HC Deb 16 April 1858 vol 149 cc1194-220

Order for going into Committee of Supply read.


said, he rose to call the attention of the House to the circumstances connected with the failure of the Western. Bank of Scotland. He felt considerable diffidence in bringing before the House a question of such great importance to the commercial interests of the country, and he regretted that some hon. Member of commercial experience had not thought it his duty to bring forward this question, the more especially as no Scotch Member had taken it up. Indeed, he could only account for this apparent indifference to a subject so nearly affecting the interests of Scotland by attributing it to that strong feeling of nationality and implicit faith in the principles, upon which their banks were conducted, which characterised the representatives of that portion of the Kingdom. He earnestly trusted, however, that as there was a chance of the subject being now ventilated, those hon. Gentlemen would not abstain from taking a part in the discussion. The Western Bank of Scotland was established twenty-five years ago with a capital of £1,500,000. Soon, however, it had obtained deposits to the amount of £5,000,000. It had, moreover, the privilege of issuing bank notes to the amount of £337,000. By these means the company had at its command a sum amounting to £7,000,000. This sum was amply sufficient, but, notwithstanding these favourable auspices, it became obvious almost from the commencement of its proceedings, that its management was so badly conducted as to render ultimate success highly improbable, and this remark applied in an especial manner to the conduct of its affairs in the last ten years of its existence. He had received a document from one of the unfortunate victims of this bank—a gentleman of the highest respectability and social position in Scotland—setting forth the charges against the directors. The first charge was that, although the contract provided that as soon as one-fourth of the capital was lost, a meeting of the shareholders should be called, in order that the concern might be wound up, the bank was carried on for many years in defiance of this provision. The second charge was, that for many years bad and doubtful debts had been carried to credit as good assets, and balances struck on this footing; divi- dends had also been declared which had to be paid out of the capital. It was one of the gravest charges that could be made. The directors held out to the public that the bank was in a state of prosperity when they well knew it was insolvent, and to heighten the deception they declared a dividend of 9½ per cent., the consequence of which was that hundreds of people with small savings were tempted to invest, many of whom, since the bankruptcy, had become inmates of madhouses, and many more had been reduced to utter destitution. One gentleman had written to him stating that he had been induced by the directors' report to buy stock within a month of the collapse at a premium of 15 per cent., and had thereby been swindled out of £2,000, for he was told that he had no remedy. The third charge was, that the directors had sent £800,000 to the United States to be used in discounting bills, contrary to the terms of their contract, which limited their operations to banking in Scotland. The whole of that sum was lost to the bank. The fourth charge was, that they had rediscounted bills in London to a largo amount for the purpose of carrying on advances to firms in Glasgow, who were in many instances persons of little or no capital. He would trouble the House with but two instances. There was a creditor of the bank of the name of Monteith, who was engaged as a commission agent to a merchant named Smith. Smith informed Monteith that he was about to become a bankrupt. Monteith went to the manager of the bank, and detailed the case. The manager said that must not ho, as it would be a degradation to Smith's family, and the death of Smith's uncle, another Mr. Smith, and rather than Smith senior should die he would advance £6,000, although at that time the bankrupt Smith had overdrawn his account to the extent of £14,000. Monteith finding how easy it was to get advances from the bank, soon got advances on his own account on discount to the extent of £124,000. All this time the manager of the bank knew that Monteith was never worth £1,500. But there was a worse case. There was a man named Macdonald who never having had a commercial position, became bankrupt for £383,000 raised upon acceptances. There were seventy-five names to their bills, of which number only fifty-five had ever had business transactions with the Macdonalds, who got the names through agents in London, Liverpool, and Glasgow, and they were composed of tailors, milliners, and persons of that class. And yet this bank, in whose directors there was placed implicit reliance, advanced £200,000 to this firm on the security of the names of these persons, most of whom became bankrupt when the bank failed. With such facts before them they were surely bound to make some inquiry into the subject. It had been said that Mr. Taylor, who had been appointed the manager of the bank, contrary to the advice of the directors, had exercised absolute control over the business of the establishment, and that he was the author of all the calamities which had ensued in that case: but that statement would not justify the conduct of the directors, who should never have left to any manager such unchecked power. The directors were accountable for the acts of their subordinate, and he (Mr. Brady) hoped that they would be brought to the bar of justice to account for their misdeeds. The Lord Advocate had stated, in reply to a question he had put to him on a former evening, that no evidence had been brought before him which would justify him in taking criminal proceedings against those men. Now he (Mr. Brady) had seen it stated in the public press that either at the time the learned Lord had given that answer, or a short time previously, he had himself been the legal adviser of the directors of the bank, He (Mr. Brady) hoped that statement was not well founded; because, although he did not mean to charge the learned Lord with having been influenced in the slightest degree in the course he had taken by the position he had occupied outside these walls, it appeared to him that he ought not, if he had really filled the office of adviser to the directors, to have made the statement which had fallen from him in the House. At all events, he trusted they should hear the learned Lord declare that evening that he was prepared to institute a most searching inquiry into the proceedings of the bank, with a view to bring to the bar of justice any person whose criminal conduct might have led to that deplorable catastrophe. He (Mr. Brady) had discharged his duty by making the statement he had just put forward, and he would then leave the House to deal with the subject as they might think fit.


said, he could assure the House that, although rising immediately after the hon. Member for Leitrim, he had no intention of answering the speech of that hon. Member. He (the Lord Advocate) was not there for the purpose of defending the principles upon which the Western Bank of Scotland had been established, or the conduct of the directors of that institution. Neither was he there to offer any opinion as to the personal culpability of the directors; but he was glad to take the opportunity of removing an erroneous impression that prevailed in certain quarters out of doors, and which seemed to have taken possession of the mind of the hon. Member. With regard to himself personally, the insinuation of the hon. Member for Leitrim seemed hardly to require even a passing observation; but he might mention that both while the bank was carrying on its business and at the time the bank stopped payment and was winding up, he was in his professional capacity frequently consulted by the directors, the shareholders, the liquidators, the depositors, the creditors of that institution. In fact, all parties, who might in any way be supposed to need legal advice with respect to its affairs, had consulted him in turn, and he had endeavoured to do fairly what he believed to be his duty by them all. It might be supposed therefore that he had no prepossession in favour of one class over another. The matter, however, to which he wished then to refer concerned his office as public prosecutor in Scotland. The hon. Member for Leitrim had on a previous occasion asked him (the Lord Advocate) whether criminal proceedings would be instituted, and his answer in substance was, that he had not before him any information that would justify a prosecution. He begged now to repeat that statement, for such was his position down to the present moment. He would, however, add, that it did appear strange to him that the par-ties who had given the hon. Member the information which justified him in using such strong language as that in which he had indulged, should not have thought fit also to lay their information before the public authorities in Scotland. It seemed that a very great misapprehension existed in the minds of the hon. Gentleman and of many persons out of doors, as to the nature of the office which he had the honour to hold. A public prosecutor was not a minister of police. It was no part of the business of a public prosecutor to hunt out crime. On the contrary, he had always understood that the true, theory of the Lord Advocate's functions was, that he should prosecute only on the complaint of an injured party. This rule was liable to certain very important exceptions it was true. Still, as a general rule, a prosecution should not be set on foot except on the complaint of the injured party; and he must take leave to say that the rule was peculiarly applicable to the case of commercial frauds. In the first place, because it was almost impossible that the public officer should be able to possess himself of the materials even for making a preliminary inquiry without the aid of injured parties; and in the second place, because in the ordinary case it might fairly be presumed that if the supposed injured parties remained silent, there could be no very good grounds for undertaking a public prosecution. The rule was firmly established by the practice of the law of Scotland, and was at once expedient and salutary; but he did not go so far as to say that it was a rule which even in the cases of commercial frauds never could have an exception. On the contrary, had he been placed in the same situation with reference to the Western Bank of Scotland as had his hon. and learned Friend, the late Attorney General with reference to the Royal British Bank in England, he should have adopted a precisely similar course. But it was just because his position was entirely different, that he had been compelled to remain quiescent, and give to the hon. Gentleman that answer of which so much complaint had been made. Let the House recal for a single moment in what way the prosecution against the Royal British Bank came to be instituted. The whole of the frauds charged were disclosed in the course of examinations in the Bankruptcy Court, and, being thus made public and notorious, necessarily came in that way to the knowledge of the Attorney General, who had then no alternative in the administration of the duties of his office but to institute proceedings. On the other hand, what was the case with regard to the Western Bank? There had been but one proceeding in the Bankruptcy Court, and that was in the case of Mr. Taylor's sequestration. On that occasion, all that transpired was, that Taylor seemed disposed to assume to himself the entire responsibility of the conduct of the bank's affairs, and completely to exonerate the directors. It is true, the matter did not stop there; there had been various meetings of the shareholders since; but it must be recollected that throughout the whole of those proceedings, and up to the present time the published accounts given, were all a person in his (the Lord Adve- cate's) position could know anything about. The tone adopted at those meetings was, to charge the directors with great culpability and neglect of duty in not controlling their manager, but certainly to charge them with nothing which could be made the foundation of a criminal prosecution. He was anxious that this should be understood by the House, and that the hon. Member for Leitrim should not think he made the statement without foundation, and, therefore, begged further to state that, so early as December last—very soon after the occurrence of the calamity, there was a meeting of the shareholders of the bank in Glasgow, when a Committee was appointed to investigate the whole ease. That Committee did make an investigation and reported to a subsequent meeting—he did not mean to say this was a very complete investigation, for the inquiry occupied but a fortnight, and was merely preliminary—but still it was rather important to see how this Committee of shareholders, very indignant, and smarting under recent suffering, did express themselves as to the culpability of the directors. They said— The Committee are of opinion that, during the whole of Mr. Taylor's career, as well as during a portion of Mr. Smith's services, the Directors of the Bank have been much to blame in neglecting to perform the ordinary duties incumbent upon them on the acceptance of such a trust. They appear, without sufficient inquiry or examination, to have trusted to the statement of the managers with a simplicity which appears to the Committee almost incredible. While we acquit these gentlemen of any moral blame in their management as directors, and consider that their errors have been those of judgment, and not of intention, we are clearly of opinion that they have failed to perform those ordinary duties in the management of the company which it is well known they all practise with so much fidelity and success in the prosecution of their own private affairs, and their neglect of these duties has been, in part, the means of bringing both pecuniary and mental distress on hundreds of their fellow-countrymen. Now, that being the opinion of the shareholders in the month of December, he put it to the House whether there was as yet any encouragement for the institution of proceedings by a public prosecutor. It was true that time had run on since then, and the shareholders might now entertain different views; but, as before stated, down to the present moment, not one single shareholder or person interested, had ever made a complaint to the authorities. But they had done what was much more becoming their position, and what he apprehended any sensible person would advise. They had organized themselves into an association, for the purpose of conducting a complete and searching investigation into the whole history and proceedings of this bank. That association was now in action, and he had that day received a letter from the chairman—purely voluntary on his part, and not in reply to any communication from him (the Lord Advocate)—of which he should take the liberty to read an extract to the House. The chairman said— As chairman of the shareholders associated for investigation, I am now enabled to state that our arrangements are completed. Funds have been subscribed and preliminary points have been settled. An accountant has been chosen, who will commence his investigation on the 19th. None of us anticipate such disclosures as would call for criminal procedure against the Directors, whatever their pecuniary liabilities may be. If anything of the sort occurs you will be informed. Now, it was to be supposed that these gentlemen understood their own position much better than their representatives in that House, and could, if they chose, probe the matter to the bottom, and ascertain whether, in point of fact, there was any foundation for a criminal prosecution. He now left the matter in the hands of the House, having stated what the actual position of the case was, and he submitted that he should have been totally unjustified if with the information before him he had occupied the valuable time of public servants and expended a large sum of public money in conducting this investigation for the shareholders of the Western Bank of Scotland.


said, that he thought the House and the public was much indebted to the hon. Member who had brought this subject forward, and that it was quite impossible to allow it to pass in the way in which the learned Lord opposite had loft it. If Scotland were so unfortunately placed that no legal investigation into a subject of this nature could take place against persons who, at any rate, were under the appearance of having committed a great fraud, it became the duty of Members of the House to represent strongly to the Government that some change must be made in the state of the law. What was the actual state in the present case? He was not going into all the particulars which had been already detailed; but he took it this large establishment owed its origin to certain great speculating capitalists in Scotland, who gathered together from all parts of the country deposits for their own purposes. Having, then, also gathered to- gether the capital of the shareholders who had followed them in subscribing money to the undertaking, these gentlemen had never come to the office, had never inquired into the proceedings, but left the management to some person who was wholly unworthy of the confidence reposed in him. In the case of the Glasgow bank, he need only mention two circumstances to the House, which would at once show the necessity of further proceedings; whether in the shape of a prosecution against the directors, or taking some legislative measures for preventing such calamities in future, he would not say. These were the two circumstances. This bank had the largest circulation of bank notes in Scotland. They had tempted poor people all over the country with the offer of a greater rate of interest than was given by the savings banks; many had given way to the temptation, and deposited all their little savings with them, for there were no less than 10,000 depositors in the bank, with sums under £50. There was something very curious in the history of these transactions. It appeared that the shareholders, so late as in May last, were assured that, upon due examination of the accounts, the bank could divine 9 per cent profits after payment of capital in full. An individual case had come under his own notice of a poor lady who had been induced by these representations to invest her property in shares of the bank, and had thereby lost her little all, and had been reduced to absolute ruin. He said to her, "If you invest your money in a bank, you must expect to run some risk." She remarked, that when 9 per cent was offered by gentlemen in the position of these directors, some of the wealthiest capitalists in Scotland, who were well capable of managing their own affairs, how was she to distrust them? He thought the Lord Advocate was bound to ask whether that statement made in May last was honestly made by the directors, and that there must be some available means of ascertaining the fact. But, so far from taking any step of that kind, or even joining with the public in their expressions of indignation at such conduct, the Lord Advocate had actually appeared in the House that night as the humble apologist of these men. He had produced letters from Glasgow, in which it was stated that they were free from all real blame. Good God! no real blame attaching to men who having been appointed guardians of the savings of 10,000 poor persons, had entrusted the whole of their affairs to some worthless agent, without seeing into them themselves for a single day. Was the learned Lord aware that several of these unfortunate depositors had been driven by the misconduct of those directors into lunatic asylums? that some were banished the country? that others were famished and reduced to the lowest destitution? They were left to believe that such persons had no public protection —that no one of the shareholders was personally liable. He was told that the directors had taken care to insert a clause in the deed of settlement that no shareholder should be liable for any loss that might accrue to the funds of the company. If the public were left in this way without protection, he (Mr. Ellice) called upon the right hon. Gentleman opposite (Mr. Disraeli) to look seriously into the question. He knew perfectly well the calamities that had resulted to the public from the failure of this bank. He had heard the whole misfortune unfolded upon investigation. The House ought to see at least, if they could not punish, whether they could not prevent the recurrence of such a calamity. If directors would neglect their duty in the way he had stated, after having induced people to invest in these banks, they should at least be liable to some penalty, personal or pecuniary. With respect to joint-stock hanks in England, some had failed in an equally disgraceful manner as the Glasgow bank. It was, therefore, absolutely necessary that some regulation should be made, either that accounts should be laid before the shareholders, or that auditors should be appointed who might certify that the accounts laid before a public meeting of the shareholders were correct. A report had reached him (Mr. Ellice) which showed, at least, the shamelessness of these offenders at the present moment. He heard that they had made an application to be enabled to sell their privilege of raising money. Perhaps in one sense, however, they were justified in endeavouring to realise all the assets they could. But at any rate, if there were no means of proceeding criminally or pecuniarily against them, it was the duty of the right hon. Gentleman at the head of the Government to see whether the law could not he altered on this subject.


said, he thought the hon. Member for Leitrim (Mr. Brady) bad pursued a very inconvenient course in bringing this subject forward on going into Committee of Supply. It was impossible that the House could come to any practical conclusion, and the inconvenience had certainly not been lessened by the way in which the hon. Member had introduced the question. Nor had the right hon. Gentleman who spoke last done anything to clear up the confusion which previously existed. He had mixed up two questions which were totally distinct and separate— the question, namely, of the culpability of the directors of the Western Bank of Scotland, and the much larger question of the whole system of banking in Scotland. There could be no doubt that the hostility which some hon. Gentlemen entertained towards the Scotch system of banking had dictated many of the severe comments which they had made upon the proceedings of the Western Bank. The present was thought an excellent opportunity of attacking the Scotch system through the side of the Western directors; but, nevertheless, the two questions ought to be kept separate. As a Scotchman, he was ready at the proper time to defend the system of banking established north of the Tweed; but he could not help thinking that the subject now before the House—the misfortunes of a particular bank—had nothing whatever to do with the issue of notes, or the Scotch system of banking generally. There was one fallacy in the speech of the right hon. Member for Coventry (Mr. Ellice) which he felt bound to notice. The right hon. Gentleman seemed to think that the 10,000 depositors in the Western Bank were going to lose their hard-earned savings by their connection with that institution. That was an entire mistake—so complete a mistake that they would lose little or nothing. Indeed he himself was willing to purchase any claim which the right hon. Gentleman might have against the Western Bank at a very small discount. He believed, indeed, that many parties were ready to give 19s. in the pound for claims against the Western Bank, and there was not, therefore, the smallest ground for saying that the creditors of the bank, whether note-holders or depositors, would lose a single farthing. The hon. member for Leitrim (Mr. Brady) in bringing forward the question had used very harsh language towards the Western directors, but for that language there was no foundation, except the statements of an anonymous correspondent; and he interpreted the remark of the hon. Member, that he regretted this subject had not been brought forward by a Scotchman, as an acknowledgment that he himself was ignorant of the circumstances of the case —an acknowledgment of which no one who had heard his speech could doubt the truth. But he did not stand there as an apologist for the conduct of the directors; he had no shares in the Western Bank himself, nor was he connected in any way with any of the directors; his only connection with the bank was as a depositor, and having a brother and other relatives shareholders. As far, therefore, as his own personal feelings were concerned, he was by no means in favour of those who had caused so much loss; but he knew many of the directors personally, and the whole of them by name and reputation, and he must say that their conduct had been misrepresented both in that House and elsewhere. Again, the right hon. Member for Coventry (Mr. Ellice) had said that the largest capitalists in Scotland had used the Western Bank as a means of collecting money, which they appropriated to their own purposes. After making that statement, the right hon. Gentleman might as well have named the parties to whom he referred, for everybody in Scotland knew that the allusion could only be to Messrs. Baird.


I beg to say that I had no intention of alluding to the Messrs. Baird, or in fact to any particular individual.


said, he was glad to find he was mistaken on that point; but he would suggest to the right hon. Gentleman the propriety of withdrawing his statement altogether. His disclaimer was satisfactory so far as it went, but still the allusion to the "largest capitalists" in Scotland was most unfortunate.


I did not say the "largest" capitalists, but large capitalists in Scotland.


thought it probable that the right hon. Gentleman did not refer to the Western Bank at all. At all events his statement, as now explained, seemed a mere general assertion, which meant anything or nothing as the case may be. With respect to the Messrs. Baird, however, he was glad to have elicited that denial from the right hon. Gentleman, for it ought to be known that they were large shareholders in the bank, and that their loss upon shares alone amounted to about a quarter of a million, exclusive of £120,000 in the shape of deposits. They were liable, indeed, to the extent of the whole of their fortune, and having identified themselves in every possible way with the rest of the shareholders and depositors, the charge of using the money of the bank for their own purposes was totally unfounded as far as they were concerned. So with the other directors. Nobody—not even the most discontented shareholder—had ever insinuated, in the most remote degree, that they had appropriated to their own use the funds of the bank. The whole of them were known to be perfectly free from any imputation of that kind, and they were all holders of shares in the bank, equally unfortunate with the other proprietors. That made the great distinction between their ease and the case of some other notorious banks, such as the Royal British, of which the world had recently heard so much. The hon. Member for Leitrim (Mr. Brady) had used the word "swindling." That term was fairly applicable to the conduct of those directors who had used for their own purposes money intrusted to them by other parties; but in no sense described the conduct of the Western directors, who had derived no personal advantage from the funds of their depositors, but, on the contrary, had themselves been the severest sufferers by the failure of the bank. He could not understand why the Western Bank should be singled out for condemnation while so many banks and large houses which had failed in the late crisis were allowed to escape. The Borough Bank of Liverpool failed for as large a sum as the Western Bank, and yet nobody thought of blaming its management. He suspected that the misfortunes of the Western Bank were to be used as an argument against a system of banking which was disliked by certain influential parties. That was not a fair course of proceeding, and he hoped it would not succeed. He believed that the whole circumstances of the Western Bank would be explained before the Committee now sitting on banking; at all events the directors, although they might not think it necessary to reply to the statements of anonymous writers in newspapers, were anxious that the fullest publicity should be given to all their proceedings, and they were ready to present themselves for examination before a proper tribunal. He did not say they were free from blame—far from it; but he denied that their conduct deserved the epithet of "criminal" which had been applied to it both in that House and elsewhere.


said, he was bound to say that the answer of the hon. and learned Lord did not seem to be at all satisfactory; that the statements made by the hon. Member for Leitrim in introducing this subject to the House had been fully justified by the admissions of the Lord Advocate. He (Mr. FitzGerald) knew nothing of this ease beyond what appeared in the Report produced by the learned Lord; but he thought that nothing in the speech of his hon. Friend went beyond that Report. That Report, as he understood, had emanated from a committee of the shareholders or the creditors—he was not certain which —of the Western Bank appointed to investigate the affairs of the establishment as far back as December last. It appeared, then, that the liabilities of the bank, at the time that it stopped, might be stated in round numbers at £9,000,000, and that the ascertained deficiency in December amounted to £2,200,000. Subject to considerable increase on the occurrence of certain eventualities. The flattering prospect held out to the public at that time was, that the private fortunes of the shareholders were amply sufficient to meet all deficiencies. That he presumed, was what the hon. Member for Stirlingshire (Mr. Blackburn) referred to when he said that nobody would lose by the bank, for surely he did not mean that the shareholders would not be losers to the extent stated. How was this deficiency of £2,200,000 created? He did not find anything in the Report produced by the Lord Advocate which would justify a charge of moral turpitude against the directors; but there was abundant evidence to prove that the directors had grossly neglected their duty to the public and the shareholders, and had not bestowed upon the business of the bank the same care which they would have given to their own private concerns. The directors seem to have intrusted everything to the hands of Mr. Taylor, the manager, thus exhibiting negligence so great that it could with difficulty be distinguished from criminality. He did not charge any party with fraud; that was a question to be determined elsewhere; but he recognised in the Report of the committee of shareholders elements which rendered an inquiry absolutely indispensable. Such an inquiry must somehow or other be made. The Lord Advocate had told them that it was not his duty, as public prosecutor, to institute an investigation of this kind, where no injured party made any complaint to him. That, no doubt, was true as a general rule. The Lord Advocate was public prosecutor in Scotland, and for certain purposes, such as the institution of inquiries and the carrying on of prosecutions, he was armed with a large staff which the Attorney General in England did not possess. But, while assenting to the general rule, he would respectfully suggest to the learned Lord that there were exceptional cases which required a departure from the ordinary routine, and one of these cases was to be found in the affair of the Western Bank. Enormous losses had been sustained, and the public interests, as well as the interests of private individuals, had suffered serious damage, and perhaps great fraud had been committed. What was the course pursued by the late Attorney General in the case of the Royal British Bank? The Attorney General was not a public prosecutor in the same sense as the Lord Advocate in Scotland; he had no solicitor to assist him and no special counsel; but nevertheless the hon. and learned Member for Aylesbury (Sir R. Bethell) no sooner became aware of the nature of the depositions in the Royal British Bank bankruptcy than he put himself in communication with Mr. Linklater, the able agent of the injured shareholders, and requested that gentleman to furnish him with copies of all the depositions. The result was, that the case was investigated, and the Attorney General having informed the House that he had received sufficient information to warrant the institution of a prosecution, Mr. Linklater was employed with an able staff of counsel to conduct it. They all knew the result. The trial was had. The Lord Chief Justice gave an admirable exposition of the law. Those who were guilty were convicted, and punished according to the degree of their guilt. But what happened in the present case? He found that there was a sequestration against Mr. Taylor, that person whom the directors trusted to such an extent that they received his statements and accounts without any question. He recollected seeing, in December last, that there were sequestrations against other parties—against the firms, for instance, of Monteith and Co., and Macdonald and Co. Now, the firm of Monteith and Co. was one of those establishments which failed at the same time, or rather whose failure brought down the Western Bank; for at the time of the failure they owed the hank nearly £500,000 on paper in the hands of the bank. The firm of Macdonald and Co. owed nearly as much, and with respect to them it appeared that the accommodation paper on which Taylor had advanced the property of the shareholders was actually drawn on accommodation acceptances of seventy-five persons in London, many of whom were paid a commission for signing them. Had any investigation taken place into those cases. Now, the directors, who had undertaken a certain trust, yet, "with a simplicity not to be believed," as the Report stated, left the whole affairs in the hands of Taylor until he had disposed of £2,500,000. It had also been publicly staled, without contradiction at a meeting in Scotland, that the directors at the last annual meeting had allowed and supported a dividend of 9 per cent, paid not out of profits, but out of capital. All these circumstances appeared to constitute a case of such magnitude and gravity, that not only the individual creditors and shareholders of the bank, but the public at large had an interest in its investigation, and it should be probed to the bottom. He had the highest respect for the learned Lord as a distinguished lawyer, but if it were the practice in Scotland that the public prosecutor could not take proceedings against those parties without being set in motion by some one behind, the time had arrived when that system of procedure should be altered. It was remarkable that whenever a Bill making changes in the law, whether commercial, criminal, or municipal, was introduced into Parliament, there was always a provision put in it that it should not extend to Scotland. The jealousy of the Scotch Members in this respect was most remarkable, although, as far as he could judge, the Scotch laws and the institutions of Scotland were not so good as the laws in the other parts of the United Kingdom. An Act was passed last year to repress fraudulent breaches of trust, and in that Act would be found the usual provision that "it should not extend to Scotland." He thought that the hon. Member who had brought forward this subject had not been treated with very great fairness, and not being satisfied with the answer of the Lord Advocate, he had ventured to address those observations to the House.


said that, having filled the office of Lord Advocate when the failure of the Western Bank occurred, and having had for some time the responsibility of any steps that might be taken in consequence, he thought it right not to allow the discussion to close without making one or two observations. He should not enter into a discussion as to the comparative merits of the Scotch and English laws; but, having been accustomed to a state of things in which every crime was investigated by public authority, and any person having a knowledge of crime had only to give information to the public prosecutor in order to have the matter investigated, he should be rather jealous of prosecutions arising out of popular discussion, newspaper articles, or speeches in that House, or upon any other ground than information having been given in the regular course to those officers by whom the matter would be immediately investigated. No question, if the hon. Gentleman who brought forward this subject had laid before the learned Lord opposite (the Lord Advocate) the facts on which his statement was founded, instead of making-it publicly in that House, an investigation would have followed immediately. No doubt, in England it was sometimes necessary to set the Executive in motion, and a prosecution by the Attorney General was an expensive and laborious proceeding; but in Scotland, if there were any real charge to make, the office of the Lord Advocate was open, and there the charge would be investigated as a matter of course. He understood the learned Lord to say no more than this, that with respect to the directors of the Western Bank of Scotland no such charge had as yet been made; he did not say that he had resolved that there should be no prosecution, but that he thought it wise to wait, before instituting a prosecution, to sec how the affairs of the bank would ultimately stand, and how the civil responsibility of the parties concerned might be worked out. That was the course pursued in the case of the Royal British Bank; for no steps were taken by the Attorney General until the proceedings in bankruptcy were completed. But if hon. Members supposed that the proceedings of the Western Bank had escaped the attention of the legal authorities in Scotland, they were entirely mistaken. While it was the duty of the public prosecutor to see that crime did not go unpunished, it was not less his duty to guard against unjust prosecutions being instituted from unpopular prejudice or from the emergency of some public event, and to take care that parties were not exposed to the shame and disgrace of a public prosecution without the utmost caution. The question where criminality began was a delicate matter to decide, and was not to be determined by popular discussion, but by the judgment of those who were responsible for the manner in which they discharged their duties, and who were bound to consider the matter with a judicial mind. He repeated, that if there were grounds for charging the late directors of the Western Bank of Scotland with criminal acts, the proper course was for the informants to lay their case before the proper legal officers, who, acting with calmness and judgment, would determine whether a prosecution ought or ought not to be entered into against the persons charged. And surely it was better that the public prosecutor should proceed on judicial considerations rather than institute a prosecution founded only on popular clamour.


said, he must express his surprise at hearing it laid down, as a sound legal axiom that a public prosecutor was bound to wait and see the effects of the crime which had been committed, and the extent of the injury inflicted by the criminal, before directing a prosecution. They could not estimate crime in any such manner, and he conceived that such a doctrine was utterly inconsistent with morality. Still from what had fallen from the learned Lord Advocate it appeared that he was waiting to see whether assets were forthcoming sufficient to release the manager from the consequences of his acts. Public prosecutors were not slow to prosecute the press without previous investigation, when the press happened to be at fault, and why should the Lord Advocate be so indisposed to take the initiative in this case, where the great principle of commercial morality was involved? Believing, as he did, that the conduct of the managers of the Western Bank of Scotland was of such a character that the directors were bound to have inquired into it, he thought that the House ought to convince the people that there should be no immunity for crime, whether committed in England by the directors of the Royal British Bank, in Ireland by the directors of the Temporary Bank, or in Scotland by the directors of the Western Bank of Scotland. They ought to show their determination to maintain intact the commercial morality of this country, and in his opinion his hon. Friend deserved the thanks of the House for having brought forward this Motion.


said, an attempt had been made to establish a parallel between the case of the Royal British Bank and that of the Western Bank, but he thought there was a wide difference between the two cases. The directors of the Western Bank were not accused of any fraud. At the time of the bankruptcy most of these gentlemen had large deposits in the bank, and they had not helped themselves to the funds of the establishment, as had been done in the case of the Royal British Bank. The charge against the directors of the Royal British Bank was of conspiracy to defraud; they were accused of deceiving the public and the shareholders of the bank in regard to its real position; but he did not think such a charge could be maintained against the directors of the Western Bank. If they were conspirators, they were, at all events, most innocent and self-deceiving conspirators, for within throe or four months of the bankruptcy they might have gone into the market and realized £70 or £80 for their £50 shares. If those gentlemen were really engaged in a conspiracy to deceive the public as to the condition of the bank and to secure a profit to themselves, why had they not sold their shares? If they had put forth false accounts, or had realized profits, by their acts as directors, there would have been a colourable case against them; but no such allegation was made. On the contrary, when the failure took place all the Directors continued to hold their shares, and most of them bad considerable sums to their credit with the bank. The conduct of these gentlemen had been strongly impugned, but he would say to their credit that when the bank became involved in difficulties, they evinced the most laudable desire to assist the shareholders in every possible way. Not one of them deserted the sinking wreck, but they laboured to do all in their power to alleviate the lamentable consequence of the catastrophe. He did not mean to be their apologist. He frankly admitted that there had been great negligence; he believed that for many years a vicious system had existed with regard to the management of the bank; that it had been the practice to bring forward balances which ought to have been written off the books; that the securities bad depreciated without sufficient allowance being made for such depreciation, and that the system pursued had been unjustifiable. It must be remembered, however, that some of the directors had only recently been elected, and he believed that all of them had acted with perfect bona fides, and without any view to their private interests. From his own knowledge he could say that it would not be easy to select a body of directors who were less likely to be guilty of dishonourable conduct, and in the west of Scotland they bore the highest character for honour and integrity. As it had been said that a criminal prosecution might still be instituted, he had, thought it right to make this statement, for nothing could be more painful to men of sensitive minds than a suggestion that they might be called upon to answer for their conduct at a criminal bar.


said, he thought some misapprehension existed as to the circumstances under which the prosecution of the Directors of the Royal British Bank took place. It had been assumed that the charge against the seven directors of that bank who had been placed upon their trial was, that they had unfairly dealt with the funds intrusted to their care as trustees, for their own personal benefit or aggrandisement. He had assisted in the conduct of that prosecution, and he could state that, with the exception of two of the seven persons prosecuted, there was no ground whatever for any such suggestion: it formed no element in the case, it was not a point to which the prosecution was addressed, nor did the guilt or innocence of the parties turn upon it. When it was urged, on the part of the gentlemen engaged in this most unfortunate bank in Scotland, that they stuck by the sinking ship, that their fortunes had been embarked in the undertaking, and had perished with the fortunes of those who trusted to their care, it should be remembered that the same remark applied to several of the directors of the Royal British Bank, five out of seven of whom had no charge against them of having abused their trust to their personal benefit; indeed, several of them had invited their friends and relatives to invest in the bank as shareholders not very long before the stoppage. It was important to have this matter well understood, and he would endeavour briefly to state the circumstances of the last mentioned case. The charge against the six directors of the Royal British Bank was, that they had combined together to make untrue statements to the public of the pecuniary condition of the bank; the untruth of the statements had been most satisfactorily proved, inasmuch as in the last year of their proceedings a balance-sheet was presented, from which it was made to appear that a dividend was to be declared at the rate of G per cent on an apparent surplus, to the extent of £30,000, of assets over liabilities, and this was arrived at by taking credit for £150,000 as available assets, which consisted of hopeless debts. In fact, however, if the truth had been told, the liabilities then exceeded the assets to the extent of £120,000. False statements of the accounts had been made from year to year, and the bank was hopelessly insolvent; the imposture was discovered, and ruin came upon all the directors, and on the whole body of shareholders. It was necessary to prove the misrepresentations by the directors, and that they were aware of there being misrepresentations; and it was on the fact of misrepresentation that the late Attorney General proceeded, while it remained for the jury to decide whether the persons on trial knew the untruth of what they had put their hands to. Certainly, when untruth was put forward to lure people to mischief and ruin, there was sufficient ground for investigation and careful inquiry, with the view of punishing those who had been the authors of the fraud if it could be shown they were aware of it. He was not minutely acquainted with the affairs of the Western Bank of Scotland, but he heard it admitted on all sides that when that bank declared a dividend of 9 per cent, it was hopelessly insolvent; certainly, in any event, not in a condition to declare a dividend to that amount. Such a declaration, made or sanctioned by the directors of the bank, unless circumstances warranted it, was the declaration of falsehood, and was calculated to produce very disastrous consequences to those who, not knowing it to be false, had put faith in it. The learned Lord Advocate had told them that the public prosecutor in Scotland must be put in motion by some individual who had a grievance, but admitted, at the same time, that it would be extraordinary if there were no exceptions, though he failed to enumerate any of them. However, he would put it to the learned Lord, if a case like the present should not constitute one of those exceptions which be had adverted to, but did not describe. The learned Lord admitted that the late Attorney General proceeded iu the matter of the Royal British Bank with the most perfect propriety, and that, in acting as he had done, he had rightly discharged the duties of his office. On what data did he proceed? Upon the fact of a proved hopeless insolvency, and upon the fact of declarations at that time by the directors of the flourishing state of the bank. There was proof here also that the Western Bank of Scotland proclaimed a dividend upon false returns, that its true condition was misrepresented, and that instead of being a flourishing concern it was an insolvent one. If so, the only addition needed to parallel the case of the Royal British Bank was the knowledge of this by those who put forward the untruth. Ho, therefore, thought the hon. Member for Leitrim (Mr. Brady) had only discharged a duty in bringing the case forward. He hoped that after the discussion which had taken place the learned Lord Advocate would reconsider the matter, and reflect if he was not called upon to follow the example of the late Attorney General in a case of a very similar character.


said, that with reference to the observation of the hon. Member for Glasgow, he must protest against the statement that the public had not been misled with regard to the position of the Western Bank. On the contrary, it was his belief that, up to the last moment, a system of deception had been kept up, which had been the ruin of many. A person connected with the bank, in the district in which he resided, told him that those who were concerned in the conduct of the business of the bank made representations to him, within a few weeks, nay, within a few days, of the time at which it stopped, which led him to believe that it was in a perfectly solvent state. Upon the faith of those representations, he not only induced depositors to allow their money to remain in the bank, but he himself, and some of his friends, purchased shares in the bank within ten days of the closing of the transfer books. Some of these persons bad, in consequence of the failure of the bank, been reduced almost to a state of beggary. This was a subject which required early investigation; and he was glad to hear that it was likely to be inquired into by a Committee on the Bank Act, which was now sitting. Without some such inquiry, he was convinced that the people of Scotland would not rest satisfied.


said, he thought that, in discussing what ought to be done in a particular case, the House was too apt to forget that its proper function was to learn from experience, and to provide a remedy against its recurrence. It had, accordingly, been his intention, before Christmas, to move that the whole subject of the management of joint-stock banks should be referred to a Select Committee, and he gave notice to make a Motion to that effect, as an Amendment to the Motion of the hon. and learned Member for New-castle-upon-Tyne (Mr. Headlam), for leave to bring in a Bill to extend the principle of limited liability to joint-stock banks. He was told, however, that such an Amendment would be informal, and he did not persevere with it. He thought, however, the causes of the calamities which had recently afflicted the nation were sufficiently apparent, and it was the duty of the House to suggest a remedy. A very unworthy prejudice existed in this country against the Scotch banking system, and it was supposed that one great reason of the bad state of things which existed was the privilege granted to the Scotch banks, of issuing £1 notes. That was quite a mistake. The real evil, he thought, was the reckless way in which bills of exchange were negotiated. Taking the case of one of the firms engaged in this very bank, the facts were sufficient to startle everybody. The firm of Macdonald and Co. were, probably, considered the best customers of this bank. What was the amount of accommodation they required? In 1849 they had accommodation to the amount of £16,000. Not to mention the amount of intervening years, he would pass to 1854, when that amount had arisen to £80,000; in 1856 it was no less than £188,000; and, in 1857, when the crash came, it had reached the gigantic sum of £383,000, not one fraction of which would reach the unfortunate depositors or shareholders in the bank. In 1849 the interest on the amount advanced was £2,800; in 1854 it was £14,000; in 1856, £19,000; and in 1857, £40,000. How was it possible, he asked, for any firm to stand such an amount of interest as that? There could be only one result, and that result ought clearly to have been foreseen by the bank directors, and guarded against. A bill of exchange, provided it was genuine, was a most valuable instrument to commerce—indeed, it was essential to commercial life; but, if this paper could be created and discounted at random, there would be an end to its value. He was sorry to say, the issue of fictitious paper was not confined to Scotland, for he could mention a case in London, which failed some time ago, and in which every servant, every clerk, even the very porters, were employed to put their names to the back of accommodation bills for a gratuity sometimes as low as 5s., or even 2s. 6d. Those fictitious bills were thrown into the market, and contributed to swell the amount of negotiable paper. He did not wish to prevent one individual from becoming security for another; but he did say, that the placing of such bills in the same category as bonâ fide bills of exchange was totally subversive of every principle of commercial morality, and ought to be put a stop to.


said, that the charge against certain individuals for alleged malversation, and the complaints made on behalf of persons who had been shame-fully wronged, were but small parts of this question. The hon. Gentleman (Mr. Cowan) said that there were houses in Scotland, and in England too, where certain persons, employed in the establishments, by giving their names as security, could obtain for themselves or their friends immediate advances of money. Those observations of the hon. Member for Edinburgh (Mr. Cowan) went to the root of this matter, which concerned the whole system of Scotch banking. Under that system, A, who had not a farthing, went to a bank to ask for an advance, and, upon giving the security of B and C, neither of whom had any farthings, he received a sum of money. That was a system of fraud and delusion. If a stop were not put to it, as well as to the plan of limited liability, by which men could no longer be called upon for every penny they possessed, in satisfaction of their debts, you would aggravate and increase the number of these panics, which had developed themselves every ten years, but which would now be likely to occur every five years. With regard to the suggested prosecution, he should like, if any such proceedings were taken, to prosecute the Duke of Hamilton, the Duke of Argyll, my Lord Belhaven, and all those men who had lent the influence of their names and reputations to deceive the poor throughout Scotland. These persons were as much concerned in the result as any others. No doubt, they found it very profitable to announce that they would receive the Western Bank notes from their tenantry; but, then, it should be remembered that they could not have received their rents in any other way. He believed there was not a gentleman connected with Scotland who could not give most heartrending accounts of the ruin which had taken place. "Oh," it was said, "but these are individual exceptions." That was not so. The exceptions wore to be found among the rich men of Glasgow, who saved their own necks, and allowed the poor people of Scotland to be the sufferers.


said, that as one of those who attended the meeting referred to by the hon. Gentleman, he did not think it necessary to apologize, either for himself or for the noble Lords who were present, further than to say that he attended it, in common with others, for the purpose of mitigating, as far as possible, the shock which had at that time been given to the public credit.


observed, that he would willingly have left the question as it rested, after the full discussion that had taken place, if it had not been for the observations of the hon. Gentleman opposite (Mr. Drummond). That hon. Gentleman had thought proper to pass a severe censure on some of his noble Friends, for the part they had taken at the meeting held in Glasgow, in relation to the Western Bank of Scotland. He (Sir E. Colebrooke) had the honour of taking part in the proceedings of that meeting, and of proposing a resolution. That resolution was, however, of a formal character. Now, he challenged the hon. Member for Surrey, or any other hon. Member, to point out one word in the resolutions agreed to at that meeting that could justify the charges that he had made against his noble Friends. There were only two resolutions passed; the one contained a general expression of confidence in the system of Scotch banking; and the other, to which he (Sir E. Colebrooke) gave his cordial assent, expressed the belief of those present at the unreasonableness of the panic that had arisen, and their confidence in the power of the banks to pay all their liabilities. They further pledged themselves, one and all, at that meeting, to take the notes of the bank in exchange, without other security. Now, he was content to be judged, either by the event that resulted, or by the determination they had formed at the time. If by the event, they would come out of the matter triumphantly; for the notes had never been discredited subsequent to the meeting, and had never failed to circulate from hand to hand; while not merely the proprietors of the bank, not merely the 300 firms of Glasgow, but even the agents of Her Majesty's Government, agreed to take the notes. With regard to the liabilities of the bank, he could not say that they were all paid; but there was little doubt of the probability of their being paid; and, within the last few days, notice had been given that half of them would be paid in a month's time. All that was done at that meeting was done with a view to restore confidence, and he did not think they were to be blamed for what they did.


said, he would not have taken any part in this discussion but for the observations of the hon. Gentleman below him (Mr. Drummond). The hon. Gentleman had mentioned the names of two or three Dukes, and blamed their conduct at the time of the failure of the Western Bank. One of those Dukes, however, was not present. He (Sir M. S. Stewart) was not ashamed to say that he took part in that meeting; and he would say that the gentlemen of Scotland were as scrupulous with regard to their honour as the gentlemen of any other part of the country. It was all very well for writers in newspapers to abuse those gentlemen who did what they could to alleviate the distress which prevailed; but he regretted that an hon. Gentleman whom the House was accustomed to respect should have spoken as he had done. The hon. Gentleman did not seem to be aware for what purpose the meeting at Glasgow took place. The Western Bank failed on the 9th of November, and, as hon. Gentlemen acquainted with Scotland knew, the 11th of November was a day on which a great many payments were made. The meeting at Glasgow was not called to uphold the Western Bank, but to see what steps could be taken to alleviate the panic. Gentlemen in London might not be aware what that panic was. The whole west of Scotland was in a state of confusion, for the Western Bank had 100 branches—almost all of them situated in that district, and hon. Members might imagine the excitement which arose when such a bank suddenly stopped payment. The panic was so great, that all the other banks in the West of Scotland were run upon, and the City of Glasgow Bank had to close its doors. It was to alleviate this critical state of things that the meeting held in Glasgow was called. The resolutions moved on that occasion were such as might, under the like circumstances, be very properly moved over again. Though he had himself been called upon unexpectedly to take part in the proceedings of that meeting, he could safely say on his honour, that if he had to speak again on the same subject to-morrow, he would not shrink from repeating every word that he had then spoken. When he heard in the House of Commons—ho did not care about the newspapers—gentlemen held up to contempt for doing what it was only their duty to do, he felt hound to express his regret; and, especially, he regretted that an hon. Gentleman should hold up certain noble Dukes to opprobrium for doing what he (Sir M. S. Stewart) thought was their duty.

MR. DRUMMOND, in explanation, said that the resolution ran thus:—"That the meeting had full confidence in the system of banking in Scotland which had been maintained for so long a period."


said that he was grateful to those gentlemen who came forward with the hope of restoring confidence in the west of Scotland during the panic. He agreed with the hon. Member for Glasgow (Mr. Buchanan), that there could not be more honourable gentlemen than the directors of the Western Bank, who had themselves severely suffered for a neglect of duty, for which he did not mean to offer any apology.


explained that he had brought forward no special allegation against the directors, but he spoke of the officials.


said he wished to express his strong opinion, that on the clays fixed for public business of great importance, the time of the House should not be occupied hour after hour by discussions which led to no practical results.


said he begged to thank the hon. Member for Leitrim for originating a debate of the most valuable character, and which was likely to have an effect on the country; and he believed that many of the observations which had been made would be valuable in relation to commercial communities such as he represented. The country had recently passed through a severe crisis from which they had all suffered, and one of the difficulties of which was caused by the withdrawal of gold to meet the wants of Scotland. It was no justification of the directors of the Western Bank to say that all the notes and deposits would be ultimately paid, for it ought not to be forgotten how much misery had been suffered during the period of suspense, when it was not known whether they would be paid or not. The banks in question had locked up money which had been collected in small sums from the frugal people of Scotland till it reached millions in a hundred branch banks, and it had been used in the way to interfere with the legitimate trader, by lending hundreds of thousands to men of straw; thus causing great loss to those who traded on their own capital, by depreciating their trade. He rejoiced that it had been pressed on the Lord Advocate to make some inquiry into this matter; and he (Mr. Turner), as a director and chairman of a joint-stock bank, was of opinion that all such concerns were liable to injury if they were not conducted with the same care as the affairs of private bankers. He was of opinion that they were amenable to the public, and ought to answer for their conduct. Whenever anything of this kind happened, he hoped that the directors of joint-stock banks would be considered amenable to justice, and that it would be administered to them.