JOINT-STOCK COMPANIES WINDING-UP ACTS AMENDMENT BILL—ADJOURNED DEBATE (SECOND NIGHT). (Hansard, 20 June 1856)

§ MR. HUME
appealed to his hon. and learned Friend who had charge of the Bill to postpone the further consideration of it till next week, seeing that the decision of the Master of the Rolls in Ireland in the case of the Tipperary Bank was expected to be delivered that day. That decision might form an important element in the discussion of the measure, and he thought that it was undesirable to proceed with it until they were acquainted with the judgment which the Master of the Rolls had pronounced.

MR. DEASY
hoped that the House and the Government would not accede to the suggestion of the hon. Gentleman; but that the Bill would be speedily passed, in order to put an end to the anomalies of the law relating to the Joint-Stock Companies in Ireland. These Companies stood in a very different position to English Companies. The House was perhaps not aware that by an Act of the Irish Parliament, as soon as a Banking Company stopped payment every partner in it was absolutely divested of all his property for the purposes of the payment of the debts of that bank. That might have been a very wise measure for the times in which it was passed, but to the present day it was totally inapplicable. The consequences of this law were that the bankers of Ireland and every Railway Company had been advised that they were not safe in transferring money or shares belonging to persons who were shareholders in the Tipperary Bank. At the same time the official manager made calls for the purpose of winding-up the bank, and thus the two conflicting laws came in collision, and resulted in a dead lock. Under these circumstances, he thought that the House ought at once to proceed to an amendment of the law. He 1767 could not, however, but think that the Bill before them was defective in taking away from creditors rights they had at present had against shareholders, while it gave them no equivalent remedies. He thought, however, that if the Bill were read a second time there would be no difficulty in amending these matters in Committee. It also ought to have added to it a clause making the order for a call, which was made by the Master, equivalent to a judgment at law; it was plainly the intention of the Legislature, in passing the Joint-Stock Act, that this should be so, but through the ignorance of Irish law, which was but too frequent in that House, that intention was not manifest in the existing statutes. Another matter which required remedy was the exorbitant amount of expense which occurred in putting the existing law in force; so great were these expenses, that sometimes the whole available assets of a Company were swept away in law expenses. In the case of the Tipperary Bank at least 500 actions would have have to be brought, the undefended cases costing at least £20 each, while the defended actions would cost £100. It was important, also, he thought, that power should be given to some one representing the creditors to enter in for reasonable and bonâ fide compromises; and he hoped that the House would consent to the second reading of this Bill, which would, he believed, when amended in Committee, get rid of great anomalies at present existing.

§ MR. CAIRNS
thought that the argument of the hon. and learned Gentleman appeared to him to tell rather against than in favour of the Bill. For his own part, he could conceive nothing more fatal to the credit and stability of joint-stock banks than any measure in the slightest degree analogous to the present. In legislating upon the principle of limited liability, banking companies had been expressly excluded from the operation of the Act, and the reason of that was, that the great source of credit of a joint-stock bank was the fact that every creditor knew that he had the power by legal proceedings of coming upon the property of every shareholder. He implored the House, as a matter of principle, to pause before they altered the rights of creditors and the liability of shareholders in a concern which had become the subject of litigation, and with regard to which the rights of the parties were already defined.

§ MR. J. G. PHILLIMORE
joined with the hon. and learned Gentleman in asking the House not to pass this ex post facto measure. The present law might be a bad one, but it was the law under which the parties concerned in this bank had mutually contracted. He trusted that the House would not violate a great principle by passing a retrospective measure to meet a temporary inconvenience.

§ MR. GEORGE
also protested against the retrospective action of the Bill. The concern to which it was intended particularly to refer had extracted £400,000 in the shape of deposits from hundreds of poor people; and they, before the shareholders, ought to be the objects of the sympathy of the House.

THE SOLICITOR GENERAL
said, this Bill was undoubtedly designed in order to remedy some clearly admitted defects in the present law. If there was a partnership or company consisting of a large body of people, common sense dictated that their affairs could not be carried on unless you permitted the majority to bind the minority. Supposing they became bankrupt, the same principle came into operation under the Bankrupt Act, but if they were brought under the operation of the Winding-up Acts, that principle was at present most imperfectly developed. Things that were most expedient for preserving the property of these unfortunate companies, and preventing litigation, were unable to be done, because at present there was no effectual mode by which the majority could bind the minority; and the consequence was, as he had unhappily to observe in his extended experience, that a very small minority succeeded in continuing most ruinous litigation to the great profit of solicitors, and other persons concerned, and to the great detriment of the interests of the creditors. It was most right, therefore, that the principle applicable to the conduct of a company when thriving should be applied when its affairs had to be wound up, and that was the principle which this Bill involved. He quite concurred, however, in the opinion that it would be necessary to introduce some limitations into the Act. For instance, he did not concur in the provision giving to two-thirds of the creditors present at a meeting, power, without reference to the general body of the creditors; but that was not an objection to the principle of the Bill, but a limitation which might be introduced in Committee. 1769 The Bill introduced a very wholesome and useful improvement, enabling a representative of the creditors to attend the proceedings before the Master to defend their rights, which was not the case now, because the official manager could only be regarded as charged with certain statutory duties relative to the accounts. He was at a loss to understand how the Bill could be said to be ex post facto, as it was really no more so than every Bill for improving the procedure or process of any court of law or equity. He trusted the House would consider in Committee whether the principle was carried out in the provisions of the Bill, or whether those provisions were susceptible of improvement. The third and fourth sections were open to objection, as leading to litigation and dispute. He should like to see them omitted, and he understood the hon. and learned Gentleman did not consider it important that they should be retained.

§ MR. SPOONER
said, he had at first thought the Bill objectionable, and that it would bear injuriously on the interests of creditors of joint-stock banks, having been brought forward for a special purpose. However, having since given it fuller consideration, he had come to a different conclusion. He was fully of opinion that the creditors were the first objects of their sympathy; but he believed that this Bill, with the alterations, which his hon. and learned Friend proposed to introduce, would be found to be really a creditors' Bill, as removing an obstacle which had existed between them and the property of the shareholders. If this Bill did not pass, he feared that the lawyers would reap the advantage, and that to send it to the Committee would be the best thing they could do for the unfortunate shareholders.

§ MR. MALINS,
in reply, denied that this Bill was any more ex post facto than the Winding-up Acts of 1848–1849. He denied that the Bill took away any rights from the creditors. There were 3,000 creditors of the Tipperary Bank, and there were 200 shareholders, against whom they were to recover. What rights, therefore, would they be deprived of? The Bill gave the shareholders the power to meet together, and appoint an authorised agent to represent them, for want of which at present the enforcement of their rights was greatly retarded. The solicitor to the New-castle-on-Tyne Bank proprietors, who were 1770 the largest creditors of the Tipperary Bank, had drawn up the strongest reasons in favour of this Bill. He maintained that it was a creditors' Bill, and did not deserve the reproaches that had been cast upon it.