§ MR. COLLIER
moved the following Resolution:—That the Law of Partnership, which renders every person who, though not an ostensible partner, shares the profits of a trading concern, liable to the whole of its debts, is unsatisfactory, and should be so far modified as to permit persons to contribute to the capital of such concerns on terms of sharing their profits, without incurring liability beyond a limited amount.The hon. and learned Member said, he entreated the attention of the House for a short time to a question of great importance to the mercantile classes of this country. He was anxious that it should not be considered a lawyer's question, dependent upon mere technical knowledge; there were no legal difficulties surrounding it that could in the least embarrass its consideration by any Member of that House: indeed it was a matter of regret that questions involving law reforms should have been left so much in the hands of lawyers as they had been; he believed the cause of law reform was most effectively promoted by the co-operation of legal and non-legal minds. The law of partnership, as it now stood in this country, presumed that every partner could bind each one of his co-partners to an unlimited extent; and this unlimited liability extended to all persons who received any share in the profits of the concern, although they might not be ostensible partners, or have been dealt with or trusted. For instance, the widow of a deceased partner who received a certain proportion of the profits was regarded as a partner, subject to unlimited liability, as was also the clerk who was paid a salary regulated according to the amount of the profits. It is true that the liability of a 753 partner might be limited by express notice proved to have been conveyed to every creditor of the concern, but this was scarcely possible in practice. Practically the law prohibited limited liability, and there was no escape from the principle of unlimited liability, unless by an Act of Parliament specially obtained for the purpose, or a charter granted by the Crown through the Board of Trade. The law of this country, in this respect, was peculiar, and at variance with the civil law; this rule of law had not, however, been settled for more than sixty years, when a decision was given, in the case of Waugh v. Carver, the propriety of which had been frequently doubted by eminent lawyers. In foreign countries the state of the law was different; for limited partnerships had existed for centuries on the Continent of Europe, called partnerships en commandite. These partnerships consisted of certain partners called gerants or managers, and certain others called commanditaires or contributors of Capital. The managing portion, or gerants, were unlimitedly liable; but they had a subscribed capital, to which other persons contributed, who were only liable for the amounts they respectively contributed, the amounts being registered; —so that everybody knew the extent of each man's liability. The commanditaires, were entitled to be repaid what they had advanced to the gerants, but their claim was postponed to the claims of other creditors. That description was sufficient for his (Mr. Collier's) argument upon this question. The principle of partnership en commandite had been early adopted in Italy, and under its operations the great Italian republics, Florence, Genoa, Venice, attained a commercial prosperity which, considering the circumstances surrounding them, may be considered unprecedented in the history of the world. It thence spread to France; it was adopted in Holland; and by its operation many of the great works by which the Dutch had rescued large tracts of land from the sea had been executed. It extended to Germany — to Russia also—and to most other European States; and finally, our transatlantic brethren in the United States, with all their prejudices in favour of English laws, adopted the principle; and the report of the Commission which had been appointed to inquire into this subject, distinctly showed that both in Europe and in America the commandite partnership system had, with very trifling exceptions, worked, beyond all 754 doubt, beneficially. This question had been investigated by two Committees of that House; and the second Committee reported, in the year 1852, in favour of his present Resolution, but they recommended that the matter should be further referred to a Commission. Well, that Commission was appointed, and it had reported. The Commissioners were divided in opinion. Five of the Commissioners reported against any change in the law; but Mr. Bramwell, one of the Commissioners, and a distinguished member of the common law bar, reported most strongly in favour of a change; Mr. Kirkman Hodgson, an eminent merchant, reported likewise in favour of his (Mr. Collier's) proposition; and Mr. Anderson, a third Commissioner, expressed views substantially the same. With this difference of opinion among the Commissioners, thinking it impossible to carry a Bill on the subject this Session, he (Mr. Collier) had considered it most desirable to elicit the opinion of the House upon it by a resolution. Now, in the first place, he said that the onus probandi was thrown upon those who maintained that restrictions ought to be imposed upon contracts. If any number of persons, such as A, B, and C, chose, by means of a public register, to announce to the world that they were willing to deal with those who would deal with them upon the terms that each should be liable to a certain amount, or if A, and B, announced that they would hold themselves liable unlimitedly, but that they had a certain amount of capital subscribed by others who would not be liable beyond a certain extent, those who held that they ought not to be allowed to enter into such an arrangement were bound to make out a case why they should not be so allowed. But it was objected in limine to such an arrangement, that the principle of unlimited liability was founded upon an unalterable rule of natural justice, viz., that a man who shared in the profits of a concern should bear its losses. Now, if any such rule of natural justice existed, he answered that that rule was violated annually by that House in the case of every railway Bill which it passed, and was violated also every time the Crown, by the advice of the President of the Board of Trade, granted a charter of incorporation to a trading company. But on examination they would find, that all semblance of natural justice vanished from this rule if accurately stated. The doctrine of the present law was, that any person who obtained a share, however 755 small, of the profits of a concern, must be liable to pay all its debts, however large, whether or not he had any hand in contracting them. Suppose he made a contract with A, and B, and nobody else dealt with them, and trusted them, but found out subsequently that W, the widow of a deceased partner, received an annuity proportioned to the profits, without any share in the management of the concern—was there any principle of natural justice by which he could make her pay a debt which she never contracted, and which he had contracted with others? Again, the same principle of unlimited liability on the ground of a share in the profits, would apply to any person who advanced money to a partnership on terms of receiving a fixed interest, for that interest must come out of the profits; but the law attached no such liability to such a fixed interest, but only to a remuneration varying according to the profits—a distinction in which there was no justice whatever. The true principle applicable to the matter was this, that no man ought to be liable to pay a debt contracted by another, unless he either authorised that other to make the contract, or represented him as so authorised. But it was said, that the commercial greatness of this country had grown under the principle of unlimited liability, and it would therefore be unwise to interfere with it. The truth, however, was just the reverse of this; to what did we owe our railways, canals, docks, fleets of steamers, and all our greatest works? not to the observance, but to the breach of the law of unlimited liability. But for the violation of that law, we should still have travelled in stage coaches, and voyaged in sailing packets. But for the violation of that law, that greatest work of modern act and science, the Crystal Palace, would never have been witnessed. All our noblest monuments, which would attest our national greatness when our race has passed away, attested the working of the principle of limited, and not of unlimited, liability. Again, he asked, could a state of things which gave a preference to a certain class of companies, by Act of Parliament or by charter, and denied the same advantage to all other classes of companies, be defended, and whether it was not desirable to place all on the same footing or at least to give all the power as a matter of right, of limiting their liability by means of a public registry? There was a general concurrence of opinion that the present 756 practice of granting charters of limited liability was unsatisfactory. He would read to the House what was said upon this subject by the Secretary to the India Board (Mr. Lowe). The hon. Gentleman, in his reply to the questions issued by the Commission, said—I view the terms on which persons choose to associate in business as a matter which they should settle for themselves, and not one which Parliament or the Board of Trade should settle for them. But of all systems, the very worst is surely to forbid limited liability, and then vest in a Minister holding his seat by a Parliamentary majority the power of suspending the law in favour of such associations as he thinks fit. If the law be right, it ought to be enforced; if wrong, to be repealed. I should as soon think of allowing the Secretary of the Treasury to grant dispensation for smuggling, or the Attorney General licences to commit murder.The operation of the present law was further attended with this effect, that, practically, there were no safe investments for persons of small capital except in these incorporated partnerships, and the consequence had been an unnatural diversion of capital into this channel of chartered and incorporated companies. To this cause might in a great measure be attributed the railway mania; for people who were not engaged in trade had now no safe and profitable investment of their capital, except in these undertakings. Mr. Porter had given it as his opinion, that from this cause a great deal of money had been invested in foreign railways, which would otherwise have been beneficially employed in the trade of this country. Mr. Hodgson, one of the Commissioners, said—This country is now, I believe, almost the only one in which this law of limited liability does not exist. It prevails in all those with which we have the most extended and important intercourse, and this isolation acts very injuriously in many cases to the English merchant. I could mention whole trades which, thirty years ago, were entirely carried on by English houses, in which at the present moment scarcely one is to be found; their places have been entirely supplied by foreigners, who establish branches of their houses here and in the manufacturing districts, while the main establishments (almost all under the commandite principle) are abroad.A great many enterprises of a beneficial character in this country—such as local improvements, the improvement of the dwellings of the poor, and undertakings of that description—were prevented by the operation of the law. He might refer, also, to the effect of the law on mining companies in Cornwall and Devonshire, and would venture to say that scarcely any prudent man would take a share in a mining com- 757 pany, because, by the law of unlimited liability, he might have to pay all the debts of the concern. If a man were only to be liable for a certain amount, important additions would be made to the capital of these companies, and the mineral resources of the country would be developed to an extent that was scarcely supposed to be possible at the present moment; but the result of the present state of the law was to leave such companies mainly in the hands of adventurers who had nothing to lose, and encourage speculation of the worst and most ruinous description. A law such as was recommended by the Resolution would also have the effect of enabling men of capital to assist men without capital, but possessing ability, honesty, and industry, to set up in trade, and, in process of time, to become capitalists. He had been informed by more than one Member of the House engaged in commercial transactions, that, but for this rule of unlimited liability, he would be glad to assist many an enterprising workman, but he was deterred by the present state of the law; all the capitalist could do was to advance money at a certain fixed rate of interest, which very often the workmen could not pay. It was desirable that a retiring partner might be at liberty to leave a certain amount of money in the business from which he was retiring without being haunted by the fear of unlimited liability, and that women, and other persons, not capable of actively engaging in trade should possess safe channels of investment, which were at that moment closed against them. It was said, by way of objection, that great injury would arise from the proposed change to various classes of society. Now, if any one were to be injured, it must be either the partners themselves, their creditors, or the public. As to the effect on the partners—if he were to enter into partnership with A B on the terms of advancing 1,000l., and participating in the profits, he wanted to know who would be injured by that? He could not be injured in the first place, for his liability would be limited; and A B was not injured, to whom he lent the money, because it was more to the advantage of A B to pay him out of the profits, when he could afford it, than to pay him a fixed interest, whether he could afford it or not. In the next place, the creditor did not require to be protected, because it was more for his advantage that the money should be advanced by a partner, than that it should be 758 lent at a fixed rate of interest; in the former case it was assets of the firm, in case of their failing, in which he shared: in the latter it was a debt of the firm subtracted from their assets; moreover, he was not bound to trust parties trading under limited liability, unless he liked. He might either confine his dealings to those who trailed under unlimited liability, or he might charge an additional profit to cover the increased risk. With regard to the interests of the public, the Commissioners stated, that it appeared to them that the benefit to be acquired by the system of limited partners would be at the expense of a more than countervailing amount of injury to the trader bearing the burden of unlimited liability, and who would have to enter into competition with those who were enjoying the benefits of limited liability. But, with the greatest respect for the Commissioners, they had in that paragraph shown, he would not say ignorance, but a total disregard of the first principles of political economy, it was the old anti-free-trade argument over again, that one class was entitled to be protected against the rest of the community, but he knew no reason why capitalists should be protected more than the landholder, or any other class of the community. if concerns trading under limited liability succeeded, it would be because they could supply the public more cheaply than at present; if they failed, no injury could be done to the fair trader as he was called. There would be nothing to prevent persons from carrying on their business with unlimited liability. Limited liability would be adopted by some, and unlimited liability by others; the latter had certain advantages in their favour, and there would be a fair competition in the open market between the two. Every one of these arguments of justice, of convenience, and of protection, entirely failed when they came to be investigated. It was said, that a change in the law would be injurious to the commercial credit of this country, but he did not see why this result should follow;—it was a confusion of ideas to think that the operations of a limited company would affect the credit of an unlimited company. The last argument which the supporters of the present law could resort to, was that, probably, in a poor country with little capital, the principle of limited liability ought to be adopted; but this county, was rich enough, and the principle did not apply 759 here. He would venture to say that the hon. Member for Meath (Mr. Lucas), who had given notice of moving an addition to the Resolution, would not say such an argument was applicable to Ireland; but, if applicable at all, it was one applicable to this country also; and he wanted to know when we were to be considered rich enough to render the application of such a principle unnecessary? He did not understand that it was possible for a country, in an economical point of view, to be too rich; and why a principle, which in one state of its progress would have the effect of developing its resources, should have an opposite effect in another, he was unable to discover. It devolved on the opponents of the principle to show why this change of effect shoud be produced. That was not the opinion of that high authority on political economy, Mr. John Stewart Mill, who was strongly in favour of the commandite principle, and who stated that no man could consistently condemn that principle without being prepared to maintain that it was desirable that no one should carry on business on borrowed capital, confining business to those who had already accumulated capital or inherited it, which was manifestly absurd. He (Mr. Collier) believed that the effect of this proposed change in the law would be to cheapen capital; in fact, he looked upon it as tending to an increase of capital, which could not by any possibility injure any one but the very great capitalists who had an interest in the monopoly. No doubt, if such a change were made, it would be desirable to have a public registration, and various provisions for protection against fraud, but those were matters of detail which he would not now discuss. He had endeavoured, as briefly as possible, to state the law of this country as compared with that of other countries, and he might venture to say, in conclusion, that he had great faith in the operation of the principle of unrestricted competition, a principle not less clearly demonstrated in theory than it had been verified by experience. On every application of this principle, prophecies of the most gloomy character had been falsified, while anticipated benefits had been realised beyond the most sanguine expectations; on the removal of each restriction, our commerce had bounded forward with an elasticity apparently immeasurable and infinite. In conclusion, he believed that the change proposed would have important social bearings, tending materially to di- 760 minish the distance between capital and labour, interests sometimes apparently opposed but in reality always identical; and that it would be socially, politically, and economically beneficial.
§ VISCOUNT GODERICH
seconded the Motion with pleasure, because he believed the principle involved in it was one which, if adopted by the Legislature, was calculated to confer great benefit upon the country, and especially because he believed it would be consistent with the whole course of their recent commercial legislation. Under the present state of the law there existed a double system of monopoly, enjoyed on the one hand by the great capitalists, who were alone able, in consequence of the system of unlimited liability, to enter into trading companies; and, on the other hand, a smaller description of monopoly which of recent years had been devised by the Legislature in order in some degree to correct the evils engendered by the former monopoly, and which consisted in the power possessed by the Board of Trade virtually, though nominally it rested in the Crown, of granting charters to such companies as it chose, which charters were accompanied by special privileges which the law refused to other companies engaged in the same branch of industry. He confessed he was at a loss to understand how hon. Gentlemen could stand up in that House and support the existing condition of the law in that respect who had been the consistent opponents of all other monopolies, who in former days were consistent freetraders, and who had passed a large portion of their lives in advocating the right of persons engaged in commerce and industrial pursuits to conduct their own affairs in the manner they chose. He knew that those who most objected to the proposition of the hon. Member for Plymouth (Mr. Collier) also objected to the powers which were now vested in the Board of Trade; but while he agreed with them that those powers were most objectionable, he could see no means by which the necessity of the existence of those powers could be got rid of, except by the adoption of that system recommended by the hon. and learned Member. No one could deny that certain undertakings would be altogether impossible if it were not that means were found for altering in their favour the law of unlimited liability. The cases alluded to of railway and other great commercial and industrial companies, the objects of which 761 were so gigantic that they could not be carried out at all without such an alteration, required special consideration; but then arose the question of whether it was right or just to grant privileges to companies formed for the accomplishment of these great undertakings which they denied to others of a smaller character, but which were framed on commercial principles as well as the larger ones. He knew it might be said the great companies were formed to carry out works of great public utility; but it appeared to him that there were other persons to be considered in this question besides the public, and the House ought to judge how far it was consistent with sound principles or with common fairness that they should deny to any body of men in this country, because the objects for which they wished to unite were not of a vast, transcendant, and important character, the right to combine together for commercial and industrial enterprises in any manner that might appear to them fit, provided sufficient guarantees were taken against fraud on their part. In the present day and under the existing circumstances of the country every opportunity ought to be afforded for the combination of the three elements of skill, labour, and capital that could be devised. It was a great evil to retain upon the Statute book any law that tended to keep these elements separate from one another, and the object of our legislation should be to facilitate their union and bind them together by the ties of a common interest. But this, it would not be denied, the existing law of partnership effectually prevented. He could instance this by a circumstance that came within his own particular knowledge. A friend of his, of great scientific attainments, after considerable labour and much thought, made a discovery by which he believed he should be able greatly to cheapen an article in large and general consumption. In the experiments required for the perfection of his discovery he expended all his little capital, and by the time he had convinced himself, and was able to produce the fruit of his labours to others, and demonstrate the truth and accuracy of his discovery, he had no further means to proceed with it so as to bring it into general notice. In his anxiety to obtain the means of coupling his skill, knowledge, and industry, with the capital of other persons, he applied to several capitalists, when he was invariably met with an answer of this nature—"If I enter into 762 partnership with you under the existing state of the law, in the first place you will be able to bind me and all the members of that partnership in any manner you please; and, in the next place, I shall be liable for the debts of the concern, to use a common expression, to my last acre and my last shilling. I cannot, therefore, enter into partnership with you on those terms, and the law will not permit me to advance a small portion of my capital to carry out the discovery on the condition of appropriating the profits—half to your skill and half to my capital. The only alternative, therefore, would be to lend you the money, but, as I am not certain your discovery will be attended with success, I could not afford, on account of the risk, to lend it, except at a very high rate of interest." The result in this case was, that the invention had been rendered useless, the discoverer lost all benefit to himself, and the public lost the benefit which might have accrued to it from the discovery. It might be well conceived that a succession of such cases must prove a great evil. The present system tended to lock up capital by preventing persons retired from business investing any portion of their money in the concerns of trade in which other parties participated, and thus to impoverish the country by withdrawing from it a portion of its circulation. The only resource was to put it into banks or the public funds, where it was not so actively employed in the production of wealth. His hon. and learned Friend (Mr. Collier) had drawn attention to the case of foreign countries; but he did not mention the fact, that all the foreign firms whom the Commissioners had written to had, with one exception, given their testimony in favour of the working of the system of limited liability in their own country. Some of them might have said they were unable to judge what might be the effect of an alteration of the law in this country, but, with the exception of Messrs. Hope and Co., of Amsterdam, they had all expressed their approval of the system. He was quite sensible of the many advantages conferred by large capitalists and monopolists upon the country; but surely they, of all persons in the world, were the least entitled to the protection of the House, where commercial, industrial, and social advantages were to be derived from an alteration in the law of this nature. Not only were these great commercial and industrial advantages to be derived from the alteration advocated by the hon. and learn- 763 ed Member for Plymouth, but he was also strongly inclined to think that great social benefits would spring out of it, because the alteration of the law would tend to remove an obstacle that now existed to carrying out and exemplifying that community of interests which ought to bind together all classes, but of the advantages of which, unhappily, those classes were not sufficiently aware. Not long since a person largely engaged in commercial affairs, who was well known to the House, while speaking on the subject, expressed a fear that, if such a change should take place, workmen might save up their money, enter into partnership, and compete with the manufacturers, and he wondered that Mr. Cobden and Mr. Bright did not move in the matter. However that might be, he was sure the hon. Members for the West Riding and for Manchester would be the last to object to the measure on such grounds as that, believing that they were willing to extend to every class, and especially to the operative manufacturers, a fair stage and no favour. But, if Gentlemen of commercial experience entertained that opinion, there could be no doubt it extended among the working classes themselves, and that they looked with little favour upon those laws which prevented them from combining for industrial purposes, although, probably, in some cases, if they did they would meet with results they very little expected. He considered it was unwise on every ground—social, political, and economical—that the House should maintain restrictions which were felt by them to be obnoxious, unless there were grounds of overwhelming public necessity in favour of their maintenance. On a former occasion, when this question was before the House, the hon. Member for South Lancashire (Mr. W. Brown) spoke of the higher character of our commercial firms, and of the greater credit that was afforded to them in the market of the world, than was afforded to those of France; and he said that the reason was, that in England we had a law of unlimited liability, whilst in France they had a law of limited liability. Surely the hon. Gentleman must either have forgotten or purposely overlooked many other important differences—differences which affected far more than any law of partnership the respective credit of the two countries. Did he forget that France had had, within the last seventy years, no less than six revolutions, whilst we had had none? Did he forget the difference between the security 764 of property which must exist in a country so subject to political change, and that which existed in a country such as this? Did he forget the difference, of which we might justly be proud, between the industrial character of Englishmen and the industrial character of Frenchmen? He (Viscount Goderich) hoped Her Majesty's Government would, therefore, consent to the Resolution, or that the President of the Board of Trade would at least state that, if he could not agree to it at this moment, he had not made up his mind upon the question irrevocably, and that he would be prepared to consider it, and give due weight to the great authorities in favour of a change. The Commissioners stated that they had taken the opinions of sixty-nine persons in England, Ireland, and Scotland, thirty-seven of whom expressed themselves decidedly in favour of a law of limited liability, while some of the remaining thirty-two were of opinion that a considerable change should be made in the existing law. He thought, therefore, that the House would do well to review their legislation upon this subject, and to adopt a system which had worked satisfactorily in those countries in which it had been established, and which he believed would tend to bind together the various classes of the trading and commercial community.
Motion made, and Question proposed—That the Law of Partnership, which renders every person who, though not an ostensible partner, shares the profits of a trading concern, liable to the whole of its debts, is unsatisfactory, and should be so far modified as to permit persons to contribute to the capital of such concerns on terms of sharing their profits, without incurring liability beyond a limited amount.
§ MR. CARDWELL
said, his hon. and learned Friend the Member for Plymouth (Mr. Collier) had brought before the House, with his usual ability, a subject which certainly excited great interest in this country; and therefore he (Mr. Cardwell) would readily answer the appeal which had been made to him by ids noble Friend (Viscount Goderich), and would state that he was willing and anxious to consider fully all the arguments which were presented to the House in the report that had recently been laid upon the table. The Committee which had sat to consider this question for two successive years had abstained from reporting any positive opinion to the House, but had recommended the appointment of a Commission, composed of men possessing great legal and commercial knowledge, in order to pursue an inquiry into the de- 765 tails of the subject. He certainly understood that it was the bounden duty of those to whom the report of that Commission was made, most carefully and most respectfully to consider it in all its bearings and in its fullest application; and of this he was quite sure—that when full time had been given for the consideration of the report, and when it should be right to take any course with regard to the alteration of the law of partnership, no objection would be made to a change in the law on grounds antagonistic to the principles of unrestricted competition. He was sure, if any proposal were submitted to the house with the view of improving the law of partnership, they would not be told that it was necessary for the protection of great capitalists that restrictions should be imposed upon the application of small capital. He was sure it would not be argued, that any system which impeded the welfare of industrious young men should be continued for the protection of those who, having been more fortunate in life, had greater advantages at command. When the subject was ripe for consideration, the only question would be, what was the mode by which free competition might be most effectually promoted, by which social improvement might most advantageously be advanced, and by which the rights and interests of scientific and ingenious men who effected improvements might best be secured? He thought that upon this, which he might call the free-trade ground of the argument, they might be assured no objection would ever be made to an alteration of the law, but the only question would be how the law ought to be framed with the view of accomplishing the important objects to which he had referred. He would, in the first place, ask the House to consider what the law of this country actually was upon the subject under discussion—for he doubted whether the true bearing of the existing law was distinctly known to those who were most anxious that it should be altered. It was quite true that with regard to partnerships, as at present regulated, there was a general presumption of agency—in other words, the general presumption was, that when persons were engaged in partnership in trade, every one of those partners was intrusted by his colleagues with a power to bind the others in their commercial transactions. That was a general presumption as a matter of evidence; but were persons therefore prohibited by the 766 present law from entering into engagements by which they might limit their liability? The law did not prevent them from doing so, but permitted individuals to enter into arrangements, as between themselves, regulating their liabilities precisely in such proportions as they thought right. The present law also permitted a partnership to make contracts with other persons, restricting their liability as a partnership by contract with the persons who became their creditors to a limited object. This was not a more inoperative power, but one constantly carried into practice by many of the large companies in the City of London. The point in which the law of this country differed from that of many foreign States was this—that we had not established by legal enactment those modes of creating a presumptive notice of partnership and liability which existed in foreign countries. In many of the United States of America there were laws, commonly known as the laws of commandite partnership, the effect of which was that, by complying with certain regulations, persons were deemed to have given notice to all the world of the nature and limitation of their liabilities. In France a system existed, similar in its general principles, but differing in its details. With regard to Ireland, there was an Act of the Irish Parliament which enabled persons engaged in trade in that country to limit their liabilities. The object of the Commission had been, by obtaining evidence from America, from France, and from other countries, and the opinions of those persons in this country who were best qualified to form a judgment upon such a question, to ascertain whether or not it was desirable to establish in this country, by legislative enactment, a mode by which a presumption of limitation of liability should be created. The question for the House to consider, in dealing with this subject, would therefore be this—what would be the effect of certain specific provisions for this purpose, and would they be calculated to operate for the advantage of the community or not? It would be necessary to consider what the operation of such a law would be upon persons who had not received actual notice of the limitation of liability. They had been told by the hon. and learned Gentleman that the evidence from America was altogether in favour of an enactment which would establish a presumptive limitation of liability. He must admit that as the Report which was a document 767 of considerable magnitude, had only been in his hands for a week, he had not, been enabled, in consequence of his other engagements, to make himself acquainted with its contents so far as to justify him in pronouncing an opinion upon them. The Committee of 1851 obtained remarkable evidence of the value of this law of limited liability in the United States of America. They had before them the American Secretary of Legation, who was then resident in this country, and who gave strong evidence in favour of the existing law in America. He observed, however, that that Gentleman appended to his printed evidence, as a note, the following statement which he had not an opportunity of making to the Committee—Since my examination I have seen a Statute enacted since I left America, by which stock-fielders in a bank stopping payment are made liable individually to redeem all unpaid bills issued by the bank, in proportion to the stock they respectively held at the time when the bank Stopped.He (Mr. Cardwell) was not going to attempt to draw from this statement any conclusion adverse to the proposition before the House; but he had thought it right to call their attention to the note appended by Mr. Davis to his evidence. The hon. Member for Meath (Mr. Lucas) had given notice of his intention to move a rider to the Resolution before the House, calling attention to the particular demands of Ireland with regard to the limitation of liability. As he (Mr. Cardwell) had previously stated, a law had for many years been in force in Ireland of which persons might avail themselves, if they pleased, for the purpose of limiting their liabilities, but that it had not been made use of to any extent. He might be told that persons had not availed themselves of that law in consequence of the manner in which it was framed; but, so far as he was aware, no one had ever come forward with any specific proposal for the amendment of the law. He thought the inquiry of the Commissioners might furnish the House with information which they had not hitherto possessed with respect to this Irish law; and they might depend upon it that, in order to legislate satisfactorily upon such a question, to confirm the credit and to expand the industry of the country, the best course was, not to approach the subject until all the materials were so fully before them that they would be enabled to guard the community against any dangers which might be involved in a 768 change of the law. He had read the opinions of the different Commissioners, and among them the elaborate argument addressed to them by one of their own body, Lord Curriehill, who thought that neither on the ground of convenience to persons engaged in partnerships en commandite, or to others, nor on the free-trade ground, could the change in the law proposed by the hon. and learned Member for Plymouth be recommended for adoption. With regard to the argument, that natural justice was involved in this question, the great authority of Mr. Mill had been cited; but he (Mr. Cardwell) thought he could show that persons who were well known as high authorities upon free-trade questions were entirely divided in opinion upon this subject. Mr. Tooke stated, in his evidence before the Committee of 1837, that a notion seemed to prevail that something like a right existed on the part of persons to circumscribe their liabilities as the condition of their embarking a certain sum in trade, and that it was only by the special interference of the law of partnership that they were prevented from exercising that right; but he said it must be obvious that partnership en commandite was a privilege, and had not the shadow of foundation in natural right; indeed, not only eminent lawyers, but also eminent political economists, viewed the question altogether apart from free trade, and only as to its effects upon contracts and dealings with persons having no knowledge of the arrangements of partnerships. The Report of the Commission had been for so short a time before the House that it was scarcely possible any hon. Members could have made themselves conversant with the contents of the volume. He had only had time to ascertain the general nature of the Report, and he observed that there was considerable difference of opinion among the witnesses examined by the Commissioners. They had been informed by the noble Viscount that sixty-nine witnesses were examined, of whom thirty-seven were in favour of a change in the law, while the remaining thirty-two did not entertain the same opinion. He (Mr. Cardwell) considered that, before the House resolved to alter the law, they should know what was the nature of the changes to be proposed, in order that they might not assent to enactments which might be prejudicial to the community. He did not think any hon. Gentlemen in that House who were favourable to a change in the law had come 769 to a conclusion as to whether it was desirable to adopt the law existing in America, or that which was established in France, or an amendment of the law in force in Ireland. He might say, however, he thought it was clear that the Irish law would not prove acceptable to those who were desirous of a change. It would be necessary, in dealing with this subject, to consider many cases which involved great difficulties. Suppose a person with a limited capital embarked in a speculative concern, in which the gains might be very great, but in which the losses might be very disastrous to himself or to others—if such a concern became insolvent, who was to bear the loss? Was it proposed to say that the liability of such a person should be limited to the small capital he had embarked in the undertaking, and that, if he had obtained large credit, the disastrous consequence of his failure should fall upon his creditor? Suppose that during four or five years the parties had derived very large profits from their speculation, and that, when the concern was wound up, it appeared that such profits ought to be brought into account, what course was to be pursued? By the American law, in such a case the profits would be brought into account, but it had been a moot question among those in this country who desired a change in the law of partnership, whether such profits should be brought into account or not. He found a difference of opinion prevailed on this point among the thirty-seven witnesses examined before the Commission who, it was said, were favourable to an alteration of the law. Another question was, whether the names of all shareholders in a concern ought to be registered in order to afford security to the creditors. He found that some of the witnesses thought there should be an open register, while others entertained a contrary opinion. Another question was, supposing a concern was unprosperous, and 25 or 50 or 75 per cent of the capital had been already lost, ought the undertaking at such a juncture to be wound up for the protection of the creditors? This was a question of great importance and difficulty, and he found that the witnesses differed materially upon the subject. In short, among these thirty-seven witnesses there was every difference imaginable as to the nature and extent of the security to be taken for the protection of the public. He submitted, then, that it was tile duty of the House of Commons to master these 770 difficulties, and to have a definite opinion on these questions before they came to a final decision on the subject. When he turned to the other class of witnesses—those who had given an opinion against any change in the law—he found they were persons of the very highest authority in such matters, and whose views, therefore, must be regarded with the most respectful consideration. The House would admit that such evidence as that of the Commercial Association of Glasgow, of Lord Overstone, of the hon. Member for South Lancashire (Mr. W. Brown), was of very great weight. This was by no means a new subject, for it had been considered by Committees of the House in 1837, in 1844, in 1850, and again in 1851. Up to the latter year the Committees had come to no decision on the point now in question, and the only specific suggestion made by the Committee of 1851 had reference to a system of loans in the nature of limited partnership, the interest receivable upon which should be in proportion to the prosperity of the concern. That Committee, however, recommended the appointment of a Commission, of adequate legal and commercial knowledge, to consider not only a consolidation of the existing law, but also to suggest such changes in the law as the altered condition of the country might require, especial attention being paid to the important and much controverted question of limited and unlimited liability. The Commission appointed in pursuance of that recommendation exactly fulfilled the conditions required of adequate legal and commercial knowledge, for it was composed of the Master of the Rolls in Ireland, of Mr. Justice Crosswell, of Lord Curriehill, of Mr. G. Bramwell, Q.C., of. Mr. J. Anderson, Q.C., of Mr. Kirkman Hodgson, a director of the bank, of Mr. Thomas Bazley, President of the Manchester Chamber of Commerce, and of Mr. Robert Slater. These most eminent persons, after elaborate inquiry into the subject intrusted to them, had reported that they had—Been much embarrassed by the great contrariety of opinion entertained by those who have favoured them with answers to their questions. Gentlemen of great experience and talent have arrived at conclusions diametrically opposite; and, in supporting those conclusions, have displayed reasoning power of the highest order.As the result of their deliberations upon these so various views, the Commissioners, by a majority of five out of eight, reported— 771In considering this subject, the question which appeared to Your Majesty's Commissioners of paramount importance was, whether the proposed alteration of the law would operate beneficially on the general trading interests of the country? and they have arrived at the conclusion that it would not. They have not been able to discover any evidence of the want of a sufficient amount of capital for the requirements of trade; and the annually increasing wealth of the country and the difficulty of finding profitable investments for it, seem to them sufficient guarantees that an adequate amount will always be devoted to any mercantile enterprise that holds out a reasonable prospect of gain, without any forced action upon capital to determine it in that direction; while any such forced action would have a great tendency to induce men to embark in speculative adventures to an extent that would be dangerous to the interests of the general commerce of the country.The Commissioners thus summed up—In concluding their brief Report, Your Majesty's Commissioners feel that, although the details of our mercantile laws may require correction, yet while there is on every side such abundant evidence of satisfactory progress and national prosperity, it would be unwise to interfere with principles which, in their judgment, have proved beneficial to the general industry of the country.A sixth Commissioner (Mr. Anderson), though not joining in the Report, separately records his opinion in favour of unlimited liability. Two of the Commissioners, on the other hand, were in favour of commandite partnerships. This variance of opinion on the part of the Commissioners was quite within the precedent of one of the earlier Committees, as appeared from their Report—The opinions of those who must be considered as best able to form an opinion on this difficult and important question are at variance; by far the greater number of those who have been examined are decidedly unfavourable to its adoption under any circumstances whatever. Among those opposed to the measure will be found Mr. Samuel Jones Loyd, Mr. Thomas Tooke, Mr. Larpent, Mr. Horsley Palmer, Mr. Kirkman Finlay, and Mr. Gladstone; while Lord Ashburton, Mr. J. W. Norman, the Hon. F. Baring, and Mr. Senior have expressed opinions favourable to its adoption.When on the part of persons so eminently qualified to form opinions, and who had sought the opinions of others of high authority, there was such difficulty and such doubt and such diversity, the House should take the utmost care thoroughly to master all the information which had been procured for its guidance ere it proceeded to take any decisive measure upon so important and so intricate a subject. With regard to the recommendation made by the 772 Commissioners, that a change should be effected in the manner of granting privileges of limited liability by means of a charter, he quite concurred that some such change was expedient. He hoped the House would be of opinion that he was but discharging his duty in abstaining from arguing the question en either side. He had on all occasions, since in office, endeavoured so to exercise the invidious power vested in him of granting such charters as to keep the subject clear for the deliberation of Parliament, when it should come under discussion. It was unquestionable, as the Commissioners suggested, that natural justice demanded that where these charters were sought persons who conceived they might be injured by the grant should have the opportunity, at a reasonable cost, of stating their objections. The whole question of joint-stock companies required the grave consideration of Parliament, and this question of limited liability would occupy an important feature in such an inquiry. The recommendation of the Commissioners that the usury laws should be revised had been adopted by the Chancellor of the Exchequer, who had a notice of a Bill on the subject on that day's paper. There was no doubt, as his hon. and learned Friend had so eloquently pointed out, foreign States had prospered under a system in the particular respect under consideration different from our own, but at the same time it must be borne in mind that under the system which prevailed here our own country had attained a degree of commercial prosperity, of commercial credit, and of commercial stability wholly unexampled in the history of the world. When the House should have maturely considered the opinions which, in their Report, had been procured for its use, it would be in a position to take a decisive course upon the subject; then, should that course involve a change in the present system, the change, he should hope, would be presented to their notice, not in the desultory form of an abstract Resolution, but in the definite and authoritative form of a Bill so cautiously, so carefully, and so conclusively framed that, once adopted as a Parliamentary Act, it would tend to enhance our commercial prosperity, and to consolidate our commercial credit, on the bases of, if possible, increased security and increased confidence.
§ MR. LUCAS
said, he was desirous of submitting to the House the Amendment of which he had given notice, specially 773 extending the effect of the Resolution to Ireland, because he was anxious to draw the attention of Government and of the House to the circumstances which made the application of this principle peculiarly expedient in Ireland; and whatever weight there might be in the right hon. Gentleman's (Mr. Cardwell's) opinion that the matter was not ripe for decision as to Great Britain, there was certainly no occasion for any delay in applying the principle of limited liability to Ireland, where it was eminently required by the industrial and social condition of that country. The result of the inquiries of the Commission whose Report was now before them was most favourable to the principle now contended for; for it appeared that in every quarter of the globe where the principle of limited liability was known, it had been established by the sanction of the law, with the exception of the United Kingdom and its dependencies. Lord Curriehill in his evidence stated that the principle of limited liability had been tried in Ireland, and had failed there; now, it could not possibly have failed there, for it had not been tried—and it was finding such a preposterous statement in the Report of one of the Commissioners that had in part induced him to give notice of an addition to Mr. Collier's Motion. The Commissioners, hostile as they are to the principle of limited liability, have collected a great deal of evidence, and the result of it is decidedly favourable to the principle which they condemn. They admit that the evidence from foreign countries is unmistakeably favourable to limited liability wherever it has been tried. In Great Britain a numerous majority of witnesses is on the same side; and the Irish witnesses are all but unanimous in favour of limited liability. Out of six Irish witnesses who had expressed their opinions on the subject, five were in favour of the law of limited liability. All of these declared their opinion that if the change were adopted, capital would find advantageous means of investment which were at present not open to it, and would thereby add materially to the prosperity and well-being of the country. Mr. Bristow, of Belfast, was the only adverse witness, and the legitimate deduction from his evidence was, that he thought the principle of limited liability was a proper one to be adopted in three out Of the four provinces, of Ireland. Lord Curriehill said the experiment had been already established in Ireland by an Act of the Irish Parliament of 774 1782, and that it had failed. So it had, but why? Here was a paragraph on the subject from the evidence of Mr. Kennedy, of Belfast, who said—The Irish Act, passed in 1782, is a dead letter; its provisions are so loose, and have been interpreted so illiberally by our courts of law, that no lawyer would advise his client to take advantage of the Act. One of these provisions is, that the anonymous partner can only withdraw the half of his profits, no matter whether or not the concern is in debt. This entails a serious loss on the acting partners, as it is usual in a firm for each member to receive interest upon the sum he has paid up; and, besides, the firm may not require this additional capital in its business. Another provision is, that it cannot discount bills with its surplus capital; and, if the concern sells by retail, or breaks hulk in any way, the limited partners become accountable and lose all the advantages of their position. Traders should be left free to deal in whatever way their interest may dictate.What, then, was the meaning of the assertion that the experiment had been tried in Ireland, when it had only been tried by an Act so badly drawn by the Legislature, or so badly interpreted by the courts of law, that it could not be made available without considerable risk? In arguing this case as regards Ireland his course had to be somewhat different from that of the hon. and learned Gentleman who moved, and the noble Lord who seconded, the Motion with such ability. They had to reply to the arguments and overturn the authority of the witnesses who oppose limited liability. He (Mr. Lucas) had no such opposition to deal with. Not only the friends, but the opponents of limited liability are in favour of that principle as regards Ireland; and what he had to do—putting aside the logic and the authority of the friends of limited liability—was to bring before the house the admissions of its opponents. The Commissioners had had to find a reason why a law which had succeeded everywhere else should not succeed in Great Britain; and their argument uniformly was, that there existed in tins country sufficient capital and sufficient enterprise under the present system, and that the law of limited liability would apply an improper and unnecessary stimulus to speculation. The first and main reason stated by the Commissioners in their Report was—"They have not been able to discover any evidence of the want of a sufficient amount of capital for the requirements of trade." Was this, however, the case with regard to Ireland? Most unquestionably not. No wan could say there 775 was a sufficient amount of capital or of speculative spirit in Ireland. Lord Curriehill, in his Report, said—The circumstances of this country in reference to commercial matters are in some respects very different from those of these other countries. In France and other European countries where commandite partnerships have been introduced, capital is less abundant, and the spirit of commercial speculation is far less active than is the case in this country; and therefore a factitious attraction of capital to commerce may be sound policy there.Mr. Slater, another Commissioner, gave testimony to the same effect. He said—Partnerships en commandite are doubtless well adapted for countries where capital is not abundant, and where it is of importance to call into action the dormant energies of a people whose industry has been laid prostrate by means of political events.With a very slight change of phrase, did not this apply to Ireland? But the adverse witnesses are not less clear upon point than the adverse Commissioners; and he (Mr. Lucas) was happy to have to select particularly those adverse witnesses whose authority the President of the Board of Trade rated so very highly. Thus Lord Overstone and Mr. W. G. Prescott have given a very elaborate joint opinion hostile to limited liability. But what do they think of it as applied to such a country as Ireland? These are their words—Some caution, we think, may be requisite in applying to the legislation of this country lessons derived from the experience of other countries differently circumstanced.There may be a great difference between the effects of a law introduced in the early stages of a community—when its transactions are few and simple, and the trading habits of the people not firmly settled, and therefore capable of easy adaptation to the law whatever it may be—and the effects of the same law, when introduced into a community at a later period, under exactly the opposite circumstances.If Lord Overstone and Mr. Prescott had had Ireland in their view at the moment of writing this, it was impossible that they could have used language more applicable to the case of that country. Then, again, Mr. S. Gurney said—In those countries where commerce is in its infancy, and capital scarce, a law limiting responsibility to capital actually advanced may be expedient. Under such circumstances it may attract capital and foster commerce. In this country, where there is abundant capital and abundant commercial talent and energy, such limitation is not called for.The Chamber of Commerce at Glasgow declared that they considered the circumstances of Great Britain to be so materially 776 different as to destroy any analogy between them and other countries, and they went on to say—With an 'exuberance' of capital, and a tendency to speculative investment, which is not deterred by the present law of unlimited responsibility from embarking in all sorts of hazardous schemes—when noblemen, and professional gentlemen, and tradesmen, and farmers, and ladies engage in mines and ironworks, and marine insurance, and banks, and exchange companies, and shipowners, assuredly the disposition to invest capital in business requires no additional stimulus.Similar opinions were expressed by many other of the gentlemen who had forwarded their views to the Commission. Other witnesses are these—Mr. James Fresh-field, jun., solicitor—Other exceptions may exist in a state of society, or in countries where capital is scarce and cannot be easily procured. Banks could hardly be established in the Colonies without a limit of liability, and associations for other trading purposes will be found to need encouragement in the Colonies on this ground; but in England capital for all legitimate purposes is over abundant.Laurence Robinson, cashier of the Royal Bank of Scotland, Glasgow—I am not acquainted with the operation in Ireland of the Act of Parliament here quoted; but I can easily conceive how the poverty and insecurity of property in that country may, in the year 1782, have created a necessity for limited liability in certain undertakings for the accomplishment of which sufficient enterprise and capital could not then be found, but which, at the same time, could form no precedent for the application of similar pleasures in Great Britain, especially during the present era of superabundant capital for all legitimate purposes.Mr. Bellenden Ker has been quoted by the right hon. Gentleman—and is esteemed, I believe, by every succeeding Board of Trade—as a great authority. His elaborate Report changed Lord Brougham's opinion some years ago, and it therefore deserves particular attention. In his reply to the Commissioners, Mr. Ker reasserts, though with diminished confidence, the opinions hostile to limited liability which he gave before the Committee of 1850. He (Mr. Lucas) was, therefore, justified in quoting his opinion given in writing to the Partnership Committee of 1851. This is the first paragraph of his reply to the queries circulated by that Committee—REPLY TO QUERIES BY H. B. KER, ESQ.Lincoln's Inn, 27th June, 1851.My dear Sir—With reference to the question you have sent to me, I beg to observe that I venture to think that the limited liability, as regards ordinary trading partnerships, or even as regards 'the aiding useful local enterprises,' is inexpedient, as I am led to believe there is always a sufficiency 777 of capital for all ordinary commercial enterprises, and for the carrying out what I suppose to be meant by local enterprises—namely, canals, roads, mills, &c. Is a country where there is not a sufficiency of capital for such purposes, the introduction of this would be beneficial, and it is mortifying to see that no one will bring the matter before Parliament, as regards Ireland.Lord Brougham, whose opinion was modified by Mr. Ker, drew precisely the same conclusion in writing to the same Committee. He says—The commandite appears better adapted to a community which has moderate mercantile capital and concerns than to ours, and would be more wanted as well as more safe in such a community.And, lastly, he must quote Mr. Bristow, of Belfast, the only Irish witness hostile to the principle, but who yet admits that to three-fourths of Ireland it may be suitable—In a new country whose resources are undeveloped, and Where capital is scarce among trading people, it may be expedient to modify, for a time, this principle; but in an old country, with a wealthy and enterprising class of merchants, such modification should be unnecessary.Thus of all the adverse witnesses those entitled to most weight agreed that to a country like Ireland limited liability in ay apply. There was only one witness who distinctly stated an objection fatal, if it were sound, to this principle in Ireland as well as in Great Britain. This objection was alluded to by one or two other witnesses, but it was distinctly stated by Mr. Clarke, of the house of Finlay in Glasgow, and he (Mr. Lucas) gave it in his own words. Mr. Clarke is of opinion that in point of fact capital is not "hoarded" or "locked up," and that, therefore, there is no capital either in Ireland or in England which a law of limited liability could set free—It seems to me that a general fallacy lurks in the argument on the other side, which assumes that capital remains unemployed, deterred by the apprehensions of its owners, in respect of unlimited responsibility; whereas I am of opinion that no more capital than is necessary as a reserve remains on the average idle, but is loaned out productively for industrial undertakings or mercantile operations, and is thereby as effectually engaged in the business of society as if every man were directly devoting his own quota of it to individual effort. In my answer to the first question, while giving my second reason for the conclusion at which I had arrived, I stated my conviction that it is fallacious to suppose that capital remains unemployed. What is true of the employment of capital in this country is true also as respects the colonies of England because it is only in countries and places where property and life are insecure, where war and rapine are normal conditions, 778 that hoarding is prevalent—a state of things happily unknown here for many generations.This is an argument which, though weak and unsound, deserves an answer, and the first answer he (Mr. Lucas) gave in the words of Mr. Kennedy—I am satisfied, if we had a proper limited partnership law, a large amount of capital that is now invested in continental stock and railway shares would be invested in this country, and that it would make the increase of our imports from Britain as important as her exports are at present to the Continent, and likewise enable us to add largely to the revenue of the empire.This was his first answer to Mr. Clarke. It was no satisfaction to him that Irish capital was not hoarded if its employment was in England and on the Continent, and not at home, where it was most needed. But there was another and a more conclusive answer. The best capital of every country is not money capital, but the skill and industry of its inhabitants; and if your laws are such as to dissuade from industry, to put a check on the energies of the people, to take from them the proper stimulus to exertion, and thus to encourage indolence—then it might with strict logical accuracy be said that the capital of the country is "hoarded," is "locked up," and is restrained from a full and profitable application. This really was the state of the case as regarded Ireland, and they had a right to ask from the Imperial Legislature, considering the state of poverty and exhaustion to which Ireland had been reduced, her want of commercial resources, and the fact that her population was flying at every outlet from her shores, that laws should be passed enabling Irish capital to be spent in Ireland in the most profitable way in which it could be spent for the interests of Irish industry and trade; and he asked them to give to the industry of the country that protection which would enable every man to apply his best exertions to develop the industrial resources within his reach, and suitable to the locality in which he resided. From his own personal experience he could testify that the existence of the present law prevented industrious persons from being as industrious as they would be—prevented prudent persons possessed of a little capital from applying it prudently and profitably to the encouragement of commercial enterprises of various kinds in their own localities—prevented one class from being industrious, and others from being prudently enterprising in commercial matters. Nobody could deny that the case was complete as regarded Ireland, 779 and he did not see the slightest difficulty in laying down the main branches of alteration which were required in tile Irish law. In the first place repeal the absurd proviso which compels a partner to be content with half his profits during the continuance of the partnership. Then repeal the clause which forbids limited partnerships to have retail as well as wholesale transactions. Then withdraw the obstacle which the Act places in the way of discounting bills where the ordinary course of trade requires and sanctions such accommodation. Abolish the limitation of 1,000l. which is fixed as the minimum of capital for such partnerships. Such changes as were necessary for making this law productive of the greatest possible benefit to Ireland were very simple, and he hoped this debate would not end without some one on the part of the Government giving the industrious people of Ireland reason to hope that the law on this subject would be so amended that it would no longer interpose between the desire for honest industry and commercial wealth and the possibility of attaining those ends.
Amendment proposed, at the end of the Question, to add the words—And such modification is especially necessary in Ireland, regard being had to the peculiar social and industrial condition of that part of the United Kingdom.
§ MR. COBDEN
agreed with the right hon. Gentleman the President of the Board of Trade, that the subject of limited liability was one which had not been thoroughly discussed, and which deserved to be debated in that House. But it was a subject which there would be great difficulty in discussing unless they heard both sides; and all he could learn of the views of the right hon. Gentleman was, that he told them when he began he would not offer an opinion, and he contrived very ingeniously to keep his word. With reference to the observations of the hon. Gentleman who had addressed the House specially in reference to Ireland as regards this question, he thought the case of Ireland was, after all, much the case of England. There was no law of England which forbade commercial transactions taking place under a contract of limited liability; on the contrary, the law would enforce contracts made on that principle, provided only certain conditions were observed; but then the particulars necessary to be observed had the effect of clogging the entering into such transactions, and 780 of rendering it impossible to carry on business upon that system. It was admitted there was nothing in the system of limited liability that was contrary to public morality; for if there were, the law would refuse to enforce such contracts altogether; and as the law enforced those contracts, he took it for granted that the spirit of the law was favourable to limited liability, and what they had to do in that House, whether with regard to Ireland or to England, was to address themselves to consider in what manner the restrictions which the law imposed upon commercial transactions conducted on the system of limited liability, and rendered therein impracticable in the working, might best be remedied. He would put the case of two persons, A and B, who entered into partnership. A was the moneyed, and what was called the sleeping partner, and he put 10,000l. into the hands of B, who was the manager and working partner. Now, if the partnership, in giving orders for goods, or in the different mercantile transactions in which they were engaged, were to give a written notice that A was responsible to the extent of 10,000l., and for no more— if that written notice were repeated in every transaction, then no creditor could have a claim upon A for more than that amount. But under such a condition as that every transaction of the partnership must be accompanied by a written notice; it would be impossible that the firm could carry on their business, and they would be involved in the pitfalls of the law at every turn. The object of the law was, apparently, to take care that the creditors of A and B—that was to say, of the man who sold the goods—should know exactly that A was responsible fur only 10,000l. It was, in fact, the same in principle with an ancient law which existed among their Saxon forefathers in the kingdom of Kent, which provided, for the sake of there being witnesses to the sale, that no bargain should take place in the market unless in the presence of the bailiff, the mass priest, or the lord of the manor. The law of limited liability was an act of precisely the same supererogatory character, and he believed that at no distant time the law of limited liability would appear as absurd to their descendants as the law of Kent did to them. What was the ground on which it was required that they should maintain this restrictive law? It was said to be necessary for the protection of the capi- 781 talist and trader. But were hon. Gentlemen afraid that such persons would give credit indiscriminately, and without first ascertaining the circumstances of the persons with whom they had transactions. Now did they require as much publicity in the case of professions? Take the case of a barrister. His hon. and learned Friend who introduced the Motion had been admitted to practise as a barrister, by having his name enrolled in one of the inns of court. Now did the law require that he should carry the certificate of his enrolment about with him, that he might thrust it in the face of everybody who might want his services? Did not everybody know that by going to the inns of court, and inspecting the register, they could satisfy themselves whether he had been properly enrolled or not? And did not the House think that they might, with just as much safety, alter the law to this convenient extent, that there should be one general registry, where every case of partnership should be bound to register the fact that, while B was the acting partner, and was responsible for his dealings to the extent of all that he possessed, A was responsible only for 10,000l. For his part, he thought that the argument against a law of limited liability was founded on this fallacy—that people possessed of capital were too easily induced to give credit, and that the law must therefore take care of their interests. Why, the capitalists, the men who had money at their disposal, were the shrewdest people in the world—men whose intellects were stimulated and sharpened by that conservative principle which attached to the possession of property. Were they to be supposed to be in a condition where they could not be trusted with the management of their own property? Why, in proposing to provide for their safety by fixing the principle on which they should give credit, this House never was engaged on a work of greater supererogation. Take the case of a large house with extensive dealings. Everybody knew that it was one of the most delicate, one of the most responsible, and one of the most incessant occupations of the most trusted partners or managing men of the firm to ascertain the trustworthiness of everybody with whom they opened an account, and to keep watch upon their solvency from month to month, as indicated by the regularity of their payments and by other symptoms, to note all down in a book kept for the special purpose, and to do all this 782 with the ingenuity and the art, he was going to say, of an officer of the detective police. If these men trusted their affairs to Acts of Parliament in these days of competition, they would not be long in a condition to trust anybody. There was another fallacy which seemed prominent upon this subject, for the question was often argued as if the persons who were in favour of a system of limited liability were about to pass a law which would force people to trust those firms established on that principle of partnership. Nothing of the kind was contemplated. They never intended, by any Act of Parliament, to force the creditor to do business with the firm of A and B. They would leave to all parties their right of free action, to trust the firm or to pass it by as they chose. But then they were told, in some of the arguments used in the blue books, that partnerships established on the principle of limited liability would not obtain credit. Well, then, the law would be inoperative, and would do no harm. It was also argued, and, he believed, universally maintained, that the credit of such partnerships would be inferior to that of others. He did not admit that; he believed that credit depended upon skill and industry, and the known amount of capital in the business. He did not mean to say that a house with only 10,000l. of capital would have the same amount of credit as a house with a capital of 100,000l.; but he believed that for the same amount of capital there would be the same extent of credit as under the present system. In reading the evidence contained in the blue book—and he could conscientiously say that he had read every word of it—he was forcibly struck with one feature it presented. He found that the questions proposed by the Commissioners were generally addressed to men in business who were of the large capitalist class—men of weight on 'Change—leading men in mercantile associations and chambers of commerce; and yet of such men not above half were unfavourable to the principle of limited liability. But lie would be bound to say that if they took another class—the class of young men who were engaged as clerks or shopmen in houses of business—of whom there were, he believed, in London alone, no fewer than 100,000—he doubted if they would not find in them a unanimous feeling in favour of the principle of limited liability, which was the principle that afforded them the best chance 783 of entering into business on their own account, and of making their way in the world. If they went to the class of mechanics and artisans, they would find them all but unanimous in favour of an alteration of the law. He confessed that it was in that point of view, which had been so eloquently and so feelingly dwelt upon by his noble Friend the Member for Huddersfield (Viscount Goderich)—it was in that point of view that he took the greatest interest in the question. It was stated before the Committee of 1851, by Mr. Wynn Ellis, formerly a Member of this House, and who had a large wholesale warehouse in London, that there were several occasions when he would have liked to enter into limited partnership with young men who were then standing behind the counter—young men of talent and promise, but without capital—but that be was deterred from doing so as that would involve the risk of his whole fortune in the undertaking, but that he would have done so if he could have limited his liability; and he (Mr. Cobden) had no doubt that it was matter of every-day occurrence in London, Manchester, Leeds, and elsewhere, where capitalists would like to assist young men who showed aptitude for business—who ingratiated themselves with their employers' customers—who made themselves, in fact, almost indispensable to the houses in whose business they were concerned—where capitalists would like to join themselves to these young amen, and give them the chance of a start in life, provided they could do so without involving their whole fortune in the risk. It was the same with the persons employed for wages in the manufacturing concerns in the north of England. But the law of unlimited liability was an insurmountable obstacle which prevented this from taking place; and therefore, if the system were to be continued, there should be some cogent reason shown for its continuance. What were those reasons? In reading this blue book, he had been surprised to find men with whom he formerly, acted in advocating sound economical opinions, now giving utterance to the most erroneous sentiments, and urging them with so much feebleness of argument. He found in these persons a constant tendency to embark in predictions, which, in his opinion, was the invariable sign of a weak cause. Whenever amen began to argue in the future tense—when they talked of what would, could, should, 784 or might be—he was certain to find that this was because there was a total want of support from existing facts. Then they were told that this system of limited liability might do very well in painstaking France, in frugal Holland, and in moral Germany, but that it would never work in this country, where there was abundance of capital. Now he could not understand this. Political economy was not a plant that flowered only in certain climates and latitudes. If there was truth in the principle, it was applicable to all countries and to all times. But the obvious answer was this—if the system did not suit this country, it would not be adopted. All he asked for was a permissive, not a compulsory law. If it did not suit England after the trial had been fairly made, then everybody would be satisfied, and no harm would be done. Neither could he subscribe to the doctrine which was sometimes laid down, that this country was doing very well, and that they ought to let well alone. Such a doctrine was adverse to all progress and to all reform for the future;—he could not understand such an argument coming from the mouths of men who were the champions of economical and social reform. He must say, once for all, that this was not a question to be referred to the arbitrement of any one class;—he did not think that any class could be trusted to legislate in favour of its own interest, for it generally mistook its own interest. Take the case of the shipowners, and the repeal of the Navigation Laws:—when was navigation in a more prosperous state? When were ships better employed than at present? Take the case of the Corn Laws: land was never higher—farmers were never more prosperous. And yet if these parties had had their way, there would have been no repeal of the Corn or of the Navigation Laws. And so it was with the capitalists, many of whom were afraid that a law of limited liability would injure capital. He could not understand this feeling at all, because a law of limited liability could not benefit any one if it did not benefit the capitalist. He could not imagine anything more suicidal on the part of capitalists than to oppose this proposition, which would afford new and hitherto unthought-of openings for their capital. It was no answer to say that capital was already easy enough of access. Men of genius and invention did not find capital easily obtained. The law interposed difficulties in the way; it would 785 not allow of the free marriage of capital and skill; it forbade the banns by the law of unlimited liability. It was because he thought it one of the social blots in this country that capital had such a tendency to accumulate in great masses and in few hands—because he believed that the removal of the present law would tend to remove that blot, and tend to diffuse capital—because he thought it would tend to bridge over the gulf which now divided different classes, and to diminish that spirit of alienation between employers and employed which they all deplored—that be hoped that the Government would, either to-night or on some future occasion, give their sanction to the change proposed in the Resolution of his hon. and learned Friend.
§ MR. MALINS
said, that on the present occasion he had the satisfaction of concurring in almost every expression that had fallen from the hon. Member for the West Riding, and thanked the hon. and learned Member for Plymouth for having brought the subject forward. A question of greater importance than the present, affecting the commercial well-being of the country, he believed it would be difficult to bring under the consideration of the House; and he ventured to predict that the period was not distant when the principle of the present proposition would he carried into effect. He quite agreed with the President of the Board of Trade that every Member ought duly to weigh the evidence laid upon the table of the House before pledging himself one way or the other; but he regretted to perceive that the bent of the right hon. Gentleman's mind was adverse to the alteration in the law. He (Mr. Malins) had formed his opinions on the subject, not from theory, but from extensive observation of the great mischief arising from the present state of the law, which was not creditable to the country. No one objected that two parties ostensibly carrying on business should both be liable for all their undertakings; but the law was in an anomalous state if one of the partners was a secret one, though with ever so small an interest, for if a person gave credit to one partner only, and if, after having delivered his goods, he found that there was another, he might call upon him to pay to the utmost farthing of his means, though he had trusted the firm not knowing that such person was a partner. The Legislature day after day gave the protection of limited liability to railway and dock com- 786 panies by particular Acts of Parliament; and he thought no one could object to give the same facilities to private partnerships which they were every day giving to public partnerships. Some advance had been made in the matter, for they had passed the Joint Stock Registration Act. When that Act was passed many persons thought that a limited liability was created; but it had been decided on appeal in the Court of Chancery, that that Act had not established the principle of limited liability. He would ask the house, if with reference to great undertakings the principle of limited liability were permitted to be applied, upon what ground was it that the Legislature should hesitate to enable all persons—not under an absolute, but under a discretionary law—to establish limited liability for themselves, care being taken that due notice should be given to the public of the terms upon which these partnerships had been framed? Let them consider for a moment the calamities which had resulted from the operation of the law with respect to partnership as it at present stood. Frequently persons of genius had beets unable from want of capital to render their inventive talents serviceable to the country. Really, the anomalies of the existing state of things were such as to make one blush for the state of our law on this subject. Let them look at the numerous instances in which persons were induced to join particular companies upon the understanding that the principle of limited liability existed with respect to the transactions in which those companies happened to be engaged, and yet afterwards found out to their cost that no such principle prevailed. The general provision of the law upon the subject was, that any persons who were associated together for any commercial purposes, and participated in the advantages of the business in which they were engaged, became liable to the debts in which, in the pursuit of that business, that firm might become involved. But the question was one with respect to which many and great anomalies existed. Take the case of a number of gentlemen associated together in a club. One would suppose that, according to the general principle of the law with reference to the subject of limited liability, the members of the club generally would be held responsible for the debts incurred by the committee of the club for the supply of provisions. [An Hon. Member: Such is the case.] He did not wonder that the hon. Member 787 should be of that opinion, inasmuch as it was one entirely in accordance with the general principle of the law upon the subject. He could, however, inform the hon. Member that it had been decided that it was only the members of the committee of a club who were held to be liable for the debts which they might have incurred with tradesmen on behalf of the members generally. Now, in order to induce a fact in proof of what he had just been saying, he should state, that in the case of a club in St. James's Street, in which establishment a nobleman who was well known to the public had been an active member of the committee, it was found that debts to the amount of 40,000l. had been contracted upon behalf of its members. It had been supposed that the members generally were liable to the payment of their proportion of that debt, and an application had accordingly been made to Vice Chancellor Bruce for an order to wind up the affairs of the club. That order had been made; but it had afterwards been reversed upon appeal to the Lord Chancellor, and ten or fifteen members of the committee had been made liable for the whole amount. Now, he would ask if that were a proper state of the law? It was well known to the profession to which he belonged—and it was probably equally well known to the House—that day after day cases occurred in which utter ruin was the consequence of the investments made by parties in commercial transactions, supposing those transactions to be carried under the operation of a principle of limited liability; when suddenly, perhaps, through the reckless conduct of the directors, the concern broke down and involved all engaged in it in ruin. In the town of Newcastle-upon-Tyne there had been in existence some time since a company, denominated "The Newcastle-upon-Tyne Banking Company," with whom large sums of money had been invested upon the faith of the principle of the existence of the law of limited liability; and the consequence had been that an order for winding up having been made, all parties engaged in the transaction had been to a great extent ruined. A still more recent case was that of the Monmouth and Glamorganshire Bank, where the people believed their money was as safe as in the public funds when it was invested in a joint-stock bank, and only found out their mistake when the bank broke down and involved them in ruin. Was this a state of things that ought to 788 last? For whose benefit was it? Some said it was necessary for the protection of the creditor; but it Was rather for the destruction of the creditor. Business was never well conducted unless it was conducted with prudence and foresight; and a man ought to be induced to give credit only where he saw the likelihood of repayment from a business being well and prudently managed. But under the present system credit was given to a company, because the creditor, after scanning the list of shareholders, was able to pick out 50 or 100 men from whom he knew he could extract every farthing of his debt, whether the undertaking flourished or fell. Was that, he would ask, a state of things which, in a national point of view, it was desirable should exist? They all knew that there were numbers of reckless creditors, and that the system which they adopted could not fail to be a national injury. In the discussion upon the Oxford University Bill—the arguments which had been put forward to prevent expense from being incurred by the student, because of his being in statu pupillari, went to the extent that it was desirable to place more restriction upon the principle upon which credit generally was given. His own opinion was, that the system of recklessly giving credit was most injurious, and that considerable advantage would result from the adoption, upon the part of tradesmen, of trusting with their money those persons only whom they deemed to be in possession of the means of meeting their demands. He must say that he thought the whole argument that evening against the principle of limited liability had failed. He was satisfied the period had passed when such a system as the present could be maintained, and he, therefore, entertained the most sanguine hope that the state of the law would speedily be altered. The right hon. Gentleman (Mr. Cardwell) had shown considerable hesitation on this occasion; but why should there be any hesitation in advancing upon a question like the present? If there had always been this backwardness, how much slower would have been our progress in those commercial changes which had been effected by the House! He trusted, therefore, that during the recess they were approaching the right hon. Gentleman would apply the powers of his mind to this question, so as to be able at the commencement of the next Session to give them an assurance that he was prepared to introduce a change. If he did so, he 789 was certain that, in that House at least, he would have no difficulties to contend with. In conclusion, he trusted that the House would, on the present occasion, accede to the Motion of the hon. and learned Member for Plymouth, and show its willingness to remove the existing absurdities of the law, leaving the public in their own way to settle all these matters for themselves.
§ MR. GLYN
said, that as he had been a Member of a Committee which was appointed in the year 1851 to inquire into this subject, he was anxious to address a few words to the House before the discussion should be brought to a close. He was not one of those described by the noble Lord (Viscount Goderich) at the commencement of the debate, who desired to maintain the monopoly which was supposed to exist under the operation of the present law, and he had for some time considered the whole system of commercial jurisprudence in this country to be in a most anomalous and unsatisfactory condition. But although he bad attended that Committee with an eager desire to find, if it should be possible, some remedy for a system which he thought required amendment, he should confess that neither in the evidence produced at the time, nor in the Report lately laid before the House, had he met with anything which could lead him to believe that, however desirable it might be that certain changes should take place, they were as yet in a position to decide how these changes ought to be effected. It appeared to him that the Report presented to the House was deficient in many respects, and was not, in point of fact, one which could form the basis of legislation upon that subject. He would remind the hon. Gentleman the Member for the West Riding of Yorkshire (Mr. Cobden), who had also served upon the Committee, that although he (Mr. Glyn) agreed with him in most of the views he had laid down, he had omitted, and the Report had also omitted to touch upon that particular point which had been the source of the greatest difficulty to the Committee, namely, the possibility of preventing that fraud which, under a system of limited liability, would inevitably occur. He said inevitably, because, from the evidence taken before the Committee given by those most favourable to the system of limited liability, and by foreigners well acquainted with its working, that that system afforded great facilities for fraud. The consequence had been 790 that in those countries where the principle of partnerships en commandite had been carried to the greatest extent, and particularly in France, it had been found necessary to give the bankruptcy laws an extremely penal character. Now, our bankruptcy laws were of a much less rigorous description. In the year 1849 certain changes had been made in those laws, which gave to them a more penal character than they had before possessed; and the result had been that since that period the laws had become so odious that the Bankruptcy Court was at present almost entirely deserted. What, then, would be the case if they were to render the bankrupt laws still more stringent, as every foreigner who had given an opinion upon the subject said that they must do in the event of their adopting the system of limited liability? He believed that the only remedy against fraud which had been suggested by the witnesses could not, in that case, be carried into practical operation. The Report, however, did not even notice that circumstance. He appealed to the hon. and learned Gentleman who had last addressed the House, whether the state of the bankruptcy laws was not a most material ingredient in the discussion of that question, and whether, before they had received evidence upon it, the President of the Board of Trade could venture to introduce a measure for the alteration of the law of partnership, as was urged by hon. Members? He felt persuaded that until they should have further considered the only remedy against fraud which had been suggested under the proposal before the House, it would be worse than folly on their part to accede to that proposal. There were other points connected with the question which would also, as he thought, require very attentive consideration before any decided step should be taken in the matter. It was all very well to argue the question morely as it affected partnerships in trade and joint-stock companies; but it should be borne in mind that in this country the system of credit was unlike that which prevailed in any other country. A large portion of the business in the manufacturing districts was conducted by means of bills of exchange, circulated from hand to hand, with endorsements bearing an unlimited liability; and the fact was, that if the change in question were adopted a material alteration must be effected in the whole of our commercial jurisprudence. He did not throw out these observations 791 for the purpose of defending the present law of partnership, for he believed that that law required considerable alteration. But as one who was largely engaged in commercial pursuits, and who knew by experience the frauds daily practised in those pursuits, he was anxious that they should enter into the discussion of that question with the fullest knowledge of all the facts connected with it, and with a desire to obviate the difficulties by which it was surrounded. He had certainly no wish to delay longer than necessary those alterations in our present commercial system, which, if they could be safely made, would prove of decided benefit to the commercial relations of this country.
§ MR. J. G. PHILLIMORE
hoped the House would not be led away by the plausible speech of the right hon. Gentleman the President of the Board of Trade, or by the ingenious arguments of the hon. Gentleman who had last addressed them. The right hon. Gentleman had told them in the language, or rather, he might say, the cant which was so often adopted in a certain portion of the House, that the subject was not yet ripe for decision. Not ripe! As if they were dealing with a law that had not been incorporated into the mercantile code of every other country in Europe, from the earliest period down to the Code Napoléon. That law had raised the old Italian Republics to the height of prosperity which they had once enjoyed; it had covered the Atlantic with ships, and New England with monuments of industry, and yet they were told by the right hon. Gentleman to go and study the blue book. He (Mr. J. G. Phillimore) knew, from the very constitution of the Commission, that its Report would be as flimsy and self-contradictory as they had been told that it had proved; and, therefore, when he was asked to attend as a witness he had morely sent word that he had seen no reason to alter his former opinion. All parties must see the great importance of showing the working classes that they really took a deep interest in their welfare, and were ready to afford them the means of raising themselves in the scale of society by the force of their own moral energies. For what would the working classes think if they saw the advantages possessed by men of their own rank in America continue to be denied them in this country? With the results of this principle in America, and with ancient experience, confirmed by modern, as to the benefit to be 792 derived from it, had not the lower classes a right to ask the House to carry out the principle which would effect for them such important changes? When the hon. Member (Mr. Glyn) said that the bankruptcy laws in foreign countries, especially in France, had been made more penal and stringent, in consequence of the adoption of the principle proposed, he had forgotten that in France these laws were rendered necessary, not by the sociéeté en commandite, but by the société anonyme, which was of a far more speculative and dangerous character. Every application that was made to the right hon. Gentleman to get rid of the necessity for unlimited liability in exceptional cases proved the present unsatisfactory state of the law, which deprived the poor man of those opportunities of benefiting himself which every one must desire to have, and which it was most desirable that every one should have. Adam Smith had said that a joint-stock company was an excellent thing, because it enabled men of small capital to take part in great enterprises; but he said it had one fault, for it did not make the persons of large capital take a sufficient interest in its affairs. But the société en commandite possessed all the advantages of a stock company, and avoided that fault; for, while the non-active members were liable only to the extent of their capital, the people at the head of the concern were responsible to the last shilling they possessed. They had thus the same means of associating men of small capital, and they had also a sufficient guarantee for the integrity of the managers.
§ MR. F. LEVESON GOWER
said, he would not venture to trespass long on their patience, but he trusted to receive the indulgence the House always extended to a new Member, while he made a few observations upon this subject, which was one in which he felt the deepest possible interest. He agreed in the main with nearly every speech which had been delivered this evening with the exception of that of the President of the Board of Trade, which he might call a neutral speech, and that of the hon. Gentleman near him (Mr. Glyn), which, however, he was gratified to observe, was not characterised by that spirit of hostility which was displayed by some of the opponents of any change in the law of partnership. He admitted that, if machinery could not be devised that would secure societies established on the principle of limited liability from being tainted with 793 fraud, such societies could never prosper in this country; but he was not of opinion that such machinery could not be introduced. He believed that the interest which the country took in this question was spreading and growing every day; and that not only would the Report which had been just published be read with attention, but also the arguments which accompanied it—the two, as it struck him, pointing at a very different conclusion. He was somewhat astonished at the conclusion at which the Commissioners had arrived—it was founded neither on the principle of protection nor upon the principle that the Government was a better judge of the interests of private individuals than those individual themselves, but their chief argument seemed to be, that there was no evidence to prove the want of a sufficient amount of capital for the requirements of trade. Now, he believed that trade was always varying, that it varied according to the capital of a country, and that the proposed change was calculated to increase that capital. He had read the opinion of Lord Overstone that limited liability could not by possibility increase the capital of the country. He (Mr. F. L. Gower) asked the House with diffidence, whether they could agree with such an opinion? Surely, if a law of limited liability held out inducements to men to lay by, instead of spending their incomes, it must thereby increase the capital of the country; and it was likewise notorious that a great amount of capital was now invested abroad because limited liability did not exist in this country. A short time ago he was anxious to invest a small sum of money, and he was advised to invest it in a foreign society, so as to have the benefit of limited liability. He had no doubt that similar advice was frequently given, and, therefore, the introduction of limited liability would materially increase the capital of the country. It must also be considered that limited liability made the capital of the country more effective, which would be tantamount to increasing it, and he could not therefore understand the view which was taken by Lord Overstone. If it increased the capital, it would, of course, increase the trade of the country. The only other practical objection that had been made to the change was the encouragement it would give to speculation. He believed that the present age was tending towards association—that the great things which might be effected by means of association were 794 now, for the first time, being appreciated —and he therefore thought it was the duty of every legislator to endeavour, to the utmost of his ability, to have the principle of association carried out by prudent, instead of inconsiderate men; but by the present law prudent men were driven away from association. Lord Overstone, in his evidence, said that a man would now look twice before joining in an undertaking, the failure of which would cause his entire destruction. He went further than Lord Overstone, for he contended that that man was no better than a madman or a gambler who would risk his whole fortune or means of existence in an undertaking in the management of which he could not have a share; and therefore, notwithstanding an association might hold out the greatest prospect of success, no prudent, cautious man would wish to join it in the present state of the law; this was one of the principal reasons which rendered a change desirable. The question which the right hon. Gentleman had put to the proposers of the measure was rather an unfair one, because, although it was easy for those who wished things to remain as they were to be unanimous, unanimity in those who proposed an alteration was difficult to be obtained. He thought that, if two or more persons joined themselves in partnership upon any conditions they thought fit, the only thing the law had to do was to secure the publicity of those conditions, and no partnership would succeed unless they were such that credit would be given to the undertaking. Having now stated his opinions upon this subject, he would assure the hon. and learned Gentleman who had brought it forward that, if he persevered in advocating a change in the law, he would always find in him a zealous supporter.
MR. DIGBY SEYMOUR
thought that in three very material points the President of the Board of Control had made great and important concessions—namely, with regard to the questions of notice, of special loans, and of charters—for which the advocates of limited liability ought to feel grateful. Upon the general question, he would call the attention of the House to the opinion which had been expressed by Mr. Whitworth in his Report upon the Industrial Exhibition of New York. Mr. Whitworth said that limited liability produced very beneficial results in facilitating the introduction of new inventions and manufactures, and in causing the investment 795 of capital by educated artisans, and thereby regulating the relations between employers and employed. It seemed to him that in these times, when we were ready to encourage every work tending to improve the condition of the working classes—such as model lodging-houses, baths and wash- houses, and the like—it was important that the humbler classes should be enabled to invest their earnings in works of a nature that did not involve the risk of ruining themselves and families. On all these grounds he supported the Motion; and he thought this discussion would, at least, have the good effect of showing that it was admitted that our present partnership laws were a disgrace to the jurisprudence of the country.
§ MR. KENDALL
observed, in reference to a remark which had been made by the hon. and learned Member for Plymouth, that Cornish mining was subject to certain stannary laws, by which a man could at any time, without consulting his partners, withdraw from the partnership and release himself from liability. He, therefore, denied that prudent persons would not be willing to risk their money in Cornish mines.
§ MR. W. BROWN
said, he had always been ready to adopt any measure which could be advantageous to the middle classes, and therefore wished to state his reasons for the course he should take on the present occasion. He should be exceedingly sorry to see anything done to impair the credit of the country, believing that such a course would inflict great injury upon the humbler as well as the higher classes. This very question had been debated for three days in the Liverpool Chamber of Commerce, and the result was a vote of 107 in favour of limited liability, and 209 against it; being pretty much the same conclusion as that come to by the Royal Commissioners in their Report. When money was lent to railroads, banks, and large establishments of that kind, there was a visible security in the shape of the property belonging to the company; but in other descriptions of partnership there was nothing to look to at all but the individual partners themselves. His conviction was decided that it would be injurious to the interests of the country to adopt, in the present state of the information upon the subject, a system of limited liability in partnerships.
§ MR. SOTHERON
regretted that the hon. and learned Member for Plymouth 796 had not brought the subject under consideration in such a form that the result of the debate might have been in some measure of a practical nature. It seemed rather to degrade the character of a legislative assembly to discuss abstract propositions of tins kind as if they were a mere debating society. If the hon. and learned Gentleman, instead of inviting the House to discuss an abstract proposition, had asked for leave to bring in a Bill for the purpose of giving a legislative sanction to loans of money on the principle of commandite, a really practical and desirable object might have been attained, and a great deal of apprehension which the Motion in its present state excited would have been saved.
THE ATTORNEY GENERAL
appealed to the hon. and learned Member for Plymouth not to press the Resolution to a division, and said, he felt that he made the, appeal with greater force when he fully and frankly admitted that he was a decided friend to the principle the hon. and learned Gentleman was desirous of laying down. This was not the first time it had been under consideration in that House, a Report having been recently made which was founded on a considerable body of evidence upon the subject. There was no object, however, to be effected in carrying an abstract Resolution, and if a measure were to be introduced upon the question, it would require great consideration, in order to afford safeguards for the prevention of fraud. He put it to his hon. and learned. Friend whether his object was not fully answered by the discussion which had already taken place, and which had served to elicit the opinion of so many hon. Members? It would be really useless to carry this abstract Resolution, and it must now be clear to the hon. and learned Gentleman, that the question was one not only deserving the serious consideration of the House and of Her Majesty's Government, but that it would receive their most serious consideration.
§ MR. NAPIER
said, he had been much instructed by the discussion which had taken place on this important subject, and he thought it had served a very good purpose. His opinion had been throughout in favour of limited liability. His chief motive for rising was to express his astonishment at the terms in which the hon. and learned Gentleman (Mr. J. G. Phillimore) had spoken of the Report of the Commissioners on this subject. Remem- 797 bering who were the learned persons composing that Commission—that included among them were the Master of the Rolls for Ireland and Mr. Justice Crosswell—he must say he could not remain silent when he heard the hon. and learned Gentleman characterise the Report of those gentlemen as a flimsy production.
§ MR. J. G. PHILLIMORE
explained that he had said it was a one-sided Report, and that he did not call it a flimsy Report.
§ MR. NAPIER
said, the Commissioners, of all persons in the world, representing as they did Eagland, Scotland, and Ireland, were the last to be suspected of making a one-sided Report. Considering the vast importance of the question, and that it came now rather prematurely before the House, he thought that more could hardly be expected than that it should be ventilated by a full discussion. Under these circumstances, he entirely concurred with what had been said by the Attorney General, and hoped the hon. and learned Member for Plymouth would not press his Motion to a division.
§ VISCOUNT PALMERSTON
wished to add his request to the hon. and learned Member for Plymouth not to press his Motion to a division. He thought, with the right hon. and learned Gentleman who spoke last, that he out to be satisfied with the expression of opinion in flavour of his proposition which had been elicited, and which had certainly been more general than often happened. Nobody could deny the importance of the question brought under the consideration of the House. It was one on which, no doubt, great differences of opinion existed, and as this division of opinion existed, a Commission was appointed upon the recommendation of a Committee of the House to inquire into the matter. That Commission had only recently reported, and he was sure the House would feel that Her Majesty's Government would not be acting properly if they were at once to rush to a conclusion without giving to the Report of the Commissioners that consideration to which it was undoubtedly entitled. It could not be expected that the Government should be prepared at the present moment to declare the result to which they had come, or were likely to come on the question at issue; and he thought it would be hardly fair to tie the hands of Government, or to induce the House to come to an abstract Resolution on a matter of so much importance, without maturely considering not only the 798 recommendation of the Commissioners, but the evidence given before them, and enabling the Government to prepare the opinion which they might think it right to submit to the House on the subject. He was quite sure, at all events, that the House would give Her Majesty's Government credit for great anxiety to correct those defects which it was admitted by everybody existed in the law as it now stood; and he trusted that credit would be allowed them for a sincere desire to propose any change in the law which might assist in the development of national industry, and give to the humbler classes of society a better means of investing their savings as well as a greater inducement to make savings in the course of their limited transactions. There was also another matter which should be taken into consideration. It had been generally understood that the hon. and learned Member for Plymouth wanted morely to elicit the opinion of individual Members, and not to call on the House to announce its opinion in a division. In consequence, many hon. Members were absent, and it was unfair, therefore, when there had been an impression that no division would take place, to take advantage of the general concurrence, which he certainly could not deny existed, for the purpose of pledging the House to an abstract Resolution.
§ MR. J. L. RICARDO
differed from the noble Lord, and from the two speakers who had immediately preceded him. He had never seen the House so unanimous upon any question as it had been upon this, and he could not understand what reason could exist why they should not place their unanimity upon record, so that the country might be aware of it as well as they were aware of it themselves. He had never seen a more straightforward Resolution, or one more directly to the purpose, than that which the hon. and learned Member had proposed. It was one which no one could misunderstand, for it went straight to the point, and not all the mystification of the right hon. Gentleman the President of the Board of Trade could envelop it in any degree of difficulty whatever. There had been only one champion on the other side, and even he did not affect to be ignorant of what the Resolution meant. There might have been some strength in the argument of the Attorney General if they had not previously heard the speech of the President of the Board of Trade, because the hon. and learned 799 Gentleman had come forward in the most straightforward manner, and had expressed his entire concurrence in the views of the hon. and learned Gentleman who had proposed this Resolution. The President of the Board of Trade, upon the other hand, had appeared carefully to avoid expressing any opinion at all; but if anything could be gathered from his speech, it was that he differed entirely from the opinion which the learned Attorney General had expressed. The question had been before the country more than twenty years, and there was no reason why the House should delay expressing its opinion upon it.
§ MR. CAIRNS
said, he also saw no reason why the House should not express their unanimous opinion on the question. It was true it was an abstract Resolution, but it was enough to embody the opinion of the House. The effect would be to strengthen the hands of the Government, and would enable them to feel confident in the support of the House when they brought in a Bill to carry out the Resolution—a confidence of success they did not often feel.
§ MR. HORSFALL
had carefully abstained from expressing an opinion upon the question until he should have had an opportunity of considering it in connection with the Report of the Commission. He had not had that opportunity yet; it had been impossible to do it in the few days that had elapsed since the Report had been in the hands of Members, and if he were obliged to give a vote now it would not be upon the merits, but against the House pledging itself at this moment to an abstract Resolution. He hoped, therefore, the Motion would not be pressed.
§ MR. THOMSON HANKEY
regretted that any Member of the Government should have entreated the hon. and learned Member not to press his Motion; and hoped that those who took a deep interest, as he did, in the question, would not be deprived of the opportunity of showing that they were a strong and united body in pressing upon Her Majesty's Government a measure which they believed to be of great importance to the commercial community.
§ MR. CROSSLEY
thought the hon. and learned Member for Plymouth was right in the main, but hoped he would not go to a division. He should divide with him if he did; but as the matter was of great importance, and one upon which there was a good deal of difference of opinion, he 800 thought there ought to be an opportunity for further discussion.
§ MR. SPOONER
said, he was not prepared to vote for an abstract Resolution, in opposition to the conclusion of a majority of the Commissioners. If the Motion were pressed, he should move the previous question.
§ MR. WARNER
said, the Commissioners were equally divided upon the question of allowing "special loans," which practically embodied the whole question.
§ MR. COLLIER
, having expressed his gratification at the manner in which his Resolution had been received, and the unanimity of opinion which had been expressed in the course of the debate, said it appeared to him to be immaterial whether he divided the House or not. The feeling of the House had been unmistakably expressed; and, as he felt the force of the appeals made to him by the Home Secretary and the Attorney General, who had intimated the readiness of the Government to take the question into its consideration, and as his own object had been answered by what had taken place, he would, if the House would allow him, withdraw his Motion.
The House, however, by loud cries, having expressed its wish that the Motion should not be withdrawn,
Question, "That those words be there added," put, and agreed to:—Main Question, as amended, put, and agreed to.