130AD. Certification of prima facie title Flashcards
130AD. Certification of prima facie title
General overview
[130AD.01] By virtue of s 130AD, an estoppel is created against the company in favour of any person who has relied upon such certification that there has been produced to the company such documents as to show that the transferor named in the instrument of transfer has a prima facie title to the shares, debentures or other interests in the company. However, the company does not represent, by virtue of the certification, that the transferor has actual title to the shares, debentures or other interests in the company.
Certification of prima facie title
[130AD.02] The giving of the certificate by the company to a person amounted to a statement by the company, intended by the company to be acted upon by purchasers of shares in the market, that the person(s) named therein were entitled to the shares, and that the purchaser having acted upon that statement, the company was estopped from denying its truth: In the Matter of the Bahia and San Francisco Rly Co Ltd, and Amelia Trittin, Richard Burton, and Mary Anne Goodburn (1868) LR 3 QB 584, QBD. The purchaser of the shares was therefore entitled to recover from the company as damages for the loss of the shares, the value of the shares at the time the company first refused to recognise him as a shareholder, with interest at 4% from that time: In the Matter of the Bahia and San Francisco Rly Co Ltd, and Amelia Trittin, Richard Burton, and Mary Anne Goodburn (above). The company is also estopped, by virtue of the certificate, from denying that the person named is a shareholder. As such, a share certificate is a valuable security within the meaning of s 30 of the Penal Code (Cap 224): Tham Wing Fai Peter v PP [1988] 1 SLR(R) 349; [1988] SGHC 37, HC. Despite the register of members being blank, an unsigned resolution upon incorporation allotting 27,000 shares to the shareholder (X) who paid the entire share capital and 63,000 shares to her daughter, and the two share certificates numbered 1 and 2 with the company seal affixed to each of those certificates but without the signatures of two directors or a director and the company secretary, it was held that X and her daughter held the legal title to the shares
Ministerial duty
[130AD.03] It is a well-established principle that where a company’s secretary or director who was invested with a statutory or common law duty of a ministerial character, without any default on his own part, exercised that duty at the request of an agent broker thereby injuring the rights of the shareholder, the law implied a contract that the requester (i.e. agent broker) would indemnify the person doing the act in respect of any actionable injury to the shareholder
Company’s indemnity on forged transfer
[130AD.04] A company which effected a transfer of shares based on a forged signature of the shareholder on a power of attorney produced by a stockbroker (acting for the shareholder) may sue the stockbroker for breach of warranty of authority: Oliver v Governor and Co of the Bank of England [1902] 1 Ch 610, CA . Cf where the defendant presented a transfer of which he was unaware that one of the signatures of the trustee member was forged, and the company issued a certificate in his favour as holder of the stock, the company could not sue him for an indemnity to make good the loss it sustained as there is no implied contract that the signatures are genuine by the mere presentation of the transfer
Person issuing the certification
[130AD.05] Section 130AD(5)(b)(i) and (ii) provide that such a person is a person who is apparently authorised to issue certificated instruments of transfer. Where an employee (i.e. a clerk) of the company had affixed its common seal without authority to a power of attorney and sold its shares without authority, it was held that the company could recover those shares. The company’s negligence was not the proximate cause of the loss: The Mayor, Constables, and Co of Merchants of the Staple of England v The Governor and Co of the Bank of England (1887) 21 QBD 160, CA ; followed The Bank of Ireland v Trustees of Evans’ Charities (1955) 5 H L Cas 389. A share certificate with this note, “Without the production of this certificate no transfer of the shares mentioned therein can be registered,” did not amount to a representation to or contract with the holder of the certificate that the shares would not be transferred without production of the certificate, but was only a warning to the owner of the shares to take care of the certificate because he could not compel the company to register a transfer without its production
Third party’s liability
[130AD.06] A firm of stockbrokers, who guaranteed that shares transacted through them are genuine transactions, are bound to buy replacement shares when the share certificates turned out to be forgeries. In turn, they may recover damages from their remisier under an indemnity: Associated Asian Securities Pte Ltd (in liquidation) v Lee Kam Wah [1992] 3 SLR(R) 812; [1992] SGCA 85, CA ; Lee Kam Wah v Associated Asian Securities (Pte) Ltd [1991] 2 SLR(R) 364; [1991] SGHC 115, HC. A bank who lent money on the security of shares that belonged to a shareholder who forged another shareholder’s signature in an instrument of transfer is liable to indemnify the company upon grounds that there is an implied contract that the signatures were genuine: Lord Mayor, & c, of Sheffield v Barclay & Ors [1905] 1 AC 392, HL ; followed in Bank of England v Cutler [1907] 1 KB 889, KBD . A shareholder whose negligence or mistaken confidence in the manager of a bank to whom he left the shares for safe custody is not entitled to costs against the defendants when the manager committed a forgery on the transfer and sold the shares: Johnston v Renton and Johnston v Parsey (1870) LR 9 Eq 181. The bailee of share certificates deposited with them by the shareholder, whose employee forged the transfer had been guilty of culpable negligence in keeping them; but the loss of the costs was too remote a consequence of the negligence of the company for them to be held liable for it, and the claim was refused
