THE DEBTORS AND CREDITORS ACT, 1875, DISCUSSED BY JUDGE WARD.

Bay of Plenty Times, Volume IV, Issue 375, 15 April 1876, Page 3

THE DEBTORS AND CREDITORS ACT, 1875, DISCUSSED BY JUDGE WARD.

QFrom the ZTwtTi OtagoJlUmes, March 23 ] At a special Bitting of the District Court, held at Oamaru, His Honor Judge Ward made a statement of his opinion upon certain points connected with the working of " The Debtors and' 1 Creditors Act, 1875," and the regulations issued thereunder-, as per Order-in>Council of date December 14, 1872. Mr Filleul drew Eis Honor's attention to Section 28, Subjection 1, and pointed out soveral difficulties which here and elsewhere, in the working of the Aot, occurred. His Honor then proceeded to comment upon the- Act and Regulatioss, and said : — Of the regulations under the new Act, Nos. 35 and 40 are the most peculiar ; and I have vainly endeavoured to ascertain 'from the statute the doubtless admirable reasons which actuated His Excellenoy in Council in framing them, and prompted bb» concurrence therein of three Judges of the Supreme Court. .Regulation 35 tuns thus :— " No person shall be entitled to vote at such meeting unless at or previously to the meeting he has proved a debt to be due to- him by the debtor of an amount not less than £10." One effect of the foregoing regulation, if valid, will be to prevent a large number of debtors from ever obtaining an order of dis< charge at all. Under the former Bankruptcy Act, many small estates came before the Court in which no debt proved was over £10. By this regulation all such debtors are precluded from relief under this Act, inasmuch as their creditors, however willing, can vote at no meeting. How, therefore, this regulation can be called " a rule for carrying into effect the object of this Act " (to quote the words of Clause 17.) it is difficult to see. It is still more difficult to see under what clause power has heen given to frame it. By the Act, certain powers are conferred on all oreditors, without exception ; and certain rights to relief on all debtors. The regulations may prescribe how these powers can be exercised ; but I fail to find any clause in the statute authorising their total abolition by tbeae regulations, with respeob to a large class both of creditorg and of debtors. Regulation 40 runs thus : — "The number of votes to be assigned to,and exercised by, each creditor shall be according to the following scale : — In respect of a proved debt or claim Exceeding £10 and not amounting to £50 1 vote Amounting to £50, and not amounting to £100' 2 votes Amounting to £100, and not amount' ing to £200 3 votes Amounting to £200 4 votes And so on at the rate of an additional vote for every complete sum of £100 over and above the first £100. Provided that no- creditor shall be entitled to more than 12. votes in the whole, &c.""

It would seem that this regulation has been framed expressly for the purpose of preventing creditors of large amount from exercising the powers conferred upon them by aab'sections 7 and 9of Clause 28.. It is clear that it has referenoe to those subjections,, and is meant to decide in what manner the value of a creditor's debt is to be weighed in the voting scale. Under this regulation, 13'oreditors, to the amount of £5- eaoh, representing in the whole £663,. would have 26 votes. Two creditors, to tbo amount of a million eaoh, would only have 12 votes eaoh— 24 in all. By this regulation, therefore, 13 creditors, repre» aenting debts to the mnonnt of £663, can

outvote — as being " a majority in value"— two creditors representing two millions.- Inthe eyes of the franaers- of' theae regulations, therefore, £663; judiciously distributed uraong 13- individuals; is superior in value to two millions, concentrated in tbe bands of two persons. The conclusion- is- not exactly in accordance with the views usually entertained by commercial men ;• nor, us far as I can see, with the Act itself. The words of subsection 9 are as follows : — (9.) "A special resolution shall be decided by a majority in number, and three'fourths in value of the creditors present personally or by proxy at tbe meeting, and voting on such resolution." By these words, it is clear that two thingß are needful for carrying a special resolution — the first, that it be concurred in by a majority in number of the voting creditors, without regard to the amount of their respective debts; the second, that such majority in number should represent three-fourths in value of the debts due to the voters ; such value to be ascertained from the proofs of debt filed by them. If the regulation in question be intended to allow creditors to create a •' majority iv number " by the powers thereby granted of giving votes in proportion to their respective debts, it is palpably in contravention of the Act. If, on the other hand, it be intended to handicap the field of creditors, in order to prevent the lighter . claimants from being jostled out of the course, and to give them a fair chance in the race for a dividend, so humane an object must claim our warmest sympathy, and we can but regret that the Act does not warrant bo charitable an intervention. Ihe meaning of the words " a majority in value " and " three>fourths in value" will inevitably be decided by sheer arithmetic, as long as the human race retains the power of compound addition — all rules and regulations to the contrary, notwithstanding. Forasmuch, therefore, as these two regulations are in contravention of the Act, under which they purport to have been framed, they are ultra vires and void. Mr O'Meagher having referred to Regulation 40, under whioh no creditor for a less amount than £10 is entitled to a vote, his Honor said : — Many of our statutes, like ourselves are fearfully and wonderfully made. On tbe Bench, however, we do not presume to oriticise the wisdom of the legislature, but we are bound to point out the results thereof. • Under this Act, and the regulations we have been discussing, the position of the debtor is, to say tbe least, peculiar. If he owe £1,000, in debts of £10 and under, the framers of the regulations do not consider him deserving of relief at all. But let us take an ordinary ease of insolvency, when a debtor can offer his creditors no dividend, or only one too small to be worth looking after. He files his state 1 menfc of insolvency, and thereupon his whole property vests in the Clerk of the Court, his next step being to call a meeting of his creditors! Now, there exists in most human bosoms, but especially in tbe mercantile breast, a curious disinclination to throw good money after bbard r or to waste time in. the unprofitable pursuit of an infinitesimal dividend. The debts will,in probability ,be Bimply written off as bad by tbe various creditors, who will then decline all farther trouble in the matter. It is plainly entertaining too exalted a view of human nature to suppose that a creditor who finds himself defrauded of his due will attend a series of meetings at great loss of time to himself, keep minutes, and pass a variety of pleasing resolutions; not with the hope of obtaining a farthing of the amount due to him, bnt purely to enable his debtor to get clear of him altogether. In suck, a case, when creditors in sufficient number will not attend a single meeting (and I hear that several such cases have ocourred recently) what is the position of the debtor ? What- ! ever property he has, or whatever may come to him, beyond his bare earnings, vests in the Olerk of the Court. He is not, however, ! protected from aotiong at law, or from their usual consequences. The Clerk oannot pay the creditors, even if funds come into his hands, inasmuch as they are not entitled to be paid until they have proved their debts. Probably none would prove their debts prior to the first meeting of creditors; in whioh case they are directed to prove them before a chairman or trustee duly elected. In the case we are supposing, such elections would not have taken place, nor would a liquidation resolution have been passed, Under the Act the proceedings can go no further, but do not lapse, and no provision is made for quashing them or for replacing the debtor in the position he occupied before filing the fatal statement of insolvency. Freed from bis property, but not from his debts, of a certainty " the last state that man is worse than the first." The wisdom of the Legislature has evidently deemed it fitting that a debtor, who has not reserved a portion of his estate sufficiently large to induce his creditors to attend bis meetings in hope of a dividend, should go down to his grave in a state of liquidation. Until his debts are merged in the great debt of Nature, Years may come and years may go, But he remains for ever An unliquidated man. It may be a comfort: to him iv his painful situation to reflect that when he filed his statement of insolvency — and paid his fees thereon — he unoonsciously enrolled himself in the " noble army of martyrs " to colonial legislation. Mr O'Meagher pointed out that there was no provision under the Act for a statutory deed o f release. The Judge stated that a deed of release might be exeouted independently of the present Act. Mr O'Meagher : But in that case it would require the signature of all the creditors. What will be the position under the present Act ? i His Honor : I may say that I believe that six months hence nine out of every ten insolvents will be in a state of liquidation for the J term of their natural life. A oreditor could put a debtor's estate in liquidation, and leave him there. Mr O'Meagher : Supposing a man files and can't get his creditors together, will not his ■ estate remain like Mahomet's coffin — sub< pended between heaven and earth ? His Honor. : Not exactly ; it will remain vested in the Clerk of the Court. Mr O'Meagher ; Then I should be glad if the the Olerk would remember me in his will.. Bis- Honor. : That is entirely a matter of private arrangement between yourself and Mr FilleuU After some further diaoussion, His Honor*said that there was no means under the Act ' of revesting the property in the debtor. j , Mr Hislog BUggeated that the trust,, so far i

ns- lite Registrar was concerned, would determiwv His Honor' was-not of that opinion. Mr O'Meaglier put the ciise of a large sum of money bein-g left to a'debtor, under certain supposed circumstances, and asked if the Court could 'not order its distribution among the creditors.Hia Honor said that under the Act the liquidation of a debtor's estate did not commence until after the passing of a liquidation resolution. It was possible that under extreme ciroumstanoes a Court of Equitj would interfere ; but the relief given would be wholly deliors of the Act and regula, tions. Mr Mirama suggested that if only one creditor proved, the trustee, if he had sufficient funds in hand, would have to satisfy his claim up to 20s in the pound, and that one creditor attending alone might resolve that the estate should not be wound up. His Honor said that when Mr Hißlop took his seat as a member of the Legislature, posaibly not on the present occasion, but after a fresh election, he would probably endeavour to amend the A cfe. After some further disoussion.in the course of which Mr Balmer raised che question of the liquidation of joint and separate estates in partnership bankruptcies, and Mr O'Meagher that of the power of a creditor, representing himself and several other creditors as a trustee, to elect himself trustee of the estate and allow himself what coats he pleased, and also the poinfc as to payment of debtors' , solicitors' costs. His Honor referred to Clause 13 of the Act, whioh runs a follows : — 13. " Where a liquidation resolution has been filed in a District Court, the right of appeal Bhall be to the Supreme Court, and no further ; and where the liquidation resolution has been filed in the Supreme Court, there shall be a right of appeal to the Court of Appeal of New Zealand, and no further. AH appeals shall be made subject to suoh pro* visions as may be prescribed respecting notice of appeal, deposit or other security, procedure, and evidence." He said : The question may perhaps be raised whether the legislators of New Zealand, in their praiseworthy desire to secure to the colony a monopoly of legal proceedings, have not somewhat . exceeded the powers conferred upon them by the ConstitUi tional Act. Within the colony, no tribunal has power to review the decisions of the Court of Appeals ; the words just cited, therefore, must be taken to forbid an appeal to the highest English Appellate Court. It will be something new for the English creditors of a New Zealand estate to find that they must content themselves with the purely colonial law and justice contemplated by our Bankruptcy Acts. I notice in certain recent telegrams that the Canadian Legislature, having passed an Act forbidding appeals to England, received intimation of its summary disallowance.