§ Order of the Day for the Second Reading read.
LORD BROUGHAM, in moving the second reading of this Bill, observed that it 820 was one of the series of measures which was found necessary for assimilating in some respects the laws relating to trade in Scotland with those of England. Great inconvenience had been experienced for a length of time in consequence of the differences in the two systems, and a noble Friend near him (the Earl of Eglinton) had on a recent occasion made a statement, to the clearness and ability and temperance of which even those who least agreed in his conclusions would feel disposed to do ample justice. Amongst other things the noble Earl referred to the great hardships which Scotland suffered by legislation respecting testamentary execution and the probate of wills, and stated that, in consequence of an oversight, a difference had been made in this respect between England and Scotland; probate or letters of administration in England or Ireland only being requisite to give the will effect in Scotland as regarded shares in bank and railway and similar stock; whereas in Scotland it was necessary for the execution of the will in England or Ireland, besides the probate or administration in Scotland, to take out probate or letters of administration in Canterbury or York and Armagh or Dublin. But that was not the only hardship experienced in Scotland from the difference in the law; for their Lordships were probably aware that in the year 1835 a great change took place in the law respecting arrests in execution for small debts. By that Act the power of arresting for debt, where such debt did not exceed 8l. 6s. 8d., was abolished; but what was the effect of it? According to one estimate 96 per cent of the small debts before the passing of that Act were recoverable, and by another estimate 80 per cent, the difference in the estimates being that one was calculated upon the debts obtained after judgment and the other upon those obtained without judgment; whereas after the alteration in question that state of affairs was entirely reversed, 96, or 80 per cent, being the proportion of debts rendered absolutely bad and irrecoverable by the creditor. Now, if they contrasted that with what followed upon the abolition of the arrest for debt in England, they would find that the year after the Bill of 1843, brought in by his noble and learned Friend (Lord Lyndhurst), abolishing arrest for debt under 20l., the table of their Lordships' House was loaded with petitions from retail traders in London and elsewhere, who complained that they would be ab- 821 solutely ruined by the Bill, which had been passed without due precaution; and the House instantly appointed a Committee, over which his noble and learned Friend presided, which Committee gave the petitioners the most complete redress, and perfectly satisfied them by the improvements immediately made in the law. It was absolutely necessary to abolish imprisonment for small debts; but the Act abolishing it in England having been passed without due precaution, so as to injure the retail traders, an immediate remedy had thus been applied. Such was not the case in Scotland after the passing of the Act of 1853 abolishing arrests for debts not exceeding 8l. 6s. 8d., and the retail traders bitterly complained of the omission; for, although 8l. 6s. 8d. might seem a small debt in any single instance, it constituted a very large proportion of debts due to retail dealers. He was now about to refer to a similar hardship, a grievance, which at present existed in Scotland from the imperfect state of the law, and which the Bill now before their Lordships was intended to remedy. Nothing could be more unsatisfactory than the Scotch bankrupt law as it at present stood. He had on a previous occasion during the last Session pointed out its defects in detail, and he would now mention one or two particulars in which it differed widely from and formed a contrast to our own. Looking at the discrepancies and deficiencies of the law as the result of inattention and oversight on the part of the Legislature, the remedy he would himself apply to that inattention and those acts of carelessness would be that which was recommended by the late Lord Langdale, whose name he never mentioned without bearing tribute to his great ability and, above all, to his sound judgment—a man never led away by vain speculations and theories—and he had suggested the necessity of appointing a Minister of Justice. In that opinion he (Lord Brougham) entirely concurred; he thought the appointment of a Minister of Justice would be of the utmost value; but he did not mean one who would be incidentally a Minister of Justice, one who, like his noble and learned Friend on the woolsack, had an immense weight of public business cast upon him, who was the Chief Judge of the Court of Chancery, who presided over their Lordships in that House, and whose time was taken up to no inconsiderable extent in hearing appeals brought before that House, but he meant a Minister whose sole occupation should be to superin- 822 tend the administration of justice, and, above all, to give his attention to improvements in the law of the United Kingdom. Had this country possessed such an officer, the discrepancies to which he had adverted could never have been found in our laws, and the delays of which so much complaint had been made would never have taken place—he meant the delay of ten years in abolishing the Masters' offices in the Court of Chancery—a great step in reforming that court; but he was by no means certain that further great changes and amendments were not needful. The plan for the abolition of the Masters' offices was in a state of perfection in 1842, when one of the Masters (Mr. Brougham) had propounded it in detail with Lord Langdale's full concurrence; and yet for ten years afterwards did the Court of Chancery labour under the disgrace, and the suitor under the misfortune, of having these offices continued. His noble Friend (the Earl of Eglinton) had recently adverted to the office of Lord Advocate. Anything more anomalous than the present condition of that office he could not imagine. He was not going to enter at all at large into that subject, but only to remind their Lordships that the Lord Advocate was in Edinburgh, that he was an Edinburgh man, that he was a barrister at Edinburgh, that he was in the Parliament House at Edinburgh, and that he was so mixed up with the profession there that he could not get out of the trammels which bound him to it if he would. The result was inevitable, that in anything laid before the Lord Advocate, the Lord Advocate did and must lean towards Edinburgh, and towards the Parliament House. How, then, must it be with him when Edinburgh stood alone—when the interests of all Scotland and the interests of Edinburgh were different—when, at all events, there was the greatest possible desire for certain measures throughout the country everywhere but in that one part to which the Lord Advocate belonged? It was easy to see. The Lord Advocate, with all the disposition to do justice in the world, with the most perfect freedom from all undue motives, would lean towards Edinburgh and towards the profession. In making these remarks, it was scarcely necessary for him to say that he did not impute anything improper in the conduct of his most excellent and learned Friend the present Lord Advocate, with whom and whose family he had been in habits of intimate friendship for more than half a century, than whom and whose 823 family there existed neither in England nor in Scotland any persons more honest, more virtuous, more enlightened. All that he wished to impress upon their Lordships was, that it was likely, in a Bill such as that to which he asked them to give a second reading, that they would find themselves thwarted by the Edinburgh influence. By the Edinburgh influence he did not mean the general trade of Edinburgh, but only that trade which was driven in the Parliament House, and upon the present subject, even that body was not unanimous. Moreover, reverting to the subject more immediately before the House, he must beg to remind their Lordships that everywhere else there was a strong feeling existing in favour of this most salutary amendment of the law. Their Lordships would see of what importance it was to give every facility to trading operations, and, as far as was practicable, to improve the laws which regulated the commercial dealings of the various classes of the community in this country. The petitions which he had presented to the House would convince them of the greatly increasing trade between England and Scotland; one of those petitions being signed by no less than 224 great firms in the City of London who carried on trade with Scotland, the first five of those firms being engaged in commercial dealings involving annually in the aggregate 5,000,000l. sterling, and one of them having transactions which led to 14,000 bills of exchange in a year. There were also petitions from Bradford, Leeds, Manchester, Sheffield, Liverpool, and Birmingham, and in Scotland from Glasgow, Aberdeen, Dundee, and other places, calling on the House to remedy the evils which they described, and praying for an assimilation in the commercial laws of the two portions of the kingdom. In other places in Scotland where petitions had not been adopted public meetings had been held in the course of the past year; so that it was plain the subject was attracting general attention, and called for legislative interference. But he would now inform their Lordships what were the leading features of difference between the bankrupt law of England and Scotland. In Scotland, in cases of bankruptcy, a trustee was appointed, who answered in some respects to our assignee, but was without the control of the court under which our assignees acted. In Scotland the trustee was the sole judge; no proof of debts was required before a public court, before the sheriff, or before the Lord 824 Ordinary; the trustee alone decided whether the debt claimed was due or not, although from him, no doubt, there was a right of appeal. The trustee was chosen by the creditors, who were canvassed for his election as constituencies were canvassed by a Member of Parliament. There were persons in Scotland who drove the trade of a trustee, and a lucrative trade. These trustees called themselves accountants, and were, generally speaking, men of respectability; but he could not but remember an old Guildhall saying, which might possibly apply to some of them, that when a man was produced as a witness who was asked what trade he was, and who replied that he was an accountant, it used to be said that this meant, he was one who would give no other account of himself. In many cases the gibe might be founded on fact; but he did not deny that the body in Scotland were generally composed of very respectable men. The appointment of a trustee, however, was in Scotland a matter of canvass, and every means were resorted to in order to obtain the majority that the law required. The consequence was, that every sort of traffic took place between the bankrupt and the trustee. The latter could hardly help leaning towards the bankrupt, who had given him every assistance towards being appointed. The result very often was, that the bankrupt's nominee was appointed the trustee, and thus the bankrupt virtually became trustee of his own estate. The system of electing trustees by the creditors had been ably exposed by the author of a pamphlet on the reform of the bankruptcy law of Scotland, who said:—
The election of the trustee lies wholly with the creditors, a majority in value prevailing when strictly regular claims have been produced. Under this system, as presently worked, it is impossible to say that the best-qualified candidate is always or even generally preferred. The most uncertain of all uncertain things is the choice of a trustee, or the result of a contest in court for the office. Influence in obtaining votes and activity in canvassing are not always guarantees for ability and impartiality. Creditors very often experience great annoyance in the exercise of their votes, and, so far from being benefited and protected by the privilege which the law confers, they are often involved in vexatious competitions, and outwitted by the manœuvres of law agents, or the collusive partisanship of the bankrupt himself. It is not required by the present law of Scotland that a trustee shall possess any professional or other qualifications, and he is often chosen on account of his losses by the bankruptcy or other considerations wholly unconnected with the essential circumstance of his fitness for the office.825 The trustee, in fact, might be as ignorant of accounts as of law, and yet might get himself chosen by a majority both as accountant and judge. Acting as a judge, he sometimes had an assessor in cases of great difficulty, and when he had, what happened? He knew a case in which a late learned Judge, who had now retired from the Scottish bench, once sat as assessor day after day for weeks. He gave his decision. An appeal was carried to the sheriff, and from him to the Court of Session, and thence to the House of Lords. This happened twenty-five years ago, but he remembered the case. All this litigation was paid for out of the estate by the creditors, and while it was going on there was a suspension of the distribution of the estate. Now, if this case had originally come before a Judge in bankruptcy, as proposed by the Bill, instead of being left to a trustee, the utmost delay would have been an appeal to the chief Judge of the Court of Bankruptcy. By possibility it might happen that a point of law might come up to the House of Lords; but since our Bankruptcy Act passed in 1831, there had been no instance of such a case having come to them.
THE LORD CHANCELLORsaid, that last year there had been one, and that was the only one; so that his noble and learned Friend's argument was in no way weakened by the fact.
LORD BROUGHAMThe Bill proposed to vest the jurisdiction in bankruptcy, not in a trustee elected by the creditors, but in a judicial officer. The sheriffs in Scotland were local judges, who could easily discharge, except in the two great counties, the duties of a judge in bankruptcy and insolvency, because by the last return it appeared that the total number of bankruptcies in Scotland, exclusive of Edinburgh and Glasgow, amounted to only 108, which gave only five or six cases in each year to each of the counties of Scotland. For Edinburgh and Glasgow separate judges would be appointed. This was the fundamental principle which the Bill was intended to establish; but there were other evils which it was proposed to remedy, such as the mode of going into the accounts and the administration of the estate. No doubt the law at present provided checks which, in the language of Mr. Douglas, an able and experienced accountant and trustee, would be admirable, if it were not for one unfortunate fact—that they 826 were never made use of. Mr. Douglas said:—
Now all this would be admirable if it were not for one unfortunate act, namely, that it is never done. We do not hesitate to say that a very considerable portion of trustees presently acting under the bankrupt Statute are even ignorant of the fact of their being obliged to lodge copies of their periodical accounts with the bill chamber clerk, and of those who are aware of the circumstance few or none do it; this is, however, a trifling omission compared with some others.For example, there was nothing more material than that the examination of the bankrupt should be public, and this the Bill proposed to provide. At present the bankrupt was examined in a back room, while other business was carried on in the front room. He was examined, not, as he had better be, by the Judge, insufficient as he was, and such as he was, but by his clerk, and was not confronted either with his creditors or with the public. It might be said the trustee was controlled by Commissioners. But what did this amount to? Three creditors were appointed Commissioners by the body of the creditors, the same body that appointed the trustee; and not only this, but practically the trustee had no small choice in the election of the Commissioners, and it was they who had the control of his remuneration. The Commissioners were to say what poundage and commission the trustee should be paid, not on the sums distributed, but upon the assets paid in, and thus they awarded the amount of his compensation. In all difficulties where he ran the risk of being questioned, the trustee. appealed to the Commissioners, who then might cover him with their shield, he having had a share in their election; but where he was not likely to be called to account he acted on his own responsibility. And then, what did he do with the funds? The Bill proposed that trade assignees should be elected by the creditors, and that permanent official assignees should also be appointed, as in England, and attached to the courts. When, in 1831, official assignees were appointed in England to act with trade assignees, their Lordships would recollect the benefit conferred by that great and salutary change. In a short time upwards of two millions were collected by the official assignees, all which had been slumbered over by the trade assignees; and a gentleman, a London banker, then in the House of Commons, who supported the Bill, said, "Though I 827 support the Bill, our house will lose 5,000l. or 6,000l. a year by its immediate operation, for the sums lying in our hands will be distributed." In Scotland large sums in the same way were unclaimed in the hands of trustees, or, what is the same thing, their bankers. The trustee was not forced to distribute, and he slumbered over it. The trustee collected the assets, and lodged them in a bank at interest, and this interest was not carried to the credit of the bankrupt's estate, but to the private credit of the trustee. From beginning to end a system of abuse, or, more properly speaking, laxity—for it was rather laxity than corruption—existed. The importance of the subject could hardly be exaggerated, and it excited great and anxious interest both in England and Scotland. If their Lordships should agree to the second reading, he should propose that the Bill be committed pro formâ, in order that certain amendments might be introduced. The Bill had been printed and extensively circulated among legal and mercantile bodies in England and Scotland, and the result had been that he had received a vast number of suggestions for its improvement, with some of which he agreed, and with others he was at issue, especially as to the mode of choosing the official assignee. He regarded the appointment of this officer as the corner-stone of the Bill, which it was in his Bill of 1831 for England; and he also attached great importance to the system of granting the certificate, as altered a few years after by Lord Cottenham. It was a great improvement in the law that the certificate was removed from the hands of the creditors, and transferred to the Judge of the Bankruptcy Court. Every one of the arguments in favour of these great improvements in the English bankruptcy law equally applied to Scotland, if, indeed, they were not more wanted there. He must again express his sorrow that we had no Minister of Justice in this country, for a Bill of so much importance ought to have proceeded, not from an individual, but from the Crown. It was impossible for a Member of their Lordships' House unconnected with the Government to obtain for such a Bill the reasonable chance it ought to have of passing in accordance with the wishes of the mercantile community. If his noble and learned Friend the Lord Chancellor would consent, pro hâc vice, to act as Minister of Justice—if he could be induced to leave the delights of the Court 828 of Chancery—if he would tear himself away from it for a brief period, in order to make this sacrifice for the good of his fellow-countrymen—if he would take charge of this Bill as if it were, what it was not, a Ministerial measure, then he should be indeed delighted. He trusted that this appeal would not be made in vain—not that he (Lord Brougham) shrunk from any labour in connection with the Bill; he only shrank from the prospect of seeing so good a measure failing in his own hands, knowing his own insufficiency to do it justice.
§ Moved, That the Bill be now read 2a.
THE LORD CHANCELLORsaid, he was sure that their Lordships would all feel that no apology was due from his noble and learned Friend for the mode in which he ushered in this Bill to the notice of their Lordships. A most important Bill it was, and one to which he (the Lord Chancellor), though not a Minister of Justice, should unquestionably feel it his duty to give his best attention, and, in a great measure, his support. He should give his assent to the second reading; but his noble and learned Friend must not consider that in taking that course he was pledging himself to support the Bill in its integrity. His noble and learned Friend had stated—and as far as he (the Lord Chancellor) was informed, he believed that he had stated truly—that there were very great defects in the existing bankrupt law of Scotland, and he was himself entirely persuaded that very material amendments were called for in that law; but he was not prepared at the present moment to state precisely what might be the best mode of reconciling that country to the amendments which were necessary. He believed that the introduction of official assignees would be a step most extremely important, and in the right direction; and he believed that the giving to some court the power of granting the certificate, instead of vesting it, as now, substantially in the creditors, would also be a great improvement. But this Bill was the introduction, substantially, into Scotland of the whole body of the English law of bankruptcy, as it was embodied in the Act of 1849. Now, from what had passed upon the subject of the bankrupt law of Scotland, in the course of the last Session, he much doubted whether such an introduction of the English system in its entirety, as it was the object of the measure to accomplish, would be conformable to the wishes 829 or the feelings of the trading community of that country. He was not now going to enter into a discussion of the merits or demerits of the Act of 1849; he considered the country was under a deep debt of gratitude to his noble and learned Friend for his efforts to improve the bankrupt law of the kingdom; and in getting rid of the old system of bankruptcy in this country he conferred a very great benefit indeed on the community. He was reminded also, that the further alterations effected by Lord Cottenham, some ten or twelve years afterwards, by which the power over the certificate was transferred entirely to the Court, was another very great step. But his noble and learned Friend must pardon him for expressing the doubts which he entertained—doubts which he felt bound to express, although he was aware that he differed in opinion from his noble and learned Friend—as to the entire success of all the provisions of that measure of 1849. He would not trouble their Lordships with a parade of learning as to the origin of the bankrupt law. Down to a comparatively recent period the bankrupt law was in truth, little more than the administration by creditors of the estates of their debtors. That was substantially what was done, and it was, in fact, a matter entirely in the hands of the creditors. The effect of his noble and learned Friend's alteration, in the year 1831, had been to place this system under more effectual legal control; and although it turned out afterwards that the establishment of a court with four judges was more than was actually necessary, the substantial effect of the change was to place far greater power, in matters of bankruptcy, in the hands of a judicial tribunal than had ever been so vested before. This, be thought, was quite right, and the effect had been very beneficial. But the system had got to assume, since then, more and more of a penal character; and at the present moment the Commissioners who administered the bankrupt law exercised a very high penal jurisdiction. They had the power of sending parties to prison, in some instances for a year. At all events they had the power to send parties to prison for very undefined offences, and it was very difficult to define exactly what the Acts were which gave them that jurisdiction. They had the power also of giving what were called class certificates—those of the highest class certifying that the bankruptcy had not arisen from the misconduct or mismanagement of the trader; and there was a 830 second-class certificate to the man whose bankruptcy had been partly unavoidable and partly caused by mismanagement. He knew that his noble and learned Friend was very much wedded to the excellence of this system of class certificates. He confessed, however, that he entertained considerable doubt upon the subject; and lie knew that that doubt was shared by a very large portion of the Commissioners by whom the subject of the law of bankruptcy had been recently investigated. The Report of those Commissioners had only been placed in his hand about half an hour before entering the House that night, but in casting his eye over it he had seen that this was a subject upon which they were not agreed, and that a very large proportion entertained the doubts which he himself felt, as to whether the system of class certificates had been beneficial. On the other hand, he believed that in the City the opinion of his noble and learned Friend preponderated. [LORD BROUGHAM: It is almost unanimous.] At all events he doubted, as he had said at the beginning, whether the introduction into Scotland of the present bankrupt law of England, in all its new aspects, would be conformable to the wishes of any large proportion of the trading community of that country. There was a feeling there that by making the proceedings in bankruptcy a sort of quasi criminal investigation into the conduct of the party, the creditors would not be likely to receive so much as they might do under a different mode of examination. He believed that the proper course lay between the two extremes. But he also believed that when it came to be known in Scotland that his noble and learned Friend's intention was to introduce into that country the English law of bankruptcy in its entirety, there would be found to prevail a very strong feeling against it. He spoke not from conjecture. The petitions which were presented in the last Session plainly proved that although the people of that country wished to have the law amended, they did not wish to have it amended in an English sense. The Scotch bankruptcy law undoubtedly required amendment; and the present Bill for amending it was in such able hands that, whether it was carried out in its integrity or only in part, it was likely to be productive of so much benefit that he had not the slightest hesitation in saying, in agreeing to the second reading of the Bill, that the objects his noble and learned Friend had in view met 831 with his entire and cordial concurrence. The course proposed was an extremely reasonable one—namely, that the Bill should be committed pro formâ, and that it should then go through an investigation. No doubt, whether it was conformable to the wishes of the people of Scotland or otherwise would be made manifest before that time by petitions.
§ LORD LYNDHURSTasked if it was proposed to examine witnesses?
LORD BROUGHAMregretted that his noble and learned Friend (the Chancellor) had not answered the question whether he was prepared to take charge of the Bill.
THE LORD CHANCELLORwas of opinion that the Bill could not be better placed than in the able hands of his noble and learned Friend.
§ Bill read 2a, and committed to a Committee of the whole House on Thursday, the 27th instant.