PREFERENTIAL PAYMENTS IN BANKRUPTCY ACT (1888) AMENDMENT BILL. (Hansard, 5 April 1897)

§ * VISCOUNT KNUTSFORD

, in moving the Second Reading of this Bill, said the object of the Bill was to secure further protection for the wages of clerks and workmen in ease of the winding up of companies. The Bill had come from the House of Commons, where it was strongly supported by Members on both sides, and especially by those who had taken a special interest in questions affecting the working classes. There was no opposition to the Bill in the other House; the only point urged against it by Members, who entirely supported the Bill as it stood, was that it did not go far enough. The Bill was in strict accord with and gave further extension to the policy which had been confirmed by Parliament on several occasions of protecting workmen's wages by giving them priority in case of the bankruptcy, liquidation, and winding up of companies. He need not do more than refer to the comparatively recent Acts of 1883 and 1886, which gave effect to this policy of protection by giving priority to wages of workmen and labourers in certain cases, and he would come at once to the Act of 1888, of which the present Bill was an extension. By that Act certain debts were given priority, and amongst them were the wages or salaries of clerks or workmen not exceeding £50, due for services rendered during four months prior to the receiving order or the winding up of the company; and, further, the wages of workmen or labourers, not exceeding £25, due for services rendered during two months before the same dates. That Act had worked well, but experience had shown that it did not go far enough, and further protection was needed. It did not cover the case of a company being wound up, and the assets not being sufficient, or not more than sufficient, to cover the claims of debenture holders. In these days of limited companies and floating debentures, it had been found that the workmen frequently lost their wages. Cases of considerable hardship were cited by the hon. Member for Oldham (Mr. Ascroft), who, with other Members from Lancashire, had paid great attention to the question, in which much interest was taken by the textile operatives of Lancashire, and by whom, indeed, this movement for extension may be said to have 487 started. The Bill met the practical grievance he had referred to, and gave the wages of clerks and workmen priority over debenture holders. Section 2 of the Bill provided for this in cases of the winding up of companies, and Section 3 for cases in which a receiver had been appointed. By Section 2 of the Bill it is provided that, the debts mentioned in the Act of 1888, that is, the salaries and wages which he had before referred to, shall have priority over the claims of the holders of debentures or debenture stock, under any floating charge on the assets or effects or uncalled capital of the company which is being wound up. The Bill was certainly a most just one, because the work in respect of which wages had been earned had improved and enhanced the value of the very assets and property to which the debenture holders would look in the case of the company being wound up, and the work would have been done just as much in the interest of the debenture holders as in the interest of the shareholders. The Solicitor General (Sir R. Finlay) during the discussion of the Bill in the House of Commons said he thought that in every part of the House there was a general agreement as to the fairness of the principle on which the Bill was founded. The debenture holders had a charge upon the undertakings, and it certainly was very difficult to say why, consistently with any principle of equity, they should not be compelled, on the principle of the Act of 1888, to give a certain priority to those workmen by whose exertions their security had been provided. So far there was, he submitted, no disagreement, and he believed lie expressed the views of the Government in saying that. It was quite clear that this extension of protection of clerks' and workmen's wages would hardly appreciably diminish the security of debenture holders. If there were any slight diminution, they might fairly set against it the justice of the case, the principle admitted and recognised by the Act of 1888; and the importance to workmen that they should not lose their wages. As he said before, there were some who heartily approved of the Bill, but only regretted that it did not go far enough, and that it did not give priority over specific charges created by mortgages. The Bill is confined to debentures which merely create 488 a floating charge on the assets or effects or uncalled capital, in which case, as pointed out by the Solicitor General, the company is at liberty to dispose of its property, and the charge is applicable only in respect of such property as is there when the debenture holders step in to take possession. The Bill does not include and give priority over instruments which create a specific mortgage of part of the company's property, as, for example, the land and buildings which belonged to the company. An amendment was proposed in the other House to effect this further extension, but it was pointed out that these latter instruments were on a different footing to those which merely created a floating charge, and that there might arise considerable difficulties in giving effect to this additional extension. The Amendment was withdrawn, and the Bill was left as it was. He hoped he had satisfied their Lordships that this was essentially a just Bill, and that workmen had a right to look for protection against debenture holders, seeing that the work they had done was as much done in the interests of debenture holders as of shareholders.