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Merlin
Sudeley The
Sudeley Bankruptcy and its Contemporary Significance Few
families can compare to our own for antiquity. We are descended from
Charlemagne, the Saxon Kings of England and the Dukes of Normandy.
The first of our line to settle in England before the Conquest was Edward
the Confessor’s nephew, Ralph, Earl of Hereford.
Amongst his estates was Toddington in Gloucestershire which remained with
us for nearly 1,000 years. At the
end of the last century, apart from 6,000 acres at Toddington, we had 18,000
acres at Gregynog in Powys, now part of the University of Wales.
In the “Sudeleys: Lords of Toddington” Dr. Stanley Chapman of
Nottingham University tells us that, whatever the debt my great-great
grandfather, 4th Lord Sudeley, accumulated through the agricultural depression,
it was covered twice over by large assets. Nevertheless in 1893 Lloyds Bank
filed for bankruptcy to force the immediate payment of the debt on the nail.
Back of that lies my exceptional discovery at the Public Record Office
that under 4th. Lord Sudeley’s Deed of Agreement with his creditors, shortly
afterwards overturned by Lloyds Bank filing for bankruptcy, they doubled their
claims. Back of that lies a recent
letter to me from the Editor of the London Miscellany, Christopher Arkell, who
is an accountant specialising in tax. In his letter he writes that creditors
have been known to enlarge their claims fraudulently where they are in collusion
with outside parties. They are thus enabled to acquire the debtor’s assets at
an under-value. Whatever is to
happen in our case, when there is no Statute of Limitations to bar after any
period of time the recovery of property taken by fraud, and the problems there
may be actually to show fraud did occur, Arkell recommends that quickly, before
my possible extinction as a hereditary peer, I should introduce a one line Bill
in the House of Lords to stop the abuse of which he complains by insisting that
creditors’ claims are adequately audited. To
follow will be a volume I am getting together on what else our case shows to be
wrong with the law on bankruptcy. A
further Bill could be introduced in the House of Lords drawing on the
recommendations of the papers in this volume.
A Law Lord, Lord Lloyd of Berwick, has offered to check over the Bill’s
drafting. In
this paper I thought I would begin with an outline of our ancestral inheritance;
then give a very long biographical sketch of the 4th. Lord Sudeley, to show the
kind of man he was who had to go bankrupt; then give signposts of where the
papers in my volume might suggest, in the light of our case, the law on
bankruptcy need be changed. II What
of 4th. Lord Sudeley’s ancestral inheritance?
The history of Toddington is so rich I can only pick out a few details up
to the end of the 18th. century: apart from our being of royal descent on both
English and Saxon sides, the lucky accident of our going through a minority at
Hastings, so the matter was never tested of which side he would have been on; if
on the English side we would have been dispossessed; our murder of Becket when,
in his dispute with the King, Henry II knew his canon law better than Becket
ever did; how the Church, unable to shed blood, exceeded its instructions in
burning the corpse of the Protestant Sir William Tracy, an irregularity which
became a powder trail of the Reformation; and our acquisition near Toddington of
the monastic properties of Hailes Abbey and Stanway. The
last Lord Tracy of Toddington married a Weaver from Morville in Shropshire,
related to the Blayneys of Gregynog since Authur Blaney’s mother was a Weaver,
Anyone familiar with the history of Gregynog will know the magnificent
sketch of Authur Blayney by his friend Philip Yorke of Erthig in Philip
Yorke’s “Royal Tribes of Wales” to which Authur Blayney belonged: how he
read law not so as to become a lawyer, but to protect himself against
the chicanery of lawyers; politically he belonged to no party except that
of honest men, so would not go near the court because it had been contaminated
by lords and placemen; staying always in Montgomeryshire, his table was stocked
with the ducks and chickens of his poor neighbours even if he did not need them;
his hounds were so overfed the huntsmen were compelled to help them over
obstacles they were not in any condition to clear with ease; and on his death he
was buried according to the instructions he had written out in his own hand,
that his coffin should be made in the simplest manner, the more perishable the
material the better. When the
Weavers came to an end, Author Blayney inherited Morville; and on his death as a
bachelor in 1795 he left both Gregynog and Morville to the last Lord Tracy as
his next of kin. The
last Lord Tracy died in 1797. In
1798 his only child and heiress married her close cousin Charles Hanbury, third
son of the Hanburys of Pontypool in Gwent.
Charles Hanbury enlarged his name to Hanbury -Tracy, and was created Lord
Sudeley at Queen Victoria’s Coronation largely because he was Chairman of the
Commission for the Rebuilding of the Houses of Parliament which selected
Barry’s design. The Hanburys go
back a long way to the 12th. century, living at Hanbury in Worcestershire as
Bailiffs to the Bishop of Worcester and MPs in the medieval House of Commons.
In the Tudor period Richard Hanbury rose to greater wealth and eminence,
being Prime Warden of the Goldsmiths Company and acquiring the ironworks at
Tintern Abbey. In the 17th century
the Hanburys greatly enriched themselves with their ironworks, innovating the
manufacture in this country of tin plate and iron wire. 1st.
Lord Sudeley became Chairman of the Commission for the building of the Houses of
Parliament because he had personally designed a new home at Toddington which is
very similar, the same blend of picturesque and Perpendicular Gothic styles, and
sometimes called a queer sort of cathedral. As a picturesque building Toddington is made by its Great
Tower, modelled on the tower at Magdalen College Oxford. The three blocks of which the building is composed, the main
block with the Great Tower, the
second block for the servants and then the stables are asymmetrically disposed
so that all the masses shift and interchange according to the angle from which
the Great Tower is approached, giving the quality in architecture which the 18th
century called movement. True to
Ruskin’s precept, that the essence of architecture is ornament, Toddington is
rich in sculpture, and being of the Regency period, the Camden Society and the
Ecclesiologists, this sculpture is secular in tome. Over the entrance is carved
our murder of Becket and the dissolved monasteries out of which with the
acquisition of Hailes Abbey and Stanway, we did so well. The building of
Toddington was largely paid for by the sale of oak trees on the Gregynog estate,
much needed by the merchant navy before the introduction of ironclads; and its
cloisters had one of the outstanding collections of Swiss glass in Europe,
formed by 2nd. Lord Sudeley who married Emma, daughter of George Hay Dawkins
Pennant who built Penrhyn Castle in the Revival Norman style out of the profits of his sugar
plantations worked by slaves in the West Indies and the slate quarries near
Penrhyn. Emma and her sister
Juliana, later 1st. Lady Penrhyn, were known as Sugar and Slate, to indicate the
sources of their prospective inheritances. The
Morville estate was sold by 1st. Lord Sudeley in 1814 to enable him to enlarge
Gregynog, I think a wise move economically, since he had been instrumental in
the completion of the Montgomeryshire Canal, enabling the transport of lime and
manure for the soil and of shale for the construction of roads when previously
much of the transport in this very backward
area had been on sledges, with the result of a great increase in the
price of land in Montgomeryshire. Far
too little is known about our
rebuilding of Gregynog in the 19th. century and laying out of the grounds, the
names even of the architect and landscape gardener have eluded us, though the
Nesfields, father and son, are plausibly suggested. I am glad we kept the old Carved Parlour, giving the heraldry
of the Blayney ancestors, to reflect a genealogy partly real, but also
conventional where the descent of the Blayneys is given from Brochwel Ysysthrog,
Dark Age King of Powys. III The
4th. Lord Sudeley was born to the old inheritance I have just outlined in 1840
as a younger son, Charles Hanbury-Tracy, and it is as such I will refer to him
for a while. He joined the Royal
Navy at the age of 14. In those
days you had no preliminary training ashore but went straight to sea, and he
quickly saw action under fire in the Crimean War with the taking from Russia of
the Aland Islands in the Baltic. Thereafter
he served on a long commission on a
sailing frigate, HMS Amethyst, which took him to nearly every part of the world.
In 1857 he saw action at Fatshan Creek, near Canton, where the Chinese -
resisting Western encroachments in what came to be called the Opium War - had
massed more than 100 junks which our navy set out to destroy.
After this practical training, he won distinction in gunnery courses at
Portsmouth, which led to his appointment as gunnery lieutenant on HMS Shannon.
A year later, in 1863, his naval career was cut short by the death of his
father 2nd. Lord Sudeley. He became
Whig or Liberal MP in the House of Commons representing Montgomery Boroughs, and
began his long-standing connection with the Welsh woollen industry at Newtown
near Gregynog. When he inherited
the peerage in 1877, his seat in the House of Commons was taken over by his
younger brother Frederick Hanbury-Tracy, until Frederick was ousted at the time
of our bankruptcy by our competitors in the woollen industry, the Pryce-Joneses,
haberdashers, very clever with their colours, who innovated mail order and were
Conservatives. Our seat in the
House of Commons and involvement in the Welsh Woollen industry must, I think, be
taken together because the seat was marginal, and I suspect sustained through
the woollen industry providing employment in the area.
The effects of the Great Reform Bill of 1832 were superficial.
Seats in the House of Commons continued to be supported by financial
influence up to the introduction of the secret ballot and the elimination of
corrupt practices at elections when, after the introduction of a more universal
franchise, everyone found the election of 1880 to be far too expensive.
Regard must also, I think, be had for the need 4th. Lord Sudeley felt
during the agricultural depressing to provide a market for the goods of his
tenants on the Gregynog estate who were mostly sheep farmers when mechanisation
had knocked the home woollen industry on the head
Certainly 4th. Lord Sudeley’s losses in the woollen industry were very
large, amounting by the time of his bankruptcy in 1893 to £100,000.
Some of the story is told in the “Outline of the Welsh Woollen
Industry” written by the late Maurice Richards for the late Peter Lewis’s
textile museum in Newton. Let me
quote from a letter written to me
by Peter Lewis before he died expressing his view of why 4th. Lord Sudeley lost
so heavily: “As
a fellmonger in Newton for many years”, Peter Lewis said, “I know how
difficult it would be to ensure adequate supplies of raw material - sheep are
shorn only once a year - and yet even a small mill needs a regular supply of
wool weekly. I can quite imagine
how a titled family at Gregynog would have found it difficult to realise the
need for the wool to arrive at the mill when expected.
It is of prime importance to keep up sales of woollen articles to
customers.” Why
did Charles Hanbury -Tracy, later 4th Lord Sudeley, sit in the House of Commons
as a Liberal or Whig? In his own
private memorandum on representation in Montgomeryshire he said all the small
farmers were Nonconformists, and a Tory candidate would stand little chance
because he would be opposed to Disestablishment of the Welsh Church.
Whiggery, however, was also in the tradition of Charles Hanbury-
Tracy’s family. Before his
elevation to the peerage 1st. Lord Sudeley had sat in the House of Commons as
Whig MP for Tewkesbury. But clearly
the belief of old Whig aristocracy like ourselves in reform was limited.
In his book on the decline and fall of the British aristocracy, David
Cannadine says the old Whig aristocracy espoused reform to exercise a
restraining hand over it. And
indeed, if we look at the string course round the main block at Toddington of
the heads of all the kings of England from William the Conqueror to Henry VIII
we are left to guess that au fond 1st.
Lord Sudeley was a Young Englander or High Tory.
It is easy to see how infuriating such an approach to politics was to the
middle class Radical wing of the Liberal Party headed by Joseph Chamberlain, and
the bitter divisions within the Liberal Party which ensued.
When Gladstone changed his mind in favour of Irish Home Rule in 1886 the
Whigs disappeared. Joseph
Chamberlain brought many of them into the Conservative Party, though rather
unusually 4th. Lord Sudeley stayed behind as a Liberal Unionist. IV Five
years after his entry into the House of Commons, in 1868, Charles Hanbury-Tracy
married Ada, daughter of Frederick Tollemache, who was a younger brother of the
Earl of Dysart at Ham House near Richmond in Surrey, now open to the public, and
well known for its ornate Baroque interior, given to it by Elizabeth, Countess
of Dysart’s second husband the Duke of Lauderdale, member of Charles II’s
Cabal and virtual ruler of Scotland for twenty years after the Restoration. In
the 18th.century, Lord Dysart’s son and heir married Horace Walpole’s niece
Charlotte. He approached his father
to say that on getting married he needed more money, to which Dysart replied he
had none to give, but plenty to lend at a low rate of interest.
A later Lord Dysart abandoned by his wife said he did not mind her going,
but had noticed she did not say good-bye, which was a breach of etiquette.
4th. Lady Sudeley’s uncle, Lord Dysart, lived as a hermit in two rooms
in the Strand, reciting Byron to himself, his meals served through a trap door;
so she was brought up at Ham by her father and uncle, Frederick and Algernon
Tollemache, who, in their frugality refused any fires, so their mother chided
them gently, if they caught cold, of dissipating money in doctor’s fees.
Frederick Tollemache was an MP for many years. Algernon Tollemache
accumulated a large fortune of £815,000
out of lending money to settlers in
New Zealand, making many of them into minor gentry; and on his death in 1892,
one year before 4th. Lord Sudeley’s bankruptcy, left half of it to his niece
Ada Sudeley. Let
me leave a vignette of how she appeared to those of my family who knew her when
they were children. Like most of
her generation she modelled herself on Queen Victoria, being dressed in black;
and so strict was the attention her generation gave to deportment she did not
seem to walk at all, but to glide on wheels.
She gave her husband many children, three sons including my grandfather,
and five daughters. Amongst these,
Aunt Alice married into the Keppel family, Earls of Albemarle, descended from
William III’s boyfriend. Aunt Eva
married into the Anstruthers, baronets of Balcaskie. Their illustrious grand-daughter Joyce, under the pen name
Jan Struther, wrote the celebrated book, “Mrs Miniver”, which in its
illustration of the English character helped to bring America into the war.
President Roosevelt said that in its contribution to the war it was the
equivalent of 14 battleships. After
the bankruptcy in 1893, when 4th. Lord Sudeley lost everything and much of 4th.
Lady Sudeley’s fortune disappeared under her Guarantee, they retired to
Ormeley Lodge near Ham, till recently the home of the financier Sir James
Goldsmith. Brought up as she had
been at Ham, 4th. Lady Sudely looked on Ormeley as
a villa and the atmosphere there was not happy. V To
return to 4th. Lord Sudeley’s political career in the House of Commons till he
inherited the peerage in 1877 and afterwards in the House of Lords where he held
office under Gladstone’s administration in the early 1880s.
It was the Prime Minister’s wish he should become Under Secretary of
State for War, but he had to decline because he was a Director of the firm of
Sir William Armstrong and Company which revolutionised naval gunnery and were
large contractors to the Government. A
surprising feature of 4th. Lord Sudeley’s bankruptcy is that he
should have lost £60,000 with this firm when Armstrong was a good
businessman who made himself very rich. Instead
4th. Lord Sudeley represented the Board of Trade and Office of Works
on the Front Bench in the House of Lords which meant attending Queen Victoria as
Lord in Waiting. In considering
which Lords in Waiting should accompany her to Osborne in the Isle of Wight,
Queen Victoria said: “Not Lord Sudeley, he is so dull.”
Though some of us may believe that is just what a peer should be, this
judgement does seem rather harsh when 4th. Lord Sudeley was a man of such
intelligence and vitality, so I should add that on hearing the news of his
bankruptcy, the old Queen is reported to have wept. On the Front Bench in the House of Lords, Sudeley represented
the views of the Government, which are already well known, so I thought I would
concentrate on his Parliamentary contribution outside office, concerned almost
exclusively with what he really knew about, the Royal Navy. This has to be
considered largely against what was wrong with the Navy in being hidebound by
conservatism and resistant to innovation when it had to undergo great changes in
his own lifetime. There were
anachronisms in the areas of the promotion and retirement of naval officers and
what they should be qualified to do after the evolution of ironclads, the
introduction of torpedoes and the great advances made in gunnery.
With the reduction of the Navy after the Napoleonic War, there was a
blockage in the promotion lists which particularly affected the senior ranks.
The naval lists were swollen with ageing officers ashore on half pay, and
during the Crimean War much inefficiency resulted because the average age of
senior officers was sixty. As an MP
in the House of Commons Hanbury-Tracy was responsible for two Admiralty Orders
in Council of 1873 and 1876 to clear the naval lists by offering many officers a
step up in rank and down payment to retire.
And it was very important that those officers who remained in the navy
should be properly trained in current technical advances.
This applied especially to navigation.
Previously, whilst the captain had command of his ship, its navigation
was left to the Master. Together with Lord Brassey when he was an MP, Hanbury-Tracy
worked successfully in the House of Commons to put an end to this by bringing
navigating lieutenants up to the same standards as gunnery and torpedo
lieutenants. It
is to be lamented that Sudeley could plead only once in the
House of Lords for the extension of
leave for naval officers on foreign service.
If bankruptcy and the temporary loss of his seat in the House of Lord had
not intervened, he would have brought the subject up two or three years in
succession, and probably a large concession would have been made. VI The
4th. Lord Sudeley’s economic problems originate in the difficulties of owning
land from the onset of the agricultural depression in 1879.
I would like to set this matter in a rather longer perspective, from the
Repeal of the Corn Laws in 1846 up to the Depression of the 1930s.
From its inception in the reign of Queen Elizabeth the British Empire
worked under the Mercantile System, that is to say exchange of raw materials
from the colonies for our manufactured products.
Then Peel betrayed his own Conservative Party by repealing the Corn Laws
and we went over to Free Trade. Sometimes
it is supposed the Corn Laws were repealed to relieve the potato famine in
Ireland. But in his biography of
Disraeli Lord Blake makes it clear that Ireland was so impoverished it would
make little difference if the Corn Laws were repealed or if they were not; Peel
acted as he did because he was a committed Free Trader under the influence of
Cobden, who was very prejudiced against the old landed aristocracy.
The ensuing sentence of death against agriculture was delayed for a
generation. Then disaster struck in
1879 when British farming was not able to compete
with wheat grown on the virgin soil of the American prairies, the import
of refrigerated meat from the Argentine, and the import of butter and wool from
New Zealand. Thence forward it was impossible to hold an estate together
without support from an outside source. In
consequence, if I can give a few statistics, by 1914 Britain’s farmland
population fell by a quarter and the rural population as a whole by a third.
Already by 1903 over 5 million acres of farmland had simply passed out of
cultivation. Many working on the
land were forced unemployed into towns or had to emigrate.
In his book on the Decline and Fall of The British Aristocracy
David Cannadine has written of other old landed families like ourselves
which carried on, despite the agricultural depression, and before the
introduction of social security, to keep their tenants afloat but at great cost
to themselves. I will cite the single case of the 9th. Duke of Bedford, with
whom the 4th. Lord Sudeley had a thriving correspondence.
The
wittiest of men, the Duke seasoned his correspondence with quotations from his
great store of knowledge from the classics and the Vulgate, the quotations often
being used in a manner most remote from their original meaning.
In his obituary, Jowlett said he was one of the finest gentlemen in
Europe. Having lived as one of the
poorest men in England, with an income of £22 p.a., he became one of the
richest, with an income of £200,000 p.a., yet retained the simplicity of
a poor man, who rather than value himself for his good deeds preferred to
apologise for them, and liked to lament that his days were passed in carrying
out the duties of a land agent. During
the agricultural depression he spent £2 million on improving his estates
without increasing the rents. Being in quite a different league of wealth to
4th. Lord Sudeley, he could afford it. In
the face of the competition of agricultural produce from overseas nearly every
other country in Europe introduced Protection,
most notably Prussia where out of his customs duties Bismarck paid for his
innovation of social security.
Free Trade was the doctrine of the Liberal Party; why did the
Conservative Party also keep to it? This
was partly because when Gladstone changed his mind in favour of Irish Home Rule
many Liberals drifted into the Conservative Party; cuckoos in the Tory nest they
have been called who changed the philosophy of the Conservative Party from
within. More to the point, the
enlargement of the franchise under the Second and Third Great Reform Bills made
it impossible to increase the price of food.
Any Government which did this would be voted out of office at the next
election. Here was the basic cause
of the failure of Joseph Chamberlain within the Conservative Party now in his
advocacy from 1903 of domestic protection for agriculture as well as industry
and Imperial Preference. Only with
the mass unemployment of the 1930s were the Conservatives able to introduce the
measures advocated by Chamberlain thirty years before. The
way out for landlords from their awkward situation in which they should never
have been placed would have been for their tenants to enfranchise, as happened
in Ireland. Compensation for Irish
landlords under Wyndham’s Land Act of 1903 was quite generous.
Amongst Conservative politicians Lord Onslow and Lord Landsdowne
recommended the use of state credit to assist tenants to buy out their own
holdings. The movement for tenants
in Wales to enfranchise was strong, and I am puzzled 4th Lord Sudeley should
have joined the North Wales Property Defence association, founded by his cousin
Lord Penrhyn, and designed to resist that movement. Whatever
Gladstone may have said in criticism of Welsh landlords and their lack of
generosity during the agricultural depression in his famous speech at the foot
of Mount Snowdon in 1892, and following on that his appointment of a Royal
Commission of Welsh land, 4th Lord Sudeley’s record at the Gregynog estate was
an exceptionally good one. When he
inherited in 1877 the estate was very dilapidated. At the celebration of my Great Uncle Charles Hanbury-Tracy,
later 5th. Lord Sudeley’s coming of age there in 1891 and before, tribute was
paid to 4th Lord Sudeley’s abatements of rent, and all he had spent on
drainage and the provision of new houses fit for his tenants to live in.
It was fully recognised that without such a generous landlord many on his
Gregynog estate could not have remained his tenants and might have been ruined. After
his bankruptcy in 1893 4th. Lord Sudeley went out to New Zealand, no doubt to
check over property his wife had inherited from Algernon Tollmache, and saw how
out there any money spent on improvements got its proper return.
Writing to his wife, he expressed bitterness over how, owing to the
agricultural depression, all the money he had spent on improving his estates in
Gregynog and Toddington did not have that effect. The
4th Lord Sudeley clearly saw the need to diversify to try to overcome the
difficulties of the agricultural depression.
The Royal Commission appointed in 1893 to inquire into the agricultural
depression confirmed that fruit farming had been profitable; so we may be sure
Sudeley did just what was needed in becoming an important pioneer in the fruit
industry. He booked an order with
George Bunyard, the leading supplier of fruit trees in Kent, for half a million
trees and bushes, claimed to be the largest order ever placed by a British
nurseryman. Planting began in
1879/80. The earliest planting were
plums, with a currant underplant. 50
acres were also planted with cobnuts. By
1890 the total area of fruit and nuts was 650 acres, probably the largest fruit
plantation in Britain at the time. For
the growing of fruit under glass Sudeley erected houses of modern, metal frame
construction. The steelwork was
imported from Belgium, with Belgium workers brought over to complete their
erection. The total area of glass
was about two acres, and the principal crops here were grapes, peaches,
nectarines and figs. Sudeley
showed equal foresight in the disposal of his fruit. In about 1887 he entered into partnership with T.W.Beach,
leading jam maker; since strawberries and other soft fruit, as well as plums,
could become much more profitable, especially in glut years, if made into jam on
site. And new processes of canning
fruit were developed. In the
disposal of fruit Sudeley’s influence was immense. The Beach family built
canning and jamming factories in Pershore and Evesham, and many others followed
suit. Sudeley’s tragedy was that
he could not hold onto his orchards for long enough till they came into full
bearing owing to his misfortunes in the City. VII The
City speculations in which Sudeley became involved contributed in some degree to
his debt but were insufficient to account for most of it.
Here he became involved with two great sharks of the period, the well
known company promoter Earnest Terah Hooley and Jabex Balfour.
Hooley gave a set of gold Communion Plate to St. Paul’s Cathedral to
celebrate Queen Victoria’s Diamond Jubilee.
When Hooley became bankrupt, the Church of England insisted
on returning it to help satisfy Hooley’s creditors.
The celebrated reactionary priest Monsignor Gilbey once remarked to me
the Church of Rome would have made no such gesture.
Balfour was a vivid illustration of the abuse of the privilege of limited
liability. He founded a series of
companies for the development of suburban housing over which he had supreme
control and all supported by a bank. He
window dressed the balance sheet of one company borrowing from the next. When
through this over extension his bank crashed, all the companies fell like a set
of dominoes. It must be noted there
still appears to be no sufficient regulation to prevent the abuse of limited
liability in this way. The
petition for bankruptcy filed against 4th Lord Sudeley by Lloyds Bank was parked
off by Sudeley’s attempt to rescue the great financial house of Murietta. Just
before they became insolvent in 1890, Dr. Chapman tells us Barings sold large
quantities of Argentinian railway stock, in which they had an interest, to the
gullible public, including the
South American and Mexican Investment Company which was incorporated
just as the bubble was about to burst.
The Baring crisis plunged Murietta into an immediate liquidity crisis.
To plug this, Sudeley negotiated with the Governor of the Bank of England
to extend the Bank of England’s loan of half a million pounds to Murietta on
the condition Murietta could amalgamate with the South American and Mexican
Investment Company of which Sudeley was a director. This plan collapsed when
that company’s debenture holders rebelled against their Directors. Sudeley
insisted the South American and Mexican investment Company never intended to
take over any large liability from the Bank of England unless its amalgamation
with Murietta was successfully carried through. The Bank of England did not agree. It successfully petitioned
the court to wind the Company up and picked on Sudeley as a surety for £40,000
owed to it by the Company. Dr.
Chapman comments that Sudeley should have guarded his position against the Bank
of England as the most powerful financial institution in the country.
When I examined some of the court papers of this case, I had to ask
myself how solid was the evidence on which the Bank of England took up its
position. The Bank of England was
in the position to pay the best lawyers to do what it wanted.
Sometimes one notices that a case of law bears little relationship to the
facts and personalities involved; it is like a drama in which the best lawyer -
like the best actor - wins. On
first seeing this, one experiences a sense of nausea and then gets used to it. It
was Sudeley’s intention to sell the Gregynog estate and keep Toddington with
its great orchards there. The
extent to which his assets exceeded his liabilities was very similar to that of
Barings. Because
Barings represented credit the world over, it suited the banking industry
to support them , and we know that after a passage of time they survived.
By contrast, it was in no one’s interest to support Sudeley in his need
so that he could sell only some of his assets at a comfortable pace to fetch
their proper value. At the same
time the Bank of England and other major creditors had no wish to press Sudeley
into bankruptcy. When Lloyds Bank,
low down on the list of creditors, filed for bankruptcy it made no difference
that they withdrew their petition. The
mere fact the petition ever was filed meant confidence was undermined, and
Sudeley could only borrow on the most onerous terms. If
Sudeley had been allowed an accommodation with his creditors whose claims were
reasonable they could have been paid in full and he could have kept the rest of
what he had. But because Lloyds
Bank acted as it did the creditors themselves got next to nothing.
So Dr. Chapman agrees there must be an unknown reason for Lloyds Bank
filing for bankruptcy and we can only speculate.
Dr Chapman suggests that in the aftermath of the Baring Crisis, which
shook credit to its foundations, scapegoats had to be found, and it was
Sudeley’s misfortune ever to have been associated with the South American and
Mexican Investment Company which had to pay for its misdeeds with its life. What
other explanations have been offered? The
late Sir John Prideaux, Chairman of the Nat West Bank, suggested that Lloyds
Bank was idle. Or with banks being
sensitive to political pressure, is 4th. Lord Sudeley’s case the
spin-off of the feud within the Liberal Party between middle class radicals and
old Whig aristocracy like ourselves, already there owing to class animosity and
exacerbated by the Irish situation when the law so heavily weighted in favour of
the creditor allows him to punish the debtor for reasons divorced from
economics. We know how Joseph
Chamberlain was the deadly enemy of 4th. Lord Sudeley’s principle
creditor Lord Stalbridge, Treasurer of the Liberal Party, who, owing to 4th.
Lord Sudeley’s bankruptcy - or so his grand-daughter Elspeth Huxley tells us
in her book “Nellie - Letters from Africa” - had to move out of politics to
make money in railways. But
perhaps the most convincing explanation is the offered by Arkell, that under
4th. Lord Sudeley’s Deed of Arrangement with his creditors shortly afterwards
overturned by Lloyds Bank filing for bankruptcy, a Deed which though formed may
not have taken effect, the creditors may have fraudulently enlarged their
audited claims because they were in collusion with outside parties. They were
thus enabled to acquire our assets at undervalue. On this abuse Arkell writes: “Cases
of fraudulent enlargement are, by their very nature, almost impossible to prove,
since the proof would place any creditors so discovered in danger of appearing
in the criminal courts. Nevertheless, most accountants are aware of cases, some
arising from their own casework (where debtor clients have alleged collusion
between creditors and a liquidator or receiver), and some heard about ‘on the
grape-vine’. From
my own files I give you the tale of a couple who ran a working men’s café. It
was the husband’s task to complete the VAT and business tax returns, since he
had sacked the business’s accountant for over-charging and delay in submitting
returns. The
VAT returns were dealt with sufficiently well so that there were few questions
raised on the infrequent inspections, and VAT was accounted for and paid over
timeously. The income tax returns, however, baffled the husband so much that he
put them in a drawer, thinking that he would deal with them later. ‘Later’
never came: instead, a series of increasingly peremptory demands which also
found their way into the drawer with the tax returns. The
end result was a court judgement in the sum of more than £40,000 (around 4
times the tax actually due as determinable from the VAT returns which had been
accepted by HM Customs and Excise as perfectly in order). Interest and penalties
were added to this figure. The
husband and wife now tried to defend themselves. They provided the Revenue with
all their accounting records. The Revenue accepted that the assessement for tax
was far too high and agreed to reduce it, and moreover, to stay any bankruptcy
proceedings while a negotiated settlement was discussed. Despite
these assurances, the Revenue still proceeded to exact judgment. This led to a
visit by the bailiff on behalf of the Revenue and a bankruptcy order, and the
appointment of a registered insolvency practitioner to administer the couple’s
estate. The Revenue put in their maximum claim, based on the erroneous
assessments, and though the couple pleaded with the insolvency practitioner to
‘make the Revenue see sense’, the Revenue’s claim was accepted by the
practitioner as good. ‘You don’t rock the boat with the Revenue’ was the
practitioner’s response. There were only a handful of other creditors (given
the cash basis of the café’s suppliers) amounting to a trivial sum in total. The
couple had to hand over their business to the practitioner as part of the
settlement with their creditors. The practitioner ran it for three years during
their bankruptcy with the couple as his
‘agents’ actually working in the café each day, and paying over to the
practitioner all the café’s takings. Eventually
the couple came out of bankruptcy, and retrieved their café. They discovered
that the Revenue were paid only a fraction of the inflated debt claimed, and the
practitioner’s fees for the administration were very substantial indeed. Unfortunately,
the couple have no wish to draw attention to themselves, since they must still
deal with the local tax authorities, and the practitioner is well known in their
area. A
clearer case where the auditing of creditors’ claims prior to acceptance by an
insolvency practitioner cannot, in my opinion, be found. Sadly, it is all too
common.” VIII The
4th. Lord Sudeley’s case cannot be taken in isolation; it
needs to be made objective by being taken in conjunction with similar, more
contemporary cases. An abundance of these cases can be provided by three
organisations, Christopher Stockwell’s Lloyds Names Associations Working
Party, dealing with victims of Lloyds Insurance, the Independent Banking
Advisory Service and Bankruptcy Association.
Papers will be published from both Christopher Stockwell and Professor
Christer of the University of Salford, who has worked through numerous
cases of the Bankruptcy Association. From
my communications with the Independent Banking Advisory Service I have found
much of their quarrel with the banking industry is about information, over which
the banks have total control. Banking is about keeping records; without records
banks would not make any money, yet the law of libel prevents us from suggesting
outside Parliament that they are hiding anything.
So a paper will be published on the better keeping and disclosure of bank
records, already discussed by Dr. Chapman in The
Times Literary Supplement for
1985. Dr. Chapman finds bank records to be still largely uncharted territory for
economic historians. In a case such
as that of the 4th. Lord Sudeley, bare entries from the bank’s
Board Minute Books about filing for bankruptcy are very galling. We need to know
about the information on which the bank’s decision was based and the
discussion which ensued - to be provided by internal memoranda, reports to
directors and so forth. The old
argument that banks cannot throw the expense of storage for such records on
their shareholders is greatly weakened owing to the ease and economy now with
which information can be stored by means of computer technology.
No doubt it will be said on the one hand Parliament should not seek to
impose statutory controls which would encourage the concealment and early
destruction of the records which it is sought to preserve.
On the other hand, in the present political climate of public acceptance
and accountability, it will be asked whether you are a Government if you cannot
ensure proper statutory controls should apply.
About disclosure of bank records, much will depend on the enlarged scope
of the old supervisory role of the Bank of England. The Independent Banking Advisory Service would like to see a
new Independent Regulator with power and clout, as per Customs and Excise, and
so proper search powers. At the
moment banks do not provide “discovery” documents which are to their
detriment even when subjected to court order. To
get a complete view of 4th. Lord Sudeley’s case we need to know
about the personalities involved, very evidently quite wrong, in a City which
was much smaller than it is nowadays. this
information we may never have. But
since Dr. Chapman was writing only as an economic historian, the late Michael
Sheldon-Allen, solicitor and officer of the Bankruptcy Association, has written
a memorandum to draw attention in particular to two aspects of 4th. Lord
Sudeley’s case from a legal point of view.
First, whether bankrupts should represent themselves.
When as I mentioned 4th. Lord Sudeley went out to New Zealand after
Lloyds Bank filed for bankruptcy, he received the extraordinary advice from the
solicitors I inherited to remain out there instead of arriving back on the scene
in England. Secondly, Sheldon-Allen
has looked at the area of fire sales when it is crucial the debtor should have
sufficient time to pay his debt so that assets can be sold at a comfortable pace
to fetch their proper value. Then
there could be republication (or reference thereto) of what Andrew Campbell of
the Law Department of the University of Wales in Aberystwyth has written on the
danger of Guarantees and how they should be sufficiently explained to women when
4th Lady Sudeley was a substantial heiress, and much of her fortune was drawn
under owing to her Guarantee of 4th. Lord Sudeley’s loan from Lloyds Bank. Then
a paper will be published on the abuses of insolvency practice: about the
excessive fees charged by trustees in bankruptcy and how insolvency has always
been the Cinderella of the soliciting and accountancy professions because it is
so lucrative, with the temptation this presents for the creditor’s reporting
accountant to give the debtor a
negative report, that is to say to act as the debtor’s mortician instead of
the physician he ought to be. And
here, with the excessive fees
charged and abuse by reporting accountants which ensues, I would like to pay
tribute to the magnificent work of the Bankruptcy Association, who would prefer
to see the whole concept of bankruptcy abolished and put into its place the
enforcement of voluntary arrangements. The
Bankruptcy Association had had huge successes where creditors accept informal
arrangements with debtors because they see the bankruptcy Association’s fees
in setting up these arrangements are minimal.
The Bankruptcy Association have reached agreements with banks and other
lending agencies for as little as 5p in the pound.
In this way they have saved hundreds of matrimonial homes even where
there is a second charge on the property.
At the centre of 4th. Lord Sudeley’s case is the old question of usury
or whether you should be allowed to lend money without taking a share of the
risk. It is difficult to see Lloyds
Bank would have acted as it did against 4th Lord Sudeley if in lending
the money it had taken a share of the risk.
Usury had been condemned by the greatest philosophers and religious
leaders of the past, by the Jews in the Old Testament, Aristotle, Mohammed and
St. Thomas Aquinas.
We know from R.H.Tawney’s classic work “Religion and the Rise of
Capitalism” the tide only began to flow the other way when the Church itself
in breach of its own teaching became embroiled in usury and Calvin sanctioned
it. Most of us do not sufficiently
appreciate the arguments against usury are not purely moralistic and relating
only to a barter economy of long ago. They
are of highly practical significance to the more sophisticated economy we have
evolved now as I pointed out in a letter to the Evening
Standard some time ago. These
matters are well expounded by John Tomlinson in his book “Honest Money” and
at the meetings in the House of Commons of the Christian Council for Monetary
Justice with Austin Mitchell MP in the chair.
Austin Mitchell described himself as unorthodox, in a minority of one on
this issue in the House of Commons, so there is much work to do. Let
me end with a quick tribute to 4th. Lord Sudeley after his misfortune.
Bankrupts are not allowed to sit in the House of Lords.
During the evening of his life Sudeley applied for his discharge from
bankruptcy and resumed his seat in the Upper Chamber to become largely
instrumental in the appointment of guide lecturers for museums.
This concept was envisaged 50 years before by Disraeli, and then lay
dormant till Sudeley picked it up. It
is unrelated to his previous activities; we are missing the information of what
gave him his interest; though an obvious guess would be his familiarity with the
works of Ruskin. The best authority
on this aspect of 4th. Lord Sudeley’s life is Giles Waterfield, Director of
the Dulwich Picture Gallery. In
retrospect the action taken against us by Lloyds Bank was at the least
unnecessary. Whatever our debt they
refused to accept our large collateral. Yet
the personal tragedy here needs to be turned to public advantage.
If retroactive justice is unlikely because it will be argued that there
are too many similar cases, let us at least seek to change the law to save
further victims. The Cork Report on
Insolvency on which our present insolvency law is patchily based is a biased
document. Banks are nowhere
mentioned in it because much of the business of Cork Gully, now Coopers and
Lybrand, now comes from them. Most
Governments have to look for the things to do for which there should be enough
public demand, so here is an excellent cause for the present Government to
pursue.
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