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ROSCOF"S DIGEST OF BUILDING CASES. A Digest of Cases rcla 1 ': to the Construction of Buildings, the Liability and Rights of Architects, Survfe) ors, and Builders ir -ou th-reto, with Notes and an Appendix containing Forms of Pleadings, Building Agreement , Leases, and Conditions of Contract s~ and R. ports of Cases. Fourth Edition. By EDWARD STARRY "RoscoE, Barrister-at-Lu\v. Demy 8vo , cloth, i8j. POLICE ACTS. The County and Borough Police Acts, 1831-1900. Together with the Special Constables Acts, the Parish Constables Acts, the Lock-up Houses Acts, the Police Rates Act, the High Constables Act, the Riot Damages Act, tl.e Public Authorities Pro- tection Act. the Police Pioperty Act, and parts of the Army Act, Municipal Corporation Act, and the Loral Government Act. With Introduction, Notes, and Index.' By EVELYN G. M. CARMICHAEL, M.A. Ox n.), of the Inner Temple and Oxford Circuit, Barrister-at-Law. Super royal 8vo., 988 pages, cloth, 2 ; cash price, 32.9. ; postage in U.K., yd. PATENTS. The Law and Practice relating to Letters Patent for Inventicns. With full appendices of Statutes, Rules, and Forms. By ROCKK WILLIAM WALLACE, Esq., of the Middle Temple, one of Her Majesty's Counsel, and JOHN BKUCE WILLIAMSON, Esq., of the Mic ! 1; Temple and North-Eastern Circuit, Barrister-at-Law. 7, FLEET STREET, LONDON, E.G. WM. CLOWES AND SONS, Limited, LAW PUBLISHERS, WOLSTENHOLME'S CONVEYANCING ACTS. Eighth Edition, thoroughly revised, demy 8vo., cloth, 2U. THE CONVEYANCING ACTS, 1881, 1882, and 1892 ; the Vendor and Purchaser Act, 1874 ; the Land Transfer Act, 1897. Part I. ; the Land Charges Registra- tion and Searches Act, 1888; the Trustee Acts, 1888, 1889, 1893, and 1894: the Married Woman's I roperty Acts, 1882 and 1893 ; and the Settled Land Acts, 1882 to 1890. With Notes and Rules of Court. By EDWARD PARKER WOLSTENHOLME, M.A., of Lincoln's Inn, Barri-ter-at-Law, one of the Conveyancing Counsel of the Court; WILFRID BRINTON, M.A., of the Inner Temple, Barrister-at- Law, one of the Examiners of Title under the Land Transfer Rules, 1898 ; and BENJ .UN LENNARD CHERRV, LL.B., of Lincoln's Inn, Barrister at Law. Third Edition, royal 8vo., 1,000 pp., cloth, 26\y. ; cash price, us. THE RELATIONSHIP OF LANDLORD AND TENANT. By EDGAR FOA, of the Inner Temple, Barrister-at-Law. " A standard treatise on the modern kw of Landlord and Tenant." Solicitors' Journal. " Perhaps the most important work on this branch of the law which has made its appearance in recent years." Law Times id Edition, thoroughly revised, demy 8vo., 2 vols., cloth, 38$. BRETT'g^COMMENTARIES ON THE PRESENT LAWS OF ENGLAND. By THOMAS BRETT, of the Mi 'die Temple, Barrister-at-Latv, LL.B. London University; B.A., laie Scholar and Student of Trinity College, Dublin; Exhibitioner in Real Property and Equity ; Holder of the First Certificate of Honour, Michaelmas, 1869 ; Joint Author of "Clerkeand Brett's Conveyancing Acts"; Author of "Brett's Bankruptcy Acts, 1883 '; anu of "Leading Cases in Modern Equity " ; and late Lecturer on Equity to the Incorporated Law Society. %* The main idea of this book is to bring into special prominence the present and living law, and only to deal wirh past law, or tha which is practically obsolete, so far as it is necessary to enable ths reader to understand the present. The Law Journal says, in the course of an exhaustive review : " We are able confidently to recommend these Commentaries to students, with whom We venture to predict th<.y will become deservedly popular. . . . Mr. Brett's Commentaries are thoroughly comprehensive, and we have little but praise for the manner in which he has discharged his self-imposed task. . . . 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By JOHN BKUCE WILLIAMSON, of the Middle Temple and North Eastern Circuit, Barrister-at-La\v. Demy 8vo., cloth, izs. bd. LICENSING SESSIONS (THE LAW AND PRACTICE OP) AX I) OF AP?' ALS THEREFROM. Including all relevant Statutes and Forms jf Licenses and Notices. By ]:. ;N BRUCE WILLIAMSON, of the Middle Temple and North- Eastern Circuit, "arrister- at-La- , Autl'ur ^f " The L:iw of Licensing in England." Third Edition, crown 8vo., cloth, y. THE OFFICE OF MAGISTRATE. By HAROLD WXICHV, B.A., LL.B., of the Middle T mple, Barrister-at-Law, Stipendiary Magistrate for the Staffordshire Potteries, Author of "A I realise on the Bankruptcy Act, 1883," &c. Thi-- little book contains a capital Epitome of the Duties ' It is f .11 of practical hint- and suggestions. " Law Times. 'Tln\ little book contains a capital Epitome of theJDuties of a Magistrate, written in popular language. It is f .11 of practical him- and suggestions." La Demy 8vo., cloth, %s. 6J. THE LAW OF AGENCY. By R. GRESLEY WOODYATT, of the Inner Tempi-' and Midland Circuit, Barrister-at-Law. Third Edition, demy 8vo., cloth, 2or. DIXON'S LAW AND PRACTICE OF DIVORCE AND OTHER MATRIMONIAL CAUSES. Third Edition, thoroughly revised. By W. J. DIXON, LL.M., of the Inner Temple, Barrister-at-Law. 7, FLEET STREET, LONDON, E.G. THE LAW AND PRACTICE OF THE STOCK EXCHANGE WITH APPENDICES. CONTAINING THE RULES AND REGULATIONS ANNOTATED, AND FORMS OF INSTRUMENTS ACCOMPANYING A MORTGAGE OF SECURITIES. BY B. E. SPENCER BRODHURST, M.A., B.C.L. OP THE INNER TEMPLE, BARR1STER-AT-LAW. LONDON: WILLIAM CLOWES AND SONS, LIMITED, 27, FLEET STREET. 1897. SPRECKELS PREFACE. AT the present day, operations upon the Stock Exchange are conducted upon so vast and complex a scale, and so intimately affect the interests of the public, that a fresh attempt to explain the rules which regulate the conduct of business between member and member, and to elucidate the legal principles which govern the relations of members with the public, perhaps scarcely requires an apology. If an apology is needed, it must be found in the various new cases dealing with this branch of the law which have been decided by the courts during the last three or four years. Among the most important of these is that of the Metropolitan Coal Consumers' Co. v. Scrimgeour, in which the Court of Appeal have held that payments made to a broker in consideration of services rendered in placing the shares of a company, do not amount to issuing those shares at a discount, and are not illegal payments a ; decision which it is now proposed to supple- ment by statute. Attention should also be drawn to those cases, such as Walter v. King, Petre v. Sutherland, and Sachs v. Spielmann, which seem to show that of late years the courts have relaxed something of the stringency of the rule which forbade a broker to deal with his principal in any other capacity than that of agent. For where a principal fails to take up stock which his broker has bought on his behalf, it seems that it is permissible for the broker to take over the stock himself, provided that he has previously had a fair 113621 IV PREFACE. valuation made, and then to charge his principal with any loss occasioned by his refusal to accept delivery. And, further, it appears that if a broker receives instructions to carry over his principal's stock, he will be allowed to carry over personally, provided that it is for the principal's interest that he should do so, and that the principal on receiving notice of the transaction does not repudiate it. In fact, the rule at present seems to be that a broker is on all occasions bound to use his best endeavours in his employer's interests, and that if, in doing so, he is occasionally com- pelled to abandon the position of an agent and take up that of a principal, he will not be held to have acted wrongfully. In Forget v. Ostigny the distinction between gambling and legitimate speculation, enunciated by Lord Justice Lindley and affirmed by the Court of Appeal in the case of Thacker v. Hardy, has received further confirmation from the Judicial Committee of the Privy Council. In Strachan v. .Universal Stock Exchange, the question of cover has received consideration ; and the Court of Appeal have drawn a distinction between monej 7 or securities which have been lodged to abide the event of a wager, the property in which passes upon the decision of the wager, and money or securities which have been lodged to secure the due observ- ance of a contract by the person who lodges them, and as to which appropriation or realization and appropriation, as the case may be, is or are necessary before any property in them passes to the depositee. The law relating to wagering contracts so rarely affects bargains in stocks and shares, that it is perhaps almost super- fluous to point out here that the principle laid down in the famous case of Head v. Anderson is no longer good law, and that an agent who, since the Gaming Act of 1892, makes a gaming contract by his principal's instructions and pays it to save himself from loss, is not entitled to recover the PREFACE. V amount from his principal, although, if the bet has been won and the money has actually been paid into the agent's hands, the principal obtains a title to it which he may enforce by process of la\v. It has been my endeavour to render the book useful not only to the legal profession, but also to members of the Stock Exchange and to the public generally. Consequently I have cited many of the cases at a length which would perhaps have been unnecessary had the bcok been intended only for those to whom the legal reports are readily accessible. It is chiefly, too, with a view to the convenience of the public, who generally have little opportunity for acquiring an intimate acquaintance with the manner in which the business of the Stock Exchange is conducted, that the chapter which illustrates the usual method of "doing a bargain " has been inserted. The rules of the Stock Exchange with short notes will be found in Appendix A. Reference has been made to them throughout the text, but it must not be forgotten that they are subject to constant revision at the hands of the Committee, and that the numbers are also liable to alteration. I have to acknowledge my indebtedness to Mr. Francis's Characters and Chronicles of the Stock Exchange for much of the information contained in the introductory chapter. I also desire to acknowledge the great obligation which I am under to those members of the Stock Exchange who most kindly assisted me with the fourth chapter, and to Mr. R. Cremieu Javal, of the firm of Messrs. James Mason and Son, for a very careful revision of the glossary and other portions of the book which deal with the practice and management of the Stock Exchange ; to Messrs. B. Perks and W. Y. R. Fane, of the Inner Temple, for assistance with the references and index ; and to Mr. F. M. Abrahams, of the Inner Temple, for y PREFACE. the many valuable suggestions which his extensive expe- rience of this class of business has enabled him to give me, and to which the book will owe a large part of such practical value as it may be found to possess. THE TEMPLE, B> July, 1897. CONTENTS. PAGE PREFACE ... ... ... ... ... ... ... iii. TABLE OF STATUTES CITED ... ... ... ... ix. TABLE OF CASES CITED ... ... ... ... ... xi. TABLE OF DEFENDANTS' XAMES IN ALPHABETICAL ORDER ... xxiii. TABLE OF ABBREVIATIONS ... ... ... ... xxvii. CHAPTER I. INTRODUCTORY ... ... ... ... ... 1 II. GLOSSARY ... ... ... ... ... ... 14 III. THE STOCK EXCHANGE AND ITS MANAGEMENT ... 30 IV. THE COURSE OF BUSINESS ON THE STOCK EXCHANGE ... 51 V. STOCK EXCHANGE SECURITIES ... ... ... 73 VI. FORMATION OF THE CONTRACT... ... ... ... 85 VII. RIGHTS OF THE PARTIES UNDER THE CONTRACT ... 94 Section I. Broker and Principal ... ... ... 94 Section II. Broker and Jobber ... ... 133 Section III. Jobber and Principal ... ... 135 Section IV. Vendor and Purchaser ... ... 146 VIII. COMPLETION OF THE CONTRACT ... ... ... 158 IX. AVOIDANCE OF THE CONTRACT ... ... ... 167 X. REMEDIES ... ... ... ... ... ... 207 XL TRANSFERS ... ... ... ... ... 220 XII. MORTGAGES OF STOCK AND SHARES ... ... ... 236 APPENDIX A. THE EULES OF THE STOCK EXCHANGE WITH NOTES 247 APPENDIX B. FORMS OF LOAN-NOTE AND MEMORANDUM QUALIFY- ING A TRANSFER ... ... ... ... 294 INDEX .. 297 TABLE OF STATUTES. PACK 13 Edw. 1 (Stututa Civitatis London) 2 1 Jac. 1, Stat. 21 (An Acte againstc Brokers) .... 3 20 Car. 2, c. 3 (Statute of Frauds) 43, 85 8 & Will. 3, c. 20 (An Act for enlarging the Capital Slock of the Bank of England, &c.) ......... 4 c. 32 (An Act to restrain the Number and Ill-practice of Brokers and Stock-jobbers) ....... 4 6 Anne, c. 68 (c. 16, Kuffhead) (An Act raising the Payments made by Brokers to the City of London) . . . . 5, 7, 106, 113 10 Anne, c. 18 (A Revenue Act) 5 7 Geo. 2. c. 8 (Sir John Barnard's Act to prohibit Stock Exchange Gambling) 10, 35, 167, 168 10 Geo. 2, c. 8 (Stock-jobbing Act, 173G) 10 55 Geo. 3, c. 184 (Stamp Act, 1815) . . . 85,151,221,220 57 Geo. 3, c. 60 (Loc. and Pers.) (An Act increasing the Payments made by Brokers to the City of London) ..... 7 8 Yict. c. 16 (Companies Clauses Consolidation Act, 1845) 221, 233, n. 3 7 & 8 Yict. c. 24 (Repeal of Statutes against forestalling, &c.) . 11 9 Viet. c. 100 (Gaming Act, 1845) . . 110, 113, 167, 172, 193 2 1 A: 22 Yict. c. 70 (Cheques to permit crossing of, &c.) . .76 23 Viet. c. 28 (Repeal of Barnard's Act) .... 10, 171 24 & 25 Yict. c. 06 (Larceny Act, 1861) 162 2:. A: 26 Viet. c. 80 (Companies Act, 1862) 77, 108, 216, 221, 233, n. 3, 245 28 20 Yict. c. 78 (Mortgage Debenture Act, 1865) ... 84 30 Yict. c. 20 (Leeman's Act Prevention of Speculation in Bank Shares) 167, 107 :;n \- 31 Yict. c. 131 (Companies Act Amendment Act, 1867) 81, 151, 231, 284 32 & 33 Yict. c. 10 (The Stannaries Act, 1869) .... 232 c. 71 (Bankruptcy Act, 1860) . . . . 47, loo, 203 c. 104 (Payment of Dividends on Public Stocks) ... 76 33 Yict. c. 14 (Naturalisation Act, 1870) 252 33 & 34 Yict. c. 60 (London Brokers Relief Act, 1870) . . .12 c. 71 (National Debt Act, 1870) 73-76 c. 82 (Canada Defences Loan Act, 1870) .... 77 c. 07 (Stamp Act, 1870) 120-122 37 & 38 Viet. c. 62 (Infants Relief Act, 1874) . . . .155 38 & 39 Viet. c. 83 (Local Loans Act, 1875) .... 84, 245 41 Viet. c. 15 (Customs and Inland Revenue Act, 1878) . . 120 43 & 44 Viet. c. 8 (Isle of Man Loans Act, 1880) .... 84 46 & 47 Viet. c. 52 (Bankruptcy Act, 1883) . . . 47-49, 155, 203 TABLE OF STATUTES. 47 Viet. c. 3 (London Brokers Belief Act, 1884) . . 12^113 51 Viet. c. 8 (Customs and Inland Eevenue Act, 1888) . 122 51 & 52 Viet. c. 41 (Local Government Act, 1888). 77 53 & 54 Viet. c. 39 (Partnership Act, 1890) ... 127 54 & 55 Viet. c. 39 (Stamp Act, 1891) 120-122, 157, 221, 229-231, 245, c. 43 (Forged Transfers Act, 1891) . . '' 229 55 Viet. c. 9 (Gaming Act, 1892). . . HO, 113, 173, 192, 195 55 & ;>6 Viet. c. 36 (Forged Transfers Act, 1892) .... 229 c. 39 (National Debt and Stockholders Relief Act, 1892) '. 74 56 Viet. c. 7 (Customs and Inland Revenue Act, 1893 (Stamps)) 120 122 56 & 57 Viet. c. 53 (Trustee Act, 1893) . ... 78, 82 c. 63 (Married Woman's Property Act, 1893) . 140 c. 64 (National Debt Redemption Act, 1893) 76 c. 71 (Sale of Goods Act, 1893) . $5 TABLE OF CASES. Abbot r. Straiten (1846), 3 J. & L. f>03 243 Adderley r. Dixon (1824), 1 Sim. & Stu. 607 ... 209, 217 Allen P. Graves (1870), L.R. 5 Q B. 478; 39 L.J. Q.B. 157: 22 L.T. 677 140 Amory r. Meryweather (1824), 2 B. & C. 573 . . . . 171 Appleyard. Ex parte (1881), 18 Ch. D. 587 ; 50 L.J. Ch. 554 ; 45 L.T. 552; 30 W.R. 170 213 Archer v. Williams (1846), 2 C. & K. 26 213 Armstrong r. Stokes (1872), L.R. 7 Q.B. 598 136 Asliton r. Dakin (1859), 7 W.R. 384 174 Atherfold r. Beard (1788), 2 T.R. 610; 1 R.R. 556 ... 168 Att.-Gen. p. Bouwens (1838), 4 M. & W. 171 .... 79 Aubert r. Maze (1801), 2 Bos. & P. 371 171 Audain, Ex parte (1889), 42 Ch. D. 1 ; 58 L.J. Ch. 467 ; 60 L.T. 684 ; :-J7 W.R. G74 118, 119 Bagshaw r. Seymour (1856), 18 C.B. 903; 29 L.J. Ex. 62, n. . . 201 Bahia and San'Francisco Railway Co., In re (1868), L.R. 3 Q.B. 584 ; 37 L.J. Q.B. 176; 18 L.T. 467; 16 W.R. 862 .... 234 Balkis Consolidated Co. r. Tomkinson [1893], A.C. 396 ; 63 L.J. Q.B 134; 69 L.T. 598; 42 W.R. 204 216,234 Baker r. Nottingham Banking Co. (1891), 60 L J. Q.B. 542 . . 244 Bank of Bengal v. Macleod (1849), 7 Moo. P.C.C. 35 . .100 Bank of Ireland r. Evan's Trustees (1855), 5 H.L.C. 389 . 222, ?2S Barclay r. Pearce (1884), 1 5 Q.B.D. 390, n. 3 . . . .198 Earned r. Hamilton (1841), 2 Rail. Cas. 624 214 Barry r. Croskey (1861), 2 J. & H. 1 173,202 Barton r. London & North We>tem Rpilway Co. (1889), 24 Q.B.D.. 77: 59 L.J. Q.B. 33; 62 L.T. 1(34 ; 38 W.R. 197 . . 228, 232 r. North Staffordshire Railway Co. (1888), 38 Ch. D. 458; 57 L.J. Ch. 800; 58 L.T. 549; 36 W.R. 754 .... 2*8 Bayley v. Wilkins (1849), 7 C.B. 886; 18 L.J. C.P. 273. 88, 99, 108, 151, 273 Bayliffe r. Butterworth (1847), 1 Ex. 425; 17 L.J. Ex. 78 . 88, 107 Beckitt r. Bilborough (1 858), 8 Hare, 188 150 Bedford r. Bagshaw (1859), 4 H. A: N. 538 : 29 L.J. Ex. 59 . 201-203 Beeston r. Beeston (1875), 1 Ex. D. 13 ; 45 L.J. Ex. 230 ; 33 L.T. 70 J ; 24 W.R. 96 193 Belton r. Hatch (1888), 109 New York Rep. 593 . Bentinck r. London Joint Stock Bank [1893], 2 Ch. 120; 62 L.J. Ch. 358; 68 L.T. 315; 42 W.R. 140 . 64, 79, 97, 133, 197, 226, 237 Xli TABLE OF CASES. PAGE Bentley, In re (1894), 69 L.T. 204 Ill) Bermingham r. Sheridan (1864), 33 Bcav. 660; 10 L.T. 256: 12 W.R, 658 148 Bicderman r. Stone (1867), L.R. 2 C.P. 504; 36 L.J. C.P. 198; 16 L.T. 415 93, 108 Bishop r. Balkis Consolidated Co. (1890), 25 Q.B.D. 512 ; 59 L.J. Q.B. 565; 39 W.R. 99 234 Black r. Homersham (1878), 4 Ex. D. 24 ; 48 L.J. Ex. 79 ; 39 L.T. 671 ; 27 W.R. 171 150 Blackburn r. Mason (1893), 9 T.L.R. 286 . . . . 126, 138 Blake r. Parker (1896), Times, April 21 .... 168, 197 Bloomenthal, Ex parte [1896], 2 Ch. 525 ; 65 L.J. Ch. 748 ; 74 L.T. 670; 44 W.R. 577 . .234 Bongiovanni v. Societe Generate (1886), 54 L.T. 320 . 66, 237, 266- Booth v. Hodgson (1795), (5 T.R. 405 171 Bouch r. Sevenoaks, &c., Railway Co. (1879), 4 Ex. D. 133; 48 L.J. Ex. 338; 40 L.T. 560; 27 W.R. 507 78 Bowlby r. Bell (1846), 3 C.B. 284; 16 L.J. C.P. 18 85, 107, 112. 220 Bowring r. Shepperd (1871), L.R. 6 Q.B. 309; 40 L.J. Q.B. 129; 24 L.T. 721 ; 19 W.R. 852 . . . 91, 147, 149, 150, 152 Bradford Banking Co. r. Briggs (1886), 12 App. Cas. 29; 56 L.J. Ch. 364 ; 56 L.T. 62 ; 35 W.R. 521 245 Bradley r. Holdsworth (1838), 3 M. & W. 422 .... 85 Bridger r. Savage (1885), 15 Q.B.D. 363; 54 L.J. Q.B. 464; 53 L.T. 129; 33 W.R. 891 ... 193 Brocklesby v. Permanent Temperance Building Society [1895], A.C. 173; 64 L.J. Ch. 433; 72 L.T. 477; 43 W.R. 606 ... 97 Brown v. Black (1873), L.R. 15 Eq. 363; 42 L.J. Ch. 397; 28 L.T. 256; 21 W.R. 457; aff. L.R. 8 Ch. 939; 42 L.J. Ch. 841 ; 2i) L.T. 362 ; 21 W.R. 892 154 r. Boorman (1844), 11 Cl. & F. 1 9!> r. Turner (1798), 7 T.U. 630; 2 Esp. 632 . . . 170, 171 Bryan r. Lewis (1826), Ry. & M. 386 169 Bubb v. Yelverton (1871), 24 L.T. 822 ; 19 W.R. 739 . . . JIM Buckeridge v. Ingram (1795), 2 Ves. juu. 652 .... 86 Buhner, Ex parte (1807), 13 Ves. 313 170 Buhner v. Norris (1860), 30 L.J. C.I'. 25 86 Burkinshaw v. Nicholls (1878), 3 App. Cas. 1004; 48 L.J. Ch. 179; 39 L.T. 308; 26 W.R. 819 234 Burra v. Ricar . .176- Cadett v. Earle (1877), 5 Ch. D. 710; 46 L.J. Ch. 798 . . . 76 Campbells Brass (1891), 7 T.L.R. 612 124 Cannan v. Bryce (1819), 3 B. & Aid. 179 171 Capper's Case (1868), L.R. 3 Ch. 458; 16 W. R. 1002 . . 141, 155 Carlill v. Carbolic Smoke Ball Co. [1892], 2 Q.B. 484; 61 L.J. Q.B. 696; aff. [1893], I Q.B. 256; 62 L.J. Q.B. 257; 67 L.T 837; 41 W.R. 210 182 Carmichael's Case [1896]. 2 Ch. 643; 65 L.J. Ch. 902 ; 75 L.T. 45 . 119 Carter v. Wake (1877), 4 Ch. D. 605 ; 46 L.J. Ch. 841 . . 125, 239 Case r. M'Clellan (1871), 25 L.T. 753; 20 W.R. 113 . . 151, 222 Castellan v. Hobson (1870), L.R. 10 Eq. 47; 39 L.J. Ch. 490; 22 L.T. 575 ; 18 W.R. 731 93, 154 Chapman r. Shepherd (1867), L.R. 2 C.P. 228; 36 L.J. C.P. 113; 15 L.T. 447; 15 W.R. 314 88,93,108 TABLE OF CASES. xiii heale v. Kenwarel (1858), 3 De G. & J. 27 : '27 L.J. Ch. 784 . 88, 217* 218 Child r. Morley (1800), 8 T.R. 610 10G, 170 City Bank, Ex parte (1808), L.R. 3 Ch. 758; 18 L.T. 894; 16 W.R. 919 81 Clarke r. Powell (1833), 4 B. & Aid. 846; 2 L.J. K.B. 145 . 6, 7, 113 Clayton's Case (IS 1 6), 1 Mer. 572 131 Clayton r. Dilly (1811), 4 Taunt. 165 170 Clegs r. Townshend (1867). 16 L.T. 180 112 Ooalport China Co., In re [1895], 2 Ch. 404; 64 L.J. Ch. 710; 73 L.T. 46 : 44 W.R. 38 232 Coates r. Pacey (1892), 8 T.L.R. 351. 474 . . . 89. 104, 198 Cohen v. Kittell (1889), 22 Q.B.D. 680; 58 L.J. Q.B. 241; 60 L.T. 932 ; 37 W.R. 400 183, 193 Colburne and Strawbridge, Ex parte (1870), L.R. 11 Eq. 478; 40 L.J. Ch. 93; 23 L.T. 515; 19 W.R. 223 81 Coles r. Bank of England (1839), 10 A. & E. 437; 9 L.J. Q.B. 36 . 222, 228 v. Bristowe (1868), L.R. 4 Ch. 3 ; 38 L.J. Ch. 81 ; 19 L.T. 403; 17 W.R. 105 92,98,143,144 (1868), L.R. 6 Eq. 149; 18 L.T. 459; 16 W.R. 690 . . 143 Collen c. Wright (1857), 8 E. & B. 647 98 Colonial Bank r. Cady (1890), 15 App. Cas. 267 ; 63 L.T. 27 ; 39 \V.R. 17 225, 227 r. Whinney (1886), 11 App. Cas. 426; 56 L.J. Ch. 43; 55 L.T. 362 ; 34 W.R. 705 1,48,224,242 Cooke r. Eshelby (1887), 12 App. Cas. 271; 56 L.J. Q.B. 505; 56 L.T. 673; 35 W.R. 629 138 Cooke, Ex parte (1876). 4 Ch. D. 123; 46 L.J. Ch. 52; 35 L.T. 049; 25 W.R. 171 129 Cooke, In r? (1876), 4 Ch. D 555 47 Cooper r. Neil (1878), 27 W.R. 159. u 110, 177 Cope r. Rowlands (1836), 2 M. & W. 149 ; 6 L.J. Ex. 63 . . 113 Copeland r. North Eastern Railway Co. (1856), 6 E. & B. 277 . 221 Crahb r. Miller (1871). 24 L.T. 219; aff. 24 L.T. 892; 19 W.R. 882 93, 98, 149, 152 Crossley r. Magniac [1893], 1 Ch. 594; 67 L.T. 798; 41 W.R. 598 126, 138 Crouch r. Credit Foncier of England (1873), L.R. 8 Q.B. 374 ; 42 L.J. Q.B. 183; 29 L.T. 259; 21 W.R. 946 ... 80, 81 Cruse v. Paine (1869), L.R. 4 Ch. 441; 38 L.J. Ch. 225; 17 W.R. 1033 145 Cuddee r. Rutter, 1 L.C. Eq., vol. i. 907 217 Curtis' Case (1868), L.R. 6 Eq. 455; 37 L.J. Ch. 629; 23 L.T. 287; 18 W.R. 957 155, 156 Daniels, Ex parte (1807), 14 Ves. 190 171 Davenport v. Powell (1844), 14 Sim. 275 115 Davis r. Havcock (1869), L.R. 4 Ex. 373 ; 38 L.J. Ex. 155; 20 L.T. 954 .... . 152 v. Howard (1890), 24 Q.B.D. 691 ; 59 L.J. Q.B. 133 . 122, 287 De Mattos v. Benjamin (1894), 63 L.J. Q.B. 248 ; 70 L.T. 560 ; 42 W.R. 284 . 193 Deut r. Nickalls (1873), 29 L.T. 536 ; 22 W.R. 218 ; aff. 30 L.T. 644 89. 139 Derry r. Peek (1889), 14 App. Cas. 337 ; 58 L.J. Ch. 864 ; 61 L.T. 265 ; 38 W.R. 33 201 xiv . TABLE OF CASES. PAGE De Ribeyre v. Barclay (1857), 23 Beav. 107 ; 26 L.J. Ch. 747 . 127 Dig-^le v. Higgs (1877), 2 Ex. D. 422 ; 46 L.J. Ex. 72 L ; 37 L.T. 27 ; 25W.E. 777 194 Dodds v. Hills (1865), 2 Hem. & M. 424 225 Donald v. Suckling (1866), L.R. 1 Q.B. 585 ; 35 L.J. Q.B. 232 ; 14 L.T. 65'6; 15 W.R. 13 240 Donaldson v. Gillot (1866), L.R. 3 Eq. 274 ; 15 L.T. 382 ; 15 W.R. 166 228 I )ownes r. Black (1816), 1 Stark. 318 211 Druce v. Levy (1891), 7 T.L.R. 259 122 Duncan v. Hill (1873), L.R. 8 Ex. 242; 42 L.J. Ex. 179; 29 L.T. 268 ; 21 W.R. 797 48,88,112,123,287 Duncuft v. Albrecht (1841), 12 Sim. 189 85 Dunne v. English (1874), L.R. 18 Eq. 524; 31 L.T. 75 . . 100, 101 Dutch v. Warren, 2 Burr. 1010 212 Dyster, Ex parte (1816), 1 Mcr. 155; 2 Rose 349 . . . 5, 100, 113 Ebbett's Case (1870), L.R. 5 Ch. 302 ; 39 L.J. Ch. 679 ; 22 L.T. 424; 18 W.R. 3 4 155 Edgington v. Fitzmaurice (1885), 29 Ch. D. 459; 55 L.J. Ch. 650; 53 L.T. 369; 33 W.R. 911 201 Ellis r. Eden (1857), 23 Beav. 543; 26 L.J. Ch. 533 ... 76 Elsworth v. Coles (1836), 2 M. & W. 31 ; 6 L.J. Ex. 50 . . .169 Evans v. Wood, (1867), L.R. 5 Eq. 9; 37 L.J. Ch. 159; 17 L.T. 190 ; 16 W.R. 67 93, 149, 152, 154, 218 Faikney v. Reynous (1767), 4 Burr. 2070 170 Fuure Electric Accumulator Co., In re (1888), 40 Ch. D. 141 ; 58 L.J. Ch. 148; 59 L.T. 918; 37 W.R. 116 117 Fenwick v. Buck (1871), 24 L.T. 274; 19 W.R. 597 . 93, 96, 123, 152 Fish v. Kempton (1849), 7 C.B. 687 ; 18 L.J. C.P. 206 . . . 138 Fitch v. Jones (1855), 5 E. & B. 238 ; 24 L.J. Q.B. 293 . . 168, 197 Fleet v. Murton (1871), L.R. 7 Q.B. 126; 41 L.J. Q.B. 49; 26 L.T. 181 ; 20 W.R. 97 90 Fletcher v. Marshall (1846), 15 M. & W. 755 . . . .96 Forget v. Ostigny [1895], A.C. 318 ; 64 L.J. C.P. 62 ; 72 L.T. 399 ; 43 W.R. 590 110,188 Forrest v. Elwes (1799), 4 Ves. 492 212 Foulds v. Thompson (1857), 19 Court Sess. Cas. (2nd series) 803 . 174 Fox v. Mackreth, 1 L.C. Eq. (6th edit.) 141 102 v. Martin (1895), 64 L.J. Ch. 473 225 v. Hill (1859), 4 H. & N. 359 ; 7 W.R. 263 . . . . 196 France v. Clark (1883), 22 Ch. D. 830; 52 L.J. Ch. 362; 48 L.T. 185 ; 31 W.R. 374 226, 239 , on appeal (1884), 26 Ch. D. 257; 53 L.J. Ch. 585; 50 L.T. 1 ; 32 W.R. 466 224, 225, 238 Franklyn v. Lamond (1847), 4 C.B. 637 ; 16 L.J. C.P. 221 . . 220 Gainsford v. Carroll (1824), 2 B. & C. 624 211 Giblin r. McMullen (1868), L.R. 2 P.C. 317; 38 L.J. P.C. 25; 21 L.T. 214; 17 W.R. 445 132 Gillet *. Peppercorne (1839), 3 Beav. 78 .... 100, 101 Gold schrnidt v. Jones (1870), 22 L.T. 220; 18 W.R. 513 . . 140 Gooch's Case (1872), L.R. 8 Ch. 266; 42 L.J. Ch. 381; 28 L.T. 148; 21 W.R. 181 150 Good v. Elliot (1790), 3 T.R. 693 ; 1 R.R. 803 .... 168 Goodwin v. Robarts (1876), L.R. 10 Ex. 337; a/. 1 App. Cas, 476; 45 L.J. Ex. 748 ; 35 L.T. 179 ; 24 W.R. 987 ... 79, 80, 133 TABLE OF CASES. XV PAGE Gorgier v. Mieville (1824). 3 B. & C. 45 80 Gorrisen's Ca?e (1873), L.E. 8 Ch. 507; 42 L.J. Ch. 864; 28 L.T. 611: 21 W.R. 536 118 Grant, Ex parte (1880), 13 Ch. D. 667; 42 L.T. 387; 28 WR. 755 46,47,288,292 Grissell r. Bristowe (1868), L.R. 3 C.P. 112; 37 L.J. C.P. 89; 17 L.T. 564; 16 W.R. 248 88,99,138,143 (1868), L.R. 4 C.P. 36 ; 38 L.J. C.P. 10; 19 L.T. 390: 17 W.R. 123 13, 138, 143, 147 Grizewood v. Blane (1851), 11 C.B. 538 ; 21 L.J. C.P. 46 . . 173 Hai^h . Town Council of Sheffield (1874), L.R. 10 Q.B. 109 195 Halliday r. Holgate (1868), L.R. 3 Ex. 299; 37 L.J. Ex. 174; 18 L.T. 656; 17 W.R. 13 240,241 Hamilton r. Vaughan Sherrin Electrical Engineering: Co. [1894], 3 Ch. 589 ; 63 L.J. Ch. 705 ; 71 L.T. 325 ;' 43 W.R. 120 . . 155 r. Young (1S81), 7 L.R. Ir. 289 . . . . 89, 125, 289 Hamuden v. Walsh (1876), 1 Q.B.D. 189 ; 45 L.J. Q.B. 238 ; 33 L.T. 852 ; 24 W.R. 607 . 194 Barker v. Edwards (1887), 57 L.J. Q.B. 147 ... 88, 89, 111 Harris v. Harris (1861), 29 Beav. 107 78 Harrison v. Harrison (1824), 1 C. &. P. 412 211 Hartas r. Ribbons (1889), 22 Q.B.D. 254 ; 58 L.J. Q.B. 187 ; 37 W.It. 278 48. 110, 12H Hart's Case (1868), L.R. 6 Eq. 512 ; 38 L.J. Ch. 85 ; 16 W.R. 1033 . 155 Hart v. Frontino, &c., Gold Mining Co. (1870), L.R. 5 Ex. Ill ; 39 L.J. Ex. 93 ; 22 L.T. 30 234 Hawkins v. Maltby (1867), L.R. 4 Eq. 572 : 37 L.J. Ch. 58 ; 17 L.T. 51; 15 W.R. 1075 147 (1867), L.R. 3 Ch. 188 ; 37 L.J. Ch. 58; 17 L.T. 397 ; 16 W.R. 209 147, 152, 218 , 2nd action (1869), L.R. 4 Ch. 200: 38 L.J. Ch. 313; 20 L.T. : 17 W.R. 557 93, 148, 152 Hiy r. Aylinff (1851), 16 Q.B. 423; 20 L.J. Q.B. 171 . . . 171 Henderson ;. Bise (1822), 3 Stark. 158 16t Henkel v. Pape (1870), L.R. 6 Ex. 7 ; 4u L.J. Ex. 15; 23 L.T. 419 ; 19 W.R. 106 Ill Heritages. Paine (1876), 2 Cb. D. 594; 45 L.J. Ch. 295; 34 L.T. 947 142 Heseltine r. Siggers (1848), 1 Ex. 856: 18 L.J. Ex. 16! . . 80 Hewitt v. Price (1842), 4 Man. &. G. 355; 11 L.J. C.P. 292 . . 169 Hibblewhite v. M'Morine (1839), 5 M. & W. 462 ; 8 L.J. Ex. 271 b7, 169 (1840), 6 M. & W. 200 224 Hodgkinspn r. Kelly (1868), L.R. G Eq. 496; 37 L.J. Ch. B 16 W.R. 1078 88, 93, 146, 152, 218 Hogan r. Shaw (1889), 5 T.L.R. 613 1> Holmes r. Symons (1871), L.R. 13 Eq. 66 ; 41 L.J. Ch. 59 ; 25 L.T. 628 ; 20 W.R. 195 155 Honer. Boyle (1891), 27 L.R. Ir. 137 244 Hubbersty r. Manchester, Sheffield, & Lincolnshire Railway Co. (1867), L.R. 2 Q.B. 471 ; 36 L.J. Q.B. 198; 16 L.T. 425; 15 W.R. 7'.'o Hull r. Hill (1876), 4 Ch. D. 97 | . 7G Humble v. Lan^ston (1841), 7 M. i- W. 517 . . . . '. . 152 v. Mitchell (1839). 11 A. & E. 205 85 Hunt v. Chamberlain (1896), 12 T.L.R. 186 172 v. Gunn (1862), i:-{ C.B. N.S. 226 ; 7 L.T. 277 . . 1G?> XVI TABLE OF CASES. Inchbald v. Cockerill (1858), 4 Jur. N.S. 093 .... U)G Ireland v. Livingston (1872), L.R. 5 H.L., p. 41G . . . . 94 Irvine v. Watson (1880), 5 Q.B.D. 4H; 49 L.J. Q.B. 5:51 ; 42 L.T. 810 136 Jackson . Cocker (1841), 4 Beav. 59 88, 219 Jausen v. Green (17G7), 4 Burr. 2013 7, 113 Jessopp v. Lntwyche (1854), 10 Ex. 614 ; 24 L.J. Ex. G5 . 10G, 195 Johnson v. Lansley (1852), 12 C.B. 468 193 r. Stear (1863), 15 C.B. N.S. 330; 33 L.J. C.P. 130; 9 L.T. 538; 12 W.B. 347 240 Jones v. Powell (1843), G Beav. 488 114 Josephs v. Pebrer (1825), 3 B. & C. 639. . .. . Ill, 113, 172 Koemena v. Central Bank of London (1888), 4 T.L.R. G57 . 225, 244 K-llock v. Enthoven (1873), L.R. 9 Q.B. 241 ; 43 L.J. Q.B. 90 ; 30 L.T. 68 ; 22 W.R. 322 ....... 153,155 Kemble r. Atkins (1816), Holt, N.P.R. 427 . . . . 5, 133 Kempson v. Saunders (1826), 4 Bing. 5 . . . . .88 Kimber v. Barber (1872), L.R. 8 Ch. 56 ; 27 L.T. 526 ; 21 W.R. 65 . 100 Knatchbull v. Hallett (1880), 13 Ch. D. 696; 49 L.J. Ch. 415; 42 L.T. 421 49, 129, 131 Knight v. Barber (1846), 16 M. & W. 66; 16 L.J. Ex. 18 . . 85 v. Cambers (1855). 15 C.B. 562 ; 24 L.J. C.P. 121 . . . 195 v. Fitch (1855), 15 C.B. 566 ; 24 L.J. C.P. 122 ... 196 - r. Lee [1893], 1 Q.B. 41 ; 62 L.J. Q.B. 28 ; 67 L.T. G88 ; 41 W.R. 125 193 Kortright v. Buffalo Commercial Bank (1838), 20 Wend. New York Rep. 91 ; 22 Wend. New York Rep. 348 228 Lacey v. Hill : Crowley's Claim (1874), L.R. 18 Eq. 182 ; 43 L.J. Ch. 551 ; 30 L.T. 484; 22 W.R. 586. . . 46, 48, 105, 126, 287 , Scrirageour's Claim (1873), L.R. 8 Ch. 921 ; 42 L.J. Ch. 657; 29 L.T. 281 ; 21 W.R. 857 48,126,287 Lamert v. Heath (1846), 15 M. & W. 486 ; 15 L.J. Ex. 297 . 95, 107 Land Credit Company of Ireland, In re (1873), L.R. 8 Ch. 831 ; 42 L.J. Ch. 435; 28 L.T. 653; 21 W.R. 612 242 Langdale's Settlement Trusts, In re (1870), 10 Eq. 39 ... 78 Lang v. Smyth (1831), 7 Bing. 284 S(t Langton v. Waite (1868), L.R. G Eq. 165 ; 37 L.J. Ch. 345 ; 18 L.T. 80 ; 16 W.R. 508 66, 238, 240, 262, 265 Lawfordfl. Harris (1896), 12 T.L.R. 275 96 Law Guarantee and Trust Society v. Bank of England (1890), 24 Q.B.D. 406 ; 62 L.T. 496 ; 38 W.R. 493 74 Learoyd v. Bracken [1894], 1 Q.B. 114; 63 L.J. Q.B. 96; 69 L.T. 668; 42 W.R. 196 114,121 Leveson Gower v. May (1891), 7 T.L.R. 696 104 Licensed Victuallers' Mutual Trading Association, In re (1889), 42 Ch. D. 1 ; 58 L.J. Ch. 467 ; 60 L.T. 684 ; 37 W.R. 674 . 118, 119 Lilley v. Rankin (1886), 56 L.J. Q.B. 248 ; 55 L.T. 814 122, 168, 197, 287 London and Canadian Loan and Agency Co. [1893], A.C. 406; G3 L.J. P.C. 14 . . . 244 London and County Banking Co. v. London and River Plate Bank (1887), 20 Q.B.D. 232 79 (1888), 21 Q.B.D. 535; 57 L.J. Q.B. 601 ; 37 W.R. 89 . 80, 81 London, Hamburg and Continental Exchange Bank, In re (1870), L.R. 5 Ch. 444 1 12 TABLE OF CASES. xvii' PAG K London Joint Stock Bank r. Simmons [1892], A.C. 201; 61 L.J. Ch. 723; 66 L.T. 625: 41 W.R. 108 . . . . 79,212,244 Loring r. Davis (1886), 32 Ch. D. 625 ; 55 L.J. Ch. 725 ; 54 L.T. 899; 31 W.R. 701 94,103,110,111,153,200- Lowenfeld r. Howatt (1891), 19 Court Sess. Cas. (4th series) 128 186, 191 Lumsden's Case (1868), L.R. 4 Ch. 31 ; 1'j L.T. 437; 17 W.R. 65 . 155 Lyne v. Siesfield (1856), 1 H. & N. 276 169 McArtlmr v. Seafortb (1810), 2Tatmt. 257 .... 211,212' McDevitt v. Connolly (1885), 15 L.R. Ir. 500 . . 99, 100, 217 Macdonald & Co., In re [1893J, 1 Ch.89; 63 L.J. Q.B 193; 69 L.T. 567 . . 234 M'E wen r. Woods (1847), 11 Q.B. 13 96 McKay's Case [18U6], 2 Ch. 757 ; 65 L.J. Ch. 505 ; 75 L.T. 298 . 234 Mackenzie v. Dunlop (1856), 3 Macq. H.L. 22 . . . .89 McKinnell r. Robinson (1838), 3 M. & W. 435 ; 7 L.J. Ex. 149 . 171 McNeil v. Tenth Nat. Bk, (1871), 46 New York Rep. 325 . 226, 228 Magee r. Atkinson (1837), 2 M. & W. 440 ; H L.J. Ex. 115 . . 13 Magnus r. Queensland National Bank (1888), 37 Ch. D. 446; 57 L.J. Ch. 413: 58 L.T. 248; 36 W.R. 577 116. Manning r. Purcell (1855), 7 De G. M. & G. 55 ; 24 L.J. Ch. 522 . 194 Marnham, Et parte (1860), 2 De G. F. & J. 634; 30 L.J. Bk. 1; 3 L.T. 516; 9 W.R. 131 175,237,26) Marshall v. National Provincial Bank (1892), 61 L.J. Ch. 465 ; 66 L.T. 525 ; 40 W.R. 328 244 Marten v. Gibbon (1875), 33 L.T. 561 ; 24 W.R. 87 87, 109, 135, 177, 263 Martin r. Hewson (1855), 10 Ex. 737 ; 24 L.J. Ex. 174 . . 194 Massey r. Allen (1879), 13 Ch. D. 558 ; 49 L.J. Ch. 76 ; 41 L.T. 788 ; 28 W.R. 212 104,210 Mather, Ex parte (1797), 3 Ves. 373 171 Maxted v. Morris (1869), 21 L.T. 535 ... 124, 139 r. Paine, 1st action (1869), L.R. 4 Ex. 81 ; 38 L.J. Ex. 41 ; 20 L.T. 34 123, 139, 141 , 2nd action (1869), L.R. 4 Ex. 203 ; 38 L.J. Ex. 129 89, 92, 94, 97 , on appeal (1871), L.R. 6 Ex. 132; 40 L.J. Ex. 57; 24 L.T. 149 ; 19 W.R. 527 92, 104, 139, 141, 154 Merry v. Nickalls (1872), L.R. 7 Ch. 733 ; 26 L.T. 496; 20 W.R. 531 92,98,137,147 Metropolitan Coal Consumers' Co. v. Scrimgeour [1895], 2 Q.B. 604 ; 65 L.J. Q.B. 22 ; 73 L.T. 137 ; 44 W.R. 35 .... 117 Me wburn v. Eaton (1869), 20 L.T. 449 .... 151,222 Meyer v. Dresser (1864), 16 C.B. N.S. 646; 33 L.J. C.P. 289; 10 L.T. 612 ; 1'2 W.K. 983 89 Midland Railway Co. v. Taylor (1862), 8 H.L.C. 751 . . . 228 Mitchell v. City of Glasgow" Bank (1879), 4 App. Cas. 624 ; 27 W.R. 875 198,232- v. Cockburne (1794), 2 H Bl. 380 171 v. Newhall (1846), 15 M. & W. 308 ; 15 L.J. Ex. 292 . 95, 107 Mocatta v. Bell (ISoS), 24 Beav. 585 ; 27 L.J. Ch. 237 . . 97, 241 Monarch Insurance Co, lit re (1873), L.R. 8 Ch. 507; 42 L.J. Ch. 864; 28 L.T. 611; 21 W.R. 536 118 Moore v. Metropolitan National Bank (1873), 55 New York Rep. 41 226- Moore v. North Western Bank [1891], 2 Ch. 599; 60 L.J. Ch. 627; 60 L.T. 456; 40 W.R. 93 225,244: Morgan r. Pebrer (1837), 6 L.J. C.P. 75 ; 4 Scott, 230 ; 3 Bing. N.C. 457 . 16& b XVlll TABLE OF CASES. I'AGE Morrice v. Aylmer (1875), L.R. 7 H.L. 717; 45 L.J. Cti. 614; 34 L.T. 218 ; 24 W.R. 587 77 r. Hunter (1866), 14 L.T. 897 95 Morris v. Caiman (1862), 4 De G. F. & J. 581 ; 31 L.J. Cli. 425; (5 L.T. 521 ; 10 W.E. 589 49, 151, 219 Mortimer v. M'Callan (1840), 6 M. & W. 58 ; 9 L.J. Ex. 73 ; a/. 7 M. & W. 20 ; 10 L.J. Ex. 136 ; in error, 9 M. and W. 636 ; ll'L.J. Ex.429 87,133,136,137,169 Mudford's Claim (1880), 14 Oh. D. 634; 49 L.J. Oh. 452; 42 L.T. 825; 28 W.E. 670 213 Mulville v. Munster (1891), 27 L.R. Ir. 379 244 Murray v. Hewitt (1886), 2 T.L.R. 872 .... 122, 216 Musgrave and Hart's Case (1867), L.R. 5 Eq. 193; 37 L.J. Oh. 161 ; 17 L.T. 313; 16 W.R. 247 .... 93,147,152,218 Nanney v. Morgan (1887), 37 Oh. D. 346; 57 L.J. Oh. 311 ; 58 L.T. 238; 36 W.R. 677 '150,221,225,244 Neilson v. James (1882), 9 Q.B.D. 546; 51 L.J. Q.B. 369; 46 L.T. 791 89, 103, 149, 198 Nevill's Case (1870), L.R. 6 Ch. 43 153 Newry, &c., Railway Co. v. Moss (1851), 14 Beav. 64; 20 L.J. Ch. 633 242 Newton v. Cribbes (1884), 11 Court Sess. Cas. (4th series) 554 . 123 Nicholson v. Gooch (1856), 5 E. & B. 999 ; 25 L.J. Q.B. 137 . . 169 Nickalls v. Eaton (1871), 23 L.T. 689 ; 19 W.R. 172 . .139, 142 v. Furneaux (1869), W.N.C. 118 154 v. Merry (1875), L.R. 7 H.L. 530; 45 L.J. Ch. 575; 32 L.T. 623 ; 23 W.R. 663 91, 92, 139, 141, 275 Oakley v. Rigby (1836), 5 L.J. C.P. 256; 3 Scott 194 ; 2 Bing N.C. 732 169 Odessa Tramways Co. v. Mendel (1877), 8 Ch. D. 235 ; 47 L.J. Ch. 505 ; 38 L.T. 731 ; 26 W.R. 887 218 Oldham v. Ramsden (1875), 44 L.J. C.P. 309 ; 32 L.T. 825 . . 195 Olivierson v. Coles (1816), 1 Stark. 496 .... 87, 169 Ormerod'a Case [1894], 2 Ch. 474; 63 L.J. Ch. 578; 70 L.T. 795; 42 W.R. 701 119 O'Sullivan v. Thomas [1895], 1 Q.B. 698 ; 64 L.J. Q.B. 398; 72 L.T. 285 ; 43 W.R. 269 194 Ottley v. Browne (1810), 1 Ball & Beat. 366 171 Ottos Kopye Diamond Mines, In re [1893], 1 Ch. 618 ; 62 L.J. Ch. 166; 68 L.T. 138; 41 W.R. 258 .... 216,232,234 Oulds v. Harrison (1854), 10 Ex. 572; 24 L.J. Ex. 66 . . 196, 197 Owen v. Routh (1854), 14 C.B. 327 ; 23 L.J. C.P. 105 . . .211 Paine v. Hutchinson (1868), L.R. 3 Ch. 388; 37 L.J. Ch. 485; 18 L.T. 380 ; 16 W.R. 553 150. 218 Panmure, Ex parte (1883), 24 Ch. D. 367 ; 53 L.J. Ch. 57 ; 50 L.T. 38 ; 32 W.R. 236 98, 107, 215, 216 Parbury's Case [1896], 1 Ch. 100; 65 L.J. Ch. 104; 73 L.T. 506; 44 W.R. 107 234 Parson's Case (1869), L.R. 8 Eq. 656 156 Pearson r. Scott (1878), 9 Ch. D. 198 ; 47 L.J. Ch. 705; 38 L.T. 747 ; 26 W.R. 796 126 Peek v. Gurney (1873), L.R. 6 H.L. 377; 43 L.J. Ch. 19; 22 W.R. 29 202, 203, 205 TABLE OF CASES. XIX PAGE Penney, Ex parte (1872), L.K. 8 Ch. 446 ; 42 L.J. Ch. 183 ; 28 L.T. 150 ; 21 W.R. 186 232 Peppercorne v. Clench (1872), 26 L.T. 656 .... 109,141 Perry v. Barnet (1885), 15 Q.B.D. 388 ; 54 L.J. Q.B 466 ; 53 L.T. 585 89,198 Petre v. Sutherland (1887), 3 T.L R. 422 125 Petrie u. Hannay (1789), 3 T.R. 418 171 Phene'0. Gillan (1845), 5 Hare, 1 Phillips, Ex parte (1860), 2 De G. F. & J. 634 ; 30 L.J. Bk. 1 ; 3 L/I 516; 9WJL131 v. Jones (1888), 4 T.L.R. 401 Pidgeon v. Burslem (1840), 3 Ex. 465 ; 18 L.J. Ex. 193 243 175 125 106 Plumby, In re (1880), 13 Ch. D. 667; 42 L.T. 387; 28 W.R. 755 47, 288, 292 Pollock v. Stables (1848), 12 Q.B. 765 ; 17 L.J. Q.B. 352 . 88, 107 Pooler. Middleton (1861), 29 Bear. 646 .... 218,232 Pott v. Flather (1847), 5 Rail. Gas. 85 ; 16 L.J. Q.B. 366 . .214 Powell v. London and Provincial Bank [1893J, 2 Ch. 555 ; 62 L.J. Ch. 795 ; 69 L.T. 421 ; 41 W.R. 545 ... 224, 243, 244 Pryce, In re (1877), 4 Ch. D. 685 ; 36 L.T. 117 ; 25 W.R. 432 . 242 Pyke, Ex parte (1878), 8 Ch. D. 754 ; 47 L.J. Bk. 100 ; 38 L.T. 923 ; 26 W.R. 806 196 Queensland Investment Co. v. O'Connell and Palmer (1896), 12 T.L.R. 502 141 Ramloll Thackoorseydass v. Soojumnull Dhondmull (1848), 6 Moo. P.C.C. 300 168 Raphael v. Burt (1884), 1 C. & E. 325 162 Read v. Anderson (1884), 13 Q.B.D. 779 ; 53 L.J. Q.B. 532 ; 51 L.T. 55; 32 W.R. 950 96,173,184,192 Reg. v. Aspinall (1876), 2 Q.B.D. 48; 46 L.J. M.C. 145; 36 L.T. 297; 25 W.R. 283 20.-> v. Inns of Court Hotel Co. (1863), 32 L.J. Q.B. 369 ; 8 L.T. 551 ; 11 W.R. 806 233 v. General Cemetery Co. (1856), 6 E. & B. 415 ... 221 Rex v. De Berenger (1814), 3 M. & S. 67 . . . 205 Remfrey v. Butler (1858), E. B. & E. 887 ; 6 W.R. 682 . . . 149 Rennie r. Morris (1871). L.R. 13 Eq. 203; 41 L.J. Ch. 321 ; 25 L.T. 862 139 Richardson's Case (1875), L.R. 19 Eq. 588 ; 44 L.J. Ch. 252 ; 32 L.T. 18 ; 23 W.R. 467 156 Roberts v. Crowe (1872), L.R. 7 C.P. 629 ; 41 L.J. C.P. 198 ; 27 L.T. 238 153 Robertson v. Heffer (1893), 9 T.L.R. 622 .... 35, 262 Robins v. Edwards (1867), 15 W.R. 1065 109 Robinson v. Mollet (1875), L.R. 7 H.L. 802; 44 L.J. C.P. 362; 33 L.T. 544 35, 88-90, 99, 100 v. Montgomeryshire Brewery Co. [1896], 2 Ch. 841 ; 65 L.J. Ch. 915 97 Robson v. Fallowes (1 837), 6 L.J. C.P. 105 ; 4 Scott, 43 ; 3 Bing. N.C. 392 169 Rogers, Ex parte (1880), 15 Ch. D. 207 ; 43 L.T. 163 ; 29 W.R. 29 103, 195 Roots v. Williamson (1888), 38 Ch. D. 485 ; 57 L.J. Ch. 995 ; 58 L.T. 802; 36 W.R. 758 150,225,244 Rosewarne v. Billing (1863), 15 C.B. X.S. 316 ; 33 L.J. C.P. 55 192, 195 XX TABLE OF CASES. PAGE Rothschild v. Brookman (1829), 2 Dow. & 01. 188 ; 3 Sim. 153 ; 5 Bli. N.S. 165 35, 100, 101 Budge v. Bowman (1868), L.H. 3 Q B. 689 ; 37 L. J. Q.B. 193 148, 152 Rumball r. Metropolitan Bank (1877), 2 Q.B.D. 194; 46 L.J'. Q.B. 346; 36L.T. 240 ; 25 W.R. 366 81 Sachs . Bpielmann (1889), 5 T.L.E. 487 .... 114,125 Saflery, Ex parte (1876), 4 Cb. D. 555 47 Salamon v. Warner (1891), 64 L.T. 598 ; 7 T.L.R. 431 ; aff. 65 L.T. 132 ; 7 T.L.R. 484 203-205 Samuel r. Rowe (1892), 8 T.L.R. 488 .... 123,214,216 Sanders v. Kentish (175*9), 8 T.E. 162 . . . . . . 169, 212 -Sargent, Ex parte (1873), L.R. 17 Eq. 273; 43 L.J. Ch. 425; 22 W.R. 815 220. 221, 241 Scott v. Brown [1892], 2 Q.B. 724 ; 61 L.J. Q.B. 738.; 67 L T. 782: 41 W.R. 116 205, 206 r. Cousins (1869), L.R. 4 C.P. 177 ; 38 L.J. C.P. 156 ; 20 L.T. 32 ; 17 W.R. 324 7 v. North (1867), L.R. 2 C.P. 270; 15 L.T. 208 . .7 Seymour v. Bridge (18S5), 14 Q.B.L). 460 ; 54 L.J. Q.B 347 89, 109, 198 Shaw v. Bay ley (1893), Times, January 24 . . . .188 v. Bentley (1893), 68 L.T. 812 119 v. Caledonian Railway C>. (1890), 17 Court Sess. Cas. (4th series) 466 184 Shaw v. Fisher (1855), 5 De G.M. & G. 596 . . . 144, 217, 218 v. Holland (1846), 15 M. & W. 136; 15 L.J. Ex. 87 . . 213 v. Port Phillip Gold Mining Co. (1884), 13 Q.B.D. 103; 53 L.J. Q.B. 369 ; 50 L.T. 685 ; 32 W.R. 771 .... 234 Sheffield v. London Joint Stock Bank (1888), 13 App. Cas. 333; 57 L.J. Ch. 986; 58 L.T. 735 ; 37 W.R. 33 . . 79, 225, 244 Shepherd v. Gilleepie (1868), L.R. 3 Ch. 764; 38 L.J. Ch. 67; 19 L.T. 196; 16 W.R. 1133 153,218 v. Johnson (1802), 2 East, 211 211 v. Murphy (1868), 16 W.R. 948 . . . 92, 143, 147, 218 Shiells i'. Blackburne (1789), 1 H. Bl. i:8 132 Shropshire Union Railways and Canal Co. v. Reg. (1875), L.R. 7 H.L. 496 ; 45 L.J. Q.B. *31 ; 32 L.T. 283 ; 23 W.R. 709 . 233, 244 Simm v. Anglo-American Telegraph Co. (1879), 5 Q.B.D. 188; 49 L.J. Q.B. 392 ; 42 L.T. 37 ; 28 W.R. 290 .... 229, 234 Skelton v. Wood (1895), 71 L.T. 616 114 Skinner v. City of London Marine Insurance Corporation (1885), 14 Q.B.D 882 ; 54 L.J. Q.B. 437; 53 L.T. 191 ; 33 W.R. 638 . 216 Sloman v. Bank of England (1845), 14 Sim. 475 ; 14 L.J. Ch. 226 222, 228 Smith v. Blakey (1867), L.R. 2 Q.B. 326; 36 L.J. Q.B. 156 ; 15 W.R. 492 210 r. Lindo (1859), 5 C.B. N.S. 587; 27 L.J. C.P. 335 . 88, 106 v. Reynolds (1892), 66 L.T. 808 . . . . 107, 162, 270 Societe Generale de Paris v. Walker (1885), 11 App. Cas. 20; 55 L.J. Q.B. 169; 54 L.T. 389; 34 W.R. 662. . 150, 224, 244, 245 Speight r. Gaunt (1883), 9 App. Cas. 1 ; 53 L.J. Ch. 419 ; 50 L.T. 330 ; 32 W.R. 435 115 Steers v. Lasliley (1794), 6 T.R. 61 171 Stephens v. De Medina (1843), 4 Q.B. 422 ; 12 L.J. Q.B. 120 112, 220 Stewart v. Cauty (1841), 8 M. & W. 160 : 10 L.J. Ex. 348 . 213, 214 P. Sanderson (1870), L.R. 10 Eq. 26; :) L.J. Ch. 337; 22 L.T. 10; 18 W.R. 278 78,79 TABLE OF CASES. xxi PAGE Stewart v. Lupton (1874), 22 W.R. 855 . 21, 150, 165, 270, 276, 281 Stock and Share Auction and Advance Co. v. Galmoye (1887), 3 T.L.K. 808 105 Stogdon v. Lee [1891], 1 Q.B. 661 ; 60 L.J. Q.B 669 ; 64 L.T. 494 ; 39 W.R. 467 140 Strachan v. Universal Stock Exchange [1895], 2 Q.B. 329 ; 64 L.J. Q.B. 723 ; 73 L.T. 6 ; 43 W.B. 611 . . . .191, 194, 195, 197 [1895], 2 Q.B. 697 ; 65 L.J. Q.B. 178 ; 73 L.T. 492 ; 44 W.K. 90 194, 195 Stray '. Russell (1859), 1 El. & El. 888 ; 29 L.J. Q.B. 115 ; 1 L.T. 162, 443 ; 8 W.R. 240 93, 109, 149 Sutton v. Grey [1894], 1 Q.B. 285; 63 L.J. Q.B. 633; 69 L.T. 673; 42 W.R. 195 43, 259 v. Tatham (1839), 10 A. & E. 27 ; 8 L.J. Q.B. 210 . . 88, 107 Swan v. Xorth British Australasian Co. (1862), 7 H. & N. 603 ; aff. 2 H. & C. 175 ; 32 L.J. Ex. 273 ; 11 W.R. 862 . . . . 224 Sweeting v. Pearce (1859), 7 C.B. N.S. 449 ; 29 L.J. C.P. 265 . 88 Tallentire v. Ayre (1884), 1 T.L.R. 143 9* Tatam v. Reeve [1893], 1 Q.B. 44 ; 62 L.J. Q.B. 30 ; 67 L.T. 683 ; 41 W.R. 174 196 Tayler v. Great Indian Peninsular Railway Co. (1859), 4 De G. & J. 559 ; 28 L.J. Ch 285 224 Taylor v. Plumer (1815), 3 M. & S. 562 . . . . 49, 129 v. Stray (1857), 2 C.B. N.S. 175, 197 ; 26 L.J. C.P. 185, 287 88, 93, 109 Tempest v. Kilner (1846), 3 C.B. 249 . . . . 85, 95, 107, 214 Tenant v. Elliot (1797), 1 Bos. & P. 3 169 Tennent v. City of Glasgow Bank (1879), 4 App. Cas. 615 ; 27 W.R. 649 ." 200 Thacker v. Hardy (1878), 4 Q.B.D. 685; 48 L.J. Q.B. 289 ; 39 L.T. 595 ; 27 W.R. 158 110, 123, 179 Toll v. Lee (1849), 4 Ex. 230 ; 18 L.J. Ex. 364 ... 223, 229 Tomkins r. Saffery (1877), 3 App. Cas. 213 ; 47 L.J. Bk. 11 ; 37 L.T. 758; 26 W.R. 62 46,47,288,292 Thompson r. Meade (1891), 7 T.L.R. 698 103 Torrington r. Lowe (1868), L.R. 4 C.P. 26; 38 L.J. C.P. 121; 19 L.T. 316; 17 W.R. 78 153 Tramways Union Co. v. Societe Ge'ne'rale de Paris (1884), 14 Q.B.D. 424 224 Union Bank of Manchester, Ex parte (1871), L.R. 12 Eq. 354 ; 40 L.J. Bk. 57 ; 24 L.T. 951 ; 19 W.R. 872 242 United Service Co., In re (1871), L.R. 6 Ch. 212 ; 40 L.J. Ch. 286 ; 24 L.T. 115 ; 19 W.R. 457 132 Universal Stock Exchange v. Stevens (1892), 66 L.T. 612; 40 W.R. 494 187 Varney v. Hickman (1847), 5 C.B. 271 ; 37 L.J. C.P. 102 . . 194 Vaugban v. Wood (1833), 1 Myl. & Cr. 403 238 Venables r. Baring [1892], 3 Ch. 527 ; 61 L.J. Ch. 609 ; 67 L.T. 110; 40 W.R. 699 79, 81 Waddell v. Blockey (1879), 4 Q.B.D. 678 ; 48 L.J. Q.B. 517 ; 41 L.T. 458 ; 27 W.R. 938 213, 215 Walker r. Bartlett (1856), 17 C.B. 44G 152 , on appeal (1856), 18 C.B. 845 ; 25 L.J. C.P. 263 . 85, 152, 223 b 3 XXll TABLE OF CASES. i-Ai.i; Walter v. King (1897), Times, March 10 . . . 36,102,215 Ward, Ex parte (1882), 22 Ch. D. 132 ; 52 L.J. Ch. 73 ; 48 L.T. 332 ; 31 W.B. 112 47, 293 Webb v. Brooke (1810), 3 Taunt. G 171 Wells r. Porter (1836), 3 M. & W. 722 ; 5 L.J. C.P. 256 ; 3 Scott, 141 ; 2 Bing. N.C. 722 161) West of England Paper Mills o. Gilbert (1891), 61 L.J. Ch. 92 . 118 Weston's Case (1868), L.K. 4 Ch. 20 ; 38 L.J. Ch. 49 ; 19 L.T. 337 ; 17 W.K. 62 232 (1870), L.K. 5 Ch. 614; 39 L.J. Ch. 753 . . . .155 Westropp v. Solomon (1849), 8 C.B. 345 ; 19 L.J. C.P. 1 88, 98, 106, 111, 161, 270 Wildy v. Stephenson (1882), 1 C. & E. 3 89 Wilkinson v. Lloyd (1845), 7 Q.B. 27 ; 14 L.J. Q.B. 165 . . 148 Williams v. Peel River, &c., Co. (1887), 55 L.T. 689 . . 212 v. Trye (1854), 18 Beav. 366; 23 L.J. Ch. 860 '. . . 169 Wilson v. Keating (1859), 7 W.R. 484 217 v. Short (1847) 6 Hare 366 102 Wiltshire v. Sims (1808), 1 Camp. 258 99 Wright v. Commissioners of Inland Revenue (1855), 25 L.J. Ex. 41) 229 - v. Snowe (1848), 2 De G. & S. 321 155 Wynne v. Price (1849), 8 De G. & S. 310 . . 147, 149, 151, 218 Yeoland's Consols, In re (1888), 58 L.T. 922 155 Young v. Cole (1837), 3 Bing. N.C. 724 106 TABLE OF DEFENDANTS' NAMES IN ALPHABETICAL ORDER. Defendants. Plaintiffs. Defendants. Plaintiffs. Albrecht Duncuft v. Boorman Brown r. Allen Massev /. Bouwens Att.-Gen. v. Anderson Bead r. Bowman Rudge v. Anglo - American Simm r. Boyle Hone v. Telegraph Co. Aspinall Reg. v. Bracken Brass Learoyd v. Campbell v. Atkins Keinble >:. Bridge Seymour v. Atkinson Magee r. Briggs Bradford Banking Ayling Hay r. Co. v. Aylmer Morrice v. Bristowe Coles v. Ayre Tallentire >: Grissell v. Brooke Webb v. Bagshaw Bedford /. Brookmau Rothschild v. Balkis Consoli- Bisbop v. Brown Scott r. dated Co. Browne Ottley v. Bank of England Coles i: Bryce Cannan v. Law Guarantee and Buck Fenwick v. Trust Society v. Buffalo Commer- Kortright v. rtiol "Rant Barber oiomtin i} Kimber v. C lal JDcilllv Burslem Pidgeon v. Knight r. Burt Raphael v. Barclay De Ribeyre v. Butler Remfry v. Baring Venables v. Butterworth Bayliffe v. Barnet Perry r. Bartlett Walker r. Cady Colonial Bank v. Bayley Shaw r. Caledonian Rail- Shaw v. Beard Atherfold r. way Co. Beattie Byers v. Cambers Knight v. Beeston Beeston v. Cannan Morris v. Bell Bowlby v. Carbolic Smoke Carlill r. Mocatta r. Ball Co. Benjamin De Mattos v. Carroll Gainsford r. Bentley Shaw r. Cauty Stewart v. Bilborough Beckitt v. Central Bank of Kaemena v. Billing Rosewarne r. London Bise Henderson /. Chamberlain Hunt v. Black Downes r. City of Glasgow Mitchell v. Brown r. Bank Blackbunie Shiells v. Tennent v. Blakey Smith r. City of London Skinner r. Blane Grizewood r. Marine Insu- Blockey Waddell /. ranee Corp. XXIV TABLE OF DEFENDANTS' NAMES. Defendants. Plaintiffs. Clark France v. Defendants. Gillot Plaintiffs. Donaldson v. Clench Peppercorne v. Gooch Nicholson v. Cockburne Mitchell v. Graves Allen v. Cocker Jackson v. Great Indian Pen- Tayler v. Cockerill Inchbald v. insular Bwy. Co. Cole Young v. Green Jansen v. Coles Elsworth v. Grey Sutton v. Olivierson v. Gunn Hunt v. Commissioners of Wright v. Gurney Peek v. Inland Bevenue Conolly McDevitt v. Cousins Scott t>. Hallett Hamilton Knatchbull v. Earned v. Cribbes Newton v. Hannay Petrie v. Croskey Barry v. Crowe Boberts v. Hardy Harrison Th acker v. Harrison v. Quids v. Dakin Ashton v. Hatch Belton v. Davis Loring v. Haycock Davis v. De Berenger Bex v. De Medina Stephens v. Dilly Clayton v. Dixon Adderley v. Dresser Meyer v. Heath Heffer Hewitt Hick man Higgs Lamert v. Bobertson v, Murray v. Varney v. Diggle v. Dunlop Mackenzie v. Hill Duncan v. Fox v. Earle Cadett v. Hull v. Eaton Mewburn v. Lacey v. Nickalls v Hills Dodds v. Eden Ellis v. Hobson Castellan Edwards Harker v. Bobins v. Hodgson Holdsworth Booth v. Bradley v. Elliot Good v. Tenant v. Holgate Holland Halliday v. Shaw v. Elwes Forrest v. Homersham Black v. English Dunne v. Enthoven Kellock v. Howard Howatt Davis v. Lovvenfeld v. Eshelby Cooke v. Evan's Trustees Bank of Ireland v. Hunter Hutchinson Morrice v. Paine v. Fisher Shaw v. Fitch Knight v. Ingram Inns of Court Hotel Buckeridge v. Beg. v. Fitzmaurice Edgington v. Cx>. Flather Pott v. James Neilson v. Furneaux Nickalls v. Johnson Shepherd v. Jones Fitch v. Galmoye Stock and Share Goldschmidt v. Auction and Phillips v. Advance Co. v. Gaunt Speight v. Keating Wilson v. General Cemetery Beg. v. Kelly Hodgkinson v. Co. Kempton Fish v. Gibbon Marten v. Kentish Sanders v. Gilbert West of England Kenward Cheale v. Paper Mills v. Kilner Tempest v. Gillan Phene' v. King Walter v. Gillespie Shepherd v. Kittell Cohen v. TABLE OF DEFENDANTS' NAMES. XXV Defendants. Plaintiffs. Defendants. Plaintiffs. Lamond Franklyn v. Morris Rennie v. Langston Humble v. Moss Newry, etc., Rail Lansley Johnson v. way Co. v. Lashley Steers v. Munster Mulville v. Lee Knight v. Murphy Shepherd v. Stogdon v. Morton Fleet v. ToUv. Levy Druce v. National Provin- Marshall v. Lewis Bryan v. cial Bank Lindo Smith v. Neil Cooper v. Livingston Ireland v. Newhall Mitchell v. Lloyd Wilkinson v. Nicholls Burkinshaw v. London Joint Bentinck v. Nickalls Dent v. Stock Bank Merry v. Sheffield v. Norris Buliner v. London and Pro- Powell v. North British Aus- Swan v. vincial Bank tralian Co. Lowe Torrington v. North Eastern Copeland r. Lupton Stewart v. Railway Co. Lutwyche Jessop v. North Western Moore v. Bank McCallan Mortimer i: North Scott r. McClellan Case r. Nottingham Bank- Baker v. Mackreth Fox v. ing Co. Macleod Bank of Bengal v. McMorine Hibblewhite v. O'Connell and Queensland In- McMullen Giblin v. Palmer vestment Co. v. Magniac Crossley v. Ostigny Forget v. Maltby Hawkins r. Manchester, Shef- Hubbersty r. Paoey Coates v. field & Lincoln- Paine Cruse v. shire Railway Heritage v. Company Maxted v. Marshall Fletcher v. Pape Henkel v. Martin Fox v. Parker Blake v. Mason Blackburn r. Pearce Barclay v. May Leveson Gower v. Sweeting v. Maze Aubert v. Pebrer Morgan v. Meade Thompson v. Josephs v. Mendel Odessa Tramways Peek Derry v. Co. v. Peel River, etc., Williams v. Merry Xickalls v. Co. Meryweather Amory v. Metropolitan Bank Bumball v. Peppercorue Gillett v. Permanent Tern- Brocklesby v. Metropolitan Na- Moore v. perance Build- tional Bank ing Society Middleton Poole v. Plumer Taylor v. Mieville Gorgier v. Porter Wells v. Miller Crabb v. Port Philip Gold, Shaw v. Mitchell Humble v. etc., Mining Co. Mollett Robinson v. Powell Clarke r. Montgomeryshire v. Davenport v. Brewery Co. Jones v. Morgan Manney v. Price Hewitt v. Morley Child r. Wynne v. Morris Maxted v. Purcoll Manning v. XXVI TABLE OF DEFENDANTS' NAMES. Defendants. Queensland Na- Plaintiffs. Magnus v. Defendants. Stevens Plaintiffs. Universal Stock tional BaDk Exchange r. Ramsden Oldham v. Stokes Stone Armstrong v. Biederman v- Bankin Lilley v. Stratten Abbott v. Reeve Tatam v. Stray Taylor v. Keg. Shropshire Union Suckling Donald v. Railways and Sutherland Petre v. Canal Co. v. Symons Holmes v. Reynolds Smith v. Reynous Ribbons Ricardo Faikney Hartas v. Burra r. Tathain Tayler Sutton v. Midland Railway Co v Rigby Robarts Oakley r. Goodwin v. Tenth National Bank McNeil* Robinson Routh Rowe Rowlands McKinnell v. Owen v. Samuel v. Cope v. Thomas Thompson Tomkinson O'Sullivan v. Foulds v. Balkis Consoli- dated Co. v. Russell Rutter Stray r. Cuddee v. Town Council of Sheffield Haigh v. Saffery Sanders Sanderson Tomkins v. Kempson v. Stewart r. Townshend Trye Turner Clegg v . Williams v. Brown v. Savage Scott Bridger r. Pearson v. Union Bank of Smith v. Scrimgeour Seaforth Metropolitan Coal Consumers' Co. McArthur v. London Universal Stock Exchange Strachan v. Seymour Bagshaw r. Sevenoaks, etc., Bouch v. Vaughan >Shcrrin Hamilton v. Railway Co. Electrical Engi- Shaw Hogan r. neering Co. Shepherd Chapman v. Bowling v. Waite Langton v. Sheridan Bermingham v. Wake Carter v. Short Wilson v. Walker Societe Ge'ue'rale Siesfield Lyne v. de Paris v. Siggers Heseltinc r. Walsh Hampden v. Simmons London Joint Stock Warner Salamon v. Bank v. Warren Dutch v. Sims Wiltshire v. Watson Irvine r. Smyth Lang r. Whinney Colonial Bank v. Snowe Wiight v. Wilkins Bayley v. Societe Ge'nerale Bongiovanni v. Williams Archer r. Socie'te' Generate Tramways Union Williamson Roots v. de Paris Co. v. Wood Evans v. Solomon Westropp v. Skelton r. Soojummull Ramloll Thack- Vaughan v Dhondmull oorseydass v. Woods M'Ewen v. Spiel man n Sachs v. Wright Collen v. Stables Pollock r. Stear Johnson v. Yelverton Bubb r. Stephenson Wildy r. Young Hamilton v. TABLE OF ABBREVIATIONS. A. & E. Adolphus and Ellis' Reports. B. & Ad. Bamewall and Adolphus' Reports. B. & Aid. Barnewall and Alderson's Reports. B. & C. Barnewall and Cresswell's Reports. Ball. & Beat. Ball and Beatty's Reports, Chancery, Ireland. Beav. Beavan's Reports. Bing. Bingham's Reports. Bing. N.C. Bingham New Cases. Bli. N.S. Bligh's Reports, New Series. Bos. & P. Bosanquet and Puller's Reports. Burr. Burrow's Reports. Camp. Campbell's Reports. . & E. Cababe and Ellis' Reports. C. & K. Carrington and Kirwan's Reports. CL & P. Carrington and Payne's Reports. C. & F. Clark and Finnelly's Reports. C. B. Common Bench Reports. C.B. N.S. Common Bench Reports, New Series. ourt Sess. Cas. Court of Sessions Cases. (Scotch.) De G. F. & J. De Gex, Fisher, and Jones' Reports. De G. & J. De Gex and Jones' Reports. De G. M. & G. De Gex, Macnaghten, and Gordon's Reports. De G. & S. De Gex and Smale's Reports. Dow. & Cl. Dowling and Clark's House of Lords Cases. East. East's Reports, Kings Bench. E. & B. Ellis and Blackburn's Reports. E. B. & E. Ellis, Blackburn, and Ellis' Reports. El. & El. Ellis and Ellis' Reports. Esp. Espiuasse's Reports. Ex. Exchequer Reports. H. Bl. Henry Blackstone's Reports. Hem. & M. Hemming and Miller's Reports. Holt, N.P.R. Holt's Nisi Prius Reports. H.L.C. House of Lords Cases. H. & N. Hurlstone and Norman's Reports. Ir. Rep. C.L. Irish Reports, Common Law. J. & H. Johnson and Hemming's Reports. Jur. N.S. The Jurist, New Series. L.C. Eq. White and Tudor's Leading Cases in Equity. L.J. Bk. Law Journal Keports, Bankruptcy. L.J. Ch. Law Journal Reports, Chancery. XXV111 TABLE OF ABBREVIATIONS. L.J. C.P. L.J. Ex. L.J. M.C. L.J. P.C. L.J. Q.B. L.K. Ch. L.K. C.P. L.R. Eq. L.E. Ex. L.K. H.L. L.R. Ir. L.E. P.C. ' App. Cas. [1893], A.C. Ch. D. [1893], Ch. Q.B.D. [1893], Q.B. Ex. D. L.T. Macq. H.L. Man. & G. If. ft 8. M. & W. Mer. Moo. P.C.C. Myl. & Cr. Kail. Cas. R.R. Rose Ry. & M. Sim. Sim. & Stu. Scott Stark Taunt. T. R. T.L.R. W.N.C. W.R. Wend. New York Rep. Ves. Law Journal Reports, Common Pleas. Law Journal Reports, Exchequer. Law Journal Reports, Magistrates' Cases. Law Journal Reports, Privy Council. Law Journal Reports, Queen's Bench. Law Reports, Chancery Appeals. Law Report?, Common Pleas. Law Reports, Equity Cases. Law Reports, Exchequer. Law Reports, House of Lords. Law Reports, Ireland. Law Reports, Privy Council. Law Reports, Appeal Cases. Law Reports for 1893, Appeal Cases. Law Reports, Chancery Division. Law Reports for 1893, Chancery Division. Law Reports, Queen's Bench Division. Law Reports for 1893, Queen's Bench Division. Law Reports, Exchequer Division. Law Times Reports. Macqueen's Scotch Appeal Cases. Manning and Granger's Reports. Maule and Selwyn's Reports. Meeson and Welsby's Reports. Merivale's Reports. Moore's Privy Council Cases. Mylne and Craig's Reports. Railway Cases. Revised Reports. Rose Reports, Bankruptcy. Ryan and Moody's Reports. Simon's Reports. Simon and Stuart's Reports. Scott's Reports. Starkie's Reports. Taun ton's Reports. Term Reports. Times La* Reports. Weekly Notes' Cases. Weekly Reporter. Wendell's New York Reports. Vesey's Reports. THE LAW AND PRACTICE OF THE STOCK EXCHANGE. CHAPTER I. INTRODUCTORY. STOCKS, if not unknown in England up to the middle of the seventeenth century, were at any rate not so generally treated as articles of commerce as to make stock-broking a remunerative calling. But from a very early period of English history *' brokerie " in contracts between English and foreign merchants had bee a a recognized and profitable undertaking, and it was not till those who plied this trade extended their operations to pawnbroking, that their pro- ceedings engaged the attention of the Legislature. Of the merchants of England it has been said that, although originally they "were much favoured in our law, yet soon- their number and cunning, and their crafty dealings, had so much increased, that it fell out that we had more need to make laws against them." x So, too, it was with the brokers. As early as the time of Edward I. it was found necessary to place some limit upon the numbers of those who were desirous of exercising this lucrative calling. The first attempt in this direction was made in 1285. In that year, a statute of 13 Edward I. recited that "divers persons do 1 See Colonial Bank v. Whinney, 11 App. Cas., p. 442. B 2 LA W AND PRACTICE OF THE S10CK EXCHANGE. resort unto the city, some from parts beyond the sea, and others of this land, and do there seek shelter and refuge by reason of banishment out of their own country ; and of these some do become brokers, hostelers, and innkeepers, within the city, for denizens and strangers, as freely as though they were good and lawful men of the franchise of the city ; and some nothing do but run up and down through the streets, more by night than by day, and are well attired in clothing and array, and have their food of delicate meats and costly ; neither do they use any craft or merchandise, nor have they lands or tenements whereof to live, nor any friend to find them ; " 1 and that through such persons many evils had happened in the city, such as robberies and breaking of houses by night. The statute accordingly decreed that no one should act as a broker unless he had previously been admitted and sworn before the Mayor and Aldermen, and that any unauthorized person so acting after one month had elapsed from the dale of the proclamation, should be imprisoned and be for ever inadmissible to the franchise. These provisions, however, appear to have been insuffi- cient to check the malpractices of the brokers for any length of time. Finding, no doubt, that the civil wars of the Houses of York and Lancaster, and the unsettled times which followed them, were not conducive to making contracts and exchanging money between English and foreign merchants, they forsook these, the legitimate objects of " brokerie," for pawnbroking and various forms of usury. The example was contagious. Many freemen of the city, being men of manual occupation and "handicraftsmen," left "their handy and manual occupations," and "set up a trade of buying and selling, and taking to pawn of all kind of worn apparel, whether it be old or little the worse for wearing." On account of their increasing numbers and the consequent keenness of competition, such persons could not afford to inquire too closely whether the articles brought to them were the pawnor's property or not. The result was that Statuta Civitatis London: "Statutes of the Realm," vol. i. p. 103. INTRODUCTORY. 3 thieves were much encouraged by finding the disposal of stolen property an easy matter, and larceny became a common offence in London and Westminster. With the object of remedying these evils, a statute of the year 1G04 1 provided that owners of stolen property nr.ght recjver their goods upon demand, and subjected pawnbrokers to heavy penalties if they refused to produce the goods when called upon to do so. The statute, however, was aimed only at those who were ' ; friperers, and no brokers," and did not effect the business of those who acted in good faith. In the time of James I. the excitements of the Stock Exchange, and the allurements of the stock-brokers, had not yet begun to trouble the English people. A national debt, the creation of the Venetians, was as yet unknown in England. Loans, indeed, to satisfy the necessities of State, Tiad been raised by Henry VI II. and many others of the English Soveieigns ; but as they never thought of repaying money which they had borrowed, and as these who were forced to lend, probably had not any expectation of seeing "their property again, there was little opportunity for specula- tion. It was left to William III. to introduce the principle that it is the duty of a State to keep faith with its creditors, and thereby to open the door to those commercial movements which were ultimately to result in the creation of the Stock Exchange. Towards the end of the seventeenth century financiers were beginning to realize that there was money to be made out of the negotiation of Government loans, and by dealings in tallies, Exchequer bills, and the stock and funds of the East India and other large corporations. Many persons, assuming the title of broker, were not slow to avail them- selves of the opportunities thus afforded. It is to a time not much later than this, that Mr. Francis refers in his Chronicles and Characters of the Stock Exchange, when he , 2 " At this time the broker had a walk upon the Royal 1 1 Jac. L, stat. 21 : " Statutes cf the Realm," vol. iv. p. 1038. 2 Page 24. 4 LAW AND PRACTICE OF THE STOCK EXCHANGE. Exchange devoted to the funds of the East India and other great corporations ; and many of the terms now in. vogue among the initiated, arose from their dealings with the stock of the East India Company. Jobbing in the great chartered corporations was thoroughly understood. Reports and rumours were as plentiful then as now. ... If at the present day l a banker condescends to raise a railway bubble- 50 per cent., the broker of that period understood his craft sufficiently to cause a variation in the price of East India stock of 263 per cent." Such practices as these were bringing the brokers into- disrepute. Complaints were made that the Royal Exchange was being put to a use foreign to the intention of its founder.. It was said that trade was being diverted from its legitimate channels, and that the jobbers, as they were called in con- tempt, should be driven from the spot which their presence was polluting. This outcry led to further legislation. In 1696 the Legislature limited the amount chargeable for brokerage to a sum of two shillings and sixpence per hundred pounds, this limit being enforced by a penalty of 500, and a liability to be dealt with as a common extor- tioner. 2 A statute of the following year, 3 after reciting that "divers brokers and stock-jobbers, or pretended brokers," had " unlawfully combined and confederated themselves- together to raise or fall from time to time the value of such tallies, bank stock, and bank bills, as may be most convenient for their private interest and advantage," provided that no- one should act as a broker of tallies, tickets payable at the receipt of the Exchequer, Bank of England notes or stock, or capital or stock of the East India Company or other company incorporated by Act of Parliament or letters patent, except he were admitted, licensed, and approved by the Court of the Lord Mayor and Alderman of the city. Every broker on admission was required to take the oaths of allegiance- 1 About 18r>0. 2 8 & 9 Will. III. c. 20, s. GO: "Statutes of the Realm," vol. viL p. 235. 3 8 & 9 Will. III. c. 32 : " Statutes of the Realm," vol. vii. p. 285. INTAODUCTO&Jf. 5 and supremacy, and an oath properly to fulfil bis duties as broker. And, further, he was required to enter into u bond with the corporation for the due performance of his office. If the broker made a contract contrary to the corporation's regulations and in violation of his bond, the contract apparently was not ipso facto void, and he was aot prevented from taking legal proceedings to enforce it, but the remedy against him was an action for the penalty of the bond." l On admission the broker was to pay a fee not exceeding forty shillings; he was to carry with him, and produce at the making of every bargain, a silver medal engraved with his name and the King's arms ; the rate of brokerage was liinitel to ten shillings per cent.; 2 and the broker was not allowed to deil on his own account. 3 The 1 Kemble v. All urn (18 IG), Holt, N.P.R. 427. 2 10 Anne, c. 18, s. 134 : " Statutes of the Realm," vol. is. p. 621, limited the rate of brokerage on tallies, Exchequer bills, and tickets to two shillings and uinepence per hundred pounds. 3 G Anne, c. 08 (c. 10, IluffheaJ), contained a similar provision. But these provisions appear only to have applied to those cases in which the broker was attempting to net in the dual capacity of broker and principal in the same transaction. For in ex purte Vysttr (181G), 1 Mer. 155; 2 Rose, 249, it \vas held by Lord Eldon that a broker in the city of London could maintain an action on a contract, or sustain a proof for a debt, arising out of transactions entered into by him as a merchant, and entirely distinct from his employment as a broker, although such trans- actions were in contravention of the regulations under which he held his office of broker, and of the conditions of the bond which he had executed ; but that he could not have maintained the action, or sustained the proof, if the contract or debt had arisen out of a transaction in which he had acted as principal and broker at the same time, that being contrary to the principles of the common law. "I think," said his Lordship (1 Mer. p. 174), "it was clearly the intention, of all these provisions . . . founded upou a most obvious policy, to prevent the broker from trading on his own account. The object of them, however, is foreign to the present point, which depends entirely upon what is the consequence, in point of law, of a city broker so trading. ' And again, "If a broker of the city of London trades for himself, openly and in public, he does that which the policy of even* legislative enactment meant to prohibit. If he mixes in a transaction, in which he is ostensibly the broker, but really a buyer or seller, this is a gross fraud ; but this is a case not now before me. ... But as to the question with the city of London, they 6 LAW AND PRACTICE OF THE STOCK EXCHANGED penalty for acting as a sworn broker without being admitted was a fine of 500 and three mornings in the pillory. The number of brokers was limited to one hundred, and their names and .addresses were to be posted in the "Royal Exchange and the Guildhall. This Act had not the effect of checking jobbing transactions in the public and other funds which was fondly expected,, and when it expired, in 1707 it had become f-o far a dead letter that its termination passed unnoticed and there was- no attempt to renew its provisions. In 1698 the dealers in funds and shares, in consequence of the severity with which thtir proceedings had been animadverted upon, determined lo remove their business- quarters from the Royal Exchange. They selected Change Alley as a suitable meeting-place, and Jonathan's Coffee House became the forerunner of the S'ock Exchange. The corporation, while not hesitating to join in the general outcry against the proceedings of ihe jobbers, was not prepared to dispense with their attendance at the Royal Exchange. It was feared that business would leave the Exchange; and, with the object of compelling the brokers'" return, a clause was inserted in the bonds which they executed on thtir admission, binding them not to assemble in the Alley. 1 As in the case of other provisions passed for the better regulation of their business, the clause was persistently disregarded by the brokers, and Change Alley continued to be their general place of resort until the building of the present Stock Exchange. In spite of the many complaints which their conduct and dealings drew fiom all sections of the public, the brokers- remained a never-failing source of profit to the city, and have not said, * you shall not track-.' They have said only, If you trade we will dismiss you ; ' and this, I think, they have a right to do. There- fore he is prohibited sub modo only; but he has not done that which the law will consider as being incapable of being made the ground for supporting an action." 1 For the form of the bond, see Clarke v. Pmcell (1833), 4 B. & Ad. 8-46 ;. 2 L.J. K.B. 145. INTRODUCTORY. ( afforded to the Legislature a constant means of readjusting the financial scales. As soon as some source from which the city drew a portion of its revenues began to fail, a statute compelled the brokers to make good the deficiency by increasing their admission and annual fees. In 1707 an Act of the sixth year of Queen Anne 1 deprived the city of the profits which they had enjoyed since the first year of James I. from the garbling of spices,- and in substitution therefore imposed upon the brokers a yearly tax of forty shillings in addition to an admission fee of the same amount. In 1817, when, in consequence of the construction of some of the London docks, there was a falling off in the profits of the office of Ganger, 3 a statute of that year 4 increased the broker's admission fee and annual payment to 5 each by way of compensation, and raised to 100 the penalty of 25 imposed by the statute of the sixth year of Anne for acting without a licence. 3 During the eighteenth century the brokers were con- tinually growing in power. The first foreign loan appears 1 G Anne, c. G3 (c. 16, Rnffhead): "Statutes of the Realm,*' vol. viii. p. 810. In JbfweN v. Green (17G7), 4 Burr. 2103, it was held that a stock- broker came within the provi.-ions of this statute. See too Clarke v. Powell (1833), 4 B. & Ad. 846; 2 L.J. K.B. 145. 2 The garbler of spikes is an officer of great antiquity in the city of London, who is empowered to enter any ship, warehouse, etc., to view and search drugs, etc., and to garble and cleanse them. Johnson's Dictionary. 3 An excise officer appointed for the purpose of gauging the contents of vessels. Johnson's Dictionary. 4 57 Geo. III. c. 60 (Local and Per.onal Acts). 5 In Scott v. Cousins (1869), L.R. 4 C.P. 177 ; 38 L.J. C.P. 156 ; 20 L.T. 32; 17 W.R. 32*, it was held that where the clerk of a company acted as broker in a transaction of purchase and sale without a licence, there being no one over him who had the necessary licence, he had incurred the penalty imposed by the statute, and it was questioned whether, if an unlicensed clerk acted in a particular transaction under the general control of a duly licensed broker, both the broker and the clerk would not incur the penalty. As to the evidence necessary to convict under the statute, see Scott v. North (1867), L.R. 2 C.P. 270; 15 L.T. 208. Until a comparatively recent date, it was the practice of important bank- ing firms to have one or two of their clerks admitted to the Stock Exchange to transact the firm's Stock Exchange business. This is now prevented by the Stock Exchange regulations (see rule 29, Appendix A ) "8 LAW AND PRACTICE OF THE S20CK EXCHANGE. to have been brought out in Change Alley in 1706, and every subsequent loan was but a fresh opportunity for the brokers to acquire influence and wealth. A regular system of intelligence was kept up between this country and the Continent by some of the most wealthy frequenters of the Alley, and as it was a matter of pecuniary and individual interest, the information thus obtained came sooner to hand and was more reliable than any obtainable by the Govern- ment of the day. This information, with a variety of tricks and artifices, was used to raise or depress the various funds and securi'ies in the interest of those who paid for it. Owing to the improvements that have taken place in our system of communication, such methods of finance can only be employed at present on a comparatively small scale. But when news had to be conveyed entirely by messenger, and information as to the result of an important public event might be in the possession of a single operator for days or even weeks before the news became public, it is easy to understand what opportunities were afforded for manipulation. " It is," said a writer of the eighteenth century, of the method of dealing practised in the Alley, " a complete system of knavery, founded in fraud, born of deceit, and nourished by trick, cheat, wheedle, forgeries, falsehoods, and all sorts of delusions ; coning false news, whispering imaginary terrors, and prey- ing upon those they have elevated or depressed." We know that the pamphleteers of the eighteenth century, political and otherwise, were not very regardful of accuracy ; still, the above does not seem to have been altogether an exaggerated account of the usual course of business in the Alley. In denouncing the stock-brokers of the last century, we should, however, remember that a very considerable amount of the gambling and grosser forms of speculation for which Change Alley provided a shelter and the biokers have borne the blame, was due, not so much to the stock-brokers as to the great bankers, the Members of Parliament, and other wealthy persons, who were not ashamed to profit by the methods of the Alley while things went well, and to make a scapegoat of the jobbers when they went ill. INTRODUCTORY. 9 It was a common thing for Members of Parliament to denounce the jobbers in unrreasured terms. "To me, my Lords," said Lord Chatham on one occasion, " whether they be insatiable jobbers of Change Alley, or the lofty Asiatic plunderers ofLeadenhall Street, they are equally detestable." Yet the House of Commons itself was not entirely free from corruption. On one memorable occasion, when the question was rai.-ed whether a limit should be placed on the dividends distributed by the East India Company, a member named Charles Townshend, who was the holder of a considerable number of shares, is said to have cried up the Company until he was able to sell out at a large profit, and then to have cried ihe Company down in the interefets of his friends. To secure peace in 1763, 80,000 was set apart for the purpose of obtaining votts, three-quarters of that sum bting distributed among eighty members, of whom forty received 10UO a piece, and forty others 500. It is, therefore, clear that Change Alley was not entirely responsible for the financial corruption of the eighteenth century, although, no doubt, it was in a large measure responsible for the birth of that spirit of uncontrolled, and for a time uncontrollable, gambling and speculation which was the ruin of so many families. Among other objectionable forms of speculation in vogue at this time was the system of taking insurances on the lives of persons of note. It was, of course, merely a bet on the duration of the life insured, and as these bargains were leported in the newspapers, invalids and their Iriends must at times have found some pleasant reading. The following is a specimen of what might be expected : " Lord niay be considered in great danger, as his life can only be insured in the Alley at 90 per cent." However, this form of gambling did not long survive the combined efforts of the nioie influential frequenters of Change Alley to put it down. 1 In 1 733 another attempt was made by the aid of the Legis- lature to put a stop to the speculation which was sapping the See Francis's Chronicles and Characters of the Stocl: Exchange. 30 LAW AND PRACTICE OF THE STOCK EXCHANGE, strength of the upper and middle classes. The author of this attempt was Sir John Barnard, who will probably always be better known as" the originator of an abortive scheme to check commercial gambling than for his many benefactions to the city. The statute usually known as " Barnard's Act " L was passed with the object of preventing " the infamous practice of stock-jobbing." This statute rendered illegal, all contracts for the payment of differences only, and con- tracts in the nature of options, and imposed penalties upon persons who entered into such contracts, and upon brokers who negotiated them. It further declare 1 that actions could not be maintained for debts thus created, and that money actually paid in satisfaction of such debts should be recoverable. This seemed enough to put a stop to speculative business altogether, and Change Alley spoke its mind very freely upon Sir John Barnard's conduct. But as in the case of other attempted restrictions upon Stock Exchange methods of transacting business, a way was soon found out of the obnoxious Act, and speculation went on as merrily as ever. The Courts of Law led the way in limiting the operation of the Act by holding that it was meant to protect the English funds only, and that speculative bargains in the funds of foreign countries, in railway stocks and shares, and in all cases in which there was a bond fide inten- tion to deliver, although the vendor was not at the time in. actual possession of the securities, were as good as ever.' 1 Naturally the jobbers were not slow to avail themselves of this solution of the difficulty. This statute, which was originally passed for three years only, was made perpetual in 1736, 3 and was not repealed till I860, 4 though by that time it had long fallen into disuse. It is perhaps a little curious that, considering how many attempts were made to keep the transactions of the brokers within bounds, stocks and shares were not included in the list of commodities to which the various statutes, passed 1 7 Geo. II. c. 8. - See pp. 169, 170, post. 3 10 Geo. II. c. 8. 4 23 Viet. c. 28. INTRODUCTORY. 11 between the fifty-first yeir of Henry III. and the twenty- seventh of Geo. III., and dealing with the offences of badgering, engrossing, forestalling, and regratiiig, applied. 1 But the reason, no doubt, was that these statutes were for the most part intended for the protection of the poor, and were therefore confined to the articles with which they were principally concerned. On the 15th of July, 1773, it was announced in a news- paper of the day that on the previous day the brokers and other persons meeting at New Jonathan's Coffee Hou.-e had come to a resolution that instead of that House being called "New Jonathan'^," it should in future be known as the " Stock Exchange." Here, up to the end of the century, the business of the dealers was for the most part conducted, and any one was admissible on payment of sixpence. There was also, at a somewhat later period, a ceitain amount of business in the public funds done by 1 rokers and jobbers in the Rotunda of the Bank of England, which was set apart by the governor and directors for that purpose. But it is probable that this was in connection with small transactions by the public, and the immediate transfer of stocks in the books of the Bank ; while the Stock Exchange Coffee House afforded a ready market for the operations of the bankers, merchants, and capitalists -connected with the floating of the numerous loans raised at' that period for the service of the State. 2 In 1801, owing to the increasing volume of business arising from the issue of a vaiiety of new loans and other undertakings, and to the consequent increase in the number of member.*, it was found that the existing premises did not afford sufficient accommodation for the purposes for which they were required. A number of members therefore com- bined to buy a site in and about Capel Court, upon which was erected the first portion of the building which was 1 See these statutes collected, 7 & 8 Viet. c. 24. - See minutes of the evidence jrivcn by Mr. F. Levien before the Royal Commission, on the London Stock Exchange, 1877: Parl. Tapers, 1878. 12 LAW AND PRACTICE OF THE STOCK EXCHANGE. thenceforth to be known as the Stock Exchange. A capital of 20,000 was raised, which was divided into four hundred shares of 50 each. The first stone of the building was laid in May, 1801, and the premises were opened for the trans- action of business in the following year, there being at that time a list of about five hundred members. In 1853 the building was again found to be inadequate to meet the requirements of its increased membership. It was pulled down and entirely rebuilt, and various additions have since been made to the structure. Until the year 1822 business in the foreign funds con- tinued to be carried on in the Eoyal Exchange. In that year, however, a foreign Stock Exchange was erected in con- nection with the building in Capel Court, and later the two buildings were amalgamated under the same management. In 1870 l the powers of supervision and control which the Corporation of London had hitherto exercised over brokers carr^ ing on business in the City were greatly cur- tailed in consequence of the publicity which was given to unfounded charges during the investigation which preceded admission. The Court of Aldermen were in future restricted to taking the admission and yearly fees, and to striking a broker's name off the list in case of a conviction for felony or fraud, or on receipt of a certificate from a judge of one of the superior courts that the broker was no longer a fit person to be on the list. It was, however, now objected that, as the Court of Aldermen had no longer power to refuse admission to any one who applied, many persons obtained a fictitious credit from what had become an empty formality. By a statute of 1884, 2 therefore, the last remnants of the City's authority were swept away, and at the present time the only control over stock-brokers and jobbers in the city of London is that exercised by the Committee of the Stock Exchange over members of that body. Such is a brief outline of the Mstory of a body which, from a somewhat mean origin, has gradually grown in 33 & :H Viet. e. 5o. " 47 Viet. c. 3. INTRODUCTORY. 13 wealth and influence until recognition by the State, conveyed by an act of incorporation, would, in the opinion of those best qualified to judge, be a disadvantage rather than a boon. At the present time complaints are frequently made of the manner in which the business of the Stock Exchange is conducted. No doubt the ease with which transactions in stocks and shares may be carried out afforJs opportunities for excessive speculation. But the public are at least as much to blame for this state of things as are the brokers. And if the temptation to speculate in stocks and shares were removed, there would probably be a corresponding increase in the speculation which already extensively exists in such commodities as wheat and oil a form of speculation which is undoubtedly more injurious to the community generally ; in the first place, because there is no such efficient machinery for controlling the actions of dealers in these commodities as- exists in the case of members of the Stock Exchange ; and,. secondly, because such speculation affects the interests of a far larger class than does speculation in Stock Exchange securities. On the other hand, as Chief Baron Kelly pointed out in Grissi'll v. Pristowe, 1 the Stock Exchange "affords to the public the very great advantage of being enabled, by means of a stock-broker and a jobber, to buy or sell at any moment any quantity of stock or any number of any description of shares at the market price of the day, and concluding the transaction, at the latest, on settling-day ; whereas, without such a practice, every one having a given amount of stock, English, foreign, or colonial, or of debentures or shares in railways or other joint stock companies, to buy or sell, must wait until a seller or buyer could be found to sell or buy the exact quantity of stock or shares which is to be parted with or acquired a state of things which, in this country, where some hundreds of these purchases and sales are effected every day, would be found intolerable, and would speedily demand a remedy, than which no better could be devised than this practice, so long established, and which has never until now been called in question." 1 L.K. 4 C.P., at p. 53. 14 LAW AXD PRACTICE OF TEE STOCK EXCHANGE. CHAPTER II. GLOSSARY. Account. " The account " is the period of time between settlement and settlement, during which stocks and shares may "be bought and sold without being respectively paid for or delivered. The length of the ordinary account varies fiom fourteen days to nineteen, while the Consols account is one month. A/C. An abbreviation for account. Sec above. Account day. The official name for Pay-day. Arbitrage. The operation of buying in one market and selling in another at different prices, so as to obtain the advantage of the varying prices of the same stock at practically the same moment in the two different markets. For instance, supposing that Spanish Stock stands at 64 in Amsterdam and at 64^ in London, A.'s agent in Amsterdam buys at 64 and telegraphs to A. in London, who immediately sells at 64^, thus making a profit of -*- per cent. The same operation when conducted in two different markets in the same country is called " shunting." Backwardation or Back. A sum of money paid to a person who has bought securities for the ensuing account, in con- sideration for his allowing delivery to be postponed until a subsequent account. This only becomes payable when there is a large " bear " or selling account open. Backwardation is the converse of " carry-over rate." Balance Certificate. See CERTIFICATE. Bang. "Banging the market" is the name given to the operation executed by a dealer when lie offers .ito^k or shares GLOSSARY. 15 for sale, without intending to sell, with the object of depress- ing the market, so that he may be able to buy at a cheaper rate. Bear. A speculator who contracts to sell stock or shares which he does not at the lime possess, in the expectation that the price in the market will fall, and that he will be able to purchase for delivery at the lower rate. Bears were so called because they were supposed to drag the market down, while the bulls tossed it up. Bearer Securities. Securities all rights in connection with which are passed by mere delivery of the documents of title. Bidding. The process by which a jobber who is desirous of procuring stock or shares, instead of negotiating with an individual jobber, makes a public bid in the House for the purpose of obtaining what he requires. It is the converse of " offering," which consists in a public offer of stock or shares. Bonus. Cash or share payments on shares made by a company over and above dividends. These payments are usually made in order to avoid the appearance of very great fluctuations in the rate of dividend. Shares may be sold ex" or "cum" bonus. Boom. A rapid and considerable rise in the price of a securit}*. It is the converse of " slump." Broker. A person who for a sum of money called " com- mission " buys or sells, as agent for his employer, any of the securities dealt in on the Stock Exchange. He is the inter- mediary between the jobber and the public. The points of difference between a broker and a jobber are, that while the broker deals directly with the public, the jobber can only deal with the public through the mediation of the broker ; that while the broker buys or sells for the public, the jobber buys from or sells to the public through the agency of the broker ; that while the broker's remuneration is obtained from a commission on the percentage of the value of the stock or shares bought or sold, the jobber's profit is realized from the difference between the prices at which he respectfully buys and sells the same security 16 LAW AND PRACTICE OF THE STOCK EXCHANGE. the "turn of the market" as it is called. An Outside Broker is a person who deals in stocks and shares without being a member of the Stock Exchange. A member of the Stock Exchange is allowed only to deal either as a broker or as a jobber, while an outside broker combines the functions of broker and jobber, or perhaps it would be more correct to say that while acting as a jobber he yet deals directly with the public. Bucket-shopkeeper. A term applied to a dealer in stock and shares who is not a member of the Stock Exchange, and who does not carry on a bond fide business. Bull. The term used to denote a person who makes speculative purchases of securities in the expectation of, or to cause a rise in their market value, and with intention of selling as soon as the rise shall have occurred. It is the converse of " bear." Buying-in. The purchaser of securities is theoretically entitled to delivery of them on paj T -day. In practice, how- ever, this has been found to be unworkable, owing to the numerous formalities which a transfer necessitates. Accord- ingly, certain days of grace are allowed to the vendor in which to make delivery. If on the expiration of this ex- tended period the purchaser has n partnership is held to be unaltered or undissolved until such communication has been made. 2 When once a partnership- has been formed, the partners may not deal privately without each other's knowledge, and if any member of the Stock Exchange transacts business, either for| money or time, with an individual member of a firm in the Stock Exchange, such bargain being intentionally concealed from the other member or members of the firm, both members shall be expelled from the Stock Exchange. 3 A new member is not allowed to enter into partnership during the period of his sureties' liability, unless he has first obtained their consent and such consent has been communi- cated to the Committee. 4 The rules of the Stock Exchange prohibit the formation of partnerships between brokers and jobbers,"' as such a combination would obviously defeat the object of the dis- tinction between the two classes. Neither is a member permitted to take into partnership a non-member ; 6 and where, as is not unusual on the Stock Exchange, a broker agrees with a member of the public, that, in consideration of the latter introducing clients to him and agreeing to bear a proportion of any losses incurred in connection with the transactions of a client thus introduced, the " runner," as he is called, shall have a share of the commission, it has been. Page 4iJ. jn,*t. 4 Rule 41. 2 Rule 5 Rule 4J5 3 Rule 56. Rule 41. THE STOCK EXCHANGE AND ITS MANAGEMENT. 43 held by the Court of Appeal that the relation of partnership is not created, as the intention to become partners is absent. 1 " I agree," said Lord Justice Kay, " that this arrangement hardly comes up to a partnership, though it is very near it. The commission received in respect of any transaction might not be all clear profit ; the expenses of the office establishment would have to be provided for ; and therefore the contract with the defendant was not that he should share the profit whatever it might be. On the whole* I think it would be going too far to say that the contract was that the defendant- should share in the profits and losses of the transactions." ' J Members who constantly deal together in any particular Limited stocks or shares and participate in the result, are lesponsible for each other's liabilities, not only in those particular securities in which they are jointly interested, but in any other description of securities in which either of them transact business, unless they send a written notice to the Secretary specifying the particular securities in which they deal on a joint account. No limited partnership of the above description is permitted between more than two members or firms, and such a partnership may carry on business in those markets only in which both members or firms are dealing. :: The failure of a firm ipso facto dissolves a partnership, and if the members of the firm, upon re-admission, desire to icnew the partnership, notice of their intention must be given to the Committee in the same manner as if a partner- ship had never existed. 4 A question might possibly arise whether, in the absence Duration of express agreement between the parties, partnerships on g^" 1 1 Sutton v. Grey [1894], 1 Q.B. 285; 63 L.J. Q.B. 633; 9 L.T. U73 ; 42 W.R. 195. It may be, however, that as towards members of the public whom the runner has induced to enter into contracts with the firm which employs him, and who believed him to be a partner, the runner would be estopped from denying his liability. In Sutton v. Grey it was further held that such an agreement was a contract of indemnity and not a guaranty, and therefore need not be in writing under sec. 4 of the Statute of Frauds (29 Car. c. 3). - Sutton v. Grey [1894], 1 Q.B., at p. 291. 3 Rule 42. * Rule 40. 44 LAW AND PRACTICE OF THE STOCK EXCHANGE. the Stock Exchange are partnerships for an indefinite lime and therefore dissoluble at will, or are for the definite period of one year, and therefore only dissoluble, in the absence of any of the causes of dissolution specified below, at the time of the general election of members in Myrch. On the one hand, as members are only elected for one year it would at first sight seem that the duration of a partnership must be likewise limited to that period. On the other hand, Eule 39 x states that no partnership will be considered as altered or dissolved until a communication has been made to the Com- mittee. Perhaps, however, as the re-election of members is more a matter of form than of anything else, and the second part of Eule 39 appears to contemplate dissolution at any time, these partnerships would be held in law to be partner- ships at will. If they are partnerships at will, then it follows as a necessary consequence that they are dissoluble at the wish of any partner. If, however, they are partnerships for a definite period they would be dissoluble on any of the grounds upon which partnerships of a similar character are usually dissolved. 2 But there is apparently nothing to prevent members of such partnerships from entering into express agreements with one another, limiting, or extending the duration of the partnership upon such terms as may be mutually agreed. 1 The meaning of Rule 39 is rather ambiguous. If the second part of the first paragraph is to be read with, the first, it would seem that an alteration or a dissolution of a partnership can only be made at the time of the general election. If it is to be read separately, an alteration or dissolution may occur at any time. - Partnerships other than partnerships at will, may be dissolved upon uny of the following grounds : (a) The impossibility of continuing, in consequence of (i.) The hopeless state of the partnership business. (ii.) Insanity, (iii.) Misconduct. (6) The transfer of a partner's interest. (c) The occurrence of some event which renders the partnership illegal. 2. Brown J 3. Jones, purchaser of 1000 Brighton "A" stock. 4. Smith & Co., brokers to Adams. 5. Thomas & Co., brokers to Brown. 6. White & Co., brokers to Jones. 7. Robinson & Co., dealers or jobbers. 1 For an explanation of " ticket," see p. 28, ante, and for the form, p. 67, post. In the case of very speculative securities, a ticket is sometimes endorsed with as many as a hundred names between the time of leaving the purchaser's broker and the time of reaching the seller's. 52 LAW AND PRACTICE OF THE STOCK EXCHANGE. Making the At 10 o'clock on June 1st, the three brokers receive instructions from their respective principals to buy or sell as the case may be. Immediately upon the official opening of the "House" 1 for business at 11 o'clock, Smith and Thomas proceed in turn to the English railway "market" where this and kindred securities are dealt in. Here they find Kobinson waiting to do business. Without telling him whether they wish to buy or sell, they ask him whether he will make a price in Brighton A. Robinson mentions a price to each, let us say 150 to 150J. The brokers, if not satisfied with the narrowness of the margin between the prices, then ask, " What will you make me in 500 ? "- meaning, "mention the prices at which you are willing to buy or sell." Robinson replies, let us suppose, "150- " meaning that he will buy at 150 (150 5s.), or sell at 150* (150 10*.) per nominal 100 of stock. The jobber need not necessarily make the same price to each of the brokers ; he may vary it at his discretion within the nominal market price, which is invariably wider 3 than that at which the jobber will deal. If either Smith or Thomas had been dissatisfied with the prices offered by Robinson, he might have passed on and tried to deal with some other jobber. If, instead of being a current 4 security with a free market like Brighton A. stock, the deal had been in a non-current security, the brokers might, after having been told the nominal price, 5 have been obliged to "open" to the jobber; that is to say, they would have told him whether they wished to buy or sell, and the amount in which they desired to deal. The jobber would then en- deavour to "place" or buy the stock elsewhere at a price which would ensure a reasonable profit to himself. This 1 For explanation of this term, see p. 21, ante. 2 For explanation of this term, see p. 23, ante. 3 I.e. the " turn of the market " (see p. 29, ante) is larger than the 5s. or \ difference between the two prices 150 aud 150. 4 For explanation, see p. 20, ante. 5 In case of a non-current security, the difference between the buying and selling prices may be as much as 2 or 3 per cent, or more. TEE COURSE OF BUSINESS. 53 course of dealing between broker and jobber is termed " negotiating." Where the jobber has named a price without the amount of the security being stated, he cannot be compelled to buy or sell more than a limited amount of such security, the amount varying according to the description of stocks or shares in which the transaction is to be effected, and, in the case of shares, according to the actual market price of the shares at the time. 1 Supposing that Smith and Thomas both consider the price offered by Eobinson satisfactory, they each in turn say, " I sell you 500 Brighton A at 150J," and the jobber answers, "I buy 500 at 150|." This concludes the contract. No written note passes between Kobinson and Smith, or Thomas, though each party makes a memorandum of the transaction in a note-book, usually called the " jobbing book." Disputes arising out of this informal method of doing business are said to be almost unknown, and it must be admitted that in times of pressure it enables business to be conducted with a rapidity which would be impossible if a formal contract had to be entered into whenever stock or shares passed between broker and jobber. Having now "done the bargain," Smith proceeds to "mark" Marking it. He writes on a printed slip of paper, " Brighton A 150J," bargain, signs his name, and places it in the box kept for the purpose, An offer to buy or sell is binding within the following limits : (a) 1000 stock, or scrip in the case of securities to bearer [Kules 80, 91, 113]. (b) In the case of shares deliverable by deed of transfer : (i.) 100 shares if the market value does not exceed 1. (ii.) 50 shares if the market value exceeds 1, but does not exceed 15. (iii.) 10 shares if the market value exceeds 15 [Rule 91]. (c) In the case of shares to bearer, 10 shares [Rule 113]. (d) French rentes, Fs. 750 [Rule 113]. 0) United States bonds, $5000 [Rule 113]. (/) 100 United States shares [Rule 113]. 54 LAW AND PRACTICE OF TEE STOCK EXCHANGE. whence the clerk of the House takes the paper and niarka up the price on a blackboard in the House. The process of marking is partly for the information of the members of the House ; but it also has the effect of enabling the broker to justify himself with his principal in case of dispute as to the price of a bargain, these marks being as a rule published in the daily papers. Thomas also comes to mark his bargain, but owing to the fact that the price at which he dealt is already marked, this becomes unnecessary. The price must be marked promptly, for it would be obviously unfair that it should be done after there had been any considerable fluctuations. The rule, however, is not inflexible, and the clerks of the House may, with the con- currence of a member of the Committee, mark omitted bargains, if notified before one o'clock, in the order of their occurrence, upon a written application from the buyer and the seller, stating the amount of the bargain, and the time when and the price at which it was made. Bargains made between the hours of one and three may, under similar cir- cumstances, be marked before three o'clock ; but no bargain made before 11 o'clock or after 3 o'clock can be marked at all. Applications made in pursuance of this rule must be filed and brought before the Committee at their next meeting ; l but the occasions on which the rule is called into operation are rare. A marking may be objected to by any member of the House, on the ground that the price is not a current one, and it may then be struck out on obtaining the leave of the Chairman, Deputy-Chairman, or two members of the Com- mittee. 2 The sold Smith and Thomas now return to their offices and have their respective bargains entered in tbe "day-book." From the day-book the clerks then make out the contract note which is to be sent to the client. It is in the following form : Rule 148. - Rule HO. TEE COURSE OF BUSINESS. 55 2, Throgmorton Lane, London, E.G., 1 June, 1896. Sold for Adams, Esq. | I 500 London and Brighton Railway Deferred Stock. ti ^ Form of sold note. @ 1501 751 = 7 l Brokerage \ and 3 3 = (Signed) Smith & Co. Contract Stamp Is.) U For 15 June. 747 9 The contract note thus made out is stamped and signed by the broker and despatched to the principal with a letter of advice. 3 On the following morning the broker's clerk takes a copy Checking of the jobbing book known as the " checking book," and j ilu meets the jobber's clerk in the checking room to check the memoranda of the bargain made by their respective princi- pals. The broker's clerk says : " I sell you 500 Brighton A at loQi ; " the jobber's clerk answers : u I buy 500 Brighton A at 1501." Each initials his book and the bargain is checked. If, however, they find that the bargains do not tally, they refer the matter to their principals. The princi- pals meet, and if they cannot agree they submit the matter to two other members for arbitration. This course is the most convenient, as the chief requirement in these cases is that the matter shall be adjusted with speed, so that loss from a continued rise or fall may be avoided. But if arbi- 1 In the case of shares the rate of brokerage varies according to the price of the shares. 2 This note is inserted for the purpose of drawing the clients' attention to the Stock Exchange regulations in order that they may become a part of the contract as between the broker and his client. 3 As to the penalties incurred by the broker if a note is not sent or is sent unstamped, see p. 120, post. 56 LAW AND PRACTICE OF THE STOCK EXCHANGE. Broker's checking- book. trators cannot be found, or if, when found, they cannot agree upon their award, the Committee will entertain and decide the matter. 1 The entry in Smith's & Co.'s checking book will be as follows : BOUGHT SIDE. JUNE 1st, 1896. SOLD SIDE. JUNE 1st, 1896. Security. Amount. Jobber's Name. Price. Security. Amount. Jobber's Name. Price. Brighton A 500 Kobinson 150J &Co. Ledgers. Smith & Co. also make the two following entries in the jobber's and principal's ledgers : DR. JOBBER'S LEDGER. ROBINSON (JOBBER). CB. a . d. 1896 June 1 500 Brighton A 150i 751 5 PRINCIPAL'S LEDGER. DR. Amount. Security. Price. Commission. Stamps. Total. 8, (/. . d. 9. d. s. d. 1896 June 1 500 Brighton A 150| 751 5 o 15 - 1 747 9 Rule 65. THE COURSE OF BUSINESS. 57 The entries of the same transaction in the jobber's books will be as follows : DB. JOBBING BOOK AND CHECKING BOOK. Jobber's checking- book. 189C June 1 Brighton A II 500 ! Smith & Co. 150 , DR. "JOUKNAL." BRIGHTON U A.' CB. s. d. .?. d. 1896 1896 June 1 500 Smith Junel 1000 White & Co. 1501 751 5 &Co. 150J 1505 5 1 500 Thomas &Co. 150} 5 Ledgers. BROKER'S LEDGER. SMITH & Co. CB. 8. d. 1896 June 1 500 i Brighton A 150f 751 5 The purchaser's broker, White, now goes into the market The bought to execute his order for 1000 Brighton " A " stock, and also note - comes to Robinson, who names the same price 150-|. White buys 1000 at 150^ per cent., and sends the following bought note to Jones : 58 LAW AND PRACTICE OF THE STOCK EXCHANGE. Form of bought note. 21, Throgmorton Gardens, London, E.C., 1 June, 1896. Bought for Jones, Esq. ? 1000 London and Brighton Deferred Stock. II P "3 55 Sg || (Signed) White & Co. s For 15 June. @ 150| 1505 ip l and Fee 2 7 17 6 erage % 7 10 6 and ract Stai np 1 1520 9 The market might, of course, have fluctuated by the time White came to buy, and Robinson would then have named a different price. But as he makes the same price, and White turns out to be a purchaser, Eobinson's liability practically ceases; he has earned a profit of 2 10s. that is to say, five shillings or the turn of the market on each of the nominal 100 of stock and becomes merely a channel for the delivery of the stock when the time for settlement arrives. Probably,, however, very few of the bargains made during an account work out in quite so simple and satisfactory a manner.. Supposing that White had bought 1500 Brighton A instead of 1000, it is clear that Eobinson would have sold 500 more than he had bought. In this case if no one came- to Robinson to sell another 500 before the settlement, and he was accordingly short of the stock which he had contracted to deliver to White, he would be obliged to buy the extra 500 back, or borrow it at interest until the following account. The stamps are as follows : where the value of the security s. d. 6 1 1 6 2 is under 5 above 5 but under 1 ,, 10 15 15 20 20 25 2 G above 25 but under 50 50 75 75 100 100 125 125 150 The amount then rises 5s. for every 50, or part of 50, ad infinitum. 2 Fee 2s. Qd. for registration at the Company's office. TEE COURSE OF BUSINESS. 59 If delivery were not made within ten days, 1 Robinson Buying-in. would become liable to have the 500 stock "bought in" against him by White, that is to say, White would instruct the official broker to purchase 500 stock for him in the open market for immediate delivery, and Eobinson would be liable to make good any loss which might be incurred owing to the price having risen in the mean time, or from a high price being required by a holder who could deliver at once. If, on the other hand, Eobinson had bought 1500 stock, and only sold 1000, when ticket-day came he would be obliged either to carry over the extra 500, or to pass his own name for that amount, which latter proceeding would entail the loss to him of the value of the stamp required, and the locking up of the money till he could sell the stock. White having bought his 1000 stock, marks it, if necessary, and then returns to his office and has it entered in the day-book. The formalities and entries are similar to those which have already been described in the case of the sale by Smith, with the exception, of course, that the entries are made on the opposite sides of the various ledgers, and that the prices are different. If this had been a cash bargain as it could only be by Cash special agreement the broker would, if a buyer, send a bar ams< ticket to the jobber, or, if a seller, take one from him on the same day, and the purchase would be completed as soon as possible. The settling-day in this case June loth has been fixed Settling- some time previously by the Committee of the Stock days for Exchange. The settling-days for English stocks (i.e. the " funds," (i.) English Corporation stocks, etc.) occur once a month, and are fixed at stock - 1 This time is somewhat extended in the case of those companies which prepare their own transfers : see Rule 105. 60 LAW AND PRACTICE OF THE STOCK EXCHANGE. least eight days previous to the settlement of the pending (ii.) For- account. The settlement in foreign loans, 1 and in shares of eignsi , s, a -Q kinds takes pi ace twice a month, and the settling-days and ticket-days are fixed at the first meeting of the Committee in each month for the succeeding month. The settling-day (iii.) Eng- in English omnium 2 and scrip fixes itself automatically, (minium occurring two days prior to the respective days of payment and scrip, of each of the instalments, unless payment falls on a Tuesday, in which case the settling-day is the Monday previous. In case of payment of an instalment on foreign or other scrip falling due on a settling-day, the settlement of such scrip takes place on the day previous to payment. 3 All bargains in the stock and shares of established undertakings, when no time for settlement is specified, are taken to have been made for the ensuing settling-day thus fixed, except that bargains in securities deliverable by deed of transfer and in bearer securities, if made after one o'clock on contango-day, are considered to be made for the following account, unless, at the time of making the bargain, the parties expressly stipulate that it is made for the existing account. 4 A bargain may, of course, be made for any future time ; but the Committee will not recognize and enforce such a bargain, if, in the case of English, India, Corporation, and Colonial Government inscribed stocks, it is made more than eight days previously to the close of the pending account, 5 or if, in the case of registered and bearer securities, it is made for a period beyond the two ensuing accounts. 6 Special The recognition of bargains in the scrip of a new loan or eetthng- ^ n ^ Q snares o f a new company is contingent upon the appointment by the Committee of a special settling-day," unless the settlement is otherwise fixed by agreement and referred to in the contract note. (i ) For ^ it i s a new l an f which a special settlement is new loans, required, an application for that purpose is made to the 1 Kule 132. - For explanation of this term, see p. 24, ante. 3 Rules 140, 141. 4 Rules 78, 89, 111. 5 Rule 79. u Rules 90 ? 112. ' Rule 130. TEE COURSE OF BUSINESS. 61 Committee after three days' public notice has been given by the Secretary of the Share and Loan Department. The application must be accompanied by various documents, in- cluding a certificate, verified by the statutory declaration of the contractors or agents, stating the amount allotted, that the scrip or bonds are ready for delivery, and that they are in reasonable amounts. The Committee will f hen ap- point a special settling-day, if no impediment exists to the settlement of the account. 1 In the case of a new company, after public notice has (") For been given for one week, the Committee will grant a special pa nies. settling-day if sufficient scrip or shares are ready for delivery, and there is no impediment to the settlement of the account. As in the case of a new loan, the application must be accompanied by a variety of documents. 2 A list of prices of English and foreign stocks, shares, The official and other securities officially recognized on the Stock Exchange, is published under the authority of the Com- mittee, and is called the " Official List." 3 Generally speaking, any member has a right to have the prices at which he has done business recorded in this list, 4 even if done during the " shutting," 5 provided it is for the " opening." G But bargains made at special prices by reason of their exceptional amounts, may only be quoted with distinguishing marks. 7 As the settling-day in the present case is the loth of Continua- June, the 14th of June will be ticket-day, and the 13th contango-day. If all the parties to the transaction were ready to perform their parts in due course, the accounts Kule 131. 2 Rule 135. Tho Official List is published daily, and may be obtained after four o'cl ck from Messrs. Wetenhall, 4, Copthall Buildings, E.G. Rules 143, 145. I.e. after the official hours for closing, viz. after three o'clock. I.e. the official hours for opening eleven o'clock. Rule 144. As to quotations generally, see Rules 142-149 ; and as to the quotation of newly issued bonds, scrip, and shares, see Rules 132, 133, and 130-139. 62 LAW AND PRACTICE OF THE STOCK EXCHANGE. would be sent out on June 13th, the tickets passed on the 14th, and the securities delivered on the 15th, or as soon as possible afterwards, and paid for on delivery. 1 Supposing, however, that Jones, either because his purchase is specula- tive, or for some other reason, is desirous of not paying for the security which he has bought until the following account, and that Adams and Brown are equally desirous of not making delivery till the succeeding account. They will, on or before contango-day, instruct their respective brokers to that effect, and thereupon there will take place a process which is called a "continuation "or "contango." Method of I n order to effect the continuation in the case of the ovei\ m| purchaser, Jones's broker, White, will, on contango-day, enter into two fresh contracts with the jobber. By the first of these contracts Jones will sell to the jobber, for the 15th of June, 1000 Brighton A at a price fixed by the officials of the House, which is called the making-up price. The effect of this will be to close the contract already open for the existing account. By the second contract Jones makes another purchase of 1000 Brighton from Robinson for delivery on the settling-day in the following account at the making-up price. These contracts need not, and probably will not, be made at the same price as that at which Jones bought on the 1st of June. A security is continually rising or falling in value, and it is improbable that there will not have been some fluctuation in the price of Brighton A stock between June 1st and 13th. Suppose that by the 13th the stock has risen two per cent, in value. On the mornings of Making-up contango-day and ticket-day 2 the clerk of the House, taking the actual middle 3 price at twelve o'clock, will fix that price 1 This is, of course, between broker and broker. The seller and the purchaser, outside the Stock Exchange, would respectively have delivered the security and paid the cheque probably some days before the one received a cheque and the other the security. 2 The making-up price is fixed, and bargains are carried over, on each of these two days. 3 If at twelve o'clock on contango-day the price of Brighton A stock was 150|-J, the middle price and consequently the making-up price- would be 150f . TEE COURSE OF BUSINESS. 63 as the making-up price for the particular stock. 1 At the price thus fixed all bargains must be continued. If it happens that no making-up price has been fixed as is the case with securities in which there are not frequent dealings con- tinuations are effected at a price mutually agreed upon, probably the price at which the bargain was originally made. If the making-up price is fixed at 152J, Jones having bought a 1000 stock at 150 and sold at 152, makes a profit of 10 on the transaction. But as he buys again at 152, and will have to pay that price on the settling-day at the end of June, it is evident that the profit thus obtained is, or may be, merely a temporary one. If at the time of the continuation there is a large Carrying- " bull " account open that is to say, a larger amount of this particular stock has been bought for the settlement than the buyers are prepared to take up Jones will be obliged to pay a " contango " or rate of interest on the money which has, in effect, been lent 2 to him by the person who has consented to hold or take up the stock in his stead in the present case to Robinson, as a consideration for not compelling him to take delivery. If, however, there is a large " bear " account open that is to say, a larger amount of this par- ticular stock has been sold for the settlement than the buyers are prepared to deliver Jones will, on the contrary, receive a " backwardation," or sum of money, in consider- ation of his not enforcing delivery. Where, however, the bull and bear accounts are fairly evenly balanced, the specu- lative purchaser will probably be obliged to pay a contago for continuation of the same stock on which the speculative seller is at the same time paying a backwardation. 3 1 As to making-up prices in Government and Corporation stocks, seo Rule i8. 2 The Court of Appeal, however, has held that a continuation, though having the appearance of a loan of the stock, is in reality a purchase and sale combined with a supplementary agreement to return a similar amount of the same stock at the following account. See p. 237, post. 3 The jobbers, through whom the larger part of the continuations at each account are effected, so arrange the continuation rates that they 64 LAW AND PRACTICE OF THE STOCK EXCHANGE. Form of account. The process will be repeated in the case of Adams and Brown, except, of course, that as they were originally sellers, the first contract made with Eobinson, the jobber, will be a contract of purchase to close the transaction for the present account, while the second is another contract of sale to open for the new account; that, the making-up price being 152J, whereas Jones made a profit of 10 on the account, Adams and Brown each make a loss of 5 ; and that Adams and Brown pay a backwardation or receive a contango, as the case may be. The brokers having thus effected the continuations on behalf of their respective principals, send them the bought and sold notes of the various transactions, make the entries in their books in the regular course, and on the evening of the same day forward the accounts showing the amounts due to and from the principals, of which payment will have to be made two days later on settling-day. Jones's account will be in the following form : ACCOUNT, 15 JDNE, 1896. Jones, Esq., in account with White & Co. DR. 21, Throgmorton Gardens, London, E.C. CR. 8. d. s. d. Junel 1000 L.B.&S.C.R. June 15 By cash Deferred stock 1520 9 or balance (to pay) 1520 9 Balance brought down 48 6 6 may obtain a profit in the usual manner, viz. by the difference between the amounts paid respectively by the seller and the purchaser. A certain number of continuations are effected with persons outside the Stock Exchange, as, for instance, with banks. This is known as "contangoing off the market." The brokers also now have a considerable share in the profits arising from accommodating speculative principals. See Bentinck v. London Joint Stock Bank [1893], 2 Ch. 120; 62 L.J. Ch. 358; 68 L.T. 315; 42 W.R. 140, where the broker arranged with his principal to borrow money from the bank at 4 per cent, and lent it to the principal at 4 per cent. THE COURSE OF BUSINESS. 65 In the present instance a continuation will be effected in Carrying- tile case of all three of the parties to the transaction, and the ( a ) where matter will therefore be very easily adjusted. The jobber, delivered. finding that both parties desire a postponement of completion, will, according to the state of the market, charge one of the parties a contango, or the other a backwardation, and will himself receive a profit from the transaction in the usual manner ; l the parties will pay to or receive from their brokers the difference (if any) caused by the making-up prices, together witli the continuation rate ; the brokers will in turn make or receive payment to or from the jobber; and the matter will be adjusted until the following account. It is probable that in this case the continuation will take (b) Where the form of a payment of differences merely, and that there iivered or will be no delivery of stock at all. But it is not a necessity *?^ m j )y that the continuation should take place between the same persons as were parties to the original transaction. It may, of course, be that only one of the parties requires a continua- tion, while the others desire to complete their part of the transaction. Let us suppose that Adams and Brown wish to make delivery ; then, unless the jobber is himself willing to hold the stock, Jones must either take delivery of it or must find some one to do so for him. If Robinson, the jobber, is unwilling to hold the stock for Jones until the settling-day in the succeeding account, in consideration of the contango, Jones's broker will go into the market and find some one who is ready to do so. In this case, therefore, there will be a delivery of stock, tickets will pass, and the transaction be CDni- pleted in the ordinary cour.se, but some other person's name will be substituted for that of Jones as the recipient of the stock. This, of course, will leave Jones free to open a fresh contract for the new account exactly as if no stock had passed. While a continuation may or may not result in the delivery of stock or shares, a contango or a backwardation, 1 "\Vlir-n the jobber acts as a channel between two parties, both, of whom wish to carry over, the jobber's profit accrues in the usual manner by the difference between the rates which one of the parties pays and the other receives. 66 LAW AND PRACTICE OF TEE STOCK EXCHANGE. and sometimes both, will invariably have to be paid in respect of the accommodation granted, the amount depending upon the state of the account, the class of security, the rates prevailing at the time in the money market, the credit of the borrower, and the demand for accommodation. Although a person who obtains stock or shares as the result of a continuation is commonly said to " take in " or borrow, as the case may be, such stock or shares, the transac- tion is in reality one of purchase and sale, and not of loan. 1 It is true that the " taker-in " or borrower of the stock or shares is or may be obliged to return a similar amount at the succeeding settlement, but this is the result of a second contract of purchase or sale, not of an original loan. It is obvious, therefore, th at the taker-in or borrower of stock in the case of a continuation is entitled to deal with it as owner, whereas the lender of money on the security of stock or shares is not entitled to place such stock or shares beyond his immediate control. 2 The continuations having been thus effected and the accounts duly settled, the bargains remain in suspense until the following settlement. We will suppose that at the following settlement all the parties are ready to complete the bargain by paying for and delivering the stock which they have respectively bought and sold. On the contango day, as the contracts are not to be continued, the brokers in the present instance have nothing to do except make up and post their clients' accounts. There is, however, a process conducted on contango day, 1 Bongiovanni v. Socitft Gtnrale (I88G), 51 L.T. 320. The taker-in of stock upon a continuation, as the term is commonly used hi the Stock Exchange, is a person who accommodates a speculative purchaser by relieving him of stock which he has bought but does not wish to take up until the following account, while the borrower is a speculative seller, who having sold stock has not wherewithal to make delivery, and is accordingly compelled to obtain a loan of the stock until the following account. 2 Langton v. Watte (1868), L.R. G Eq. 16.) ; 37 L.J. Ch. 345; 18 L.T. 80 ; 1G W.R. 508. See Rule 70, which appears to have been framed with a view to the requirements of the law as laid down in the above two cates. THE COURSE OF BUSINESS. 67 with the object of facilitating the work of the settlement, Making up. which is deserving of notice, althoiigh, owing to its practical supersession in the settlement of London business by the Clearing House system, it is no longer of first-rate importance. The process in question is called " making-up." The clerks meeting in the settling-rooms on ticket-day read their books against one another, and where a security is found to pass in a circle between three or more parties, one or more of the parties drop out of the transaction, merely paying or receiving differences, and leave the matter to be settled between the ultimate parties to the transaction. For instance, where A. has to deliver to B., B. to C., and C. to D., the parties confer, B. and C. drop out and leave A. and D. to complete the actual transaction, settling their accounts by putting the stock through at the making-up price. On the second day of the settlement, called " name-da}"," or Tickets. " ticket-day," the process is commenced which is to bring the original vendor and the ultimate purchaser into connection with each other by enabling the name of the person to whom there is to be an actual transfer of the security to be traced through a long line of intermediate vendors and purchasers. In the present instance, between 10 and 12 o'clock on ticket-day, White & Co. will issue a ticket in the following form : i J }? g All rights to Dividends and New Stock are hereby claimed. Form of 2*. ^ ticket. ~ = o,. No. 10000. Consideration 1505. 1000 Brighton A 150^ M/u @ 1521 15-25 Stamps " 7 15 '- .1 I " 1 To Jones, Esq. { ~ of etc., etc. 1532 15 ' L ~t. ~ I - = ~ | | ^ 1 1 Given to Eobinson & Co. White & Co., pay. June 30, 1896. 21, Throgmorton Gardens, B.C. Having issued the ticket, the broker White makes a 1 These forms vary slightly in the different offices, but for practical purposes they are the same. 68 LAW AND PRACTICE OF THE STOCK EXCHANGE. further entry in his jobber's ledger to close the account with the jobber. The entry of the entire transaction in White & Co.'s ledger will therefore be as follows : Dr. JOBBER'S LEDGER. ROBINSON (JOBBER). Cr. ]89G 8. d. 1896 8. d June Cgo 1000 1 1000 Brighton Brighton A 150 1505 n A 152| 1525 30 1000 Brighton A 152J 1525 n 1 Difference to pay 20 tickets. In many instances, the broker opens in his books another account headed " Ticket Account," in which are posted all tickets on which stocks or shares are to be delivered or received. But the practice as to this varies very much in the different offices. Delivery of The issue and delivery of tickets are governed by precise regulations, which vary according to the security involved. (a) In the case of English and India Government, or Corporation Stock, the ticket must be issued by 12.30 o'clock on settling-day, and if not so issued, any loss or charge incurred will fall upon the issuer of the ticket. 2 (Z>) If the security be Colonial Government Inscribed Stocks the buyer must issue a ticket before 2 o'clock on ticket-day. 3 (c) The buyer of securities deliverable by deed of transfer may, as early as ]0 o'clock on ticket-day, or even on the previous day, and must before 12 o'clock on ticket-day, issue a ticket with his own name as payer of the purchase-money, which ticket shall contain the amount and denomination of the security; the name, address, and description of the transferee in full ; the price, the date, and the name of the member to whom the ticket was issued. Each intermediate N. means " name.' " Rule 81. Rule 82. THE COURSE OF BUSINESS. 69 seller to whom the ticket is passed must endorse on it the name of the person who sold to him. Persons receiving tickets after certain specified hours must make a note of the time on the back of the ticket. 1 The purchaser of these stocks and shares must state on the ticket the amounts in which he desires that they shall be transferred. 2 (c?) In the case of securities to bearer the tickets must be passed between 10 and 1 o'clock, but may not be issued later than 12.30. They do not bear any price, and accounts made up therewith must be settled at the making-up price of the day. 3 Bearer tickets must have distinctive numbers, and be for specified amounts, lesser amounts being settled without tickets. Every member must endorse on the ticket the name of the member to whom he pas-ses it. These tickets may not be split. 4 The ticket, having been duly issued by White, comes into Split the hands of Eobinson, who enters it in his "List." But tickets< Robinson sold 1000 Brighton "A" in a single lot, while he bought it in two lots of 500 each. Instead, therefore, of the single ticket which he has received from White, he is obliged to issue two tickets to Smith and Thomas in the same form, but for a smaller amount and consideration. These tickets are called "splits," and the split issued to Smith will be in the following form : 5 Split by Robinson & Co. 752 10 Form of 400 split ticket. Xo. loooo. 1501 500 Brighton A @ 152i To Jones, Esq. of etc., etc. 30 June, 1896. White & Co., pay. A purchaser cannot object to his ticket being split, and is boiind to pay for any portion of shares or stock which may 1 Rule 94. "- Rule 100. 3 See Rule 116. 4 Rule 116. 3 These forms vary slightly in the different offices, but for practical purposes they are the same. Xo details beyond such as are absolutely necessary are given on a split. 70 LAW AND PRACTICE OF THE STOCK EXCHANGE. be ^resented, provided that the number of shares is not less than ten, nor the value less than 200, 1 while in practice it is usual to accept any reasonable amount. The member, however, who splits a ticket is bound to pay any increased expense incurred thereby, owing to a multiplication of stamps and transfer fees. 2 A purchaser is also bound to repay to the deliverer any call made on registered shares, and paid by the deliverer, although, not due at the time of delivery. 3 Selling- If the vendor's broker does not leceive a ticket by 2.30 . ' c l c ^ ne mav re-sell, through the official brokers, the stock which he has ah eady contracted to sell elsewhere ; 4 and any loss incurred by such re-sale will be borne by the per&on to whose fault it is owing that the ticket did not reach the vendor's broker in due time. 5 But supposing Smith to have received the ticket within the time allowed by the rules, on the evening of ticket-day he will proceed to make out a transfer of the stock to Jones. This he will forward to Adams, the vendor, for execution. Delivery of the stock may be made either on settling-day or on any of the ten succeeding days, but if delayed longer, the purchaser's broker is at liberty to " buy in " the stock through the official brokers, and arjy loss occasioned by such buying-in will be borne either by the original vendor, or by any member who is proved to have caused undue delay in passing the ticket. 6 Clearing The majority of those securities in which a large volume louse. o Business i s US ually transacted during an account are settled by the aid of the Clearing House. In the case of highly speculative shares which do not "clear," it is not 1 Rule 101. -' Rule 94. 3 Rule 99. 4 If, on the other hand, stock which has been bought is not duly delivered, the purchaser is entitled, after notice, to buy in the stock, that is, to buy a similar amount of stock and charge the seller \\ith any loss incurred. J Rules 94, 103. Rules 10.5, 100. THE COURSE OF BUSINESS. 71 unusual to find the backs of the tickets endorsed with twenty <>r thirty names, and in times of great activity tickets bear- ing a hundred names are not unknown. But in such cases the tickets often pass through the same hands, and are endorsed with the same names several times during a single settlement; and it was to obviate this unnecessary labour that the Clearing House was introduced. All securities do not clear, but the tendency is to admit to the advantages of the system all the more active stocks and shares. 1 Nor are all members of the Stock Exchange members of the " clearing," for a jobber who deals exclusively in a non- clearing stock would obviously obtain no benefit from mem- bership. But as to those stocks which do clear, and those members of the Stock Exchange who are members of the clearing, the system is as follows : On the afternoon of contango day the Clearing House supplies to each member, on application, a number of sheets with a list of members of the clearing. In each fresh class of stock or shares a new sheet is used ; on one side of the sheet are set out the names of those from whom securities have been bought, 011 the other side the names of those to whom securities have been sold, with the respective amounts. The lists when made out are handed in to the Clearing House, the clerks make a trace through from the taker of securities to the deliverer, and on the morning of ticket-day they give a memorandum of any discrepancies between the sheets thus handed in and the sheets of other members of the clearing. In the case of registered securities names will be passed to or received from the Clearing House on ticket-day, according as, on balance, a member is to receive or deliver securities. In the case of securities to bearer on the morning of account-day a member will, on applying to the Clearing House, receive tickets on which to deliver such securities as, on balance, he has to take. Cheques are then paid in the ordinary way to the members to whom they are due, but do not pass through the 1 Shares in the Australian mining market did not clear until the year 1896, although a large business had been done in them for many months previously. 72 LAW AND PRACTICE OF THE STOCK EXCHANGE- Clearing House; while intermediate parties pay or receive the amounts due from or to them, as they would do in the ordinary course. Transfers On receipt from Adams of the transfer deed duly exe- and c< cates. and certifi " cuted, Smith will deliver it to White, either with the share certificate, or after having had the transfer certified by the company. If there is a certificate for the actual amount sold, that certificate is forwarded with the deed of transfer ; but if, for instance, Adams is selling a portion only of the holding, the transfer, with the certificate for the whole amount of holding, is forwarded to the company, who then certify on the deed that the certificate is at their office, and presently make out two new certificates, one for the purchaser, and a "balance" certificate for the vendor. 1 White, on receiving the deed of transfer, hands a cheque for the amount due to Smith, who, after deducting his com- mission, and paying to or receiving from the jobber anything that may be due to or from him, pays the residue over to- Adams. White, the purchasing broker, now forwards the deed of transfer to his client, Jones, for execution. It is then re- turned to White, who forwards it to the company for regis- tration. A few days later the vendor will receive a notice from the secretary of the company, stating that the transfer deed has been lodged for registration, and that if no notifica- tion to the contrary be received within a specified time, it will be assumed to be correct, and will be dealt with by the directors in the usual way. Xo answer being received to this communication, the company will in due time register the transfer, and issue a new certificate to Jones.- Proceed- ings are similarly conducted between Jones and his broker and the other vendor, Brown, and his broker, Thomas, and the transaction of purchase and sale is complete. 1 See Rule 102 aa to certification by the Share and Loan Department of the Stock Exchange. 2 As to the liability of a company in the case of forged certificates, or certificates, the issue of which is obtained by fraud, see pp. 233, 231, pott.. CHAPTER V. STOCK EXCHANGE SECURITIES. THE securities, with which the business of the Stock Ex- change is chiefly concerned, are British and foreign Govern- ment loans, the bonds, debentures and stock of such public bodies as borough and county councils, and the shares and stock of public companies. Government loans are either funded or unfunded. But Govern- the word "funded" has a more restricted meaning when mentloan?> applied to British Government securities than in the case of loans issued by the Governments of foreign countries. In its strict sense the word implies that the principal and interest of the loan are secured upon some specified source of revenue. In this sense British Government securities are unfunded, being payable generally out of the annual Parliamentary supplies, while many foreign loans are funded. The words are, however, more generally used to draw a distinction between those loans for the repayment of which a date is not fixed, and which are only redeemable at the option of the Government that issues them, and those which are repayable at a specified future date. In this sense the former are said to be funded, while the latter are unfunded ; and it is in this sense that the " British Funds " are spoken of. The British Funds, which comprise those securities that The are usually referred to as consols, are transferable at the Banks of England and Ireland. The National Debt Act, 1870, 1 contains the following provisions as to stocks, which are so transferable.- 1 33&S4 Viet. c. 71. 2 As to the actual method of proceeding in making a transfer at the bank, see p. 222, post. 74 LAW AND PRACTICE OF TEE STOCK EXCHANGE. iransfers. j n t]i e offices of the respective accountants of the Banks of England and Ireland books are kept, in which all transfers of such stocks are to be entered. Every transfer is to be signed either by the transferor himself, or by his agent, law- fully authorized, by writing under his hand and seal, such writing to be attested by two or more credible witnesses. The tiansferee may also sign if he thinks fit. 1 Deceased The interest of a deceased stockholder is transferable by holder. n * s executors or administrators notwithstanding any specih'o bequest thereof. But the banks are empowered to, and as a matter of fact do, require that the probate of the will of, or the letters of administration to, the deceased, shall be first left with them for registration, and in case of a will, all the executors who have pioved are required to join in the transfer. 2 Evidence The banks ma} 7 , if it appears to them expedient, before fero?stitle a ^ ow i n S an y transfer of stock to be made, require evidence of the title of the person who claims to make the transfer. 3 Joint- These stocks may be transferred to, and held in the names of an individual and a body corporate, and any such holding shall, in its relation to the banks, be deemed to be a joint tenancy. 4 Certifi- Stock certificates are issuable to the holders of certain of these funds, but only in sums of 50, and multiples of 50 not exceeding 1000. 5 Unless a name is inscribed in the certificate, the bearer is entitled to the stock, and the certifi- cate is transferable by delivery. The certificate may, how- ever, be converted into a nominal certificate by the insertion of the name, address, and description of some person, when it ceases to be transferable, and the person whose name is 1 33 & 34 Viet. c. 71, s. 22. 2 Ibid. s. 23. 3 Ibid. s. 24. 4 55 & 50 Viet. c. 39, s. 6 ; passed, no doubt, in view of the decision of Matthew, J., in the Law Guarantee and Trust Society v. Bank of England (1890), 24 Q.B.D. 40G ; G2 L.T. 496; 38 W.R. 493, that the Court would not grant a mandamus to compel the bank to register a transfer in the joint names of the society and one Hunter. 5 33 & 34 Viet. c. 71, ss. 2G, 27, 28. STOCK EXCHANGE SECURITIES. 75 inscribed, or persons deriving their title from him by devolution of law, will alone be recognized by the banks. 1 The banks are not fixed with notice of any trust in respect of any stock certificate or coupon, 2 and a trustee is not per- mitted to hold a certificate unless authoiized to do so by the terms of the tru^t. 3 If a certificate is lost, the banks will issue a new certificate on receiving a satisfactory indem- nity. 4 A fee not exceeding five shillings on every hundred pounds of stock included in the certificate is charged upon its issue. 5 Coupons are annexed to a stock certificate, comprising Coupons, the dividends payable for not less than the next five years in respect of the stock described in the certificate. On the expiration of this period fresh coupons are issued for a farther period of not less than five y<. ars, and so on. Coupons are payable at the chief establishments of the banks at the expiration of three clear days fiom the day of presentation, and at branch establishments, which are situate more than ten miles from the chief establishments, at the expiration of five clear days. By payment to the bearer of a coupon of the amount expressed therein, the banks obtain a complete discharge fiom all liability in respect of such coupon and the dividend represented thereby. 7 Income tax is deducted before payment of the coupons, even though the dividend represented is less than fifty shillings. 8 Before paying dividends the tanks may, if they think it Dividends, expedient, require evidence of the title of the person who claims to te entitled to receive them. 9 Executors and administrators may be requited to leave with the lanks for registration, the piobate of the will or the letters of adminis- tration. 10 If an infant or a lunatic is a joint stockholder, a letter of attorney from tbe person who is not under disability, 33 & 31 Viet. c. 71, s. 32. - Ibid. s. 30. Ibid. s. 29. See too 56 & 57 Viet. c. 53, s. 7. Ibid. s. 38 ; arid see 55 & 56 Viet. c. 39, s. 7. Ibid. s. 37, and third schedule. Ibid. s. 34. ' Ibid. s. 35. 8 Ibid. B. :< Ibid. s. 18. Ibid. s. 17. 76 LAW AND PRACTICE OF THE STOCK EXCHANGE. witnessed by two or more credible witnesses, is sufficient authority for the payment of dividends, though the banks may still require proof of the alleged infancy or unsoundness of mind. 1 The dividends may be paid by sending warrants through the post at the request of the stockholder, such request being made in a form approved by the banks and the Treasury. 2 Every warrant sent by post is deemed to b& a cheque, and may be crossed and treated accordingly/ 5 Foreign The chief matter to be considered in buying foreign Government securities is whether they are funded or un- funded, in the sense of being secured in some particular source of revenue or not. But it is to be noticed in this connection that the words " stock in the foreign funds " occurring in a will, have been held to comprise all foreign securities for which, the faith of a foreign country was- pledged. 4 As to what are Government securities, a direction to trustees to invest money " upon any of the stocks or funds of the Government of the United States of America, or the Government of France, or any other foreign Government," has been held to authorize an investment in New York and Ohio stock, and Georgia bonds. 5 But, on the other hand, a bequest of " foreign bonds amounting to about 8000," has been held not to include bonds issued by the colony of New South Wales, although such bonds formed part of the amount mentioned. Indian and Indian and Colonial bonds, debentures, and stock, are colonial created under a variety of statutes passed, in the case of securities. 1 33 & 34 Viet. c. 71, s 19. 2 Ibid. ss. 20, 21. 3 Ibid. s. 20 ; 32 & 33 Viet. c. 104 ; 21 & 22 Viet. c. 71), s. 2 ; 50 & 57 Viet. c. 64, s. 5, sub-s. 3. 4 Ellis v. Eden (1857), 23 Beav. 543; 26 L.J. Ch. 5:;:;. 5 Cadett v. Earle (1877), 5 Ch. D. 710; 46 L.J. Ch. 71)8. G Hull v. Hill (187G), 4 Ch. D. 97. STOCK EXCHANGE SECURITIES. 77 India, "by the English Government, and in the case of self- governing colonies, by the respective Colonial Governments. The repayment of such loans is in some instances guaranteed by the Imperial Government. 1 public bodies are authorized by the Acts which County and constitute them to raise loans for various purposes, and to ti^nstocks. issue stock which may be dealt with, transferred, and redeemed subject to prescribed regulations. The Local Government Act, 1888, for instance, authorizes county councils to borrow money for the purposes, and subject to the restrictions therein specified, and to create county stock by way of security. 2 Municipal corporations and other local authorities have similar powers. Public companies have either a limited or an unlimited Com- liability. In the great majority of the companies formed at shares, etc. the present time, the liability of the shareholders is limited under the provisions of the Companies Act, 1862, and com- panies whose shareholders' liability is so restricted, are obliged to bear the word " Limited " affixed to the company's name. 3 The liability of the shareholders may be limited by guarantee, or by the amount, if any, remaining unpaid upon their shares, the latter being the usual method of restricting liability. 4 When a company is limited by shares, if the shares are fully paid up so that there is no further liability upon them, the Act enables them to be converted into stock. 5 But when thus consolidated the stock still possesses all the qualities of shares, so that a bequest of shares in a company is sufficient to pass the stock as well. 6 1 See, for instance, 33 & 34 Viet. c. 82 (Canada Defences Loan Act, 1870). - 51 & 52 Viet. c. 41, SB. 09, 70. 3 25 & 2G Viet. c. 89, ss. 8, 9. 4 Ibid. s. 7. * Ibid. ss. 12, 28, 29. Morrics v. Aylmer (1875), L.R. 7 H.L. 717; 45 L.J. Ch. G14; 34 L.T. 218; 21 W.R. 587. 78 LAW AND PRACTICE OF THE STOCK EXCHANGE. Railway The shares of railway companies are divided into three companies. c ] asses . preferred, ordinary, and deferred; and these shares, when fully paid up, may be converted into corresponding classes of stock. The above shares rank in the order named for payment of dividends, and the preferred shares are accordingly a better security than are the other two classes. Nevertheless, a power to invest trust money "upon the security of the funds of any company incorporated by Act of Parliament," was formerly held not to authorize an investment in preference stock or shares. 1 Nor did a power to invest trust funds in " bonds, debentures, or other secu- rities, or the stocks or funds of any colony or foreign country," authorize an investment in the bonds of a French railway company the payment of the capital on which within fifty years was secured by a sinking fund, which, together with interest in the mean time, was guaranteed by the French Government. 2 But these cases are now qualified by the provisions of the Trustee Act, 1893. 3 The payments of the dividends and capital of such under- takings is sometimes guaranteed by another similar under- taking, or in the case of foreign railways by the Government of the foreign State. But in some instances that which is described as a guarantee amounts to nothing more than a preference of a particular class of shareholders. 4 Railway companies also issue debenture stock as security for loans of money, the repayment of the loan being charged upon the plant and other assets of the company for the time being. Subject to the provisions of the Trustee Act, 1893, even should the trust instrument give to the trustees an appa- rently uncontrolled discretion as to the investment of the trust funds, the Court will not permit an investment in 1 Harris v. Harris (1861), 29 Bear. 107. See, too, Stewart v. Sanderson (1870), L.K. 10 Eq. 26; 39 L.J. Ch. 337; 22 L.T. 10; 18 W.K. 278. 2 In re Langdale's Settlement Trusts (1870), L.R. 10 Eq. 39. 3 See Note, at end of chapter. 4 Bouch v. Sevenoaks, etc., Railway Co. (1879), 4 Ex. D. 133; 48 L.J. Ex. 338 ; 40 L.T. 560 ; 27 W.E. 507. STOCK EXCHANGE SECURITIES. 79 securities which are of a determinable character, and if such an investment is made will compel the trustees to refund any loss that may be incurred thereby. 1 In connection with the securities of which mention has Xegotia- been made, it will at times become a question of the greatest bllit - v - importance to notice whether they are negotiable or not. If they are negotiable, a person who takes them for value and in good faith, without any circumstances occurring to arouse suspicion, obtains a title independent of that of the person from whom he received them. 2 But if they are not negotiable, or, even though negotiable, if there are circumstances which should have put a person receiving them upon inquiry, 3 the holder will only take them subject to the equities which affected the title of his predecessor. A negotiable instrument is an instrument which is of such a nature that by the custom of trade it is transferable, like cash, by delivery, and is capable of being sued upon by the person holding it pro tempore, the property in the instrument passing to any person who takes it bond fide and for value, whatever may be the defects in the title of the person transferring it to him. 4 But in order that a usage among commercial men to treat any class of securities as negotiable may be recognized by the courts as a legally 1 Stewart v. Sanderson (1870), L.R. 10 Eq. 26; 39 L.J. Ch. 337; 22 L.T. 10; 18 W.E. 278. 2 London Joint Stock Sank v. Simmons [1892], A.C. 201 ; 61 L.J. Ch. 723 ; 6G L.T. 625 ; 41 W.R. 108 ; Bentinck v. London Joint Stock Sank [1893], 2 Ch. 120; 62 L.J. Ch. 358; 68 L.T. 315 ; 42 W.E. 140. * Sheffield v. London Joint Stock Sank (1888), 13 App. Cas. 333 ; 57 L.J. Ch. 986 ; 58 L.T. 735 ; 37 W.B. 33. But mere neglect on the part of a transferee of a negotiable instrument to avail himself of means at his disposal to detect the bad title of the transferor, does not constitute a defence to an action or the instrument by the transferee : Venables v. Baring [1892], 3 Ch. 527 ; 61 L.J. Ch. 609; 67 L.T. 110; 40 W.R. 699. 4 London and County Banking Co. v. London and Elver Plate Bank (1887), 20 Q.B.D. 232, at p. 239. See also A.-G. v. Bomcens (1838;, 4 M. A: W. 171 ; Goodicin v. Edbarts (1876), 1 App. Cas. 476 ; 45 L.J. Ex. 74* ; 35 L.T. 179 ; 24 W.R. 987. 80 LAW AND PRACTICE OF THE STOCK EXCHANGE. binding custom, it must be proved to be generally accepted and acted upon. 1 Value. A somewhat singular point with regard to what consti- tutes value was decided in the case of the London and County Banking Co. v. London and River Plate Bank. 2 The manager of the latter bank had incurred losses in Stock Exchange speculations, and as security for the losses foreign and colonial bonds, which belonged to clients of the Eiver Plate Bank and had been abstracted by the manager from the bank, were deposited with the London and County Bank, which received them in good faith and without notice. Subsequently the manager obtained the return of the bonds in order that they might be exhibited on the audit-day at the Eiver Plate Bank, and they were re-deposited with that bank. The manager was afterwards convicted of the fraud. The London and County Bank thereupon brought an action claiming the return of the bonds, on the ground that the River Plate Bank had not given any consideration for their re-deposit. The Court of Appeal, however, held that, as the manager was under a civil obligation to return the bonds or to pay their value, there was consideration for the re-deposit, and that, although at the time of the re-deposit the bank did not know of the proceedings, in the absence of evidence to the contrary their acceptance must be presumed, and that they were therefore bond fide holders of the bonds for value, and were entitled to retain them. Govern- In Gorgier v. Mieville, 3 Prussian bonds ; in Heseltine v. Securities. S*99 ers >* Spanish bonds ; in Goodwin v. Robarte, 5 fully paid Russian and Hungarian scrip ; and in the London and County 1 Crouch v. Credit Fonder of England (1873), L.R. 8 Q.B. 374; 42 L..T. Q.B. 183 ; 29 L.T. 259 ; 21 W.K. 940. The length of time during which the custom has existed appears to be only material as determining the generality of its acceptance; see the judgment of Cockburn, C. J., in Goodwin v. Robarts, L.R. 10 Ex., pp. 355, 356. For a general exposition of the history of the law of negotiability, see L.R. 10 Ex., pp. 338-358, and Lang v. Smyth (1831), 7 Bing. 284. - (1888), 21 Q.B.D. 535 ; 57 L.J. Q.B. 601 ; 37 W.R. 89. 3 (1824), 3 B. & C. 45. 4 (1848), 1 Ex. 850; 18 L.J. Ex. 166. 5 (1870). 1 App. Cas. 476 ; 45 L.J. Ex. 748 ; 35 L.T. 179 ; 21 W.R. 987. STOCK EXCHANGE SECURITIES. Sli Banking G). v. London and Rtver Plate Bank, 1 Unified Egyptain bonds, Egyptain Preference Government bonds, and New South Wales bonds, were respectively held to be negotiable instruments. In Crouch v. Credit Fonder of England ' 2 it was held that Deben- debentures issued under the company's seal, and subject tures - to certain conditions as to half-yearly drawings, were not negotiable, and the Court expressed a doubt as to whether instruments under the seal of a corporation could under any circumstances be regarded as negotiable. But it seems pro- bable that now, provided a company is empowered by its articles of association to issue negotiable instruments, if it is proved that securities issued by such company customarily pass by delivery, the courts will hold them to be negotiable. 3 In Bumball v. Metropolitan Bank,* scrip certificates, which Scrip cer- certified that after payment of all instalments the bearer would be entitled to be registered as the holder of shares in the bank, were held to be negotiable. Although the question has not yet come before the courts, Share there does not appear to be any reason to doubt that where warrants * shares in a company are transferable by share warrants to bsarer which customarily pass by delivery merely, vesting in the person who for the time being holds them the property in the shares, and entitling him to be placed on the register in respect of the shares, such share warrants would be held to be negotiable instruments. 5 1 (1888), 21 Q.B.D. 535 ; 57 L.J. Q.B. 601 ; 37 W.R. 89. 2 (1873), L.R. 8 Q.B.374; 42 L.J. Q.B. 183; 29 L.T. 259; 21 W.R. 946. 1 See L.R. 10 Ex., p. 356 ; Ex parte City Bank (1868), L.R. 3 Ch. 758; 18 L.T. 894 ; 16 W.R. 919 ; Ex parte Colborne and Strawbridge (1870), L.R. 11 Eq. 478 ; 40 L.J. Ch. 93 ; 23 L.T. 515 ; 19 W.R. 223 ; Venables v. Baring [1892], 3 Ch. 527; 61 L.J. Ch. 609; 67 L.T. 110; 40 W.R. 699. 4 (1877), 2 Q.B.D. 194 ; 46 L.J. Q.B. 346 : 36 L.T. 240 ; 25 W.R. 366. 5 Section 27 of the Companies Act Amendment Act, 1867 (30 & 31 Viet. c. 131) authorizes the issue of share warrants for fully paid-up shares or for stock, by companies whose regulations, either as originally framed, or as altered by special resolution, provide for such warrants. And sec. 28 provides that when such warrants are issued mere delivery of the warrants shall pass the property in the shares. G 82 LAW AND PRACTICE OF THE STOCK EXCHANGE. NOTE. The Trustee Act, 1893, 1 makes the following provisions as to the investment of trust funds : Section 1. A trustee may, unless expressly forbidden by the instrument (if any) creating the trust, invest any trust funds in his hands, whether at the time in a state of investment or not, in manner following ; that is to say : (a) In any of the parliamentary stocks, or public funds, or Government securities of the United Kingdom ; (6) On real or heritable securities in Great Britain or Ireland ; (c) In the stock of the Bank of England or the Bank of Ireland ; (d) In India three and a half per cent, stock and India three per cent, stock, or in any other capital stock which may at any time hereafter be issued by the Secretary of State in Council of India under the authority of Act of Parlia- ment, and charged on the revenues of India ; (e) In any securities the interest of which is for the time being guaranteed by Parliament ; (/) In consolidated stock created by the Metropolitan Board of Works, or by the London County Council, or in deben- ture stock created by the Receiver for the Metropolitan Police District ; ((/} In the debenture or rent-charge, or guaranteed or preference stock of any railway company in Great Britain or Ireland incorporated by special Act of Parliament, and having during each of the ten j'ears last past before the date of the investment paid a dividend at the rate of not less than three per centum per annum on its ordinary stock ; (A) In the stock of any railway or canal company in Great Britain or Ireland whose undertaking is leased in per- petuity, or for a term of not less than two hundred years, at a fixed rental to any such railway company as is mentioned in sub-section (9), either alone or jointly with any other railway company ; (*) In the debenture stock of any railway company in India the interest on which is paid or guaranteed by the Secre- tary of State in Council of India ; (./) In the "B" annuities of the Eastern Bengal, the East Indian, and the Scinde, Punjaub, and Delhi railways, and any like annuities which may at any time hereafter be created on the purchase of any other railway by the Secre- tary of State in Council of India, and charged on the revenues of India, and which may be authorized by Act 56 & 57 Viet. c. 53. STOCK EXCHANGE SECURITIES. 83 of Parliament to be accepted by trustees in lieu of any >T"ek held by them in the purchased railway; also in deferred annuities comprised in the register of holders of annuity Class D, and annuities comprised in the register of annuitants Class C of the East Indian Railway Company ; (&) In the stock of any railway company in India upon which a fixed or minimum dividend in sterling is paid or guaran- teed by the Secretary of State in Council of India, or upon the capital of which the interest is so guaranteed ; (?) In the debenture or guaranteed or preference stock of any company in Great Britain or Ireland, established for the supply of water for profit, and incorporated by special Act of Parliament or by Royal Charter, and having during each of the ten years last past before the date of investment paid a dividend of not less than five pounds per centum on its ordinary stock ; (m) In nominal or inscribed stock issued, or to be issued, by the corporation of any municipal borough having, according to the returns of the last census prior to the date of invest- ment, a population exceeding fifty thousand, or by any County Council, under the authority of any Act of Parlia- ment or Provisional Order ; (ri) In nominal or inscribed stock issued or to be issued by any commissioners incorporated by Act of Parliament for the purpose of supplying water, and having a compulsory power of levying rates over an area having, according to the returns of the last census prior to the date of invest- ment, a population exceeding fifty thousand, provided that during each of the ten years last past before the date of investment the rates levied by such commissioners shall not have exceeded eighty per centum of the amount authorized by law to be levied ; (o) In any of the stocks, funds, or securities for the time being authorized for the investment of cash under the control or subject to the order of the High Court ; l And may also from time to time vary any such invest- ment. 1 The securities so authorized at present are contained in Order 22, Hule 17, of the Supreme Court Ptules, 1888. With the exception of Exchequer bills the above list apparently includes all the securities contained in the Order, but the provision gives a power extending the list of trust investments without the necessity of resorting to an Act of Parliament. 84 LAW AND PRACTICE OF THE STOCK EXCHANGE. Section 2. (1) A trustee may under the powers of this Act invest in any of the securities mentioned or referred to in sec. 1 of this Act, notwithstanding that the same may be redeemable, and that the price- exceeds the redemption value. (2) Provided that a trustee may not under the powers of this Act purchase at a price exceeding its redemption value any stock mentioned or referred to in sub-ss. (g\ (i), (&), (Z), and (m) of sec. 1, which is liable to be redeemed within fifteen years of the date of the pur- chase at par or at some other fixed rate, or purchase any such stock as is mentioned or referred to in the sub-sections aforesaid, which is liable to be redeemed at par or at some other fixed rate, at a price- exceeding fifteen per centum above par or such other fixed rate. (3) A trustee may retain until redemption any redeemable stock, fund, or security which may have been purchased in accordance with the powers of this Act. Moreover, unless the instrument which creates the trust forbids such an investment, under Section 5. (2) A trustee who is empowered to invest in the mort- gages or bonds of any railway company or of any other description of company, may invest in the debenture stock of a railway company or such other company ; (3) A trustee who is empowered to invest money in the debentures or debenture stock of any railway or other company, may invest in any nominal debentures or nominal debenture stock issued under the Local Loans Act, 1875 ; l (4) A trustee who is empowered to invest money m securities in the Isle of Man, or in securities of the Government of a colony, may invest in any securities of the Government of the Isle of Man under the Isle of Man Loans Act, 1880 ; 2 (5) A trustee who has a power to invest trust-moneys in or upon' the security of shares, stock, mortgages, bonds, or debentures of com- panies incorporated by or acting under the authority of an Act of Parliament, may invest in or upon the security of mortgage debentures duly issued under and in accordance with the Mortgage Debenture- Act, 1865. 3 1 38 & 39 Viet. c. 83. 43 & 44 Viet. c. ' 28 & 29 Viet. c. 78. CHAPTER VI. FORMATION OF THE CONTRACT. THE provisions of the Statute of Frauds, 1 which require written evidence of certain classes of contracts, so rarely by Statute affect contracts for the purchase and sale of stocks and shares, that it may be broadly stated that writing is not required in case of such agreements. For stocks and shares are not goods, wares, and merchandise within the meaning of the seventeenth section of the statute ; 2 nor, as a general rule, do they fall within the terms of the fourth section, by which a written memorandum is prescribed as a condition precedent to taking action either where the subject of the agreement is an interest in or concerning land, 3 or where the agreement is one, the performance of which, at the time of making it, the parties contemplate extending over a longer period than one year. On the first of these three points the law is too well settled to admit of any doubt, or apparently of any excep- tion, and it may now be taken as correct that a contract for 1 29 Car. II. c. 3. Humble v. Mitchell (1839), 11 A. & E. 205; Duncuft v. ATbrecht (1841), 12 Sim. 189; Bmclby v. Bell (1846), 3 C.B. 284; 16 L.J. C.P. 18. Following the principle of these decisions, scrip in a railway company has been held not to be goods, wares, and merchandise within the mean- ing of the Stamp Act, 55 Geo. III. c. 184; Knight v. Barber (1846), 16 M. & W. 66; 16 L.J. Ex. 18. Moreover, shares are apparently not goods within the meaning of the Sale of Goods Act, 1893. 3 Bradley v. Eoldsicortk (1838), 3 M. & TV. 422; Duncuft v. Albrecld, *upra; Tempest v. Kilner (1846), 3 C.B. 249; Walker v. Bartlett (1856), 18 C.B. 845; 25 L.J. C P. 203. 86 LAW AND PRACTICE OF THE STOCK EXCHANGED the disposal of stocks and shares will, under no circum- stances, fall within sec. 17. Likewise, for practical purposes- it may be taken as equally certain that such a contract will not require a written note or memorandum under sec. 4. At the end of the last century, shares in an association for the navigation of the river Avon were held to be real estate for purposes of dower ; * but since that date the courts have been unanimous in deciding that the only interest which a shareholder obtains is a right to participate in the profits- of the undertaking. 2 Again, contracts on the Stock Ex- change are so universally completed at the settlement following the account in which they are made, that a special agreement is required if either of the parties desires to fix a different date for performance, and a stipulation that performance should not take place within a year would be rendered very improbable by the fact that the Committee- would in that case refuse to recognize the contract. What is a Under these circumstances the question of what con- dum with- stitutes a memorandum sufficient to satisfy the requirements in sec. 4. o f ^he statute becomes one of merely academic interest. Still, it may not be out of place to devote a few lines- to its discussion. The method of transferring securities is- quite distinct from the question of what evidence is required of the existence of the contract. But inasmuch as the note or memorandum required by the statute may be made at any time before action, and any written document acknow- ledging liability and setting out the consideration will be sufficient, if signed by the party to be charged or his duly authorized agent, it is clear that a transfer in writing may- serve the same purpose as a note made at the time of the sale. Shares may be either "bearer" shares transferable by delivery of share warrants merely, or they may be- deliverable by some written instrument either under seal or under hand only. In the former case, if the shares were to fall within the fourth section there would be- nothing subsequent to the date of the contract to remedv 1 Buclteridge v. Ingram (1795), 2 Yes. jun. 652. 2 Bulmer v. Norris (1800), 30 L.J. C.P. 25. FORMATION OF THE CONTRACT. 87 the want of writing. In the latter case, the instru- ment, when executed, would no doubt supply the element that was wanting to make the contract actionable, one or both the parties being chargeable, as the transfer deed had been executed by both the parties or by the vendor only. 1 In a large majority of cases the transfer takes place by means of a written instrument of one description or another, and the transfer is executed by both the vendor and the purchaser. Still, cases do undoubtedly occur in which either shares are transferred by delivery only, or the purchaser neglects or refuses to execute the deed of transfer, and they are probably sufficiently numerous to make the question deserving of attention. It might be that, were the question to arise, although no note or memorandum had passed between the actual parties to the final contract, the entries in the respective jobbing-books of their authorized agents would be held to be sufficient to take the case out of the statute, and that such entries would, where necessary, be allowed to be explained by oral evidence as patent ambiguities. Just as the owner of a field may make a binding contract Subjects for the sale of the following season's wheat or hay crop, the contract, prospective owner of shares, or the man whose only prospect of obtaining the shares which he undertakes to deliver is by purchase in the market before the time for completion arrives, may make a perfectly legal contract for their sale. 2 So, too, a prospective sale may be made of dividends not yet declared, and the contract will be enforced against the vendor. 3 And the holder of shares upon which no instal- ments have been paid may make a valid contract for their 1 Specific performance of a contract to take shares may be decreed against a purchaser, although he has failed to sign the instrument of transfer ; see pp. 93, 152, 218, post. - Olimerson v. Coles (1816), 1 Stark, 496; HibUewUte v. M' Marine (1839), 5 M. &. W. 462 ; 8 L.J. Ex. 271 ; Mortimer v. McCallan (1840), 6 M. & W. 58; 9 L.J. Ex. 73; S.C. 7 M. & W. 20; 10 L.J. Ex. 13G; in error, 9 M. & W. 630 ; 11 L.J. Ex. 429. 3 Marten v. Gibbon (1875), 33 L.T. 561; 24 W.R. 87. S8 LAW AND PRACTICE OF THE STOCK EXCHANGE. sale, such a contract not being nudum pactum, because the possibility that the shares will become valuable is sufficient to constitute an agreement to transfer them a good con- sideration. 1 But in order that a contract for the purchase 'of shares in a company may be binding, the company must actually exist, and a purchaser of shares in a proposed undertaking may recover his money from the vendor if the undertaking is abandoned. 2 Moreover, the purchaser of scrip certificates in a proposed railway company which has not obtained an Act of Parliament is, it seems, not bound, in the absence of special agreement, to take a transfer of the corresponding shares when the Act which incorporates the company has been passed. 3 'Stock A contract made on the Stock Exchange embraces all the rules and usual characteristics of a legally enforceable agreement, with customs such additions and alterations as the rules and customs embodied. peculiar to the market may introduce into all contracts which are concluded there. For every one who contracts, or authorizes another to contract for him, in a market which is governed by special rules and customs, is taken to be aware of those rules and customs, and either himself to make the contract, or by implication to authorize his agent to make it, with reference to them, 4 unless they are illegal, 1 Cheale v. Kenvcard (1858), 3 De G. & J. 27 ; 27 L.J. Cb. 784. - Kempson v. launders (182G), 4 Bing. 5. 3 Jackson v. Cocker (1841), 4 Beav. 59. But see p. 219, post. 4 Sutton v. Tatham (1839), 10 A. & E. 27 ; 8 L.J. Q.B. 210; Baylijfe v. Butterworth (1847),! Ex. 425; 17 L.J. Ex. 78; Pollock v. Stables (1848), 12 Q.B, 765; 17 L.J. Q.B. 352 ; Sweeting v. Pearce (1859), 7 C.B. N.S. 449 ; 29 L.J. C.P. 265 ; Grissell v. Brisloice (1868), L.R. 3 C.P. 112; 37 L.J. C.P. 89; 17 L.T. 564; 16 W.R. 248; Hodykinson v. Kelly (1868), L.R. 6 Eq. 496; 37 L.J. Ch. 837; 16 W.R. 1078; Edbimon v. Mollett (1875), L.R. 7 H.L. 802; 44 L.J. C.P. 362; 33 L.T. 544; Barker v. Edtcards (1887), 57 L.J. Q.B. 147 ; Westropp v. Solomon (1849), 8 C.B. 345; 19 L.J. C.P. 1 ; BaijJey v. Wilkins (1849), 7 C.B. 886; 18 L.J. C.P. 273; Taylor v. Stray (1857), 2 C.B. N.S. 175; 26 L.J. C.P. 185; affirmed -2 C.B. N.S. 197; 26 L.J. C.P. 287; Smith v. Undo (1859), 5 C.B. N.S. 587; 27 L.J. C.P. 335; Chapman v. Shepherd (1867), L.R. 2 C.P. 228; 36 L.J. C.P. 113; 15 L.T. 447; 15 W.R. 314; Duncan v. Hill (1873)', L.R. 8 Ex. 242; 42 L.J. Ex. 179; 29 L.T. L>68 ; 21 W.R. 797. FORMATION OF THE CONTRACT. 89 as being contrary to public policy, 1 or, as regards customs, -are, in the opinion of the Court, unreasonable as against any non-member who was not aware of them, and are not proved to have been brought to his notice. 2 The latter part of the exception relates to customs only; for, in the case of -contracts made on the Stock Exchange, the reasonableness of the printed rules cannot be called in question by the parties, since their attention is called to the rules by a notice on the contract notes, and by accepting the notes they elect to be bound by the rules. But the customs stand on a somewhat different footing. They are not expressly brought to the parties' notice in the ordinar} 7 course of business, but a knowledge of them is presumed from the fact that the parties are dealing in the market in which they obtain. So long as they are fair and reasonable a non-member is bound by them, although he was not aware of their existence at the time when he entered into the contract. But if the courts should hold any custom to be unreasonable, a non-member will not be bound by a contract in which it is embodied, unless it can be shown that he had an actual and not merely -a constructive knowledge. In order to establish a particular course of dealing as When a custom binding upon those who transact business upon j s i e g a ilv the Stock Exchange, the practice must be shown, not merely to prevail in an office here and there, but to be so iiniversally recognized and acquiesced in that a vast majority of persons who have dealings upon the Stock Exchange cannot fail to "be aware of it. 3 1 Barker v. Edwards, supra. 2 Maxted v. Paine (1869), L.R. 4 Ex., p. 211; Robinson v. Mollett, -supra] Hamilton v. Young (1881), 7 L.R. Ir. 289; Xeilson \. James (1882), 9Q.B.D. 546; 51 L.J. Q.B. 369; 46 L.T. 791 ; Perry v. Barnet (1885), 15 Q.B.D. 388; 54 L.J. Q.B. 466; 53 L.T. 585; Seymour v. Bridge (1885), 14 Q.B.D. 460 ; 54 L.J. Q.B. 347 ; Harher v. Edwards, supra ; Coates v. Pacey (1892), 8 T.L.E. 351, 474. 3 Wildy v. Stephenson (1882), 1 C. & E. 3. See also Dent v. NicJcalls -(1873), 30 L.T. 644 ; 22 W.E. 218 ; Meyer v. Drt^er (1864), 16 C.B. X.S. 646; 33 L.J. C.P. 289 ; 10 L.T. 612; 12 W.E. 983; Mackenzie v. Durilop (1856), 3 Macq. H.L. 22. 90 LAW AND PRACTICE OF THE STOCK EXCHANGE,. Nature J n Robinson v. Mollett, 1 Brett, J., thus described the nature- and growth of a custom : " Customs of trade, as distinguished from other customs, are generally courses of business invented or relied upon in order to modify or evade some application which has been laid down by the courts, of some rule of law to business, and which application has seemed irksome to some merchants. And when some such course of business is proved to exist in fact, and the binding effect of it is disputed, the question of law seems to be, whether it is in accordance with the fundamental principles of right and wrong. A mercantile custom is hardly ever invoked, but when one of the parties to the dispute has not, in fact, had his attention called to the course of business to be enforced by it ; for if his attention had in fact been called to such course of business, his contract would be specifically made in. accordance with it, and no proof of it as a custom would be necessary. A stranger to a locality, or trade, or market, is not held to be bound by the custom of such locality, or trade, or market, because he knows the custom, but because- he has elected to enter into transactions in a locality, trade, or market, wherein all who are not strangers do know and act upon such custom. When considerable numbers of men of business carry 011 one side of a particular business, they are apt to set up a custom which acts very much in favour of their side of the business. So long as they do not infringe some fundamental principle of right and wrong they may establish such a custom ; but if, on dispute before a legal form, it is found that they are endeavouring to enforce some rule of conduct which is so entirely in favour of their side that it is fundamentally unjust to the other side, the courts have always determined that such a custom, if sought to be enforced against a person in fact ignorant of it, is unreasonable,, contrary to law, and void." 2 Novation. I n passing from the possession of one holder into that 1 L.E. 7 H.L., at p. 817. 2 As to the admissibility of evidence of a custom, see Fleet v. Murton- (1871), L.K. 7 Q.R 126; 41 L.J. Q.B. 49 ; 26 L.T. 181 ; 20 W.R. 97. FORMATION OF THE CONTRACT. 91 of another, securities generally become the subject of more than a single contract, the process of novation or the substitution of a new contract for one already existing which is comparatively rare in the case of ordinary com- mercial contracts, being an almost inseparable incident of Stock Exchange transactions. When tracing the course of a business transaction on the Stock Exchange, 1 it was shown that when a member of the public desires to buy or sell securities, he instructs a broker, and the broker thereupon enters into an agreement with a jobber for the purchase or sale of the amount required. This is a contract which can be enforced by and against the jobber unless, before the time for completion arrives, there is substituted for it another contract between the same or different parties. When the jobber enters into such a contract he usually has no intention of either making or accepting an actual delivery of stock or shares. His intention is to act as a medium for bringing together two persons, one of whom desires to sell, and the other to buy, the same securities, and then to drop out and leave these parties to complete the transaction. And what he in fact undertakes and by the custom of the Stock Exchange is entitled to do is, either himself to take or give delivery of the securities on the following account day, or to find some one who will do so in his place. 2 In furtherance of this object, when ticket- day arrives, the jobber by means of a ticket passes to the vendor the name of the purchaser who is to take his place by accepting a transfer of and paying for the shares. The name supplied by the jobber must be that of a person who is competent to contract and has given authority for the use of his name. " The jobber's contract, therefore,'* said Lord Chelmsford, in Nlckalls v. Merry? " is of this description : It is at first a temporary and conditional contract, but it becomes 1 See Chapter IV. 2 Bowing v. Shepherd (1871), L.R. 6 Q.B. 309; 40 L.J. Q.B. 129; 24 L.T. 721 ; 19 W.R. 852. 3 (1875), L.R. 7 H.L., at p. 5i4. See too the judgment of Mellish, L.J., in the same case in the Court of Appeal, L.R. 7 Ch., at p. 758. 02 LAW AND PRACTICE OF TEE STOCK EXCHANGE. absolute upon his failure to furnish Jby name-day the name of a person capable and willing to become the transferee of the shares, so that the seller by executing a transfer may make with him a new contract in substitution of the original one with the jobber. . . . The jobber is not required to give the name of a person merely, but to give the name of a person as the purchaser, meaning, of course, a person capable of becoming the purchaser, whose contract will be binding and enforceable against him." Although the new purchaser must be capable and willing to contract, it is not apparently essential to the validity of the contract that he should be a person of substance capable of performing the contract. 1 As soon as the name is passed to and accepted by the vendor, and the transfer is accepted and the securities paid for by the purchaser, privity of contract is established between these parties,' 2 the liability of the purchaser under the new contract is substituted for that of the jobber under the original one, and the jobber is discharged. "It may be well to repeat," said Lord Cairns, in Coles v. Bristowe* "in order to prevent mis- apprehension, that in our opinion the liability of the defen- dants" (i.e. the jobbers) "continued entire and unbroken until there was an acceptance by the plaintiff, by the preparation and execution of the transfers, of the names sent in by the defendants as purchasers, and until there was an acceptance of the shares by the purchasers through the delivery to their brokers of, and payment by their brokers for, the transfers and certificates of the shares. It is difficult to see how this liability can continue after the transfer, as in the present case, of the shares to other persons." The formation of this new contract is complete without 1 Maxtnl \. Paine (1869), L.R. 4 Ex. 203; 38 L.J. Ex. 129 ;i (1871), L.R. 6 Ex. 132; 40 L.J. Ex. 57; 24 L.T. 14 ( J ; 19 W.R. 527; Merry v. NicJtalls (1872), L.R. 7 Ch. 73:-l; 26 L.T. 490 ; 20 W.R. 531; Nickalls v. Merry (1875), L.R. 7 ILL. 530 ; 45 L.J. Ch. 575 ; 32 L.T. 02:5 ; 23 W.R. 003. 2 Shepherd v. MvrpJiy (18G8), 10 W.R. 948. 3 L,R. 4 Ch., at p. 12. FORMATION OF TEE CONTRACT. 93 the execution of the transfer by the purchaser ; 1 for the purchaser may become equitable owner where, through no fault of his own, he is prevented from acquiring legal ownership, as, for instance, by the winding-up of the com- pany. 2 A fortiori, registration of the purchaser's name is not necessary, the vendor while on the books of the company holding as trustee for the purchaser. 3 And even should the directors refuse to recognize the transfer, the contract is still complete as between vendor and purchaser. 4 1 Musgrave and Hart's Case (1867), L.R. 5 Eq. 193 ; 37 L.J. Ch. 161 ; 17 L.T. 313 ; 16 W.R. 247 ; Hodgkinson v. Kelly (1868), L.R. 6 Eq. 496 ; 37 L.J. Ch. 837; 16 W.R. 1078; Hawkins v. Maltby (1869), L.R. 4 Ch. 200; 38 L.J. Ch. 313; 20 L.T. 335 ; 17 W.R. 557 ; Crabb v. Miller (1871), 24 L.T. 892; 19 W.R. 882; Fenwick v. Buck (1871), 24 L.T. 274; 19- W.R. 597. - Taylor v. Stray (1857), 2 C.B. N.S. 175, 197 ; 26 L.J. C.P. 185, 287; Stray v. Russell (1859), 1 El. & El. 888; 29 L.J. Q.B. 115; 1 L.T. 162, 443 ; 8 W.R. 240 ; Chapman v. Shepherd (1867), L.R. 2 C.P. 228 ; 36 L.J. C.P. 113; 15 L.T. 477; 15 W.R. 314; Biederman v. Stone (1867), L.R. 2 C.P. 504 ; 36 L.J. C.P. 198 ; 16 L.T. 415. 3 Ecans v. Wood (1867), L.R. 5 Eq. 9 ; 37 L.J. Ch. 159; 17 L.T. 190 ; 16 W.R. 67 ; HodgUmon v. Kelly (1868), L.R. 6 Eq. 496 ; 37 L.J. Ch. 837; 16 W.R. 1078; Castellan v. Hobson (1870), L.R. 10 Eq. 47; 39 L.J, Ch. 490 ; 22 L.T. 575 ; 18 W.R. 731 ; Fenwick v. Buck (1871), 24 L.T. 274 ; 19 W.R. 597. 4 Taylor v. Stray (1857), C.B. X.S. 175, 197; 26 L.J. C.P. 185, 287; Stray v. Russell (1859), 1 El. & El. 888 ; 29 L.J. Q.B. 115; 1 L.T. 162, 443 ; 8 NV.R. 240. 94 LAW AND PRACTICE OF TEE STOCK EXCHANGE. CHAPTER VII. RIGHTS OF THE PARTIES UNDER THE CONTRACT. Section I. Broker and Principal Sec. II. Broker and Jobber Sec. III. Jobber and Principal Sec. IV. Vendor and Purchaser. SECTION I. BROKER AND PRINCIPAL. Broker's THE employment of a broker by an intending purchaser or authority, vendor of securities creates a contract of agency. To this con- of agency, tract the general law of agency applies, except in so far as it is modified by the rules and customs of the Stock Exchange. 1 The contract between broker and principal is concluded as soon as the principal has given his instructions to buy or sell, and the broker has signified his acceptance by executing them, or such part of them as he can execute where he is unable to carry out the whole. For an offer to buy or sell a certain amount of shares or stock at a price named is bind- ing upon the broker as to any part thereof, and is therefore also binding upon the principal. 2 The instructions should be clear and unambiguous, for they be capable of more than a single construction, and should the broker in consequence honestly act contrary to the intention of his principal, the latter cannot sub- sequently repudiate the contract on the ground that it is not the contract which he intended should be made. " Now, it appears to me," said Lord Chelmsford, in Ireland v. Livingston, 3 " that if a principal gives an order to an agent Ambiguous instructions. 1 Maxted v. Paine (1869), L.R. 4 Ex., at p. 211. 2 Rules 80, 91, 113. 3 (1872), L.R. 5 H.L., at p. 416; and see Tallentire v. Ayre (1884), 1 T.L.R. 143; Loring v. Davis (1886), 32 Ch. D. 625; 55 L.J. Ch. 725 ; 54L.T. 899;34W.R, 701. EIGHTS OF TEE PARTIES UNDER THE CONTRACT. 95 in such uncertain terms as to be susceptible of two different meanings, and the agent bond fide adopts one of them and ^cts upon it, it is not competent to the principal to repudiate the act as unauthorized because he meant the order to be read in the other sense of which it is equally capable. It is a fair answer to such an attempt to disown the agent's authority to tell the principal that the departure from his intention was occasioned by his own fault, and that he should have given his order in clear and unambiguous terras." So that where a principal instructs his broker to purchase a particular security, and that security not being procurable in the market, the broker purchases something which, is generally dealt in in substitution for it, the principal may be compelled to take what the broker has bought, although it is not what he intended to order. In Mitchell v. Newhall 1 the defendant instructed the plain- Purchase of liff to purchase for him fifty shares in a foreign railway fetterwhen mi AT i ,1 agoodexecu- oompany. Inere were at the moment no shares in the tion of order market, as the foreign Government had not granted a con- cession. But according to the evidence of members of the Stock Exchange letters of allotment were commonly bought and sold as shares. The plaintiff bought a letter of allotment for fifty shares, and it was held that there was evidence upon which a jury was justified in coming to the conclusion that this was a good execution of the order. The principal may revoke the authority which he has Kevoca- .given to his broker to contract on his behalf, at any time authority, before the broker has done some act towards executing the in- structions which he has received. But if not countermanded the authority will, it seems, expire automatically on the fol- lowing settling-day ; for since that is the usual time for the completion of contracts, it would probably, in the absence of any special agreement, be held to be a reasonable time for the 1 (1846), 15 M. & W. 308 ; 15 L.J. Ex. 292. See too Lamert v. Heath {1846), 15 31. & W. 486 ; 15 L.J. Ex. 297 ; Tempest v. Kilner (1846), 3 C.B. 249; Morrice v. Hunter (1866), 14 L.T. 897. 96 LAW AND PRACTICE OF THE STOCK EXCHANGE. execution of orders. 1 But when once, in compliance with his principal's instructions, the broker has placed himself in such a position that he cannot retreat from it without loss to himself, the principal is not at liberty to withdraw the authority which he has given, nor to demand the return of his money where he has already paid it to the broker. 2 In Fletcher v. Marshall* where a broker was instructed by the plaintiff to buy scrip certificates of shares in a new railway company, and, owing to a delay on the part of the company in issuing the certificates, the broker was unable to deliver them on demand fourteen days after the next settling-day, it was held that a reasonable time for delivery had elapsed, and that the plaintiff was entitled to demand his money from the broker, although the latter had used reasonable endeavours to obtain delivery of the certificates, and would by the rules of the Exchange be liable to the jobber from whom he had bought. The broker would probably now protect himself against a similar loss by stating in the bought note that the purchase was for delivery and not for a fixed date, though a similar verdict would scarcely be likely to be given again. Indeed, in the following year it was decided in a very similar case, 4 that where the scrip had been called in by the directors between the time of purchase and the time when it should have been delivered, the non- performance of the contract at the agreed time did not furnish a reason for repudiation of his liability by the principal, since it was due to circumstances over which neither party had any control ; and that the contract was- for delivery of scrip on the 29th of August, if not then called in, otherwise for share certificates as soon as they should be- issued. And in Fenwick v. Buck 5 the purchaser of shares- 1 See Lawford v. Harris (1896), 12 T.L.R. 275, where it was held that if a principal gives instructions to sell and fixes a limit for such sale, such limit does not hold good beyond the end of the current account. Head v. Anderson (1884), 13 Q.B.D. 779; L.J. Q.B. 532; 51 L.T. 55 ; 32 W.R. 950. 3 (1846), 15 M. & W. 755. 4 M'Ewen v. Woods (1847), 11 Q.B. 13. 5 (1871), 24 L.T. 274; 19 W.R. 597. RIGHTS OF TEE PARTIES UNDER THE CONTRACT. 97 was not permitted to repudiate his liability merely because the transfer was not handed to him for execution until fourteen days after the settling-day for which the shares were bought. When a principal instructs his broker to enter into Limits of contracts of purchase and sale on his behalf, it is of course authorit y always open to him to limit, in such manner as he may think press, fit, the broker's authority to bind him, provided that the broker will assent to his terms. "If the principal," said Cleasby, B., in the second action of Maxted v. Paine, " forbids the broker to bargain for him according to the peculiar usages of the Stock Exchange, and limits his authority to specified contracts, the broker could not bind him to a contract to be performed according to those usages." l The general rule of the law of agency is, that if an agent has authority to contract, even though such authority is limited, a party who, without notice of the existence of any limitation, enters into a contract with the agent as agent within the apparent scope of the agency, is not bound to inquire as to the extent of the authority, but may recover from the principal the full value under the contract ; but that if the contract is entirely unauthorized by the professed principal, the other contract- ing party is obliged to look for his remedy to the person who made the contract alone, although the latter held himself out as an agent.' 2 For instance, if a broker receives securities with authority to raise money upon them to a limited amount, a person who, without notice that any limitation has been imposed, advances a larger sum than that authorized to be borrowed, is entitled to hold the securities as against the principal, until the entire sum raised by the agent has been repaid ; 3 but if the securities 1 Maxted v. Paine (18G9), L.K. 4 Ex., at p. 211. 2 See BrockUsby v. Temperance Permanent Building Society [1895], A.C. 173 ; 64 L. J. Ch. 433 ; 72 L.T. 477 ; 43 W.B. 606. See also Robinson v. Montgomeryshire Brewery Co. [1896], 2 Ch. 841 ; 65 L.J. Ch. 915. 3 Mocatta v. Bell (1853), 24 Beav. 585 ; 27 L.J. Ch. 237 ; Bentinck v. London Joint Stock Bank [18.13]. 2 Ch. 120 ; 62 L.J. Ch. 358 ; 68 L.T. 315; 42 W.R. 140; Brocklesby v. Temperance Permanent Building Socifty, supra. H 98 LAW AND PRACTICE OF TEE STOCK EXCHANGE. were deposited merely for the purpose of safe custody, any one who makes an advance to the broker and receives then* as security, is not entitled to hold them against the principal,., unless they are negotiable instruments. 1 Where, therefore, a principal imposes a limit upon his- broker's authority to contract on his behalf, and the broker exceeds that limit, the principal will, it seems, be liable to the full extent of the contract, and the effect of his arrange- ment with his broker will be that he will be entitled to have recourse to the broker for any loss or liability to which he is subjected in excess of his instructions;' 2 while if the broker contracts on behalf of a principal who has not authorized him to contract at all, he will be personally liable for the fulfilment of the contract, on the ground that he impliedly warranted that he had the authority which he held himself out as having when he entered into the contract. 3 But the question is not likely to become important, as it is improbable that members of the Stock Exchange will, unless in very excep- tional cases, consent to depart from the ordinary course of business, or to assume a heavier responsibility towards their fellow-members than their principals are under to them, (ii.) Im- If a principal imposes no restrictions upon his broker's authority to contract, the law implies an authority to make the contract subject to all such rules and regulations as are in force at the date of the contract, 4 and to such customs as are reasonable. 5 " For one who employs a broker to transact business for him upon the Stock Exchange, or any other general market, impliedly authorizes him to deal according to the general and known usages and customs of the market, 1 See p. 132, post. 2 See the judgment in Cralb v. Miller (1871), 24 L.T. 219, and Cole* v. Sristowe (1868), L.K. 4 Ch., at p. 14. 3 Gotten v. Wright (1857), 8 E. & B. 647; Merry v. Nicltalh (1872), L.R. 7 Ch., at p. 756 ; Ex parte Panmure (1883), 24 Ch. D. 367 ; 53 L.J. Ch. 57; 50 L.T. 38 ; 32 W.E. 236. 4 But not to rules or resolutions of the Committee, which are passed subsequently to the making of the contract : Westropp v. Solomon (1849),. 8 C.B. 345; 19 L.J. C.P. 1. 6 See p. 88, ante, and the cases collected in note 4. EIGHTS OF THE PARTIES UXDEK THE CONTRACT. 9D although lie may not himself be aware of their existence. 1 But there is no implied authority to the broker to contract in accordance with a custom which is unreasonable, and the principal will not be bound by such a contract unless he is proved by the broker to have been aware of the custom. 2 Nor is there any implied authority to conduct the purchases and sales otherwise than in accordance with the usual course of business, although the broker in so doing is acting bond fide and with the intention of benefiting his principal. In order to bind the principal by a course of dealing which is unusual, there must be an express authority to the broker so to deal. 3 This implied authority extends to the doing of all acts Extent of which are necessary to the completion of the contract. The authority? 1 purchaser's broker is therefore justified in repaying to the vendor a call upon shares which the latter has been compelled to pay before he could make a transfer of the shares. 4 According to the case of McDevitt v. Connolly? decided by the Court of Appeal in Ireland, the vendor's broker is not authorized to receive the purchase-money on the vendor's behalf, without either an express authority, or an implied authority which may be presumed from the vendor's conduct, as, for instance, where he hands to his broker share certificates or a transfer. But since, in the ordinary course of business, the principal invariably does place the certificates and trans- fers in his broker's hands, and the latter thereby obtains that authority without which the settlement of the trans- actions that have taken place during an account would be impossible, the case loses much of its importance. 1 Griudl v. Pristowe (1868), L.R. 3 C.P. 112 ; 37 L.J. C.P. 89 ; 17 L.T. 564:; 16 W.R. 428; and see Robinson v. Mollett (1875), L.R. 7 H.L. 802, 817, 836. 2 See cases collected in note 2, p. 89. 3 Wiltshire v. Sims (1808), 1 Camp. 258. See also Broicn v. Boorman (1844), 1 Cl. & F. 1. The principal may, however, subsequently ratify a course of dealing which is unusual. 4 Bayley v. Wilkins (1849). 7 C.B. 880; 18 L.J. C.P. 273. 5 (1885), 15 L.R. Ir. 500. 100 LAW AND PRACTICE OF TEE STOCK EXCHANGE. SDuties It is the duty of a broker towards his principal to loyally ^ er * iise liis best endeavours to forward the principal's interest, and the courts have always strongly discountenanced and disapproved anything which would tend to militate against the performance of this duty. (i.) To dis- It is unusual on the London Stock Exchange for two fact where brokers to transact business without the intervention of he is acting a JQ"^^ except, of course, in transactions in which the and pur- same broker is acting for two principals, one of whom wishes the^me * se ^ an( ^ ^o o ^ er * b uv the same security. The broker time. i s i n such a case presumably justified to bring his prin- cipals together without the jobber's intervention. He owes, however, a " paramount duty " to both seller and buyer to disclose the fact that he is acting for both parties. For while his duty to the vendor is to sell at the highest price obtainable, his duty to the purchaser equally is to buy at the lowest, and it is for the persons most concerned to consider whether they will consent to combine in the hands of a single person interests which are diametrically opposed. 1 (ii.) Broker Similarly, on the ground of a probable conflict of interests, seUtoor a broker who is instructed to purchase or sell securities tray from s no t permitted to sell to or purchase from his principal 2 unless the transaction is perfectly bonafide, and the principal is fully informed as to the broker's intention. 3 For "in matters touching the agency, agents cannot act so as to bind their principals where they have an adverse interest in themselves. This rule is founded upon the plain and obvious consideration that the principal bargains in the employment for the disinterested skill, diligence, and zeal 1 McDevitt v. Conolly (1885), 15 L.K. Ir. 500. 2 Ex parte Dyster (1816), 1 Mer. 155; 2 Rose, 349; Rothschild v. Brookman (1829), 2 Dow. & Cl. 188 ; 3 Sim. 153 ; 5 Bli. N.S. 165 ; Gillett v. Peppercorne (1839), 3 Beav. 78 ; Bank of Bengal v. Macleod (1849), 7 Moo. P.C.C. 35; Kimber v. Barber (1872), L.R. 8 Ch. 56; 27 L.T. 526; 21 W.K. 65; Robinson v. Mollett (1875), L.R. 7 H.L. 802 ; 44 L.J. C.P. 362; 33 L.T. 544. 8 Dunne v. English (1874), L.R. 18 Eq. 524; 31 L.T. 75; Robinson v. Mollett (1875), L.R. 7 H.L., pp. 815, 816. EIGHTS OF TEE PARTIES UNDER THE CONTRACT. 101 of the agent for his exclusive benefit." l Therefore, in order that the principal may be bound by such a transaction, it is necessary that the broker shall show, not merely that he acted in perfect good faith, but also that he made a full disclosure to his principal of the exact nature of his interest ; for it is not sufficient that he should inform his principal that he has an interest, or that he should make statements calculated to put the principal upon inquiry.' 2 If he acts^ without making the necessary disclosure the transaction will be set aside, although several years have passed since it took place, 3 and although there is no trace of anything but the most complete bona fides on the part of the broker. 4 " The principle is this," said Lord Wynford, in Rothschild v. Brook- man, 5 " that no man ought to be trusted in a situation that gives him the opportunity of taking advantage of the person who has reposed confidence in him. If such a man, in such a (situation, performs any acts which are afterwards made the subject of legal inquiry, he must suffer the consequences. In this case the appellant is bound to show, by clear evidence, that the respondent knew at the time the real nature of the transactions, and with full knowledge of their nature assented to them. ... I think it fit that your Lorships should say, in language which cannot be misunderstood, that in these transactions of trust and confidence there must be, on the part of the person trusted, that most marked integrity, that ubcrrima fides, which cannot leave a doubt as to the fairness of the transaction." When such a charge is made against a broker the burden of proof will rest upon him and not upon his principal. The delivery of I ought and sold notes in such a case is an untrue- representation upon which an action may successfully be 1 Storey on Agency, sec. 210. - Dunne v. English, tupra. 3 Gillett v. Peppercome (1839), 3 Beav. 78. 4 Rothschild v. Brookman (1829), 2 Dow. & Cl. 188 ; 5 Bli. N.S. 165 ; Sim. 153. 5 2 Dow. & Cl., pp. 197, 198. 102 LA W AND PRACTICE OF THE STOCK EXCHANGE. maintained, 1 the principal having the choice of one of two courses either to adopt the contract and claim any profit which the broker may have made out of it, or to repudiate the contract and claim the return of his money. 2 In these cases it is immaterial whether the transaction is fraudulent or perfectly innocent. In either case the principal is entitled to be replaced in his former position, if that be possible, or if circumstances have subsequently arisen which render such a course impossible to be placed in as good a position as he formerly held, so far as the payment of damages can have that effect. 3 It appears, however, that if a principal refuses to accept delivery of securities which he has instructed his broker to purchase, and in respect of which the broker has entered into binding contracts 011 the Stock Exchange, the broker is not compelled to sell them out against his principal, but may take them over personally after having had a fair price fixed, and may charge his principal with any loss caused by a fall in value. 4 In fast the tendency of the courts in recent years seems to have been to somewhat relax the former stringency of the rule which prohibited a broker from acting as principal, and to hold that he is justified in so acting if he can show that he was thereby doing his best to promote the interests of his employer. Apparently, in the cae last referred to, the shares pur- chased were shares for which there was not a ready sale, and the question arises whether a broker would be held to be justified in thus taking over securities purchased for his principal if there was a free market in them. The question does not at present appear to have been decided, and in the absence of any reported authority on the point, brokers will probably be pursuing the safer course if in such cases they dispose of the securities by a tale in the open market. 1 Wilson v. Short (1847), G Hare, 366. 2 See the notes to Fox v. Mackreth, 1 L.C. Eq. (6th edit.), p. 141. 3 As to the measure of damages in these cases, see p. 215, post. 4 Walter v. King, the Times, March 10, 1897. The burden of proving that the price was a fair one will, of course, rest on the broker. H1GHTS OF TEE PARTIES UXDEB THE CONTRACT. 103 In whatever way the law on the questions discussed above may be finally decided, it is clear that the mere fact that a broker, who has received at the same time two or more separate orders from different principals for the same security, has entered into a single contract with a dealer for the entire amount, will not render the transaction unenforce- able against the principals. 1 If a broker receives instructions from his principal to buy at a specified price, the meaning is that he is to buy at the best price obtainable for the principal's advantage not exceeding the price named. Therefore the broker is not justified in ibuying at a lower price and re-selling to the principal at the price named, even though he does not charge commission.- And, vice versa, an order to sell out at a -specified price must be taken to mean that the broker is not to sell below that price. It is the broker's duty, when he enters into a contract (in,) TO -on behalf of his principal, to make a valid and binding J5^? n a contract and not one that is void and unenforceable. " There contract, was," said Brett, L.J., in Neilson v. James, 3 " a well-known duty which the defendant (i.e. the broker) undertook to perform, namely, that he would use reasonable efforts to find a purchaser of such shares on the Stock Exchange, and that he would make a contract with him in such form as would bind the purchaser to take the shares." And, there- fore, where it has become customaiy upon the Stock Exchange io disregard the provisions of an Act of Parliament, a con- tract made in accordance with such a custom cannot be enforced against the principal unless either he was aware of the custom, 4 or has become equitable owner of the shares by not repudiating the contract within a reasonable time. 5 1 Exparte Rogers (1880), 15 Ch. D. 207; 43 L.T. 163; 29 W.B. 29. - Thompson v. Meade (1891), 7 T.L.R. 698. 3 (1882), 9 Q.B.D., at p. 552. 4 See p. 89, ante. 3 Loring v. Davis (1880), 32 Ch. D. 625; 55 L.J. Ch. 725; 54 L.T. SOU ; 34 W.E. 701. 1 04 LA W AND PEA CTICE OF THE STOCK EXCHANGE. And prima facie it will be presumed that the authority given to the broker is to make a valid and enforceable contract. 1 No duty to Butgit is no part of the broker's duty to enter in hi& trart^in 11 ' day-book the contracts [which he makes. And therefore, day-book, where the broker is dead, entries in the day-book cannot be used as evidence against his principal, for such entries are not statements necessarily adverse to the pecuniary intereot of the broker, since it depends upon the turn of the market whether they are in his favour or not. 2 (iv.) To It is the broker's duty to use due diligence in the conduct alliance of * lis P rincl P al ' s business. If, for instance, he receives- instructions to apply for shares in a company which is in process of formation, and the application-money is paid to* him, it is his duty to pay it directly to the company's brokers, and if he pays the money into the hands of third persons he will be personally liable for its return in case the directors do not proceed to allotment. 3 (a) No duty It has at times been suggested by the courts that it is purdTaTe?s tte dutv of a Broker to examine into the credit and responsi- ciedit. bility of his principal's co-contractor. 4 But this would involve an expenditure of time and trouble out of all pro- portion to the amount of the broker's remuneration, and can scarcely be held to be the law. Indeed, since the decision in Nickalls v. Merry, in the House of Lords, that the jobber's liability continues until he has passed the name of a com- petent party, the question has become of minor importance. <&) To The broker is also under an obligation to take steps to- procure procure delivery of the securities which he has purchased securities on the principal's behalf, or to collect the purchase-money chase-' where he has sold, and in default of so doing he will be money. liable to an action. But it may always be that it will be more in the principal's interest to allow tome delay in 1 Coates v. Pacey (1892), 8 T.L.R. 351, 474. 2 Massey v. Allen (1879), 13 Cli. D. 558 ; 49 L.J. Ch. 76 ; 41 L.T. 788 ; 28 W.R. 212. But see p. 210, post. 3 Leveson Gower v. May (1891), 7 T.L.R. C9G. 4 See Maxted v. Paine (1871), L.R. G Ex. 132; 40 L.J. Ex. 57; 24. L.T. 149 ; 19 W.R. 527. EIGHTS OF THE PARTIES UNDER THE CONTRACT. 105 completion than to press for an immediate settlement, and where this is the case, the broker must, in the absence of express instructions, exercise his discretion as to the length of the delay. It is further the broker's duty to hand over to his ( 19 \V.R. 106. 899 112 LAW AND PRACTICE OF THE STOCK EXCHANGE. (e) Where money and tendered. (/) Where uystt it was held that he could not recover such costs from his principal. 1 And where the loss, in respect of which an indemnity is sought, is caused by the insolvency of the broker, the law does not imply a promise on the part of the principal to recompense the broker. 2 In Bowlby v. Bell, 3 which was decided in 1846, a broker had been employed to sell certain railway shares, but being unable to deliver them at the settlement, as the scrip had been sent to the company's offices for registration, he paid to the purchaser the difference between the contract price and the price at which the latter was able to purchase similar shares. He then claimed to be indemnified by the vendor, but it was held that the action would not lie, since, if the contract was for unregistered shares, the broker was not authorized to make it; and if for registered shares, the purchaser, not having tendered either the purchase-money or a transfer, was not in a position to proceed against the broker, who therefore paid the money in his own wrong, and could not recover it from his principal as money paid to his use. 4 Where a broker is employed by the directors of a com- pany to do something which is beyond the powers of the company, as, for instance, to purchase the company's own shares for the purpose of supporting the market without an authorization from the articles of association, the broker is not entitled to prove, in the company's winding-up, for the price of the shares ; and, apparently, if he had already received the price, he would be liable to refund it. For, being a stockbroker, he must know " that a purchase by a company of its own shares is not a legal transaction, unless there is a clear, distinct, undoubted, and special authority authorizing them to do so." 5 1 Clegg v. Townshend (1867), 16 L.T. 180. 2 Duncan v. Hill (1873), L.R. 8 Ex. 242; 42 L.J. Ex. 179; 29 L.T. 268 ; 21 W.R. 797, overruling same case, L.R. 6 Ex. 255. But see Hartas v. Ribbons, p. 110, ante. 3 3C.B. 284; 16 L.J. CJP. 18. 4 See also Stephens v. De Medina (1843), 4 Q.B. 422. 5 In re London, Hamburg, and Continental Exchange Bank, Zulueta's Claim (1870), L.R. 5 Ch. 444, 452. RIGHTS OF THE PARTIES UNDER THE CONTRA CT. 113 The result of the above cases is that the proper course for a broker to pursue where he has entered into contracts on the Stock Exchange at the instance of a principal who sub- sequently refuses to pay or deliver, as the case may be, is to pay to the vendor or purchaser the amount of the loss caused by such refusal, and then to claim the amount from his principal, who will be compelled to repay him, subject to the exceptions noticed above. This is, in fact, the only course which a broker can pursue without incurring a liability to be expelled from the Stock Exchange. Formerly, unless a broker in the City of London had Broker's been duly admitted by the Court of Aldermen, he was not S i n. permitted to practise as a paid broker ; l and if he did practise, not only did he render himself liable to a fine, but he was unable to maintain an action against his principal to recover his commission. 2 The point has now ceased to be of practical importance, as the power of the Court of Aldermen in respect of the licensing of brokers was abolished in the year 1884. 3 Under Sir John Barnard's Act, gaming contracts were illegal, and brokers who entered into such contracts did not acquire any legally enforceable claim to commission. That Act is repealed, but the principle would still hold good were a broker to make an illegal contract on his principal's behalf. 4 At present, unless the contract is either illegal or a mere (i.) For gaming and wagering transaction within sec. 18 of 8 & 9 Viet. c. 109, 3 when the Gaming Act of 1892 prevents it from being legally enforced, or unless it incorporates some 1 6 Anne, c. 10. Aud see Jcuisen v. Green (1767), 4 Burr. 2013; Clarice v. Powell (1833), 4 B. & Ad. 846 ; 2 L. J. K.B. 145. 2 Cope v. Roiclands (1836), 3 M. & W. 149 ; 6 L.J. Ex. 63; Ex parte Dyster (1816), 1 Mer. 155; 2 Rose, 349. 3 47 Yict. c. 3. 4 Josephs v. Pebrer (1825), J5 B. & C. 639. 5 As to the transact >ns which fall within that section, see p. 172 et seq. I 114 LAW AND PRACTICE OF THE STOCK EXCHANGE. custom which is unreasonable, 1 the broker is entitled to receive the usual commission as soon as he has carried out his principal's instructions. 2 Bat the commission is not earned where the broker appropriates to the principal's account securities of which, unknown to the principal, he is already possessed. 3 Moreover, the broker is not entitled to com- mission where he has himself carried over his principal's securities and has charged the ordinary rate for doing so, since he is then no longer acting as an agent but as a principal. 4 The payments made to a broker by way of commission include payments for many services besides those rendered in effecting purchases or sales. Of course where a principal who is sui juris is acting on his own account, he is at liberty to make what payments he pleases to his broker, and to employ him in any way he thinks fit. And where he is acting as trustee for another, although his powers are more restricted, he is perfectly justified in making such payments to the broker as are generally made in the ordinary course of (ii.) For business. And so in Jones v. Poivell, 5 an executor, who, upon tionuporf transferring stock at the Bank of England to a legatee, paid transfer of one-sixteenth per cent, to a broker for identifying him it theBankof being the practice of the bank to require such identification was a ^ owe< l the payment in passing his accounts. And into court, where the identification has taken place in the course of a transfer of stock into court, the payment of one shilling and threepence per cent, to a broker for that purpose is a 1 See the cases collected in note 2, p. 89, ante. 2 Learoyd v. Bracken [1894], 1 Q.B. 114 : G3 L.J. Q.B. 96 ; G9 L.T. GG8 ; 42 W.R. 196. 3 Slcelton v. Wood (1895), 71 L.T. GIG. It seems that the principal is justified in such cases in refusing to pay the sums claimed by the broker without bringing into account the sums which he has already received from the broker. Ibid. The broker is not entitled to differences in such a case, nor in a case where, between the dates within which the differ- ences are said to have arisen there have not in fa-?t been any continuing contracts open for the principal's account, but the broker has sold the securities and re-bought them without the principal's knowledge. 4 See Sachs v. Spielmann (1889), 5 T.L.K. 487. 5 (1843), G Beav. 488. RIGHTS OF THE PARTIES UNDER THE CONTRACT. 115 proper payment and will be allowed in taxing the parties' costs. 1 In connection with, the question what payments a trustee Payment is justified in making to his broker out of the trust moneys, mon ey to it is to be noticed that in making investments on behalf of broker, the trust, the trustee may, without exposing himself to any legal liability, employ a broker and pay over to him the trust money, provided that it is paid in the ordinary course of business and under such conditions as a prudent man of business would pay it. For although the trustee is primarily liable for the proper care and custody of the money until it has actually been invested, he is not bound personally to undertake business which, according to the usual mode of conducting business of a like nature, persons acting with reasonable care and prudence on their own account, would ordinarily conduct through mercantile agents. In Speight v. Speight v. Gaunt 2 a broker who was employed by a trustee to buy securities of municipal corporations authorized by the trust, gave to the trustee a bought note which purported to be subject to the rules of the London Stock Exchange, and obtained the purchase-money from him on the representation that it was payable on the following day, which was the next account-day on the Exchange. The broker never procured the securities, but appropriated the money to his own use and subsequently became insolvent. Some of the securities were procurable only from the corporations direct, and were not bought and sold in the market, and there was evidence that the form of the bought note would have suggested to experts that the loans were to be direct to the corporations. But the House of Lords held that there was nothing which was calculated to excite suspicion in the mind of an ordi- narily prudent man of business, and that, such payment being in accordance with the usual course of business on the London Exchange, the trustee was not liable to the cestuis que trmtent for the loss of the trust funds. Lord Selborne, 1 Davenport v. Powell (1844), 14 Sim. 275. - (1883), 9 App. Cas. 1 ; 53 L.J. Ch. 419 ; 50 L.T. 330; 32 W.R. 435. 116 LAW AND PRACTICE OF THE STOCK EXCHANGE. however, considered that if the broker had represented to the trustee that the contracts were with corporations for loans direct to them from the trustee, the latter would not have been justified in paying the money to the broker, as in that case there would not have been any sufficient reason for such a course of action. 1 But trustees will render themselves liable to their cestuis que trustent if they are negligent in allowing the trust securities or funds to remain in the broker's hands for an* undue length of time, or in not seeing to their due application. In Magnus v. Queensland National Bank,' 2 a stock-broker, one of three trustees, acted as broker to the trust. He proposed to his co-trustees to sell certain London, Brighton, and South Coast Eailway debenture stock belonging to the trust, and with the proceeds to buy North Eastern preference stock. The three trustees, on the 27th of January, 1882, executed a transfer of the Brighton stock for a nominal! consideration to two officers of a bank of which the stock- broker was a customer. The broker gave the transfer to the bank as a security for a loan to himself, and the transfer was registered. The broker, in February, 1882, paid off the loan, and the bank transferred the stock to purchasers named by him, and without giving any notice to his co-trustees, allowed! him to receive the purchase-money. He invested it in North Eastern stock in his own name, and in the following year sold out the stock and misappropriated the proceeds. Shortly after the sale of the Brighton stock the broker had given an account to his co-trustees showing the sale of the Brighton and re-investment in North Eastern stock, and he subse- quently rendered another account representing the latter stock as forming part of the trust funds. In an action by the co-trustees against the bank, it was held that the bank had occasioned the loss by allowing the purchase-money to come into the hands of the broker who had no authority to- receive it, and whom they had not sufficient ground for 1 As to how far trust funds in the hands of a broker may be followed and recovered, see p. 128, post. - (1888), 37 Ch. D. 4GG; 57 L.J. Ch. 413; 58 L.T. 248; 36 W.R. 577. RIGHTS OF TEE PAR TIES UNDER TEE CONTRA CT. 117 supposing to have such authority, and that they were there- fore liable to refund the amount to the co-trustees, although the latter had themselves been negligent in not seeing that the North Eastern stock was registered in their joint names. But it is clear that the co-trustees would have been obliged to bear the loss personally if, after notice from the bank, they had not seen to the proper application of the proceeds of the sale and the registration of the new investments. Considerable doubt has been expressed at various times ^) p or whether, in cases in which a broker is employed in con- nection with the promotion of a company, the directors of the company are justified in paying a portion of the assets to him for services rendered in " placing " its shares that is to say, for obtaining persons to purchase and take up the shares or for underwriting them. The point appears to have been first made the subject of Re. legal proceedings in the year 1888, when it was considered in the case of Re Faure Electric Accumulator Co. 1 Kay, J., there held that payment of brokerage or commission to a broker for placing a company's shares was an improper application of its capital, and was not authorized even by a power given by the memorandum of association to do whatever might be " conducive to " the specified objects of the company. The case appears to have depended on a special state of facts, the learned judge considering that the circumstances under which the payments to the brokers were made constituted such payments a fraud upon the company. If, however, the case was decided, as it was argued, upon the question whether the payments did not in effect amount to issuing shares at a discount, it must now be taken to be overruled by the later case of the Metropolitan Coal Consumers' Co. v. Scrimgeour.' 2 Metropoli- In that case the action was brought by the liquidators of a ^ v< company to recover from the company's brokers a sum of Scrim- 26 10. paid to them by the directors for services rendered fft in placing the company's shares. But the Court of Appeal, 40 Ch. D. 141 ; 58 L.J. Ch. 148 ; 59 L.T. 918 ; 37 W.R. 116. [1895], 2 Q.B. 604; 65 L.J. Q.B. 22; 73 L.T. 137 ; 44 W.R. 35. 118 LAW AND PRACTICE OF THE STOCK EXCHANGE. distinguishing it from the case before Mr. Justice Kay, held that the directors were justified in making the payment, and that such payment did not amount to issuing the company's shares at a discount. Directors, however, are not justified in making payments to a broker for placing shares which have not in fact been placed through his instrumentality. 1 (iv.) For An agreement to pay a specified percentage to a broker in writing return for his undertaking to underwrite a certain number shares. Q s ] iares i n a company is a good and enforceable agreement, and the word " discount " if used in the agreement does not make it invalid, but must be construed as " commission." 2 Distinction The distinction between the payment of brokerage for between . v J placing placing shares and the payment of underwriting commis- writing der " s i ns i s tnat i Q tne former case the payment is made for shares. services rendered in obtaining persons to subscribe for the shares, while in the latter case the payment is the under- writer's reward for binding himself to take a given number of shares if the public cannot be induced to do so. The distinction is material, for the mere placer of shares is not liable to have his name inserted on the register as a share- holder, although he may be liable to an action for damages if he fails to perform his contract. And though an agree- ment to place shares and an agreement to take shares might, under certain circumstances, come to the same thing, there would be many defences open to one who had agreed to place shares which would not be open to a shareholder. 3 But the underwriter of shares in a company is liable, to have his name placed on the list of contributories in the event of the winding up of the company, in respect of all the shares underwritten by him which have not already been allotted. For an agreement to underwrite will be treated, not merely as a guarantee, but as an applica- tion for an allotment of so many shares as have not been 1 West of England Paper Mills v. Gilbert (1891), 61 L.J. Ch. 92. 2 In re Licensed Victualler's Mutual Trading Association, Ex parte Audain (1889), 42 Ch. D. 1 ; 58 L.J. Ch. 467 ; 60 L.T. 684 ; 37 W.K. 674. 3 In re Monarch Insurance Co., Gorrissen's Case (1873), L.R. 8 Ch. 507 ; 42 L.J. Ch. 864 ; 28 L.T. 611 : 21 W.E. 536. SIGHTS OF THE PARTIES UNDER THE CONTRA CT. 119 applied for by the public. 1 So that in Shaw v. Bentley* where the plaintiff had agreed with an agent of the com- pany to underwrite, if necessary, two hundred shares in Bently & Co., and to apply for such shares on that day on which the list opened, and the plaintiff failing to apply, the company's agent made the application for him, and the shares were duly allotted, it was held that the plaintiff could not repudiate the agent's application, and that the fact that the plaintiff was not informed as to the number of shares for which he was alleged to be liable, did not affect his liability under the contract. Since the above cases were decided, the law in relation to Provisions companies has been considered by a Royal Commission, and jj^ N the draft bill which is the result of their labours, contains the following provisions bearing upon this subject : 1. It shall be lawful for a company to pay a commission Lawful either in money, shares, or otherwise, to any person in con- ^^y S f sideration of his subscribing or agreeing to subscribe, cpmmis- whether absolutely or conditionally, for any shares in the company, or procuring, or agreeing to procure, subscriptions for any shares in the company, if the payment of such a commission and the amount or rate per cent, of the commis- sion paid, or agreed to be paid, are respectively authorized by the articles of association and disclosed in the prospectus, if any, and the commission paid or agreed to be paid does not exceed the amount of rate so authorized. 2. Save as aforesaid, it shall be unlawful and beyond the Unlawful powers of any company to apply any of its shares or capital- P a y inents - money, either directly or indirectly, in payment of any com- mission, discount, or allowance to any person in con^idera- tion of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any shares of the company, or procuring or agreeing to procure subscriptions for any 1 Ex parle Audain, wpra ; CarmicliaeVs Case [1896], 2 Ch. 643; 65 L.J. Ch. 002 ; 75 L.T. 45. 2 (1893), 68 L.T. 812. See also Ormerod's Case [1894], 2 Ch. 474; 63 L.J. Ch. 578; 70 L.T. 7!>5; 42 W.R. 701; In re Beniley (1894), 69 L.T. 204. 120 LAW AND PRACTICE OF THE STOCK EXCHANGE. shares in the company, whether the shares or money be so applied by being added to the purchase-money of any pro- perty acquired by the company, or to the contract-price of any work to be executed for the company, or the money be paid out of the nominal purchase-money or contract-price, or otherwise. Director's 3. All directors who are parties to the payment of any where fcy " suca un l aw f u l commission, discount, or allowance as af ore- payments said, shall be jointly and severally liable to repay to the unlawful. , ... company the amount thereof, with such interest as the Court may direct. Liability 4. Every person who receives any shares or capital- of persons ,. . , , f , receiving money ot a company in payment ot any such unlawml unlawful commission, discount, or allowance as aforesaid, or for the payments. purpose of the same being applied in payment thereof, knowing the same to be the property of the company, shall be liable to repay or restore the same or the value thereof to the company with such interest as the Court may direct. Stamping Besides making the contract for his principal, the broker fng c S on- d ~ kas a further duty to perform before he is entitled to his tract note, commission. As soon as the purchase or sale is effected, a note is to be sent advising the principal of all particulars of the transaction. 1 Before sending this contract-note the broker is obliged to stamp it if it has reference to securities of a greater value than 5, and to duly cancel the stamp. If the value of the security is below 100 the duty is one penny, denotable by an ordinary adhesive penny stamp ; it the value is above 100 the duty is one shilling, denotable by a stamp of that amount.' 2 Penalties But the penalties imposed for failing to send and for to'send" ^ a ^i n g to stamp a contract-note are net identical. For while or stamp, a broker who fails to send a note to his principal renders 1 33 & 34 Viet. c. 07, s. G9; 41 Viet. c. 15, s. 20 ; 54 & 55 Viet. c. 30 (Stamp Act, 1891) s. 52, subs. 1. 2 54 & 55 Viet. c. 39, s. 52, and sched. " Contract Note " ; 56 Viet. c. 7, 8.3, subs. 1. RIGHTS OF THE PARTIES UNDER THE CONTRACT. 121 himself liable to a fine of 2q. 2 (1857), 23 Beav. 107, 118; 20 L.J. Ch. 747. 128 LA W AND PRACTICE OF THE STOCK EXCHANGE. ment) " could not have bought or deposited bonds ; his acts were those of a stock-broker; he was instructed in that character, and in that character he acted." right to* 1 S When a principal has entrusted money or securities to a follow broker for investment or sale, and they or their proceeds have been misappropriated, the principal is entitled to follow and recover them so long as he can trace them, pro- vided that, in the case of bearer securities, they have not come into the hands of a holder for value without notice of a prior title. 1 In practice there is, no doubt, often a diffi- culty in tracing a fund that has once been misapplied, and the principal's remedy in such cases is usually confined to proving in the broker's bankruptcy ; but this of course does not affect the principle. It is immaterial whether the fund in question is one of which the principal is a trustee, or whether it is the principal's own property. The relation of a principal to his broker is not that of a customer to his bank, but of a principal to an agent in whose hands he has placed money to be applied in a particular manner. A fiduciary relation is in consequence created between broker and principal which renders the broker a trustee of the property entrusted to him, and entitles the principal to claim it, whether it is his own or trust property. Accord- ingly it follows that where the principal is acting as trustee it is not necessary that the broker shall have notice of the fact in order that the principal may be entitled to recover 1 As to what amounts to a notice of another's title sufficient to dis- entitle a holder to call himself a bona fide holder, see pp. 224 et seq. If the securities are inscribed stocks or shares which require a transfer for their delivery, the certificates will be deposited either with a blank transfer or without any transfer at all. If deposited with a transfer executed by the principal in blank, any one receiving them from the broker bona fide and for value, together witli the transfer duly filled in and registered in the broker's name, will apparently obtain a good title unimpeachable by the broker's principal ; see p. 223, post. But any one who takes them with a transfer which the broker has forged, obtains no title whatever against the true owner though he took for value and with- out notice ; see p. 228, post. RIGHTS OF THE PARTIES UNDER THE CONTRACT. 129 in case of misappropriation. Some doubt was expressed on the point by the Court of Appeal in ex parte Cooke, 1 but it has now been set at rest by the judgment of Sir George Jessel in the later case of Knatclibull v. Halhit. 1 In the case of Taylor v. PZwmer, 2 decided at the beginning of the century by Lord Ellenborough, a broker received from his principal a draft for money belonging to the principal for investment in Exchequer bills. He misapplied the money by purchasing American stocks and bullion, and was taken with the securities upon him as he was starting for America. In an action by the broker's assignee in bank- ruptcy for delivery of the securities to him, it was held that the principal was entitled to keep them, as they had been purchased with his money. This decision was subsequently approved by the Court of Appeal in the case of KnatMull v. Hallett? so far as it established the right of the principal to follow his property when misappropriated, though Sir George Jessel pointed out that Lord Ellenborough had under-estimated the right where the property to be recovered consisted of money. Knatchbull v. Hallett was not, it is true, an action between broker and principal, but the law govern- ing the relations of persons who, though not trustee or cestui que trust, yet stand in a fiduciary position towards one another, was so clearly and fully expounded by the Court of Appeal as to leave no reasonable ground for doubting that the view taken above is correct. In Ex parte Cookef a trustee employed a broker to sell out consols and invest the proceeds in railway stock, giving him notice of the trust. The broker sold the consols for cash, paid the cheque which he received for the price into his account at the bankers, and bought railway stock to the same amount for settling-day. But before settling-day he stopped payment and went into liquidation. The trustee claimed so much of the broker's balance at his bankers as was attributable to the price of the consols, and it was held 1 See these cases infra. - (1815), 3 M. & S. 562. 3 (1880), 13 Ch. D. 696; 49 L.J. Ch. 415 ; 42 L.T. 421. 4 (1876), 4 Ch. D. 123; 46 L.J. Ch. 52; 35 L.T. 649; 25 W.R. 171. K 130 LAW AND PRACTICE OF THE STOCK EXCHANGE. that he was entited to recover, as the broker knew that the money was trust money. " I do not give any opinion," said Baggallay, L.J., " how this case would have stood if the money had not been trust money, or if the broker had received it without any notice of its being such. Before doing so, 1 should desire an opportunity for further con- sideration, though I certainly am at present much impressed by the decision in Taylor v. Plumer. It is clear, however, to my mind, on the evidence, that Strachan was informed of the fact that the consols were a trust fund. . . . But if the fact was communicated to him that the consols were trust funds, he was bound to deal with the produce as such. I am not prepared to say that his paying the money into his account at the bank was necessarily a breach of trust ; but the money so paid in remained trust money, and if it can be traced, it can be followed. There maybe difficulty in tracing it, but that does not affect the principle." And Bramwell, J.A., added, "If the whole of the money had remained in the hands of the bankers without being drawn out, I think it clear that the cestui que trust could have claimed it as trust money traced into their hands. And if on properly attributing the payments any part of it is found to remain there, the same rule must apply to what so remains. As to the other point, whether the money could have been followed if it had not been trust money, the case appears to me indis- tinguishable from Taylor v. Plumer." The questions raised by the lords justices in this case must, as has already been pointed out, be regarded as now settled by Sir George Jessel's elaborate judgment in KnatcKbull v. Hallett. The question of notice, it is true, was not specifically dealt with, as the circumstances rendered it unnecessary, but the point appears to be immaterial if that very learned judge was correct as to the broker's fiduciary position. Principles When a broker has paid his principal's money into his to follow- own account, and after drawing upon his account goes into ing money, liquidation, the sums drawn out will not be taken to be those which were first paid in, but the drawer will be pre- sumed to have withdrawn his own money in prefeience lo EIGHTS OF TEE PARTIES UNDER THE CONTRA OT. 131 the trust money. But where the money of two or more principals has been paid into the broker's single account, the ordinary rule l will apply as between the principals, and the sums withdrawn will be presumed to have been drawn out in the order in which they were paid in. 2 A principal is not prevented from following and recover- ing his money either by the fact that it has been mixed with other money in an indistinguishable mass, or that it has been expended, either alone or with money belonging to the broker or other principals, in the purchase of property. For, in the first case, equity will permit the principal to take out of the mass the same quantity that was put in ; and, in the second, the principal may, where the money belonged solely to him, either take over the property purchased or have a charge over if, or, where the purchase-money is drawn from a mixed fund, have a charge for the amount due to him. 3 " The principle of law," said Thesiger, L. J., " may be stated, as it appears to me, in the form of a very simple, although at the same time very wide and general proposition. I would state that proposition in these terms : namely, that wherever a specific chattel is intrusted by one man to another, either for the purpose of safe custody or for the purpose of being disposed of for the benefit of the person intrusting the chattel, then either the chattel itself, or the proceeds of the chattel, whether the chattel has been wrong- fully or rightfully disposed of, may be followed at any time, although either the chattel itself or the money constituting the proceeds of the chattel may have been mixed and confounded in a mass of the like material." It is not unusual for a principal to deposit securities with Custody of his broker for the purpose of safe custody. Where this is se done and loss or injury follows, a broker, who undertakes the duty without reward, and whose profession as a broker can (i.) Gratu- itous. 1 Known as the rule in Clayton's Case (1816), 1 Mer. 572. - Knalclibull v. Hallett, supra. 3 Ibid. 4 13 Ch. D., at p. 72ii. 132 LAW AND PRACTICE OF THE STOCK EXCHANGE. scarcely be said to imply special skill in such, an undertaking, will only be liable to refund the amount of the loss if he has been grossly negligent, or, in other words, if he has not used such care as a prudent man of business would have exercised in his own affairs. " I agree," said Lord Loughborough, in Shiells v. BlacJcburne, 1 " with Sir William Jones, that where a bailee undertakes to perform a gratuitous act from which the bailor alone is to receive benefit, there the bailee is only liable for gross negligence. But if a man gratuitously under- takes to do a thing to the best of his skill, where his situation or profession is such as to imply skill, an omission of that skill is iinputable to him as gross negligence." 2 (ii.) For If a broker were to receive reward for taking charge of 11 ' securities, his liability would be very much increased. And in order to establish this greater degree of responsibility in the broker, it is not necessary that the reward should take the form of an actual money payment : any advantage or benefit to the depositee, or any detriment or disadvantage to the depositor, is sufficient to constitute a legal consideration. In such a case the negligence on the part of the broker required to give rise to a claim against him would be very slight, though what constitutes actionable negligence must always be a question of fact, to be decided on a consideration of the circumstances of the particular case. 8 There is, no doubt, a certain risk in depositing securities in the hands of a broker either for safe custody or as cover for a debt. For, should the securities be negotiable, and should the broker wrongfully dispose of them, the true owner cannot be heard to say, as against a holder for value who took without notice and in the ordinary course of business, 1 (1789), 1 H. Bl. 158, at p. 163. 2 See also Giblin v. McMulhn (1868), L.R., 2 P.O. 317 ; 38 L. J. P.O. 25 ; 21 L.T. 214; 17 W.R. 445. Whether a very general practice among brokers to constitute themselves caretakers of their principals' securities might not be sufficient to fix them with the higher degree of responsibility, as holding themselves out as possessing special skill, is perhaps a question that deserves consideration. 3 See In re United Service Co., Johnston's Claim (1871), L.R. 6 Ch. 212; 40 L.J. Ch. 286; 24 L.T. 115; 19 W.R. 457. BIGHTS OF THE PARTIES UNDER THE CONTRACT. 133 that the broker had only a limited power to deal with them. The broker will be presumed to have had the same power to deal with the securities as any other person would have who should bring them into the market, 1 and the principal will be left to his remedy against the broker for exceeding his authority. And even it the securities are not negotiable, the principal may be estopped from denying the title of a band fide holder for value, in whose favour he has himself executed transfers. 2 SECTION II. BROKER AND JOBBER. The parties to the contract, as originally made on the Stock Exchange, are a broker and a jobber. This contract, as will be seen, is almost exclusively governed by the practice and regulations of the market in which it is made, and the occasions on which the general law intervenes are very infrequent. Such contract is invariably made in the The broker's name, 3 for in dealings between members of the { Stock Exchange, non-members are not recognized; and therefore, even if a jobber should, on rare occasions, look to the credit of the principal as well as to that of the broker, where he considers that the latter's credit is insufficient, 4 the broker is always personally liable, under the rules of the Stock Exchange, for the fulfilment of all bargains into which he enters. And this is undoubtedly a salutary rule ; for no one is in a better position for ascertaining the credit of the principal than the broker whom he employs, and who is in direct communication with him. But even if the broker were not liable under the Stock Exchange rules, it is clear that he would be liable at law ; for he who induces another 1 Goodwin v. Robarts (1876), 1 App. Gas. 476; 45 L.J. Ex. 74S; 35 L.T. 179 ; 24 W.B. 9S7. See, too, Bentinck v. London Joint Stock Sank [1893], 2 Ch. 120; 62 L.J. Ch. 358; 68 L.T. 315; 42 W.B. 140. 2 See Bentinck v. London Joint Stock Bank, supra. 1 The fact that the contract is made in the broker's name does not excuse the principal from performance: Kemble v. Atkins (1816), Holt, N.P.B. 427. 4 Mortimer v. McCallan (1840), 6 M. & W. 58; 9 L.J. Ex. 73. 134 LAW AND PR A CT1CE OF THE S TO CK EX CHANGE. to enter into a contract in reliance upon his own credit, cannot subsequently compel that other against his will to accept in substitution the credit of a third person, of whose name, and perhaps existence, he was unaware at the time of contracting. 1 Legal pro- However, it is not very probable that the question will ceedmgs among come before the courts, for a member is not permitted to members. en f orce ^y j aw a c l a im arising out of Stock Exchange trans- actions against a fellow member without the consent either of the member himself, or of the General Purposes Com- mittee. 2 It is, of course, improbable that a member would give his consent to being made a defendant in an action under any but very exceptional circumstances ; and the Committee would, no doubt, generally refuse their consent to the trial at law of a question which they are themselves peculiarly competent to decide. And although this does not act as an absolute bar to legal proceedings, still the penalty of expulsion from the Stock Exchange to which a member, who instituted such proceedings without permission, would render himself liable, would almost invariably deter him from taking action. of dis^tes Tlie Stock Exchange itself provides a domestic tribunal to which members, and, in some cases, non-members, 3 may refer their disputes, the Committee being the ultimate tribunal for the decision of all questions affecting members and their interests. But the Committee will not, in the first instance, take into consideration disputes in which the question does not affect the general interests of the Stock Exchange. Disputes of purely personal interest are obliged to be referred to the arbitration of private members; and it is only when persons willing to arbitrate cannot be found, or, if found, cannot agree upon their award, that the Com- mittee will consent to intervene in such matters. 4 Unrecog- There are certain transactions of which the Committee nized bargains, will not in any case take cognizance. Such are dealings in 1 Magee v. Atkinson (1837), 2 M. & W. 440; 6 L J. Ex. 115. 2 Rule 54. 3 Rule 55. 4 Rule Go. EIGHTS OF THE PARTIES UNDER TEE CONTRACT. 135 letters of allotment of loans, or of the shares in new com- panies. 1 It appears that when a particular species of trans- action is not prohibited, but is merely refused recognition, the Committee will not exercise the penalty of expulsion for failure to fulfil the bargain. 2 And since, as has been seen, members are not permitted to take legal proceedings against one another, the payment of a debt arising out of a trans- action of this description is, it seems, in practice, dependent entirely upon the honesty of the member who owes it. The rule as to dealings in prospective dividends was originally framed in a similar manner ; 3 but owing to the decision in Marten v. Gibbon* it has been altered, and members are now absolutely prohibited from making such contracts. Although during the course of a transaction on the Stock Continu- Exchange a novation takes place, one of the parties to the Amber's original contract being released from liability, and the liability, liability of the new party to the subsequent contract being taken in substitution, 5 this transfer of liability is not absolute so far as members are concerned. For under the Stock Exchange rules the selling broker is entitled to demand the purchase-money from the member who actually passed the ticket to him; and should he apply to the issuer of the ticket and fail to obtain payment from him, or should he receive a cheque which is subsequently dishonoured, he may even then have recourse to the member who passed the ticket to him. 11 SECTION III. JOBBER AND PRINCIPAL. "When a broker executes the instructions of his principal Relation to buy or sell securities, his contract is, in the first instance, jobber and made with a jobber. This contract the jobber may under principal, certain circumstances be compelled to personally carry out. In return for the liability which he thus incurs he obtains 1 Rule 60. See also Rules 62, 63, 79, 90, 93, 112. - Marten v. Gibbon (1875), 33 L.T. 561 ; 24 W.R. 87. 3 Rule 64. 4 See note 2, supra. 5 See pp. 141-145, post. 6 Rule 68. 136 LAW AND PRACTICE OF THE STOCK EXCHANGE. the right to look for payment or delivery from either of two persons. In the first place he may make the broker respon- sible for the payment of the purchase-money or delivery of the securities ; l or, secondly, he may claim against the actual vendor or purchaser, as the case may be. 2 Principal's It was at one time thought that where one of the parties t a contract made by an agent, had given credit to the agent, believing him to be the principal, if the real principal bond fide paid the agent at a time when the other party still gave credit to the agent, the principal was freed from further liability. 3 The law, however, appears to be now settled that a principal is not discharged as against the other party by payment to his own agent, unless the other party has by his- conduct led the principal to believe that he has settled with the agent. 4 From the usual course of business on the Stock Exchange the jobber is aware of the probable existence, behind the broker with whom he is dealing, of a principal whose name is undisclosed. He may at any time become desirous to rely upon the credit of the principal rather than upon that of the broker, and he cannot be deprived of his- unquestionable right to do so by any private arrangement between the broker and his principal. The principal, there- fore, cannot free himself from liability by paying over the purchase-money to the broker before the jobber has exercised his right to choose to which of the two he will look for pay- ment, unless such a payment should be held to have been made in the usual course of business on the Stock Exchange. But the jobber is bound to elect whether he will proceed against the broker or against the principal within a reason- able time after discovering the latter ; and the fact that the jobber has already pursued his remedy against the broker under the rules of the Stock Exchange, and has obtained a resolution of the Committee in his favour, or has received 1 Eule 53. 2 Mortimer v. McCallan (1840), 6 M. & W. 58 ; 9 L.J. Ex. 73. 3 Armstrong v. Stokes (1872), L.K. 7 Q.B. 598. 4 Irvine v. Watson (1880), 5 Q.B.D. 414; 49 L.J. Q.B. 531; 4 L.T. 810. EIGHTS OF THE PARTIES UNDER THE CONTRACT. 137 from the broker a part of the purchase-money, would undoubtedly be evidence that he had made his election, and would probably prevent him from subsequently enforcing his claim by law against the principal. However, the Stock Exchange rules forbid a member to Legal pro- attempt to enforce by law claims arising out of Stock ^jobbers. Exchange transactions against the principal of a fellow member without the consent of such member or of the Com- mittee. And although this appears to be merely a dis- ciplinary rule by which the contracts of non-members are not affected, and one which therefore, as a matter of law, does not prevent members from suing non-members, 1 as a matter of fact it has that effect, since any member who brings an action without having obtained the required per- mission renders himself liable to expulsion, and in practice the consent of the Committee is never given where the action would be for the sole benefit of the jobber. But the rules cannot, and do not profess to prevent a Legal pro- non-member from bringing an action against a member. 2 by All that they do is to offer him an alternative remedy, in the adjudication of the Committee on his case upon his under- taking in writing to abide by the Committee's award, and not subsequently to institute legal proceedings in respect of the same matter. 3 But except where he has signed such a submission to arbitration the purchaser or vendor is at liberty to sue the jobber with whom the contract was originally made, unless before the time for completion arrives the jobber has freed himself from liability by putting another person in his place to carry out the contract. Upon selling securities a jobber is bound to pay cash or its equivalent to the principal's broker, and is not entitled right of to set off against the money due from him to the principal against debts due to him from the broker arising out of other trans- 1 Mortimer v. McCallan (1840), 6 M. & W. 58 ; 9 L.J. Ex. 73. - Mtrry \. Sicltalh (1872), L.R. 7 Ch. 733, 7.H. 3 Rule 55. 1 38 LA WAND PRACTICE OF THE STOCK EXCHANGE. actions. 1 But it seems that if the jobber has already bona fide made payment to the broker on account of the claim in respect of which the principal is bringing his action, such payment, although made prematurely, will be a good answer to the principal, because the jobber has thereby put the broker in a position to carry out his contract with his principal.- It is the custom of the Stock Exchange, where there have been cross purchases and sales of the same des- cription of securities between brokers and jobbers, to set off such purchases and sales against each other at the settlement, and thus to save unnecessary passing of shares and money. 3 A majority of the Court, in the case of Grtssell v. Bristowe, when that case was before the Court of Common Pleas, 4 con- sidered that the custom was unreasonable and unenforceable against the broker's principal. But Byles, J., dissented from this view, and although the point was not noticed in the Exchequer Chamber, 5 it is submitted that the opinion of the single judge was correct, and that such a set-off would be held to be good against the principal were the question to arise again. 1 In ordinary cases of agency the buyer may set-off against an undis- closed principal a debt due from the agent, provided that in making the contract the buyer was induced by the conduct of the principal to believe, and did in fact believe, that the agent was selling on his own account : CooTcev. Eshelby (1887), 12 App. Gas. 271; 56 L.J. Q.B. 505; 56 L.T. 673 ; 35 W.R. 629. But it would seem that in transactions on the Stock Exchange a jobber can never take advantage of this rule, because, since he knows that the selling broker is in all probability selling on behalf of a principal, he is put upon inquiry as to the character in which the broker is actually selling, and if he neglects to make any inquiry he will not afterwards be heard to say that he believed the broker to be selling on his own account : Ibid. 2 Fish v. Kempton (1849), 7 C.B. 687 ; 18 L.J. C.P. 206. See also Crossley v. Magniac [1893], 1 Ch. 594 ; 67 L.T. 798 ; 41 W.R. 598 ; Blackburn v. Mason (1893), 9 T.L.R. 286. 3 (1868), L.R. 3 C.P. 112; 37 L.J. C.P. 89; 17 L.T. 564; 16 W.R. 248. 4 This is, of course, only necessary in the case of securities which do not pass through the Clearing House. 5 (1868), L.R. 4 C.P. 36; 38 L-J- C.P. 10; 19 L.T. 390; 17 W.R. 123. RIGHTS OF TEE PARTIES UNDER THE CONTRACT. 139 The contract into which a jobber enters is not an absolute undertaking to take or deliver securities himself, but a con- contract, ditional undertaking that he will do so if he cannot before settling-day find some one to do it in his place. 1 And he further undertakes, where he is purchasing, that he will indemnify the vendor against all liabilities which the latter may incur through his name remaining on the register, until a purchaser is found. 1 But the jobber's liability is not discharged by merely obtaining a substitute. He is "not required to give the name of a person merely, but to give the name of a person as the purchaser, meaning, of course, a person capable of becoming the purchaser, whose contract will be binding and enforceable against him." The substitute must in fact be a person both competent and willing to contract. And there- fore a jobber who passes the name of an infant, a lunatic, or other person who is incapable of contracting, or of some one who has not authorized the passing of his name either at all or for the particular date in question, does not thereby relieve himself from liability, 2 though in the last case the person whose name is passed may of course ratify the con- tract subsequently to its making. 3 But while the jobber by implication undertakes that the ^J^,^ purchaser whose name he supplies shall be one who is com- of perform- petent and willing to contract, he does not undertake that purchaser, he shall also be capable of performing the contract ; 4 and against the possibility of the purchaser's failing to perform the contract the vendor must protect himself, if he thinks it necessary to do so, by his own diligence in making inquiries 1 XickaUs v. Merry (1875), L.R. 7 H.L. 530; 45 L.J. Ch. 575; 32 L.T. 623; 23 W.R. 663. - Nickalh v. Merry, supra, overruling Rennie v. Morris (1871), L.R. 13 Eq. 203; 41 L.J. Ch. 321; 25 L.T. 862; Maxted v. Paine (1869), L.R. 4 Ex. 81 ; 38 L.J. Ex. 41; 20 L.T. 34; Maxted v. Morris (1869), 21 L.T. 535; Nickalls v. Eaton (1871), 23 L.T. 689; 19 W.R. 172; Dent v. Nicl-aUs (1873), 29 L.T. 536; 22 W.R. 218 ; affirmed, 30 L.T. 644. 3 Maxted v. Morris (1869), 21 L.T. 535. 4 Maxted v. Paine (1871), L.R. 6 Ex. 132; 40 L.J. Ex. 57; 24 L.T. 149 ; 19 W.R. 527 ; Nickalls v. Merry, supra. 140 LA WAND PRACTICE OF TEE STOCK EXCHANGE. as to the purchaser's capabilities, or by special terras in the contract. To give time for making such inquiries a delay of ten days is allowed to the vendor of inscribed securities l between the time of receiving the ticket containing the purchaser's name and the time of making delivery ; and at any time before the expiration of the ten days the vendor may make any objection he desires to the name which has been passed to him. 2 Should the name be rejected, it is- passed back to the issuer of the ticket, who is obliged to meet the objection. If the vendor is not then satisfied he may appeal to the Committee of the Stock Exchange, who will consider the validity of the complaint, and will, if necessary, order another name to be given. An objection thus made will be upheld when the name passed is that of a foreigner residing abroad ; 3 though if the foreigner were desirous of purchasing, the difficulty might no doubt be over- come by procuring some responsible person in this country to join with him in a covenant to secure the vendor against any further liability in respect of the shares. 4 This question would only be likely to arise where there was a continuing liability on the shares, for in the case of fully-paid shares it would be unimportant to the vendor to know who the transferee was when once he had received the purchase- money. 1 A delay in delivery is, of course, unnecessary in the case of bearer securities, as there is no outstanding liability. 2 See Rule 105, which allows ten days for delivery before the pur- chaser can buy in. 3 Allan v. Graves (1870), L.E. 5 Q.B. 478 ; 39 L.J. Q.B. 157 ; 22 L.T. 677; Goldsmidt v. Jones (1870), 22 L.T. 220 ; 18 W.R. 513. It seems to be doubtful whether an objection could now be taken to a name on the ground that it is that of a married woman, since the rule affirmed in Stogdon v. Lee [1891], 1 Q.B. 661; 60 L.J. Q.B. 669; 64 L.T. 494; 39 W.R. 467, by which the plaintiff in an action against a married woman was under the obligation to prove that she had, at the date of the con- tract, some separate estate in respect of which she could reasonably be presumed to have contracted, appears now to be no longer law owing to the provision of the Married Woman's Property Act, 1893 (56 & 57 Viet. c. 63), s.l. 4 Goldsmidt v. Jones, supra. EIGHTS OF THE PARTIES UNDER THE CONTRACT. 141 After thirteen clear days have elapsed from the delivery Discharge of the ticket without delivery of the securities purchased, J^iii^ 61 ' 8 and without any attempt being made on the part of the purchaser to buy in against the vendor, the jobber is released from liability unless the buying-in was delayed at his request. 1 This entirely closes the jobber's liability so far as the purchaser's ability to perform the contract is con- cerned, unless an allegation of fraud or wilful misrepresenta- tion is made against the jobber, for on no other ground will the Committee subsequently entertain any objection or an application to annul the bargain. 2 The limit, however, relates solely to the purchaser's ability to perform the contract ; where the purchaser is incompetent to contract at all owing to some legal disability, such as infancy, or where he has not authorized the making of the contract, the jobber is not discharged from liability. 3 In such a case the Committee has been known to order the various parties to the transaction to indemnify one another after the lapse of as long a period as two years from the passing of the sup- posed purchaser's name. 4 Where the jobber has passed the name of an incompetent Indemnity party he is compellable to indemnify his vendor against any to jobber loss occasioned by his failure to give a good name, and he w nere name of m- niay then in turn proceed against the person who passed the competent name to him. 5 He cannot, however, prevent the vendor p * ^ d is from asserting his claim against him on the ground that there is another person who is liable to pay the money, and who will ultimately be compelled to pay, and that there- 1 Rules 103, 106. - Rule 59. 3 Sickalls v. Merry, supra. See too the two actions ofMaxted v. Paine 1st action (1869), L.R. 4 Ex. 81 ; 38 L.J. Ex. 41 ; 20 L.T. 34 ; 2nd action (1869), L.R. 4 Ex. 203; 38 L.J. Ex. 129 ; S.C. (1871), L.R. 6 Ex. 132 ; 40 L.J. Ex. 57 ; 24 L.T. 149 ; 19 W.R. 527. 4 See Capper's Case cited in Nickalls v. Merry, L.R. 7 H.L., at p. 545. 5 Pepperconie v. Clench (1872), 26 L.T. 656. See too Queensland In- vestment Co. v. O'Connell and Palmer (1896), 12 T.L.R. 502. 142 LAW AND PRACTICE OF THE STOCK EXCHANGE. fore the vendor should proceed directly against such person. 1 When in the winding up of a company a vendor is com- pelled to pay calls owing to the name of an incompetent party having been passed to him and registered, the jobber will be liable to indemnify him, and this liability will not be affected by a compromise arranged between the liquidator of the company and the vendor if the object of the compromise was to keep the jobber's liability alive. In Heritage v. Paine 2 the name passed to the vendor and registered was that of an infant. In the winding up of the company the infant's name was removed from the register and the vendor's replaced, and he in consequence became liable for calls to the amount of 5400. An agreement was entered into between the liquidator of the company and the vendor for a compro- mise of the latter 's liability in consideration of the payment to the liquidator of 2000, the transfer of the shares to him, and an authority to him to use the vendor's name in all proceedings against the jobbers. The liquidator was to retain all moneys recovered from the jobbers, and to apply them in recouping the vendor the 2000 paid by him and in satisfying the liability on the shares, and the vendor was to be released from all further liability after proceedings were over. The jobbers did not dispute their liability, but they contended that the release comprised in the agreement enured for their benefit so as to make the 2000 payable thereunder by the vendor the measure of their liability either to the vendor or the liquidator. But it was held that the object of the agreement being to keep up and enforce the jobbers' liability, they could not set it up without giving effect to all its provisions, and consequently that it did not operate as a release in their favour, or relieve them in any degree from their liability to pay the full amount which was due on the shares. It was at one time considered that until the jobber had 1 NicTtalk v. Eaton (1871), 23 L.T. 689; 19 W.R. 172. 2 (1876), 2 Ch. D. 594; 45L.J. Ch. 295 ; 34 L.T. 947. RIGHTS OF THE PARTIES UNDER THE CONTRACT. 143 obtained the registration of the name of the person whom No obliga- he had substituted for himself to perform the contract, he jobberfe? had not done what was necessary to discharge his liability. 1 obtain But it was subsequently decided that this view was in- tion of -. ,1 T_T_ T_ i JJ.-L f purchaser's correct, and that as soon as a jobber nacl passed the name of a responsible person and no objection had been taken within the time limited by the rules, he was, by the custom of the Stock Exchange, discharged from liability, and that there was no implied agreement on his part, nor obligation upon him, to see that the name of the ultimate purchaser had been registered. 2 " The contract of the jobber," said Lord Cairns, L.C., in Coles v. Bristowe, 3 " is that at the settling-day he will either take the shares himself, in which case he would, of course, be bound to accept and register a transfer and to indemnify, or he will give the name of one or more trans- ferees, names to which no reasonable objection can be taken, who will accept and pay for the shares. The jobber may perform either alternative ; and if, electing to perform the latter alternative, he sends in names which are accepted, and to which transfers are executed, and those transfers are taken and paid for by the transferees or their brokers, the jobber is then and at that stage relieved from further liability, and the liability to register and indemnify is shifted to the transferees." Moreover, when the vendor has executed the transfers to the ultimate purchaser and has received the purchase-money from him or from the jobber, he has put it out of his power to perform his share of the original contract with the jobber by transferring the shares to him, and the consideration for the jobber's contract is consequently at an end. 4 And 1 Grissell v. Bristoice (1868), L.R. 3 C.P. 112 ; 37 L.J. C.P. 89; 17 L.T. 564; 1(5 W.R. 248; Coles v. Bristowe (1868), L.R. 6 Eq. 149; 18 L.T.459; 16 W.R. 690. - Grissell v. Bristowe (1868), L.R. 4 C.P. 36; 38 L.J. C.P. 10; 19 L.T. 390; 17 W.R. 123; Coles v. Bristowe (1868), L.R. 4 Ch.3; 38 L.J. Ch. 81 ; 19 L.T. 403; 17 W.R. 105; Sheppard v. Murplty (1868), 16 W.R. 948, 953. 3 L.R. 4 Ch., pp. 11, 12. 4 Grissell v. Brittoice, L.R. 4 C.P., at p. 50. 1 44 LA W AND PR A OTICE OF THE S TO CK EXCHANGE. further, by the execution of the transfers the vendor adopts the new contract with the purchaser's liability under it, in substitution for the original contract and the jobber's liability. In the case cited above, the Lord Chancellor added i 1 "It may be well to repeat, in order to prevent misapprehension, that in our opinion the liability of the defendants (i.e. the jobbers) continued entire and unbroken until there was an acceptance by the plaintiff, by the pre- paration and execution of the transfers, of the names sent in by the defendants as purchasers, and until there was an acceptance of the shares by the purchasers through the delivery to their brokers of, and payment by their brokers for, the transfers and certificates of the shares. It is difficult to see how this liability can continue after the transfer, as in the present case, of the shares to other persons. If A. be trustee of shares for B., and if he require B., as the beneficial owner, to indemnify him against calls or other liabilities, B. has clearly the right to say that he will assume the whole liability and ownership, legal as well equitable, and may require A. to transfer to him the shares in respect of which the liability arises. But if such a requisition were made to the plaintiff in this case, he could not comply with it, for he has transferred the shares and handed over the certificates to other persons as purchasers for value. Lord Cran worth's observations in Shaw v. Fisher 2 apply forcibly to this part of the case : * The plaintiff cannot make a title to these shares to Mr. Fisher, because he has already assigned them to Mr. Carmichael. Then it is said that Mr. Carmichael has not completed. "What does that signify ? As far as Mr. Shaw is concerned he has executed the deed, and there is nothing to prevent Mr. Carmichael at any time from coming with the deed and registering it. Therefore it is plain that the plaintiff cannot now make a title.' " It may at first sight seem hard that a principal should be thus compelled to take another purchaser or vendor in substitution for the jobber with whom he made the original 1 Coles v. Bri&towe, L.K. 4 Ch., at p. 12. 2 (1855), 5 De G. M. & G. 59G, 608. EIGHTS OF THE PARTIES UNDER THE CONTRACT. 145 contract. But on consideration it will be seen that there is really no hardship nor injustice in the rule. For supposing that the person who contracted with the jobber is a seller, all that he desires is to find a purchaser who will accept the shares, pay the purchase-money, and relieve him from further liability. If a purchaser is found, as to whom the seller's broker is satisfied, the seller has obtained all that he required. For in practice a seller does not limit his broker's authority to selling exclusively to a jobber, nor does he rely upon the credit of the jobber, whose name even is usually unknown to him. But he is generally content to depend upon the probability that the purchaser with whom he is brought into contact will prove to be a man of substance, and he has it in his power to protect himself against loss by insisting on registration in the name of the new purchaser as part of the jobber's contract. On the other hand, it would be a considerable hardship on the jobber if, for the small profit realized upon the re-sale, he were to be held to be responsible in respect of the non-fulfilment of any part of the contract after the matter has passed out of his hands through the assent of the vendor to complete the transaction with the substituted purchaser, or for loss occasioned by the laches of the vendor in parting with the shares without insisting on the execution of the transfer by the purchaser. If the vendor desires to obtain further protection than is "Regi given by the terms which are usually implied in the jobber's g^aran contract, he is obliged to make a special agreement with the teed - ' jobber that the latter will guarantee registration in the name of the substituted purchaser, and to pay at a higher rate for the extra risk which the jobber undertakes. The jobber who has contracted with a guarantee of registration as part of the contract, is not free from liability until registration of the purchaser's name has actually taken place, and if the purchaser fails to register, the jobber will himself be liable to indemnify the vendor against all liability incurred in consequence of such failure. 1 1 Cruse v. P ) j 3 to delivered, until the purchaser has had a reasonable timeg^^- allowed him to obtain verification and registration. 3 The documents, time which would be deemed reasonable for the purpose of these rules would, no doubt, vary according to the size of the company and the nature of the documents requiring registration. Rule 75 seems to point to six weeks as being the longest period that would, under any circumstances, be deemed to be reasonable by the Stock Exchange itself. But as there is no express provision on the point, and the question of what is a reasonable time must always be a question of fact dependent upon the circumstances of the particular case, it is conceivable that cases might arise in which the courts would consider that even six weeks was too short a time for a proper investigation of the genuineness of documents. From the time of the completion of the contract until y endor a the transfer has been accepted by the directors, or the shares trustee for have been registered in the name of the new holder, the jjjji com _ latter is merely equitable owner, the legal ownership being P letion of in the vendor, who is accountable for any rights accruing 1 Wynne v. Price (1849), 3 De G. & Sm. 310 ; Bemfry v. Butler (1858), E.B. & E. 887 : 6 W.R. 682 : Stray \. Russell (1859), 1 E. & E. 888 ; 29 L.J. Q.B. 115 ; 1 L.T. 162, 443 ; 8 W.R. 240 ; Evans v. Wood (1867), L.R. 5 Eq. 9 ; 37 L.J. Ch. 159 ; 17 L.T. 190 ; 16 W.R. 67. - Crdbb v. Miller (1871), 24 L.T. 219; affirmed, 24 L.T. 892; 19 W.R. 882 ; Bowring v. Sliepherd (1871), L.R. 6 Q.B., at p. 323 ; Ntilson v. James <1882), 9 Q.B.D., at p. 553. 3 See Rules 92, 127. 150 LAW AND PRACTICE OF THE STOCK EXCHANGE. in respect of the shares. 1 Where, therefore, dividends are declared on the shares subsequently to the date of the contract, the purchaser is entitled to them. 2 And where new shares or stock are issued in right of old, the purchaser of the original shares or stock is entitled to the new, provided that he specially claims them in writing within a reasonable time. 3 It seems that the purchaser will not have exceeded a reasonable time, even though he neglects to assert his right until the original shares or stock have been quoted " ex new." 4 If, owing to neglect on the part of the purchaser to have his name registered, the vendor's name remains on the register, and in order to save himself from liability, the vendor re-sells the shares, he is accountable to the purchaser for the price which he receives. 5 Pur- The purchaser, on the other hand, is bound to accept the under- S transfer and to pay for the securities, and if at this stage taking. he breaks his contract by refusing to accept the transfer paying for or to pay the purchase- money, the securities will be sold out securities, a g a i ns t him, and he will be obliged to pay any loss thereby incurred; or if they happen to be shares in an insolvent company, and, in consequence, unsaleable, the amount which he will be obliged to pay as damages will be the same as if 1 The purchaser's legal title is acquired either (1) upon acceptance of the transfer by the company (Roots v. Williamson (1888), 38 Ch. D. 485; 57 L.J. Ch. 995; 58 L.T. 802; 36 W.E. 758), or (2) upon registra- tion in the case of those companies in which the transferee's title is not complete until after registration (Soctetf Gfiifrale de Paris v. Walker (1885), 11 App. Gas. 20; 55 L.J. Q.B. 169; 54 L.T. 389; 34 W.E. 662; Nanney v. Morgan (1887), 37 Ch. D. 346; 57 L.J. Ch. 311 ; 58 L.T. 238; 36 W.E. 677). 2 Rule 92 ; Black v. Homersliam (1878), 4 Ex. D. 24 ; 48 L.J. Ex. 79 ; 39 L.T. 671 ; 27 W.E. 171. 3 Eules 107, 126. 4 Steicart v. Lupton (1874), 22 W.E. 855. 5 Becldtt v. Bilbrougli (1850), 8 Hare, p. 188. 6 Paine v. Hutchinson (1868), L.E. 3 Ch. 388; 37 L.J. Ch. 485; 18 L.T. 380; 16 W.E. 553. An acceptance by the purchaser's brokers on his behalf is sufficient to bind him. Son-ring v. Shepherd (1871), L.E. 6 Q.B. 309; 40 L.J. Q.B. 129; 2t L.T. 721 ; 19 W.E. 852. EIGHTS OF THE PAE TIES UNDER THE CON Tit A CT. 151 he had completed the contract, and had been obliged to indemnify the vendor. The Stamp Act, 1815, 1 requires that the amount of consideration inserted in the transfer, and on which the duty payable is calculated, shall be the sum paid by the ultimate purchaser. It is evident that this sum may be either higher or lower than that actually received by the vendor. A note is generally appended to the transfer, explaining this apparent discrepancy, and the vendor is not, in that case, justified in refusing to sign the transfer on the ground that he would thereby be admitting the receipt of a larger sum than he has in fact received. But it appears to be doubtful whether he could be compelled to execute the transfer if such a note were not attached. 2 Nor will the purchaser be justified in refusing to duly execute on the ground that the transfer has been invalidated, after leaving his possession, by the correction of unimportant clerical errors in, for instance, the spelling of the parties' names. 3 If the purchaser accepts the transfer and pays the (ii.) To purchase-money, it becomes his duty to execute the deed, reglst and to have it registered. 4 But sec. 26 of the Companies Act Amendment Act, 1867, 5 now provides that on an appli- cation by the vendor, the company shall register the name of the transferee, in the same manner and subject to the same conditions as if the application had been made by the transferee. If from any cause the purchaser fails to register, and the (ill.) To vendor is compelled to pay calls, or incurs other liabilities t ^ e Ven d6r. in consequence of his name remaining on the register, the purchaser is compellable to repay such calls, 6 and to indemnify 1 55 Geo. III. c. 184, Sched., Part I., Conveyance. 2 Meicburn v. Eaton (1869), 20 L.T. 4-19 ; Case v. McClellan (1871), 25 L.T. 753 ; 20 W.K. 113. 3 Mewburn v. Eaton, SUJJI-K. 4 Wynne v. Price (1849), 3 De G. & Sm. 310; Morris v. Cannan (1862), 4 De G. F. & J. 581.; 31 L.J. Ch. 425 ; 6 L.T. 521 ; 10 W.K. 589. 5 30 & 31 Viet. c. 131. Bayley Y. Wilkim (1849), 7 C.B. 886; 18 L.J. C.P. 273. 152 LAW AND PRACTICE OF THE STOCK EXCHANGE. him not only against expenses actually incurred, but also against future liabilities. 1 This question of indemnification is a question which lies entirely between the vendor and the purchaser, and is one with which the company and the remaining shareholders are quite unconcerned. 2 It in no way depends upon whether the list of shareholders can be altered or not, the Court having power to order the purchaser to indemnify the vendor where they cannot order the rectifi- cation of the register. 3 It was formerly held that where the vendor delivered a transfer which the purchaser failed to fill up or execute, there was not an implied promise by the purchaser to indemnify him against subsequent liabilities. 4 But it is now settled that the purchaser is subject to this liability, although he has not executed the transfer, 5 and although proceedings for winding up the company are commenced before the contract is completed. Nor does the liability to indemnify cease immediately upon registration of the purchaser's name ; for if the company is wound up within twelve months of the transfer of the shares, the vendor will 1 Evans v. Wood (1867), L.K. 5 Eq. 9 ; 37 L. J. Ch. 159 ; 17 L.T. 190 ; 16W.R. 67; Bowring v. Slieplterd (1871), L.K. 6 Q.B. 309 ; 40 L.J. Q.B. 129 ; 24 L.T. 721 ; 19 W.R. 852 ; HawMm v. Maltby (1867), 3 Ch. 188 ; 37 L.J. Ch. 58; 17 L.T. 397; 16 W.R. 209; and see Davis v. Haycock (1869), L.K. 4 Ex. 373 ; 38 L.J. Ex. 155; 20 L.T. 954, where apparently it was only the form of the declaration which prevented the plaintiff from recovering. 2 Hawkins v. Maltby (1867), L.R. 3 Ch., at p. 194; Hodgkinson v. Kelly (1868), L.R. 6 Eq., at p. 500. 3 Musgrave and Hart's Case (1867), L.R. 5 Eq. 193; 37 L.J. Ch. 161 ; 17L.T. 313; 16 W.R. 247. 4 Humble v. Langston (1841), 7 M. & W. 517; Walker v. Bartlett (1856), 17 C.B. 446. 4 Walker v. Bartlett (1856), 18 C.B. 845 ; 25 L.J. C.P. 263 ; Musgrave and Hart's Case (1867), L.R. 5 Eq. 193; 37 L.J. Ch. 161; 17 L.T. 313; 16 W.R. 247; Hodgkinson v. Kelly (1868), L.R. 6 Eq. 496; 37 L.J. Ch. 837; 16 W.R. 1078; Hawkins v. Maltby (1869), 4 Ch. 200; 38 L.J. Ch. 313, 20 L.T. 335; 17 W.R. 557; Crabb v. Miller (1871), 24 L.T. 219; affirmed, 24 L.T. 892; 19 W.R. 882; Fenwick v. Buck (1871), 24 L.T. 274 ; 19 W.R. 597. Rudge v. Bowman (1868), L.R. 3 Q.B. 689; 37 L.J. Q.B. 193; Fenwick v. Buck, supra ; Crabb \. Miller, supra. JRIGHTS OF THE PARTIES UNDER TEE CONTRACT. 153 be placed as a contributory in Class B, and, in the event of his being compelled to pay, will be entitled to be reimbursed by the purchaser, 1 although the latter has in turn trans- ferred the shares to another. 2 If a person, who is not the actual purchaser, has so acted as to lead others to suppose that he is the purchaser, he will be precluded by his conduct from subsequently denying his liability, and will be compelled to indemnify the vendor. In Shepherd v. Gillespie? the plaintiff, through his broker, sold some shares in a company to the managing director of the company. By the instructions of the director, Gillespie's name was passed as that of the purchaser. Gillespie refused to execute the transfers, but did not inform the plaintiff of the facts. He retained the transfers until the company was wound up, and then handed them to the secretary for the purchase-money with which he had been debited. It was held that he could not then repudiate the contract, but must indemnify the plaintiff against calls, and pay the costs of the plaintiff and the director. So, too, the want of a sufficiently definite repudiation of a contract which violates the provisions of Leeman's Act, will prevent the apparent purchaser from subsequently denying his liability to the vendor. 4 It is not always the person into whose name the transfer jndemnity is made who is under liability to indemnify the vendor, but w ^ e c r ^ aser it is the person who is the actual purchaser, though he has takes chosen to take the transfer in the name of another. In such ano ther's a case it is immaterial whether the transferee has executed the transfer or not. In Torrington v. Lowe 5 it was held by the Court of Common Pleas that when once the transfer v - Lowe - had been executed it was not open to the vendor to claim 1 Roberts v. Crowe (1872), L.R. 7 C.P. 629; 41 L.J. C.P. 198; 27 L.T. 238. 2 Net-ill's Case (1870), L.R. 6 Ch. 43, at p. 46 ; Kellock v. Enthoven (1873), L.R. 9 Q.B. 241 ; 43 L.J. Q.B. 90; 30 L.T. 68; 22 W.R. 322. 3 (1868), L.R. 3 Ch.764; 38 L.J. Ch. 67; 19 L.T. 196; 16 AV.R. 1133. 4 Loring v. Davis (1886), 32 Ch. D. 625; 55 L.J. Ch. 72o; 54 L.T. 899; o4 W.R. 701. 5 (1868), LR. 4 C.P. 26; 38 L.J. C.P. 121 ; 19 L.T. 316; 17 W. It. 78. 154 LAW AND PRACTICE OF THE STOCK EXCHANGED indemnity against any one but the person named in the transfer, as no one else was fixed with privity of contract. The result of this was that the purchaser of shares which were not fully paid up, by taking a transfer in the name of an unsubstantial person, might escape from liability for future calls. But this view did not apparently obtain a very general or a very lengthy recognition even among the common law judges. For in 1869, in the case of Maxted v. Paine, it was suggested by several of the learned judges that the vendor might have an action against the real purchaser, although he was not entitled to insist that the purchaser should take the transfer in his own name. 1 In the year following the decision in Maxted v. Paine the question came before the Court of Chancery in the case Castellan of Castellan v. Hobson." 1 In that case the defendant had jon * bought shares of the plaintiff through his broker and had given the name of one of his workmen as transferee. The plaintiff duly executed the transfer to the workman and; received the purchase-money, but owing to the winding-up of the company the transfer was not registered, and the shares remained in the plaintiff's name. It was held that the defendant, as the real purchaser and equitable owner of the shares, was bound to; indemnify the plaintiff against liability in respect of them. A similar decision was given by the same court three Brown v. years later in the case of Brown v. Black ; 3 and now, since the amalgamation of legal and equitable principles by the Judicature Act of 1873, there can be no doubt that were the question to arise again the decision would be in accordance with the two later cases. indemnity In case of the vendor's death the right to be indemnified in case of death or ruptcy * See L ' R - 6 Ex> ' P- 15L - (1870), L.R. 10 Eq. 47; 39 L.J. Oh. 490; 22 L.T. 575 ; 18 W.R. 731. See too Nicltalls v. Furneaux, W.N. 1869, 118. The minutes of decree in Castellan v. Hobson followed those in Evans v. Wood (1867), L.R. 5 Eq. 9. 3 (1873), L.R. 15 Eq. 363 ; 42 L.J. Oh. 397 ; 28 L.T. 256 ; 21 W.R. 457 ; affirmed, L.R. 8 Ch. 939; 42 L.J. Ch. 841; 29 L.T. 362; 21 W.R. 892. EIGHTS OF THE PARTIES UNDER THE CONTRACT. 155 will pass to his personal representatives. Whether an indemnity is a claim provable in the purchaser's bankruptcy is perhaps still open to some doubt. Before the passing of the Bankruptcy Act, 1869, it was held by the courts to be incapable of proof, 1 but now such a claim would appear to fall within sec. 37 of the Bankruptcy Act, 1883, 2 and to be provable accordingly. Where the purchaser of shares is an infant at the time Repudia- of the purchase, he may repudiate the transaction either infant" pur- while still an infant or within a reasonable time after reach- chaser - ing full age, unless, perhaps, he has fraudulently misrepre- sented his age, 3 or has received some benefit such as a payment of dividends. 4 But if he fails to repudiate within a reasonable time, or if, after attaining twenty-one, he acts in a manner inconsistent with his right of repudiation, as, for instance, by receiving a dividend or paying a call, he cannot subsequently repudiate the contract, 5 and the Infants Relief Act, 1874, u does not release an infant from this liability. 7 But if at the commencement of the winding-up of a company the infant is not precluded from repudiating, the right is not lost by mere delay. 8 Not only may the infant himself repudiate the contract, Repudia- but the company is entitled to reject an infant transferee infant by and to place the transferor on the list of contributories, 9 up. 1 Holmes v. Symons (1871), L.E. 13 Eq. 66; 41 L.J. Ch. 59; 25 L.T. 628; 20 W.R. 195; Kellocl: v. Enthoren (1873), L.R. 9 Q.B. 241 ; 43 L.J. Q.B. 90; 30 L.T. 68; 22 W.K. 322. 2 46 & 47 Viet. c. 52, s. 37 (1). 3 Wright v. Snoice (1848), 2 De G. & S. 321. 4 Hamilton v. Vaughan-Sherrin Electrical Engineering Co. [1894], 3 Ch. 589; 63 L.J. Ch. 795; 71 L.T. 325; 43 W.R. 126. 3 Lumsden's Case (1868), L.R. 4 Ch. 31 ; 19 L.T. 437; 17 W.K. 65; Ebbett's Case (1870), L.R. 5 Ch. 302; 39 L.J. Ch. 679; 22 L.T. 424; 18 W.R. 394. 6 37 & 38 Viet. c. 62. 7 In re Yeolantfs Consols (1888), 58 L.T. 922. 8 Hart's Case (1868), L.R. 6 Eq. 512; 38 L.J. Ch. 85; 16 W.R. 1033; Capper's Case (1868), L.R. 3 Ch. 458; 16 W.R. 1002. 9 Capper's Case, supra; Curtis' 8 Case (1868), L.R. 6 Eq. 455; 37 L.J. Ch. 629; 23 L.T. 287; 18 W.R. 957; Weston's Case (1870). L.R. 5 Ch. 614 ; 39 L.J. Ch. 753. 156 LAW AND PEA OTICE OF THE STO CK EXCHANGE. unless the right has been lost by the company's neglect. 1 But if the infant has transferred his shares to an adult and the company has accepted his transferee, the original trans- feror is, it seems, not liable to be placed even on the list of past members, although the company is wound up within twelve months of the transfer to the adult. 2 If a company seeks to place a person on the list of contributories as the holder of shares, and he objects, it is incumbent upon him to show that at some period there was on the register a transferee from him who could have been made liable at law in respect of the shares. 3 Indemnity If a purchaser of shares takes a transfer in the name of an i n f an t the purchaser's name may be placed on the list chaser an o f contributories in the place of that of the infant. 4 But even in this case the company is entitled to place on the list the name of the transferor, who will, however, then be entitled to an indemnity from the actual purchaser. 5 Sale under If the vendor is selling, or the purchaser is buying, on attorne f Behalf ^ another under a power of attorney, the document stamping, must bear a stamp of the following amounts. If the power of attorney is for the sale, transfer, or acceptance of any of the Government or Parliamentary stocks or funds : *. d. (i.) Where the value does not exceed 20 ... ... 5 (ii.) in any other case ... ... ... ... 10 A power of attorney for the receipt of dividends or interest on any stock : S. d. (i.) Where made for the receipt of one payment only 1 (ii.) in any other case ... ... ... ... 5 1 Parson's Case (18G9), L.R. 8 Eq. 656. 2 Gooch's Case (1872), L.R. 8 Ch. 2G6; 42 L.J. Oh. 381; 28 L.T. 148; 21 W.R. 181. 3 Curtis's Case, supra. 4 Richardson's Cane (1875), L.R. 19 Eq. 588; 44 L.J. Ch. 252; 32 L.T. 18 ; 23 W.R. 467. 5 See p. 153, supra. EIGHTS OF TEE PARTIES UNDER THE CONTRACT. 157 But a power of attorney for the receipt of dividends of Exeinp- any definite and certain share of the Government or Parlia- stamping? uientary stocks or funds producing a yearly dividend less than 3, is exempt from the necessity of stamping. So, too, is an order, request, or direction under hand only from the proprietor of any stock to any company, or to any officer of any company, or to any banker, to pay the dividends or interest arising from any stock to any person therein named. And further, a power of attorney for the sale, transfer, or acceptance of any of the Government or Parliamentary stocks or funds, duly stamped for that purpose, is not to be charged with any further duty by reason of containing an authority for the receipt of dividends on the same stocks or funds. 1 1 Stamp Act, 1891 (54 & 55 Viet. c. 39), s. 81, and Sched. I., Letter of Attorney. 158 LAW AND PRACTICE OF THE STOCK EXCHANGE. Delivery. (.)0f (ii.)or securities deliverable by deed of transfer. CHAPTER VIII. COMPLETION OF THE CONTRACT. i. Delivery ii. Payment iii. Settlement of Bargains. THE contract is completed by delivery of the securities on the one side, and the payment of the purchase-money on the other. 1 The delivery must be made within a time which is fixed by the rules ; and if. the securities are not duly delivered, the purchaser is entitled to avail himself of the right of buying in, which is the remedy afforded in such cases by the rules of the Stock Exchange. 2 English and Indian Government, and corporation securi- ties which have been bought for a specified day, must be delivered on that day, and if it is not duly delivered the purchaser may buy it in. 3 Stock receipts are obliged to be delivered by half-past three o'clock, or by a quarter-past three if the deliverer elect to deliver to the member with whom he dealt, and on Saturdays by half-past one o'clock. 4 English and Indian Government, and corporation securities to bearer must be delivered before three o'clock on ordinary days, or before one on Saturdays. 5 Securities deliverable by deed of transfer must be de- livered within ten days of the last day of the settlement in 1 The times specified in this chapter for delivery of and payment for securities apply only as between members of the Stock Exchange. Non- members will, of course, be obliged to make delivery or payment some time previously, in order to enable their brokers to comply with the rules on the subject. 2 See Remedies, pp. 207-209, post. 3 Rule 83. 4 Rule 84. * Ibid. COMPLETION OF THE CONTRACT. 159 which they were bought, or, in the case of companies which prepare their own transfers, within ten days of the earliest day on which a transfer can be procured. If not delivered within that time, they may be bought in against the seller. 1 Moreover, if delivery does not take place within thirteen days, the intermediate buyer from whom the seller received the ticket is discharged from liability, and the issuer of the ticket alone remains responsible for the payment of the purchase-money. 2 In the case of bearer securities, on settling-day and the day following the delivery commences at ten o'clock, securities. Sellers who prefer to settle with their immediate buyers under Kule 68, are obliged to deliver before half-past twelve o'clock; while the holders of tickets passed under Rule 116, and of tickets passed in the Settlement Department, are allowed to deliver securities up to two o'clock on settling- days. Sellers of securities for which no tickets are passed are allowed up to half-past two to deliver stock. 3 Where such securities have been bought for any period except settling-day, and have not been delivered by half-past two o'clock on that day, or, if the day be Saturday, by half-past twelve, the vendor is entitled to buy in, and the seller will be obliged to recompense him for any consequent loss. 4 Securities bought for the settling-day, and not delivered by half-past two o'clock, may be bought in on the following or any subsequent day, after one hour's notice has been posted in the foreign market announcing the intended purchase. 5 The holder of a ticket who allows two clear days to elapse in the case of bearer securities without delivering stock, releases his buyer from any loss in consequence of the declaration of any member as a defaulter. 6 Securities deliverable by deed of transfer must be de- Delivery livered at the price marked on the ticket ; but a member registered cannot be compelled to take a ticket at a price not quoted in the official list during the account, unless the bargain was 1 Rule 105. 2 Rule 103. 3 Rule 116. 4 Rule 118. 5 Ibid. 6 Rule 119. 160 LAW AND PEACT1CE OF THE STOCK EXCHANGE. made within the two preceding accounts. 1 In the absence deliverable ^ ^ s P ec * a l agreement, a purchaser of American securities in American cannot be compelled to accept delivery of a certificate of securities. J American shares of a larger amount than ten shares of $100 each nominal capital, or twenty shares of $50 each, or an American bond of a larger amount than $1000. 2 ^securities Delivery of bonds and other securities, which are subject subject to to periodical drawing, cannot be claimed previous to the day for which they were bought ; and bargains are obliged to be settled in securities which have not been drawn. If there is an erroneous delivery of drawn bonds, the purchaser must return them or their proceeds to the seller, if they still remain in his possession or under his control, on condition of his being recompensed for anything which he may lose by the transaction. But the Committee will not entertain any claim by a seller in respect of an erroneous delivery of drawn bonds unless it is made within nine calendar months. 3 Unpaid Foreign coupons sold at the exchange of the day and not stopped paid, are returnable with all reasonable expenses. 4 French and Egyptian securities which, under the law of those countries, have been officially notified as stopped, do not constitute a good delivery, but may be returned to the deliverer. 5 Party Where securities deliverable by deed of transfer are sold,. responsible . . . . for genuine- the seller is responsible lor the genuineness and regularity securities, of all documents delivered, and for such dividends as may be received, until the transferee has had a reasonable time in which to execute and duly lodge such documents for verifi- cation. 6 Where bearer securities are delivered, the deliverer is responsible for the genuineness of such securities, and in case of his death, failure, or retirement from the Stock 1 Rule 98. The price marked on the ticket may be less than that at which the seller contracted to sell, in which case he can claim the difference from his immediate buyer. 2 Rule 114. 3 Rule 125. 4 Rule 124. 5 Rule 127. The notification in the case of French securities is by a publication in the "Bulletin Official." (i Rule 92. COMPLETION OF TEE CONTRACT. 161 Exchange, the responsibility attaches to each member in suc- cession through whose account the ticket for such securities has passed. 1 Every bond and scrip share is considered to be perfect, Delivery 1 of damaged and to constitute a good delivery, unless it is much damaged securities. or a material part of the wording is obliterated. If the purchaser has retained such damaged securities in his pos- session for more than eight days after delivery, the Commit- tee will not take cognizance of any complaint in respect of them, unless it can be proved that the member who passed them was aware that they were imperfect. 2 A delivery of forged securities 3 is not a sufficient perform- Delivery ance of the seller's contract to deliver, and in such a case securities, the seller will be bound either to deliver genuine securities in the place of the forgeries, or to refund the purchase-money. In Westropp v. Solomon* the seller delivered bonds which had been forged, though not to his knowledge. There were a considerable number of these forged bonds in the market, and the Committee of the Stock Exchange, on dealing with the matter subsequently to the date of the contract, passed a resolution compelling brokers who had sold any of the bonds to pay to their purchasers a price considerably in advance of that at which the defendant Solomon had actually sold. The broker Westropp paid, and brought an action against the defendant, claiming to be indemnified. But it was held that he was not entitled to recover the sum claimed, because in the ordinary course the principal was at the most bound to repay the amount which he had received on the sale, and a resolution of the Committee passed subse- quently to the date of the contract could not affect the position of a non-member, since he could not be presumed to have 1 Kule 127. - Rule 128. 3 Forged certificates or transfers are ineffectual to give a title to the purchaser of the securities to which they relate, though the company may be estopped from denying their liability to the purchaser who has acted in the belief that such certificates or transfers were genuine. See pp. 228 and 233-4, post. (1849), 8 C.B 345 ; 19 L.J. C.P. 1. M 162 LA W AND PRACTICE OF THE STOCK EXCHANGE. contracted with reference to it. The case, however, supports the proposition that a vendor of forged securities is bound to refund the amount which he actually received for them, and he would now undoubtedly be liable under the rule which makes the seller responsible for the genuineness and regu- larity of the documents which he delivers. 1 o?stoien I n Raphael v. Burt, 2 a question arose as to the validity bondB. Q f a delivery of bonds which had been called in for payment and had subsequently been stolen. 3 It is usual for persons in EI gland who desire to make remittances to America to buy, at an agreed price, bonds or coupons of railway com- panies payable in America, without specifying any particular bonds or coupons. Evidence was given in the course of the case that if default was made in the payment of the coupons in America the seller returned the money paid for them, but there was no evidence that payment of a bond had ever been refused. The bonds in question had been issued by the United States Government in 1865. They were payable to bearer, redeemable at the pleasure of the Government at any time after 1870, and payable at all events in 1885. When the Government wished to redeem any of the bonds, they publicly notified that specified bonds would be paid on pre- sentation, and such bonds then became "called bonds." Some of these called bonds were stolen from the American 1 Kule 92, supra ; and see Smith v. Reynolds (1892), 66 L.T. 808. 2 (1884), 1 C. & E. 325. 3 By sec. 100 of the Larceny Act, 1861 (24 & 25 Viet. c. 96), which provides for the restitution of the property stolen where the thief is prosecuted to conviction, a special exemption is made in favour of " any valuable security" which "shall have been bond fide paid or discharged by some person or body corporate liable to the payment thereof, or being a negotiable instrument shall have been bond fide taken or received by transfer or delivery, by some person or body corporate, for a just and valuable consideration, without any notice or without any reasonable cause to suspect that the same had by any felony or misdemeanour been stolen, taken, obtained, extorted, embezzled, converted, or disposed of." Of course, if the securities stolen consist of inscribed stocks or shares, a forged transfer will be necessary in order to dispose of them, as to which see note 3, p. 161, supra. COMPLETION OF THE CONTRACT. 163 holders and were subsequently sold in England by the defendants to the plaintiffs. The bonds, on presentation, were claimed by the Manhattan Saving Institution, from whom they had been stolen, and the American Government refused to pay their value to the plaintiffs. In an action between the plaintiffs and the Manhattan Saving Institution, the American Court of Claims held that in law the bonds became matured on the day on which the holders had the right to receive payment of all which was then due on them, and that any one who accepted any of the bonds after that day took them as overdue paper with only such title as his vendor had, and with a liability to have his title disputed and impeached. The plaintiffs then claimed the return of their money from the defendants, and they were held to be entitled to it on the ground that there was an implied warranty of title on the sale. The performance of the contract to deliver is complete as soon as the vendor has done all that is necessary to place the purchaser in the position of legal owner, and it is not necessary that there should be a delivery of any of the mere indicia of property. And so in Hunt v. Gunn, 1 where the defendant had contracted to deliver sixty shares to the plaintiff, and had directed the shares to be placed in the plaintiffs name, and the plaintiff had executed the deed of settlement in respect of them, it was held that the contract had been properly completed although no scrip certificates had been handed to the plaintiff. Payment for securities bought on the Stock Exchange is Pa y menfc< usually made by cheque, and cheques must be passed through cheque. 7 the bankers' Clearing House, unless the drawer consent to their being otherwise presented. If a member requires bank notes instead of a cheque, without having stipulated for them at the time of the bargain, he is obliged to give notice to that effect before half-past eleven on the day of delivery. 2 (1862), 13 C B. N.S. 226; 7 L.T. 277. = Kule 67. 164 LA W AND PRACTICE OF THE STOCK EXCHANGE. For registered securities. The Payer. A member is not obliged to take a reference for payment to a non-member, nor is he obliged to pay a non-member for securities which he has bought. 1 The seller is entitled to demand payment from the member who passed him the ticket, though the usual course is to receive payment direct from the purchaser's broker, and only to apply to the passer of the ticket where the issuer fails to pay. 2 In the case of securities deliverable by deed of transfer, the purchaser is obliged, in the event of the ticket being split, to pay for any portion of shares or stock that may be presented, provided that the number is not less than ten shares, nor the value less than 200. 3 The purchaser may, however, refuse to pay for a transfer deed which is un- accompanied by coupons or certificates, unless it is officially certified that the coupons or certificates are at the office of the company. 4 For where the vendor has a larger coupon or certificate than the amount of the stock or shares con- veyed, or a single coupon or certificate representing stock or shares conveyed by two or more transfer deeds, the coupon or certificate must be forwarded to the offices of the company, when the secretary makes a memorandum of the deposit on the transfer deeds, which then constitute a valid delivery. 5 In the case of such securities a member cannot be compelled to pay for them on the day of delivery, if they are delivered after half-past two on ordinary days, or after one o'clock on Saturdays. 6 The purchaser of bearer securities for a specified day must be prepared to pay for them by half-past two o'clock on that day, or by half-past twelve if the day be a Saturday, on pain of having the securities sold out against him, and For bearer securities. 1 Rule 6G. 2 Rule 68, and see also Rule 69. 3 Rule 101. Rule 102. 5 In the case of stocks (not shares) which are dealt with by the Settlement Department, the duty of forwarding the coupons to the company's offices is undertaken by the Secretary to the Share and Loan Department; in all other cases the broker will forward the certificates direct to the offices : Rule 102. 8 Rule 110. COMPLETION OF THE CONTRACT. 165 being compelled to defray any expense incurred by the vendor owing to such non-payment. 1 If securities are bought for the ordinary settling-day payment must be made on delivery, but the times for delivery vary as tickets have or have not been passed, and as sellers elect to settle with their immediate or with the ultimate buyers. 2 Securities presented on any other day than settling-day before half-past two, or before one o'clock on Saturdays, must be paid for on delivery. 3 In the settlement of all bargains concluded on the Stock Settle- Exchange, dividends are accounted for at the net amount bargains, receivable after income-tax has been deducted. Where Adjustment dividends are payable only abroad, the Secretary of the Share and Loan Department fixes a price for the coupons in sterling money. This price is posted in the Stock Exchange, and thereat all dividends are accounted for. 4 Securities to bearer must be delivered on settling-day with the current coupon attached, unless the coupon is pay- able on settling-day when the securities are deliverable ex coupon. When the dividend is payable after settling-day, outstanding bargains in bearer securities are settled with the current coupon, and if the coupon is not handed over the buyer is entitled to demand its market value, which, in case of dispute, is fixed by the Secretary of the Share and Loan Department. 5 A purchaser of registered and bearer securities is entitled to such new securities as may be issued in right of old, shares - provided that he claim the same in writing from the seller within a reasonable time. 6 Bargains in French rentes, in the absence of special agreement, are settled in certificates to bearer, and at a fixed exchange of twenty-five francs per pound sterling. 7 1 Rule 115. 2 Rule 116. 3 Rule 117. 4 Rule 73. 5 Ibid. 6 Rules 107, 126. And see Stewart v. Lupton (1874), 22 W.R. 855, and p. 150, ante., 7 Rule 123. 166 LAW AND PEA CT1CE OF THE STOCK EXCHANGE. ^ The bonds and debentures of railways in Great Britain, of interest Ireland, and the East Indies, are so dealt in that the accrued bonds, etc. interest up to the day for which the bargain is done, is paid by the purchaser ; but bargains in bonds and debentures of colonial and foreign railways include the accrued interest in the price. 1 Rule 129. ( 167 ) CHAPTEK IX. AVOIDANCE OF THE CONTRACT. Section I. 7 Geo. II. c. 8 Sec. II. 8 & 9 Viet. c. 109, a. 18 Sec. III. Lee- man's Act Sec. IV. Fraud. THE circumstances attending a contract for the purchase and sale of stocks and shares may be such that the courts will refuse to compel the parties to fulfil the obligations which they have undertaken. The obstacle to compulsory enforcement of the contract may be due to one of three causes that the contract is (1) illegal and void, or (2) void merely, or (3) voidable. Since the repeal of Sir John Barnard's Act it can very rarely be that a contract made on the Stock Exchange is illegal. But contracts may still be void as falling within 8 & 9 Viet. c. 109, s. 18, or within Leeman's Act, or voidable on the ground that they have been induced by fraud on the part of one of the parties. By or under the provisions of three statutes, certain classes of Stock Exchange transactions have at various times been declared to be null and void. Those statutes are Sir John Barnard's Act, 8 & 9 Viet. c. 109, and Leeman's Act, of which the two latter are still in force. The object of Sir John Barnard's Act was to render illegal and void transac- tions on the Stock Exchange which were in the nature of wagers. The effect of 8 & 9 Viet. c. 109, s. 18, was to render such contracts, not illegal, but void. Leeman's Act, on the other hand, avoided contracts for the sale of bank shares of which the numbers or the names of the registered proprietors were not stated in the contract note. As between the original parties to the contract the effects of illegality and nullity are the same. No action can be 168 LAW AND PR A CTIOE OF THE S TO CK EXCHANGE. founded on the contract, and accordingly money won under it cannot be recovered by process of law. The distinction between illegality and nullity arises in cases in which rights have been acquired by persons who are not parties to the contract. Where a negotiable instrument has been given to secure the money due under an illegal contract, the defendant, in an action on the instrument by a third party into whose hands it has come, by showing that the con- sideration was illegal, will shift on to .the plaintiff the burden of proving that he gave value for it, and, after showing that he gave value, the plaintiff may still be de- feated by proof that at the time he took the instrument he knew of the illegality. But where the original contract is merely void, a negotiable instrument given to secure the payment of money under it, is founded not upon an illegal consideration, but upon no consideration at all, and therefore the defendant to an action on v the instrument is obliged to show affirmatively that the plaintiff did not give consideration for it, and if the plaintiff gave consideration, it is immaterial whether he took with or without notice of the defect in the original contract. 1 SECTION I. ILLEGALITY (7 GEO. II. c. 8). Wagers At common law, contracts of gaming and wagering were a^common ne ^^ er illegal nor void, but were enforced in the courts, law. provided that they were not contrary to public policy. 2 But in 1733 Sir John Barnard carried through Parliament the 7 Geo. II. statute usually known by his name, 3 with the object of placing a check upon excessive speculation. The statute rendered illegal all contracts for the payment of differences only, and contracts in the nature of options. It further 1 Fitch v. Jones (1885), 5 E. & B. 238 ; 24 L.J. Q.B. 293; Lilley v. Eanldn (1886), .56 L.J. Q.B. 248; 55 L.T. 814; Blake v. Parker, the Times, April 21, 1896. 2 Atlierfold v. Beard (1788), 2 T.K. GIG ; 1 E.R. 556 ; Good v. Elliot (1790), 3 T.K. 693 ; 1 R.R. 803 ; Eamloll Thackoorseydass v. Soojumnull TlT, J 7IX-IO^o\ /TfcJT _ f* r~\ /~\ r\f\n f\-t s\ Dhondmull (1848), 6 Moo. P.C.C. 300, 310. 3 7 Geo. II. c. 8. AVOIDANCE OF THE CONTRACT. 169 declared that actions could not be maintained for debts thus created, and that money actually paid should be recoverable. It did not, however, expressly avoid securities given for the payment of such debts. But the effect of the statute was soon whittled down by Judicial the courts. It was held in a series of cases that its scope J^iorTof was limited to bargains in the funds of this country, and that the statute, where such bargains were made either in the funds of a foreign country, or in those of British dependencies, 1 or in the stocks and shares of incorporated companies, 2 or where there was a genuine intention to deliver, although the seller was not in actual possession of the securities at the time when he made the bargain, 3 the contracts were not affected by the statute. Moreover, in Sanders v. Kentish 4 a loan of stock with an undertaking to replace it at a future date was held not to be within the operation of the statute. In Tenant v. Elliott 5 it was held that where A. had received money to the use of B. upon an illegal contract between B. and C., he could not be allowed to set up the illegality of the con- tract as a defence to an action brought by B. for money had and received. And in Lyne v. Siesfield? where the claim was for money paid for differences arising partly from contracts relating to the public funds, and partly from contracts 1 Henderson v. Bise (1822), 3 Stark. 158 ; Wells v. Porter (1836), 3 M. & W. 722 ; 5 L.J. C.P. 256 ; 3 Scott, 141 ; 2 Bing. N.C. 722 ; Oakley v. Eigby (1836), 5 L.J. C.P. 256 ; 3 Scott, 194 ; 2 Bing. N.C. 732; Elsicorthv. Coles (1836), 2 M. & W. 31; 6 L.J. Ex. 50; Eobson\. Fallowes (1837), 6 L.J. C.P. 105; 4 Scott, 43; 3 Bing. N.C. 392; Morgan v. Pebrer (1837), 6 L.J. C.P. 75 ; 4 Scott, 230 ; 3 Bing. X.C. 457. 2 Hewitt v. Price (1842), 4 M. & G. 355; 11 L.J. C.P. 292; 5 Scott, N.K. 229 ; Williams v. Trye (1854), 18 Beav. 366; 23 L.J. Ch. 860. 3 Olivierson v. Coles (1816), 1 Stark. 496; Mortimer v. McCallan (1840), G M. & AV. 58; 9 L.J. Ex. 73; S.C. 7 M. & W. 20; 10 L.J. Ex. 136 ; 9 M. & W. 636 ; 11 L.J. Ex. 429; Hibblewhite v. McMorine (1839), 5 M. & W. 462 ; 8 L.J. Ex. 271, overruling the dictum of Lord Tenterden to the contrary in Bryan v. Leicis (1826), Ky. & Moo. 386. And see Nicholson v. Gooch (1856), 5 E. & B. 999; 25 LJ. Q.B. 137. 4 (1799), 8 T.R. 162. 6 (1797), 1 B. & P. 3. 6 (1856), 1 H. & X. 276. 170 LAW AND PRACTICE OF THE STOCK EXCHANGE. relating to railway shares, and it was pleaded in defence that such contracts were contrary in part to 7 Geo. II. c. 8, and in part to 8 & 9 Viet. c. 109, it was held that the plea being no answer as to the money paid in respect of the contracts relating to the railway shares, was wholly bad, and was not made good in respect of the losses 011 the contracts relating to the public funds by sec. 75 of the Common Law Pro- cedure, 1852. In ex parte Bulmer, 1 however, where a pro- missory note had been given for money due on Stock Exchange transactions, some of which were illegal under this statute, in the bankruptcy of the giver of the note proof was restrained to that portion of the consideration which did not arise from illegal transactions. In Brown v. Turner 2 the statute was declared to include and make void gaming trans- actions in omnium. And in Child v. Morley, 3 where a broker contracted for the sale of stock at a future day by the authority of a principal who afterwards refused to complete, it was held that the broker could not, after paying the amount of the loss occasioned by the failure to carry out the contract, maintain an action against his principal on an implied assumpsit. Rights Though the effect of these decisions was to destroy the parties'? efficacy of the statute to a very large extent, still, where it could be shown that a case came within it as thus interpreted, there was, of course, a complete defence to any action as between the original parties to the contract. Questions, however, arose as to the rights of third parties resulting from such contracts. In Faikney v. Reynous,* in 1767, Lord Mansfield held that where a bond was given to secure the repayment of money advance 1 by the holder to pay differ- ences arising out of these illegal transactions, the holder was entitled to recover. For this purpose he drew a distinction between cases in which the subject of the contract was 1 (1807), 13 Ves. 313. 2 (1798), 7 T.R. 630; 2 Esp. 032. 3 (1800), 8 T.R. 610. See also Clayton v. Dilly (1811), 4 Taunt. 165. 4 4 Burr. 2070. AVOIDANCE OF TEE CONTRACT. 171 malum in se and those in which it was merely malum pro- li Hi turn. Faikney v. Reynous was followed in the subsequent case of Petrie v. Hannay 1 by a majority of the Court, Lord Kenyon, C.J., dissenting. The question came before Lord Kenyon again in 1794, in the cnse of Steers v. Lashley? and it was there held that where a broker, having paid differences on stock-jobbing transactions for a client, drew a bill on his client for part of the amount due, and, after the client had accepted the bill, indorsed it to the plaintiff in the action, who received it with knowledge of the illegality of the consideration, the plaintiff could not recover. From that time until the repeal of the Act, the principle laid down in Faikney v. Reynous and Petrie v. Hannay, as well as the distinction drawn between malum prohibition and malum in se, met with much dis- approval, 3 and those cases can no longer be considered as authorities, since the law will not lend its aid to enforce claims that have arisen through a breach of its provisions. 4 So that where the defence to an action upon a bill of exchange or other similar instrument was that it was founded upon a consideration which was illegal under 7 Geo. II. c. 8, the holder could not recover if it could be shown either that he had given no value for the instrument, or that he had taken it with knowledge of the illegality. 5 The question has, however, ceased to be of practical importance, for in 1860, after it had for many years been a dead letter, the Act was repealed. 6 Stock Exchange contracts that partake of 1 (1789), 3 T.R. 418. 2 6 T.R. 61. 3 Mitchell v. CocMurne (1794). 2 H. Bl. 380 ; Ex parte Mather (1797), 3 Ves. 373; Brmcn \. Turner (1798;, 7 T.R. 630; Hubert v. Maze (1801), 2 Bos. & P. 371 ; Ex parte Daniels (1807), 14 Ves. 190; Ottley v. Browne (1810), 1 Ball & Beat, 360; Cannan v. Bryce (1819), 3 B. & Aid. 179; Amory v. Meryweather (1824), 2 B. & C. 573; M'Kinnell v. Robinson (1838), 3 M. & W. 435; 7 L.J. Ex. 149. See too Booth v. Hodgson (1795), 6 T.R. 405; Webb v. Brooke (1810), 3 Taunt. 6. 4 Lindley on Partnership, 6th edit., p. 113. 5 Hay v. Ayling (1851), 16 Q.B. 423; 20 L.J. Q.B. 171. fi 23 Viet. c. 28. 172 LAW AND PEA CTICE OF THE S TO CK EX CHA NGE. the nature of gaming transactions have therefore ceased to be illegal, 1 though they are still void and unenforceable under sect. 18 of 8 & 9 Viet. c. 109. SECTION II. 8 & 9 YICT. c. 109, s. 18. Section 18 of 8 & 9 Viet. c. 109 declares "that all con- tracts or agreements, whether by parole or in writing, by way of gaming and wagering, shall be null and void ; and that no action shall be brought or maintained in any court of law or equity for recovering any sum of money or valu- able thing alleged to be won upon any wager, or which shall have been deposited in the hands of any person to abide the event on which any wager shall have been made." The section, it will be seen, contains two distinct provi- sions making actions unmaintainable where the claim is either (i.) for money won as the result of a gaming contract; or (ii.) for money deposited in the hands of any person as stakeholder to abide the event of such a contract. As to the first of these provisions it is clear that the future price of stocks or shares may be made the subject of a wager, and the possibility of Stock Exchange transactions coming within the scope of the statute does not appear to have been ever seriously disputed. But when the defence of gaming and wagering has been pleaded to an action arising out of a Stock Exchange contract, the attention of the courts has been occupied with two matters. In the first place they have striven to settle the points of distinc- tion between a bond fide purchase and sale of stock or shares, 1 Illegality may, however, still be a good ground of defence, as, for instance, where the bargain is made in respect of shares in an illegal company ; Josephs v. Pebrer (1825), 3 B. & C. 039. But the mere fact that a company, for the shares of which the Stock Exchange Coinmitteo has granted a special settlement, although formed in this country, has not been registered here under section -i of the Companies Act, 1862, does not make the company illegal if its business is carried on in the colonies; Hunt v. Chamberlain (1896), 12 T.L.K. 186. AVOIDANCE OF TEE CONTRACT. 173 and a transaction which, though in form resembling a purchase and sale, in reality is a contract for payment of differences only, and therefore a bet upon the future price of such stock or shares. In the second place, they have pointed out the difference between the actual contract of purchase and sale, which is avoided by the statute, and contracts subsidiary and incidental to the main agreement, which do not fall within 8 & 9 Viet. c. 109, but are now avoided by the Gaming Act of 1892. The result of the cases cited below appears to be as follows : That where the contract is between parties who act as vendor and purchaser, neither of whom intends to enter into a real contract, but both of whom, at the time of entering into the contract, intend and contemplate a settle- ment of differences only, the contract is one of gaming and wagering, and is made void by the statute. But ( i.) that where a possible delivery of stock is within the contemplation of one or both of the parties, although no delivery actually takes place, and although neither of the parties expects to be called upon to take or make delivery, there is a perfectly valid contract to which the courts will give effect. And (ii.) that, formerly, even where the main transaction was a gaming transaction, if the action was brought, not upon the contract between the two principals, but upon the collateral agreement between the agent who actually made the bet and the principal who authorized him to make it, the action was maintain- able until the Gaming Act of 1892 deprived the agent of any claim to indemnity and commission under such circumstances. 1 In Grizewood v. Blane 2 the first case in which, in relation Grizewood v. Blane. 1 The principle of Read v. Anderson (1884), 13 Q.B.D. 779 ; 53 L. J. Q.B. 532 ; 51 L.T. 55 ; 32 W.K. 950 ; so far as an agent's right to recover from his principal sums due in respect of gaming contracts is concerned, is now overruled by the Gaming Act of 1892. See post, p. 192. 2 (1851), 11 C.B. 538 ; 21 L.J. C.P. 46. See too Barry v. Croslcey (1861), 2 J. & H. 1. 174 LAW AND PRACTICE OF THE STOCK EXCHANGE. Foulds v. Thomson. Ashton v, Dakin. to the statute under discussion, the validity of Stock Ex- change contracts was called in question, it was held that a colourable contract for the sale and purchase of railway shares, where neither party intended to deliver and accept the shares, but the intention of both the parties was merely to pay differences according to the rise or fall of the market, was gaming within the meaning of the Act. Jii the case of Foulds v. Thomson?- the Court of Session in Scotland held that, where a person employed a broker to buy and sell stocks which he neither possessed nor intended to take up, merely speculating on the rise and fall of the market and hoping to settle by payment of differences, the contracts were perfectly valid and enforceable and were not gaming and wagering within the meaning of the Act, on the ground that to constitute gaming in the sense of the statute there must be two parties to the contract opposed to each other, each intending that the transactions shall be fictitious, and neither of them bound to accept or deliver the securities, as the case may be. Two years later, in Asliton v. Dakin? the question was raised whether a broker who was employed to purchase and actually did purchase railway shares, and to sell them again before the account-day, could be met with the defence of gaming and wagering in an action brought to recover from his principal his commission and losses incurred in the transactions. The arbitrator before whom the case origin ally came, had found that at the time when the order to purchase the shares was given, nothing was said by either party as to whether the defendant intended to complete the purchases by taking a transfer of the stock ; that the defendant never in fact at any time intended to take a transfer or to call on the plaintiff to deliver the stock ; that the plaintiff was fully aware of this when the orders were given ; and that the orders were given and accepted upon the implied terms that the plaintiff should not be called upon by the defendant to deliver the shares, but that they should be resold before the 1 (1857), 19 Court Sess. Cas. (2nd series),; p. 803. 2 (1859), 7 W.R. 384. AVOIDANCE OF THE CONTRACT. 175 time for payment arrived. But the Court held that as there had been an actual purchase of shares by the broker this was not a gaming contract within 8 & 9 Viet. c. 109. " If," said Pollock, C.B., " no actual purchase had been made, but the object was merely to speculate, without buying or selling, upon the price at a future day, that would be by way of gaming and wagering. But I see no objection to a man, confiding in his own judgment, saying to a broker, ' Will you buy corn (or anything else) for me, and let the bargain be so as to the day of payment, that you may have an opportunity of reselling it for me by such a day, when I expect the market will have risen, and then you will pay the seller for me with the money you receive from the pur- chaser, and I shall receive the gain, if any, or pay you the loss.' " He Morgan, 1 decided in the following year, was a case in Re which two members of the Stock Exchange, named Phillips or ff an ' and Marnham, claimed to prove in the bankruptcy of a fellow-member for sums of money arising out of Stock Ex- change transactions, which they alleged to be due to them. Phillips had, on the 13th of November, 1858, lent Morgan a sum of 775 on a deposit of one hundred Luxem- bourg railway shares, which were then at the market price of 7 1 5. per share, so that the loan was to the full amount of the shares deposited. The shares were actually deposited, and the money was actually paid. On each settling-day, down to the time when he became a defaulter, Morgan paid Phillips the interest on the loan, and when the shares had fallen in value, he also paid the amount of the depreciation ; while, when the shares had risen in value, Phillips paid him the amount of the increase in value. Upon Morgan being declared a defaulter, Phillips took the shares at a price fixed by the officials of the Stock Exchange and claimed to prove for the balance due to him after deducting the price at which the shares were valued. In Marnham's case, the bankrupt had agreed on the 1 Ex parte Phillips, re Morgan. Ex parie Marnham. re Morgan (I860;, 2 De G. F. & J. 634 ; 30 L.J. Bk. 1 ; 3 L.T. 516 ; 9 W.K. 131. 176 LAW AND PRACTICE OF THE STOCK EXCHANGE. 27th of March, 1858, to purchase from Marnham one hun- dred new shares in the Great Western Railway Company of Canada at 11 10s. per share, the purchase to be completed on the next settling-day. Marnham was actually possessed of shares to that amount. The transaction was not com- pleted on the day named, but was carried over from settling- day to settling-day, Marnham or the bankrupt, as the case might be, paying the difference in the value of the shares on each succeeding settling-day, and the contract being renewed for the following settlement at the market price on the day on which the renewal took place. The shares re- mained in Marnham's possession, but the bankrupt was credited with all dividends that accrued upon them. On the 2nd of August Marnham repurchased twenty of the shares from the bankrupt at 10 10s. per share, the then market price, and the contract was renewed as to the re- maining eighty shares. Upon the bankrupt being declared a defaulter, Marnham took over these eighty shares at a price fixed by the Stock Exchange officials, and claimed to prove in the bankruptcy for the residue of the debt. The Commissioner in Bankruptcy rejected both proofs, holding that in each case the transactions partook of the nature of gaming and wagering. The Court, however, reversed the Commissioner's decision, and held that the proofs must be admitted, though with some hesitation in Marnham's case. " The mere payment of dividends," said Turner, L.J., " might not perhaps have altered the case, as it is not necessarily inconsistent with the whole transac- tion having been fictitious and a mere cover for the pay- ment of differences, but I think the repurchase of twenty shares and the payment of the price for them is inconsistent with that view, and stamps the transaction with the character of reality." Byersv. In Byers v. Beattie, 1 however, it was held that an agree- Beattie. men t between brokers and their principal that the brokers should at the principal's direction buy and sell shares, being (1867), 2 Ir. Rep. C.L. 220 ; 16 W.R. 279. AVOIDANCE OF THE CONTRACT. 177 personally liable to him for profits, and receiving losses from him personally and not merely by way of indemnity, was within the mischief aimed at by the statute, and was not less a gaming and wagering contract because the brokers were to receive a commission in any event. It is clear that in this case brokers, by making themselves personally liable to the client for the profits of the transactions, were acting in the matter as principals and not as agents, and therefore, there being no intention to do anything more than to receive or pay differences, the transaction resolved itself into a bet between the parties to the action on the future price of the shares. In 1875, in Marten v. Gibbon, 1 where the defendant had Martenv. instructed his brokers to sell the prospective dividends on certain railway stock, and the brokers accordingly, calcu- lating the dividends at a certain rate per cent., sold them to jobbers on the Stock Exchange, and, when the dividend declared amounted to a higher rate than that which they had calculated, paid the jobbers the differences, it was decided that the transaction did not amount to gaming within the meaning of the Act, and that the brokers were entitled to recover from their principal the amount which they had paid, notwithstanding the refusal of the Committee of the Stock Exchange to recognize or enforce such bargains. In 1887 the question came before the Court of Appeal in Cooper v. the case of Cooper v. Neil. 2 The judgment of the Court was ** delivered by Brett, L.J., Cotton and Thesiger, L.JJ., con- curring. "The real question," his Lordship said, "was, what was the contract between the broker Bailey and the defendant ? Three contracts had been suggested, one of which had been found to be the true one by the jury, but upon unsatisfactory evidence. One suggested was that Bailey and the defendant came to an express agreement that Bailey should enter into transactions on the Stock Exchange 1 33 L.T. 561 ; 24 W.R. 87. There can be no question, however, that contracts for the purchase and sale of future dividends may amount to wagering ; see ex parts Marnham, re Morgan, p. 175, supra, 2 27 W.K., at p. 159. 178 LAW AND PRACTICE OF TEE STOCK EXCHANGE. which might end either in gain or loss, but that whatever happened to Bailey upon the Stock Exchange, he would only claim differences from or pay differences to the defendant. In that case he was inclined to think the broker could not sue for the differences as it would be a gambling transaction. There was, however, no evidence of such a contract. The contract found by the jury was that Bailey was employed by the defendent to make with the jobbers on the Stock Exchange time-bargains, and that he did so. If such was the case the defendant was entitled to succeed, because there was no pay- ment in that case by the brokers, and the plaintiff was only suing in respect of an alleged liability incurred by him ; but if he was employed to make with the jobbers time- bargains, he came under no liability if he did not make them. They would be within the statute and void, and the jobbers could not sue upon them. The jury had, however, misunder- stood the questions put to, and the answers given by, the witnesses. The third contract suggested was that the defendant employed Bailey to make contracts upon the Stock Exchange with the jobbers according to the rules of the Stock Exchange, and therefore real so far as the jobbers were concerned ; but that Bailey undertook with the defen- dant that he would so manage, or endeavour to manage, the contracts with the jobbers, that the defendant would never be called upon to pay or receive more than differences if Bailey succeeded; but still the defendant authorized Bailey to make contracts upon which he would be personally liable. The defendant must know that any jobber could make Bailey liable to take shares. If such was the employ- ment the reasonable implication was that there was an implied contract that if Bailey incurred liabilities without his own fault, the defendant would indemnify him. Part of the contract might be a gambling transaction, but in the contract was included an authority to Bailey to make himself liable to the jobbers. Upon that authority rose an implied contract to indemnify him, which was not within the statute at all, but a collateral contract on which Bailey might sue without regard to the bet." AVOIDANCE OF THE CO NTH ACT. 179 In the same year the question was exhaustively treated both in the Queen's Bench Division and in the Court of Appeal in the case of Thacker v. Hardy. 1 There the learned Thacker judge in the court of first instance found that the plaintiff, who was a broker and a member of the Stock Exchange, was employed by the defendant to speculate for him upon the Stock Exchange ; that to the knowledge of the plaintiff the defendant did not intend to accept the stock bought for him, or to deliver the stock sold for him, but expected that the plaintiff would so arrange matters that nothing but differences should be payable or receivable by him, but that he knew the course of dealing on the Stock Exchange and was content to run the risk of having to accept or give delivery of the shares contracted for ; and that the plaintiff knew that unless he could so arrange matters for the defendant as the latter expected he would be unable to meet the engage- ments into which the plaintiff might enter for him. On these facts the courts held that the plaintiff was entitled to recover, for the employment of the plaintiff by the defendant was not against public policy, was not illegal at common law, and was not in the nature of a gaming and wagering contract within the meaning of 8 & 9 Viet. c. 109. " I proceed next," said Lindley, J., 2 " to examine the law applicable to transactions of this kind. The only statute in force and material to be noticed is 8 & 9 Yict. c. 109, s. 18, which, in effect, declares all contracts by way of gaming and wagering null and void, and renders actions for the recovery of money won on any wager unsustainable. The Act does not expressly mention or allude to Stock Exchange trans- actions ; but it has been decided that agreements between buyers and sellers of shares and stocks, to pay or receive the differences between their prices on one day and their prices on another day, are gaming and wagering trans- actions within the meaning of the statute. Grizewood v. Blane, Barry v. Croskey, and Cooper v. Neil, 3 all decide 1 (1878), 4 Q.B.D. 685; 48 L.J. Q.B. 289; 39 L.T. 595; 27 W.E. 158. - 4 Q.B.D.,. p. 686. 3 See these cases cited above. 180 LAW AND PRACTICE OF THE STOCK EXCHANGE. that. But the plaintiff did not agree to buy or sell from or to the defendant; and I havo the authority of Brett, L.J., 1 for saying that the statute only affects the contract which makes the bet or wager. The agreement between the plaintiff and the defendant rendered it necessary that the plaintiff should himself, as principal, enter into real contracts of purchase or sale with the jobbers, and the plaintiff accord- ingly did so, and in respect of these contracts he incurred obligations, for the non-performance of which actions could, and can now, be brought against him. It is against the liability so incurred that he seeks to be indemnified. "Upon general principles an agent is entitled to in- demnity from his principal against liabilities incurred by the agent in executing the orders of his principal, unless those orders are illegal, or unless the liabilities are incurred in respect of some illegal conduct of the agent himself, or by reason of his default." After discussing the question of the illegality of the transactions, his lordship continued : " In answer to the argument that a contract which is void and unenforceable cannot be made the foundation of an implied promise to indemnify, it appears to me sufficient to say that an obligation to indemnify is created whenever one person employs another to do a lawful act which exposes him to liability by buying and selling as above described. I am unable to draw the inference which the jury drew in Cooper v. Neil, namely, that the plaintiff was instructed to make time-bargains and that he did in fact make such bargains. A real time-bargain is, I suspect, a very rare occurrence. Grizewood v. Blane affords an instance of one, and Cooper v. Neil, as understood by the jury, afforded another. But what are called time-bargains are in fact the result of two distinct and perfectly legal bargains, namely, first, a bargain to buy or sell ; and, secondly, a subsequent bargain that the first shall not be carried out ; and it is only when the first bargain is entered into upon the understanding that it is not to be carried out, that a time-bargain in the sense of an 1 In Cooper v. Neil, supra. AVOIDANCE OF THE CONTRACT. 181 unenforceable bargain is entered into. Such bargains are very rare, and this is what I understand the witnesses to mean when they say that there are no such things as time bargains on the Stock Exchange." This judgment was affirmed in the Court of Appeal by Bramwell, Brett, and Cotton, L.JJ. "The question," said Bramwell, L. J., 1 " is between the jobber in the House and the broker. The bargains made by the plaintiff on behalf of the defendant were what they purported to be : they gave the jobber a right to call upon the broker or the principal to take the stock, and they gave the broker the right to call upon the jobber to deliver it. There was nothing in the transaction from which the jobber could tell whether the transaction was bond fide, that is, for the purposes of investment, or whether it was a mere speculation." After pointing out that it had been contended that, although the jobber might be able to enforce the con- tract against the broker, the contract between the latter and the defendant was that the broker was so to arrange matters that the defendant should never be called upon to receive or give delivery of the stock, the Lord Justice continued : " If a principal orders a broker to sell for him 10,000 consols for the next account, I think it clear that he could not after- wards, as a matter of right, order him to rebuy them : the broker might object that he was not bound to do so. Whether an obligation is cast upon the broker to avoid the transaction when business has been previously done in that manner, may be doubtful. If the principal had said that in reality he could not take the stock, and that the broker must resell it, and if the broker had assented, or even if the broker had expressed dissent, but nevertheless had bought the stock, possibly the understanding might be held to be, and a court might come to the conclusion, that the arrangement was in truth that the two transactions should be set off the one against the other, and that the principal should only pay differences. However, it must not be overlooked that the broker might i Q.B.D., pp. 690-692. 182 LAW AND PRACTICE OF THE STOCK EXCHANGE. lawfully object that lie was not bound to resell, although he would try to do so if he could find a market for the stock. . . . In my opinion that bargain does not infringe the provisions of 8 & 9 Yict. c. 109, which was directed against gaming and wagering ; for the principal might take the stock which had been bought for him and hold it as an investment. I have no doubt that it continually happens that stock which is bought for a rise is really taken up and held when the market falls. But the broker might be unable to resell, if, for instance, he had been ordered to buy shares in an insolvent bank ; so that the transaction really comes to this, that the principal is bound either to take or deliver the stock (as the case may be), but that the broker is to endeavour to relieve the principal from liability by buying or selling again. There is no gaming and wagering in a transaction of that kind : the broker has no interest in the stock, and it does not matter to him whether the market rises or falls ; but when a trans- action comes within the statute against gaming and wagering the result of it does affect both paities. In the case before us the broker does not wager at all. I am of opinion that if every fact were found in the defendant's favour, he could not succeed." " The essence of gaming and wagering," said Cotton, L.J., in the same case, 1 " is that one party is to win and the other to lose upon a future event, which at the time of the contract is of an uncertain nature ; that is to say, if the event turns out one way A. will lose, but if it turns out the other way he will win. But that is not the state of facts here. The plaintiff was to derive no gain from the transaction ; his gain consisted in the commission which he was to receive, whatever might be the result of the transaction to the defendant." And the Lord Justice distinguished the case under consideration from Grizewood v. Blane in the following words : " In Grizewood v. Blane the plaintiff, being a jobber, 1 4 Q.B.D., p. 695. See also to the snmc effect Carlill v. Carbolic Smoke Ball Co. [1892], 2 Q.B. 484; Gl L.J. Q.B. 696; affirmed [1893]. 1 Q.B. 256; 62 L.J. Q.B. 257; 07 L.T. 837; 41 W.R. 210. AVOIDANCE OF THE CONTRACT. 183 pretended to buy from, or sell to, the defendant ; here the plaintiff bought and sold for the defendant." l The effect of this restrictive interpretation was to make Cohen ^ the statute almost inoperative, in the case, at all events, of transactions on the Stock Exchange, and the decisions cited above were somewhat severely criticized by Manisty, J., in the case of Cohen v. KitteU.' 2 In that case the plaintiff had employed the defendant to bet on commission, and the defendant having failed to make certain bets in accordance with the instructions given to him by the plaintiff, the latter sued him for breach of contract, claiming as damages the amount which he would have won had the bets been made. Manisty, J., in giving judgment said : " A decision in favour of the plaintiff in this case would still further defeat the object of this statute which, as the preamble shows, was to add to the strictness of the law with regard to gambling. Since the Act passed, however, and in consequence, as I cannot but think, of some of the decisions upon it, the practice which it was intended to discountenance has greatly increased, and that with results of a most disastrous character, as regards both horse-racing and transactions in stocks. The contracts avoided by the 18th section are not, it is to be observed, 'contracts of gaming and wagering,' but 'contracts by way of gaming and wagering.' These words, which are perhaps capable of a different interpretation, have been held not to apply to contracts between principals and agents, by which the agents agree to bet with third persons on behalf of their principals. Doubtless where the gambling transaction is a thing of the past, the bet having been won or lost, and the money having been received or paid, as the case may be, by the agent, it would be unjust that he should not in the one case account to, and in the other be recouped by, his principal. But in Read v. Anderson 3 it was held by 1 4 Q.B.D., at p. G97. 2 (1889), 22 Q.B.D. 680; 58 L.J. Q.B. 241; GO L.T. 932; 37 W.R. 400. 3 Seep. 192, post. 184 LA W AND PEA CTICE OF THE STOCK EXOHA NG-E. a majority of the Court of Appeal that as soon as a bet has been made by an agent in his own name on account of a principal, the principal cannot revoke the authority to pay the bet should it be lost, because forsooth the result to the agent may be the inconvenience of exclusion from. Tattersall's. The decision is, of course, binding on this Court, but I per- sonally agree with the dissenting judgment of the Master of the Kolls." It may, however, be remarked that to have decided this case otherwise than as it was decided, would have been to have taken a considerable step in advance of any previous decisions on the point. In Read v. Anderson the bet had already been made and lost, and therefore the Court was not forcing the defendant to make contracts, which the law avoided, as would have been the case in Cohen v. Kittell had the judg- ment been in the plaintiff's favour. Moreover, in consider- ing the bearing of Cohen v. Kittell on the Stock Exchange transactions, it is to be remembered that in all the Stock Exchange cases in which the contract was enforced, the Court held that the transactions were not as a matter of fact gaining and wagering, but were real contracts of purchase and sale, while the circumstances of Cohen v. Kittell of course precluded the possibility of any such contract in that case. Shaw v. Down to this time all actions brought in connection with Railway 1 Stock Exchange transactions appear to have been brought Co - by or against members of the Stock Exchange; but in 1890 a case was tried in the Court of Session in Scotland in which the transactions out of which the claim arose were conducted with an " outside " dealer in stocks. In Shaw v. Caledonian Railway Co., 1 Rayner, the second defender, and the only witness examined, stated that it was never intended, and was no part of his bargain with Shaw, that stock should be delivered, and that he had no contract except for the payment of diiferences; that he had deposited the stock certificates, the subject of the action, as a temporary pledge in security for any differences which might arise; that, (1890), 17 Court Sess. Gas. (4th series), 4GG. AVOIDANCE OF THE CONTRACT. 185 when asked to do so by Shaw, he signed a blank transfer which did not contain any particulars of the stock. He further stated that he looked upon the series of transactions in which he engaged from the autumn of 1886 down to the end of June, 1887, as gambling transactions. Nevertheless, the Court, overruling the findings of the sheriff-substitute, held that the transactions in question were not gaming transactions. " I think," said Lord Shand, 1 " that the rule or principle to be applied is of this nature : that if it appears clearly that the contracts and dealings between the parties were for differences only, and were not intended in any sense to be real transactions, and were not real trans- actions, then they must be regarded as gambling transactions, and the Court will not give effect to them. And I say further, that if it appears that any writings which passed between the parties, in the form of sale or otherwise, were a mere form intended by both parties to give a colour to the transactions, and to have no legal effect of any kind, then I do not think that writings in such circumstances would take the case out of the rule I have mentioned. Transactions carried through by writings of that kind would be colourable merely, the transactions in themselves being truly for differ- ences, and for nothing else. But, on the other hand, I think it appears from the authorities, and on sound principle, that if contracts for the sale of stock or shares, or of goods, as the case may be, are entered into so as to create mutual obliga- tions upon the parties, on the one hand to give, and on the other to take, delivery of shares or stock, or of goods, as the case may be; if the obligation is such as can be enforced if either party think fit to do so, then I think we get out of the region of arrangements for mere differences of the nature of betting and gambling. If either one or both the parties may, as and when he thinks fit, demand or give delivery of stock, and ask payment of the price under the contract if that be so as to one of the parties then I think the trans- action has the mark and stamp of a real transaction, and 1 17 Court Sess. Cas. (4th series), p. 475. 18G LAW AND PRACTICE OF THE STOCK EXCHANGE. is inconsistent with the notion of a transaction for mere differences." Lowenfeld In Lowenfeld v. How at, 1 which came before the Court of ca ' Session in the following year, the Court took the same view of similar transactions and overruled the defender's plea of gaming and wagering, holding that the mere fact that a broker is known not to be possessed of capital proportionate to the amount of the apparent transactions conducted by him on behalf of his principal is not sufficient, either alone or in conjunction with other circumstances, to stamp the contracts in dispute as gaming transactions. " There are," said Lord Adam, " bought and sold notes in every case, and so far as appears from the documents everything bought and sold was a real transaction. Now, I do not think any one can dispute that it is competent to get behind the notes, and to show that the contract apparently expressed upon the document was not a real contract between the parties ; that although that contract so far as appears could be enforced, nevertheless it was, by some other contract or some other agreement provable by writing or parole, not a real trans- action, and that that was the state of the fact. I do not in the least doubt that such a contract could be proved. I can quite understand that the contract might have included that, but I agree with your Lordships that there is no evidence of that here. I do not find in the state of the evidence that there was any such agreement or any necessity for such. I have 110 doubt at all that Mr. Lowenfeld, the dealer in these stocks, knew his position quite well, and knew that any contract or agreement he made with Mr. Howat for dealing in differences would render all his transactions with him illegal. In the circumstances, he would conclude that there was no necessity whatever for him to enter into such an understanding with the purchaser. I have no doubt, on the other hand, Mr. Howat understood in his own mind perfectly well that Mr. Lowenfeld would deal with him practically only for differences, and that the (1891), 10 Court Sees. Cas. (4th seiies), 128. AVOIDANCE OF THE CONTRACT. 187 parties expected that that would be the course of dealing;. But that to my mind is not enough. That is a great deal short of what I think is necessary. I think that the party who admits that the contract disclosed by the documents does not show any such transaction, is bound to show some other contract or some other thing which could be enforced by the one against the other, which would prevent either of them founding upon the contract produced." And Lord M'Laren added : "I think one of the difficulties is this, that the dealer generally has no interest as to the particular mode in which the settlement is to be effected. It is a matter of perfect indifference to him whether the account is to be closed by a resale or by a delivery of the stock, because if his customer likes to take delivery of the stock the broker has only to go into the market and to supply himself at the market price of the day. It is, therefore, antecedently very unlikely that a dealer should enter into a subsidiary engagement that would be of no benefit to him- self in the eventual settlement, and whioh would expose the original transaction to be feet aside on the ground of ille- gality if it turned out to be favourable to himself. The unsupported evidence of either party would not in ordinary circumstances be sufficient to displace the inference arising from the documents, especially when the evidence of the dealer is to the effect that the transaction was a real trans- action and in accordance with the documents. I must say that as regards such Stock Exchange transactions as are carried out in the ordinary course of business, the distinction between contracts for differences and real transactions is of purely theoretical interest, and really does not afford to speculators in stock any available means of being released from their obligations." In the Universal Stock Exchange v. Stevens, 1 another case Universal in which the transactions in question were conducted with Exchange an outside broker, Komer, J., held that although the parties v - Sterns. might have contemplated that as a whole there would be a 1 (1892), 66 L.T. 612 : 40 W.E. 494. 188 LAW AND PRACTICE OF TEE STOCK EXCHANGE. mere payment of differences between them, yet inasmuch as the contracts entered into involved the liability of the actual delivery of the stock dealt with, they were not gaming and wagering transactions. " No doubt," said the learned judge, "the parties contemplated that actual de- livery of the stock would not take place except under special circumstances, but the contracts were, in fact, sales and purchases of stock, and were not wagering and gaming, and not the less so because both parties may have thought that, as a whole, the contracts would result in the long run in the mere payment of differences." Shaw v. In 1893 the question again came before the Court of Appeal with a similar result. 1 Forget v. In 1895 the question was raised before the Judicial Com- Ostigny. m ittee of the Privy Council, in an appeal from a decision of the Court of Queen's Bench for Lower Canada. 2 The action was brought by a broker, a member of the Montreal Stock Exchange, against his principal to recover a sum of $1926, the balance alleged to be due from the latter in respect of certain contracts entered into by the broker on his behalf and by his directions for the purchase and sale of shares in various joint-stock companies. It was not disputed that the broker had actually taken delivery of the shares in question, but the defence chiefly relied upon was that, as between the broker and his principal, the trans- actions out of which the claim arose were gaming contracts within the meaning of Article 1927 of the Civil Code of Lower Canada, the words of which are to the same effect as those of section 18 of 8 & 9 Viet. c. 109. The Superior Court of Montreal, before whom the case originally came, had found (1) that Ostigny, who was a bank clerk, with a salary of $900 to $1000 a year, never intended to take delivery of the shares, but merely to speculate on the rise and to settle according to the variation of prices; (2) that the broker, Forget, could not have been ignorant of 1 SJtaio v. Sayley, Times, January 24, 1893. - Forget v. Ostiyney [1895J, A.C. 318; G4 L..T. P.C. 02; 72 L.T. 399; iSW.*B.590. AVOIDANCE OF THE CONTRACT. 189 Ostigny's circumstances, and that he encouraged the latter's speculations by not fixing any date for the delivery of the shares ; (3) that each transaction between the appellant and the respondent was nothing but a bet upon the rise of the shares in question, the appellant undertaking to pay to the respondent the difference in price if they rose, and the respondent undertaking to pay to the appellant the difference in price if they fell; (4) that, under these circumstances, the purchase of shares by the appellant had no other object than to shield himself against the rise expected by the respondent. On these findings judgment was given for the respondent, and on appeal, the Court of Queen's Bench, with one dissentient, afSrmed this decision. On appeal to the Privy Council, however, the Judicial Committee reversed the decision. Lord Herschell, L.C., in delivering the judgment of the Court, after pointing out that the broker in every case had taken delivery of the shares, and that dividends accruing on them between the times .of purchase and re-sale were credited to the re- spondent, said : 1 "In the courts below much stress was laid on the fact that the respondent was known to the appellant to be a bank clerk -with a small salary and possessed of little other means. This was regarded as bringing home to him the knowledge that the respondent had in view not investment but gambling. The other circumstances mainly relied on were that the respondent never asked for nor received delivery of any of the shares purchased; that the purchase-money was raised by a loan procured by the appellant ; that the respondent was not in a position to furnish the whole of the purchase-money, and, in fact, only provided the appellant with a small margin. " It may well be that the appellant was aware that in directing a purchase to be made the respondent did not intend to keep the shares purchased, but to sell them when, as he anticipated would be the case, they rose in value ; [1895], A.C.. p. 122. 190 LAW AND PRACTICE OF THE STOCK EXCHANGE. that his object was not investment, but speculation. To enter into such transactions with such an object is some- times spoken of as * gambling on the Stock Exchange ; ' but it certainly does not follow that the transactions involve any gaming contract. A contract cannot properly be so described merely because it is entered into in furtherance of a speculation. It is a legitimate commercial transaction to buy a commodity in the expectation that it will rise in value, and with the intention of realizing a profit by its re-sale. Such dealings are of everyday occurrence in commerce. The legal aspect of the case is the same, what- ever be the nature of the commodity, whether it be a cargo of wheat or the shares of a joint-stock company. Nor, again, do such purchases and sales become gaming contracts because the person purchasing is not possessed of the money required to pay for his purchases, but obtains the requisite funds in a large measure by means of advances on the security of the stocks or goods he has purchased. This, also, is an everyday commercial transaction. For example, a merchant who has to pay the price of a cargo purchased before he resells it, obtains in ordinary course the means of doing so by pledging the bill of lading. "Much stress was laid on the fact that the respondent never asked for delivery of any of the shares purchased, and that the appellant never tendered such delivery. The question whether a contract is intended to be executed by delivery according to the obligations expressed upon the face of it, is no doubt an important test for determining whether it is a real one or only a gambling arrangement under the guise of a commercial contract." After reading from an Act of the Dominion Parliament passed in 1888, by which it was made a misdemeanour to make a contract for the purchase or sale of stock or shares without either an actual delivery or a bond fide intention to make or receive delivery, but subject to the proviso that the Act was not to apply where the purchaser's broker received delivery on behalf of his principal, but retained or pledged the stock or shares as security for the advance AVOIDANCE OF THE CONTRACT. 191 of the purchase-money, his Lordship continued: "Their Lordships think this proviso was enacted by way of pre- caution only, inasmuch as they cannot doubt that, where a real contract of purchase has been made and carried out by a broker on behalf of a principal, delivery to the broker is delivery to the principal just as much as if it had been actually made to himself. " In the present case, the respondent might at any time on tendering the balance due in respect of any of the shares purchased have required the appellant to deliver them to him. As has been pointed out, he received the dividends upon them, and any increase in their value enured ex- clusively for his benefit, whilst if there was a diminution of value the loss was exclusively his." In Strachan v. Universal Stock Exchange, 1 however, the Strachan Court of Appeal held that there was ample evidence on J^JJj*" which a jury might come to the conclusion that certain Stock dealings between a firm of outside brokers and a principal were mere gambling transactions, although the contract notes and other documents were in correct form. " I come," said Rigby, L.J., "to the same conclusion that there was evidence upon which a jury might well find that the written transactions, which are, of course, in form it is an elementary part of such a transaction that they should be in form were a cloak for the real transactions, and that the real transactions were transactions in differences gaming and wagering transactions of a simple character." To sum up the results of the above cases, it appears that although, if proved, it will be a complete defence to an action in respect of Stock Exchange transactions to allege that such transactions were not bond fide purchases and sales, but were merely by way of gaming and wager- ing, yet such an allegation is exceedingly difficult to substantiate, and, in the words of Lord McLaren in Loioen- feld v. Hoicat, 2 the defence of gaming and wagering "really 1 [1895], 2 Q.B. 329 ; G4 L.J. Q.B. 723 ; 73 L.T. G ; 43 W.R. GIL - (1891), 19 Court Sess. Cas. (4th series), p. 137. 192 LAW AND PRACTICE OF THE STOCK EXCHANGE. does not offer to speculators in stock any available means of being released from their obligations." Eead v. The scope of the statute was still further contracted by the decision of the Court of Appeal in the case of Head v. Anderson. 1 It was there held by Bowen and Fry, L.JJ., affirming the decision of Hawkins, J. Brett, M.R., how- ever, dissenting that even where the transactions in question undoubtedly came within the provisions of section 18, still, if they were conducted through an agent, who, in the event of there being a loss upon them which was not paid, would suffer severe pecuniary inconvenience, or become liable to the deprivation of privileges which would prac- tically exclude him from the exercise of his calling, there was an implied authority from the principal to the agent to pay the debt, which authority was irrevocable when once the liability had been incurred. But the principle of that case was overruled by the Gaming Act of 1892, which enacted that " any promise, express or implied, to pay any person any sum of money paid by him under or in respect of any contract or agreement rendered null and void by the Act of the eighth and ninth Victoria, chapter one hundred and nine, or to pay any sum of money by way of com- mission, reward, or otherwise in respect of such contract, or of any services in relation thereto or in connection therewith, shall be null and void, and no action shall be brought or maintained to recover any such sum of money." Effect of j t j s ev ident that the effect of this Act is, not only to Gaming * Actof 1892. prevent a broker who has entered into contracts which are proved to fall within 8 & 9 Viet. c. 109, from recovering differences arising out of such contracts, which he has paid on account of his employer, but also to prevent him from recovering any commission or payment for his services in such transactions ; and, therefore, while no action is 1 (1884), 13 Q.B.D. 779; 53 L.J. Q.B. 352; 51|L.T. 55; 32 W.R. 9.10. See too the opinion of Erie, C.J.. to the same effect in Rosewarne \. Killing (18G3). 15 C.B. N.S. 310. 322; 33 L.J. C.P. 55. AVOIDANCE OF THE CONTRACT. 193 maintainable upon the original transactions by reason of 8 & 9 Yict. c. 109, the collateral contract between broker and principal for payment of commission and indemnity is now also unenforceable owing to the later Act. That Act, Act not re- however, is not retrospective, and therefore a broker em- ployed to enter into gaming contracts prior to its passing may still recover any moneys which were already due to him at the time when it came into operation. 1 As has been already shown, a principal cannot recover Winnings damages from his agent for an omission to make bets which agent re- he has been employed to make. 2 But when once the bet has cov erabie by pnn- been made and won, and the money has been paid over to cipal. the agent, the principal may maintain an action for its recovery from the agent, for the undertaking of the agent to pay over to his principal the money when received is affected neither by 8 & 9 Viet. c. 109, 3 nor by the Gaming Act of 1892. 4 The provision which section 18 contains that no action Recovery shall be brought to recover any sum of money or valuable * thing " which shall have been deposited in the hands of any with a person to abide the event on which any wager shall have holder. been made " affects those cases only in which the winner of a bet is seeking to recover the money or valuable thing either from the loser, or from a stakeholder in whose hands it has been deposited by the loser to await the result of the bet. In the latter case a long series of decisions shows that, whether the bet has been decided or not, until the deposit has actually been paid over in satisfaction of the bet, either party is at liberty to revoke the authority to pay which he 1 Knight v. Lee [1893], 1 Q.B. 41 ; 62 L. J. Q.B. 28 ; 67 L.T. 688 ; 41 W.B. 125. - Cohen v. Kittell (1889), 22 Q.B.D. 680; 58 L.J. Q.B. 241 ; 60 L.T. 932 ; 37 W.R. 400. 3 Johnson v. Lansley (1852), 12 C.B. 468 ; Beeston v. Beeston (1875), 1 Ex. D. 13; 45 L.J. Ex. 230; 33 L.T. 700; 24 W.R. 96; Bridger v. Sarage (1885), 15 Q.B.D. 363; 5i L..7. Q.B. 464; 53 L.T. 129; 33 W.R. 891. 4 De Mattos r. Benjamin (1891), 63 L.J. Q.B. 248; 70 L.T. 560; 42 AV.R. 284 194 LAW AND PRACTICE OF TEE STOCK EXCHANGE: Recovery of money and securities deposited as cover. has given to the stakeholder, and recover the deposit. 1 Of this right the depositor is not deprived by the Gaming Act of 1892, which does not affect money deposited with a third party for the purpose of paying the winner of a bet. 2 Where a deposit has been placed in the hands of one of" the parties to the wager, so long as the wager is undecided the depositor may recover his deposit ; 3 but as soon as the wager has come off, whether the event is in the depositor's- favour or not, he cannot maintain any action for the money deposited. 4 The principle of the above cases does not, however, affect securities or money deposited with one party by the other to insure the observance by the depositor of the terms of the contract, for in such a case the securities or money do not constitute a stake within the meaning of the provision. The securities may be recovered at any time before they have actually been realized and the proceeds appropriated to the discharge of differences already incurred. 5 " In my opinion," said Lord Esher, M.R., in Strachan v. Universal Stock Exchange? "the valuable things which in this case were given as security against a breach of contract and a non-payment of damages were not deposited to abide the event of a wager within the meaning of the 18th section. That section applies where there is a deposit upon these terms : that on the determination of the event of the wager, 1 Varney v. Hickman (1847), 5 C.B. 271 ; 17 L. J. C.P. 102 ; Martin v. Hewson (1855), 10 Ex. 737; 24 L.J. Ex. 174; Hampden v. Walsh (1876), 1 Q.B.D. 189; 45 L.J. Q.B. 238; 33 L.T. 852; 24 W.R. 607; Higgle v. Higgs (1877), 2 Ex. D. 422 ; 46 L.J. Ex. 721 ; 37 L.T. 27; 25- W.R. 777; and see the remarks of Cockburn, C J., in the last case, on the previous cases, and Lord Esher's comment, on the same cases, in Strachan v. Universal Stock Exchange [1895], 2 Q.B., at p. 699. 2 O'Sullivan v. Tlwmas [1895], 1 Q.B. 698; 64 L.J. Q.B. 31)8; 72 L.T. 285; 43 W.R. 269. 3 Manning v. Purcell (1855), 7 De G. M. & G. 55; 24 L.J. Ch. 522. 4 Ibid. ; and see Strachan v. Universal Stock Exchange [1895], 2 Q.B. 697 ; 65 L.J. Q.B. 178 ; 73 L.T. 492; 44 W.R. 90. 5 Strachan v. Universal Stock Exchange [1895], 2 Q.B. 329; 64 L.J. QB. 723; 73 L.T. 6; 43 W.R. 611. 9 [1895], 2 Q.B. 332. AVOIDANCE OF THE COX T ACT. 195 that which is deposited is, by that alone, to become the property of the winner. That is not the case here, where there is a deposit by way of security, for the property does not pass the moment the bet is lost and won. There is something else which must happen, which is, that there being a breach of contract, the damages arising from it are not paid. I think a valuable thing deposited by way of security is not deposited to abide the event on which any wager shall have been made, within the meaning of the 18th section." But when the securities have been realized, and the proceeds appropriated to the discharge of differences already incurred, then it appears that the depositor cannot recover either the securities or damages. 1 And where money has been deposited by a plaintiff with defendants as cover, and, to his knowledge, treated by the defendants as appro- priated to meet his losses to them, the plaintiff is likewise prevented from recovering. 2 A wager is not forbidden by the statute. It is left a Payment mere debt of honour, being deprived of all legal obligation, by but not made illegal. 3 And therefore, prior to the Gaming Act of 1892, although no action could be maintained upon the wager itself, yet where the wager had been lost, and the plaintiff had at the defendant's request paid the money due upon it, he could successfully have maintained an action for its recovery ; 4 and it was even held that, from an authority to bet, a request to pay the bet, if lost, might be inferred. 5 But since the Act of 1892, any one who, at the defendant's request, has paid money in settlement of lost bets is unable to recover it, although he was himself no party to the 1 Strachan v. Universal Stock Exchange [1895], 2 Q.B., pp. 334, 699. 2 [1895], 2 Q.B., p. 699. 3 Haigh v. Town Council of Sheffield (1874), L.R. 10 Q.B., p. 109. 4 Jessop v. Lutwyche (1854), 10 Ex. 614 ; 24 L. J. Ex. 65 ; Knight v. Cambers (1855), 15 C.B. 562; 24 L.J. C.P. 121; Boseicarne v. Billing (1863), 15 C.B. N.S. 316; 33 L.J. C.P. 55; Ex parte Rogers (1880), 15 Ch. D. 207; 43 L.T. 163 ; 29 W.R. 29. 5 Bulb v. Telyerton (1871). 24 L.T. 822; 19 W.R. 739; Oldham \. Ramsden (1875), 44 L.J. C.P. 309; 32 L.T. 825. 196 LAW AND PRACTICE OF THE STOCK EXCHANGE. letting, and, apparently, whether he knew or did not know the purpose for which the payments were made. 1 Moreover, the payment of bets, when lost by an agent authorized to make them, but without a special subsequent authority to pay them, has been held to be a sufficient con- sideration for the giving of a bill of exchange. 2 But a bill so given now would be held to be given for no consideration, and, as between the original parties, would be unenforceable. In cases in which the claim was for work done and money paid, a plea of gaming and wagering was held to be a bad plea, as it afforded no answer to the count for work done. 3 But these cases must now be considered as overruled by the statute of 1892. of 6 money It has further been held to be no defence to an action for Lent to pay monev i en t, to say that it was lent to pay a bet, if the bet was already lost at the time when the loan was made; 4 and a lond fide loan by the winner of a bet to the loser for general purposes, out of which the loser paid the bet to the winner, has been held to be recoverable, though the case would have been different if there had been an agreement beforehand that the bet should bo so paid, as then the loan would have been a mere evasion of the statute. 5 Although there is no authority upon the point, on principle there does not seem to be any reason why money lent with a knowledge that it is boiTowed for the purpose of making bets should not be recovered, provided that it is not lent by a person interested in the payment of the bets. These cases do not appear to come within the operation of the Gaming Act of 1892. As the statute 8 & 9 Yict. c. 109 makes contracts by way 1 Tatam v. Reeve [1893], 1 Q.B. 44; 62 L.J. Q.B. 30; 67 L.T. 683; 41 W.R. 174. 2 Quids v. Harrison (1854), 10 Ex. 572 ; 24 L.J. Ex. 66. 3 Knight v. Fitch (1855), 15 C.B. 566; 24 L.J. C.P. 122; Inchbcdd v. Cockerill (1858), 4 Jur. N.S. 693. * Ex parte Pylte, In re Lister (1878), 8 Ch. D. 754 ; 47 L.J. Bk. 100 ; 38 L.T. 923; 26 W.K. 806. 6 Fox v. Hill (1859), 4 H. & N. 359 ; 7 W.R. 263. AVOIDANCE OF THE CONTRACT. 197 of gaming and wagering not illegal, but merely null and void, negotiable instruments given for the payment of money won upon such contracts are not given for an illegal con- sideration, but for no consideration at all. 1 And therefore, when such securities come into the hands of any one who- has given consideration for them, whether that person knew or did not know of the wager upon which they were founded, an action is maintainable against the loser of the wager. 2 And where non-negotiable securities are deposited as cover for such a debt, there seems to be no reason, either on authority or on piinciple, why the person who has received them for value should not be entitled to claim the amount due from the loser of the bet. 3 SECTION III. LEEMAX'S ACT. The next limitation which the Legislature thought fit to impose upon the freedom of Stock Exchange transactions was in 1867, when the statute known as Leeman's Act 4 was passed, with the intention of preventing speculation in bank shares. But this attempt also, to a large extent, failed to attain to the object which its promoters had in view. The Act, which is still in force, declared that all contracts for the sale or transfer of stock or shares in any joint-stock banking company should be null and void, unless the contract stated the numbers by which such stock or shares were dis- tinguished in the register or books of the company, or, where no register by distinguishing numbers was kept, the persons in whose names the stock or shares were standing in the books of the company, as the registered proprietors thereof,. 1 Fitch v. Jones (1855), 5 E. & B. 238; 24 L.J. Q.B. 293; Lilley v. Rankin (1887), 56 L.J. Q.B. 248 ; 55 L.T. 814 ; Blake v. Parker, the Timen, April 21, 1896. 2 Quids v. Harrison (1854), 10 Ex. 572 ; 24 L.J. Ex. 66. 3 Strachan v. Universal Stock Exchange [1895], 2 Q.B. 329; 64 L.J. Q.B. 723; 43 W.R. 611 ; Bentiuck v. London Joint Stock Bank [1893], 2 Ch. 120; 62 L.J. Ch. 358 ; 68 L.T. 315; 42 W.R. 140. 4 30 Viet. c. 29. 198 LAW AND PRACTICE OF TEE STOCK EXCHANGE. at the time of making the contract. 1 The statute further made it a misdemeanour for any one, whether principal, broker, or agent, to wilfully insert in the contract a false entry of any numbers or the names of any persons other than the registered proprietors. A custom, however, grew up on the Stock Exchange to disregard the provisions of the Act, and to send out the contract notes without specifying the numbers of the shares or the names of the registered proprietors. But the custom has been held to be unreasonable, and a contract which embodies it cannot be enforced against one who was unaware of the custom at the time when the contract was made. 2 And when an authority to buy bank shares has been given by a principal to his broker, it will in the first instance be presumed that the authority was to make a valid and bind- ing contract in accordance with the provisions of Leeman's Act, and not one that is void and unenforceable. 3 But in Seymour v. Bridge,* where the de r endant had on several previous occasions dealt in bank shares and received contract notes which did not comply with the requirements of the Act, it was held that he had authorized his broker to enter into that particular form of contract and must indemnify him against any resulting loss. Seymour v. Bridge was decided on the authority of Head v. Anderson, and the principle of the latter case has since been overruled, so far as transactions that come within 8 & 9 Yict. c. 109 are con- 1 In Mitchell v. City of Glasgow Bank (1879), 4 App. Gas. 621 ; 27 W.E. 875, where the sale had been entered in the transaction books of the respective brokers, and each entry specified the name of the broker for the other party and was initialed by him, and at the time of sale the vendor's name was verbally mentioned to the purchaser's brokers, it was held by the Court of Session in Scotland that thid was not sufficient to satisfy the statute. 2 Neilton v. James (1882), 9 Q.B.D. 546 ; 51 L.J. Q.B. 369 ; 46 L.T. 791 ; Perry v. Barnet (1885), 15 Q.B.D. 388 ; 54 L.J. Q.B. 466 ; 53 L.T. 585 ; Coates v. Pacey (1892), 8 T.L.R. 351,474 ; and see Barclay v. Pearce (1894), 15 Q.B.D., p. 390, n. 3. 3 Coates v. Pacey, supra. 4 (1885), 14 Q.B.D. 460 ; 54 L.J. Q.B. 347. AVOIDANCE OF THE CONTRACT. 199 3 L.T. 3G9; 33 W.R. 911; Derry v. Peek (1889), 14 App. Gas. 337; 58 L.J. Ch. 864 ; 61 L.T. 265 ; 38 W.R. 33. 2 (1859), 4 H. & N. 538 ; 29 L.J. Ex. 59. See too BagsJiaw v. Seymour (1856), 18 C.B. 903; 29 L.J. Ex. 62, n. 202 LA W AND PRACTICE OF THE STOCK EXCHANGE. person whom the defendant ought to have been aware he was injuring or might injure. If a director of a company, one of the persons who puts the shares forth into the world, deliberately adopts a scheme of falsehood and fraud, the effect of which is that the parties buy the shares in conse- quence of the falsehood, I should feel no difficulty in saying that in such a case an action is maintainable." The Chief Baron's judgment was approved by Sir W. Page Wood, V.C., in Barry v. Croskey. 1 But in Peek v. Gurney 2 the decision met with a somewhat severe criticism. " The actions," said Lord Chelmsford, 3 "were brought upon the allegation of a false representation made to the plaintiff. But no representation at all was made which reached either his eyes or his ears. From his knowing the rules of the Stock Exchange he assumed that a certain representation had been made, and he acted upon it. According to the judg- ment, it was his knowledge of the rules whioh led him to appropriate the representation to himself, and therefore it could not be taken to be made to any one who was ignorant of these rules. The decisions, and the grounds on which they proceeded, appear to me to be extraordinary, and I cannot bring my mind to agree with them." Peek v. Gurney is clearly distinguishable from Bedford v. Bagshaw, for while a prospectus has done its work when it has drawn the original subscribers, a quotation in the official list, such as was obtained in Bedford v. Bagshaw, is a repre- sentation to all future intending purchasers of the status of the company, which, although not communicated so directly as are statements contained in a prospectus, is neverthe- less communicated sufficiently clearly to those who know the rules of the Stock Exchange. And as all purchasers receive an express notice of the rules, and are taken to have knowledge of them for the purpose of being bound by them, when it is not to their interest to have such knowledge, it would perhaps seem only fair that they should b3 taken to 1 (1861), 2 J. & H. 1. 2 (1873), L.R. 6 H.L. 377; 43 L.J. Ch. 19; 22 W.R. 29. 3 L.R. 6 H.L. 397. AVOIDANCE OF THE CONTRACT. 203 know them when to do so would be to their advantage. The effect which a knowledge that a special settlement had "been granted to a company, and an official quotation to its shares, would necessarily have on the minds of persons acquainted -with the regulatious of the Committee as to special settlements, would undoubtedly be that the Commit- tee, from information received from responsible persons, had considered the company of sufficient importance and as probably having a wide enough market to justify them in affording increased opportunities for the circulation of its shares among the public by fixing a special settling-day for bargains done in them. And in the absence of any further authority on the point, it might be doubtful whether the dicta of the judges in Peek v. Gurney could be taken as overruling the express decision in Bedford v. Bagshaw. Within the last few years, however, a somewhat similar state of facts has come before the courts in the case of Salamon v. Warner? and although perhaps it was not necessary to the actual decision in that case that the point which arose in Bedford v. Bagshaw should be decided, still the learned judges who tried the case seem to have been so unanimously of opinion that Bedford v. Bagsliaic could not now be supported, that it must be taken that if the state of facts presented in that case were to occur again, the loss suffered by the injured party would be held lo be too remote, and he could not successfully found a claim for damages upon it. The facts as set out in the statement of claim in Salamon v. Warner, 1 were as follows : The plaintiff, who was a jobber on the Stock Exchange, on the strength of a prospectus which the defendants procured to be issued on the bringing out of Warner's Safe Cure Company, sold shares before allotment for the special settling-day to brokers who had been instructed by the defendants to contract on the Stock Exchange for the purchase of the shares. The defendants then procured an allotment of a very large majority of the 1 (1891), 64 L.T. 598; 7 T.L.R. 431; affirmed, 65 L.T. 132; 7 T.L.K. 484. 204 LA WAND PRACTICE OF THE STOCK EXCHANGE. shares to their own nominees, and subsequently induced the Committee of the Stock Exchange to grant a special settling- day. In consequence of the control of the shares which the defendants had obtained, the plaintiff, when called upon to- deliver, was only able to do so at a price dictated by the defendants, and incurred a very heavy pecuniary loss. But it was held that even if the facts as stated in the claim were correct, 1 the plaintiff could not recover damages from the defendants on the ground of fraud, because his contracts were made on his own judgment as to the company's chances of success, and on the faith of the prospectus which was not, at any rate directly, fraudulent; and that, although upon the facts as stated there undoubtedly was a conspiracy to obtain a special settlement by means of misleading state- ments, such conspiracy would merely render the conspirato s liable to criminal proceedings, and would not give rise to civil liability, unless an individual member of the public could show that his rights had been thereby invaded. Cornering The facts in Salamon v. Warner, as stated for the- the market, plaintiff, afford an instance of a method of dealing known as " cornering the market." The process consists in getting into the hands of the person creating the corner, or his nominees, so large a number of shares in a particular undertaking as will practically give him a complete con- trol over all transactions connected with the undertaking. There is not, of course, anything essentially illegal in such a process ; but it may become illegal if used for the Rigging purpose of perpetrating a fraud. "Rigging the market" is the market. a somewhat different method of dealing, which is employed to induce the public to purchase the shares of a new company by creating an artificial price in the market by means of transactions which, if not actually fictitious, are not bond- fide, but are made at a nominal premium with the sole object of drawing purchasers. When two or more persons combine with the intention of obtaining purchase! s by such 1 Salomon v. Warner was decided upon a question of pleading, and- the courts were not called upon to give judgment on the facts. AVOIDANCE OF THE CONTRACT. 205 means, or of making purchasers pay more for the shares than they would otherwise have been obliged to do, they are guilty of a conspiracy to defraud. 1 The fraud is one which is "levelled against all the public, for it is against all such as may possibly have anything to do with the funds on that particular day." 2 The remedy for this fraud consists, primarily, in criminal proceedings for conspiracj'. Whether there is a sufficiently direct communication, in this case, between the conspirators and the party defrauded to entitle the latter to maintain an action for damages is perhaps doubtful, in the face of the dicta in Peek v. Gurnet/ and Salamon v. Warner. Where fraud is perpetrated to obtain a special settlement, the direct object of the false repre- sentations is to deceive the Committee and the deceiving of the public is only an indirect though an important object while in the case of rigging the market, the only object is to deceive the public. The question, then, is whether, in the latter case, there is a sufficient communication to entitle the injured party to damages which he could not obtain in the former. In the case of rigging the market, the parties are certainly a step nearer to each other than where the fraud is for the purpose of obtaining a special settlement. But the communication of the misrepresentations if com- munication there be is through the same source, namely, the publication of the day's prices in the official list and the daily papers; and it hardly seems to be probable that if the injured party cannot recover in the one case, he can in the other. But even if this is so, there will undoubtedly be a good defence to an action by one of the conspirators on a contract induced by the fraud, if the conspirator cannot prove his case without showing his own guilt, for nemo allegans suam turpitudinem est audiendus. The contract between the conspirators themselves for Action V)ptwcpn the perpetration of the fraud is an illegal contract, which C on- spiratora. 1 Eex v. De Berenger (1814), 3 M. & S. 67; Beg. v. Atpinatt (1876), 2 Q.B.D. 48; 46 L.J. M.C. 145; 36 L.T. 297; 25 W.R. 283; Scott v. Brown [1892], 2 Q.B. 724; 61 L.J. Q.B. 738; 67 L.T. 782; 41 W.K. 116. 2 Rex, v. De Berenger, 3 M. & S., at p. 72. 206 LAW AND PRACTICE OF THE STOCK EXCHANGE.. does not give rise to any rights enforceable in a court of law. In an action on such a contract, even if the illegality is not pleaded by the defendant, the Court will take notice of it if proved by the evidence adduced by the plaintiff, and will refuse to assist the plaintiff on the ground that ex turpi causa non oritur actio. 1 1 Scott v. Brown, supra. ( 207 ) CHAPTER X. REMEDIES, i. Buying-in ii. Selling-out iii. Damages iv. Specific Performance. WHEN a contract which has been made on the Stock Exchange is not duly carried out by one of the parties, the injured party may obtain redress either by the methods- peculiar to the Stock Exchange, or by process of law. In the first case the remedy will consist in buying in or selling out the securities, as the party injured is buyer or seller ; in the second, in an action for damages or specific per- formance. BUYIXG-IN. If securities have been purchased, but have not been duly delivered by the seller, the purchaser's remedy, under the rules of the Stock Exchange, is to buy them in against the seller, who is then responsible for any loss occasioned by the default. The buying-in must be effected publicly by the officials of the Buying-in and Selling- out Department, who trace the transaction to the responsible party and claim the difference. 1 The right of buying in is, however, subject to modifi- Modifies- cations. The rule may be suspended by a resolution of the Committee in cases in which it would work unfairly. And when bonds, shares, or other securities are known to be out of the control of the seller for the payment of calls, or the Rule 71. 208 LA WAND PRACTICE OF THE STOCK EXCHANGE. receipt of dividends or bonus, the purchasing broker is not allowed to buy them in until, on application being made to the Committee, they specify a day on which the right may be exercised. 1 Times for The time within which securities, which have been exercising right, etc. purchased but not delivered, are to be bought in, varies according to the class of security in which the bargain is made. 2 If the ultimate buyer allows the given time to elapse without buying in, or, at least, without attempting to buy in, his immediate seller is discharged from liability, unless the delay occurred at the request or with the consent of such seller. 3 In the case of securities deliverable by deed and of bearer securities, public notice of the intention to buy in must be given by posting it in the Exchange, and any loss occasioned will be borne by the person who is respon- sible for the non-delivery of the securities. 4 When stock or shares have been thus bought in, and are not delivered by one o'clock on. the following day, or by twelve o'clock on Saturdays, they may be repurchased for immediate delivery, and the member who causes the repurchase will be obliged to bear the loss. 5 On the sale of securities deliverable by deed, the seller must be allowed a reasonable time to obtain such verification as is required before the securities are bought in against him. f a SELLING-OUT. The remedy which the Stock Exchange regulations afford to the seller of securities for failure on the part of the purchaser to pay for them is the resale of the securities after a given time, and the debiting of the purchaser with any loss occasioned thereby. As in the case of buying in, the selling-out must be effected publicly by the officials of the Buying-in and Selling-out Department. 7 Kule 72. 2 Rules 83, 105, 118. Rules 106, 119. 4 Rules 105, 118. Rules 105, 118. 6 Rule 102. 7 Rule 71. REMEDIES. 209 The time for selling out varies as tlie securities for which tickets are not duly delivered are Government or cor- etc. poration stocks, 1 securities deliverable by deed of transfer, 2 or bearer securities. 3 If the seller of English, India, or corporation stock does not receive a transfer- ticket by one o'clock, or by a quarter to one on a settling-day, he is entitled to demand a sum of two shillings and sixpence for each transfer fee actually paid for the transfer of such stock, or for every 1000 stock respectively. 4 If the seller of securities deliverable by deed allows two clear days to elapse without availing himself of his right to sell out, his immediate buyer is released from liability in cases in which the failure to pass the ticket is due to the declaration of any member as a defaulter ; 5 and where such securities are sold out and a ticket is not given within half an hour after the time of sale, they may be transferrel into the name of the buyer. While the above methods of redress are peculiar to the Stock Exchange, the remedies which the law grants for the breach of a Stock Exchange contract are those to which any other breach of contract gives rise. When a money pay- ment will sufficiently compensate the injured party for the loss which he has suffered, or where the party who has done the wrong has put it out of his power to fulfil the contract, the remedy will consist in damages. But where, owing to the nature and scarcity of the security in which the bargain is made, a pecuniary compensation would not be an adequate remedy, then, provided that the party causing the breach still has it in his power to carry out the contract, the Court will compel him to do so, or, in other words, will grant specific performance of the contract. 7 i Kules 81, 82. n - Rule 103. 3 Rule 115. 4 Rule 81. 5 Rule 103 6 Rule 101. 7 Adderley v. Dizon (1821), 1 Sim. & Stu. 607. 210 LAW AND PR A CTICE OF THE STOCK EXCHANGE. DAMAGES. Evidence- In considering the admissibility of evidence in the case broker's 11 ^ a c ^ a i m ^ or indemnity or damages, it is noticeable that day-book, apparently an entry in the day-book of a deceased broker cannot be put in as a declaration made by a deceased person, since it is neither a declaration against direct pecuniary interest, which could not under any circumstances have been made available in the interests of the person making it, nor is it an entry made in the discharge of a duty to do a parti- cular act and make a record of it. 1 In Massey v. Allen 2 the plaintiffs claim was for an indemnity in respect of two hundred shares which were alleged to have been transferred into the plaintiff's name as trustee for the defendant. The plaintiff wished to prove that the shares had been bought on the Stock Exchange through his own broker for the defendants. The broker was dead, and the plaintiff tendered in evidence an entry in the broker's day-book of the pur- chase of two hundred shares by the broker for the defendant. The entry was proved to be in the handwriting of the broker, and to have been made by him in the ordinary course of business at the time of the purchase as a memorandum of the transaction. It was also proved that the ledger was made up from the day-book. The plaintiff contended that the entry was admissible as a declaration made by a deceased person, in the first place, because it was made against the pecuniary interest of the person making it ; and, secondly, because it had been made in the ordinary course of business. Vice-Chancellor Hall, however, held that the entry was not admissible upon the first ground, because it might, according to the turn of the market, have been to the advantage of the deceased, 3 nor upon the second 1 Smith v. Blakey(l8Q7'), L.E. 2 Q.B. 326; 36 L.J. Q.B. 156; 15 W.R. 492. 2 (1879), 13 Ch. D. 558 ; 49 L.J. Ch. 76; 41 L.T. 788; 28 W.R. 212. 3 It is difficult to understand the ground of the Vice-Chancellor's first objection, for unless the transaction was merely a wager between broker and principal, as this clearly was not, the broker would receive the same commission in any case, and it would make no difference to him personally whether the market rose or fell. REMEDIES. 211 ground, because it was not made in the performance of -any duty. If securities which have been borrowed are sold by the Deten- T3orrower, the lender is at liberty to claim the amount which bammed has been realized by such sale. But if he does not do so, or securities. if for any other reason there is a failure to re-deliver the securities at the stipulated time, or on demand if a time has not been fixed for their return, a question will arise as to the proper measure of damages. In cases in which stock which has been lent is not duly principles returned, damages will be assessed upon a different prin- J^^ 1 ^ ciple from that adopted in ordinary cases of non-delivery, assessed, on the ground that in actions for not replacing stock the borrower holds in his hands the money of the lender, and thereby prevents him from going into the market and him- self replacing it, as he might do if the money remained in his hands. 1 Where, therefore, the owner of securities has placed them in the possession of another and they are not duly re-delivered, the measure of damages will be the value of the securities taken at such a rate as will, so far as is pos- sible, place the lender in the same position as he would have been in had the contract been carried out. Accordingly, if (i.) Where the securities have risen in value since the date when they hl should have been re-delivered, the damages will be their in value, value on or immediately before the day of trial ; and it is no answer to say that the defendant may be prejudiced by the plaintiff's delay in bringing the action, as the defendant is at liberty to replace the securities at any time, and thus avail himself of the rising market. 2 But the plaintiff cannot i Gainsford v. Carroll (1823), 2 B. & C. 624. Applying these prin- ciples to cases in which securities have been deposited in return for a loan of money, the ordinary methods of assessing damages -would appear to be correct, for in that case the borrower of the money would hold it until the securities he had pledged were returned to him, and he might accordingly expend it in the purchase of securities of a like description and amount. - M 1 Arthur v. Seaforth (1810), 2 Taunt. 257. See also Shepherd v. Johnson (1802), 2 East, 211; Dowries \. Slack (1816),! Stark. 318; Harrison v. Harrison (1824), 1 C. & P. 412 : Oicen \. Routh (1854), 14 C.B. 327: 23 L.J. C.P. 105. 212 LAW AND PRACTICE OF THE STOCK EXCHANGE- (ii.) If the in value. Kemote- ness of damage. recover the highest price which the stock reached between the time of default and the time of trial, unless he can show that he actually would have made surrh a profit, for other- wise to assess the damages at that price would be to give the plaintiff a merely speculative profit. 1 Nor can the plaintiff claim damages for the loss of a profit which he- might have made if he had had the securities in his posses- sion at all events unless he has communicated to the defendant his wish to have them back for that purpose. 2 On the other hand, where the securities have fallen in value, it has in one instance been held that the measure o f damages was their value at the date agreed upon for their return ; 3 in another case, their value at the time when the stock was actually retransferred. 4 It is submitted that the former principle is the more correct in this case, as to adopt the latter would encourage delay on the part of the borrower if there seemed to be a probability of a further fall in the market. 5 Where the borrower or other depositee of securities, wrongfully detains them against the true owner, but gives them up before action, the stock having fallen in value during such detention, the true owner is entitled to sub- stantial damages. 6 It may, however, be that the damages caused by the detention are too remote to be recovered in a court of law. Where, for instance, the loss consisted in an inability to pay 1 M' Arthur v. Seaforth, supra; Simmons v. London Joint Stock BanJf [1891], 1 Ch., at p. 284. 2 M' Arthur v. Seafarth, supra. And see the judgment of Bowen, L.J., in Williams v. Peel Ricer, etc., Co. (1887), 55 L.T., at p. 693. 3 Saunders v. Kentish (1799), 8 T.R. 1G2. 4 Forrest v. Elwes (1799), 4 Ves. 492. [:. s Williams v. Peel Biver, etc., Co. (1877), 55 L.T. 689. 6 See Dutch v. Warren, cited in 2 Burr. 1010, where, in an action to recover 262 10s. paid for shares which the defendant subsequently- refused to deliver, the plaintiff recovered only 175, their value at the date fixed for delivery. It can scarcely now be contended that such a measure of damages is correct. For a discussion as to its correctness, see Mayne on Damages, 5th edit., pp. 185-190. REMEDIES. 213 deposits which would have entitled the plaintiff to an allot- ment of shares, owing to the non-return of certain scrip which had been lodged as security, it was held that the loss was too remote and that damages were not recoverable. 1 Where the seller of securities fails to deliver, the pur- Failure "' chaser is entitled to be placed, as far as possible, in the same f ven d r . to perform position as if the contract had been duly carried out. The the con- damages will therefore be the market value of the securities tract * at, or within a reasonable time after, the date at which they should have been delivered. 2 If the securities are not pro- curable in the market, a jury will have to assess damages at an amount which will reasonably compensate the plaintiff. If shares which are not fully paid-up are handed over in fulfilment of a contract for fully paid shares, the damages will be the amount remaining unpaid. 3 When shares in a projected undertaking are sold, the contract will be satisfied by the tender of a letter of allot- ment if, from the circumstances, the inference can be drawn that the parties dealt upon the footing of such letter being equivalent to scrip. Consequently there may be a complete breach of such a contract before the actual existence of any scrip or shares properly so called, and in that case the pur- chaser may recover as damages for non-delivery the difference 1 Archer v. Williams (1846), 2 C. & K. 20. 2 See Shaw v. Holland (1846), 15 M. & W. 136 ; 15 L.J. Ex. 87. What constitutes & reasonable time will to a large extent depend on the securities in respect of which the contract is made. Generally it will be the day of the breach, or the following day, or so soon after as securities of a similar description can usually be sold; see Waddell v. Bloclcey (1879), 4 Q.B.D. 678 ; 48 L.J. Q.B. 517 ; 41 L.T. 458 ; 27 W.K. 938. In the case of a non-current security, the only complete remedy is specific performance, but failing that, the damages will be such as a jury consider will reasonably compensate the purchaser. For the admissibility of evidence as to a reasonable time, see Stewart v. Cauty (1841), 8 M. & W. 1GO ; 10 L.J. Ex. 348. 3 Mud ford's Claim (1880), 14 Ch. D. 634; 49 L.J. Ch. 452; 42 L.T. 825; 28 W.R. 670: Ex parte Appleyard (1881), 18 Ch. D. 587; 50 L.J. Ch. 554; 45 L.T. 552; 30 W.R. 170. 214 LAW AND PRACTICE OF THE STOCK EXCHANGE "between the price agreed upon, and the market price on the- day on which the sale should have been completed by delivery of the letter of allotment; but he is not entitled to damages in respect of a further advance in price taking; place subsequently at the time of the actual issuing of the scrip. 1 Failure of If a purchaser fails to accept securities which he has ffaccepT bought, the measure of damages will be the amount of the delivery. } OSS) if any, which the vendor incurs upon a re-sale, provided that such re-sale takes place within a reasonable time. 2 But the vendor is not obliged to sell at all, though if he refrains from selling at the time of the breach he takes upon himself all risk of further depreciation, for he may not inflate the damages at the expense of the purchaser by neglecting to sell when he has the opportunity to do so. 3 In Pott v Flatlier* the defendant purchased scrip railway shares from the plaintiff at 25s. premium on the 20th of October, but the scrip was not issued until the 24th. On the 21bt the shares fell to 14s. premium, and on the evening of that day the plaintiff gave notice that he would not accept them. On the 22nd they had fallen to 8s. premium, and continued to fall until the 6th of December, when, after notice to the defendant, they were sold at 17s. discount. In an action for not accepting or paying fur the shares, the measure of damages was held to be the difference between the prices on the 20th and on the 22nd of October, and not at the date at which they were actually sold. If a correspondence respecting the repudiation of the shares has extended over a considerable period, it will be for a jury to fix the date at which the contract was finally repudiated, and to assess damages accordingly. 5 1 Tempest v. Eilner (1846), 3 C.B. 249. 2 Stewart v. Cauty (1841), 8 M. & W. 160 ; 10 L.J. Ex. 348. As to what constitutes a reasonable time, see note 2, p. 213, supra. 3 Samuel v. Eowe (1892), 8 T.L.E. 488. 4 (1847), 5 Rail. Cas. 85 ; 1C L.J. Q.B. 366. a Earned v. Hamilton (1841), 2 Rail. Cas. 624. REMEDIES. 215 When securities are unsaleable the damages for non-ac- Unsaleable ceptance will be the full price, if any, named in the contract. 1 If a price is not named, the damages will be such sum as a jury will award. If, owing to the principal's refusal to accept delivery of ^ r S e X s securities which have been purchased by his instructions, damages such securities are left upon the broker's hands, the latter cijJS'Tnon- may adopt one of two courses. He may either sell the acceptance, securities at the market price of the day, or, if it is to the advantage of the principal that he should do so, he may have a fair valuation of the securities made, and may personally take them over at such valuation. In either case he is entitled to claim from his principal any loss which he suffers from the principal's refusal to accept delivery. 2 When a broker has, fraudulently or otherwise, sold to his ale by principal securities of his own instead of purchasing them O f his own in the market, the principal is entitled, on discovering the 8ecurifci es. facts, to hand back the securities if he still holds them, and demand the return of his money. If he has parted with them and has incurred loss, he is entitled to claim as damages from the broker, not the amount of the loss which he has actually suffered, however long after the original sale the re-sale took place, but such a sum as he would have lost if he had resold the securities within a reasonable time after purchasing. He cannot claim damages for loss occasioned by his own act in retaining the securities. 3 If a broker has held himself out as having authority to Breach of -, . . ,, i , warranty purchase or sell securities on a principal s account, when he O f autho- has in fact no such authority, he will be personally liable nty< to the party with whom the contract is made, on the ground that there was an implied warranty that he had the authority which he professed to have. The damages in cases of breach of warranty of authority are the amount of the loss which 1 Ex parte Panmure (1883), 24 Ch. D. 367 ; 53 L.J. Ch. 57; 50 L.T. 38; 32 W.R. 236. Walter v. King, the Times, March 10, 1897. 3 Waddell v. Bloctey (1879), 4 Q.B.D. 678 ; 48 L.J. Q.B. 517 ; 41 L.T 458 ; 27 W.R. 938. 216 LAW AND PRACTICE OF THE STOCK EXCHANGE. the plaintiff has actually sustained by losing the particular contract which was to have been made by the alleged principal in other words, the profit which the plaintiff would have obtained from the contract which the broker wan-anted should be made. 1 Wrongful if a broker has wrongfully sold out securities belonging broker. to his principal, the damages will depend upon the fluctua- tions which have taken place in the price of the shares since the date of the wrongful sale. 2 Refusal Section 35 of the Companies Act, 1862, 3 enacts that if the regis er. name o f anv p erson j s> without sufficient cause, entered on or omitted from the register of members of any company under that Act, or if default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to be a member of the company, the Court may, if satisfied of the justice of the case, order the rectifica- tion of the register, and award to the aggrieved party such damages as he has sustained, the measure of damages being the value of the shares at the time of the refusal to register. 4 But where the contract between vendor and purchaser con- tains special terms of which the company has not received notice, and in consequence of a delay by the company in registering the transfer, and a fall in the value of the shares, the vendor loses a price which he would have obtained but for such delay, he cannot recover from the company more than nominal damages. 5 1 Ex parte Panmure (1883), 24 Ch. D. 367; 53 L.J. Ch. 57; 50 L.T. 38; 32 W.R. 236. 2 See Murray v. Hewitt (1886), 2 T.L.R. 872 ; Samuel v. Rowe (1892), 8 T.L.R. 488. 3 25 & 26 Viet. c. 89 ; and see BalJds Consolidated Co. v. Tomldnson [1893], A.C. 396 ; 63 L.J. Q.B. 134 ; (59 L.T. 598 ; 42 W.R. 204. * In re Ottos Kopye Diamond Mines [1893], 1 Ch. 618; 62 L.J. Ch. 166; 68 L.T. 138; 41 W.R. 258. Apparently the Court has no jurisdic- tion in case of a summons under this section to direct a company to pay damages, except in cases in which an order is made for rectification of the register; a party who fails to obtain rectification, or who merely desires damages, is obliged to bring an action at common law: Ibid. 5 Skinner v. City of London Marine Insurance Corporation (1885), 14 Q.B.D. 882 ; 54 L.J. Q.B. 437 ; 53 L.T. 191 ; 33 W.R. 028. REMEDIES. 217 SPECIFIC PERFORMANCE. Specific performance of contracts will, as a general rule, Principles -only be decreed where damages would fail to put the plain- ^ e ^g^ d tiff in as favourable a position as he would have enjoyed had granted. the contract been carried out. 1 Where, therefore, there is always a sufficient amount of a security in the market to satisfy the requirements of any one who desires to buy, a purchaser cannot obtain specific performance of a contract to deliver it, his remedy lying in an action for damages. It Applicable has accordingly been held that an action will not lie for J shares . but not to specific performance of an agreement to deliver stock, since stock. it is always readily procurable by a would-be purchaser. 2 But shares are on a different footing, and specific performance will be granted of an agreement to deliver them. " Now, I agree," said Vice-Chancellor Shadwell, in Duncuft v. Alhrecht* " that you cannot have a bill for specific performance of an agreement to transfer a certain quantity of stock. But, in my opinion, there is not any sort of analogy between a quantity of three per cents, or any other stock of that descrip- tion (which is always to be had by any person who chooses to apply for it in the market) and a certain number of rail- way shares of a particular description, which railway shares are limited in number, and which, as has been observed, are not always to be had in the market. And as no decision has been produced to the contrary, my opinion is that they are a subject with respect to which an agreement may be made which this court will enforce." The Vice-Chancellor's decision as to the compulsory enforcement of a contract to take Chares has been followed in numerous subsequent 1 Adderley v. Dixon (1824), 1 Sim. & Stu. 607. 2 Cuddee v. Sutler, 1 L.C. Eq., vol. i. 907. 3 (1841), 12 Sim. 189. And see Wilson v. Keating (1859), 7 W.R. 484; Shaw v. Fisher (1855), 5 De G. M. & G. 596 ; Cheale v. Kenward (1858), -3 De G. & J. 27; 27 L.J. Ch. 784; M'Devitt v. Connolly (1885), 15 L.R. Ir. 500. 218 LAW AND PRACTICE OF THE STOCK EXCHANGED cases ; l and as, since the decision in Cuddee v. Butter, 2 many county and corporation stocks have been created, which are as strictly limited in amount as are a company's shares, and to which, therefore, the Vice-Chancellor's remarks appear to be equally applicable, it is probable that in the case of many of the stocks now in existence specific performance would be granted of a contract for their delivery. Applicable Specific performance may be granted although no instal- directors merits have been paid upon the shares, 3 though the transfer transfer ^ as not ^ een execute ^ by the parties, 4 and though the directors of the company refuse to recognize the transfer when executeJ. 5 But in the last case the purchaser will have merely an equitable title to the shares, the legal ownership continuing in the vendor. Applicable When the contract to take shares in a company is in part contract & a fraud upon the company, specific performance will be granted of such part as is not fraudulent if the parties con- templated a piecemeal performance. 6 If a contract has been entered into for the sale of shares, and one of the parties 1 Wynne v. Price (1849), 8 De G. & S. 310 ; Shaw v. Fisher (1855), 5 DC G. M. & G. 596; Evans v. Wood (1867), L.R. 5 Eq. 9; 37 L.J. Ch. 159; 17 L.T. 190; 16 W.R. 67; Hawkins v. Maliby (1867), L.R. 3 Ch. 188; 38 L.J. Ch. 8; 17 L.T. 397; 16 W.R. 209; Musgrave and Hart's Case (1867), L.R. 5 Eq. 193; 37 L.J. Ch. 161; 17 L.T. 313; 16 W.R. 247 ; Paine v. Hutchimon (1868), L.R. 3 Ch. 388 ; 37 L.J. Ch. 485 ; 18 L.T. 380; 16 W.R. 553; Shepherd v. Gillespie (1868), L.R. 3 Ch. 764; 38 L.J. Ch. 67 ; 19 L.T. 196; 16 W.R. 1133 ; Hodgldmon v. Kelly (186S> L.R. 6 Eq. 496; 37 L.J. Ch. 837; 16 W.R. 1078; Shepherd v. Murphy (1868), 16 W.R. 948. 2 1 L.C. Eq. vol. i. 907. 3 Cheale v. Kenward (1858), 3 De G. & J. 27 ; 27 L.J. Ch. 784. 4 See Evans v. Wood (1867), L.R. 5 Eq. 9; 37 L.J. Ch. 159 ; 17 L.T. 190; 16 W.R. 67; Musgrave and Hart's Case (1867), L.R. 5 Eq. 193; 37 L.J. Ch. 161; 17 L.T. 313; 16 W.R. 247; Hawhins v. Maliby (1867), L.R. 3 Ch. 188; 37 L.J. Ch. 58; 17 L.T. 397; 16 W.R. 209; Paine v. Hutchinson (1868), L.R. 3 Ch. 388; 37 L.J. Ch. 485; 18 L.T. 380; 16 W.R. 553. 5 Poole v. Middleion (1861), 29 Beav. 646. 6 Odessa Tramways Co. v. Mendel (1877), 8 Ch. D. 235; 47 L.J. Civ. 505; 38 L.T. 731; 26 W.R. 887. EEMEDIES. 219 subsequently becomes bankrupt, his assignees in bankruptcy will be compelled to carry it out. 1 It has been held 2 that the purchaser of scrip certificates Applic- in a proposed railway company, which has not obtained an casVof "* Act of Parliament, is not bound to take a transfer of the script cer- corresponding shares from the vendor when the Act has been passed. It is perhaps doubtful whether a similar decision would be given were the case to occur again. When the purchaser in Jackson v. Cocker bought the certificates, he no doubt supposed that he was purchasing the right to the shaiass when issued, and probably the vendor equally sup- posed that he was freeing himself from liability. If a purchaser, on buying scrip certificates, does not obtain a right to the shares, it is not easy to see what consideration he receives for his money. But if he obtains the right to demand delivery of the shares, it seems to be unreasonable that he should not also be compellable to take delivery. 1 Morris v. Carman (1862), 4 De G. F. & J. 581 ; 31 L.J. Ch. 425; 6 L.T. 521 ; 10 W.K. 589. 2 Jackson v. Cocker (1841), 4 Beav. 59. 220 LAW AND PEA CTICE OF THE STOCK EXCHANGE. CHAPTER XI. TRANSFERS. Prepara- EXCEPT in the case of securities to bearer, the property in tion of which is passed either by delivery or indorsement of the stock or share warrants, an instrument of transfer must be prepared. It is the custom of the Stock Exchange for the seller's broker to prepare this instrument, and no claim to the purchase- money arises until it has been tendered to the purchaser. In Stephens v. De Medina^ decided in the year 1843, a declaration by a purchaser of shares against the vendor for non-delivery of the shares, although the purchaser was ready and willing to pay for them, was, on special demurrer, held to be bad, for not averring that the plaintiff had tendered a conveyance. This decision was subsequently followed in the case of Bowlby v. Bell, 2 and the Court was evidently of the same opinion in Franklyn v. Lamond* But in view of the custom to which reference has been made, these cases could scarcely be supported at the present time. Transfer ^ ne f rm of the instrument will depend upon the consti- by deed or tution of the company, some companies requiring that the hand. transfer shall be by deed, while in other cases a writing not under seal will be sufficient. And where the articles of association require a writing merely, a deed is not necessary, although the general practice of the company is to have one. 4 Companies The shares of companies which are governed by the Clauses daSonAct, ' 4 Q.B. 422; 12 L.J. Q.B. 120. 1845. 2 (1846), 3 C.B. 284; 16 L.J. C.P. 18. 8 (1847), 4 C.B. 637; 16 L.J. C.P. 221. 4 Ex parte Sargent (1873), L.R. 17 Eq. 273; 43 L.J. Ch. 425; 22 W.R. 815. TRANSFERS. 221 Companies Clauses Consolidation Act, 1845, 1 are transferable by deed only, which must be delivered to the secretary properly executed by the parties and duly stamped. 2 But in the case of companies incorporated under the Companies Companies Act, 1862, 3 the Act does not prescribe sealing, and the shares Act > 1862 - may apparently be transferred by an instrument not under seal. 4 With the above exception, the forms of the instrument of transfer given in the schedules to the two statutes are almost identical. The following is the form given in the first schedule to the later Act : I, A.B., of , in consideration of the sum of Form of paid to me by C.D. of , do hereby transfer - transfer to the said C.D. the share [or shares] numbered , standing in my name in the books of the Company, to hold unto the said C.D., his executors, administrators, and assigns, subject to the several conditions on which I hold the same at the time of the execution hereof; and I, the said C.D., do hereby agree to take the said share [or shares], subject to the same conditions. As witness our hands the day Under the Act of 1845 the transfer was to be made in the form given in the schedule, or in a form to the like effect. But the qualifying words did not admit of any great divergence from the statutory form, and the secretary of a company was held to be justified in refusing to register a transfer which was in an inconvenient form owing to the inclusion of other descriptions of property besides the shares. 5 The Stamp Act, 1 81 o, 6 requires that the amount of the Duty on transfer. 1 8 Viet. c. 1C. 2 Copeland v. North Eastern Railway Co. (1856), 6 E. & B. 277; Xanney v. Morgan (1887), 37 Ch. D. 346; 57 L.J. Ch. 311 ; 38 L.T. 238; 36 W.R. 677. 3 25 & 26 Viet. c. 89. 4 Ex parte Sargent, supra. 5 Copeland v. North Eastern Railway Co. (1856), 6 E. & B. 277 ; Reg. v. General Cemetery Co. (1856), 6 E. & B. 415. 6 55 Geo. III. c. 184. See now the Stamp Act of 1891 (54 & 55 Viet. c. 39), s. 58 (5). 222 LAW AND PRACTICE OF THE STOCK EXCHANGE. Transfers at the Bank of England. Fee pay- able on transfer. consideration inserted in the transfer, and on which the duty payable is calculated, shall be the sum paid by the ultimate purchaser. This may, of course, be either higher or lower than that which the vendor receives. It is usual to append to the transfer an explanatory note as to this, and it is doubtful whether, in the absence of such a note, the vendor would not be justified in refusing to sign the transfer. 1 The following is the method of transferring securities which are transferable at the Bank of England : A special form of ticket is procured at the Bank, which is duly filled in and passed by the purchaser's broker to the seller. With the ticket the broker also hands a stock receipt containing the principal's name, the amount of the stock purchased, and the amount of the purchase-money. If the ticket is in order, the seller attends at the Bank either per- sonally or by attorney, 2 and hands the ticket into the Consol Office of the Bank before one o'clock. A clerk then makes out a transfer, which is signed by the seller or his attorney and witnessed by the clerk. If the seller is acting personally, or if his attorney is not a broker or banker, identification by a broker or banker is required, 3 and is paid for by a percentage on the amount of stock transferred. On every transfer of stock at the Bank of England a fee is payable to cover stamps and other expenses, the amount being nine shillings on transfers of less than 25 of stock, and twelve shillings if the value of the stock is over 25. 1 Meicburn v. Eaton (1869), 20 L.T. 449 ; Case v. M l Clellan (1871), 25 L.T. 753; 20 W.K. 113. 2 A power of attorney must be made out on a special form which is supplied by the Bank. The form is filled up and left at the Power of Attorney Office at the Bank of England before 12.30 on ordinary days, or eleven o'clock on Saturdays. The cost is 6s. Gd. for sums less than 20, and 11s. Qd. above that amount. If a transfer has taken place in conse- quence of a forged power of attorney, the Bank will be liable to re-invest the stock in the name of the original holder: Sloman v. Bank of England (1845), 14 Sim. 475; 14 L.J. Ch. 226; but the right to claim against the Bank may be lost by negligence on the part of the stockholder : Coles v. Bank of England (1839), 10 A. & E. 437 ; 9 L.J. Q.B. 36 ; Sank of Ireland V. Evans's Trustees (1855), 5 H.L.C. 389. 3 As to allowing a trustee's payments for identification, see p. 114, ante. TRANSFERS. 223 Shares in cost-book mining companies are usually trans- Cost-book ferred by a document in which the transferor acknowledges that he has transferred, and the transferee acknowledges that he has accepted shares. The document is signed by both parties, is addressed to the purser of the mine, and is the authority to the purser to register the tranferee as a shareholder. 1 If a seller of securities signs an instrument of transfer, Blank but leaves blank spaces for the name of the transferee and ^ the purchase-money, the effects of the instrument will differ of sale, according to the class of securities of which it purports to dispose. As has been pointed out, 2 it is not necessary that a contract for the sale of stock or shares should be by deed, or even in writing, though a deed or writing may be required for the actual transfer. So long, therefore, as there is a valid and binding contract for the sale, although the instru- ment of transfer is incomplete or inoperative, the seller is entitled to compel the purchaser to accept a transfer in the proper form and to obtain registration, while the purchaser can compel the seller to execute a transfer and to account for all incomings received since the date of the contract. It appears that if the seller of securities delivers the cer- tificates with a blank transfer to a purchaser, he impliedly authorizes the latter to deal with the documents as his own. If a formal writing is not required to pass the property, the (a) Where purchaser is entitled to fill up the blanks, and on the accept- document ance by the company of the transfer, he will become legal not neces- owner; or before becoming legal owner he may in turn sary ' transfer to a purchaser, the vendor in either case holding ^s trustee for the purchaser until registration. 3 If, on the ^ where other hand, a deed is required, a transfer in blank is inopera- deed tive, and the filling in of the blanks by the purchaser does re 1 Toll v. Lee (1849), 4 Ex. 230; 18 L.J. Ex. 364; Walker v. Bartlett (1856), 18 C.B. 845 ; 25 L.J. C.P. 263. The authority to register will jrequire a sixpenny stamp ; see p. 229, post. - Page 85, ante. 3 See Lindley on Company Law (5th edit.), p. 478. 224 LA W AND PRACTICE OF THE STOCK EXCHANGE. not render it operative unless it can be shown to have been re-delivered since the blanks were so filled in. 1 But the purchaser is equitable owner, and is entitled to the execution of a valid transfer of the securities, and until a proper instrument is duly executed the vendor is trustee for him or for a purchaser from him. 2 (ii.) In case In the case of a mortgage by means of a blank transfer, gage. r it appears to be doubtful whether, in the absence of a special (a) right contract, the mortgagee has, strictly speaking, any right ecr e m0rtsa " save to hold the certificates and transfer as security for the return of his money. At any rate, he is not entitled to- transfer a larger right than he himself has obtained, and if he does so he is liable to the mortgagor for any damages which the latter may sustain through his act. (6) right The rights of a person who derives his title from the mor" b a ee mort o a g ee w ^ depend upon whether he has had notice of dependent the title of the original mortgagor. If the mortgagee has on notice. fiUed in tnQ transfer wn i c h ne received in blank, and has obtained registration, so that he is to all appearances the legal owner, a holder for value from him, who has not had notice of the mortgagor's title, will be entitled to hold the securities against the mortgagor, provided that before receiving notice of the prior equitable title of the mortgagor, 1 Societf G(fn&'ale de Paris v. Walker (1885), 11 App. Cas. 20; 55 L.J. Q.B. 169 ; 54 L.T. 389 ; 34 W.K. 662. See also Hilblewhite v. M'Morine (1840), 6 M. & W. 200 ; Swan v. North British Australasian Co. (1862), 7 H. & N. 603 ; an . 2 H & C. 175 ; 32 L.J. Ex. 273 ; 11 W.K. 862 ; Tayler v. Great Indian Peninsular Railway Co. (1859), 4 De G & J. 559 ; 28 L.J. Cli. 285. A mere acknowledgment by the transferor of the deed after the blanks have been filled up, but while the deed is not in his possession nor under his control, does not render it valid and operative : Tramways Union Co. v. Soritff Gtfntfrale de Paris (1884), 14 Q.B.D. 424; Powell v. London and Provincial Sank [1893], 2 Cli. 555; 62 L.J. Cli. 795 ; 69 L.J. 421 ; 41 W.K. 545. When a deed is invalid and incomplete, registration does not perfect the title of the transferee : France v. Clark, 26 Ch. D., at p. 262 ; Powell v. London and Provincial Bank [1893], 2 Ch., at pp. 560, 566. 2 It seems that a deposit of share certificates accompanied by a blank transfer which is inoperative as a transfer is evidence that the deposit of the certificates was intended to operate as a security. See Lord Black- burn's judgment in Colonial Sank v. Whinney (1886), 11 App. Cas., p. 433. TRANSFERS. 225 he has obtained the legal title, or, at any rate, a legal right to be registered, so that some purely ministerial act alone remains to be done which, as between the transferee and the company, the company will be bound to do forthwith. 1 For if the legal title or right is acquired after notice of a-n existing equitable title, the latter will prevail, 2 unless, perhaps, the subsequent purchaser's legal title was almost complete at the time of notice, and after notice is completed by getting in the legal estate, when it appears that the legal owner will not as a general rule be deprived of the advantage which he has thereby obtained in favour of a person who has merely an equitable title. 3 The receipt of a blank transfer signed by a third party Blank is constructive notice to the receiver of the title of the signatory. For he knows that the instrument requires to tive notice, be other than it was at the time when he received it in order to pass the property, and accordingly he is put upon inquiry as to the true title of the person from whom he received it. He cannot, therefore, fill up the blanks in his own favour, and claim to be a holder for value without notice of a prior claim, except to the extent of the sum due from the person who signed the transfer. In France v. France v. Clark* the registered holder of shares in a company deposited clark ' the certificates as security for a loan of 150, giving the mortgagee at the same time a transfer signed, but with the 1 Roots v. Williamson (1888), 38 Cli. D. 485; 57 L.J. Ch. 995; 58 L.T. 802; 36 W.R. 758; Moore v. North Western Bank [1891], 2 Ch. 599; 60 L.J. Ch. 627; 60 L.T. 456; 40 W.R. 93. - Nanney v. Morgan (1887), 37 Ch. D. 346; 57 L.J. Ch. 311 ; 58 L.T. 238; 36 W.R. G77. 3 Roots v. Williamson, 38 Ch. D., pp. 497, 498, explaining Dodds v. Hills (1865), 2 H. & M. 424. The fact that securities are standing in joint names is not notice of a trust to persons buying or advancing money upon them, nor is it sufficient to put them upon inquiry : Kaemena v. Central Bank of London (1888), 4 T.L.R. 657. 4 (1884), 26 Ch. D. 257; 53 L.J. Ch. 585; 50 L.T. 1; 32 W.R. 466. See too Sheffield v. London Joint Stock Bank (1888), 13 App. Cas. 333; 57 L.J. Ch. 986; 58 L.T. 735; 37 W.R. 33; Colonial Bank v. Cady (1890), 15 App. Cas. 267 ; 63 L.T. 27 ; 39 W.R. 17 ; Fox v. Martin (1895), 4>4 L.J. Ch. 473. 226 LAW AND PRACTICE OF THE STOCK EXCHANGE. consideration, date, and name of the transferee in blank. The mortgagee sub-mortgaged the shares as security for a loan of 250, and handed the blank transfer to the sub- mortgagee. After the death of the mortgagee the sub- mortgagee filled in the transfer with his own name, and stated 250 as the consideration. But it was held that he had no title as against the original mortgagor, except to the extent of 150 which the latter had received. For "he must necessarily have had notice that the documents required to be other than they were when he received them in order to pass any other or larger interest, as against the person whose name was subscribed to them, than the person from whom he received them might then actually and bond fide be entitled to transfer or create; and if he makes no inquiry he must at the most take that right (whatever it might be) and nothing more. He cannot, by his own subsequent act, alter the legal character, or enlarge in his own favour the legal or equitable operation, of the instrument." A person, however, who advances to the mortgagee a larger sum than the latter has advanced to the mortgagor, without any circumstances occurring to suggest a title other than that of the mortgagee, will be entitled to hold the securities deposited, as against the mortgagor, until the full amount of the later loan has been paid. 1 To the extent of the advance to the original mortgagor there is apparently an implied authority to the mortgagee to fill in the transfer so as to complete his own title as mortgagee of the shares, or to delegate his right to do so to a subsequent mortgagee. 2 American In McNeil v. Tenth National Bank 3 and Moore v. Metro- politan Bank* the courts of the United States appear to have come to a decision entirely opposed to that of the 1 Beniinck v. London Joint Stock Bank [1893], 2 Ch. 120; 62 L.J. Ch. 358; 68 L.T. 315; 42 W.R. 140. 2 France, v. Clark (1883), 22 Ch. D. 830; 52 L.J. Ch. 362; 48 L.T. 185 ; 31 W.R. 374. See also Buckley's Companies Acts (7th edit.), p. 489. 3 (1871), 46 New York Rep. 325. (1873), 55 New York Rep., 41. TRANSFERS. 227 House of Lords in France v. Clark on a very similar state of facts. In the first of these cases, at any rate, the bank had notice of another title besides that of the brokers who pledged the shares, since the plaintiff had given to his brokers, together with the share certificate, an assignment in blank with a power of attorney endorsed thereon, and the bank gave instructions as to filling up the blanks. But the Court held, nevertheless, that as the principal had conferred upon his brokers an apparent title to and power of disposition over his shares, he was stopped from asserting his title as against persons who had taken in good faith from the brokers. 1 A question may arise in case of a deposit of foreign share Law certificates whether the rights of the parties are to be decided 5{ by English law, or by the law of the country in which the foreign undertaking is situate. The question arose in the Colonial certificates Bankv. Cady' 2 on a deposit of American share certificates. deposlted ' The plaintiffs in the original action were the executors of the registered owner of 1210 shares in the New York Central and Hudson Eiver Railway Company. The shares were transferable in person, or by attorney on the books of the company, only on the surrender and cancellation of the certi- ficate by indorsement. The indorsement was in the form of a transfer for value, blank in the names of the transferor and transferee, with a power of attorney in blank to carry out the transfer. On the death of the owner the executors, in order to obtain registration in their own names, signed the transfers on the back of each certificate as executors, but without filling up the blanks, and sent the certificates to their broker, who fraudulently deposited them with a bank as security for advances to himself. The bank received the certificates bona fide and without further notice than the form of the certificates afforded, but took no steps to obtain registration. Neither on the New York nor on 1 See, however, the opinions expressed by the judges in the House of Lords in the Colonial Banli v. Cady, infra, as to the state of the American law on this subject - (1890), 15 App Cas. 267; 63 L.T. 27; :!9 W.R. 17. 228 LAW AND PRACTICE OF THE STOCK EXCHANGE. the London Stock Exchange are transfers thus signed by executors treated as being in order or received as sufficient security for advances, unless duly authenticated. The executors brought an action to establish their title to the certificates, and it was argued on behalf of the bank that the case should be tried by American law, and that accord- ing to that law, as laid down in M'Neil v. Tenth National Bank x and KortrigM v. Buffalo Commercial Bank* the banks were entitled to retain the shares until their advances to the broker were repaid. But it was held that since all the dealings with the certificates had taken place in England among persons domiciled here, the respective rights of the executors and the bank must be determined by English law ; and that the conduct of the executors in delivering the transfers was consistent with an intention either to sell or pledge the shares or to have themselves registered as the owners, and therefore did not estop them from setting up their title as against the bank, since the bank ought to have inquired into the broker's authority. Forged A transfer which has been forged is merely a nullity, transfers. an( ^ ^ Qeg not n &n y wa ^ a ff ect fa e title o f t ne person whose name has been forged. 3 And if, on the strength of such a forged transfer, a company has removed the name of one of their shareholders from the register, they will be com- pelled to make good the loss which he has incurred thereby. 4 1 (1871), 46 New York Kep. 325. 2 (1838), 20 Wend. New York Rep. 91 ; affirmed, 22 Wend. New York Rep. 348. 3 As to the effect of a transfer obtained by fraud, see Donaldson v. GUM (1866), L.R. 3 Eq. 274 ; 15 L.T. 382 ; 15 W.R. 166. 4 Sloman v. Bank of England (1845), 14 Sim. 475 ; 14 L.J. Ch. 226 ; Midland Railway Co. v. Taylor (1862), 8 H.L.C. 751 ; Barton v. North Staffordshire Railway Co. (1888), 38 Ch. D. 458 ; 57 L.J. Ch. 800 ; 58 L.T. 549 ; 36 W.K. 754 ; Barton v. London & North Western Railway Co. (1889), 24 Q.B.D. 77; 59 L.J. Q.B. 33; 62 L.T. 164; 38 W.R. 197. As to the liability to the Banks of England and Ireland for the transfer by means of forged transfers and powers of attorney of stocks which are transferable in their books, see Sloman v. Bank of England, supra ; Coles v. Bank of England (1839), 10 A. & E. 437; 9 L.J. Q.B. 36; Bank of Ireland v. Evans's Trustees (1855), 5 H.L.C. 389. TRANSFERS. 229 But the registration of the forged transfer will not render the company liable to the person whose name has been wrongly registered unless he has acted in the belief that the transfer and registration were valid. 1 The Forged Transfer Acts, 1891 and 1892, 2 now empower Forged local authorities and public companies to compensate, by a J f< cash payment, persons who have suffered loss from a transfer of shares, stock, or securities in pursuance of a forged transfer, or of a transfer under a forged power of attorney. A fund may be formed for this purpose by insurance, reservation of capital, accumulation of income, or otherwise, and on pay- ment of the compensation the rights and remedies, which the party injured would have had against the party liable for the loss, pass to the authority or company which has paid the compensation. Every transfer of stock or shares must be duly stamped Stamping, before it can be registered. 3 A transfer of shares in mines conducted on the cost-book Cost-book system did not require a stamp under the Stamp Act of mmes - George III., 4 but now a request or authority to the purser of such a mine to register a transfer of shares, or a notice of any transfer, must bear a sixpenny stamp. 5 The duty may be denoted by an adhesive stamp which is to be cancelled by the person by whom the request, authority, or notice is written and executed. Any one who writes or executes such a document without stamping it, or a purser or other officer of the mine who gives effect to it while unstamped, is liable to a fine of twenty pounds. 6 1 Simm v. Anglo-American Telegraph Co. (1879), 5 Q.B.D. 188; 49 L.J. Q.B. 392; 42 L.T. 37; 28 W.K. 290. 2 54 & 55 Yict. c. 43; 55 & 56 Viet. c. 36. 3 If the transfer is executed in this country, the fact that the under- taking is situated abroad does not relieve it of the necessity of stamping : Wright v. Commissioners of Inland Revenue (1855), 25 L.J. Ex. 49. 4 55 Geo. III. c. 184, Sched., Part I. ; Toll v. Lee (1849), 4 Ex. 230 ; 18 L.J. Ex. 364. 5 54 & 55 Viet. C..39, Sched. Transfer. 6 54 & 55 Viet. c. 39, s. 110. 230 LA W AND PRACTICE OF THE STOCK EXCHANGE. Transfer Under the Stamp Act, 1891, transfers of stock and shares of bank are chargeable with duty as follows : l StOCKj 6iC A conveyance or transfer, whether on sale or otherwise s. d. (1) Of any stock of the Bank of England 7 9 (2) Of any stock of the Government of Canada inscribed in books kept in the United King- dom, or of any Colonial stock to which the Colonial Stock Act, 1887, applies. For every 100, or for any fractional part of 100, of the nominal amount of stock Ad valorem " Subject to the above, transfers of stock and shares are transf 'rs c h a rgeable w ^ a ^ valorem duty at the following rates : s. d. If the value of the consideration is less than 5 ... 6 Exceeds 5 and does not exceed 10 ... 1 10 15 ... 1 6 15 20 ... 2 20 25 ... 2 6 ' 25 50 ... 5 50 75 ... 7 6 75 100 ... 10 100 125 ... 12 6 125 150 ... 15 150 175 ... 17 6 175 200 ... 1 200 225 ... 1 2 6 225 250 ... 1 5 250 275 ... 1 7 6 275 300 ... 1 10 with an additional five shillings for every 50, or fraction of 50. If the purchaser re-sells before he has obtained a con- veyance, the duty is charged only upon the consideration moving from the sub-purchaser, whether it be higher or lower than that payable by the original purchaser. 2 Foreign The Act contains the following provision as to the duty Bha C re 10nial P a y a ^ e on ^ e 1rans ^er or delivery of bonds or other certificates. 1 54 & 55 Viet. c. 89, Sched. I., Conveyance or Transfer. 2 Ibid., s. 58 (4), (5). See also s. 59. TltANSFEKS. 231 securities to bearer, and of foreign or colonial share certificates : l On the occasion of the first transfer thereof by delivery in the United Kingdom, and on the occasion of the first transfer thereof by delivery in the United Kingdom in any year after the year in which such first transfer by delivery shall happen . d. Where the amount secured does not exceed 25 3 Exceeds 25, but does not exceed 50 6 Exceeds 50, for every 50 and any fractional part of 50 of such amount 6 2 The duty is to be denoted by an adhesive stamp, and any one who is concerned in delivering or transferring such an instrument which is not duly stamped renders himself liable to a fine of twenty pounds. 3 Section 33 of the Companies Act Amendment Act, 1867, 4 provides that " there shall be charged on every share warrant a stamp duty of an amount equal to three times the amount of the ad valorem stamp duty which would be charge- able on a deed transferring the share or shares or stock specified in the warrant, if the consideration for the transfer were the nominal value of such share or shares or stock." Before registering a transfer which is alleged to have been R . . made by a shareholder, a company generally takes the pre- tion. caution of sending to the shareholder a notice of the fact that the transfer has been lodged with them, and stating that if they do not hear from him within a specified time the transfer 1 ** Foreign or colonial share certificates " include any document which is primd facie evidence of the title of any person as proprietor of, or as having a beneficial interest in, any share or shares, stock or debenture stock, or funded debt of any foreign or colonial company or corporation, where such person is not registered in respect thereof in a register duly kept in the United Kingdom : 54 & 55 Viet. c. 39, s. 82 (2). 2 54 & 55 Viet. c. 39, Sched. I., Marketable Security. 3 IbiJ., s. 85. See also SB. 82-84. 4 30&31 Vict.c. 131. 232 LAW AND PRACTICE OF THE STOCK EXCHANGE. will be registered. But it appears that this precaution will not always protect the company if the transfer is not in order. 1 Power of To what extent shares in a company are transferable at ^refuse *^ e w ^ ^ a shareholder depends upon the constitution of registra- the company. As a general rule, unless the regulations of the company, or the act or charter of incorporation, other- wise authorize them, the directors of a company are bound to give their consent to a transfer,, although they may believe it not to be for the benefit of the company, and though the transfer may be made with a view to escape from liability. 2 But in such a case the transfer must be a bond fide, in the sense of being an out-and-out transfer. a The directors are in the position of trustees, and if a power accepting or refusing transfers is confided to them, they will not be permitted to exercise it in a capricious or arbitrary manner. 4 But in the absence of evidence to the contrary, it will be presumed that they have acted reasonably and in good faith. 5 And provided that they have considered the question and are acting bond fide, directors will not be com- pelled to give reasons for their refusal to register a transfer either where their power of refusal is absolute, or where it is limited to particular grounds. 6 In any case, they are entitled to take a reasonable time to consider a transfer. 7 1 Barton v. London & North Western Railway Co. (1889), 24 Q.B.D. 77 ; 59 L.J. Q.B. 33 ; 62 L.T. 164 ; 38 W.R. 197. 2 Weston's Case (1868), L.K. 4 Ch. 20; 38 L.J. Oh. 49; 19 L.T. 337; 17 "W.R. 62. But transfers of shares in cost-book mining companies under such circumstances are fraudulent and void: see 32 & 33 Viet. c. 19, s. 35. 3 Weston's Case, supra. * Poole v. Middleton (1861), 29 Bear. 646 ; ex parte Penney (1872), L.R. 8 Ch. 446; 42 L.J. Ch. 183 ; 28 L.T. 150; 21 W.R. 186. 5 Nelson Mitchell v. Liquidators of City of Glasgow Bank (1879), 4 App. Cas. 624 ; 27 W.R. 875. 6 In re Coalport China Co. [1895], 2 Ch. 404 ; 64 L.J. Ch. 710 ; 73 L.T. 46 ; 44 W.R. 38. 7 In re Ottos Kopye Diamond Mines [1893], 1 Ch. 618 ; 62 L.J. Ch. 166 ; 68 L.T. 138; 41 W.R. 258. 233 The regulations of most companies provide that before a transfer can take place outstanding calls must be paid. But the transfer cannot be refused on this ground, unless at the time of its presentation the call has actually been made, 1 and the shareholder has already received notice that it has been made. 2 If a shareholder in a company has shares, on some of which the calls have been duly paid, while on others they are outstanding, he is entitled to transfer those on which the calls have been paid, unless the regulations of the company, or the Act under which the company is incor- porated, distinctly provide against a transfer in such cases." Upon acceptance and registration of the transfer, it is Certifi- the practice of companies to issue to the new shareholder a certificate acknowledging his title to the stock or shares therein mentioned. The certificate is a solemn affirmation under the company's seal that a certain amount of stock or a certain number of shares is or are standing in the name of the person mentioned in the certificate. The directors will generally require production of the certificate before registering a transfer in the name of a purchaser ; but this is a matter which is in their discretion, and they may dispense with the production if they see fit to do so. 4 The giving of a certificate amounts to a statement by the company, upon which it is intended that those who purchase the company's stock and shares in the market shall act, that the person to whom the certificate is issued is entitled to the stock or shares in question. It is not a warranty of title upon which a purchaser from the holder can maintain an 1 Eeg. v. Inns of Court Hotel Co. (1863), 32 L.J. Q.B. 369 ; 8 L.T. 551 ; 11 W.R. 806. - Hubbersty v. Manchester, Sheffield, & Lincolnshire Eailway Co. (1867), L.R. 2 Q.B. 471 ; 36 L.J. Q.B. 198 ; 16 L.T. 425 ; 15 W.R. 793. 3 Such a provision is made by the Companies Clauses Consolidation Act, 1845 (8 Viet. c. 16, s. 16), and by the Companies Act, 1862 (25 & 26 Yict. c. 89, Table A). 4 Shropshire Union Railways and Canal Co. v. Eeg. (1875), L.R. 7 H.L. 496; 45 L.J. Q.B. 31 ; 32 L.T. 283; 23 W.R. 709. 234 LA IV AND PRACTICE OF TEE STOCK EXCHANGE. action at common law against the company, but it estops the company from disputing such purchaser's right to be registered. 1 The company is therefore liable to persons who have suffered loss through buying shares or advancing money on the faith of the certificates, even if the company has been induced to issue the certificate by means of a forged transfer, 2 or if the directors' signature to the certifi- cate has been forged by the secretary, 3 provided that such persons have acted in reliance upon . the validity of the certificate. 4 If the company issues a certificate of shares as fully paid, they are estopped from subsequently denying that such shares were not fully paid, 5 unless the person who receives the certificate has such a knowledge of the facts as would lead any one who considered them to the conclusion that the liability in respect of the shares had not been fully satisfied. 6 1 In re Ottos Kopye Diamond Mines [1893], 1 Ch. 618 ; 62 L. J. Ch. 166; 68 L.T. 138; 41 W.R. 258. - In re Bahia and San Francisco Railway Co. (1868), L.R. 3 Q.B. 584; 37 L.J. Q.B. 176; 18 L.T. 467; 16 W.R. 862; Hart v. Frontino, etc., Gold Mining Co. (1870), L.R. 5 Ex. Ill; 39 L.J. Ex. 93; 22 L.T. 30; Balltis Consolidated Co. v. Tomkinson [1893], A.C. 396; 63 L.J. Q.B. 134; 69 L.T. 598; 42 W.R. 204; In re Ottos Kopye Diamond Mines [1893], 1 Ch. 618; 62 L.J. Ch. 166; 68 L.T. 138; 41 W.R. 258. As to the liability of a company on a transfer which has been certificated, see Bishop v. Ballds Consolidated Co. (1890), 25 Q.B.D. 512; 59 L.J. Q.B. 565; 39 W.R. 9J. But see this case discussed in McKay s Case, infra. 3 SJiaw v. Port Philip, etc., Gold Mining Co. (1884), 13 Q.B.D. 103 ; 53 L.J. Q.B. 369 ; 50 L.T. 685 ; 32 W.R. 771. 4 Simm v. Anglo-American Telegraph Co. (1879), 5 Q.B.D. 188; 49 L.J. Q.B. 392 ; 42 L.T. 37 ; 28 W.R. 290. 5 Burltinsliaw v. Nicholls (1878), 3 App. Cas. 1004; 48 L.J. Ch. 179; 39 L.T. 308 ; 26 W.R. 819 ; Parbury's Case [1896], 1 Ch. 100 ; 65 L.J. Ch. 104; 73 L.T. 506; 44 W.R. 107; McKay's Case [1896], 2 Ch. 757; 65 L.J. Ch. 505 ; 75 L.T. 298. In some cases a statement accompanying the certificate to the effect that the shares are fully paid will create an estoppel against the company, although the certificates themselves contain no such statement : In re Macdonald & Co. [1893], 1 Ch. 89 ; 63 L.J. Q.B. 193; 69 L.T. 567. 6 Exparte Bloomentlial [1896], 2 Ch. 525; 65 L.J. Ch. 748; 74 L.T. 670; 44 W.R. 577. These principles are applicable to an allottee of shares as well as to a transferee ; see Purlury's Case, supra ; approved Ex parte Bloomenthal, supra. TRANSFERS. 235 On the Stock Exchange the certificate is required to accompany the transfer in order to constitute a valid delivery. 1 But unless the certificate happens to be for the exact amount of the stock or shares sold to the particular purchaser, it is lodged with the secretary of the company ; or, in the case of stocks appearing in the official list, with the secretary of the Share and Loan Department of the Stock Exchange, who thereupon "certifies" the transfer that is to say, makes a note on it that the certificate has been lodged with him and the transfer alone then constitutes an effectual delivery. See Kule 102. 236 LAW AND PRACTICE OF THE STOCK EXCHANGE. CHAPTEK XII. MORTGAGES OF STOCK AND SHARES. A MORTGAGE of stock or shares may be either legal or equitable. If, in the case of securities, the legal title to- which depends upon registration, there is a mere deposit of the documents of title with the mortgagee, the transaction amounts to an equitable mortgage only. But if everything has been done which is necessary to constitute the mortgagee the apparent owner of the securities, whatever collateral arrangement there may be between the parties, the result is a legal mortgage. The mortgagee is, of course, more effectively protected by a legal than by an equitable mortgage. Loans on On the Stock Exchange, deposits of stock and share Exchange certificates, bonds, etc., as security for loans of money, are of daily occurrence. Among members, these transactions are very informally conducted. No receipt or written undertaking for the return of the securities is given, but the member who makes the loan merely hands his cheque to the borrower for the full market value of the securities at the time of the transaction. 1 The duration of the loan is from settlement to settlement, the money being paid back or the loan renewed on each succeeding settling-day. If the loan is renewed, the amount lent is increased by the lender, 1 If a nominal consideration stamp of ten shillings, registration fee, and mortgage stamp are required in the case of loans upon the Stock Exchange, the cost is borne by the borrower; Rule 100. MORTGAGES OF STOCK AND SEAEES. 237 or is partially repaid by the borrower, according as the security has risen or fallen in value during the account. 1 On the day on which the loan is repayable, it is the custom of the lender to return the securities deposited to the borrower, the latter subsequently sending a cheque for the amount due, or returning the securities, or sending others of equal value. By permitting the securities to leave his custody, the holder does not surrender his rights over them, but a fiduciary relation is established by which the borrower becomes a trustee of the securities for the lender. 2 It is sometimes difficult to distinguish a loan from a Loans and series of contracts of purchase and sale, known on the Stock Exchange as a " continuation." It was, in fact, for a long time considered that a continuation actually was a loan of money on a deposit of securities, and even now the two transactions are apt to be confused. But it was pointed out in Bongiovanni v. Societe Generate^ that the transaction is, in form and in law, a purchase and re-sale, or sale and re-purchase, as the case may be, "although in a business point of view so like a loan by the first buyer to the first seller as to be easily mistaken for a loan." The distinction between a continuation and a loan is that, in the former case the receiver of the securities obtains dominium, and consequently enjoys an absolute power of disposition, while the receiver of securities, in return for a loan of money, obtains a very limited right of disposal. The result is apparent when the securities are mortgaged or sub-mortgaged, as the case may be. If the taker-in of securities upon a continuation mortgages them, as they are his absolute property, his mortgagee is entitled to hold them against all the world until the full amount of his debt is paid. 4 But if a mortgagee of securities sub-mortgages them, 1 See the evidence given in Ex parte Marnham, re Morgan (1860), 2 De G. F. & J. 634; 30 L.J. Bk. 1 ; 3 L.T. 516; 9 W.R. 131. 2 Burra v. Eicardo (1885), 1 C. & E. 478. 3 (1886), 54 L.T. 320. 4 Bentinck v. London Joint Sloclc Bank [1893], 2 Ch. 120 ; 62 L.J. Ch. 358 ; 68 L.T. 315 ; 42 W.R. 140. 238 LAW AND PRACTICE OF THE STOCK EXCHANGE. the sub-mortgagee obtains only such title as the mortgagee had, 1 unless through some act or default on the part of the mortgagor, the mortgagee has been enabled to obtain the legal title. 2 Deposit On the Stock Exchange, when the securities deposited ment Vern cons i st of English, India, corporation, or Colonial Govern- securities. ment inscribed stocks, the rules provide, in the first place, that if the striking of balances for dividend takes place before repayment of the loan, the lender shall allow the dividend, deducting interest thereon till the day of payment of, and at the same rate of interest as the loan ; 3 and secondly, that if such stocks are borrowed without any stipulation as to their return, the borrower or lender may be called upon to deliver or take them, as the case may be, on the following day, whether a regular transfer-day or not. 4 Realiza- The rules of the Stock Exchange do not, in the first tion of instance, permit members who hold securities as cover for on the loans, to place such securities beyond their immediate Exchange, control, and after reasonable notice and upon repayment of the sum borrowed, with interest down to the time for which the loan was originally made, lenders may be required to return the identical securities deposited with them, and not merely securities of the same denomination and amount. 5 If, however, the borrower is declared a defaulter, members who have made advances to him upon securities which are 1 France v. Clark (1834), 26 Ch. D. 257 ; 53 L.J. Ch. 585 ; 50 L.T. 1 ; 32 W.R. 466. 2 For instance, where the securities are bearer bonds, etc., or, if inscribed stocks and shares, are accompanied by a transfer executed in blank by the mortgagor, so that the mortgagee is able to fill up the transfer and obtain registration in his own name. 3 Kule 86. See Vaughan v. Wood (1833), 1 Myl. & K. 403, to the same effect. The same rule would, no doubt, in the absence of special agreement, hold good as to all securities, and whether the mortgage were made on or off the Stock Exchange. 4 Rule 85. 3 Rule 70. See, to the same effect, Langton v. Waite (1868), L.R. 6 Eq. 165; 37 L.J. Ch. 345; 18 L.T. 80; 16 W.R. 508. As to the measure of damages where the securities are not duly returned, see pp. 211-213, ante. MORTGAGES OF STOCK AND SHARES. 239 valued at less than the market price, are bound to realize their securities within three clear days (unless the creditors consent to a longer delay), or to take them at a price to be fixed by the official assignees, but with an appeal to any two members of the Committee ; and should the security be insufficient, the difference may be proved against the defaulter's estate. 1 An unsecured loan is not admitted as a claim on the difference due to a defaulter's estate. And no such loan, when of longer duration than two business days, is admitted as a claim on any other of his assets. Should any unsecured creditor receive payment of his loan from a member on the day of his default, such payment being made out of assets not belonging to the defaulter previously to that day, he will be compelled to refund the amount so received for the benefit of the defaulter's estate. 2 If the mortgage is made outside the Stock Exchange, the General mortgagor is also entitled to the return of the particular j^rtgages securities deposited after repayment of the sum borrowed of stocks , ,,, . . i , , and shares. with interest, and alter giving such notice as may nave been agreed upon, or, in the absence of any stipulation as to notice, after a reasonable notice. In the absence of special Mort- agreement, the mortgagee is not entitled to sell the securities until default has been made in keeping up the stipulated sale margin, if any, or in repaying the money at the stipulated time, or, if a time has not been fixed for repayment, until after a demand for repayment has been made and refused." On the occurrence of any of these events, the mortgagee is entitled to an order for sale; but he is not entitled to a foreclosure order, though if the market value of the securi- ties at the time is less than the amount for which they were mortgaged, the Court will sometimes give leave to the mortgagee to bid at the auction. 4 If the mortgaged 1 Rule 158. - Rule 159. 3 France v. Clark (1S83), 22 Ch. D. ScO; 52 L.J. Ch. 382; 48 L.T. 185; 31 W.R. 374. * Carter v. Wake (1877), 4 Ch. D. G05 ; 46 L J. Ch. 841. 240 LA W AND PRACTICE OF THE STOCK EXCHANGE. securities are sold wrongfully, the mortgagee is accountable to the mortgagor for any profit that may have been realized by such sale. 1 Right While a mortgagee is undoubtedly entitled to sell the pledge. securities upon the mortgagor's failure to repay the loan at the proper time, it appears to be still open to question to what extent he is entitled to dispose of his interest in the securities before the mortgagor has made default. If the loan is to be extended over a considerable period, the mort- gagee may himself require an advance before repayment is due. How far, in such a case, will he be justified in sub- mortgaging the securities which have been deposited with him? It was at one time considered that the mere fact of a sub- mortgage would put an end to the mortgagee's interest and right of retainer under the contract, and would entitle the mortgagor to maintain an action of detinue for the securities without tendering the amount of the loan. But it was decided by a majority of the Court in the case of Donald v. Suckling, 2 that the mortgagor could not recover his securities without tendering the amount which had been advanced to him, even though the securities had been sub-mortgaged for a larger sum than the amount of the original loan. Chief Justice Cockburn, however, hesitated to say that a transfer of the mortgage was justifiable, and considered that the mortgagor would be entitled to recover as damages whatever loss he could show that he had sustained by reason of the transfer. 3 For in so far as, by disposing of the reversionary interest of the mortgagor, the mortgagee causes the mortgagor any difficulty in obtaining possession of the securities on 1 Langton v. Waite (1868), L.K. 6 Eq. 165; 37 L.J. Ch. 345; 18 L.T. 80; 16 W.B. 508. 2 (1866), L.B. 1 Q.B. 585 ; 35 L.J. Q B. 232 ; 14 L.T. 772 ; 15 W.B. 13. See too Halliday v. Holgate (1868), L.B. 3 Ex. 299 ; 37 L.J. Ex. 174 ; 18 L.T. 656; 17 W.B. 13. 3 The same is the case when the securities have been sold before the proper time : Johnson v. Stear (1863), 15 C.B. N.S. 330 ; 33 L.J.C.P. 130 ; 9 L.T. 538 ; 12 W.B. 347. MOXTGAGES OF STOCK AND SHARES. 241 payment of the sum due, and thereby causes him any real injury, he commits a legal wrong against him. 1 However, the mortgagee's right to transfer his mortgage, subject to the rights of the mortgagor, appears now to be generally recognized. 2 As has already been pointed out, 3 a mortgage of securities Form of may be either legal or equitable. If the securities mortgaged m are securities to bearer, the mortgagee, on receipt of the bonds, share warrants, or other documents of title, obtains all the outward appearances of ownership and is as effectively protected as it is possible for him to be. If, on the other hand, the securities are inscribed stocks and shares, the proper course for the mortgagee to pursue will depend upon whether they are or are not fully paid up. If the securities consist of stocks, fully paid shares, etc., (i.) Where the legal ownership of which does not involve liability, it artfully 3 will generally be to the interest of the mortgagee, if the loan P*"* U P- is to extend over any considerable period, to take a properly executed transfer and to have his name duly registered as owner, as he is then entitled to receive the dividends and the mortgagor is prevented from further dealing with the securities. 4 This course has the additional advantage that if there still exist securities which are not things in action within the meaning of the order and disposition clause of the 1 See the judgment of Willes, J., in Halliday v. Holgate, supra. 2 See ex parte Sargent (1874), L.B. 17 Eq., at p. 279. See also the opinion of Sir John Komilly, M.R., in Mocatta v. Bell (1858), 24 Beav. 585 ; 27 L.J. Ch. 237, that if a principal deposits securities with a broker in return for a loan of money he impliedly authorizes the broker to sub- mortgage them. 3 See p. 236, ante. 4 Where such a transfer is taken an ad valorem duty is payable (as to the amount see p. 230, ante), and therefore, where the loan is of very short duration, it may not be worth while to incur the expense involved in the course advised. Banks apparently overcome the difficulty by stating a nominal consideration in the transfer, but the legal effect of such a state- ment seems to be open to question (see note 2, p. 243, post). For a form of instrument qualifying a duly stamped transfer of stock or shares under sec. 23 (2) of the Stamp Act, 1891, see p. 295, poet. R 242 LA W AND PRACTICE OF TEE STOCK EXCHANGE. Bankruptcy Acts, 1 the transfer would clearly take them out of the apparent disposition of the mortgagor, and therefore prevent them from falling into the hands of his trustee in case of his bankruptcy. If the mortgagee obtains a transfer and registration he becomes the legal owner of the securities and, whatever private arrangement he may make with the mortgagor as to redemption, obtains the apparent right to dispose of them. Presumably if, under these circumstances, the mortgagee wrongfully sells to a bona fide purchaser for value, who has no notice of the trust in favour of the mortgagor, such purchaser will, upon obtaining a transfer and registration, be entitled to hold against the mortgagor, whose only remedy will be to proceed against the mortgagee for damages. (ii.) Where If the mortgaged securities are liable to! further calls, the notify 6 mort g a g ee w iU i n tne event of his name being placed upon paid up. the register, be liable to pay such calls as are made while he is registered owner, or within a year of his name being removed from the register if the company is wound up and his transferee is unable to pay. 2 In such a case, therefore, it will generally be advisable for the mortgagee to accept an equitable mortgage of the shares only, when he will not be liable to pay calls made in respect of them, 3 though he may find that he is unable to dispose of the shares while the calls 1 In Ejcparte Union Bank of Manchester (1871), L.B. 12 Eq. 354; 40 L.J. Bk. 57 ; 24 L.T. 951 ; 19 W.E. 872, it was held that the shares in question in that case were not things in action within the meaning of sec. 15 subs. 5 of the Bankruptcy Act, 1869. But in the Colonial Bank v. Whinney (1886), 11 App. Gas. 426; 56 L.J. Ch. 43; 55 L.T. 362; 34 W.R. 705, the House of Lords held that shares transferable by deed of transfer were things in action within the corresponding section (sec. 44) of the Bankruptcy Act, 1883, and the reasoning on which the decision was based appears to be sufficiently wide to cover shares of every description. Debentures of a joint stock company were held to be choses in action within the meaning of the Bankruptcy Act, 1869, in the case of In re Pryce (1877), 4 Ch. D. 685; 36 L.T. 117 ; 25 W.K. 432. 2 In re Land Credit Company of Ireland (1873), L.R. 8 Ch. 831 ; 42 L.J. Ch. 435 ; 28 L.T. 653; 21 W.R. 612. 3 Newry, etc., Railway Co. v. Moss (1851), 14 Beav. 64 ; 20 L.J. Ch. 633. MORTGAGES OF STOCK AND SHARES. 243 are outstanding. 1 The mortgagee in this case will take a transfer in blank signed by the mortgagor, and he will then, it seems, be justified in completing his security at any time by filling up the transfer and obtaining registration. 2 If, however, before filling up the transfer the mortgagee becomes entitled to sell, and does in fact sell, the mortgagor will hold as trustee for the purchaser as, prior to the sale, he did for the mortgagee. If the mortgagee fills up the transfer and obtains regis- tration, and the mortgage is subsequently paid off by the mortgagor, the mortgagee holds as trustee for the mortgagor until the shares are re-transferred, and is entitled to an indemnity against all liabilities properly incurred by him in holding and maintaining them. 3 So, too, if he sells and calls are made before the legal ownership is transferred, he is entitled to be indemnified by the purchaser for the pay- ment of such calls. 4 If an equitable mortgage is effected by a deposit of Equitable certificates only, the mortgagee should make sure that the mortgagor does not hold the securities in the capacity of o certifi * 1 See p. 233, ante. 2 If the transfer must be by deed and a blank transfer is delivered in the first instance, it will either have to be re-delivered after execution or be accompanied by a power of attorney under seal authorizing the mortgagee to fill up the blanks : Powell v. London and Provincial Sank [1893], 2 Ch. 555 ; 62 L. J. Ch. 795 ; 69 L.T. 421 ; 41 W.R. 545. By way of further security the mortgagee who receives a blank transfer may take a power of attorney to receive the dividends as they fall due. Such a power being given as part of the security for money, and therefore for valuable consideration, is irrevocable : see Abbott v. Straiten (1846), 3 J & L. 603. When certificates are deposited with a bank to secure a loan, it is customary for the bank to take a transfer signed in blank by the mortgagor and stamped with a nominal consideration stamp of ten shillings. The bank subsequently fills in the transfer with a nominal consideration, and obtains registration in the name of officials of the bank. It seems that such a statement of the consideration does not invalidate the transfer even where a deed is necessary : Powell v. London and Provincial Sank, xupra. 3 Pliene-\. Gillan (1845), 5 Hare, 1. 4 See p. 151, ante. 244 LA W AND PRACTICE OF THE STOCK EXCHANGE. trustee, since in such a case the mortgagee will generally obtain no title as against the cestui que trust. 1 In all cases of equitable mortgage the question of notice is of the greatest Effect of importance. For if at the time of taking the mortgage the notice of mortgagee had notice of a prior equitable title, or if he took prior title. ^ . . . the mortgage under circumstances which should nave put him upon inquiry as to the true title of the mortgagor, his claims will be deferred to those of the holder of the earlier title even though he subsequently acquires the legal estate. 2 But if, before receiving notice of any prior title, the mortgagee gets in the legal estate, or if, perhaps, he has fulfilled all necessary conditions to give him, as between himself and the company, "a present, absolute, unconditional right to have the transfer registered before the company is informed of the existence of a better title," his title will be preferred to that of the holder whose claim was earlier in date. 3 The notice must, however, be sufficiently direct to impose upon the mortgagee a duty to make inquiries, 4 and the mere fact that the mortgagor is a broker is insufficient to give rise to such an; obligation. 5 But a transfer in blank signed by some party 1 Shropshire Union Railways and Canal Co. v. Reg. (1875), L.R. 7 H.L. 496; 45 L.J. Q.B. 31 ; 32 L.T. 283 ; 23 W.R. 709 ; Powell v. London and Provincial Sank [1893], 1 Ch , at p. 615. 2 Nanney v. Morgan (1887), 37 Ch. D. 346; 57 L.J. Ch. 311 ; 58 L.T. 238 ; 36 W.R. 677 : Sheffield v. London Joint Stock Bank (1888), 13 App. Cas. 333; 57 L.J. Ch. 986; 58 L.T. 735 ; 37 W.R. 33; Simmons v. London Joint Stock Bank [1892], A.C. 201 ; 61 L.J. Ch. 723 ; 66 L.T. 625 ; 41 W.R. 108. 3 SocMtt Ge'ne'rale de Paris v. Walker (1885), 11 App. Cas. 20, 29; 55 L.J. Q.B. 169 ; 54 L.T. 389 ; 34 W.R. 662 : Roots v. Williamson (1888), 38 Ch. D. 485 ; 57 L.J. Ch. 995; 58 L.T. 802 ; 36 W.R. 758 ; Moore v. North Western Bank [1891], 2 Ch. 599; 60 L. J. Ch. 627 ; 60 L.T. 456; 40 W.R. 93. See also p. 224, ante. 4 Marshall v. National Provincial Bank (1892), 61 L.J. Ch. 465; 66 L.T. 525 ; 40 W.R. 328. 5 Baker v. Nottingham Banking Co. (1891), 60 L.J. Q.B. 542; Mul- ville v. Manster (1891), 27 L.R. Ir. 379 ; Hone v. Boyle (1891), 27 L.R. Ir. 137. As to what constitutes notice of a trust, see Kaemena v. Central Bank of London (1888), 4T.L.R. 657; London and Canadian Loan and Agency Co. [1893], A.C. 406; 63 L J. P.C. 14. MORTGAGES OF STOCK AND SHARES. 245 other than the mortgagor is in itself notice to the mortgagee of a title in some one else than the mortgagor. 1 In the absence of any statutory provision on the point, a Companies question might arise as to how far an equitable mortgagee g ^ ' could protect himself by giving notice of his title to the company. But sec. 30 of the Companies Act, 1862, 2 provides that no notice of any trust, expressed, implied, or constructive, shall be entered in the register, in the case of companies governed by the Act and registered in England or Ireland. The effect of this section was discussed at considerable length in Societe Generale de Paris v. Walker, the Court of Appeal holding, 3 and the House of Lords 4 apparently agreeing though deciding the case on another ground, that priority of title was neither obtained nor lost by giving or not giving notice to the company. And though some of the judges in the House of Lords in the Bradford Banking Co. v. Briggs 5 appear to have doubted the correctness of the decision on this point, it will be advisable to assume that such a notice has not any effect in strengthening the position of the possessor of a merely equitable title. 6 If an instrument under hand only is given upon the Loan note, deposit of any share warrant or stock certificate to bearer, or foreign or colonial share certificate, or any security for money transferable by delivery, by way of security for a loan, such instrument is deemed to be an agreement and is charged with a duty of sixpence, which may be denoted by an adhesive stamp, which is to be cancelled by the person by whom the agreement is first executed. 7 See p. 225, ante. 25 & 26 Viet. c. 89. (1884), 14 Q.B.D. 424. (1885), 11 App. Gas. 20 ; 55 L.J. Q.B. 169 ; 54 L.T. 389 ; 34 W.B. 662. (1886), 12 App. Gas. 29 ; 56 L.J. Ch. 364 ; 56 L.T. 62 ; 35 W.R. 521. The Local Loans Act, 1875 (38 & 39 Viet. c. 83), s. 9, contains a similar declaration as to notice in the case of loans raised and stocks issued by local authorities in accordance with its provisions. ' Stamp Act, 1891 (54 & 55 Viet. c. 39), ss. 22, 23. For a common form of such a loan note, see App. B, p. 294. The Bank of England and many of the principal banks have forms of their own, which they supply to persons to whom they consent to make an advance. 246 LAW AND PRACTICE OF TEE STOCK EXCHANOK So, too, an instrument under hand only which makes redeemable or qualifies a duly stamped transfer, intended as a security, of any registered stock or marketable security, is deemed to be an agreement and is charged with a duty of sixpence, which is to be denoted in a similar manner. 1 Stamp Act, 1891, SB. 22, 23. ( 247 ) APPENDIX A. 1. ON the 20th day of March in every year, or if that day should Election of be a Sunday or Bank Holiday, then on the following business day, JJ-ttee for a ballot by the members shall be held for the appointment of a General committee of thirty members who shall be called the " Committee Purposes, for General Purposes/' and shall hold office for twelve months from the 25th of March next following the date of their election, but shall be re-eligible. Notice of such ballot shall be publicly ex- hibited in the Stock Exchange during fourteen days previous to the same being held, and a further notice containing the names of the persons on the existing committee willing to serve again, and of all new candidates, their proposers and seconders, shall be publicly exhibited in like manner during three business days previously to such ballot being held. The members on the said committee re- tiring shall remain in office until the 25th of the same month of March, in which their successors shall have been elected, and in case no election shall be made at any such ballot as aforesaid, the members retiring shall remain in office until the 25th day of March in the following year, or until a valid election shall have taken place under clause 92. Four business days' notice previous to any ballot of intention to propose any person not already on the committee and eligible for re-election must be given to the secretary of the committee in writing signed by two members, and the ballot shall be by printed lists containing the names of the persons willing to serve again and of all persons so proposed, distinguishing the former from the latter. In case no valid election be made on the day hereinbefore appointed for that object, the committee may forthwith or at any time thereafter, prior to the next ordinary yearly ballot, cause a ballot to be held for such election, on a day to be fixed by the committee for that purpose, and in all respects, as lastly herein- before provided ; and the committee to be appointed by such ballot shall remain in office until the 25th day of March then next following. Every ballot for the election of the Committee for General Purposes or 248 LAW AND PRACTICE OF TEE STOCK EXCHANGE. for supplying vacancies in the committee shall be held at the Stock Exchange, and except as specially provided by these presents shall be conducted in accordance with the existing practice and usage in reference to such elections. In case of dispute as to what such practice and usage has been in any particular, the committee shall from time to time determine the same by resolution. Deed of Settlement, sec. xii. cl. 90. Qualifica- 2. No person shall be elected to the said Committee for General members Purposes who shall not for the space of five years immediately of the com- preceding the day of election have been a member, and every person mittee and on ceasing to be a member shall ipso facto vacate his seat on the ers * committee. Deed of Settlement, sec. xii. cl. 91. Every member is entitled to vote although he may not have paid his subscription. Occasional 3. Any occasional vacancy in the said Committee for General vacancy in Purposes shall be filled up by a ballot of members to be held for tee< the purpose on a day to be fixed by the Committee for General Purposes, and of which seven days' previous notice shall be given by the same being publicly exhibited in the Stock Exchange. Similar notice of nomination shall be given as provided by Clause 90. The surviving or continuing members on the committee, not- withstanding any vacancy in their number, may act until the same can be filled up. Any person elected to supply an occasional vacancy in the said committee shall hold office for the residue of the year in which he shall be elected, and shall then retire with the other members of the said committee. Deed of Settlement, sec. xii. els. 92, 93. Procedure 4. The said Committee for General Purposes shall meet at such of the times as they may from time to time appoint, and shall determine ee * their own quorum (the same to be not less than seven members actually present) and mode of procedure. Quorum. Until otherwise determined, the quorum of the said committee shall be seven members personally present. Deed of Settlement, sec. xii. els. 98, 99. Committee ^. ^^ e sa ^ Committee for General Purposes shall regulate the to regulate transaction of business on the Stock Exchange, and may make rules the 81 sSck n an ^ re u l at i ns not inconsistent with the provisions of these presents Exchange, respecting the mode of conducting the ballot for the election of the and make committee and respecting the admission, expulsion, or suspension of members and their clerks, and the mode and conditions in and subject to which the business on the Stock Exchange shall be transacted, and the conduct of the persons transacting the same, and generally for the good order and government ,of the members of the APPENDIX. 249 Stock Exchange, and may from time to time amend, alter, or repeal such rules and regulations, or any of them, and may make any new, amended, or additional rules and regulations for the purposes aforesaid. Deed of Settlement, sec. xii. cl. 95. 6. At their first ordinary meeting after the annual election, the Election of committee shall elect, from amongst themselves, a chairman and ^^"nan deputy-chairman, who shall respectively hold office till the 25th deputy- of March next ensuing. In case either appointment shall become chairman, vacant, it shall be filled up as soon afterwards as possible. When the chairman and deputy-chairman are absent, the meeting shall appoint a chairman. In all cases, when, on a division, the votes are Chairman equal, the chairman shall have a second or casting vote. vote?* 8 *^ 7. At the first meeting of the committee, one of the members Election of of the Stock Exchange shall be chosen secretary, who shall hold his J^jjljjj office during their pleasure; and three other members shall be ap- neers. pointed to act as scrutineers at elections, who shall report the result of the ballot to the committee and to the Stock Exchange. 8. The ordinary meetings of the committee shall be held every Meetings. Monday at one o'clock, commencing on the first Monday after each annual election. But a special meeting of the committee may at Special any time be called by the chairman or deputy-chairman, or (in their meetings, absence, or in case of their refusal) by any three members of the committee. One hour's notice, at least, shall be posted in the Stock Exchange. 9. If a quorum be not assembled within a quarter of an hour after Absence of the time appointed for meeting, the chairman or deputy-chairman t ^ e ru j eSj gj^ a C0 p y O f suc h alteration of a rule, or proposed new rule, shall be sent to each member of the committee. Precedence After the reading of the minutes, the consideration of any altera- ess ' tion of a rule, or proposed new rule, shall take precedence of all other business, except the re-admission of defaulters and cases of urgency. Communi- 13. All communications to the committee shall be made in ca ions. vvriting ; and no anonymous letter shall be acted upon. Attendance 14. Members and their clerks shall attend the committee when an^derks 8 re^ui^ 5 an( ^ & ha.\\ tP ve sucn information as may be in their possession when relating to any matter under investigation. 15. The committee may expel any of their own members from of'members tne commmittee who may be guilty of improper conduct. The of com- resolution for expulsion must be carried by a majority of two-thirds tee * in a committee specially summoned for the purpose, and consisting of not less than twelve members, and must be confirmed by a majority of the committee, at a subsequent meeting, specially summoned. Expulsion 16. CLAUSE 1. Tlie committee may expel or suspend any member or Buspen- w j lo ma y violate any of the rules or regulations. members. CLAUSE 2. The committee may expel or suspend any member who may fail to comply with any of the committee's decisions. CLAUSE 3. The committee may expel or suspend any member who may be guilty of dishonourable or disgraceful conduct. A resolution for expulsion or suspension must be carried by a Special majority of three-fourths of a committee present at a meeting specially committee. summonea , and consisting of not less than twelve members, and must be confirmed by a majority of a committee present at a subsequent meeting specially summoned. Improper jy^ p ne committee may censure, or suspend for a period not orderly exceeding two months, any member of the Stock Exchange who may conduct. APPENDIX. 251 conduct himself in an improper or disorderly manner, or who may wilfully obstruct the business of the House. Any resolution adopted under this rule must be carried by a majority of three-fourths of the members present. A resolution for expulsion or suspension must be carried by a majority of three-fourths of a committee present at a meeting specially summoned, and consisting of not less than twelve members, and must be confirmed by a majority of a committee present at a subsequent meeting specially summoned. 18. The Committee for General Purposes for the time being may, Publica- in their absolute discretion, and in such manner as they may think ti n of fit, notify or cause to be notified to the public that any member has namea e been expelled, or has become a defaulter, or has been suspended, or lias ceased to be a member, and the name of such member. No action or other proceeding shall under any circumstances be main- tainable by the person referred to in such notification against any persun publishing or circulating the same, and this rule shall operate as leave to any person to publish and circulate such notification, and be pleadable accordingly. NOTE. The power given to the committee under this rule is clearly very extensive ; but since every member, on admission, expressly binds himself to comply with the rules, he cannot subsequently complain that the rule is unreasonable, or maintain an action for libel in respect of anything published by the committee, even after he had ceased to be a member by expulsion or otherwise ; see Belton v. Hatch (1888), 109 New York Rep. 593. 19. The committee may dispense with the strict enforcement of Suspension any of the regulations ; but such power shall only be exercised by a of rule: committee specially convened for that purpose, and consisting of not i a tions. less than twelve members, three-fourths of whom must concur hi the resolution for such dispensation. The resolution must be confirmed by a majority of the committee, at a subsequent meeting, specially summoned. ADMISSIONS, RE-ELECTIONS, AND RE-ADMISSIONS. 20. Every member desirous of being re-elected shall, on or before the 15th of February in each year, address to the secretary a letter, re-election, of the form inserted in the Appendix, p. 257, infra. Each member of a partnership is required to sign a separate letter. 252 LAW AND PRACTICE OF THE STOCK EXCHANGE. Admission 21. The committee shall, on the first Monday in March, proceed election to a( ^ m ^ an( ^ re ~ e l ect suc h persons as they shall deem eligible to be members of the Stock Exchange, for one year, commencing on the 25th of March then instant, or last preceding the admission of such subscriber, at the amount fixed by the trustees and managers for such admission. Sureties 22. Every applicant for admission, previously to being balloted for new f or ^ mus t b e recommended by three members of not less than four years' standing, who have fulfilled all their engagements, and who are not indemnified. Each recommender must engage to pay five hundred pounds to the creditors of the applicant, in case the latter shall be declared a defaulter within four years from the date of his admission. When two ^ tne applicant has been a clerk in the Stock Exchange for four sureties years previously to his application, two recommenders only shall be required. re q u i re d, who must each enter into a similar engagement for three Exception hundred pounds, but any clerk, who previously to his employment in dilate C r D ~ tne Stock Exchange shall have been engaged as principal in any viously business, shall only be eligible for admission as a member with three engaged in sureties for five hundred pounds each. No member shall be surety for more than three new members at the same time. mendation. NOTE. As to the release of the sureties where a default is declared in consequence of a composition with creditors, see Rule 163. Foreigners. 23. No foreigner shall be admissible, unless he shall have been naturalized for a period of two years, and shall have been a resident in this country for seven years. NOTE. The Naturalization Act of 1870 (33 Viet. c. 14), s. 7, provides as follows : An alien who, within such limited time before making the application hereinafter mentioned as may be allowed by one of Her Majesty's principal Secretaries of 'State, either by general order or on any special occasion, has resided in the United Kingdom for a term of not less than five years, or has been in the service of the Crown for a term of not less than five years, and intends, when naturalized, either to reside in the United Kingdom or to serve under the Crown, may apply to one of Her Majesty's principal Secretaries of State for a certificate of naturalization. The applicant shall adduce, in support of his application, such evidence of his residence or service as such Secretary of State may require. The said Secretary of State, if satisfied with the evidence adduced, shall take the case of the applicant into consideration, and may, with or without assigning any reason, give or withhold a certificate as he thinks most conducive to the public good, and no appeal shall lie from his decision, APPENDIX. 253 but such certificate shall not take effect until the applicant has taken the oath of allegiance. An alien to whom a certificate of naturalization is granted shall, in the United Kingdom, be entitled to all political and other rights, powers, and privileges, and be subject to all obligations to which a natural-born British subject is entitled or subject in the United Kingdom, with this qualification, that he shall not, when within the limits of the foreign State of which he was a subject previously to obtaining his certificate of naturalization, be deemed to be a British subject unless he has ceased to be a subject of that State in pursuance of the laws thereof, or in pursuance of a treaty to that effect. The said Secretary of State may, in manner aforesaid, grant a special certificate of naturalization to any person with respect to whose nation- ality as a British subject a doubt exists, and he may specify in such certificate that the grant thereof is made for the purpose of quieting doubts as to the rijjht of such person to be a British subject, and the grant of such special certificate shall not be deemed to be any admission that the person to whom it was granted was not previously a British subject. An alien who has been naturalized previously to the passing of this Act may apply to the Secretary of State for a certificate of naturalization under this Act, and it shall be lawful for the said Secretary of State to grant such certificate to such naturalized alien upon the same terms and subject to the same conditions in and upon which such certificate might have been granted if such alien had not been previously naturalized in the United Kingdom. By sec. 8, a natural-born British subject who has ceased to be a British subject by virtue of the provisions of the Act, may be re-admitted to the status of a British subject on conforming to the terms and conditions as if he were an alien born. The oath of allegiance is as follows : " I, do swear that I will be faithful and bear true allegiance to Her Majesty Queen Victoria, her heirs and successors according to law. So help me, GOD." See sec. 9. 24. A notice of each application, with the names of the recom- Notice of menders, stating that they are not, and do not expect to be, indem- ppl- nified, shall be posted in the Stock Exchange, at least eight days before the applicant can be balloted for. 25. Members are required to have such personal knowledge of Personal applicants whom they recommend, and of their past and present cir- o a W plU S cumstances, as shall satisfy the committee as to their eligibility. cant by 26. Any recommender of a new member, who at the time of such member's admission shall have avowed that he was not, and that he did not expect to be indemnified, and who shall subsequently receive fication of any indemnity, shall, in the event of the new member failing within 8Uret ies. 254 LAW AND PRACTICE OF THE STOCK EXCHANGE. the time of his liability, be compelled to pay to the creditors any sum so received, in addition to the amount for which he originally became surety. Ineligi- 27. An applicant may be recommended by a firm, but not by two bilitv of members of the same firm, nor by a member who is an authorized or 16S * unauthorized clerk, nor by a member whose authorized clerk the applicant may be, nor by a member whose sureties are still liable. New 28. If a member enter into partnership with, or become sureties authorized clerk to, any one of his sureties, or if any one of his required, sureties cease to be a member during his lia'bility, he shall find a new surety for such portion "of the time as shall remain unexpired ; and until such substitute is provided, the committee will prohibit his entrance to the Stock Exchange. Applicants 29. No applicant is admissible, if he be engaged as principal or engaged in clerk in any business other than that of the Stock Exchange, or if 1- his wife be engaged in business, or if he be a member of, or subscriber to, any other institution where dealings in stocks or shares are carried on ; and if subsequently to his admission he shall render himself subject to either of those objections, he shall thereby cease to be a member. Bankrupts. 30. No applicant for admission, who has been a bankrupt, or who has been proved to be insolvent, or who has compounded with his creditors, shall be eligible, unless he shall have paid 20s. in the pound, and obtained a full discharge. 1 No applicant, having once been a bankrupt, or insolvent, or com- pounded with his creditors, shall be eligible for admission. Obiections 31. A member, intending to object to the admission or re- to be in admission of an applicant, or to the re-election of a member, is writing. required to communicate the grounds of his objection to the com- mittee by letter, previously to the ballot, or re-election. Rejected 32. If any applicant for admission, re-admission, or re-election, be applica- rejected, he shall not be balloted for again before the 25th of March )ns ' then next ensuing. Defaulters declared within four years of their committee admission as members, and defaulters who have been rejected upon on de- two ballots can only be re-admitted by a majority of three-fourths in faulters a com mittee specially summoned, and consisting of not less than required, twelve members. Discon- 33. Any former member, who, not having resigned, and not tinuance havin^ been a defaulter, bankrupt, or insolvent, shall have discon- of sub- scriptions. 1 This rule does not apply to the re-admission of members of the Stock Exchange. APPENDIX. 255 tinned his subscription for one year, must be recommended for re- election by two members, but without security. If he shall have discontinued his subscription for two years, he will be considered a new applicant, and must apply for admission in the usual way. 34. Any member wishing to resign his membership must forward Resigna- to the secretary a letter tendering such resignation, and a copy of this letter shall be posted in the Stock Exchange for at least four weeks before the matter is entertained by the committee. 35. A notice of every defaulter, bankrupt, or insolvent, applying Re-admis- for re-admission, shall, at the discretion of the committee, be posted (without recommenders) in the Stock Exchange at least twenty- one days, and the committee shall then take the application into consideration, upon the report of the sub -committee, appointed according to Rule 171. If, however, the committee think fit, a de- faulter may be re-admitted without the above notice, upon a report of the sub-committee, and a certificate signed by such a number of the creditors as may be satisfactory to the committee, that all liabilities have been bond fide discharged in full. In all such cases, after the defaulter has been re-admitted by ballot, it shall be decided by show of hands, whtther his name shall be posted in The Stock Exchange as having paid 20s. in the pound, or whether it shall be placed in one of the two classes mentioned in Rule 172. NOTE. As to suspending the re-admission of defaulters, see Rules 163-166. 36. The re-admission of defaulters shall take precedence of all Precedence other business. f de ~ , faulters 37. The chairman of the committee, in addition to any other re-admis- questions that may appear to be necessary, shall, to each of the Q U ",. recommenders of an applicant, put the following : put to Has the applicant ever been a bankrupt, or has he ever com- sureti es. pounded with his creditors? and if so, within what time, and what amount of dividend has been paid ? Would you take his cheque for three thousand pounds in the ordinary way of business ? Do you consider he may be safely dealt with in securities for the account ? 38. The chairman shall require every new applicant to acknow- Questions ledge his signature to the form of application, and shall ask such questions as may be deemed necessary. 256 LAW AND PRACTICE OF THE STOCK EXCHANQ E. APPENDIX TO ADMISSIONS AND RE-ELECTIONS. Form of 1- Form of letter to be signed by persons desirous of becoming application members of the Stock Exchange, for admis- sion. To the Secretary of the Committee for General Purposes. SIB, You will please to acquaint the Committee for General Purposes that I am desirous of being admitted a member of the Stock Exchange for the year commencing on the 25th of March, 18 , upon the terms of, and under and subject in all respects to the Rules and Regulations of the Stock Exchange, which now are, or hereafter may be, for the time being in force. I have read the Rules and Regulations of the Stock Exchange. I have read the resolution at the back of the letter. I am a British subject, and of age. I am (state whether married or unmarried). My residence is My office is My bankers are I am not engaged in any business, except such as is transacted at the Stock Exchange, nor am I clerk in any public or private establishment unconnected with the Stock Exchange, nor a member of, or subscriber to, any other institution in which dealings in stock or shares are carried on. I am, Sir, yours faithfully, We recommend Mr. as a fit person to be admitted a member of the Stock Exchange ; and in case he shall be publicly declared a defaulter within four years from the date of his admission, we each of us hereby engage to pay to his creditors, upon application, the sum of five hundred pounds * 2 to be applied in discharge of the said defaulter's debts, in the Stock Exchange. The following rule is to be printed on the back of the letters of application : 28. If a member enter into partnership with, or become authorized clerk to, any one of his sureties, or if any one of his sureties cease to be a 1 The sureties must state opposite to their signatures that they are not, and that they do not expect to be, indemnified for the security they give, and must attend, together with the person recommended, at one o'clock of the day on which the ballot is to take place; and they are required to have such personal knowledge of the applicant and of his past and present circumstances, as may enable them to give a satisfactory account of the same to the committee. 2 Three hundred pounds when two sureties only are required. APPENDIX. 257 member during his liability, he shall find a new surety for such portion of the time as shall remain unexpired ; and until such substitute is pro- vided, the committee will prohibit his entrance to the Stock Exchange. The secretary shall send to every member, on his admission, a letter to the following effect : SIR, I am directed to inform you, that you are elected a member of Letter to the Stock Ex-change, for the year commencing on the 25th of March, be sent 18 , upon the terms of, and under and subject in all respects to, the Rules and Regulations of the Stock Exchange, which now are, or here- after may be, for the time being in force. You will be entitled to admission to the House upon payment of your entrance fee and subscrip- tion to the credit of the managers. I am, Sir, etc., FRAXCIS LEVIEN, Sec. to the Committee for General Purposes. 2. Form of the letter to be signed by persons desirous of being Form of re-elected members of the Stock Exchange. j^re^ election. APPLICATION FOB BE-ELECTION. To the Secretary of the Committee for General Purposes. SIR, You will please to acquaint the Committee for General Purposes that I am desirous of being re-elected a member of the Stock Exchange, for the year commencing on the 25th of March, 18 , upon the terms of, and under and subject in all respects to, the Rules and Regulations of the Stock Exchange, which now are, or hereafter may be, for the time being in force. My residence is My office address is My bankers are I am engaged in partnership with I carry on business as a l I am not engaged in any business, except such as is transacted at the Stock Exchange, nor am I clerk in any public or private establishment unconnected with the Stock Exchange, nor a member of, or subscriber to, any other institution in which dealings in stocks or shares are carried on. The under-named will continue to act as clerk. A member who may part with a clerk, or be desirous of withdrawing from an authorized clerk the permission to transact business on his 1 Members who desire their names to appear in the published " Lists of Brokers who are Members of the Stock Exchange," must here state whether they act as brokers. 258 LAW AND PRACTICE OF THE STOCK EXCHANGE. account, shall give notice in writing to the secretary, who shall forthwith communicate the same to the Stock Exchange in the usual manner. N.B. Application for the admission of new clerks or the authoriza- tion of clerks hitherto unauthorized, must be made on special forms, to be obtained at the office of the secretary. Name of Clerk. Here state whether authorized or not to transact business, and if the party be a Member, it is to be so stated. &3~ It is requested that all the names be written at full length. The subscription is to be paid to the credit of the managers, within twenty-one days from the 25th of March. Rules to be 3. The secretary shall furnish each applicant with a book of the a^licants ru ^ es an( ^ regulations, which must be carefully read by him previous to his admission. Letter to The secretary shall send to every member, on his re-election, a S-Swted. letter to the foll <> win g effect: SIB, I am directed to inform you, that you are elected a member of the Stock Exchange, for the year commencing on the 25th of March, 18 , upon the terms of, and under and subject in all respects to, the Rules and Regulations of the Stock Exchange, which now are, or hereafter may be, for the time being in force. You will please to pay your subscription to the credit of the managers. I am, Sir, etc., FRANCIS LEVIEN, Sec. to the Committee for General Purposes . Notice of partner- ships. To be posted. PARTNERSHIPS. 39. In every year, as soon as possible after the general election, a list of partnerships shall be made out by the secretary. In case of a new, or alteration in an old partnership, the same shall be communi- cated to the committee; and no partnership shall be considered as altered or dissolved until such communication be made. All notices relative to partnerships must be signed by the parties, countersigned by the secretary, and posted in the Stock Exchange. NOTE. After a partnership has been formed, no member of the Stock Exchange is permitted to do a bargain with an individual member of the firm without the knowledge of the remaining partners, under pain of expulsion from the Stock Exchange (Rule 56). APPENDIX. 259 40. The failure of a firm dissolves the partnership, and, should the members of such firm, when re-admitted, desire to renew the partner- solved by ship, notice thereof must be given to the committee in the usual way. failure. 41. Xo member of the Stock Exchange shall be allowed to enter Partner- into partnership with any person who is not a member; nor shall any jJjJP ^^ member form a partnership during the liability of his recorn menders, members without their written consent, such consent to be communicated to prohibited the committee. NOTE. Where a non-member introduces business to a firm of brokers on the terras that he shall receive a fixed proportion of the profits of such business and bear a fixed proportion of the losses, the transaction does not amount to a partnership between the parties ; see Sutton v. Gray [1894], 1 Q.B. 285; 63 L.J. Q.B. 633; 69 L.T. 673; 42 W.K. 195. See also p. 42, ante. 42. Members dealing generally together in any particular stock or Joint shares, and participating in the result, shall be held responsible for the dealin S* liabilities of each other, not only in the shares or stock in which they are jointly interested, but also in any other description of securities in which either of them may transact business, unless they forward a written notice to the secretary, specifying the particular shares or stock in which they deal on joint account. No limited partnership shall consist of more than two members, or firms, nor shall such partnership be carried on in any other markets than those in which both parties are dealing. This rule to be applicable also to members allowing others to deal with their shares, stock, or capital, and participating in the result. Form of notice to be countersigned by the secretary and posted Limited in the Stock Exchange. ship. (NOTICE.) We, the undersigned, beg to inform the Committee for General Form of Purposes that, from this day until further notice, we hold ourselves notlce< jointly responsible to the Stock Exchange for all transactions entered into by either of us in I We are, Sir, etc. Brokers and 43. The committee will not allow members or their authorized dealers, clerks to act in the double capacity of brokers and dealers ; nor will JJ,^ 611 they sanction partnerships between brokers and dealers. Partner- NOTE For the distinction between brokers and dealers, see pp. 36, 37, between ante. brokers and dealers. 260 LA WAND PEACTICE OF THE STOCK EXCHANGE. CLERKS. Admission. 44. No clerk shall be admitted without the permission of the committee, nor unless he be seventeen years of age. Eligibility. No person, who is not eligible for admission as a member, can be admitted as a clerk, with the exception of persons under age, who are ineligible as members on that account only. Defaulters. Defaulters can be allowed as clerks only by a majority of three- fourths in a committee specially summoned, and consisting of not less than twelve members. Clerks so allowed are not thereby admissible as members. Authority No clerk shall be authorized to transact business until he has been two years in the Stock Exchange, and is twenty years of age. No member acting as clerk can be authorized to transact business until he has been two years on the Stock Exchange. No authorized clerk shall transact business as a dealer in any securities other than those in which his employer deals. Applica- 45. A member, desirous of obtaining the admission of a clerk, or admi f i ^ em plyi n S another member as his clerk, shall make application in writing to the committee, and state whether such clerk is to be authorized or not authorized to transact business. Previous When application is made for the admission of a clerk who has occupation previously been engaged in business out of the Stock Exchange, the cants. l name and address of such person, together with the name of the member applying for his admission, shall be posted in the Stock Exchange eight days prior to the application being considered by the committee. Notice of No clerk shall enter the Stock Exchange until his employer has lon * received from the secretary notice of his admission. Consent of 45. A member, applying for the admission of an authorized clerk, fuaew 68 must first obtain the consent of his sureties in writing, if the term of member to their liability be not expired, his employ- ment of an 47^ ^ member who may part with a clerk, or be desirous of with- authonzed , . . , , , ., clerk. drawing from an authorized clerk the permission to transact business Dismissal on his account, shall give notice in writing to the secretary, who shall of a clerk, forthwith communicate the same to the Stock Exchange, in the usual a?;, -auue, to'deal^ttc ^8. A list of authorized clerks (distinguishing those who are also List of members) and the names of their employers, shall be posted in the authorized Stock Exchange, and the authority shall be considered to continue clerks. until revo k e d by letter to the committee. Respon- 49. A member authorizing a clerk to transact business shall not be sibihty of APPENDIX. 261 held answerable for money borrowed by the clerk, without security, members unless he shall have given special authority for that purpose. authorized 50. A member employed as clerk, whether authorized or un- clerks - authorized, shall not make any bargain in his own name. Members authorized 51. No clerk shall be allowed to apply for an allotment in loans or clerks, shares without the sanction of his employer, who shall be responsible Applica- for the payment of the deposit on the shares or stock so applied for. allotments 52. Clerks of defaulters are excluded from the Stock Exchange. bv clerks - Clerks of deceased members may, by permission of two members of the Exclusion committee, attend to adjust unsettled accounts. defaulters GENERAL RULES APPLICABLE TO STOCK EXCHANGE TRANSACTIONS. and deceased members. 53. The Stock Exchange does not recognize in its dealings any Fulfilment other parties than its own members ; every bargain therefore, whether of bargains, for account of the member effecting it, or for account of a principal, must be fulfilled according to the rules, regulations, and usages of the Stock Exchange. NOTE. Although the rules profess to be binding only upon members, they, in fact, unless merely disciplinary, bind non- members also, when dealing upon the Stock Exchange ; for every one who instructs his agent to enter into contracts for him in a special market, if he does not expressly limit the agent's authority, gives him an implied authority to contract according to the rules and usages governing that market, with the exception of usages which are unreasonable as against persons who are not aware of them, and of which the principal is not proved to have had actual notice. See, further, pp. 88, 89, ante, 54. No member shall attempt to enforce by law a claim arising Legal pro- out of Stock Exchange transactions against a member or defaulter, or ceedingsby against the principal of a member or defaulter, without the consent of such member, of the creditors of the defaulter, or of the committee. The committee have power to intervene in cases where the prin- Legal pro- cipal of a member shall attempt to enforce by law a claim which is ceedings not in accordance with the rules, regulations, and usages of the Stock Exchange, and will deal with such cases as the circumstances may require. NOTE. The first paragraph of this rule does not prevent the principal of a member from enforcing against another member, by means of legal proceedings, a claim arising out of Stock Exchange transactions. The principal is entitled to bring an action in his own right and in his own name, although the contract is made in the name of the agent : Langton 262 LAW AND PRACTICE OF TEE STOCK EXCHANGE. v. Waite (1868), L.B. 6 Eq. 165; 37 L.J. Oh. 345; 18 L.T. 80; 16 W.B. 508. But in the event of the principal taking such legal proceedings, by the second paragraph of the rule the committee reserve to themselves the power to do what is just, under the circumstances, between the members, as, for instance, by making the principal's broker refund to the jobber the money which the latter has been legally compelled to pay to the principal. See Robertson v. He/er (1893), 9 T.L.B. 622, as to granting an injunc- tion to restrain an application to the committee of the Stock Exchange for the purpose of compelling a member to carry out his contracts. Complaints 55. If a non-member shall make any complaint against a member, by non- members against members. the committee shall, in the first place, consider whether the complaint is fitting for their adjudication, and in the event of the committee deciding in the affirmative, the non-member shall, previously to the case being heard by the committee, sign a consent in writing as follows : To the Committee for General Purposes of the Stock Exchange, London ; In the matter of a complaint between and GENTLEMEN, Form of I do hereby consent to refer this matter to you, and 1 under- consent to take to be bound by the said reference, and to abide by and forthwith to committee. carr y into effect y ur award, resolution, or decision in this matter, in the same manner as if I were a member of the Stock Exchange ; and I further undertake not to institute, prosecute, or cause, or procure to be instituted, or prosecuted, or take any part in proceedings, either civil or criminal, in respect of the case submitted. And I consent that the committee may proceed in accordance with their ordinary rules of procedure, and I undertake to be bound by the same. Also that the committee may proceed ex parte after notice, and that it shall be no objection that the members of the committee present vary during the inquiry, or that any of them may not have heard the whole of the evidence, and any award or resolution of the committee, signed by the chairman for the time being, shall be conclusive that the same was duly made or passed, and that the reference was conducted in accordance with the practice of the committee. And I hereby agree that this letter shall be deemed to be a submission to arbitration within the meaning of the Arbitration Act, 1889. Agreement Stamp. APPENDIX. 263 56. If a member shall do a private bargain, either for money or time, with an individual member of a firm in the Stock Exchange, with such bargain being concealed from the firm, both members shall be individuals ' 57. If any member or authorized clerk shall do a bargain, either Bargains for money or time, with an authorized or unauthorized clerk, for J^g r account of such clerk, they shall be liable to expulsion. A resolution for expulsion or suspension must be carried by a majority of three-fourths of a committee present at a meeting specially summoned, and consisting of not less than twelve members, and must be confirmed by a majority of the committee present at a subsequent meeting specially summoned. 58. The committee particularly caution members against transact- Specula- ing speculative business directly or indirectly, for or with officials or clerks in public or private establishments, without the knowledge of officials or their employers. p r bited. Members disregarding this caution are liable to be dealt with in p ,. such manner as the committee may deem advisable. A resolution for expulsion or suspension must be carried by a majority of three-fourths of a committee present at a meeting specially summoned, and consisting of not less than twelve members, and must be confirmed by a majority of a committee present at a subsequent meeting specially summoned. 59. No application which has for its object to annul any bargain J^T 1 *^ in the Stock Exchange shall be entertained by the committee, unless bargains. upon a specific allegation of fraud or wilful misrepresentation. 60. The committee will not recognize any dealing in letters of J^ters of"* allotment, either of loans or shares in new companies. allotment. NOTE. It appears that when a rule states that bargains of a specified description will not be officially recognized, but does not actually prohibit them, the meaning is that the committee will not visit a refusal to carry out such bargains with expulsion or suspension from the Stock Exchange. Such bargains may still, however, be legally binding, and, therefore, where the actual parties to the bargain have carried it into effect, they are entitled to claim to be reimbursed by their respective principals ; see Marten v. Gibbon (1875), 33 L.T. 561 ; 24 W.R. 87. As to the payment of claims and collection of assets arising out of unrecognized bargains, see Kule 179. 61. A m ember applying for shares or stock of loans or public ^p^t^by companies, and neglecting to pay the deposit on the same shall be allottees. considered to have violated a contract, and shall be compelled to fulfil his engagement. 264 LA WAND PEACTICE OF THE STOCK EXCHANGE. New bonds g2. The committee will not recognize new bonds, stock, or other Govern- 811 securities, issued by any Foreign Government that has violated the ments conditions of any previous public loan raised in this country, unless V1 d T^ ^ shall appear to the committee that a settlement of existing claims of previous has been assented to by the general body of bondholders. Companies issuing such securities will be liable to be excluded from the official list. Loans raised by Powers while at war with Great Britain. Bargains in dividends forbidden . 63. The committee will not, after the restoration of peace, recognize, or allow the quotation of, any loan raised by a power whilst at war with Great Britain. 64. No member shall enter into bargains in prospective dividends on shares or stock of railway or other companies. NOTE. The wording of this rule was originally similar to that of Kule 60 ; but after the decision in Marten v. Gibbon, a prohibition was placed upon dealings in prospective dividends, and such dealings might now be visited with expulsion from the Stock Exchange. See the note to Rule 60. 65. All disputes between members, not affecting the general interests of the Stock Exchange, shall be referred to arbitration ; and the committee will not take into consideration such disputes, unless arbitrators cannot be found, or are unable to come to a decision. N.B. The committee strongly recommend that all bargains be checked on the following day. NOTE. As to the checking of bargains, see p. 55, ante. 66. No member shall be obliged to take a reference for payment to a non-member ; nor shall he be obliged to pay a non-member for securities bought in the Stock Exchange. 67. Cheques must be passed through the Clearing House, unless the drawer consent to their being otherwise presente'd. But if a member requires bank notes in payment for securities sold, without having made such stipulation at the time of making the bargain, he must give notice to that effect before half-past eleven o'clock on the day of delivery, and payment shall be made upon delivery of the securities or the bank receipt. NOTE. The Clearing House mentioned in this rule refers to the bankers', not to the Stock Exchange, Clearing House. As to payment generally, see pp. 163-165, ante. Seller may Qg t ^ seller, having transferred or delivered stock or other payment of securities, has a right to demand payment from the member who Arbitra- tion. Bargains to ec e * Reference for pay- ment to non-mem- bers not sanctioned. Cheques for clearing. Demand for bank notes. APPENDIX. 265 passed him the ticket ; and in case the seller apply to the issuer of purchase- the ticket, and fail to obtain payment, or receive a cheque which is dishonoured, the member from whom he received the ticket shall j) ig _ make immediate payment. honoured cheques. NOTE. The usual course is for the selling broker to receive payment directly from the ultimate purchaser's broker, the immediate sellers merely paying or receiving differences according to the rise or fall of the market, and only to apply to the member who passed the ticket to him when the ultimate purchaser fails to pay, or his cheque is dishonoured. 69. A seller may require payment of the difference between the Difference price marked on the ticket, and the making-up price of the day on p ^ eeE which the ticket is tendered, but if such making-up price be above marked on the price of sale, he shall only be entitled to claim the difference up to tic k et J tendered the price of sale. an d that at 70. In cases of loans, the lender is not entitled to place beyond may be his control shares or stock received as security for money advanced ; demanded, and he may, after reasonable notice, and upon payment of the Loans, principal together with interest up to the time for which the loan ^"Jjtf was originally made, be required to return the identical bonds, or to sec urity. re-transfer the shares or stock given as security for such loan. But Security to this liability does not apply to a member who has taken in shares or be returned stock upon continuation. required. All continuations shall be effected at the making-up price, or at Cont j nua . the then existing market price. tion. JSOTE. When a loan is negotiated on the Stock Exchange, it is generally re-payable at the following settlement. The practice is for the lender to advance the full market value of the securities offered in pledge, and in case of renewal, the amount lent is augmented by tl.o lender, or partially repaid by the borrower, as the securities have risen or fallen in value since the last settlement; see Ex parte Marnham (1860), 2 De G. F. & J. 634; 30 L.J. Bk. 1 ; 3 L.T. 516; 9 W.B. 131. On the morning of the day on which the loan is repayable it is customary for the pledgee to send back the securities to the borrower, who then sends a cheque for the amount of the loan, or, if unable to do so, returns the securities or other securities of equal value. The return by the pledgee of the securities in this manner does not affect his right to them, if he does not receive a good cheque or securities of equal value : Burra v. Ricardo (1885), 1 C. & E. 478. It was argued-in Langton v. Watte (1868), L.K. 6 Eq. 165, 172; 37 L.J. Ch. 345 ; 18 L.T. 80 ; 16 W.K. 508, that there was a custom on the Stock Exchange which enabled a lender of money on a pledge of stock to sell the stock during the continuance of the loan. But it was held that the custom was not proved, and it is now settled law that the pledgee is not at liberty to do anything inconsistent with the keeping up 266 LAW AND PEA CTICE OF TEE STO CK EXCHANGE. Employ- ment of officials in buying-in or selling- out, etc. When securities may not be bought in. How dividends are to be accounted for. Fixing price of foreign coupons. Current coupon. When deliverable ex coupon. When dividend payable after set- tling-day. of the pledge, although he is permitted to deal with it to a limited extent As to the payment of fees, etc., on loans, see Rule 100. And as to loans and mortgages of securities generally, see chap. xii. A loan or mortgage of securities is to be distinguished from a continuation, to which at first sight it bears a very close resemblance. For a continuation is a purchase of the securities continued with an undertaking to re-deliver at a future date securities of the same kind and amount, but not the identical securities received as in the case of a loan or pledge; see Bongiovanni v. Socitte G&ufrale (1886), 54 L.T. 320. Consequently, while the pledgee of securities has, at the most, a very limited power of disposal, the person with whom a continuation is effected becomes absolute owner of the securities, and may dispose of them as he pleases. Continuations are effected at the existing market price, when no making-up price is fixed. As to making-up prices, see p. 62, ante. 71. Buying-in or selling-out must be affected publicly by the officials of the Buying-in and Selling-out Department, appointed by the Committee for General Purposes, who shall trace the transaction to the responsible party and claim the difference thereon. NOTE. As to buying-in and selling-out generally, see chap, x., pp. 207-209, ante. 72. Bonds, shares, or other securities shall not be bought in, while they are known to be out of the control of the seller for the payment of calls, or the receipt of interest, dividends, or bonus ; and the committee, on being applied to, will fix a day on which they may be bought in. 73. In the settlement of all bargains, dividends are to be ac- counted for at the net amount receivable after deduction of income tax. In the case of dividends payable only abroad, the secretary to the Share and Loan Department shall fix a price for the coupons in sterling money which shall be posted in the Stock Exchange, and at which the dividends shall be accounted for. Securities to bearer are not deliverable on the settling-day without the current coupon. Securities to bearer, with coupon payable on the settling-day, shall be delivered ex coupon. When the dividend is payable after the settling-day, outstanding bargains in securities to bearer shall be settled with the current coupon, otherwise the buyer shall have the right to demand the market value of the coupon, which, in case of dispute, shall be fixed by the secretary to the Share and Loan Department. APPENDIX. 267 74. Fifteen clear days between delivery and the closing of the Time books of the company be allowed by the seller to the buyer of shares allowed^ of American railway companies, in order to afford time for transmission mission of of the certificates to New York and Philadelphia. American certificates 75. Six weeks between delivery and the closing of the books o the company be allowed by the seller to the buyer of shares of South African companies having registration offices in South Africa allowed for only, in order to afford time for transmission of the certificates transmis- theret0 ' Sil 76. All optional bargains for the consols account shall be declared certificates at a quarter before three o'clock two days before the account-day, and f r regis- those made for a foreign settlement shall be declared at a quarter tra before one o'clock on the first making-up day. Consols 3 ' Options for any other day must be declared at a quarter before account, three o'clock, or on Saturdays at a quarter before one o'clock. Foreign. Daily. NOTE. As to options, see p. 24, ante. 77. The hours of business in the Stock Exchange are from eleven Hours of until three o'clock. On Saturdays business will close at one o'clock. business - When the ticket-day is fixed for a Saturday, the House will be Ticket- kept open until THREE o'clock, for the purpose of the settlement only, ^ " the regulations for which shall be the same as on ordinary ticket-days. The Stock Exchange will be closed on the following days, Holidays, viz.: 1st January, Easter Monday, 1st May, Whit Monday, The first Monday in August, 1st November, 26th December, unless specially ordered otherwise by the committee. When either the 1st January, 1st May, 1st November, or 26th December falls on a Sunday, the House will be closed on the day following. 268 LAW AND PRACTICE OF THE STOCK EXCHANGE. Bargains when no time specified. Dealing for future accounts. KULES APPLICABLE TO ENGLISH, INDIA, CORPORATION, AND COLONIAL GOVERNMENT INSCRIBED STOCKS, &c. 78. All bargains, when no time is specified, shall be considered as made for the existing consols account, except bargains in Colonial Government stocks, which shall be for the foreign settling day. NOTE. A majority of the bargains done in consols are "cash bargains," for immediate delivery ; only bargains for very large amounts being made for the account. In ordinary cases, when making a bargain it is usual to add the words " for money," when the bargain is taken out of the rule. 79. The committee will not recognize any bargain for a future account, if it shall have been effected more than eight days previously to the close of the pending account. NOTE. See the notes to Rule 60. Offers to 80. An offer to buy or sell a sum of stock, at a price named, is buv or sell> binding as to any part thereof; and an offer to buy or sell stock, when no amount is named, is binding to the amount of 1000 stock. Transfer fees. Time for selling-out. Liability on late passed tickets. Time for selling-out on Satur- days. Time for issue of tickets. Selling- out. 81. If the seller of English, India, or Corporation stock shall not receive from the purchaser a transfer-ticket by ten minutes before one o'clock, he may demand two shillings and sixpence for each transfer- fee, which may be paid for the actual transfer of such stock. On a settling-day, if the transfer-ticket is not delivered by a quarter before one o'clock, the seller may claim of the purchaser two shillings and sixpence for every 1000 stock. If the seller shall not receive a transfer-ticket before half-past one o'clock on the day it was contracted to deliver the said stock, he may sell out the same and claim of the person who held the ticket at half-past one o'clock any loss or charge incurred. If the ticket has not been issued before half-past twelve o'clock, any loss or charge incurred shall fall on the issuer of the ticket. On Saturdays stock may be sold out at a quarter to one o'clock. 82. The buyer of Colonial Government inscribed stocks for the account must issue tickets before two o'clock on the ticket-day, and the deliverer of Colonial Government inscribed stocks who shall not receive a ticket by three o'clock on the ticket-day, may sell out on the settling-day, or on any following day. If a ticket shall not have been regularly issued before two o'clock on the ticket-day, the issuer thereof shall be responsible for any loss occasioned by such selling-out. Should a ticket have been regularly put into circulation, the holder at three o'clock on the ticket-day shall APPENDIX. 269 be liable. In case of selling-out, on any subsequent day, the holder of the ticket at three o'clock on the previous day, or at one o'clock on Saturdays, shall be liable. Should, however, undue delay in passing the ticket be proved, the member causing such delay will be held responsible. 83. Stock bought for a specified day, and not then delivered, may Buying-in. be bought in on the following day at eleven o'clock, and the member causing the default shall pay any loss incurred, and also in the case of English and India stocks dealt in for the settling-day one-eighth per cent, for the non-delivery of the stock. This fine shall attach to all stock not delivered whether it shall have been bonght-in or not. 84. Stock receipts must be delivered by half-past three o'clock ; Time for but if a deliverer elect (under Rule 68) to deliver a stock receipt to delivery of the member with whom lie has dealt (such member not being the receipts issuer of the ticket) he shall deliver such receipt by a quarter-past three o'clock. Stock receipts must be delivered by half-past one o'clock on Saturdays. English and India Government and Corporation securities to Bearer bearer, must be delivered before three o'clock, or before one o'clock on securities. Saturdays. 85. When stock is borrowed without any stipulation as to its Borrowed return, the borrower or lender may be called upon to deliver or take stock. it on the following day, whether a regular transfer-day or not. NOTE. As to loans generally, see chap. xii. 86. In cases of loans on the deposit of stock, when the striking of Loans on the balances for dividend takes place before repayment of the loan, the stock - lender shall allow the dividend, deducting interest thereon till the day Dividend of payment of, and at the same rate as, the loan. 87. Purchasers of bank stock may require, at the seller's expense, Limit as to as many transfers as there are even thousand pounds stock in the sum namber of bargained for. 88. The clerk of the House shall fix the making-up prices, by Fixing taking the average price between eleven and one o'clock on each of making-up the two days preceding the account, and in the case of English, India, pn( and Corporation stocks between eleven and a quarter before one o'clock on the settling-day ; and no making-up shall be binding unless at such fixed prices. NOTE. As to the making-up, see p. 67, ante. As to making-up prices in other securities, see p. 62, ante. 270 LAW AND PRACTICE OF THE STOCK EXCHANGE. RULES APPLICABLE TO SECURITIES DELIVERABLE BY DEED OF TRANSFER. 89. Bargains in stocks and shares, when no time is specified, shall be considered as made for the existing account ; but those made after Bargains when no specified. one ' c ^ oc k on the day before the ticket-day, shall, unless otherwise specified, be for the ensuing account. Dealing for future accounts. 90. The committee will not recognize any bargain in shares or stock effected for a period beyond the ensuing two accounts. NOTE. See the notes to Rule 60. Offers to 91. An oifer to buy or sell an amount of shares or stock at a price buy or sell, named, is binding as to any part thereof that may be a marketable quantity ; and an offer to buy or sell shares or stock, when no amount is named, is binding to the amount of 1000 stock, or to the amount f fifty shares. If, -however, the market value of the shares is above 15 each, then an offer is binding only to the extent of 10 shares, and if the market value is not over 1 each, an offer is binding to the extent of 100 shares. 92. The seller of shares or stock is responsible for the genuineness and regularity of all documents delivered, and for such dividends as may be received, until reasonable time has been allowed to the trans- feree to execute and duly lodge such documents for verification and registration. When an official certificate of registration of such shares or stock has been issued, the committee will not (unless bad faith is alleged against the seller) take cognizance of any subsequent dispute as to title, until the legal issue has been decided, the reasonable expenses of which legal proceedings shall be borne by the seller. NOTE. Where forged securities have been delivered in the place of genuine, the committee will compel the deliverer either to replace them with genuine, or to refund the purchase-money, and the selling broker is then entitled to an indemnity from his principal ; see Smith v. Reynolds (1892), 66 L.T. 808. But where the committee Lave ordered the selling broker to refund an amount in excess of the price actually received by the principal for the securities, the broker is not entitled to recover such excess from his principal ; see Westropp v. Solomon (1849), 8 C.B. 345. As to delivery of securities generally, see chap. viii. As soon as the contract is complete between the parties, but before the purchaser has been placed in the position of legal owner, the vendor becomes trustee for him of the securities sold, and is accountable for all dividends and bonus received in respect of them. The purchaser is also entitled to claim any new shares or stock issued in respect of existing shares or stock which he has bought, provided he claim them within a reasonable time ; see Rule 107 ; Stewart v. Lupton (1874), 22 W.R. 855. )onsi- bility of seller for regularity of docu- ments and for divi- dend. Disputed title after registra- tion. APPENDIX. 271 See also p. 149, ante. See _Rules 126, 127 for similar provisions in the event of bearer securities. As to the liability of the company when share certificates have been issued, see p. 233, ante. After the legal question as to the title to the shares has been settled in the courts, the committee apparently reserve to themselves the right to do what, in their opinion, is right between the members who are parties to the contract, or non-members where the latter sign a submission to arbitration under Rule 55. It will be noticed that the seller is to bear the reasonable expenses of legal proceedings only. This would perhaps be held to mean that where the party attacking failed in his case, his expenses would not be reasonable as against the seller. 93. The committee will not (except under special circumstances) Transfers interfere in any question arising from the delivery of shares, stock, m bonds, or debentures by transfer in blank. NOTE. The language of this rule is somewhat different from that of Rule 60, but the effect would no doubt be the same. See the notes to that rule. 94. The buyer who takes up securities deliverable by deed of Mode of transfer shall, before twelve o'clock on the ticket-day, issue a ticket with his own name as payer of the purchase-money, which ticket shall days, contain the amount and denomination of the stock or security to be Tickets to transferred; the name, address, and description of the transferee in contain full full ; the price, the date, and the name of the member to whom the particulars, ticket is issued. Each intermediate seller, in succession, to whom Endorse- such ticket shall be passed, shall endorse thereon the name of his m e nt - seller. All tickets representing stock or shares which, at the time, are Tickets for subject to arrangement by the Settlement Department, shall be stock ^ passed through the accounts at the making-up price of the day before by Seltle- the ticket-day, and the stock or shares paid for at that price ; but ment De- the consideration money in the deed must be at the price on the ^ ticket. A member receiving a ticket from the issuer after twelve o'clock Notifica- on the ticket-day, shall note the same on the back of the ticket ; it is also required that the member who first receives a ticket After one o'clock, After half-past one o'clock, After two o'clock, or After half-past two o'clock, shall draw a line noting such times ; and members receiving tickets after three o'clock, or at any time on any subsequent day, shall mark the exact time at which they are received. Members omitting to note the times thus fixed may become liable 272 LA WAND PRACTICE OF TEE STOCK EXCHANGE. for losses occasioned by selling-out in case undue delay is proved under the provisions of Rule 103. A member splitting a ticket shall pay any increased expense caused by such splitting, and shall retain the original ticket. Split tickets must bear the name of the issuer of the original ticket. No claim for loss on a split ticket shall be valid unless made by the original claimant within three months after the date of the ticket, but the member splitting the ticket shall be liable to intermediate claimants for a period of four months. A member failing to keep the original ticket will be required to trace it in case of selling-out. On ticket-days the passing of tickets shall commence at ten o'clock. Tickets may be left at the office of the seller up to twelve o'clock on ticket-days, and all tickets not so left must be passed in the settlement rooms. Tickets may be issued and passed on the day before the ticket- day, but the buying-in upon tickets so issued shall not be allowed until the eleventh day after the ticket-day. Shares con- 95. When shares have been converted into consolidated stock and eolidated are so quoted in the official list, buyers are required to pass tickets for ock ' stock, and not for shares. Antedated 96. A member not refusing an antedated ticket, when tendered as or undated such, takes it with all its liabilities ; but if it be passed as an ordinary tickets. ticket, the liabilities remain with the member putting such ticket again into circulation ; and any member holding an undated ticket shall not be liable for any loss arising from the shares or stock having been bought in, unless such ticket has been seven days in his possession. Splitting tickets. Time for claiming. Selling-out. Time for commence- ment of passing. Time for leaving tickets at offices. 97. A member who makes an alteration in, or improperly detains a ticket, shall make good any loss that may occur thereby. NOTE. As to the re-aduaission of a member who is declared a defaulter through loss incurred by improperly passing or detaining a ticket, see Kule 165. Prices 98. The deliverer shall cause the shares or stock to be transferred marked on a t the price marked upon the ticket ; but no member shall be com- pelled to take a ticket at any price not quoted in the official list during the account, unless the bargain represented by such ticket shall have been made within the two preceding accounts. NOTE. Although the deliverer of securities is bound to transfer them at the price marked on the ticket, that price is not necessarily the whole amount which he receives. The securities may have fallen in value Alteration or deten- tion of tickets. ticket. APPEND IK. 273 between the time when the deliverer sold and the time when the ultimate purchaser bought, in which case he will receive the difference from the person with whom he originally made the contract. The committee will not recognize, nor enforce by expulsion, the carrying out of bargains effected for a period beyond the two ensuing accounts; see Rule 90. 99. The deliverer may, previously to delivery, pay any call made Pending on registered shares, although not due, and claim, the amount of the "" s> issuer of the ticket. NOTE. Where the broker who issues the ticket has repaid to the seller the amount of the call, he is entitled to be reimbursed by his principal : Bayleij v. Wilkins (1849), 7 C.B. 886; 18 L.J. C.P. 273; and see p. 108, antt. 100. The buyer of shares or stock shall pay the ad valorem duty Payment and registration fee, and shall state on the ticket the amounts in ^ stamps. which he may desire to have the shares or stock transferred (provided no such amounts require a higher stamp than 50). In cases of loans the borrower shall pay the nominal considera- stamps on tion stamp of ten shillings, the registration fees, and the mortgage loans. stamp. NOTE. As to loans, see Rule 70 and the notes appended thereto. 101. The buyer shall, in the event of his ticket being split, pay Portions to for any portion of shares or stock which may be presented, pro- vided the number be not less than ten shares, or the value less than 200. NOTE. As to split tickets, sec p. G9, ante. 102. The buyer of shares or stock may refuse to pay for a transfer Coupons or deed unaccompanied by coupons or certificates, unless it be officially certificates certified thereon that the coupons or certificates are at the office of the company. But if the transfer deed be perfect in all other respects, the shares of stock must not be bought in until reasonable time has been allowed to the seller to obtain the verification required. If the Division of seller have a larger coupon than the amount of stock conveyed, or cou P ns ' only one coupon representing stock conveyed by two or more transfer deeds, the coupon may be deposited with the secretary of the Share and Loan Department of the Stock Exchange, who shall forward it to the office of the company, and certify to that effect on the transfer deeds, which shall then be a valid delivery. No person is to look to To be the managers or Committee of the Stock Exchange, as being liable for certified by the due or accurate performance of those duties, the managers and share and committee holding themselves, and being held, entirely irresponsible Loans De- partment. 274 LA WAND PRACTICE OF THE STOCK EXCHANGE. in respect of the execution, or of any mis-execution, or non-execution, of the duties in question. NOTE. The seller can, of course, only deliver coupons or certificates to the purchaser -when he has a coupon or certificate for the exact amount which he is selling to a single purchaser ; in other cases he must take the course pointed out in the rule. In due time, after the certificates have been deposited with the company, new certificates are made out for the various amounts transferred to the purchasers, while, if the seller retains any part of his holding, he receives a certificate for the balance, or, as it is usually called, a " balance " certificate. As to buying-in generally, see pp. 207-8, ante. Selling- 103. The deliverer of shares or stock who shall not receive a ticket outt by half-past two o'clock on the ticket-day, may sell out such securities up to three o'clock. If a ticket shall not have been regularly issued before twelve o'clock, the issuer thereof shall be responsible for any loss occasioned by such selling-out. Should, how- ever, a ticket have been regularly put into circulation, the holder thereof at two o'clock shall be responsible for any selling-out on the ticket-day. If the selling-out take place on the next day, the holder of the ticket at three o'clock on the ticket-day shall be liable; Settlement unless such ticket was in the Settlement Department at three o'clock, Depart- - n ^j^ case ^he holder of such ticket at four o'clock shall be liable, ment. In case of selling-out on any subsequent day, the holder of the ticket at three o'clock on the previous day, or at one o'clock on Saturdays, shall be liable, unless he can prove undue delay in passing the ticket. Should the deliverer allow two clear days to elapse without avail- ing himself of his right to sell out, his buyer shall be released from all loss in cases where the ticket has not been passed in consequence of Release of the public declaration of any member as a defaulter. If a seller does int *L r .~ not deliver shares or stock within thirteen clear days, the intermediate buyer from whom he received the ticket shall be released, and the issuer thereof shall alone remain responsible for the payment of the purchase-money. NOTE. As to selling-out generally, see pp. 208, 209, ante. As to the re-admission of a member who is declared a defaulter through loss incurred by improperly passing or detaining a ticket, see Rule 165. Where the loss is borne by a member whose principal is in default, the member is entitled to be indemnified by the principal. See p. 107, ante. Tickets for 1C4. When shares or stcck are sold out, if a ticket be not given sold-out shares. APPENDIX. 275 within half an hour after the time of sale, the transfer may be made into the name of the buyer. NOTE. As to selling-out, see Rule 103. 105. If shares or stock are not delivered within ten days, the Bnying-in. issuer of the ticket may buy in the same against the seller at or after half-past one o'clock on the eleventh clay after the date of the ticket, or in the case of companies which prepare their own transfers, on the eleventh day after the earliest day a transfer can be procured, or on any subsequent day. One hour's public notice of such buying-in must be posted in the Notice of Stock Exchange ; the notices to be posted not later than half-past bnying-in. twelve o'clock. On Saturdays notices shall be posted by half-past eleven o'clock, and no buying-in shall take place before a quarter-past twelve o'clock. The name into which the shares or stock are to be transferred must be stated in the order to buy-in. The loss occa- sioned by such buying-in shall be borne by the ultimate seller, unless he can prove that there has been undue delay in the passing of the ticket on the part of any member, who shall in that case be liable. Shares or stock thus bought in and not delivered by one o'clock on Xon- the following day, or by twelve o'clock on Saturdays, may be re- purchased for immediate delivery without further notice, and any loss stock, etc. shall be paid by the member causing such re-purchase. In case the official shall not succeed in executing an order to buy- in, the notice of such buying-in shall remain on the general notice board, and the official may buy-in shares or stock, if not delivered, on any subsequent day without further notice, but not before two o'clock, or on Saturdays before a quarter-past twelve o'clock. NOTE. The ten days mentioned in the first paragraph of this rule is the time within which the vendor is at liberty to take any objection he may see fit to the name which has been passed to him as that of the purchaser, in the place of the jobber witli whom he originally contracted. Should the vendor fail to take any objection within the time thus limited, the jobber is discharged from liability, unless the name which he has passed is that of a person who is legally incapable of contracting, such as an infant -or lunatic, in which case his liability continues: Nickalh v. Merry (1875), L.R, 7 H.L. 530 ; 45 L.J. Ch. 575 ; 32 L.T. 623 ; 23 W.R. 663 ; and see p. 141, et seq. The loss mentioned in the second paragraph, as occasioned by buying- in, may have to be borne not only by a member who unduly delays to pass the ticket, but also by the member who occasions undue delay by omitting to record on the ticket the time at which he received it as directed in Rule 94. Where the loss falls on the member who actually sells the security, and is caused by his principal's default, he is entitled to be indemnified by the principal. See p. 107, ante. 276 LAW AND PRACTICE OF THE STOCK EXCHANGE. Time for 106. The issuer of a ticket who shall allow thirteen clear days . f rom the date of his ticket, or in the case of companies which prepare their own transfers, thirteen clear days after the earliest day a transfer can be procured, to elapse without buying-in or attempting to buy-in shares or stock, shall release his seller from all liability in respect of the non-delivery of the securities, unless he shall have waived his L'ight right to buy-in at the request or with the consent of his seller; and to buy. ^ e holder of the ticket shall alone remain responsible to such issuer for the delivery of the securities. Ri^ht to 107. The buyer is entitled to new shares or stock issued in right new shares. O f old, provided that, within reasonable time, he specially claim the Claims. same, in writing, from the seller. Claims should be entered as bargaius, and as such be checked in the usual manner. Letters of When practicable, claims are required to be settled by letters of renunciation, but if not practicable, and there be sufficient time for registration, the seller may, after due notice, require the buyer to complete the bargain in old shares or stock. Fixing If the new shares or stock cannot be obtained by letters of renun- n'e'wshares c ^ lon > or by tne transfer of the old, the committee will fix a price at which the same shall be temporarily settled, and which amount may be deducted ~by the buyer from the purchase-money of the old shares or stock, until the special settlement. Unchecked The committee will not entertain any dispute relating to un- ;ums. checked claims, uuless brought before them within ten days after the special settling-day. NOTE. It seems that the purchaser is entitled to claim new shares or stock issued in right of old, even after the old shares or stock have already been quoted" ex new :" Stewart v. Lupton (1874:), 22 W.R. 855. See Rule 126 for a similar provision in the case of bearer- securities. The Stamp Act, 1891 (5-4 & 55 Viet. c. 39), s. 79, and Sched. I., contains the following provisions as to stamping letters of allotment and renunciation : Any letter of allotment and letter of renunciation, or any other document having the effect of a letter of allotment : (1) Of any share of any company or proposed company ; (2) In respect of any loan raised, or proposed to be raised, by any company, or by any municipal body or corporation ; (3) Issued or delivered in the United Kingdom, of any share of any foreign or colonial company or proposed company, or in respect of any loan raised, or proposed to be raised by or on behalf of any foreign or colonial state, government, municipal body, corporation, or company ; is to bear an adhesive penny stamp, which is to be cancelled by the person who executes it, and any one who executes, grants, issues, or delivers such document before it is duly stamped, will incur a fine of 2'. As to special settling days, see pp. 60, 61, ante. APPENDIX. 277 108. On the day before the ticket-day, and on the ticket-day, the Making-up clerk of the House shall, at twelve o'clock, fix the making-up prices by P nce *- taking the then actual market prices, and no making-up shall be binding, unless at such fixed prices. In case of dispute as to the making-up price, or of any omission in fixing the same, the clerk of the House shall act upon the decision of two members of the com- mittee. NOTE. The actual price at which bargains are made up is the middle price of the security at 12 o'clock. If, for instance, the market price of Brighton A at 12 o'clock on making-up day were 149|-150J, the making- up price would be 150. 109. On the morning of the settling-day all unsettled bargains Making-up shall be brought down and temporarily adjusted at the making-up P 1 IC( js for price of the ticket-day, except bargains in stocks and shares, subject accounts, to arrangement by the Settlement Department, which shall be brought down and temporarily adjusted at the making-up price of the day before the ticket-day. NOTE. See note to the preceding rule. 110. No member shall be required to pay for shares or stock Time for presented after half-past two o'clock : or after one o'clock on requiring Saturdays. payment. RULES APPLICABLE TO SECURITIES TO BE REE. 111. Bargains, when no time is specified, shall be considered as Bargains made for the existing account ; but those made after one o'clock on T hen no the day before the ticket-day, shall, unless otherwise specified, be for specified, the ensuing account. 112. The committee will not recognize any bargain effected for a Dealing period beyond the end of the ensuin- two accounts. for future accounts. NOTE. See the notes to Rule 60. 113. An offer to buy or sell a sum of stock, at a price named, is Offers to binding as to any part thereof, not less than the under-mentioned bn 7 or sel1 - sums, and divisible by the same : viz. 1000 stock or scrip. Fes. 750 French rentes. 10 shares. An offer to buy or sell United States bonds or shares when no amount is named is binding to the amount of 85000 bonds or 100 shares. 278 LAW AND PRACTICE OF TEE STOCK EXCHANGE. American bonds and shares, amount deliver- able. Selling- out. Tickets shall be passed. Tickets must bear numbers. Amounts deliver- able. Time of issue. To be endorsed. Time for commence ment of delivery. 11-i. No member shall be required to accept the delivery of a certificate of American shares of a larger amount than 10 shares of $100 each nominal capital, or 20 shares of $50 each, nor an American bond of a larger amount than $1000, except upon special contract. 115. The seller of securities for a particular day, which the buyer is not prepared to pay for by half-past two o'clock on that day (or half-past twelve o'clock on Saturdays), may sell-out the same, and claim of the buyer any loss incurred. NOTE. As to selling-out generally, see pp. 208, 209, ante, and also Rule 71. Where the loss borne by the member under this rule is caused by his principal's default, such member is entitled to be indemnified by his principal. See p. 107, ante. 116. On the ticket-day between ten and one o'clock, tickets shall be passed without any price thereon, and the accounts made up there- with are to be settled at the making-up price of the day. Tickets must bear distinctive numbers, and be for the following amounts, viz. : 1000 stock, or multiples of 1000 up to 5000. 1000 Italian stock, or multiples thereof up to 5000. Also 800, or multiples thereof up to 4800. $5000 American stock, or multiples thereof, up to $25,000. Fes. 1,500 French 3 per cent, rentes, or multiples thereof up to Fes. 6000. 10 shares, or multiples thereof up to 100. Tickets for 500 stock may be passed for bargains or balances of that amount. Smaller amounts must be settled without tickets. Tickets shall not be issued later than half-past twelve on the ticket-day. Tickets shall not be split, except in the Settlement Department in cases where the sub-committee appointed to control that department may consider it necessary. Every member is required to endorse on the ticket the name of the member to whom it is passed. On the settling-day, and on the day after the settling-day, the delivery of securities shall commence at ten o'clock. Sellers shall accept tickets, and if they elect to settle with their immediate buyers under the provisions of Rule 68, they shall deliver their securities before half-past twelve o'clock. The holder of tickets passed under this rule, and of tickets passed by the Settlement Department may deliver securities up to two o'clock on settling-days. APPENDIX. 279 A member not issuing a ticket shall be required to pay for stock up to half-past two o'clock. Buyers shall pay for such portion of securities as may be delivered Portions to within the prescribed times. b e paid for. 117. A member shall he required to pay for securities presented Time for until half-past two o'clock on any day other than settling-days. On re q uirin S Saturdays he shall not be required to pay for securities after one o'clock. 118. Securities bought for any period except the settling-day, Buying-in. which shall not be delivered by half-past two o'clock, or by half- past twelve o'clock on Saturdays, may be bought in on the same or any subsequent day, and any loss occasioned by such re-purchase shall be borne by the seller. But securities bought for the settling-day, and not delivered by half-past two o'clock, may be bought in on the following or any subsequent day, after one hour's notice to be posted in the foreign Notice, market announcing the intended purchase ; the notices to be posted not later than half-past twelve o'clock. The buying-in not to take place before half-past one o'clock, nor before quarter-past twelve o'clock on Saturdays, on which days public notice shall be posted by half-past eleven o'clock. The loss shall be borne by the member who shall not have delivered the shares or stock by half-past two o'clock on the previous day, or by one o'clock on Saturdays. Stock thus bought in, and not delivered by one o'clock on the Xon- following day, or by twelve o'clock on Saturdays, may be re-purchased d l ll ^ 1 2' for immediate delivery without further notice, and any loss shall be bought-in. paid by the member causing such re-purchase. In case the official shall not succeed in executing an order to buy in, the notice of such buying-in shall remain on the general notice board, and the official may buy in such stock, if not delivered, on any subsequent day without further notice, but not before two o'clock, or on Saturdays before a quarter-past twelve o'clock. A member neglecting to take the numbers of securities delivered Neglecting after time, shall be required to trace out the member responsible ^ for the loss. NOTE. As to buying-in generally, see pp. 207, 208, ante. Where the loss occasioned by buyiog-in falls on the member who actually sold the security, and is due to the default of his principal, he is entitled to be indemnified by the principal. See p. 107, ante. 119. A member who shall allow two clear days to elapse without Limit of availing himself of his right to buy iu, or without attempting to buy tim for . , , - ,, buvmg-in. in secunties, releases the seller from anv loss m consequence ot the 280 LAW AND PRACTICE OF THE STOCK EXCHANGE. Release public declaration of any member as a defaulter, unless he shall have mediates wa -i ve( i suc ^ right at the request, or with the consent, of the seller. The holder of a ticket who shall allow two clear days to elapse without delivering the stock releases his buyer from any loss in consequence of the declaration of any member as a defaulter. Making-tip 120. The clerk of the House shall, at twelve o'clock on each of prices. tn e two days preceding each settling, fix the making-up prices of all securities, by taking the then actual market prices ; and no making- up shall be binding unless at such fixed prices. NOTE. See note to Eule 108. Adjust- 121. On settling-days, all unsettled bargains shall be brought nen L? f d down and temporarily adjusted, at prices to be fixed by the clerk of accounts. tu e House at half-past two o'clock, and the differences shall be paid in the usual manner. Exchequer 122. Bargains in Exchequer Bills are for bills not filled up bills - to order. French 123. Bargains in French rentes, unless otherwise specified, shall rentes. ^ se t,tl e d in certificates to bearer, and at a fixed exchange of 25 fcs. per pound sterling. Foreign 124. Foreign coupons sold at the exchange of the day, and not oupons paid, are returnable with all reasonable expenses. returnable. 125. The buyer of bonds or other securities subject to periodical Subject to drawing, shall not be entitled to claim delivery thereof previous to ng> the day for which they were bought. Bargains must be settled in securities which have not been drawn. Drawn In case of the erroneous delivery of any drawn securities the bonds. buyer (on receipt of undrawn securities, and on allowance being made for any drawing or dividend of which he may have lost the benefit) shall deliver such securities back to the person who held them at the time of the drawing, or shall pay to him any proceeds received from such drawing, providing the said securities or the proceeds thereof be traced to, and remain in the possession and under the control of such buyer, all intermediate members being released from liability. No claim ly the Keller in respect of the erroneous deliver}- of drawn securities will be entertained by the committee unless made within nine calendar months. NOTE. As to delivery generally see pp. 158-163, ante. It will be noticed that it is the seller only who is precluded from making a com- plaint in respect of a delivery of drawn bonds after the lapse of nine months from the date of the delivery. If the purchaser should have any complaint to make, the committee will apparently entertain it after that period. APPENDIX. 281 126. The buyer is entiled to new securities issued in right of old, Buyer provided that within reasonable time he specially claim the same " new in writing from the seller, who may after due notice require the buyer securities, to complete the bargain in old securities. Claims should be entered as bargains, and as such be checked in the usual manner. The committee will fix a price for the new securities, which may be deducted by the buyer from the purchase-money of the old securities, until the special settlement. The committee will not entertain any dispute relating to un- checked claims, unless brought before them within ten days after the special settling-day. NOTE. The purchaser is entitled to claim new securities issued in right of old, even after the old have been quoted " ex new : " Stewart v. Lupton (1874), 22 W.K. 855. See Kule 107 for a similar provision in the case of inscribed stocks and shares. As to special settling-days and settlements, see Rules 130-139, post. 127. [The deliverer of securities on tickets is required to apportion Genuine- such securities to each ticket at the time of delivery, and takers of Securities securities, in order to secure their right under this rule, shall keep such tickets and the numbers of the securities to which they were respectively apportioned, or, in the case of Settlement Department tickets, the numbers of such tickets.] The deliverer is responsible for the genuineness of securities delivered, and in case of his death, failure, or retirement from the Stock Exchange, such responsibility shall attach to each member in succession, through whose account the ticket for such securities shall have passed. French and Egyptian securities to bearer which, under French or Stopped Egyptian law, have been officially notified as stopped, are returnable to the deliverer. NOTE. As to the delivery of forged bonds, and bonds which have been stolen after they have been called in for payment, see pp. 161, 162, ante. The official notification of the stoppage of securities under French law takes place through the Bulletin Oificiel. See Eule 92 for similar provisions in the case of inscribed stocks and shares. 128. Every bond or scrip share is to be considered perfect, unless Torn or it be much torn or damaged, or a material part of the wording be bond?. 61 obliterated. The committee will not take cognizance of any com- plaint in respect of bonds or shares alleged to have been delivered in a damaged condition, or deficient in, or with irregular, coupons, should Irregular such bonds or shares be detained by the buyer more than eight days cou P nSt after the delivery, unless it can be proved that the member passing them was aware of their being imperfect. 282 LA WAND PRACTICE OF THE STOCK EXCHANGE. Railway 129. Bonds and debentures of railways in Great Britain, Ireland, debentures. and tlie Eagt j u ji es> s | ia n ^ d ea lt j n so ^^ t } ie accrue( } interest, up to andfo 'reign the day for wllictl tne bargain was done, be paid by the buyer ; but railway bargains in bonds and debentures of colonial and foreign railways debentures shall include the accrued interest in the price. SPECIAL SETTLING DAYS. Bargains in 130. Bargains in the scrip or bonds of a new loan, or the shares or iml shares ot ^ er securities of a new company, are contingent on the appointment etc. ' of a special settling-day. NOTE. The committee will grant a special settling-day for the shares of a new company, or for other securities, provided that the undertaking is of sufficient magnitude, that the various conditions imposed by the rules immediately following have been complied with, and that fraud is not alleged against the undertaking. Where a special settlement has been procured by false and fraudulent statements made to the committee by the promoters or directors of the undertaking, the statements will not, it appears, afford ground for an action by persons who have been induced to take shares, etc., through a knowledge that such a settlement has been granted, though where the promoters and directors have combined together with a view to obtaining a special settlement, and thereby defrauding the public, they may have rendered themselves indictable for a criminal conspiracy. See pp. 200-204, ante. Appoint- ment of special settling- day. Docu- ments. Settling- days in foreign or colonial loans. 131. The secretary of the Share and Loan Department shall give three days' public notice of any application for a special settling-day in the scrip or bonds of a new loan previously to its being submitted to the committee, who will appoint a special settling-day, provided that sufficient scrip or bonds are ready for delivery, as vouched for by a certificate verified by the statutory declaration of the contractors or agents stating the amount allotted ; and that the scrip and bonds are in reasonable amounts. 132. Bargains in foreign loans which are officially quoted in the country to which they belong shall be for the ordinary settlement. 133. The secretary of the Share and Loan Department shall give three days' public notice of any application for a special settling-day in the shares or other securities of a new company previously to such application being submitted to the committee, who ^vill appoint a special settling-day provided that sufficient scrip or shares are ready for delivery. APPENDIX. 283 OFFICIAL QUOTATIONS. 134. The committee may order the quotation of the scrip or bonds Quotation of any loan the dividends of which are payable in this country, * scrip or provided that the application, of which three days' public notice must new i oan s. be given, is accompanied by the prospectus, by notarial copies or translations, or other satisfactory evidence of the powers under which the loan is contracted ; that the loan has been publicly negotiated by tender, contract, or otherwise ; that the bonds specify the amount and conditions of the loan, the powers under which it has been contracted, and the numbers and denominations of the bonds issued, and that they bear the autographic signature of the contractor or properly authorized agent. Bonds will not be admitted to quotation until a specimen has been submitted to the committee. 135. Bonds, the dividends of which are payable abroad, may be Quotation quoted upon satisfactory proof of the amount created and issued, and of bonds of the official quotation in the country where issued. J^ nd *~ 136. The committee may order the quotation of a new company abroad, in the official list, provided that the company is of sufficient Q uota ti n magnitude and importance, and that the application, of which three of new days' public notice must be given, is accompanied by the following companies, documents : The prospectus, the Act of Parliament, the articles of association, or, a certificate that the company is constituted upon the cost-book system, under the Stannary laws; the original applications for shares, the allotment-book, signed by the chairman and secretary to the company, and a certificate verified by the statutory declaration of the chairman and the secretary, stating the number of shares applied for and unconditionally allotted to the public, the amount of deposits paid thereon, and that such deposits are absolutely free from any lien, the bankers' pass-book and a certificate from the bankers stating the amount of deposits received. It is further required that the prospectus shall have been publicly advertised, and that it agrees substantially with the Act of Par- liament or the articles of association, and, in the case of limited companies, contains the memorandum of association ; that it provides for the issue of not less than one-half of the nominal capital, and for the payment of ten per cent, upon the amount subscribed, and sets forth the arrangements for raising the capital, whether by shares fully or partly, paid-up, with the amounts of each respectively, and also states the amount paid, or to be paid, in money or otherwise to concessionaries, owners of property, or others on the formation of the 284 LA WAND PRACTICE OF THE STOCK EXCHANGE. company, or to contractors for works to be executed, and the number of shares, if any, proposed to be conditionally allotted ; that two- thirds of the whole nominal capital proposed to be issued has been applied for and unconditionally allotted to the public (shares reserved or granted in lieu of money payments to concessionaries, owners of property or others, not being considered to form part of such public allotment), that the articles of association restrain the directors from employing the funds of the company in the purchase of its own shares, and that a member of the Stock Exchange is authorized by the company to give full information as to' the formation of the undertaking, and be able to furnish the committee with all particulars they may require. In cases where fully-paid shares have been granted in lieu of money payments, an official certificate will be required that the contract providing for the issue of such shares has been filed with the Registrar of Joint Stock Companies, as prescribed by the 25th section of the Companies' Amendment Act, 1867. Of foreign 137. Foreign companies partly subscribed for and allotted in this shares. country, shall not, unless under special circumstances, be allowed a quotation in the official list, until they have been officially quoted in the country to which they belong. Quota- 138. When a company has been formed to carry on an existing company business, tne committee may order the quotation of any of its classes formed to of capital, as well as of its debentures or debenture stock, provided carry on an that a t least two-thirds of the nominal amount of such class or business, classes have been unconditionally allotted to the public. Issue of 139. A company issuing, or promising to issue, new shares within within arCS twelve mont hs after the first settling-day appointed by the committee, twelve unless under special circumstances, shall be liable to exclusion from months of t he official list. special settling. ORDINARY SETTLING-DAYS AND OFFICIAL QUOTATION OF PRICES. Settling- 140. The committee shall fix the settling-day for English stqck days and a t least eight days previous to the settlement of the pending account, and at their first meeting in each month they shall fix the ticket-days and settling-days for foreign stock, shares, etc., of the succeeding month. The secretary shall give notice of the days thus appointed. APPEXD1X. 285 141. The settling-day in English omnium and scrip shall be two Settling- days prior to the respective days of payment of each of the several dav ! n instalments, unless the payment falls on a Tuesday, in which case etc. 1 " 11 ' the settling-day shall be on the previous Monday. In case the payment of an instalment on foreign or other scrip Instalment falls on a settling-day, the settlement of such scrip shall take place on scnp * the day previous to the payment. NOTE. For an explanation of the term "omnium," see p. 24 ante. 142. A list of prices of English and foreign stocks, shares, and Price list other securities, permitted to be quoted, shall be published under the under the ^ authority of the committee ; and no list shall be published and sold committee, by a member without the sanction of the committee. NOTE. A list of prices recorded between the hours of 11 a.m. and 3 p.m. is published daily at 4 p.m. by Messrs. "NVetenhall, 4, Copthall Buildings, E.G., and is called the Official List. 143. The prices of all bargains may be quoted in the official list, Quotation but no price shall be inserted unless the bargain shall have been of P nces - made in the Stock Exchange between members at the market price ; nor on the authority of one of them, if he refuse, when required by a member of the committee, to give up the name of the member with whom he has deal'. NOTE. As to the expunging of prices already inserted, see Rule 149. 144. Bargains at special prices by reason of their exceptional Excep- amounts may only be quoted with distinguishing marks. tional amounts. 145. Bargains in English stock for the next transfer day, or in Q uo tation foreign or other stocks for the following day, may be marked in the of money official list of money prices. prices, etc. Bargains in all stocks made during the shutting, for the opening, Of stock may be quoted in the official list. Bargains in foreign bonds may be quoted in the official list, with or without over-due coupons. Omnium may be quoted for the issue of the receipts, for money, overdue and for the next succeeding payment. oupons. Omnium. NOTE. For an explanation of "omnium," see p. 24, ante. 146. All dealings in English stock (except bank stock), and in Quotations India stocks, for any day subsequent to the striking of the balances o such stocks lor dividend, shall be ex dividend, and quoted accordingly. 147. Bargains in transferable shares or stock shall be quoted ex Quotations interest from the beginning of the account in which the interest may of shares become payable ; and ex dividend from the beginning of the account dend' or'ex- following that in which the dividend may have been declared, provided interest. 286 LAW AND PEA CTICE OF THE STO CK EXCHA NGE. the dividend be made payable to the holders then registered ; but in case of a subsequent shutting of a company's books for payment of the dividend, then, from the beginning of the account following that in which such shutting occurs. Dividends Bargains in securities to bearer shall be quoted ex dividend on the on secun- ^ av w h en the dividend is payable. bearer. Shares in foreign railways shall, when practicable, be quoted ex dividend, or ex interest, at a period in accordance with the practice of foreign bourses. Bargains 148. Bargains should be quoted in the order in which they are omitted to made ; but the clerks of the House may, with the concurrence of >e marked. ft mem ^ er O f ^ G committee, quote omitted bargains, if notified before one o'clock, in the order in which they occurred, upon a written application from the buyer and the seller, stating the amount, the time when, and the price at which, such bargains were made ; and such application shall be filed and laid before the committee at their next meeting. The above regulation applies likewise to all bargains done between one and three o'clock. Prices 149. A price inserted in the official list shall not be expunged, not to be without the authority of the chairman, deputy chairman, or two expunged . ,, * without members of tne committee. authority. NOTE. -As to the Official List, see the note to Rule 142. FAILURES. Public 1^0. A member unable to fulfil his engagements, shall be publicly declara- declared a defaulter by direction of the chairman, deputy chairman, or defaulters an y two mernrj ers of the committee. NOTE. It will be observed from Rule 151 that a default upon the Stock Exchange does not necessarily follow from insolvency or bank- ruptcy. The cases must, however, be very rare in which insolvency and much more bankruptcy is not followed by a default, and for general purposes they may probably be taken to be the same thing. A general outline of the results of a default and of insolvency will be found on pp. 45-50, ante. A broker's default is often occasioned through no fault on his own part, but through inability or neglect on the part of his principal to pay what is due to him. To some extent, in these cases, the broker has the remedy in his own hands. For where a principal neglects to keep up a sufficient margin to his account, or to put up fresh cover when requested by his broker to do so, the practice of the Stock Exchange permits the APPENDIX. '2S7 broker to close the client's account, and this practice is approved by the law: Dart's v. Howard (1890), 24 Q.B.D. 691; 59 L.J. Q.B. 133; Lilley v. Ranldn (1880), 56 L.J. Q.B. 248 ; 55 L.T. 814 ; and see p. 122, ante. And where the principal becomes bankrupt the broker is entitled to sell securi- ties bought with his own money, and to prove in the client's bankruptcy for any moneys that may remain due to him after such sale ; see Lacey v. Hill, Scrimgeour's Claim (1873), 8 Ch. 921; 42 L.J. Ch. 657; 89 L.T. 281; 21 W.R. 857; Crowley's Claim (1874), L.R. 18 Eq. 182; 43 L.J. Ch. 551; 30 L.T. 484; 22 W.R. 580. If the broker is declared a defaulter, he is not entitled to close his client's account without inform- ing him of a custom whereby the client has the right to insist on carrying out his contract with the jobber either personally or through the intervention of another broker: Duncan v. Hill (1873), L.R. 8 Ex. 24-2; 42 L.J. Ex. 179; 29 L.T. 208; 21 W.R. 797. See the above cases more fully treated on pp. 47, 48, 125, ante. 151. A member declared a defaulter in the Stock Exchange, or Defaulters, a member who may become a bankrupt, or be proved to be insolvent although he may not be at the same time a defaulter in the Stock to be Exchange, ceases to be a member. members. XOTE. See note to the preceding rule. 152. When a member shall give private intimation to his creditors Private of his inability to fulfil his engagements, the creditors shall not make * a " ures ' any compromise with such defaulter, but shall immediately com- municate with the chairman, deputy chairman, or two members of the committee, in order that the member in default may be immediately declared ; and in case the committee shall obtain know- ledge of any private failure, the name of the defaulter shall be publicly declared. 153. A member conniving at a private failure, by accepting less Liability than the full amount of his debt, shall be liable to refund any money who^on^ or securities received from such defaulter, provided he shall be declared niye at a within two years from the time of such compromise, the property so refunded being applied to liquidate the claims of the subsequent creditors. Any arrangement for settlement of claims, in lieu of bond fide money payment on the day when such claims become due, shall be considered as a compromise, subject to the provisions of this rule. 154. A member who shall have received a difference on an account, Receiving prior to the regular day for settling the same, or who shall have Pjospec- received a consideration for any prospective advantage, whtther by claims a direct payment of money, or by the purchase or sale of stock at u P on a price either above or below* the market price at the time the bargain de au ter> was contracted, or by any other means, prior to the day for settling JsAWAND PRACTICE OF THE STOCK EXCHANGE. the transaction for which the consideration was received, shall (in case of the failure of the member from whom he received such difference or consideration) refund the same for the general benefit of the creditors ; and any member who shall have, under the circumstances above stated, paid or given such difference or consideration, shall again pay the same to the creditors ; so that, in each case, all persons may stand in the same situation with respect to the creditors, as if no such prior settlement or other arrangement had taken place. Equality 155. A creditor receiving, under any ' circumstances, a larger of right proportion of differences on a defaulter's estate than that to which difference eactl of tne creditors is entitled, shall refund such portion as shall creditors, reduce his dividend to an equality with the others. Priority of 156. Creditors for differences shall have a prior claim on all claim by difference creditors. differences received by, or due to, a defaulter's estate. NOTE. The fund formed by the payment to the official assignee of the differences due to a defaulter's estate at the time of his default, is an artificial fund which cannot be claimed by the trustee in bankruptcy where the defaulter at the same time is declared a bankrupt : Ex parte Grant, In re Plumbly (1880), 13 Ch. D. 667; 42 L.T. 387; 28 W.R. 755. But where any part of the general assets of the bankrupt have come into the hands of the official assignee, the trustee in bankruptcy is entitled to recover such part : Tomlcins v. Sa/ery (1877), 3 App. Cas. 213 ; 47 L.J. Bk. 11 ; 37 L.T. 758 ; 26 W.R. 02. Under Rule 168, non-members as well as members are permitted to share in the distribution of these differences, provided their claims are admitted by the creditors or the committee, and they may be represented at meetings of the creditors by any member whom they may choose. Claims for 15!- Members not receiving due payment for securities delivered securities on the day of default, are entitled, so far as regards the value thereof, at tne average price on the day of delivery, to be paid pro raid, and preferentially, out of assets resulting in any manner from such securities, or derived from the defaulter's own resources ; and, should these prove insufficient, they shall, as to the balance of such claims, participate with other creditors in any surety-money of the defaulter. and not paid for. 158. In the case of loans of money made upon securities valued i ess than the market-price, the lender shall realize his securities Loans on securities below the within three clear days (unless the creditors consent to a longer market- delay), or take them at a price to be fixed by the official assignees (with appeal to any two members of the committee.) Should the security be insufficient, the difference may be proved against the defaulter's estate. price. APPENDIX. 289 In the Irish case of Hamilton v. FOMMJ (1881), 7 L.R. Ir. 289, it has been held that a custom among brokers to take over, at the market price, securities pledged for money lent where the market would be unduly depressed by their sale, is unreasonable and unenforceable against persons who have not received express notice of it. In the case of this rule, however, a plea of unreasonableness would be inadmissible, as the borrower will have had express notice of its provisions. And the principle of Hamilton v. Young perhaps requires some qualification since the recent decision of Walter v. King, the Times, March 10, 1897, for which see p. 102, ante. XOTE. As to loans generally, see chap. xii. 159. No loan without security shall be admitted as a claim on the Loans differences of a defaulter's estate ; nor shall any such loan, when of w longer duration than two business days, be admitted as a claim on any other of his assets; and should any unsecured creditor receive payment of his loan from a member on the day of his default, such payment being made out of assets not belonging to the defaulter previously to that day, he shall refund the amount so received for the benefit of the defaulter's estate. 160. Differences allowed to remain unpaid for more than two Differences business days beyond the day on which they become due, cannot be on old proved against a defaulter's estate, or set off agaiust any difference due actions. to a defaulter at the time of his failure. Differences overdue and paid previous to the day of default are not to be refunded. 161. The committee will not recognize any claim on a defaulter's Claims not account that does not rise from a Stock Exchange transaction. on Stock Exchange 162. Xo defaulter shall be re-admitted, who shall not, if required, JC*^* " give up the name of any principal indebted to him, or who, within g urren( jer fourteen days from the date of his failure, shall not have delivered of books to the official assignees, or to his creditors, his original books and* d * mes accounts, and the statement of the sums owing to, and by him, in the cipals. Stock Exchange, at the time of his failure. NOTE. As to re-admission of defaulters, see Rule 35. 163. A member, having compounded with his creditors, and being Composi- subsequently declared a defaulter, shall not be eligible for re-admission ^-JJU^' for six months, and should he be declared in consequence of his having failure. so compounded, his sureties shall not be called upon to pay their Release of security money. sureties. NOTE. A.S to re-admission of defaulters, see Rule 35. And ns to a member's sureties, see Rule 22. U 290 LA WAND PEACTICE OF THE STOCK EXCHANGE. balance loss. Defaulter tickets. Payment to 164. A defaulter shall not be eligible for re-admission, who shall beforere not tave paid from his OWn resources ' independently of his security- admission money, at least one-third of the balance of any loss that may occur of 6s. 8d. on his transactions, whether on his own account or that of principals ; or who, in the event of his debts being less than the amount which his sureties may be called upon to pay, shall not have refunded to the sureties one-third of the amount paid by them. NOTE. See note to the preceding rule. 165. A member who passes or retains a ticket for shares or stock, whereby loss is incurred or increased, and who shall be declared a defaulter in that account, shall not be eligible for re-admission for at least one year from the date of such default, provided it be proved to the satisfaction of the committee that he knew himself to be insolvent at the time of passing or retaining the ticket. NOTE. As to re-admission of defaulters, see Rule 35. Where on an application for re-admission a sub-committee is appointed to investigate a defaulter's conduct, etc., they are specially instructed to see whether there has been a violation of this rule. See Rule 171, par. 4. 166. No member shall carry on business for a defaulter for his benefit, without the consent of the creditors and the sanction of the committee. No member shall deal with a defaulter on his own account before his re-admission to the Stock Exchange. 167. No member shall transact business for a principal who, to his knowledge is in default to another member, unlesss such person shall have made a satisfactory arrangement with his creditors. 168. Non-members shall be allowed to participate in defaulters' estates, provided their claims be admitted by the creditors, or, in case of dispute, by the committee ; and a person whose claim is so admitted, may be represented at the meeting of creditors by any member whom he may select. 169. No member, being a creditor upon a defaulter's estate, shall sell, assign, or pledge his claim on such estate, to a non-member, without the concurrence of the committee ; and such assignment shall be immediately communicated to the official assignees. 170. If a creditor of a defaulter be dead, the dividend due to him shall be paid to his legal representative ; but if the creditor himself be a defaulter, the dividend due to him shall be paid to his creditors. Business for a defaulter. Business with a defaulter. Business for prin- cipals who are defaulters to other members. Claims of non- members admitted against defaulters. Claims not to be sold to non- members. Dividends due to deceased creditors. Duties of 171. Upon any application for the re-admission of a defaulter, sub-corn- a sub-committee, of not more than three members, to be chosen in tnittee. APPENDIX. 291 alphabetical rotation, shall investigate his conduct and accounts ; and no further proceedings shall be taken by the committee with regard to his re-admission, until the report of such sub-committee shall have been submitted, together with a balance sheet of the defaulter's estate, signed by himself. The attention of the sub-committee shall be directed 1st To ascertain the amount of the greatest balance of shares or stock open at any time during the account, the current balance at his bankers, as well as the balance of shares or stock open at the time of failure; and whether the transactions were on his own account, or on account of principals, specifying the amount of each respectively. 2nd To ascertaiu the total amount of money paid by him; specifying the sums collected in the Stock Exchange ; and those received from principals; and the money or other property brought forward by himself. 3rd To ascertain the conduct of the defaulter preceding and subsequent to his failure ; and to inquire of the official assignees whether any matter, prejudical or otherwise to the defaulter's application, has transpired at any meeting of creditors, or has officially come to their knowledge elsewhere. 4th To ascertain whether the defaulter has violated Rule 165. 172. The re-admission of defaulters shall be in two distinct Clt classes : j|jer The first class to be for cases of failure arising from the default of Defaulters principals, or from other circumstances, where no bad faith, nor are re- breach of the regulations of the House has been practised ; where the operations have been in reasonable proportion to the defaulter's means or resources ; and where his general conduct has been irreproachable. The second class, for cases marked by indiscretion, and by the absence of reasonable caution. The decision of the committee on the re-admission of a defaulter shall remain posted in the Stock Exchange for thirty days. NOTE. See also Rule 35. 173. Every defaulter, bankrupt, or insolvent (applying for re- Defaulters admission) shall furnish the sub-committee with every information to furnish J mforma- they may require. tion. 292 LAWAXD PRACTICE OF TEE STOCK EXCHANGE. Appoint- ment of official assignees. Official assignees to give security. Division of assets amongst creditors. Assignees to fix prices. OFFICIAL ASSIGNEES. 174. Two or more members shall be appointed annually by the committee, to act as official assignees, whose duty it shall be to obtain from a defaulter his original books of account, and a statement of the sums owing to and by him, to attend meetings of creditors, to summon the defaulter before such meetings ; to enter into a strict examination of every account ; to investigate any bargains suspected to have been effected at unfair prices; and to manage the estate in conformity with the rules, regulations, and usages of the Stock Exchange. 175. Each official assignee shall find security amounting to 1000 from two or more members of the Stock Exchange. In the event of any default or misappropriation by either assignee of funds or property entrusted to his care, or of any other act of dishonesty on his part, each of his sureties shall pay, under direction of the committee* such sum as he shall have guaranteed. 176. The assignees shall collect and pay the assets to the credit of their joint account at a banker's, and shall distribute the same as soon as possible. NOTE. In the opinion of Lord Blackburn, the word " assets," as used in this rule, means the whole of a defaulter's available property ; see Tomldnsv. Saffenj (1877), 3 App. Gas. 213; 47 L.J. Bk. 11.; 37 L.T. 758 ; 26 W.R. 62. But in view of the subsequent decision of the Court of Appeal in Ex parte Grant, In re Plumblij (1880), 13 Ch. D. 667; 42 L.T. 387 ; 28 W.R. 755, that in case of a bankruptcy occurring at the same time as a default, the trustee in bankruptcy is entitled to recover from the official assignee any part of the defaulter's general assets, as distinguished from differences due to him from Stock Exchange creditors, with which the assignee is entitled to deal, it may be doubted whether the word would not be better confined to the fund which the assignee may lawfully distribute. 177. In every case of failure, the official assignee shall publicly fix the prices current in the market immediately before the declaration, at which prices all persons having accounts open with the defaulter shall close their transactions by buying of or selling to him such stocks, shares, or other securities as he may have contracted to take or deliver, the differences arising from the defaulter's transactions being paid to, or claimed from the official assignees. In the event APPENDIX. 293 of a dispute as to the prices named, they shall be fixed by two members of the committee. NOTE. The amount of the differences thus fixed by the official assignee as due to a Stock Exchange creditor is a "liquidated sum" within the meaning of sec. 6 of the Bankruptcy Act, 1869 (32 & 33 Viet. c. 71), and will support a bankruptcy petition by a creditor against a defaulter; see Ex parte Ward (1882), 22 Ch. D. 132; 52 L.J. Ch. 73; 48 L.T. 332 ; 31 W.R. 112. The corresponding section of the Consolidat- ing Act of 1883 (46 & 47 Viet. c. 52), is sec. 6 (1 (&)), to which the above case is equally applicable. See also the notes to Rule 156. 178. The official assignees shall not claim differences on a defaulter's Differences estate, until they become due. claimed 6 XOTE. The time intended to be expressed by the word due " in this "^ due ' rule is perhaps not very clear. But the meaning of the rule appears to be that although all contracts made with a defaulter are closed at the prices current at the time of the default, the differences shown to be due to the defaulter's estate by such prices cannot be claimed until the date at which the contract would be completed in the ordinary course. 179. The official assignees shall not admit any claims upon a Claims not defaulter's estate arising out of transactions which are stated in the admitte rules as not recognized until all other claims have been paid in full, but they shall forthwith collect and distribute amongst the creditors all assets arising from such transactions. , NOTE. See Rules 60, 62, 63, 79, 90, 93, 112. 180. Once in every month, the official assignees shall lay before Statements the committee an account of the balances in their hands belonging to J^J^^ 1 ^ defaulters' estates, and the committee shall order such balances as they the corn- think fit to be paid over to the account of the trustees of the Stock mittee by Exchauge Benevolent Fund, subject to recall by the committee for M distribution amongst creditors, or for payments by or to the official assignees which have been authorized by the committee. A statement of all sums so paid over, and of the amount remaining in the hands of the trustees of the Stock Exchange Benevolent Fund on the thirty-first of December in every year, shall be furnished by the official assignees, and deposited in the committee-room, for the inspection of the members of the Stock Exchange. On the first of March, in each year, the official assignees shall lay before the committee a statement of all dividends paid during the last year on each defaulter's estate. Every defaulter's estate shall be registered in a book, to be kept te/of ** by the official assignees. defaulter's accounts to be kept. 294 LA WAND PRACTICE OF TEE STOCK EXCHANGE. Scale of 181. The scale of remuneration to the official assignees shall be as r_a- follows: _ assignees., From 1 to 1000 collected ... 5 per cent. From 1000 to 5000 2 do. From 5000 1 do. Sums received from the estate of another defaulter upon the same settlement and redistribution, shall be charged with half the above percentages. r+ In case of distribution of funds not chargeable under the above scale, and where exceptional duties have been performed by the official assignees, the Committee for General Purposes shall decide, upon appeal of the official assignees, whether any or what special allowances shall be made to them. APPENDIX B. MEMORANDUM UNDER HAND ACCOMPANYING AN EQUITABLE MOETGAGE OF SECURITIES. 1 London, 189-. To A B 2 of , in the county of , I hereby deposit with you the securities in the schedule hereto annexed as collateral security for the sum of , which you are advancing to me, together with interest thereon at the rate of per cent, per annum payable , 4 and in consideration of any future advances which you may make to me, together with such interest thereon as may be agreed upon. It is agreed that the current market price of the securities held by you shall, at all times during the continuance of the loan, represent a value exceeding by per cent, the amount outstanding in respect of such loan and interest thereon ; and if at any time the value of the securities in your hands shall fall below the margin of per cent., I hereby undertake, on notice from you, to provide you with additioral 1 See Stamp Act, 1891, ss. 22, 23. This form is subject to necessary modification?, according to the agreement of the parties. The Bank of England, and many of the principal banks, have printed forms of their own. The Bank of England will not receive applications for loans after 2.30 p.m. on ordinary days, or after 1 p.m. on Saturdays. 2 The mortgagee. 3 Insert description of mortgagee, e.g. solicitor. 4 Quarterly, or half-yearly, or as the case may be. APPENDIX. 295 security to your satisfaction, or to pay you such sum as shall restore the said margin even before the said day of . And in the event of my making default in payment of any of the sums which are hereby secured when the same sliall respectively become due, I authorize you forthwith, or at any time thereafter, to realize the said securities or any part thereof, and to pay yourself the amount due to you, with proper costs and expenses of realization and all other proper and usual charges, I hereby undertaking to execute and do all necessary deeds and things which may reasonably and properly be required by you to render this authority effective. And I hereby declare that I have a good right to deposit with you the said securities, and to execute and do such deeds and things when called upon. This agreement is to apply not only to the said securities, but to any securities which may by consent be substituted for the same. Sixpenny (Signature of mortgagor) stamp. The schedule above referred to UNDERTAKING UNDER HAND ONLY QUALIFYING A DULY STAMPED TRANSFER. 8 London, 189-. To C. D. 3 of , in the county of I hereby acknowledge that you have transferred to me the legal title to the securities mentioned in the schedule hereto annexed by way of security for the repayment on the day of next of the sum of , which I have this day advanced to you, together with interest thereon at the rate of , payable , 5 as well as for any further sum or sums of money which I may advance to you, together with interest thereon at such rate as may be agreed upon. It is agreed that the current market price of the securities held by me shall, at all times during the continuance of the loan, represent a 1 The stamp must be cancelled by the person executing the agree- ment ; see the Stamp Act, 1891, s. 22. - Stamp Act, 1891, s. 23, subs. 2. This form is subject to necessary modifications, according to the agreement of the parties. 3 The mortgagor. 4 Insert description, e.g. gentleman. 5 Quarterly, or half-yearly, or as the case may be. 296 LA WAND PRACTICE OF THE STOCK EXCHANGE. value exceeding by per cent, the amount outstanding in respect, of such loan and interest thereon ; and that, if at any time the value of the securities in my hands shall fall below the margin of per cent., you undertake, on notice from me, to provide me with additional security to my satisfaction, or to pay me such sum as shall restore the said margin even before the said day of ; and that, in the event of your failing to pay any of the sums aforesaid, when the same shall respectively become due, you authorize me forthwith, or at any time thereafter, to realize the said securities or any part thereof, and to pay myself the amount due to me, with proper costs and expenses of realization and all other proper and usual charges. And I hereby under- take, upon payment of all sums due to me in respect of principal and interest, to execute and do all necessary deeds and things to re-transfer to you the legal title in the said securities. This agreement is to apply not only to the said securities, but to any securities which may by consent be substituted for the same. Sixpenny (Signature of mortgagee) stamp. The schedule above referred to 1 The stamp must be cancelled by the person executing the agree- ment; see the Stamp Act 1891. s. 22. INDEX. [Numbers simply refer to pages in the text, with r. preceding them to the rules in Appendix A.] ACCOUNT, 14 ACCOUNT DAY, 14 ACCOUNTS, form of, 64 of principal, closing of, by broker after notice, 48, 122 without notice, 48, 123 closing of portion of only, 122 of defaulters, closing of by official assignee, 46, r. 177 investigation of by sub-committee, r. 171 unsettled, adjustment in securities deliverable by deed, r. 109 in securities to bearer, r. 121 ACTION. See LEGAL PROCEEDINGS. for specific performance. See SPECIFIC PERFORMANCE. ADMINISTRATORS of deceased holder of Government stocks, production of probate of will by, 74, 75 ADMISSION TO STOCK EXCHANGE, scale of fees upon, 34, n. 1 objections to, 38, r. 31 eligibility for, 38 of clerks, 38, r. 22 of bankrupts, 38, r. 30 of foreigners, 38, r. 23 of persons engaged in other business, 38, r. 29 notice of, 258 notice of application for, r. 24 sureties for. See SURETIES. ADVERTISING by members of Stock Exchange not permitted, 36 AGENT. See also BROKER. relation of to principal, 35, n. 5 implied authority to, when dealing in special market, 88, 98 AGREEMENT. See CONTRACT. 298 INDEX. ALLOTMENT, letters of. See LETTERS OP ALLOTMENT application for, by clerks, r. 51 by members, r. 61 ALTERATION of rules, r. 5 notice of, r. 12 of ticket, effect of, r. 97 AMERICAN SECURITIES, amounts deliverable, r. 114 offers to buy and sell, to what amount binding, r. 11 3 tickets for, r. 116 time allowed for obtaining registration, r. 74 effect upon, of indorsement in blank, 226 ANTEDATED TICKETS, liability for, r. 96 APPLICANTS FOR MEMBERSHIP, eligibility, 38, rr. 22, 23, 29, 30 objections to, 38, r. 31 sureties for. See SURETIES. questions put to, r. 38 rejection of, 38, r. 32 APPLICATION for admission to membership, 38, r. 38 form of, 256 notice of, r. 24 for admission of clerk to Stock Exchange, r. 45 for authorization of a clerk, r. 45 for re-election, 39, r. 20 for allotment of shares, by clerks, r. 51 by memoers, r. 61 to annul a bargain, r. 59 ARBITRAGE, 14 ARBITRATION between members, 33, 55 between members and non-members by Committee, r. 55 ASSETS, meaning of, as used in the rules, 46, n. 5, r. 176 collection of defaulter's, by official assignee, 46, 50, rr. 176, 178 distribution of defaulter's, among creditors, 50, rr. 156-161, 170, 17G, 179 defaulter's general, right of trustee in bankruptcy to, 47, r. 156 n. ASSIGNEE. See OFFICIAL ASSIGNEE. ATTORNEY. See POWER OF ATTORNEY. AUTHORIZED CLERKS. See CLERKS. BACKWARDATION, explanation of, 14, 63 rate of, how fixed, 63 n. 3, 66 INDEX. 299 BALANCE CERTIFICATE, 18, 72. See also CERTIFICATE. BALLOT for election of Committee, 32, rr. 1, 3 for election of members, 33, r. 22 BANG, 14 BANK OF ENGLAND, stockbroking business transacted in rotunda of, 11 stocks transferable at. See BRITISH FUNDS. liability of, on forged transfers and powers of attorney, 222, n. 2 BANK NOTES, demand for, by selling broker, r. 67 BANK SHARES, restrictions on dealings in. See LEEMAN'S ACT. BANK STOCK, restrictions on dealings in, by 8 & 9 Will, in., c. 32.. 4 transfers on sale of, r. 87 BANKRUPTS. See also INSOLVENCY ; DEFAULTERS. not eligible for membership, 38, r. 30 cease to be members, 34, 46, r. 151 readmission of bankrupt members, 40, rr. 30, 35, 162, 164, 165, 171- 173 BAKGAIXS for cash, 59 with or for clerks, 41, rr. 57, 58 with or for defaulters, 50, r. 166 for principal in default to another member, r. 167 how made, 52 marking of, 53, rr. 142-149 entry of, by broker, 53, 56, 68 by jobber, 53, 57 note of, to be sent to principal, 54. See also CONTRACT NOTE. objections to, 54, r. 149 checking of, 55, r. 65 settlement of disputes as to, 55, r. 65 in dividends prohibited, r. 64 not recognized by Committee, in letters of allotment, r. 60 in loans of states which have previously defaulted, r. 62 in loans issued by states whilst at war with this country, r. 63 for a future account, in English, &c., stocks, 60, r. 79 in securities deliverable by deed, 60, r. 90 in securities to bearer, 60, r. 112 settlement of, 59-61 in English, &c., stocks, 59, r. 78 in foreign loans, 60, r. 132 in stocks and shares, 60, rr. 89, 111 in omnium and scrip, 60, r. 141 in French rentes, r. 123 in Exchequer Bills, r. 122 time allowed tor registration of, in American railway shares, r. 74 m South African shares, r. 75 quotation of, 61, rr. 142, 143 at special prices, 61, r. 144 300 INDEX. BARGAINS continued. quotation of ex-dividend and interest, rr. 146, 147 in English and foreign stock, r. 145 in foreign bonds, r. 145 in omnium, r. 145 when omitted, 54, r. 148 in loans raised by states at war with Great Britain, r. 63 in shares of an illegal company, 172, n. in new loans and shares contingent on special settlement, 60, r. 130 in railway bonds, interest on, r. 129 when Committee will annul, r. 59 BARNARD'S ACT, provisions of, 10, 168 judicial interpretation of, 10, 169 rights of third parties under, 170 repeal of, 10, 171 BEAR, 15, 63 BEARER SECURITIES. 15. See also SECURITIES. BIDDING, 15 BLANK TRANSFERS. See TRANSFERS. BONDS formerly entered into by brokers with Corporation of London, 5 effect of clause in, as to assembling in Change Alley, 6 sale of unstamped, indemnity of broker, 106 purchaser entitled to new, in right of old, 149, 150, r. 126 vendor responsible for genuineness of, 149, 160, r. 127 delivery of drawn, 160, r. 125 called, 162, r. 125 torn or damaged, 161, r. 128 with irregular coupons, r. 128 with or without coupons, r. 73 quotation of, where dividends payable abroad, r. 135 stamps on transfer of, 232, 233 deposited by principal with broker, right of sale of, 125 of railways, settlement of interest on sale of, r. 129 BONUS, 15 BOOM, 15 BORROWER, 66, n. 1 BOUGHT-IN STOCK AND SHARES, non-delivery of, rr. 105, 118 BRITISH FUNDS. See also BANK OF ENGLAND ; GOVERNMENT STOCK. meaning of " funded" and " unfunded," 73 securities included in, 73 certificates for, when issuable, 74 fee chargeable upon issue, 75 transferable by delivery, 74 when nominal, 74 right of trustees to hold, 75 conditions of new issue when lost, 75 dividends on, coupons for, 75 evidence required of title of persons claiming, 75 receipt of, where joint-stock holder under disability, 75 INDEX. 301 BRITISH FUNDS continued. dividends on continued. warrants for, 76 may be treated as cheques, 76 joiut tenancy in, 74 mode of transfer of, 74, 222 transfer of, by executors of deceased stockholder, 74 stamps and fee on transfer of, 222, 230 BROKEB, explanation, 15 functions of, 15, 36 commission of. See COMMISSION. licence formerly required by, 4, 7 restrictions placed upon by 13 Edw. I., ] 1 Jac. I., St. 21.. 3 8*9WiLIIL,&82..4 7Geo. II., c. 8.. 10 walk of, upon Royal Exchange, 3 dealings of, in funds of East India Company, 4 bond of, with corporation, 5, 6 removal from Royal Exchange to Change Alley, 6 responsibility for" speculation in eighteenth century, 7-9 powers of corporation over, curtailed 1870.. 12 abolished 1884.. 12 advertising by, not permitted, 36 personal liability of, on Stock Exchange, 35 purchase or sale" by, from or to principal, 36, 100, 215 contract of, with principal, 94 instructions to, by principal, acceptance of, 94 partial execution of, 94 effect of, when ambiguous, 94 authority to contract, when irrevocable, 96 revocation by principal, 95 expiry of, when not revoked, 95 implied by law when limit not specified, 98, 99 right of principal to limit, 97 liability when limit exceeded, 97, 98 express required when course of dealing unusual, 99 authority to raise m<>ney on security, 97 indemnity of, by principal, payment of, where principal dead or insolvent, 105, n. 2 where money paid under mistaken decision of Committee, 106 where bonds unstamped or transfers forged, 106 where vendor fails to deliver, 107 where purchaser fails to pay, 107 where instructions substantially carried out, 107 on payment of calls 108 on pale of prospective dividends, 109 where company wound up before transfer completed, 108 where transfer taken in name of infant, 109 where Leeman's Act disregarded, 109 where broker insolvent, 110 where business speculative. 110 not entitled to indemnity, where contract wagering or illegal, 110 302 INDEX. BROKER continued. not entitled to indemnity continued. where custom unreasonable or illegal, 111 where loss due to broker's insolvency, 111 where telegraphic instructions inaccurate, 111 where no tender of transfer or purchase money, 112 where order ultra vires of a company, 112 when entitled to close principal's account, 48, 122 not entitled to close part of principal's account, 122 when entitled to sell securities deposited by principal, 125 effect of bankruptcy of, upon securities deposited with, 48-50 effect on principal's contracts of default of, 47, 123 not permitted to act for principal in default to another member, r. 167 contract of, with jobber, 133 entry of, in jobbing-book, 53, 56 in jobber's ledger, 56, 68 in principal's ledger, 56 duty of, to promote principal's interests, 100 when acting for both vendor and purchaser, 100 to make an enforceable contract, 103 when instructed to deal at specified price, 103 as to application-money paid into his hands, 104 to procure delivery of purchase-money or securities, 104 to hand over money or securities when received, 105 as to examining purchaser's credit, 104 to apply for registration, 105 to send stamped contract-note to principal, 120 penalties for failure to send, 120 liability of, where member of a partnership, 127 partnerships of. See PAKTNERSHIPS. relation of, to runner, 42 continuations by, not obligatory, 123 ratification of, when unauthorized, 124 when effected personally, 124 payments to, by trustees, 115, 116 placing and underwriting shares by, 117, 118 distinctions between, 118 proposed statutory provisions as to, 119 not entitled to credit trustee's personal account with money received on behalf of the trust, 126 not entitled to credit country broker's account with proceeds of securities belonging to country client, 126 deposit of securities by principal with, for safe custody, 131 warranty of authority by, damages for breach of, 98, 215 wrongful sale by, of principal's securities, 216 information as to new companies furnished to Committee by, r. 136 BROKERAGE. See COMMISSION. BROKER'S LEDGER, entry in, 57 BUCKET-SHOPKEEPER, 16 BULL, 16, 63 BUYING-IN, explanation of, 16 how effected, 16, 59, 70 INDEX. 303 BUYING-IN continued. liability of selling broker for, rr. 105, 118 indemnity of broker by principal in case of, 107 notice of/in securities deliverable by deed, r. 105 in bearer securities, r. 118 time for, in English, &c., stocks, r. 83 in securities deliverable by deed, r. 105 in bearer securities, r. 118 when not permitted, 207, r. 72 right of, where stock bought-in is not delivered, rr. 105, 118 release of intermediate parties if right not duly exercised, rr. 106, 119 CALLS ON SHAKES, explanation of, 16 payment of, r. 99 indemnity of vendor by purchaser, 151 of broker by purchaser, 108 required by directors before registration of transfer, 233 do not invalidate contract of sale, 147 CANADIAN STOCK, stamps on transfer of, 230 CARRYING-OVER, 16. See also CONTINUATION. CARRYING-OVER DAY. See CONTANGO-DAY. CARRYING-OVER RATE, 17, 63 CASH BARGAINS, 18, 59 CASUAL VACANCIES on Committee, how filled, 32, r. 3 CERTIFICATES, explanation of, 18 in case of British funds, 74 balance, when divided on delivery, 72, 164 delivery of, with transfer deed, 72 refusal of payment on non-delivery, 164, r. 102 certification of deed of transfer, 72, 164, 235, r. 102 deposited by principal with broker, right of sale, 125 deposit of, without transfers, 243 with blank transfers. See TRANSFERS. scrip, negotiability of, 81 forgery of, 233, 2:i responsibility of vendor for genuineness, of, 149, 160, rr. 92, 127 law applicable on deposit of foreign, 225 duty on foreign and colonial, 230 CERTIFICATION of deed of transfer, 18, n. 2, 164, 235 CERTIFIED TRANSFERS, 18,72, 164, 235 CHALLENGING, 18 CHANGE ALLEY, brokers remove to, from Royal Exchange, 6 financial methods in vogue in, 7, 8 responsibility of, for financial corruption in eighteenth century, 9 objectionable form of speculation practised in, 9 304 INDEX. CHAIRMAN OF GENERAL PURPOSES COMMITTEE, election of, 33, r. G CHECKING BARGAINS, 55, r. 65 CHECKING BOOK, form of entry in, 56, 57 CHEQUES, payments made by, 71 to be passed through banker's Clearing House, r. 67 payments in case of dishonour, r. 68 CLAIMS to new stock and shares, entry and checking of,rr. 107, 126- settlement of, rr. 107, 126 unchecked, settlement of disputes as to, rr. 107, 126 in respect of drawn bonds, &c., 160, r. 125 against defaulters, 50, rr. 153-161 by non-members, 47, r. 168 CLEAN, 18 CLEARING HOUSE, 18, 70 CLERKS, admission to Stock Exchange, eligibility for, 41, r. 44 application for, r. 45 form of application, 258 notice of, r. 45 admission of, to membership, 38, r. 22 fees and subscriptions of, 34, n. 1 date of payment, 258 members acting as, 41, rr. 44, 50 when defaulters allowed to act as, r. 44 of deceased members, permitted to attend to settle accounts, r. 52: of defaulters, excluded from Stock Exchange, r. 52 application by, for allotment of shares, r. 51 not permitted to deal on own account, 41, r. 50 authorized qualification for position of, 41, r. 44 consent of sureties required, r. 46 dealing for jobber, restriction on, 41, r. 44 form of application for authorization, 258 list of, posted in Stock Exchange, 41, r. 48 money borrowed by, when employer responsible for, r. 49- liable to expulsion for dealing with clerk, r. 57 withdrawal of authority from, 41, r. 47 unauthorized, 41 CLERK OF THE HOUSE, marking bargains by, 54, rr. 142-149 making-up prices fixed by, 62, rr. 88, 108, 120 CLOSING of Stock Exchange on holidays, r. 77 of principal's account by broker, 19, 48, 122 of defaulter's accounts, 46, r. 177 COLONIAL RAILWAY BONDS, settlement of interest on sale of, r. 129 IXDL'X. 305 COLONIAL STOCK, 76. See aho GOVERNMENT STOCK. bargains in, when made for, 59, r. 78 when not recognized by Committee, 60, r. 79 offers to buy or sell, to what amount binding, r. 80 tickets for, issue and delivery of, r. 82 COMMISSION of broker, 19, 113 rate of, 36, 53 limits placed upon by 8 & 9 Will. III., c. 20.. 4 by 10 Anne, c. 18.. 5* when earned. 113 not recoverable on gaming contracts, 113 where contract note unstamped, 120 not payable upon appropriation of broker's own securities to principal, 114 where broker personally continues principal's securities, 1 14 COMMITTEE FOR GENERAL PURPOSES, election of, 32 notice of, 32, r. 1 notice of proposal for, 32, r. 1 ballot for, how conducted, 32, r. 1 qualification for, 32, r. 2 duration of office, 32, r. 1 on casual vacancy, 32, r. 3 casual vacancies in, 32, r. 3 notice of election and proposal in case of, r. 3 quorum of, 33, rr. 4, 9 meetings of, 33, rr. 4, 8 notices of, 33, rr. 8, 10 business of, 33, r. 10 jurisdiction of, over members, 33, 34 . over non-members, 33 seat on, how lost, 32, r. 32 chairman and deputy-chairman of, 33, r. 6 secretary and scrutineers, 33, r. 7 making and alteration of rules by, r. 5 notice of, r. 12 expulsion of members of, r. 15 expulsion, suspension, or censure of members by, 33, rr. 16, 17 publication of cause of expulsion, &c., r. 19 resolutions by, confirmation of, r. 11 communications to, how made, r. 13 information to, by members and clerks, r. 14 decision by, of dispute as to title subsequent to registration, r. 92 upon objections to names passed, 139, 140 intervention* of, in questions arising out of blank transfers, r. 93 in legal proceedings by members, 137 arbitration of, between members, r. 65 between member and non-member, 137, r. 55 annulling of bargains by, for fraud, &c., r. 59 bargains not recognized by, rr. CO, 62, 63, 79, 90, 112 entertaining by, of claims on drawn bonds, r. 125 of complaints as to damaged securities, r. 128 of disputes as to now shares, rr. 107, 120 fixing of settling and ticket-days by, 59, rr. 140, 141 306 INDEX. COMMITTEE FOR GENERAL PURPOSES continued. granting of special settlements by, 60, rr. 131, 133 of official quotations by, rr. 184-188 list of prices published by authority of, 61, r. 142 recognition of claims of non-nieuabers by, 47, r. 168 COMPANIES, liability of, limited by shares, 77 by guarantee, 77 fully paid-up shares of, conversion into stock, 77 new, settlement of bargains in, 60, r. 130 application for special settling-days by, 60, r. 133 when granted, 60, r. 133 quotattm of, rr. 136, 138 conditions precedent to, r. 136 revocation of, r. 139 foreign, quotation of, r 137 instructions by ultra vires, position of broker, 112 payments by, for placing or underwriting shares, 117 right of, to reject infant transferee, 155 cost-book mining, 223 negotiating loans for defaulting states, exclusion from official list. r. 62 notice of trust to, effect of, 245 when illegal, 172, n. 1 COMPLAINTS against members by non-members, r. 55 COMPOSITION with creditors by defaulter, 45, rr. 152, 153, 163 CONSIDERATION, statement of, required by Stamp Acts in deed of transfer, 151, 221 CONSOLS. See BRITISH FUNDS. CONTANGO, explanation of, 19, 63 rate of, how fixed, 63, n. 3, 66 CONTANGO-DAY, 19 CONTINENTAL BOURSES, 35, n. 3, 37 CONTINUATION, description of, 19, 61-66 distinguished from loan, 237 effected at making-up price, 62 unless no making-up price fixed, 63 right to dispose of securities taken up on, 237, r. 70 not obligatory on broker, 123 unauthorized by principal, ratification of, 124 authorized by principal, revoked by his death, 125 personally effected by broker, 124 CONTRACT for sale of shares need not be in writing, 85 for sale of shares not in contractor's possession, legal, 87 for sale of prospective dividends prohibited by Committee, 135, r. 6i enforceable at law, 109, 177 for sale of shares when no instalments paid, 87 INDEX. 307 CONTRACT contin w<S forfeiture of membership, 84, 45, rr. 16, 151 IXDEX. 317 MEMBERS OF STOCK EXCHANGE continued resignation of membership, 34, r. 34 acting as clerks, 41, r. 50 advertising by, 36 bargains by, with clerks, 41, r. 57 with individual members of a firm, 42, r. 56 caution to, as to speculative business for public officials, r. 58 complaints by non-members aj*ainst, r. 55 division of, into two classes, 35 peculiar to London Stock Exchange, 35, n. 3 advantages of, 37 disputes of, how settled, 134, r. 65. employment of clerks by, 41, rr. 45-47 entitled to vote at election of Committee though subscription unpaid, r. 2 legal proceedings by, 134, 137, r. 54 effect of rules and customs on, 34 neglect by, to pay deposit on application for allotment, r. 61 partnerships of. See PARTNERSHIPS. payments by and to. See PAYMENTS. suretyship of. See SURETIES. election of new, application for, notice of, r. 24 form of, 256 ballot for, 33, r. 32 eligibility for, 38, rr. 22, 23, 30 objections to, 38, r. 31 questions to, r. 38 renewal of application on rejection, 38, r. 32 . sureties for. See SURETIES. re-election formal in ordinary cases, 39 after discontinuance of subscription, 39, r. 33 application for, 257 objections to, 38, r. 31 renewal of application on rejection, 38, r. 32 re-admission of bankrupts, defaulters, &c., 40, rr. 171, 172 restrictions on, 38, 40, rr. 162-165 notice of application for, 40, r. 35 renewal of application on rejection, 38, r. 32 MISREPRESENTATION, when bargains annulled for, r. 59 MORTGAGE, distinction between legal and equitable, 236 liability of mortgagee, as to return of securities, 238, 239 in cases of wrongful disposal, 240 form of, where securities fully paid, 241 where continuing liability, 242 effect of, when by deposit of certificates only, 243 accompanied by blank transfer, 224 effect of mortgagee's bankruptcy, 48, 241, 242 of notice to company of, 245 instruments accompanying and qualifying, 294, 295 right to sub-mortgage, 240 to sell, 239 to foreclose, 239 318 INDEX. NAME passed by jobber, objections to, by vendor, 139, 140 publication of, on default, &c., r. 18 NAME DAY, 23 NATIONAL DEBT, idea due to Venetians, 3 introduction into England by Will. III., 3 NATIONAL DEBT ACT, provisions of, 73-76. See also BRITISH FUNDS. NATURALIZATION of foreigner, r. 23 NEGOTIATION, 23, 52 NEGOTIABLE INSTRUMENTS. See also BEARER SECURITIES definition of, 79 advantages of, 79 negligence of holder, effect of, 79, n. 3 what constitutes value for, 80 what may be, 80 Government securities, 80 debentures, 81 scrip certificates, 81 share warrants, 81 NEW SECURITIES, claims to, when issued in right of old, 150, rr. 107, 126 NON-CURRENT SECURITIES, explanation of, 23 advantages of jobbers in connection with, 37 making-up prices in, how fixed, 62 NON-MEMBERS bound by rules of Stock Exchange, 88 unless made subsequently to date of contract, 161 how far bound by customs, 88 when subject to jurisdiction of Committee, 33, r. 55 legal proceedings by, 137 assignment to, of member's claims against defaulters, 50, r. 169- representation of, at meetings of defaulters' creditors, 47, r. 168 right of, to participate in defaulters' estates, 47, r. 168 NOTICE of alterations in the rules, r. 12 of application for membership, r. 24 for re-admission of defaulters, r. 35 for special settling-days, rr. 131, 133 for quotation of shares, rr. 134, 136 as to clerks, 41, rr. 45, 47 of ballot for election of Committee, 32, rr. 1, 3 of meetings of Committee, 33, rr. 8, 10 of dissolution or alteration of partnership, r. 39 of renewal of partnership, r. 40 of buying in, in securities deliverable by deed, r. 105 in securities to bearer, r. 118 of resignation of membership, 34, r. 34 of prior title in mortgages, what constitutes, 224, 244, 245 NOVATION of contract, 90 INDEX. 31I> OBJECTIONS to marking of bargains, 54, r. 140 to names passed, by jobber, 139, 140 to election and re-admission of members, 38, r. 31 OFFERING, 23. See also BIDDING. OFFICIAL ASSIGNEE OF THE STOCK EXCHANGE, explanation of, 23 appointment and functions of, 45, r. 174 collection of defaulters' assets by, r. 176 differences, when claimable by, r. 178 distribution of defaulter's assets by, r. 180. See also ASSETS. duty of, as to transactions not recognized by Committee, r. 179- prices for closing defaulter's accounts fixed by, r. 177 not entitled to defaulter's general assets, 47 remuneration of, 45, r. 181 sureties for, 45, r. 175 OFFICIAL BROKERS, 24 OFFICIAL LIST, explanation of, 24 publication of, r. 142 prices recorded in, 61, r. 143 in case of exceptional bargains, 61, r. 144 expunging of, r. 149 offices of, 61, n. 3 OFFICIAL QUOTATION-. explanation of, 24 of new loans and companies, 60, rr. 134-136 OMNIUM. meaning of, 24 settling-days in, 60, rr. 141, 145 ONE MAN MARKET, 24 OPENING, 24, 52 OPTIONS, explanation of, 24 declaration of, r. 76 ORDINARY STOCK OR SHARES, 25 PAR, 24 PARTNERSHIPS, dissolution of, by failure 43, r. 40 grounds of at law, 44, n. 1 duration of, 43, r. 39 limited, 43, r. 42 list of, 42, r. 39 members of, may not deal secretly, 42, r. 56 notice of alteration or dissolution, 42, r. 39 renewal, after failure, 43, r. 40 not permitted between brpkers and jobbers, 42, r. 43- between members and non-members, 42, r. 41 of new members, 42, r. 41 PAY-DAY, 25. See also SETTLING-DAYS. 320 IXDEX. PAYMENT, how made. r. 67 by whom made, r. 68 time for, 62 in English, &e., stocks, r. Si in securities deliverable by deed, r. 110 in securities to bearer, r. 117 in case of split tickets, r. 101 of expense caused by splitting tickets, r. 94 of difference between price on ticket and making-up price, r. 69 of calls on transfer, r. 99 of stamp duty and fees, r. 100 of deposits on allotment, r. 6L of trust money to broker, 115 refusal of, when transfer not accompanied by certificates, r. 102 references to non-members for, r. 66 PENALTY on broker for not sending or stamping contract note, 120 for executing, &c., unstamped transfer of cost-book mining shares, 229 for transferring bearer securities unstamped, 231 PLACING SHARES, explanation of, 25 payments to broker for, 117 proposed statutory provisions as to, 119 distinctions between underwriting and, 118 PLEDGE. See MORTGAGE. POOL, 25 POWER OF ATTORNEY for receipt of dividends on Government stock on behalf of infant or lunatic, 75 forgery of, liability of Bank of England for, 222, n. 2 special form of, on transfer of Bank of England stock, &c., 222, n. 2 stamps on, in case of sale under, 156 exemptions, 157 PREFERENCE SHARES AND STOCK, 26 PREMIUM, 26 PRICE in transfer deed, 151, 221 on ticket, rr. 69, 94, 98 PRICE LIST. See OFFICIAL LIST. PRINCIPAL, account of, closing of by broker, 48, 122 form of, 64 bankruptcy of, rights of broker in, 48 contract of, with broker, 94 et seq. authority to broker under, 94-99 duties of broker under, 100-105, 120-122 right of broker to indemnity, 105-113 to commission, 113-120 carrying over of, 123-125 liability of broker's firm to, 127 securities of, deposited with broker, 48, 125, 131 INDEX. 321 PRINCIPAL mtfiu*i. contract of. with jobber, 135 et seq. nature of, 139 enforcement of, 136, 137 objections to names passed by jobber, 139, 140 indemnity by jobber, 141 right of set-off by jobber, 137 discharge of jobber, 141 when registration guaranteed, 145 contract of, with vendor or purchaser. See VENDOR ; PURCHASER. PRINCIPAL'S LEDGER, form of entry in, 56 PRIVATE DEALINGS with members of firms forbidden, 42, r. 56 PROSPECTUS, application for official quotation accompanied by copy of, r. 136 PROVINCIAL EXCHANGES, business methods of, 30, n. want of jobbers upon, 35, n. 3 PUBLIC FUNDS. See BRITISH FUNDS; GOVERNMENT STOCK. PURCHASE-MONEY. See also PAYMENT. receipt of, by vendor's broker, when justified, 99 tender of, right of broker to indemnity dependent on, 112 PURCHASER. See also VENDOR. capability of, to contract, 91, 139 contract of, with vendor, 146 et seq. buying-in by. See BUYIXG-IX. duty of, to register, 151 to pay ad valorem duty, r. 100 to pay for securities, 150 to indemnify vendor, 151 entitled to dividends from date of contract, 150 new shares, &c., in right of old, 150, rr. 107, 126 equitable ownership of, where transfer incomplete, 149 indemnity of broker by, where purchase-money unpaid, 107 liability of. where consideration overstated in transfer, 151 where clerical errors corrected, 151 payment of damages by, in case of non-acceptance, 214 to, in case of non-delivery, 213 QUOTATION, explanation of, 26 of bargains, 61, rr. 142-145 for exceptional amounts, 61, r. 144 when omitted, 54, r. 148 of new loans and companies, rr. 134-136 when ex dividend or ex interest, rr. 146, 147 when expunged, r. 149 RAILWAY COMPANIES, securities issued by, 78 investment in, by trustee?. 7- 322 INDEX. RAILWAY DEBENTURES, settlement of interest on sale of, r. 120 READMISSION OF DEFAULTERS. See DEFAULTERS; MEMBERS, RECOMMENDERS. See also SURETIES. of applicants for membership, 38, 39 of members, after discontinuance of subscription, 39, r. 33 RE-ELECTION of members. See MEMBERS. REGflSTER of defaulters' estates, 45, r. 180 of non-current securities, 37 of shareholders, rectification of, 216 REGISTRATION OF TRANSFERS, contract of sale not dependent upon, 93 duty of purchaser to obtain, 151 of purchaser's broker as to, 105 fees upon, 58 liability of purchaser for, r. 100 of borrower in case of loans, r. 100 guaranteed by jobber, 145 liability of jobber where no guarantee of, 141, 143 notice to shareholder prior to, 231 payment of calls prior to, 233 when directors entitled to refuse, 232 RESCISSION OF CONTRACT by Committee for fraud, &c., r. 59 REVOCATION of broker's authority to contract, 95 RIGGING THE MARKET, explanation of, 26 what constitutes, 204 RIGHTS, 26 ROYAL COMMISSION on Stock Exchange in 1877, report of, 37 ROYAL EXCHANGE, connection of brokers with, 3 brokers remove from, to Change Alley, 6 business in foreign funds carried on in, till 1822 ..12 names of brokers formerly posted in, 6 RULES OF STOCK EXCHANGE, effect of, on members' contracts, 34 on non-members' contracts, 33, 88 principal's attention called to, by contract noto, 55, n. 2 notice of alteration in, r. 12 RUNNER, explanation of, 26 relation of, to broker not a partnership, 42 to persons introduced by, 43, n. 1 SALE FOR THE COMING-OUT, 26 INDEX. 323 SCRIP, explanation of, 26 negotiability of, 81 not good, wares, &c., within Stamp Act, 1815 .. So, n. 2 settling-days in, 60 SCRIP SHARES, delivery of, when damaged, r. 128 SCRUTINEERS, of elections, appointment of, r. 7 SECRETARY OF THE STOCK EXCHANGE, election of, 33, r. 7 notices to. See NOTICES. SECURITIES authorized for trust investments, 82, 83 bargains in, settlement of, rr. 78, 89, 111 for future account, rr. 79, 90, 112 buying-in and selling-out. See BUYING-IN ; SELLING-OUT. custody of, when gratuitous, 131 for reward, 132 delivery of. See also DELIVERY. when called, 162 when forged, 161 when stopped, 160 genuineness of, responsibility of vendor for, 160, rr. 92, 127 new issued in right of old, purchaser entitled to, 150, rr. 107, 126 offers to deal in, to what amount binding, rr. 80, 91, 113 principal's right to follow, when misappropriated by broker, 48, 128 pledged by defaulter, r. 158 sold to defaulter, payment for, r. 157 tickets for, rr. 81, 82, 94, 116 transfer of. See TRANSFERS. to bearer, explanation of, 15 negotiability of, 79-81 property in, how passed, 220 stamps upon, 230, 231 SELLING-OUT. See also BUYING-IN. explanation of, 26 how effected, 70, r. 71 liability for, 70 restrictions on, where tickets are not passed for securities already sold out, r. 104 time for, in English, &c., stock, r. 81 in colonial stock, r. 82 in securities deliverable by deed, r. 103 in bearer securities, r. 115 SETTLEMENT, explanation of, 27 of bargains. See BARGAINS. SETTLEMENT DEPARTMENT, adjustment of securities subject to arrangement by, r. 109 tickets for stocks arranged by, r. 94 tickets for bearer securities s'plit by, r. 116 324 INDEX. SETTLING-DAYS, fixing of, by Committee in English stock, 59, r. 140 in foreign stocks, GO, r. 140 in shares, &c., 60, r. 140 in English omnium and scrip, GO, r. 141 SHARES. See also SECURITIES. contract for sale of, not within Statute of Frauds, 85 specific performance of, 217 when not in contractor's possession, 87 where no instalments paid, 87 letters of allotment dealt in as, 95, 213 of an illegal company, bargains in, 172, n. placing of, 117-120 transfers of. See TRANSFERS. underwriting, 118 warrants for, negotiability of, 81 for dividends on Government stock, 76 SHARE AND LOAN DEPARTMENT, certification of transfer by secretary of, 72, 164, 235, r. 102 notice of application for special settling-day by secretary of, 60,- r. 131 price of foreign coupons fixed by secretary of, r. 73 SHAREHOLDERS in the Stock Exchange, 31 interest of, in company, 86 right of, to transfer shares, 232 SHUNTING. See ARBITRAGE. SINKING FUND, 27 SLUMP, 27 SPECIAL SETTLING-DAYS, fixing of, by Committee, 60, rr. 130-133 SPECIAL BARGAINS how marked, 61, r. 144 SPECIAL SETTLEMENT, 27 for bargains in new loans and shares, rr. 130, 132 notice of, rr. 131, 133 when obtained by fraud, effect of, 201-206 SPECIFIC PERFORMANCE, decree for, 209, 217 not generally obtainable as to stock, 217 quaere as to corporation, &c., stock, 218 obtainable as to shares, 218 of shares, where scrip bought, 219 when granted of part of a contract, 218 when one of the parties bankrupt, 218 SPLIT TICKETS. See also TICKETS. description of, 28, 69 form of, 69 increased expense incurred by, borne by splitter, 70, r. 94- original ticket to be kept by splitter, r. 94 payment for securities in case of, 69, r. 101 INDEX. 325 SPECULATION, little opportunity for, before Will. III., 3 objectionable form of, in Change Alley, 9 effect of Barnard's Act on, 10 what amounts to lawful, 173 et seq. SQUEEZE, 27 STAG, '11 STAMPS on loans, r. 100 on instruments accompanying mortgage by deposit of certificate^ 245, 246, 294, 295 on transfers of securities in undertakings situate abroad, 229, n. 3. on transfers of Bank of England stock, &c., 222, 230 of securities deliverable by deed or writing, 58, 230 on securities to bearer, 231 STATUTE OF FRAUDS, contracts for sale of stocks and shares not within, 85 what constitutes a sufficient memorandum under, 86 STATUTORY DECLARATION as to new loan by contractors, r. 131 STOCK. See also SECURITIES ; SHARES. explanation of, 27 contract for sale of, not within Statute of Frauds, 85 transfers of. See TRANSFERS. STOCK BROKERS. See BROKERS. STOCKBROKING, history of. See STOCK EXCHANGE. STOCK CERTIFICATES. See CERTIFICATES. STOCK EXCHANGE, advantages and disadvantages of, 13 creation of, indirectly due to Will. III., 3 business in foreign funds removed to, in 1822. . 12 erection of buildings on present site in 1801. . 11 rebuilding of, in 1853. . 12 deed of settlement, 31 general description of, 30 government of, 32 Committee of. See COMMITTEE FOR GENERAL PURPOSES. members of. See MEMBERS OF STOCK EXCHANGE. officials of, appointment of, 32 proprietors and shareholders in, 31 shares in, 31 holidays upon, r. 77 hours of business upon, r. 77 admission of clerks to, 41 report of Royal Commission upon, 37 provincial exchanges, 30, 35, n. 3 SUB-MORTGAGEE, rights of, where mortgagor apparently legal owner, 2'J4 what constitutes notice to, ot prior title, 225, 244 position of, dependent on notice of prior title, 224 326 INDEX. SUBSCRIPTIONS of members, 34, n. 1 of clerks, 3i, n. 1 fixed by Board of Managers, 32 date of payment of, 258 SURETIES, number required, 39, r. 22 for clerks of four years' standing, 39, r. 22 who may be, 39, r. 27 may not be indemnified, 39, rr. 24, 26 knowledge required by, of persons recommended, r. 25 consent of, to partnership of assured, 42, r. 41 to authorized clerkship of assured, r. 46 new, required in certain cases, r. 28 questions put to, r. 37 repayment to, by defaulters, r. 164 for official assignee, 45, r. 175 SUSPENSION of members, 33, rr. 16, 17 SYNDICATE, 27 TALLIES, dealings in, in seventeenth century, 3 restrictions on, by 8 & 9 Will. III. c. 32. . 4 TAKING-IN STOCK OR SHARES, 28, 65, 66 TAPE PRICES, 28 TELEGRAM, mistake in instructions conveyed by, 1 1 1 TICKETS, description of, 28, 67 form of, 67 when split, 69 in securities transferable at Bank of England, 222 account of, kept by brokers, 68 issue and delivery of, in English, &c., stock, 68, r. 81 in colonial stock, 68, r. 82 in secuiities deliverable by deed, 68, rr. 94-98 payment for, when split, 101 in securities to bearer, 69, r. 116 non-delivery of stock by holder of, r. 119 wrongful passing or detaining of, by defaulter, 40, r. 165 TICKET-DAY, 29, 67 TRANSFERS, certification of, 72, 164, 235, r. 102 form of, 221 preparation of, 220 tender of, 220 execution of, 72 contract complete without, ( J2, 218 forged, effect of, 228 light of vi ndor's broker to indemnity in respect of. 106 powers of companies under Forged Transfers Acts, 229 IXDEX. 327 TRANSFERS continued. in blank, effect of, on sale, 223 effect of, on mortgage, 224 a constructive notice of a prior title, 225 redelivery of, after blanks filled in, 224, n. 1, 243, n. 2 American decisions as to, 226 intervention of Committee in question arising out of, r. 93 in case of British funds. See BRITISH FUNDS. notice of deposit of, with company for registration, 72, 231 number of, in purchases of Bank stock, r. 87 of shares in cost-book mining companies, 223 refusal of payment for, when unaccompanied by certificates, 235, r. 102 sealing of, when necessary, 220 stamping of, in case of cost-book mining companies. 229 Bank of England, &c., stock, 222, 230 foreign and colonial share certificates, 230 securities deliverable by deed, 230 securities in undertakings situate abroad, 229, n. 3 TRUST, Bank of England not bound by notice of, 75 companies not bound by notice of, 245 notice of, to purchaser or mortgagee, what constitutes, 244 TRUSTEES, broker may not credit personal account of, with trust-money, 126 cannot hold certificates of British funds unless specially authorized, 75 deposit of certificates by, position of depositee, 24:> investments of, 82, 83 payments by, to brokers, for commission, 114 for investment, 115 liability for negligence in case of, 116 right of, to follow money misappropriated by broker, 128 TRUSTEE IN BANKRUPTCY when entitled to defaulter's assets in hands of official assignee, 47 TURN OF THE MARKET, 29, 58 UNDERWRITING SHARES, explanation of, 29 payments to brokers for, 118 proposed statutory provisions as to. 119 distinction between "placing" and, 118 UNSETTLED ACCOUNTS, adjustment of, rr. 109, 121 USAGE. See CUSTOM. VACANCY on Committee, how filled, 32, r. 3 VENDOR. See also PURCHASER. contract of, with purchaser, 146 trustee for purchaser until completion, 149 undertaking of, as to execution of transfer, 148 as to obtaining directors' consent to transfer, 148 as to solvency of company, 149 as to genuineness of documents, 149, rr. 92, 127 328 INDEX. VENDOR continued. entitled to apply for registration of purchaser, 151 indemnity of, by purchaser, 152-154, 150, 200 by person holding himself out as purchaser, 154 by purchaser's representatives, 154 by jobber passing name of incompetent party, 141 of broker by, on failure to deliver securities, 107 on delivery of forged securities, 10G liability of, in case of re-sale, 150 payment to purchaser by, on non-delivery, 213 payment to, by purchaser on non-acceptance, 214 selling out by. See SELLIXG-OUT. VENDOR'S SHARES, 29 WAGERS. See GAMING. WAIVER of right to buy in, rr. 100, 119 WAR, loans raised during, recognition of, r. 63 WARRANTS for dividends on Government stock, 76 for bearer shares, negotiability of, 81 WILL, production of probate of, by executors on dealings with Government stock, 74, 75 WINDING-UP of companies, effect of, on contract of sale, 147 THE END. LONDON I PRINTED BY WILLIAM CLOWES AND SONS, LIMITED, STAMFORD STREET AND CHARING CROSS. WM. CLOWES FRIENDLY SOC Compri-ing the Friendly 5 Companies Act, 1896, toge> DIVERSITY OF CALIFORNIA LIBRARY POtEY'S LAW A Law affecting Solicitors on College, Oxford), of the; containing the Statutes b* THE STOCK EX With Appendices. Com accompanying a Mortg:- Inner Temple, Barrister MORTGAGES. By WALTER ASHBURN: Oxford. " A short treatise on the book will . . . be a welcoi Law Times. THE LAW OF E. W. GARRETT, M. Police Court. 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