Dáil Éireann debate -
Tuesday, 8 Feb 1983

Vol. 339 No. 9

Bankruptcy Bill, 1982: Second Stage.

Minister for Justice (Mr. Noonan,

Limerick East): I move: “That the Bill be now read a Second Time.”

The object of the Bill is to consolidate and amend the law relating to bankruptcy, which is contained in the Irish Bankrupt and Insolvent Act, 1857, the Bankruptcy (Ireland) Amendment Act, 1872 and the Preferential Payments in Bankruptcy (Ireland) Act, 1889. These very old statutes were supplemented by Bankruptcy Court Rules which are now incorporated in the Rules of the Superior Courts, 1962, as amended, as well as by a number of statutory provisions relating to bankruptcy which are contained in legislation concerned primarily with other matters.

The Bill is based in the main on recommendations contained in the 1972 Report of the Bankruptcy Law Committee. The report, to which the committee appended a draft Bankruptcy Bill and Rules, was published in 1973 and circulated to Members of both Houses of the Oireachtas at that time. The delay in preparing a Bill on the lines suggested by the committee was due largely to the fact that publication of the report coincided with our entry into the European Economic Community. That required us, among other things, to enter into immediate negotiations with the other member states with a view to adopting an EEC Bankruptcy Convention.

The purpose of the proposed convention, which was already in draft form and being negotiated by the original Six, was to ensure that a bankruptcy or company liquidation once begun in one member state would be recognised and enforced throughout the Community with the minimum of formality. These negotiations have been continuing to date and have now reached Council level. While the negotiations were at an early stage it was considered inappropriate to proceed with the introduction of domestic bankruptcy legislation. However, when it became apparent that the draft convention would not prejudice or be prejudiced by the enactment of new national bankruptcy laws, it was decided to prepare a Bill on the basis of the committee's recommendations. The very complex and technical nature of the subject necessitated a detailed examination and revision of the Bill proposed by the committee before an acceptable text could be arrived at.

This is the first bankruptcy legislation which has been put before the Oireachtas since the foundation of the State. Since it consolidates and amends the main bankruptcy statutes which have governed the law over the past century-and-a-half, it is an extremely complex measure. An explanatory memorandum giving some brief information about the principal changes which are being effected has been circulated to Deputies and I trust that they will find it useful. If any further information of a more detailed nature is required I shall be glad to provide it during the Committee Stage. In what follows I propose to mention only some of the major provisions in the Bill.

There are three main features. First of all, the Bill proposes to alter, in the interests of speed and efficiency, the existing methods of proving a bankrupt's debts, distributing his property, and discharging and annulling bankruptcies. Second, it proposes to give the official assignee, subject to the general control of the court, sole responsibility in bankruptcy matters with specific powers and functions similar to those of a liquidator in the winding up of a company by the court. Third, it proposes to align more closely the law governing the bankruptcy of individuals with the law relating to the winding up of companies. I should like to refer in somewhat more detail to these and other changes being effected in our law.

The conditions necessary to commence bankruptcy proceedings have continued with little or no change up to the present day. For example, a condition precedent to bankruptcy is that the debtor shall have made himself liable to be proceeded against by committing what is termed an "act of bankruptcy", that is, any one of a number of specified acts which are regarded as indicating the precarious state of his financial position so as to justify the commencement of proceedings which may lead to his being adjudicated bankrupt. These acts of bankruptcy or implications of insolvency have been reduced in number and set out in modern form in section 7.

One of the most criticised aspects of the law at present is that the expensive machinery of the Bankruptcy Court can be set in motion for a debt of as little as £40. The committee regarded this situation as untenable. Accordingly section 11, in laying down the requirements which in future must be fulfilled in order to found a petition to adjudicate, provides that the debt owing to the petitioning creditor must not be less than £500. In addition, the time during which an act of bankruptcy will be available to a creditor for adjudication of a debtor has been reduced from six months to three months since the committee considered it unfair that a debtor should be at risk for such a long period. Once this period expires, the particular act of bankruptcy in question ceases to be available as a basis for the court to adjudicate.

Section 16 re-enacts in substance the procedure whereby a bankruptcy is entitled to show cause against the validity of his adjudication. Pending the outcome of his application to the court to this effect, advertisement of the adjudication is deferred. Over the years, and more particularly since the committee reported, a practice has developed of making successive adjournments in these "show cause" applications, frequently for long periods, even where the validity of the adjudication is not in dispute. Such adjournments are granted in exercise of the court's equitable jurisdiction. While they are justified in so far as they enable the bankrupt to enter into a composition with his creditors, the fact that the adjudication is not advertised puts at risk persons who continue to give credit to the bankrupt in total ignorance of his bankruptcy. This is particularly the case where the show cause application ultimately fails.

The Bill does not disturb this "extra-statutory" procedure but it formally recognises its existence and endeavours to ensure that it is only invoked in circumstances where it does not involve risk for potential creditors. Subsection (2) of section 16 therefore provides that where the court adjourns a show cause application it shall be under a specific duty to have regard to the interests of the bankrupt, his creditors and any person who might advance further credit to him. In addition, subsection (4) of section 17 gives the court power, when granting an adjournment, to dispense with publication of the notice of the adjudication on security being given by the bankrupt or on such conditions as it thinks fit.

Section 17 deals also with the fixing by the court of a statutory sitting which the bankrupt must attend and at which he must make a full disclosure of his property. This replaces the two such sittings required under the present law and reflects the intent of the Bill and of the committee to expedite proceedings and to reduce the number of formal sittings, not only in bankruptcy proper but also in compositions after bankruptcy—section 39—and arrangements under the control of the court—section 90(b).

Under existing law bankruptcy administration may be said to be divided between the assignees, that is, the official assignee and the creditors' assignee, and the court examiner. The committee considered that this system was archaic and cumbersome and lent itself to unnecessary duplication, in particular as regards the division of functions between the official assignee and the examiner. They recommended that the minimal role of the creditors' assignee should be reduced still further and that the examiner's functions in bankruptcy should cease.

Under section 44, where a person is adjudicated, all property belonging to him will on adjudication vest in the official assignee alone and not as hitherto jointly in the official assignee and the creditors' assignee. Section 61 sets out the official assignee's duties and functions and implements the committee's view that the official assignee should have complete freedom in administering bankruptcies subject to the overriding control of the court and the right of a creditor or other person to apply to the court in relation to the exercise or proposed exercise of the official assignee's powers. The specific powers and functions of the official assignee will be similar to those of a liquidator in the winding up of a company by the court.

Section 76 and the First Schedule provide a new procedure for the proof and admission of debts under the supervision of the official assignee, the underlying basis of which is that creditors will normally prove their debts by sending the required evidence by post to the official assignee and by attending at his office where necessary.

A major recommendation of the committee was that the system of preferential payments in bankruptcy should be abolished. Under this system certain debts, including arrears of tax, wages and social welfare contributions, are payable out of the bankrupt's estate in priority to the claims of ordinary creditors. The committee were concerned because one of the main objectives of bankruptcy law was being eroded, namely, to secure equality among creditors so that one creditor would not obtain an unfair advantage over another. They pointed out that the State and public authorities were the main beneficiaries of the system and that there was no justification for preferring them to ordinary commercial creditors. As regards wages and salaries, the committee thought that a preference was no longer necessary, because in modern conditions trade unions would not allow substantial arrears of pay to accumulate. As regards social welfare contributions and so on, the committee considered that, instead of making these preferential, employers should be required to keep them in a special bank account which would not vest in the official assignee.

As against the committee's view, a system of preferential payments, very often more extensive than ours, is an established characteristic of bankruptcy law in most jurisdictions. It is also a feature of company law here and elsewhere. If preferences were to be abolished in bankruptcy it would be difficult to justify the retention of the provisions in the Companies Act, 1963, relating to preferential payments on the winding up of companies, and it is in that area rather than in a bankruptcy that the effect on State revenue would be more significant. As regards wages and salaries, bankruptcies involving arrears of these still arise, while in relation to social welfare contributions it would be difficult to ensure that employers would pay them into the special bank account as recommended by the committee. For these reasons, the view was taken that the present system of preferential payments should be retained and this is being effected by section 81. Some amendments are being made to bring the preferences into line with company legislation.

In so far as arrears of pay are concerned, the existing ceilings of £50 for clerks and servants and £25 for workmen and labourers are being raised to £2,500. This is the same preference as that given to those employees by the Companies (Amendment) Act, 1982.

The list of preferences has been extended to include all accrued holiday remuneration and remuneration in respect of absence from work through good cause as well as to pension fund payments. These preferential payments have been taken over from the Companies Acts. The closer alignment of bankruptcy law with the law governing the winding up of companies is also reflected in sections 56, 57 and 80, which deal with the disclaimer of onerous property by the official assignee, the avoidance of fraudulent preferences and the priority of expenses.

I should like to draw attention to two further aspects of the Bill which should make for a speedier and more efficient system of administering bankruptcies. These are sections 82 and 85, which provide for a simpler method of distributing a bankrupt's property and for the early discharge or annulment of his bankruptcy. Finally, Part V implements the committee's recommendation that the estates of persons dying insolvent should be capable of being wound up in bankruptcy. This is also the position in Northern Ireland and England.

The Bill is, of course, a consolidation as well as an amending measure and it contains many provisions which simply repeat existing requirements with little or no change. In accordance with the major recommendations of the committee it re-enacts those elements of existing law which are still relevant, while it discards provisions which have become obsolete or have fallen into disuse. The latter category includes the provisions in the 1872 Act known as the trustee clauses. These allow a bankrupt's estate to be wound up by a trustee and committee of inspection rather than by the assignees.

Furthermore, the Bill does not reenact the Local Bankruptcy Ireland Act, 1888, from which the bankruptcy jurisdiction of the Cork Circuit Court originally derived. In future the High Court — subject to appeal to the Supreme Court — will alone have bankruptcy jurisdiction.

As I mentioned earlier, this is the first Bankruptcy Bill ever to be introduced into the Oireachtas. Therefore, not simply because of that but because of its very complex and technical nature, it might be better to refer the Committee Stage in due course to a special committee. I am in the hands of the House in that respect. If the House agrees, I will move the necessary motion at the appropriate time.

Mr. Lenihan

I shall be very brief because I want to take up immediately what I regard as a very sensible suggestion in the last paragraph of the Minister's speech, that this important Bill be referred to a special committee of the House. I know it is urgent because the Bankruptcy Law Committee have been sitting for a long number of years now. It is important, in order to get the whole of the bankruptcy procedures and laws updated in line with modern commercial practice, to have this Bill introduced. The most expeditious way of doing this would be to establish a special committee and I feel that the Committee Stage should be referred to such a committee of the House. I should be very glad if the Minister would, as he suggests himself, move the necessary motion at the appropriate time.

There are a few brief points I should like to make in regard to the Minister's introductory remarks. He is very right, in my view, in stating that the expensive machinery of the bankruptcy court can be set in motion for a debt of as little as £40, which is ludicrous in this day and age. That is an obviously untenable position. Indeed the £500 suggested by the Minister might even be raised higher than that. Having regard to the modern depreciation of money he might consider raising that level to £1,000. Obviously the present position is untenable, as the committee say.

The question of successive adjournments constitutes an abuse of the whole system. The committee themselves have helped in highlighting that aspect. A practice has developed of making successive adjournments in "show cause" applications. These adjournments are granted as part of a court's equitable jurisdiction. Again that has given rise to a situation in which courts have been clogged and bankruptcies have dragged on over the years. There will have to be some remedy devised in that respect. The question of whether the equitable jurisdictional aspect is being overdone is something that should be examined. This refers to section 16 in particular. I should prefer to have this done on a statutory basis rather than any equitable jurisdiction giving rise to an overall freedom of action of the courts. That is my view of the matter. The more tightening of legislation in this area the better. What has happened heretofore is that the legislation has been too fluid and easy and the net result has been that bankruptcies have dragged on interminably.

Bearing in mind that this Bill is essentially one for special committee consideration I might say that I agree fully with the committee in their contention as regards the division of functions between the official assignee and the court examiner, the recommendation that the examiner's function in bankruptcy should cease and that the minimal role of the creditors' assignee should be reduced. I feel it should be abolished and have the whole of that area vested in one office, that of the official assignee. Of course it is a matter for the special committee to examine that aspect.

I side with the Minister against the committee's recommendation that the system of preferential payments in bankruptcy should be abolished. This would mean that the priority given to the payment of debts relating to arrears of tax, wages and social welfare contributions over claims of creditors would cease. For practical and good reasons the Bill goes against that recommendation. In all jurisdictions where bankruptcy law operates preferences exist and rightly so. Revenue which is owed to the State, social welfare payments and wages owed to employees should be regarded as preferential matters. For once the old law is right and should be retained in spite of the committee's recommendation. I am glad that the Bill incorporates this point of view and I am sure it is one the special committee will regard as proper. There may be changes in the system of preferential payments, either additions or deletions, but the fundamental notion that debts owing to public authorities and the less well-off sections of the community should be acknowledged and regarded as having priority over other debts is a good principle.

There are other points in the Bill which can be teased out in the special committee. This is a Bill about which there is not much conflict. It is obviously necessary and long overdue. The committee have been sitting for many years and there is an expectation in the business community that a Bill such as this will be passed. There is uncertainty at present because of archaic conflicting interests regarding bankruptcy procedures.

I am glad the Bill rejects the committee's finding in regard to preferential payments. The Bill is welcomed by the Opposition and the sooner the motion to introduce and implement the special committee is made the better from our point of view. It is necessary and important legislation which will give a sense of certainty to the business and commercial community.

Mr. Taylor

I do not understand why the subject of bankruptcy comes under the brief of the Minister for Justice whereas the allied subject of company law and liquidation comes under the brief of the Minister for Trade, Commerce and Tourism. Both these branches are parallel in the context of the law reform which the Dáil has been discussing. The logical development would be that both matters would be dealt with by one Department and Minister.

The whole subject of bankruptcy, as the Minister pointed out, has never received the attention of the Oireachtas since the foundation of the State. I could go further and say it did not receive the attention of parliament for upwards of 50 years before the State was formed. The existing system we have dates back well over 100 years. It is entirely antiquated, archaic, full of anomalies and inconsistencies. It requires radical alteration. For that reason, I am disappointed to find that after 100 years when the matter comes up for discussion the best that can be put forward is a measure largely designed to consolidate existing law. I agree there is also an element of amendment of bankruptcy law contained in it but reading through it, it is primarily a consolidating measure. I would have thought we could have done better than this and have had a radical review of the whole subject. For example, the principle of the act of bankruptcy which the Minister referred to is preserved in the existing Bill. It is an entirely archaic concept and in the modern context should be dispensed with.

The procedures to adjudicate a person bankrupt are unnecessarily complex. It requires three documents: a notice in the first instance, a bankruptcy summons and a petition to adjudicate. I fail to understand why three documents should be necessary when one document, a simple notice of application to the intending debtor, would be perfectly adequate. The procedure is also expensive. Part of the expense derives from the fact that the High Court has exclusive jurisdiction to deal with bankruptcy matters other than the anomaly of the Cork Circuit Court which had a jurisdiction but this is being taken away in the Bill. A less expensive procedure using the District Court and skilled registrars who would be trained as specialists in the field of bankruptcy would be a more appropriate procedure in the modern context. I am disappointed that the Bill retains the exclusive jurisdiction of the High Court in the matter of bankruptcy.

The whole emphasis of the Bill is misplaced in the sense that it concentrates the resolving of an insolvency case in the field of bankruptcy. That is wrong in the modern context. I would have thought that the ultimate remedy of bankruptcy should have been confined to exceptional cases which involved serious misconduct or fraud on the part of a debtor who was obtaining assets, making away with them and avoiding payment of his debts. In the case of fraud or misconduct I would agree that the ultimate remedy of bankruptcy would be appropriate, but in the more common case of a person who has failed in business through no fault of his own I would have thought that alternative procedures could have been devised which would have been simpler and less expensive. I refer to a procedure under which, without having a person actually adjudicated bankrupt, he or his creditors would be enabled to have an arrangement perhaps to defer process against him so that he would be enabled to come to an arrangement to pay off his debts out of future salary or earnings. A simplified procedure could be brought in for the obtaining of protection orders during the making of arrangements by the debtor with his creditors. The ultimate stigma of bankruptcy would be reserved and confined to cases of misconduct and fraud.

I know there is under existing procedures a system for arranging debtors but it is an archaic procedure which is expensive and complex. I believe it is very rarely used and perhaps the Minister could clarify this point. A new simplified and inexpensive procedure to enable a debtor to make an arrangement with his creditors under the protection of the court would be a major step forward and one would have welcomed that sort of reforming tendency in our law of bankruptcy in the first such measure to come before the House since the foundation of the State.

I had hoped that provision would have been inserted in an amending Bill on bankruptcy to provide facilities whereby a debtor who had a business and who employed people could have been enabled to preserve that business intact as a going concern, thereby preserving at least some of the jobs of those employed. The whole thrust and emphasis of the present bankruptcy procedure, as would be consolidated in this Bill, have the effect not of preserving a business as an entity but of selling it off, breaking up the entity and disposing of it for the purpose of realising assets. A procedure which would facilitate preserving the entity would have been welcomed in what should be a reforming measure.

The protection of the family home is a matter which is not touched on in the Bill and I had hoped it would receive some attention in such a measure. Under the existing system a family home would fall into the assets of the bankrupt and would be liable to be seized like any other asset by the official assignee, thereby causing tremendous hardship to the family of the bankrupt, people with no responsibility for the financial difficulties in which he found himself. The thrust in recent legislation has been to recognise the special position of the family home and to enact special measures to protect it, as in the Family Home Protection Act. I do not suggest that a bankrupt should be left in an expensive house while his creditors are seeking money. That would be an untenable proposition but there could be some measure which would at least give the bankrupt and his family a fixed measure of time within which he would be permitted to remain in the family home and which would enable him to make arrangements to acquire alternative accommodation. He could be given a year or 18 months before the home would be liable to seizure by the official assignee, as the remainder of his assets.

Deputy Lenihan touched on the question of preferential payments and expressed pleasure at the fact that these were preserved. I agree so far as the preferential payments due in respect of salaries to people who have been employees are concerned but I would disagree entirely with the suggestion that debts due to the State, to say nothing of debts due to a local authority, should receive preferential treatment. That would be entirely inconsistent in the context of equality and I can see no basis whatsoever for suggesting that a debt due to the State should be in a special position and should be paid in full before a debt lawfully and properly due to a private individual. The State in this context should receive compensation in the same manner as anybody else. To give a State preference would mean that the amount recoverable to a private individual could be very substantially reduced, in some cases causing serious hardship to an individual owed money by a bankrupt's estate, whereas the benefit that would accrue to the State would be infinitesimal in proportion to the State's revenues. To extend that even to the matter of rates due to a local authority seems to be extending the principle of preferential payment to an outrageous degree and in all seriousness I would ask the Minister to re-examine the question of preferential payments both to the State and to local authorities and to consider reverting to the recommendations made by the committee which would be in line with my thinking on this subject. There should be equality and the State should not be in a special position but should rank the same as anybody else. The State, if it allows its debts to accumulate over a period, is at fault in the same manner as anybody else. It has facilities to collect its debts and very wide and extensive powers to raise its assessment and collect taxes due. If it fails to do that and if debts are found outstanding, the State is entitled to prove its debts and be treated the same as any other creditor.

I express my disappointment that we are faced here after a period of about 100 years with a largely consolidating measure. I do not object to putting this Bill into Committee but the measure I would have hoped for after 100 years during which there was no treatment of this subject by any legislature would have been altogether more radical. I do not know whether a committee would be able to bring into effect the radical alterations of the system of bankruptcy I would wish to see. I will certainly suggest some amendments along the lines I have outlined. The Bill does little more than trim the edges of the system rather than bring about a rethink of the concept of bankruptcy and how best an insolvent debtor should be treated in a modern context. It builds in, cements in and consolidates the old system and all forward thinking on it is at variance in many respects with the subject matter of the Bill.

An excellent committee dealt with this in England. The Cork Report put forward excellent suggestions for a new and revised system of bankruptcy administration. I would have thought that the many valuable suggestions and recommendations in that report would have been drawn on and used to parallel in our own purposes. Unfortunately, that does not seem to have been done and many of the measures incorporated in the Bill are directly at variance with the proposals in that report.

Mr. R. Bruton

I should like to welcome the attempt in the Bill to speed up the procedure in dealing with bankruptcy. In particular, the measure which deals with proof of amounts due is an important one — to put a time limit on the period in which people must present proof of debts and a sworn affidavit to back them up. One of the big problems in the past has been the long delay that takes place while various claims are teased out and dealt with. That will be an important reform but I should like to see more specification of the time limit within the Bill. It does not specify any time limit in respect of debts due, although it does specify a time limit of one month in respect of claims upon property. A specific time limit might be appropriate in this case also. It is also welcome to see that the procedure whereby the official assignee is consulted in dealing with bankruptcy cases. It will speed up his ability to deal with bankruptcy as expeditiously as possible.

There may be an argument for greater use by the official assignee of outside administrators in the case of bankruptcy. As I understand it, his office is very overloaded at present due to the fact that his role is not only in the case of bankruptcy but also in the case of the liquidation of companies. That may to some extent be responsible for the delay, but it might be worth considering greater use by the official assignee of outside administrators. There is the argument that this may leash money from the estate to pay the fees of an outside administrator but I do not think that argument has substance since people have entered into transactions with the estate willingly. It is hard to see why the State should pick up the tab for administration of that estate when it proves bankrupt. I would not accept that the use of outside administration would be unduly burdensome on the procedure.

On a broader context I have to echo some of the points raised by Deputy Taylor. He mentioned the Cork Report on bankruptcy and the conclusions of that report were quite dramatic. The report stated:

It became clear at an early stage of our deliberations that the immense social and economic changes which have taken place since the mid-Nineteenth Century, when our present insolvency laws and procedures were formulated, have rendered them at best obsolescent and at worst positively harmful. Without radical reform they are no longer capable of meeting the requirements of a modern society and fresh legislation of a comprehensive nature is urgently required.

Our legislation as I understand it — I am no expert in the area — almost entirely stems from the British legislation which was under study for the Cork Committee. There is the indication, therefore, that our legislation has also become obsolete to that disturbing degree. It seems to me that there are three objectives which ought to be achieved by a reform of bankruptcy law. The first is that wherever possible the bankrupt's estate should be disposed of as a going concern. Secondly, to the greatest extent possible, ordinary creditors should get fair treatment and as large as possible a proportion of the amounts owing to them from the estate when it is wound up. The final objective is that there should be greater speed and minimum hardship involved in the procedure.

The Bill tackles those in part but it is certainly wanting in many areas. The point of disposing of the estate as a going concern is not touched upon at all in the Bill. There is a need to improve the law in relation to this. The Cork Committee made a recommendation that the functions and responsibilities of administrators should be reformed so that they would have greater powers to carry on the business of the debtors and to rescue whatever possible out of the estate. That committee recommended that the appointment of an administrator — in our Bill that is only at the discretion of the official assignee — could be proposed by either a debtor or any one of the creditors provided they gave grounds why they believed the business could be kept on as a going concern. If that was adopted it would give greater opportunity to pull the business back because many of the bankruptcies we see now, or the difficulties companies get into, are due to bad management. With reform in management it could be that a lot of the business could be rescued.

The other major fear, especially in the present climate when there are so many firms getting into difficulty, is that the valuable experience of the workforce and valuable non-realisable assets of the company are completely sunk in the event of it being wound up and sold. Every attempt should be made to go as far as possible along the way of preserving the business of the debtor as a going concern. If that proposal of the Cork Committee offers a hope in that direction it would be only appropriate that it be examined. The special committee to be set up should look at that.

The second area in which there should be reform in our Bankruptcy Acts is this. The ordinary creditors should have access to a greater portion of the estate. This issue is ducked largely by the present Bill. As the Minister pointed out, this Bill has adopted largely the preferential debts which are included in the Companies Acts. In very many cases in the recent past, these preferential claims on the estate of a debtor who became insolvent have absorbed virtually all of the estate, and there has been very little pay-back to the ordinary creditors.

Preferential debts fall into two main categories. One is tax and the other is the claim of the employees. In the case of taxation, the bankruptcy committee of 1972 dealt very comprehensively with the arguments put forward as to why tax should have a preference. Mainly the arguments are that the State cannot control the level of its debt and, very often when a debtor gets into difficulties, the State's debt is long-fingered. That is one argument offered in favour of the State's preferential debts.

Another argument is that the State represents the community and the common good and should not fall victim in a bankruptcy case. A final argument offered is that the alternative to giving the State preference is that there will be increased taxation for the rest of the community. The 1972 commission dealt very fully and adequately with those arguments. In particular they pointed to the exceptional powers the State has to recover its debts. They also pointed out that the State is not the only one who enters into debt with a bankrupt without knowingly and voluntarily doing so. Very many suppliers are in precisely the same position as are people who have been purchasing goods from the debtor. Those goods were proved to be faulty and a court judgment found in favour of the consumer.

I have known of cases where, when a company was wound up, people who had got a court ruling that they should be compensated were left high and dry. I am thinking of a particular case. The person was particularly vulnerable and had made a substantial investment of his life's savings in the goods which proved faulty. On the winding up of the company he was not paid anything. There is a real issue there. There are others.

As Deputy Taylor said, in very many cases the individual member of the public will be victimised to an enormous extent in terms of his purse, whereas if the general public forfeited their preferential position they would be hurt to a very small extent individually. It would be a tiny proportion of the total tax revenue which would be collected. That is the argument against the possible worry that tax might be increased if the State lost its preferential position. The truth of the matter is that the sums of money are not so substantial that they would increase significantly the tax bill for the rest of the community.

The only cases for which there is a strong argument for continuing the preference afforded to the State are PAYE and PRSI payments. In those cases essentially the debtor is acting as a tax collector on behalf of the State. It is not simply a tax due from the debtor to the State. He is franchised to collect tax and what he has collected is the property of the State and should continue to get preference.

The preference should be limited in time. The preference, which dates back for as many years as one would care to mention, means that there will be a very long delay in settling up exactly what is due. Often this can hold up the bankruptcy proceedings. The Cork Committee in Britain recommended on this very point that the time limit for the preferential debt in respect of PAYE and PRSI payments should be limited to the last complete period for which returns were due. That would be a relatively short period and the whole matter could be cleared up quickly. There would not be the long delay which occurs at present.

There would be other valuable spinoffs if the preferential debt position of the State were eliminated. In particular, the Revenue Commissioners would be encouraged to be more attentive to the collection of tax due, instead of waiting until others petitioned for bankruptcy and effectively scooped the pool as they do at present. That would be a worth-while change in the whole area of tax collection. The other worth-while change would be that it would speed up the procedure under which long delays can arise in agreeing tax liability.

The other area of preferential debt relates to employees. On this matter I take issue with Deputy Taylor when he says he believes preferential debt to employees should be retained. I can see the argument as to why employees are thought to be particularly vulnerable and victimised in the event of a bankruptcy. However, I do not think it is exclusively the employees who are particularly vulnerable and victimised in the case of a bankruptcy. There are also weak creditors who may be caught, as I described in one particular case, or there may be creditors whose whole business depends on the money outstanding to them from the bankrupt. We had examples of such occurrences in the recent past. Therefore, I do not think the employees' claim holds universal preference in the hierarchy of what is the most desirable group to give preference to.

Mr. Lenihan

The Deputy had better sell that to the Labour Party. It is a bit Victorian.

Mr. R. Bruton

I do not think so. I beg to differ. There are many social causes we would like to support and among them are not just the employees but also the victimised creditors. Under EEC directive 1980/987 in the very near future it is proposed that the State should pick up that sort of liability of the employees. In other words the employees who had forfeited their just wages through the winding up of a company would be covered under the normal social welfare code. I am not saying they do not have a good case in social justice but it is one that should be picked up by the community at large and not by a limited group of creditors who now pick up the tab under the preferential debt procedure.

The EEC directive will be most welcome to all sides of the House. As I understand it, from the experience in Britain which already has a code like that, the cost is not enormous because, as the Minister pointed out, employees are not a group who fall into significant arrears with their employer, even in the event of bankruptcy. However, there is an important point which the change will make if employees' preferential debt was dropped. The present system whereby banks can use the employees' preference to get preference for their debt would be eliminated. At present, in cases of company law, although not in the case of bankrupts, banks can claim that because they advanced money to pay wages they are entitled to the employees' preference which otherwise would have prevailed. That is a procedure which is open to abuse by banks; essentially they are able to jump the gun over other debtors. It is hard to see why a bank supplying advances should be treated more favourably than a company who were supplying raw materials. I cannot see why that distinction should be made.

The third area which I mentioned as the objectives of the reform of a bankruptcy Bill is in dealing with greater speed and with less hardship. Deputy Taylor drew attention to one area where the Cork Committee suggested that improvements could be made. The Bill already deals with the need to provide greater speed. It is suggested in the Cork Committee report that less hardship could occur if there was, for example, the right of a debtor to call together the creditors at a meeting with some sort of statutory backing and discuss the possibility of coming to a voluntary agreement on the winding up of the company and that bankruptcy and all that goes with it could be avoided in that case.

They are the major reforms which are not fully dealt with in this Bill. With Deputy Taylor, I would like to see in Committee some consideration given to reforms in these directions. I know they would, to a large extent, involve, as the Minister said, reforms that would bear just as much on the winding up of companies as on the winding up of estates. However, I do not think that is a reason for ducking the issue. Possibly, some method could be introduced of drawing the Companies Act into our consideration in Committee to see where the overlap could involve reform in both codes. I think the intention of this Bill was to bring the two codes into agreement so I do not think it would be outside the scope of a committee to examine both Bills simultaneously.

In looking at this Bill, I noticed that the bankrupt is allowed to retain articles to the value of £1,000. Although it is a substantial improvement on what was there already it is still very low and the sort of items mentioned in the Bill, such as household effects and so on, would soon amount to £1,000. I also echo some concern expressed about the family home. As Deputy Taylor said, we cannot go all the way in exempting a home from a bankrupt's estate. However, if the Family Home Protection Act protects the wife from a husband selling the property over her head, would it not equally protect her from his committing it in debt, as it were, over her head and without her permission? Are we not, to some extent, flying in the face of that Act? This would especially arise in the case of a joint ownership where the wife would have an even stronger legal claim over the family home. There is an area there that needs to be cleared up.

I am also concerned about the procedure involving the practice of relating back, whereby the official assignee is able to declare void any transactions that have occurred between the date of the first Bankruptcy Act and the signing of the petition. The idea is to prevent bankrupts giving away large parts of their assets before creditors can get a hold of them. In this Bill that has been replaced by provisions to eliminate fraudulent preferences and also a new provision to prevent a bankrupt selling below market value in the run up to the bankruptcy proceedings. I understand it is very difficult, in practice, to prove fraud. One has to establish that the debtor knowingly and willingly attempted to give preference to one creditor over another. It can be quite difficult to prove that the bankrupt did that knowingly and willingly so I have my doubts about the effectiveness of this replacement that is being provided for in the Bill and similarly in the case of any sales below market value being treated as void by the official assignee. Before he can treat them as void, it is required that the purchaser in that case knew that the person was bankrupt. Again, it would be difficult to establish that a purchaser did know that the debtor was bankrupt, that he was getting money to which he was not entitled and making a sale. I am concerned as to whether the present procedures proposed in this Bill to replace the old relation back are foolproof. Perhaps, again in Committee, we could examine the specific clauses dealing with that situation and satisfy ourselves that that is the case.

I welcome the Bill in its attempt to simplify procedures to speed up dealing with bankrupt cases. However, I must echo the concern expressed by the Cork Committee in Britain that our procedures established in the nineteenth century have become obsolete and are becoming increasingly irrelevant to the growing number of difficulties that companies are running into, especially during this recession which has brought many of them to their knees. We should be seeking a Bill which does more towards achieving disposal of a debtor's assets as a going concern and replacing them by better management if that will solve the problem. If the case cannot be retrieved in that way, we should give greater justice to the ordinary creditors who are often small people robbed of substantial sums. They should not be asked to carry the conscience of the community so that employees and the taxpayers can be protected. The community should pick up those social requirements, not the individual creditors.

Mr. O.J. Flanagan

I came to the House for the purpose of making a speech on Dáil reform but unfortunately arrangements were made by the Whips to conclude the debate. I thought I should give the House the benefit of my long experience here and, as it was not possible for me to contribute to that debate, I decided to make a brief contribution on the Bankruptcy Bill. When I make up my mind to make a speech I make a speech.

I was interested to see that so few speakers contributed without referring to British law. When are we going to break away from looking on British law as the example we should follow? We are an independent, sovereign Parliament, but we are a young country. Many of the British Acts of Parliament, such as the 1857 Act, which is incorporated in this Bill, the 1890 Act, the 1872 Act dealing with debtors and the Act of 1889 were designed at a time when circumstances were completely different from those of today. They were prepared by the British Parliament when the master of the manor was supreme, when the debtor was the ordinary peasant who was looked on with contempt and disrespect by the lord of the manor. Yet, here we are in 1983 and we do not design legislation to suit our own times and our own people.

In my long experience as a Member of this House I have come across numerous bankrupts and also many cases dealing with wards of court. I would have thought that legislation in those areas should be updated and modernised in order to eliminate all the red tape involved. I hope that soon we will have legislation before this House to unravel the legal knots which cause so many problems for the people concerned.

This House should take a serious view of the problem of bankruptcy. There has been a record number of bankruptcies lately and the economic forecasts do not encourage the thought that there will be a lessening in the number of unfortunate people who are likely to be declared bankrupt in the years to come. Is it not time that we changed the word "bankrupt"? I do not like it and this view is shared by many people. It has the sound of the lord of the manor and the peasant. Would it not be better to call this Bill "The Insolvency Bill, 1983"? Would it not be better to call the person now known as a bankrupt by the word "insolvent"? The word "bankrupt" carries an extraordinary stigma. How often do we hear in rural Ireland that a person's father, grandfather or great-grandfather was a bankrupt? Many people use the word "bankrupt" without knowing its meaning. We should have Irish legislation to suit our times, conditions and our people. We should get away from the titles imposed by alien legislation which we are continuing to this date. I hate to refer to people as bankrupts. There may be little difference between the title "a bankrupt" and "an insolvent" but perhaps the latter will not carry the same stigma.

I hope this legislation will serve a purpose. If I were asked what kind of legislation is necessary to deal with this problem I would suggest it be based on a county basis with a county registrar dealing with it. It is about time county registrars were paid a proper rate: they are working for a pittance. I hope the Minister for Justice will improve their office conditions and assist them in their work. There must be in his office a file which would take a handcart to move from place to place dealing with the problems of county registrars. I suggest that a county registrar should have with him a person who could be known as "the insolvent officer". These officers should be in each county to deal with the problem in that area, rather than attempting to deal with it on a national scale. That officer would know the debtor and whether fraud was involved. He would also know the creditors and many of the difficulties that exist today could be solved without any grave embarrassment to those unfortunate enough to fall into debt through no fault of their own.

These are the people we want to deal with, people who in all good faith have fallen on hard times, who in spite of every effort they could make with their own skill and industry, working hard from sunrise to nightfall, find because of their domestic circumstances that it is impossible to pay all the debts they incur. Many a person through no fault of his own — for example, farmers who were advised to borrow by the State, Government Ministers, agricultural officers, county committees of agriculture and the EEC in relation to farm development and at whom various banks shovelled out money — now finds himself in a very serious plight because he accepted what could be considered wise, sound advice in order to increase his profits and make himself better off. Are we to stand by now when we see such people with debts they cannot pay having their names published in Irish Oifigiúil and outside courthouses and on public notices and being described as bankrupts so that their children's children's children may carry the stigma attached to bankruptcy? A person who is bankrupt through no fault of his own is given the same title and standing as the person who is bankrupt through fraud. There must be a difference, but the law does not make any difference. For that reason steps should be taken to bring our legislation more into keeping with the prevailing circumstances.

In numerous cases individuals take the responsibility for directorships of a number of companies and they can deliberately let one company go into heavy debt as a matter of central company economics and then they can transfer the assets, such as the machinery and so on from the insolvent company to the other companies which apparently are solvent. Why have such people not been brought to justice? There seems to be no law to deal with them. In a case which comes to my mind the High Court awarded a very substantial sum by way of workman's compensation to an unfortunate worker who will never work again. The moment the High Court made the order for compensation the company sought the protection of the court. I am informed reliably and have gone to the trouble of informing the liquidator in writing that quite an amount of valuable machinery was removed from one area where there was industrial activity to another area. All the people concerned were directors of different companies and at the same time of the one company. That may be rather difficult for people to understand, but there is nothing to prevent such individuals from being directors of a number of companies and having various forms of activity in progress. The result in this case was that the unfortunate worker was informed that there was not a penny piece to meet the just award of the court. From that day to this he never got a penny, nor is he likely to do so. Does any Member of this House tell me that that is justice and honesty, that it is not a form of fraud to do that man out of what the law awarded him because some smart aleck could drive a coach and four through the existing bankruptcy laws? This man and his family must suffer loss while he must suffer also the pain of never being able to work again and he must maintain his independence and keep his family. The law which permits that must be described as nothing short of seriously defective. In cases such as this some protection should be afforded to workers in companies which are either forced into bankruptcy or which go into voluntary liquidation.

In how many cases throughout the length and breadth of this country are workers deprived of their social welfare benefits and of their contributory pensions to which the law of the land entitles them because their employers did not comply with the law in either the payment of contributions under the Social Welfare Acts or through other means of neglect? The State should provide some means of protecting people who have been victims of sharp practice of this kind. I have seen too many cases of it and hardly a Deputy in this House has not come across cases of this grave form of injustice.

I have often said, and it is no harm to repeat, that such people may drive a coach and four through the laws here but they will not do so through the laws that will be hereafter. Numerous people, particularly in modern society, have very little thought about the significance of what can be described as debt. They run wrecklessly into debt which incurs the obligation to repay when one can. A sense of responsibility in this regard seems to be lacking. In the repayment of debts there are numerous obligations. There is the obligation to pay one's debts and the obligation to do an honest day's work for an honest day's pay.

We have heard here reference to the making of affidavits. There was a time when an affadavit meant something. In modern times in many cases affadavits are hardly worth the paper they are written on because the quality of life has changed. If the quality of life has changed to that extent we cannot expect much progress from this Bill particularly if it is based on incorporating Acts passed by the British House of Commons 100 years ago. During those days debts and affidavits meant something. There were victims of debt in those days and there were those associated with fraud.

I have known many people declared bankrupt who were very decent and honourable people. They worked hard to pay their way but because of many problems they were unable to keep their heads above water. Some machinery should be set up on a county basis to help people like that. Problems of this kind should be tackled in the rural and urban localities where the officers in charge will know the debtors and creditors and will also know the history of all the people involved. Every effort should be made to sort matters out before the stigma of the bankrupt is put on any family or individual.

Many people have been deliberately driven into bankruptcy. There was a motive for doing this. Many of us are long enough in public life to know that debts were built up against one or two former Members of the House for the purpose of having those people silenced in Parliament. We are also aware of cases where payments were not made on principle for some reason. Even for a relatively small amount of money the notices were signed and issued and efforts were made to have such people who did not pay on principle declared bankrupt. The threat of bankruptcy has hung over certain people because they would not do certain things and respond to certain requests. How dreadful it is to live in a community where the laws of the land allow such an extraordinary state of affairs.

I do not believe there is anything wrong in setting machinery up by legislation to make arrangements for the payment of debts by instalments over a long period so that those particular people will be saved the embarrassment of being described as bankrupt. This would avoid having to publish notices in the usual legal form bearing the names of very decent people who through no fault of their own are declared bankrupt. There should be a distinction between the person who is in serious debt and under pressure by creditors through no fault of his or her own and the person who is in that position through fraud. Our bankruptcy laws have not distinguished between the genuine case of hardship and debt and the individual who is in that position because of fraud.

What about the many fly-by-night industrialists who were given vast sums of money by the State for industrial purposes and to create employment and when it suited them packed up in the dead of night and flew out of the country with any profits they made and any money they could take out? How do we get those people back? How are their obligations met? In recent years there have been many of those fly-by-night industrialists who deprived the State and the taxpayers of vast sums of money, who came here with the fraudulent intention, under the disguise of creating jobs, of taking what they could and disappearing when it suited them. Many of them were there when the doors closed at 5.30 but were far from our shores by the rising of the sun the following morning. The workers and the creditors had to whistle for the payment of the debts those people incurred.

We have had the sad experience of people falling on hard times and we have seen too many of what can be described as sheriff sales. I hope those days are gone. When I became a Member of this House 40 years ago I saw farmers' livestock and the contents of their machinery sheds and haggards taken into court squares and put up for sale. There were John Browns in those days and I suppose there are also many of them about today. They are always ready to find a bargain at the expense of unfortunate families who have fallen on hard times. I make no apology for saying that in any bankruptcy legislation land should be excluded. I have seen too many people in my constituency and elsewhere falling into debt through no fault of their own, who are forced to put some of their land up for sale. I have seen orders made to have land put up for sale. In many cases cheap land was readily available for a John Brown because of debts of a family who were born and reared and had lived for generations on that land. There should be some law to safeguard people who are financially embarrassed. Deputy Taylor referred to the family home.

Many years ago I headed a procession of 2,000 people through the town of Tullamore after a grave injustice had been perpetrated on a family. Acting single-handed, I had that injustice undone but today there seems to be a great lack of courage on the part of public representatives compared with those times. Nowadays many public representatives merely cite the law and say there is nothing they can do, whereas they can do plenty. The John Brown or the emergency man can always be prevented from taking the roof from over anyone's head. In the past 40 years I have seen the John Browns deprive many a poor person of his home because of his inability to meet his obligations. Because of the economic position today many landowners are being forced into bankruptcy. If not by way of legislation, I hope that steps will be taken outside this House by such organisations as the IFA and other right-thinking people to ensure always that the John Browns will never have the opportunity of depriving anyone of his home. We are very likely to experience John Brown times again. I know of one man in my constituency who borrowed £50,000 in order to buy land. His debt in that regard is now £87,000 so we can assume safely that the land will not be paid for even in the lifetime of that man's grandchildren. That sort of serious debt will tie up the title deeds of that property for the lifetime of three generations but that will be through no fault of the landowner. It arises from his anxiety to develop and to extend his holding and thereby to provide a better standard of living for his wife and family. There is no better time for safeguarding the interests of such people than when we are dealing with a Bill relating to bankruptcy.

There is no point in our having pious words written into the Constitution in terms of the protection of the family if we do not also have laws which ensure that families are never deprived of their homes because of debt that is artificially created. Is it not a tragedy that people through no fault of their own should lose their homes in which generations of their ancestors were born and reared? There is no question of any authority being set up by the State to advise people who find themselves in difficult financial situations. As legislators we have an obligation to assist such people. Generally the people who suffer most in a case of bankruptcy are the wife and children of the bankrupt. Too often I have seen small businesses, farmlands and houses being taken from families because of the financial difficulties in which they have found themselves. There are times when members of the legal profession are very slow to take on cases of people who find themselves in that deplorable financial position but fortunately there are many dedicated members of the Incorporated Law Society who, without receiving any remuneration, are prepared to defend the privileges of the people I am talking about.

We all know of the many small businesses that have gone to the wall in recent years. Many family grocers and other shopkeepers were put out of business as a result of the big supermarket combines which, in many cases, have their headquarters outside our shores. But there was no machinery to protect these small business people. Even by way of this Bill, what machinery is there in that regard? The people I am referring to are those that many of us here have devoted most of our lives to helping but we need to change the law so that there can be proper legal help for those people. We are heading for an extraordinary period for the next ten years, a period in which people will be driven from their homes and off the land and in which further small businesses will be closed to make way for the multinationals. I have great respect for the reports on economic trends that emanate from the OECD. Judging from these reports there is little hope of economic recovery for at least ten years or maybe for 20 years. Where, then, will all these people who are now in debt find the wherewithal to meet their obligations? They will not be able to meet their obligations and, consequently, they will be faced with bankruptcy. What a situation to have to hand on to their families. The sooner the better we move away from the present system of dealing with people who find themselves in that situation.

The Bill before us is a means of keeping together the British legislation, simply including odds and ends to simplify parts of that legislation. Can we not sit down and pool together our best resources and deal with the problems of these people as they should be dealt with rather than to leave them bankrupt?

I am dealing with people who find themselves in that position through no fault of their own. If through fraudulent activities a business is closed down or its assets are transferred elsewhere, the laws of the land should deal very severely with the person concerned. There is not very much in this Bill to cover such a situation. I do not have any sympathy or consideration for the person who goes bankrupt because of fraudulent dealings but I have every sympathy and consideration for the person who gets into difficulties because of hard times or accidental mismanagement.

This Bill gives us an opportunity of studying the economics of the family as a unit as well as financial stresses on the individual. If the full powers of this House are not available to assist these people, what then? Are we merely passing legislation to put laws on the Statute Book to make life more difficult for these people, or do we intend including in our legislation some way to help these people? That would be the proper form for our legislation to take, particularly in present times. Bankruptcy is an every day occurrence, and we sympathise with people who find themselves in that position through no fault of their own but expressions of sympathy are little use when the locks are put on the door and the curtains are drawn for the last time. Why not include in this legislation a way to help these people not just once but as often as is needed? We seem to be forgetting our responsibility to the honest people of this country.

This Bill gives us the opportunity to consider the plight of these people. There is room on our Statute Book for new legislation to deal with Irish conditions, Irish customs and Irish tradition; our own laws for our own people, to help people who have fallen on difficult times through no fault of their own. In this new legislation we should abolish for all time the title "bankrupt". That word is detested in the country. Families have carried that stigma to the fourth generation. The title "bankrupt" carries the same stigma as the old workhouse, poorhouse and county homes carried. Thank God almost all these institutions have gone. If we are to introduce progressive ideas we will have to consider the suggestions which have been made so far.

The appointment by the courts of liquidators is being done on a national scale. We should have legislation to deal with the problems of these people area by area rather than nationally. In this Bill we should try to help people avoid bankruptcy and so avoid the stigma of "bankrupt". These people who have been declared bankrupts through no fault of their own, should be able to go out at weekends with their heads held high. We have an opportunity now to do something for these people. Members should give the House the benefit of their experience in helping such people to deal with problems of this kind. Many members of the Government are too young to know about the difficulties faced by people some years ago when they tried to keep the wolf from the door and avoid bankruptcy.

Some of us have had the painful experience of sitting for hours looking through the affairs of a man titled a bankrupt to see in what way we could help and we know the fearful physical and mental strain on the families of such people. One must have the experience of dealing with these people at very close quarters before one can adequately speak on their plight. We cannot be coldhearted or stern, but must have sympathetic understanding. In all legislation dealing with matters of this kind, we must safeguard the rights of the creditors who gave their goods or money in good faith and the debtors who accepted the goods or money in good faith but who through no fault of their own are unable to meet their obligations.

I hope that we will have an opportunity for much serious debate on every section of this important Bill on behalf of those put in this terrible plight in recent years. Some speakers made reference to a relevant EEC directive, but, as yet, I have never seen an EEC directive for the benefit of the underdog whether farmer, small shopkeeper or businessman. EEC directives uphold the interests of high-powered European financial institutions which seldom consider the plight of those commonly described as bankrupts. If they are to have no voice in this Parliament, where will they find someone to speak for them?

I am glad of the opportunity of discussing this Bill and hope that it will lead to sympathetic and understanding legislation based, not on foreign opinions but framed to meet the serious difficulties of the bankrupt. Such modern legislation must not embody the cold hand of the law, with public notices from Irish Oifigiúil to the local newspapers announcing to all and sundry that Mr. X has failed to meet his obligations and bringing him into public ridicule as a bankrupt. Our people in debt deserve better legislation which will protect and assist them in their need.

I hope that this legislation will be drafted on a county basis, but I doubt that because it is extremely difficult for central organisations such as State Departments to deal with problems at local level. There has been a call for regionalisation, but the regions are too big. It is similar to the setting up of committees to deal with the problems of this House. This House is too small for the committee system, which works well in the United States of America. The British House of Commons, with 600 members, has no such system and it will not work in Ireland. Let the problems of those in debt be discussed on a local level, in public or private as the case may be.

I hope that we will have legislation for the protection of employees, whose demands must first be met. If a solicitor gets into debt, the Incorporated Law Society ensures the payment of all debts in the event of misappropriation of funds. Why is there not a State fund for the other numerous bankrupts? There is no reason why this should not be. All we need is the political will. No company should be allowed to hide behind the protection of the courts at the expense of the unfortunate workers. I have known workers to be bled to their last penny piece, with hard-hearted company directors putting an iron bar across the gate and closing the company, leaving the unfortunate workers outside. There is no legislation to deal with such problems.

I speak from long experience of many bankruptcies in my constituency. The one thing everyone, whether farmer, small shopkeeper or businessman, wants to avoid is the title of bankrupt. We need modern legislation for the present situation, providing full legal support for people on the verge of bankruptcy who may eventually find their names in the columns of Iris Oifigiúil. I hope that this House will be the better and richer for this debate, at a time when so many are being declared bankrupt. The outlook is not too rosy and the number of declared bankrupts will not diminish in the immediate future.

Let us endeavour to assist those people, their families and employees to overcome whatever difficulties are encountered. But it must be remembered that their creditworthiness is finished, they will have lost public confidence and that of their neighbours and friends. The moment they are declared bankrupt there will be no confidence shown in their future in so far as credit is concerned. Therefore, rather than catering for people who find themselves in that position let us endeavour to keep them out of it, helping them to live full lives in the community side by side with those more fortunate, those who have been more successful in the business, commercial and industrial lives of the country.

Mr. Allen

It is with great reluctance that I contribute to this debate because, not being in either the accountancy or legal professions, it is difficult to deal with a Bill which the Minister has described already as highly complex and technical and which most certainly will go to a Special Committee of the House.

My opinion is that the bankruptcy procedure performs three main functions. First, it seeks to maintain fairness between creditors competing for the limited assets available, secondly, protects the bankrupt from undue pressure from different creditors and, thirdly, discharges the bankrupt from his liabilities, enabling him to start afresh. In endeavouring to carry out those functions there must be framed within the system regulations which will protect both the commercial failure and the fraudulent tradesman.

The previous speaker dealt on a wide scale with the problems of bankruptcy. I should like to avail of the opportunity to deal with a number of its aspects. The first is the role of the Collector General, that of the Revenue Commissioners and also with the fraudulent businessman who jeopardises other business people. The problems encountered in relation to the office of the Collector General have been well documented in recent weeks by myself and others. The inefficient system followed by the Collector General — even though he has the resources and manpower available to him to carry out that work — means that he is at present not only jeopardising other businesses but is placing an unfair extra burden on taxpayers who, having paid tax once, find that that has not been collected and must pay again.

I cannot understand why the activities of certain fraudulent businessmen over a number of years cannot be investigated thoroughly. A number of years ago there were allegations made about illegal moneylending which became the subject of a major investigation. We can see now businesses blatantly put into liquidation, happening month after month, without any investigation of the inherent problems.

I disagree with the provisions of the Bill in regard to the preferential creditor. For example, the system obtaining under which a preferential creditor can force a company into liquidation to ensure that the moneys outstanding to him are collected is nothing short of a scandal. Here again the Revenue Commissioners are inefficient themselves initially in collecting moneys due. Then when massive amounts of debts accumulate on the part of a specific firm, the Revenue Commissioners move in, at times so fast that they jeopardise the firm, forcing it into liquidation.

The previous speaker referred to the recommendations of the Cork Report. I suggest that the recommendations of the Cork Report whereby a secured creditor would get less than 100 per cent of his dues and an unsecured creditor get at least a minimum percentage should be examined. The recommendations of that report warrant more investigation than they have received. The implementation of such a recommendation would alleviate hardship on unsecured creditors and safeguard the future of many companies. There have been a number of instances recently in my constituency of companies forced into liquidation, indeed where unsecured creditors themselves went bankrupt also. If the recommendations of the Cork Report were implemented even partly through the provisions of this Bill at least it would prevent a lot of unsecured creditors going into liquidation.

Section 81 (1) (a) deals with the state of the preferential creditor but does not cater at all for the unsecured creditor. Under the provisions of subsection (1) (b) the preferential creditor will now receive up to £2,500 when his employer goes bankrupt. Perhaps the Minister would clarify whether this amount is gross or net. If net I would suggest it is inadequate especially in these times when the average industrial wage is in the region of £120 to £130. I suggest that the minimum amount there should be raised substantially.

Subsection (1) (f) deals with pensions, a very important subsection the provisions of which I welcome. Even though I have reservations about preferential creditors this subsection classifies the recipients of pensions and persons in the company who are drawing pensions and contributing to pension schemes as preferential creditors. However, being short on legal knowledge I should like the Minister's assurance that all contingencies have been taken into account in this subsection. Here again experience has shown sadly that it is pensioners under company pension schemes who are most vulnerable. Hopefully this subsection will take care of that problem.

I should like to know also what procedures will be adopted in cases where company employees find themselves without salaries and wages. Will the Bill contain a procedure where salaries and wages can be paid out when a receiver is appointed? Like the previous speaker, I should like to deal with fradulent trading. The present interpretation is too loose and should be tightened up.

Debate adjourned.