lies on the plaintiffs to shew us that the bank were constructive trustees for Mrs. Gibbes and not entitled to charge the shares with the debt of the trustee, and that they could have done by shewing that the bank knew the shares were bought with trust money. This, however, does not appear in the special case—all we are told is that at some time the bank had notice of the trust, and that at the time of his death Gibbes was indebted to them. We must therefore take it-since it lies on the plaintiffs to prove their case-that the indebtedness arose before the defendants had notice of the trust, and they are therefore entitled under their deed of settlement to charge the shares. Were we satisfied, however, that the defendants had notice of the trust before they advanced the money, I have no doubt that the defendants would not be allowed to exercise their right of lien, and this appears also to have been the opinion of Stephen, C.J., in Browne's case, where he says:-"It is not clear, however, that this debt had been incurred before the bank had notice of the trusts, and it might be that if it had been contracted after such notice the Court would have a restraining power. It would be hardly honest for the bank to credit a mere trustee, and thus enable Messrs. Massie and Greene to incur debts upon the strength of another person's money." And Hargrave, J., says "that the equitable jurisdiction of the Court was not to be taken away by any construction to be put upon the Act of Incorporation, and that if, after notice of the trust had been given, the bank gave credit to a trustee and then desired to appropriate the trust funds, a Court of Equity could vi et armis take the money from their custody."

Following Browne's case comes that of The New London and Brazilian Bank v. Brocklebank in the Court of Appeal, where it was held, under articles of association containing clauses very similar to the clauses in the Deed of Settlement of the bank, that the cestui que trust of shares could not claim the benefit of the investment and at the same time repudiate the terms upon which the trustees acquired them.

I think it may also be gathered from that case that the company would be prevented from exercising their lien in respect of advances made subsequent to a notice of trust.

1890.

BUDGE

V.

THE BANK

OF

NEW SOUTH
WALES.

WINDEYER and FOSTER, JJ., concurred.

Judgment for the defendants.

Attorneys for the plaintiffs: Norton, Smith, Westgarth & Co.

Attorneys for the defendants: Iceton & Faithfull.

1872.

BROWNE บ.

THE BANK

BROWNE V. THE BANK OF NEW SOUTH WALES AND OTHERS.

This was an appeal on behalf of defendants (the bank) from a decree of the Primary Judge (Mr. Justice Hargrave), directing the Bank of New South Wales to pay over certain dividends to the plaintiff, and restraining such bank from NEW SOUTH selling or in any way disposing of certain shares therein, except by plaintiff's WALES. consent. The arguments were resumed and concluded.

OF

The C.J. Hargrave J. and Faucett J.

Sir James Martin, Q.C., and Mr. Gordon, appeared in support of the appeal.
Sir William Manning, Q.C., Mr. Owen and Mr. Davis, in support of the Primary
Judge's decree.

The plaintiff in this suit was Mrs. Eliza Angell Browne, of 77 Harcourt-terrace, South Kensington, London; and the defendants were the Bank of New South Wales and Messrs. Robert George Massie and Molesworth Robert Greene (the latter of whom was also out of the jurisdiction of the Court, being resident in Melbourne), but the real defendants were the bank, the others being merely joined for purposes of formality.

It would appear that many years ago the defendants Massie and Greene purchased with the plaintiff's money twenty-six shares in the Bank of New South Wales, which were in the first instance placed upon the bank register kept in Melbourne, but afterwards on the Sydney register. Massie and Greene always remained upon the register as proprietors of the shares, Massie's name being placed first thereupon. He was in the habit of receiving the dividends and remitting them to the plaintiff through a draft upon the bank. In May, 1870, however, some difficulty was made by the bank authorities, who demanded an explanation as to who was the real owner of the shares. In reply, Mr. Massie wrote the following letter:"22 Bridge-street, Sydney, "18th May, 1870.

"Dear Sirs,

"On my application for the dividends on the twenty-six shares in the Bank of New South Wales, standing in the names of Messrs. Greene and Massie as trustees, for the purpose of remitting them as usual to the lady for whom we are acting as trustees, and who now resides in England, I was requested by your secretary to put the application in writing, I presume with a view of giving you full information as to who is the real proprietor of the shares and how it comes that we are trustees. I can do so in a very few words, and in a way that will no doubt prove satisfactory to you, and thus enable me to remit the dividends by the ensuing San Francisco mail, as these dividends form a large portion of the income on which the lady in question depends; and I am afraid that the non-receipt by

1872.

BROWNE

V.

OF

the last overland mail may prove a source of very great inconvenience to her. Greene and myself, at the request of some members of the family, were many years ago appointed trustees for the lady in question (Mrs. Browne) in connection with a property near Melbourne. The house on this property was burnt down, THE BANK but being insured by us the office with whom the insurance was effected paid over NEW SOUTH to us the amount, about 1100. With this, instead of rebuilding the house, we WALES. invested in the purchase of twenty-six shares in Bank of New South Wales stock on account of Mrs. Browne, and unfortunately for her at a much higher price than they can be bought for here. These shares were on the Melbourne register, purchased from Mr. George Hebden and paid for by the joint cheque of Mr. Greene and myself on the Bank of Victoria, where the money was lodged by the insurance office. In consequence of Mrs. Browne's going to England these shares were put on this register to enable me to draw the dividends and remit them home, and this has been done regularly by me by draft on your bank until last Wednesday, when I was asked for this explanation. I believe the shares have been held by as for more than six years. If there is any other point on which you wish for information in connection with this matter, I am quite prepared to give it; but I think you will consider what I have stated satisfactory, and I trust that I may be able to send the dividends home by the mail on the 28th; and that for the future, as the dividends on these shares are declared, they may be forwarded at once, as I think after the explanation I have given above this question need not arise again.

"I remain, dear sirs,

"Yours very truly,

"ROBT. GEO. MASSIE.

"To the Board of Directors,

"Bank of New South Wales."

Shortly after this letter had been received the dividends then due were remitted to Massie, and he forwarded them in the ordinary course. He shortly afterwards went on a visit to England, leaving a power of attorney to manage his affairs with Mr. Shepherd Smith, and upon his return in a year or so found that no dividends had been paid in the meantime. The result of this was that on the 17th April, 1871, Massie caused a letter to be written to the directors by Messrs. Roxburgh, Slade, and Spain (his solicitors), who again placed the circumstances of the case before the Board, and threatened proceedings in the event of further refusal to pay over the dividends due.

The prayer of the bill was that it might be declared that plaintiff was entitled to the dividends on the shares due in October, 1870, all dividends since declared and payable, and all dividends hereafter declared and payable. That an account might, if necessary, be taken of the amount of dividends due, and that defendants might be ordered to pay same to plaintiff or some other person on her behalf. That the bank might be restrained from applying the dividends towards payment of any amount due to them by Massie, and from applying or disposing of them in any way except in payment to the plaintiff or her agent or order of any dividends hereafter declared; that the bank might be restrained from selling or disposing of the shares or dividends except to the plaintiff or her agent; that proper inquiries might be made for the purpose of ascertaining the amount due, &c.; that the bank should pay all costs of suit; and that such other relief should be given as should be deemed expedient.

It would appear that the dividends had been paid over without demur or inquiry to the proprietor first on the register (Massie) until about the month of May, 1870, when that gentleman became indebted to the bank in respect of his own

1872. BROWNE

V.

OF

personal liabilities, and that then a difficulty was raised. The two trustees (Massie and Greene), however, never were jointly indebted to the bank, nor had they ever pretended that the dividends were due for any purpose except as before THE BANK described, nor was the plaintiff ever indebted to the bank. The directors, however, refused to pay over the dividends, upon the ground that under their by-laws they were entitled to apply them towards the reduction of Massie's debt, and that they were equally entitled to appropriate them to that purpose until the entire debt should be extinguished. They denied that they had ever recognised any person save Massie and Greene as proprietors of the shares, or that they had ever expressed satisfaction with Massie's explanation in May, 1870, though they had then paid the dividends due in the hope that that gentleman's debt would be cleared off.

NEW SOUTH
WALES.

The bank is incorporated by Act of Parliament as a banking company, trading in New South Wales and Victoria, but previous to their incorporation they were established under a Deed of Settlement, the clauses whereof and those made under them were by the second section of the Act of Incorporation adopted as the by-laws of the incorporated company. The twenty-first clause of the deed provided that if a proprietor of shares should become indebted to the company, or should be under engagements to the company, such debts or engagements should become first and paramount charges upon his share or shares. Clause 28 provided that if a share or shares were vested in two or more persons jointly or in common, or otherwise, that one of such proprietors or of the survivors of them whose name should stand first in the books as one of the owners or the sole survivor should be considered and deemed to be the proprietor. The thirty-first was to the effect

that the company should not be bound in any manner by any trusts or equitable interests affecting any share or shares, or the capital standing in the name of any person or persons, or to take any notice of any such trusts or equitable interests, but the receipt of the person in whose name the share or shares should stand, or the first or the survivor of several proprietors should be a sufficient discharge to the company, who should not be bound to see to the application of the moneys; that a transfer of shares standing in the name of any ostensible proprietor or proprietors should, when duly executed by the latter, be a sufficient and binding transfer, notwithstanding any equities upon such shares or any notice thereof, provided that the company might in its discretion refuse to pay over any dividends or to allow the transfer of any shares after having received notice of any equities thereupon. Clause 105 provided that after the appropriation for a reserve fund the balance of net profit should be available for payment of dividends. The 11th section of the Act of Incorporation was much to the same tenor as the 31st clause of the Deed of Settlement, providing that the corporation should not be bound in any manner by any trusts or equitable interests or demands affecting any share or shares or capital standing in the name or names of any person or persons as the ostensible proprietor or proprietors, or to be required to take any notice of such trusts or equitable interests or demands, but the receipt of such person or persons should nevertheless be a good receipt to the corporation, provided that it should be competent to the Board of Directors if they should think fit to withhold payment of any dividends or to refuse to sanction the transfer of such share or shares in any case in which they should have had notice of any claims under alleged trusts or equitable interests or demands and when such claim should appear to the Board to be well founded, provided also that there should be no construction put upon this clause to abridge the right of any Court of equity to restrain the payment of any dividend or other money.

His Honour made a decree as sought.

The grounds of appeal taken and argued were

1872.

BROWNE

v.

THE BANK

OF

Firstly-That the bank were not bound by any trusts or equitable interests affecting the shares before referred to and standing in the names of Massie and Greene, and that plaintiff, claiming to be the cestui-que trust of her equitable NEW SOUTH interest in the shares, had not any right to call upon the bank for or receive payment from the bank of the dividends upon such shares.

Secondly-That the bank not being affected by notice of any relation of cestui que trust and trustee existing between the plaintiff and defendants Massie and Greene at the time when the former became indebted to the bank were not prejudiced with reference to any charge which they had upon the shares by any trusts or other equities affecting the shares as between plaintiff and defendants before named.

Thirdly--That the shares and dividends upon them were subject to all charges affecting the same as shares vested jointly in two persons.

Fourthly-That Massie being indebted to the bank his debt became, under the circumstances of the case, a first and paramount charge on the whole or a portion of the shares and the dividends accruing thereon.

Fifthly-That the bank being entitled to Massie's debt, and such debt remaining due and unsatisfied, they were entitled to prohibit and restrain payment of the dividends on the shares, or some proportion of them, until such debt should be fully discharged, and

Sixthly That under all the facts of the case, the plaintiff's bill ought to have been dismissed.

Their Honours were unanimous in sustaining the appeal.

THE CHIEF JUSTICE said that where two persons had signed a deed covenanting with other co-proprietors, and becoming, by their own act, the only persons whom the company would recognise, each would become bound by all the covenants and stipulations. Here the plaintiff had gone to two gentlemen (the defendants Massie and Greene) and desired them to invest her money in bank shares, desired them to sign the roll and become the ostensible joint proprietors; and she had expressed her complete confidence in them, and her willingness to trust them to the fullest extent. What right had she now to turn round because she found that under one of the by-laws which had been assented to by the trustees when they ostensibly became proprietors the bank were entitled to retain dividends in satisfaction of a debt incurred by one of the trustees. It was not clear, however, that this debt had been incurred before the bank had notice of the trusts; and it might be that if it had been contracted after such notice the Court would have a restraining power. It would be hardly honest for the bank to credit a mere trustee and thus enable Messrs. Massie and Greene to incur debts upon the strength of another person's money. Assuming, however, that the debt had been contracted prior to notice, the only difficulty was that it was contracted by one only of the trustees. It had been provided, however, under clause 28 that where there were several proprietors of shares that one whose name stood first on the roll should be deemed to be the sole proprietor so far as the bank was concerned. It appeared, therefore, that if this one person contracted a debt the other was bound by it, and the plaintiff had clearly assented to be bound by what the trustee had covenanted for. In his (The Chief Justice's) opinion, therefore, her case failed.

WALES.