I ask is that the unscrupulous use which the small creditor has hitherto made of his power shall in future be confined within reasonable limits. The simple object of the clause is to protect the honest creditors against unscrupulous small creditors.

Clause (Deeds of arrangement binding on minorities,)—(Mr. John Kelly,)—brought up, and read the first time.

Motion made, and Question proposed, "That the Clause be read a second time."

*(12.57.) SIR R. WEBSTER

The Amendment of my hon. and learned Friend is intended to deal with one of the most complicated matters that can be suggested, and the feeling of the Grand Committee was against any such attempt being made in the present Bill. It is a proposal whereby large creditors will be able to force an arrangement upon small creditors. According to a Return obtained at the instance of the right hon. Member for West Birmingham (Mr. J. Chamberlain) it appeared, if I remember right, that in 10 large County Court districts in the course of six months, out of 20,000 debts 14,000 were under £20 and 10,000 under £10. The hon. and learned Member proposes that a deed of arrangement, assented to by the larger creditors, shall be binding upon the small creditors. I am satisfied, in my own mind, that the clause now proposed would not work properly, and all who have had any experience of the working of the Bankruptcy Act will agree with me that in dealing with the question it will be necessary to protect the small creditor against the undue weight of larger creditors preventing the administion of the estate in bankruptcy.

*(12.59.) SIR J. LUBBOCK

I am in favour of the clause with some modification of its details. The question is not so much whether a particular course is desired by large or small creditors, as whether the majority of the creditors consider that it is the most efficient way of winding up the estate. But as I understand the Attorney General to promise to consider the question in a separate Bill, I think my hon. and learned Friend would prejudice his case if he were to go to a Division. I would, therefore, suggest that he should content himself with having brought the matter before the House, and that he should accept the assurance of the Attorney General that the whole question will be dealt with subsequently.

(1.0.) MR. SINCLAIR (Falkirk, &c.)

I have had a great deal to do with creditors' meetings in various places; and, as I know the extreme interest that is taken in this subject, I will join with my hon. Friend in urging the withdrawal of this proposal—not because there is anything objectionable in the clause itself, but because it imports considerable controversial matter into a Bill which, whatever it was as originally introduced, has been very much improved in Committee. The commercial community would prefer that the question should be postponed until full justice can be done to it.


I am very glad that this proposal is not likely to be pressed, and therefore it is unnecessary to discuss it at any length. At the same time, I do not like to let it pass out of the control of the House without expressing my opinion that the clause is bad in principle, and that the introduction of any such system into the bankruptcy proceedings of this country would be attended with all the abuses which the Bankruptcy Act of 1883 was passed to suppress. My hon. Friend behind me has said that the universal opinion of the commercial community is in favour of such a clause. I have no doubt that is right as far as the organisations which profess to represent the commercial body are concerned; but there is an immense body of men outside those organisations who do not share that opinion. The effect of the clause would be enormously to multiply deeds of arrangement and to limit the administration of insolvent estates under such official control and investigation, as I believe to be an absolute necessity if commercial morality is to be in any way preserved. I believe the result would be the same as obtained before the Bankruptcy Act of 1883, that is to say that the creditor, with the help of such professional assistance as he can always obtain, would go to one or two large creditors, and would make a proposal which might or might not be a satisfactory or an honest proposal; but which, when accepted by the one or two principal creditors, would be forced upon the great mass of the creditors. The Return for which moved shows that nine-tenths of the creditors in these cases are creditors for amounts of under £50. Then I would point out that the large creditors are not always large commercial people. They are very often either bonâ fide or sham creditors who are friends of the bankrupt, and to whom he goes, very often collusively, to secure an arrangement which can afterwards be forced on the rest of the creditors. Certainly if this proposal is pressed, or if it comes up on any other Bill, I shall give it the most strenuous opposition, believing it, as I do, to be fatal to the Bankruptcy Act of 1883.

*(1.5.) SIR A. ROLLIT

The Amendment obviously refers to deeds of arrangement, and if an alteration is to be made in the law in that respect, I think it should be an amendment of that Act to which the hon. Member has referred in such complimentary terms. I venture on this subject to differ somewhat from the right hon. Gentleman who has just spoken. For my own part, I think that deeds of arrangement, under proper restrictions for the protection of the rights of dissentient minorities of creditors, and of the public interests in casa of commercial offences, are an essential supplement of any good bankruptcy system. The difficulty is, that this clause does not propose to provide those safeguards and that machinery which are absolutely essential for the purpose of preventing the abuses that occurred under the former Acts, such as that of 1861. I sincerely hope that when the subject is again brought before the House the right hon. Gentleman will be able to give us the benefit of his further consideration of the proposal.

Motion and clause, by leave, withdrawn.

*(1.7.) MR. KELLY

I do not know whether the hon. Member in charge of the Bill will accept the next clause I have put on the Paper: "Board of Trade not to refuse to confirm appointment of Trustee." We were told in the Committee by the right hon. Gentleman the President of the Board of Trade that there was no power to refuse to confirm the appointment of a Trustee, and he no doubt is under the belief that such a thing is not done. Quite a recent case has, however, been brought to my notice. I cannot understand on what principle the creditors who have appointed the Trustee of a deed of assignment as Trustee of the same estate in bankruptcy are not to be allowed to maintain that appointment. I do not doubt for a moment that the hon. Member in charge of the Bill intends next year to amend the Act to which he has referred, but I doubt very much whether he will be successful in the ballot next year. We cannot, at all events, base any reasonable calculation upon it. I am not perhaps, capable of that beautiful belief in the intention of others which I think the right hon. Gentleman the Member for the London University has shown on this occasion. He alluded to a sort of promise on the part of the right hon. Gentleman the President of the Board of Trade to take under his protecting wing some Bill, the provisions of which have never been explained, but which may possibly be introduced next Session by the hon. Gentleman who is in charge of this Bill. I think that is rather a shadowy ground on which to refuse to make any amendment, however necessary, in the present system. I do not want to labour the point, and I may say that if the clause I now propose is not looked upon as important by those who represent more particularly the commercial classes of this country I have no option but to at once withdraw it. I would, however, appeal to the hon. Member in charge of the Bill to consider whether it is not a proposal it would be well to accept.

Clause (Board of Trade not to refuse to confirm appointment of Trustee,)— (Mr. J. Kelly,)—brought up, and read the first time.

Motion made, and Question proposed "That the Clause be read a second time."

*(1.10.) SIR R. WEBSTER

The hon. and learned Member has but one argument in favour of the clause, and that is that if any person is appointed Trustee of a deed of assignment he should subsequently be Trustee of the bankrupt estate.


No; what I wished to urge was that the fact of a man having been appointed a Trustee of an abortive deed of assignment should not prevent his being subsequently appointed Trustee of the estate.

*(1.11.) SIR R. WEBSTER

My hon. and learned Friend has, I think, forgotten that it has been laid down by the Bankruptcy Court, and by Mr. Justice Cave, as a sound principle that where a person has become an accounting party to an estate by virtue of an abortive deed of assignment, he ought not to be afterwards appointed as the person who will pass the accounts. I submit that the Board of Trade ought not to be compelled to recognise the appointment of such a person as Trustee of the bankruptcy.

*(1.13.) SIR J. LUBBOCK

I do not see why the Board of Trade should be able to prevent the appointment of a Trustee under a deed of assignment as Trustee of the bankruptcy if the creditors wish it. My hon. and learned Friend (Mr. J. Kelly) attributed to me a good deal of trust in human nature; but I think we have had a distinct assurance from the Government that they will deal with the question of deeds of arrangement next year. I do not feel as strongly about the proposed new clause as the hon. Member who has brought it forward; but I do not see why the Board of Trade should interfere with the choice of the creditors, and, therefore, if the hon. and learned Member thinks it worth while to go to a Division, I shall certainly vote with him.

(1.15.) The House divided:—Ayes 15; Noes 95.—(Div. List, No. 180.)

(1.22.) MR. COZENS-HARDY (Norfolk, N.)

I beg to move the new clause of which I have given notice. Its object is to remove a hardship which has arisen under the Act of 1883.

Clause (Disclaimer of leasehold property. Amendment of 46 and 47 Vic. c. 52, s. 55, subs. (6),—(Mr. Cozens-Hardy,)—brought up, and read the first) and second time, and added.

Amendment made.

*(1.24.) MR. J. KELLY

I desire to move the next Amendment which stands in my name, namely, in Clause 1, line 11, to leave out "fourteen," and insert "twenty-eight." The matter is one of some importance. This clause, for the first time, makes an act of seizure an act of bankruptcy. Originally the clause provided that if an act of seizure had lasted for seven days that was an act of bankruptcy, but the hon. Member, in charge of the Bill made some concession. The Sheriff, as most Members know, does not get much, except out of his poundage, and, therefore, if there is any question of his losing the poundage, the Sheriff will take very good care to precipitate the sale. Now, who will lose if the sale be conducted with improper haste? The creditors, and the creditors only. Take the case of a man having property of the value of £3,000 or £4,000, and consisting to a considerable extent of china and pictures. To make out and print a catalogue is, I am told by several auctioneers, a matter of almost a week's work, and therefore it is impossible to suppose that a proper assemblage of purchasers can be got together in 14 days. The result of having the sale within 14 days will be to give enormous advantages to those who are known by the appropriate term of "knock-outers." The goods will not fetch much more than a fourth of their value, and the creditors will be the losers. Why should they lose? What is the advantage of the clause as it now stands? I quite agree with what the hon. Member in charge of the Bill said in the Standing Committee, that the way in which the Sheriff has been allowed week after week and month after month to remain in possession is a scandal, and that something ought to be done to prevent it. But what difference will it make to the estate whether the Sheriff remains in possession 14 or 28 days? The possession money amounts to only about 30s. a week, find the postponement of the sale for another fortnight may mean a gain to the creditors of hundreds of pounds. I have no personal interest in this matter, and I have not pat the Amendment down at the instigation of any person connected directly or indirectly with the Sheriff. I admit that since my proposal was rejected by the Committee I have had several letters from those who are interested in the rights of the Sheriff begging me not to abandon the position I then took up, and pointing out that it was not so much to the interest of the Sheriff as of the creditors that the goods should not be mercilessly and ruthlessly sacrificed. I beg to move the Amendment.

Amendment proposed, in page 1, line 11, to leave out the word "fourteen," and insert the words "twenty-eight."—(Mr. John Kelly.)

Question proposed, "That the word 'fourteen' stand part of the Bill."

*(1.30.) SIR A. ROLLIT

The hon. Member has no need to make any disclaimer of interested motives in making any proposal on this or any clause. I willingly acknowledge his assistance towards the improvement of the Bill. The present proposal raises a question of very considerable administrative importance. The mischief with which the clause proposes to deal is this: There are many cases in which the Sheriff is in possession for weeks or months, and, in consequence, there is a dissipation of the estate, which is especially serious if the estate be small; the debtor continues to live upon the assets, and the creditors are kept at bay while the expenses, only £3 a week, mount up to a considerable sum. I think the House will see this is a mischief to be limited, and in the existing system there is a long delay which should be curtailed. The hon. Member asks me to make a concession for which lam not prepared. In the Committee I undertook to accept 21 days, and since then the hon. Member for West Wicklow and the hon. Member (Mr. Kelly) have convinced me that there are points that deserve consideration. For instance, in the case of a sale of articles of vertu it may be that the services of a particular auctioneer may be required or desirable, and these, perhaps, may not be obtained in a short time. To meet such cases, which are, however, very exceptional, I will so far accede to the wishes of the hon. Member as to substitute 21 days for 14 if he will accept that.

*(1.32.) MR. KELLY

I am afraid I have no choice left me but to accept that, and I will amend my Motion in that sense.

Question put, and negatived.

Question proposed, "That the words 'twenty-eight' be there inserted."

Amendment, by leave, withdrawn.

Words "twenty-one" inserted.

Other Amendments made.

*(1.38.) MR. WEBB (Waterford, W.)

I beg to suggest an alteration in Clause 8, line 38. This sub-section appears to me to be one of the most useful in the Bill, and it will meet what has undoubtedly been a great scandal in relation to the debtor's expenditure. I think the House will appreciate the difference my Amendment indicates between "expenditure" and "extravagance." The word used here is "extravagance," which does not appear to me to quite meet the case, and I propose to substitute the word "expenditure." Extravagance we may assume to be always unjustifiable, though there may be unjustifiable expenditure which yet may not be called extravagance. I think the word expenditure is preferable; I simply put the suggestion before the House.

Amendment proposed, in page 3, line 38, to leave out the word "extravagance," and insert the word "expenditure."—(Mr. Webb.)

Question proposed, "That the word 'extravagance' stand part of the Bill."

*(1.39.) MR. T. H. BOLTON (St Paneras, N.)

I think there is no doubt "expenditure" is the better word to use. Extravagance is always culpable, and it is unnecessary to call it unjustifiable.

*(1.39.) SIR A. ROLLIT

That is very true, but extravagance is only condemnable except morally—when it comes within the purview of the Bankruptcy Act. Logically and legally the hon. Member may be right, but let me point out the valid reason for retaining the word. A legal and definite meaning has been attached to the words "unjustifiable extravagance" since they have been used in the Bankruptcy Act of 1883 adapted from previous Acts; they have been the subject of decisions, and recognised constructions have been placed upon the words. To alter the word now might, I apprehend, lead to controversy and confusion, and to the increase of cost in re-constructing the law.

*(1.39.) MR. KELLY

I would advise the hon. Member to withdraw the Amendment. The words "unjustifiable expenditure" will lead to a good deal of litigation before the definition would be authoritatively settled.

*(1.40.) SIR R.WEBSTER

It would be a great mistake to change the word. The construction has to be settled, and the word "extravagance" gives the cue or indication of what is meant; "expenditure" is but a relative term; it may be large, yet not unjustifiable; extravagance is the point to which the sub-section is directed.


When the Act of 1883 was under consideration, I preferred the word expenditure; but, on the other hand, we have had the opportunity of seeing the enormous opening that would be given to litigation by the alteration of the word, and I still think it is undesirable to alter it.

(1.41.) MR. P. M'DONALD

Still, I think the word "expenditure" is also necessary; and I would suggest that both words should be used, "unjustifiable expenditure or extravagance."

Amendment, by leave, withdrawn.

Other Amendments made.

*(1.45.) MR. SYDNEY GEDGE (Stockport)

The Bill was so thoroughly discussed in Committee under the able Chairmanship of the hon. Member for East Donegal that I am unwilling to bring before the House any Amendment to the work of the Committee; but my two Amendments together involve a principle which I will shortly state. As the clause stands, though the Court is of opinion that the arrangement or the terms of composition are reasonable and calculated to benefit the general body of creditors, the Court may disallow it, if the bankrupt has misconducted himself in certain ways, and must do so, unless 7s. 6d. in the £1 is to be paid. Now you, are dealing with a case in which the Court is of opinion that the proposal for composition or scheme of arrangement is calculated to benefit the general body of creditors, and yet in the one case the Court may refuse to approve the proposal, and in the other cases shall refuse, unless there is a payment of 7s. 6d. in the.£1. But here you are punishing the creditors for the bankrupt's fault. Let the bankrupt be punished if he breaks the law; but if he has only committed a fault, then, whether he ought to be punished or not, I hold that the creditors ought not to be punished, Although it is said that Bankruptcy Law is mixed up with moral considerations, I do not understand a moral consideration limited by 7s. 6d. in the £1. The effect of the clause will be to punish the creditors; but the bankrupt, if he has misbehaved himself, can purge himself of his offence, so to speak, by providing 7s. 6d. in the £1. It may be an advantage to the creditors to get less than 7s. 6d., but the assertion of the moral principle is made to depend upon that sum. When the bankrupt has broken the Criminal Law let him be punished as the Criminal Law provides; but if he has not broken the Criminal Law and has committed a fault, for which you think he ought to be punished, well and good, but do not make the punishment fall upon, the creditors. On these grounds, and taking the two Amendments as hanging together, I move the first.

Amendment proposed, in page 5, line 20, to leave out from the word "creditors" to the words "the court," in line 21.—(Mr. Sydney Gedge.)

Question proposed, "That the words proposed to be left out stand part of the Bill."

*(1.48.) SIR R. WEBSTER

I admit the importance of this, but it is not possible to agree to the omission of the words. My hon. and learned Friend will observe that the President of the Board of Trade proposes, in conformity with the view he has previously expressed, to leave out the words "may in its discretion," in order to insert "shall," and it seems to be that that is a course that must be adopted. I would point out that in a very limited number of cases is the Court required to refuse discharge; the cases are when the bankrupt has committed a misdemeanour under Section 31 of the Act of 1883; that is to say, where an adjudged bankrupt obtains credit to an amount of more than £20, not informing the creditor that he is a discharged bankrupt, or where he has committed an offence or misdemeanour under the Debtors' Act of 1869, which has been previously treated or described as fraud. Now, it seems to me a serious thing to suggest that when the Court is going to decline to give a bankrupt his discharge on the ground that he has been guilty of a crime, that in that case the Court may indirectly give a discharge by approving of a composition or arrangement. It will be observed that the sub-sections proceed by steps. In the first the Court must refuse, and then, under the second sub-section, an option is given. I confess, knowing how my hon. and learned Friend is the champion of law—and order also—I am surprised he should commit himself to a suggestion that the Court, which must refuse a discharge on account of gross and criminal misconduct, should still indirectly promote a dis-large by approving an arrangement. It is not really a case in which the creditors are involved, because, speaking as a general rule, and not of exceptional cases, if the bankrupt is guilty of such conduct, surely it is better to wind up his affairs in bankruptcy.

Question put, and agreed to.

Amendment proposed, in page 5, lines 21 and 22, to leave out the words "may in its discretion," and insert the word "shall."—(Sir Michael Hicks Beach.)

Question proposed, "That the words 'may in its discretion,' stand part of the Bill."

*(1.53.) MR. BARING (London)

I desire to say that the decision of the Committee upon this point was arrived at by a considerable majority against the view of the Government representatives. That the Government were right in refusing the Amendment of my hon. friend near me (Mr. Gedge) I have no doubt, but for the very same reason that he wished to leave out those words, I wish to retain the option given to the Court. I do not wish to punish the creditors for the fault of the debtor. I hope the House will maintain the decision arrived at in Committee upstairs by a considerable majority, even though the Government still stick to their view.


Perhaps I may explain the circumstances that occurred in Committee. The issue was raised twice, first by the hon. Member for Camberwell, who moved to leave out the whole of the sub-section, leaving the action of the clause purely within the discretion of the Court, and this was negatived by a considerable majority; and then, without further discussion, the proposal of my hon. Friend behind me was accepted, substituting "may in its discretion," for "shall," practically giving what the Committee had already rejected. The reason far the present Amendment is obvious. My hon. Friend admits it is right with-regard to the first two paragraphs, namely, if the conditions, in the opinion of the Court, are unreasonable or not calculated to benefit the general body of creditors, that the Court should be bound to refuse the proposal, because in that case it would be with, the Court to decide whether the terms of the proposal are reasonable or not, or whether they are or are not for the benefit of the general body of creditors. Then my hon. Friend, taking up the point the hon. Member for Stockport unsuccessfully urged, desires to give the Court discretion to allow composition in cases in which, by Sub-section 8 of the previous clause, it would be bound to refuse the order of discharge of a bankrupt on the ground of dishonest conduct. I hope the House will not accept such a proposition, but will restore the clause to the position in which it stands in the existing law in Sub-section 6 of Section 18 of the Act of 1883. I cannot but think the Committee settled the clause as it now stands under a misapprehension.

*(1.57.) SIR J. LUBBOCK

With all deference to my right hon. Friend, I hardly think the Committee were under any misapprehension. The matter was decided by a large majority after a discussion on the Motion of the hon. Member for Uxbridge, who, if he were here, would no doubt support my hon. Friend opposite (Mr. Baring). I admit there may be cases in which, in the interest of public morality, it might be necessary to impose pecuniary sacrifices on creditors; but it does not follow that this Amendment is necessary. If the House is not prepared to support the judgment of the Committee upstairs, still may they not trust the Court to deal with the matter wisely when it comes before them. I feel the greatest confidence that in cases suggested by the right hon. Gentleman the Court would act aright, and the discretion may be safely left to it. I would appeal to the right hon. Gentleman to allow the clause to stand as it is.


I venture to express a hope in the same direction.


I would strongly support the Amendment, and the opposite view seems to me to be most extraordinary. If a debtor has committed an offence of such magnitude as to require the Court to inflict on the bankrupt certain punishment, namely, the refusal of a discharge, Parliament has decided that the Court shall have no discretion at all so far as the bankrupt is concerned. The act of the bankrupt is of such a character that it is necessary to impose on the Court the duty of inflicting a severe punishment; but then the hon. Member opposite and others say, "No; although this House has thought it necessary to require without alternative that this punishment shall be inflicted on the bankrupt, the bankrupt shall be allowed to escape scot-free, he shall be relieved from punishment if the creditors can prove to the satisfaction of the Court that, in their opinion, their interests will suffer by the refusal of a composition;"—["No, no,"]—do not be in a hurry; "if they can persuade the Court to adopt their view that the principles of morality and justice should be sacrificed to the pecuniary interests of the creditors." I think it is a montrous proposition. If a bankrupt deserves punishment he ought to have it; and if in the course of that punishment some slight disadvan- tage is inflicted on the creditors, they ought to take the responsibility. After all, what is the damage done to creditors? Whereas the estate would be wound up under a composition in one case, in the other it would have to be wound up in bankruptcy. There are those who take the view that bankrupety always leads to loss to creditors, and that it involves pecuniary sacrifice. I take a totally different view, and I feel certain the future will show that I am justified in that view. We have as yet had no opportunity of comparing the cost of private arrangements with that of bankruptcy. But in this Bill there is a proviso that Return shall be made to the Board of Trade of the costs of winding up under a deed of composition, and I think that when we get that we shall find that compositions and deeds of arrangement are, on the whole, not so economical as bankruptcy. After all, the sacrifice asked of creditors in order that public justice may be done is very small, and may probably prove no sacrifice at all.

*(2.2.) Mr. SYDNEY GEDGE

The right hon. Gentleman may be right in thinking that creditors will not suffer, but creditors hold a very different opinion. On the one hand, the right hon. Gentleman admits that he cannot prove his proposition, while on the other the creditors base their opinion on a good many years' experience. I should like to state a concrete case. A bankrupt had within two or three months preceding the date of the receiving order incurred an unjustifiable expense by bringing a frivolous and vexatious defence to an action in the County Court. Possibly, at the most, the expense so occurred did not exceed £5, yet the Court in such a case is to have no discretion.


That is exactly a case in which, under this Bill, there will be discretion in the Court.


Well, if the hon. and learned Gentleman says that, I need not pursue the point further. There are cases in which the degree of blame attaching to the bankrupt varies very much, and I think some confidence should be reposed in the Courts. I cannot understand the right hon. Gentleman on this Bench asking us to show no confidence in Courts of Justice by giving them no discretion in these matters. I hope the Amendment will not be persisted in.

*(2.5.) SIR A. ROLLIT

I am sorry to criticise the work of a Committee which has done so much to improve this Bill. But I think this clause bears internal evidence that something has gone wrong with it. It is not at all logical as it now stands, though it was so in the Bill as drafted. For instance, the clause now says that in the most serious cases the Court may exercise a discretion as to granting or refusing a discharge; then, in less serious cases that it shall refuse, and that it shall allow the offences to be compounded: and, lastly, it repeats that in any other case it shall have a discretion. All this is illogical and inconsistent, and ought to be rectified by restoring the words originally in the Bill.

*(2.7.) MR. WINTERBOTHAM (Gloucester, Cirencester)

It is quite true the sub section is illogical as compared with the following subsection, and one or the other must be amended. The question is whether we are to accept the more elastic rule laid down at first or to make a hard-and-fast line for the Court, and oblige it, under all circumstances, and without exercising any discretion, to refuse to approve of arrangements come to by creditors under these circumstances. I hope the House will stick to the original words, because there may often be special and exceptional matters which should be left entirely for the Court to decide; otherwise, the Court may feel bound to refuse to sanction an arrangement which it considers would be for the benefit of the creditors. It is all very well and very right to punish fraudulent bankrupts, but it is very hard that the creditors should share in the punishment. I am one of those who have confidence in the Court, and wish it to have a reasonable discretion left to it.

*(2.9.) SIR R. WEBSTER

I should like to point out, in furtherance of the observation made by the right hon. Gentleman the Member for West Birmingham, that it is a mistake to suppose that this Amendment takes away any discretion from the Court, as in the Act of 1883 the words are that the Court "shall refuse to approve of the composition if it is of opinion that the terms of the composition" are not reasonable or best for the general body of the creditors. The proposed Amendment, therefore, does not extend the restrictions on the Court. During the last seven years we have had no experience to show that the present condition of affairs with regard to the discretion of the Court has worked hardship on creditors. I do not state that without authority. I have endeavoured to find out as far as I could what the real facts are, and I do not think a case has occurred in which creditors have substantially suffered through an estate being administered in bankruptcy instead of under a deed of arrangement. I assure the House that this Amendment does not introduce any new principle.

(2.12.) MR. A. O'CONNOR (Donegal, W.)

I shall support the Amendment. When the 1883 Act was under consideration in this House, there were prolonged and almost bitter disputes on this point. This is a retrospective clause. It says that after the passing of this Act no composition or deed of arrangement under Sections 125 and 126 of the Bankruptcy Act of 1869 shall be entered into or allowed without the sanction of the Court having jurisdiction in the matter, and that such sanction shall not be granted unless the composition or liquidation appears to be reasonable or calculated to benefit the general body of creditors. Under the Act of 1869 the Court had very wide discretion, and the experience of the exercise of it was so regrettable that in the Act of 1883 it was found necessary to insert a special section of a most unusual character and in a most unusual part of the Bill—in the interpretation clause—so as to prevent a continuance of the mischief. I think that the arguments which then prevailed are equally pertinent in the present case.

(2.15.) The House divided:—Ayes 32; Noes 122.—(Div. List, No. 181.)

Word "shall" inserted.

Other Amendments made.

*(2.40.) SIR R. WEBSTER

I now move, in Clause 23, to omit Sub-section 3 and insert the following:— A creditor may give a special proxy to any person to vote at any specified meeting or ad- journment thereof on all or any of the following matters, namely:—(a) for or against any specific proposal for a composition or scheme of arrangement; (b) for or against the appointment, remuneration, or continuance in office of any specified person as trustee or member of the Committee of Inspection; (c) on all other questions arising at any specified meeting or adjournment thereof. Perhaps I may be permitted to make a brief explanation. The House is aware that the right hon. Gentleman the Member for the University of London has taken great pains to put this question of proxies upon a proper footing, and I am sure my right hon. Friend is very much indebted to him for the labours he has bestowed upon the matter. At the same time he will recognise also that the President of the Board of Trade has endeavoured to meet him as far as possible, consistent with the prevention of certain evils, which we must endeavour to stop. I refer to the system of touting for proxies so as to obtain the control of bankruptcies; but the right hon. Gentleman will see that we have endeavoured to meet that evil by giving the delegate power to vote on various questions, while ensuring the good administration of the bankrupt's estate.

Amendment proposed, in page 5, line 27, to leave out sub-section (3) of Clause 11.—(Mr. Attorney General.)

Question proposed, "That sub-section (3) of Clause 11 stand part of the Bill."

*(2.45.) SIR J. LUBBOCK

I desire to acknowledge the courtesy of the Attorney General and the President of the Board of Trade. I should no doubt have preferred the Amendment which stands in my name on the Paper. The objections against special proxies have, I think, been removed by the subsequent legislation; at the same time, I recognise that the Government have done much to meet the views of the London Chamber of Commerce, and, under these circumstances, I am ready to accept the words suggested by the Attorney General.


I confess the Amendment now proposed by the Government and accepted by my right hon. Friend behind me is not open to the objection that was taken to his original proposal, and I am prepared to accept it as a reasonable compromise. At the same time, I differ from my right hon. Friend. I cannot see why the difficulties of the case which he puts cannot be met by the provision of a general proxy which can be given to the clerk or person in the employment of the person giving the proxy. No doubt the object of many of those who support the alteration of the law is to avoid the old system under which there was a touting for proxies. A special proxy may of course be given to any person, and consequently to a professional firm. In the vast majority of cases, it will be admitted that to allow a professional firm to vote for the appointment of a Trustee or highly-remunerated official would undoubtedly lead to all those evils that the Act of 1883, in dealing with this question of proxies, was supposed to guard against. I must say that I prefer the law as it stands, and no real case has been made out for a change in the system of enabling a creditor to allow his proxy to act for him, as if he himself were present.

*(2.54.) MR. GROTRIAN (Hull)

I do not intend to offer any objection to the compromise suggested, but I must say I view with some misgiving and alarm the enlargement of this general proxy system. I entirely concur in the view which the right hon. Gentleman (Mr. Chamberlain) has expressed on one or two occasions. Everyone acquainted with proceedings under the Bankruptcy Act of 1869 is aware of the abuses which crept in under the proxy system. I am of opinion that these abuses have been entirely removed by subsequent legislation, namely, the Act of 1883. I therefore view with some misgiving the enlargement proposed. But, under the circumstances, as the proposition is certainly a considerable modification of the original proposition of the right hon. Gentleman, I am not disposed to offer it any serious opposition.

Question put, and negatived.

*(2.58.) SIR R. WEBSTER

I now move, in Clause 23, to omit Subsection 3, and insert the following:— A creditor may give a special proxy to any person to vote at any specified meeting or adjournment thereof, on all or any of the following matters, namely: (a.) for or against any specific proposal for a composition or scheme of arrangement; (b.) for or against the appointment, remuneration, or continuance in office of any specified person as trustee or member of the Committee of inspection; (c.) on all other questions arising at any specified meeting or adjournment thereof.

Question, "That those words be there inserted," put, and agreed to.

Amendment proposed, in page 5, line 31, to leave out sub-section (4) of Clause 11.—(Mr. Tomlinson.)

Question proposed, "That sub-section (4) of Clause 11 stand part of the Bill."

Amendment, by leave, withdrawn.

Other Amendments made.

Bill read the third time, and passed.