Casey v Bentley

JurisdictionIreland
Judgment Date08 May 1902
Date08 May 1902
CourtCourt of Appeal (Ireland)

CASEY
and

BENTLEY

Chancery Division

Appeal

Stock Exchange — Sale of shares — Custom of Stock Exchange — Refusal of Company to register transfer — Action by vendor for specific performance or rescission of contract — Regulation of Company empowering directors to refuse to register purchaser as transferee of shares.

Bermingham v. SheridanENR 33 Beav. 660, at p. 663.

Borland v. SteeleELR [1901] 1 Ch. 288.

Borland's Trustee v. Steel BrothersELR [1901] 1 Ch. 288.

Castellan v. HobsonELR L. R. 10 Eq. 47.

Coles v. BristoweELR L. R. 4 Ch. 3.

Cruse v. PaineELRELR L. R. 6 Eq. 641; L. R. 4 Ch. 441.

Evans v. WoodELR L. R. 5 Eq. 9.

Fenwick v. Wood Not reported, 6 June, 1870.

Founders CaseELR 20 Q. B. D. 576.

Hawkins v. MaltbyELR L. R. 4 Ch. 200.

Hodgkinson v. KellyELR L. R. 6 Eq. 496.

Kellock v. EnthovenELRELR L. R. 8 Q. B. 458; L. R. 9 Q. B. 241.

London Founders Association v. ClarkeELR 20 Q. B. D. 576.

Loring v. DavisELR 32 Ch. D. 625.

Maxted v. PaineELR L. R. 6 Exch. 132.

Nickalls v. MerryELR L. R. 7 H. L. 530.

Paine v. HutchinsonELR L. R. 3 Eq. 257.

Skinner v. City of London Marine Insurance CorporationELR 14 Q. B. D. 882.

Skinner v. London Marine Insurance CompanyELR 14 Q. B. D. 882.

Stray v. RussellENR 1 E. &E. 888, 914.

The London Founders Association v. ClarkeELR 20 Q. B. D. 576.

Walker v. BartlettENR 18 C. B. 845.

Ward & Henry's CaseELR L. R. 2 Ch. 438.

Wilkinson v. Lloyd 7 Q. B. 27.

376 THE IRISH REPORTS. [1902. CASEY v. BENTLEY. Stock Exchange—Sale of shares—Custom of Stock Exchange—Refusal of Company to register transfer—Action by vendor for specific performance or rescission of contract—Regulation of Company empowering directors to refuse to register purchaser as transferee of shares. A contract for the sale of shares in a registered company, with unlimited liability, was made through stockbrokers, subject to the Rules of the Stock Exchange. In accordance with the practice of the Stock .Exchange, the transferee of the shares paid the price of them to the vendor upon delivery to him by the vendor of a duly executed transfer, together with the certificate of the shares. One of the regulations of the Company provided that it should be lawful for the directors to decline to register the transfer of shares to any person not approved of by the directors as transferee, and that thereupon such transfer should be void. An application for registration of the transfer being subsequently made to the directors of the Company by the purchaser, they refused to register him as the transferee of the shares. The vendor issued an equity civil bill, claiming specific performance of the contract, and asking that the purchaser should be ordered to procure the shares to be registered in his own name, or in that of some other person. The civil bill was subsequently amended by adding a prayer for an indemnity and for rescission of the contract ; and the County Court Judge made a decree declaring the plaintiff a trustee of the shares for the defendant, and that the defendant was bound to indemnify the plaintiff against calls : Held, by Madden, J., that the inability of the defendant to register the transfer was the non-performance of a condition subsequent binding on the defendant, by reason of which the plaintiff was entitled to treat the conÂtract as at an end ; and that the shares should be re-transferred on return of the purchase money : Held, by the Court of Appeal (Lord Ashbourne, C., and Walker and Holmes, L.JJ., Fitz Gibbon, L.J., dissentience), that the contract for the sale of shares on the Stock Exchange did not import an undertaking by the vendor that the Company would register the transfer; and that the equity civil bill should have been dismissed. APPEAL from the Recorder to Madden, J., sitting as a Judge of the High Court to hear appeals from the Recorder. On the 31st January, 1898, the plaintiff through her stock Vot. I.] CHANCERY DIVISION. 377 broker, Mr. E. M. Kelly, agreed with 'the defendant to sell to Madden, J. him, and the defendant agreed to purchase two shares in the 1902. Dublin & Glasgow Steam Packet Company, of which theCASEY plaintiff L. was the owner, at the price of £3 17s. 6d. The agreement was • _ ENTLEY. entered into in the mode and manner usual in similar transactions on the Dublin Stock Exchange. In pursuance of the said agreement, a proper transfer of the shares from the plaintiff to the defendant was duly executed and delivered to the defendant with the certificate of the said shares, and the purchase money was duly paid on or before the 11th March, 1898. The said Dublin & Glasgow Steam Packet Company is an unlimited Company, duly registered pursuant to the Companies Act, 1862, and by the 15th Regulation of the Company it is proÂvided that " it shall be lawful for the directors to decline to register the transfer of shares to any person not approved of by them as transferee, and thereupon such transfer shall be void, and the directors shall not be compellable to give any reason for such refusal." The defendant made several applications to the directors of the Company (accompanied by the said instrument of transfer executed by plaintiff and defendant, and the certificate), to have his name entered in the register book of the Company as holder of the said two shares, but the directors in exercise of the power aforesaid refused to register the defendant as the holder of the said shares. The Company continued, notwithstanding the aforesaid sale, to pay the dividends on the shares, as the same fell due to the plainÂtiff ; and the plaintiff on the 17th October, 1900, in consequence of a letter from the defendant's solicitor threatening proceedings, paid to the defendant under protest the sum of £3, being the dividends which she had received from the Company in respect of the said shares. On the 15th January, 1901, the plaintiff issued an equity civil bill before the Recorder of Dublin, claiming specific perÂformance of the agreement so far as the same remained unperÂformed, and that the defendant should be ordered to obtain the registration of the said shares in the books of the Company in his THE IRISH REPORTS. - [1002. own name or in that of some person otheri than the plaintiff, and damages for the non-performance of the said agreement. The equity civil bill came on for hearing before the Recorder, when it was ordered that the plaintiff should be at liberty to amend the civil bill by adding a prayer for an indemnity, and also for a rescission of the contract. The case came on again on an amended pleading, when the Recorder made a decree in the following terms :—" On hearing the oral evidence of the defendant, and it appearing that the defendant though acting in good faith was unable to obtain the consent of the directors of the Company to the registration in his name of the shares, the Court doth declare that the plaintiff is not entitled to enforce by specific performance such registration as was prayed for ; and the Court doth further declare that inasmuch as the sale and transfer of the said shares has been made through and in accordance with the rules of the Stock Exchange, the plaintiff, in accordance with such rules, is not entitled as a matter of right to enforce such registration or to rescind the contract, provided the defendant acting in good faith has endeavoured but failed to obtain registration by the Company, and doth therefore refuse to direct that the contract should be rescinded; and the defendant offering in open Court to give to the plaintiff a proper indemnity against liability on her part in respect of said shares, let such indemnity be given accordingly. In case the plaintiff elects to accept same let each party abide her and his costs in this action ; and in ease the plaintiff declines such indemnity, let this action stand dismissed with £8 8s. costs to be paid by the plaintiff." The plaintiff appealed, when, after hearing J. Leech for the plaintiff, and Serjeant _Dodd and Whitaker for the defendant, MADDEN, J., who heard the civil bill appeal, delivered judgÂment as follows :— This appeal involves an important question in Company law, which has not yet been decided. On the 31st January, 1898, the plaintiff entered into an agreeÂment through a broker on the Stock Exchange, Mr. E. M. Kelly, for the sale to the defendant of two shares in the Dublin and Tn. I.] CHANCERY DIVISION. 379 Glasgow Steam Packet Company for the sum of £3 17s. 6d. The Madden, J. purchase money was paid, and a transfer of the shares executed 1902. and delivered to the defendant on the 11th March, 1898, along CASEY v. with the certificate. The Company has been registered under the BENTLEY. Companies Acts, with unlimited liability in respect of shares, and the plaintiff's object in selling the shares appears to have been to get rid of this liability. The defendant has been repeatedly called upon to complete the transaction by procuring the registration of the transfer to him. This has not been done, not through any default on his part, but by reason of the refusal of the directors to accept him as registered owner of the shares. It is unnecessary to consider the reasons assigned for this refusal, inasmuch as under the Articles of Association the directors possess an absolute discreÂtion in this matter. The plaintiff's case, as now presented, seeks for a declaration that the contract is at an end, the defendant having failed to perÂform a condition subsequent to the entering into the contract, the duty of performing which rested upon him, and which is necesÂsary to its completion, that is to say, the registration of the transfer. As a consequence she seeks a re-transfer of the shares upon the terms which I shall afterwards state, and the equity civil bill is to be taken as amended accordingly. The defendant contends that the contract between him and his vendor was completely carried out when the purchase money was paid and the...

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