Hardoon v Belilios
| Jurisdiction | UK Non-devolved |
| Judgment Date | 1901 |
| Date | 1901 |
| Year | 1901 |
| Court | Privy Council |
Calls Paid by Registered Owner of Shares - Liability of Beneficial Owner - Indemnity.
A party who is sui juris and beneficially entitled to shares which he cannot disclaim is personally bound, in the absence of contract to the contrary, to indemnify the registered holder thereof against calls upon them. It is immaterial whether the beneficial owner originally created the trust by which the registered holder was plainly affected, or accepted a transfer of the beneficial ownership with knowledge of the trust.
APPEAL from an order of the Supreme Court (Feb. 28, 1899) affirming an order of the Chief Justice (May 19, 1898) non-suiting the appellant.
The suit was brought under the circumstances stated in the judgment of their Lordships to recover payment of the amount of calls on fifty shares in the Bank of China, Japan, and the Straits, Limited, which the appellant as their registered holder had been compelled to pay, the respondent being the beneficial owner thereof.
At the close of the appellant's case the respondent's counsel asked for a non-suit (1.) on the ground that the appellant had failed on the evidence before the Court to establish his contention that the respondent was the true owner of the shares in question, and (2.) on the ground that, even assuming this was taken as proved, there was no privity of contract between the respondent and the appellant in respect of the shares, and consequently no liability on the part of the respondent to indemnify the appellant against calls or otherwise.
The Chief Justice found that the appellant had established his contention that the respondent was and had since June 30, 1893, been the true owner of the shares in question; he nevertheless directed judgment of non-suit in favour of the respondent on the ground that, as a matter of law, the respondent was under no liability, contractual or otherwise, to indemnify the appellant in respect of the shares.
This judgment was affirmed by the Full Court on appeal; the Chief Justice stating more specifically than in his former judgment that he did not think that the appellant had satisfied the onus which lay upon him of establishing that the relationship of trustee and cestui que trust subsisted between him and the respondent.
Latham, Q.C., and F. Whinney, for the appellant, contended that the true question in dispute between the parties was not whether or not privity of contract or the relation of vendor and purchaser existed between them, but whether a trust relation had been constituted. It was contended that on the evidence the entire and absolute beneficial interest in the fifty shares in dispute was vested in the respondent, who in consequence had received the dividends and paid earlier calls. From the moment of being registered as holder in the bank's books the appellant had had no beneficial interest, but had been trustee for the true owner — that is, for the respondent and his assignor before him. According to established rules of equity, the trustee's right to be indemnified by his cestui que trust flowed from the trust relation and the fact that he had been compelled to discharge an obligation of the trust estate. Reference was made to Castellan v. HobsonF1; Jervis v. WolferstanF2; Levi v. AyersF3; Fraser v. MurdochF4; James v. MayF5; Phené v. GillanF6; Brown v. Black.F7
Joseph Walton, Q.C., and R. J. Parker, for the respondent, contended that the Courts below were right. The respondent never expressly or impliedly contracted to indemnify the appellant in respect of the shares in question. There, at all events, was no contractual relation from which any obligation to that effect could be implied. As for the trust relationship, the cases shew that no liability arises from that, but only from an antecedent request expressed or implied and made by the cestui que trust. No one of them shews that the cestui que trust is under all circumstances and always liable to indemnify. Dicta are to be found therein some of which are too broad and must be qualified with reference to the facts. Here the shares were not acquired by the respondent under such circumstances as to impose upon him a liability to indemnify either the persons from whom he acquired them, and who originally created the trust under which the appellant held, or the appellant. Even if the appellant had any right to indemnity as trustee, it was merely a right to be indemnified out of the trust property, and not by the cestui que trust personally. Reference was made to Grissell v. BristoweF8; Loring v. DavisF9; Sales v. BlaneF10; Fraser v. MurdochF11; Jervis v. WolferstanF12; Hobbs v. WayetF13, where a request was relied upon. So in James v. MayF14; In re National Financial Co.F15; Hemming v. Maddick.F16 Similar questions between vendor and purchaser come under the same principle: see Kellock v. EnthovenF17; Castellan v. HobsonF18; Loring v. DavisF9; Brown v. Black.F19
Latham, Q.C., replied.
The judgment of their Lordships was delivered by
LORD LINDLEY. The question raised by this appeal is whether the plaintiff, who is the registered holder of some shares in a banking company which is being wound up, is entitled to be indemnified by the defendant who is the beneficial owner of those shares, against calls made upon them in the winding-up of the company. The Courts of Hong Hong have decided against the plaintiff upon the evidence adduced by him, and have entered judgment of non-suit. The defendant adduced no evidence; it did not become necessary for him to do so. The Chief Justice, who first heard the case, decided that the defendant was the sole beneficial owner of the shares, but that the plaintiff had failed to prove any contract by the defendant to indemnify him either express or implied. On appeal the Chief Justice and Wise J. considered that, although the defendant had become the sole beneficial owner of the shares, the relation of trustee and cestui que trust had not been created between the plaintiff and the defendant, and that the defendant had not become liable to indemnify the plaintiff. Against these decisions the plaintiff has appealed to this Board.
The facts of the case so far as they are material are shortly as follows:—
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