58

Taxes on the Administration of Justice.-Report of the Bankruptcy Commissioners. home, asks the assistance of a Court of Courts, are the severity of the penal proJustice?" visions of the Consolidation Act of 1849. They observe that

enumerated, such as losing, at any time, how"By the 201st section, certain offences are ever remote, by any sort of gaming or wagering, in one day the sum of 201., or losing within twelve months preceding the bankruptcy the sum of 2007., or losing within the like period of twelve months the like sum of 2001. by any time bargain in Government or other stock, or parting with, concealing, destroying, altering, mutilating, or falsifying books, papers, writings, or securities after an act of bankruptcy, or in contemplation of bankruptcy, or with the intent to defeat the object of the Bankrupt Law, or making false or fraudulent entries with intent to defraud creditors, or concealing any property, or suffering a false debt to be proved, and not disclosing it within one month after the bankrupt knows it. By the commisagainst him, the bankrupt is precluded from sion of any of these offences, if established obtaining the benefit of a certificate of conformity. Indeed, as the law now stands, a merchant who has carried on an extensive business with prosperity and success, and is unexpectedly brought down to a state of insolvency by a series of misfortunes which he could not anticipate, would be absolutely unable, if he had lost 204. on a horse-race at any antecedent period, to claim his certificate during the rest of his life. Unless he could pay his debts in full, his incapacity of holding property would last for ever."

And again, in another article in the same Volume, we remarked-" Practically it would seem that the tribunals did not exist for the whole kingdom, but were created specially at the moment for the individual suitor. He is in the situation of a man who should buy a carriage and horses, establish a place to keep them in, and servants to take care of them and to drive them, but who should find himself called to pay a fare every time he used them. In the case of the private individual, such a demand on his purse would probably make him give up the carriage and horses. But the subject cannot give up the Courts and their Judges and officers. There they are, and there the Government insists that they shall be. And why? Let us take the most favourable answer that the Government can give to this question, and (putting out of view all reasons of dignity, power, and patronage), suppose it to say, the Courts are maintained because no one can foresee the time when he may need their aid, and the Government must provide for even the possible wants of every subject of the Crown. Exactly so, and that is just the reason why no individual should pay fees when his wants compel him to enter one of these Courts. The answer shows that they are kept up for the whole community, not for the individual suitor. All the property taken from the 130th section of the 6 Geo. This provision of the Statute (which is in the kingdom which does not come into litigation receives a value from that litiga- 4, c. 16) is evidently too stringent, and the tion to which the rest is subjected. Mr. A., Commissioners think that the making the who never practically knew what a lawsuit validity of the certificate cognizable in other was, obtains all the benefit of one from the Courts in the cases therein mentioned is fact that Mr. Z. has been compelled to un- Court of Bankruptcy, subject to appeal, also objectionable. The judgment of the dergo its troubles." should be conclusive on that question.

These extracts show the principle on which the proposed reform proceeds, and we make them with no little pleasure, as evidence of the early and earnest interest we took in a subject which was at the bottom of all real Law Reform, and the neglect of which, up to this time, has been, more than anything else, the cause of Law Reform having been incomplete.

REPORT OF THE BANKUPTCY
COMMISSIONERS.

PROPOSED AMENDMENTS IN PENAL
PROVISIONS.

AMONGST the causes, which the Com missioners state have produced the diminution in the business of the Bankruptcy

The 256th section, as now drawn, is also, in the Commissioners' opinion, unnecessarily harsh and severe.

"It enumerates certain offences which, if substantiated at the last examination, or at any adjournment thereof, would apparently oblige the Commissioner to refuse the bankrupt any further protection, although by a preceding section (the 112th) he has clearly and indisputably the power to grant it. Moreover, the 256th section includes among the enumerated offences, not only acts which are obviously contrivances to defeat the objects of the Law of Bankrupts, but others also which have not necessarily an intent so fraudulent. We can see no reason for diminishing the power which the Commissioner has, under the 112th section, of granting protection to the bankrupt, except so far as such power is controlled by any of the following recommendations.

Report of the Bankruptcy Commissioners.

59

"With respect to some of the cases pro- caused to be concealed, destroyed, altered, vided for in the 201st section-namely: after mutilated, or falsified, any of his books, an act of bankruptcy or in contemplation of papers, writings, securities, or any documents bankruptcy, destroying, altering, mutilating, relating to his trade, dealings, or estate ;or falsifying books; or making or being privy to any false entries in any book of account with intent to defraud creditors; or concealing any property with the like intent; or suffering a false debt to be proved, and not disclosing it to his assignees within one month after the bankrupt knows it,-in such cases we think it should be obligatory upon the Court to refuse the allowance of the certificate altogether, and also thereupon to refuse protection.

"With respect to some of the other cases provided for in the 201st and 256th sectionsnamely: losing by gaming or wagering in one day 201., or 2001. within one year; or losing 2001. by stock jobbing; or any of the offences mentioned as the fourth, fifth, and eighth of those enumerated in the 256th section,-we think it should be obligatory upon the Court to suspend the certificate for a period not exceeding three years, nor less than one; and the provision against stock jobbing should extend to time bargains in shares in railway and other public companies, and in foreign stock.

"With respect to the other offences enumerated in the 256th section, these as well as other commercial delinquencies not enumerated should be dealt with by the Court under the discretionary power in the 198th section, subject, of course, to the power of appeal."

"Or if the bankrupt shall, either after an act of bankruptcy, or in contemplation of bankruptcy, or within two months next preceding the filing of the petition for adjudication of bankruptcy, and with the like intent, have been party or privy to the making of any false or fraudulent entry in or omission from any book of account or other document ;

"Or if the bankrupt shall, either after an act of bankruptcy, or in contemplation of bankruptcy, or within two months next preceding the filing of the petition for adjudication of bankruptcy, and with the like intent, have concealed any part of his property of the value of 201. or upwards;

"Or if any person having proved a false debt under the bankruptcy, such bankrupt being privy thereto, or, afterwards knowing the same, shall not have disclosed the same to his assignees within one month after such knowledge;

"Then and in such or any of such cases, the Court shall refuse to grant him a certificate, and shall also refuse to grant him protection:

"And if the bankrupt shall, within one year next preceding the filing of the petition for adjudication of bankruptcy, have lost by any sort of gaming or wagering in one day 207., or at any time within such year 2001. ;

shares in any partnership, association, or company, corporate or unincorporate, to which the 1848," applies, where such contract was not Joint-Stock Companies' Winding-up Act, to be performed within one week after the contract, or where the stock or shares bought or sold were not actually transferred or delivered in pursuance of such contract ;

Under these circumstances the Commis"Or if the bankrupt shall, within one year sioners are unanimously of opinion, and ac- next preceding the filing of the petition for cordingly recommend, that the imperative adjudication of bankruptcy, have lost 2007. by part of the 256th section, as to refusing any contract for the purchase or sale of any protection in certain cases on the last exa-government, foreign, or other stock, or any mination, should be repealed; while some of the Commissioners, who differ from the foregoing expressions of opinion on this part of the subject, think that during the interval between the adjudication of bankruptcy and the allowance or refusal of the certificate, protection to the bankrupt should always be given, in justice to himself as well as for the benefit of his creditors. His personal services are then required for preparing his accounts, and for affording explanation and co-operation in the management of his affairs.

The Commissioners further recommend that such parts of the 201st and 256th sections as they propose to retain, with some alteration, should be incorporated in

one section:

"Or if the bankrupt shall, at any time within two months next preceding the filing of the dulently, in contemplation of bankruptcy, and petition for adjudication of bankruptcy, fraunot under pressure from any of his creditors, but with intent to diminish the sum to be divided among his creditors, or to give an undue preference to any of his creditors, have paid or satisfied any such creditor, wholly or in part, or have made away with, mortgaged, or charged any part of his property, of what kind

soever;

"Or if the bankrupt shall at any time after "So that if the bankrupt shall, either after the filing of the petition for adjudication of an act of bankruptcy, or in contemplation of bankruptcy, and with intent to diminish the bankruptcy, or within two months next pre- sum to be divided among his creditors, or to ceding the filing of the petition for adjudication give an undue preference to any of his crediof bankruptcy, and with the intent to defeat tors, have concealed from the Court or his asthe object of the Law of Bankruptcy, or to de- signees any debt due to or from him, or have fraud his creditors, have parted with, concealed, concealed or made away with any part of his destroyed, altered, mutilated, or falsified, or property, of what kind soever;—

Report of the Bankruptcy Commissioners.

fication under the notice of the Commissioner;

that these facts may be, and too often are, intentionally withheld;—that it may be, and often is, the case where little or no assets are realised, that the bankrupt has first misconducted himself in diminishing the estate, and, next, has secured himself from the stigma of a thirdclass certificate by depriving his creditors of the pecuniary means essential to an effective these and other penal clauses is to deter the scrutiny of his conduct;-that the effect of a creditor of respectable but unfortunate traders from bringing them into Court, and the traders themselves from resorting to bankruptcy;and that for such and the like reasons the clauses establishing the classification of certificates ought to be repealed.

"On the other hand it is contended, that although this is a novelty in the Law of England to a certain extent, it is not so altogether; -that the principle of conferring the power of "On the one hand it is represented to us, punishment on a single Commissioner, is as that this is a novelty in the law of England;- fully conceded by giving him the power of that it enables a single Judge, without the in-withholding the certificate, or suspending it

Report of the Bankruptcy Commissioners.

61

There

without protection, as it is by giving him the system of classification has or has not been power of awarding a certificate of the third-productive of benefit. Both as regards the class; that although the certificate is the usual consequence of the cessio bonorum which the have failed to arrive at any definite conclupast and the future, the Commissioners law enforces, yet in many cases, such as fraud or gambling, the Statute itself denies to the sion; and they regret to say, that after bankrupt the benefit of obtaining it under any great deliberation they are still divided in circumstances, even when it has stripped him opinion. Some of them think that the sysof all his property:-that the suspension or tem of classification should be abolished classification of the certificate is only a modifi- altogether; whilst others are of opinion cation of the same principle which the law has that to a certain extent it ought still to be thus already recognised and always acted upon; continued, provided it can be cleared of the -that the certificate in fact is not a right that any one may claim, but a privilege to traders, Tagueness and uncertainty which appear to which no other class of insolvents enjoys, and have produced, under similar circumstances, therefore, like all privileges, it may be sub- very different decisions. They are all agreed, jected to conditions that are reasonable in however, that the law, as it stands, is so themselves and beneficial in their effects; vague and ill-defined that it cannot be adthat it is unjust to the honest trader whose in- ministered with justice or precision. solvency has been occasioned by losses and misfortunes that could not be anticipated, to "By the law as it now stands,' the Combe sent back again into the arena of com-missioner is to have regard to the conformity merce' with nothing to distinguish him from of the bankrupt to the Law of Bankruptcy and the dishonest trader, whose bankruptcy was to his condut as a trader before as well as after owing to his own misconduct;-that advantages his bankruptcy: and then he is to certify, in arise both to the mercantile community and in awarding the class of certificate, either that many cases, to the bankrupt himself, by noting his bankruptcy has arisen from unavoidable that distinction;-that the beneficial results of losses and misfortunes, or that it has not this classification have been strongly evidenced wholly arisen from unavoidable losses and by the extreme anxiety which different Com- misfortunes, or that it has not arisen from missioners have observed in bankrupts to ob- unavoidable losses and misfortunes. tain a high class and to avoid a low one; that can hardly be a doubt that the object of those although a third-class certificate is a brand or who framed this provision was to say, that stigma in a figurative sense, yet it cannot be bankruptcy from misfortune should entitle a considered, if justly awarded, as a brand or man to a first class, that bankruptcy from misstigma imposed by the law, but a brand or conduct should degrade him into a third, and stigma which is self-imposed, and knowingly that the intermixture of the two should place incurred, because it is the necessary and in-him in the second. There is to be a certificate evitable result of the misconduct which the insolvent has chosen to pursue ;-that the severity of the punishment, if there be any severity, arises therefore from the moral misconduct of the party himself, and not from the system, or the act of the Judge, who through the certificate expresses his judgment on that misconduct;-that the uncertainty of the law, and the want of uniformity in the Commissioners' decisions, is rather a reason for prescribing a clearer and better rule for their guidance in future than for superseding the system of classification altogether, if that system in other respects has been found to be advantageous;that the preponderating opinion among the Commissioners of the Court, as well as in the trading world, is in favour of some classification, and that therefore it would be unadvisable and highly impolitic to subvert a system, recently introduced, generally approved of by those most interested in it, and capable of amendment in the only points which are open to objection."

It cannot be denied (says the Commissioners) that there is considerable force in both these views. But they rest so much on the opinions of witnesses rather than on facts adduced in evidence, that the Commissioners are unable to state whether the

of approval, a certificate of disapproval, and a certificate importing neither the one nor the other. Assuming, however, that this is the construction, the language is ambiguous, and there are numberless cases which would not be

defined."

"To remedy this ambiguity, some witnesses have suggested that the body of the Statute should point out the circumstances which should act as a guide to the Commissioner in his judgment, and then that the certificate should simply be a certificate of the first, second, or third class, according to the degree of approval or disapproval which ought to be applied to the bankrupt's conduct.

"Others have considered that some such plan as the foregoing should be adopted, but that the Commissioner should state in the certificate the grounds of his decision, in order that they might be known to the mercantile community, and also that they might be rectified, if wrong, upon appeal.

"Others, again, have despaired of making three distinctions, which will not create uncertainty and confusion; and they have, therefore, recommended two certificates, the one, a certificate of approval, which would indicate to the world that the inability of the bankrupt to

1 12 & 13 Vict. c 106, s. 198.

62

Report of the Bankruptcy Commissioners.

meet his engagements was owing to his mis- "The form of the certificate, after briefly

fortune, and not to his fault; the other, a simple certificate of conformity which should intimate no opinion of his conduct; but in so far as that conduct might deserve punishment, the refusal, or suspension, or adjournment of the certificate should be the mode by which it should be conveyed.

referring to the completion of the examination, might in its substantial parts run as follows:- And having regard to the conformity of the said bankrupt to the Law of Bankruptcy, to the mode in which he has kept his books and accounts, and his conduct in that and in all other respects as a trader, as "These suggestions deserve every considera- well before as after his bankruptcy, the Court tion, not only on account of the high authority did then and there find the said bankrupt enfrom which they come, but also for the im- titled to such certificate.' Then if the Comprovements which they evidently contemplate. missioner should award a certificate of con"With regard to the first and second, it formity only, such certificate should proceed appears to us, that if the threefold classification simply as follows:- And the Court doth of certificates were still to be retained, it would hereby award him a certificate of conformity;' be advisable that the Act itself should be more but if the Commissioner should award a certispecific than it is at present, and that the Com-ficate of approval, it should be in the words missioners should indicate shortly the grounds following-And it is hereby further certified upon which the certificate was awarded, in order that the Court doth approve of the conduct of that the case might be better heard on appeal, the said bankrupt in respect to the mode in and also that the public might be made aware which he has kept his books and accounts, and of the reasons with reference to the trader's in all other respects as a trader; and doth conduct, which raised him into a high class, award him a certificate of such approval acor degraded him into a low one. We recom- cordingly."" mend that this should be done if the threefold classification should still be continued. may be doubted whether it would be practicable to work out a system of threefold classification with perfect fairness, since the same facts will strike the minds of different Judges in different ways; since circumstances material to the truth of the case will often be with

But it

held; and since it is hardly possible to draw a clear and definite line which will distinguish either the first from the second, or the second from the third class."

It appears that some of the Commissioners would object to classification in whatever way the system might be modified, since such modification can only be regarded by them as a contrivance for abolishing a simple certificate of conformity, or rendering it discreditable to the bankrupt and prejudicial to his future prospects. But those of the Commissioners who still approve of some system of classification agree in the opinion that two classes will be preferable to three; the one for approval of the bankrupt's conduct as well as for his conformity to the law, and the other only for conformity; leaving the punishment, or stigma of dishonesty to be attached to those who have misconducted themselves, by refusing the certificate, or suspending or adjourning it, as the justice of the case may seem to require. They would accordingly recommend that a provision be inserted in the body of the Act of Parliament requiring the Court to grant either a certificate of conformity and approval, or a certificate of conformity only, and distinguish ing the circumstances under which they are to be awarded, as described in the terms of the certificate.

PUBLICITY OF PROCEEDINGS.

Another cause of diminshed business, as stated in the report, is the unwillingness of creditors to undergo an exposure of their affairs.

"The evidence given in a paper sent in to us by some leading solicitors in the city of London is clear upon this point. They say, and the statement is generally confirmed by most of the witnesses,-"The creditors complain that the control and management of the bankrupt's estate is taken from them, and they have to attend a crowded Court with great formalities: and the frequent publication in the newspapers of the names of the creditors, the debts proved, and discussions on contested debts, have also tended to make the system unpopular to creditors.

higher class, there has always been an objec"On the part of the merchant debtors of a tion to pass through the ordeal of bankruptcy, and this has been greatly increased by the present constitution of the Court, and especially since the last Act has given the Court all the attributes of a criminal tribunal.'

"These remarks are entitled to consideration; but we cannot forget that publicity is an Court of Justice. The principle must be preimportant and necessary incident to every served without being unduly pressed. And it appears to us that a more general adoption of the means provided by the existing law for the reception of proofs of debts by affidavit, subject to the power of summoning the claimant for oral examination, will, without interfering with that principle, meet the real exigency of the case; more than that can hardly be expected. The objection taken on the ground of formality, as far as it applies, may be met by allowing the transaction of portions of the purely administrative business of the Court before the Commissioners in Chambers. Such