1923-05-25

MARINE AND FISHERIES COMMITTEE RECOMMEND INVESTIGATION

Mr. WILLIAM DUFF (Lunenburg):: I beg to move that the third report of the select standing committee on Marine and Fisheries be concurred in.


Right Hon. ARTHUR MEIGHEN (Leader of the Opposition):: If I recall correctly, the chief subject of this report is a recommendation for another roving commission. If the report is to be concurred in, I ask that it be concurred in on division.


Hon. ERNEST LAPOINTE (Minister of Marine and Fisheries):: May I ask you, Mr. Speaker, to postpone this motion until next sitting?


Mr. SPEAKER:: Of course, this motion was only by unanimous consent, because notice had not been given. Therefore, the matter will stand.
Motion stands.

Bankruptcy Act



CANADIAN REPRESENTATIVE AT WASHINGTON

[Stage Direction]
On the Orders of the Day:
Mr. S. W. JACOBS (George Etienne Cartier) :: I should like to direct the attention of the government to a despatch which appeared in the daily press this week to the effect that the delay in naming Canada's envoy at Washington is due to pressure from the Imperial authorities at London., It is stated that this question will be taken up at the forthcoming Imperial Conference at London, and that an interchange of correspondence has taken place between this government and London with respect to the matter. Is the government in a position to give us any information.


Right Hon. W. L. MACKENZIE KING (Prime Minister):: The report is wholly
without foundation as respects any one of the features mentioned by my hon. friend.



SOLDIERS' CIVIL RE-ESTABLISHMENT VANCOUVER EMPLOYEES

[Stage Direction]
On the Orders of the Day:
Mr. MURRAY MacLAREN (St John City):: I wish to draw the attention of the Minister of Soldiers' Civil Re-establishment (Mr. Beland) to an answer that was given in reply to certain questions of mine. I refer the minister to Hansard at page 2297. The first question I asked was:
Were the services of any men in the employ of the Department of Soldiers' Civil Re-establishment at Vancouver, British Columbia, dispensed with on or about March 1st, 1923?
The answer to that question was: "No." I have in my hand a communication stating that the following: Captain R. C. Cruit, Captain W. R. Elewin, M.C., Mr. H. Irvine and Mr. W. A. Beattie were given notice and left the service on February 28. They were all married men with dependents; they were of good overseas' service, and, as I state, they were given notice and left the service on February 28. Would the minister be good enough to look into the matter and ascertain if there has not been some inaccuracy in the answer?


Hon. H. S. BELAND (Minister of Soldiers' Civil Re-establishment):: The answer was prepared by officials of the department. I shall be glad to make an inquiry as to the apparent inaccuracy in the answer given.



BANKRUPTCY ACT AMENDMENT

[Stage Direction]
Sir LOMER GOUIN (Minister of Justice) moved the second reading of Bill No. 139, to amend the Bankruptcy Act.
He said: When introducing the bill I explained the purposes of the amendments. The main amendment is to change the system as to the trustees. Under the present law we have authorized trustees who are appointed by the Governor in Council. We propose to have the trustees chosen by the creditors. Under the present law the debtor assigns to the trustees. We change this system; we propose that a debtor should assign to the.creditors. He will assign willingly through an official receiver who will be a judicial officer in one or another of the different provinces, or he will be forced to assign on a petition granted by the court. In either case a custodian will be appointed-by the receiver when the assignment is made willingly, and by the judge on petition. The duties of the custodian are to take charge of the assets of the estate and to call the creditors to appoint the trustee. We propose to amend the law for various reasons, among others for the purpose of authorizing the sale of real estate properties that are subject to hypothec in the province of Quebec in the same mode as we now proceed in that province in connection with sales by the sheriff. Another amendment is to restore to the landlords the privileges which they enjoyed, before the law of 1919, under the legislation of the different provinces. We propose also to provide that the debtor shall not be authorized to propose a composition between his creditors and himself until after the assignment; while another authorizes the official receiver to compel the appearance of the debtor before him for examination in regard to the causes of his assignment, the disposal of his property, and so forth. There are minor amendments, consequent upon the main ones which I have just outlined.
Mr. W. A. BOYS (South Simcoe):: In
committee I shall probably have more to say than on the present occasion, but I desire to take the opportunity now of making an observation or two upon the proposed amendments. It seems to me that if what the minister suggests is carried out we might just as well go back to the provincial law as it previously obtained in the various provinces. We were getting along fairly well in Ontario, and the only thing we required was a law providing for discharge, which has been the feature of the bankruptcy law, so far as I know. I hold in my hand the act as originally introduced, together with a mass of amendments; now we have a further bill, with another extensive collection of amendments. If the law is to be changed so frequently and extensively it seems to me
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Samuel William Jacobs: I do not understand that these proposed amendments are intended to interfere with the discharge of the bankrupt. As I understand the matter, the provisions proposed relate more to procedure than to anything else, and I gather from a cursory reading of the bill that the amendments now introduced rather strengthen the act in many respects. The substance of the bill appeals to me as being an improvement, with the possible exception of one' of the clauses, which restores to the landlord all the rights that he had prior to July 1920, when the act was put into force. I am against the provision in that clause, because I fear that as a result of it the landlord will walk away with the entire assets of the estate.


Sir HENRY DRAYTON:: They often do.


Samuel William Jacobs: In one province, which I know most, the province of Quebec, the privilege of the landlord in some cases extends to twenty-eight months' rent. In a large city like Montreal, where rents are pretty high, we can conceive of cases where a landlord not only will rank as a privileged creditor and walk away with everything, but will be a creditor to a considerable extent even after the entire estate is wound up. Let me read section 2,005 of the Civil Code:
The privilege of the lessor extends to all rent that is due or to become due under a lease in authentic form.
But in the case of the liquidation of property abandoned by an insolvent trader who has made an abandonment in favour of his creditors, the lessor s privilege is restricted to twelve months' rent due and the rent to become due during the current year if there remain more than four months to complete the year; if there remain less than four months to complete the year, to the twelve months' rent due and to the rent of the current year and the whole of the following year.
That is to say, the landlord would be entitled to sixteen months' accelerated rent and twelve months' past due rent. Where the trader has been paying $1,500 or $2,000 a month rent, this privilege claim will run up to some $40,000 or $50,000 in some cases, whereas the whole estate might not be worth more than $15,000 or $20,000. I think the

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minister ought to consider this amendment carefully before finally putting it through, because there is no reason so far as I can see why the landlord should be placed in this exceptional position. The creditors are all more or less in the same boat. A merchant who has sold goods to a trader expects to get paid, otherwise he would not have given him credit, and when the trader makes an assignment this class of creditor ought reasonably to get something out of the wreck, instead of the landlord being given the preference and perhaps gobbling up the entire estate. To my mind it is a relic of feudalism that the property-owner should have everything and the ordinary creditor nothing. In that respect I am opposed to the bill.
I am in favour of the other amendments. I am glad that the rights which a married woman had before the passing of this act are to be restored. Under the act of 1920 a married woman who has advanced money to her husband has no claim whatever against his estate until all the creditors are paid in full, which means that her claim is wiped out. We can easily conceive of a husband in trade who upon becoming financially embarrassed would naturally look to his wife to lend him whatever means she possessed. She would be the very first to whom he would apply for assistance. Simply because she is a married woman she gets absolutely nothing, whereas if she happened to be unmarried or living in concubinage with the debtor she would be entitled to her full rights as an ordinary creditor. I think it was a mistake on the part of this parliament to enact such legislation, and I am glad to see that under the proposed amendments this injustice is removed.


Mr. HANSON:: What is the effect of the laws of the province of Quebec with relation to marriage settlements?


Samuel William Jacobs: The act wiped out marriage settlements so far as husband and wife are concerned, and these amendments do not propose to restore them. It is only where a wife has advanced money to her husband that she is entitled to rank as an ordinary creditor. This seems to me to be only just and right, and I heartily support the amendment. Another amendment to which I give my entire approval is in regard to fees paid to attorneys and trustees of estates. It was provided that attorneys and trustees should be entitled to not more than five per cent of all the proceeds of the estate; they might get less but not more. A trustee and an attorney might carry a case to the judicial
committee of the Privy Council, they might be engaged for five or ten years on work in connection with the estate, but would not be entitled to more than the specified percentage. Under these amendments the inspectors may in writing, with the consent of the judge, fix such fees as they may deem advisable. That seems to be logical. I may say that this particular section of the act was introduced after the bill left this House. The Senate seemed to be so obdurate on the point that it was not thought worth while to insist on the withdrawal of their amendment, and by so doing imperil the passing of the act. I think it is high time that this section was repealed, and I am glad the Minister of Justice (Sir Lomer Gouin) has yielded to the requests of those who have studied the act. The measure by its other provisions makes easy of comprehension the more or less complicated verbiage of the act as it was prepared in 1920, and naturally we are all in favour of this simplification. So far as the province of Quebec is concerned I think I can say that in a general way the bill meets with the approval of the entire province, but I am sure the section with regard to the priority of landlords' claims will not meet with the approval of the trading interests throughout Quebec.


Hon. J. B. M. BAXTER (St. John City and Counties of St. John and Albert):: Mr. Speaker, the only feature of the act in reference to which I would like to make a few remarks is the change in regard to official receivers. Experience no doubt has convinced the Minister of Justice that the system is not quite satisfactory in some of the provinces. While in the province of New Brunswick recently for about a week, I made inquiry of a number of members of the legal profession and of some business men who come very closely in contact with the working of the act. I do not pretend that I interviewed everybody, but those I canvassed were unanimous in supporting the present system.


Mr. VIEN:: Which province did the hon. member refer to?


John Babington Macaulay Baxter: New Brunswick. My inquiry was confined really to the people in the city of St. John; I do not pretend to have got information outside. But I am quite convinced that the business men and lawyers there are better satisfied with the law as in force at present than with the system under the Assignments and Preferences Act-provincial legislation-which used to be administered. Under
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the proposed amendments there is practically a direction to appoint the chief creditor as trustee. Under certain circumstances this system might work out very badly, for the chief creditor might arrange to realize the estate in such a way that perhaps the general creditors would not fully benefit.


Samuel William Jacobs: The chief creditor only acts as official guardian until the trustee is named.


John Babington Macaulay Baxter: There is rather an indication that his appointment is to be permanent. Under the old Assignments and Preferences Act the chief creditor was very often a big wholesale house which practically dominated the whole administration of the estate. All I want to say is that the Canadian Credit Men's Association, which has organized itself as a trustee, has the confidence of the business world of New Brunswick, and the few others who have been appointed there as official receivers also have the confidence of the public. In the case of any new law the people require to become adapted to it. In the province of New Brunswick we have virtually a body of officials who have become, to a reasonable extent, expert in the administration of insolvent estates. Under the system now proposed there is no necessary filling of the official position by the same person. In other words, if A becomes insolvent X may be the official receiver, while if C becomes insolvent Y may administer his' estate, and so on. We think it is better to have a few corporations or individuals designated for this purpose who have acquired a knowledge of, and consequently are much more expert in dealing with, the ordinary problems that arise in respect to insolvency, and we prefer these experts to a procession of untutored men. I do not want to oppose the change if the Minister of Justice is convinced that it is advisable, as I am sure he must be convinced of its necessity in certain provinces; but I would ask him to confine its operation to those provinces where he has found the need for it, and to let the other provinces alone where the present system is working well to-day. Surely that can be arranged. While the plan seems to be that more responsibility is to be placed on the clerks of the Circuit Courts, I do not know that the Minister of Justice or anyone advising him has made any sort of inspection of those clerks in my province. They are all very admirable gentlemen, but I trust, in regard to some of them, that no very onerous burdens will be imposed upon them. Some of them would fail in performing the simplest official act-and to say that is not to reflect at all upon their honour or their credit; it is simply a question of ability. I am not favourably

impressed with the idea of the attaching oi federal bankruptcy provisions to the existing assignments and Preferences Acts in the provinces, because I do not see how you would be able efficiently to deal with an estate which was in more than one province. That is the value of the bankruptcy law, and I do not think we ought to detract from that value. I would ask the Minister of Justice to consider carefully the advisability of leaving as it is the present machinery in the provinces where it is working efficiently, and where the suggested change would not be as good. The changes should be confined to the districts from which complaint may have come.


Mr. W. F. CARROLL (Cape Breton South and Richmond):: Mr. Speaker, the intention of the Bankruptcy Act as passed by this parliament was, I believe, that there should be a uniform law throughout Canada. If the proposals of the hon. member for St. John City (Mr. Baxter), who is a good lawj^er of considerable experience, were put into effect the bankruptcy law would be anything but uniform.


John Babington Macaulay Baxter: The principle would not be altered.


William F. Carroll: No, but the procedure under which the bankruptcy act was enforced would not be uniform. In regard to th" point raised by the hon. member for George Etienne Cartier (Mr. Jacobs), I would point out that the law respecting rentals under bankruptcy or assignments in the province of Quebec is different from the law in the other provinces. Speaking for my own province, I would say offhand that the very best a landlord may get when an assignment is made is three months' rent, which is equivalent, I think, to a notice that when assignment is made the occupant of the premises must get out in three months.


William Alves Boys: One year in Ontario.


William F. Carroll: Yes,-unless indeed, the premises are used by the assignee or the trustee for the purpose of selling the goods, and so on. In view of the circumstances that might arise, and that in fact do arise every day in connection with bankruptcy or assignment cases, where the creditors are from different provinces and people from different provinces are interested in the estate, I think the minister should make the law as regards the rights of landlords in bankruptcy cases uniform over all Canada.
With reference to the matter of trustees in bankruptcy, there have been numerous complaints from Nova Scotia. I do not know

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how well founded these complaints are; while I do some little practice of law there when I am not in parliament, I have had no considerable experience under the new Bankruptcy Act aside from giving an opinion occasionally-that is, I have never followed a bankrupt through the bankruptcy courts. But the situation was this. Trustees from all over Canada had jurisdiction in all parts of the country under the act, and the complaint was that gentlemen from other cities -I am not going to mention the particular cities-would come down to Nova Scotia and actually induce persons who were in more or less shaky circumstances financially to make an assignment or to take proceedings under the Bankruptcy Act.


Thomas Vien: May I ask my hon. friend whether there are any trustees in his own province doing this same thing?


William F. Carroll: Oh, I am not talking about that. If they are doing the same thing they are certainly doing something that is unquestionably wrong.


Thomas Vien: My hon. friend did not catch the purpose of my question. In the province of Quebec we have just such a condition, and we protest against it. I made the inquiry of my hon. friend in order that I might learn from him whether such a grievance existed in his own province.


William F. Carroll: That is, whether or not trustees from Nova Scotia went into other provinces?


Thomas Vien: Not only that, but that they indulged in the practice of inducing debtors to go into bankruptcy.


William F. Carroll: That is, in our province?


Thomas Vien: Yes.


William F. Carroll: Well, I did not make the statement, but I think I can fairly say now that such has been done. If my hon. friend wants to find out what is the concern to which I have reference, I will tell him; it is the Credit Men's Association of the city of Montreal. Now, they are not here to defend themselves, and I am simply saying that the charge has been levelled against them that they have come into Nova Scotia and induced people there who are a little shaky financially to make an assignment under the Bankruptcy Act. I have no doubt in the world that the people of my province are not one iota better in that regard than this particular association to which I have referred- In Nova Scotia the official receiver under the act would be
the prothonotary of the Supreme Court, or perhaps in some instances, as in New Brunswick, the clerk of the county court. But it does not take one very long to become acquainted with the general principles of the Bankruptcy Act. The assignees or trustees who were appointed after 1919 were, of necessity, novices in that kind of work, but they benefited by their experience and, if they had any brains, became, as a rule, expert. I would point. out to the hon. member for St. John City that the receiver in the first instance, namely, the prothonotary of the Supreme Court or the clerk of the county court, will have, as I understand the act-and I have not studied it very thoroughly-very little to do. A meeting of the creditors is called; they appoint some person, one of themselves or someone else who is competent, to become the guardian of the estate.


John Babington Macaulay Baxter: They are only formal custodians.


William F. Carroll: So that no very onerous task would be imposed on the prothonotary of the Supreme Court or the clerk of the county court. I have no further suggestions to offer; in fact, I would not have arisen had not the hon. member for George Etienne Cartier brought up the question of rentals. I would ask the minister to take into his serious consideration the advisability of making this phase of bankruptcy-the matter of rentals, uniform all over the country.


Richard Burpee Hanson: I have given this proposed amendment of the Bankruptcy Act some consideration; during the interim between last session and this I had occasion to act in a number of bankruptcy cases in my own province. I should like to say first of all that except for one thing, to which I shall advert later, the act has given very general satisfaction in New Brunswick. I believe in the principle involved in the act, that of giving a debtor his discharge so that he may start over again. It would be a great pity indeed if that outstanding feature of the act were wiped out, and I am glad there is no suggestion of that kind in this bill.
With regard to the outstanding substantive feature of the bill as introduced by the Minister of Justice, namely, the change in the claim of the landlord to the estate, I think that ought to be opposed very, very strenuously. Under the old Assignment Act in the province of New Brunswick, and I think it is true of nearly all the provinces, only three months' rent could be taken by the landlord,
3C90
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and if the law is changed as proposed by this bill and this provision would be in suspense while this act is in force, in my humble opinion in the province of New Brunswick there would be no limitation on the rights of the landlord. It would depend entirely on what might be contained in this bill and the terms of the lease. The lease might have ten years to run, and I know of no reason why the landlord in that event should not collect the full rent out of the estate. Of course, I know I am putting an extreme case, but anyone can see at a glance that that would be a very wrong state of affairs. If three months is too short make it six months, or a year, but do not leave it as long as is suggested by the civil code of Quebec, which is apparently what has actuated the hon. minister in regard to this matter. That would put the ordinary, unsecured creditors at a very great disadvantage. After all, they are the people whom we should look after, they have given credit. The landlord is always in a secured position, and I suppose he always will be. I suppose it will be necessary that he should have some priority and preference over the ordinary creditor; otherwise rents would have to be guaranteed and premises would not be secured easily, but at the same time there is danger of going to the other extreme, and I would suggest that the minister devise some happy medium and make it applicable to the whole Dominion.


Mr. CANNON:: Does my hon. friend contend that section 27 of the present bill would make the laws of the province of Quebec concerning lessor and lessee applicable in New Brunswick?


Richard Burpee Hanson: No, I do not say it would. I did not argue that for a moment, but I would say this to my learned friend. From what I gather from the reading of the article in the civil code by the hon. member for George Etienne Cartier (Mr. Jacobs), I think it gives the landlord a very great preference, and one that I personally do not wish him to have. In the province of New Brunswick it would revert, of course, under this section to the old act where the provision was three months, and in the province of Ontario a year, and in some other places eighteen months, all of which is undesirable to say the least. I think there should be uniformity.
The chief objection to the Bankruptcy Act in the province of New Brunswick is not with reference to the principle involved at all. It is not with respect to the personnel of the authorized trustees. We are a small province down there, and business is comparatively small having reference to, say, Toronto

and Montreal. The estates of bankrupts are small, and the complaint I have found among creditors and others in the province of New Brunswick is in relation to the costs and expenses. I think it has been little better than a scandal the expenses that have been incurred and the fees that have been paid to solicitors out of some of the estates. I happen to know of a few cases in my own office, and there was one where I felt constrained to admonish my junior with respect to the size of the bills he got taxed by the registrar. They have been altogether too large having regard to the character of the business; I will be perfectly frank about it. I could give you a case in point, where there was a contest with respect to an alleged preferred claim. An ex parte order was made by the judge of the bankruptcy court to set the case down for trial, and when the bill of costs came out, the solicitor got a fee of $80 for going to St. John and back and getting the ex parte order setting the case down for trial. The judge ruled that he was entitled to 830 as solicitor, and a counsel fee of $50, which was absolutely absurd. It tends to bring the act into disrepute and gobble up the whole estate. There was a contest over this case, ending in a drawn battle, each side winning one of two points. The costs involved were over $800, and the amount in dispute was less than 8500. The creditor class do object to the size of the costs, and I wish the minister to give some heed to what I am saying in that regard with relation to small estates. The cases I have in mind will never get to the Privy Council, and I think the act would be received with a great deal better grace if there was a real limitation on the amount payable to authorized trustees or the trustees as proposed here, and to the solicitor.


Samuel William Jacobs: Might I point out. that these amendments make provision for a case of that kind?


Hewitt Bostock: Order. I think I should point out to hon. members that on the second reading of the bill only the principle is discussed. I see that the hon. Minister of Justice is by this bill introducing several amendments to the Bankruptcy Act. When the motion for the second reading was made it was carried, but as the Minister of Justice thought proper to give a brief explanation the debate continued, and now on both sides hon. members are discussing various features of the bill. Would it not be better to go into committee of the whole and there take up these amendments one by one?


Some hon. MEMBERS:: Hear, hear.

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Hewitt Bostock: Then the motion is
carried.


Henry Lumley Drayton: Before the motion is formally carried I would ask my hon. friend the minister to give us the usual assurance we get on second readings in a case of this kind. I quite realize that we would make much better progress in committee, but we do not wish to be told in committee that any objection we might raise is a matter of principle that should have been raised in the House; so I would ask that if the second reading now carries, it be on the understanding that we have the right to raise in committee any matter of principle 'that we desire.
Motion agreed to and bill read the second time, and the House went into committee on the bill, Mr. Gordon in the chair.
On section 1-Short title.


Mr. DENIS (Joliette):: Before this clause carries I wish to make some remarks which I was just in the way of making when the second reading was called "Carried" by Mr. Speaker, as he did not happen to see me rise. A few weeks ago we had a debate in this House on the motion of the hon, member for Charlevoix-Montmorency (Mr. Casgrain) asking that this act be repealed altogether. The debate was carried on to a very large extent by members from the province of Quebec from which I come, and I feel safe in saying that it was the opinion of a very large majority of those members, in fact the almost unanimous opinion, that the Bankruptcy Act should be repealed. Moreover objection to the act was expressed by various hon. members opposite. As a result of those opinions the Minister of Justice said he would give his very best attention to what had been said, and that some measure would be introduced in the course of the present session, which would give better effect to the wish of the House as expressed at that time.
To-day I was particularly pleased to hear the hon. member for South Simcoe (Mr. Boys) suggest to the government that the Bankruptcy Act should be repealed in toto, provided some provision was made in the law to allow the debtor his discharge such as now exists, under the Bankruptcy Act. In other words, if I understood the hon. member for South Simcoe rightly, in the event of there being a provision enacted by which a debtor could be discharged, just as he can now be discharged under the Bankruptcy Act, he would favour the repeal of the whole act. I emphatically endorse that proposition.
When the debate took place on the motion of the hon. member for Charlevoix-Montmorency, I was one of those who protested very strongly against the Bankruptcy Act and asked for its repeal I do not intend at this moment repeating what I said on that occasion, much less repeating the arguments of hon. members who took the same stand as I did. Be it sufficient for me to say that the provincial legislature, no later than December last passed a resolution declaring that the Bankruptcy Act was not in the interest of the province of Quebec, and expressing the opinion that it should be repealed. That is a declaration from the highest tribunal in the province of Quebec, and I may add that 95 per cent of the citizens of our province would favour the repeal of the act. As to having a provision in the law under which the debtor could be discharged under the same conditions as the present, I have not the least objection; I very strongly support the hon. member for South Simcoe when he asks that the Bankruptcy Act should be repealed subject to the retention of a clause such as referred to.


Mr. MERCIER:: There is no proposition of that kind before the House just now.


Jean-Joseph Denis: It is true, the hon. member did not make a formal motion to that effect, but I gathered that to be the effect of his argument. I repeat, there is a good deal in what the hon. member for South Simcoe said and I think the Minister of Justice should give heed to it, especially when it represents the opinion of ninety-five per cent of the citizens of my province.


William Alves Boys: I think I had better make a little explanation. I do not know that I went quite as far as has been suggested. What I said was that if the present idea of having authorized trustees was abandoned and we were to revert to the system of candidates, so to speak, on the part of large creditors- for that is what it would amount to-we might as well get back to the former provincial practice as set out in the various provincial acts. My experience has been this. An assignment in the past was made to some individual; it could be made to anyone, it could be made to an office boy for that matter. A meeting of creditors was held. The creditors organized themselves, and in the large cities we know perfectly well that there are cliques each with their pet trustee. They came there supporting their pet trustee, and finally one side won out. Instead of having what should be, in my opinion, more or less of a judicial officer in the position of trustee,
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you had the successful candidate of certain interests in the larger cities. There might be forty or fifty local creditors but their claims were small. One or two large creditors in the cities controlled the situation, changed the trustee, or assignee as he was called 4 p.m. before, and appointed their choice.
He might be a perfectly honest man, but it goes without saying that his tendencies would be to do what he could for those who secured the ofifice for him. What I said was, that if we are going to depart from the system we have at the present time of having an authorized trustee-who is a man appointed by the department and who has to give substantial security-we might as well go further and return to the provincial idea. For the whole county of Simcoe, so far as I know- and it is a very large county, large in territory and very large in population, the people numbering over 90,000-I think there are only two trustees. They are both men of excellent standing in the county, they have given security, and they are doing their work well. If you are going to destroy that system entirely it seems to me-the Minister of Justice shakes his head but I certainly thought-


Sir LOMER GOUIN:: I say that in fact they will not be abolished, because if they have such experience they will be elected by the creditors.


William Alves Boys: With the greatest possible respect to the views of the minister-and I would like to say that I do have very high respect for his opinion so far as I have heard it expressed in this House-I do not think the matter will work out that way at all; it has not during my thirty years' experience at the bar in my own province. I repeat, I believe you will find you will get back to the system of ''candidates," just as I have mentioned, and chat the creditors controlling the meeting

which means the largest creditors-will change the assignee as appointed by the debtor and elect one of their own choice. Now, you do not, in my opinion, get a man who could for a moment fill the position of an independent judicial officer under those conditions. I want the committee to understand that I do not oppose the present system at all, but I say if you are going back to the system suggested in the bill now before us you are practically returning to the provincial system. If you are going back to the provincial system you may just as well go the whole distance and let the laws of the various provinces govern. I think the. hon. member for George Etienne Cartier misunderstood me in that 
connection. I would much sooner see the law as it exists at present maintained-


Samuel William Jacobs: I think it was the hon. member for Joliette (Mr. Denis) who misunderstood my hon. friend.


William Alves Boys: I gathered from your remarks that you thought I had made some reference to the trustees, and advocated the repeal of the act, but perhaps I was mistaken.


Samuel William Jacobs: It was the hon. member for Joliette.


William Alves Boys: Perhaps I am mistaken. My position is this: If we can retain the authorized trustees, let us do so. If we have too many, they are not appointed for life and good conduct, and the services of some of them may be dispensed with. That might be unpleasant; but it can be done, and we should get capable men.
As regards the landlord and his preference, this is not an appropriate time to discuss that subject, and when we come to it I may have something to say, as there seems to be a difference of opinion as regards landlords and preferential claims. In Oritario, I understand a landlord has a preference for one year's rent as regards the past. I was not speaking of the future at all.


Lomer Gouin: My hon. friend from South Simcoe (Mr. Boys) seems to be surprised at the fact that the law of 1919 is amended, and that we have these amendments this year. I must tell him that this is not new. The United States had been working for a century and a half before they arrived at their present bankruptcy law. We have been doing the same thing for nearly one hundred years. It is not because we now propose to make a change in the system of appointing trustees, that we should say that this is so radical an amendment that we would be justified in repealing the whole act. I may be in error, but it seems to me that the majority of the people of Canada are in favour of a bankruptcy act. I know the province of Quebec is opposed to it.


William Alves Boys: So am I in favour of a bankruptcy act.


Lomer Gouin: But the majority seem to be in favour of it. My hon. friend says that we should not change the system of appointing trustees; that we have authorized trustees, and if we proceed in the way in which we now propose, many of the best men who have acquired experience under the present law will be deprived of the op-

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portunity of continuing to practise their profession. He says that the system by which the trustee is chosen by the debtor is preferable. It seems to me that the creditors should have more to say than the debtor in the choice of the trustee who is to liquidate the estate. If my hon. friend looks over the situation in the various English-speaking countries, I do not think he will find anywhere else in the world a country which has such a system as we have to-day of authorized trustees, where the debtor is the judge as to the choice of the trustee. We now propose to adopt the English system, we propose to adopt the American system, and to say that the creditors who are most interested are those who should have the first and last say in the election or choice of the trustee.


Mr. CLARK:: Is it not a fact that the creditors have it in their power to remove the authorized trustee at any time after appointment? Does that not give the creditors the control to which they are entitled, and which is all that is necessary?


Lomer Gouin: They can do that for cause; but if it is good to give them such a right, why not give it to them at the start? That would not dispose of the objection raised by the hon. member for South Simcoe.


Richard Burpee Hanson: The difficulty with the present modus operandi is this. You appoint in a locality an official called the custodian. He is only a locum tenens after all. While a meeting of the creditors is being arranged for, I think it will be found that the estate will be gradually disappearing; that these officials will not act as the authorized trustees act to-day. The minute a petition is filed with the authorized trustee, he takes control of the estate and he takes all steps necessary to protect the assets, pending the first meeting of the creditors. When the meeting of the creditors is held, it not infrequently happens that the creditors exercise their right under the act and change the authorized trustee. But the estate has been preserved in the meantime by a man who is responsible.


Lomer Gouin: It has been so well preserved that, in many cases, if not in most cases, there has been nothing left for the creditors. We want to put a stop to that.


William Alves Boys: Does the minister, in making
that statement, refer to Canada as a whole or only to certain parts of Canada?


Lomer Gouin: To many of the interests.


William Alves Boys: I wish to say that, in irf, experience, that is absolutely not the case at all. The work of the trustees with whom I have had something to do, has been very satisfactory and the charges have not been excessive.


Lomer Gouin: I congratulate my
hon. friend who is most fortunate, and I am sure, as I have said before, that his trustees will continue to exercise their profession in the future, because the creditors will confide to them all the different estates which may have to be entrusted to trustees.
The hon. member for St. John City (Mr. Baxter) raised an objection to the amendment that we propose regarding the custodian. He said that he objects to the choice of one of the largest creditors, because in most cases that creditor would be appointed trustee. It is very seldom that creditors are appointed trustees. I remember that in Quebec, under the law we had, we had regular professionals as trustees. We had not a very large number of them. They got to be known by the merchants, by the manufacturers, and in the large centres they were, in most cases, the same. Creditors were never appointed trustees,and I have reason to believe that under this law, what has happened in the past will happen in the future.
I understood some hon. members to say that the Credit Men's Associations disapproved of these amendments. From what I have heard and read of them, I find that they all approve the amendments. We have received resolutions of approval from the Manufacturers' Association of Canada, and from many boards of trades and different associations in Canada. This bill, which has been on the order paper for two or three weeks, has been considered by the whole population of Canada, and I gather from opinions that I have received that the amendments are generally approved.
As to the question of the rights of landlords, all we wish to do in suggesting amendments to the present law, is, first of all, to make it constitutional. It is all very well to say that in such and such a province the preference is too large in favour of the landlords; it is all very well to say that the laws of the provinces are different; but in amending our statutes, we must take into consideration our constitution. If we were to make a special section or clause which would make the law uniform for the whole Dominion, and if we were to find afterwards that such a section or clause was not in accordance with the British North America Act, we would have to amend our

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statute once more. I am told that at this moment an action is pending before a court in one of the provinces of the Dominion, and the parties have been told that the judge will decide that our section 52 is unconstitutional. Is it not preferable to leave it to the provinces to decide as to the privileges they wish to extend to the landlords? The adoption of our amendment, which provides that the privileges of the landlord shall be controlled by the provincial laws in force in 1920 in the various provinces, would not deprive any province of the right to amend its own laws to meet its own views. If it is found that the province of Quebec, for example, gives too much to the landlords, the business men or any of the electors of that province might very well wait upon the provincial government and request that the law, which my hon. friend (Mr. Jacobs) seems to think is so bad, be amended to provide that in future the privilege accorded the landlords should not extend to more than 26 or 28 months, or 16 months, or whatever might be deemed best. It would be quite simple for the people of Quebec to have their law amended if they considered it unjust; and if the privilege of the landlord is not considered enough in any of the other provinces, it is equally competent for them to amend their statutes. What I wish to insist upon is that in regard to the question of the privileges of the landlord, the important consideration is that whatever legislation we pass shall be constitutional, and unless we are perfectly certain that we can legislate without infringing upon any rights of the provinces in this particular we ought to be exceedingly careful. If we cannot pass a provision, in regard to this question of the privileges of landlords, that shall be uniform, and equally satisfactory and acceptable to every province, I think it is preferable for us to take the course that is now proposed, so that the provincial laws which are now in existence or which may be enacted in the future shall govern the rights of the landlords.


William F. Carroll: That would necessitate aa amendment to section 51A of the act?


Lomer Gouin: Yes. On this point I am prepared to receive the suggestions of the committee, and if there is offered anything that is better than what we propose I am ready to consider it.
Mr, CANNON: My hon. friend from Joli-ette (Mr. Denis) mentioned anterior debates in this matter. I do not wish to reopen the discussion, but before entering upon a consideration of the details of the various amend-

ments I would offer some general observations to the committee on the law itself. I fully agree with the majority of hon. members from my own province who have suggested in this House the entire repeal of the Bankruptcy Act. I do not desire to criticize the operation of the law outside the province of Quebec. Evidently, in view of the expressions of opinion of other hon. members in the House, the Bankruptcy Act operates rather favourably and satisfactorily in the other provinces. In the province of Quebec it has not given satisfaction.


Samuel William Jacobs: Why?


Lucien Cannon: Before the bankruptcy law of 1919 was passed we had a very simple, economical law under our code of civil procedure, which was known as the voluntary abandonment of property. The people were satisfied with the operation of that law, and whatever changes wTere brought about by the Bankruptcy Act certainly did not meet with the approval of the majority of the people in our province. My hon. friend (Mr. Jacobs) has just inquired why the people of Quebec were not satisfied with the act of 1919. I can answer that question briefly. The reasons for this dissatisfaction were principally these three: First, the authorized trustees were appointed by the government in too large a number. We had in our province, in the large centres like Montreal and Quebec, accountants who had given entire satisfaction to the people, and who had been handling estates under our own abandonment of property law; and when the 1919 act was passed and put into force a greater number of trustees than necessary were appointed. The result was that while on the one hand we had large, prosperous and trusted firms who could handle estates in a satisfactory manner, there were on the other hand a whole lot of trustees who had for the most part been appointed through political pull, who had no experience, and who began to make a living by inducing people to go into bankruptcy. This evil has been considerable in the cities, but it has been widespread in the country. Farmers who had always met their liabilities with the merchants and with the banks, who never had any serious financial troubles, were told by these trustees that if they went into bankruptcy their debts would be wiped out, their financial liabilities would disappear, and they could start all over again. The farmers were deceived and a large number of them went into voluntary assignment. The trustees made a whole lot of money, the farmers lost the little they had, and their credit has naturally diminished in consequence. The re-

Bankruptcy Act
suit of the appointment of these unnecessary trustees under the 1919 law was most disastrous in our rural centres. The second reason is that the officials under the law, that is to say, the court officials who were supposed to conduct the proceedings under the Bankruptcy Act, were under the control of nobody. They were not provincial officials; they were not federal officials; they were not under the authority of any judge. Although exercising functions of the widest importance, they were subject to the supervision of no one.


Richard Burpee Hanson: Were the registrars not under the supervision of the judges?


Lucien Cannon: If my hon. and learned friend will examine the law he will see that while the judge has certain functions the official registrar also has distinct functions altogether beyond the judge's control. Let me give an example. In one of our judicial districts a minor official whose duties were solely to affix stamps to judicial proceedings became the registrar. Now this minor official has for years exercised functions of the highest character and is drawing tremendous fees without being controlled by anybody, and whoever attempts to control him is told very politely that "it is none of his business."


Samuel William Jacobs: May I be permitted to
point out that under the law passed last year he becomes an official of the provincial department?


Lucien Cannon: We had another example
in the city of Montreal. The registrar under the Bankruptcy Act, when he received instructions from the attorney general of the province to follow a certain line of conduct, told the attorney general that "he had nothing to do with it." This is a notorious fact.


Samuel William Jacobs: But he ended up by following the instructions of the attorney general.


Lucien Cannon: He may have changed his attitude. But that is the condition of things . in the province of Quebec: first, too many trustees; second, officials under nobody's control; and third, the Civil Code put aside and mortgagees treated as ordinary unsecured creditors. Therefore there is throughout the province a general feeling of dissatisfaction with the act.


William F. Carroll: Does my hon. friend
mean to say that under the Bankruptcy Act a mortgage would not be a preferred claim in the province of Quebec?
19SJ


Lucien Cannon: Not unless it fell within
the provisions of, I think, Section 32.


William F. Carroll: The three months?


Lucien Cannon: Yes. I do not wish to
repeat the arguments which were brought forward this afternoon, but there is also the question of the married woman's rights being put aside. One of the hon. gentlemen opposite mentioned the desirability of having a uniform law throughout Canada, especially as concerns federal matters. We all agree on this point. But this uniformity, if it is to meet with the approval of the people, must be of such a nature that it does not take away privileges which have been guaranteed to any province by the British North America Act or by existing treaties. We have in the province of Quebec privileges concerning our civil laws which are considered, and rightly so, as the most sacred heritage received from our forefathers. We are justly proud of our French laws. These laws have their source, as everybody knows, in the greatest work of the highest legal minds-Pothier and others. We have in the province of Quebec laws handed down to us from la coutume de Paris, and we have our civil laws which are a reproduction of the Code Napoleon. We wish to follow in federal matters the same laws as the other provinces, but we ask the federal government, when it deals with matters of this sort, to be always careful not to lay a hand on the sacred heritage which we treasure and which we want to retain as complete and as intact as it was left to us.
I observe with pleasure that the amendments brought forward by the Minister of Justice meet to a large extent the three inconveniences which I have indicated. Trustees are now to be chosen by the creditors. Those who are good will continue in business; those who are simply trying to live by deceiving people and leading them into bankruptcy will have no more business, and so this evil will disappear. As to officials under the Bankruptcy Act, if there was no control before, I see with pleasure that, should these amendments be adopted, these officials in our provinces will be under the immediate control of our prothonotaries.
As to our civil rights, I see by the amendments that they are restored in great measure. There is, I think, misapprehension in this House as to the right of the federal government to encroach on the civil rights of the provinces. Bankruptcy is within the scope of federal legislation according to the British North America Act. If we have a right to
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legislate on bankruptcy we should exercise the right, but only encroach on provincial rights whenever we have to enact something which is an essential incident to our own law. What are the essentials of a bankruptcy act? First, to take Over the property of a debtor; secondly, to realize the assets of that debtor; and, thirdly, to distribute the proceeds. These are the essentials.


Samuel William Jacobs: What about the discharge of the bankrupt?


Lucien Cannon: I do not think it is essential. But even if it were, supposing we have, then, four essentials, cannot this parliament enact a complete bankruptcy law to meet these four essentials without laying a hand on the civil laws of the province of Quebec?


William F. Carroll: Does my hon. friend think that uniformity should attach to all federal laws?


Lucien Cannon: Certainly, provided the rights of the provinces are safeguarded. Let us legislate in bankruptcy matters in order to meet four, or three, requisites of a bankruptcy act. But I say we can do so without in any shape or form encroaching on the civil rights of any province. I am pleased that the Minister of Justice who is in charge of this legislation belongs to the school of those who believe that the provinces are not merely adjuncts of this federal parliament, but that they are just as powerful and sovereign within their own jurisdiction as the federal parliament is.


Richard Burpee Hanson: You did not say so the
other night.


Lomer Gouin: Yes, I did.


Lucien Cannon: We have had in Canada a long fight between successive Ministers of Justice and the attorneys general of the different provinces, and I hope, notwithstanding what my hon. friend opposite may say, that the Minister of Justice will continue the tradition of Sir Oliver Mowat and others and will never, after having been Premier of Quebec, endorse as Minister of Justice the policy that would make the federal power superior to the provincial.
I have read the amendments and am sorry to see that the Minister of Justice has brought forward nothing to cover the punishment of offences under the Bankruptcy Act. Under sections 92 and 93 all such offences are indictable offences; but the Criminal Code has not been amended to meet the provisions of the Bankruptcy Act, and therefore it is impossible for a man accused of an offence under the act to have either a summary or speedy

trial. Very often these offences are of such a nature that they could be tried summarily or speedily, especially in rural centres where criminal terms are held only once a year, sometimes only one every two years. Before this bill passes I hope the Minister of Justice will see to it that amendments are prepared by his officials to meet this condition.


Samuel William Jacobs: I would point out to my hon. friend that cases under section 417 of the Criminal Code

offences against bankruptcy-are now handled speedily in the district of Montreal under the Speedy Trials Act.


Lucien Cannon: When was the amendment introduced?


Samuel William Jacobs: It has been the law for the last thirty years.


Lucien Cannon: My hon. friend may think it is the law, but I doubt whether a provision enacted thirty years ago would have effect in the legislation of 1919, which repealed the old law.


Samuel William Jacobs: The section of the code to which I refer-I think it is 417-says that the court may handle offences under the Bankruptcy Act. Under that act we have sent to prison quite a large number of traders in Montreal. I trust they will not take this hint from my hon. friend to apply for habeas corpus.


Lucien Cannon: I know I have had occasion as Crown prosecutor to discuss the matter before our judges of the Sessions of the Peace, and they have come to the conclusion that they had no jurisdiction. The Criminal Code was passed when there was no Bankruptcy Act.


William F. Carroll: My hon. friend will remember that the Criminal Code gives jurisdiction in all criminal cases except certain matters, and if it does not except bankruptcy, the courts have the power to try cases undel the Bankruptcy Act.


Lucien Cannon: I attach great value to the opinion of my two learned friends, and I hope they are right. But I direct the matter to the minister's attention in view of the fact that it was decided altogether differently by our judges in Quebec, and that very recently.
I support most heartily the amendments which are offered, and I hope this is only the first step in the right direction. If we cannot obtain a complete repeal of the law, I trust that it will be amended in such a way as

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to cause most of the present inconveniences and disadvantages to disappear.


Henry Lumley Drayton: In the first place, I want to commend the member for Dorchester (Mr. Cannon) upon the study he has given to this question and also to congratulate him upon his sudden, violent, and, I hope, permanent, conversion to the recognition of provincial rights. During this same session we witnessed an absolute disallowance, a flouting, a complete disregard of provincial rights in the case of a Nova Scotia statute, and it is both refreshing and interesting to see the good that discussion has done and the converts it has already made.


Samuel William Jacobs: May I point out that desperate diseases require desperate remedies?


Henry Lumley Drayton: Apparently the disease looked so bad that the remedy, which is best illustrated by that frame of mind which grants to the provinces their rights and acknowledges their jurisdiction, has already happily been established just where it was most needed. I agree that there are difficulties in Quebec. I do not personally know anything about them, but so many hon. gentlemen have said they exist that I am sure they do. I have no doubt that too many trustees were appointed in the very first instance, as my hon. friend says. The former government appointed 182 trustees for Quebec-a larger number than had been appointed for any other province. In that list were included all the accountants and all the gentlemen the hon. member referred to as having done business before, and it included also a lot of others. But even at that, apparently it was not large enough, because the new government promptly appointed 66 more, so that we had a total of 248 in that province. Revocations in the case of people not putting up their security reduced the number by 39. I am frank to say that 209 trustees for Quebec are altogether too many. I suggest that the minister consider the advisability of recognizing that fact and of putting Quebec upon a more reasonable basis in that respect. He will have no difficulty in finding out where the troubles are or in getting the act on a working basis in that province, because so far as I am aware it is on a working basis everywhere else. Would it not be better to make an honest attempt to improve matters in the province of Quebec by cutting dowrn the number of trustees, getting it back to what the situation was before the legislation was introduced? Would it not be better to do that than to upset every other province with the idea of helping a
comparatively small matter of regulation or administration in Quebec? I recall very well the old days when assignments were plentiful when there were many commercial and law firms specializing in assignments, firms which had their representatives here, there and everywhere. We remember that certain gentlemen who could be named by the practitioners in almost every town and who specialized in that kind of work always had a little valise packed in their office in order that they might take the first train out where there was a chance of getting an assignment. We all recollect the fights that used to be worked up, the money that was spent, and the indirect preferences that resulted. Is it wise to go back to that condition? For that is what we are doing. Again, is this thing not costing enough money as it is? Why should any unnecessary interest be brought into the matter? I am very much in sympathy with my hon. friend from the province of Quebec when he speaks about junior officials having large powers-and we propose to increase those powers; we are aggravating the evil he complains of. It is the first step that is important in matters of bankruptcy and assignment; the great thing is to get in quickly and see that the right thing is done at the right time. Well, we are now saying that the person who is to take the first steps is the class of official that my hon. friend from Quebec has spoken about.


Lucien Cannon: My hon. friend is under
a misapprehension as to the word "custodian." In our province, under these amendments, the prothonotary, the chief official of the Superior Court, will be the one who will control the operation of the act. We are satisfied with that. Before, he had no authority.


Henry Lumley Drayton: I do not know how it is in Quebec, and I will take my hon. friend's statement for that at once, but in Ontario we have the local registrar everywhere. The vast majority of these gentlemen have never had the slightest amount of commercial experience, absolutely none. Very many of them have very little experience of the ways of the world or anything else outside of the town where they may have had a practice and subsequently received the appointment, and many of them have never practised at all. Yet it is to gentlemen of that experience that estates are now to be given, just at a time when decisive action is the most necessary. Is that a good thing?
Again, in order to protect-I do not know why we have this other feature brought in- but in order to protect the estate-I do not
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know whether it is to protect it from these registrars or what the real idea is-we are to have a custodian. There is another place of possible conflict and possible loss. But why, if the registrar is good enough to take hold of this thing in the first instance, cannot you trust him with the problems? Or is it really necessary to have a second set of costs besides the registrar's set of costs'? You have the custodian's set of costs, and you have not finished then, because you must go further and have your election and finally find out who the trustee is to be. Mr. Chairman, as we are running it in Ontario-I do not know how it will be in other provinces-the result is simply this:	You are going to have three
sets of law costs in any event, and we do not know how serious they will be or how far this thing will go. The opportunity is there. You have the opportunity in the first instance with the registrar. He will have somebody to look after him, to steer him. Then you have the debtor, and the debtor usually has a substantial interest in the estate. You have him there with his lawyer. Then you have the curator, and finally you have the receiver. We have all these additional costs thrown on estates in Ontario simply because too many trustees are appointed in Quebec; there is no trouble anywhere else. I do not want to overstate this matter in the slightest, and so that I do not overstate it I am just going to read a short memorandum as to how people who trade, people in business, think this will work out. They point out what the present law is; I do not touch that. They point out as to the amendments that are now being made:	I do not touch that. Then
they go on to say that the court officer to do this work in the province of Ontario will be the registrar or the local registrar. Then they say:	.
The debtor, when filing this voluntary assignment with the court, is required by the amendment to, at the same time, file with the official receiver a sworn statement of his affairs including a list of his creditors. Then the official receiver, or, in the case of a receiving order then the court, is to appoint a custodian who shall, as far as possible, be selected from the most interested creditors. The official receiver is required to preside at the first meeting of creditors, which is to be called by the custodian at his office or some other convenient place. This meeting of creditors is to appoint a trustee for the estate, who may be any person the meeting may name, and the trustee thereupon takes charge of the administration of the estate.
I think these business men have fairly stated it.


Lomer Gouin: My hon. friend says they are business men?


Henry Lumley Drayton: Yes.
[Sir Henrv Draytor "


Lomer Gouin: Who are these gentlemen?


Henry Lumley Drayton: Auditors accustomed to business. I want to make it sure that I am not overstating the case, and I am giving their opinion to my hon. friend. I do not want to overstate in any one particular, and if these gentlemen are wrong on any point I hope the minister will point out where. They go on to say:
This method of appointing a trustee contains many objectionable features. It is undoubtedly designed in an attempt to correct an unfortunate state of affairs in the province of Quebec, where authorized trustees have been appointed under the Bankruptcy Act who are inexperienced: It is stated that the government has appointed-
They go on to give the number of trustees appointed in Montreal, and then say:
The result is that the administration of bankrupt estates throughout the entire Dominion is being complicated very materially in an effort to cure a condition in Quebec w'hich should never have been permitted to arise. The present Bankruptcy Act, section 15, provides adequate machinery for the change by the creditors at any meeting of the authorized trustee to whom the assignment was originally made, or who was appointed receiver by the court, and it is submitted that the creditors have therefore a complete remedy in their own hands.
I think my hon. friend is wrong when he stated in his speech that section 15 was only operative for cause, that the creditors for cause might make a change. And if I may draw his attention to the section I think he will find that the creditors at their discretion, without any cause, at their will, may make any change they like. It is the court that asks for cause. If I am wrong in th.".t, I hope my hon. friend will correct me. The memorandum goes on:
The objectionable features of these changes may be summarized as follows:
As to the matter of expense: The proposed amendments add to the cost of an estate, the costs of the court and the costs of the custodian, which will bear heavily upon small estates. Three sets of solicitors' costs will have to be paid out of many estates, that is, the costs of the solicitor for the debtor, then the solicitor of the custodian, and finally of the trustee.
As to meetings of creditors, assignment papers would frequently be filed with local registrars through the province in which the debtor lives. The appointment of a creditor at a distant centre as custodian will be inconvenient. If a local creditor should be named as such custodian the first meeting of creditors will be called locally, resulting in creditors, who are usually located in large centres, having to make long journeys to attend meetings for the appointment of a trustee. On the other hand, the meetings of creditors of a debtor residing, for instance, at Sault Ste. Marie, if called in Toronto, where the majority of creditors of most estates in Ontario are usually located, and which would be the most convenient place for the meeting, then the local registrar at Sault Ste. Marie would be obliged to personally attend the meeting of creditors, at the expense of probably a small estate.

Bankruptcy Act
I pause there and ask my hon. friend what he thinks ought to be done in a case like that. There you have a merchant at Sault Ste. Marie. The local registrar there is the appropriate person to handle that estate. You have all the creditors in, say, Toronto. These amendments provide for a meeting of the creditors. What is to be done? Are all the creditors to go up to Sault Ste. Marie, or is the local registrar to come down to the creditors at Toronto? Usually debtors arrange these meetings so as to meet the convenience of creditors, and so that there shall be only one railway trip instead of the expense of bringing thirty or forty creditors to the meeting. What does the minister think ought to be done in a case of that kind? Is the local registrar, because he has to be there, going to call the meeting where the creditors are or where the debtor lives?


Lomer Gouin: That is a matter of detail, when we come to it we can deal with it. I may remark that the creditors have the right to vote by proxy; it is not necessary for them to travel from any place in any province to the centre of that province, they may very well send their proxies. Even where the meetings are held in the great centres very few creditors attend but they are always represented by someone. What is complained of is a matter of detail but I am prepared to discuss it. In reference to the memorandum from which my hon. friend is quoting I should explain that I have met quite a number of trustees. There was only one that I saw who was unalterably opposed to this amendment. He is a gentleman from Toronto and very well experienced in these matters. I tried to convince him that he would not lose anything from this amendment but I find he has not been converted yet.


Henry Lumley Drayton: In a city like Toronto you have your one registrar. How would it be possible for him to look after the meeting of creditors from time to time in a city of that size, with the amount of insolvency matters which are pending there? How could he do it?


Lomer Gouin: Very easily, and he could have a sub-officer to replace him, as we propose by an amendment which my hon. friend will see later on.


Henry Lumley Drayton: So there will be relief given in that direction?


Henry Lumley Drayton: Here is another point that I draw to the minister's attention:
In the administration of a complicated or important estate a great deal of preliminary work must be done by a trustee prior to the first meeting of creditors apart from the mere preparation of the statement of affairs.
I do not suppose any one of us will deny that that work ought to be done, unless you are going to have a whole lot of time and money thrown away.


Lomer Gouin: What kind of work?


Henry Lumley Drayton: The work of getting together all the figures, the work necessary in order to make a proper and complete statement of the affairs of the debtor. That ought to be available. Further than that, if the trustee be a good trustee he should be prepared with some suggestions as to the best way of working the matter out.


Mr. MARTELL:: As I understand it the proposed amendment provides that the assignment shall first be made to the clerk of the court or prothonotary of the court, who is usually the same official, and this prothonotary first secures a list of the creditors and notifies them. He calls a meeting of these people and they elect a curator or trustee to carry on the work. Now, prior to this amendment there was a lot of official trustees in bankruptcy and the majority of them, though perfectly honest men, were concerned primarly with getting their fees for the work they did.


Henry Lumley Drayton: What is the question?


Lewis Herbert Martell: In this case it is proposed, I believe, that the person to whom the assignment is primarly made-


Henry Lumley Drayton: My hon. friend is not asking a question he is making a speech. Surely we would all agree that in the administration of a complicated or important estate a great deal of preliminary work must be done by the trustee prior to the first meeting of the creditors, apart from the mere preparation of the statement as to the condition of affairs.


Lomer Gouin: My hon. friend's informant wants the trustees to be chosen by the debtors. We say the trustee should be chosen by the creditors, and that work could be done by the official receiver or custodian. And what is the work to be performed? Purely and simply the calling of the creditors.


Henry Lumley Drayton: If that is all my hon. friend thinks ought to be done I can


Lomer Gouin: Yes.
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tell him he is not familiar with the work which is done by the better class of trustees when the work is properly looked after, and it is usually properly looked after by the better class of men. If this meeting is merely in order to see how many people there are on the list of creditors, and the time and money consumed is to be thrown away well and good. But if you have a man who understands this work there will be a lot more than that done.


Lewis Herbert Martell: Does the hon. member not think well of the proposition of the Minister of Justice which is to try and provide that everybody concerned shall get a fair return from a bankrupt estate?


Henry Lumley Drayton: If that is what the Minister of Justice has in mind he is not doing it.


Lewis Herbert Martell: I think he is doing it.


Henry Lumley Drayton: No, he is going to prevent that. Now, is there any dispute about this?-
This work calls for expert accountancy knowledge and its proper preparation does materially assist the meeting in its decision. This preparatory work could not be accomplished by a creditor-custodian, thus making necessary further needless meetings.
Is there any dispute about that?


Lomer Gouin: Yes, there is dispute. When an assignment is made by the receiver a custodian is appointed and if it is necessary to take any proceedings to preserve the property the custodian does it under the direction of the receiver. If there is an inventory to be made the custodian makes it and he calls the creditors. In the work of liquidation he is supported by the trustee.


Henry Lumley Drayton: Then, Mr. Chairman, we have this position: No work of liquidation goes on, nothing is done, except a mere collection of names, until the receiver is appointed.


Lewis Herbert Martell: Is not that right?


Henry Lumley Drayton: Nothing is done at all, there is no preliminary work of any kind done?


Lewis Herbert Martell: Nobody is prejudiced.


Henry Lumley Drayton: The estate is not got into shape at all, and nothing is done to clarify the issue. We have that, at any rate, that nothing of any kind is done until after the meeting of the creditors. I take it that the minister would 5 p.m. not suggest that the local registrars have any expert knowledge in ac-TSir Henry Drayton.]
countancy that would enable them to do the work, no matter how pressing the necessity?


Lomer Gouin: That work has to be done by the custodian, who will be a man of experience and interested by reason of the fact that he will be one of the largest creditors.


Henry Lumley Drayton: Ah, but how can the minister tell he will be experienced because he is a creditor?


Lomer Gouin: I said "interested."


Henry Lumley Drayton: But the one thing here is experience-experience in accountancy, experience in the work. The fact that the man is a creditor does not say that he is at all experienced one way or the other. The custodian is to be one of the creditors.


Lewis Herbert Martell: Not necessarily.


Henry Lumley Drayton: Should he be one
of the creditors?


Lomer Gouin: If possible, yes.


Henry Lumley Drayton: Why should ha not be the man who ought to be appointed the permanent receiver?


Lomer Gouin: If it is satisfactory to the creditors they will appoint him trustee.


Samuel William Jacobs: Some little time must pass before the appointment of the permanent trustee?


Henry Lumley Drayton: That is what T am pointing out, and I am pointing out further that under this amendment there will be a complete waste of time. On the other hand, if you appoint a man who is experienced in accountancy a lot of preliminary work will be done and, very often, a complete scheme worked out. Now, what does my hon. friend say to this?-
The appointment of a creditor as Custodian opens wide the door for serious collusion between the creditor-custodian and the debtor and would lead to irregularities of many kinds which would be extremely difficult to trace.
In other words your custodian is a man who .may have a private interest in the estate apart from the rest of the creditors As a creditor he has his own axe to grind, but it may not be one that is common to the rest of the creditors.


Lomer Gouin: But the custodian acts under the direction of the receiver.


Henry Lumley Drayton: The custodian is getting control and I do not know how

Bankruptcy Act [DOT]
long that matters could be delayed until the permanent receiver is ultimately appointed, or whether you may not have to deal with the fact that the custodian being on the ground would like to stay there. I suppose it will also be admitted:
In large estates a creditor would be totally incapable of taking charge or administering its affairs for even the short period between his appointment and the calling of the meeting.
Would that be permitted?
Experience is essential to such temporary administration and often it is necessary and expedient that advances should be made to the estate in order to conserve assets and manage the business so "that the estate can be subsequently dealt with to the best advantage.
I suppose my hon. friend will provide in his bill that this custodian may be recouped for advances he makes in order to keep the estate going. That is a risk that good trustees are taking to-day.


Lomer Gouin: There is no doubt that if he disburses any money, he should be recouped.


Henry Lumley Drayton: And if he advances money for the purpose of keeping the business going?


Lomer Gouin: Yes.


Henry Lumley Drayton: I am pointing out again to my hon. friend that that incidental work is sometimes very important, and that it ought to be in the hands of people who have been accustomed to doing that sort of thing. The rest of this memorandum- and it is a long one-merely emphasizes the points that I am indicating. It shows the manner in which log-rolling and wire-pulling goes on when you have an election carried out in the way that my hon. friend suggests. At least that is what has happened in the past, and there is no question that it will happen again in the future. I am not, however, going to trouble my hon. friend with further details, because that is all covered in the larger points that I have mentioned. Again I ask my hon. friend: Why not make the Quebec situation right and have things functioning in Quebec as they ought to function and as they are functioning in Ontario?


Lewis Herbert Martell: What is the difference?


Henry Lumley Drayton: I am afraid it would take me too long to tell my hon. friend. We have had a long statement on that, and we all have to agree that there is a difference. I am taking what hon. members from the province of Quebec say.


Lewis Herbert Martell: Everybody in Canada knows that the system of laws in Quebec is different from that in any of the other provinces. If my hon. friend and I were to argue in regard to the Nova Scotia laws and the Ontario laws, we would understand each other; but if we undertake to argue about the laws of Quebec, we are both in the dark.


Henry Lumley Drayton: I am not going to argue with my hon. friend as to the Nova Scotia or the Ontario laws.


Lewis Herbert Martell: They are very much the same.


Henry Lumley Drayton: We were not talking about the laws in either province. My hon. friend was out of the room at the time, but our discussion had to do with the character and number of trustees in Quebec. Would it not be better, as I said before, to try to get this Quebec difficulty overcome as I have suggested? I am not going to discuss the other clauses at all. I have discussed the question of appointment only, and only because my hon. friend discussed it. I am not going into any details as to his rent clauses and the like, except to say this. I want to find out, in the first instance, whether my hon. friend thinks this House has jurisdiction to pass a bankruptcy law.


Lomer Gouin: Yes.


Henry Lumley Drayton: Can my hon. friend tell me how in the name of common sense, a bankruptcy law can be passed which does not affect property and civil rights?


Lomer Gouin: It depends.


Henry Lumley Drayton: A bankruptcy law means the creation of a method of determining civil rights. It takes civil rights here and civil rights there.


Lomer Gouin: I wish I had the assurance of my hon. friend to decide that point of law. It is not so clear as that.


Henry Lumley Drayton: I am not talking about a point of law; I am talking about the necessary implication of a Bankruptcy Act. Under a Bankruptcy Act you are immediately taking away the rights of creditors. Are they not civil rights?


Lomer Gouin: Yes.


Henry Lumley Drayton: The right of distress is taken away. Is that not a civil right?


Lomer Gouin: Yes.


Henry Lumley Drayton: Unquestionably. Therefore, we must all agree that you cannot
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have a bankruptcy law, power to pass which is given to the Dominion under the British North America Act, and you cannot exercise it unless you interfere with property and civil rights. The whole thing deals with property and nothing else. Does my hon. friend find in the British North America Act any distinction drawn between property and civil rights having regard to personal property on the one hand and property and civil rights having regard to real property on the other? Because I cannot find such a distinction.


Lomer Gouin: Perhaps I might show some to my hon. friend, but I do not suppose we intend to discuss that point here. As I say, the question has already been submitted to some of our best judges, and some have said that we have no right to interfere to the exent of depriving landlords of their preference; some say that we may have that right. As I said before, we have now a case pending in which, I understand, judgment is to be rendered against our act. I shall not be prepared to say that the judgment is not sound.


Henry Lumley Drayton: If we stand in that parlous position, we ought to stop doing anything with this act.


Lomer Gouin: Not at all.


Henry Lumley Drayton: Yes, because my hon. friend himself has admitted that it is absolutely necessary and essential, under a bankruptcy law, to deal with property and civil rights. Every day, under a bankruptcy law, we are interfering with rights of action which are founded on provincial law, just as much as is the right of a lessor founded on provincial law. I would have thought that if we had the right to introduce and pass a bankruptcy law, we would have the right to deal with matters of necessity incidental to that field of legislation. The Privy Council has so held in other cases. If we have not that right, I point out to my hon. friend that this measure ought to be withdrawn.


Lewis Herbert Martell: Though we have already passed a Bankruptcy Act, does my hon. friend not think that before we put an amendment to the Bankruptcy Act upon the statute books, it would be well to repeal the Bankruptcy Act as it stands at present, and to get a reference to the Supreme Court of Canada and, if necessary, to the Judicial Committee of the Privy Council, in order that we may know exactly what we can do in regard to bankruptcy-though we have the power, under the British North America Act, to pass a bankruptcy law-in order to see how far, in the opinion of the learned judges or of the law

lords, we can go as regards an infringement on property and civil rights? Would that not be better than allowing the ordinary people to bear the expense?


Henry Lumley Drayton: The trouble in that case would be that the people would have to pay a great deal more. There are many insolvencies at the present time; if we cancel this law, that would cost the public, the creditors and the debtors, a great deal of money, and more money would be thrown away.


Lewis Herbert Martell: Does my hon. friend not think, before we had this bankruptcy law, we were getting along very well under our various provincial laws with regard to debtors and so on?


Henry Lumley Drayton: It is a good thing to have a law which will enable a man who has failed honestly to be able to get a clean sheet and to start afresh. We could not do that before, and for that reason I am in favour of the bankruptcy provision. But surely my hon. friend will agree with me in this, that if we have jurisdiction to pass this bankruptcy law, we have jurisdiction to interfere with the right of a lessor just as much as we have the right to interfere with the rights of any other creditor.


Lewis Herbert Martell: I agree with that.


Lomer Gouin: I understand my hon. friend desires, as we do, to frame a bankruptcy law that will be as perfect as possible- he is in favour of a bankruptcy law?


Henry Lumley Drayton: Yes.


Lomer Gouin: We are discussing the point whether we have the right, legislating as we do in regard to bankruptcy, to affect property and civil rights?


Henry Lumley Drayton: Yes.


Lomer Gouin: As I said before,
there is room for discussion on that point. The only point, though, that we have to consider in connection with these amendments is the preference of the landlord. When there is doubt on such a question why not make it sure that there shall be no cause for attack by anyone on our amendment, on the ground of its being unconstitutional, by leaving to the provinces all their rights intact in this matter? If, simply in order that we may have a uniform law for all provinces, our legislation changes the status of the landlords in any province and thereby gives occasion for the contesting of our act and the decision later on by the courts that it is un-

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constitutional, we should only have to start all over again; while if we leave, as we propose to do, the privileges of landlords within the jurisdiction of every province, there is no possibility of any doubt being raised in connection with our amendment.


Henry Lumley Drayton: I would willingly give in to my hon. friend if it were possible in my opinion logically to do so on the one hand, and on the other hand to maintain our bankruptcy law. Logically, 1 cannot see the difference between saying to a preferred creditor, who has risked his capital, that his preference shall be absolutely void under our bankruptcy law, while we say to the landlord, who has risked nothing except the occupancy of his property, "We will not interfere with you."


Lomer Gouin: That is the merit
of the provision.


Henry Lumley Drayton: The merit of
the provision? I should think the merit is all with the man who has risked his capital. But on the question of property and civil rights, is there any distinction between a preferred creditor and a preferred landlord? You interfere with local law in each case.


Lewis Herbert Martell: Is it not a fact that in all failures, even under provincial laws-and this is certainly the case in Nova Scotia-the landlord has priority over all other creditors?


Henry Lumley Drayton: I know that
there is such a preference. In Ontario it has been one of twelve months down to the time of the failure, and three months afterwards. But we changed that in Ontario by our legislation; it is only three months now, if I remember rightly, to the time of the failure. But there is no trouble in Ontario.


Lewis Herbert Martell: There is no trouble in
Nova Scotia.


Henry Lumley Drayton: It was a just
change to make, and I believe Nova Scotia had the same provision as Ontario.


Lomer Gouin: Suppose we postpone further discussion of this point until we get to that amendment.


Henry Lumley Drayton: Very well.


William Alves Boys: If the minister is afraid of
the question of landlords' rights, if he fears that we are treading upon provincial jurisdiction in interfering with the landlords in their claim for rent, what has he to say regarding the Statute of Limitations? Under the law of Ontario, which I imagine is the
same as in many other provinces, the creditor has a right of action for six years. But if you give the bankrupt his discharge, and if you want seriously to face this question of provincial rights, what about the application of the Statute of Limitations in this case? When you give the debtor his discharge you say to the creditor that while the law of his province gives him for six years the right to sue, yet under federal legislation in this particular respect he shall not sue at all?
I am not seeking to raise these provincial questions, but now that we are discussing them I am surprised to hear the minister state that there is a grave doubt concerning our right with respect to the landlords.


Lewis Herbert Martell: I understand the minister to propose that as regards the landlord's preference the provincial law as it previously stood shall be invoked again. Is not that fair to those people who have been brought up under that law, and to the lawyers who are fully acquainted with it?


William Alves Boys: The hon. gentleman is quite
right; that is exactly what the minister says, and that is acceding to the suggestion that we are interfering with provincial rights. But I am asking the minister's attention to another feature which is more far-reaching than that. The Statute of Limitations in Ontario gives the creditor the right to sue within a period of six years.


Lewis Herbert Martell: It is the same with us.


William Alves Boys: Well, are you not taking that right away by this legislation when you give authority for the discharge of the bankrupt? I am absolutely in favour of the discharge, but if we are to worry about provincial questions, I should think it would be better to take time to consider all these matters, because there is no earthly doubt that you are interfering with the right of the creditor under the Statute of Limitations when you provide for the discharge of the debtor. It may be well for us to go cautiously' until the Privy Council has passed upon the question. If you venture into the realm of provincial rights there are a number of other questions, besides that of landlords, which might be urged along the same line.
There is another feature with regard to the authorized trustee on which I might speak for a moment. I have listened carefully to what the minister has said on this point, and while I have an absolutely open mind on the subject I must confess that he has not convinced me. I am in favour of the authorized trustee, because, as I think, you will get in
Bankruptcy Act

the main good men. They are appointed by the department and give a substantial security. What right has the creditor to find fault if the estate of the debtor is dealt with by a man appointed in this way? Surely the creditors are just as safe in the hands of such trustees as they would be with one of their own choice, when he is only himself a successful candidate against others. There is absolutely no doubt that in all these meetings of creditors an effort is made by one clique to have one man appointed who will act for a number of wholesale houses in the large cities, while another clique will endeavour to have an assignee of their own choice nominated; and generally one group come to the meeting sufficiently strong to control affairs and they secure the appointment by outwitting the others. Surely creditors-and this is what we must consider-are as safe in the hands of an authorized trustee, appointed with proper security, as they 'would be under a trustee appointed in the way I have described. If the minister has anything further to urge upon the subject I shall be glad to hear it, because if I could see any reason for a different view I would gladly take it. I do believe that the present system has worked well in Ontario, and because it has w'orked well I think we should stick to it. It it has not proved satisfactory in Quebec, and the minister thinks that something different is advisable for that province, it is not my desire to say or do anything that would interfere with the satisfactory operation of the act there. But I realize that if we are to have uniformity at all it would hardly be right to have one law for one province and a different law for another province. For that reason I think it is better to stick to the idea of authorized trustees. I agree with the suggestion of the member for West York (Sir Henry Drayton) that if there are grievances in Quebec, if too many trustees have been appointed, if they are not of the right type, or if they have been guilty of improper conduct, such as persuading solvent farmers to make assignments in order that they themselves might be personally advantaged, then it is high time that some provision be embodied in the act to make any such conduct a criminal offence in order that these men might be punished. There are proper ways of dealing with men of this type. But the mere fact that a few trustees, such as have been described, have been appointed in this way is no valid reason for turning this act completely upside down. If you are going to do that let us get back to provincial legislation.


Lewis Herbert Martell: Would it not be well to assign the work to local registrars? Many of these men holding official positions are not dependent on the fees derived under the Bankruptcy Act, whereas the trustee in bankruptcy is very apt to be particularly concerned regarding his fees.


William Alves Boys: Unless the position of registrar is looked upon as a sinecure, and therefore those occupying them do not earn the fees they are now receiving, I do not approve of the suggestion. It may be that there are local registrars who have not work enough to do, but as a rule I think they are fairly busily engaged, and you would be simply giving them a lot more work. I do not hesitate to say that in Ontario we have as capable a registrar as anywhere in Canada. He is a very efficient man. But he already had plenty of work to do, and there is no question that when these duties were heaped upon him he had too much to attend to. From what I have been told by members of the profession in Toronto-my own experience is limited-he did not have time enough to perform these additional duties.


Lewis Herbert Martell: You take as your instance, a large centre of population.


William Alves Boys: I am taking the act as it stands.


Lewis Herbert Martell: Take the case of a small centre.


William Alves Boys: We must deal with the act as it is. There was only one registrar for Ontario; if there was one for every county I would not be arguing as I am. I admit at once that the suggestion contained in the amendment before the committee is a great improvement, because of course the work is being divided up, and it may be that in that respect it will turn out all right. If we have to submit to these other changes, as far as I am concerned I am in favour of this feature, but I take the stand that we should not depart from the system which is working well everywhere except in Quebec. Again I say, if these abuses exist let us insert a section which will deal with the guilty and punish them. Regarding the controversy between two hon. gentlemen opposite, I am of opinion that where an offence is made indictable, as it is in many cases in this act, that is sufficient in itself, as the Criminal Code deals with indictable offences. This act says that the doing of a certain thing shall be an indictable offence, and thereupon I should imagine information could be laid and the provisions of the code invoked. However, if

Bankruptcy Act
there is any doubt on the point a very definite provision should be inserted in the act.


William F. Carroll: The hon. member for
Dorchester (Mr. Cannon) raised the point that the judge handling a bankruptcy case might commit the accused to the Supreme Court for trial, and thereupon no other criminal proceedings could be taken against him. There may be something in this contention. On the other hand, section 523 or 533-I forget which-of the Criminal Code provides that a county court judge shall have absolute jurisdiction except in cases of murder, treason and so forth. I take the ground that as bankruptcy is not included in the exceptions the bankruptcy court would have jurisdiction under the code. But there is something to be said in favour of my hon. friend's contention.


William Alves Boys: I do not know of any provision which gives the bankruptcy court any jurisdiction regarding indictment. Certain things are made indictable offences.


Lucien Cannon: If my hon. friend will allow me, according to section 93 of the Bankruptcy Act a judge of the Superior Court who acts as judge in bankruptcy has a right to commit, and the section indicates the procedure to be followed. It says that after the judge has committed the accused an indictment has to be preferred. Then subsection 4 says that should proceedings be taken under the Bankruptcy Act no other proceedings can be instituted under any other act.
I argue that if the commitment is by a judge in bankruptcy, as the law stands to-day the trial can only be held before the Court of King's Bench.


William F. Carroll: That is, by jury?


Lucien Cannon: By jury. If, on the other hand, the complaint is made under section 417 of the Criminal Code, which is altogether different, then there can be a summary or speedy trial.


Lewis Herbert Martell: Do I understand my hon. friend to say that the judge in bankruptcy has power to order the commitment of a person without any preliminary investigation?


Lucien Cannon: No. According to the
Bankruptcy Act the judge acts as the magistrate hearing the preliminary investigation. After the trustee, or whoever lays the complaint, has put before the judge sufficient evi- . dence, there is a commitment. When the commitment has been made by the judge, at the following term of the Court of King's
Bench an indictment is put before the grand jury. Then the question arises: if a prison&r when arraigned is called upon to plead, has ne a right to ask for a speedy trial?


Samuel William Jacobs: Yes, he has.


Lucien Cannon: I do not think he has.


Mr. MICHAUD:: I think we had better submit the question to the Minister of Justice, and find out.


Lucien Cannon: To sum up my argument, I say if the proceedings are taken under the Bankruptcy Act there cannot be a summary or speedy trial; if proceedings are taken under the Criminal Code there can be either trial by jury or summarily.


Lewis Herbert Martell: In other words, as I understand my hon. friend, an accused committed under the Bankruptcy Act has no power to elect for a speedy trial, he must go before the grand jury, be indicted and be tried by the petit jury?


Lucien Cannon: As the law reads now.


John Arthur Clark: I can shorten my remarks considerably by saying that I endorse the suggestions made by the hon. member for West York (Sir Henry Drayton). The object that the Minister of Justice appears to be anxious to attain is that the creditors shall control or have the power of appointment of the trustee or custodian of the estate. If that is so I have no objection, but I think the same object can be attained in a simple and much more effective manner than by the proposed amendment. In the first place, I think it objectionable that the registrar should become the official receiver. In the second place, I think it is objectionable also that one of the creditors should be a custodian of the property even though it is only for a short period of time. I can think of instances where creditors with business reputations that are Dominionwide have been only too anxious to secure advantage over their co-creditors. I think it objectionable that one creditor should be the custodian of the property, even for a short time, particularly where the estate may be owned by foreigners. There you will have creditors who, probably, are also foreigners; you will have a bad element; the custodian is almost sure to be not too scrupulous with regard to the rights of his co-creditors, and I am afraid that before the general meeting of creditors takes place the assets of the estate in many eases will have been dissipated. Or advantage may be gained by means of lobbying which will result in a trustee being appointed who
,'.106
Bankruptcy Act

has not had experience, who is not trustworthy, and who should not be given control of the estate pending its winding up. It strikes me that there are some weaknesses in the present act. Probably the most serious trouble has occurred in the province of Quebec. Undoubtedly too many trustees have been appointed, and apparently the trustees have not been of such a calibre that they should be entrusted with the administering of estates.
There is a provision in the act which permits debtors going into bankruptcy when they should not do so at all, debtors who are involved, perhaps, yet solvent, and who would eventually pull through. I refer to section 3, subsection (j) of chapter 8 of the statutes of 1922. This section uses the expression, "If he ceases to meet his liabilities as they become due." In other words, if one of these unscrupulous trustees, who appear to be so plentiful in the province of Quebec, comes across a man who may not be able to meet one particular debt, he can persuade that man to go into bankruptcy, and it is pretty difficult to combat the right of the debtor to do so. There is one debt he cannot meet; perhaps he cannot meet a good many; but he is not a man who should be permitted to go into bankruptcy. This section should be so amended as to provide that only those who are unable to meet their general liabilities may go into bankruptcy.


Lomer Gouin: We intend to amend that section along those lines.


John Arthur Clark: Then that point is met. But I am very serious when I say that throughout Canada, these estates should be administered by authorized trustees. I do not believe that in Ontario or in the western provinces any serious difficulties have been encountered in connection with the authorized trustees. It all comes back to the man who is appointed. Perhaps the number of authorized trustees should be limited, and the appointees should be men experienced in the winding up of estates. I am prepared to agree that the creditors should have the power at the outset that the minister thinks they should have, provided that it is an authorized trustee who is appointed, a responsible man. That will bring about a condition of security and will make it certain that the estate will be administered in an honest manner. But in the present act there is a provision under which the creditors appoint a committee of inspectors representing all the creditors-not any particular creditor-and this committee of inspectors control the ad-

ministration of the estate; the trustee cannot make a move without their authority. Therefore I think we have in the act now a provision which gives the creditors the control from the outset that the minister has laid down as essential.
There is another feature that has not been touched upon, and a very important one, with which I had to deal last summer. A responsible firm in Vancouver was in serious financial difficulty. They did not want to go into bankruptcy, and under the provisions of section 13 they made a proposal for a composition, which meant that eventually they would pay their debts in full. That composition was accepted by the creditors. As the act is proposed to be amended, that company could not make a composition with its creditors without going into bankruptcy; the good will of the business would have been gone and its credit lost; in fact, the business would have been destroyed. On the other hand, by being able to submit that composition to its creditors, the business of the company was continued, its credit in England and throughout this country was preserved, and to-day it is carrying on successfully. The minister might well consider leaving the act as it is so that a firm can make a composb tion without the necessity of going into bankruptcy. If the amendment as proposed goes through it will be a very serious matter for the business of the country. I say again that I hope the minister will give serious consideration, before these amendments are passed to the suggestions made by the hon. member for West York (Sir Henry Drayton), which, I think, are essentially sound. I do not mind the creditors having control so long as we are assured that we are not to have further complications. The minister will find within a year, I think, if this proposal regarding custodians is adopted, that great protest will be made by the business interests of the country. I do not see how anything can be gained by having these custodians. If it is necessary to have a custodian, by all means let him be one of the authorized trustees. Do not let an interested person have control of the estate, even for ever so short a time because the best business men will look after their own interests.


[Stage Direction]
Section agreed to.
On section 2-"Authorized assignment."
The CHAIRMAN:: It is suggested by the minister that (yy) should read as follows:
"Official Receiver'' means the person having authority-

Bankruptcy Act
The words "having authority" are dow inserted by motion to amend.
-in the locality of the debtor to exercise the functions of the official receiver for the time being.
The word "authorized" is struck out.


Henry Lumley Drayton: Does this section really carry out the expressed intentions of the minister, Mr. Chairman? For example, when we were discussing the question of custodian and I was pointing out the disadvantage of having creditors placed in that position, he said that it was not necessarily a creditor that the custodian had to be but I think as the clause now reads it makes' the custodian a creditor. It says:
"Custodian" means the creditor duly authorized to exercise the functions of custodian for the time being.
That clause stands, and I think it is entirely out of line with the remarks of the hon. minister.


Lomer Gouin: Subsection 4 of section 10 provides:
Immediately after the acceptance of the authorized assignment, the official receiver shall appoint a custodian whom he shall, as far as possible, select from the most interested creditors.
So it is not necessarily a creditor, but only as far as possible.


Henry Lumley Drayton: I am pointing out to my hon. friend his own section here defining the word "custodian," and it says he shall be a creditor.


Lomer Gouin: We might substitute the word "person" for the word "creditor" in line 12, subsection 2 of the bill. I move accordingly, Mr. Chairman.


Henry Lumley Drayton: That would remove that difficulty.


[Stage Direction]
Amendment agreed to.
Henry Lumley Drayton: I would like to
ask my hon. friend what is meant by section (yy) reading:
"Official Receiver" means the person in the locality of the debtor authorized to exercise the functions of the official receiver for the time being.
What does that mean? It says the official receiver is the person authorized to exercise the functions of the official receiver.


Lomer Gouin: My hon. friend will
find that by clause 31 we are providing for the appointment of an official receiver, and here in (yy) of section 2 we are defining what the official receiver is. We say that the official receiver means the person having authority, that is to say, the person appointed in virtue of that section 31 which I have just mentioned.


Henry Lumley Drayton: This refers not
to the real receiver, but to the stop-gap?


Lomer Gouin: To the real receiver, the judicial officer.


Henry Lumley Drayton: To the man who only acts temporarily?


Lomer Gouin: No. He will be there for all time, even after the discharge has been granted. He will keep the records, the archives. He is a very important officer, and is permanent.


William Alves Boys: Why does the minister use the word "locality?" That is very indefinite.


Lomer Gouin: That means a district. Each province is a district, and we intend to divide them into sub-districts. It means the locality where the assignment is to take place.


William Alves Boys: Do these sub-districts come
down to country or judicial districts?


Lomer Gouin: When we arrive at
that section we can discuss whether in Ontario we shall have, say ten or forty districts.


Henry Lumley Drayton: Does my hon.
friend really think there is any sense in having that clause there at all? It says: The receiver is the receiver.


Lomer Gouin: It is necessary to define who the receiver is.


Henry Lumley Drayton: The definition
is that the receiver is the receiver. I do not know that we are getting any further by that. If you wanted to define it I would have thought you would have had some reference to the other section and say that it was the person to be appointed under the authority of that subsequent section. To say that a cow is a cow does not advance one very far in a definition.


Lomer Gouin: This is not the definition of a cow. It is for the purpose of showing where the assignment shall take place. It must take place in the hands of the receiver in the province.


William F. Carroll: He can only go to one
receiver.


Henry Lumley Drayton: I see.


George Newcombe Gordon: There is an amendment submitted to be known as 2A to be inserted between clauses 2 and 3. It is moved to amend section 3 of the act by inserting the word "generally" after the word "liabilities" in paragraph (j) thereof.
Bankruptcy Act


Lomer Gouin: That is to say, the
debtor cannot be adjudicated bankrupt because he has failed to pay one of his debts. He must cease generally to meet his obligations.


Henry Lumley Drayton: We have not
that in front of us. It is rather hard to follow.


Lomer Gouin: It is subsection (j) of section 3a, which now reads as follows:
If lie ceases to meet his liabilities as they become due.
We propose to include the word "generally" after the word "liabilities." The subsection will then read:
If he ceases to meet his liabilities generally as they become due.
That is to say we cannot adjudicate a man bankrupt because he fails to pay one of his debts; he must cease generally to meet his obligations.


Samuel William Jacobs: Does not the word "liabilities" carry the implication of "generally."


Lomer Gouin: No. There was a judgment rendered by Mr. Justice Fisher in the case of Stevenson vs. Taylor, reported in volume 70, Dominion Law Reports, page 853, where it was decided that failure to pay one debt that was an act of bankruptcy within this paragraph.


William Alves Boys: It seems to me that the minister will cause litigation by using the phrase that a man shall only be adjudicated bankrupt when he "generally" fails to pay his debts. Who knows what that means? It is quite evident it does not mean the failure to pay one debt; does not mean two or three, or twenty? Why not have a provision that if on written demand he fails to pay his debts for a week, or two weeks, or some such period, then he may be adjudicated bankrupt? The word "generally" is very indefinite, and is certain to give rise to litigation.


Lomer Gouin: I do not see what litigation it could give rise to. It is for the judge to reach a decision. A petition is presented to the judge and if there is any objection from the debtor, if he says, "I have not ceased meeting my obligations" the petitioner will give proof that in three, or four, or five instances, he has failed to do so. Then the petition will be granted.


William Alves Boys: There may be an answer to that suggestion or some explanation given. Surely it is better to have the section definite in its wording. The provisions of The Companies Act are somewhat along the line I have referred to. If you do not want to prolong

the situation make the period one or two weeks, but let there be a written demand for the payment of the debt. On failure to pay the debt within a specified time he may be adjudged bankrupt. In that case there will be no doubt about it. Otherwise, I think, you will have doubt, possibly difference in judicial decision, as to what the wording means, and there will certainly be answers and unfounded excuses given for failure to pay the claims which might delay the declaration of bankruptcy.


Lomer Gouin: I thought this was the best amendment we could draft. There certainly were abuses in declaring a man bankrupt because he ceased or refused to pay one of his debts. By saying that it should be "generally" and leaving the matter to the judge to decide we thought there was protection for the creditors and for the debtor.


Samuel William Jacobs: I want to say that the section we are now discussing was inserted in the Bankruptcy Act as an amendment, I think, last year and it is taken word for word from the old Bankruptcy Act which was reproduced in our Code of Civil Procedure.
At six o'clock the Speaker resumed the chair and the House took recess.
After Recess
The committee resumed at eight o'clock, Mr. Gordon in the chair.


George Newcombe Gordon: It is moved that the bill be amended by adding section 2A as follows :
Section 3 o-f this act is amended by inserting the word "generally" after the word "liabilities" in paragraph (j) thereof.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
On section 3-If petitioning creditor is a secured creditor.
John Arthur Clark: Sub-clause (2)-


Lomer Gouin: We should add the words "as far as possible" after the word "custodian" in the third line of sub-clause (2).


John Arthur Clark: What I was going to suggest was that the words in the third line "one of the most interested creditors" should be struck out, and the words "a person qualified to act as trustee" inserted. That would be in keeping with the spirit of paragraph (mm) of clause 2, subclause (2), which was amended by striking out the word "creditor", and inserting the word "person".

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Lomer Gouin: Yes.


John Arthur Clark: The substitution of those words would get over the difficulty with which most of us have been faced, namely that of having competition, lobbying, amongst creditors for the appointment of a trustee. I think it would also tend to reduce the cost of winding up these estates. As was pointed out this afternoon, we are likely, under the amended legislation, to have at least three sets of costs.


Lomer Gouin: Will my hon. friend
be satisfied to accept the substitution of the words "a qualified person" instead of "one of the most interested creditors", but keeping the last part of the clause, that the judge should be governed as far as possible by the wishes of the creditors?


John Arthur Clark: That is agreeable. It would then read:
A qualified person, having regard, as far as the court deems just, to the wishes of the creditors.
I would rather have the words "qualified to act as trustee", because it would then be quite clear to the official receiver that it is the desire of this parliament that, so far as possible, the person who is appointed is a person capable of winding up an estate, because if that official receiver appoints a man who is qualified to act as a trustee and he receives the approval of the creditors in making that appointment, the probability is that when the creditors meet for the first time for the purpose of appointing or approving a trustee, that person who has been appointed as custodian during the interim, will be the person chosen. The chances are also that the costs will be reduced, the efficiency in winding up the estate increased, and at the same time the object which the minister has in view, namely, the consulting of the creditors and giving them ultimate authority, will be accomplished.


Lomer Gouin: I have no doubt that the amendment as we offer it will fully protect the interests of the creditors. I have no wish to oppose any suggestion offered and I am prepared to accept the change. I therefore move that the words "one of the most interested creditors" be struck out of line 3 in subsection 2 and that there be substituted therefor the words "a qualified person."


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
On section 55-Regarding vestment of property in trustee.
John Arthur Clark: What is the effect of this section?


Lomer Gouin: It repeals section 6, which constitutes the authorized trustee or receiver, since there is no longer an authorized trustee, and provides for the substitution of the official receiver and the creditors' trustee. This section also contains provision for stay of proceedings. In the act as it stands now there are three sections relating to stay of proceedings, sections 6, 7 and 13A. These three sections are repealed by the present bill and the whole subject is embraced in section 9.


John Arthur Clark: In line 6 of subsection 3 it is provided that upon the appointment of a
trustee:
-as hereinafter provided, such property shall, subject to the rights of secured creditors, forthwith pass to and vest in such trustee, and in any case of change of trustee, the property shall pass from trustee to trustee without any conveyance, assignment or transfer whatever.
If a company holds property in trust for another, will that property vest in the trustee under the provisions of this section?


Lomer Gouin: The trustee will have the same right as the company had before.


John Arthur Clark: Under the act as amended, I assume from the minister's answer that in future all property which the assignor held in trust for any other person will vest in the trustee?


Lomer Gouin: Yes.


[Stage Direction]
Section agreed to.
On section 6-Stay of proceedings:
Lomer Gouin: This is covered by the new section 9.	'	.


[Stage Direction]
Section agreed to.
On section 9-Limitation regarding remedy of creditor against property or person of debtor:
Lomer Gouin: This section contains the provisions with regard to stay of proceedings. In the case of a secured creditor who takes action against his debtor the court is authorized to stay proceedings when this is considered to be in the interests of the creditors generally.


John Babington Macaulay Baxter: The last phrase in this section, "unless the court otherwise orders," applies, I take it, only to the clause beginning with the words "provided that, subject to the provisions of section forty-six," etc.

Bankruptcy Act


Lomer Gouin: Yes, it applies only to the last clause; it is not necessary in relation to the first.


[Stage Direction]
Section agreed to.
On section 10-Regarding assignment for general benefit of creditor.
Lomer Gouin: We amend this clause so as to make the statement which is to be offered by the debtor less complicated. It would be an impossibility for a debtor to prepare the statement which was provided for in the amendment as first suggested. If the details offered to the receiver by the debtor are not sufficient the statement will be refused. A full statement will be prepared by the trustee when elected.


George Newcombe Gordon: This is the amendment submitted:
That subsection 5 be struck out and the following be substituted therefor:
The official receiver or his nominee shall preside at the first meeting of creditors and shall decide any question arising in connection with the appointment of the trustee by the creditors, and any creditor may appeal from his decision to the court. Upon the appointing of the trustee by the creditors he shall complete the authorized assignment by certifying thereon the name of such trustee, and such assignment shall thereupon, subject to the rights of the secured creditors, vest, as of the date and the acceptance of filing of the said assignment, in the trustee all the property of the debtor.
Shall section 10 as amended carry?


John Babington Macaulay Baxter: I see it is dependent in part on another section, but here is something that seems to be very important. We are in the hands of the official receiver; he has the power to accept or reject an assignment. Now I have to refer to section 65A as enacted by section 31 of this {fill, and there I find that in my province the official receiver is the Circuit Court clerk until the Chief Justice assigns another officer to perform those duties. If the Chief Justice does not assign the duties to any other officer I would have great fear of the consequences sometimes.


Lomer Gouin: I agreed with my hon. friend from South Simcoe (Mr. Boys) that we would not consider this section before Monday evening. Then we might discuss the point now raised by my hon. friend.


John Babington Macaulay Baxter: I think it would be well to reconsider it.


George Newcombe Gordon: Shall section 10 as amended carry?


[Stage Direction]
Section agreed to.

On section 11-Form of assignment.
George Newcombe Gordon: The following amendment is submitted to section 11 (A):
That section 10 (A) of the said act as enacted by chapter 17 of the statutes of 1921 be repealed.
Shall section 11 (A) carry?


[Stage Direction]
Section agreed to.
On section 12-Publication of notice, etc.
Lomer Gouin: This is only a change in the procedure. Notice has to be given by the custodian instead of by the authorized trustee.


[Stage Direction]
Section agreed to.
On section 13-Composition, extension or scheme of arrangement.
Lomer Gouin: In this amendment, Mr. Chairman, we provide that a composition will be allowed only after assignment.


John Arthur Clark: I should like to repeat what I said this afternoon, that I think it is a great mistake, as far as my experience goes at any rate, to force a business concern into bankruptcy before it is allowed to make a composition with its creditors. I had a concrete instance of this last year in Vancouver. A large business firm was in financial difficulties, as many other firms are to-day owing to the general deflation. It had large creditors in Great Britain and throughout this country:	It wanted to continue its business
operations. It made a proposal to its creditors, which after due consideration was accepted by all of them, and to-day that firm is carrying on successfully. Now, had it been necessary for that firm to go into bankruptcy before making a composition its credit would have been destroyed and it would not have been able to carry on business. I am sure many other similar instances might be given. I feel confident that the object which the minister has in view will not be accomplished without grave injustice being caused to business in general.


Lomer Gouin: We have complaints from nearly every province that this clause has been much abused. We are told that debtors will go before a judge, make an offer of composition, have it approved, and then go to their creditors, who are forced to accept the composition. The clause may have been advantageous in the case mentioned by my hon. friend, but generally we understand from traders and manufacturers that a composition should only be allowed to take place after an assignment. Then the creditors are in a position to examine the debtor as to his.

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assets and can judge whether a composition is worth acceptance. I really think we should not refuse the amendment.


John Arthur Clark: I have one other observation to make. My understanding of the act as it now stands is that a debtor must go to his creditors first, not to the court. The court merely approves what the creditors have already approved. The creditors now have all the facilities that have been suggested by the minister. In the instance I have cited the creditors appointed their inspectors and auditors, who made inventories and audits just as they would have done if the estate had gone into bankruptcy. But there was this further advantage, that the public was not informed that the business was bankrupt, and consequently its good will was not destroyed. It was an instance of an unfortunate debtor successfully coming through a trying period. The provision for examination might be made applicable to debtors who seek a composition with creditors, without the necessity of actually making an assignment. If we make the provisions regarding examination applicable, then they appoint their inspectors and auditors who can go into the business and do everything that is now done in cases where the debtor actually makes an assignment. My view is that once an assignment is made the business is destroyed.


Lomer Gouin: Even with the amendment there would be nothing in the law to prevent such a debtor from informally calling his creditors together and trying to make an arrangement with them. If his creditors are willing to accept a composition informally, they are at liberty to do so.


John Arthur Clark: But he cannot go to the court after he has consulted them informally and get the court to approve the compromise. That is what was done in this case.


Lomer Gouin: That is exactly the objection we find-that two-thirds of the creditors should, before assignment, bind the other third. If it is possible for such a debtor to arrive at an arrangement with his creditors, there is no objection to his doing so. It was found in nearly every province that many debtors would take advantage of this provision for composition to do away with their assets, and if there was no settlement between them and their creditors there w'ould be very little left of the estate when they came to assign.


John Babington Macaulay Baxter: I would ask the minister to be good enough to hold this section with the
other one and give it a little more consideration. The section of the original act of 1919 dealing with this subject has been so much amended that it is impossible to follow the amendments. But the original scheme provided for a decision by the majority of the creditors, and that accomplished something that you cannot get by a voluntary agreement, because one creditor or more than ouo standing out may utterly destroy the opportunity. Under the original plan the court did not approve until after the creditors had voted, and there was also a provision by which 10 per cent of the creditors could demand an investigation of the bankrupt under oath. But it might require more than his examination; it might require the submission of his books and the examination of other persons. I suggest that the minister strengthen the provision on that line. You may still allow the benefit of the secrecy and still give the opportunity for getting all necessary information, but, no small group of dissident creditors- who may be dissident only for the purpose of forcing the payment in full of their own debts-can block the creditors who are willing to give the debtor a chance for a fresh start.
Section stands.
On section 14-Security to be furnished by trustee.


John Babington Macaulay Baxter: Should this not provide that the trustee shall give security to the satisfaction of a majority of the creditors? I can well understand that you could not satisfy all the creditors. There should be some rule applicable to the thing.


Lomer Gouin: Section 42 of the act, subsection 14 provides as follows:
Subject to the provisions of this act, all questions at meeting of creditors shall be decided by resolution carried by the majority of votes, and for such purpose the votes of creditors shall be calculated as follows :
For every claim of or over twenty-five dollars, and not exceeding two hundred dollars-one vote*
For every claim of over two hundred dollars and not exceeding five hundred dollars-two votes;
For every claim of over five hundred dollars and not exceeding one thousand dollars-three votes;
For every additional one thousand dollars or fraction thereof-one vote.


John Babington Macaulay Baxter: I still suggest that it would be better to say, "to the satisfaction of a majority of the creditors."


John Arthur Clark: I have given the minister a copy of an amendment which I propose in connection with this section, and which, I think, would overcome the difficulty regarding the creditors which has been pointed out by the hon. member for St. John City. My

Bankruptcy Act
suggestion is that the section read as follows :
Every trustee appointed by the creditors as hereinafter provided shall within seven days give security in cash or by bond of an approved guarantee company, satisfactory to the official receiver, conditioned for the due accounting and for the payment over and transfer of all moneys and property received by him as such trustee.
The objection I see to the amended section as it stands in the bill is that the creditors may not understand the security which should be given by a trustee. The official receiver, on the other hand, is an officer of the court and deals with such matters daily; he knows the nature and the value of the security that should be given in such cases. Then again we may have cases where the custodian appointed is one of the creditors, and he may be a friend of the trustee appointed, and use his influence to see that no security is given or only nominal security, whereas if the matter is left to the official receiver and the different security laid down in the act is taken, namely, cash or the bond of a guarantee company, all would be safeguarded.


Lomer Gouin: The creditors are most directly interested. I understand that my hon. friend wishes the receiver to have a say in the matter, that he should name the company?


John Arthur Clark: Not necessarily. .


Lomer Gouin: That he should approve it.


John Arthur Clark: As to the amount, yes.


Lomer Gouin: I think the creditors should decide that.


John Arthur Clark: I cannot think of any instance in the courts where the court does not say: I leave it to the registrar to fix the security; or the court itself says the security shall consist of a bond by a guarantee company conditioned in such and such an amount. That is the usual procedure.


William F. Carroll: Probably what my hon. friend is afraid of is that the persons fixing the security would be interested parties, which is of course opposed to the ordinary legal procedure.


John Arthur Clark: Yes.


William F. Carroll: That would be the objection I would see.


Lomer Gouin: I understand that my hon. friend wishes the receiver to fix the amount and the form of the guarantee, and not leave it to the creditors?


John Arthur Clark: Yes.


Lomer Gouin: I do not see much objection to that.


John Arthur Clark: And it should be cash or the bond of a recognized guarantee company.


Mr. BLACK (Yukon):: I do not think the security should be limited to the bond of a guarantee company. If the bond is satisfactory to the creditors it does not matter whether it is a guarantee company or not. There are places where these guarantee companies have no office and you could not find an agent to issue a bond. I submit that if the bond is approved by the official receiver, that should be quite sufficient, without limiting it to a guarantee company.


John Arthur Clark: The objection raised by my hon. friend (Mr. Black) is overcome by section 13 with the proposed amendment which provides that all these assignments shall be made in certain localities, and the localities will be such that there cannot be an instance where the registrar carries on where there is not a guarantee company.


George Newcombe Gordon: It is moved by the hon. member for Burrard that section 14 be amended by substituting therefor the following:
Every trustee appointed by the creditors as hereinafter appointed shall within seven days give security in cash or by bond of an approved guarantee company satisfactory to the official receiver conditioned for the due accounting and for the payment over and transfer of all moneys and properties received by him as such trustee.


[Stage Direction]
Amendment agreed to.
Lomer Gouin: Is the hon. member for St. John satisfied now as to a majority of the creditors?


John Babington Macaulay Baxter: This makes it all right. This goes to the official receiver. If it had remained in the original form I would*have thought it advisable to submit an amendment.


George Newcombe Gordon: The next amendment is to provide that the last paragraph of section 14 on page 6 of the draft bill be amended to read as follows:
And provided further that nothing in this section shall have the effect to terminate the security heretofore given by any such person; such security shall be kept in force until such time as the Governor in Council is satisfied that all moneys and properties received by the trustee have been duly accounted for and paid over to the parties entitled thereto.
KMr. BAXTER: I would move to substitute for the phrase "to terminate" the words "of

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terminating." To say "the effect to terminate" is not very good.
Amendment (Mr. Baxter) agreed to.


Henry Lumley Drayton: I would ask the minister if it is intended to have the Governor in Council exercise authority in these proceedings. This would rather indicate that it is. What is the real scheme? Is the ultimate authority with the courts or with the Governor in _Council?


Lomer Gouin: This refers to bonds heretofore given, and that right has already been given to the Governor in Council


Henry Lumley Drayton: This is merely as to past business.


Lomer Gouin: Yes.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
On section 15-Appointment of trustee.
John Babington Macaulay Baxter: I have not had time to examine the voting section very carefully, but 1 do not think there is any provision that a certain proportion of the creditors shall be represented at the meeting for this purpose. Clause 2 says:
A trustee may be removed and another trustee appointed or substituted by creditors by ordinary resolution at any meeting of creditors.
That would leave it open for a meeting at which it would not be anticipated perhaps that such a step would be taken, and you would have the matter dealt with by perhaps a small proportion of the creditors. It seems to me there ought to be some provision so that there would be at least a substantial body of the creditors or of the claims represented, for this is quite an important meeting, and very often there is not much more in these estates than the sort of fighting that goes on between one side that wants one representative and another side that wants another. I know the minister does not want to lend the legislation to the assistance of any party quarrel of that kind.


Lomer Gouin: If a trustee is not honest and the creditors find it necessary that he should be removed, and if they had to wait until there was a full meeting with two-thirds of the creditors represented, it would mean a delay of three or four weeks, and in the meantime, how would you administer?


Henry Lumley Drayton: Is not that covered?


John Babington Macaulay Baxter: You have the security for him if he is not honest.


Lomer Gouin: Yes, but it is not sufficient to have the security. You have to liquidate in the interest of the creditors, and in some cases a delay of three or four weeks might be very injurious to their interests.


John Babington Macaulay Baxter: You are going to give
notice anyway?


Lomer Gouin: Notice is given of the meeting and the creditors have to appear.


John Babington Macaulay Baxter: Then have it put in the notice and it is their own fault if they do not turn up. Provision may be there but I have not been able to follow it up. If you are sure all will get their notices it will be their own fault if they do not turn up.


Lomer Gouin: Suppose at a meeting of creditors they are informed that the trustee has acted dishonestly and they wish to remove him why should it be necessary to wait for another meeting, with special notice to the creditors, to authorize such removal? After all the creditors are there. They are not interested in removing the trustee unless they think he is not acting honestly. He is acting for them, and why make it so hard for the creditors to effect a change if they find it is necessary for the good of the creditors at large?


John Babington Macaulay Baxter: I will only say this: Tin section as drafted allows the trustee to be removed for cause by the court, but it does not require any cause for removal by the creditors.


Lomer Gouin: This is a repetition of the old law.


John Babington Macaulay Baxter: Probably there were faults in the old law and it was amended many times. No doubt it can be amended again.


Henry Lumley Drayton: I do not think this provision is the same as in the old law which appears to be the point taken by the hon. member (Mr. Baxter). Under the old law a majority of the creditors who held one-half, or more, of the amount of the accrued debts could do this. Theoretically, I think the minister is quite right, but the trouble is that this is not a theoretical question. In most of the difficulties with assignments in the past you have two factions trying to get control of an appointee. Now I can see what the objection of the hon. member (Mr. Baxter) is. He does not wish to have these factional fights. He does not want to .have one man
Bankruptcy Act

in one day and somebody else in the next day. We have had that condition in Ontario under the old law.


Lomer Gouin: Suppose we were to say a majority of the creditors.


William F. Carroll: You cannot simply say a majority of the creditors.


John Babington Macaulay Baxter: You might say a majority in number of the creditors who hold accrued debts and so on.


William F. Carroll: I think it should be a majority in interest. For example one person might have control of 75 per cent of the claims. He should have the real interest in the matter. Twelve others might control only 12 per cent of the whole of the claims. I am only suggesting this for the purpose of getting the provision properly worded.


John Babington Macaulay Baxter: I agree with my hon. friend in that respect. I think it would be preferable to have it worded "a majority in amount of the claims" rather than a majority of the number of creditors. But I would suggest to the minister that as there are other sections that are being held this one also might be deferred. I would be perfectly willing, even at the risk of a little more draftsmanship, that in case of dishonesty the creditors could act at once and irrespective of the size of a meeting. Nobody wants to protect dishonesty. On the mere question of substituting one man for another let it be a majority in amount of the estate. In any other case let the matter go to the court.


William F. Carroll: The court may now remove a trustee for cause. Would it be satisfactory to my hon. friend that the trustee might be removed by a majority in number or interest of the creditors at a meeting?


John Babington Macaulay Baxter: I am impressed by what the Minister of Justice says. I do not think that in the case of manifest dishonesty we should hold the creditors back from acting and compel them to go and show that cause to the court. I am willing if dishonesty is established that a bare majority in numbers of the creditors should act on that. What I want to provide against is putting in A to-day and then moving to put in B to-morrow. That is only a mischievous proceeding and helps no one.


Lomer Gouin: We will reconsider the section.
Section stands.

On section 16-Right of manufacturer.


Henry Lumley Drayton: What is the effect of that?


Lomer Gouin: This is to protect the time in which a manufacturer of a patented article must apply to repurchase. The delay runs from the date of the appointment of the trustee rather than from the date of the assignment or the receiving order.


[Stage Direction]
Section agreed to.
On section 17-Sales in the province of Quehec; sales of hypothecated immovable property.
Henry Lumley Drayton: Will the minister explain what change is made here?


Lomer Gouin: In the case of immovable property, whereon a hypothec or privilege exists, such property shall not be sold by the trustee unless he is authorized by the judge after permission given to him by the inspectors to that effect, and after notice having been given to each hypothecary or privileged creditor whose name is entered on the register that the registrars of the registration division are obliged to keep according to the laws of the province. According to these laws when a hypothecary or privileged creditor lodges notice with the registrar in every case where a sale is to take place by the sheriff, and such property is to be sold, the registrar has to notify the creditor. We exact the same from the trustee. He will be authorized to sell such real estate on which there is a hypothec only with the permission of the judge and the inspectors and after notice has been given to the creditors who have such hypothes or privilege on that property. Then he will proceed to sell the property exactly in the same method, 9 p.m. and after the same notice, as when the sheriff effects such sale. He will have to give such notice and to sell at auction, if he is authorized in writing by the creditors to do so, in order to save costs. This is satisfactory, I understand, to the creditors of the province of Quebec who have been asking for such an amendment to protect their rights.


Henry Lumley Drayton: I suppose what my hon. friend means is that preferred creditors in Quebec have been objecting that their rights have been interfered with under this insolvency law?


Lomer Gouin: No. Some properties were sold by the trustees without the

Bankruptcy Act
creditors knowing about the sale, and this sale can free the properties of mortgages, hypothecs, privileges only if they are sold by the sheriff. By these amendments, however, we wish to authorize the trustee to proceed himself with the sale without going to the sheriff; but this he will do only after authority has been given to him by the judge, and by the inspectors, and after notice has been given to the creditors. He will replace the sheriff where such consent or authorization has been given to him.


Henry Lumley Drayton: I suppose the complaint really is that notice was not given in the past.


Lomer Gouin: Under the present law the trustee could not discharge the property; the property had to be sold by the sheriff, and such a procedure is sometimes very expensive. It is in the interest of the creditors, the trustee and the debtor, that the sale should take place at auction by the trustee. The intention is to save money, to protect the rights of the creditors and to protect the creditors generally.


Henry Lumley Drayton: Why cannot you in Quebec make the valid sale that you can make in Ontario under the bankruptcy law?


Lomer Gouin: It is not the same law.


Henry Lumley Drayton: The procedure is under the same bankruptcy law.


Lewis Herbert Martell: The system of procedure is different.


Henry Lumley Drayton: We provide our system of procedure under this legislation.


Lewis Herbert Martell: My hon. friend knows that we in the English-speaking provinces have a certain form of procedure. The courts and officials of Quebec are accustomed to an absolutely different form of procedure. While I quite agree with my hon. friend, who is a lawyer of many more years' standing than I am, he knows very well that lawyers become acquainted with a certain form of procedure. Quebec has become accustomed to a certain form of procedure, and it wants to carry that out. As I understand the matter, in Quebec they had no authority to discharge the debtor; in Ontario they could do that. In Ontario the property could be sold by the sheriff, and in Nova Scotia and other provinces it could be sold by the trustee and discharge given. I understand this section is intended to apply only to Quebec.


Lomer Gouin: That is what I am saying. In Ontario, if a property is mortgaged, a sheriff could sell it and discharge the mortgage. It is the same in Quebec..


Henry Lumley Drayton: What is the
necessity for this change?


Lomer Gouin: To facilitate the liquidation, to give full title.


Lewis Herbert Martell: To save costs.


Henry Lumley Drayton: Under the law of Quebec, is it suggested that, if the judge says so, the property can be sold without being subject to the mortgage.


Lomer Gouin: No.


Henry Lumley Drayton: Then why do we have this trouble about the judge in this clause?
' Sir LOMER GOUIN: The judge cannot discharge the mortgage. We now legislate to this end, that with the permission of the judge, the permission of the inspectors, and notice being given to the creditors, the trustee will have the right to sell and discharge the property, which is something that cannot be done in Ontario.


John Babington Macaulay Baxter: I am not going to attempt to discuss this clause because I know simply nothing about the procedure. I do not even know whether the remarks I am going to make pertain to this particular clause or not. Since the House rose I was in conversation with the hon. member for George Etienne Cartier (Mr. Jacobs), and there are some matters that he wishes to speak of that are peculiar to the law of Quebec. They may o-may not bear upon this clause. I have no: the knowledge to say so. I am going to suggest to the minister that, perhaps, he let this clause stand until that hon. member is here, and if what he wants to say bears upon it, he will have an opportunity of discussing it.


Lomer Gouin: I have seen the hon. member for George Etienne Cartier, and he wishes to speak only as regards the preference of the landlords. As to this, he is perfectly well satisfied, and he made that declaration this afternoon in the House.


[Stage Direction]
Section agreed to.
On section 18-Description of debtor's property.
Henry Lumley Drayton: What is the effect of this amendment?
Bankruptcy Act


Lomer Gouin: Section 18 is to amend section 25 of the act. It is to render the property of a debtor acquired after the assignment and before his discharge, available to his creditors. The present act makes a distinction in this respect between a debtor adjudicated bankrupt and a debtor who has made an assignment. The result is to encourage assignments since the assignor virtually gets a discharge automatically by this provision. There is a distinction between a receiving order and an assignment. Under this amendment all property that is acquired by a debtor up to his discharge goes to his creditors without any distinction between the case of the receiving order and the voluntary assignment.


John Babington Macaulay Baxter: The old section called him a debtor in one line and a bankrupt in another, and this is to call him the same all through.


[Stage Direction]
Section agreed to.
On section 19-Abstract of receipts and disbursements.
Henry Lumley Drayton: What is the reason for the change?


Lomer Gouin: It is to require the trustee to give notice to the creditors with the final dividend sheet, that he will apply to the court on a certain day for his discharge. Subclause (2) amends section 37, subsection (7) of the act to make it articulate with the provisions for the appointment of a custodian and his duties. The authorized trustee hitherto has advertised the assignment and called the first meeting of creditors. This is now to be done by the custodian. It is a change in the procedure.


Henry Lumley Drayton: A distinction is made between the dividends paid. In subclause 2, final dividends are mentioned. The first subclause apparently deals with a dividend, and then the trustee is to give "notice that he will apply to the court on a day named therein for his discharge." He would not apply until after the final dividend was paid, would he? Or does that refer only to the final dividend? It does not read that way in the amendment as drawn, but it may have that effect.


Lomer Gouin: When the trustee pays his last dividend he gives notice to the creditors that at a certain date he will apply to the judge for his discharge.


Henry Lumley Drayton: I do not think that the proper side notes have been given. The first one refers to the abstract of receipts 
and disbursements. Is the minister quite sure that subsection 2 refers to cases of final dividends?


Lomer Gouin: The side note is not correct.


[Stage Direction]
Section agreed to.
On section 20-Remuneration of trustee.
Lomer Gouin: This enables the inspectors and the court to give to the trustee a remuneration in excess of 5 per cent, which in the case of small estates has proved inadequate. If, for instance, an estate realized $1,000, five per cent would only be $50, and I do not see how a trustee could be expected to act for such a remuneration. It is deemed wise to leave it to the court and the inspector.


[Stage Direction]
Section agreed to.
On section 20A-Release of security.
Lomer Gouin: This provides for the release of the security on the discharge of the trustee.


Henry Lumley Drayton: We have not this section before us but I presume the minister can assure us that this is the purpose of it.


Lomer Gouin: Yes, that is the purpose.


[Stage Direction]
Section agreed to.
On section 21-Application of trustee for discharge.
Lomer Gouin: It is provided that the trustee shall apply to the court for his discharge within fifteen days of the payment of the final dividend.


John Babington Macaulay Baxter: That is, for the discharge of himself as trustee?


Lomer Gouin: Yes. We propose now to make the period thirty days. We considered that fifteen days was not long enough, and as the trustee could not be appointed in any other case until he got his discharge it was represented that this provision might work a hardship on trustees. If a judge were not in a position to render judgment in that time a trustee might be deprived of a valuable appointment. We therefore provide that the trustee shall apply within thirty days and if the charge is refused he shall be ineligible to act in any subsequent case.


Henry Lumley Drayton: That/ is much better.


[Stage Direction]
Section agreed to.

Bankruptcy Act
On section 22-Meetings of creditors.
Sir LOMER GOUiN: By this we propose that the meeting of the creditors shall take place at the office of the receiver, who shall decide any controverted points; and there is an appeal to the judge from his decision.
John Arthur Clark: Is it the first meeting of the creditors that is to take place in the office of the receiver?


Lomer Gouin: Yes.


John Arthur Clark: Suppose a business has failed in the town of Barrie, say. which is an instance that was suggested this afternoon; there is no local registrar or official receiver there. The official receiver for that particular locality is in the city of Toronto, and it is reasonable to think that the major portion of the creditors would be located in Barrie. Is it intended that these creditors, in order to attend the first meeting of creditors, must journey to Toronto to secure representatives there?


Lomer Gouin: Does the hon member think that the receiver should go to Barrie?


John Arthur Clark: Frankly, I say that would be preferable, especially in view of the fact that the official receiver can now appoint someone to represent him.


Lomer Gouin: It is necessary to fix some place where the creditors shall meet, and if the meeting is to be official and of that solemn character which it should possess, there is no better place at which it could be held than the office of the receiver. If the creditors do not wish to travel they can very well send proxies. There are creditors all over the country in every province and I do not see really how you could have a better arrangement than this.


John Arthur Clark: I am thinking more particularly of small businesses in small communities. I do not think that this applies to my own district, but it certainly does apply to smaller communities all over the country where small businesses fail and go into bankruptcy. The creditors might be located in a little town and there would not be much solemnity to the occasion if they had to journey a hundred, or fifty or twenty-five miles to the office of the receiver to attend a meeting of creditors. As a matter of fact, I believe that in many instances the estate would be so small that the travelling expenses of the creditors in going to the office of the official receiver night be equal to the whole estate.	.


Lewis Herbert Martell: Does not my hon. friend think that if these things may occur in certain districts it is a good practice to have a prothonotary act as official receiver? He is a clerk of the court, and everyone who goes into court is struck by the solemnity of the f roceedings.


John Arthur Clark: I think my hon. friend misses my point altogether. I am directing attention to cases where the official receiver has no office in the town. Take my hon. friend's own community, for instance. Supposing the nearest official receiver resided in the city of Halifax, and the creditors of the insolvent concern lived in his home town, they would all have to journey to Halifax to attend the first meeting before the official receiver. That is the situation I am presenting to the minister. It would be most unreasonable and unjust to the creditors, in many instances the expense would be prohibitive to them, and as for the issuing of proxies, through the failure of any of the creditors to attend the first meeting there would be no one available to represent them.


Lewis Herbert Martell: We may not have any official receiver in my particular county. That is one reason for putting the matter in the hands of the prothonotary. But supposing a merchant fails in my county, the majority of the creditors are very apt to be resident in Montreal, Toronto and other large centres. Would my hon. friend say that under such circumstances the official receiver should journey to those cities? Why not let the creditors retain some good local solicitor to appear before the court in their behalf? When the clerk of the court is clothed with the authority of an official receiver there is always due solemnity about the proceedings.


John Arthur Clark: If my hon. friend is looking for a job this would be the best way of getting one.


Lewis Herbert Martell: No, I am not looking for a job.


Henry Lumley Drayton: If the minister is determined that we shall go through these meaningless forms before we get down to business, I do not know that he can adopt any better course. Apparently because there is difficulty in Quebec he thinks it perfectly reasonable that we should inconvenience creditors in Ontario by requiring that these two unnecessary things be done, involving delay and expense. As my hon. friend to my right (Mr. Clark) said, you may have all your creditors at a place where there is no receiver. We were discussing a similar case
Bankruptcy Act

this afternoon-not a hypothetical case, but an actual case of a man failing in northern Ontario and not a single creditor living within one hundred miles of his home town. There is the option on one hand of one person taking a railway trip, and the option on the other hand of perhaps twenty-five creditors or more taking the railway trips. Well, if we are to have these troubles perhaps it is just as well that the twenty-five should be obliged to travel instead of one.


Lomer Gouin: It is precisely for
those creditors who live far from the receiver's office that we make such a provision to protect them. We are not legislating especially for Quebec, we are considering the whole Dominion. It was represented to us that the present law was abused, that authorized trustees would sometimes decide to have a meeting of creditors where it would be impossible for them to attend. By this amendment we provide that the first meeting of creditors shall take place at the office of the receiver, which is supposed to be the centre of the district. Taking Ontario-leaving out Quebec for the moment-Toronto is the centre. It is not the intention to bring all creditors to Toronto; we have in mind by a later section to divide the province into various districts and to locate a receiver in the centre of each. I do not know that we could choose a better place for meetings of creditors than the centre of the district in which the bankruptcy takes place. This amendment is not to embarrass creditors, it is to protect them.


Henry Lumley Drayton: The case I put to my hon. friend was that the creditors were already in Toronto. The insolvency occurred at Sault Ste. Marie, where there is a local registrar and where you have the assignment, but all your creditors are hundreds of miles away down in Toronto. Under this law they would have to go to Sault Ste. Marie.


Lomer Gouin: No.


Henry Lumley Drayton: It may be very good for the creditors' health that they should have to take these journeys at their own expense on top of the money which they are already out, but I really do not think they will be of this opinion. So far as geographical boundaries are concerned, my hon. friend is going to have trouble. The centres of commerce are not fixed by geographical boundaries. You will have a place in a particular section of territory from which all your freight and all your credit movements will radiate, and if that be on the out-

skirts of the community instead of in the centre, as he says that i^ the place where the convenience of creditors should be considered. But I suppose my hon. friend has absolutely made up his mind that all this has to be done? I was not in the House for a few minutes after dinner and do not know whether in the interval the section as to the appointment of local registrars was adopted.


Lomer Gouin: That is to be considered on Monday.


Henry Lumley Drayton: Then perhaps
we are considering all these sections in advance of time, because they will only be important if my hon. friend is determined to put through the other section.


Lomer Gouin: If we leave the
law as it is to-day we are entirely in the hands of the receiver. My hon. friend speaks of the interests of Toronto creditors. Well, supposing an assignment is made at Sault Ste. Marie in favour of the official receiver, who would be the registrar. With the law as it is to-day he might decide to have the first meeting of creditors in Winnipeg or Montreal. Would that be fair to the creditors generally?
Sir HENRY DRAkTON: No, absolutely unfair, and my hon. friend is giving us one of those hypothetical cases that we need never worry about. All these men want to hold their jobs. The receivers, who can be thrown out by the creditors, call their meetings in such a way, in any case I ever heard of, as to help the creditors and make their course easy. Men do not usually go against their self-interest. If my hon. friend has a case of a man failing at the Soo and having creditors' meetings called in Winnipeg or in Montreal, I could understand his position, but I am afraid he will never find such a case.


Lewis Herbert Martell: Does my hon. friend not think that the creditors should seek the court rather than that the court should seek them? Under the scheme he submits the registrar or referee would go all over the country to discover all sorts of claims some of which might be purely fictitious, devoid of credit from every possible point of view. The registrar gives due notice; the creditor has to file his claim. If the registrar goes from place to place in order to find out who the creditors are he will run up a bill of costs which will derogate from the interests of the other creditors. So that when notice is given of the locus in which the registrar is situated, every person interested should go to that

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locus to put in his claim there. That is what the minister is after.


Henry Lumley Drayton: I am afraid my hon. friend was out this afternoon when I was addressing myself to this question. If he had been here he would know that I did not want any pesky registrar at all. I do not want the method of appointment changed.


Lewis Herbert Martell: With all due deference to my hon. friend, I say that the proper registrar is the prothonotary the clerk of the court, for these officials are known to every person in the municipality or county.


George Newcombe Gordon: Clause 2 as amended, carried.


Henry Lumley Drayton: On division.
On section 22, subsection 4-voting by proxy.


Henry Lumley Drayton: What is the import of the amendment?


Lomer Gouin: Section 42, subsection 13 provides for the lodging of proxies with the trustee; they are now lodged with the custodian. That is the only change.


George Newcombe Gordon: Shall the subclause
carry?	[DOT]


Henry Lumley Drayton: I think we had
better have all these carried on division, Mr. Chairman.


George Newcombe Gordon: Carried on division.
On section 23-proof of debts.


John Babington Macaulay Baxter: The original act provides
as follows:
A debt may be proved by delivering or sending through the post in a prepaid and registered letter to the trustee, a statutory declaration verifying the debt.
Now, the amendment makes it optional to send the proof either to the custodian or to the trustee. As I understand it, when the trustee is appointed the custodian ceases to function. Suppose someone sends proof of debt to the custodian after that official ceases to function; is there anything, to tell the excustodian to hand these things over to the trustee?


Lomer Gouin: There is no special provision for that. If my hon. friend thinks it is necessary, I would be prepared to accept the suggestion.


John Babington Macaulay Baxter: Does the minister not think it would be well to do it, just to stop carelessness? However, so far as I am concerned the section may pass.


Henry Lumley Drayton: This is one of
the difficulties of the proposed changes: you have one man here to-day and another tomorrow, and the people know they have the right to send proof of debt to either. I think my hon. friend is going to find difficulty with his scheme.


[Stage Direction]
Section agreed to.
On section 24-secured creditor to value of
security.
Lomer Gouin: This amendment is to require secured creditors to value securities only in the case of a demand by the trustee. Heretofore the secured creditor has been obliged to value the securities within thirty days of the receiving order or assignment on penalty of being disentitled to rank as an ordinary creditor if his claim is in excess of the value of the security. As the secured creditor may not know of the insolvency it is unfair that he should be penalized for failure to value within thirty days; it is sufficient to compel him to value when the trustee so demands. If the trustee asks for a valuation and if the creditor neglects to value, then he is disentitled to rank as a creditor for the surplus over the security. This subsection is also amended to make it clear that the secured creditor shall be entitled to receive dividends only in respect of the balance of his claim in excess of his valuation; this resul' is doubtful under the present section. It i? further provided that subsection 3 shall be repealed, which requires a secured creditor tc identify the property covered by the security within ten days on penalty of forefeiture. He must, of course, identify the property if the trustee contests his claim, but it is manifestly unfair to compel him to identify within ten days under penalty of forfeiture. Suppose a creditor pretends that he has a lien on certain goods. If he files his claim with the trustee, the trustee will either accept his claim or contest it. If he contests it, then it will be the duty of the creditor to identify his property, but if his claim is contested we do not see why the creditor should proceed to such identification within a period of ten days.


Henry Lumley Drayton: Would it be
necessary in both cases? Supposing you have a claim on goods. Unless those goods are identified, unless it be that under the new act it is recognized that we are going to have delay, and I think we are going to have it, surely one of the very first things is to take an inventory of your goods, put your valuation upon them and the like. Get to know what the assets are, but you cannot do that
Bankruptcy Act

unless you first find out whether those assets are subject to lien. I would have thought that was one of the first things to make clear. I would have thought that the trustee would have a right to try and make the creditor distinguish the goods he claims.


Lewis Herbert Martell: Surely the hon. member knows that the first thing to do is to take an inventory of the goods. Subsequently you find out what the liens are, but at the outset you take a full inventory of all the assets. When it is known what stands against them, that is submitted to your creditors.


Henry Lumley Drayton: Is that to be for an indefinite date? I suppose my hon. friend thinks it ought to be done some time. Before, it had to be claimed within ten days. Does he think that is too soon? But surely one of the first things for the trustee to do is to know what the goods of the insolvent really are. I would have thought that was absolutely elementary.


Lewis Herbert Martell: That is plain.


Henry Lumley Drayton: Surely then the law ought to stand and the man ought to say: These are my goods, and not the goods of the insolvent.


Lewis Herbert Martell: Your liens come in after the inventory is made.


Lomer Gouin: If there is a claim filed by the creditor it is accepted or refused. Simply because the creditor goes to the trustee and says: I hold security on such-and-such goods, that does not change the position. By the mere fact of the creditor filing his claim, the trustee knows what the claim is, and he is in a position to contest the same if so disposed. Because a claim is filed it does not necessarily have to be accepted. I do not see what difference it makes. Why force a creditor who has a lien to proceed to such identification under a penalty of losing his privilege unless he does it with-,in ten days?


Henry Lumley Drayton: What length of time does the minister think should be set apart for the identification of these lien goods? Sooner or later it has to be done. How long a time does the minister want?


Lomer Gouin: As soon as the creditor claims, the trustee is informed. We are told by men who have had a very large practice in bankruptcy matters that this is of no use, that it is only a cause of trouble. It does not help in the liquidation, and that is why we have brought down the amendment.


George Newcombe Gordon: Shall the section carry?


Henry Lumley Drayton: I do not think we did more than discuss the first section.


Lomer Gouin: Subsection 2 amends subsection 5 to enable the trustee to sell any goods the creditor fails to value. The creditor has to value his property if he is asked to do so. This is to supply an omission in the existing law which does not provide for the case where the creditor omits to value. If the creditor omits to value the trustee cannot sell. We provide to this effect, that whether he values or not the trustee will have the right to sell.
Subsection 3 amends subsection 7 of the act, which provides for substituting the amount realized by the sale of a security for the amount at which the creditor valued such a security, to make it clear that such substitution extends to sales by the trustee under subsection 5 of the act as well as to sales by the creditor. This is necessary by the amendment to subsection 5.


Henry Lumley Drayton: My hon. friend this afternoon or this evening dealt with the question of hypothetic and mortgage properties in Quebec. I suppose he there was dealing with claims similar to those dealt with by this section, and we had machinery provided for in the case of Quebec. Is there any difference made as a result of these amendments in the ultimate solution of these questions as between Quebec and the other provinces?


Lomer Gouin: No.


Henry Lumley Drayton: So far as the results are concerned similar justice is done all over the country.


Lomer Gouin: Yes.


Henry Lumley Drayton: I just wanted to make sure that that would be the effect of this. I confess I cannot make it out.


Lomer Gouin: There is no difference. Subsection 4 amends subsection 8 of the act to enable a creditor to amend his valuation at any time before sale instead of within two months. If the property has changed in value there is no reason why the creditor should not be permitted to change his valuation. He is limited to two months under the present law, but we say that he should have the right to change his valuation whenever he finds it proper to do so. There will be no loss to the creditors by his doing that.

Bankruptcy Act


Henry Lumley Drayton: The only trouble I see is this, and I have no doubt my hon. friend has considered it:	Ought not these
things to be wound up a little quicker than a delay of two months would render possible? Why should there be so much delay?


Lomer Gouin: This amendment does not extend the delay.


Henry Lumley Drayton: You do not think it will?


Lomer Gouin: Not at all. If the sale was to take place in six weeks the whole thing is finished.
Section agreed to on division.
On section 25-Wife's claim.


Henry Lumley Drayton: What does the minister say as to this?


Lomer Gouin: Section 25 amends section 48, subsection 2. It is to repeal the provision whereby a wife's claim, for money lent her husband for the purposes of his business is postponed until other creditors are paid. As the wife is frequently unable to refuse to make such a loan it is thought to be unfair that she should suffer under the existing disadvantage. This was explained by our friend from Dorchester this afternoon. He thought the wife should be protected.


Henry Lumley Drayton: I just wanted to make sure of one thing there, Mr. Chairman, and that is what the minister's opinion is. I have not the acts before me as to the effect of this amendment, whether the old laws which permitted all kinds of abuses to be worked as against creditors would again be put into effect, or whether this would be absolutely confined to bona fide approved claims of the wife in the shape of loans to the husband's business.


Lomer Gouin: The amendment to that effect is very clear.


Henry Lumley Drayton: It reads that way here, but I have not the act itself before me and I wanted your opinion.


[Stage Direction]
Section agreed to.
Sections 26 and 27 stand.
On section 28-Examination of bankrupt
by official receiver.
George Newcombe Gordon: It is proposed to strike out subsection 1 and replace it by the following:
Subsection 1 of section fifty-four, as amended by chapter eight of the statutes of 1922, is repealed and the following substituted therefor:
54. Where a receiving order or authorized assignment is made the bankrupt or assignor shall present himself before the official receiver who shall examine him as to the causes of his insolvency and the disposition of his assets and shall put to him the questions provided by the general rules or questions to the like effect. The official receiver shall make notes of such examination, and shall communicate them to the creditors at their first meeting. If the bankrupt or assignor fails to present himself at such an examination within three days from the making of the receiving order or the filing of the assignment, the court may by warrant cause him to be apprehended and brought up for examination, and may order him to be committed to the common goal of the judicial district in which he resides for a term not exceeding twelve months. ' Furthermore, the bankrupt or assignor shall make out and submit to the Official Receiver a statement of and in relation to his affairs in the prescribed form verified by affidavit and showing the particulars of the debtor's assets, debts and liabilities the names, residence, and occupations of his creditors, the securities held by them respectively, the dates when the securities were respectively given, and such further or other information as may be prescribed by the court. Such statement shall be submitted within seven days from the date of the receiving order or assignment, but the court may for special reasons extend the time. It shall be the duty of the custodian to verify the debtor's statement of affairs and to make an inventory of his assets.


Lomer Gouin: This amendment is to require the bankrupt or assignor to present himself before the official receiver within three days of the making of the receiving order or assignment to be examined as to the disposition of his assets and the causes of his insolvency. This is the English law and it is considered a very important feature of their act. The official receiver is to make notes of the examination and to communicate the same to the creditors at their first meeting.


Henry Lumley Drayton: I was trying to follow the amendment as it appears in the bill, but I ran out of type here in a very short time. I think my hon. friend has got some long typewriten amendment he is asking the committee to adopt.


Lomer Gouin: The amendment was read by the chairman.


Henry Lumley Drayton: Perhaps we might have it read again.


George Newcombe Gordon: It is proposed to strike out the section as it appears in the bill and substitute a new one.


Henry Lumley Drayton: No wonder I experienced considerable difficulty in trying to follow it as printed in the bill. I wonder if my hon. friend cannot have copies made?


William F. Carroll: I quite agree with the hon. member. In order to follow intelligently the progress of an important bill of this kind we should have the data the minister has before him, or it should be in the possession
Bankruptcy Act

of the clerk of the committee and available to members. While not objecting to the present proceeding, I think that in future when important bills of this kind come down we should have all the necessary information before us in order to know exactly what is being done.


Lewis Herbert Martell: How can my hon. friend have placed in his hands all the data that the minister has? The minister has come here with the notes he has read showing why he desires these amendments. I do not see why the minister should be called upon to supply every member with copies of his notes.


Lomer Gouin: I will give my hon. friend (Sir Henry Drayton) a copy of the amendment if he wishes it.


Henry Lumley Drayton: From my reading of the amendment which has been handed to me by the minister, it appears to provide for an immediate examination which, of course, is a very good thiDg. Is this the English form of procedure?


Lomer Gouin: That is the English law.


Henry Lumley Drayton: Can the minister tell us from memory what the real change is as compared with the present law?


Lomer Gouin: Under the present law the debtor can only be examined after a vote of the creditors or inspectors. By this amendment we are providing for a compulsory examination immediately after the assignment, so that the creditors when they meet, will be informed of the position of the estate.


John Arthur Clark: I have not had an opportunity of studying this amendment carefully but I think the objection I raised to an earlier section also applies to this, namely, that the debtor may have to travel one hundred miles or more for the purpose of this examination within three days of the assign-
10 p.m. ment. I think that is correct, is it not? Now, it is safe to assume he will come down say to Toronto from Barrie, and attend before the official receiver for examination. The official receiver knows nothing about the particular business in question, and is not a qualified person, I should say, to examine the debtor in regard to it. The result will be that the examination will be conducted by a man who knows nothing about the business.


Lomer Gouin: I may say in answer to my hon. friend that the questions will be

put by the official receiver in the same form as provided for in the English law.


John Arthur Clark: Is that provided for by the bill?


Lomer Gouin: In effect, yes.


Henry Lumley Drayton: I wonder if the minister thinks that is a sufficiently searching examination. I confess I did not realize for one minute that the only kind of examination that the creditors would get the benefit of would be an examination conducted by a registrar of one of our courts. That would be a kind of cross-examination that would generally take us virtually nowhere. It would never get under the hide of a fraudulent bankrupt.


Lomer Gouin: This does not deprive the creditors of examining the debtor afterwards. They may petition the court, and they will be granted that opportunity of examining the debtor at any time they wish.


John Arthur Clark: The circumstances in this country are quite different from those in England, because in England the distances are nothing. Furthermore, the centres there are large and, therefore, it is safe to assume that there will be an official receiver in every centre and that a debtor will not have to travel far as in this country. Therefore, if the questions are of a stereotyped nature, why not have them printed, send them to the local registrar and let the debtor fill out the answers to the questions and swear to them before the local registrar? I can see many instances where the poor debtor will not have the money to travel, and I assume that the court or the country is not going to put up the money for him to make such a trip.


Lewis Herbert Martell: My hon. friend undoubtedly desires to have the most searching examination. All parties have the right to be represented by counsel, to examine and cross-examine. Then if the registrar rules against them, they have a right to appeal against his decision to the court. What more does my hon. friend want? What right have people who may have a good claim to pay the expenses of a registrar travelling throughout the country?


John Arthur Clark: I am not suggesting that the registrar should travel in order to do this. I am making this suggestion in order to save money for the creditors. I am suggesting that the local registrar is a perfectly fit and proper man to take the examination, because it is, after all, only a stereotyped examination.

Bankruptcy Act
I think I am correct in saying that these questions take a set form. Therefore, the debtor can write down his answers just as easily as he can deliver them by word of mouth.


Lewis Herbert Martell: If the examination is stereotyped and stereotyped questions are set, a solicitor may advise his client, who may be the debtor, what sort of answers to give that may be evasive, I do not think he should be given the form of questions at all.


John Arthur Clark: I am not presuming fraud on the part of the debtor or his counsel.


Lewis Herbert Martell: In the case of the average bankrupt there is probably an element of fraud.


John Arthur Clark: I am trying to get an examination that will be of some value, and I am endeavouring to save some money to the estate. On this preliminary examination, is it provided for in the legislation that debtor and creditor shall be represented by counsel?


Lomer Gouin: The debtor can be assisted by counsel if he likes. The hon. member has objected that the debtor may not have enough money to travel from his domicile to the receiver's office. If the debtor is as poor as that, I do not suppose the creditors would be very anxious to examine him. All we do is to protect the creditors, and I do not see why my hon. friend should be so much interested in the debtor. It is all very well to see that the debtor gets fair protection. On the other hand, he is generally the one who is the cause of loss to the creditors, and it is only just and right that the creditors should have some opportunity of examining their debtor and knowing what he has done with their property, because, after all, it is their property he has used and disbursed.


John Arthur Clark: I think the minister has
misunderstood me. I am not objecting to the creditors having an opportunity to examine the debtor. I am not thinking of the interest of either; I am trying to think of the interests of both. If we can save money, that means that the creditors will receive a larger dividend. On the other hand, I can think of many instances where a debtor, when he has come to the state where he becomes bankrupt, may have assets which are worth a great deal of money, but he may be without a cent of ready cash, and within three days he may be in a fix where he is subject to a penalty through no real fault of his own. What I want to get at is this. If this preliminary examination is going to be an extensive one, conducted in the presence of counsel, it is going to be more than a preliminary affair; it is going to be an exhaustive and expensive affair and to last over a considerable period of time. If it is going to be an exhaustive affair, it should not take place within three days of the assignment, because the registrar will not be sufficiently seized of the nature of the business to enable him to carry on this examination. If, on the other hand, it is going to be only a preliminary affair, with stereotyped questions, the same questions put to one debtor that will be put to all, that can be done just as well on a printed sheet. Let the debtor write his answers down and swear to them before a notary public. If that is not considered satisfactory, then the debtor should be entitled to attend before the nearest local registrar of the Supreme Court to the place where the debtor is living, so that these questions may be put to him, and then he can take his oath and give his answers to the questions. I am not clear, under the clause of the bill, whether this is to be in the nature of a preliminary examination, or whether it is intended to be an exhaustive examination in the presence of counsel representing all parties.


Lewis Herbert Martell: Would my hon. friend,
if he were going to court, give beforehand to the party opposite the questions that he was going to ask? If you send out a number of stereotyped questions-


John Arthur Clark: I am asking the minister
that question.


Lomer Gouin: There are formal questions to be put; if the receiver finds' that he should put other questions, he will be at liberty to do so.


Lewis Herbert Martell: The parties will have
the right to be represented by counsel.


Henry Lumley Drayton: Has the minister really found any necessity for this in administering the act? This is not what I was thinking of-a full examination; it is' a matter of the purest formality. I assume there is a series of questions one would naturally put to a debtor: what assets he has, the reasons for his insolvency, questions looking to whether or not he has made disposition of his assets, a general discovery of assets. That is what such an examination amounts to on a regularly stereotyped line. Has the minister found any necessity for that? At one time I had a good deal to do with insolvency matters, but that is so long ago now that I am not. as familiar with the subject as I used to be. But my recollection is that examinations that
Bankruptcy Act

ever amounted to anything always occurred after something had been found out. An examination as a rule is no good at all except in cases where there is fraud of some kind, either in getting rid of property, or transferring property or in preferring certain individuals. My experience was that you never got on to anything like that, unless you knew just what you were after and worked out a good line of cross-examination. I believe that this examination by itself might be more educative to the dishonest debtor than useful to the creditor. Has my hon. friend found any troubles arising because we have not had this complete examination in the past?


Lomer Gouin: Yes, we were told by some trustees that such an examination should be required in all cases, and from what we have learned from some interested creditors it is very important that thorough examinations should be made. My hon., friend, with the experience that he has had in dealing with such cases, knows as well as I do that it is always well that creditors should have the right to examine the debtor-


Henry Lumley Drayton: Oh yes.


Lomer Gouin: -so that they may know what he has done with his property-


Henry Lumley Drayton: Undoubtedly.


Lomer Gouin: -and may ascertain the details of different claims that might be filed against the estate by some of his family or his friends. I do not understand why objections should be raised to the amendment we now offer. This is the law as it is in England and it has been found of great use to the creditors. We have been informed that it would be of some advantage to creditors in this country if it were embodied in our legislation, and that is why we have proposed it. If, of course, it proves of no benefit to the creditors in any case it will not be put to use by them. But when we are asked to pass this provision, which is the law in England, and which the experience of everyone who has practised at the bar for some years recognizes to be useful, it seems to me that it should be accepted without further discussion.


Henry Lumley Drayton: My hon. friend says that if the creditors do not want to use it they will not, but my recollection is that the debtor is obliged within three days to present himself for examination, which examination must be made.


Lomer Gouin: Yes.


Henry Lumley Drayton: If my recollection is right, every bankrupt is bound to do this.


Lomer Gouin: Yes.


Henry Lumley Drayton: Then it is not a matter of option; the examination must be made. My hon. friend has entirely mistaken the object of my inquiry. I want to find out, where an examination is not calculated to discover fraud, whether it has been found necessary to have such an examination at all. If the minister says it is necessary, very well.
I entirely agree that there is a necessity for a thorough examination, and if this were to be a real examination conducted by counsel,
I could see the utility of it. I find, however, that it is to be a stereotyped form of examination.


Lomer Gouin: There is nothing to prevent an examination on any grounds.


Henry Lumley Drayton: Suppose a man comes within three days and makes a discovery which the registrar thinks is a full and perfectly good and free discovery. The registrar thinks he is a fine gentleman, and there the matter ends. Does that stop the creditors theflaselves from conducting an examination on their own account? Supposing the creditors themselves desire to examine the man a month afterwards, can they do so, or is the right of examination exhausted by this inquiry on the part of the registrar?


Lomer Gouin: They can examine him whenever they like. As to the question of travelling, it is provided that the assignor shall present himself to the receiver within three days. As he must assign personally into the receiver's hands, there is no reason why he should not ask to be examined on the same day. One trip would therefore be sufficient for both purposes.


Henry Lumley Drayton: I was concerned in making sure of the right of further examination. What section gives that right?


Lomer Gouin: Section 56.


[Stage Direction]
Section agreed to.
On section 29-Examination of Debtors.
Lomer Gouin: We are adding a new subsection 2. The first part provides for the * examination of all persons who are supposed to know anything about the affairs of the assignor. Under the present law, only the employee of the assignor and the assignor himself may be examined. We propose to amend it to give the right to the creditors to examine any person who may be thought to possess any knowledge of the affairs of the assignor. The last part of the amendment provides that the debtor shall be examined as to

Bankruptcy Act
the administration, of his affairs. He can ask for protection, as the law now stands, against prosecution in any criminal court. By this amendment we propose that any information that he may give under oath may be used by the creditors against him in any action they may take. If he is so protected that no such use may be made of any of his answers, I do not very well see that there would be any use in the examination.


Henry Lumley Drayton: Mr. Chairman, the section of which you have been kind enough to let me see the typewritten copy does not seem to me 'to cover one of the points raised by the hon. minister. It says, "Any person liable to be examined under the provisions of this section." Is there another amendment for our consideration as to what people are liable to be examined?


Lomer Gouin: If you read the beginning of section 29 in the bill the amendment will be clear.
v Sir HENRY DRAYTON: Then the context does not show us exactly how that examination is to be held. Is it to be taken before a special examiner under the ordinary rules? For example, in Ontario whom will the examination be held before?


Lomer Gouin: (reading.)
Where a receiving order or an authorized assignment has been made the trustee upon ordinary resolution passed by the creditors present or represented at a meeting regularly called or upon written request or resolution of a majority of the inspectors of the estate may without order examine under oath before the registrar of the court or other prescribed person the debtor or any person who is or has been an agent, clerk, servant, officer, director or employee of the debtor respecting the debtor, his dealings or property,
It will be the same examination before the registrar or any other officer designated.


Henry Lumley Drayton: Then who will determine what the word "reasonably" means, having regard to the new section? Have these words been given any judicial interpretation- "any person reasonably thought to have knowledge of the affairs of the debtor." That may be used to very great advantage or very harshly, or it might be made merely a source of expense.


Lomer Gouin: He will appear before the registrar or some other officer, and if he has any objection to raise he will raise it and the registrar will decide.


Henry Lumley Drayton: I would have thought that the ordinary way of proceeding there would be to get from the registrar authority to bring the man before him, and
that he would not grant this authority unless it was shown prima facie that the man sought to be examined had some knowledge of the affairs of the debtor. It looks as if subpoenas could be issued for anybody.


Lomer Gouin: I do not think that creditors would be interested in calling any persons merely for the pleasure of annoying them.


Henry Lumley Drayton: The mere issuing of a subpoena would not cause the attendance of any man unless it was reasonably shown in the first instance that he had some knowledge of the debtor's affairs.


Lomer Gouin: What does my hon. friend suggest?


Henry Lumley Drayton: I was asking
my hon. friend. Frankly, I confess I have not had very much chance of considering this.


Lomer Gouin: This is not an
amendment; it is in the bill.


Henry Lumley Drayton: But I am afraid this is the first time I have read it. It certainly seems to me that if the section goes through it will not do what my hon. friend expects. Before anyone could be in default under a subpoena it would have to be shown that he was a person who could reasonably be thought to have knowledge of the affairs of the debtor, and that would have to be established prima facie some way or other.


Lomer Gouin: Does my hon.
friend wish to let it stand or not?


Some hon. MEMBERS:: Carried.


Henry Lumley Drayton: I hope my hon. friend will come to the conclusion that we are really helping him if we say, "passed on division."


Lomer Gouin: I hope my hon. friend will do a little more in that direction.
Section agreed to on division.
On section 30-Powers of court regarding conditional discharge:


Lomer Gouin: This is to amend
subsection 5 of section 58. The subsection reads as follows:
The court shall refuse a discharge in all cases where the bankrupt or authorized assignor has committed any offence under this act or any offence connected with his bankruptcy or assignment or the proceedings thereunder, unless for special reasons the court otherwise determines, and shall on proof of any of the facts mentioned in the next succeeding section, either-

Bankruptcy Act

We propose to strike out the words, "unless for special reasons the court otherwise determines."


[Stage Direction]
Section agreed to.
On section 31-Officer to be assigned to duty by Chief Justice, etc.
Lomer Gouin: Stands.
On section 32-Tariff of costs and fees.


Lomer Gouin: This is to enable
inspectors of the court to approve payment of legal fees in excess of 5 per cent of the gross proceeds of the estate. In some cases assets have been lost because there was no provision to pay the necessary legal charges to recover them.


John Arthur Clark: I would suggest to the minister that he strike out the words "in writing of the inspectors and" so that the amendment will read, "except with the approval of the court." My reason for the suggestion is that the trustee deciding to do certain work must first consult his inspectors under the provisions of the act. When he receives their authority he instructs the solicitor to go ahead. There are many cases where the value of the work is largely in excess of 5 per cent of the gross proceeds of the estate, and that is particularly true where the assignor holds large properties in trust for other persons. In fact a large portion of the assets may consist of these trust assets; the actual assets of the estate may be very small. In cases where the inspectors instruct the solicitor to go ahead and do the work, obviously the solicitor should be paid reasonable fees for doing that work. In practically all cases the court fixes the fee payable to solicitors or counsel. A tariff of fees is laid down and the court first directs taxation of the bill of the solicitor. I cannot see why it should be necessary to secure the approval of the inspectors in writing of such bill, because they do not understand what are proper fees to be paid the solicitors. The court, on the other hand, is dealing with that question every day, and I think it will be quite sufficient to leave it entirely to the court to say whether or not it is reasonable that a solicitor in a certain case should be paid more than the five per cent. If it i3 decided that he shall be paid more than five per cent, then it is fair to leave it to the registrar to decide by means of taxation what actual amount the solicitor should be allowed.


Lewis Herbert Martell: Does my hon. friend not think it would be better for the registrar to tax the costs in the first instance, and then if the parties are not agreeable, to have the judge decide the matter?


John Arthur Clark: I am only suggesting what I think is the custom not only throughout Canada but in Great Britain as well. The court in all such matters directs the solicitor's account to be taxed by the registrar and then the registrar taxes it.


Lewis Herbert Martell: With all due deference to my hon. friend, I may say that the practice in our province is that the solicitor's bill is taxed by the taxing master. Certain fees are prescribed; there is a maximum and a minimum, and the maximum can only be exceeded when the court or a judge so rules. If a solicitor is not satisfied, he may appeal to a judge for a rehearing and retaxation.


John Arthur Clark: That is not the point at all. This is a case where it must be decided in the first instance whether or not a solicitor shall be at liberty to present a bill. The court decides that; it is decided every day in winding-up proceedings. When the court decides that the solicitor is entitled to present a bill, then it goes to the taxing master, who taxes it. If the solicitor is not satisfied with his bill he has the right to appeal to the judge as my hon. friend has suggested.


Lewis Herbert Martell: I am not familiar with the system of taxation in the various provinces, but does my hon. friend mean to say that a solicitor is entitled to have costs taxed where the act does not entitle him to costs?


John Arthur Clark: No; my hon. friend has not followed me at all. He has not got the point.


Mr. GOULD:: I suggest that where the money procurable from the insolvent's estate is not sufficient to pay the solicitor's fees, the solicitor himself shall become one of the creditors and go on a pro rata basis the same as the rest.


Lewis Herbert Martell: A Daniel come to judgment.


Lomer Gouin: I understand that my hon. friend suggests that the word "in writing of the inspectors and" be struck out.


John Arthur Clark: Just leave it, "except with the approval of the court."


Lomer Gouin: I have no objection to that.
Section, as amended, agreed to.

Petition of Right Act
On section 34-Commencement of the act.


Lomer Gouin: Did I understand my hon. friend (Mr. Baxter) to propose an amendment with regard to the removal of a trustee by majority of creditors?


John Babington Macaulay Baxter: I was only making a suggestion upon which the minister might work out something.


Oliver Robert Gould: I have gathered from the discussion that has taken place that this bill pertains moie particularly to large investments, that is, to institutions in urban centres. It has occurred to me that some provision might be made, through an addition to the act, to provide for smaller businesses, we will say, in the country, or agriculturists, or both -provision whereby the smaller business man or the agriculturist might be enabled to settle with his creditors and start his business life over again. As there will be further discussion on the bill on a later occasion I just give that thought to the minister and the committee for their consideration.


Lomer Gouin: I think the hon member will find that the previsions in the present act cover such cases. Farmers and wage earners are entitled to assign whenever they wish, and can get their discharge.


[Stage Direction]
Section agreed to.
Progress reported.

[Stage Direction]
Hon. W. S. Fielding (Minister of Finance) moved that the House go into Committee of Supply:
Henry Lumley Drayton: I would ask my hon. friend who is leading the House whether he thinks it is worth while starting anything fresh at this stage, in view of the very depleted benches by which he is surrounded.


An hon. MEMBER:: How about your own?


Mr. FIELDING:: Does my hon. friend say that he desires us to go on with the estimates?


Henry Lumley Drayton: I was wondering whether anything would be gained by starting new business now.


William Stevens Fielding: Whether we gain anything will depend very largely on my hon. friend and those sitting near him.


Henry Lumley Drayton: I do not think that much will be gained.


William Stevens Fielding: It is still early. The Minister of Marine and Fisheries is prepared to go on with his estimates.


Lomer Gouin: We can take order No. 35. It is a Senate bill.
Motion withdrawn.



PETITION OF RIGHT ACT AMENDMENT

[Stage Direction]
Sir LOMER GOUIN (Minister of Justice) moved the second reading of Bill No. 165 (from the Senate) to amend the Petition of Right Act.
Motion agreed to, bill read the second time, and the House went into committee thereon, Mr. Marcil in the chair.
On section 1-Revocation of fiat obtained by fraud.
Lomer Gouin: The amendment is to authorize the Governor in Council to revoke any fiat which he might have granted on a petition of right whenever he discovers that the granting of such fiat was induced by misrepresentation, concealment or non-disclosure on the part of the petitioner of any material fact which in the minister's opinion should have been truly stated or disclosed for the minister's information in the consideration of the petition. Passing an order in council revoking such fiat and depositing that order in council with the clerk of the court, puts an end to the case. Here is how subsection 2 reads:
A copy of any order in council revoking or withdrawing the Governor General's fiat upon any petition of right as aforesaid, certified by the clerk of the Privy Council, may be filed in the Exchequer Court, and thereupon the petition shall abate, and all further proceedings in the action shall be and be deemed to have been, by the revocation or withdrawal of the fiat, perpetually stayed.


Henry Lumley Drayton: This bill looks to be a perfectly proper bill, but I suppose it was brought in for the purpose of correcting the mistake of the government in granting the fiat in the famous Hoppe lease case.


Lomer Gouin: We do not admit tve ever committed an error. There is not legislation to cover any special case. We only thought it was advisable to make our position perfectly clear, that whenever a fiat had been granted and we discovered that we were misinformed or deceived we would have the right to revoke such fiat.


Henry Lumley Drayton: I am quite sure, Mr. Chairman, that the coincidence is just simply something that is remarkable.


Mr. GRAHAM:: It just synchronizes.


Henry Lumley Drayton: The synchronization is really complete. It is perfectly wonderful that just after a committee of the Senate dealing with the Hoppe case recommends such legislation this legislation is brought down and there is no connection between the two at all. Well, Mr. Chairman,
Petition of Right Act

apparently we have not got out of the age of miracles yet.


Lewis Herbert Martell: Does the hon. member believe in miracles?


Henry Lumley Drayton: I never did before but I am asked to believe in them tonight.


Lewis Herbert Martell: I am glad to see you are waking up.


Henry Lumley Drayton: My hon. friend is perfectly correct, Mr. Chairman. It is a great thing to brighten up, and it is a great thing to be able to listen to the declarations now made by the minister without a smile of incredulity. I ask my hon. friends though seriously whether it is not a fact that the Hoppe leases were referred to a committee of the Senate, and that as a result of its inquiries such a state of affairs was ascertained that the department presided over so ably by my hon. friend-I do not say he did it- recommended that the fiat should be withdrawn, stated that if the facts had been known the fiat would never 'have been given, and that this bill is necessary for the purpose of carrying that report into egect. Am I not right?


Lomer Gouin: An investigation took place in the Senate into the Hoppe leases. The Deputy Minister of Justice appeared before the Senate committee as a witness, and he was told that a certain agreement had been come to between a party and the heirs of the Isenberg estate. The Deputy Minister of Justice wrote a letter to the chairman of that committee telling him that if ha had been informed of what he had since heard and had been told during that investigation he would probably have not granted a fiat.
I said at the outset in explaining the bill and in answer to my hon. friend that this was not legislation specially brought down for the Isenberg estate. This bill was introduced in the Senate so as to make our position perfectly clear, that there should be no doubt as to our right to revoke such fiats whether it be in the Isenberg case, or any other case that might be now pending or arising in the future. There is no mystery in the whole thing. If my hon. friend is satisfied that this is good legislation, he should approve of it and let it pass.


Henry Lumley Drayton: I quite understand that my learned friend is in one sense perfectly right. He is perfectly right when he says that this is not a special private act which is passed for the purpose of undoing (Sil Henry Drayton.]
the mistake of granting the fiat in the Hoppe case. That is perfectly true. It is not special in that sense at all, but it is an act nevertheless, a general act, for the purpose of enabling the government to undo the wrong they did in granting the fiat. That is what it is for. I think it is right under the circumstances that the wrong should be righted and the fiat which ought never to have been granted recalled, and if this is necessary for doing that I think this legislation is right. Is it a further term in connection with the granting of this improvident fiat, which hon. gentlemen were warned against, not once, but twice in one year, that this cancellation is to be accompanied by a cash payment?


Lewis Herbert Martell: May I ask my hon. friend what is the usual rule in applying for a petition of right?


Henry Lumley Drayton: I am afraid my hon. friend is getting more like an Irishman every minute.


Lewis Herbert Martell: I simply want to know.


Henry Lumley Drayton: What I said is not meant as any offence against the Irish at all; I boast of a fair amount of that strain myself. I am merely referring to the fact that an Irishman is supposed to answer a question by asking another. Now my hon. friend has been doing that pretty regularly to-night when a question has been put to the minister. I do not mind answering my hon. friend's question but I do object to his rudely interrupting when the minister wants to answer a question that has been properly put to him.


Lewis Herbert Martell: I am not rude at all; 1 am simply asking you to give the rule.


William F. Carroll: I would suggest that, my hon. friend from West York read section 2 of the bill which will explain the whole thing
Nothing in this act shall be construed or interpreted as a legislative interpretation, declaration or limitation of the prerogatives of the Crown in dealing with the issue or revocation of any fiat granted upon petition of right.


John Babington Macaulay Baxter: We are all taking a hand at stopping the minister when he is very anxious to make a reply. I would suggest to the last hon. member who has spoken he should read section 1 when he will see that it is retroactive. I will ask him to ask the minister whether there is any other case in esse or in posse, except the Hoppe case, to which the retroactive feature of this legislation is to be applied. I think it would be a first rate thing to apply to that case, but is

Petition of Right Act
3129s
it suggested that there is any other case known to the government where a fiat has been improvidently issued.


Lomer Gouin: This is not retroactive legislation.


John Babington Macaulay Baxter: Not in section 1? Yes.


Lomer Gouin: I beg your pardon.


John Babington Macaulay Baxter: Let me quote the section:
In the case of any petition of right as to which the Governor General has heretofore granted or may hereafter grant-his fiat-
And so on. Then you act upon that. It applies not only to a petition of right which may be granted in the future but also to a petition which has been heretofore granted.


Lomer Gouin: It is not as to any
pending litigation that it is retroactive.


John Babington Macaulay Baxter: Yes and it is right that it should be.


Lomer Gouin: I understood my
hon. friend from West York to put a question.
He wants to know what the government is going to do in the matter of reimbursement?


Henry Lumley Drayton: I asked whether it had been stated in this report, or agreed that the money would be paid. What is the stand of the government in that matter?


Lomer Gouin: I have not got the report before me. I understand, though, that the report goes to the extent of saying that the Senate would recommend the payment of the moneys that were disbursed. I am not sure that this is an exact statement. However, I cannot give any answer to my hon. friend as to what the government would do if that question were put to them.


Henry Lumley Drayton: I take it from what my hon. friend says that the government have not got as far yet as to consider the report of the Senate. Does he accept it in so far as putting the government-


Lomer Gouin: I cannot speak for the government, I can only speak for myself.


Henry Lumley Drayton: -putting them in a position to remedy the wrong which they did. The minister says this is not retroactive legislation. I want frankly to say that I will not support it unless it is retroactive because I understood this bill was for the purpose of righting the wrong done in the Hoppe case in the granting of that fiat. I understood that this bill was brought down for the purpose of changing the general law so that that fiat might be recalled. If I read
the bill properly I think my hon. friend is: wrong because the first section states clearly :[DOT]
In the case of any petition of right as to which' the Governor General has heretofore granted or may hereafter grant his fiat that right be done, and whether or not the petition has been or is filed in the Exchequer Court of Canada, and at any stage of the proceedings in the said court, the Governor General in Council may upon the report of the Minister of Justice withdraw and revoke his fiat, if the minister reports that the granting of the fiat was induced by misrepresentation, concealment or non-disclosure on the part of the petitioner of any material fact which in the minister's opinion, should have been truly stated or disclosed for the minister's information in the consideration of the petition.
I do not think the minister had the wording before him when he said this was not retroactive.


Lomer Gouin: What I mean is this: It is not retroactive in the sense that this would apply to any case now pending. It is not retroactive in that sense.


Henry Lumley Drayton: 
Lomer Gouin: I shall ask permission to drop it. That is not necessary.


Henry Lumley Drayton: It should be struck out, it only weakens the bill.


Lewis Herbert Martell: Before the section carries I wish to explain why I asked one or two questions. Probably I am a little hoarse and my hon. friend opposite did not quite understand me. I asked those questions with a view to securing information. I have a little

Petition oj Right Act
but not great familiarity with the question of petitions of right. Every subject has a right to petition the sovereign and the Crown has the right to issue a fiat, which fiat issues in order that right may be done. But supposing any person applies for a petition of right and the Crown, as represented by the cabinet ministers, refuses to grant that right; to whom should people appeal in order to have it declared whether they have been rightly or wrongly denied that right? Now, irrespective of what party may be in power persons will apply for a petition of right. I have in mind a case where a petition of right was refused and by the party which I support. I believe we have a Supreme Court of Judicature in this country to which we refer all cases, whether constitutional or otherwise, in the form of a stated case, and that court should have the right to say finally whether or not a petition of right or a fiat should issue. If you do not do that people will never get justice in this country because politics will enter in and no minister will admit that he ever did wrong in his own department. That was my only reason in rising to ask questions of lawyers who have been longer at the bar, than I have touching this matter. I am sorry that I am a little hoarse to-night or I would have talked
11 p.m. at much greater length in protest against any cabinet, or any government having the power to say finally whether people should be denied the right to appeal to the courts of the land in order to have their cases tried on their merits. Now, as the case stands to-day a person may petition to the Minister of Justice for the issue of a fiat. Naturally the minister, in connection with whose department the petition is entered, is very apt to say, "We have done no wrong," and to go to the law officers of the Crown and argue his own case. I submit that should not be final. I believe it would be good legislation in this country, where a petition of right is denied by the government, to give the Supreme Court of Canada the right to say whether a fiat or petition of right should issue. That may be considered radical from a lawyer; but I consider that is the proper way to deal with the matter, because no man should be denied justice or deprived of an opportunity of contesting his rights in the courts of the land.


Mr. SHAW:: I should like to ask the Minister of Justice (Sir Lomer Gouin) a couple of questions, the first question for a matter of information. Supposing the Minister of Justice has been imposed upon, and a fiat has been granted by reason of some misrepresen-
tation or some fraudulent non-disclosure; would the minister not be entitled to cancel the fiat without any legislation whatever?


Lomer Gouin: That is possible, but we want to make it perfectly clear.


Joseph Tweed Shaw: The second question that I want to ask the minister is whether or not he proposes, when this legislation is passed, to apply it to the Hoppe case.


Lomer Gouin: As to that we will consult our lawyers, and if it is applicable, we will apply it to that case.


Lewis Herbert Martell: I should like to have an answer as to whether there is any possibility of having my suggestion followed out. If there is argument in favour of a fiat or petition of right, could the matter not be carried to the Supreme Court 'of Canada to determine whether or not a fiat should issue in the event of the government deciding that it should not issue?


Henry Lumley Drayton: The hon. member
addressed the question to me in the first instance, and I say that there is no appeal. I may say to him that he has found a Minister of Justice big enough to say when he is wrong. He did give the fiat last year, and he is now saying that it ought not to have issued.


Lewis Herbert Martell: I am satisfied with the Minister of Justice, and he is a big man too.


[Stage Direction]
Section agreed to.
Bill reported.
Sir Lomer Gouin moved the third reading of the bill.
Hewitt Bostock: When shall the bill be
read the third time?


Henry Lumley Drayton: Next sitting of
the House.


Lomer Gouin: The bill has to go
back to the Senate.


Henry Lumley Drayton: Owing to the
fact that the bill has to go back to the Senate, I will withdraw my objection.
Motion agreed to and bill read the third time and passed.



PRIVATE BILLS


[Stage Direction]
Bill No. 179 (from the Senate), for the relief of Grace Lees Smiley.-Mr. Boys.
Bill No. 182 (from the Senate), for the relief of Laura MacBrien.-Mr. Sheard.
Bill No. 183 (from the Senate), for the relief of Chester Abbott Redmond.-Mr. Church.
On motion of Mr. Mackenzie King, the House adjourned at 11.05 p.m.

Questions
Monday, May 28, 1923.