Section 7 lists the acts of bankruptcy any one of which a debtor must have committed before a petition can be presented to the court to adjudicate him bankrupt. Two new acts of bankruptcy are being provided, that is, where the debtor gives a fraudulent preference and where his goods are seized or there is a return of no goods (paragraphs 2.10.10. and 2.10.5. of the Bankruptcy Commission Report). Certain acts of bankruptcy that at present apply in relation to traders — for example, a debtor leaving his dwellinghouse — are being extended to non-traders. That is at paragraph 2.9.3. and 2.14.1. of the report. The acts of bankruptcy created by the Auctioneers and House Agents Act, 1967, and the Central Bank Act, 1971, will not be affected. That is in paragraphs 2.9.9. and 2.10.9. The references I am making there are to the Bankruptcy Law Committee's report. Subsection (1) makes it clear that only an individual can commit an act of bankruptcy. Partnerships as such and incorporated bodies cannot do so and cannot therefore be adjudicated.
SECTION 7 (Resumed).
I appreciate the position about the amendments. I was not aware that they could not be put in once debate on the section had started but, of course, I accept that that is the situation.
This concept of the act of bankruptcy is an antiquated concept and some of these things here are buried in the roots of history going back for the past couple of hundred years. I wonder whether in a modern measure we should carry them on for the sake of carrying them on. Take the ones in particular there: "Makes a conveyance or assignment of all or substantially all of his property to a trustee or trustees, for the benefit of his creditors generally" and "fraudulent conveyance, gift, delivery or transfer of his property or any part thereof" or "creates any charge thereon which would under this or any other Act be void or a fraudulent preference." These fraudulent conveyances in any case are void or voidable and it is open to any person adversely affected to have them impugned. They have no legal effect if they are fraudulent preferences anyway. I agree they have always been regarded as acts of bankruptcy since the 1857 Act and no doubt for hundreds of years before that too. That was not the start of the bankruptcy procedure. I would have thought that if we narrowed the acts of bankruptcy down to perhaps two or three we would be meeting from a practical point of view every eventuality that is likely to arise on which a creditor would want to initiate. There are the very substantial bankruptcy procedures. The provision there that if it was with intent to defeat or delay his creditors he leaves the State is the sort of thing that is really impossible to prove. How does one prove to a court what a person's intent was? Any situation that involves approving of the state of a man's mind from the practical point of view is an extremely difficult if not impossible thing to do. If he is out of the State then the procedures are there for dealing with that situation and legal proceedings can be brought against him and a judgment can be obtained and he can be adjudicated a bankrupt if that is felt necessary on foot of that. But, to put in a provision like that or to maintain it in this day and age might not be the right thing to do in a modern context. You could have a situation perhaps where a person might be away from his home and he might be adjudicated a bankrupt in his absence. Perhaps he had not gone away at all with the intent of defeating his creditors.
I agree that, if he files in court a declaration of insolvency, that is exceptional and that would be reasonable enough ground to be recognised as an act of bankruptcy. On the question of execution against him having been levied by the seizure of his goods or return of no goods, I was going to suggest an amendment there too. I do not know why it would be necessary for there having to have been a seizure or a return of no goods. I would have thought that if there was a court order or a court decree against a person for a sum of £1,000 or more — I am going to suggest on section 8 (2) that we up that figure from £500 to £1,000 — if a court has decreed a person in the sum of £1,000 or more and that decree has not been appealed against and is unsatisfied for a period of say, 28 days that would be adequate enough without the necessity of having formally to get a sheriff's return. The practicality of a sheriff's return in any case is that it is a prolonged business and the sheriff's procedure is not working terribly well either. It could take anything from six months or a year to 18 months before the sheriff deals with most cases. He is inundated with hire purchse cases and it is not a speedy or terribly efficient procedure. I would ask the Minister to consider dispensing with the necessity for a seizure or a return of no goods and that if a court decree was there that that should be adequate.
On the question of amount, it falls more properly under section 8 but I was putting in here the question of a court decree being for £1,000. I think the figure of £500 is perhaps too low to warrant taking the very extreme step of adjudicating somebody bankrupt with the depreciation in money and, indeed even since the committee of inquiry whose report we have was held. I do not know if that was the figure in that report or not. Maybe some provision has been made to increase it, but even then the £500 has been around for quite a while. It is too low for a bankruptcy procedure. In this day and age having regard to present day values of moneys I would have thought that it should be at least £1,000 before bankruptcy would be warranted. There are various other possible remedies open to a creditor who is owed less than £1,000 to enable him to get his money not just by dealing with the sheriff — instalment orders, charging orders. There are various procedures that are open but bankruptcy is quite a heavy and serious business. I do not think it would be warranted for £500 or £600. We have to remember that we are confining bankruptcy under the Bill — something I have reservations about — making it peculiarly and entirely the preference of the High Court. The costs in the High Court are very high. You would eat up £500 in legal costs in the High Court in no time. Personally I would have thought that we might have been better having the county registrars doing it in the circuit courts around the country. Be that as it may, it has been decided, for better or worse, to leave it within the realm of the High Court. One has to put the thing in context. When you are talking about running up the massive legal bills and so on in processing a bankruptcy, the question of permitting it for a sum as low as £500 bears at least some further re-examination.
First of all, the Bankruptcy Law Committee especially stated that acts of bankruptcy as in section 7 should be retained. While it is accepted that the vast majority of adjudications are based on the act of bankruptcy which arises through non-compliance with a debtors' summons, a circumstance the committee were fully aware of, the remaining acts of bankruptcy in section 7 can be availed of by a creditor provided they have been committed within three months of the presentation of the bankruptcy petition. It is true that the acts of bankruptcy mentioned in section 7 (1) (a), (b), (c) and (d) have not been frequently used. Nevertheless, from time to time that relating to a debtor absconding — section 7 (1) (d) — has been occasionally availed of. It is also probably significant that in Northern Ireland, where bankruptcy law has the same historical background as our bankruptcy law — the law was up-dated there in 1980 — the acts of bankruptcy referred to in our section 7 (1) (a), (b), (c) and (d) have been retained, while that in sub-section 1 (f) has been modified by two acts of bankruptcy which deal respectively with: (1) seizure and sale et cetera of debtors goods under an enforcement order, and (2) where a certificate of unenforceability in respect of a judgment against a debtor has been granted.
There are reasons why the concept of "an act of bankruptcy" should be retained. First, the abolition of the concept does not necessarily require that the term "act of bankruptcy" should not be retained. In fact in the Bill it is used primarily as a descriptive term.
Also, on the basis of the committee's recommendation, the crucial date henceforth will be that of adjudication, (a precedent which the Cork report in the United Kingdom followed). Only in the context of section 58, (the avoidance of certain transactions), will knowledge of the act of bankruptcy be relevant. The act of bankruptcy will only be available for three months, as proposed under the Bill. At present it is a six month period. Another reason for retaining it is that the removal of the concept does not resolve the problems of listing statutory pre-conditions for bankruptcy and of fixing time scales for the avoidance of antecedent transactions. Clauses 101 and 151 of the United Kingdom Insolvency Bill illustrate this. It is relevant that the Cork Committee emphasised that this was not simply a question of modernising and simplifying the grounds upon which a creditor may initiate insolvency proceedings but it also represented a fundamental change in the law of bankruptcy with far-reaching consequences. For example, no creditor could rely on the failure to satisfy another creditor's claim; no creditor demanding and receiving payment of a debt will be concerned whether the debtor is able to meet his other liabilities. There will be no relation-back and the debtor's insolvency will be treated as beginning on the day the protection order, which is a proposed new procedure in the UK, is made. It is worth noting that the Bankruptcy Bill also abolishes relation-back and makes the date of adjudication the starting point of the bankruptcy. Northern Ireland bankruptcy law was updated in 1980, as I have said, and retains the concept.
From a practical point of view the abolition of the act of bankruptcy has a lot of difficulties. For example, it would necessitate amendments to the Central Bank Act, 1971, and the Auctioneers and House Agents Act, 1967, if we were to proceed to abolish it.
In precis, what I am saying is that I do not think there are very strong reasons for departing from the advice of the committee, which says we should retain the concept of the act of bankruptcy.
As regards the particular amendments put down by Deputy Taylor, since they cannot be moved we will look at them between now and Report Stage and examine each of them. On the point of raising the sum of money from £500 to £1,000, I find that acceptable and under section 8, I will accept the amendment the Deputy is proposing there. There is also provision within the Bill for the Minister to vary the sum subsequently. The figure in the committee report was £100. We started off in the draft Bill with £500. The Bill has been out for quite a while. We will raise it to £1,000 now and there is still power there for the Minister to vary it subsequently.
Would the Minister explain to me this relatively new concept in section 7 (1) (f)? What will the position of a debtor be where he arrives at an arrangement with the county registrar or the sheriff to pay by instalments? As the Minister knows, that has become quite the fashion nowadays. It is referred to in the text of the committee's report. I do not quite understand the implication of their reference and I would like the Minister to clarify the position. If somebody owes PAYE £1,000 and says "I will pay you £100 per month, Mr. Sheriff" will he in the intervening period be committing an act of bankruptcy or not?
It is removing the facility of paying by instalments in the sense that the recommendation of the committee was that a mechanism for payment by instalments prevented the sheriff or county registrars from seizure or sale so that the effectiveness of section 21 (5) of the 1872 Act was reduced considerably.
I wonder would the Minister have a further look at that? I would like him to talk to one or two county registrars and sheriffs on the ground about it. It is a very useful way for them to fulfill their functions at the present time. I appreciate that there might be some difficulty or some problem. Perhaps one of the problems that we would be creating is that, while we would be facilitating the adjudication of persons as bankrupts, we might in fact be precipitating that crisis unnecessarily.
Certainly I will look at it between now and Report Stage.
I feel it is important in that regard. I thank the Minister.
Section 7 (2) refers to a debtor's summons served pursuant to section 21 (6) of the Bankruptcy (Ireland) Amendment Act, 1872. As this Act is being repealed by this Bill I presume that the only thing that is covered by this is existing debtors' summonses which are extant at the time of the coming into operation of the Bill.
That is correct.
There would not be much point in having it there if we are going to abolish the Bankruptcy (Ireland) Amendment Act, 1872. I think this section is being abolished, unless the result of my research was incorrect. If you look at the repeals, the Bankruptcy (Ireland) Amendment Act, 1872, in the Second Schedule is down as being the whole Act repealed.
The Senator is correct.
There is no point in repetition but I just want to reiterate the point made by Senator O'Leary on section 7 (1) (f) in that in real terms in the current economic situation the only practical way some debts are paid is by instalments. Invoking an act of bankruptcy in real terms might actually have the opposite effect: it might result in debts that would otherwise be discharged over a period of time not being discharged. Most lawyers who are familiar with the problems in this area are quite familiar with arrangements such as that being made through the sheriff which result in debts being paid off over a period of time which otherwise would never be paid. I appreciate the technical problems the Minister has here and the reason why he would wish to have it made an act of bankruptcy and not proceed with the instalment situation, particularly when promises for instalments are made and then not paid. That is the other side of the problem. But where a promise is made and it is complied with, you are producing a situation where debts are being met that might otherwise not be met as a result of an act of bankruptcy. The point made by Senator O'Leary is well made. I appreciate the Minister saying he will have another look at it. It might be worth getting feed-back from county sheriffs and having their views as to how this operates in practice. All of us have had individual experience of dealing with people in this situation on a professional basis. I have no overall view, for example, as to whether promises to pay by instalments are abused to the extent that one or two instalments are paid and the debt is never met or whether in the majority of cases it works. It would be interesting to get some information back along those lines to clarify the position.
I take what has been said but I would like to put it in the context of what section 7 (1) (f) is doing. It is replacing the act of bankruptcy in section 21 (5) of the 1872 Act: "that execution issued against the debtor on any legal process for the purpose of obtaining payment of not less than £20 has in the case of a trader been levied by seizure and sale of goods". The new act of bankruptcy was recommended by the committee because the growing practice of execution debtors paying debts by instalments to sheriffs or county registrars to prevent seizure or sale or both, had reduced the effectiveness of section 21 (5). To put it bluntly, the information is that section 21 (5) of the 1872 Act has become totally ineffective as a result of this. The act of bankruptcy differs from the original in that (a) it refers only to the seizure and not to the seizure and sale; (b) there is no limit put on the judgment debt; (c) it is not restricted to traders. I will look at the points raised and try to get up-date information on them between now and Report Stage.
I appreciate that with interest. I have no particular knowledge of this area at all of execution. In the case where instalments are made what is the act which is the act of bankruptcy? It says: "if execution has been levied by the seizure of his goods under an order of any court or if a return of no goods . . .". Which section of that covers the instalments? Is paying by instalments part of an execution which has been levied on him by seizure of his goods or what is the reason for that? I do not understand it and I would like the Ministo clarify this for me.
I understand that at present the law said goods could be seized and sold and to avoid the sale instalments were paid and that that was how it operated in practice.
It is explained in the report, in paragraph 2.10.5, that the object of section 21 (5) of the 1872 Act is to ensure equitable distribution and that its main provisions, at least, should be re-enacted. The report goes on to say:
The growing practice of execution debtors paying debts by instalments to sheriffs and county registrars to prevent seizure and/or sale has reduced considerably the effect of the subsection. In order, therefore, to carry out its original intention, we recommend its amendment and provide in the draft Bill that an act of bankruptcy is committed by a debtor if either execution against him is levied by the seizure of his goods or a return of no goods has been made by the sheriff or the county registrar whether by endorsement on the order or otherwise.
We will ask county registrars again to see if in the intervening period since publication of the report the situation has changed in any way which would make us vary this.
I appreciate the Minister's promise in that regard. I would like to pursue it a little further. The Minister may have to seek advice on this and may have to come back to us on it. As I understand it, there can be two kinds of instalments. If I am reading the situation correctly, the sheriff can go to the debtor and say that he has an order in which £1,000 has to be paid. The debtor agrees to pay £100 for the next ten weeks. The sheriff never actually completes his job but just delays the execution until such time as the instalments are paid. If I am correct in saying this, I do not think it is covered by the section. If it is not, I am very happy.
There is another section which is suggested by the Minister, that the sheriff goes and seizes the goods. The goods are now in his possession and the debtor tells him not to sell the goods, that he will pay over the next ten weeks. I do not mind that being an act of bankruptcy. It is the first case I am concerned about. That may not be an act of bankruptcy and if it is not I am very happy to leave the section as it stands.
That is precisely what the county registrar would do. He would endeavour to collect, let it be £5 or £10 per week or whatever. That is my experience on the ground and that is the way they would prefer to work. Senator O'Leary is correct in that regard.
I have not the precise information to give the Senator a reply to that. I will check it out.
There is one other matter on section 7. I would not agree at all with the suggestion of Deputy Taylor that any order of the court should itself become an act of bankruptcy which remains unsatisfied for a period of 28 days. This is much too restrictive.
We may have a chance later to discuss this point.
I appreciate that. I would like to say that to the Minister, in case he would get the impression that we were unanimous on that point. I agree with Deputy Taylor on the £1,000 but not in regard to an order of the court remaining unsatisfied. That could happen by mistake.
Fair enough.