and novel elements in Bankruptcy Law. It such breadth and importance introduced proposed, in the first place, the abolition into the Bankruptcy Law, it was found in altogether of imprisonment for debt. In working that various details of difficulty the next place, it put an end to the dis- and complication arose, which led to some tinction for the purposes of bankruptcy embarrassment and dissatisfaction as the which had up to that time existed between results of the measure. The difficulties traders and non-traders. In the third that had arisen found expression in a Moplace, it introduced a system which had tion in the other House of Parliament for obtained great favour in Scotland, under a Select Committee to consider the working which creditors in a bankruptcy were left of the Bankruptcy Law as it then stood. in a great measure to choose a trustee for Committees of the House of Commons sat themselves, who was to conduct the affairs during 1864 and 1865 on this subject. In arising out of the bankruptcy. And, in 1864 they were unable to make their Rethe fourth place, it introduced a system of port, and they contented themselves with composition or arrangement deeds. That reporting the evidence taken before them proposition was based on the Report of the to the House; but in 1865 the Report of Royal Commission of 1854. This Bill, the Committee was presented. I will ask with these objects, received the most care- your Lordships' permission to mention the ful consideration at your Lordships' hands. names of those who composed that ComIt passed through a Select Committee, mittee, because I venture to think that a where it received suggestions and Amend- more important representation of the merments. It was afterwards amended on cantile element could not be obtained. The the Report, and it was on the point of names were-Mr. Moffatt, Sir Roundell being sent down to the other House of Palmer (then Attorney General), Mr. RoeParliament when the dissolution of Parlia- buck, Mr. Miller, Mr. Ayrton, Mr. Murray, ment took place. In the new Parliament Mr. Malins (now Vice Chancellor), Mr. my noble and learned Friend, who now Goschen, Mr. Crum-Ewing, Mr. Gathorne sits on my left (Lord Westbury), who was Hardy, Mr. Dunlop, Mr. Lowe, Mr. Monthen Attorney General, introduced into creiff, Mr. Weguelin, Mr. Vance, Mr. the other House, and succeeded in 1861 Hodgson, and Mr. Cave. In 1865 the Comin passing through the Act, which after-mittee reported their opinion to the House wards became law, and which I will refer as to the changes necessary to be made in to as the Bankruptcy Act of 1861. That Act of Parliament contained these three conspicuous features. It abolished, as the Bill I have before referred to proposed to do, the distinction between trader and non-trader. With regard to imprisonment for debt, it did not entirely put an end to Coming now to these Bills, I have to that, but it provided that any person state in the first place that the three meaimprisoned for debt might, in a summary sures now before your Lordships will, of and rapid way, apply for his discharge in themselves, if they become law, form a bankruptcy; and if he did not think fit complete and entire code of bankruptcy so to apply of his own will, it provided for the country. They are consolidation what I may term a gaol delivery at very Bills. They repeal every measure of bankfrequent intervals for liberating prisoners, ruptcy passed up to the present time, and under which the Registrars in Bank- and if they receive the assent of Parliaruptcy attended the various prisons for ment, any one who holds these three Acts debt, and liberated those confined whether in his hands will be in possession of the they liked it or not. In the third place, whole Bankruptcy Law of the country. In the Act introduced a system of composition consolidation measures of this kind a numdeeds, under which a debtor by arrange- ber of provisions are necessarily re-enactment with his creditors, and by the consentments. But they are re-enactments in this of a majority in number and three-fourths sense. The Bill contains between 500 the Law of Bankruptcy in the shape of thirty-one Resolutions; and I think, with one or two exceptions, the whole of the recommendations of that Committee have been incorporated in the Bill which I now ask your Lordships to read a second time. in value, might bind the minority of his and 600 clauses. About a quarter of that creditors to a composition, or any other number are new clauses, the others are arrangement which the majority might re-enactments. I am, however, in a posiagree to with regard to the estate. These were the main features of the Act of 1861. It is not surprising that, with changes of tion to say, with regard to nearly every one of these re-enactments, that the clauses have been re-considered, and in many in stances re-drawn, in order to simplify, and, I that is to say, we provide that, if after if possible, to abbreviate and make more judgment the debtor against whom judgplain the enactments on the subject. My Lords, I think the most convenient course I can now take in order to make the matter more intelligible will be as briefly as possible to go through the various heads of alteration of the law which these Bills propose. In the first place, I will ask your Lordships to consider the mode in which these Bills deal with the important subject of imprisonment for debt. The present state of the law is this -that no person can be imprisoned for debt before judgment in an action has been obtained, unless it be proved that he is about to leave the country, and become what is called an absconding debtor. In that case only can an arrest take place before judgment, and then only for the purpose of obtaining payment or security from the person who is about to leave the country. After judgment has been obtained under the present law the ordinary process can be issued by the creditor, and the debtor can be taken in execution and put in prison as a debtor. When there he can apply to be made a bankrupt, and if he does not think fit to do so he would be in a short time discharged under the Act of 1861, to which I have referred. The proposal which the present Bills make, as distinguished from the present law, is this-we propose to abolish imprisonment for debt altogether; that is to say, we propose to abolish altogether the power which the creditor has of his own will to issue a process after judgment under which a debtor may be confined. Your Lordships will not expect me at this time to enter into any argument in defence of the proposition to abolish imprisonment for debt. Your Lordships have passed the Bill of 1859, which contained an enactment to that effect. The total abolition of imprisonment for debt has further been recommended by a Committee of the other House, and measures have on two occasions passed the second reading in the other House for the abolition of imprisonment for debt. But your Lordships will naturally ask-Supposing that imprisonment for debt be abolished, what means can we substitute in lieu of imprisonment for dealing with persons against whom judgment has been obtained? We have introduced provisions under this head which have always been recommended to go along with the abolition of imprisonment for debtVOL. CXCI. [THIRD SERIES.] ment is obtained is shown to be about to leave the country without paying or securing the debt, he may be arrested as an absconding debtor, and, independently of that process, there is a power given of examining him in the most stringent way under what is termed a judgment debtor summons as to any property he may possess, and of requiring the discovery of any documents which would elucidate his position, so that, if possible, payment may be obtained by the realization of such property. In case he is unable or unwilling to give security for, or make payment of the debt, resort may be had to the Court of Bankruptcy for adjudication against him in the same manner as at present. Imprisonment for debt, as a process to which the creditor may resort of his own accord, will thus be at an end; but there will remain imprisonment under an attachment for non-payment of money, by a Court of Equity or by order of a Common Law Court. There will remain imprisonment such as I have described in the event of a debtor being about to leave the country and refusing to pay or give security, and there will remain, finally, imprisonment either by County Courts or by Inferior Courts, which are analagous to them. This brings me to another part of the subject to which I will ask your Lordships' particular attention - the mode in which imprisonment for debt is at present dealt with by the County Courts. At present, in the County Courts, if judgment has been obtained for a debt, the debtor may be called before the County Court Judge and examined as to his means of payment, and if the Judge be of opinion that he has means of paying the debt, either at once or by instalments, he may make an order accordingly; after which the debtor, if he does not pay, may be imprisoned by the Judge for any period not exceeding forty days. Now, it has always appeared to me that a very strong and anomalous power is thus given to these Courts. The arguments which are commonly adduced in support of it are these: In the first place, it is said that we have to deal with men who live by their labour, and that since there occasionally come times of want of employment or of illness, such men, unless they can get credit during these intervals, will suffer very considerably, and that they cannot → B 2 get credit unless their creditors are aware that they have the power of imprisoning them in the event of not paying. In the next place, it is alleged that if credit is given, and if the person of the debtor cannot be arrested by the County Court, the creditor will immediately seize the furniture or the other contents of the debtor's house, and that it would be a greater loss to the family of a working man that his home should be thus broken up than that he should undergo temporary imprisonment. It is also said that this process, as shown by its results, operates very effectively in terrorem, for that whereas a great number of warrants of arrest are issued there are comparatively few instances in which the warrants are actually executed. I may refer to statistics upon this point which appear to me to possess considerable interest. Taking the eight years from 1859 to 1866, both inclusive, there were, in round numbers, 108,000 judgment summonses issued in the County Courts. Of that number 54,000 were actually heard; but only 26,000 resulted in warrants of commitment, and of these only 7,800 were actually carried out by the consigning of the debtors to prison. Thus out of the 108,000 judgment summonses issued, only 7,800, or about 7 per cent, led to imprisonment. It further appears that a few years ago the County Court Judges were consulted as to whether this power should be retained, and I am bound to say that, with very few exceptions, their opinion was that this power was of the greatest importance, some of them even saying that were it given up the system of recovering debts in the County Courts could not possibly be continued. These are the arguments for the maintenance of this power of imprisonment. But it has always appeared to me that by this power you continue a very invidious distinction between the case of the small debtor and that of the large one. The large debtor is absolved from the irksomeness of imprisonment, while the labouring man is still liable to it. It is very singular, too, that while the hypothesis is that you are dealing with a man who has nothing but his labour wherewith to discharge the debt, you put him, in order to make him pay, in a place where it is impossible for him to exercise his power of labour. Moreover, it has always appeared to me that by holding out this liability to imprisonment, we probably engender or continue a system of credit in itself vicious and undesirable. I remember very well hearing a right hon. Friend of mine (Mr. Henley) giving in very graphic terms the results of his own observation in the rural districts. He described how the travellers of small traders go to a farmhouse or the cottage of a labouring man, and, the head of the family being away at work, a lot of finery or other goods are shown to the wife and daughters, who are easily tempted to become purchasers, and to pledge the credit of the head of the family. This practice, Mr. Henley remarked, and I believe with great truth, these travellers would not dream of pursuing if they were not perfectly sure they could afterwards take out a summons and, if the man still refused to pay, could imprison him in order to compel payment. Individually, I should be very glad to see a way of putting an end to this power of imprisonment for debt by the County Courts and Inferior Courts altogether; but I am afraid it would be difficult to do so at once. I have, however, proposed by these Bills a course which I think will considerably diminish the practice and before long will lead to its extinction. I propose in the first place, in one of these Bills, that no committal shall take place in any Inferior Court except by the Judge himself and in open Court-for I find there is too much reason to suppose that a great number of these committals are at present made by the Registrars or at Chambers. I also propose that every Court invested with this power shall make an annual Return to Parliament of the names of persons committed by it for debt, so that Parliament may be kept acquainted with the extent to which the power is enforced, and that if any suspicion of abuse arises its attention may be drawn to the subject. I further propose an alternative which I think is in itself much more sensible, and much more likely to be beneficial than the present system. It is that a power should be given to the Judge of arresting the future wages or earnings of a debtor against whom judgment has been obtained, to the extent of 25 per cent; that is to say, a power of serving an order on the debtor's employer, under which one-fourth of his wages will be paid into Court as they become due for the benefit of the person who may have obtained judgment. The machinery by which this will be carried out will, I trust, be found simple and effectual, and I hope that as in consequence it would be comparatively useless to resort to imprisonment to compel payment, it will cause that practice to fall into desuetude. The next point to which I wish to call your Lordships' attention is one of great importance-I refer to the existing power of a debtor becoming bankrupt on his own petition. Under the present law any person, whether in prison or not, may present a petition to the Bankruptcy Court, stating that he cannot meet his engagements, and thereupon he becomes bankrupt on his own petition and obtains the protection of the Court. The Returns of the Court of Bankruptcy laid upon the table a few days ago show that the total number of bankruptcies last year was 8,994, or, in round numbers, 9,000. Now, of these persons no less than 6,533 were made bankrupts on their own petition. On the petition of the creditors there were only 805-that is, 6,533 on the petition of the debtor himself as compared with 805 on the petition of the creditor. My noble and learned Friend (Lord Westbury) has very properly reminded me that I should state the number of petitions in formâ pauperis, which amount to 480 and should be added to the number I have already given. There is a striking piece of information contained in this Return upon another subject. How many bankruptcies do your Lordships suppose there were in that year in which no dividend was paid? No less than 5,876; and, my Lords, I believe it will be found by those who look minutely into the matter that it is principally in those bankruptcies which take place on the petition of the debtor himself that there are no dividends. Now, some propose that a stop should be put altogether to the practice of permitting a debtor making himself bankrupt on his own petition. I doubt whether that would be a very desirable course. In the first place, one may easily conceive a case in which it is quite proper that a debtor should make himself bankrupt, and should do so without any intention of acting otherwise than would be beneficial to his creditors. But there is a still more important reason against taking away that power. If you take away the power in name, nothing in the world is easier for one who wants to make himself a bankrupt than to get a friendly creditor to present a petition to have him declared bankrupt, and so the same thing would be done in another form. I think the present measure will treat this evil in a more satisfactory way. In the first place, the abolition of imprisonment for debt will take away one of the principal motives which at present induce a debtor to petition to be made bankrupt. In the second place, the course which this Bill proposes of leaving the after-acquired property of the debtor to a great extent subject to the payment of his debts will take away another powerful motive which at present operates in the same direction-that is to say, the inducement which there is at present to the debtor to become a bankrupt in order that he may secure his future property from his creditors. And more than that, the present measure will provide a remedy by substituting another process which I will describe. Any one who wishes to make himself a bankrupt must file a declaration of insolvency, which will be published. Thereupon his property will be secured against execution and against loss. For twenty-one days it will not be competent for the debtor to take any steps towards making himself a bankrupt. For these twenty-one days his creditors will know that he professes himself a bankrupt, and it will be for them to consider whether they will put themselves in motion to prevent him from petitioning. If after twenty-one days no creditor proceeds to make him a bankrupt, then, and only then, he may become so on his own petition. The next important alteration which this Bill proposes is to introduce to a great extent what I may term the Scotch system of trusts in bankruptcy-a system which has worked very well in Scotland, and which the mercantile community in England are anxious to try. The main characteristic of this system is that, in place of having a bankruptcy conducted with forensic proceedings through the Court of Bankruptcy, the creditors, on the first meeting after the bankruptcy, may determine for themselves the course to be pursued in winding up the affairs of the debtor. They may, if they please, have a trustee to represent them and wind up the estate. They may choose that trustee where and as they please he may be a creditor, or he may not-and I anticipate that, as has been the case in Scotland, it will be found that many persons will be anxious to show how speedily and economically they can, as trustees, wind up the estate, and thus seek employment in a legitimate and useful way. Over this trustee the creditors will appoint one or two inspectors out of their own number, | of a bankrupt there are mainly three who will control the trustee, and keep the things which ought to be kept in view. general body of creditors apprised of what In the first place, I submit that no arbiis being done. And, besides, the Account- trary power whatever should be left in ant in Bankruptcy, who at present does the Court of indefinitely postponing or renothing more than keep the accounts of fusing the discharge of the bankrupt who the Bankruptcy Court, will perform the has surrendered his property. In the functions of a general auditor of bankrupt- second place, if the bankrupt has comcies, and will be supervisor of the trustees. mitted any offence against the Bankruptcy In Scotland, the fashion has been not to Law-and every offence that can be comhave even an official assignee, as we have mitted ought to be clearly ascertained and in this country. After the most mature defined-in that case you will rightly and consideration, we have thought the best properly suspend his discharge for a licourse to take is this:-The present offi-mited period by way of punishment, and cial assignees will be continued as provisional trustees if a necessity should arise that any person should be put in possession of the property before the creditors would have an opportunity of appointing a trustee of their own. The official assignee will act as this provisional trustee, and he will step in and take possession if ordered by the Court, but not otherwise; and as soon as the creditors choose their own trustee the functions of the provisional trustee will be put an end to. Further than this, we have introduced a provision which will, I venture to think, expedite the distribution among the creditors of the estate in trust. We provide that the creditors' trustee shall not in any case be paid any remuneration until the accounts have been audited and the remuneration allowed in the audited accounts-so that there will be no retaining any sum for remuneration until the accounts have been regularly audited and passed. I now come to what is next in order and importance-I mean the discharge of the bankrupt. My Lords, the principles upon which bankrupts in this country have been discharged have varied very materially from time to time. I will not trouble your Lordships with a history of the alterations made at different periods. The present system is this:-The discharge of the bankrupt may be altogether refused, or it may be suspended for a limited period, or it may be granted; but when it is granted it frees him from any claim upon subsequently acquired property that is to say, it leaves the property afterwards acquired free from liability for his own debts, unless he has committed some of the offences pointed out by the present Bankruptcy Law. If he has, a condition may be attached to his discharge, making his future property liable by way of punishment for his offence. I venture to think that in any law as to the discharge you may also proceed to inflict punish- You |