Limited Liability Partnerships-Mr. Bramwell's Opinion.

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do not believe that that will be the result, but of future earnings; the more capital the more if it were to be anticipated, the experiment gains by the whole body of the community; should be tried. Because, although I fully the more ways of employing capital, the more feel the inconvenience of changes in the law, I ways of making those gains; consequently, I think it due, in the present case, to the autho- should say we never can have too much of it. rity of those who advocate it, that an opportu- And so far from thinking the objection under nity should be afforded of forming these part- consideration well founded, the direct opposite nerships; it being merely an additional power of it seems to me to be the truth. I am into that possessed already, and one which no- clined to think that limited liability partnerships body need exercise. are more desirable in a country where profits "But to be consistent, if there is anything are low than where they are high; as where in the first and second objections, why do not profits are low less inducement exists for similar considerations cause an interference saving, and the consequent accumulation and with private partnerships with unlimited liabi- augumentation of the wealth of the community, lity Admitting that limited liability will lead than where they are high. The argument is, to more, it cannot be denied that unlimited we do well enough, and so need not do better. will and does lead to some mischiefs. Why "There is another objection, which appeals are not such partnerships superintended? It more to the ear than the understanding. may be said, they cannot be reached; they have When stated with precision it seems to be this: no favour to ask. That could easily be ma- that there is a natural justice in, or connexion naged. Prohibit all trade and partnerships between, buying goods and paying for them. except by license, say, from the Board of I ask, why should a man who buys goods pay Trade, and then their proposed proceedings for them? Either he has undertaken to do so, could be reviewed; or tax every proposing or he has not. If he has, make him liable to trader, as a preliminary to his right of trading; the extent of his undertaking; to his last or punish him if he failed. No doubt, rash speculation would thereby be somewhat checked. It will be said, the public would not endure it. I agree. Nor if it had once enjoyed the right of forming partnerships with limited liability, would it tolerate that right being denied it. The reason for not interfering in such cases is, that it is felt that persons judge best for themselves. The State, after all, acts by its officers; and they cannot know each man's private interest as well as he does himself; while the interference with private affairs in cases of proposed partnerships with limited liability, and the belief in its utility, exist merely from the opportunity which the law at present affords of exercising it.

"As to the third objection, it is one which in principle is opposed to all the great corporations chartered by the Crown or Parliament. They are, on the principle contended for, all exceptional and wrong. The liability is limited, and they preclude the possibility of competition by private persons. No reason is given for permitting them, that I know, except that without them works executed by them would not be executed at all, while other enterprises are; which is in effect to say that how done is immaterial, provided they are done somehow. "There is another argument against our adopting limited liability partnerships-that they may do well in a new or poor country, but not in a rich or old one like this. It is said, we have abundance of capital; witness the price of land and of the public funds. It has been well asked, when did this become the case in England? At what period did the desirableness of limited liability partnerships cease with us? I ask, what is the meaning of the expression we have abundant capital?' Does it mean we have too much, and should be better off by destroying part, or exactly enough, so that we should be worse off if one pound richer or poorer? Capital is the means

shilling and acre, if he has pledged them. But if he has not, if he has not undertaken at all, or if he has limited his liability, I not only see no reason why he should be called on to do that which he has not engaged to do, but I think it a positive dishonesty to attempt to make him. I take the case of a dormant partner as an example: A. has entered into a partnership with B.; he has bargained that B. shall not pledge his credit; he has agreed to find certain capital; he has performed his engagement faithfully. C. has sold goods to B.; B.'s fraud, folly, or misfortune makes him insolvent. The existence of the partnership is discovered, and A. is called on by C., who had never heard of him, and never trusted him, to pay. This claim is, in my judgment, inconsistent with common sense and common honesty.

"Again, it is said, that as profits would have gone to pay a debt, he who takes them ought to pay it. If he did not undertake to do so, why should he use a profit on a transaction with A. to make good the loss on another with B. ?

"I do not therefore concur in the objections which have been urged. No doubt some mischiefs may ensue, for it would indeed be a wonderful law that was unattended with any; but they must be contrasted with the advantages on the other side. These I have refrained from giving, as they are to be found stated in the evidence.

"If I had to choose between the proved and anticipated advantages and disadvantages of the prohibition or permission of limited liability partnerships, I should unhesitatingly decide in favour of the permission; but I repeat, I think no one can predict the amount of benefit to be derived from leaving persons to act for themselves; and it is to the value of that principle, and to the probable results of its application, that I attach the greatest importance. I think, therefore, the permission to form partnerships

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Limited Liability Partnerships-Mr. Bramwell's Opinion.

with limited liability desirable intrinsically. It remains to be considered whether there is anything in our laws, habits, or usages to make it otherwise.

"I think not. It is impossible for any law to be in a worse condition than our law of partnership. From the liability of the private partnership to the last acre and shilling, up to the entire absence of all liability in the members of some incorporated companies, there is every variety of liability, on the extent and nature of which no one, not even the most accomplished lawyer, can speak with certainty. No doubt we are not called on to consider the general law of partnership; but it is important to refer to its condition to ascertain how far the proposed change would be a change-how far a novelty to the public, and what present mischief it might prevent. Now the law does at this moment permit partnerships with limited liability. Many insurance companies, though unchartered, are carried on in that principle; and I conceive all other trades or businesses theoretically may be so conducted. In point of law, I believe that A. and B. might buy 100 quarters of corn of C., on the terms that C. should be paid by A. alone, or out of an ascertained fund only. Practically this cannot be done, because it is impossible, in every case of dealing, to bring home to the creditor the knowledge of the partnership terms. The present proposal, therefore, is only to allow that practically, which may be done theoretically in all cases, and is done in many. Again, creditors under the present system often find another species of limited liability, as, where directors of joint-stock companies act ultra vires, for instance, trade on credit without authority, the shareholders are held not liable; cases which would be diminished if a more wholesome law of partnership existed. Railway companies, and others incorporated in like way, are partnerships with limited liability.

interest. If A. owes me 1,000%., and is worth 1,000l. he is not in a very distinguishable situation from that of being my partner, our assets being 1,000l., and our capital also being 1,000l., which I have furnished, and for which he has to account. The only difference I can perceive as regards the trader and his creditors is, that the lender of money is better off than he would have been as a limited partner. I say, therefore, that our present law not only presents no objection to the proposed alteration, but sanctions it by its own theory, in some cases by its practice, and only not in all, by the difficulty which exists of giving actual notice to the parties dealing with the partnership of the limited authority of each partner; -and that it urgently requires alteration, to obviate the mischiefs and injustice which at present exists, and to prevent those cruel cases we see in practice, as, for instance, where unwary people holding a few shares in a bank have been wholly ruined by its stoppage, and reduced from plenty to want.

"All laws are objectionable which are of such a character, that those to be affected by them cannot be taught them; they are productive of surprises and hardships. This is the case with a part of our law of partnership. Anything more opposite to what would be supposed to be the law, than the case of Waugh v. Carver, I cannot conceive. Two separate firms, trading at different places, bargained privately to share a part of the profits of the businesses which each separately carried on. On the insolvency of one firm, the other was held liable for its debts, on the ground that profits are the creditors' fund. I believe the decision was erroneous in point of law; but it has been too much followed to be now reversed, unless by the legislature. How it is consistent with the rule, that partnership questions are questions of authority, it is difficult to see. A reasonable law based on an obvious principle is easily incorporated into the general knowledge of the people; but such a law as this, at the utmost, only inspires some with a vague alarm, that somehow a man may be a partner without knowing or intending it; while many, for want of as much knowledge as that, have most unhappily so found themselves.

"There is another argument which is suggested by the present state of the law. Money may be lent at any rate of interest, without a partnership being constituted; say 50 per cent. per annum. It may, I suppose, be lent at that rate, with a stipulation that it shall be reduced in proportion as the profits of the business it was used in, fall; or, as I infer from Lord "I have made these observations in case my Eldon's dictum in exparte Hamper, it may be opinion should be desired in addition to the lent to be paid for by a sum proportioned to weighty authorities we have collected and rethe profits, though not by a portion of them, ferred to; and I wish to say, most sincerely, and in neither case is a partnership formed that I believe I have added nothing to what thereby. If, however, this is so, why should has been said and better said before, while I not a portion of the profits be allowable? It have omitted so much, that I fear, in an atmay be said, a jury would find such an ar-tempt to be brief, I may have prejudiced the rangement to be colourable, and to be a partnership; but they ought not to do so if they regarded their oaths, for by the hypothesis it is not colourable, which, I apprehend, is the case only where one thing is said and another meant. What is the difference between such cases and a partnership? It is said that in a partnership all the partners jointly are owners of the partnership assets, their goods and debts; but so in effect is a lender to the extent of his

case so ably made by others. If I am only required to give a verdict, I do it unhesitatingly in favour of a change in the law. The evidence and reasoning in its favour, in my judgment, infinitely preponderate; and the case of its advocates is conclusively made out.

"I recommend, therefore,

"1st. That persons be allowed, as of right, to form partnerships limiting the liability of one or more or all of the partners.

Limited Liability Partnerships.—Differences in the Mercantile Laws.

"2nd. That they be allowed to do so by private agreement among themselves, on registering their names, place and nature of business, term of partnership, and capital subscribed by the limited partners.

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way: if A. B. and C. D. are to be liable without limit, and others not, let the style of the firm be A. B., C. D., and Co., with limited liability. The names of the unlimited partners being always specified; those of the others not.

"5th. I need hardly say I would allow money and services to be paid for by a portion of profits.

"I think this registry desirable, for the sake of such partnerships; for the greatest apprehension of mischief I have from their being allowed is, that persons will join them in the belief of a limited liability, and be unjustly made hable to claims by dishonest creditors, limited partners, or advise or require return "I would not prohibit interference by the who will declare that they always thought the of profits, or additional liability, in case of indefendant a partner, that he conducted himself solvency of the general partner, or the publishas such, and that they had no means of know-ing of accounts. I believe all those regulations ing his liability was limited. The last topic to be useless, mischievous, and unjust. If any will be taken away, or at least diminished, by a

registry.

3rd. That where the liability of all the partners is to be limited, the partnership should be incorporated, on registration. "4th. That the partnership name should be used, and in such way as to indicate the limited liability.

"In the case of corporations there is no difficulty; in the case where some partners are to be liable unlimitedly, there is perhaps a little practical difficulty, arising from the present permitted use of the names and styles of firms which do not truly describe those who use them. It may, however, be obviated in this

partner so conducts himself as to induce persons to trust the firm on his credit as a general partner, let him (as any one who is no partner now may), be made liable to the debts so contracted. In that case, where one man has so acted as to induce another to trust him, and in the case where he has himself, or his actual he ought to be liable, and in my judgment in agent has by his authority, pledged his credit, those cases only.

"I desire to add my entire concurrence in the views and reasoning contained in the paper put in by Mr. Kirkman Hodgson.

"G. W. BRAMWELL."

DIFFERENCES IN THE MERCANTILE LAWS OF ENGLAND, IRELAND, AND SCOTLAND.

HAVING in the last Number noticed the differences pointed by the Mercantile Law Commissioners relating to bills of exchange and promissory notes, we proceed now to various conflicting rules in the Law of Debtor and Creditor :

England and Ireland.

PRINCIPAL DEBTOR AND SURETY.

1. Where an engagement by principal and surety is joint, though the creditor must institute proceedings against both, yet having obtained judgment or decree, he is at liberty to enforce payment against the surety being living, and, if there be two or more sureties, against any one of them, who is living, exclusively; such surety being left to adjust with the principal, and with the other sureties (if any), his right to indemnification and contribution.

2. The surety, on performing the obligation, cannot have the benefit of bonds or judgments by or against the principal debtor, or other like securities which are extinguished by such performance. (Bond.) Gammon v. Stone, 1 Vez. 339.

Scotland.

PRINCIPAL DEBTOR AND CAUTIONER.

1. If in an engagement by principal and cautioner the latter have bound himself only as cautioner, and not also jointly and severally, or "as full debtor," the cautioner is entitled to have the principal "discussed," i. e. compelled by diligence or execution to perform the obligation so far as the creditor can enforce it.

2. The cautioner, on performing the obligation, is entitled to an assignation of the creditor's claim on the principal debtor, and on co-cautioners, and of all the securities of every description held by the creditor from or against the principal debtor, and not subject to any other claim of the creditor. 1 Bell's Comm. 348.

3. An absolute discharge of one co-cautioner operates as a discharge of the others only to the extent of the proportion which the one discharged should have contributed in the relief of the others. 1 Bell's Comm. 359.

4. The discharge of a written guarantee can be proved only by the writing or oath of the creditor. But when the implement of the

Differences in the Mercantile Laws of England, Ireland, and Scotland.

Differences in the Mercantile Laws.-Oaths in Chancery.