Friday, 27 March 2009

Star of Zanzibar aka the Wrekin Ruby - mystery solved. Thank you Mr Paxman

The Star of Zanzibar mystery has been solved! The officeholders at Ernst & Young can now put their deer stalkers to one side. Wrekin Construction's Star of Zanzibar, or the Wrekin Ruby as it has become known, has been found. However, there are some problems with the purported value of the gem that are unlikely to go down well with creditors. It seems that the chap who valued the ruby, Mr Michael Hart Jones, has a track record of rather strange behaviour. Newsnight exposed him two years ago after he tried to sell a fake cure for AIDS which was made of goat serum. 

An independent valuer instructed by the BBC's Newsnight valued the Wrekin ruby at £5,000. Another valuation purportedly puts the Wrekin ruby at £300,000. This is a bit less than £11 million figure which was originally given for the gem by Mr Michael Hart Jones. 

Picture Credit: Hat tip to Mr M for the intelligence. http://salfordstudents.com/files/university_challenge.jpg

Court of Appeal judgment in Re Rottmann, The Times, March 27, 2009 - some interesting issues

There are a couple of noteworthy developments in the bankruptcy law field that have been reported today. The celebrity chef and Michelin Star winner Mr. Paul Rankin has reached a settlement with his creditors thus staving off a bankruptcy order. Mr Rankin is to pursue an IVA. Elsewhere in the Royal Courts of Justice, Collins, LJ, Keene, LJ and Ward, LJ have delivered their judgments in Re Rottman. A full transcript of the judgment is not yet available but the Times report makes clear that Judge Kaye QC, sitting at first instance, had been justified in suspending the public examination of a bankrupt who was also facing criminal proceedings in Germany and in ordering the examination to be conducted in private. Interestingly it was held that the use in the foreign criminal proceedings of the transcript of the private examination did not infringe the bankrupt's right not to incriminate himself, nor did it prejudice his right to a fair trial. The first instance decision can be seen at: [2008] EWHC 1794 (Ch), [2009] Bus. L.R. 284. As soon as a copy of the full Court of Appeal judgment is available more thorough comment will follow. 

Re Rottmann raises some interesting issues regarding the interplay between the insolvency laws on the one hand and article 6 of the European Convention on Human Rights and Fundamental Freedoms on the other hand. The vexed issues are perhaps best summed up by two latin tags, namely, accusare nemo se debet (nobody is bound to incriminate himself) and qui non negat confitetur (he who does not deny acknowledges). This area has a long history, stretching back to at least 1604 (James I, 1604, c.15. -  An Act for the better relief of the creditors against such as shall become bankrupts’). Punishment occurred then of course when evidence was not forthcoming, for it is noted in that statute that:

“if therein the offender or offenders shall refuse to be examined or to answer fully to every interrogatory to him to be ministered by the said commissioners, or the greater part of them, it shall be lawful for the said commissioners or the greater part of them, to commit the said offender or offenders to some strait or close imprisonment, there to remain until he, she or they shall better conform him or herself’ ‘and that if upon his, her or their examination, it shall appear that he, she or they have committed and wilful or corrupt perjury, tending to the hurt or damage of the creditors of the said bankrupt, to the value of ten pounds of lawful money of England, or above, the party offending shall or may thereof be indicted in any of the King’s majesty’s courts of record, and being lawfully convicted thereof shall stand upon the pillory in some publick place by the space of two hours, and have one of his ears nailed to the pillory and cut off”

The current regime is less severe. Pursuant to the Insolvency Act 1986 (IA86) and the Companies Act 2006 (CA06) certain people are required by compulsion to assist the officeholder by giving evidence. Herein lies the problem, especially against a backdrop of investigatory powers that Dr Hamish Anderson has called the “most rigorous in the world.” If the debtor or director does not assist the officeholder they can be held liable for contempt of court. They must therefore comply and assist the office holder. The problem arises in that by complying, they may inadvertently give information in their evidence, which is prejudicial to themselves and which can be used in relation to other, possibly criminal, proceedings. The recent rise in complex fraud cases has highlighted the problem of on the one hand, (1) balancing the basic right of a witness to rely on the privilege of not self-incriminating and the right to silence, against on the other hand, (2) the public interest requirements in punishing and properly investigating such frauds.

The matter has been somewhat resolved by the Insolvency Act 2000 (IA2000), but problems may still arise. The officeholder will need to ascertain “the true facts…from those who know them”  pertaining to the company’s past activities in order to ascertain whether or not any improper activities have taken place. The relevant statutory provisions within the IA86 are:

s.131 IA  - Statement of Affairs. This provision enables the official receiver, where the court has ordered a winding up order or appointed a provisional liquidator , to apply to the court to compel any past or present officer of the company, or anyone else who has been involved in the formation, promotion or management of the company and any past or present employee to produce a statement of affairs to enable the official receiver to ascertain the companies present position. The information can include, inter alia,

  • particulars of any assets
  • liabilities the company may have,
  • all names and addresses of the company’s creditors,
  • any securities held and when these were given,
  • or any other information the official receiver may require.

If the requirements of the provision are not adhered to then the defaulting party may be fined  and any answers that are untruthful will give rise to a prosecution for perjury

s.235 IA86 - Duty to co-operate with the office holder. This section provides that any person who is a past or present officer of the company, any person who has taken part in the formation of the company, any past or present employee and or any administrator, administrative receiver or liquidator, must supply the office holder with any information in relation the company which he requires , essentially they have a duty to co-operate with the office holder. Failure to comply with this section results in a fine . This provision requires no court order and significantly bolsters the s.133 and s.236 provisions .

s.133 IA86 – Public Examination. This section permits an official receiver, when a company is in winding up (ONLY!) , to apply to the court for a public examination of any past or present officer of the company, any administrator, liquidator or receiver of manager or any other person concerned with the formation, management or promotion of the company . The official receiver may be compelled to apply to the court for a public examination if the creditors of company contributories so request it by the appropriate majorities. If the person requested to attend fails to attend he may be punished for contempt of court .

s. 236 IA86 – Private examination. This provision applies to companies in respect of which a winding up order has been made, provides that the court  may on the application of the office holder , summon to appear before it, inter alia , officers of the company for private examination . The courts discretion is unfettered , and as Milman and Sealy have noted, “there are overriding requirements that the examination should be necessary in the interests of winding up, and that it should not be oppressive or unfair to the respondent.”

s.290 IA86 - Public examination of bankrupt. This section is noteworthy as: (1) Where a bankruptcy order has been made, the official receiver may at any time before the discharge of the bankrupt apply to the court for the public examination of the bankrupt.

The central problem arising in this area, is that any information obtained under the provisions can possibly be used (prior to the Insolvency Act 2000) in subsequent proceedings pursuant to s.433 IA86. The section provides that any information obtained may be used in proceedings, whether or not under the IA86. Specifically it states:-

"[(1)]   In any proceedings (whether or not under this Act)— 

  (a)    a statement of affairs prepared for the purposes of any provision of this Act which is derived from the Insolvency Act 1985, and 

  (b)    any other statement made in pursuance of a requirement imposed by or under any such provision or by or under rules made under this Act, 

may be used in evidence against any person making or concurring in making the statement."

It is a fundamental principle of English law that an accused:

  • has a privilege against self-incrimination
  • a right to remain silent

The genesis of the dual rights arose form the innocuous activities of the Star Chamber in the early seventeenth century who frequently compelled confessions on pain of severe personal injury and death. These dual criminal law privileges have caused problems for the Department of Trade and Industry (DTI now of course BERR) investigators when interviewing directors in that they have pleaded the dual rights in defence to questions asked and when the information is used pursuant to s.433 as discussed above. Unfortunately, the IA86 makes no mention of the rights and the courts have had to grapple with this complex question

The case law in this area on the corporate side is voluminous. Re Rottmann is particularly noteworthy as it provides us with some authority on the personal side. The cases which, inter alia, spring from a rash of frauds in the late 1980’s and early 1990’s consider the extent that the privilege is evocable against the office holder. These include:

  • Re Jeffrey S Levitt Ltd 
  • Re London United Investments plc
  • R v. Seelig
  • Cloverbay Ltd v. Bank of Credit and Commerce International
  • Bishopsgate Investment Management Ltd v. Maxwell 
  • Re Arrows Ltd (No.4)

The Human Rights Act 1998 has lead to much controversy in this area. Article 6 of the European Convention of Human Rights and Fundamental Freedoms states, inter alia, that:-

“In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly but the press and public may be excluded from all or part of the trial in the interest of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of the private life of the parties so require, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice.”

The whole area was tested in: Saunders v. UK, Case No 19187/91 (17 December 1986), (1997) 23 EHRR 313. [1997] EHRR 313; [1997] BCC 872. In the case the European Court of Human Rights had the opportunity to consider the legality of the admissibility of evidence obtained by compulsion and its compliance with Article 6 of the European Convention of Human Rights and Fundamental Freedoms. This case has had a fundamental effect on the usage of evidence obtained under the Companies and Insolvency Act and its subsequent admissibility in criminal trials. The court held by a majority of sixteen votes to four that the use of a self-incriminating statement, in criminal proceedings, obtained under compulsion pursuant to the Companies and Insolvency Acts provision was unfair and a breach of Article 6(1) of the European Convention on Human Rights.

Section 11 of the IA2000,  provides for an amendment to s.219 of the IA86 in light of the decision of the European Court of Human Rights in Saunders v. UK. As a result of this amendment there are restrictions on the use of answers obtained under compulsion, namely, any answers given under compulsion cannot be used against a director who would has been compelled to give answers pursuant to the IA86 provisions except in limited circumstances.

It is clear from the above, that the position at English law in relation to the admissibility of evidence in criminal trials, that has been obtained by compulsion pursuant to either the IA86 or the CA06, is that such evidence will not be allowed to be used except under limited circumstances. The investigatory provisions although not capable of use in criminal trials are however obviously eminent useful for the office holder in pursuit of the statutory purposes of the IA86.

I have some sympathy with the view that the privilege of separate corporate personality must not be abused and the denial of the right of silence and the right to not self-incriminate in an effort to bolster protection of this privilege of incorporation has been somewhat eroded by s.11 of the IA2000. Further expansion of occasions when such evidence is admissible as it is deemed a ‘limited circumstance’, is a matter for further interpretation by the courts.

If you are going to have juristic persons as a legal concession or a statutory privilege, you must afford them the same rights as ‘natural’ persons, i.e. why should a director be immune from prosecution after he has fraudulently acted towards a company? I will revisit this area more closely on the personal side of our subject once the full Court of Appeal judgment in Re Rottmann is available.

Picture Credit: Muir Hunter Museum of Bankruptcy, KU (BP).

Law Society guidance on DROs

A recent blog entry on DROs highlighted some qualities of the new procedure, due to come into force on the 6th April 2008. The Law Society has now also issued guidance for solicitors on the new procedure. They DRO is summarised as:

"Debt Relief Orders are an alternative to bankruptcy for clients who have:
less than £15,000 in unsecured debt
less than £300 in assets and
less than £50 per month disposable income after they have met all their essential expenditure.

Creditors who are included in the DRO will be prevented from taking any action to recover their debts from the client. Generally the debts of the client will be discharged at the end of one year."

Picture Credit: http://bankruptcyandinsolvency.blogspot.com/2009/03/debt-relief-orders-recent-insolvency.html. The Law Society, Chancery Lane.

Wednesday, 25 March 2009

Trade Finance - Thomas calling for more access again


Mr Gareth Thomas MP the minister of state at BERR with responsibility for trade, development and consumer affairs, has recently given a speech at the London Chamber of Commerce. In his speech he again mentions the need for increased access to finance for businesses. The salient parts are quoted here: 

"Access to finance

At a national level the priority for government action has been to do all we can to help companies struggling to secure the finance they need – not because of any failure in their business but due to much tougher credit conditions.

There is evidence for example that lending from foreign banks to UK businesses is slowing.

Estimates suggest that up to £25 billion of lending could be withdrawn in 2009 as foreign banks retreat to their home markets.

Since the start of the year Government has introduced a range of measures to help increase liquidity and ease credit conditions for SMEs.

We established the Asset Protection Scheme, which allows participating banks to insure against losses on assets that have either lost a lot of value or for which there is no market.

In return for this, we have commitments from banks to maintain and increase lending.

Royal Bank of Scotland has committed to increase lending this year by an additional £16 billion for businesses, and Lloyds Banking Group will increase its business lending by an additional £11 billion.

And we are absolutely determined that banks do all they can to raise awareness of the real help available to businesses.

Encouragingly, more than 1,300 eligible loans worth almost £145 million are being processed through the Government’s Enterprise Finance Guarantee scheme.

Since its launch in January, registered lenders are now seeing a ten-fold increase in demand for loans.

We’re determined to work with all 26 lenders signed up to EFG to ensure frontline staff are offering it where appropriate to small companies across the country."

Picture Credit:  http://www.historycooperative.org/journals/sia/32.2/images/fahlman_fig13b.jpg

SI 642/2009 The Insolvency (Amendment) Rules 2009 - a link

Following my recent blog entry on the new Insolvency Rules I have now been given a link to the 2009 amendments SI, entitled: The Insolvency Amendment Rules 2009, which I can now add to the record. The rule amendments come into force on the 6th April 2009. 

This date coincides with the start date of Ms Sally Barber, currently of 11 Stone Buildings, who has recently been appointed as the next Bankruptcy Registrar of the High Court. As far as I am currently aware Ms Barber is only the second female to take up this position on a full time basis in the history of the office. Although there have been a number of female deputy bankruptcy registrars already, e.g. Miss Deputy Registrar Kyriakides. Ms Barber joins Mr Chief Bankruptcy Registrar Baister, Mr Bankruptcy Registrar Jacques, Mr Bankruptcy Registrar Nicholls, Miss Bankruptcy Registrar Derrett, and Mr Bankruptcy Registrar Simmonds. Ms Barber has been sitting as a deputy registrar for some time. Despite their titles the work of this type of High Court judge is not restricted to the personal side of the subject. Much of their day to day work and many of their full length judgments (comparable in terms of length and depth to High Court justices) relate to corporate insolvency, directors disqualification and other areas of chancery business touching on insolvency. 

Picture Credit: Muir Hunter Museum of Bankruptcy, KU (GP).

A multiplicity of commentators with the same name - Australian insolvency patterns

For some time insolvency scholarship had two commentators on the subject named Ian Fletcher, i.e. first, Professor Ian F. Fletcher of UCL Faculty of Laws and 3-4 South Square, and author of The Law of Insolvency (Sweet and Maxwell, fourth edition due April 2009) and secondly, Mr Ian M. Fletcher, a partner at Brinkmann & Partner, and the co-author of Fletcher, Higham and Trower on Corporate Rescue (Butterworths, 2003). 

A recent Australian news announcement from ABC has highlighted another insolvency related shared name conundrum, this time in relation to Professor Ian Ramsay of the Melbourne Law School (outputs available on SSRN) and Professor Iain Ramsay of Kent Law School, University of Kent. As with the Fletcher authors, the Ramsay authors also concentrate on the same areas in some instances. This is made clear by the ABC announcement in relation to the Melbourne Professor Ramsay who has recently published some research on the personal side of the project in relation to Australian law and debtor experience of the bankruptcy procedure in that country. The announcement notes:  

"Australia's bankruptcy rates have increased by 261 per cent over nearly 20 years, according to a study by the Melbourne Law School.

The study's author, Professor Ian Ramsay, says bankruptcy has now hit the nation's middle class, with a 50 per cent rise in insolvency in New South Wales alone.

"That rate of increase dramatically exceeds, for example, the increase in population in Australia over the corresponding period," he said.

"So, effectively, a greater proportion of the Australian population, over the period that we examined, was becoming personally insolvent."

Comparing the last six months of 2008 with the last six months of 2007, the study found a 12 per cent jump in bankruptcies over the past year alone.

Professor Ramsay says Australia's love affair with credit is the main cause.

Over the last 10 years, excessive use of credit as a cause of non-business related bankruptcies has gone up by more than 100 per cent," he said.

"Over the period of time we've found quite a significant increase in the age of bankrupts. We also found ill health as a growing reason for people going bankrupt.

"One interesting finding was gambling. What we found was a significant increase in the last 10 years, up something like 230 per cent, as a cause of bankruptcy."

Professor Ramsay says bankruptcy is becoming more of a middle class phenomenon.

"Effectively, we found that bankrupts are coming from higher status occupations," he said. "They also have increasing levels of both personal income, but also household income. They also have increasing assets and property ownership levels.

"So even during these times, where there was strong economic growth in Australia, we still found that bankruptcy was claiming, if you like, more and more of the Australian middle class.

"We found a growing number of bankrupts with dependents. So, clearly there's an important family context here."

The most significant increase in bankruptcies has occurred in New South Wales.

"In fact, a 50 per cent increase in the proportion of bankruptcies occurring in New South Wales between 1997 and 2008," he said.

"And that's not just a factor of New South Wales having more people, it is that there's just more bankruptcies occurring in that state."

The study investigated personal insolvency under the Bankruptcy Act, from 1990 until 2008. That covered Australia's economic boom time.

Professor Ramsay predicts bankruptcy rates will skyrocket in the months and years ahead.

"Looking ahead though, of course, the conclusion would need to be, in my view, that these trends would actually accelerate," he said. "And what are those trends? The trends are a greater number of Australians becoming personally insolvent and, of course, personal insolvency, including bankruptcy, affecting more and more parts of the Australian society, including the Australian middle class."

Financial and Consumer Rights Council executive officer Richard Foster says he is not surprised by the figures.

"This is a case of 'greed is bad'," he said.

"We are seeing an increasing number of people coming to financial counsellors and consumer advocates with no option other than to consider bankruptcy.

"What's concerning most about the study is that it commenced at the height of the last recession and the numbers have only gone up ever since. So, what we can expect in the future, I expect, is more of the same."

I do not feel left out however as I also have a namesake at the University of Surrey. Professor John Tribe, researches and teaches in the area of leisure and tourism in Surrey's School of Management.

Picture Credit: Muir Hunter Museum of Bankruptcy, KU (GP).

Tuesday, 24 March 2009

Insolvency Rules 2011 - a long way off?

As the clamour grows surrounding pre-pack administrations (see for example the latest press on the Wrapit and Please and Thankyou companies, or Archers brewery) it may be of some solace to those dealing with insolvency issues that the main body of the new Insolvency Rules implementation has again been put back. This will enable practitioners and policy makers to focus on the more immediate problems of perception and use of pre-pack administrations, as well as dealing with the 16 year high in company liquidations. In relation to the rules the following Insolvency Service announcement is of note:

"Modernisation & Consolidation of Secondary Insolvency Legislation - Update March 2009

Insolvency (Amendment) Rules 2009

The first modernisation changes under the Modernisation and Consolidation project are now being delivered.

The Insolvency (Amendment) Rules 2009 have been made by the Lord Chancellor and laid in Parliament. This instrument will introduce a modernised and better targeted advertising regime for insolvency with effect from 6th April 2009.

Better Targeted Advertising

The Insolvency (Amendment) Rules 2009 will shortly be published on the OPSI website at www.opsi.gov.uk. These Rules will revise insolvency advertising procedures in nearly all new insolvency cases commencing on or after the 6th April 2009.

The majority of insolvency advertising requirements appear within the Insolvency Rules and amendment to these provisions is not dependant upon changes to the Insolvency Act. The Insolvency Act however contains two separate requirements for advertising in voluntary liquidation proceedings, within sections 95 and 98. Separate action is being taken to amend sections 95(2) (c) and 98(1) (c) by means of a Legislative Reform Order (“LRO”). That Order is subject to an on-going Parliamentary scrutiny process but we are hopeful that the amendments to these sections will also be implemented on 6th April 2009.

The reason for these changes is to achieve better targeted publicity in insolvency proceedings Insolvency office-holders (and others upon whom the duty to advertise currently falls) will continue to be required to gazette key insolvency events but will have discretion as to whether any additional publicity is warranted and, if so, the best medium for this. This initiative will immediately remove unnecessary costs  in administering insolvencies and insolvency office-holders are not therefore expected to benefit from the savings themselves, but to pass them on to creditors  by way of better returns.

The Insolvency Service would not expect this discretion to advertise more widely to be used routinely in ‘run of the mill’ cases but rather in cases where clear benefits or a business need can be identified. The discretion might properly be exercised in cases where the office-holder assesses that a full disclosure may not have been made, for example where the office-holder cannot determine to his/her satisfaction the full extent of a company’s or debtor’s assets and liabilities and where it is considered that some form of advertising may redress this.

The new provisions will give office-holders flexibility to decide the most efficient and effective form for additional publicity so that this can be placed to best serve the intended purpose and to reach the target audience. Advertising in addition to notice in The Gazette will no longer have to be by newspaper advertisement so other forms of media advertising , including internet, radio, print media or even television advertising, will in future be an option, if deemed most appropriate to meet the purpose of the advert (given the cost and likely effect).

As part of the move to a better targeted insolvency advertising regime the needs of stakeholders will be met by introducing three new requirements for the gazetting of key insolvency events. Petitioners will be required to give notice in The Gazette of the dismissal of a winding up petition. Currently, the presentation of a petition is advertised, but if it is subsequently dismissed the fact that it has been dismissed is not advertised. The appointment and termination of appointment of a Provisional Liquidator to a company will also be required to be gazetted by the insolvency office-holder.

As part of the Modernisation and Consolidation project, The Insolvency Service Policy Unit has reviewed existing requirements for the filing of insolvency documents at court. Currently, Rule 7.32 of the existing Insolvency Rules requires that where insolvency proceedings are pending in any court a copy of every issue of The Gazette which contains an advertisement relating to those proceedings, a copy of any newspaper advertisement relating to those proceedings and, from time to time, a memorandum giving particulars of such advertisements must be filed in court. Routine filing of all insolvency advertising is unnecessary and so Rule 7.32 will cease to have effect, providing further savings in the costs of administering insolvencies and for the courts.

Further Modernisation of the Insolvency Rules: change in timetable

The Insolvency Service now wishes to proceed with delivery of the remaining modernisation changes to the Insolvency Rules before consolidating those Rules and other project statutory instruments. This approach aims to ensure the most effective delivery of measures to provide added flexibility of communication within insolvency processes and other measures to reduce burdens on users of the legislation, providing further savings in the cost of administering insolvencies for the benefit of creditors.

These modernisation proposals are dependant upon the successful passage of a further LRO through the Parliamentary process, to make necessary changes to the Insolvency Act that will allow the Rules to provide for matters such as e-delivery of insolvency notices and the use of websites for sending reports and other documents to creditors.  As this LRO will make significant changes we have decided to follow a lengthier “super affirmative” LRO procedure.   

Accordingly, the Minister has confirmed his agreement to the following new programme for delivery of the next phases of the Modernisation and Consolidation project:

·      6th April 2010- LRO and Insolvency (Amendment) Rules 2010 to implement the full programme of modernisation measures proposed, by way of changes to the Insolvency Act and the existing Insolvency Rules;

·      6th April 2011- Consolidation of the Insolvency Rules by publication of a completely new set of Insolvency Rules together with several smaller insolvency statutory instruments.

This delivery programme will allow us to introduce further changes to modernise insolvency procedures in April 2010. The modernising amendments to the Rules would then have a short time to bed in before the new Insolvency Rules (and other instruments) come into force in April 2011.

This project has evolved to accommodate requests from users for more than a mere consolidation of existing law. Our aim is to provide modernised insolvency legislation which remains fit for purpose in a modern business environment. We are looking to address practical issues raised by stakeholders and to produce clear, modern, sensible and effective legislation which can reduce burdens placed upon its users."

Picture Credit: Muir Hunter Museum of Bankruptcy, KU (GP).

 

Saturday, 21 March 2009

Being Glib About Debtor Treatment – some historical and sadly current practices that suggest caution.

As news reaches us that a loan shark has been jailed for raping a debtor, a piece of pat commentary in last Thursday’s Times is thrown sharply into focus. I have addressed the issue of loan sharks before and I have addressed the issue of debtors’ prisons before, but some recent comments made by Mr Edward Fennell cannot go unaddressed without some historical analysis. In the context of Howell Jones’s announcement that the firm is going to offer a no win, no fee arrangement for businesses chasing bad debt, Mr Fennell observed:

“Personally, I would favour a return to the old debtors prisons. To judge from the recent Little Dorrit on TV they looked cosy, civilised institutions where romance lay just around the corner.” 

Whilst this comment could be taken as a side-swipe at the BBC’s standards of historical accuracy in representing debtors prisons in the recent Little Dorrit adaptation, the advocacy of a return to this method of debtor treatment in the wider sense (and Mr Fennell is not alone in calls for a return to 18th century debtor treatment) is perhaps a little frivolous (even if done in jest) when one considers what that would actually mean and what it did mean for so many thousands of unfortunate debtors who could not seek redress to the bankruptcy laws, not being traders. A few examples will now be given to illustrate why the BBC’s illustration of conditions in the Marshalsea was wrong and why perhaps Mr Fennell should exercise caution when dealing with such issues. I will highlight two key texts that shine a light on this area and also give some brief examples from debtors' prisons that both rebut Mr Fennell’s contention and show why the BBC’s portrayal of the Marshalsea was inconsistent with both the Dickens’ text and historical reality.

Debtors’ prisons existed to compel payment of the sum owed, not as a punishment device. But a mere glance at the historical sources shows that punishment and torture occurred in a great number of cases. Trevelyan opined that seventeenth century prisons were, “the house of misery and misfortune, not of crime.” A plight which one commentator has judged unfortunate, because, “the lot of the criminal in jail was…superior to that of the unfortunate debtor.” Imprisoning for debt was widespread. Metropolitan institutions such as the King’s Bench and Queen’s Bench prisons, Ludgate debtors’ prison, the Marshalsea (of Little Dorrit fame), Newgate prison, the Fleet prison, and the Clink, all have their predecessors in county towns across the country where provincial debtors were often imprisoned in the town gatehouse or in some instances specially constructed debtors prisons. There were also ‘Sponging Houses’, a form of halfway house between debtors’ prison and freedom, where Bailiffs would detain debtors at great expense so as to extract what little money they had left.

One seventeenth century commentator highlighted barbarous practices such as the ravishing of debtors’ wives and daughters (raping in modern parlance), torture, starvation, disease and theft. Pestilence was said to be a serious risk in debtors’ prisons during the mid-sixteenth century. Conditions it seems did not improve in the eighteenth century with prison keepers being examined by Parliament for gross misdeeds being conducted under their control. Eventually the counter-productive nature of imprisonment for debt was recognised by the legislature (the practice was abolished in 1869). The principal objections levelled at the process can best be seen in a pamphlet published in 1641 where it was observed that imprisonment for debt was:

“1. against the law of God, 2. Against the Law of Man: and the most ancient fundamental Common Laws of this Kingdome. 3. Against the Law of Conscience and Christian Charity. 4. Against the practice of other Countries. 5. against the Creditors owne profit. 6. To the prejudice of the King and Commonwealth.”

Let us briefly examine some of the debtors’ prisons to see why Mr Fennell’s comment is perhaps a tad flippant. Conditions in the Fleet were according to one contemporary chronicler appalling. Debtor prisoners were kept in the prison itself and not in auxiliary buildings. Pitt (discussed below) recounts how his chamber fellows were, “so lousie, that the Vermin Crawled on the outside of their Cloths” and despite public munificence and a survey of the Fleet prisoners conditions did not improve right up until the prisons abolition by the Queen’s Prison Act 1842.

John Dickens (the father of Charles) was imprisoned for debt in the Marshalsea in the early 19th century and it is perhaps because of this that we are most famously aware of the institution. The Court of the Marshalsea’s prison was used as a debtors prison for debtors arrested within twelve miles of the Palace of Westminster, except in the City of London itself. The Marshalsea was situated in the Borough of Southwark. Writing in 1808 Neild opined that in the Marshalsea the, “habitations of the debtors are wretched in the extreme.” It is most probable that such conditions were extant for debtors in the Marshalsea since the sixteenth and seventeenth centuries and were perhaps the catalyst for numerous escape attempts. As with the Fleet, the Marshalsea gaol was abolished and finally closed pursuant to Queen’s Act 1842.

The picture painted by Pitt in his 1691 tract on the state of debtors’ prisons, The Crye of the Oppressed, is primarily an account of conditions in regional debtors’ prisons. Addressed to the Lords and Commons of Parliament, the text was written towards the end of the seventeenth century by a debtor imprisoned in the Fleet, Moses Pitt. The tract was a response to the “most gracious” Act For Relief of Poor Prisoners for Debt or Damages, which received Royal assent in 1690, in the second year of the reign of William III and Anne. In his 164 page tract, “as full as tragedies as pages”, Pitt provides an exposition of the state of debtors’ prisons during the reign of William III. Motivated by a Christian desire to better the country, the text contains a powerful denunciation of the lamentable condition of debtors’ prison throughout England and is remarkable for its objective analysis considering its author’s position as an imprisoned insolvent debtor, that most “miserable and oppressed subject.” The text itself provides a fascinating insight into debtors’ prison throughout the country and is enlivened with twelve copper plates depicting scenes within some of the prisons discussed. Pitt carefully describes how the imprisoned debtors “groan under…starving conditions…and…great oppressions” in their impecunious confinement. The tract is constituted from testimony of imprisoned debtors in the gaols featured. Pitt discovered some sixty-five debtors’ prisons in England and Wales during his attempts to raise money to finance a new Bill to relieve the plight of insolvent debtors.

Writing in April 1808 James Neild, as part of his work for the Society for the Discharge and Relief of Persons Imprisoned for Small Debts throughout England and Wales, gives a vivid depiction of Appleby debtors prison in the County of Westmoreland. Neild describes the prison layout, which was used for imprisoning both felons and debtors. The debtors had fireplaces in their ‘three good rooms’ and a day room where divine service was performed. There was only one courtyard in the prison which meant that men and women prisoners could mix ‘promiscuously together in the day-time.’ The debtors had no kitchen and had to prepare their meals on the stone steps leading up to their quarters. No allowance was made for the debtors, but there was a pump in the courtyard. A description of the gaol published one hundred and seventeen years previously describes the gaol as being, “but eight yards long, and four and a half in breadth, without any chimney, or place of ease”. Pitt’s tract includes a copper plate of some prisoners in Appleby ‘starv’d others poysond’ and Pitt’s correspondents allege that one seventy year old prisoner, John Watson, had no sustenance for several weeks save for bread and water.

The debtors’ prison at Bury St. Edmunds, Suffolk, receives particularly close treatment in Pitt’s treatise and Neild also reserves eight pages to its elucidation. Neild’s depiction of the gaol relates however to that of a new structure situated at the end of the South Gate, being nearly a mile from the town’s centre. Debtors in the prison had an allowance in 1805 providing a daily ration of a pound and a half of bread and a weekly ration of one pound of cheese and Neild suggests that their living conditions were relatively comfortable, certainly compared with the seventeenth century exposition given by Pitt of conditions in the gaol around 1691. Indeed, Neild concludes his exposition of the Bury St. Edmund gaol in 1805 by stating, “This Goal (sic) does honour to the County, and is superior to most in this Kingdom.” This is in stark contrast to the picture painted by Pitt in the late seventeenth century. There we find a prison where criminals lodged together with debtors, where the turnkeys ravished (raped) the debtors’ wives and daughters and where thumbs screws and iron pothooks were frequently visited upon the hapless insolvent.

Thomas Morgan was placed in Liverpool debtors’ prison in approximately 1690 for the sum of eleven pounds debt. He was a ‘Chrurgeon’ whose practice had fallen on hard times after he had become lame. Unhappily, his wife came down with the fever and his children with the pox at about the same time as his financial decline. During his year and a quarter confinement Morgan had no bedding or sustenance allowance and was forced to catch mice to stave off starvation. Such privations were not restricted to Morgan, but were also extended to his wife, who upon complaining about Morgan’s confinement with felons and highwaymen was herself imprisoned under close confinement and was restricted from obtaining access to her husband. She and her three month old child also received no allowance and survived solely on the charity of her neighbours. Thomas Row, the gaoler of Liverpool debtors’ prison did not remedy the alleged ill treatment that Morgan had received but instead beat him and put him in irons.

Debtors in seventeenth century Oxford resided in either the Castle gaol or the City gaol. There is evidence of a petition for relief from Oxford prisoners in 1687 which states that the prisoners are, “very poor and… forced to undergo great want and suffer great calamities.” The use of the clog was not restricted to the Fleet (where it cost 100l to remove), it was also used in Oxford Castle gaol.

Rothwell debtors gaol in the county of Yorkshire contained in the year 1688, upwards of twenty prisoners, including one William Hall. The Gaoler at Rothwell, Samuel Brogden, on occasion locked up the debtor prisoners in a ‘close hole’. When so confined the prisoners were only allowed to, “ease themselves…but when the said goaler(sic) pleaseth.” Perhaps more seriously it is alleged that “the goaler(sic) doth Beat and Bruise the poor Prisoners in a most Cruel and Bloody manner.”

There are many, many more examples of the sort of treatment that has been highlighted above. What has been given provides a general flavour of what occured. Are these the kinds of conditions Mr Fennell seeks to resurrect? Fortunately there exists a set of prison bars, a pillory, manacles, a whip and a wooden clog in the Muir Hunter Museum of Bankruptcy. I am prepared to act as gaoler for the day to Mr Fennell to see if he really does think that debtors’ prisons should be reintroduced. He is correct to point out that the BBC got it wrong, but we should perhaps talk more seriously about such issues.

Picture Credit: Muir Hunter Museum of Bankruptcy, KU (GP).

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