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MONTREAL: PRINTED HY JAMES STARKE ik CO. 1843. ■i : t -i 3 7S3L R E M ARKS, &c, '1 in; III: is not probably at present, any question more j^i'iiorally or more anxiously discussed, among tlu; legal and nK>rcantilc men in this city, than that of the opera- tion of the Bankrupt Ordinance, now in force in this part of the Province. Do the provisions of this Ordin- ance embrace debts contracted before, as well as those contracted after, it was passed ? Does the certificate obtained under the Ordinance operate to discharge the Haidf tiie warrant." — So far, then, as regards creditors resident in Lower Canada at tiie time specified, the banl\riipt is, by the unecpiivocai and express terms of tliis section, discliarfjed from nil his dehta tuoveaule I'nder the ordinanc k. But wc have already seen that debts contracted before tho passinir of tiio statute are dearhf proveahlo, under tlio Ordinance, by section i\. Tlio conclusion is irresistible, that tiie banlNrnpt is bv his certificate disciiarjjcd from all debts contracted before tho passiuj^- of the Ordinance, where such debts are duo to persons residin;jf in tiro Prov- ince at the time specitiod in tho ninth section. If any doubt can bo entertained as to the meaning of the Ordinance as now worded, it will be removed by a consideration of tho circumstances connected with tho enactment of the Ordinance by the Special Council. I have now before mc a copy of the original draft of the Ordinance, a^ submitted to the Special Council. By the ninth section of the orii,iual draft, debts contracted before the passing of the bill were clearly excluded from the operation of the bankrupt's certilicato, and woio not dischariiod therebv. The o])eration of the certificate is expressly limited, by the following words in that section : *•' And if it shall tlii;n api)car to the satisfaction of the " Commissioner that tho bankrupt has made," i<:c., " the " Commissioner shall grant him a certificate thereof ; " and the bankrupt shall be thereupon absolutely and " wholly discharged from all his debts which shall be at any time actually proved against his estate, and from all debts which are proveablo under this Ordinance, and irkivli are founded on. any co)dract made hy him after " this Ordinance shall go info operation, if made irithin. n « (( 8 " this ProiHtH'Oy or to he prrformed within the sann^ ami ^^ from all ihhts which arc proveabk as aforvsniU, ninl " which arc founded on anij contract made hi/ him afhrthis " Ordinance shall go into operation^ and due to ant/ jieraon " who shall he resident within this Province,'* Tho certificato, in the above tlrnft, was accorilin|Tly limited in its operation to those debts wliich are "founded " on any contract made after tliis Ordinanro sliall f;o into " operation," &c. — the words given in italics in tho above section, being copied verbatim in the form of tho ccrti- ticate. The Special Council, which was then composed princi- pally of merchants of high standing,— men well qualified to judge of the merits of such a measure, — saw clearly that a law such as that projected in tho draft, which would operate to extinguish some debts and leave others untouched, would necessarily be productive of great in- justice. They accordingly struck from tho ninth section, and also from tho form of the certificate, tho clause, given above in italics, by which the operation of the statute was limited to debts founded on contracts made previous to the passing of the bill, fiy the above clause in tho draft, the bill was carefully and strictly limited in its operation to one class of debts : the Special Council rejected this clause of limitation, and by so doing, rendered tho bill ap- plicable to all debts equally. By rejecting the above clause, the Special Council deliberately declared their intention that tho operation of the statute should not be restricted to those debts which had been contracted previous to the enactment of the statute, ' ut that it should extend equiilly to all debts. In a word, they declared that the statute should bo rtl re- spective as well as prospective in its clVocts. !) mid ami this frson \i\ (loinp; tliis, tho Special Council wcro opposod by ono of their legal members, on tiie ground that they would thus render the law retrospective ; but, though fully aware that such would be the necessary result, they persisted in their alteration ; and the Ordinance, thus altered, after being submitted to tho law ollicers of the Crown in England, received the royal sanction. I have thus established, I think, satisfactorily, as well from what is expressed in the Ordinance as from what was purposely not expressed, that the Ordinance was in- tended to bo, and is in fact, retrospective. Here, however, it is necessary to refer to the 28th section of the Ordinance, upon which those who would give the Ordinance an exclusively prospective operation mainly, if not entirely, rely. It is as follows : — " And be " it further ordained and enacted, by the authority afore- " said, that all the provisions of law inconsistent with the " provisions of this Ordinance arc hereby repealed, " saving all rights which have accrued to any person by " virtue of the same, which shall be judged and decided " upon in the same manner as if this Ordinance had not " been passed." It cannot be supposed that the Legislature which struck from the ninth section, in two places, the words " and which are founded on any contract made by him *' since the passing of the said Ordinance,** clearly and avowedly in order to render the Ordinance rcfcrrible to all debts, whether contracted before or after the law should go into operation, intended, by the vague words contained in the 28th section, to nullify what they had already done, and virtually to replace the clause which they had deliberately rejected. But, perhaps it may be jaid, that the Legislature repented of the change which 10 ! I they liad made in tlie bill, and resolved by the '28tli section, to restore it to its former state, and » wgfct».'. ^'g''>^'^'*^*'*°^V-^-''ir; *! i i iii WfRWiT^iMffn th 11 and oeiicral torins, introduced pro forma at the close of this Ordinance, as of almost every other law. The gene- ral rule respecting the interpretation of such " saving clauses," is clearly laid down by Dwarris, in his valuable w'ork, as follows : — " A saving clause, in a statute where it " is directly repugnant to the purview or body of the act, '•' and cannot stand without renderinu" the act inconsistent " and destructive of itself, is to be rejected." Now, if the L'Hth section is to be considered as making th(> Ordinance referrible only to a particular class of debts, it is directly ()j)posed to the purview or body of the Or- dinance, and therefore, according to the rule last cited, nuist be rejected. I shall also hereafter show that the proposed construction of that section would not only be rcpuu'nant to the purview, but would defeat the object of the Ordinance, and render it destructive of itself. Independently, however, oi' the inference as to the (iniitn/s of the Leuislature, derived from the difl'erence between the draft and the Ordinance, it appears to me plain, that had the Legislature intended to contine the eflbct of the certilicate to debts contracted after the law h;ul passed into operation, they would have said so in express terms, and not made use of such comprehensive words as those contained in the ilfth sec^tion : " All debfs " due and payable from such bankrupt at the time of the '•'■ lirst publication of the notice of the issuing of the said " warrant," ^c. ; and if. by the liSth section, it had been intemled to exempt from the operation of the Ordinance all debts contracted before the law went into operation, the Legislature wculd have s[mken plainly, and would not have attempted to produce that efTect by the use of the loose and general terms, " That all the provisions of law " inconsistent with the provisions of this Ordinance are 12 it hereby repealed, saving all rights which have accrued to any person by virtue of the same." Having thus attempted to show that the 28th section cannot have the meaning which has been put upon it by those who would restrict the effect of the Ordinance, I shall submit my own views respecting the true object of that clr.use. The Ordinance contains twenty-eight enacting sections. The 25th, 26th, and 27th sections, merely define the powers of the Commissioners with reference to assignees, witnesses, and the like ; and therefore may, for the pur- poses of the present discussion, be lost sight of. The first twenty-one sections of the Ordinance, regulate the rights of creditors, as between the creditors and the bankrupt. The next three sections refer to the rights of creditors, as amongst each other. The provitions of the Ordinance in these three sections arc directly opposed to the provisions of laws which they have superseded. — Now, I contend, that the rights reserved under the 28th section are the rights which had accrued under the pro- visions of laws which arc repealed as being inconsistent with the provisions of these three, the 22nd, 23rd, and 24th sections, which apnear to me to be the only parts of the Ordinance directly opposed to the common law. In order to be fully understood, it will be requisite to remind the reader of the rights which creditors enjoyed under the previously existing laws. By the 17t>th article of our " Coutume de Paris," the seller of goods for ready money, if not paid, could, within a reasonable time, follow his goods, and claim them in the hands of a third party ; and by the 177th article, if the seller had even given credit, and the goods were seized by another creditor in the hands of the purchaser, in the state in which the latter 13 received them, the seller had a privileged claim upon the proceeds of the sale. Further, by our common law, when a copartnership became insolvent, the assets of the firm were divided among the copartnership creditors, to the exclusion of the creditors of the copartners individually ; but the assets of each copartner were not set aside for his own separate creditors. Again, by our common law, no provision was made for the registering of the marriage contracts of traders. Now, by the 22nd, 23rd, and 24th sections of the Ordinance, important changes were made relative to the provisions of the law on all these subjects. Thus, the 22nd section of the Ordinance declares, that the separate estate of each partner shall be appropriated to pay his separate creditors. The provision of law, giving a concurrent right to the copartnership creditors to rank on the sepi\rate estate, is, in fact, repealed by this section. The 23rd section deprives the seller of goods of the privileges which he had under the 176th and 177th articles of the Custom, and introduces, in lieu thereof, the right of stoppnge in transitu, as provided by the law of England. By this section, therefore, the provisions of the 176th and 177th articles of the Custom are in effect repealed. The 24th section requires the marriage con- tracts of certain traders to be enregistered, in default of which the contract shall be null and void, as against the creditors cf the bankrupt. It was to preserve the rights which had accrued under the provisions of the law thus repealed, that the 28th section was necessary. A few examples will show the salutary effect of the clause, in these respects : — A. B. &. Co. stop payment, after the proclamation of the Bankrupt Ordinance. Their assets are £10,000 ; their liabilities, £20,000. The separate estate of A. amounts to £10,000, 14 and his separate creditors have claims to that extent. Amonjr the creditors of the firm, is C. who holds their promissory note for £5,000, dated before the passing of the Ordinance. The estate of the firm is divided before the separate estate of A. By our common law, C. would have received £37.50 ; by the jjeneral rule of our Bunk- rupt Ordinance, £2500 only. The right of C. to the £1250, the dillerence between those sums, thus endanger- ed by the 22nd, was preserved by the 28th section of the Ordinance, according to my interpretation of that clause. Ajjain, A. B. & Co. when thev failed, had ten bales of cloth in their possession, which they had purchased from C. for £1000, before the passing of tlie Ordinance. The bales are seized by another creditor, exactly in the same state as when they were purchased ; and the cloth, when sold, produces the cost price. By the common law, C. would have £1000 ; by the 23rd section of the bank- rupt law, he could receive but £500. Here, the claim of C. was endantrered bv the 23rd section of the Ordinance, and again the saving clause in the 28th section, as con- strued by me, comes to his relief. The 28th section, thus understood and interpreted, harmonizes with the remainder of the Ordinance, and, in the words of Blackstonc, " furnishes matter for every clause " of the statute to work and operate upon." Whereas, if interpreted as the advocates of the non-retroactivity of the Ordinance would wish, it stands forth a discormected, isolated fragment, diametrically opj)osed to the object and terms of the remainder of the Ordinance. I think that I have thus established satisfactorily that the Bankrupt Ordinance under our consideration was clearly intended to be retroactive ; — that the whole body of the Ordinance, but more especially the 5tli and Dth 'xtcnf. their 15 sections, most expressly make it retro;ic(ive ; — that the '2franted to the conformin<'- bankrupt, from all debts, \\hcther contracted before or after the law went into operation. This law, in (>\press terms, refers tr) " any person or persons who, since the " 14th May, 17'2J), hath or have become bankrupts." It is manifest that the debts contracted in Enjiland, betv.een 1729 and 173*2, when there was no law by which a debtor could obtain a discharge^ were in precisely the same posi- tion as debts contracted in Canada before the i)assino- of 1 O the Bankrupt Ordinance ; and yet the British Parliament, as ap])cars by the preamble of the 5th Geo. II. chap. 30, 1!) /'or the hnii'Jit of creditors^ luade all tho provisions of thai law, atul more particularly tlio certificate, reforriMe to all (lehts, whether contracted before or afler tho [ issinj^ of the law. Tho words of the Enijlisli statute which "rant the dis- charge, are not, in any way, more j^cneral than those of oin- Ordinance on the same suhjeet. It is true, that the context in the English statnti; places the intention of the Leuislature hevoiul the nossi'ojlitv of douJ'* ; hut this arises from the circumstance of tiie English Icnislature having been compelled lo refer to the statute whicli had ex[)ired, whereas, no such necessity cxisteil with respect to our Ordinance. I rouret that I have not as vet been able to obtain a copy of an act recently passed by the legislature* of New Brunswick, whi<'h, I am informed, is clearly retroactive, and has been invariably so construed and acted upon in all the courts of justice of that Province. If, as I think, I have established that our Bankrupt Ordinance is, and was intended to be, retroactive, and that our Special Council, in adopting this principle, had the sanction of tho h'gislatiuvs of two of the most en- lightened commercial nations, I may now proceed to establish that thev had a still higher sanction for their conduct, — the sanction of reason and justice. And this leads me to my second proposition, " That every bank- ru))t law ought to be retroactive." I shall endeavour to prove this, by showing, that a bankrupt law merely pro- spective, must necessarily bo jiartial and unjust, whereas, a bankrupt law retrospective as well as prospective, may, if properly framed in other respects, secure and grant the means of enforcing the rights of creditors, speedily, effectually, and inexpensively, and, at tlu^ same time. D •ill I . atVord such relief as is consistent with iu>itiet», to lionesf, but unfortunate, debtors. Firstly, abiinkrnpt law, merely prospijinnieur by the coinniissioner has this elTect, and the warrant in bankruptcy absolutely prevents the debtor from pasino' any one of his creditors. The debtor beinj; thus, by a single blow, denuded of all bis property, for the benefit of all his creditors, it would Ix* manifestly luijust to allow a part of the creditors to administer and divide his t>slal(', aci'i)rdinculat ion increase 21 'i-^f ricccs- <>l»|('(!f of ll' of (li,. '"""s, it is lis oidiii- '•> fli(< '"^'I'liptcy •lie of liis Jf l)io\v, 'I' all Lis ■> p.irf of (!«'()r(Ii|in- '••' (iiiic, rass tli(» K'li must I nierdv I'l avail III, and liolc of ' (icl)ts » cnino •wcr to isfviiiir •Is, llO '» niay corn- ;rrasc his moans, sto as to moot tlio ilomamis of liis cri'ditors ; but no situation in lifo can bo inoro ntti>rly hopeii-ss, or more deserving' of ooinmisoration tlian tiiat of an honest dobtor, who, uftor havinj;- been divested by law of every vesti{Te of his property, is cast upon llie world, destitute of all means, and still exposed to tho claims of unrelentinii, without reference to the interests of the debtor, llu-y caimot con'.plain if obliged to content themselves with that estate; in .>hort, that the law, wiiich deprives an honest man (ii".;ll his assets, should at the >ame time relieve him from all his liabilities. The injustice that would ensue from {giving to a bank- rupt law a purely prospective opi'ralion, is not, however, the only evil wbicli would ri'sidt from such a construction, I think it can be shown that it would be iuii)ossiblc for many years to carry tlu- law, it" so inferp.retetl, into opera- tion. If the law be not retrospective, it cannot extinguish delits dating prior to the passing of that law; an(' if so, the creditors to whom such debts are due, ought not to be compelled to place themselves in a position in which they would have to accept a dividend, a^ payment in full of ')•) I SI those debts : on the contrary, the law sliould aflbrd them tlie means of exercising^ their rights without prejudice to themseh'es. My views will be best explained by an example : — A. B. & Co. fail, after the passinji^ of the bankrupt law. Their liabilities amount to £'20,000. C. is a creditor for £500, which was due before the law was passed. The claims of the otlicr creditors, D. E. & F. were acquired after the date of the law. D. E. cs F. force A. B. & Co. into the bankrupt court, and obtain possession f the estate of that firiu. All the opponents of the doctrine of non- ref reactivity, to whom I have had an opjiortunity of speakinji, admit that, if a creditor prove his claim before the cojnmissioiier, and accept a dividend, the claim so proved is ipso facto discharged. Our Ordinance is ex- press on the point. Under these circumstances wliat course must C. adopt ? If he accept a dividend in th.c Bankrupt Court, his claim for the balance is lost. If he be a passive witness of the distriluition of his debtors' estate, without participating- in it, he jeopards the whole. If C. cannot bring the proceeds of the ))roperty uf A. B. & Co. before the common courts by means of attachment { saisic arret,) and executions, his ijrivilege is worse than useless; and if he can, by the service of an aMachment on the assignees, bring the property of the bankrupts be- fore the connnon court, he would, in elVect, thereby deprive the assignees of their ollicial character under the Ordinance, and render them nothing more or less than garnishees in the King's Bencl\ : and the estate of the debtor, instead of being divided, at a trilling expense, in the Bankrupt Court, would theri be subjected to the ruinous expense of a distribution in the law courts. The C^om-f of Bankruptcy and the superior tribunal would be Viif- '2:\ in constant collision ; mid the bankrupt law rendered, for many years, a dead letter. The claims, therefore, of this privileged class of credit- ors, — to secure which is the object of a purely prospec- tive law, — must, if enforced, operate great injustice to the debtor, produce infinite confusion in the courts of justice, prevent the practical operation of the law, and defeat effectUially one of its primary objects, — the ultimate discharge of debtors deservinfj relief. Such would be the results of a non-retroactive construction of the 28th sec- tion. I think, therefore, that I am fully warranted in aflirming, that this construction is not me'''>ly repugnant to the terms and spirit of the Ordinance, but renders it inconsistent with, and destructive of, itself. I shall now proceed to discuss the latter clause of my second proposition — that a general bankrupt law, in which all creditors arc placed on the same footing, will, if pro- j)erly framed, avoid all these evils, and will moreover afford the best means of securing and enforcinnf the rights of creditors generally, at the same time that it grants a just relief to debtors. Our Ordinance, although requiring in its details some alterations, is, I maintain, a general bankrupt law so framed as to secure both these important objects. To it, therefore- I shall now direct my attention. The ])rimary object of our bankrupt law, as of every other bankrupt law, is, " to provide the means of discover- " ing and securing the estates of bankrupts, for the bene- " fit of their creditors." The warrant in bankruptcy is the most powerful means that the law can devise for this purpose. By this pro- ceeding, a creditor may, at a trivial expense, and in a single hour, effect more than he could have done bv the common law. al infinite expense, and after the delay of years. t '^VKfibi^3HR*i 4 < t ..uAiW. :.=;;.:; ^»M;jy. ' a rgg ?« igfc«i 21 In the common tribunal, i fraudulent and wealthy debtor might, for many months, and sometimes for years, prevent the recovery of a judgment agaii .t him ; the sale of his goods and lands vas attended with great expense, and still greater delay, and as to his bookb, and the great mass of his ouf^tandinij debts, thev were utterly bevond the roach of his creditors. Tlie warrant in bankruptcy, in a moment places the *' messenger" in possession of the whole of the bankrupt's property, including the books of account and papers, which could never have been obtained by any other means. The bankrupt ceases to have the power of collecting his debts, which are vested bv law in the assionees. The vast im- portance of obtaining possession of a ilebtor's books is manifest. If the books leave any part of the bankrupt's conduct in obscurity, th;it alone is such misconduct as will prevent a discharge ; if the books have been regularly kept, and the bankrupt has been guiUy of fraud, he can hardly escape detection. The law, besides thus discoverinir and securinjr the es- tates of bankrupts, professes to furnish the means of ad- ministering- and distributin"' those estates. As to the distribution of the property, the mode adopted by the legislaturi^ appears to bo unobjectionable. The creditors whoso claims are by law ]n'ivileged, whe- ther by mortgage or otherwise, rank by ])reference ujkmi the property subject to such privilege, and the common creditors divide tlu^ reniaindcT of the estate anionii: them in proportion to the amount of their re>tril)ution of the ell'ects of the debtor amongst his ere- ditors, and the relief of the doservin"' thouuh unfortunate debtor. The second proposition proposed to be ]M'oved, " That every bankrujit law ought to be retrospective," lias thus, I think, been satisfactorily <'stabli>luHl, (brectly and indi- rectly, positively and negatively, indirectly and nega- tively, by shewing that a bankrupt law not being retrospec- tive must be productive of much evil and injustice : directly and positively, by shewing that being retrospective it avoids this evil and injustice, and (if otherwise properly framed) secures most ellectually the important objects for which it is desiijiicd. I now conclude these remarks, having, I think, shown that our bankrupt law is, and was intended to be, retro- spective; that the bankrupt laws of oilier countries have been retrospective ; that a bankru[)t law, purely prospec- tive, would be opposed to the interests of creditors, the principles of justice and the dictates of humanity, and would be moreover inconsistent with, and destructive of, itself: whereas a general bankrupt law, prospective and retrospective, may be made the means of ellectually secu- urinir and onforcinjj the lejjfitimate riyhts of creditors, and at the same time of aflording equitable reli(>f to deserving debtors.