DIRECTORS' LIABILITY BILL.—(No. 300)

HC Deb 25 June 1890 vol 345 cc1881-906

Bill, as amended, further considered.

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

I beg to move at the end of Clause 3 to add— Or unless he proves with respect to every such incorrect or misleading statement that it was in reference to some matter or thing which was known to one or more of the other Directors and not disclosed to him. The object of this Amendment is to provide that, in the event of misleading statements having been made by individuals which were not disclosed to the Directors generally, an individual Director to whom such statements were not made known should not be damnified. I submit that this is a reasonable protection to persons who are induced to become Directors, and unless such a provision is made I do not see how any individual is to protect himself against a false representation.

Amendment proposed, In page 2, line 4, at the end of Clause 3, to insert the words "Or unless he proves with respect to every such incorrect or misleading statement that it was in reference to some matter or thing which was known to one or more of the other Directors and not disclosed to him."—(Mr. Murphy.)

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

(12.39.) SIR G. CAMPBELL (Kirkcaldy, &c.)

No doubt the case to which the hon. Member alludes may be a hard case, but I think that every Director before he gives his name to a prospectus is bound to do something to ascertain the truth of the statements he is putting forward. Even if he is not personally guilty it is better that he should suffer than that the public should be defrauded. If these words are inserted a Director will simply plead ignorance. I take it that a man who gets £200 or £300 a year for the mere use of his name should not be absolved from the consequences of any misleading effect which the use of his name may have had, so far as the public are concerned.

(12.40.) MR. WARMINGTON (Monmouth, W.)

I hope the hon. Member will not press the Amendment. He must have forgotten what the provisions of the Bill are, and that they require every Director, before giving the sanction of his name, to have made every reasonable inquiry and examination. Surely, in regard to a statement made in a prospectus with a view to obtaining money from the public, it is not too much to require that those authorising it shall have made reasonable inquiry before they allow their names to go forth.

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

I, for one, must oppose the Amendment in every possible way, on the ground that it would legalise the very thing which the Bill is intended to prevent.

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

I also think that the words of this Amendment would afford too much protection to a careless or oven a fraudulent Director. It would open the door to endless fraud, for a Director would not only take no steps whatever to obtain information as to the misleading statements in the prospectus, but might even, if a substantial man, take care, by making an agreement with his impecunious colleagues on the Board, that the statements should not be disclosed to him, with the effect, if this Amendment were assented to now, of his being thus enabled to evade all liability for them.

(12.43.) MR. MURPHY

I beg to withdraw the Amendment.

Amendment, by leave, withdrawn.

(12.44.) MR. TOMLINSON (Preston)

I have placed the following Amendment upon the Paper—to add at the end of Clause 3 the following words: — (c.) In this section the word 'expert' includes any person whose official position or special knowledge gives authority to a statement made by him, and the expression 'misleading statement' means a statement which is so made as by suppression of fact or ambiguity to create a false impression. A general concurrence of opinion has been expressed that some Amendment in this direction is required, in order to provide some legal definition of the word "expert," which has never received any judicial interpretation. In order to meet some formal objections which have been suggested to me, I propose to leave out the word "position," and to substitute the word "professional" for "special," and to move the Amendment in that modified form. As to the second part of my Amendment, the expression "misleading statement" is equally without judicial interpretation, and the fear is that, every Director would be at the mercy of any discontented shareholder, who would say that he had, in fact, been misled by the prospectus, and that therefore it must be considered to have been misleading.

Amendment proposed, In page 2, line 14, at the end of Clause 3, to insert, as anew Sub-section, the words— (c.) "In this section the word "expert" includes any person whose official or professional knowledge gives authority to a statement made by him, and the expression "misleading statement" means a statement which is so made as by suppression of fact or ambiguity to create a false impression."—(Mr. Tomlinson.)

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

(4.48.) MR. WARMINGTON

I think it would be a matter of convenience if my hon. Friend would consent to divide the Amendment, seeing that different considerations apply to the first part from those which apply to the second. If my hon. Friend will, in the first place, move his Amendment down to the words "by him" I will not personally make any objection to it, as it seems to me that it may be a guide as to the definition of the liability.

(4.49.) MR. TOMLINSON

I am quite willing to divide the Amendment, as suggested. I, therefore, beg leave to withdraw it, with the view of moving the first half down to the word "him."

Amendment, by leave, withdrawn.

Amendment proposed, In page 2, line 14, to insert the words "In this section the word 'expert' includes any person whose official or professional knowledge gives authority to a statement made by him."—(Mr. Tomlinson.)

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

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

I certainly regard this Amendment as a very important one, and a very serious doubt occurs to me with regard to the propriety of passing it. When the subject was under discussion some time ago there was a distinct pledge given to the House by the President of the Board of Trade that when the Bill was taken into another House those in charge of it would take care that a definition of the word "expert" should be inserted, so as to meet the objections which have been urged in this House. I would suggest to my hon. and learned Friend that the words originally placed on the Paper, "official position or special knowledge," would be preferable to the amended version which he now proposes. I do not think that the words "official or professional knowledge" are broad enough to meet the objections which are made to the use of that very indefinite word "expert." Personally, I should like to retain all three phrases—"official," "special," and "professional." I think that all three are needed in order to give the full meaning of the word "expert," and I would venture to suggest to my hon. and learned Friend, and to the hon. Member in charge of the Bill, that the real meaning to be assigned to the word "expert" is of such vital importance that it would be advisable to have a conference with the President of the Board of Trade on the subject.

(12.52.) MR. G. OSBORNE MORGAN (Denbighshire)

We have discussed this question seven or eight hours already, and voted upon it three or four times. I therefore think the time has come when the House should arrive at some definite conclusion. It does not seem to me that the Amendment will do either good or harm, for it simply includes in the Bill that which the Court itself would have introduced by way of construction.

(12.53.) MR. WARMINGTON

In answer to the objection of the hon. Member for North Kensington, I may say that the President of the Board of Trade has already considered these words and has assented to the form in which they are moved.

SIR ROPER LETHBRIDGE

I desired to convey no imputation whatever upon the good faith of the President of the Board of Trade. On the contrary, I am satisfied that whatever pledge he has given he will fulfil.

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

I cannot see that there is any objection to the Amendment, and I think it is only right we should let the House of Lords know what we mean by the word "expert."

Question put, and agreed to.

Another Amendment proposed, at the end of the last Amendment, to insert the words— And the expression 'misleading statement' means a statement which is so made as by suppression of fact or ambiguity to create a false impression."—(Mr. Tomlinson.)

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

(1.0.) The House divided:—Ayes 37; Noes 97.—(Div. List, No. 155.)

MR. SPEAKER

I would suggest to the hon. Member for Longford that the Amendment which he has upon the Paper might be better proposed in the form of a sub-section of Clause 3, otherwise notice would be required for a new clause.

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

The object of the Amendment I am about to move is one that I trust commends itself to the promoters of this Bill, and I hope it will be agreed to. We know that the modern so-called boom in shares began with the Guinness boom, in connection with brewery shares, in October, 1887. That boom was greatly stimulated by the Conversion Scheme of the Chancellor of the Exchequer. The public invested in those shares since the date which I propose to appoint in this section. In 1888–9, the Chancellor of the Exchequer passed an Act requiring a certain amount of Stamp Duty on every £100 worth of shares. Therefore, if this Bill is to do anything to meet the difficulties in the way, and to capture fraudulent promoters, it ought to date from the year 1886. What is the good of locking the stable door after the steed is stolen? What good will it do to shareholders in Allsopp's to know that in future it will be impossible for a man in the position of Lord Hindlip to do what he did in connection with these shares? The Conservative Party have now declared themselves strongly in favour of the brewery interest, and all their money is invested in brewery or distillery shares. I sug- gest that it is vital to the general body of the public, in whose interest the Licensing Bill was introduced, that the Amendment should be adopted in order to prevent swindling by fraudulent promoters, largely in connection with these brewery shares. The matter is not confined to brewery shares. The Conservative Party is largely a warlike party, and we know very well that in connection with the Hotchkiss Gun, the Gatling Gun, and the Nordenfeldt Gun, and a number of other public companies^* the grossest frauds are being perpetrated. I venture to say, since the days of Adam, if Adam was connected with company promoters, no greater fraud has been known to the public than in connection with the Gatling Gun Company. All these companies are shadowed forth to the public as companies that have paid an enormous interest, and anybody who will read their prospectuses will see at a glance that if this Bill is passed it is, as I say, locking the stable door after the steed has been stolen. I should ask, what satisfaction is it if I invested my money, say in Lord Hindlip's brewery, and he has pocketed his three millions, to find, when it comes to wanting the money back, that, as J. Gould said when he was asked to turn up the money that he had got in connection with the New York frauds, "it had gone where the woodbine twined." That is exactly the position of so large a number of the gentlemen connected with company promoting. I am happy to say that my losses have been very slight from the whole of them. So my action in this matter is purely disinterested. I view the matter from a very practical point of view. Take water gas. It was boomed to the world as a tremendous commodity which would knock out of time the electric light, and coal gas, and every other illuminant. £5 shares went up to £20, and then suddenly dropped, and everybody concerned got about £2 for their £5. Ought not the gentleman connected with that fraud to be unearthed? I suggest that it is a very remarkable piece of legislation, which proposes, after all the wrong and mischief has been done, to say that in the future only, forsooth, shall the remedy be applied. Then there was the leading case of Warner's Safe Cure. The £10 shares went up to £50 before the dealers in them knew where they were. And Mr. Warner and his gang of American sharpers plundered this country in the most marvellous American manner. When companies of this class are allowed to do this sort of thing, there must be something rotten in the state of Denmark. The hon. and learned Gentleman who is promoting this Bill has put down an Amendment to earmark his intentions, and to provide that the Bill shall only deal with all future swindles. It is a remarkable course for the hon. and learned Gentleman to pursue. I suppose the reason is that he has read so much of the doings of Warner and Lord Hindlip Allsopp, and all that class of persons, that he decided that, in future, persons in the peerage, who are connected with the brewing interest, shall be punished, and that the Peers in the past who have committed frauds on the public are to go scot free. That, in my opinion, is to take a course which cannot commend itself to the common sense of the House. I really think it is a remarkable state of facts that the English public do not turn and rend these company promoters, whose iniquity steams every day in the financial and leading newspapers. And to think that a Peer of the realm should pocket £3,000,000, and then, when it comes to be examined how many pounds ho has allowed to remain in the company, it is found that only a paltry few thousands are invested, the remainder of the £3,000,000 being invested in Goschen or Government Stock. That is not a credit to the commercial status of this country. The fact that this gentleman and his friends are not torn to pieces by the indignant public shows the very remarkable state of numbness to which the public have been reduced by this system. If there is a class who deserve protection it is the class gulled by these circulars. I must say the fact of Members of Parliament lending their names to this system of company promoting is little less than a scandal, and this House, if it goes on, will become little less than a sty of guinea pigs. Of course, a Member of Parliament ought to be allowed, like any other man, to follow any business he choooses, but what I condemn is that the "M.P." should be blazoned forth and used as a bait to trap the unwary. The widow or the investor down in the country, when they see the respected name of their Member, or of some Member of the Tory Party, just made a Peer because of his connection with hops, published in association with some company, are inspirited with confidence, and invest their money. If Members of Parliament lend their names to public companies, the very name Member of Parliament will become almost as odious as the name Deputy has become in France. We know that in Prance a Bill was introduced to prevent Deputies lending their names to such companies. I do not know whether the Bill has been passed into law, but at any rate it has had a most salutary effect on the French community, and most of the crawling guinea pigs have been sent about their business by the electors. Of course, a number of these companies may be perfectly sound, and I believe a number of them are; but what I contend is that the great office to which we are elected in this House should not be turned into a simple connection with the promotion of companies. I see strings of Members of Parliament, dozens of them, connected with public companies. If you turn to the directory of Directors, you will find whole strings of Peers and Members of Parliament whose names are connected with these companies. Therefore, I say that what ought to be dealt with is this question of promotion in the past. It is not sufficient to deal with this evil as if it was a future evil. The mischief is done. The Conversion Scheme of the right hon. Gentleman the Chancellor of the Exchequer let loose £100,000,000 for the purpose of investment. Guinness's boom opened the eyes of shareholders to investments offering the chance of 15 and 20 per cent. We ought to deal with the evil as one which commenced upon a given date. It would not do to go back to the days of the Glasgow Bank, or any case of that kind. There is a particular time which, in my opinion, ought to be taken as the starting point of fraud, and on this ground I beg to move the Amendment in the form which you have suggested, Sir, from the Chair.

Amendment proposed, at the end of the last Amendment, to insert the words— Provided always, that this Section shall apply to any prospectus or notice issued since the first day of October, one thousand eight hundred and eighty-six."—(Mr. T. M. Healy.)

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

(1.20.) MR. WARMINGTON

I cordially concur in the observations of the hon. Member for Longford, but, at the same time. I must explain my position in this matter. In Grand Committee I gave an undertaking that the action of the Bill should be prospective, and I believe I am bound, so far as I can, to insist that the Bill should be prospective. I have an Amendment on the Paper, however, promising that the Bill should come into force as soon as possible, and I propose that the Bill shall apply to notices and prospectuses issued after 1st of October, 1890. I am afraid, therefore, I shall not be able to support the Amendment of the lion, and learned Member, but must ask the House to allow the Bill to stand as it is, with prospective action, and to come into force as soon as possible.

(1.22.) MR. ISAACSON

I cannot possibly sec how the measure can be made retrospective. But if it only takes effect from 1890, I feel sure that it will do a great deal of good. I read a calculation the other day that in five years something like £180,000,000 had been absolutely wasted, or, I may say, the public have been defrauded out of that enormous sum by bogus companies. I am extremely sorry that Members on both sides of the House should lend their names to companies day after day. I should have thought the Members of the Government would have had enough to do to attend to the business of Parliament, and I do think they ought not to take these offices. I remember some time since the Honduras Loan was brought out for 8s.

MR. SYDNEY GEDGE (Stockport)

I rise to order. The point is that this Bill should be retrospective from the 1st October, 1886.

MR. ISAACSON

I do not say the hon. and learned Gentleman is connected with a case of that kind, and I should be very sorry indeed to say so. The only thing I feel is this, that the public ought to be protected, and this Bill does not go far enough to protect the public in the matter of loans. This Honduras loan was brought out at 107, and it dwindled down to 13, and the man who brought it out had to leave the country.

MR. SPEAKER

The hon. Member must confine himself to the retrospective character of this Amendment.

MR. ISAACSON

I am anxious to obey the orders of the Chair. I do not see how this Bill is to be made retrospective without filling the Law Courts, and giving employment to some 150 gentlemen of the long robe.

(1.26.) MR. G. OSBORNE MORGAN

I could wish for many reasons to vote with my hon. and learned Friend, but to adopt this Amendment would be a departure from the usual course of legislation. I believe there is no instance, or, at any rate, the instances are very rare, in which penal legislation has been made retrospective. Besides, if you antedate its operation why stop at 1885? Why not carry it back 10 or even 20 years? The one safe ground to take is to make the measure prospective.

(1.27.) MR. J. M. MACLEAN

The right hon. Gentleman has pointed out the weak spot in the Amendment of the hon. and learned Gentleman. The Amendment of the hon. and learned Member for Longford is apparently directed against one or two companies to which ho has strong objection.

MR. T. M. HEALY

Two or three hundred companies.

MR. J. M. MACLEAN

The hon. Gentleman particularly specified Allsopp's, and he reproached this side of the House for investing all their money in brewery shares. I have never had a brewery share; therefore, I can speak impartially. The hon. Member throws all the blame on the Directors. He goes a good deal further than even the Bill, which proposes to make the liability of the Directors unlimited. That is a serious matter enough. But the hon. Member would allow, no Member of Parliament to be a Director.

MR. T. M. HEALY

I have no objection to his being a Director; but I object to the "M.P." being used for the purposes of advertisement.

MR. J. M. MACLEAN

That would hardly make any difference. Everybody knows whether a man is a Member of Parliament or not, and to take away the "M.P." from his name would be of very little consequence. But I would point out that the hon. Member himself has a good deal of private business, and yet he finds time to attend to business in this House very effectually. Members who are lawyers and physicians pocket fees for the advice they give. Why should Members of Parliament, with their business know ledge, be prevented from going into these companies. Why should a Member be denounced as a guinea pig because he takes fees for attending to the business of public companies? Nobody reproaches the lawyer or the physician for pocketing his fees. No doubt we should all like to be born millionaires, and then we should be like some of the hon. Members below the Gangway opposite, who have such a vehement antipathy to Directors. Some hon. Members habitually speak of Directors as criminals.

MR. SPEAKER

Order, order! The question is solely as to the retrospective action to be given to the Bill.

MR. J. M. MACLEAN

I would point out, with great respect, that the hon. and learned Member was allowed to make a very strong attack on Directors generally, and especially on Members of this House who happen to be connected with public companies, and I claim very respectfully the right to say a word or two in justification of the action of Members of this House, who give their leisure time to the direction of companies. Throughout this discussion hon. Members have spoken of Directors in the freest terms. The hon. Member for Kirkcaldy (Sir G. Campbell), for instance, habitually speaks of Directors as sinners. [Cries of "Order."]

MR. SPEAKER

The hon. Member is out of order in addressing himself to the general question of the conduct of Directors. The question before the House is whether the provisions of this Bill shall be made retrospective.

MR. J. M. MACLEAN

I will not say anything further on that point, but I thought that if it was my duty to correct the false impressions that were conveyed by the speech of the hon. and learned Member for Longford. He was loudly cheered when he denounced Directors generally. He seemed to work the House up to that state of mind which reminded me of a sentence of Macaulay's— We know no spectacle more ridiculous than that of the British public in one of its periodical fits of morality.

MR. SPEAKER

I have already called the hon. Member to order on the ground that he is transgressing the rules of Debate. I must ask him to pay attention to the ruling of the Chair.

MR. J. M. MACLEAN

It is difficult to restrain one's indignation at the attacks that have been recklessly made by the hon. and learned Member for Longford upon the reputation of perfectly innocent people, and it is rather hard that hon. Members are not permitted to reply to them. With regard to the hon. and learned Member's proposal to make the operation of the Bill retrospective, and apply the Bill to Companies already in existence, I may say that in the cases to which the hon. and learned Gentleman has referred the shareholders were as much to blame as the Directors. People, we know, go down on their knees and entreat Directors to make them an allotment, and then, if anything goes wrong, they turn round and abuse the Directors, expecting to get their losses back again. That is a thing which the House should thoroughly apprehend. This is not a question that concerns the public at large, but merely the shareholders and Directors in particular companies. I should be sorry to see the Bill made retrospective to all companies. There are a thousand millions invested in these companies, which are successfully carrying on some of the great industries of the country, and the men who direct them deserve thanks instead of being held up to reprobation as criminals.

(1.35.) SIR W. HARCOURT (Derby)

I do not differ in any way from the sentiments which have been expressed by the hon. and learned Member for Longford, but I am not going to follow the hon. and learned Member in his remarks, because you, Sir, evidently are of opinion that some of the points he raised ought not to be discussed in this Amendment. I imagine that the hon. and learned Member in making those remarks, had in view the justification of his proposal that the House would adopt what, I admit, would be the rather exceptional course of making the provisions of the Bill retrospective. I do not think there is very often much blame attaching to the class of Directors. The question before the House is, whether we should be justified, on account of the blame which attaches to some Directors, in adopting this course, which is extremely unusual in English law. I, myself, must lie under the imputation of the hon. Member for Oldham, as I am suffering from one of the periodical attacks of morality, and I think it is a very good thing that the House of Commons has taken this matter up. I have voted steadily in favour of the most stringent provisions of this Bill, because, I think, it is high time that the public should be protected against the schemes of unscrupulous persons. In my opinion, the position of Membership of this House is often grossly abused, and is used for the purposes of advertisement. I do not, however, wish to do or say anything, or to make any imputation, against anyone who may happen to be a Member of this House, and who may happen, in the regular course of his life, to be a Director. That, I think, is a circumstance no one can condemn, but what I do condemn is the use of Membership of this House to advance the interests of Directors of companies. The question is whether we should, in the present Bill, do that which really would amount to what was called in the olden days a "Bill of Attainder," which had a retrospective action. I think that in doing that we should be departing from the usual course of legislation in these matters. It would be taking a very grave view of what is, unquestionably, a very grave subject. I hope that the Bill, as it stands, will be sufficient to restrain the practice complained of, and which I hope the great majority of the House are disposed to condemn. Although I am very much disinclined to vote against my hon. and learned Friend in this matter, I trust that, upon consideration, he will not press his Amendment, which certainly would almost be a solecism in legislation of this kind.

(1.40.) MR. JOHNSTON (Belfast, S.)

I should be most willing to support the proposal of the hon. and learned Member for Longford, for making the provisions of the Bill retrospective, if the hon. and learned Member will consent to those provisions relating back to 1881, so as to include the case of the Irish Land Purchase Company, of which Mr. Charles Stewart Parnell was the Chairman.

MR. SEXTON (Belfast, W.)

What company does the hon. Member say?

MR. T. M. HEALY

What did Mr. Parnell get out of it? Did he ever receive a farthing fee?

(1.41.) MR. W. RADCLIFEE COOKE (Newington, W.)

I do not know whether, if the Amendment is pressed to a Division, the right hon. Gentleman opposite intends to vote for it.

SIR W. HABCOURT

I said I objected to it.

MR. COOKE

I regard the Amendment as being open to the greatest possible objection. People expect to carry on their businesses according to the law existing at the time those businesses were started, and no business at all would be started if it were considered possible that laws of a totally different, and of a destructive, character could be established after the business had been commenced. That is the real and fundamental objection to the Amendment. However objectionable may have been the conduct of certain promoters and Directors, few people would desire to produce so disastrous a state of things as would be brought about if this Amendment were to be accepted. After all, we cannot shut our eyes to the fact that the tendency of modern times is in the direction of large industries being carried on by means of companies. It is quite possible that in the transference of a business from a private individual to a company, the individual obtains more for his business than it is worth. But after all, it is the active principle of business to sell what you have for more than it is worth. If you sap that principle you will destroy the mainspring of human industry. I do not believe that the hon. and learned Member for Longford, from the tone of his remarks, is in earnest in moving this Amendment, and probably, having made his caustic remarks upon hon. Members who are Directors, he will be satisfied and withdraw the Amendment.

(1.40.) THE ATTORNEY GENERAL FOR IRELAND (Mr. MADDEN,) Dublin University

I hope that the hon. and learned Member for Longford will be satisfied with having raised this interesting discussion, and will withdraw his Amend- ment. Your ruling, Sir, renders it impossible for me to enter into the question of whether the greater portion of the losses which have occurred to investors during recent years have been due to the dishonesty of Directors or the folly of shareholders. Hon. and learned Members from Ireland will be aware that this is a branch of law I have had a great deal to do with in that country, and I must say my experience has led me to the conclusion that there is scarcely any branch of the law which could be more usefully dealt with for the protection of the general public. I say this without any invective against Directors or statement as to how these unfortunate losses have occurred. The result of my experience—such as it has been—is this, that the public require additional protection in this matter, and, therefore, I think our thanks are due to the lion, and learned Gentleman who has introduced this Bill. But, having come to the conclusion that the general investing public require protection, I must say I object to the highly penal provisions of this measure being made retrospective. Having decided to attach penal consequences to a certain course of action on the part of Directors, you should proceed with your legislation in the ordinary way, and not adopt an exceptional— and more than that, an unprecedented—course of legislation in this particular instance. Very property the provisions of the Bill are highly penal. But this very consideration creates an insuperable objection to the proposal in the Amendment, for there is no parallel for legislation of this kind being made retrospective. I trust the hon. and learned Member will rest satisfied with the discussion he has raised and will not press his Amendment.

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

I think those who oppose the Amendment proceed on a complete misapprehension as to its scope. Obviously, if it created a new moral obligation, we should all vote against it, and I am sure my hon. and learned Friend would never make such an unjust proposal; but the Amendment does not propose to create any new obligation whatever. I am sure the right hon. and learned Gentleman who has just addressed the House would not for a moment urge that, up to the present, Directors have been morally entitled to mislead the public, and to lend their names to prospectuses, and father statements which they knew—or ought to have known—to be untrue. They have always been, at least, morally bound to act with prudence in investigating the statements they have been asked to give to the public, and all this Bill proposes to do is to render them liable to attach some money meaning to that responsibility. It creates no new responsibility, but merely gives an effective means of enforcing the responsibility which has always existed. As to its being unusual to pass retrospective legislation, this House constantly passes Bills which affect contracts already entered into between private persons. And I would point out that the Bill does not propose to give a criminal remedy against a fraudulent Director, but merely a civil one; and why should hon. Gentlemen opposite object to such a remedy as that being enforced against rogues and thieves, for that is the only class of people who will be prejudicially affected. Your criminal legislation has been made retrospective on other occasions, notably in 1887, when you created artificial criminal offences in Ireland; why, therefore, should you not legislate retrospectively against fraudulent Directors?

(1.50.) MR. SYDNEY GEDGE

I challenge the hon. Member who has just sat down to point to a single case in proof of his assertion that we have passed measures dealing retrospectively with offences in Ireland. It is true there has been retrospective legislation in regard to contracts. Retrospective action with regard to contracts has been adopted in two instances—once with regard to the Ground Game Act and once with respect to the Irish Land Bills. In both instances it was objected to by large parties in this House, and in the latter case was only adopted under the pressure of strong necessity in the case of the Irish tenants. I do not think we need go so far as to say that those who would be affected by these clauses would be necessarily rogues and thieves. As the clauses are drawn many men might be brought under them who had simply been careless. When the Act has been passed notice will have been given to Directors as to the matters which it makes illegal. It is a very different thing to say a man shall be criminally responsible in face of a law which directs attention to his responsibility, and to say he shall be criminally responsible for carelessness for which at the time he could not be made responsible, and in reference to action committed in good faith. It is proposed that the clause shall affect prospectuses or notices issued not after the passing of the Act, but after the 1st of October, 1886. The earlier parts of the clause, however, relate to the time when the Act comes into operation; and, therefore, if the Amendment be adopted, we shall have a clause which is not couched in Queen's English, or even in Parliamentary English, and which is nonsensical on the face of it.

(1.54.) SIR G. CAMPBELL

I entirely agree in principle with this Amendment, and have not the least objection to put down wicked acts, but I cannot concur in the desirability of making the clause retrospective. An enormous number of Gentlemen inside and outside this House have followed the profession of "guineapigging," and lam afraid if this Amendmend were passed we should have a panic in the country, and the Kingdom would be almost depopulated.

(2.0.) The House divided:—Ayes 55; Noes 135.—(Div. List, No. 156.)

(2.21.) MR. WARMINGTON

I beg to propose to substitute "October" for "January" inline 16. I wish to make the Bill to come into operation on the 1st of October, 1890.

Amendment proposed, in Clause 4, page 2, line 16, to leave out the word "January," and insert the word "October."—(Mr. Warmington.)

Question put and agreed to.

MR. WARMINGTON

I now beg to move to omit "one" after "ninety."

Amendment proposed, "To leave out the word 'one.'"

Question proposed, "That 'one' stand part of the Bill."

(2.23.) SIR ROPER LETHBRIDGE

As I have an Amendment on the Paper that deals with the same point, it may expedite the progress we desire to make if I explain now why I put the Amendment down and why I do not propose to move it. The Amendment just moved fixes a certain date on which this Bill is to come into operation. It seems to me that it would be of advantage to the public interest, and especially to the interest of those great undertakings which are now in the hands of Limited Liability Companies if that date were somewhat postponed. It seems to me that the result of this Bill will be to effect a very great change in the status of future Directors of Limited Liability Companies. I am sure those who promote the Bill have the very best intentions, namely, the protection of the public. But the great danger in the case of Limited Liability Companies arises not so much from the action of fraudulent Directors as from that of fraudulent promoters, who are not touched by the Bill. The provisions of the Bill make such a great change in the responsibility of honest Directors who really act up to their lights and with the utmost honesty of intention, that I think it will be very difficult in the future to induce any men of position and reputation, who have anything to lose, to become connected with or responsible for the issue of new companies. It is undoubtedly a fact that large amounts of capital have already been laid out in the preparation of perfectly sound enterprises that would come into being if nothing happened to prevent them during the next few months or the next year. These schemes, I maintain, will in all probability be hopelessly ruined by the introduction of this Bill, because those noblemen and gentlemen who have allowed their names to be connected with them will undoubtedly withdraw front all association with them, and consequently it will be impossible to put the enterprises before the public. I think that this Bill may be described as a Bill for placing the future of limited liability in the hands of guinea-pigs and men of straw.

MR. SPEAKER

The Amendment is to omit "ninety-one" for the purpose of inserting "ninety." The hon. Gentleman is hardly entitled to go into the matters he is dealing with.

SIR ROPER LETHBRIDGE

Of course, Sir, I do not contest your ruling, but the point I wish to put before the House is that if a very early date be assigned for the operation of the Bill, it will imperil a large number of perfectly sound and legitimate enterprises that have been prepared for submission to the public because of the danger that must result to gentlemen who have allowed their names, or have intended to allow their names, to be associated with the prospectuses about to be issued. I submit that this may possibly be regarded as a reason why a very early date should not be fixed for the coming into operation of the Bill. I do not propose to move my Amendment, as I do not wish to obstruct the House in coming to a decision; but I urge these facts as a reason why the hon. Member should not fix too early a date for the coming into operation of the measure.

SIR R. FOWLER (London)

I am glad to hear the announcement that my hon. Friend does not intend to propose his Amendment. I am not very much in love with the Bill, for reasons I hope to state hereafter, and I have, therefore, voted on many occasions with my hon. Friend beside me. I think the hon. Member opposite has fixed very properly on the 1st of January, 1891, because I think, if the Bill is to become law, it would be a great mistake to defer the time at which it is to come into operation.

SIR ROPER LETHBRIDGE

The date now proposed is October, 1890.

SIR R. FOWLER

I am sorry to hear of that alteration. It changes my view of the matter. At the same time if the date fixed were October, 1891, that would allow a large number of companies to be brought out, and would lead to things that might be very prejudicial.

Question put, and negatived.

MR. WARMINGTON

Then I have to propose an Amendment at the desire of the President of the Board of Trade. I have submitted it to the right hon. Gentleman, and it has his approval.

Amendment proposed, At the end of the last Amendment, to insert the words "and shall only apply to prospectuses and notices issued after that date."—(Mr. Warmington.)

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

(2.31.) MR.T.M.HEALY

I think this Amendment most objectionable. We have heard from influential Members of the House what their objections are to the retrospective action of the Bill, and the hon. Gentleman (Mr. Warmington) has delivered himself of the opinion that it would he a hardship upon promoters and Directors to make the action of the Bill retrospective, but what does he now propose to do? He is going to give a kind of scapegoat period between the months of June and October within which frauds may continue. This Act would naturally take effect immediately after the Queen's Assent, but there is to be a close time for fraudulent Directors up to October, 1890. Well, I object to a close time for swindlers. Promoters, Directors, and everybody else have had long advertisement that this Act is about to be passed; but so tender is the hon. and learned Gentleman for those whom this Bill is to punish, that he proposes to allow the flow of a flood of felony between now and October. A more remarkable proposal I have never heard; it is a condemnation of the hon. and learned Gentleman's own Bill. I can understand his objection to my proposal to make the Act retrospective, but here he is branding his own Bill as a measure that is really not much wanted. He says, in effect, there is no need of hurry about it after all, and these poor guileless promoters should have time to run their merry rigs a little longer. I am amazed that the hon. and learned Gentleman should cast such a slur upon his own legislation, practically justifying the opposition of hon. Gentlemen opposite. "You are right," he says. "The Bill is objectionable, and there should be ample scope and verge enough" for these operations up to October I next, and this is assented to, practically, without debate. I suppose this is to allow the development of schemes now in process of incubation. Is this to be tolerated? Are we to wait for months, so that fraudulent proposals and prospectuses now, perhaps, in the printers' hands, can be put before the public? Really, I think this Bill has had from its own parent the most severe stab it could receive. Apparently the view of the hon. and learned Gentleman is that there should be a close time for fraud. You may commit a fraud on September 30, but not on October 1. Hon. Gentlemen opposite may date their prospectuses September 30, but not later.

MR. JOHNSTON

Does the hon. and learned Gentleman attribute to Members on this side the circulation of fraudulent prospectuses?

MR. T. M. HEALY

The hon. Gentleman is quite mistaken. I say anybody can issue a fraudulent prospectus on September 3 and is not to be struck at by this Act; but if he dates it October 1, then lie renders himself liable to punishment. The hon. Member for South Belfast does not carry into public life that geniality we all recognise in his private capacity. He suggested a moment ago the Bill dating from 1881, but the case he put is of a wholly different character to those we have in contemplation in passing this Bill. The company formed for migration purposes was one from which no Director derived a penny. The Directors were mistaken perhaps, but they drew no fees; but this Bill does not touch such a case; it strikes at false and misleading statements issued. But I rose to protest against the suggestion that there should he a close time for fraud. I say the moment this Bill becomes an Act, let it come into operation. I deny that this is a Bill so unjust and harsh in its operation that any interval should be allowed.

(2.36.) MR. BARING (London)

I very much regret the introduction of words suspending the operation of the Bill until the 1st October. I think it should run from the passing of the Act, and all the more because we have heard from my hon. Friend near me that there are sundry noblemen and gentlemen who are considering whether their names shall appear on prospectuses now in preparation.

SIR ROPER LETHBRIDGE

Not within my knowledge.

MR. BARING

I thought my hon. Friend spoke of what he knew; but it seems he spoke of what he did not know. I think, looking at the serious nature of the evils with which the Bill is to deal, we ought not to give them what has been called a close time, but as soon as the Bill becomes law it should be enforced. I could not agree with the proposal to make penal legislation retrospective; but when we make penal legislation, it should come into force with the passing of the Act.

(2.37.) SIR W. HARCOURT

I quite agree in that view. I am against a close time of any description, whether for Directors or for hares. Certainly I cannot conceive any possible argument by which, a measure of this kind, if it is justifiable at all, should not take effect as soon as Parliament has given assent to it. As I said before, in opposition to the retrospective Amendment, that it was a departure from Parliamentary usage, so I say in opposition to this Amendment that it is equally a departure from Parliamentary usage without justification.

MR. SPEAKER

I must remind the House that, as amended, the clause runs thus:—"This Act shall come into operation on the 1st of October, 1890."

MR. T. M. HEALY

Will it not be competent for us to vote against the clause as amended; and, the clause being struck out, the Act would come into operation at once?

MR. SPEAKER

No; the proposal that the clause stand part of the Bill is made in Committee.

(2.38.) MR. SETON-KARR (St. Helen's)

Are not the words now before us consequential upon the decision of the House that the Bill shall come into operation on October 1, and are they really necessary? The Bill docs not apply to prospectuses issued before that date, or what is the meaning of the clause? If we have already passed the words declaring that the Bill shall come into operation on October 1, naturally the Bill cannot apply to prospectuses before that date.

(2.38.) MR. SPEAKER

The House has passed the clause that this Act shall come into operation on October 1, 1890, and the Amendment now proposes that the Act shall only apply to prospectuses and notices issued after that date. The point is how to deal with notices issued between the passing of the Act and the date for the operation of the Act.

(2.39.) MR. T. M. HEALY

I assume, undoubtedly, that prospectuses issued meantime will be covered by the Act, but legal procedure can only be taken after October 1. Undoubtedly, as the clause stands, all bogus and improper prospectuses come under the Act as soon as it passes; but these proposed words will prevent that.

MR. SETON-KARR

It seems to me that the Amendment is the natural consequence of what the House has accepted, and the hon. and learned Member's interpretation makes nonsense of the Bill. The Bill cannot apply to prospectuses issued before October 1, when we accept that is the date of the operation of the Act.

(2.40.) MR. G. OSBORNE MORGAN

As I understand it, the Bill comes into operation on October 1, and, that being so, no prospectus issued before that time would come within the operation of the Act. For operative purposes there is no Act until that date. It seems to me that the words proposed by my hon. and learned Friend are not required, and I really do not know why they are introduced. Can the right hon. Gentleman opposite give us any possible reason?

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

Of course, I cannot give a legal opinion. I expressed my view that the liabilities under the Bill should not attach to notices issued before the passing of the Bill. My right hon. and learned Friend near me informs me that the words are not necessary, and I do not see why they should be introduced.

(2.41.) MR. MADDEN

It appears to me that the House, having fixed the 1st of October as the commencement of the legal consequences that follow under the Act, the Amendment expresses the exact position and the legal consequence of fixing the commencement of the Act at that date. The words add nothing to the meaning, but, on the other hand, they are absolutely harmless.

MR. BARING

I rather wish to have words inserted applying the Act to prospectuses and notices issued between the passing of the Act and October 1.

SIR ROPER LETHBRIDGE

I submit, Sir, that after your ruling any further discussion is really little better than obstruction.

MR. WARMINGTON

I do not myself think the words are necessary, and I am quite ready to withdraw the Amendment.

(2.42.) MR. CHANCE

As bearing upon the present position, I may mention that the date of the issue of the prospectus is not the vital point, the date of subscription is the root of the action. If the Bill is allowed to go through as it now stands, the result will be that a person who subscribes to a company after this date, the promoters having issued their prospectus the day before the date, will have no action. The subscription gives the right of action, but there is no word in the Bill as to date of subscription; it is only provided that the Act shall come into existence on a certain day. It seems to me it would be well to have this matter defined in some better manner. We had better understand clearly whether the date of the prospectus, or the date of the subscription is the vital date in respect to the commencement of the action.

Amendment, by leave, withdrawn.

(2.43.) MR. T. M. HEALY

I now propose to add after the word "ninety" these words: "But this Act shall apply to all prospectuses and notices issued after the passing of this Act." The object these words would effect would be that, while no legal procedure can be adopted to punish promoters of a fraudulent character between now and October, yet the moment October arrives the legal machinery of this Act comes into operation for the punishment of anything of a fraudulent nature which may have taken place in the interval between the passing of the Act and that date. I am obliged for the suggestion to the hon. Member for the City (Mr. Baring.) He is a great authority on financial matters, and I am quite sure he will lend the weight of his authority to protect us against this close time for fraud, and to prevent the launching of dishonest schemes now on the stocks.

(2.44.) MR. SPEAKER

The House has agreed that the Act shall come into operation on October 1, 1890, and that operation refers to prospectuses and notices. What the hon. and learned Member now proposes amounts not to a limitation, but to a contradiction of what has already been agreed upon by applying the Act to all prospectuses and notices issued after the passing of the Act.

MR. CHANCE

On a point of order, Sir. There is a difficulty as to the date upon which the Act shall come into operation, whether it shall be the date of prospectus or the date of subscription for shares. Perhaps the Attorney General for Ireland can explain that.

(2.45.) SIR W. HARCOURT

To contradict a provision previously laid down is of course not allowable; but, as I understand, the hon. and learned Member wishes to make an exception. Now, if we could not fix a date, and afterwards make an exception to it, we should not be able to legislate at all. We must fix a general date, though we may choose to make certain exceptions. If the hon. and learned Gentleman puts in the words "Except as to prospectuses and notices," etc., that would show that the reference is to a portion of these proceedings and not to the whole. Proceedings may not be instituted until October. We know there are cases continually where, in order to prevent evasions of an Act, you have to put in a clause to provide that there shall be no violation of the Act while discussion is going on. So here we shall be stultifying ourselves before the public if we pass an Act in a form allowing impunity to promoters during the months of July, August, and September. What possible reason is there for allowing such a thing? It is possible, I submit, to make exceptions, and I think we ought to do it here to maintain our credit for common sense.

(2.47.) SIR M. HICKS BEACH

The argument of the right hon. Gentleman is addressed to a point which has already been decided he desires that the Act shall come into force immediately on its passing, but the House has decided it shall come into force on October 1. If we were now to put in words to provide that prospectuses issued between the passing of the Act and October 1 should render the issuers liable to the penalties provided that would be anticipating the date already fixed, and would be directly contrary to what has already been done.

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

I was about to urge the same point. It is not a question of policy or prudence or good sense. If it is nonsensical, fortunately there is another branch of the Legislature where it can be put right. It is a matter of order; the words have been passed declaring the Act comes into operation on October 1, and the words of the Act are to be read as if spoken by the Legislature on that day.

SIR W. HARCOURT

There may be exceptions.

MR. COURTNEY

The gist of the Bill is Clause 3, which declares that certain statements shall be followed by certain consequences. It is further declared that the Act shall come into operation on October 1, and the proposed Amendment is a direct contradiction, declaring that the operation shall be immediate.

(2.49.) MR. SEXTON

Could my right hon. Friend move his Amendment as regards prospectuses or notices, not as regards both? Directed to both it would be a, contradiction, but not to the one or the other.

MR. SPEAKER

The proper time to raise the point would have been when the hon. and learned Gentleman moved October 1, 1890, as the date for the operation of the Act. To say now that the operation of the Act shall be from the date of its passing will be to virtually contradict what has been passed by the House. I am afraid there is no remedy at this stage.

(2.50.) MR. T. M. HEALY

I appreciate entirely, Sir, the force of what you say; and I will, on the Motion for Third Reading, move the re-committal of the Bill to omit this clause, and I presume that in this I shall have the assent of the President of the Board of Trade.

Motion made, and Question proposed. "That the Bill be set down for Third Reading on Wednesday."—(Mr. Warmington.)

MR. T. M. HEALY

I beg to give notice that, on the Motion for Third Reading, I shall move to re-commit the Bill in order to strike out the entire clause, and this will have the effect of making the Act speak as from the day it receives the Royal Assent.

Question put, and agreed to.

Bill to be read the third time upon Wednesday next.