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principle of the bankruptcy law was correct. The method of the administration and enforcement thereof was defective. All that was needed was the man to find the remedy. The man was found. He was the long-sighted, clear-headed, and capable Joseph Chamberlain, then occupying the position in the English Cabinet of President of the Board of Trade. After exhaustive enquiries he found the remedy, and for nearly thirty years the Act introduced by him, and which became law in 1883, has been administered in England in such a way as to secure bankrupts’ estates for the creditors and justice, not slavery, for honest debtors. Similarly in the United States, after various experiments, Congress upon a careful and exhaustive inquiry into the operation and effect of bankruptcy laws in other countries, enacted a national bankruptcy law in 1898, which, with some amendments made in 1903, has been the law ever since and gives every evidence of being entirely satisfactory to the nation at large.
COMPARISON of FAILURES IN CANADA witH THOSE IN ENGLAND AND IN THE UNITED STATES.
That a bankruptcy law does not tend to increase the number of failures is apparent from a comparison between the number of failures in Canada in the past four years as against the number of failures in the United States and England.
Number One failure Year of Failures Assets Liabilities for every 1908 1,713 $7,767,207 $17,577,201 3,885 1909 1,581 6,156,915 12,724,384 4,325 1910 1,459 6,961,147 15,525,134 4,810 1911 1,399 6,399,647 12,799,001 5,000
Average 4,500 UNITED STATES.
1908 15,690 ........ $222,315,684 5,655 1909 12,924 • * * * * * * * 154,603,465 6,995 1910 12,652 . . . . . . . . 201,757,097 7,270 1911 13,241 . . . . . . . . 186,498,823 7,060
Average 6,745 ENGLAND AND WALES.
Number One failure Year of Failures Assets Liabilities for every 1907 4,111 £1,917,338 £5,673,623 8,916 1908 4,306 2,103,492 5,509,949 8,040 1909 4,070 2,154,034 5,804,142 8,700 1910 3,880 2,867,068 8,211,678 9,200
These figures for England and Wales represent the numbers of receiving orders made under the Bankruptcy Act, and do not include cases of insolvency under deeds of arrangement. The exact figures for these latter are not available but the indications are that if they were included the number of inhabitants to a failure would still be over 5,000. It would appear, therefore, from the foregoing that there are as many or more failures in a country without a bankruptcy law as in analogous countries possessing such an enactment.
ENGLISH ACT OF 1883.
The salient features of the English Bankrupt Act of 1883, may be said to be as follows:— 1. An independent and public investigation of the debtor's conduct. 2. The punishment of commercial misconduct and fraud in the interests of public morality. 3. The summary and inexpensive administration of small estates. 4. Full control by a majority in value of the creditors of the appointment of a trustee and a committee of investigation. 5. Strict investigation of the proofs of debt with regulations as to the proxies and votes of creditors. 6. Provision that no arrangements between creditors and debtors, or compositions by deed or by resolution, should have any force against dissenting creditors, unless confirmed, after full investigation by the Bankruptcy Court. 7. An independent audit and general supervision of the proceedings and control of the funds in all cases. In 1908, after the law had been in force for 25 years, a committee of the Board of Trade, after making full enquiry into the working of the English Act, and into those of Germany, France, Australia, Scotland and Ireland, reported that the result of their enquiry did not disclose any dissatisfaction on the part of the commercial community with the main features of the then existing law and procedure. Improvements were suggested in certain minor aspects of the law and certain branches of its administration, but with regard to the general scheme they recommended no change. It has already been pointed out that other parties are interested in insolvency than the creditors and the debtor. Unless restrained by legal enactment, the predominant characteristic of the human mind is selfishness. Every man is more or less dominated by what is best for his own interests. It matters little to creditors that it is unsafe to the community that their debtor should be allowed to carry on his trade. On the other hand it also matters little to creditors that their debtor has talents and enterprise, which if allowed free scope, would be of great value to the community. In the one case, if he is willing to offer them five or ten cents more on the dollar than they can collect from his estate, they will give him a discharge, and allow him to prey generally upon the community, until he again fails, and pays only a percentage of his debts. In the other case, unless the debtor's friends are willing to come to his aid, and recognizing his talents and enterprise, are willing to contribute Out of their own means towards his debts, they are willing that he shall be handicapped with such a load of debt as to deprive the community of his services. His only reliefs are the Statute of Limitation, the generosity of such of his creditors as recognise both his honesty and ability, and thirdly, the satisfaction of the demands of those sordid individuals, who refuse to give a man a chance until they have first extorted the uttermost farthing. The trading community does not sufficiently recognize that the dishonest trader is a menace to the community, nor that it is impossible for the honest man who pays one hundred cents on the dollar to compete with the man who frequently fails and pays only a percentage of his debts. Many men are reputed to have become rich by so administering their affairs as to fail for a sufficiently large amount.
It would be beyond the scope of this paper to attempt to work out the details of a Canadian bankruptcy law. The
English and American Bankruptcy Acts contain sufficiently ample measuring rods to enable a satisfactory Act to be framed.
The particular points to be observed are:—
1. Every debtor must be compelled to submit to a public examination before a judicial tribunal respecting his conduct, and he must be compelled to explain the reasonable and probable causes of his failure in business. 2. No man whose failure has not been brought about by misfortune should be entitled to a discharge. 3. All undischarged bankrupts should be incapable of obtaining credit and should be incapable of holding public office and positions of trust. I would, therefore, suggest:
1. That there should be enacted in Canada a uniform law, governing all matters coming within the ambit of bankruptcy legislation. Creditors in Toronto or Montreal should be able to know that the remedies against a defaulting debtor resident in Halifax are equally as good and as readily available as the remedies against a debtor in Vancouver. 2. The administration of the bankruptcy laws should be committed to the Superior Courts of the various provinces, and the Judges of the various County and other local Courts should be Referees in bankruptcy. 3. Upon the commission of an Act of bankruptcy the creditors should have a summary and speedy remedy against the entire estate of a debtor. 4. The creditors should have the entire control of the administration of assets and should be at liberty to say whether the assets should be administered under the supervision of the Courts or by a trustee of their own choosing. 5. No composition should be effective or should entitle the debtor to a discharge unless first confirmed by the Court after full enquiry into : (a) the conduct of the debtor; (b) the claims of the creditors; (c) the objections of dissentients, or the expenses attendant thereon. 6. Inasmuch as the state is entitled to the benefit of the services of all its subjects, no creditor should be allowed to hold in bondage the soul, body or talents of any of its subjects, merely because he has been unfortunate. 7. If a debtor is not able to give an adequate reasonable and satisfactory account of the transactions causing his failure, his future earnings should be impounded for the benefit of his past creditors until they have been sufficient to pay a reasonable percentage upon the dollar of his creditors' claims. 8. Dishonest and incompetent traders should be stigmatized as undischarged bankrupts, and should be incapable of
engaging in trade or contracting debts without reasonable
prospects of paying them. 9. There should be an official supervision over the accounts of all trustees. 10. A central bureau should be established in each province, presided over by a superior Court Judge by whom all bankruptcies would be supervised, thus ensuring both uniformity and honesty of administration. 11. The guiding principle should be “the estate for the creditors.” The procedure should be so simple and expeditious as to produce the speediest and best results. 12. Every debtor should be compelled to submit a full statement of his assets and liabilities and the reasons for his failure at the first meeting of his creditors and should thereafter be examined in open Court before a Judge in the presence of his creditors, and should thereupon be called upon to answer all questions which might be put to him by counsel or any of his creditors with regard to his affairs, and any prevaracation or failure to make a satisfactory explanation should be punishable as contempt. 13. The bankruptcy law should be available to all debtors both traders and non-traders. 14. The wage earner and the possessors of small estates who perhaps have fallen into the hands of loan sharks, should be enabled to have their estates administered in bankruptcy at a minimum of expense. 15. The present system of appointing assignees has been found in the main to work satisfactorily and subject to the control of creditors, should be permitted to continue, but for the administration of small estates and estates over which creditors do not care to take control, a salaried official should be appointed in each province, who would officially supervise all such small bankruptcies and enable justice to be done both to the creditor and the debtor without undue expense. I should like to conclude this paper by an extract from the report of the committee appointed in 1906, by the English Board of Trade, which report was published in 1908. The committee in its report says:–