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Colonial Cases

Hong Kong and Shanghai Banking Corporation v. Tombrink, 1871

[partnership, bankruptcy]

Hong Kong and Shanghai Banking Corporation v. Tombrink, Trustees of Glover, Dow and Co.

Supreme Court of China and Japan
10 June 1871
Source: The North-China Herald, 16 June 1871




Shanghai, 10th June, 1871.

Before C. W. GOODWIN, Esq.




 (Trustee in the estate of Glover, Dow & Co.)

   Mr. Rennie for Plaintiffs.

   Mr. Bird for Defendant.

   This was an application for a rehearing; the case having already been tried in the Provincial Court at Nagasaki, and decided in favour of the plaintiffs.

   The Plaintiffs in the case asked the Court to order the Defendant to deliver up certain securities (116 cases arms and ammunition) on which they (the Bank) claimed a lien as part collateral against an advance of Tls. 7,500.

   The Defendant declared that the lien had been removed by a previous special payment of $8,000.

   The case was tried before H.B.M. Consul at Nagasaki, on the 8th April, and decided against the defendant.

   Mr. Rennie opposed the Defendant's application for rehearing, on the ground that no affidavit had been filed, nor any new evidence shown to be forthcoming.  In such a case the onus of proof lay upon the Defendant, and he submitted that not one iota of evidence had been offered such as the Court below ought to have received, to upset the Plaintiff's case.  The case had been tried and lost.  If, now, the Defendant came forward and said he could produce new evidence, his Lordship might have granted a rehearing; but in the absence of an affidavit, that some such strong evidence was forthcoming, he submitted that it ought not to be granted.  The effect of granting a rehearing on the ground of informality in the conduct of the trial would be to open the door to perpetual appeals for rehearing from provincial Courts.  The judges in these Courte were not lawyers, and most cases were conducted there more or less irregularly; the effect therefore of granting this appeal would be to establish a precedent for ex parte applications for a rehearing by every Defendant who felt himself aggrieved by a decision.  He would urge, therefore, that the application ought not to be granted unless some special reason were shown; and this application was unsupported by any offer of new evidence.

   Mr. BIRD said, as to the first objection, he had not filed an affidavit, because he took it that where there was no new evidence to produce in the affidavit, there was no need for one.  Here, there was no new evidence offered. The application was made under Rule 172 of the Rules of H.B.M. Supreme Court for China and Japan.

The Supreme Court may from time to time make such orders as seem necessary for determining the real question in controversy between the parties, - and for that purpose may, as between the parties to the appeal, - amend any defects, or errors in the record of appeal, - and may direct the Court below to inquire into and certify its finding on any question as between such parties, or any of them, which it may be necessary or expedient to determine before final judgment in the appeal, - and generally shall, as between the parties to the appeal, have as full and ample jurisdiction over the whole suit as if the same had been instituted and prosecuted in the Supreme Court itself as a Court of first instance, by parties subject to its ordinary jurisdiction, - and may rehear the whole case, - or may remit it to the Court below to be reheard, or to be otherwise dealt with as the Supreme Court directs.

   This Rule had obviously in view to remedy possible irregularities in the Consular Courts. Without entering into the merits of the case, he would say that the question here was whether the Bank had or had not a lien upon certain property belonging to the appellant.  But even his learned friend would admit that the answer filed in this case did not raise the question, and did not put Plaintiffs to the proof in support of his claim.  Even in an undefended case, the Plaintiff had to prove that he had a prima facie good case.  But in this case there were no lawyers engaged, and the answer did not raise a fair issue.  The motion was framed in an alternative form in accordance with Rule 145, which permits, and seems to be worded generally so as to permit the Court to make such order as may seem necessary to determine the real questions at issue in the controversy between the parties.

   With the exception of the petition, the proceedings in this case were informal; and he thought it was the very case which Rule 17 wass framed to meet. A man should not be prejudiced by his case being decided informally.  He had no legal advice, and never put the Plaintiffs to proof.  The case was decided without sufficient evidence.  The only evidence was a letter of hypothecation and Mr. Jackson's statement.  One witness, even, had not been sworn.

   Mr. RENNIE said the letter of hypothecation had been produced and judgment given.  If the Defendant had not legal advice, that should not prejudice Plaintiff's case.  The Plaintiff's case was properly stated in the petition, and they had attained judgment by regular steps.  In applying for a rehearing, he contended that it was the Defendant's duty to give to the Court on oath some new evidence which he would be able to produce before it.  Otherwise, he repeated he feared the effect would be that, when ever a defendant felt aggrieved by a decision in a Provincial Court, he would come to this Court for a rehearing.

   HIS LORDSHIP said that, in most of the cases that had been appealed to him, he would rather they had come before him for rehearing than on appeal.

   Mr. RENNIE agreed, but still thought the application for rehearing ought not to be granted without an affidavit.

   Mr. BIRD said there was no rule requiring an affidavit, and he had followed the course he had taken, to save money and trouble.

   HIS LORDSHIP gave the order for a rehearing, with leave to both parties to amend pleadings and to produce new evidence.


Source: The North-China Herald, 23 June 1871


Shanghai, 19th June, 1871.

Before C. W. GOODWIN, Esq.




(Trustee in the estate of GLOVER & Co.)


Re-hearing from Nagasaki.

   Mr. Rennie for Plaintiffs.

   Mr. Bird for Defendant.

   Mr. RENNIE did not think it was necessary to make any statement of the facts, because the petition set them forth.  He would read that document.

  1. - The Plaintiffs are a Banking Corporation carrying on business at Hongkong, Shanghai in the Empire of China, Nagasaki in the Empire of Japan and elsewhere in China and Japan.
  2. - That Defendant is the Trustee of the estate of Messrs. Glover & Co., a British form of copartnership, lately carrying on business at Nagasaki and elsewhere in the Empire of Japan, duly appointed under a special resolution of the Creditors of such firm or copartnership passed at a Meeting of Creditors held at Nagasaki on the 16th and 19th days of September last and duly registered at Her Britannic Majesty's Consulate at Nagasaki in accordance with the provisions of the Bankruptcy Act, 1869.
  3. - On or about the - day of March 1870, a certain firm or trading co-partnership carrying on business at Shanghai under the name of Glover Dow & Co. being indebted to the Plaintiffs in general account and seeking to obtain from them further advances, indorsed over to Plaintiffs and deposited with them as and for security for further advances to be made by the Plaintiffs to the firm of Glover Dow & Co. and to secure the general balance due from the said Glover Dow & Co. to the Plaintiffs a letter written and signed by the firm of Glover and Co. Dated 4th March 2871, in which it was stated that the firm of Glover and Co. held top the order of Glover Dow and Co. certain goods thereunder mentioned (and more particularly described in the Schedule to this petition annexed) stored in their Godowns in the Foreign Settlement of Oota Nagasaki as collateral security for an advance from Glover Dow & Co. of Shanghai of Taels Seven Thousand Five Hundred (Tls. 7,500) there receipt whereof was thereby acknowledged.
  4. - The indorsement made by Glover Dow and Co. as mentioned in the preceding paragraph was in the words following: viz:

Pay the within to the order of the Manager of the Hongkong and Shanghai Bank Corporation.

(Signed) GLOVER DOW and Co.

  1. - On the 15th March 1870 Glover and Co. of Japan wrote and sent to the Manager of the Plaintiff's branch Banking establishment at Shanghai a letter in which they stated that they had been informed by their Shanghai friends Messrs. Glover Dow and Co., that they Messrs. Glover Dow and Co. had deposited with such manager their lien of Hypothecation (meaning thereby the letter alluded to in the 3rd paragraph of this petition) upon 122 cases of Arms and ammunition enumerated in their list of the 4th instant and further informed the  said manager that they the firm of Glover and Co. had sold Dix cases of the goods mentioned in such letter and had therefore to hand to such Manager a cheque for Tls. Five hundred and thirteen and cents fifty-six) (Tls. 51356) for proceeds of the same which sum they requested the said manager to consider as specially on account of the lien in such letter before referred to and as releasing such Six cases of goods.
  2. - The remainder of the goods enumerated in the letter of Glover & Co. alluded to in the 3rd paragraph of this petition save and except the Six Cases mentioned in the preceding paragraph of this petition consisting of 116 Cases of Arms. Accoutrements and ammunition more particularly describer in the Schedule attached to this petition, have not been sold or released by or on account of the Plaintiffs and are now in the possession of and under the control of the Defendant as such Trustee as mentioned in the 2nd paragraph of this petition.
  3. - The sum of Taels Seven thousand five hundred (Tls. 7,500) alluded to in the letter of Glover and Co. mentioned in the 3rd paragraph of the petition has not nor has any portion thereof save and except the sum of Tls. 513.56 mentioned in 5th paragraph of this petition been paid to the plaintiffs by the said Glover and Co. or any one on their behalf.
  4. - Subsequently to the d ay of March 1870, the plaintiffs made further advances of money to the said Glover Dow and Co. upon the security amongst other securities of the goods mentioned in the said letter of Glover and Co. of date the 4th day of March 1870.
  5. - The said firm of Glover Dow and Co. suspended payment in or about the month of --------- 1870, and a special resolution of the creditors for the liquidation of their affairs by arrangement was subsequently registered in this Court.
  6. 0.  - There is an amount due, owing and unpaid from the said firm of Glover Dow and Co. to the plaintiffs on general balance of account for Taels two thousand six hundred and eighteen and cents forty-nine (Tls. 2,618.49.)
  7. 1.  - The plaintiffs have applied to the defendant to  deliver up to them possession of the goods mentioned in the 6th paragraph of this petition and more particularly described in the Schedule hereto, and have done and performed all things and all things have happened and all times elapsed necessary to entitle them to have possession of the said goods so  delivered to them by the defendant but the defendant had wholly neglected and refused to comply with their requests and has detained and still does detain the said goods.

   And the plaintiffs therefore pray that the defendant may be ordered to deliver to the plaintiffs possession of the goods mentioned in the Schedule hereunder written or their value with $100 for their detention and be ordered to pay the costs of this suit, and that the plaintiffs may have such other and farther relief as the nature of the case may require.


  1. - That he admits the truth of the allegations contained in the 1st and second paragraph of the said petition.
  2. - As to the 3rd paragraph of the  said petition the defendant denies that the  said firm of Glover Dow and Co being indebted to the plaintiffs as in the said paragraph mentioned, did indorse over to and deposit with the plaintiffs the letter referred to in the said paragraph for the purpose and in the manner therein alleged.
  3. - As to the 4th and 5th paragraphs of the said petition the defendant admits the truth of the allegations therein contained.
  4. - As to the 6th paragraph of the said petition the defendant denies the allegations therein contained.
  5. - As to the 78th paragraph of the  said petition the defendant says that the sum of Taels seven thousand and five hundred therein mentioned was not nor was any portion thereof in fact paid and advanced by the plaintiffs to the said Glover Dow and Co. or to the  said Glover and co. or to any one on their behalf.
  6. - As to the 8th paragraph of the s aid petition the defendant denies the allegations therein contained.
  7. -  As to the 9th paragraph of the said petition the defendant admits the allegations therein contained.
  8. - As to the 10th and 11th paragraphs of the said petition the defendant denies the allegations therein respectively contained.
  9.  As to the whole of the said petition the defendant says - That the said letter of the 4th March 1870, was given to the said Messrs. Glover Dow and Co. being the agents of the said Glover and Co. as collateral security for an advance of Tls. 7,500 and for no other purpose, whereof the plaintiffs always had notice.  Yet the said Messrs. Glover Dow and Co. in breach of their duty as agents of the said Glover and Co. and without the knowledge or consent of the said Glover and Co. indorsed the said letter to the plaintiffs for purposes other than that for which the same had been given to them as aforesaid.
  10. 0.  - And for a further plea the defendant says that at the time when the said letter of the 4th Match 1870, was handed to the said Glover Dow and Co. the said Messrs. Glover and Co. drew a bill of exchange for the sum of Mexican dollars seven thousand five hundred in favour of certain persons trading under the style of Boyd and Co. upon the said Glover Dow and Co. and the  said letter of hypothecation was given as collateral security for the repayment to Glover Dow and Co. by Glover and Co. of the  amount of the said bill and for no other purpose.  And the defendant further says that afterwards to wit on the 11th day of March 1870 the said Glover Dow and Co. drew in return upon the said Glover and Co. in Hiogo a bill of exchange for the sum of Mexican dollars Eight Thousand and handed the same together with the said letter of 8th March to the plaintiffs.  That afterwards to wit on the 5th say of April 1870 the said bill fell due and was paid by the said Glover and Co. to the plaintiffs in Hiogo whereby the purpose wherefore the said letter of the 4th March had been given as aforesaid was fulfilled, and the alleged lien thereunder given became and was discharged.

   The amended answer, Mr. Rennie said, admitted some points, and contested others; but contained two special paragraphs bearing on the whole petition, with which he would not deal now, but would say that neither showed ground of defence in point of law.  At present, as he doubted whether his friend would be able to produce evidence to prove the points alleged, he would not enter into the legal argument.

   DAVID MACLEAN. - I am Manager of the Hongkong and Shanghai Bank Corporation, Shanghai.  I remember receiving the original of this document (letter from Glover and Co., dated 4th March) about the 7th or 8th March 1870.  The endorsement was on it at the time I received it.  I received it from Mr. Groom, of the firm of Glover Dow and Co.  He gave it to me as general security for a loan then running.  I held other securities at the time.  This was an additional security to be held for the same purposes as others in our hands.  It was not given against any particular loan.  Nothing was said at the time, about further advances.  The firm was at this time indebted to the Bank on various accounts.  Subsequently, I made a great many further advances.  I remember receiving a letter dated 15th March from Glover and Co.

DEAR SIR, - We are informed by our Shanghai friends Messrs. Glover Dow and Co. that they have deposited with you our lien of hypothecation upon 122 packages of Arms and ammunition as enumerated in out list of 4th instant.

   We beg to inform you that we have since then sold 6 cases of the above as enumerated at foot, and we have therefore to send you the enclosed cheque for the proceeds Tls. 513.56 which sum please consider as specially on account of the lien above referred to, and releasing the undernoted 6 cases.

   After receiving that letter I continued business with Glover Dow and Co.  I did not afterwards receive any further remittance on account.  I next heard some time in August.  No claim was made upon me by Glover and Co, in respect of their letter of hypothecation, between the months of March and August.  I did not advance any further money to Glover Dow and Co., after Messrs. Glover and Co.'s letter in August, to the effect that they considered the lien of the Bank discharged by the payment of Glover and Co.'s drafts, and asking me to return the documents.  I had not at any tine notice from Glover and Co. that this letter was given to Glover Dow and Co. with any special purpose.  Except the Tls. 513 I have never received either the arms or any thing arising from them.  There is a balance now due to the Bank of Tls. 2,618.  This balance is against the arms, the remaining part of the balance due from the estate having been liquidated by the sale of other securities also held by the Bank. I have received notice from the Trustee that they claim the balance should we be able to realise it.

   To Mr. BIRD. - When the letter of 4th March was handed to me, I made no advance.  The agreement between the Bank and Messrs. Glover Dow and Co. was not reduced to writing.  I said to Mr. Groom you must give me additional security on a certain special loan.  I read the document at the time it was handed to me.  The agreement come to between Mr. Groom and myself was that it should be held against general account.  I think the letter was handed to me by Mr. Groom.  I do not remember the day.  I cannot swear it was not the eleventh.  I think it was before that date; but I cannot swear it.  The bill of e x change for $8,000 on 11th March was handed to our Bank on that date.  I paid $8,000 for it.  No security was given against that bill.  G. D. and Co.'s account was over-drawn Tls. 10,000 or Tls. 11,000 against the security of some wood.  I did not know what it would realize, and I asked for additional security.  The wood was taken away, and this document was given as security instead.  The wood was stored at the Arsenal, and they won't give godown orders.  We had only a letter from G. D. and Co. hypothecating it.  The bill of exchange was paid, and the money remitted by our Bank at Hiogo.    

   Messrs. Adrian and Co. are our agents in Nagasaki. I am not aware they they in the first instance claimed as against a definite advance of $9,570.  They may have done so, this would represent about Tls. 7,500.  It is possible that I instructed them to claim Tls. 7,500, and that they did so.  The entire of this claim was not for debts due to our bank.  We claimed for G. D. and Co. also.  I think this was in consequence of an interview with G. D. and Co.  At the time, there was only Tls. 2,618.47 due to the bank.  I never told out agent that, on payment of Tls. 2,618.47 that amount should be endorsed off, and the letter of hypothecation returned to the Trustee.  I requested that the letter should be returned to us, in order that we might deliver it up to G. D. and Co.  Even if Defendant had paid Tls. 2,618.47 the document would not have been given up, but would have been returned to us.  I do not think the Bank gave G. D. and Co. notice of the purpose for which G. D. and Co. handed the document to us.  I don't think it was our duty to do so.  The arms have never been in possession of the Bank.  The balance Tls. 2,618 remains as against the security.  What I mean is that the balance due to the Bank by G. D. and Co. on general. Account is of that amount, and this is the only security that we retain.

Statement of claims by Hongkong and Shanghai Banking Corporation against Messrs. Glover, Dow and Co.


To Balance of Promissory note with interest,

   From 30th June to 15th December, 1870.                 Tls. 1,503.75

To Balance &c

   From 31st December, 1869 to 15th December,

1870.                                                                             Tls.  1,114.74


                                                                                   Tls. 2,618.49



   One hundred and twenty two cases arms and ammunition under lien to the Corporation in Nagasaki.

   One item in the account id Tls. 1,114.74, balance of promissory note with interest due on 15th December 1869.

   Mr. RENNIE objected to the use, in cross-examination, of documents which had been improperly admitted, in the Court below.  This rehearing had been granted on the ground of irregularity in the procedure below; and it was the more necessary to strictly avoid irregularity here.

   Mr. BIRD was cross-examining on a statement handed in by the defendant in the Court below, and which had not been then objected to by the Plaintiff.  The object of the rehearing was to decide the case on its merits; and the Court's order was that it should be tried on the evidence taken below, save just exception.

   Mr. RENNIE contended that this was a just exception.  The Defendant might as well claim that the evidence of Mr. Glover who had not been sworn, be taken, as extracts from documents which had not been sworn to.

   Mr. BIRD submitted that they had been proved, inasmuch as they had not been objected to, in the Court below.  They had been received there and came up authenticated by the seal of the lower Court which, he submitted, cured any defect in formality regarding them.  It was impossible to decide the case on the merits without these documents.  His friend's was a purely technical objection, and, he could not but think, showed a weak case. If it was persisted in, he should have to apply for an adjournment, till properly certified copies could be got.

   Mr. RENNIE argued in defence of a principle.  If the rehearing had become necessary, through irregularities, these should not be repeated, here.  Mr. Glover might have spoken to extracts from documents which did not exist, for they were not sworn to.  He contended that the Court would be going beyond its power in admitting such evidence, and would be establishing a very dangerous precedent.

   Mr. BIRD said the extracts had been made by the Court, which was a sufficient guarantee of their genuineness.  However, the objection was premature; it could not be made until he opened his case and offered the evidence.

   It was eventually agreed that Mr. Bird should use the statement of account in cross-examining the witness, and that the point regarding the other documents should be argued when Mr. Bird opened the case for the defendant, and offered to hand in the documents in question.  Mr. Rennie would then object that they were not even admissible as evidence between the parties, and if the Court over-ruled that point would object to them as informal.

   To Mr. RENNIE. - At the time of the buying the $8,000 bill, I received this letter.

Shanghai, 11th March.

To the Manager, &c.

DEAR SIR, - We enclose our draft No. 479 a 15 days sight on Messrs., Glover and Co. Hiogo for dolls. 8,000, settled with you at exchange of 72 ½, giving Tls. 5,800 to our credit.


There was no mention made in the letter or otherwise, of the letter of hypothecation being security for the amount of the bill.  The letter meant, the amount would be put to their credit in the bank, and they could draw cheques against it.  The ordinary practice of a Bank, in case security is given and it can realise it, is to return the security to the hypothecator.

   To Mr. BIRD. - After receiving such a notice as that written to me by Messrs. Glover, & Co., in August, I should not deliver up the security at all, until the parties had settled between themselves to whom it was to belong.  The Tls. 5,800 was drawn against, and was very   soon exhausted.

   To Mr. RENNIE. - I held the security against any balance then running, or that might occur afterwards.

   This closed the case for the plaintiffs.

   Mr. BIRD, in opening the case for the Defendants, referred to Rule 84 of the rules of procedure regarding the right of reply by the Plaintiff's Counsel.

When the party beginning has concluded his evidence, he shall ask the other party if he intends to call evidence (in which terms is included evidence taken by add davit or deposition, or under commission, and documentary evidence not already read or taken as read); and if answered in the negative, he shall be entitled to sum up the evidence already given, and comment thereon; but if answered in the affirmative, he shall wait for his general reply.

   When the party beginning has concluded his case, the other party shall be at liberty to address the Court, and to call evidence, and to sum up and comment thereon.

   If no evidence is called or read by the latter party, the party beginning (saving the right of the Crown), shall have no right to reply, unless he has been prevented from summing up his case by the statement of the other party of his intention to call evidence.

   He intended to take no further evidence than had already been admitted in the Court below, and presumed that his friend would therefore have no right of reply.  His evidence was all before the Court.

   HIS LORDSHIP was not supposed to know anything of Defendants' case.  There was no evidence before him.

   Mr. BIRD said the evidence taken in the Court below was before his Lordship.  The record came up from below.  It was presumed, in cases of appeal, that the Court read the record.  And this was virtually a case of appeal, as there was no new evidence.

   Mr. RENNIE denied that it was a case of appeal; it was a rehearing; and the heading to the Defendant's answer showed that he so considered it. If his friend was content to waive the last two pleas in his answer, and to say he would not use the evidence given in the Court below, he (Mr. Rennie) was content to sum up now.

   Mr. BIRD declined.  That would be to abandon the very ground on which he had sought for a new trial.

   HIS LORDSHIP looked upon this as a new trial.

   Mr. BIRD had proposed making some comments on the judgment of the Nagasaki Court; but as the Cotuit decided this was a new trial, these would not now be necessary.  He would proceed therefore to an examination of the petition.  This appeared to be framed in detenue.  It alleged the detention by the Defendants, and claimed delivery, of certain goods.  The claim was founded upon a lien which was sought to be set up, on these goods; at the same time, though they only allege that Tls. 2,618.46 is due to them, they yet seek delivery of goods valued at a larger sum than they claim.  This was inconsistent; how could they be entitled to more that the amount of their debt with interest and costs.  The Bank could have no further claim over the goods, than for the amount of the debt.

   Another inconsistency was in clause 7 of the petition, which, without alleging that Tls. 7,500 had been advanced by the plaintiffs to Defendants, complained that Glover and Co. would not refund this sum to the Bank.  His friend could not mean to contend that, where no sum had been advanced, Tls. 7,500 should be repaid. Inasmuch as no advance was alleged, no reason was shown why G. and Co. should repay.

   HIS LORDSHIP might remark that he regarded this as a case in Equity, and should treat it so, in so far as the law of mortgages was concerned.

   Mr. BIRD would be only too glad if His Lordship would look at it in that light. The Petition went on to allege that further advances had been mad to the defendants, but did not state the amounts.  They might be of only one Mexican dollar.  These were inconsistencies which he wished to bring to the notice of the Court.  A lien was sought to be established in respect to general account.  Clause 2 says that Tls. 2,618.47 are due on general account; and in addition the Bank's account shows how this is made up.  One of the items is a debt due on a promissory note, with interest to December 1870, of Tls. 1,114.74.  Now the letter of hypothecation was handed to the Bank between the 7th and 11th of March 1871 - subsequently to the data when this debt became due, the greater part of which was made up of interest on a promissory note.  There was no pretence of any sum being due by Glover and Co.'s estate to the Bank, and yet the petition alleged that a sum of Tls. 7,500 had not been paid by them to the Bank. 

   He now came to the broad ground of defence, which was that Glover Dow and Co. had no right to endorse the letter as security for general balance of account, and the plaintiffs had no right to take it as conveying a general interest to them.  He did not quite make out whether his friend intended to omit the allegation or not; but a clause which had existed in the original petition to the Nagasaki Court, alleging that G. D. and Co. were agents of G. and Co. was now struck out without apparently good cause.  It was obvious that, admitting the agency, the obligation lay upon the Plaintiffs to enquire the extent of the authority of. G. D. and Co to pledge the goods.  And the letter of hypothecation bore upon its face that it was given in respect to a particular loan.  It was clear therefore that, on repayment of the loan, their lien was gone.

   Assuming for a moment, the agency or Glover, Dow and Co., the letter bore upon its face that it was given for a special purpose; and it could not be made use of for any other purpose without permission from the principals.  Glover & Co. gave security for Tls. 7,500 for an advance of money to that amount.  This was what G. & Co. transferred to G. D. and Co., and G. D. and Co. to the Bank.  If G. D.  & Co. were agents to G. & Co., then it was the duty of the Bank to ascertain that they were acting within the scope of their authority.  (Storey on Agency 224, Story on Bailments, 324).  He could not see how the transfer could be held to fall within the scope of the Factors' acts, but it could not be otherwise protected. (Smith's Mercantile Law, p. 138).  G. and Co. were the owners of the goods.  They were transferred by G. D. and Co.  If the latter did so as agents, they must refer to the Factors' acts.

   HIS LORDSHIP feared it would only be confusing to go into the pleadings quoted.  He thought this question might be set aside; as the petition s aid nothing about agents.

   Mr. BIRD said the allegation had been made in the Court below.

   Mr. RENNIE - But it has been withdrawn from the present petition.

   Mr. BIRD. - But trhe Court could not altogether ignore what had passed in the Court below.

   HIS LORDSHIP had consented to rehear the case ab initio, on the ground that it had been conducted irregularly, in the absence of legal advice.  He would take it therefore on the footing on which it stood, now.

   Mr. BIRD, then, would conclude his argument on this point very shortly, as his Lordship did not consider it material; and merely quoted Chitty on Contracts to show that of G. D. and Co. could be regarded as agents, they were not protected.

   He would pass, now, to the second clause of his contention.  Assuming that G. D. and Co. were not the agents, he case resolved itself into the ordinary one of Pawnor and Pawnee.  And he thought no point could be more clearly established, than that the Pawnee could have no better title than the Pawnor.  (Broom's legal maxims P. 416, 418, 425) and no man can transfer a better title than he possesses.  The Factors Acts relate merely to the case of principals and agents; where there are no such relations they do not apply.  In this instance, it was not argued that G. D. and Co. were agents.  Possessing certain securities they had transferred these to the Bank.  But of G. D. and Co. were not entitled from G. and Co. to hold these as security for general balance of account, they could not transfer them on that footing to the Bank.

   HIS LORDSHIP said they could, to the extent of their debt.

   Mr. BIRD contended that they could not.  If the letter of hypothecation had merely said, "we transfer to the order of Messrs. G. D. and Co. - well.  But it is said, to hold as security for money advanced on a particular loan of Tls. 7,500, which was acknowledged.  If the Bank claimed the Tls. 2,618 as part of the special loan made on that security, well and good.  But at least one item in the claim could not be so; it was for an advance made months before the security was given.

   HIS LORDSHIP. - Security can be taken for an antecedent debt.  I am incliner to look upon it that, so far as the evidence goes, this was a valid pledge.  G. D. and Co. pledged the security and the debt.

   Mr. BIRD contended that under no principle of law of equity could the Bank claim the Tls. 1,114 in respect of a previous loan, under the lien conferred by G. and Co.'s letter.  It was possible there might have been advances several years outstanding.  Could they take G. and Co.'s security in satisfaction of such a debt?  It was obvious from the letter of hypothecation that it was given to G. D. and Co. only in respect of a particular loan; and the Bank must have taken it with the knowledge that, the debt paid, their lien was gone.  The security had been applied to a purpose for which it was never intended.

   HIS LORDSHIP said this seemed to be the cream of the question - whether the security could be used for any purpose.

   Mr. BIRD hoped, if the disputed evidence were admitted, to be able to show that G. and Co. were unaware of the circumstances of the transfer.  They were under the impression their security had been used, as they authorised it to be used, to obtain a special loan from the Bank, and had remitted the sum to the Bank's agents in Hiogo under that impression.

   These points showed that the relationship between G. and Co. and G. D. and Co., and the power vested in the latter by the letter of hypothecation were very material points.  And he proposed to make use of the evidence handed into the Court below, to show what were the circumstances, and to sustain his argument that it was a breach of trust to use the securities for purposes other than they were originally given for.

   HIS LORDSHIP. - What special purposes?

   Mr. BIRD. - The documents were given as security against a particular loan.  He contended the special loan had been paid off, and proposed to adduce letters in support of this statement.

   HIS LORDSHIP. P- Where are the letters?

   Mr. BIRD. - Before the Court, in the record.

   Mr. RENNIE rose to oppose the admission of these letters.  He submitted that the letters which had passed between G. and Co. and G. D. and Co. were not admissible as evidence, unless it could be shown that the Bank had knowledge of them.  The letter of hypothecation stated that certain goods were held by G. and Co. to the order of G. D. and Co. as collateral security for a loan of Tls. 7,500 by G. D. and Co.  He need hardly show cases to prove that a debt of this kind with security was negociable.  There was then security for a debt pledged to G. D. and Co., and an endorsement of that debt to the Bank, G. and Co. using goods which they state are their own property.  There was not a tittle of evidence to show that the Tls. 7,500 had been repaid to G. D. and Co.  But if it had been so, the Bank was still unpaid.  It was not alleged that G. D. and Co. had been repaid.  Therefore the Bank now stood in the place of G. D. and Co., and the goods must be held to their order as security for the repayment.  G. and Co. must have known, when writing the letter, that the goods could not be transferred to the Bank except by endorsement.  It was clear they knew they were writing a negociable document.  When G. and Co. wrote to the Bank the letter of the 15th March, they must have been aware of the endorsement.  Indeed they never objected till August; and recognised the transaction so far in the meantime, as to pay in Tls. 513 on account of a portion of the goods sold.  The Bank never had notice from G. and Co. or from any one else that the goods were pledged with a special purpose.  And he contended that no correspondence not brought to the knowledge of the Bank could have a bearing upon the case.

   Mr. BIRD said, much that Mr. Rennie had urged could not be refuted, without producing the letters that were in dispute.  For instance, Mr. Rennie argued that G. and Co. must have known of the endorsement to the Bank; but this could be explained away by a letter between G. and Co., and G. D. and Co. received as evidence in the Court below, whether properly so or not.  It was perfectly consistent with the letter of the 15th March, that G. and Co. should not have known for what purpose the security had been endorsed to the Bank.

   HIS LORDSHIP must rule that the correspondence in question was no evidence as against the Bank.

   Mr. BIRD must of course submit to the ruling of the Court; and there was of course an end to that point in his case.  All that he had further to submit was, that one of the material conditions which the petition alleged to have been fulfilled, had not been proved; in fact it had been disproved.  The Bank refused to give up the security.  There was no pretence that the Bank was a creditor against G. and Co. Yet it refused to give up their security, even after the claim upon it had been satisfied.

   He would submit then that, on payment of this Tls. 2,618 to the Hongkong Bank, - assuming the judgment of the Court to be in favour of that amount - the Trustee was entitled to have the security given up.  It is simply a charge upon a debtor's property which he was entitled to redeem.  A Trustee in bankruptcy was entitled to redeem as well as any other mortgagor.  The property was the property of the Bankrupt and the surplus should go to the benefit of his creditors.  If the Court held the charge good, the Bankrupt was entitled to redeem it.

   HIS LORDSHIP. - In other words the Bank stands in the place if a sub-assignee.  It holds a valid assignment of debt and security.

   Mr. BIRD. - For a certain amount; but the surplus?

   Mr. RENNIE. - If the Court deem the Bank entitled to the money, my labour is at an end, as I appear only for the Bank.  But there were other claimants for the securities.  By this letter of hypothecation, G. and Co. equitably assigned these securities for the full amount to G. D. and Co.  The latter got an advance and assigned the securities for a certain sum; though they now turned out indebted to the Bank only in Tls. 2,618.  G. and Co. had not repaid G. D. and Co., and the security should come back to the latter.

   Mr. BIRD contended that the Bank was only entitled to receive the Tls. 2,618, and when they had been satisfied, the documents must be handed over to the parties who had to pay this sum.  No other claimants were before the Court, and the Court could not listen to mere rumours that came before it.  G. and Co., were entitled to redeem on payment.  The Bank was in a very advantageous position, and was seeking to take advantage of it.  But it would not be just to the other creditors that it should get the advantage.

   HIS LORDSHIP considered, when the first mortgage had been paid off, the proper thing to do would be to return the securities to Glover and Co., and let the other parties take steps to establish their rights.

   Mr. RENNIE. - The other claimants would then have to serve the Bank with notice not to part with the securities.  There were two other claimants.  The Court would substantially confirm the judgment of the Court below?

   Mr. BIRD. - No.  The Court below did not provide for the return of the documents.  All the evidence which was now rejected would come in if proceedings were taken by G. D. and Co, against G. and Co.

   The Court eventually made an order that the Defendants pay to Plaintiffs the sum of Tls. 2,618, and the latter then surrender to Defendants the security.

Published by Centre for Comparative Law, History and Governance at Macquarie Law School