COUNSEL:

SOLICITORS: For the appellants: The Solicitor, Board of Trade; Freshfields, Leese & Munns.
For the respondents: Donald McMillan & Mott.

JUDGES: Viscount Cave, Viscount Finlay, Lord Atkinson, Lord Sumner, and Lord Wrenbury.

DATES: 1924 May 13, 15, 16, 19, 20; July 22.

Banker—Foreign Corporation—Russian Bank—London Branch—Authority to Branch Manager to sue in Name of Bank—Deposit of Bonds to secure Loan—Action in Name of Bank to recover Bonds—Nationalization of Banking by Decree of Soviet Government—Effect of Decree on Branch Manager’s Authority—Estoppel.

In 1914 a Russian Bank had its head office in Petrograd and a branch office in London, the manager of which was authorized by a power of attorney to transact business for and bring actions in the name of the Bank. By the direction of the Petrograd office the London branch deposited with a London bank certain Brazilian and Chinese Government bonds to be held to the order and on account of a French Bank as security [*113] for a banker’s credit opened by the French Bank for the benefit of the Russian Bank.

In and after 1918 the Soviet Government of Russia by various decrees and orders nationalized banking in Russia by taking over the assets, share capital and management of all private banks and vesting them in a State Bank, then in a People’s Bank, and ultimately in a Government Department. Subsequently the manager of the London branch agreed with the French Bank to pay off the amount due to the latter on the banker’s credit in return for the bonds. The amount was paid, but the French Bank refused to release the bonds.

In an action brought in the name of the Russian Bank by the manager of the London branch against the French Bank and the London Bank for the return of the bonds, the defendants by their defence alleged that the plaintiff Bank had ceased to exist, and disputed the authority of the London branch manager to bring the action.

Held, first, upon the construction of the decrees of the Soviet Government, that the defendants had not proved that the plaintiff Bank was dissolved or that the property in the bonds was no longer in the Bank.

Secondly, that it was not open to the defendants to raise by way of defence to the action the objection that the London branch manager had no authority to bring the action in the name of the plaintiff Bank, but that they ought to have moved to strike out the name of the Bank as plaintiff.

Richmond v. Branson & Son [1914] 1 Ch. 968 approved.

Daimler Co. v. Continental Tyre and Rubber Co. [1916] 2 A. C. 307 distinguished.

Thirdly, that the defendants were estopped by their conduct from disputing the authority of the London branch manager.

Roe v. Mutual Loan Fund (1887) 19 Q. B. D. 347, and Rogers, Sons & Co. v. Lambert & Co. [1891] 1 Q. B. 318 applied.

Decision of the Court of Appeal [1923] 2 K. B. 630 reversed.

APPEAL from an order of the Court of Appeal [FN1] affirming by a majority (Bankes and Scrutton L.JJ.; Atkin L.J. dissenting) a judgment of Sankey J.

FN1 [1923] 2 K. B. 630.

The facts, which are summarized in the headnote, are stated in the report of the case before the Court of Appeal, and the several decrees and pronouncements of the Soviet Government in Russia are fully set out in a note appended to that report. The opinion of Viscount Cave also contains a detailed statement of the facts.

1924. May 13, 15, 16, 19, 20. Sir Patrick Hastings A.-G. (with him Schiller K.C. and Micklethwait) for the appellants. The respondents have failed to establish either that the [*114] appellant Bank has ceased to exist as a legal entity or that the authority of Mr. Jones, the manager of the London branch of the Bank, to carry on the branch business in London and to institute proceedings in the appellants’ name is determined. The true inference from the facts is that the authorities in control of the appellant Bank recognized Mr. Jones’s authority to carry on the branch business under his power of attorney and impliedly authorized him to do so. Assuming that the effect of the decrees of the Soviet Government was to destroy the entity of the appellant Bank in Russia those decrees have no extra-territorial operation, and, consequently, do not affect the assets and liabilities of the London branch of the Bank in this country: Lecouturier v. Rey [FN2]; Macleod v. Attorney-General for New South Wales [FN3]; Wolff v. Oxholm. [FN4] As to the relation between a branch and the head office of a bank, see Hart on Banking, 3rd ed., pp. 92, 93; Woodland v. Fear. [FN5]The respondents, having agreed with the London branch manager to hand over the bonds against payment and having thereby induced him as such manager to obtain the marks and make the payment to them under such agreement, are estopped from denying his authority to receive the bonds. In the absence of any claim to the bonds by the authorities in Russia the respondents cannot set up the jus tertii as a defence to the action: Rogers, Sons & Co. v. Lambert & Co.Roe v. Mutual Credit Fund. [FN7] The alleged want of authority to sue was not a matter of defence but should have been raised on a summons to set aside the proceedings: Richmond v. Branson & Son. [FN8] The decision of this House in Daimler Co. v. Continental Tyre and Rubber Co. [FN9] is distinguishable, because there the plaintiff company was incapable of giving any retainer at all. The English Courts have authority to [*115] wind up a foreign company which has an office and assets in this country: In re Commercial Bank of India [FN10]; In re Matheson Brothers [FN11]; In re Commercial Bank of South Australia [FN12]; Buckley on Companies, 10th ed., p. 554; and, having regard to the language of s. 268, sub-s. 1 (iii.), of the Companies (Consolidation) Act, 1908, which provides for the winding up of a company after dissolution when there can be no members, it cannot be necessary that there should be more than seven members in existence at the date of the winding up: see per Swinfen Eady J. in In re New York and Continental Line [FN13], commenting upon In re Bowling and Welby’s Contract. [FN14] This company has been properly wound up and the provisional liquidator, as the representative of the foreign company in this country, has the right to collect its assets and protect its creditors, and for that purpose to adopt the acts of the servants of the foreign company acting properly in the course of their business.

FN2 [1910] A. C. 262, 265.

FN3 [1891] A. C. 455, 458.

FN4 (1817) 6 M. & S. 92, 99, 105.

FN5 (1857) 26 L. J. (Q. B.) 202, 204; 7 E. & B. 519, 521.

FN6 [1891] 1 Q. B. 318, 323, 325.

FN7 19 Q. B. D. 347, 350.

FN8 [1914] 1 Ch. 968, 974.

FN9 [1916] 2 A. C. 307, 337.

FN10 (1868) L. R. 6 Eq. 517.

FN11 (1884) 27 Ch. D. 225.

FN12 (1886) 33 Ch. D. 174.

FN13 (1909) 54 Sol. J. 117.

FN14 [1895] 1 Ch. 663.

R. A. Wright K.C. and O’Hagan for the respondents. The appellant Bank has been abolished by the decrees of the Soviet Government. It is agreed that this was the intention of the Government, and the suggestion that this intention has failed is not borne out by the facts. This appeal is concerned with a Russian corporation recognized as such by other countries by the comity of nations, and if that corporation has been abolished by Russian law that abolition must be recognized here. The Soviet Government has declared the shares in this company cancelled, and the right to a share in this foreign company depends upon Russian law, which is now the law of the Soviet, that Government having been recognized in this country. It follows that upon the cancellation of the shares the members cease to be members. But a corporation cannot exist without corporators; consequently the abolition of the shareholders involves the abolition of the company. And if the Bank is abolished the branch goes with it; it has no separate entity of its own. The only [*116] plaintiff on the record being the Russian Bank, if that corporation is dissolved it cannot bring an action. There is therefore no plaintiff here at all. There being no Bank in existence, if anybody can sue it must be the Russian Government: Dicey’s Conflict of Laws, 3rd ed., p. 511, rr. 139, 140; Foote’s Private International Law, 4th ed., pp. 125, 126; Westlake’s Private International Law, 6th ed., p. 373, § 306; Grant on Corporations, p. 50; Bateman v. Service [FN15]; Colonial Bank v. Cady and Williams [FN16]; Continental Tyre and Rubber Co. v. Daimler Co. [FN17]; Luther v. Sagor & Co. [FN18] No doubt banking business was carried on after the Soviet decrees, but the person carrying on the business had changed. Assuming that the Bank has not been absolutely abolished, the effect of the nationalization of the Russian banks by the Soviet Government is to change the character of the Bank, and the power of attorney has become invalid. That power was given by an organization which on any view is swept away, and the London manager was in no sense acting for the company in its new guise. Therefore this action was not authorized: Dunlop Pneumatic Tyre Co. v. Actien-Gesellschaft für Motor und Motorfahrzeugbau vorm. Cudell & Co. [FN19] [They also referred to In re Thomas [FN20] and In re Clark. [FN21]] As to the winding up: if Jones’s authority has ceased is the liquidator in any better position?

FN15 (1881) 6 App. Cas. 386, 389.

FN16 (1890) 15 App. Cas. 267.

FN17 [1915] 1 K. B. 893, 915; [1916] 2 A. C. 307, 336-7.

FN18 [1921] 3 K. B. 532.

FN19 [1902] 1 K. B. 342, 347.

FN20 (1884) 14 Q. B. D. 379.

FN21 [1904] 1 Ch. 294.

[On the suggestion of Viscount Cave the argument on this point was postponed.]

As to estoppel: the doctrine of estoppel postulates a representation of an existing fact made to a person who relied upon it and whose position was thereby affected: George Whitechurch, Ld. v. Cavanagh [FN22]; Jorden v. Money. [FN23] But here the real representation was made by Mr. Jones that he had authority to give a receipt. This [*117] consideration applies equally to the question of approbating and reprobating.

FN22 [1902] A. C. 117, 145.

FN23 (1854) 5 H. L. C. 185.

Sir Patrick Hastings A.-G. replied.

The House took time for consideration.

1924. July 22. VISCOUNT CAVE.

My Lords, the facts leading up to this appeal may be shortly stated. The appellant, the Russian Commercial and Industrial Bank, was incorporated under Russian law in the year 1889, its capital being divided into shares. Its head office was in St. Peters-burg, and it had branches in London, Paris and elsewhere. The manager of the London branch was Mr. Victor Jones, who held a power of attorney giving him wide powers. In January, 1914, the appellants through their head office obtained from the respondents Le Comptoir d’Escompte de Mulhouse (whom I will call “the Mulhouse Bank”) an acceptance credit of 800,000 marks; and on the instructions of the head office the London branch deposited with the respondents the London County Westminster and Parrs Bank, Ld. (whom I will call “the Westminster Bank”), as security for the advance 29,000l. Chinese 5 per cent. bonds and 29,000l. Brazilian 4 per cent. bonds. In January, 1919, the London branch was minded to pay off the advance, and after some correspondence the amount due for principal and interest was agreed at Marks 1,090,000, and the Mulhouse Bank agreed to accept payment of that sum from the London branch. On September 15, 1919, the Mulhouse Bank wrote to the Paris branch of the appellant Bank in the following terms:–

“In pursuance of our verbal discussion with Monsieur Maurice Montebrun, your Attorney, we request you to remit for our account to the B.N. de C., at Mayence, the amount of:

Mk. 1,090,000 – One million and ninety thousand Marks, representing approximately the balance of your account per 22nd September.

“On the other hand, we are writing to-day to the London County Westminster and Parrs Bank to hold at the [*118] disposal on the 22nd September of your London Office:

£29,000 – Chinese 5 per cent. Bonds

Capital and

£29,000 – Brazil 4 per cent. 1911 Bonds

Coupons secured.

security which has been lodged in 1914 by your London Office for account of your Petrograd Office for the purpose of covering our advance of 800,000 Marks.

“We will despatch to you as soon as possible a rectified extract of account, and request you to settle the difference as soon as possible with the B.N. de C., at Mayence, under advice to us.”

In reliance on the agreement which had been made and confirmed by the above letter the London branch paid to the credit of the Mulhouse Bank the sum of Marks 1,090,000, and claimed delivery of the bonds; but the Mulhouse Bank, having received the agreed amount, made difficulties about giving up the bonds, and finally instructed the Westminster Bank not to part with them. Thereupon this action was brought by the appellants against the Mulhouse Bank and the Westminster Bank, claiming the bonds and the interest accrued thereon with damages for their detention. The two defendant Banks joined in resisting the plaintiffs’ claim, and by their defence as amended raised in substance two pleas – namely, (1.) that by virtue of certain decrees of the Soviet Government of Russia the plaintiff corporation had been dissolved and its property transferred to the People’s State Bank of Russia; and (2.) that the real plaintiff in the action was not the plaintiff corporation but Mr. Jones, and that the effect of the decrees above mentioned and of the seizure of the appellants’ property in Russia was to determine his authority either to receive the bonds or to bring the action. In addition to these pleas, the Court had to consider a contention raised on behalf of the plaintiffs that the defendants having received the Marks 1,090,000 under the agreement confirmed by the above letter were estopped from alleging the plaintiffs’ want of authority as an excuse for their failure to carry out their part of the agreement. During the currency of the proceedings an order was made under [*119] s. 268 of the Companies Act, 1908, for the winding up of the appellant company, and the effect of that order had to be considered.

The action was heard by Sankey J., who gave judgment for the defendants, mainly on the second of the above pleas; and on appeal his judgment was confirmed by a majority of the Court of Appeal (Bankes and Scrutton L.JJ.) mainly on the first of the above pleas, Atkin L.J. dissenting. Both the Courts held that the alleged estoppel had not been made out. Hence the present appeal.

My Lords, in the course of argument of this appeal a number of questions were raised, and I propose to deal with them in the following order:–

1. Have the defendants proved that the appellant company is dissolved and therefore incapable of maintaining this action?

2. Have they proved that the property in the bonds in dispute is no longer in the appellant company?

3. Have they proved that the authority of Mr. Jones was determined and accordingly that he had no authority either to receive the bonds or to bring this action?

4. Were the defendants prevented by their conduct from alleging want of authority?

1. Before considering the effect of the decrees it appears desirable to refer briefly to the nature of the Constitution which was set up in Russia after the revolution of October, 1917. It appears from the evidence given in this case that after that time the supreme authority in Republican Russia was vested in the All Russian Congress of Soviets, but that legislative authority was also vested in the Central Executive Committee of Soviets. There was also an executive body called the Council of People’s Commissaries, which had wide powers of administration; but all its orders or important decisions were subject to the examination and ratification of the Central Executive Committee. The Government so established originally exercised its functions in the northern districts of Russia only, including Petrograd and Moscow; but its authority was gradually extended over other parts of [*120] old Russia including the Ukraine. The Soviet Government was recognized by the British Government as the de facto Government of Russia in or about May, 1921; and it is well known that at a later period, that is to say, in January, 1924, it was recognized as the de jure Government also.

The decrees upon which the respondents relied in their pleadings were three in number and were dated December 14, 1917, January 26, 1918, and April 12, 1918. A fourth decree dated January 19, 1920, was discovered and put in evidence at a later period. There are also certain resolutions and instructions of the Russian Government which have to be taken into account.

The decree of December 14, 1917, was made by the Central Executive Committee and was in the following terms:–

“DECREE ON THE NATIONALIZATION OF BANKING.

“In the interests of the proper organization of national economic life, of the resolute eradication of banking speculation, and of the complete liberation of the workers, peasants, and the whole labouring population from exploitation by banking capital, and also with the object of establishing a single People’s Bank of the Russian Republic – a bank genuinely serving the interests of the people and the poorest classes – the Central Executive Committee hereby decrees:–

“1. Banking is declared a State monopoly.

“2. All existing joint stock banks and banking houses are amalgamated with the State Bank.

“3. The assets and liabilities of the liquidated banks are taken over by the State Bank.

“4. The method of amalgamation of joint stock banks with the State Bank shall be determined by a special decree.

“5. The management of the business of joint stock Banks is temporarily placed in the charge of the Council of the State Bank.

“6. The interests of small investors shall be fully safeguarded.”

The decree of January 26, 1918, was made by the Council of People’s Commissaries, and there is no evidence that it [*121] was confirmed by the Central Executive Committee. It was as follows:–

“DECREE OF THE COUNCIL OF PEOPLE’S COMMISSARIES CONFISCATING SHARE CAPITAL OF THE FORMER JOINT STOCK BANKS.

“1. The share capital (stock, reserve and special) of former joint stock banks are transferred to the State Bank of the Russian Republic on the basis of complete confiscation.

“2. All bank shares are declared null and void, and payment of dividends of any kind whatsoever is unconditionally stopped.

“3. All bank shares must forthwith be surrendered by the present holders to the local branches of the State Bank.

“4. The holders of bank shares which they cannot produce must submit to the branches of the State Bank register records of the shares in their holding, indicating their exact whereabouts.

“5. The holders of bank shares who have failed to surrender them in accordance with para. 3, or to submit register records of their shares in accordance with para. 4, within a period of two weeks following the day of the publication of the present decree, are punished by confiscation of all their property.

“6. All transactions and deeds of transfer referring to bank shares are unconditionally prohibited. Persons taking part in such prohibited transactions and deeds are punished with imprisonment up to three years.

Signed VL. ULIANOFF (Lenin),

Chairman of the Council of the People’s Commissaries.

Signed VL. BONTCH-BRUIEVITCH,

Principal Secretary to the Council of People’s Commissaries”

It appears that at or about the time when these decrees were passed the premises of the appellant Bank in Petrograd were seized by Red Guards, and a commissary appointed by the State Bank took possession of the books and securities of the appellant Bank. Shortly afterwards the name of the appellant Bank was removed, and a board was put up over the premises bearing the words “People’s Bank No. 4.”

On April 12, 1918, the Principal Commissariat of the [*122] People’s Bank issued a notice stating that

“The administration of the late private banks is abolished as from the 1st April 1918, and its functions are handed over to the People’s Bank of the Russian Republic.”

This notice is referred to in the defence as a decree.

On July 10, 1918, the fifth All Russian Congress of Soviets adopted a new Constitution, which included the following paragraph:–

“There is confirmed the passing of all banks into the ownership of The Workmen-Peasants’ State as one of the conditions of the emancipation of the labouring masses from beneath the yoke of capital.”

On September 20, 1918, the Council of the People’s Commissaries passed the following resolution:–

“Having considered the report of the People’s Commissary of Finance as to the mode of further carrying into effect of the nationalization of banks, the Council of People’s Commissaries has resolved:–

“1. To recognize that by the Decree of 14th December, 1917, there is established the principle of monopolization of banking in Russia by means of nationalization (or liquidation) of all the then existing private and public credit institutions.

“2. To instruct the People’s Commissary of Finance to carry out urgently by administrative procedure the nationalization (or liquidation) of all still existing credit institutions.

“3. To direct the People’s Commissary of Finance to submit to the Council of People’s Commissaries periodical reports as to the course of nationalization of banks and as to the position of banking.”

And on December 2, 1918, the same Council passed the following further resolution:–

“RESOLUTION OF THE COUNCIL OF PEOPLE’s COMMISSARIES ON THE LIQUIDATION OF FOREIGN BANKS, DATED 2ND DECEMBER, 1918.

“All foreign banks operating within the confines of the Russian Socialist Federative Soviet Republic are to be liquidated. With regard to Russian joint stock banks, they come under the effect of the Decree of 14th December. 1917 [*123] (Collection of Enactments, 1918, No. 10, Article 150), irrespective of the nationality of their shareholders or depositors.

VL. ULIANOFF (LENIN),

Chairman of Council of People’s Commissaries.

VL. BONTCH-BRUIEVITCH,

Administration of Affairs of Council of People’s Commissaries.”

On December 10, 1918, the People’s Commissary of Finance issued instructions on the method of nationalization of private banks, which were expressed to be issued in pursuance of cl. 4 of the above-mentioned decree of December 14, 1917. These instructions declared that all private commercial banks, with their branches, agencies and commission agencies, were “subject to nationalization, “ and that such nationalization was to be carried out locally under the supervision of “special technical liquidation collegiums” to be appointed as therein mentioned. The liquidation of the “former private banks” was to take effect as from December 14, 1917.

The fourth “decree” relied upon in these proceedings was dated January 19, 1920, and was made by the Council of the People’s Commissaries. It stated that “with the object of unification of the activities of the apparatus for estimates, settlement of accounts and cash operations” the Council had resolved (among other things) as follows:–

“(1.) To abolish the People’s (State) Bank of the Russian Socialist Federal Soviet Republic with all the staffs of officials, establishments and institutions forming part thereof.

“(3.) To transfer all the assets and liabilities of the late People’s Bank to the Central Budget and Accounts Administration.”

My Lords, it is not an agreeable task for a British Court of Justice to consider the effect of a series of decrees and orders providing for the compulsory acquisition by a foreign State of the assets of private persons “on the basis of complete confiscation.” But the Soviet Government has been recognized by Great Britain as the lawful Government of Russia; and this being so its decrees must, as Bankes L.J. said in [*123] Luther v. Sagor & Co. [FN24], be treated by the Courts of this country as binding so far as the jurisdiction of the Russian Government extends; and upon this basis I proceed to consider the effect of the decrees upon the continued existence of the appellant company.

FN24 [1921] 3 K. B. 532.

My Lords, on the language of the decrees themselves, and apart from any evidence given by the expert witnesses called in this case, I am by no means satisfied that their effect was to dissolve the plaintiff corporation. The decree of December 14, 1917, is in very general terms, and reads more like a declaration of policy than a positive enactment which is to take immediate effect; and this construction of that decree is supported by the provision in cl. 4 that “the method of amalgamation of joint stock banks with the State bank shall be determined by a special decree.” The decree of January 26, 1918, is inconsistent with the view that the joint stock banks had been dissolved in the previous December, for it provides for a transfer of the share capital and a surrender of the shares in those concerns. The notice issued by the principal Commissary of the People’s Bank on April 12, 1918, shows that he, at all events, did not take the view that the private banks had been dissolved in the previous December, for he directed that their administration should be abolished as from April 1, 1918. The paragraph in the Constitution of July 10, 1918, relating to the passing of all banks into the ownership of the Workmen and Peasants’ State, is even less definite than the decree of December and is inconsistent with it; for it omits all reference to the People’s Bank and treats the private banks as passing directly into the ownership of the State. The resolutions of September 20 and December 2, 1918, and the instructions of December 10, 1918, are executive acts only; but so far as they go they support the view that the decree of the previous December contemplated a future and not an immediate supersession of the private banks, for they provide for a liquidation of those banks to be effected by the new machinery which is set up. Lastly, the decree of January 19, 1920, [*125] carries the matter no further so far as the private banking companies are concerned, for its only effect is to abolish the People’s State Bank and transfer its assets to the State. From these documents therefore I should be unable to draw the inference that the joint stock banking companies, including the plaintiff corporation, were dissolved by the decree of December, 1917; and no other decree is proved which could have directly produced that effect.

But it was argued on behalf of the respondents that, as the decree of January 26, 1918, declared that all bank shares should be null and void, the effect of that decree was to destroy the banking corporations; for “where there are no corporators there can be no corporation.” This argument was forcibly urged, particularly by Mr. O’Hagan; but I do not think that it should prevail. The decree in question, though purporting to declare the shares null and void, proceeds to direct that they shall be surrendered to the State Bank under severe penalties; and it appears to me that the intention must have been that the State Bank should hold the surrendered shares and so control the banking corporations If so, the corporations would continue to exist. Further, this so-called decree was, in fact, only an order or resolution of the Council of Commissaries, and does not appear to have been confirmed by any body having legislative authority. I am unable to understand how such an order could be effective to confiscate or destroy shares held by persons out of the jurisdiction of the Soviet Government; and as there were admittedly many such shares, the corporation cannot have wholly disappeared.

Passing to the evidence as to the construction of the decrees given by Russian lawyers in this case, I find that it rather increases than allays the doubts which I had felt on reading the original decrees. The expert witnesses called at the trial were Mons. Krougliakoff on behalf of the defendants, and Mons. Idelson and Mons. Halpern on behalf of the plaintiffs; but for the purposes of the appeal further evidence was obtained from Mons. Krougliakoff and Mons. Idelson, and a new legal witness, Mons. Thal, gave evidence for the [*126] defendants. Mons. Krougliakoff, a Russian lawyer practising in London, stated in his evidence in chief that by the decree of December, 1917, the plaintiff Bank was “abolished as a separate and private entity and was merged into the State Bank”; but in cross-examination he was disposed to say that the decree of December was a statement of policy only and that it was left to be afterwards determined whether the taking over of the banks should be on the basis of compensation or of simple confiscation. In his further evidence he admitted that the banks had not “ceased their existence in law” before the decree of January 26, 1918. Mons. Idelson, a Russian barrister and lecturer on banking law at the Peter the Great Polytechnic, Petrograd, stated emphatically that according to Russian law a Russian corporation could only be dissolved by a special law, and that in his opinion the plaintiff corporation was not dissolved by the decrees, but was still in existence. In his view the decree of December, 1917, was “obviously a declaration of policy and not a legislative act in the ordinary way.” Mons. Halpern, an advocate of the Court of Appeal at Petrograd and legal adviser to the British Embassy there as well as to several banks, stated his opinion that the effect of the decree of December, 1917, was not to effect in law the dissolution of the private banks as corporate bodies, and that none of the other decrees had that effect. “In my opinion,” he said, “the corporation of the Russian Commercial and Industrial Bank still exists and owns assets.” In his further evidence he added that the notice of December, 1918, had not the force of a decree. The defendants’ second expert witness, Mons. Thal, a Russian barrister who had been professor of commercial and civil law at the University of Moscow and had remained there until the end of 1921, gave some very guarded evidence. When asked in his examination in chief whether after their amalgamation in the People’s Bank the private banks had any existence in contemplation of law, he replied:–

“In contemplation of law I think they had not. It is very difficult under such a new revolutionary condition to give an unqualified yes or no to that question; therefore, [*127] I say, 'No.' But I must add that, in so far as outside the Soviet power there might still be maintained any portions of this property, the continuance as a matter of pure fact of such operations would result from the existing circumstances; but, from the juridical point of view, those could not create any right on the part of these negotiorum gestores to the property which they were managing. It is not a beneficial interest; it is not individually to themselves, but it regards them as having some right.

“Q. Have they any title in Russian law? – A. They could have by subsequent ratification of the State. If the State had subsequently said all transactions effected by you are recognised by us, then this subsequent ratification would have formed a juridical basis, but without that they have none.”

This witness’s cross-examination added little or nothing to the above somewhat cryptic reply. He appeared for a time to say that on losing its property and going into liquidation the plaintiff corporation ipso facto ceased to exist; but after an adjournment of the Court he made the following pronouncement:–

“During the lunch time I have had an opportunity of thinking over several of the questions put to me, and I think my answers might not have been clear, because I did not really think them sufficiently out myself. For instance, I was asked whether I think the loss by any Company of its property ipso facto causes the cessation of the Company; I answered 'Yes,' but I think not now. I think, in order that it should cease to exist as a juridical persona, there is need for either the act of some authority or other resolution on the subject; in my opinion, such act is represented by the Decree of January concerning the cancellation of the shares; that is one correction. Another correction is this: a further question was put to me whether I think that every juridical persona which is in a state of liquidation does not exist while in that state. I think that a juridical persona which finds itself by its own resolution in liquidation for the purpose of its determination still possesses a certain limited legal capacity, [*128] namely, only that limited capacity which is necessary for the purpose of those actions requisite to put an end to it, but outside these limits it no longer possesses its legal capacity; that is the view of science and practice; I think that is this present case. In this bank there was no liquidation in the sense of a voluntary termination of its own existence, but, by the Soviet laws, a different mode of legislation is laid down, namely, the conversion for the future into branches of the People’s Bank; therefore, in so far as the law uses the term 'liquidation,' that does not mean their destruction, but the carrying through of all the operations relating to their previous existence; so that, in the present case, the liquidator is not the Company itself, the Company has ceased to exist and the liquidation is carried out by someone else.”

This hesitating and obscure statement appears to be the high-water mark of the defendants’ evidence as to the dissolution of the plaintiff company; and having carefully considered it, I am still far from being convinced that the defendants have proved – as in order to succeed they must prove – that the plaintiff corporation has ceased to exist.

There is another class of evidence to be considered – namely, evidence showing the conduct of the Soviet Government – which has a bearing on the proposal that the plaintiff Bank has been dissolved. In this connection the resolutions and instructions of the executive in September and December, 1918, which have already been referred to, are significant; but apart from these documents the dealings of the Russian Government and its State Bank with the English branch of the appellant Bank after the date of its alleged dissolution raise a strong presumption that the Russian Government did not look upon the plaintiff Bank as wholly extinct. These dealings were described by Atkin L.J. in his careful and lucid judgment, and need not here be stated in detail. It will be sufficient to quote the following conclusions from the judgment of the learned Lord Justice [FN25]:

“During the course of 1918, long after the alleged dissolution of the bank, the London branch was communicating in its corporate name with the [*129] head office at Petrograd, and receiving communications from Petrograd, each honouring orders addressed by the one to the other. It is true that the Petrograd branch signs 'Formerly the Russian Commercial and Industrial Bank, Liquidating Committee,' or describes itself as a branch of the State Bank, and sometimes but not always describes the London branch as a branch of the State Bank; but there is no suggestion of any lack of continuity, the old name is retained in formal documents, while in communications from Moscow the Moscow Commissary addresses himself to the Russian Commercial and Industrial Bank.”

FN25 [1923] 2 K. B. 665.

Similar evidence continuing down to the year 1922 was given as to the dealings of the Russian Government with another Russian banking corporation, the Russian Asiatic Bank, which was not less affected than the plaintiff Bank by the decrees on which the defendants relied. Having regard to these transactions it is impossible to avoid the conclusion that the Soviet Government desired to have the benefit of the operations of the plaintiff Bank in England and elsewhere abroad, and for that purpose treated it as having a continuous existence as a corporation.

Upon the whole matter I have come to the same conclusion as that which was reached by Atkin L.J. – namely, that the defendants have not established their plea that the plaintiff corporation no longer exists.

2. The allegation that by virtue of the Russian decrees the property and rights of the plaintiff corporation (including the bonds in dispute) had been transferred to and vested in the People’s State Bank, or in their successors the Russian Government, is found in the defence in this action; but so far as the bonds are concerned it was not supported by any arguments before your Lordships. Indeed counsel for the defendants deliberately refrained from arguing the question whether a Russian decree could confiscate foreign bonds which were in this country; and it is therefore unnecessary to deal with this question. But it is desirable to add that neither the Russian State Bank nor the Russian Government has (so far as the evidence shows) made any claim whatever to the bonds in dispute or otherwise intervened in any way; [*130] and this being so, it is not open to the defendants, who received the bonds from the plaintiff bank, to set up an adverse claim as existing in a third person except on behalf of and by the authority of that person: see Rogers, Sons & Co. v. Lambert & Co. [FN26]

FN26 [1891] 1 Q. B. 318.

3. But it is said that, assuming the plaintiff bank still to have a corporate existence, yet, having regard to the transfer of the undertaking of the bank to the State Bank, and afterwards to the Soviet Government, and to the suppression of the board of administration of the plaintiff Bank, the authority given by that bank to Mr. Jones by his power of attorney must be deemed to have been revoked, and accordingly that he had no authority to claim or receive the bonds or to commence this action.

My Lords, I do not think that it is open to the defendants to raise this question by way of defence to the action. If the defendants desired to dispute the authority of Mr. Jones to commence these proceedings in the name of the plaintiff company, their proper course was to move at an early stage of the action to have the name of the company struck out as plaintiff and so to bring the proceedings to an end. The decision of Warrington J. to that effect in Richmond v. Branson & Son [FN27]is not affected by the decision of your Lordships’ House in Daimler Co. v. Continental Tyre and Rubber Co. [FN28], where the alleged plaintiff was incapable of giving any retainer at all. The same observation applies to the suggestion that, as the arrangement for the loan was made with the plaintiff’s head office, these proceedings could only be brought by the authority of that office. The plaintiff company and its branches are one, and with the authority given for these proceedings the defendants are not concerned.

FN27 [1914] 1 Ch. 968.

FN28 [1916] 2 A. C. 307.

But there is another answer to this plea. The power of attorney given by the plaintiff company to Mr. Jones contained the following clause:

“And the Bank hereby ratifies and confirms and agrees to ratify and confirm all and whatsoever the Acting Manager pro tem. shall legally do or cause [*131] to be done by virtue of these presents including in such confirmation whatsoever may be legally done between the date of revocation by any means of these presents and the time of such revocation becoming known to the Acting Manager pro tem.”

Now it may well be that, if in the year 1920, when the bonds were claimed and this action was commenced, Mr. Jones had known all the facts which have been disclosed in the evidence in these proceedings, he would have felt considerable difficulty in acting under his power of attorney. But the evidence shows that he had not then any such knowledge as should have led him to infer that his authority had been revoked, and that on the contrary he had been treated throughout by the authorities in Russia as a person entitled to continue to carry on the business of the London branch. Further, it was only after this action had been commenced that the Soviet Government was recognized by Great Britain as the de facto Government of Russia, and until that event happened Mr. Jones could not be satisfied that any act of that Government could effectually determine his authority. This being so, the revocation (if any) of Mr. Jones’ authority had not then “become known” to him, and the acts done by him in purported exercise of his authority were, as between himself and his principal, valid and effective. Any difficulty which might now exist in delivering the bonds to Mr. Jones is removed by the winding-up order and the appointment of the official receiver as liquidator.

It was argued that the winding-up order was void, as by reason of the order of January 26, 1918, the company had no shareholders; but it is plain that there were many English shareholders, and in my opinion the order of January, 1918, did not effectively confiscate their shares.

4. There remains the plaintiffs’ plea of estoppel, and I think that it is sound. The Mulhouse Bank, with all the knowledge which they now have, agreed with the London branch of the plaintiffs’ Bank to receive payment of 1,090,000 marks and to deliver up the bonds; and having received the sum agreed upon they cannot now be heard to dispute the [*132] authority of the London branch to receive the bonds which were to be delivered in exchange for it: see Roe v. Mutual Loan Fund. [FN29]It is stated that some time after the receipt of the 1,090,000 marks, when the value of the mark had greatly depreciated, an offer was made to return to the London branch the same sum in marks, and was refused; but no such offer is pleaded, and if made it was wholly illusory.

FN29 19 Q. B. D. 347.

For the above reasons I have come to the conclusion that the defences set up by the defendants fail and that the plaintiff Bank is entitled to a return of the bonds. I am therefore of opinion that this appeal should be allowed, that the orders of Sankey J. and the Court of Appeal should be set aside, and that judgment should be entered for the appellants for the relief which they claim with costs here and below, and I move your Lordships accordingly.

VISCOUNT FINLAY

(read by LORD SUMNER). My Lords, the Russian Commercial and Industrial Bank was incorporated in Russia in 1889 as a joint stock company for banking business. The head office was in St. Petersburg; there were various branches in Russia and abroad; one of them was at Odessa, another in Paris and a third in London. Le Comptoir d’Escompte de Mulhouse, the first respondent, carried on business at Mulhouse, and appears to have been closely associated with the Banque Nationale de Crédit, a French bank.

In January, 1914, the London branch of the Russian Commercial and Industrial Bank deposited with the respondents, the London County Westminster and Parr’s Bank, certain bonds: 29,000l. Chinese 5 per cent. 1912 bonds and 29,000l. United States of Brazil 4 per cent. bonds. The bonds so deposited had been in the custody of the London branch, and were handed over by the manager of that branch on the terms that the coupons were to be remitted as they became due to the London branch of the Russian Bank and that the bonds were to be held by the London and Westminster Bank to the order of the Mulhouse Bank as security [*133] for advances made by the Mulhouse Bank to the appellants, and the dividends on the bonds were to be credited to the Russian Commercial and Industrial Bank at their London office. This arrangement went on till 1919, when Mr. Jones, the manager of the London branch of the Russian Bank, paid off the loan, which was fixed by agreement at 1,090,000 marks. The money was duly paid, but the bonds were not returned, and this action was brought on January 23, 1920, to recover them. Pleadings were delivered, but before the case came on for trial there took place in May, 1921, the recognition by Great Britain of the Soviet Government. The defendants in the action applied for an adjournment in order to enable them to amend the pleadings, so as to raise the defence that by the legislation of the Soviet Government the Russian Commercial and Industrial Bank had ceased to exist. The adjournment was granted, and the amended defence, delivered on June 15, 1921, contained the following paragraphs:–

blockquote>“10. The defendants say that the persons suing herein are an unincorporated body of persons and have adopted the style or title of the Russian Commercial and Industrial Bank, but have no right to the property of or to claim under agreements made with the said Corporation.

“11. The said Corporation has in fact ceased to exist by reason of the matters aforesaid.”

The case now turns substantially on the question whether this allegation, that the corporation in whose name the action is brought had in fact ceased to exist, is established.

Mr. Jones, the manager of the London branch of the Russian Bank, held a power of attorney from the Russian Bank dated November 20, 1914, and under this power he carried on the business of the bank in London until a provisional liquidator was appointed in February, 1922.

Sankey J., on February 23, 1922, delivered judgment in favour of the defendants. He based his judgment, chiefly on the finding that, having regard to the facts which had supervened and to the complete change of circumstances, Mr. Jones’ power of attorney had become exhausted either [*134] because the Russian Bank had ceased to exist or because a state of circumstances had supervened which was never contemplated at the time the power of attorney was given and to which the power of attorney was not applicable: Appendix, vol. i., p. 27, letter I.

An appeal was brought, and the Court of Appeal by a majority (Bankes and Scrutton L.JJ.) dismissed the appeal. Atkin L.J. differed, as he was of opinion that judgment should be entered for the plaintiff in the action, with costs.

As I have said, the great question in the case is whether the bank in whose name the action is brought still exists as a corporation, and the first point to be investigated is the effect of the legislation of the Soviet Government – has it terminated the existence of the plaintiff company? We have before us an agreed translation of the Russian decrees and orders and the evidence of eminent Russian lawyers as to their effect, upon which there is an acute difference of opinion among the expert witnesses.

I shall first examine the decrees themselves, and then consider the expert evidence as to their effect.

The first decree is that of December 14, 1917: Appendix, vol. ii., p. 150, letters C to F. It runs as follows: [His Lordship read the decree, which is set out in the opinion of Viscount Cave.]

It seems to me that this decree did not put an end to the existence of the Russian Commercial and Industrial Bank. The decree is largely in the nature of a manifesto in its provisions as well as in its preamble. The preamble speaks for itself, and I proceed to the consideration of the operative clauses. By them banking is declared a State monopoly (cl. 1). This assertion of principle is followed by the statement (cl. 2) that all existing joint stock banks are amalgamated with the State Bank. The third clause provides that the assets and liabilities of the liquidated banks are taken over by the State Bank. Clause 4 announces that the method of amalgamation shall be determined by a special decree, and cl. 5 states that the management of a joint stock bank is temporarily placed in the charge of the Council of the State [*135] Bank. The sixth, and last, clause is this: “The interests of small investors shall be fully safeguarded.”

It is obvious that the method in which the amalgamation contemplated by cl. 4 should be carried out is for the present purpose all important. We have not before us any special decree such as is spoken of in that clause, but we have a document entitled “Instructions approved by the People’s Commissary of Finance on the 10th December 1918 on the Method of Nationalization of Private Banks”: Appendix, vol. ii., p. 169, letter F. These instructions begin by referring to the fourth clause of the decree of December 14, 1917 (cl. 1). The second clause is as follows:

“Under nationalization, referred to in Clause 1, must be understood not only the transfer of credit institutions out of the hands of private owners into the hands of the State by means of amalgamating them with the State (People's) Bank, but also the reorganization of the activities of such institutions on new principles in accordance with the tasks imposed by the conditions of the present social order on the People’s Bank of the Russian Socialist Federative Soviet Republic.”

The first sentence of the third clause is this: “All private commercial banks with their branches, agencies and commission agencies are subject to nationalization”; and cl. 3 then goes on to provide for the carrying out of nationalization of private banks locally under “special technical liquidation collegiums.”

Clause 5 is as follows:

“In those towns where besides the establishments of the former State Bank there is only one establishment of a private bank, the latter is subject to liquidation; in the towns with two or several affiliated branches of private banks all such branches are amalgamated into one or several branches, in accordance with local requirements. In any case, if local economic conditions call forth a necessity of opening more than one affiliated branch of the People’s Bank, then the fundamental branch (office) must make an application to this effect, stating its reasons, to the Central Administration of the People’s Bank.”

Clause 6 provides that December 14, 1917, is to be the initial date [*136] to which the liquidation of former private banks is to be referred. Clause 7 provides that the liquidation balance sheet shall be made up on December 14, 1917. Clause 10 makes provision for the form of balance sheet to be returned, and cl. 21 provides for preservation of the rights of mortgagors, a note being appended “Securities are not to be returned.”

These instructions are a somewhat lengthy document, extending from pp. 169- 174 in Appendix, vol. ii. I think it appears, from the general tenor of the document, and especially from the clauses to which I have referred above, that these instructions were intended to deal with banks in Russia and do not apply to, and are not intended to apply to, branches in foreign countries, such as those in London and Paris. But further, it is obvious that “amalgamation” might be carried out without destroying the existence of the corporations which are amalgamated. These instructions do not show that such destruction was involved in the amalgamation, and there is no “special decree” such as was indicated in the decree of December 14, 1917. It is, in my opinion, not established that that decree, either with or without the instructions, put an end to the existence of the Russian Bank.

The decree of December 14, 1917, was followed by another issued in January, 1918. It is a decree of the Council of the People’s Commissaries, and is dated January 26: Appendix, vol. ii., pp. 150 and 151. This second decree declares the transfer to the State Bank on the basis of complete confiscation of all share capital stock in the former joint stock banks. It further declares all bank shares null and void and stops the payment of all dividends: cl. 2. All bank shares are to be forthwith surrendered to the local branches of the State Bank: cl. 3. Particulars must be furnished to the State Bank of the locality of all shares which cannot be produced: cl. 4. The holders of the bank shares who have failed to comply with clauses 3 and 4 within two weeks are to be punished with confiscation of all their property: cl. 5; and, finally, all transactions and deeds of transfer [*137] referring to bank shares are prohibited under penalty of imprisonment up to three years.

Whatever may have been the effect of this decree in the territory under the control of the Soviet Government, it appears to me that it cannot be regarded as applicable to such branches as those which were carrying on business in London and in Paris.

The same observation applies to the document which will be found in vol. ii. of the Appendix, entitled “State Organization”: pp. 152-168. This appears to be a statement of the Constitution of the Soviet Republic adopted on July 10, 1918, by the Fifth All-Russian Congress of Soviets. This document (ch. 2, p. 152) begins by stating that the Congress sets itself as its fundamental task the destruction of all exploitation of man by man, and the complete elimination of the division of society into classes, the establishment of a Socialist organization of society and the victory of Socialism in all countries, and proceeds to make special provisions under heads (a) to (g). For the present purpose only head (e) need be noticed. It runs thus:

“There is confirmed the passing of all banks into the ownership of the Workmen-Peasants State as one of the conditions of the emancipation of the labouring masses from beneath the yoke of capital.”

At p. 168 of the same volume there is another document entitled “Resolution of the Council of the People’s Commissaries, dated 20th September, 1918, on the Undeviating Enforcement of the Decree of Monopolization of Banking.” It recognizes (cl. 1) that by the decree of December 14, 1917, there is established the principle of monopolization of banking by liquidation of all still existing private and public credit institutions.

Another decree has been supplied to us: “Decree of the Council of People’s Commissaries,” dated January 19, 1920: Appendix, vol. ii., pp. 174, 175; but this appears merely to refer to the organization in Russia of the machinery for dealing with banking matters, and not to be relevant to the present inquiry. [*138] Neither of the documents last mentioned appear to have any bearing upon the position of the bank branches in England or France.

As I have said, evidence was called on both sides as to the effect which these various documents have according to Russian law upon the continued existence in point of law of the Russian Commercial and Industrial Bank.

For the plaintiffs in the action, evidence was given by Dr. Idelson and M. Halpern. Both of these gentlemen gave their evidence before Sankey J. at the trial in 1921. I desire to quote what the learned judge said of Dr. Idelson: Appendix, vol. i., p. 24, line 1 to B:

“Upon this question several Russian lawyers of great eminence gave evidence. I was particularly impressed by that given by Dr. Idelson, who was a member of the Council of the Ministry of Finance, and held the Chair of Banking in the Imperial Peter the Great Polytechnic from 1906-1918. He gave it excellently, but appreciated the difficulty of applying any principles of law, as we understand it, to what has taken place in Russia. It is not easy to apply the canons derived from the wisdom of the Ages to the hasty experiments of the moment.”

This passage records the impression of the judge who heard and saw the witnesses as to Dr. Idelson’s trustworthiness and ability, and in it the learned judge puts his finger upon the difficulty of dealing with such legislation as this on the ordinary lines, which would apply to legislation in a European country under normal circumstances.

Dr. Idelson was asked whether the effect of the Soviet legislation in the various decrees was to destroy the entity of this bank in Russia. He replies (Appendix, vol. i., p. 153 F):

“In this case the Russian Commercial and Industrial Bank, a limited company, was deprived of its rights to carry on banking business within the jurisdiction of the Bolshevik Authorities, but the limited company is still in existence because, as I have already explained, a corporation aggregate under Russian law cannot die by simply taking out of the till of that corporation certain securities or passing certain laws which prohibit the corporation within certain boundaries [*139] to carry on this or that business that it has been carrying on before.” Sankey J. then asked him: “You say the bank has not entirely ceased to exist?” Answer: “The limited company under the style of the Russian Commercial and Industrial Bank is still in existence”: p. 153 H.

On p. 154 (letter H) the witness says that while the Government has seized assets of the banks it has not taken over their liabilities and (p. 155, F to I) that the corporation continues to exist.

M. Halpern, an advocate of the Court of Appeal in Petrograd and legal adviser to His Britannic Majesty’s Embassy at Petrograd, who is familiar with banking business, also gives evidence to the same effect: Appendix, vol. i., p. 169. He is asked about the decree of December 14, 1917, and says: “I do not think that its effect in law was the destruction of the private banks as corporate bodies. “ With regard to the decree of January 26, 1918, he said that in his view the legal entity still exists while the share capital was transferred to the State Bank: Appendix, vol. i., p. 170, letter C to letter F. He is referred to other decrees, and on p. 172 (letter H to I) says that in his view the Corporation of the Russian Commercial and Industrial Bank still exists and owns assets, and adds that he regards such decrees as having purely territorial effect: Appendix, vol. i., p. 173, letters A, B and C.

Dr. Idelson gave evidence of the same nature in his deposition when further evidence was called for in the Court of Appeal: vol. ii., pp. 3-44.

Dr. Krougliakoff and Dr. Thal were called as experts on the other side.

Dr. Krougliakoff gave evidence at the trial (vol. i., pp. 113-138 and pp. 177-179), and made a deposition on examination under Commission (vol. ii., pp. 46-93). He said on the former of these occasions (vol. i., p. 116 G) that the effect of the decrees was that the bank was abolished as a separate and private entity and was merged into the State Bank, which was then called the “People’s Bank,” and at p. 117 he says that the effect of the abolition of the Russian Commercial [*140] and Industrial Bank was to abolish also the power of attorney which it had issued.

Louis Thal, who had been Professor of Commercial and Civil Law at Moscow, a member of the Russian Bar and a member of the Senate for Commercial cases, also gave evidence for the respondents on commission. His deposition is in vol. ii., pp. 93-133. Dr. Thal gave it as his opinion that the joint stock banks no longer exist as legal entities, but spoke of them as converted into portions of the National Bank: vol. ii., p. 96 D and p. 97. When he was asked whether the banks had, after such conversion, any existence in contemplation by law, he said (vol. ii., p. 97 F et seq to p. 98 B): “In contemplation of law I think they had not. It is very difficult under such a new revolutionary condition to give an unqualified yes or no to that question; therefore, I say, 'No,' but I must add that in so far as outside the Soviet power, there might still be maintained any portions of this property, the continuance as a matter of pure fact of such operations would result from the existing circumstances, but, from the juridical point of view, those could not create any right on the part of these negotiorum gestores to the property which they were managing; it is not a beneficial interest; it is not individually to themselves, but it regards them as having some right.

“Q. Have they any title in Russian law? – A. They could have by subsequent ratification of the State. If the State had subsequently said all transactions effected by you are recognized by us, then this subsequent ratification would have formed a juridical basis, but without that they have none.”

A great deal of the evidence on this head is very involved and obscure, and I do not think that anything would be gained by an attempt to abstract it.

As I have said, Bankes and Scrutton L.JJ. were of the opinion that the effect of the decrees was to put an end to the existence of the Russian Commercial and Industrial Bank, and on this ground they affirmed the judgment of Sankey J. in favour of the defendants.

[*141] The effect of the Soviet legislation is, to my mind, somewhat obscure, and I certainly am not prepared to assent to the proposition that the effect of the decrees has been to put an end to the existence of the Russian Bank. The burthen of proving that the plaintiff bank had ceased to exist is upon the defendants, who assert the demise of the corporation, and, in my opinion, it has not been satisfactorily established. But considerable light is thrown upon the problem by the narrative of what took place in fact. It is from this point of view that Atkin L.J. treats the case in his dissenting judgment. I desire to refer to his judgment on this subject (vol. i., pp. 60-64), and I agree with his conclusion, which is as follows [FN30]:

“For the above reasons I have come to the conclusion that the defendants have not established their plea that the plaintiff corporation no longer exists. I venture to think that their witnesses have assumed too readily that nationalization involves extinction, and have not given sufficient weight to the consideration that a business may be nationalized or amalgamated without the persons who owned the business being extinguished.”

FN30 [1923] 2 K. B. 670

It must never be forgotten that here we have to deal with a branch of the bank established and carrying on business in this country. Even if it had been demonstrated that the Russian Bank had, so far as Russia was concerned, ceased to exist, I should not treat that as decisive in this case. The London branch has existed for a long time, it has carried on business here, there are many English shareholders, liabilities to British subjects have come into existence. It carries on business here now just as the French branch does in Paris. To affirm the defence set up by the defendants in the present case would be to make it impossible for the branch to get in its assets and discharge its liabilities. In all fairness the branch must have the right to use the name of the bank for the purpose of getting in its assets. If there is any other body or person having a preferential right to these securities a claim may be made in the winding up in this country. But it is clear that the Comptoir d’Escompte de Mulhouse, having [*142] been paid the 1,090,000 marks, has no right to retain the securities too; the securities should be returned to the London branch by which they were lodged and which is suing in this action for their recovery, having paid off the debt.

Even if the power of attorney originally given to Mr. Jones should be regarded as at an end, I think the circumstances are such as to authorize those in control of the English branch to take the steps necessary for getting in the assets and discharging the liabilities of the branch.

In my opinion, judgment should be entered for the appellants with costs here and below.

LORD ATKINSON.

My Lords, the facts of this case have been fully stated by my noble friend who has preceded me. I will not attempt to deal with them at any length.

I find in the able and, to me, convincing judgment of Atkin L.J., the following passage containing a succinct and accurate description of the real nature of this case. He said [FN31]:

“In the result this case resolves itself into the simple position of a claim against a mortgagee who has been paid off and who holds both the security and the sum repaid.”

FN31 [1923] 2 K. B. 674.

This position is defended on the ground that, where bonds are deposited with a bank to secure a particular advance, and the amount of the advance is subsequently paid to this same bank by one purporting to be the agent of the bailor duly authorised to pay it for and on behalf of his principal, it is competent for the bank to receive from the agent the money in the character and for the purpose for which it is paid, and at the same time to refuse to deliver up to this agent the bonds pledged to secure the payment of the very debt the latter has discharged, on the ground that, though the bank has by accepting the payment from the agent treated him as a person having lawful authority from an existing principal to pay the latter’s debt, yet, in the matter of obtaining possession of the bonds so pledged, the principal may be treated as dead, extinct, incapable of appointing an agent or giving him authority to do anything.

[*143] Stripped of all sophistry and contention as to the meaning and force of certain decrees of the Soviet Government, this is really the right claimed by the Mulhouse Bank. It is about as audacious an attempt to, at the same time, approbate and reprobate a given transaction, as could well be imagined. It was urged in argument that the defendant bank had offered to refund the money paid them. The time at and the circumstances under which the offer was made are not stated.

It may possibly be that it was after they had discovered that the device of approbating and reprobating a given transaction was not, in the Courts of law in this country, very successful in defeating just claims.

The substance of the evidence given on behalf of the defendants was that the Soviet Government had by two decrees, dated respectively December 14, 1917, and January 26, 1918, not only acquired the business and assets of the Russian Commercial and Industrial Bank (a banking corporation having its head office in Petrograd and branches in London, Paris and Berlin), taken over its administration and annulled the rights of its shareholders, but had in addition dissolved the legal entity, and completely terminated its existence, so as to make it incapable of being an actor in a suit, or appointing an agent to take proceedings on its behalf or in its interest.

The agreement, in pursuance of which the bonds, the subject matter of this proceeding, were deposited, bore date the month of January, 1914. The bonds were actually deposited with the London and Westminster Bank about the same time, and the debt the bonds were deposited to secure was paid off on or about December 22, 1919, one year an tell months after February 12, 1918, the date of the Order of the Principal Commissioner of the People’s Bank so much relied upon. The revolution in Russia did not break out till the month of November, 1917, and the Soviet Government was not recognized by His Majesty’s Government till May, 1921. This recognition is presumed to have been retrospective in its operation and effect. It is essential to [*144] consider how the business of the London branch of this bank was carried on from, at all events, the time when the deposit of the deeds was made, the parent corporation being then alive, and apparently in vigorous health and activity, and how that same business was carried on after the parent institution was, as is contended, dead, dissolved and had ceased to be.

Atkin L.J. deals with this matter ably and exhaustively in his judgment. [FN32]

FN32 [1923] 2 K. B. 665-669.

He shows conclusively, I think, that several of the branches of this Russian Bank were not only communicating and doing banking business with each other, but with the parent institution itself, long after the latter’s alleged decease. It is said that “even in our ashes live their wonted fires,” but a dead and dissolved bank having live and active branches with which it transacts banking business is rather incomprehensible. The inference to be drawn from what has occurred would seem to me to be that none of the parties concerned the Head Office of the Russian Bank in Petrograd, its various branches, or the banking institutions with which they severally dealt, ever regarded the parent institution as defunct, unable to appoint an agent, or to do business through and by the aid of such an officer. The London branch knew presumably that the parent institution had been spoliated by the above-mentioned decrees, but it could not, it would appear to me, have ever considered that it had been annihilated or the branch would not have acted as it has done.

The burden of proving that the entity – the parent banking institution in Petrograd – was annihilated and destroyed, that it had ceased to exist as a business entity, rests upon the respondents. It has been proved by the evidence given on behalf of the appellants that the dissolution of a corporation like that of the Russian Bank could only be effected by an express statutory enactment. Russian lawyers were examined on both sides upon this point. They were directly opposed to each other in opinion, those examined on behalf of the respondents being of opinion that the effect [*145] of the decrees was to extinguish the Russian Bank, while those examined for the appellants were of opinion that, in spite of the decrees mentioned, this bank maintained its existence as a legal entity.

Having regard to this evidence, I do not think it is competent for an English tribunal to hold that each of these decrees is ex facie, according to Russian law, clear and unambiguous in its meaning, or, if properly construed, would be precise and certain in its operation and effect. It is in my view essential, in order to find out what it was designed according to the Russian law to effect by those decrees, to have regard to what was done under them by the parties concerned, what kinds of business transactions between those parties were carried on after the decrees were respectively made. It is more rational, it would appear to me, to hold that the banking and other business carried on, subsequently to the date of these decrees, by the parties concerned was permissible according to Russian law than to hold that it was carried on in violation of the prohibitions contained in the decrees. If that be so, as I think it is, then the business so carried on by its very existence and nature affords help in the construction of the decrees as legal documents. Atkin L.J. has collected and described these transactions in the passages of his judgment to which I have already referred. I thoroughly agree with him as to their significance and effect. The detailed examination of them, coupled with that of the decrees and orders actually made by the Soviet Government, has convinced me that the respondents have, as to this part of their case, utterly failed to discharge the burden of proof already mentioned, which, in my view, at all events, indubitably lay upon them.

I think they have failed to prove their plea that the plaintiff corporation has ceased to exist. Till that is established, it must be taken that the corporation exists as a juridical person capable of instituting such an action as the present in this country. The minor question, or one of the minor questions, remaining for decision is as to whether Mr. Jones, the manager of the London branch of the plaintiff corporation, had, as agent [*146] of that corporation, authority to institute the present action. The power of attorney executed by the Russian Bank bears date October 7, 1914. It purports to be executed by the board of directors of the Russian Commercial Industrial Bank, thereinafter styled “the Board.” In it Mr. Jones is styled “the acting manager “ pro tem. in London, to carry on, in the name of this bank, in accordance with the fourteenth article of its articles of association, the operations therein described, in the United Kingdom. It conferred upon this acting manager very wide and important powers, amongst others the following:–

“(1.) To direct and superintend the business affairs of the bank (i.e., the Russian Commercial and Industrial Bank) in the United Kingdom in accordance with the instructions and orders of the Board, and the provisions of the articles of association of the bank,” and

“(2.) to represent the bank whether as plaintiff or defendant in connection with any litigation in which the bank may in any way be interested before any tribunal or court and to appoint on behalf of the bank such solicitors, counsel and other professional persons or person to prosecute or defend any action, suits or other proceedings, and generally in connection with the affairs of the bank, and any such appointment at pleasure to revoke and to appoint another or others in the place of the party or parties so removed.”

No date is expressly named at which this power of attorney is to be taken to be revoked or to expire, but by its last clause it is provided that

“the bank ratifies and confirms and agrees to ratify and confirm all and whatsoever the acting manager pro tem. shall legally do or cause to be done by virtue of these presents, including in such confirmation whatever shall be legally done between the date of revocation by any means of these presents and the time of such revocation becoming known to the acting manager pro tem.”

It is not pretended that the authority of the manager was ever expressly revoked either by the directors of the State Bank or by the Soviet Government. But it is contended apparently, on the evidence of the expert Russian lawyer, Mr. Krougliakoff, called as a [*147] witness on behalf of the respondents, that the decree of January, 1920, did in effect work a revocation of this power of attorney. That is presumably a question to be determined by Russian law. But even if the decree had this effect, the revocation it worked would come within the last clause of the power, since the words used are “Revocation by any means.”

The powers of the acting manager, therefore, continued until the revocation became known to him, which could not have been before May, 1921, when the English Government for the first time recognized the Soviet Government – that is, more than twelve months after the present suit had been instituted, eleven months after the respondents had filed their defence, and one month after that defence was amended. The question remains whether, even though the authority of the acting manager was by implication revoked in the manner described, it was not renewed by the new authority, the Soviet Government, which had become responsible for the management and administration of the affairs of the bank. Atkin L.J. deals with this point, so convincingly to my mind, in a passage of his judgment. [FN33] I cannot do better than quote it verbatim. It runs thus: “In the second place, even if the authority had been revoked, it appears to me plain that it was renewed by the new authority responsible for the administration of the affairs of the bank. That the Soviet Government knew that there was a London branch is obvious, that they knew that it was continuing to carry on business in the name of the Russian Bank is established by the correspondence to some of which I have already referred, and also by the fact that they intended it to carry on business. Indeed, without this correspondence I should have drawn that inference from the knowledge of the existence of the branch and the knowledge of the nature of banking business. They reply to letters written by Mr. Jones on behalf of the bank and accept his business directions. They must be deemed to have intended that some one should carry on the business of the bank in this country, and in the ordinary case [*148] of a private principal I cannot conceive of any one refusing to draw the inference that authority was impliedly given to the former manager to carry on as before with the former authority. Such an inference under the circumstances would, in my judgment, be a matter of course if we were dealing with an official liquidator or receiver and manager in Russia permitting a branch to be continued here, and I refuse to draw a different inference merely because we are dealing with a foreign Government.”

FN33 [1923] 2 K. B. 671.

I also concur in opinion with Atkin L.J.: (1.) that on the authority of Richmond v. Branson & Son [FN34]the point of want of authority to sue is not open to the respondents as a defence to this action, and (2.) that the French Bank (the respondents) having received the bonds from the Russian Bank is estopped from raising a jus tertii except on behalf of a third person named and with the authority of that person whose right of property is set up: Rogers, Sons & Co. v. Lambert & Co. [FN35]

FN34 [1914] 1 Ch. 968.

FN35 [1891] 1 Q. B. 318.

I am of opinion that the appeal succeeds, and that judgment should be given for the plaintiffs for the relief claimed with costs.

LORD SUMNER.

My Lords, I have had the opportunity of reading the opinion of my noble and learned friend on the Woolsack and I entirely agree with it.

LORD WRENBURY.

My Lords, I am of opinion with your Lordships that this appeal succeeds, and I concur in the reasoning upon which that conclusion is based. Had I been of a different opinion as regards the operation of the Soviet decrees and had I thought that those decrees had an effect beyond that of taking over, amalgamating, and absorbing the private banks in Russia and extended to extinguishing and determining altogether the existence of the Russian corporation, there would have emerged another question upon which the appeal might have fallen to be decided and upon which I should have desired to hear argument. There is no question but that according to [*149] private international law and according to the comity of nations a foreign corporation is for many purposes recognized as a corporation here. It may sue and be sued here in its corporate name. But there is also no question but that a corporation created under a foreign law is not a corporation within our law. The foreign corporation which establishes itself in trade in this country is an unregistered company within s. 268 of the Companies Act, 1908, and may be wound up as an unregistered company. The question which arises is whether the association of persons which is in the foreign country bound together by a nexus of corporation is not in this country an association of natural persons bound together by a nexus of partnership but not corporate. No objection arises by reason of the association consisting of more than ten persons, for the word “formed” in s. 1 of the Companies Act, 1908, means “formed in this country, “ and the association was in such a case “formed” abroad by incorporation there. The question then is whether the association is not to be treated here as an association or partnership of natural persons whose relations inter se are to be found in the articles of association of the company and are to be ascertained no doubt with reference to the lex loci contractus, but which is nevertheless an association whose existence is not terminated by the death of the foreign corporation, but continues for the purpose of winding up its affairs so far as this country has control over the persons and the assets within its jurisdiction. The natural persons forming such an association are not dead even if the corporation is. It is settled that a company which is a foreign corporation can be wound up here, and even if the corporation had been “dissolved” in the foreign country, I should have wished to hear argument upon s. 268 of the Companies Act, 1908, whether after the “dissolution” in the foreign country it would not be good ground for winding it up here that it had been dissolved and fell within the words in s. 268, which provide that an unregistered company may be wound up “(a) if the company is dissolved.”

My Lords, I have desired to add these few words to [*150] protect myself in case the above question should arise hereafter. It has been unnecessary now to determine the question, having regard to the course which the case took upon other grounds.

Order of the Court of Appeal reversed, and judgment entered for the appellants for the relief claimed. The respondents to pay the costs in the Courts below, and also the costs of the appeal to this House. Cause remitted back to the King’s Bench Division to do therein as shall be just and consistent with this judgment.