Accepted, At 36, Throgmorton-st., per procuration of the trustees of the London and Westminster Bank,
J. W. GILBART, Manager.
"The Bank of England moved for an injunction to restrain the bank from accepting bills in this form, and the case having been argued, the Court of Common Pleas held that it was an infraction of the Bank Charter Act of 1833, and the other Acts then in force respecting the Bank of England. Accordingly, the Master of the Rolls granted an injunction, restraining them from accepting bills at less than six months' date. The only result was, that the bank paid the bills drawn upon it without acceptance. The London and Westminster Bank being defeated in this manner, the London Joint-Stock entered the lists against the Bank of England in another form. It agreed with a bank in Canada, that the latter might draw upon Mr. George Pollard, who might accept in his own name, and the London Bank agreed to find the funds to meet Mr. Pollard's acceptances, and such transactions were to be matters of account between the two banks. Mr. Pollard was not a shareholder in the London Bank; but he was their manager, and the transaction was substantially an acceptance by the bank. The House of Lords, however, declared this ingenious device to be illegal, as it was merely doing indirectly what they were forbidden to do directly. Thus ended the attempts of the London joint-stock banks to free themselves from this monstrous oppression, from which they were not relieved till the Act of 1844.
"It was always held at common law that a man could not sue himself. Consequently, if the same individual was member of two partnerships, they could not go to law against each other. The consequence of this was, that no partnership could sue one of its members, or vice versd and if the same person had shares in two different banks, they could not have sued each other for any demands or debts. The Statute 1838, c. 96, was passed to remedy this anomalous state of matters. It enacted that a banking company might sue, or be sued, by any of its members, exactly as if they were separate individuals; and by the
Statute 1840, c. 1ll, this was extended to criminal cases, so that if a member of such a banking partnership steals or embezzles any property belonging to it, of any description, or shall commit any offence against it, he may be indicted, and convicted exactly as if he were a stranger.
"It being unlawful for spiritual persons to engage in any trading concerns, and such partnerships, of which any of its members were spiritual persons, being held to be void and illegal, it was suddenly found that most of the banking companies in England were illegal, and all their contracts void, because some of their shareholders were clergymen. The Act, Statute 1841,, c. 14, was passed to remedy this, and declared that such partnerships should not be illegal and void; and that their contracts should not be illegal and void, although some of their shareholders were clergymen.
"When the impediments to the formation of joint-stock banks beyond sixty-five miles from London were removed in 1826, they were left perfectly free as to the provisions of their deeds of constitution, their nominal and their paid-up capital, and all the details of management, nor were they obliged to publish any accounts. The public, consequently, were perfectly in the dark as to the magnitude and position of the bank, because they might advertise that their nominal capital was £1,000,000, divided into any number of shares. But no one had any means of knowing how many of the shares were taken and paid upon. Consequently, although the capital of the bank might be advertised in the papers as £1,000,000, no one could tell whether it had bond fide £500 paid up.
"The first few joint-stock banks having been apparently successful, naturally turned speculation into that channel. Numbers of new banks were started in all parts of the country, and many private bankers, fearing that the competition would be too powerful for them, united and formed themselves into joint-stock banks. The rapid growth of these establishments led to much mismanagement, and many disasters, as might have been expected, and Committees of the House of Commons were appointed to-inquire into the subject in 1836-7 and 1840-1.
"The great abuses which were revealed in the course of these inquiries determined Sir Robert Peel, who was supposed to be the minister who par excellence understood banking, to bring in a bill to regulate the future constitu-tion of these establishments. An Act, containing many elaborate provisions for this purpose, was accordingly passed, Statute 1844, c. 113. Fully admitting the enormous evils which this Act was intended to remedy, we will only say that a more unfortunate specimen of legislation, or one more entirely unsuitable to the nature of the business it related to, has not emanated from Parliament in recent times; and, being found to be an unmitigated nuisance, without any counterbalancing advantages, it was wholly repealed in 1857.
"We have already said that Sir Robert Peel's Joint-Stock Banking Act, Statute 1844, c. 113, was found to be-wholly unsuitable for the purposes for which it was intended, and that it was totally repealed. This was done by the Act, Statute 1857, c. 49. The principal provisions of this Act are as follows :-
"I. Every company formed under the Acts, Statute 1844, c. 113, or the Statute 1845, c. 75, were to register themselves before the 1st January, 1858, under the said Act, under severe penalties.
"II. Any banking company, consisting of seven or more persons, having a capital of a fixed amount, divided into shares also of a fixed amount, and legally carrying on the business of banking before the passing of the Act, may register itself under this Act, and then all provisions of any Act, letters patent, or deed of settlement constituting or regulating the company, as are inconsistent with the Joint-Stock Companies' Acts, 1856, 1857, or with the said Act, are thereby repealed in regard to that Company.
"III. The above Banking Acts were then repealed as to any future companies, and as to existing companies, as soon as they were registered under this Act.
"IV. Seven or more persons might register themselves as a company, other than a limited company, under this Act, provided the shares into which the capital of the company is divided are not less than £100 each.
"V. The number of partners permitted in a private bank is extended to ten.
"The question of admitting the principle of limited liability into commercial partnerships in this country has long been debated with much acrimony. The old theory of the law was expressed by Lord Eldon, who said that a man who entered into a commercial partnership, rendered himself liable 'to his last shilling and his last acre' for the debts of the company. And this, no doubt, was true, as far as regards ordinary private partnerships. But many great companies had been formed and incorporated, in which the privilege of limited liability was specially conferred upon them. A principle may be good when applied to ordinary traders, who are supposed all to take an active part in the business, and to be each and all parties to every transaction. But in the case of great companies it is rather different. In them the great majority of the partners are specially debarred from all knowledge of the real nature of the transactions, which are expressly left in the hands of a small committee. Now, as there are many great objects in commerce which can only be carried out by means of a great company, and it was obviously desirable that they should be carried out, it has long been the practice in granting Acts to these companies to limit the liability of the shareholders. This was done in the case of the Bank of England itself; in railway and other companies; also, almost universally, in the charters granted to Colonial banks. But for a very long time the application of this principle to private partnerships in England was vehemently resisted. However, this resistance was overcome in 1855, and in that year an Act was passed, Statute . c. 133, to permit the formation of joint-stock companies with limited liability. However, although the principle was conceded as to other companies, joint-stock banks were still most jealously excluded, on account of some unintelligible distinction between their trading and other trading. In the Joint-Stock Banking Act of 1857 this exclusion was still strictly maintained. But the terrible examples of the failures of joint-stock banks in at last compelled the Legislature to yield, and in 1858 an Act was passed to extend limited liability to banks.
"The chief provisions of this Act, Statute 1858, c. 91, are:-
"I. So much of the last mentioned Statute of 1857, as prevented banks being formed on the principle of limited liability, was repealed.
"II. All banks which issue promissory notes are sub-to unlimited liability, as far as regards their notes, for which they are to be liable, in addition to the sum for which they are to be liable to the general creditors.
" III. Every existing banking company may register under this Act, upon giving thirty days' notice to each and all of its customers. Any customer to whom it may fail to send notice retaining his full rights as before.
"IV. All companies formed, or registering themselves, under this Act, must, on the 1st February and 1st August in each year, post up in a conspicuous place in its head office, and each branch, a statement of its liabilities and assets, made up in a form prescribed by the Act."