IN BANCO.

Otago Witness, Volume 25, Issue 2321, 25 August 1898, Page 22

IN BANCO.

Tuesday, August 16.

(Before His Honor Mr Justice Pennefather.)

COLBECK V. GUTHHIE. Sxjecial case stated for the opinion of the court.

Mr Chapman and Mr Hosting appeared on behalf of the plaintiff, John Cordmgley Colbeck; and Mr Solomon and Mr Sim on behalf of the defendants, Walter Gxillme and Margaret White Guthrie.

In this . previously-argued case his Honor" gave- judgment as follows: —

In this case a large number of questions arise, in consequence, partly of the involved circumstances, but partly also of the peculiarities of the documents, which have to be construed.

In 1883 the late Wm. Pai&ley and Marg. W. Guthrie (the defendant) were in partnership as merchants at Invercargill, trading under the style of "W. Paisley and Co." Part of the assets of the partnership consisted of a> piece of laud on which the warehouse was erected. This land was mortgaged by them on the Ist February, 1833, to the Otago and Southland Investment Company (Limited) for £10,000 ; the mortgage to expire on the 31st December, 1887.

In August, 1883, Wm. Paisley, with tho consent of Marg. W. Guthrie, sold his share of the partnership to J. C. Colbeok (the plaintiff) for £1835. Marg. W. Guthrie and J. C. Colbeck covenanted that they would pay all the debts and discharge all the liabilities of the former partnership, and keep Wm. Paialey indemnified against all such debts and liabilities, and all actions, proceedings, costs, and expenses in respect thereof. Wm. Paisley also conveyed to J. C. Colbeck the said piece of land, subject to the mortgage; and J. C. Colbeck covenanted with Wm. Paisley that ho would pay the mortgage debt and interest, and keep Wm. Paisley indemnified therefrom, and from all actions, proceedings, costs, charges, claims, and demands in respect thereof.

The new partnership (which, though consisting of J. C. Colbeck and Marg. W. Guthrie, was to be known as " Walter Guthrie and Co.") assumed tho mortgage as one of its liabilities.

In ' September, ISB3, a cteed was executed by which Marg. W. Guthrie, J. C. Colbeck, and, Walter Guthrie formed a new partnership in continuation of the business formerly carried on by Marg. W. Guthrio and Wm. Paisley, which was to last until the 12th April, 1888. The capital was to consist of the money already embarked in the business by Marg. W. Guthrie and ihe sum of £1835 to be contributed by J. C. Colbeck (that is, the sum ha had given for Wm. Paisleys share). AU outgoings were to be paid out of the gross profits of the business. Marg. W. Guthrie was to be entitled to draw out of the business £iW per annum as interest on her share; J. C. Colbeck interest p*t 1 per cent, on tho £1835 ho had advanced, and a sum not exceeding £400 per annum as 3alary; and Walter Guthrie £800 per annum as salary ; but beyond that the profits were to remain in the business until the expiration of the partnership, when they were to be divided by Marg, W. Guthrio taking 90-100 th and Walter Guthrie l-100th. The deed contains several provisos such as are usual in x^-rkiership deeds ; and a proviso that if at any time all moneys due to the Bank of New Zealand ..should have been repaid to the bank, J. C. Colbeck should retiio from the partnership if required by Marg. W. Guthrie and Walter Guthrie to do so, on repayment, of the capital contributed by him and interest thereon. Then follows a proviso that six months after the expiration of the paitnership by elfiuxion of time accounts should be taken and a sale of effects held ; and all the moneys oi ftie partnership should be applied — first, m payment of tho costs of wiuding-up ; secondly, in payment and discharge of the debts and liabilities of the partnership; thirdly, in repayment to J. C. Colbeck of tho capital brought by him into tho partnership, with interest; fourthly, in payment to Marg. W. Guthrio of the capital brought in by her, with interest; and, lastly, bo divided between M?.rg. W. Guthrie and Walter Guthrie in the proportions of 93-100 th to Iviarg. W. Guthrio and 1-lOOth. to Walter Guthrie.

It must be observed that although there are many reported cases m which the- subject under discussion his been whether the transactionsbetween two persons amounted in law to a> partnership, either absolutely, or at least as against third x^arties, although they did not themselves intend to enter into a partnership, yet it would be difficult to find a case in which persons entered into an agreement which they spoke of, and intended should be regarded as, a partnership, and at the same timo provided that one of them should have no claim to tho profits of tho concern, but should be merely paid interest on his money at the rate then current and a salary for his services, and should be liable to be discharged at any moment when the firm's debt to the bank should have been paid. It is hard to say, either from precedent or principle, what theeffect of such an agreement would be; but it appears, on the whole, that the fairest way to take it is as an agreement between three persons that they should have inter so all the rights and liabilities of partners except the very important right of sharing profits. It is admitted that the mortgage and the mortgaged land became part of the liabilities and assets of the new partnership. In 1890 tho business, r,ssets, and liabilities of this partnership were takeu over by a_ company called " Walter Guthrio and Co. (jbimited)." J. C. Col beck's £1835 v/as paid to him, but no other money. Tho other vendors (that is to say, Marg. W. Guthrie and Walter Guthrie) were paid in fully paid-up shores of tho new company; but the shares winch would otherwise have gone to Marg. W. Guthrie yrere, with her consent, issued to Walter Guthrie.

In 1893 (J. C. Colbeck having before that time ceased to have any connection with the company, and having left the district) a mortgage deed was executed by Walter Guthrio and Co. (Limited) and by the Otago and Southland Investment Company (Limited). This deed, after reciting the mortgage of the Ist Februi ary, 1883, contained the following recitals : — j " Whereas the mortgagors are now tho 1 owners of the said last-mentioned parcel o£ 1 Li2id subject to the said mortgage, and the said principal sum is still owing and now due, and whereas the mortgagors have requested the mortgagees to extend the timo for payment of the said principal sum, in manner hereinafter expressed, which the said mortgagees have agreed to do (without prejudice to the said '• deed of mortgage or the rights of the said ; Wm. Paisley and Marg. W. Guthrie) upon re- | ceiving this mortgage by way of additional 1 security." By the operative part, the time for repay- ! ment of the £10,000 was, as to part thereof, I extended to tho 31st December, 1896, and certain additional security was added. The deed, then, amongst other provisos, contains the following : — "Eighthly, that this security shall not (except as extending the time for payment of the 1 said principal sum of ten thousand pounds ba affected by or affect any other security of any kind or nature whatsoever which the mortgagees now hold, or may at any time hold, fo» | the whole or any part of tho moneys intended j to bo hereby secured, and shall not be pleaded as a defence to any action or any nesotiabla ' instrument or other simple contract, but all such securities, whether by specialty or simpla ! contract, shall co-exist, and may be enforced ' and sued upon independently of. each, other. ' Ninthly, that this security, or the wrong*-

ment hereby effected, shall not in any way prejudice or affect the said Win. Paisley and Marg. W. Guthrie, whose rights are hereby declared to be reserved."

"Win. Paisley did not consent in any way to the extension oE the time for repayment; and (as has already been shown) at the date of the new mortgage the Otago and Southland Investment Company were aware that "Walter Guthrie and Co. (Limited) had become the sole owner of the equity of redemption in the laud originally mortgaged. "Walter Guthrie and Co. (Limited) subsequently reduced the mortgage debt to £8500.

In 1896 Walter Guthrie and Co. (Limited) ■was ordered to be wound up by the court. In 1897 the Otago and Southland Investment Company commenced an action against Marg. "W. Guthxie for the principal and interest then due on the mortgage, debt, and recovered judgment against her by default for £8776 ss. She, liowever, is insolvent. The next step taken by the Otsgo and Southland Investment Company was to demand payment of all moneys owing under the fir&t mortgage from tbo administratrix of "William Paisley. She did not pay, but called on J. C. Colfosc\ to indemnify her under the covenants he Jia! entered hiio in August, 18S3. J. C. Col"bejk thereupon called on Marg.W. Guthrie and (Walter Guthrie, as his partners under the deed •of September, 18S3, to indemnify him, but neither of them did so. He therefore paid to the mortgagees £8666 4s 9d for principal and interest, and £40 for mortgagees' costs, and took a transfer of the securities held by the mortgagees.

J". Ct CoJbsck now seeks to recover that money (and a ftivViier sum for the expenses to which ho 2ias been out) from Marg. TV. Guthrie and Walter Guthrie. The question of their liability Jus been brought before the court in the form of & suecial case.

It has been urged for the defendants that "Willie ;n Paif-ley had become the surety for the mortgage debt, Walter Guthrie and Co. (Limixed) being the principal debtor; that the extension oi time granted by the deed of 1893 not •containing any reservation of the remedies arainst Win. Paisley, operated as a release io him ; or, if that view be not taken by the court, ihey next contend that the plaintiff should have waited until an act ; ou was brought against him, and then called on them to defend ; but that he, iiavmg paid not under legal compulsion, cannot demand an indemnity now. Or, failing this, they next contend thai the assets of Walter Culhrie and Co. having been sold not for money bin for fully-paid-up shares, all that the deierJ.'Uits can be called on to restore are those *lisires (which are now valueless). Failing that, chcy contend that the two defendants can only bes called on to contribute in the proportion to whi<"h they were entitled to the profits of the -.sartnerfhip ; that is to say, that Walter Guthrie c in only be compelled to pay 1-100 of the debt, an:! that the fact of "Walter Guthrie having received a larger number of shares on the sale to thr company is immaterial, inasmuch as he did 3iof; receive them as vendor, but as the alienee of Marg. W. Guthrie. Failing that, they con"teud that reference must be had to what would have taken place had the partnership come to an end by effluxion oi time; that, there being jio surplus, and the capital brought in by Marg. "W. Guthrie having disappeared, recourse must be had first to the £1835 brought in by the plaintiff and then to the private estates of the xiarlners (it being admitted that if one of the three partners is insolvent, each of the other two mutft bear a moiety). And lastly, if everything else fails, they contend that they are not liable to pay any of the expenses incurred by the plaintiff in connection with taking over the securities held by the Otago and Southland In■vestn:ent Company. Taking these points in order, it is neces■gary first to consider what would be the effect of the deed of 1533 without reference to the proviso contained in it i'eseiving the rights of Win. Paisley. Now, it is clear that at the time of executing the mortgage of 1883 "Wm. Paisley and Marg. W. Guthrie were principal debtors; next, that when Wm. Paisley retired from the business in August, 1883, and Marg. W. Guthrie and J. C. Colbeck covenanted to indemnify him from the mortgage debt, they became (as against him) principal debtors, and he became (as against them) a surety only. Therefore, if the mortgage money had fallen into arrear, and the Otago and Southland Company had been informed that Wm. Paisley had become a surety only, and after that had given time to Marg. W. Guthrie aud J. C. Colbeck, without the consent and knowledge of Wm. Paisley, he would have been discharged from liability. The reason for this is that a surety has a right at any time to apply to the creditor and pay him off, and "then (on giving proper indemnity for costs) to sue the principal in the creditor' 3 name; if the creditor binds himself not to sue the principal debtor, for however short a time, he interferes with the surety's right to sue in his name during such period; and if the surety's Tights have been interfered with, to however small an extent, it is proper that he should be released from liability. (See Swire v. Redman, 1, Q.8.D., 536, 541.) And this doctrine has ■been carried out in Oakeley v. Pasheller (-1, C. and F., 207 ; 10, Bli., N.C., 548), which decided ihat the information to the creditor of a subsequent arrangement by which his co-debtors .became as between themselves in the position ■of principal and surety, puts him under the obligation not to deal with the principal debtor so as to prejudice the surety, just as would be the case if the debtors were originally in that position inter se, and the creditor had discovered it afterwards.

Whilst, of course, not forgetting that this court is bound to follow the decisions of the House of Lords and the Court of Appeal, it must at the same time be remembered that the doctrine is a refinement of equity, and care must be taken not to refine it still further. It will be observed that in the leading case of 'House v. Bradford (1834; 1 Ch., 32, 49) great stress was laid upon the fact that the bank, who were the creditors, knew the terrors of the deed -of dissolution, whereby the retiring partner became a surety only. Again, in Overend v. "Oriental Financial Corporation (L.R., 7, H.L., '818) it was because the creditor had learnt that one of two debtors was a surety only that he was bound afterwards to treat him as such, and therefore giving time to the principal released him. And this is only fair, because, although when a creditor has dealings with two persons whom he knows to be principal and surety, he must, of course, be bound by the law as to suretyship, whether that law is ■founded on justice or not. Yet if a creditor *has dealings with two principal debtors, he must have the clearest possible evidence that their position inter se has been altered before -the right which would naturally arise from any subsequent transaction of his with one of them can be affected by such an alteration to which ■he was no party.

But what evidence is there hero that tho Otago and Southland Company knew the terms of the deed of August, 1883? The only evidence of their knowledge that has been produced is the recital in the mortgage of 1893 that Walter Guthrie and Co. (Limited) were then— that is, at the moment when the extension of time was granted — the owners of the mortgaged land. What tho terms were on which they had purchased it from the firm ■which succeeded to the firm which covenanted to indemnify Wm. Paisley, they may not have known. 1 am obliged to hold, therefore, that the case is to be distinguished Jiom House v. and that, therefore, the granting of an extension of time to Walter Guthrie and Co. (Limited) did not operate as a release of Wm. Paisley.

This makes it 3 strictly speaking, unnecessary |q decide another point to which much uaaeni-

oas argument has been directed. It has been urged on the part of the plaintiff that oven _ if granting extension of tune would ordinarily operate as a release to the surety, yet the other clauses m the mortgage prevent its doing so hers. It is, of course, admitted that a reservation by the creditor of the liabilities of the surety would prevent the granting of time to the principal from operating as a release; and the contention is that, although perhaps all that is found here is a reservation of the rights (not the liabilities) of the surety, the result must bo the same ; for the ri&ht of a surety to call on the principal to indemnify him can only como into existence if he himself is sought to bo made liable; and, therefore, a reservation of the rights of the surety must by implication include a reservation of the rights against the suiety The reason why a reservation of the liabilities of a surety operates as preventing a release is that it includes by implication a resen ation ol his rights. In the words of De Colyar ("Treatice on the Law of Guarantees, 3rd edition, p. 433), "where an agreement giving time to the principal debtor is expressly made with a reserve of remedies against the surety, such a reservation prevents there being any discharge of the surety. The reason for this is, first, because it rebuts tho implication that uhe surety was meant to be discharged, which is one of the reasons why a surety is ordinarily exonerated by such a transaction; and, .secondly, because it prevents the rights of the surety against the debtor being impaired, the injury to such rights being the other reason why, m ordinary cases, the surety is discharged. For the debtor cannot, where there is a reservation, cornplum if, the instant after paying the ciecator, the surety enforces his rights against him, and the debtor's consent that the creditor shall have recourse against the surety is implied- by a consent that the surety shall have recourse against him. Further than that, it is contended for the plaintiff that the v.ords in the recital "without prejudice to tne said deed of mortgage, combined with, tno Gth and 9th provisos, must operate as a reservation of all n°hts under the mortgage deed. As to this, I wish to remark that, although no direct authority, on the point has been cited (possibly bpciusc a deed so worded has never been brought before a court), I fail io see, on principle, how a surety could be discharged by an extension of time v a desd which m terms rc-servp-i his rights; tor the theory is that a surety is disctuuged it some of Ins ri&nts arc taken away. Therefore, even if I had been oi own'on that the deed of 1593, without, these clauses, would have operated as a release, 1 must have held that the existing deed does not do so.

There has also been a lengthy argument on the question whether the release of a surety is absolute, or whether it loaves a qualified or natural obligation ; and if the latter, whether the surety is bound to plead the release or may pay if the choose to call on the principal ior indemnity ; but for reasons above appearing, it is not necessary now to enter into this question. I come, therefore, to the next point. Was J. C Colb-ck bound, when the demand was made, to waH until action should be brought, or can he now, having given notice of the claim to Marg. W. Guthrie and Walter Outline, and received no answer; and then having paid tiie claim without action, call on them for coiiui-i-buticn? In other words, was he bound to ptu the Otago and Southland Co. to the trouble and expense oi bringing, and lumscif to hi cur the trouble and expense oi defending, a totally unnecessary action/ I cannot but feel that, as he had -seen the action against Marg. W. Guthrie go by default, had reason to believe that an action would at once be brought against himself; and must be taken to have known his legal position, he was compelled to pay m tne sense that he was under a reasonable obligation and necessity, and therefore can now claim contribution. Next as to the question whence this contribution must come. And here I am placed m a difficulty by the extraordinary arrangement contained in the deed of September, 1553. It would be natural to suppose that a losa should bo paid for out of piofUs, according to the rule laid down by "The Partnership Act, IS9I S 47. But the %l profits " spoken of in .that section are the profits of the partneisuip \to. 4) No statute as to paitnerahip could include a leonine arrangement by which one partner was to get no profits! And it it be argued that there were profits to which the othc-r two partners were entitled, ond that those profits are now represented by worthless shares, the matter is carried no further, for, all the profits being exhausted, the partners must remain liable For can it be said what is tho capital of the business, for that has disappeared. 1 may here remark that 1 cannot admit the soundness of the r.rgument that it would be impossible to follow the shares that came into tho possession of Walter Guthrie, for it is not a case of shares being allotted to the person who was entitled to them and that person by a, subsequent arrangement alienating them <,o a stranger; but of the purchase money paid ior the as3ets of the firm being handed direct to "one of the partners at the request of _ the other. The money was earmarked, and as i long as it remained in his hands it remained liable for the debts of the firm. A further difficulty arises as 'to J. C. Col-beck's £1835 In the deed of September, 18S3, it is'TCieried" to as "brought by him into the partnership concern. But the more correct expression would have been, "lent him by Marg. W. Outline and Walter Guthrie." He was in exactly the same position as any other creditor ; he was entitled to receive his "interest, and ultimately to have his capital returned (as was done) ; but if any profit wns made by means o? it. all was to go to the other two. The fact that he was to have been postponed to other creditors if the partnership had teiminatod by effluxion of time, and a sale had taken place, is immaterial, as the partnership did not so terminate, but was continued after the day named, and terminated by agreement. The cbuse which has & closer analogy is that which provides that J. G. Cotbeck shall at any time retire from the partnership if Marg. W. Guthrie and Walter Guthrie request him to do so, and repay him his £1835. Failing, therefore, to obtain any assistance from the terms of the deed, I can only fall back on the fundamental principle that equality is equity; and that as J. G. Colbeck, Marg. W. Guthrie, and Walter Guthrie have called themselves paitners, the loss must bo borne by them all equally ; but as one of the three has become insolvent, J. C. Colbeck must bear one-half and Walter Guthrie tho other half. As J. C. Colbeck only adopted the prudent course in paying the money and taking over the securities, and was", moreover, obliged to act on his own judgment, Walter Guthrie not having replied to his request, the costs and expenses must also be provided for in the same manner as the principal sum; and interest must bo paid on Walter Guthrie' b moiety from the date when it was paid by the plaintiff to the Olago and Southland Company. Costs, costs in cause; amount reserved.

Thursday, August 18.

•FI.EMING V. THE BANK OF NEW ZEALAND.

Motion by plaintiff for judgment on the finding i, and motion on behalf of the defendant for a nonsuit or for judgment for the bank, or in the alternative for a new trial on the grounds of misdirection and the improper admission of evidence, and on the further ground that the damages were excessive. Mr Sim and Mr Rattray (of Invercargill) appealed on behalf of the plaintiff, James Fleming, farmer, of liakahouka, Southland, and Ml Ollivier (of Wellington) and Mr Hosking on behalf of the defendant bank. When Mr Hosking proposed io continue his argument oa behalf pi tha bank.

His Honor said lie had come to the conclusion that the contract could not be ratified, as ratification had come too late, so he proposed to call on the other side to argue the question of ratification. If he decided that a nonsuit should be granted on that ground then would be no necessity to argue the motion for a new trial. If on the other hand he decided in favour of the plaintiff on the novsuit point that would be cleared away, and he would then be able to hear argument oil the motion for a new tiial.

Mr Sim then rose on behalf of the plaintiff,

Hi."-, Honor said lie was decidedly of opinion tint a contract was entered into to grant an increased overdraft in consideration, of the warrant being deposited, but what had impressed itself so very strongly on Im mi.id w\s that it was obvious according to the intention of the paihcs, that it was not a contract made with Fleming but a contract made with Thompson. Thompson was Fleming's agent not for the purpose of coiitrr.c-ting but for the purpose of paying. Thompson went to the bank and made an airangement with the bank which on the face of it was not ior the benefit of Fleming but ior the convenience of his own company. It seemed to him (his Honor) that the contract, siich as it was, Yvas made with. Thompson. Nr Sim: On behalf of Fleming, as I submit. Eis Honor: But he said ho had not been authorised by Fleming to make it. Mr Sim submitted that whatever arrangement Thompson had made with Chisholm was au arrangement made on behalf of Fleming. The reason why a warrant was substituted for cash was no doubt for the convenience of Thompson's company, but in domg what he did there was no doubt— and the jury found- ■ that lie did it on behalf of Fleming, and when Fleming knew what had been done he affirmed it and ratified it.

His Honor observed that what Thompson did was to arrange with the bank for an mcronsed overdraft for Fleming, which Fleming had never thought 01. Mr Sim said there was no doubt that what Fleming iutende.l to do when he went to the bank on the Saturday afternoon was to arran o e for an increased overdraft. His Honor srid Fleming abandoned that and wont to borrow the monoy irom lha Freezing Company. Mi- Sim: The overdraft was to be granted to Fleming on the security of a warrant to be deposited by Thompson, but if there was ar.y contract at all it was clearly intended by tho paities to bo a contract between Fleming _and the bank. Neither Mr Ollivier nor Mr Hosking had suggested that the contract was between Thompson ard the bank. It wps a contract entered mlo by Thompson purporting to act Tor Fleming, made by him without Fleming's authority, and the whole question argued on the previous day was that as Fleming had not ratified Thompson's action in making the pgreeineiib before the breach Fleming was iiot entitled to take advantage r>[ the bargain. He (Mr Sim) contended in the first plaf-e thot the ratification made by Fleming on the Tuesday, when he knew cf the ivrangement, was a good ratification, and related back to the making of the contract jo as to onable Fleming to take advantage of the breach cf the contract by the bank on tho Monday. His second contention was that assuming that the ratification did not have that effect, still the bonk was, under the circumstances, estopped from alleging Thompson*) w£»nt of futhority to make the contract so that, as betwet-i the bank and Fleming, Thompson must be treated as having had authority from Hie ?evy beginning to make the contract which he did. If the bank was not satisfied with Thompson's authority to do what he did it should have said it would r.ot accept the -warrant, and Thompson would then have paid the £1000 in to Fleming's credit; but, having elected not to speak, but to accept performance fioin Thompson of the contract entered into with him, ana having accepted complete performance of the contract at tho hands of Thompson, the bank was estopped from afterwards alleging want of authority, and, if that was so, as between the bank and Fleming, Thompson must be treated .13 having had authority from the beginning. A duty on the part of the bank to speak arose when the warrant was given, and it certainly arose when Chisholm went over to spc Thompson in the afternoon after the cheques came in If Chisholm had said then that he was not satisfied with the wan ant, but wanted caeli, Thompson would have provided the money. On two occasions tliere was an imperative duty to speak, but no objection v;as raised to Thompson's authority, and the bank, having elected to be silent then, must remain for ever silent. Chisholm's conduct was a leprcsentation to Fleming that the bank was satisfied with Thompson's authority to do whit he was doing, and had agreed to waive any objection on that ground.

Mr Ollivier having replied, His Honor said he had made up his mind about tho matter, and would write a judgment, which he would deliver next day.

CRAWFORD V. GRAY,

Motion for judgment. Mr Wilkinson appeared on behalf of x he plaintiff, Henry Beloe Crawford, solicitor, of Oamarii, and there W8" no appearance on behalf of the defendant, t)avi<fl William Gray, labourer, of Papakaio, near Oarnaru. Tho statement of claim set out that by ar assignment by way of mortgage, dated the 17th May, 1888, the plaintiff assigned to the plaintiff by way of mortgage, to secure advances, inter alia, all his property in the property known as the Frances block, and that on the 3rd November, 1888, the defendant covenanted to sign all such further deeds, assurances, and instruments as the plaintiff should consider necessary for the further or more perfectly vesting the premises in him or any person to whom he might sell the same, and on the 10th November, 1896, to sign any deed necessary to vest the fee simple in the plnintiff", but that the defendant had neglected and put off signing a deed required by the plaintiff, and had eventually declined to sign xmless he was paid £5. The plaintiff prayed the court to order specific performance of the defendant's promise.

The following order was made: I—"That1 — "That the defendant be ordered specifically to perform his agreement of the 10th November, 1896, and to execute any deed necesraaiy to vest in the plaintiff the fee simple of the land assigned by way of mortgage dated the 17th May, 1888, and to pay the costs of the action on the lowest scale."

Friday, August 19

In the case of Floming v. the Bank of New Zealand, his Honour give judgment as follows: In this case, the verdict of the jury having been taken tho matter was adjourned for further consideration, and leave was given to the defendant to move for a nonsuit. It has now been brought before the court again (1) on motion by the plaintiff for judgment; (2) on tho motion by the defendant for lionsuit or judgment for the defendant ; and (3) on the motion of the defendant for a new trial. It has been arranged that the second motion sha'l b e taken first and all order made on it; and that in the event of that order being in favour of the plaintiff the third motion Shall not be argued. It has been urged for the defendant thai thera was no intention on tho part o£ Chisholin to enter into a contract with Thompson to honour the cheques of Fleming in consideration of the deposit of the warrant; that the evidence of Thompson and Chisholm as to the conversation which took place between them on tha jj&Wlwt morning may b« explained.

' equally well as refeiring to a consent on the j part of Chi-sholm to receive £1000 in reduction I of Fleming's overdraft, or in the alternative to receive the warrant as additional security; j and that being so the surrounding circuta- i stances and the previous conversation between ( Fleming and Chisholm must be looked at, and these will show that such a view is moie pro- . bable ; therefore the seventh question, viz. — ! " Did Mr Chisholm accept the said warrants ] as conpicloration lor honouring plaintiff's cheques beyond the limits of his overdraft '•"'— i ought not io have been left to the jury. Fail- ' ing that, the defendant contend 3 that the ' picper form in which the ibsuc should have ' been put, in order to riucc the question whether there ically was a consensus ad idem between the parties, was (,as suggested by counf-cl for defendant at the trial) : '' Did the iuanagor of the bank undei stand that the choq.ies le-ftii-ed to by Thomppon at their intoiview of the Glh September were cheques drawn by the plrintiS beyond the limit of hi 3 existing overdraw " I Failing that, the defendant contends thr.t, even suppo&ing ti contract to have taken place, ' tliere was no consideration, inasmuch as it was open to Fleming, as Thompson's prin- • cipal, to repudiate the action of his agent at any moment. Failing that, he contends that the contract ' was nevor broken by the defendant, as the only • cheques to be honouied vere those given for the "purchase of sheep, and it was not proved to the defendant what had been the conudera- , tion for the cheques which actually were pre- ' sented. j Lastly, the defendant contends that the alleged contract was made by a person who had i no authority to contract; that the lyrincipal remained in ignorance of the contract txntil aftn- the broach of it; and that when he essayed to ratify it it had come to an end, and thciefore was not cappble of mtiftcatiozi. J For the first contention Cotton v. Wood (8 C.8.N.5.) has been cited. S That was an action claiming damages for injiJiy resulting from the negligent driving of the defendant's servant. The judge who tried the case had been of opinion that thoie was no evidence of actionable negligence; but to avoid the necessity of going down ■ again if the court should think otherwise, ho left the case to the jury, who returned a ver- i diet for the plaintiff. The court were of opinion lhat a scintilla of evidence, a mere siumise that there may have been neligence on the part of the defendant, would not justify the judge in leaving the case to the jury. Tliere must be evidence upon which they might reasonably and properly conclude there was negligence ; that where the evidence was equally • consist-? ut with the existence or nonexistence of negligence it was not competent to the judge to 'cave the matter to the jn«-y. , T need hardly ray that I respectfully concur in •' tho judgment of the Court of Common Pleas, 'but [ must add that in this caso I am still o: opinion that the jury might, and did, reasonably and properly conclude that the arrangement which Thompson proposed, and to which Chis hohn agreed, was that further cheques given by • Fleming should be cashed by the bank, anil that the overdraft might be increased. It might not have been Improbable that Fleming, . if he h&d an extra £1000 in his pocket, should _ wish to reduce his overdraft by that amount; j but it certainly seems improbable that he | should wi&h to borrow that sum from the ' Freezing Company in order to pay it to tho . bank, and the fact that Thompson suggested the alternative scheme must have shown to Chisholm that Fleming was borrowing the £1000 from the Freezing Company. .Besides that, Thompson's evidence as to his conversation with Chisholm seems to me only consistent with the view that he understood, and that he represented to Chisholm that a new arrangement was being made in consequence of more cheques having been issued by Fleming, j So far from the plaintiff having only given evidence as consistent with one view of the case as the other (see the remarks of Mr Justice ] Erie in Wheelton v. Hardisly, 8 3. and B. 263), j I must hold that the evidence which he has tendered is far more consistent With his case than with that of the defendant. If, therefore, the warrant was tendered by -j Thompson to Chisholm as consideration for j honouring Fleming's cheques beyond the limits j of his overdraft, and was accepted by Chisholm ] as such, it appears to me that there must have ' been aggregatio nientium necessary to complete ! a contract, and therefore the question put to the jury was the correct one. j Next, as to tliere being no consideration for j 'the contract. But there was, in fact, a con- ; sideration — namely, the deposit of the warrant. ' It may be said that that consideration was not very valuable, as Fleming might theoretically , at any moment repudiate the unauthorised ac- : tion of his agent (remote tnough the chance of his doing so might be, seeing that the bank has just granted him a convenient overdraft) ; but \ Chisholm knew the circumstances, and was willing to take the risk. Next, as to the contract not having been broken inasmuch as it was to honour cheques j drawn for the purchase of sheep, and the bank • had no proof that the cheques presented we. -i 3 1 for that purpose. I may here lernark in pasd- . ing that this is a strange defence for the bank j to set up, seeing that Chisholm had sworn that [ Thompson never referred to the purchase of ■ sheep ; but Ido not base my decision on th«,ii \ ground, but on the fact that if the bank had ' any dov.bt on the subject it was for them to ma,ke''inquiries. CL'tild it be supposed that Fleming ought to have written en each che-iue "This is for the purchase of sheep?" Cheques which appeared to have been given in the ordinary coiirse of business on the Saturday by a sheepdealer, whose agent on the Monday morning informed the bank that his principal had been drawing cheques for the purcnase <A sheep, were presented to the bank on the Moaday afternoon ; if the bankei had any suspicion that those were not the cheques referred to, his proper course would have been to have made inquiries from tho agent. _ I I come now to the last contention of the defendant. Here I wish to state that Ido not consider it perfectly correct to speak of Thompson as "a person who had no authority to contract." If I pay £1000 to my banker, he comes under a liability to cash my cheques to that amount; in other woids, he and I have contracted that he shall do so. To go a step further, if I ask a friend to lodge £1000 for me at my banker's, I authorise him to make that contract for me. Hence in the present case Thompson was authorised by Fleming to make a certain contract. What lie did was to vary that contract with 'the consent ol the contrac- ' tee, who knew the circumstances. j But a veiy difficult question arises as to whether it was possible for Fleming to ratify ' tliat contract bo varied after it had been broken j by tho bank. The analogy of a policy of marine insurance which may be ratified although the ship has been lost in the meantime (see Williams v. North China Insurance Company, 1 \ C.P.D., 757) is a tempting one; but unfortu- i nately that rule is an exception from the gene- , ral liile— in other words, the general rule is the other way. It has been strongly urged that this case is exactly governed by Bolton v. Lambert, 41 CD., 295, in which an offer to purchase was made by Lambert to the agent of Bolton, who was not authorised to make any contract for sale. The offer was accepted by the agent on behalf of his principal ; Lambert then withdrew his offer, and alter the withdrawal Bolton ratified the acceptance of the offer and claimed specific perloimance; and it wag held that tha ratification by Bolton related back {o tho acceptance by his agent, and therefore the withdrawal by Lambert was inoperative, and Bolton was entitled to specific perfbrma-ttoe. If that case were exactly in point I should hold myself bound by it, in spite of tha hostile critipisaa ii haa received in th« not* to the Brd edi-

f tion of "Fry on Specific Performance." Bit* i I think it is clearly distinguishable. When Lambert attempted to withdraw his offer the i right of the other party was at his option either i to treat the contract as broken and seek fov , damages, or to treat it as still subsisting and claim specific performance. Therefore, at tho I momcitT when the prh)cipal ratified theio was : something to rdify. The ratification was mace ', at a, time nnd under circumptan ces when tho ratifying party could himself have effectually ! done the net which he has ratified (sec Bird v. ! Brown, 4 Ex., 786). But hero, from the nature of the cose, when the cheques were dishononieJ tho contract was ii retrieve bly gone; the cocalled unification was merely an allocation to himself by the principal oi n right of action for davt.ns'es. It ha 3be on argued that in Bolxon v. Lfimheit the coiut might ha\-e awarded damages in lisu of or in addition to specific perfora.mr.ee ; but it has r.ofc been shown th.is if specific peiformance had been impossible tlio ratification would have been held good. If, thciefore, the vnaUsr rested there i should feel obliged to hold thai a nonsuit must 15a entered; but tho plaintiff had urged in lep'iy that the defendant has by his conduct estopped hansel E from i?.ising the objection ihnt Thompson hfd exceeded his powejs. fii the iiici place, it has boon pioved that Thomyeon went to Chi&holm and stated that his instructions were only to pay in a sum of money ; that it would be more convenient to him (or, lather, Ut the Freezing Company) to depoi.it the warrant instead; Chisholm assented to his action, stood by wiiil.'t he prcpaiod the van ant, then accepted the wairpnt; then in tl\3 afternoon, when the cheques had come in had another interview with Thompson, but never led hup to suppose that he did not consider the warrant a sufficient consideration for honouring i 'it* cheques (of course h?.d be said so Thompson would at onto have deposited the ceach. e h instead : it was Chisholm's conduct that put him to a b'-each of duty on the part of Chisholni to r«Jieve that ho was cany ing out the contract as varied by Thompson and himself, so there w;is a breach of duty on the pert of Chisho'in to reveal the truth as regards Thompson, the agent for Fleming, and therefore as regards Fleming himself (see "' Cababc oa Estoppel," p. 85). Ii other wo'ds, Chisholm, by his words and conduct, induced Fleming's agent to bolievo that he would honour the cheques ; Thompson acted on the belief, and sent the warraat; he was prevented by Chisholni'a representation from lodging the money; in fact, Chibholm led Thompson to believe, as a man ol average intelligence, that the lodgment of the money would not bo required. He therefore cannot now take the point as against Thompson's principal that the money was not lodged (see Simon v. Anglo-American Company, 5 Q.B.L 1 ., ISS, 211; " Bigelow on Estoppel," p. 633). I hold, therefore, that the defendant is rot entitled to enter a- nonsuit. Mr Ollivier sr.id that if the new trial points could be dealt with on appeal he did not think he was entitled to »&k his Honor to hear argument on the new trial motion. Mr Sim suggested that the best wsy would bo ioi his friend to consent to judgment foi' plaintiff with stay of execution on the understanding that the defendant went to appeal atthe rext sitting of the Court of Appeal. Mr Ollivier thought it might be more conveniently dealt wi'ih in that manner. His Honor mpde the following minute: — Judgment for plaintiff for X 2000; costs according to scale; £15 15s for each of two extra days; second counsel allowed; £8 8s for intevrogctories (mcilidiag argument); stay of execution pending appeal, the defendant undertaking to appeal at the next sittings of the Couit of Appeal ; disbursements- ar.d witnesses' expeYises to be fixed by the registrar ; motion for judgment costs ; £10 10s; extra counsel, £S 8s; defendant's motion for a new trial to be taken as having been argued and dismissed and to be heard at the same time as the appeal from refusal to nonsuit and treated as one with it, defendant to be at liberty to amend his notice ot motion for a new trial as he thinks fit.