Scottish Court of Session Decisions

In these two cases, which were heard and advised together, the pursuers respectively sued in the first case the Clydesdale Bank alone, and in the second case the Clydesdale Bank and the manager and agent of said bank in Wishaw, for payment of certain sums due and resting-owing upon bills discounted by them as they alleged in consequence of false and fraudulent representations made by Mr Thomson as agent of the bank.

The first case was at the instance of J. A. Salton & Company, bill brokers, London, and James Albert Salton, the only partner of that firm, against the Clydesdale Bank, Limited.

The pursuers averred—“(Cond. 1) The pursuers carry on business as bill brokers at 10 George Yard, Lombard Street, London. In September 1896 they were asked to discount two bills amounting together to £1199, which were drawn respectively by the Self Lock Roofing Tlie Company, and by John Thorl & Company of Gracechurch Street, London, upon and accepted by John Agnew, coalmaster and brick manufacturer, Carluke, Lanarkshire. (Cond. 2) Before discounting the said bills the pursuers instructed their bankers Messrs Henry S. King & Company of Cornhill, London, to make inquiries of the defenders, as being Mr Agnew's bankers, as to the standing of Mr Agnew, and on or about 21st September 1896 they wrote to the defenders' branch at Wishaw, in accordance with directions given by or on behalf of Mr Agnew, and asked them to wire in reply whether Mr Agnew was good for an obligation of £5000, and a telegram was sent by the defenders in reply in the following terms—“Quite safe for sum named.” The pursuers also about said date caused an inquiry as to the standing of Mr Agnew to be made by their bankers, the Manchester and Liverpool District Banking Company, of Cornhill, London, of the defenders. They asked the defenders at their Wishaw branch, where Mr Agnew's account was kept, whether Mr Agnew was good for an obligation of £4000 to £5000; and the defender's agent at Wishaw, Mr William B. Thomson, replied on behalf of the defenders, that he considered Mr Agnew good for that amount. The answers received were communicated to the pursuers, and on the faith of them they discounted the said two bills, which fell due in December following and were met at maturity, but the pursuers aver that the money to retire the said bills was raised by fresh accommodation bills, and was so raised fraudulently. Moreover, the proceeds of the said bills or portions thereof were paid to the defenders into the account of the said John Agnew.”

The letter from Messrs Henry S. King & Company was in the following terms;—

“Private. 65 Cornhill,

“London, Sept. 21st, 1896.

The Manager,

The Clydesdale Bank, Wishaw, Lanark.

Dear Sir,—We request the favor of your confidential opinion as to the standing and respectability of Mr John Agnew, manufacturer, and shall be obliged by your stating whether you consider him trustworthy for £5000.—Yours faithfully,

“ Henry s. King & CO.

P.S.—As this information is urgently needed, kindly reply by telegram, for which we enclose stamped form.

H. S. K. & Co.”

The letter from the Manchester and Liverpool District Banking Company, was as follows:—

“(Form No. 32) The Manchester and

Liverpool District Banking “ Confidential. Company, Limited,

75 Cornhill,

London, 23rd September 1896.

Clydesdale Bank, Limited,

Wishaw, Lanark.

“Dear Sirs,—I shall be much obliged by the favour of your opinion, in confidence, of the means and standing of Mr John Agnew, manufacturer, Wishaw—£4/5000. Thanking you in anticipation,—I am, dear Sirs, yours faithfully,

R. Meikle, Sub-Manager.”

The answer to this letter was as follows:—

Page: 121↓

The Clydesdale Bank, Limited, Wishaw, 24th September 1896.

The Manager,

The Manchester and Liverpool District Banking Company, Limited, 75 Cornhill, London.

Dear Sir,—In answer to your inquiry of 23rd inst. I have to report that Mr Agnew has a large interest in a limited company known as The Scottish Terra Cotta and Metallic Brick Company, Limited. He has also an interest in a colliery, and he is the owner of an independent brickwork near Carluke, besides being the owner of considerable heritable property. I would consider him quite good for your figures.—Yours faithfully, W.B. Thomson.

The pursuers further averred—“ (Cond. 3) In December 1896 and January 1897 the pursuers were asked to discount two bills, each drawn by the said John Thorl Company upon and accepted by the said John Agnew, which together amounted to £1325, 3s. 6d., the one being for £889, 16s. 6d., and falling due on 27th April 1897, and the other for £435, 7s., and falling due on 11th May 1897. In reliance upon the very satisfactory reports received so recently from the defenders in September 1896 through the foresaid two firms of bankers, coupled with the fact that the bills for £1199 had been met, the pursuers discounted the said two bills, amounting together to £1325, 3s. 6d., and the proceeds thereof, or some portions thereof, were paid to the defenders into the account of the said John Agnew. It is in accordance with custom and practice that such satisfactory reports received through bankers should be trusted to and acted upon for a period of several months without requiring any fresh report. (Cond. 4) The said two bills were dishonoured at maturity, and both the drawers and the acceptor have since become bankrupt. Mr Agnew's estates were sequestrated in 1897.”

It was averred that after allowing for securities held and dividends paid the sum sued for still remained due and restingowing.

The pursuers also averred—“ (Cond. 5) The said John Agnew was a customer of the defenders at their Wishaw branch at the dates when the said inquiries were made on behalf of the pursuers. He kept his bank account there. The agent of the Bank at the said branch is Mr William Brown Thomson, who also carries on business as a solicitor. He was then and had for a considerable period acted as solicitor for Mr Agnew in all his business and private matters, and he was well acquainted with the position of Mr Agnew's affairs.” Then followed particulars as to the financial position of Mr Agnew, who was said to have been then deeply involved, to the knowledge of Thomson at the time, in accommodation bill and other transactions with money lenders, and not to have been good to meet an obligation of £4000. “(Cond. 6) At and prior and subsequent to September 1896 Mr Thomson was frequently pressing Mr Agnew to make payments to the said Bank… . Mr Thomson was then pressing Mr Agnew for payments, and threatening that unless payments were made to him he would cease to report favourably as to Mr Agnew's credit, and discount no more of his bills. The report made by him on behalf of the said Bank in answer to the inquiry made on behalf of the pursuers was a wilful misrepresentation and was not given honestly. It was fraudulent, and was given by the Bank's said agent in order to keep up the credit of their said customer, and to prevent him from becoming bankrupt, and thus causing serious loss to the defenders. Mr Agnew had overdrawn his bank account at the time, and he had also obtained large advances from the defenders upon bills which he had discounted. He had also advances from the Bank in other forms. The said fraudulent misrepresentation was given by the Bank's agent with the view of benefiting the Bank, and did benefit the Bank. But for that misrepresentation the said bills would not have been discounted by the pursuers, and Mr Agnew would not have got the proceeds nor any part thereof. In point of fact the said bills were accommodation bills, although that was not known to the pursuers at the time, and Mr Agnew obtained the proceeds or a large part thereof, and paid the same into his account with the defenders. (Cond. 7) … information got by bankers from other banks in the way above stated is invariably given to their customers who had asked the inquiries to he made, and the defenders knew of this practice.”

The defenders averred—“(Ans. 7) Denied. The defenders' bank follow the custom of other bankers and sometimes furnish information relative to the credit of persons who keep their accounts with the defenders, but only in confidence to other banks.”

The pursuer pleaded—“The pursuers having suffered loss and damage to the extent of the sum sued for through the false and fraudulent representations of the defenders or of those for whom they are responsible are entitled to decree as concluded for, with expenses.”

The defenders pleaded—“(l)The averments of the pursuers are irrelevant and insufficient to support the conclusions of the action. (4) No representations with regard to the standing of John Agnew having been made by or on behalf of the defenders to or on behalf of the pursuers in December 1896 or January 1897 the defenders should be assoilzied. (5) The pursuers not having relied, or alternatively not having been entitled to rely, upon the alleged representations made in September 1896 in accepting the two bills falling due on 27th April and 11th May 1897 respectively, the defenders should be assoilzied. (6) The alleged representations to the pursuers not having been made by or on behalf of the defenders, and no benelit having been derived by them therefrom the defenders are entitled to absolvitor. (7) Separatim—The alleged representations not having been made in writing, and subscribed by the persons

Page: 122↓

making the same, are, by section 6 of the Act 19 and 20 Vict. cap. (60, of no effect.”

The second case was at the instance of Oliver Hockey, provision merchant in London, against the Clydesdale Bank, Limited, and William B.Thomson, solicitor, Wishaw, manager and agent of said bank in Wishaw.

The pursuer averred—“(Cond. 1) In the month of November 1896 the pursuer was asked to discount two bills for £1000 each drawn by John Thorl & Company, London, upon and accepted by John Agnew, coal-master and brick manufacturer, Carluke. (Cond. 2) Before discounting the bills, the pursuer's solicitor, Mr R. Chapman, wrote to the Clydesbank Bank, Wishaw, with whom Agnew kept his banking account, a letter in the following terms:—

‘R. Chapman, 92 London Wall, E.C.

Solicitor. London, Nov. 30, 1896.

Dear Sir,—I am acting for Mr Oliver Hockey, a merchant of 16 Fish Street Hill, London, with reference to some mortgage transactions with Mr Julius Burckhardt, of 9 Gracechurch Street, London. Mr John Agnew, of the Brick, Tile, Terra Cotta, &c., Company, of Carluke, Lanark, has given, and is to give, his acceptances to about £2000. Mr Agnew is a stranger to myself, and my client desires to know if you consider him in a substantial position and able to meet a sum of £2000 in about six months' time if my client entertains it. I am not personally acquainted with Mr Agnew, and am making these inquiries on behalf of my client Mr Oliver Hockey, and only for the purpose of satisfying him as to the position of the gentleman in question.—Yours faithfully, R. Chapman.

Manager. Clydesdale Bank, Limited, Wishaw, Lanark.’

(Cond. 3) In reply to this letter the defender Thomson, Wishaw agent for the Bank, and on its behalf, wrote to Mr Chapman the following letter:— Private.—William B. Thomson, Solicitor.

R. Chapman, Esq., Solicitor, 29 London Wall, London, E.C.

The Clydesdale Bank, Limited,

Wishaw, 1st December 1896.

‘Dear Sir,—I am in receipt of your letter of 30th inst. Mr Agnew, the party inquired about by you, I should think is perfectly good for £2000, He is largely interested in a brickwork carried on by a limited company, and has a large brickwork and collieries belonging to himself. He would seem to me to be perfectly good for his engagements.—Yours truly,‘ WM. B. Thomson.’

(Cond. 4) About the same date the pursuer also caused inquiry to be made as to Agnew's financial position through the Union Bank in London. The Union Bank communicated with the Clydesdale Bank in regard thereto. A certified copy of the letter, bearing date 4th December 1896, sent by the Union Bank of London, Limited, and which is addressed to the Clydesdale Bank, Wishaw, is herewith produced, along with the reply thereto, bearing date 5th December 1896, sent by the defender Thomson on behalf of the defenders the Clydesdale Bank. It was within his powers to write the said letter, and it is customary for the agent to answer such communications as that of the Union Bank on behalf of the Bank by which he is employed, where the party inquired about keeps his banking account. The said letters are herein held repeated, brevitatis causa.” These letters were as follows:—

“The Union Bank of London, Limited, 2 Princes St., Mansion-House, London, E.C., December 4th, 1896. “Clydesdale Bank, Wishaw, Lanark.

“Gentlemen,—I shall feel much obliged if you will favour me with your opinion as to the respectability and responsibility of Mr John Agnew, Brick Tile Terra Cotta Company, Carluke, for £2000. Thanking you in anticipation, I am, Gentlemen, your obedient servant, W. Fenn,

pro Manager.”

“The Clydesdale Bank, Limited, Wishaw, 5th December 1896.

“ The Agent, Union Bank of London, Ltd.,

2 Princes Street.

“Dear Sir,—In reply to your favour of 4th inst., J. A. is very respectable, and I am of opinion that he is quite good for your figures.—Yours truly, W. M. B. Thomson.” (Cond. 4, continued)—“The statements contained in said reply were false, and were known to the defender Thomson to be so, all as condescended on in condescendence 9 hereof; and the defender Thomson knew that the terms of this letter would be communicated to the pursuer. At the time when the said statements made in the said letter of 5th December 1896, and also the letter of 1st December 1896, mentioned in condescendence 3 hereof, were made, the Clydesdale Bank was advancing large sums of money to the said John Agnew, and was generally financing him, and it was in the interest of the said Bank to keep his credit good to enable him to get his bills discounted, and to assist him in getting advances from third parties. The maintenance of the said John Agnew's credit was desirable in the interests of the Bank at the time, and the Bank did in point of fact derive benefit from the pursuer having been induced to discount said bills. The terms of this letter were communicated to the pursuer, and the Clydesdale Bank knew that this would be done.”

The pursuer also averred that relying on these representations he had discounted the bills, that but for them he would not have done so, and that all the parties to the bills were now bankrupt and unable to pay the sums due under them.

The pursuer further averred—“(Cond 8) It is the custom of the said Bank to furnish information as to the credit of individuals with whom they are doing business. The said Bank frequently answers similar inquiries from those advancing money or giving credit to their customers, and it is customary to supply such information. It was within the power and scope of the said William B. Thomson's duty, as agent of said Bank, to supply the said information and to sign the said letter. (Cond. 9) The statements contained in said letter were in

Page: 123↓

various particulars false, and were made by the defender Thomson on behalf of the other defenders fraudulently, he well knowing the same to be untrue, or at any rate not having any reason to suppose them to be true.”— [Then followed a detailed statement of various facts as to Agnew's financial position said to have been known to Thomson.]

The defenders (Ans. 4) admitted that the defenders' bank sometimes furnished information in confidence to other banks as to the credit of customers.

The pursuer pleaded—“ The pursuer having suffered loss and damage through the false and fraudulent representations of the defenders as condescended on, decree should be pronounced as craved with expenses.”

The defenders the Clydesdale Bank, Limited, pleaded—“(1) The averments of the pursuer are irrelevant, and insufficient to support the conclusions of the action. (3) The alleged misrepresentations not having been made by or on behalf of the Clydesdale Bank, and the bank not having derived any benefit therefrom, these defenders are entitled to absolvitor.”

Separate defences were lodged by the defender Thomson, and he was represented in the Outer House by separate counsel and agents.

The Mercantile Law Amendment (Scotland) Act 1856 (19 and 20 Vict. c. 60), sec. 6, enacts as follows:—“From and after the passing of this Act all guarantees, securities, or cautionary obligations made or granted by any person for any other person, and all representations and assurances as to the character, conduct, credit, ability, trade, or dealings of any person made or granted to the effect or for the purpose of enabling such person to obtain credit, money, goods, or postponement of payment of debt, or of any other obligation demandable from him, shall be in writing, and shall be subscribed by the person undertaking such guarantee, security, or cautionary obligation, or making such representations and assurances, or by some person duly authorised by him or them, otherwise the same shall have no effect.”

On 13th July the Lord Ordinary ( Kyllachy), having heard parties in the procedure roll, pronounced the following interlocutor in the action at the instance of Oliver Hockey—“Sustains the first-plea-in-law for the defenders the Clydesdale Bank, Limited, and assoilzies them from the conclusions of the action as laid, and decerns: Finds said defenders entitled to expenses so far as not already found due: Allows an account thereof to be lodged, and remits the same to the Auditor to tax and to report: Quoad ultra, and with respect to the defender Thomson, before answer allows the pursuer and said defender a proof of their respective averments, and the pursuer a conjunct probation,” Ac.

Opinion.—“ In this case I have considered the argument on the closed record, and I have come to the conclusion that the pursuer has not stated a relevant case against the Bank.

In the first place I am of opinion that the letters complained of were not letters written by the defender Thomson as representing the bank, but were individual communications expressing his personal opinion. I am unable to distinguish the case from that of Swift v. Jewsbury L.R., 9 Q.B. 301, referred to at the discussion, and although not bound by that decision I adopt its reasoning. I do not overlook that the second letter, viz., that of the Union Bank, dated 4th December 1896, was addressed to the ‘Clydesdale Bank,Wishaw’ That, I consider, was simply a mode of addressing the agent or manager of the bank's Wishaw branch. It is certain that the agent so understood, and answered the letter on that footing.

In the next place, and separately, I am further disposed to think that the pursuer has made no relevant averment of benefit taken by the bank from the agent's alleged fraud. The benefit alleged is certainly not direct, nor is there anything stated as to its extent or amount. Now, I hold it to be settled by the case of Addie v. Western Bank (overruling, so far as inconsistent, the previous case of Barwick v. London Joint Stock Bank) that a bank or other principal is not liable for the fraud of an agent except to the extent of being bound to restore any benefit obtained by fraud. It may be that as matter of pleading it is competent to impute to the principal the fraud of the agent, and so to recover from the principal such benefit as he may have obtained under what is called in England an action for deceit. That proposition receives countenance from the judgment in the Privy Council in the case at Mackay v. Commercial Bank of New Brunswick. But I am not aware of any authority, either English or Scottish, in which the doctrine laid down by the House of Lords, and particularly by Lord Cranworth in the case of Addie, has yet been impeached. The observations by Lord Selborne in the case of Houldsworth v. City of Glasgow Bank, 7 (HL) 653, appear to make this point clear.

There being, therefore, in my opinion no relevant statement of benefit held by the bank as the result of the agent's alleged fraud, I should not be able to sustain the relevancy of the pursuer's case, even, if contrary to my opinion, it should be held that the agent's fraud was committed by him qua agent and on behalf of the bank.

As to the defender Thomson, I am of opinion that the pursuer has stated a relevant case. There is not, I think, any difficulty under the terms of the Mercantile Law Amendment Act. The written and signed representations were not, it is true, addressed to the pursuer, but in the first letter the inquiry was made expressly on his behalf; and with respect to the second letter, he avers, and, I must assume, sees his way to prove that the defender knew that its terms would be communicated to him (the pursuer). In other words, he avers, and offers to prove, that the Union Bank, in making the inquiry, were acting as his agent, and that appears to be enough. As to the criticism which the defender makes upon the averments otherwise, it is

Page: 124↓

true that the pursuer is very general in his statements as to what he did on the faith of the letters, or at all events on the faith of the second letter, but I must say that the statements in question, although somewhat general, are relevant, and on the whole I consider that as against the defender Thomson there must be a proof before answer.”

Of even date the Lord Ordinary pronounced the following interlocutor in the action at the instance of J. A. Sal ton & Company:—“Sustains the first plea-in-law for the defenders, and assoilzies them from the conclusions of the action as laid, and decerns,” &c.

Opinion.—“This case is rested on communications between the pursuers or the pursuers' agent and Mr Thomson, the Bank's agent at Wishaw—communications of a similar character to those in the other action (Hockey v. The Clydesdale Bank) But the case being laid exclusively against the Bank, it follows, I think, from my previous judgment, that the case as against the Bank is here also irrelevant, and I shall also sustain the plea of irrelevancy and assoilzie the defenders from the action as laid.”

The pursuers in both actions reclaimed.

The defender Thomson did not reclaim, and he was not represented by counsel in the Inner House.

Argued for the pursuers and reclaimers J. A. Salton & Company—The Bank was liable for the false and fraudulent representations of its agent made in the course of his employment, and for the Bank's benefit, that is, with a view to its benefit, whether the Bank actually benefited or not— Barwick v. English Joint-Stock Bank, 1867, L.R., 2 Ex. 259 (Exchequer Chamber), per Willes, J., delivering the judgment of the Court, at p. 265. This case was not overruled by Western Bank of Scotland v. Addic, May 20, 1867, 5 Macph. (H.L.) 80. See Houldsworth v. City of Glasgow Bank, March 12, 1880, 7 R. (H.L.) 53; Mackay v. Commercial Bank of New Brunswick, 1874, L.R., 5 P.C. 394; Swift v. Jewsbury, 1874, L.R., 9 Q.B. 301 (Exchequer Chamber); Weir v. Bell, 1878, 3 Ex. D. 238; and Swire v. Francis, 1877, 3 App Cas 106, in all of which cases Barwick, cit., was recognised as an authority. See also Story on Agency (9th ed.), sec. 452. The case of Addie, cit., proceeded on the ground that the pursuer could not get rescission of the contract, as restitutio in integrum was impossible, that he could not get damages against a company of which he had become and remained a member, and that he could not get damages against an incorporated company for having been induced to take shares in the company when it was unincorporated. The dicta of Lord Chelmsford, L.C., at p. 85, and of Lord Cran worth at p. 90, were obiter, and had been commented on in Mackay, cit. and in Houldsworth, cit., per Lord Selborne at p. 57. Moreover, in Addie, cit., the representation made by the agent was with regard to the position of the company, and with a view to inducing the pursuer to purchase shares. That was clearly something not within the scope of the agent's duties. The ground upon which the agent had been held liable in Barwick, cit., by Willes, J., whose opinion was referred to in all the other cases as authoritative, was simply the well -known principle upon which the master is held liable for the acts of his servant when acting within the scope of his employment. In that view the question whether the Bank had actually taken benefit was quite irrelevant. In none of the ordinary cases in which a master was held liable for the acts of his servant did the master take any benefit. The fraud was in law imputed to the master or principal. It would be no answer to an accusa-sation of fraud against the principal himself that he had taken no benefit by it— Pasley v. Freeman, 1789, 3 T.R. 51, and 1 R.R. 634; Foster v. Charles, 1830, 7 Bing. 105; Corbett v. Brown, 1831, 8 Bing. 33. If the fraud was committed by the agent in the course of his employment, it was in law the fraud of the principal—See Barwick, cit. In Swire, cit., the principal took no benefit, as the agent appropriated the money to his own uses. There was no case in which the pursuer's claim had been rejected expressly upon the ground that the principal had taken no actual benefit from the agent's fraud. (2) What the agent did here was done by him as agent, and as part of the business of the Bank. It was so averred, and whether it was so or not could only be determined by proof. The fact that he signed with his own name without the addition of the word agent was not conclusive. (3) It was within the scope of the agent's authority to give such representations as those founded on here, and he was employed, inter alia, to give such information. It was so averreu. It was a verred, and indeed admitted, that it was the custom for banks to do so, not only at their head office but at branches. If it was part of the Bank's business to answer such inquiries—and it was averred that it was—then such inquiries could only be answered by individual agents, for they alone had the necessary information. A company like the Clydesdale Bank could only act at all through its agents, and the acts of its agents, acting within the scope of their employment, were the acts of the Bank. The application for information here was to the Bank, not to the agent as an individual, and it was to be presumed that the inquiry was answered by the person to whom it was made. At least it could not be assumed without proof that it was not so. (4) The case of Swift v. Jewsbury, cit., upon which the Lord Ordinary had proceeded, was decided after inquiry. That decision was not binding upon this Court as a decision. The weight of judicial authority upon each side was about equal, the Court of Exchequer Chamber (Lord Coleridge, C.-J., Bram well, Piggott and Cleasby, BB., and Grove and Denman, JJ.) having reversed the judgment of the Court of Queen's Bench (Cockburn, C.J., and Quain, J.) reported under the name of Swift v. Winter-botham, 1873, L.R., 8 Q.B. 244. Moreover, what was there decided as matter of law

Page: 125↓

was that the signature of the agent was not sufficient to bind the bank, which was apparently the case in terms of the English Act there founded on, but that was not so in Scotland under the Mercantile Law Amendment Act, sec. 6. As to anything eise which was decided, it was simply a judgment on the particular facts of that case which could not be authoritative in any other case. Further, that case was expressly distinguished by Lord Coleridge, C.J., at p. 312, from a case in which the agent, “in conducting the business of a joint-stock company, does something “by which they profit or by which they may profit.” Here it was averred that the agent made the representation in the course of conducting the business of the Bank, and for its profit, and further, with the result that it did in fact profit. It was to be observed that in the case of Jewsbury the bank could take no benefit, actual or possible, from the action of the agent. British Mutual Banking Company v. Charnwood Forest Railway Company, (1887), 18 QBD 714, which was relied upon by the defenders, was decided upon the ground that the agent was acting for his own private ends, and not in the course of conducting the business of the company. Weir v. Bell, Cit., also cited by the defenders, turned upon questions as to the scope of the agent's authority and as to whether the relation of principal .and agent existed between the defendant and the person guilty of the fraud. (5) If it were necessary to aver and prove actual benefit to the Bank resulting from the agent's fraud, then benefit to the Bank was here relevantly averred. In Clydesdale Bank, Limited v. Paton, May 12, 1896, 23 R. (H.L) 22, the question was not whether it was relevantly averred that benefit had accrued to the bank, but whether the averment relevantly set forth that a promise on the part of the agent to continue giving credit had been broken. The question whether the account had been closed immediately after the sum obtained in consequence of the action of the agent had been paid in to the coffers of the bank, though quite relevant in a case such as Paton, cit., was quite irrelevant here, because whatever happened afterwards, the benefit accrued once for all when the money was paid in, and the Bank's ultimate loss was so far reduced. (6) No question such as arose and was decided in Paton, cit., with regard to the Mercantile Law Amendment Act 1856 (19 and 20 Vict. cap. 60), section 6, could arise here, because the representation founded upon was in writing. The case of Paton was really decided upon the Mercantile Law Amendment Act. (7) It was no doubt the case that the pursuer's name was not mentioned in the letters of inquiry, but it was averred that the information was obtained at the request of the pursuers, and for the purpose of being communicated to them, and also that such information as the agent gave was invariably communicated to customers, and that the Bank knew of this practice. In such circumstances the customer was entitled to sue upon the representation made to the bankers whom he had requested to make inquiries as to a person's solvency— Swift v. Winterbotham, cit. The judgment of the Court of Queen's Bench upon this point was not overruled in the Exchequer Chamber. It was also no doubt the case that the first bills were paid, and that it was only the subsequent bills which were not met, but it was averred that such representations as were given here were in practice understood to be reliable for several months after their date.

Argued for the reclaimers in the action at the instance of Hockey—They adopted the argument in the action at the instance of J. A. Salton &Company, and in addition pointed out (1) that as regards the letter sent in reply to the inquiries of Mr Chapman no objection could be taken on the ground that the representation was not given to the pursuer, because the letter in answer to which this representation was given stated that the information was requested on behalf of the pursuer, who was mentioned by name; and (2) that in this case the credit was given immediately after the representation was made.

Argued for the respondents—(1) As regards the replies to the letters in the action at the instance of J. A. Salton & Company, and the reply to the letter from the Union Bank of London, Limited, in the action at the instance of Hockey, the Bank was not responsible to either of the pursuers, in respect that no representation was given to them. The only person who could sue upon such a representation was the person to whom it was given. The person to whom such a representation was given was an important consideration, for reliance was necessarily placed upon his prudence and discretion, and consequently the granter might grant a representation to one person and not to another. Bell's Commentaries (7th ed) 392 (5th ed 374— C. & J. Philip v. Melville, February 21, 1809, F.C. Here J. A. Salton & Company had shown great indiscretion and imprudence if they relied on the representation as an assurance of solvency seven or eight months after its date. (2) This last-mentioned circumstance was by itself conclusive against J. & A. Salton. Whatever might be the effect of this representation, it was not a continuing guarantee, and could not involve liability for bills accepted three and four months, and payable seven and eight months after its date. The averment of custom put forward to meet this defence was irrelevant. There could be no such custom, for if such an understanding existed at all, it was only a prevalent mistake as to the law, which was entitled to no consideration from the Court— Anderson v. M'Call, June 1, 1866, 4 Macph. 765, jtcr L. J.-C Inglis at page 769. It was in the nature of things impossible to give a representation as to the future. A man's future solvency might be guaranteed, but it could not be represented. Moreover, it was not averred that this custom was known to the defenders. (3) Apart from these considerations which did not apply to the first letter in the action at the instance of Hockey, the

Page: 126↓

representations founded upon could not support an action against the Bank, in respect that they were not subscribed by the Bank or by any “person duly authorised” by them, and consequently they had no effect as against the Bank—Mercantile Law Amendment Act (Scotland) 1856 (19) and 20 Vict. cap. 60), section 6. It was plain that the letters were not subscribed by the Bank. “ Duly authorised ” meant authorised ad hoc. No such authority to grant these letters was averred. It was never held to be within the scope of an agent's implied authority to give such representations. What was proposed here was to prove a contractual relation between the pursuers and the bank by parole proof to the effect that although the agentsigned with his own name only, without the addition of the word “agent,” and said “should think,” “he would seem to me,” “am of opinion,” “ have to report,” “ would consider,” that nevertheless he meant “We the bank think,” and so forth. This was an attempt to contradict the plain meaning of the writings founded upon, by parole evidence, or at least to instruct the true nature of the contract by such evidence. Both of these courses were incompetent under the statute: Bell's Commentaries (7th ed) 105; Swift v. Jewsbury, cit., per Bramwell, B., at page 316. (4) Apart from this, however, the averments of authorised agency were irrelevant. It was not alleged that banks authorised their agents to give such representations on behalf of and in name of the bank, or that this was part of the business of banking. No such averments could possibly have been made. None of the agents at the head office or elsewhere, nor even the directors themselves, could give such representations as part of the business of the Bank, and so as to make it liable. What was truly the fact, and all that was averred here, was that the banks allowed their agents to give such information for the convenience of trade, but it was the agents opinion that was sought and given, not the Banks. The knowdedge of which the inquirer desired to have the benefit was the knowdedge of the agent, not of the bank. For such expressions of opinion given by their agents the banks were not liable— Swift v. Jewsbury, cit. (second ground of judgment). Everything which was averred by the pursuers here as to the agents act being within the scope of his employment and so forth, was found proved by the jury in that case. Yet that was found by the Court to be insufficient to infer liability against the bank. Moreover, this case was a fortiori of Swift v. Jewsbury, because (a) there the agent signed as agent, and (b) here the bank agent was also Agnew's private agent, and much of the knowdedge which he was said to possess was acquired in that capacity. The Bank was not liable upon documents signed by agents without the addition of the word agent to their signature— Bank of Scotland v. Watson, March 15, 1813, 1 Dow 40. (5) The Bank was not liable for the fraud of its agent except to the extent to which it had benefited by such fraud. There were no doubt conflicting dicta upon this subject, but it had never been decided that an innocent principal was liable for the fraud of his agent, when he had taken no benefit thereby. The opinions of Lord Chelmsford, L.C.,and Lord Cranworth, in Addie v. Western' Bank, cit., were not mere obiter dicta. It appeared from the report in L.R. 1 H.L., Sc. 145, at page 151, that the Lords took time to consider the case with a view to the laying down of some general rules. The statements of their Lordships therefore, though perhaps not necessary for the decision of the case, were not intended to be mere general observations, but as general rules for the decision of future cases of this kind. These general rules had never been discredited. They were approved in Houldsworth v. City of Glasgow Bank, cit., per Lord Selhorne at p. 58; and in Weir v. Bell, cit., they formed the ground upon which Cock-lnirn, C.J., and Brett, L.J., decided the case. In Weir v. Bell, Bramwell, LJ., at p. 244, while recognising the authority of Barwick v. English Joint-Stock Bank, criticised the grounds upon which Willes, J., based his opinion. In the latter case the principal de facto took the whole benefit derived from the agent's fraud. So also in Mackay v. Commercial Bank of New Brunswick, cit., the general question was expressly reserved, and the case was decided upon the ground that the plaintiffs had suffered damage, and the defendants had commensurately profited by the fraud of the agent acting within the scope of his authority. See p. 416 of report. In Swire v. Francis, cit, the principal benefited by the fraud of the agent, because the sum which was originally stolen by the agent from the principal was replaced in the principal coffers by the sum obtained by fraud from the plaintiff, and the principal was thus saved the loss which he would otherwise have sustained. See also British Mutual Banking Company, Limited v. Charnwood Forest Railway Company, cit. The expression “in the course of the service and for the master's benefit” was derived by Willes, J., in Barwick, cit., from Huzzsey v.Field, 1835, 2 C., M. & R. 432, at p. 440, per Lord Abinger, C.B. (who read an opinion prepared by Lord Wensleydale-See Limpus v. London General Omnibus Company, Limited, 1862, 32 L.J, (Ex.) 34, per Willes L, at p. 40, 1 H. & C. 526). In Huzzey the master undoubtedly took the benefit of the wrong if any wrong was committed. The result of the decisions, although there were dicta to the contrary, was that fraud, which was a wilful act, could not be imputed to a master or principal like negligence. The liability of the master or principal arose not from imputed wrongdoing, but from the rule that no one is entitled to benefit by his agent's fraud. There was no case in which it had been held that the principal was liable in damages generally for his agent's fraud. In every case in which the principal had been found liable he had actually taken benefit by the fraud complained of. The liability was only as for innocent misrepresentation. See Redgrave v. Third,

Page: 127↓

1881, 20 Ch. D. 1, per Jessel, M.R. at p. 12. (6)There were here no relevant averments of benefit to the Bank resulting from the representations founded upon. It was not enough to say that money was paid into the bank in consequence of the representation, unless it was also averred that the account was immediately thereafter closed, and the amount paid in retained by the bank— Clydesdale Bank, Limited v. Paton, cit.

At advising—

In the action at the instance of J. A. Salton & Company—