§ Amendments reported (according to Order).
§ LORD WENSLEYDALE moved to insert the following Amendments after Clause 1:—
§ In order to entitle any Person, so lending Money, to the Benefit of this Act, the following Particulars shall be registered in the Manner hereinafter provided:
- (1.) The Surname and Christian Name or other Name or Names in full, and the Place or Places of Residence, of the Lender and of the Partner, or, if more than One, the Partners, to whom the Money is so advanced.
- (2.) The Nature of the Trade or Undertaking and of the Place or Places at which it is carried on or to be carried on.
- (3.) The Name of the Firm or Style in which the said Trade or Undertaking is or is to be carried on.
- (4.) The full Particulars of the Contract by which the Advance of Money by way of Loan is agreed to be made.
§ The Registrar of Joint Stock Companies shall be the Registrar, and shall keep a separate Register for the Registration of Trades and Undertakings under this Act.
§ Every Registration shall be effected within Fifteen Days after the Contract for the Advance of Money to the Person or Persons engaged or about to engage in the Trade or Undertaking shall have been entered into; and no Person lending Money shall be entitled to the Benefit of this Act in respect thereof unless the several Sums specified in the Registration shall he lent to the Person borrowing the same at the Time or at the Times respectively specified in that Behalf in such Registration, or within Fourteen Days thereof.
§ No Part of the Money lent under the Provisions of this Act shall be repaid, satisfied, or secured in any Manner before the Expiration of the Time registered as aforesaid in that Behalf.
§ Any Person so advancing Money who shall violate the Provisions of the foregoing Sections, or cither of them, shall become and be a General Partner with the Person to whom it is lent.
§ Provided also, that such Person or Persons to whom such Advances by way of Loan shall be made shall cause in all Bills of Exchange, Promissory Notes, Cheques, Orders for Money, Bills of Parcels, Invoices, Receipts, Letters, and other Writings used in the Transaction of the Business of the Company to be added the Word, Registered, to his Name or Partnership Name.
§ LORD CHELMSFORDsaid, he concurred in the Amendments of his noble 710 Friend. He (Lord Chelmsford), however, agreed with his noble Friend opposite (Lord Cranworth), in not being able to discover any difference in principle between a person receiving a fixed interest for a sum of money which he advanced, and being paid a fluctuating interest by taking a share of the profits. But he confessed that he had a lingering prejudice in favour of the view that a person who took a share of the profits ought to bear his share of the losses. The Bill before the House would lead to a revolution in the law of partnership, and what might be the effect of it upon the character and commercial credit of the country it was impossible to say. The noble and learned Lord on the Woolsack made an admirable speech the other evening, in moving the second reading of the Bill, and after listening to that speech their Lordships were quite prepared to accept the measure as it stood. But his noble and learned Friend, while he placed the advantages of the Bill in a strong light, took care to throw into the shade all the objections. He (Lord Chelmsford) ventured to submit to their Lordships that when they were about to enter into an untried system of law, such as this Bill proposed, it would not be proper for the Legislature to take such a step without taking care to provide all proper safeguards. A useful lesson might be learnt from their neighbours, the French, amongst whom there has been established for some time the partnership called societé en commandite, in which the general partners are liable for the whole of the society's obligations, while the commanditaire is liable only to the amount of the capital he has put into the concern. Thus there is combined a general and a limited partnership. In a partnership of this kind it is necessary that there should be registration, and in particular that there should be stated the amount advanced to the partnership by the commanditaire. The registered particulars are afterwards affixed to the walls of the Tribunal of Commerce. Certainly if the French think it necessary that there should be registration in order that the public might know the persons with whom they were dealing, â fortiori, in a case where a man is to be allowed to receive a large portion of the profits without being a partner the public should have warning of the terms upon which the business is carried on. Under these circumstances it was impossible for him not to agree with the Amendment of his noble 711 and learned Friend, and he trusted that their Lordships would pause before they passed the Bill without some such safeguard as was now proposed.
THE LORD CHANCELLORsaid, he should be extremely sorry if the good work done in giving this Bill a second reading should be annulled and their progress retraced in the manner proposed by the noble and learned Lord's Amendments. The noble and learned Lord had spoken of the difficulty of divesting our minds of early impressions, and lawyers certainly were not exempt from this difficulty. The truth was that from their earliest education they imbibed the principle that the rule of law was right—they published it in their opinions, they carried it into effect in their judgments, and the feeling increased and intensified until it seemed a kind of sacrilege to question its accuracy. What this Bill proposed was not to reverse a positive principle of law, hut a rule which was founded on a mistaken decision, and which, repeated from mouth to mouth with a kind of superstitious authority, had grown to be reverenced as an irreversible principle of law. What the Bill did say, and what their Lordships, by giving it a second reading, had affirmed, was this—that a trader might be at liberty to borrow, in the same manner as any other person, upon the best terms and conditions he could. If he could borrow on the condition of giving part of his profits, instead of paying a definite rate of interest, then he should be at liberty to do so. What reason or justice could there be in preventing him from doing this? The observations of his two noble and learned Friends came to this— that a great deal of mischief would ensue from this secret dealing—but what it was they did not condescend to tell their Lordships. This was the kind of terrible thing with which children were frightened. At present a trader might borrow at any rate of interest he pleased. The contract was good. The lender need not be known, although the terms might be such as would grind the trader down and prevent him deriving anything like a fair remuneration from his business. That was one instance in which there was no registration; and what evil results had flowed from it? When the usury laws were abolished they had been the idols of many generations, they had been looked on almost as matters of religion, and yet they expired with the approbation of all men. Had any evil results followed from these laws coming to 712 an end? A man might be a secret partner now, and no registration was required. The instances referred to by the noble and learned Lord in the French law was that of anonymous partnerships, not partnerships en commandite, and in similar partnerships our own law required the registration of the partners. Registration was required in the case of joint stock companies; but that was an obligation attached to the privilege of a great number of individuals being associated together, none of whose names would otherwise be known to the world, and it was not done by reason of fear, but for the sake of the partnership, which would not get credit if no one knew of whom it was composed. What was proposed by his noble and learned Friend would, in fact, be utterly destructive to the trade. Noble Lords were aware how extremely sensitive credit was, and if at the same time that the trader were given the means of borrowing money on fair terms, the obligation were imposed on him of publishing to the world that he had been obliged to borrow money, how long would his credit last? The Bill might as well be put behind the fire at once if it was to have a condition of this kind annexed to it. In the House of Commons this very point was very anxiously discussed by men of the greatest mercantile experience, and upon an examination of the arguments one way and the other no one could fail to see that it had been demonstrated that the proposal was utterly at variance with the principle of the Bill, and would destroy it, and that there was no ground whatever for requiring it. He could see no reason why a restriction should be placed on the liberty of the trader to borrow which was not placed on anybody else, and he hoped their Lordships would not sanction the Amendment.
§ LORD ST. LEONARDSsaid, he had frequently heard the noble and learned Lord recommend the House to disregard the opinions held in past times, but he confessed for himself that he did feel some respect for those who had gone before him, and for the principles they had laid down. His noble and learned Friend was far above this feeling. His noble and learned Friend said, the present rule was founded on a mistake; but why were they to assume that all the learned authorities of past times had been unable to detect the mistake, and that it was left for the present age to discover for the first time the true principle of action? Were they of the present time to arrogate 713 to themselves that sort of authority that would entitle them to disregard everything that had been established before their time? Then the noble and learned Lord told them, that if they admitted the Amendment they might as well put the Bill behind the fire; but let their Lordships consider what was the object of the Amendment. The object of the Amendment was simply to give to the public that kind of knowledge that would be sufficient to prevent men from embarking their money without knowing what security they had. His noble and learned Friend said, that what was proposed to deal with was not in effect a partnership; but he (Lord St. Leonards) must say that by the law of England, as it now stood, it was a partnership. By this Bill they proposed to allow for the first time a trader to allow another to take a share of his profits without assuming the liability of a partner. What they should guard against was that a man might trade apparently for himself, whereas in reality he was only trustee of the profits for another person. Under the proposed law a man might advance money to a trader on condition that he should receive three-fourths of the profits. The trader would then get credit from others who might think he was in a sound position, being unaware of the private arrangement with the lender of the capital. He could assure their Lordships that there was a great feeling of apprehension in the country in reference to this Bill, but there had not been full time for the expression of that opinion. He had himself presented two petitions to their Lordships, from the Chamber of Commerce of Dundee and the Chamber of Commerce and Merchants of Edinburgh, and both petitions contained exactly the same complaints of the absence of publicity in such transactions as were about to be authorized. He had also received a letter from a gentleman who had been in a large way of business, and who had establishments both in London and Lyons. The gentleman took a warm interest in this Bill. He wrote—
To my mind there is something frightful in contemplating the fraud, litigation, and uncertainty that must ensue from the Bill if it is passed in its present shape. An English partnership will he as uncertain and equivocal as a Scotch marriage, and commercial credit will he much endangered.He added—Only ten days ago I showed the proposed Bill to the Judge of the Tribunal of Commerce in 714 Lyons, and he shook his head and held up his hands in amazoment.He (Lord St. Leonards) spoke in the interest of the trader, when he advocated a certain amount of publicity in these transactions. The usury laws, which had been referred to, were not analogous to the present case; they affected all classes, and not the trading class only. Several recent Acts of Parliament had established the principle which he sought to introduce into this Bill—that of registering liabilities, so that all the world might know the solvency or insolvency of the man with whom they were dealing. If a man, for instance, gave a warrant of attorney to confess judgment his creditor must publish that document by registering it. The wholesale traders were beginning to feel that if this Bill passed they would not know whom to trust, or whether a man was carrying on a business for his own interest or in the interest of other parties. A more important measure, as regarded trade and commerce, than that before their Lordships had never been introduced into Parliament, and time would tell whether the warning uttered from his side of the House was well or ill founded.
§ On Question? Their Lordships divided: —Contents 14; Not-contents 39: Majority 25.
§ Amendment negatived.
715| CONTENTS. | |
| Derby, E. | Clements, L. (E. Lei-trim.) |
| Hardwicke, E. | |
| Malmesbury, E. | Denman, L. |
| Verulam, E. | Kingsdown, L. |
| Redesdale, L. | |
| Hawarden, V. | Saint Leonards, L. |
| Wensleydale, L. [Teller.] | |
| Chelmsford, L. [Teller.] | Wynford, L. |
| Churston, L. |
| NOT-CONTENTS. | |
| Westbury, L. (L. Chancellor.) | Suffolk and Berkshire, E. |
| Grafton, D. | Eversley, V. |
| Somerset, D. | Falmouth, V. |
| Torrington, V. | |
| Ailesbury, M. | |
| Abinger, L. | |
| Airlie, E. | Belper, L. |
| Albemarle, E. | Camoys, L. |
| Chichester, E. | Chesham, L. |
| Clarendon, E. | Clandeboye, L. (L. Dufferin and Claneboye.) |
| De Grey, E. | |
| Ducie, E. | Cranworth, L. |
| Grey, E. | Dartrey, L. (L. Cremorne.) |
| Harrowby, E. | |
| Nelson, E. | De Mauley, L. |
| Romney, E. | De Tabley, L. |
| Saint Germans, E. | Foley, L. [Teller.] |
| Granard, L, (E. Granard.) | Seymour, L. (E. St. Maur.) |
| Hastings, L, | Stanley of Alderley, L |
| Leigh, L. | Talbot de Malahide, L. |
| Mostyn, L. | Wenlock, L. |
| Ponsonby, L. (E. Bessborough.) [Teller.] | Wentworth, L. |
§ LORD CHELMSFORDsaid, he had an Amendment to propose which had become infinitely more important and necessary for the protection of the public, in consequence of the rejection of those safeguards which his noble and learned Friend had brought forward for the registration of the particular contract into which a party entered for the loan of money. A person advancing money to carry on a business would always have access to the books. If the concern flourished, he would be content with the profits he had stipulated to receive; but if he saw there was danger, and the trade was likely to prove a failing One, he would immediately withdraw his capital, render himself safe, and leave to the other creditors a man of no substance for the satisfaction of their debts. He therefore proposed that if within twelve months after the lender had withdrawn his money, bankruptcy, or insolvency, or a composition with creditors should take place, or the person conducting the business should die insolvent, the money withdrawn should be liable to the debts of the concern, or so much thereof as the assets of the partnership should be insufficient to satisfy.
§
An Amendment moved, in Page 1, Line 14, after ("such") insert the following clause:—
If the Lender of such Loan shall withdraw the same or any Part thereof from the Trade or Undertaking, and within a Year afterwards the Trader shall be adjudged bankrupt, or shall take the Benefit of any Act for the Relief of Insolvent Debtors, or shall enter into any Agreement to pay his Creditors less than Twenty Shillings in the Pound, or shall die in insolvent Circumstances, the Sum so withdrawn shall be applicable to the Payment of the Debts and Liabilities incurred in carrying on such Trade or Undertaking."—(Lord Chelmsford.)
§ LORD STANLEY OF ALDERLEYopposed the Amendment as unnecessary. The principle of the Bill having been already affirmed, it was not, in his opinion, competent to the noble and learned Lord to treat as a partner a person who lent money out of his share in the profits. Sufficient security would be given to the public by the clause which provided that the claims of the lender should, in case of bankruptcy, be postponed until all other creditors had been satisfied.
§ LORD CHELMSFORDsaid, that in the case which he had suggested the lender would have withdrawn his money, and therefore would not be a creditor or have any claim to be postponed.
THE LORD CHANCELLORthought that the existing law as to fraudulent preferences would be sufficient to attain the object which the noble and learned Lord had in view. He objected to the provision that money withdrawn within twelve months of bankruptcy should be recovered by the creditors, that it was possible that none of those who were creditors at the time of the bankruptcy might have been creditors when the money was withdrawn.
§ Amendment negatived.
§ Clause 5 (In case of Bankruptcy, &c, Lender not to rank with other Creditors).
§ On Motion of Lord CHELMSFORD, the words "or such Widow or Child"struck out.
§ Clause, as amended, agreed to.
§ Bill to be read 3a on Monday next.