§ Order of the Day for the Second Reading read.
THE LORD CHANCELLOR, in rising to move the second reading of the Bankruptcy and Insolvency Bill, expressed a hope that, inasmuch as their Lordships had on previous occasions, by enactments that had passed that House, sanctioned the most material provisions of the present measure, they would be unanimous in supporting the second reading. In bringing 624 the measure before their Lordships he would abstain from minute technicalities; but he thought it his duty shortly to give to their Lordships some history of the past and present state of the law in regard to bankruptcy and insolvency. By the common law of England there was no distinction between traders and non-traders—between bankruptcy and insolvency. There was nothing resembling the cessio bonorum of the civil law. No remedy was given to the creditor till he had brought an action and recovered judgment, and then, upon that judgment, he might levy execution against the lands, the goods, and the person of the debtor. But until he had obtained that judgment, however insolvent the debtor might be, there was no remedy against him, and he could not he deprived of his property. An action being brought, and the person of the debtor being arrested, the debtor had no remedy. He was sentenced to perpetual imprisonment unless he paid the uttermost farthing that was due to his creditor. This state of things, which was injurious alike to debtor and creditor, received some mitigation in the reign of Henry VIII., when, in order to obviate the mischievous consequences of that state of the law, an Act was passed which enacted that those who were traders and obtained the goods of others in their hands, and then fied the country, or concealed themselves, or made away with such property, were liable to be made bankrupts. A commission issued under the Great Seal; they were arrested and thrown into prison, their property was confiscated and distributed among the creditors, but the debtors stript of all their property were still liable for their debts. The reign of Elizabeth, when an alteration was made by which the law was rendered still more stringent; and nothing could satisfy the creditor except perpetual imprisonment of the body of the debtor. So things continued down to the fourth year of the reign of Queen Anne; and then, for the first time, it was enacted that when a trader honestly and fairly delivered up all his property to his creditors he should be discharged from all liability to debts theretofore incurred. He obtained what was called a certificate of conformity, which was a protection against any action for a bygone debt. The bankruptcy law received various amendments, but still proceeded on the same general principle down to the time of Lord Eldon. Lord Eldon was a most consummate Judge in every 623 department of the law, and in none more than in the law of bankruptcy; but, strange to say, although he, at an early period of his career, denounced the existing law of bankruptcy, he did nothing to improve it. In the sixth year of the reign of George IV. there was a consolidation of the bankruptcy law introduced by Lord Henley. But it was simply a consolidation, and it left all the abuses that before existed untouched. In the first place, there was a patentee of bankruptcy, who received for doing nothing about £8,000 a year from the estates of bankrupts that ought to have been distributed among the creditors. There would have been no harm in the Bankruptcy Court being made self-supporting; but this patenteeship was an enormous abuse. And there were various other sinecures. With regard to the judicial system by which the law was administered, strange to say, in the London district there were seventy judges, who went by the name of "The Septuagint." There was hardly any qualification required of them, any one could be appointed. He himself was once a candidate to become one of "The Seventy" The moment he was called to the bar he had a promise from the then Lord Chancellor that he should be appointed one of "The Septuagint"—not from any merit of which he could boast, but because his father had been at school and at college with the Lord Chancellor. It so happened, however, that before a vacancy arose, "All the Talents" were turned out; and if he (the Lord Chancellor) had not been disappointed he probably never would have risen higher than one of "The Septuagint." Under this system a great part of the estates of bankrupts was consumed before the creditors were thought of. "With regard to the country districts matters were much worse. In the country a Commission of Bankruptcy was like a wrecked ship on the Cornish coast. The Commissioners were selected by the solicitor to the bankruptcy, and the solicitor having appointed the Commissioners, the Commissioners taxed the bill of the solicitor. The abuses that took place were almost incredible. He bad been informed by a gentleman at the bar, who had sat on a country commission of bankruptcy, that on one occasion after a meeting they amused themselves by turning out a fox at the expense of the bankrupt's estate. This state of things continued down to the time when Lord Brougham became Chancellor; 624 and he might say, in passing, that the country was much indebted to him for the improvements which he effected in the Court of Bankruptcy, as well as for the establishment of the Judicial Committee of the Privy Council and the Central Criminal Court, which would make his memory long respected as a law reformer. Lord Brougham swept away the sinecures; but, then, there were compensations to be paid the sinecurists out of the estates of those who might afterwards become bankrupt. There were appointed for the London district six Commissioners, who were permanently to be employed, and form the Court of Bankruptcy. In the country districts there were one or two commissioners for each district; for Birmingham, Manchester, Leeds, and other great towns. Lord Brougham also established a Court of Review, consisting of four Judges; but this did not succeed so well. He also introduced that great improvement in the bankruptcy system involved in the appointment of the official assignee. Most monstrous abuses had been perpetrated from the assignee being chosen by the creditors without any control whatever. The assignee employed an attorney who, too, often became the sole master of the concern, and the greater part of the estate of the bankrupt was spent in litigation. But on the appointment of official assignees by Lord Brougham it was found that £2,000,000 which ought to have been distributed amongst the creditors were locked up in the hands of the London bankers. In 1849 there was a consolidation of the bankruptcy law, embracing all the statutes from the 34th of Henry VIII. down to the 13th of Victoria. That measure failed to give satisfaction. It occasioned much disappointment and discontent in its operation. Had the Court and its machinery been properly constituted it would have been generally resorted to by those who sought a fair distribution of the effects of a bankrupt; but as it was the Court of Bankruptcy was shunned as an unmitigated evil, and composition deeds had become all but universal. To 10,000 eases brought into court there were 10,000 deeds of trust. Such was the state of the law with regard to traders. "With respect to non-traders the evil was considerably greater, both for creditors and debtors. There had been no alteration in the law in respect to non-traders since the time of William the Conqueror up to the period within his own recollection. In 1813 Lord 625 Redesdale brought in a Bill the object of which was to give relief to non-traders by the establishment of the Insolvent Court, for until that time there was no tribunal to which the non-trader could apply for relief. The establishment of that Court was considered a great boon to non-trading insolvents, and he recollected a humorous scene in an opera, popular at that time, in which a number of insolvents in a debtor's prison were represented dancing round a May-pole and singing a song in praise of the Court and its first Judge:
Cease your dunning!Serjeant Running-ton will quickly set us free.The relief given under this Bill was, however, very inadequate, because the measure applied only to those who had been in prison for a certain time. Unless a person had been thrown into gaol by his creditor, there were no means under the law of making him surrender his property, and the insolvent, on the other hand, obtained no relief if he had surrendered it, unless he had been in prison. Early in the present reign an alteration was made in the law, by which the Court in every instance had the power to require the insolvent when he was discharged to confess a judgment binding all his future prospects. Under that judgment of the Court, the insolvent, if he became afterwards possessed of any property, was still liable to the payment of his debts to the last farthing. In practice that law was somewhat modified, so as not to deprive the insolvent of the whole of his future acquired property, but only of one-third portion of it. But still he was not a free man, and the vesting order was a clog upon him in his subsequent career. The insolvent, too, was only discharged from the debts returned in his schedule, and lawsuits were constantly arising respecting the construction of the schedule. Down, then, to the present moment, the non-trader, although surrendering the whole of his property, was not discharged from the liability to the payment of his debts, and can not commence the world again a free man. Moreover, the creditors have no effectual remedy against an insolvent. This state of the law was discreditable and injurious to all parties. It was well known that Boulogne and other towns on the Continent were crowded with English debtors, who drew their money from this country and set their creditors at defiance. It had been said that a strong reason for not, at present, introducing any measure for the re- 626 form of the representation of the people in Parliament, was to be found in the fact that there was no popular demand for such Reform. That, at any rate, could not be said in respect of reform of the bankruptcy and insolvency laws. "Indignation meetings" had been held and every Chamber of Commerce in the kingdom almost had petitioned the House in favour of such a change in the law as that now proposed, and he had had numerous applications to receive deputations on the subject from all parts of the United Kingdom. His official duties made it impossible for him to receive those deputations; but there could be no doubt as to the strong and general feeling on the subject. Various Bills had been brought into Parliament to remedy those evils, but all of them had failed to give satisfaction. When his noble and learned Friend near him (Lord Chelmsford) was on the woolsack he introduced a Bankruptcy Bill. That measure passed the House of Lords; but it was regarded by the commercial world as not satisfactory, chiefly, he believed, because it did not give sufficient power to the creditors. Another Bill was introduced by the noble Lord the Member for London (Lord J. Russell) for the amendment and consolidation of the bankruptcy law, the noble Lord being asked, as the most influential Member for the largest mercantile community in the world, to take charge of it; but it made no further progress than being laid on the table of the other House of Parliament. They had now before their Lordships a Bill sent up to them from the other House, and upon which most laborious pains had been bestowed. Shortly after the formation of the present Government he had had a consultation on the subject of the law of bankruptcy with his hon. and learned Friend the Attorney General, and they entirely agreed as to the principles on which such a Bill should be constructed. The framing of the Bill had been left to his hon. and learned Friend, who had bestowed an immense amount of labour upon it, and made sacrifices of a more than ordinary character to accomplish the undertaking. He (the Lord Chancellor) sincerely hoped that the success of the measure would amply reward him for all his labour and sacrifice. The Bill of last Session included a consolidation of the bankruptcy law; but that was found to be an inconvenient course; and, upon consideration, he arrived at the opinion that the Bill, to be effectual, should be 627 a Bill for the amendment of the law, and not one for the consolidation of the law. The Bill of the present Session was in reality limited to an alteration of the existing law. He would now shortly mention the leading features of the Bill. The first was, that though it would not entirely do away with the distinction between trader and non-trader—a point upon which a misunderstanding existed—yet it provided that when insolvency was established, whether the party were a trader or non-trader, his effects should be administered by the same tribunal and according to the same law. It seemed to him that there was no reason why such should not be the state of the law. As soon as a man was unable to pay his debts, his property was no longer his, and ought to be administered by other hands. But, in the second place, assuming that he made an absolute and really honest surrender of all that belonged to him, it was only just that the non-trader likewise should have the benefit of the provisions of the Bankruptcy Act, and, for the future, should be wholly relieved of responsibility in respect of his debts. The principle of this part of the measure was, that when insolvency was established it was immaterial whether the insolvent was a trader or non-trader. In a Bill which had been adopted by their Lordships and sent down to the other House, the principle of extending the law of bankruptcy to non-traders had been sanctioned, and he trusted their Lordships would not on the present occasion depart from the principle they then sanctioned. The Bill, therefore, proposed to abolish the distinction between trader and non-trader, and rendered it no longer necessary to show any trading on the part of the debtor. There was, however, a distinction as to what were acts of bankruptcy by a non-trader. The special acts which under the present Bill would constitute an act of bankruptcy on the part of the non-trader were these—departing the realm with the intent to defraud or delay his creditors, or remaining abroad with like intent; and making any fraudulent conveyance, gift, delivery, or transfer of his property. There were other acts of bankruptcy which were common alike to the trader and non-trader, such as lying in prison on arrest for debt for fourteen days, or escaping from such imprisonment; filing a declaration of insolvency; suffering an execution to he levied. Another and very important class of acts of bankruptcy resulted from what was known as the Judg- 628 ment Debtor Summons. If, after one week, in the case of a trader or one month in the case of a non-trader, after judgment signed, the debtor shall fail to pay the debt, if the debt amount to £50 or upwards, the creditor is entitled to issue a Judgment Debtor Summons requiring his debtor to appear and be examined respecting his ability to satisfy his debt. If, on his appearance, he fails to satisfy his creditor, the Court may adjudicate a conditional bankruptcy against which he had three days to appeal, after which he might, if the Court thought fit, be finally adjudged bankrupt; but the Court was empowered to allow such time as it thought fit, in order to afford to the debtor the opportunity of paying his debt or giving security. If he failed within that time to do either, he would be guilty of an act of bankruptcy and adjudged bankrupt. It had been feared that a provision of this nature might be made to operate most unfairly behind the back of a non-trader who might be absent abroad. But this danger was effectually guarded against by a clause which had been introduced into the Bill in its passage through the other House, which provided that a copy of the petition for adjudication shall be served personally on the non-trader debtor whether at home or abroad, or, if personal service cannot be effected, then the Court may be satisfied that efforts have been made to effect personal service and have come to the notice of the debtor, and intentionally defeated by him; and such copy must be endorsed by a memorandum specifying the time within which the debtor is to appear; but such time is in no case to be less than thirty days after service. "Whether at home or abroad he must have at least thirty days to show cause; his defence must be heard by the Judge of the Court, and every facility was allowed him to show, if he could, that he had reasonable means or expectations of being able to pay his debts. A wise distinction was thus made between a trader and non-trader, the former being supposed to have some settled place in which he was to be found when his liabilities became due, while the non-trader was not so restricted. But no reason existed why in the event of his being unable to discharge his liabilities he should not equally with the trader be compelled to surrender his property. While it would punish the extravagant and fraudulently-disposed, the Act would entail no hardship whatever on any honest man. By the next clause, 629 the Insolvent Court was entirely done away with, for it was absurd and mischievous to have two rival systems of jurisdiction, regulating cases of a kindred nature by wholly different modes of procedure. The expense of the Insolvent Court would be done away with, and in future there would be one general court for traders and non-traders. There would be in London one supreme Judge in bankruptcy. In the country all cases in which the property was under £300 would by the Act be referred to the County Courts, and in all other cases it would be open to the creditors, if they pleased, to take them into such Courts. The County Court Judges already exercised jurisdiction in certain cases of insolvency, and this extension of their powers would make but very little difference. He hoped that eventually all the bankruptcy business in the country would be disposed of by the Judges of the County Courts, and that we should be able to do without country Commissioners. In this respect a good example had been set us by Scotland, where already bankruptcies were administered by the Sheriffs' Courts, and a trustee was appointed by the creditors to manage the estate. The result of this was that, while in England the expense of distributing a bankrupt estate amounted to 33, in Scotland it reached only 13 per cent. By this Bill the Government proposed to confer the management of the estate upon an assignee to be appointed by the creditors. The measure did not, however, abolish official assignees. The enormous profits of those officers would be reduced, but it would still be their duty to take possession of the bankrupt's property, to hold it until a trustee or creditors' assignee was appointed, and to superintend the latter functionary in the management of the estate—a check which would, no doubt, prevent the waste and extravagance which prevailed under the old system. The next alteration was an important and a useful one, and was entirely new. It gave the Bankruptcy Court power to assist in winding up the affairs of persons who had entered into an arrangement with their creditors by deed of assignment. Hitherto the Court could not render any assistance unless the debtor absolutely became a bankrupt, but now it would be empowered to settle disputes and otherwise facilitate the carrying out of these arrangements. It was provided the voluntary deeds of composition should be registered, and that if any dispute arose 630 upon them the facts might be stated to the Court of Bankruptcy, which would at once decide the question. By this means justice would be done speedily and at little expense, without the necessity of bringing the estate into bankruptcy. It was further proposed to abolish the classification of certificates. There had never been any rules according to which certificates were classified, and in consequence great uncertainty had prevailed in that respect. The Commissioners had nothing to guide them; and thus each, taking his own individual views, took a different course in awarding certificates. For instance, in London during five years Mr. Commissioner Evans out of 479 applications granted but 17 first-class certificates, or about 1 in 28; Mr. Commissioner Fonblanque out of 653 applications granted 31 first-class certificates, or about I in 14; and Mr. Commissioner Fane out of 653 applications granted no fewer than 161 first-class certificates, or nearly 1 in 4. The punishments to which a bankrupt was liable for not appearing when summoned, and for other offences, were formerly excessively severe, but by the Bill all such offences were made misdemeanours, and three years' imprisonment was the heaviest punishment which could be inflicted for any of them. This power of making certain offences criminal in a great degree did away with the necessity for different classes of certificates. He understood that the clause imposing a stamp duty had given rise to a great deal of complaint, which was really groundless. There were now no sinecurists to be paid out of bankrupt estates, for the Chancellor of the Exchequer had agreed, though not without great reluctance, that the payment of compensation for abolished offices should be transferred to the Consolidated Fund. A number of fees were suppressed, and certain meetings rendered no longer necessary; and the stamp was imposed for the purpose of defraying only the necessary expenses of proceedings. The next matter was the right of attorneys and solicitors to practise in this Court. No one admitted more freely than he did the honour and respectability of that branch of the profession; they would be allowed to continue to practise as heretofore in the inferior Courts; but only counsel could appear before the Chief Judge. He thought that this arrangement would be found to be advantageous in every respect. The Chief Judge would be empowered with the Lord Chief Justice to make rules and orders of Court. This imposed a great additional 625 labour on the Lord Chancellor; yet it was manifest that it would be highly inconvenient to have to go to Parliament for every rule and order that the practice of the Courts might render necessary. He was sorry-he had had to detain their Lordships so long in making this explanation, and he would now move that now the Bill be road a second time.
§ Moved, that the Bill be now read 2a.
§ LORD CHELMSFORDsaid, the amendment of the existing bankrupt law had been so long and so earnestly desired and looked forward to by the commercial world, that he thought, he having himself formerly proposed some alteration in it, it would hardly be becoming at this stage of the Bill if he were not to offer a few observations as to the parts of the measure which he thought would require their Lordships' earnest attention. He felt that although the subject was one of considerable importance it was not a very inviting one, and he was afraid that he could hardly secure their Lordships' willing attention to it; but, at the same time, a measure abolishing the distinction between a trader and a non-trader was a step that must be personally interesting to all; and, although they might not be aware of it, to each one of their Lordships individually. He was aware of the inherent difficulties in this subject, and he knew how hard it was to reconcile conflicting interests and conflicting views in respect of it. He should rejoice, though he himself were were not the author of it, if the Government should succeed in passing a measure which would satisfy the expectations and wishes of the commercial world. Although, however, he had every disposition to look favourably on the efforts that had been made in this particular, he regretted to say that from communications he had received from various quarters from persons connected with trade and commerce, and from his own examination of different portions of this Bill, he was convinced that without considerable alteration it would hardly secure the approbation of the classes for whose benefit it was intended. He was glad to find that his noble and learned Friend had become a convert to the view which he (Lord Chelmsford) had himself suggested when he introduced his Bill in 1859, which view was opposed to the premature consolidation of the law. His noble and learned Friend on that occasion expressed himself strongly on the subject of the Bill which he (Lord Chelmsford) introduced. He said he was disappointed— 626 he was mortified—that an attempt was not made to consolidate the low of bankruptcy; he said that he merely proposed a patchwork on the existing system. The scheme which his noble and learned Friend now had under his protection had been described by its projector himself as a "fragmentary measure; "and he thought that the fragments would require much shaping and polishing before they would fit into this piece of patchwork. He had no difficulty in tracing in this Bill much of the hand of the Mercantile Law Amendment Society; indeed, they boasted that they had induced the hon. and learned Attorney General to make alterations in his Bill to suit their views. That society was composed of persons carrying on wholesale houses and large mercantile establishments—persons of the greatest respectability; but they had their own peculiar views of these subjects, and in falling in with those views the Attorney General had run contrary to the wishes of a very large class of persons. It was pretty well known that there were two distinct classes of opinions as to the manner in which the bankrupt law ought to be administered. One class of persons thought the creditors ought to have complete control over the administration of the affairs of the bankrupt; the other class thought that the official assignee or some person in the Bankruptcy Court should administer the affairs of the bankrupt, and should have so effectual a control as almost entirely to exclude the creditors from any interference in the winding up of the estate. The Mercantile Law Amendment Society entertained the view that the creditors ought to have absolute control over the administration of the affairs of persons who claimed the relief of the bankruptcy laws. Many persons connected with the mercantile body entertained opinions of an opposite kind, and on a former occasion Lord Overstone expressed his opinion in accordance with the views which he had last adverted to. It was very important to bear in mind that it frequently happened that the interests of the larger creditors of an estate and those of the smaller were not perfectly consistent, and that the machinery applicable to large bankruptcies was scarcely applicable to smaller ones. He understood that of the bankruptcies which annually took place 85 per cent were of estates the value of which did not exceed £1,000, many being as low as £300; and only 15 per cent were of estates of a larger character. This Bill applied particularly— 627 he-would not say exclusively—to large bankruptcies, and the machinery it provided was infinitely too cumbrous to be applicable to the smaller estates. The Mercantile Law Amendment Society proposed to give the creditors as much control over the estates of bankrupts as possible; and for that purpose it was necessary that they should in some way dispose of the official assignee. They could not get rid of him altogether; but this Bill lowered his position and considerably impaired his efficiency. By this Bill the moment a man was adjudicated a bankrupt the official assignee was required to take possession of the whole of the property. This duty had hitherto been performed by the messenger, who occupied the position of sheriffs officer of the Court; and certainly it was rather degrading the official assignee from his present position to impose such a duty upon him without the slightest necessity, as it had always been adequately and properly performed by the messenger. Provision was made for the subsequent transfer of the property from the official assignee to the creditors' assignee. Upon the adjudication of bankruptcy the Court was to order the first meeting of creditors, and that meeting was to take place at the time and place the Court should determine, having regard to the residences of the majority of the creditors. He should like to know how, in the case of a hostile bankruptcy, it would be possible for the Court to ascertain the residences of the majority of the creditors, so as to order the meeting to be held at the place most convenient for that majority. Suppose, however, the first meeting held. The creditors then had power, though they were not bound, to appoint a creditors' assignee; and the effect of this permission would be that in all large bankruptcies there would be a struggle for the assigneeship, which would be accompanied by the right to choose the solicitor, and probably by a considerable influence in the appointment of a manager, a new paid agent provided under the Bill. But in the small bankruptcies no creditors' assignee would be appointed, because nothing was to be gained by the appointment of the solicitor and manager. At present if the creditors did not choose to appoint their assignee, the official assignee might let the affairs remain in statu quo; but under this Bill the official assignee, possibly at his own risk, and the Court at its own expense must go on and carry the bankruptcy to its termination. Supposing a creditors' assignee to be chosen, the offi- 628 cial assignee was required "forthwith" to make out a balance-sheet of all payments, receipts, and transactions of the bankruptcy. That word "forthwith" seemed to him to be used in a manner that was almost flippant; for it seemed to be assumed that he would in a day or two make out this balance-sheet, whereas they all knew that in large bankruptcies the preparation of such a statement of their affairs might take weeks or even months? And what was to become of the estate in the meantime? The moment the creditors' assignee was appointed the estate became vested in him, and it was his duty to collect the debts, except a certain class of debts to which be would presently refer. And how was he to collect the debts? He must have the books for that purpose, but the official assignee would also want them to make out the balance-sheet. It was perfectly clear that, under these circumstances, delay, which was so much complained of under the present system, must take place to a very considerable extent, and that frequently detriment to the estate of the bankrupt must follow. But he would suppose the balance-sheet made out, and the official assignee vested with full power to perform his portion of the duty. At present the official assignees were the sole collectors of the debts, and he believed that they had performed this duty to the entire satisfaction of the mercantile community. Mr. Whitmore had during the time that he had been official assignee collected debts to the amount of £1,850,000, and had distributed the entire amount, with the exception of £40,000, without a single complaint; and of this £40,000, £20,000 remained to be divided, and £20,000 was not divisible in consequence of the smallness of the individual amounts. And his books were in such perfect order, that if inquiries were made he would be able in ten minutes to tell what had become of every portion—even to the application of a single postage stamp. It was proposed that the official assignee should collect debts under £10—and the majority were under that amount—and the creditors' assignee those above that amount; and, therefore, there would be a double collection by the two assignees. But who was to have the books? for each party would want them. In London the inconvenience, though great, might not be insuperable; but in the country, with the official assignee in one town and the creditors' assignee in another, double sets of books would be required, so that enormous ex- 629 pense would be thus incurred. If, however, all these difficulties were overcome, the creditors' assignee was then to deliver quarterly accounts to the official assignee, who was to audit them. It would frequently take two years to wind up a large estate, and therefore there would in such a case he eight quarterly accounts, requiring the assistance of a professional accountant; and this would entail very considerable expense. But there was to be no check or control over the accounts rendered by the official assignee; in default of there being a creditors' assignee, the official assignee was to render accounts to the registrar; and in the County Courts the registrar was to be the official assignee; so that in those courts the registrar would render the accounts to himself, and would himself audit them. This state of things would go on until the final dividend—though there was no definition of what that was—but then the creditors' assignee was to he entitled to his discharge, and the official assignee was then to go on, his responsibility reviving. He ventured to say that it would be quite impossible to work this Bill in its present shape, and that unless it received considerable alterteration at their Lordship's hands it would only result in mortification and disappointment. As to the prevention of expense, there would be, as he had pointed out, the expense of the balance-sheets of the assignee, of the quarterly accounts, and of the balance-sheet of the bankrupt; and in addition there might be a manager appointed at the expense of the estate. He could not for the life of him understand why there should be any such paid agent appointed, for if the creditors' assignee were not competent why should he be appointed, and if he were competent why was he to be supplanted by the appointment of a paid agent? For all these reasons he was perfectly satisfied that unless changes were made in the Bill it would bring to a dead-lock the performance of the duties of official and creditors' assignees, and that there would be an enormous increase of expense. He wished to speak with all respect of his hon. and learned Friend who had framed the measure, and of the industry which he had applied to it; but it proved the inherent difficulties of the subject, that, after all the care and diligence of his learned Friend, he was only able to produce a Bill of this description. Now, as to the abolition of the distinction between traders and non-traders, or, to speak more cor- 630 rectly, between bankruptcy and insolvency. His noble and learned Friend said, that upon this point he had followed the Bill which he (Lord Chelmsford) introduced in 1859. But his noble and learned Friend was mistaken in that, for the object of that Bill was that there should only be three acts of bankruptcy applicable to non-traders, whilst by this Bill, as it was now worded, they were to be affected, not only by these three acts of bankruptcy, but also by the ten other acts of bankruptcy applicable to traders under the present law. This was probably an inadvertence; but it showed that the Bill required careful attention at their Lordship's hands. They all knew how Bills were altered in Committee; and after this Bill had been so altered in Committee of the other House it was proposed to reprint it; but it was not, in fact, reprinted until just before the third reading, when it was too late to propose Amendments; so that the measure had not in fact received the finishing touch of the House of Commons. But there was a more important objection, namely, that the non-trader clauses were to have a retrospective effect. Such was not originally the intention of the Attorney General. There was in the Bill originally a clause that these provisions were not to be retrospective; but by some means or other this clause was struck out, and as the Bill at present stood any non-trader who had incurred any debt within six years of the passing of the Bill would be liable to be made a bankrupt upon that antecedent debt. It was said that there was no injustice in this, and that eases had frequently occurred where new modes of procedure and new facilities were created for the recovery of debts, and those new modes of procedure were applicable to persons liable in respect of antecedent transactions. But this was not analagous, for this Bill proposed to alter the whole status of the debtor by attaching consequences to the debt which were not anticipated when the debt was contracted, and thus to inflict all I the evils and injustice of a retrospective law. He hoped to obtain their Lordship's consent to reintroduce the clause preventing the retrospective operation of the Bill. With regard to the County Court Judges they seemed to be treated like beasts of burden, for every weight was placed upon them. It was now proposed that they should have jurisdiction in bankruptcy, and that where there should be no Commissioner in any district the Lord Chan- 631 cellor should have power to transfer the whole jurisdiction of the Commissioner to the County Court Judge, and to transfer to the Judge likewise the staff of official assignees and registrars. This power of transfer, according to the interpretation clause, was not limited to estates under £300, and this power was to be given, notwithstanding the Commissioners on the Bankruptcy Law in 1854, of whom Mr. Walpole was the chairman, in the strongest possible way described how unfit the County Courts were to deal with questions of bankruptcy. It was necessary that a court of bankruptcy should be stationary. But the County Courts were ambulatory; and according to this Bill 485 new courts of bankruptcy were about to be created. Where were the books to be left, or how was it possible that the Judges in the County Courts should administer the estate of the bankrupt in the same way as the district Court now did? Then, again, the official assignee was generally chosen on account of his experience in commercial affairs and his great knowledge of accounts. But how was the registrar of the County Courts to perform those official duties when he was appointed for quite other purposes? The thing must break down. Then it must not be forgotten that the Judges of the County Courts were for the most part already overloaded with their proper business, and great injustice would be done them by saddling them with the bankruptcy business which was now discharged by District Commissioners at salaries of £1,800 a year, while there was to be no addition whatever to the salaries of the County Court Judges. If the County Courts were to take cognisance of cases of bankruptcy at all their jurisdiction ought to be limited to estates that were under £300 a year, and he was satisfied that even with that limitation the County Court Judges and registrars would have great difficulty in performing their duty. There were various clauses in the Bill of which he approved, but which were so clogged with other provisions as to have their intentions in a great degree frustrated. He alluded especially to that clause by which bankrupts who had no means to pay the fees of application in the ordinary way might, by the interference of the registrar, on making an affidavit that they had not the means of paying the expenses, obtain their discharge. This was a humane and a wise provision; but the object was thwarted by Clauses 115 and 116, which provided that this provision should 632 not be applicable to parties committed by a County Court Judge, but that in such cases the parties must be imprisoned forty days before he could be discharged; and when after that he was discharged the debt must still remain as a hopeless clog upon him. He thought these provisions ought to be struck out of the Bill. There was a general impression abroad that this Bill had not received that attention from the House of Commons which its great importance deserved. It appeared that hon. Gentlemen trusted—as they well might under ordinary circumstances—to the authority of his hon. and learned Friend the Attorney General, and that they were glad to get the Bill into their Lordships' House, where they knew their Lordships were in the habit of giving measures of this kind the most careful attention. He believed, further, there was a general impression abroad in the public mind that they might rely upon their Lordships to make those alterations and Amendments which were requisite to make the Bill perfect, and he hoped that impression would not be disappointed. But he feared, if he might judge from the attendance that evening, that this Bill would not receive adequate attention if it were considered in a Committee of the "Whole House; and he trusted that his noble and learned Friend the Lord Chancellor would adopt the suggestion of his noble Friend (the Earl of Derby), and consent to the Bill being referred to a Select Committee, where alone it could receive that consideration and amendment which its importance deserved and of which it was so susceptible.
§ LORD CRANWORTHsaid, that among all the subjects that could engage the attention of their Lordships, a good bankruptcy law was the most difficult. On the one hand there was the bankrupt, who was sore and irritable from the position in which he found himself; on the other hand the creditors, who were very angry when the bankruptcy took place, gradually became indifferent, and left the matter to agents and attorneys, until they found that the oyster was consumed and the shell alone remained for them. Any one who would settle this matter in even a tolerable manner deserved well of his country. The Bill now brought in by his noble and learned Friend contained many very excellent provisions. The clauses relative to traders and non-traders had, he thought, been framed with eminent skill. There ought to be no difference in the mode of administering the estates of in- 633 solvents whether traders or non-traders. The difficulty was in defining correctly an overt act of insolvency on the part of the trader and non-trader respectively. That difficulty had, he thought, been met very satisfactorily. Another part of the Bill was well calculated to give general satisfaction to the trading community. He referred to the clauses allowing the affairs of the bankrupt to be wound up by trustees without making the debtor a bankrupt, yet having the assistance of the Court of Bankruptcy if difficulties should arise. Another provision enabled the Chief Judge in London, where fraud had been committed of the nature of a misdemeanour, to try the bankrupt on vivâ voce evidence before a jury. This clause would require considerable modification. It would be necessary, for example, if such a severe punishment as three years' imprisonment was to be inflicted, that an appeal should be permitted such as now might take place in the case of persons tried under indictment. It would also be matter for consideration whether a penal jurisdiction of that kind ought to be extended to County Court Judges. In 1859 he had expressed his opinion, that the County Court Judges could not be advantageously employed in conducting bankruptcy business; he was still of that opinion, but in Committee he would carefully consider whether his objections were removed by the provisions of the present Bill. He doubted much whether the time of the Commissioners would be fully occupied; and, therefore, he approved of the power proposed to be given by the Lord Chancellor to order them to take accounts in Chancery; and he should like to know whether the Chief Clerks in Chancery might not be employed in some way in bankruptcy business—seeing that Chancery business was now disposed of so rapidly. He was afraid great evils would arise from the powers intrusted to the creditors' assignees. When in 1858 his noble Friend Lord Chelmsford's Bill was under discussion, he had communicated with a noble Lord who was not now present—Lord Ovcrstone—and that noble Lord satisfied him that the proposal to abstract the proceedings in bankruptcy from the official assignee and put them into the hands of the creditors' assignee was one that ought to be gravely considered. The effect would be to put them into the hands of the attorney of the creditors' assignee, and they might again see a state of things similar to that which existed 634 when Lord Brougham became Chancellor, when above £2,000,000 of money belonging to bankrupts' estates was found lying with London bankers. His noble and learned Friend referred to the great number of cases now settled out of Court; but there would always be a large number of cases settled privately, even with the most perfect system of bankruptcy law that could be established, for the general feeling was that when no fraud had been committed publicity should be as much as possible avoided. Then, with respect to the Chief Judge, he wished his noble and learned Friend had defined more exactly what the duties of that functionary were to be. He did not think the time of the Chief Judge could be occupied by the duties likely to devolve upon him. Indeed he could not see the necessity for such a functionary with a salary of £5,000 a year and a secretary at £300. Those were all matters that he thought would require serious consideration before the Bill passed into law.
§ LORD KINGSDOWNsaid, he did not propose to go into details, but he thought it desirable that their Lordships should distinctly understand the effect of this Bill in its two great divisions. In the first place it annihilated the distinction between traders and non-traders; and, secondly, it constituted an entirely new court for the purpose of administering both bankruptcy and. insolvency. He must say that if their Lordships had not yet pronounced any opinion upon the subject, he should have asked them to consider carefully whether it was fit to abolish the distinction by which those who were engaged in trade, and those who were not, were placed in different positions as regarded the operation of the bankrupt law. It appeared to him that the duties and liabilities of the two classes were entirely different, and it had hitherto been the policy of this country uniformly to preserve a distinction between them. In so doing we had, in his opinion, acted upon a sound and well considered principle. The man who engaged in trade must, from the nature of his engagements, give and receive credit, and it was also a part of his engagements that he must at all times be ready to answer the demands which he was liable to have made on him. With respect to those who were not engaged in trade the ease was very different. Take the case which, unfortunately, too often happened—that of a young man at college; there were always tradesmen ready to 635 press their goods on him—to tell him that payment was a matter of no consequence, or that it would do at anytime. Even after he left college and came to London the same thing was likely to happen to him, especially if he was entitled in reversion to a large property. It might he extremely reasonable to seize and sell the whole of a trader's property the moment that he was unable to meet his engagements; but was it so just or so equitable to do that in such a case as he had described? "When a creditor gave a young man in such a position credit he knew that the young man had no necessity to contract the debt—that he was, in fact, seducing him into debt—and was it right to give a person who had induced or seduced a young man to contract debts the right to put the whole power of the bankrupt law in operation to recover those debts? But, after the opinions expressed on the subject both by their Lordships and the other House of Parliament, he had no intention to ask them to review their decision. He should merely observe that it would require great care to provide against the consequences which might follow from it. Let them take the case of an heir in tail with a large property. A Jew moneylender might commence by lending him £50 and end by selling the entailed property, though that sale might bring ruin on an entire family. He believed that the mixture of the bankruptcy and insolvency jurisdictions and the having both administered in the same court was a mischievous system; but, assuming that their Lordships should be of a different opinion, he must take the liberty of inviting their attention to what had been already done on this subject. His noble and learned Friend had already referred to what had been done in the way of amendments in the bankrupt law. Certainly, if the law was in a bad. state it was not from want of attempts to improve it. Experiment after experiment had been tried though it seemed with little success. In 1831 "The Septuagint" were swept away, and a Court was constituted, with a Chief Judge and three other Judges, as a Court of Review, and there were six Commissioners. The Chief Judge had a salary of £3,000 a year, the other Judges £2,000, and each of the Commissioners had £1,500. The Commissioners who acted under the old law all received compensation, some of whom, he rejoiced to say, were receiving it yet. It was found that the Chief Judge and the other Judges had not enough to do, and, 636 accordingly, in the next year, or in 1833, another Bill was passed by which a part of the business of the Insolvent Court was transferred to the Court of Bankruptcy. Still work could not be found for them. In 1835 the number of Judges was reduced to three. In 1836 another transfer was made to the Court of Bankruptcy of the power over insolvents. In 1838 another, and in 1844 another Bill was passed, and in 1847 the Court of Review was abolished altogether, the Judges were otherwise provided for, and one or two of them were still living and in the enjoyment of pensions for the offices which they had received in exchange. It was now proposed by this Bill to restore the Court of Review, which in 1847 was abolished as useless. It was proposed to restore the Chief Judge without any other Judge, and to give him £5,000 a year. The present Commissioners of Bankruptcy in London were as competent to give a decision on any point which might come before them in that court as any Judge who could be appointed. Of two of these gentlemen, Mr. Fane and Mr. Serjeant Goulburn, he could speak from an intimate acquaintance with them of near forty years, and Mr. Fane had been a law reformer long before law reform became a fashion, and he was nearly the only reformer who had not reformed to his own advantage. Another great defect in the Bill lay in the multitude of appeals which it allowed. A single appeal was necessary in all cases; but here they had first the decision of the Commissioner, then of a Judge, next an appeal lay to Chancery, and finally to the House of Lords.
§ LORD KINGSDOWNreferred to the 75th section, which enacted that the decision of the Chief Judge should be final, unless he thought it a proper case for an appeal to the Court of Chancery, and asked whether it was becoming that the decision should rest with the Judge, whether or not he would permit his own ruling to be subjected to review. He contended that no Judges who might be appointed could more fittingly discharge the duties of an appellate jurisdiction than the Vice Chancellors, who, in the present state of business in the Court of Chancery, had ample time for the purpose. The Vice Chancellors were not fully occupied. He believed that for three days in each week for several weeks past the Master of the Rolls' Court had been 637 closed. Having referred to the provisions relating to official and trade assignees, the noble and learned Lord said he believed the operation of the Bill, instead of tending towards economy, would be productive of great extravagance. It was impossible to feel any confidence that this Bill would give satisfaction when it was remembered how many similar attempts had been made in the last thirty years, and that the result had been a state of things which the Lord Chancellor had described (though he believed erroneously) as exacting universal indignation. He had felt it right to give expression to these sentiments, intending no disrespect to the distinguished persons by whom the Bill had been prepared; but he felt it right to add that the measure now before the House was not that which the Attorney General had originally proposed. He had been obliged to consider the opinions and interests of a number of persons representing, with or without authority, the mercantile and trading interests of a portion of the Metropolis, and to introduce corresponding alterations into the measure.
§ LORD WENSLEYDALEshortly addressed the House, but was inaudible.
THE LORD CHANCELLORsaid, as it had been intimated that it was not intended to offer any opposition to the second reading of the Bill he should not think it necessary to occupy any of their Lordships' time in reply to the objections urged. He thought, however, that his noble and learned Friends, since they did not intend to oppose the Bill, would have done much better if they had reserved the greater portion of their observations until the measure had arrived at its next stage. It had been insinuated that the House of Commons had not duly considered the provisions of this Bill, and that they had been guilty of precipitation in sending up a Bill to this House to which they had not themselves paid proper attention. Now, he had known the House of Commons for many years, and he must say that he did not remember any instance of a Bill, with the exception of the Reform Bill in 1831 and 1832, which had occupied so large a portion of the attention of that House. When the Bill was in Committee each clause was duly considered and everything like party feeling was laid aside, and the Members on either side devoted themselves with great diligence to improving the measure. Several of the most important improvements in the Bill 638 had come from his Conservative Friends, amongst whom he should mention with honour the name of Sir Hugh Cairns. The Bill was amended, with their assistance, and it assumed such a shape as to satisfy them as well as the House of Commons. After such prolonged deliberations by the other House of Parliament it was now proposed by a noble Lord to refer the measure to a Select Committee. Such a proposition he (the Lord Chancellor) should resist, because he did not think it would be respectful to the House of Commons, after the most careful attention they had bestowed upon the provisions of the Bill that it should now be referred to a Select Committee. The commercial world had been informed every morning how the clauses had been disposed of the night before in the House of Commons; and now that the Bill was in their Lordships' House it was most undesirable that it should be considered by a select and secret tribunal, where perhaps some of its most valuable enactments might be smothered in private. He could not but express his surprise and regret at the objections urged by his noble and learned Friend near him (Lord Kingsdown), whose opinions he respected as much as that of any man living; but at the same time he (the Lord Chancellor) knew that the current of authority for the last fifty years had been against the barbarous distinction which now existed between trader and non-trader. With regard to the apprehensions entertained that family settlements would be disturbed by this measure, he would remind their Lordships that a provision similar to that now proposed had long been the law in Scotland, and had worked beneficially. The noble and learned Lord, in conclusion, said that when the Bill was in Committee he would answer at greater length the objections that had been urged against it.
§ Motion agreed to.
§ Bill read 2,a accordingly; and committed to a Committee of the Whole House on Monday the 29th Instant.
§ House adjourned at half past Eight o'clock, to Thursday next, half-past Ten o'clock.