N.B.—These remarks seem to assume that if plaintiff had known and acquiesced in the custom he could not have been heard to say the custom was unreasonable. This would probably have been the case if the defendant had previously done similar transactions for plaintiff without his taking any objection.
So the broker was held liable to his client for negligence, in not conforming to the requirements of the statute, and thereby depriving his client of the benefit of the sale of his shares.
It will be seen that the law as it stands is somewhat in favour of an unscrupulous purchaser. The Act having made the contracts void, and not illegal or punishable, there is nothing to prevent members of the Stock Exchange from disregarding it, except a possible liability to a client; while on the other hand, the inconvenience entailed by complying with the Act is sufficient to induce dealers and brokers to incur whatever risk there may be, so as to facilitate business. It is probably only a member of the outside public that would over take advantage of the Act, and repudiate a bargain on the ground of non-compliance with it provisions. Besides, there can be no doubt it affords a safeguard to banks against undue fluctuation in the price of their shares.
From a late case before the Court of Appeal, it seems that in the case of the purchase of bank shares through a broker, if the principal have notice (e.g. by the receipt of the bought note) that the contract effected by the broker does not comply with Leeman’s Act, and if he does not repudiate it, the broker will be justified in paying the purchase-money on his principal’s behalf. |Barclay v. Pearce.| At least this seems to be the effect of the case of Barclay v. Pearce.[[275]] Defendant instructed plaintiff, who was a stockbroker, to purchase shares in the Oriental Bank. The usual bought note was sent to the defendant, but neither this nor the contract with the jobber contained the numbers of the shares purchased, nor the name of the registered owner, as required by the Act. The “name day” was the 29th, on which day the name of the defendant as the purchaser was handed to the jobber. The transfer was duly executed.
By the rules of the Stock Exchange the plaintiff was personally responsible to the jobber for the payment of the purchase-money. It is customary in dealings in bank shares to disregard Leeman’s Act. The plaintiff paid the purchase-money and sued to recover from defendant. There was no proof that defendant had revoked the plaintiff’s authority to pay. The Court held that the plaintiff having at defendant’s request entered into a contract on which he was personally responsible, though it was void at law, was entitled to recover for money paid to defendant’s use. It was also intimated that until Read v. Anderson was reversed by the House of Lords, it would be immaterial whether the authority to pay had been revoked or not.
It is, however, submitted that it would have been competent for the defendant to have repudiated the transaction before the transfer was executed when he discovered that the statute had not been complied with, and that in that case the plaintiff’s authority would have been revoked. According to Neilson v. James, the usage of the Stock Exchange to disregard the Act would not bind the principal, at any rate unless he acquiesced in it. The distinction between this case and Read v. Anderson seems to be that in the latter case the agent was employed to carry out a contract necessarily void as being a wager. In this case the contract might have been carried out so as to be legally binding, and there would probably be no presumption that the instructions were to make other than a legal agreement.
This view of the matter has lately been confirmed by the Court of Appeal in Perry v. Barnett.[[276]] The facts of this case arose out of the Oriental Bank. The plaintiffs, stockbrokers, had at defendant’s request bought for him 100 shares in that Bank on the London Stock Exchange. The bought note did not comply with Leeman’s Act, and next day the bank closed its doors and defendant refused to complete the purchase. The plaintiffs were really Bristol stockbrokers, but as the shares could not be obtained in the Bristol market, they, with defendant’s knowledge, instructed their London agent to purchase them in London. Grove, J., decided in favour of the defendant on the ground that he was not shown to have known or acquiesced in the custom to disregard Leeman’s Act. On appeal it was thought to distinguish the case from Neilson v. James on the ground that in that case the broker was instructed to sell shares which the plaintiff had in his possession, and so he might without inconvenience have complied with the Act. By Rule 68 of the London Stock Exchange no bargain on the Stock Exchange will be annulled by the committee except on the ground of fraud. The Court affirmed the decision of Grove, J., in favour of the defendant. (1) Adopting the principles on which Neilson v. James was decided, the custom or practice to disregard the Act was unreasonable, and so could not bind persons who were ignorant of it. Per Bowen, J., “It is as regards outsiders only who are ignorant of the custom that such an usage can be called unreasonable.” (2) Rule 68 is unreasonable, so not binding to persons who have not consented to be bound by it.
Seymour v. Bridge.
This case must not be taken as overruling another of the same kind decided by Mr. Justice Mathew about the same time, Seymour v. Bridge.[[277]] His lordship decided in favour of the plaintiff, on the ground that the defendant knew of the customary course of dealing in bank shares, though he was ignorant of Leeman’s Act.
However, in a late case before the Court of Appeal, Coates v. Pacey[[278]] which was another action by a broker against a client for indemnity in respect of a purchase of bank shares, the Court threw out serious doubts whether the same right of indemnity which had been established in favour of an agent employed to make bets for his principal existed in the case of a broker even when authorised to deal in bank shares in contravention of Leeman’s Act.