§ THE ATTORNEY GENERAL rose to move for leave to introduce a Bill to make fraudulent breaches of trust criminally punishable. The hon. and learned Gentleman said, that he was well aware that he had undertaken a task of no ordinary difficulty and responsibility; of no ordinary responsibility, because, while the necessity for such a measure had long been felt, all had admitted the difficulty and had shrunk from the duty of framing it, and because he proposed to pass an Act which should affect in a manner entirely novel to our laws one of the most ordinary relations of life. The situations of trustee and cestuique trust were among the most common and the most necessary. He was about to propose that they should be subjected to new rules, and it would therefore demand the most serious consideration whether this could be done with safety, and whether the mode in which he proposed to accomplish it would bear the test of examination. He had, however, the more confidence in proposing this measure, because it had not been brought in on the spur of the moment, but was introduced to meet an acknowledged and long-recognized defect, in which our law stood in contrast with the jurisprudence of every other civilized country. He knew no other code in Europe in which fraudulent breaches of trust were not held to be proper subjects of criminal punishment. In all other countries it had been deemed a proper principle of law to hold the violation of confidence or the betrayal of trust reposed by one man in another, to be one of the greatest aggravations of crime; but he must beg the House to observe in our law there was this remarkable peculiarity, that fraud or theft, when 674 accompanied by breach of trust, was divested of its criminal character. If a man stole £500 he would be punished by the criminal law; but if a man upon his deathbed called in a friend and told him, "I propose to make you executor to my will, and commit to you all my property for the benefit of my widow and children," if the man accepted the trust, proved the will, and then robbed the widow and the orphans of their property, the law said that he was not a criminal, but a debtor. That which to the mind of every man rendered the act most odious and most abominable, according to our law stripped it of its wicked character, and we said to the man, "It is not a crime which you have committed, it is only a debt which you have incurred." But the anomaly and the singularity did not rest there. One would have imagined that, having called this a debt, we should have given great and ready facilities for its enforcement. No such thing. Our ordinary tribunals refused to recognise the act as creating a debt, and such was the absurdity that our courts of law drove the widow and the orphan from the judgment seat, and told them that they had no remedy. It was indeed true that we had not left them entirely without remedy, but it was one which added mockery to the injury which they had sustained. We told them that they must go to the Court of Chancery. That was the only tribunal; and to tell the widow and orphan in humble life, who had been robbed of the small pittance which was their all, that they might go to that court was a wanton aggravation of their original injury. It had been said that this was not a matter which called for the attention of the House of Commons, but surely they could not admire such a system. This was one of our institutions; it was a sample of the amendment which our law required, and it was high time that they should seriously apply themselves to the task of carrying out that amendment. It was indeed a grievous anomaly with which he proposed to deal; but it was necessary to inquire a little further, in order that, before proceeding to improve the law, they might know why it was in a state so calamitous and so revolting to moral feeling. Our law had never been happy in general definitions. It confined itself, as did our Acts of Parliament, to dealing with a vast number of instances. We made particular rules and endeavoured to include in our Statutes every case that 675 might occur; therefore it was that they were so lengthy and so cumbered; but we never attempted to meet an evil by a comprehensive definition, which should accurately define the offence, and leave particular instances to fall within its scope. When we had definitions they were singularly unlucky. Our definitions of theft, even in the various forms which they had assumed, were none of them equal to the occasion. Coke or Blackstone defined it as "feloniously taking and carrying away the goods of another." But what was meant by "feloniously taking and carrying away?" The definition involved the very thing which it professed to define. Another writer defined theft as "an unlawful taking and carrying away the goods of another." This definition would apply only to an unlawful distress, which according to it would be theft. The difficulty which had arisen from these definitions had been, that indictments had been framed according to them. Our indictment for theft ran, that the accused feloniously took and carried away, &c. Now, our common law had constantly refused to recognize the title of the individual who was entitled beneficially to the property. Our common law refused, save in only one or two instances, to recognize the ordinary distinction between trustee and cestuique trust, and accordingly if property were committed to a trustee, our common law, founding itself upon our definition of theft, said, "How can a man take away, how can he carry away from himself? He is already in lawful and complete possession, therefore he is unable to commit a theft." Accordingly, if he gave £10,000 to A to hold upon trust for his wife and children, A was by our common law regarded as being the lawful possessor and absolute proprietor of the money; and, although the money was really and truly the property of another, the law refused to recognize the distinction. It refused to recognize the usufructual act, and although the possessor was nothing in the world more than a legal holder, yet if he pillaged and robbed the individual for whom he held the property in trust, it would not acknowledge the title of the beneficiary, and therefore refused to recognize this transaction as a theft. Observe the difference between the jurisprudence of England and that of Scotland. In Scotland theft might be defined thus—Fraudulenta convertatio rei alienœ invito domino. Our common law, however, said that trust property was not res aliena but 676 res sua, and therefore a fraudulent trustee did not take the property of another, but only that which was legally his own. This ignoring of the equitable title had led to anomalies in our criminal law which were almost too absurd to be mentioned. If a man hired a horse to ride to Richmond, and, having ridden it there, sold it—in fact, stole the horse—and appropriated the money, that, said the law, was no larceny. Again, where it recognized the trust, as in the case of a bailee; if you sent a hamper of wine by a carrier, and he stole the whole hamper, it was no larceny; if he broke it open and took out a single bottle, that was a felony. He had so far explained the nature and origin of the existing law, and any one might imagine that a very simple method of remedying the evil complained of would be to introduce a new definition of the term larceny, making it more extensive, and making it include fraudulent appropriations of trust property. To do so, however, would be so great a departure from the ordinary principle upon which statutes were framed, that he had not felt bold enough to make the experiment, and therefore he had, in the Bill which he was asking the House to allow him to introduce, framed several clauses to meet the different forms of breaches of trust. He would, in the first place, deal with the fraudulent conversion by a trustee of the property committed to his charge, and upon that subject he wished particularly to invite the serious attention of the House to the difficulties with which they had to contend, and which require the most anxious consideration before any law was passed relating to the subject. He had already adverted to one of the great difficulties, namely, the responsibility of introducing a new principle into the most ordinary transactions. Now, it was essential that there should be trustees, and also that the honest, well-meaning trustee should be protected in the discharge of his duty, and the dishonest one discountenanced and punished. Great difficulties existed with regard to the performance of his duty by a trustee, and in introducing a measure to make breaches of trust criminally punishable it was necessary to take great care that a trustee should not be liable to be dragged into a criminal court and made the subject of a public examination without sufficient cause, but merely to gratify a feeling of passion or revenge on the part of the cestuique trust, or perhaps for the purpose of extortion merely. That 677 was a subject for serious consideration, and he had thought it necessary to introduce into the Bill a particular clause to guard against the possibility of that evil. In his opinion, the cestuique trust should be compelled to obtain from some high authority a sanction to proceed against his trustee, and therefore he had framed a clause which enacted that no proceeding or prosecution should be commenced against a trustee without the previous sanction of some one of the Judges of one of the Courts of Westminster Hall, or of one of the Superior Courts in Ireland, or of the Attorney General. That provision was analogous to the provision in the Act for the abolition of arrest for debt, which enacted that a person might be arrested for debt upon an order made by a Judge in Chambers upon affidavits that the debtor was about to leave the country. If a cestuique trust became aware of a criminal breach of trust on the part of his trustee, there would, under the provisions of the present Bill, be no impediment to his taking proceeedings, except that which would arise from the necessity of stating the facts of the case in an affidavit to be produced before a Judge in Chambers or the Attorney General, and obtaining the sanction of one of these functionaries to proceed. Whether that was a proper precaution would be a question for the House to consider at a subsequent period, but he mentioned it then in order to let the House know what they would have to take into their consideration if he obtained leave to introduce the Bill. The next question to which he would beg the attention of the House was as to the nature of the trust, a breach of which should be rendered criminally punishable. Breaches of trust were of various kinds. A breach of trust for the immediate benefit of the trustee was, no doubt, a direct breach of trust; but even in direct breaches of trust there were some grades of distinction to which he would call the attention of the House, and which rendered it difficult to make a definition. If a man fraudulently converted trust property to his benefit, that was undoubtedly a direct breach of trust; but suppose that he converted it for the benefit of a third person, would that fall within the definition? The House would think that if that third person was connected with the trustee, the case would be the same. Again, suppose a trustee embarked the property of his cestuique trust in a speculation, and that speculation having 678 succeeded he restored the money. Well, it might subsequently be discovered that he had done so, the act was attended with all the characteristics of crime, but resulted in no injustice, in such a case ought the trustee to be criminally punished? To take another case, suppose a trustee engaged in trade embarked the money of his cestuique trust in his business. Now, many hon. Gentlemen would be aware that by the rules of Courts of Equity it was competent for the cestuique trust to adopt the act of his trustee. By so doing, he condoned the act, and in a certain degree sanctioned it when done. If the cestuique trust chose to adopt the act of the trustee in the case which he had mentioned, and claim the profits which had been made, in what category was the trustee to be placed? A trustee holding money in trust for several persons also might do an act approved by some of his cestuisqui trustent, but in which the others did not concur, and was he to be held liable to be criminally punished? He mentioned these cases in order to point out to the House that many grades of distinction existed, and that it would require more than ordinary care to decide upon the language which should be used in the Bill. In the Bill which he proposed to bring in, he treated as criminal those acts only which contributed directly to the benefit or use of the person committing them. Trusts they knew were of different kinds. There was the direct trust already explained; but in addition to direct trusts there were also what were called in legal phraseology resulting trusts, which arose, when any property remained after the original direct trusts were satisfied, and concerning which the trustee could not be considered as having entered into any contract. Now, if a trustee, after satisfying the direct trust, found that he had a surplus and applied it to his own benefit, it would be a violation of the resulting trust, and ought to be punished, because criminality attaches immediately where a man appropriates property which he must be well aware is not his own. There were, however, another class of trusts, namely, constructive trusts, which were trusts created by the law itself, and, being so, they might arise without the knowledge of the trustee, and therefore he did not propose to make breaches of that description of trust criminally punishable. Those were the general provisions of the Bill which related to one part of the subject—namely, property held by one person for the benefit 679 of another; but he had thought it right not to stop there. There were other breaches of trust of a more dangerous character, because of more extended influence, committed by persons who did not stand in exactly the relation of a trustee, but which required the introduction of some particular law, in order to meet delinquents who at present might remain untouched. He alluded to those persons who, in the prosecution of those great undertakings which were almost peculiar to this country, had formed companies and had placed themselves in the position of directors or managers of those companies. The next set of clauses which he proposed to introduce into the Bill had been framed to meet the delinquencies, which he regretted to say were so frequent and so gigantic, of persons standing in that situation. In those cases in which such persons fraudulently and openly appropriated sums of money, there could, of course, be no doubt as to their liability to prosecution; but these appropriations were for the most part much too cleverly executed to render it necessary that they should have recourse to a proceeding so clumsy and common as a direct and manifest fraud. Their appropriations of money were, as the House was well aware, effected through the medium of false accounts and fraudulent representations. He had therefore introduced into the Bill a series of clauses under whose operation, if they should pass into a law, the act of keeping false accounts, of making false entries, or disguising the nature of those transactions, by means of untrue representations, should be made criminal. He had also framed two other clauses, which would embrace in their operation that extensive system of fraud which was produced through the medium of false representations, coupled with acts to give a colour to those representations, such as fraudulent statements of the affairs of a company, the payment of dividends out of a fictitious capital, or other wrongful acts which went to the perpetration of great public cheats. Whether the law, as it stood, was or was not sufficient to meet such cases, there could be no harm whatsoever in making the particular mode of robbery to which he referred the subject of a direct criminal enactment. While speaking upon that point, he might perhaps be allowed to advert to an answer which he had a few evenings before given to a question of an hon. Gentleman who had asked him to inform the House whether 680 he would not institute criminal proceedings against certain persons, who were concerned in transactions by which the public mind had of late been much occupied. Now, as he had at the time at which that question had been put to him read none of the evidence in that case, and had kept his mind free from the impressions which might be produced by newspaper reports, he had not been in a position to state to the House that he would certainly institute such prosecution. He had, however, since made himself acquainted with the nature of the case, and having read the documents which had been laid before him by the solicitor to the assignees, he had no hesitation in saying that he would try, without a moment's delay, whether the law as it now stood was not strong enough to meet that case. He trusted, therefore, the House would feel that in giving the answer to which he had just alluded he had been guided by his own conscientious convictions, and that he would not permit himself, as first law officer of the Crown, to be dictated to by a newpaper, nor adopt its suggestions, unless they happened to be such as to command his individual assent. But to proceed to the provisions of the Bill: he had further to state that it proposed to deal not merely with the trustees, directors, and managers of companies, but also with the numerous class of persons who came under the designation of assignees of bankrupts and insolvents, to whose case the same principle would be extended. With reference to bankers and agents the law now stood in the position which he was about to state. The jurisprudence of the country was greatly indebted to the hon. Member for Surrey (Mr. Drummond) for the passing of the Act of the 52nd of Geo. III., the introduction of which measure was occasioned by the frauds which had been committed by a stockbroker named Walsh. That Act, however, so far as agents, brokers, and bankers were concerned, was limited altogether to meet the case in which the instructions to the agent happened to have been given in writing, and such was the feeling at the time of its passing that, notwithstanding the exertions of the hon. Gentleman the Member for Surrey, a clause was introduced into the Bill expressly excluding trustees, mortgagees, and other persons occupying positions of that description from its operation. The Act was repealed by the 7th & 8th of Geo. IV., but which, while it introduced certain 681 Amendments into the wording of the Act, made but little substantial alteration—so far as related to the particular subject of his remarks—in its provisions. He scarcely need, however, inform the House that the Bill which he had framed proposed to extend the law to all cases of property committed to the charge of agents, although they might not have received any instructions in writing. The next subject to which he would allude was one to the consideration of which he would invite the particular attention of the House. He might, first of all, state that he unquestionably recognized that principle of the English law which provided that no man should be put upon his trial and found guilty upon evidence procured from his own confession made in a civil proceeding. That was a principle which should, in his opinion, be preserved, and he had therefore continued the exemption from liability to criminal prosecution on the ground of evidence given before a civil tribunal in a civil case; but he did not propose to include within the scope of that exemption the extraordinary provision continued in the 7 & 8 Geo. IV., which, no doubt, had originally been forced on his hon. Friend (Mr. Drummond). It enacted that a person who had criminally converted property thus entrusted to him, and made a voluntary confession of his guilt in any proceedings instituted against him in a court of bankruptcy or insolvency, should by such confession escape all criminal prosecution and penalties. There were in the Bill other clauses providing that criminal liability should not be permitted to interfere with the civil rights of the party. There was also another clause in the Bill, which provided that in the case in which a civil suit had been instituted against a trustee to recover property which he had fraudulently appropriated, no criminal proceedings should be taken during the progress of that suit without the leave of the Judges before whom it happened to be pending. He proposed that, for fear of criminal proceedings being resorted to for the purpose of influencing the civil suit, and also to prevent civil proceedings being instituted in order to extort a confession. It was a clause, however, which possibly might lead to some difference of opinion. Those were the principal features in the Bill. Of the language in which it was drawn up he was by no means particularly enamoured, but he felt assured he would receive from both sides of the House the 682 most zealous co-operation in the endeavour to remedy its defects. He himself had prepared the Bill, and therefore he should welcome any suggestions which might be made to him with that view, from whatever quarter they might come; and he should, in conclusion, express a hope that the present Session might be signalized by such an instalment of legal reform as would remove a great opprobrium to our jurisprudence, and would lead—particularly in the case of those in humble life, among whom the constant recurrence of the frauds against which the Bill sought to provide produced so much misery—to an improved state of things, while it tended to place our legislation on a more respectable footing than that upon which it now stood. The hon. and learned Gentleman then moved for leave to bring in his Bill.
§ MR. MALINScongratulated the House that this subject had now been brought under their consideration by his hon. and learned Friend the Attorney General in a speech which was worthy of his reputation and the interests involved in it. There was among those whom he had the honour to address scarcely one who had not in all probability, at some period or another of his life, dischared the duties of an executor or a trustee, and to them, of course, it was needless to say that the question with which his hon. and learned Friend proposed to deal was one which was worthy of their most serious attention. He himself had long been of opinion that breaches of trust under aggravated circumstances should be rendered liable to criminal prosecution, and he might add that the present Lord Chief Justice of the Court of Common Pleas had, when Attorney General, introduced a Bill by which it was intended to carry out objects similar to those which his hon. and learned Friend had in view. That hon. and learned Gentleman had felt, however, some difficulty in prosecuting that measure on account of a doubt entertained by some of the most distinguished Judges of the land as to whether it would be expedient to endanger the civil remedy by giving a criminal one? The hon. and learned Gentleman opposite was, he was glad to see, fully alive to that danger. No doubt it was a very poor remedy to afford those who had been injured by a breach of trust, to send them to the Court of Chancery. It was, indeed, a poor consolation to those who had been ruined by the misconduct of a trustee, in appropriating to his own use that which he was bound to 683 protect for the interest of those in whose behalf it was committed to his charge, to send them to the Court of Chancery for redress; not on account of any defect in that court, for in this matter it was perfectly innocent, and there was no part of its jurisdiction more beneficially exercised or more frequently brought into operation, and he regretted to say, also, very frequently brought into operation in working great hardships on trustees. There were few gentlemen in society but had at some time or other committed a breach of trust. And why had they done so? Families, or members of families, applied to the trustees; a pressing necessity had arisen; family arrangements were proposed; and it was urged upon the trustees that if a certain sum of money could be advanced, a certain property purchased or sold, or something done which was not strictly regular, the interest of the family would be greatly promoted. Trustees had frequently and most correctly been described as an unfortunate class of persons. Theirs was, indeed, a thankless office; for whilst they incurred great perils they could not, from the rigid rules of the Court of Chancery, themselves derive any personal benefit. It was of the highest importance, then, that there should be thrown around them guards and precautions to prevent that, which was done from motives of benevolence, being attributed to motives of criminality. He concurred with the Attorney General in thinking that the law ought to be made more stringent in cases where trustees had deviated from their duty from a regard to their own interests, and especially in gross cases where executors and trustees knowingly and abominably sold out, perverted, and appropriated trust property to their own use. At present the only remedy was by a bill in Chancery to make them restore the funds they had appropriated. That would be an effectual mode of proceeding if the delinquents had the money forthcoming; since, for the honour of human nature, it generally happened that the Trustees had acted under some pressure of poverty and necessity, and that deceived by false hopes they had trusted at some future period to be able to replace the money. Seeing the difficulties by which the question was beset, he thought it would require the exercise of the greatest possible care on the part of the House:—all the experience and ability of his hon. and learned Friend, and the assistance of all sides of the House, to make the measure 684 effective for the object he had in view—preventing its going too far, and making those criminals who acted from the best and purest motives. It was with the greatest satisfaction, also, that he found his hon. and learned Friend was prepared to grapple with that other great question of the criminal misappropriation of trust property by the direction of the Trustees and Managers of Joint-stock Banks. Numerous instances of this kind had of late occurred which were perfectly familiar to the public. Need he mention the Tipperary Bank, the Royal British Bank, and an Indian Bank which had lately failed. These were three prominent instances; but not all. Gentlemen who practised in Chancery were daily being made acquainted with others. He himself would tomorrow be professionally engaged in the case of an Australian Banking Company, with respect to which this state of things occurred. The Bank was established in 1844 or 1845, with a capital nominally of £300,000 or £400,000. The Company never raised more than £40,000. The Directors, however, at once proceeded to trade on a large scale; borrowed more than £300,000 on debentures, and misappropriated the whole of the money. Process was instituted in the Court of Chancery, which had wound up the affairs as nearly as possible, and it had done so under the Winding-up Act by calling upon the unfortunate shareholders in the Company to pay up upwards of half a million of money. Such cases frequently occurring with regard to these Joint-stock Banks, produced the painful impression upon his mind that there was in this country—from what cause he knew not, but he deeply deplored the fact£an absence, to a lamentable extent, of commercial integrity. Of course, these were exceptional cases; for, as a rule, the commercial classes of England were composed of men of high respectability and great integrity, but unfortunately the public could not discern those who were from those who were not, and thus a stigma was cast upon our country which lowered us in the scale of nations. He rejoiced to find that his hon. and learned Friend had made up his mind to see if the law, as it stood, was not strong enough to reach such criminal acts as that of declaring dividends of a large amount in order to deceive the public, at the very time that those who declared the dividend knew that the capital was all gone. In conclusion, he rejoiced at the 685 introduction of this most important measure—important, not only as affecting the law, but as making a strong effort, which he trusted every Member in the House would aid in rendering successful, to put the law in such a state as would enable it to uphold, as far as the law could do it, the integrity of commercial transactions, as well as the integrity of all men who took upon themselves the administration of trusts.
§ MR. HADFIELD, whilst welcoming the introduction of the measure, was of opinion that the utmost care and caution were necessary not to offend gentlemen who undertook the management of others' interests in the capacity of trustees. It was already one of the most difficult things to get suitable persons to act. He himself had always refused to be a trustee beyond the circle of his own family. With regard to Joint-stock Banks it was most desirable that they should be looked into closely. He considered them as engaged in a profitless competition; and it was matter of surprise to him how a man of property could ever consent to take a share in anyone of them. The Directors themselves were generally chosen from a class of men who were utterly unfitted for the office.
THE ATTORNEY GENERALreplied, that the measure was to be a general one, applicable to the United Kingdom.
§
Leave given.
Bill to make better provision for the punishment of Frauds committed by Trustees, Bankers, and other persons entrusted with Property, ordered to be brought in by Mr. ATTORNEY GENERAL, Sir GEORGE GREY, and Mr. BAINES.