Scottish Court of Session Decisions

Benjamin Sutherland, retired butler, Edinburgh, brought an action against W. M. Low & Company, Limited, Burgh Sawmills, Leith, and Robert Thomson, joiner, Kirkcaldy, and Robert Hunter, builder, Kirkcaldy, trustees under a trust-disposition granted by Robert Thomson for behoof of his creditors, in which the pursuer concluded for reduction of a bond for £303, 15s. 1d., which bore to be granted by Robert Thomson as principal and by the pursuer as cautioner, surety, and full debtor for and with Thomson, at least in so far as the same affected the pursuer.

The pursuer pleaded, inter alia—“(1) the pretended bond described in the summons should be reduced, in any case so far as it affects the pursuer, in respect—… ( b) that it was fraudulently impetrated from the pursuer by the defender Robert Thomson; ( c) that the pursuer, when he executed the deed, was weak and facile, and easily imposed on, and that the said Robert Thomson taking advantage thereof did by fraud or circumvention procure the pursuer's signature thereto to his lesion. (2) In respect that the defenders W. M. Low & Company, Limited, instructed the said Robert Thomson to procure the pursuer's signature to the said pretended bond by the misrepresentations and in the circumstances libelled, or otherwise in respect that they had reason to suspect and knew, or ought to have known, that the said Robert Thomson had procured the pursuer's signature by the misrepresentations and in the circumstances libelled, the pursuer is entitled to decree of reduction as concluded for.” They also pleaded (3) that the deed was not duly executed in accordance with Law.

Proof was allowed and led. The import of the evidence sufficiently appears from the opinion of the lord ordinary, infra.

The Lord Ordinary ( Kincairney) on 22nd January 1901 pronounced this interlocutor:—“The Lord Ordinary having considered the proof, productions, and whole cause, Finds in fact (1) that the bond libelled was duly executed; (2) that when it was granted the pursuer was facile, and that the defender Robert Thomson, by fraud or circumvention, and by arrangement with the defenders W. M. Low & Company, Limited, procured his signature thereto; (3) That he did so on the instructions of the defenders the said W. M. Low & Company, Limited; (4) That these defenders are not entitled to retain the benefit of said bond procured as aforesaid: Therefore sustains plea one, subdivisions ( b) and ( c), and plea two for the pursuer; Repels the third plea-in-law for the pursuer, and reduces, decerns, and declares in terms of the conclusion of the summons so far as the bond mentioned in said conclusion affects the pursuer, but subject always to the obligation by the pursuer contained in the minute for the pursuer: Finds the defenders W. M. Low & Company, Limited, liable in expenses to the pursuer, reserving the question of modification: Allows an account,”&c.

Opinion,—“The grounds of reduction are (1) essential error, fraudulent impetration by Thomson, and facility of Sutherland; (2) that the deed was procured by Thomson on the instructions of Low & Company, and that Low & Company knew, or ought to have known, that it was procured by Thomson's fraud, and (lastly) defective execution.

There is not much important conflict of evidence, and the facts are brought out sufficiently clearly. The circumstances under which the bond was granted are these. It appears that in or about March 1899 Thomson owed Low & Company above £300, and it also appears that Thomson had then several other pressing creditors, and that he was hopelessly insolvent, so much so that he granted a trust-deed for behoof of his creditors on 11th April 1899. He was, however, owner of a property in the burgh of Dysart, which was burdened by a bond for £500. It may, however, have been worth more than that, and if conveyed to Low & Company it might have afforded security to some extent for Thomson's debt. But then it seems clear that if Low & Company had taken a disposition of it in security it would almost certainly have been reduced as a gratuitous deed in favour of prior creditors, and therefore as a fraud on the other creditors of Thomson.

Low & Company, as Mr John Low admitted in his evidence, were aware of the embarrassed state of Thomson's affairs, and they were confessedly desirous of obtaining security for their debt, even although it might have been a preference. But this simple mode of obtaining such a

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security and preference could not be adopted with safety. But Thomson's sister was married to a retired butler Benjamin Sutherland, who apparently had money enough to be able to give sufficient security for the debt due to Low & Company, and it was arranged between Low & Company and Thomson—it is not very clear which suggested the idea—that Sutherland should be asked to become security for the debt due by Thomson, and that Thomson should dispone to him his property in Dysart. This plan was carried out; Sutherland granted the bond now sought to be reduced, bearing date 21st March 1899, and Thomson by an ex facie absolute disposition, dated 20th March 1899, disponed the subjects in Dysart to Sutherland. Sutherland had not asked this deed, and did not understand why it was granted. More motives than one might be imagined, but that is a question which it is not necessary to follow. The consequence of these transactions so long as unchallenged was this, that the defenders Low & Company obtained the security of Sutherland for Thomson's debt, and Sutherland in exchange received Thomson's Dysart property for what it was worth, and Thomson's other creditors are deprived of that property. The whole benefit accrued to Low & Company, and the loss to Thomson's other creditors, and also to Sutherland if the value of the Dysart property burdened by the bond for £500 should prove to be less than Thomson's debt to Low & Company. This, however, is not an action of reduction by Thomson's trustee, and he has not as yet taken any step to recover the Dysart property. I do not suggest that he could have done so, seeing that it might be maintained that the disposition to Sutherland was an onerous deed.

This action is by the cautioner Benjamin Sutherland, who was at the date of the bond a very frail old man, and who seeks reduction on the grounds which have been stated.”

[ His Lordship then considered the pursuer's plea (3) as to the detective execution of the deed, which his Lordship held not to be established]—“On the other grounds of reduction, however, I have come to a different conclusion, and think that the pursuer is entitled to prevail, although the point is narrow and not free from difficulty. It was no doubt natural and legitimate that Low & Company, who have been represented in this case by Mr John Low, should endeavour to get security for the debt due to them by Thomson; and no objection can be taken to Mr Low's request or demand that Thomson should procure such security, and that he should procure the security of his brother-in-law, if Low did not know—as he says he did not—of his great age and frail condition. But when the idea occurred to Low—it was to him and not to Thomson that the idea occurred—that Sutherland might be protected really or apparently by a disposition of Thomson's Dysart property, he came perilously near to a fraud on Thomson's other creditors. That, however, is not the question here raised, which is about fraud said to have been practised on Sutherland, not on Thomson's creditors.

Now, it is clear that Mr John Low never saw Sutherland, and any influence which he may have exerted to induce Sutherland to sign the bond must have been exerted through the instrumentality of Thomson. The first question therefore is whether Thomson induced Sutherland to sign the bond, and how he did so, and the second is whether Low and W. M. Low & Company, Limited, are implicated in or answerable for the acts or representations of Thomson.

But, in the first place, it is of course necessary to advert to the mental and bodily condition of Sutherland. I unfortunately did not see him because he was not able to come to the Court, and it was necessary to take his evidence on commission. I do not think it proved that he was quite incapable of understanding the deed, or that he had not some idea about its nature. Indeed, the pursuer does not make that case on record, and does not plead that the deed was not Sutherland's deed. But he avers and pleads that he was feeble and easily imposed on, and that, in my opinion, has been proved. He was seventy-eight years old, and had apparently fallen into a condition of senility. Thomson was his brother-in-law, Mrs Thomson his sister, and Jane A. Thomson (Thomson's daughter) his niece and housekeeper. On this old man, Thomson, by arrangement with Low, called on 21st March, and he asked him to become security for him (Thomson). Thomson says that the sum he mentioned was £200. Considering the connection between them, it may be that Thomson thought that his request was not extravagantly unreasonable, and was one with which he might fairly hope that Sutherland would comply. But there is no doubt that on this occasion Sutherland did not consent, but declined to comply without consulting Mr Patrick Blair, W.S. Sutherland had been for many years in the service of Mr Blair and his father, and he was accustomed to consult Mr Blair whenever any business had to be done, and there could be nothing more natural and reasonable than that he should desire to consult him when asked to do so serious a thing as to sign a bond of caution. On getting this answer Thomson did not then press his request further, but called on Low & Company at their office in Leith, where he saw Mr John Low, and informed him that Sutherland would not sign the bond without Mr Blair's advice. One might have expected that Mr Low would have recognised the reasonableness and propriety of Sutherland consulting Mr Blair on the occasion, and might have expressed his approval of that course, and so through Thomson's intervention have encouraged Sutherland to follow it. That would have been an honest course to take, although I do not say that Low was under a legal obligation to take it. But it is clear that Mr Low did not do that. He told Thomson that Sutherland would incur no danger, and that if the matter were fully explained to him there would be no difficulty. Mr

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Low's evidence does not strike me as perfectly frank, but I cannot doubt that he at least discouraged the idea of consulting Mr Blair. It is impossible to doubt that he felt that if Mr Blair were consulted there was little chance of the bond being executed, and that he sent Thomson back to Sutherland in order to persuade him that he incurred little or no risk in signing the bond, and that he might do it without consulting Mr Blair.

After this interview with Mr Low, Thomson returned to Sutherland's house, having with him the bond prepared and ready for execution. Thomson depones that he then repeated to Sutherland what Low had said to him, namely, that there was no necessity for Mr Blair knowing anything about it, and that all that was wanted was his name. Mrs Thomson and Jane Thomson, who were present, substantially corroborate that evidence, and although I agree that the evidence of the Thomsons is not above suspicion, it is consistent with Low's evidence, or nearly so, and I think I may hold that Thomson is substantially correct in his account of what he said to Sutherland.( ¹) Sutherland then signed the bond without consulting Mr Blair, persuaded to do so—as may be fairly presumed—by what Thomson had said …

A creditor or his debtor may be under no absolute obligation to make a full disclosure to a person who agrees to be a cautioner, But if a creditor or debtor actively dissuades the cautioner from consulting his legal adviser, then I think that very little more is necessary to warrant reduction. Although there may be no absolute duty of disclosure in a contract of surety, yet (to adopt the words of Justice Fry in Davis v. The Provincial Marine Insurance Company, February 28, 1878, 8 Ch. Div. 469, 475, quoted by the pursuer's counsel) very little said which ought not to have been said, and very little omitted which ought to have been said, will avoid the deed. On this point the pursuer referred also to Owen v. Homan, 1852, 4 H.L. Ca. 997, 1033.

Mr Low explains that he considered that Sutherland undertook no risk because of the conveyance by Thomson of the Dysart property, but I think that reason quite insufficient. There has been no reliable proof of the value of that property, and it appears to have been burdened with the full sum which could be borrowed over it, and there is no adequate proof that it was worth more, certainly none that it was worth the sum in the bond.

I am therefore of opinion that—having in view the facility of Sutherland, the fact, which I think of great importance, that Sutherland was prevented from consulting his law-agent, and the false representation that he incurred no risk in signing the bond—enough has been proved to warrant the reduction of the deed in a question with Thomson, and as it appears to me that Thomson but repeated what Low had told him, with the view that he should repeat it to Sutherland, I think that the deed must be reduced in a question with Low also. I have assumed that Low in this matter binds the Company by what he said and did. The contrary has not been pleaded or argued. I am of opinion on these grounds that plea 1 ( b) and ( c) and plea 2 for the pursuer should be sustained, and plea 3 repelled.

I understood the pursuer to argue further that the deed ought to be reduced apart from all connection of Low or Low & Company with the representations of Thomson, on the ground that Low & Company are not entitled to retain any benefit derived from Thomson's fraud in terms of the brocard nemo debet locupletari aliena jactura, referring to Clydesdale Bank v. Paul, March 8, 1877, 4 R. 626, and Wardlaw v. Dunlop, June 10, 1859, 21 D. 940. I am disposed to think that this argument is well founded and applicable to the circumstances. Perhaps it is not very well pleaded, although I think the pleas may cover it.

The pursuer lodged a minute to the effect that if the bond were reduced he undertook to execute and deliver in favour of the trustee for the creditors of Robert Thomson a disposition of the Dysart property which was conveyed by Robert Thomson to Sutherland. It is clear that the obligation to do so follows from reduction of the bond of caution.”

The defenders reclaimed, and argued—Even if the deed fell to be reduced in a question between the pursuer and Thomson as having been procured by the misrepresentations of the latter, it should not be reduced as in a question with Low, unless it were proved (which it was not) that he had employed Thomson as his agent to make the misrepresentations to the pursuer— Hamilton v. Watson, March 11, 1845, 4 Bell's App. 67;

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(1) Thomson deponed as follows:—After Sutherland told me he could not be cautioner without consulting Mr Blair. I went to the Leith office of Low & Company and reported the result of my meeting with Sutherland to Mr John Low. I told what I have said to-day. Mr Low said it was not necessary that Mr Blair should know anything about it, that possibly the money would never be called for, and at least I would have two years to pay it. I would have the interest to pay during the two years, but not the cautioner. When I had that conversation with Mr John Low, Mr William Low was in the room for a short time. He is a brother of Mr John Low. Mr John Low said, if I got the security they were to keep me supplied with wood, so that I would not need to stop. The bond was then handed to me by Mr Low. That was the first time I had had the bond. Mr Low asked me to go up and see Mr Sutherland to see if I could get him to sign it. I left the office in company with Mr Low and we went along to the foot of Leith Walk together. When we got to the foot of Leith Walk I intended taking a car up, and Mr Low said I would not have time. We then went along to a restaurant and had a refresh, at his expense, and then he got a cab for me and I got into it with the bond. I went up to Sutherland to get him to sign it. Mr Low paid for the cab. When I arrived at Sutherland's, I told Sutherland what Mr Low had said to me—namely, that there was no necessity for Mr Blair knowing anything about it, that he would never likely be called upon to pay anything, and all that was wanted was his name. I told him that I would have two years to pay it, and would have to pay the interest in the interval.

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Railton v. Matthew, June 14, 1844, 3 Bell's App. 56; Young v. Clydesdale Bank, December 6, 1889, 17 R. 231; Wallace's Factor v. M'Kissock, February 23, 1898, 25 R. 642, per Lord M'Laren at p. 652.

Argued for the pursuer and respondent—It was established by the evidence that Low had instructed Thomson to make the misrepresentations by which the pursuer was induced to sign the deed. If that were so, the case was the same as if Low had himself made the statements to the pursuer. In any view the non-disclosure of Thomson's circumstances—the fact that he was insolvent—was sufficient as in a question with the proposed cautioner to void the deed— Owen & Gatch v. Homan (1853), 4 H.L. Ca. 997, per Lord Chancellor Cranworth, at p. 1033; Davies v. London and Provincial Marine Insurance Company (1878), 8 Ch D 469, per Fry, J., at p. 475. Alternatively, Low was not entitled to retain a benefit derived from Thomson's fraud, on the principle quod nemo debet locupletari aliena jactura; Clydesdale Bank v. Paul, March 8, 1877, 4 R. 626; Wardlaw v. Mackenzie, June 10, 1859, 21 D. 940.

At advising—