Scottish Court of Session Decisions

On 27th October 1893 the estates of Henry D. Dickie, stockbroker, Edinburgh, were sequestrated, Mr Molleson, C.A., being appointed trustee in the sequestration.

At this date Dickie was indebted to the National Bank of Scotland in respect of loans of £5200, £2000, and £4000 made to him by that bank. He was further indebted to the same bank in the sum of £1323, 8s. 1d., being the overdraft on his current account. The loans of £5200 and £2000 had been granted originally in 1890, and the loan for £4000 in 1893. In every case the loan had been granted for a short fixed period, but by repeated renewals they had been respectively extended to various dates in October 1893.

In security of these loans Dickie had pledged with the bank the following stocks, shares, and bonds:—(1) In security of the £5200 loan, £20,000 Caledonian Railway Deferred Converted Ordinary Stock; (2) in security of the £2000 loan, £7450 North British Railway Stock; and (3) in security of the £4000 loan certain American shares and bonds payable to bearer. The title of the bank was constituted in the first two cases by registered transfer, and in the third case by delivery.

In obtaining the loan of £5200 Dickie had acted on behalf of a client, Dr M'Watt, who had instructed him to purchase £20,000 Caledonian Railway Deferred Converted Ordinary Stock, and to borrow on the security of the stock as much of the price as he could obtain from the bank. Acting on these instructions Dickie had purchased the stock, and borrowed £7200 (afterwards reduced to £5200 by payments made by Dr M'Watt through Dickie) upon its security. The remainder of the price had been paid to Dickie by Dr M'Watt.

In obtaining the loan of £2000, Dickie had also acted for a client, John Thyne, who had instructed him to purchase the North British Railway Stock, and borrow £2000 from the bank upon its security. The stock was purchased and pledged, and the loan obtained by Dickie in pursuance of these instructions, and the balance of the price was paid by Thyne.

The case of the £4000 loan was different. That sum had been borrowed by Dickie on his own account, and the American shares and bonds deposited in security of the advance belonged to two of his clients, Daniel Bernard and Miss Christie. Dickie had no authority to pledge the securities with the bank.

Shortly after Dickie's bankruptcy the bank realised the securities in their hands. The Caledonian Railway Stock realised £6474, 18s. 1d., the North British Railway Stock £2622, 8s. 1d., and the American shares and bonds, £4967, 8s. 9d., the total sum realised being £14,064, 12s. 1d. This amount the bank placed against Dickie's indebtedness to them, including the overdraft on his current account. M'Watt, Thyne, Bernard, and Miss Christie having objected that the bank were not entitled to place the proceeds of the stocks, shares, and bonds, which respectively belonged to them, against the overdraft on Dickie's current account, the bank raised an action of multiplepoinding to have the rights of parties determined. The fund in medio amounted to the sum of £2827, 3s. 7d., which consisted of the surplus remaining out of the proceeds of the stocks realised by the bank after deduction of the whole of Dickie's indebtedness to the bank therefrom, and of the amount applied by the bank to the payment of the overdraft on Dickie's current account.

The following claims were lodged—(1) The National Bank claimed to be ranked for the amount of the overdraft on Dickie's current account; (2) Dr M'Watt claimed to be ranked for the surplus remaining out of the proceeds of the Caledonian Railway Stock, after satisfaction of the £5200 loan for

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which that stock had been pledged; (3) Thyne claimed for the surplus of the proceeds of the North British Railway Stock remaining after satisfaction of the £2000 loan; and (4) Bernard and (5) Miss Christie for the surplus of the proceeds of the American shares and bonds, after payment of the £4000 loan; (6) the trustee of Dickie's sequestrated estate claimed the balance of the fund in medio remaining after the overdraft due to the bank had been paid.

The bank averred that they had transacted with Dickie alone, and had had no knowledge that any third party had any interest in any part of the advances granted to Dickie, or in any of the securities pledged by him.

They pleaded—“In respect that the claimants were entitled to retain the said securities or the proceeds thereof, and to apply the same in satisfaction of all debts due to them by Mr Dickie, they should be ranked and preferred in terms of their claim.”

A proof was allowed.

The cashier and manager of the National Bank gave evidence to the effect that it was the custom for brokers to apply to the bank for loans on the security of stocks and shares; that the bank in such cases, while presuming the broker was acting for clients or customers, had no actual knowledge of this, and dealt with him throughout as the principal, and did not regard the client as their debtor; that they assumed the broker had full power to impledge the securities, and that their transactions with Mr Dickie had been on the above basis.

It further appeared from the evidence of the cashier and the correspondence that, at least before the last extension of the loan over the stocks of M'Watt and Thyne, the bank were incidentally informed that Dickie had clients behind him, for whose behoof these loans were being obtained.

It was shown from the entries in the books of the bank that in each loan transaction an advance of a definite amount was authorised against the particular stocks, and that the advances were entered as items of credit in Dickie's general account, and that he was only allowed to operate upon the account by drafts to the extent of the sums which ex facie of the account stood at his credit. In each case the money lent was drawn out by Dickie by cheque, passed on the special loan account, and was paid into his current account. On each loan account Dickie alone operated. No other name appeared in the bank's books.

The evidence also showed that the overdraft on Dickie's account-current was not granted on the credit of the securities impledged, but on his representation that the money would be immediately replaced, and that it appeared as an overdraft without security on the face of the current account.

On 22nd November 1894 the Lord Ordinary ( Kyllachy) pronounced the following interlocutor—“Finds that the claimants the National Bank of Scotland did not obtain or possess a security over the stocks, shares, and bonds in question, which covered the balance due on H. D. Dickie's current account at the date of his stoppage: Finds therefore that the said claimants have no right to participate in the fund in medio, which consists of the surplus arising upon the sale of the said stocks, shares, and bonds after satisfying the special advances in security for which the said stocks, shares, and bonds were held: Finds also that the trustee on the said H. D. Dickie's estate has no claim on the fund in medio, and that the same falls to be apportioned amongst the other claimants in the proportions in which the said stocks, shares, and bonds belong to the said claimants respectively: Reserves in the meantime the question of expenses; appoints the case to be enrolled for further procedure, and grants leave to reclaim.

“ Opinion.—This is a multiplepoinding which arises out of the bankruptcy of Mr H. D. Dickie, formerly stockbroker in Edinburgh. The raisers are the National Bank of Scotland, who claim to have made advances to Dickie on the security of certain shares, stocks, and bonds, of which the bank stood possessed at the date of the bankruptcy, and which have since been realised in ordinary course. The fund in medio consists of the surplus arising upon the realisation after paying certain advances made by the bank, as to which there is no dispute, viz., certain advances made specifically against the stocks, shares, and bonds in question, and entered in the bank's books as specifically so secured. The amount of this surplus is £2827, 3s. 7d., and the real question in the case is, whether the bank are entitled to apply the same to the extent of £1323, 8s. 1d. in payment of advances made to Dickie, not expressly against particular securities, but by way of overdraft upon cheques passed on his current account a few days before his stoppage. With respect to the balance of the fund, amounting to £1503, 15s. 6d., there is, so far as appears, no real dispute. The bank admit that it must be paid to and among the other claimants, who are (1) the trustee in Dickie's sequestration; and (2) certain clients of Dickie's, to whom, as it now appears, the stocks, shares, and bonds truly belonged. And so far as I followed the argument it did not occur to me that there was much difficulty in this part of the case. The trustee's claim although excellently maintained did not appear to have much substance, and the distribution of the fund among the other claimants after satisfying the bank's claim was not matter of controversy.

The true point for decision therefore being as to the bank's preference for the £1323, 8s. 1d. advanced by way of overdraft upon current account, the case of the bank rests upon, or at least involves two propositions—(1) That whatever the limits of his authority in a question with his various clients, Dickie had apparently authority to deal as he pleased with the stocks, shares, and bonds in question, and in particular, had apparent authority to impledge them, either separately or in the lump, for any sums which he desired to borrow; (2) that, that being his position, Dickie did in fact impledge the said stocks,

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shares, and bonds for the overdraft in question—that is to say, obtained, or must be held to have obtained, that overdraft on the faith and security of the margins existing on his several loan accounts. And this last proposition involves or presents itself under two alternatives—(1) That the supposed impledgment arose upon a contract, expressed or implied, covering the overdraft as well as the special advances; (2) that the impledgment arose ex lege by virtue of what is known as the banker's general lien, or by virtue of the right of retention common to all persons holding a title of property as against persons claiming under a personal contract for retrocession.

It was to the first of those propositions, and the different points which it involved, that the proof and the debate which followed were mainly directed. The fact chiefly at issue was the extent of the bank's knowledge with respect to the ownership of the several securities and with respect to the interests of their several owners in the loans for which they were specially impledged. The law again chiefly canvassed was that applied and explained in two well-known cases in the House of Lords, viz., Sheffield v. London Joint-Stock Bank, L.R., 13 App. Cas. 333; and London Joint-Stock Bank v. Simmons, L.R., 1892, App. Cas. 201.

I may say at once that on this part of the case my judgment, if a judgment were necessary, would be in favour of the bank, and I may summarise in a word or two the view which, on that matter, I am disposed to take.

There were in all, it appears, three sets of stocks and three loans—(1) £20,000 Caledonian stock belonging to the claimant Dr M'Watt, against which Dickie had borrowed in his own name, but on behalf of M'Watt, £5200; (2) £7450 North British stock belonging to the claimant Thyne, against which Dickie had borrowed in his own name, but on behalf of Thyne, £2000; and (3) certain American shares and bonds payable to bearer, belonging mostly to the claimant Bernard (but to a small extent, it is said, to the claimant Miss Christie), against which Dickie had borrowed in his own name and on his own account the sum of £4000. All these securities were impledged for specific loans of fixed amount and having a fixed currency, and to all of them the bank had obtained a sufficient security title, viz., in the first two cases a title of property ex facie absolute, constituted by registered transfer, and in the third case a title (either of property or possession, as the case may be,) constituted by delivery. In each case the money lent was drawn out by Dickie by cheque, passed on the special loan account, and was paid into his current account. On each loan account Dickie alone operated, and the bank throughout dealt with him alone. The loans were negotiated in his own name, and no other name appeared in the bank's books. In short, as between Dickie and the bank, he contracted and was contracted with as a principal.

These are the admitted facts, and prima facie they beyond doubt imply that Dickie had at least apparent authority to deal with the securities in question as he pleased. In other words it seems clear that, apart from notice of some limitation of Dickie's title to deal with the securities, the bank were in safety to contract with him with respect to the same, and to do so on the footing that they were in his absolute disposition. That follows in the case of Mr Bernard's bonds and shares, because the same were negotiable securities, and because it is the rule of law with respect to such instruments that any person in possession of them may confer a good title to them upon any bona fide purchaser or pledgee. And it follows equally in the case of Dr M'Watt's and Mr Thyne's stocks, to which the bank had a title by registered transfer, because it is an equally fixed rule of law that where the true owner of property has so acted as to arm another person with an ostensible title to that property, or otherwise with ostensible authority to deal with it as his own, he is thereby barred from disputing any title derived from that person by a bona fide transferee for value.

The case, therefore, of the competing claimants rests on this branch of it, entirely on the suggestion that the bank had notice or knowledge of some limitation of Dickie's title or Dickie's authority, and that suggestion rests mainly on the admission, candidly made by the bank's manager, that in dealing with Dickie as with other stockbrokers, the bank presumed that he was acting for clients, and that the loans were being obtained on behalf of clients, and that the stocks either belonged to clients, or that the clients had an interest in them greater or less. I think that must be taken as the result of the manager's evidence; and I think it must also be taken as the evidence of the bank's cashier, and as the result of the correspondence, that at least before the last renewal of the loans over the stocks of M'Watt and Thyne, the bank were informed incidentally, but yet distinctly, that Dickie had clients behind him for whose behoof these loans were being obtained. There was an attempt to prove specific mention of Mr Thyne's name as principal in the £2000 loan. But so far as that fact may be important I do not consider it proved.

Now, I am quite unable to hold that—assuming knowledge on the part of the bank that the loans in question were being got on behalf of clients, or that the stocks which were being impledged wholly or partially, belonged to clients—such knowledge imposed any duty on the bank to doubt or to distrust the apparent limits of Dickie's authority. It is said that knowing so much the officials were put on their inquiry; by which I suppose is meant that they were bound with respect to each sum drawn out against each security to require from Dickie evidence that his clients knew and approved of the transaction. But anything of that kind would be plainly inconsistent with the whole course of banking business, and indeed when reduced to a

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proposition was hardly maintained. It was not, for example, contended that, with regard to the first loan, there was any duty to inquire; and—apart from notice of something wrong—it is difficult to see how a distinction can in this matter be drawn between the first, second, and third loans. Nor does it appear to me to be possible to distinguish between loans taken against particular securities, and loans taken against the whole securities in the lump; or between loans taking the shape of special advances and loans taking the shape of overdraft allowed on current account. These distinctions may possibly be in some views material, but none of them involve or suggest, so far as I can see, any note of fraud. It may be true—I must so take it—that in dealing with stockbrokers in such transactions, bankers always, or as a rule, assume that the stockbroker is acting on behalf of clients—that is to say, is not speculating on his own account. But the banker does not know, and cannot know, the pecuniary relations between the stockbroker and his clients—how far he is in advance to or for them—how far he may be financing them by the help, it may be, of securities of his own—how far, although the securities are entirely theirs, he has claims or responsibilities in connection with them, which have procured for him a free hand in dealing with them. In short, the business of a stockbroker is a quite different business from that, for example, which was in question in the case of the Earl of Sheffield; and this was fully acknowledged and emphasised in the subsequent judgment of the House of Lords in the case of The London Joint Stock Bank v. Simmons.

If, therefore, the bank and Dickie did in fact contract that the overdraft in dispute should be made and granted as a further advance against the whole securities which the bank held—in other words, if Dickie did in fact impledge these securities for the overdraft which he obtained, I should, as I have already said, been prepared to sustain the bank's claim. But the next point is, Did Dickie do so? Was there any contract of impledgment, express or implied, between the bank and Dickie with respect to this overdraft, as there certainly had been with respect to each of the advances making up the previous loans? It is here that it seems to me the difficulty of the bank's case lies.

Now, there certainly was no express impledgment. Dickie did not go or write to the bank and say, ‘I propose to overdraw my current account, and I hope you will allow me to do so as against the unexhausted margins on my several special loans.’ Neither did the bank when they cashed the cheques which produced the overdraft, or when, after cashing them, they drew Dickie's attention to the fact, make any reference to the matter of security. The letters which passed come simply to this, that Dickie, having without previous notice on the Saturday before his failure overdrawn his account, was on the same day reminded of the fact, and replied that he was aware of the overdraft and would attend to the matter on Monday.

But then if there was no express impledgment, can such impledgment be held implied? This raises a question, in the first place, with respect to the law of pledge—a question bearing specially on Mr Bernard's securities, which being negotiable were, I assume, capable of being pledged in the proper sense. Is it the law of Scotland that when goods or documents of title are pledged for specific loans, the pledge is held by implication to cover any subsequent advances made by the pledgee to the pledgor.

Now, I apprehend this question must be answered in the negative, and I do not know that I need do more than refer to the well-known case of Hamilton v. Western Bank, 19 D. 152, where this question was fully discussed and the whole authorities reviewed, particularly in the exhaustive judgment of Lord Handyside in the Outer House.

But if there is no room under the contract of pledge to imply an agreement that subjects pledged for a special debt shall stand pledged for all future advances, is there room for implying such an agreement where, as in the case of Dr M'Watt's and Mr Thyne's stocks, the security is constituted by registered transfer—that is to say, by transfer not merely of the possession, but of the property—a transfer equivalent in effect to an absolute disposition of heritage qualified by an unrecorded back bond? I know no authority for making in this matter any distinction between a security by way of pledge and a security constituted by absolute transfer of disposition. The same reasoning seems to apply to both. Assuming that the immediate object was to secure a particular debt, the form of the security can scarcely affect the implications to be deduced with respect to future debts or future advances. No doubt, as I shall presently notice, the holder of an absolute title may have in result a universal security which will in general be all he wants. But that is not a security which results from contract express or implied, but results simply by force of law, and from the necessity of the situation, and may not, as we shall see presently, at all operate to secure further advances to the original debtor.

The bank, however, in the recent debate did not put their case so much upon contract, express or implied, as upon lien or retention operating ex lege. And, in the first place, they appealed to the doctrine of what is known as ‘banker's general lien,’ a lien undoubtedly recognised in our law (Bell's Com. ii. 113; Robertson v. Royal Bank, 18 R. 12), and the application of which in the law of England is illustrated by such cases as Jones v. Peppercorne, 28 L.J., Ch. 158; Brandao v. Barnett, 12 C. & F. 787, and similar cases.

Now, I must observe at the outset that this banker's lien can at the best apply only to the securities belonging to Mr Bernard. It is a lien which applies only to what are called paper securities—that is to say, speaking generally, to negotiable securities.

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It has never been applied to securities constituted by registered title. And indeed where, as in the latter case, the banker obtains a title of property, there cannot be a lien, for a lien is only possible over the property of another. It is a legal pledge, and pledge implies a title of possession as distinguished from a title of property.

But with regard even to securities like those of Mr Bernard the suggested lien can only apply in the absence of special appropriation—that is to say, it cannot apply where securities have been pledged for a special purpose, and that purpose was inconsistent with the existence of a general lien. Now, I should be disposed to hold that it was enough to exclude this condition that the securities were here pledged in security of a particular debt. That, I observe, was the opinion of the late Lord President (Inglis) in the case of Robertson, 18 R. 12, already referred to. But however that may be, there can, I think, be no doubt that a pledge for a particular debt excludes the general lien, where, as in the present case, the bank had notice and knew that the securities belonged to someone else than the pledgor, and were being pledged by the latter for special loans effected by him as a stockbroker for behoof, if not on behalf, of clients.

The ultimate question therefore comes to be, whether, putting aside contract, and also banker's general lien, and taking the bank's case as rested simply on their ex facie absolute title of property, they have in virtue of that title of property a right of retention which will serve their purpose. Now, it is undoubtedly the law that where property has been transferred in security under an ex facie absolute title, the creditor holding that absolute title is subject only to a personal obligation to retrocess, and being so is not bound to perform that personal obligation except upon performance by the reverser of all personal obligations however arising prestable by the reverser to him. That is undoubtedly a principle well established and often applied, and it is a principle which would I do not doubt have in this case secured the bank if the stocks in question had been Dickie's own. Perhaps also it might have done so if the bank had believed the stocks to be Dickie's own. But the difficulty is this. The question here is not, as in Hamilton v. Western Bank, between the bank and the trustee for Dickie's creditors, but between the bank and the—as it now appears—true owners of the stocks. If the stocks had been Dickie's own, there would have been no difficulty. He would have been the debtor in the overdraft, and at the same time (as being the true reverser) creditor in the bank's obligation to retrocess; and as between these counter obligations there would of course have been a set-off operating at least in bankruptcy. But was Dickie, as the facts stand, the reverser? Was he the creditor in the bank's obligation to retrocess? Was it not the true owners of the stocks to whom the bank, on their special advances being paid, were bound to reconvey? It must be noted, as I have already said, that the universal security which, in cases like that of Hamilton, results to a creditor who has obtained in security of a specific debt an absolute transfer or absolute disposition, does not result from any implied contract to the effect that the subject of the security shall stand impledged for all debts due or to become due by the debtor in the specific debt. The only contract expressed—and there is no reason to imply any other—is, that the subject of the security shall be impledged for the specific debt. The universal security which may arise does so not ex contractu, but from the rule of law that mutual obligations may, at least in bankruptcy, be set off the one against the other. And hence the question always is—Who has the right to demand the retrocession? Now, the person who has that right is, and must be, the true owner of the subject of the security. Against that owner the bank may of course hold for all advances which they have made on the security of the subjects with his apparent authority. But these advances being repaid, the right of the true owner revives, and the universal security only operates to the effect of enforcing payment of all his debts if there any be. The present case is in this respect really the same as if M'Watt and Thyne had themselves made the transfers in question expressly in security of certain specified sums borrowed from the bank by Dickie. And if that had been the shape which the transaction took (and in point of fact it did so with regard to certain of Mr Thyne's stocks), I do not at this moment see what the bank would have had to say.

No doubt it might, as I have already indicated, have made all the difference had it appeared that the bank believed that the stocks were Dickie's own, and had been misled into that belief by the action of Messrs M'Watt and Thyne. In that case it might be argued that in allowing the overdraft without stipulating for security, they relied, and were entitled to rely, on the universal security which the holder of an absolute title to stocks necessarily has against their owner. But then comes the question—Did they believe that the stocks were Dickie's? Is it not rather the result of the evidence that they knew, or at least presumed the contrary? As already said I think that question must be answered in the affirmative. I do not say that the bank knew the names of Dickie's clients, or how far particular stocks belonged to particular clients, or how far the client's ownership of the stocks was exclusive of all interest on the part of Dickie. But they at least knew that the stocks were not exclusively Dickie's—that he was not raising the special loans on his account or pledging stocks which were his own on his clients' account. That, I think, at the lowest, is the result of the evidence of the bank's officials, and I do not, I confess, see how in these circumstances the bank can, as against the true owners, set up a general right of retention for Dickie's debts.

On the whole matter, therefore, I come

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to the conclusion that for the reasons above stated the bank's case fails—not, it will be observed, on the point as to the extent of Dickie's authority, but on the point as to the extent of its exercise. I quite accept the proposition that the bank were entitled to take it that Dickie had full authority to deal with the whole securities, so that if he gave a title for value to any of them, that title was a good one. But they have failed, in my opinion, to show that Dickie did give or profess to give a title constituting a universal security in the bank's favour for all his debts.

I have only to add what perhaps I should have mentioned earlier, that I have not overlooked the argument that Messrs M'Watt and Thyne did not, for the most part, possess any title of property to their respective stocks, but were owners of these stocks only in this sense, that they had a jus ad rem to the specific stocks as having been purchased and taken up on their behalf by Dickie, who had arranged with the sellers that the latter should transfer direct to the bank. It is quite true that, except as regards two parcels of Mr Thyne's stocks, this was the shape which the transaction took. But I have not been able to see the materiality of that circumstance. The stocks certainly never belonged to Dickie, nor were they ever transferred to or registered in his name; and whether or not the claimants referred to were ever vested with the legal title, they had at least a sufficient title to have claimed the stocks as against Dickie or Dickie's creditors, and they have now, in my opinion, a sufficient title to claim them from the bank.” …

The claimants, the National Bank, reclaimed, and argued—The bank were entitled to use the securities in full satisfaction of Dickie's debts—1. As regarded Bernard's claim, there had been nothing in the course of the bank's transactions with Dickie to indicate that he had a client behind him. In order therefore to establish his claim Bernard would have to prove that Dickie had no right to pledge the securities for any amount however small, and that the bank had no right to make any advances on them. These being negotiable securities fell directly under the rule laid down in the case of London Joint-Stock Bank v. Simmons, L.R., 1892, App. Cas. 201. That case showed that, unless there was some sign of fraud indicating that the broker was exceeding his authority, the bank was not put upon its inquiry on that point, but was entitled to assume that the broker had the right to deal with the securities exactly as though they were his own. The same principles were laid down in the case of Baker v. Nottingham Banking Company, 1891, 60 L.J., Q.B. 592. The case of Sheffield v. London Joint-Stock Bank, 1888, L.R., 13 App. Cas. 333, was a very special one, and was easily distinguishable from the present, as the bank there had exact knowledge as to the limits of the money-lender's authority, while here it was entitled to consider Dickie's as unlimited. The respondents assumed that the question of good or bad faith on the part of the bank was settled by the consideration whether or no they knew that Dickie had clients behind him, but there was no need—as was proved by the cases quoted—for the bank to inquire who were the true owners of the stock, if, as was the case, they were entitled to assume that he had a free hand to deal with them. Accordingly, the principle of Cook v. Eshelby, quoted by the respondents, did not apply, and the bank were entitled to use the securities as though they belonged to Dickie. That being so, the only question to consider was, whether on that assumption they were barred from using them against Dickie's whole indebtedness by their specific appropriation to particular advances. They were not so appropriated; the mere agreement to make a particular advance was not enough to exclude the securities from being used against Dickie's general account. The case of Jones v. Peppercome, 1858, 28 L.J. Ch. 158, was almost identical with the present case, and showed that a special contract was only exclusive of a general lien when quite inconsistent with it. There was no such inconsistency here. The same principles were laid down in Robertson's Trustees v. Royal Bank of Scotland, October 24, 1890, 18 R. 12, and Mure v. Royal Bank of Scotland, June 23, 1893, 20 R. 887; Bell's Prin., sec. 1451. Again, in the case of in re European Bank, 1872, L.R., 8 Ch. App. 41, the whole securities held by the bank were held to apply to each of the separate accounts of their customer, while in Greenwood Teale v. Brown & Company, 1894, Times L.R., vol. xi. p. 56, it was held in the case of a customer having three accounts that the bank had a lien in respect of all three. 2. With regard to the cases of M'Watt and Thyne, there was no evidence that the bank ever knew who Dickie's clients were, and the only indication that he was acting for clients was given after the loan had been made. In the case of Bentinck v. London Joint-Stock Bank, L.R., 1893, 2 Ch. 120, there was. just as much ground for suspicion on the part of the bank as to the power of the agent as there was here, but yet the doctrine of Simmons' case was applied in a question as to a general balance. The reasoning in the latter case while primarily applicable to Bernard's claim also applied to these claims. The bank had obtained by a registered transfer an absolutely universal security, and therefore the principle of specific appropriation could not apply— Nelson v. Gordon, June 26, 1874, 1 R. 1093. They had obtained a good title to the securities against all the world—why therefore were they not entitled to use it against any advance made to Dickie?

Argued for the claimant Bernard—The securities had been pledged for definite specific advances, and the bank had no right to retain them for advances on Dickie's general account. If the bank had any reason to suspect the broker of having

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only a limited title they were bound to make inquiries; they had such reason here— Sheffield v. London Joint-Stock Bank, supra; Farrar v. North British Railway Company, July 6, 1850, 11 D. 1190; Attwood v. Kinnear, July 11, 1832, 10 S. 817. In the cases of Simmons and Bentinck the bank had no ground of suspicion, and they were therefore distinguishable from the present case, and emphasised the distinction to be drawn between the authority which the bank was justified in assuming Dickie had for pledging the securities for a specific loan, and that which it was not justified in assuming he had in regard to his general account. As regarded the general lien of the bank, it was excluded because inconsistent with the facts known or believed by the bank to exist— Robertson's Trustees v. Royal Bank, 18 R. 19, and accordingly the cases quoted for the bank actually excluded such cases as the present. There were dicta to the same effect in Garnett v. M'Ewan, November 8, 1872, L.R., 8 Ex. 10.

Argued for the claimants M'Watt and Thyne—Dickie had no authority to pledge the stocks except in security for the specific loans, and as matter of fact he only pledged them for these loans, and not for his general account, and the bank actually knew that he was acting for clients; in Thyne's case they even knew who the client was. Each renewal of the loan was a new transaction. This was even a stronger case than that of Sheffield, where there was only a suspicion on the part of the bank. This was a case of an agent with an undisclosed principal, and the bank must show that they were induced to believe by the conduct of the principal that the agent was the real owner of the securities— Cook v. Eshelby, 1887, L.R., 12 App. Cas. 271, at 278. But the evidence was clearly against holding that there was any such belief on the part of the bank. No loss arose to the bank on any of the loan amounts, but only on Dickie's current account, and they knew that the overdraft was allowed to him as an individual, and had nothing to do with his clients. They had therefore no right to use his client's stock against it— Loche v. Prescott, 1893, 32 Beav. 299. The banker's lien did not attach documents given in pledge for a specific advance. There was here such a specific appropriation, and therefore the general lien was excluded as inconsistent therewith— Farrar and Booth v. North British Banking Company, July 9, 1850, 12 D. 1190.

At advising—