JOINT COMMITTEE ON BANKRUPTCY.

New Zealand Mail, Issue 545, 15 July 1882, Page 2 (Supplement)

JOINT COMMITTEE ON BANKRUPTCY.

Tht. following report w»3 laid on the table of the House of Representatives, July 6th : The Joint Committee have had before them the English Bankruptcy Act of 1869, j the Amendment Bill, 1879, and the Amendment Bill, 1881, ; as well as tbe interim report of the Joint Committee of the two branches of the Legislature in 1880 ; also the questions and answers thereto forwarded by their Honors, the Chief Justice, Mr Justice Richmond, Mr Justice Johnston, and Mr Justice Williams, of the Supreme Court ; and the answers received from the various Judges of the District Court ; and they have also read the letters from Mr T. B. Craig and others, and also a voluminous report from the delegates appointed by the various Chambers of Commerce. !

The Committee consider, looking at the numerous attempts which have been made since 1825 in England, and for many years in this and neighboring colonies, to establish a sound principle for bankruptcy proceedings, and the utter failure even of the last and most carefully-prepared Act—namely, the English Act of 1869 and the amendments thereto—to effect this desired end, that it is most difficult to provide against the frauds and various other contingencies which arise out of the reckless, or at least too easy, trading which is carried on' under. a system of indiscriminate credit, especially with regard to the smaller class of tradespeople and their p orer customers. It becomes therefore almost an impossibility to frame an Act which will meet all the various phases of bankruptcy arising from such causes as these.

The above views with regard to Bankruptcy Acta are confirmed by the various and conflicting opinions of the Judges and others, given in the report referred to. (Journals and Appendix, Legislative Council, 1880, No. 2.) A reference to the report above referred to will show that even the Judges of the Supreme Court, whom it might be expected would be the most competent to offer opinions on the subject of bankruptcy, have found it difficult to answer satisfactorily many of the questions put to them, and in some instances have not answered them at all. There are various and conflicting opinions on that much-vexed question, viz., the desirability of doing away with bills of Bale, and the learned J udges have not given much assistance in enabling the Committee to arrive at a satisfactory conclusion on this subject. ... : In the answer of one of the learned Judges as to punishing fraudulent bankrupts, it is recommended that creditors should prosecute by leave of the Court, a course which appears to your Committee to be almost prohibitive, as it involves the necessity for indicting a bankrupt and proceeding according to the usual costly and dilatory process of the Courts; and it has therefore been recommended that the Court should deal with certain cases summarily. Another very important" feature in bankruptcy, upon which there appears to be a great diversity of opinion, is that of the discharge of a bankrupt ; and we venture to say that the suspension pf the discharge has been found in most cases a farce. It is true that in one or two cases it has called forth as-, sistance from a kind friend of a bankrupt in an offer to pay a composition, and therefore the power to suspend should be maintained ; but, unless something more is added, it will, as we have B»id, in a large number of cases, prove a farce, and we have therefore made a recommendation especially bearing 1 on this point. Looking, therefore, as a whole, on the various proceedings, Acts, of Parliament, Judges’ opinions, &c., to which,we have referred, and at the unsatisfactory and contradictory character of the views and opinions of many persons of great experience in administering the bankruptcy laws, it will not be surprising to find that the Committee have arrived at the conclusion that it is an almost impossible task to prepare a Bill that will meet the wishes and views of creditors generally, but that much maybe done towards facilitating the protection of the assets of an insolvent person, and procuring a speedy realisation and distribution of them at as little cost and withia as short a period of time as possible, and also to a certain extent to prevent fraudulent transactions. Your Committee, with that view, therefore, beg to present the following recommendations :

1. As substantial alterations are called for in the policy of the existing bankruptcy laws, especially as to the appointment of official assignees and one or two other cardinal points, we recommend very stroDgly that the Government should at once instruct their draftsman to prepare a consolidation of the Acts now in force, and so altered as to accord with and include the amendments which we now suggest—namely, that section 8 of the Act of 1876 should be repealed, and a new clau-e inserted to be founded on section 72 of the English Bankruptcy Act of 1869, vesting full powers in a Judge sitting in bankruptcy to try all cases (vide sectiou 12 of the English Bankruptcy Consolidation Act of 1849) ; and it should be made perfectly clear and distinct and beyond argument that the Judge of the Court shall have all the same powers as the Supreme Court in. all matters arising out of the bankruptcy, whether for setting aside of alleged fraudulent deeds or other transfers of property, or in any matter whatever, in which the official assignee claims any property from third parties ; and that such proceedings shall be taken on simple procedure without pleadings, with the usual right of appeal, when the amount exceeds £3OO, to the Court of Appeal, whose decision shall be final, 2. Section 9 of the New Zealand Act of 1876 is useless in practice.

3. We would suggest that there should be official assignees appointed as officers of the Court, who should give security to the extent of £SOOO at least, and the creditors should have power to also appoint one or two of their number to advise with the official assignee in the dealing with and realisation of the estate—such creditor or creditors for the purposes of the Act should be called supervisors; that official assignees shall, under liability of a penalty for omission, file a statement of the accounts of a bankrupt, and pay a dividend once at least every three months, unless such period shall be enlarged by consent of a meeting of creditors ; that any creditor may at any time apply to the Court, upon good cause showD, to order an official assignee to pay any money into Court, or to proceed with the distribution of the estate forthwith, or to make any such order in the matter as the Court may consider the exigencies of the case require ; and that the Court, if satisfied such application is frivolous, may order the persons

applying to pay such costs as the Court may fix.

4. That section 22 of the BaDkruptoy Amendment Act, 1879, English, be embodied in the new Act, and be altered so as to give a judge power to order the discharge of a bankrupt on the condition that he shall pay such Bum in the pound as the Court may fix ; and also giving the Court further power to rescind or alter such order, but so as not to increase the amount to be paid. ; 5. That a Judge sitting in bankruptcy should have full power to hear and try all casesof fraudulent bankruptcy under the Act, providing the trial take place in open Court, and that witnesses may be examined and crossexamined in the usual manner ; and if, upon such trial; the Court shall be satisfied that the persons charged with any fraudulent act under the bankruptcy laws have been guilty of such act, or if they shall have been guilty, in the opinion of the Court, of gross misconduct in their business, the Court may sentence such persons to imprisonment for a, period not exceeding twelve calendar months, and with or without hard labor. 6. Section 29 of New Zealand Act, 1876. Possession being taken under writ and execution should be an act of bankruptcy, and the debtor’s estate should immediately vest, in the official assignee. The expenses incurred by the creditor who shall have issued execution shall be a first charge on the estate, unless the Judge shall order otherwise. 7. As to the costs of counsel and solicitors, the Committee strongly recommend that the costs should be fixed by a scale similar to that in force in the District Court, arranged, as a matter of course, according to amount of estate ; and particularly that, under no circumstances, should there be costs as between solicitor and client.

8. That no solicitor or counsel should be allowed to take from the debtor any sum of money on account /of costs, excepting such amounts as are actually payable for fees of Court, advertising, &c. ; that, if any dispute shall arise between any official assignee or supervisor and a solicitor as to the amount of any costs claimed, the matter shall be referred to |the Judge, and he shall thereupon fix the amount which shall be paid according to the scale ; that a scale of charges to be allowed to counsel and solicitors for opposing creditors should also he fixed, and for counsel and solicitors of debtors ; and that the Judge should also have the power to fix such charges in case of disagreement with the supervisor or official assignee. . ", ! ■ 9. That the official assignee should be compelled to pay all moneys in his hands in each estate at once to a separate account, to be kept at such Bank as, on application by the official assignee, the J udge may appoint, in the joint names of himself and the supervisors, if any, or in his own name' when there is no supervisor;

i 10. Section 29 should be altered so as to make the acts therein mentioned actual acts of bankruptcy, and not conditional, as is the effect of the above section. 11. Alteration in above., section to six months.

12. Subjections (1), (2), and (3) stand. 13. Subsection (4) should be altered to carry the recommendation that possession; being taken under writ and execution shall be an act of bankruptcy ; but, on payment of sueh execution and costs, the act of bankruptcy to be annulled.

14. The bankruptcy and title of assignee to bankrupt’e' estate, shall relate back to any prior act of bankruptcy within six months. 15. Section 11 of English Act, 1869, to be adapted. The am-lint in sectiou 30 to be altered to £25.

16. Section 64 to be altered by striking out the words " with a view of giving such creditor a preference over the othpr creditors.” After the word “ shall ” add “ unless protected as hereinafter provided.” ~ 17. In this section it is suggested that after the word “ suffered ” in the third line, the following words shall be added : “whether the Act be voluntary or under pressure from a creditor.” ' , 18. Section 65. In cases of bills of sale : They should be unavailable if made within three months of bankruptcy, as against the creditors', excepting as to actual cash advanced at the time of execution of bill of sale and secured thereby ; and any other moneys secured shall be proved under the bankruptcy. This clause not to affect the purchase money, or any balance thereof, for any machinery over which the bill of sale may have been taken at the time of purchase and given to the vendor.

19. Part 2 of section J 67 will have to’ be omitted. It should be made clear by the Act that the assignment by a debtor of all his property for the benefit of one or more of his creditprs shall be an act of bankruptcy, whether made fraudulently or otherwise. 20. Section 119. Change from bankruptcy to arrangement : Seetions 119 to 127 should stand; the previous consent of the Judge to be obtained before change from bankruptcy to arrangement. 21. Sections 128 and 159. Arrangement by deed: Tbe Committee recommend that this part of the Act be repealed entirely, assuming that the official assignee system is adopted. 22. A scale of costs is recommended ; and that the Judge shall fix the costs at the time of hearing in all matters, when not fixed by the Act.

23. Official assignees’ costs and fees to be fixed, on estate realised up to £IOOO, at 5 per cent.; on second £IOOO, per cent.; on all above £2OOO, 1 per cent., unless a Judge shall otherwise order.

24. Creditors’ supervisors may be paid as per arrangement with creditors, but the payment must not exceed 2$ per cent, in all. 25. Costs of bankrupt in no case to exceed £lO in addition to Court fees, but no costs to be paid without order of a Judge. 26. Costs of solicitor to official assignee, up to debtor’s discharge, are not to exceed £2O. Judge to have power to order payment of additional costs if considered absolutely necessary. The Committee make the following suggestions :

27. Solicitors should not exercise any lien on deeds in their possession belonging to a bankrupt for any amount beyond the costs involved in the preparation of such deeds. R. Oliver, Chairman. H. Wtnn Williams, Chairman, House Committee.