1844.-Clarke v. Mauning.

was to be occupied as the banking shop of the Joint Stock Banking Company then in formation. The deed of settlement was executed on the 9th of May, 1842, and the business commenced on the 12th of May. The directors who were appointed to superintend the business were four persons, of whom Roe and Blachford, partners in the old firm, were to be the managing directors, an arrangement, the prudence of which certainly seems (to say the least of it) very questionable. They accordingly undertook to be the managing directors. Roe and Blachford were debtors to the defendants in this cause on two separate accounts. On one account they were debtors to the amount of 4631. 14s. 6d., and on the other for the sum of 18771. 18s. Some variations took place in one of these accounts before the month of August, 1842, when, on one account, 463l. 14s. 6d. was due from Roe and Blachford, and on the other 14677. 12s. 1d. There was some interest due, and the whole sum then due for principal and interest amounted to 19771. which is the only sum now in question between the parties.

*In the saine month of August, the defendants were [*165] desirous that the balance due to them from the old firm, should be transferred to the account of the new firm, the Joint Stock Banking Company, and on the 11th of August, a letter was written by Mr. Blatchford to the defendants, stating that they were at liberty to draw on the new firm to the amount of 14677. 12s. Id., the balance due upon one of the two accounts. On the 15th of August, a check was drawn by the defendants upon the new firm, for the sum of 10007. in favor of Mr. Deacon, the solicitor of the defendants. Mr. Deacon paid it into the hands of his bankers, his bankers communicated with the joint stock bank, but when it was paid, does not appear. Another check, for a sum of 1000, was also drawn on the 29th of August. by the defendants in favor of Mr. Deacon, and which was treated in the same manner. When that was paid, does not appear.

I think it does appear, on this occasion, that when these two checks were drawn, there was no account open between the new firm and the defendants, but it seems, that on the 5th of September, Mr. Blachford, the managing director, gave instructions to the clerk of the new firm, to open an account between the new

1844. Clarke v. Manning.

firm and the defendants; and we find entries made, beginning on a day in September which is not stated, in which those two checks of 10007. each, together with other sums, are duly entered. The first entry on the other side of the account is dated on the 23d of September, and consisted of a sum then paid into the new bank by the defendants, and some other sums were also entered. On the 30th of September, there is one of cash entered as 557. 10s., paid in by the defendants to the new bank, and immediately

under that entry, and seemingly on the same day, there [*166] is an entry to the *credit of the defendants of 19777., being

the sum which is now in question between these parties, and stated to be the amount of the whole balance due to the defendants from Roe and Blachford. It is thus entered, on the 30th September, to the credit of the defendants with the new firm, in the pass book between the new firm and the defendants; but as it seems at present, entered no where else, and not at all entered in any of the general open books of the partnership, which books, though they comprise the entries of the other sums of money comprised in this "pass book," do not contain any entry whatever of this particular sum. The account, as kept in the pass book, goes on with this item of 19777., but as kept in the other books of the firm, without that item. The pass book is, from time to time, made up with that item. Whether there was any making up of the accounts in the other books, does not appear on this occasion; but this item was not in them, as it would seem. The matter so proceeds, and the account goes on between the parties. Roe and Blachford became bankrupts in December, 1842. The pass book is then communicated to the persons who at that time had the management of the business, and it is discovered that the accounts in the pass book and in the other books of the firm differ in respect of this item. It became plain a fraud must have been committed, and a very gross fraud. Who is to bear the burthen of it? That is really the only question between these parties. The fraud, which up to that time was secret, having been exposed, immediately, and of necessity, arises the question between these parties, "who is to be charged with the effect of it?" The Joint Stock Banking Company, who are the plaintiffs in this cause, say, they are advised, that, under the cir

1844.-Clarke v. Manning.

cumstances, they ought not to bear it. The defendants say they have acted in the usual way between bankers and their customers; that *they were justified in trusting the per- [*167] sons with whom they dealt, who acted on behalf of the company; that they are perfectly and entirely innocent, and therefore ought not to be charged with the consequences of this fraud.

In that state of things the defendants commence their action, for the purpose of recovering what appears to be due on the balance of their account, including in it this disputed item of 19771. The defendants in the action, represented by the plaintiffs in this cause, say, you are not entitled to so large a sum as that; we must deduct the 19777., the subject of this fraud, and we will pay into court the remaining part of the balance. They did pay that into court. The plaintiffs in the action have accepted that sum, and it now appears that the remaining sum is, as I stated before the only one in question.

This bill is filed, stating these and some other facts which I have not thought it necessary minutely to detail; and, in stating those facts, it, at the same time, charges the defendants with having concerted a fraud with Blachford, or with Blachford and Roe, for the purpose of obtaining payment of this balance from the new firm, which it was hopeless they would be able to obtain from Roe and Blachford, and, on that ground of fraud, thus charged, it asks for relief. The charges in the bill are those of fraud, by concert and combination between these parties. The case is brought into equity, not only on the ground of fraud, but also on the ground of complication of account; that, however, I do not particularly take notice of..

This court has clearly a concurrent jurisdiction with

all other courts in matters of fraud; but the defence *which [*168] is made is this-that all the frauds which are here distinctly charged are such, that if the plaintiffs were to make them out, they would furnish a defence at law, and therefore the plaintiffs have no occasion to seek relief in equity. The defendants here say, let the action be tried, you have pleaded the frauds, prove them, and you will have there the same relief which you ask for here. The answer to which is this: It is very true,

1844. Clarke v. Manning.

that if I make out those frauds which would be a defence at law, I should succeed at law; and, though I have not distinctly charged fraud of any other kind, yet I have stated and alleged facts, which show that there has been a fraud which would not be a defence at law, not being those direct frauds arising from falsehood, concert, and combination, which will be taken notice. of there, but frauds which will only be taken cognizance of in a court of equity, namely, fraud arising from the negligence or want of caution of the parties dealing with the agents, directors or managers of the joint stock company :-such negligence and such want of caution as have enabled them to practise a fraud on those for whom they were acting, and which they would not have been able to have practised, if the defendants here had not been guilty of such want of attention and such negligence as they have.

It is very true that there are courses of conduct which this court construes to be fraudulent, and which may be used as a defence to a party sought to be charged with the consequence of them, which would not be taken notice of in a court of law. It is very true also that those matters which have been called legal. frauds might be taken notice of here; but relief is sought for on the ground of both species of fraud, namely, that which would

be considered fraud in a court of law, and that which [*169] would be held to be fraud in a court *of equity. This answer comes in, denying directly and positively all the charges of fraud which are particularly set out in the bill, and claims and insists, that the defendants have a right to have those imputed frauds determined by an immediate investigation in a court of law. They, however, admit that there may possibly be such things as this court alone would consider a defence to their claim, but not admitting that any thing of the sort exists.[1]

[1] In those cases of fraud in which the proper remedy is not exclusively vested in other courts, (as in the case of fraud in obtaining a will,) it is no objection to the bill, that there is an adequate remedy at law. 1 Story's Eq. § 184; Green v. Bostwick, 1 Sand. Ch. Rep. 186. The Court of Chancery has concurrent jurisdiction with courts of law, in cases of fraud; and where the complainant files a bill for relief against a fraudulent contract, and for a discovery of the fraud, the court may proceed and grant relief, and make a final decree between the parties after such

1844. Clarke v. Manning.

This being a motion made upon the answer, which denies all direct or legal fraud, the order which I have to make on this present occasion cannot proceed, in the least degree, on that foundation. The question which I have to consider here is, whether there is not a probable case to be made out which requires investigation; and I think that this is a case that requires investigation as to that which is alleged to be a fraud in a court of equity. Then it is said by the plaintiffs that the legal and equitable fraud are but one case, and that I must determine both together. It is certainly one case, but it is founded on two distinct portionsnamely, the charges of direct fraud, and the charges of fraud which, though not direct and being innocently meant, might nevertheless relieve the party who is sought to be charged with the effect of it. Is it an imperative rule that I must have the whole tried at once? Where direct frauds are charged, I think they are much more likely to be fully investigated in a court of law than here. Why, then, should not this court relieve itself of that portion of the case which can be best determined in a court of law? Why should not that part of this matter, which is capable of being better tried and determined in a court of law, be there disposed of, reserving to the parties the benefit they may be exclusively entitled to in a court of equity? It comes, therefore, *to this, whether there might not be an injunc- [*170] tion to stay execution, without staying the trial; and I think that this will be the most convenient mode of disposing of the matter.

The importance of trying the matter in this way is quite apparent. Suppose that, in the action, this legal fraud should be made out, then there would be an end of all the plaintiff's claim there would be an end of the necessity for this bill. On the other hand, suppose there was to be a verdict against these charges of direct fraud, and that the plaintiff in this cause was satisfied, after the evidence which had been produced, that these charges of fraud, which are so distinctly denied by this answer, discovery has been obtained. But the court will not in a case of concurrent jurisdiction, grant an injunction for the mere purpose of transferring the jurisdiction from a court of law, where no discovery is necessary, or after the defendant has fully answered the complainant's bill. Crane v. Bunnell, 10 Beav. 333.