HL Deb 09 December 1915 vol 20 cc577-89


Order of the Day for the Second Reading read.


My Lords, the Bill to which I invite your Lordships to give a Second Reading to-day is of a simple character, and its object is to make provision with respect to companies of enemy character carrying on business in this country. Your Lordships require no reminder from me that trading with the enemy is in itself an offence except with His Majesty's permission, but the legal fiction which prevents objection being taken in the case of an enemy company which is registered in the United Kingdom is one the reason for which it requires some legal acumen to discover. If instead cf being registered as a company these people were engaged in an ordinary partnership and it was found out that they were alien enemies, the matter would be a very simple one indeed. But by a legal fiction —for it is absolutely a legal fiction—a company composed of twelve Germans can register under the Companies Acts here, and by that very simple process can be made, forsooth, an English company. A company so registered has been declared to be an English company, capable of doing everything that the legal person thus constituted by law may think proper to do by way of trade.

Legal fictions, I know, are not very popular with the general public. John Doe and Richard Roe have departed from among us, but they served a very useful purpose. But John Doe and Richard Roe were never allowed to be actual persons and to be so dealt with when they ran counter to common sense. An ingenious gentleman, in an action of ejectment, once pleaded that he had got a release from John Doe or Richard Roe— I forget which—but the Courts cut very short this treating of a legal fiction as a reality, for they sent him to prison for contempt of Court, and very justly. After all, legal fiction was intended as legal fiction; it was never intended that these fanciful persons should he invested with the ordinary powers of a natural person. So I think it might have been well if the Courts who had to deal with this question had recognised the fact that the legal entity is not different in its constitution when you come to deal with the question which was in debate in the case of the Continental Tyre and Rubber Company v. Messrs. Daimler. It was because the entity created has no nationality at all that the question of trading with the enemy was held not to arise.

I am not going to discuss the legal question which arose in this case, partly because I have not heard it argued and partly because it is still sub judice, and I may have to form a portion of the tribunal which will have to determine it. I am, therefore, reluctant to give any opinion on the subject. But the question arises, What is to be done in the meantime before this is decided? If ever a case for interference by legislation was proved, it was proved by the noble Marquess (Lord Lansdowne) on Wednesday of last week in answer to a Question by my noble friend Lord Portsmouth. The noble Marquess on that occasion said— …the Board of Trade ale enabled to apply to the Court for the appointment of a controller of such a company if an offence has been or is likely to be committed and if it is expedient in the public interest that a controller should be appointed owing to circumstances or considerations arising out of the war. It may, perhaps, interest the House to know that no fewer than 492 inspectors have been appointed by the Board of Trade under the first of the sections which I have quoted. In 232 cases supervisors have been appointed by the Board, and in eight cases controllers have been appointed by the Court. I do not know whether or not those figures should be added together, but I will take it that the figure 492 represents the number of companies involved. I suppose these controllers, supervisors, and so on, do not do this work for nothing; and when we hear so much about the need for economy and the desirability of not increasing the number of employees, why, I should like to ask, should all this expense be thrown upon this country? If enemy companies are to be allowed to trade at all, this cost of supervision ought to be an expense thrown upon them. To my mind the whole thing depends upon whether or not you are going to be bound by a mere technicality to permit what nobody in his senses would permit if he could help it. It is therefore clear that there ought to be some limitation on this power. It comes to this, that if an alien company registered in this country is trading under the fiction that it is an English company, that fiction should be got rid of.

I notice that in another place last night it was intimated that there was to be an effort to raise again the question which has given rise to the discussion of this subject. I confess I should have thought I might have received notice of that, because I had some correspondence with the late Attorney-General, Sir Edward Carson, and I postponed from time to time bringing in this Bill because he assured me that the Government were going to deal with the subject. I have reason to know that an effort was made at a very early period to bring the case which has given rise to this discussion to appeal, and that this effort was rejected at the time. But be that as it may, I only say for myself now that I have brought in this Bill to check what I believe to be a gross abuse of the law—I assume for this purpose that it is the law—and I hope your Lordships will think right to give it a Second Reading. I do not say that the Bill is complete, and I would welcome any Amendments to improve it. What the Bill provides is this, that where in truth the predominating power of management is in the hands of alien enemies—and that is a fact to be judged by the tribunal which tries the question—the company should be declared an enemy company, and a company So declared should immediately he subject to the forfeiture set forth in the Bill.

I do not know that one could give a better illustration of the outrageous mischief, as it appears to me, of the present state of the law—if it be the law—than the fact that as the law now stands a ship completely German in character might be owned by a company completely German in its management and yet, for sooth, that company might be registered as an English company. The Bill creates conditions under which such a company may be declared to be an enemy company, and provides the tribunal by which the question is to be tried. The tribunal can interfere at once and declare the company an enemy company, and then the consequences in the Bill follow. This is a matter which everybody who has dealt with it has admitted to be one of great difficulty. I have provided a power of intervention with which, I quite admit, I am not altogether satisfied—that is, the Attorney-General. One reason is that, greatly to my surprise, and I may add to my regret, the Attorney-General may now be, and I believe in fact is, a member of the Cabinet, and that adds complication where there was quite enough before. I may say, in conclusion, that I have received an extraordinary number of appeals to proceed with this Bill. Whether my particular method of dealing with the subject is accepted or not, or whether the Bill is amended, or added to, or subtracted from, I submit that this is a matter of great national importance, and I therefore ask your Lordships to read the Bill a second time.

Moved, That the Bill be now read 2a.—(The Earl of Halsbury.)


My Lords, I am sure every one will realise the importance of the subject to which the noble and learned Earl has referred, and will feel grateful to him for having brought it before your Lordships' consideration. I much regret that he has not been kept fully informed of what has transpired with regard to the case to which he referred. I expect the reason is that matters have moved rather unexpectedly, and that time did not permit. I feel quite certain that it was not due to any intentional discourtesy, and certainly not to any idea that the noble Earl's Bill was not one dealing with a subject of the utmost importance.

The Bill deals with two quite distinct subjects, as the noble Earl himself said. One is the strange and, to laymen, startling position of companies in this country all the shareholders of which are, or the predominating influence in which is, of enemy character; and the other the position with regard to ships owned by aliens and standing in the name of a company incorporated under our laws. The two subjects are distinct and need one or two words of separate consideration. With regard to the first, it would obviously be unbecoming in me to discuss what the law really is. As it stands at the present moment, a majority of the Court of Appeal have decided that if seven or more Germans, alien enemies, had joined themselves together and incorporated a company in this country, they have by that means created an entity which is not German in its character. That may well be the law, but owing to the position which I have the honour to occupy I cannot at this moment properly discuss whether it be the law or not. The mere fact that it is unusual and a little startling does not necessarily mean that the law is not as it has been stated to be.

This case has been the subject of consideration for upwards of twelve months, and no steps until quite recently have been taken to bring it before the consideration of your Lordships' House. I quite share the feeling expressed by the noble Earl that in those circumstances there was no reason why he should any longer postpone bringing in the Bill which he had drawn for the purpose of dealing with the position as it stood. I am, however, informed that the case will now be brought before this House, and I am sure that I shall be expressing the desire of all your Lordships if I state that every opportunity will be afforded to the parties to expedite the hearing. It is obviously better that the law should be settled by the highest authority before any attempt is made to alter it. Indeed, I am not sure that the is not the view of the noble Earl, Lord Halsbury, whose criticism partly was that he did not know how much longer it would be before the law was definitely settled on the point.

In those circumstances I think it would be impossible for the Government to undertake to proceed with this Bill or to give it facilities in another place, but I can see no reason why it should not be read a second time. It is a valuable contribution to an important matter, and though it may be impossible that it can receive legislative effect immediately its discussion can do no harm. There is one small point on which the noble Earl is under some slight and not unnatural misapprehension. As the law stands to-day, it is true that companies that are predominantly of an enemy character with regard to the shareholders or the authority by which they are controlled may be the subject of inspection, and, indeed, of control and management by officers appointed by the Board of Trade. I share the noble Earl's view that officers so appointed should not be paid out of public funds. Fortunately the Statute which deals with this matter has expressly provided that in those circumstances the expenses, whether for the original inspection or the subsequent supervision, to such amount as may be fixed by the Board of Trade, shall be payable by the person, firm, or company whose affairs are looked after. That removes part of the objection which the noble Earl feels to the present system of inspection. So far as control of the property of these bodies is concerned, it appears to me that at the moment that control is complete. There can be no distribution of the funds of any of these companies to any of its shareholders, or debenture holders, or creditors, who are alien enemies. What is not prevented by the law as it now stands is the collection of outstanding debts by these companies. They can still recover their property, but, having recovered it, they cannot deal with it to the prejudice of this country or dispose of it in favour of alien enemies in any capacity whatever. So that the danger which we have to guard against, is not imminent and not grave, though the position is one which sounds startling and undesirable.

The other matter to which the noble Earl referred, the question of ships, stands in a different position altogether. So far as a ship is concerned, it may be owned by a company incorporated under the Companies Acts in this country, notwithstanding the fact that every one of the shareholders may be an alien enemy; and certainly that might lead to alien enemies getting control of our shipping and using our flag when not one single penny of English money was embarked in the enterprise nor the least control exercised by any one owning allegiance to the Crown. Again speaking of affairs as they stand at the present moment, we have full control over these companies and know all about them, and I do not think your Lordships need be under any apprehension that at the present time any danger is to he feared from the existence of these rather anomalous circumstances. But it might well be the subject of consideration whether a Bill dealing with that matter ought not to be presented and proceeded with quite separate from the litigation to which I have referred, because it is quite apart from it. I do not say, in view of the large amount of urgent legislation still to be passed through Parliament, that such a Bill could be proceeded with at once, but it would receive the earnest consideration of the Government and might be made the subject of independent legislation later.

I have no desire to oppose the Second Reading of this Bill. I think its principle is one to which general assent might readily be accorded. But the noble Earl will not misunderstand me if I add that there is but little prospect of its becoming law; and possibly in the circumstances the noble Earl himself would not desire to proceed with it further than the Second Reading, if there be any real reason for anticipating that the case which has given rise to his measure is to be brought before the consideration of your Lordships' House.


My Lords, as a very junior member of your Lordships' House I have hesitated whether I should address you at all on this matter, but I think I may perhaps do so without presumption because of the fact that the branch of the law with which the noble and learned Earl's Bill deals is one with which I am necessarily very familiar. I certainly hope that your Lordships will give the Bill a Second Reading. I want to indicate as shortly as I can what are the two points—they are totally distinct points—on which I think the law requires either to be further investigated by judicial decision or amended by legislation.

It is, of course, an elementary fact that when any one uses the Companies Acts for the purpose of incorporating a body he calls into existence a totally new legal entity, a person known to the law, and that person exists altogether apart from the corporators—it is a new and separate legal entity. The next thing to bear in mind is that during times of peace an alien is entitled to come here and avail himself of our law provided he observes our law, and it is perfectly competent that any two persons in the case of a private company, or any seven persons in the case of a public company, may, by using the machinery of the Companies Acts, call into existence such a separate legal entity, a new persona altogether, recognised in law. Under that system of incorporation it is competent to any two Germans who chose in time of peace to have incorporated a company, as to which it now is a question whether, for the purpose which I am going to describe, it can assume the rights of a British citizen.

Some things are quite obvious, I think, as regards such a legal abstraction as the corporate entity which I have described. It can swear no oath of allegiance to the Crown; it can do neither loyal nor disloyal acts; it can be neither friendly nor hostile, for it has no mind, no wishes, no intentions whatever. Its active movements are necessarily set on foot by the natural persons who stand behind it. I am going to say nothing about the decision in the Continental Tyre case, because that is a matter which I hope will be reviewed here, and that is one reason for abstaining from entering into it. Another reason is that I took part in that decision and was, unfortunately, in a minority in the Court which decided it. But I want to call Your Lordships' attention to what the decision in that case involves. It involves this, that when the question before the Court is whether the plaintiff in the action is or is not an enemy, you are to attribute to that person the qualities which I have suggested are impossible in an abstract legal entity; you are to assume that it is loyal to the King, friendly, not an enemy, because it is, under a British Statute, incorporated as British. One of the objects of the noble Earl's Bill would be to enable, under certain machinery which he sets up, an investigation to be made as to whether that is well founded in point of fact.

I myself should very much prefer that this question should be resolved first by a Judicial decision, and that could be done only by bringing the case to your Lordships' House. When the ultimate tribunal shall have decided that the views I held in that case were wrong, I shall agree that they were wrong; but until that happens I beg leave to hold my own opinion. Far the best way to resolve the question would be that the Continental Tyre case should be appealed to this House, and that it should be determined by decision of this House what the law is. Why I say that is much better is for this reason, that you then get the principle laid down whether, for the purpose of ascertaining loyalty or disloyalty, you may go behind the corporation and investigate the feelings, the wishes, the intentions of those natural persons who in point of fact form it. That being so, if that case is appealed it would be well that the further prosecution of this Bill, after the Second Reading, should stand over till a later time. However, that is a matter for subsequent consideration.

I may say that if this Bill goes forward, and if it goes to Committee, I should wish to introduce into it clauses having a very much wider operation than those now in the Bill. The noble Earl's machinery enables only the Attorney-General to intervene and prospectively to obtain a, determination that some particular company is of such a character that it ought to be called of enemy character. It is obvious that that machinery would only be set in motion in some notorious cases. The Attorney-General cannot be expected to be perpetually setting in motion the machinery of the Bill against every company trading in this country which is supposed to be German. My object would be, in Committee, to introduce a clause under which, if any such case as that of the Continental Tyre Company arose, it should be competent to a defendant then and there to ask for a declaration that the company is an enemy corporation and ought not to be allowed to sue.

The other matter with which the noble and learned Earl proposes to deal is of greater importance—the question relating to the Merchant Shipping Act. Under Section 1 of the Merchant Shipping Act, 1894, it is provided that British ships may be owned only by persons subsequently described in the section, who are called "persons qualified to be owners of British ships." Then follow four paragraphs—(a) Natural-born British subjects; (b) persons naturalised (c) persons made denizens by letters of denization; and (d) bodies corporate established under and subject to the laws of some part of His Majesty's dominions, and having their principal place of business in those dominions. Those are the qualifications for owning a British ship. While that provision in paragraph (d) stands upon the Statute Book there is absolutely nothing to prevent any two Germans, who may be of low station or may be of the most exalted station, incorporating themselves under the English Act and owning and sailing under the British flag—unless the Foreign Office have any power to prevent it—a ship as a British ship which is wholly owned and controlled by persons who in the present unfortunate circumstances would have become enemies of this country. The only thing which may make that not of the most pressing importance is that there may be few caws in which it arises, but if it did arise obviously it would be a point of the greatest importance. It seems to me that that section of the Merchant Shipping Act requires amendment at once, and I should hope that this Bill might go forward if only for that purpose. It would be necessary simply to pass a single clause —I have myself drafted a clause for that purpose—amending para graph (d) of Section 1 of the Act, by adding to the definition of British corporations who may own ships this qualification, that all the shareholders, or, if your Lordships thought proper, a majority of the shareholders in number, or authority, or influence must be subjects of this Crown. Whether this Bill goes forward upon the first question or not, I hope it will go forward on the second, and at any rate I hope it will receive mature consideration in your Lordships' House.


My Lords, I desire to support this Bill and the arguments used by my noble and learned friend. It is to my mind most important that a ship should not be able to clear from our Custom House for a stated destination and then to sail under a captain acting under the directions of a foreign owner upon some voyage quite different; and I should like to see some provision in this Bill to prevent that state of things. There is another point that occurs to me. It appears that many German companies, founded, we will say, in Berlin and supported by money provided by those financial institutions in Germany which describe themselves as banks, create what are called subsidiary companies in neutral States— for instance in Sweden, in Holland, or where not. Those companies are really composed of the directors and shareholders of the parent company, but they are separate and hide-pendent companies formed in neutral States for carrying on a business in which the parent company is deeply interested. Those companies stand quite outside our laws at present, and we cannot touch them. I should like to see some provision in this Bill which would enable our Government to prevent such companies from carrying on their business in this country during a time of war. There are other matters which will have to be taken into consideration in moulding this Bill. There are, for instance, numbers of foreign companies, some very large indeed, established in this country, which are doing a great deal of work for our Government. That work ought not to be interfered with. There are many matters of this kind which perhaps ought to be dealt with. But the principle of this Bill, I submit to your Lordships, is good. It is this, that a sham shall not be perpetuated and that the truth shall prevail; that the tribunal before which a dispute comes shall be entitled to say "This may be a corporation in accordance with the letter of the law, but the real question is as to what is its true character." I support the Bill, and I hope that your Lordships will agree to the Second Reading.


My Lords, may I venture to say one word of appeal to my noble and learned friend opposite in the hope that, if the House gives a Second Reading to this Bill, he will at any rate allow us the amplest time to consider it before he presses it further upon the attention of Parliament. Speaking as a layman I may, perhaps, venture to say that the decision of the Court of Appeal in the Continental Tyre case was regarded by many of us with great alarm, if not with consternation; and if that decision does represent the actual condition of the law I imagine that there will be no doubt as to the desirability of amending the law. But I believe it is the case that the condition of the law upon these particular points has not vet been determined, and to an ordinary judgment there certainly would seem to be a good deal to be said for the view that before we endeavour to revise the law on points of this kind we should ascertain what the actual condition of the law is.

But unless I am wholly mistaken this Bill would do a great deal more than reverse the decision of the Court of Appeal. I think that is the case in so far as it deals with the question of shipping, for unless I misunderstand the fifth subsection of the first clause I gather that when once the Judicial Committee has reported that a company is of a predominantly enemy character a ship belonging to such company may thereupon be confiscated. That is a serious innovation. We prevent trading with the enemy, but, so far as I am aware, confiscation is a new remedy in cases of that kind. And may I venture to support. what was said just now by the noble and learned Lord who spoke last as to the effect of the second clause of this Bill? Under that clause, if it. is decided by the Judicial Committee that a company is an enemy company it not only loses the right to sue in our Courts of Law but it is debarred from trading. That would be an extremely serious matter in the case of some of those more or less foreign companies to which my noble friend referred in his speech, which are at this moment under supervision, probably quite necessarily under supervision, doing a great deal of very important business for different Departments of the Government, the War Office and the Admiralty in particular. If companies in that position were compelled by legislation of this kind to close their doors the inconvenience that would result would be very serious indeed.

All these points seem to require a good deal of consideration, and I gathered with satisfaction from my noble and learned friend that he himself was disposed to admit that his Bill at several points might require further examination. I only rose for the purpose of expressing my hope that he will give ample time for such further examination before he presses the Bill further.


I understand the noble Marquess to appeal to me not to press the Bill forward. I place myself, of course, in his hands with regard to the question of the adjournment of the Committee stage of the Bill. But if he asks more than that, I should not assent to it.


only ventured to suggest that if the Bill is given a Second Reading this evening the noble and learned Earl should not press it for a time in regard to the further stages.


I put myself in the noble Marquess's hands as to the particular day for taking the Committee stage, but I certainly desire that the Bill should go forward into Committee and, if possible, receive a Third Reading.

On Question, Bill read 2a.