THE BANKRUPTCY LAW.

Southland Times, Issue 1300, 29 August 1870, Page 2

THE BANKRUPTCY LAW.

The second annual report of the Inspector in Bankruptcy furnishes the information that the number of bankruptcies in this colony during the past year is greatly in excess of the number of sequestrations throughout Scotland during a like period. The population of Scotland being over three millions, and that of Few Zealand under a quarter of a millioi, the statement affords room for mucl conjecture and speculation in explanatioi of the fact. The Inspector states :— " The last annual return I have received from the Accountant in Bankruptcy, Scotlandj shows that 452 estates were sequestrated; while in this colony there were, during the year ending 30th November, 1869, 520 persons xidjudicated^bankrupts. This is the more to be regretted when it is considered that of 821, the total number of bankruptcies for the two years ending 30th November, 1869, there were 360 cases in which the liabilities did not exceed £300, while the assets recovered are merely nominal." There can be no question but that the effect of the bankruptcy laws of the colony up to the present has been to render bankruptcy an easy and profitable, if not a very pleasant and honorable occupation to the debtor. Facilities for fraud have been so apparent in bankruptcy legislation as to lead to the supposition that they were intended. Detection of fraud has been seldom if ever expected, and its punishment regarded as impossible of accomplishment. Hence creditors have too often been willing to submit in comparatively uucomplaining silence to the first loss rather than incur an additional one, with j-i.^ ».^r>.-t.v^-pn-nTiv»™»<v-riP~-<:hfi ■■ trouble an<lvexation entailed by the cumbrous and ineffectual machinery of the court. The result of this has doubtless been the serious detriment of creditors by inducing recklessness and extravagance in trading, and fraudulent resort to the bankruptcy court to wipe off existing obligations, and to put the debtor at once in a position to repeat the operation as soon and as often as the kindness or credulity of creditors might render it practicable. The introduction of the " Bankruptcy Act Amendment Bill " will materially remedy the existing state of matters, afford to creditors such protection as they are entitled to expect from legislation, operating at the same time to deter from the gambling recklessness and fraud which the history of recent jnsolvencies has disclosed. The Dew Bill will come into operation sanctioned in all its important features by the express recommendations of the various Chambers of Commerce in the colony. A late writer (Mr J. S. Mill) on the subject of insolvency, gives the following : — " The law is bound to take care that insolvency shall not he a good pecuniary speculation; that men shall not have the privilege of hazarding j other people's property without their knowledge or consent, taking the profits of the enterprise, if it is successful, and if it fails, throwing the loss upon the rightful owners ; and that they shall not find it answer to make themselves unable to pay their just debts, by spending the money of their creditors in personal indulgence. It is admitted that what is called fraudulent bankruptcy, the false pretenoe-of^ inability to pay, is, when detected, properly ■subject to punishment. Bat does it follow that insolvency not the consequence of misconduct because the inability to pay may be real I If a man has been a spendthrift, or a gambler, shall he pass scot-free because the mischief is consummated and the money gone ?" The principleinvolvedinthe above has been virtually ignored in oui bankruptcy legislation, and it is therefore all the more satisfactory now to know that the new law meets the difficulty— a declaration of insolvency, which formerly afforded facilities to dishonest debtors for concealment and improper disposal of effects, is now to be regarded as an act of bankruptcy, and followed by an immediate surrender to the Provisional Trustee of estate of the bankrupt. Another source of fraud is aimed at and comparatively provided for by the new Bill, making void all settlements within two years of bankruptcy, except in caaes of ante-nuptial settlement, and unless the claimants under such settlements can prove solvency at the time of making. The value of such a provision as this — copied from the English Act — will be readily recognised here, many cases being of very recent memory in which the whole of the property of a debtor has been ! cleared off by a friendly arrangement. The occasional punishment of now and then one of the smallest of the debtor fry, who had been either barefacedly

dishonest, or culpably incautious in his mode of managing matters, was barely sufficient to impart the slight sense of danger to the proceedings, necessary to furnish a zest. Every one knew that it was the small fish who were caught, while the larger escaped to enjoy the fruits of their legalised plunder. By the French Code de Commerce the word " banqueroute" (which can only be translated by " bankruptcy") isconfinedto culpable insolvency, which is distinguished into simple bankruptcy, and fraudulent bankruptcy. Simple bankruptcy relates to such offences as — excessive housekeeping expenditure (all traders' house expenses being required to be entered day by day), large borrowing, sale of goods at a loss, losses by gambling, or improper or excessive issue of negotiable securities, as bills of exchange, &c. For any or either of the foregoing offences, the penalty is imprisonment for a term of i not less than one month, nor more than i two years. By the same code the following are dealt with as fraudulent bankruptcy, of which the punishment is travaux foices (the galleys) for a term : — " If he has attempted to account for his property by fictitious expenses and losses, or if he does not fully account for all his receipts : " If he has fraudulently concealed any sum of money or any debt due to him, or any merchandise or other moveablea : — y -If~~he has made fraudulent sales or gifts of his property : "If he has allowed fictitious debts to be proved against his estate : "If he has been entrusted with property, either merely to keep, or with special directions as to its use, and has nevertheless appropriated it to his own use" (for auch acts of peculation by trustees there is generally in England only a civil remedy, and that, too, through the Court of Chancery) : " If he has purchased real property in a borrowed name : " If he has concealed his books." The following may also be proceeded against in a similar way : — " He who has not kept books, or whose books shnll not exhibit his real situation as regards his debts and credits. " He who, having obtained a protection (sauf conduit) , shall not have duly attended." These various provisions relate only to commercial insolvency. The laws in regard to ordinary debts are considerably more rigorous to the debtor. By far the majority of operators under the bankruptcy laws of this colony have reason to congratulate themselves on not being under the jurisdiction of the French code, or the number of those fulfilling the expressed wish of a member of the Legislature in the discussion of the Amendment Bill, by macadamising the public wayß, would be very considerable. The tendency of the existing law has really been to make debtors dishonest, and inasmuch as a truly honest man will never feel that the operation of law discharges him morally from the payments -ofLhisjuefc obligations, lie -will not quarrel with any law that furnishes him with sufficient protection to do this. In the Amendment Bill the conditions of the English Act have been copied relative to the discharge of a debtor. It is now provided that a dividend of 10s in the pound shall be paid by the debtor to entitle him to his discharge, or that it shall be clearly showed that but for circumstances over which the debtor had no control, the estate would have paid that sum, or such discharge shall be granted at request of his creditors, at a meeting duly convened for that purpose, and certified to the court. In cases in which the estate does not realise 10s in the pound, protection may at the discretion of the court be granted for three years, during which time the debtor may make up the amount and claim his discharge,' or the balance of his liabilities may be registered against him as judgment debts for which he is ever after liable, and in reference to which he has no protection. It is admitted that by no possibility can a law be framed to meet every conceivablecircumstance, yet the Amendment Bill is a considerable advance in the right direction, and one thing is certain as to its operation, that no really dishonest person having come within the range of the law, will wish to continue under a system which renders him liable to such an extent. The community will thus to a great degree become purged of the rascals who enter into bankruptcy as a speculation, by which they intend to make money, regardless of the wide-spread ruin consequent upon their nefarious transactions.