Durack v West Australian Trustee Executor and Agency Company Limited [1944] HCA 21

60, 61, 90, 95. Metrourye, . ae May 17, 18. Companies - Memorandum of association - Loan by company to finance purchase of its shares - Ulira vires, Sypwey, Aug. 9

A person who signs a promissory note on the back thereof with the intention of incurring the liabilities of an indorser is so liable notwithstanding that his Latham C.J.,

signature was made before delivery of the note to the payee and that the yftitit, Starke, Williams JJ.

payee's indorsement was subsequently made below his signature. So held by Rich, Starke and Williams JJ.

A signed his name on the back of a promissory note before it was delivered to the payee. After delivery the payee indorsed the note below A's signature, which was so close to the edge of the note that there was no room for an indorse- ment above it. The note was given pursuant to an agreement to which the maker of the note, the payee and A were parties. The agreement provided that, on receipt of the note indorsed by A, the payee would return promissory notes, given under an earlier agreement, which had been indorsed by A " without recourse." The note was not met at maturity by the maker. In an action on the note by the payee against A the trial judge found that A had signed the note with the intention of making himself liable as an indorser to the payee for the amount of the note. Judgment was given for the payee for that

Durack v Wesr AUSTRALIAN 'TRUSTEE Execuror & AGEncy Co. Lrp.

Held, by Rich, Starke and Williams JJ. (Latham C.J. and MeTie dissenting), that the judgment was correct. National Sales Corporation

memorandum of association, to a person to purchase its shares is not illeg Trevor v. Whitworth, (1887) 12 App. Cas. 409, distinguished.

Decision of the Supreme Court of Western Australia (Dwyer J.) The W Australian Trustee Executor & Agency Co. Ltd. v. Connor, Doherty & Dura Lid. (1943) 46 W.A.L.R. 30, affirmed.

Appxat from the Supreme Court of Western Australia. In an action brought in the Supreme Court of Western Austra by the West Australian Trustee Executor and Agency Co. Ltd. executor of the will of Hannah Alicia Connor, deceased, aga Connor Doherty and Durack Ltd. (a company incorporated in Western Australia), Michael Patrick Durack and Kenneth Jami Davidson (executors of the will of John Wallace Durack, de and Eva Kathleen Durack (executrix of the will of Patrick Be Durack, deceased), the plaintiff made a claim on an agreement alternatively on a promissory note. The claim on the promissor note was expressed in the statement of claim as being made by t plaintiff as holder of a promissory note for £11,800 dated 11th Aug 1932, which had been duly presented for payment and dishonou and still remained unpaid ; the claim was for the amount of the not against the defendant company as maker, and against the defendants on the basis that their testators were indorsers, note. In their statement of defence the defendants pleaded alia) that "if any such promissory note were made or indor: alleged in the statement of claim (whichis . . . denied) the said promissory note was indorsed for the accommodation of th defendant company as maker." q

At the trial of the action before Dwyer J., it appeared that t

space for an indorsement by the plaintiff above them. Dwyer held that the note was not enforceable against the defendant pany inasmuch as the giving of the note was part of a tran

which was beyond the powers of the company ; but he found that the H. ©. or A. 1944,

intention of J. W. and P. B. Durack in signing the note was to become liable as indorsers to the payee, and he gave judgment for the plaintiff against the defendants other than the company for the amount of the

note: The West Australian Trustee, Executor & Agency Co. Lid. v. ,

From this decision, the defendants against whom judgment had been given appealed to the High Court.

The argument of counsel and further relevant facts appear suffici- ently for the purposes of this report in the judgments hereunder.

Durack K.C. and A. M. Fraser, for the appellants. Fullagar K.C. and Unmack, for the respondent. Our. adv. vult.

Laruam ©.J. Appeal from a judgment of the Supreme Court of Western Australia (Dwyer J.) in an action in which the plaintiff is the West Australian Trustee Executor & Agency Co. Ltd. as the executor of Hannah Alicia Connor deceased, and the defendants are Connor Doherty & Durack Ltd., the executors of J. W. Durack deceased, and the executrix of P. B. Durack deceased. J. W. Durack, P. B. Durack, D. J. Doherty and F. Connor were shareholders in and directors of the defendant company. In the action, the plaintiff claimed against all the defendants for principal and interest alleged to be due under a deed dated 27th July 1933 made between the defendant company, the plaintiff company (as trustee of the will of the wife of Connor, who had predeceased his wife), J. W. Durack and the executor of P. B. Durack. Alternatively, the plaintiff claimed against the defendant company as maker and the other defendants as indorsers of a promissory note for £11,800. The action against the company failed, the learned trial judge holding that the agree-

"ment sued upon was, when read in conjunction with other agree- ments to which it referred, an agreement whereby the company undertook to lend money of the company to Doherty, J. W. Durack and P. B. Durack for the purpose of enabling them to buy shares in 'the company from Connor. It was held that the agreement was void under the principle of Trevor v. Whitworth (2). The promissory note sued on was given to secure the payment of the moneys agreed to be so provided by the company and accordingly the action against

(1) (1943) 46 W.A.L.R. 30, (2) (1887) 12 App. Cas. 409,

the company on the promissory note also failed. As the agreement was held to be void for the reasons stated, the action against th other defendants on the agreement also failed, but judgment given against the other defendants on the claim based on indorsement of the promissory note. A counterclaim was dism) and there is no appeal in respect of it.

The appellants naturally did not challenge in this Court the decisi in their favour that the agreement was void. The responde company also did not challenge that decision, counsel stating thi he accepted the proposition that the agreement was void, thoug rather than reaching that conclusion on the basis of Trevor Whitworth (1), he preferred to put it on the ground that the tr action represented by the agreement and the promissory note void because it involved the application of moneys of the cony for the private benefit of directors of the company in breach of th duty owed by those directors to the company.

It is therefore strictly unnecessary to consider whether any lia bility was imposed upon the defendants other than the company by reason of the agreements between the parties. It may, however, observed that those agreements were evidently drafted with object of excluding any personal liability of Doherty, J. W. Di and P. B. Durack in relation to the purchase money for the s The terms of the agreements are set out in the reasons for judgn of my brother Williams, and it is unnecessary to repeat their pro visions in detail.

The agreement of 21st April 1915, clause 2, expressly excluded any

shares. The promissory notes given under that agreement wer indorsed by J. W. and P. B. Durack " without recourse." In agreement of 5th February 1924 between Mrs. Connor (as personal

of promissory notes " without recourse " and notes were so indorsed by J. W. and P. B. Durack.

The agreement of 11th August 1930 did not purport to impose any liability in respect of the purchase money for the shares upon J. Vl Durack and P. B. Durack, nor did it even contain any agree by them that they were to indorse the promissory note for £11. Clause 3 of the agreement provided that upon delivery to the plainti company of a promissory note for £11,800 drawn by the company favour of the plaintiff and duly indorsed by J. W. Durack and

Durack the defendant company would deliver up twenty-four promis- 1. ©. oF A. sory notes to the company. This was a promise by the plaintiff to ety deliver up promissory notes upon receiving a promissory note for pyrscK £11,800 indorsed as specified - not a promise by J. W. Durack and 2 P. B. Durack to indorse the note. Pe, iiae The agreement of 27th July 1933, upon which the plaintiff sued, _Trusree provides that the covenants and conditions contained in the agree- payee ment of 11th August 1930 shall apply to the agreement of 1933, save Co. Lrv. and except as they are modified by the later agreement. The agree- ment of 1933 contains no promises by J. W. Durack or the executrix of P. B. Durack except in relation to the payment of a sum of £200. Accordingly there is nowhere in any of the transactions between the parties any agreement by J. W. Durack and P. B. Durack or their representatives to pay the purchase money for the shares, or to jndorse the promissory note upon which the defendants have been sued, or to become sureties for the payment by the defendant com- pany of the promissory note. The liability of the defendants other than the company exists, if at all, only by reason of the fact that J. W. Durack and P. B. Durack wrote their names on the back of the promissory note. Unless it is the law that these indorsements create a liability to the plaintiff, the plaintiff must fail in the claim upon the note. The question is purely a technical question arising under the law relating to promissory notes. The promissory note is in the following terms : - " Promissory Note. Due 24th April 1933. £11,800. 11th August 1932. Fixed date - On the 24th day of April 1933 We promise to pay The West Australian Trustee Executor & Agency Co. Ltd. or order the sum of eleven thousand eight hundred pounds sterling value received. Payable at Bank of } For Connor Doherty & Durack New South Wales, | Limited St. George's Terrace, J. W. Durack, Director. Perth Branch. | E. S. Barker, Secretary.

Indorsements. J. W. Durack. P. B. Durack. For The West Australian Trustee, Executor & Agency Co. Ltd. Edmund 8. Barker, Manager. E. Stokes, Accountant.

Without Recourse. Credit The West Australian Trustee Executor & Agency Co. Ltd. Trust Account."

1944, Ss? | Durack v. West AUSTRALIAN TRUSTEE EXECUTOR & AGENCY Co. Lrp.

of the note indorsed as intended. It is quite clear that the note indorsed before it was delivered by the company to the payee. Bills of Exchange Act 1909-1936, s. 90, provides that a pro note is inchoate and incomplete until delivery thereof to the pay bearer. Accordingly this promissory note was incomplete unti was delivered to the plaintiff company. It was therefore incomplet when it was indorsed.

The note was payable to the order of the payee. It could b negotiated by the indorsement of the payee, when the payee ber the holder, completed by delivery (Bills of Exchange Act 1909- s. 36 (1) (3) ). The indorsers were at no time the holders of the not They never had any rights in relation to the note which they coul transfer to the plaintiff, and the plaintiff does not claim, and coul not claim, as upon a title derived from them. The questi whether their indorsements, in the circumstances stated, enable the plaintiff to treat them as if they had negotiated the note to th plaintiff, though they did not in fact do so.

If the plaintiff had negotiated the note, the defendants doubtl would have been liable to a subsequent holder in due course, but action is not brought by a person to whom the note was negotiate the plaintiff. It is brought by the payee of a note drawn to pay order indorsed by two persons before the note was delivered to payee, and so indorsed by them before and above an indorsement the payee.

In the ordinary sense of the term, the indorsement of a pro! note is an act which is done by the holder of a negotiable ins Where a bill or note is payable to order the payee must ind instrument before he can negotiate it. If the instrument is indo in blank, it becomes payable to bearer and can be negotiate delivery. If it is specially indorsed, it becomes payable only to specified person or to the order of that person (Bills of Bxchang s. 39). Thus indorsement, speaking generally, is a means of bri about the negotiation of a bill, and, if a stranger to the bill, a pi who is not a holder of the bill, writes his name on the back of th he is not an indorser in the strict sense. He is of Exchange, 9th ed. (1927), p. 220) calls a quasi-indorser. q

In the present case, neither J. W. Durack, P. B. Durack not representatives were at any time holders of the promissory Their " indorsement " was not necessary for, and was not

any negotiation of the note. There never was any negotiation of the note. Accordingly it was not an indorsement in what I have called the strict sense of the term.

But the Bills of Exchange Act, s. 61, provides that where a person signs a bill otherwise than as drawer or acceptor, he thereby incurs the liabilities of an indorser to a holder in due course. The provisions of the Act relating to bills of exchange apply, with the necessary modifications, to promissory notes (s. 95 (1) ). In applying those provisions, the maker of a note is deemed to correspond with the acceptor of a bill (s. 95 (2) ). Liability is incurred under s. 61 only to a holder in due course. The payee of a note who is in possession of it (as in the case of the present plaintiff) is a holder of the note (Bills of Exchange Act, s.4). Buta payee is not as such a holder in due course. A person can be a holder in due course only where he takes a bill which already is complete (Bills of Exchange Act, s. 34) and, as already stated, no promissory note payable to payee or order can be complete until it is delivered to the payee (s. 90). Accord- ingly the payee of a promissory note as such cannot be a holder in due course. In R. E. Jones Lid. v. Waring & Gillow Ltd. (1), it was held that the original payee of a cheque is not a holder in due course within the meaning of the Bills of Exchange Act 1882 (Imp.). The reasoning in the case shows, and the case conclusively establishes, that the payee of a promissory note is not a holder in due course. Accordingly no liability to the payee can be imposed upon the defendants in the present case by reason of the provisions contained in s. 61 of the Act.

If no liability attaches by reason of s. 61, then liability can attach, if at all, only upon some other ground. The only ground that can be suggested is that the individual defendants really are ordinary indorsers of the note, so that it is unnecessary for the plaintiff to rely upon s. 61. The plaintiff would then rely directly upon s. 60 (2), which specifies the obligations of an indorser. But the contract of an indorser is a contract with subsequent parties. An indorser is not a surety for prior parties. As was said in Steele v. M'Kinlay (2), the indorsement is solely for the benefit of those who take subsequently.

Reliance is placed, however, upon Ferrier v. Stewart (3), where it was held that a person who indorsed a promissory note after it had been signed by the maker but before it was delivered to the payee became liable to the payee. But in Ferrier v. Stewart (3) the payee indorsed the note above the indorsement of the defendant, it being held that he was authorized to do this by the provisions of s. 25 (2)

(1) (1926) A.C. 670. (8) (1912) 15 CLR, 32. (2) (1880) 5 App. Cas. 754,

: payee, the plaintiff succeeded because, as payee in. possession of

"fil up aie omission of any Sani Seta in any way he thin fit - if this is done within a reasonable time (sub-s. (3) ). Trimble v. Thorne (1), where a payee succeeded in an action a person who indorsed a note before the note was delivered to

note, he had authority to indorse the note above the indorsem made by the defendant, and actually did so indorse it. In McDonald & Co. v. Nash & Co. (2), the plaintiffs (payees) succeed because they had taken advantage of the corresponding provision and had, after receiving an indorsed bill, written their o names above the names of the defendant indorsers.

The case is different, however, when a payee does not use t authority conferred by s. 25. In Jenkins & Sons v. Coomber ( where a bill was drawn to the plaintiffs' own order and the defe wrote his name on the back of it and it was later indorsed b

the defendant was not liable as an indorser under s. 55 of the Ei Act (s. 60 of the Commonwealth Act) which specifies the liabi of an indorser, because " the bill was never made complete, as he was concerned, by the necessary indorsement of the drawer, bill being drawn to the order of the drawer. The bill not complete when the defendant. indorsed it, he did not in

liabilities of an indorser which may arise by reason of s. 56 (s. 61 Commonwealth Act). Nor was he liable on a contract of suret because the provisions of the Statute of Frauds were not sat Accordingly the defendant, though he had indorsed the bill, wi liable on the bill. This decision was approved in M. 7. Shaw Ltd. v. Holland (4). In that case, as in Jenkins & Sons v. Coo

and the present case, the plaintiffs " unfortunately " indo

bill below the name of the person whom they were suing as in (5). It was conceded that if the plaintiffs' indorsement had b above the names of the defendants, no question would have a is

Appeal (Vaughan Williams, Farwell and Kennedy .JJ.) hel the action must fail. The judgments are based on the order in the indorsements appeared. In Ferrier v. Stewart (6), the Steele v. M'Kinlay (7), Singer v. Elliott (8) and Jenkins & Son Coomber (3) are distinguished upon the ground that in those cases

(5) (1913) 2 K.B., at p. 19. (2) (1924) A.C. (6) (1912) 15 C.L'R., at p. 36. (3) (1898) 2 Q.B. 168. (7) (1880) 5 App. Cas. 754. (4) (1913) 2 KB. 15. (8) (1888) 4 T.L.R. 524,

payee. So also in the present case the indorsement of the defendants precedes that of the payee - and the payee did not thereafter indorse the note above the indorsement by the defendants. Thus Ferrier v. Stewart (1) and Trimble v. Thorne (2) are distinguishable from the present case. See Byles on Bills, 20th ed., p. 173, as to these cases.

But it may further be pointed out that both of these cases were decided upon the basis of the view that the payee of a note was a holder in due course : See in Ferrier v. Stewart (3) per Griffith CJ., and in Trimble v. Thorne (4) per Madden C.J. and per Cussen J. (6). Accordingly, in so far as Ferrier v. Stewart (1) and Trimble v. Thorne (2) depend upon the view that the payee of a promissory note is a holder in due course, the decisions cannot be supported after the case of R. E. Jones Ltd. v. Waring & Gillow Ltd. (6).

M. T. Shaw & Co. Ltd. v. Holland (7) was a case, like the present, in which there had been no negotiation of the bill upon which the action was brought. In In re Gooch ; Ex parte Judd (8), an indorser was held liable upon a bill where his indorsement was above that of the person sought to be made liable. But, in that case, the bill had been negotiated, and this fact is relied upon as distinguishing the case from M. T. Shaw & Co. Ltd. v. Holland (7) - see In re Gooch (9), per Lord Sterndale M.R.; per Warrington L.J. (10), and per Scrutton LJ. (11).

In the cases of National Sales Corporation Ltd. v. Bernardi (12) and McCall Brothers Ltd. v. Hargreaves (13) disapproval was expressed of Jenkins & Sons v. Coomber (14) and the decisions of the House of Lords in Gerald McDonald & Co. v. Nash & Co. (15) and of the Court of Appeal in M. T. Shaw & Oo. Ltd. v. Holland (7) were the subject of comment. In the National Sales Case (16), it was held that the fact that the drawer of a bill drawn to drawer's order placed his signature upon the bill below instead of above the signature of a third party was a " mere inadvertence " which should not be allowed to affect the rights of the parties. The learned judge quotes (17) what Lord Sumner said in McDonald's Case (18) - that the bill in such a case (i.e., with the indorsements in the wrong order) " is incomplete till it is filled up . . . andwhen . . . filled up, though not before" (my italics) " it becomes retrospectively enforceable, as if it

(1) (1912) 15 CLR. 32. (10) (1921) 2 K.B., at pp. 602, 603. (2) (1914) V.L.R. 41. (11) (1921) 2 KB. at p. 606. (8) (1912) 15 C.L.R. 32, at p. 38. (12) (1931) 2 K-B. 188, (4) (1914) V.LR. 41, at p. 51. (13) (1932) 2 K-B. 423, ~ (5) (1914) V.LR., at p. 52. (14) (1898) 2 Q.B. (6) (1926) A.C. 670. (15) (1924) A.C, 625. (7) (1913) 2K.B. 15. (16) (1931) 2 K.B. 188. (8) (1921) 2 K-B. 593. (17) (1931) 2 K-B., at p. 192. (9) (1921) 2 K-B., at p. 601. (18) (1924) A.C. 625, at p. 648.

had been complete throughout." The question in McDonald's (1) was " whether the appellants, being in possession of these bi February 26, 1921, were, by the provisions of s. 20 of the Bil Exchange Act 1882," (s. 25 of the Commonwealth Act) " empow to make them complete and enforceable" (my italics) " against Nas Co. by indorsing them at that date, in the manner in which should have indorsed them - namely, in priority to the indorsemen of them by the respondents - thus making the instruments e to do what the parties to them desired and intended them to do performance of the agreement into which those parties had ente The whole point of the decision in McDonald's Case (2) is that enabled the holders of the bill to do that which was necessary { impose any liability upon the third parties by reason of their " indorse ment "' - namely, to place their signature above that of the di dants, and that they actually did so place their signature. In th National Sales Case (3), this fact was wanting - the fact which House of Lords most explicitly held to be the essential point whit enabled the plaintiff in McDonald's Case (2) to succeed. : In the National Sales Case (4), it is said that in Jenkins & Sons Coomber (5) and in M. T. Shaw & Co. Ltd. vy. Holland (6) "th judgments seem to turn mainly, if not entirely, on the questio whether s. 20 of the Bills of Exchange Act, 1882, can apply to instrument in which the only or principal omission was the abs of the drawer's indorsement." But the learned judge neverth goes on to say that in Jenkins & Sons v. Coomber (5) "s. 20 was no actually mentioned either in the arguments or the judgments" It is accordingly only with some difficulty that s. 20 can be re; as the main, or possibly the only, ground of the decision. It is stated that "the fact that the drawer's indorsement came bi that of the indorser" was not " actually mentioned " in th ments or in the judgments in that case (4). Reference to the of Jenkins & Sons v. Coomber (5) will show that counsel for appellant argued that "until this bill had been indorsed by th plaintiffs no property in it passed, as it was drawn to their o Counsel for the appellant contended that " the fact that the plaint here indorsed the bill after and not before the defendant ought not be allowed to defeat the admitted intention of the parties." Wills (with whom Kennedy J. concurred) bases his judgment on the fa that " when the defendant indorsed it the bill had not been indor: by the plaintiffs, to whose order it was payable " (7) and he re

(1) (1924) A.C., at p. 642. (5) (1898) 2 Q.B. 168. (2) (1924) A.C.'625, (6) (1913) 2 KB, 15, (3) (1931) 2 KB, 188, (7) (1898) 2 Q.B., at p. 171.

his reference to this fact when he says: " Here, as I have already said, the bill was not a complete negotiable instrument until it had received the indorsement of the drawers" (1). In the Court of Appeal in Glenie v. Smith (2), Cozens-Hardy M.R. said: " With reference to Jenkins & Sons vy. Coomber (3), that was a case in which s. 20 was not cited or referred to either by counsel or the judge, and for a very good reason, namely, that s. 20 could have no application, because it was a case altogether outside that section " - a statement exactly the opposite of what was said about that case in the National Sales Case (4). Accordingly I feel justified in respectfully dissenting from the statement in that case that Jenkins & Sons v. Coomber (3) was decided " mainly, if not entirely " on s. 20 of the Act.

M. T. Shaw & Co. Ltd. vy. Holland (5), the case in the Court of Appeal, is admitted in the report of the National Sales Case (6) to have been treated by that court as a case " in which the third party's indorsement could only be binding if made after an open indorsement by the drawers." The latter indorsement was not in fact made (even if s. 20 would have authorized it) and for this reason the third party was held not to be liable by reason of his indorsement. This case therefore cannot support the decision in the National Sales Case (4).

Glenie v. Smith (7) was a case the decision in which I have difficulty in understanding. Two bills were sued upon. In one case (a bill for £91 9s.) the indorsement of the drawer was written above that of the defendant and in the other case (a bill for £124 11s.) it was written below it. The learned judge said as to this: "I think the bill for £124 11s. must be read with the other as though indorsed to the defendant by the drawer and re-indorsed by the defendant" (8). I do not understand how one bill can be " read with " another so as to alter the liability upon either bill. In the Court of Appeal, the case was decided upon the basis that the plaintiff was a holder in due course (9). In the present case, the plaintiff is not a holder in due course.

In McCall Brothers Ltd. v. Hargreaves (10), the indorsement of the plaintiff was below that of the defendants, and the plaintiff succeeded. The plaintiff succeeded because the learned judge held that Jenkins & Sons v. Coomber (3) was " clearly overruled " (in relation to the importance of the order of the indorsements) by McDonald's Case (11)

(1) (1898) 2 Q.B., at p. 172. (7) (1908) 1 K.B. 263,

(2) (1908) 1 K-B. 263, at p. 267, (8) (1907) 2 K-B. 507, at p. 512. (3) (1898) 2 Q.B. 168. (9) (1908) 1 K-B., at pp. 266, 269, (4) (1931) 2 KB. 188. (10) (1932) 2 KB. 423,

1944.Durack . West AUSTRALIAN 'TRUSTEE EXecuror & AGENcY Co. Lap.

ne Durack v. West AUSTRALIAN TRUSTER Exrcvror

and the National Sales Case (1). I am unable to agree. Jei & Sons vy. Coomber (2) was referred to by Lord Dunedin McDonald's Case (3) as representing one recognized category cases. The decision in the latter case was based upon the fact an indorsement had been made (as it was held duly) abo indorsement of the third party who was defendant. McDonald's Case (4) assumes as correct the principle of the decisi in Jenkins & Sons v. Coomber (2). The National Sales Case (1 decision of a single judge, could hardly " overrule " the decision Divisional Court in Jenkins & Sons v. Coomber (2). I am therefore of opinion that neither the National Sales Case nor McCall's Case (5) nor the other cases mentioned in those ¢ should be regarded as diminishing the authority of Jenkins & } vy. Coomber (2) or as qualifying (if that were possible) in any) the decisions of the House of Lords in R. E. Jones Ltd. v. Wa & Gillow Ltd. (6) or McDonald & Co. v. Nash & Co. (7). In both Ferrier v. Stewart (8) and Trimble v. Thorne (9), decisions were supported by reference to estoppel. In the pre case, there is no recital in any of the agreements between the which is not consistent with the clear terms of the agreements ¥ exclude personal liability of J. W. Durack and P. B. Durack the agreements. Minutes of meetings of the directors of the dant company (including the Messrs. Durack), not shown to h been communicated to the plaintiff or to have induced the pl to change its position, would not have supported any allega' estoppel. But it is unnecessary to consider what defences have been available to those defendants if the plaintiff had upon estoppel because no estoppel was pleaded, and the defendi were not called upon to meet any case based upon estoppel. The result, therefore, is that - (1) The agreements betwi parties do not create any personal liability of the testators of individual defendants or of those defendants ; they do not any promises by those testators or by the defendants to the by way of guarantee or otherwise. Thus the plaintiff succeed in the action upon the agreements. (2) The parties upon the basis that they were content to rely upon whatever effect in law of J. W. Durack and P. B. Durack indorsing the sory note. The plaintiff must succeed or fail merely upon ground that those persons indorsed the note. In my opinion,

(1) (1931) 2 K.B. 188, (6) (1926) A.C. 670. (2) (1898) 2 Q.B. 168. (7) (1924) A.C. 625, (3) (1924) A.C., at p. 635, (8) (1912) ReBat

(4) (1924) A.C.'625. (9) (1914) V.L.R. 41. (5) (1932) 2 K.B, 423,

reasons stated, the plaintiff should fail in this claim and the appeal should therefore be allowed.

Ricn J. The nature of the action which has resulted in this appeal is stated in the reasons for judgment of the Chief Justice, and my brother Williams in his judgment has set out the provisions of the agreements which with certain promissory notes are the foundation of the liability alleged by the plaintiff now the respondent - The West Australian Trustee Executor & Agency Co. Ltd. The effect of the order unappealed from reduces the matter for our determination to the question whether the respondent company, the plaintiff in the action, was entitled to recover against the appellants, the defendants in the action, the amount claimed in these proceedings.

Whether or not the appellants were so liable depends upon certain documentary evidence admitted at the trial. It appears that by an indenture made on 9th August 1916 the widow of F. Connor acquired by assignment certain rights in favour of her husband under a previous agreement made 21st April 1915 between F. Connor, D. J. Doherty, M. P. Durack, J. W. Durack, P. B. Durack and the defendant company - Connor Durack & Doherty Ltd. Subsequently, by an agreement made 11th August 1930 between the defendant company Connor Durack & Doherty Ltd., the respondent company - the executor of Mrs. Connor who had died in the meantime - and Michael Patrick Durack and John Wallace Durack wherein, after various recitals, it was agreed that the respondent company should pay on account of the indebtedness relating to the purchase of F. Connor's shares in the defendant company the sum of £200 to the respondent company, that the due date of the balance of £11,800 should be extended to 24th April 1933, and that the respondent company should deliver up twenty-four promissory notes to the defendant company, Connor Durack & Doherty Ltd., upon payment to it of this sum of £200 and upon delivery to it of a promissory note for £11,800 drawn by the defendant company Connor Durack & Doherty Ltd. in favour of the respondent company and as appears from the promissory note itself duly indorsed by John Wallace Durack and Patrick Bernard Durack. The result of the docu- mentary evidence is that John Wallace Durack and Patrick Bernard Durack were required by the agreement dated 11th August 1930 to indorse a promissory note for £11,800 drawn by the defendant company Connor Durack & Doherty Ltd. in favour of the respondent company. This was accordingly done. As the defendant company was unable to pay this note at maturity, a further indenture dated 27th July 1933 was made between the defendant company, the

Durack v West AUSTRALIAN TRUSTEE Executor & AcExcy Co. Lrp.

plaintiff company and J. W. Durack and E. K. Durack executri the will of P. B. Durack, then deceased, the effect of which wa: extend the due date of the promissory note to 24th April with the proviso that all the covenants and conditions conta the agreement of 11th August 1930, except such of them thereby modified or altered, should apply to this indenture as were therein specifically set forth. It thus appears that the pm of these agreements was to enable the Duracks to purchase (i shares in the defendant company and to effect this purpose defendant company agreed to finance the purchase and bh

responsible to Connor for the payment of the purchase money interest. At all relevant dates the Companies Acts in force in We Australia were similar to those in England upon which Trevoy

company of its assets for the purchase of its own shares is a redi of capital not authorized by the legislature (British & A Trustee & Finance Corporation v. Cowper (2) ). But, in my opin

for its shares was prohibited: Cf. In re V.G.M. Holdings Lin (3), referred to by my brother Williams. The appeal from learned trial judge's decision is restricted in its nature. And argument submitted to us was that the transactions evidenced the several indentures and the promissory note in question were ma or given for an illegal consideration or for no consideration. argument was based on the ruling that the contract to purch company's shares was ultra vires and void and therefore thi consequential or collateral agreements and the promissory note mi pursuant thereto were also invalid. Assuming that the o contract was ultra vires, it must be remembered that the liabi the defendants under the agreement of 11th August 1930 a promissory note made pursuant to that agreement were absolu form. The agreement of 27th July 1933 to which the defend: were parties repeats and reaffirms this liability and clearly ev an intention on their part of becoming liable to the resp trustee company. Further facts of importance are the letter fi plaintiff company to the defendant company, 11th August 1

(1) (1887) 12 App. Cas. 409. (3) (1942) Ch, 235. (2) (1894) A.C. 399,

"wherein the promissory note is acknowledged as having been duly H:- C. ov A. indorsed by J. W. Durack and P. B. Durack in their personal ba) capacities, and the note to the minutes of the defendant company's TyURAtt meeting, 27th July 1933, to the same effect. And the question v "being one of intention the evidence to which I have referred supports 4, ues ne

• the conclusion that the defendants held themselves responsible. 'TRUSTEE The position of the indorsement does not nullify the intention of ExPeuror

"the parties (Vational Sales Corporation Ltd. v. Bernardi (1); McCall. 'ca Bros. Ltd. v. Hargreaves (2), cases to which my brother Williams has Rich J. referred). Thecollateral transactions to which I have referred have been held to be enforceable (Chambers v. Manchester & Milford | Railway Co. (3); Yorkshire Railway Wagon Co. v. Maclure (4) ;

Garrard v. James (5) ). And I think it may be said that the principle _ underlying such cases may perhaps be that, where a contract is made collateral to a contract which is ultra vires a company, it is enforceable

if absolute in form and is not tainted with illegality (Matthey v.

Curling (6) ). In these circumstances, I am of opinion that the appeal should be

Starke J. Appeal from a judgment of the Supreme Court of Western Australia for the respondent here for the sum of £17,953

. (ineluding interest) and also costs of action against the appellants _ here, the executors of John Wallace Durack deceased and executrix of Patrick Bernard Durack deceased, de bonis testatoris and, as to costs, et si non de bonis propriis. The statement of claim alleged two

_ causes of action, one upon an agreement and the other upon a promis- sory note, and there was also a counterclaim. But this appeal con- _ cerns only the claim upon the promissory note, which is in the fol-

Due 24th April 1933. £11,800. 1th August 1932. Fixed date - On the 24th day of April 1933 We promise to pay The West Australian Trustee Executor & Agency Co. Ltd. or order the _ sum of eleven thousand eight hundred pounds sterling value received. Payable at Bank of New) For Connor Doherty & Durack South Wales, St. George's Limited Terrace, Perth Branch. | J. W. Durack, Director.

(1) (1931) 2 K.B, 188. (4) (1881) 19 Ch. D, 478, at p. 491. (2) (1932) 2 KB. 423, (5) (1925) Ch. 616, at pp. 623, 624, @) ra 5B. & S. 588 [122 E.R. (6) (1922) 2 A.C. 180, at p, 234,

Durack Wesr AUSTRALIAN TRUSTEE Executor & AGENCY Co. Lap.

Indorsements on back of Note J. W. Durack. P. B. Durack. (These indorsements were close to the top of the note, lea insufficient space for an indorsement by the payee.) On 11th August 1932 this note was delivered to the payee, Th West Australian Trustee Executor and Agency Co. Ltd., whi subsequently indorsed it below the names of J. W. Durack and P. J Durack, leaving a space (about one inch) between their names r its indorsement, which was as follows : - For The West Australian Trustee, Executor & Agency Co, Edmund 8. Barker, Manager. E. Stokes, Accountant. Without Recourse. Credit The West Australian Trustee Executor & Agency Co. Ltd. Trust Account. Connor Doherty & Durack Ltd., the maker of the note, was ak sued, but judgment was given in its favour because, as the lean trial judge said, it had " not lawful power either to use its asset

its money to others for such purposes": See Trevor v. Whitwo The plaintiff in the action, the respondent here, has not app from this decision. And the counterclaim was dismissed and defendants - the appellants here - have not appealed from decision. But, following Yorkshire Railway Wagon Co. v. Ma (2) and Garrard v. James (3), the learned Judge held that indorsers of the note might be liable notwithstanding the fact Connor Doherty & Durack Ltd., the maker of the note, had ext its powers: See also McDonald v. Dennys Lascelles Ltd. (4). however, contended that J. W. and P. B. Durack were not indors of the note and had not incurred the liability of indorsers to a hol in due course : See Bills of Exchange Act, ss. 60,61. R. E. Jones lit v. Waring & Gillow Ltd. (5) decides that the original payee of a b note is not a holder in due course. So it must be established J. W. and P. B. Durack were indorsers or were in the posi indorsers of the note. The argument is that an indorser is a to whom a bill or note has been negotiated or transferred and w thus rights on the bill or note which he can and does tran subsequent delivery "with the addition of his own cr

(1) (1887) 12 App. Cas. 409. (4) (1933) 48 CLLR. 457, at pp. 4 (2) (1881) 19 Ch. D, 478. 472. (3) (1925) Ch, 616, (5) (1926) A.C. 670,

indorser": See Bills of Exchange Act, s. 36 (1); In re Gooch; Ex p. Judd (1); Gerald McDonald & Co. v. Nash & Co. (2). So it is concluded that "the persons whose names appeared upon the back 'of the document were not indorsers in the ordinary sense of the law merchant " who could be sued as such (Steele v. M'Kinlay (3); Jen- kins & Sons v. Coomber (4); M. T. Shaw & Co. Ltd. v. Holland (5) ). The note was delivered to the payee and was not inchoate and incomplete : the maker could have been sued upon it by the payee : See Bills of Exchange Act, s. 90; Gerald McDonald & Co. v. Nash & Co. (6). But it is true that the note was not a completely negotiable instrument until it received the indorsement of the payee. The authorities, however, make it clear that, if the persons whose names appear on the back of the note intended to make themselves liable to the payee, then the-payee had a prima-facie authority to fill up the omission of any material particular in any way it thought fit (Bills of Exchange Act, s. 25 (2); Gerald McDonald & Co. v. Nash & Co. (7) ; Glenie v. Smith (8); In re Gooch (9); Ferrier v. Stewart (10) ; Brikssen vy. Bunting (11) ). A note is wanting in a material particular if the payee has not indorsed the same above the signatures of the persons whose names appear on the back of the bill. Therefore the payee, if those persons intended to make themselves liable to him, might write his name above theirs and enforce the note against them as indorsers: See cases supra. The trial Judge has found in this ease that J. W. Durack and P. B. Durack intended to become liable to the payee as indorsers of the promissory note sued upon and that finding is supported by the evidence, but I shall refer to the evidence more at large in another aspect of this case. And Wilkinson & Co. v. Unwin (12) makes it clear that in such cases the persons whose names then appear below the name of the payee could not sue the payee as a prior indorser. Further still, the Victorian case Trimble v. Thorne (13) holds that the payee's indorsement may be made after action brought, a proposition that was advanced in argument in M. 7. Shaw & Co. Ltd. v. Holland (14). But the Act, s. 25 (3), requires that the instrument must be filled up within a reasonable time and strictly in accordance with the authority given. Steele v. M'Kinlay (3), which is relied upon for the appellants, rests upon its own special facts. The person sought to be made liable as an indorser had written his name across the back of a bill payable to drawer or order

(1) (1921) 2 K.B. 593, at p. 606, (8) (1908) 1 K.B. 263. (2) (1924) A.C. 625, at p. 649, (9) (1921) 2 K.B, 593. _ (3) (1880) 5 App. Cas. 754. (10) (1912) 15 C.L.R. 32. (4) (1898) 2 Q.B. 168. (11) (1901) 20 N.Z.L.R. 388, (5) (1913) 2 K.B. 15, at p. 20. (12) (1881) 7 Q.B.D. 636. (6) (1924) A.C., at pp. 645, 646. (13) (1914) V.LLR. 41. (7) (1924) A.C. 625. (14) (1913) 2 K.B. 15, at p. 23, Vou. Lxxm. 4

H.C. or A. 1944, Syed Durack v West AUSTRALIAN TRUSTEE Execuror

before the bill was indorsed by the drawer, who subsequently his name under the signature of the person sought to be made as indorser. "But there was no evidence to show why, in character, for what purpose or object " the person sought to be m liable had written his name across the back of the bill. A like st of facts must be assumed so far as Jenkins & Sons v. Coomber (1) a M. T. Shaw & Co. Itd. v. Holland (2) rest upon the authori

Steele v. M'Kinlay (3). But, if the evidence in those cases was: the party sought to be made liable as indorser intended to himself liable as an indorser to the party suing, then those cases an in line with the facts of the present case, for the signatures of the persons who had written their names on the back of the bills app above the signature of the drawer to order of those bills. Jenhi Sons v. Coomber (4) and M. T. Shaw & Co. Ltd. v. Holland (: though the latter case was the decision of a Court of Appeal, if no overruled, are, however, no longer treated as authority in Eng cases in which a party whose name appears on the back of a bi note above that of the payee intended to make himself liable indorser to the payee or a person in possession of the note. would be strange, I think, that the mere position of the si tures of the parties altered their rights, and the reaso several English judges shows that the contention is not sound. Glenie v. Smith (5), one of the bills sued upon had the nan the drawer as indorser placed below that of the defendant had written his name on the back of the bill, or, in other word had indorsed it. Lawrence J. said : - ' I think the bill for £124 1 must be read with the other as though indorsed to the defendant! the drawer and reindorsed by the defendant to the deceased " | drawer) " for value received " (6). This means that the signat were read in the order that gave effect to the intention of the parti and made the bill effective. The Court of Appeal affirmed tl decision, which, as Serutton L.J. pointed out in In re Gooch ;

Judd (7), seems inconsistent with the reasoning of M. 7'. Shaw Ltd. v. Holland (2). In In re Gooch (7), a bill purporting to be d to the order of the drawer upon and accepted by Cardbox Co. and indorsed by one Gooch was without the signature of the d Judd subsequently signed the bill as drawer and indorsed i wrote his name on the back of the bill below that of Scrutton L.J. said : - "' Further, by s. 55, sub-s. 2 (c), of the 4

(1) (1898) 2 Q.B. 168, (5) (1907) 2 K.B. 507 and, in (2) (1913) 2 K.B. 15, Court of Appeal, (1908) 1 (3) (1880) 5 App. Cas. 754, 263. 7

(4) (1898) 2 QB. 168. (6) (1907) 2 K.B,, at p. 512. (7) (1921) 2 K.B. 593.

(Bills of Exchange Act 1909-1936, s. 60 (2), Australia) " the indorser of a bill by indorsing it is precluded from denying to a subsequent indorsee that the bill was at the time of his indorsement a valid and subsisting bill, and that he had then a good title thereto. Now the debtor" (Gooch) " intended to be an indorser, giving authority to his drawer to fill up the bill as a regular bill. I think the statute estops him from denying to his subsequent indorsee, Judd, who holds because of the debtor's indorsement in blank (not, it is to be noted, to 'a holder in due course' as in s. 56)" (s. 61, Australian Act), "that the bill when he indorsed it was a valid and subsisting bill " (1). Again that reasoning seems inconsistent with that in M. T. 'Shaw & Co. Ltd. v. Holland (2). Further, in National Sales Corpora- tion Ltd. v. Bernardi (3), bills of exchange drawn to the order of the drawer and accepted were indorsed by a third party, Bernardi, with the intention of making himself liable as an indorser. Subsequently the drawer indorsed the bills, but his indorsement was put below and not above that of the third party (Bernardi) who had indorsed the bills. Wright J., as he then was, therefore faced the same position as arises in this case and said : - "' In my judgment effect can here be given to the necessary inference that the corporation indorsed the bills to complete them by adding the necessary indorsement between themselves as drawers, and Bernardi as indorser, and on that basis the position of the signatures is immaterial, and the result is just as if the indorsement by Bernardi had been added to the indorsement of the corporation, after in time, and below in space" (4). This is in line with the judgment of Lawrence J. in Glenie v. Smith (5) and also _ seems inconsistent with the reasoning of M. T. Shaw & Oo. Ltd. v. Holland (2). In McCall Bros. Ltd. v. Hargreaves (6), Goddard J., as he then was, agreed with and acted upon the decision of Wright J. _ just mentioned. He said: - "The bills must be regarded as _ indorsed by the plaintiffs to the defendant and re-indorsed by him to them: See Glenie v. Smith (5) " (7). In this state of the authorities, this Court is bound, I think, to exercise its own judgment. And, to adapt the words of Lord Sumner _ inGerald McDonald & Co. v. Nash & Co. (8), " the assumption of an indispensable ritual of transmissibility in time as well as in form " in the negotiation and transfer of bills and notes without reference to _ any intention of the parties is not a principle of the law merchant. _ The intention of J. W. and P. B. Durack in the present case was,

• the trial Judge found, to become liable as indorsers, and legal effect

_ (1) (1921) 2 K.B., at p. 607. (5) (1907) 2 K.B. 507. 2) (1913) 2 KB. 15. (6) (1932) 2 KB, 423. (3) (1931) 2 KB. 188. (7) (1932) 2 K.B., at p. 430.

(4) (1931) 2 K.B., at p. 193. (8) (1924) A.C., at p. 649.

Durack b. Wesr Ausrrattan TRUSTEE Executor & AgExey Co. Lap.

v Wesr AUSTRALIAN TRUSTEE Executor & Agency Co. Lrp.

may and should be given to that intention by reading the signatu in the order that gives effect to that intention or by giving effect the statutory estoppel that arises upon s. 61 of the Bills of Hachang Act or by reliance upon both propositions. The first propositio depends upon the application of a principle of law that is not unknown namely, that effect should if possible be given to the intention of the parties appearing from their instrument and the relevant rounding circumstances : the second upon the construction of s. 6 of the Act. ;

Another contention relied upon for the appellants is that the pron issory note was given for an illegal consideration. Any attempt, was said, by a company to finance or any financing by a company of any person to purchase its shares from the company or from another shareholder is illegal and void. The English Companies 4 1929 (19 & 20 Geo. V. c. 23), s. 45, was referred to, but this provi is not in force in Western Australia. But it was said that the trans actions at which the English section aims would, before it was passed, have been ultra vires and therefore the consideration, if any, in case, is illegal (Trevor v. Whitworth (1); Buckley on The Compani Acts, 11th ed. (1930), p. 102). The argument is, I think, untenable for reasons given by Cairns L.C. in Ashbury Railway Carriage & Iron Oo. Ltd. v. Riche (2): "I have used the expressions extra vires an intra vires. I prefer either expression very much to one whie occasionally has been used in the judgments in the present case, has also been used in other cases, the expression ' illegality.' In: case such as that which your Lordships have now to deal with, iti not a question whether the contract sued upon involves that whie is malum prohibitum or malum in se, or is a contract contrary to p policy, and illegal in itself. I assume the contract in itself to b

assuming that the agreements the basis of the note and the making 0 the note sued upon in this case were ultra vires Connor Doherty 4 Durack Ltd., the maker of the note, because it was lending it moneys or credit to others for the purchase of its shares or aiding a breach of the fiduciary duties of its directors, still the questio is one affecting the authority and power of the company and not th legality of the consideration.

Lastly, it was contended that there was no consideration for note or the indorsements of W. J. and P. B. Durack.

(1) (1887) 12 App. Cas. 409. (2) (1875) LR. 7 HLL, 653, at p. 6

Prima facie every party whose signature appears on a bill or note is deemed to have become a party thereto for value (Bills of Exchange Act, s. 35). But this presumption is displaced, it is said, by the proved facts. The history of the promissory note goes back some twenty-eight years. The maker of the note, Connor Doherty & Durack Ltd., is an incorporated company in which Connor, Doherty and the Durack brothers were in 1915 the shareholders. '' Trouble arose," said the trial Judge, "' between Connor and his"? fellow shareholders "by reason of his large drawings of the company's moneys at Manila, and his establishing a partnership there which was trading with the company that he was representing. The other directors . . . became alarmed and decided that he must be got tid of." Negotiations were carried on to that end, and an agreement was made in 1915 which provided for the acquisition of Connor's shares (20,000) by Doherty and three of the Durack brothers for the sum of £19,000. The consideration was 38 promissory notes of £500 payable 10 years after date and interest at 6 per cent. The promis- sory notes were to be and were made by the company in favour of the purchasers and by them restrictively indorsed to pay the vendor " Francis Connor only " and without recourse against the purchasers asindorsers. The purchasers, the agreement itself provided, were in no event to be personally liable to pay the said £19,000 and interest or any part thereof. Connor signed transfers of his shares to the pur- chasers and the scrip certificates and the transfers were lodged with a bank to be delivered up when and as purchase money was paid. The purchasers indemnified Connor against all liability under any guarantee given by him to the Bank on account of the company. The company released Connor from various claims. And Connor covenanted with the company and separately with each of the pur- chasers that neither he nor any other person firm or corporation in the Philippine Islands with whom he had contracted obligations on behalf of the company would make any claim or demand against the company or the purchasers or any of them for debt compensation or

damage other than in respect of certain matters specially excepted. Connor also covenanted with the company and separately with the purchasers and every one of them that his wife would make no claim or demand of any kind against the company or the purchasers or any of them. And Connor also guaranteed the payment to the company of certain moneys mentioned in the agreement. The Duracks did not incur any personal liability to Connor and he was to look to the assets of the company for payment. And, assuming that the agree- ment was unenforceable against the company for the reason assigned _ hy the learned Judge, still the argument is untenable that there was

Se DURACK v. Wesr AUSTRALIAN TRUSTEE EXECUTOR & Acexcy Co, Lr.

no consideration moving from Connor to the company or to th Duracks. He handed over 20,000 shares to the bank with ti to the purchasers attached, to be delivered when and as pr money was paid and the purchasers collected the dividends upon shares. Connor also entered into various covenants with company and the Duracks of all of which the company and th Duracks have had the benefit. In 1916 Connor assigned the prine

wife. The promissory notes matured in 1925, but in February an agreement was made varying and modifying that of 1915. A of £7,000 was paid to Mrs. Connor by the company. The bank authorized to and did deliver to the company share certificates 7,000 shares with transfers indorsed, and the purchasers bee registered as shareholders in respect of those shares. The thirty-eig promissory notes were cancelled, and the company signed twenty-fou fresh promissory notes for £12,000 payable 25th April 1931 in fayou of Doherty and the Duracks, and these notes were indorsed Doherty and the Duracks restrictively, prohibiting further negotia- tion, and with a direction to pay Alicia Connor only, and withou recourse to them. Mrs. Connor died during the currency of tl notes, namely, in July 1929. In August 1930 another agreement made between the company, Mrs. Connor's personal representatiy

• the respondent here - the Bank of New South Wales and J. W. P. B. Durack. The company agreed to pay the personal repre: tive of Mrs. Connor £200. The personal representative of Mr Connor agreed upon payment to it of the sum of £200 and delivery to it of a promissory note for £11,800 in its favour payable on April 1933 and duly indorsed by J. W. and P. B. Durack to del to the company the whole of the twenty-four promissory no' Interest on £11,800 was to be paid at the rate of 7 per cent pr annum, This agreement was carried out, and the promissory not sued upon was subsequently given to the respondent here pur to that agreement. The agreement itself provided that the should be indorsed by each of the parties of the fourth part, who J. W. and P. B. Durack. But, in addition, subsequent co dence is important. On 5th August of 1932 the respondent forwarded to the company a copy of the agreement " dated 1 August, 1930." It also enclosed a promissory note " for dating signature by your firm and for indorsement by Messrs. J. W. P. B. Durack, after which please return it to us when we shall for you the promissory notes totalling £12,000 now held by us." company replied the same day : - '' As soon as our Mr. P. B. D returns next week we will get his indorsement to the pr

note for £11,800, and then forward it on to you." On 11th August the respondent acknowledged that it had "received your promis- sory note of to-day's date for £11,800 due on the 24th April, 1933, payable at the Bank of New South Wales, St. George's Terrace Branch, and duly indorsed by Messrs. J. W. and P. B. Durack in their personal capacities. This will also serve to confirm our Mr. Scahill's having handed you your twenty-four promissory notes totalling £12,000, which were not met on their due date in 1930." Tn my opinion, the agreements, the correspondence and the form _ of the indorsement-make it plain that the indorsers, J. W. and P. B. Durack, intended to make themselves liable to the payee of the note, the respondent here and the personal representative of Mrs. Connor. The consideration moving from the respondent here to the company _ and the Duracks is that arising from the agreements of 1915, 1924 and 1930. In 1933 the time for payment of the promissory note for £11,800 was extended to 1938. Subsequently to the giving of the promissory note both J. W. and P. B. Durack died, and the appel- lants are respectively their personal representatives. A sum of £22,041 or thereabouts has been paid in respect of the principal becom- ing due on the promissory notes and interest thereon. But the prom- issory note for £11,800 was not paid on maturity, and after some further delay and correspondence the respondent in 1942 issued the _ writ in this action. In my opinion, the judgment given in its favour for £17,953 (including interest) against the personal representatives of the

• indorsers of the note for £11,800 is right for the reasons stated and _ this appeal should be dismissed.

McTiernan J. In my opinion, this appeal should be allowed. The questions to be decided arise only upon the judgment which 'was given against the appellants upon the cause of action framed upon the promissory note: this cause of action was alleged alterna- tively to that framed upon the covenant in the deed dated 27th

The former cause of action was alleged against the company _ as the maker of the promissory note and against the appellants on the footing that J. W. Durack and P. B. Durack, their testators -Tespectively, had each contracted an obligation to the respondent as

• the indorsers of the promissory note. The cause of action was held to fail as against the company, but to succeed as against the respon-
• dents. The Supreme Court held that it was beyond the powers of
• the company to pay the debt represented by the promissory note, but _ that the appellants were liable to pay it on the ground that the

Durack vw Wesr AUSTRALIAN TRUSTEE Executor & Agency Co. Lrp.

The company is the maker of the promissory note : the respond is the payee and the holder of it. The evidence shows that Duracks put their signatures upon the promissory note before it ¥ delivered to the respondent and that its indorsation was made bel their signatures.

Section 4 of the Australian Bills of Exchange Act says that indor; ment means an indorsement completed by delivery. " An indor ment in general is a transfer by the holder of the bill to a new hold on whom the property is thereby conferred " (Steele v. M'Kinl (1), per Lord Blackburn; Smith v. Commercial Banking Co. Sydney Ltd. (2)). A promissory note is inchoate and incomple until delivery thereof to the payee or bearer (s. 90).

The facts which have been mentioned are insufficient to prove th the Duracks endorsed the promissory note to the respondent 3 hence contracted an obligation under s. 60 as indorsers. Moreo they did not, by signing their names upon the promissory note, cor tract an obligation under s. 61 to pay the amount of the note tot respondent for the reason that the payee of a promissory note is n a holder in due course: R. #. Jones Ltd. v. Waring & Gillow Lid. ( The signatures of the Duracks would have operated to render liable to a holder in due course to whom the promissory note ¥ negotiated. But the facts that have been mentioned, although insufficient to prove that the Duracks contracted an obligation on th promissory note as indorsers, do not preclude a finding that they d contract such an obligation. q

The question that arises is whether the evidence proves that th did contract with the respondent to be liable to it as indorsers of note. If this fact is established, then they should be held to h made themselves liable to the respondent as indorsers, notwithstat t ing that they put their signatures on the promissory note befor was completed by delivery and the signatures appear above | indorsation of the respondent (Steele vy. M'Kinlay (4); McDonald & Co. v. Nash & Co. (5) ).

The evidence does not, in my opinion, justify the inference that Duracks undertook a liability to the respondent for the amount note. It is the balance of the total consideration of £19,000 for Connor agreed by the indenture of 21st August 1915 to 20,000 shares in the company to Doherty, M. P. Durack, as we

(1) (1880) 5 App. Cas. 754, at p. 772. (4) (1880) 5 App. Cas. 754, at p. 7 (2) (1910) 11 C.L.R. 667, at p. 680. (5) (1924) A.C. 625, at pp. 636, (3) (1926) A.C. 670. 650.

J.W. Durack and P. B. Durack. An express term of the indenture is "©: oF A. 1944.

• that the purchasers are in no event to be personally liable to pay the

sum of £19,000 and interest or any part thereof. The indenture vides that the consideration to be given by the purchasers to the

~ yendor for the shares is thirty-eight promissory notes of £500 each

pearing the same date as the indenture and payable ten years after-

_ wards: that interest shall be paid by the company, which is a party

_ to the agreement, on the promissory notes at 6 per cent: and that

: they shall be made by it in favour of the purchasers and by them yer;

| respectively indorsed to pay vendor " Francis Connor only" without

Mrs. Connor, to whom her husband made over the promissory notes

and his rights under the agreement, delivered to the company for

~ cancellation, before they matured, all these promissory notes pur-

suant to the agreement made on 5th February 1924 under a term of

which the company paid her £7,000 on account of the sum of £19,000

and signed fresh promissory notes for £12,000 due 25th April 1931 in

favour of the four purchasers, and obtained their indorsements

_ without recourse on them to pay Mrs. Connor only. It is a term of

_ the agreement that the company should pay interest on the fresh

_ promissory notes at 6 per cent. Another term of the agreement

confirmed the provision of the prior agreement of 27th April 1915

__ whereby Connor and the Duracks agreed to purchase the shares. The

__ latter agreement thus saddled the company with the payment of the

balance of the consideration for which Connor sold his shares to them,

_as did the prior agreement saddle the company with the whole con-

_ sideration : and the latter agreement, like the former, relieved all the

_ purchasers from the payment of any part of the consideration or any

-~part of the interest. _ The purchasers had agreed to a division of the shares and any divi- _dends declared by the company were paid to them. The agreement of ith August 1930 recites that the company is indebted to the "respondent, Mrs. Connor's executor, in the sum of £12,000, and that indebtedness is represented by the promissory notes which the pany had signed in his favour. The agreement provides for the nm of the company's liability under the promissory notes to h he respondent by the sum of £200, and for the delivery, in substitu- for them, of one promissory note for £11,800, which the agree- says shall be drawn by the company in the respondent's favour le on 24th April 1933, "and duly indorsed by each of the ies hereto of the fourth part." These parties were J. W. Durack P. B. Durack.

There is no evidence that either of the Duracks undertook to p

by the respondent upon payment of the sum of £200 and deliy to it of a promissory note for that amount drawn by the cot and " duly indorsed " by the Duracks to deliver to the company whole of the current twenty-four promissory notes.

The evidence fails, in my opinion, to prove that the D indorsed the promissory note to the respondent or that there

should operate to charge them as the indorsers of it. Having to the facts that the Duracks put their signatures on the back promissory note before it was delivered to the respondent and its indorsation is made below the signatures of the Duracks, it ¥ I think, be in accordance with Jenkins & Sons v. Coomber (1 M. T. Shaw & Co. Ltd. v. Holland (2) to hold that the signat the Duracks do not operate to charge them as indorsers of | promissory note. The present case can be distinguished from Glenie v. Smith (3 this material respect that there the person whom it was alleged hi contracted the obligation of an indorser to the drawer had not meré put his signature on the bills, but had agreed to guarantee the pi ment of the price represented by the bills and for that purpé indorsed them. q In the case of In re Gooch ; Ex parte Judd (4), there is this stat by Scruton L.J. in the course of his judgment : " Now in my viet debtor " (the indorser) " clearly intended and contracted to himself liable as an indorser for good consideration moving ft Judd. He did so not merely as surety for Cardbox Ltd., but a person interested in that company, giving consideration for time gi to that company and himself as a person interested in it" (5 was alleged in the case that the debtor had contracted an oblii onthe note asan indorser. In the present case, there is, in my opin no evidence to justify that the Duracks intended and contract make themselves liable for the unpaid balance of the conside for which Connor sold his shares to them and Doherty and M Durack. 3 (1) (1898) 2 Q.B. 168. (4) (1921) 2 K.B, 593. i

(2) (1913) 2 KB, 15, ~ (6) (1921) 2 KB, at p. 607 (3) (1907) 2 K-B, 507 ; (1908) 1 K.B, 4 263,

In Gerald McDonald & Co. v. Nash & Co. (1), it was held that the conclusion which was required by the facts was that the common intention of the appellants and respondents was that the respondents should be liable on the bills and with that object should indorse them.

Again, in National Sales Corporation Ltd. v. Bernardi (2), it appears that a material fact in the case was that Bernardi intended by indors- ing the bills to render himself liable to the corporation if the acceptors failed to pay, he having an interest in Alldays in consideration of time being given.

Lastly, in the case of McCall Bros. Ltd. v. Hargreaves (3), it was the fact that the bills were indorsed by the defendant in pursuance of an agreement under which the plaintiff sold and delivered goods to the acceptors in consideration of the defendant indorsing the bills with the intention of making himself liable to the plaintiff in the case of default by the purchasers.

It seems to me that, as the facts of the present case do not justify the inference that the Duracks intended and contracted to make them- selves liable to the respondent as indorsers of the promissory note, there is nothing in the cases that have been referred to which would justify the Court in holding that the promissory note should be read as if the respondent's signature was written above the signatures of the Duracks.

I have read the analysis which the Chief Justice has made of the cases and agree with it.

The effect produced by the Duracks' signing their names on the promissory note was that they would be liable to a holder in due course if the respondent negotiated it: Compare Castrique v. Buttigieg (4) ; Gerald McDonald & Co. v. Nash & Co. (5).

For these reasons, I think the appeal should be allowed.

Tt is not necessary for me to deal with the question whether the indebtedness represented by the promissory note sued upon and those which preceded it arose out of a transaction which was not only ultra vires the company but also illegal. I reserve the question whether or not it was illegal for the directors of the company to agree to appropriate the funds of the company to pay for the shares in the company which four of them agreed to acquire for their own benefit from another of them: See Lorang v. The King (6). There was at the relevant time no provision in force in Western Australia corres- ponding with s. 45 of 19 & 20 Geo. V. c. 23.

(1) (1924) A.C. 625. (4) (1855) 10 Moore 94, at p. 111 [14 2) (1931) 2 KB. 188, at p. 191. E.R. 427, at p. 434), (3) (1932) 2 KB, 423. (5) (1924) A.C. 625, at p. 640.

1944, ed Durack a Wesr AUSTRALIAN 'TRUSTEE Executor & Agency Co. Lrv.

Wituams J. This is an appeal from a part of the judgment 0 Supreme Court of Western Australia given in an action in whi West Australian Trustee Executor & Agency Co. Ltd., the exe of Hannah Alicia Connor deceased, as plaintiff sued M. P. Du and E. J. Davidson, the executors of J. W. Durack decea E. K. Durack the executrix of P. B. Durack deceased,

until 24th April 1938, and for outstanding interest. The defendant company counterclaimed for the sum of 14s. 1d., being money paid for principal and interest to Mrs. Cc under the agreements hereinafter referred to made prior indenture of 27th July 1933 but forming part of the same trai The learned trial Judge dismissed the action against the def company and the counterclaim by that company and agai judgment in these respects there is no appeal. But he gave judg against the defendant executors and executrix de bonis testatoris the principal sum of £11,800 and for interest, the total amount bi £17,9 9d., and these defendants have appealed against thisp of the judgment. Before coming to the grounds argued on the appeal, it wil necessary briefly to state the essential facts. In 1915 F. Connor, D. J. Doherty, M. P. Durack, J. W. D and P. B. Durack were the directors of and substantially the b ficial holders of all the shares in the defendant company. Or April 1915, an indenture was entered into between these five per and the defendant company for the purchase by Doherty a three Duracks of Connor's 20,000 shares in the defendant con The indenture provided that the consideration to be given purchasers to the vendor should be thirty-eight promissory each for £500 payable ten years after date, such promissory n made by the defendant company in favour of the purchaser: them restrictively indorsed to pay the vendor only without against the purchasers as indorsers, the purchasers in no event personally liable to pay the £19,000 and interest or any part th The vendor agreed to sign transfers in blank of the shares and certificates therefor and transfers thereof and deposit these w Bank of New South Wales at Perth, the scrip certificates and tt to be delivered to the purchasers on the promissory notes b paid at maturity.

By an indenture made on 9th August 1916, which recited the circumstances under which Connor agreed to sell his shares to Doherty and the three Duracks, Connor assigned his rights under the indenture of 21st April 1915 and the promissory notes to his wife, Hannah Alicia Connor.

The defendant company was unable to meet the promissory notes when they fell due and the time for their payment had to be extended.

On 5th February 1924, it was agreed between Mrs. Connor and the defendant company that the g@efendant company would pay £7,000 to Mrs. Connor and that she would authorize the Bank of New South Wales to deliver up to the defendant company scrip for 7,000 shares. She also agreed to deliver up to the defendant company the thirty-eight promissory notes for £500 each already mentioned and the defendant company agreed to sign fresh promissory notes for £12,000 due 25th April 1931 in favour of D. J. Doherty and the three Duracks and to obtain their indorsements as soon as possible without recourse from them to pay Hannah Alicia Connor only. It was also agreed that the scrip certifi- cates for the remaining 12,000 shares should be held in escrow with the Bank of New South Wales as against the promissory notes for £12,000 as on the same terms as in the original escrow. Pursuant to this indenture, the defendant company paid the sum of £7,000 to Mrs. Connor, and she caused the scrip for 7,000 of the shares to be delivered to the defendant company. These shares were then divided between the purchasers. The promissory notes provided for by the indenture were also made in favour of Mrs. Connor by the defendant company and indorsed in the manner thereby provided.

Mrs. Connor died on 29th July 1929 and the plaintiff is the executor of her estate.

On 11th August 1930, an indenture was made between the defendant company of the first part, the plaintiff of the second part, the Bank of New South Wales of the third part, and J. W. Durack and P. B. Durack of the fourth part, which provided, inter alia, for the payment by the defendant company to the plaintiff of £200 in respect of the principal sum of £12,000 and for the extension of the balance of £11,800 until 24th April 1933. Clause 3 provided that the plaintiff should, upon payment to it of the sum of £200 and delivery to it of one promissory note for £11,800 drawn by the defendant company in favour of the plaintiff payable on 24th April 1933 and duly indorsed by each of the parties of the fourth part, deliver to the defendant company the whole of the current promissory notes. Pursuant to this indenture, but for some unexplained reason nearly two years later, the defendant company on 11th August 1932 made a promissory

Durack v West AUSTRALIAN, 'TRUSTEE Executor & AGENCY Co. Lrp.

note in favour of the plaintiff or order for £11,800 payable on 2

so that, by an indenture made on 27th July 1933 between the dant company of the first part, the plaintiff of the second p J. W. Durack and B. K. Durack executrix of the will of P. B. Dura (who had died in the meantime) of the third part, after reciting, alia, that the promissory note dor £11,800 had been indo1 J. W. Durack and P. B. Durack, that the defendant company indorsers had paid to the plaintiff the interest due under the p sory note up to 24th October 1932, that the promissory note hadb

the first and fourth parts (presumably the third part is meant), unable to pay and discharge this promissory note, had requ plaintiff to extend the time for payment and to reduce the r interest payable thereon, the indenture witnessed that the pa the first and fourth (sic - third) parts covenanted and agreed top: the plaintiff the sum of £200 on the execution thereof, and the tiff agreed to reduce the rate of interest to 5 per cent per anni to extend the due date of the promissory note until 24th April I Clause 4 provided that, save and except as the same were th modified or altered, all the covenants and conditions contained in agreement of 11th August 1930 should apply to this agreement the same were therein specifically set forth.

The substance of the transaction entered into in 1915 was, therel that it was agreed between the five directors of the defendant cor pany that Doherty and the three Duracks should purchas shares in the defendant company of Connor, the fifth director, that the defendant company should finance the purchase of thes on behalf of the purchasers and be solely liable to the vendor payment of the purchase money and interest. At the date of t indenture of 21st April 1915 and upon all subsequent relevant d the statute law relating to companies in Western Australia same as that contained in the English Companies Acts discu the House of Lords in Trevor v. Whitworth (1). In that case articles of association authorized the company to purchase it shares, and it was held that under the Companies Acts a com no power to purchase its own shares, so that a purchase of shares the company had made was ultra vires, and the vendor was unal claim the balance of the unpaid purchase money in the liquidati

he company. The foundation of the decision was that the Com- ies Acts provide the only legal means (apart from forfeiture) of reducing the capital of the company, so that for a company to buy its own shares from its shareholders is to return the capital on those to those shareholders and thereby to reduce its paid-up and nominal capital in an unlawful manner. __ In the present case, the defendant company was not purchasing its own shares. It was only financing their purchase by advancing money to some of its shareholders to enable them to purchase its shares, so that the transaction was not one which resulted in any reduction of the nominal or paid-up capital of the company. Further, the memorandum of association of the defendant company contains a clause authorizing the company to advance money without security, and to advance money to the four purchasers to enable them to buy the shares would create a debt from them to the company, and would not lead to any reduction of its capital. But the learned trial 'Judge held that it followed from the decision in Trevor v. Whitworth (1) that it is beyond the power of the company to lend money to its shareholders for this purpose, because so to do is to traffick in its shares, and that is a business which is contrary to the policy of the Companies Acts and therefore ultra vires the powers of a company limited by shares incorporated under these Acts and void. | The agreement was entered into at a time when there was no statutory provision in force in Western Australia corresponding with s. 45 of the English Companies Act 1929 which prohibits a company, under a penalty of £100, from lending money to a person to assist him to purchase shares in the company. It is true that, in Lorang v. The King (2), the Court of Criminal Appeal said that it was unable to see any difference between a company buying its own shares and the company making a loan authorized by its memorandum of association toa person to enable him to buy its shares, and that the latter was ig independently of s. 45. It is difficult, however, to reconcile case with the decision of the Court of Appeal in In re V.G. M. 'tas s Ltd. (3), in which their Lordships appear to regard the = eam as making new law which is restricted in its scope to loans by a company for the purpose of acquiring its shares which are purchased n the strict sense of the term, and they held therefore that the section not prohibit loans for the purpose of enabling persons to subscribe for shares in a company. They refer specifically to the practice of a "prt lending money to its shareholders to buy its shares as a

ice which, after the last war, gave rise to great dissatisfaction and

(1) (1887) 12 App. Cas. 409. (3) (1942) Ch, 235. (2) (1931) 22 Cr. App. R. 167.

scandals but do not even hint that it was illegal or ultra vires powers of a company that had power to lend money. Further, api from statute, a company can take a security over its shares for mon lent to a shareholder. If it can do this, it is difficult to see wi cannot lend money to buy its shares, especially when its artiel association give it a lien over the shares when bought to secure { moneys owing. Such a lien is valid (Allen v. Gold Reefs of W Africa (1)).

If it is correct to hold that such loans were void independently s. 45, which I take leave to doubt, it must be on the footing although not expressly or impliedly prohibited by the Act, they opposed to its polic i opposed to public pol ment but is merely void (Mogul Steamship Co. Ltd. v. McGregor, & Oo. (2); Attorney-General (Cth.) v. Adelaide Steamship Co. Id. and a provision in an agreement which is unenforceable only becaut opposed to the general policy of a statute is in no worse po (In re Johns ; Worrall v. Johns (4) ; Vita Food Products Ine. v. Shipping Co. (5) ). On the other hand, an agreement prohibit statute is inherently vicious and incapable of giving rise to tights: Montreal Trust Co. v. Canadian National Railway Co. see the authorities usefully collected in Marks v. Jolly (7). the plaintiff has not appealed against the judgment dismissing thi action against the defendant company, so that I shall assume, for th purposes of the appeal, contrary to my own opinion, that the agn ment by the defendant company to pay this purchase money am interest was void and unenforceable.

Further, although this point was not raised in the Court below, to be noted that the articles of association of the defendant compat do not contain any provision authorizing a director to enter i contract with the company so that, unless the contract was ratifi by the company in general meeting, which does not appear to been done, it would be a contract which offends against the equital rule that, for the reasons given by Lord Cranworth in Aberdé Railway Co. v. Blaikie Bros. (8), cited by Lord Russell of Killou when delivering the judgment of the Privy Council in 2.B. Ltd. vy. Dominion Bank (9), a director cannot make a contract wil

(1) (1900) 1 Ch, 656, at p. 658. (7) (1938) 38 S.R. (N.S.W.) 35) (2) (1892) A.C, 25, ab pp. 39, 47, 51. pp. 355-358; 55 W.N. 125, (3) (1913) A.C. 781, at p. 797. pp. 127, 128. 4 (4) (1928) Ch. 737. (8) (1854) 1' Macq. 461, at pp. (5) (1939) A.C. 277, at p. 293. 472,

(6) (1939) A.C. 613. (9) (1937) 3 All E.R 555, at Pp

company of which he is a director through the agency of the other directors, and it would therefore be a contract voidable at the mere option of and unenforceable against the defendant company.

But, in view of the limited nature of the appeal, it is unnecessary, in my opinion, to discuss the position that existed prior to the indenture of 11th August 1930, because that agreement introduced a number of material alterations into the original agreement. 'The promissory note provided for by that agreement was not a note to be made in favour of the purchasers by the defendant company and by them indorsed without recourse to the plaintiff, but was to be and was in fact made by the defendant company in favour of the plaintiff, and was to be and was in fact indorsed by J. W. Durack and P. B. Durack with the intention that they should become personally liable to the plaintiff for the payment of the balance of purchase money and interest. Their indorsements upon the promissory note appear above that by which the plaintiff indorsed the note without recourse to the credit of its account at the bank. But, where the intention is clear that an indorsement is placed upon a promissory note in order that the indorser shall be personally liable to the payee for the pay- ment of the note by the maker, or in other words as a promise to the payee that the note will be met at maturity, this is immaterial, and the law would indeed be in a most unsatisfactory state if it were otherwise, so that the liability of an indorser under such circum- stances would depend upon whether the payee was wise enough to place his own indorsement above or foolish enough to place it below that of the indorser. On this point, I desire to adopt the reasons given by Wright J. (as he then was) in National Sales Corporation Ltd. y. Bernardi (1) and Goddard J. (as he then was) in McCall Bros. Ltd. vy. Hargreaves (2), which with respect appear to me to be unanswer- able, simply adding that s. 25 of our Bills of Exchange Act corresponds to s. 20 of the Imperial Act. See also Ferrier v. Stewart (3), a decision which was clearly right but is capable of being supported, in my opinion, on broader grounds than those which appear in the judgments, and Sydney and North Sydney Lime Burners Ltd. v. Phillips (4).

Further, the plaintiff sued on two counts, (1) on the agreement contained in the indenture of 27th July 1933, and (2) on the promis- sory note of 11th August 1932. The learned trial Judge dismissed the action against the defendant company, but gave judgment against the appellants, and this judgment, which is not given on either count

(1) (1931) 2 K.B. 188. (4) (1931) 31 S.R. (N.S.W.) 505; 48 (2) (1932) 2 K.B, 423, W.N. 170. (3) (1912) 15 C.LR. 32.

1944, Se Durack v. West AUSTRALIAN 'TRUSTEE Executor

Durack West AUSTRALIAN TRUSTEE Executor & Agency Co. Lrp,

specifically, should stand if it can be supported on either count. have said, it clearly can, in my opinion, be supported on the s count, but I also consider that it can be supported on the first coun J. W. Durack and E. K. Durack would be estopped by the reciti to the indenture of 27th July 1933 from denying that the f personally and the latter as executrix of the estate of P. B. D to the extent of his assets had agreed to pay the balance of purcha money and interest. In the case of E. K. Durack, the indentu contains an express provision that nothing therein contained or it plied shall in any wise render her personally liable for pay of principal or interest, but that such liability shall be limited to estate of P. B. Durack coming into her hands at any time as executr The indenture also contains a provision that, if on 24th April in e year the trading account of the defendant company should not tl have been reviewed by the Bank of New South Wales, then int should not be payable until after such review by the bank, pro also that, if after such review the defendant company and the app lants were not able, out of any moneys made available to them b bank for that purpose, to pay the whole or any part of such int then it should not be payable until 24th April 1938.

The minute book of the defendant company is in evidence, which it appears that, at a meeting of the board of directors held 27th July 1933, the indenture of 27th July 1933 was signed, seal delivered. On 7th March 1934, a document in the following terms signed by the other two purchasers, M. P. Durack and D. J. Doh "re company's liability to the estate of H. A. Connor £11,800 and indenture dated 27th July 1933 - minute book 379 - he' Connor Doherty & Durack Ltd. and W. A. Trustee Executor Agency Co. Ltd., re estate H. A. Connor, which was indorsed J. W. Durack and E. K. Durack as executrix of the estate of P. B

responsible in this debt for any liability that may be incurn J. W. Durack and E. K. Durack as executrix for the estate of Durack." A meeting of directors of the defendant company at M. P. Durack, D. J. Doherty, J. W. Durack and E. K. were present, was held on 7th March 1934, the minutes of contain an entry relating to this document in the following t "The document attached to these minutes was signed by Mr. Doherty and Mr. M. P. Durack holding themselves equally liable Mr. J. W. Durack and Mrs. E. K. Durack as executrix of the of P. B. Durack." This, and other evidence in the action, fully su ports the finding of the learned trial Judge that "looking at all th facts and circumstances I have come to the conclusion that on

promissory note of 1933 " (his Honour evidently means 1932), " J. W. Durack and P. B. Durack did intend to become liable as indorsers, and that the form of the promissory note was varied accordingly." The liability of the appellants to the plaintiff can therefore be "supported under the agreement on the first count, or as indorsers of the promissory note on the second count.

Further, supposing that the nature of the liability of the appellants as indorsers is that of guarantors and that, contrary to the view expressed by Goddard J. in McCall's Case (1), there must be a suffi- cient memorandum in writing to satisfy the Statute of Frauds (which has not been pleaded), the indenture of 27th July 1933 is such a memorandum.

'The grounds mainly argued on the appeal were that the indentures of 11th August 1930 and 27th July 1933 and all other agreements and documents, including the promissory note of 11th August 1932 made in pursuance thereof, were illegal and void, that any promise or covenant contained therein made by the appellants or their testators was made or given for an illegal consideration, that the promissory note was made and indorsed for and on account of an illegal consideration or alternatively without consideration, and that the plaintiff and all prior holders of the promissory notes had notice of such illegality or alternatively absence of consideration.

It is clear that Connor, Mrs. Connor, and the plaintiff had notice of the circumstances under which the various indentures were entered into and the various promissory notes were made, so that the appellants are entitled to succeed if they can establish that there was no consideration for their promises or that the consideration was illegal.

But the sale of the shares by Connor as vendor to Doherty and the three Duracks as purchasers was a perfectly valid transaction. There was nothing to prevent the purchasers completing the pur- chase by paying the purchase money, whereupon the vendor was bound to deliver the scrip and transfers to enable the purchasers to be registered as the holders of the shares. It cannot be con- tended, therefore, that there was no consideration for the promises by F. W. Durack and P. B. Durack to pay the balance of purchase money, so that it is unnecessary to discuss whether there were other and independent considerations for these promises. If, however, the indentures were entered into for an illegal purpose, then it would follow that a promise to pay or a guarantee of the payment of the money for such a purpose would also be illegal,

1944, ad Durack v. West AUSTRALIAN TRUSTEE EXECUTOR & AGENcy Co. Lap.

by shares who desire to have the concern in the hands of themselye and their friends . . . ought to use their own money for that purpose and . . . not the trading capital of the company. my opinion the application of the company's funds in furtherance of any such object is altogether illegitimate, because it is foreign to the proper business of the company and in violation of statute law " (2) But I doubt whether his Lordship intended to say more than that th transaction there in question was invalid. If he did, then his sti ment of the law has not found acceptance and is not in accord with the statements in the speeches of the other members of the House Lord Herschel in the same case cited with approval a statement James L..J.: " Hither this is a purchase of shares in the sense of trafficking in shares, which is a purchase not authorised by memorandum of association, or it is an extinguishment of shares therefore a reduction of the capital of the company" (3). Macnaghten said that "if a power to purchase its own shares were found in the memorandum of association of a limited company, it would necessarily be void" (4). Later he said : " Here the appli are seeking to enforce against the company a contract which was beyond the powers of the company " (5).

In Kirby v. Wilkins (6), Romer J. (as he then was) said; " If the company paid money for that transfer, then no doubt it would trafficking in the shares of the company and that would be invali

This case is commented on in In re Buckingham ; Oswell vy. John Dobell Ltd. (7). The same view that a similar transaction would be ultra vires the powers of a company and therefore void was taken Maugham J. (as he then was) in In re Walters' Deed of Guara Walters' " Palm"? Toffee Ltd. v. Walters (8). 4

For a company in Western Australia to carry on a business of traf ficking in its shares by financing their purchase by its shareholde was at most to carry on a business which could not lawfully be aut ized by its memorandum of association because it was contrary the policy of the Act and therefore ultra vires and void. It certainly not illegal at any relevant time for a company there t advance money to a person to enable him to purchase its shares in

(1) (1887) 12 App. Cas. 409. (5) (1887) 12 App. Cas., at p. 441. (2) (1887) 12 App. Cas., at p. 430. (6) (1929) 2 Ch. 444, at p, 452. (3) (1887) 12 App. Cas., at pp. 418, (7) (1943) 170 L.T, 53.

419, (8) (1933) Ch. 321. (4) (1887) 12 App. Cas., at p. 436.

these reasons, I am of opinion that the present case, viewed in favourable light for the appellants, cannot be distinguished decision of Lawrence J. in Garrard v. James (1), which, if 1 VS"

STRALIAN ty so with respect, was rightly decided, and I would dismiss the TaverES.

rs for the appellants, Dwyer, Durack & Dunphy, Perth, by : Brennan & Co. s for the respondent, Unmack & Unmack, Perth, by