§ Order for Committee read.
§ Motion made and Question proposed, "That Mr. Speaker do now leave the chair."
§ MR. ARCHIBALD HASTIEsaid, he rose to move that the House do go into Committee upon the Bill that day three months. In doing so, he must complain that the Bill had been introduced and carried on without the usual opportunities for discussion. It had been brought in without any explanation, and had been read a second time without his having any opportunity of expressing his objections to it. He, therefore, took the present occasion to explain his reasons for objecting to the measure, and he believed he would be able to adduce the opinions of great economists and men of high commercial standing in opposition to the Bill. It was to be expected, that the right hon. Gentleman the Vice President of the Board of Trade, would have shown some deficiency of capital required for carrying on manufacturing and commercial undertakings which rendered necessary the measure he proposed; but nothing of the kind had been proved. The Bill was very artfully drawn, in order to captivate all those who were about to retire from business, whom it would enable to retire—leaving, say 5,000l., with which any clerk or other person who might be selected could speculate without rendering the retiring party liable beyond the amount he continued in the business. It was also his opinion that the Bill was unnecessary, because now that the usury laws were abolished, a person might retire from a concern, taking 10 per cent for the capital he left in it, and then, if a failure took place, he would be treated as an ordinary creditor, an arrangement which was advantageous to all parties. He would not support his objections to the Bill by referring to antiquated French writers, but he would call the attention of the House to the opinion of the greatest modern authority upon the subject. Mr. M'Culloch, in his work upon limited liability, said that several large concerns, such as railways and canals, might be carried on by Joint-stock Companies established upon the principle of limited liability, but there was a class of 637 concerns of a totally different description, such as partnerships for manufacturing, or agricultural, or trading purposes, in which it was necessary to adopt measures suited to sudden emergencies as they arose, and to that class the principle of limited liability could not be advantageously applied. Mr. M'Culloch went on to observe, that the limitation of the responsibility of partners would tend to increase reckless speculation; that the public would have no security that the published capital of a company had been bonâ fide paid up, or had not been dissipated; and that the prohibition to the partners en commandite to take a share in its management would be practically good for nothing. He would particularly call attention to the remark of Mr. M'Culloch, that he feared the system now proposed would materially affect the high moral standing of the British merchant, who at present felt himself bound to maintain that responsible and honourable course of conduct which had raised him to the eminence and credit which he at present enjoyed. "It was not," said Mr. M'Culloch, "easy to see how such a system could be productive of any good result." What branch of trade he (Mr. Hastie) would ask, what manufacturing or what commercial house was there at the present moment, which could not raise money at 4 and 5 per cent? If, then, capital could be so easily raised, that there was no great work which could not be carried on in any part of the country, why adopt a measure, the effect of which would only be to bring capital into the market at a rate of interest which would be barely more than was obtainable at the present time? Mr. M'Culloch then proceeded to say—
§ MR. E. BALLI rise to order. I presume it is not usual that Gentlemen should be allowed to read whole pamphlets as portions of their speeches.
§ MR. ARCHIBALD HASTIEI have only followed the practice which I have long found to be pursued in this House, and which the right hon. Gentleman who introduced this measure himself adopted when bringing it forward. [Mr. E. BALL: The right hon. Gentleman only read extracts.] Well, those which I am now quoting are only extracts, and, when an hon. Member who is not accustomed to address the House finds extracts in a publication by one of the most shrewd and sagacious writers of the day so clearly and so distinctly to the point under discussion, 638 I think it is no waste of the time of the House for him to refer to them. [The hon. Member then proceeded to read other portions of Mr. M'Culloch's pamphlet.]
§ MR. JOHN MACGREGORI rise to order. The hon. Member for Paisley might as well read to the House the whole works of Adam Smith, or all that has been written pro. and con. on the subject of limited liability as the pamphlet of Mr. M'Culloch. Why does not the hon. Gentleman make a speech of his own?
§ MR. SPEAKERThe hon. Member for Paisley is quite in order in quoting extracts in support of his own views, provided he confines himself to quotations which are pertinent to the question. At the same time, there is a discretion to be observed in making such quotations. It is not regular to quote a whole pamphlet.
§ MR. ARCHIBALD HASTIEWith great submission, Sir, I believe the quotations I have read are quite pertinent to the question; and, in reply to the hon. Member for Glasgow (Mr. J. MacGregor), I would with much deference say to that hon. Gentleman, that unfortunately I do not happen to possess that gift of eloquence, and that rare power of speech, which it is the good fortune of that hon. Gentleman so pre-eminently to possess; and, therefore, I hope the hon. Gentleman will permit me to read a few more extracts. [The hon. Member then read further portions of the pamphlet, vith a view to show that a system of limited liability would be productive of very great disadvantages, unaccompanied by any countervailing advantages.] I must now advert to the several provisions of the Bill, and, with regard to the second clause, I contend that it will give rise to a system of the grossest fraud. I cannot avoid expressing my astonishment that the author of the measure should not at once have perceived the fallacy of that provision. I am convinced that the tendency of this Bill will be to increase fraud and bankruptcy, and to destroy the credit of the English merchant.
§ MR. MITCHELL,in seconding the Amendment, said that, when the right hon. Gentleman the Vice President of the Board of Trade had introduced his Bill, he adduced but few cases of grievance under the present state of the law; he, in fact, only brought forward two special cases—that of parties who, on retiring from a firm, were desirous of leaving money to their successors, and the case of patentees. The last-mentioned 639 class of cases was very limited, and in the former class of cases no difficulty had, as yet, been found in the way of preventing parties from carrying out their wishes. The present measure was not called for by the public—no petitions had been presented in its favour, and the commercial gentlemen who were examined before the Commission appointed to inquire into the subject were against the proposed alterations of the present law of partnership. He considered that where parties, on the one hand, had the power of making large speculations and receiving unlimited profits, they ought not, on the other hand, to be liable only for losses to a limited extent. That, at all events, was the abstract Justice of the case, and they were, therefore, not called upon to make any alteration in the law, either on the ground of the general opinion of the public being in favour of the change proposed, or from a want of capital to carry on the trade of the country. All the evidence brought forward went to prove that they had more capital than was adequate for the business of the country; and, as the tendency of the present Bill would be to create a large amount of surplus capital, the consequence would be that wilder schemes and speculations would be entered upon than had hitherto been attempted. With respect to the details of the measure, the right hon. Member for Oxford (Mr. Cardwell) had conveyed the impression, that under the second clause, gentlemen out of business would be able to lend money to partners en commandite, and would still have the control and supervision of their money; but it certainly was not so; for if they engaged in the active operations of the business they would, under the Statute law of the land, become partners in the concern. Clauses 4, 5, and 6, of the Bill imposed no effectual check upon fraud, and even the slight provision for that object originally contained in the Bill had been modified by the right hon. Gentleman (Mr. Bouverie). If B lent A 10,000l. of capital under the Bill, and in six or twelve months afterwards found that A was doing badly in his business and likely to be ruined, B might withdraw his money in time to save it from forfeiture, provided he registered its withdrawal. The former Bill, however, afforded such an amount of protection to the creditors of A, that it rendered B's capital liable for a period of a year anterior to bankruptcy; whereas, by the altered shape of the measure, the twelve months 640 had been reduced to three months. Moreover, B was to be allowed to withdraw, not his capital only, but also his profits within the same period. Now, was it to be supposed that merchants, who were engaged in multifarious transactions, had nothing to do but to study the register daily, in order to know what capital had been advanced to, and what withdrawn from every firm with which they might have dealings. Practically, therefore, in ninety-nine cases out of a hundred parties trusting A on the strength of B's 10,000l. would never be aware that the money had been withdrawn. Thus, the Bill would offer a premium to illegitimate speculations, and enable a system of the most gigantic frauds to be introduced with impunity. The argument founded on the practice of foreign countries on the subject was inapplicable, there being no real analogy between the case of England and those of France, Belgium, and the United States. In the latter country there was a want of capital, whereas in England that article was abundant, while in Belgium and France the fact was, that the principle of partnership en commandite was rapidly falling into discredit, as had been sufficiently illustrated by the figures adduced even by the right hon. Gentleman (Mr. Bouverie) himself, showing that in France only one-fifth of the partnerships were now conducted on that system. On those grounds, therefore, the House ought to support the Amendment before it.
§ Amendment proposed, to leave out from the word "That" to the end of the Question, in order to add the words "this House will, upon this day three months, resolve itself into the said Committee," instead thereof.
§ MR. JOHN MACGREGORsaid, he hoped the House would give him a little of its attention on the subject now under consideration. Seeing that he had had the honour to draw up no fewer than forty-two Reports, which were presented to Parliament by command of Her Majesty, on the subject of the commercial system of the nations of Europe and of other parts of the world—seeing that he had also been officially connected for nine years with the Board of Trade, and that his recommendations on the questions of import duties had all been ultimately carried through Parliament by Sir Robert Peel—he hoped that he had some claims upon the attention of the House, although he might not boast the same gifts of eloquence as the hon. Member for Paisley (Mr. Archibald Hastie), 641 who had favoured the House with such literal quotations from a pamphlet. Nobody but the large capitalists were opposed to limited liability. Therefore he was not surprised that Lord Overstone was hostile to it. He should much like to know, however, whether that nobleman's father, when he travelled about as a Unitarian minister, would not have been glad to invest 5l. if he thought he could get 5 or 10 per cent interest for it. He (Mr. Macgregor) thought it right to tell bold truths, because Lord Overstone was now a millionaire of commanding influence in that city, but for which circumstance he would never have been Lord Overstone. An honest man who told the whole truth was a better man than one who went as plenipotentiary to any part of the world. There were many persons who wished to become Lord Overstones by preventing the poor man from investing 5l. without incurring an unlimited responsibility. He (Mr. Macgregor) was in favour of a liability limited to double the amount subscribed, but beyond that he would not go. Without the system of limited liability Lille and Lyons and Marseilles and Bordeaux would never have become the seats of industry they now were. Let them take warning by the past. They were at one time offered an 8s. duty on corn, and a protection of 50 per cent on West India sugar; but where were they now? He was present also when a deputation of several shipowners prayed Mr. Huskisson to keep on the timber and other shipbuilding duties, in order that the smaller capitalists might not be in a condition to compete with them. He warned them how they denied their just rights to the industrious classes.
§ MR. WILKINSONsaid, he should support the principle of the Bill. It was said that capital abounded where there was a reasonable prospect of an advantageous return. But he believed the present law was a great hindrance to the profitable employment of capital. The Hon. Member for South Lancashire (Mr. W. Brown) said in his evidence before the Committee of 1854 that the less they interfered with individual enterprise the better. He willingly admitted that principle, and therefore it was that the advocates of the measure were not looking to legislation, but to repeal legislation. He thought that the labouring classes would not be able to avail themselves of borrowed capital, but they would be discontented as 642 long as they were not allowed the opportunity of getting it. He hoped the House would not allow the Bill to go into Committee.
§ MR. CARDWELLsaid, he thought no more time should be occupied in preliminary discussion at that hour of the night, but the House should go into Committee at once. He only wished to clear himself from a misconception, which seemed to have arisen about the observations which he made upon a former occasion. There were two grounds upon which persons could be held liable for the debts of a partnership. One would be, that they held themselves out to the public as partners; and the other, that they participated in the profits. These grounds were totally distinct and separate. The Bill dealt only with the second condition, participation in profits; and the statement which he had made with reference to the Bill was perfectly correct. A man might, consistently with the operation of the Bill, if he were a dormant partner, enter by deed and document into stipulations which would enable him to protect his capital; but the Bill would not enable him to do so whilst holding himself out to the world as an active partner. That would be contrary to every principle of law and justice, and he (Mr. Cardwell) could never consent to any enactment of that kind.
§ MR. MALINSsaid, he thought that a fallacy ran through the arguments of the hon. Members for Paisley (Mr. Archibald Hastie) and Bridport (Mr. Mitchell), inasmuch as they had entirely overlooked the fact that the Bill did not address itself to ostensible partnerships, but solely to dormant partnerships. The hon. Member for Paisley complained, that the Bill allowed dormant partners to withdraw without the public being made acquainted with the fact; but he did not see how that could be a grievance, since the public never were aware of those partners joining. As the law now stood, a man could silently join a partnership, and silently retire; but under the proposed Bill a man could neither join nor retire without the public being made cognizant of it through the means of registration. With regard to the much-used argument, that there was no want of capital in the country, he must observe that there was no lack of capital for the rich, but that there was a great want of it for the poor. There was a great want of capital for men who were commencing life—there was none for those who had 643 gone through it and had made money. What was required therefore was a rational system of dormant partnership, which should encourage the advance of capital by those who had it to those who had it not, but who had industry and energy, without the capitalist incurring those large risks which amounted practically to an entire prohibition—a measure which should promote the union of capital with skill, industry, and enterprise, which were such essential elements of success in a commercial country. He did not rely upon the authority of the great capitalists, like Lord Overstone, upon a question like the present; he would rather take the opinion of Lord Overstone's father, who began the world as a poor Dissenting Minister, and who would better understand the interests of young men struggling to establish themselves in business. He gave his hearty support to the Bill.
§ MR. GREGSONsaid, it seemed to him that the object of the Bill was to set up a new class of petty monopolists; its principle was extraordinary, and was objectionable. The Liverpool Chamber of Commerce had voted two to one against it, and men of business thought the country were of the same opinion.
§ MR. W. BROWNsaid, he must also express his disapproval of the Bill, and his fear that it might tend to disturb the high commercial reputation of the country, and eventually be as injurious to the general interests of England as limited liability had proved to be in France and elsewhere.
§ Question, "That the words proposed to be left out stand part of the Question," put, and agreed to.
§ Main Question put, and agreed to.
§ House in Committee.
§ Clause 1, agreed to.
§ Clause 2, (lenders to persons or partnerships, not being bankers or bankers' partnerships, are not to be deemed partners).
§ MR. GURNEYsaid, he wished to point out that there existed no very clear definition as to what a banker was, and, therefore, it might happen that a man might lend money—the borrower might do some act by which he would be held to be a banker, and so the creditor might be liable to an unlimited partnership by an act on the part of the borrower to which he was not privy. He thought it a matter of consideration whether some clause should not be introduced defining what a banker was within the meaning of the Bill.
§ MR. GLYNsaid, that by a recent Act 644 of Parliament, all bankers were compelled to register their names at the Stamp Office and pay for an annual licence; and that he took to constitute a definition of what a banker was.
§ MR. GURNEYsaid, it was perfectly possible that a firm which ought to return itself in that way might not return itself, and in that case it could hardly be said that by such an omission the firm was taken out of the category of bankers.
§ MR. VANCEsaid, he wished to point out that the Bill was borrowed almost entirely from an old Irish Act of Parliament, which bore the date of 1781. One very curious provision in that Act was that half the profits made by the anonymous partner should remain invested in the business, and also that any anonymous partner who meddled in the business transactions should be held liable to the extent of his means. It was rather unfair that the wisdom of the Irish Parliament should be made use of for the purposes of an English Act without one word of acknowledgment.
§ MR. CAIRNSsaid, that the Irish Act in question was so clogged in its details with regard to registration and other matters that it was rendered a perfect dead letter; and, so far as he knew, no partnerships had taken place under its provisions.
§ MR. HUSSEY VIVIANsaid, he proposed to add to the second clause the following proviso:—"Provided that the moneys borrowed shall not exceed the amount of capital employed in the trade or business." It appeared to him that, without such restriction, the clause would leave a door open to great fraud, and, though the original capital en commandite might be exceeded three or four times by the profits, yet in the case of the bankruptcy of the concern the lender would only be liable for the amount of the loan.
§ MR. BOUVERIEsaid, that it was often impossible to ascertain the amount of capital embarked in a business, and even if it were, the proviso would not be just or expedient.
§ MR. MALINSsaid, he fully agreed with the right hon. Gentleman that the proviso would go far to defeat the objects of the Bill.
§ MR. THOMSON HANKEYsaid, that it would not only nullify the objects of the Bill, but it would be impossible that a balance could be struck so as to let a creditor know every day and every hour the amount of capital in a concern.
§ Amendment withdrawn; Clause agreed to.
§ The House resumed; Committee report progress.