HC Deb 19 March 1890 vol 342 cc1169-215

Order for Second Reading read.

*(1.15.) SIR ALBERT ROLLIT (Islington, S.)

I bag to move the second reading of this Bill. Lord Beaconsfield once remarked "We have always a Bankruptcy Bill," but I think I may congratulate the House and the country on the fact that, at any rate since the passing of the Bankruptcy Act of 1883, there have been very few such Bills before the House, and it is only now, after full experience of the working of that Act, that expression is given to the opinion of the commercial world, and especially of Chambers of Commerce, that there is a necessity for amending that Statute. The Bill which I now introduce is based on the principle, not of reversing in any degree the operation of the Act of 1883, but of extending and strengthening its principles. I cannot help feeling that through the whole century our bankruptcy legislation has had too much the character of a reversal of machinery and a series of new departures, instead of amendments of existing Statutes, making them to conform to the teachings of experience and so to the commercial benefit of the country. But new, it appears to me, there is no necessity for any material alteration or new departure. Notwithstanding the evil prophecies which were made, I think the feeling of the commercial world is that the Act of 1883 introduced by the right hon. Gentleman the Member for West Birmingham (Mr. Chamberlain) has, upon the whole, worked successfully, and it is not now necessary to do more than to build further upon the foundations then laid, and to improve some clauses of the Act which may have been found not to work completely well in practice. I think, too, the Statute may be considered as having been beneficial to the trade of the country, and as having had a tendency to expose departures from commercial morality, and, in some respects at any rate, it has been a deterrent to misconduct on the part of bankrupts. But in some instances the full effect of the sections directed to this important end have not been achieved, and the object of this Bill is to provide a remedy on these points. Whatever may be thought of the effect of the Act, there is no doubt there has been recently a great revival in trade, and I think we may attribute the long depression from which the business of the country suffered mainly to over-production and unjust competition. Now, nothing stimulates unjust competition more than facilities for debtors to prolong their periods of insolvency by trading on the capital of their creditors, to fail ultimately and pay those very small dividends unfortunately much too characteristic of our bankruptcy administration. We hear a great deal of competition from abroad, and our disadvantages in having to contend with the commercial advances of other nations, but I venture to think that we might give more attention to unfair competition at home, and consider whether by such means the large losses from bankruptcies are not preventible, and whether a saving could not thus be affected of the national wealth; whether, too, some check might not thus be put upon unjust and undue competition, and the country so placed on a higher footing of commercial morality. The Bill, as I have said, is based essentially on the principles of the Act of 1883. With one, or at the most two exceptions, there will not be found any material departure from them or any innovation upon them. And it is a satisfaction to me to know that in principle the Bill is generally approved by the commercial world. It is supported by the Associated Chambers of Commerce, who have passed resolutions in its favour, and have also presented petitions to this House in its support. The London Chamber of Commerce has also pronounced and petitioned in its favour, and the most important Chambers of Commerce in the country at Birmingham Halifax, and elsewhere have lodged petitions praying this House to pass the measure into law. The Bill has the additional advantage of being backed by Members of all political opinions, and the still greater benefit of having the approval of both Front Benches. I take this opportunity of acknowledging the material assistance rendered both last Session and this by the right hon. Gentleman the President of the Board of Trade, and I am sure I am expressing the feeling of the commercial public throughout the country, and especially that of Chambers of Commerce, when I say there has been on the part of the right hon. Gentleman not only a strong disposition to promote all legislation which has had for its object the improvement of the tone and character of our commerce, but all those engaged in matters affecting the trade and industry of the country have found him ready to lend an attentive ear and warm participation in all measures calculated to secure the advantage of the trading community. With regard to the Second Reading, I am glad to feel that there are no great difficulties to encounter. The points to which I have to refer are matters of detail, wherein I detect some imperfections disclosed by experience of the working of the Act of 1883, and seek to amend them. In fact, the whole Bill is one to be considered in detail by a Committee upstairs, rather than to be made the subject of a Second Reading discussion. At the same time, I feel, concurring in the opinion of the President of the Board of Trade, that I am called upon to explain in a general way the principles upon which the Bill is founded, and the nature of the proposals suggested, but ultimately I shall propose, with, I think, the approval of all parties, that the Bill shall be referred to the Standing Committee on Trade, where there will be found, no doubt, matters for controversy and arrangement. I am the more induced to take this course because the Act of 1883 is itself the product of a discussion in Grand Committee, and this seems to indicate that it is the most suitable method of dealing with the details of the present Bill. On one or two points, undoubtedly, the Statute calls for immediate amendment. In the first instance I refer particularly to Clause 21 of the Bill, and here I think there is undoubted reason for amending the law without delay. It seeks to render all bankrupts in future amenable for misdemeanours and offences under Section 11, Sub-sections 13, 14 and 15 of "The Debtor's Act, 1869."The bankrupts it seeks to bring within the reach of this section are those who file their own petitions in bankruptcy, and the offences aimed at are obtaining goods on credit by fraudulent representations, by pretence of carrying on trade in the ordinary way of business, and pledging or pawning goods obtained on credit and before they are paid for otherwise than in the ordinary way of trade. The House will hardly believe that such an anomaly exists in our bankruptcy administration as the fact that when a debtor has a petition in bankruptcy filed against him he may, for these offences, all of a most serious character, be prosecuted and convicted; but if he happens to file his own petition no such result can follow, and he may escape the penalty of his wrongful trading. This arises from a defect in the Act of 1883, and consists in the absence of words which, I think, can only have been omitted by inadvertence, for the words that make the bankrupt liable occur in another part of the section, even in relation to the case where a bankrupt files his own petition. In the case of "Burden and Wood" in relation to this sub-section, no order for prosecution could be made, though the offence was undoubtedly committed, simply because of this omission in the Act of words covering a man's filing his own petition. The difficulty probably arose thus: Prior to the Act of 1883, and under the Act of 1869, a petition could only be filed against the bankrupt, and when the bankrupt sought to institute proceedings for his own absolution it was by a petition for liquidation or composition. But the Act of 1883 introduced a new system, under which a petition can be filed by or against a debtor, and although under the previous practice and under the Debtors' Act of 1869 a bankrupt could be prosecuted when a petition was filed against him, the new Act, introducing a new system, and enabling a debtor to file his own petition, did not provide in the same way for prosecution under the Debtors' Act in all such cases. This was probably a slip in draftsmanship, and with every confidence I ask the House to say that, an offence having been committed, the bankrupt shall be liable, whether the petition has been filed by himself or in hostility to him, to the consequences of his unlawful trading. We have seen the result of the omission from the Act of 1883 in the case of "Burden and Wood," and again in the well-known case of Mr. Walker, of Batley, it was impossible to make an order for prosecution, though beyond all doubt the offence had been committed. Under such circumstances I can only feel surprised that a state of affairs, in which a bankrupt can claim immunity because he filed his own petition, should have been allowed to exist for seven years. I can only re-echo the words of Baron Pollock in a bankruptcy case, "It presents a startling anomaly." Whatever may be thought of other portions of the Bill, I am sure the House will say that in the interest of commercial credit this anomaly ought to be put an end to without delay. Another evil that equally requires remedy is dealt with in Clause 22, which proposes to repeal Section 85 of the Larceny Act, the application of the terms of which, in Bankruptcy proceedings, has seriously hampered the efforts to bring commercial criminals—for so I must call them—to justice. This section of the Larceny Act provides that no person shall be liable to be convicted of certain misdemeanours—very serious ones, frauds or embezzlements by bankers, agents, and factors, offences of an essentially commercial character—if he first discloses the same in any compulsory examination before the Court in bankruptcy proceedings. Now, it has been held that this disclosure includes the case of a bankrupt who has undergone public examination. Of course, it is the duty of the Official Receiver or the Trustee upon the public examination to take care that everything material to the interests of the creditors shall be fully disclosed, and the result of the operation of this section of the Larceny Act is, that if a bankrupt, in the course of his public examination, has made a statement which would incriminate himself, then, although further evidence may be forthcoming from an entirely independent source, the law as it stands is that a prosecution shall not take place, and the bankrupt escapes, notwithstanding his admission of his offence. This produces frequent miscarriages of justice, and is a very serious commercial danger. There are, of course, two principles in conflict; one is, that the truth and the whole truth in relation to all bankruptcies shall be discovered; and the other is, that a man shall not be required to incriminate himself. I venture to think that the Bill adjusts this matter equitably. It is monstrous that if a man on examination discloses facts conclusive as to his own guilt, independent testimony shall not be able to be adduced in order to procure his conviction. But the Bill has a proviso that in cases where there has been an incriminating statement in public examination it shall not be used in evidence against the man who has made it. What is provided is that a prosecution may still take place upon independent evidence derived from other sources. That, I think, is consonant with law and equity. A jurist once said that law and equity were things God had joined together, but which man had put asunder, and I think there can be no better illustration of this than the state of the law I have referred to, but if the clause is passed, I think the matter will be properly adjusted. Now I come to a part of the Bankruptcy Act of 1883, where one must he somewhat more critical. The effect of the Act has undoubtedly been, as I have said, to expose and punish fraudulent trading as a general rule, but I must refer for a moment to the Report of the Inspector General in Bankruptcy, whose official statements may be depended upon, and whose assistance to myself I readily acknowledge. He says— The general feeling of the commercial world is, that the effect of the section providing for the exposure and punishment of fraudulent trading has been greatly weakened and very much destroyed under the system, by which a bankrupt guilty of gross commercial irregularities is nevertheless relieved from his obligations, subject only to the nominal suspension of his discharge. Now, I ask the House to consider for a moment what is the effect of a suspension of discharge, familiar as we are with such occurrences in bankruptcy. The chief legal effect is merely to prevent the bankrupt incurring a debt for more than £20 without disclosing the fact that he is an undischarged bankrupt, and if he fails to do that he may be prosecuted for a misdemeanour. But the object of the clause in the Bill making the regulations as to discharge more stringent is not to prevent legitimate trading. On the contrary, an undischarged bankrupt can trade legitimately, subject to the condition that if he does trade, and seeks to incur any large liability, he must honestly disclose the fact to the person with whom he is trading. We know there are manifold methods by which men carry on trade illegitimately after bankruptcy, making use of the names of relatives or of strangers, denuding themselves of the responsibility they may incur after bankruptcy by carrying on business in the name of other parties. There is at the present time no obstacle to such trading, legitimately or illegitimately. Moreover, for at least a year after bankruptcy it is very difficult for a man to obtain credit; but when the year has passed away, and memories have faded somewhat, then he can begin again and incur new obligations, the creditors with whom he is dealing being unaware that he is labouring under the grave discredit of not having obtained his discharge. This matter—that suspensions of discharge are of a nominal character—has attracted the attention of the commercial community for many years, and has received careful consideration at the hands of Chambers of Commerce throughout the country; and in 1886 the Associated Chambers of Commerce passed a Resolution, moved by a great commercial authority, whose death has been a great loss to the commercial world—Sir Jacob Behrens, of Bradford—who, in strong terms in the Resolution, censured this mode of carrying on business. I stop to verify my statement that suspensions of discharge are of a nominal character, wholly inadequate to secure proper trading, and to deter others from incurring the penalty that should attach to a fraudulent bankrupt. From the Report of the Inspector General in Bankruptcy, I select a few cases out of a multitude said to be of a typical character. In one case the gross liabilities of the debtor were £144,354, and the realised assets £166. In this case the debtor was a merchant and steam-shipowner, who had originally commenced business without any capital. He had admittedly been continuing to trade at a loss for some years back, and carrying forward ships and shares, which he knew had undergone depreciation, at an excessive value in his books. Among other items of liability was one of £3,500 upon accommodation bills. Upon any true or reasonable valuation of his property he must have known that he was insolvent many years before, and that he was contracting obligations which he had no reasonable expectation that he would be able to meet, and the Court found That his books of account do not disclose his financial position within the three years immediately preceding his bankruptcy. One would have thought this was a case calling for some stringent suspension of discharge; but, notwithstanding these facts, the bankrupt applied for his discharge, and obtained it subject to a suspension for three weeks. Remember the only penalty this involves is that he shall not trade beyond £20 without disclosing that he is undischarged, and in three weeks he would be entirely free from the obligation of making this material communication. Take another case, that of a merchant with liabilities £32,464, and estimated assets £31. This debtor attributed his failure to the insolvency of his firm three years before, caused by differences arising on speculative transactions in the produce market. The Inspector General adds— These losses appear to be as much of the nature of gambling as any of those incurred at a gaming-table. But the debtor's discharge was granted subject to a suspension for three months. So this speculative gambler was at liberty to go into society and incur new liabilities without disclosing that, under these circumstances, he was a bankrupt three months before. Another case I have before me is that of a florist who was a bankrupt 12 years previously, paying no dividend. He was again bankrupt five years previously, when a dividend of 3s. 1d. in the £1 was paid. So there were three failures in 12 years, and on the third occasion his estate was not expected to pay more than Is. in the £. The Official Receiver reported that his books were unreliable; that he had traded after knowledge of insolvency, and contracted debts without reasonable probability of repayment. The County Court Judge granted the discharge subject to six months' suspension, remarking that he felt in so doing "he was allowing his sympathy to get the better of his judgment." I think that his sympathy should have been reserved for the creditors, who ought to be protected from the incursions of men who fail under such circumstances as these. I have before me the particulars of another failure. The debtor in this case was a financial agent; his liabilities amounted to £35,612, and his assets to £80. He had been bankrupt twice previously. Yet he was granted an almost immediate discharge. There are cases in which the details are almost humorous. One man—described as a "gentleman" in the schedule—attributed his failure to being without an income; he had lived for years on the incomes of his creditors, and ultimately failed with practically no assets. Yet he was able to get his discharge very quickly. The Inspector General says that— Many other illustrations of a similar character might be given from the experience both of London and of the country, all tending to prove that bankruptcy docs not, as a rule, arise from misfortune or from unforeseen circumstances beyond the debtor's control, but is the necessary result of deliberately reckless trading, or of gambling, or of culpable abase of credit. … … On the question of a debtor's discharge, as has been pointed out in previous Reports, and as is further amply verified by the experience of the past year, the provisions of the Act, and the action of the Courts in dealing with offences under the 28th, section, have not, as a rule, been such as to inspire any great degree of apprehension in the minds of debtors who have committed these offences, or to prevent others from following their example. Such transactions as the floating of accommodation bills when a debtor knows that he is insolvent; the obtaining of goods on credit to be sold below their market price for the purpose of staving off bankruptcy; and the adoption generally of ruinous means for obtaining money for the same purpose are rarely taken into account in dealing with a debtor's application for a discharge under the English law; while the non-keeping, or the improper keeping, of books, is generally dealt with as an offence which is amply punished by the withholding of the discharge for a nominal period … … A careful study of these cases (which it should be remembered have been selected solely on account of their magnitude, and not on account of their special character), will probably satisfy anyone who is acquainted with the most elementary conditions of business, that only a very small fraction of them can justly be attributed to misfortune, and, apart from cases of actual fraud, it may well be doubted whether the Legislature in passing laws from time to time 'for the relief of insolvent debtors' really contemplated the letting loose upon the mercantile community without conditions and free from their obligations of debtors, who (as appears in the great majority of these cases) have shown themselves so reckless of their neighbour's interests and so incompetent to manage their own affairs. I am not surprised at a remark attributed to Mr. Justice Cave, the Bankruptcy Judge, to the effect that the Judges are far too lenient. I think it, is clear, then, that the suspension of discharges is too frequently of a merely nominal character, and that some alteration is urgently called for. It may therefore be regarded as one of the main objects of this Bill to strengthen the law in respect to the defects which experience has thus shown to have arisen in its administration under this particular head. I am perfectly aware that many members of the commercial community who have studied this question, feel that it is difficult to draw a hard-and-fast line which shall be equally applicable to every bankrupt. I agree with that; but I think it is quite right and proper that there should be some attempt to lay down a minimum line of punishment, so far as the suspension of discharges is concerned, in the case of bankrupts who have brought about their bankruptcy by culpable conduct. The Bill therefore proposes that where the condition of discharge is a temporary suspension for certain acts specified in this measure, then the minimum period of suspension shall be five years; and that when the condition is the payment of a dividend, the minimum dividend on which a discharge may be granted shall be 10s. in the £1. Probably these figures may not command general acceptance, but they are open to consideration by the Grand Committee on Trade. I should point out a matter which considerably modifies the apparent stringency of these conditions: it is still proposed by the Bill to leave in the hands of the Court unlimited discretion as to the discharge of a bankrupt, on his agreeing to judgment being entered up against him, appropriating his future earnings, and in this Bill the amount of future income to be attached will be a matter entirely in the discretion of the Court, Under the statute of 1883, where future income is attached as a condition of discharge, judgment is, it has been held, to be entered up for the whole balances of the debts; but this provision was found to be too stringent, and the section has consequently become practically inoperative. I do not disguise from myself, in dealing with this Bill, the fact that Draconic legislation frequently defeats its own ends; and therefore I have proposed that where any portion of a man's future earnings is appropriated to the payment of past debts, the amount should be in the discretion of the Court, and the discharge of the debtor may at once be granted. Then, again, the Bill provides—and I think rightly so—that where the bankrupt has been guilty of felony or misdemeanour he shall be cut oft from commercial society altogether, and that no absolution shall be granted him by the Bankruptcy Court. It may be suggested that this provision is too severe; but I think it is one calculated to secure proper commercial conduct, and to deter persons from committing acts which ought to be universally condemned. The application of the remedies I have suggested will, I think, act as an inducement to bankrupts not to fritter their estates away in various stages of insolvency to the disadvantage of creditors. The present system enables dishonest men to live for years on the money of their creditors; it enables them to plunge on the principle "Heads I win, tails you lose;" and the records of the Bankruptcy Court afford many illustrations of the fact that debtors themselves frequently think it best to wreck their estate so as to leave little or nothing for the creditors, in the hope that the latter will come to the conclusion that it is not worth while to investigate the matter at all. This will account for the numerous cases in which dividends of one farthing are declared. There are many instances in which there have only been infinitesimal dividends paid; and so long as a man feels that he can with impunity and at the risk and cost of his creditors trade in such a manner we shall never ensure that reasonable and prudent course of action which ought to characterise men, even when they are in a position of insolvency. One does not want to denude a man of all hope; but, on the other hand, we ought not to place creditors in a hopeless position by encouraging such a course of trading. The Bankruptcy Court records show that in 1887 no dividends were paid in 37 per cent, of the bankruptcies; in 23 per cent, the dividend was less than 1s. in the £1; and in 20 per cent, it ranged from Is. to 2s. 6d. in the £1. In 1888 two-thirds of the cases dealt with by the Chief Official Receiver in London resulted in the payment of no dividend at all. In London, in 1887, there were eight cases with a liability of over a million and a quarter, and the dividend realised was only 2¾d. in the £1. In 1888 the proportion of assets to liabilities was only 31.5 per cent.; and I have here a record of many too typical cases which shows the urgent necessity for something to be done to stop a course of action which results in so much disaster to creditors. I will take first the case of Mr. Ellis Hyams, tailor and clothier, of Nottingham. Replying to Mr. Barlow at a meeting of his creditors he is reported to have made these answers— Mr. Barlow: How long have you been insolvent? The Debtor: For some years. For six years?—Yes. For eight years?—Yes. For 10 years?—I cannot say. Don't you know to a year or two?—No; I cannot tell you. What have your personal expenses been?—About £600 a year. So you have been living at the rate of £600 a year and have been insolvent all the time?—Yes. Now, Mr. Speaker, the report of this debtor's examination goes on to say that a creditor inquired if there were no power to inflict punishment in such a case, and he was informed by the Official Receiver that there was no power; but if the case went into bankruptcy the debtor would have to apply for his discharge, and all the facts could then be laid before the Court, which might suspend the discharge. It is to deal with cases like this that the Bill is promoted. The Bill asks the House to consider the interests of creditors as well as of debtors. If the latter are entitled to sympathy the creditors, at any rate, should receive justice. The Bill gives them that justice, while it refuses no reasonable mercy to debtors consistent with doing justice to the creditors. I think, then, I have shown that the suspension of discharges is too often nominal, and that the absence of a discharge is not a great incubus on a man who trades legitimately or even illegitimately, for it only requires him to state the fact that he is an undischarged bankrupt. And, lastly, I have pointed out that there; are too numerous cases in which men have gone on trading recklessly until their assets have been reduced to the merest pittance. And now in relation to deeds of composition and arrangement, if the House should approve the clause dealing with the suspension of discharges it will be necessary to adjust to it that portion of the Bill which deals with composition arrangements; because if it were not altered the effect of the more stringent regulations in bankruptcy would be to induce debtors to avail themselves of composition schemes, and thus get through the Court without making any substantial payment to the creditors. It has been argued that the public have little or nothing to do with such arrangements. We know from experience that often creditors are glad to get what they can, and that they care little as to whether or not the conduct of the debtor has been culpable. But our object in bringing forward this Bill is to strengthen the beneficial influence which the Act of 1883 has had upon commercial morality; and we therefore propose, in the matter of composition arrange- ments, to insist on the payment of a dividend of at least 7s. 6d. The distinction between this sum and the dividend to be insisted on in bankruptcy is accounted for by the assumption that the costs of winding up and distributing a debtor's estate will amount to the difference between the 10s. and 7s. 6d., and that a guaranteed composition of 7s. 6d. will be equivalent to the administration in bankruptcy of an estate likely to realise 10s. in the £1. In one respect the Bill facilitates compositions by simplifying the procedure. At present, in order to effect a composition or arrangement, it is necessary to hold one meeting before the public examination and one afterwards, the idea being that creditors after the public examination are better able to judge as to whether the conduct of the debtor justifies the acceptance of his offer. But, as a matter of fact, it is found that the question of conduct exercises very little influence on the decision of the creditors in these cases, the arguments which appeal to them being chiefly of a pecuniary character. Moreover, the holding of two meetings involves both delay and expense, and occasionally prejudicially affects businesses which it is desirable to keep as going concerns. Therefore, it is proposed by this Bill that only one meeting shall be held, but that creditors may be at liberty, if they think fit, after the public examination, to apply to the Court to set aside the composition arrangement. Another provision, which I think will be found very useful, is contained in Clause 7, by which it is proposed that in cases of summary administration the limit shall be extended from £300 to £500. It has been found, under the Act of 1883, that the arrangements for summary administration have acted beneficially in reducing costs and expediting the winding up of estates. Even now, in. summary cases, the Board of Trade can dispense with the holding of second meetings, and although that course is generally adopted no complaint has ever been received that it has prejudicially affected creditors. In view of these facts, the Bill proposes to extend the limit for summary administration to estates of £500. Now, Sir, the only other clause to which I need refer is Clause 10, which is of a very important character, for it constitutes certain acts mis- demeanours. It is a clause as to which very much may be said both for and against; and the President of the Board of Trade—to whose authority I shall readily bow—thinks great consideration should be exercised before so penal a clause is inserted in the Act. In the Grand Committee there will be opportunities of consulting numerous opinions on the subject, and of ascertaining what is the general feeling of the commercial community; and if the opinion should prove adverse to the clause its stringency can be modified, or it may be omitted, although personally I think more stringency in some of these respects is most desirable. At any rate, the matter can be thoroughly threshed out in the Grand Committee, through which I hope the Bill will pass The new misdemeanours proposed in this clause are—(1) rash and hazardous speculation, or unjustifiable extravagance in living, which is too often a characteristic of bankruptcy; (2) undue preference to creditors within three months of insolvency, which my experience as a former Registrar, constantly acting as Judge under the delegated powers of the Act of 1869, showed mo was the most fruitful source of litigation. The very basis of the Bankruptcy Law is the equal distribution of the estate among the creditors; but bankrupts often, a few months before their failure, take the opportunity of preferring their relatives and friends to the disadvantage of their general body of creditors. The third new misdemeanour is fraud or fraudulent breach of trust. The punishment in these cases is proposed to be imprisonment not exceeding 12 mouths, with or without hard labour. There is a strong feeling in favour of these clauses in commercial circles; and the meeting of the Associated Chambers of Commerce at Cardiff unanimously passed a resolution in favour of the constitution of these acts as misdemeanours. We have precedents for this in Continent Codes, which I believe are of great advantage in repressing conduct of the character I have described. Under the French Code the law is as follows:— The debtor is liable to be punished with imprisonment where among other offences—

  1. (1) His personal or household expenses have been excessive;
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  3. (2.) He has lost largo sums, either in gambling, or in operations on the Stock Exchange, or in merchandise;
  4. (3.) He has purchased goods to be sold below their market price, with the intention of staving off his failure;
  5. (4.) He has, with the same intention, borrowed large sums of money, and put bills in circulation (accommodation bills presumably), or has adopted other ruinous means for obtaining money;
  6. (5.) He has not kept books, or they have been kept irregularly and do not give a true statement of his assets and liabilities."
Under the German Code we find that debtors are dealt with under the Criminal Law, and punished by two years' imprisonment, whenever they have—
  1. "(1.) By excessive expenditure, gambling or speculation in differences either in Stock Exchange values or merchandise, lost excessive sums of money, or have become indebted through such losses;
  2. (2.) Omitted to keep trade books as required by law, or kept them so improperly that they fail to give a proper survey of the position of their affairs."
And on the subject of books I will make this remark, that in nearly all aggravated cases there is the offence of defective bookkeeping; not only are the books defective but frequently they are intentionally misleading, and in my opinion there ought to be a stringent requirement that proper books shall be kept. I have a letter here from a commercial gentleman at Bradford, who points out that under the German Law Every merchant starting business must make an opening balance sheet, stating clearly all his assets and liabilities. The balance sheet must be signed by himself and produced on his stopping payment. He must also keep a cash book, journal, and ledger, all books to be properly paged and to be preserved 10 years. Anyone who fails and is found to have broken one of these rules is dealt with in a most strrngent manner. Bad book keeping is far too frequent and is the cause of much commercial mischief. Fas est ab haste doceri; and no doubt there is much to be said in favour of this foreign stringent procedure where a man is so negligent as not to keep books at all. In such a case he cannot hope for success, the only success he can hope to obtain being at the expense of those with whom he deals. We may then, I think, learn a little from the laws of foreign countries on this subject, and where we are under strong competition with foreign nations it is possible that a knowledge of their mode of procedure in such cases may be useful to us in our own commercial dealings. I have now gone through the chief points of the Bill. I do not think it necessary to deal at any length with those minor proposals which are more matters of detail, and which will be much better discussed by the Grand Committee. There is, however, one point to which I should like to make a passing allusion, and that is, the provision of the Bill which reduces the amount oil which a bankruptcy petition may be filed from £50 to £20. I think £50 is an arbitrary and also an illogical sum, because if a man is deemed to be insolvent when he cannot pay £50, he certainly ought à fortiori to be regarded as insolvent if he cannot pay £5. It would, however, be desirable to reduce the amount experimentally to £20, in contemplation of any further diminution which experience may demand. There are other good reasons why the amount should be reduced to £20. One is that although a petition can only be granted on debts of £50 and upwards, nevertheless a petition may be equally granted on a judgment for any amount, so that if it is thought desirable to make a man bankrupt for a debt of less than £50 the debtor must incur the expense of obtaining a judgment before he can present his petition. That is an additional hardship on both creditor and debtor which this Bill seeks to remedy. The Bill also contains provisions for altering an innovation made by the Law of 1883, as compared with the Act of 1869. It relates to the Trustees' title. and the Bill provides that such title shall no longer be restricted to three months' but shall go six months back, as was the case for 12 months under the Law of 1869. I think I may say that the period now adopted is too short, and that it has opened the door to a great deal of fraud. My own experience tells me that a great deal of litigation in bankruptcy has turned on the short period of the relation of the Trustees' title, and has facilitated undue preference by the debtor of his family and other friendly creditors. There is also a provision which gives to the Board of Trade power to appoint special managers of the bankrupt's estate. The object is to appoint these special managers only in urgent cases, and it is sought because sometimes the two creditors who now nominate are apt to give a vested position to persons who would not be the best managers for the intended purpose. In conclusion, I have to apologise for having taken up so much of the time of the House, although the subject is a very intricate and difficult one, and not without great practical importance. I am glad to sec present so many Members, who I hope are prepared fully to debate the subject and to throw more light upon it. I feel I have dealt with it somewhat inadequately; nevertheless, I commend the Bill to the cordial consideration of the House. It comes from the commercial community, and they have a strong feeling in favour of the reforms it proposes, a feeling which is based on very unpleasant experiences as far as they are concerned. I think the best mode of dealing with the subject under discussion would be to adopt the course taken in the case of the Act of 1883, which was carried through by the right hon. Gentleman opposite, and refer the Bill to a similar tribunal, and I trust the end may be—as I think it will, because the proposals are based on strong considerations—to benefit legitimate trade, and encourage the legitimate trader, and at the same time to deter those who pursue and think only of their own selfish interests, while they sorely damage the interests of those with whom they deal as well as the general commercial interests of the country to which they belong.

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

*(2.25.) COLONEL HILL (Bristol, S.)

Mr. Speaker, I rise for the purpose of seconding the proposition, which the hon. Member has made in a speech of that clearness and ability one would naturally expect in one of his professional, commercial, and official experience, which has placed him in possession of so much knowledge on the subject. I do not think it is possible to exaggerate the importance of the question of bankruptcy. Upon the due administration of the Bankruptcy Laws depends, to a very great extent, the preservation of that standard of commercial morality which it is necessary for this country to keep if it is to maintain its great position in the commercial world. The subject of bankruptcy has occupied the attention of the Associated Chambers of Commerce, of which I now have the honour to be President, for some 28 or 29 years; and all kinds of motions have been made and have received ample attention from the Chambers. We have even discussed the question whether any Bankruptcy Laws at all should be adopted. The Bill introduced by the right hon. Gentleman the Member for West Birmingham has, no doubt, done a very great deal to improve the Bankruptcy Laws, but experience has shown that the Act contains certain anomalies, and that there are certain deficiencies in it, which it is the object of the present Bill to remove and correct. This Bill might very properly be termed the Debtors' Belief Bill, for that is really its main object. The Legislature have thought that it would be more kind, and more advantageous to the State, when a man has been overcome by misfortune, that he should, if possible, be afforded an opportunity of exercising any abilities he may possess, in retrieving his position, and so benefitting the community, and so he is relieved from the legal burden of his debts. The question of their repayment is left to him as a moral responsibility. And we have had some brilliant examples of men who, by their abilities, have emancipated themselves from their difficulties, and having paid small dividends have afterwards satisfied, in full, all claims upon them, though their obligation to do so was of a moral and not of a legal character. I will not go into the Bill more than is necessary, but I will remark upon one or two leading matters which it is designed to correct. First of all, it has been found that there is some considerable difficulty in ascertaining what exactly constitutes a bankrupt. It is a matter which has been much debated by learned Gentlemen, and about which there has been highly technical decisions given by the Bankruptcy Court. The second clause maybe said to deal with the matter and make it more plain in future. Considerable inconvenience has arisen and creditors have been injuriously affected because £50 has been the minimum amount of indebtedness necessary to the proof of bankruptcy. I am informed that the proportion of debts under £50 is something like 80 per cent, of the whole. It is proposed by the Bill to reduce the minimum amount of debt entitling to a bankruptcy petition from £50 to £20. Even £20 is a sum which, in the opinion of many, is a great deal too large, and the fact that 60 per cent, of debts are under £10 seems, to support that contention. That is a question, however, which may be reserved for the Grand Committee, or for future legislation; but there is little doubt that some reduction of the £50 is needed. Another inconvenience, and I may say a great injury to creditors, occurs in consequence of limiting to three months the retrospective view of the Act. It has been shown by experience that frauduleut pretences are made, and legal documents making over property are executed, which would not be possible if a longer time were adopted. The Bill proposes that the period should be extended from three months to six. I think the feeling of the House will be that that is a very moderate proposition, which will not in any way inconvenience the honest trader. Again, it is considered desirable that a composition may be accepted at the first meeting in order to encourage creditors, to attend the meeting in person, and to judge of the character of the bankruptcy in which they are interested. This also is a proposal which seems to me to be worth attentive consideration of the House. A great defect in the present Act is found in the discharge of bankrupts, and the facilities which debtors enjoy for evading the law. Clause 9 of the Bill suggests certain penalties to be imposed on the bankrupt coming into the Court with assets less than 10s. in the £1. With regard to the question of books, in 99 cases out of a 100 a bankrupt who keeps proper books can tell his position well enough to wind up his affairs before he has lost 10s. in tho£l. I hold that in these days, when education is so thoroughly extended all over the country, when you can hardly find a little girl or boy who cannot read and write and do something in arithmetic, that for a man to engage in business without keeping proper books is very wrong, and that if he should come to grief he ought to be made to feel that he has been guilty of negligence. Very often no books are kept, or they cannot be produced in Court, and for such negligence, or for hazardous speculation, or for the instigation of frivolous actions, or for wanton extravagance while in debt, no consideration is due to the bankrupt. Then there comes the question of the punishment of individuals who are guilty of faults of this kind. I do not think the Bill is unduly stringent on this point. Such offences are seriously regarded in other countries, and ought to be in this country. There is another provision which is intended to apply to compositions. Compositions have frequently been used as a means of evading the Bankruptcy Laws, and unfortunately the difficulties, expense, and delays of bankruptcy proceedings are so great that creditors are induced to connive at compositions which ought not to be accepted. I think it only wise that some limit should be placed on this power of making compositions. No doubt there are circumstances under which compositions are honest, just, and desirable, but on the other hand they are frequently very much abused. I am sure no one would wish to make a law which would act unkindly or harshly upon the just trader. But the laws hitherto have been so much abused that there is undoubtedly a feeling springing up in the commercial mind that it would be far better to abolish Bankruptcy Laws altogether, and leave the debtor to the tender mercies of the creditor, and my experience is that cases in which that mercy would be withheld would be of very unfrequent occurrence. I do not propose that we should do so, but I refer to the feeling as a reason why the House and the Grand Committee should give its very best attention to the Bill. I believe the measure, if carried, would do a great deal to make proceedings in bankruptcy such as we should wish they should be.

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

I find I have lived already under six Bankruptcy Laws, and if the Bill is passed I shall have to live under a seventh, because it will practically constitute a new Bankruptcy Law. I remember the time when we all thought ourselves fortunate in obtaining the consolidation of the law in 1849, and I personally regret that one of the features of the law as it then stood has since been done away with, namely, degrees in certificates. Then I remember the chorus of triumph and blowing of trumpets with which the Law Officers in 1869 brought in a Bankruptcy Bill, under which we lived for 14 years. There were great defects in that law, and I was very glad indeed when the right hon. Gentleman the Member for West Birmingham (Mr. Chamberlain) brought in the Act under which we have been living since 1883. I sincerely hope that the provisions of that Bill will continue during my lifetime—not that I ever hope or fear to take advantage of the provisions of a Bankruptcy Act. I look on all these changes chiefly from a creditor's point of view. When I read this Bill through last night my first impression of it was that it ought to be rejected on the Motion for the Second Reading. The speech of my hon. Friend who introduced the Bill has, however, convinced me that such a course would be a mistake, and that all the Bill's defects can be cured in the Grand Committee. I confess I do not find in the measure exactly the principles which my hon. Friend spoke of in his able and interesting speech. Its first principle, as it struck me when I read the Bill last night, seems to be the multiplication of small bankruptcies. It will take away discretion as much as possible from the Court. It will take away from creditors powers which they already have, and it will set a great number of traps by introducing many new offences to be followed by serious consequences. The result will be to enable small people to blackmail those with whom they have dealings. In some respects, at all events, I think I can show these objections are well founded. The Bill is exceedingly difficult to understand, because it takes different clauses of the existing Act and alters them, and sometimes inserts new clauses, but does not say whether these are to supersede the old or to be added to them, and one has to read the provisions of this Bill into the Act of 1883 in order to understand it. The measure carries further than is the case at present that which is a dangerous thing to do, namely, to treat all persons alike, whether traders or not. Now, the Legislature has abolished the distinctions between bankruptcy and insolvency, but in doing that and in making laws to catch the dishonest trader care must be taken not to catch honourable men who find them- selves, without intending it, within the meshes of the law. For instance, the 9th clause proposes to enact that the Court shall refuse the discharge of the bankrupt where it appears he has committed any felony arising out of or connected with his bankruptcy, which is right enough, but it also imposes on the Court the obligation of refusing the discharge of a bankrupt whore lie has committed any misdemeanour. Yon might then have a case of this kind. A man, being unable to pay his debts, sends his boy to school without the fee, and thereby commits a misdemeanour. Under such circumstances the Court is obliged to refuse his discharge. Surely this is not the intention of the promoters? My hon. Friend who has just sat down seemed to think it would be a good thing if there were no Bankruptcy Laws. I have oft3ii thought the same, but that is hardly a reason for making such a stringent Bankruptcy Law as this. The first object of the Bankruptcy Laws is, I presume, to enable creditors to get a bankrupt's estate into their hands and convert it into cash as expeditiously as possible. The next object is to allow a debtor who has become a bankrupt through no fault of his own to get his discharge, so that he can begin to earn his living again as soon as possible, instead of becoming a burden on the parish. A purely subordinate object is to punish a dishonest debtor in the hope of deterring others. In doing so, we must be very careful indeed, because of the great ramifications of modern business and modern society. I have known a very eminent literary man who became bankrupt in early life, because he had taken a share in an unlimited liability company, which came to grief. Every shareholder in an insurance office whose liability is unlimited, and which fails, is liable for the whole amount of its indebtedness. Judgment may be obtained against him for the whole amount, and under this Bill a man against whom such judgment is obtained can never get his discharge if he cannot pay 10s. in the £1, a simple impossibility in such cases as these. A number of changes are made by the Bill which seem to me to be by no means wise, and which I hope will be amended in Committee. I find that acts which are defined to be acts of bankruptcy are very widely extended by the Bill beyond anything which have ever been acts of bankruptcy in the English Law before. Thus, if a man submits to any of his creditors a statement showing that he is insolvent, that is made an act of bankruptcy, and such a provision may be availed of by some small creditor to make the poor man a bankrupt. His solicitor is in all probability a creditor, and if he submits to him confidentially a statement of affairs showing that lie is insolvent, or if he shows a similar statement to three or four creditors together, that, under the Bill, is an act of bankruptcy, and a small creditor hearing of it may take advantage of it to levy blackmail upon the debtor. The man may be insolvent at the present moment if everybody presses him for payment of all he owes. I have known a barrister who was able to obtain time paying his college debts which, if they had all been pressed for at once, he could not have paid. Under this Bill that man, if he consulted two or three of his creditors, or his solicitor, and put before them a statement showing that at that particular moment he could not meet his debts, would be committing an act of bankruptcy, although he was doing his best for his creditors and had every prospect of paying everybody in full in a few years. [Mr. W. REDMOND: Divide, divide.] I hope the hon. member who says "Divide" will never come under this measure. I am sorry to see that under the Bill the Official Receiver can no longer be a Trustee. Under Section 5, while at present no man can go and look at the debtor's statement of affairs unless he states in writing that he is one of the creditors, under this Bill any person can look at the statement. I observe that the name of the hon. Member for Northampton (Mr. Labouchere) is at the back of the Bill, and I have no doubt that if the clause passes in its present form we shall have a man sent round by Truth to inspect and report upon the books of all well-known creditors. Again, I see no reason for the distinction that while the bankrupt must pay 10s. in the £1 before he can get his discharge, a composition must not be less than 7s. 6d. I did not quite follow the argument of my hon. Friend on that point. I understood him to say that 2s. 6d. out of the 10s. would be the cost of the bankruptcy. But the dividend actually paid is to be 10s. in the £1, and if the cost is to be 2s. 6d. out of every 10s. collected, you must provide for 12s. 6d. in the £1. Then I come to Subsection 2 of Clause 7. I find that whereas under the; present law a statement of the creditor's affairs must accompany the offer of a composition, under this Bill there is no such provision, and therefore the creditors will have to consider whether they will accept the composition without having that information before them. There is much less discretion left to the Court and the creditors. Under Clause 8 a Trustee "shall" be appointed not "may." I do not think we ought to limit or take away the discretion of the creditors and the discretion of the Court. Clause 9 specifics the facts on proof of which the Court must either refuse or order a discharge, or suspend the operation of the order for a specified time, or grant an order of discharge subject to conditions. The first fact is— That the bankrupt's assets are not of a value equal to 10s. in the £1 on the amount of his unsecured liabilities. Surely it is very unwise to lay down a hard-and-fast rule of that kind. That is a fact which ought to be omitted from the clause. Why not leave the matter to the discretion of the creditors and the Court. Then— That the bankrupt has during within the three years immediately preceding his bankruptcy, failed to take steps to make himself properly acquainted with his true financial position. Suppose he did take steps three years before, and found himself insolvent owing to his college debts, for example, is he on that account never to get his discharge? Then take Sub-section 2 of the same section. The Court has no discretion with regard to the period of the suspension of the discharge. It must either suspend the discharge for a period of not less than five years or until a dividend of not less than 10s. in the £1 has been paid, and so on. To suspend the discharge for five years is heavy punishment. Whom does it benefit? It benefits no one, but it does infinite harm to the bankrupt. I have already shown the hardships of suspending the discharge until 10s. in the £1 is paid. Another alternative is that the Court "must," not "may," require the bankrupt, as a condition of his, discharge, to consent to judgment being entered against him by the Official Receiver or Trustee for any balance, or part of any balance, of the debts provable under the bankruptcy, which is not satisfied at the date of the discharge. The introduction of the words, "part of any balance," is new, and I approve of it, but I object to the removal of the present condition, that the judgment shall be enforced by execution only by leave of the Court, and it has to be shown that the bankrupt has become possessed of some property or earnings on which the judgment can be enforced. You may have a Trustee or Receiver who is a personal foe of the bankrupt, and who follows the poor fellow week after week with the intention of enforcing the judgment. I will pass on to Clause 11 which seems to me to be open to grave objection. It is— If the Court is of opinion that the terms of any proposal for a composition or for 3 scheme of arrangement are not reasonable, or are not calculated to benefit the general body of creditors, or in any case in which the Court is required where the debtor is adjudged bankrupt to refuse his discharge, the Court shall refuse to approve the proposal. In other words, you have creditors who have trusted the man foolishly, they are offered a composition of 9s. 6d. in the £1, it is shown that no more can be paid, and they wish to get it. Because the bankrupt has acted badly that composition must be refused. All the creditors are to be punished. They are to see the estate wasted because the bankrupt has behaved badly. Could anything be more illogical than such a proposal as that? I hope it will be struck out of the Bill. There is only one other point I wish to refer to, and that is the examination of the bankrupt. At present it is considered of such paramount importance in the public interest to get at the facts that when a man discloses an offence he is not liable to be prosecuted for it. In order to encourage a bankrupt to make a clean breast of everything, he cannot be punished for any offence he admits having committed. That protection is to be taken away. I hope the House will hesitate to interfere with this old and well-known principle in English Law. It is true that his evidence is not to be used against him; but this evidence will enable other proofs of the same facts to be obtained elsewhere. The Bill, how- ever, seems to me to contain some valuable clauses, and the House is certainly indebted to the hon. Member for Islington and his Colleagues for framing and introducing it; at the same time many of its provisions are detrimental to the interests of the trader, are calculated to defeat the objects of the Bill, and are likely to act with undue harshness. In my opinion, the House should be very cautious in altering a law which was passed with so much care as the present Bankruptcy Act of 1883, and should not do so on the points to which I have referred without much stronger proof of its necessity than has yet been brought before the House. I will not move the rejection of the Bill, but only express the hope that every effort will be made in Committee to alter some of its provisions.

(3.13.) MR. J. LLOYD MORGAN (Carmarthen, W.)

I cannot agree with the hon. Gentleman that the object of the Bankruptcy Law is simply to protect creditors. A main object is to relieve debtors. Again, we would imagine from the speech of the hon. and gallant Member for Bristol (Colonel Hill) that the only parties to be considered in the matter of alterations in the Bankruptcy Law are members of Chambers of Commerce.


I beg the hon. Gentleman's pardon. I distinctly said the object of the Bankruptcy Law was to protect creditors, to relieve honest traders, and to punish dishonest traders.


I think we should take a much wider view of this matter than the hon. and gallant Gentleman (Colonel Hill) seems to favour. There is one observation I desire to make in reference to the 4th clause of the Bill. The 12th section of the Act of 1883 gives power to the Official Receiver to appoint a special manager, in case the creditors apply to him to do so. By the 4th clause of this Bill absolute power is given to the Official Receiver to appoint a special manager, whether the creditors desire it or not. I am inclined to think that the power given by the Act of 1883 to the Official Receiver in respect to the management of the estate of the debtor is sufficient. I cannot help thinking that the creditors are perfectly wellable to form a judgment as to whether or not it is advisable in their interest to have a special manager. I am not opposed to the Bill—it is, in my opinion, a most excellent measure—but I cannot help thinking that there are some sections under which small debtors will be treated with great severity and hardship. Under the 28th section of the Act of 1883 the County Court judge has, in case certain offences have been committed by the debtor and reported by the Official Receiver, discretionary power to withhold or to grant the discharge in a certain time, and to impose certain conditions if he thinks it necessary. This Bill not only increases the number of offences to which regard may be had, but it divests the County County Judge of discretionary power. I see great objection to this provision, because the County Court Judge or the Bankruptcy Judge, having all the facts and documents before him, is undoubtedly the best authority on the question whether or not the debtor ought to have his discharge. The Mover of the Second Reading has said that an undischarged bankrupt is a man who is under no practical disability; that he can go about and trade just as he likes, only he must, if he incurs a debt of £20, disclose the fact that he is an undischarged bankrupt-How can a trader carry on business if, when he incurs a small liability, he has to make the humiliating admission that he is an undischarged bankrupt? I think it is a great disability for a man to be obliged to make a disclosure of that kind, and that, in fact, it prevents a man carrying on any business in the future. I fear it really leads to fraud. Men will not trade unless they are able to do so like their fellow men, and the result of this provision is that undischarged bankrupts transact business in the names of their wives. They are thus able to commit a fraud on the public, or, at any rate, to be free from the penalties of the Act of 1883. The only other part of the Bill which, I think, ought to be received with great caution is that clause which creates a new misdemeanour. If a man has been speculating or living beyond his means—for that is what it comes to—he is to be liable to 12 months' imprisonment with hard labour. We can imagine that such a provision may lead to great hardships, especially in the case of young and inexperienced traders. I trust that when the Bill reaches Committee hon. Members will duly consider this and the other points I have raised.

*(3.18.) MR. T. H. BOLTON (St. Pancras, N.)

If I felt as strongly with reference to the Bill as some hon. Gentlemen opposite I should certainly move that the Bill be read a second time this day six months. If hon. Gentlemen entertain such grave doubts as to the policy of the measure, the only course for them to adopt is to oppose the measure altogether. There is no doubt that some amendment of the Bankruptcy Law is necessary in the direction of this Bill; whether it should be of such a severe character as that now proposed is altogether another question. There is one provision which I believe will be attended with many disadvantages: I refer to the provision allowing creditors for £20 instead of £50 to present a petition in bankruptcy. I am sure that this will lead to a great deal of expense and a great deal of trouble; and will be made use of as a means of extorting money by avaricious creditors of small amount, while a certain class of practitioners will readily avail themselves of this mode of manufacturing costs. Fifty pounds is surely a small enough sum to justify a petition in bankruptcy. With regard to the question of the statement to the Official Receiver, with a view to a composition and the summoning of a meeting, that seems to be a subject rather for the rules of procedure than for an Act of Parliament. It is desirable that if any creditor or the debtor himself considers that composition would be more beneficial to the creditors, there should be some speedy mode of taking the opinion of the creditors, and I would suggest that a simple majority of creditors, both in number and value, with the sanction of the Court, should be quite sufficient, without its being necessary that there should lie a majority in number, and of three-quarters in value. If the majority of the creditors desire it, surely that is a sufficient guarantee that a composition is fair. With regard to the creation of new offences. I entertain very grave doubts as to whether it is wise to make two or three of the things proposed punishable as misdemeanours. Another offence I would like to notice—where a man has within three years of his bankruptcy failed to take steps to make himself properly acquainted with his true financial position; this, I think, will lead to a great deal of dispute, and will be very difficult to establish as an offence, so as to disqualify a debtor from having his discharge, and I doubt whether this provision will lead to any good. There is another provision that the bankrupt who has put any of his creditors to unnecessary expense by bringing a frivolous or vexatious action should be punished. Whether the action is frivolous or vexatious is a matter on which people may entertain very different opinions. Is the Judge who tries the action to certify in view of a possible bankruptcy, or is the Judge in Bankruptcy to decide after the result whether the action was frivolous and vexatious? At any rate, I think the provision open to a good deal of doubt. With regard to the suspension of the period of discharge for five years, it seems to me that that is an inordinately long time. The position of an undischarged bankrupt is one of considerable difficulty when he wants to carry on business, and this suspension of the discharge is only calculated to make him carry on business under some other person's name, or to do, in some indirect way, what, of course, he must do in order to earn his living. There are some other provisions in the Bill which are open to criticism, but as this is a discussion on the Second Reading of the Bill and not one upon its details, I will refrain from going into these questions. As the Bill is going to a Standing Committee I will not discuss details fully. I am in doubt as to the policy of reducing the amount for which petitions in bankruptcy can be presented, and as to the policy of increasing the number of offences, but my principal objection to the Bill is that the provisions generally are too severe in many respects; and in consequence of their extreme severity will defeat the very object that the hon. Members who have the Bill in charge desire to effect. I hope the Bill will receive careful consideration upstairs, and I believe considerable changes will have to be made in it.

*(3.30.) MR. DIXON-HARTLAND (Middlesex, Uxbridge)

I congratulate the Mover on the eloquent speech he has made in support of the Bill, and I hope after the Second Reading the Bill will be allowed to go before the Grand Committee, for I cannot be blind to the fact that there are a great many clauses in it that will require entire alteration or omission. I am one of those who even in regard to the Bill of 1883 thought the commercial classes would be better off if there were no Bankruptcy Bill at all. In some of the States of America there is no Bankruptcy Act, and they get on much bettor than we do. When two people fail in their contract, and the one is unable to pay, it is better to allow them to get out of the difficulty by arrangement than to have recourse to a system of law. Anyhow we ought to hesitate before allowing the Bill to pass as a whole. Clauses 21 and 22 will be most valuable, and there is nothing to be said against the remarks of my hon. Friend upon these. But it seemed to me that the whole of his speech was in favour of suspension of discharge, and I notice from the form of various clauses that that seems to be the great point of his Bill. Now, I am not one of those who think that suppression of discharge is of great consequence. We do not, in commercial circles, find that it much matters. I know two large traders in the City who, having failed, carry on business in other names, and nobody makes any objection. There are plenty of ways of getting rid of the difficulty, and the risk is nominal. Whether creditors have such short memories that in a year they forgot that a man was once a bankrupt I do not know, but there are new creditors and, as a rule, a man does not disclose that he is an undischarged bankrupt, and it is not to the interest of anyone to go to the Court and find out. What is far more important is to see that it is a man's own interest to suspend payment before he is in very low water, and that he shall not get his discharge unless he pays 10s. in the £1. If you can make a man stop before he goes beyond that limit that will be of far more advantage to the commercial classes than any punishment by suspension of discharge. Criminal acts, of course, ought to be punished irrespective of dividend. Reckless men now get far too much sympathy, and the Court is too lenient with them. When a man gets so low and is so thoroughly insolvent that he cannot pay more than 2s. or 3s. in the £1, then he is utterly reckless and his only course is to go on from hand to mouth, and then he does more damage to honest trading than anybody else can. It does not matter to him whether he makes a profit or loss; but it does to the honest trader, who cannot live in competition with a man who is careless of the result, and thus arise vast evils to the trade of the country. Statistics show how large a proportion of bankrupts among the mercantile classes pay very small dividends, and in such cases pity is much misplaced. The hon. and learned Member for Stockport says that gentlemen become bankrupt through no fault of their own, that they join limited companies and so suffer losses. But what difference is there, if they join a trading concern they do it with their eyes open? I do not think in the suspension of discharge there would be any advantage in making a distinction. The hon. Member for West Carmarthen (Mr. Morgan) said a Bill should deal equally with the interests of debtor and creditor, but it is the debtor who gets into trouble, not the creditor; the debtor obtains the goods and is first to be thought of. In regard to future profits I have never known a case where future profits were really pledged, and if they were it is nobody's business to look after them; nobody will take the trouble to see if they are earned or paid. The real question is what a man has at the time he suspends payment, not what he may have in the future. I do not believe in the pledging of future profits. A man is sufficiently handicapped by becoming a bankrupt, and if he is further handicapped by having to yield part of his future profits, I venture to say he will never succeed. In regard to the clause dealing with executions, if any execution being levied is to make a man bankrupt then there will be an end of executions, except for purposes of black-mail, for no honest trader would put in an execution if the moment he had gone to the expense, he had to hand the proceeds to the Official Receiver, and would get no advantage for himself. There would be an end to this process of law being carried out. Then under this Bill it is to be a criminal offence to give an undue preference to any creditor. But what is undue preference? Suppose a man has a bill falling due, and it is not paid, then the creditor comes down on him to enforce payment, but on getting security gives time. Is that undue preference to bring a man under the penalty imposed by the Bill? If he lets the thing go he becomes a bankrupt, but because he does a thing which is perfectly honest, and which not doing would bring about an act of bankruptcy, is he to be punished? I think this clause will require much modification. As to special managers, I think this point was thoroughly discussed in the passing of the Act of 1883. We were all desirous of making the working of the Act as cheap as possible, and the special manager clause was fought for two days. The compromise arrived at was a reasonable one, that the manager should be appointed wherever the Official Receiver thought it necessary. The last point I will mention is the disclaimer of leases. The Official Receiver is to have more than 28 days to consider whether he shall disclaim a lease; that is not fair. If he is going to keep it he knows that before the end. of 28 days, and it is not fair to the owner that the Receiver should hold this power for so long a time. I have known cases of great hardship where the Official Trustee has kept the landlord in suspense until the day before quarter-day, and then cleared out everything, leaving the landlord with no rent whatever. It is bad enough now; it would be still worse if this clause were passed. Under all circumstances I think it is very desirable that the Bill should be sent to Committee upstairs, and I hope it will come back to us in a very much altered form, and on that we shall pass our judgment.

(3.40.) MR. P. MCDONALD (Sligo, N.)

As a trader I desire to say a few words in support of the Bill. The object of a Bankruptcy Law ought to be to cheapen and expedite procedure, but the tendency of the observations of those hon. Members who have spoken in opposition to the Bill has not been in that direction. Three of these hon. Gentlemen are members of the legal profession. It is a very singular thing that proposed Amendments of the Law of Bankruptcy, in which the trading interest is mainly concerned, are always opposed by members of the legal profession. This is purely a trade question, and consequently should be left for decision to the trading interest. I have carefully read over the Bill, and will confine myself to saying that it has my thorough and entire approval as a trader, and I shall cordially support the Second Reading. I do not take exception to clauses as several hon. Gentleman have done, inasmuch as I think every clause in the Bill is necessary and very much called for, and I only hope that similar provisions may be passed into law for Ireland, for the Irish Bankruptcy Law is in a state of confusion that has led to great trouble and many abuses. The English Bankruptcy Law, after five years' operation, is about to be amended, but the Irish Law has existed 18 years without a touch of improvement, and I appeal to the Government to give us such facilities as I understand they are now going to give the hon. and learned Gentleman opposite who has introduced this Bill, for passing a measure that will meet the much-needed demands of Irish traders.

*(3.42.) SIR ROBERT FOWLER (London)

Like the hon. Gentleman who has just spoken I look at the question from a commercial and non-legal point of view. I wish to point out that when a commercial man has had the misfortune to make a bad debt, he thinks the best thing he can do is to write it off at once, though anything that may come out of it of course he is glad to get. There is a story current in the City that a large firm, having written off what they considered to be a bad debt of £40,000, told an inquirer immediately afterwards that the debtor did not owe them a sixpence. The fact is commercial men have a dread of bankruptcy proceedings and do not give their attention to the winding up of bankrupt estates. An hon. Member has said this is the seventh Bankruptcy Bill within his recollection, and though I have not so many in my memory, I can recollect during the time I have been a Member of the House, and before, many alterations of the Bankruptcy Law, but I did hope that the law had been brought into as satisfactory a state as possible. I do not believe, owing to the circumstance I have mentioned, that the proceedings are always quite satisfactory, but the difficulties are rather outside legislation. I had hoped that the legislation of 1883 had been thoroughly successful. I remember the ability displayed by the right hon. Gentleman the Member for West Birmingham (Mr. J. Chamberlain), in carrying the Bill through the House and through Committee, and after the exhaustive discussions we then had, I certainly do regret exceedingly that the House seems disposed to re-open the whole question and pass a new Bankruptcy Act. The Committee through which the right hon. Gentleman piloted the Bill with so much ability was very strongly manned by Members of both the legal and commercial interests—among the latter I may mention my lamented friend Mr. Samuel Morley, Sir Henry Peek, who has retired from the House—everything was fully discussed, and I regret the intention to go over the whole question again.

(3.45.) MR. HANDEL COSSHAM (Bristol, E.)

I will not dwell upon details of the Bill; that will be better discussed in Committee, but there are two principles I would ask the House to bear in mind. The point at which all these Bills should aim is to get the estate distributed as cheaply as possible and as soon as possible. There is too much interception between the estate and the creditors; members of the legal profession get their teeth in and secure much that should go to the creditors. Any Bankruptcy Bill that does not tend to prevent this is imperfect in a very important particular. At the present time I think half an estate is eaten up by the interposition of lawyers, and our aim should be to prevent this. The great defect I find fault with as a commercial man is' not so much dishonest trading, but the fact that a solicitor gets hold of an estate, and a large bulk of it is consumed before the residue reaches the creditors. I am in favour of reading the Bill a second time, but the details should remain for Committee. We are indebted to the hon. Gentleman for his explanation of the Bill. I have not much faith in Bankruptcy Bills myself; my own belief is, that creditors would be quite as well off with no Bankruptcy Act as with any Act you may pass, but the main point I would insist on is that lawyers should not get such considerable pickings from an estate.

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

I think that the feeling of the commercial community with respect to bad debts has been accurately stated by the hon. Baronet the Member for the City of London. They take no trouble to investigate the circumstances of a bankruptcy and to prosecute the wrongdoers if there be any. This is perfectly true, but it is not to the interest of the commercial class as a whole that this state of things should continue. It is, on the contrary, to their interest that all failures should be investigated, and that any culpable malpractice should be visited with condign punishment. I confess I do not regard the Bill before the House as in any way hostile to the work upon which we were engaged in 1883. On the contrary, I hail the Bill and this discussion with great satisfaction, for, indirectly, at all events, it is a signal confirmation of the opinions arrived at by the Grand Committee in those days. That Committee did not at the time believe a final settlement of the question was being arrived at. I may say at once there were several points on which the Board of Trade were defeated in Committee, and some of these I find in this Bill; and by the light of the further experience we have had there is a prospect of their having more favour-consideration than they received at that time. There were points in respect to which the Board of Trade desired to go further, but we had not the courage to go further at that time, because we were endeavouring to substitute for the system which we thought had failed a system which was, in fact, a return to a still older system—namely, that which prevailed before the Act of 1869. There was in 1883 a very strong opinion in the country against any extension of official administration, but now experience justifies a further extension of it. There is a clause in the Bill which extends jurisdiction from £300 to £500, and I may say it was my desire that the limit should be £1,000. Experience amply justifies the extension of the limit. Although the Bankruptcy Act of 1883 has not brought all dividends up to 20s. in the £1, an effect we cannot expect from any legislation, it has had the effect of reducing most materially the percentage of costs, and the number of very small dividends has greatly diminished. These results have been more marked in cases settled under official administration than in cases under the control of creditors themselves. I would go further, and I think experience justifies me when I say that, to insure full investigation, you must entrust inquiry to a public authority, and that you cannot rely on the public spirit or even the self-interest of creditors themselves. There is another point of considerable importance. That the debt of a petitioning creditor must amount to £50 is a condition which I should like to see altogether abolished. The limit was inserted in the Bill rather against the opinion of those who were advising me at the time. In every case it is necessary that an act of bankruptcy should have been committed, and that being the fact, every creditor, however small his debt, ought to be allowed to bring his case before the Court. The interests of creditors demand that all cases of insolvency should be at once investigated, and that matters should not be allowed to goon until the whole of the estate is wasted or lost. The present limit of £50 is based, as far as I' know, on no sound principle. In the vast majority of bankruptcies there are no creditors who are owed as much as £50. The law, it is true, provides that several creditors may combine so as to reach the prescribed limit, but it is not often easy for them to take advantage of the provision. It is difficult, for example, when the creditors are scattered over the country, and live at long distances one from another. The change proposed in the Bill is, therefore, one which I heartily approve. The question of the suspension of discharge is more difficult. I agree with some hon. Members who have spoken as to the insufficiency of this suspension of discharge as a penalty. The Judges have been extremely lenient in exercising the discretionary power which they enjoy, and I think the House might well say that the power must be exercised and no longer be discretionary. I also agree that in many cases the suspension of the discharge is hardly a penalty at all, because the undischarged person finds it possible to carry on his business in another name, and in that way to evade the law. But I am bound to say I do not know any other penalty that can be substituted, and I should be inclined to take it for what it is worth, so far altering the law as in some cases to remove the discretion that rests with the Court. I think the hon. Gentleman has gone to extremes in the extension of the penal clauses, and that some of the offences for which it is proposed to make bankrupts liable to 12 months' imprisonment hardly justify so heavy a punishment. That however, is a matter which can be considered in Grand Committee, and though, in regard to that particular point, I differ from the hon. Gentleman, I must say it does not affect the value of the Bill. There is only one other point I wish to refer to, and that is with regard to the appointment of special managers. It is now proposed to give an independent power to the Official Receiver to make such appointments. When, on a previous occasion, this matter was discussed in Grand Committee, it was dealt with from a rather different standpoint. It was then urged on behalf of creditors that Official Receivers should have the right in every case to appoint special managers. I am prepared to consider the arguments in favour of that proposal, but at present I regard it with some distrust, as the result would be to multiply officials and expenses. The Official Receiver must have a great deal of discretion in the matter, but it may make him inclined to throw some of his duties on the special manager, and thus create two offices and two salaries for the duties which ought to be performed by one. But on the whole I regard the introduction of this Bill with great satisfaction, and I hope it will be sent to the Grand Committee.

*(4.4.) MR. J. R. KELLY (Camberwell

I regret that I cannot support the Second Reading of this Bill, and I must add that I think measures of this kind should be undertaken by the Government if they are to be undertaken at all. No doubt the Bankruptcy Law is a matter of vital importance to the mercantile community. One hon. Member has twitted the lawyers in this House with taking part in the discussion, but I venture to think it is almost impossible for a layman to deal with a Bill of this kind. The fact of the matter is that if hon. Members had time to go through the Bill as carefully as I have done they would agree with the hon. Member for Stockport, who described it as a measure for the indefinite multiplication of small bankruptcies, and see that the only people who would gain by it would be the blackmailers and the money lenders. The right hon. Gentleman the Member for Birmingham has called attention to the fact to one section which has not been discussed, although it is a very useful and that is the proposal, to extend the limit of cases for summary administration from £300 to £500. I think every one agrees that that would be a useful extension, and if this Bill were simply limited to strengthening and extending the provisions of the admirable Act of the right hon. Gentleman opposite, I should be happy to support it. But this is an altogether new Bankruptcy Act, based upon principles which this House never yet has sanctioned, and which I hope it never will sanction. I agree with the hon. Member for Stockport in his views as to the compulsory examination of debtors, and I think that the effect of Clause 22 will simply be to force them to commit perjury, inasmuch as they will have to choose between admissions which, as the indemnity is to be withdrawn, may lead to their own conviction, and stating what they know to be false; and that is a position in which I am sure the House would not desire to place any man. Throughout this discussion there has been, to my mind, a very strange fallacy. It is that everybody has supposed that creditors are a wonderfully innocent set of people, who are imposed upon by a wicked set of debtors, with no sort of possibility of refusing to give credit, and often with no idea of giving credit, while it is an undoubted fact that they must know perfectly well when the retailer is carrying on a risky trade, and that they are giving the credit in order to cut rut business rivals. The fact of the matter is that 99–100ths of the bad debts made in this country are made through the recklessness with which credit is given, and with the knowledge that there is little chance of the debt being paid in full. But creditors well know how to protect themselves, because in many trades there is a discount of 75 per cent, given for ready money. For instance, it is notorious that gaseliers are sold at a discount of 60 per cent, for cash, and, therefore, whore an estate pays 5s. in the £1 the creditor is perfectly safe. Now I will give my reasons for saying that this is a new Bankruptcy Bill altogether. I am not at all satisfied with Clause 2; I think it would do no good whatever. I do not know of any case in which a trader would take any real trouble to follow a debt of £50, but I have known many cases where they have not taken the trouble to follow a debt of ten times that amount. Well, if they will not take the trouble for a debt of £50, they would not be more likely to do so in the case of a £20 debt, and I view with considerable anxiety and doubt the suggestion that advantage would accrue to the public generally from having an enormous number of people liable to be made bankrupt at any time by a person to whom they owe £20. Indeed, the principle might be carried further, for the hon. Gentleman who introduced the Bill boldly stated that he could see no virtue in any limit. But those who know anything of County Court procedure must be well aware of the enormous labour such a reduction of the limit would throw on the County Courts, and the waste of the small estates which would ensue. Again, I think a most extraordinary proposal has been made, that a person who is not a creditor, and has nothing to do with the bankruptcy, shall, upon payment of a fee, be able to examine the accounts, and take whatever extracts he likes from them. Upon what principle should a man, perhaps a rival in the trade, be able, on the payment of a few shillings, to find out who are the customers of the debtor, and at what prices he sold his goods? I fear improper use would be made by rival traders of that power. But I pass from that and come to the chief provisions of the Bill, which are to be found in Clauses 9 and 10. In passing, however, I may point out, in regard to Clause 8, which debars persons from acting as Trustees when once they have been removed from a similar office, that it would act very unjustly, as sometimes a Trustee is removed simply for neglecting his duties, in consequence of ill-health, and yet by this Bill he will be for ever prevented from taking a similar position. And now, as to the proposals affecting bankrupts' discharges, I think it is a most astounding proposal that unless a bankrupt's estate shows 10s. in the £1 on the unsecured liabilities the discharge must be suspended for five years. According to that proposal it does not matter in the least how far the bankruptcy has been caused by the action of the bankrupt himself, or his partner, or of a customer, over which the bankrupt had no control, nor whether he has struggled honestly to pay his creditors 9s. in the £1, or has tried to cheat them and has not paid them 9d. Under any and every circumstance he is to remain an undischarged bankrupt for five years. There must be many cases in the knowledge of hon. Members in which a man has taken a large contract, and subsequently, through a strike, the price of labour and material has gone up and he has been ruined. Yet, under this Bill, a man who fails through no fault of his own will have his discharge suspended five years unless he can pay his creditors 10s. in the £1. Then, again, a penalty is to be inflicted if a bankrupt has not taken steps to acquaint himself with his true financial position within three years immediately preceding his bankruptcy. But does every Member of this House know his true financial position? Why, there must be thousands of men in this city who speculate in produce, and are at any time unable to ascertain their true financial position. A frivolous defence to an action is also to be constituted an offence under the Bill, but it is not stated who is to decide whether a defence is or is not frivolous. It would hardly be fair to throw the onus of deciding this on the County Court Judge, who has only a few of the facts before him, considering the severe consequences which by this new Act the offence would entail. Again, it is proposed that when a man applies for his discharge he shall be called upon to consent to judgment being entered up against him for the balance of his debts, and this judgment is to be enforceable, not as now only by leave of the Court, but at any moment which the Trustee may select. I am afraid that such a provision might work very unsatisfactorily, and that it might be used vindictively by a rival trader who happened to be Trustee of the estate. But, of course, the real point of the Bill is Clause 10, which says that if a man brings on his bankruptcy by rash and hazardous speculation or unjustifiable extravagance of living, or within three months preceding the date of the receiving order, gives an undue preference to a creditor, or is guilty of any fraud or fraudulent breach of trust, he is to be liable to 12 months' imprisonment, with or without hard labour. Therefore, a man who speculates, say, in produce, if successful will be honoured, but if unfortunate he will be imprisoned. A man who, on the verge of ruin, pays back money lent to him by friends or relations will get 12 months' imprisonment; but a man who gives a bill of sale, and so cheats his creditors of the price of their goods, and his relations of the moneys they have lent him, will not be punished. As for a fraud or fradulent breach of trust, I thought they were already offences under the existing law, and I should think that any man guilty of such an offence would be lucky to get off with only 12 months' imprisonment. We have heard a good deal about foreign codes, but it ought to be borne in mind that these codes have always made the strongest distinction between cases of insolvency and bankruptcy. If in this Bill a similar distinction were drawn perhaps I should not oppose it. But in this Bill you make a series of new offences, and entirely remove that discretion which it is so necessary to leave to the Judges in these matters. Moreover, the Bill actually names a minimum instead of a maximum penalty, which is opposed to the principle of all modern legislation. The fact of the matter is that this is a Bill favoured by Chambers of Commerce, and it treats debtors as criminals, sending them to prison for acts which have never been deemed to be offences against our law at all. We are not here to study merely the opinions of Chambers of Commerce. We must look to the public interest generally, and, therefore, in order to enter my protest against the Bill, I beg to move "That the Bill be read a second time this day six months."

Amendment proposed, to leave out the word "now," and at the end of the Question to add the words "upon this day six months."—(Mr. John Kelly.)

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

*(4.26.) SIR J. N. McKENNA (Monaghan, S.)

Although I second the Amendment, I quite recognise that this Bill contains many valuable clauses, and if it goes upstairs I hope it will pass through the Committee in a form which will retain those clauses while the more objectionable features are eliminated, which the hon. Member who last spoke has pointed out. There are persons who give credit, perfectly well knowing that the trader is practically insolvent. We all know there are cases in which 50 per cent, discount is allowed on ready money transactions, and this class of trade is particularly prevalent among the small shopkeepers, who not only get goods, but also get money on credit on most onerous conditions. Now, Sir, my principal objection to the Bill is that it provides no remedy against fraudulent creditor. The fraudulent creditor is one who advances, say, £50 and obtains interest at the rate of 100 or 120 per cent., and who, having had back two or three times over the money he has lent, nevertheless appears as a creditor at a meeting of the general creditors of a bankrupt, who, perhaps, in consequence is only able to pay 1s. or 2s. in the £1. Now, Sir, I will make an offer to the hon. Gentleman who has introduced this Bill, and that is that if he will undertake in Committee upstairs to introduce or propose a clause which will provide some legitimate relief against the usurious creditor and prevent that creditor from getting anything more than the amount duo to him with reasonable interest on the money he has advanced, I shall be perfectly satisfied to see the Bill sent upstairs. The hon. Gentleman the Member for Sligo (Mr. P. McDonald) has expressed a hope that the Bill may be extended to Ireland, and for my part I should like to see any good measure that would be popular with the Irish people extended to Ireland; but it should be remembered that the sympathies of the Irish people are in the main with the debtor. My sympathies, however, are not in the main with the debtor; they are divided between the debtor and creditor; but I know that anything which would accentuate the punishment of the debtor, which is now in the hands of the creditor, to inflict would be most unpopular in Ireland. The only point I desire to insist upon is this: that this Bill ought not to re-appear in the House without bringing with it some counterpoise to the enormous strength of the creditor to enforce an usurious contract.


I think, Sir, the discussion we have had on the Second Reading of this Bill has been of a very-useful character, but the measure proposes alterations in the Act of 1883 which it is essential should be carefully considered by a Committee upstairs. The difficulty the House is in with regard to a measure of this kind is this: that, in a Bill proposing to amend so large a body of the law as that which relates to bankruptcy, while there are a number of provisions that are obviously good and reasonable and which the House may confidently be asked to support, there are also a number of proposals which can hardly be said to partake of that character. My hon. Friend, who moved the Second Reading of the Bill has put in the forefront of his argument references to Clauses 21 and 22, with regard to one of which it can be said that it is quite obviously a reasonable proposal, and with regard to the other that there is a very strong balance of opinion in its favour. The 21st clause is rendered necessary by the fact that there was a mistake in drafting the Bill of 1883, which did not notice the terms of the Debtor's Act of 1869; while in Clause 22 a provision of the present law is repealed which protects a man from prosecution when he is the first to reveal an offence under examination. This is a serious question, deserving of careful discussion; but I believe the balance of opinion is strongly in favour of the Bill before the House, provided it sufficiently protects the man who, under compulsory examination, reveals an offence he has committed. The proposal in the Bill does as much as is reasonable for the protection of a man who has been compulsorily examined, and is the first to reveal one of the offences specified in the sections referred to. The Attorney General and myself have had, since we came into office, to consider whether a great criminal should escape whoso crime is revealed in a compulsory examination. But there are a large number of proposals in the Bill to which grave objection ought to be taken. It has been said that the Government look with friendly eyes on this Bill as far as some of its provisions are concerned, and would be willing to see it sent to a Grand Committee for further consideration; but the Motion which has been made for the rejection of the Bill makes it incumbent on me to say something as to the proposals it contains. I hope that my hon. Friend who has moved the rejection of the Bill will see that the questions on which he has expressed so strong an opinion are, after all, questions that may well be relegated to the consideration of a Grand Committee. There are a few suggestions I should like to offer to the promoters of the Bill. The hon. Gentleman who introduced the measure has stated that it comes to this House backed by the authority of the Associated Chambers of Commerce, and supported by a large number of commercial gentlemen who think its passage would be of great advantage to them. If this be so, I can see nothing unreasonable in the proposal that before this Bill is allowed to go before a Grand Committee a careful Memorandum should be prepared showing the changes it proposes to make in the existing law; otherwise it would be extremely difficult for the Committee, at a brief notice, to pick out those questions which will require the greatest amount of consideration. I will give the House an illustration of what I mean. In the very first clause of the Bill there is a limitation of the present law which is of extreme gravity, and will require great and careful consideration. In section (b.) of that clause, it is provided that a man shall commit an act of bankruptcy if by himself or through any other person he informs any of his creditors that he has suspended, or is about to suspend, payment of his debts. As the law stands at present, a man would commit an act of bankruptcy if he gave notice to his creditors that he intended to suspend payment. It is not necessary that the notice should be in writing, but the Courts hold that it should be a definite notice upon which the creditors can act, and that a mere casual notice shall not be sufficient. The effect of this section would be to alter the law so as to make information given to a creditor through any one else as to a suspension of payment sufficient to constitute an act of bankruptcy. I do not propose to discuss in detail whether this would be a good alteration or not, but I would point out that the Members of the Grand Committee would not be able to address themselves to the discussion of this Bill, unless they have before them an exact indication of the way in which the present law would be altered. In regard to the main parts of the Bill, my hon. Friend who has opposed it felt called on to say what in his judgment were its main provisions and its principle. He pointed to the section referring to the suspension of the order of discharge and to the creation of a new offence. With regard to the section dealing with the order of discharge, the hon. Gentleman pointed out that the law would be strengthened by requiring that the assets of the debtor should be equal to 10s. in the £1 on the amount of his unsecured pebts. That would be a large alteration of the Act of 1883. The point was discussed by the Grand Committee on the Bill of 1883, the authority of which Committee has by no means been exaggerated, and it was resolved that the 10s. should be struck out. The House has had no reason why the 10s. should be introduced. The effect of the Act of 1883 has been to improve the procedure in bankruptcy, and to increase the amount of assets; and it would require some strong reason why failure to achieve the 10s. should be an offence which would oblige the Court to suspend the order of discharge. So much for Section 9, which deals with this matter. The next clause, Clause 10, is undoubtedly a very important clause, and it appears to me that it is open to the most serious objection. It relates to new criminal offences, and is most curiously worded. "Where it appears to the Court on the Report of the Official Receiver that a bankrupt has done any of the following things" then the things are enumerated "he shall be deemed guilty of a misdemeanour." That is not an accurate way of dealing with the matter. It should be if a man has done any of these things the Court should be empowered to order a prosecution, and then you are to prosecute, the charge against him being that he was rather rash, or entered into an unjustifiable speculation. It is said that one reason for proposing this Bill is that the County Court Judges do not exercise their authority strictly enough. Why is that? Because they do not think the offence has been committed. To refer a question of that kind to a jury would, I think, in a great many cases be productive of serious injustice. But the next part of the clause is still more remarkable. It deals with the question of undue preference of any creditor—an extremely dangerous thing to make a criminal offence. As if that were not enough, Clause 13 of the Bill is intended to be read with that relating to undue preference, the two together constituting a sort of constructive offence of undue preference, for which there is no justification whatever. After so long a debate as we have had on this Bill, it was desirable that something should be said from this Bench on the subject. The Government are quite willing that it should go to the Grand Committee on Trade; but I hope my hon. Friend will accept the suggestion to circulate a Memorandum before the Bill is submitted to that Committee, and that he will look to those clauses which have been commented upon this afternoon, with a view to seeing whether he himself does not recognise that further Amendments might be made. I hope my hon. Friend will allow this Bill to be read a second time and not press his Amendment.

Question put, and agreed to.

Main Question put, and agreed to.

Bill read a second time, and committed to the Standing Committee on Trade, &c.