It would seem, from the foregoing history of the legislation in respect of betting contracts, that the tendency of the Legislature has been to abstain from active interference with the subject’s liberty, and to give negative discouragement to the practice, by observing a neutral attitude as between the parties, rather than to endeavour to stamp it out by penal enactments. Thus within the last half century three penal statutes on the subject have been repealed. The Act of 1845 repealed the penal provisions of the Statute of Anne. The penal provisions of the Bankruptcy Act of 1849 have not been renewed. Barnard’s Act, which it seems, had for a long time been a dead letter, was repealed in 1860. There is, however, one statute in a contrary direction, 30 & 31 Vict., c. 29, known as Leeman’s Act, |Leeman’s Act, 30 & 31 Vict., c. 29. History of legislation.| which enacts that all contracts for the sale or transfer of any shares, stock or joint interest in any joint stock banking company in the United Kingdom of Great Britain and Ireland constituted or regulated by the provisions of any Act of Parliament, Royal Charter or letters patent, issuing shares or stock transferable by any deed or written instrument, shall be null and void to all intents and purposes whatsoever unless such contract, &c., shall set forth and designate in writing such shares, stock or interest by the respective numbers by which they are distinguished at the making of such contract, &c., on the register or books of such banking company as aforesaid, or, where there is no such register of stock, by distinguishing numbers, then unless such contract, &c., shall set forth the person or persons in whose name or names such shares, stock or interest shall at the time of such contract stand as the registered proprietor in the books of such banking company. It is further made a misdemeanour to insert in any contract a false entry of any such number or names.
Effect of Leeman’s Act.
The purport and effect of this statute is obvious; it is intended to prevent speculative sales and purchases of bank shares, and to annul such transactions in cases where the vendor has not the shares in his possession at the time of the contract: in the same way as Barnard’s Act prohibited the sale of public stocks not in the possession of the vendor. Leeman’s Act, however, only makes the contract void, whereas Barnard’s Act made it illegal.
The circumstances which gave rise to the passing of the Act are well known. From 1864 to 1866 there was a large amount of speculation in bank shares, which caused great fluctuation in their prices, and led to serious consequences. From the evidence given by some of the witnesses before the Stock Exchange Committee of 1878, it would seem that the real origin of the panic is to be looked for, not in the “bear” or selling movement, but in the previous rush to buy, which was in some cases started by combinations of persons who were supplied with means by the directors of the banks. This “bull” movement produced the desired result of raising the prices of the shares above their real value. The shares then having reached a price which neither the dividends nor the internal condition of the banks justified, speculators took the opposite course; the “bear” operations which followed caused a rapid fall in prices. Not only shareholders, but depositors became alarmed, the sudden rush to withdraw deposits was more than some banks could meet; but those that did stop payment had long been hastening their own ruin by unsound internal management and investment in rotten securities. Others, whose condition was more stable, suffered a temporary depreciation in the value of their shares, but ultimately survived the panic. There were many reasons why banks and bank shares should be protected in future from such onslaughts and the disastrous results consequent thereon, so Leeman’s Act was passed avoiding all contracts for the sale of shares which at the time of the contract could not be specifically identified: contracts which the vendor could only perform by going and purchasing in the market himself.
Act not observed on the Stock Exchange.
In practice, however, the Act has on the Stock Exchange been a dead letter, owing to the impossibility of transacting business in the ordinary way if its provisions were observed. But a recent case shows that although as between members of the Stock Exchange it may be the practice to disregard the Act, yet such practice does not bind the outside public, and that if a broker, through not complying with the Act, fails to carry out his client’s instructions, he may become liable in damages.
Liability of broker.
In Neilson v. James[[273]] the plaintiff employed the defendant to sell for him some shares in the West of England Bank in the Bristol Stock Exchange. The shares were not numbered, but registered in the name of their owner. Defendant sold them on the 4th of December to a firm of jobbers on the Bristol Stock Exchange, but the bought and sold notes which passed between the defendant and the jobbers on that date did not disclose the name of the owner of the shares. The 13th December was the “name day” (i.e. the day on which the jobbers were bound either to accept delivery of the shares themselves or furnish the name of a sub-purchaser to stand in their place,[[274]]) and the jobbers then furnished the name of one J. R. Gould as the purchaser to take delivery, who thereupon became liable (under ordinary circumstances) to accept and pay for the shares. But previously to this date, on the 7th of December, the bank had stopped payment and soon after was wound up, and Gould repudiated his purchase on the ground that the name of the owner of the shares did not appear on the Contract, which was therefore void under Leeman’s Act. The consequence was that the plaintiff remained owner of the shares and lost the price he would have obtained if the sale had been validly carried out. Plaintiff sued to recover the price of the shares as stated in the sold note.
For the defendant it was argued—(1) That the agreement of the 4th December was only inchoate and not the completed contract, consequently there was no breach of duty on the defendant’s part on that day. (2) That the real contract was not completed till the 13th, and then performance was impossible as the bank had then stopped payment and was in the course of winding up; at any rate the damages should be only nominal according to the value of the shares on the 13th. (3) That the defendant was employed by the plaintiff to effect the sale subject to the customs of the Bristol Stock Exchange; that one of those customs was to disregard the provisions of Leeman’s Act in the sale of bank shares.
The Court decided—(1) That according to Coles v. Bristowe[[274]] the contract was complete on the 4th, subject only to the right of the jobbers to furnish the name of a sub-purchaser as a substitute for themselves on the “name day.” (2) There is no undertaking on the part of the vendor of shares that the company shall be a going concern on the day of transfer; consequently, as plaintiff would have been entitled to the full price, that price must be the measure of damages. “It is said,” remarked Brett, L. J., “on the part of the defendant, that the plaintiff can only recover nominal damages, because if the contract had been in due form, the jobbers would not have been bound to have taken the shares, as the plaintiff could not on the account day, when the bank was being wound up, have given a valid transfer which the bank could have registered. But it seems to me that all the seller was required to do was to deliver shares on the account day, which, if the bank had remained solvent would have entitled the purchaser to have had them transferred into his name, and that the seller does not undertake that banking company shall be a going concern up to the account day. The plaintiff was therefore ready to do all that he was bound to do, and if the jobbers had accepted the shares on that day, they would have been bound to have paid the agreed price; and as the defendant failed to do that which would have compelled them to have taken the shares, the plaintiff lost such price by reason of such failure.” (3) That the custom was bad as being unreasonable and illegal. Per Brett, L. J.: “He does not say the plaintiff knew of the custom, but he says that because plaintiff employed him to sell the shares on that Stock Exchange and according to its rules, he is bound by that custom. I think, however, that the plaintiff is only bound by such a custom as is both reasonable and legal, for to that extent only can a person who is ignorant of a custom be assumed to acquiesce in and be bound by it.”