THE BANKRUPTCY REPORT.
THE Select Committee appointed by the House of Commons to examine the working of Lord Westbury's Bank- ruptcy Act has at least deserved praise for its despatch, and though the report is in many respects very far from a satisfac- tory document, it may give the clue to a very valuable Bill. The proposer of the report was Mr. Ayrton, and the alterations which have been introduced into his resolutions have scarcely improved his scheme. So long as the Committee confined itself to simple excision it prospered, for certain of Mr. Ayrton's resolutions entered into matters of detail which were scarcely included in its province. But when it came to amend- ment the ordinary result of divided counsels became apparent. The majority were for the system which makes bankruptcy a mere method of administering an insolvent's estate. Others, of sounder views, saw that this object might be attained with- out sacrificing the judicial control of the debtor and some attempt at least at making his discharge from his debts dependent on his conduct. One or two were for the Australian system, no imprisonment for debt, and no bank- ruptcy. Some traces of both these last views are to be found in the report, but unfortunately the Australian party seems ' to have been mainly influential in crippling the proposals of the minority, who were not prepared to make dividend the sole test of an insolvent trader's integrity. If, however, the report is open to criticism on this side, it has boldly asserted the principle—which indeed the public has already adopted—that the administration of assets is not the province of law. The law should decide when and how a man may be made a bankrupt, and on what terms he is to have his discharge. But as soon as be is adjudicated a bank- rupt his property belongs to his creditors. To collect and divide it is their business and, as experience has proved, their interest. Insolvent estates have been mere feeding grounds for official assignees and messengers, and though there is still much pleasant pasture before them in the shape of compen- sation even annuitants die at last. Henceforth if an estate is wasted in the winding-up creditors will have to blame themselves, and not the law, and though we do not expect them to be hard on the first, they may perhaps spare the last ; for the report wisely adopts the Scotch system pure and simple. On adjudication the bankrupt is to become a trustee for his creditors until they have met and elected a trustee in whom the bankrupt's property will immediately vest. This nominee of the creditors is to wind up and dis- tribute the estate subject to the supervision of two of them, and is to be paid by them. He is in short their servant. A certain watch will be kept on his accounts by the Accountant in Bankruptcy also, and if he needs the aid of the law he will be able to apply to the Court of Adjudication. This system gives satisfaction in Scotland, and is consistent with common sense. So far as the creditors are concerned it seems not only to supply their need, but to be content to stop there—a great merit in an administrative department.
We now come to what is a still more important part of a system of bankruptcy—the mode of dealing with the insol- vent debtor. The alterations proposed by the report in this part of the law are, we think, less satisfactory. In the first place, imprisonment for debt is to be abolished, and instead, the creditor who has obtained a judgment for any sum, how- ever small, is to have the power of making his debtor a bank- rupt. Arrest will be possible only when the debtor is sus- pected of an intention to leave the country. But the power of the County-Court judges to commit a debtor who wilfully refuses to pay, or at least to earn the means of paying, is apparently not to be interfered with. The bankrupt, on the other hand, is to be discharged from his debts when he has satisfied the Court of Adjudication that he has made a full disclosure and surrender of his assets, and when he has either paid 6s. 8d. in the pound or else remained uncertificated for six year. Finally, all acts which are declared criminal in L'ae debtor are to be punishable only in the criminal courts.
The merits of this system, and it must be judged as a system, seem to be these :—It in principle substitutes bank- ruptcy for imprisonment for debt. It leaves the discharge of the bankrupt a judicial act., for even when the debtor rays 6s. 8d. in the pound he will be amenable to the existing bankrupt law. And it makes an effort to keep the crowd of pauper bankrupts out of the Court. Its faults are that it retains imprisonment for debt in an anomalous form, and so as practically to affect only the labourer,—of all debtors the most excusable. And it makes the bankrupt's discharge depend not on his conduct, but on his assets, and keeps him for an inordinately long period in the most hopeless of posi- tions. The one great principle which ought to govern the policy of the law with reference to an insolvent, is that it is for the public interest to take his property for the creditors, punish him if he has done wrong, and let him go free, so that he may have at least the ordinary inducements to industry. If he is honest and has only been unfortunate or stupid this much is his right, for the same reasoning which justifies keeping a debtor in the fetters of a crushing debt would justify imprisoning him. And, moreover, iu these cases some share of the blame almost always belongs to the creditors. If the debtor has been dishonest, punish him, but leave him free; if you do not, you are almost certain to make a confirmed rogue of him. Even in Scotland, where the creditors are suffered to punish their debtor, their power is limited to two years, and they may if they think him honest, grant him an immediate discharge. But this report draws an absolute rule-6s. in the pound, and you wait six years ; 6s. 8d., and you go free at once. It is easy to put a dozen cases in which a man might pay only 3s. or 4s. and yet be absolutely blameless. He might be a sleeping partner, or have been an invalid for years, or managing a foreign branch, or robbed by his clerks. Did the Committee ever ask what dividend Marsh, Sibbald, and Co. paid, yet Fauntleroy's partners are admitted to have been entirely deceived. A mere rigid rule of this sort is the most cruel of punishments, and still in the true sense of the word no punishment at all, for punishment implies proportion between the sentence and the offence. It is only just to Mr. Dunlop, Mr. Roebuck, Mr. Goschen, and Mr. Miller to say that they strenuously opposed this resolution, and that on a subsequent division the term six years as opposed to three was only carried by one vote, the numbers being 7 to 6.
Probably, however, the idea was that the rule would keep pauper bankrupts from filing petitions. But for this purpose it was quite unnecessary. Abolish arrest for debt, and why should a pauper go to the Court ? If he does it is probably be- cause he wants to turn over a new leaf, as people say, and to try and do better for the future. What do the creditors gain by keeping him in a position in which it is his interest to spend everything he earns the instant he gets it, and live literally from hand to mouth ? The true remedy for mere applications to be whitewashed is to give up the pedantic theory that no punishment is to be inflicted on a bankrupt except through the criminal courts. For all offences against the ordinary criminal law, and even for acts which are in themselves necessarily criminal, such as not surrendering to his bankruptcy, a man should be tried by a jury. But those offences against creditors which are not criminal until bank- ruptcy has supervened on them should be punished sum- marily by the court which discharges the bankrupt. Bad book-keeping, reckless trading, excessive expenditure, gam- bling, buying on credit to sell at a loss for ready money, these are things which are no crimes until they are followed by bankruptcy. You may keep no books if you make a fortune, and gamble on either turf or 'Change so as you only win. No jury in the world will ever convict a man of crime for an net which when committed may have been perfectly innocent, and only became wrongful when the market had turned the wrong way. Take the case of the Board of Trade's prosecu- tions of merchant captains for wrecking their vessels. Not only would no jury ever find them guilty, but there is such difficulty in getting unprofessional magistrates to convict that the Board of Trade will not prosecute in places where there is no stipendiary. The argument that the captain has only done what he had done a hundred times before with impunity, and what everybody else does every day, is one which the lay mind can never resist. The conclusion at which we arrive is that the true principle of dealing with debtors is this, to abolish imprisonment for debt in every shape, to give every creditor power to make his debtor a bankrupt, to give every debtor power to petition for discharge from his debts, to free the bankrupt from debt in return for full discovery and sur- render of any property he may have, and to inflict stringent summary punishment through the Court of Discharge for mis- conduct as a trader. The imprisonment to be for a time not exceeding one year, actual fraud to be sent to the ordinary criminal tribunals at the discretion of the Court.
With respect to the constitution of the Court of Bank- ruptcy itself, the report is not quite intelligible. It proposes to abolish the existing Courts in toto. Then it proposes to make a new Court for the metropolis, consisting of all the judges of equity and common law. This is simply impracticable. Even as a court of appeal its decisions would want uni- formity. Then the committee does not recommend, but seems to imply, that for adjudication and all ordinary business a single member of the Court is to sit. Neither the Vice- Chancellors nor the judges have time for it. Mr. Ayrton's proposal to have a judge in bankruptcy, with an appeal from him alone to him together with any two equity or common- law judges, was intelligible, and perhaps as good a scheme as any other. It is also analogous to the constitution of the Court of Divorce. We believe, however, that the present Court of Appeal, the Lords Justices, are really the only judi- cial shoulders which can bear the burden, and we see no reason for shifting it. Country cases are to go to the County Courts, with a double appeal, first to the single metropolitan judge and then to the full Court. But what is the principle of this distinction between country and metropolitan cases ? Carrying out the principle of totally abolishing imprisonment for debt, we should be glad to see all small bankruptcies left to the county court judges. If they can deal with all, large or small, we see no objection. The appeal would be easily settled. Any consistent scheme, however, would work equally well, and the law officers of the Crown will have no difficulty in devising one. The report will not help them much. Lastly, the Committee make a few recommendations on the subject of deeds of assignment which are to bind all creditors. They are simply these,—that such deeds are to be registered in the Court which would have bad jurisdiction if the debtor had been made a bankrupt, and that it shall decide whether the deed is duly executed and valid ; and that no creditor who has not signed is to be bound until every creditor who has signed has proved his debt, and unless the deed provides for the distri- bution of all the debtor's estate equally among all the creditors ; nor even then till the debtor has paid 6s. 8d. in the pound, or six years have elapsed from the date of the deed. Of these all seem unexceptionable. Even the last is not, we think, unreasonable where the debtor escapes a judicial examination of his conduct. It seems too much to allow a majority of creditors to compel a dissentient minority to accept less than a third of their debt as a full discharge, unless the latter have some effective guarantee that the debtor has made a complete surrender df his assets.
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