§ Order for Second Reading read.
§ MR. SPOONER
feared that if the Bill were passed in its present form injurious consequences would result. It was rather more plausible than just, on the part of the right hon. Gentleman who introduced the measure, to exclaim against the "unfairness" of making a dormant partner liable, not only in the proportion of the capital invested, but to the full extent of his fortune. The Bill did more than apply a remedy to the so-called grievance. It gave the dormant partner privileges which it would be difficult to vindicate on any principle of consistency or fair dealing. A man entering into partnership and advancing for its purposes a large sum of money, might afford the means of extended credit being given to it, even though his name should never appear in its transactions 474 The capital he had embarked might enable the business to be so conducted as to establish the reputation of the house and attract the confidence of the public. Things might go on prosperously for a short time, and large profits might be realised; but commerce, like all things else, was liable to vicissitudes; and was it to be tolerated that, at the first approach of adversity, this partner, who, though unseen, had been mainly instrumental in inducing others to put faith in the establishment, should silently and gradually withdraw his capital, and unscathed leave the creditors to the consequences? To make the law at all equitable, it should provide that in case the concern became insolvent, the sleeping partner should be liable to the amount of capital he had withdrawn, and also to reimburse any profit he had received. Unless the right hon. Gentleman met this reasonable objection in Committee, he (Mr. Spooner) should feel it his duty to divide the House upon the Bill; and he believed, when the public knew what the effect of this provision would be, there would be very great opposition to the measure. He contended that it was not right to bring on so important a Bill, and he regretted that the right hon. Gentleman had not acceded to the suggestion of the right hon. Member for Oxfordshire to postpone it to a future day. The consequence would be a renewed discussion on a later stage of the Bill.
§ MR. WATSON
said, he was favourable to be principle of the Bill, but thought some of its provisions stood in need of amendment. For example, it was very desirable that the position of a dormant partner should be clearly defined. That might be done by declaring a dormant partner to be a person who took no active part in the business of the concern, but loft the entire management in the hands of the individual who was known to the whole world as conducting it. With all due deference to the opinion of the hon. Gentleman opposite (Mr. Spooner), the man who merely advanced his money to the avowed and only ostensible parties in a trading enterprise, and whose relation to the concern was, therefore, unknown to the commercial public, ought not to be held legally responsible for the debts of the company. The system of remunerating clerks, foremen, and other employés by a share in the profits of the concern would act as a stimulus to them to promote its prosperity by their industry and 475 vigilance; but its introduction had been discouraged by the decision in the case of "Waugh v. Carver," which rendered such persons liable as partners for the debts of the firm. This Bill, however, by removing this serious anomaly would effect a, very valuable improvement in the law; and the measure should, therefore, have his best, support.
§ MR. MUNTZ
said, he must reiterate his previously-expressed conviction, that the Bill would spread a great delusion among the public. The hon. and learned Member who last addressed the House, viewing its principles exclusively with a lawyer's eye, very naturally could not perceive the practical dangers which it would create. It would enable any man to give an air of prosperity to a bad concern by obtaining a loan from another party, who, by collusion with the first, could secretly withdraw his capital as soon as he saw that things were going wrong, and yet the concern would retain the false credit in the commercial world to which it was no longer entitled. It was said that they ought to copy the American law on this matter, but, let them also adopt the safeguard which the American law provided—namely, make it compulsory on sleeping partners to publish to the world when they advanced their money to any concern, and when they withdrew it again. He did not, however, object to Her Majesty's Government riding their hobby if they would only ride it in public. But, if they did not, and rode their hobby in secret, they would ride in confusion.
§ Mr. CAIRNS
said, he did not rise to oppose the Bill, but simply to justify the course which he and other hon. Members near him pursued when the question was before the House during the last Session. A Bill, with the title of the present measure, and another on limited liability, were then introduced and discussed in that House by the Government. Various Amendments were proposed in the Partnership Bill; and he (Mr. Cairns) thinking the measure as framed by the Government too cumbrous in its provisions, moved the substitution of three simpler and shorter clauses in lieu of them. Now, what had the right hon. Gentleman the Vice President of the Board of Trade done in the case of his present Bill? Why, he had taken his (Mr. Cairns') three clauses of last year and inserted them word for word (with the single exception of the words "not being the trade of a banker") in the measure now before the House. Now, 476 that is the conduct of a Government, Members of which last year taunted Gentlemen on that (the Opposition) side for their "factious" resistance to the Bills then before the House, and charged them with seeking to throw them out under cover of a pretended assent to their principles. Again, in the case of the Limited Liability Bill of last year, he (Mr. Cairns) proposed certain Amendments, and the right hon. Gentleman opposite (Mr. Card-well) proposed certain others; many divisions took place upon them, and the Government always voted against them, the present Vice President of the Board of Trade also by his vote aiding them in rejecting them. Three of those very Amendments—namely, those relating to the number of shares, the amount of capital, and the number of shareholders, which the Government last year stoutly opposed, as inconsistent with the objects of their Bill, were incorporated in the corresponding measure which they had now introduced.
said, he thought the commercial community was deeply indebted to the right hon. Gentleman (Mr. Lowe) for the introduction of the Bill, which might be fitly regarded as the natural corollary and complement of the repeal of the usury laws, admitting as it did of as unrestricted a trade in money as was allowed in any other commodity—namely, upon such terms as the borrower and the lender mutually deemed best for their interests. The whole commercial fabric of the country in all its ramifications was based upon credit, and the effect of the measure would be to bring that increased capital into the channels of commerce which artificial restrictions had hitherto kept out of them. On the first clause of the Bill there was a difference of opinion in the country; but, in the main, the opinion was strongly and distinctly in favour of the measure passing, chiefly on account of its extreme simplicity. As to the apprehension that the Bill would offer facilities to trading upon a false credit, that evil was not prevented under the existing system; and all that the Bill did was, to provide that the remuneration of the lender should be such as the working of the capital invested could afford, than which a more equitable mode of advancing money could not be conceived. The trading community of that city was strongly in favour of the measure; and it was extremely doubtful whether it would not be injurious rather than beneficial to attempt, by its provisions, 477 to define in what a sleeping partnership consisted, as the hon. and learned Member (Mr. Watson) had recommended. The old law of partnership was so essentially rotten that it could not be long kept from falling to pieces. He considered that the emancipation of capital for application to commercial purposes would be attended with great national advantages. The opinion in the City was unanimous in favour of the second clause, and he thought a more beneficial proposition could scarcely have been made. He was, therefore, quite ready to give his assent to the second reading of the Bill.
§ MR. T. BARING
said, that, although in the opinion of the hon. Member for Ashburton the feeling of the commercial community of London was in favour of the Bill, for his own part he (Mr. Baring) did not believe that commercial men were thoroughly aware of the manner in which the measure would operate. [Mr. MOFFATT said, he had referred more particularly to the second clause.] He (Mr. Baring) had that day spoken to several gentlemen in the City who had just seen the Bill for the first time, and they expressed their astonishment at its introduction in its present form, and their hope that it would not pass without great alterations were made in it. However, be that as it might, whether the Bill was the child of his hon. and learned Friend (Mr. Cairns), or of the right hon. Gentleman (Mr. Lowe), it would be necessary to introduce some alterations in its provisions that would control and regulate its operations. For good or for evil, undoubtedly the measure proposed great changes in the commercial habits and usages of the country. That change might be called for, but he confessed he did not see the necessity of any change as to partnerships or private business. Various countries had been referred to as having adopted a law in some respects similar to that now proposed, but there were differences in the circumstances of countries which justified the establishment of a different code of commercial regulations and laws. The habits, and customs, and laws of one country were not applicable to every other; and if they had to choose a model for commercial usages and laws, what country would they select? Would they not choose that country which possessed the most extended commerce, which could command the largest capital, and which had displayed the greatest enterprise— namely, England? Where had been the failure of their present system in developing 478 the resources and the commerce of this country? He believed there was not a country in the world in which such a law existed as would be established by the Bill. The measure would introduce quite a novel principle; it proposed an experiment without the test of any experience. The two clauses of the Bill, short as they were, introduced a mass of novel principle and of experimental change. The same Government by which the Bill was introduced had last year brought forward a measure on the same subject, but of an entirely different nature. The present Bill was a complete contradiction to that of last year, and the Government could not be right with regard to both. Now what said the Bill of last year? The Bill of last year provided for publicity and registration; under it persons could readily ascertain the amount of capital advanced; it provided that, in case of failure, no portion of that capital should be returned to the lenders until other creditors were satisfied, and that any payment to a lender within three months before a failure should be invalid, and should be returned for the benefit of the general creditors. But what said the Bill now before the House? Why the Bill would actually prevent publicity; and the hon. Gentleman the Member for Ashburton (Mr. Moffatt), who assumed to represent the commercial community of London, said, "What we want is a lender who advances an amount which is only known to the person who lends and to him who borrows." But would that answer the purpose of the borrower, who wished his credit to be based upon capital, who was desirous it should be known that he was supported by Mr. So and So—a very rich man; and who, on the supposition that he was so supported would readily obtain credit? Well, what might happen? The borrower might extend his business, and the lender, having set the man going, and having thus gained him credit, might withdraw his capital without that fact gaining any publicity. Now, he would ask, was that a system which ought to be introduced into this country? Was it a system under which commercial affairs were likely to prosper? In his opinion the measure held out a premium not to trade but to fraud, and if it were adopted he believed it would seriously affect the commercial reputation of the country. Although he did not intend to offer any direct opposition to the Bill, he must say that he thought its principle was erroneous, and that it must be 479 detrimental to trade. Upon what did credit rest in this country? Partly upon capital actually engaged in trade, partly upon capital which was responsible in case of failure, and as much upon the management and conduct of the business. The Bill, however, would separate management and capital, bat what gave confidence in commercial transactions was the consideration that a man engaged in trade knew that he risked everything—not only his whole capital, but also his reputation. The Bill, however, seemed to treat trade merely as a game in which a man played for a certain amount. It had been said that the measure would lead to the investment of additional capital, to a considerable extent, in trading and commercial enterprises; but he believed that every branch of trade which afforded profit would attract capital, and that there was enterprise enough in the country to engage in trade in any part of the globe where there was a prospect that it could be successfully carried on. A measure establishing limited lability in partnership might do very well for a country like the United States, where there was enterprise without capital; or for a country like France, where there was capital without enterprise; but it certainly was not wanted in this country, which had as much capital as could be employed in trade, and not only as much enterprise as was necessary, but, perhaps, rather more than was sometimes desirable. His (Mr. Baring's) objections did not apply to the Joint-Stock Companies' Bill, but he did object to this measure, because they had no authority in favour of its principle, and because he thought it would lead men who had the management of businesses to care very little about losing their capital.
§ SIR WILLIAM CLAY
said, that if the hon. Member for Huntingdon (Mr. T. Baring) entertained so strong an impression that the Bill would introduce a dangerous element into the commercial law of the country, he was surprised that he did not oppose the second reading. He believed the reason was because the hon. Member was sensible that the measure was popular with the country generally. The hon. Member said, that he should have thought it natural that any one wishing to introduce some new principle of commercial law, would have looked to the experience of England, the greatest commercial nation in the world, and of the highest reputation, and as no such law of partnership existed here, therefore the hon. Gentleman wished 480 the House to infer that a principle which England had not sanctioned could not be right or good in itself. Surely such an argument as that would have been valid for retaining all the old and now happily extinct restrictions on trade—the corn laws, for instance, and the trading monopoly of the East India Company. They had gradually got rid of false principles—of all monopolies and restrictions, and this was one of the last of them. It was certain that the general rule with regard to commercial law was, that the law should never interfere except in a case of plain and urgent necessity. It should be assumed, as a general principle, that reasonable men would conduct their affairs in the mode best suited to their interests. The hon. Gentleman asked if there was any want of capital in this country. In one sense there was not, for great capitalists were always ready to enter upon any enterprise that promised profit; but was it true that there was always a sufficiency of capital among the humbler classes of society? He did not believe it, and he felt satisfied that there were many trades the development of which would be valuable and useful to the community, and which would draw forth a great accession of capital if the existing system were done away with. The false principle on which we had hitherto acted had prevented persons of small capital from investing their savings in useful and profitable enterprises at home, and had been the cause of millions of money being swallowed up in foreign loans and South American mines. He believed that a great portion of that amount of capital would not have been lost to the country if there had been at home greater facilities for the investment of it. The hon. Gentleman had likewise spoken of fraud. Did the present law afford no facilities for fraud? Had not the world been recently astounded by great cases of fraud which had occurred under the existing law? No doubt there might be fraud under the new law—for he was afraid that fraud would be perpetrated under any system which could be devised;—but he believed that under it there would be less fraud and less spurious credit than there was under the old law. He did not see why there might not he introduced into the measure some of the provisions to which the hon. Member for Huntingdon had alluded, but he (Sir W. Clay) could not allow the second reading of the Bill to pass without tendering to the Government and to his right hon. Friend (Mr. Lowe) his thanks 481 for having introduced a measure which was based on sound economic principles, which abstained from interfering with the enterprise of the people, and which, in its results, he believed would be eminently useful to the public. Without committing himself to all its details, he should now give to the second reading his most cordial support.
§ MR. ARCHIBALD HASTIE
said, he hoped, after the clear and able description which had been given of the Bill, that the Vice President of the Board of Trade would see the propriety of postponing the second reading. It was said there was a strong feeling in favour of the Bill out of doors. If so a postponement would only enable him to carry it hereafter with greater éclat; but in any case he protested against proceeding with so important a measure till the country had an opportunity of considering and understanding it. Before the right hon. Gentleman introduced such a Bill he was bound to prove that there was a deficiency of capital in the country, and when he had shown it to be necessary that additional capital should be brought in he was bound to propose such a scheme as would not lead to the commission of frauds. Now, it was his belief, that the Bill would open a wide door to fraud. The Bill referred to dormant partners; but how was it to be known when such partners put capital into a concern, or when they took it out? Care might be taken to let the world know that a certain partner had put his money into a concern, but afterwards he might take it out privately and leave the rest of the partners behind with no means to meet their engagements, so that the public would in the end be defrauded. The hon. Baronet (Sir W. Clay) said the Bill would bring a large amount of capital into the transactions of commerce; but he would ask him whether he ever found in any enterprise that offered fair remuneration that capital was wanting? There was no want of capital. In fact, there was a redundance of capital in the country, and the present measure would only have the effect of encouraging frauds. Some hon. Members said credit was too cheap in the country, and that if the present measure was to destroy credit altogether so much the better. Those who said so knew very little of the subject. He did not know on what ground the Government had brought in the Bill. There had certainly been a great cry for it amongst the lawyers and the political economists. But it was impossible 482 to form a just opinion of what would be beneficial to commerce, unless hon. Gentlemen had a practical experience of its working. The commerce of this country was founded more on its credit than on its capital; and its credit amongst foreign nations arose mainly from the circumstance of our having unlimited liability. When a foreign merchant now got a credit upon a British merchant, he knew that the house was liable to the full extent of the power of payment; but if the Bill were passed, he would never know whether it was a house trading on limited or unlimited liability, or to what extent it was liable Such had been the effect of the law, which said that all persons joined together in copartnership were liable for the whole amount of the debts of the firm; while the effect of the present Bill would be to destroy all that confidence. They were asked to pass the Bill on the authority of the Board of Trade. Now, he would ask, who had been at the head of the Board of Trade for the last twenty years? With one or two exceptions, they had been men entirely ignorant of commerce—either briefless barristers or persons placed there by the favour of the Government, not on account of their knowledge of trade, but because of their political services. Hence arose those absurd Bills which tended only to destroy credit and to enable persons to defraud the public by abortive schemes. He hoped the Vice President of the Board of Trade would see the propriety of not pressing the Bill through the House with undue precipitancy, but would postpone it until the country should have an opportunity of considering its provisions.
§ MR. BIGGS
said, he believed there was an almost universal feeling out of doors in favour of the Bill. The present law of partnership was thought not to be just or equitable, and the opinion was strong that the Legislature, by adopting the principle of limited liability, should afford facilities to men to engage in commercial undertakings who had hitherto abstained from such pursuits. It could not be denied, however, that the Bill in its present shape had given rise to a sense of insecurity, and certainly it would be improved by the introduction of clauses requiring registration and publicity, as in America and France; but still he was willing to accept it as a step in the right direction, and as a decided improvement upon the existing law. He himself knew several instances, 483 and had heard of many more, in which men who had retired from business at an advanced age, but had, for the encouragement of young friends or relatives, become partners to a small extent in commercial undertakings, had been entirely ruined, and thrown upon the world without the means of supporting themselves. Such were some of the results of the present system, and he could not but think that the sooner a change in the law was effected the better. Another defect of the existing law was, that it did not afford those facilities for the accumulation of wealth by men of talent and industry which were to be found in other countries. He read the other day in a pamphlet that half of the riband manufacturers in the South of France had attained their position by availing themselves of the present law of partnership in that country. They could not have raised themselves by such means in England. With respect to the other Bill introduced by the Vice President of the Board of Trade, there was a strong feeling among the working classes in favour of associations; they believed, whether right or wrong, that capital oppressed them, and that they had not a fair share of the proceeds of their labour. Any measure, therefore, which would allow them to associate together, with the view of carrying on business on their own account, would give immense satisfaction, and could not fail to be productive of good. If the working classes were right, they would reap the advantages of their exertions; if wrong, they would profit by experience. On the whole, if the Vice President of the Board of Trade succeeded in passing his Bills, he would confer greater benefits upon the present generation than any Gentleman who had been at the head of that Board for the last thirty years.
§ MR. GLYN
said, he could scarcely think that the Vice President of the Board of Trade would be induced to accede to the request of the hon. Member for Paisley (Mr. Hastie), and to postpone the Bill. For his own part, although not altogether in favour of the measure, he did not see the slightest ground for postponing it. Indeed, he was not at all sure whether, viewing the Bill with reference to the particular case to which it was meant to apply, it was not on the whole the best settlement of the question at which they could arrive. It was impossible for any one connected with the commercial affairs of the country to disguise from himself that 484 a very great alteration had taken place with respect to the law of partnerships since the abolition of usury; and if it were only for the purpose of preventing the lending of money upon a high rate of interest, with the right of the lender to come in as a creditor on the estate, he should give his support to the Bill. But, at the same time, he must confess that he had not heard from the Vice President of the Board of Trade any reason whatever for the omission of the clauses introduced into the Bill of last year for the purpose of securing registration and publicity. There was no difficulty connected with those clauses—no large machinery was required to carry them out; they were in themselves exceedingly simple, and, he thought, were well calculated to effect the object now in view, which was, as far as possible, to give some security against the sudden withdrawal of capital invested in any commercial undertaking by partners not actively engaged in the management of the business. Without some security of that kind he was afraid that the Bill would open a door to frauds of all sorts. If the Vice President of the Board of Trade would remember how very large a portion of the commercial transactions of the country took place not only upon book credit, but upon bill credit, he would at once see that his measure would facilitate the commission of many frauds, and cause great inconvenience with respect to the passing from one hand to another of bills of exchange. But, although he thought the machinery of the Bill imperfect, he did not object to its principle, and would therefore support the second reading.
§ MR. MALINS
said, that, having concurred in the principle of the Bill, notwithstanding the remarks which had fallen from his hon. Friend the Member for Huntingdon (Mr. T. Baring), he then only desired to say a few words with respect to a few modifications which he thought it required. Amongst the provisions which it was proposed to make with respect to dormant partners, in the expediency of which he concurred, were that contracts should be made in writing, so that there should be no mistake as to the parties, and that the capital should not be drawn out upon the eve of bankruptcy. But adhering, as he did, to the principle of the Bill, he thought that the changes to which he referred should be made in Committee.
§ MR. CARDWELL
said, he was glad they were going to give a unanimous vote 485 in favour of the second reading of the Bill. He quite agreed with the observation of the hon. Member (Mr. Glynn), that since the repeal of the usury laws, the law of partnership required to come under the consideration of Parliament. One of the most able writers on the subject of partnership declared that the present law was maintained upon two grounds, but that both had been either destroyed or weakened by the abolition of the usury laws. In the first place, men were now able to obtain an extravagant interest without subjecting themselves to the penalties of the usury laws. In the next, there was nothing to prevent the withdrawal of a portion of the funds on which the creditors ought to rely. Therefore, it was necessary to make some alteration in the law of partnership. He thought that the appeal which had been made for the postponement of the second reading of the Bill was one to which his right hon. Friend could not accede. Having himself on a former occasion ventured to complain at being called upon to legislate in haste on this subject, he gave great credit to his right hon. Friend for having introduced these measures at so early a period of the Session as to admit of a full consideration of their details in Committee. It was important that those details should be well discussed; and the question which would mainly arise in the Committee would be this:—whether a contract between a dormant partner and other partners, that he should receive a rate of interest proportionate to the profits arising from the trade was solely a question between him and his partners; because, if so, registration and publicity would be unnecessary; but if on the other hand it were a matter in which the community and the public were concerned, then registration and publicity might fairly be called for, and clauses should be inserted in the Bill to provide for them. As that was a question, however, which would properly be discussed in Committee, he should not say more upon it at this time. It would not have been right for him to remain silent, because, after what had been said by the hon. Member for Belfast (Mr. Cairns) he might have obtained a credit in this matter from those who supported the Bills which he did not deserve. The history of the affair was this: in the Sessions of 1850 and 1851 a Committee of the House was successively appointed for the consideration of this subject, which was presided over by Mr. 486 Slaney. That Committee recommended that power should be given to lend money for periods of not less than twelve months at a rate of interest varying with the profits, the claim for the repayment of such loans being postponed till after the payment of all other creditors. In obedience to the recommendation of that Committee, a Commission was appointed, the members of which were equally divided upon the question of whether in a private partnership a person who advanced money should be deemed to be a creditor or a partner. The measure which he (Mr. Cardwell) had prepared, and of which he had given notice to the House, would have contained provisions entirely in conformity with the recommendation of the Committee; and the effect of that mode of legislation would have been that a person so advancing money would be a creditor, and not a partner; but, inasmuch as he was a creditor having the special advantage of receiving a rate of interest proportionate with the profits of the business, he would, in return for that advantage, be the last person to be paid in case of insolvency. He thought that this recommendation had been somewhat lost sight of in the present measure, but he joined most cordially in supporting the second reading of the Bill.
§ MR. PELLATT
said, he entirely concurred in the objects of the Bill. He believed that the effects of the present state of the law of partnership were most prejudicial by impeding the free circulation of capital, and preventing those who might he so inclined from advancing money to persons to carry on or increase their business. He was sorry that there was no provision compelling gas and water companies to furnish gas and water of a certain standard quality, at fixed rates. He merely threw this out as a suggestion, but in other respects he gave the Bill his cordial support.
§ MR. MITCHELL
said, he could not admit that the Bill was rendered necessary on account of the repeal of the usury laws, the operations of the two measures being entirely distinct. Every merchant in business knew that men wishing to carry on a legitimate trade did not borrow money for a permanence at a high rate of interest. Supposing that he lent £5,000 at 8 or 10 per cent, it was his obvious interest that the person who borrowed the money should be as prudent as possible, because the lender, not being a partner, had no interest in the profits; and if the trader lost 487 his own money, he would lose that also of the person who advanced him money; but if, on the other hand, he lent £5,000, and was to receive a portion of the profits, it would be to his direct interest to encourage everything like reasonable speculation, in order that he might take his chance of gaining perhaps £20,000 or £30,000 at the risk of losing £5,000. He did not see, therefore, how the repeal of the usury laws necessarily called for this measure.
§ MR. SERJEANT SHEE
said, he thought that they were much indebted to the right hon. Gentleman for bringing this measure forward at so early a period of the Session. The law of partnership undoubtedly required a change, inasmuch as in its present condition it was most unsatisfactory, not only to commercial men, but also to those who were engaged in the administration of the law. The evil of the present system was, that any person advancing his money to a trading partnership, with a stipulation that he should receive an uncertain share of the profits—no matter how small that share might be, provided it fluctuate with the profits—might be liable to the whole debts of the firm. But in their attempt to remedy an admitted evil, they should be careful not to fall into a greater one. He could not help thinking that the present Bill as it stood might probably lead to greater evils than even those it proposed to remedy. He would ask the right hon. Gentleman what was the exact meaning of those words in the 1st clause of the Bill—"the person carrying on such trade and undertaking." If they were intended to mean the principal of the firm, one or more, might not an evil of another character arise? Might not the person lending the money be the owner of all the shares in a firm except one, or half a one, held by the person or persons actually carrying on the trade? Let them suppose, for example, a Mr. Charles Jones, carrying on a trade or business, to contract with an elderly lady in the north of England —that if she advance £20,000, she shall have nineteen shares of the profits out of the twenty shares. Now, although Charles Jones would have only one share in the business, the money advanced by the old lady would give him an appearance of wealth and credit. But by the Bill as it stood, the person advancing all this money would be allowed to come in as a creditor, and not be subject to any of the liabilities as a partner. Such a state of things might lead to great injustice and inconvenience to 488 all those persons who dealt with Jones and Co. The lady might say, "Now you can go on upon the credit of the capital which I advanced, and I shall now withdraw it." Such an evil as he had supposed might easily arise under the Bill, as it stood at present. These inconveniences, however, might be obviated by the introduction of certain amendments which could not injure the character of the Bill. It might, however, be said that similar evils existed at present. No doubt they did, but the facts of the case would be very soon known. When a firm was borrowing money at large interest the circumstances soon became known, to the injury of the credit of such firm. On the other hand, if a man were asked to lend money at a reasonable rate of interest, he would insist on receiving the best security, so that the evils referred to were thereby checked. It was a common thing for commercial men to say that these Lawyers knew nothing about mercantile affairs, but he begged to state that lawyers knew quite as much about commercial affairs as mercantile men themselves did, and he, as a lawyer, ventured to warn the House to beware that the remedy applied to cure what he admitted was an existing evil was not in itself productive of still greater inconvenience. It would, however, be better to discuss those details when the Bill was in Committee.
§ MR. J. G. PHILLIMORE
said, he thought that the evil which the hon. and learned Gentleman complained of existed at that moment, and nothing could prevent it, and he also doubted the possibility of giving commercial sagacity by legislative interference. The case of the old lady referred to by his hon. and learned Friend might happen under the present system, and he thought that the right hon. Gentleman the Vice President of the Board of Trade would do well to allow the Bill to remain as it was. As to the observation of the hon. Member for Huntingdon (Mr. Baring), that this was a country of activity and enterprise, it must be remembered that such enterprise and activity were the work of the merchants, while the evils which had arisen were owing to the lawyers. It was, therefore, just that the law should remove the evils which itself had created.
§ MR. LAING
said, he begged to express his gratification at the present attempt to repeal the present law, which was an impertinent interference with the natural rights of individuals. The sound principle 489 to adopt was, to allow any one who chose to advance a given sum to any parties upon the condition of participating in the profits, provided he made the facts known to the public, so that any persons dealing with the firm could make themselves acquainted with them. He could hardly imagine a more monstrous state of things than that a person should be at liberty to advance money to a man of straw, or a trader of small capital, to take large profits while there were any, and when reverses occurred to step in as a creditor for the whole amount of his advances. He thought the principle of publicity was a proper one. As to the objection which had been raised that such could be done in the present state of the law, he regarded it as an argument for carrying legislation still further. He believed it would be a great advantage to the community at large if the right hon. Gentleman, who had shown in this Bill a capacity to grasp the whole subject of commercial legislation, would devote his attention still further to the subject, and see whether the laws which guarded commerce against fraud were sufficiently stringent. It had been seen that, sometimes through mistaken humanity, sometimes through legal defects and technicalities, the punishments inflicted under the existing law for commercial frauds were far from adequate to the offences committed. This state of the law held out a positive temptation to fraud. The wealthy railway director who published a fraudulent prospectus, and the small trader who defrauded his creditors, and then passed through the Insolvent Debtors' Court, might alike calculate to a great extent upon complete impunity. If the right hon. Gentleman would take a general review of the commercial laws, and, without interfering with the transactions between individuals, could devise an efficient remedy in cases of commercial fraud, he would confer a very great benefit to all classes. He (Mr. Laing) should cheerfully vote for the principle of the Bill, with the reservation that he held himself at liberty in Committee to support such clauses as should be necessary to carry out his views.
§ MR. MONTAGU CHAMBERS
said, he was prepared to give his cordial assent to the principle of the Bill, as he regarded it as a step in the right direction towards promoting the trading prosperity of the country. He thought that the abolition of the usury laws had led to great inconvenience 490 and evil with regard to the advances of capital. He had observed it happen frequently that persons who had their own interests principally in view would advance their small capital at a high rate of interest to an industrious man. The latter struggled to pay, and succeeded in doing so at the end of the first year of his business. Then, finding himself going back in the world, he was ultimately pressed down by his supposed benefactor withdrawing his capital, and his prospects were destroyed. The hon. and learned Gentleman the Member for the county of Kilkenny (Mr. Serjeant Shee) had expressed his surprise at the enormous rate of interest charged on advances made to traders; but it was well known that very high rates of interest were charged for what were called secret loans. These loans were contracted in order to prevent the publicity of getting hills discounted at more than the ordinary rate of interest. Secret loans, therefore, became general, and led to the evils denounced by those who opposed the principle of the present Bill. He believed that the Bill now under discussion would effect a large amount of good, and that industrious and ingenious persons would be able to advance themselves in the world through its agency. The great security the public have in respect to the advance of capital in business or speculation was, that the lender was naturally watchful and vigilant as to the proceedings of the concern or business, and was desirous that the concern in which he had invested his money should be prosperous and successful. There was, he must confess, great difficulty in introducing words to prevent abuses occurring. When the Bill went into Committee he was sure some valuable suggestions would be made by which the Bill would be rendered a most useful and important measure. He hoped that all the lawyers and mercantile men in the House would lend their assistance to render the measure perfect for its objects, as he considered it to be a step in the right direction towards the trade and commercial prosperity of the country.
§ MR. LOWE
said, he begged to return his thanks to the House for the very kind manner in which it had received the Bill, and would show his gratitude by not troubling them with any lengthened remarks on the present occasion. With respect to the principle he would say nothing; but there had been a tolerably general expression of opinion that the Bill required to be 491 accompanied with many safeguards. It had been pointed out, and with great truth that that which was proposed by the Bill, was the law of partnership as it now existed, but deprived of one of its harshest and most vexatious incidents—an incident so harsh and vexatious that even Lord Eldon, who was not apt to be moved by legal grievances, expressed his regret that's the law should have been so decided. The feeling of the House seemed to be, that the proposed change of the partnership laws would give rise to some amount of fraud, and must be met by some safeguards; but he was sure that all that had been mentioned about putting forward men of straw, lending capital, withdrawing capital, and winding men up, was pursued on a large scale under the present laws. Since the usury laws had been repealed, and to very little less extent before the repeal of those laws, a plan of plundering persons through the medium of partnerships had been carried on. It was within his own knowledge that persons who stood very high had made a practice of this. He could mention the names of persons who did this long before the present state of the law existed, and he did not see that any law could prevent the evil. The attempt to prevent fraud must check freedom of action in partnership concerns, and the Bill now before the House did not aim at this. He begged hon. Members to consider that any safeguard they could devise would not merely prove nugatory, but would have the effect of aggravating the very evils they were intended to remedy. He should be delighted to hear any proposition by the hon. and learned Member for Kilkenny (Mr. Serjeant Shee) to prevent fraud. He (Mr. Lowe) would not say that it was impossible for human ingenuity to devise such a remedy, but he would say this, that if the hon. and learned Gentleman did succeed in framing a provision that would prevent fraud, he would be the first legislator of the human race that had ever done such a thing. It was said "let us register," but if they should establish a system of registry what were they to register? The names of the partners? If they did they would not follow the example of France. They did not do this in France; and the reason was, that the name of a partner who had advanced a limited sum might be used as a puff; besides, it would induce the giving of bribes to persons to allow their names to appear as partners although no money was 492 advanced by them. Well, then, would they register the amount of money advanced by each partner, and say he was not to withdraw it? Where would the registry be? A registry office would prove to be a dead letter; and if they required the registry to be kept in the place where the partnership business was carried on, there would be the same sort of indelicacy as in asking a banker to allow one to see if one's securities were safe. Then, if the register was to be any protection, they must ascertain that it was not a name merely, but a reality. Cases without end would arise of advances registered which were never advanced, and there would be a great outcry for further intervention to ascertain that the money was bonâ fide paid up. Then, to make sure the money was still in the business, a periodical inspection must follow to see that it was not withdrawn or applied to some other purpose. It would be found to come to this— that if they once began any legislative interference they must go on step by step in the vain endeavour to render it efficient, until they had made these partnerships into little joint-stock companies, subject to all the rules and vexations of the Act of 1844, which they were about to repeal. They would frame troublesome machinery, and still fraud would after all prevail, and probably the very machinery they had devised for the prevention of fraud would be made use of to further it. He was most anxious that hon. Members should have an opportunity of considering this important subject; and in order that they might have ample opportunity for so doing he would put off the going into Committee on the Bill till Monday fortnight. In the meantime hon. Gentlemen could elicit public opinion on the subject, and put their Amendments on the paper. But he would beg of them not to satisfy themselves by saying that they had devised a remedy which would cure a particular evil. They should see what the consequences in other respects of their Amendments would be, and leave no loopholes for the introduction of practices equally objectionable as those against which they had provided. His opinion was, that the introduction of the safeguards suggested would lead to a complicated system that would end in nothing at all; and he thought he should not have been dealing fairly by the House if he had not expressed that opinion. The hon. Member for Wick (Mr. Laing) had suggested the introduction of penal provisions 493 for cases of fraud. Now, the dealing with criminal matters was not within his (Mr. Lowe's) official province. At the same time he felt that the subject was well worthy of consideration. According to the existing law, to be guilty of larceny the party must not only have appropriated to his own use the property of another with a felonious intent, but he must have taken it out of that other person's possession. That was the quibble upon which persons who appropriated to themselves money handed to them by another, or trustees who made away with money entrusted to them—perhaps for orphan children—escaped the operation of our criminal law. He believed that a law which should explode that state of things —a law which would make the application by a man to his own use of money handed to him for other purposes, whether by way of trust or otherwise, a felony without reference to the possession—would be one of the greatest boons that could be conferred on society. To do this, as he had previously said, was not his province, hut he had stated that as his opinion; and he hoped the matter would be taken up by some one who would be more competent to deal with it. He should conclude by stating that if the House agreed to the second reading, he should name Monday fortnight for going into Committee.
§ Bill read 2°.