Scottish Court of Session Decisions

This was a Test Case, selected for the trial of the question of the personal liability of trustees holding stock in the bank.

William Muir of Inistrynich, Argyleshire, and others were trnst-disponees of Mrs Mary Murdoch or Syme, widow of the late Francis Darby Syme, of No. 14 Great King Street, Edinburgh, and of Mrs Sophia Murdoch or Boyd, wife of John Boyd, 27 Melville Street, Edinburgh. As trust—disponees the petitioners were holders of .£6000 stock of the City of Glasgow Bank, and their several names had been placed on the list of contributories by the liquidators of the bank under the head “First part contributories in their own right,” and a call was made upon them collectively and individually to make payment of £30,000, being £500 per share of £100 each, payable the first half, viz. £15,000, on 23d December 1878, and the other half on 24th February 1879, in respect of the stock so held. The truster John Murdoch had died on 2d June 1873, leaving a trust-disposition and settlement dated 13th September 1843 conveying his whole estate to trustees, but a difficulty having arisen as to whether the conveyance of the trust-estate was sufficient in its terms to include the whole of Mr Murdoch's estate, the beneficiaries made up a title, and were confirmed executrices-dative to him. This having been done, they executed a trust-disposition dated 20th September 1873, and registered in the Books of Council and Session 28th October also of that year, by which they made over to the petitioners as trustees the whole estate, heritable and move—able, to which as next of kin of the testator John Murdoch they were entitled.

Besides the general conveyance, these beneficiaries on 27th January 1874 executed a transfer in favour of the petitioners as trustees foresaid of certain stock to the amount of £5000 in the City of Glasgow Bank, of which they were then the registered proprietors as next of kin to their father, and also of stock to the amount of £1000 issued by the bank in 1873, and subscribed for by Mrs Syme and Mrs Boyd at a premium of £100 per cent., and which they held as original allottees. The transfer assigned, transferred, and made over to William Muir and his three co-trustees, “the trust-disponees in a deed of conveyance in trust granted by us in favour of the said William Muir . . . dated and ratified the 20th day of September, and recorded in the Books of Council and Session the 28th day of October, both in the year 1873, and their successors and assigns whomsoever, six thousand pounds sterling of the consolidated capital stock of the City of Glasgow Bank Company, with the whole interests, profits, and dividends that may arise and become due thereon, thesaid WilliamMuir, &c., . . astrustdisponees foresaid, by acceptance hereof, being in terms of the contract of copartnership of said bank subject to all the articles and regulations of the said company in the same manner as if they had subscribed the said contract: And we the said William Muir, &c., . . . as trust-disponees foresaid, do hereby accept of the said transfer on the terms and conditions above mentioned.”

The instructions for the preparation of the transfer quoted in the petition were submitted to the directors, passed by them, and the transfer thereafter prepared by an officer of the bank in accordance therewith. The transfer, after being executed by the parties thereto, was by the authority and on behalf of the petitioners presented to the bank for registration in the register of members of the bank, and in consequence thereof the £6000 stock was transferred with their authority to their names, and the following entry was made in the stock ledger (which was stated to be the register of shareholders kept by the bank in terms of section 25 of the Companies Act 1862)—“William Muir, Esquire of Inistrynich, Argyleshire, merchant in Leith; William Thomson, Esquire of West Binny, Linlithgowshire; John Boyd, 27 Melville Street, Edinburgh; and James Lawrence Boyd, S.S.C., 1 Regent Terrace, Edinburgh, as trust-disponees of Mrs Mary Murdoch or Syme, widow of the late Francis Darby Syme, residing at No. 14 Great King Street, Edinburgh, and Mrs Sophia Maria Darby Murdoch or Boyd, wife of the said John Boyd.—Trust—disponees of Mrs Mary Murdoch or Syme and another.”

In the statutory annual returns made to the Registrar of Joint-Stock Companies by the bank, the holding of the stock was described as follows—

“ Syme, Mrs Mary Murdoch or, and Mrs Sophia Maria Darby Murdoch or Boyd, Edinburgh, trust disponees of, . £6000.”

The names of the petitioners never appeared in any of the published lists of the shareholders.

The stock certificate certified that “the trust—disponees of Mrs Mary Murdoch or Syme, &c., have been entered in the books of this company as the holders of six thousand pounds consolidated stock.”

The dividend warrants were in the following form:—

P. John Boyd, 27 Melville street, Edinburgh.

Incorporated under Act of Parliament

The City Of Glasgow Bank.

Dividend No. 33, Second Instalment for Year 1873–74, payable 2d February 1875.

Warrant No. 1100. £330 on £6000 Consolidated Stock, standing in the name of the trust-disponees of Mrs Mary Murdoch or Syme and Mrs Sophia Maria Darby Murdoch or Boyd, Edinburgh.

(Place and date)

£330 sterling. 4th February 1875.

Debit dividend account No. 33 with the sum of three hundred and thirty pounds sterling, being the second instalment of dividend declared at the general meeting of shareholders held on 1st July 1874 on the above Stock.

(Signature) John Boyd,

(Present address) 27 Melville Street, Edinburgh.

To the Manager of the City of Glasgow Bank, Glasgow.

The trust-disposition of Mr Murdoch and the trust-conveyances of Mrs Syme and Mrs Boyd were admitted not to have been produced or exhibited to the bank, though the latter deed was referred to in the transfer prepared by its officer.

On November 27, 1878, the petitioner presented a petition to the Second Division of the Court, which (along with the other legal proceedings arising out of the winding-up of the bank), was afterwards transferred to the First Division, praying the Court under the powers conferred upon it by the 74th and 138th sections of the Companies Act 1862, to ordain the liquidators of the bank

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“to rectify the list of contributories by transferring the names of the petitioners from the first part thereof to the second part thereof, entitled “Second part contributories as being representatives of others,” and to direct that the entry to be made therein shall set forth that the petitioners are holders of stock as representing the trust—estate constituted by Mrs Syme and Mrs Boyd, or that such entry shall be expressed in such other terms as shall limit the obligation of the petitioners to a liability to make the trust-estate forthcoming in a due course of administration, and meantime to prohibit and discharge the said liquidators from taking any measures for enforcing payment of the said call or any further calls that they may make against the petitioners individually, or to do further or otherwise as to your Lordships shall seem proper.”

The petitioners averred—“The petitioners never agreed to become individually members or partners of the said City of Glasgow Bank. They only accepted the foresaid transfer in their representative capacity as administrators of the trust-estate conveyed to them as aforesaid. Their instructions to the officers of the bank were to prepare a transfer in their favour in that capacity, and the transfer so prepared and passed by the directors bears to be in favour of them as trustees and their successors and assigns whomsoever, and the obligation therein contained bears to be undertaken by the petitioners as trust-disponees foresaid. The entry in the stock ledger is qualified in the same terms.”

“It was the regular practice of the City of Glasgow Bank, in virtue of the pel-mission implied in section 30 of the Act 25 and 26 vict. cap. 89, to recognise trustees in their trust capacity, and to insert their names in the said register of shareholders expressly as trustees. Trustees were by the company's contract debarred from attending meetings of the company.”

“The company of the City of Glasgow Bank, by their assent given to the said transfer in manner foresaid, and by the entry in the stock ledger or register of shareholders, entered into a special contract with the principal petitioners to admit them as holders of stock in their representative capacity as trust-disponees under the deed of Mrs Syme and Mrs Boyd, or administrators of the trust-estate thereby conveyed, and by the terms of their obligation the petitioners undertook only to subscribe to the undertaking, and to be liable in the obligation incumbent on holders of stock to the extent of the trust funds under their administration. They are therefore only liable to be placed on the list of contributories in part second thereof as contributories in a representative capacity.”

The liquidators, in their answers, founded upon the bank's contract of copartnery, and further stated—Denied that the petitioners only became liable “in their representative capacity as administrators of the trust-estate,” or that the directors of the bank entered into a special contract with them whereby their liability was in any way limited. Neither the bank nor its directors had any power or authority to enter into any such contract, and they never did so. The list of contributories of the bank was made up by the respondents on 7th November 1878, acting as liquidators in the voluntary winding-up, in terms of the Companies' Act, 1862, and particularly sections 133 (8), 98, and 99; and in doing so the respondents rightly included the petitioners in the part of the said list entitled “first part-contributories in their own right.” The petitioners are partners of the bank, and are contributories liable in their own right.”

The terms of the contract of copartnery, and the clauses of the statutes so far as referred to, will be found in the opinions of the Court.

M'Laren for the petitioners—This was a Test Case brought to obtain a decision of the question whether persons who had been placed on the register of shareholders, and had accepted transfers under the description of trustees, had thereby become members in their own right or only in a representative capacity, in accordance with the rule that trustees entering into contracts within their powers as trustees were only under obligation to make the trust-estate forthcoming. The only speciality, of this case was that whereas in its origin it was a testamentary estate, in point of form it was an inter vivos trust. The petitioners, for the purpose of their argument, assumed the law of previous decisions as to the liability of trustees as shareholders of companies, incorporated or unincorporated. But this was a new case. I. It was the first raising the question that had occurred since the passing of the Companies Act 1862, and there were differences between the relation of company and shareholder as constituted by the Act of 1862, and that of company and partner at common law, or under previous Acts of Parliament or charters which did not confer the status of an incorporated body upon the company. II. There was a special provision (sec. 30) in the Companies Act of 1862, under which it was per missible in Scotland, though not in England or Ireland, to transfer stock and make the entry in the register in such terms as to disclose the fiduciary character of the holder's right. III. The terms of the deeds here vesting the stock in the petitioners imported a contract with the trust—estate. IV. The leading case of Lumsden v. Buchanan did not apply. V. It was not ultra vires of such a company to accept a shareholder on any other conditions than that of individual and personal responsibility.

I. Differences between Membership of an Incorporated Joint-stock Company and Private Partnership—A private partnership was not a separate person in the sense in which an incorporation was. Partners of private companies were universally responsible, because the act of one partner was the act of all. There was no separation except for accounting purposes, and for the purpose of suing and being sued. A company under the Companies Act of 1862 was, on the contrary, a corporation, and no individual member had any power to bind the rest. There was further in such a company no delectus personœ, and the stock was absolutely transferable along with its liabilities, and the transferor divested of all liability for the past and for the future, except that he was liable as a past member for a year if the company were unable by the contributions of all its members added together to meet its debts. In a private company which admitted of a transfer of a partner's share, a retired partner was liable for the firm's engagements previous to his retirement during the whole prescriptive period or till winding-up. As an ordinary rule of law applicable to incorporations, corporators were not liable for the debts of the corporation, e.g., as municipal

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corporations, universities, &c. Incorporation relieved the individual members of a corporation from liability. The Western Bank, which was onlyincorporated for the purposes of winding-up, appeared in Lumsden v. Buchanan to have been treated as an unincorporated company. The City of Glasgow Bank was incorporated while it was carrying on business, and thereby acquired all the privileges conferred on companies by the statute, which must be held to overrule the contract of copartnery in any question affecting the rights and liabilities of its members. Under the Companies Act of 1862 (clauses 45, 46, 49 et seq.) in the case of every company the management devolved upon the managers and directors. So under this contract of copartnery. The shareholders could not individually interfere with the conduct of business in either case. There were provisions in the statute similar to those in the contract of copartnery both as to the character of the stock and for its transference. A company was looked upon in both as a corporate estate divided amongst a number of corporators who had an interest in it which might be acquired by representative persons. It was very clearly recognised in the articles of copartnery (arts. 13 and 14) that trustees as such might be partners, but they were not to be entitled to vote. That showed that it could not be the intention that they be received as individuals.

II. Notice of Trust.—The Joint-Stock Act 1856 (19 and 20 Vict. cap. 47), sec. 19, provided—“No notice of any trust, express or implied or constructive, shall be entered on the register or receivable by the company; And every person who has accepted any share in a company registered under this Act, and whose name is entered in the register of shareholders, and no other person (except a subscriber to the memorandum of the association in respect of the shares subscribed for by him) shall, for the purposes of this Act, be deemed to be a shareholder.” That statute did not originally apply to banking companies, but by the Act 20 and 21 Vict. cap. 49, sec. 3, it was extended so as to apply to these, and by section 15 it was specially provided that the 19th section above quoted of the Act of 1856 was not to apply to any banking company in Scotland registered under the Act. The Companies Act of 1862 by section 30 provided “that no notice of any trust, expressed, implied, or constructive, shall be entered in the register or be receivable by the registrar in the case of companies under this Act, and registered in England and Ireland.” The object of the exception as to notice of trust in favour of Scotch banking companies might be held to be that it was a favourite investment in Scotland by trusters and trustees. It could not be to save the company from embarrassment arising from a complication of title, for in that case the Legislature would have laid down one uniform rule applicable to all companies. The Act of 1862 repealed the previous Joint-Stock Companies Act 1856, but the provisions of that Act threw light on the Legislature's intention in the successive changes that followed. The provisions with reference to notice of trust left it open for consideration as a new question whether, where trustees contracted in their fiduciary capacity, they could be held individually liable. The motive for prohibiting it in the 1856 Act was to insure individual responsibility, and in the 1857 Act to avoid it in the cases named.

III. Meaning of the Contract of Copartnery.—The language in the documents whereby the trustees became the transferees of the stock was the same as would have occurred in an ordinary conveyance or bond. A real right to the stock could not be given without a transfer. The transfer to an individual is to the party, his heirs, executors, and successors. The transfer in the present case was different. It was “successors and assigns whomsoever,” which meant—to their successors in office. The terms of the transfer was the bank's Act under the Companies Act, and if their view was to accept trustees in their individual capacity they would insist upon the insertion of terms implying that. Further, the obligation was laid upon the parties specially as trust-dis—ponees. So, too, in the register of shareholders and in the statutory list of members, and other documents. The acceptance of the stock was thus effectually qualified. Notice of trust on the register was not necessary to protect the beneficiaries' interests against the trustees' creditors— ex parte Stewart, in re Shelley 34 L. J., Banktcy. 6. Therefore where there was, as here, such notice, it was no answer to say that it was merely done to protect the beneficiaries or prevent a breach of trust. It had been held that where the contract was that trustees should be bound in a representative capacity that it was sufficient to qualify the words of the obligation by adding “as trustees”—Cf. Gordon v. Campbell, February 21, 1840, 2 D. 639, (H. of L.), 1 Bell's Apps. 428.

IV. Previous Decisions.—No doubt trustees had been held personally responsible, but it was always a question of the nature of the contract between the trustee and the other party. That was an answer to a class of cases about which there was a great deal of discussion in Lumsden v Buchanan—cases where, e.g., a trustee had informally contracted obligations as a seller or purchaser, or taken up a lease, and where no writing passed. In such cases the question would always be, what was the fair understanding between parties? In the present case the words of the obligation themselves fixed the nature of the contract with reference to the extent of the obligation. Gordon v. Campbell, as being the latest case where there was express written obligation, was thus important. It might be different, e.g.. in cases of bills of exchange, the nature of which was to constitute an individual obligation, but these were distinct from the cases of documents the primary purpose of which was the transference of property or the constitution of a security over it. Here there was a clear agreement between the contracting parties to admit the petitioners in their capacity of trustees. There was no intimation by the company of anything else. — Cf. Bell's Comms. (5th ed.) i. 39.

Coming to Lumsden v. Buchanan, February 26, 1864, 2 Macph. 695 (H. of L.), May 8, 1865, 3 Macph. 89, 4 Macq. 950, the only limitation of the trustees' obligation there was a description of their character as such introduced into the testing clause of the deed of accession. It bore “subscribed by us, trustees of Mrs Brown.” But it was clear law that no qualification contained in a testing clause of a mutual contract could ever bind the other party to the contract, and that ground alone was sufficient for the decision in Lumsden's case. What was filled into the testing clause merely at the request of one

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party, without being submitted to the other, could not be read as part of the contract. But it was true there were other considerations affecting the liability which were entered into by the Court. There was the argument founded on the nature of the contract of copartnery as involving universal responsibility. But the Western Bank was only a private partnership, differing from ordinary partnerships only in respect its membership was numerous and its capital large. In the present case it was the corporation which contracted—the individuals not being liable as partners as in the Western Bank, but as contributories. [Lord President—You must take it as settled by Lumsden's case that if the parties are liable to creditors, they are also liable to relieve their copartners.] There were no partners in the present case; the word “Partners” was not to be found in the Companies Act, and it was the corporation which contracted. The liability was the statutory liability of a contributory, and the question was, was there an agreement to “become a member” (Companies Act 1862, sec. 23). In a private partnership the question was not—In what character did you agree to join the undertaking? but Were you one of those on whose joint employment the obligation was undertaken? There was the further argument in Lumtden's case, that the trustees were traders, and were therefore under a series of decisions responsible. But in the present case, as the company was incorporated, the individual members were not traders; if banking were a trade, then the corporation was the trader. In England the conditions for raising the present question did not exist, because notice of trust was refused there. Trustees were held personally liable there, but they were entered without notice of the trust. — Cf. Bugg's case, May 15, 1865, Deury and Smail, 452; Davidsons case, July 19, 1849, 3 De Gex and Smail, 21.

V. Was it ultra vires of the Bank to accept Trustees with a Limited Responsibility?—That involved two questions—(a) What were the powers of the directors under the Companies Act 1862? (A) Assuming they had acted ultra vires, What was the consequence? ( a) The contract of copartnery contemplated that trustees should be partners. The petitioners were so designed in the stock ledger, and persons so entered were disqualified from attending meetings and voting. Then in the winding-up clauses of the Companies Act 1862 there was provision for making up the list in two parts, the latter for those liable in a representative capacity. That might apply to executors and assignees of bankrupts, but it had a much larger meaning. There was a great analogy between the case of a trust and of a limited company holding stock. The capital of the company was available, and so, too, there was the unlimited responsibility of the trust, which in the general case was as wealthy as the individual shareholder. Really in most cases it would be the individual responsibility of the truster—the man who was formerly the partner — and the estate was the same as during the truster's life. The liability of a trust was further more enduring than that of an individual. And the intention of the Legislature in authorising in Scotland the acceptance of trustees with notice of trust was to recognise and protect them in their corporate capacity.

(b) If the bank had no authority to accept the petitioners in their fiduciary character, they could not be made parties to a contract different from that to which they had agreed. The contract was void.

Balfour for respondents—I. The petitioners did become “partners” or “members” of this company. II. Having become so, they were liable personally for the debts of the concern.

I. Did the petitioners become partners? — The argument upon this head was submitted in respect of that part of the petition which prayed that the petitioners' names should be transferred from the first part of the list of contributories to the second part—entitled “second part contributories as being representatives of others.” That prayer proceeded on a misapprehension of section 99 of the Companies Act 1862. Under that section the second heading of the classification could not contain the names of persons who became partners in the concern, either with personal or representative liability, but only the names of those who, not being partners, represented those who were, such as an executor on a dead man's estate or a trustee on a bankrupt estate. Section 23 of the Act, defined the term “member,” and by later sections the definition was made applicable to companies not constituted under the Act, but only registered under it as the City Bank was, as well as to those constituted under it. Section 38 defined who were to be contributories, and in this statute limited liability in an unlimited concern was not recognised unless in the two cases of limitation by shares or by guarantee. The classes of contributories mentioned in sections 76, 77, and 78 satisfied the definition of “representative” contributories. So that it was clear the petitioners could not be placed in the second head of the list, as they were not “representatives.”

II. Were these petitioners partners with limited or with unlimited liability? — The petitioners must distinguish their case from that of Lumsden v. Buchanan (H. of L. 3 Macph. 89.) One broad distinction between that case and the present was not favourable to the petitioners, viz., thatin Lumsden the majority of the Court of Session founded their judgment on the fact that as all the debts of the bank had been paid, the question was one simply inter socios. And for anything that appeared the Judges here would have decided Lumsden's case as it ultimately was decided in the House of Lords, had it been as here a question with creditors. The grounds of the decision of the minority here, and of the House of Lords on appeal, were (a) that the terms of the contract of copartnery did not allow of a distinction between partners with limited and partners with unlimited liability, and (A) that such a distinction was repugnant to the very nature of the partnership contract into which the trustees had entered ( 2 Macph. 710). The petitioners here had therefore to show either that the contract of copartnery was so different from that of the Western Bank that the reasoning applied there did not apply here, or that the reasoning on the general question of personal liability in partnerships did not apply here.

The distinction drawn by the petitioners between members of a registered company and members of a private trading firm could not apply here, for the Western Bank was no more a private firm than the City of Glasgow Bank was up till November 29, 1862, when it was incorporated. They

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were identically constituted; there was no delectus pe soœ, in either, no mandate, and the directors had the same powers in both, and the very fact that there was no delectus persona in either made it very unlikely that either bank should recognise such a principle as members coming in with limited liability. This first ground of distinction was then really present in Lumsden's case, and was taken into consideration.

It was further argued for the petitioner that the fact of this bank being incorporated created a distinction between the two cases, but as matter of fact the contract of copartnery had been in existence long before the 1862 Act, and up to that time it had been upon the same footing with the Western Bank. Again, the only effect of the Act of Incorporation was, that whereas so long as this was a private partnership a creditor must have had direct recourse against the individual partners, such recourse must thereafter be had through the company, not in a bankruptcy but in a liquidation. One man might previously have had to pay the whole debt at once, with recourse against the company, but the Act changed that. The incorporation had not the effect of introducing the ordinary rule of corporations which limited the liability, for in that case individual funds could never be reached at all. That rule had been altered with regard to trading corporations long previously to 1862 by the Acts 6 Geo. IV. cap. 91 (which related to charters), 4 and 5 Will. IV. cap. 94, and 7 Will. IV. and 1 Vict. c. 73. And the Act of 1862 did not displace any one of the considerations arising from a construction of the contract of copartnery of any company existing previously to that Act and registered under it. The contract of copartnery was made to come in place of the articles of association in the constitution of a company created under that Act— cf. sec. 196 of the Companies Act 1862. And therefore the considerations arising from the nature of the partnership relation on which Lumsden's case was decided still applied.

As regarded the clauses which were said to recognise varying liabilities, section 19 of the Act 19 and 20 Vict. c. 47, which had been quoted, did not distinguish companies in England and Scotland, but banking companies were never under that statute, and therefore it had no application. The Act of 20 and 21 Vict. cap. 49, however, made the last-named statute applicable to banking companies, but section 15 specially enacted that section 19 of that Act “shall not apply to banking companies in Scotland,” so section 19 might as well never have been written so far as Scotland went. Neither the Western Bank nor the City of Glasgow Bank could ever have been affected by that section. You could not then, reading section 30 of the 1862 Act, found a distinction between the cases, for the fact was that banks in Scotland had always taken notice of trusts. The 1857 Act did not stop that being done, but only left the law to determine the effect of such a course. The common law liberty of banks in Scotland to take notice of trusts had in fact never been touched by statute. Shareholders in Scotch banks had found it convenient in their dealings to notice trusts, and it would have been an interference with Scotland to prevent the continuance of that practice.

Further, on the contract of copartnery, the petitioners urged that in the case of Lumsden the words added to the designations of the trustees in the testing clause were the words on which the judgment turned, and that there was an essential difference in the binding words in the transfers here. In Lumsden the words were “heirs, executors, and successors;” here the words were identical, except that “executors” was omitted, and there was nothing in the judgments in Lumsden to show that that word was considered specially material. The real ground was that, looking to the terms of the contract and its provisions regarding the liabilities of partners, it would be repugnant to the general scope and tenor of the deed if it were held that the trust only was bound. Too much stress had been laid by the petitioners upon the terms of the transfer, but it was not that but the contract that should be looked at. The transfer had to be sent in for registration, and that was equivalent to a signing of the contract by allottees—Section 38 of contract of copartnery. The clauses in the contract of the Western Bank were held to exclude the idea of two kinds of liability, and the clauses of this contract were identical in purpose though more logically framed and better worded. The test of liability defined in art. 5 of the contract of copartnery was the holding a share, and that clause was verbatim the same as in the Western Bank case, and was specially founded on by the Lord Chancellor (Westbury) there. Articles 13 and 14, which were said to recognise the existence of trustees, merely denied the right of voting to those trustees who were not themselves partners. Trustees who were themselves partners were entitled to vote. The opposite argument implied that where trustees took by transfer from a man who was under universal liability their own liability was not universal. That was inconsistent with the continuity of character of the partners, which the deed contemplated. If instead of taking by transfer the petitioners had taken by deed of accession, the analogy between this case and Lumsden would have been complete— cf. Lord Cranworth in Lumsden's case.

Again, there was nothing in the transfer which, even had it occurred in the contract,, would have'distinguished the case from Lumsden's. The words founded on were similar to those used in the testing clause in Lumsden, and were words of destination, not of obligation. The other documents founded on were no part of the contract. The case of Gordon v. Campbell was one of a loan transaction with a single individual, where the trustees carefully bound the estate, and that alone. It was fully considered in Lumsden, but it did not weigh in the decision.

Lastly, if it were ultra vires of the officials of the bank to admit trustees in that capacity, such persons would not necessarily be freed in a question with creditors, for creditors saw the terms of the contract, they saw the names in the register, both being published, and they were therefore entitled to assume that the admission had been regular. Lumsden v. Peddie, Nov. 16, 1866, 5 Macph. 34, was a case of a transfer, not of an original allotment.

Replied by the Dean of Faculty ( Fraser) for petitioners—This case was not ruled “by Lumsden's. The question was “[Who were the partners, and in what capacity were they partners”? The

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position the petitioners took up was, not that there were two sets of members, one with limited the other with unlimited liability, but that they were representatives of a trust-estate, and liable to the utmost farthing of the fortune they represented.

There were two main distinctions between this case and Lumsden's—(a) this was an incorporated company, and (b) the terms of the trustees' undertaking were different.

(a) There were the distinctions between a partnership and a joint-stock company, which had been already contended for, and there was a difference under the Statutes of 1856, 1857, and 1862 between England and Scotland as to notice of trust. The object of allowing notice in Scotland was not for identification. That was the suggestion of some one who had to find a reason. A trust when it went on the register carried with it the consequence that there should be only trust liability, according to the usage and the understood law of Scotland, down to Lumsden's case— Cf. Lord Moncreiff in Gordon v. Campbell, 2 D. 639. The exceptions where trustees had been found personally liable—where, for instance, they had exceeded their powers, or had granted bills under circumstances implying individual responsibility—merely confirmed the general law that it was the trust-estate which was responsible. The respondents desired to make a new exception to the ordinary rule of the common law, without any justification from necessity, expediency, or justice, which was the only excuse they could have for doing so. The Companies Act of 1862 made the law regarding notice of trust more distinct without in any way altering it. In England in such cases there was a legal estate in the trustee, and an equitable estate in the cestui que trust. In England, where there was notice of a trust behind, the beneficiaries might intervene in the case of a sale, but in Scotland a bank would be bound to honour the trustees' transfers.—Lewin on Trusts, 204, 559. In England the reason for preventing the notice of trusts upon the record was that of convenience. There was no inconvenience in allowing it in Scotland. There was further in England the object of preventing the interference of the cestui que trust or of the creditors. Therefore the law had laid down that the trustee there should hold both the legal and the equitable estate. Upon that point the Judges who decided Lumsden v. Buchanan might quite consistently give a different opinion now. The liability rested upon the estate represented by an individual whose name was put upon the register. There was nothing inconsistent with that in the contract of copartnery, which contemplated there being persons in two capacities on the register, one where the person represented himself and his own interests, and the other where he was the mere conduit pipe to convey the money of others. There was no doubt a pro rata liability, but the liability was that of the beneficiaries, who had to pay to the full extent of the trust-estate. That would result in no hardship to creditors, as the only names which were conspicuously before them in their dealings with the bank were those of the directors. The amount of a trust-estate was always ascertainable at the Commissary Office, but the amount of the fortune of a living man could not be ascertained by creditors.

(b) It was as “trust-disponees” that these trustees were received by the bank, and as such that they undertook the obligation. Gordon v. Campbell therefore applied. The entry in the annual list of members sent to the registrar, and also in that sent to the Commissioners of Stamps, was “Mrs Sophia Murdoch, the trust—disponees of,” so that no creditor could complain, for the names of the petitioners had never been intimated.

It was said that such a contract as the petitioners pleaded was ultra vires of the bank. If so, what was the result? Was it that the qualification of trust—disponee was to be rejected? Where illegal conditions were attached to contracts, the contracts were held at an end. So the result in the present case would be that the petitioners would hand back the benefit they had got, and the bank would repay what had been given them in consequence of its having been entered into.

Sections 76, 77, and 78 of the Act of 1862 dealt with three cases where persons might be put on the register in a representative character. But their language covered the case now in hand, and there was no reason why there should be such a limit. The petitioners were accepted as representatives of a trust-estate, and therefore claimed the benefit of the 99th section of the statute. If that construction was not right, then section 30, which allowed a trust to appear on a register in Scotland, had no meaning.

Replied by Kinnear for the respondents—The petitioners could not take the benefit of the provision for dividing the list of contributories because it was now admitted that they were partners. Therefore the only case they could make was that their liability should be qualified by some such words as they expressed in their prayer. It was true that the limitation was not to be a fixed sum, as in the case of partners of limited companies, but it was nevertheless an inferior liability to that of other partners. The undertaking which appeared to be contended for was that if at the time the liability attached the trustees happened to have funds out of the estate they would pay the calls, and that was all.

Was that the true nature of the contract of co—partnery into which the petitioners had entered? It was said that the accident of a shareholder's death ought not to extend the liability attaching to his shares. But it was not because they represented a deceased shareholder, but because being shareholders they had disclosed the fact that they held in trust, that the petitioners claimed a different liability from the other partners. Thus the question was—could the case be distinguished from Lumsden's?

(1) Lumsden's case was not decided upon the terms of the obligation, as was pleaded on the other side, though that was a circumstance of weight in the case. But if it was decided upon that footing, there was the same ground here, for the effect of accepting the transfers was the same as that of subscribing the contract of copartnery, and the contract expressly bound subscribers and their heirs and successors.

(2) The judgment in Lumsden did not proceed on a peculiarity of English law, but exclusively on the Scotch law of partnership. But, further, the special terms of the deed of copartnery in

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that case was held to exclude the contention of the trustees, and the contract in the present case was similar.

(3) As to the argument founded upon incorporation under the Act of 1862, there was no distinction in fact between the present case and Lumsden's. It was not material that incorporation of the Western Bank was only obtained for the purposes of winding-up, because the assumption was that registration operated so as to alter the liability under the contract of copartnery. But that contention was negatived in Lumsden's case. Of. further section 196 of the Act of 1862, which provided that upon registration a company continued to be regulated in the same manner as before by the conditions of its own contract of copartnery, and there was no provision in the statute repugnant to the provisions under the contract rendering all parties personally liable. The only difference constituted under that Act was that instead of having a direct remedy, as previously, against the shareholders, a creditor must claim upon the common fund. The only new ground of distinction stated here was, that under the Statutes of 1856, 1857, and 1862 notice of trust upon the register was sanctioned in Scotland. But the Acts had made no difference on the previously existing law. [Lord Shand—I looked over the printed papers in the appeal in Lumsden's case, and I find that the effect of the Statutes was pressed.] Then there was an end to that distinction.

(4) The petitioners argued that they were transferees here, which put them in a different position from original shareholders or allottees. But the mode of execution of the contract by disclosing that a party was acting in a particular capacity could not control the plain meaning of the stipulations of the contract which was being undertaken. Lumsden's case settled that.

It was objected that the trustees' names did not appear either in the published lists or in those sent to the registrar. But they did appear in the true register of shareholders, which determined the rights of parties under the Statute. And that register (sec. 32 of Act of 1862) was open to the inspection of the public.

At advising—