[CHANCERY DIVISION]

In re FENWICK, STOBART & CO., LIMITED.

DEEP SEA FISHERY COMPANY'S (LIMITED) CLAIM.

[00344 of 1901.]

Companies - Winding-up - Bill of Exchange - Dishonour - Notice - Person acting as Secretary of two Companies - Knowledge in one Character - Presumption of Notice in other Character - Bills of Exchange Act, 1882 (45 & 46 Vict. c. 61), ss. 48, 49, 50, sub-s. 2 (b).

Where a man acts as secretary of two companies, it is not true as a general proposition that a fact which comes to his knowledge as secretary of one company is notice to him as secretary of the other company from the mere existence of the common relationship. In order to make it notice, it must be shewn that it was his duty to the first company to communicate his knowledge to the second company. (1)

THIS was a summons in the voluntary liquidation of Fenwick, Stobart & Co., Limited, for an order that the applicant (the voluntary liquidator of the Deep Sea Fishery Company, Limited) might be admitted as a creditor for 3525l., the amount of a bill of exchange drawn by the former company.

Three companies were concerned in the transaction which led to the claim - namely, Fenwick, Stobart & Co., the Deep Sea Fishery Company, and a company called the Fiskeri Aktieselskabet Gardar, generally known as the Gardar Company. These companies carried on fishery businesses and had offices in Iceland and in London. Their head offices were in the same room in London, and a Mr. Higgins acted as secretary for all three companies. In 1900 the Deep Sea Fishery Company held a large number of shares in the Gardar Company, and the Gardar Company owed them a large sum, and were also indebted to Fenwick, Stobart & Co. to the amount of 3525l. At a meeting of the directors of the Deep Sea Fishery Company held on August 13, 1900, Mr. Higgins, on behalf of Fenwick, Stobart & Co., threatened to enforce payment of the 3525l.; and an arrangement was come to whereby, amongst

(1) Compare In re Hampshire Land Co., [1896] 2 Ch. 743, not referred to in the argument of the principal case.

other things, the Deep Sea Fishery Company passed a resolution to purchase from Fenwick, Stobart & Co. the acceptance of the Gardar Company at seven days' sight for 3525l. Thereupon Fenwick, Stobart & Co. drew a bill of exchange to their order on the Gardar Company for 3525l., payable seven days after date; this bill was accepted by the Gardar Company, and indorsed by Fenwick, Stobart & Co. to the order of the Deep Sea Fishery Company. The Deep Sea Fishery Company gave to Fenwick, Stobart & Co. a cheque for 3525l., and took over the bill. The evidence proved that every one concerned knew the bill would be dishonoured. The bill was presented and dishonoured, and the Deep Sea Fishery Company took proceedings against the Gardar Company, issued execution, and received from one sheriff 1426l. and from another 1740l., leaving a balance of 359l. still due, and it was to the extent of this balance that they now claimed to prove in the winding-up of Fenwick, Stobart & Co.

Mr. Higgins, as secretary of the Deep Sea Fishery Company, of course knew that the bill was dishonoured, but he stated in his affidavit that he never gave notice to Fenwick, Stobart & Co. of the dishonour because it was never intended to make them liable upon it. The Deep Sea Fishery Company, however, contended that, as he was secretary of both companies, it must be taken that Fenwick, Stobart & Co. had had notice of it through him.

Levett, K.C., and E. Ford, for the applicants. The result of the transaction was to make Fenwick, Stobart & Co. liable on the bill. We bought the bill, and became holders of it for value, and can sue them both as drawers and indorsers. We did not buy the debt so as to step into the shoes of Fenwick, Stobart & Co., but the bill.

Secondly, Fenwick, Stobart & Co. had through their secretary notice that the bill was dishonoured. When a person who acts in two capacities and is secretary of two companies has in his hands as secretary of one company a dishonoured bill drawn by the second company, he cannot say that as secretary of the second company he has no notice of the dishonour.

Higgins was the agent of Fenwick, Stobart & Co. for the purpose of receiving notice. The secretary of a company is the proper person to give and receive notice. A man who holds two offices cannot be divided into two persons, and cannot be called upon to write a letter giving formal notice to himself.

[BUCKLEY J. It was not necessary that Higgins should write a formal letter to himself. The true test to be applied is whether it was his duty as secretary of the Deep Sea Fishery Company to tell himself as secretary of Fenwick, Stobart & Co. that the bill had been dishonoured. It could not be his duty to do so if Fenwick, Stobart & Co. were not to be liable on the bill.]

But, in fact, he had notice as secretary of Fenwick, Stobart & Co.

Further, notice of dishonour may be waived under s. 50, sub-s. 2 (b), of the Bills of Exchange Act, 1882. All parties knew that the bill would be dishonoured, so no notice of dishonour would be necessary, and the Court will assume that it was waived.

[BUCKLEY J. That applies where there ought to be notice, and none has been given.]

English Harrison, K.C., and D. C. Leck, for the voluntary liquidator of Fenwick, Stobart & Co. The real nature of the transaction was an agreement that the Deep Sea Fishery Company should pay this sum to save the Gardar Company from Fenwick, Stobart & Co., and should not have any further rights against Fenwick, Stobart & Co. The word "purchase" in the resolution was only used in contradistinction to "discount." The Deep Sea Fishery Company did not buy the bill in the ordinary sense; they bought the debt with the right to stand in the shoes of Fenwick, Stobart & Co. against the Gardar Company in respect of it.

Secondly, their knowledge that the bill was going to be dishonoured is not a waiver of the right to notice: Caunt v. Thompson. (1) "Notice of dishonour means notification of dishonour, i.e., formal notice. The fact that the drawer or indorser of a bill knows that it has been dishonoured does

(1) (1849) 7 C. B. 400, 409.

not dispense with the necessity for giving him notice of dishonour": Chalmers' Bills of Exchange, 5th ed. p. 154. Notice of dishonour must be given to the drawer; it is unnecessary to add that he will be held liable, but formal notice must be given, and that is exactly what Higgins did not do.

E. Ford, in reply.

BUCKLEY J. stated the facts, and continued:- The first question is: What was the real transaction between the parties? Was it a transaction under which the Deep Sea Fishery Company were to have the liability of Fenwick, Stobart & Co. as drawers and indorsers, which, of course, prim‰ facie they would have? I answer, No. The transaction was one under which, in substance, the debt was to be paid to Fenwick, Stobart & Co., and the bill, which was a bill for only seven days, was to put the Deep Sea Fishery Company in a position to sue the Gardar Company in a summary manner. It was never intended that they should have recourse against Fenwick, Stobart & Co. as drawers. [His Lordship referred to the correspondence, and proceeded:-]

The true nature of the transaction, I think, was that the Deep Sea Fishery Company were minded to put themselves in the position to get a judgment against the Gardar Company, excluding Fenwick, Stobart & Co. from getting that judgment, because it better suited them that they should hold the judgment than that Fenwick, Stobart & Co. should. In other words, I think the true transaction was a purchase of the debt, and not a purchase of the debt with a further liability on Fenwick, Stobart & Co. in the event of the debtor not paying it.

But there is another point, which involves considerations of some general importance, and it is this: Mr. Higgins was secretary of the Deep Sea Fishery Company, the holders of the bill, and he was also secretary of Fenwick, Stobart & Co., the drawers and indorsers of the bill. In the former character he knew that the bill was dishonoured. Was that fact notice of dishonour to himself as secretary of Fenwick, Stobart & Co.? In other words, is it true as a general proposition that

a fact which comes to the knowledge of a man as secretary of one company is notice to him as secretary of the other company from the mere existence of the common relationship? In my opinion it is not. What Mr. Higgins says in paragraph 8 of his affidavit is this: "Fenwick, Stobart & Co., Limited, never received notice of dishonour of the bill from any one. I never gave any notice of the dishonour of the bill to them, as I was fully aware that it had never been the intention of any one connected with the transaction that they should be liable, and that the bill was, as above stated, merely drawn by them at the request of and for the purposes of the Deep Sea Company." So that here the secretary of the Deep Sea Fishery Company knew the fact under circumstances such as that it was not his duty to communicate it to himself as secretary of Fenwick, Stobart & Co. I think that the true test is this: Where a man holds a double character, it is not necessary that he should write a letter from himself in one character to himself to inform himself in another character. What the Court has to see is whether the information he gets, as secretary of the one company, comes to him under such circumstances as that it is his duty to communicate it to the other company. Suppose, for instance, as secretary of the first company he learns something which it would be a breach of his duty to that company to communicate to the other company. I should say certainly that is not notice to the other company. It depends upon the circumstances relating to the particular case. Here he knew of the dishonour of the bill by the Gardar Company under circumstances under which it was not his duty to communicate it to Fenwick, Stobart & Co. Therefore, I think, there was no notice of dishonour to Fenwick, Stobart & Co. The result is that, upon that ground also, the drawers, if ever they were liable, would be discharged.

Solicitors: Stokes & Stokes; Lowless & Co.

H. C. R.