SECOND READING. (Hansard, 14 July 1857)

THE LORD CHANCELLOR
, in moving the second reading of the Bill, said, that the object of the measure which had been sent up from the other House of Parliament was substantially to give to creditors of joint-stock banks that became insolvent the same relief as they would have against an ordinary bank when it became bankrupt. The law at present was in an anomalous condition with regard to these banks. If a joint-stock bank became insolvent, a shareholder might obtain a winding-up order, and the Master in Chancery, or the Chief Clerk of the Vice Chancellor, whose duty it was to wind up these affairs, had the power of making calls on all the shareholders in order to raise a fund to pay the creditors; but that was a proceeding to which the creditors were not parties; it was a mere proceeding of the shareholders inter se. The object of the present Bill was, as far as possible, to remedy this defect, to give to the creditors the power of taking care that in making the calls proper steps might be taken to seize the whole of the property of the shareholders if need be, 1425 in order to raise a sufficient sum out of which the creditors might be paid in full. For this purpose it provided, in the first section, that the creditors might summon a meeting, and, if two-thirds in value thought fit, they might appoint a person to represent them in the matter of winding up the concerns of the company. If the company had become bankrupt, then there was no necessity for the choice of a representative, because the assignee in bankruptcy would perform those functions. The second section provided, that where a company had become bankrupt, and there had been a winding-up order, the assiguee might proceed with it. Then there was a provision which gave to the representative the power to make any compromise, whether for the discharge of the liability of all the shareholders or of any one of them, and if the compromise were approved by a Judge, it should he valid and binding. Then there was a further provision of great importance. By the law as it at present stood, any creditor of a joint-stock bank, when he recovered judgment against the public officer of a bank, had a right to take out execution against any of the existing members of the corporation, arid if he were able to show that he had exhausted the resources of all those members in seeking to obtain satisfaction of his claim, then he might proceed against parties who were not existing members, but who had been so within the limit of three years. Practically this last had been found to be a delusive remedy, because it was a remedy only on the creditor being able to satisfy the Court that he had exhausted all reasonable means to obtain payment from all the existing members, and in a large joint-stock banking company that was almost an impossibility. In order to remedy this inconvenience, the Bill provided that where there had been a compromise entered into, such as he had already referred to, that was to be deemed proof that all reasonable steps had been taken to obtain payment from the existing shareholders. These creditors would therefore obtain a locus standi, whereby they would be in a position to enforce their rights against those shareholders who had ceased to be members of the company within three years. There was another provision to prevent the shareholder of an insolvent joint-stock bank from going out of the country without giving security for the repayment of the debt or of his share of the fund to be contributed. In the course of the last 1426 year or two there had been two memorable failures of joint-stock banks which had caused great disaster, and been the ruin of a great many honest and industrious depositors. The position the creditors of these banks was placed in was this:—they had the right to bring an action against the public officer of the bank, or in the case of a winding-up order, against the official assignee, and having recovered in the action, they might by scire facias get execution against any of the shareholders, and if that did not satisfy them, against another; and therefore, all the creditors who resorted to these steps might take any number of proceedings, and run a sort of race against each other as to who should obtain payment first. Now, it was said that the effect of the measure would be to do an injustice to those creditors who might have obtained a judgment by placing them upon a level with all the other creditors; but that was a charge which, in his opinion, the whole tenour of recent legislation, in relation to similar questions, tended to disprove. The Bill would have the effect of enabling two-thirds of the creditors to bind the remaining third to submit to a rateable share; but, at the same time, it was provided that the sanction of a Judge or master should be necessary to every compromise, in order to secure creditors against any injustice which might be done them. The Bill was, in point of fact, very similar to the one which had obtained their Lordships' sanction last year, and, although it might be said that at present there was a larger number of creditors who had obtained judgments at that time, he had already endeavoured to point out that no material injustice would be done to them.

§ LORD MONTEAGLE
said, that a noble Friend of his (the Earl of Donoughmore) had placed upon the paper a notice of his intention to move that certain persons who had petitioned their Lordships against the Bill be heard against it by counsel. The petitioners complained that the Bill would operate very unjustly towards judgment creditors in Ireland, because it would destroy the advantage which attached to a judgment in Ireland, where it operated as a mortgage on the debtor's property. He himself would not express any opinion upon the subject of that petition, but, as his noble Friend was unable to be present that evening, he hoped that the noble and learned Lord would not consider that he 1427 was stopped from making that Motion at a future stage of the Bill.

THE LORD CHANCELLOR
said, that he could not hold out any notion that he could concur in the prayer of the petition; but at the same time the noble Lord would not be prevented making his Motion at a subsequent period.

§ LORD ST. LEONARDS
said, he wished to point out to their Lordships the position of the creditors of the Tipperary Bank. These creditors believed that under an Act of Geo. II. they were entitled to lay hold of the whole of the real and personal estate of the bank shareholders, and they took measures to give them what they considered to be their rights. After very long arguments, however, at their Lordships' Bar, it was considered that they had no rights of the sort, for the Act of Geo. II. was repealed by an Act of the 6th of Geo. IV., which gave the creditors certain remedies against the shareholders of joint-stock banks, and did not enable them to take all the property. The law of England was quite clear. Not only might the shareholders themselves resolve to wind up the company, but the creditors might issue a fiat in bankruptcy against the shareholders. In Ireland it was otherwise; there they could not make them bankrupts. He (Lord St. Leonards) had certainly come to a different opinion; but since great doubt existed on the point, and it was the duty of the Government to-remove that doubt, and to give the creditors in Ireland the same rights as they had in England, he hoped their Lordships would take care in arranging for a compromise that they did not destroy the security which certain creditors were already in possession of by virtue of the judgments which they had recovered. It would be a great injustice to take away from them a security which in law amounted to a mortgage.