THE BANKRUPTCY BILL.
THE passing of the Bankruptcy Bill has enabled the Government to add at least one measure of first-rate social, if not political, importance to the Statute-Book. The main credit of this result must rest with the Government, and particularly with that Member of the Government who framed it, brought it in, and carried it through with such conspicuous ability, energy, and tact. But the Standing Committee on Trade, the House of Commons at large, and even the House of Lords, each and all, deserve some share in the credit of the work. For once the Second Chamber confined itself to the legitimate functions of a revising body, and passed "at sight s' six pages of amendments intended to make the Bill clear and consistent with itself, which were propounded by the draftsman of the original Bill through tbe Lord Chancellor.
The Leader of the Opposition wisely abstained from letting loose his legions on the Bill, notwithstanding the usual com- plaints of want of time for consideration, and so forth. The Law Lords were chiefly conspicuous by their absence. In sparing the House and the Bill "the string of amendments" with which he had been supplied, and the "sixty-seven notes and queries" which he had made on the Bill, which he could not pronounce "good or bad, because he had not had an oppor- tunity of reading it," Lord Bramwell exercised a continence and a wisdom which his zeal in defence of Liberty and Property has not always allowed him to exhibit. The Grand Committee in the House of Commons also deserves the negative credit of continence in letting the greater part of the Bill alone, as well as the positive merit of having, according to its author, improved it by two months' "cutting and carving."
Considering the ultimate results, indeed, one may venture to express a doubt whether two months was not an excessive time to devote to the operation, and to hope in the future the Standing Committees may get through more than two Bills during the Session. Bat, on the whole, the Government cer- tainly have cause to congratulate themselves on the result of the experiment, and to look forward to an extension of the labours, and an increase of the fruits of the labours, of the Standing Committees in the future.
When the Bill is examined in detail, it is curious to see how little it has been altered in substance between its first introduction and its final stages, and how slight the actual changes are in the existing Law of Bankruptcy. The bulk of the Bill is simply a re-enactment of the Bankruptcy Clauses of the Act of 1869. In thus preserving the present law, Mr. Chamberlain showed not only an amount of common-sense which his supporters have always claimed for him, but also an amount of constructive Conservatism which his opponents have been rather apt to deny him. The fact is that it is not the Bankruptcy part of the Act of 1869 which has proved a failure. The real causes of the break-down of that Act have been the two sections which permitted liquidation by arrangement and composition. The "new way to pay old debts" pointed out by these sections was not discovered by the many till two or three years after the passing of the Act. But once discovered, the number of those who trod it advanced by leaps and bounds, and as the number increased the amounts paid by way of composition diminished, till it became the exception to pay more than ten shillings, while those who paid under one shilling were more numerous than those who paid over seven shillings and sixpence in the pound. Any debtor, if he could get the assistance of a sharp solicitor and a not wholly artless accountant, was thus enabled to defraud his creditors with ease and comfort if his gambling should turn out adversely. By the new Bill this primrose path will be stopped up, or at least will have a very strait gate placed at the entrance. Compositions may still be made, but they will be placed under the supervision of the Court. The proxies, which were the means by which the trustee and the debtor between them controlled affairs, are to be lodged with the official receiver, instead of with the trustee, and the Official Receiver is to make a report to the Court as to the debtor's character and affairs. It will rest with the Court instead of the creditors to give the debtor his discharge, just as under a bankruptcy. It will no longer be possible, therefore, for the debtor and trustee between them to juggle away the assets and liabilities at their own sweet will. The eye of the Court will be upon them, and if they are caught straying from the right path, the hand of the Court will be heavy upon them. The Act, however, aims rather at prevention than at cure. It does, indeed, hold out to the fraudulent debtor a greater certainty of punishment than hitherto. Not only may the Court commit him for trial, but if it does, it is the duty of the Public Prosecutor to prosecute. But the best precaution is likely to be that, in case of certain acts of misbehaviour on the debtor's part, the Court is not to be able to grant a debtor his discharge ; while for certain other acts it may only grant a conditional discharge. An effort is thus made, as under the Act of 1849, to distinguish between avoidable and unavoidable bankruptcies. Under the old Act, the Commissioners were to give one of three classes of certificates of discharge ; one certi- fying that failure was duo wholly to misfortune ; another, that it was due partly to misfortune ; and the third, that it was due wholly to causes other than misfortune. But this last was a brutum fulmen. Equally with the other forms, it operated as a discharge, and though it was intended to affix a stigma, yet as no evil results followed, the stigma was disregarded. But now the discharge is not to be granted at all, or only granted subject to conditions, if the bankruptcy has been caused "by rash and hazardous speculations, or un- justifiable extravagance in living," and so on. Not only, therefore, is a stigma affixed, but disqnalifications, disabilities, and disadvantages follow. Moreover, if an undischarged bankrupt incurs a debt of £20 without stating that he is un- discharged, he commits a penal offence, so that his status must needs be known to all with whom be has dealings. Even the most brazen-faced insolvent would feel the shame of revealing his own insolvency, when at the same time the in- solvency is known to have resulted from improper conduct. By removing the possibility of paying a fraudulent composition "on the quiet," and by marking with the mark of the Beast the criminal and quasi-criminal bankrupt, the Act should do a great deal towards the discouragement of the lax tone which has lately sprung up in dealing with insolvencies.
It is not, however, the debtor alone whose power of getting round his creditors has to be guarded against. He would be comparatively powerless without the trustee. The Act, there- fore, aims at diminishing both the temptations to the trustee to collude with the debtor or any section of the creditors, and also his power to do so, if be gives way to temptation. The first object is sought to be attained by providing that the pay- ment of the trustee shall be by commission or per-centage, partly on the amount realised and partly on the dividends distributed, instead of being left wholly to the discretion or interestedness of the creditors ; and the minority of creditors may get the Board of Trade to disallow the payment allowed by the majority, if too large. The chief inducement to adopt the profession of bankruptcy wrecker, has been not so much the salary, as the indirect profits which could be made by keeping the balances got in, and employing them for the trustee's private profit. There were stringent provisions passed in 1869 to prevent this, but they had to be enforced by the Court, and, unhappily, they were held not to apply to cases of liquidation. They are now re-enacted, but the enforcement of them is placed in the hands of the Board of Trade, instead of the Court, and they will apply as much to compositions as to regular bankruptcies. The trustee will, therefore, have to pay interest at 20 per cent, on outstanding balances over £50; he is expressly prohibited from pay- ing any moneys whatever into his private account ; he must pay them into the Bank of England, unless (owing to an unfortunate amendment introduced by Sir John Lubbock, in the interests of Bankers) the Committee of Inspection authorise his keeping an account with a local bank. His accounts, too, are not to be audited by the Com- mittee of Inspection, and merely forwarded once a rear to the Comptroller, who has no power to disallow them, but they are
to be audited by the Board of Trade twice a year. Perhaps the regulation which more than any other will tend to keep down illegitimate profits by the trustee is that when one person is trustee of several estates, if the Board of Trade thinks that the aggregate balance on all the estates in his hands is larger than is required, they may order him to pay over the surplus to the Bank of England. There is reasonable ground for hoping that under these regula- tions trusteeship in bankruptcy will become a less profitable trade, and that the office will, in a large number of cases, be left in the hands of the Official Receiver. He, as the salaried agent of the Board of Trade, will look for his reward to pro- motion in his Department earned by the ability and energy with which he conducts the bankruptcies committed to him, instead of to the protraction of lucrative operations with the balances got in by him.
A further check is put upon waste and loss by provisions as to the summary administration of small estates where the total amount realisable is under £300, which have been hitherto the most fruitful sources of scandalous compositions and illegal profits to trustees. A great relief to small debtors who owe altogether under £50 is afforded by enabling a County-Court Judge to make an order-for-payment into what is practically a bankruptcy order. The working-classes will, therefore, now be able to have the benefit of that white-washing which has hitherto been reserved for sins or misfortunes on a larger scale. It has been very hard on working-men that hitherto, if once they got into debt, they could never remove the millstone from round their necks. This clause should do more for their emancipation from the small money-lender and shopkeeper than the prohibition of bills of sale, or any other paternal protection of that kind which can be devised. A similar step is taken in imitation of the Scotch law, by the transfer of the administration of the in- solvent estate of a dead man to Bankruptcy, to the great relief of the Chancery Division and the great benefit of the creditors.
Such are the most salient points of the new B11. In one sense, they may be said to be a return to the officialism of the Act of 1849. But there is this essential difference. Under that Act, the official assignees, as they were called, had the appearance of control, without the reality. Moreover, they were legal officers, and necessarily acted with the slowness and the timidity which characterise the action of Courts of Law. The great novelty of the present Bill lies in its separation of the legal from the administrative officialism. The official receiver will rather be amicus than minister Curiae. He will advise, report to, and set in motion the Court, but he is the servant of and responsible to the Board of Trade. The .Board of Trade replaces the Comptroller in Bankruptcy, but it can not only examine and report, but net on the result of its examina- tion. Under two such heads as Mr. Chamberlain and Mr. Fairer, there is little danger of its functions not being care- fully, freely, and swiftly exercised.
It is possible that the new Act, notwithstanding all the skill and care with which it has been framed, may prove a failure' like those which have preceded it. It is possible that no Bankruptcy system can be satisfactory. It may be that the speedy release of the unfortunate debtor, and the sure punishment of the fraudulent or reckless debtor, are irreconcileable objects ; and that when the third object, of
speedy recovery of such debts as can be recovered for the creditors, is added, that the attainment of all three objects at once is beyond the power of any legislation. It may, however, be fairly claimed for this Act that it so courageously attempts innovation where innovation has been shown to he necessary, and so carefully preserves all that has worked successfully in the past, that it deserves success.
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