Lord Sudeley

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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.

Background Lord Sudeley Austin Mitchell MP Lord Ahmed Concerned Citizens