Scottish Court of Session Decisions

Upon 26th February 1889 James Thompson Dowling, commission-agent, Dundela villa, Shettleston, wrote to Simon Henderson & Sons, Grove Biscuit Factory, Edinburgh, offering his services as agent in Glasgow for the sale of their biscuits. He stated that he had several other commissions in kindred trades, and had an established reliable connection. Upon 13th March Simon Henderson & Sons appointed him agent under the following agreement:—… . “1. We agree to pay you monthly at the rate of £200 per annum, and to allow you 5 per cent, on all sales of biscuits (tins, &c., not included) above £300 per month, this to be calculated on the whole year, at the end of the first year, and according to arrangement thereafter. 2. Twenty per cent. to be the maximum discount to be

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allowed by you. Less than this to be allowed to smaller buyers, and wherever practicable. 3. Accounts monthly. 4. You to be responsible for 10 per cent. of bad debts. 5. You also to lift and forward empties. 6. While holding our agency you will not sell biscuits for any other firm… . We are prepared to make a start with you on Monday 1st April.”

Dowling entered upon his business on 1st April as arranged. Upon 1st June 1889 Henderson & Sons wrote to him as follows:—… “We are much disappointed that your sales have been so small, and so far short of what you led us to understand you could sell, and on the strength of which we guaranteed you commission on sales of £300 per month. In the circumstances we find it necessary to give you notice that we cannot continue the guarantee after the end of the month begun to-day.” Dowling replied on 3rd June—“I cannot accept your interpretation of my agreement with you. There is a distinct understanding between us that the term is to be one year, and I may say at once, and it is nothing more than I keenly feel, that not for twenty times the value of your agreement with me would I have my name associated with any firm for such a short time.” Upon 6th July Messrs Henderson repeated some of the complaints which they had already made to Dowling as regarded his way of doing business, and the amount of sales he had effected, and ended their letter thus—“In view of this, and all the circumstances of the case, we hereby give you notice that after the end of the present month your services will not be further required.”

Dowling raised this action against Henderson & Sons, concluding for £16, 13s. 4d. as a month's salary due to him, and also £300 as damages for the breach of contract. He averred that his appointment was for a year from 1st April 1889.

The defenders admitted that the month's salary was due. They stated—“The pursuer represented to the defenders that he had had considerable experience in the biscuit trade, and that he had an established reliable connection in the Glasgow district; that he was selling over £300 amonth there for his then employers. These representations were false. He also represented that if appointed he would undertake to sell from £300 to £400 per months of the defenders' biscuits according to their priced list. Relying on these representations, the defenders appointed him agent for their biscuits in the Glasgow district, with salary at the rate of £200 a-year, payable monthly, and commission at the rate of 5 per cent. on all sales above £300 per month. They also stipulated that 20 per cent. was to be the maximum discount allowed, and that only to large buyers. The said agency was terminable by a month's notice, which is the general usage of trade in such agencies.” “The defenders, soon after the pursuer's agency began, discovered that the pursuer had neither experience in the business nor any established connection. His sales of biscuits in terms of price list amounted to only £20, 4s. 4d. in April, £30, 6s. 6d. in May, £59 in June, and £31, 15s. in July. Further, the pursuer took and persisted in taking orders for cheap inferior biscuits of a class not in defenders' line, and at prices which resulted in a loss to them notwithstanding the defenders' express and repeated orders not to do so. He also broke the condition of his employment by allowing the maximum discount to buyers generally, the usual trade discount being only 10 per cent.”

The pursuer pleaded—“(2) The defenders having illegally and unwarrantably dismissed the pursuer from their employment are liable to him in damages, and the sum sued for being fair and reasonable, decree should be granted as concluded for.”

The defenders pleaded—“(3) The dismissal of the pursuer not having been illegal or unwarrantable, the defenders are entitled to absolvitor, with expenses, from the second conclusion of the summons. (4) The pursuer having induced the defenders to appoint him agent by false representations, and having thereafter contravened their express orders and the conditions of his agency to their loss, the defenders were entitled to terminate the same.”

A proof was allowed, the import of which sufficiently appears from the opinion of the Lord Ordinary, who pronounced this interlocutor upon 8th January 1890:—“Finds the defenders liable in payment to the pursuer of the sum of £150 sterling, with interest as concluded for: Quoad ultra assoilzies the defenders and decerns: Finds the defenders liable in expenses, &c.

“ Opinion.—The first question to be determined is whether the agreement between the parties was one for the period of a year, or whether it was terminable sooner by either party on a month's or other reasonable notice. The agreement itself does not provide for any specific period of duration, and therefore the answer to this question must be ascertained by a consideration of the terms of the agreement, taken along with its general character and the circumstances under which it was made. The defenders recently became biscuit bakers, and having no commercial connection with Glasgow, they engaged the pursuer as their servant or agent to sell their biscuits in that city, the pursuer having a large connection there with shopkeepers and others who deal in such biscuits. The terms of the agreement between the parties are set forth in a letter dated 13th March 1889, addressed by the defenders to the pursuer, in which they agree to pay him ‘monthly at the rate of £200 per annum,’ and to allow him in addition ‘five per cent. on all sales of biscuits (tins, &c. not included), above £300 per month, this to be calculated on the whole year, at the end of the first year, and according to arrangement thereafter.’

The defenders maintain that under this agreement the pursuer became their agent, and that under a contract of agency the principal may withdraw or cancel the agent's mandate at pleasure. But in my opinion the contract between the parties

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was not mere agency. I think it was rather a contract of service. A fixed salary is not a usual feature of agency—the agent is paid by a commission on the business which he does. Here, however, the principal remuneration stipulated to be paid to the pursuer was a fixed salary; the addition of a commission on business transacted beyond a certain amount being a bonus on his success or an inducement to greater exertion. But whether the relation between the parties was that of principal and agent, or that of master and servant, I think it was not intended and not agreed that that relationship should be put an end to at the pleasure of either party on a short notice. It was plainly contemplated that the relationship between them was to be of some duration, and in my opinion, on a fair reading of the agreement, the period contemplated and agreed to was a year at least. (1) The purpose for which the pursuer was employed was that he might make for the defenders a business connection with Glasgow, and introduce their manufacture to the Glasgow market. It is obvious that this could not be accomplished in a month or two; it required not only exertion on the pursuer's part but time. (2) The salary to be paid to the pursuer was to be at the rate of £200 per annum, and this points to a year's engagement rather than an engagement for a shorter period. I do not, however, put so much weight on this consideration as on those which follow. (3) The commission to be paid the pursuer on his transactions exceeding the value of £300 per month was to be calculated on the ‘whole year at the end of the first year.’ This language, I think, is inconsistent with the idea that the engagement was to terminate before the lapse of a year, The ‘first year’ can only mean the first year of the engagement, during which the pursuer was earning or endeavouring to earn his commission, and it would have been impossible for the parties to calculate that commission on the ‘whole year’ if the engagement terminated before the whole year had run. I suppose there can be no doubt that the meaning of the agreement as regards commission is this, that the pursuer was only to receive commission on all sales exceeding £300 per month, one month taken with another. In other words, the pursuer was to receive commission (in addition to his fixed salary) only if his sales exceeded £3600 a year. If the pursuer had sold £2000 worth of biscuits in the first three months he would have had no claim for commission then, because the sales of the following nine months might have been such as to reduce the average monthly sales below £300. If this is the meaning of the agreement, then it becomes plain that the parties contemplated that the agreement would endure for one year. (4) The agreement as made, however (so far as concerned the commission), contemplated that it might be changed. It was to be ‘according to arrangement thereafter.’ After what? I think, clearly, after the ‘first year.’

These considerations lead me to the conclusion that the agreement in question was intended to be and was an agreement for a year. The views expressed by the Court in deciding the case of Moffat v. Shedden, 1 D. 468, appear to me to support the view I have taken.

There remains the question, whether the defenders (assuming the agreement to have been for a year), were justified in terminating the agreement as they did at the end of the fourth month. The defenders justify their action on three grounds—(1) That they were induced to enter into the agreement by the false representations of the pursuer; (2) That the pursuer gave a discount to customers beyond that which he was authorised to give; and (3) That the pursuer persisted in the sale of a certain cheap biscuit, contrary to defenders' orders, and to their loss.

[ The Lord Ordinary here examined the evidence on these poirds in detail.]

I am of opinion that the defenders have failed to justify the dismissal of the pursuer on any of the grounds now put forward by them. I shall therefore find the pursuer entitled to one year's salary, less the amount already paid to him. This is not so hard upon the defenders as it might seem to be. They are now canvassing and obtaining orders from the tradesmen to whom they and their manufacture were introduced by the pursuer.”

The defenders reclaimed, and argued—The Lord Ordinary had taken a wrong view on the matters of fact in the case. The pursuer had repeatedly disobeyed their orders in regard to the sales of biscuits he made, and had also given a false representation of his position and ability to make the large amount of sales he claimed, and the defenders were entitled to dismiss him on those grounds.. This was not an engagement for a year, but was terminable by either of the parties at pleasure after reasonable notice, and which had been given. A commercial agency was terminable by either party on such notice. The arrangement that the salary would be paid in a lump sum and not at so much a week or month was no indication that the engagement was for a year— Robson v. Overend, November 21, 1878, 6 R. 213. In this agreement payment was to be made monthly at the “rate of £200 per annum.” These words showed that the ordinary rule was to be followed, and the pursuer had not discharged the onus which lay on him of showing that another rule was to prevail— Fergusson, November 13, 1850, 13 D. 51; Dunn v. Sayles, February 9, 1844, 13 L.J., Q.B. 159; Moffat v. Shedden, February 8, 1839, 1 D. 468; Fraser's Master and Servant, 51; Nicol v. Graves, May 30, 1864, 23 L.J., C.P. 259; Hoey v. M'Ewan & Auld, June 4, 1867, 5 Macph. 814.

The respondent argued—The pursuer had not disobeyed any of the defenders' orders. This was an engagement for the whole year, and was not terminable at the pleasure of either party. The terms of the engagement showed that. The pursuer occupied a high position in his line in Glasgow,

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and he undertook to make the defenders' business there. That was not to be done in a short time, nor under such a dubious engagement as this would have been if it had been as the defenders suggested. There was a lump sum offered that showed the engagement was to last the whole year. In the second place, the actings of the parties showed that the contract was not terminable at pleasure. The pursuer had at once repudiated that view of the contract. The defenders had said nothing in reply to that statement, therefore they had acquiesced in the view put forward by the pursuer. The English cases were not in point, as they referred to the case of menial servants— Campbell v. Fyfe, June 5, 1851, 13 D. 1041; Fawcett v. Cash, 5 B. & A. 908; Megton v. Bolton, L.R. 3 Ex., W. H. & G. 518.

At advising—