I tend to imagine, though I haven't got the books to prove it, that the idea for the sword-cane probably originated in the Orient, somewhere, since it seems to me that this area of the world developed the smaller, thinner blades necessary for it slightly earlier than the west. That, or it was one of those cases wherein distant cultures simultaneously spawned an almost identical notion. I do know that sword canes can be found in various styles back into at least the mid-17th century. I did learn that much, before I foolishly allowed my opportunity to slip away...but that's another tale.
I am familiar with oriental "Banker's Canes", which were often topped with ivory or jade carvings. These, however, became more prevalent, if I recall (I foolishly did not absorb enough during my months of tenure as an apprentice sword-cane maker), during the High Shogunate period, as moneylenders and changers were still prohibited from carrying the traditional blades of the Samurai class.
As for WHY swordcanes developed, they were very much the equivalent of today's concealed handgun. As the open wearing of weaponry fell out of fashion, or in places that it would be gauche to openly wear a sword (at court, for instance), it allowed the bearer to remain confidently armed, without disturbing the emerging middle-class sheeple. This middle class, while used to short blades and comfortable with them, oftentimes saw longer blades as an icon of the aristocracy and it's past control. Thus, as the middle class grew, societally, into a major force in trade, it became wise to play to their attitude and forsake wearing a sword (else one might find his prices raised, or a merchant simply unwilling to trade with him!). Still, only a fool would be caught in the evening streets of any town unarmed. Conversely, the swordcane allowed the less-privileged classes to arm themselves, when long blades might otherwise have been denied them by convention or edict (as in the case of the Banker's Cane, mentioned above). Thus, the rise of the sword cane.
Hope this helps you to get a start on the background for your piece. I'd be very interested to see pics of your piece, Golok, if you have them.