Sitting of 1 March 1809

BANKRUPT LAWS BILL.
Sir Samuel Romillyrose pursuant to notice, to move for leave to bring in a bill to alter and amend the Bankrupt Laws. In bringing this subject before the house, he rested not merely upon the notice which he had given; but also upon what he had stated to the house three years ago. He then said, that ail he proposed to do was, to render the system less defective, and not to free it from all objection. He repeated the same thing now: some indeed had been so struck with the many glaring defects of the system that they thought it ought to be abolished, and a new one substituted in its place. But he confessed that he had not sufficient confidence in himself to undertake such an Herculean labour, and all he could do was, to attempt to reform some of the most obvious defects of the system.—The first defect to which he would call the attention of the house was this; that a trader, after giving up all he possessed in the world to his creditors, was still liable for many debts, the proof of which could not be received under the commission. This was the case, in direct opposition to the principles of these laws, which was, that a trader having given up all his effects, ought to be free from all claims contracted before the period of that bankruptcy. The most numerous class of debts of this kind consisted of those for which some one else was liable as security. These surety debts did not legally arise till after the commission. The consequence was, they could not be proved under the commission, and the consequence of that again was, that the bankrupt was still liable. The remedy which he meant to propose for this was, that the sureties
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might prove their debts under the commission, provided they paid them at any time before the final dividend. The effect of this would be, that the bankrupt would be exempt from any liability for these debts upon obtaining his certificate.—The second defect under the existing Bankrupt Laws was that the assignees were in the habit of using the bankrupt's effects for their own advantage, and of speculating with the property before the dividends, as if it were their own. The consequences, as he himself had witnessed, often were, that the assignee became bankrupt, and the creditors had, in the end, only the remainder, after a bankruptcy upon a bankruptcy. A remedy for this had been proposed some time ago in the house of lords, and a Bill brought in to affix certain heavy penalties to the offence. The object might be attained with out so severe and troublesome an operation. Though the creditors had the power of appointing a bank where the property should be placed, yet at present it often happened that they neglected to do this, and that the property remained under the controul of the assignees. The remedy which he intended to propose was, that if the creditors did not appoint a bank to receive the property, at an early period, the Commissioners should be bound to do it; and that, if after that the assignees should retain any part of the property, it should be imperious upon the Commissioners to charge 20 per cent on the money so retained. He imagined that this would be sufficient to prevent the abuse, or at least that it would go a much greater way towards that desirable object than any severe penalties that might be enacted.—The third defect in the system was, the expence and uncertainty of proceedings under Commissions of Bankruptcy. In actions by the assignees to recover debts due to the estate, it was incumbent on them to prove an Act of Bankruptcy, and a petitioning creditor's debt, and in many instances the debtors of Bankrupts were induced to withhold the payment of their debts, in the hope that the assignees might find it impossible to establish them. The remedy which he would propose was, that in actions by the assignees, that they should not be obliged to prove the proceedings as above stated, unless the defendant gave notice some time before that he meant to contest any of these points. And he would also propose that the mode of recovering from the assignees should not be by action

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as at present, but by petition to the Chancellor—The fourth amendment which he would submit to the house, was, of all the other points, that of the greatest importance. This was, to take from the creditors the power which they possessed, without any controul, and without the obligation to assign a reason, of refusing a certificate to the bankrupt when they chose. He requested of the house to consider the situation of an uncertificated bankrupt; he could acquire no property, for whatever he gained might be instantly seized upon by the assignees; his industry was lost to himself and to his country, and he was liable to be imprisoned for life for debts contracted before the bankruptcy, which he was unable to discharge. By a statute in the early part of the reign of George the second, this power was given to the Chancellor, but by a subsequent statute of the same reign, it was enacted, that a bankrupt could not receive his certificate without the consent of 4-5ihs in number and value of his creditors; so that however fair, honourable, and blameless, in a moral point of view, the conduct of a bankrupt might be, he was to labour under all the evils of the condition just mentioned, unless his creditors chose to relieve him. This choice often rested with a small number of the creditors, and sometimes the whole depended on a single creditor whose debt bore a large proportion to that of the rest. But this was not the only hardship to which the bankrupt was exposed by the statute just alluded to. Any creditor who could not prove under the commission, nor receive a dividend, was yet admitted to refuse the certificate, in order to give effect to his action. This involved the very serious consideration of imprisonment for life for debt. On that point generally he would at this time say no more than this, that in his opinion a man could not do a greater service to his country, than to procure the abolition of imprisonment for debt altogether. It was mischievous to the individual; it was pernicious to the public; and the worst of it was, that it made the creditor the judge in his own cause, and though the imprisonment might in many cases be just, yet it was certain, that in many cases also it was most unjust. But with respect to an uncertificated bankrupt it was always unjust; for the only object of the punishment was to compel him to do that which the law supposed impossible for him to do, and what indeed it rendered it impossible
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for him to do, unless he chose to be guilty of a capital felony. The punishment therefore in this case must be unjust. Consider what were the consequences; an irritated creditor, to whom the bankrupt might have given some previous offence, and whom he must have offended, in depriving him of his legal claim, however innocent the bankrupt might be. When the consequences that might result from such a relative situation were considered; a man exposed without defence to the mercy of an enraged enemy; it would hardly be possible to appreciate the extent of mischief which such a state of things was calculated to produce. The certificates were often withheld from the innocent, and given to the fraudulent bankrupt; for in fraudulent commissions it seldom happened that the certificate was refused. These certificates were often withheld for the purpose of extorting an advantage over the other creditors, as facts constantly recurring sufficiently proved. The law, it was true, gave several securities to the great body of creditors against such practices, but still they prevailed to a considerable extent. This held out a temptation to fraud to which no bankrupt ought to yield, certainly, but of which it was extreme y impolitic to permit the existence. The temptation was too often indeed sufficient to overcome the moral principle. The parent was often tempted to assist the child, and the child the parent, in an improper way; and it was notorious that cases of this kind were constantly occurring. But there was another temptation to which the defect in question exposed the bankrupt, and that was to avoid making a full disclosure of his effects. When the creditors came forward to prove their debts, the bankrupt was sensible how much he was in their power, and did not give that assistance in examining the debts, which under other circumstances he might be inclined to do. And a case had occurred the other day in the court of Chancery, where it appeared that a creditor had refused to sign a certificate, because the bankrupt had suggested what turned out to be the fact, that he was endeavouring to prove a larger debt than was due to him. There also existed another motive to withhold the certificate. The bankrupt, until he obtained the certificate, could not be a witness in any thing that related to the estate; and the creditors who had any contest with respect to it, often refused to sign, in order to prevent

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the testimony upon which the verdict, and the justice of the case might depend. Within a period of three or four years, there were more cases where certificates had been withheld than where they were granted.—In the year 1805, there were. 940 commissions taken out, and of these 489 were uncertificated.—In 1806, there were 1084 commissions taken out, and of these 601 were uncertificated.—In the last twenty years, there were 16,202 commissions taken out, and of these 6,597 remained without certificate. The evil had been found to be of such magnitude, that a temporary relief had sometimes been given. In 1772, and afterwards in 1778, bills were passed to compel creditors to give certificates, unless they could shew that there was something fraudulent in the conduct of the bankrupts; but this relief was confined to cases that had occurred previous to these periods. This plan of temporary relief, however, was certainly not one that ought to be resorted to, if it was possible to discover a remedy of another description.—If the thing was unjust at all, it was always unjust, and therefore the remedy ought not to be temporary, but permanent. In Ireland these temporary measures had been adopted more frequently than in this country. Bills of this kind were passed in 1786, in 1797, and then in 1799, being an interval of only two years. A bill was next passed in 1800, being only an interval of one year; so that, in Ireland, had it not been for the Union, the plan was in a fair way of becoming the subject of an annual law. But, since the Union, no such temporary act had been passed, and the distress that must have been produced by this suspension of a remedy, the nature of which proved the necessity of some remedy, might be easily imagined. The remedy he would suggest was not to take the power out of the hands of the creditors; but that, if the certificate was withheld for two years, the bankrupt might petition the Chancellor to allow the certificate, while the creditors might shew cause why the certificate should not be granted. The Chancellor would decide upon the merits and allow the certificate, provided there appeared no good reason to the contrary.—The only objection to this remedy, as far as he could judge, was the additional ex-pence which it would occasion in these proceedings; and in order to obviate this, he would propose that the additional process should be exempt from taxes. Of all taxes, those which were imposed on law
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proceedings were the worst, with the exception of lotteries. Such taxes were perhaps popular, however, and therefore they had been but little considered. But, a very little consideration would shew how excessively hard it was to subject to heavy taxation, without distinction of fortune, those who only incurred these taxes in the struggle to do themselves justice. It was his intention to make this part of the bill not only prospective but retrospective.— It might be asked, however, why when a law was proposed for the protection of the honest bankrupt, something was not done to protect the creditor against the dishonest bankrupt, and to prevent the frequency of fraudulent bankruptcies? To this he could only answer, that at present he had no remedy to propose but one, which he rather thought the house would not adopt. The only remedy he could conceive was, to render the law more efficacious, by making it less severe. The cause of the frequency of fraudulent bankruptcies he believed was, that the fraudulent bankrupt was, upon proof of the fact, liable to lose his life. He had already stated that there had been upwards of l6,000 commissions taken out in 20 years; and though instances were every year occurring of bankrupts withholding their property, there had been, in the space of 80 years, only three prosecutions, and only one executed —he believed about the year 1759. Another had been convicted, from a mistake as to the facts of the case; but these being represented in their proper light to his majesty, he had extended his mercy to the bankrupt in question. There never perhaps existed a stronger instance of the inefficacy of laws owing to their severity. Was it surprising that few persons were found to prosecute when for an offence of this nature the punishment was death? Under such circumstances bankrupts were under the strongest temptations to with-hold their property. This was bad; but at the same time in point of moral guilt, was it worse than the case of a man who in a higher station with-held his property from his creditors, and spent it in personal gratifications? If the law had been less severe, it would have been more enforced, and the end would have been attained in a much greater degree.—The objects which he had in view would make a very material alteration in the bankrupt laws. The best method of proceeding, he imagined would be to bring in the bill, to have it read a first time, and to get it printed, and then to put off the second

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reading to a distant day. But he hoped that no one would require that the postponement should be beyond a month. He should be very sorry if the bill did not pass with every possible speed. Every day's delay was the cause of imprisonment and misery to a great number of individuals. If such a bill had been passed at the beginning of the present reign, what misery might it not have prevented? What an increase of industry might it not have produced? What wealth might it not have raised? How many persons who had passed their lives in poverty and distress might have been in a respectable situation? How many might have recovered their rank in life, and paid all the just demands upon them? There were some other objects of minor importance which he had in view, such as to prevent the vexatious consequences that often arose from secret acts of bankruptcy. He meant also to provide that bankrupts might be Competent witnesses without releasing the sums to which they might be entitled in case their property came to a certain amount. He also intended to propose an alteration in legal executions in cases of bankruptcy. He concluded by moving for leave to bring in a bill to alter and amend the laws relating to bankrupts.—The motion was agreed to.