THE NEW BANKRUPTCY BILL.

New Zealand Mail, Issue 243, 15 July 1876, Page 17

THE NEW BANKRUPTCY BILL.

The following is a report of the committee of the Dunedin Chamber of Commerce, appointed to report upon the existing bankruptcy laws, presented at the annual meeting of the Chamber, held on Thursday, June 8, 1876 :—■ The committee have carefully considered the Debtors and Creditors Act, 1875, and the Rules of Court under which it is administered, and have now to offer the following suggestions for the amendment of the same. These suggestions are almost all dictated by the actual experience of creditors in estates that have been brought under the operation of the Act. To those which appeared to the committee to be of special importance, the grounds on which they are made are briefly appended : NEW PROVISIONS. The committee believe that, in order to render the Debtors and Creditors Act an efficient piece of legislation, additions should be made to it, providing for the following matters : 1. For the appointment of official assignees, in whom the estate of a debtor should vest immediately on his filing a statement of inability to pay his debts, or upon an order being issued for a meeting of his creditors, when a creditor has moved the Court for that purpose, and who should realise and distribute the estate, if the creditors neglect or refuse to take other steps for that purpose. The committee consider this point to be one of primary importance. Under the present system, on the filing of a statement of inability to pay debts, the estate of the debtor vests in the Registrar of Court, an officer having other duties, and not likely to have any acquaintance with those now cast upon him. An official assignee should be a person selected on account of special qualifications, and, therefore, able to give great assistance to creditors from the outset of the proceedings, whether the trusteeship were left in his hands or not. Moreover, under the present system (if the first meeting of creditors lapses), the estate vests again in the debtor, who has no further means ' of protecting it in the interests of the general body of his creditors, or of obtaining a release from his liabilities. 2. For permitting the estates of deceased persons to be administered under the Act, and for vesting the separate estate of a deceased partner in the trustee of the estate of the surviving partner, when it appears that the firm was insolvent at the time of his decease. Mode —By order of Court on motion. 3. For vesting the joint estate in the trustee appointed under a liquidation, when one partner only has filed a statement of his firm's inability to pay their debts. Mode—by order of Court on motion.

4. For authorising the Registrar, in the absence of the Judge from court, to exercise the power to grant an order under section 20 of the Act, together with all other powers, except the hearing of appeals. 5. For the public examination in court, before a Judge or the Registrar, of a debtor, and of other persons supposed to be able to give evidence touching the affairs of a debtor. The committee believe that such public examinations are much more dreaded by dishonest debtors than the withholding of a certificate, and that without them evidence of fraudulent insolvency will very seldom be secured in a form sufficiently clear to warrant a prosecution.

6. For the issue by the Registrar (without motion) of order or summons, commanding the attendance in court, or before the trustee, of the debtor, or of any other person supposed to be able to give evidence ; such summons to issue on the application of the trustee, the debtor, or of any creditor. 7. For the administration of the separate estates of partners in a firm whose affairs are placed under liquidation (see section 214 of Bankruptcy Act), and providing that after payment of the creditors of such separate estates, the surplus thereof should vest in the trustee of the joint estate ; also, providing that the creditors of separate estates shall not rank on the joint estate until the creditors have been paid in full. 8. For prescribing a limit of time for proofs of debts being lodged with the trustee, and jfor rendering it incumbent on a trustee, when distributing a dividend before the expiration of such limit, to provide for payment of the same to all persons whose names appear in the debtor's list of his creditors. The committee are of opinion that the limit should be, for New Zealand and the Australian colonies, two months; and for more distant places, six months after the date at which the trustee shall have posted to the creditor notice of the liquidation ; and that any moneys reserved as dividends for creditors, or assumed creditors, who do not lodge proofs of debts with the trustee within the prescribed time, should be distributed amongst the creditors of such estate who have proved their debts. 9. For the issue of search warrants, as provided in clauses 157, 158, and 159 of the Bankruptcy Act. In connection with this, power should be given to a trustee to break open any premises forming part of the estate, and any box or other package containing assets in the estate.

10. For obliging a debtor to quit premises belonging to his estate on notice from the trustee, with prevision that, if he refuse or neglect to do so, he may be ejected by a constable on a warrant from the trustee, or may be given into custody on a charge of being illegally on the premises. Experience has shown that it is of great importance that this should be provided for. 11. For authorising trustees to administer oaths to persons whom they may require to examine, and to take affidavits or declarations in proof of debts in the estates of which they are trustee's. At present, although the Act authorises a trustee to examine persons on oath, the trustee has not, by virtue of his office, any right to administer oaths. 12. For exempting from stamp duty all declarations and affidavits made by any creditor, debtor, or trustee in connection with any liquidation under the Act;

AMENDMENTS OP THE ACT. To carry out the views of the committee as expressed in the foregoing suggestions for additions to the present law, and to render various clauses of the Debtors and Creditors Act more workable and more calculated to render justice both to debtors and to creditors, the following amendments of the Act are required : 1. In all cases where there would, under the Act, be a vesting of the estate of a debtor in the Registrar of the Court, the estate should vest in the official assignee. The last clause of section 19 should provide that on the filing of the resolution of creditors appointing a trustee, the estate shall forthwith vest in such trustee ; and that an attested copy of the said resolution should be, in all cases, sufficient evidence of such vesting. 2. It should be provided that a creditor for £25 may move the Court to call on a debtor to show cause why his estate should not be liquidated under the Act, if he shall have made demand on the said debtor for payment of a debt due to him, and such debt shall not have been liquidated within forty-eight hours after such demand. Also, that the Registrar may order a meeting of creditors, if he shall be satisfied that a debtor is unable to meet his engagements, or that it is necessary for the interest of the whole of creditors that such meeting should be called. The same rights should be given to two or more creditors whose joint claims amount to £25. The Registrar should also have power to order a meeting of creditors if any of the acts of bankruptcy mentioned in clause 20 of the Act be proved to his satisfaction. Under the law as it stands at present, a creditor cannot move at all, unless he can show that certain acts of bankruptcy or fraud have been committed by the debtor, and, therefore, not in any case, until the debtor's estate has been materially damaged. The risk of failing to prove any of the grounds on which a motion may be made, and of consequent reprisals on the part of the debtor, will, in almost all cases, deter creditors from taking action.

3. It should be provided that if a sufficient number of creditors should not be present or represented at the first meeting, it should stand adjourned for three days, and that the Registrar should cause notice of such adjournment to be granted ; and that if a sufficient number of creditors are not present or represented at such adjourned meeting, the estate of the debtor should vest in the official assignee, and be administered by him forthwith. Also, that the remuneration of the official assignee in such cases should be the same as it was under the Bankruptcy Act. Also, that any first meeting, or adjourned first meeting; may be further adjourned on resolution duly passed by the creditors present thereat. ....

Also that, in order that distant creditors may have proper opportunity of being represented thereat, the first meeting should take place within such a number of days, being not less than three nor more than ten, after the filing of a statement of inability to pay debts, as the Registrar may appoint. 4. In clause 24, provision should be substituted that any execution against the property of a debtor shall be staid on notice of filing a statement of inability to pay his debts, or of a creditor's motion for a liquidation under the Act • being gazetted, or served on the bailiff or any of the other persons mentioned in section 73.

5. Section 3 of clause 24 of the Act should be amended so as to provide that, failing an appointment by creditors of a substitute in case of a death, &c, of a trustee, the official assignee should become trustee. G. No distress for rent should be allowed after a statement of inability to pay his debts has been filed by any debtor, or after a motion for a liquidation has been made by any of his creditors.

7. Three months' rent and no more should be a preferential claim on any insolvent estate.

8. Section 49 should be amended so as to provide that dividends should only be set aside and retained for a creditor who has proved a contingent debt until the date of the contingency, and that if such contingent debt does not then become a claim, the amount so retained shall be divided amongst the other creditors who have proved. As the law now stands, a contingent creditor may receive dividends, although it may ultimately turn out that he has no claim whatever on the estate, and there is no provision by which he can be made to refund sums thus paid to him. 9. The words " other than a pre-existing debt" should be added at the end of section 75, so as to make it clear that no security given to a creditor in preference to others within three months of insolvency can stand as against the trustee of a debtor's estate. No part of the Act requires more careful revision of its wording than this clause. A recent decision, given in this province by Judge Ward, has made it manifest that the law does not render void preferential payments made to one creditor to the detriment of others, unless in some very exceptional cases. 10. The same words should also be added after the words " valuable consideration" in section 3 of clause 77. 11. The words "when sufficient funds have been realised to provide for a dividend" should be inserted in this clause, so as to render its provisions inapplicable to those cases in which the assumed assets of the estate prove valueless.

12. If no quorum is formed at a meeting of creditors called to close a liquidation under clause 90, the liquidation ought to be thereupon deemed to be closed, and the trustee should file a declaration to that effect in court.

' 13. A debtor should be allowed at any time, on giving seven days' notice of his intention so to do to the trustee in writing, and by notice in a gazette, to apply to his creditors for an order of discharge. If such order be thereupon refused by the creditors, or there should be ne quorum at the meeting called for the purpose, the debtor should be allowed to apply

to the Court for an- order on gazetting notice of his intention so to do. Under the present Act there can be no order of discharge until the debtor's estate is wholly distributed, however deserving the debtor, or however willing his creditors may. be to grant a discharge. 14. That the following should be added to 76 : —" Provided also that nothing herein contained shall be held to apply to consignments of goods held by the debtor in the ordinary course of his business for sale on account of any other person, the identity and ownership of which can be proved to the satisfaction of the trustee of the debtor's estate, or of the Registrar of Court, and in respect of which the owner shall tender payment to the trustee of all advances made thereon by the debtor, and of all charges due thereon to the debtor's estate, and shall surrender to the trustee any acceptances granted by the debtor in his favor by way of advance thereon." AMENDMENT OP THE KULES OP COURT. After a careful examination of the rules which have been gazetted, and comparison of the same with the Act and with the foregoing suggestions, the committee is of opinion:— 1. That the first meeting of creditors should be held at the Supreme Courthouse of the district, unless a majority in number and value of the creditors reside within ten miles of a district courthouse, in which case the meeting should be held in such district courthouse.

2. That at the first meeting, and at all adjournments thereof, the Registrar of the Court should preside, and should determine all questions of procedure which may arise at such meetings.

3. That after the proceedings of the first meeting, and of any adjournments thereof are closed, all minutes of further proceedings in the estate should be kept by the trustee, the minutes of the first meeting being in all cases retained in court. 4. That creditors for amounts under £lO ought not to be excluded from voting at meetings of creditors. 5. That rule 40, which defines the voting power of creditors, should be wholly rescinded, its provisions being contrary to section 9 of clause 28 of the Act. 6. That a statement of accounts should be attached to or be embodied in all proofs of debt.

7. That when proof of debt is made by an agent or attorney, his declaration that he is instructed by his principal that the statement of account attached thereto is correct, should be sufficient.

8. That when a creditor applies to the Court to set aside a decision of a trustee in respect of his claim, he should be obliged to give immediate notice of his appeal to the trustee.

9. That the fees payable to the Court should be as follows :—On filing statement of inability to pay debts, £1 ; on filing other documents, 35.; on proof of debt, nil. 10. That the words " any person" should be inserted instead of the word " solicitor " in rule 56. It. That the trustee in any estate should be definitely authorised to employ a solicitor to represent or advise him whenever he may consider it necessary to have such assistance. GENERAL RECOMMENDATIONS. The committee would strongly recommend that a special Act should be passed validating all past proceedings under the Debtors and Creditors Act, 1875, in so far as they are rendered doubtful by the conflict between the Acts and the Rules of Court that have been gazetted under it, or by ambiguities in the Act or in the rules. The committee also recommend that the Chamber should again pointedly urge upon the Government that the evidence of experienced persons should be taken, before a select committee of Parliament, before an Amending Act is passed, and that such evidence should also be obtained for the information of the Governor in Council before amendments of the Rules of Court are passed. The Bill amending the bankruptcy laws, drafted by Mr. Macassey last year, and introduced into the Legislative Council by the Hon. Mr. Buckley, together with the suggestions for a basis of a Bankruptcy Act forwarded to the chamber by the Hon. Mr. Reynolds, have had careful consideration at the hands of the committee ; and all their provisions, so for a 3 the committee have been able to agree with them, have been embodied in the foregoing recommendations.