LAW OF DEBTOR AND CREDITOR— COUNTY COURTS ACT AMENDMENT BILL.

THE LORD CHANCELLOR

My Lords, I beg leave to solicit the attention of your Lordships to a subject which I believe to be one of great interest and importance to the people. That subject is the state of the law of debtor and creditor, and its administration as especially affecting the poorer classes of society. My Lords, I entreat your attention to this matter for a short time in the abstract, before I proceed to explain the provisions of the Bill which I am about to present, and which I trust will remedy some part of the evils now existing. The text of what I have to submit to your Lordships is furnished by the Returns that have been made to Parliament from time to time with regard to the operation of the power of imprisonment intrusted to County Court Judges. Your Lordships are aware that 86 in 1859 the attention of Parliament was drawn to this subject, and those powers were, to a certain extent, modified; but I find, notwithstanding, that the extent of imprisonment is still, at least to my mind, fearful in amount, and attended with the most injurious consequences to the poorer classes. By a Return which I moved for some time ago, I find that in the two years ending on the 31st of December, 1863, no fewer than 17,979 persons were committed to prison. The number of days for which they were committed altogether was 309,777, and the number which they actually spent in prison was 257,251. Out of that large number of prisoners, and that great amount of confinement, I find that for one cause alone—namely, on the ground of not having satisfied the judgment and costs, having the means and ability so to do—no less than 17,850 persons were committed to prison, and the number of days for which they remained in prison were 253,860. Comparing those figures with what I have already stated, your Lordships will observe that this cause is a great and fruitful source of imprisonment, I beg your Lordships to notice that the liberty of many of these men was taken away for sums of money as low as 1s. 6d., 3s. 1d. 1s. 10d., 2s. 9d, and one person was actually committed to prison for several days for the sum of 9d. The sum total of the debts due on all the judgments at the time of committals amounted only to £63,438, Now, the 17,850—or as I will, for the sake of round numbers, call them 18,000—persons belonged for the most part to the operative classes—to the class of artizans and to the class of agricultural labourers—the majority being of the former class, I think the wages of an artizan may be put at from 20s. to 40s, a week, and those of an agricultural labourer at 12s. a week. Probably, therefore, I am below the mark when I value each day spent in prison as equivalent to 3s. worth of labour for each working man. Confining ourselves at pre sent to this single ground of commitment —namely, having had ability to pay—your Lordships will find, if you multiply 253,860 days by 3s., and it' you estimate that each of these unfortunate persons has lost one: day's work independent of and in addition to the time he is confined in prison by his attending the Court, that the value of the labour actually lost to the country by the operation of this imprisonment, in order to bring about the possible payment of 87 £62,438, is £43,434. Surely no system can be worse than this—that whereas the labourer or the artizan has no wealth except his ability to labour, you subject him to the operation of a law that shuts him up in prison, deprives him of the power of exercising his skill or his strength, condemns him to idleness, exposes him to contamination, and after a certain period sends him out from prison demoralized, degraded, with the probability of his being unable again to obtain work without considerable difficulty. But your Lordships must consider, in addition to this, the evils that fall upon society by the operation of this law. I have stated the loss to the country of that which is its wealth — productive labour; but we must add to that what society suffers—first, by the augmented charge thrown on the county rates in order to keep these persons in prison; secondly, by the increase made to the poor rates for the maintenance of those who, being dependent on the productive head of the family, are by his imprisonment in many cases thrown upon the parish; and thirdly, by the aggravation of the burden of debt by the costs payable by the prisoners, which are of course added to the debt, thus removing to a more distant time the possibility of being relieved from the debt. Let me here ask your Lordships to pause and consider whether this is a state of things which ought to be maintained? On what right does the creditor claim a title to imprison his debtor? What right has a man, because he is a creditor, to inflict positive loss and evil upon society? Before he is entitled to imprison his debtor I think the least you may require of him is to prove that he gave credit to the debtor under circumstances which justified him in doing so, and which require him to punish his default by imprisonment. But, in the present case, as I shall endeavour to show, there is hardly a single creditor in a position to say that he has a right to demand this remedy on the part of society, in order that he may be enabled to recover that debt which he has thought proper to allow his debtor to contract. Let us contrast the state of the law as it is administered in County Courts with reference to labouring men with the state of the law as it exists with regard to other classes of the community. The debtor under this law may be imprisoned fifty times over for the same cause. The state of the law is such that the creditor is always on the watch to find where his debtor is employed, and then he 88 pounces upon him and sends him to prison, frequently three or four times, in the hope of wringing from him some further contribution towards the payment of his debt. Observe the great injustice thus done to the poor. If there was a single bright spot in the original law of England with regard to debtor and creditor it was this —that by the common law if a creditor seizes the body of his debtor and keeps him in prison for however short a time, that amounted to a satisfaction of the debt — having once deprived the debtor even for a few hours of his liberty, the common law held that the debt was satisfied. But the law now established with regard to the poor permits the creditor to send his poor debtor to prison again and again—in fact, there is no limit to the repetition of the right of imprisonment except the limit which a merciful Judge may be inclined, even at the expense of the law, to interpose. The law which is the origin of the whole of these enactments is a clause contained in the 9 & 10 Vict, c, 95, s. 99; and the peculiarity of that clause as it affects the poor man is this—he is liable to be committed if he has contracted a debt without having had at the time a reasonable expectation of being able to pay it—if he has contracted it without having had sufficient means and ability to pay it. Now, a poor man has no fixed means whatever, except what his labour and the wages earned by that labour supply. If, therefore, he is not in a condition to labour, and contracts a debt, he is caught by the clause, for he is held by the law to have contracted a debt without a reasonable expectation of being able to pay it; and if he complains that his labour from day to day should be held to be included in the words of the Act, but that he was unable to get employment at the time though willing to work, then it follows again that he has contracted a debt without having the reasonable means of paying it. The result is that the law has mortgaged the labour and earnings of the poor to their creditors for an indefinite time mercilessly and without possibility or hope of relief. The law of England was, I am sorry to say, until late times, in a very barbarous and savage state. In 1551 a case came before Chief Justice Montague, in which a question was raised as to whether a sheriff or his officer should supply a person whom he had arrested with the means of living. The Chief Justice, on that occasion, said— 89 If a sheriff or other officer takes an obligation of his prisoner for meat and drink, it is void; for if one be in execution he ought to live on his own, and neither the plaintiff nor the sheriff is bound to give meat or drink no more than if one distrains cattle and puts them in a pound, for there the owner of the cattle ought to give to them meat, and not he that distrained them. And if he have no goods he shall live of charity of others; and if others will give him nothing let him die, in the name of God, if he will, and impute the cause of it to his own fault, for his presumption and ill behaviour brought him to that imprisonment, inasmuch as the sheriff and his other officers are not bound to find their prisoners meat. An obligation (bond?) taken for meat is void, for it is colore officii, and the sheriff cannot take an obligation of his prisoner but in a small number of cases. The law did not improve for a century, for, in 1633, we find Sir Robert Hyde, one of the Judges of the Common Pleas, expressing himself in nearly the same words— If a man," he said, "be taken in execution and lie in prison for debt, neither the plaintiff at whose suit he is arrested, nor the sheriff who took him, is bound to find meat, drink, or clothes. He must live on his own or the charity of others; and if no man will relieve him, let him die, in the name of God, says the law, and so say I. My Lords, I refer to these cases for the purpose of illustrating the way in which Judges almost invariably look at the matter from the creditor's point of view, which is also, as it were, that established by law. They have a notion that whatever the law has ordained must be right, and hence they regard the case with reference only to the creditor, and not with reference to what mercy, or, which is more to our purpose, the interests of society require for the debtor. At one period, the unhappy debtor was left to rot in prison. Then a more humane spirit came over the law; and the Lords' Acts were passed. Subsequently the Insolvent Debtors' Court was established, The principle of the Bankruptcy Court used to be to treat a bankrupt as a criminal; but there has been, as your Lordships are aware, a considerable modification in the administration of that part of the law, and I now wish to point out to your Lordships the difference between the law according to the County Court system, and that which has at length been established with regard to the rest of the community. When the first great advance was made in the law relating to imprisonment for debt, a distinction was drawn between the imprisonment of debtors, merely as such, and of debtors who have committed frauds amounting to a misdemeanour. By the recent changes 90 in the law no man can now remain in prison as a bankrupt for more than fourteen days; whether he be a trader or non-trader he has equally the power to emancipate himself, unless fraud can be shown against him. I have no reason whatever to be discontented with that part of the Act. On the contrary, I hope I may be permitted to refer to it with some satisfaction, for I have seen the Queen's Prison — which had existed for an indefinite time —closed for ever, and that notorious nursery of idleness and profligacy transformed into an hospital. Under the County Court system, however, the debtor is subject to longer imprisonment; in fact, the County Court has become the parent of the very evil which we are now called upon to check. As soon as these Courts were established, there grew up along with them an infinite expansion of credit. Small shopkeepers gave credit in every village, pedlars went from cottage to cottage offering credit—every kind of temptation was held out to the improvidence, thoughtlessness, and self-indulgence of the poor man. It is his great misfortune that he now obtains credit ad libitum. The result is, that when he takes home his wages at the end of the week, and finds that a certain portion of them is required for necessaries for the use of his family, a struggle commences in his mind whether he shall pay for these goods in ready money or procure them on credit, and regale himself with the money in his possession. The consequence is that, in a vast number of instances, the money is spent in the public house or in some other improper way, because of the facility of obtaining credit, and thus the poor man is inevitably demoralized. Nor does the evil end here, I learn from inquiries I have instituted, that the poor man who takes credit has, almost always, to pay from 30 to 50 per cent above the actual value of the goods if they were bought with ready money. When the shopkeeper demands payment the debtor is probably unable to meet the claim, and is carried to the County Court; the Court issues a judgment against him; and thereupon he finds it necessary to incur a fresh debt with another shop in order to make up for what he has to deduct from his earnings in partial satisfaction of the original obligation. Thus the poor man is forced to go on struggling with increasing difficulties, after he has taken the first false step. You must remember, my Lords, that in this 91 case you are legislating for an uninstructed, half-informed body of persons, prone, no doubt, to habits of improvidence, delighting in recreations and amusement, and thoughtless as to the future, and hence you are bound to use the same care and caution as if you were legislating for children or women. The advocates of the credit system say that it is advantageous because it enables a poor man to get assistance in the time of adversity. There may be a few cases in which that happens, but they are far more than counterbalanced by the number of cases in which the debtor is demoralized by too ready and unnecessary credit. The Returns made by the County Court Judges describe the operation of the system. The Judge of a very extensive district in Wales, where there is a great number of poor labourers, says— There is an extensive system of selling goods, chiefly wearing apparel, by travelling packmen, on terms of paying 1s. or 6d. per month. These purchases are almost always made without the knowledge of the husbands, and not unfrequently of the wives (the purchases being made by the daughters), and when the payments fall into arrear, which is constantly the case, the vendor enters his plaints by hundreds, and takes out his judgment summonses in large numbers. There is, in Pembrokeshire, Cardiganshire, and Carmarthenshire, a system of sales by auction which supplies nearly half the business of the County Courts in those counties. These sales comprise nearly every species of goods, and the intended purchasers are liberally supplied with beer, &c. The goods are sold on nine months' credit, with a surety, whose name is written by the clerk of the sale—A being security for purchaser B, and B being security for purchaser A. The auctioneer or clerk (who is frequently an attorney or an attorney's clerk) discounts the sale by a payment at once to the vendor, whereby the right to sue is transferred to the purchaser of the sale monies, of which the result is an enormous crop of action and judgment summonses. All the Judges, or, at any rate, a great number of them, concur in describing the County Court as a great machine for the collection of debts, which shopkeepers, pedlars, and dealers of that sort willingly allow the labouring population to contract, depending for the payment of them on the pressure of that tribunal. The Judge of another very extensive district in North Lancashire states— In the case of the Scotch pedlar the usual course is this:—He calls when the husband is at his work, tempts the wife with shawls and dresses that she really does not want or cannot afford, and gives her credit for them. She goes on paying without her husband's knowledge what she can save from the house money for perhaps a year or more; at last the creditor comes forward and 92 demands the money from the husband; he beats his wife, and is summoned by the creditor to the County Court; thinks it unjust, particularly as the goods are sold as a rule (I speak advisedly) at three times their value; refuses to pay, and often goes to prison rather than submit to what he considers an imposition. He goes on to say that "you can have no idea of the extent to which the system is carried on in the North of England. I sometimes have fifty cases in one day of this kind." This is the nature of the cases which result from the state of the law. I am unwilling to aggravate this part of the case with respect to the "tally" system, as what I am about to mention may be an exceptional case; but there is a case specially mentioned by the County Court Judge of the district of Cornwall, of a woman having poisoned herself, and on the inquest, it appeared that she had contracted a debt intending to keep up the payments. In the absence of her husband at sea, her furniture was seized for the debt under a County Court Order, and shortly afterwards she poisoned herself. The jury expressed their strong disapprobation of the "tally" system, and their hope that some stringent measure would be introduced into Parliament to put a stop to it. I take from a Return in reference to another county an example to illustrate the results arising in cases where credit may be had, and in cases where it cannot be obtained. The County Court Judge contrasts the circumstances of the mechanic at the Enfield Rifle Establishment, which supplies him with a great many cases, with the fact that in respect to the large body of soldiers at Colchester scarcely a private or non-commissioned officer had ever been before the County Court. He says— I would contrast with that the large body of soldiers in camp at Colchester, scarcely a private or non-commissioned officer of whom can I remember to have been before me in the County Court. I am at a loss to assign any reason for this than the knowledge of the publicans and other traders of the town that these men are exempted from being committed for debt, and are not, therefore, allowed to incur any. I am thus led to the conclusion, that it is not by wholly abrogating the powers of imprisonment given by the 8 & 9 Vict, c. 127, and the 9 & 10 Vict. c. 95, that the desired object will be best attained, but by confining their application to cases of fraud, and by carefully defining the nature of the frauds which shall be so punishable. In giving credit to poor persons, the tradesman trusts to the power of imprisonment for the recovery of his debt.

Such being the state of the law and the result of its administration, I beg your 93 Lordships to consider what, under the circumstances, moral justice and those principles of duty to which you would appeal, if this matter were now for the first time to he dealt with, demand of you. Suppose you found your law without any trace of; imprisonment for debt, would you say that the man who had given credit had the right to throw his debtor into prison? Is that a likely mode of obtaining payment of the debt, when the unfortunate debtor has nothing by which he could pay the debt except his labour? But if you have a law producing such evils to the community, are you to be told that it is justified on the hypothesis that it may tend to alleviate the condition of the poor man in times of distress by enabling him to obtain credit? That is the only argument I find brought forward to maintain and support this state of things—namely, that this description of credit is necessary for the good of the poor man, and that credit would not be given without the power of imprisonment. I utterly deny that this description of credit is necessary or desirable, or that it conduces to the good of the poor man, I say that the very contrary system would produce habits of prudence, care, and of providence on the part of the poor; and these are the objects which your legislation should be directed to attain, and that it should not be directed to arm the creditor who unduly, improvidently, and in the spirit of competition gives credit of this kind.

I now beg your Lordships to observe the manner in which I contemplate to apply a remedy to this state of things, I propose, in the first place, to abrogate entirely the present rule of law that gives the power of imprisonment to the Judge if he is satisfied that the debtor has the ability to pay. I endeavoured to mitigate that power by introducing into the Bankruptcy Bill of 1861 a provision which required the Judge, in estimating that ability, to take into consideration the whole circumstances of the debtor. I have no reason to find fault with the conduct of the County Court Judges. On the contrary, I have every reason to be satisfied with the diligence, the care, and anxiety for justice shown by these judicial functionaries in furnishing their opinions on this subject, With the exception of that feeling which naturally actuates them in favour of the existing law, and particularly of maintaining the power of imprisonment, on which they consider the efficiency of their system almost entirely depends, I find nothing in 94 their answers to the application for the expression of their views but great humanity and great anxiety to discharge this painful duty in the most considerate and humane way. But, my Lords, after abrogating the punishment of imprisonment for the cause I have just stated, it still is necessary to retain some principles of that criminal jurisdiction in this portion of our statute law. Therefore, there is a power to commit to prison on the Judge being satisfied that the debt was contracted without any reasonable expectation of ability to pay it. The result is that, by my measure, if passed, the law will stand thus: that if the debt was contracted by fraud, false pretences, or without reasonable expectation of ability to pay it, the debtor will be liable to imprisonment; but that imprisonment will be once for all—he will not be liable to imprisonment more than once for the same debt; but I hope to make that imprisonment not a farce, but a reality. I use the word "farce," because, from the want of some general stringent rule, I find imprisonment in some gaols is a farce and in others a reality. A person committed to some gaols is permitted to supply himself with his own food and to have strong drinks. If a debtor should have been proved to have committed one of the criminal acts which I have enumerated in the Bill, then I propose that he shall be treated as a misdemeanant, that he shall be sent to gaol and imprisoned for a period not exceeding two calendar months, but shall not be subjected to any further imprisonment. I propose in addition what I trust your Lordships will consider a humane and wise improvement. At present the Judge is obliged to confine his attention to the individual case which is brought before him. If a debtor be brought into Court upon a judgment debtor's summons, the Judge can make an order only for that particular debt; and thus a rope is, as it were, thrown round his neck, and the unfortunate man is probably compelled to go and contract other debts in order to meet his liabilities under the judgment of the Court. I beg your Lordships to figure to yourselves the case of an agricultural labourer who, in time of sickness or want of work, has contracted debt to the amount of £7, £8, or £9. Probably his wages are only 10s. or 12s. a week. He is brought to the County Court, and makes an arrangement, to pay £3 or £4. But in what way can he provide for the payment of the debt? There are scarcely any means by which he 95 can recover himself; and the Judge has no power to take into consideration the whole condition of the man. I provide, therefore, by the Bill, that whenever a debtor shall be brought up, and the Judge, from the examination that takes place, shall have reason to believe that the man has no sufficient means, either present or future, to provide for the discharge of his debts within reasonable time, then the Judge shall bring before him all the creditors, and ascertain the amount of the load which with propriety can be laid upon the debtor's shoulders, and the sum which he is to pay shall be paid into court and divided among the creditors. In this way the administration of the law in the County Courts will aid in the prevention or punishment of fraud; and, in the same way, I think there is some hope of restoring the poor man who has been involved in debt to a condition equal and corresponding to that in which the administration of your Bankrupt and Insolvent Debtors Law has for a long period of time placed those who are commonly said to be in a better condition of life. My Lords, these are the chief propositions which I make with respect to the alteration of the law—with one addition, which I hope your Lordships will think a fit and proper one. I propose that no action should lie or judgment be given for any score for beer or ale consumed on the premises of any alehouse or beershop. If the publican has the poor man inside his door, he may then and there take his money for the drink which he consumes, but he shall not tempt the poor man by the offer of credit, and score up against him a sum which for a long time may not be demanded, but which is sure to be brought forward at last to plunge him into despair. There are other clauses which I trust your Lordships will think have been properly introduced. With respect to debts under £20, there is no reason why they should be allowed to remain hanging over the poor man for a long time, as at present. I propose, therefore, to enact that the debt shall be sued for, and the judgment enforced within one year from the time when the last item of the account was contracted, or the last payment made. There is no good reason why old scores should be recorded and registered against the poor debtor, instead of having the debts promptly demanded and enforced; and by this enactment he will be emancipated from those old debts, which are sure to be brought forward when they have become most bur- 96 densome and inconvenient, whereas they might, at the proper time, have been promptly and easily paid.

My Lords, I have now gone through the first portion of the Bill, and will proceed to explain the provisions of the second portion. Your Lordships are aware that when the County Courts were first established, their jurisdiction was limited to what lawyers are in the habit of calling matters of law, in contradistinction from matters of equity. A matter of law must, of necessity, be matter of equity; but your Lordships are aware that there has been a very great distinction in our law between certain contracts, certain subjects, certain causes of action, certain rights and privileges, which belong all of them to natural justice, but which, in consequence of the indisposition of Judges at common law in former times to entertain them, have now become allocated and peculiar to "equity." To show how necessary it is to the poorer classes that they should have the benefit of "equity," I shall give one or two examples. A poor man may die worth some £80, £90, or £100, and may leave behind him a widow with four or five children, or some brothers and sisters. If a quarrel should arise the County Court has no jurisdiction—no relief can be had without coming to the Court of Chancery. But the Court of Chancery, though I am happy to say greatly ameliorated, is still a machine utterly incapable of dealing with property of small amount. The smallness of the property sinks beneath the weight and expense of the machine. It is not right that it should be necessary to drag these small matters before a Court whose machinery is so utterly un-suited to such cases. If you will but suppose a case of a small property of this kind being brought up from Lancashire or Cumberland, you will at once see the absurdity and injustice. It is not right when a poor man has left behind him £100 to be distributed among his brothers and sisters, that there should be no means of distribution. Again, that in the case of a partnership in a country town, where the goods do not perhaps exceed £100 or £200, where there is a quarrel between the partners, and one appropriates the lion's share, there should be no remedy without going to the Court of Chancery. In all these and similar cases, I propose to invest the County Court Judge with summary equitable jurisdiction, to be administered promptly, economically, without much 97 form, without delay, and I hope in a manner that will supply a want which has long been felt, and with respect to which I have one concurrent testimony from the County Court Judges, that this addition to their powers will tend greatly to the relief and benefit of the poorer classes, and will remedy what amounts at present to a palpable denial of justice.

There is one other point to which I beg your Lordships' attention, Your Lordships are aware that when the County Court system was established, the power of suing for small debts in a superior court of common law was not taken away, but that power was attempted to be checked by providing that costs should not be recovered. But, unfortunately, as the power remains, many unscrupulous practitioners, when they are desirous of extorting payment, resort to the machinery of the superior courts, calculating upon the submission of the debtor, and making that calculation constantly with success, because it would be impossible for the defendant to resist the action, although he might have a good case, without incurring in the progress of the defence a greater amount of cost to his own attorney, than the sum for which the original writ was issued. I propose to introduce provisions in the Bill which I hope will be sufficient to prevent the abuse of the power of resorting to the process of the superior courts of law.

My Lords, this is a measure to which I earnestly entreat the attention of your Lordships, because in your several positions you have an opportunity, in the most extensive and most effective manner, of ascertaining what is needed by the condition of the labouring and operative classes, I desire to make the law with regard to; these classes as plain, as economical, and as readily applicable as I desire to see it in regard to the other classes of the community, and even more so. Therefore, I repeat with some diffidence, but with an earnest hope and conviction that you will deem this measure worthy of your best attention, I submit to you the result of the great and anxious consideration which I have given to the subject, in the hope that, by the aid of your Lordships, this Bill, although, perhaps, not in the form in which you will ultimately affirm it, may yet go from this House and result in such a change in the law as may tend to the benefit of the labouring classes of the community. The noble and learned Lord then presented—

98 A Bill for Limitation of Actions and Process for Small Debts, and to amend the Acts relating to the County Courts, and to confer on such Courts a limited jurisdiction in Equity.

LAW OF DEBTOR AND CREDITOR— COUNTY COURTS ACT AMENDMENT BILL.—FIRST READING