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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> City of Glasgow Bank Liquidation - (Wishart's Case) John Wishart and Others (Galletly's Executors) v. The Liquidators [1879] ScotLR 16_808 (19 July 1879) URL: http://www.bailii.org/scot/cases/ScotCS/1879/16SLR0808.html Cite as: [1879] SLR 16_808, [1879] ScotLR 16_808 |
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The trustees and executors of a deceased shareholder in a joint-stock bank at their first meeting directed their law agent—who was one of their number—“to take all steps necessary to make up a title in the person of the trustees and executors to the heritable and moveable estate left by deceased, and generally to do everything he may think necessary for the preservation of the estate.” The minute of the second meeting bore that the agent” had had the confirmation sealed with the seal of the High Court of Probate in England, as required by statute, had exhibited the same to the various companies (except two) in which the deceased held shares, and got the whole stocks and shares transferred to the executors' names, with the exception of the above two, which would be so transferred before the end of the week,” and that “the trustees approved of all that had been done.” They subsequently, on his advice, resolved to sell the stock of the bank in question, but they had done nothing towards a sale when the bank failed. The confirmation had been sent to the bank by the agent with a request that a new certificate in the names of the executors should be returned, and in consequence their names were entered in the register of members. In a petition for rectification of the register and of the list of contributories by the executors other than the agent, held after proof that the agent had acted without authority in
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getting the stock transferred to the petitioners—a step not necessary under the 24th section of the Companies Act 1862 to give them a title to sell; and (2) that they had not in any way homologated his act— petition therefore granted.
The petitioners in this case were John Wishart, Gilbert Heron, and James Nicolson, three of the accepting trustees and executors of the late David Galletly. There was one other accepting trustee and executor, Mr John Galletly, S.S.C. The following were the chief averments in the petition:—
Mr Galletly died at Edinburgh on 17th January 1878, and a meeting of, inter alios, the petitioners was held in his house after his funeral, when Mr John Galletly was appointed to be agent and factor in the trust, and was directed, as the minute of meeting bore, “to place the trust-disposition and settlement of the testator on record, and take all steps necessary to make up a title in the person of the trustees and executors to the heritable and moveable estate left by deceased, and generally to do everything he might think necessary for the preservation of the estate.” No other instructions were given by the petitioners to Mr Galletly, who proceeded to expede confirmation of the moveable estate.
The confirmation included £2400 consolidated stock of the City of Glasgow Bank which belonged to the deceased, and a dividend of £144 which had accrued at the date of the oath to the inventory. With reference to this stock the said Mr John Galletly, without further communication with the petitioners, addressed the following letter to the agent and manager of the bank at Edinburgh:—
“Wm. Bain, Esq. 8 th March 1878.
“ Mr Galletly's Trust.
Dear Sir—now send you (1) Bank passbook, (2) certificates, six in number, for £2400 stock held by deceased, and (3) confirmation of deceased's executors, dated 6th currt., and will be glad to receive a discharge of the balance due deceased on current account for signature by the executors, and new certificate of the above stock in their name.
Please either destroy my letter of obligation of 24th January, or write me, holding it to have been implemented.”
Following upon this letter and enclosures the usual entry was made in the transfer register of the bank, and the names of the executors were subsequently entered in full in the stock ledger. Thereafter in the annual return made to the registrar of joint-stock companies the holders of the stock were described as “Executors of David Galletly.”
The petitioners further averred that they “never agreed to become, and did not become, partners of the said bank. They gave no authority to Mr Galletly to make them partners thereof, nor were they aware till after the bank stopped payment of the terms of the said entries in the bank's transfer register and stock ledger. They have now ascertained and explained that a dividend of said stock was received by the said John Galletly on behalf of the executry in the month of August 1878, but they granted no mandate or other writing in connection therewith, nor did they ever see any certificate of the said stock as standing in their names. The petitioners never contemplated holding the said stock. They had been advised that they had no power to do so, and had resolved to realise the whole stocks and shares of the deceased, and were in course of doing so when the bank stopped payment.” They also averred that the 38th article of the contract of copartnery of the bank was not complied with. The article is:—“Every assignment of shares in security, or mortis causa, and confirmations thereof by right of succession, shall, after being completed, be recorded in a book to be kept for that purpose, and such deeds, transference, assignments, and confirmations shall be delivered or returned to those in right of the same after having marked thereon a certificate of the registration thereof: And it is hereby declared that the production of such writings to the said manager or ordinary directors for the purpose of registration shall ipso facto infer the acceptance of the capital stock therein specified, and the liabilities of the parties having right to the same as partners of the company; but it is hereby declared that no purchaser or other assignee of, or successor to, shares so acquired shall be recognised as a partner until the writing constituting his title is recorded in the books of the company in manner above specified.” In these circumstances the petitioners submitted that their names should be removed from the first part of the list of contributories, and transferred to the second part thereof, so as to appear in said list as liable for calls only in their representative capacity—(1) Because the petitioners never agreed to become, and did not become, partners of the said bank; and (2) because in any view they never agreed to become, and did not become, partners in their individual capacity, or otherwise than as representing the deceased.”
There was a proof, the purport of which will be found in the opinions of the Court infra.
Argued for the petitioners—It was not necessary for executors to become shareholders in order to transfer shares belonging to the deceased — Companies Act 1862 (25 and 26 Viet. c. 89) sec. 24. And accordingly a broad distinction was drawn in England between executors and trustees. There were many cases in which executors were found not liable even where they had drawn dividends— Blakley's, Armstrong's, Gouthwaite's, Crossfield's, Doyles', Baird's, and Bulwer's cases. In Buchan's case it was held that the executor intended to become a shareholder, and in Spence the executors had themselves acquired the shares. In the present case the facts in favour of the petitioners were peculiarly strong. They intended to sell the shares, for they were told, and told rightly— Brownlie's Trs., ante, p. 731—that they could not legally continue to hold them. It was therefore plain that they did not intend to become shareholders, and they had done nothing to manifest a contrary intention. The minutes of their meetings did not authorise the agent to do what he did, if at least that involved his fellow executors in the liabilities of shareholders. Nor had they done anything to homologate his acts. They knew nothing about the dividends, and gave him no mandate. But in any case, as already shown, the drawing of dividends was not a fatal act. Then, again, the formalities required by the 38th article of the bank's contract of copartnery had not been complied
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with, and that vitiated registration— Macdonald Hume. Authorities— Blakley, 1850, 13 Bevan 133, 3 Mac. and G. 726; Armstrong, 1849, 1 De. J. and S. 565; Gouthwaite, 1850, 3 Mac. and G. 187, 3 De J. and S. 258; Crossfield, 1852, 2 De J., M., and G. 128; Doyle, 1850, 2 Hall and Twells, 221; Baird, 1864, 5 Ch. App. 725; Bulwer, 1864, 33 Bevan 435; Fearnside v. Dean, 1865, 1 L.R., Ch. App. 231; Buchan, May 20, 1879, ante, p. 512; Spence, 1853, 17 Bevan 203; Macdonald Hume, February 9, 1879, ante, p. 290.
Argued for the respondents—The question was, had the executors by their actings assumed the position of shareholders? Now, whatever the meaning of the first minute was, the second must be taken as homologating what the agent had done, for the petitioners, as the minute bore, knew what he had done, and approved. As to the informalities, these were of no moment when the registration had been otherwise fully completed— Bell's and Cochrane's cases.
Authorities — Ness v. Armstrong, 1849, 4 Welsby, Hurlston, & Gordon, 21; Armstrong v. Burnett, 1855, 21 L.J., Ch. 473; Bell, January 22, 1879, ante, p. 234.
At advising—
Now, the facts applicable to this part of the case are shortly these—the agent Mr Galletly having obtained confirmation on the 6th of March, wrote upon the 8th of that month to the agent of the City of Glasgow Bank in these
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Now, having got this certificate and the documents relative to the trust-estate, a meeting of the trustees was called on the 3d of April, being the first regular meeting of the trust at which Mr Galletly reports verbally what had been done. The minute of that meeting is printed, and it bears that Mr Galletly stated that after making the necessary investigation into the deceased's affairs he had prepared and given up the inventory of his estate, and that he had got the whole stocks and shares transferred to the executors' names. The minute bears that the testament-testamentar was produced, but it does not appear from the minute, and I do not understand from the evidence, that any of the certificates or other documents which Mr Galletly had obtained from the time of making up his title were laid before the meeting. As I understood the argument of the respondents, it was upon the terms of this minute that they mainly relied as showing that the petitioners were aware of the fact that their names had been entered as shareholders of the bank, and that they were therefore properly put upon the list; so that the question is, whether that passage must be held to have conveyed to the minds of the executors that they had been registered as shareholders in the City of Glasgow Bank, and not only in that bank butin all the other companies in which the truster held stock. In disposing of this question the passage must, as I conceive, be read as the minute of the 21st of January must be read, with reference to the position which the petitioners occupied as executors under Mr Galletly's settlement. They were not under the provisions of that settlement entitled to acquire bank stock, or even to retain or hold it as partners of the bank. They had been informed by their agent that such was their position, and the concluding paragraph of this minute bears—“Mr Galletly gave it as his opinion that the trustees had not the power to hold on any of the stocks or shares held by deceased, but that the same should all be realised.” Now, such being their position, I am not prepared to hold that this passage, taken as it stands, is sufficient to justify the inference which was in argument attempted to be drawn from it, that the petitioners were thereby informed that they had been registered as shareholders of the bank, and as such were holding bank stock, and so doing the very thing which in the concluding part of this minute they are advised it was beyond their power as executors, and consequently contrary to their duties as executors, to do. Taking the minute as it stands, and assuming it to state correctly what was communicated to the meeting, that is the conclusion, even upon the minute as it stands, I should be disposed to come to, and to hold that its terms are altogether insufficient to warrant such an inference. But it is by no means certain that the minute states correctly what actually occurred. Mr Galletly's evidence as to this is I think important, more especially as the minute was not written out at the time, but was extended from jottings some time afterwards. As to this Mr Galletly says in his evidence—“The first meeting of the trustees thereafter was held on 3d April 1878. After the meeting I drafted No. 12 of process. (Q) The minute was not read to that meeting, was it?—(A) No; I merely reported verbally and very shortly what I had done. (Q) The minute was prepared as a record of what had occurred, was it?—(A) As a record of what had been done between the funeral and the 3d of April. (Q) In the minute it is stated that you ‘had had the confirmation sealed with the seal of the High Court of Probate in England, as required by statute, had exhibited the same to the various companies (except two) in which the deceased held shares, and got the whole stocks and shares transferred to the executors' names, with the exception of the above two, which would be so transferred by the end of the week’—do you recollect exactly the words that you used in conveying that information?—(A) I think as nearly as possible it was that I had got the confirmation sealed and exhibited to the different companies except two, and that I had procured certificates in favour of the executors.” Therefore there was nothing said there by Mr Galletly according to his own evidence about transferring shares from the one party to the other, but merely that he had got certificates of the shares. And the evidence of Mr Nicolson is confirmatory of this. He says—“There was no meeting between 21st January 1878 and 3d April 1878, nor was I consulted between these dates. I did not know what steps Mr Galletly was taking further than that he came to me to sign the inventory before the justice of the peace. On the 3d April Mr Galletly reported what he had been doing; I have a very distinct recollection that Mr Galletly had the confirmation in his hands sitting at his own table, and he reported that he had now expede confirmation, or this confirmation, or some such expression as that, and intimated to the different companies in which David Galletly had stocks. (Q) Do you remember anything more specific than that?—(A) Nothing; I am quite positive there was nothing more specific. (Q) Do you recollect these words being used, that he had got the whole of the stocks and shares transferred to the executors' names?—(A) No,
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It is of importance, I think, also to observe in this case that there was no mandate by these parties to anybody to draw the dividends, and no dividends were drawn by them. That was done by Mr Galletly alone, without any specific instructions, for though it bears to be per mandate, no mandate was ever given. Upon the whole, therefore, though the case is attended with some nicety with reference to that part of it which refers to the minute of 3d April, I have been unable to come to any other conclusion than that, in the present instance, the names of the petitioners were inserted in the register of this bank without authority from them, and that they never knew that they had been made shareholders of the bank.
I think your Lordships are all clear, and have always been clear, that an authority of that kind standing alone will not entitle an agent to put the names of the parties upon the stock register of any bank. Unless there has been more than that, there is no authority at all. Any evidence connecting these parties with that registration is therefore to be gathered, if at all, from their having subsequently approved of it. It is perfectly clear that if they did to any extent subsequently approve of it, it was still upon the footing that the stock was forthwith to be sold, and, as Lord Mure has mentioned, even the drawing of the dividends was not their direct act, but was the act of Mr Galletly, who does not seem to have sought authority for it. Therefore it seems to my mind clear enough that, excepting in regard to the National Bank, Mr Galletly in putting their names on the register as executors did what was not necessary, and what he wasnot entitled to do in order to carry out his own view about a sale, and that he did not inform them or obtain their authority to do this on the footing that they were to be made shareholders of the bank. Now, that seems to me to constitute a very great distinction between this case and any of the cases that we have hitherto dealt with. If executors continue
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I have only further to say, and I think it right to say, that it appears to me that supposing we had found ourselves constrained to hold that there was a general liability against these petitioners, I could not come to that result with reference to Mr Nicolson, for if we were separating the cases they stand in a very different position. He signed the general authority in the outset. The only other minute that he signed was the minute of 3d April. Mr Galletly expressly depones that the meeting of the 17th took place at three o'clock, and Mr Nicolson only came in at twenty minutes to four, and he further says that the minute of the meeting of the 3d was read over before he came in. It was not read over after he came in, and if it was read to him at all, it was never read over till after the failure of the bank, so that Mr Nicolson was never made acquainted with its contents so far as we see. He swears expressly that he was not. No doubt his name is at it, but Mr Galletly explains that that was done subsequently, and that he was asked to put it there without reading it over. Now if that be so, there is nothing under his signature to connect him with this registration except the minute about the National Bank stock, and, as I have already said, that stood in this way, that it was simply because the National Bank had a rule that they would pay no dividend without registration that that was done. Therefore, even if I had been of opinion, which I am not, that some of these trustees were liable, I could not apply that to the case of Mr Nicolson. He may have been fortunate, but when a party in a case of this kind is unfortunate we do not let him off on that ground, and we are not to come to a contrary conclusion if he has been fortunate in this question of liability.
With that explanation I entirely concur in the opinion which has been delivered by Lord Mure.
The question of fact to be determined in this case is, whether these executors did authorise the transfer of the stock to their names so as to make them owners or shareholders, or merely authorised the making up of a title by confirmation? On that question I think they are entitled to the full benefit of the presumption to which I have referred, because it appears that from the very first meeting of the trustees they had their law agent's advice that they were not entitled to hold the shares, and because I think their resolution as recorded in the minutes and stated in their evidence—which upon that matter I entirely believe—is that it was their intention without delay to realise the whole of the testator's stocks, and to put the price into securities of a safe character. But giving them the benefit of that presumption, I confess I have felt the question of fact to be one of great difficulty. I understand all of your Lordships are of opinion that the petitioners are entitled to have their names removed from the register, and although I have had more difficulty than your Lordships in reaching that result, at least in regard to two of the petitioners, I do not withhold my assent to the judgment which your Lordships propose to pronounce.
There have been two points raised entering into this question of fact with which I am now dealing—the first being whether Mr Galletly gave authority to the bank to put the shares in the name of the executors? and the second, assuming that the bank were entitled, so far as Mr Galletly was concerned, to register the shares as they did, whether his act was authorised by the executors or subsequently approved of by them? On the first of these points I am of opinion that
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That, however, only advances one to the remaining question, whether the executors authorised Mr Galletly to do this, and there it is that I feel constrained—giving considerable weight to the unanimous opinion of your Lordships to that effect—to give my concurrence to the judgment which is to be pronounced. It is clear, I think, that there was no authority antecedently given to Mr Galletly to transmit the confirmation for registration, and request the transfer of the stock to the names of the executors in the books of the bank. At the meeting after the funeral the authority given was only to make up a title to the shares, and I have already stated in the case of Macdonald Hume, ante, p. 290, referring to what occurred with Mr Dickson, one of the petitioners in that case, that in my opinion an authority merely to make up_a title to stock in the person of an executor does not infer authority to do more than take out confirmation, and does not therefore infer authority to make the parties confirming partners of the bank. But the difficulty and nicety of this case lies in what followed. Assuming, as I do, that Mr Galletly had not authority to make these gentlemen partners of the bank, the question remains, whether his act in that respect was not adopted by the subsequent proceedings?
In the minute of the 3d April it is expressly stated that the agent “had got the whole stocks and shares transferred to the executors' names,” and I confess that if it had appeared that a statement in these terms had been made to the executors, and, as the minute bears, they had approved of what had been done, I should have had very great difficulty in saying that they had not thereby adopted Mr Galletly's act. It may be quite true—I believe it to be quite true in this case—that none of these executors knew that the result of having the shares transferred to their names would be to make them personally liable as partners; but that is not the question we have to deal with. We know that in the majority of cases—at least in many cases—trustees who knew that their names were registered in the books of the bank did not know that that would make them personally liable; and if it appeared as matter of fact that the petitioners were informed that the shares had been placed in their names, and they had approved of what had been done, even although they did not know the legal consequences of that act, I should have been unable to hold that they were free from the consequences. But taking the case as a whole, I think it appears that the language used in this minute does not correctly state what was in fact said at the meeting. Mr Nicolson distinctly depones on this matter of comparatively recent occurrence—and I am satisfied he gave his evidence with all truthfulness—that all that was said was that confirmation had been obtained and intimated to the various companies. Mr Galletly also says that the words embodied in the minute were not used at the meeting. What he believes he said was that certificates of the shares had been got; and I am not prepared to say that the mere mention to persons who had given no antecedent authority for a transfer of the shares to their names that certificates had been got was necessarily enough of itself and alone to inform them that they had been made shareholders. That being so, the proceedings at the meeting of 3d April are not, I think, enough to infer adoption of Mr Galletly's act. The chief difficulty I have had has arisen from what followed after that meeting; for, in the first place, the minute was written out and signed byall the trustees, and, in the next place, at the subsequent meeting of 17th April, which we find from the minute was attended by Mr Wishart, Mr Nicolson, and Mr Galletly, it appears that the minute of 3d April was read over and approved of. But while that raises the difficulty, as it seems to bring home to the parties signing the minute of 3d April and present at the meeting of 17th April knowledge that the shares had been transferred to their names, I have come to the conclusion that, taking the evidence as a whole, the fact of such knowledge has not been made out. It must be observed that the minute is a record subsequently prepared of what was said to have taken place before. The reading over of a minute recording the business of a previous meeting is often not regarded with the close attention which the actual business taking place at the meeting receives, and the parties might not so observe or note the language as to lead them to take exception to the form of expression used in regard to what had been reported to them at the previous meeting. If language such as is used in this minute of 3d of April had been contained in a document signed by the parties and communicated to the bank, and which therefore the bank were entitled to rely upon, I confess I should have been constrained to decide the point differently; but the specialties of the case which seem to me to warrant the judgment in favour of the petitioners are these—that, in the first place, there was a clear intention to realise the stock from the first without delay, and plainly therefore no possible object that the executors could
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On these grounds I concur with Lord Mure and Lord Deas in thinking that all of the petitioners are entitled to be relieved from responsibility. But I feel bound to add that I think with Lord Deas that there is a difference in the case of the petitioners individually if we were to go upon specialties. The case of Mr Wishart, when one reads his evidence as a whole with reference to the minute of 3d April, and the case of Mr Heron—who unhappily through the misfortune of the bank failing has entirely lost his memory—appear to me to be different, and to present circumstances more serious than that of Mr Nicolson. The letter of Mr Heron of 20th April 1878 in reply to Mr Galletly's letter of the 18th shows that the minutes were communicated to him, and put him very much in the same position as Mr Wishart; and there is altogether more evidence in support of the view that they had knowledge of what was done than I think there is as against Mr Nicolson. The peculiarity of Mr Nicolson's case arises from the circumstances that he was not present when the minute of 3d April was read over. He does not appear to have read that minute when he signed it; and as the case against him really depends upon the statement in that minute, I think this would have made a specialty in his favour, even if we had been constrained to hold that the case against the other executors had been made out. But as I have said, I concur with your Lordships in thinking that while the case is one of difficulty as regards Mr Wishart and Mr Heron, the application should be granted in regard to all of the petitioners.
The Court therefore ordered the names of the petitioners to be removed from the first part of the list of contributories.
Counsel for Petitioner— Dean of Faculty (Fraser)— Mackintosh. Agents— Boyd, Macdonald, & Co., S.S.C.
Counsel for Respondents— Kinnear— Balfour— Asher— Lorimer. Agents— Davidson, & Syme, W.S.
