The New Zealand Times (PUBLISHED DAILY). SATURDAY, MAY 17, 1879.

New Zealand Times, Volume XXXIV, Issue 5657, 17 May 1879, Page 2

The New Zealand Times (PUBLISHED DAILY). SATURDAY, MAY 17, 1879.

After all the time and trouble which have been expended in endeavoring-to place the law of bankruptcy on a satisfactory footing, it would seem that very little success has been achieved. There is much discontent amongst creditors, and perhaps even more unequal dealing with debtors than before the present system came into force. But whilst most people who have any interest in the matter are prepared to admit that reform is necessary, few are agreed as to the direction it ought to take. The central principle of the present law appears to be that the chief power of dealing with a bankrupt estate should be vested in those to whom the estate may bo said to belong, namely, the creditors. In a large majority of cases tho debtor himself sets tho law in motion. He files a declaration that he is unable to meet his liabilities, and the officer of the Court thereupon appoints a day for the first meeting of creditors. Those who prove on the estate and are present, either personally or by proxy, when that meeting takes place, proceed to elect trustees from amongst their number. It is the duty of the trustees to make a searching examination into the affairs of the bankrupt, and at a subsequent meeting of the creditors to bring up a report on tho whole case. In this report there is usually something said with reference to the discharge of the bankrupt, who then makes a formal appeal to the Court for a release from his liabilities. If he has filed a full statement of his affairs, if there is no opposition on the part of the creditors or any of them, and if there is no evidence of fraud on the face of the proceedings, the necessary order is made almost as a matter of course indeed, we believe it has been held that in such a case the Judge has no power to withhold the discharge. If there is opposition, and the Judge, after duo inquiry, comes to the conclusion that the bankrupt has . acted rashly or improperly in tha conduct of his affairs,

the certificate may be suspended. If the trustees fail to report, or fail to call a second meeting, or if there is no quorum at the second meeting, the bankrupt can make an affidavit of the facts, and still apply to tho Court for his discharge. The above sentences contain a brief statement of the usual method of procedure in bankruptcy. It, of course, sometimes happens that there are complications, that the proceedings are spread over a considerable time, or it may be that the debtor on calling his creditors together makes them an offer of so much in the pound. In the latter case, if he can secure the signature of a certain proportion of the creditors representing a certain proportion of his indebtedness, the remaining creditors are bound by the arrangement, whether thoyobject to it ornot. It is evident from all these facts that to a very great extent creditors are judges in their own cause when the debtor has once signified, in proper form, that ho is unable to meet his liabilities. This is precisely what the Legislature intended, and, notwithstanding tho experience gained since the passing of the Act, many commercial men might be found prepared to defend the principle. Their argument would, we presume, simply bo that a bankrupt’s estate belongs to h’.s creditors, and that it is just and right that they, the real owners, should have the disposal of their own property. It may be here remarked that for a considerable time creditors in England have been invested with just such powers and duties as they possess in New Zealand, and that the system has not been found to work satisfactorily. We do not question the fact that there have been many cases of bankruptcy in this colony in which the most has been made of estates for the general body of creditors, whilst no injustice has been done to the debtors ; but we contend that in many other, perhaps a majority of cases, the estates have been more or less sacrificed, and the debtors unnecessarily detained before getting their discharge from the Court. The theory that the creditors will _ look sharply after their own interests is too often not borne out by facts. It sometimes will not pay the trustees to perform their duty as it ought to be performed. They have more important business to attend to, and the interests of their fellow creditors are consequently allowed to suffer. Again, it may happen that, owing to relationship, private friendship, old associations, or other influences which need not be enumerated, the bankrupt may bo able to secure more favorable terms than would otherwise have been granted him. There may under such circumstances be a respectable minority whose interests are largely affected, but who, in the present state of the law, are utterly powerless to protect themselves against the majority, if only it bears a certain proportion to the whole body of creditors. There is an old and generally true saying, that there is no friendship in business, but unquestionably it does not apply to business in the Bankruptcy Court. The fact is that considerations such as we have alluded to above are continually operating, often greatly to the disadvantage of the minority. On the other hand, if the bankrupt should chance to be a man of disagreeable manners, and blessed with few friends, he may have a very unpleasant and protracted time of it before he is free to commence another struggle with the world. It is a truism to say that it is not always the most deserving who finds the quickest and easiest road out of bankruptcy ; and we are compelled to believe that an adverse report by the trustees is sometimes the result of soreness or vindictive feeling on account of pecuniary loss, rather than the just consequence of the bankrupt’s dealings. If we are reminded that the Court is not bound by the report of the trustees, we reply that the report is generally regarded as of very great weight, and is acted on in a large majority of cases. The Legislature, as we have pointed out, intended creditors to have the principal voice in settling tho debtor’s .affairs, and for the most part the Court, whether district or supreme, has shown little disposition to assume more responsibility than obviously belongs to it. .On the whole it appears at least open to question whether the good old rule that “no man should be a “ judge in his own cause” does not apply to bankruptcy matters quite as forcibly as to all other cases where conflicting interests are arrayed, one against the other. We admit the difficulty of arriving at a just conclusion, and it is quite evident that creditors will never be really satisfied, because no effectual law can be passed compelling insolvent debtors to pay twenty shillings in the pound. That is where the shoe unfortunately pinches, and'where it must of necessity continue to pinch till the end of time. There is only one other point to which we desire to allude before leaving the subject. When there' has been reckless trading, or when the bankrupt, although not guilty of criminal misconduct, has nevertheless been wanting in what is called commercial morality, it is the practice to suspend his certificate for a longer or shorter period according to the extent of his culpability. There is reason to believe that an alteration of the law in this -respect would be beneficial to society. If the bankrupt has cheated, or attempted to cheat or defraud, let him by all means be prosecuted, and on conviction by a jury be sent to gaol in tho same manner as any other criminal; but we object to punishment being inflicted without a regular trial, and tho suspension of the certificate is in the nature of a punishment, and is intended to bo so. Apart from the injustice to the bankrupt it inflicts an injury on the public. The man must live, and the suspension of the certificate renders it very difficult, if not impossible,’ for him to pursue his ordinary occupation. The consequence is that the uncertificated bankrupt too often becomes a burden on other people until his period of waiting comes to an end. Having once been compelled to enter the portals of the Bankruptcy Court, and having surrendered the whole of his property, the sooner he is enabled to commence life again on equal terms with his fellowraen the better both for himself and them. ■