THIRD READING. (Hansard, 28 March 1890)

§ LORD HERSCHELL
My Lords, I do not propose at this stage to revive the discussion which took place in Committee upon this Bill, or to ask your Lordships to re-consider it in any way. My proposal to omit certain words, which I will allude to in a moment, was defeated in this House, and, of course, here, where my noble and learned Friend can count upon the big battalions, it would have been useless to divide. But I desire to call your Lordships' attention to the Bill as it stands, because I cannot think it is really appreciated, or that, when appreciated, it can be permitted finally to pass in its present form. The Bill provides that where any property which is subject to any liability, such as shares, on which calls may be made, is vested in the Public Trustee, the Public Trustee shall not be liable to the payment of any such calls. Whatever may be said for limiting the liability of Trustees, I think it ought only to be done under careful safeguards. Here the proposal applies, of course, only to a Public Trustee, and I must invite your Lordships' attention to what will be the effect of the Bill as it at present stands. If the owner of shares in a company, upon which large calls still remain to be paid or can be claimed, thinks fit to vest those shares in the Public Trustee upon trust, we will say for a member of his family, the effect would be that the beneficiary would, under that trust, obtain all the advantages of belonging to the company in the way of receiving? dividends in common with all the rest of the shareholders; but should the company go into liquidation, neither the beneficiary nor the Trustee, nor anybody else, will, in respect of those shares, be liable to make a penny of payment towards satisfying the claims of creditors, and, of course, that will have the effect of throwing the whole of the burden upon the other shareholders. Now, this is not merely a question of the liability 132 of Trustees, public or otherwise; it is a question in which every public company and everybody who holds shares in a public company is interested, because, of course, in the event of liquidation or loss, they are all liable; that is to say, if there are debts of the company they will fall to be paid by all the shareholders alike, and if any shareholder is freed from that liability it throws a greater burden upon the others. If you say that the Public Trustee shall not be liable beyond the amount of the property which he holds under the trust, the creditors will still have to be satisfied, and therefore heavier calls will have to be made on the other shareholders. That will be the result of freeing the Public Trustee from liability under this Bill. I cannot think that that is the intention of your Lordships' House, or that it ought to be carried into effect. What reason is there for it? Simply the result will be that if a man makes the Public Trustee his Trustee in regard to shares in a company, he thereby wipes out that portion of the capital of the company. Suppose that the capital of the company is £1,000,000, and a large number of the shares representing that capital are put in the hands of the Public Trustee, the result will be that whereas the capital of that company appears to be £1,000,000, it is, in reality, so much less. That result is brought about simply because one of the shareholders chose to vest his shares in the Public Trustee. It may be said that may not be done to any great extent; but there will be every temptation for people holding shares to do so. Suppose a man vests shares in the Public Trustee for his son's or his daughter's marriage, he will get all the benefit of being a shareholder, and be at the same time freed from all burdens. Your Lordships know there are many prosperous companies who may, nevertheless, get into trouble. Suppose the capital of a company is in £25 shares, on which £5 may have been paid, so that a liability of £20 remains upon them. We will suppose 1,000 of those shares settled, and that the Public Trustee is made Trustee. £5,000 has been paid upon them, and of course that is the amount of the property settled. The company goes into liquidation; the other shareholders can be called upon to the extent of £20 per share on the amount 133 of their shares, but no call can be made upon the 1,000 shares settled in the hands of the Public Trustee, and the result is that that unpaid £20,000 is as much wiped out of the capital of the company by the action of the shareholder investing it in the Public Trustee as if the company had been started with a so much smaller capital. I have spoken only so far of a company being wound up; but I hardly know what is to happen if a company is still a going concern. The Public Trustee is not to be bound to meet a call that is made—can the shares he holds be forfeited? If an ordinary shareholder does not pay his calls, the company can forfeit his shares; but could the company forfeit the shares held by the Public Trustee, who, the Legislature has said, shall not be liable to pay beyond the amount of the property he holds? I think that is a matter which is at least open to grave doubt. I will only add that I have thought it right to call attention to the matter in order that it may be considered elsewhere. Here it is quite hopeless now to expect a consideration of it; but if the Bill passed in its present form I think it will be found hereafter very difficult to justify such legislation. The truth is that the Public Trustee ought not to take shares in trust unless he has ample property in his hands to meet the liability upon them, or gets an indemnity which shall be sufficient to satisfy him that he is secure. No Trustee need hold shares in trust; and it seems to me that if the Public Trustee does so it would be right that the shares he holds should remain subject to the same liability as other shares, because otherwise they are at once, by that difference in liability, in fact deducted from the capital of the company. This is a matter which will not only affect future transactions, but will affect existing companies, which may be in that way deprived of part of their share capital in some cases, and in others have to throw greater burdens upon their other shareholders.

§ THE LORD CHANCELLOR
My Lords, I do not desire to argue the question over again; but it seems to me that my noble and learned Friend entirely forgets the difference between the positions of the Public Trustee and an ordinary Trustee. Unless some such provision as this 134 were incorporated in the Bill, the Public Trustee could never accept a trusteeship or executorship which involved taking over shares. The extent to which he will be liable is the full amount of the trust property, and no more. Being only a public official and not a private Trustee, there is an entire difference between his position and that of an ordinary Trustee. Practically, the effect of the alteration which my noble and learned Friend desires to make would prevent the Public Trustee ever undertaking any trust or executorship in which there were shares at all; and I hope your Lordships will not allow the effect of the measure to be defeated by altering this excellent provision, as it seems to me, for limiting the liability of the Public Trustee.

*THE EARL OF MORLEY
I would venture to suggest that, if it is desirable to relieve the Public Trustee from all liabilities in respect of shares, it would be a simpler plan to prohibit the Public Trustee from holding any but fully paid-up shares. I confess it seems to me that my noble and learned Friend behind me has made a very strong point in pointing out the unfairness with which companies would be treated under such a Bill as this.