Scottish Court of Session Decisions

John Bain, the pursuer in this action, was a coobligant with Alexander Munro, one of the defenders, and his son, the late Alexander Donald Neill Munro, doctor of medicine, Cupar-Fife, under a cash-credit bond granted by them to the Union Bank on 15th May 1871, for the sum of £400, and interest thereon. After Dr Munro's death on 15th March 1873 the Bank had called upon the pursuer to pay up an overdrawn balance of £437, 5s. 9d., and eventually this action of relief was brought by him against Alexander Munro, the principal debtor, and against Mrs Munro, the widow and executrix qua relict of Dr Munro, concluding against them, conjunctly and severally, for payment to the bank or to the pursuer of the balance due under the bond, The action as laid was directed against Mrs Munro, as the executrix of her husband Dr Munro, and as such bound to implement a letter which Dr Munro had granted to the pursuer guaranteeing to relieve him of risk under the cash-credit.

It was stated that the total free balance of Dr Munro's estate amounted to £33, 2s. 10d.; but the pursuer alleged that Mrs Munro had been lucrata by her husband's death, not only in the £33, 2s. 10d., but also to the extent of £2346 or thereby, consisting of various sums, including a sum of £400, being the price which she obtained by the sale of her deceased husband's practice. Other questions were raised in the action, but it is unnecessary to notice these.

Dr Munro, by a will dated 2d October 1872, had nominated a Mr Nicholson, (who predeceased him) his executor, and it further bore that he wished his wife “to inherit all or any property I possess.” There was this further provision—“She will employ him to sell my practice for her, and she shall have it in her power either to take a sum in payment—say £500 or £600—or to take bonds and security for payment of a third part of the gross drawings of the practice for four years. Mr Nicholson shall guide her, and shall see that she sells the practice. If she cannot obtain the price I have mentioned, she will take what she can get, but it is distinctly my wish that she should sell the practice. Further, I consider it would be advisable for her to sell Weston House, and realise her money for it.”

It appeared from the evidence which was led in the case that, after advertisement, Weston House where Dr Munro lived, was sold to Dr W. Whitelaw, Dr Munro's successor, for £1500, who also bought for £400 the “goodwill” of his practice. For the discharge of these obligations Dr Whitelaw entered into a personal bond, one clause of which was as follows:—“Therefore I hereby bind and oblige myself and my heirs, executors, and successors whomsoever, jointly and severally, without the necessity of discussing them in their order, to pay to the said Mrs Hay Margaret Edie or Munro, and her executors and successors or assignees, the sum of four hundred pounds sterling, by five equal yearly instalments of eighty pounds each.”

The following letter was written by Mr Pagan, Mrs Munro's agent, in answer to an offer made by Dr Whitelaw to purchase the practice:—

“ 8th April 1873.

I have your letter of 7th curt., and I am authorised to accept your offer for Weston House and the goodwill of Dr Munro's practice … The bonus for the goodwill to be eighty pounds per an. for five years, payable 31st March yearly, commencing first payment 31st March 1874….

I think you had better come at once and get introduced and set to work. Mrs Munro can receive you ad interim, and Dr Wood is ready to do his part.

As to a circular from us, you would need supply your qualifications, experience, &c., for our preparing same.

I think you have secured an excellent opening, and if you attain the success I wish for you, you will have nothing to regret in settling among us.”

The pursuer maintained that the £400 having been received for the sale of the practice, must be included in the executry estate, and he therefore

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contended that that sum should be applied in giving him relief under the letter of guarantee above mentioned. The defender, on the other hand, maintained that the £400 was obtained for Mrs Munro's personal recommendation, and could not be included in the husband's executry estate.

After a proof had been led and various procedure the Lord Ordinary ( Curriehill) pronounced an interlocutor finding Mrs Munro bound to relieve the pursuer to the extent of £33, 2s. 10d.: “ Quoad ultra assoilzies the defender, the said Mrs Hay Margaret Edie or Munro, from the whole conclusions of the summons.”

The part of his Lordship's note referring to the £400 was this:—“As regards the £400 which she received from Dr Whitelaw for the sale of the goodwill of her husband's practice, payable to her by five yearly instalments of £80 each, I am of opinion that the claim of the pursuer is entirely unfounded. It is an error to talk of this as the ‘goodwill’ of Dr Munro's practice. There is truly no such thing as ‘goodwill’ in the case of business carried on by a professional man, such as a physician, surgeon, or law-agent, whose success depends entirely upon his own personal skill. It is quite different in the case of a trade or manufacture, where the employer may have the possession of patents or trade secrets, or may by long exercise of his trade or manufacture in some particular locality have drawn together skilled artisans, and attracted the custom of a district to his establishment. In such a case it is not the individual skill of the employer, but the reputation which his establishment has acquired which creates that incorporeal, but frequently valuable, estate known as the ‘goodwill’ of a trade. But there is no such thing in the case of a professional man. His business dies with him, and the man who comes after him in the district must depend for success upon his own exertions. It is quite true that such businesses are occasionally sold; but what is thus sold in the case of a living professional man retiring from business is truly the personal recommendation which the seller gives to his-former clients or patients in favour of his successor, coupled with the predecessor's own retirement from business. But where the physician or law-agent is dead, nothing of the kind can take place. He has been removed by death from all possibility of competing with the new doctor or the new solicitor; and his voice being for ever silenced, he cannot give any recommendation to his clients or patients. But if the family of the deceased professional man offer to recommend a successor to the clients or patients of the deceased on receiving a money equivalent, what is paid for is merely the recommendation of the living members of the family of the deceased, and that is precisely what was done in the present case. Dr Munro's business had greatly fallen off during his fatal illness, which lasted for nearly half-a-year, and without his widow's recommendation it was really of no value whatever to a new doctor. And it is clearly proved that but for Mrs Munro's recommendation Dr Whitelaw, who purchased Weston House and began practice in the district, would have paid nothing for the practice, and would have had to fight his way into business entirely on his own merits. But great sympathy appears to have been felt in the district for the unfortunate circumstances in which Mrs Munro became a widow, and the old patients appear to have been willing to accept her recommendation in favour of a successor, in the knowledge, and indeed with the express intention, that she might, in return for such recommendation, receive from the new doctor a valuable pecuniary equivalent. And this it is which is called by the pursuer the sale of ‘the goodwill’ of Dr Munro's practice. But, as I have said, there is no such thing known to the law—nothing which in any sense of the word can be held to be in bonis of Dr Munro at his death, or to have been taken possession of by his widow as a lucrative succession. The £400 in question was the price which Mrs Munro received, not for anything which belonged to her husband, but solely for the exertions made by herself and her friends in recommending the patients of her late husband to avail themselves of the services of Dr Whitelaw as his successor in the district.”

The pursuer reclaimed, and argued—The price of the practice must be included in Dr Munro's executry, for it was obtained for a thing that he had created, and was sold by his widow as his executrix. The goodwill of a trade was a recognised species of property. It could be assigned. It was carried by the Bankruptcy Act, and was an asset in the hands of an executor. There was no distinction in principle between the sale of the goodwill of a trade and the goodwill of a profession. The latter was sold every day when the parties were alive, and there was no reason why it should not be included in the executry of a professional man deceased if it was worth anything. In the present case Dr Munro dealt with it as property in his will, and the fact was that it brought £400 when sold. The defender said that the value of it was due to the personal recommendation of Mrs Munro, but Mrs Munro's recommendation was worth nothing except as Dr Munro's widow.

Authorities— Worral v. Hand, 1791, 1 Peake's Cases 74; M'Cormick & Co. v. M'Cubbin and Others, July 4, 1822, 1 S. 541 (new ed. 496); England v. Downs, 1842, 12 L. J., Chan. 85; Smith v. Everrett, June 1859, 27 Beav. 446; Mellersh v. Keen, 27 Beav. 236 and 28 Beav. 453; Potter v. Inland Revenue, June 15, 1854, 11 Hurl. and Gordon Exch. Rep. 147; Crutwell v. Tye, 1810, 17 Vesey 335; Spicer v. James, 1830, reported in Collyer on Partnership, 104; Attorney-General v. Brunning, Jan. 31, 1859, 4 Hurl. and Norman, 94; Davies v. Penton, Feb. 6, 1827, 6 Barn. and Cress. 216; Lindley on Partnership, 884; Clark on Partnership, 430; Robson on Bankruptcy; Hanson on Probate Duties, &c. 165; Smith's Mercantile Law, 9th ed. 193.

Argued for respondents—The goodwill of a profession was personal to the professional man, and could not be transmitted, and was worth nothing after his death. The practice in the present case was worth nothing without Mrs Munro's recommendation, which was all that was paid for, and the £400 could not be included in Dr Munro's executry.

Authorities— Farr v. Pearce, February 10, 1818, 3 Maddock's Reps. 74; Austen v. Boyd, May and June 1858, 2 De G. and Jones, 626–35; Spicer v. James, supra.

At advising—