"CARRYING" SHARES.

Auckland Star, Volume LVI, Issue 133, 8 June 1925, Page 4

"CARRYING" SHARES.

BROKERS AND CLIENTS

AX IMPOHTANT DKCISIOX

A point, of interest to those .Waling on the Stock Exchange was decided recently in Sydney, when the 11iurli Court pivu it's roso'ived' decision, allowing the 'appeal of .lohn llrooks-Tlioriiloy against a judgment of Mr. .lustico llurvey with regard i.i tin' "."imnis" of shares by brokers ~,i behalf of clients. Mr. Justice Higgins said that William Tillcv and lonipnny. brokers, of Sydney, purchased, mil ol' their own funds. 11."ill shares in the Kampong Kntmtnting Mining Company at the request ol" BrooksThornley. On being requested 1,, reduce his iiidchtodne.-s for these and other sliurcs. 1„. asked for a statement of the urn,mot ~uiiii,'. The account showed 11 purchases of these shares in .lune. IH'2O, interest at eight per cent, carry-over charges on daily balances to date. After deduction of two dividends, there was a debt of £.ll(l.->. Hrooks-Thornley paid this amount at once, in November, 1020, and demanded his scrip. The defendants had not got l be scrip in hand, but on .November -2."> they handed him 1000 of the scrip. The other 150 was handed to him on December 17. It. transpired that tin- defendants loaned and sold and dealt with many of tho shares for market purposes, and treated the profits as belonging to themselves. Two of the members of the linn, in Iho witness box, insisted that they had the property in the scrip until the plaintiff paid, and were entitled to any profits made by their dealings with the shares. Tlie plaint ill' claimed accounts of what was really due to the defendants, and that any excess money paid by him should be repaid. He asked for an inquiry ns to the amount of secret profits made by the defendants, and for payment of them to him. Mr. Justice Harvey had dismissed the plaintiff's suit, on tlie ground that under the agreement between the defendants and this client, taken with the custom of the Sydney Stock Exchange, they -were entitled to keep any profits made before their client paid: nnd then they delivered to the client tlie number of shares bought, but not necessarily the original shares which they purchased for him. Mr. Justice Higgins said that, in his opinion, the court below was not justified in giving effect to the custom on which the defendants now relied in spite of their attitude on the pleadings. It ■was only fair to add that the judge was probably misled by the general acquiescence in the evidence of custom. It was obvious, said the judge, from the plaintiff's reference in a letter to shares with a speedy rise that he meant to get tlie benefits of any rise. Under the suggested usage a lender of moneywould get not only his interest on money lent, but the profits made by means of the money lent. As reasonably might a morgagee who had lent to his mortgagor money, at interest, wherewith to buy an orchard, claim to treat as his own nnd free from accounting any profits made from the sale of the apples in the market, lt was surely not too much to say that if a broker wanted to get the profits from sales of shares as well as his interest and commission lie ought to make an express stipulation to that effect. Mr. Justice Isaacs said that he had examined the matter from a purely legal aspect. He was content that he had not been driven to hold the brokers were entitled to hold the shares as their own, and to reap tlie profits of speculating in them, while charging their client interest on money no longer advanced, but recouped out of tli-J client's property.