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MELBOURNE TRAMWAY AND OMNIBUS Co. v. FITZROY CORPORATION. recognisance not exceeding the value of the appeal. But as in consequence of the -5001. sterling, for the prosecution of the order of February 9, 1900, the appellant appeal and the payment of all such costs company was forced to make application as may be awarded by her Majesty, her to this Board, the respondents must pay the heirs and successors, or by the Judicial costs of that application, which will form a Committee of her Majesty's Privy Council set-off against the general costs of appeal. to the party or parties respondent, and if such last-mentioned security shall be Solicitors-Wadeson & Malleson, for appel. entered into within three months from lants; Stanley, Woodhouse & Hedderwick, the date of such motion or petition for

for respondents. leave to appeal, then and not otherwise

[Reported by J. Eyre Thompson, Esq., the said Court shall allow the appeal, and

Barrister-at-Lan. the party or parties appellant shall be at liberty to prosecute his her or their appeal.”

What the appellant company did was to execute bonds in favour of the respon

1900. dent city and to deposit them with the Nov. 22, 27. HARDOON V. BELILIOS. Prothonotary. It also, though it was Dec. 8. superfluous, deposited 4001. in Court.

Trustee and Cestui que Trust-Registered The reasons for the order of February 9 are Holder of Shares Assignment of Benenot stated in the record, but counsel ficial Interest --Calls--Liability of A8agree that the objection to the company's 'signee-Indemnity. . proceedings was that the bonds were delivered to the Prothonotary and not to

The relation of trustee and cestui que

trust is established as soon as it is shewn the City. The validity of this objection has not been maintained by any argument

that the legal title is in one and the equitat the Bar. It seems to their Lordships

able title is in another ; and where the only to proceed on an erroneous construction

cestui que trust is sui juris the trustee's of the Order in Council. That order right to indemnity by the cestui que trust requires security for payment of costs to

against liabilities incurred by the trustee,

as such, is not limited to the trust property, the respondent, but does not require delivery to him of the bonds constitutiog

but also imposes on the cestui que trust a his security. The Court's order as settled personal obligation enforceable in equity to on December 21, 1899, correctly follows the indemnify his trustee, and the obligation Order in Council. If there is an effec

attaches not only where the cestui que trust tual delivery of the instruments constitu

has created the trust, but where he has ting the security, that is a compliance accepted a transfer of the beneficial ownerwith both the orders. It is stated at the ship with a full knowledge of the facts. Bar to be the common practice to deliver

Appeal from an order of the Supreme bonds to the Prothonotary. The practice Court of Hong Kong, dated February 28, is probably very convenient, and certainly

1899, which affirmed a decision of the there is nothing at variance with it to Chief Justice of the colony, May 19, 1898. be found in the Order in Council.

The suit was brought by the appellant Their Lordships are of opinion that the

to recover payment of calls which he had order of February 9, 1900, should be dis

been compelled to pay on fifty shares in charged, and that instead thereof the

the Bank of China, Japan, and the Straits, appeal of the city from the order of Lim., of which the appellant was the January 4 should be dismissed with registered owner and the respondent the costs. They will humbly advise her beneficial owner. Majesty to make an order to this effect, The Chief Justice found that the appeland with that exception to dismiss the pre- lant had proved that since June 30, 1893, sent appeal. The appellant, having failed

* Coram, Lord Hobhouse, Lord Robertson, in every point on the merits of the con

Lord Lindley, Sir Francis Jeune, and Sir Ford troversy, must pay the general costs of North, VOL. 70.-P.C.

с

course

V.

HARDOON V. BELILIOS. the respondent had been beneficially [They also referred to National Financial entitled to the shares, but the appellant Co., In re [1868],13 and Hemming v. had failed to prove any liability in the Maddick (1872)"} respondent, contractual or otherwise, to Latham, Q.C., in reply. indemnify him in respect of the shares. He therefore directed a nonsuit in favour

LORD LINDLEY delivered the judgment of the respondent. The Full Court

of their Lordships: affirmed this decision, and the Chief The question raised by this appeal is Justice also stated that the appellant had

whether the plaintiff, who is the registered failed to establish the relationship of

holder of some shares in a banking comtrustee and cestui que trust between him

pany which is being wound up, is entitled self and the respondent.

to be indemnified by the defendant, who Latham, Q.C., and Whinney, for the is the beneficial owner of such shares, appellant.—The appellant was the regis- against calls made upon them in the tered owner of the shares, but the re- winding-up of the company. The Courts spondent received the dividends and paid of Hong Kong have decided against the some of the calls. It is elementary law plaintiff upon the evidence adduced by that in such circumstances the one was him; and have entered judgment of trustee and the other cestui que trust. nonsuit. The defendant adduced no That being so, the right to indemnity by evidence; it did not become necessary for the respondent follows as a matter of

him to do so. The Chief Justice, who first - Castellan Hobson (1870). heard the case, decided that the defendant James v. May (1873] 2 is very like this

was the sole beneficial owner of the shares, case, and the trustee was held entitled to

but that the plaintiff had failed to prove indemnity. The fact that the respon

any contract by the defendant to indemnify dent acquired title by transfer and did

him, either express or implied. On appea not himself create the orginal trust makes the Chief Justice and Mr. Justice Wise no difference - Phene v. Gillon (1845), considered that, although the defendant The same principle has been established had become the sole beneficial owner of in various forms in many decisions

the shares, the relation of trustee and Jervis v. Wolferstan (1874), Levi v. Ayers cestui que trust had not been created [1878],5 Fraser v. Murdoch [1881], and between the plaintiff and the defendant, Brown v. Black (1873).?

and that the defendant had not become Joseph Walton, Q.C., and R. J. Parker, liable to indemnify the plaintiff. Against for the respondent.—There is no right to these decisions the plaintiff has appealed indemnity unless there be a contractual

to this Board. obligation, express or implied—Grissell v.

The facts of the case, so far as they are Bristowe [1868] ® and Loring v. Davis

material, are shortly as follows: (1886]. The mere existence of the trust

The bank in question was formed and relation is not sufficient. There must be

registered with limited liability under the an express or implied request—Sayles v.

Companies Act, 1862. Its capital was Blane [1849],10 hobbs v. Wayet [1887],11 divided into shares which were not fully and Kellock v. Enthoven (18741.12

paid up when it went into liquidation, (1) 39 L. J. Ch. 490; L. R. 10 Eq. 47.

which it did in December, 1894. Calls (2) 42 L. J. Ch. 802; L. R. 6 H.L. 328.

have been made on the contributories, of (3) 15 L. J. Ch. 65; 5 Hare, 1.

whom the plaintiff is one.

He is a con(4) 43 L. J. Ch. 809; L. R. 18 Eq. 18. (5) 47 L. J. P.C. 83; 3 App. Cas. 842.

tributory in respect of fifty 101. shares. (6) 6 App. Cas. 855.

He has been sued by the liquidator for the (7) 42 L. J. Ch. 397, 814; L. R. 15 Eq. 363;

calls made on him in respect of those 8 Ch. 939.

shares, and judgment has been given (8) 38 L. J. C.P. 10; L. R. 4 C.P. 36. (9) 55 L. J. Ch. 725; 32 Ch. D. 625.

against him for 4021. 12s. 11d., which he (10) 19 L. J. Q.B. 19; 14 Q.B. 205.

seeks to recover from the defendant. (11) 56 L. J. Ch. 819; 36 Ch. D. 256. (12) 43 L. J. Q.B. 90; L. R. 8 Q.B. 458; (13) L. R. 3 Ch. 791. 9 Q.B. 241.

(11) 41 L. J. Ch. 522 ; L. R. 7 Ch. 395.

HARDOON v. BELILIOS. The fifty shares in question were placed this time Coxon's interest in these shares in the plaintiff''s name in April, 1891, by was at an end, and they belonged absohis then employers Benjamin & Kelly, lutely to the defendant. who were sharebrokers. The plaintiff On April 10, 1894, the plaintiff wrote never had any beneficial interest in them, to the defendant asking that the shares but he was registered as their holder on might be transferred out of the plaintiff's April 3, 1891. A provisional certificate name, but the defendant declined to get of his ownership was made out, and this done, and the plaintiff said no more he signed a blank transfer of them, and about it until June. 1894, when the those two documents were held by Ben- fourth instalment of 58. in respect of the jamin & Kelly, who paid the application call of 11. became due. The plaintiff then and allotment money and first call. This asked the defendant to pay this instalcertificate and transfer afterwards came ment, and he did so, but debited the into the hands of one Coxon, who acted plaintiff with the amount as before. on behalf of a syndicate formed to specu- Shortly afterwards the plaintiff's solicitors late in shares in another company. The wrote to the defendant and asked him to defendant financed this syndicate, and the have the shares transferred out of the provisional certificate and blank transfer plaintiff's name. But the defendant deof the fifty shares in question were, with clined, saying that the shares were lodged other securities, pledged by Coxon with with him by Coxon, who was absent from the defendant as security for his advances. the colony. In October, 1891, the plaintiff's pro- Further correspondence took place visional certificate was exchanged for an after calls had been made by the liquidaordinary certificate, which the defendant tor on the plaintiff as already stated, has ever since held. In March, 1892, but the defendant refused to indemnify dividends were paid on those shares, and the plaintiff, and this action was comthe defendant, as holder of these fifty menced. shares, demanded these dividends from It appears from the evidence as it the plaintiff and received them from stands that the defendant became in him. The operations of the syndicate October, 1892, the sole beneficial owner of resulted in considerable loss. Their these shares, the legal title to which was accounts with the defendant were closed, vested in the plaintifr. Assuming this to and in October, 1892, the defendant be established, their Lordships are at a became the absolute owner of the shares. loss to understand what more This at least is the conclusion arrived at quired to create the relation of trustee by both Courts in Hong Kong from and cestui que trust between the plaintiff the entries in the defendant's books, and the defendant. The facts that they and there are no grounds on which this never stood in the relation of vendor and Board can come to any different con- purchaser, that there was no contract clusion.

between them, that the defendant never In November, 1893, a call of ll. per requested the plaintiff to become his share was made payable by four instal- trustee, are quite immaterial. All that is ments of 58. each. The first three of necessary to establish the relation of these instalments payable in November, trustee and cestui que trust is to prove 1893, February and April, 1894, were at that the legal title was in the plaintiff

and the plaintiff's request paid by the defen- the equitable title in the defendant. This dant to the plaintiff, and by him to the might be proved in many ways. The bank. The defendant said he was not mode of proof is quite immaterial. Being liable to pay them; and in his books he proved, no matter how, the relation of debited the plaintiff with those payments, trustee and cestui que trust was thereby but there is no evidence that the plaintiff established. was informed of this. The fact that the No one can be made the beneficial defendant did not at this time debit owner of shares against his will. Any Coxon with these calls seems to their attempt to make him so can be defeated Lordships very strong evidence that at by disclaimer But the moment the

was

re

HARDOON v. BELILIOS. defendant accepted the beneficial owner- cestuis que trust who are not sui juris ship of these shares he became the plain- and also sole beneficial owners) shews tiff's cestui que trust, and the plaintiff had plainly enough that it was taken for no option in the matter.

granted as well-settled that, speaking The next step is to consider on what generally, absolute beneficial owners of principle an absolute beneficial owner of property must in equity bear the burdens trust property can throw upon his trustee incidental to its ownership, and not throw the burdens incidental to its ownership. such burdens on their trustees. The plainest principles of justice require The short report of Balsh v. Hyham, 15. that the cestui que trust, who gets all the as given in 2 Eq. Ca. Ab. 741, fol. 8, benefit of the property, should bear its shews that this general rule was well burdens, unless he can shew some good recognised, and that the decision was only reason why his trustee should bear them an illustration of its application to the himself. The obligation is equitable and facts then before the Court. not legal, and the legal decisions nega- It is impossible to read the judgment tiving it, unless there is some contract or of Vice-Chancellor Wigram in Phene v. custom imposing the obligation, are wholly Gillon 3 without coming to the conclusion irrelevant and beside the mark. Even that he also regarded the general rule as where trust property is settled on tenants well established. for life and children, the right of their The principle acted upon in Balsh v. trustee to be indemnified out of the whole Hyham 15 was reconsidered and most trust estate against any liabilities arising strikingly illustrated in the well-known out of any part of it is clear and indis- case of German Mining Co., In re putable ; although if that which was once [1851], 6 where the shareholders of a one large trust estate has been converted mining company were held liable personby the trustees into several smaller dis- ally to indemnify the directors against tinct trust estates, the liabilities incidental payments made by them in discharge of to one of them cannot be thrown on the debts contracted by them, but which beneficial owners of the others

payments created no legal obligation on decided in Fraser v. Murdoch, which was the company enforceable at law, and referred to in argument. But where the could not be recovered by the directors only cestui que trust is a person sui juris, from the company by any action at the right of the trustee to indemnity by common law. The shareholders in vain him against liabilities incurred by the contended in that case that the directors trustee by his retention of the trust pro- had only a right to indemnify out of the perty has never been limited to the trust assets of the

company. property; it extends further and imposes Where, as in Balsh v. Hyham,15 a upon the cestui que trust a personal obli- trustee seeks indemnity in respect of gation enforceable in equity to indemnify transactions in which he need not have his trustee. This is no new principle, but engaged, and which were not within is as old as trusts themselves

the scope of his trust, he must prove that In Balsh v Hyham [1728] 15 the trustee his cestui que trust either authorised or sought indemnity in equity, not against a ratified such transactions. But if he has liability incidental to the ownership of incurred liability within the scope of his the trust property, but against a liability trust, and for the benefit of his cestui que incurred by him by borrowing money at trust, German Mining Co., In re, 16 shews the request and for the benefit of his that nothing more is required cestui que trust. The Court decided that When a trustee seeks indemnity from the plaintiff was entitled in equity to the his cestui que trust against liabilities relief which he sought on the broad arising from the mere fact of ownership, ground" that the cestui que trust ought to there is neither principle nor authority save the trustee harmless, as to all damages for saying that the trustee need prove relating to the trust.” This language any request from his cestui que trust to (although open to criticism if applied to incur such liability.

In the case SUP(15) 2 P. Wms. 453.

(16) 24 L. J. Ch. 41; 4 De G. M. & G. 19.

This was

or

HARDOON v. BELILIOS. posed the trust involves such liabilities, opinion govern this case. The fact that and the trustee whilst he remains such the defendant did not create the trust on cannot get rid of them. He is subject which the plaintiff held the shares when to them as legal owner ; but in equity they were first placed in his name affords they fall on the equitable owner unless the defendant no defence to this action. there are good reasons why they should Although the defendant did not create not.

the trust he accepted a transfer of the As regards shares this right of a trustee beneficial ownership in the shares, first as to be indemnified by bis cestui que trust mortgagee and afterwards as sole beneficial against calls has been repeatedly recog- owner, with full knowledge of the fact nised and enforced on the principles that they were registered in the plaintiff's applicable to the equitable ownership of name as trustee for their original purproperty, and without reference to the chasers and their assigns, whoever they principles applicable to contracts might be. By this acceptance the defenspecific performance or any other legal dant became the plaintiff's cestui que trust, or equitable doctrine. Nothing can be and the plaintiff could not prevent it or plainer or sounder than the language of effectually dispute his trusteeship for the Vice-Chancellor James in Castellan v. defendant. By this acceptance the defenHobson, and of Mr. Justice Chitty dant created the trust for himself. Havin Loring v. Davis. James v. May ? ing done so, the defendant as the beneproceeded on the same principle. Other ficial owner of the shares demanded from cases to the same effect might be cited, the plaintiff and obtained dividends but it is unnecessary to refer to them. declared in respect of them. The defenNo case has been found, nor as their dant also paid calls made upon them, Lordships believe can be found, which is although he attempted to protect himself opposed to these authorities.

from any admission of liability by entering The principle was recognised by Mr. these payments in his books as made on Justice Fry in Huyhes Hallett v. Indian behalf of the plaintiff. Lastly, when Mammoth Gold Mines Co. [1882],"? al- asked by the plaintiff to procure a transfer though he there held that the application of the shares out of the plaintiff's name, for indemnity was premature.

the defendant refused to do so, and thereby It is true that the facts of this case are compelled the plaintiff to continue to hold not in all respects like those in the cases them as his trustee. It is idle after this above alluded to. But although the to rely on the fact that the defendant did facts are different the result of them is not create the trust in the first instance, the same

—that is, the facts were such and idle to talk of renunciation or disthat the relation of trustee and cestui que claimer of these shares by the defendant. trust was created.

In this case

the He cannot now get rid of the trust for defendant did not create the trust on himself which he created by becoming which the plaintiff originally held the beneficial owner of the shares, and which shares. The defendant had nothing to do trust he has recognised since as subsistwith procuring their registration in the ing. plaintiff's name as trustee for Benjamin It is quite unnecessary to consider in & Kelly and their assigns. This feature this case the difficulties which would arise of the case was strongly relied upon by if these shares were held by the plaintiff the defendant's counsel as distinguishing on trust for tenants for life, or for infants it from those above mentioned, and reliance or upon special trusts limiting the right was placed on what Lord Blackburn said to indemnity. In those cases there is no in Fraser v. Murdoch 6 about makers of beneficiary who can be justly expected or trusts and trusts to carry on business required personally to indemnify the with particular funds. But their Lord- trustee against the whole of the burdens ships can find nothing in Lord Blackburn's incident to his legal ownership; and the judgment which is inconsistent with the trustee accepts the trust knowing that principles which in their Lordships' under such circumstances, and in the

(17) 52 L. J. Ch. 418; 22 Ch. D. 561. absence of special contract, his right to

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