Robb v Gow Brothers & Gemmell
| Jurisdiction | Scotland |
| Judgment Date | 17 November 1905 |
| Docket Number | No. 14. |
| Date | 17 November 1905 |
| Court | Court of Session |
Lord Low, Lord President, Lord Adam, Lord M'Laren, Lord Kinnear.
Contract—Agent and Principal—Liability for loss caused by fraud—Stockbroker—Purchase of Shares—Share Certificates allowed by client to remain in stockbrokers' office.—
A, whose brother-in-law B was a trusted clerk in the office of a firm of stockbrokers, carried on a series of transactions with the stockbrokers, in the course of which he instructed them to buy for him certain shares. The shares were bought and paid for, and transfers having been duly executed, A became the registered owner of the shares. The share certificates, which had been duly forwarded by the various companies to the stockbrokers, were not handed over to A, but were allowed by him to remain in the stockbrokers' office for periods varying from one to two years, when it was found that B had, by taking possession of the certificates and by executing forged transfers, sold the shares on his own behalf and had absconded with the proceeds. Throughout the course of dealing between A and the stockbrokers, B was recognised both by A and the stockbrokers as the person in the stockbrokers' office who attended to A's business.
In an action at the instance of A against the stockbrokers for delivery of the share certificates or for damages, held (in aff. the judgment of Lord Low, Ordinary), that the stockbrokers were not liable, in respect that either (1) A, in the knowledge that he might have got delivery of the certificates, had chosen to leave them in the stockbrokers' office for his own purposes and under the general management of B, so that B had received delivery of the certificates as A's agent for the time, or (2) if B was not A's agent for the time, B had got hold of the certificates fraudulently, in which case, under the rule of Barwick v. English Joint Stock BankELR (L. R., 2 Exch. 259), the stockbrokers, as innocent principals, were not liable for B's fraud, the fraud not having been committed in the course of his service and for their benefit.
Payment—Bank—Bearer Cheque.—
A, in payment for certain shares which he had instructed a firm of stockbrokers to buy for him, sent by post to the firm or handed to B, their clerk, a cheque payable to the stockbrokers or ‘bearer.’ B cashed the cheque and appropriated the proceeds.
In an action by A against the stockbrokers for delivery of the share certificates or for the value of the shares, the stockbrokers pleaded that as they had never received payment they were entitled to absolvitor.
Held that sending an uncrossed bearer cheque was not a remittance in ordinary course of business, and consequently that the stockbrokers not having received the cheque were entitled to absolvitor.
Payment—Proof of payment—Stockbroker—Statement of account—Stockbrokers' Clerk—Authority—Receipt.—
B, a clerk employed by a firm of stockbrokers, sent a fortnightly statement of account to A, a client of the firm. The statement contained an entry of a sum of money as paid by A to the firm as the price of certain shares. The statement was written by B, and was initialed by him as on behalf of the firm. In an action by A against the firm for delivery of the shares, the defence was that the defenders had not received the price. Held that, it being admitted that the defenders had not received the money, the defenders were not barred by the entry from pleading their defence, in respect (1) that it was not in itself a receipt, and (2) that even if it were it had not been proved that B had authority to grant it so as to bind the defenders.
Andrew Robb, cattle-dealer, Flemington Farm, Newton, Lanarkshire, brought this action against Gow Brothers & Gemmell, stockbrokers, Glasgow, concluding (1) for delivery to the pursuer of certificates in his favour for certain lots of shares purchased by the defenders for the pursuer conform to contract-notes issued by the defenders to the pursuer, bearing dates from September 1901 to February 1903; (2) for production of an account by the defenders of their intromissions with the shares, with the dividends therefrom, from the several dates on which the shares were purchased; and (3) for payment of the balance which should be ascertained to be due to the pursuer by the defenders in respect of their intromissions with the shares; and (5) alternatively to the foregoing conclusions, for payment of £2500 as damages. The summons was signeted on 13th April 1904.
The summons set out nine lots of shares. Five of these lots, viz. (1) 100 shares of the British South Africa Company; (2) 30 shares of the British South Africa Company; (3) 30 shares of the Johannesburg Investment Company, Limited; (4) 30 shares of the Johannesburg Investment Company; and (9) 30 shares of the East Rand Proprietary Mines, Limited, were, it was admitted, bought by the defenders on the pursuer's instructions, on various dates in 1901 and 1902. They were paid for by the pursuer, and transfers were duly executed in favour of the pursuer, and share certificates in favour of the pursuer were duly sent to the defenders. The share certificates were not sent to the pursuer, and the shares were ultimately sold by William Cook, a clerk in the employment of the defenders, who forged transfers in the pursuer's name and appropriated the proceeds to his own use. Cook was the pursuer's brother-in-law.
Two lots of the shares set out in the summons, viz. (5) 100 shares of the Barnato Consolidated Mines, Limited; and (6) 20 shares in Nobel's Dynamite Trust Company, Limited, were bought by the defenders on the pursuer's instructions, but transfers were not executed in favour of the pursuer, Cook having represented to the defenders that the pursuer did not intend to take up the shares, and the shares having in consequence been sold by the defenders. The defenders' books contained a record of the sale of these shares, but the pursuer did not receive a sold-note. Cook sent a fortnightly statement for settlement dealing with each of these lots of shares to the pursuer. The statement with respect to lot (5) is quoted below.* The cheque
referred to in this statement was a cheque in favour of the defenders or bearer. Cook obtained possession of this cheque and appropriated the proceeds. Cook also obtained possession of a similar cheque drawn by the pursuer in settlement of the statement dealing with lot (6), and appropriated the proceeds.
The other two lots of shares set out in the summons, viz. (7) and (8), were in each case a lot of 20 shares in Nobel's Dynamite Trust Company, Limited. Cheques in payment of these shares were drawn by the pursuer in favour of the defenders or bearer. Cook obtained possession of these cheques and appropriated the proceeds. But there was no entry in the defenders' books referring to these shares.
The pursuer averred that the shares set out in the summons had been bought on his instructions by the defenders; that he had duly paid to the defenders the prices of the whole of the shares; and that the defenders had refused or delayed to make delivery to him of the certificates for the shares.
The defenders admitted the purchase of the shares for the pursuer, except lots (7) and (8). They averred that the pursuer had received delivery of the certificates of lots (1), (2), (3), (4), and (9); that they did not receive the price of lots (5) and (6); and that accordingly these latter lots were sold by them.
In a statement of facts the defenders averred;—(Stat. 1) ‘For some years prior to 26th September 1903 the defenders had in their employment a clerk named William Cook junior, a brother-in-law of the pursuer. All the pursuer's transactions were carried out through Cook, who acted as the pursuer's agent. The defenders had no correspondence with the pursuer, and they received the money to pay for purchases on the pursuer's behalf from Cook, who in turn got the certificates.’ (Stat. 2) ‘The certificates for’ the lots of shares (1), (2), (3), (4), and (9) ‘were delivered to Cook on the pursuer's behalf. Until the end of 1903 the pursuer never suggested that he had not received the certificates of these shares. The pursuer became a registered shareholder in the different companies, and the shares are believed to have been subsequently sold through other brokers than the defenders.’
The pursuer in answer averred;—(Ans. 1) ‘… Cook was the managing clerk in defenders' business, and was pecuniarily interested with the defenders in all the transactions which they carried out for the pursuer, and received from the defenders a share of the commission earned on all the said transactions. He at no time acted for the pursuer, but in pursuer's dealings with the defenders he constantly represented them, and was empowered to act for them.’ The pursuer (Ans. 2) admitted that he did not make complaint as to non-receipt of the share certificates prior to the end of 1903, and explained that he had absolute confidence in the defenders as his stockbrokers, and, having considerable transactions with them, he believed that they had taken the certificates in his name, and held the same for him.
The pursuer pleaded, inter alia;—(1) The defenders having purchased the said shares on behalf of the pursuer, and having received payment of the price thereof, the pursuer is entitled to delivery of the necessary share certificates, as concluded for. (3) In the event of the defenders failing to deliver the certificates for said shares to the pursuer, they are bound to account to the pursuer for the value or proceeds thereof. (4) Alternatively, the pursuer having, through the actings of the defenders, suffered loss and damage to the amount concluded for, under the fifth conclusion of the summons, decree should be granted for the sum sued for.
The defenders pleaded, inter alia;—(1) No relevant case. (2) The defenders, having delivered certificates of shares purchased by them to said William Cook junior, on the...
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