Lords Sitting of 12 March 1869

MINUTES.
SELECT COMMITTEE—Hypothec appointed.
PUBLIC BILL—First Reading—Bankrupt Law Amendment (Ireland)* (30).

LAW OF HYPOTHEC IN SCOTLAND.

  MOTION FOR A SELECT COMMITTEE.
  THE EARL OF AIRLIE, in moving that a Select Committee be appointed to inquire into the operation of the Law of Hypothec in Scotland, said that, as many noble Lords were probably strangers to the law of hypothec as it obtained in Scotland, it would be necessary to enter into some explanation of its operation. In the first place, the Scotch law of hypothec was analogous to, though not precisely identical with, the law of distress in England and Ireland—a law which gave to the landlord, if the tenant should be unable to pay his rent, the right to distrain upon his crops or furniture. In fact, it gave to the landlord the first-claim upon either crops or furniture, and entitles him to receive his rent before any creditor could recover any portion of the debt owing to him. This was not altogether a new question. In the year 1864 a Royal Commission was appointed to inquire into the subject, and in 1867, under the late Government, an Act was passed which was introduced by a noble and learned Lord who was then Lord Chancellor (Lord Chelmsford). That measure did to a certain extent remedy what was held to be a grievance. The passing of the Act, however, could hardly be said to have settled the question, for there had been in Scotland for some time a great deal of discussion upon the subject. Last Session the hon. Member for Forfarshire (Mr. Carnegie) introduced a Bill in the other House to abolish the right of hypothec. His hon. Friend did not succeed in passing his measure, but he (the Earl of Airlie) understood that he had again this Session introduced a Bill with the same object. He would not now discuss the provisions of that Bill, which was not before the House, nor would he speak of what might or might not be the fate of that Bill. He only referred to it because he understood one of the most important stages of the Bill was fixed rather late, and as there

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  was a considerable pressure of Business in the other House, it might happen that the Bill might come up to their Lordships at so late a period of the Session that they could have no alternative but either to reject it altogether, without discussion, or pass it without due consideration. He thought therefore their Lordships would agree that it would be better to grant a Committee of Inquiry into this Act, so that they might be able to ascertain whether any further legislation upon the subject was required; and, if so, what ought to be the scope and tendency of such legislation. It was argued by those who desired the abolition of the law of hypothec that there was no reason why the landlord should have any priority of claim in the event of the bankruptcy of the tenant. It was said that this was unfair to the general creditors, and that it was injurious to the tenant himself, inasmuch as it induced a large number of occupiers to compete for farms, and thus raised the rent. It was said that the law was pernicious to agriculture, because, by its peculiar operation, it prevented the farmer from obtaining such facilities as he ought to have for procuring artificial foods and other things—indispensable to high farming. These shortly were the arguments which were used against the law of hypothec, and they were arguments which applied equally against the law of distress. Now, there was a great contrast between the great breadth of the principles which were laid down, and the very narrow and limited area in which it was proposed to apply them. The arguments which were urged, if good against hypothec in Scotland, were equally good against the law of distress in England and Ireland. He did not mean to say that there might not be exceptional circumstances which might justify exceptional legislation, and if it could be shown that the condition of agriculture was more backward in Scotland than in England and Ireland, and that on the whole the occupiers of land, as a class, were less comfortable and happy, and that the position of the agricultural population was altogether less satisfactory, then indeed a case would be made out for dealing with the question in Scotland, and leaving it alone in England and Ireland. It seemed to him that the burden of proof lay with those who de-
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  manded this exceptional legislation to show that such legislation was necessary and expedient in Scotland as, judging by the mode in which they proposed to proceed, they thought neither expedient nor necessary in England nor in Ireland. To compare for a moment what had been proposed for Scotland with what had been proposed in the case of Ireland. They were told by people who were entitled to be listened to at all events with attention and respect, that the land tenure question of Ireland was at the root of the Irish grievance. Now, in 1866 a measure was brought forward by the Government of that day which dealt with the question of land tenure in Ireland. It was introduced by the right hon. Gentleman who was then, as he is now, Chief Secretary for Ireland (Mr. C. Fortescue), and he (the Earl of Airlie) referred to that measure because he believed it was considered satisfactory even by the most ardent advocates of tenant-right. The measure failed, not so much on account of the opposition on the part of the tenant-right party, as on the part of those who advocated the side of the landowners. That measure dealt with the law of distress, and dealt with it in this manner—it abolished the presumption in favour of the law of distress, unless there was an agreement in writing between the landlord and the tenant that the right of distress should be retained; but the measure now asked for in the case of Scotland went beyond this. If the measure was carried by those who desired the abolition of the law of hypothec, the law would then over-ride any contract which might be made between the landlord and tenant. He was not there to discuss the merits of the proposition, or whether it was right or wrong—all he wished to point out was this, that the proposition made in regard to Scotland went very far beyond—as far as, he believed, beyond any proposition ever made even in the case of Ireland. Now, no doubt there were differences between the position of the landlord in Scotland and the position of the landlord in England; but it did not appear to him that the position of the Scotch landowner was so exceptionally favourable that he should be legislated for in such a way as to impair the security which he now had in reference to the holding of his land, and yet leave the English law untouched. In Eng-

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  land, as their Lordships were aware, it was the occupier of the land who payed the tithes and rates; he also paid the property-tax, but he deducted the amount from the rent. On the other hand, there were charges upon the land and upon the landowner in Scotland which did not at all fall upon the land or landowner in England—and, in point of fact, the case with regard to England was reversed in Scotland. In Scotland the landlord was liable to payment of half the poor rate. He was also liable for the whole of the county rates; and, in addition to this, he was liable for the whole burden of the maintenance of the Established Church. Beyond all this, in Scotland the landowner was charged with building and repairs of schools. He was also liable for half the amount of the schoolmaster's salary, and for the building repairs of the house of the clergy, and for the building and repairs of the churches; whereas in England the church rate had been abolished. Now, in Scotland, for all these charges the landowner was liable, whether he received one penny of his rent or not; and he thought it would be a very proper subject for a Committee to inquire into, whether, supposing the Legislature should think fit to abolish the security which the landlord now had for the payment of his rent in the case of a bankrupt tenant, he should be left still subject to all these charges. There was another point. Supposing the law of distress to be abolished, how would that affect those who held what in Scotland were called heritable bonds, and in England first mortgages on landed estates? At present the security of the holder of the mortgage was as perfect as it could be; but his security for his interest could not be better than the security of the landlord for his rent. If the landlord agreed to pay the interest, the mortgagee stepped into the shoes of the landowner, and sequestrated the rent; and if the tenant failed it was clear that for so much of the interest his security was less than it was before. It was all very well to say that the mortgagee could foreclose, or require his principal to be paid. So he might, no doubt; but, in the first place, men who invested their money in mortgages on land generally did not want to be paid. What they wanted was to secure an easy investment of their money. If you di-
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  minish the security for the rent, it was clear that you depreciated the value of the land; and if that was so—if the value of the security was depreciated—one of two things would happen—either a larger margin would be required, or the rate of interest would be raised; and probably both would happen. But every one knew that the larger part of the improvements made on landed estates were made with borrowed money, for very few landlords could make them out of their incomes. But he would leave this matter to the attention of those Gentlemen who said that the law of hypothec stood in the way of the improvement of the land, and would ask them to consider whether, if they diminish the security, and supposing the security to be unpaid, that would not have the effect of diminishing the landowners' power of raising money, and thereby prevent or stand in the way of improving the land? Then it was said that the landowner ought to take care to get tenants with plenty of capital, and then there would be no doubt as to his rent. In general, owners of land were anxious to get tenants with capital, and for certain descriptions of farms there was no difficulty in getting tenants with abundance of capital. There was no difficulty in getting tenants with capital for farms which were of good soil and which were favourably situated as regards climate. There was no difficulty in getting tenants with capital for large grazings; but there was a large amount of land in Scotland which lay on the verge between the pasture land and the arable country, and was formed into small farms of not very good land, with a not very favourable climate. Those farms were occupied for the most part by men of an industrious and deserving class, who were, in the first instance, generally without any capital; and it was impossible for them on entering their farms to pay their rent in advance, or even to pay it within a short time afterwards. He knew cases where many of these men had risen from being shepherds, ploughmen, or agricultural labourers, but who were now in the occupation of very good farms, with very fine land indeed; but he did not believe that those men would ever have had the opportunity if it had not been that the landlord was enabled to give them credit for the rent they had to pay at first. For

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  his own part, he saw no great cause for fear with regard to the landowner. He thought he would be able to secure his rent. They were in the possession of property for which the demand was great, and continually increasing, and they were in a position to make their own terms; but he did fear that, if this law of hypothec was abolished unconditionally, it would place a very great hardship on a very deserving and industrious class of men. What would be the consequence in the case of those farms of very moderate fertility and bad climate to which he had alluded? He believed that, if they took into account the expense of repairs, the landowner did not derive much more profit from them than he would have if they were in grass, in a state of nature; but, so long as his rent was paid, he preferred that these men should hold them. But if they imported into the contract the element of uncertainty, and made it very doubtful whether he would be sure of receiving his rents or not, what he would naturally do would be this—He would consolidate those farms, throw them into large grazings, and either stock them himself or let them to men of capital who would be able to pay rent. That was a change which could not be gone through without creating great hardship and suffering to those who might occupy those farms. He had seen in one of the local papers an account of a meeting held by members of the Rossshire Farmers' Club, which was largely attended by tenant farmers, who agreed unanimously to petition against the abolition of the present law of hypothec. If your Lordships would grant this Committee, he hoped they would be able to begin work soon after Easter, and he trusted that in a reasonable space of time they would place before their Lordships such information as would enable them to come to a right conclusion upon the question.
  Moved, That a Select Committee be appointed to inquire into the operation of the law of Hypothec in Scotland.—(The Earl of Airlie.)
  THE DUKE OF ARGYLLsaid, he had listened with great interest to the very able and clear statement of his noble Friend, who, he thought, had put the whole question before the House in a very clear manner. He thought it very desirable that this matter should be investigated by a Committee of that House.
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  He entirely agreed with the general principle laid down by his noble Friend, that this question could not be considered only in reference to Scotland; he thought the Committee should consider the relation in which the law of hypothec in Scotland stood to the law of distress in England and Ireland, and to the existence of similar provisions—he was told there were such provisions—for the security of the landowner in other countries of Europe. It would be most satisfactory, having regard to the general principle of jurisprudence, and it would be found convenient for the Committee to inquire into the rights of the owners of the soil in this country and in Europe generally. On behalf of the Government, he fully concurred in the Motion.
  LORD CAIRNSasked, what would be the form of reference, so as to enable the Committee to include an inquiry into laws with regard to other countries, and to all parts of the United Kingdom as well as to Scotland?
  THE DUKE OF ARGYLLsaid, the Motion referred only to the law of hypothec; but he apprehended it would be quite competent for the Committee to inquire into the relation of that law to similar laws in other places.
  THE EARL OF SELKIRKwas understood to approve of the appointment of a Committee, but desired to point out that the Act of 1867 had been so short a time in operation that its effect could scarcely be ascertained at present.
  Motion agreed to.
  And, on Thursday, 18th March, the Lords following were named of the Committee:—

  L. Privy Seal

  L. Saltoun

  E. Doncaster

  L. Wharncliffe

  E. Airlie

  L. Rossie

  E. Graham

  L. Panmure

  E. Grey

  L. Abinger

  E. Minto

  L. Portman

  E. Morley

  L. Clandeboye

  E. Camperdown

  L. Colonsay

  BANKRUPT LAW AMENDMENT (IRELAND) BILL [H.L.]
  A Bill to amend the law of Bankruptcy in Ireland—Was presented by The Marquess of CLANRICARDE; read 1a. (No. 30.)
  House adjourned at a quarter before Six o'clock, to Monday next, a quarter before Five o'clock.