In re RHODESIA GOLDFIELDS, LIMITED. PARTRIDGE v. RHODESIA GOLDFIELDS, LIMITED. [1907 R. 454.] Company-Debenture Stockholders' Action-Distribution of Fund in Court— Company in Liquidation-Debenture Stock Trust Deed-No Condition protecting Transferees against Equities Stockholder a Trustee and Director-Alleged Devt by Stockholder to Company-Retention of Shares of Stockholder and his Transferees. Where a trust fund is being distributed by the Court, a trustee-beneficiary against whom proceedings are pending for moneys alleged to belong to the fund cannot take any share until the amount (if any) due from him has been ascertained and made good. After the appointment of a receiver in a debenture stockholder's action and a winding-up order, a stockholder, who was also a trustee of the deed securing the stock and a director, transferred 10,000l. stock to certain transferees. The certificate in the action found that 2501. stock belonged to the transferor and 10,0007. to the transferees. Among the assets certified as now subject to the trust deed was a debt alleged to be owing by the transferor to the company for moneys alleged to have been had and received by him while a director. Proceedings were being taken to establish this alleged debt, but the amount (if any) due was not yet ascertained or established. The trust deed did not contain any condition protecting the transferees from any equity, set-off, or cross-claim of the company against the transferor. The fund in Court realized in the action was more than sufficient to pay the stockholders in full, and it was proposed to distribute it on the further consideration : Held that, pending the ascertainment and establishment of the amount (if any) due from the transferor, the amounts due to the transferor and the transferees must be retained and carried to separate accounts. In re Akerman, [1891] 3 Ch. 212, 219; In re Goy & Co., Ld., [1900] 2 Ch. 149, 153; and In re Brown & Gregory, Ld., [1904] 1 Ch. 627; [1904] 2 Ch. 448, applied. FURTHER CONSIDERATION. This was the further consideration of a debenture stockholders' action. The stock, which carried 5 per cent. interest payable on January 1 and July 1 in each year, was secured by a trust deed of October 31, 1899, giving the trustees a floating charge on the SWINFEN 1909 Dec. 14, 15. EADY J. SWINFEN company's assets. Any surplus on realization was to be held in trust for the company. The plaintiff Partridge was one of the trustees. He was also a director and a stockholder. 1909 RHODESIA GOLDFIELDS, In re. PARTRIDGE On March 9, 1907, the debenture stockholders' action was LIMITED, commenced, and on March 15 a receiver was appointed. On March 12, 1907, the company presented a winding-up petition, alleging that it was no longer able to carry out at a profit the GOLDFIELDS, objects for which it was established, and was unable to pay any LIMITED. debts that might be incurred in the continuance of its business, 17. RHODESIA and on March 26 a compulsory winding-up order was made. On May 23, 1907, Partridge transferred 10,000l. stock to the trustees of his sister's marriage settlement in exchange for 10,000l. debentures of the French South African Development Company, Limited, which had defaulted in payment of its interest. A mortgage given by Partridge to the trustees to secure payment of that interest was at the same time handed back. The consideration in the transfer was expressed to be 58. and it bore the following indorsement : "I hereby certify that the consideration on this transfer is nominal, no money having passed. "Henry Partridge." This transfer was registered by the receiver, and a fresh certificate handed to the transferees, signed by the receiver, but without the seal of the company. On May 4, 1909, the conduct of the action was given to the defendant Game, another stockholder. On May 13, 1909, the certificate in the action was made. It certified (inter alia) that 82,000l. of the stock was still outstanding, of which the plaintiff Partridge held 250l. and his transferees 10,000l. All interest had been paid up to January 1, 1909, and further interest was credited up to the date of the certificate. Among the assets now subject to the trust deed were certain claims against Partridge and the other directors (inter alia) "In respect of profits received by such directors of the company as were members of the firm of Partridge and Jarvis from the purchase and sale to or the acquisition by the company of stocks and shares.” EADY J. Partridge was a member of the above firm. Proceedings were SWINFEN being taken to enforce these claims, which if substantiated would amount to a considerable sum, but the claims as yet were neither definitely ascertained nor substantiated. 1909 RHODESIA GOLDFIELDS, In re. PARTRIDGE RHODESIA In these circumstances the question arose whether upon the LIMITED, payment out of Court of the amounts owing to the stockholders on the distribution of the fund realized in the action, which was v. more than enough to pay them in full, the Court ought for the GOLDFIELDS, present to retain the amounts due to Partridge and his transferees and carry them to separate accounts. The party with conduct of the action had issued a summons asking that this should be done. The trust deed did not contain the common form condition that "the transferee will be recognized as entitled to the stock free from any equity, set-off, or cross-claim of the company against the transferor": Palmer's Company Precedents, 10th ed., pt. III., p. 321, condition 9. Jenkins, K.C., and G. F. Hart, for the party with conduct of the action, asked that the amounts certified to be due to Partridge and his transferees should be retained and carried to separate accounts. Hon. Frank Russell, K.C., and Bischoff, for the company. Partridge was a trustee for the stockholders to the amount of their stock and a trustee of the surplus for the company. He cannot share in the distribution without paying what he owes for money had and received on behalf of the company. The transferees, who took by a voluntary transfer after the action and the winding-up, are in no better position: In re Brown & Gregory, Ld. (1) In that case there was actually a condition that "the principal moneys, bonus, and interest hereby secured will be paid without regard to any equities between the company and the original and any intermediate holder." There is no such condition here, and the present case follows a fortiori. general principle is stated in In re Goy & Co., Ld. (2) The Ward Coldridge, for Partridge and his transferees. In re Brown & Gregory, Ld. (1) and In re Goy & Co., Ld. (2) were (1) [1904]1 Ch. 627 ; [1904] 2 Ch. 448. (2) [1900] 2 Ch. 149, 153. LIMITED. SWINFEN cases of debts ascertained and established before the fund was EADY J. distributed. In the present case there are merely claims which may or may not result in a debt against Partridge. 1909 RHODESIA GOLDFIELDS, [SWINFEN EADY J. The claim is for a liquidated demand. A LIMITED, plaintiff can sue for money had and received without specifying PARTRIDGE the amount.] In re. v. RHODESIA That is so, but the amount could not be set off against a crossGOLDFIELDS, claim until it was definitely ascertained and established: Christie LIMITED. v. Taunton, Delmard, Lane & Co. (1) [SWINFEN EADY J. The company could not set off a future debt, e.g., a future call. The present claim is for an existing debt.] It is only an inchoate liability. It is not a debt until the amount (if any) due is ascertained and established: Ex parte Theys. (2) [SWINFEN EADY J. That was a claim for damages for misfeasance, so there was no debt until judgment. But the present case is not governed by any technical questions of set-off. It falls within the far wider principle that a person who owes an estate money cannot claim an aliquot share without first making good what he owes: In re Akerman. (3)] That principle assumes an established debt. It has never been applied to a mere inchoate liability which may or may not be established as a debt. Executors cannot retain a share of residue against future instalments of a debt payable by instalments: In re Abrahams. (4) [SWINFEN EADY J. Because the instalments are not presently payable. Your debt is immediately payable subject to the amount (if any) being ascertained.] It is not payable until the amount is ascertained and established. Until then it is a mere possible inchoate liability. Even if Partridge's 250l. is retained, the 10,000l. belonging to the transferees ought not to be retained. In In re Brown & Gregory, Ld. (5) the transferee was merely a trustee for the transferors and their creditors. Here the transfer was made on (1) [1893] 2 Ch. 175. (2) (1884) 25 Ch. D. 587, 594. (4) [1908] 2 Ch. 69. (5) [1904] 1 Ch. 627; [1904] 2 Ch. 448. an exchange for valuable consideration, and the transferees had SWINFEN no notice of any claim against Partridge. [SWINFEN EADY J. The transfer, which is under seal, states that the consideration was nominal, and it is stamped accordingly.] EADY J. 1909 RHODESIA GOLDFIELDS, LIMITED, In re. v. RHODESIA That is a matter for the Inland Revenue. It does not estop PARTRIDGE the parties from setting up the true consideration. The company cannot set off against the transferees any debt of Partridge GOLDFIELDS, accruing since the transfer was sent in for registration: Watson v. Mid Wales Ry. Co. (1), approved in Newfoundland Government v. Newfoundland Ry. Co. (2) [SWINFEN EADY J. In the present case the transfer was by a trustee against whom claims for money had and received existed prior to the transfer. Can his transferees take the fund due to him as cestui que trust free from those claims?: Hooper v. Smart (3); Evans v. Benyon (4); Chillingworth v. Chambers. (5)] If the liability were definitely established before the Court had parted with the fund there might be a difficulty. But there is no case in which the Court has retained control of a fund simply for the purpose of providing money for payment of alleged personal claims that may or may not be substantiated against the parties entitled to the fund. A. M. W. Wells, for the other trustee. Hon. Frank Russell, K.C., in reply. The trust deed omits the ordinary condition making the transfer free from equities, and the transferees' certificate is not under the company's seal. Partridge and the transferees are therefore in the same position. I do not dispute that a future debt cannot be set off. But this is not a case of set-off. It is a case of a trustee-beneficiary making good a trust fund before taking any share of it. In In re Goy & Co., Ld. (6) the company was wound up in May, 1898, and judgment was given in the debenture-holders' action in June, 1898. Chandler, a director, transferred debentures for value to Robey in September, 1898. In October, 1898, the liquidator discovered grounds for alleging that Chandler had (1) (1867) L. R. 2 C. P. 593, 598. (2) (1888) 13 App. Cas. 199, 211. (3) (1875) 1 Ch. D. 90. (4) (1887) 37 Ch. D. 329. LIMITED. |