CASE REVIEW

In The Matter of The Bahia and San Francisco Railway Company, Limited, And
Amelia Trittin, Richard Burton and Marry Anne Goodburn (1868) L.R. 3 Q.B.
584.

Facts :

Amelia Trittin was the registered holder of five shares in the Bahia and San
Francisco Railway Company, Limited. She left the shares certificate with her
stockbroker for him to keep and receive the dividends payable thereon. A transfer of
the shares were transferred to John Alfred Stocken and Samuel Goldner purporting to
be done by Trittin which was admitted to be a forgery. The transfer was left with the
secretary of the company for registration together with share certificates. The
secretary, as in the ordinary course of business, send a written notice by post to
Trittin’s last place of residence indicating the deed of transfer had been received by
him. After 10 days has passed without any answer or reply by Trittin, the secretary
registered the deed and removed Trittin’s name and placed the names of Stocken and
Goldner upon the register of shareholders. They were given share certificates of
aforesaid five shares.

In May 1866, Reverend Richard Burton bought four shares in the company, and
Mary Anne Goodburn bought one share, both through their brokers. About the same
time, Stocken and Goldner sold their five shares to a stockbroker, Arthur Bristowe
who then transferred the shared comprised in the forged transfer to Burton and
Goodburn.

After the forged transferred was discovered, the company was ordered to restore
Trittin’s name to the register of shareholders and pay dividends that have fallen due
since shares were transferred from her name.

Action was brought by the claimant, Mr Burton and Mrs Goodburn who claimed
to be entitled to equivalent shares in the company, or damages. The court awarded
them damages, holding that the company estopped by the share certificate from
denying the title of Stoken and Goldner.
Issues :

1. Whether, as against the company, Mr Burton and Mrs Goodburn are entitled to be
indemnified by the company, either by having the said shares handed to them,or
equivalent number.

2. Whether they are entitled to any and what damages to be paid to them by the
company under the aforementioned circumstances.

Principle of laws:

The company may be liable to pay damages to a person who suffers loss. Such
loss might arise where the company issue as share certificate to a person who does not
have a valid title to the shares and a subsequent purchaser purchases the shares on the
faith of the certificate. It is liability of the company for issue of incorrect share
certificate. Thus, the purchasers could claim damages from the company since, by
issuing the certificate to the vendors, it had represented to the purchasers that the
vendors were the true owners.

Decision of the court :

1. The court ruled out that Reverend Richard Burton and Mary Anne Goodburn are
entitled to be indemnified by the company, either by having shares handed to them, or
by such compensation in damages. A special case between Reverend Richard Burton
and Mary. Anne Goodburn, and the company can be commenced to determine the
amount of damages (if there is any) which the company are liable to pay them
respectively since the company has failed to stop the transaction from happening.

2. It was also held that when the company granted certificate to Stocken and Goldner,
it amounted to a statement by the company intending to be acted upon by purchasers
of shares in the market. This means that Stocken and Goldner were entitled to the
shares.
3. Arthur being a bona fide purchaser was held to be entitled to recover damages for
the loss of the shares from the company. It was ordered further that the name of
Amelia Trittin is to be restored to the register of the Bahia and San Francisco Railway
Company in respect of the five shares in the company and that the company do pay to
Amelia Trittin any dividends that have fallen due since the shares were transferred
from her name.

Reason for the Decision :

1. Reverend Richard Burton and Mary. Anne Goodburn are entitled to be indemnified
by the company

The rationale is to put Burton and Goodburn in the same position as if the title of
the persons from whom they had purchased the shares had been valid. This is based
on two grounds. First, the statute imposes on the company a duty to keep a correct
register of shareholders, otherwise, they are guilty of negligence, and are liable to any
one who is damnified by their breach of duty. The second ground for this judgement
is since the company admitted Stocken and Goldner into partnership and furnished
them with credentials after their sale of their shares in the partnership to the claimants,
the company are estopped from saying the claimants are not partners. This is because
by issuing the share certificates to Stocken and Goldner, the company affirmed that
they were partners, and the claimants having changed their position in consequence,
the company are estopped.

Lush J explained the reason behind the decision that the claimants, Burton and
Goodburn are entitled to recover from the company the value of the shares at the time
when they were deprived of them. When the company put the names of the fraudster
upon the register, and granted them a certificate, the company are estopped cannot
deny that those persons were the legal holders of the particular shares which have
been transferred to the claimants. This is because it is the company are the one who
shall keep and look after the register. The company have control over it, they have the
power to refuse to register a person’s name to the shares until it is satisfied that he is
legally entitled. The company in this case has failed to do so, the secretary took no
precautions to ascertain the genuineness of the transfer, beyond the mere formal
proceeding of writing to Miss Trittin's last place of residence.
2. Stocken and Goldner were entitled to the shares :

Coming into this decision, Blackburn J referred to the Companies Act to explain
the reason for it. He highlighted that the statute provides that the company may give
certificates specifying the shares held by the member. The object of this provision is
clear, that is the certificate should be prima facie evidence of the title of the person
named to the shares. Therefore, by granting the certificate, the company make a
statement that they have transferred the shares specified to the person to whom it is
given, and that he is the holder of the shares. So if these persons named in the
certificate have been deceived and the statement is not perfectly true, they may not be
guilty of negligence, but the company. In addition, it was the intention of the
legislature that these certificates should be documents on which buyers might safely
act, and it is quite clear that a statement of a fact was made by the company, on which
the company, at the very least, knew that persons wanting to purchase shares might
act.

Reviewers’ Analysis :

Based on the judgement & ratio decidendi given laid down the judges in this
present case, we understood clearly that a share certificate is indeed a prima facie
evidence of a person’s title over the shares. The certificate estopped the company
from denying that the person named in the certificate is entitled to the shares specified.
The rulings in this case has granted a maximum protection for bona fide purchaser
who relied upon that (forge) certificate in buying the share.

This case serves as a very important foundation/landmark for the status and
consequences of a forged certificate of transfer of shares as it was codified into the
Malaysian Companies Act 2016 under Section 103. This provision provided that
where the name of a person is wrongly entered in, or omitted from, the register of
members, the person aggrieved may apply to the Court for rectification of the register
of members, compensation by the company or an officer who has caused the error or
omission for any loss sustained, or both rectification and compensation.