Corporation of Sheffield v. Barclay and Others

Factual and Procedural Background

Two individuals, Individual A and Individual B, jointly owned corporation stock created under a local Act of Parliament. In 1893, Individual A forged Individual B’s signature on a transfer of that stock and obtained a loan from Company B (the Respondents, a bank) using the stock as security. Relying on the apparent validity of the instrument, Company B demanded that Company A (the Appellants, a municipal corporation statutorily responsible for maintaining the stock register) register the transfer and issue new certificates.

Company A, acting in what it believed to be the ordinary course of its ministerial duties, registered the transfer and issued fresh certificates. Company B later transferred the stock to third-party purchasers, whose titles became indefeasible against Company A. In 1899, after Individual A’s death, Individual B discovered the forgery and successfully sued Company A for rectification of the register, imposing a substantial financial liability on the corporation.

Company A then sued Company B for an indemnity. The trial judge (Lord Chief Justice) found for Company A, but the Court of Appeal (Williams, Romer and Stirling L.JJ.) reversed that decision. On further appeal, the House of Lords delivered the present judgment.

Legal Issues Presented

1. Whether, when a person with a statutory ministerial duty (here, registering stock transfers) acts on the request of another and thereby incurs liability because the requested act proves unlawful (a forged transfer), the law implies a contract requiring the requesting party to indemnify the ministerial actor.
2. Whether the absence of negligence or knowledge of the forgery on the part of the requesting party affects the existence or scope of the implied indemnity.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

Lord Chancellor (Judge Halsbury) emphasised the difference between the positions of the parties. Company A was compelled by statute to register transfers presented in proper form and had no practical machinery to investigate their validity. By contrast, Company B voluntarily entered the loan transaction and was free to make whatever enquiries it thought fit, including simple confirmation from Individual B that he had consented to the transfer. Because the bank’s “demand” for registration set in motion the sequence that caused the corporation’s loss, fairness and established authority required the bank to bear that loss.

Lord Davey articulated the governing principle: where a party with a statutory or common-law ministerial duty acts, without fault of its own, upon the request of another and thereby commits an apparent but unlawful act (here, removing a true holder’s name and inserting a forged transferee), the law implies a contract that the requesting party will keep the ministerial actor indemnified against any resulting liability. The principle applies even when the requesting party is unaware of the invalidity of its title to make the request.

His Lordship noted that Company A owed a duty only to those already on the register (the legitimate stockholders), not to persons presenting transfers. Consequently, the corporation’s breach, though innocent, created liability to Individual B. Because that breach occurred solely in compliance with the bank’s request, an implied indemnity arose.

Lord Robertson concurred without separate reasons.

Holding and Implications

Holding: Judgment of the Court of Appeal REVERSED; the trial judgment in favour of Company A is restored. Company B must indemnify Company A for the loss incurred as a result of registering the forged transfer.

Implications: The decision confirms that when a statutory registrar acts ministerially on a request that later proves unlawful, an implied contract of indemnity arises in favour of the registrar against the requesting party, irrespective of fault. The ruling reinforces protection for bodies performing compulsory ministerial functions and allocates risk to those who initiate potentially defective transactions. No new precedent was set, but existing authority on implied indemnities was affirmed and clarified.