Scottish Court of Session Decisions

Upon 16th January 1888 Hugh Mollison, late farmer, Burnside, Ruthrieston, Aberdeen, and James Noltie, grocer and spirit merchant, Aberdeen, agreed to enter into a joint-adventure in the sale and purchase of Grand Trunk Railway Company of Canada First Preference Stock. They accordingly on said date instructed Mr Alexander S. Sutherland, stock and share broker, Aberdeen, to sell for them 500 said Grand Trunk Railway Company of Canada First Preference Stock at 54 1 1 1 6 per cent. Mr Sutherland made said sale. No such stock was in the hands of the parties at the time. The stock was continued till, on the 11th day of June 1886, the said quantity of stock was purchased through Mr Sutherland at 63 3 2; per cent., in order to close the adventure. The sum which thus fell due to the broker for commission and differences amounted to £49, 15s. 11., which sum was paid by Mollison, who in October 1887 brought this action against Noltie for £24, 17s. lid., being the half of the above-named sum.

The defender averred, inter alia—“In the beginning of March 1886 the defender called on Mr Sutherland and instructed him to close the 500 Trunks, and to let the pursuer know this. Mr Sutherland agreed to do so. From that time till 9th August 1886, two months after the stock had been purchased, the defender was not aware that said account had been closed. He believes and avers that if said stock was continued it was so continued in the name of the pursuer alone. The defender has no knowledge with whom the pursuer was dealing, and never received any sale notes, nor was he otherwise informed that a sale had been effected.”

The pursuer pleaded—“(1) The defender having agreed to enter into said joint-adventure with the pursuer, and having done so, defender is bound to bear his share of the loss arising therefrom.”

The defender pleaded—“(2) The defender having instructed his broker to close his account at a time when no loss would have been incurred, the defender is in the circumstances not liable to pursuer. (5) The transaction being of the nature of gambling transactions, the action should be dismissed.”

After a proof, which was mainly directed to the question whether the defender had instructed Mr Sutherland to close the account in March 1886, the Sheriff-Substitute ( Brown) upon 30th June 1888 sustained the defender's 5th plea-in-law, and dismissed the action.

On appeal the Sheriff ( Guthrie Smith) on 25th September 1888 issued this interlocutor:—“Recals the interlocutor: Finds it proved that on their joint employment Mr A. S. Sutherland, stockbrocker, sold on their account certain railway stock, with the result that they became indebted to him in the sum of £49, 15s. 11d. for commission and differences: Finds in law that the pursuer having paid this sum to the said A. S. Sutherland, is entitled to recover from the defender his share thereof, being the sum sued for: Therefore repels the defences; decerns in terms of the conclusions of the summons; finds the defender liable in expenses, &c.

“Note.—On the 16th January 1886 the pursuer

Page: 241↓

and defender gave joint instructions to Mr Sutherland to sell on their account 500 Grand Trunks. Neither of them had the stock to deliver; it was in fact a ‘bearing’ transaction belonging to a class of dealings on the Stock Exchange which have frequently been denounced by eminent Judges as immoral and pernicious. There is no doubt also that, as between buyer and seller, a contract that the one shall receive and the other shall pay ‘differences’ is a wagering contract, which by Statute 8 and 9 Vict. c. 109, is null and void. But it is equally well settled that the statute only affects the contract which makes the bet or wager, and that the stockbroker employed by the seller to find for him a purchaser of the stock incurs obligations on his principal's behalf, which by the rules of the Stock Exchange are enforceable against him, and of which he has relief against his employers. In this case Mr Sutherland executed his commission by selling through a London broker, and the stock was continued till the month of June, when it was closed at a loss. In these circumstances if an action had been brought against the parties by Mr Sutherland it could not have been defended, and on general principles it is too clear for argument that if one of the two parties discharges a contract debt in which they are jointly interested, the other is liable in contribution. A more revelant defence to the action is that if the broker had closed the account when he was told to do so there would have been no loss. But this fails in fact. Mr Sutherland affirms that he acted on his instructions to close as soon as he received them; pursuer says the same, and the defender's statement to the contrary is unsupported.”

The defender appealed, and argued — This was a gambling debt, and therefore the pursuer could not recover. In these circumstances the Court would not look at the agreement at all, and one of the wrongdoers could not recover from another any sum which he paid for purpose of gaming— Risk v. Auld and Guild, May 27, 1881, 8 R. 729: O'Connell v. Russell, November 25, 1864, 3 Macph. 89; Calder v. Stevens, July 20, 1871, 9 Macph. 1074; Higginson v. Simpson, January 12, 1877, L.R., 2 C.P.D. 76; M'Kinnell v. Robinson, Easter Term 1838, 3 M. & W. 434; Bell's Prin., secs. 36, 37, 550; Don v. Richardson, June 16, 1858, 20 D. 1138; Ainslie v. Sutton, December 14, 1851, 14 D. 184; Gillies v. M'Lean, October 16, 1885, 13 R. 12; Newton v. Cribbes, February 9, 1884, 11 R. 554. Secondly, the proof showed that the defender was not liable for any loss incurred after March 1886, when he had given orders to the broker to close the account.

The respondent argued—This was not a gambling transaction; the pursuer ordered the broker to sell so much stock. No doubt it was a speculation. The parties expected the stock to fall. But it was no gaming transaction. The parties simply agreed to await the result of an expected fall. Moreover, the stock was sold to a real purchaser. It was a bona fide transaction. There was no element of sponsio ludicra here— Foulds v. Thomson, June 10, 1857, 19 D. 803; Addison on Contracts, 1157. The defender was resting-owing to the pursuer in the amount sued for. The pursuer simply paid the whole loss for the sake of convenience, and that mainly on the defender's part, who by repaying the half of the loss, would only repay a loan. There was no proof that the defender had instructed the broker to close the account in March.