CONSIDERATION. ADJOURNED DEBATE.

HC Deb 18 June 1890 vol 345 cc1245-90

Order read for resuming Adjourned Debate on Amendment proposed to the Bill [11th June], on consideration, as amended.

And which Amendment was, in page 1, line 22, to leave out the words "of fact."—{Mr. Edmund Robertson.)

Question again proposed, "That the words 'of fact' stand part of the Bill."

Debate resumed.

(12.30.) MR. E. ROBERTSON (Dundee)

If the House will look at the Bill, I think it will be found that the introduction of the words "of fact," in Clause 3, makes the Directors personally liable for inaccurate and misleading statements, but imposes a limitation upon their defence that is not contained in the liability itself. In other words, the defence is less extensive than the liability.

Question put, and negatived.

(12.32.) SIR R. LETHBRIDGE (Kensington, N.)

I beg to move the Amendment which stands in my name on the Paper, namely, to insert after the word "fact" in Clause 3, page 1, line 22, the words "in the prospectus or notice." I would point out to the House that the Amendment must be taken in connection with another Amendment which comes in later on, and to which it would probably be out of order to refer at any length now. The object of the Amendment is to relieve Directors and others responsible for the issue of prospectuses from the liability which might otherwise attach to them for the appearance of untrue or misleading statements or memoranda incorporated in such prospectuses in a case where the untrue or misleading nature of the statements is not material or relevant to the undertaking of the company. As the clause has come down to the House from the Grand Committee, it appears that a Director or any other person who allowed his name in any way to be connected with a prospectus would be responsible for the statements contained or even referred to in it, and that his whole fortune and reputation might be at stake, even in cases where a company is floated in a legitimate and proper manner for developing the resources of India or the colonies or any foreign country remote from England. In such cases it is manifest that the Directors and others who are responsible for the issue of a prospectus must frequently, to a large extent, rely upon documents and official statements published in India, Australia, or elsewhere, where the property is situated. They must very often rely upon the statements of local experts, and the object of my Amendment is this: that while the Directors and others shall rightly be held responsible for any statements which they actually quote which are relative or material to the matter dealt with, it would be absurd to make them responsible for every immaterial statement which may appear in any obscure corner of any report or memorandum quoted or referred to which may have nothing whatever to do with the property which is being dealt with, and which the utmost care of a Director would not enable him to check in every minute particular. I think it would be improper to lay down that every person who attaches his name in any way to a prospectus issued by a company should be liable to the terrible extent provided by this Bill.

MR. WARMINGTON (Monmouth, W.)

I rise to order. The question of the liability of Directors has already been discussed and decided. The question now for consideration is the defence which a Director may have to offer.

SIR R. LETHBRIDGE

Quite so. The point which I am now raising is that this Amendment is necessary in order to extend the defence of the Director. Of course, I am in the hands of the House.

MR. SPEAKER

I think the hon. Member is out of order.

MR. G. OSBORNE MORGAN (Denbighshire, E.)

The effect of the Amendment is to limit the defence. Surely, the hon. Member cannot mean that.

SIR R. LETHBRIDGE

In deference to your ruling, Sir, I will withdraw the Amendment.

(12.38.) MR. KIMBER (Wandsworth)

I have now to move, in line 22, at the end of Clause 3, to insert "or other person named therein." The addition of these words, which apply to the authenticity of a statement, will become more apparent when we come to consider the next clause.

Amendment moved, in page 1, line 22, after the word "expert," to insert the words "or other person named therein."—(Mr. Kimber.)

Question proposed, "That those words be there inserted."

(12.40.) MR. WARMINGTON

I am sorry that I am unable to accept the Amendment. A Director has no right to use information supplied by a person who is not in a position to give accurate information.

(12.41.) MR.G. OSBORNEMORGAN

The Amendment of the hon. Member is far too vague, and would make nonsense of the clause. It would justify the issue in a prospectus of information obtained from a person picked up in the street.

(12.42.) MR. E. ROBERTSON

The scheme of the Bill is that you are to be responsible for every statement you make unless it is a statement made upon the authority of an expert. What my hon. Friend opposite asks is that a Director is to be responsible unless he has made the statement on the authority of anybody else.

MR. KIMBER

The answer is—

MR. SPEAKER

The hon. Member has no right to reply. Does he press the Amendment?

MR. KIMBER

No, Sir.

(12.43.) MR.TOMLINSON (Preston)

I confess the words the hon. Member proposes to add seem to me vague, and might be misleading.

(12.44.) THE PRESIDENT OF THE BOARD OF TRADE (Sir M. HICKS BEACH,) Bristol, W.

I quite agree that the words proposed by my hon. Friend behind me could not possibly be admitted into the Bill. I think the question will be more properly raised when we come to Sub-section B.

SIR R. FOWLER (London)

gave an explanation of what Mr. Kimber had said.

(12.46.) MR. SALT (Stafford)

I think the words proposed by my hon. Friend are too wide. It should be upon the authority of an expert or of some person duly qualified to give the information. If at any time this Bill should become an Act, I am afraid that the word "expert," taken in its most narrow sense, might be very inconvenient. If it is to be taken in a wider sense it ought to be so defined.

(12.47.) SIR R. LETHBRIDGE

Will it be in order to substitute for the words "person named therein" the words "other reasonable authority?" It seems to me that some words of that kind are needed in order to extend the definition of the clause. The term "expert," in one of its meanings, is well understood. He is recognised as a person who understands the subject upon which he writes; but I hope the hon. and learned Member in charge of the Bill will see the necessity of defining in some way the larger meaning of the term. Perhaps he will consent to the re-committal of the Bill in order that the point, which is an extremely important one, may be threshed out.

MR. KIMBER

I propose to withdraw the Amendment and to submit another which will meet the difficulty.

(12.48.) MR. COURTNEY (Cornwall, Bodmin)

The words in Sub-section B appears to have been overlooked. The defence will only be available, if it can be shown that the Directors believed that the report as to value was made in good faith, and that the person making it was competent to give an opinion—in other words, that the person making it was an expert.

(12.50.) MR. KELLY (Camberwell, N.)

I would ask the hon. Member for Wandsworth (Mr. Kimber) not to press the Amendment. The object of the Bill is to put an end to a system under which Directors are able to evade their liability. In my humble judgment anything that tends to fritter away their liability under this part of Clause 3 would be mischievous.

Amendment, by leave, withdrawn.

(12.51.) MR. KIMBER

I beg leave to move, instead of the Amendment which I have just withdrawn, the substitution of the words after the word "expert," "or any person, firm, or authority whose name, address, and description are stated in the prospectus." In that case all persons, before they subscribe, would know exactly the authority upon which the statements contained in the prospectus were made.

Amendment proposed,

In page 1, line 22, after the word "expert," to insert the words "or of any person, firm, or authority whose name, address, and description are stated in the prospectus;"—{Mr. Kimber.)

Question proposed, "That those words be there inserted."

SIR G. CAMPBELL (Kirkcaldy, &c.)

I rise to a point of order. I want to know whether this Amendment is not absolutely identical with the one which we have just decided.

MR. SPEAKER

There was no decision on the first Amendment; it was withdrawn.

MR. BARING (London)

I think the Amendment is much too wide. What is wanted is that the Directors shall have made all reasonable inquiry and examination and should have had reasonable ground for believing the statements made to them. If they make statements on the authority of somebody else, that somebody else ought to be quoted and ought to be an expert.

(12.55.) SIR R. LETHBRIDGE

The Amendment clearly proposes to put before the investing public the exact authority upon which a particular statement is made. It is proposed that not only the name, but the address and description of the person, or firm, making the statement should be given to the public, who will thus have an opportunity of ascertaining for themselves what the weight of the authority quoted in the prospectus is. I do not see why the whole responsibility should be thrown upon the Directors personally. If they give the name, address, and description of the person who supplies the information, they will afford the public every facility for ascertaining its authenticity for themselves. That is, I think, all that in fairness can be demanded.

(12.56.) MR. ISAACSON (Tower Hamlets, Stepney)

I trust that the House will do nothing to weaken the responsibility of Directors, who are sometimes composed of a noble Lord, with one or two hon. Members of this House, and an hon. Gentleman who has spent most part of his life in India or some other distant part of the world, and who, on returning to this country, joins a company solely for the sake of the fees, knowing absolutely nothing about the business he undertakes to direct. I am afraid that if this Amendment is carried it will do a great deal to destroy the good that is contained in the Bill.

(12.58.) SIR G. CAMPBELL

I agree in substance with the remarks of the hon. Member, and also in the conclusion which he has drawn. At the same time, it must not be forgotten that a person who has returned to this country from India or from some other distant quarter of the globe has often a good deal of spare time upon his hands.

(1.0.) The House divided:—Ayes 27; Noes 116.—(Div. List, No. 144.)

(1.11.) MR. HANBURY (Preston)

I have an Amendment to propose at the end of line 27, in Clause 3, and it is to insert the words "and not misleading" after the word "true." These words are, I think, necessary if we wish to make sense of the clause. We have substituted the word "true" for the word "inaccurate" in line 18, and we also draw a broad distinction between a statement which is untrue and one which is misleading. This proviso says that although the Director may have made a statement which is untrue or misleading, yet if he can show that at the time he made it he had good grounds for believing it to be true, he shall not be held responsible. Having drawn that distinction, I think we ought to add the words I have suggested. If a man makes a misleading statement he ought to be called on to prove he did not think it to be misleading at the time he made it.

Amendment proposed, in page 1, line 27, after the word "true," to insert the words "and not misleading."—(Mr. Hanbury.)

Question proposed, "That those words be there inserted."

(1.12.) MR. KELLY

I would suggest that the words should be "not intentionally misleading."

(1.13.) SIR H.DAVEY (Stockton)

I opposed the introduction of the word "misleading" last Wednesday, but was not successful. I agree, however, with my hon. Friend that, in order to make this clause consistent, some such words as he suggests should be inserted. I think this object would be better obtained by using other words. Whether a prospectus is misleading or not is a fact to be ascertained. A Director may not believe it to be misleading, and yet he would come under the law. I would, therefore, suggest the addition of the words "and the same was not calculated to mislead."

(1.14) MR. HANBURY

I will withdraw my Amendment.

Amendment, by leave, withdrawn.

Amendment proposed, in page 1, line 27, after the word "true," to insert the words "and the same was not calculated to mislead."—(Mr. Hanbury.)

Question proposed, "That those words be there inserted."

( 1.15.) SIR ROPER LETHBRIDGE

I must move as an Amendment to the Amendment, the insertion of the word "that," so as to make it read "and that the same was not calculated to mislead." It seems to me to make a great difference, as we want to secure it shall be the Director's belief that the statement was not calculated to mislead.

Amendment proposed to the proposed Amendment, after the word "and," to insert the word "that."—(Sir Roper Lethbridge.)

Question proposed, "That the word 'that' be there inserted in the proposed Amendment."

(1.16.) MR. KIMBER

He has to prove it was not calculated to mislead.

SIR ROPER LETHBRIDGE

No.

MR. KIMBER

No man ought to be bound to prove a negative. He may prove what was his belief.

(1.17.) MR. TOMLINSON

I think the word "that" is necessary to make the clause clear.

(1.18.) MR. COURTNEY

It really makes no difference. I think the clause will accomplish its object. The sub-section provides that unless the Director proves he made reasonable inquiry, and had reasonable ground of belief that the statement was true, and was not misleading, he may be held liable.

MR. E. ROBERTSON

I entirely concur. I do not see how one can get out of that construction of the section.

(1.19.) SIR ROPER LETHBRIDGE

Of course, if the interpretation given by the Chairman of Committees is accepted, I am quite content. But I do venture—

MR. T. M. HEALY (Longford, N)

I rise to a point of order. Unless the hon. Gentleman is going to withdraw the Amendment he is not entitled to make a second speech.

MR. SPEAKER

I understood the hon. Member was explaining his reasons.

(1.20.) MR. G. OSBORNE MORGAN

The question is not what any Member of this House may think the right construction but what will be the view taken by a Court of Law. Although the construction of my right hon. Friend is, no doubt, right, I think it would be better to insert the word "that."

(1.21.) MR. J. M.MACLEAN (Oldham)

What is the opinion of the framer of the Bill? Does he accept the interpretation of the Chairman of Committees? A question may be raised in a Court of Law as to whether a Director is liable not for his belief, but for some fact as to the misleading character of which he could possibly have no information. Our object, as I understand it, is to make a Director answerable for anything in the way of foul play on his part; therefore the words of the clause should be distinct. Will the framer of the Bill tell us in what way he intends the clause to be interpreted?

(1.22.) MR. WARMINGTON

I think the view of the Chairman of Committees is correct, and that it will be quite sufficient to add the words after "true," "and not misleading."

Question put, and negatived.

Original Question again proposed.

MR. HANBURY

I withdraw the words "the same was not calculated to mislead." It seems to be the general opinion that the original words are more desirable. I, therefore, propose to use the words, "and was not misleading."

(1.24.) SIR ROPER LETHBRIDGE

Does the framer of the Bill agree, them that the clause means the Director believes it is not misleading?

MR. WARMINGTON

Certainly.

Amendment, by leave, withdrawn.

Amendment proposed, in page 1, line 27, after the word "true," to insert the words, "and was not misleading."

Question, "That those words be there inserted, "put, and agreed to.

(1.25.) Amendment proposed, in page 2, line 2, after the word "valuation," to insert the words, "or certificate or other document."—(Mr. Kimber.)

Question proposed, "That those words be there inserted."

SIR M. HICKS BEACH

It seems to me it would be rather dangerous for the House thus to extend these words.

(1.26.) MR. WARMINGTON

I cannot accept the Amendment. The report or valuation of any engineer, or valuer, or accountant, or expert, sufficiently cover all that is necessary, and to add the words suggested in the Amendment would simply fritter away the whole force of the Bill.

(1.27.) SIR ROPER LETHBRIDGE

Will the clause as it stands cover such a case as the quotation of an Official Report to a Colonial or the Indian Government? These Reports are frequently quoted, and, certainly, they cannot be said to come under the category of Reports of engineers, valuers, accountants, or other experts, yet I do not see why they should not be equally privileged. Surely they should all be on the same footing. I hope my hon. and learned Friend will accept the Amendment.

(1.29.) MR. G. OSBORNE MORGAN

I do not think the words of the Amendment would cover the case of such documents.

MR. COURTNEY

I should like to call attention to a point that occurs to me as one deserving of consideration in regard to this matter. Sub-Section A of the clause says— Unless he proves with respect to every such inaccurate or misleading statement of fact, not purporting to be made en the authority of an expert. Now, suppose an untrue or misleading statement does purport to be made on the authority of an expert, where is that placed? Is it supposed to be under Sub-section B? I think not. Sub-section B says— From any Report, or valuation of any engineer, valuer, accountant, or other expert, that it was a true and fair statement of or extract from the Report or valuation. But it might be made in any other form, and I think we cannot say that Subsection B extends to everything not covered by Sub-section A. I should have supposed Sub-section B would have said, "With respect to every statement or extract purporting to be made on the authority of an expert, "and so forth. In that case it would prove entirely valid. I cannot see that there is any liability on the part of a Director who makes an untrue or misleading statement which purports to be made on the authority of an expert. I should like to know what the hon. Member in charge of the Bill thinks on that point.

(1.32.) MR. WARMINGTON

I am bound to say that the suggestion of the right hon. Gentleman would be an improvement. Would it not be well to let Sub-section B run in this way: "With respect to every statement or extract purporting to be made on the authority of any engineer, valuer, accountant, or other expert." That would carry out the meaning of the suggestion just made, and I wish to ask the hon. Member opposite whether he will withdraw his Amendment and consent to the substitution of these words?

MR. KIMBER

I should be glad to withdraw my Amendment in favour of that suggested by the hon. and learned Member; but I shall then propose after the word expert to extend the protection of the clause to documents or statements made by persons other than experts.

(1.33.) Amendment, by leave, withdrawn.

Amendment proposed, In page 2, line 2, to leave out the words "a statement of, or an extract from, any Report or valuation," and insert the words "made on the authority."—(Mr. Warmington.)

Question proposed, "That the words proposed to be left out stand part of the Bill."

SIR R. LETHBRIDGE

I may say that I do not see any great difference between what appears in the clause and what is proposed by the hon. and learned Gentleman; at the same time, I think that an Amendment which does alter the whole tenour of a very important and material clause ought hardly to be sprung on the House in this sudden fashion? I think the hon. and learned Member should give the House a little further information and explanation of what would be the result of this Amendment, and that it really demands from the House a little more consideration than has yet been accorded to it. I would add that in this, as in several other respects, the Bill appears to have come down from the Standing Committee in rather a chaotic condition. I would suggest that the hon. and learned Gentleman should move in the interests of his own profession the reconsideration of the Bill, so that it may be presented to the House in a form in which it may be planned to stand permanently, or, at any rate, in such a form that the House will be in a position to adjudicate on questions such as this. It is, I think, a little too much to ask us to accept an alteration in the wording of an important part of the clause, under the circumstances, like the present. I repeat that I do not, on the face of it, see any great difference between the Amendment now proposed and the words that already appear in the clause. [Laughter.] Hon. Gentlemen laugh, but there may be certain pitfalls in these legal phrases which we who are outside the mystic circle of the law cannot at the moment comprehend. The House will probably admit that a lawyer will see dangers and pitfalls which an ordinary layman would not be able to recognise. I can hardly trust my own judgment in this matter, and should like to have the opinion of the hon. and learned Member for Stockton, as well as of other Members of the House, who are recognised authorities on such questions, as to what would be the precise effect of this Amendment, which, whether important or not, is clearly, on the face of it, a proposal to effect a considerable alteration in an important clause.

MR. S. WILLIAMSON (Kilmarnock)

I think the meaning of this Amendment so clear that it might almost be understood by a child, and, for my part, I shall give it my support.

(1.36.) SIR R. FOWLER

I only rise to say that this Bill, as I suppose, received consideration upstairs, and no doubt there are advantages in the discussion of such matters in Committee rather than in the House; but as the House decided to send it to a Grand Committee, by whom it has been dealt with, and then considered by the House, with you, Sir, in the Chair, I can hardly concur in some of the remarks of my hon. Friend.

MR. G. OSBORNE MORGAN

I would point out to my hon. Friend opposite that it is rather unwise in him to refuse this Amendment, because it distinctly tends in the direction for which he is contending.

MR. TOMLINSON

I earnestly hope the Amendment will be accepted, as I think it will be an improvement on the Bill as now framed.

MR. J. M. MACLEAN

I would point out that the words "report or valuation," which the hon. and learned Member proposes to omit, occur again and again in the clause, and I would ask whether he proposes to leave them out altogether; because it seems to me they are important words to retain. Moreover, the substitution of the words "made on the authority" seems to me to have a very wide scope. We are here legislating to prevent Directors from being parties to misleading statements, and we ought, therefore, to be very clear that the language of this Bill is not in itself misleading. I should be glad if the hon. and learned Gentleman will tell us how he proposes to amend the subsequent portion of the clause.

MR. SALT

I would remind the House that we have got to the word "valuation" in line 2 of page 2, and we are now asked to go back to the beginning of the whole line, a step which ought not to be taken without good or special reason. With regard to the hon. and learned Gentleman in charge of the Bill, I have only to say that being in charge of the measure, there is no one more capable of explaining it; but I think that in regard to such an Amendment as this, he ought to give us a clear and distinct statement as to what it is intended to do, not only in regard to this part of the clause, but also in relation to the subsequent portions of the Bill. There can be no doubt that the Bill is an extremely difficult one to deal with, and any hasty and ill-considered Amendment might have consequences very different from those for which the measure is designed. I would also remind the House that it passed its Second Reading with little, if any, discussion, not only as to details, but also in regard to principle. It was then sent upstairs to the Grand Committee, where it is said to have been thoroughly thrashed out; but the result of that thrashing out appears to have been that it has now become necessary for the House to thrash it out on the Report, when, instead of following the rule appertaining to Committees of the whole House, hon. Members interested in the measure can only speak once. The result is that there must necessarily be a great deal more speaking by more hon. Members and more points raised than would otherwise be the case, because it is not in the power of those who best understand the Bill to follow up their remarks on any one point. No doubt, the objects of the Bill are exceedingly good, and I, for one, do not wish to oppose the Amendment proposed by the hon. and learned Gentleman in charge of the measure; but I do hope that, with the permission of the House, he may have the opportunity of explaining what will be the effect of this Amendment if it be inserted.

SIR M. HICKS BEACH

I confess, Sir, that, in my opinion, the hon. and learned Gentleman in charge of the Bill was a little premature in accepting the Amendment suggested to him by the Chairman of Committees. What, I ask, was the shape in which this Bill was sent down by the Standing Committee? It was that under the latter portion of Clause 3 a Director was to be liable, on the one hand, to pay compensation unless he could prove one of two things, either that he had made, in respect to any untrue or misleading statement not purporting to be made on the authority of an expert, reasonable inquiry and examination, or that he had reasonable ground to believe, and did believe, at the time of the allotment of shares, that a statement purporting to be an extract from a Report or valuation of an expert was true, and was made by the expert whose name it bore, and further, that the Report or valuation was made in good faith, and that the person making it was competent to make it. Now, Sir, the hon. and learned Gentleman in charge of the Bill, in response to a suggestion made by the Chairman of Committees, proposes to leave out from line 2, page 2, the words, "A statement of or an extract from any Report or valuation." I would point out that a "Report or valuation" is a tangible thing, and that it makes a difference if we alter this Sub-section by striking out these words, and merely inserting in their place the words "made on the authority." I think the hon. and learned Gentleman the Member for Mon-mouthshire (Mr. Warmington) ought to tell us how, in proposing to leave out the words I have quoted, he intends to frame the rest of the clause.

SIR H. DAVEY

I think, if my hon. and learned Friend persists in accepting the Amendment suggested by the Chairman: of Committees, the result will be to throw the clause into inextricable confusion. I do not say the clause is drawn up in the best possible way, but, as it stands, I do not think it will do much harm. Therefore, I would rather concur in the suggestion of the right hon. Gentleman opposite, and urge upon my hon. and learned Friend that the clause should be allowed to remain as it stands in the Bill.

SIR G. CAMPBELL

I was a member of the Committee which considered this Bill, and I wish to state that we were not able to thrash out the details as is done in Committee of the whole House —a thing which, in my opinion, is absolutely necessary in regard to measures such as this. I think we should hardly have been induced to enter upon the discussion in which we are engaged but for the high authority of the Chairman of Committees, and I regard him as a very high authority. At the same time, after what has been said, I hope my hon. and learned Friend who is in charge of the Bill will not press the Amendment, in-Sir M. Hicks Beach as much as it seems to be the opinion of several eminent authorities that it is open to serious objection.

MR. WARMINGTON

Under the circumstances, I will, with the permission of the House, withdraw the Amendment. When I accepted it, I did not see exactly how it would work in regard to the latter part of the clause, in relation to which I think it might create some-confusion. I, therefore, ask leave to withdraw the Amendment. ["No, no."]

MR. E. ROBERTSON

I hope the House will allow the Amendment to be withdrawn. In my opinion, its effect upon, the clause would be that, with respect to every misleading statement purporting to be made on the authority of an expert, the Director would be absolutely liable, unless the authority is contained in the Report or valuation, and in that case the exception would apply.

MR. G. OSBORNE MORGAN

I may be allowed to say—

MR. SPEAKER

The hon. and learned Gentleman has already spoken on this Amendment.

MR. G. OSBORNE MORGAN

I was about to speak on the question of the withdrawal of the Amendment.

MR. SPEAKER

The hon. and learned Gentleman has no right to speak OH this question again, save by leave of the House.

MR. G. OSBORNE MORGAN

Perhaps the House will allow me to say that if this Amendment be carried, the words "every statement" would apply not only to every statement made in writing but also to every oral statement.

MR. KIMBER

It was on the consideration that this Amendment would be accepted that I withdrew my Amendment. It seems to me that the hon. and learned Gentleman's Amendment is one that ought to be accepted, and that the principle enunciated by the Chairman of Committees is correct, namely, that where a statement is made by a Director on the authority of an expert, the Director ought to be protected. The only alteration necessary after accepting the Amendment would be the striking out of the words "Report or valuation "in other places. If line 2 of page 2 is left as it is, it seems to me to be open to all sorts of objections, which would not apply to the general words suggested by the Chairman of Committees.

MR. BRUNNER (Cheshire, Northwich)

I wish to ask you, Sir, as a point of order, whether the Amendment, which was only temporarily withdrawn to permit another Amendment to be moved, can be renewed if the present Amendment be withdrawn?

MR. COURTNEY

I wish to point out with respect to one portion of the clause that, as it stands, in respect of every statement purporting to be made from any Report or valuation of an expert the Director would have to prove that the expert made it, and that he had reason to believe the expert made it in good faith, and was competent to make it. The whole question seems to be narrowed to this, whether the defence should be limited to statements purporting to be made on the authority of an expert when such statements occur in a Report or valuation, but not in any other document though made by the same class of persons. I do not wish to embarrass the discussion of this Bill any further, but I must dissent to our reverting to the original form of the Bill.

MR. SPEAKER

In reply to the hon. Member for Northwich, who asked a question on a point of order, I may state that the Amendment which has been withdrawn, under the circumstances stated, can be renewed.

MR. MURPHY (Dublin, St. Patrick's)

I would put it to the House, how would it be if we were to leave out the words "Report or valuation," and insert the words "statement or extract" in the last line but one of the sub-section?

MR. GROTRIAN (Kingston-on-Hull, E.)

The liability under Sub-section A only goes to statements not made on the authority of an expert, so that under that sub-section a Director will be relieved of liability in regard to any statement made on the authority of an expert; but under Subsection B the liability is limited to statements on the Report or valuation of an expert. The question is whether it is the wish of the House to widen the liability under Sub-section B, so as to make it run more in accord with the full exemption under Sub-section A. On the other hand, I may say the Bill was thoroughly thrashed out before the Grand Committee, and I believe it would, on the whole, be better to allow Subsection B to stand as it now is, rather than attempt to doctor it, as is now proposed.

MR. SPEAKER

Is it your pleasure that the Amendment be withdrawn?

Several hon. MEMBEES

No.

(2.0.) The House divided:—Ayes 181; Noes 19.—(Div. List, No. 145.) (2.11.)

(2.29.) Notice taken, that 40 Members were not present; House counted, and 40 Members being found present,

(2.31.) Amendment proposed, in page 2, line 3, after the word "accountant," to insert the words "banker, mercantile firm, or official authority."—(Mr.Kimber.)

Question proposed, "That those words-be there inserted."

(2.34.) MR. CHANCE (Kilkenny, S.)

On a point of order, I wish to ask you, Sir, whether this Amendment ought not to have been moved, if at all, on Subsection A?

SIR R, LETHBRIDGE

On the point of order, I would point out, on the authority of the Chairman of Committees, that the 1st sub-section does not cover every possible case.

MR. SPEAKER

As far as a question of the order is concerned the Amendment may be moved.

(2.36.) MR. S. WILLIAMSON (Kilmarnock, &c.)

I hope my hon. Friend will allow the Bill to remain as it is. Lots of people call themselves "bankers "who are not entitled to the name. "Mercantile firm "is very wide, and so is "official authority." I think the word "expert" covers all that is necessary.

(2.37.) SIR R. LETHBRIDGE

Surely it is quite conceivable that a large class of documents which ought to be covered by the clause could not be classed as "Reports or valuations of engineers, experts," &c.

MR. WILLIAMSON

Yes, the word "expert" will cover them.

(2.38.) MR. G. OSBORNE MORGAN

I venture to ask what is a "mercantile firm," and, still more, what is an "official authority"? If the people referred to possess the knowledge which alone entitles their statements to credit they will come under the head of "experts."

(2.39.) MR. BRADLAUGH (Northampton)

I hope the Amendment will not be accepted, because there are many people connected with financial undertakings whom it would not be desirable to include in the excepting clause, and yet who describe themselves by the words used in the Amendment.

MR. KELLY

I hope my hon. Friend will not press the Amendment.

(2.40.) MR. WARMINGTON

I cannot accept the Amendment, and I should like to impress on the House that this matter has been discussed in the Grand Committee on Trade, of which the Mover of the Amendment was a Member. He did not attend. I dare say he had reasons for his absence; but I ask the House to stand by the Bill as it is.

MR. TOMLINSON

I would point out that if the Amendment be adopted, it will be necessary to introduce other words also.

Amendment, by leave, withdrawn.

(2.41.) SIR R. LETHBRIDGE

I beg to move after the word "expert," in line 3, of page 2, to insert "or other document vouched by the name, address, and description of the author." I wish to point out to the hon. and learned Member in charge of the Bill that no provision is made in any part of it for the protection of Directors from misstatement in official documents, published on the faith of the Government of a colony, or a Local Government in India, or a Foreign State. If the hon. and learned Member can point out that such protection is afforded I shall not, of course, put the House to the trouble of dividing on this Amendment. But I do wish to obtain some solid assurance, either from the hon. and learned Member, or from some of those authorities whom the House is in the habit of following on a point of this kind. It will be in the recollection of the House that two or three of its leading authorities, whom, we look upon as competent to guide us in the choice of the phraseology to be used in such cases, absolutely differed on a recent occasion as to the language that ought to be employed. I confess I was induced by the support given by the right hon. Gentleman the Chairman of Committees to one phraseology to vote in favour of it, because I thought, and I think still, if I had such authority as that for my decision, I could not be wrong. I think we should ask for a full assurance from those leading Members of the House who are competent to advise us on this point, whether, as the Bill stands now, there is any protection afforded to Directors and others when mis-statements are made in Reports which they feel justified in regarding as true, but which turn out to be untrue. I refer to cases in which a Director has made full and careful inquiry, but in which it is absolutely out of his power to go into every hole and corner, as it were, of the statements in a Memorandum. I do not see why the Directors should be penalised for an obscure mistake or mis-statement, whilst those persons, who ought really to be punished for it—usually the promoters, whose names are not shown on the face of the prospectus—are not touched by a single line or word of the Bill. I do not find in the measure a single word that refers to promoters. The Bill is utterly incomplete, and its chaotic condition is shown by the fact that, on a recent Amendment, the Chairman of Committees, and the author of the Bill were absolutely opposed to each other, and the House divided in a muddled state, without comprehending the point put before them. The result was the retention of words and phrases, which, on the high authority of the Chairman of Committees, are misleading and wrong.

Amendment proposed, In page 2, line 3, after the word "expert," to iusert the words "or other document vouched by the name, address and description of the author."—(Sir Roper Lethbridge.)

Question proposed, "That those words be there inserted."

(2.47.) MR. WARMINGTON

My first objection to the Amendment is, that it will not make common sense of the clause, and my second—although I am not one of the high authorities to whom the hon. Gentleman referred—is that the words should remain as they are. I consider it rank heresy to say that official statements are not made by experts. I should have thought that every official person who has special knowledge is an expert.

(2.48.) MR. BRADLAUGH

It is inconvenient, after the time that this Bill has been on the Paper, that Amendments should be sprung upon us in such a way that it is impossible to give them full consideration. I understand that this Amendment would simply make nonsence of the clause. One argument used in support of this and other Amendments is, that the Directors ought not to be made liable for this, that, and the other misrepresentation made by the promoters. I would point out, however, that without the Directors the promoters would be unable to get credit from other people. The Directors become Directors for profit, and they ought to be responsible for the statements made.

(2.50.) MR. S. WILLIAMSON

I think this Amendment might afford extra protection to the promoters and Directors of bogus companies, but that it would not carry out the objects of this Bill. Suppose a tea planter in India thinks he has discovered a gold mine and puts him self into communication with promoters with the object of starting a company. If under this Amendment he gives his name, address, and description, that will free the Directors, who are possibly men of straw for all the statements put forward in his name.

(2.57.) SIR B. FOWLER

I would point out that Directors do not always become such for purpose of profit. There are many companies started for purely philanthropic purposes, and the Directors of which take no fees.

(2.52.) SIR J. LUBBOCK (London University)

Of course, if, as has been said, Directors are men of straw, it is clear that no provision inserted in this Bill will force them to make restitution. I am afraid, however, the Amendment will not carry out the object with which it is moved, and I would venture to suggest that the hon. Gentleman should not press it further on the present occasion. At the same time, I really would ask Her Majesty's Government to consider in "another place" whether the word "expert" covers everything that is necessary. Let me give an illustration. Some friends of mine wished to invest in property in America, and they sent out a distinguished expert to investigate the title, and he also made a Report on the question of the land. No doubt he is an expert on the legal question, but I think it might, perhaps, be argued in the Law Courts that he is not an expert on the question of land. If a man of high character and good judgment makes a Report, I think a Director ought not to be liable in such a case; but, under the Bill as it stands, the Directors could not refer to the Report on the one point without rendering themselves liable on the other.

(2.54.) SIR M. HICKS BEACH

I am disposed to agree with that which has fallen from the right hon. Gentleman opposite as to the advisability of carefully considering the word "expert" before this Bill passes into law, but I do not think the example he gave was a very good one. No doubt the gentleman he referred to would be an expert with regard to the legal title of the land, but I do not think he could be regarded as an expert on a matter of which he has no special knowledge. I will undertake that the matter is fully considered by the Lord Chancellor and the Attorney General before the Bill passes into law.

(2.55.) MR. GROTRIAN

I think my hon. Friend the Member for Kensington (Sir R. Lethbridge) is needlessly alarming himself. He asks for protection in a case in which there is an official Report or a Report from some Government Department. If such a Report were misleading, the Director would simply have to show that he had reasonable ground to believe, and did believe, that the statements were true. Can it be assumed for a moment that any Judge would direct or any Jury find that, in regard to an official Report or a statement issued by a Government Department, a man had not reasonable ground to believe in its truth? I am myself a Director of many companies, and I shall be glad to assume the responsibility that will be thrown on me by this clause. I think a Director should not attempt to shirk any reasonable responsibility.

(2.58.) MR. CHANCE

I am sure the object of the hon. Member who has moved the Amendment is not to enable Directors to shirk the responsibility. I think the Bill is imperfect in this respect that it renders it necessary to make the Director a defendant, and to subject him to the cost of defending an action when the persons taking proceedings would be willing and prepared to strike directly at the person who is really guilty of the fraud. I do not think this Amendment carries out the hon. Member's object. I hope it will be withdrawn, and that the Government will consider the question in "another place."

(3.0.) MR. J. M. MACLEAN

I do not think we can have too many safeguards to protect Directors from being unjustly treated under this Bill. Let the Committee consider what the object of the Bill is. It is to do away with limited liability altogether, so far as Directors are concerned. It throws upon Directors unlimited liability. I grant that the Bill has been watered down a good deal, but still it is left to Judges and juries to say whether a Director has taken reasonable precautions to find out that statements in the prospectus were not misleading, and one knows that Judges are often disposed to be rather harsh in the treatment of capitalists, and that juries are occasionally apt to be even vindictive when Directors were brought before them by disappointed shareholders. This is a remarkable Bill, for it is really a Bill making the liability of Directors unlimited both in point of fortune and time. Under it a shareholder who has been a partner with a Director may be able, five or six years afterwards, when he has lost his money, to come into Court and make the Director liable. When penalties of this kind are sought to be imposed on Directors the House should inquire very carefully into every word in the Bill. The hon. and learned Member for Monmouth shire (Mr. Warmington) is very fond of telling us that this Bill was thoroughly threshed out by a Grand Committee upstairs; that this is only a formal stage; and that it is wrong that we should raise any discussion. The present discussion shows the great inconvenience of referring a Bill of this kind to a Grand Committee, whose proceedings are only reported in the most abbreviated form. I venture to say there is not a Chamber of Commerce in the country, and hardly a dozen men of business, who are aware of what Parliament is doing in the way of imposing this unlimited liability on Directors. The truth is, that the Bill has been framed by lawyers familiar with the seamy side of company promotion for the purpose of protecting private capitalists and shareholders. This is a Bill directed against the most beneficent movement of modern times, the introduction through limited liability for cheap capital into Industrial Companies—a movement now going on so rapidly that I believe, before the end of the century, we shall hardly have any private proprietors of large industrial undertakings. The Member for Northampton (Mr. Bradlaugh) has said, "Oh, we ought to have no mercy on Directors, because they may mislead shareholders."

MR. BRADLAUGH

I do not think I said that. I said, in answer to the argument used by the Mover of the Amendment, that if it were not for the Directors the promoters would not be able to get the money from the public, and that, therefore, the Directors ought to be made responsible for the statements made.

MR J. M. MACLEAN

But shareholders also go into companies. Are they to have no responsibilities? I complain that this Bill relieves shareholders from all kinds of responsibility. Why should this be? Why should we remove all responsibility from shareholders for the purpose of throwing the whole of it on Directors? It seems to me that the Bill goes much too far in that direction.

(3.7.) MR. ISAACSON

I was sorry to hear the speech of the hon. Member for Oldham (Mr. Maclean), for it is well-known that it is the shareholders who have suffered from the losses of companies. The Directors have suffered a minimum amount of the loss; they have suffered the loss possibly of their annual fees, but the shareholders have lost their capital. I have known cases in which false statements have been made by Directors who have evidently been urged by the promoters to make them, and in which the public have been induced to subscribe capital solely and wholly upon those statements. I hope the promoters of this Bill will continue to make it as drastic as possible for the protection of the public, for it is only the public who have to be considered in this matter.

Question put, and negatived.

(3.9.) SIR R. LETHBRIDGE

The next Amendment which stands in my name is after "and," in line 5, page 2, to leave out the words "that the report or valuation was made by the person whose name it bears, and." I wish to bring the words in in a subsequent part of the clause, and to make them governed, as the other qualifications are governed, by the statement that he has reasonable ground for believing that the report or valuation was made by the person whose name it bore. It seems to me absurd to make such an anomalous and invidious distinction between the various forms of statements as is here made. As the Bill stands, every person responsible for the prospectus guarantees that the statement or extract from the report or valuation was true and fair, and he also guarantees that the report or valuation was made by the person whose name it bore. Then there is the question as to whether the report or valuation was made in good faith, and that the person making it was competent to make it. In this case, the Director is relieved from liability if he had reasonable ground for believing that the report or valuation was made in good faith, and that the person making it was competent to make it. Why on earth is this invidious distinction made between the various classes of statement? This is only another instance of the slipshod and careless way in which this Bill has been allowed to come down from the Grand Committee. In regard to the last two points raised, the President of the Board of Trade has given us the assurance that measures will be taken to alter the phraseology in another place. It was solely upon that pledge that I did not press my Amendment to a Division.

SIR M. HICKS BEACH

What I undertook was that the word "expert" should be considered by the Government. I do not undertake that the word should be altered.

SIR R. LETHBRIDGE

; I quite understood that, and that is all I ask in regard to the present Amendment. I challenge the hon. and learned Member in charge of the Bill to give any sensible or rational explanation why a Director should be made to absolutely guarantee in its entirety the fact that the report or valuation was made by the person whose name it bore, while, on the other hand, he is only to guarantee his belief that the person making the report or valuation was competent to make it.

Amendment proposed, in page 2, line 5, to leave out the words, "that the report or valuation was made by the person whose name it bears, and."—(Sir Roper Lethbridge.)

Question proposed, "That the words proposed to be left out stand part of the Clause."

(3.16.) MR. BARING

But for the hon. Gentleman's phenomenal loquacity, I could have wished that he had been on the Committee upstairs. I doubt very much whether his presence would have conduced to the transaction of business, but it might have saved us time here. There is a distinct and proper reason for the variation in these terms. It is the bounden duty of a Director to know that the report is made by the person who purports to sign it, but it is not always possible for him to know that that person is competent to make the report.

SIR R. LETHBRIDGE

I do not wish to interrupt the hon. Gentleman—

MR. BARING

I have done.

SIR R. LETHBRIDGE

With the per mission of the House I—

Mr. BARING

I object.

(3.20.) MR. KIMBER

The House would do well to remember that the property reported upon may be situated thousands of miles away. How is it possible in such circumstances for a Director here to know that the valuation is a genuine one, or that the signature to the report has not been forged, or that the person employed is a competent person? Words ought to be inserted in the clause providing that the Director has taken the best means at his disposal to ascertain the authenticity of the report.

(3.21.) MR. RADCLIFFE COOKE (Newington, W.)

It is ridiculous to suppose that any gentleman in England can prove that a document sent from a place 1,000 miles away was signed by the person whose signature it bears. We may require him to do so, but, fortunately, the law is interpreted by Judges who possess a fund of common sense, and no Court of Justice would put the interpretation upon the Bill which my hon. 'Friend supposes. If a signature is duly attested in the Courts of Law of the country in which the person signing the report resides, the fact would be received as a sufficient answer on the part of the Director, who believed the report so signed.

(3.22.) MR. GAINSFORD BRUCE (Holborn)

Who are to be responsible? The Directors, who certainly have some means of information, or the innocent shareholders, who have no means of information, and who have been misled by an inaccurate or misleading statement? We are dealing with a case where a prospectus contains a statement that a report is made by a particular person. It turns out that the report is a forgery. I submit that the Directors who have put their names to the prospectus, and who have certainly means of ascertaining whether the report is genuine or not, should bear the loss consequent upon their mistake, rather than the innocent shareholders.

(3.23.) MR. TOMLINSON

My hon. and learned Friend forgets that what this Bill proposes to do is to place unlimited liability on the Directors, and the Court would have no power to relieve them. It seems to me that in a case where the Directors took every means to ascertain the genuineness of a document and still are deceived it would be very hard to make the Directors liable.

(3.24.) SIR H. DAVEY

According to this Bill, as it at present stands, it would be incumbent on the Director to prove not only that he took every reasonable means to ascertain the authenticity of the signature, but that the signature was de facto that of the person signing the report. Where a Director has believed on reasonable grounds that the report was made by the person whose name it purported to bear, and it subsequently appeared that the signature was a forgery—although he could not have any reasonable means of ascertaining the fact—it appears to me to be absolutely monstrous that this Director should be rendered liable for hundreds of thousands of pounds, which may have been subscribed on the faith of the prospectus. The Amendment proposes to require the Director to prove that he took reasonable means to ascertain the authenticity of the signature, and satisfied himself that the signature was authentic. Of course, he may be mistaken by a clever forgery, like anybody else, but I think that if he has taken all reasonable means to ascertain the authenticity of the signature, and has satisfied himself of its authenticity, he should not be rendered liable in damages for a single shilling.

(3.26.) MR. WARMINGTON

The question is whether, when companies are started and prospectuses are issued on the strength of a report, with the object of obtaining money from the public, the Director ought not to satisfy himself that the report came from the person whose name it bore, and have evidence at call, if need be, to show that the report bore such name?

(3.28.) MR. BRADLAUGH

It is not altogether a question whether the particular report is or is not signed by the person whose name it bears. Before a Director can be made liable the report must contain a statement which is either untrue or misleading, and on the faith of which a shareholder has invested his money. In the bulk of cases in which law suits have been brought against Directors, it has been found that there were three or four Directors in league with the promoter. I think that in these circumstances the Director ought to be held responsible in law.

(3.30.) MR. CHANCE

It appears to me that it is proposed to put a Director in the position of an absolute guarantor. Now, that ought not to be the position of a Director. A Director is simply a pioneer for the shareholders. He does not say, "I want to sell something," but he says, "I want you to join with me in buying something from a third party; I want you to join me as a partner." Therefore, a Director ought not to be called upon to guarantee as facts matters about which he cannot be absolutely certain. There is no rule of law which makes a vendor absolute guarantor of title; and if a man sells land ho is a guarantor only to the limited extent of the covenants.

(3.34.) MR. C. J. DARLING (Deptford)

An additional argument for the Amendment is that a Director would not be excused if it turns out that he himself has been deceived by a downright forgery, even although he is the greatest pecuniary sufferer. It appears to me that the House would not be justified in inflicting this great hardship on directors or anybody else. This clause provides that the Director must satisfy himself that the Report or valuation was made by the person whose name is attached to it; that he must satisfy himself it was made in good faith and by a person competent to make it. Even if he does that, he still remains liable if he is deceived, although he may have believed it to be true. It is nonsensical to reply that the Judges are men of common sense, and would not mulct a man in damages and costs in a case in which he had been grossly imposed upon. The Judges have to administer the law as it is, and not as it should be; and if the hon. Member for Stockton himself were on the Bench he could not avoid deciding against a Director in such circumstances. I do hope the hon. Member for Mon mouth shire will see his way to accept the Amendment.

(3.38.) MR. S. WILLIAMSON

Of course, if the Amendment is accepted, I shall be prepared to assent to it; but I do not see how a forged document could be used as the basis of a company without the grossest carelessness on the part of the promoters. I do not see how such a document, if not genuine, could be made a basis for launching a company without much carelessness.

(3.40.) MR. COURTNEY

I would point out that if the Amendment is accepted, the Directors or promoters will still be liable, for they will have to prove that they had reasonable ground for believing that the document was signed by the person whose signature it bore, and that he was a competent person to make the Report. The arguments are strongly in favour of the Amendment. It is not reasonable to expect a person to prove that he ascertained beforehand that a document signed in a foreign country was genuine; and if he took all reasonable pains to satisfy himself, he did enough to save himself from further liability. I hope that the Amendment will be accepted.

(3.42.) MR. SALT

There are many companies, as hon. Members know, connected with foreign countries and the colonies, and in connection with these documents are sent home from abroad, and are embodied in the prospectus, in order to enable the investor to see what is offered. But it seems to me that if the words of the clause are retained it will be almost impossible for a man with credit to lose to endorse any of these statements coming from abroad.

(3.43.) SIR G. CAMPBELL

I am very suspicious of these attempts to find loopholes by which Directors may escape. A case rarely arises in which, with good faith, a Report of an expert is put forth and subsequently turns out to be forged. Still, I shall not object to the acceptance of the Amendment, if it will not involve us in a mesh of consequential Amendments.

(3.45.) SIR M. HICKS BEACH

This is, of course, a very difficult point, but I think that if a Director has done his best to make himself reasonably certain that a Report is genuine, and if after that it proves to be a forgery, it will be impossible, under the clause, for the Court to exonerate him, and that would be going too far. I am inclined to think that the Amendment might be accepted if the words "after reasonable inquiry and examination" are inserted in the clause. If the House shows a desire to sanction this alteration, I hope the hon. Member for Monmouthshire will see his way to-accept it.

(3.46.) VISCOUNT GRIMSTON (Herts, St. Alban's)

Would it not be sufficient to insert words providing that a Director shall take reasonable means to ascertain that the Report was signed by the person whose signature it purported to bear?

SIR M. HICKS BEACH

I think it would be better to put it in the other form.

(3.46.) MR. WARMINGTON

With the acceptance of the House I will accept the Amendment.

Question put, and agreed to.

(3.47.) Amendment proposed, in page 2, line 6, after the word "that," to insert the words "after reasonable inquiry and examination."—(Sir Michael Hicks Beach.)

Question, proposed "That those words be there inserted."

(3.48.) MR. CHANCE

These words would compel Directors not only to make reasonable inquiry, but to ascertain as to the competency of the person making the report. That would be a very difficult matter.

(3.49.) SIR M. HICKS BEACH

I do not know anything into which Directors ought more to make inquiry than the competency of the person sending a report on the faith of which the public are asked to subscribe.

MR. CHANCE

Yes; but according to the clause not only must he reasonably believe in the report, but he must prove he has actually inquired into it and held some sort of examination. How can Directors be expected to examine as to the competency of an expert in minerals?

(3.50.) THE ATTORNEY GENERAL (Sir R. WEBSTER,) Isle of Wight

It is important that Directors should not simply take the report of any person without finding out what are his qualifications. Some such provision as this must be inserted, or a Director might profess himself simply satisfied with a name, and not seek to find out the qualifications of the person whose name is attached to the report.

(3.51.) MR. A. BROWN (Shropshire, Wellington)

It might be that the person who made the report was not a com- petent person, but I see how that is provided against by the last words of the sub-section.

(3.52.) MR. J. M. MACLEAN

What is the difference between Sub-section A and Sub-section B1 One refers to a statement made by the Directors themselves on their own authority, and, in regard to that, it is perfectly right that they should be called upon to make reasonable inquiry and examination into those statements before publishing them. But Sub-section B refers to statements made by experts, and it is provided that before issuing these statements the Director shall have reasonable ground for believing that the person who made the report was competent to make it, and that it was made in good faith. I think the words suggested by the right hon. Gentleman efface the distinction between the two sections, and ought not to find a place in this Bill.

(3.53.) SIR H. DAVEY

I really do not think this is a question on which the time of the House should be expended. All that is desired is that a Director should do what is necessary in order to form a just belief. He must make a reasonable inquiry and examination for the purpose of satisfying himself on that head, although I do not think, strictly speaking, that the words are necessary. I hold that the Amendment may well be accepted, as I do not think it would impose any greater burden on Directors than they ought to bear.

(3.54.) MR. MURPHY

I think the words "and examination" convey a distinct meaning that an examination has been made by a third person. I move that those words be omitted.

Amendment proposed to the proposed Amendment, to leave out the words "and examination."—(Mr. Murphy.)

Question proposed, "That the words and examination stand part of the proposed Amendment."

(3.55.) SIR R. LETHBRIDGE

I think that this Amendment is very necessary. I will ask the House to consider what would be the effect of leaving in such words as "due inquiry and examination," in the case of a forged signature to a document that has come from abroad in a way that may induce Directors reasonably to believe that it is true. How, in the case of a document coming from India, could Directors guarantee that the signature of the person whose signature it purported to be was genuine. I think that that is laying a most intolerable burden on the shoulders of Directors. I agree that we should insist on Directors and other responsible persons taking every reasonable care that the statements put forward are accurate, but in many cases, such as I have mentioned, it would be impossible to have more than reasonable grounds for believing; it would be impossible actually to verify the signatures. I do hope that the right hon. Gentleman will withdraw that portion of his Amendment which has been objected to. I do not think that the word inquiry even is needed, because the other provisions of the Bill render such inquiry imperative. I think this proposal puts too heavy a burden on the shoulders of Directors, and that it will tend unduly to relieve promoters of liability.

SIR J. LUBBOCK

I shall support the Amendment. The right hon. Gentleman proposes to throw on Directors, not only the responsibility of inquiring, but of examining into the competency of an export. What can they do more than inquire? Surely the words "inquiring-into" are sufficient. I should like to ask what is meant by "examining into" which is not covered by "inquiring into"?

MR. G. OSBORNE MORGAN

I do not think that the words "and examination" carry the matter any further; but, as a long time has been spent over the point, I hope the House will come to a decision.

SIR M. HICKS BEACH

I move the insertion of the words merely to stiffen the language of the Bill.

MR. KIMBER

It is said that this Amendment will tend to enlarge the responsibility of the Director; but it does not do so. The words already in the Bill have, in my opinion, a much wider scope than will be the case if those words are amended as proposed. The words in the Bill are that the Director shall prove "that he had reasonable ground for believing," and I think that any Court would be able to exercise a sound and clear judgment as to whether he had or had not reasonable ground. Therefore, to insert "after reasonable inquiry and examination" would be absolutely to limit the inquiry. I object to the insertion of these words altogether.

MR. CHANCE

I think a proposal to insert "after reasonable inquiry," merely, would be a perfectly reasonable thing. An examination as to the signatory of a report or valuation cannot be unreasonable; and, therefore, so far I should be inclined to support those words. But do they not also apply to the competency of the person making the report or valuation I This being so, the Director is to be required to prove not only that he had reasonable ground to believe that the report was made by the person named, but that that person was also competent, so that the Director is to set himself as a sort of licensing authority and to make inquiry into the competency of every expert. I hope the hon. Gentleman will withdraw the words "and examination"

(4.5) The House divided: —Ayes 244; Noes 93.—(Div. List, No. 146.)

Question, "That those words be there inserted," put, and agreed to.

SIR R. LETHBRIDGE

The next Amendment standing in my name is simply consequential to that already adopted. But perhaps I may be permitted to vary the words I have placed on the Paper, in accordance with the terms suggested and approved by the right hon. Gentleman the President of the Board of Trade, and, as I take it, also by the hon. and learned Gentleman who has charge of the Bill. I would, therefore, propose, after the word "faith," in Clause 3, page 2, line 9, to insert the words "by the person whose name it bears."

Question, "That those words be there inserted," put, and agreed to.

SIR R. LETHBRIDGE

There is another Amendment I desire to move, in order to raise a question which ought to be decided by this House before parting with this clause. I propose, in Clause 3, page 2, line 11, to leave out the words— Or unless he proves that he had not consented to become a Director of the company, or that, having so consented, he withdrew his consent before the issue of the prospectus or notice, and that the prospectus or notice without his authority or consent. I move this omission because I wish the House to decide what is really meant by this very badly-drafted Bill. [Laughter.] I think this is already shown by the numerous alterations and amendments made in the Bill, and although hon. Members laugh at my suggestion, I wish to raise the point—What will a Court of Law understand by the word Director, as it is used throughout this clause? Who is a Director? I respectfully urge on this House that the Bill does not touch certain persons who are really responsible for misstatements and bogus undertakings generally. That is to say, the promoters of companies whoso names do not appear on the face of the prospectus. It simply applies to those who do so appear as Directors, and, therefore, I want it to be set out very clearly who are to be considered Directors. A man is not a Director, and would not be hold to be one by any Court, if he has not consented to become a Director, although his name may appear on the prospectus. If this be so, I simply say that the words I propose to omit are simply surplusage and verbiage. Beyond this, a man who has consented at one time provisionally to become a Director, but has subsequently withdrawn his consent, before the issue of any prospectus or notice, can no more be a Director than any other person having nothing whatever to do with the company; ipso facto, he is not a Director. I hope we shall hear from the hon. and learned Member in charge of the Bill some definite statement as to who are really to be rendered liable under this measure —whether he means those who have fraudulently or otherwise affixed names to a prospectus which ought never to have had those names upon it, or whether he means those who are really the promoters of the company?

Amendment proposed, in page 2, line 10, to leave out from the words "make it," to the end of Clause 3.—(Sir Roper Lethbridge.)

Question proposed, "That the words from 'make it,' to the word 'before,' in line 13, stand part of the Bill."

SIR J. LUBBOCK

I think if the hon-Gentleman who has proposed this Amendment will look carefully at the clause he will see that it applies to. Every person who is named in the prospectus or notice as a Director of the company or as having agreed to become a Director of the company either immediately or after an interval of time, and every person "who has authorised or is responsible for this issue of the prospectus or notice. Obviously, therefore, the words which it is proposed to omit are necessary and I hope, therefore, that the hon. Member will not think it necessary to press this Amendment.

SIR R. LETHBRIDGE

After what has just been said I ask leave of the House to withdraw this Amendment.

Amendment, by leave, withdrawn.

MR. KELLY

I beg to move, in place of the Amendment standing in my name, the following Amendment: — Clause 3, page 2, line 13, after the word "consent," to insert these words, "or has given proper public notice that he has sent in his resignation and has ceased to be such Director. I do think it would be a most unfortunate thing, if in seeking to bring about a remedy for one evil, we should create a much greater evil. If the result of this Bill were to be that it would become almost impossible for any honest man to become the Director of a company, the House will, I think, agree with me in saying it would have been much better if this Bill had never been brought into the House at all. Perhaps the House will be somewhat surprised to know that there are cases in which a man has acted as a Director, and yet has never taken on himself the office of Director. The question as to whether a man has or has not in fact become a Director is one to be determined by the circumstances of each case. If this Bill only referred to ordinary cases of first issues, there would be no point in the observations I am making; but are there not many cases in which a prospectus, when first issued, is bonâ fide, but in which, subsequently, a majority of Directors, finding they cannot induce the public to take up a second or third set of shares or debentures and so subscribe a sufficient sum to get the necessary works for a mining or a railway undertaking done, agree to issue a fresh prospectus containing untrue or misleading statements. Take the case of a railway abroad, in regard to which a majority of the Directors agree to overstate the fact as to the extent of the completed line. A Director who had been a party to the original prospectus might decline to be a party to the subsequent one, and it is obvious that he ought to be able to divest himself of responsibility for a statement the truth of which he doubts, and for which he refuses to vouch. That is a case which is a common one; but from the words of the clause as they now stand, that if a man becomes a Director and acts for a number of years, he cannot withdraw from the position as I hold he should be able to do if he wishes. A man may be a Director for five years; every one of the other original Directors may cease to be Directors— there may not be any other person living from whom he can withdraw his consent to be a Director. Therefore, I submit that there should be some limitation adopted in the clause. Directors who wish to be honest should have the power of withdrawing from a Directorate the moment transactions take place that they repudiate, and they should be allowed to put an end to their responsibility as Directors. So far as I understand the facts, there is considerable doubt as to that which constitutes the act of ceasing-to be a Director. A man may cease to be a Director in his own intention—that is to say, he may send in his resignation —but I am not sure whether his responsibility will not continue if his co-Directors refuse to accept his resignation. The cases must be decided according to their varying circumstances. Two things must be clear: first, that the act of a Director sending in his resignation is bonâ fide, and that he intends it to be acted on; and, secondly, that he intends no longer to be in the position of a Director, or to do any act which a Director alone can perform. I do not wish to labour the point, and I am bound to say that possibly the first part of the Amendment is very vague, but it is susceptible of easy modification. I understand that an hon. Member, who has an Amendment lower down, is not prepared to move it; and I think he is wise in refraining, because it seems to me it would be a most dangerous Amendment for the House to accept. I do not think it would be right to say, in the case of a man who had lent his name to a concern, and on the strength of whose name many shareholders had been induced to come forward with subscriptions—I do not think it would be right to provide that in such a case he should be able to escape all liability by giving notice of his intention to leave the Directorate three days before allotment. I think a Director should be required to give such notice as would be proper and reasonable under the circumstances. It would be idle to seek to protect the public by allowing a Director to give three days' notice of his intention to resign his directorship before the allotment of the shares, and advertising the fact in a paper circulating in a district in which the registered office of the company is situated, as proposed by the Amendment of the hon. Member for Dundee. This seems to me to be obvious, for this office might be in Wales, when the great bulk of those subscribing for the shares might reside in London. I hope that whatever view the House may take of the Amendment, it will not seek to whittle the words down so as to make the notice a merely technical one, and such as would never be likely to be brought to the knowledge of those who had subscribed for shares.

Amendment proposed, In page 2, line 13,after the word "consent" to insert the words" or has given proper public notice that he has sent in his resignation and ceased to be such director."— (Mr. John Kelly.)

Question proposed, "That those words be there inserted."

(4.40.) SIR R. LETHBRIDGE

Before this Amendment is put to the House, I think it is clear that we should ask the hon. and learned Gentleman in charge of the Bill whether, broadly speaking, he accepts the view of the Mover of the Amendment; secondly, I think we may fairly ask from the hon. and learned Gentleman who has moved the Amendment what he means by the word "proper?" "Proper public notice" is a very vague term, and I suppose we might say in regard to it Quot homines, tot sententiœ,—every man has his own idea of what is a proper public notice. This is really a very serious and important point. Public notice given by a Director of his having ceased to be a Director invariably means, I take it, the wrecking of the company to which ho is attached. There can be no doubt that if a gentleman who is prepared to be a Director has obtained information before the company goes to allotment which convinces him that some fraud is contemplated, he will resign without a moment's hesitation, and notify the fact in such a way that investors will not be misled by the fact of his name appearing on the prospectus. There is no doubt about such a case as that; but I imagine that if this Bill passes, in the future a Director, when he sees that he has to examine every statement made in a prospectus, and that for the authenticity of every obscure document that may be referred to in the prospectus he is liable to the extent of his whole fortune, will hesitate very seriously before allotment before he allows his name to appear in connection with the enterprise, however sound and genuine it may be. What is ho to do in such a case? The hon. and learned Gentleman who proposed the Amendment said that in such a case the Director should give proper public notice that he has sent in his resignation. That means that, because he has been associated with other gentlemen in an enterprise that may be of the soundest possible character, but is not quite certain on some obscure point, and, therefore, is legitimately and properly anxious not to have any connection with it, he is bound to wreck that enterprise. The question is a difficult one, and I think the point raised by the Mover of the Amendment should be arranged for, but I do not think it will be met by the acceptance of these words, I hope that before the Bill passes into law the right hon. Baronet the President of the Board of Trade or the hon. and learned Gentleman in charge of it will devise some means of meeting the important point raised. I do not think the Amendment should be accepted in its present form.

(4.45.) MR. MOLLOY (King's Co., Birr)

I think the difficulty could be got over by providing that the prospectus should bear on the face of it the names of all existing Directors.

(4.45.) MR. WARMINGTON

I admit that there may be something in the point raised by the Mover of the Amendment, but I doubt whether it is possible to provide words to meet it without doing an injustice. I would suggest to the hon. Member that, having received this acknowledgment of his point, he should allow it to be dealt with when the Bill is in the House of Lords.

(4.47.) MR. KIMBER

I hold that some such Amendment is required. A Director of a company may, after the issue of the prospectus, learn something, owing to the fact of the company being advertised by the prospectus, which may make it his bounden duty as a man of honour to retire. If this Bill passes without Amendment in this connection it will be out of the power of the Director to do so. I think that a locus penitential should be open to the last moment. For instance, it ought to be competent for a Director, to retire if he thinks that the allotment has been made upon an insufficient contribution. He should be allowed to do so at any time before the actual allotment, provided notice is given to the person making application.

(4.50.) MR. J. CHAMBERLAIN (Birmingham, W.)

I confess I have not followed the argument, but it seems to me there is nothing to prevent any Director who has discovered anything about the company which may influence his action from resigning. ["Yes there is!"] No, not from resigning; but there is to prevent him getting rid of any liability he has incurred. What is the liability which affects a Director in his position? It arises only in case he has been a party to a false statement which has misled other people, or in case he has not taken sufficient pains to ascertain if a statement to which ho has given currency is true or false. If he finds it to his interest to go out of the company, I have no objection; but I am extremely unwilling that he should, at the same time, get rid of liability due to his own misconduct or tactics; his misconduct if he sanctioned a false state- ment; his tactics if he neglected to make sufficient inquiry into the accuracy of a statement. The hon. and learned Gentleman did not, perhaps, give us the full particular's of the ease he put before the House. He spoke of a Director who formed a company and afterwards resigned on information which he did not have previously. Well, everything1 depends on whether he was a party to any statement in the prospectus which was false. If he was no party to such a statement, he would not be liable; he might resign, and no liability would attach to him if he had made reasonable inquiry and examination into the statement, and satisfied himself it was not false or misleading. But if the Director was a party to a false statement, and if some shareholders could show that he was led to join the company by this false statement, and if he could show, at the same time, that the Director had not made reasonable inquiry into the truth, then the Director ought to remain liable.

(4.53.) SIR R. FOWLER

I am sorry my hon. Friend (Mr. Kimber) did not give us a little more information on the case he mentioned. As I understand, the noble Lord had private information that induced him to retire from the company. I should have thought his first course should have been to call his co-Directors together and put forward his information saying, "After this I object to going on, and our duty is at once to return the money paid and cease to advertise the company." Then the liability would be simply for the expenses of advertising, consulting solicitor, and small initial expenses. But, as the clause stands, it would seem to be a hard case for the noble Lord if he, having taken this course and having put the matter before his colleagues and his colleagues deciding to go on and make themselves liable, he hereafter should be involved in the same liability with them. That is a case the House ought to consider.

(4.55.) MR. R.T. REID (Dumfries, etc.)

I agree with the criticism of the right hon. Gentleman the Member for West Birmingham. The liability of a Director is up to the time of the issue of the prospectus or notice. This Bill does not interfere with the liability of a Director in respect of any subsequent publication of the prospectus, but merely up to the time of notice. It seems to me a Director is absolved under reasonable conditions, if he did not consent to the issue, or if he can prove that, having consented, he withdrew his consent before the issue of the prospectus or notice, and that such notice was issued without his authority or consent. It seems to me that no Director will be liable unless, in fact, he consented to the issue of the prospectus, or remained a Director, knowing that the prospectus was being issued, and that it contained a false statement. The hon. Member opposite has discussed the situation of a Director who subsequently became informed of a matter which, if he had known, in the first instance, he ought not to have sanctioned the issue at all. Such a case remains regulated by the Common Law and is not interfered with by this Bill. ["No!"] That is my opinion. If he allows his name to remain, and allows the thing to go forward with his name as a voucher, without attempting to prevent it, then he is liable. I am inclined to think that in moving this Amendment there is some confusion in the liability which arises on the first issue and subsequent issue of notices upon which the Director allows his name to appear and which is not dealt with by the Bill.

Amendment, by leave, withdrawn.

(4.58.) SIR J. LUBBOCK

Before we leave Clause 3, I should like to point out that no limit of time of liability is provided. It is reasonable there should be some limit, for it might be possible to prove circumstances within a reasonable time, but not after the lapse of years. I would ask the right hon. Gentleman to consider whether a clause should not be introduced limiting the time within which actions should be brought under the Bill.

(4.59.) SIR M. HICKS BEACH

I shall be very happy to consider that point, but I apprehend a limit is provided by the Statute of Limitations. Of course, it may be urged that that limit should be reduced, but that is a point upon which I can express no opinion at present.

(5.0.) MR. BRUNNER

I would suggest the insertion of the words "or resigned" after the word "consent." It cannot be said that a Director who may have been a Director four or five years, or even more, can have been considered to have withdrawn his consent if he wants to retire before the issue of the prospectus or notice. A second prospectus asking for money from the public is a very common thing, and a Director may desire to withdraw before the statement or prospectus is put before the public. Such a case is not provided for by the words in the Bill. I should like the hon. Member in charge of the Bill to consider this point.

Amendment proposed, in page 2, line 13, after the word "consent," to insert the words "or resigned."—(Mr. Bnmner.)

Question, "That those words be there inserted," put, and negatived.

(5.2.) MR. BAUMANN (Camberwell, Peckham)

I wish to raise the point mentioned in the Amendment of which the hon. Member for Dundee has given notice, where a Director has resigned his office three days before allotment, and has advertised such resignation in newspapers circulating in the district where the registered office of the company is situated. It is a different point to that which has been raised, and, I think, a material point; it deals with a man who, having become a Director, comes into further information between the issue of the prospectus and the allotment of shares. I think that a man who sends in his resignation before the allotment is made ought to be protected by some such words as these.

Amendment proposed, In page 2, line 13, after the word "notice" to insert the words, "or that, having been a Director, he has three days before allotment resigned his office, and has advertised such resignation in a newspaper circulating within the district in which the registered office of the company is situated."—(Mr. Baumann.)

MR. SPEAKER

With the difference of the three days, the Amendment is substantially one upon which the House has decided, and is, therefore, not in order.

MR. KIMBER

May I ask if the words I propose "or before allotment" world be in order?

MR. SPEAKER

I think the hon. Member may move that Amendment.

(5.4.) MR. KIMBER

I will do so. The right hon. Gentleman the Member for West Birmingham dealt with the case of a Director having placed his name on a prospectus, and having neglected to use means to satisfy himself of the accuracy of a statement therein, but that was not the case I put. I put the case of a Director having taken every means to satisfy himself, and who afterwards came bonâ fide into possession of information which may not go to falsifying the statement in the prospectus, but may be a material truth which should be made known to the persons making application. I quite agree with what has been said by the hon. Baronet as to the duty of such a Director, and it would be my advice to him that ho should, as a matter of courtesy to his Colleagues, put the matter before them. But if they do not act as he would have them, he is at the mercy of his Colleagues, who maybe the nominees of the promoters, and they may proceed to allotment, and he, though he may have tried to protect the allottees, may be prevented by the state of the law. He can resign, but he cannot escape the consequences attaching to himself, with the other Directors; he is still under the liabilities the Bill provides. The hon. and learned Member for Dumfries says that he is protected under the Common Law, but I dispute that proposition. He is committed to the statement in the prospectus issued, and the advertisements continue, on the faith of which men may take shares. I say distinctly he is not protected by Common Law.

MR. R. T. REID

I said his liability is under Common Law.

MR. KIMBER

The Bill makes a man responsible for any omission or false assertion, any omission of a material truth, and if a man having incurred responsibility is not allowed to get out of that responsibility, under such circumstances as I before detailed to the House, that is adding a gross injustice to the others contained in this Bill. I shall divide in support of the Amendment I now move.

Amendment proposed, in page 2, line 13, after the word "notice," to insert the words "or before allotment."—(Mr. Kimber.)

Question proposed, "That the words 'or before allotment' be there inserted."

(5.9.) SIR R. LETHBRIDGE

Before the question is put, I think we have a right to be informed exactly as to the point we are hero enacting'. Does the hon. and learned Member in charge of the Bill mean to assert, that after a Director has attached his name to a prospectus, in firm belief in its bona fides, arrived at after thorough inquiry, and that then, if he obtain fresh information before allotment, and takes every possible step to act on such information, withdrawing his name from the Directorate, and giving public notification of the fact; does the hon and learned Member mean to tell us that, notwithstanding all this, that Director shall be hold liable for all his Colleagues or the Board may do in proceeding to allotment and carrying out the purposes of the Company in an improper manner? If so, it seems to me that to state such a proposition carries a negative with it. I hope the Hon, and learned Gentleman will tell us what is his real intention. I would suggest to him that he might fairly accept the Amendment, which seems to me to be but simple justice.

(5.2.) MR. WARMINGTON

I cannot accept the Amendment, nor do I accept the views of the hon. Member who moved it as to the objects of this Bill. The Bill makes no Director in any degree liable for statements in the prospectus, unless he has neglected his duty. If a Director is party to an untrue or a misleading statement, he is open to an action; but if he can prove that, after careful inquiry, he believed such statement was true and honestly made, he is not liable to penalty. The allottee must show that he subscribed on the faith of the statements in the prospectus, and if this is shown, why should not the person who can be held responsible for the prospectus be liable to the consequences? That is the whole of the Bill.

(5.12.) SIR J. LUBBOCK

The case contemplated in the present Amendment is that of a Director who ascertains that he has been misinformed, and goes to his brother Directors and says, "Manifestly, we ought not to go on with allotment," makes this known as well as he is able by advertisment in the newspapers, and resigns his connection with the Board, but his Colleagues, against his remonstrances, proceed to allotment. The words in the Bill still leave him liable, though he has done everything in his power to make known the facts that have come to his knowledge, and to protect the shareholders from loss. This is a very hard case, and it is a point Her Majesty's Government would do well to consider when the Bill goes to another place.

(5.15.) The House divided: —Ayes 64; Noes 281.—(Div. List, No. 147.)

It being half after Five of the clock, Further Proceeding on consideration, as amended, stood adjourned.

Further proceeding to be resumed on Wednesday next.