Anwar et al v. Fairfield Greenwich Limited et al

Filing 1048

DECLARATION of Professor Jonathan Harris in Support re: #775 FIRST MOTION to Certify Class.. Document filed by AXA Private Management, Harel Insurance Company Ltd., Harel Insurance Company, Ltd., Pacific West Health Medical Center Inc. Employees Retirement Trust(On behalf of Itself), Pacific West Health Medical Center Inc. Employees Retirement Trust(on Behalf of All Others Similarly Situated), Pacific West Health Medical Center, Inc. Employee's Retirement Trust, Securities & Investment Company Bahrain, St. Stephen's School. (Attachments: #1 Exhibit 1 through 3, #2 Exhibit 4 Part 1, #3 Exhibit 4 Part 2, #4 Exhibit 5, #5 Exhibit 6, #6 Exhibit 7 and 8, #7 Exhibit 9 through 11, #8 Exhibit 12 through 14, #9 Exhibit 15 through 21, #10 Exhibit 22 and 23, #11 Exhibit 24, #12 Exhibit 25 through 27, #13 Exhibit 28 through 32, #14 Exhibit 33, #15 Exhibit 34, #16 Exhibit 35, #17 Exhibit 36, #18 Exhibit 37 through 39, #19 Exhibit 40, #20 Exhibit 41 Part 1, #21 Exhibit 41 Part 2, #22 Exhibit 42 through 51, #23 Exhibit 52 through 65, #24 Exhibit 66 through 70, #25 Exhibit 71 through 74, #26 Exhibit 75 through 77, #27 Exhibit 78 through 81, #28 Exhibit 82, #29 Exhibit 83 Part 1, #30 Exhibit 83 Part 2, #31 Exhibit 84 and 85, #32 Exhibit 86 Part 1, #33 Exhibit 86 Part 2, #34 Exhibit 87 through 90, #35 Exhibit 91 Part 1, #36 Exhibit 91 Part 2, #37 Exhibit 92 through 103, #38 Exhibit 104 through 106, #39 Exhibit 107 and 108, #40 Exhibit 109 through 113)(Barrett, David)

EXHIBIT 34

THE IRISH

REPORTS

PUJn,I~HRD

CON'flWL OF THE INCORPORA'rEll

UNDER

COUNCIl, OF LAW REPORTING

FOR IRELAND.

CONTAINING

REPORTS

OF CASES ARGUED

AND DI~TERMINED

IN

THE COUHT OF APPEAL~

h.

¥HE

HIGH

. COURT

COUHT

OF JUSTICE .

FOR CROWN
IN

CASESHESERVED,

IRELAND"
AND

THE

IRISH

LAND

COMM [SSlON.

EDITED BY

T. HENRY MAXWELL,
w.

BAIUUSTlm-AT-LA

1917.
VOL. I .
. ' CHANOERY DIVISION AND LAND COMMISSION.

DUBLIN:
PUBLISHED FOR THE INCORPORATED

BY

E.
116,

COUNCIL OF LAW REl'OUTING

PONSONBY,
GRAFTON

1917.

STREET.

LTD.,

ron

mELAND,

VOL.

203

CHANCERY DIVISION.

1. J

(1905. No. 125.)

cox

v. DUBLIN

Barton J.
1916.

CITY DISTILLERY COMPANY, LTD.
(No.3.)

June 16.
July 10.

Oornpany-Debent~t1'es- Validity of-Estoppel-Res
Order X Vi, R. 8.

Judicata-Test

Action,
Appeal.
1917.

By a deed executed in 1895, property of lit distillery company was conveyed Jan. 17, 18.
f
Feb. 27.
to trustees for the holders of second debentures to b t h
e erea tel' issued. The
articles of association of the company provided that no director should vote in
respect of any matter in which he was individually interested, the quorum of

..

11, kIt2. C· /01:3 .

directors being fixed at two.
D., a director of the company, advanced moneys to the company on the ~;)
security of manufactured whiskey of the company stored in a warehouse, and
also upon second debentures issued to him by the company in 1903, but forming
part of the series secured by the trust deed of 1895. There was admittedly
no quorum of independent directors present at the meeting which purported to
authorize the issue of these debentures to D.
The present action was instituted ill 1905 by the plaintiff on behalf of
himself and all other holders of first debentures claiming a declaration that
certain first mortgage debentures were well charged on the property of the
company, and a liquidator was subsequently appointed (Oox v. Dublin Oity
Distillery, [1906] 1 1. R. 446; [1915] 1 1. R. 345).
In 1909 D. instituted an action for a declaration as to his rights against
the company in liquidation and the trustees for the second debenture-holders.
The latter defendants delivered no defence, and D. obtained judgment against
them by default. The company impeached D.'s right to claim a lien on the
second debentures, on the ground that these were not registered under the
Companies Act, 1900, but no point as to the absence of a proper quorum at the
meeting which purported to authorize the issue of D.'s debentures was either
pleaded 01' specifically relied upon in argument. D.'s action subsequently
resulted in a declaration by the House of Lords that D. was not entitled to a
valid pledge of the whiskey, but was entitled to a valid lien on the debentures
for the amount of his advances to the extent of the property comprised in the
trust deed.
On the hearing of a memorandum from the Chief Clerk in the present action:
Held, by the Court of Appeal (1), reversing the order of Barton J., that
C. R. and 'G., as representing the holders of valid second debentures issued by
(1) Before Sm I. J. 0'

BRIEN

L.C., and

RONAN

and

MOLONY

L.JJ.

:204

THE IRISH REPORTS.

Barton J.
1916.

Cox
v.
DUBLIN CITY
DISTILLERY.

[1917.

the company in 1895, were sufficiently represented by the trustees for tbe
second debenture-holders in the action brought by D. agai.nst the company and
the said trustees; and that the order of the House of Lords in the latter action
operated as an estoppel so as to preclude C., R., and G. from relying' in the
present ac tiion on thee i
mva Iiditv I th e erea tioi 0 f I)' s d ebentures.
1 1 Y III
ion
•

MEMORANDUM Chief Olerk submitting for the consideration
from
of Barton J. the following question :_
Whether, having regard to the decision of this Honourable
Oourt on the 24th February, and of the Oourt of Appeal in
Ireland on the 28th June, 1915, that the resolutions of the directors
of the company, passed on the 12th and 16th May, 1903, and
20th January, 1904, are invalid, the debentures mentioned in the
schedule hereto are invalid as against the holders of valid second
debentures of the company.
And whether Edward Doherty (or Frederick Hans Kennedy
on his behalf) should be allowed to prove on foot of the said
debentures mentioned in the schedule hereto in competition with
the holders of such valid second debentures in respect of advances
made to the company by Edward Doherty; or
Whether William Carroll, George Richardson, and Patrick
Gaynor, on behalf of themselves and the other second debentureholders, whom they were appointed to represent by order herein,
dated the 25th July, 1915, are in anywise precluded from relying
upon the invalidity of the said resolutions and the debentures
issued thereunder as against them by the orders of this Honourable
Court, dated the 8th June, 1911, made in au action in which the
said Edward Doherty was plaintiff, Frederick Hans Kennedy,
William Findlater, and the above-named company defendants,
whereby it was deelared : "that the plaintiff is entitled to a good
and valid lien c;>nhe debentures mentioned in the 26th paragraph
t
of the statement of claim, being the debentures mentioned in the
schedule hereto, so far as the same affect the freehold and leasehold
premises comprised in the trust deed dated the 9.th day of
November, 1905, for the amount of his advances," which said
order was affirmed by the Court of Appeal in Ireland by order
dated the 17th May, 1912, arid by the House of Lords by order
dated the 17th July, 1914.

VOL.1.J

CHANCERY

DIVIS LON.

Barton J.

SCHEDULE.

1916.
COX
Name of present
holder.

No. of debentures
and amount.

Debenture No.
both inclusive.

Amount of
Principal.

Hans

3 of £100

241 to 243

£300

Kennedy

as

4 of £100

262 to 265

£400

Trustee

for

3 of £10

305 to 307

£30

17 of £100

214 to 230

V.

£1iOO

Frederick

Edward Doherty

DUBLIN CITY
DISTILLERY.

'I'he facts referred to before Barton J. are fully reported in.
Oo» v. Dublin Oity Distillery (No.2) (1), and appear in his

judgment.
Serjeant

Sullivan

K G., and

Ocerend, for William

George Richardson, and Patrick Gaynor.
He1'bert TiVilson K.G., Garrett
Andrews, for Edward Doherty.

Carroll,

.

TV Walke1· K.G., and James

The arguments were similar to those in the Court of Appeal,
reported infra, p. 208.
BARTON

J. :-

July 10.

By order dated July 28th, 1915, the applicants William
Carroll, George Richardson, and Patrick J. Gaynor, holders of ,
second debentures of the Dublin City Distillery, were appointed
to irepresent the class of second debenture-holders, other than
certain specified debenture-holders one of whom is Edward
Doherty.
These representative parties have instituted this proceeding by way of memorandum for the purpose of having it
decided whether twenty-seven debentures issued by way of
security for advances to the company to Frederick Hans Kennedy
as trustee for Edward Doherty are invalid as against the holders
of valid second debentures of the company. Twenty-£our of these
debentures were £01'the amount of £100 arid three for the amount
(1) [1915J1 I.

u, 3Mi.

206

THE HUSH lmpORTS.

[1917.

of £10, in all £2430. They are impeached upon the ground
that the meetings at which the resolutions were passed authorizing
Cox
their issue were not properly constituted. Their invalidity is
v.
DUBLIN Crrr admitted, and the only question for decision is whether the
DrrSTILLRRY.
.
appIi tId are prec u e d :from averring thei mvalidit Y b Y an
iean s
eir
1 1
order of the Court, dated 8th June, 1911, affirmed on this point
by an order of the Court of Appeal and the House of Lords in an
action in which Edward Doherty was plaintiff, the company and
the trustees for the second debenture-holders were the defendants.
The applicants were not parties to that action, but it is said that
they were privies through their trustees, who were defendants.
That action was brought mainly to establish the plaintiff's
claim as pledgee of whiskey in casks against the company in
priority to the second debenture-holders. That was the only
contentious question in the action, but the plaintiff also stated in
paragraph 26 of the Statement of Claim that these twenty-seven
debentures had been issued to Frederick Hans Kennedy as trustee
for him as a security for money advanced and claimed, in paragraph 5 of the prayer of the Statement of Claim, a good and valid
lien on them for the amount of such advance and interest thereon,
and by the order of the Court he obtained a deolaration that he
was entitled to a good and valid lien upon the debentures mentioned in paragraph 26 of the Statement of Claim, and an account
of the moneys available to meet such lien, and of the sum due to
him on foot thereof. That order was made so far as the trustees
of the second debenture-holders were ooncerned in default of
defence.
In my opinion the applicants are not precluded by that judgment
from averring the invalidity 01 these debentures. On their behalf
reliance was placed upon the principle which was referred to the
old case of Hamond v. Walker (1), that trustees are not deemed
to represent the interest of absent cestuis que trust in a contention
between cestuis que trust inter se, although it may be otherwise in
a contention between a stranger and all the cestuis que trust. It
was suggested in reply that this was an obsolete doctrine which is
superseded by Rule 8 of Order 16 of the rules of the Supreme
Court. That rule enables trustees, executors, and administrators
Bat-ton J.
1916.

(1) 3.Tur. N. S. 686.

1917.

ound
izmg
ty is
: the
y an
point
In an
y and

dants,
1 that
.ts.
ntiff's
.ny III
only
,ted in
-seven
.rustee
para1 valid
lereon,
.hat he
:s menLccount
due to
.rustees
ault of
dgment
r behalf
a to the
deemed

ntontion
rwiee III
ust. It
which is
Supreme
listrators

VOL. I.]

CHANCEH.Y

207

DIVISION.

to sue and be sued as representing the estate of which they are
Barton J.
trustees without joining beneficiaries, and provides that they shall __ 1916.
be considered as representing such beneficiaries, but goes on to
provide that the Court or judge may, at any stage of the proceed.
floi .
dd e
b
mgs, ord er b-enei cianes t 0 b e a d or su s tit u t ed as par t'
1
ies,

v.
Cox
DUELJN

That useful rule does not in my opinion affect the principle to
which I have referred.
It recognizes that in certain proceedings
trustees and personal representatives
perly represent beneficiaries.
The principle referred to

would not adequately or pro-

in Hamond

v.

Walker

(1)

was

discussed in De Mora v. Concha (2), reported in the Court of
Appeal and in the House of Lords under the name of (loncha v .
Conclia (3). Although the ground of that decision does not affect
the present case, the principle to which I have just referred was
incidentally aJluded to both in the arguments and in the judgments
in the Court of Appeal. In the arguments it was recognized that
the executor does not represent beneficiaries in internal disputes;
and Fry L.J., in the course of observations made on behalf of
Baggally L.J. and himself, remarked, at P: 305, that" where the
litigants both claim under a third person, it seems that such third
person can never be a legitimus contradictor on behalf of one of
them against the other of them."
In Doherty v. Kennedy (4), and others, which is relied upon as
working an estoppel in the present case, Mr. Doherty did not
claim adversely to the trust estate in respect of these debentures,
but as a cestui que trust he claimed the benefit of the trust deed.
'I'hat being so, the trustees for the second debenture-holders cannot be regarded as having constituted a legitimus contradictor on
behalf of the applicants so as to preclude them from challenging
the validity of these debentures.
I must add that there is another serious difficulty in the way of
this plea of estoppel. What Mr. Doherty, in the action of

Doherty v. Kennedy (4), sought to obtain, and succeeded in obtaining, was not a declaration as to the validity of the debentures, but
as to the validity of his lien on them" for his .advances, and an
inquiry as to the amount of those advances, and the sums available
(1) 3 JUf. N. S. 686.
(2) 29 cs, D. 268.

(3) 11 A. C. 541.
(4) [1914] A. C. 823.

CITY

DISTILLERY.

THE HUSH REPORTS.

208

[1917.

for discharging them. 'I'hat declaration is not inconsistent with
19]6.
the present application. The validity of the debentures was never
c~x
in dispute. It was not raised, argued, or decided in that suit.
DUBLIN CITY Indeed the trustees do not appear to have been under any obligaDiSTILLERY . ti
.
it
1
IOn t 0 raise I . 'I'hei d u t y un der th e t erms 0 f cause 6 0 f the
err
'L
trust deed was to apply any moneys arising from the sale under
the trust for conversion contained in the deed towards payment
pari passu without preference or priority of arrears of interest
and principal to the holders of second debentures according to the
tenor of their debentures.
Other objections were raised to this alleged estoppel which I
. need not discuss. There will be a declaration that the debentures
mentioned in the schedule to the memorandum are invalid as
against the holders of valid second debentures of the company,
and that the applicants William Carroll, George Richardson, and
Patrick Gaynor, are not precluded from so averring by the order
of the Court, dated the 8th June, 1911, made in the action in
which Edward Doherty was plaintiff, and Frederick Hans
Kennedy, William Findlater, and the above-named company
were defendants.
Bartow J.

D. M. S.

Mr. Edward Doherty appealed to the Court of Appeal.
1917.
J an. 17 , .
18 for
Feb. 27.

H. Wilson I~.O. and G. W. Walket· KO. (J. Andrews with them),
the appellants:-

We contend that the respondents are bound by the decree of
the House of Lords in Dublin Oity Distillery, Lid., v. Doherty (1),
under which Doherty was declared entitled to a good and valid
lien on the debentures in question so far as the same affected the
freehold and leasehold premises comprised in the trust deed.
Barton J. has placed too narrow a construction on this decree,
namely, that Doherty was entitled to a lien on the debentures,
in so far as there were valid debentures in existence. This would
render the decree of the House of Lords entirely nugatory.
It
(1) [1914J A. C. 823.

r,
1

r

e
r
t
t

VOL.

1.J

CHANCERY DIVISION.

209

was never intended to decide that Doherty had a good charge
Appeal.
upon invalid debentures.
The judgment of Lord Parker is
1917.
Cox
specific to the effect that Doherty was a cestui que trust under
v.
the trust deed, and was entitled to the benefit of the trust deed DUBLIN CITY
with the other holders of second debentures. The debentures were DISTILLERY.
voidable only, and not void, until assailed. The company got
the cash from Doherty, and could have ratified the invalidity in
the creation of the debentures. Neither the company nor the trustees for the holders of second debentures raised this particular
question of invalidity in Doherty's action, although the validity
of the debentures was specifically raised on the pleadings, and
was in issue in the action. It cannot be said that Doherty's
action was wrongly constituted as to parties. Under Order 16,
Rule 8, the trustees for the second debenture-holders represented
the latter, who are as much bound by the decision as if they
had been made individual defendants. In Cox v. Dublin City
Distiller'y (No.2) (1), Palles C.B., speaking of this action, said:
"'1'he second debenture-holders as a class were represented in
that action by their trustees, and therefore the second debentureholders are estopped from raising, as against the plaintiff in that
suit, not only any defences which they did raise in that suit, but
also any defence which they might have raised, but did not raise
therein."
This disposes of the present contention. See also
Howlett v. Tarte (2), and Humphrie« v. Humphries (3).
[Ronan L.J. referred to In re La1·!.; Willdnson v. Blades (4).J
Assuming that, as laid down in Hamond v. Walker (5), trustees
will not be deemed to represent the interests of absent cestuis que
trust on any contention amongst the latter iuter se, the contest
in Doherty's action was not one amongst the cestuis que trust;
in addition to his claim to a pledge of the whisky he sought to
establish his claim as a cestui que trust under the trust deed.
In Ooncha v· Concha (6) the finding of the Probate Court on
the question of domicil was, a,s pointed out in the judgments,
irrelevant, and oould not operate. as an estoppel. The Irieti Land

at

(1) [1915] II. R. 345,
p. 372.
(2) 10 O. B. N. S. 813, atp, 826.
(3) [1910J 1 K. H. 796; [1910]
2 K. B. 531.

1917--VoL.1.

(4) [1896] 2, Ch. 788.
(5) ;) Jur. N. S. 686.
(6) 11 A. C. 541.
Q

[1917.

THE IRISH REPORTS.

210
Appeal.
1917.
O~~
DUBLIN

CITY

DISTILLEH.Y.

Commission v . Ryan (1) is clearly distinguishable.
There the
original judgment was obtained in default of a.ppearance, and
there was no record which could operate as an estoppel.
Here
we rely on the words of the decree in the House

of Lords.

[They also relied on the affidavit of Mr. R. Dickie, cited infra
in the judgment of the Lord Chancellor, to show that the appeal
to the House of Lords in Doherty's action was in fact brought on
behalf of the holders of valid second debentures.]
The following

oases were also referred

to :-Francis

v. Ha1"·

rison (2) ; Commissioners oj Sewers oj the City of London v. Gellatly (3)
In re New London and SubU1'ban Omnibus Oo., Appleyard v.
the same Co. (4); In re Cooper (5);

Wilkins

v. Reeves (6);

In re

Bowden, Andrew v. Cooper (7).
SerJeant Sullivan K.C., and Overend, for the respondents
The resolutions

for the

issue

;-

of the second debentures

in

question are void. 'I'here was no quorum:
Re Greyrnouth;
Point Elizabeth Railway and Coal Co., Ltd. (8); and the decision
in Cox v. Dublin City Distillery (9) in this effect is a binding
authority that the resolutions are invalid.
'I'he only question is whether respondents are prevented from
raising the point by the decision in Doherty v. Kennedy (10). The
respondents are second debenture-holders
of the original issue to
the amount of £13,570
in 1895.
They were not parties to
Doherty v. ,Kennedy (10). 'I'he trustees for second debentureholders who were parties represented' the whole 25,000 second
debentures, and could not represent one portion of their oestuis '
que trust in a dispute inter se. Hemond v; Walker (11), supra;
see also judgment
of Molony L.J. in Cox v. Dublin City
Distillery (9). If the trustees for seoond debenture-holders
did
.represent the respondents, the latter are nevertheless not estopped
from n~w alleging the invalidity of the debentures in question.
(1) [1900] 2 1. R. 565.
(2) 43 ci, D. 183.
(:1) 3 Oh. D. 610.
(4) [1908] 1 ou. 621.
(5) 20 Oh. D. 611.
(6) 3 W. R. 305.

(7) 45 Oh. D. 444.
(8) L 1904] 1 Oh. 32.
(9) [1915] 1 1. R. 345.
(10) [1914] A. C. 823.
(11) 3 Jur. N. S.,686.

VOL.

1.]

UHANCER Y DIVISION.

211

'I'hat action was in effect one to establish Doherty's right to a All/leal.
pledge on the whisky, and no importance was attached to the
1917.
.
f ar as regal' ds
Cox
question of the validity of the debentures, save so
.
v.
the question of non-registration.
DUBLIN CITY
.
E st oppe 1 by reeor IS con fine d t0 rnatt ers appeanng on th e DISTILLERY.
d .
.
record, and the record only declares Mr. Doherty entitled to a
valid lien on the debentures, and does not decide on the validity
of those debentures on the ground in question.
Further, the trustees could not raise the point against their
own cestui que trust. Once a debenture, regular on its face, was
issued, the trustees became trustees for the holder (see judgment
of Lord Parker in Doherts) v. Kennedy (1). If the trustees could
have raised this point, it was one raisablo only by special defence,
and not by a mere traverse, and the trustees delivered no defence,
and judgment went by default: Howlett v. Tarte (2), supra;
Humphries v. Humphries (3), supra; Irish Land Commiesior; v.
Ryan (4), supra.
The appellants are not entitled to use the affidavit of R. Dickie,
filed on the petition of competency; it is not ill evidence; the
respondents have had no opportunity of giving evidence to show,
as the fact is, that the persons whom they represent were no
parties to any such arrangement as is there suggested. But if
the affidavit were in evidence, it only states that" certain" second
debenture-holders agreed to indemnify the liquidator, and this
could not bind the class.
The following cases were also referred to :-De Mora v.
Concha (5); Concha v. Concha (6), supra; Worman v. WOJ'man (7).

H. Wtteo« K.O., in reply.
I

l
l

(1) [1914J A. C. 823.
(2) 10 C. B. N. S. 813,

(4)
(5)
(6)
(7)

at

p.826.

(3) [1910J 1 K. B. 796; [1910J
2 K. B. 531.

Q2

[1900] 2 1. R. 565.
29 Ch. D. 268.
11 A. C. 541.
43 Ch. D. 296.

212

THE IRISH REPORTS.

Appeal.
1917.

SIR IGNATIUS

J.

O'BRIEN

[1917.

O. :-

In this case it is our duty carefully to consider the judgment
e,
of Mr. Justice Barton, by which he has held that the previous
DDUllLIN CITY proceedings, in which Mr. Doherty was plaintiff, and the comISTILLERY.
pany and the trustees for the second debenture-holders were
defendants-proceedings
which ultimately came before the House
of Lords, and were decided to a certain extent in Mr. Doherty's
favour-were of no effect whatsoever as between Mr. Doherty and
certain other of the second debenture-holders in this company,
whose interest it was to ha·ve it determined that Mr. Doherty's
claim in respect of certain debentures was wholly bad. It is not
that the result arrived at by Mr. Justice Barton would enhance
the value of the general assets of the company available for
unsecured creditors, but the exclusion of one debenture-holder
would, in the circumstances here existing, enhance the value of
what was left available for the remaining debenture-holders.
It is absolutely essen tial, in order to arrive at a definite view
of the facts and of the law, to consider carefully the nature
of the different stages of this action of Doherty v, Kennedy (1).
Mr. Doherty had a double claim against the assets of the company. In the first place, he claimed to have a prior right against
these assets in respect of certain pledges made to him of whisky,
part of the stock-in-trade of the company; and, secondly, he
claimed that, even if he had not got an effective lien on this
whisky, in so far as there was property comprised in a certain
deed of trust, of which Mr. Hans Kennedy was trustee, he
had, through certain debentures, which he owned or controlled,
a limited claim against the assets of the company pari passu with
other holders of second debentures.
The action was brought for the purpose of determining
whether or not, 1, there was a lien created on the whisky, and,
2, whether Mr. Doherty had a valid charge on the assets of the
company comprised in this deed of trust.
It was decided
ultimately by the House of Lords that, owing to certain defects,
which I need not specifically refer to, the issue of the warrants,
Cox

(1) L1912] 1 I. R. 346, a63.

VOL.

LJ

CHANCERY DIVISION.

213

which were supposed to create a lien on the whisky, was ineffective; Appeal.
but the House of Lords, on the other hand, decided to a limited _~~~_._
extent in Mr. Doherty's favour, holding that he was entitled to
C~.x
a 'good and valid lien on the property comprised in the trust deed. DUBLIN CITY
[His Lordship referred to the order of the House of Lords of DISTILI,ERY.
the 17th July 1914 (1) , and continued.]
Sir Ign.atiusJ.
O'Brien C.
'I'he result was that the other debenture-holders were placed
in a better position with regard to the assets of the oompany than
they would have been in if Mr. Doherty had succeeded in his
claim based upon a pledge; but, of course, in so far as his claim
was declared to be a valid one in respect of the premises in the
deed of trust, it placed him in an advantageous position in respect
of his claim, not, of course, to the same extent as if he had
succeeded in sustaining his claim as pledgee. But the decree of
the House of Lords gave him a substantial advantage, which it
is now sought to take away from him.
The first matter which has to be determined before coming to the
question of estoppel is, what is the meaning of the former order
in connexion with the same subject-matter, which Barton J.
made, and whether or not the present declaration which has been
made by Barton J. is, as he considers, consistent with his own decree
and that of the House of Lords. '1'he order made originally by
Barton J. in Doherty v. Kennedy (2) on the Sth June, 1911,
directed, amongst other things, an account of the proceeds of
the sale of the whiskies, which, as the learned judge held,
were pledged to Mr. Doherty, and "an account of what charges
for first debenture-holders, costs, charges, and expenses of
realization and receiver are payable out of said proceeds in
priority to said pledge ... ," and the plaintiff was declared" entitled
to a good and valid lien on the debentures mentioned in the
twenty-sixth paragraph of plaintiff's statement of claim so far as
the same affect the freehold and leasehold premises comprised
in the trust deed dated the 9th day of November, 1895, for
the amount of his advances." That was the order made by
Barton J. and affirmed by the House of Lords in so far as the
latter part dealing with the trust deed is concerned, and it can bear
no meaning other than this-that
Mr. Doherty had, a good charge
(1) [1914J A.: C. 823, at p. 868.

(2) [1912J 1 1. R. 346, 363.

214

THE IRISH REPORTS.

[1917.

on certain assets of the company. Lord Parker,in
giving
judgment in the House of Lords (1), places the matter beyond
Cox
all doubt.
v.
DUBLIN CITY
" By this deed," he said, "certain
freeholds and leaseholds
DISTILLERY.
belonging to the company were conveyed or demised to the
Sir Ignatius J. trustees therein named, upon trust in certain events therein
O'Brien C"
h
.
h
specified to sell t e same and hold the proceeds subj eet to t e
payment of costs in trust for the holders of such second debentures as the company might thereafter issue. Clearly neither the
trust deed itself nor any second debentures issued prior to the
passing of the Companies Act, 1900, required registration under
that Act. But the company, after the passing of that Act, issued
certain second debentures to the respondent, these debentures
containing 1, a clause entitling him to the benefit of the trust
deed, and 2, a floating charge over all the assets of the company.
So far as this floating charge is concerned, it is admitted to be
void as against the liquidator of the. company for want of
registration under the 14th section of the Act, but the question
arises whether, notwithstanding such want of registration, the
respondent is not entitled to the benefit of the trust deed pari
passu with the other holders of seoond debentures. I have oome
to the oonclusion that he is so entitled. As a holder of second
debentures he is a cestui que trust under the trust deed, which
itself is good as against the liquidator, though unregistered. His
debentures are not entirely avoided by the 14th seotion, even
against the liquidator, but avoided only so far as any security on
the company's property or undertaking is thereby conferred.
In my opinion the security to which the respondent claims title
is, so far as the property comprised in the trust deed is concerned,
conferred by such deed and not by the debentures. Even if the
debentures had not referred to the trust deed, the respondent
would have been a oestui que trust thereunder. . .. In my
opinion, on this point the appeal fails."
I am quite unable to accept the view of Mr.J ustice Barton
as to the consistency of his present order with his own former
order and. the decision of the House of Lords. He says in thejudgment now under review, "I must add that there is another
Appeal.

1917.

(1) IJubh'n City Distillm'y,

u«, v, Doherty,

[19~4J A. C. 823, at

r-. 859.

VOL.

1

r
3-

r

1.J

CHANCERY DIVISION.

215

serious difficulty in the Way of this plea of estoppel. What Mr.
Appeal.
Doherty, in the action of Doherty v. Kennedy (1), sought to obtain, __
1~17. and succeeded in obtaining, was not a declaration as to the validity
Cox
.
v.
of the debentures, but as to the validity of his lien on them for DUBLIN CITY
hi dvances, an d an Inqmry as to tl1e amoun t 0 f th ose avances DISTILLERYan i
d
ISa
-and the sums available for discharging them. That declaration Sir IgnatiusC.J.
O'Brien
is not inconsistent with the present application. The validity' of
the debentures was never in dispute. It was not raised, argued, or
decided in that suit. Indeed, the trustees do not appear to have
been under any obligation to raise it."
I am absolutely unable to agree in the view that the declaration now made, namely, that the debentures in question are
invalid as against the holders of valid second debentures of the
company, is consistent with the former decision of the House of
Lords. That, however, does not dispose of the case. There is no
doubt that the entire claim of Mr. Doherty might have been
effectively assailed in the former proceeding before the House of
Lords by reason of a defect in the resolution forming the first
step towards the creation of a valid charge, there not having been
a majority of technically independent directors present when the
right was sought to be conferred on Mr. Doherty. So far as the
company is concerned it is admitted that the order made by the
House of Lords is a complete estoppel as to this matter, and it is
necessary to see whether or not it is equally binding on the
other debenture-holders. It has been suggested in the argument
before us that a document to which I shall refer ought not to
-be referred to for the purpose of ascertaining what the real
position of the trustees of this trust deed was, but I cannot agree
in this. The original action was brought in this way. It was
evident that the position of Mr. Doherty, claiming as he did to be
a pledgee of the whiskies, was one hostile to the other persons who
held second debentures, and, it being a hostile claim, it was
necessary that Mr. Doherty should pursue it in a hostile manner,
bringing before the Court all parties interested in resisting his
claim, which was intrinsically of a twofold character. He
applied to the Court for leave to take proceedings. He Was
joined originally with a Mr. Kennedy (not the gentleman who was
(1) [1912J 1 I. It. 3-1:6, 363.

216

THE IRISH REPORTS.

[1917.

a trustee under the trust deed); but, after a short time, this
1917.
Mr. Kennedy, whose position would have been the same as that
Cox
of Mr. Doherty, elected to withdraw from the proceedings, and
v.
DUBLIN Cny Mr. Doherty alone carried on the further proceedings, which were
DIS'r~RY.
constituted in this way. In the first place, the company were
Sir,Ig~atius J. made defendants.
The company were, owing to the illegality
OBrIen C"
ken pace, ound to resist t h e claim of M r. D 0 h erty
lb'
.
WhICl}. ta
had
in every way permitted to them by the law, either by seeking to
destroy the pledge, or by denying the validity of the claim based
upon the trust deed; and, accordingly, we find that not only the
company but also the trustees of the trust deed were made defendants. There was no other practicable way in which Mr. Doherty
could have constituted his suit so as to have represented before
the Oourt all parties interested in its subject-matter so that they
might be bound, and it is not suggested that the suit was improperly constituted by reason of the omission of the debentureholders by name, or that one, or ten, or all of the other debentureholders should have been named as defendants. Indeed, some
of these debenture-holders might have adopted a view consistent
possibly with fair play towards Mr. Doherty, and might not
have oared to raise the question of the validity of his claim.
Others might have taken a different view. Mr. Doherty, however,
was under no obligation to speculate as to the views held by the
different debenture-holders, so long as all were represented in the
action before the Court, and provided that there was a person
before the Court interested in attacking the validity of the debentures as a charge upon the assets of the company. The plaintiff's
statement of claim specifically asked for a declaration that he was
entitled to "a good and valid lien on the said debentures,
mentioned in the 26th paragraph hereof" ...
(these being the
debentures we are now dealing with) "for the amount of his
said advanoes and interest"; and the defendants by their defence,
in addition to traversing the issue of these debentures, pleaded that
if the issue was made " such issue was ultra vires and void."
It is true that the exact position afterwards taken up in the
argument before Mr. Justice Barton, and which formed the
substratum of the judgment of the House of Lords, may not,
perhaps, have been pleaded in great detail; but the point was
Appeal.

VOL.

1.J

CHANCERY DIVISION.

clearly raised that, whether the pledges were good or bad,
Mr. Doherty had an unquestionable right to claim through the
trust deed. 'I'hs Court of Appeal was of opinion that the pledges
were good, and that Mr. Doherty's claim was valid in its entirety.
There then arose a question whether or not the liquidator could
of his own motion and without the leave of the Court below
,
,
appeal to the House of Lords. It appears that the liquidator was
refused leave to appeal, and when a petition of appeal to the
House of Lords was subsequently presented by the company and
the liquidator Mr. Doherty presented an interlocutory appeal
praying that the former petition of appeal was incompetent.
N ow, in order to meet that application an affidavit was filed by
Mr. Robert Dickie on the 13th June, 1913, in which he sets out
the. history of the proceedings. I shall read portion of this
affidavit :-" Mr. Smyth applied to Mr. Justice Barton for liberty
to defend the proceedings on behalf of the second debentureholders and creditors. The said trustees for the second debentureholders also applied for leave to defend, but Mr. Justice Barton
refused to allow the trustees to defend at the expense of the estate,
and appointed Mr. Smyth to defend the action in the name of the
distillery company, and I beg to refer to this order dated the
14th December, 1909, which was made in the debenture-holders'
action. No further step was taken by the trustees, and the action
was defended by Mr. Smyth in the name of the company as
provided by the said order. Mr. Justice Barton gave judgment
iu favour of Mr. Doherty as far as his pledge on the whisky was
concerned, but decided that the second debentures which he held
as collateral security, and which were issued to him by the company after the commencement of the Oompanies Act, 1900, were
void as against the whisky, inasmuch as they had not been
registered pursuant to the provisions of said Act, but held that
they were good as regards the leasehold premises, the trust deed
securing them having been executed prior to 1900. From this
decision the receiver and liquidator appealed to the Court of
Appeal, save in so far as the decision was in his favour; and the
Court of Appeal (Lord Justice Cherry dissenting) affirmed
Mr. Justice Barton on the question of the pledges of the whisky,
but gave no decision as regards the validity of the second

217
Appeal.
1917.

Cox
v.
DUBLIN

CITY

DISTILLERY.

SirIg~atiusJ.
O'Brien C.

THE IRISH REPOltTS.

21~

L1917.

debentures which Mr. Doherty held. The result of the decision
___ 1917_: __ in this action of Mr. Doherty's is that the pledgees, who were
Cox
either directors of the company or banks which had been colv.
DUBLIN CITY laterally secured by the personal guarantee of the directors, take
DISTILLERY.
alm~st the entire remaining assets of the company, so that there
Sir IgnatiusJ. will practically be nothing available for the ordinary second
O'Brien C.
debenture-holders who paid the full price for their debentures,
and certainly nothing for the ordinary creditors of the 'oompany.
'I'he receiver and liquidator having been advised by eminent counsel
both at the English and the Irish Bar that the judgment of
Lord Justice Cherry was, in their opinion, the true view of the
law, he applied, in the debenture action, to Mr. J ustice Barton to
allow him to carry the case to the House of Lords. Mr. Doherty's
counsel appeared on this application, and opposed same on the
grounds that this would be allowing the receiver to fight the
pledgees out of money which had been decided was theirs.
Mr. Justice Barton took this view, and refused the liberty, but
Appeal.

that he would give eVeJ'y facility
to the receiver to take
the case to the House of L01'ds, provided that the second debentureholders, and the creditors for whom he was appearing, provided him
wdJi the fund«.
The receiver having conveyed this intimation of

drtfed

Mr. Justice Barton to certain of the second debenture-holders
who are not pledgees, and to creditors, he was instructed by
them to proceed with the appeal at their expense, and he accordingly brought same, and has lodged the £200 security, and has
entered personally into a recognizance of £500."
The House of Lords held in favour of the competency of the
appeal, and the decision was in favour of Mr. Smyth and the
general creditors of the company so far as the question of pledge
was concerned, but was against the company and the other debenture-holders, who might desire to defeat Mr. Doherty's claim
with regard to the property comprised in the trust deed. The
point has now been raised that the Court is not at liberty to look
at this statement of Mr. Dickie's for the purpose of ascertaining
whether the position now taken up in this memorandum by some
of the second debenture-holders is one which entitles them to say
they are not bound. I have considered this objection very carefully, but, in my .opinion , it would not be in accordance with

219
H7.

non
'ere
colake
lere
ond
ires,
any.
msel
It of
; the
m to
Irty's
l the
t the
heirs.
" but
) take
niure~dhim
ion of
olders
.ed by
.ecordad has
oIthe
nd the
pledge
deben~ claim
l. rrhe
to look
rtaining
oy some
11 to say
Iry careroe with

VOL.

1.J

CR ANCERY

DIVISION.

natural justice that these other debenture-holders,
who now allege
that they were pure strangers to these prooeedings, could not

Appeal,

be confronted with doouments showing that they were active
litigants, and not strangers.
The position technioally was that an

v.

19l7.
Cox
DUBI,IN CITY
DISTILLERY.

the second debenture-holders
through the trustees were represented
nen .
on the record, and prima facie the judgment would seem to me to SiOl'~Bg~·atiuCsJ.
bind an the debenture-holders through those who represented them.
I say prima facie, because it has been argued that it is not so. Now,
it is most material to see what the trustees did. rfhey were, of
course, in the position-to
a certain extent an awkward one for
them-that
they were reluctant to determine whether any partioular individual was or was not a cestui que trust of tbeirs.
If what
had been done did not give Mr. Doherty a oharge, he would not
have been one of the cestuis que trust of these trustees; but it
would have been a difficult task for the trustees to determine which
of the debenture-holders
they ought to attack, and which they
ought to defend.
They accordingly
took this course. They
entered an appearance in the action, but did not deliver a defence.
This would seem to have been the natural course to take. Why?
because the issue, so far as the dissentient debenture-holders
were
concern-ed, was the same whether Mr. Smyth was the litigant
or any other persoll.
Wbat would have been the position if one of these debentureholders had applied for leave to be added under Order 16 as
a defendant to litigate some point independently?
I think that
Mr. Justice Barton would have decided &S he did, namely, that
to avoid further expense, leave to add them should not be given;
that the interest of the debenture-holders
was amply protected
by the person whose interest it must be to destroy the plaintiff's
security in toto. 'I'he company having put in no defence, the
cas,e came on for judgment on admissions as against them, and for
trial in the ordinary way so far as the liquidator
was concerned.
The liquidator raised every objection to the debentures
which he could possibly raise, both at the hearing of the action
and in the House of Lords, except the point raised in the
Greymouth case (1). The result was an important success for the
(1) [1904J 1 cu. 32.

'220
Appeal.
19 I 7 .

THE IRISH REPORTS.

[l917.

second debenture-holders who had guaranteed the costs, although
Doherty succeeded in part.

__Mr.

Oox
The matter now comes before the Court in the awkward form
v.
.
DUBLIN of a memorandum. I am entitled to assume that the persons
OITY
DISTILLERY. were anxious to oppose the debentures in toto, and who were
who
-Sir,Ig~atius J. unquestionably, as it seems to me, having regard to the cause of
OBrien C.
•
the proceedings, represente d by t h e I' id a t 01' .in t h e appea I
lqm
before the House of Lords, must be to some extent the same
persons who now claim that they are not bound by the decision
of the House of Lords at all, and who say that (although
they obtained a substantial advantage by that decision, and
succeeded in defeating Mr. Doherty's claim, in so far as it was
based on the existence of a pledge of the whisky), there was an
omission in not raising the point decided in the Greymouth case (1),
and that they are now entitled to start afresh, so to speak, in their
attack upon these debentures.
A great deal has been said about the question of estoppel, the
principle of which has often been made the subject of disapproval
from the time of Coke to that of Lord Justice FitzGibbon.
For
myself I fail to see why this should be so, because it appears to me to
afford a convenient means, and sometimes the only means, of defending a position which may be just and fair as between man and man.
It appears to me that this whole question was really litigated in
the interests of the debenture-holders, though in form by the
liquidator, and it would be an unfortunate state of 0111' law if the
dehenture-holders could escape from the result of these proceedings,
and now commence other proceedings de novo. Mr. Justice Barton,
however, has acceded to the contention of these debenture-holders,
which he considered to be in accordance with the decision in
Hamond v. Walker (2), and the passage which he has cited from
the judgment of Fry L.J. in De Mora v. Ooncha (3). To say that
the second debenture-holders hostile to Mr. Doherty could not
be bound unless he made each one a defendant to the action, is a
far-reaching proposition, and one which would introduce a great
deal of uncertainty into cases like the present. How Mr. Doherty
was to discover and select as defendants those who might be
(1) [1904J 10h. 32.
. (i) 3 JUl'. N. S. 686.

(3) 29 Ch. D. 268, at p. 305.

_------!I!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!I!!II!!!!-o~!!!!IIIIIIIo-.!!!!lllllll-!!!!IIIIIII--ooo-lIIIIIlIIII-o-o

VOL.

T.J

••••••
--

~---=--=--oo-----o-o-

221

CHANCERY DIVISION.

hostile to him I do not quite know. The contention, however, Appeal.
is that as between them and Mr. Doherty they are entitled to
1917.
say that they are not bound, because they were not parties to
C~x
v.
the original proceedings, although the trustees were, and although DUBLIN CITY
they could have applied to be added as parties to the proceedings, DISTILLERY.
and did not do so. Why should Mr. Doherty have ignored the Sir Ignatius J.
O'Brien C.
provisions of Order 16, rule 8, and have added each of these
gentlemen as a defendant to see whether or not he would dispute
his claim? I do not say that there may not be cases in which the
fact that trustees are parties may not prevent litigation of rights
between cestuis que trust themselves; trustees may be added solely
for the purpose of technically representing the estate, and there
may be room for the operation of this suggested principle in such
a case, but the present case is not one of that class, and I do not
understand the dictum of Fry L.J. in De Mora v. Concha (1)
as deciding any such unfortunate proposition as that in such a
case as the present all the debenture-holders should have been
made defendants.
The suit was, in my judgment, properly
constituted, the trustees being named as defendants, and if any
particular debenture-holder wished to be separately represented
he should have applied to the Court for liberty to defend.
'I'he appeal to the House of Lords was one promoted in the
interests of the second debenture holders other than Mr. Dohertythose who were not holders of pledges. The general assets of the
company could not have been, as I understand the figures,
enhanced to the extent of one penny by the success of thl appeal.
The appeal was brought in substance for the benefit of these
other debenture-holders, and I consider that I am entitled in the
interests of justice to look at the documents filed in that matter to
see that this was not the fact.
The case of Concha v. Concha (2) has been strongly pressed
upon us as a binding authority in favour of the respondents, but
I cannot accede to this contention. The question that arose in that
case was as to whether a certain decree of the Probate Court in
1860 was conclusive in rem on a question of domicil. [His Lordship
referred to the facts of the case, and continued.] It was there
0_

(1) 29 Ch. D.26S.

(2' 11 A. C. 541.

222

THE IRISH REPORTS.

L1917.

carefully pointed out in the judgments of the Court that this
1917.
question of domicil was one not necessary to be determined in the
Cox
application made to the Probate Court, and it was also pointed
v.
DUBLIN CITY out by Lord Blackburn
(p. 561) as a matter of importance in
DIS'.ru,LER Y. consi deri
•
th e effect t 0 b e gIven t 0 th e JU d gmen t 0 f err Cresswe 11
.
.
c:c.
__
ermg
SirIgnatius J. Cresswell, that by the Probate Act of 1857 the jurisdiction of the
O'Brien C.
judge of the Probate Court was altered, the former jurisdiction
over suits for distribution being taken away, and vested from that
time solely in the Court of Chancery.
In the present case the Court had not only jurisdiction to
entertain the question whether Mr. Doherty had a valid charge
on the property comprised in the trust deed, but was bound to
exercise that jurisdiction, and the resulting judgment was, to my
mind, a judgment binding on all parties who were made amenable
Appeal.

to the procedure.
The case of Concha v. Concha (1) to my mind has no a.pplication.
The case of the Irish Land Oommission v. Ryan (2) has also been
relied on by the respondents, but appears to me to be clearly
distinguishable.
Lord Justice Holmes in that case points out
clearly the essential difference between a case like the Irish Land
Commission v, Ryan (2), where there was a default of appearance
to the writ, and judgment was entered in the office, and a suit like
that which we are now considering, where we have a specific claim
of Mr. Doherty clearly pleaded in the statement of claim, an
appearance entered by the trustees, a hearing in Oourt, and a
judgment entered which is a matter of record. It appears to me
a startling proposition that a plaintiff who has delivered a statement of claim setting forth his cause of action is in a worse
position when the defendant fails to file a defence than he would
be in if a mere bogus defence were put on the file of the Court
which the defendant could not subsequently substantiate. The
defendant who does not file a defence admits the averments in
the statement of claim, but the plaintiff cannot by reason of this
obtain judgment in the offioe; he must apply to the Court, and
the Court determines what judgment is 'proper to be entered.
(1) 11 A. C. 541.

(2) [1900] 2 I. R. 565.

1917.

this
n the
inted
ee in
swell
If the
.otion
l

that

.on to

harge
nd to
[0 my
-nable
.0

ap-

) been
;learly
ts out
t Land

arance
lit like
:;claim
lID, an
and a
\ to me
" state, worse
l would
e Court
l.
The
Lents in
of this
irt, and
sntered-

VOL. 1.J

CHANCERY DIVISION.

223

In the present case the Court had before it a perfectly clear state- Appeal.
ment of claim, claiming a right against the property comprised in
1917.
Cox
Th e 0ourt
the trust deed, the trustees being before the Court.
.
v.
determines what the effect is of the failure to deliver a defence, DUBLIN CITY
.
.'
h hs nlai 'ff' I'
.
DISTILLERY.
and says that there IS an adrnissiou t at t e P ainti s c aim IS a
valid one against the property comprised in the deed. What more SiO~~~~~uc:'
could the plaintiff do? If the argument based on the supposed
effect of the decision in the Irish Land Commission v. Ryan (1)
is sound, it appears to me that the entire procedure in Mr. Doherty's
action is rendered futile. I do not consider that the Irish Land
Commission v. Ryan (1) is an authority in favour of the respondents. At p. 572, Lord Justice FitzGibbon said :-" That a
judgment by default has an operation by estoppel cannot be
denied; but the ground and extent of that estoppel must, in my
opinion, be found on the face of the judgment itself, and cannot
be inferred or deduced from the pleading of the party who has
obtained the judgment, when the defendant has said nothing,
and done nothing, and has merely allowed the judgment to go by
default."
Athough this passage is relied on by the respondent,
the learned Lord Justice clearly recognizes that a judgment by
default may operate as an estoppel, and when, as in the present
case, we find, on looking at the record, a complete statement of the
plaintiff's claim, and a judgment entered in open Court based on
admission of that claim by the defendants in not delivering a
defence, that judgment must, in my opinion, operate as an
estoppel.
In conclusion I shall refer to the judgment of Palles C.B. in
Cox v. Dublin City Distillm'Y (No.2) (2). At p. 372 the learned
Ohief Baron says :-" This brings me to the third question, viz.,
whether the judgment in Dohedy v. Kennedy (3), a decision
between a second debenture-holder and the company, estops the
valid second debenture-holders from alleging that certain of those
second debentures not specially represented in that suit are invalid. Now, I do not wish to be misunderstood. I hold that as
between Doherty, the plaintiff in that suit, and the company and
the second debenture-holders, the whole matter as to the validity
(1) .[1900J 2 1. R. 565.
(2) [191511 1. R. 345.

(3) 1:.1912J11. R. 346, 363 ;
[1914] A. C. 823.

224

THE IRISH REPORTS.

[1917.

of Doherty's claim is res judicata. The second debenture-holders
1917.
as a class were represented in that action by their trustees, and
Cox
therefore the second debenture-holders are estopped from raising,
v.
DUBLIN CITY as aga~'nst the plaz'ntifJ in that suit, not only any defences which
DIS===:ERY. they did raise in that suit, but also any defence which they might
Siof~Bgn.atiucsJ. have raised, but did not raise therein."
'I'his to my mind is an
flen
.
accurate statement of the effect of the decision in the former case
in regard to the question argued before us in this appeal.
I am of opinion that the order appealed against was wrong,
and that the appeal must be allowed.
Appeal.

RONAN

L.J.:-

It appears to me that there are really three questions in the
case :1. Did the House of Lords decide in Dohertv' 8 Case (1) that
Doherty was a cestui que trust under the trust deed?
2. Did they succeed by that order in giving effect to their
decision?
3. If questions 1 and 2 are answered in the affirmative, are
the respondents estopped by the decision and order of the House
of Lords from asserting that Doherty is not a cestui que trust
under the deed, and entitled to the benefit thereof as a security
for his advances to the company?
The third question is mainly a question as to whether Doherty'S
action was properly constituted as to parties. It does not arise if
either 1 or 2 is answered in the negative. I shall, therefore, in
the first instance consider 1 and 2 entirely apart from the question
of parties or estoppel.
'I'his is a proceeding in the winding-up of the Company, the
object of which is to ascertain whether Doherty is entitled to
prove in the winding-up as a secured creditor on foot of the
security created by the deed. The debentures gave a security as
a floating charge
the property of the company other than that
comprised in the deed. 'I'he deed is an ordinary mortgage of
land to a trustee upon trust for persons described in it. In my
opinion it is clear that in Dublin Oz'tyDistillery, Ltd., v. Dohm·ty (1)
the House of Lords at all events intended. to decide-I, that the

on

(1) [1914J A. C. 823.

VOL.

1.]

CHANCERY DIVISION.

225

trust deed was good against the liquidator; 2, that. Doherty was a Appeal.
cestui que trust under the trust deed. At p. 859 Lord Parker_
ll)) 7.
S(1ys
:-" rrhe question arises whether, notwithstanding such want
':
of registration, the respondent is not entitled to the benefit of the DUBLIN" CITY
trust deed pari passu with the other holders of second debentures. DISTILLERY.
I have come to the conclusion that he is so entitled. As a bolder Ronan L.J.
of second debentures he is a cestui que trust under the trust deed,
which itself is good as against the liquidator though unregistered.
His debentures are not entirely avoided by the 14th section, even
against the liquidator, but avoided only so far as any security
on the company's property or undertaking is thereby conferred.
In my opinion the security to which the respondent claims title
is, so far as the property comprised in the trust deed is concerned,
conferred by such deed and not by the debentures. Even if the
debentures had not referred to the trust deed, the respondent
would have been a cestui que trust thereunder."
The above portion of this judgment is expressly adopted by
Lord Sumner at p. 868. Lord Atkinson at p. 851 gives judgment to the same effect. 'I'he judgment does not decide the
amount due to Doherty on foot of the security created by the
deed. It only decides that the deed is good, and that he is a
cestui que trust under it. This seems to me to dispose of question
No.1, which must be answered" yes."
As to question No.2, the order of the Court of Appeal affirmed
the judgment of Barton J. That judgment declared" that the
plaintiff is entitled to a good and valid lien on the debentures
mentioned in the 26th paragraph of the statement of claim so far
as the same affect the freehold and leasehold premises comprised
in the trust deed, dated the 9th November, 1895, £01' the amount
of his advances." The order of the House of Lords (1) is as
follows :_" Order of the Court of Appeal in Ireland reversed, save
so far as it affirmed that portion of the order of Barton J., which
declared." [And then the above declaration is set out in terms.]
There can be no doubt as to the meaning of the words "so
far as the same affect"; they mean "so far as the debentures
affect," not so far as "the lien affects." I mention this because
(1) [1914] A. C. 868.

1917-VoL.1.

R

THE IRISH REPORTS.

226
Appeal.

____
1917.
Cox

v.
DUBLIN CITY
DISTIl,LEttY.

Ronan L.J.

l1917

in his judgment in Cox v. Dublin City Dis#ller'Y (No.2) (1);
Barton J. reads" affects" for" affect," which would make the
words" the same" refer to the lien and not to the debentures.
The debentures were issued to Kennedy as trustee for Doherty.
Kennedy was a defendant. The debentures were in his name, but
he held them as trustee to secure Doherty's advances. The
holders of debentures were cestuis que trust of the trust deed. The
plain meaning of the declaration was that Doherty was entitled
to rank as a cestui que trust of the deed, and to have the benefit
thereof as a security for his advances. If the declaration did not
mean that, it was meaningless. I have referred to this at an early
stage, as I am by no means sure that Mr. Justice Barton's
judgment in the present case does not involve the proposition that
Doherty's case really decided nothing. If it did not decide what
Lord Parker purported to decide, I am unable to disoover what it
did decide. This is quite distinct from the question on whom the
decision is binding. This latter question assumes that something
was decided. Questions 1 and 2 would equally arise if all the
seconddebenture-holders had been defendants in Doherty's Case (2).
As to questions 1 and 2, the result of Dohm'ty's Case (2) is stated
with great precision by Barton J. in his judgment in Cox v. Dublin
Distillery (1), thus :-(, In paragraph 26 of the statement of claim
and clause 5 of the prayer the plaintiff alleged the material facts
upon which his claim to a charge on these debentures was based,
and prayed for a declaration of his right to a good and valid lien
on the debentures. The defendants in paragraph 15 of the statement of defenoe pleaded that the issue of these debentures was
void. That is what this Court is asked to decide to-day. The
question whioh is raised upon this memorandum was open under
that plea. No contentious question of fact was raised about the
debentures, but questions of law were raised; and it was held that
a valid oharge was created upon the premises oomprised in the
debenture trust deed, and a deolaration was made in this Court to
that effect. 'I'he company appealed upon that point unsuccessfully
to the Court of Appeal and to the House of Lords. 'I'he order
in the House of Lords expressly affirmed, and protected the
plaintiff as regards the costs of. that portion of .the order of
(1) [1915] 1 J. R., at p. 356.

(2) [1914] A.. C. 823.

VOL.

I.]

CHANCERY

DIVISION.

227

this Court which declares that the 'respondent (Doherty) is
AJlpeai.
entitled to a good and valid lien on the debentures mentioned in
1917.
the 26th paragraph of the statement of claim, so far as the same
Cox
v.
affects (error for 'affect ') the freehold and leasehold premises DUBLIN CITY
ib d i th t t d d'"
DISTILLERY.
d ssor; e III e rus ee.
In favour of whom was this valid charge upon the premises Ronan L.J.
created? Beyond all possible doubt, in favour of Doherty.
'I'his statement of Barton J. in my opinion shows plainly,
1, that the effect o! the decision in his opinion was that Doherty
had a valid charge on the premises comprised in the trust deed,
and 2, that the effect of this was what he intended by his declaration. The House of l.• adopted both the substance of the
ords
decision and the form of the declaration. If the allegations as to
the issue of the debentures in paragraph 26 had not been proved or
admitted, Doherty's action must have been dismissed. A judgment
in his favour necessarily involved that he was the lawful holder
of valid debentures. The valid charge could only be created
in favour of Doherty if he was the holder of valid debentures
either personally or through his trustee. In the next paragraph
of this judgment (1), however, Barton J. substitutes for" a valid
charge upon the premises comprised in the debenture trust
deed" "a chargeant on the debentures," and then says that he
expresses no opinion on the validity of Mr. Doherty'S debentures, as their validity was not open upon the memorandum.·
Does he mean by this that all that he, the Court of Appeal,
and the House of Lords decided was that Doherty had a charge
on certain pieces of paper, but that there never was any
decision that he had any. charge on the trust premises, or that
he was a cestui que trust under the deed? This seems an
extraordinary proposition to impute to the learned judge; but,
after the most careful consideration, I can put no other meaning
on his judgment in the present case. He says (2): "I must add
that there is another serious difficulty in the way of this plea of
estoppel. What Mr. Doherty, in the action of Doherty v.
Kennedy (3), sought to obtain, and succeeded in obtaining, was
not a declaration as to the validity of the debentures, but as to
(1) pp. 356, D57.

(2) Ante, p. 207.

/.

(3) [1912] 1 1. I.t. 349, 363.
I

228

THE IRISH REPORTS.

Appeal.
1917.

Cox
v.
DUBLIN

CITY

DISTILLERY.

Ronan L.J.

L1(H7.

validity of his lien on them for his advances, and an inquiry as
the amount of those advances and the sums available for discharging them. That declaration is not inconsistent with the
present application. The validity of the debentures was never in
diISpUe. It was not' raise,d argue,d or deoid ed' In t h a t SUI."
t
it
em
This certainly is a startling statement. It follows from it that
Doherty's action, which was instituted (so far as the present
matter is concerned) to determine his right to prove as a secured
creditor on root of the debentures and the trust deed, did not
raise that question at all; it really decided nothing, though the
three tribunals apparently thought it did.
Further, what was Cox v, Dublin City Distillery (No.2) (1) all
about? "A test action," which decided nothing, except perhaps
that Kennedy held some papers as trustee for Doherty.
It is strange that in his judgment Barton J. does not even
mention this case of Cox v. Dublin Dzstille1"y (No.2) (1), before
himself and the Court of Appeal.
In that case Ohurton,
Trower, and Kennedy contended that they were entitled to prove
as secured creditors under the trust deed. Their case was that
the judgment in Doherty'S action established his right to do so,
and that it was a test action, and that they were entitled to the
benefit of the judgment.
The case occupied apparently two days
at argument before Barton J., and three days before the Court of
Appeal. Judgment was reserved in both Courts. Barton J. held
that the judgment in Doherty's Case (2) could be relied on by way
of estoppel by Kennedy, but not by Churton or Trower. The Court
of Appeal held that neither Kennedy, Ohurton, nor Trower could
so rely on it. It is obvious that if Doherty's judgment did not
establish his right, the entire proceeding in the case was futile.
In such a case it would be absurd to discuss whether third parties
could take advantage of a decision without first ascertaining what
the decision was. Accordingly, in the Court of Appeal it is clear
that the Court held and decided two propositions, viz.: 1, that
Doherty's Oase (2) did establish Doherty'S title as a cestui que
trust of the trust deed; and 2, that Doherty's Oase (2) was not a
test action, and that no one else could avail himself of it as such.
The Lord Chief Baron and the Lord Chief Justice expressly say
(1) [1915] 1 i. R. 345.

(2) [1914] A. C. 823.

VOL.

1.J

229

CHANCERY DIVISION.

so. I think that the same propositions are ill volved in the j udg- Appeltl.
1917.
ment of Molony L.J., and he tells me that he intended his j udgment to have this effect. I accept the decision of the Court of
':
Appeal as a binding authority on the effect of the decision and D[ )IST[LLERY.
UBLIN CITY
order in Doherty's Oase (1), but for the present apart from the
'fl
Ronan L.J.
question of estoppel and that of parties.
lis brings me to my
third question.
The main point as to this third question is, whether it is now
open to the second debenture-holders to dispute Doherty's right
to be dealt with as a cestui que trust under the deed. In my
opinion Oo« v. Distillery (No.2) (2) is a clear aut-hority on this as
well as on the other two questions in the case. At p. 372 the
Lord Chief Baron states what he decides in the case in the
following words. [His Lordship read the passage from the
judgment of the Lord Chief Baron, quoted by the Lord
Chancellor, ante, p. 223.J This short paragraph, in the most
accurate and precise legal language, states not only his decision,
but the grounds of his decision, and, in my opinion, it rules the
present case on every point. At p. 367 the Lord Chief Justice
says that" the House of Lords have adjudicated upon Doherty's
claim, and Doherty's claim only." He suggests, no doubt, that
it was a complete and final adjudication on the validity of Doherty's
claim as a secured creditor under the deed.
I can find nothing in the judgment of Molony L.J. expressing
any dissent from what had been said by the Lord Chief Justice
and the Lord Chief Baron. He says, at p. 378: "'fhe decision
in Doherty's action is, of course, binding and conclusive on the
parties to the record" (the liquidator and the trustees of the
deed); "but the debentures here" (that is, not Doherty's debentures, but those of Kennedy, Trower, and Churton-see
per
Palles C.B.: at p. 372) "are impugned by other debenture-holders
of the same class, and they are entitled to show that the debentures" (again those of Kennedy, Trower, and Ohurton) "were not
validly issued." This is entirely in accord with the judgments of
the Lord Chief Justice and the Lord Chief Baron.
The following paragraph (3) in the judgment of Molony L.J.
has been strongly relied on:"It has been pointed out that the trustees for the second
(1) [1915] 1 1. R. 345. (2) [1914J A. C. 82a.

(3) [1915] 1 1. R. 378.

THE IRISH REPORTS.

230
Appeal.
1917.
Cox

v.

DUBLIN

CITY

DISTILLERY.

Ronan L.J.

[1917.

debenture-holders were parties in the aotion ; but it is clear that
trustees will not be deemed to represent the interest of absent
.
cestuis que trust on any contention amongst t h e cestuis que trust
inter se, but only where the contention is between a stranger and
.
rr
aI· the cestuis que trust: riamon d v. "U7" lk er "(1) .
I
rr a
I presume there was considerable argument on the extent to
which trustees represent their cestuis que trust, but the paragraph
is expressly confined to contentions amongst the cestuis que trust
inter se. This can have no application to a case where the only
claim is a claim to be a cestui que trust. Until that claim had
been decided in favour of the claimant, the paragraph can have
no application to him. Molony' L.J. intimates no doubt as to the
correctness of the view of the Lord Chief Baron that in this case
the trustees represented all the second debenture-holders, and
that they are bound by the decision. I, therefore, accept the
judgments as deciding the reverse of what Barton J. has held in
the present case.
Frederick Hans Kennedy and William Findlater were trustees
for the debenture-holders only to a limited extent. So far as regards
the floating charge created by the debentures they were not such
trustees; they had really no duties to perform in respect of the
debentures. If a debenture holder released the lands comprised in
the deed from his charge, and confined it to the other assets of the
oompany, they would no longer be trustees for him. - They were
in fact trustees for the persons who were "entitled to the benefit
of the trust deed, and it was their duty not to give the benefit of
that deed to parties who were not cestuis que trust under it." The
judgment in the case only dealt with the rights of Doherty under
the trust deed.
If he is a cestui que trust under a valid mortgage of the com- .
pany's land, he is entitled to prove as a secured creditor, The
judgment decides that he is a cestui que trust. It decides no
question between the cestuis que trust under the deed. It only
decides that he is one of them.
There are two olasses-I, those who are cestui que trust under
the deed; 2, those who are not. 'I'here is no third class. The
trustees are trustees for 1 and for all of them, and not for 2.
(1) 3 Jur, N. S. 686.

VOL.

1

7

I
e
1

s
1

e
11

e
e

t
f
e

e
o

y
ir

.e

LJ

CHANCERY

DIVISION.

231

It is the duty of the trustees to confine the benefit of the deed Appeal.
tp 1, and not to permit 2 to take any part of it.
HJl7.
Cox
If the cestuis que trust dispute inter se as to their respective
v.
rights to the benefits of the deed, the trustees are not arbitrators DUBLIN CITY
to decide between them. They should not take sides with one set DISTlLLERY.
of cestuis que trust against the others. If A is trustee of a fund Ronan L.J.
for B, C, D, and E, and they dispute among each other as to their
rights to the trust fund, it would be absurd to suggest that B in an
action against the common trustee A alone, should be allowed to
obtain a decision as against 0, D, and E. In such a case the
Court would, of course, insist on their being separately represented.
Barton J. refers to the provision in Order 16, Rule 8, enabling this
to be done; but he seems to overlook the fact that neither he nor
the Court of Appeal nor the House of Lords thought it necessary to
have the parties separately represented in Doherto:« Case (1). But
before this state of things can arise there must be a common
trustee, and the dispute must be among his cestuis que trust. If
F, a-fifth person, claims to be a cestui que trust, and his right is
disputed, a wholly different state of things arises. If his claim
is admitted or established, it diminishes the fund divisible among
B, C, D, and E just as much as if a stranger appropriated all
amount equal to the share which F proved he was entitled to.
Once F had established that he was a cestui qne trust, any
question between him and his co-cestuis que trust as to their
respective shares would be what Molony L.J., in Cox's Case
(No.2) (2), calls" a contention among the cestuis que trust inter
se." But until it was settled that he was a cestui que trust this
position could not arise as to him. It was the duty of the trustees
to hold the entire trust fund for persons who were cestuis que
trust, and not to allow anyone else to participate in it. I have
already pointed out that Doherty'S action, so far as regards the
present matter, was an action to establish his right as a cestui que
trust under the deed, and to prove as such in the liquidation, and
that the judgment in the action only established that right. It
did not decide any question between him and his co-cestuis que
trust, except that he also was a cestui que trust .

•

J.

(1) [1914J A. C. 823.

(2) [1915J 1I. R. 345, at p. 356.

232

THE

UUSH

l{'EPOH.TS.

[1917.

ReadilJg this judgment oue would think that there never was
1917.
any dispute that Doherty was a cestui que trust nuder the trust
Cox
deed, or, indeed, any dispute as to the full claim in paragraph 26
v.
DUBLIN CITY of the statement of claim, and paragraph 5 of the prayer.
DISTII,LERY.
Barton J. says (1) that the question of the pledge" was the only
Ronan L.J. contentious question in the action. He" (Doherty) " did not claim
adversely to the trust estate in respect of these debentures, but as
a cestui que trust he claimed the benefit of the trust deed. That
being so, the trustees for the second debenture-holders cannot
be regarded as having constituted a legitimus contradictor on
behalf of the applicants, so as to preclude them from challenging
the validity of these debentures. . . . 1'he validity of the
debentures was never in dispute: It was not raised, argued, or
decided in that suit." I confess I cannot understand this. The
Judge refers to paragraph 26 of the statement of claim as containillg the plaintiff's claim in respect of the present matter. But this
is all specifically traversed by paragraph 15 of the company's
defence, as pointed out by himself in his judgment in Oo» v.
Dublin Oity Distillm-y (No.2) (2). He himself decided that the
debentures in question were invalid so far as they purported to
give a floating charge, and he cut down the plaintiff's claim to that
under the trust deed; but as to this, held that they had still
the effect of entitling the plaintiff to the benefit of the trust
deed. Paragraph 3 of the argument for the appellant in Dublin
City Distillery, Lid., v. Dohm'ty (3), at page 831 of the report, and
paragraph 3 of that for the respondent at page 834, show that
this was fully argued in the House of Lords. And, lastly, the
careful judgment of Lord Parker, quoted above, and the concurrence of the other lords, show that this was treated as a grave
question in the action. Barton J., in his judgment in this
action, says: "Doherty . . . as a cestui que trust claimed the
benefit of the trust deed. That being so," (1) etc. Prior to the
decree, Doherty claimed to have it decided that he was a cestui
que trust under the deed. Until that was decided he could
not claim as a cestui que trust. The question in the case was in
fact, Was he such a cestui que trust? When it was decided that he
was, then, but not before, could he claim as a cestui que trust, who
Appeal.

(1) Ante, pp. 207,208.

(2) [1915] 1 I. R. 345, at p. 356.

(3) [1914] A.1C. 823.

ii

VOL

LJ

CHANCERY

DIVISION.

233

must be recognized as such by the trustees and the liquidator.
Appeal.
Once 'the validity of the trust deed was established, in my opinion __ 1_9_1_7._
it is plain that the only question in dispute in the action, as
Cox
v.
regards this branch of the case, was whether Doherty was a cestui DUBLIN CITY
tl
'
d
f L d P I
DISTIJ.LIOty.
que trust un d er iat d ee, an d} t re JU gment 0
or
ar cer,
t
d
Ronan L.J.
in so many words, decides that he was.
As to the question whether a person is a cestui que trust
under the deed or not, Barton J. seems to 'Suggest that the
trustees are not under any obligation to consider this. His
j ndgment proceeds :-" Indeed the trustees do not appear to have
been under any obligation to raise it. Their duty under the terms of
clanse 6 of the trust deed was to apply any moneys arising from
the sale under the trust for conversion contained in the deed towards
payment pari passu without preference or priority of arrears of
interest and principal to the holders of second debentures according
to the tenor of their debentures."
Now, I presume that this
means that their duty is simply to pay according to the tenor of the
debentures, and that there is no duty cast on them except to regard
the tenor of the debentures; they are not bound to consider whether
the persons they pay are holders of valid debentures. This is an
entire misreading of the clause. The trusts are-(l) to pay to the
holders of debentures pari passu, in proportion to the amount due,
the arrears of interest remaining unpaid; and (2) the principal.
The clause then provides that this shall be done "whether the
eaid p1'incipal moneys shall or shall not be payable according to the
tenor oj the said debentures."

So far from the payment being directed to be according to
the tenor of the debentures, the clause provides that the tenor of
the debentures is not to regulate the payment. Now, it is quite
true that the point showing that the debentures were issued by
•
persons who were not. authorized to do so was not relied on at the
trial before Barton J. or in the Court of Appeal. The point
appears to have been discovered by the present Mr. Justice Younger,
who was counsel for the appellants in the House of Lords.
Even if the House of Lords intended to decide that Doherty
was a cestui que trust under the deed, and entitled to prove as a
secured creditor, and their order gave effect to this decision, still
if Barton J. is right on the question of estoppel, this decision had
1917-Vol. I.

i:i

234

THE IRII'lH REPORTS.

[1917.

really no operative effect on the assets of the company or the trust
1917.
premises in the trust deed of which he was decided to be a cestui
Cox
que trust. It certainly is a most extraordinary situation. When
DUEL;;
CITY
Mr. Justice Younger oa]led the attention of the House of Lords to
DISTILLERY. the facts as to the issue of the debentures, it never occurred to him,
Ronan L.J. or any of the Lords, or anyone else, that it was a pure waste of
time to argue the case, as, having regard to the frame of the action,
their judgment would be wholly inoperative. Mr. Younger said
that if this point had been taken in time it would have put an end
to this part of the case; but that he could not rely on it because
it had not been raised in either of the Courts below, not because it
was not open on the pleadings in the action. It was a defence to
the entire action, so far as this case is concerned, open on the
traverse in the pleadings, but not taken at the trial.
The first ground on which Barton J. decided the case was that
the trustees of the deed did not represent their cestuis que trust in
D~herty's Case (1) so as to make the judgment bind the latter.
If
they did not so represent them, I asked counsel for the respondent
whether the judgment had any effect at all by reason of the
trustees being defendants. I pointed out that it clearly did not
bind the trustees' own property, and they practically had to admit
that it had no operation whatever beyond what it would have had
if the trustees had not been parties. This is rather startling,
having regard to Order 16, Rule 8 (following sect. 42, sub-so 9, of
the English Chancery Regulation Act of 1852 and sect. 66 of the
Chancery (Ireland) Act, 1867).
It will be observed that the mandatory words "shall be considered as representing" are not to be found in rule 9. When
rule 8 provides that trustees who sue or are sued as representing
the estate of which they are trustees without the joinder of the
persons beneficially interested" shall be considered as representing,
such persons," it means that the trustees shall be considered as
representing these persons. If there be a conflict of interest
amongst the cestuis que trust, provision is made for this. The
rule proceeds :-" But the Court or a judge may at any stage
of the proceedings order any of such persons to be made parties
either in addition to or in lieu of the previously existing parties."
Appeal.

(1) [1914J A. C. 823.

VOL.

I,

L]

CHANCERY DIVISION.

235

The Law Lords had before them all the facts as to this point
Appeal.
which is sought to be raised here; they knew what was involved
1917.
in the case; and that the point, if taken in time, would have been
':
fatal in this respect. They did not, however, think it necessary to DUBLIN CITY
.
. h
di
.
inter f ere WIt the or mary operation 0 f 0rder 16, Rule 8, as to t Iie DISTILLERY .
trustees representing the persons beneficially entitled.
Ronan L.J
The case of Concha v. Concha (1), which was pressed upon us
by the respondents, and which the Lord Chancellor has already
referred to, is clearly distinguishable. Lord Herschel there said
(at p. 553) :-" It cannot be questioned that for certain purposes
the executors do represent the legatees and the residuary legatee;
and it may, perhaps, be admitted (at all events for the purposes
of this case) that so far as regards all matters necessarily decided
in a suit to which the executors are parties, the residuary legatee
and the other legatees may be bound by the decision. But I
think that must be limited to the matters necessarily decided in
the litigation to which the executors are parties, and that if the
executors choose, as it is said here they have chosen, to obtain a
decision of the Court upon a point which is immaterial for the
purpose of determining the rights in question between the parties,
they cannot, by tendering for decision an issue which is unnecessary for the determination of the case, bind all parties claiming
under the will, legatees of whatever description, because that
finding has been obtained in such a suit under such circumstances
by the executors. That really is the present case. If the residuary
legatee is bound here at all, he is bound by a finding of the
learned judge, which was quite unnecessary for the determination
of what he had to decide, and by a finding of the learned judge
which therefore could not be successfully appealed against."
The finding of the Probate Court on the question of domicil was
accordingly held to be not conclusive in that case, ithaving been
an irrelevant finding. Here, however, the question as to
Doherty'S rights as a cestui que trust under the trust deed was one
which, in the words of Lord Herschel, was "necessarily decided
in the litigation," and was, indeed, the vital question in the case.
We have not been referred to any case in which, in an action
brought against trustees for a class by a person claiming. to be a
(1) 11 A. C. 541.

THE IRISH REPO RTS.

236

[1917.

member of that class, it was held that the trustees did not
1917. _ represent the class. Here the trustees represented all the second
Cox
debenture-holders.
Doherty was claiming as an outsider until
v.
DUBLIN CITY his right
was established. If he was a cestui que trust, the
DISTILLEltY.
trustees represented him; if he was not a cestui que trust, they
Ronan L.J. did not.
The remaining question is as to the effect of the decision in
the Irish Land Commission v. Ryan (1), with which the Lord Chancellor has already dealt. 'I'he dictum of FitzGibbon L.J. in that
case, which appears in the head note (paragraph 5) as if it were
the judgment of the Court and the basis of the decision, and
which the Lord Chancellor has read, does not seem consistent
with the judgment of Holmes L.J. I do not, however, think it
necessary to discuss the matter ill detail, as in the present case
" the ground and extent of the estoppel" are clearly and fully to
" be found on the face of the judgment itself."
If the judgment in this case be compared with the facts set out
on p. 566 of the report in [1900] 2 Irish Reports, it will be seen
that the Irish Land Oommiesion v. Ryan (1) has really no bearing
on the present case.
In conclusion, I may say that the decision of this Court in
Oo» v, Dubli» City Distillery (No. %I) (2) is, ill my opinion, a clear
and binding authority, and the specific statement of the Lord
Chief Baron, to which I have already referred, appears to me to
cover every question in the present case.
Appeal.

MOLONY

L.J.:-

The appellant, Edward Doherty, on 6th December, 1909, commenced an action against Frederick Hans Kennedy, William
Findlater, and the Dublin City Distillery, Limited, to have it
declared that he was entitled to a good and valid pledge of the
whiskies contained in certain casks therein referred to, and also
that he be declared entitled to a good. and valid lien on certain
second mortgage debentures of the said company, for the amount
of his advances to the company, with interest. The defendants
Kennedy and Findlafer were sued as trustees for the said deben-

.

(1) [1900J 2 I. R. 565.

(t) [1915J 1 1. R. 345.

VOT,.

1.J

CHANCERY DIVISION.

237

ture-holders under an indenture of 9th November, 1895, whereby Appeal.
certain hereditaments and premises the property of the company
] 917.
were assigned to them as such trustees. A defence was filed by
Cox
Samuel Smith, the receiver and liquidator of the company, who DUBL;; Crry
defended the action in the name of the company pursuant to an DISTILLERY.
order of Mr. Justice Barton of the 14th December, 1909, and, Molony L.J.
amongst other defences, he pleaded that if such issue of second
debentures was made as alleged, such issue was ultra vires and
void, and in a notice served subsequent to the claim he further
stated that the defendant company, in support of the plea that the
said second debentures were ultra vires and void, would rely on
the fact that the said issues of second debentures' were made after
the Companies Act, 1900, came into operation, and were not
registered pursuant to that Act. Messrs. Kennedy and Findlater,
the trustees, did not put in any separate defence, but it appeared
in the course of the proceedings, and was in fact admitted, that
the action was defended by the liquidator in the interests of the
second debenture-holders, and, so far as the subsequent appeal to
the House of Lords was concerned, with their active co-operation
and financial support. On the 27th January, 1911, Mr. Justice
Barton gave judgment, holding that there was a good and valid
pledge of the whisky comprised in the warrants, and also holding
that Doherty was entitled to a valid lien on the debentures for the
amount of his advances, to the extent of the property comprised
in the trust deed. The judgment was affirmed by this Court, and
on an appeal being taken to the House of Lords it was decided
that there was no valid pledge of the whisky, but that there was
a valid lien. The trustees for the second debenture-holders had a
two-fold duty to perform. They were bound to assert the validity
or the deed and enforce its provisions as against the company;
but they were equally bound to see that no person came to share
in the trust property who was not legally authorized to share in
it. When they were sued as trustees by a person claiming to have
a valid lien in respect of certain debentures issued to him by the
company, the trustees, as rspresenting all the debentures of that
class, were entitled to require the existence and validity of the
debentures to be proved in the proceedings. 'I'he trustees cannot
be placed in a better position by reason of not having in fact
1917VOL. L

T

238

THE IRISH ImpORTS.

Appeal.

_._1_~~7..:
__

[1917.

delivered a defence, and the question of estoppel does not depend
on whether the question was actually raised, but on whether it could

l>rsTILLEl{Y.
__

have been properly raised in the proceedings.
The company did
raise the issue that the debentures were void. In Dohertu:« Case (1)
it
I was per f eotl y open t 0 th e t rus t eps t 0 ques tiIon t h e va lidit Y
1 1

Molony L.J.

of the issue of the debentures;

Cv~x
DUBLIN

CITY

but having

allowed the case to be

carried to the House of Lords ou the assumption that they were
validly issued, although
subsequently
avoided as regards the
floating security by reason of the provisions of the Companies
Act, 1900, not having been complied, with, it is impossible, I
think, for the second debenture-holders
now to claim that they
are not hound by the proceedings in the action or by the judgment of the House of Lords.
After
the decision of the House of Lords the second
debenture-holders
took
proceedings
in the
present action
to have certain debentures
issued to Frederick Hans Keunedy
(as trustee for Frederick
Kennedy),
Percy
Bence Trower,
Percy Vardon
Churton,
Adam S. Findlater,
and William
Findlater
declared invalid on the ground that the resolution
authorizing
the issue was invalid, having been passed at a
meeting at which there was HO quorum competent t.o vote on
the resolution.
Mr. Justice Barton held that the debentures to
Trower and Churton
were void, but that the debentures to
Frederick Kennedy, Adam S. Findlater,
and William Findlater
were valid, and this Court varied his order by declaring that the
debentures to Frederick Keunedy were also void. It was argued
that the action of Dohertu v. Kenlledy (1) was a test action brought
behalf of all the holders of the second debentures, and that they
were entitled to rely upon the judgment in that case. This Court,
however, was clearly of opinion that the action was not a test
action, and that it only dealt with the validity
of Doherty's
debentures.
In the course of my judgment
I pointed out that
while the decision in Doherty's Case (1) was, of course, binding and
conclusive on the parties to the record, the debentures which were
the subject of that appeal were impugned by other debentureholders of the same class, and that they were entitled to show
that the debentures were not validly issued. The reference which
OIl

(1) [19141 A. C. 823.

VOL

I.J

239

CHANCERY DIVISION.

I made to the case of Hemond v. Walker (1) seems to have been AZJplJltl.
misunderstood. I pointed O~lt that it would appear from that
un7.
oase that trustees will not be deemed to represent the interests of
Cox
v.
absent cestuis que trust on any contention between the cestuis que DUBLIN CITY
trust inter se, but only where the contention is between a stranger DISTILLERY.
and all the cestuis que trust. It seemed to me that the statement Molony L.J.
of V.-C. Page- Wood in Hamon« v. WalkeI' (1) was correct, but
I was not in any way differing from the judgment of the Lord
Chief Baron, or his conclusions of law, with which I respectfully
concur. 'I'here was not in Doherty's Oaee (2) any contention
amongst the cestuis qUI3
trust inter se; but there was a contention
between persons who were admitted to be valid debenture-holders
and certain persons, the validity of whose debentures was impeached; and it was perfectly within Order 16, Rule 8, that the
trustees should represent all the valid cestuis que trust, as it was
their interest to prevent any person who was not properly entitled
from claiming the benefit of the trust deed; and there was no
contention between valid cestuis que trust inter se. I am of
opinion, therefore, that, having regard to the proceedings in
Dohe1·ty v. Kennedy (2), and the judgment of the House of Lords,
the order appealed from should be discharged, and that we should
declare that the applicants are precluded from now averring the
invalidity of the debentures held by Frederick Hans Kennedy as
trustee for Edward Doherty.
Solicitor for the appellant: H. W. Franl:k.
Solicitors for the respondents: G. D. FoUretl

&

Sons.
R. ST. J". C,

(2) [1914J A. C. 823.

(1) 3 Jur. N. S. 686.

T2