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Ruin and Redemption

Ruin and Redemption: The Struggle for a Canadian Bankruptcy Law, 1867-1919

Copyright Date: 2014
Pages: 328
  • Book Info
    Ruin and Redemption
    Book Description:

    In 1880 the federal Parliament of Canada repealed theInsolvent Act of 1875, leaving debtor-creditor matters to be regulated by the provinces. Almost forty years later, Parliament finally passed new bankruptcy legislation, recognizing that what was once considered a moral evil had become a commercial necessity. InRuin and Redemption, Thomas G.W. Telfer analyses the ideas, interests, and institutions that shaped the evolution of Canadian bankruptcy law in this era. Examining the vigorous public debates over the idea of bankruptcy, Telfer argues that the law was shaped by conflict over the morality of release from debts and by the divergence of interests between local and distant creditors.Ruin and Redemptionis the first full-length study of the origins of Canadian bankruptcy law, thus making it an important contribution to the study of Canada's commercial law.

    eISBN: 978-1-4426-1968-5
    Subjects: Business, Law, Economics, History, Political Science

Table of Contents

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  1. Front Matter
    (pp. i-viii)
  2. Table of Contents
    (pp. ix-x)
  3. Illustrations, Figures and Tables
    (pp. xi-xii)
  4. Abbreviations
    (pp. xiii-xiv)
    (pp. xv-xvi)
    R. Roy McMurtry and Jim Phillips

    Professor Telfer’s deeply researched book shows that between Confederation and 1919, when the federal parliament passed the Bankruptcy Act that remains the basis of the current law, Canadians debated insolvency law with a perhaps surprising amount of passion. The discharge raised deep issues of commercial morality, as many still clung to the idea that paying one’s debts was a paramount concern. At the same time, arguments about priorities pitted local against regional and national interests, for a statutory scheme removed the advantages held by those closest to the debtor. Federalism complicated the story, as it often does in Canadian legal...

  6. Preface
    (pp. xvii-2)
    Thomas GW Telfer
  7. 1 Ideas, Interests and Institutions
    (pp. 3-18)

    In 1909, James Crowe had no choice but to flee Canada for the United States. He was one of the thousands of Canadian debtors who had been “banished” to the United States. Although Erie, Pennsylvania, was not that far from Canadian soil, James Crowe could not return to his homeland. The repeal of theInsolvent Actin 1880 left Canada without any national bankruptcy law and many debtors without hope. In the absence of such a federal statute, creditors could enforce judgments and seize the debtor’s assets without the need to worry about a federal bankruptcy law interfering with collection...

  8. Part One: 1867–1880

    • 2 Constitutional and Legislative History 1867–1880
      (pp. 21-31)

      The enactment of theInsolvent Act of 1869might be seen as watershed in the history of Canadian bankruptcy law. For the first time Canada had embraced a national bankruptcy law. TheInsolvent Act of 1869repealed any provincial statutes that were inconsistent with the terms of the new bankruptcy statute.² However, opponents of bankruptcy law began to call for repeal shortly after the Act of 1869 came into effect. The introduction of a more creditor-friendlyInsolvent Act of 1875did little to placate demands for repeal. Between 1869 and 1880, the House of Commons debated ten separate repeal bills,...

    • 3 The Rise and Fall of Bankruptcy Law 1867–1880: The Equitable Distribution of Assets
      (pp. 32-57)

      When Smith endorsed a promissory note on behalf of a debtor, he could not have anticipated having to take dramatic and rather drastic steps to collect on the debt when the debtor defaulted. In December 1866, Smith heard that the debtor had absconded or was about to abscond to the United States. Smith believed that the only opportunity to recover the money was to hire an agent to track him down. Smith asked his agent to pursue the debtor across the suspension bridge at Niagara Falls into the United States. The agent located the debtor in a private room in...

    • 4 The Repeal of Bankruptcy Law 1867–1880: The Discharge
      (pp. 58-80)

      By 1874, Julius McCarty had established himself as Hamilton’s largest lumber merchant, and his success extended to the political field. McCarty had been elected Alderman for the St Mary’s ward. However, his accomplishments and reputation vanished overnight. The city “was startled” to read the headline “Hamilton: A Lumber Merchant Absconded – His Liabilities $150,000.”¹ Rather than remaining in Hamilton to take advantage of recent bankruptcy legislation, McCarty “levanted,”² leaving numerous creditors unpaid. Facing the shame of the bankruptcy was not an option. On leaving Hamilton, McCarty left behind a letter telling his family that he had “left for good” and...

    • 5 The Role of Institutions 1867–1880
      (pp. 81-98)

      Ideas and interests in part explain the repeal of theInsolvent Acts; however, it is also important to acknowledge the significance of institutions as having an autonomous influence on policy choice.¹ Institutional factors, and in some cases the failure of institutions, contributed to the demise of the bankruptcy legislation in 1880.² The absence of a strong government department responsible for the oversight of all bankruptcy matters was an important institutional factor. The Canadian regulatory state was yet to be formed, and political parties divided over the issue of repeal. Further, governments were not committed to reform. The weakness of the...

  9. Part Two: 1880–1903

    • 6 Living with Repeal and the Failure of Federal Reform 1880–1903
      (pp. 101-115)

      Parliament’s action to repeal theInsolvent Act of 1875in 1880² left an immediate void in the federal field of bankruptcy and insolvency. During the period of 1880–1903, reform efforts took place at the provincial and federal level. The provinces sought to fill the gap by enacting provincial statutes in an attempt to establish an equitable distribution of assets and prohibit preferences, but there were limits to provincial jurisdiction and the provinces could not replicate a federal bankruptcy law. These limitations led many to suggest that Parliament should reinstate a national bankruptcy law. Under provincial law no discharge was...

    • 7 The Constitutional Question and the Impact of Federalism 1880–1903
      (pp. 116-126)

      Federalism also had a significant effect upon the legislative history of Canadian bankruptcy law.¹ TheBNA Actprovided the possibility that provinces might ameliorate the effects of federal repeal of theInsolvent Act of 1875by providing their own distribution scheme under their jurisdiction over property and civil rights. Similarly, provinces might enact legislation that prohibited preferences. If all the common law provinces could be convinced to enact such legislation, a federal bankruptcy law would no longer be required. The existence of a possible provincial solution provided the federal government with a strong reason not to push for the reform...

    • 8 The Bankruptcy Law Debates 1880–1903
      (pp. 127-142)

      The equitable distribution of assets and the discharge continued to spark debate after repeal. Ideas still mattered. All federal reform bills contained an equitable distribution of the debtor’s assets and prohibited preferential payments, yet the idea of equality still remained controversial. Canadian Boards of Trade, and for the first time foreign creditor associations, lobbied for federal reform to overcome the deficiencies of provincial law.

      The discharge also remained contentious. Throughout the 1880s, forgiveness competed unsuccessfully with the notion that a debtor had a moral obligation to repay all debts. What distinguished the post-repeal period from the 1870s was the increasing...

  10. Part Three: 1903–1919

    • 9 Reform Achieved: The Bankruptcy Act of 1919
      (pp. 145-173)

      TheBankruptcy Act of 1919re-established a national bankruptcy law after nearly forty years. It created the framework for much of twentieth- and twenty-first-century Canadian bankruptcy law.¹ The newBankruptcy Act of 1919marked an important event in “Canada’s legal history.” After the long regime of provincial legislation, the Act was “a very radical change” in debtor and creditor relationships.² The Act contained several important provisions that improved upon provincial legislation and the prior federalInsolvent Acts. The legislation allowed creditors to initiate compulsory bankruptcy proceedings and permitted formal composition proceedings.³ Unlike theInsolvent Act of 1875, theBankruptcy Act...

  11. 10 Conclusion
    (pp. 174-186)

    One business historian suggests that “fraud and success are not easy to separate … some players in business often find themselves on the borderline of legality when they have the pitfalls of failure in mind.”¹ In 1880, Parliament repealed theInsolvent Act of 1875in response to the growing perception that bankrupts engaged in fraudulent behaviour, but it was not clear that additional legislative reform would cure the problem of deviant bankrupts. In an 1880 letter to Prime Minister Macdonald, Thomas Ritchie declared that opting for further bankruptcy reform would “carry us back to darkness and chaos.”² Ironically, repeal of...

  12. Notes
    (pp. 187-260)
  13. Bibliography
    (pp. 261-288)
  14. Index
    (pp. 289-298)
  15. Back Matter
    (pp. 299-303)