HL Deb 23 July 1857 vol 147 cc235-45
LORD BROUGHAM

then rose, pursuant to notice, to call attention to the subject of the bankruptcy laws. He said that it was not his intention to enter at large, or indeed at all, upon the general subject of the bankruptcy laws. The subject, however, to which he was about to call attention was one of the greatest possible importance, and he therefore hoped that during the approaching recess his noble and learned Friend on the woolsack would devote some attention to it, with the view of devising remedies for the abuses in the administration of the bankruptcy laws, and for the defects in these laws themselves. His reason for calling attention to this matter was the proceedings that took place at the beginning of the present year, just on the eve of the last Session, at the great Conference of delegates from all the manu- facturing and commercial towns, but particularly from the great towns of Manchester, Liverpool, Birmingham, Leeds, Sheffield, Bristol and Hull; while Scotland sent delegates from Edinburgh and Glasgow, and Ireland from Dublin, and, he believed, Belfast. As this Conference was assembled under the auspices of the Law Amendment Society, over which he had the honour to preside, he was called upon to take the chair at its meeting, and he must do the gentlemen who attended it the justice to say that, during the four days and the four evenings which the Conference lasted, he could not discover the least ground of objection to any one part of their proceedings. The great number of delegates who were present, the great variety of opinions on the subjects which they had met to discuss, and the still greater variety of opinions that existed among their constituencies, had no effect whatever in producing any discord or anything like wrangling or contention, or any thing other than a calm, deliberate, and business-like consideration of the highly important subjects that had brought them together—which were neither more nor less than the grievances which they had to complain of with respect to the state of our mercantile law in general, and of no one branch of it more than that relating to bankruptcy and insolvency. Upon that branch of the law a highly important discussion took place, and most valuable information was communicated from various parts of the country;—opinions of great value were given; and the conflict of some of those opinions clearly showed how much these objects had been discussed in the local districts. A report had since been prepared, and presented to Government, of the various points of which they had cause to complain, with suggestions for their remedy. He (Lord Brougham) would take the liberty to observe that a body of men of this description was very differently situated from others in certain points of view. Upon the question of the existence of grievances they had every right to be heard with all possible attention, because it was for their benefit that all these provisions were made; everything was devised for their interest, and they, of all men in the world, were most concerned to know whether the law worked well or not. They might be greatly mistaken, the measures of relief they asked for might, or might not, be well advised; but as to the existence of evils, they were judges almost without appeal. He believed that some of the measures proposed by them were not adapted to give that relief which they sought, but they were clearly entitled to have these suggestions considered. He would shortly state the grounds of their complaints, and how far he was disposed to concur in the measures which they suggested by way of remedy. There was nothing on which the Conference was more unanimous than that the expenses attendant upon bankruptcy proceedings were grievously heavy. Taking an average of the bankruptcy proceedings during the last three years of which returns had been made,—namely, 1853, 1854, and 1855, (and he would omit the names of the towns in which they had taken place, because the delegates averred that the expenses were not so much owing to the law as to the officers by whom it was administered), he found that under 121 bankruptcies a sum of £90,000 was collected, while the amount distributed among the creditors was only £44,000, the remaining sum of £46,000 having been consumed by the bankruptcy proceedings. This arose mainly from the fact, that the salaries and expenses of administration were paid by fees. It was suggested that a portion of those expenses ought to be borne by the Consolidated Fund. No person was more strongly opposed than himself to the payment of officers of a court of justice and judicial expenses by fees upon suitors. But he made a very great distinction between litigation and administration, and while he would not listen to any argument for making the suitors pay for the salaries of the Lord Chancellor, the Vice Chancellor, the Master of the Rolls, and the whole judicial staff so far as they were employed in deciding causes, it was a very different thing when persons were employed in the administration of causes. In the one case all fees would be contrary to principle; in the other they might be allowed to be paid to a certain extent by those who benefited by the labours of the Court. He thought that the Commissioners and the higher officers of the Court of Bankruptcy ought to be paid by salary as in courts of justice, but that the payment of the administrative officers ought to be thrown to a certain extent upon the creditors. Their Lordships would be surprised to hear that the sum of £25,000 a year continued still to be paid as compensation to those Commissioners of Bankruptcy who by his Bill of 1831 were dispensed with, and who had not been otherwise provided for by legal promotion, and that the whole of this sum I came out of the pockets of the creditors in the Bankruptcy Court. It was utterly unendurable that after a lapse of a quarter of a century this compensation should continue to be defrayed by creditors in the present suits before the courts. The extent of the Bill which he had prepared did not go beyond transferring the charge to the Consolidated Fund of the compensation payable to the Commissioners whose services were dispensed with in 1831. The next ground of complaint was, that there were unnecessary officers in the courts of bankruptcy—the messenger, the accountant, and the broker. He doubted whether the services of the messenger could be dispensed with, or the office properly abolished; and although he had framed his Bill so as to dispense with the accountant and broker, he thought the messenger should still be kept, subject to the authority of the Commissioners in each case whether it were fit that the messenger should be employed or not. The next point was the office of official assignee, and on that the Conference insisted they had the greatest ground of complaint as to the manner in which they were paid, by a per centage on the assets of each estate. He found that there was no difference of opinion in the Conference as to the mode of paying that most useful and necessary officer. But there was the greatest variety in the emoluments of official assignees. In certain cases his profits, which were paid by commission, barely sufficed to pay the expenses of his office, and he was literally left without emolument, In other cases his profits amounted to several hundreds, and even to thousands of pounds. In two instances the official assignees were in receipt of £3,000 a year, and in other cases they obtained upwards of £2,000 a year, while in other instances they had nothing. He proposed that the official assignees should be paid to a certain amount by salaries and the rest in fees, which latter mode of payment would whet their zeal and maintain their activity in collecting the assets as effectually as possible. There ought, however, to be a maximum of income from both sources. Another complaint, which was not altogether without foundation, referred to the irregular attendance of the Commissioners. He strongly recommended the Lord Chancellor to look into this sub- ject, and after having obtained a return of their attendance during the last twelve months he trusted that his hon. and learned Friend would insist on a more frequent and regular attendance upon the part of the Commissioners. Great inconvenience and dissatisfaction arose, he believed, from the fact that the Commissioners in many instances lived at great distances from their respective courts; that in their anxiety not to miss a particular train in order that they might reach their residences at a certain time, the business before them was often postponed until the next day, and that great inconvenience to the suitor, witnesses, and all other parties concerned, was the result. He might also state that he found from returns which had been laid upon the table of the House that in one town 130 sittings in bankruptcy had been held in the course of a single year; while in another there had been 185; in a third 151; and in a fourth 705; but inasmuch as there were only 365 days in a year, he had been at a loss to account for the last-mentioned number until he had found that what was termed a "sitting" embraced the consideration of every one of the different matters which might have been brought before the Commissioner for decision. The fact was, he learned that those 705 sittings had been held in fifty-four days, so that not less than thirteen cases had, upon an average, been determined each day. The consequence had been the accumulation of the business to be done in a given time to an extent of which the suitors complained. Well might the courts present the scene which had been described to him as a scramble. On another point the Conference had made a suggestion, as to the propriety of which there could be no doubt whatever, namely, that a remedy should be applied to a defect arising out of the arrangement clauses, under which, according to a recent case, confirmed, he was sorry to say, by a Court of Error, there could be no assignment unless every article down to the very apparel of the creditor had been given up. There certainly ought to be some alteration of the law in this respect. He should next advert to the suggestions which had been made by the Committee to whom the Bill which he was about to present to their Lordships would probably be referred. They had expressed themselves as being in favour of permitting the estate of a deceased person who, if he had been alive, would come under the operation of the bank- ruptcy law, to be administered under that law; and they complained that under the present system a right of appeal was given from the Commissioner before whom a case had been heard, and who, having seen both the bankrupt and the witnesses, was likely to be the best judge as to whether a certificate ought or ought not to be granted, to the Lords Justices of Appeal, who would be in possession of no such advantages. The Committee had, therefore, suggested that an intermediate court of appeal should be constituted, which should consist of the Commissioner before whom the case had been tried and two of his fellow Commissioners. He might add, that another great objection which had been urged against the law as it stood was, that it made no distinction between traders and non-traders—an objection in the justice of which, however, he could not altogether concur. There was also a strong and general opinion expressed—an expression of opinion which did the greatest credit to their humanity—against all imprisonment for debt. Arrest on mesne process had long ceased to exist, and an approach had been made to the correct principle. That principle, he apprehended, was not to visit upon misfortune the punishment which was due only to misconduct. Where there had been fraud, or gross extravagance, or scandalous imprudence, or where the party had power but refused to perform his engagements, they might properly inflict a penalty; but if it could be so arranged that no person should be imprisoned for debt except, perhaps, for a short time previous to the necessary investigation taking place, a very great improvement would have been introduced into the law. Such were the principal recommendations of the Conference; and he had no doubt that the discussion which had already taken place, and the time which would be afforded for considering and further discussing those recommendations before the next Conference took place, would give rise to many other valuable suggestions; and so at last they might arrive, not indeed at a perfect measure, but at one that would be a great improvement upon the system which now existed. In the meantime he would ask permission to lay on the table a Bill embracing the recommendations he had just stated.

THE LORD CHANCELLOR

said, that the address of his noble and learned Friend suggested to his mind some very melancholy and painful reflections, as it must have suggested to the minds of all men, who like his noble and learned Friend were really anxious for the improvement of the bankruptcy law. Those distressing reflections arose from the fact that there was no one subject connected with the administration of the law which had received so much attention, and on which so many amendments had been made from time to time as that to which his noble and learned Friend had just drawn their Lordships' attention; and the result appeared to be that all the projects of improvement which had been brought forward since his noble and learned Friend sat on the woolsack, had left the bankruptcy laws in 1857 very little better than they were in 1831, when he (Lord Brougham) commenced the work of reform. The picture drawn by his noble and learned Friend would show that the whole job was to be done over again. Up to 1831 the administration of bankruptcy was rather a private affair. There had been Commissions in London and the country in which affairs were administered before an almost domestic court, inasmuch as the parties concerned had the power of nominating their own Commissioners. That system had worked very unsatisfactorily. Funds to an enormous amount got into the Bankruptcy Court, and the Commissioners' hands, and in some cases were never distributed in discharge of the bankrupt's debts. A general outcry was raised, and his noble and learned Friend (Lord Brougham) interposed and many great changes were effected by an Act then introduced, and which was in the main a very good one. However, experience soon showed that the machinery provided by his noble and learned Friend was much more extensive than it need have been. Commissioners were appointed under that Act, and a Court of Review was established, and that system proceeded for some time. Experience, however, at length showed that the Court of Review might be done away with, and as the members of that court fell off, one by one, their places were not filled up. Their duties were first discharged by the Vice Chancellor, and afterwards by the Lords Justices. The new system, which had been at first confined to London, was afterwards, in 1841 or 1842 extended to the provinces. Experience again showed that that was a system in which the machinery was far larger than it need be. Accordingly, some two or three years ago, he (the Lord Chancellor) obtained their Lordships' sanction to a Bill providing that as Commissioners in the country retired or died off, it should not be incumbent on the Crown to fill their places up, until their numbers were reduced to the point which ought to be considered adequate to the proper discharge of the duties they had to perform. But the law of bankruptcy had been added to very much since 1842. There was, first, the Bill of the Marquess of Dalhousie—a Bill providing bankruptcy proceedings in the cases of joint-stock companies. Then came the series of Acts called the Winding-up Acts; and next the Consolidated Bankruptcy Act, in 1849, which was supposed to put everything on a perfect footing. Yet that was the system which, it appeared from the statement of his noble and learned Friend, was now so much complained of, and justly complained of. One of the greatest inconveniencies of the present system was its expense. The expense of administering the estate of an insolvent person was found to be so large that a plan had for some time been very generally resorted to, of withdrawing matters from the ordinary tribunal, and having a settlement by agreement amongst the parties. He was not prepared to contend that an investigation, would not suggest some mode by which the expense of bankruptcy proceedings might be diminished. He had moved for returns which were then on the table, but not printed; and, in some respects, he saw his way clearly to a diminution of the expense. There were connected with the Bankruptcy Courts officers who went by the name of messengers, but who were in reality the functionaries who took charge of the property of bankrupts, and in whom considerable trust was reposed. He agreed with his noble and learned Friend (Lord Brougham) that it was necessary to retain those officers; but he did not think it right that they should hold offices that gave them emoluments amounting to nearly twice as much as those of County Court Judges; for he was told that the returns now on the table showed that some of the messengers were receiving £1,600 or £1,700 a year. That was an abuse which it came under his province to remedy; and he was in communication with the Lord Justices, with whom he should act on the subject. That must and should be altered; but he could not say that such alteration would effect any material diminution in the expense of administering estates in bankruptcy. It was wrong to say that the official assignees were remunerated by fees. They were remunerated in proportion to the amount they realised; and he (the Lord Chancellor) thought it was of great importance that in every case as much of the funds should be got in as possible, and he was afraid that the adoption of any other mode of payment than a per centage would only tend to diminish the amount of the assets. He was told that for the last year or two the emoluments of the official assignees had been very large; but when he first held the Great Seal a complaint was made to him that they scarcely received anything, and that complaint was well founded. It often happened that in times of very great mercantile prosperity like the present, there were very heavy cases of bankruptcy, which might, perhaps, be accounted for by the increased desire for speculation, to which that prosperity gave rise. As regarded those two heads which he had just named, something might be done; but he could not hold out any hope that he should be able to materially lessen the difference between the sum realised and the sum expended. His noble and learned Friend had also called attention to the way in which the duties of the commissioners were performed both in town and country. He could only say that when his attention was called to any dereliction of duty, on the part of any of those learned functionaries—and such had only occurred in one single instance—he took immediate steps to ensure the proper discharge of the Commissioners' functions. He did not know from what authority his noble and learned Friend spoke of the proceedings of the Commissioners in the country; but he (the Lord Chancellor) believed that in London the duties of the learned gentleman were well discharged. The establishment, as regarded Commissioners, was on a larger footing than it should be; but there they were by Act of Parliament. Should any of them die, or otherwise cease to be Commissioner, he doubted very much that the vacancy should be filled up. There were at present five Commissioners in London. It was not necessary now to determine what course should be taken when the number was reduced to four; but he was inclined to think that even four would be more than sufficient. As regarded what had been said about the Commissioners in the country not residing near their courts, he thought that any Commissioner who did not live within a convenient distance of his court, so as to be always at hand, had much to be responsible for; but it was not in his power, and if it were it would not be right, to compel Commissioners whose courts were in large towns, to live in those towns. It was, however, manifest that they ought not to live too far away from their courts. The whole subject had been under the consideration of Government, and he would give the Bill of his noble and learned Friend his most respectful attention; and although some ten or twenty amendments had taken place in the last quarter of a century, he hoped that some scheme might be devised to make the proceedings of the Bankruptcy Courts less expensive and dilatory than they now were. More than this he was sure his noble and learned Friend would not expect him to say at present. With respect to the objections taken by his noble and learned Friend to the present system of appeal on the ground that the Lords Justices had not an opportunity of making themselves acquainted with the demeanour of the bankrupt and witnesses, he (the Lord Chancellor) should say that having for a year had the honour of discharging the duties of Lord Justice, he should look with extreme suspicion on any proposition that would have the effect of giving to one Commissioner the ultimate power of refusing a man his certificate. It would be in the last degree dangerous to a trader not to have the opportunity of appealing from the refusal of the Commissioner to grant him that certificate, the consequence of such refusal being the sending of the bankrupt out of the country, for without a certificate he could not for one week carry on trade with any degree of security. While he acted as Lord Justice several cases came before the Court of Appeal in which the Lords Justices insisted on having the bankrupt and witnesses before them; and in some of these cases the Court reversed the order of the Commissioner, and granted certificates. He could assure his noble and learned Friend that his Bill should command his best attention, and that he should cull from it whatever seemed to him (the Lord Chancellor) likely to improve the present state of things.

LORD BROUGHAM

said, that he would beg to point out in a few words of explanation, the great advantages which had resulted from the Act of 1831. So unsatis- factory was the state of the law at that time that the only wonder was that some change had not been made in it before that period, and Lord Eldon, than whom no man had been slower to encourage rash alterations in the law, had denounced it before he had been a week in the Court of Chancery, and had agreed that some alteration was not only necessary but in fact impossible to be avoided. What were the immediate effects of the change then made? Why property to the extent of nearly £3,000,000 which was in the hands of the twenty; Commissioners—the Septuagint, as they had been called—and which ought to have been distributed ten or fifteen years before, was distributed within a few months. It had been admitted by one bank that it realized £5,000 or £6,000 a year by the money left in it by assignees in bankruptcy, whereas, after the Act of 1831, such a thing became an impossibility. That Act, however, although a great improvement upon the old system, was itself capable of amendment, and it was with no feeling of discouragement—certainly with no feelings of shame that such should be the case after the lapse of twenty-five years—that he now asked their Lordships to give a first reading to the Bill which he had the honour of laying upon their Lordships' table.

Bill read 1a.

House adjourned at half-past Six o'clock.