THE BANKRUPTCY LAWS.

New Zealand Mail, Issue 16, 13 May 1871, Page 1

THE BANKRUPTCY LAWS.

The presence of the Inspector of Bankruptcy at the seat of Government naturally suggests the rather unpleasant and difficult subject of our bankruptcy laws. We have from time to time urged the inoperative necessity of revising existing legislation on this subject, and providing some simpler, cheaper, and more efficient system of dealing with insolvent estates. At present-it is impossible, without referring to three separate acts at least, to know what is the law, and the difficulty of applying it to any particular case is so great that nothing can be done without a lawyer. To make a bad debt is a misfortune ; but it is sorely aggravated by having to incur the anxiety and expense of legal proceedings, before what is recoverable out of it can reach the pockets of the unfortunate creditor. In all future legislation on this subject, therefore, we would again urge upon the Government the propriety of repealing all existing statutes, and passing one clear and comprehensive measure, within the four corners of which all that is necessary may be comprehended. The term bankruptcy, by the way, having no specific meaning here, should be abolished, and that of insolvency alone retained as in all the Australian colonies. We propose for the present only to notice one or two absurdities of the present law, reserving others for future consideration. And first we mention the astounding anomaly that insolvent estates are not preserved from depreciation, and not guarded from improper disposal by the debtor, at the time of all others when such contingencies should be most guarded against. A man may file a .declaration 1 of 'insolvency, and the creditors and trustee may see him dispose r j of ms estate in any way he chooses; but I until this filing is followed up by an adjudication, neither can interfere. In this interval they may see the door of the stable open, but they cannot close it! When by an adjudication they can at last manage to shut it, the steed is stolen ! We cannot see why the acceptance by the Court of the insolvent’s petition should not per se be the adjudication, and should give the official assignee immediate possession of the estate, with power to sell or otherwise dispose of it, in any case where delay is likely to cause depreciation or waste. We would therefore recommend that the new act should contain no such clauses as those now in force, whereby, in the interval between the filing of the petition aud the adjudication, the insolvent can make “ ducks and drakes” with his estate, which the very act of petitioning shows to be of right the property of his creditors. The creditors would then be in a position, at the very time when such an officer is most required, to elect a trustee, or the official assignee might take possession in the first place, pending the election of one from and by t.be creditors interested. In theory, it seems better that the trustee should be a creditor chosen for that purpose hy the co-creditors, but from the able and luminous reports of the Inspector in Bankruptcy (rather curiously designated in the Act, by the way, as <£ Accountant”), it is to be feared that in many cases they are ill qualified for the duties imposed on them. The acts are so perplexing that it requires no little time and study, even to master the portions relating to the duties and liabilities of trustees. In nine cases out of ten a lawyer has to be consulted, and his charges still further impoverish the estate. Indeed, the present acts may be described as “ acts for the better securing of employment to lawyers, and for the relief of debtors.” Then, again, the trustees when appointed are not sufficiently under the control and supervision pf the Inspector in Bank*

ruptcy. In cases of Deeds of Arrangement, it does not appear that they are under the control of the Inspector at all. No wonder, then, that complaints of the conduct of trustees are so frequently heard. In Scotland, whence the idea of appointing an Inspector has been taken, such a state of things is altogether unknown. The Inspector is provided with a competent staff of clerks, whose appointment, if Ve mistake not, is fixed by the act; and the administration of the act under that officer lias been favorably commented on from the Bench and in the leading public journals. If any circumstances connected with an insolvency to him suspicious, he has the power at once to institute a local inquiry. It is clearly impossible to ensure fair and prompt dealings by trustees with the estates entrusted to them without having an inspector with full powers to protect the interests of the co-creditors, and even of the insolvents, by supervising their official conduct. The new act should therefore provide for the extension of the powers of the Inspector. From the last yearly report of the gentleman now holding that office, we observe that “ there is a larger number of bankruptcies annually here than there is in Scotland.” It seems strange, therefore, that while we should so far copy the Scottish Act as to appoint an Inspector, we should not at the same time furnish him with a sufficient staff or with the necessary powers. From an exchange we learn that the Minister of Justice is preparing a bill on this subject, and we presume he will avail himself for that purpose of the presence of Mr Brodie in Wellington. His experience of the actual working of the present acts cannot but prove a very valuable assistance- No one can doubt that this very difficult question is in good hands, if it is taken up, as reported, hy the Hon Mr Sewell; but in matters of actual practice in which the vices and defects of existing legislation have been fully shown, the Inspector in Bankruptcy must have acquired information which no framer of a bankruptcy bill can safely afford to dispense with.. If the Ministry effect as great an improvement in dealing with insolvent estates as they have done in the transfer of land, they will earn a further title to the reputation of being the most useful Ministry that has ever held office in New Zealand.