Section 8 made invalid all sales of stock not in the vendor’s possession.
Statute only applied to public English stocks.
The statute only applied to English public stocks, and not to foreign stocks nor to shares in companies.[[231]]
It also made the contracts and compounding for differences not merely void but illegal. Thus in Cannan v. Bryce[[232]] it was held that money lent for the purpose of compounding such differences could not be recovered. But in Faikney v. Reynous,[[233]] where a bond was given to repay money advanced by plaintiff to settle for differences, it was held that the bond was good.
Nicholson v. Gooch, 5 E. & B., 999.
The case of Nicholson v. Gooch[[234]] was an important case under this statute, and also seems to have some bearing on Stock Exchange transactions at the present day.
The bankrupt Lodge was a member of the Stock Exchange and the defendant was the official assignee of that body. By the rules of the Stock Exchange every member unable to fulfil his engagements was declared a defaulter, and all members indebted to him in respect of Stock Exchange transactions were to pay their debts to official assignees appointed by the Stock Exchange, whose duty it was to distribute the money received rateably among his Stock Exchange creditors. On 11th November, Lodge wrote to the secretary to say he could not meet his engagements, and large sums were paid to defendant by members who were his debtors. On 23rd November a petition in bankruptcy was presented against Lodge; on the 31st, Lodge was adjudicated bankrupt. The plaintiffs were Lodge’s assignees in bankruptcy. It seemed from the evidence that according to the customary way of dealing, speculative transactions and genuine sales were so mixed up, that it was impossible to separate the two; but the jury found that the majority of the transactions were speculative and the parties merely intended to settle differences. It seemed that the method of settling these differences was for the members on the account day to set off the amount of stock which they had respectively agreed to buy and sell, and by a fictitious bargain for the sale at the price of the day of as much stock as would cover the balance, and then settle by paying the difference in the price. The plaintiff sued defendant for the moneys they had received from Lodge’s debtors. The Court drew an inference of fact that they were all contract for differences only. Held, that the settling of differences without actual delivery of stock was, so far as the public stock was concerned, illegal by section 5 of Barnard’s Act. That money paid to defendant in pursuance of this illegal arrangement, and forming the fund sought to be recovered, could not be recovered, as it could not form part of Lodge’s estate.[[235]] Therefore the assignees had no title to it.
It had been attempted on the plaintiff’s behalf to apply the doctrine of Tennant v. Elliott, and so prevent the defendant from setting up the illegality against them.[[236]] But the Court held that this did not apply because defendant received the money, not as agent for Lodge or for his use, |Position of Official Assignee of Stock Exchange.| but on an implied mandate to distribute it according to the rules of the Stock Exchange.
Crampton, J., distinguished the receipt of money for differences on public stock which was illegal, and on ordinary shares which were not within the statute. In the latter case the doctrine of Tennant v. Elliott might have applied if defendant had received the money as Lodge’s agent, and subject to his disposal. But the receipt seems to have been under an adverse claim by virtue of the stock Exchange rules rather than as agent of the bankrupt.
Of course to a great extent the importance of this case was diminished by the Statute 23 & 24 Vict., c. 28 by which Barnard’s Act was repealed. |Repeal of Barnard’s Act.| At the same time it seems still of importance as showing the position of the official assignee of the Stock Exchange, i.e., the agent of the Stock Exchange, to distribute the money according to their rules; the defaulter, as a member of that body, binding himself to authorise the money in the event of his default to be paid to the Stock Exchange or their agent.