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Kf^ /17S' ■-•, '. 7 DIVISION COUETS AND ^ SMALL CRBDITS. A REVIEW OF DIVISION COURT LITIGATION AS AUXILIARY TO THE RETAIL TRADE. A SCHEME FOR THE RESTRICTION OF SMALL CREDITS AND THE MORE EXPEDITIOUS RECOVERY OF SMALL DEBTS. BY E. DOUGLAS ARMOUR, (OF OBOOODI HALU, BARIUSTBR-AT*IiAW.) »»> Rose-Belford PuBusiHNa Co., 25 Wellinoton Strebt.. 1879. . --^i_i«.rr;':rj*r?-_ s rs I f <. ( !t 1^* DIVISION" COUKTS AND SMALL CREDITS. • •• A REVIEW OF DIVISION COURT LITIGATION AS AUXIUABT TO THE RETAIL TRADE. The extraordinarily large number of failures in business, in proportion to the number of traders, in a system of commerce where credit is given by the manufacturer to the wholesale merchant, by the wholesale merchant to the retail dealer, and by the latter to his customers in Slims decreasing in proportion to the extent of the re- spective grades of business, and where the banks give credit to all, brings painfully home to us the serious re- Nults of the whole system, and leads us to inquire at what particular point the disease originates. If we begin with the smaller trade, and assume that the retail dealer, finding a diflBculty in collecting from his numerous customers, is unable to meet his payments, we see a direct effect upon the wholesale dealer who depends upon the sales made to the retailer to' meet his payments to ponawviiaii I III SlY 88, of to to in e- e- Blt le is re II i DIVISION COURTS AND SHALL CREDITS. the manufacturer. Or if we bo^n with the manufacturer who is pressed for money, he naturally looks to the re- venue arising from the sales made to the wholesale dealer, who to meet these engagements hastolook to thesalesmade by him in turn ; and if the retailer be unable to collect from his customers, the whole edifice is afifected, so closely are its parts connected together. This comes more forcibly home to us, if we keep in view the fact that the pro- ducer and the manufacturer exist for the purpose of supply- ing the wants of the mass of consumers, the distribution of their products being effected through the two other important classes named. That whatever goods are produced or manufactured are for the use of the consumer, and that the consumer even- tually pays for them, no matter how many intermediate hands they may pass through, is so much of a truism that it calls for no reasoning to support it. Therefore from whatever point of view we examine the structure the sure foundation lies in the prompt payment of small, or comparatively small individual accounts, by those who compose the multitude of consumers. Assuming that in the variety of small business transactions which the retailer has with his customers the average credits are under $100, and seeing how closely the different grades of business are connected with and interdependent upon each other, an efficient system for the collection of small debts is seen to be of vast importance as an indispensable ad- junct of the whole credit system ; and it may be -either TT DIVISION COURTS AND SMALL CREDITS. 5 ^ •: r ..nc of the greatest safeguards against the tendency to jj^^olvency, or one of its greiatest incentives according as it may be found to be effectual in its results or impotent in its working. It was estimated and stated publicly by a prominent merchant lately, that some 84,000,000 were lost in the year 1877 by the insolvent retail traders in debts under $100 each. Though this conclusion is based upon an assumed j-iemiss, yet when we consider the alarming extent to w liich credit is given to consumers it is not an improbable one. There may be two causes for this loss. While one 1 ofers it to the inefficiency of the present process for en- forcing the payment of debts under SI 00, and attributes tills inefficiency either to the inherent defects of the system itself or to its hitherto almost unchecked abuse ; another refers it to the inability of the consumer to pay for what hf has got upon credit. Both opinions have their advo- cates. Those who adhere to the latter are bound to show in support of it the practical insolvency of a vast number of consumers. That such a state of affairs exists is as improbable as it would be deplorable. And those again ^vho uphold the former opinion are met with the fact that (he process of the courts must, in many cases, be ineffectual tlnough the insolvency of debtors. That there is anumerous class who can pay and who will not, is more than probable —preferring as they do to get necessaries upon credit, while they spend their ready money upon luxuries ; who, de- lighted at the opportunity of giving a note for a current (S'? I ; 1' ]J 5 r to gas bent lent ^ear aoo med t to •able \ one en- mtes stem >ther /^hat dvo- how \ iber s as gain that iual rous able hile de- rent II DIVISION COURTS AND SMALL ('REDITS. account, are apt to exclaim with a certain famous arlvotat. of the credit system — "There, thank God, that's paid!" and wlio, cflllous to threats and requests, are in no fear of tht Division Courts, their clerks or bailiffs. There is a third view, however, which must in all fail- ness be taken, and that is lat a large proportion of this sum is lost by the lethargy of creditors or their unwilling- ness to sue. But this may be referred to either of the two causes first mentioned. Those who cultivate the first vir- tue may well be left ^disturbed. The unwillingness of creditors, however, to take strenuous measures, must arise either from their experience of the slender benefits arising from the setting in motion of an illworking machine, or from their knowledge or suspicion that the debtor is not worth suing. From whatever cause this result springs, it is sufficient for our present purpose that it does exist; and if a legislative remedy is to be provided, it must aim either at checking the giving of such indiscriminate credit, or at making the recovery of small debts rather a matter of approximate certainty than one of speculation. The latter object is less likely of attainment than the former, but we need not despair of providing a system of ma- chinery which shall be in its working vastly superior to that already in use. The object of the writer is to suggest a scheme which, it is confidently believed, would accomplish both of these results. With respect to the system already in existence, for the I I J ■; DIVISION COURTS AND SMALL CREDITS. 7 I ti. r purpose, a perusal of the returns made lately by the |'i>peetor of Division Courts will give us some idea of its i.. fulness. A very careful repbrt has been made for a . riod extending from the 1st December, 1876, to the .uith November, 1877; and the reader of it may well V, under, as he turns over leaf after leaf, that such a system for the prostitution of justice has remained so long in our luidst without a hand stretched out to reform it. A few flotations will serve to show the tenor of the whole ; «iiid if its ardent admirers and supporters cry out that they uic cnlled from it by a partisan — a zealous opponent of tlie system — they are assured that the Report was opened in no partisan spirit — that its contents were a matter of uprise to the writer — and they are also assured that favourable extracts would have been placed in contrast to those quoted, if they could have been found. For instance ;it p. 1 of the Report : — " It is surprising to find so many olorks with a strong aversion to the authorized form of i>h-book; but even this is giving way, and it is now pos- ih]^ to examine the cash account in some offices in a short [•ace of time, where before without the aid of this book iich a course was almost an impossibility." Compare this •A'ith the following from*the same page : — " There is not so II inch holding- back or delay in paying suitors' money out "f court as formerly, but here again there is ample room for improvement ;" and with this on p. 2 : — " Some clerks may be prompt enough in the payment out of court of ni tors' money in home matters, but be the very opposite ,.^ nail am n ^fm f DIVISION COURTS AND SMALL CREDITS. in the treatment of suitors from a distance, or that have been received by transcript of judgment. The letters of parties living perhaps hundreds of miles off can be treated with contempt, for there is not much likelihood of their mak- ing a journey of that great distance for a small sum of money. Thus time has been gained, and the party at last has written to me complaining of the conduct of the clerk. I have had occasion to visit such offices and have found just such a state of things as I have described." And contrast with this at p. 1 : — " It has always to be re- membered, however, that fnany Division Court clerks have to follow other callings in order to make a living ; the fees of their office not being sufficient for that pur- pose." From pp. 4 to 10 are thirteen specimens of bills of costs as charged by the clerks with the same bills as taxed by the Inspector, and in every case are shown "charges made by the clerk in excess of his lawful fees." The total amount of these thirteen bills is $35.10, of which the sum of Si 1.85, or over one-third, is an unlaw- ful excess. At p. 8 is this remarkable clause : — " I taxed the costs in several suits in the court from which the above bill No. 9 is taken, and in every case I found the clei'k unable to furnish items sufficient to cover his total charges." It is obviously unfair that we should ac- cuse these officers of overcharging where there is a difference of opinion as to the right to charge a certain item. But deference must be shown to the opinion of I -»n. .-..■..••«.-, DIVISION COURTS AND SMALL CREDITS. 9 till- [nspoctor expressed at p. 10 of the report: "To give . xiimples of all the modes of accomplishing these over- ihar<'es would be impossible, but I believe those given ;iiv sufficient to establish the faict that the tariff of fees has been so read by many clerks in their own interest* jukI its meaning so strained and perverted as to give them fees never intended by the tariff', and that others li;ive charged fees for which they fail to find any grounds *it which to rest their claim, and that still another class lias ignored the tariff", and in the language of one vener- able old gentleman ' charged just what he thought was a ixasonable sum.'" Following this is a list of eighteen >[)i.'cified practices " resorted to as a means of increasing costs, and for which there is no authority in the Table of I lerks' fees." And, at p. 11, it said " although the statute makes it the duty of the plaintiff* to do this [furnish the clerk with a copy of particulars of demand — Ed.] as ne- cessary to the commencement of his suit, some clerks per- sist in the illegal course of taxing costs against the defen- dant for it, and by virtue of their positions, issue executions under the seal of the Court, and thus cause the defendant's goods and chattels to be seized and sold for amounts, part of which are clearly illegal." But this IS mild when we compare it with the practice among the bailiffs. From pp. 13 to 1 7, are given twelve spe- cimens of bills as charged by these officers with the same bills as taxed by the Inspector; and in every case are shown " cliaiges made by the Bailiff' in excess of his lawful fees." 1^ DIVISION COURTS AND SMALL CREDITS. 'o give i over- i given )f fees aterest* 10 give others rrounds er class i vener- it was a dghteen jreasing Fable of ! statute nish the .] as ne- jrks per- le defen- :ecutions ["endant's nts, part I practice reive spe- the same je shown rf ul fees." The total amount of these bills is S67.6G, of which the sum of 842.16, or very nearly two-thirds, is an unlawful excess. Thus it appears that the bailiffs are accustomed to charge three times their lawful fees, while the clerks show favourably beside them with an overcharge of only half as much again as they are entitled to. It may be here noticed, that the usual overcharge made by the bailiffs is an item of five per cen* on the amount realized, which is invariably exacted, though only allowed where there has been a sale. There also appears a charge for advertising, when it was not in fact done. This is illustrative of what we find on p. 12 : " The other chief fault of bailifis, that of charging excessive and illegal fees on writs of execution and enforcing the same is very widespread, and the sums of money thus extorted from the pockets of defendants, are very large." And immedi- ately before this, with respect to the irregular returns of writs, the Inspector says, " I have no hesitation in assert- ing my belief, that nothing short of this forfeiture of fees or dismissal will ever accomplish the necessary reform in regard to this practice and secure to suitors their legal rights." The Inspector, in proceeding to estimate the total amount of overcharges in a year, says, at p. 17: " I am satisfied that the aggregate of these overcharges, if un- checked, would assume proportions truly alarming. Of course it is impossible to determine the exact amount of money that has been thus extracted from the pockets of DIVISION COURTS AND SMALL CREDITS. 11 .iiitors in any one year; but with my knowledge of the working of these offices, the practices that have pre- vailed in different counties, and after carefully consulting the minutes made in very many offices when inspecting, and bearing in mind tathy for the system. But while the opinion of the l.'itter may well be asked concerning the internal working of the system, its inherent merits or demerits, excellen- cies or defects, this is a matter subservient to the object for which they exist. It is with the ratio between the amount sued for and that collected that we have most concern; and to see that the system becomes. an effectual msti ument for the use and benefit of the mercantile public —and it is to this class that we must look for a favour- able expression of opinion before extending the system. But it must be admitted that even if the Courts were ren- dered perfect in their nature and totally free from abuse Ifi DIVISION COURTS AND SMALL CRJJDITS. I in their working, it would be a smaller l)enefit to the coramimity than the contraction, to the very narrowest limits, of the field of their operations. Prevent the necessity for their existence rather than attempt to cure by their aid. The existence of gross abuses in the present system, and the meagre result of one-third of the amount sued for being paid out to suitors, through the medium of the Courts, is a most conclusive reason against the increase of their jurisdiction, if it be not an urgent one for its res- triction within narrower limits ; and it is not saying too much to assert that these, coupled with other defects in- herent in the system, furnish a strong reason for their total abolition. If we seek reform by weeding out the abuses simply, the system still exists a crude and defective one. If we would reform the system, the opinion of the profes- sion would be found to be a unit upon this, that a reform must bring with jt a total change in the • nature of the procedure, by remodelling it upon the fashion of that of the higher courts. Some of its faults and defects have been enumerated in the report of the gentlemen of the Kingston and Peterborough Bar published in the Caruidxi Law Journal for December. If the fault be in the in- ability of defendants to pay, the only check upon this in- discriminate indulgence is a measure which will make the vendor more careful in dealing. If a man in giving credit knew that he had no remedy at law against the purchaser, he would be inclined to exercise greater cau- #■ i: m '■'i ii I ' V- t t % t 3 1 DIVISION COURTS AND SMALL CREDITS. 17 tidu in disposing of his goods. If the giving of credit for ,iimll " store debts " were to pass out of existence, with it would be buried the greater part of that almost ineffec- tual litigation which we have been reviewing. The total abolition of all process for collecting " store ,lobts " under SlOO will strike many as too .sweeping a 1 iiange, while one who has carefully perused the report referred to before will hold it to be unnecessary. For tho average Division Court claim is under $30, and the (. vil is to be found with the very small accounts. But to the professional man whose experience has been supple- iiionted by a perusal of this report and the published an- swers of the profession to the questions submitted to them by the Hon. the Attorney-General, the total abolition of these courts would -seem not to be too violent a pro- ceeding. A SCHEME FOR THE RESTRICTION OF SMALL CREDITS — ^AND THE MORE EXPEDITIOUS RECOVERY OF SMALL DEBTS. Not to be accused of destructive criticism, the first sug- gestion is that the lower limit of the ordinary practical (if we maj^ use the term) jurisdiction of the County Courts should be $50.* This seems to be the first move in the solution of what appears to be at first sight a perplexing problem. By this method claims of over $50 would be * This line of demarcation is arbitrary, and \% only used to aasist in fr»- t"in^' a scheme in outline. Since the average Di^i8ion Court claim is under - '-\ the above limit ought be fixed at 830 without impairing this Mheme. B * ' . i' | ii .W.iJ ( ,ttl ' W J, iipWHWIWI»iiWfW8gg a !> ll < ."»i.' i!» L'' • » ■■ ■ •'!r'^^«?)*S5rS^,, 18 DIVISION COURTS AND SMALL CREDITS. brought within the cognizance of a tribunal, whose rules of procedure are modelled upon those of the Superior Coqfts, where the recognized rules of pleading lead the contending parties to the actual point of dispute between them, where the established rules of evidence are made use of to arrive at the truth, and where order and decency are observed in the conduct of business.* From a profes- sional standpoint it may at first sight be urged that the business of the County Courts, already rendered somewhat onerous by the multifarious duties of the Judges, would be vastly increased. But when it is recollected that the average claim sued for in the Division Court is under S30, the number of suits above $50 and under 8100, of which the County Courts would take cognizance, would be com- paratively small ; and it is confidently anticipated that if such a scheme as follows were to be adopted, the actual litigation as to sums under S50 would decrease to such an extent as to make the duties of the Judges in respect thereof comi)ai'atively light. Next, let there be no restric- tion as to amount ii^ actions for damages, but let all actions for damages not exceeding S200 be brought in tLa County Courts. The increased expenditure in such actions in the County Courts where the amount claimed is very small, would be a check upon speculative suits. Comparatively * The author takes this opportunity of saying that the learned Judges who g reside over these Courts far from bein^ responsible for this, are rather to e commended for their patience in lintening to suitors who insist upon con- ducting their own cases ; and who ai^gravate the irritation which the^ cause by their ignorance of the Proceedings, by substituting vituperation for argument and invective for eloquence. I 'i DIVISION COURTS AND SMALL CKEDITS. 19 little objection can he raised to this part of the scheme. It remains to (U*al with debts below S50 ; and it is with tins part of the matter that the most trouble confessedly is found. ll^ Were the present system to continue, practically little benefit would result from the contraction of the Division Court powers. But it is proposed that these Courts should be utterly abolished ; and that the County Courts should take cognizance of all sums under $50 in the manner presently to be shown. A measure should then be enacted, which would tend at once towards killing (»tr the small credits system and furnishing a more expeditious method of collecting small debts. Let it be that no action shall be brought to recover any sum under fifty dollars, alleged to be due for goods sold and delivered, unless some memorandum, or note, or evidence of the sale shall be in writing and signed by the party to be charged therewith, or his authorized agent ; auxiliary to which let there be a speedy method, analogous to the practice of summons in Chambers, for the transmutation of the claim into a judgment debt. A person holding such a claim could then appear before an attorney, produce liis memorandum and make afiidavit of the bona fides of his claim, its signature by the defen- dant, and such fui-ther or other proofs as might be deemed necessaiy or suflicient, upon which a summons would be obtained in County Court Chambers, calling on the defen- dant to show cause why judgment should not be entered 1 MH I UI P ^W — ^''^^—P' "••i^l ■9^" -rm w DIVISION COUKTS AND SMALL CREDITS. and execution issued for the debt. The usual practice would then follow, and if thought advisable, the right to cross-e.xjuiiine on affidavits filed might be allowed. An order for payment in cases of this kind would, where the debt was a bond fide one and there was no dispute as to the amount, be made within three or four days, and writs of execution against goods and lands directed to the sheriff should issue thereupon. In case of a disputed signature or other special cause, requiring it in the discretion of the Judge, a reference could be had to an officer of the Court, who could take evidence and report to the Court for fur- ther directions : or an issue might be directed lo be tried. Considering the few cases of promissory notes that now actually come to trial, the opinion is ventured, that but few of these motions would go beyond the Judge's order in Chambers. Let there be a tariff framed in accordance with this practice, so low as not to be onerous, and yet one that will afford a reasonable remuneration to an attorney for the work done ; and there is no reason in justice why the costs should not follow the order and be borne by the unsuccessful party as in the case of larger claims. The expense might be slightly increased, but the knowledge that on a bond fide claim the defendant would ultimately have to pay it, would prove a great deterrent to vexatious defences. And, to protect defen- dants against the vindictiveness and speculation of plain- tiffs, a severe penalty should follow the falsification of an account, if the present enactments respecting' perjuiy 1, l^' DIVISION COURTS AND SMALL CREDITS. and forgery should be thought not a sufficient protection. Doubtless the fact that a signature was appended to a inemorandiira of indebtedness would not make the debt any better or more secure than it was before ; but the practice would be attended with a certain amount of inconvenience, which would gradually conduce to cash trading; while the attendant remedy would overtake the tardy debtor more speedily than the present process. If the debtor be impervious to a judgment, all procedures are in the end equal. As a matter of choice then, the speedier one is to be preferred. Debts contracted for work done, &c., might be submitted to a similar process for their recovery, though it would be impossible or im- practicable in many cases that the indebtedness should be evidenced by writing. It may be regarded as almost a certainty that this memorandum would not become one of the daily require- ments of retail trade. It would eventually become an exceptional occurrence, and in course of time would appear only from absolute necessity. The outcry against adopting a system of this kind would no doubt be, that we have no right to debar a person from legal pro- cess for the collection of an honest debt. The objection is of course a plausible one, and at first sight appears to be a just one. But if we search our statute books for similar instances we shall not search in vain. And by comparison the scheme suggested is not an unjust one. Besides this there are many grievous moral wrongs which A t iniL, ip . i i i m ^1 i in H I Mil i^ii mn^ ^gwiw^yi i» tl»J I I JB I ■!.. „ . 22 DIVISION COURTS AND SMALL CREDITS. .1; CAnnot l)e remedied by action at law or suit in equity; many of tlieni, too, such that no foresight could have prevented them. Here there is no deprivation, only a restriction. A man uia\'^ give credit if he choose to run the risk, and there is nothing to prevent his getting his money, if he can, by means of moral suasion, since it was on the good morals of the purchaser he relied. Nor is he to be pitied if he fail, for his loss arises from his improvidence. The existence h practice might then be adopted. Indeed, there is no .'oud reason why it should not even now be applied in its • Mtirety to notes of all amounts. Where the amount is a-CLTtained, and verified by the signature of the debtor, and he has several months' notice that he will have to }.;!}• it on a certain day, there is no rea.sonable excuse for ;,'iving him the opportunity of defending an action upon it. In Scotland, " by means of a legislative provision of ;:rcat simplicity, bills of exchange, inland bills, and pro- missory notes, * * are enforced by every sort of (iiligence known to the law without any necessity for a previous action, and in the most summary way {Kjssible." (Bell's CJom. p. 386.). This may be more fully illustrated by a further quotation from the same commentator. It will be seen that the prac- tice gives all the benefits arising from a successful action at law, without the wearisome procedure req -red ir» r«f? < cases to attain the same result. " The Decree by ''lied a decree of Registration, may generally be d directly grounded on the registration of an j'iU'v.ii.ijii QY contract in the books of a court of comoe- ■j(> U' >"CV)r>»(' i I >JJ«W« ^i 28 DIVISION COUHTS AXn SMALL < REDITS. tent jurisdiction, by virtue of a previous consent inct.r porated in the obligation or contract. Proceeding on sud consent, a fictitious judgment is given forth by the Cl(;ik of Coui-t,authorizingall usual and necessarywritsof execu tion, as if by authjrity of the Judge. Analogous to tliis though perhaps more operose in its form, is the Englisli warrant of attorney to confess judgment ; and the greater simplicity of the Scottish consent to registration for sum- mary execution, has enabled the Legislature to declare that by legal construction such consent shall be implied in bills of exchange and promissory notes, whereupon protests for non-i)ayment may be recorded, to the effect of having a decree of registration issued; and in this way the neces- sity is avoided of an action on those instruments of trade 3vhich are in daily use, and creditors have immediate access to the most summary execution." (p. 4.). And in a note thereto, it is said : " By statute, * * a regular pro- test of a bill for non-payment or non-acceptance, or of a promissory note for non-paj'^ment, shall be a warrant for a decree of registration authorizing the King's writ of execution. The execution can proceed only on a previous charge to pay within a certain number of days ; and if there be any good defence, it is competent to stop the execution by applying to the Supreme Court for suspen- sion, on bail to pay the debt if the gi'ound of suspension be bad." With reference to this process, one of our most successful Bank Managers in a note to letter VII of "Bul- lion on Banking," observes : " This may seem sharp prac- ■Ww-. Ml DIVISION COURTS AND SMALL C'REDn>}. 29 ^ : but it is not so in reality. Such a law would .ake men punctusil, provident, and cautious ; would ; IV vent rash borrowing and foolish speculation; would lit a stop to a good deal of that ridiculous crediting .. iiicli has been the bane of business in Canada, and in- :r Hluce an order of things as far in advance of what .i.uins at present, as our present system of business is upon themode-when twelve months* credit was universal." 1 1 tlie wisdom of the Scotch commercial body is not hacked by a process whereby execution may be had almost at once, merely by lodging the protested note in C'uiirt, the safety of trade here would not be imperilled t>\- the adoption of the analagous process which has been notched in these pages. But we need not look beyond the limits of our own Province for a kindred case. A judgment creditor may call upon his debtor, and a purchaser of lands from liim, to shew cause in Chambers why the sale should not i'c set aside, and the land sold to satisfy the judgment lebt. Though it may be urged that the power is seldom exercised by the Judge in Chambers, who usually directs •in issue to be tried, yet that the power is lodged in him to exercise it if he see fit, cannot be disputed. If inter- t>ts inlands may be thus treated, why should not a cre- •Jitor to the extent of $50 be at liberty to summarily tall his debtor into Court, to shew cause why payment should not be immediately enfoi-ced ? 30 DIVISION COURTS AND SMALL CREDITS. The benefits claimed as the results of this scheme art briefly : 1st. The total abolition of a Court whose abuse> are as flagi'ant as its usefulness is questionable. 2nd. Thi restriction within the bounds of necessity, of the small credits system, and the consequent more free circulation of small sums of money, and a more solid and legitimate basis and system of trade ; and 3rd, a sf)eedy remedy for the collection of small debts, with a decreased probability of a dispute as to the liability of the debtor, or the amount of the debt. As a consequence of all, a clearer commercial atmosphere, and a more healthy and sound system of commercial ethics.