HL Deb 18 February 1858 vol 148 cc1592-604



said, he rose to lay on the table a Bill for amending the distribution of the Bankrupt and Insolvent Courts, and for effecting great and important improvements in the law of bankruptcy and in- solvency. The Bill that stood on the paper in his name for a Second Reading to-morrow was a partial measure, relating to imprisonment for debt, but which, if no further improvement were effected in that respect, would be a great improvement of the law. But the Bill, the nature of which he was now about to state, went, as he thought, to the root of the evil as it existed at the present time, and which had been so long and generally admitted. During the last autumn he had had the honour of presiding over the great congress, which was held at Birmingham, of the Association for Promoting Social Reform and Social Progress. In that body there were different departments, at the head of one of which was his noble Friend Lord John Russell. The department over which he so ably and usefully presided was that to which were referred matters connected with the jurisprudence of the country, to which his noble Friend had before given great attention; and it was clear from the manner in which he performed the duties of his office that he had not thrown away his time in bestowing that attention upon it, but that he had a competent knowledge of the subject, and entertained sound and judicious views in reference to it. It was on the suggestion of his noble Friend that a Committee was appointed, after a lengthened discussion, for the purpose of examining the whole subject of the bankruptcy and insolvency laws—for there was no one thing more manifest throughout that discussion than the universal and deep interest which the state of those laws excited among the whole mercantile community. This was evident from the various plans that were proposed to the Committee by different interests,—some of them in favour of the debtor, others in that of the creditor, and others, again, in that of the trading part of the community at large. The variety and in some respects the opposition of those proposals were as remarkable as the interest by which all of them were regarded by their several supporters, and the vast importance which was attached to the subject itself by them all. He (Lord Brougham) would take leave to repeat what he had said on a former occasion on presiding over the great Mercantile Law Conference which was held about eighteen mouths ago—in this metropolis—that when they saw the whole mercantile community coming before them with complaints of grievances under which they were suffer- ing from the state of the law, though there might be great contrariety of opinion among themselves which rendered them less deserving of being implicitly relied on, and even if none of those proposed remedies should be deemed deserving of approval, yet, if they were agreed as to the existence of the grievance, their authority was supreme and without appeal, because they were the parties for whom and to protect whose interests, the law existed. Therefore, it was that he urged the universality of the complaints of the present state of the bankrupt and insolvent laws, as demonstrating that there was ground for those complaints, although their Lordships might not agree with the complainants in adopting the remedies which they thought necessary. As President of the Mercantile Law Conference to which he had alluded, he turned his attention to this subject, which, however, was one that he had more than once before brought under their Lordships' notice, and for which he had on several occasions sought to apply a remedy. But since the discussion which had since taken place, he had certainly made material changes in the measures which he propounded in 1849 and 1852, and the Bill he was about to lay on the table was the result of this further consideration and further experience of the subject; and he would fain hope, when the evils complained of and the remedies he sought to apply to them were taken into consideration, that this measure would be held by their Lordships as likely to be effectual in affording the requisite protection. He was, however, aware that the Committee cf Delegates from the Chamber of Commerce, pending the inquiry suggested by Lord John Russell, had resolved to prepare a measure which they would submit to the Government, and he trusted it would receive full consideration. It went a great deal beyond that which he now proposed, and which was intended to remove the evils chiefly complained of. The first great evil was the expense of the Court of Bankruptcy. His noble and learned Friend (the Lord Chancellor) knew that the ground of that complaint was the large amount of fees exacted from the suitors, to their extreme vexation. For example, those suitors considered it an intolerable grievance that in this year 1858 they were compelled to pay large sums of money as compensation to officers, some of whom had ceased to exist as officers of the court for a quarter of a con- tury. They were paying many thousands a year to those most learned and respectable gentlemen whose official existence he was the means of terminating by the Act of 1831 and 1832, when the new system was substituted for the Septuagint, as the seventy Commissioners then in existence were called, others as ceasing since 1843. There were other instances of the same nature with which he need not trouble their Lordships; he would merely remind them that all these compensations came out of the pockets of the creditors, constituting in the aggregate a great ground of complaint. Besides there was another serious grievance. The Court of Bankruptcy in London exercised jurisdiction over upwards of 3,000,000 of Her Majesty's subjects; but there were twenty-nine counties in England in which there was no Court of Bankruptcy at all; and of those twenty-nine counties some were far distant from the Central Court, and yet the inhabitants of them must come there to transact their business. Of those twenty-nine important counties, omitting Middlesex, Surrey, Kent, Essex, Hertford, in the immediate neighbourhood of the metropolis, there were seven counties with a population of 1,800,000, besides four other counties, and parts of Wiltshire and Dorsetshire, containing a total population of more than 2,000,000, the inhabitants of which had to conduct their bankruptcy business in London, there being no local tribunal for that purpose. This was the case even now after the principle of local bankruptcy tribunals had been adopted by the act of his noble and learned Friend (Lord Lyndhurst). It was no doubt true that in many of these places there was very little bankruptcy; but in others there were towns in which a large trade was carried on and the bankruptcy business was proportionate. Of the places the inhabitants of which had to come to London to transact their bankruptcy affairs he would mention four important towns:—Norwich, which was distant 108 miles; Great Yarmouth, 124 miles; Southampton, 77 miles; and Brighton, 58 miles. In those cases he would admit that the evil was mitigated by the fact that much of the goods supplied to the bankrupts on credit came from London; and in that way an inquiry was sometimes more convenient in the metropolis than elsewhere. But the extent of the provincial districts produced the same measures; as when creditors in Whitehaven had to go as far as Newcastle to the Bankruptcy Court, 130 miles off. The next thing complained of was the inequality of the business in the district courts. In some of the bankruptcy courts the Judges were overworked, while in others they were underworked. That was the case also with the County Courts. The learned Judge of the County Court at Liverpool had far more work than any man ought to be asked to do; but the two Bankruptcy Commissioners of Liverpool were, as he was informed, exceedingly under worked, and had much time upon their hands, which could be applied most use-fully to the public service. He should propose in that case to make the two Bankruptcy Commissioners and the County Court Judge of Liverpool form one court, and to transfer to the County Court, of which they should be Judges, the bankruptcy jurisdiction now possessed by two of them alone. With the view of mitigating the evil arising from the distance of a place from the central Court in London, he proposed to apply the principle generally, and to localize bankruptcy generally just as insolvency was now localized—for the County Court Judges had jurisdiction at present in insolvency though not in bankruptcy. That was the main foundation of the Bill which he proposed to introduce—that the Bankruptcy jurisdiction should be transferred to the County Courts, together with the whole staff of officials now engaged in the district Bankruptcy Courts. The Bill also gave parties an option to go before the district Judge or to apply to the central Court in London as might be most for their convenience, which would depend upon whether most of the creditors resided in London or in the neighbourhood of the bankrupt's place of business. The Bill also gave the Bankruptcy Commissioners power to imprison for debts incurred by fraud or misconduct. It was most unfortunate that they had not hitherto possessed that power, as the Insolvency Commissioners had long done. In the hands of the latter it had been found to be very ineffectual as a security to the public, as far as that security was to be obtained by punishment of the wrong-doing debtor. He had already, in proposing two other Bills, stated to their Lordships the remarkable facts that not above one-eleventh of those who were now imprisoned for debt, and who took the benefit of the Insolvent Act, ought ever to have been in prison at all, and that in seven-tenths of the cases in the Insolvency Court there was not even one inquiry, there being no opposition. In many instances, no doubt, the absence of opposition arose from the disinclination of the creditor who had lost his debt to incur more expense and trouble in performing a public duty. If the Bill relating to Insolvency which he had introduced should be passed into law the creditor, who now could only arrest his debtor, would have the power of summoning him, and of suddenly laying hold of any property he might possess, just as the Bankruptcy Court could do at present. He had added to the Bill abolishing the distinction which now existed between the trader and the non-trader a clause to the effect that an officer, to be called an "official examiner," should be appointed, whose duty it would be to examine, on behalf of the public—in the event of the creditor not choosing to undertake the task of examination,—and to sift and scrutinize the case of every debtor, whether trader or non-trader, who should be brought before the Court. One of the great defects of our laws—one, however, which had in a great degree, he was happy to say, been removed—was that no adequate punishment had been awarded in those instances in which breaches of trust had been committed. It was impossible to survey the last year and a half without being ashamed and shocked at the discredit which had for the first time been brought on the character of our trading classes. He believed that his noble and learned Friend the Lord Chief Justice would bear him out when he said, that in many of the cases which had come before his noble and learned Friend during the last year and a half, where parties tried for misdemeanour, or parties tendered as witnesses, or parties to the suit, had disgraced themselves by the conduct disclosed, it would be found that the persons who had so disgraced themselves—who so showed that they were not worthy of credit as witnesses, of respect as parties, or of acquittal as culprits—owed much of their fall from the paths of honesty to the state of the law respecting fraud and breaches of trust. He believed that the great defect of the law—that of not punishing criminal breaches of trust, especially where those breaches of trust were committed for the lucre of gain—had been the cause of a very great portion of the prevailing immorality. The manner, too, in which the Commissioners acted in the granting of the various classes of certifi- cates was in itself extremely inconsistent, and he should therefore propose that the power should be vested in the Commissioners of either absolutely granting or refusing a certificate, giving them in the latter case the further authority to punish by imprisonment, which they did not now possess. It might be objected to this proposal that the punishment of imprionment ought not to be inflicted without trial by jury, but his answer was that the Insolvency Commissioners had always exercised that power which he proposed to confer upon the Judges in Bankruptcy, and to a still greater extent, for they could imprison for a longer period than two years, which would be the maximum named in this Bill. As to class certificates he had adopted the plan in the Bill of 1849, in deference to the City authorities; it was not in the Act of 1851. There were also some provisions in the Bill in reference to the remuneration of official assignees, between the maximum and minimum amount of whose incomes a very considerable difference existed, that amount being in some instances £5,000 or £6,000 in one year; while in some cases the official assignee hardly received enough to pay the expenses of his office. He proposed to fix a maximum and minimum remuneration, which, without taking away the interest of that functionary in the collection and distribution of assets, would provide against the present gross inequality. Where the remuneration was defective, he would make up the deficiency out of the fee fund, taking care that the fees of those who were overpaid should be diminished. There were many persons engaged in trade who were of opinion that a measure of a somewhat wider scope than that which he had submitted to the House should be introduced. Now, so far from proposing his Bill as a substitute for any more extensive scheme, he should ask their Lordships to regard it simply as a natural introduction to a still greater measure, which very possibly the Chamber of Commerce would propound. There was a material difference between the measure which he was now introducing and that which he had in a former Session laid before their Lordships, and he hoped it would be found to embody the experience of late years, and better adapted in many ways to effect the object in view. It was sometimes said in the City to men engaged in trade, "Your name is on too many bills," and he was afraid that the same remark would apply to him. In extenuation of the offence, however, and in order that his Bills might not be dishonoured, he was bound to add that he was pursuing on the present occasion the same course which he had taken in other cases and particularly on the important questions relating to the patent law. He had introduced a Bill for the amendment of the law on this subject when at the same time it happened to be under the consideration of the Government. The Ministerial measure was afterwards introduced, and both were referred to a Select Committee, which examined them in detail, and formed out of both a Bill which effected a great improvement in the patent law, and was still in force. Following that precedent, he was now introducing the present Bill in the expectation that his noble and learned Friend on the Woolsack would shortly propound another, that then both would be fairly and impartially considered by a Select Committee, and that out of the two measures one might be framed deserving the sanction of the House and of the Legislature. He hoped his noble and learned Friend would give his careful attention to this subject, in which case he was sure that the commercial and trading interests of the country, as well as the character and the morals of the country, would profit greatly by the result of his labours. He would now conclude by laying his Bill on the table,

Bill to limit the jurisdiction of Her Majesty's Court of Bankruptcy; to abolish the Courts of Bankruptcy for the Country Districts; to give to the Judges of the County Courts acting in the Country Jurisdiction in matters of Arrangement and of Bankruptcy in certain cases, and further to increase the Jurisdiction of the County Courts; and to amend the Laws relating to Bankrupts and to the Estates of deceased Debtors.


said, it was always a part of the courtesy of that House to allow a Bill to be laid on the table and be read a first time without opposition. That was a most useful practice; but his noble and learned Friend could hardly expect any discussion to arise with regard to complicated details only now announced for the first time, and of which none of their Lordships had any previous knowledge; nor must he be thought guilty of discourtesy if he now made only the most cursory allusion to his noble and learned Friend's observations. In many of the proposals now submitted to their Lordships he entirely concurred. In the first place, he believed it absolutely necessary to provide some different mode of remunerating the official assignees. At the same time, he thought his noble and learned Friend rather overstated the case when he spoke of these gentlemen sometimes making as much as £5,000 or £6,000 a year. It had happened only in one case, where the British Bank case having fallen into the hands of the official assignee in question, he certainly did last year make more than £6,000 of clear income. On the other hand, he might mention that soon after he took the Great Seal he was beset with applications from official assignees, who complained that they actually made hardly enough to pay the expenses of their office. That was an objectionable state of things, and in communication with some of these gentlemen he proposed a scheme, apparently very similar to that of his noble and learned Friend—namely, that there should be always a maximum sum, beyond which their remuneration should not rise, and a minimum sum, below which it should not fall. He agreed also very much in the remarks of his noble and learned Friend as to the different classes of certificates given in bankruptcy. He thought it would be very wrong to retain the present classification of certificates. It certainly was the case that, whereas some Commissioners made it a rule to give first class certificates unless there had been disreputable conduct on the part of the bankrupts, others, on the contrary, always awarded certificates of the lowest class unless something meritorious appeared in the conduct of the bankrupts. Considering the number of the Commissioners it was impossible but that there should be discrepancies in their decisions; still, as things were, the obtaining a first or third class certificate was very much a chance, depending mainly upon what Commissioner a bankrupt was obliged to go before. Any change of system which removed these inconsistencies would be an. improvement. His noble and learned Friend, if he collected what had fallen from him aright, thought the district bankruptcy courts should be abolished, and their jurisdiction in the country given to the County Court Judges. Now, there appeared to him to be grave difficulties in the way of such a change. Four or five years ago this matter was considered with the greatest attention by Mr. Glyn, Mr. Walpole, and others, both lawyers and non-lawyers, who came to the conclusion that, however useful the County Court Judges might be, and however meritorious in the discharge of their duties, they were eminently ill-calculated for the administrative business in bankruptcy. In insolvency cases there was very little such business, but not so in bankruptcy. As his noble and learned Friend had lately correctly stated, the charge of proceedings in bankruptcy was from 33 to 36 per cent upon the assets realized—an enormous percentage, and one which it must be the great object of legislation to reduce. Still, however, upwards of 60 per cent remained to be distributed. Now, an ambulatory Judge, who came to a town once a month for the transaction of business, would experience great difficulty in discharging that portion of his duties which would consist in investing, securing, and ultimately distributing the sums of money which were from time to time realized. He would not say that the proposal of his noble and learned Friend on this subject did not point to the best resource which was open to them; but it was not one to which he thought they could look with anything like satisfaction; and he confessed that, along with the Commissioners of 1853, he considered it one which would entail the greatest possible difficulty. There would be delay, there would be the chance of having assets purloined, it would be impossible to keep them together as you could wish, and there would not be that stability and fixity of place which were essential to the due administration of a bankrupt estate. His noble and learned Friend suggested that the Bankruptcy Judges should have in certain cases the power of imprisoning. But he could not look without suspicion on a proposal to give them such a power. Such a power might, perhaps, be safely intrusted to the three or four Judges who sat in London, where a vigilant public eye watched over their proceedings. Even there, however, it was a matter of great difficulty to allow a number of Judges not acting in common to imprison those brought before them at their discretion for any considerable length of time, more particularly when the point to be determined was whether the persons in question had or had not acted honestly and fairly as traders. The opinions which one man formed on such a subject differed so widely from those which would be formed by another man that he should look with great apprehension to the exercise of such a power. [Lord BROUGHAM: The County Court Judges are intrusted with it in cases of insolvency.] Yes; but if such a provision were coupled with an extension of jurisdiction all over the kingdom, if all the County Court Judges were empowered to imprison at their discretion for any considerable length of time persons whom they might consider to have acted without due caution or improperly in the conduct of their affairs, he thought serious danger would arise. He believed that the Bill which had been so long under the consideration of the Board of Trade was completely prepared, and would receive the final approval of Her Majesty's Government in the course of a few days, and it would be laid before that or the other House of Parliament without delay. In the meantime he would give the subject his very best attention; but his noble and learned Friend (Lord Brougham) must not take it for granted that because his name was on the back of many Bills he (the Lord Chancellor) was prepared to endorse or accent them. The Bills of his noble and learned Friend might be very good and useful measures, and if so he would be happy to give them his cordial support; but all he could promise was that he would give careful attention to his noble and learned Friend's propositions. He would suggest that his noble and learned Friend's Bill, and the other Bill relating to the same subject which was already before their Lordships, should stand for a second reading on the same day.


wished to remind the noble and learned Lords who were dealing with this question of the great inconvenience occasioned in the country from the distance which creditors and other persons concerned in bankruptcy proceedings had frequently to travel from their own residences to the district courts. The inhabitants of the large county of Salop, containing a population of 250,000, were compelled to go to Birmingham in cases of bankruptcy, and the larger portion of the inhabitants of North Wales were obliged to resort to the district courts at Liverpool and Chester. It was, therefore, in many cases not worth the while of small tradesmen to incur the expenses of the journey and the other inconveniences consequent upon the prosecution of cases of bankruptcy. The same inconvenience was experienced by solicitors and other persons who might be connected with cases of this nature. Bankrupts were sensible of their advantage in this respect, and all manner of expedients were resorted to in order to delay the proceedings.


said, it was with the view of remedying the inconvenience referred to by the noble Earl that he proposed to give jurisdiction to the County Courts.


expressed his hope that an attempt would not be made simply to amend the law of bankruptcy, but that that law would be entirely recast. He believed that a partial attempt to reform the law by calling in the assistance of the County Court Judges in the administration of bankruptcy would be of little advantage, and unless the whole system were recast he did not think any satisfactory result could be expected.


cordially concurred with his noble and learned Friend that this was a subject which required the most careful consideration in all its parts. Indeed, the law of bankruptcy and insolvency was in a more unsatisfactory state than any other branch of our law, and he hoped his noble and learned Friend who last spoke, and all others who were conversant with the subject, would endeavour to effect those improvements which were absolutely requisite. Nothing satisfactory could, however, be done without going into a consideration of the whole subject. The Bill just introduced by his noble and learned Friend, and that which was already upon the table, dealt with parts of the subject; hut he thought some method should be devised for carefully considering the whole question in all its bearings. The present system was undoubtedly attended with great inconveniences. The noble Earl (the Earl of Powis) had mentioned the inconvenience felt in Salop and North Wales. Now he (Lord Wensleydale) had only been informed yesterday by an hon. Member of the other House that it was a matter of serious complaint on the part of the inhabitants of Westmoreland and Cumberland that they were compelled to travel from the remotest parts of those extensive counties to Newcastle-on-Tyne for the transaction of bankruptcy business. It would, undoubtedly, be a much more convenient arrangement if the Commissioners went about from place to place so that meetings might be held in the vicinity of the bankrupts' residences, without subjecting creditors to unnecessary expense.


said, the public owed a deep debt of gratitude to his noble and learned Friend (Lord Brougham) for his contribution towards the improvement of the law on this subject by the Bill which he had just laid upon the table. He concurred with his noble and learned Friend that there was scarcely any branch of law in which the necessity of reform was more universally admitted. He would not enter upon the different points which had been noticed in the course of the discussion; but it seemed to him that the essence of his noble and learned Friend's Bill was to transfer the duties of the Commissioners of Bankruptcy, as far as it could be done, to the County Court Judges. He thought that there was a broad distinction between the trader and the non-trader. In bankruptcy there were generally more or less assets to administer; but in insolvency persons frequently came before the courts without any means whatever, and the same machinery was not necessary which was required in bankruptcy. With regard to the measure which was being prepared in the department with which he was connected it was in a very forward state, and he trusted it would soon be introduced either in that or the other House of Parliament. He hoped that the measure would meet some of the more obvious difficulties, and give facilities for those arrangements which were now common by voluntary agreement among the creditors, so that it should be left to the creditors themselves to decide in what mode the effects of their bankrupt debtor should be administered. It would not interfere with the consideration of the general improvement of the laws on the extended basis which the noble and learned Lord thought so necessary; but he trusted that as it would correct many evils it would meet with the assent of Parliament, with such alterations as might be doomed desirable. Bill read 1a.

House adjourned at Seven o'clock, till To-morrow, half-part Ten o'clock.