JUDGE WARD ON "THE DEBTORS AND CREDITORS ACT, 1875."

Evening Star, Issue 4080, 24 March 1876, Page 2

JUDGE WARD ON "THE DEBTORS AND CREDITORS ACT, 1875."

A, special sitting of the District Court was held at Oamarn yesterday, to. give his Honor Judge Ward an opportunity of stating his opinion upon certampoints connected with the working of “ The Debtors and Creditors Act, 1875, and the regulations issued thereunder, as per Order in Council of date December 14, 1875. Mr Filleul drew his Honor’s attention to section 28, sub-section 1, and pointed out several difficulties which here and elsewhere, in the working of the Act, occurred. . . His Honor then proceeded to comment upon the Act and Regulations, and said Of the Regulations under the new Act, Nos. 35 and 40 are the most peculiar; and I have vainly endeavored to ascertain from the statute the doubtless admirable reasons which actuated his Excellency in Council in framing them, and prompted the concurrence therein of three Judges of the Supreme Court. Regulation 35 runs 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 LlO. One effect of the foregoing regulation, if valid, will be to prevent a large number of debtors from ever obtaining an order of discharge at all. Under the former Bankruptcy Act many small estates came before the Court, in which no debt proved was over LlO. By this regulation all such debtors are precluded from relief under this Act, in. asmuch 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 been given to frame it. By the Act, certain powers are conferred on all creditors, without exception; and. certain rights to relief on ml 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 these regulations,' with respect to a large class both of creditors 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 s In. respect of a proved, debt or claim— ErceedinglilO and not amounting to L 50... 1 vote Amounting to LSQ, and not amounting to L 100... ... ... ... ... 2votes Amounting to LIOO and not amounting to L200...‘ ... ... ... ... 3votes Amounting to L2OO ... ... ... 4 votes and so on at the rate of one additional vote for every complete sum of LIOO over and above the first LIOO. Provided that no creditor shall be entitled to more than twelve votes'in the whole, Ac. 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 sub-sec-tions 7 and 9 of clause 28. It is clear that it has reference to those suh-sectious, 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, thirteen creditors, to the amount of L 5 each, representing in the whole L 663, would have twenty-six votes. ' Two creditors to the amount of a million each would only have twelve votes each—tWenty-fourinall. By this regulation, therefore, 'thirteen creditors, representing debts to the amount of L 683, can out-vote—as being “a majority in value ’’—two creditors representing two millions. In the eyes of the framers of these ' regulations, therefore, L 663, judiciously distributed among thirteen individuals, is superior in value to two millions concentratecf in the hands of two persons. The conclusion is not exactly in accordance with the views usually entertained by commercial men; nor, as far as I can see, with the Act itself. The words of sub-section 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 the meeting and voting on such resolution. By these words it is clear that two things are needful for carrying a special resolution, the first, that it bo concurred in by a majority in number of tbe 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 he ascertained from the proofs of debt filed by them. If the regulation in question be intended to allow creditors to create: a “majority in number” by-the powers thereby granted of giving votes in proportion to their respective debts, it is palpably in contraversidn of the Act. If, outlie other hand, it be intended to handicap th e field of creditors, in order to prevent the lighter clairnants from being; jqstled out pf,, the course, and to give them a fair chance in the race for a

mast chum our wmmestsymp&tiiy, and we can .but regret that the Act doe* not wiurTant so charitable an intervention. The •meaning of the words “a majority in value” And ** tliree-fourths in value ” will inevitably ■be i : decided by sheer arithmetic, a& long as the human race 'retains the power of •compound addition; all rnlee and regulations'to the contrary notwithstanding, Forasmuch, therefore, as these two regulations arc in contravention of the Act under which they purport tdhave beeh framed, they are ultra vtyes and roid.

. Mr <> ’Meagher having referred to Regulation 40, under which no creditor for a less amount than LlO is entitled to a vote. His Honor mud—

of our statutes, like ourselves, are fearfully Mid wonderfully made. " On the Bench, however, we dp not presume to criticise the wisdom of the' Legislature, but we are bound to point out the results thereof. ■■ Under' this Act, and the *fegulations we hiwe been discussing, the positibh of the debtor is, to say the mast, -peculiar. Khe owe LI,OOO, in dents of LIO and under, the framers of the regulations do not consider him deserving of relief at all.. But let us au ordinary case of insolvency, when A.debtor can offer his creditors no dividend* Or only one too small to be worth looking after. He files his statement of insolvency, and thereupon his whole property vests ,xn the the Clerk of the Cpnrt, his next step .being to call a meeting of his-creditors./ -Now, there exists in most human bosoms, hut especially inthe mercantile breast, a curious disinclination to throw good money, after bad, or to waste time in the unprofitable pursuit of an infinitesimal dividend. The debts will, in probability, be simply written off as bad by the various creditors, #ho will then decline all further trouble in the matten It is plainly entertaining too aval tor) a view of human nature to that a creditor who finds himself defrauded ( of his due will attend a series of meetings at meat loss of tnne 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, but purely to anahjo his debtor to get clear of him altogether. In such a case, when creditors in sufficient number will not attend a single meeting (a*nd . I hear that several such cases have occurred i recently), what is the position of the debtor I ■Whatever property he has, or whatever nnay c ome to him, beyond his bare earnings, vests in the Clerk of the Court. He is not* however, protected from actions at law, or from their usual consequences. The Clerk cannot pay the creditors, even if funds eome iiito his hands, inasmuch as they are not entitfod to be paid until they have proved their debtxi. Probably none would prove their debts prior to the first meeting of creditors; in which case they are directed to prove thembeforma chairman or trustee duly elected. Inthe .case we are supposing, such elections would tiot have taken place,-nor would a lidhidation t resolution have been passed.. Under the Act, the proceedings can go no further, hat do not lapse, and no provision is made for quishing •them or for replacing the debtor in ’the position he occupied before filing the fetal statement of insolvency. Pre ed from his property, but not from his debts, of tva/certainty “the last state of that man i$ 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 his 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, •' Tears may come and years may go, Bat he remains for ever An unliquidated man. It may be a comfort to him in. his painful situation to reflect that when he filed nis statement of insolvency—qnd. paid, the fees thereon-r-he unconsciously enrolled himself in the “noble army of martyrs ’’ “to Colonial legislation. Mr O’Meagher pointed ont that there ward no provision under the Act for a statutory deed of release. J

The Judge stated that a deed of release might be executed independently of the present Act. Mr O’Meagher ; But in that case it would require the signature of all the creditors. What will bp the position under the present Act?

His Honor; I may say that I believe that six months hence nine out of every ten Imsolvents will be in a state of liquidation tor the term of their natural life. A creditor could put a debtor’s estate in liquidation, nnd 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 suspended 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 Clerk would remember me in his will.

BBs Honor ; That is entirely a matter of private arrangement, between yourself, and Mr Filleul.

After some further discussion his Honor said that there was no means under the Act of revesting the property in the debtor. ; Mr Hislop suggested that the Trust, so far as ; the Registrar was would determine. ,

His Honor was not of that opinion. Mr O’Meagher put the case of a huge sum of money' being left to a debtor, under certain supposed circumstances; and asked if the Court could not order its distribution among the creditors. His 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 undar extreme circumstances a Court of Equity would interfere; but the relief given would wholly dehors to the Act and regulations. Mr Minuitt 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 £, and that one creditor attending alone might resolve that the estate should not be wound up. His Honor said that when Mr Hislop took his seat as a member of the legislature, poa sibly not on the present occasion but after a fresh election, he would probably endeavor to amend the Act.

After some farther discussion, in the course of which Mr Balmer raised the.ques-

tion of the liquidation of joint and separate estates in partnership bankruptcies; ; hnd Mr O’Meagher that of tne power of a creditor; representing himself and several othoa* creditors as a trustee, to elect himself trustee of the estate and allow himself what cpp tr he pleased, and also the point m to payment or debtors* solicitors’ costs. < : * 1 His Honor referred to clause 13 of the Acfr which runs as follows ; ' 13. Where a liquidation wsoluKoh has been.filed in a District Court, the rhjht of appeal shall be to . the Supreme Court, and no farther j and- where the liquidation revolution'has beenfllod in tw Supreme Court, there shall he a tight of appeal to the Court of Appeal of New Zealand, and no fur- . ther. All appeals shall be subject to such provisions as may be prescribed, respecting notice of Bp-. Seal, deposit or other security, procedure, and «»• once. ‘ " > " 'r\ He said, the whether the fegisUtors their praiseworthy. deure.4o -secure, ttetho f' : Colony a toonbftuy« havenot somewhat exceeded ferred npciu them by* the OoftStdtatdtmAct.* Within the Colony, no .tiibhmd "■ • to review. the . i. the must be taken to

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 m certain recent telegrams that the Canadian Legislature, having Easaed an Act forbidding appeals to Engind, received intimation of its summary disallowance,