Hamilton v Young

• Jurisdiction: Ireland
• Judgment Date: 03 June 1881
• Date: 03 June 1881
• Court: Chancery Division (Ireland)

V. C.

HAMILTON

and

YOUNG.

In re Bloye's Trusts 1 Mac. & Gor. 488.

Robertson v. NorrisENR 1 Giff. 421.

Greenlaw v. KingENR 3 Beav. 49.

Gillett v. Pepprcorne Ibid. 78.

Ex parte Cooke, In re Strachan 4 Ch. Div. 123.

Meyer v. Dresser 16 C. B. (N.S.) 646, 660, 668.

Bostock v. JardineENR 3 H. & C. 700.

Robinson v. MollettELRELRELRELR L. R. 7 H. L. 802; L. R. 7 C. P. 84; L. R. 5 C. P. 646. See per Jundge Wille, whose judgment was ultimately upheld: L. R. 5 C. P. 656.

Ex parte Dyster, In re MolineUNK 2 Rose 349.

Wilson v. ShortENR 6 Hare 366.

Brookman v. RothschildENRENR 3 Sim. 153; 5 Bligh (N. S.) 165.

Gillett v. PeppercorneENR 3 Beav. 78.

Grissell v. BristoweELRELR L.R. 3 C. P. 112; on appeal, L. R. 4 C. P. 36.

Taylor v. StrayENR 2 C. B. (N. S. ) 175.

Duncan v. HillENR L R. 6 Ex. 255.

Sutton v. Tatham 10 Ad. & Ell. 27.

Bayliffe v. Butterworth 1 Exch. R. 425.

Pollock v. Stables 12 Q. B. 765.

Robinson v. MollettELRELR L. R. 7 H. L. 802; L R. 7C. P. 84; L. R. 5 C.P. 646.

Ex parte Cooke, In re Strachan 4 Ch. Div. 123.

Jennings v. BroughtonENR 5 De G. M. & G. 126.

Clegg v. EdmonsonENR 8 De G. M. & G. 767.

Kimber v. BarberELR L. R. 8 Ch. App. 56.

Smith v. Kay 7 H. L. Cas. 750.

Brookman v. RothschildENR 3 Sim. 153.

Gillett v. PeppercorneENR 3 Beav. 78.

Downes v. GrasebrookENR 3 Mer. 200.

Sutton v. TathamENR 10 Ad. & E. 27.

Mollett v. RobinsonELRELR L. R. 5 C. P. 646; L. R. 7C. P. 84; L. R. 7 H. L. 802.

Usage of Stock Exchange Stockbroker and customer Principal and agent Agent for sale Broker taking over shares to cover advances, where forced sale would be disadvantageous Unreasonableness of alleged custom.

Von. VII.] CHANCERY DIVISION. 289 March, 1881, Mary Molloy obtained from Mr. C. S. O'Donel, one V. a of the Divisional Magistrates of the city of Dublin, under the 28 1881. Vict. c. 43, entitled " An Act to Provide for the Security of Pro- NORTON v. perty of Married Women separated from their Husbands in Ire- itioLLoy. land," an order protecting her earnings and property acquired since the summer of 1872 (the commencement of her desertion), from her husband, and all creditors and persons claiming under him. The Stock and cash now in Court represented the balance of the said legacy of 200, to which Mary Molloy became so enÂÂtitled on the death of Christopher Thomas Browne, after making eertain payments thereout directed by the decree in the cause made on further consideration. Mr. William Kenny, in support of the application, relied on the 28 Vict. c. 43, and cited In re Coward and Adam's Purchase (1) ; and Nicholson v. Drury Buildings Estate Company (2). THE VIM-CHANCELLOR made the order sought. Solicitor for Mary Molloy : Mr. Arthur Cullen. HAMILTON v. YOUNG. V. C. 1881. Usage of Stock Exchange-Stockbroker and customer-Principal and agent- April 28, 29. Agent for sale-Broker taking over shares to cover advances, where forced June 3. sale would be disadvantageous-Unreasonableness of alleged custom. An alleged usage of the Stock Exchange, relied upon as authorizing stockÂÂbrokers who are entitled to sell Stock or shares of a customer for the realizaÂÂtion and payment of money due to them by such customer, to take over to themselves, at the price of the day, Stock or shares of the customer, for which there is an inadequate demand, where a forced sale would lower the selling price : Held, unreasonable, and incapable of being supported against a customer who was not proved to be acquainted with the existence of such alleged usage. (1) L. R. 20 Eq. 179. (2) 7 Ch. Div. 48. 290 LAW REPORTS (IRELAND). [L. It. I. V. a The Plaintiff had been for many years engaged in speculative transactions 1881. in Stocks and shares, and employed as stockbrokers the Defendants, who had, HAMILTON obtained loans for him on the security of bills of exchange, and by pledging v. shares. The Defendants had obtained for the Plaintiff from G. M. & Co., YOUNG. another firm of stockbrokers, a large loan on the security of shares and other property of the Plaintiff, including one hundred-and-ninety shares in the C. Mining Company. The Plaintiff was also largely indebted to the DefenÂÂdants. They called on him to close his account ; and on his failing to make any arrangement with them, the Defendants paid off the amount due on the Plaintiff's account to G. M. & Co., and obtained from the latter firm a transfer of the securities which they held, including the one hundred-and-ninety shares of the C Mining Company ; and on the next day, the Defendants sent to the Plaintiff a note of their sale, by his order, of the one hundred-and-ninety shares of the C. Mining Company, at the price of the day, charging him commission for such sale. The Defendants did not, in fact, sell the shares, but took the shares over to themselves at the price of the day. In an action by the Plaintiff to set aside the transaction, the Defendants relied on an alleged custom or usage of the Stock Exchange, entitling stockbrokers who have made advances to their customers, or who hold Stock or shares of their customers as security for general advances, on default by a customer in paying the sums due to the brokers, to take over to themselves, at the market price of the day, such shares or Stock, where an immediate sale of such shares or Stock would be likely to lower their price. No proof was given that the Plaintiff was aware of the existence of the alleged custom or usage, and he deposed that ht was ignorant of it :- Held, that the custom or usage relied on was unreasonable, that it could not be supported, and that the transaction should therefore be set aside. THE statement of claim sought to have the sale of one hunÂÂdred-and-ninety shares of the Plaintiff in the Cape Copper Mining Company, made by the Defendants to themselves on the 5th of April, 1879, when they were acting as the stockbrokers of the Plaintiff, and were also mortgagees of the said shares, declared void ; and that the Defendants might be declared to be trustees for the Plaintiff of the equity of redemption of the said shares. The facts of the case are fully stated in the judgment of the VICE-CHANCELLOR. VoL. VII.] CHANCERY DIVISION. 291 The Defendants, at the time of the transaction we impeach, V. C. were stockbrokers of the Plaintiff, i.e., agents for sale, and. they 1881. were also pledgees of these shares. In neither character had they HAMILTON the right to take over the shares. Even if the relation of stock- V CHING. broker and client had not existed, and the Defendants were mere pledgees of these shares, with an express power of sale, they could not sell to themselves. A mortgagee with a power of sale cannot sell to himself : Sugden's Vendors and Purchasers (14th ed.), p. 689 ; In re Bloye's Trusts (1) ; Robertson v. Norris (2) ; nor can a person in any fiduciary capacity : Greenlaw v. Sing (3). In Gillett v. Peppercorne (4), where a stockbroker who was emÂÂployed by the plaintiff to buy shares in a certain Company for him, sold his own shares to the plaintiff, concealing from him the fact that they were his, the sale was set aside. That is the converse of this case. That a fiduciary relation subsists between a stockbroker and his client, see Ex parte Cooke, In re Strachan (5). If, then, the Defendants in either character are disabled from purchasing, the alleged custom of the Stock Exchange cannot alter these well-established principles of law. The alleged custom relied on is uncertain, and is therefore bad in law. The alleged right to take over the shares, instead of selling them, is stated to arise only when the demand is inadequate, or when a danger exists of depressing the price by forcing the shares on the market. Who is to judge as to when the demand is inadequate, or whether there is a danger of depressing the market ? These elements of uncerÂÂtainty render the alleged custom bad. The custom is also unreasonable, and one that will not be supported by the Court. A usage which is not according to law cannot be set up to control the law : Meyer v. Dresser (6) ; _Rostock v. Jardine (7). A limited custom of this kind, even though not uncertain or unreasonable, cannot be supported against a person not proved to 292 LAW REPORTS (IRELAND). [L. R. I. V. C. have been acquainted with it : Robinson v. Mollett (1). In that 1881. case the custom was clear and definite, and. not vague and HAMILTON uncertain, as here. That a broker could not recover on a con YOUNG. tract, or for a debt, where the debt or contract arose out of a transaction in which he acted both as broker and principal, was held, in Ex parte Dyster, In re Moline (2) ; see also Wilson v. Short (3). The sold note supplied by the Defendants to the Plaintiff was an untrue representation. They did not tell him what they did with the shares ; and to sustain a purchase by trustees or agents from their cestui que trustent or principals, the eestui que trust or principal must be set at arm's-length, and must be fully informed of every particular of the transaction. The form of the sold note of the 5th April, 1879, clearly shows that these shares were sold by the Defendants as the stockbrokers of the Plaintiff, and they actually charged him 25 8s. commisÂÂsion for this sale, which they now allege was not a sale on his account at all. In Brookman v. Rothschild (4), a...