THE LORD CHANCELLOR, on rising, according to notice, to call their Lordships' attention to this subject, said, that though there was a very wide-spread feeling in favour of some Amendment in the law of bankruptcy, yet the opinions entertained as to the mode in which that Amendment should be made were various and conflicting. Any one, therefore, who undertook the task of reforming this branch of the law must expect to be besieged on all sides by suggestions from practical men and theorists, from merchants and lawyers, and from debtors and creditors, all of whom were entitled to be heard on such a subject. Under these circumstances it was, perhaps, less a matter of surprise that his learned Friend the Attorney General, in the midst of his multifarious occupations, should have been so long in framing a measure on this important question than that in the end he should have been enabled to produce a Bill in a form which might be submitted to their Lordships' approval. Nor was it to be wondered at if, after the measure had been prepared by the industry and ability of his learned Friend, those who were to be responsible for it should, while assenting generally to its leading features, yet object to other—and those not unimportant—parts of it. The difficulties which surrounded the subject could not be better exemplified than in the history of preceding legislation on this subject. In 1849, a Bill to consolidate the bankruptcy law was introduced, and after the most careful consideration passed under the auspices of Lord Brougham, to whom the country was greatly indebted for his services in the amendment of this as well of other branches of the law. Not more than four years afterwards, however, defects seriously impairing the efficiency of that Act were discovered in its practical work- 2294 ing, and a Commission, at the head of which was my right hon. Friend the present Home Secretary (Mr. Walpole), was accordingly appointed in August, 1853, to inquire into its operation. In April, 1854, the Commissioners made their Report, recommending various alterations in the law, some of which had since then been carried into effect. Many of their other suggestions, however, had not yet been adopted, and some of them were embodied in the Bill which he was now about to lay on the table. He was not presumptuous enough to anticipate a complete acquiescence on the part of their Lordships in the Bill in its present shape. It had been said by Archbishop Whately, with that strong sense which distinguished all his writings, that there never was, and never would be any plan proposed or executed to which there might not be strong and even unanswerable objections urged, and unless they looked at the objections which might be put into the scale on the other side, they never could advance a single step. He, therefore, anticipated objections to several parts of the measure. He invited friendly, and even hostile criticism, because the question was not a party one, and the earnest desire entertained on all sides must be, to make whatever measure was ultimately passed as perfect as possible for its purpose. He now wished rather to point out the leading principles on which the Government meant to proceed in regard to this important subject than to ask their Lordships to agree to details which were both numerous and entitled to mature consideration. It would be found that the Bill combined Amendment with consolidation. He believed it was a most important consideration, not only with regard to this measure, but with regard to all measures for the Amendment of the law, whether it was desirable that these two objects should be united in the same Bill, or whether it was advisable to pursue the course which had been adopted by their Lordships with regard to the Copyholds Amendment Act, in respect to which the Amendments had been first considered and adopted, after which the consolidation of the Copyhold Acts took place. His impression was, that it was the more convenient and desirable course, in the first instance, to deal with the Amendments, and having introduced the Amendments which were deemed necessary, then to bring in a Bill for the consolidation of the law. His intention was to give their Lordships a mere index of the present Bill instead of a 2295 minute description of its details. Supposing the question were put at the outset, what would be the most desirable Amendment of the bankrupt law, and that which would be most acceptable to the commercial community, he would refer their Lordships for an answer to the important petition he had lately presented from no fewer than 4,000 merchants and bankers of the City of London, who put prominently forward their earnest wish that some legislative sanction should be given to the arrangement of debts by liquidation under the superintendence of inspectors. In that suggestion lay the principal key to the measure which he was about to introduce. There were provisions in this Bill which would enable creditors to avoid going through the expensive course of proceedings in the Bankruptcy Court in which, as their Lordships knew, there was a percentage upon the estate of every insolvent debtor who went into the Court, and in which the creditors had very little power over the proceedings, which were entirely under the control of the official assignee. By the provisions of this Bill either the creditor or the debtor might proceed to the Court of Bankruptcy, and there petition for an order with a view to liquidation. When the petition was presented the debtor immediately received a protection from the Court, and was bound instantly to prepare a schedule of his debts and assets. A meeting of creditors was then to be called within three or four days, at which meeting the creditors were to decide whether the estate of the bankrupt should be wound up by means of liquidation, and if so, in what manner; and if three-fourths in value and number of the creditors agreed that the estate should be wound up in that manner the agreement should be binding on all of them. They might then proceed in the Bankruptcy Court to obtain an order of liquidation in the manner agreed upon between them, and to appoint inspectors, and the debtor might be called upon to assist. The whole matter went on completely under their control and management; but they were not confined to the particular arrangement which had been agreed upon, because if, in the course of the investigation of the affairs of the bankrupt, it should be found that a different arrangement was more advisable, then they were to be at liberty to change the arrangement, of course with the consent of the majority of the creditors; or if the debtor should turn out to be refractory or if for any other reason it should be 2296 thought desirable that the affairs should be wound up in bankruptcy, they might abandon the arrangement altogether and proceed to ask for an adjudication in Bankruptcy. So that in this manner the whole affairs of the bankrupt would be completely within the power of the creditors. There were other provisions of minute detail, which would enable this machinery to work most completely and satisfactorily. Those provisions would not in the slightest degree interfere with the mode of winding up the affairs of an insolvent debtor which was now very much resorted to—namely, by deeds of arrangement and composition. That he regarded as a most important feature in this Bill. Then the question arose, how were they to deal with non-traders? At times a desire had been expressed that all distinction between traders and non-traders should be abolished, and that both alike should be subject to proceedings in bankruptcy. He had very great doubts whether it would be desirable to abolish that distinction; as at present advised, he did not think it would be advisable; but, at the same time, he thought it was proper that where a person who was not in trade had incurred debts which he was unable to pay, and where he went on wasting that substance which in justice should be distributed among his creditors, they ought to have the power of enforcing a just and honest distribution of his effects. It would accordingly be found that provision was made for enabling the creditors to compel a liquidation of the debts of non-trading debtors by means of the machinery provided with respect to traders. But that provision was guarded in a certain way, and for this reason it appeared to him that it would not be advisable, where a debt was merely owing, that the creditor should be able to go at once to the Bankruptcy Court and insist on the non-trading debtor being brought into the court and the whole of his effects being distributed in satisfaction of his debts. That provision was, therefore, thus guarded:—Where a creditor had a judgment upon which he could issue execution, or where there had been an order or decree of a Court, for the payment of money which had been served upon the debtor and had not been paid at a certain time, then the creditor might go to the Bankruptcy Court and present a petition for liquidation and obtain an order, whereupon the non-trading debtor was brought within the jurisdiction of the Bankruptcy Court and the machinery of this liquidation. In that manner he would 2297 be compelled to do justice to his creditors, which, if he was an honest man, he would be disposed to do without the necessity of having recourse to these measures. There was also this provision—that a person who was not a trader might, if he pleased, voluntarily submit himself to the proceedings of the Bankruptcy Court. There was another subject which, as their Lordships knew, had occupied a great deal of public attention—namely, the propriety of some measure for administering in the Bankruptcy Court the estates of insolvent debtors after their decease. There would be found in this Bill various clauses which were familiarly known as "dead men's clauses." The subject was full of difficulty. It was very difficult indeed to know under what circumstances it would be desirable that the Bankruptcy Court should have the administration of the estate of a deceased debtor instead of the Court of Chancery, which had now jurisdiction to administer or distribute the estate through the medium of a creditor's suit. Their Lordships were aware that where there was an adjudication against a debtor in bankruptcy, and he died the next day, the Bankruptcy Court, having possession as it were of his property, could administer it after his death. And therefore this Bill provided, with regard to the effects of a deceased insolvent debtor, that if there had been an act of bankruptcy committed a month before his death, and if there were an application for adjudication within a month after his death, the Bankruptcy Court should then have the power of administering his property. There was also in this Bill an important provision as to the mode of dealing with partnerships where a firm became insolvent. It was proposed to treat the firm itself as a person, and to allow a fiat in bankruptcy to issue against the firm in the same manner in which it might issue against individual partners, and to apply to it the system which existed with regard to corporate and quasi-corporate bodies, so as to enable the creditors to compel individual partners to satisfy the joint liabilities of the firm. At the same time that this was a new system it would not interfere with the old one as to insolvent individual partners where the firm itself remained solvent. The subject of joint-stock companies had of course occupied a great deal of public attention. Their Lordships were aware that those companies were amenable to the bankruptcy laws, but that the law relating to them could hardly 2298 be deemed a part of the bankruptcy code, because they were governed by Acts of Parliament relating exclusively to them. The law provided for the winding-up of joint-stock companies by the Court of Chancery, and for the administration of their effects by the Court of Bankruptcy. There had been a great contest between the authorities upon that subject, and the Legislature had endeavoured to remove all doubts upon it by bringing the two streams, as it were, into one receptacle. It was proposed to take away the business of winding up from the Court of Chancery, and to confer it upon the Bankruptcy Court. He believed that would be deemed upon the whole to be a very desirable alteration. It was proposed that the Bankruptcy Court should have, in addition to its existing powers, all the powers which existed under the Winding-up Acts, and that joint-stock companies should have the same facilities with regard to the liquidation of their debts as was afforded in the case of debtors and creditors in the manner already mentioned. If his noble and learned Friend Lord Brougham were then in the House he would probably say, "What are you going to do with the County Court Judges? Are you going to give them any increased jurisdiction on this subject?" His answer was, that he thought that the County Courts hardly possessed the machinery which rendered it desirable that they should have a more ample jurisdiction in these matters than they had at present, and he did not propose, therefore, to throw any portion of this business upon them. In the petition to which he had already referred, from the merchants and bankers of London, it was suggested that all distinctions between insolvency and bankruptcy should be abolished, and that traders and non-traders should be subjected to one common law. He did not know that the matter was quite ripe for that proposition; but he proposed that the vacancies which took place in the Insolvent Court as they occurred should not be filled up. He believed that the process of liquidation provided in the Bill would reduce the business of the Courts very considerably, and that in a short time they might be able to put an end to the Insolvent Court altogether, one Court being sufficient for the business which it would then have to transact. The Bill further provided that a good deal of the business of the Bankruptcy Commissioners, being purely of an administrative character, should be transacted in chambers, where it might be 2299 conducted more conveniently and less expensively than in open court. There were some of the officers of the Court to whom it was necessary to advert. His noble and learned Friend Lord Brougham had been extremely desirous that the official assignees should be paid partly by salary and partly by fees, and had objected altogether to their being paid by salary alone. The Bill did not at present touch that question, because it was quite uncertain what the effect of the proceedings for the liquidation of the affairs of an insolvent debtor might be, and it was very possible that it might remove so much of the business from the Bankruptcy Court as to leave the official assignees without sufficient emolument from fees. It would be time to consider this subject more in detail when they knew exactly what would be the amount of business. With respect to the brokers, they were not appointed under the provisions of any Act of Parliament, but were selected by each Commissioner to attend his Court, having the duty imposed upon them of taking a valuation, in every instance, of a bankrupt's effects. This valuation of a broker was a very costly and utterly useless proceeding, and it was proposed by the Bill to abolish it altogether, and to provide for a valuation either under the authority of the Court or with the sanction of the creditors, as might be considered most advisable. And inasmuch as those persons were not appointed under any Act of Parliament, and had no legal claim to their offices, they could have no title to compensation on the abolition of their offices. There was another matter which had led to much litigation, and on which it was necessary to legislate—that was with respect to the classification of certificates. As the law now stood, there were three classes of certificates,—first, second, and third,—which were awarded according to the supposed merits or demerits of the bankrupt. [Lord CAMPBELL: Do away with them altogether.] His noble and learned Friend had anticipated him. The Bill proposed to do exactly what his noble and learned Friend had suggested. The Commissioners took different views of what constituted moral delinquency. Then came appeals to the Lord Chancellor or to the Lords Justices, and a great amount of time was wasted in considering the kind of certificate which a bankrupt ought to receive. The Bill abolished the distinction. There was only one other point—but it was a very important one— 2300 to which it was necessary to direct attention, and that was with regard to the offences of bankrupts and insolvents, and their punishment. He was astonished to find that the bankers and merchants of the City of London desired to give the Commissioners power to punish fraudulent bankrupts or insolvents by sending them to the House of Correction. Now, he must say that he never would consent to invest any man with the arbitrary power of sending a person to prison without the intervention of a jury; and therefore he could not consent to that proposition, although he might observe, in passing, that his hon. and learned Friend (the Attorney-General) who prepared the Bill originally seemed to have given his adhesion to it. The offences peculiar to bankrupts, such as the falsification of accounts, the concealment of property and the like, would require a great deal of consideration, because the language of the Bill, as originally framed, was not sufficiently precise to exclude from the operation of the punishment clauses various dealings which he believed were considered to be perfectly legitimate in the city of London—among others, the accepting of accommodation Bills. He mentioned this in the hope that during the recess their Lordships would direct their particular attention to this portion of the Bill. He himself should devote all the time in his power to it, and should endeavour, as cautiously and guardedly as he could, to frame those clauses so as to meet cases of real delinquency. He hoped that he had kept his word with their Lordships, and that he should not be considered to have entered too minutely into details. He had endeavoured to make his remarks serve rather as an index to the Bill, pointing out the more important provisions which it contained. He trusted that those who took an interest in the subject would give him the benefit of their assistance and advice in considering most carefully the clauses of the Bill, in order that at the commencement of next Session the Government might be enabled to introduce a measure which would prove beneficial to the public, and would receive the ready acceptance of the whole commercial community.
§ The noble and learned Lord then presented
§ A Bill to amend the Law of Debtor and Creditor, and of Insolvency and Bankruptcy, and to enable and facilitate the liquidation by creditors of a Debtors Estate, 2301 and the Administration of Estates of Insolvent Trailers, deceased.
LORD CAMPBELLsaid, he would content himself with expressing his entire approbation of the course which had been taken in this matter by his noble and learned Friend on the woolsack, in having deliberately considered the subject, and having favoured their Lordships with an outline of the measure which he proposed. This certainly was no party question, and all must be anxious to assist his noble and learned Friend in framing his measure so that it should be generally acceptable to the public. He trusted that his noble and learned Friend would consider whether means could not be adopted for abolishing the distinction between traders and non-traders, and he suggested that a perusal of the Scottish bankruptcy laws might enable him to arrive at a solution of that question. The Scotch laws upon the subject generally were worthy of consideration; for he believed that under them the expense of working the commission and distributing the effects of a bankrupt did not exceed charge of 7 per cent upon the estate, as contrasted with about 30 per cent under the English law.
THE LORD CHANCELLORThe pamphlet has been sent to me also, but I find that it does not praise, but condemns, the Scotch system.
LORD CAMPBELLThe proof I gave of the system was 7 per cent as contrasted with 30 per cent—a considerable proof of our Scotch advancement.
§ LORD CRANWORTHexpressed his satisfaction at the lucid statement of his noble and learned Friend on the woolsack. In most of the propositions of his noble and learned Friend he entirely concurred, though of course he could not be expected to give in his assent to all the details without further consideration. He was glad that the noble and learned Lord proposed to amend before consolidating, for of course until it was settled what the law on the subject was to be, it was impossible to proceed to consolidate it. He sincerely hoped, that in the course of the next Session, a comprehensive measure of Amendment and consolidation on this subject would pass into law.
§ Bill read 1ª.