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of Chancery to subsist can never flourish. But it is only a superficial truth. It is true only as a fact; it is not true as a principle. It is true in the case of the particular partnership before the Court; it is not true as respects the hundreds which that litigation may influence. Are there to be no laws against theft, because re-committals take place for that offence ? Most assuredly we have not yet succeeded, and never shall succeed, in making thieves honest by sentence and punishment. But any laws against crime are better than none; the worst possible system of penal justice that you can imagine, the most fitted to harden the criminal in his crime, yet raises the community in which it is enforced far above the mere horde of lawless savages. For that community has a witness still in its bosom for right against wrong. Its penalties, however mischievous to the actual criminal, strengthen yet the hands of the upright, deter from crime the timid or the wavering. The brand on the thief's face, however injudicious as a punishment, though it may make him a thief for ever, will yet help to restrain hundreds of hands from stealing, like Polynesian savages, whatever the eye may covet. The philanthropist, whose heart most bleeds to see it, will yet point it out to his child in proof that the command, " Thou shalt not steal,” is no vain word even below.
So with reference to civil transactions: Any attempt to do justice is better than the denial of it. However ineffectual the attempt in any particular instance, the knowledge that it can be made, tends to secure actual justice in numberless instances which will never come before the Court. Let it once be known that the Courts will interfere for the redress of partnership grievances, and a standard of right and wrong in
a partnership matters will be created, which men will work up to more or less. Let such interference be denied-let partnership disputes be placed beyond the pale of the law—and what a door is opened to trade roguery! Is it not clear that, to refuse judicial interference except on a case shewn for dissolution, as Lord Eldon endeavoured to do-as our judges often do to this hour-is to sanction almost every profitable fraud ? Why is the partner in a successful business to be denied all justice except upon condition of breaking up that business? Most truly was it said by Sir James Wigram: “If a bill in no case would lie to compel a man to observe the covenants of a partnership deed, it is obvious that a person fraudulently inclined might, of his own mere will and pleasure, compel his copartner to submit to the alternative of dissolving a partnership, or ruin him by a continued violation of the partnership contract” (3 Hare, 392, Fairthorne v. Weston).
I have dwelt at disproportionate length upon this part of my subject; but it is, in fact, the most important of any. The frank and complete recognition of the firm, as distinct from its members, would sweep away almost the whole of this complex head of partnership procedure. The creation-otherwise most anomalous-of corporations with unlimited liability in our days, has surely torn to pieces the last shred of argument against the position, that questions of law as between a firm and its members are incapable as such of judicial decision. If a shareholder in the Royal Bubble Bank, though liable without limit for all its engagements, is yet entitled to prosecute any lawful claim against the said bank, is yet liable to the legal enforcement of any lawful claim on its behalf, why should not the same thing take place as between Jones, Smith, and Co., and any individual Jones and Smith ? Your corporation with unlimited liability is nothing but an overgrown firm, with so many partners in it that it has to take an impersonal name; yet the law finds not the slightest difficulty in distinguishing its personality from that of any of its partners. So it will be with the ordinary firm, as soon as the law chooses to see facts instead of blinking at them.
9. Proceedings by Partnerships in Bankruptcy. The process through which a man, by giving up all his property, becomes relieved from all his debts, is, as we know, one peculiar to the sphere of trade; a trader alone can be a bankrupt. We need not therefore be surprised to find that, in this department, the mercantile conception of partnership has made the greatest progress towards complete legal recognition. Parliament has indeed sanctioned this tendency, by putting a firm and an individual creditor on the same footing as respects the amount of the petitioning creditor's debt. Thus, whilst in order to found an adjudication of bankruptcy, the debts sworn to must amount together to £70, where two separate creditors petition whose single debts do not amount to £50 each, one debt of £50 claimed by a firm will be sufficient, as if claimed by a single person (12 & 13 Vict., c. 106, s. 91, & sched. M.); and see previous statutes (a). And in the proceedings under the bankruptcy, to use the words of Lord Eldon, “one partner on behalf of all may prove a debt, vote in the choice of assignees, and sign the certificate" (19 Ves. 293; ex parte Hodgkinson; and see ex parte Mitchell, 14 Ves. 597; ex parte Hall, 17 Ves. 62; Rose, 2). Here it has been held that the affidavit and bond of one partner on behalf of all are sufficient; Lord Eldon holding himself concluded by a long series of decisions (ex parte Hodgkinson, 19 Ves. 291); and again, that one partner can execute a power of attorney to vote in the choice of assignees on behalf of all (ex parte Shaw, 1 GI. & Jam. 129; ex parte Mitchell, u. s.). “There is a vast number of acts," said Lord Eldon, “ upon which, if one partner is not permitted to act for the others, the inconvenience is obvious.” Very revolutionary doctrine, coming from the great Tory Chancellor; very wise doctrine, commercial men may think, and applicable beyond the range of bankruptcy proceedings.
In all these cases, the form of the decision has been merely that of an extension of the agency of partners for each other. In substance, the firm has been suffered to recover its commercial privilege of acting through any of its members. Surely it would be better that form and substance should wholly harmonize.
10. Bankruptcy of Partners :—When we come, however, to the bankruptcy of partners themselves, all progress which seemed to have been attained in reconciling the law and the practice of merchants, seems wholly stopped. There is no part of Mr. Cory's book more valuable than that in which he shows the utter discrepancy between the two, arising out of the rule of Bankruptcy, that the separate estate must be dis
(a) Other statutes also recognise the personality of the firm, such as the Property Tax Acts, which assess the firm ay an individual trader.
tributed amongst the separate creditors, and the joint estate amongst the joint creditors. John Thomas, an individual trader, has stock in trade to the amount of £500, private property to the amount of £1000; he owes £1000 trade debts, £1000 private debts. He fails; the Bankruptcy Court makes no distinction between his trade creditors and his private creditors, but hands them a dividend of 158. in the pound, all round. But John Thomas, with £500 stock in trade, and £1000 private property, enters into partnership with William Styles, whose resources are exactly equal. They fail ; joint and separate adjudications take place, the firm being indebted £2000, and each of the partners having £1000 of private debts. The Court of Bankruptcy severs at once the trade debts and the private debts, the joint property and the separate property; hands over to the private creditors 20s. in the pound out of the private property, fobs off the trade creditors with 10s. in the pound only. In other words, John Thomas's and William Styles's private creditors gain 5s. in the pound, and their trade creditors lose the same amount, by the simple fact of their having traded in partnership instead of separately.
Now, it is well known that this strange rule was not admitted without difficulty, and that tough old Lord Thurlow, in particular, set his face wholly against it. It is also clear that a contrary one might have been followed, without any special recognition of mercantile theory. But it is equally clear that the rule could never have been established, had the principles of commercial book-keeping been recognised. For an accountant, winding-up the affairs of the firm of Thomas and Styles, would find each of them indebted to the firm in the amount of £500, being half the balance of £1000 beyond assets of the firm. He would hand over to the creditors of the firm, in the first instance, the whole of the joint property, being 10s. in the pound; and then reckoning the firm as a creditor on each separate estate of £1000 for £500, along with the other creditors, he would find for them another 68. 8d. in the pound, on each estate, making £666 : 13:4, or 168. 8d. in the pound in all; the private creditors taking respectively 13s. 4d. in the pound. In other words, John Thomas's and William Styles's private creditors would lose 1s. 80. in the pound, and their trade creditors would gain the same amount, by the fact of their having traded in partnership instead of separately. Surely this premium to the joint creditor is one which it would not be impolitic to hold out to commercial association, in preference to bare individual competition.
The utterly anomalous character of the existing rule is obvious at a glance, when it is compared with the legal doctrine of partnership liability. The law says that a man is liable,“ to his last shilling and his last acre,” for all the debts of the firm of which he is a member. It allows the creditor of the firm to have his execution against the separate estate of individual members; but as soon as he has to resort to his own peculiar tribunal, the Bankruptcy Court, his position is wholly changed. Yesterday, Thomas and Styles's joint creditors might have levied on execution the whole 20s. in the pound of their debts, with an ample margin for costs, out of the joint and separate property of the partners. To-day, having been fools enough to let a petition in Bankruptcy slip in, they have to content themselves with 10s., and to see the private creditors paid in full. The law thus holds out every encouragement to individual proceedings, to desultory litigation, to the multiplication of costs. Bankruptcy becomes in great measure the last resort of folly or of fraud.
Nay, the anomaly does not cease even here. There is a case in which the rule of bankruptcy actually coincides with mercantile practice. Where there is no joint property, or no solvent partner, the joint creditors are entitled to prove against the separate estate. But any the least amount of joint property will withhold from them this benefit. Incredible as it may seem, a joint estate of £13, which would all be swallowed up in costs, has been held sufficient to preclude joint creditors from receiving a dividend out of the separate estate, until all the separate creditors have been paid in full (ex parte Kennedy, 2 De G. M‘N. & G. 228). Thus, in the case before put, of Thomas and Styles failing with separate pro