RENNIE v. MORRIS. [1868 R. 154.] Custom of Stock Exchange-Transfer of Shares-Infant Transferee-Liability of Jobber. A jobber or dealer in shares on the Stock Exchange contracted to purchase the Plaintiff's shares in a company, and gave in to the Plaintiff's brokers a ticket with the name of the intended transferee, which had been passed on to him. After the execution of the transfer it was discovered that the transferee was an infant, of which neither party was previously aware; and the Plaintiff became liable for calls. In a suit by the Plaintiff against the jobber, seeking to make him liable to indemnify him in respect of the shares : Held, that, as by the usage of the Stock Exchange the jobber was, in the absence of fraud, discharged from liability when he had given the name of the transferee and paid for the shares, and as he had given all the further information required by the vendor, the suit against him could not be sustained. THE Plaintiff, George Rennie, was, at the time of the transactions in question, the owner and registered holder of certain shares in Overend, Gurney, & Co., Limited. The Defendant, William Morris, was a member of the Stock Exchange, and a dealer and jobber in shares. The object of the suit was to make the Defendant liable in respect of thirty shares in the said company sold and transferred by the Plaintiff, but to the calls on which the Plaintiff remained liable by reason of the Defendant, who contracted for the purchase, having given the name of an infant as transferee. On the 14th of May, 1866 (four days after the company had stopped payment), the Plaintiff's brokers offered the shares for sale in the market, and the Defendant agreed to purchase them at 5s. a share, and on the same day handed in a ticket, according to the usage of the Stock Exchange, with the name of Robert Graham as the intended transferee. The Plaintiff executed the transfer of the shares into the name of Robert Graham, and on the 21st of May the Plaintiff's brokers handed to the Defendant the transfer and share certificates, and made no objection to the name of the transferee. Neither party was aware till long afterwards that Graham was an infant. The Defendant's name was never registered, and the Plaintiff's name remained on the list of shareholders. M. R. 1871 W Dec. 5; 1872 Jan. 11. M. R. 1871 RENNIE v. MORRIS. It appeared that, according to the established usage of the Stock Exchange, which was followed in the present case, a jobber or dealer in shares bought in the market, not for himself but for the purpose of re-sale, and was deemed to have fulfilled his contract with the broker of whom he purchased if, on the day preceding the settling day, called the "name-day,” he furnished to the broker a ticket with the name or names of the person or persons who had contracted to purchase, and pay the price for which the same were bought, or some other marketable price, the difference (if any) being made up by the jobber. It further appeared that the ticket so handed in to the vendor's broker often passed through several hands, from the ultimate transferee or his broker to the jobber with whom the contract was made. Evidence was also given by the deputy chairman of the committee of the Stock Exchange of a further usage (referred to in the judgment), by which ten days were allowed by the rules of the Stock Exchange before the transfer was completed to enable the vendor or his broker to satisfy himself that the proposed transferee was a responsible person. In June, 1866, a resolution was passed for the voluntary windingup of the company, and on the 3rd of July, 1866, an order was made to continue the voluntary winding-up under the supervision of the Court. Soon afterwards the Plaintiff was settled on the list of contributories in respect of the said shares, and paid the calls that were made thereon. In December, 1866, the Plaintiff having discovered that Graham was an infant, applied to the Defendant for information respecting the person who gave in his name. He referred the Plaintiff to Messrs. Bentley & Hall, who were the next intermediate jobbers; and it appeared that they purchased for Messrs. Wolfenden & Gell, of the Manchester Stock Exchange, who, on being applied to, said that they purchased for Mr. Lancashire on the Manchester Stock Exchange, and that he refused to give the name of his principal. The Plaintiff filed his bill, alleging that the Defendant must be treated as the principal in the contract so entered into by him as aforesaid, and praying that the agreement for the purchase of the shares should be specifically performed; and that the Defendant might be decreed to pay to the Plaintiff the amounts which had been paid or might be paid by him in respect of calls, and to indemnify the Plaintiff from all future liability in respect thereof. The Defendant, by his answer, denied his liability. Mr. Southgate, Q.C., and Mr. Bagshawe, for the Plaintiff : The contract having been made with the Defendant for the sale of the shares, which is undisputed, the Plaintiff is entitled to call upon him to complete it, as he has failed to give in the name of a responsible purchaser. He might have elected to take the shares himself, but instead of that he gave in the name of an infant as transferee. He cannot discharge himself of his liability unless he can shew some usage of the Stock Exchange which clearly exonerates him. This, we submit, he has failed to do. Where the substituted purchaser is unable to contract, then the original contracting party remains liable. The usage of the Stock Exchange in such cases was fully considered in the case of Grissell v. Bristowe (1), where it was held that the final buyers of shares were at liberty to transfer the contract to any sufficient buyer who would take them, and would then be released from liability; but that case is no authority for exonerating a jobber when he has given the name of an infant as transferee. Here the vendor has become liable for calls, for which he is entitled to be indemnified by the jobber. The same principle was recognised in Hawkins v. Maltby (2); Castellan v. Hobson (3); Hogkinson v. Kelly (4); and Maxted v. Morris (5). Sir R. Baggallay, Q.C., Mr. Macnamara, and Mr. Higgins, for the Defendant : This case is governed by the authority of Maxted v. Paine (second action) (6), where the majority of the Court held that a jobber who had purchased shares had fulfilled his obligation by passing in a name to which no objection was taken within the time limited by the usage of the Stock Exchange, and that in the absence of fraud (1) Law Rep. 4 C. P. 36. (2) Ibid. 6 Eq. 505; Ibid. 4 Ch. 200. (3) Law Rep. 10 Eq. 47. (6) Law Rep. 6 Ex. 132. M. R. 1871 RENNIE v. MORRIS. M. R. 1871 RENNIE v. MORRIS. 1872 he could not be treated as an ultimate buyer for himself or be made liable for calls. That decision is directly applicable to the present case. There may be many intermediate purchasers between the jobber and the ultimate purchaser, and the jobber cannot be held liable for not inquiring into the responsibility of the person whose name is given him to hand in. There are ten days allowed by the rules of the Stock Exchange for the vendor to make inquiries. After that time the liability of the jobber is at an end. It does not, however, follow that the ultimate purchaser is not liable, but we contend that by the custom of the Stock Exchange, as well as upon principles and authority, the present suit cannot be sustained. Mr. Southgate, in reply:— The case of Maxted v. Paine (1), relied on by the Defendant's counsel, is not an authority in their favour, as the facts were different, the transferee there being a person capable of contracting. There is no usage of the Stock Exchange which affects the Plaintiff's right to indemnify, and his remedy is not barred by lapse of time. Jan. 11. LORD ROMILLY, M.R., after stating the facts of the case, continued:: There is no doubt that the Defendant acted bona fide; nor is any charge of fraud or collusion alleged against him. He bought and sold according to the established usage of the Stock Exchange. According to that usage, by which all members and all persons employing members of the said Stock Exchange for the purpose of buying and selling shares are bound, a jobber or dealer does not buy shares for his own account or for the purpose of taking a transfer of the same to himself, but for a re-sale, and is held to have fulfilled his contract with the broker from whom he buys if, on a day preceding the settling day on which the contract is to be completed, and called the "name-day," he furnishes to such broker the name or names of a certain person or certain persons, who will receive a transfer or transfers of the shares which he (1) Law Rep. 6 Ex. 132. contracted to purchase, and pay the price for which the same were bought, or some other marketable price for the said shares, the difference being made up by the jobber. According to the said usage a broker, who has purchased shares for a particular settling day, issues on the preceding name-day to the jobber from whom he purchased a ticket bearing his own name and address, and the name and address of the person or persons to whom the shares bought by him were to be transferred, with the price at which they were bought. Such jobber on the same day passes on this ticket to any jobber from whom he may have purchased as many of the shares in the same company for the same day; and it so passes from hand to hand until it is delivered by the jobber who has purchased so many shares from a broker to that broker. The lastmentioned broker then fills up a transfer in a printed form, inserting the name of his principal as transferor, and the name so given to him as transferee, and the price specified on the ticket as the consideration money for the transfer; and his principal having executed the transfer, he, on or within a reasonable time after the settling day, delivers it to the broker whose ticket was so passed, together with the share certificates, and receives from him the price specified on the ticket. If the price payable by the transferee should be less than the price at which the shares were originally sold, the difference between these prices would be paid to, or settled in account with, the broker of the transferor by the jobber to whom he sold. There is also a practice on the Stock Exchange which it is desirable to refer to in order to shew that it was not resorted to here, which is thus described in the evidence: "According to the said usage, and by the rules of the said Stock Exchange, ten days are allowed to the seller, that is the transferor, of registered shares for their delivery, during which time he can make inquiry as to the bona fides of the transaction, and the status of the intended transferee of the shares whose name may have been handed to him in manner hereinbefore described. The jobber or other middleman has no opportunity for making such inquiry, as immediately he receives the name he must pass it on. In the absence of any special bargain for indemnity, it is the duty of the seller, for his own protection, to inquire into and ascertain the bona fides of the trans VOL. XIII. R 2 M. R. 1872 RENNIE V. MORRIS. |