Skip to Content

Colonial Cases

Enemy Property Cases, 1917-1919

[enemy property]

Enemy Property Cases

Supreme Court for China
1917, 1919
Source: The law as to enemy property in China. Reports of the cases decided in H.B.M. Supreme Court for China in 1917, 1918 and 1919, and the King's regulations made under the China order in council, 1904, together with an introductory note by Sir H. de Sausmarez (1919)

 

THE LAW

AS TO

ENEMY PROPERTY IN CHINA.

 

REPORTS OF THE CASES

DECIDED IN

H.B.M. SUPREME COURT FOR CHINA,

IN 1917, 1918 AND 1919.

 

Until July, 1915, no attempt was made to deal with enemy property in China, then a neutral country.  In that month the trading with the Enemy Regulations, 1915, were passed and they established an account called the Enemy Dividends Account at such incorporated banks as the minister might appoint.  Into this account British subjects were ordered by reg. 5 to pay such sums as, had a state of war not existed, would have been payable and paid to or for the benefit of an enemy, by way of dividends, interest or share of profits.  The regulation further provided that no sum so paid in shall be paid out save on an order of the Supreme Court.  The Enemy Dividend Account at this early period of the war in a small measure took the place of the Custodian of Enemy Property in England, and it has continued the central provision for the preservation of such property in China until the regulations of 1918. ...

Such is a short history of the legislation affecting enemy property in China and the cases reported in the following pages contain the whole law on the subject in so far as it appears in the judgments of the Courts.  Two cases have been added which do not directly bear upon the subject; the first, In re Eckhardt, which was that of a person who claimed to have lost his German nationality, and the second Morgan v. Mack, which considers fully the powers conferred by the orders in Council to make King's regulations, a power on which all the local legalisation depends.

 

Sir. H. de SAUSMAREZ

 

SHANGHAI 1919

 

EX PARTE ECKHARDT.

   A German-born subject acquired American nationality in 1903; having left America and come to Shanghai he renounced American nationality and was granted German protection by the German Consul-General, he made no application in accordance with German law to be allowed to return to German nationality.  He claimed he was of no nationality and entitled to sue in His Majesty's Courts.

   Held, that the case was covered by that of Ex parte Weber (1916) 1 A.C. 421, and that he was not entitled to sue.

   Home for the applicant.

   Sir HAVILLAND DE SAUSMAREZ.

   This is an application for the issue of a summons against a British subject by Theodore Eckhardt, who is of German origin.  It is necessary under rule 108 (3) that to complete a writ of summons an order for service shall be endorsed thereon.  Where the registrant has reason to believe that the would-be plaintiff is an alien enemy the practice is to refuse this endorsement without an order from a judge, hence this motion.

   The facts are that the applicant was born in Germany in 1867, he went to the United States in 1891 and was naturalised as an American citizen in 1903.  In 1904, having in the meantime come to Shanghai, he renounced his American nationality with the sanction of the proper American authority.  An application in the same year to the German Consul-General in Shanghai for registration as a German subject was refused, but registration as a German protected person was granted him.  His submission is that he is a person without nationality and is not debarred from suing in one of His Majesty's Courts as an alien enemy.

   Mr. Home has with my approval appeared for the applicant and I am obliged to him for his assistance.  It at once occurred to me that the case of ex parte Weber  [1916, 1 A.C. 421] would present difficulties to the applicant, and after consideration of the German Imperial and State Nationality Law of 1913, I am of opinion that in principal there is no distinction between that case and the present.

   Mr. Home has come to the same conclusion, but nevertheless it will be well to indicate shortly how the matter stands.  Weber, who had resided in England for fifteen years, and being then 32 years old, was interned in a war camp; he contended that he was of no nationality.  By paragraph 17 of the law of 1917 state citizenship is lost, among other causes, by foreign Naturalisation and by non-fulfilment of military service, the latter is taken to have happened if the person concerned has not caused a definite decision to be taken as to his military service by the time he completes his 31st year, and even which had happened in Weber's case.  A careful study of the German Act shows me that such a person is in exactly the same position as one who has acquired foreign naturalisation. I am accordingly relieved from the difficulty of deciding the effect for the purpose of administering English law of the German law on Eckhart as it has been decided by the House of Lords in Weber's case.  Lord Buckmaster says

"it is quite plain that there still remain attached to this man certain ties by which he is bound to his native country; there are certain obligations that he might be called upon to discharge if he went back to his country; there are certain rights which he is entitled to enjoy if he remains away.  In those circumstances I am unable to see that the applicant has discharged the burden that is cast upon him of showing that he has so completely divested himself of German nationality that he can be treated for the purpose of this application as though he were no longer a German citizen."

   It has been urged that these last words and the stress laid by the House of Lords on the fact that Weber might be called upon to perform military duties on return to Germany indicate that their Lordships had regard to policy in deciding the particular case, and that the circumstances as well as the point discussed are different.  That is true and, even though there is nothing in the judgment of the house to indicate this, I will shortly examine the argument.

   It is clear that it is not for the Court to say what public policy should be, but if there are provisions which indicate the purpose of legislation then the Court may deduce its policy therefrom, or as I should prefer to put it, such provisions are circumstances which will assist the Court in the application of the law.

   By the Orders in Council which govern the extraterritorial jurisdiction of His Majesty the persons subject to his jurisdiction are British subjects including British-protected persons and such foreigners as by treaty or otherwise are under his protection.  An Order in Council is an authoritative statement of the scope and purport of a treaty, and the extraterritorial rights of Germany must have been practically the same as our own.  The right to grant protection is ill-defined and as Eckhardt had that protection it is necessary that I should examine how he obtained it in order that I may appreciate the circumstances which I have to consider.  It is apparent that he obtained protection in virtue of his possessing in the eyes of the German authorities such qualities as render his position analogous to that of a German subject.  A consideration of the acts of the German authorities show that this is the case, for while by German law the consular authorities of Germany could not restore to him his lost nationality, they at once gave him protection thus showing that he was a person who was thought worthy and who would almost certainly have been granted leave to résumé German nationality, had his application been made in accordance with the law.

   Then there is the proclamation of His Majesty in Council of the 25th June, 1915, extending to persons of enemy nationality resident or carrying on business in China proclamations for the time being in force relating to trading with the enemy, in the same manner as they apply to persons resident or carrying on busies in an enemy country, a plain indication of the policy of His Majesty's Government.

   It is clear, I think, that the circumstances of the applicant are not such as will free him from the trammels cast about him by the German laws of nationality as they are understood by the highest Court in the United Kingdom and, if I may humbly say so, by myself.

 

 

SHANGHAI LAW REPORTS,

1917, March 1.

In re PRASCHMA.

    Shares on the register of a China company standing in the name of P. an enemy were hypothecated by him to C in respect of an advance.  C, being unable to get payment of the advance or to obtain a transfer of the shares into his name, moved to vest them in the Custodian.  The Court refused the order not being satisfied that it had jurisdiction under the circumstances or that the case came within the purposes of the legislation as to the payment of debts, and because the consideration should prevail that, where other remedies were provided by the local law independent of the Custodian, recourse should be had to them in the first instance.

   Held, that the Trading with the Enemy Acts apply in China as far as circumstances permit and that King's Regulations dealing with the subject must be construed as explaining the extent to which circumstances allow the application of English law and as substituting, when necessary, machinery for the attainment of the ends of the imperial legislation.

   The position of the whole legislation applicable and that of the Custodian in China considered.

   The Court in a subsequent motion made an order on the H. & S. Bank to pay to C the money in its hands in the enemy dividend account in the name of P, and any further money which came into its hands as dividends on the pledged shares.

   The facts appear sufficiently in the judgment.

   The Custodian in person.

   McNeill for the applicants, the Cathay Trust, Limited.

   Sir HAVILLAND DE SAUSMAREZ.

   This is a summons in the matter of certain shares in the Sungei Duri Rubber Co., Ltd., which stand in the name of Count C. Praschma, an enemy.  These shares were hypothecated to the applicants, the Cathay Trust, Limited, in respect of an advance of Tls. 3,500.  Interest has been paid on the debt to date but no payment has been made in respect of the principal: the applicants are not satisfied with their position, as they are unable to dispose of the shares or obtain a transfer of them into their own names in the books of the company.  Hence this application.

   The summons asks for an order vesting the shares in the officer perforating the duties of Custodian of enemy property.  This is the first application of the kind made to the Court and it will be convenient if I indicate fully the position of enemy property in China over which the Court has jurisdiction and the manner in which that power will be exercised.  His Majesty's jurisdiction in China is exercised in conformity with English law in force for the time being and it has not been doubted that this covers the emergency legislation necessitated by the present war "as far as circumstances admit."  The Acts of Parliament which are material to the present summons are The Trading with the Enemy Amendment Acts, 1914 and 1915.  In addition to these Acts there are certain King's Regulations made by His Majesty's Minister in virtue of the powers given him to legislate in this way for British subjects in China.  These are now contained in The trading with the Enemy (Consolidated) Regulations 1917, and a short amending regulation providing for the return by companies to an officer who is performing the duties of the Custodian of enemy property.

   Let me look first at the English law as contained in the Acts of Parliament.  The first was enacted, as the preamble says, to make further provision for preventing the payment of money to persons and bodies of persons resident or carrying on business in an enemy country in contravention of the law relating to trading with the enemy, and for preserving, with a view to arrangements to be made at the conclusion of peace, such money and certain  other property belonging to enemies and to make other provisions for preventing trading with the enemy.  Section 1 provides for the appointment of a Custodian of enemy property and for the disposal of moneys paid to him under the Act.  Section 2 provides for the payment to the Custodian of any dividends, interest or share of profits which would have been payable to an enemy had a state of war not existed.  Section 3 subsection (1) imposes a duty on people to inform the Custodian of any property which they hold or manage for an enemy, and sub-section (2) obliges companies and others to communicate to the Custodian particulars of all shares, etc., which are held by or for the benefit of an enemy; by section 2 of the amending Act of 1915 bank balances, deposits and debts are added to the matters on which information has to be given under sub-section (1).  Section 4 empowers the High Court to vest any property "belonging to or held or managed for or on behalf of an enemy in the custodian."  There are other provisions, which it does not seem to me necessary to the purposes of this judgment to consider, but I think that some of them show the necessity for the rule of construction to which I have already referred that in applying English law His Majesty's Courts in China must be guided by the circumstances prevailing locally.  One of the principal circumstances is that until recently there was no official who filled the office of custodian; and that now that office is only filled to a limited extent.

   I turn now to King's Regulations. Until the Order in Council of 1907 they had the same effect as if contained in the principal Order, but the repeal of article 157 had modified that.  At the same time they must be given the same effect they are entitled to, and I think they must be construed as an explanation by the local legislature of the extent to which circumstances allow of the application of English law and as substituting, where necessary, machinery for the attainment of the ends aimed at by the Imperial Legislature.

   The matters contained in the sections of The Trading with the Enemy Acts which I have summarised are dealt with in that part of The Trading with the Enemy (Consolidation) Regulations which is headed "Enemy Property," and we find the carious matters in which the custodian is interested and which I have very shortly reviewed covered by provisions which are suited to local circumstances.  There is no mention of the custodian until an amending Regulation of 1917 refers to an officer who has been designated by the Secretary of State, in virtue of the powers he has under article 31 of the Principal Order, to perform some of the duties of custodian under The Trading with Enemy Acts, a further indication, if it were necessary, that those Acts are binding on British subjects in China.  This appointment was publicly notified on 20th January.  But there is a provision for the returns, which in the United Kingdom have to be made to the Custodian, being made to some other person.  Regulation  6 provides for the returns required from companies by section 3 (2) of the Trading with the Enemy Act, 1915, being made to the Custodian of enemy property in the colony of Hongkong, a provision repealed before it became operative owing to the appointment to which I have just referred.  Regulation 7 provides for a return to the Consular Officer in charge of a district of information in respect of property in that district covered by section 4 of the Act.  Regulation 6 deals with the forms of property covered by sect. 2 of the Act of 1914 and sec. 2 of that of 1915, this, instead of being paid to the Custodian, is paid into an account in a British bank called "the enemy dividend account.  It would seem, therefore, that the position of the custodian is filled by the Minister, the Consular Officer and the officer designated by the Secretary of State to perform the duties of Custodian in respect of property vested in him, and as provided in regulation 6.

   The Trading with the Enemy Amendment Act, 1914. Is the first enactment which deals with the property of an enemy, and it does so expressly, as the preamble states, to preserve it with a view to arrangements to be made at the conclusion  of peace.  It is made in the interest of the State and not of the creditors of the enemy owner of the property, a point which Mr. Justice Younger emphasized in In re Fred Krupp Action-Gesellschaft [1916, 2 Ch. 194.], though payment out of monies in the hands of the custodian may be made by him with the approval of the Court.  But the Court is pressed with a difficulty, inasmuch as, at all events in respect of the bulk of enemy property in China, it had no jurisdiction, for its jurisdiction is limited by article 5 of the Principal Order, to the property, proprietary rights and liabilities of British subjects within the limits of the order, and therefore such jurisdiction as it possesses must be exercised with this limitation in view.  So, however much the Court may wish to control such property as we are considering, its powers are limited; there are nevertheless some  classes of property which seem to be within the reach of its orders and these I now proceed to consider.

   Property paid into the enemy dividend account will clearly remain in it until the end of the war unless it is paid out of that account under an order of the Court (section 5 of the Act of 1915, and regulation 8), and the Court may authorised the payment out of that account of a debt due to a British subject by an enemy.  I can see no difficulty in making that order, for the Minister in taking charge of the enemy's money undertakes in accordance with the terms of the regulations the liability to pay thereof whatever may be ordered by the Court.  What order this Court will make must depend on the circumstances of each case and upon the consent of the Custodian that is of the Minister.  [In re Fried Krupp Actien-Geselelschaft (1.) and Trading with the Enemy Amendment Act, 1914, s. 5 (2).]  No doubt it will always have regard to the interests of those who may not be before it as well as to the policy of the legislature.  I have referred to the minister as being in the place of the Custodian with respect to the money paid into the enemy dividends account.  I should perhaps rather have said £"the Crown," for there is a difficulty in that the Minister cannot be brought before the court; on the other hand it is clearly contemplated by the regulations that these matters should be subjected to the Supreme Court and I think that all that is necessary will be done if the bank, in which the money in respect of which the application is made, and the Crown Advocate are given proper notice.  The bank can appear or not as it pleases, but the Crown Advocate must submit to the court such matters as it is the duty of the Custodian at home to being before it.  There may, of course, be cases where the court is asked to vest property already in the enemy dividends account in the officer performing the duties of Custodian, if so, the officer performing his duties should also receive notice.

   Whether the Court will make a vesting order must depend upon its power to do so.  But before examining this power I  wish to state that I should hesitate to make such an order where the regulations provide a remedy which will ensure to the applicant what he is entitled to under The Trading with the Enemy Act.  The reason is that, as I have pointed out, the regulations adapt the provisions to local circumstances.

   The power of the Court to make a vesting order depends in its turn on whether the court had jurisdiction over the property which it is sought to vest.  Obviously there is a great deal of enemy property in China over which we have no jurisdiction.  The only property which it is necessary for me to consider now is that in the enemy dividends account and that in shares in China companies' with the former kind I have already dealt.  Whether there is jurisdiction to vest shares standing in the name of an enemy in the Custodian is not clear to mind mind, nor am I clear that what the law aims at in respect of enemy property cannot be attained in China without such orders; but it is clear that there are circumstances where the intervention  of a Custodian in the affairs of a company which is under an obligation to an enemy is almost imperative, and I need only point to the cases of reconstruction or of an issue of new shares as outstanding examples.  There are also the occasions on which the orders of a Court are made with respect to the property of a company as a whole,  e.g., a winding-up order, in which I suppose the Court would feel no difficulty in making a vesting order if it was required for the purposes of company law. There are therefore manifold reasons why a Custodian should be appointed in whom the Court may vest property without assuming an intention to extend the existing jurisdiction of the Court.

   The short result of this consideration of the law is that the duty of a British subject with respect to enemy property with which he has to do is:

  1. To pay into "the enemy dividends account" any property which belongs to an enemy and is covered by regulation 8 of the consolidated regulations:
  2. To make a return to the consular Officer of the district in which he is resident of all enemy property which he holds or manages for or on behalf of an enemy and which is covered by regulation 7; this return does not include the property covered by regulation 6:
  3. If the person is a China company, to make a return under regulation 6   of all shares, stick, debenture stock and other obligations held by or for the benefit of an enemy; this return is made to the officer who has been d designated by the secretary of State to perform the duties of the custodian in respect of property vested in him.

   The Court will in respect of such property make such orders as are made by English courts, and will treat each of the officers interested on behalf of the Government as occupying the office of Custodian of enemy property in respect of the property in which he is interested under the King's Regulations.  Further the Court will not make a vesting order solely for the benefit of a creditor, where there is a remedy under the local legislation as I have interpreted it.

   I can now deal with this application.  It is made on behalf of a creditor for his own benefit, it is not an application by the Custodian.  I have not enough before me to define the position of these shares.  I know that they are shares in a British company, and are security for a debt, and that the applicants are unable to procure a transfer of them into their own name.  It has also been stated that the dividends on the shares lying in the enemy dividends account are not far short of the sum advanced to the debtor, and apparently the dividends expected to accrue will be ample to pay the interest in future and to provide a sinking fund for the balance of the debt.

   The result of the principles as I have deduced from the legislation and the circumstances in China where that legislation has to be applied is that I must refuse the order.  First because I have not sufficient before me to shew that the property involved is in such a position  that there is jurisdiction to make the order, secondly because I have grave doubts whether this is a case which comes within the purpose of the legislation as to the payment of debts, and thirdly because, especially in a doubtful case, I think that the consideration should prevail that, where there are other adequate remedies afforded by the local law, i.e., the law independent of the officer who had been appointed for the administration of the Imperial Acts, that law should be first invoked.  I see no reason why in a case like this the present the Custodian as represented by the Minister should not consent to a payment out of the enemy dividends account of the principal and interest due and to become due in respect of this debt and which is drawn from the shares which are a security for it.  Should any difficulty arise I give the Cathay Trust, Ltd., leave to raise the question again.

   On April 19, the Court was moved by Counsel for the Cathay Trust for an order that the Hongkong and Shanghai Banking Corporation be at liberty to pay them the amount standing in the name of Count Praschma out of the enemy dividends account, and further sums not exceeding the balance of his debt out of future dividends to be declared by the Sungei Duri Rubber Company the total not to exceed the amount of debt due by Praschma to the Cathay Trust.

   The Minister consented.

   Ordered accordingly.

   The Bank did not apply for costs.

   The following order was made as to costs. "That the Cathay Trust shall pay to H. M. Minister his costs of and incident to these proceedings to be taxed and shall be at liberty to add to the said sum of Taels 1423 which the Bank is hereby ordered to pay to the Company the amount paid by the Company in respect of such taxed cists and also the amount of the company's taxed costs of and incident to these proceedings which additional amounts the said Bank is hereby ordered to pay to the company our of the dividends aforesaid.

 

SHANGHAI LAW REPORTS

1917, Aug. 10

In re KRANZ.

   K, an enemy subject resident in Germany, owned property in China, and before the war gave to A a power to manage it.  The property consisted of property movable and immovable, no part of which could be dealt with by K without the intervention of some person subject to the total jurisdiction of the court.  The court held A's agency had not been concluded by the declaration of war, and on the application of A and of the Consul General in Shanghai ordered that the property should vest in the custodian.

   Held, that the court, having express jurisdiction in respect of the liabilities of British subjects, could make an order the effect of which was to transfer the liability of A to the custodian.

   The case of In re Praschma explained, and the position of the different officers entrusted with the duties of the custodian considered.

   The application by summons to vest enemy property situate in a consular district in China by Mr. King the officer designated by the Secretary of State to perform the functions of the Custodian of enemy property in respect of any property which may be vested in him under the trading with the Enemy Acts, was made by Mr. King and by A. & A. Company, limited.  It appeared that the application was wrongly made by Mr. King and the summons was amended by substituting the name of the Consul General for the district for his.

   The facts appear sufficiently in the judgment.

   Mossop, Acting Crown Advocate, for the Custodian.

   Platt, for Algar and Algar and Company, Limited.

   Sir HAVILLAND DE SAUSMAREZ.

   This is a summons asking that certain property belonging to an enemy should be vested in Mr. King, representing for certain purposes the Custodian of enemy property.  The application is a joint application made by Mr. King in his official capacity and by Algar & Co., Limited, and Mr. Algar, who have since the year 1906 been managing the property in Shanghai belonging to pastor P. E. Kranz, a germane now resident in Germany.

   Before dealing with the application it will be convenient in view of future applications to consider the position of Mr. King as there has been some doubt expressed as to his being the proper officer in whom to vest the property.  The property with which the Court is asked to deal is of the class contemplated by regulation 7 of the trading with the Enemy regulations, 1917, which is substantially the same as Section 3 of the Trading with the Enemy Amendment Act, 1914; such property has to be reported to the Consular Officer of the district in which the person managing it is resident.  The regulation does not contemplate that any steps should be taken by the Consul in respect of that property, but he is informed of its existence, and so he is in the same position in regard to it as the Custodian would occupy under section 3 (1) of the Act in regard to similar property in England.  This position was recognised in the case of In re Praschma, in which it was said

"the Court will make such orders in respect of enemy property as are made by the English courts and will treat the officers interested on behalf of the Government as occupying the office of custodian of enemy property in respect of the property in which they are interested under the King's Regulations."

It appears from this that the Consular Officer concerned is the proper officer to make an application such as the present, but in my opinion the person in whom the property should be vested is Mr. King.

   The King's Regulations do not before the amending regulation of 1917 contemplate a vesting order being made, that regulation was passed after Mr. King's designation "as the officer to perform the functions of the custodian of enemy property in respect of any property which may be vested in him under the Trading with the Enemy Acts." This designation was made in virtue of the powers of the Secretary of State under article 31 of the China Order in Council 1904, implies that there was no officer in China with functions analogous to those of the Custodian of enemy property in respect of vested property, if there had it would not have been necessary to designate Mr. King.  It was pointed out in In re Praschma that the Kingh's Regulations "must be construed as an explanation by the local legislature of the extent to which circumstances allow of the application of English law and as substituting, where necessary, machinery for the attainment of the ends of the imperial Legislature." The designation of Mr. King supplies another circumstance which allows the application of section 4 of the trading with the Enemy Amendment Act, 1914.  His appointment does not derogate from the duties of the consular officer under regulation 7 or the functions of the "enemy dividend account" under regulation 8 of the Trading with the Enemy (Consolidation) Regulations, 1917, but is supplemental to them for the purpose, to quote the words of section 2 of the Act, "of receiving, holding, preserving and dealing with such property as may be paid to or vested in him in pursuance of this Act"; a purpose which could not have been fulfilled if Mr. King had not been designated.

   The control of enemy property remains in the hands in which it is placed by the King's Regulations as explained In re Praschma unless and until it is vested in Mr. King, who is the only officer in whom it will be vested.  The application should be made by the Consular officer concerned and not by Mr. King except in the case of the property covered by the amending regulation of 1917, as to which returns are made to the officer designated by the Secretary of State to perform the functions of the custodian of enemy property in respect of property vested in him, at present Mr. King.  As the returns are made to him he is the person to apply.

   This ruling is not fatal to this application as Mr. Algar and Algar and Company, Limited have joined in  it as persons interested, as in accordance with the judgment of Younger, J. in In re Ruben [1915, 2 Ch. 320] they are entitled to do.  They are the agents of the enemy subject for the purpose of managing this property and they represent his interest.  Younger, J. says "It seems plain that a person 'interested' means a person interested under the enemy and not a person claiming adversely to an enemy."  It would, however, if he consents, be as well to amend the summons by substituting the name of His Britannic Majesty's Consul General in Shanghai for that of Mr. King.

   The facts of the case are these.  Kranz, an enemy resident in Germany, is a brother-in-law of Algar, and he owned considerable property in Shanghai.  This property is worth about Tls. 200,000 and consists of

  1. Land registered in Algar's name in the books of the British Consulate,
  2. Land registered as to one lot in the British Consulate and as to one lot in the American Consulate in the name of Kranz, but both these are mortgaged by British subjects in respect of a loan to them by Kranz,
  3. Land mortgaged by Chinese to Kranz which land is registered in the name of Algar and Company in the British Consulate,
  4. Shares in British companies in the same names, and
  5. Shanghai Municipal debentures also in the same names.

All this property was managed by Algar under a power of attorney dated the 27th February, 1906, until on the 1st May, 1915, he handed over the agency to Algar and Company, Limited, which was formed at that time.  The power of attorney is a very full power but it is on a printed form which has not been altered or added to, and I am informed was given in respect of the management of Kranz's private property in Shanghai and of that only.  Whatever the power was, what was done under it is thus described by Algar in his affidavit:-

"My work and duties connected with the management of the said property so entrusted to me as agent consisted in keeping the property in good state of repair, effecting insurance on it, obtaining tenants, collecting rents, paying rates and taxes and doing all other necessary and usual work in preserving and managing the property to the best advantage.  I also collected all interest due on the debentures forming part of the said property."

He then says that all the money less expenses was paid into the enemy dividend account.

   After the war broke out the agency continued and monthly statements appear to have been sent to Kranz by post, but after the establishment of the enemy dividend account, all sums collected were paid into that account, Algar & Co., advising Kranz of the fact and sending him monthly statements as before.  Mr. Algar says this was done to make it clear that the interest received was not retained by Algar & Co.  These statements of Mr. Algar are accepted by the learned Crown Advocate, who speared for Mr. King.  I have also had before me letters which show that the British authoriser in Shanghai, from October, 1915, were aware of this agency, and by giving Algar and Co. permission to do certain things in effect authorised him to continue it.  It is, however, clear that they never gave him leave to send the monthly statements and that they knew nothing about them.

   In view of the necessity of deciding the effect of the declaration of war on the agency under which Algar and Co, were managing enemy property it is necessary to arrive at as definite a conception of their relations with their principal as possible.  The fact that the British authorities allowed things to be done by Algar and Co. under their power of attorney does not establish the legality of this agency after war was declared, but it does show that they did not consider that, if Algar and Co. continued their management of Kranz's property, they would be holding such intercourse with the enemy as is forbidden, because if the agency involved such intercourse it would be voided by the declaration of war.  I have therefore only to consider whether this position which must have been regarded as innocent is in fact so when tested by the law as it stands at present.

   The relation of principal and agent depends on contract, and as in the case of other contracts, whether in a particular case that relation is annulled by the outbreak of war depends on whether the terms of the agency are such as to involve unlawful intercourse with the enemy.  In Halsey v. Lowenfeld [1916, 2 K.B. 707] Lord Reading lays down the result of the cases thus:-

"That commercial intercourse between inhabitants of this country and alien enemies, unless permitted by the Sovereign, is prohibited and illegal is beyond question; and this prohibition at common law between residents in this country and aliens is not confined to commercial or trading intercourse.  The prohibition is based on public policy, which forbids the doing of acts that will or may be to the advantage of the enemy state by increasing its capacity for prolonging hostilities and by adding to the resources available to individuals in the enemy state."

Though this statement of the law is limited to the case before the court which dealt with a resident in the United Kingdom I do not think that the law affecting British subjects in China is materially different.  Warrington, L.J. in his judgment in the same case does not make any distinction.  In the present case, as in all these English cases, "enemy" means a resident in a country with which we are at war and the question might well arise whether the management of the property of such a person does not come within the mischief aimed at.  I have no doubt that if it involved unlawful intercourse with the principals the agency could not be defended, but that does not appear to be the case here, for payments were made into the enemy dividend account without any communication with Kranz and no referenced was made to him as to the management of the property.  The letters merely announce facts and appear to have been unnecessary.  I have already referred to the acquiescence of the authorities, which is entirely inconsistent with any known illegality on the part of Algar & Co.  Their unauthorised communication with Kranz bid fair to involve then in difficulties but it seems to have been innocent at all events in intention.

   In the recent case of Tingley v. Muller [1917, 2 Ch. 144], an agency created by a German who was resident in England and who subsequently went to Germany and so became an "enemy" was held good, the object being the sale of a piece of land in England the purchase money to remain in England and subject to the directions of the Custodian of enemy property until after the war.  In the judgment of the Master of the Rolls the following passage  from the Daimler Co. Ltd., v. the Continental Tyre and Rubber Co. Lid [1916, 2 A.C. at p. 347] is cited from the speech of Lord Parker:-

"I see no reason why the trustee of an English business with enemy cestuis que trust should not during the war continue to carry on the business, although after the war the profits may go to the persons who are now enemies, or why moneys belonging to an enemy but in the hands of a trustee in this country should not be paid into Court, and invested in Government sock or other securities for the benefit of the persons entitled after the war.  The contention appears to me to extend the principle on which trading with the enemy is forbidden far beyond what reason can approve or the law can warrant.  In early days the King's prerogative probably extended to seizing enemy property on land as well as on sea.  As to property on land, this prerogative has long fallen into disuse.  Subject to any flagellation to the contrary or anything to the contrary contained in the treaty of peace when peace comes, enemy property in this country will be restored to its owners  after the war just as property in enemy countries belonging to His Majesty's subjects will or ought to be restored to them after the war.  In the meantime it would be lamentable if the trade of this country were fettered, bushiness shut down, or money allowed remaining idle in order to prevent any possible benefit accruing thereby to enemies after peace.  The prohibition against doing anything for the benefit of an enemy contemplates his benefit during the war and not the possible advantage he may gain when peace comes, after the war,"

  which was concurred in by three other members of their Lordships' House.

   There is therefore direct authority for holding that an agency which does not involve intercourse with an enemy is good.  But this is all of further interest in view of the prohibitions of the Trading with the Enemy Amendment Act, 1914, which was passed to prevent the payment of money to persons resident and carrying on business in an enemy country and to preserve, with a view to arrangements to be made at the conclusion of peace, property belonging to enemies.  The Act provides amongst other things for the appointment of a Custodian of enemy property, to whom under section 3 (1) any person s who holds or manages for or on behalf of an enemy any property must communicate such fact, and by section 4 the Court may vest such property in the Custodian, and it is under this section that this application is made.  There might I think be some doubt as to the applejack ability of this part of the Act in China, owing to the difficulty of a Court of limited jurisdiction making an order affecting enemy property, but regulation 7 of the Trading with the Enemy regulations, 1917, follows exactly the words of this subsection, and Mr. King has been designated as I should suppose particularly to enable the Court to apply it.

   The property in this case is clearly managed by Algar & Co. for an enemy, there is I think no part of it which could be dealt with by Kranz, its owner, without the intervention of the British Consular authorities, or a British company, or Algar, or Algar & Co., all of whom are subject to the jurisdiction of this Court.  One of three alternatives must arise, either Algar & Co. must continue their management, which is u desirable and they do not desire it, they must be relieved by the property being vested in Mt. King, or, if the agency terminated with the outbreak of war, the property must be without a manager, in which case it is difficult to see how the Court could act at all under the section under which the application is made.  I have been at some pains to shew that the management is not necessarily at an end, and it is not contended that it is, it is not desirable that Algar & Co, should continue their management, and if the Court has jurisdiction there is every reason why I should grant an order for the purpose of preserving the property in view of arrangements which may be made after the declaration of peace, or if no arrangement is made then, as Lord Parker put it, "for the benefit of persons entitled after the war."

   It is quite clear that in respect of every item of this property there is some liability on the part of Algar & Co. and in some cases of other British subjects, and in respect of such liabilities this Court has express jurisdiction.  The effect of this order would be to transfer the liability of Algar or Algar & C, as the case may be, to the officer appointed for the purpose, and I therefore make it as prayed.

 

 

SHANGHAI LAW REPORTS

1917, Dec. 6.

IN RE GENSBURGER

   The Court will make an order for the payment out of the enemy dividend account of money belonging to an enemy on the application of the Minister based on special reasons or on public policy.  The Court should be fully informed of the Minster's reasons, and that he applies to the Court on due consideration of the circumstances.

   H. Gensburger was born in Alsace in 1869 of French parents.  Alsace was at that date French territory.  In 1891 he came to the east and has been carrying on business in Hong Kong or China ever since.  On arrival in Shanghai he was registered as a German subject.  Recently he applied for and was granted French protection.

   Gensburger was a shareholder in Gensburger and Judah, Limited, and considerable sums were paid by the liquidator of that company into the enemy dividend account; Gensburger wished to have this money paid out to him.

   At the instance of the French government Authorities in China the Minister applied to the court for the payment out of the enemy dividend account to Gensburger of the money standing in his name.

   Mossop for the Minister as Custodian.

   SIR HAVILLAND DE  SAUSMAREZ:-

   I will make the order, but I should like it to be clear that where there is an application made by the Minister on behalf of an enemy the Court should have before it the special reasons on which it is asked to act.  In two previous cases, those of Mrs. Seitz and of Gaeta there were such reasons; in Mrs. Seitz's case there were personal reasons which the Court could consider, in Gaeta's case one reason was that he had been reinstated by a friendly Government at war with Austria-Hungary, to which nation he belonged, in an official capacity under it. 

   In the present case there is no such reason and I have had to be assured on one or two points by the learned Crown Advocate in the course of the hearing.  I find that the authorities of the French Government have applied to His Majesty's Minister and that it is in consequence of their request that the Minister now applied to the Court.

   Accordingly I look upon this as a request by the Minister to the Court to make an order on the grounds of public policy.  I wish to state that I think the Court ought to be fully informed as to the Minister's wish in a matter of this kind; and it may then be understood that, it if is made to appear to the Court that the matter has been fully represented to him and that he on due consideration has made the request, the Court will make the order.

 

SHANGHAI LAW REPORTS

1917, Dec. 21

IN RE WESTPHAL AND OTHERS.

   The court has no jurisdiction to vest in the custodian shares in British companies which are the property of enemies and in respect of which there is no liability on the part of a British subject and where the company itself is not in liquidation.

   Westphal, King and Ramsay, Limited, took out a summons to vest in the Custodian the shares in the Company standing in the names of four enemy subjects of the names of Westphal and of the Deitche Bank.  The Company was a going concern but its London office had received a notice from the British Government that it was advisable that the enemy interest in the company should be eliminated.  The intention of the directors was to liquidate the company and to form a new company without the German members and thus comply with the wish of the Government.   An affidavit sworn by W. L. King, the managing director of Westphal, King and Ramsay, Limited, contained the following paragraph:-

"I am advised that in order to carry through the liquidation and to prevent any question arising in the future as to whether the interests of the enemy shareholders were properly safeguarded, someone should be appointed to represent their interests in the liquidation."

   The Custodian was present in court and concurred in the application.

   Platt for the Company.

   SIR HAVILLAND DE SAUSMAREZ.

   The application is to vest the party of certain enemy shareholders in the China Company Westphal, King and Ramsay, Ltd., in the officer appointed by the Secretary of State for the purposes of the Enemy Trading Acts.

   The question is purely one of jurisdiction; therefore whether a Court in England, which obviously has jurisdiction, would make such an order is immaterial.  I have not now to consider the question of expediency, though I have little doubt I should make the order if I had the power.  The Court has jurisdiction over British persons including corporations, their property and their personal or proprietary rights, it is asked to say that it has jurisdiction in respect of Germans' proprietary rights in shares in a China company.  The fact that the company is British is not in my opinion enough to give the Court jurisdiction over such property, for shares are bathe property of the shareholder.

   The cases where this Court would be prepared to make a vesting order of shares in British companies held by enemy subjects, were referred to in In re Praschma and to a certain extent explained in the case of In re Kranz; in the latter case the order was made, not because the shares which formed part of Kranz's property could be called the property of the companies, but because the liability of a British subject in respect of these was within the jurisdiction of the Court.

   In the present case no liability in respect of shares is in question, the company want the order because they contemplate liquidation in order to get rid of their German shareholders by reconstruction.  Nothing, however, has been done to alter the position of the company, and its shareholders in respect of their shares.  There is no debt from the company to the shareholders in respect of its capital, nor has any liability of the company or any other British subject arisen.

   Were this company in liquidation the position would be altered and that suggested in In re Praschma would be reached, the company would be in course of reconstruction.  The position would be altered because the time would have come when it became necessary to ascertain the financial position of the company and the rights of the shareholders in respect of the share capital would have arisen.  When that position arises the question may be considered; at present the Court has no jurisdiction to consider it.

 

SHANGHAI LAW REPORTS

1918. FEB. 8.

IN RE MAMMEN AND OTHERS.

Persons of enemy nationality resident in China are not enemies within the meaning of sec. 4 of the Trading with the Enemy Act, 1916, and the court had no power, notwithstanding the definition of "enemy£" in the trading with the Enemy (Consolidation) Regulations, 1917, to make a vesting order in respect of their shares in a British company.

   Motive of an application such as the present should be given to the owners of property which it is sough to vest.

   The applicants, the Shanghai Pilot Boat Company, Limited, asked for an order vesting the shares of four enemy shareholders in the Custodian.

 The enemy shareholders had had their licenses as pilots withdrawn by the Chinese Government.  The company was desirous of appointing other pilots to fill their paves and asked for a vesting order to facilitate the arrangement.  Article 7 of the Company's articles of association provided that upon the retirement as a pilot of any member of the company the joining member should pay through the directors to the retiring member the value of the retiring member's share.

   At the time of the application no new member had joined the company in place of the enemy pilots, all of whom were residents in China.

   The Custodian was present and concurred in the application, Hays for the applicants.

   The four pilots interested were given notice of the application by direction of the Court but were not represented at the hearing.

   SIR HAVILLAND DE SAUSMAREZ.

I regret that I must refuse the application.  The power to make the order depends entirely upon the Trading with the Enemy (Amendment) Act of 1914. where it is set out in the preamble who are enemies.  For the purposes of this Act it is  quite clear that enemies are "persons or bodies of persons resifting in or carrying on business in any country with which His Majesty is for the time being at war."  These four pilots, who are shareholders in the company and in respect of whom this application is made are at the present time residing in China.  They are not therefore within the definition of "enemy" as set out in the trading with the Enemy (Amendment) Act.  I am aware of the bract that there has been a proclamation as to enemies in China.  The Trading with the Enemy (Consolidation) Regulations, 1917, take note of that proclamation and in the definition of "enemy" in regulation 2, they apply for the purposes of the regulation, the provisions of that proclamation to the subjects of Enemy Powers, who are residing or carrying on business in China amongst other places.

But this is not an application under the regulations of which I have spoken, it is made under section 4 of the Trading with the Enemy (Amendment) Act of 1914 and, as I have said, the definition of "enemy" in the preamble to that Act does not cover the four people with respect to whom this application is made.  Nor is it possible by analogy to take the case any further, because, if you look at later Acts, amending the trading with the Enemy Act, 19154, that Act, is modified with respect to certain section of the Act, and those sections do not include section 4.  I think it quite clear that I am unable to act and that there is no course open to me but to refuse the order.

 

SHANGHAI LAW REPORTS

1918. Mar. 18

IN RE LINKE.

   L purchased through his brokers G & J Ltd 100 shares in a China company.  These shares were held by G and J Ltd, as security against farther transactions on behalf of L.  They were placed in the name of J in the company's register and the certificates deposited with G and J Ltd.  L was at the time a clerk in a German Bank in Shanghai; when last seen, in 1913, he was on his way to Germany and has not been since heard of.

   Under these circumstances the Court presumed that he was in Germany and was, therefore an enemy within the meaning of sec. 4 of the Trading with the Enemy (Amendment) Act, 19165, and on the application of G & J Ltd, in liquidation, made an order vesting the shares in the Custodian.

   Held, that the case as one in which the Court could make an order, and that it was expedient to do so as the liquidation  of G & J Ltd, could not be proceeded with without such order.

   The evidence which the court would require before presuming that an enemy had returned to his country considered.

   This was an application made by Mr. Thomson, the liquidator of Gensburger and Judah, Limited, who carried on the business of stockbrokers, to vest certain shares in the Consolidated River estates (1914), Limited, in the Custodian.  The shares were the property of Linke, an enemy, who shortly before the war had left China for Germany and had not since been heard of.  Judah, a member of Gensburger and Judah, Limited, had bought shares in the Consolidated Rubber Estates, Limited, for Linke, who deposited them with Gensburger and Judah, Limited, for safe custody and as security for money which might be expended by them in respect of further transactions to be entered into by them on behalf of Linke.]

   On a reconstruction of the Company the shares in the new company remained with them on the same conditions.  These shares were issued in the name of Judah.  There was in fact no debt owing by Linke to Gensburger and Judah, Limited.

   Under the circumstances affecting these shares the liquidator found himself unable to property complete the winding up of the company, and in order that they should be dealt with, made the present application.

   Macleod for the applicant.

   The Custodian in person.

   SIR HAVILLAND DE SAUSMAREZ

   This is an application made under section 4 of the Trading with the Enemy (Amendment) Act, 1914, to vest certain property belonging to Paul Linke, an enemy subject.  The applicants are the liquidators of Gensburger and Judah Limited, and J. J. Judah, who was a director of that company.  They carried on business as stockbrokers and it was in connection with a share transaction that this property came into the possession of Mr. Judah.  The property is 100 shares in the Consolidated Rubber Estates (1914) Ltd., and the circumstances are sufficiently set out in the third paragraph of Mr. Thomson's affidavit.  He says:

"I am informed and believe that the 100 shares at present registered in the name of Judah Joseph Judah, the subject matter of this application, were allotted to him under a reconstruction of the Consolidated Rubber Estates (1910) ltd. In respect of shares in such last mentioned company which were bought by Gensburger and Judah Ltd., in the ordinary course of its business as share and stock brokers on or about the 6th May, 1911, for the above mentioned Paul Linke and that such last mentioned shares were registered in the name of Judah Joseph Judah and that the certificate therefor was deposited with Gensburger and Judah Ltd, either for safe custody or to be held as security against moneys expended by Gensburger and Judah Ltd. in transacting further business on behalf of the s aid Paul Linke."

  It seems to me that those facts clearly bring these shares within the words of section 4 of the trading with the Enemy (Amendment) Act 1914, as being property belonging to, or held of managed for or on behalf of an enemy.  In fact I think the shares are held for an enemy by Gensburger and Judah, or were, when they went into liquidation.

   The difficulty is that the liquidation of the company Gensburger and Judah cannot be proceeded with or finally disposed of until these shares are got out of the way, and the only way they can be dealt with is by vesting them in the officer designated to perform the duties of Custodian in respect of such property as may be vested in him by this Court.  It is desirable, I think, to bear in mind always, in dealing with these cases, the object of the Trading with the Enemy Acts, are they are both set forth in the preamble to the Act.

   The preamble of the trading with the Enemy (Amendment) Act, 1914, which defines the purpose of the Act, runs

"Whereas it is expedient to make further provision for preventing the payment of money to persons and bodies of persons resident or carrying on business in any country with which His Majesty is for the time being at war in contravention of the law relating to trading with the enemy, and for preserving, with a view to arrangements made at the conclusion of peace, such money and certain other property belonging to enemies; and to make such other provisions for preventing trading with the enemy."

I think these shares fall within the classes d exalt with in this preamble and it is very difficult to see what could possibly be done with the property if some such order as that asked for w ere not made.  It is necessary that some means be provided by which the liquidator will be able to deal with the property, so as to preserve it without transgressing the law relisting to trading with the enemy. 

   I have also to be satisfied that it is "expedient" to make such an order.  This is one of those cases, which is covered, though not quite, by what was said of the case In re Praschma and, because it is important to complete the winding up of the company without making an order of this kind, in my opinion it is expedient that it should be made so as to afford the company such facilities as we can to deal with the shares which are held by enemies.

   The only other question is whether the Court had jurisdiction in this case.  That, I think, is entirely covered by In re Kranz, and I have only to consider the question which was raised in In re Mammen and others as to whether Linke is an enemy within the intention of section 4.  The evidence is that he was last seen in 1913, having been until that time a clerk in the German bank in Shanghai, and that he was then on his way to Germany.  I think that I am justified in assuming, as noting more has been heard of Linke, that he arrived in Germany, and, on the ground of his being resident in Germany, in holding that he is an enemy within the meaning of the Act.

This point has been before me in chambers on previous occasions and I think it is just as well to indicate the amount of proof that would be required in a case of this kind.  The date at which the person in respect of whom the application is being made was last seen, in China, or elsewhere, is important, because one is able to gather with some certainty as to whether the opportunity of getting to Germany is within his reach.  And in further support of proof as to the whereabouts of a person who has left this country, I should expect to be certified, as I am here that due inquiries have been made and that he has not been heard of since.  Under those circumstances I should be prepared to assume that a German enemy is in Germany and that he comes within the definition of "enemy" in the Act.  The order which has been asked for will be made.

 

SHANGHAI LAW REPORTS

1 March 1919

IN RE SIEMSSEN AND COMPANY

   King's Regulations having been passed to deal with the property of enemies situate in British concessions, the Minister vested in the Custodian certain lots of land in Shanghai which has been leased to S & Co.  These were subject to a lien by the H and S Bank, who moved the Court under the Trading with the Enemy (Amendment) Act, 1918, sec 12, for an inquiry into the amount of the lien and an order for the sale of the property free from such lien and payment to the bank of the money arising from the sale.

   The regulations do not specifically substitute the Minister for the Board of Trade, which has the similar power to vest under the Trading with the Enemy) Amendment) Act, 1916.

   Held, the Regulations purport to provide a means of dealing with property which owing to the exigencies of war is in the hands of the British Government and that under the circumstances the Court can take cognizance of an order made by an officer, who in fact is exercising the same power as the Board of Trade, the Regulations purport to provide a means of dealing with property which owing to the exigencies of war is in the hands of the British Government and that under the circumstances the Court can take cognizance of an order made by an officer, who in fact is exercising the same power as the Board of Trade exercises in similar cases in England, as if that officer had been substituted by name for the Board in the Regulations.

   Siemssen and Company, a German firm, held under lease from His Majesty certain lots of land in the British Concession in Shameen, they deposited the title deeds of these lots with the Hongkong and Shanghai Banking Corporation to secure advances made to them from time to time.  Owing to the Warf the Bank as unable to realise its security.

   The property in Siemssen and company's lots was vested in the Custodian by the minister in virtue of the powers he has under the Trading with the Enemy (Enemy Property in British Concessions) Regulations, 1918, on November 18.  They were vacated by Siemssen and company at the end of that month and no rent has been paid since.  In virtue of the vesting order the Custodian now holds the property subject to the lessee's covenants for the remainder of a term of 99 years from the year 1861.  In consequence of the bank's lien no order to sell has been made by the Minister.

   The Bank applied for an enquiry in to the amount of their lien and an order for the sale of the property free from such lien and payment to them of the moneys arising from the sale.

   McNeill for the appellants.

   The Custodian appeared and supported the application.

   SIR HAVILLAND DE SAUSMAREZ:-

   The present application is that the court should apply section 12 of the Trading with the Enemy (Amendment) Act, 1918, to immovable property held by an enemy under a lease from the British Crown in a British Concession, and order a sale of this property free from a lien which the applicants, the Hongkong and Shanghai Banking Corporation, claim to have upon it.

    The case of In re Praschma which came before me in 1917, deals with the position as it stood and still stands under the Trading with the Enemy (Consolidation) regulations, 1917.  Those regulations are drawn with reference to the Trading with the Enemy Acts of 1914 and 1915, and I will quote once more the sentence which sums up their effect:

"they must be construed as an explanation by the local legislature of the extent to which circumstances allow of the application of English Law and as substituting where necessary machinery for the attainment of the ends aimed at by the Imperial Legislature."

They do not deal with the Trading with the Enemy Act, 1916, because at that time there was no official body which stood in China in the place of the Board of trade.  Since then the necessity of having some authority to deal with property of enemies in British Concessions has been felt and the Trading with the Enemy (Enemy property in British Concessions) regulations, 1918, have been passed  

    Then principal object of these regulations is to place the Minister in the position of the Board of Trade under section 4 of the Act and to enable him to make vesting orders in respect of the property mentioned in the regulations.  The difficulty which arose in the case of In Re Mammen and others is thus removed, for the definition of "enemy" is extended to cover all subjects of and bodies incorporated under the laws of a state at war with His Majesty.  The regulations seem to me to fulfil their proper function, they substitute in matters where it has been judged necessary that there should be a power to deal with certain classes of property., a local authority for the Board of Trade, or in the words of the Court in In re Praschma "machinery for the attainment of the ends aimed at by the Imperial Legislature."  The scope of King's Regulations was fully considered in the recent case of Morgan v Mack and it was held that they must be ancillary to not in derogation of the law applied by the Order in Council.  This is a condition fulfilled by the present Regulations, what they purport to do is to provide a means of dealing with property which owing to the exigencies of the war is in the hands of the British Government.

   Mr. Mossop, the custodian within the meaning of the regulations, has s worn an affidavit from which it appears that the lots on the British Concession  in Shameen in respect of which this application is made were taken over by the superintendent of the municipal police under the instructions of His Majesty's Consul General at Canton.  They are the property of the Crown subject to a lease, as to the continuance of which under present circumstances I am not concerned.  No rent is being paid for them.  The Custodian now holds them subject to the lessee's covenant for the unexpired part of a term of 99 years from the 3rd September, 1861.  Mr.  Mossop further sets out that he has received instructions to sell properties in the position of the present, and these are instructions which the Minister is entitled to give, whether under section 4 of the Trading with the Enemy Act, 1916, or the regulations.  He has not, however, in this case made an order for sale, I suppose because of the lien on the properties claimed by the bank.

   Consequently we have this application under section 12 of the Trading with the Enemy (Amendment) Act, 1918. That section gives the Court powers in the case of property vested either by the Court or by the Board of Trade under the Trading with the Enemy Acts, on which any person claims a lien, to direct an account and enquiries to determine the extent of such lien and the payment of the lien out of the purchase money.

   The Trading with the Enemy Acts are part of the civil law of England, and, therefore, in so far as circumstances admit, must be applied in this Court.  The fact that this particular section had not been put into a King's regulation does not deprive it of force, for the Minister has no power to derogate from the law applied by this Order in Council.  I have felt that there is some danger of confusion in legislation which selects certain sections from Acts of Parliament and omits others when all are applicable in so far as circumstances admit; but when it is desired as in the present cased to substitute the Minister for the Board of Trade in respect only to some of the functions of the Board there may be difficulties in the way of conveniently drafting legislation.  The difficulty of construction  in the present  case is that it might be contended that the Minister not having been substituted for the Board of Trade save by implication, it cannot be said that the vesting order is a vesting order made by the Board of Trade.

    All such difficulties would have been removed had the regulations contained a proviso that the functions of the Board of Trade in sections 4 and 9 of the Trading with the Enemy Act should be exercised by the Minister; the question is whether the court can so construe the section of the Act of 1918 as to apply it as though the Minister were substituted for the Board of Trade.  It is not without some difficulty that I have come to the conclusion that the Court can so construe the section.  Sections 4 and 9 of the Act of 1916 are clearly meant to give the Board of Trade powers to vest enemy property, and section 12 of the Act of 1918 is part of a subsequent enactment in pari materia, it confers no new powers on the Board of Trade. The King's regulations gibe the Minister the powers of the Board of Trade section 4 and 9 of the Act in respect of certain leasehold property in British Concessions, the construction I am asked to put upon the section gives him no new power; all the Court is asked to do is to take cognizance of an order which has been made by an officer who is in fact exercising the powers  of the Board of Trade under the Statute and to give effect to that order as if the substitution had been made by name as well as in fact by the regulation.

   Unless the Court is prepared to make the orders the Minister's powers may be frustrated in all cases where a lien or charge exists on any property which he is desirous of selling, in other words, the object of the Regulations may be defeated in a number of cases.  For these reasons I think the Court should treat the vesting rider as one which gives it jurisdiction under the Act of 1918 to make the orders prayed.

 

SHANGHAI LAW REPORTS

April 17, 1919.

IN RE THE JAVA CONSOLIDATED RUBBER ESTATES, LIMITED.

   The Minister having under the Trading with the Enemy (Shares in China Companies) regulations, 1919, vested in the Custodian certain shares in a China company belonging to M. an enemy, the Custodian under sec.  9 (1) requested the company to transfer the shares registered in M's name in to the name of the Custodian.  On the company's refusal the Custodian moved to rectify the register accordingly, the Court made the order.

   A provision in an ordinance of the colony of Hongkong which in effect amends the Companies Ordinance, 1911, is part of the law applied by Order in Council to British subjects in China, and the minister may be substituted for the Governor of the colony in respect of China companies by King's Regulation.

   On march 4, 1919, the Minister arcing under the Trading with the Enemy (Shares in China companies and trust property) Regulations, 1919, vested 25 shares standing in the name of L. Roser in the books of the Java Consolidated Rubber Estates, Limited, in the Custodian, who communicated this fact to the company on March 14, at the same time sending them a copy of the order.  On March 27 he requested the company to transfer these shares into his name, the company declined compliance unless ordered to do so by the Court because of certain doubts as to their position and the effect of the Regulation.

   On this the Custodian moved under sec 33 of the Companies ordinance, 1911, to rectify the registers of the company by substituting his name for that of Roser.

   Mossop for the Custodian.

   McNeil for the Company.

   SIR HAVILLAND DE SAUSMAREZ.

   The application depends upon the terms of the trading with the Enemy (Shares in China Companies and Trust property) Regulations.  The first relevant regulation is the second, which gives the Minister power by order to vest in the Custodian any shares of any China company.  The Minister may give powers of sale or management to the Custodian under regulation 4, and then comes regulation 5, which says that the vesting order shall be sufficient to vest in the custodian any property or right to transfer any property as provided by the Order, without any necessary of any further conveyance, assurance or document.

   Acting under this, and Regulation 9, section (1), the request to transfer was made by the Custodian.  That regulation provides that, where a company is required by the Custodian to transfer, the company shall, on receipt of a transfer executed by the Custodian, notwithstanding any regulations or stipulations of the company, and notwithstanding the custodian is not in possession of the certificate, scrip or other document of title relating to the shares, stock or security, make the transfer in their register.

   The question comes before the court on this motion to rectify the register of the Java Consolidated Rubber estates, Limited, the company having refused the custodian's request because they entertained certain doubts, which may conveniently be stated in the form of two questions.  The first is, is there protection to the company acting under the King's regulations which is equal to the protection given by section 8 of the Trading with the Enemy Act, 1916?  The second question which has been raised is, is the action by the Custodian in Shanghai in respect of shares known throughout China, and (as a rider to that) under the circumstances, what are the rights of innocent holders without notice?

   I have come to the conclusion that it is not the duty of the Court to answer those questions, and indeed, in the circumstances, the Coeur is in a measure not in  a position to do so, and my reasons for coming to that decision are these.

   The terms of the regulations are cudbear, they are practically identical with the terms of the law of England and that of the Colony of Hongkong.  The latter fact is relevant to this extent that in so far as any part of them comes within the definition of "The ordinance" in the China (Companies) Order in Council which includes any Ordinance amending the companies Ordinance, 1911, they are part of the law applied by the Principal Order with which the Companies Order in Council is to be read as one.  In that case the substitution by King's regulations of the Minister for the Governor of Hongkong in respect of the provisions of an Ordinance which applies in so far as circumstances admit does not seem, to be ultra vires. It is one of the matters which are not provided for by the Principal Order at all events in the case of ordinances posterior in date to the Companies Order in Council.

   The regulations on the face of them  do not seem to derogate from the law applied by the Order in Council, and though some doubt has been suggested as to their efficacy by counsel for the company, I have not been asked to say that they are ultra vires. Even if I had doubts on the point I should not undertake to resolve them jumbles I were definitely asked to do so.

   The regulations deal with certain liabilities of China companies,  which stand in a somewhat peculiar position in that for various reasons they are subject to officials of His Majesty in a country  where he enjoys extraterritorial rights and their registers are kept in that country.  I can see no reason why the provisions of regulations affecting those registers made by the authority in whose hands the legislative power has been placed should not be obeyed.

   It was said by Mr. McNeill that section 8 of the Trading with the Enemy Act, 1916, practically indemnified companies who obeyed the Act, and that the same could not be with the same certainty said of the local law.  That may be so, but, if so, it is a matter touching the right of third parties and it is a question on which I clearly cannot express an opinion  when they are  not before the Court.

   The second point made by the company is that there are or may be persons in China who hold shares in these companies under a title required from an enemy, and that, as they cannot be expected to know English law, they may be deprived of their rights.  The Custodian has assured me that every precaution possible le has been taken to bring these proceedings to their notice by advertisement, were it otherwise I should have adjourned the present application , as it is I see no need to do so.

The provisions of  the Regulations are designed to carry out the policy of the Trading with the Enemy Acts and the above considerations do not seem to me to affect their application  in the present  case.

   I shall therefore make the order which is asked for.

 

SHANGHAI LAW REPORTS

No Date

G. J. T. MORGAN versus A. C. MACK[1]

   The plaintiff, a member of the Shanghai Stock Exchange entered into contracts for the defendant for the purchase of shares; and on the defendant failing to meet his liabilities, became liable to pay for the shares himself.  In an action to recover the money paid or the amount due from the plaintiff on account of the contracts the defendant pleaded that the contracts were illegal and that the plain tiff could not recover.   The defence was based on the Companies (Sale of Shares) Regulations, 1915.

   Held, that the Regulations, in so far as they interfered with the English law of contract, were ultra vires and constituted no defence to the action.

   The power of the Minister to make King's regulations considered.

   The plaintiff, as the defendant's broker, bought shares for him on the Shanghai Stock Exchange of which the plaintiff was a member.  The contract notes had the following note upon them:

N.B. - This contract is made subject in all respects to the rules and regulations for the time being and from time to time of the Shanghai Stock Exchange.

Rule 57 of the Stock Exchange's rules reads:-

A member finding himself  unable to fulfil his engagements or to make satisfactory arrangements with his creditors shall inform the committee within twenty four hours of his inability to do so ... ....... And he shall be suspended from the Stock Exchange pending investigation, and failing explanation shall be publicly declared a defaulter.

   The shares were brought forward for the December settlement, and no numbers were given.

   The defendant failed to find the money for the shares which had fallen in value since they were bought; and the plaintiff in order to prevent his suspension and possible expulsion from the Stock Exchange made arrangements with the brokers from whom he had bought, whereby he surrendered his commission and undertook the liability to pay for the shares bought for the defendant.

   The defendant refused to pay the plaintiff the money due on the shares on the ground that the transaction had been made illegal by the Compensation (Sales of Shares) Regulations, 1915.

   McNeill for the plaintiff:-

   The King's regulation is ultra vires, it cuts right across the ordinary course of business as carried on in England.  The result of it is to stop business.  This change is made not by Order in Council but by king's regulation, and the power to make such Regulations depends on the terms of the China Order in Council, 1901; Art. 155, which confers the power, enables the Minister to make Regulations for "the peace, order and good government of British subjects in relation to matters not provided for by the Order and to matters intended by the Order to be prescribed by Regulation."  This must fall within the first category, and it will be found that the matter is one provided for by the Order.

   It is a transaction covered by the ordinary law of contract and is not a gaming contract, Forget v. Ostigny [1895 A.C. 318] and is therefore within the provisions of Art. 89, which provides that "subject to the provisions of this Order, the civil jurisdiction of every Court acting under the Order shall, as far as circumstances admit, be exercised on the principles of, and in conformity with English law for the time being in force."

   Home for the defendant cited Foreign Jurisdiction Act, 1890, sec: 12 and Anson's "Law of the Constitution" 12th ed: pp. 233-240.

   The intention of the legislature was to declare this method of dealing with shares illegal, and leave the consequences of such a declaration to do the rest.

   Whatever may be the provisions of the Order in Council as to civil law, the Minister has power to make such an act as the present criminal.

   McNeill in  reply.

   SIR HAVILLAND DE SAUSMAREZ.

   The facts of this case are simple but the point to be decided is one of no ordinary difficulty.  It is whether His Majesty's Minister has power to make a king's Regulation which has been pleaded as a defence to the action.

   The defendant appears to be in the habit of speculating in shares and other securities which are bought and sold on the Shanghai Stock Exchange, the plaintiff was one of his brokers.  He began to act for him about two years ago.  In August last defendant has certain transactions for the October settlement and made a profit which he took, he had more transactions for the December settlement, and on these he had a serious loss.  The plaintiff called on him to take up his shares, but he failed to do so, with the result that the plaintiff, who is a member of the Shanghai Stock Exchange, was called to account by the committee and escaped suspension on possible expulsion on explaining the situation and giving promissory notes to the different brokers with whom he had dealt for the amounts due to them, he also surrendered all the commission he had earned on the transactions in which he had participated as broker in the December settlement.

   The plaintiff claims that the defendant is indebted to him by way of indemnity in the amounts for which he is liable and for the commission earned by him.  The only defence to the action, which I seriously have to consider, is whether the contracts made by the defendant for the sale and purchase of shares are illegal, because they did not specify the numbers by which such shares were distinguished in the registers of the companies issuing them.  This is a provision of the Companies (Sale of Shares) Regulation, 1915.  The plaintiff contends that the power which the Minister had to make King's regulations does not cover such a regulation as this, that it is ultra vires and that he is entitled to recover under the ordinary law.

   It is I think desirable first to consider the nature of the subordinate legislation contemplated by the China Order in Council, 1904, and secondly the limitation put upon the Minister's power to legislate by regulation.  The power to make King's Regulations is conferred on the minister by the China Order in Council, 1904: that Order is made under the Foreign Jurisdiction Act, 1890.  The regulation under consideration which is published in the form prescribed by the Secretary of State, purports to be made under Article 155 of the Order.  That article gives the Minister power to make regulations and then enumerates the matters with which he may so deal; the first division of the article appears top cover all these matters and it reads:-

"(a) For the peace, good order and good government of British subjects in relation to matters not provided for by this Order, and to matters intended by this Order to be prescribed by regulation."

   The article then proceeds to set out the matters to be prescribed by regulation, and  with the exception of the matters therein mentioned the only other matter to be  dealt with under the Order by King's Regulation is "the mode of registration" of British subjects under Article 162.  Article 156 deals with "regulations for the municipal government of any foreign concession in China" and these are placed on the same footing as regulations under article 155.  Probably they cannot strictly be called Kin's Regulations.  Since this order the power to make King's Regulations has only once been extended, and that is by Article  3 of amending Order of 1909 giving power to make regulation for the control of a police force.  This article recognises the difference between regulations made under Article 155 and 156, peaking of the former as "King's" and the latter as "Municipal."   To complete the enumeration of subordinate legislation under the Order I may point to Prison regulations made under Article 159, to International regulations under article 74, and to those dealing with a Court of Consuls, article 52 of the Amendment Order in Council 1913; International regulations deal with game, harbour, health and other local matters.

   I do  not propose to  discuss these articles dealing with subordinate legislation  under the Order, but it is clear from a perusal of them that they are of local application or deal with local circumstances.  I have had some twenty years' experience of these or similar provisions and they have not to my knowledge been made to cover legislation of a wider scope; at all events none such have been cited to me.

   The Companies (Sale of Shares) Regulations is attacked because it is said that it deals with a matter provided for by the Order, inasmuch as it falls within the province of arteriole 89.  Now I apprehend that the power to make King's regulations, though it may be construed ,liberally when applicable, is strictly limited to the matters to which it is applied by the Order in Council.  And for this reason: His Majesty's Jurisdiction in China is exercised under the Foreign Jurisdiction Act, 1890, and for the purposes of that exercise of jurisdiction His Majesty In Council has passed an Order in Council under that Act, by section 11 of which every Order in Council made in pursuance of it shall be laid before both Houses of Parliament, and shall have effect as if it were enacted in the Act. If, then, the Minister makes King's Regulations which are not within the powers given him by the Order In Council he is doing more than His Majesty In Council is able to do under the Act, namely, passing legislation which has not been laid before parliament.  The conclusion seems irresistible, that strict regard must be had to the limitations to the power to legislate by the Minister.

   I must next consider whether the matters dealt with by the Sale of Shares Regulations are within the terms of article 155 (1) (a).  No serious argument has been addressed to me to shew that they do not come within the words "peace, order and good government," which are words of very wide application and which have been considered in the Courts: for the purpose of this judgment I shall assume that they cover the legalisation impugned and turn to the later words which confine such legislation to "matters not provided for by this Order."

   Article 89 is a general provision as to the exercise of civil jurisdiction under the Order; it reads "subject to the provisions of this Order, the civil jurisdiction of every court acting under this Order shall, so far as circumstances admit, be exercised on the principles of and in conformity with English law for the time being in force."   This is clear statement that in civil matters the law of England applies, and not only in this but that amendments of the law of England as they are made apply, there is no exception in favour of King's regulations as in the case of circuital jurisdiction provided for in Article 35.  That Article runs:-

Except as regards offences made or declared such by this or any other Order relating to China, or by any Rules or regulations made under any Order: Any Act that would not by a Court of justice having criminal jurisdiction in England be deemed am offence in England, shall not, in the exercise of criminal jurisdiction under the Order, be deemed an offence, or be the subject of any criminal proceeding under this Order."

It would seem, therefore, that if regulations under the Order can deal with civil law, they must be directed to such matters as are outside the scope of English law, as applicable in China.  Where circumstances do not admit of the application if English law as it stands, as in the case of trading with the enemy, it would seem proper to invoke the power to make King's Regulations to adapt the laws to local circumstances.

   Again from a perusal of the powers conferred on the minister to make regulations it would seem that the policy of the Order is to make this legislation supplementary to and not in derogation of the law of England.  And this is reasonable, China is a settled country with a large trade, the British community is a wealthy, trading community, considerable in numbers but confined ordinarily to certain ports; while, therefore, on the one hand that is not and does not appear ever to have been need foe extraordinary legislation by King's regulation for its protection, there is on the other good reason for a known system of contract and commercial law.  If the Monoester could by Kahn's regulations alter or repeal parts of the civil law as lay down by the Order in Council the result would be an autocracy with the legislative power in his hands.  In view of the case of the King v. the earl of Crewe: Ex parte Sekgome [1910, 2 K.B. 576} I am  not prepared to say that such a state of affairs could not be established by Order in Council, but, so far as local circumstances form a guide, the need of an established system such as that of English law seems greater that]n that of a power to deal speedily with emergencies as they arise, e specially when it is borne in mind that King's regulations are not binding on the inhabitants of the country.

   I must shortly deal with a contention of Mr. Home which seemed to be an after-thought, that in view of the exception in article 35 to the exclusive application of English law of matters provided for by regulation the Minister may make punishable whatever he chooses and so by implication repeal part of the civil law.  I think Mr. Home can hardly have considered the article for it only excepts "offences made or declared such" and this regulation does nothing of the kind, it merely declares certain contracts to be illegal.  In any case it would be difficult to persuade a court that the Minister could do by a side wind what he could not do directly.

   It seems then that the proper construction of the Order in Council is that the minister cannot alter the civil law in so far as it is prescribed by the Order, and that the law so prescribed is the law of England which is to be applied as far as circumstances admit.

   I have accordingly now only to consider whether this regulation does in fact conflict with the law of contract as it is to-day in England.

   It was described by counsel for the plain tiff in his opening as "one which cuts right across the ordinary course of business as [as] carried on in England," and therefore one which is not in accordance with English law.  The regulation is founded on an ordinance of the colony of Hongkong which made contracts for the sale of shares in joint stock companies void, and is practically identifiably with it only in that the regulation makes such contracts illegal.  The Hongkong ordinance was founded on Leeman's Act, but as was conceded in argument that act differs in its object from two local enactments.  The former was to protect joint stock banks from speculation in their shares, the latter to protect people from themselves by putting an end to speculation, both the Hongkong and China enactments followed on periods of wild speculation, that in China being the rubber boom of 1910.  Now I wish it to be clearly understood that I am not criticizing the beneficence or reasonableness of this regulation, it certainly was efficacious in stopping speculation; but what I have to consider is not whether the legislation was wise or reasonable but whether, in order to stop speculation in shares or for any other reason, the Minister is empowered by the Order in Council to make such contracts as that sued upon illegal.

   Now there is a considerable amount of confusion as to the meaning of speculation, it is often identified with gambling, which is quite a different thing.  A large part of legitimate commerce depends upon speculation, which cannot be said of gambling.  I cannot do better that read the remarks of the Privy Council in giving judgment in Forget v. Ostigny  [1895, A.C. 328].  The question was whether contracts for the purchase and sale of shares as a speculation  was  gaming.  Lord Halsbury in delivering their Lordships'' judgment said

It may well be that the appellant was aware that in directing a purchase to be made the respondent did not intend to keep the shares purchased, but to sell them when, as he anticipated would be the case, they rose in value; that his object was not investment but speculation.  To enter into such transactions with such an object is sometimes spoken of as "gambling on the Stock Exchange," but it certainly does not follow that the transaction involves only gaming contract.  A contract cannot properly be so described merely because it is entered into in furtherance of a speculation.  It is a legitimate commercial transaction to buy a commodity in the expectation that it will rise in value with the intention of realizing a profit buy its resale. Such dealings are of everyday occurrence in commerce.

   The legal aspect of the case is the same whatever be the nurture of the commodity, whether it be a cargo of wheat or the shares of a joint-stock company.  Nor, again, do such purchases and sales become gaming contracts beanies the parson purchasing is not possessed of the money required to pay for his purchase, but obtains the required funds in a large measure by means of advances on the security of the stock of goods he has purchased.  This, also is an everyday commercial transaction.  For example, a merchant who has to pay the price of a cargo purchased before he resells it obtains in ordinary course the means of doing so by pledging the bill of lading."

   It appears then that the contracts based on speculation in shares are not void in English law, and it follows that the interference with the law of contract which this regulation effects is ultra vires.  A somewhat absurd result would follow from a different conclusion, for whereas a gaming contract is void by English law and therefore also under the Order in Council a contact based on speculation on the Stock Exchange would be good in England by English law and illegal in China where English law governs British subjects.

   It is with regret that I have to take a different view of the minister's powers to that which he has taken himself; but this is not one of those cases where the Court is called upon to interfere with the discretion of an authority entrusted with the power of making subordinate legislation, all I have had to do is so construe an Order in Council of great complexity, and having come to a different conclusion to that at which he arrived I am bound to give effect to my opinion.

 

Source: The North China Herald, 17 April 1920
LAW REPORTS
H.M. SUPREME COURT
Shanghai, April 12.
Before His Honour Judge SKINNER TURNER.
L. ANDERSON
v.
A. G. MOSSOP, Custodian in China of Enemy Property.
  Plaintiff's claim is for damages not exceeding Tls. 3,500 for breach of an agreement in writing contained in a letter written by the defendant to the plaintiff and others and dated March 4, 1919, and a letter written by the plaintiff to the defendant dated March 6, 1919.
  Mr. R. F. C. Master appeared for plaintiff, and Mr. H. P. Wilkinson, Crown Advocate, for defendant.
  On the application of Mr. Master, His Lordship ordered pleadings.

Source: The North China Herald, 19 June 1920
THE SALE OF ENEMY SHARES
Local Broker's Suit to Recover Commission
  A case in which two prominent residents of Shanghai were connected and which apparently arose out of a misunderstanding, was, fortunately, settled on Monday afternoon in H.M. Supreme Court, when the case of Mr. A. L. Anderson v. Mr. A. G. Mossop, Custodian of Enemy property was withdrawn by the plaintiff after the case had lasted half a day.  The case, which was being heard by His Honour Judge Skinner Turner, arose out of matters connected with the sale of stocks and shares which came into the hands of Mr. Mossop in his official capacity.
THE CLAIM
  The story told by the plaintiff in his statement of claim was to the effect that by an agreement in writing, entered into between the defendant and plaintiff and others, dated March 4, 1919, and a latter written by the plaintiff to defendant on March 6, it was agreed that in consideration of the plaintiff acting on the advisory committee appointed to assist defendant in carrying out his duties as Custodian in China of Enemy Property in connexion with the sale of shares vested in him as custodian, the plaintiff should be employed as broker in connexion with the sale of such shares as might be disposed of in the open market upon the advice of the Advisory Committee and subject to its certificate.  An exception was made to this in cases where the shares were sold back to the companies whose shares they were.  It was agreed, averred the plaintiff, that the brokerage should be one-half of one per cent. to be deducted from the purchase price as in the case of ordinary brokerage charged locally.
  Plaintiff alleged that the defendant, in breach of that agreement, had disposed of a number of shares vested in him in the open market without informing the plaintiff that he was doing so, or offering to employ him as broker in connexion with such transactions.
  Plaintiff's claim consequently was:-
That the defendant be ordered to furnish him with a complete list of shares so sold by him together with the prices at which same were sold.
Payment of one per cent on the amount of such purchase price by way of damages for breach of the agreement.
Costs.
Further and other relief.
  In the statement of defence, the defendant admitted the first two formal paragraphs of the statement of claim setting out the particulars of the parties, and denied the paragraphs in which the foregoing version of the matter appeared.  Defendant denied that the plaintiff was employed by him for the consideration alleged, but as member of the Advisory Committee appointed to advise defendant in his official capacity as to the price at which he should sell the shares, the other members of the committee being a member of the firm of Messrs. Lowe, Bingham & Mathews.  After March 6 and prior to July 8 a further and better agreement that that mentioned by the plaintiff was entered into whereby it was agreed that if the defendant found it necessary to place any shares not sold to companies, such shares would be handed to the plaintiff for disposal so ,long as he remained a member of the committee, in which event the remuneration would be included in a fee of one per cent on the selling piece of such shares payable to the committee and not to the plaintiff individually.
  The defendant at no time material to the action had occasion to, nor did he, place any shares vested in him in the hands of a broker for sale.  All remuneration payable to the Committee by the defendant, while plaintiff was a member, had been duly paid and acknowledged and there was now no sum owing to the Committee.  Defendant further urged that the agreement was made between him and the advisory committee and plaintiff had, therefore, no title to sue in his own name.
  Deadbeat further claimed that the plaintiff was estopped from saying that he, the plaintiff, was under contract to be employed as broker in connexion with the sale of any shares sold otherwise than to companies whose shares they were, subject to a brokerage of one per cent because the plaintiff, on August 5, 1919, in his firm name of A. L. Anderson & Co., and on other dates made written offers to the defendant to buy from him certain shares not sold to companies, which offers, with the advice of the Advisory Committee, of which plaintiff was a member, were accepted by the defendant, no brokerage being claimed by the [plaintiff, not paid.
  Mr. Rader Harris appeared for the plaintiff and Mr. H. P. Wilkinson, Crown Advocate, appeared for Mr. Mossop.
PLAINTIFF'S CONTENTION
  Mr. Harris opened the case for the plaintiff which he finally summed up as follows: there were only two ways in which the Custodian of Enemy Property could sell the shares; either direct to the companies, whose shares they were, or through Mr. Anderson, as broker.
  Plaintiff, in the wines box, said he had carried on the business of a sock and share broker for the last 22 years.  Foe many years he had been a member of committee of the Stock Exchange and had been chairman five times. In February of last year he was approached by Mr. E. N. Ross, who informed him that Mr. Mossop had a number of shares to sell and wanted someone to advise him.  In consequence he saw Mr. Mossop with Mr. Ross, and Mr. Mossop explained that Mr. Ross would act as his accountant adviser, and himself should advise from the point t of view of the state of the market.  The arrangement, he said, would have to be submitted to H.M. Minister and if he agreed, Mr. Mossop inquired whether plaintiff would act.  Plaintiff added that Mr. Mossop explained that the various companies would be given an opportunity to purchase their own shares, while if they did not choose to buy then they would be sold in open market when plaintiff's services would be requisitioned.  Mr. Ross explained that many of the companies would not want to purchase their own shares and said that was where the plaintiff would come in.  He added that Mr. Mossop had suggested paying the advisory committee one-quarter of one percent but he, Mr. Ross, had pocketed out to Mr. Mossop that plaintiff could not accept less than one-half per cent by the rules of the Stock Exchange.  The arrangement was confirmed in writing by the letter of March 4, which, he said, accurately set out the arrangements Defendant arrived at during the conversation. This was confirmed by a letter from the plaintiff on March 6.
  About April 12 or 14 of the same year witness was called in, as a member of the advisory committee to name a price which the Custodian would be well advised to accept for some New Engineering Co.'s shares.  He and Mr. Ross agreed that owing to the condition of the money market, the Custodian would be well advised to accept Tls. 22, more especially if he did not sell then he would have to take up the rights to the new issue.  As the Custodian explained, he was not justified in taking up the new shares as he was not furnished with funds for the purpose and if he did nit take them up the old shares would suffer.  Taking into consideration the fact that money was tight and as capital sum of Tls. 87,000 which was required would be a very hard sum to come by, the committee advised him to accept Tls. 22 per share.
A QUESTION OF BROKERAGE
  The next thing that witness knew was when Mr. Mossop told him that he had received a letter from the New Engineering Co., saying that they were not prepared to purchase the shares.
  On April 24 or 25 witness went to Mr. Mossop's office, when Mr. Ross was not present, and Mr. Mossop said, "I have a letter here from Mr. Arnold, written in his private capacity.  He says that he would like to take these shares on the same terms as I was willing to sell to the directors."  Mr. Mossop asked whether anything had happened in the interim to change his opinion as to the value of the shares and he replied that there had not.
  Mr. Mossop then handed him the letter and said, "Well, go and see if Mr. Ross is of the same opinion, and, if he is, you had better settle." Witness understood him to mean that if Mr. Ross agreed with him he was to close the deal with Mr. Arnold.  Mr. Ross did agree and witness closed the deal and, according to his recollection, reported the same afternoon to Mr. Mossop.
  A few days later he saw Mr. Mossop at his office when he went to get the shares, and Mr. Mossop seemed rather out out over the matter.  He seemed to have considered that witness had made a large sum of money too easily.  "He told me," winters added, "that he had heard that I had charged Mr. Arnold brokerage."  I s aid, "Yes, I have.  He was willing to pay, and he seemed to think that I had no right to charge him brokerage."
  Mt. Harris: - Mr. Arnold, in fact, agreed to pay brokerage? - yes.
  That was the only point raised then? - he said, "I don't want you to get brokerage from the other side."
  Continuing, witness said no further sale of shares took place: he received a letter on July 8 setting out the procedure, which Mr. Mossop proposed to adopt for the future, and which was adopted.
FIRST SUSPICIONS
  Witness received about three lists of shares for sale from the Custodian of Enemy Property and on one of those lists he noticed that some Shanghai Hotel shares, about which he had had a previous conversation with Mr. Mossop, were not included in the list and asked why they were not included and Mr. Mossop replied that he did not put them on the list because he did not want the other brokers to know. He added that he might still sell them to the directors of the company.  Witness asked, "What brokers?" for he had always been under the impression that he was receiving the lusts as a member of the Advisory Committee.  Mr. Mossop replied, "Oh, the other brokers get them; some of them have had them since the beginning."
  "I had had suspicions for some time," witness continued, "that Mr. Mossop was not abiding buy his agreement."  Witness was very much upset and wrote a letter to Mr. Mossop hoping to bring the matter to a head, for the position he took up was that all shares sold otherwise than to the companies to which they referred should be sold through him and that he should have obtained his commission.  Referring to the statement that Messrs. Anderson & Co. had offered to buy shares without asking for brokerage, witness explained that he was the only partner in the firm and could not properly have claimed brokerage on shares which were in fact sold to himself.
  In answer to Mr. Wilkinson: It was absolutely impossible that Mr. Mossop would have thought witness would have done the work on a basis of one-quarter per vent because Mr. Ross had told him that he, witness, could not sell shares for a brokerage of less than one-half per cent.
ALL A MISUNDERSTANDING.
  After further cross-examination, the Court adjourned for tiffin and after a delayed resumption, during which negotiations proceeded between the parties, Mr. Wilkinson, addressing his Lordship, said that after consulting with his cleared friend, and with the consent of his client, he was able to state that the defendant had agreed, subject to the leave of the Court, that the plaintiff should withdraw his action and that no application be made by either side for costs.  It must be clear that there was a misunderstanding between the parties and that being so he was glad, on behalf of his client, to make that statement.
  Mr. Harris endorsed what the Crown Advocate had said and asked for leave to withdraw the action.  At the same time, his client asked him to state that he did not being the action for the sake of collecting the brokerage, but because he honestly believed that under the agreement he was entitled to brokerage on all these transactions.  As the Crown Advocate had said, there must have been some misunderstanding.
  His Lordship in allowing the action to be withdrawn, said the Court approved of that course.  He had been prepared, after that morning's session, to tender his office, if that could have been utilized to arrive at some settlement.  It was obvious to him that there must have been some misunderstanding between the parties and he fully accepted the statement of Mr. Anderson that he did not seek to obtain money to which he did not consider himself honestly entitled.  He was glad the parties had been able to settle a  dispute of this nature.

Note

[1] This case was also reported in North China Herald, 7 March 1919; 8 March 1919, judgment reserved; 22 March 1919, judgment. Also North China Herald, 5 April 1919, Judgment summons; adjourned to May 5; also 12 April, same report, adjourned 1 May; May 2, 1919, resumed hearing; execution order.  North China Herald, 5 December 1919, Judgment Summons "absolutely no reason" and 6 December, same report.  27 March 1920, editorial mention.  30 October 1920, bankruptcy proceedings; 4 December 1920, composition formally approved.

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