Wednesday, 10 November 2010

FE Smith and his contribution to the bankruptcy jurisdiction

We have considered the contribution of Blackstone to the bankruptcy jurisdiction in recent days. Elsewhere I have considered the contribution of Sir Francis Bacon (Viscount St Albans) to the jurisdiction. We can now consider my all time favourite judge's contribution to our subject, namely that of the 1st Earl of Birkenhead PC, KC - FE Smith (1872–1930 - pictured between Lloyd George and Churchill). FE, as he was known throughout his life, was appointed Lord Chancellor at the age of 46 and served in that position between 1919 and 1922. He was called in 1899, took silk in 1908, was appointed Solicitor General and subsequently Attorney General in 1915, whereupon he "became known for the next three years by the unaccustomed title of Sir Frederick Smith." (ODNB). He was awarded a baronetcy on the 24 January 1918,  and subsequently progressed through the peerage in the following manner: the Baron Birkenhead in 1919, the Viscount Birkenhead on 15 June 1921, and finally the Earl of Birkenhead in the County of Chester and the Viscount Furneaux, of Charlton in the County of Northampton on the 28 November 1922.

In addition to his statesman role and legal work, FE is of course well known, like his friend Churchill, for his rapier wit. Indeed, FE once said of Churchill, "He has devoted the best years of his life to preparing his impromptu speeches." The following exchanges are reported to have occurred between FE (when counsel) and various "pompous judges":

"Judge: I have read your case, Mr Smith, and I am no wiser now than I was when I started.
Smith: Possibly not, My Lord, but much better informed.

Judge: Are you trying to show contempt for this court, Mr Smith?
Smith: No, My Lord. I am attempting to conceal it.

Judge: Have you ever heard of a saying by Bacon - the great Bacon - that youth and discretion are ill-wedded companions?
Smith: Yes, I have. And have you ever heard of a saying of Bacon - the great Bacon - that a much-talking judge is like an ill-tuned cymbal?

Judge: You are extremely offensive, young man!
Smith: As a matter of fact we both are; but I am trying to be, and you can't help it.

Judge: Mr Smith, you must not direct the jury. What do you suppose I am on the bench for?
Smith: It is not for me, your honour, to attempt to fathom the inscrutable workings of Providence."

But what of FE's contribution to the bankruptcy jurisdiction? FE does have at least one connection to bankruptcy. It is said that FE harboured a life long dislike of Oxford University's Professor Edward Jenks FBA. This animosity was due to the fact that FE considered Jenks responsible for the upper second he was awarded following his BCL viva. Jenks once said of bankruptcy, "'Finally, a few words must be said about the uninteresting but important subject of bankruptcy jurisdiction……..', (from: Jenks, E. A Short History of English Law: From the Earliest Times to the End of the Year 1911. Metheun & Co. Ltd. 1912). FE may have been right about Jenks!!

In terms of case law, FE "...appeared more often than was prudent for Horatio Bottomley" (ODNB) the notorious bankrupt fraudster and some time parliamentarian. As a judge, FE sat on the panel in a number of bankruptcy cases. The first of note is Wilson and Another Appellants; v United Counties Bank, Limited, and Another Respondents[1920] A.C. 102. The case concerned an action by a bankrupt and his trustee in bankruptcy against a bank for damages for breach of contract. It was held in the case that, "the right to claim damages for the injury to the bankrupt's credit and reputation did not pass to the trustee in bankruptcy, but remained in the bankrupt, and that, in the case of a trading customer, substantial damages were recoverable on this head of claim without proof of special damage..." In his speech Lord Birkenhead makes reference to Erle J's judgment in Beckham v. Drake 2 H. L. C. 579, 604 where it was noted that: "The right of action does not pass where the damages are to be estimated by immediate reference to pain felt by the bankrupt in respect of his body, mind, or character, and without immediate reference to his rights of property. Thus it has been laid down that the assignees cannot sue for breach of promise of marriage, for criminal conversation, seduction, defamation, battery, injury to the person by negligence, as by not carrying safely, not curing, not saving from imprisonment by process of law."

In his speech in Viscountess Rhondda's Claim [1922] 2 A.C. 339 Viscount Birkenhead LC (as he had by then become) made reference to the bankruptcy laws when he noted, "A felon (Forfeiture Act, 1870 (33 & 34 Vict. c. 23), s. 2) or a bankrupt (Bankruptcy Act, 1883 (46 & 47 Vict. c. 52), s. 32) is not entitled to receive a writ, but a felon may receive a pardon and a bankrupt his discharge."

The Earl of Birkenhead LC (as he had by then become) also sat in Mersey Docks and Harbour Board Appellants v Hay and Others Respondents. (S.S. the Countess - Detinue.) [1923] A.C. 345. He did not address the bankruptcy laws, but his brother judge, Lord Atkinson, did. He observed, "...that does not mean that secured and unsecured creditors are to be treated alike. For instance, equality of distribution of a bankrupt's assets amongst his creditors is the fundamental all-pervading principle of the Bankruptcy Code. But the fact that some of those creditors hold securities for their debts is not ignored; on the contrary, a secured creditor must either realize his security, or surrender and prove against the bankrupt's estate for the entire amount of his debt, or value it and prove for the balance of his debt. A secured creditor is by s. 168 of the Bankruptcy Act of 1883 defined to be a person holding a mortgage, charge or lien on the property of the debtor as a security for the debt due to him by the debtor..."

In Food Controller and Others Appellants; v Cork Respondent [1923] A.C. 647 the Earl of Birkenhead LC introduced his speech and the issue in the case in the following manner; "The question, shortly stated, is whether the admitted bankruptcy rule that Crown debts have no claim to priority of payment, other than is given by statute, obtains equally under the statutes now in force in the case of winding up an insolvent company. The trial judge decided that the Crown's prerogative right of priority still exists in the case of the winding up of a company, though extinguished in the case of bankruptcy. The Court of Appeal decided that the effect of the statutes now in force is that the rule is the same in both cases and that the Crown's prerogative right of priority in the winding up of an insolvent company has been extinguished." The noble Earl thought the Court of Appeal were correct and the appeal failed.

As Lord Chancellor FE's "judgments were greatly admired, and he pushed through an important agenda of reforms..." There was however a dark side to his character, a "A "formidable drinker...after years of abuse his powerful constitution suddenly cracked; his health rapidly declined, and he died of bronchial pneumonia at his London home, 32 Grosvenor Gardens, on 30 September 1930, leaving his family mainly debts." Several film clips of FE still survive. To see FE playing tennis with Bonar Law see here (FE's grandson, the 3rd Earl of Birkenhead died of a heart attack whilst playing real tennis - the title became extinct upon his death). To see FE on a yacht see here. To see him generally hanging around see here. To see him leading judges to Divine service in his full robes of state as Lord Chancellor see here.

Picture Credit: http://farm5.static.flickr.com/4077/4902169817_e06ffdcc0a_z.jpg

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