Ambrose J:

The sole issue in this case is an issue of law. It is whether the defendant company is entitled to disregard notice of an equitable mortgage of shares in the defendant company made by the registered holder in favour of the plaintiff, and to claim priority under its articles for its lien on the shares in respect of a debt incurred by the registered holder after the notice.

The relevant facts are not disputed and are as follows. The defendant company was originally known as Sze Hai Tong Banking and Insurance Co. Ltd. By a special resolution passed on 29 May 1957, it changed its name to Sze Hai Tong Bank Ltd. By a further special resolution passed on 29 July 1964 it changed its name to Four Seas Communications Bank Ltd. Lam Joo Chong (whom I will call Lam) was a member of the defendant company. On 2 February 1957, Lam deposited with the plaintiff a certificate of 225 shares in the defendant company, which were registered in his name, as security for repayment of all sums advanced to him by the plaintiff on his current account. And on the same day t he plaintiff gave the defendant due notice in writing of the security. On 4 February 1957, the defendant replied to the plaintiff claiming a first and paramount lien upon the shares under article 25 of its articles of association. On 29 July 1957, Lam deposited with the plaintiff as further security a further certificate of 225 shares in the defendant company which were registered in his name.

On 4 November 1959, Lam guaranteed in writing the account of Paramount Traders Ltd. with the defendant. Lam was a shareholder and director of Paramount Traders Ltd. On 17 May 1962, the defendant gave written notice to Lam requiring him to pay the sum of $80,000 pursuant to his guarantee and stating that, in the event of his failing to pay the required sum within ten days, the 450 shares deposited with the plaintiff would be sold by the defendant, together with 112 bonus shares to which Lam was entitled. Subsequently the defendant sold the shares and bonus shares.

Article 25 of the articles of association of the defendant company provides as follows:

The Company shall have a first and paramount lien upon all the shares registered in the name of a member (whether solely or jointly with others), and upon the proceeds of sale thereof, for all calls upon such shares, and also for all debts, obligations, engagements and liabilities of such member, solely or jointly with any other person, to or with the Company, whether the period of the payment, fulfilment, or discharge thereof shall have actually arrived or not; and such lien shall extend to all dividends from time to time declared on such shares, and shall have priority over all debts, obligations, engagements and liabilities of such member to or with any other person, notwithstanding that any such last mentioned debt, obligation, engagement or liability was incurred or undertaken prior in date to any debt, obligation, engagement or liability to or with the Company in respect of which it may claim to exercise the lien conferred on it by this Article, and notwithstanding t hat the Company had full notice thereof.

Counsel for the plaintiff cites Bradford Banking Co. v. Briggs [1886], 12 App Cas 29, for the proposition that a company is not entitled to disregard notice of an equitable mortgage of shares in the company and to claim priority for its lien under its articles in respect of a debt incurred after the notice. In that case the facts were these. Article 103 of the articles of association of the defendant company provided as follows:

The company shall have a first and permanent lien and charge, available at law and in equity, upon every share of every person who is the holder or one of the several joint holders thereof, for all debts due from him, either alone or jointly with any other person, whether a shareholder or not in the company."

A shareholder deposited his certificates of shares in the defendant company with th