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PRESENT LAWS.

In Ontario and the Western Provinces, very strict laws are now in force prohibiting unjust preferences of one creditor over another. There are also laws abolishing priority between execution creditors. Assignments for the benefit of creditors providing for a ratable distribution of an insolvent debtor's property among his creditors without preference or priority (except claims given by law or statute, a preference such as wages), are valid, and for certain purposes the assignee is the representative of the creditors. These Acts also contain provisions for the examination of the debtor and for the contestation of creditors' claims. Under these Acts the assignee is in the first place selected by the debtor, but may be removed and a new assignee appointed upon a vote of the creditors. The creditors are largely at the mercy of the assignee, both as to the administration of the estate, the expenses connected therewith, the scrutiny of claims, the conduct of proceedings for the contestation of securities and the examination of the debtor. In many cases no doubt the creditors prefer to avoid the loss of time and expense which would be involved in scrutinizing the affairs of the estate and are content to take whatever dividend may become payable and to continue to hold their debtor responsible for the unpaid balance of their claims. Unless a creditor wishes to be unduly harsh, he omits to obtain judgment for the amount remaining due to him and consequently in due time his claim is barred by the Statutes of Limitation and the debtor becomes free from enforceable liability except to those creditors who have taken the precaution to obtain a judgment against him.

BANKRUPTCY IN OTHER COUNTRIES.

Apart from China and Canada, and possibly Japan, there is no country of any considerable importance without its bankruptcy law. In China the various foreign nationalities have bankruptcy laws, which are enforced against their nationals. All Chinese delinquents pass into the dishonoured class, and are put under process of coercive termination of a business career, and are subject to punishment by bamboo blows.

In the United States the first in 1800, and repealed in 1803.

bankruptcy law was passed A second Act was passed

in 1841, and repealed in March, 1843. A third was passed in 1867, and repealed in 1878. In 1898, Congress passed a Bankruptcy Act, which is now in force in the United States

THE CAUSES OF FAILURE OF BANKRUPTCY LAWS.

It will be seen by reference to the many Bankruptcy Acts which have been passed both in England, the United States, and in Canada, that bankruptcy legislation has apparently been a series of experiments. This has been due to various causes. The principle of every Bankruptcy Act, since the beginning of the 18th Century, has been the same. The difficulty has been in its administration. Some of these difficul

ties are:

1. The manufacture of fraudulent claims.

2. The rapacity of trustees.

3. The expense attendant upon the administration of an estate under the official supervision of a Court.

4. The absence of control by creditors.

5. The facility of obtaining the approval of a deed of composition by creditors constituting the requisite majority. 6. The absence of public examination of the debtor.

7. The want of sufficient penalties for dishonest or reckless conduct or for violations of the principles of commercial morality.

CAUSES OF THE REPEAL OF BANKRUPTCY LEGISLATION IN CANADA.

The repeal by Parliament in 1880, of the Insolvent Act, of 1875, was probably due to an aggregation of evils rather than to any specific cause. Under the Act of 1875, there was no single Bankruptcy Court. The Act was administered in Quebec by the Superior Courts, in Manitoba, by the Court of Queen's Bench, in Ontario, British Columbia, and Prince Edward Island by the County Courts, and in Nova Scotia by the Court of Probate, until such time as County Courts should be established in that province. There was no examination of the debtor in open Court. True, a debtor was liable to be examined under oath before the assignee, and was bound to attest his statements of liabilities and assets under oath. The administration of the estates was committed to a privileged class of persons called official assignees, who were appointees under the party system of Government.

No effective audit of the accounts of these assignees was provided for and the security required to be given by them for the proper administration of estates committed to their care was nominal. The debtor by obtaining the execution by a majority in number and three-fourths in value of his creditors having proved claims of $100, and upwards, could obtain his discharge unless some dissenting creditor chose to intervene and oppose confirmation of the composition upon grounds enumerated in the statutes. Moreover, at the time that the Canadian Parliament dealt with the matter in Canada, an agitation was on foot in England to repeal the bankruptcy law of that country. As the dissatisfaction existing in England with the working of the bankruptcy law then in force contributed in no small degree to the repeal of the Canadian Act-helping as it did to discourage the supporters of bankruptcy legislation here and to confirm the opponents of it in their antagonism-we may digress for a moment to glance at some of the defects in the English Act, which gave rise to the aforesaid dissatisfaction and agitation. In most respects the English Act, of 1869, was an admirable one, but the English practitioner discovered in it what in the slang of the present period may be called a "joker."

Sections 125 and 126 of the Act contained provisions enabling a debtor to present a petition in Court for liquidation of his affairs by arrangement or on payment of a composition. On presentation of this petition a meeting of creditors was to be summoned, but the names of the creditors were furnished by the debtor himself. No judicial investigation of the right of these creditors to be deemed creditors was held. A majority in number and value after lodging proof of claims could, by resolution, agree to liquidation by arrangement, and to the acceptance of the composition. That resolution then became binding on all other creditors, without any act of approval by the Court, any judicial examination of the debtor, or any judicial examination of the trustees' accounts. The consequence was that most of the proceedings under that Act were taken under these sections. After the Act had been in force ten years the comptroller in bankruptcy reported. 13,000 annual failures in England and Wales, and of these 12,000 were taken under secs 125 and 126. The facilities for fraudulent and collusive arrangements afforded by the Act, and the want of effective control over the administra

tion tended to lower the moral of the proceedings and to throw the control of them into the hands of the less scrupulous members of the profession. The demands for reform were frequent and came from all classes of the business community. Thirteen Bills, dealing with the subject were introduced into the English House of Commons between 1869 and 1879. At length in 1879 a memorial signed by a large body of bankers and merchants in the city of London, a memorial described as "One of the most influential memorials ever presented to any Government," was forwarded to the Prime Minister. The matter was referred to the president of the Board of Trade, who was Mr. Joseph Chamberlain. Exhaustive inquiries were made under his direction, and in 1881, a measure was introduced which with some amendments finally became law, under the title of "The Bankruptcy Act of 1883." This Act with some amendments is still in force in England, and is giving satisfaction. One underlying principle of the Act is the estate for the creditors, not for the debtor or for the trustee. The other underlying principle is commercial morality. The dealings of an insolvent debtor with his estate are not matters which concern only him and his creditors; the community is also vitally interested therein. Therefore, the Act, while just and generous to the honest and unfortunate trader, penalizes the incompetent and dishonest and endeavours to protect the trading community from his incompetency and dishonesty.

DEBATES OF 1879 AND 1880.

The agitation for the repeal of the English Bankruptcy Act of 1869, synchronized then, as we have said, with the debates in the Canadian House of Commons on the same subject in 1879 and 1880.

In 1879 a resolution was proposed by the leader of the Government to refer three bills, which had been introduced in that session, dealing with the question of insolvency legislation, to a select committee, whose duty it should be to enquire into and consider all questions of insolvency and bankruptcy. On the debate on this resolution many speakers on both sides of the House strongly opposed the continuance of bankruptcy legislation, but the resolution to refer was nevertheless passed and the committee was appointed. Later in the same session they brought in their report and proposed the repeal of the old law and the enactment of a new Act.

An amendment was moved to approve the report of the committee in so far as it related to the repeal of the old Act, but not to enact any new law. Somewhat unexpectedly this amendment received an affirmative vote in the House, but was rejected in the Senate. Next year, however, a bill to repeal the existing Act was again passed in the House, and this time it received the support of a majority in the Senate, and the Insolvent Act of 1875, was repealed.

Thenceforward creditors were compelled to protect themselves against one another by means of the more or less imperfect remedies provided by provincial enactments. Debtors had several courses open to them:

1. They could leave the country.

2. They could carry on business in the names of their wives and defy their creditors.

3. They could form limited liability companies.

4. They could obtain precarious credit.

5. They could await the Statute of Limitations.

6. They could obtain a discharge from such of their creditors as were willing to grant it and could settle with or pay the others.

The honest capable man, unwilling to adopt any device. derogatory to his manhood was practically prohibited from giving to the community the benefit of his services, except as the hired servant of others more fortunate, but possibly not so capable as himself.

OBJECTIONS URGED IN PARLIAMENT.

When the debates in Parliament are examined it will be found that the reasons given for the repeal did not go to the root of the matter. The fault of the law was not so much in its principle as in its administration.

Among the objections were :

1. The Act gives too great a facility to debtors to make private arrangements with their creditors.

2. The throwing of bankrupt stocks on the markets deranges business and militates against the honest trader.

3. The only man who needs protection is the honest but unfortunate debtor, and to such a debtor the commercial community will be indulgent without a bankruptcy law.

4. A bankruptcy law, the benefits of which are enjoyed only by traders, induces a great many people to go into business who otherwise would not.

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