Scottish Court of Session Decisions

This was an action at the instance of James Duncan Stewart against John Joseph Shannessy, cycle agent, Newcastle-on-Tyne, concluding that the defender should be ordained “to exhibit and produce before our said Lords a full and particular account of the commissions due by the defender to the pursuer under letter of engagement by the defender to the pursuer dated 29th January 1897 upon or in connection with the sale of cycles and tyres and rubber goods in Scotland by the ‘New’ Buckingham & Adams Cycle Company, Limited, cyclemanu-facturers, Birmingham, and the Non-Collapsible Tyre Company, Limited, Birmingham, the successors of the Midland India-Rubber Company, Limited, in the course of their trade or business from the said 29th January 1897 to 18th May 1898, whereby the true balance due by the defender to the pursuer may appear and be ascertained by our said Lords; and the defender ought and should be decerned and ordained by decree foresaid to make payment to the pursuer of the sum of £454, 1s. sterling, or of such other sum as shall appear and be ascertained by our said Lords to be due by the defender as the amount of the said commissions.” There was also a conclusion for payment of £7, 14s. 6d., which the pursuer claimed as due in respect of his dismissal without proper notice.

The letter of engagement referred to in the summons was in the following terms:— “Mr J. D. Stewart, Glasgow.—Dear Sir,— I beg to confirm arrangement made with you this day, and appoint you as representative for New Buckingham and Adams Cycle Coy., Ld., and the Midland Rubber Works, Ld., on following terms 45/-per week salary, payable monthly, and 1 1 2 per cent. commission on all orders for cycles sold by us or you in Scotland, from date of January 23rd 1897, and 2 1 2% as commission on all orders for tyres and rubber goods. Travelling expenses to be 15s. per day when travelling outside Glasgow, and if samples are carried further allowance to be made to cover same.—Yours truly, J. J. Shannessy.” This letter was written on paper headed with the name of the New Buckingham Cycle Company, and dated from their office in Newcastle.

The relation of Mr Shannessy to the New Buckingham & Adams Cycle Company, Limited was defined in an agreement entered into between him and them and dated 15th March 1897, which contained the following conditions:—“1. Shannessy shall during the term of five years from the first day of January One thousand eight hundred and ninety-seven be the exclusive sales manager of the company for the district following—that is to say, the whole of Scotland and Ireland, and that part of England which is situated to the northward of a line drawn from Grimsby to Leeds and from Leeds to Lancaster, including these towns except Leeds, which shall not be deemed to be included in the said district. Shannessy shall not sell the company's goods at less than the minimum prices, which from time to time shall be arranged as hereinafter provided.” The company were to pay all the expenses relative to the head office at Newcastle, including “clerks and servants' wages, travelling and other expenses,” and Shannessy was to receive a salary of £5 per week and 5 per cent. commission on cash received for sales. It was further provided—“(4) Shannessy shall be at liberty during the said engagement to act as sales' manager in the said district for the Non-Collapsible Tyre Company, Limited, its successors and assigns, upon terms which have the consent of the Company ( i.e. The New Buckingham Company) been arranged and are contained in an agreement bearing date the day of One thousand eight hundred and ninety-seven, and for that purpose Shannessy shall be at liberty to use the district office or offices or warehouse of the company and to employ the travellers, clerks, and servants thereof.” …

By an agreement entered into between Shannessy and the New Buckingham & Adams Cycle Company, Limited and the Non-Collapsible Tyre Company, who were the successors of the Midland India Rubber Company, it was provided that Mr Shannessy was to be “the exclusive sales manager” of the Tyre Company for the same district, and was to receive a salary of £4 per week and 2 1 2 per cent commission on cash received for goods sold within the district. It was further provided that the company “shall also pay to Shannessy for every traveller or travellers that may be engaged in travelling upon the business of the Tyre Company as aforesaid at the rate of three pounds per week as travelling expenses, to be paid every four weeks. The said salary of four pounds per week shall be deemed to include the travelling expenses of Shannessy. The number of travellers so to be paid or remunerated shall not (excluding Shannessy) exceed three in number without the consent in writing of the Tyre Company.”

The pursuer in the present action averred that he entered upon his duties in terms of his engagement and continued to discharge them till 18th May 1898, and that seven days before that date he received intimation from the defender that his engagement was to terminate in one week. He averred that no payments had been made to him by way of commission, and that he had been dismissed without proper notice, and maintained that he was entitled to an accounting for commissions and payment of the sum found due to him, and to payment of a further sum in respect of his dismissal without proper notice.

The defender averred—“Explained and averred that, at the time of his engagement by the defender, the pursuer was well aware that the defender was acting as the representative of the said New Buckingham and Adams and the Non-Collapsible Tyre Companies, and that it was in this capacity that he engaged the pursuer as the servant of the companies whom the defender represented. All letters written by the pursuer to the defender were written upon the New Buckingham and

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Adams Company's note-paper, with the company's heading, supplied to him for the purpose … During the time the pursuer was engaged as traveller he sent reports of the work he had done each week, and these reports were made out upon forms with the Non-Collapsible Tyre Company's heading, and taken from an official report book supplied to him for the purpose. These reports are herewith produced and referred to. Any dealings which the pursuer has had with the defender were dealings with him as a representative only.”

He further averred that the pursuer had been dismissed in consequence of his persistent disregard of the defender's instructions.

The defender pleaded, inter alia—“(1) The action is irrelevant, et separation, incompetent. (5) The defender having acted as an agent for the said principals, and the pursuer being well aware of this, he has no claim as alleged against the defender, and the defender is entitled to absolvitor with expenses.”

The Lord Ordinary ( Stormonth Darling) on 8th March 1899 repelled the defender's first plea, and appointed the defender to lodge the account called for, and granted leave to reclaim. The defender reclaimed, and the Court on 16th May 1899 adhered to the Lord Ordinary's interlocutor so far as it repelled the defender's first plea as a plea to the competency, and quoad ultra recalled the interlocutor and remitted to the Lord Ordinary to allow the parties a proof before answer.

The purport of the evidence led at the proof is fully set forth in the opinion of the Lord Ordinary infra. It is only necessary to add that the defender admitted that while his agreements with the two companies were not dated till after the letter of 29th January 1897, by which he engaged the pursuer, the agreements were in operation before that date, and he was acting upon them.

The Lord Ordinary, on 17th November 1899, pronounced the following interlocutor:—“Finds that the defender is liable to account to the pursuer for the commission due to him under the letter of engagement libelled: Appoints the defender to lodge the account called for within fourteen days from this date: Finds the pursuer entitled to expenses since 2nd June 1899,” &c.

Opinion.—“This case has been in Court for more than a year without the parties having touched the merits of the real question between them. The time has been entirely occupied in discussing the preliminary question whether the defender or the two companies which he represents were the proper parties to account to the pursuer. This I think is to be regretted, both because something is undoubtedly due to the pursuer, and also because it now appears that the companies are willing to undertake liability. That being so, I am at a loss to understand why the present action should not have been utilised for the purpose of determining the amount. But litigants do not always take the shortest route to their goal, and the action of the parties compels me to decide a question which is of no importance to anybody, except as affecting the expenses hitherto incurred in this case.

That question is, whether the letter of 29th January 1897 had the effect of establishing privity of contract between the pursuer and the two companies. And I observe at the outset that privity of contract must either have been established with both companies, or the defender himself must remain liable. It would be impossible to hold that it had been established with one company and not with the other.

Now the letter of appointment, which is written on paper headed with the name of the New Buckingham Cycle Company, and dated from their office at Newcastle, undoubtedly appoints the pursuer as representative of the two companies for the purpose of selling their goods in Scotland; but it is signed by the defender in his own name, without qualification of any kind, and it does not bear to be granted by him in the character which he undoubtedly possessed of sales manager of both companies. Accordingly, the letter is not by itself conclusive either way. It prescribes the duties which the pursuer is to perform and the remuneration which he is to receive; but, so far as its terms go, he might have been intended to do his work and to get his pay, either as servant of the defender or of the companies. It was therefore necessary to have evidence as to the actings of parties; and the proof has disclosed the following facts:—

The relation of the defender to the New Buckingham Company is defined by an agreement of 15th March 1897, whereby he was to be for five years ‘exclusive sales manager’ for the company in a district embracing Scotland, Ireland, and the north of England, and was to receive a salary of £5 a week, and 5 per cent. commission on all cash received by the company, in respect of sales of their goods within the district, the prices of such goods being annually to be fixed by the company and the defender mutually, The company were to pay all the expenses incident to the head office at Newcastle, including ‘clerks and servants’ wages, travelling and other expenses,' and the defender was to be at liberty to act as sales manager in the district for the Non-Collapsible Tyre Company, and for that purpose to use the district office of the Cycle Company, and ‘to employ the clerks, servants, and travellers thereof.’ His relation to the Tyre Company is also defined by a written agreement, the material parts of which are that he was to act as their ‘exclusive sales manager’ for the same district, and was to receive a salary of £4 per week, and 2 1 2 per cent. commission on all cash received for goods of theirs sold in the district. The arrangement with regard to travellers was much more precise than in the other agreement. The Tyre Company were to pay to the defender for every traveller who might be engaged upon their business at the rate of £3 per week as

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travelling expenses, and £1 a-week in addition, but the number of travellers so to be paid or remunerated was not to exceed three in number without the written consent of the company.

In pursuance of these agreements the defender from time to time rendered accounts to the two companies. As regards the Tyre Company, he charged them, precisely in terms of the agreement, with sums of £1 a-week of salary, and £3 a-week of travelling expenses for each of three travellers (including the pursuer). As regards the Cycle Company, he charged them with £1, 10s. a-week of salary for the pursuer, and varying sums of travelling expenses as these were incurred. The sums which he charged against the two companies in respect of salary for the pursuer were thus £2, 10s. a-week, and as the pursuer's stipulated salary was only £2, 5s. a-week, there was an apparent profit to the defender of 5s. a-week. He explains that this profit was apparent and not real, because the money was spent on other travellers, but none the less does it hold good that the amount paid by the Tyre Company to the defender in respect of the pursuer's salary was not the same as that which the defender paid to the pursuer. No sums were ever charged against either company in respect of the pursuer's commission on sales, because no commission has yet been paid to the pursuer; and it appears that both companies remained throughout in entire ignorance of the terms of the agreement between the pursuer and the defender. From first to last the pursuer dealt exclusively with the defender, to whom he made his reports, from whom he received his orders, and by whom his salary and travelling expenses were paid. He is not shown ever to have been brought into direct relation with either of the companies, except at a cycle show where some instructions were given to him by the manager about the exhibits. He is not shown to have made any inquiry, or to have received any information, as to the relations existing between the companies and the defender. It now appears, as I have said, that both companies hold themselves liable for his commission. But it seems to me that the present question depends, not on their willingness to meet his claims, but on whether they would have been bound to do so if he had sued them, or in other words, whether he was bound to assume that they were his true debtors. I think not.

In one sense it is quite true that the defender had authority to employ travellers within his district, as many as he chose. It does not follow that he had authority to make a contract of agency between these travellers and the two companies. In the case of the Tyre Company certainly, I think they would have been entitled to say to the defender, if they bad chosen to do so, ‘We are bound to pay you £1 a-week of salary, and £3 a-week of expenses for each of three travellers, but that is the limit of our liability; we are not bound to pay to any traveller 2 1 2 per cent. of commission, and especially we are not bound to pay any sum of commission on orders in Scotland not procured by himself.’ The mere fact that the Tyre Company do not choose to take up that position seems to me to be of no moment at all.

That, I think, would have been the position of parties if the pursuer had known all about the contract between the defender and the two companies. But I do not think that he was bound to inquire into that matter. He was entitled to assume that the defender had (as in fact he had) a personal interest in pushing the sales of the companies' goods, and in employing sub-agents for that purpose. The terms of his appointment were consistent with that view, and he received no information to an opposite effect. Prima facie, the person liable to pay his remuneration was the person who had promised it, and I do not think that he was bound to run the risk of calling the companies as defenders, and of being met with the defence that they had not contracted with him.

I shall therefore find that the defender is liable to account to the pursuer for the commission due to him under the letter of engagement libelled, and I shall appoint the defender to lodge the account called for.”

The defender reclaimed, and argued—On the contract, and the circumstances attending it, the proper defenders were the companies, who were the true principals in the contract. There were two classes of cases, the first where the relation of the parties could be ascertained from the contract itself, and the second where it was ascertained from the surrounding circumstances. It was clear from the terms of the contract that the pursuer was to be a servant of the companies, and that the defender was only acting as their agent, the true principals being disclosed. This view of the contract was borne out by subsequent events. The pursuer all along corresponded with the defender as the district manager representing the companies, and not as if he were employed by him personally. The pursuer had full power under his agreements with the companies to engage travellers who were to be their servants.

Argued for the respondent—The defender had always acted as a principal in the contract. The pursuer had never been paid by anyone but the defender, and his reports bad always been made to him, and he was dismissed by him. The pursuer had never applied to the companies for an accounting, and the contract throughout had been treated as one between him and the defender. The defence now stated was never suggested until it was put forward as a technical plea by the defender after the case was in Court. The contract itself was clearly one between the pursuer and defender alone. There was no qualification in it of the defender's responsibility, but an unqualified signature by him which, in the absence of anything in the contract pointing the other way, made him clearly liable as principal— Paice v. Walker, 1870, L.R. 5 Ex. 173; Thomson v. Davenport,

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2 Smith's Leading Cases (10th ed.) 368. The terms of the contract, and especially the condition as to payment of weekly salary, which was not apportioned between the companies, confirmed this view.

Taking the agreements between the defender and the companies, it did not appear that he had power to make contracts between them and the travellers. So even if the pursuer must be held as knowing the relations which existed between them and the defender, there was nothing to show that he considered the companies as his employers. Moreover, if an agent contracted in such a form as to make himself personally responsible, whether or no his principal was known, he would not be free from liability— Cartwright v. Hately, 1791, 1 Ves. Jun. 292; Higgins v. Senior, 1841, 8 M. & W., 834, at 845; New Zealand and Australian Land Co. v. Watson, 1881, 7 Q.B.D. 374; Evans on Principal and Agent, p. 294.

At advising—