BANKRUPTCY (AMENDMENT) BILL

Order for Second Reading read.

2.57 p.m.

The Attorney-General (Mr E. P. Shanks): Mr Speaker, Sir, I have His Excellency's recommendation that this Bill, which was read the First time on the 12th of December last, be proceeded with. I beg to move, "That the Bill be now read a Second time."

The purpose of this Bill is to improve the bankruptcy law which largely follows an English Act of 1883. Since 1888, when the present Bankruptcy Ordinance came into force, amendments have been made on several occasions, but although based on the law of England, we have not kept pace with certain important changes made in England by the Acts of 1914 and 1926. These are the Acts referred to in the Comparative Table printed at the end of this Bill.

There are also certain anomalies which it would be as well to remove and this Bill seeks to bring the law up to date, and to tighten up the penal provisions of the Ordinance with a view to deterring persons minded to defraud their creditors.

Although bankruptcy is a technical and complicated branch of the law, the general principle is well known. It is to keep a fair and even balance between a debtor who cannot pay his debts and his creditors, and between the creditors themselves.

At present, under the Bankruptcy Ordinance, a debtor commits an act of bankruptcy if execution has been levied by seizure of his property where a judgment, including costs, is for an amount exceeding $500. But there is a difficulty in that a creditor cannot present a petition unless his debt amounts to $500. This anomaly will be removed by the first part of clause 2 of this Bill.

The other alterations in clause 2 are designed to equate the effects of final orders and final judgments. It is a technical difference which at present can only be overcome by costly proceedings. The distinction was removed in the English law some considerable time ago, and it is an anachronistic anomaly that ought to be removed here.

The next clause, clause 3, Sir, merely corrects an error in the present law. There is no Assistant Registrar.

Clause 4 will give the Registrar jurisdiction to conduct routine examinations without the necessity of such examinations having to be conducted by a judge. A similar amendment was made in 1955 to another section of the Ordinance which gave the Registrar jurisdiction to take the public examination of a debtor, but there will here, as there is in the section 17 to which I referred, be power for an examination to be adjourned by the Registrar for consideration by a judge.

Clause 5 deals with priority debts and the effect of this will be to add to rates, income tax and wages, which are now given preference, amounts due to the Central Provident Fund, if those amounts have become payable within 12 months of the receiving order.

The next clause reduces the period of relation back of the Official Assignee's title to a bankrupt's property. It is not uncommon for debtors, on the eve of their bankruptcy, to attempt to defraud their creditors by transferring their property to others. This cannot be allowed and so there is provision in the law for the Official Assignee's title to relate back to a period prior to the actual operation of ordinary bankruptcy proceedings. It has been found in practice that 12 months is too long and sometimes inequitable, and this clause proposes that it should be changed to six months next preceding the date of the presentation of the bankruptcy petition.

The amendment that will be made by clause 7 will enable the Official Assignee to recover assets where there has been an improper preference of a surety or guarantor. This is in effect related to the previous amendment that I have referred to, where it is sometimes possible for a bankrupt to give a wrong preference to persons by judicious disposing of his property immediately before he goes bankrupt.

The next clause merely sets out what is the existing practice. It will formally relieve the Official Assignee from personal liability for costs and expenses in respect of work he does in the discharge of his official duties.

Clause 9, which is the next part of the Bill, does a variety of things relating to the penal provisions of the Bankruptcy Ordinance, and is an endeavour to bring them up to date.

There is a figure of $25 mentioned in section 110 of the present Bankruptcy Ordinance which limits offences by debtors. It is at the present time no offence to conceal or remove property to the value of only $25. That is a provision which has existed since 1888, and it is considered high time that the limit be increased from $25 to $100. True there is an offence, morally, however small the amount involved, but it is not practicable for the Official Assignee to concern himself with minor evasions by concealment or removal where the property is of very small value, and $100 is considered to be a reasonable amount at which to draw the line.

It has been found in practice that sometimes debtors can avoid penal provisions under this particular section by delaying their presentation of petitions for four months, which is the period at present specified in this section. It is proposed that this should be enlarged to 12 months and the deletion of the expression "or the service of a debtor's summons upon him" mentioned in paragraph 4 of this clause will prevent the enlarging of the period by the debtor making use of the inevitable delay in the obtaining and issue of a judgment debtor's summons.

The eighth paragraph of this clause substitutes a new paragraph for an existing one -(m)- and amplifies the existing provisions by making it an offence for an undischarged bankrupt to obtain credit to the extent of $100 or upwards if he does not inform the person from whom he obtains the credit that he is an undercharged bankrupt. This is extended to cases of obtaining credit jointly with other persons. A further change is the introduction of a new offence of engaging in trade under a name other than that under which he was adjudged bankrupt without disclosing that all-important name under which he became a bankrupt.

The remaining paragraphs make comparatively minor improvements, and I will mention only one, (xiv), which relates to the taking of goods in pawn. At present, a pawnbroker who receives goods from a bankrupt knowing that the goods have been pawned in order to defraud the bankrupt's creditors can be proceeded against only by invoking the provisions of the Penal Code. It is thought that for simplicity of procedure and administrative convenience it is better to enshrine the necessary provisions in the Bankruptcy Ordinance itself.

Clause 10 contains two new sections which overlap with existing provisions which will be repealed by clause 12. They are provisions regarding the engaging in trade without keeping accounts and the question of punishment is made more flexible by being changed from three months' imprisonment to a maximum of two years' imprisonment, which is almost certainly desirable, or the possibility of the infliction of a fine. This is an offence which is quite prevalent and it is thought to need severe punishment in most cases but there are occasionally cases where a fine would be more appropriate, and that will be possible when this amendment is made.

The new section 110 (B) will replace provisions relating to the obtaining of credit or the contracting of a debt without a reasonable expectation of being able to pay. Here again the penalty is increased from three months to two years - as the maximum penalty.

Clause 11 will amend the existing Ordinance to limit the application of the Ordinance to bankrupts and persons in respect of whose estates receiving orders have been made and will make a bankrupt punishable for causing or conniving at the levying of execution on his property with intent to defraud his creditors. It is obviously desirable that if a person connives at or, perhaps, as has happened in some cases instigates, the levying of execution on his property by a creditor he likes to the disadvantage of a creditor he dislikes, it is quite clear that there is an injustice that should be made punishable if it can be discovered.

The last clause, as I have said, repeals provisions which will be covered by the two new sections 110 (A) and 110 (B).

Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole Assembly.

Assembly immediately resolved itself into a Committee on the Bill.-[Mr Shanks].

Bill considered in Committee.

[Mr Speaker in the Chair]

3.15p.m.

Clause 1-

The Chairman: There is a note of an alteration.

In page 1, line 5, to leave out "1958" and insert "1959".

That will be done.

Clause 1 ordered to stand part of the Bill.

Clauses 2 to 12 inclusive ordered to stand part of the Bill.

Bill reported without amendment; read the Third time and passed.