Scottish Court of Session Decisions

This was an action at the instance of john Risk, residing in Glasgow, against Messrs Auld & Guild, accountants and stock-brokers there. The pursuer alleged that he had sustained loss and damage to the amount of £416, through the defenders having while employed by him as his brokers sold between settling-days on the Stock Exchange, and contrary to instructions from him, certain stocks which were then rising in the market, and which would if judiciously realised have brought him the sum sued for in addition to the sum of profit actually obtained. There had been certain dealings in stocks between the parties previous to the transaction in question in this case, which began with instructions given by the pursuer on 16th June for the purchase of 100 shares in the Steel Company of Scotland, 50 to taken up and paid for, and the remaining 50 to be carried over. The pursuer alleges on record that this order was for the joint-benefit of himself and a Mr Craig, and that that was known to the defenders. On 22d June the pursuer wrote to the defenders this letter:—“Gent.,—Sometime ago I gave orders for a bond of £3500 to be looked out for me. Yesterday I got notice that I could get £4000, a first bond on good property, but this will take away the cash I intended for the 50 Steel shares. Would it inconvenience you or upset anything already done to put all the 100 shares on the spec. list, and I could lodge with you say £50 against loss until closed. If any expense beyond the ls. per share on the 50, charge it.—Yours truly, John Risk.” The defenders agreed to this request, and did not require the deposit of £50 offered. Thereafter the defenders on the pursuer's orders made numerous purchases and sales of stock, until about 15th July the purchases and sales represented a sum of £6500. At that date they wrote to him as follows:—“Dear Sir,—In consequence of information we have to-day received, we must ask you to give us a reference as to your position and means, else we must close your account. The information may not be correct, and a reference to your solicitor who offered you a bond for £4000 will doubtless satisfy us.” At that period the stocks were being carried over to the next settling-day, 26th July. On 16th July the pursuer wrote this reply:—“Gent.,—I have just got your note, and am rather surprised at it. I rather think you have got bad information, but where a doubt has got hold, instead of giving references or making explanations, as all this has a tendency to unamooth business between us a little, it will perhaps be better to close, at least for a time, until you may get better information. However, I should not like you to close all at once, as I think this would be imprudent, but we will try to finish up with this account. I expected you would have sold my Huntingtons yesterday; and if they and the Steels are good to-day, close both. Caledonians & Atlantios I think would be better to go on with until near the close of the account. I may say that, except lodging a little money as what I offered you, I never was asked for more before, and had this been proposed at first by you I would have taken it kindlier, as I consider this would not have been out of place, nor do I consider on the whole you are far wrong yet, altho’ quite misinformed.—Yours truly, Jon Risk.” On the same day the defenders sold the stocks and closed the account. Thereafter they rendered to the pursuer a statement of account, bringing out a balance in his favour of £52, 15s. 4d. This the pursuer declined to accept, and raised the present action. He averred that the purchase of the Steel Company's shares was partly for himself and partly for Mr Craig, and that Mr Craig having been offered a bond for £4000 had accepted it, and had then arranged with him that he (pursuer) should take all the shares.

The defenders referred to the following rule of the Stock Exchange as showing that in the circumstances they were entitled to close the pursuer's account:—“87. When (1) members continue or carry over stock, shares, or other securities for their constituents, the differences, if any, thereon, against said constituents, shall be paid by them to said members not later than twelve o'clock on the settling-day; and failing due payment accordingly by said constituents, said members may thereupon close all their transactions then outstanding for said constituents; and when (2) members have entered into transactions for constituents, and while the said transactions are still outstanding, said constituents become bankrupt or insolvent, or by their own admission, intimation, or otherwise, are unable to implement said transactions, said members may thereupon close all said outstanding transactions; and they may so close said transactions in both cases foresaid either—(a) By assuming or taking over said transactions to their own account, or to the account of other constituents, at the average market prices of the day, as said prices shall be fixed by the committee; or ( b) By selling out or buying in, as the case may be, either at their own hand, or through the secretary officially; and said transactions shall be entered to the credit or debit, as the case may be, of said constituents, and thus fix the balance due on their accounts.”

They also pleaded that inasmuch as they had been induced to enter into transactions and incur personal liability on pursuer's behalf in consequence of his false representation that he had the command of £4000, whereas it now appeared that that sum belonged to another person with whom they had no relation at all, they were entitled, on the pursuer's failure to give them satisfactory references as to his position, to close his account.

The Sheriff-Substitute ( Spens) allowed a proof before answer and under reservation of all the pleas of parties.

He added this note:—“Defenders’ agent argued on three separate grounds that the action should at this stage be dismissed. These grounds were—first, that on the face of the record and the admitted productions it appeared that the defenders had been induced by false representations to act as the brokers of the pursuer, and

Page: 522↓

that this being so, the defenders were entitled at any time to close the account—that is to say, at once to put in the market all the stock held for behoof of the pursuer. I do not think it either necessary or advisable to enter at any length into this question at this stage. I am satisfied that this question cannot be disposed of without an inquiry into the facts. The second ground on which defenders' agent craves that the action should be dismissed as irrelevant is that no particulars are given of how the claim of damage preferred is arrived at. I cannot refer to any decision upon the subject, but it is matter of well-known and established practice in the Court of Session that it is not necessary to set forth the particulars of an alleged claim of damage arising from a breach of contract, or otherwise. It is sufficient to set forth, as the pursuer has done here, a claim of damages for an alleged breach of contract, provided the alleged breach of contract is itself distinctly specified, and it rests upon pursuer to establish a specific amount of damage. It is, in the third place, argued by defenders' agent that by the rules of the Stock Exchange, on which he founded, and which were admitted by both parties as binding, the defenders were entitled to close the account on 16th July. This question is left over for determination till after the proof is taken, but I will merely say here that to sell off the pursuer's stock at once, on receipt of his letter of 16th July, without any further communication with him, seems to me to have been imprudent. A point was raised at the discussion as to the measure of damages, assuming the case relevant. I incline to think that defenders' agent is right in contending that damage must be limited, in any event, to the market price of stock on the day when pursuer received information that defenders had disposed of his stock, or at such date, at least so soon thereafter on receipt of the information as reasonably possible, pursuer could have gone into the market and replaced the stock. I refer to this subject here, for at the proof I expect distinct and specific evidence with reference thereto.”

On appeal the Sheriff ( Clark) pronounced this interlocutor:—“Finds that it appears on the record that the defenders were induced by misrepresentation on the part of the pursuer that he had the control of means to the extent of £4000 to undertake his employment and act for him: Finds that soon after they discovered that they had been misinformed in this respect, and that, in point of fact, as appears from his own letters in process, that he was not possessed of the said means: Finds that in these circumstances they were warranted in refusing to proceed further with his employment or execute his orders: And therefore Finds, in point of law, that he has disclosed on record no relevant case; sustains accordingly the defenders' pleas in law to this effect: Recals the interlocutor appealed against, and dismisses the action and decerns: Finds the pursuer liable in expenses.”

He added this note:—“It is plain from the record that the defenders were induced to act for the pursuer as brokers on a gross misrepresentation, and that if they had continued to act for him they might have incurred responsibilities of a grave kind without any adequate security. The pursuer by his letter induced the defenders to believe that he had the control of £4000. Before executing his orders they, from inquiries made, ascertained that this statement was questionable, and accordingly before proceeding further they granted him an opportunity of satisfying them on the matter. Instead of doing this he wrote them another letter, the plain meaning of which was that their connection had better terminate, seeing they entertained doubts as to the matter in question, and giving them no satisfactory explanation of the state of his means. By the rules of the Stock Exchange referred to, it would appear that the defenders were acting quite within their power when in these circumstances they brought their connection with the pursuer to an end—indeed, were it not for such rules, no broker would be in safety to deal with parties as to whose means he was not perfectly informed. I would also notice that the statements in the condescendence averred, as regards the alleged claim of damages, are very far from being of that clear and distinct kind, more especially in reference to dates, which an action of this kind would require. In short, I do not think that on his own showing the pursuer has made a case of sufficient relevancy to be remitted to proof.”

The pursuer appealed, and argued—The case was plainly not within the rule of the Stock Exchange quoted by the defenders, for that rule only applies to defaulters. Certainly it could not be held to apply to the pursuer without a proof. The case was one where an agent had caused loss to his principal by disobedience of his orders. The English cases of Lacey v. Hill (Scrimgeour's claim) July 2, 1873, 8 L.R. Ch. 921; Lacey v. Hill (Crowley's claim) April 25, 1874, 18 L.R. Equity Cases, 182, were in point. A proof should be allowed.

The defenders argued that no proof could modify the plain meaning of the pursuer's own letters produced in process, which formed in themselves a complete defence.