Effect of representation in debenture that it will pass by delivery.

Whether bearer can be enabled to sue company in

been cited to show that it is within the competency of private persons by their contract to attach such an incident to any property." The Court thought it "beyond the competency of the parties by express stipulation to deprive the assignee of either the contract or the property represented by it, or of his right to take back his property from any one to whom a thief may have transferred it, even though that transferee took it bonâ fide and for value."

Of course, if an express stipulation would not be effectual, neither would an implied one.

Nevertheless it would seem that a debenture, which can be treated as a representation that the company will pay to the bearer, possesses this valuable incident of a negotiable instrument to a limited extent, for if the owner of such an instrument entrusts it to some other person, who wrongfully sells it, the purchaser will acquire a good title as against the real owner. See supra, p. 220.

6. A debenture may be so framed that the bearer will be entitled to sue the company upon it in his own name. This incident could not at common law be annexed by express stipulation to a contract contained his own name. in an instrument not legally negotiable. "We have already intimated our opinion that it is beyond the competency of the parties to a contract, by express words, to confer on the assignee of that contract a right to sue in his own name." Crouch v. The Credit Foncier, L. R. 8 Q. B. 387. Nor could the incident be annexed by implication. Ibid. However, it would seem that upon the principles laid down in Pickard v. Sears, In re Agra Bank, and Goodwin v. Robarts, supra, p. 220, the holder of a debenture, framed as a representation that the company will pay to the bearer, is entitled to sue in his own name.

Estoppel.

Effect of Judicature Act.

Rule at law.

In equity.

Moreover, there is another ground upon which it may be held that the holder of a debenture to bearer can sue in his own name, namely, upon the ground that he is equitable assignee of the monies thereby secured.

Before the Judicature Act, 1873, came into operation the assignee of a legal chose in action had, at law, to sue in the name of the person with whom the contract was made; but this rule had become "purely technical" Per Blackburn, J., Crouch v. Credit Foncier, L. R. 8 Q. B. 380; Dicey, Parties to Actions, 71.

There was no such rule in the Court of Chancery; there the assigne could sue in his own name.

Nevertheless it was well settled that the Court would not entertain a suit for the recovery of a legal chose in action, unless there were special circumstances; and the plaintiff was therefore, in most cases, obliged to sue at law. Thus, in the case of Hammond v. Messenger, 9 Simon, 332, the plaintiff was suing in equity for payment of a debt due from the defendant Messenger to the defendants Wilks and Wooler and assigned to the plaintiff. It was held, on demurrer, that the assignee of a debt could not sue for it in a court of equity, unless the assignor refused to allow the assignee to sue for it, at law, in his name, or had

done or intended to do some act which would prevent the assignee from recovering it at law in the assignor's name: liberty to amend, however, was given. The Vice-Chancellor said: "If bills of this kind were allowable, it is obvious that they would be pretty frequent; but I never remember any instance of such a bill as this being filed unaccompanied by special circumstances." See Tudor's L. C., Vol. II., 780.

The rules of equity are now to prevail, and a plaintiff is expressly empowered to sue in respect of an equitable right, Judicature Act, 1873, section 24, sub-section (1.) It would therefore seem that now, in any Division of the High Court, the holder of a debenture is, as assignee of 、 the contract contained in it, entitled to sue the company liable on it in his own name. And it is submitted that sub-section 6 of section 25 of the Act cannot be construed so as to deprive him, by implication, of this right.

In reference to the above, it will be borne in mind that the transferee of a debenture purporting to be payable to bearer must, though no assignment in writing be made to him, in any view, be taken to be equitable assignee of the contract or of the monies secured by the instrument. In re Agra Bank, 2 C. 397; In re Blakely Ordnance Co., 3 C. 158.

From what has been said, it appears that a debenture under seal can be so framed that many of the most valuable incidents of a negotiable instrument will be annexed to it.

bearer may

law merchant.

As to whether a debenture to bearer, under seal or otherwise, may not Whether debe held to have become a negotiable instrument by the law merchant, benture to see Goodwin v. Robarts, L. R. 10 Ex. 337; S. C. 1 App. Cas. 476; not be held Rumball v. Metropolitan Bank, 2 Q. B. D. 194; Merchant Banking Co. negotiable by v. Phænix Co., 5 C. D. 205. The writer understands that debentures expressed to be payable to bearer, are now generally treated as negotiable, and if this be so, the day may be at hand when their negotiability will be settled by judicial decision. In the meantime the usual clauses [p. 244, (2) and (4)] should be inserted, for although, if the instrument is in factnegotiable, these clauses may be implied by law, their presence will not prevent the instrument from being held negotiable, since expressio eorum quæ tacite insunt nihil operatur.

AS TO DEBENTURES TO THE REGISTERED HOLDER:

In many cases it is deemed expedient to make debentures payable to "Registered the registered holder [infra, p. 248]. One reason for adopting this form debentures." is that trustees are more likely to invest in such securities than in debentures to bearer. Moreover, there are many investors who do not like to hold securities to bearer lest they should be lost or stolen.

Very commonly now where a company is about to raise money by an issue of debentures, applicants are given the option of having their debentures framed, either to bearer or to the registered holder.

In framing a debenture payable to the registered holder it is usual to Usual clauses.

Registered debentures

with coupons.

Mortgage debentures.

Trust deed.

Advantages of trust deed.

insert various provisions for the benefit of the company and of the holder, and in particular to provide that the holder shall be entitled free from equities between the company and any former holder, that his receipt shall be a good discharge to the company, that a register shall be kept that all transfers must be registered, that no trusts shall be entered in the register, and that the company shall not be bound to take notice of equities.

The chief object of these provisions is (a) to render the debenture transferable by a simple and convenient process, (b) to enable persons to deal with the debenture without going behind the register, and without fear of equities being subsequently set up by the company, (c) to enable the company to look to the register alone, without being obliged (in the absence of legal proceedings) to attend to notice of assignment and claims by outsiders.

AS TO REGISTERED DEBENTURES WITH COUPONS TO BEARER : Sometimes debentures are so framed that the principal monies shall be payable to the registered holder, while the interest is payable to the bearer of coupons annexed. The chief reason for using this form is, that many persons who are unwilling to invest in a security payable to bearers have no objection, or prefer to have the interest made payable by coupon to bearer. Such an arrangement facilitates the payment and collection of the interest, and at the same time does not expose the debenture holder to any material risk.

AS TO MORTGAGE DEBENTURES:

There are three kinds of mortgage debentures in general use:
1. Mortgage debentures secured by a trust deed.

2. Mortgage debentures secured by a charge therein contained.
3. Mortgage debentures secured in part by a trust deed, and in part
by a charge in the debentures contained.

AS TO MORTGAGE DEBENTURES SECURED BY A TRUST DEED :

The trust or covering deed above referred to usually contains a conveyance or assignment to trustees of all or some part of the company's property upon trust to permit the company to carry on its business therewith until default is made in payment of some principal or interest due to a debenture holder, and then to enter and sell the property, and out of the net proceeds to pay off the debentures and hold the surplus, if any, in trust for the company. The deed generally contains power for the trustees, after entry and till sale, to carry on the business of the company and divers other powers and provisions for the benefit of the debenture holders. See infra, Form 168.

Debentures secured by such a trust deed have some advantages over those not so secured; for, of course, the trustees having the legal title

to the property can in case of default enter and sell, &c., without seeking the aid of the Court, whereas the only mode of enforcing the charge contained in a debenture not secured by a trust deed is by action.

chattels.

A trust deed is requisite where it is desired to charge debentures on Personal personal chattels by registered bill of sale, for it would be extremely inconvenient and objectionable to register a number of debentures as bills of sale. See further, infra, p. 238, as to the practice in regard to registration. So, too, when ships are to be charged, a trust deed is Ships. sometimes considered necessary. In such case the ships can be transferred to the trustees absolutely under section 55 of the Merchant Shipping Act, 1854 (17 & 18 Vict. c. 104), or they can be mortgaged to the trustees under the same Act. In either case the instruments of transfer or mortgage must be in the statutory forms duly registered, and - the trusts will be declared by a separate deed. It must be borne in mind that, if the ships are transferred to the trustees, they incur the serious responsibilities attaching to ownership. See supra, p. 86. To obviate this objection it may sometimes be deemed expedient to form a small company to act as trustee. But a valid equitable charge on ships can be effected without any registered security. In re Panama Co., 5 C. 318, infra, p. 229. And accordingly the trust deed may, if thought fit, be framed as a covenant that the ships shall stand charged, or a trust deed can be dispensed with, and the charge can be inserted in the debentures (infra, Form 165.] It must be borne in mind that, if either of these plans is adopted, the company can give a good title to a purchaser or mortgagee, notwithstanding notice of the debentures. This, however, is sometimes not considered objectionable, it being intended that the debentures shall be a floating security.

So, too, a trust deed may be desirable where debentures are to be Patents. charged on letters patent.

A trust deed is not uncommonly deemed necessary where debentures Foreign are to be charged upon real property situate abroad, for the right to the property. possession of land must be determined by the lex situs. Whether the property should be actually vested in the trustees or not, must depend on the circumstances. In some countries trusts are not recognised, and accordingly difficulties arise if land is vested in trustees, e.g., taxes in the nature of succession duty may become payable; moreover, in some countries, aliens are not permitted to hold land, and yet objection is felt to appointing foreign trustees for debenture holders. Sometimes it is deemed expedient to get the company or its nominee registered as the proprietor of the land, and then to take a registered charge to trustees for a sum sufficient to secure the debentures; or, when the local laws permit, to register a deed charging the land with the payment of the debentures.

However, land situate abroad, but belonging to a company registered here, can in most cases be effectually charged in favour of debenture holders or their trustees, without regard to the formalities required by the

local law in relation to transfers or mortgages. For it was settled long since that the Court of Chancery, by virtue of its jurisdiction in personam, would, as between persons resident here, enforce equities in regard to foreign land, e.g., would decree specific performance of an agreement to settle the boundaries of land in America. Penn v. Lord Baltimore, Tudor, L. C. Eq. 926, Westlake (1880), 183.

Moreover, in determining whether there was an equity subsisting between the parties, the Court regarded English law exclusively; and if according to that law there was an equity, the Court would enforce it although the equity was not recognised by the lex situs. Thus in ex parte Pollard, 4 Deac. 27, a contract for security on land in Scotland, in terms which, according to English law, created an equitable charge thereon, was enforced here as against the debtor's assignees in bankruptcy, as representing his person, although by Scotch law the contract created no lien or charge on the land. In that case Lord Cottenham, C., said that: "If indeed the law of the country where the land is situate should not permit, or not enable, the defendant to do what the Court here might think it ought to decree, it would be useless and unjust to direct him to do the act; but when there is no such impediment, the Courts of this country, in the exercise of their jurisdiction over contracts made here, or in administering equities between parties residing here, act upon their own rules, and are not influenced by any consideration of what the effect of such contracts might be in the country where the lands are situate, or of the manner in which the Courts of such countries might deal with such equities." See the cases cited in Westlake (1880), p. 183, and Coote v. Jecks, 13 Eq. 597, as to chattels.

The jurisdiction of the Court of Chancery is now vested in the High Court, and it therefore seems clear that if a company registered here covenants or purports to convey foreign land to trustees for debenture holders, or purports to charge it by the debentures or otherwise, or covenants that it shall stand charged in favour of debenture holders, the Court will, if occasion arises, enforce the equity just as if the land were in England; and consequently, unless the local law forbids, will compel the company to convey the land so as to give effect to the relief

decreed.

And in accordance with the principles above referred to relief has in several cases been granted here to the holders of debentures charged on foreign land. See the judgments and orders in Barry v. Sao Pedro Co., Form 237, infra; Bower v. Foreign and Colonial Gas Co., W. N. 1877, 223; Perry v. Oriental Co., 5 Ch. 420, and Forms 241 et seq., infra.

It must, however, be borne in mind that if land situate abroad is charged with debentures otherwise than in accordance with the lex situs, the debenture holders may find their charge postponed or ousted by a purchaser or mortgagee who has complied with the lex situs. In re Florence Land Co., 10 C. Div. 530.

And it seems that such a purchaser or mortgagee, even if within the