Taylor v. Barclay

HIGH COURT OF CHANCERY

Original English Reports Version, PDF

Original Citation: (1828) 2 Sim 213

English Reports Citation: 57 E.R. 769

Nov. 12, 19, 1828.

Pleading. Public Policy.

S. C. 7 L. J. Ch. (O. S.) 65. See The Charkieh, {{{{1873, L. R. 4 A. & E. 86}}}}; Foster v. Globe Venture Syndicate, Limited

[1900], 1 Ch. 814. See also the preceding case.

This suit was instituted against the same Defendants as Thompson v. Powles, and nearly resembled that case in its circumstances; for which reason it was thought advisable to report it here.

Taylor v. Barclay. Nov. 12, 19, 1828.

Pleading. Public Policy.

To prevent a demurrer to a bill it was falsely alleged in it that a revolted colony of Spain had been recognized by Great Britain as an independent State; the Court is bound to know, judicially, that the allegation is false, and not to give it the intended effect.

The bill in this case prayed a discovery only. It alleged that, in August 1825, Barclay & Co., representing themselves to be the agents of the Government of the Federal Republic of Central America, which, wax a sovereign ami independent State, recognized and treated as such by His Majesty the King of these realms, and in a state of amity with this country, publicly announced their intention of raising a loan for the said Republic, by [214] open competition, to be paid by instalments: that Barclay & Co. proposed to raise such loan upon the security of bonds or special obligations of the said Government; and represented that the bonds, or special obligations, were not to be delivered, in the first instance, to the subscribers to the loan; but that certificates of obligations, purporting to be issued by the said Government, should be given to them on payment of the first instalment, and that, on payment of the last instalment, arid on production of the certificates to the then contractor for or buyer of the loan, special obligations of the Government would be delivered to the holders of the certificates : that it was afterwards publicly advertised that Powles & Co. were the highest bidders, and had contracted for the loan; that, in all the advertisements, the two firms were represented as distinct parties to the transaction, and as having no common or joint interest therein : that the Plaintiff was induced, by Messrs. Powles, to purchase of them seventeen of the certificates, and afterwards duly paid, by the direction of Powles & Co., five of the instalments of the purchase-money into a banking-house, to the credit and on the account of Barclay & Co.; whereupon Powles & Co. signed receipts upon the certificates : that the Plaintiff, by the advice of Powles & Co. forebore to pay the sixth instalment: that such advice was given, as the Plaintiff afterwards discovered, with the view of making the Plaintiff commit a forfeiture of the former instalments; that Barclay & Co. were not authorized by the Government (as the Plaintiff had also since discovered) to make the said contract, or to bind the said Government thereby; and that the same was well known to Powles & Co. : that the Plaintiff had also recently discovered that, instead of Barclay & Co. having publicly sold the [215] certificates to the highest bidder, it had been clandestinely arranged, between them and Powles & Co., that the latter should be the nominal contractors for the loan, and purchasers of the certificates; and that Barclay & Co. should be secretly partners with them in the transaction : that the representations made by Barclay & Co., that they were authorized to make the contract, and that they had sold the certificates, by public sale, to Powles & Co., were made in order to induce persons to purchase the certificates at higher prices than they would have given if they had known the real nature of the transaction ; and that such conduct was a fraud upon the Plaintiff and the other persons who had purchased the certificates in ignorance thereof : that the Plaintiff was about to commence an action against the Defendants to recover the amount of the instalments which he had paid. The bill prayed a discovery in aid of that action.

The Defendants put in general demurrers.

Mr. Sugden, Mr. Pepys, Mr. Simpkinsori, Mr. Purvis and Mr. Jacob, in support of the demurrers. First. This State has never been acknowledged by Great Britain.

(1) This suit was instituted against the same Defendants as Thompson v. Powles, and nearly resembled that case in its circumstances; for which reason it was thought advisable to report it here.

TAYLOR V. BARCLAY 2 SIM. Jll.

There is an existing treaty which recognizes Guatemala as still belonging to Spain. In order to avoid a demurrer, an allegation has been introduced into the bill that Guatemala is a sovereign and independent State, and has been recognized as such by His Majesty; and the simple question is, whether that allegation can have the intended effect. Now the Judge is bound to know that our Government has never recognised this State; and, if an allegation, which [216] is false on the face of it, is made in a bill, it goes for nothing.

Second. The buying of these securities was an illegal act; and, therefore, the Court will not aid the Plaintiff to recover his money.

Third. The fraudulent conduct imputed to the Defendants amounts either to a conspiracy, or to obtaining money under false pretences, which are indictable offences ; the Defendant cannot therefore be compelled to answer the bill.(l)

Mr. Bickersteth, Mr. Pemberton and Mr. Hill, in support of the bill. It has been assumed that the Court is bound to know that the allegation in question is not true; but it has not been even hinted what is meant by the recognition of a State. There might be such a recognition as a Judge would not be held to have judicial knowledge of. A congress was held at Panama, and officers from our King met there functionaries from Guatemala. Is it unlawful to enter into contracts with a State because it has not been formally recognized by treaty, or by the sending of an ambassador or other public functionary ? If so, no contracts can be made with the Governments of the South Sea Islands and of many other countries. Doctrines so subversive of fair dealing were never before propounded. In October 1823, two years before this transaction took place, Spanish America was recognized by our Government as separated from Spain; [217] for consuls were sent to those parts of that country where the protection of British commerce required them. The ground of Lord Eldon's doubt in Jm.es v. Garcia del Rio (1 Turn. & Russ. 297) was not that the transaction was with an unrecognized State, but that this country was at peace with Spain. Will anyone say that, after commerce between Great Britain and these provinces has been permitted from year to year, and after consuls have been sent to them, there is still the difficulty existing that struck the mind of Lord Eldon ? It is important to look at the mode in which the recognition took place. It was not a recognition of certain particular States; but a distinct, unqualified recognition of the independence of the whole of Spanish America; and the only distinction that was made in the sending of ministers arose from the greater importance of the places to which they were sent. Guatemala was part of Mexico; and the independence of Mexico was recognized the first of all the provinces. In the King's Speech, delivered in 1824, we find a distinct recognition of the same independence. It is not necessary that there should be a treaty subsisting, and a resident minister, to give validity to contracts between two States. (Vattel, Law of Nations, Book II. chaps. 2 and 4.) Supposing that a contract between an unrecognized State and an individual of this country would not be valid, does it necessarily follow that, if the goods, the subject of the contract, were actually purchased and brought into this country, they could not be made the subject of barter or contract here ?

It is clear that, if the facts stated in the bill are proved, an action for money had and received might [218] be maintained. If, therefore, there is a clear ground of action, why is it not a case for discovery 1 Will it be said that there is no ground of action because the contract was illegal? But money paid upon an illegal contract may be recovered, if the contract is not completed; (2) and, therefore, it is not necessary to shew that the contract between Barclay & Co. and the Guatemala Government was legal. If, indeed, Barclay & Co. had received the whole of the instalments, and had delivered the obligations to the Plaintiff, and those obligations could not be enforced because they were illegal, the Plaintiff must have acquiesced in his loss.

(1) The arguments upon this third objection are not reported at length, because

the Court decided the case upon the first.

(2) Hubert v. Walsh, 3 Taunt. 277; Tappenden v. Randall, 2 Bos. & Pull. 467 ;

Cotton v. Thurland, 5 T. R. 405; Morris v. Robinson, 3 Barn. & Cress. 196; Sate v.

Cartwright, 7 Price, 540; Thistlewood v. Cracroft, 1 M. & S. 500.

3 SIM. 219. TAYLOR V. BARCLAY 771

If a partnership defraud a person, can it be said that, as the partners have conspired to commit a fraud, an indictment against them would lie, and therefore they cannot be compelled to give a discovery 1 If that be so, then, in all cases where two persons join in cheating a third, he can obtain no discovery from them, and the only case in which this Court will give its assistance is where the fraud has been committed by a single person. There is scarcely ever a bill filed to unravel a fraud that does not state a case of conspiracy. But this bill does state a case which, if proved, would subject the Defendants to a prosecution for a conspiracy. But if it did state such a case, the Defendant is not, on that account, protected from answering. {G-reen v. Weaver, ante, 1st vol. 404.) If the bill had imputed a felony to the Defendants, they could not have put in a demurrer [219] for want of equity, but could not have \'f2demurred to those questions only which tended to support the indictment. In The Attorney-General v. Brawn, the Lord Chancellor says: " The next question is," &c. \'f2(See 1 Swanst. 293.) The first allegation in the bill is that, in August 1825, Barclay & Co. and Powlea & Co. respectively carried on business in partnership together; the next is that this State has been recognized. The Defendants are, at all events, bound to answer these statements; and, if there are any passages in the bill that impute a \'bdrime to the Defendant, they form a very small part of it.

Mr. Sugderi, in reply. The sending of consuls has relation to commerce only. Up to this time three only of the provinces of Spanish America have been recognized; .and that has been done by solemn treaties, and the sending of ministers to reside in them; but Guatemala is not one of those States. Inquiry has been made at the Foreign Office, and the answer returned is that Guatemala has not been recognized as an independent State. The case of Yrisarri v. Clement (2 Carr. & Payne, N. P. C. 223 ; and 3 Bing. 432) was decided two years after a consul had been appointed. With respect to the right to recover upon an illegal contract which is not completed, if a man agrees to lend 500 at usurious interest, and pays 50 of it, he cannot recover it, as the offence is complete. A party dealing with the Government of "Guatemala deals with it as a sovereign State ; therefore the Court cannot entertain jurisdiction; as it cannot be put upon the record that there is such a Government as xuatemala. The case put of a bar-[220]-barous State does not apply; for this is a revolted colony of Spain. Throughout the whole of the bill it is stated that the \'f2contract was made with Barclay & Co. as the agents of the Guatemala Government; and, when the money was received by the agents, it became the property of the employers. It is, then, money raised for Guatemala; and this Court will give no relief, as the contract was illegal. The case stated at the Bar for the Plaintiff is very contradictory to that made by the bill. By the latter the contract is alleged to be legal; but the Plaintiffs counsel assert that it is illegal. If it be legal, how can it be contended that the Plaintiff is entitled to recover on the ground that it js illegal 'l. Green v. Weaver was decided on the ground that the party had given a bond for the due performance of his duty as a broker, which ho had violated. Thorpe v. Macauley (5 Madd. 218) decided that a discovery could not be compelled in aid of .a criminal action.

The vice-chancellor [Sir L. Shadwelll. In consequence of the arguments in this case I have had communication with the Foreign Office, and I am authorized to state that the Federal Eepublic of Central America has not been recognized as an independent Government by the Government of this country. It appears to me that, when it is stated, in the bill, that this Republic was, and still is a sovereign and independent State, recognized and treated as such by His Majesty the King of these realms, it must have been meant that it has been recognized by the Government of this country as an independent State altogether; and, inasmuch as I conceive it is the duty of the Judge [221] in every Court to take notice of public matters which affect the Government of the country, I conceive that, notwithstanding there is this averment in the bill, I am bound to take the fact as it really exists, and not as it is averred to be; and then it does not seem to me that there is any substantial distinction between the present case and the case in which I formerly gave judgment, that is, the casa of Tlwmpson v. Pawles,

I observe that, in this case, the bill is filer] for discovery only ; but it does not appear to me that the circumstance that, in one case, discovery alone is sought, at all

772 TAYLOR V. BARCLAY 2 SIM. 222.

tends to introduce a distinction in the judgment that has been given in a case where the bill was filed for discovery and relief. The judgment proceeded, not on the question whether the Court should give relief or not, or give a discovery or not, or give discovery and withhold relief; but upon the question whether the King's Courts should attend to the case of a party who founded his case on the representation that certain persons did form an independent Government, recognized by this country, when the Government of this country did not so recognize them. It appears to m& that sound policy requires that the Courts of the King should act in unison with the Government of the King. Now I apprehend that what Lord Eldon proceeded upon was a general doctrine of policy, that is, that he would not allow a person to sue, at least as a Plaintiff, in the Court of Chancery, who founded his case upon the representation that there was that existing as an independent Government, acknowledged by this country, which, in fact, was not so. It is impossible for me to suppose that any other than some such general principle [222] as that influenced him, when I observe what his Lordship did in the case of Bir& v. Thompson. The case was mentioned as an unreported case, but I have got the very brief, which I, as counsel, held on an application to Lord Eldon in that case. It was represented by the Plaintiffs that, in August 1823, the Defendant entered into an agreement with the Government of the Republic of Colombia to take a lease of certain salt mines ; and then certain circumstances are stated regarding that lease. It is stated that the Defendant had not himself funds sufficient to complete the contract; but, as the contract with these parties was a very advantageous contract, the Defendant was desirous of completing the same; and that, about the month of April, the Defendant came over to this country to provide funds to enable him to complete the advances to the Republic of Colombia, and entered into a treaty, with certain persons, for the purpose of raising a portion of the money for completing this contract. It was then represented that there was an agreement signed, which had been prepared and approved of between the parties ; and it was represented that the Plaintiff was willing to perform the agreement; and it was asked, by the bill, that the Defendant might be restrained, by the order and injunction of the Court, from transferring or assigning, or agreeing to transfer or assign, the part of the contract so entered into between him and the Republic of Colombia for that purpose; and this statement of the case was verified by affidavits. And, on this case, as it appears to me, as a matter of course, the Court would have granted the injunction, unless there had been this objection, founded upon the representation that the original contract was made with the Government of the Republic of Colombia. [223] Lord Eldon thought it right to refuse the application : and the note I have is that the Lord Chancellor refused the application because he could not take notice of the Republic of Colombia.

Now, in this case, I am asked to compel the Defendant to make a discovery, to the Plaintiff, of certain proceedings, all of which are bottomed on the original representation that certain persons were the agents of the Government of the Federal Republic of Central America, which then was and is an independent State, the faut being that it was not then, has not been, nor is now, an independent Htate acknowledged by the Government of this country. It appears to me that, without saying how far the Plaintiff might have had the discovery which he asks, provided he had represented his case otherwise, yet, if he makes this fact the foundation of his case, that this is an independent Government, recognized by the Government of this country, when it is not so, I must judicially take notice of what is the truth of the fact, notwithstanding the averment on the record, because nothing is taken to be true except that which is properly pleaded : and I am of opinion that, when you plead that which, is historically false, and which the Judges are bound to take notice of as being false, it cannot be said you have properly pleaded, merely because it is averred, in plain terms ; and that I must take it just as if there was no such averment on the record. My opinion is, without making any new law, which I entirely disclaim, but merely meaning to follow the precedents which Lord Eldon laid down as bottomed on sound policy, that I must allow the demurrer.