ON APPEAL FROM THE SUPREME COURT OF Principal and Agent--Sharebroker and client-Purchase of shares- Carry at 8
per cent"--Right of sharebroker to deal with shares-Natural meaning of Usage of Stock ExchangeReasonableness.
A client instructed a sharebroker to buy a certain number of shares in a company and "carry at 8 per cent."
Held, that the sharebroker was not entitled to deal on his own behalf with the shares bought in pursuance of such instructions, and was bound to account to his client for any profits made by such dealing.
Per Knox C.J. and Higgins J.: A custom under which sharebrokers retain such profits would be unreasonable, and would not bind the Court, even if proved; but no such custom was proved and under the pleadings any evidence of such a custom was inadmissible.
Decision of the Supreme Court of New South Wales (Harvey J.): Thornley v. Tilley, (1924) 41 N.S.W.W.N. 171. reversed.
A suit was brought in the Supreme Court, in its equitable jurisdiction, by John Brooks Thornley against William Tilley, Frank Edward Tilley and Herbert Vivian Hordern, trading as William Tilley &Co. as stock and sharebrokers, in which the plaintiff alleged in his statement of claim, shortly, that in or about March 1920 it was agreed between him and the defendants that the defendants would buy shares on behalf of the plaintiff when instructed by him
SO to do, that they would on behalf of the plaintiff pay the amounts required to purchase such shares, that they would on behalf of the plaintiff obtain and hold such shares, that the plaintiff should repay to the defendants such amounts together with the customary fees for brokerage and interest at the rate of 8 per cent per annum on the respective amounts SO paid by the defendants from the respective dates of payment by them to the date of repayment by the plaintiff, and that thereupon the defendants should hand to the plaintiff such shares; that the plaintiff instructed the defendants to purchase certain shares on the terms of such agreement, and that the defendants informed him that they had accordingly purchased 1,150 shares in the Kampong Kamunting Tin Dredging Ltd.; that the defendants furnished the plaintiff with a document which purported to show that the defendants had purchased, at different dates from 5th June 1920 to 18th June 1920, 1,150 shares in that company for a sum which, including £67 17s. 9d. being interest at 8 per cent "carry over charges on daily balances," amounted to £3,364 10s. 11d. that £258 15s. had been received by the defendants as interest on the shares, and that the balance owing by the plaintiff to the defendants was £3,105 15s. 11d.; that on 18th November 1920 the plaintiff paid to the defendants such sum of £3,105 15s. 11d. and asked for the scrip for the shares, but that the defendants…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Thornley v Tilley [1925] HCA 13
Case
[1925] HCA 13
Decision Date
CaseChat Overview and Summary
The High Court of Australia heard an appeal from the Supreme Court of New South Wales concerning a dispute between John Brooks Thornley (the appellant) and William Tilley & Co. (the respondents), who were stock and sharebrokers. Thornley alleged that the brokers had purchased shares on his behalf and subsequently dealt with these shares without his knowledge or authority, thereby making secret profits. Thornley sought an account of moneys due and an inquiry into and repayment of any secret profits made by the brokers.
The central legal issue before the High Court was the interpretation of the instruction given by Thornley to the brokers to "carry at 8 per cent" shares purchased on his behalf. Specifically, the court had to determine whether this instruction entitled the brokers to deal with the purchased shares for their own benefit, retaining any profits made from such dealings, or whether they were bound to hold the shares for Thornley and account for any profits derived from them.
The High Court, in allowing the appeal, reasoned that the instruction to "carry at 8 per cent" meant that the brokers were to purchase shares on behalf of Thornley, pay for them, and hold them for him, charging interest at 8 per cent per annum on the money advanced until repayment. The court found that the brokers were not entitled to deal with the scrip for their own benefit. While the brokers' defence initially relied on a custom of the Sydney Stock Exchange, this was abandoned in favour of an argument based on the "natural meaning" of the instruction. The court held that even if evidence of custom were admissible, it was insufficient to establish a usage that would bind the court, and furthermore, such a custom would be unreasonable. The court concluded that the brokers' dealings with the shares constituted a breach of their fiduciary duty to Thornley, and they were liable to account for the profits made.
The High Court ordered that the appeal be allowed, the decision of the Supreme Court be discharged, and a decree be made in favour of Thornley for an account and an inquiry into secret profits. The respondents were ordered to pay the costs in both the Supreme Court and the appeal.