(J. SM.*)
COMPARATIVE LAW
_British Empire_.--In most parts of the British empire the law of
bankruptcy has been modelled upon the English system. This is particularly
the case in Australia and New Zealand. Victoria, South Australia, Western
Australia and New Zealand follow the lines of the existing English acts. In
Queensland, Tasmania and New South Wales the system is rather that of the
English act of 1869, leaving more to the creditors' management and less to
officialism.
One point may be mentioned in which the Australian colonies have improved
on the English system. Under the English acts a bankrupt is under no
obligation to apply for his discharge. The result is that the United
Kingdom contains a population of 70,000 undischarged bankrupts--a manifest
danger to the trading community. Under the bankruptcy systems of New South
Wales, Victoria and New Zealand, a bankrupt is bound to apply for his
discharge within a fixed period, otherwise he is guilty of a contempt of
court.
In Canada, under the British North America Act 1867, the Dominion
parliament has exclusive legislative power in regard to bankruptcy and
insolvency: but there is no existing Dominion act on the subject. A
Dominion act was passed in 1875, but repealed in 1880. The failure of this
act may perhaps be ascribed to the diversity of the pre-existing provincial
systems, embracing such contrasts as the English law of Ontario, and the
French code based on _cessio bonorum_--which ruled in Quebec. Bankruptcy is
dealt with in a fragmentary way by the provincial legislatures by acts
regulating such matters as priority of execution creditors, fraudulent
assignments and preferences, imprisonment of debtors, administration of
estates of deceased insolvents.
In Cape Colony and Natal English law is substantially followed. In the
Transvaal, where Roman-Dutch law prevails, the law governing the subject is
the Insolvency Law, No. 13 of 1895. It provides for voluntary surrender and
compulsory sequestration. The law of the Orange River Colony is similar.
In British Guiana, Gambia, Jamaica, Hong Kong, Mauritius, Grenada,
Trinidad, Tobago and the Straits Settlements the law is modelled on the
English pattern.
In India insolvency is regulated by the Indian Insolvency Act 1848,
extended by the Act XI. of 1889.
An English bankrupt, it may be added, is entitled to plead his discharge in
England as a defence in a colonial court. The explanation is this. The
English act vests all the bankrupt's property, whether in the United
Kingdom or in the colonies, in his trustee in bankruptcy. Having thus
denuded him of everything, it has been held to follow that the bankrupt's
discharge must also receive recognition in a colonial court.
_France_.--Bankruptcy in France is regulated by the Commercial Code of
1807, amended and supplemented by the law of 9th June 1838. By Article 437
of the code bankruptcy is defined as the state of a trader who is unable to
meet his commercial engagements. Simple insolvency of this kind is known in
France as _faillite_. Insolvency attended with circumstances of misconduct
or fraud is known as _banqueroute simple_ or _banqueroute frauduleuse_.
Only a trader can become bankrupt. The debt, too, for obtaining
adjudication must be a commercial debt, the laws regulating bankruptcy
being designed exclusively for the protection of commerce. To be made a
bankrupt a trader need not be insolvent: it is sufficient that he has
suspended payment. Commercial companies of all kinds are liable to be
declared bankrupt in the same manner as individual traders. A trader-debtor
can be adjudicated bankrupt upon his own petition, or upon the petition of
a creditor, or by the court itself _proprio motu_. A petitioning debtor
must within fifteen days file at the [v.03 p.0331] office of the Tribunal
of Commerce of the district, a declaration of suspension, with a true
account of his conduct and of the state of his affairs, showing his assets,
debts, profits and losses and personal expenses. On adjudication the
Tribunal of Commerce appoints a person, called a _syndic provisoire_, to
manage the bankrupt's estate, and a _juge commissaire_ is also named to
supervise the syndic. A bankruptcy terminates by an ordinary composition
(_concordat_), a sale of the debtor's assets (_union_), or a composition by
relinquishment of assets. It is a striking feature of the French system,
and highly creditable to French commercial integrity, that a discharge in
bankruptcy, even when accompanied by a _declaration d'excusabilite_, leaves
the unpaid balance a debt of honour. At the time of the French Revolution
the National Convention passed a resolution that any man who contracted a
debt should never be free from liability to pay it. The spirit of this
resolution still survives, for until a trader has paid every penny that he
owes he is not rehabilitated and remains under the stigma of various
disabilities: he has no political rights, he cannot hold any public office,
or act as a stockbroker, or sit on a jury. _Banqueroute simple_ is where
the bankrupt has been guilty of grave faults in the conduct of his
business, such as extravagance in living, hazardous speculation or
preferring creditors. _Banqueroute frauduleuse_ involves the worse
delinquency of fraud. Both _banqueroute simple_ and _banqueroute
frauduleuse_ are punishable,--the latter with penal servitude ranging from
five to twenty years.
_Germany._--Bankruptcy in Germany is governed by a code passed in 1877.
Prior to this each state had its system and the law was "wholly chaotic."
The same distinction is drawn in Germany as in France between mere
commercial failure and bankruptcy, simple or fraudulent. Simple bankruptcy
is established by such offences as gambling, dealing in "futures,"
disorderly book-keeping or extravagance in living: fraudulent bankruptcy,
by offences of a deeper dye--the concealment of property, the falsifying of
books, the manufacture of fictitious debts and the giving of illegal
preferences. Both kinds of bankruptcy are punishable, fraudulent bankruptcy
by penal servitude, or in case of mitigating circumstances, by imprisonment
for not less than three months. Accessories in fraudulent bankruptcies are
liable to penal servitude--for instance, a creditor who conspires with the
debtor to secure an advantage to the prejudice of the other debtors. The
creditors are called together within one month from the date of
adjudication, and at their meeting they may appoint a committee of their
number to advise with the trustee. It is the duty of the court to see that
the trustee performs his functions. Estates are liquidated with great
rapidity. In order that the creditors may receive dividends at the earliest
moment, it is customary to sell the assets by auction. The creditors by a
majority in number and three-fourths in value may accept a composition, but
such an arrangement must have the approval of the court. The fees are very
moderate: in an ordinary bankruptcy the attorney's fees do not, it is said,
exceed L5.
_Italy._--Bankruptcy in Italy is regulated by the Commercial Code of 1883
(Part III.). Only merchants can pass through the bankruptcy court.
Merchants are defined by the code as those who, as an habitual profession,
engage in commercial business. This definition includes merchant companies.
Bankruptcy proceedings may be taken either by the debtor or by a creditor
for a _commercial_ debt, or may be ordered by the court. The amount of the
debt is immaterial: a small sum will suffice, provided its non-payment is
proof of insolvency. Bankruptcy can only be declared where there is
insolvency. The judgment adjudicating a debtor bankrupt deprives the
bankrupt of the right to administer his affairs, and nominates a trustee to
realize the property under the superintendence of a judge and a commission
of creditors. All the property of the bankrupt, movable and immovable, is
sold by auction and distributed in dividends. This is one way of closing
the bankruptcy, but it may also be closed by an arrangement. No minimum
percentage is required for such arrangement, but it must have the assent of
creditors representing three-fourths of the bankrupt's indebtedness.
Composition before bankruptcy is not recognized by Italian law. Bankrupts
are liable to criminal proceedings involving punishments more or less heavy
for offences against the law, _e.g._ for not keeping books in the way
prescribed by law.
_United States._--After much fragmentary legislation the bankruptcy system
of the United States is now embodied in the National Bankruptcy Act of
1898, as amended by the act of 1903. The acts of bankruptcy under the act
may be summarized as follows: where a debtor (1) removes any of his
property to hinder or delay his creditors; (2) being insolvent, transfers
property with intent to prefer a creditor; (3) suffers any creditor to
obtain a preference; (4) makes a general assignment for the benefit of his
creditors; (5) "admits in writing his inability to pay his debts and his
willingness to be adjudicated a bankrupt on that ground." These acts of
bankruptcy do not include, it will be observed, non-payment by a debtor of
his debts. A debtor can therefore only be adjudicated a bankrupt on the
ground of indebtedness with his own consent in writing. Presumably the
legislature thought that the desire to obtain the protection and privilege
of bankruptcy would be a sufficient inducement to confess insolvency, where
such insolvency, in fact, exists.
To constitute a fraudulent preference it is not necessary, as it is under
English law, that the payment should be made "with a view to prefer" the
favoured creditor. It is enough that the creditor is preferred. This avoids
the nice questions of legal casuistry which have embarrassed the English
courts, and it is the more rational rule, for creditors are not concerned
with a debtor's intention. Any person, trader or non-trader, may avail
himself of the act, but, in the case of a corporation, there is this
peculiarity: it may be petitioned against but cannot petition.
Insolvency is construed in a practical sense; that is, a person is
insolvent where the aggregate of his property, at a fair valuation, is
insufficient to pay his debts; but he is not necessarily insolvent because
his realized assets are insufficient to meet his liabilities.
Involuntary proceedings can only be taken against debtors owing $1000 or
over, with certain exceptions. A petitioning creditor's debt must amount to
$500.
The administration of the law of bankruptcy is entrusted to the district
courts and is exercised through the medium of certain officers appointed by
the courts and called referees. The creditors appoint a trustee or trustees
of the estate.
So soon as his judicial examination is over the bankrupt may offer his
creditors a composition, but to take effect the composition must be
approved by the court after hearing objections.
The discharge is the key to the efficiency of every bankruptcy system. By
the control which the court thus holds, it is enabled to bring its moral
censorship to bear on a debtor's conduct and so maintain a high standard of
commercial integrity. Under the United States system the judge is to
investigate the merits of the application and to discharge the bankrupt,
unless he has (1) committed an offence punishable by imprisonment; (2) with
intent to conceal his financial condition, destroyed, concealed, or failed
to keep books of account or records from which such condition might be
ascertained; or (3) _obtained property on credit from any person upon a
materially false statement in writing made to such person for the purpose
of obtaining such property on credit; or_ (4) _at any time, subsequent to
the first day of the four months immediately preceding the filing of the
petition, transferred, removed, destroyed or concealed any of his property
with intent to hinder, delay or defraud his creditors; or_ (5) _in
voluntary proceedings been granted a discharge in bankruptcy within six
years; or_ (6) _in the course of proceedings in bankruptcy refused to obey
any lawful order of or to answer any material question approved by the
court._
It is significant that the italicized qualifications were added to the act
of 1898 by the experience of five years of its working.
(E. MA.)
* * * * *
Corrections made to printed original.
page 186, "His opportunity for territorial aggrandizement":
'aggrand-dizement' over line-break in original.
page 202, "the accommodation and protection of the reeds": 'accomodation'
in original.
page 225, "in the neighbourhood of Bayeux": 'neighborourhood' in original.
page 273, equation (26) "... = -r = -gp/C.": '= -rr = -gp/C.' in original,
the first r upright, the second italic. Compare the table before (25) where
Cr = gp.
page 286, (Victor Baltard) "In 1833 he gained the prix de Rome": '1803' in
original (2 years before he was born!); various internet sources agree 1833
is the correct date.
page 308, "he had a perfect sense of proportion": 'pefect' in original.