HC Deb 17 March 1913 vol 50 cc793-803

Order for Second Reading read.

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

The PRESIDENT of the BOARD of TRADE (Mr. Buxton)

This Bill has been a considerable time before the House one way and another, and I am anxious, if possible, to obtain the assent of the House to the Second Reading at an early stage of this Session in order that it may go to Grand Committee, where its various provisions will be well considered. I can assure the House that I shall be very glad to give great attention to any Amendments in reference to it. The Bill is a simple one, and I think I may safely say it is welcomed by the Chambers of Commerce and by the traders of the country. It is founded largely on the Report of a strong representative Committee which sat a few years ago and presented a unanimous Report. This Bill is founded upon that Report, supplemented, of course, by various suggestions of the Department itself and various other proposals which have been made from outside. The Bill was introduced originally in 1911 as a Draft Bill, not with a view of passing it then, but with a view of giving an opportunity to Chambers of Commerce and other persons interested of making representations in regard to it. I think, and have always thought, it a very useful and effective method of dealing with Bills of this character, because it enables the Bill on its reintroduction to be put in a more complete and acceptable form. Last season the Bill was reintroduced into the House of Lords, and passed the House of Lords after being subjected to useful discussion and consideration in Committee of the House of Lords. It was amended in some particulars, and has now come down to us in, I think, a very complete fashion. I do not, therefore, regret the delay that has taken place, because I think the result will be that we will have a Bill which is more effective and complete than otherwise, and that therefore it may be hoped will last longer without Amendment.

This Bill follows the line of the last great effective Bankruptcy Act of 1883, which was introduced by the right hon. Gentleman the Member for West Birmingham (Mr. J Chamberlain), and entirely altered in substance the system of administration of our Bankruptcy Law as it then stood, and it has been very effective and has lasted with very small amendments for something like thirty years. The Committee in their Report made reference to that Act and the amending Act of 1890 and they say that there was— no evidence of dissatisfaction on the part of the commercial community with the main features of the existing law and procedure, and, in particular, they report that the law and practice relating to the investigation of the conduct of debtors required no alteration. This Bill is not revolutionary in character, but it deals with various points that have arisen since and required amendment. The first proposal—and I am endeavouring as far as I can to use simple language, because I do not myself understand many questions dealt with in technical phraseology in the Bankruptcy Law—simplifies and facilitates proceedings in reference to the prosecution of bankruptcy offences, making them simpler and more summary. At present a bankruptcy prosecution can only be instituted on indictment, and when the Bankruptcy Court makes an order for prosecution it must be taken by the director of Public Prosecutions. Though all the circumstances have been already investigated by the Official Receiver and the Board of Trade and the Court, and the Court has made an order for prosecution, the particulars must be laid before the Public Prosecutor as a preliminary to bringing the matter before a magistrate. If the magistrate regards the case as one in which a jury are likely to convict there follows a prosecution at Quarter Sessions or the Central Criminal Court, and then a Bill is sent up to the grand jury and there is a trial by a jury. The present very lengthy, elaborate and costly process would be very well with regard to grave cases, and with regard to such cases the present procedure will continue to be used, but as regards minor offences under the Bankruptcy Law the magistrate or justices could properly dispose of a very large number of them, and from every point of view they are much better dealt with summarily and as soon as possible after the bankruptcy has taken place. We provide, therefore, for more expeditious procedure in the simpler cases to which I am referring, and we act in that matter on the recommendations of the Committee. The Bill proposes that bankruptcy offences may be tried by a Court of Summary Jurisdiction and that the officers or agents of the Board of Trade may be empowered to prosecute in these Courts, but if graver features appear in the case they will be taken in a different way. And in order to safeguard the bankrupt from any possible miscarriage of justice from this alternative procedure the accused will always have the option of trial by jury, or, on sentence of imprisonment, of appeal to Quarter Sessions. That is the first reform carried out in the Bill. It simplifies and makes more speedy action taken under the Bankruptcy Act.

Secondly, the Bill proposes to make punishable certain offences which wilfully contribute to the bankruptcy it self and to make punishable certain commercial offences which at the present time involve only the refusal or suspension of discharge of the bankrupt, ant which in the interests of the creditor ought to have greater prominence and ought to have a greater penalty attached to them. I would point out in regard to these matters with regard to the Bill as a whole that the honest and unfortunate debtor is in no way prejudiced by any of the Clauses in the Bill. The object is to hit the dishonest or evasive or reckless debtor by making the offences more punishable than at present. Against such a one the creditor deserves all the protection he can get. The offences that will be brought into the categories to which I have referred are these: First, when committed by persons engaged in business and trade not keeping proper books and accounts. That will not apply in the first instance, but after the first insolvency, and it will not apply to the smaller traders who cannot always be expected to keep books in the same way as the larger trader and where the omission is an honest and excusable one no punishment will be imposed.


How do you define small traders?


Cases where £200 or under is the amount of the unsecured liability. The second point is where a debtor fails satisfactorily to explain the disappearance of his assets within the preceding twelve months, and the third is where the insolvency is brought about by gambling or speculation unconnected with his trade or business. In each of these cases two years' grace is given and the obligation does not begin in the latter case beyond two years before the bankruptcy. The Bill includes a provision making it an offence for an undischarged bankrupt to engage in trade or business under cover of an assumed name, without disclosure of his case and of the name under which he was adjudged a bankrupt. There has been a good deal of fraud in connection with such matters, by a trader assuming a name, and not making his creditors aware of his position in the past.


What is to happen if he trades under his wife's name?


I presume, in that case, he would be trading under an assumed name. If he is made a bankrupt in his own name, and afterwards trades in his wife's name, that obviously would be an assumed name. The next point is in reference to transactions, otherwise than in his trade or business, in respect of the property acquired by the bankrupt. The law always held the right of creditors represented by their trustee over the bankrupt's assets extended to any property he might acquire subsequent to his bankruptcy up to the time the Court has given him his discharge. A clear distinction is now to be drawn between the transactions with third parties in respect of such property, according as they had or had not knowledge of dealing with an undischarged bankrupt. Where there is a bonâ-fide purchaser of the bankrupt's property—real or personal—for value and without knowledge of the bankruptcy, that will hold good as against the trustee. But where, on the other hand, a person acquiring or dealing with the bankrupt with regard to property is aware of his bankruptcy, he will not be protected as against the claim of the trustee. I think it is fair, in such cases as that, that he should have no claim to be protected by the law. Further, in the case of the second bankruptcy—this is a new proposal—the law at present gives all the assets to the creditors of the first bankruptcy. In future the creditors of the second bankruptcy will be allowed to rank equally with those of the unsatisfied claims of the first. Then there is one point in which we propose to do justice to the married woman in regard to bankruptcy, because at the present the married woman has a privileged position in regard to bankruptcy proceedings, and action can only be taken against her when trading apart from her husband. The Committee recommend, and we have adopted the proposal, that in future married women engaged in trade or business, whether separate from their husbands or not, shall be subject to the bankruptcy laws, and that judgment recovered against them should be available for bankruptcy purposes, and a Clause is introduced giving effect to these recommendations. There are other points of importance—one connected with foreign firms.

It was laid down, I think, in 1900, by a judgment of the House of Lords, that foreign members of firms resident abroad and doing business in this country could not be adjudicated bankrupts unless they voluntarily submitted themselves to the jurisdiction of the Court. That did not seem fair as between foreign and English traders and the creditors here, and it is proposed in future to extend the control of the Bankruptcy Court over foreigners carrying on business in this country through agents or partners, as if they were resident here. Then there is a point which has arisen in which it has occasionally occurred that a landlord, by means of a covenant for payment of rent in advance covering a period subsequent to that in which the bankruptcy has occurred has been able to distrain for rent. That in future will not be permitted, because it is clearly unfair to other creditors. Then there are provisions with regard to general assignment of book debts, which will generally be void unless registered. There is another point affecting moneylenders. Under the existing law, in the case of an estate being wound up, the moneylender is allowed to have his claim up to 5 per cent. interest, but any claim for higher interest will only become valid after other claims are met. But unfortunately, this has been a good deal evaded, and in mixing up capital and interest, and so on, the moneylender has been able to claim a very exorbitant rate of interest as an early claim. Clause 22 is designed to checkmate that. There are a good many other Clauses, some small and some important, dealing with the Bankruptcy Law, but I have explained the ones of the greatest importance and the ones to which the commercial community will give the greatest consideration. The Bill deals also not only with bankruptcy, but with questions of deeds of arrangement. These are very often useful alternatives and suitable alternatives to bankruptcy in dealing with insolvent estates, and where they are honestly and effectively carried out they are not only in the interest of the creditors, but also in the interest of the debtors as well, and there is no reason to believe that in a majority of cases they are not honestly and effectively carried out. The Committee, however, had considerable evidence that such deeds are frequently executed without consultation with the general body of creditors, and in many cases under cover of such deeds fraudulent results occurred, and you have not only the dishonest debtor but the unscrupulous trustees as well. It proposes to introduce safeguards, but it strongly recommends that they should not be brought under official control, and the Board of Trade have adopted the recommendations of the Committee. In framing this Section of the Bill they have done their best, without introducing official control, to secure honest administration by the trustees. Under the Bill creditors will be in a position to exercise much more effective control than they have done before. It is proposed that such deeds should not be operative unless a sufficient number of creditors approve of them. At the present time a few of the creditors are able to obtain a deed of arrangement very often in collusion with the trustee. In future the majority of the creditors will have to sanction such an arrangement before it can come into practical operation. We have also provided that security shall be given by the trustees, and they will have to render accounts of their proceedings under a penalty. At the present moment there is no specific penalty for not rendering accounts, and the result is that in a number of cases they are able to dispense with this practice to the detriment of the creditor. Another provision is that if the majority of the creditors desire it there will be an official audit. Such a provision may be expected to go some way to improve the efficiency and the honesty of these deeds of arrangement, and will guard against the class of persons who are very often responsible for such unsatisfactory arrangements. These are the main provisions of the Bill. There are a number of other Clauses, but I will not weary the House by entering more into minute details. I hope the House will allow me to obtain a Second Reading of this measure. All these other matters can be carefully considered in Grand Committee. I am anxious, as far as I can, to make this Bill one which will be generally acceptable to the commercial community of this country. I shall be very glad to listen carefully to any suggestions which may be made in Committee for the improvement of the Bill.


This is a very important Bill, and it will be received with great interest by the mercantile community. It contains provisions to deal with the extremely frequent case of an undischarged bankrupt again entering business and again, unfortunately, becoming bankrupt. I suppose this is owing to the difficulties under which a man labours when once he has been bankrupt. This is a matter which has created great difficulties in the past. There is the difficulty of people who have had bonâ fide transactions with an undischarged bankrupt, but not to their own knowledge. I notice there are important Clauses providing for this and providing particularly that an undischarged bankrupt who obtains credit renders himself liable to prosecution, which is no doubt an extremely proper provision to be inserted in the Bill, but we shall have to very carefully consider in Committee under what conditions it should arise. The main question with regard to the second bankruptcy of an undischarged bankrupt is one of great importance, and I hope we shall go very carefully into that question in Committee. There is also the question of foreigners with agents over here and acts of bankruptcy through those agents. That is a point of very great interest, and I should have to consider very closely how it is proposed to be provided for by this Bill. International trade has become more and more common, and the businesses of our own firms abroad and foreign firms here are becoming more and more interwoven, and we shall have to consider whether they do hardship to foreigners. There should be no sort of retaliation on our people who are trading in foreign countries. That is another question which will have to be looked into very carefully. I welcome the introduction of the Bill, and I congratulate the President of the Board of Trade upon bringing it in.


I agree with what has been said by the hon. Member for Yarmouth as to welcoming the Bill as a whole, though I confess it would have been better legislation if, instead of being an amending Act, it had taken the form of a consolidation of the Bankruptcy Laws.


I entirely agree about that, but it seemed to us to be better in this case to first get an amending Act through and then, if it is generally desired, have the Consolidation Act.

Sir F. LOW

I am glad to hear that it is intended to follow this up by a Consolidation Act, because the enormous number of references in this Act to existing enactments will cause a very serious complication in the Bankruptcy Law. That is especially so with regard to an Amendment of the Schedules. I wish the President of the Board of Trade to consider the provisions in Section 2 of the Act with regard to criminal proceedings. This Bill will enact that for the future criminal proceedings under Debtors Act and under the Bankrutpcy Act may be taken in Courts of Summary Jurisdiction. I have very grave doubt as to whether Courts of Summary Jurisdiction, especially those in country places, are Courts fit to adjudicate on matters arising under the Debtors Act, or under the Bankruptcy Law. These are matters which very often are very complicated and difficult, and it certainly is introducing a very great extension of the criminal law to give Courts of Summary Jurisdiction cognisance of matters of that kind. I especially draw the President of the Board of Trade's attention to the difficulties which will arise, or may arise, in cases of this sort with regard to appeals from Courts of Summary Jurisdiction. At the present time criminal matters come to the Court of Criminal Appeal in cases tried at Court of Sessions, Assizes, or at the Central Criminal Court, with regard to matters tried by Courts of Summary Jurisdiction, and the arrangements for appeal are most unsatisfactory.

A man cannot appeal to a Court of Sessions from the decision of a Court of Summary Jursidiction without entering into recognisances and getting sureties which make it impossible for a bankrupt to appeal to a Court of Quarter Sessions from whatever might be the decision of a Court of Summary Jurisdiction. That being so, it does seem to me that it is a very grave extension of the criminal law to allow Courts of Summary Jurisdiction to try cases of this sort, and I hope that when this case comes before the Committee it will receive very grave consideration indeed. There is not only difficulties of procedure, but also extremely difficult questions arise with regard to the type of offence and the necessity for a very careful trial in matters of this nature. With regard to the various other enactments in this Bill I would like to have said a few words, but as I understand from the President of the Board of Trade that he will hold himself open to suggestions during the course of the Committee, I will not trouble the House with them at the present time. I think all lawyers will be of opinion that matters connected with the Bankruptcy Law require very careful consideration and investigation at the hands of the Committee, who will have charge of this Bill. I quite agree that there are many great improvements of the Bankruptcy Law included in this Bill, and I hope that when it has been passed no unnecessary time will be lost in consolidating the Bankruptcy Law in an effective measure for dealing with this very important subject.


I congratulate the President of the Board of Trade upon having introduced a Bill containing a number of small amendments of the law, many of which will be well received by the persons interested. The provision making it an offence for a bankrupt to start trading under another name without disclosing the fact of his bankruptcy is a welcome innovation. I have in mind the case of a man who, after doing a long term of imprisonment for fraudulent bankruptcy, emerged from prison under the name of Samuel Morley, who was then a distinguished merchant in the City of London, and solely by the use of this name he was enabled to carry on business, and he again became bankrupt, with very large liabilities indeed. I think such an Amendment as that which is contained in this Bill will put an end to that kind of career. I wish to refer to the provision contained in Clause 2, providing that in certain cases the onus of proof in the case of a person being prosecuted for an offence under this Bill shall be upon him to discharge. I think that provision requires to be looked at very carefully in Committee, particu- larly having regard to the provisions of Clause 11 of the Debtors Act, 1869, as amended by this Bill. There are a large number of offences which are the subject of legal proceedings, and in each ease it is provided, with one exception, that the onus of proving innocence shall lie upon the debtor. There may be good grounds in some of these cases for shifting the onus of proof, but if it is suggested that the onus is placed upon the debtor because the prosecution was ordered by the Board of Trade or directed by the Court, I should like to enter my respectful protest against the onus being shifted in that way. I congratulate the President of the Board of Trade very heartily on proposing to bring in a Consolidation Bill. It is a thing which all lawyers desire, as well as all members of the public who feel any interest in the subject. That is one of the things for which the present Government deserve credit. They have in a large number of cases brought together law which lays scattered over many scores of Statutes and have consolidated it in one large and intelligent form, so making it more convenient to all persons whose business it is to study the provisions of those Statutes. I suggest there is room for improvement even in this Bill. The Government have shown by the methods adopted in this Bill that they know how to legislate clearly and intelligently. The First Schedule contains the provisions of Section 11 of the Debtors Act, 1869, as amended by subsequent legislation and by this Act, and it gives one at a glance the present law. The Second Schedule is also an excellent piece of legislation, because it tells one briefly, with regard to the Bankruptcy Acts of 1883 and 1890, what amendments it is proposed to make. You are told that certain words are repealed and that certain words are inserted, and, when it comes to a question of reprinting the revised Statutes hereafter, there will be no difficulty in presenting them clearly. Those are excellent examples of the way in which legislation should be conducted as a matter of form. There are some other Clauses which are not open to that kind of praise, and I hope they may be put in the same excellent form when the Bill is in Committee. I heartily support the Second Reading of the Bill.


I wish to join in the thanks expressed to my right hon. Friend for bringing in this Bill, and still more for his promise to follow it with a Consolidation Bill. At the same time I want him to give his attention to one matter. There are an immense number of undischarged bankrupts who are in business. I do not think these men are entirely to blame. We should make it easier for men who wish to conduct business in an honourable and straightforward way, but who have not been successful in their first venture, to go into business again. They have to undergo their public examination, and many of them do their very best to meet the wishes of their creditors. After the realisation of the assets and the closing of the estates these men, in spite of their desire to be straightforward and to go into business honourably, have not the courage to face a second public examination on application for their discharge. Clause 6, which already makes one alteration in the application of a bankrupt for his discharge, might be enlarged so as to give the Official Receiver or the Registrar power, if these men, in addition to complying with every requirement, paid their creditors a minimum dividend, to grant them their discharge without a public examination. I put that forward for my right hon. Friend to consider when this Bill goes into Committee.


The House seems in a considerable hurry to pass this Bill, which contains thirty-six Clauses. I confess I am not conversant with the Bankruptcy Law, and, not having had any personal experience of the Bankruptcy Court, I am not in a position to say much about the Bill. It apparently has the general approval of the business community as a whole, and the right hon. Gentleman has said that he will welcome any suggestions made to him in Committee. I would like to make one suggestion to him, and that is that he should not be in too much of a hurry to commence the Committee stage. The House is very readily giving it a Second Reading in a short space of time, and I hope that he will give ample time for the business community as a whole to digest the Bill. It is a measure of considerable complications for anyone not conversant with the law, and I hope there will be ample time for business people to consider any practical proposals they may think desirable to amend it.