Page images
PDF
EPUB

the account in his name, and with the proceeds of such drawings paid into the account in the plaintiffs' name the requisite deposits. Sometimes he paid in the identical notes he received, sometimes in change he had procured for them at the Bank, and sometimes it was managed otherwise. But he never kept for twentyfour hours any of the money he drew, and when it was thought desirable that he should go to Paris and seek shareholders, and that 6,000l. should be sent there to pretend to pay their deposits, a clerk of the defendants was sent with the money for that purpose; Challis probably not being willing to trust Stafford with so large a sum. The bona fide real bankers of the plaintiffs were Dimsdale & Co., and the London & County Bank. The allottees, or pretended allottees, so procured, were real persons, but as we were informed wholly incapable of paying the amounts of the shares allotted to them, and without any intention of really being shareholders. They immediately handed their letters of allotment and blank transfers to Stafford (9). In the result

(9) The letters of allotment were made out in the names of the allottees, who thereupon executed blank transfers and delivered them, with the letters of allotment, to Stafford. Stafford presented to the defendant bank the letters of allotment, and in exchange for his cheques or notes received from the defendant bank deposit receipts. The company having applied to the committee of the Stock Exchange for the appointment of a "settling day," with a view to assisting in obtaining such settling day the following certificate was given by Challis without the knowledge of the directors of the bank, for the purpose of being produced before the Committee.

"Certificate of the Albion Bank, Limited.

"11th of September, 1867. "We hereby certify that 11,593 shares have been applied for in the British and American Telegraph Company, Limited, and that deposits of 21. per share, amounting to 23,0067. have been paid

[blocks in formation]

the plaintiffs' account with the defendants stood with a credit of 24,505l. 18s. 6d., made up of the real 1,500l. paid in, and the deposits or pretended deposits so paid in by Stafford, less a trifle for stamps. Stafford's account on the other hand stood with a debit of 24,5061. 8s. 4d., made up of the sums he had drawn or purported to draw to pay the deposits, and of the 1,5007. which he drew out, partly to pay the 6007. bonus to the defendants who have received it, partly for himself, partly for some of his confederates, and partly for the purposes of the scheme. The defendants have debited the plaintiffs' account with this amount, and say nothing is due to them (10). They have, however, paid into Court the 6001. they have received for themselves, and the question now is whether the plaintiffs are entitled to recover the whole or any part of the balance, 23,9057. 18s. 6d.

At the same time the pass-book of the company with the defendant bank, shewing a balance in favour of the company of 24,5057. 18s. 6d., was produced to the committee. The committee refused to appoint a settling day. In November 1867, the Court of Chancery ordered the company to be wound up by the Court, under the Companies Act 1862, and afterwards appointed an official liqui

dator.

(10) The accounts stood thus in the defendants' books, on October 9th, 1867, and the company's pass-book, when made up by the defendants and sent by them to the official liquidator, corresponded with the company's account as entered in the defendants' books. The shareholders of the company had no knowledge of the arrangement for placing shares, or of the guarantie. The guarantie was dated the 21st of June, 1867, sealed with the common seal of the company, and signed by two of the directors, who thereby requested the bank to honour Stafford's cheques, or advance him cash on demand up to 30,000., and on behalf of the company guaranteed the repayment of such payments and advances, with interest, and charged such payments and advances, and interest on all moneys, from time to time standing to the credit of the company in the bank books until repayment.

Now it is necessary for the purposes of our judgment, and right that it may not be supposed our opinion is otherwise, that we should say that the scheme we have mentioned was fraudulent and illegal, and brought the parties to it within the criminal law; and we must equally regret and wonder that gentlemen of character and position could have been parties to it, a thing we can only account for by supposing some extraordinary self-deception.

This being the case, of course the plaintiffs are not bound by what was agreed to on their behalf. The act of the directors who were parties to it was void, and bound the plaintiff company as little as though it had been entered into by the plaintiffs' secretary or messenger; and as the facts were known to their manager Challis, the defendants have notice of the illegality and invalidity of the transaction. On the other hand the defendants are bound to refund any money they have received, because although Challis had no authority to bind them to any such contract as he entered into, yet if the defendants received the plaintiffs' money under it, the plaintiffs (though not their directors) being innocent parties, the defendants must refund it. If A, the clerk of B, without B's authority, pays money into the bank of C, having previously made an arrangement with D, the clerk of C, for some application of that money, which neither A nor D had authority from their masters to make, C must refund to B. It seems to us clear, therefore, that the plaintiff's must recover the 9001. balance of the 1,500l. of the plaintiffs' real money, paid into the defendants' bank. The defendants have received that money-what right have they to retain it? None, unless under the guarantie. But that guarantie is not binding on the plaintiffs. For this reason, then, our judgment must be for the plaintiffs for that sum at least. It remains to consider the other amount.

Now, as to that, the defendants never received any money which they were to pay to the plaintiffs. We are not referring to any special pleading matter of money had and received or money lent, but in substance and reality the defendants never had any of the plaintiffs' money, or money

[ocr errors]

for the plaintiffs, except the 1,500l. Treating the contract as valid, if the plaintiffs had demanded any of the money nominally standing to their credit, the defendants would have said, "That sum is charged with your guarantie, you have no right to it;" and that would have been an answer. Treating it as invalid, the plaintiffs in effect say, "We opened no account with you, we gave you no authority to receive money on account; and if they add, "but you have done so, and we elect to take it," the answer would be and would truly be, "No money has been paid to us or received by us to be paid by us to you absolutely; but only conditionally and subject to our lien for Stafford's balance." Let us suppose that instead of the directors being parties to this scheme, it had been done by the secretary or manager, or by Stafford alone. How, then, could the plaintiffs have claimed this money, except subject to the conditions and on the terms on which Stafford paid it in, and the defendants received it? But the case is the same, though some or all the plaintiffs' directors are parties to the scheme. If the defendants are liable to pay to the plaintiffs any of this money, it must be because they have made a contract with them or some one else that they, the defendants, would pay them, the plaintiffs, this money, but they have made no such contract. If, therefore, the realities only are looked at, it seems to us the plaintiffs could not recover this sum.

But the case was put in another way. It was put as an estoppel. It was said, “We, the plaintiffs, have allotted 11,503 shares, and you, the defendants, have signed certain deposit receipts to the amount of 23,0067, therefore there are shareholders who are entitled to say as against us that they are shareholders entitled to all rights and benefits as such; that they have paid 23,0067., which our agents, the bank, acknowledge they have received; therefore we, the plaintiffs, say, you, the defendants, are estopped from saying you have not received that amount." But it seems to us that this is not so. We think no allottee under the scheme could have claimed to be a shareholder. In all the cases Stafford was the allottee's agent in

the matter, and his knowledge of the fraud and invalidity would affect the allottee. May be the plaintiffs could ratify what had been done, and treat the allottees as such; but then they must ratify in toto, and their doing so would be voluntary. They are not bound by the defendants' acts, but would, if they adopted them, be so, because they chose to adopt and take advantage of them.

Further, without wishing needlessly to prejudge any matter, it seems to us that these allottees cannot say they have paid their deposits. They applied for shares, it may be there was some director or directors who, not knowing of this scheme, made the allotment, which would therefore be valid. Then the allottee being liable, employs Stafford to pay his deposit, and undoubtedly the letter of allotment says it may be paid at defendants' bank. But that in the mind of an innocent director and an innocent allottee would mean to an ordinary account, really to the credit of the plaintiffs, and which the plaintiffs might draw on. But the deposit money is paid by Stafford, the allottee's agent, to the defendants, and received by them, so far as it is paid and received, not really on the account and for the benefit of the plaintiffs, but for that of Stafford and the defendants. It seems to us, therefore, that these allottees cannot say they have paid their deposits. But further, if they can, they have done so by borrowing money of the plaintiffs or of Stafford. If of the plaintiffs, they owe it to them in a different form. If of Stafford, they owe him, and he owes the plaintiffs; and though that owing may be of small value, the plaintiffs cannot be entitled to the money twice-ouce from the defendants, once from Stafford.

It seems to us, then, that the plaintiffs are not entitled to recover this sum. It would be hard upon the defendants if they could. The defendants' manager has behaved very ill and ought to be punished; but the directors are acquitted by the arbitrator of any complicity with him, though we cannot but think it wonderful their suspicions should not have been aroused by so unusual a transaction, if indeed they attend to their duties. But why should their shareholders suffer? Why should

the plaintiffs make an enormous profit out of this fraud, as they will if they recover? Because, suppose the allottees should claim a dividend, suppose one was payable, how could they make out their case? Even if they could, the losses of the company will be distributed over 13,827 shares instead of over 2,324, and that by virtue of an illegal and fraudulent transaction which the plaintiffs repudiate; fraudulent shareholders will be entitled to claim dividends, or if not there may be a large surplus distributable among the holders of the 2,324 shares which will come out of the pockets of the defendants, who (though their manager has,) have done nothing wrong, with no remedy for them, except against Stafford or the pauper allottees, or their manager or perhaps directors.

We have been pressed with the case of Gray v. Lewis (1). Now, in the first place, that case was expressly decided on equitable considerations. We must decide this on legal principles, so that even if the cases were indistinguishable in their facts, this is not necessarily governed by that. But in truth the cases are distinguishable.

The whole of the reasoning of that judgment (except that addressed to technical points relating to the form of the suit) goes to this, that the defendants are bound to "restore" the plaintiffs' money, thus assuming that the money in question had actually become the plaintiffs', which indeed in one passage the Vice Chancellor expressly states that he did assume. He made this assumption upon facts very similar to those in the present case, though, as we shall shew, not identical. For in Gray v. Lewis (1) the advances by the National Bank to the International Contract Company (which stood in the same position as Stafford in the present case) were made by discounting their promissory notes. Certain sums were placed to the credit of the Contract Company as the proceeds of the notes, and the sums so credited appear to have been drawn out from time to time by cheque. When the proceeds of the first lot of notes were thus exhausted, fresh notes were discounted and another guarantie taken.

The notes discounted may have been and probably were of little value; still during the currency of the notes so held by the National Bank, it could scarcely be said that the sums of money dealt with in account, and representing the proceeds of these notes, were wholly fictitious.

In the present case, however, there was not even so much appearance of reality in the matter as was there presented by the discount of the notes. On looking at Stafford's account, it will be seen that, even giving him credit for the supposed loans, it was almost always, if not always, overdrawn. In fact, the account was evidently balanced or nearly so from time to time by entering on the credit side loans to about the amount of the sums already drawn out for payment to the plaintiffs' account.

It may be, therefore, that the payments made to the account of Lafitte & Co. (Limited) out of the proceeds of the notes discounted and held by the National Bank, ought to have been treated as actual payments independently of any estoppel. But further than this, there was more ground in that case than here for saying there was an estoppel.

Here the committee of the Stock Exchange refused the settling day, and it is expressly found in the 37th paragraph of the case that the bona fide shareholders in the plaintiff company had all taken their shares before the commencement of these transactions. In Gray v. Lewis (1) the committee of the Stock Exchange had, upon the faith of the statement made to them as to Lafitte & Co.'s balance, granted the settling day. This fact is not distinctly stated in the report of Gray v. Lewis (1) in the Law Reports, though it might be inferred from that report that it was so. In the report in the Weekly Reporter (17 W. R. p. 433), the fact is distinctly stated. There can be little doubt that the result of the settling day being granted was that many transfers of shares were carried out, and new shareholders put on the register, so that in all probability the constitution of the company, as regards its individual members, was materially altered. It may well be that in that state of things the statement of the National Bank (as to

Lafitte & Co.'s balance) having been so acted on as to affect the constitution of the company, and to make persons liable as contributories who would not otherwise have been so liable, the statement became binding on the National Bank, so that they could not be allowed to set up the argument that they had not really received money for Lafitte & Co., for which they were accountable. As we said, the Vice Chancellor scarcely states his reasons for assuming that the money in question was actual money of Lafitte & Co. This may

have been because he thought it unnecessary to allude to a doctrine so familiar to the Court of Chancery as that according to which statements not binding in the first instance become so by being acted on. Whatever his reasons may have been, we think there is a sufficient difference between the facts of the two cases to prevent our being bound to follow the Vice Chancellor to the full extent of directing payment of the whole nominal balance at one time shewn upon the account between the plaintiffs and the defendants.

We agree with him upon the question with which he mainly dealt, viz., that the money appropriated to the satisfaction of the guarantie must be restored; that is to say, applying the decision to the facts and pleadings in the present case, that the defendants' set-off cannot be maintained. But we think that the plaintiffs fail to shew a greater amount of money payable to them than 1,5007. Of this 6007. has been paid into Court, and there should therefore in our opinion be judgment for the plaintiffs for 9001. No question will probably be raised as to the few shillings charged for stamps, which are the only items appearing in the account besides those with which we have dealt.

Judgment for plaintiffs for 9001.

Attorneys -Lewis, Munns & Co., for plaintiffs; W. & H. P. Sharp, for defendants.

[blocks in formation]

A testator by a will made before 1838, gave to his wife, whom he nominated executrix, certain land, without words of limitation, and all his personalty, but if she married again, the land was to be reserved by trustees and sold for the benefit of all his children equally. Then he directed, "that my executrix shall pay my eldest son the sum of 51. a year for wages, as long as he shall continue to labour on the farm after my decease: "-Held, affirming the judgment below, that the wife's estate was, by the direction to pay wages, enlarged from an estate for life to an estate in fee defeasible on her marrying again.

Held, also, that the estate for life was so enlarged, because the testator's intention that his wife should take the fee could be collected from the gift over in the event of her marrying again.

Ejectment defended by the defendants Snow, as landlords of their tenant, the defendant Spencer.

The following SPECIAL CASE was stated by consent without pleadings.

Matthew Pickwell was, at the date of his will and death, absolutely entitled to the inheritance in about six acres of copyhold land, which he had duly surrendered to the use of his will. He devised the land by his will, made on the 26th of March, 1821, of which the material part is as follows

"I give and bequeath to my beloved wife Mary Pickwell all those my copyhold closes, and which I have surrendered to the use of my will, situate lying and being at Eagle in the said county of Lincoln. I also give and bequeath to my said wife Mary Pickwell all the land which may fall to the said closes by the inclosure of the high moor. Also I give and bequeath to my said wife Mary Pickwell

NEW SERIES, 41.-EXCHEQ.

all my money, securities for money, goods, chattels and effects of what nature or kind soever, and wheresoever the same shall be at the time of my decease. And I do nominate, constitute and appoint my said. wife executrix of this my last will and Pickwell marry again and cease to be testament; but if my said wife Mary my widow, my will is that an inventory of the land, goods and chattels and effects before mentioned be immediately taken by" (certain persons named) "whom I nominate, constitute and appoint guardians to my children (till the two youngest shall have arrived at an age capable of providing for themselves), to superintend their bringing up and education till that time; and my will is that the before mentioned guardians shall upon the marriage of my widow have power to take away the goods, chattels and effects mentioned in the inventory they shall make, and reserve them for the benefit and profit of my children, and to have power to reserve the before mentioned closes and land for the benefit of my children till the two youngest shall have arrived at an age capable of providing for themselves, then and at that time the before mentioned goods, chattels, effects, closes and land shall be sold, and the money they produce shall be equally divided amongst my surviving children. It is also my will that my executrix shall pay my eldest son William Pickwell the sum of 51. a year for wages as long as he shall continue to labour on the farm after my decease."

Soon after the will was made the testator died, leaving the plaintiff his heir-atlaw according to the custom of the manor. The testator's widow, Mary Pickwell, proved his will in February, 1822, and died on the 30th of September, 1870, not having married again.

In November, 1832, Mary Pickwell, in consideration of 250l. paid to her by one R. S., surrendered the copyhold land devised by the will to the use of R. S., his heirs and assigns, and R. S. was admitted tenant at a Court held in 1833. R. S. died in 1857, having by will devised the copyhold land to the defendants Snow, who were duly admitted.

If the Court be of opinion that the testator's widow did not take a larger Ꮮ

« EelmineJätka »