ican Telegraph Co., 5 Q. B. D. 188. I will content myself with quoting the language of Cotton, L. J., 5 Q. B. D. p. 214; and see per Bramwell, L. J., p. 203, and Brett, L. J., p. 209: "The duty of the company is not to accept a forged transfer, and no duty to make inquiries exists towards the person bringing the transfer. It is merely an obligation upon the company to take care that they do not get into difficulties in consequence of their accepting a forged transfer, and it may be said to be an obligation towards the stockholder not to take the stock out of his name unless he has executed a transfer; but it is only a duty in this sense, that unless the company act upon a genuine transfer they may be liable to the real stockholder." True it is that the appellants, following what is now the usual practice, gave notice of the transfer which had been brought in to the persons named as transferors, but they had no duty to do so, and it was done merely for their own protection. Experience in these cases shews, however, that it is a very poor protection.

Stirling, L. J., held that the mere performance of a duty imposed by law upon any one holding a definite legal position does not constitute a consideration sufficient to support a promise to him by the person to whom the duty is owed. But with great respect to that very careful judge, he overlooked that this very point was involved in the decision of the case of Oliver v. Bank of England [1902], 1 Ch. at pp. 621, 622. Vaughan Williams, L. J., quoted and commented upon the passage from the judgment of Willes, J., in Collen v. Wright, (1857) 8 E. & B. 647, 658, where he says: "The fact of entering into the transaction with the professed agent as such is good consideration for the promise." And it did not occur either to the learned counsel, who argued the case with great pertinacity, or to any of the learned judges in the Court of Appeal or the noble Lords in this House, to question that the acting by the Bank of England on the demand of the supposed attorney was a good consideration for the promise by him to warrant the genuineness of the power which they held to be established.

Lastly, my Lords, it was said by Romer, L. J., that this is not an action on a warranty, and that a warranty and a contract of indemnity are distinct, one important difference being the period from which the statute of limitations would run. That, of course, is so, and the appellants admit that if they were suing on the warranty their action would be out of time. But I can see no legal reason why, in circumstances like those of the present case, it should not be held, if necessary, that the true contract to be implied from those circumstances is not only a warranty of the title, but also an agreement to keep the person in the position of the appellants indemnified against any loss resulting to them from the transaction. think that justice requires we should so hold. I agree with the Lord Chief Justice that, as between these two innocent parties, the loss should be borne by the respondents who caused the appellants to act upon an instrument which turned out to be invalid.

And I

I am therefore of opinion that the appeal should be allowed, and the judgment of the Lord Chief Justice restored with costs here and below.9

9 Contra: Boston Tow Boat Co. v. Medford National Bank (1910) 232 Mass. 38, 121 N. E. 491. In rendering the judgment in the Court of Appeal, (1903) 2 K. B. 580, reversed in the principal case, Vaughan Williams, L. J. said: "Before dealing more particularly with the terms of the Sheffield Act and the authorities bearing on the circumstances justifying an implication of a contract of indemnity, I wish to say at once that I regard what the defendants did and the act of the corporation thereupon as being aptly described by the words of Bramwell B. in Hart v. Frontino, &c. Gold Mining Co., L. R. 5 Ex. at p. 115: 'I made you a tender of myself as a shareholder, and you accepted me, and I have acted upon that acceptance.' And I do not think that the defendants in sending in a transfer to the corporation gave any warranty to the corporation, or made any material representation to the company, that the transferor was the registered holder of the stock; see the judgment of Lord Field in Balkis Consolidated Co. v. Tomkinson (1893) A. C. at p. 413, where he says that a purchaser sending in a transfer to the corporation makes no representation which might estop him as against the corporation." (p. 587) And again: "The case, as pointed out by Bramwell B. in Hart v. Frontino, &c., Gold Mining Co., L. R. 5 Ex. 111, at p. 115, is analogous to that of a bona fide holder of a bill of exchange presenting it for payment to a bankerif the banker pays it he cannot afterwards recover the money from the holder on the ground that the name of the drawer was forged. Lindley J. took the same view in Simm v. Anglo-American Telegraph Co., 5 Q. B. D. 188, at p. 195. In my judgment the provisions of the special Act bring his case within the observations of Blackburn J. in In re Bahia and San Francisco Ry. Co., L. R. 3 Q. B. 584, at p. 595, approved by Lord Herschell in Balkis Consolidated Co. v. Tomkinson, (1893) A. C. at 403. Those observations of Blackburn J. run thus: That when joint stock companies were established the great object was that the shares should be capable of being easily transferred; that the Legislature had accordingly provided for the keeping of a register of the members, in order to keep which the company must alter the register whenever there was a transfer of its shares; and the learned judge drew attention to s. 31 of the Companies Act, 1862, which provides that a company may give certificates, and that these shall be prima facie evidence of the title of the person named to the shares specified, and pointed out that by granting the certificate the company make a statement that they have transferred the shares specified to the person named in it and that he is the holder of the shares; that if the company have been deceived and the statement is not true, they may not be guilty of negligence, but they and no one else had power to inquire into the matter.' (pp. 590-1.)

See articles by J. L. Thorndyke, 17 Harv. Law Rev. 373, and J. B. Ames, 17 id. 543, also note, 16 id. 228, discussing the principal case.

Cf. Boston & Albany R. Co. v. Richardson (1883) 135 Mass. 473; Oliver v. Bank of England, (1902) 1 Ch. Div. 610, s. c. on appeal, Starkey v. Bank of England, (1903) A. C. 114. See also Leurey v. Bank of Baton Rouge (1912) 131 La. 30, 58 So. 1022.

The transfer of shares of stock is now regulated by statute in many states in accordance with the provisions of the Uniform Stock Transfer Act which up to Feb. 1921 had been adopted in fifteen states, Alaska, Connecticut, Illinois, Louisiana, Maryland, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, South Dakota, Tennessee, Wisconsin. Under the provisions of this Act stock certificates are made negotiable. The title to the certificate and the shares represented thereby can be transferred, only by delivery of the certificate with written indorsement or accompanying separate assignment. A good title may be acquired from a thief. No attachment or levy upon the shares of stock for which a certificate is outstanding is valid until the certificate itself is seized. The provisions of this Act are not applicable to stock certificates issued prior to its adoption.-Eds.

CHAPTER VIII.

PROMOTERS. UNDERWRITING.

IN RE BRITISH SEAMLESS PAPER BOX CO.

1881. L. R. 17 Ch. Div. 467.1

Jessel, M. R.—I do not think it necessary to hear the respondents, as they do not ask for costs.

First of all, as far as I know, there is no case like this. If there were, I should only be too glad to follow it. It is an entirely new case, and entirely distinguishable from that of the Society of Practical Knowledge v. Abbott, 2 Beav. 559, before Lord Langdale. which was a very peculiar case. It was simply this: The company was a chartered company, and by the terms of the charter the shares were to be paid for in cash, and in no other way. The four gentlemen who obtained the charter allotted the shares to themselves without paying for them in cash, and sold them to other people, and then the corporation sued them for the balance of cash due on their allotments. Lord Langdale held that, having regard to the terms of the charter of the corporation, these four gentlemen had no right to allot the shares to themselves except for cash, and therefore that the claim made by the bill was well founded.

That case does not appear to me to have the slightest application to a company formed as this is. The other case of New Sombrero Phosphate Co. v. Erlanger appears to me also to have no application. I quite agree to this, that if promoters make an arrangement to get a profit for themselves out of what is apparently paid to the vendors, it is immaterial whether the contract with the vendors is approved of by the directors of the company, who are the promoters, just before the allotment or just after: in both cases it is intended to cheat the future shareholders; and of course it makes no difference whatever that the persons who, at the time the allotment was made, were in fact the promoters or their nominees, knew of the fraud. You can defraud future allottees as well as present allottees. Therefore that case appears to me to have no direct bearing upon the case before me.

What, then, is this case? I must say I am convinced of the thorough honesty of all parties engaged in the transaction. Of course, to a certain extent, the honesty of the parties engaged in a particular transaction must naturally affect the case in the mind.

1 The facts sufficiently appear in the opinion of Jessel, M. R. The opinions of Brett, L. J. and Cotton, L. J. are omitted.-Eds.

of the judge who has to consider the transaction; but, as far as I am concerned, I always endeavor to administer justice fairly, according to law, even if it should bear hardly on people, as it sometimes does. I say "fairly." because my mind is affected-as every judge's mind must be affected-to some extent, at all events, by what I will call the "morality" of the transaction. I should be more anxious to find reasons to trounce a rogue than I should be to find reasons to rob an honest man.

The present question is this: Three Americans, who appear to be inventors, were possessed of a certain patent. Whether it is valuable or not I do not know-it has not been successfully worked in this country; but it was supposed to be valuable. An English engineer of the name of Ransome appears to have had some faith in it; at all events, he agreed to advance £2,000 for the purpose of introducing a machine into this country to make seamless paper boxes according to the patent. This he agreed to do under an agreement in writing of a very curious character, and the effect of which it is very difficult to state in a few words. The agreement is dated the 7th of January, 1874. In substance it was this. I think that he was to advance £2,000 to get the machine at work; if he got it to work satisfactorily the company was to be formed, he was to get £2,000 worth of shares for his £2,000 advanced, the three Americans were to get £30,000 in shares out of a total capital of £50,000, and out of those shares Mr. Ransome was to receive £6,000; but if the machine turned out a failure, and through no fault of Mr. Ransome's, he was then to be entitled to have a fifth of the patent. So that the moment this agreement was signed Mr. Ransome was to be treated as substantial owner of one-fifth part of the patent. That was the substance of the agreement.

Then a meeting of the promoters was called, at which three other gentlemen were present. They divided the interest with the Englishman, and they agreed to get up a company on the footing of this agreement of 1874; they not only knew all about it, but their arrangement was to form a company on that footing; and it having been arranged to form what I will call for this purpose a private company-for it was not intended to come before the public at all— a formal agreement, not a real agreement, was made on the 27th of February, 1875, between the three Americans of the one part, and a Mr. Bennett, who was their nominee, of the other part, for the nominal sale to the company of the patents for £32,000 in shares. Of course this was a mere bit of form, with the view of launching the company. The company was registered on the 4th of March, and contemporaneously they prepared a memorandum of association to carry out the formal agreement, with articles of association making all the members of the company directors, with the exception of the solicitor, who knew all about the formation of the company and was the only additional person who came in to sign the memorandum of association. The result was that, at the time of the formation of the company, the company consisted of eight men, and it was not intended to consist of any more. There was power,

of course, to issue the remainder of the shares, but the intention of these eight men was to carry on the company with these shares, and accordingly we find this, that there is a meeting of directors after the company is formed, ratifying the formal agreement of 1875 and allotting the shares, and allotting them on the principle of recognizing the agreement of 1874, of which they were all aware, and which is actually mentioned by its date in one of the early meetings of the directors; so that they recognize Mr. Ransome's right to be treated as one of the vendors, and to be paid in his share of the purchase-money.

That being so, it appears-though not so clearly as might bethat the other directors thought that Mr. Ransome had incurred expenses to the extent of £3,000; but when they found that he had only paid £2,000, they insisted that the other £1,000 should be applied by him in taking up £1,000 worth of shares, which he did; and then, again, a few days after the formation of the company, it seems that five shares apiece extra were given to the Messrs. Stevens (I will assume that it was a bonus), apparently with the knowledge of everybody, in consideration of their having furnished the capital, which they in fact did.

Now, if this company had been intended to be formed as a company in which the shares were to be taken by the public, and a prospectus had been issued immediately after these transactions, concealing them from the allottees, and the allottees had come in, and afterwards, with reasonable promptitude, repudiated the contract, I think a great deal could have been said in favor of their contention, but that is not the case. The company went on, as they intended to go on, with these eight people. In 1875 there is a regular general meeting of the company, and the seal of the company is put to the register of shareholders, treating it as then complete. I then find another regular meeting of shareholders held on the 30th of June, 1876, and at that time there are still only eight shareholders, so that the position of the company up to June, 1876, was this, that every member of the company was perfectly well aware of the whole of the transaction. It was confirmed in March, 1875, and the members carried on business for the whole period— that is, from March, 1875, to June, 1876-without attempting to repudiate the transaction, even if they could have repudiated it.

What then was the position of the company-not the promoters only as regards the vendors and as regards Mr. Ransome? They are actually the same people with the exception of Mr. Tindell, but the company itself had adopted this contract of 1874 with full knowledge of every member of it (which is a case I never heard of before), without any intention of bringing in any other shareholder, without any notion of defrauding any future allottee, and had made this bargain with knowledge of the facts. Is it possible to say that the company is not bound by that? It would be impossible to say so. The transaction was entirely bona fide in every respect.

What occurred subsequently was this: In June, 1876, the company wanted more capital: Messrs. Stevens and other English