CHAPTER XV.

Liens.

A LIEN may be defined a right which one person has to detain the property of another on account of labour expended on that property, or for the general balance of an account due from the owner.

As the common law imposes on certain trades, as innkeepers and carriers, the obligation of accepting all employment offered within the limits of their occupation, so, in return for this obligation, it entitles the party to a particular lien on the property as a remuneration for the expense and trouble incurred in the execution of the But the general purpose for which such property was entrusted. opinion appears to be, that the right of lien is not confined to those trades which are under an obligation to accept employment from all who offer it; but that the remedy by detention extends to every trade exercised for the benefit and advantage of the community.

Attorneys and solicitors have a lien for their costs on the papers of their clients; bankers, upon all securities in the way of trade: brokers, factors, and agents, on the property of their principals in possession, or even in the hands of purchasers; masters of vessels, on their cargoes, for wages or necessary repairs, during the voyage; carriers have a lien for the carriage price; innkeepers on the goods and property of their guests, for their food and lodging, and on their horses, for their keeping and stabling; insurance brokers have a lien for the general balance of their account on the policies effected by them for their principals; lastly, millers, packers, wharfingers, dyers, coach-makers, calico-printers, and others, have all a lien on the goods respectively confided to them in the way of business.

But as the right of lien is admitted for the benefit of trade, it is confined in its operations to trade only. Therefore no lien lies for the pasture of cattle, or the keep of the dog; or where there has been a special agreement to pay a certain sum for workmanship, in which case the owner of the goods on which the labour has been bestowed can only be made personally liable.

A right of lien gives no general right to sell goods, except where the detention of goods is creative of expense, when the lien is saleable. In case, too, of the lien on cattle, it is admitted that they may be worked as the owner would have worked them; so also a cow may be milked.

Under the following circumstances the right of lien cannot be exercised-1. If the possession of property has been obtained wrongfully or by misrepresentation. 2. If it has been entrusted solely on the personal credit of the owner of the lien, or delivered

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by an authorized servant or agent. 3. And lastly, no lien can be acquired over property delivered by a bankrupt, or one in contemplation of bankruptcy. It is also material to remark, that if the holder of goods accept a specific security in lieu, or voluntarily part with the possession of the whole, or part of them, he afterwards loses all right of lien upon them.

CHAPTER XVI.

Bankruptcy and Insolvency.

A BANKRUPT is a trader who, either from the want of sufficient property, or from the pressing difficulty of converting what he possesses into money, is unable to meet those demands of his creditors which the law gives them the power of enforcing, and who has cmmitted some act indicative of the situation in which he is so placed. It is in the latter attribute that the bankrupt has been held chiefly to differ from an insolvent, who may, equally with a bankrupt, be unable to meet the demands upon him, but who has not, by secreting himself from creditors, or other open evasive act, revealed his insolvency to the world. But under the Bankruptcy Act of 1861 (now superseded by the act of 1869) the legal distinctions between bankrupt and insolvent disappeared, and both description of debtors, in respect of procedure, became amenable to the same jurisdiction.

In the ordinary course of law, creditors may seize either the person or the effects of their debtor, but they cannot take both at the same time, and if they take the body in execution, they cannot afterwards resort to the effects. All the creditors must run through the same process to recover their several debts. By the bankrupt laws, on the contrary, a form of proceeding is allowed, at the instance of one or more of a man's creditors, at the common expense, and for the common benefit of them all. The debtor is at once, by operation of law, divested of all his property, real and personal, which is transferred to trustees either chosen by his creditors or appointed by law. But if the debtor make a full discovery, and appear to have acted without fraud, he then becomes entitled to a complete discharge, both of his person and generally of any property he may subsequently acquire; and also to a reasonable allowance out of his former effects proportioned to his good conduct, and the amount of the dividend which his estate yields to his creditors.

Of late years the bankrupt laws have undergone much inquiry and discussion, and attempts have been made to improve this complicated branch of mercantile jurisprudence. So early as 1825 the great mass of statutes on the subject had been consolidated, and

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several new and salutary provisions introduced; among others, that which allowed the proof of contingent debts; that which allowed all debts to bear interest in the event of a surplus; that which allowed the tender of a composition; and that which allowed a trader in insolvent circumstances publicly to declare it, whereby steps might be taken to secure an equitable distribution of his property to all his creditors.

In 1831 was introduced the 1 & 2 W. 4, c. 56, for lessening the expense, delay, and uncertainty in bankruptcy proceedings. This act established a court of bankruptcy, by abolishing the seventy commissioners of bankrupts, and the substitution of ten judges in Various other alterations their places, with registrars, clerks, &c.

of importance were adopted. 1. The substitution of a fiat from the lord chancellor, in lieu of the petition of bankruptcy. 2. The 3. The appointment of official assignees of the bankrupt s estate. allowing of all attorneys and solicitors to practise in the Bankruptcy 4. The appointment Court, and debts to be proved by affidavit.

of fixed commissioners, on the nomination of the judges of assize, to adjudicate bankruptcy business in the country. And 5, allowing assignees to employ the bankrupt in the arrangement of the estate, and refer any matter to arbitration, and the reference by them to be made a rule of court.

Despite of these and numerous subsequent amending statutes, the bankrupt laws proved wholly inadequate to the due protection of mercantile credit, and by secret transfers, concealment of property, or other fraudulent devices, the chief bulk of the bankrupt's In conseeffects continued to vanish from the grasp of the law. quence the subject was again urgently pressed on the attention of the legislature by the higher classes of the commercial world, and the result, after anxious and protracted inquiry, was the act of 1849, the 12 & 13 V. e. 106. The improvements introduced by this act were many and important, and may be briefly recapitulated.

First, the simplification of the process in bankruptcy by substituting a petition for a fiat. Secondly, a saving of time and expense, to be effected by conferring upon the commissioners original jurisdiction in certain matters that had been only cognizable by one of the vice-chancellors sitting at Lincoln's Inn. Thirdly, the useful clauses facilitating the winding-up of insolvent estates out of court. Fourthly, a classification was introduced of the various cases of commercial delinquency, and of awarding accordingly certificates of desert and conformity.

For the first time, a broad distinction was drawn by law between honest and fraudulent debtors. Traders who, at an early period of their insolvency, place their affairs before their creditors, and obtain their assent to such propositions as they are able to make, can obtain protection for their p rsons, and can wind up their affairs, either by trustees, without the interference of the court, or

under control of the court with the aid of an official assignee, but in either case without the stigma of bankruptcy; but, if bankruptcy cannot be avoided, then, after hearing the case, and judging of the conduct of the bankrupt during his examinations, it was left to the commissioner of the court to grant either a first-class certificate, which declared that the trader's inability to pay his debts had arisen from misfortune only, or a second-class certificate, in which it was declared to have arisen partly from misfortune: or a thirdclass, in which it was declared not to have arisen from misfortune. These discriminations of the debtor's conduct appeared at the time of greater importance to society and the morality of trade than any other portion of the act.

Subsequently Lord Chancellor Westbury, while attorney-general, sought to provide a useful digest and improvement of the jurisprudence and administration of insolvency. It failed to be carried in its original scope, but resulted in the act of August 6, 1861, to amend the law relating to bankruptcy and insolvency in England. This act, the 24 & 25 V. c. 134, was not a consolidating act, but retained much of previous legislation, and only partly repealed some of the statutes to which reference has been previously made.

The act commenced from and after October 11, 1861; it is to be construed, together with so much of the bankrupt acts of 1849 and 1854 as remain unrepealed, as one act, and be cited as the Bankruptcy Act of 1861.

One of the more prominent features of the act of 1861 was the bringing under the same judicature the previously divided administration of the laws of bankruptcy and insolvency. Besides the

abolition of the Insolvent Court, except as to such functions of its judges as pertain to the carrying out and conclusion of pending business, the other important changes made and the general principles of the act may be thus described :

First, to effect a more general, speedy, and economical administration of the insolvent laws. Secondly, and as a consequence of these improvements, to afford increased facilities for private arrangement, composition, and agreement between creditor and debtor. Thirdly, to bring about a gradual approximation to the abolition of the punishment of imprisonment as a means of satisfaction for debt; and, fourthly, to effect the issue already mentioned of an assimilation of the laws of insolvency and bankruptcy.

As to the practical results under the new administration, an important one was to vest the management of the debtor's property more in the hands of creditors and less in officials. Next, is the abolition of the distinction in bankruptcy between traders and nontraders. All persons of full age, male and female, peers and commoners, denizens and aliens, and natural-born subjects, except foreign ambassadors, become liable to the bankrupt law. Lunatics might be made bankrupt upon an act committed in a lucid in

terval. Thirdly, the county courts, except those within the limits of the metropolis, had, for the first time, jurisdiction in bankruptcy, same as the district courts of bankruptcy. They had jurisdiction in all cases where a debtor made himself bankrupt and his debts did not exceed £300, and resided without the metropolitan district, the boundary of which included every parish within twenty miles of the General Post-office. The London Court of Bankruptcy had power to transfer any petition for adjudication from a district court to a county court, not being a metropolitan county court. Lastly, the classification of certificates as indicative of degrees of commercial delinquency, or conformity to bankrupt procedure, ceased. The act of 1861, however, was not found to work satisfactorily, and was consequently suspended by the Bankruptcy Act, 1869 (32 & 33 V. c. 71), which is now the governing statute on the subject.

II. INSOLVENCY.

Although bankruptcy and insolvency are now assimilated in jurisdiction, it may not be altogether irrelevant to describe the legal definition by which they had been divided.

By the term insolvent is generally meant a person that is not in a condition to pay his debts, in the ordinary course, as persons carrying on trade usually do, Bayley v. Schofield, 1 M. & S. 350. Between bankruptcy and insolvency the distinction that has been held is twofold. First, as to persons, the bankrupt being a trader, which an insolvent need not be. Secondly, as to property; for the bankrupt, after receiving his certificate, was discharged, not only as to his person, but as to his future acquired property, by which clearance he became eligible to resume trade and obtain credit afresh. The condition of the insolvent was essentially different, his person only being protected, not his after acquisitions. At the moment of his discharge he contracted a future liability to pay his debts, by a solemn instrument which he signed, and which the creditors had the power of enforcing ever after. The insolvent, though personally relieved by due process of law, when no fraud had been proved against him, continued still liable, to the latest period of his life, to pay his debts in full; the creditors reserving authority to compel the payment of their debts, when the insolvent was in a condition to liquidate them, by bringing him up from time to time before the court, which decided whether he was then able to pay his debts out of the property he had acquired.

III. PERSONS LIABLE TO BANKRUPTCY.

By s. 69 of the statute of 1861, all debtors, whether tra lers or not, became subject to bankruptcy, but no debtor not a trader was