The shareholder had had his share certificates stolen. The thief lodged forged transfers with stockbrokers, who in good faith sent the share certificates and transfer deeds to the bank for registration and transfer, which was done. The transferee thus came to be registered and he then sold the shares. The innocent shareholder asked for his name to be restored to the register and for related relief. The bank brought third party proceedings against the stockbrokers. The original shareholder succeeded against the bank. As between the bank and the stockbrokers, at first instance and in the Hong Kong Court of Appeal the Judges relied on the Barclay implied indemnity and found the stockbrokers liable to indemnify the bank. The stockbrokers appealed to the Privy Council.
Held: The decision in Barclay was upheld.
Lord Scarman dealt with an argument advanced by the stockbrokers that it was truly the transferee rather than the stockbrokers who had requested the bank to act upon the transfer deeds and to issue new certificates and hence, as it was sought to argue, that, rather than the stockbrokers, it was only the transferee who was responsible for indemnifying the bank. As to that argument he said: ‘It is not the case that, if a principal is liable, his agent cannot be. The true principle of the law is that a person is liable for his engagements (as for his torts) even though he is acting for another, unless he can show that by the law of agency he is to be held to have expressly or impliedly negatived his personal liability. But, upon the view of the letters, which the Courts below accepted and this Board believes to be correct, the brokers cannot avoid personal responsibility for whatever consequences the law attaches to the making of the request and the bank’s compliance with it. It was their request – even though made on Mr Wong’s [the transferee’s] behalf.’
As to an indemnity, after quoting Dugdale v Lovering: ‘This ‘broad principle’, as Lord Davey called it, has been consistently followed, and Mr Leggatt for the brokers disclaimed any intention to invite their Lordships’ Board to review it. Their Lordships are satisfied that it is now firmly embedded in the law: see Bank of England -v- Cutler [1908] 2 KB 208; Secretary of State for India -v- Bank of India Ltd [1938] 65 Ind. App. 286 and Welch -v- Bank of England [1955] Ch 508 (per Harman J at pp. 548-549). ‘ and ‘For these reasons their Lordships find themselves in agreement with the Court of Appeal in holding that there was in the circumstances of this request a promise by the stockbroker to indemnify the bank if, by acting on the request, it caused actionable injury or damage to a third party. The promise was accepted by the bank acting on the request and became a contractual indemnity.’
Lord Scarman
[1981] AC 787, [1980] 2 All ER 599
England and Wales
Citing:
Adopted – Corporation of Sheffield v Barclay and Others HL 3-Jul-1905
Lord Davey said: ‘I think that the appellants [Sheffield Corporation] have a statutory duty to register all valid transfers, and on the demand of the transferee to issue to him a fresh certificate of title to the stock comprised therein. But, of . .
Cited – Dugdale v Lovering 1875
The court adopted the position proposed by Mr Cave, for the Plaintiff: ‘It is a general principle of law when an act is done by one person at the request of another which act is not in itself manifestly tortious to the knowledge of the person doing . .
Cited by:
Cited – Cadbury Schweppes Plc and Another v Halifax Share Dealing Ltd and Another ChD 23-May-2006
Fraudsters had successfully contrived to sell shares of others, by re-registering the shares to new addresses and requesting new certificates. The question was which of the company, the company registrars and the stockbrokers should bear the loss. . .
These lists may be incomplete.
Updated: 09 July 2021; Ref: scu.242170