Ex parte Grant. 15 Ch. D.
A late case bearing on this topic, and to a great extent confirming the views of Crampton, J., in Nicholson v. Gooch, is that of ex parte Grant re Plumbly.[[237]] Plumbly declared himself a defaulter and on the same day presented his petition in bankruptcy. By virtue of his being a defaulter the official assignee, as stated above, became entitled to receive money due to him for differences. An injunction was obtained in bankruptcy against the official assignee against receiving and collecting such debts, and an order to pay all sums that he had received to the trustee in bankruptcy. Against this order the official assignee appealed.
The evidence chiefly consisted of affidavits filed by leading members of the Stock Exchange. Some points in these affidavits call for special notice.
(1.) That contracts on the Stock Exchange are never for payment of differences, but are real transactions for cash ... contemplating transfer or delivery of the stocks, &c. The transfer and payment can only be rendered unnecessary by a new and equally real bargain, on the one part to accept and pay for on the same day, and on the other part to transfer or deliver, an equivalent amount of the same stocks, &c.
(2.) Members having bargains open in stocks and shares which the defaulter has contracted either to take or deliver, but which contracts he breaks by his default, pay to the official assignee the difference in value of stocks, &c., as determined by the prices fixed by the official assignee, at the time of such default, when the change in price is against such members; and on the other hand become entitled to claim against the fund so created in the hands of the official assignee for any such differences when in their favour.
(3.) The defaulter cannot claim differences on damages in respect of contracts which he has broken by his default, nor can he claim the moneys payable as differences under the rules to the official assignee.
(4.) Had Plumbly not become a defaulter nor a liquidating debtor, and had all the contracts been duly performed by him, none of the differences received by the official assignee would have found their way into Plumbly’s possession. In payment of differences, bank notes and cash do not pass and cannot be demanded. All payments on account of differences must be by crossed cheques on a clearing house banker, and the whole of the differences which a member is entitled to pay or liable to receive on each account day must all pass through the Clearing House together. If the balance is in his favour, he receives only the difference; otherwise, the general balance of all his dealings goes to his debit through the operation of the bankers’ clearing. The credit differences of each member are thus directly hypothecated for the payment of his debit differences.
The reader is referred generally to the affidavits in the case, which are set out in extenso in the report; but the above will be sufficient to render the judgment intelligible. Held (1) that the official assignee received the moneys by a title adverse to the trustee, who on that account could not claim them as received to his use. (2) The fund claimed was an entirely artificial fund, created by the rules of the Stock Exchange: if the contracts were winning ones, the trustee could not have enforced them at law, as the defaulter had shown his incapacity to perform the contracts himself: so that the differences could never have been payable to the trustee who was now claiming them. (3) That the trustee could not take advantage of those rules, to which alone the fund owed its existence, and claim the moneys, without also complying with them with respect to the distribution; i.e., he could not claim for distribution among the general body of creditors. James, L.J., put the case on a more general ground. If A owes money which is claimed by B and C, and he pays B, C cannot sue B; but payment does not discharge A, if wrongful.
The case shortly seems to come to this:—“Differences” are payable simply by the rules of the Stock Exchange, and not as a matter of contract between two parties; being payable to the official assignee by virtue of those rules, the fund thereby created in his hands must be subject to the same rules. That the official assignee receives these differences in his own right and not to the use of the defaulter’s trustee in bankruptcy.
It seems, then, that even if bargains for “differences” were known on the Stock Exchange (which it appears they are not), the rights of the official assignee with respect to them as against the trustee in bankruptcy would be governed by the above case, as he could only receive them under the rules, and not as a legal debt. |Nicholson v. Gooch and ex parte Grant compared.| The two cases seem to a great extent to stand on a common ground, though the former was not cited in argument in the latter. In both it was held that the title of the official assignee was adverse to that of the trustee in bankruptcy, so that the former could in no sense be considered his agent. In both the ratio of the decision was that the fund was entirely artificial and owed its existence to the Stock Exchange rules, as the moneys which formed the funds were irrecoverable at law. They were irrecoverable in Nicholson v. Gooch on the ground that the payments were in pursuance of illegal or void contracts; and in Plumbly’s case there was the additional reason pointed out that as he by his default was incapable of performing his part of the contract, he could not enforce it himself.