L. JJ. 1869 OF INDIA'S CASE. intervals between the 11th of April and the 12th of December, 1865. It is true that those transfers are not executed under the seal of the company, but there is what has been termed only a ROYAL BANK wafer "For the Royal Bank of India, J. Gordon, Manager." The transfers having been so executed, it appears that the bank caused itself to be duly registered as a shareholder in respect of these shares. Some of the shares have been sold and transferred by them to purchasers, and they have received the purchase-money in respect of those shares, and have ever since remained registered shareholders as to the rest, which are the 605 shares now in question, and they have received the dividends on those shares. It has been said by Mr. Karslake, that the receipt of the dividends is a matter of no importance, because in their character of equitable mortgagees, having in their possession powers of attorney in respect of those same shares, they might have received the dividends under the powers of attorney as much as they did under the transfers. But I think that the sale of so many of these shares was, on the part of the bank, an unequivocal act of appropriation and acceptance by them, and although it be true that they might have received the dividends under the powers of attorney, if those powers had remained in force, it is obvious that having sold some of the shares in the character and capacity of registered shareholders, they must be taken to have received the dividends on the remaining shares in the same character and capacity, and it is equally obvious that the powers of attorney from the former shareholders, whose shares had been transferred to the bank, were put an end to and became inoperative as from the date of those transfers. I think, therefore, under these circumstances, that any question as to the mode in which the transfers were executed by the bank or its agent, becomes quite immaterial, because, as was held by the full Court of Appeal in Coles v. Bristowe (1), where shares have been so accepted, it becomes quite immaterial whether the deed of transfer has been executed or not. And then, in addition to that, by the 45th section of the Indian Act of 1857, it is declared that, "any contract which if made between private persons would be by law required to be in writing, and signed by the parties to be charged (1) Law Rep. 4 Ch. 3. L. JJ. 1869 therewith, may be made on behalf of the company in writing, signed by any person acting under the express or implied authority ROYAL BANK of the company, and such contract may be in the same manner OF INDIA'S varied or discharged." It has been said that here there is no CASE. evidence of any authority, but I think that under the circumstances which I have already stated, the authority of the bank is most clearly and explicitly proved. There is the resolution of the directors, entered into, as I have already said, under circumstances which rendered it prudent and proper that such a resolution should be come to. Then we have the resolution acted upon by the bank, we have them procuring themselves to be entered as shareholders, and dealing with the shares, and after that I think it impossible that it can be argued with success that there was no authority to their agents to do what in fact was done. Then it is said that the consequence is one of very great hardship, as involving the shareholders in the Royal Bank of India in a great number of liabilities in respect of other companies with which they have had nothing to do, and many cases have been suggested in argument, such as that of bankers becoming partners in a brewing company, or a shipping company, or many other things with which, in their own articles of association, they had no connection whatever. But I think the answer to that is, that such dangers are necessarily involved in lending money upon securities of this kind. Take, for instance, the common case of a banker advancing money upon the security of a ship and the freight. Nothing, probably, would be further from the notion of the banker than entering into any transaction respecting the sailing of the ship, or receiving the freight in respect of that ship. But if he is obliged to foreclose his security, if he is obliged to take possession of the ship, then, as a prudent man, he would necessarily become involved in the management of the sailing of the ship and receiving the freight as constituting the only means by which he could recover the money he had advanced. I may mention one very familiar instance, known to us all, that of a wellknown insurance company. Having lent money upon the security of a mortgage on land in Galway, and having been obliged to foreclose that mortgage, they became dealers in land in Galway L. JJ. 1869 OF INDIA'S CASE. on a very large scale. So in this case, if it is once established that it was within the authority of the directors to lend money upon the security of shares, it necessarily follows that anything Royal Bank which was a prudent and proper act for them to do with a view to obtaining the benefit of such security, was equally within the scope of their authority. If it could have been shewn that it was an act absolutely prohibited by their memorandum or articles of association, then, no doubt, a different question would have arisen, the act would have been ultrà vires and incapable of confirmation or ratification, but in my judgment there is no such prohibition, but, on the contrary, the directors had, under the memorandum and articles of association, powers so ample as fully to justify that which was done, and I think that the mere circumstance of their having passed that by-law, of which no public notice was given, and which they had power from time to time to alter as they thought fit, cannot be construed as constituting any such prohibition, more especially when the very same persons who had power to alter that by-law did, for a reasonable cause, pass the resolution under which the acts now in question were done. The result, therefore, is, that in this case-the company having received the shares in the ordinary course of their business as bankers, as a deposit or security for moneys owing to them, the directors having afterwards, for a reasonable cause, and influenced by the effect of a judicial opinion, and acting for the benefit of the company, and at a meeting duly constituted, resolved that those securities should be changed from equitable securities into complete legal transfers; that resolution having been acted on, and the shares having been, in fact, transferred to the Royal Bank of India, and accepted by them, and they having been duly registered as shareholders, and having taken the benefit of the shares, having sold and received the purchase-money for some of the shares, and having in their character of registered shareholders received the dividends on the remaining shares down to the time of the windingup—I think that the name of the Royal Bank of India was rightly included in the list of contributories in respect of the remaining 605 shares, and consequently that the appeal motion must be dismissed with costs. L. JJ. 1869 CASE. SIR G. M. GIFFARD, L.J.:— This is an appeal by the Royal Bank of India seeking to have its ROYAL BANK name taken off the list of contributories of the Asiatic Bank. The OF INDIA'S Royal Bank of India is upon the register of shareholders; it was put there some time ago in respect of these particular shares, along with others; it has, as shareholder, sold some of the shares, and received the purchase-money, and has received considerable sums of money for dividends on the rest. I quite agree, however, that all this would not make the company a shareholder if the transaction was ultrà vires. The Royal Bank of India was constituted' under the Indian Act of Parliament, which gets rid of the difficulties which sometimes arise as to dealings with corporations-I mean difficulties with reference to the seal, and other matters of that description. It is constituted by a memorandum of association and by articles as a bank for the purpose of lending money, and that upon every species of security. From the very nature of such a company it must, without more, be inferred that the directors have all the ordinary powers which the managers of an ordinary bank would have, and you may safely deal with the managers of such a bank upon that assumption, unless there is something in the articles to restrict their powers, and here the articles tend strongly the other way. If it is sought to import the by-laws into transactions with third parties, it must, according to the ordinary law of principal and agent, be shewn that those third parties knew that there was a restriction upon the general powers of the agents. Now, in the first place, it is not proved that these by-laws were known to the Asiatic Bank, and therefore we must assume that they were not so known. Even if they had been known, I think that the subsequent resolution which, although not signed, is recorded-passed, as it was, by six directors—would be abundantly sufficient to get rid of the effect of these by-laws. It is not, however, necessary to decide that point, for I am clearly of opinion that in the dealings between the Asiatic Bank and the Royal Bank of India all that has to be looked to is the Act of Parliament and the memorandum and articles which constituted the company. What, then, was the transaction? I quite agree that the Royal Bank of India had no authority to speculate in shares, and that if it had gone upon the Stock Exchange and bought shares as a L. JJ. 1869 OF INDIA'S CASE. speculation, such a proceeding would have been ultrà vires, and all that has taken place would not have been enough to constitute the Royal Bank of India shareholders in this bank, or prevent them ROYAL BANK from repudiating these shares. But the transaction was of quite a different nature. There was a bona fide loan upon the deposit of shares. That unquestionably is a transaction within the scope and objects of the company, being one within the scope of every ordinary banking business. While that goes on, and while these shares are in the hands of the Royal Bank of India, there comes a decision in a Court of Law, from which the Royal Bank of India infer, rightly or wrongly, that their shares will be in jeopardy unless they take a transfer of them either into the name of their manager or into their own name. In consequence of that, they take the reasonable course of having the shares transferred into their own name, for the purpose of making those securities which they had taken valid and effective, and for no other purpose whatever. Of course, although no banker is authorized to become a partner with merchants, or shipowners, or builders, or to engage in transactions of that sort, yet he is authorized to lend upon securities of that description, and he is authorized to take every rational course for the purpose of making his securities good and available. In that way he may become liable upon a building contract; in that way he may become liable as a shipowner; in that way he may become liable in respect of matters of freight, or, in fact, in respect of any matters connected with a bill of lading which he holds as a security. I entirely found my judgment on this, that it is within the scope of an ordinary banking business to make the loans which have been made, and to take the deposit of shares as a security; and when the directors, having done so, afterwards took a reasonable and bonâ fide course to realize those securities, they cannot now turn round and say that what they did for that purpose was ultrà vires, and not justified by their articles of association. Upon these grounds I am of opinion that the decision in the Court below was perfectly right, and that the appeal must be dismissed with costs. I must say the justice of the case is entirely in this instance with what the law most clearly is. Solicitors: Messrs. Freshfields; Mr. W. R. Harris. |