§ Bill read 3°
§ MR. J. G. PHILLIMORE
proposed to add a proviso to Clause 3. He was anxious for the adoption of limited liability, but must say that the Bill, as it stood, was not sanctioned by any legislation in the world. All countries which adopted the principle of limited liability required publicity, which was completely excluded from this Bill. He would prefer that there should be a public registry of partners, which should be open to all the world; but, in order that there might be some kind of security, he would move to add the following proviso to Clause 3:—Provided also, that no such loan shall be deemed to be protected by this Act, unless the tender thereof shall within fourteen days after the same shall have been advanced cause to be inserted in his own name in the Gazette of London, Edinburgh, or Dublin, according as the principal place of business of the borrower may be in England, Scotland, or Ireland, a statement of such advance, exhibiting the amount thereof, the person to whom and the term for which the same is made, the portion of the profits which the lender stipulates to receive on account thereof, and the nature of the business by which such profits are intended to be acquired.
§ MR. WILKINSON
said, it was all very proper that fraud should be prevented; but, if the Legislature went on adding precautions in this manner, the object of 802 the Bill would be altogether destroyed and nobody would lend any money at all.
§ MR. PELLATT
asked what difference there was between giving credit for money and credit for goods? The whole question was one of character. He thought the proviso would materially damage the measure.
§ MR. SPOONER
said, the difference between the case of a person selling goods and a person lending money was this—that the latter could secretly withdraw his money after having enabled the borrower to obtain credit in the market, whereas the seller of goods would only have the chance of obtaining payment in common with the other creditors after the lender had been paid.
§ MR. ROEBUCK
said, the object of the clause was to let the world know the exact amount for which the parties lending the money were responsible; and that they did not want more credit than their capital entitled them to.
§ MR. GLYN
said, the object of the clause was that all parties to a contract should be known to the public. He supported the clause, and considered secrecy in this case to be objectionable. But he would ask the right hon. Gentleman (Mr. Lowe) whether, under all the circumstances, considering the lateness of the Session and the state of the Bill, he was really prepared to press it forward? The right hon. Gentleman had admitted that it would be necessary to have a Committee next Session on the whole question of the law of partnership, and the Bill, as it at present stood, contained some most incongruous provisions.
§ MR. JOHN MACGREGOR
was confident that the Bill could not pass through both Houses this Session; he would, therefore, advise the right hon. Gentleman to withdraw it in order to introduce next Session some measure more consistent with justice and equity. He believed it would never work beneficially.
§ MR. LOWE
said, the hon. Member for North Warwickshire had pointed out the distinction between lending and selling, by stating that lending was necessary to give to the borrower public credit; out he (Mr. 803 Lowe) should like to ask the hon. Gentleman how the fact of publishing in the Gazette that a trader was trading upon borrowed money could enhance his credit in. the market? The hon. Member for Kendal (Mr. Glyn) had talked about the secrecy of these transactions, and of the necessity of making them public. The hon. Gentleman was a banker, and he should like to know whether the hon. Gentleman would consent to have every Bill which he discounted published in the Gazette? If he would not, and if the hon. Gentleman could carry on his business without publishing those Bills, why in this case should there be an exception? In a case where partners were only limitedly liable it was just and right that there should be a publication, and that notice should be given; but the question here was whether this was a partnership at all. The principle of this Bill was that lending on profits was not a partnership, and if it were not a partnership, why should there be annexed to it the incidents of partnership? If the principle he had just mentioned were a bad one, the House ought not to have passed the Bill so far through its various stages; if it were a good principle, then the House ought to leave these contracts to stand for what they really were—namely, for loans—ought to attach to them the incidents of a loan only, and allow them to remain secret, as other loans were. With regard to the particlar clause now before the Committee, it surely could not be a bonâ fide proposition. It was proposed that "no such loan shall be deemed to be protected by this Act"—the fact being that the Act did not protect any loan at all—unless the lender should, within fourteen days after the same should have been advanced, insert in the Gazette "a statement of such advance, exhibiting the amount thereof, the person to whom and the term for which the same is made, the portion of the profits which the lender stipulates to receive on account thereof, and the nature of the business by which such profits are intended to be acquired. "It amounted, therefore, to this—that whereas a man might lend his money at a fixed interest without making it public, and without running any other risk than losing his money, a man who lent money the interest upon which was to vary with the profits of the concern was to be liable to his last shilling, unless he inserted in the Gazette a number of very loosely-worded provisions, a failure in regard to 804 any one of which rendered him responsible for the whole of the debts. It was said that they ought to avoid pitfalls. Why, the whole proposal would involve a series of pitfalls, and in his opinion, it would be a hundred times better to drop the Bill altogether than run the risk of establishing such a system. If this clause were adopted by the Committee it would be impossible to proceed with the Bill, and he called upon those who proposed the clause to point out what good it would do. He could understand, though he could not approve, a provision requiring the registration of these contracts; a registry might be referred to at any time: but here it was not proposed to register them; they were to be inserted in the Gazette, which it was most difficult to refer to, and which would not be referred to until a concern failed, and then there would be a search in the Gazette in order to discover if some unfortunate person who had lent money to the concern had not committed some trifling inaccuracy, and could not therefore be made liable for the debts. The provision proposed was full of snares and pitfalls for the lenders—like the Sphinx which set men riddles, and then devoured them if they failed in solving the enigmas. For himself, he stood upon the principle of the Bill, and he called upon those who had approved that principle to reject the clause now submitted to the Committee.
§ MR. CARDWELL
said, that whether theory was or was not on the side of the Amendment of the hon. and learned Member (Mr. J. G. Phillimore), at all events the experience of centuries was recorded in its favour. When, too, his right hon. Friend asserted that the clause was badly drawn, and contained nothing but impracticabilities and pitfalls, the Committee should remember that it was borrowed almost in its very words from the statutes of Massachusetts, and that it contained nothing which had not been in force in the United States during the time the principle of limited liability had been established there. His right hon. Friend had asked whether these contracts were to be regarded as loans, or whether they were to have annexed to them the incidents of partnership. Now, he would remind the Committee that on the last occasion when this question was discussed the House adopted an Amendment in favour of the partnership view of the case; and he therefore hoped the Committee would be consistent and would carry that principle bonâ 805 fide into effect. This was not a question of yesterday. Registration had long been required in Italy under this system, and Fierti, the great Italian commentator, laid it down that such registration was absolutely essential. The well-known American writer, Mr. Troubat, described the course taken in France, and said:—The French commercial law received at the hands of Louis XIV. the celebrated ordonnance of that year—'one of the noblest monuments of the creative genius of that great King.' In this ordonnance partnership en commandite was invested with the character and insignia of regular and real partnership, and was distinguished from other forms of partnership. But an agreement for it was not required to be publicly registered—a practice that gave rise to frauds, inasmuch as the secret special partner might, by purchasing the silence of his general associate, come forward after a failure and claim as a creditor for money lent.The Committee would observe the consequences attributed to the absence of registration. Was not experience a hundred times more valuable than theory when they were altering a law affecting the great commercial system of this country? Then, a great French commentator upon this subject (Mr. Troplong) brought us from the time of Louis XIV. to that of Napoleon, and he said:——"To prevent the danger of too much clandestinity"—the word might seem peculiarly French, but it expressed precisely the evil which it should be their object to avoid—to prevent too much clandestinity the Code de Commerce required all but the name of the special partner to be registered." In the evidence taken before the Commission which had inquired into this subject it was pointed out that other countries had required the names of the special partners to be registered, and that mischief had been occasioned in France by the absence of such precaution. In dealing with this Bill he trusted the House would proceed upon experience rather than on theory. His right hon. Friend objected to the Gazette as a medium for these announcements. But did not every commercial question turn upon publication in the Gazette? Were not dissolutions of partnership made through that medium? Daylight was what they wanted—darkness what they wished to avoid. He submitted that the clause proposed would not prove a clog upon the Bill, and that the case in favour of the clause was irresistible.
said, for his part, he could not understand why a person should not be at liberty to lend money at a fluctuating 806 rate of interest. The law permitted him to dispose of one of his ships on any terms which he liked, and why should any restriction be placed upon his parting with his money in precisely the same way? If this clause were agreed to it would be impossible to draw the line, because a small loan to one man might be of as great consequence to him as a loan of £1,000 to a firm, and were loans of a sovereign to be published? He hoped that if the clause were agreed to the right hon. Gentleman would throw the whole Bill into the waste-paper basket of the House.
§ MR. T. BARING
said, that as regarded lending money, if the transaction were simply between man and man the principle of the hon. Gentleman, that there should be no restriction in point of law, might be a correct one; but in a case where A lent money to B, if, in consequence of that operation, the credit of either A or B was in any way altered in the eyes of the public the case became different, and some provision was necessary to avert the danger to which the public might be exposed; and the object of the clause proposed was to furnish such a provision. The right hon. Gentleman was so enamoured of his Bill that he could not think that he would withdraw it, even if the House agreed to the present clause; but he wished to point out to him that, considering that he had introduced the Bill in February, and that he had altered it three times before the second reading, it was not fair to the House or to the country to press on the Bill at so late a period of the Session. The right hon. Gentleman had stated that the Bill was founded upon the same principle as the Joint-Stock Companies Bill. Now there were very serious doubts as to the actual operation of that Bill, and it would only be prudent to wait until those doubts had been set at rest before extending the principle. The right hon. Gentleman had stated that he wished to give the same facility to two men as was enjoyed by seven. But why did he stop there? Why not give the same facility to one man? Why not let one man say, "I am prepared to gain as much as I can, but only to risk a certain portion of what I have already got?" Why, because it would be perfectly absurd to say so; and the absurdity had been realised and the danger which might arise had been guarded against by the legislators of other countries which had adopted the principle of limited liability. It was said 807 that the present Bill would encourage benevolence, and enable a master to help a servant to start in business. Now, he did not pretend to be over benevolent, but he could quite understand lending money to a man out of benevolence without asking him for a share of his profits. It might be lent to him without interest, or at a low rate of interest, but there was no necessity for the lender to receive a share of the profits. The fact was that the Bill was not a Bill to assist the poor man. It was, on the contrary, a Bill to enable the rich man to run his chance in a lottery, and only risk a certain stake—to grasp nil that he could, with the risk of losing as little as he pleased. The Bill, as it at present stood, would do nothing but give rise to gambling, and he trusted that it would not, in its present form, receive the sanction of the House of Commons.
§ VISCOUNT PALMERSTON
said, he was quite at a loss to understand the distinction which hon. Members attempted to draw between money lent upon profit and upon a fixed rate of interest, or why there should be such danger apprehended to the country if money should be lent upon profits without publication, whereas no publication was required of money lent upon interest, let the rate be ever so high. If there was any value in the argument urged against the Bill, hon. Gentlemen who made use of it ought to go a great deal further. They ought to bring in a Bill to prevent persons engaged in trade from borrowing any money at all, and to confine them entirely to their own capital. The principle which lay at the bottom of these objections was that principle which he had hoped had long since been worn out in this country—the principle of restricting all transactions, of interfering between all persons, whether engaged as borrowers or lenders, which in former times had led to the assize of bread, to regrating, and forestalling. It was the principle which proclaimed that the Legislature was to be the guardian of every person in the community, that it was to prescribe the conditions on which transactions were to be carried on between man and man, as if commercial men were children, and required that their interests could be protected by the parental care of the Legislature. That principle was a bad one, and he hoped it would not receive the sanction of the House. He hoped that the House would come to a decision, not so much on the clause itself as on the Bill, and say at 808 once whether they would have the Bill or not.
thought the Bill the most dangerous measure which had ever been introduced into that House. It was in fact a Bill to enable persons to commit fraud under the protection of an Act of Parliament. He was of opinion that, where any person shared in the profit of a concern, that person should be held responsible to the whole extent of his fortune.
§ MR. HENLEY
was of opinion that, as a clause had been introduced into the Bill at a former stage, enacting that lenders on profit should be postponed to all other creditors, some such provision as this was necessary to prevent collusion. He should therefore support the clause.
§ MR. MALINS
said, the clause proposed was so foreign to the objects of the measure and to the habits of conducting business, that if it were adopted the Bill would be entirely valueless.
§ MR. T. HANKEY
said, that if this clause were assented to, he should recommend the immediate withdrawal of the Bill.
§ After a few words from Mr. GREGSON and Mr. BASS,
§ Question put, "That those words be there added."
§ The House divided:— Ayes 108; Noes 102: Majority 6.
§ Motion made and Question proposed,
§ "That the Bill do pass."
§ MR. LOWE
said, that, after the decision to which the House had just come, it was not the intention of the Government to proceed with this Bill. If hon. Gentlemen would excuse him for a moment, he had one word to say on a point which considerably diminished his regret at the result of the division. Since he introduced this Bill, he had had laid before him the opinion of Mr. Justice Cresswell, Mr. Justice Willes, Mr. Baron Bramwell, the Attorney General, the Solicitor General, Sir Fitzroy Kelly, and one or two other legal gentlemen of eminence, to the effect that all loans lent on the terms of receiving a portion of the profits, and all services given on similar conditions, did not render persons liable as partners. He stated this publicly, because it was only due to the public that it should be made aware of it; for if those learned persons were right, the decision the House had come to would deprive the country of one of the safeguards which would have been afforded if this Bill had passed in its original shape.
§ MR. DISRAELI
wished to know whether 809 the right hon. Gentleman had any objection to lay before the House, not only the legal opinion to which he had referred, but also the case on which it was based. If the practice of falling back on the opinions of gentlemen of the long robe, with the view of alleviating the pain of a defeat, was to be introduced into their debates, it was but fair that the House should frankly be made privy to the sources whence the official consolation was derived.
§ MR. LOWE
would, as far as he was concerned, be most willing to accept the challenge of the right hon. Gentleman, and to lay the case as well as the opinion before the House. The opinion was given on a case drawn up in special reference to the Unity Bank, which was founded on the principle that the depositors should be entitled to dividends according to the rate of the profits accruing from the business; and the learned personages he had named; gave their opinion in favour of the legality of this principle, on which the bank was now acting. He did not know that it would be any breach of confidence on his part to give publicity to the case and the opinion which had been put into his hands; and therefore, as far as he was concerned, he should be quite ready to do so.
§ MR. MALINS
understood that the opinions of the learned Judges referred to were given before they were raised to the judicial bench.
§ MR. HENLEY
deprecated the observations just made by the Vice President of the Board of Trade. Extra-judicial statements, probably not worth the paper on which they were written, when they received the sanction of the high official authority of the right hon. Gentleman, were calculated to produce a serious amount of mischief.
§ Motion, by leave, withdrawn.
§ Bill withdrawn.