Share Registers
Re The Bahia and San Francisco Railway Co Ltd -v- Trittin and others
(1868) LR 3 QB 584
Lord Cockburn CJ wrote
“This power of granting certificates is to give the shareholders the opportunity of more easily dealing with their shares in the market, and to afford facilities to them of selling their shares by at once showing a marketable title, and the effect of this facility is to make the shares of greater value. The power of giving certificates is, therefore, for the benefit of the company in general; and it is a declaration by the company to all the world that the person in whose name the certificate is made out, and to whom it is given, is a shareholder in the company, and it is given by the company with the intention that it shall be so used by the person to whom it is given, and acted upon in the sale and transfer of shares. It is stated in this case that the claimants acted bona fide, and did all that is required of purchasers of shares; they paid the value of the shares in money on having a transfer of the shares executed to them, and on the production of the certificates which were handed to them. It turned out that the transferors had in fact no shares, and that the company ought not to have registered them as shareholders or given them certificates, the transfer to them being a forgery. That brings the case within the principle of the decision in Pickard v- Sears [6 AD & E 469] as explained by the case of Freeman v- Cooke [2 Ex 654] that if you make a representation with the intention that it shall be acted upon by another, and he does so, you are estopped from denying the truth of what you represent to be the fact.”
Blackburn J referred to the Companies Act and said:- “The statute further provides that the company may give certificates specifying the shares held by the member; and the object of this provision is expressly stated to be that this certificate should be prima facie evidence of the title of the person named to the shares specified; and the company, therefore, by granting the certificate, do make a statement that they have transferred the shares specified to the person to whom it is given, and that he is the holder of the shares. If they have been deceived and the statement is not perfectly true, they may not be guilty of negligence, but the company and no-one else have power to enquire into the matter; and it was the intention of the legislature that these certificates should be documents on which buyers might safely act,” and “. it is quite clear that a statement of a fact was made by the company, on which the company, at the very least, knew that persons wanting to purchase shares might act.”
Lush J referred to the certificate given by the company to the fraudsters:- “And the claimants having acted on this statement by the company, there arises an estoppel as against the company, prohibiting them from denying that what it states is true. And the question then is, what does the certificate mean? Does it mean merely, that [the fraudsters’ names] are on the register, and the company have done their best to ascertain that they are entitled to the shares, but cannot say whether they are so entitled? Or does it amount to a statement that the company take upon themselves the responsibility of asserting that they are the registered shareholders entitled to the specific shares? I think the certificate must amount to the latter assertion. It is the company who are to keep and look after the register, and they are the only persons who have control over it, and they can refuse to register a person until he shews that he is legally entitled. Having, therefore, put the names of [the fraudsters] upon the register, and granted them a certificate, the company are estopped after that statement has been acted upon and cannot deny that those persons were the legal holders of the particular shares which have been transferred to the claimants. The claimants, therefore, are entitled to recover from the company the value of the shares at the time when they were deprived of them.”
Sheffield Corporation v Barclay
[1905] AC 392 Lord Davey wrote
“I think that the appellants [Sheffield Corporation] have a statutory duty to register all valid transfers, and on the demand of the transferee to issue to him a fresh certificate of title to the stock comprised therein. But, of course, it is a breach of their duty and a wrong to the existing holders of stock for the appellants to remove their names and register the stock in the name of the proposed transferee if the latter has, in fact, no title to require the appellants to do so. I am further of opinion that where a person invested with a statutory or common law duty of a ministerial character is called upon to exercise that duty on the request, direction, or demand of another (it does not seem to me to matter which word you use), and without any default on his own part acts in a manner which is apparently legal but is, in fact, illegal and a breach of the duty, and thereby incurs liability to third parties, there is implied by law a contract by the person making the request to keep indemnified the person having the duty against any liability which may result from such exercise of the supposed duty. And it makes no difference that the person making the request is not aware of the invalidity in his title to make the request, or could not with reasonable diligence have discovered it.’ and as to Dugdale v Lovering: ‘I am also of opinion that the authority keeping a stock register has no duty of keeping the register correct which they owe to those who come with transfers. Their only duty (if that be the proper expression) is one which they owe to the stockholders who are on the register. This point was decided by all the learned Judges who took part in the decision of the first case of Simm -v- Anglo-American Telegraph [5 QBD 188]. I will content myself with quoting the language of Cotton L.J. [at 214] ‘The duty of the company is not to accept a forged transfer, and no duty to make inquiries exists towards the person bringing the transfer. It is merely an obligation upon the company to take care that they do not get into difficulties in consequence of their accepting a forged transfer, and it may be said to be an obligation towards the stockholder not to take the stock out of his name unless he has executed a transfer; but it is only a duty in this sense, that unless the company act upon a genuine transfer they may be liable to the real stockholder.’.’
Balkis Consolidated Co. Ltd v Tompkinson and others
[1893] AC 396
Lord Herschell LC referred to the Bahia case:- ‘The Court held that the giving of the certificate amounted to a statement by the company, intended by them to be acted upon by the purchasers of shares in the market, that the persons certified as the holders were entitled to the shares; and that the purchasers having acted on the statement by the company, they were estopped from denying its truth and liable to pay as damages the value of the shares.’ and ‘The learned counsel for the appellants impeached these decisions, as they were entitled to do in your Lordships’ House, and contended that they ought to be overruled. After carefully considering the able arguments urged at the Bar, I have no hesitation in expressing my concurrence in the law laid down by the Court of Queen’s Bench in Re Bahia and The San Francisco Railway Co.. The reasoning of Blackburn J in pronouncing judgment in that case appears to me to be sound and in accordance with the law, and I think it would be very mischievous to cast any doubt on the authority of that case.’
Lord Macnaghten:- ‘The general principle of law relating to estoppel by representation cannot be questioned. It is, as Lord Cranworth observed in the case of Jorden v. Money, before this House, a principle of universal application, that if a person makes a false representation to another and that other acts upon that false representation the person who has made it shall not afterwards be allowed to set up that what he said was false and to assert the real truth in place of the falsehood which has so misled the other. Then, after referring to some cases on the subject, his Lordship goes on to say: ‘I think the principle may be carried much further, because I think it is not necessary that the party making the representation should know that it was false, no fraud need have been intended at the time. But if the party has unwittingly misled another you must add that he has misled another under such circumstances that he had reasonable ground for supposing that the person whom he was misleading was to act upon what he was saying.’ Now there is no doubt, I think, that in this case the company must be taken to have known that the certificate was required by Tomkinson or his firm for the purpose of being acted upon.’
Ruben v Great Fingall Consolidated
[1906] 1 AC 439 Lord Loreburn wrote
‘I cannot see upon what principle your Lordships can hold that the defendants are liable in this action. The forged certificate is a pure nullity. It is quite true that persons dealing with limited liability companies are not bound to inquire into their indoor management, and will not be affected by irregularities of which they had no notice, But this doctrine, which is well established, applies only to irregularities that otherwise might affect a genuine transaction. It cannot apply to a forgery.
Another ground was pressed upon us, namely, that this certificate was delivered by Rowe in the course of his employment, and that delivery imported a representation or warranty that the certificate was genuine. He had not, nor was held out as having, authority to make any such representation or to give any such warranty. And certainly no such authority arises from the simple fact that he held the office of secretary and was a proper person to deliver certificates. Nor am I able to see how the defendant company is estopped from disputing the genuineness of this certificate. That, indeed, is only another way of stating the same contention. From beginning to end the company itself and its officers, with the exception of the secretary, had nothing to do either with the preparation or issue of the document.
No precedent has been quoted in support of the plaintiffs’ contention except the case of Shaw v Port Philip Gold Mining Co(1). I agree with Stirling LJ in regarding that decision as one that may possibly be upheld upon the supposition that the secretary there was, in fact, held out as having authority to warrant the genuineness of a certificate. If that be not so, then in my opinion the decision cannot be sustained.’
Lord Macnaghten said: ‘The thing put forward as the foundation of their claim is a piece of paper which purports to be a certificate of shares in the company. This paper is false and fraudulent from beginning to end. The representation of the company’s seal which appears upon it, though made by the impression of the real seal of the company, is counterfeit, and no better than a forgery. The signatures of the two directors which purport to authenticate the sealing are forgeries pure and simple. Every statement in the document is a lie. The only thing real about it is the signature of the secretary of the company, who was the sole author and perpetrator of the fraud. No one would suggest that this fraudulent certificate could of itself give rise to any right or bind or affect the company in any way. It is not the company’s deed, and there is nothing to prevent the company from saying so.
Then how can the company be bound or affected by it? The directors have never said or done anything to represent or lead to the belief that this thing was the company’s deed. Without such a representation there can be no estoppel.
The fact that this fraudulent certificate was concocted in the company’s office and was uttered and sent forth by its author from the place of its origin cannot give it an efficacy which it does not intrinsically possess. The secretary of the company, who is a mere servant, may be the proper hand to deliver out certificates which the company issues in due course, but he can have no authority to guarantee the genuineness of validity of a document which is not the deed of the company.
I could have understood a claim on the part of the appellants if it were incumbent on the company to lock up their seal and guard it as a dangerous beast and if it were culpable carelessness on the part of the directors to commit the care of the seal to their secretary or any other official. That is a view which once commended itself to a jury, but it has been disposed of for good and all by the case of Bank of Ireland v Trustees of Evans’ Charities (1) in this House.
Of all the numerous cases that were cited in the opening none, I think, is to the point but Shaw v Port Philip Gold Mining Co.(1), and that, as it seems to me, cannot be supported unless a forced and unreasonable construction be placed on the admissions which were made by the parties in that action.’
Lord Davey said: ‘It is admitted that Rowe was the proper person to deliver certificates to those entitled to them. From this harmless proposition, the appellant slides into another and very different one, that it was the secretary’s duty to warrant on behalf of the company the genuineness of the documents he delivered. There is no evidence that any such duty or power was, in fact, entrusted to Rowe and it is too great a strain on my powers to ask me to imply it from the mere fact of his being the secretary or the proper person to deliver documents.’