April 25, 1919

L LIB

Daniel Duncan McKenzie (Leader of the Official Opposition)

Laurier Liberal

Mr. McKENZIE:

Not the appointment, but the procedure. Every move then must be subject to the direction of the court. You cannot do anything without the consent of the court. You cannot accept the trustee's estimate of the value of the estate without the consent of the court. If a man

in Nova Scotia seeks to be appointed as a trustee, somebody makes a motion before a judge of the Supreme Court of that province. The judge can familiarize himself with the conditions of the case in a very short time, and the applicant will be appointed largely as a result of the court's investigation into his character. The Secretary of State has to deal with the whole of Canada and is not in a position so readily to ascertain the qualifications of the applicant, and in that way he can be more easily imposed upon. He has to consult someone perhaps two thousand miles away as to the character of the person making the application. The advantage in this respect is decidedly with the English practice the matter could be settled ment by the court. A man in Sydney would have to communicate with Ottawa, nearly 2,000 miles away, whereas if we followed the English practice the matter could be settled cn the spot. Seven times in the year we have judges sitting in Sydney. Altogether I think that instead of expediting matters you are only creating much more clumsy, expensive and inoperative machinery.

Topic:   BANKRUPTCY ACT.
Permalink
UNION

Hugh Havelock McLean

Unionist

Mr. H. H. McLEAN:

I understand that, first, official assignees are to be appointed on personal application, stating their qualifications, and then security is to be given in the sum of $10,000. I under-

10 p.m. stand also that only these official assignees can be appointed trustees of the estate. Section 15 says that "a majority in number of the creditors who hold half or more in amount of the proved debts," and so on, may, at their discretion, substitute any other authorized trustee for the trustee named in the receiving order. I do not understand why only official trustees appointed by the Governor in Council can be appointed as trustees of the estate. Take a big fishing business like that conducted by the hon. member for Northumberland (Mr. Loggie)-this is merely an illustration -it would require a man conversant with that particular business to take charge oi that estate and successfully wind it up. But they can only appoint an official trustee from that district, and a man who might have special qualifications for the position could not be appointed by the creditors. The same thing applies to shipbuilding concerns and lumbering industries, which require men with special knowledge. I do not see why the creditors' power of appointment is taken away. In England, and under our own Insolvency Act of 1869 and 1875, the creditors have the power of appointment. I would like the minister to explain 126

why the majority of creditors, over 50 per cent, should not have the right to select the assignee of the estate, subject to the approval of the court, and why the choice should be limited to a particular class appointed by the Governor in Council. A certain number of people will apply and give securities and bonds, but in connection with large estates the creditors might not wish to have them, owing to lack of the particular qualification.

Topic:   BANKRUPTCY ACT.
Permalink
UNION

Hugh Guthrie (Solicitor General of Canada)

Unionist

Mr. GUTHRIE:

The object in confining the trustees to a specially appointed list is to see that they all give the necessary security. The creditors can change the trustee but they must have a man on the appointed list, so that no irresponsible person may be permitted to act. It was to remedy a difficulty under the old system. It must be borne in mind that a trustee under this Act is an accountant. He cannot act in regard to the debtors' estate unless he is authorized by the inspectors and creditors. So that in the case cited by my hon. friend, if you want men particularly familiar with the shipping business, you have the appointment of suitable inspectors. The creditors have full charge of that matter. The trustee is more or less an accountant and has really very little to do with the disposition of the estate except in so far as he is authorized to act by the inspectors and creditors; the inspectors have the real control. The trustee cannot sell the assets, cannot either keep the estate running or close it up, and is under the authority of the creditors and inspectors. What is most required of the trustee is a prompt accounting, and the great difficulty in the past has been that the trustees did not pay over dividends when they were declared. That was the real difficulty, which, even with this security, many people apprehend in. connection with this Act. These people say that dividends are declared, and the trustees neglect to pay over small amounts, and accumulate a fund for themselves, and so they ask heavy penalties against trustees who do not pay unclaimed dividends into court or into some fund of 'the Government. It is the intention to make the trustee accountable, to see that he provides adequate security, and as far as possible, to keep him from mixing up with the estate, save under the control of the inspectors and creditors.

Topic:   BANKRUPTCY ACT.
Permalink
UNION

Hugh Havelock McLean

Unionist

Mr. H. H. McLEAN:

I can remember very well, under the old Insolvent Act, when an assignee was appointed there were always inspectors appointed. We know that

Topic:   BANKRUPTCY ACT.
Permalink
UNION

Hugh Guthrie (Solicitor General of Canada)

Unionist

Mr. GUTHRIE:

It is not contemplated, under the provisions of this Bill, that the trustee will be asked to carry on the business. It is not the common experience, after an assignment takes place, that the business is oarried on; it is wound up. One of the chief objects of the Bill is to see that it shall be wound up properly. It may have to be carried on, but it is not contemplated that the trustee shall do it. The creditors may appoint a manager. The insolvent himself may be appointed by the creditors. There is a special provision that the insolvent, who is the man most familiar with

the business, shall be appointed if the creditors agree.

Topic:   BANKRUPTCY ACT.
Permalink
UNION

Hugh Havelock McLean

Unionist

Mr. H. H. McLEAN:

You say that the creditors may appoint as manager whomever they think fit. Why not go farther in principle and let the creditors have control of the estate if they desire it? Insist on a majority of three-fourths of them if you wish. Why should you not allow the creditors to take control of the estate and appoint as trustee whomever they may want to appoint?

* Mr. GUTHRIE: The largest creditor

bodies of this country, the Canadian wholesalers, the Canadian Manufacturers' Association and the retailers have all passed favourably upon this clause; in fact, it is drafted very largely in accordance with their views. They do not approve of appointing any one as a trustee or of anything that might open the door to the appointment of the friends of any man or set of men as trustees or of anything of that kind which is not in accordance with the interest of the creditors. Under this you get a high class of trustees, men who are experienced accountants-although not necessarily accountants because there is no [DOT]limitation of that kind in the Act. If you [DOT]allow these men to do this work and to become familiar with the procedure, you will find it will work out to the interest of the creditors, and they are the ones chiefly concerned in the amount of their dividends. Cases have come within my own knowledge [DOT]where at a meeting of creditors this man, or the other man, is appointed assignee of the estate because he is broke and needs the money. We have been trying to avoid that by appointing men of high standing who do not need the money or who are not in an impecunious state. Many of the old assignees were so, and as a result there was a great deal of discontent with the administration of the Act.

i Mr. COCKSHUTT: As a member of the special committee that had to do with this *Act, I sympathize very much with the views expressed by the hon. member for Royal (Mr. McLean) but I want to say that the principal proposal that he has made should be made in regard to the very small estates, il think I would be within the mark in saying that fully fifty per cent of the failures that take place in Canada are for amounts under $1,000. Therefore, it becomes necessary to keep down expenditure in dividing up the estate. Otherwise the result will be that even though a bankrupt might be able to pay fifty cents on the dollar if the estate was well managed, in the final

'analysis, the heavy expense will eat up the estate and you will have nothing to *distribute to the creditors. The hon. member for Royal (Mr. McLean) is absolutely *right in his contention with regard to small estates in the country, if the local creditors can appoint a man who is on the spot. The official trustee will have to travel anywhere *from two hundred to four hundred miles, ihe will have to live at a hotel and his general expenses will run the liquidation cost away beyond the amount that would be incurred by a local man. *Under these conditions the suggestion of my hon. friend is a satisfactory one. But it must be remembered that these estates will run anywhere from $1,000, or $2,000 up into millions and what is thought fit or proper for a million-dollar or five-million-dollar estate will be very unfit for a thousand-dollar or five-hundred-dollar estate. It must be remembered that as a rule the creditors are scattered all over the country and that many of them are in foreign countries and are unable to be represented at the meeting. I have had some experience in regard to small estates, as I dare say the hon. member for Eoyal has. If he has had the same experience as I have had he will know that after one or two meetings have been called with regard to an estate running from $1,000 to $5,000 and a statement has been presented showing that the estate is hopelessly involved, the final meetings of the creditors will be attended by five or ten per cent of the creditors at the outside. The others say it is hopeless, that there is no use of throwing good money after bad, and they do not attend the meeting at all. Their interest is lost in the estate if they think it is not going to produce any dividend. The winding up of a small estate with expensive machinery will mean that very little will come out of it. As I say, I have been at a good many creditors' meetings myself, being mostly there in the capacity of a man who had sold goods, and my experience has been that the number of those present is infinitesimal in comparison with the number of those who are entitled to be present. The British and United States creditors are usually unrepresented. Of course, you may say: Let them look after themselves. But the credit of Canada suffers if there is not an equal distribution of the estate. As the Solicitor-General has said, we have considered this Bill in Committee. We stayed with it for weeks, and the member for George Etienne Cartier (Mr. Jacobs) 126}

will bear testimony, I think, that the Committee worked as faithfully on this measure as on any Bill that has been dealt with in the House in recent years. For weeks and weeks we sat three and four times a week, and we heard all sorts of evidence.

I was one who held just about the same notion that my hon. friend here has expressed, when I went to that Committee.

I thought that the man on the spot was the cheapest to act as trustee, and he might often be a most efficient man, but then there was the question of security, and in large estates that is an absolute necessity, because if a man is going to get possession of money that he does not distribute there is going to be the dickens to pay. That is where the estate has been entrusted to a man and he is not paying up as lie should. Now the inequalities in the size of estates, the situation of the town or city in which the estate is-all these things-have to be taken into account. I somewhat reluctantly assented to the proposition embodied in the Bill as being perhaps, after all, the best solution of a very difficult job, but I quite agree that the creditors are the men first concerned, and the most concerned, and they should have a good deal to say as to the trustee and how the estate shall be handled, and perhaps should decide whether or not it should be retained for a time or whether it should be sold off. There is a variety of things to consider, but the average estate has to be wound up, or ought to be wound up, and an accountant is necessary-a man who knows how to keep accounts and who will give an account of the money received and the money disposed of. He is hedged about in this Bill as far as we can hedge him as to his expenditures, and is held down to what we thought was the minimum. I do not say the clause is absolutely perfect by any means, or absolutely just in every respect, but taking it altogether it may be the best solution. As to the objection of my hon. friend from Royal, there is difficulty in appointing a man on the spot; often the place where the estate is is very small or it is in a very ouhof-the-way district. As regards large estates, you need a machinery that can handle it, as well as the smaller estates, though I think this is expensive for the small estates and I do not favour a trustee going a distance of two or three hundred miles if it can be avoided. However, the Bill provides for the creation of districts, if I remember well, and probably a trustee will not have to go that far. In my opinion the machinery that has been provided has been well thought out, and

I hope it will be found by the House on [DOT] examination that the course provided is as safe and wise as could be adopted under -the circumstances.

Topic:   BANKRUPTCY ACT.
Permalink
UNION

Hugh Havelock McLean

Unionist

Mr. H. H. McLEAN:

I do not think the hon. gentleman who has just spoken quite understood my point. It is quite true these official trustees could be appointed, and there would be no objection to them. But suppose there are estates where the creditors represent three-fourths, in amount, or a majority number, and they say "We do not want to leave it to the official trustee, we want to appoint a trustee of our own." Provided that man gives security to the satisfaction of the judge, why should not he be appointed? That is the point I want to make. This question does not arise in the ordinary cases. In those cases the creditors may agree to the official trustee; but in such a case as I have mentioned why do you deliberately take away from the owners of the property-because if a man is insolvent his creditors own the estate- the absolute control of that property? If the creditors do not want to take control the official trustee carries on the estate; but here you are raising this barrier. If the creditors are united in the matter- representing say three-quarters of the amount involved, and also, if you wish, a majority number-and if they want to appoint a special person for a particular purpose, why should they not have that power of appointment? There surely can be no answer to that.

Topic:   BANKRUPTCY ACT.
Permalink

Section agreed to. On section 14, subsection (4)-General security to be given by ^trustee.


L LIB

Samuel William Jacobs

Laurier Liberal

Mr. JACOBS:

I would suggest that the minister amend the subsection so that in case a cash deposit is made by the trustee he will be entitled to interest, say at the rate of five per cent per annum, during the period in which the money is deposited with the Government.

Topic:   BANKRUPTCY ACT.
Permalink
UNION
L LIB
UNION

Hugh Guthrie (Solicitor General of Canada)

Unionist

Mr. GUTHRIE:

If my hon. friend will prepare an amendment I will consider it.

Topic:   BANKRUPTCY ACT.
Permalink
L LIB

Samuel William Jacobs

Laurier Liberal

Mr. JACOBS:

If the minister will allow the subsection to stand I will prepare an amendment and hand it in.

Topic:   BANKRUPTCY ACT.
Permalink
L LIB

Andrew Ross McMaster

Laurier Liberal

Mr. McMASTER:

I have another suggestion for the minister. It is provided here that the bonds shall be executed to

His Majesty, represented by such departmental officer as may be designated by the Governor in Council. In the case of Montreal business, would that be some officer located in Montreal? [DOT]

Topic:   BANKRUPTCY ACT.
Permalink
UNION

Hugh Guthrie (Solicitor General of Canada)

Unionist

Mr. GUTHRIE:

No, it devolves upon

some particular officer of the Government who has to take the bond and execute it to His Majesty. There has to be some one named for the purpose of enforcing it.

Topic:   BANKRUPTCY ACT.
Permalink
L LIB
UNION

Hugh Guthrie (Solicitor General of Canada)

Unionist

Mr. GUTHRIE:

The bond would be executed to His Majesty as represented by the Secretary of State.

Topic:   BANKRUPTCY ACT.
Permalink
L LIB

Andrew Ross McMaster

Laurier Liberal

Mr. McMASTER:

Under our procedure

in the province of Quebec, judicial bonds are usually executed before one of the deputy prothonotaries of the Superior Court, or one of the clerks of the Court of Appeal. The point I want to get at is whether the Bill indicates the procedure to be followed or not. Perhaps that is unnecessary. The matter may be governed by rules and regulations drawn up for the carrying out of this Bill; but if the point has not been covered it seems to me it might be wise to indicate before what officer these bonds may be executed.

Topic:   BANKRUPTCY ACT.
Permalink
UNION

Hugh Guthrie (Solicitor General of Canada)

Unionist

Mr. GUTHRIE:

I should think that

would be a matter that would be dealt with in the rules and regulations, but at any rate the bond will have to be satisfactory to His Majesty.

Topic:   BANKRUPTCY ACT.
Permalink
L LIB

Rodolphe Lemieux

Laurier Liberal

Mr. LEMIEUX:

I do not think a higher rate of interest could be provided for than is paid by the Government Savings Bank.

Topic:   BANKRUPTCY ACT.
Permalink

April 25, 1919