Conclusion

This concluding chapter reiterates the points made in the previous chapters to tell a story of how a commercial law was created by giving voice in law to broader political economic concerns. Although, as with the Factors Acts, there were instances of conflict between judges and merchants, the overall picture here is not one of judges pushing back against merchants riding the tide of economic progress. Unlike many modern courts, judges did not see their role as simply encouraging commercial activity. This was rooted in the wider belief that commercial activity was not per se desirable, as too much trade was causing economic instability. This was not a mindset specific to judges or lawyers. This analysis itself raises a broader question. Given that large joint stock companies were perceived of us inefficient and even immoral, why did England introduce general incorporation in 1844, and limited liability in 1855? The chapter draws from the foregoing analysis to make some observations.

Introduction

This introductory chapter discusses the significance of the Regency era in English commercial law's development. There are two main reasons for this. First, the unstable economic circumstances of the period, and the business failures this caused, brought commercial law issues into sharp focus. The second reason the Regency era was particularly important in the development of commercial law relates to the availability of published legal materials. In the period, cases were continuously reported for the first time, and many new commercial law treatises were published. This story of how the courts responded to the needs of commerce has four sets of main characters, which the chapter describes in depth. It concludes with a quick outline of the basic structure of this book.

Ostensible Authority and the Ordinary Course of Business

This chapter takes a look at cases where a partner, or agent, of a business fraudulently acted for their own benefit, whilst purporting to act on behalf of their trade. It looks at how partners and agents would bind business assets when they were authorised to act or appeared to be acting in the ‘ordinary course of business’. This is because courts determined the effect of unauthorised transactions entered into by agents and partners by looking at the comparative fault of people who became unwittingly involved in a fraudulent transaction. The analysis here has roots in the political economic ideas that reckless trading was responsible for destabilising economy but developed in the court's own precedents to focus on whether the fraudulent party's actions would have appeared suspicious to a reasonable commercial party. It had the side effect of upholding transactions which occurred in the ordinary course of business — in that sense it was commercial efficient and facilitated trade.

Trusts and the Risk of Bankruptcy

This chapter shows how commercial parties could use trusts to control the effects of bankruptcy and evade the doctrine of reputed ownership. Trusts facilitated by improving traders' capacity to pursue their rational self-interest: by acting as a surrogate for a charge or mortgage over personal property. The chapter examines how traders could use trusts to avoid the risk of their debtors' insolvency in three stages. It first examines why and how the doctrine of reputed ownership restricted the ability of traders to take mortgages or charges over personal property, and so limited their autonomy. The chapter then examines why the doctrine did not apply to trusts law — if a trustee had legal title to trust assets, surely he was their ‘reputed owner’? Finally, this chapter shows the role that trusts played in controlling the risk of insolvency in contemporary finance.

Partnership Dissolution and Bankruptcy

This chapter looks at those cases where a partnership failed and looks at the rules governing how its assets would be distributed on the bankruptcy of its partners. This is used as a way of examining the extent to which a partnership was treated as an entity separate from the partners, given contemporary ideas about the importance of traders' personal liability for their business debts. Exactly how partnership law prioritised business creditors' claims over the personal creditors of a partner has to be examined in cases where the firm collapsed. Only in cases of insolvency did the issue of which assets different types of creditor could claim matter. By examining the rights of creditors upon a partnership's insolvency in this way, the extent to which the law encouraged creditors to lend money to partnerships — and so facilitated trade — are examined.

Judicial Resistance to Merchant Demands: Factors and Paternalism in the King’s Bench

This chapter turns to judicial resistance to merchant demands. In the 1820s, what counted as an agent's ordinary course of business became a major Parliamentary issue. The dispute was rooted in a profound disagreement between the government, merchants, and the Court of King's Bench — the most important common law court in the Regency period — as to what should properly be considered the course of business of a factor: a commercial agent given possession of his principal's goods to sell in his own name. The controversy arose over whether a factor had authority to pledge his principal's property. On the one hand, merchants contended that factors would typically appear as owners of the property, and so pledges made by a factor should bind principal's business assets under the doctrine of ostensible authority. The government took the same view — hoping to encourage foreign merchants to store and sell their wares in Britain through agents. However, the King's Bench rejected the argument, fearing that allowing factors to validly pledge their principal's property in respect of their own debts would facilitate widespread fraud and breach of fiduciary duty by factors. In turn, this would encourage the type of immoral trading which caused financial instability.

The Use of Trusts in Business Structures

This chapter examines the ways in which trusts could be used by stock traders to stabilise business structures and emulate some of the benefits of incorporation, and even limited liability in the testamentary context. One of these ways was settling legal title to the assets of the business on a fixed body of trustees, who acted as its legal personality, and held the assets for the benefit of the business owners. This chapter explores the way that traders could make use of this device to try and emulate some of the benefits of incorporation, despite the business's lack of its own legal personality, and in the face of the perception of the owner-run partnership as the most stable and moral form of trading. In that way, it examines the extent to which the law of trusts met the needs of traders in the Regency era and so facilitated trade. In so doing, it shows that Regency era trusts were not simply part of the law of real property, as has commonly been supposed, but could be used in two forms of business: the deed of settlement company and the testamentary trading trust.

The Authority of Trustees and Executors

This chapter examines the doctrines governing the authority of trustees and executors. It also looks at the extent to which they could bond the assets they managed where they had no authority to do so under the express or implied terms of the trust or will. As in other areas, the courts of equity and law were concerned to protect innocent purchasers by upholding transactions which appeared to take place in the ordinary course of business, and so to facilitate trade. However, in these cases the courts had to balance that concern with a desire to ensure that trusts and wills could continue to play their respective social functions. There was also a recognition that testators and beneficiaries were not responsible for creating the risk of the unauthorised disposition in the same way as partners and principals.

Partnership as Organisational Law

This chapter shows how partnership was able to function as organisational law, in effectively allowing the assets dedicated to the concern to be used primarily for its purposes, but also highlight the fragility of this ‘ringfencing’ effect. The assets settled for the purpose of the business are treated as separate from the assets of the shareholders, and so ‘bonded’ to the business, its disponees, and its creditors, rather than the shareholders. The focus of this chapter is on the extent to which Regency era legal rules allowed asset partitioning of this type, and so allowed what we would today regard as commercially efficient forms of trading. In the Regency era, commercial parties could not usually incorporate, and a sole trader would simply be liable in the same way for any debts he contracted. The chapter also asks whether traders regarded the law of partnership as sufficient to meet their needs, in light of the limitations of its asset partitioning rules.