ORIGIN OF BANKRUPTCY

Hokitika Guardian, 12 October 1929, Page 8

ORIGIN OF BANKRUPTCY

SOURCE OF MODERN PROCEDURE. The history of the law of bankruptcy was the subject of a most interesting address which Mr W. A. Beattie, the Auckland barrister, delivered at Auckland before the members of the Karangahape Road Busi ness Promotion Society. The origin of the word, “bank ruptcy,” said Mr Beattie, was Spanish, the term having been derivet from the words ‘banca’’ and “rap ta.” signifying a broken bench. The origin of the phrase was that in ancient times there were held fairs ai Venice. Genoa, Barcelona and o-thei Continental towns, and these fairs were visited by the same merchants. When a merchant failed to meet his obligations, his bench was brought before the elders present, and was broken as a symbol of the fact that the man had defaulted. This had its modern prototype Tn the “hammering” of the man on the Stock . Exchange. 1 The act of breaking the bench was sufficient to inform the Commercial world that the man had failed. His assets were immediately distributed according to the claims oi bis creditors.

MANY DEBTORS DIED IN GAOL

Dealing with the. introduction of the bankruptcy law in England. Mi Beattie said the earliest record dated back to the reign of Henry VIII. It was a rough and ready statute under which a creditor, by proving his debts, was empowered to write out a docket stating the amount owing to him, and also that if lie thought the debtor was about to abscond the body of the debtor could be seized. The debtor had. no redress, except the Habeas Corpus Act, which he could put into operation if lie had a reasonable chance of proving that lie was being wrongfully seized. There was no such tiling as discharge in those days. A man had -to, pay in full or remain in gaol, and often a debtor languished in gaol until death overtook him.

PILLORY FOR PERJURY

If a man committed perjury for iiiiv sum of £lO or' over he had to stand in the pillory for two hours, and one of his ears was nailed to the pillory*and cut off. In 1604, for the first time, a debtor was allowed to make account to the Commissioners in Bankruptcy, stating what was owing to him. The commissioners up to this stage had been .spending most ot the bankrupt’s estate ip eating and drinking at their meetings. There was pn a record a case in which an estate of £20,000 was dissipated in this fashion, and a special statute had eventually to be passed td prevent the ooriunissioners from taking expenses for eating and drinking. In the reign of Qpeen Anne in the year 1705 the law swung towards leniency, for it was enacted that if an estate paid 8s in'the £ the debtor could get five per cent of the proceeds, so as to encourage him to disclose all his pmperty. The discharge system was the natural outcome of this provision.

A quaint clause in the law at this period, said Mr Beattie, was that benefits of the law should not extend to people “who lost £5 in one day or '£loo in twelve months at cards, dice, tables, bowls, sliulfle-board, cock fighting, horse racing, dog matches, foot races or other pastimes.”

Tilt FIRST CREDITOR’S PETITION.

In the year 1706, Jt was provided by law that a creditor must he owed at least £IOO before he could file his docket to make a map bankrupt. This was the origin of the creditor’s petition. Nothing much happened in the Law of Bankruptcy until 1851, when a Bankruptcy Court was established and the modern law came into force. This was founded on the Scots law, which, in its turn, dated back to the Roman law, which it followed in its main details. A curious feature of the law 'was that it was only applicable to traders, and until 1861 ordinary debtors continued to go to prison, many staying there until they died.

There were quaint qualifying clauses in the law, cases being altered by special circumstances. In one case . a man who was a runner and a smuggler of goods, was held to be a trader, thus bringing him within the law. The question of acts of bankruptcy were also of interest. One such act was that of avoiding the sheriff’s officer, and another was that of fleeing from the realm. One man murdered his wife arid fled, and it was held that he could therefore be made bankrupt, but another who left “to avoid the harsh language and irritation” of his creditors was adjudged not to he bankrupt.

The first act in New Zealand dealing with bankruptcy was the Debtors Act of 1844. This was amended from time to time, but its main provisions were that a debtor was to be released after he had served two months in gaol unless the creditor proved fraud, in which case he might have to stay in prison for two y'ears. If a creditor set out to prove fraud, he had to pay 4s a day maintenance for the prisoner in gaol whilst the case was being heard. If the creditor failed for two weeks to pay this maintenance, debtor was released, j All the Acts already existing were swept away in 1867 by the commit-t-tee, of which Mr Pember Reeves was ! chairman, and the existing system