HL Deb 14 May 1912 vol 11 cc997-1017

Order of the Day for the House to be put into Committee, read.

Moved, That the House do now resolve itself into Committee.—(The Earl of Granard.)

On Question, Motion agreed to.

House in Committee accordingly.

[The EARL OF DONOUGHMORE in the Chair.]

Clause 1 agreed to.

Clause 2:

Provisions with respect to offences under the Debtors Act, 1869.

2.—(1) Where under the Debtors Act, 1869, an act or default committed by a person who has been adjudged bankrupt, or in respect of whose estate a receiving order has been made, is an offence unless the jury are satisfied that he had no intent to defraud, or (as the case may be) he I no intent to conceal the state of his affairs or to defeat the law, it is hereby declared that the onus of proving the absence of intent to defraud or, as the case may be, of intent to conceal the slate of his affairs or to defeat the law, lies upon the person accused, and that it is not necessary to allege in the indictment or information charging the offence or to prove any of the intents above mentioned.

(2) Any acts or defaults of any person who has been adjudged bankrupt, or in respect of whose estate a receiving order has been made, which under any of the provisions of the Debtors Act, 1869, are made offences if committed within four months next before the presentation of a bankruptcy petition by or against such person, shall as from the commencement of this Act be offences if committed within six months next before the presentation of such a petition.

(3) Any act or default which under paragraphs thirteen, fourteen, or fifteen of section eleven of the Debtors Act, 1869, as amended by this section, is an offence if committed within six months next before the presentation of a bankruptcy petition, shall be an offence if committed after the presentation of a bankruptcy petition and before the making of a receiving order.

(4) Paragraphs fourteen and fifteen of section eleven of the Debtors Act, 1869 (which make, certain acts offences if committed by traders), shall extend to the like acts committed by parsons who are not traders, and accordingly those paragraphs in relation to persons who are not traders shall have effect as if the words "being a trader," wherever they occur in those paragraphs, and the words "otherwise than in the ordinary way of his trade," which occur in paragraph fifteen, were omitted therefrom.

(5) Section eleven of the Debtors Act, 1869, shall be construed and have effect as if the term "the trustee in bankruptcy" included the Official Receiver.

(6) Section fourteen of the Debtors Act, 1869 (which relates to false claims by creditors in a bankruptcy) shall extend to persons claiming to be creditors in a bankruptcy, and accordingly in that section after the word "creditor" there shall be inserted the words "or any person claiming to be a creditor."

(7) Notwithstanding anything in section sixteen of the Debtors Act, 1869, it shall not be obligatory on any court, in the absence of any application by the Official Receiver for such an order, to make an order under that section for the prosecution of an offence, unless it appears to the Court not only that there is a reasonable probability that the bankrupt will be convicted, but also that the circumstances are such as to render a prosecution desirable.

THE EARL OF GRANARD had three Amendments on the Paper to subsection (1) of this clause. The first Amendment was to leave out the words "had no intent" ["(as the case may be) had no intent"]; the second Amendment was to insert "such" before "intent" ["it is hereby declared that the onus of proving the absence of intent"] and to omit the words "to conceal the state of his affairs or to defeat the law"; and the third Amendment was to substitute, at the end of the subsection, the words "such intent" for the words "of the intents above, mentioned."

The noble Earl said: When this Bill was under discussion on Second Reading the noble and learned Earl, Lord Halsbury, dealt very severely with this Clause, and informed us that in the form in which it then stood it was hardly intelligible. The object of the three Amendments standing in my name is to make the clause a little clearer. It is the desire of the Government to mate the Bill in every way intelligible, and I trust that the Amendments which now move will meet the views of the noble and learned Earl opposite.

Amendments moved—

Page 2, line 14, leave out ("had no intent")

Page 2, line 16, after the second ("of") insert ("such") and leave out from ("intent") in line 17 to ("lies") in line 18

Page 2, line 20, leave out ("of the intents above mentioned") and insert ("such intent").—(The Earl of Granard.)


I am reluctant at this period of the Bill to interfere with the drafting, because no doubt the person who drafted it has thought it out. At least I presume he has. But I confess I do not think that these Amendments make the clause any clearer, and I feel great difficulty in letting it pass without attempting myself to amend it. At the same time, there will be a further opportunity of amending the clause on Report. I will only say at this stage that it strikes me as a very undesirable thing to place upon the Statute-book a criminal offence which it is not necessary to allege or to prove. It should be made intelligible what the offence is. I am reluctant to allow an offence of that kind to be created without some kind of definition of what it is.


This is not new; the principle of it is in the Debtors Act, and the purpose of this clause is only to improve the drafting. As the noble and learned Earl is prepared that the matter should be considered at a later stage, we shall then be able to justify the clause.

On Question, Amendments agreed to.

Clause 2, as amended, agreed to.

Clause 3:

Punishment on Bankrupt falling to keep proper Accounts.

3.—(1) If any person who has on any previous occasion been adjudged bankrupt or made a composition or arrangement with his creditors is adjudged bankrupt, or if a receiving order is made in respect of his estate, he shall be guilty of an offence under Section eleven of the Debtors Act, 1869, if, having during the whole or any part of the two years immediately preceding the date of the presentation of the bankruptcy petition been engaged in any trade or business, he has not kept proper books of account throughout those two years or such part thereof as aforesaid, and, if so engaged at the date of presentation of the petition, thereafter, whilst so engaged, up to the date of the receiving order, or has not preserved all books of account so kept:

Provided that a person who has not kept or has not preserved such books of account shall not be convicted of an offence under this section if his unsecured liabilities at the date of the receiving order did not exceed two hundred pounds, or if he proves that, in the circumstances in which lie traded or carried on business the omission was honest and excusable.

(2) A prosecution shall not be instituted against any person under this section except by order of the court, nor where the receiving order in the bankruptcy is made within two years from the commencement of this Act.

(3) For the purposes of this section a persons shall be deemed not to have kept proper books of account if he has not kept such books or account as are necessary to exhibit or explain his trans actions and financial position in his trade or business, including a book or books containing entries from day to day in sufficient detail of all cash received and cash paid, and, where the trade or business has involved dealings in goods, also accounts of all goods sold and purchased, and statements of annual stocktakings.

(4) Paragraphs (9), (10) and (11) of Section eleven of the Debtors Act, 1869 (which relate to the destruction, mutilation and falsification and other fraudulent dealing with books and documents), shall, in their application to such books as aforesaid, have effect as if "two years next before the presentation of the bankruptcy petition" were substituted for "four months next before such presentation" as the time within which the acts or omissions specified in those paragraphs constitute an offence.

LORD HOLLENDEN moved to omit from the beginning of the clause the words "who has on any previous occasion been adjudged bankrupt or made a composition or arrangement with his creditors." The noble Lord said: We feel in the City very strongly that this clause, which is a very good one, should be used in the same way for a first offence as it would be for a second. There are many cases in which traders keep books up to a certain point, and when they find it is convenient to do so they destroy them and become bankrupt. If the noble Earl in charge of the Bill would accept this Amendment and make the provision apply to first offences, it would be of very great benefit to traders.

Amendment moved—

Page 3, lines 17 to 19, leave out ("who has on any previous occasion been adjudged bankrupt or made a composition or arrangement with his creditors").—(Lord Hollenden.)


I regret that the Government are not able to accept this Amendment. It must be remembered, in the first place, that the making of the failure to keep books a criminal offence is quite an innovation in Bankruptcy Law. As matters at present stand, where a bankrupt has not kept books the Judge takes that into consideration with regard to granting his discharge or not. This clause as drafted in the Bill proposes to make this a criminal offence only on the second bankruptcy, and that provision the President of the Board of Trade and his advisers consider proper. The effect of the Amendment moved by Lord Hollenden would be to make any person who failed to keep books before his first bankruptcy amenable to the criminal law. Although we are anxious that persons trading on credit should keep proper books stating what their financial position is, we do not think at the present moment that it would be advisable to enlarge the provisions of this clause to the extent asked by my noble friend.


I am certainly in favour of this Amendment, and if it is pressed to a Division I shall vote for it. After all, we are a trading community, and it is not too much to say that a man who goes into trade should keep books, and that if he does not do so he should suffer. It is vital that traders should not trade in a reckless way. The Committee who considered this matter desired that the trader should be punished on his first offence. I support that view, and if the Amendment is pressed to a Division I shall vote for it.


This is a new offence, and rather a serious one. It is here proposed that if a man has not kept proper books he shall be guilty of a misdemeanour and be liable to be imprisoned for a term not exceeding two years with or without hard labour. When a man has once been bankrupt I think it is quite right that he should be placed under harder conditions than before and that there should be an obligation on his part to keep books. But "trade or business" is a very wide term, and I suppose many of us have been engaged in affairs which, though not commercial, might come under the term "business," and I do not think that in such cases the non-keeping of books ought to be made a misdemeanour.


I entirely agree with what has been said by my noble and learned friend who has just sat down.

Amendment, by leave, withdrawn.

Clause 3 agreed to.

Clause 4:

Punishment of Bankrupt for Gambling, &c.

4.—(1) Any person who has been adjudged bankrupt or in respect of whose estate a receiving order has been made shall be guilty of an offence under Section Eleven of the Debtors Act, 1869, if, having been engaged in any trade or business,—

  1. (a) he has, within two years prior to the presentation of the bankruptcy petition, by gambling or by any rash and hazardous speculations unconnected with his trade or business materially contributed to or increased the extent of his insolvency; or
  2. (b) he has, between the date of the presentation of the petition and the date of the receiving order, lost any part of his estate by gambling or by such rash and hazardous speculations as aforesaid; or
  3. 1002
  4. (c) on being required by the Official Receiver at any time, or, in the course of his public examination, by the Court, to account for the loss of any substantial part of his estate incurred within a period of a year next preceding the date of the presentation of the bankruptcy petition, or between that date and the date of the receiving order, lie fails to give a satisfactory explanation of the manner in which such loss was incurred:

Provided that in determining for the purposes of this section whether any speculations ware rash and hazardous tie Court shall take into consideration the financial position of the accused person at the time when lie entered into the speculations.

(2) A prosecution shall not be instituted against any person under this section except by order of the Court, nor where the receiving order in the bankruptcy is made within two years from the commencement of this Act.


I do not wish to raise much discussion on this clause, but I should like to ask the Government a question on paragraph (a). When this Bill was before your Lordships on a former occasion the noble Earl in charge of it gave us to understand that the word "gambling" was governed by the words "unconnected with his trade or business"; so that the clause was not directed to interfering with legitimate speculation in the trader's business. It was recognised that all trading is to some extent of a speculative character. To say that a man who gambled actually in his own business was guilty of a criminal offence would be a very serious extension of the law; and so the noble Earl, in order to console us, told us that the gambling must be "unconnected with the trade or business." But that does not appear to be so from the wording of this paragraph. The words "unconnected with his trade or business" really apply to "any rash and hazardous speculations." That reading of the Bill is confirmed by the appearance, a little lower down in paragraph (b), of the words "gambling or by such rash and hazardous speculations." The insertion of the word "such" rather shows that the gambling is general gambling and is not limited in any way. I do not wish to commit myself to any general approval of this subsection. The inclusion of gambling at all is a very great extension of the law, but I think the Government ought to be quite clear what they mean in their Bill.


I have the greatest sympathy with the frame of mind in which the noble Marquess approaches this clause, because what he says is, "Above all things let us make clear what we intend in passing an Act of Parliament." I who have suffered so much from the neglect of that habit on the part of Parliament can entirely sympathise with the noble Marquess in that view. I think there is a great deal in his criticism as to whether the gambling is connected or disconnected with the business, and if he will allow us to consider the point between now and the next stage of the Bill we will endeavour to put forward a concise, and, I hope, acceptable form of words.

Clause 4 agreed to.

Clause 5:

Obtaining Credit by Undischarged Bankrupts.

5.—(1) Where an undischarged bankrupt—

  1. (a) either alone or jointly with any other person obtains credit to the extent of ten pounds or upwards from any person without informing such person that he is an undischarged bankrupt; or
  2. (b) engages in any trade or business under an assumed name, or under the name of any other person, or under the name of a firm, without disclosing to all persons with whom he enters into any business transaction his true name;
he shall be guilty of an offence under Section Eleven of the Debtors Act, 1869.

(2) Section Thirty-one of the principal Act is hereby repealed.

LORD HOLLENDEN moved to add, at the end of paragraph (b), the words "or the name in which he was adjudicated bankrupt." The noble Lord said: A person is sometimes adjudicated a bankrupt in a name other than his own. The insertion of the words which I now move is intended to compel him to disclose the assumed name in which he was adjudicated bankrupt as well as his own.

Amendment moved—

Page 5, line 11, after ("name") insert ("or the name in which he was adjudicated bankrupt").—(Lord Hollenden.)


I am not quite certain that the object which the noble Lord wishes would be attained by his Amendment. Supposing the man had been adjudicated bankrupt under some name other than his true name. He could then, by giving his true name, conceal his history. The Board of Trade are in sympathy with the principle of the Amendment and we suggest that instead of the noble Lord's Amendment there should be added at the end of subsection (1) of this clause the words "and for the purpose of this provision the name under which the bankrupt was adjudicated bankrupt shall be deemed to be his true name, and any other name shall be deemed to be an assumed name." That would meet the noble Lord's object, and if he will move the Amendment in that form we shall be prepared to accept it.


I withdraw my proposed Amendment, and will move an Amendment in the form suggested by the noble Earl.

Amendment, by leave, withdrawn.

Amendment moved—

Clause 5, page 5, line 16, at end insert ("and for the purposes of this provision the name under which the bankrupt was adjudicated bankrupt shall be deemed to be his true name, and any other name shall be deemed to be an assumed name").—(Lord Hollenden.)

On Question, Amendment agreed to.

Clause 5, as amended, agreed to.

Clause 6 agreed to.

Clause 7:

Security in Cases of Compositions and Schemes of Arrangement.

7. "Five shillings in the pound" shall be substituted for "seven shillings and sixpence in the pound" in subsection (9) of section three of the Bankruptcy Act, 1890, as the sum for the payment of which reasonable security must be provided under the circumstances stated in that subsection before the court may approve a proposal by a debtor for a composition in satisfaction of his debts or for a scheme of arrangement of his affairs.


I should like to know the grounds on which this clause is suggested.


I understand that the noble and learned Earl wishes to know the reason for substituting in this clause 5s. in the pound for 7s. 6d. in the pound in subsection (9) of Section 3 of the Bankruptcy Act, 1890.


That is what I want to know.


It was thought very hard that a bankrupt should not be able to get his discharge if the only thing against him was that ins assets did not come up to the stated amount in the pound. The object of this clause is to reduce the sum to 5s. in the pound.


The object is quite intelligible. I want to know why it is to be done.


The reason is that experience—and it is really only experience that can tell—has proved that the sum of 7s. 6d. is too large to meet the case. Accordingly it is proposed that the sum should be reduced to 5s. in order that the machinery of the law may work more effectively.


I shall not divide the House upon the clause, but I must say that I do not understand in the least why the proposed alteration is to be made.

Clause 7 agreed to.

Clauses 8 and 9 agreed to.

Clause 10:

Validity of certain Payments to Bankrupt and Assignee.

10. Nothing in any of the enactments relating to bankruptcy shall invalidate a payment of money, or delivery of property, to a person subsequently adjudged bankrupt, or to a person claiming by assignment from him, if the payment or delivery is made before the receiving order and (except in cases where the receiving order is made under Subsection (5) of Section one hundred and three of the principal Act) before notice of the presentation of a bankruptcy petition, and is either pursuant to the ordinary course of business or otherwise bonâ fide.

THE EARL OF GRANARD moved to leave out the word "before" ["before notice of the presentation of a bankruptcy petition"] and to insert "without." The noble Earl said: This is purely a drafting Amendment.

Amendment moved—

Page 6, line 25, leave out ("before") and insert ("without").—(The Earl of Granard.)

On Question, Amendment agreed to.

Clause 10, as amended, agreed to.

Clauses 11 and 12 agreed to.

Clause 13:

Amendment of Section 47 of Principal Act as to the Avoidance of Settlements.

13. The following subsections shall be substituted for Subsection (2) of Section forty-seven of the Bankruptcy Act, 1883, which relates to the avoidance of settlements:— (2) Any covenant or contract made by a person (hereinafter called the settlor) in consideration of marriage, either for the future payment of money, or for the future settlement on or for the settlor's wife or husband or children of property, wherein the settlor 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 settlor's wife or husband, shall, if the settlor 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 settlor'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 settlor in pursuance of such a covenant or contract as aforesaid shall be void against the trustee in the settlor's bankruptcy, unless the persons to whom the payment or transfer was made, prove, either—

  1. "(a) that the payment or transfer was made more than two years before the date of the commencement of the bankruptcy; or
  2. "(b) that at the date of the payment or transfer the settlor was able to pay all his debts without the aid of the money so paid or the property so transferred:
but in the event, of any such payment or transfer being declared void the persons to whom it was made shall be entitled to. claim for dividend under or in respect of the covenant or contract in like manner as if it had not been executed at the commencement of the bankruptcy. Provided that nothing in this subsection shall affect or prejudice the title or interest of any person who without notice of the settlor's bankruptcy has bonâ fide and for value purchased or acquired from the person or persons entitled to the benefit of the said covenant or contract the money or property the subject thereof.

THE MARQUESS OF SALISBURY had two Amendments on the Paper, to omit from paragraphs (a) and (b) of subsection (2A) the words "payment or transfer" and to substitute the Words "covenant or contract." The noble Marquess said: I am conscious of my rashness in embarking upon this very technical matter, and my only excuse as a layman for touching upon it is the very great regard which your Lordships have always paid to the sanctity of marriage settlements. When a parent or guardian is entrusting the future life or fortunes of a daughter or ward to her husband it is natural and proper that he should take every precaution that she should be protected in case of such mischance as the commercial losses of her husband, and it appears to me that the care which the parent or guardian thus displays ought to be protected in every possible way by Parliament.

I ask your Lordships to consider the object the Government have in view, at least what I apprehend they have in view, and then consider the effect of this clause and the change which I now propose. What is the object which the Government have in view? I take it that it is this. They want to prevent a common form of evasion of the Bankruptcy Law, an evasion which takes this form, that when a man sees he is about to become bankrupt he gets rid of his property to his wife or someone else on whom he can rely and so cheats his creditors. A particular form of that evasion is this. When a man sees he is going to become bankrupt he contracts a marriage, and by settling on his wife not only the property he possesses but any property he may become possessed of hereafter he succeeds in defrauding his creditors. The Government, I understand, are endeavouring to stop that kind of evasion. But they have cast their net very wide, and they actually propose, not merely to declare void a settlement made under such terms, but even if the settlement has been made years and years before they propose to make void a payment made under it many years subsequently unless that payment has been made two years before the actual bankruptcy takes place. It is quite clear that, under such a clause as this, perfectly bonâ fide precautions taken by a parent or guardian at the time of marriage might be rendered wholly inoperative. There might be a covenant or contract of settlement made ten or twelve years before the bankruptcy which might contemplate as one of its provisions that money to come subsequently to the husband from some particular person should be protected for the wife under the settlement. Yet if years after that the husband got into pecuniary difficulties, and the actual case contemplated by the settlement did not occur more than two years before the bankruptcy, then all these precautions would be torn up and the woman for whom all this had been carefully arranged would be left without this benefit which was one of the con- siderations for which she was allowed to contract the marriage. That cannot be the intention of His Majesty's Government.

I do not know whether I have made the case clear. Let me give an example. Let us say that when a woman was about to be married one of the conditions which were put into the settlement by the husband was that money from a particular source which might hereafter come to him should be part of her property under the settlement. It might be that besides certain property of which he was then possessed he had expectations from his father. The father might have assured him that he would be remembered in his will. The husband might say that all that came to him from that source hereafter was to go to his wife. His father might go on living a long time after the marriage was contracted, and in the meantime the husband might be getting into commercial difficulties. Then one day the father dies, the will is read, and the money goes into the possession of the husband and is paid over into the settlement. But if within two years of the payment over of that money the man becomes bankrupt, then, if you please, the creditors are to be allowed to come down and tear up the whole of that arrangement, and the money is to be taken from the wife and paid over to the creditors. Surely it is clear that the moment of evasion is not when the money is paid over, but when the covenant or contract is signed. It is possible that where a man, seeing bankruptcy impending, enters into a covenant to defeat his creditors there may be evasion. But when the actual payment takes place there is no opportunity of evasion—it is in pursuance of a contract made before.

I propose by my Amendment to substitute the words "covenant or contract" for the words "payment or transfer," and I should have thought that it almost stands to reason that that is fair. It may be said that the kind of settlement which I have indicated, wherein a man puts into settlement money which he is not at present possessed of but which he may hereafter acquire, is not a very common settlement. But if it is not very common in the case of a man, it is a very common form of settlement on the woman's side. And your Lordships will remember that in this very Bill the Government are enabling married women to be in entirely the same position with regard to bankruptcy following on failure in trade or commerce as a man is. Therefore the case in such settlements as I have referred to is material to the arguments I have addressed to your Lordships' House. Though we are, as my noble friend behind me said, a commercial country, we are not only a commercial country. There are other considerations besides purely commercial considerations which have to be borne in mind. It is a strange thing that everybody is protected under covenants or contracts in this clause except the wife. Of the money is assigned to somebody else, then; those who receive it are protected, but the woman herself is not protected. Surely I am right in saying that marriage is always regarded as a consideration, for the, woman gives something of value in; that she gives the most valuable thing she possesses—namely, herself. The provision as it stands in the clause appeal's to me one of inequity and injustice which I am sure the Government do not intend. I beg to move—

Amendment moved—

Page 8, line 30, leave out ("payment or transfer") and insert ("covenant or contract").—(The Marquess of Salisbury.)


I share the sympathy of the noble Marquess opposite for marriage contracts, and agree with him as to the desirability of protecting the interests which marriage contracts create. The consideration of marriage is, I agree with him, one of the gravest of considerations, and ought to be protected, by law. But I do not think the noble; Marquess quite realises what he is asking your Lordships to assent to. It is all very well to take what seems to be a hard case, but you cannot extend that to other cases without seeing what the nature of the other cases is. if a person has property—land, investments, or a specific sum of money—which can be ear-marked, it is, quite right that upon marriage that sum of money should be settled, and settled; in the hands of trustees so that in the event of bankruptcy no creditors can touch it.

But let me put the other side of the case. I have an illustration here which is a very cogent one. It concerns litigation which came before this House sitting in its judicial capacity. There was a gentleman who married in 1879 and made a covenant just such as the noble Marquess suggests. He covenanted to settle all the property to which he might become entitled, except his business assets. Well, in 1880, having by means of this covenant covered the whole of his property except what he had in business, he became bankrupt. He got his discharge in 1882 and started again in business, and in 1894 became bankrupt for the second time. Being an ingenious person he then turned about for other means of livelihood. He became an outside broker—a business which, I believe, gives opportunities for highly ingenious enterprise—and made large profits. He got together £17,000 as the result of speculations, and he bought a house in which he settled himself with his wife and family. In May, 1903—a long time after the marriage, which, as I have said, took place in 1879—he found himself indebted to the extent of £10,000 to his creditors on the Stock Exchange. He then, on the 23rd of that month, transferred the house aid furniture to the trustees of his marriage settlement in pursuance of this omnibus covenant. On May 29, six days later, he committed an act of bankruptcy, and the unfortunate creditors naturally tried to get hold of this £17,000 house which was bought really out of the proceeds of his speculations during his fortunate period. The case was fought and was brought up to this House, and your Lordships, sitting on the judicial side, had to regretfully declare that the law afforded no means of redress against this monstrous fraud. If the noble Marquess's Amendment were accepted that case might remain absolutely un-redressed.

The noble Marquess took one side, and I am presenting the other. The question is what is the right line of legislation between the two. What the Government, after consultation with their advisers, think is the right line is this. If a man or a woman has a house or piece of land or a specific sum of money invested which is thrown into settlement on marriage, that should be sacred. On the other hand, it is equally clear that there should not be power to enter into the covenant which the ingenious gentleman whose career I have described entered into. The true view seems to me to be that what you should be at liberty to settle is just what the clause describes. The clause enables you to settle any property in which you have at the date of marriage any estate or interest, whether vested or contingent, in possession or remainder, or property or money in right of the wife or husband as the case may be. That is quite right, because there you have the specific thing. But surely it cannot be right that you should be enabled to enter into a covenant which is to operate on something which you have not got. The noble Marquess referred to expectations from a man's father. The father could himself have put a clause in his will so settling the property, but if he leaves a sum of money at large to the son, surely the son had no better title to speculate upon that and to treat it as the subject of an omnibus covenant like this than to speculate on profits that he was likely to make. The clause is indeed a little more hard against creditors than might have been expected, because it allows a man who has entered into an omnibus covenant of this kind and who has made a transfer to have that transfer protected if it has taken place within two years of the bankruptcy.

To my mind the opportunity should be taken when you are altering the law of seeing that the monstrous conduct of which the man was guilty in the litigation to which I have referred should not continue protected. I think it is a monstrous state of the law, and I am glad that we are able to take this opportunity of putting it on a better footing. I hope what I have said may have gone some way to convince the noble Marquess that we have, on the balance of advantages and disadvantages, taken the enormous balance of advantages in the public interest in drawing the clause in this form. The noble Marquess said it would be hard in the case of a married woman. I agree with that in the case of the ordinary married woman for whose benefit the original covenant was invented. But the position of woman has advanced. There are some so enterprising that they go into trade and become bankrupt with quite as much freedom and facility as any one else, and I do not think your Lordships are entitled to protect women who go into business. One step I beg your Lordships to take in the interests of the sudden and somewhat startling rise in the position of woman in the commercial world, and that is to apply the Bankruptcy Laws to her as freely as you do to your own sex.


This is a very technical point, but it arises frequently in trade, and I venture to repeat what I had the honour of saying in the discussion of this Bill on Second Reading. A trader, a single man, has lost all his own money and is trading with his creditors' money. He says to himself, "How am I to get my creditors' money so that it cannot be taken away from me if I become bankrupt?" There is only one way, and it is often employed. He gets married, and marriage being a good consideration he settles the whole of the creditors' money on his wife. The creditors come next week and want their money, and he says "There is none for you." He may have £30,000 or £40,000 of their money, but as it is settled on his wife the creditors cannot touch it.


I would point out that if the man in question married the previous week the covenant would not be two years old, and would not in any way be affected by my Amendment. We all agree that if a covenant or contract is made just before bankruptcy, or even within two years before bankruptcy, it may be an evasion of the Bankruptcy Act. But the case which I am contemplating, and the only case which would be affected by my Amendment, is where the contract or covenant has been made a long time before, but where it is only the payment which has been made within two years.


What we want is to prevent a trader settling the creditors' money, and how are we to do that except by a clause of this sort I We must have some method of preventing a trader taking the creditors' money and settling it on his wife. Is it not rather the duty of a father or guardian, before consenting to the marriage, to look into the trader's affairs beforehand and see exactly how he stands?


We are embarked upon a difficult subject, and one which, as I warned your Lordships on the Second Reading, is embarrassing to those who are experts, and must be still more so to those who are not experts. For example, the noble Lord who has just sat down instanced the case where a man who had money which he really ought to have paid to his creditors contracted a marriage and settled that money on his wife. The noble Lord seemed to think that the effect of this clause would be, or ought to be, to make void that settlement. Not in the least, my Lords. If a man has any money which in law is his, and he, possessing it, settles it upon the highest of all considerations—namely marriage—then unless you can show that there was actual fraud to which he and the wife and all the rest of them were parties you cannot interfere with that. That is not this Bill, still less is it the Amendment of the noble Marquess.

The proposal in the Bill is this, if I may put it in a few sentences. You want to treat with the greatest consideration every settlement that is made, even though it be a settlement in anticipation that money may be earned in trade hereafter and when earned may then be handed over to the trustees. But, on the other hand, it is quite obvious that a settlement of that kind may be abused so as to enable a man to go into trade and contract debts and then swoop down just before he is called upon to pay his just debts and, by virtue of the covenant which has been made, take away all the means with which in all honesty he ought to pay his legitimate debts. What you want to do is to draw the line fairly between the two classes of people—on the one hand, the wife, who trusts to this very trading in order that any money may exist at all; and the creditors, without whose dealings in trade the money never would have been obtainable. What is done is this. We say that where money is so earned and not settled any transfer or payment of it in pursuance of a covenant made in the air before the marriage was contracted shall be void unless it can be shown that the transfer was made two years before the bankruptcy or that at the date of the transfer the man was solvent. That is the way you adjudicate the equity between these two kinds of people.

What does the noble Marquess propose? Let me put his suggestion and invite him to consider what it means. He says that every such payment or transfer shall be good if the covenant—the marriage contract, that is—was made two years before. That is to say, a man may make a contract of this kind and may subsequently put it to every kind of dishonest use. The case to which my noble and learned friend Lord Haldane referred could, under this Amendment, be repeated. Does not the noble Marquess see that m this relation the date of the marriage contract is irrelevant? The unfairness as between the settlement trustees and the creditors is just the same however long or however short the period between the marriage contract and the insolvency. But the noble Marquess would allow the lapse of two years to cleanse the whole thing. Surely that cannot be right.

The second thing the noble Marquess's Amendment would do would be this. If at the date of the contract—that is to say, at the date of the marriage settlement—the settlor was solvent, then the creditors would be defeated. How can that be right? A man if he marries as a young man is generally quite solvent. He probably has nothing and owes nothing. To say that, as this man was quite solvent twenty years ago, therefore he may make this covenant surely cannot be right. That is not a relevant consideration at all. Whether this is right, or wrong ought to be settled by what is fair play between, on the one side, the trustees of the settlement, and, on the other, the creditors, by trading with whom the whole of the profits are made, and not by the consideration whether twenty years or ten years before the gentleman who contracted this marriage and made this marriage settlement was solvent or not. Marriage is the highest of all considerations, and I, as much as any Judge who ever sat on the Bench, will always endeavour to protect marriage contracts and the covenants connected therewith sacredly. But do not allow contracts which are not based upon existing realities but which hypothecate in advance speculative future acquisitions to be used against those with whom the trading husband deals, so as in effect to sweep away unfairly from them the assets to which they were legitimately entitled to look in order to implement the business contracts made by the husband.


I confess I am disposed to vote for this Amendment, although I do not say that it is ideally perfect. But surely it is within the resources of legal science to contrive some form of words more just than those in the clause. One of the greatest pieces of injustice ever done was the sweeping away in 1834 of the right of dower, and it is, I think, to complete it to leave a woman, although she has a settlement, without protection. If the Government resist any amendment of this clause I shall vote with my noble friend behind me. I suggest that it might be possible to be a little more lenient in respect to what settlement may be considered good. One knows something of the 27th of Elizabeth, where the test is whether the person was solvent at the time the settlement was made. It is not a new form, but one with which we are very familiar, and we have generally got rid of those difficulties by referring to the intention with which such and such a thing was done and making that fraudulent which was found to have been done with fraudulent intent. Something between the Government's proposal and that of my noble friend behind me might, I think, he suggested. I shall certainly vote with him if the Government show no sign of yielding.


I recognise that my Amendment, as my noble and learned friend has said, is not ideally perfect, and I feel that I should be doing wrong if I pressed it upon your Lordships at the present stage. I feel greatly flattered that I have drawn such speeches from noble and learned Lords, who must have thought much of what I said exposed a great deal of ignorance on this most difficult subject. The lucid speech of the Lord Chancellor has shown me how difficult a subject this is, and I should be sorry to press upon the House on a matter of law of this kind an Amendment against which so much can be said. But I hope that between now and the next stage of the Bill the Government will consider what fell from my noble and learned friend, Lord Halsbury, and see whether they cannot arrive at some middle course to protect legitimate forms of marriage settlements consistently with stopping the evasion of which the noble and learned Lords opposite complain.


I need not state what the authority of the noble and learned Earl opposite is on these matters. If he can suggest any, what I may term, palliative—although I do not think when he examines the clause he will find that it is a really severe one—we will pay the greatest attention to it. Intent in this instance can hardly be the test, because you would have to establish at the commencement a desire to defraud, and this is not necessarily a fraud—it is only a disposition of assets in one direction which in fairness ought not to be exclusively directed there. If the noble and learned Earl can suggest an improved wording we shall certainly consider it. Of course, I cannot say we will accept it, but we will give it most respectful consideration.

Amendment, by leave, withdrawn.


The Amendments standing in my name to this clause are all amendments of the principal Act. The enactment is at present vague, and our object is to substitute more precise words. I beg to move.

Amendments moved—

Page 8, line 41, leave out (" Provided that nothing in this subsection ") and insert: (2) The following subsection shall be added at the end of the said Section Forty-seven:— (4) Nothing in this section

Page 8, line 42, after ("who") insert ("before the date of the receiving order and").

Page 9, line 1, leave out ("settlor's bankruptcy") and insert ("presentation of a bankruptcy petition")

Page 9, line 3, leave out ("the said covenant or contract") and insert ("any such settlement, covenant, or contract as aforesaid")

Page 9, line 4, after ("thereof") insert ("or any interest in such money or property").— (The Earl of Granard.)

On Question, Amendments agreed to.

Clause 13, as amended, agreed to.

Clause 14:

Avoidance of General Assignments of Book Debts unless Registered.

14. Where a person engaged in any trade or business makes an assignment to any other person of his existing or future book debts or any class thereof, and is subsequently adjudicated bankrupt, the assignment shall be void against the trustee unless the assignment has been registered as if the assignment were a bill of sale, and the provisions of the Bills of Sale Acts, 1878 and 1882, with respect to the registration of bills of sale given otherwise than by way of security for the payment of a sum of money shall apply accordingly, subject to such necessary modifications as may be made by rules under those Acts:

Provided that nothing in this section shall have effect so as to render void any assignment of book debts due from specified debtors or of debts growing due under specified contracts.


I move to add, at the end of this clause, the words "or any assignment of book debts included in a transfer of a business made bonâ fide and for value." This was pressed upon us by the Chambers of Commerce, and it appears to be quite reasonable. It obviates the necessity of registering book debts in the transaction of buying a business.

Amendment moved—

Page 9, line 17, after ("contracts") insert ("or any assignment of book debts included in a transfer of a business made bona fide and for value").—(The Earl of Granard.)

On Question, Amendment agreed to.

Clause 14, as amended, agreed to.

Clause 15 agreed to.

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) (which makes it an act of bankruptcy to fail to pay a judgment debt after bankruptcy notice has been served) references to orders and to sums ordered to be paid were included in the references to judgments and judgment debts respectively wherever the same occur.


I move to insert the word "final" before the word "orders" and also before the word "judgments." It is not intended that interlocutory orders should be included but only final orders, as is at present the case in regard to judgments. That is the object of these two Amendments.

Amendments moved—

Page 9, line 39, after the first ("to") insert("final")

Page 9, Line 40, after ("to") insert ("final").—(The Earl of Granard.)

On Question, Amendments agreed to.

Clause 16, as amended, agreed to.

Clauses 17 to 24 agreed to.

Clause 25:

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