HC Deb 06 June 1856 vol 142 cc1142-51

Order for Second Reading read.

MR. MALINS

, in moving the second reading of this Bill, said, it had come down from the House of Lords with the sanction of the high authorities of Lord Brougham, who introduced it, of the Lord Chancellor, and, with some Amendments, of Lord St. Leonards. Its object was to remedy a great defect in the present Winding-up Acts. It was originally proposed that the failing of a joint-stock company should be an act of bankruptcy, that in the official manager should vest all the estate of the company applicable to pay its debts, and that he should have control over the separate estate of the shareholders, making the proceedings analogous to the bankruptcy of a private firm. But those who introduced the Winding-up Acts made them to settle the liabilities of shareholders inter se, and the creditors were left the same remedy as before, with the exception that after a winding-up order was made a creditor was no longer at liberty to sue without first taking a proof of debt into the Master's Office. An impression, he believed, prevailed that this Bill was brought in by some parties to give protection to the shareholders of the Tipperary Bank. If hon. Members wished to continue to entertain an erroneous impression, he could not help that; but he had thought that he would be free from the supposition that he had any sinister motive in the introduction to that House of a measure like the present. He could not be presumed to have any personal connection with the party whom some hon. Members seemed to think the Bill was intended to benefit; and certainly he had no political sympathy whatever with those individuals who had been concerned in the affairs of the Tipperary Bank. He was conscious of the rectitude of his own motives; and nothing but that consciousness could have compensated him for the pain inflicted on him by the opinions expressed in reference to this Bill by some of those whom he had been accustomed to regard as his nearest and dearest political friends. The origin of the Bill was this. On a Saturday, about three weeks ago, Mr. Bacon, a learned and distinguished Queen's counsel said, as he was sitting by his side in Court, that his attention had been called in a marked manner to the evil of the Winding-up Acts, by his having to advise whether the Tipperary Bank could be made bankrupt, and he thought it could not, as the joint property vested in the official manager. He told Mr. Bacon he was quite aware of the imperfection in the law, and he perused an opinion of his learned Friend and a Bill prepared to remedy the evil. Having in the interim been waited upon by the solicitor who had charge of the business, he stated on the Monday that he was so clearly of opinion that something ought to be done that, if it were desired, he would take charge of a Bill upon the subject. The Tipperary Bank had no doubt given rise to the Bill. The House would remember that Sydney Smith once said, that railways would never be set right till a Bishop was killed; so the evils now brought before the House would never have been attempted to be remedied if it had not been for the monstrous injuries inflicted on a large body of individuals by the failure of the Tipperary Bank. He would ask hon. Members what difference ought there to be made between the failure of a firm consisting of ten members, and of a firm consisting of 100 members? If the joint estate and the separate estate of the ten members should vest in the assignees, why should not the same process apply to the joint and separate estates of the 100 members? But, according to the present law, in the latter the joint estate was only vested in the assignees, while the separate estate of the shareholders was untouched. There was another great difference between the bankrupt law and the Winding-up Act. By the bankrupt law all process against the parties by the creditors was stopped, except by the assignees; but, under the Winding-up Act, any creditor might sue a shareholder, so that he had the means of litigation, and might come in and take the spoil, and a comparatively wealthy shareholder was assailed as it were by a pack of blood-hounds. Now, he would ask, was it reasonable or proper that one principle should prevail in the case of a bankruptcy of a firm consisting of ten partners, and another principle in the case of a firm consisting of 100 partners? Justice and reason required the same principle to apply whatever the number of proprietors might be. It was monstrous that every creditor should be let loose on every shareholder, by means of which either all the property of a share-bolder might be laid hold of by a single creditor, or, if 100 creditors brought actions, the whole of the property of the shareholders might be absorbed in the expenses of litigation. He would now show the working of the present law in another shape. He would suppose a certain number of the shareholders of a company under the Winding-up Act to be possessed of means by which all the debts of the company might be paid; and that the joint estate which was vested in the assignees was only equal to pay 2s. in the pound. The question then would be, how were the creditors to get paid the residue of their debts? It would be done by making calls on the shareholders. Well, a call of £40 a share had already been made in the case of the Tipperary Bank, and if that were not enough, a second call would be made; so that if there were 200 shareholders, and it was found that the call was not sufficient to pay the whole of the debts, by making a further call those creditors who had means would be made to pay on account of those who were not possessed of any. At present the creditors under the Winding-up Act, although they might he thousands in number, had no representative; and they could not be brought to bind themselves to any particular course of action. The object of the present Bill was to enable the judge or master charged with the winding up of any company to call upon the creditors to appoint a representative, by whose acts the creditors should be bound. Was there anything very wrong in that? And yet he had been charged with advocating a Bill for the purpose of whitewashing some political delinquents. By the 150th clause of the Bankruptcy Act the assignee, with the sanction of the Commissioner, could enter into arrangements with the creditors. Was it improper to extend that principle? The object of the Bill was, without sacrificing the interests of creditors, to afford some protection to shareholders. It was not intended to refer particularly to the bank with which the late Mr. Sadleir had been connected, but it was certain that person was in the habit of visiting Buckinghamshire and Hertfordshire in consequence of his connection with another bank, and the result was, he believed, that hundreds of persons who were induced to take shares in the Tipperary Bank now found themselves suddenly ruined. He was aware, that all that those persons possessed must, to the last farthing, if necessary, be applied in paying the debts of the company. By the second clause of the Bill, he proposed that the Master should be enabled to call meetings of the creditors, at which the creditors should appoint a representative, and that this official person should have the power of making arrangements with the shareholders either for payment in full, or for payment in part, giving time, entering into compromises, and so on; and that the official person who represented the shareholders should have the same power of compromising with the creditors, that the assignee in bankruptcy now possessed under the sanction of the Court. It had been supposed by hon. Gentlemen from the other side of the water, that his object was to release shareholders from their liability. That would, in fact, be impossible under an Irish Act, called "The Bankers' Act," the 33 Geo. II. By the 3rd clause of that Act, from the moment any person became a banker, his estate was pledged to the creditors, and he could not afterwards make any settlement so as to deprive his creditors of the security of any part of the estate. It was decided in 1838, by Lord Plunket, that where a banker made a settlement on his son and became bankrupt, the settlement was void. That principle was applicable to joint-stock banks, so that in the case of the Tipperary Bank, all shareholders possessing real estate were liable to the full extent of their property, so that if he had intended by his Bill to protect the shareholders in that bank, he should have signally failed. Having thus stated the objects of the Bill, he would beg to urge its second reading on the House.

Motion made, and Question proposed, "That the Bill be now read a second time."

MR. SEYMOUR FITZGERALD

said, in opposing the second reading of the Bill now before the House he felt the difficulty of his position, as his Amendment, if carried, would materially affect some Members of that House for whom he had the greatest respect. There must be also, as the hon. and learned Gentleman had stated, considerable sympathy with the innocent shareholders who now found that their whole estates would be swept away if this Bill were not passed. At the same time the provisions of the Bill were not only injurious but cruel to the small depositors who had invested their all in that bank, and so opposed to the policy of the law affecting joint-stock banks that he felt it his duty to oppose the second reading. It might be true, as stated by the hon. and learned Member for Walling-ford, that it was not the object of the Bill to whitewash the shareholders of the Tipperary Bank, but that such would be its effect could scarcely be questioned. Assuredly there was something suspicious in the unreasonable haste with which the measure had been pressed on, not only in that House but elsewhere. The hon. and learned Member who had charge of the Bill had promised not to bring it forward after twelve o'clock, and he (Mr. S. Fitzgerald) conceived that he had a just cause of complaint that the engagement had not been adhered to.

MR. MALINS

said, he must explain that it was only five minutes after twelve o'clock when he rose to move the second reading, and he had done so in obedience to loud calls from all parts of the House.

MR. SEYMOUR FITZGERALD

said, he must state that he had not heard any of those calls, and he still thought that the hon. and learned Member would have acted more fairly in respecting the original arrangement. There could be no doubt that the reason why the Bill was forced on with such precipitation was that, passing into law without delay, it might be made applicable, notwithstanding what had been stated to the contrary, to the particular case of the Tipperary Bank. If such was not the intention, nothing could be easier than for the hon. and learned Member to introduce a general proviso declaring that the Bill should not have a retrospective effect, or a special one excluding the Tipperary Bank from its operation. With respect to the shareholders in that establishment, there were some of whom it was not too much to say that no language of reprobation could be too strong to mark the sense which the country entertained of their fraud and criminality. Others of them there were who were not liable to such serious imputations, but even they had laid themselves open to grave censure, inasmuch as they had, through their neglect or incompetency, permitted a state of things in reference to the bank which had been productive of the most calamitous results to many industrious and deserving families. No doubt there were other shareholders who had acted in an honourable spirit, and for whom, their fortunes being swept away by the ruin that had overtaken the bank, it was impossible not to feel sympathy. But, on the other hand, it should not be forgotten that there was a multitude of humble creditors—depositors of sums varying from £30 to £100—whose whole savings would be lost to them for ever if the present Bill should become law. These poor people had all the stronger claim on the commiseration of the Legislature that they had no means of making their voices heard in that House. The aspect of the question was twofold. In the first place the Bill would touch the particular case of the Tipperary Bank, and secondly it would also affect the general law as regarded joint-stock banks. It was obviously liable to the objection which Parliament had at all times entertained to ex post facto legislation. It would curtail the rights of depositors and the liabilities of shareholders. Then there was another circumstance with reference to this Bill to which he desired to call attention. Look at the way it had passed the Lords! Brought in on Monday, it was read a second time on Tuesday, committed on Thursday, and read a third time on Friday. The printed draught of it had not reached Dublin until after the Bill had gone through all its stages in the other House. The hon. and learned Member (Mr. Malins) contended that it would not be in the power of the Bill to destroy that provision of the Irish Bankers' Act which gave to the creditor a lien on all the property of the shareholder; but the hon. and learned Gentleman would do well to explain to the House the probable operation of the second clause. He (Mr. Fitzgerald) was inclined to think that under that clause it would be quite possible for the representative of the creditors to enter into a compromise or composition one term or condition of which should be the discharge of that lien. His hon. and learned Friend said he wished by this Bill to bind every shilling and every acre of the shareholders' property, but already every acre and shilling of the shareholder was liable to the creditor. More than this the Bill could not give them. It object was clearly to give him less—to serve the shareholder at the expense of the creditor. The assignee of a bankrupt establishment was possessed of the joint and separate estates of the bankrupts, and could at once say whether a proposed compromise would be beneficial and equitable or otherwise, but no such knowledge would be within the power of the "official representative" contemplated by this Bill. Moreover, an assignee would not sanction any compromise that was not approved by a majority of the creditors representing both numbers and value, whereas the present Bill proposed that the representatives should be bound by a majority in value only.

MR. MALINS

I propose to alter that in Committee, and to provide that the compromise shall be sanctioned by two-thirds of the creditors, regard being had both to value and number.

MR. SEYMOUR FITZGERALD

In that case the objection would fall to the ground. But there were other serious arguments against the Bill. The Bill provided that the representative of the creditors, who was to enter into the compromise, should be elected by those who, at the moment when it was thought desirable to make the compromise, should have proved their debts. It was perfectly obvious, therefore, that this representative might be elected at a time when a portion of the creditors only might have proved their debts—those creditors being persons whose claims were the largest, who could best afford the loss, and who would thus be enabled to bind all those who had not proved. It appeared to him that the Bill was one intended for the benefit of the rich shareholders, and in order to oust, as far as it could, the poor creditor. It was obvious that when you had to deal with an institution which would have its head-quarters in a town or city, you would be sure to find the richer creditors living close in the neighbourhood of the bank, and easily able to avail themselves of the provisions of the Bill now under consideration, while the poorer creditors, to whom the loss of £30 or £40 would be of more importance than thousands to a rich man, would be scattered over the country, would be probably in ignorance of the course to be taken under the Bill, and would find themselves under its provisions ousted of their rights, and denied the payment of their just debts. But he would put the matter to the House in another point of view. It seemed to him that by this proposed alteration in the law, you changed the whole system of credit upon which these joint-stock banks rested. What was now the security of a depositor in a joint-stock bank? Why, he knew that there was a certain paid-up capital, that the shareholders had a certain additional amount to pay in calls before the capital was completely raised, and that every mouth there was published in the Gazette a list of the shareholders in the bank, so that the depositors might see in case of failure to whom they were to have recourse for the discharge of the bank's liabilities. The present Bill, however, declared that there should no longer be a list of men who to their utmost shilling would be responsible to the creditors for the debts of the bank, but that it should be a list of gentlemen who might, by collusion with an official manager, by having friends among the creditors of the bank, and by threatening litigation, induce the poorer creditors to accept a composition, and instead of 20s., take, perhaps, only 10s. in the pound. Of course it was in the power of Parliament to do anything, but in the case of a Bill which was to meet a by-gone case he was at a loss to understand on what principle of equity or justice, if any creditor of this bank could get 20s. in the pound, Parliament should interfere and say, "You have a right to 20s., but because some other creditors in the bank are willing to let the shareholders off easily and accept 12s., we will compel you to forego your legal rights and to accept the same composition." On those grounds—looking to the effect of the Bill as applicable to this particular case, and also believing it to be most objectionable—being of opinion that it would be attended with great injustice and cruelty to the poorer creditors—looking at the same time to the general policy of the law affecting joint-stock banks, and believing that it would strike a fatal blow to the credit of joint-stock banks generally, he asked the House to assent to the Amendment with which he would now conclude—namely, that this Bill should be read a second time that day six months.

MR. HENLEY

said, he would second the Amendment. He wished, in the first place, to remark upon the defence which his hon. and learned Friend (Mr. Malins) had thought it necessary to make against imputations which he said had been cast upon him in reference to this Bill. Now, he (Mr. Henley) had heard of no such imputations, and he thought his hon. and learned Friend need hardly have troubled himself to notice them. His hon. and learned Friend had honestly avowed that this was a Bill intended to meet the case of the Tipperary Bank; that, in fact, it was brought in with that special object. Now, the House had only just passed a Bill which included among its objects the Amendment of the Winding-up Acts, and if this grievance had been so much felt it was certainly very odd that it had not occurred to his hon. and learned Friend to insert clauses in that Bill which would have accomplished his object. The only ground on which his hon. and learned Friend asked the House to assent to the Bill now before them was because he said it was a very hard case, if five or six persons were in trade, and were made bankrupts, that you should not give to the 100 persons in a joint-stock company the same advantages as to those fire or six individuals. But his hon. and learned Friend did not propose in his Bill that all the property of these 100 shareholders in the joint-stock bank, about which he was so tender, should immediately vest in the assignee. If that were the proposal made, he could understand what was meant. Then his hon. and learned Friend was a great stickler for what he called freedom of contract, but it was a strange sequence to freedom of contract that as soon as men had made contracts and found them to be inconvenient the Legislature was to interfere for their relief. When once a principle of that sort was established—when once Parliament countenanced such a mode of proceeding—there was no telling where it would end. It would open the door to every species of collusion and trickery.

Amendment proposed, to leave out the word "now," and at the end of the Question to add the words "upon this day six months."

Question proposed, "That the word 'now' stand part of the Question."

MR. BLAND

said, he did not think that, as between the shareholders and the creditors, this was by any means a fair Bill. It was a one-sided Bill, which did not, as it ought to do, attempt to put the creditors of these banks in the same position as the creditors of bankrupts.

MR. HUME moved the adjournment of the debate.

MR. MALINS

said, he should be sorry to take a division at that hour, after his having given an assurance that he would not proceed with the Bill after Twelve o'clock, and therefore he would accede to the Motion for adjournment.

Debate adjourned.