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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Morrison v. Harrison and the Forth and Clyde Junction Railway Co. [1876] ScotLR 13_273 (3 February 1876) URL: http://www.bailii.org/scot/cases/ScotCS/1876/13SLR0273.html Cite as: [1876] SLR 13_273, [1876] ScotLR 13_273 |
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Page: 273↓
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A executed a transfer of a number of shares in a railway company in favour of B. More than a year afterwards A was sequestrated. After the sequestration had taken place, a memorial of the transfer was sent by B to the secretary of the company, and entered in the register of transfers. In an action brought at the instance of the trustee on A's sequestrated estate, for the purpose of having the deed of transfer reduced and the shares entered in his own name— held (1) that the act of sequestration, although it might be equivalent to an intimated assignation to these shares in favour of the trustee, had not the effect of rendering him a partner in the company until he complied with the statutory provisions for completing a transfer; and (2) that as B had complied with these provisions and was entered in the register of shareholders, his right could not now be cut down by the trustee.
The pursuer in this action was Mr James Maidment Morrison, trustee on the sequestrated estate of George Merret, railway contractor, who was sequestrated in the year 1856. A considerable part of the bankrupt's estate consisted of shares in the Forth and Clyde Junction Railway. In June 1855, being more than twelve months previous to the sequestration, the bankrupt handed over fifty of these shares to Thomas Harrison, the defender, and he afterwards signed a transfer of them to him. This transfer was not delivered to the secretary of the defenders, the Forth and Clyde Junction Railway Company, in terms of “the Companies Clauses Consolidation (Scotland) Act, 1845,” nor was any intimation of it made to the Railway Company previous to the bankruptcy of Mr Merrett, nor until 17th September 1857. At the date of the sequestration the shares stood in the register of the Company in the bankrupt's name. On the 17th September 1857 the transfer was received by the secretary, and on the 28th of the same month a memorial thereof was entered in the register of transfers of said Company.
The trustee brought the present action, in the first place, to have this memorial of the deed of transfer reduced, and then to have it declared that he had a right to the shares, and that the Company were bound to enter him as the owner of these shares in their register. He pleaded that he was entitled to decree on the ground that the transfer to the defender had not been delivered or intimated to the Company, or the memorial entered in their register of transfers until after Mr Merrett's sequestration.
The defender Mr Harrison maintained that as he had acquired right to these shares prior to the cedent's bankruptcy, he was empowered to complete his title by enrolment in the register of transfers. Appearance was entered for the Company, but they took no part in the question of the ownership of the shares. Upon 18th November 1875, Lord Young pronounced the following interlocutor: — “The Lord Ordinary having heard counsel for the pursuer, and considered the record and productions, sustains the defences and assoilzies the defenders from the conclusions of the summons, and decerns: Finds the pursuer liable in expenses, and remits the accounts when lodged to the Auditor to tax and report.”
The pursuer reclaimed.
Argued for him—In virtue of the 102d section of the Bankruptcy (Scotland) Act, 1856, the position of the pursuer with regard to these shares was that of an assignee, of whose assignation intimation has been made, and he was therefore entitled to cut out a prior assignee whose right was not intimated. The intimation to the Company of the transfer to Mr Harrison was made after the sequestration, and therefore subsequent to the completion of the pursuer's right. The bankrupt could not be divested of these shares at the time of his sequestration, because his transfer to Mr Harrison was still unintimated. The fact that the trustee has never complied with the formalities relating to transfers provided by the statute was immaterial. The Act was not a code of transfer, and did not exclude other means of legally vesting shares. These statutory provisions
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were merely for the convenience of the companies. Argued for the defender Harrison—The intervening bankruptcy could not put the trustee in a better position than that of a transferee who had made intimation or notification of the transfer in his favour. But that was not enough to render him a partner, and give him a right to these shares, for the Act had made special provisions for the completion of a transfer and the constitution of partnership. Mr Harrison having completed his right by having the transfer to him entered in the register, bould not now be cut out by the trustee, who had never yet done this.
Authorities—2 Bell's Com. 16 and 18; Bankruptcy Scotland Act (1856); the Companies' Clauses Consolidation (Scotland) Act, 1845, § 16; Eadie v. Mackinlay, 7 Feb. 1865; Hill v. Lindsay, Feb. 7, 1846, 8 D. 472; Redfearn v. Sommervails, 1 June 1813, 5 Pat. Ap. 707; Connal & Co. v. Daunt & Co.'s Inspectors and Others, July 18, 1868, 40 S. J. 624; Wertherly v. Turnbull, June 3, 1824, 3 Sh. 92; East Lothian Bank v. Turnbull, June 3, 1824, 3 Sh. 95; Turnbull v. Allan & Son, March 1, 1833, 11 Shaw, 487; Thomson v. Fullarton, Dec. 23, 1842, 5 D. 379; Copeland v. North Eastern Railway Co., April 26, 1856, 6 Ellis & Black-bum, 277; The Queen v. General Cemetery Co., May 1856, 6 Ellis & Blackburn, 415.
At advising—
I do not know that I quite concur in all that has been said in the course of the argument as to the code of procedure laid down in the statute and the consequence of any deviation from that code. No doubt the statute lays down in a clear manner the course to be pursued in a transfer of shares, but I doubt if that excludes any other mode of transfer habile to the law.
But there are certain additional proceedings necessary before a party can be put upon the register. The first question in this case is whether there has been a valid transference from the bankrupt to the trustee. But granting that there has, the case of the trustee is not advanced one bit. He says that he holds an assignation to these shares, which has been intimated. But the question is, is he a partner? The right to become a partner is surrounded by conditions imposed by statute, and which the secretary of the company is bound to observe. Intimation must be given to him, and an entry of the transfer made in the register of the Company, which is followed by all the consequences of partnership.
It is clear, then, that a mere intimated assignation is not in itself sufficient to make the assignee a partner. Therefore I am of opinion that Mr Harrison, who went to the register and had his transfer entered, has the right to these shares, and that the trustee has none, and never can have, since he cannot now disturb that acquired by the registered transferee. The trustee never was a partner, because he never took the proper steps to make himself one.
I think it is plain that mere assignation is not the proper mode of completing a right of this kind at all. Assignation is the transmission of a jus crediti in its original conception—a mandate from the cedent. The purpose of the intimation of an assignation is twofold—first, to prevent the debtor from paying to his original creditor; and second, to show that the assignee is in future to be the sole creditor. These principles are not applicable to the transfer of a bilateral right like partnership. The position of a partner is not conferred by the mere appointment of the trustee in a sequestration; indeed, that position may often not be a proper thing for him to undertake. In short, the transmission of a share in a company is a thing sui generis, not to be governed by the same principles which regulate the transmission of a unilateral debt.
It is remarkable, if this question was raised that it has never yet been determined either in England or Scotland. I do not say that this is the case, but it may be so. And if so, I account for it in this way—that individuals having property of this description have seen so plainly that there is only one way of having that property transferred—that no practical difficulty has really ever been felt.
And I account in this way for the silence maintained by the trustee for these last twenty years, during which Mr Harrison has been dealt with as the owner of these shares, and has, I suppose, been drawing the dividends. I am quite clearly of opinion, on the grounds stated by your Lordship, that Mr Harrison has the only completed right to the shares. He had a formal deed of transfer, although it was not registered at the date of the sequestration. Then there arose that race between him and the trustee which often does arise in similar cases, where the party holding his security, if first infeft, cuts out the trustee. Now, I apprehend that Mr Harrison did proceed to present his transfer, that it was received, and that he became a shareholder. But it is said, on the other hand, that the act of sequestration operated as an intimation of the transfer of these shares to the trustee. Assuming that it did, what then? The trustee is, at least, in no better position than an assignee after intimation. But this is not sufficient to give him the character of a shareholder. If it was, it would create an unmanageable state of things. Companies would require to keep a register of intimations. In short, it would give rise to a variety of irregular and difficult questions, and cause perfect confusion. But the Companies Clauses Act has regulated the whole proceedings necessary to render a transfer of shares valid and complete. And the trustee has not conformed to the regulations laid down.
It is quite possible that the trustee might have had a right to compel the bankrupt to grant a transfer of these shares to him. But the bankrupt in this case would, as an honest man, have said:—“I have already transferred these shares to another. Your course is to go to the register with your decree in the sequestration, and get entered.” This the trustee never did.
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The Court adhered with additional expenses, which were awarded both to Mr Harrison and to the Railway Company.
Counsel for Pursuer— Balfour—Keir. Agents— H. & A. Inglis, W.S.
Counsel for Defender (Harrison)— Dean of Faculty and M'Laren. Agents— Millar, Allardice, Robson, & Innes, W.S.
Counsel for the Railway Company— R. V. Campbell. Agents— A. J. & J. Dickson, W.S.
