THE BANKRUPTCY ACT, 1883.

FIRST ANNUAL REPORT OF THE INSPECTOR-GENERAL.

THIS report (the principal features of which are noticed below) will be read with special interest by members of the Institute, having in view the facts that not only does the Bankruptcy Act, 1883, to a great extent carry out the views urged by the Institute, but also that those views have on more than one occasion been prominently put forward by Mr. John Smith, the present InspectorGeneral in Bankruptcy.* Though the Act only came into full operation on 1st January, 1884, certain of its provisions became law on August 25, 1883, and the first portion of the report deals with the action taken by the Board of Trade under Sec. 162 in respect to the payment into the Bank of England of dividends unclaimed for six months and upwards, and all other funds remaining undistributed for two years and upwards. A form of return relating to cases under the liquidation and composition clauses of the Act of 1869, was issued to all accountants and other persons who could be ascertained to have acted as trustees during the five years from 1876 to 1881, and who had not received their discharge at the date of the passing of the new Act. In such return was to be set forth the particulars of all moneys received and paid away, and the balances, if any, remaining in hand, including dividends which had been declared but remained unpaid. The following table shows the results of the applications made, and the manner in which they were responded to :

* Of these 307 were addressed to persons who have subsequently been ascertained to be either dead or bankrupt, or to have left the places where they carried on business.

* Journal of the Institute, Vol. I., p. 379, Vol. II., p. 259, Vol. IV., p. 219.

The result of these steps was that up to the 31st March payments into the Bankruptcy Estates Account were made by 1,213 trustees, in respect of about 10,500 estates, to the amount of £180,507. The Inspector-General remarks that, "in view of some popular anticipations on the subject, these figures may appear small," but this is, in a great measure, accounted for by the fact that people have failed to distinguish between the total funds in the hands of the trustees and the small proportion called for under the said returns, in addition to which there is little doubt that the closing of debtors' estates and the distribution of the funds in hand was powerfully stimulated by the new Act.

From these returns definite information was obtained as to the cost of liquidation by arrangement, under the 125th Section of the Act of 1869, and the following significant fact appeared, viz., that out of 4,143 cases no fewer than 1,983, or nearly 48 per cent., have paid no dividend whatever. The following table most clearly brings out the average amount of assets realised and the costs of realisation of 4,143 estates in liquidation, and percentage of the same to gross and net assets, with the corresponding percentage of costs in cases of bankruptcy for 1882.

LIQUIDATIONS.

The costs in Liquidations are those actually charged up to 25th August, 1883. The costs in Bankruptcies are the total costs up to the close of the estate.

The Inspector-General also states in detail his reasons for concluding that in practice the control of the creditors over the administration of estates in liquidation under the Act of 1869 was of a very slender description.

The latter portion of the report deals with the administration of debtors estates under the new Act. Though the system established by that Act had been but a short time in operation at the date of the report, yet some indications of its probable effect were already discernible, more especially with regard to summary official administration of estates under £300 in value, of which 476 have for the three months ending March 31st been ordered to be thus summarily administered.

A great reduction in the number of insolvencies brought within the new Act, as compared with those dealt with under the old Act, was also discernible. Thus while the number of these latter in 1883 was 8,555, the average annual number for the past five years 10,149, the number under the new Act is only at the rate of about 3,000 per annum. Several causes have been suggested for this, and much has been said about the large increase of private arrangements between debtors and their creditors outside the sphere of the Act, but there seems to be little reliable evidence of any but the smallest increase of these arrangements, and the Inspector-General is probably justified in saying that "the influences at work in promoting private arrangements are likely from various causes to increase with the increased efficiency of any legal system of bankruptcy administration." One satisfactory feature in connection with the working of the new Act deserves notice, and that is the increasing interest taken by creditors in the proceedings. The apathy of creditors has always been an unhealthy feature of Bankruptcy proceedings, and it is to be hoped that a further experience of the working of the new Act, and some modification of the Rules with regard to the use of proxies, will still further encourage creditors to attend and take part in the proceedings. It is understood that the authorities have in contemplation (with a view of meeting objections on the subject raised by Mr. Cunliffe Brooks, M.P., and others) some such modification of the existing Rules, so as to allow a person in the regular employment of a creditor, and holding a general power of attorney on his behalf, to act for such creditor in his absence, by appointing proxies under the Act.

The results of the working of the old and new Acts are forcibly contrasted in the following table, showing the average rates of compositions sanctioned under the Act of 1869 during the year 1882, with corresponding results under the Bankruptcy Act of 1883 for the period ending 31st March, 1884 :

This shows a great average improvement, which the report attributes to the searching investigation required by the Act to be instituted before compositions are sanctioned.

The last portion of the report deals with the important question of the comparative costs of administration under the old and under the new Act. Considerable discussion has taken place on this subject, and the report devotes some space to show how the fees payable under the new Bankruptcy Act compare with the costs of other systems of administration. In so doing it is pointed out that a distinction should be made between "large" and "small" bankruptcies, in which latter case the fees represent the entire cost of administration, while in the former the official fees even after the appointment of an independent trustee, cover, in addition to Court charges, the cost of the interim preservation of the estate, the examination of the debtor's conduct and affairs, reports thereon to the creditors and the Court, the supervision of the trustee, and the audit of his accounts. As the fees under the old Act were simply Court fees, charged in respect of the registrations of resolutions, and other formal proceedings, the Inspector-General contends that to contrast the two sets of fees is to decide on a false issue; the real estion is whether the total cost of realisation is higher or the

reverse, and the following table shows the comparative cost per cent. of realising estates of £300 and under, calculated on gross realisations:

That is to say, that the total only 27 per cent., as against 50 With regard to estates where the assets exceed £300, the InspectorGeneral remarks that it is as yet too early to furnish reliable details, but that a favourable result may be looked for here also, and obviously the official fees are not of so much relative importance in the case of large estates. It is to be hoped that a further experience of the working of the Act may engender increased confidence in its proceedings, more especially if care be taken to remove the frictions which, as in the case of the use of proxies, must from time to time arise in the working of so large a new and comparatively untried machine. The next annual report will therefore be read with even greater interest than the present one.

cost of administration under 1883 is per cent. under the old Act.

F