Scottish Court of Session Decisions

This was an action in the Sheriff Court at Hamilton at the instance of M. D. Dawson & Company, brewers, Clydesdale Brewery, Glasgow, against John Gold, Hamilton, for £51, 10s., as the value of various quantities of stout and ale which the pursuers averred they had sold and delivered, between 4th January and 26th April 1886, to the defender, or on his behalf to his manager, W. H. M'Latchie, at the Royal Hotel, Calderbank, Lanarkshire, the defender being the proprietor thereof.

The pursuers averred that M'Latchie was the defender's manager, and had sole charge of the hotel, conform to an agreement between them, and that he received the goods, which were sold in the ordinary course of business in the hotel.

The agreement in question was entered into in October 1885 between John Gold of the first part, and W. H. M'Latchie and his wife, RosinaGold or Armstrong or M'Latchie, of the second part. It provided as follows—“The first party having raised an action against the second party for delivery of the furniture, &c., within the Royal Hotel, Calderbank, and failing delivery, for payment of £100, both parties have agreed in manner following, that is to say—1st, The second party hereby acknowledge that the whole furniture and effects within the said hotel belong to the first party by right of purchase from John M'Queen Barr, trustee in the cessio of the said Rosina Armstrong or Gold, and that he is entitled to take delivery thereof at pleasure. 2nd, The second party agree, whenever they are asked to do so by the first party, to transfer to him the licence certificate and excise licences now held by Mrs M'Latchie in name of Armstrong or Gold. 3rd, The second party William M'Latchie agrees to manage the said hotel at Calderbank for the first party, to render due account of his management,

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and pay over the nett drawings to the first party. The said William M'Latchie further agrees to manage the said business in a strict and proper manner, so as not to contravene the Public-Houses Act, or to incur a forfeiture of the licence, and also obey the instructions and orders of the first party. 4th, The first party agrees to pay the said William M'Latchie a wage of 35s. per week. 5th, The first party agrees not to exact or charge rent for the second party's possession of the said hotel from Whitsunday last to the, date of this agreement. 6th, The second party agree to account to the first party for the stock in the said hotel as at 16th February 1885, conform to inventory and appraisement by Mr William Burn, auctioneer, Glasgow. In like manner, the first party agrees to pay the second party for whatever surplus of stock there is over and above what is stated in the inventory and appraisement.”

The defender's answer was that M'Latchie had not implemented this agreement, and that he did not manage the hotel business for the defender.

He pleaded—“The goods, payment of which is sued for, not having been ordered by the defender, or by anyone for whom he is liable, and not having been delivered to the defender, the defender should be assoilzied, with expenses.”

The facts appear from the opinions infra.

The Sheriff-Substitute ( Mair) on 7th January 1887 assoilzied the defender with expenses.

“ Note.—There can be no doubt from the evidence that the goods furnished by the pursuers to the Royal Hotel at Calderbank, between January and April 1886, were supplied on the credit and responsibility of Mr W. H. M'Latchie, who then occupied the hotel. The goods were ordered by him in his own name, and so delivered to him. They were charged for in the pursuers' books against M'Latchie, and the pursuers knew of no one else in connection with these goods except M'Latchie, who alone was regarded by them as their debtor. They never heard of the defender in connection with the hotel until shortly before the raising of the present action. The pursuers however aver that Mr M'Latchie was the defender's manager, and had the sole charge of the conducting of the business in the Royal Hotel at Calderbank, conform to an agreement between them, and that the manager received the goods, ‘which in the ordinary course of business were sold in the defender's said hotel.’ The agreement is in process, and the question now to be determined is, whether at the time the goods were ordered and furnished by the pursuers, M'Latchie acted as the defender's manager, under the agreement or whether he was acting for himself. Before, however, adverting to the terms of this agreement, it is important to see the position of matters before it was executed. The defender is the proprietor of the Royal Hotel at Calderbank, and for some years before his brother Andrew's death, three or four years ago, Andrew was his tenant in the hotel, and as such held the hotel licence. The furniture in the hotel, however, belonged to the defender. After the brother's death his widow carried on the business in the hotel, and the licence was taken out in her name. The business apparently did not prosper, and cessio was taken out against Mrs Gold in the beginning of the year 1885. It would appear that the defender for the purpose apparently of saving his property in the hotel and preventing the hotel as such being ruined,'and with a view to the business being still carried on by his sister-in-law, purchased back from the trustee in the cessio the whole of the furniture and effects therein, which the trustee had taken possession of as part of the assets under the cessio. The business was thereafter still carried on by Mrs Gold until she got married to M'Latchie in June or July 1885, after which, although the licence was still in Mrs Gold's name (the year for which it was granted being at the date of the marriage current), the business was carried on by M'Latchie. According to the evidence of the defender he seems after the marriage to have got concerned about the furniture, as there was no written evidence that it was his property, and the agreement before referred to was entered into. It is dated October 1885, and proceeds on the preamble or narrative that the defender had raised an action against M'Latchie and his wife for delivery of the furniture in the hotel, or for payment of £100. The first article of the agreement contains an acknowledgment by M'Latchie and his wife that the furniture and effects belonged to the defender by right of purchase from the trustee in Mrs Gold's cessio, and that he was ‘entitled to take delivery thereof at pleasure;’ the second, that M'Latchie and his wife agreed, ‘whenever they are asked to do so’ by the defender, ‘to transfer the licence certificate and excise licence now held by Mrs M'Latchie in name of Armstrong or Gold.’ The third, that M'Latchie agreed to manage the hotel for the defender, to render due account of his management, and pay over the net drawings to the defender, and to manage the business in a strict and proper manner, so as not to contravene the Public Houses Acts, or incur a forfeiture, and obey the orders of the defender. The fourth, that the defender agreed to pay M'Latchie a wage of 35s. per week. The fifth, that the defender agreed not to exact or charge rent for M'Latchie's and his wife's possession of the hotel from Whitsunday 1885 to the date of the agreement; and the sixth, that M'Latchie and his wife agreed to account to the defender for the stock in the hotel as at 16th February 1885, conform to inventory and appraisement by Mr Wm. Burn, auctioneer, Glasgow, and in like manner the defender agreed to pay M'Latchie and his wife for whatever surplus of stock there was over and above what was stated in the inventory and appraisement. Such are the terms of agreement between the defender and M'Latchie, and if it had been established that it was acted on. the pursuers—notwithstanding that the goods supplied by them were ordered by, and delivered to, M'Latchie—would have been entitled to prevail in the present action. The-burden of proof, however, lay upon the pursuers, and in my opinion they have failed to discharge that burden. The agreement itself does not constitute the relationship of principal and agent as one which was to come into existence immediately upon the execution of the agreement. I cannot help thinking that the primary object of the agreement was to preserve evidence that the furniture and effects in the hotel were the property of the defender, and that the secondary object was to put

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it in the power of the defender, if he found that the hotel was not being properly managed, to take possession himself, and to pay to M'Latchie a certain sum per week as manager. If the agreement was intended to have immediate effect, and to transfer the business from the M'Latchies to the defender, what was the use of inserting in it that the defender was entitled to take delivery of the furniture at pleasure? If the business was to be the defender's there was no necessity for this. Again, the licence was only to be transferred to the defender whenever the M'Latchies were asked to transfer it, and the defender only agreed to pay the M'Latchies for whatever surplus of stock there was over and above what was in the inventory and valuation. It is manifest from all this that something required to be done before the agreement came into operation. Accordingly the defender has sworn, and his evidence is uncontradicted, that the agreement was not acted on in the sense of making the business his. He says it was necessary before this could take place that the stock should be valued and taken over, but this was not done, that no money was ever paid to M'Latchie in name of wages, and that no account was ever rendered by him of the management of the business. In short, notwithstanding the agreement, the business still continued to be that of M'Latchie and his wife, and to be entirely managed by them. The defender never profited a sixpence by it. It is true the defender did all he could to get the agreement implemented, but until it was implemented in the way and manner pointed out by him in his evidence he could not be regarded as the responsible party in the business of the hotel. In such a case as this the substance of the transaction between the parties and not the mere form is what is to be looked to. The real nature of the transaction was that the M'Latchies were to continue to carry on the business for their own behoof, with power at the same time to the defender, when he thought it necessary for the sake of preserving his property in the hotel as a hotel, to take the business over, and to pay M'Latchie a wage of so much per week as manager. This, however, did not make the defender the real trader in the business. It is not without significance in the present case that the defender is himself an agent for a beer firm in Dundee, and that his commission as agent is 37 1 2per cent. If the business of. the Royal Hotel at Calderbank had been his in reality it is highly probable that he would have supplied the beer to it himself. But this was not so, simply because it was not his business. He says he supplied public-houses in Calderbank with beer ‘on both sides of M'Latchie's, both Mr Wallace and Mr Hay, one on one side and the other on the other side of the hotel. I never asked M'Latchie for an order, because I did not consider he was good enough for an order.’ But it appears that the defender obtained a transfer of the licence to the hotel in the month of January 1886, and that most of the goods supplied to the hotel were supplied after that date. If I had thought this circumstance made any change in the management of the hotel, I would have felt myself bound to give the pursuers the benefit of it. In point of fact, however, this step was taken by the defender to put him in a position to obtain implement of the agreement and get possession of the business. There was no change in the management of the hotel or in the name above the door. It was still carried on by the M'Latchies, and the goods supplied to it were supplied on their credit and responsibility, and not on that of the defender. In the whole circumstances therefore, and having regard to opinions of the Judges in the cases of Eaglesham v. Grant, 17th July 1875, 2 R. 960, and Stott v. Fender & Crombie, 20th July 1878, 5 R. 1104, I have felt myself constrained to assoilzie the defender from the action.”

On appeal, the Sheriff ( Berry) on 25th May 1887 pronounced this interlocutor:—“Finds, in fact, that the quantities of stout and ale, the price of which is sued for, were sold and delivered to Mr William M'Latchie at or about the dates libelled, for the purposes of the Royal Hotel, Calderbank: Finds that at the time of such sale and delivery M'Latchie was acting as manager of the hotel, on behalf of the defender, his principal: Finds that in purchasing and accepting delivery of the said goods, M'Latchie was acting, within the scope of his authority as such manager: Finds that the price thereof has not been paid: Finds in law, in these circumstances, that the defender is liable therefor; therefore recals the interlocutor appealed against, and decerns as libelled, &c.

“ Note.—I think the defender is in the circumstances of this case liable for the goods supplied to M'Latchie at the Royal Hotel, Calderbank. The case turns mainly on the effect of the agreement of October 1885 between Mr and Mrs M'Latchie and the defender. It has been contended, and apparently is the view taken by the Sheriff-Substitute, that that agreement was not intended to be immediately operative; that certain steps required to be taken before it was so; that these steps were not taken before the goods in question were ordered; and that therefore the defender, whose position as principal depends on that agreement being operative, is not liable for the goods supplied to M'Latchie. It is true that the first two articles of the agreement admit of an interpretation consistent with its being merely prospective so as to come into operation at some future date; but it seems to me that the other articles are not consistent with any other view than that they were to be immediately operative. The third provides for M'Latchie managing the hotel for the defender, and the fourth for the payment of a weekly wage by the defender to M'Latchie, and to neither of these conditions is any time adjected at which they were to come into operation. The natural interpretation is, that they were to come into operation at once. Again, by the fifth head, the defender agrees not to charge rent for M'Latchie's possession from the previous Whitsunday to the date of the agreement. That stipulation seems to imply that after the date of the agreement it was unnecessary to make any stipulation as to rent, for rent would then cease to be payable under the agreement, the relation of the parties being no longer that of landlord and tenant, but that of master and servant. Further, the actings of parties are consistent with the view that the relation of master and servant between them under the agreement was not postponed to any indefinite

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date after its execution. We find in the course of 1886 actions brought on the one hand by the defender against M'Latchie for the ejection of him from the hotel as the defender's manager, and for an account of his intromissions as manager for the period from 12th October 1885 to the date of the action, and, on the other hand, by M'Latchie against the defender for his wages or salary under the agreement. I am not much moved by the fact that the defender abandoned his action against M'Latchie. The abandonment may probably have proceeded from an apprehension of a claim like the present being put forward should the relation of the parties come to be known. The second head of the agreement was not conceived so as to be immediately operative, providing as it did for transference of the licence to the defender when asked by him. Under this provision, however, a transference was obtained about the beginning of January 1886. It seems to me that in these circumstances it must be taken that the defender was the person to whom the real interest in the hotel and its profits belonged at the time when the goods in question were supplied to M'Latchie, and that he is therefore liable for the price as an undisclosed principal. There can be no doubt that the ordering of such goods was within the implied authority of M'Latchie as manager. The two cases referred to by the Sheriff-Substitute seem to me to be distinguished from the present. They proceed on the ground that the persons sought to be made liable were not the real principals or partners of those by whom the debts sued for were incurred, whereas here I think the defender became the real principal, and to him any benefit or profit from the management of the hotel would have belonged. Such cases are to a large extent cases of circumstances. In the present case I think the circumstances are against the defender.”

The defender appealed, and argued—M'Latchie carried on this business for himself. The only ground on which the defender was sought to be made liable was the existence of the agreement. But M'Latchie had never observed it, and the appellant had always been thwarted in his attempts to enforce it. The defender had never got any benefit from the business while M'Latchie had it. He carried on the business for himself.

Argued for the respondents—The appellant was the true principal. Even if true that he never got the profits of the business, it made no difference to the legal aspect of the case. The appellant's whole actings showed that he recognised the agreement as subsisting.

At advising—