RICHARD PHILLIP PHILLIPS Vs. WILLIAM FRANCIS BARNS

JUDGEMENT

(1.) This is an appeal from an order of the Court of Appeal for the Federated Malay States dated 8 October 1935 (Burton, J., Terrell, J.: Sir Samuel Thomas, C. J. dissenting) allowing an appeal by the respondent (the plaintiff in the action) from a judgment of the Supreme Court (Howes, J.) dated 11 May 1935, dismissing the plaintiff's action with costs.

(2.) The nature and course of the proceedings was as follows :-In the year 1925 the plaintiff, a retired merchant and planter, in the State of Perak, when about to leave Perak to reside in Europe, entrusted certain of his monies available for investment to the management of the defendants, who are accountants at Ipoh in Perak and elsewhere and gave them a power of attorney for the purposes of such management. Loss of capital having been sustained by the plaintiff in connexion with the employment of his monies in 1929 and the following years, the plaintiff on 1 May 1934 filed a plaint, which was amended on 16 August 1934, claiming damages from the defendants for negligence and breach of duty. The action was tried in March a April, 1935, and on 11 May 1935, Howes, J. delivered judgment dismissing the action. The appeal was heard in August 1935. During the hearing of the appeal an amendment of the plaint was allowed. The judgment of the Court, delivered on 8 October 1935, allowed the appeal and awarded the plaintiff a sum of $2,500, representing certain expenses incurred by the plaintiff and specifically claimed as damages, and as to the main claim for damages ordered an inquiry by the Registrar which was duly held On 3 January 1936, the Registrar certified that the amount of damages (exclusive of the above-mentioned sum of $2.500) was $36,147'26. The ground upon which the majority of the Court held that the plaintiff was entitled to the account resulting in the Registrar's certificate for the amount other than the $2500 was first raised as a ground for the claim to this larger relief in the amendment made during the hearing in the Court of Appeal. The Chief Justice dissented from the view of the majority and agreed with the trial Judge that the action should be dismissed.

(3.) The facts material to the decision of the case are these:-The plaintiff left Ipoh in June 1925, after giving the power of attorney dated 4 April 1925; but before that date the particular employment of the plaintiff's funds which subsequently gave rise to trouble and loss had been discussed between the parties and arranged for. Such employment was in what have been called "brokers' loans" or "carrying transactions". Their nature was this : There is no stock exchange in Perak, but stockbrokers who require funds in respect of the purchase of shares for forward settlement-mainly those of rubber and in tin producing and industrial companies-procure loans upon certain customary terms. The most important of these terms is that the loans are made against or in respect of specific shares approved by the lender or his agents, certificates for which are deposited with them accompanied by a blank transfer. On a monthly transaction which was the period adopted in the dealings now in question, there are passed two contracts, under the first of which at the beginning of the month the shares are sold by the brokers to the lender for the amount of the loan made, representing the value of stocks and shares less a margin of ten per cent., and under the second of which the same shares are re-purchased by the brokers at the end of the month for an amount increased by the interest on the loan, usually one per cent., for the month's accommodation. If the borrower desires to redeem any shares during any month he can do so on paying a sum equal to their value or depositing other shares agreed upon of the like value. At the end of the month the particular transaction would be at an end, but another similar transaction might be entered into in respect of the same or other shares and so on from month to month. There were other methods availed of, for the employment of the plaintiff's funds such as mortgages and other secured loans; but the transactions above described, which will for convenience be called brokers' loans throughout, are the only ones which gave rise to any serious trouble and they alone were in question in this action.