Scottish Court of Session Decisions

Lord Justice-Clerk—I have no difficulty in adhering to the judgment of the Lord Ordinary.

I do not know that I quite concur in all that has been said in the course of the argument as to the code of procedure laid down in the statute and the consequence of any deviation from that code. No doubt the statute lays down in a clear manner the course to be pursued in a transfer of shares, but I doubt if that excludes any other mode of transfer habile to the law.

But there are certain additional proceedings necessary before a party can be put upon the register. The first question in this case is whether there has been a valid transference from the bankrupt to the trustee. But granting that there has, the case of the trustee is not advanced one bit. He says that he holds an assignation to these shares, which has been intimated. But the question is, is he a partner? The right to become a partner is surrounded by conditions imposed by statute, and which the secretary of the company is bound to observe. Intimation must be given to him, and an entry of the transfer made in the register of the Company, which is followed by all the consequences of partnership.

It is clear, then, that a mere intimated assignation is not in itself sufficient to make the assignee a partner. Therefore I am of opinion that Mr Harrison, who went to the register and had his transfer entered, has the right to these shares, and that the trustee has none, and never can have, since he cannot now disturb that acquired by the registered transferee. The trustee never was a partner, because he never took the proper steps to make himself one.

Lord Neaves—I concur, and upon the same grounds.

I think it is plain that mere assignation is not the proper mode of completing a right of this kind at all. Assignation is the transmission of a jus crediti in its original conception—a mandate from the cedent. The purpose of the intimation of an assignation is twofold—first, to prevent the debtor from paying to his original creditor; and second, to show that the assignee is in future to be the sole creditor. These principles are not applicable to the transfer of a bilateral right like partnership. The position of a partner is not conferred by the mere appointment of the trustee in a sequestration; indeed, that position may often not be a proper thing for him to undertake. In short, the transmission of a share in a company is a thing sui generis, not to be governed by the same principles which regulate the transmission of a unilateral debt.

Lord Ormidale—My Lords, I am of the same opinion, and I would just make the observation that I consider the case one of great importance and of general application, and of special application to one very important kind of property in companies possessing transferable shares.

It is remarkable, if this question was raised that it has never yet been determined either in England or Scotland. I do not say that this is the case, but it may be so. And if so, I account for it in this way—that individuals having property of this description have seen so plainly that there is only one way of having that property transferred—that no practical difficulty has really ever been felt.

And I account in this way for the silence maintained by the trustee for these last twenty years, during which Mr Harrison has been dealt with as the owner of these shares, and has, I suppose, been drawing the dividends. I am quite clearly of opinion, on the grounds stated by your Lordship, that Mr Harrison has the only completed right to the shares. He had a formal deed of transfer, although it was not registered at the date of the sequestration. Then there arose that race between him and the trustee which often does arise in similar cases, where the party holding his security, if first infeft, cuts out the trustee. Now, I apprehend that Mr Harrison did proceed to present his transfer, that it was received, and that he became a shareholder. But it is said, on the other hand, that the act of sequestration operated as an intimation of the transfer of these shares to the trustee. Assuming that it did, what then? The trustee is, at least, in no better position than an assignee after intimation. But this is not sufficient to give him the character of a shareholder. If it was, it would create an unmanageable state of things. Companies would require to keep a register of intimations. In short, it would give rise to a variety of irregular and difficult questions, and cause perfect confusion. But the Companies Clauses Act has regulated the whole proceedings necessary to render a transfer of shares valid and complete. And the trustee has not conformed to the regulations laid down.

It is quite possible that the trustee might have had a right to compel the bankrupt to grant a transfer of these shares to him. But the bankrupt in this case would, as an honest man, have said:—“I have already transferred these shares to another. Your course is to go to the register with your decree in the sequestration, and get entered.” This the trustee never did.

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