§ Order of the Day for the Third Reading read.
§ Moved, That the Bill be now read 3a.— (The Earl of Granard.)
§ On Question, Motion agreed to.
§ Clause 1:
§ Prosecution of Offences Summarily. 32 & 33 Viet. c. 62.
§ 1.—(1) Any offence under, or which may be dealt with as if it were an offence under, the Debtors Act, 1869, alleged to have been committed by a person who has been adjudged bankrupt, or in respect of whose estate a receiving order has been made, may be prosecuted summarily, and if so prosecuted references in the enactments creating those offences to the jury shall be construed as references to a Court of summary jurisdiction:
§ Provided that—
- (a) the maximum term of imprisonment, with or without hard labour, which may be awarded by a Court of summary jurisdiction for any such offence shall be six months; and
- (b) summary proceedings in respect of any such offence shall not be instituted after the expiration of three years from the commission of the offence, or of one year from the first discovery thereof either by the Official Receiver or by the trustee in the bankruptcy.
§ (2) Where the prosecution of a person for any such offence is ordered by the Court, and the order of the Court is made on the application of the Official Receiver and based on his report, the Board of Trade may, notwithstanding anything in section one hundred and sixty-six of the Bankruptcy Act, 1883 (hereinafter referred to as "the principal Act"), themselves or through the Official Receiver institute the prosecution and carry on the proceedings, if or so long as those proceedings are conducted before a Court of summary jurisdiction, unless in the course thereof circumstances arise which, in the opinion of the Board, render it desirable that the remainder of the proceedings should be carried on by the Director of Public Prosecutions.372
THE EARL OF HALSBURY had four Amendments on the Paper to subsection (2), which as the noble and learned Earl proposed to amend it would read—
(2) Where the prosecution of a person for any such offence is ordered by the Court, and the order of the Court is made on the application of the Official Receiver and based on his report, the Public Prosecutor may, notwithstanding anything in section one hundred and sixty-six of the Bankruptcy Act, 1883 (hereinafter referred to as "the principal Act"), himself or through the Official Receiver institute the prosecution and carry on the proceedings, if or so long as those proceedings are conducted before a Court of summary jurisdiction, unless in the course thereof circumstances arise which, in his opinion, render it desirable that the remainder of the proceedings should be carried on by himself.
§ The noble and learned Earl said: I do not think there is much difference between the noble and learned Viscount on the Woolsack and myself on this matter. My point is that I very much object to any Government Department taking upon itself Judicial duties, and it appeared to me from the look of this subsection that this was transferring a Judicial duty to the Board of Trade. My noble and learned friend has called my attention to the fact that the magistrates have by Statute already the power of determining the question, and he has assured me that he will assure himself of that condition of things, and that if it should turn out not to be so he will take care that the Bill does not pass its final stage without that being put right. I have no objection as to who conducts the prosecution. But what I object to and always will object to is any Government Department allocating to itself such powers as these. I will not move my four Amendments to Clause 1 after the assurance which I have received from the Lord Chancellor.
§ THE LORD CHANCELLOR (VISCOUNT HALDANE)
I have conferred with my noble and learned friend, whose authority on these matters we all recognise, and I am glad that as a result of the conference I have been able to meet his wishes on this particular point. I have undertaken, on behalf of the Government, that in another place an Amendment shall be inserted under which Section 12 of the Summary Jurisdiction Act should be made to apply. There is in my mind a doubt as to whether the Amendment will be required, but it shall be looked into and if necessary the application of the section shall be a condition of this Bill proceeding.
§ Clause 13:
§ Amendment of Section 47 of principal Act as to the avoidance of Settlements.
13.—(1) The following subsections shall be substituted for subsection (2) of section forty-seven of the Bankruptcy Act, 1883, which relates to the avoidance of settlement:—
(2) Any covenant or contract made by a person (hereinafter called the settler) in consideration of marriage, either for the future payment of money, or for the future settlement on or for the settler's wife or husband or children of property, wherein the settler's had not at the date of the marriage any estate or interest, whether vested or contingent, in possession or remainder, and not being money or property in right of the settler's wife or husband, shall, if the settler is adjudged bankrupt and the covenant, or contract has not been executed at the date of the commencement of his bankruptcy, be void against the trustee in bankruptcy, except so far as it enables the persons entitled under the covenant or contract to claim for dividend in the settler's bankruptcy under or in respect of the covenant or contract, but any such claim to dividend shall be postponed until all claims of the other creditors for valuable consideration in money or money's worth have been satisfied.
(2A) Any payment of money (not being payment of premiums on a policy of life assurance) or any transfer of property made by the settler in pursuance of such a covenant or contract as aforesaid shall be void against the trustee in the settler's bankruptcy, unless the persons to whom the payment or transfer was made, prove, either—
(2) The following subsection shall be added at the end of the said section forty-seven—
(4) Nothing in this section shall affect or prejudice the title or interest of any person who before the date of the receiving Order and without notice of the presentation of a bankruptcy petition has bond fide and for value purchased or acquired from the person or persons entitled to the benefit of any such settlement, covenant., or contract as aforesaid the money or property the subject thereof or any interest in such money or property.
§ THE EARL OF HALSBURY moved to amend the proposed new subsection (2) to be substituted for subsection (2) of Section 47 of the Bankruptcy Act, 1883, by omitting from the end of the subsection the words, "but any such claim to dividend shall be postponed until all claims of the other creditors for valuable consideration in money or money's worth have been satisfied."
§ The noble and learned Earl said: In order to make this Amendment intelligible I should call your Lordships' attention to what is the state of the law at present, and what is the amendment proposed in respect of it. This section has reference to marriage settlements, and the provision, which appears to me to have been very carefully worded, and but for the developments that have taken place since I should have thought would have effected the object, is this, that marriage being valuable consideration the settlement made upon marriage was as good as the ordinary course of dealing in which valuable consideration is exchanged and property exchanged for what is valuable consideration in law. The authors of the Act, I think, had a very clear idea of what they meant, and one of the first things they did was to prevent a man, simply by the expedient of a covenant in a marriage settlement, covenanting for a large sum of money to settle on his wife when he had no such property at all, so that any property acquired afterwards should be treated as if it were already settled and handed over. That is not really the truth of what is suggested to be the danger here. I am bound to say that since the previous discussion I have made some inquiries, and I have found out that it is not a fanciful suggestion, and that such a thing has been known as a person entering into a covenant to settle on his wife a very large sum of money without any such property being in his possession or expectation, but that when bankruptcy is imminent he has settled a very large amount, which, of course, under the covenant made on the marriage would be protected against the trustee in bankruptcy. I am not certain that the original provision is not sufficient, but at all events I think that was not one of the ideas which my noble friend beside me (Lord Salisbury) was considering when we discussed this question last. It is to be observed that the first part of the section we are dealing with is untouched by this Bill; it is only 375 the second part, and when you look at the second part you find that what it really does is to prevent a fraudulent attempt to take what has been described as creditors' goods away from them under cover of a covenant in a marriage settlement. I cannot deny from what I hear that it has grown into a practice to covenant in this way and so protect the debtor's goods. I confess the only thing that I think they have done about it is this. They omit from this section the word "fraudulent," which I should have thought was a necessary qualification for such a proceeding and which I certainly should have inserted myself if I had been drawing up the section. On the one hand, if it is not a fraudulent transaction, I think it is right that the claim of the person interested should not be postponed until all the claims of the other creditors have been satisfied; but, on the other hand, on the hypothesis that the covenant is fraudulent, I see no reason in the world why it should not be made void altogether. That is what I should have done; but instead of that they say in this clause that notwithstanding this, which by hypothesis is fraudulent, the only thing to be done is that after everybody else is paid then the persons entitled under this fraudulent settlement are to come in. It should be one thing or the other. If it is fraudulent it ought to be set aside. If it is not fraudulent I do not understand why this colourable provision that they may come in for dividend when everybody else is paid—circumstances in bankruptcy not often known—is put in. In these circumstances I move to leave out the last three lines of the subsection, in order, if it is possible that the covenant may be honest although it has every symptom of fraud about it, that then the person so entitled might come in for dividend like everybody else and not be postponed until everybody else is paid.
Clause 13, page 8, line 26, leave out from ("contract") to ("2A") in line 30.—(The Earl of Halsbury.)
§ THE LORD CHANCELLOR
The reason why the words were inserted is this. There is really a class of cases which you cannot say are fraudulent but which are totally contrary to what public policy ought to allow. It sometimes happens when a young man is married that his father-in-law, being of a careful 376 disposition and more careful of his own interests and the interests of his family than those of the persons with whom the young man will be engaged in business, gets a general covenant put in to settle all the property and all the money that may come to him in the course of his business or otherwise hereafter. You cannot say that the young bridegroom is fraudulent in that case. He is acting under great pressure. The hypothesis is that he is perfectly solvent at the time and he may continue solvent for a long time. You cannot say that the covenant in this case is fraudulent, but what you can say is that it is a most objectionable covenant and one that ought not to be allowed. In a case which came before this House, sitting on the Judicial side, some of the worst features of this practice were brought to light, and great surprise was expressed that attention had not been called to the evil before. That, however, is not a reason for making the covenant absolutely and altogether bad. It may be quite a proper covenant as between the husband and his future wife. The point is that it ought not to be allowed, on grounds of public policy, to prevail so as to withdraw the husband's estate from the creditors. It was from that point of view that the draftsman acted in drawing this clause as it is now. It seems to me that that footing is a justifiable one on the ground of public policy—that as it is not a case where fraud necessarily would arise the covenant should not be rendered void altogether. Therefore while I fully appreciate my noble and learned friend's point I suggest that the words are really most useful in the form in which they stand at the present time. They were only adopted after a great deal of consideration and examination of cases in which this kind of question had arisen.
§ THE EARL OF HALSBURY
If the noble and learned Viscount objects to my Amendment I will not press it.
§ Amendment, by leave, withdrawn.
§ Clause 16:
§ Amendment of Section 4 (1) (g) of Principal Act as to acts of Bankruptcy.
§ 16. Section four of the principal Act (which relates to acts of bankruptcy) shall have effect as though in paragraph (g) of subsection (1) thereof (which makes it an act of bankruptcy to fail to pay 377 a judgment debt after bankruptcy notice whore bankruptcy notice has been served) and in section one of the Bankruptcy Act, 1890, references to final orders and to sums ordered to be paid were included in the references to final judgments and judgment debts respectively wherever the same occur, tint a reference to the proceedings in which the order was obtained was included in the reference to the action in which the judgment was obtained.
§ THE EARL OF HALSBURY
The new subsection which I propose to add to Clause 16 is simply to correct what I think has been a very technical and useless rule. The Lord Chancellor will understand what it means. It is a question of the debtor's summons. It has been, I think unfortunately, decided that unless the debtor's summons is exactly accurate in respect of that matter, the Order making the adjudication may be set aside. This Amendment is only to provide, in the event of there being a tender of what the debtor really admits to be due, and that if that has been given according to the accurate fact of what is due, and he has tendered it, that that ought to prevent adjudication in bankruptcy. But unfortunately some decision has been given that it must be accurately correct. I do not understand the ground on which the decision formerly was come to, but those familiar with bankruptcy wish this Amendment to be passed. I am only intervening here for the sake of the bankruptcy official, and I think that this Amendment is right.
§ Amendment moved—
Clause 16, page 10, line 24, after ("obtained") nsert as a new subsection:
(2) A debtor shall be considered to have sufficiently complied with the terms of a Bankruptcy Notice if within the time allowed for payment by the said notice he either pays the money to any agent of the creditor named in the notice or pays it into Court to the credit of the creditor and gives notice of such payment to the creditor within the time allowed; or, in the event of the Bankruptcy Notice demanding more than is actually due he within the time allowed for payment as aforesaid tenders the amount actually due to the creditor or his agent as aforesaid, or pays it into Court to the credit of the creditor with notice to the creditor as aforesaid."—(The Earl of Halsbury.)
§ THE LORD CHANCELLOR
I find myself very much at one with what any noble and learned friend has said. The Court of Appeal has decided lately that a Bankruptcy Notice in the form with which we have been familiar is bad if the 378 addition which my noble friend desires is put in. The result is that unless we amend the law as it stands, even if the Amendment were inserted it might not carry out the object which my noble and learned friend has in view. I am entirely at one with his object, and. I would suggest that he should move his Amendment in a form varying slightly but not in substance front his Amendment on the Paper. I think it will meet his point if the new subsection should read—(2) Notwithstanding anything in the said paragrapl (g)—(i) A Bankruptcy Notice may specify an agent to act on behalf of the creditor in respect of any payment or other thing required by the notice to be made to or done to the satisfaction of the creditor.That will get rid of the effect of the decision of the Court of Appeal of which I have spoken—(ii) A Bankruptcy Notice shall not be invalidated by reason only that the sum specified in the notice as the amount clue exceeds the amount actually due unless the debtor within the time allowed for payment gives notice to the creditor that he disputes the validity of the notice on the ground of such misstatement; but if the debtor does not give such notice he shall be churned to have complied with the Bankruptcy Notice if within the time allowed he takes such steps as would have constituted a compliance with the notice had the actual amount due been correctly specified therein.I think that covers the point in my noble and learned friend's Amendment.
§ THE EARL OF HALSBURY
I am content to move the Amendment in that form, and I beg to withdraw the Amendment in the form in which it stands on the Paper.
§ Amendment, by leave, withdrawn.
§ Amendment moved—
Clause 16, page 10, line 14, at end, insert as a new subsection—
(2) Notwithstanding anything in the said paragraph (g)—
(i) A Bankruptcy Notice may specify an agent to act on behalf of the creditor in respect of any payment or other thing required by the notice to be made to or done to the satisfaction of the creditor.
(ii) A Bankruptcy Notice shall not be invalidated by reason only that the sum specified in the notice as the amount due exceeds the amount actually due unless the debtor within the time allowed for payment gives notice to the creditor that he disputes the validity of the notice on the ground of such misstatement; but if the debtor does not give such notice he shall be deemed to have complied with the Bankruptcy Notice if within the time allowed he takes such steps as would have constituted a compliance with the notice had the actual amount due been correctly specified therein."—(The Earl of Halsbury.)
§ On Question, Amendment agreed to.
§ Bill passed, and sent to the Commons, and to be printed as amended. (No. 104.)