Muir's Case. Re City of Glasgow Bank
| Jurisdiction | England & Wales |
| Judgment Date | 07 April 1879 |
| Date | 07 April 1879 |
| Docket Number | No. 4. |
| Court | House of Lords |
Ld. Chancellor (Cairns), Ld. Hatherley, Ld. Penzance, Ld. O'Hagan, Ld. Selborne, Lord Blackburn, Lord Gordon.
Partnership—Trustee—Bank—Public Company—Companies Act, 1862 (25 and 26 Vict. c. 89).—
Held (aff. judgment of First Division) that persons who accepted a transfer of stock of a joint stock banking company, registered under the Companies Act, 1862, ‘as trust-disponees’ of other persons, and were so entered in the register of members of the company, thereby became, as individuals, partners of the company, and that in liquidation they were subject to calls as ‘contributories in their own right.’
(See report of case in Court of Session in present vol., Dec. 20, 1878, p. 392.)
The petitioners appealed.
Lord Chancellor.—My Lords, the City of Glasgow Bank is a joint stock partnership which has carried on business since the year 1839. In 1862 it was registered as an ‘unlimited company’ under the Companies Act of that year. The partnership contract (to the terms of which I shall have afterwards to refer) was registered as the articles of the company under the Act.
In this bank the late John Murdoch held at the time of his death £6000 of stock. He died in 1873. He had made a deed of trust-disposition and settlement, dated in 1843, but a question having arisen whether the bank stock would pass under it, his daughters, Mrs Syme and Mrs Boyd, made out a title to his estate as executrices-dative, and executed a supplementary deed of trust, dated the 20th of September 1873, by which they assigned and made over to the appellants the whole estate of their father, including the stock in question, to be held upon the trusts contained in the settlement of their father.
On the 27th of January 1874 a transfer of the stock was executed by Mrs Syme and Mrs Boyd to the appellants, in order that their legal title to the stock might be completed. By this transfer Mrs Syme, who was a widow, and Mrs Boyd, with the consent of the appellant John Boyd, her husband, assigned and made over to the appellants, described as ‘the trust-disponees’ in the deed of conveyance in trust, dated the 20th of September 1873, ‘and their successors and assigns whomsoever,’ the £6000 capital stock, the appellants, ‘as trust-disponees foresaid, by acceptance thereof, being, in terms of the contract of copartnership of the bank, subject to all the articles and regulations of the company in the same manner as if they had subscribed the said contract,’ and the appellants, ‘as trust-disponees foresaid,’ thereby accepted of the said transfer on those terms and conditions.
In the stock ledger of the bank the appellants were entered by their names and addresses, their names and addresses being followed by these words, ‘as trust-disponees of Mrs Mary Murdoch or Syme, widow of the late Francis Darby Syme, 14 Great King Street, Edinburgh, and Mrs Sophia Maria Darby Murdoch or Boyd, wife of the said John Boyd.’
A stock certificate was also issued by the bank to the appellants in these words:—‘Glasgow, 4th February 1874.—These certify that the trust-disponees of Mrs Mary Murdoch or Syme, widow of the late Francis Darby Syme, and residing at 14 Great King Street, Edinburgh, and Mrs Sophia Maria Darby Murdoch or Boyd, wife of John Boyd, residing at 27 Melville Street, Edinburgh, have been entered in the books of this company as the holders of £6000 consolidated stock.’ On the back were these words,—‘William Muir, Esquire, of Inistrynich, Argyllshire, merchant in Leith; William Thompson, Esquire, of West Binny, Linlithgowshire; John Boyd, Esquire, residing at No. 27 Melville Street, Edinburgh; and James Laurence Boyd, Esquire, solicitor Supreme Courts of Scotland, and residing at No. 1 Regent Terrace, Edinburgh, as trust-disponees within mentioned.’
In the returns made to the Board of Inland Revenue and to the registrar of joint stock companies the stock is described as held by the trust-disponees of Mrs Syme and Mrs Boyd.
The liquidation of the bank commenced on the 22d of October 1878, and the liquidators have entered the appellants in the first part of their list as contributories in respect of the stock in question. The effect of this is to make the appellants personally answerable for calls. Whether they should thus be made answerable is the question to be determined in this appeal. The respondents, the liquidators, contend that the appellants are personally liable, and this has been the unanimous decision of the Court of Session. The appellants, on the other hand, contend that they are not personally liable, but that the bank entered into a special contract with them, to use the terms of their petition, ‘to admit them as holders of stock in their representative capacity as trust-disponees, and by the terms of their obligation the appellants undertook only to subscribe to the undertaking, and to be liable in the obligation incumbent on holders of stock to the extent of the trust-funds under their administration.’
Whether in any particular case the contract of an executor or trustee is one which binds himself personally, or is to be satisfied only out of the estate of which he is the representative, is, as it seems to me, a question of construction, to be decided with reference to all the circumstances of the case, the nature of the contract, the subject-matter on which it is to operate, and the capacity and duty of the parties to make the contract in the one form or in the other. I know of no reason why an executor, either under English or Scotch law, entering into a contract for payment of money with a person who is free to make the contract in any form he pleases, should not stipulate by apt words that he will make the payment, not personally, but out of the assets of the testator. If, for example, A B, the executor of X, contracted to make a payment as executor of X, and as executor only, to C D, it would be difficult to suppose that any obligation except an obligation to pay out of the testator's assets was intended. C D, in the case supposed, would have authority to accept a contract so limited, and the words used could have no meaning, and could be referred to no object other than that of limiting responsibility. I do not know that there is in this respect any difference in principle between English and Scotch law, although there may be a difference in the application of the principle. It may be (I will not say more) that from the English system of judgments in actions at common law, and from the difficulty of obtaining a judgment de bonis testatoris founded upon an engagement made by the executor, the English Courts have leaned against a construction which would not result in a judgment de bonis propriis; whereas in Scotland, where law and equity were jointly administered, such a difficulty did not arise.
But the first question, whether in Scotland or in England, must be, what is the contract which the parties have entered into? and that must be accompanied by another question, what is the contract which the parties were competent to enter into? For if words have been used of any ambiguity, or the object of which may be open to any doubt, that construction must, according to the well-known rules of law, be given which will make the contract a legitimate and valid one, and not that construction by which the contract will be destroyed.
Now, it is to be observed that the directors of the bank were a body with limited and clearly defined powers, and acting in the execution of a delegated and limited authority. The appellants must be taken, as must all persons who deal with the directors of a company, and especially those who deal with the directors for admission into the company, to have known the nature and extent of the authority of the directors, and the character of contract which they were empowered to enter into. With regard to the directors also it is to be borne in mind that if they exceeded the powers committed to them by the deed of partnership, if they placed the stock and capital of the bank in the power of persons brought upon the register upon terms less favourable to the other shareholders than the deed authorised, the directors would incur a liability to their constituents for so doing, and it is not to be supposed that they intended to incur this liability.
With these observations I will now ask your Lordships to bear in mind the general scope and provisions of the deed of partnership.
There is no limit of liability whatever for the shareholders of the company. The deed takes notice that the shareholders might be individuals or companies and bodies corporate; but the scheme of the deed is that the shares shall be held by individuals or by companies (that is to say, partnerships consisting of individuals), or by corporations, without any limit of liability in the individual so far as he has property, or in the corporation so far as it has property. And I need hardly observe that there was no power by law to affix any limit of liability upon the shares, except by a resort to statutable arrangements, which in this case were not resorted to.
By the fourth section of the deed the parties bound themselves to contribute and pay when required the sums of money corresponding to the number of shares of the stock subscribed. By the fifth section the partners are to have the right to the profits, and to be liable for the losses, and bound to relieve each other of all the debts and engagements of the company in the proportion of their respective interests or shares in the capital stock. By the sixth section any person holding a share, whether as an assumed subscriber, or as a purchaser, heir, or other representative of a subscriber, shall be entitled to all the rights and subject to all the liabilities of an original partner of the company. The 13th and 14th sections contain careful provisions for the purpose of preventing any person interested in a share, other than the partner in whose...
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