BANKRUPTCY LAW

Dominion, Volume 28, Issue 255, 25 July 1935, Page 13

BANKRUPTCY LAW

Need of Amendments In New Zealand VARIOUS REFORMS URGED For some years the Associated Chambers of Commerce and the New Zealand Society of Accountants have pointed to the need of amendments of the Dominion’s bankruptcy law. At the Accountants’ Congress in Auckland last year it was resolved to recommend that the Bankruptcy Act should be amended to bring it into line with the English and Australian Acts which assure a better hearing for the commercial community than the New Zealand law does. This subject was thoroughly opened up at a meeting of the Wellington branch of the society this week by a leading legal authority on bankruptcy law. “It can, I think, be safely said,’’ he began, “that no system of bankruptcy law has ever given full satisfaction. This is certainly true in New Zealand.” Plea for Private Trustees. He mentioned that prior to 1883 estates in bankruptcy were administered by private trustees, and that abuses in some cases had led to the adoption of the official assignee system. Recognising that circumstances had changed appreciably since 1883, the chambers of commence, as far back as 1924, recommended that provision should be made whereby a bankrupt estate might be administered by a trustee to be appointed by resolution of a meeting of creditors. Such trustee should be chosen from a list of persons authorised by Order-in-Council to undertake the duties of a trustee. The list would include persons experienced in the conduct of various kinds of business and in the winding-up of companies and assigned estates, so that the creditors might obtain the advantages arising from selecting a trustee possessing a special knowledge of the particular kind of business in which the bankrupt has been engaged. One of the principal needs for amendment of the present bankruptcy law arose from the fact that the official assignees and their deputies could not. in the nature of things, be expected to possess expert knowledge of every kind of business, and of the most advantageous methods of realising every kind of stock. The principle of this reform had been in operation in England for a very long time. “A great advantage that the official assignee has had over private trustees under the present law lies in the fact that he is a Government official, a permanent officer of the court, subject to control by the Justice Department, and also by the court itself,” the speaker continued. “Of his official rectitude and of his amenability to discipline there can be no doubt. If the Australian system were to be adopted these essential characteristics would apply to the private trustees equally as to the official receiver, while there would be imported into the actual administration of estates a greater flexibility and a more advantageous realisation of assets. It is to be remembered that since 1883, and more particularly during the last quarter century, the status of the accountants’ profession has been immeasurably raised. It is a profession now which demands the highest standards of character, reputation and ability of its members, who are subject to rigorous discipline at the hands of its governing body. In practice, in other jurisdictions, the work of trustees is entrusted for the most part to accountants, and there can be little doubt but that they are, as a class, the persons in the community best qualified for the office of trustees in commercial estates.” Australian Practice Satisfactory. After remarking that the Australian law made provision for the appointment of private trustees, the lecturer said that a perusal of the Australian bankruptcy cases since 1927 would seem to indicate that great use was being made by creditors of the provision for the appointment of private trustees and that the Act was in this respec giving satisfaction. The provisions of the Act in respect of the appointment of trustees largely, followed that of the English Act. Tn both countries the trustees were usually public accountants, but there was no positive rule on the subject. In a comment on deeds of assignment, the lecturer held that the New Zealand law was defective. For instance, there was no restriction upon the person who might be appointed the trustee, nor was there any supervision of his conduct in the administration of the estate.

The Principle of Indemnity.

Attention was drawn to another desirable feature of the Australian Act in the indemnifying of creditors in certain circumstances. One section provided: “Where assets in any estate have been recovered by means of an indemnity for costs of litigation given by certain creditors, the court may make such order as it deems just with respect to the distribution of those i.ssets with a view to giving the indemnifying creditors an advantage over others in consideration of the risk run by them in giving the indemnity.” In New Zealand such creditors acted wholly on their own risk.