SECOND READING. (Hansard, 22 June 1876)

§ LORD HATHERLEY

said, that there were two grievances connected with the former law on bankruptcy—one was that a bankrupt was allowed to be discharged upon payment of a very moderate dividend, or no dividend at all, through the influence of some favourable creditors; and the other was that a bankrupt's property was entrusted to hands unworthy of that trust, and who took care to retain for their own benefit a large proportion of the bankrupt's property. There was also the grievance that bankrupts could take the initiative, and by good management and the influence of friends easily become "whitewashed." As he mentioned on the last occasion, of 8,000 or 9,000 only 200 or 300 had paid any dividend at all. The Act of 1869, therefore, left every initiatory step in bankruptcy to the creditors, and no man could be discharged from his debts until he paid 10s. in the pound, unless the majority in number and three-fourths in value of his creditors passed a resolution, at a properly convened meeting to the effect that his inability to pay his debts was the result, not of his own fault, but of unavoidable misfortune. He wished to point out that one clause in his noble and learned Friend's Bill proposed to restore to the bankrupt the power of initiating bankruptcy proceedings in his own behalf for the purpose of putting his affairs in liquidation—a proceeding which he was afraid would revive all the old evils that were so rife before the Act of 1869 was passed. He thought, therefore, that the noble and learned Lord would do well to omit that clause from his Bill. With regard to the administration of the assets of the bankrupt, that duty before the Act of 1869 was entrusted to the officers of the Court with very unsatisfactory results; by that Act it was handed over to the official trustee, who was to be chosen by the creditors at a public meeting called for the purpose. Under such circumstances the creditors had no right to complain if the trustee whom they themselves had 235 chosen acted improperly. The Act of 1869 contained some very severe provisions regulating the conduct of the trustee, under which he was required to account to the officer of the Court for his administration of the assets, and was bound to pay all sums over £50 in the aggregate he received in his capacity as trustee into such bank as the creditors should select within a very short time of his receiving them. Under the Bill it was proposed that the provisional Committee of Inspection should consist of the five creditors resident in England by whom the largest amounts appeared by the debtor's list of creditors to be provable. The objection to that proposal was that the creditors of a bankrupt who had lost largely by his failure were seldom desirous of coming forward, and thus proclaiming that they had incurred bad debts to a considerable amount in the course of their business. Great complaints had arisen that the dividends paid under the Act of 1869 on bankrupts' estates were very small; but the fact was that compositions were much favoured by the existing law. The clause which directed that unclaimed or undistributed dividends should vest in the Crown at the expiration of five years, would afford a very efficient check upon those empowered to administer bankrupt estates. He was, on the whole, anxious that the measure should pass, believing that it would prove a very useful amendment of the present law; but whilst it seemed a large measure, it was, in truth, with the exception of four or five clauses, a mere re-enactment of the Act of 1869, and he doubted whether his noble and learned Friend would be able to pass it during the present year in that shape.

THE LORD CHANCELLOR

said, he would not repeat the observations he had previously made in introducing this measure, and expressed his obligation to the noble and learned Lord (Lord Hatherley) for the criticisms he had made upon the Bill, and the suggestions of amendment that he had offered. He might point out that although the present Bill looked rather formidable in its dimensions, it was in reality mainly a re-enactment of the Act of 1869, with some new clauses and amendments. He admitted that by proposing to repeal the Act of 1869 and to re-enact the greater part of its provisions in the present mea- 236 sure he ran the risk of extending the surface of opposition; but at the same time, having always advocated the principle of repeal and re-enactment, instead of patchwork legislation, he should not like to shrink from carrying out that principle in the present instance. The noble and learned Lord had correctly stated that the object of the Act of 1869 was to transfer the power of initiating proceedings in bankruptcy against himself from the debtor to his creditors; but, unfortunately, that Act allowed the debtor to initiate proceedings in liquidation and composition, and the consequence was that bankruptcy proper as compared with liquidation and composition had become a mere trifle. He had thought it preferable, therefore, to abolish the distinction between those methods of procedure, and to place all proceedings in bankruptcy under proper control, and under a uniform system. It was true that under the Act of 1869 a bankrupt was not entitled to his discharge without the assent of the majority in number and three-fourths in value of his creditors unless he had paid 10s. in the pound; but that provision only applied to bankruptcy proper, and not to liquidation or composition. He quite agreed in the views stated by his noble and learned Friend who had recently addressed the House in reference to the appointment of trustees in bankruptcy, and the period within which estates should be wound up when liquidation had been resorted to.