Scottish Court of Session Decisions

On June 15, 1826, Charles J. F. Orr, W.S. lent a sum of £500 to John Fleming, builder in Edinburgh, who granted a bond and disposition in security, in favour of C. J. F. Orr, over houses in Parkside, near Edinburgh, belonging to him. The money, so advanced, belonged to four different parties, one of whom was Elizabeth Hunter, a domestic servant of a Mrs Hall, who was a client of C. J. F. Orr. On July 23, 1826, Orr addressed the following letter to Elizabeth Hunter:—

“Madam,—On the 15th of June, 1826, I received from you the sum of £100 sterling, and have, agreeably to your wish, included it along with other £400 got from other persons in a loan of £500 granted to John Fleming, builder in Edinburgh, for which he has granted a bond and disposition in security over his property in Parkside Street here, in my name, for your and their behoof, of date 15th June, 1826, upon which I have been infeft. I therefore hereby declare that I hold the said security for your behoof to the extent of £100 sterling, and shall regularly pay you the interest as I receive it from him, and the said sum of £100 whenever he repays it, or whenever you may demand payment of it from him, on giving him six months' notice, I shall use the necessary means of obtaining repayment. I am,” &c.

This letter was delivered to, and retained by Elizabeth Hunter.

At the date of this loan, Fleming, who had for a short time previous been a client of C. J. F. Orr, was involved in pecuniary difficulties, which was known to Orr. Several bills of his were lying over unpaid, and he had repeatedly advised with Orr, as to the state of his affairs. For several years after the loan, the interest, at 5 per cent, was paid to Elizabeth Hunter, and the receipts were signed by herself. The body of the receipt was written, sometimes by Mrs Hall, her mistress, and sometimes by a clerk of C. J. F. Orr. In these receipts the interest was described as being paid for £100, “lent out by Mr Orr;” or “lent out for me;” or “lent by Mr Orr for me;” or “interest for the money Mr Orr lent Mr Fleming;” or “interest upon Fleming's bond;” or “interest due by John Fleming to me.” No interest falling due after Martinmas, 1830, was paid.

In July, 1831, Elizabeth Hunter applied to C. J. F. Orr, stating that she wanted “the sum of £ 100 which you requested of me in July 1826, for the purpose of lending to a Mr Fleming, builder, of whom I knew nothing, and as you have secured yourself on his heritable property I beg that you will repay me that sum with interest which has been due these two years and a half past.” Orr replied that the loan could not be recovered until Fleming's property was sold; that it would not be advisable to sell the subjects at that time; but that they would be sold as soon as possible. Elizabeth Hunter wrote a letter in answer stating, “when I gave you the money which was lent Fleming, I had no thought but that you were my security, and that you would be answerable, and in lending it, you would take care of yourself; if you are not betwixt me and any loss, I have misunderstood the matter, and certainly think you have not attended to my interest. I hope, however, you will bring matters as speedily as possible to an end, as I want both principal and interest.” Matters stood over till 1835, when a party who held £200, of the loan of £500, applied to C. J. F. Orr, either to have the subjects sold, or divided by arrangement among those interested. This was notified by Orr to Elizabeth Hunter, and her law-agent returned an answer, stating that the loan of £100 was made personally to C. J. F. Orr; “that she knows nothing of the bond (Fleming's) you allude to;” and that she held C. J. F. Orr liable to her.

In January 1836, Elizabeth Hunter raised an action against C. J. F. Orr, libelling that he was “justly indebted and resting-owing to the pursuer in the sum of £100 sterling, which sum was lent or advanced by the pursuer to the defender, on or previous to the 15th June, 1826, on the representation that he would give or obtain for her 5 per cent interest therefor, and that the said principal sum of £100 should be furthcoming to her within six months after requisition to that effect: That the defender now alleges that he lent the said sum of £100, along with certain other sums belonging to other parties, amounting in all to £500, to John Fleming, builder in Edinburgh, on heritable security, for the behoof of the pursuer and the said other parties: But the pursuer never was any party to any such investment, nor was she consulted thereanent, before it is alleged to have been made, nor did she ever agree to substitute the said John Fleming, or the said heritable security, in lieu of the obligation of the defender to repay her the said sum. Neither does the pursuer know or believe that the said sum has been lent on any heritable security taken in her name, or in the names of any other party or parties for her behoof.”

In his defences C. J. F. Orr explained the circumstances already mentioned, and stated that he had acted merely as a trustee for four individuals, including the pursuer, and had lent the money in one sum, in his own name, to save trouble and expense to all parties; that this had been explained to each of the lenders, by a letter, written at the date of the transaction, and in particular to the pursuer, by the letter already quoted; that, in addition to this, her receipts for the termly interests, were so expressed as to import her knowledge of the loan being made to Fleming, and therefore the action was unfounded, as no loan whatever was made by the pursuer to him.

The pursuer answered that, as the loan was taken in the defender's own individual name, and not as trustee, ex facie of the bond, it lay with him to prove, by clear evidence, that he had merely acted as trustee, and that the pursuer had discharged him of all personal liability to her for the money which she had placed in his hands; and that, especially considering the pursuer's rank in life, and ignorance of business, her receipt of the letter of July 23, 1826, and her signatures to the receipts for interest, were not sufficient for that purpose. The defender was therefore liable as libelled.

In making up a record, the pursuer made averments to the effect that the loan was such as no prudent man would have made in reference to the value of the subjects, and pleaded that the defender was personally liable for the sum lent, on account of the insufficiency of the security; that he was the more clearly exposed to this liability, because he had acted, in relation to the loan, in the double capacity of agent both for the borrower and the lenders; and as these parties had opposite interests, the agent could seldom discharge his duty adequately to both, and must be subjected in liability to that client whose interests he had overlooked or disregarded for the sake of the other. The pursuer contended that this was a ground of action sufficiently comprehended within her summons, as the summons concluded generally for £100 as advanced to, and resting owing by the defender, which general liability covered the ground now stated.

The defender, besides stating that the value of the subjects was such as amply to justify the loan, and that the risk of loss had arisen entirely from the subsequent depreciation of house-property in Edinburgh; and also that the practice of acting as agent for both borrower and lender had long been common among the most respectable agents in Edinburgh; contended that this new ground of liability was not within the summons, and could not be disposed of in this action. The summons libelled a loan to the defender as the ground of action. But if the sum was now claimed, in respect of professional negligence in taking an insufficient security, that implied that the loan was made not to the defender, but to a third party through his agency, and that a loss had arisen for which he was liable, not as debtor in the loan, but as bound to make reparation and pay damages to the pursuer, to the extent of her loss upon the loan to the third party. This was not merely a separate ground of liability; there was even a repugnantia between it, and the ground of liability laid on the summons, and therefore it could not be entertained in this action.

The Lord Ordinary found “that the ground or grounds of action is not, or are not supported by the evidence in process: Sustained the defence, assoilzied the defender, and decerned, and found the defender entitled to expenses.” ^*

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^* “ Note.—There are opposite averments in the Record, and a good deal was said at the debate, as to whether the money in question was at first represented as belonging to Mrs Hall, or to the pursuer, and from whom the offer of the loan proceeded. This is quite immaterial, because the defender does not merely admit now, that he soon came to know that it was the pursuer's money, but he fixed this fact against himself at the time, by recording the receipt of it in his books on the 15th of June, 1826, in her name. The point is, on what understanding did he get it?

“The substance of the pursuer's case, as set forth in the summons, and in the relative parts of the record, is, that the sum was given or advanced by her, or by Mrs Hall for her, in loan;—that this was done on his personal responsibility; that she was not privy to his lending it to Fleming, and never adopted or recognised this application of the sum; and that, therefore, she has her recourse entire against the defender; and that the insufficiency of Fleming, or of his property, is no answer to her claim.

“The Lord Ordinary is of opinion that this statement is not only not supported, but that it is contradicted by the facts. There is no direct evidence of the terms or object of the original deposit; Mrs Hall, who seems to have been the only third party cognizant of it, being dead. But the defender lent the money almost the moment he got it, to Fleming, on heritable security, taking the bond as usual in his own name, because it included the names of various lenders. The pursuer urges that he did this merely to oblige Fleming, who also was his own client, and in great embarrassment. The Lord Ordinary sees no probability in his being anxious to serve one client by mining another, but the motive is of no consequence. The true question is, whether his letting Fleming have the use of the money was sanctioned, no matter whether before or after, by the pursuer. Now the facts are, that on the 23d of July, 1826, the defender wrote a letter to her, explaining his view of the transaction; and in particular, stating that he had included her £100 with other sums in one bond in his own name, to Fleming; that this had been done agreeably to her wishes; that he held the bond for her behoof, and that when she wanted the money back, he would use the necessary means of obtaining it. The pursuer got this letter and was silent. She took the interest as long as Fleming could pay it, and eight of her discharges for it are in process, every one of them implying her knowledge of the way in which her money had been applied. Some of them describe it ‘as lent by Mr Orr for me;’ one states what was received ‘as interest on Fleming's bond;’ another, ‘the half-year's interest due by John Fleming to me,’ and in another, she states herself to have ‘received from Mr John Fleming, by the hands of C. J. F. Orr,’ and in one of the letters, 29th July, 1831, she explicitly says, that she had given the money for the purpose of being lent to a Mr John Fleming, builder. These circumstances make it difficult to resist the conviction that its being lent to Fleming was the arrangement which she herself originally contemplated, and they demonstrate her subsequent adoption of it.

“The pursuer no doubt adds, that the security was insufficient, and that she at least never acquiesced in this, but relied on her agent, who knew of its worthlessness, but disregarded the circumstance, because the borrower was his client. Now, the Lord Ordinary is of opinion that this, which is a separate and peculiar ground of action, is not within the summons. The summons is framed to suit the case of a loan or advance of money, but not a claim for reparation on the ground of professional negligence.

“Being of this opinion, he has not made up any decided judgment as to the adequacy or reputed adequacy of the security; but his impression certainly is, that whatever may have been the condition of Fleming's personal credit, or how much soever the value of his real property may have fallen afterwards, it did not at the time form a security, which it was the duty of an agent to have rejected.”

The pursuer reclaimed.