Principal & Third Party
Cases
Said v. Butt
[1920] 3 K.B. 497
Butt, was the managing director of a theatre was involved in a dispute with Said. Twice S’s personal application for a ticket had been refused. He employed P as his agent to buy a ticket for him without disclosing his name. On his arrival at the performance, Said was refused admission.
McCardie held that this contract was affected by mistake as to the identity of the contracting party and Said’s action therefore failed. Where the personal element is strikingly present in the contract made with the agent, the undisclosed principal may not intervene.
The “Magellan Spirit”
[2016] EWHC 454 (Comm)
Mr Justice Leggatt:
“The undisclosed principal doctrine
The proposition that a party to a contract should have rights against and obligations towards a principal of the other contracting party whose existence was not disclosed when the contract was made is out of harmony with the objective approach of modern English commercial law. It runs contrary to the salutary principle that “civil obligations are not to be created by or founded upon undisclosed intentions”: Keighley Maxsted & Co v Durant [1901] AC 240, 247, per Lord Macnaghten. Nevertheless, the doctrine is firmly established. As long ago as 1872, Blackburn J said in Armstrong v Stokes (1871-72) LR 7 QB 598, 604, that it had often been doubted whether it was originally right to hold that an undisclosed principal was liable to be sued on the contract made by an agent on his behalf, but that “doubts of this kind come now too late”. The applicable legal principles have been succinctly summarised by Lord Lloyd giving the judgment of the Privy Council in Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199 at 207:
“(1) An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of his actual authority. (2) In entering into the contract, the agent must intend to act on the principal’s behalf. (3) The agent of an undisclosed principal may also sue and be sued on the contract. (4) Any defence which the third party may have against the agent is available against his principal. (5) The terms of the contract may, expressly or by implication, exclude the principal’s right to sue, and his liability to be sued. The contract itself, or the circumstances surrounding the contract, may show that the agent is the true and only principal.”
The agent’s intention
In relation to the second of these propositions, Mr Baker for VSA submitted that the test of whether the agent intended to enter into the contract on the principal’s behalf is subjective. On that basis he submitted that there is a very short answer to the Owner’s contention that VSA was an undisclosed principal. Mr David Fransen, who signed the charter for Mansel, has made a witness statement in which he says that he intended to sign the charter on behalf of Mansel as principal and not as an agent for VSA. Mr Baker submitted that, unless this evidence is to be disbelieved, it is sufficient to defeat the Owner’s case on this issue and the court need go no further.
I do not accept, however, that Mr Fransen’s subjective state of mind is relevant for this purpose, let alone decisive. It is one thing to infringe the objective principle – as the doctrine of undisclosed principal undoubtedly does – by allowing the existence of contractual rights and obligations to depend on an intention which is not communicated to the other contracting party. But it would go a step further, and would give rise to wholly unacceptable uncertainty, if such rights and obligations were to depend on a purely private intention of the supposed agent which was not even communicated to the supposed principal before the contract was made. As Lord Shand observed in Keighley Maxsted & Co v Durant [1901] AC 240, 256:
“There is a wide difference between an agency existing at the date of the contract which is susceptible of proof … and an intention locked up in the mind of the contractor, which he may either abandon or act on at his own pleasure, and the ascertainment of which involves an inquiry into the state of his mind at the date of the contract.”
In the same landmark case Lord Macnaghten (at 247) quoted from the year books of Edward IV (17 Edw 4, 2, pl 2) the observation of Brian CJ in 1477 that “the thought of a man is not triable, for the Devil has not knowledge of man’s thoughts”[3] – a maxim which Lord Macnaghten endorsed as sound – “at least, in its legal aspect”.
The question whether an undisclosed agency relationship was created must depend in principle, as I see it, not on the state of mind of the supposed agent at the time of contracting, but on whether the supposed agent had communicated to the supposed principal an intention to contract on its behalf. The principle is confirmed by further binding House of Lords authority. In Garnac Grain Co Inc v HMF Faure & Fairclough Ltd [1968] AC 1130 at 1137, Lord Pearson (with whose speech the other law lords agreed) stated the principle as follows:
“The relationship of principal and agent can only be established by the consent of the principal and the agent. They will be held to have consented if they have agreed to what amounts in law to such a relationship, even if they do not recognise it themselves and even if they have professed to disclaim it … But the consent must have been given by each of them, either expressly or by implication from their words and conduct.”
See also Yukong Lines Ltd v Rendsburg Investments Corp, The “Rialto” [1998] 1 WLR 294, 303. This statement of the law makes it clear that if on an objective analysis of their words and conduct Mansel and VSA consented to the creation of a relationship of agent and principal between them, it matters not that Mr Fransen (or anyone else involved in the transaction) did not subjectively intend or perceive this to be the case.
In support of his submission that the test of intention is subjective, Mr Baker referred to Bowstead & Reynolds on Agency (20th Edn, 2014) para 8-072, footnote 399, where six cases are cited. Having looked at those cases, only two of them appear to suggest that the agent’s subjective intention is relevant. The first is National Oilwell (UK) Ltd v Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582, a case involving an unidentified rather than an undisclosed principal. In that case a broker concluded a contract of insurance purportedly as agent for a class of persons who included sub-contractors of the principal assured. The claimant was such a sub-contractor but had not authorised the broker or principal assured to enter into the insurance contract on its behalf. Colman J interpreted the effect of earlier authorities as being that in these circumstances the claimant could nevertheless ratify the contract provided that at the time it was made the principal assured or other contracting party had subjectively intended to contract on the claimant’s behalf (see 596-7). I have serious doubts as to whether this proposition is correct. It was not necessary to the court’s decision, as Colman J found that there was no such intention and that, even if there had been, a term of the insurance contract would in any event have precluded the claim. On any view, however, the proposition expressed obiter in this case is not applicable to undisclosed principals, as it was specifically held by the House of Lords in Keighley Maxsted & Co v Durant, supra, that an undisclosed principal cannot ratify a contract made without authority even if the person who entered into the contract subjectively intended to act on the supposed principal’s behalf.
The only other case cited which suggests that subjective intention is relevant is Lai Wo Heung v Cheung Kong Fur Pty Co Ltd [2004] 1 HKLRD 959, a first instance decision from Hong Kong, also involving an unnamed rather than undisclosed principal. The court’s approach is based on the National Oilwell case and I do not find it persuasive. In neither of these cases nor in the passage in Bowstead on Agency on which Mr Baker relied is reference made to the statement of principle in the Garnac Grain case which seems to me to be conclusive of the test to be applied.
Was an agency relationship excluded?
Mr Baker also argued that VSA has another short answer to the Owner’s case on agency based upon the last proposition in the summary of the law quoted earlier from the judgment of the Privy Council Siu Yin Kwan: namely, that the contract itself, or the circumstances surrounding it, may show that the agent is the true and only principal and thus exclude the undisclosed principal’s right to sue and liability to be sued. In the light of the decision of the House of Lords in Drughorn Ltd v Rederiaktiebolaget Transatlantic [1919] AC 203, Mr Baker accepted that the description of Mansel in the charter as the “charterer” of the vessel is not sufficient to exclude the possibility that Mansel contracted on behalf of an undisclosed principal. He nevertheless submitted that this possibility was excluded by the way in which Mansel came to be designated as the charterer in the negotiations for the contract. To assess this argument (together with the third ground of the Owner’s claim, which I will come to later) it is therefore necessary to look at what was said in those negotiations.”
Clarkson Booker Ltd. v. Andjel
[1964] 2 Q.B. 775, 790 (C.A.),
A third party sold goods to agent who did not disclosed he was purchasing them on behalf of a principal but the third party later discovered this
– letters were written by the solicitor of third party to both the principal and agent threatening proceedings in respect of the price of the goods and a writ was then issued against the principal
– when the principal went into liquidation, a writ was issued against the agent and judgment obtained against him
The Court of Appeal upheld the judgement. The court pointed out that the institution of proceedings against either the agent or principal did not amount as a matter of law to a binding election so as to bar proceedings against the other.
– The institution of proceedings was normally strong evidence of such election but as third party had never withdrawn the treat to sue the agent, third had not by suing the principal unequivocally elected to hold principal alone liable for the price.
Shogun Finance Limited v Hudson (FC)
[2003] UKHL 62
LORD NICHOLLS OF BIRKENHEAD
!Dyster v. Randall [1926] Ch. 932
Dyster knew that Randall would not agree under any circumstances to sell certain land to him. He therefore employed an agent to negotiate the purchase of the property without revealing the fact that he was acting for a principal. Upon discovering that the agent had been acting for Dyster, Randall sought to resist performance of the contract on the grounds that he had been deceived by the agent. The court held that the contract could be enforced by Dyster. It was not a personal contract and the identity of the real purchaser consequently was not a material ingredient.
Nash v. Dix (1898) 78 L.T. 445
The defendants sought to resist the plaintiffs claim for specific performance of a contract to sell a Congregational chapel on the grounds that the plaintiff was secretly acting as agent for a committee of Roman Catholics, whose earlier and more direct overtures had already been rejected by the defendant seller. The plaintiff had contracted to purchase the chapel on the understanding that the Roman Catholic committee would in turn buy it from him at £100 profit.
North J:
`The fact that (the plaintiff) knew that the defendants would have been reluctant to sell to a person who was buying as agent for the Roman Catholics, did not touch the case if he were buying, not as agent for the Roman Catholics, but on his own account.’
Where an agent represents that he has authority to do a particular act, and he has not such authority, and another person is misled to his prejudice, the ground upon which the agent is held liable in damages is that there is an implied contract or warranty that he had the authority which he professed to have. It would seem to follow from this, in principle, that, where the authority upon which an agent is professing to act is a continuing authority, there is a continuing representation by him that he has authority to do the series of acts, and an implied contract or warranty that he possesses such authority In Firbank’s Executors v. Humphreys (3) the law is thus stated by Lord Esher: “The principle of Collen v. Wright (4) extends further than the case of one person inducing another to enter into a contract. The rule to be deduced is, that where a person by asserting that he has the authority of the principal induces another person to enter into any transaction which he would not have entered into but for that assertion, and the assertion turns out to be untrue, to the injury of the person to whom it is made, it must be taken that the person making it undertook that it was true, and he is liable personally for the damage that has occurred.” And Lindley L.J. said (5): “Speaking generally an action for damages will not lie against a person who honestly makes a misrepresentation which misleads another. But to this general rule there is at least one well established exception, namely, where an agent assumes an authority which he does not possess, and induces another to deal with him upon the faith that he has the authority which he assumes.”
Now this principle is, in my judgment, equally applicable whether the authority which the agent assumes extends to one act only, or to a series of acts; and, in the latter case, if some only of the acts are unauthorized by reason of an authority having determined, there is no reason why the principle should not extend to those. The fact that the earlier acts of the series were within the authority should make no difference as regards the later unauthorized acts.
The contention of the respondents is inconsistent with the opinion expressed by Lord Davey in the House of Lords in Starkey v. Bank of England. (1) Lord Davey said: “The whole stress of his” (Mr. Upjohn’s) “argument has been to shew that this case is not an exception from the rule as to actions of deceit, and that the rule as laid down in Collen v. Wright (2), and other cases which need not be enumerated, does not extend to cases where the supposed agent did not know that he had no authority and had not the means of finding out. …. I am of opinion that it is utterly immaterial for the purpose of the application of this branch of the law whether the supposed agent knew of the defect of his authority or not, and indeed that is the very doctrine which is asserted by Story J. in the first edition as well as in subsequent editions of his work on Agency to which a reference has been made.” And Lord Lindley stated that the decision in Firbank’s Executors v. Humphreys (3) was sound, thus repeating in the House of Lords what he had previously said in that case in the Court of Appeal, to which I have already referred. Lord Halsbury expressed the same view, citing with approval some of the original judgments in Collen v. Wright (4), which were affirmed in the Exchequer Chamber, laying down that, when a person purports to act as agent, he promises or warrants that he is what he represents himself to be, and can be sued on the promise or warranty, although he believed it to be true. Lord Halsbury also points out that this principle is unaffected by the decision in Derry v. Peek. (1)
Having regard to the authorities to which I have referred, I am of opinion that the distinction acted upon by Stirling J. in Salton v. New Beeston Cycle Co. (2) is not a sound one, – namely, the distinction between the period before and that after the date at which the solicitor knew, or by the exercise of due diligence might have known, of the revocation of his authority, – the principle that there must be some wrong or omission of right on the part of an agent, for the time being acting without authority, to make him personally liable.
In my judgment Smout v. Ilbery (3) can no longer be regarded as law, if and so far as it decided that an agent continuing to act without knowledge of the revocation of his authority is not under liability to the other party for his warranty or representation of authority.
Jordie & Co v James Gibson
County Court.
1 April 1894
[1894] 28 I.L.T.R 83
His Honor Judge, Colquhoun
Newtownards, April, 1894
His Honor.—The facts in this case are clear, and I would give the plaintiffs a decree for the sum sued for, but that a serious question of law arises. The defendant carried on the business of a publichouse through his son David, and the defendant, who did not appear in the transaction at all, was unknown to the plaintiffs until after they had supplied the goods and sued the son, David, to judgment. The question now is—Does this judgment, recovered against David Gibson, bar the plaintiffs (although they have not received satisfaction) from now proceeding against the defendant, who at the time the judgment was recovered filled the position of an undisclosed principal? I think on the authorities it does. In the case of Priestly v. Fernie, which was decided on demurrer, the owner of a ship was sued on a bill of lading which was signed by the master in his own name; the defendant pleaded that the plaintiff had already obtained judgment against the master for the same cause of action; the plaintiff in his replication stated that the judgment was unsatisfied, and that he had not before the recovery of the judgment any notice or knowledge that the bill of lading was made by or on behalf of the defendant. Bramwell, B., delivered the judgment of the Court, and, no doubt, treated the case as one of election, but he clearly lays it down that if the agent be sued to judgment no action can afterwards be brought against the principal, and he does not suggest any difference even if the plaintiff at the time of recovering the judgment does not know that there is a principal. It might be forcibly contended that until the plaintiff becomes aware of the existence of a principal he cannot have exercised any election, because the existence of an election would imply that the fact of two courses being open was known to him. The result of the authorities, however, appears to me to be, that election exists up to the time of judgment, but after judgment has been recovered against the agent it is not possible to sue an undisclosed principal, and have two judgments against different persons in different capacities ( i.e., one against the agent and another against the principal) for the same cause of action. In Calder v. Dobell, L. R. 6 C. P. 486, Kelly, C.B., says (p. 499):—“I think the plaintiffs had a right to sue either the agent or principal at their election. No doubt the election being once determined there is an end of the matter, as where the agent has been sued to judgment.” And in another case of Ex parte Williamson, L. R. 10 Q. B. 57, the case of Priestly v. Fernie was adopted as a binding authority. Thereis one other case of Kendall v. Hamilton, 4 Ap. Cas. 504, in which the point was not actually decided, but the judgment of Lord Cairns is very valuable; the defendant in that case was a sleeping partner, and the plaintiffs had sued to judgment Wilson and M’Lay, the ostensible partners. Lord Cairns, at p. 514, deals with the case as if it were one of undisclosed principal and agent, and at p. 515 says:—“In the present case I think that when the plaintiffs sued Wilson and M’Lay, and obtained judgment against them, they adopted a course which was clearly within their power, and to which Wilson and M’Lay could have made no opposition, and that, having taken this course, they exhausted their right of action, not necessarily by reason of any election between two courses open to them, which would imply that, in order to an election, the fact of both courses being open was known, but because the right of action which they pursued could not, after judgment obtained, co-exist with a right of action on the same facts against another person. If Wilson and M’Lay had been the agents, and Hamilton (the defendant in this action) alone the undisclosed principal, the case could hardly have admitted of a doubt; and I think it makes no difference that Wilson and M’Lay were the agents, and the undisclosed principals were Wilson, M’Lay, and Hamilton.” I am, therefore, coerced to decide, though I would rather decide otherwise, that the action is not maintainable against James Gibson, and I must dismiss the present civil bill.
Brennan v. O’Connell
[1980] IR 14O’Higgins C.J.
18th March 1975
I have read the judgment which Mr. Justice Henchy is about to deliver and I agree with it.
Budd J.
I also agree with the judgment of Mr. Justice Henchy.
Henchy J.
It is common case that when the defendants appointed Mr. Byrne as their estate agent for the purpose of procuring a purchaser of the home farm for £25,000, Mr. Byrne did not thereby acquire any authority to enter into a contract on the defendants’ behalf for the sale of the home farm for £25,000. His contract of agency merely authorised him to pass on to the defendants for their further instructions an offer to purchase for £25,000, if he obtained such an offer. Consequently, when on Friday the 13th October, 1972, the plaintiff made an offer to Mr. Byrne of £25,000 for the home farm, Mr. Byrne was not competent to bind the defendants when on that date he entered into a written contract purporting on their behalf to sell the home farm to the plaintiff for £25,000. It is also common case that the contract could not become enforceable against the defendants unless they subsequently ratified it and that, if ratification took place, it would operate retroactively so that the contract would then become the defendants’ contract just as if they had authorised it when Mr. Byrne entered into it: see Sheridan v. Higgins .5
However, as the trial judge has found, Mr. Byrne telephoned the defendant Henry O’Connell either on the following day (Saturday) or on the following Monday and told him that he (Byrne) had sold the home farm for £25,000. Speaking for himself and on behalf of his brother (the second defendant), Henry O’Connell said he was well satisfied. On the face of it, this would seem to constitute a ratification of the contract which Mr. Byrne had made. But counsel for the defendants say that closer examination of the circumstances will show that it cannot be treated as a ratification because Mr. Byrne did not disclose in his telephone conversation with Henry O’Connell the extent of the inquiries about the lands that had been made by another potential purchaser, named Martin Moloney.
The extent of Mr. Moloney’s overtures, as established by the trial judge, may be stated briefly as follows. On Wednesday the 11th October, 1972, Mr. Moloney made Mr. Byrne an offer of £24,000 for the home farm on condition that 1,500 bales of hay (estimated to be worth £700) were included in the sale. Mr. Byrne passed on this offer to the defendant Henry O’Connell, who turned it down and reaffirmed his requirement of a price of £25,000. Then came the plaintiff’s offer of £25,000 on Friday the 13th October, which Mr. Byrne purported to convert into a contract on that date. On the following day (Saturday) and before Mr. Byrne had passed on the plaintiff’s offer to Henry O’Connell, Mr. Moloney telephoned Mr. Byrne and inquired if Mr. Byrne would sell, as a single lot, the home farm and the out farm (which Mr. Byrne had been instructed to sell by public auction on a later date) and, if so, at what price. Mr. Byrne answered in the affirmative and stated that the price would be £45,000. Mr. Moloney’s response was that that was a lot of money. There was no further contact with Mr. Moloney before the alleged ratification. It is agreed that the defendants were not informed of Mr. Moloney’s telephone conversation before the alleged ratification.
The central point in this appeal is whether the failure of Mr. Byrne to inform the defendants of Mr. Moloney’s telephone conversation was a non disclosure which prevented the defendants’ assent to a sale to the plaintiff from being a ratification of the written contract entered into by Mr. Byrne and the plaintiff on the 13th October, 1972.
Before a principal can be held to have ratified a contract made on his behalf by his agent, the principal must be made aware of all the material facts on which the contract is founded; that is well-established law. This stands to reason, for clearly it would be unfair to hold a man bound by the obligations of a contract made on his behalf if he was debarred by lack of factual information from being able to assess what a ratification would let him in for. The nature of the information that must be made available to the principal depends on the circumstances of the particular case. In the instance of a vendor and an estate agent, the vendor should not be held to have ratified a contract for sale which the estate agent has purported to make on his behalf unless the vendor is made aware of all facts in the knowledge of the estate agent which, in the particular circumstances and without the benefit of hindsight, could objectively be said to have been necessary to enable the vendor to decide if he should assent to the sale. Applying that test to the present case, the question at issue reduces itself to this. Before the defendants could be said to have been able to decide if they should approve of the sale to the plaintiff of the home farm for £25,000, should they have been told (a) that on the day after the purported sale Mr. Moloney had inquired of Mr. Byrne if the two farms might be sold together and, if so, at what price, and (b) that, on being told that the two farms could be bought together for £45,000, Mr. Moloney had merely replied that that was a lot of money?
In my opinion it was not necessary for the defendants to be given that information before they could be said to have been in a position to ratify the sale to the plaintiff for £25,000. Mr. Moloney was a person who had made a qualified offer of £24,000 for the home farm a few days previously; that offer was rejected and he had made no further offer. His inquiry about the possibility of a sale of the two farms as one lot was no more than an inquiry.
.
The evidence does not disclose that there was at the time any reason to expect that Mr. Moloney’s inquiry would lead to an offer from him for either or both farms. The inquiry was in character indistinguishable from the usual inquiries about properties on their books which it is the business of estate agents to elicit and to answer. In the absence of special terms in the contract of agency between a vendor and an estate agent, and so long as they remain mere inquiries, disclosure of such inquiries to the vendor could not be said to be necessary to enable him to decide whether or not to accept a particular offer. They would be objectively immaterial. So much so, that the estate agent and his staff might not even think it necessary to keep a record of them. Only facts which are material to the decision of acceptance or nonacceptance have to be disclosed for the purpose of ratification. The suggestion in the judgment of Pringle J. that non-disclosure of material facts would not invalidate an alleged ratification cannot be supported.
The defendants insist that they would not have approved of the sale to the plaintiff if they had been told of Mr. Moloney’s inquiry. They point to the fact that after they learned of that inquiry they sought, and still seek, to avoid being bound to sell to the plaintiff; they say that this shows that it was a material fact that was essential for a valid ratification by them. Viewed in the light of the subjective requirements of the defendants, that may be so; but an objective test of materiality must be applied. If information which, merely by the subjective standards of a particular vendor, is thought necessary to be disclosed before a sale can be approved, the contract of agency should provide for such disclosure. If that were not the law, a vendor could avoid an otherwise valid ratification, on which the estate agent may have acted, by claiming that the estate agent had withheld from him information which he (the vendor), for private and unpredictable reasons, considered necessary such as the identity of the purchaser; or the nature of his race, religion or politics; or the way in which the property is to be used by the purchaser; or other purely personal or idiosyncratic considerations which would not reasonably be expected to be material to a decision to reject or to accept an offer to purchase.
The contract of agency should expressly, or by necessary implication, authorise the property owner to do so before he can avoid an otherwise valid ratification by relying on non-disclosure of a circumstance which, according to ordinary business standards, could not be said to be material to a decision to accept or reject a particular offer. No such term can be read into the agency here. As the mere fact that someone had made an inquiry about the terms on which the property might be sold could not, without more, be held to be a consideration which might be expected in the ordinary course of business to affect a decision to assent to an otherwise acceptable offer, the non-disclosure of that inquiry cannot be held to avoid the ratification.
The effect of the ratification is that Mr. Byrne is to be deemed to have had authority to make on behalf of the defendants the open contract in writing which he made on the 13th October, 1972: see Law v. Robert Roberts & Co. 1 The plaintiff is entitled to specific performance of that contract.
Therefore, I would dismiss this appeal.
Woodman, Matheson & Co., Ltd. v. Waterford Corporation.
Hanna J. [1938] IR 3
This is a case of importance to public or market authorities having public weighbridges.
I have no difficulty as to the facts in this case. I find that Hurley and Woolfson agreed to swindle the plaintiffs, Woodman and Matheson. The plan of the swindle was that when Woolfson had wool to sell to the plaintiffs, Hurley, who was the weighman at the Corporation weighbridge of the defendants in Waterford, would issue bogus weigh dockets for loads, most of which he had never seen and had not weighed, inserting in the dockets the imaginary weights given to him by Woolfson, these dockets being then presented by Woolfson to the plaintiffs’ accountant, Mr. Ward, who accepted them and paid on them as correct, as they came from the public weighbridge. With the exception of four loads, which for the present we may leave out of consideration, from July until October, the busy part of the wool season, none of the loads delivered by Woolfson’s carters to the plaintiffs’ store was weighed on the weighbridge, though dockets were issued in respect of all, nor was the weight of any of these loads checked in any way when they were delivered to the plaintiffs’ employees at the store. Woolfson was paid on the dockets for between 16 and 17 thousand lbs. of wool more than actually delivered.
The manner in which the store of the plaintiff’s was conducted was very unbusinesslike, but it had served for half a century, and in a provincial town where all the parties were well known to each other and every one believed every one else to be honest, it probably worked well enough.
Woolfson pocketed about £390 for which he delivered no wool, but, in the end, he got nine months imprisonment and Hurley three, as a reward for their misdeeds. Hurley was a man of 76 years of age, and though 26 years ago he had been reduced to the position of being assistant from being weighmaster, he continued in the responsible position of assistant weigh-clerk. But while carrying out this swindle, he covered himself with the defendants by always returning the proper fee of 1s., being the charge for each weighing under the regulations and by filing the duplicates of his bogus dockets. The facts of the case have been made abundantly clear by the schedules prepared by Inspector Halloran and Guard Scallan in a manner which would be a credit to skilled accountants.
The only question which requires any serious consideration is one of law, namely, whether Hurley, in issuing these bogus dockets with intent to defraud the plaintiffs, was acting within what the law considers the scope of his employment so as to make the defendants liable for his default, as breach of duty to the plaintiffs.
Now, the position of the defendants in respect of the weighbridge was thisthey were not under any statutory obligation, but they exercised a right implied under the tolls and markets powers in their Charter of 1626 to provide a weighbridge to give to members of the public who tendered loads of merchandise to be weighed a certificate in the form of a docket of the correct weight of the particular load at the time it was weighed. Once the docket was issued the defendants or their servants had no control over either the docket or the load and either might be fraudulently dissociated from the other after the load left the weighbridge; even the same load might be brought back a second time and another docket obtained for dishonest use with a load that had not been weighed at all. Towards members of the general public who do not tender any loads to be weighed but are pleased to accept such dockets, there is no legal duty in respect of which this action, or any action of this character, could be maintained. There is no legal privity of a contractual or other character between the plaintiffs and the defendants. I might put it this waythe only duty in the issuing of the docket in respect of a load is to the person who has requested that it should be issued. I find as a fact that the extent of Hurley’s authority in his employment was to issue dockets in respect of loads weighed by him, and that it was outside the scope of his duty to give to any one, either honestly or fraudulently, a docket for a load he had not weighed While the outside public usually accept the weigh-dockets from a public weighbridge as reliable, they do so at their own risk in so far as any liability can be put on the public body supplying the weighbridge. The duty is owed to the person paying them for the service of weighing, with whom they have a legal privity.
Accordingly I am of opinion that in law the action of the plaintiffs is unsustainable and that judgment must be given for the defendants with costs.
Against the defendants’ costs I shall allow the plaintiffs to set off their costs of proving certain facts and documents set out in their notice to admit which they were required to prove. I shall set out particulars of them in the judgment and order.
The plaintiffs appealed to the Supreme Court (1).
SULLIVAN C.J. :
As we are all in agreement in this case we do not think it necessary to reserve judgment.
Mr. Campbell’s argument has occupied a considerable time but in the end the question we have to decide is, upon the facts, a simple one.
I take the facts as summarised in the judgment of Mr. Justice Hanna as follows:[Reads judgment of Hanna J. setting out the facts.]
Mr. Justice Hanna then goes on to say that the only serious question to be considered “is one of law, namely, whether Hurley, in issuing these bogus dockets with intent to defraud the plaintiffs, was acting within what the law considers the scope of his employment so as to make the defendants liable for his default, as breach of duty to the plaintiffs.”
He answered that question as follows:”I find as a fact that the extent of Hurley’s authority in his employment was to issue dockets in respect of loads weighed by him, and that it was outside the scope of his duty to give to any one, either honestly or fraudulently, a docket for a load he had not weighed.”
I think the learned Judge has correctly stated the question involved in this case and the answer to it. The principles which were recognised and applied in Barwick v.English Joint Stock Bank (3), Lloyd v. Grace, Smith & Co. (4)and Langridge v. Levy (5) have no application to the facts of this case and are not in question here.
Mr. Campbell admits that in order to succeed in this appeal it is necessary for him to establish that in issuing the dockets in question Hurley was acting in the course of his employment. I am satisfied that he has failed to establish that fact, and I am therefore of opinion that this appeal should be dismissed.
FITZGIBBON J. :
I agree with the judgment just delivered by the Chief Justice and I have very little to add.
This case really depends on what Hurley was held out as having authority to do by the Waterford Corporation.
In my opinion he was held out as having authority to weigh goods and to give dockets in respect of goods which he had actually weighed.
There is no shadow of evidence in this case that any representation was made by the Waterford Corporation to Messrs. Woodman, Matheson & Co., and no shadow of evidence that the dockets issued by Hurley were accepted generally as evidence of the weight of goods. Neither was there any evidence of any custom by which these or similar dockets were so accepted as evidence of the accuracy of any statement or figure contained in them.
On the contrary, the only evidence on this point was to the effect that it was by a special arrangement made with Woolfson that Messrs. Woodman, Matheson & Co. agreed with him to accept these dockets as evidence of the weight of wool supplied by him to them. So far as the Corporation were concerned it was open to Woolfson to deal with the loads after they had been weighed upon the Corporation weighbridge in any way he liked before he delivered them to the plaintiffs, or to any other customer of his.
For these reasons I agree that the appeal must be dismissed.
MURNAGHAN J. :
I agree.
Mr. Campbell bases his argument principally on the case of Lloyd v. Grace, Smith & Co. (1). I agree that that case is an authority for the proposition that a principal is liable for the fraduluent act of his agent when that agent is acting within the scope of his authority, and it makes no difference that such fraudulent act may be done for the benefit of the agent and not of the principal.
The question whether or not an agent is acting within the scope of his authority is, however, one to be determined in each particular case.
On the facts of this case I am satisfied that while Hurley, who has placed in charge of the weighbridge, had authority to give dockets in respect of goods which he had weighed, in giving dockets for goods which he had not weighed, by reason of an agreement to defraud and for the purpose of assisting in such fraud, he was not acting within the scope of his authority.
Further, there is no evidence of any agreement between the plaintiffs and the Waterford Corporation, or even between the plaintiffs and Hurley, that the weigh-dockets would be accepted by the plaintiffs as correct, and in these circumstances I am of opinion that this appeal should be dismissed.
MEREDITH J. :
The essential facts in this case can be briefly stated and there is only one net question of any difficulty.
The defendants maintain a weighbridge at the markethouse in the City of Waterford, and, for a small charge, they weigh loads of goods for members of the public, and they issue to the person who pays for the weighing weigh-dockets setting out among other things the weight as ascertained. The plaintiffs are wholesale wool merchants, and in connection with prospective purchases of wool by them from one, Benjamin Woolfson, it was agreed between the plaintiffs and Benjamin Woolfson that the defendants’ weigh-dockets would be accepted as correct statements of weights of quantities of wool supplied by Woolfson to the plaintiffs. The weighbridge was placed by the defendants in charge of their agent, John Hurley, and he and Woolfson entered into a conspiracy to defraud the plaintiffs by setting out false weights on the weigh-dockets and thereby inducing the plaintiffs to pay to Woolfson sums considerably in excess of what was properly payable for the wool sold. The plaintiffs paid large sums to Woolfson on the faith of the figures set out in the dockets and thereby suffered considerable loss. In only four cases has it been suggested that the farce of actually weighing loads was gone through, and in these cases the evidence does not go the required length. In the other cases the dockets were certainly issued by Hurley for the suggested false weights without any pretence of weighing. Apart from several obviously unsustainable claims, the plaintiffs’ claim is for damages for fraudulent misrepresentation.
The question is whether the defendants are liable for the deceit of their agent, Hurley. Here the difficulty is to decide how much of what Hurley did is material to the question of whether he was acting within the scope of his authority in what he did. The receiving of the payment and the issuing of the weigh-dockets with figures purporting to show the ascertained weights were obviously well within the scope of his authority, and, if it is not necessary to go farther, that ends the matter. Consequently, the vital question is whether making a representation to the plaintiffs, who were not parties to, or even present at, any weighing transactions, was within the scope of Hurley’s authority.
But, before coming to that, I should deal with the point that, as I have said, in all but three or four cases where dockets were issued Hurley omitted to go through the farce of weighing, and simply gave out the dockets on receiving the payment which kept him straight with the defendants. Whether there was a weighing or not cannot, to my mind, make any difference. If the statement as to the weight is going to be false and fraudulent, the actual process of weighing is a pretence, and its omission cannot make any real difference. If the fact that the docket is false and fraudulent does not prevent the action of the agent being within the scope of his authority the absence of the farce of weighing cannot have that effect. Of course the action must first be such as to be within the scope of the authority before any question can arise as to its being brought outside the scope of the authority. But the material act in this case was, first of all, the issue of the weigh-dockets, which contained the false representations, and these were issued by Hurley in his capacity of weigh-master. If matters stopped there the action seems to me to have been within the scope of his authority.
In George Whitechurch, Ltd. v. Cavanagh (1) Lord Robertson said:”I find it extremely difficult on principle to hold that the scope of an agent’s employment can be limited to the right performance of his duties, or to say that an agent within whose province it is truly to record a fact is outside the scope of his duties when he falsely records it, when the question of liability to be decided is whether a loss is to be borne by the principal who placed him there, or by an innocent third party who has no voice in selecting him.” I do not think that doubt is thrown on that observation by the other judgments delivered in the case. A mere wrong doing of what is within the scope of authority will not take it out. But performance of the act in general must first be shown to be in general within the scope before the question arises of taking it out.
The difficulty here only begins with the further essential feature of his act, namely, that, for a fraudulent purpose, he made, through Woolfson, a fraudulent misrepresentation to the plaintiffs. Was it within the scope of his authority to make any representation to them at all? If it was, then the fact that it was fraudulent will not put the making of the representation outside the scope of his authority.
But the point was made at the hearing that, even if the fact that the agent’s act was fraudulent would not of itself make the act outside the scope of his authority, it is different where the act was a transaction with a person who was party to the fraud, and where in fact the whole transaction was part of a conspiracy. That is as much as to say that though the act might have been within the scope of Hurley’s authority if the plaintiffs had been the instigators of the fraud and Woolfson, who procured the dockets, the innocent and injured party, the case is different where Woolfson, who procured the dockets, demanded false dockets from Hurley and only got what he paid for. It was not, as is urged, within the scope of Hurley’s authority to arrange with Woolfson to supply him with false dockets and carry through a bogus transaction with him. If the false representation to Woolfson was not within the scope of Hurley’s authority, it did not come within the scope of his authority in transit to the plaintiffs. There is a double confusion of thought underlying this contention. The conception of what is within the scope of an authority is a wider conception than that of what is a proper exercise of the authority and in its particular character can be regarded as having been in fact authorised. If Hurley, in his capacity of weighmaster, took loads and accepted a charge for weighing them and issued weigh-dockets, his issuing of the weigh-dockets was intrinsically and in its general character an act within the scope of his authority. The fact that he did not weigh the loads and issued false weigh-dockets was simply an abuse of his authority. That Woolfson could not sue for breach of contract, since what he got was what he had asked for, or sue for fraudulent misrepresentation, since he was not deceived, does not affect the question of whether the issue of the weigh-dockets to him was within the scope of Hurley’s authority. The very fact, that if Woolfson had been the innocent party and the plaintiffs the party inducing Hurley to give false dockets, in an action by Woolfson it could not be contended that Hurley’s act was not within the scope of his authority, shows that at the back of the contention there is the erroneous notion that where the misrepresentation is made by an agent in the course of a principal’s business, it being concerned with the carrying out of a contract, the scope of an action for fraudulent misrepresentation is limited to a compass defined by privity of contract and duty under the contract.
Person & Son. Ltd. v. Dublin Corporation (1) is one of the many cases which have disentangled the action of fraudulent misrepresentation from arguments depending on a notion of the primacy of the contractual relation. It is this erroneous notion that leads to the erroneous notion that the representation to the plaintiffs must be regarded as coming to them through and out of the transaction between Hurley and Woolfson. Once Hurley knew that the communication was to be passed on to the plaintiffs to be acted on by them as buyers from Woolfson the communication is in the same position as a direct representation to the plaintiffs. All that has to be considered is the simple question whether the making of a representation in respect of the weight of the goods to a prospective purchaser of the goods who was intended to act upon it was within the scope of an agent’s authority. If the making of any representation at all to such a person, who was not the person paying for the weighing of the goods, was not within the scope of the agent’s authority, then cadit quaestio. If it was in itself and in general within the agent’s authority, then the fraud of Woolfson and the conspiracy between him and Hurley can no more take it out of the scope of Hurley’s authority, than fraud on the part of Hurley alone. In the case of George Whitechurch, Ltd. v. Cavanagh (1) there was such collusion and that was not considered to dispose of the case.
In order to prove that making a representation to a third party, such as the plaintiffs, was within the scope of Hurley’s authority, the plaintiffs have, first of all, to show that the act, if rightly performed, was such as to be of business concern to the defendants. The argument that it was has to take, and, as I understood, did take, these lines. When goods are weighed and a weigh-docket issued the statement on the docket as to the weight is not something merely incidental or collateral to the transaction, like a receipt for the money paid for goods is to the sale and purchase of the goods. It is the substance of the transaction itself. Without the statement as to the weight the weighing would be useless. It is the statement as to weight that gives the weighing any value. But what gives the statement a value is the purpose for which the statement may be used, and the ordinary purposes for which the statement as to weight in a weigh-docket may be used are what give the weigh-docket its common value. The purpose in general is always, from the nature of the case, to make a representation as to the weight to someone, and different purposes can only differ in respect of the different persons or classes of persons to whom the representation is to be made. Buyers of goods from a seller who is getting the goods weighed and procuring the weigh-docket are presumably one of the most common classes of persons, communication of the representation to whom gives the docket a value. But, however that may be, if in a particular case the object of procuring the docket is to communicate the representation to a particular person, that is what gives the particular docket its particular value, and if an agent knows that the docket is to be shown to such person for him to act upon, the making of the representation as one for him to act upon is clearly within the scope of the business interests of the principal and consequently something done in the course of the conduct of the principal’s business. The scope of the agent’s authority extends to all that is within the compass of the principal’s business, and this is defined by the scope of the business interests of the principal, and is not confined to what is immediately necessary to the performance of the contractual obligations of the principal.
To my mind what we have here is simply an element to be considered. Apart from some such consideration the plaintiffs could not begin to build up a case. The point of view was recognised in a brief passage in the judgment of Lord Macnaghten in George Whitechurch, Ltd. v.Cavanagh (1) at p. 125:”No doubt the practice of certifying transfers is a convenient one. It facilitates dealing in shares on the Stock Exchange, and so tends indirectly to increase the value of shares as a marketable commodity.” Consequently in that case it was necessary to go farther to see if what might well have been authorised was in fact authorised, and it was held that it was not.
In the present case I was entirely convinced by the observations of Mr. Lavery on the form of the weigh-dockets, the whole circumstances of the usual weighing operations, and the effect that the weigh-dockets would be likely to have, and can in this case be supposed to have had, on the minds of the plaintiffs or their agent. Apart from confidence in the honesty of Woolfson, the dockets would be worthless to the plaintiffs. If I go into my Bank and ask a clerk how my current account stands, the request would be satisfied by a verbal communication. But he writes the debit or credit balance on a slip of paper and hands it to me. No doubt he has authority to do that. Now, suppose he knows that I am going to show that to a particular person for the
purpose of getting credit, is it to be said that the Bank holds out the agent as authorised to make a representation to the person in question by means of such a document? The operation at the weighbridge is one of many operations, the result of which is almost habitually for convenience recorded in some written memorandum. If you go into a chemist’s and pay a penny to get weighed the assistant usually gives a card, with spaces for a number of entries, and enters your weight and the date of weighing. If you choose to hold on to a parcel weighing 10 lbs. while you are being weighed, the chemist is not concerned with that.
I cannot find anything in the evidence to show that this weighing and issuing of dockets, which had no connection with the market, was anything different from a host of other operations in which the result is for convenience put down on paper.
The plaintiffs in their pleadings evidence consciousness of this weakness in their case, for they refer to the weigh-dockets as dockets or certificates. The dockets have in form no resemblance to certificates, and I do not think their issue could give, or did give, the plaintiffs any reasonable ground for supposing that the defendants were holding out Hurley as authorised to certify anything to him. If the plaintiffs’ agent had been present at the weighing, and if Hurley had pretended to weigh and put down a false weight with the intention of inducing the plaintiffs to act upon it, the case would probably be different.
On the ground, therefore, that there is nothing to show that the defendants held out Hurley as having any authority to make any representation to the plaintiffs by means of the weigh-dockets in question, I am of opinion that the plaintiffs’ action fails.
Gordon v. Gordon.
[1951]IR 303
Kingsmill Moore J.
Mr. and Mrs. Gordon were not happy in their married life and for this each was inclined to blame the other. Accordingly Mr. Gordon filed a petition against his wife, asking for judicial separation on the ground of her cruelty, of which he gave lurid particulars, and Mrs. Gordon replied with a countercharge of cruelty against her husband accompanied by equally, if not more, lurid particulars. When the cause was set down for trial the experienced counsel who were engaged on both sides were not long in realising that a settlement, if it could be negotiated, was in the best interests of husband and wife alike.
The hearing was listed for a Tuesday. On the previous Friday, Mr. Murnaghan, Senior Counsel, and Mr. Fahy, counsel for the husband, held a consultation with their client and his solicitor, Mr. Halpenny, at which Mr. Murnaghan broached the question of settlement. A general discussion took place at which the client made it clear that he did not want custody of the child of the marriage, that the outside figure he was willing to go to for alimony was £9 per week and that he wished his wife to leave the house where she was residing, which was his property, as soon as possible. Other matters which were germane to a settlement were discussed generally and I am satisfied that Mr. Gordon was fully informed as to the usual form which is taken by a matrimonial settlement; but at no time was it suggested to him that the alimony which he would have to pay should be secured on his property or that alimony should be payable for any period extending beyond the joint lifetime of husband and wife. At the conclusion of the consultation counsel, and Mr. Murnaghan in particular, were authorised to negotiate a settlement along the lines discussed, but they were not authorised to conclude a settlement. Any agreement, which they might make provisionally with counsel for the wife, was to be submitted to their client, and was not to be binding till he had expressly consented to the terms. The channel of communication contemplated and impliedly authorised was by counsel to Mr. Halpenny, the solicitor, and by him to his client: the client’s assent or dissent was to be conveyed in the same way.
On the ensuing Monday negotiations were started in the Law Library between Mr. Murnaghan, Senior Counsel, and Mr. Fahy for the husband and Mr. Campbell, Senior Counsel, and Mr. Hamill for the wife. They were somewhat discontinuous, as counsel were engaged, off and on, in several courts and most of the finessing seems to have been between Mr. Hamill and Mr. Murnaghan. By 4 p.m., however, all counsel were agreed on terms which they would recommend to their clients, and these terms were noted in a compressed form by Mr. Campbell on his brief and, slightly more fully, by Mr. Murnaghan on a sheet of notepaper. Mr. Campbell had kept his client in attendance in a consultation room and obtained her consent at once to the settlement. Mr. Murnaghan prepared to communicate the terms by telephone to Mr. Halpenny for transmission to his client. There was a slight discrepancy between witnesses as to whether Mr. Murnaghan did or did not expressly make clear that the settlement was not to be binding until his client had assented. I think the probabilities are that Mr. Murnaghan was explicit on this matter and I am satisfied that he did not do anything to give a contrary impression. The terms so provisionally arranged were, later that day, written out in full by Mr. Hamill on the brief of his senior, Mr. Campbell, and are as follows:
1. (a) Petitioner to pay the respondent £9 per week net (i.e. without deduction of tax) for her life from 4th July, 1950, same to be secured by a charge on his property [or otherwise].
(b) Wife to have custody of child and be responsible for its maintenance during her lifetime.
(c) The said weekly sum of £9 to be reduced to £7 if child dies in lifetime of wife.
2. Wife to be entitled to furniture in house of husband in which she is now living.
3. Arrears of alimony pendente lite to be paid up to 4th July, 1950, in a lump sum.
4. Wife to have two months to leave house in which she is now living from date of execution of separation deed. £2 per week to be deducted from alimony while she remains in house as from this date.
5. Separation deed to be entered into, incorporating the above provisions and other usual clauses but no dum castaclause.
6. Respondent to be paid her taxed costs as between party and party of these proceedings (one senior) and costs to include the costs of and incidental to the separation deed.” The words, “or otherwise,” which I have bracketed were not added till next morning, but, apart from this, all counsel are agreed that Mr. Hamill’s reproduction of the terms arrived at orally is entirely accurate and correct. Mr. Gordon takes no objection to any of the provisions save two that the weekly payments were to continue for the whole life of his wife and not only for the term of the joint lives of himself and his wife, and that payment was to be secured on his property. Both these provisions are unusual and neither had been previously discussed with him.
Mr. Murnaghan, his pencil note in his hand, went to the telephone and rang up Mr. Halpenny to whom he communicated the proposed terms. It is most likely that he actually read from his pencil note but, even if he did not, there is no reason to suppose that he did not convey the terms accurately and fully. Mr Halpenny, unfortunately, made no written memorandum at the time, and either he did not hear or, more probably, did not take in the provision that alimony was to be paid for the life of the wife. He did appreciate that the alimony was to be secured by a charge but seems to have attached little importance to this provision. In this he may have been influenced by something said by Mr. Murnaghan who tells me that at the time he himself did not regard this matter as important.
Mr. Halpenny then rang up his client and told him of the proposed settlement and its contents, but he did not mention that alimony was to be paid for the wife’s life, because he himself did not realise this, and he made no mention of security either because he forgot or because he did not think it important. Mr. Gordon agreed to the terms as communicated to him and Mr. Halpenny rang up Mr. Murnaghan and told him that his client was agreeable to the proposed settlement.
Next morning, the day fixed for the trial, Mr. Hamill showed to Mr. Murnaghan the note of the agreement which he had written on Mr. Campbell’s brief. Mr. Murnaghan read it, added the words, “or otherwise,” at the end of clause 1 (a) and said that his client had agreed to the terms. When the case was called Mr. Campbell announced that a settlement had been reached and asked to have the case adjourned till the next term, which was done. The adjournment was asked for in order to give time to have a separation deed drawn up and executed, and it was the intention of Mr. Campbelland, I think, of all persons concernedto have the case struck out when this was done. Mr. Halpenny was not in Court when the case was adjourned.
Correspondence then ensued between the solicitors with a view to settlement of a separation deed and determination of the property on which the alimony was to be charged. Mr. Kearon, solicitor for Mrs. Gordon, was not satisfied with the security offered and Mr. Gordon refused to give further security. Mr. Halpenny sought the advice of Mr. Murnaghan in this impasse and, in the course of conversation with Mr. Murnaghan, and on reading the note on Mr. Campbell’s brief, realised for the first time that alimony was to be paid for the full life of the wife. Mr. Halpenny was indignant that counsel should have agreed to such a term, of which he strongly disapproved, and his client on having the matter referred to him refused to consent to any such arrangement. The best efforts of counsel on either sideincluding a joint consultationfailed to bring about agreement and, after the matrimonial case had been further adjourned on a couple of occasions, Mrs. Gordon instituted an action for specific performance of the agreement as endorsed on Mr. Campbell’s brief.
The defence, apart from traverses, and so far as is material to the facts therein found, is twofold. It is alleged first that any agreement between counsel was to be subject to Mr. Gordon’s consent and that such consent was never obtained; and secondly the agreement is void for uncertainty. The uncertainty on which Mr. Liston, for the husband relies, is to be found in the words, “same to be secured by a charge on his property or otherwise.” He says, and I think says correctly, that the words can fairly be interpreted as meaning either “reasonably secured” or “fully secured” and that there is no way of deciding the extent of the security required. Mr. McGonigal, for the wife, while not accepting that there is any uncertainty, yet offers to waive this provision and asks for specific performance of the agreement with this provision left out. It is a severable provision and one which is entirely in favour of the wife and I am of opinion that he is entitled to waive it and ask for specific performance of the rest of the agreement: Hawksley v. Outram (1), per Lindley L.J., at p. 376; per Lopes L.J., at p. 378; North v. Loomes (2),per Younger J., at p. 386.
The other question, as to whether the husband can be bound by an agreement made between counsel in the belief that he had adopted it, but of certain terms of which he was actually ignorant, is one of difficulty.
The cases go far in support of the authority of counsel to settle without express authority from his client and even uphold a settlement by counsel against the instructions of his client where the limitation on his apparent authority had not been communicated to the other side: Swinfen v. Swinfen (1); Strauss v. Francis (2). The latter case was distinguished by Molony J., in Gethings and another v.Cloney (3), on the ground that the withdrawal of a juror by Sergeant Ballantyne was part of the conduct of the case in court and did not touch the question of an agreement arrived at out of court. The judgment of Blackburn J. (3) as to counsel’s power to enter into an agreement for compromise with opposing counsel seems to be limited to a compromise entered into during the actual hearing. “Counsel, therefore, being ordinarily retained to conduct a cause without any limitation, the apparent authority with which he is clothed when he appears to conduct the cause is to do everything which, in the exercise of his discretion, he may think best for the interests of his client in the conduct of the cause: and if within the limits of this apparent authority he enters into an agreement with the opposite counsel as to the cause, on every principle this agreement should be held binding.” Mellor J. uses general language when he says (at p. 383):”. . . unless it could be shown that the attempt on the part of the client to limit this authority [to withdraw a juror] had been brought to the knowledge of the other side, it was perfectly within the competency of the defendant’s counsel to make a valid and binding agreement, assuming, as he had a right to do, that the plaintiff’s counsel was acting within his apparent authority.” But this passage, when read in connection with the rest of his judgment seems also to be intended to refer only to a compromise entered into during the course of the hearing, when a sudden shift may necessitate an immediate exercise of discretion by counsel. In Matthews v.Munster (4) counsel, in the course of a case and in the absence of his clients consented to a verdict with costs and this was held binding. The judgments in this case, again, are expressed in a somewhat general way but, in their references to the apparent powers of counsel to compromise a suit, it seems that the learned judges did not intend that their words should be applied to compromises effected before the hearing of the suit. They were dealing with a case where the compromise was effected in the course of the hearing.
I cannot, however, read the judgments of the Lord Chief Justice and the Court of Appeal in Neale v. Lady Gordon Lennox (5) as restricted to a compromise effected during the actual conduct of a case in court. The case had not been called, and the compromise between counsel was arrived at as a result of a suggestion by the Lord Chief Justice followed by a conference between counsel in his chambers. In the meanwhile there had been a communication between counsel for the plaintiff and his client in which she signed a written instruction, consenting to compromise on certain lines, which instruction was subsequently held by Lord Halsbury clearly to prohibit a compromise on other lines. The compromise which was finally reached between counsel was that the case should be referred to an arbitrator and the record withdrawn, and this was stated in court. Before the order for reference was drawn up plaintiff intimated her dissent and accordingly her counsel applied to the court that the order for reference should be set aside and the case restored to the list. Thus the compromise was not effected in the stress and emergency of the actual conduct of a case in court. There was time for discussion, time to consult the client. I cannot distinguish such a compromise from one made, as was the compromise in the present case, on the morning of the day fixed for the trial. Yet the Lord Chief Justice and the judges in the Court of Appeal were unanimous in their view that such an arrangement for compromise made between counsel in exercise of their apparent authority was binding even if it was in excess of, or contrary to, the authority actually given to counsel on one side, unless such limitation was made known to the other side. The Lord Chief Justice did indeed make a distinction on the ground that the order was interlocutory but the Court of Appeal overruled this distinction.
When the case went to the House of Lords the decision of the Court of Appeal was set aside on grounds which did not impugn the validity of the judgments given in so far as those judgments upheld the apparent authority of counsel to settle a case. They took higher ground. The compromise arranged was that the court should make a consent order. The Lords held that no agreement between counsel could bind the discretion of the court as to whether it would or would not make an order, and that when circumstances were brought to the knowledge of the court which, in the view of the court, made the making of such an order inequitable, then the court was at liberty to refuse to make it. In the case before them the Lords considered that it it would be inequitable to make an order for reference in a case where the reputation of the litigant had been impugned and where she had previously refused to consent to such an order unless all imputations were withdrawn. But Lord Halsbury is careful to point out that there may be cases in which a court would enforce a compromise entered into by counsel within apparent authority, but actually without authority.
But counsel’s apparent authority is not unbounded. There is a well settled limitation. He may not, without express authority, effect a compromise which involves matters collateral to the action: Kempshall v. Holland (1); Neale v.Lady Gordon Lennox (2) per Lord Alverstone, at p. 843. The action in the present case was one for judicial separation and the compromise deals with many matters collateral to such an action. With two exceptions counsel had specific authority to introduce these collateral matters into the compromise. The two exceptions are 1, the provision that the weekly payments should be secured; 2, the provision that the weekly payments should continue for the life of the wife. The apparent authority of counsel did not cover such terms and the client would not be bound by them in the absence of express authority or authority to be implied by his conduct. Mr. McGonigal is not willing to waive his right to the benefit conferred by the second of these exceptions. In so far as Mr McGonigal based his case on the apparent authority of counselhis original groundhe must fail, for there was no apparent authority to enter into any agreement that the weekly allowance should be paid for the life of the wife. But, in his reply, Mr. McGonigal subtly shifted his ground.”Forget,” he said, in effect, “that Mr. Murnaghan is a counsel. Remove the pomp and panoply and privileges of his position. Strip himmetaphoricallyof his wig and gown. This done, you have still an ordinary man who is capable of being an agent and of binding his principal. What was the authority given to him as agent? He was authorised to negotiate, to report the result of his negotiations, and to carry back an answer which should bind his principal. The channel of communication through the solicitor was impliedlyperhaps expresslyauthorised by this principal. If that channel proves defective owing to the fault of the solicitor the principal is answerable for the defects of the channel, for any fault that may be imputed to the solicitor. He must be taken as having expressly authorised the disputed term.”
Let us then treat Mr. Murnaghan as if he were merely a person of good will employed by Mr. Gordon to negotiate terms for a settlement, to report the result of his negotiations, and to carry back the answer of the principal. What was the answer of the principal? It was that he agreed to certain terms which were put before him, not to terms of which he had never heard. He never agreed that the weekly payments were to be for the life of the wife. Mr. Murnaghan’s mistaken statement that he had so agreed could not create a contract. If indeed Mr. Gordon had represented to Mr. Campbell in
any way that he would be bound by what Mr. Murnaghan said as to his (Mr. Gordon’s) agreement; then a case of estoppel might arise, but I can find no such representation. Nor did Mr. Gordon hold out Mr. Murnaghan as being authorised to make any agreement other than an agreement which was within the ordinary and apparent authority of counsel. If it is suggested that Mr. Halpenny was negligentwhich I am not in any way decidingit may be, then, Mr. Gordon is liable for damages, if any, accruing through the negligent act of his agent, but this would be a matter for an action of tort, not an action for specific performance of a contract.
Mr. McGonigal relied on cases such as Van Praagh v.Everidge (1) where a man entered into a contract by mistake and was held bound to perform. Such cases have no application to the present facts where Mr. Gordon never at any time entered into the contract which it is sought to enforce. Nor is there a parallel to Bawden v. London, Edinburgh, and Glasgow Assurance Co. (2) where an agent wrongfully withheld from his principal knowledge of which the agent was in possession. I hold as a fact that Mr. Halpenny had no knowledge of the disputed term. Mr. Murnaghan may have used words which, properly understood, conveyed the meaning that the weekly payments were to be for the life of the wife and so might extend beyond the joint lives of the wife and the husband. But I am satisfied that Mr. Halpenny did not appreciate this, and, having regard to the unusual nature of the provisions and to the difficulties which attend telephone conversations, I think that he may well be excused for failing to grasp the significance of a short statement that the weekly payments were to be for the wife’s life unless some further explanation or elaboration was given. Whatever be the explanation I accept fully Mr. Halpenny’s statement that he had no conscious knowledge of this provision until many months afterwards when he learnt it as a result of conversation with Mr. Murnaghan and examination of the agreement endorsed on Mr. Campbell’s brief. Accordingly I cannot impute to the principal knowledge which was not, and never had been, in the mind of the agent. I hold therefore that there was no contract to make the weekly payments continue for the life of the wife after the death of the husband and accordingly must dismiss the action.
Patrick McDonnell v Thomas McGuinness
High Court.
27 October 1938
[1938] 72 I.L.T.R 234
Johnston, Gavan Duffy JJ.
Johnston, J., having stated the facts, said—An auctioneer is an agent of a special kind, with very great authority and very special powers, and he is usually remunerated in a liberal way; but he is also subject to very grave duties and liabilities in regard both to the vendor and the purchaser. With regard to the latter, he is liable to pay damages for breach of warranty of authority when he sells property without, or in excess of, authority. It seems to me that the measure of these damages, in a case like the present, is to be found in the two cases which have been cited to us on behalf of the plaintiff—Engel v. Fitch (L. R., 4 Q. B., 659) and Godwin v. Francis (L. R., 5 C. P., 295). The latter case has been followed and applied in many subsequent cases, especially In re National Coffee Palace Co. (24 Ch. D., 367) and Meek v. Wendt & Co. (21 Q. B. D., 126).
The rule is conveniently summarized in an article of great authority by Sir Rigby Swift in the second edition of “Halsbury.” He says (Vol. I, p. 302): “The measure of damages for a breach of warranty of authority is the loss actually sustained by the third person as the natural and probable consequence of the non-existence of the authority. In the case of a contract made without authority and repudiated by the principal, the loss will be the amount which could have been recovered from the principal in an action for breach of the contract if it had in fact been made with his authority, together with the costs of any action upon the contract reasonably brought by the third person against him” See also Bowstead on Agency, 3rd Ed., p. 387; Leake on Contracts (1878), pp. 1045 and 1073.
This is the rule, and it is one that, in my opinion, is founded upon fair play and commonsense, and no limitation of the principle ought to be allowed. In Engel v. Fitch (supra) the action was against the vendor himself, and it was held that as the breach of contract arose, not from the inability of the vendor to make a good title, but from his not having taken the proper steps to get possession of the property for the purchaser, the case did not come within the principle of Flureau v. Thornhill (2 W. Bl., 1078), and the plaintiff was entitled to recover, not only his deposit and the expenses of investigating the title, but also damages for loss of bargain. This case was followed and applied in In re Daniel ([1917] 2 Ch., 405) and Braybrook v. Whaley ([1919] 1 K. B., 435), and in both cases it was held that the principle which was established in Flureau v. Thornhill (supra) and Bain v. Fothergill (L. R., 7 H. L., 158) did not apply.
The general rule, then, is that when a vendor breaks his contract of sale and refuses to sell in accordance therewith, or when an agent commits a breach of war *235 ranty of authority, the purchaser is entitled to damages based upon the loss incurred by him in consequence, and such damages include damages for loss of bargain. That is the general rule, and it is enforced, whether the vendor or the agent is the person liable, in an action for damages, upon the contract against the vendor, or for breach of warranty against the agent. The question of damages for deceit or anything else of a tortious character does not arise. An exception was grafted upon the general rule by the case of Flureau v. Thornhill (supra), in which it was held that when the default arises from the failure of the vendor to make title, he (and therefore, in the case of a breach of warranty, the agent), though still liable in damages, is liable only to a limited extent: he is not liable to the purchaser for damages for loss of bargain. That case was followed and applied in Bain v. Fothergill (supra), but it seems to me that neither of these cases in any way affects the general rule.
The Irish case of Kelly v. Duffy ([1922] 1 I. R., 62) has been strenuously relied on by Mr. McGonigal. That was a case in which the vendor had purported to sell leasehold premises to which at the time of the sale he had no title, and it was held that the purchaser in an action for damages could not recover anything for his loss of bargain. The Order of the Court actually sets out the reason for the decision in these words: “The defendants are unable to make title to the premises agreed to be sold,” thus bringing the case within the very terms of Flureau v. Thornhill (supra). Counsel for the plaintiff in Kelly v. Duffy (supra) endeavoured to get round the rule in Flureau v. Thornhill (supra) by introducing the element of deceit on the part of the vendor. If such reasoning had succeeded, an exception upon an exception would have been established.
But the case of Kelly v. Duffy (supra) did not in any way curtail the generality of the principle so well established in Engel v. Fitch (supra). I am of opinion, therefore, that in the present case, the defence not being by any allegation of want of title on the part of the defendant, but being grounded on the deliberate action of the vendor in breaking his contract, when he discovered that he could get more money elsewhere, and selling the property at a higher price, the purchaser is entitled to damages in respect of his loss of bargain. Incidentally, the vendor here was much more blameworthy than the vendor in Engel v. Fitch (supra).
The amount of the damages would be the difference between the sum which the plaintiff agreed to give, and the sum which the vendor got from the second purchasers; but there are circumstances in this case which suggest that a smaller sum should be awarded. I would assess the additional damages at £75, which, together with the amount of the decree in the Circuit Court, would entitle the plaintiff to a total decree of £84 16s. 11d.
Gavan Duffy, J., having stated the facts, observed that they established the warranty of authority: Wallace v. Roe ([1903] 1 I. R., at p. 35). He then said—The measure of damages for breach of warranty of authority is generally the plaintiff’s loss in being deprived of the contract which the agent warranted that he had: Simons v. Patchett (7 E. & B., at p. 574), and In re National Coffee Palace Co. (24 Ch. D., at p. 372). Since the action is founded on contract, the damages are in the nature of compensation: Addis v. Gramophone Co. ([1909] A. C., 488). If a plaintiff wishes to rely on tortious conduct by a defendant, and so get heavier damages, he must frame his action in tort. There is no hardship in requiring a plaintiff to sue in tort, when he claims damages for a tort.
The difficulty in the present case is the rule in Flureau v. Thornhill (2 W. Bl., 1078), restricting the plaintiff to a narrow measure of damages, by depriving him of compensation for loss of his bargain, in an action on a contract for the sale of real estate, if the vendor, without fraud, is incapable of making a good title. The rule was recognized in this country more than eighty years ago, in Buckley v. Dawson (4 Ir. C. L. R., 211), and it is too well rooted in our law to be ignored by this Court. The rule cuts down the ordinary measure of damages for breach of contract, in view of the difficulties a vendor of land may have in making title. Up to 1874 there was in England considerable authority for the view that this singular rule was confined to cases of difficulties of title, by which it had been justified originally; nor should I myself have any hesitation in applying the principle cessante ratione, cessat lex, if the matter were open. However, the scope of the rule in Flureau v. Thornhill (supra) was considered by the House of Lords in 1874 in Bain v. Fothergill (L. R., 7 H. L., 158), after the judges had been consulted, and the great authority *236 of this case was recognized in Ireland by the late Master of the Rolls in Kelly v. Duffy ([1922] 1 I. R. 62). Lord Chelmsford, in Bain v. Fothergill (supra), says that a distinction as to damages in actions on contracts for the sale of real estate according as to whether the action is against an honest, or a dishonest, vendor, cannot be justified in principle. He accepts the view that misconduct cannot alter the measure of damages for breach of contract, and, with the concurrence of Lord Hatherley, declares that the rule in Flureau v. Thornhill (supra) must be taken to be without exception, and (at p. 207) that “if a person enters into a contract for the sale of a real estate knowing that he has no title to it, nor any means of acquiring it, the purchaser cannot recover damages beyond the expenses he has incurred by an action for the breach of the contract; he can only obtain other damages by an action for deceit.” The House proceeded to overrule Hopkins v. Grazebrook (6 B. & C., 31), where a vendor, having contracted to sell property which was not in his possession, but which he had good reason to expect to be able to deliver at the time stipulated, was compelled, on failing to complete, to compensate the purchaser for the loss of his bargain. Bain v. Fothergill (supra) was recently applied by Russell, J., in Keen v. Mear ([1920] 2 Ch., 574).
The purchaser in the present case seeks to avoid Bain v. Fothergill (supra) by relying on Engel v. Fitch (L. R., 3 Q. B., 314, and 4 Q. B., 659), a case that went to the Exchequer Chamber a few years before the decision in Bain v. Fothergill (supra). In Engel v. Fitch (supra), although the action was framed as an ordinary action for breach of contract, the vendor had to compensate the purchaser for loss of bargain caused by the vendor’s deliberate refusal to take the necessary steps to give the purchaser possession. It is true that Engel v. Fitch (supra) was not overruled by the House of Lords in Bain v. Fothergill (supra); Denman, J. (at p. 192) advised their Lordships that the case was one of great value as showing beyond all question that the rule in Flureau v. Thornhill (supra) was confined wholly to cases of inability to make title; but Lord Chelmsford, who plainly disliked the case, was at pains to state that both the Court of Queen’s Bench and the Exchequer Chamber had proceeded expressly on Hopkins v. Grazebrook (supra), which he had just overruled, and on another case which was itself expressly grounded on Hopkins v. Grazebrook (supra), and he then went on to declare that the principle upon which damages might be recovered for breach of contract for the sale of real estate was without exception: he thus quite plainly dissented from Engel v. Fitch (supra). Lord Hatherley (at p. 209) shows that Engel v. Fitch (supra) was a case of wilful default “whether the course taken by the Court was correct or not in the decision upon the point of damages arising in consequence of the loss of the benefit of the contract”; and again (p. 210) he says: “There could be no doubt whatever in that case that he was acting in gross violation of his contract which he had the power of performing. Whether or not the proper mode of correcting that abuse was by giving damages to the plaintiff in respect of the loss of his contract, I will not stop to inquire.” Since Lord Hatherley had opened his speech by giving his entire concurrence to Lord Chelmsford, who had emphatically laid down that damages outside the Flureau v. Thornhill (supra) measure could be obtained only in an action for deceit, it is reasonably clear that Lord Hatherley thought that Engel, in his action for breach of contract, had recovered too much. Accordingly, I do not regard Engel v. Fitch (supra) as affording a solid foundation for the purchaser’s claim, in view of the subsequent approbation of Bain v. Fothergill (supra) in this country.
The question thus arising is one of considerable practical importance. In Bain v. Fothergill (supra) Sir George Jessel, the Solicitor-General, argued that the rule in Flureau v. Thornhill (supra) was confined to cases where the vendor was in possession with a title which he had no reason to believe defective. Having rejected this attractive exposition of the rule, the House proceeded, with strict logic, to insist upon uniformity in the measure of damages for breach of a vendor’s contract. The actual damage suffered by a purchaser is the same whether it arise from difficulties of title, or from the vendor’s contumacy; there is therefore no rational justification, so long as the loss is viewed as the consequence of the breach of a contract, that is, so long as the element of tort is disregarded, for applying different standards to the ascertainment of damages in the two cases. The anomaly is recognized in Dart’s Vendor and Purchaser (7th Ed., p. 996). Nevertheless, English judges in modern times have sought to limit this 18th century rule; they have been inclined to treat the principle of Bain v. Fothergill (supra) as inapplicable in a case of wilful default by the vendor, *237 whether he is sued merely for breach of contract or for specific performance with compensation, and to confine the rule in Flureau v. Thornhill (supra) to a limited type of case, as if the argument of the Solicitor-General had been accepted by the House of Lords. Day v. Singleton ([1899] 2 Ch., 320) is the leading case in the process of diminishing Bain v. Fothergill (supra) by treating the more repugnant passages as obiter dicta. But whatever the law may be in England, in this country O’Connor, M.R., in Kelly v. Duffy (supra), made a very careful examination of the decision in Day v. Singleton (supra), and showed that it was reconcilable with Bain v. Fothergill (supra) because the purchaser in Day v. Singleton (supra) succeeded in getting damages for loss of bargain after amending his claim so as to charge fraud; and he held that, in a case of the breach of a contract for the sale of land, the purchaser, seeking to recover general damages beyond those allowed in Flureau v. Thornhill (supra), must, in order to succeed, allege and prove either deceit, or wilful default amounting (p. 66) to fraud.
In my opinion, this decision is plainly right, if Bain v. Fothergill (supra) be good law; and it is logical. It has prevailed here for sixteen years, and until it is overruled it must be regarded as representing the law in this country. Accordingly, I feel that I am bound in this case to act on the principle of stare decisis.
Now, this is not an action against a vendor for failing to complete, but an action against a pretended agent for failing to make good his warranty. No doubt, the damages in the two cases will not always be the same: In re National Coffee Palace Co. (supra, at p. 372). But the damages to which the plaintiff is entitled in this action cannot exceed what he could have recovered against the solvent vendor, if the latter, having authorized or ratified the contract, had wilfully and without lawful excuse refused to complete. In my opinion, in an action upon the contract against the recalcitrant vendor, framed as this action is framed, the damages must, according to the judgment of O’Connor, M.R., have been limited by the rule in Flureau v. Thornhill (supra). For these reasons I am of opinion that this appeal fails.
If I am wrong, I assess damages at the same amount as Johnston, J. But if the plaintiff is compensated for the loss of his bargain, he can hardly be allowed, in an action for breach of contract, to make a profit on the breach. Therefore, I should not allow him anything for costs and expenses which he would have had to pay had the contract gone through.
Reade v. Royal Bank of Ireland.
[1922] 2 IR 24
Appeal. (S. I.)
RONAN L.J. :
The question in this case is rather obscured by the form of the pleadings, but this is immaterial, as the only matter of fact in dispute viz., was there an effectual countermand prior to payment?was decided by the Judge, and defendants do not question that decision. The statement of claim is as follows [His Lordship referred to the Statement of Claim, and continued]:
The defence practically denies every allegation in the statement of claim, with one significant exception. The defendants do not deny that they “have debited the plaintiff’s said banking account with the said sum.”
It is plain to my mind the action was brought to try whether they were entitled to do so. The relation between the plaintiff and the defendants was that of debtor and creditor. At the date of the payment of the cheque the defendants were indebted to plaintiff in a sum equal to or greater than £460, the amount of the cheque. On the 6th of August the bank, out of these moneys, paid M’Entyre a sum of £460. Lord Cottenham says in Foley v. Hill (2): “Money, when paid into a bank, ceases altogether to be the money of the principal; it is then the money of the banker . . . . The money placed in the custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases . . .; but he is, of course, answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands.”
If the sum of £460 was paid to M’Entyre at the request of the plaintiff, the defendants would be entitled to debit him with the payment. The ordinary request in such cases is a cheque. Let me first assume that there was no request and no cheque at all. M’Entyre comes into the bank and says, “Reade owes me £460; you owe him more than that; pay me my debt, and debit him with the amount. I have a writ against him for the amount, and, if you will not pay, I will serveit at once.” The bank pays. Can they then justify the debit to Reade by saying, “You suffered no damage. If we had not paid, you would have had to pay the debt and costs in addition”?
If the alleged debt of M’Entyre was a doubtful or unenforceable debt, would the position of the bank be better? Can they then say,”Even if you don’t owe the debt, you can probably get the money we paid M’Entyre back from him by an action. This may involve some trouble and cost, but we give you one shilling to cover this.” Surely these are impossible propositions, which only require to be stated. A bank has no authority or right whatever to make payments to a customer’s creditors, and debit his account therewith, unless at his request, express or implied, or under a garnishee or other order of the Court. The payment being out of their own moneys, was made at their own risk. It was the debit to the plaintiff that was wrongful.
On the other hand, if the cheque in this case had not been countermanded, the bank would have been entitled to debit his account with amount. They had no notice of the transactions which led to the giving of the cheque. But what was the effect of the countermand? Sect. 75, sub-s. 1, of the Bills of Exchange Act, 1882, says [the Lord Justice read it]. Four years before the case of Cohen v. Hale (1) was decided. It is cited as applying to the section by Sir M. Chalmers, and referred to in Hart on Banking as the existing law. I take the statement of the case from pp. 326-7 of that book. This puts the case in the same position as if the payment had been made without any cheque for the amount having ever existed. It follows, therefore, that as between the plaintiff and the defendant the case must be treated precisely in the same way as I have dealt with the case of no cheque and no request. The question here would directly arise if the plaintiff brought an action of debt for his balance, and the bank sought to see off this payment pro tanto. I cannot see what possible application to such a case the cases as to the duty of plaintiff in an action for damages for breach of contract to minimize his loss can have. This never was really an action for unliquidated damages. It was an action to determine whether the liquidated sum of £460 was due by defendants to the plaintiff or not. If the view of Samuels J. was right, he should, in my opinion, have given the defendants the costs of the action, and the plaintiff the costs of the issue as to the countermand. We are all agreed that his decision must be set aside, and that the plaintiff is entitled to succeed on the real question in the action, and that the defendants should pay his costs in this Court and in the Court below. As to the form of the order we should make, I differ from my colleagues.
The plaintiff claims damages because the defendants have wrongfully debited him with £460. Samuels J. decided that he was to get one shilling damages for this, but his judgment was plainly rested on the assumption that the wrongful debit should stand as a valid debit, though the judgment does not say so. The order I would make in this case would be1, discharge the order and judgment of Samuels J.; 2, declare that the defendants were not and are not entitled to debit the plaintiff with the sum of £460; 3, costs. The plaintiff is willing to accept this order, and makes no claim for damages for the period the debit was insisted on. My colleagues, as I understand, prefer to make an order that the invalid debit shall be treated as valid, but that the defendants shall pay the plaintiff £460 damages for the wrongful debit; of course their view must prevail. I dislike differing from my colleagues in such a matter, but I cannot agree to declaring a debit valid when our entire judgment rests on its invalidity. If any amendment of the pleadings is necessary, I think we are bound to make it under the mandatory provisions of Order 28, rule 1, and sect. 7 of the Judicature Act.
Having regard, however, to some observations of Samuels J., I think it right to say that I confine my judgment in this case to the question between the parties. I do not decide that the existence of the cheque may not affect the rights of either of the parties against M’Entyre and in his absence I prefer not to express any opinion as to these rights, if any. At the same time, I may say that I fail to see how the plaintiff could recover back the cash paid by the bank to M’Entyre, except by adopting the payment by the bank as his payment, and thereby abandoning his claim against the bank for the wrongful debit.
O’CONNOR L.J. :
I think that once the facts of this case are clearly appreciated, and the claim of the plaintiff and the answer of the defendants properly understood, no legal difficulty whatever arises.
The facts are fully found by the learned Judge who tried the action. Let me summarize them. The plaintiff, having bad luck at a game of cards, gave a cheque on the defendants’ bank for £460 to one M’Entyre, the amount of the plaintiff’s losses to that individual. Before the cheque was presented for payment, the plaintiff repented of having given it, and sent a telegram to the defendants countermanding it. Now, it is as clear as anything can be that this telegram, in the circumstances of this case, was an effective countermand, and that it reached the defendants in ample time to enable them to act upon it. This appears obvious from the evidence; it is clearly found by the Judge; and, indeed, so much is, in effect, admitted by the defendants. By a blunder on the part of one of the defendants’ clerks, the cheque was paid to M’Entyre on presentation. The bank say they are under no liability to the plaintiff, and that is the issue we have to decide.
The statement of claim of the plaintiff is liable to lead to some confusion, which, I am inclined to think, was increased in the conduct of the case. For the claim does use the word “negligently” in describing the payment, and there was obviously a good deal of controversy before the learned Judge as to negligence and the consequences thereof. But that, in my judgment, is not the way to view this case at all.
The relation of a bank to its customer is that of debtor to creditor. A bank can, and, indeed must, diminish its indebtedness to the customer by obeying the mandate of the customer to pay away to third parties moneys up to the amount which the bank owes the customer, or, in other words, which is standing to the credit of the customer’s current account. The mandate is, of course, usually given by cheque. But a bank cannot diminish its indebtedness where no such mandate is given, or where a mandate is given but subsequently withdrawn, for that is the same as if no mandate were given at all.
Here there was no mandate, for the mandate which was given was withdrawn, and yet the bank claim that they have diminished their indebtedness to the plaintiff by the amount which the bank, out of their own money, paid to M’Entyre. I fail to understand their position.
Apparently, they contended before Samuels J. that if they were liable to the plaintiff in the amount of the cheque, the plaintiff would have a good chance of being paid twice over, once by the bank and once by M’Entyre, if the plaintiff choose to take an action against M’Entyre for the amount of the cheque, on the authority of a recent House of Lords decision. Not at all. The plaintiff repudiated this payment by the bank to M’Entyre; he still repudiates it; he says it is not a payment by him to M’Entyre at all, but a wholly mistaken and unauthorized payment by the bank; and that being so, his remedy, treating the bank as his debtor, begins and ends with them. If the bank have such perfect faith as they suggest in M’Entyre’s solvency, they can take appropriate proceedings against him; and, though it is none of my business to advise the bank, I should be, as at present advised, disposed to think that an action for money received by M’Entyre for the use of the bankit being paid to him in mistake would lie.
I say nothing as to the decisions cited, for they seem to me to have nothing to do with this case.
As to the form of our order, I think it is immaterial whether the judgment should be for £460 as money due, or for £460 damages for the wrongfully debiting by the bank of the plaintiff’s account with them.
DODD J. concurred.