Scottish Court of Session Decisions

This was an action of damages for slander at the instance of John Ralston Cunningham junior, merchant, Glasgow, against George Skinner, baker, Glasgow, and others.

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The defenders pleaded, inter alia, as follows:—“(1) The pursuer should be ordained to find caution in respect that he is vergens ad inopiam, and in respect of the nimious actions which he has raised against the present defenders. (4) The pursuer's statements being irrelevant the action should be dismissed. (4) ( a) Res judicata. (5) Mora. (6) The statements complained of … being privileged, et separatim not being slanderous, decree of absolvitor should be pronounced.”

The slander complained of was alleged by the pursuer to be contained in a certain memorandum dated 21st September 1891, and issued by the defenders, who along with certain other persons had been appointed as a committee to investigate the financial position of a company called the Solana Mining Company, Limited, of which the pursuer was formerly managing director.

The pursuer averred that the Solana Mining Company, Limited, was incorporated under the Companies Acts on 10th July 1889; that its capital was £30,000 divided into 6000 ordinary shares, of which the pursuer held 5639; that it also issued debenture stock which was held by the pursuer, the defenders, and others; that on 29th January 1891 the committee above mentioned was appointed; that they issued a report in which they recommended that the working of the mines should be continued, and that additional capital should be raised; that this report was approved by the share and debenture-holders; that the defenders and the other members of the committee formed a fraudulent design of throwing the company into liquidation, their object being to take advantage of a preference which the pursuer by an agreement had accorded to their holdings in the company's stock—although the basis of that agreement had been that the company was to be carried on—and to sell the company's assets at a small figure to a syndicate in which they were interested; that the company went into voluntary liquidation on 28th May 1891, and that the liquidation was placed under the supervision of the Court on 19th December 1891; and that the sale of the company's assets was effected, and the pursuer's interests in the company sacrificed.

The pursuer then set forth the memorandum of which he complained, and which he alleged was maliciously framed and circulated by the defenders in order to accomplish their ends and discredit the pursuer.

This memorandum contained, inter alia, the following allegations against the pursuer:—“For instance, although Mr Cunningham undertook to carry on the company without remuneration, it was found that the sum he charged and was allowed in name of office expenses, secretary's salary, &c., was much in excess of what was either required or disbursed. The list of the company's debts in Britain as submitted by him was inaccurate, a large item having been omitted though the creditor was pressing hard for his money. Further, it came to light that considerable amounts had been paid away in Spain really in connection with Mr Cunningham's private business, but had been charged to the company, and also that much of the time of Mr Findlay, the clerk at the mines, had been occupied with such business. … A more remarkable departure, however, from the line of duty which should have been followed by Mr Cunningham as managing director consisted in his habitual and deliberate exclusion from the ordinary business correspondence falling to be submitted to his directors, of those financial details which would have awakened the suspicion or alarm of the board. Mr Cunningham gave written instructions, repeated and re-enjoined at various dates, to the officials of the company in Spain to write to him privately upon the difficulties of the company arising from want of funds and otherwise. This was complied with. Only after great delay and difficulty was this private correspondence obtained from the mines, Mr Cunningham having refused to hand over the letters in his hands. This correspondence, which is as extensive as the so-called ‘ official’ correspondence, was never submitted to the directors, who were quite ignorant of its existence. In the meantime it is deemed unnecessary to print extracts from these letters, but they may be seen in the liquidator's hands. These letters disclose that the company had been utterly unprovided with the necessary means for carrying on its business; that there were incessant calls from the mines for funds to meet overdue wages and current expenses; and that in consequence the management and the working had got into a disorganised state. … From the facts above set forth it will be seen that the decision of the committee to liquidate the company arose from two causes, either of which was sufficient justification for the course adopted—(1) the financial embarrassment of the company, (2) the policy of concealment which Mr Cunningham was found to be adopting towards the directors and the committee. In brief, the committee which Mr Cunningham so seriously maligns commenced their work with an earnest endeavour to extricate Mr Cunningham and the company from a desperate position. They were at first hopeful of success, and had Mr Cunningham's demeanour and conduct been straightforward their efforts might have succeeded, but as damaging facts, one after the other, in regard to Mr Cunningham's conduct and management came under their notice they were most reluctantly compelled to acknowledge that any attempt to carry on the company would have resulted in general dissatisfaction and great loss of money. Even had the financial difficulty not been an overwhelming one, conduct of the kind above described on the part of a director would have been sufficient to endanger the safety of any undertaking.” …

The memorandum bore to be a reply to a report issued by the pursuer to the shareholders on 7th September 1891. The pursuer admitted that he had issued this report. In it he alleged that the liquidation

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had been brought about from a desire to reduce his holding to a minimum figure; that an agreement by which he surrendered his control over the company was obtained from him in an altogether unfair manner; that the policy pursued by the committee had been a secret policy; that their aim was to get his shares into their hands so that they might be able to wind up the company regardless alike of his interests and of those of the debenture-holders; and that he had reason to believe that the members of the committee entertained a good opinion of the mines, and that their action had not been dictated by the opinion that the mines were not worth carrying on. The committee in their memorandum denied these imputations.

With regard to the memorandum, the pursuer averred as follows:—“Said memorandum above quoted is of and concerning the pursuer, and falsely, maliciously, and calumniously represents, and was intended by the defenders to represent, that (1) the pursuer had been guilty of fraud and dishonesty, and that his character was such as to render him unfit to be connected with the management of any company. In particular, the said circular represents that the pursuer had defrauded the company by fraudulently charging for office expenses sums not required for that purpose, and not so disbursed; (2) that the pursuer had fraudulently applied the funds of the company in connection with his own private business, and had charged the payments against the company; (3) that the pursuer fraudulently employed Mr Findlay in the joint service of himself and the company, whilst falsely representing to the directors that Mr Findlay was in the sole employment of the company, and charging the whole of Mr Findlay's salary against the company; (4) that the pursuer had fraudulently misrepresented the financial position of the company to his co-directors, or concealed the same from them, and had fraudulently and dishonourably concealed from them a secret correspondence carried on by him with the officials of the company in Spain; (5) that the pursuer's demeanour and conduct had not been straightforward, meaning thereby that it had been dishonest, and that such damaging facts had come to the knowledge of the defenders with regard to the pursuer's conduct and management as to render it impossible to carry on the company, meaning thereby that the pursuer's conduct and management had been fraudulent; that the pursuer had abused his position as a director of the company and been guilty of conduct which would have been sufficient to endanger the safety of any company on whose directorate the pursuer had a place, meaning thereby that the pursuer's conduct as a director had been dishonest. The said circular was hurriedly framed and issued by the defenders without any inquiry being made as to the truth of the statements made therein. The said false and slanderous statements were made by the defenders in the knowledge that they were false. They were made maliciously and without probable or any cause.”

The pursuer also averred as follows:—“In consequence of the said statements printed and circulated by the defenders, or with their authority, as above stated, the pursuer has suffered severely in his feelings, character, and commercial credit, and has suffered loss and damage to the extent of £20,000. The pursuer has found it utterly impossible to do any business owing to the publicity given to the said false and malicious charges, and he in 1892 raised an action in the Court of Session to vindicate his character therefrom, and to obtain reparation for the injuries he had suffered thereby. In that action the defenders succeeded in getting pursuer ordained to find caution, and on his failure to do so it was dismissed. The pursuer [who had been sequestrated on 28th December 1891] for years was opposed by the defenders, particularly by the said John Mann junior and George Skinner, and also by John Munn Ross, C.A., Glasgow, trustee in pursuer's sequestration, in his attempt to obtain his discharge in his sequestration, and it was only after great outlay, and overcoming the greatest possible opposition, that he got his discharge on or about 21st December 1896. The pursuer's books and papers were retained by his said trustee, who denied him access to them that he might obtain the necessary data for furthering his petition for discharge, and for carrying on his business afresh, and it was only after protracted litigation in the Sheriff Court and Court of Session that the pursuer recently obtained delivery of his books and papers and was awarded expenses. Thereupon, although well aware that their claim had been settled, the defender John Mann junior, on his own behalf and on behalf of and at the instigation of the other defenders, maliciously and fraudulently arrested the aforesaid expenses on the plea that the pursuer was still owing them the sum of £65 in respect of legal proceedings against them in 1892. The First Division recalled the arrestments, with expenses against the defenders, on 3rd June 1900. The pursuer believes and avers that the said defender John Mann junior raised this fictitious claim solely for the purpose of delaying or blocking the pursuer's proceedings to recover his position and property. The delay in bringing the present action is entirely due to these and other tactics of the defenders and the said John Munn Ross. The pursuer finds that the charges are still current, and that he has no alternative but to vindicate himself from them.”

It appeared that the action of slander raised by the pursuer against the defenders in 1892, and referred to by the pursuer supra, was in substance and to a great extent in terms identical with the present, and raised the same question. It was signeted on 21st November 1891. On 28th December thereafter the pursuer's estates were sequestrated; on 16th February intimation of the dependence of the action was ordered to be made to the trustee, who declined to sist himself. On 3rd March 1892 the pursuer was ordained to find caution for expenses.

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He failed to find caution, and in respect of his default an interlocutor was pronounced on 15th March 1892 dismissing the action. The pursuer had since paid the expenses awarded against him in this action.

The defenders averred that the pursuer was continually engaged in reckless litigation; that he had brought sixteen unsuccessful actions; and that he was vergens ad inopiam.

By interlocutor dated 20th November 1901 the Lord Ordinary ( Kincairney) repelled the defenders' preliminary pleas and approved of two issues, and appointed them to be the issues for the trial of the cause.

The issues approved by the Lord Ordinary were as follows:—“Whether on or about 21st September 1891 the defenders, or any and which of them, framed, subscribed, and circulated a memorandum or statement in the terms set forth in the schedule appended hereto; whether the said memorandum or statement is in whole or in part of and concerning the pursuer, and falsely, maliciously, and calumniously represents that the pursuer had been guilty of fraud and dishonesty, and in particular that he had defrauded the Solana Mining Company, Limited, by fraudulently charging for office expenses sums not required for that purpose and not so disbursed, to the loss, injury, and damage of the pursuer? Damages laid at £10,000 sterling. 2. Whether the said memorandum or statement is in whole or in part of and concerning the pursuer, and falsely, maliciously, and calumniously represents that the pursuer had fraudulently applied the funds of the said company in connection with his own private business and had charged the payments against the said company, to the loss, injury, and damage of the pursuer? Damages laid at £10,000 sterling.”

The defenders reclaimed.

The pursuer gave notice of a motion to vary the terms of the issues approved of by the Lord Ordinary by deleting from each of them the word “maliciously.”

Argued for the defenders—(1) As to Relevancy. There was no libel at all in the report. The statements in it did not bear the innuendo sought to be put upon them. No charge of fraud was made, nor was it said that the pursuer was appropriating money to his own use. The inference suggested by the innuendo was not the inference which reasonable persons would draw on reading the report, and that was the criterion to be looked to— Capital and Counties Bank v. Henty (1882), 7 App. Cas. 741. The statements complained of were made in answer to pursuer's attack on the defenders contained in the statement issued by him to the shareholders of the company. The defenders' statements were made by way of fair retort, and so did not ground an action of libel. The statement must be read as a whole, and the pursuer was not entitled to pick out casual expressions and found on them— Gray v. Society for Prevention of Cruelty to Animals, July 18, 1890, 17 R. 1185, 27 S.L.R. 906; Laughton v. Bishop of Sodor and Man, L.R., 4 P.C. App. 495. The memorandum was not circulated to outsiders, but only to parties interested in the company affairs. In any view the statements were privileged, and malice ought to be inserted in the issues. (2) As to Res Judicata.—In the former action the decree should have been one of absolvitor and not one of dismissal— Gray v. Ireland, July 18, 1884, 11 R. 1104, 21 S.L.R. 766; Teulon v. Seaton, June 30, 1885, 12 R. 1179, 22 S.L.R. 786. A decree by default is a decree in foro, and can only be got rid of by a reclaiming-note— Forrest v. Dunlop, October 15, 1875, 3 R 15, 13 S. L.R. 2. In the present case a wrong decree had been pronounced in error, but the Court could competently deal with the case as if the appropriate and proper decree ( i.e., one of absolvitor) had been in fact pronounced— Shirrefj v. Brodie, May 24, 1836, 14 S. 825. The pursuer was virtually bringing the same action on a new summons—the only difference being the innuendo which was now sought to be put upon the statements in the memorandum. (3) As to Caution.—The law as to this was clear, viz., that it was always a question for the discretion of the Court which would be exercised in view of the facts and circumstances of each case, and among such circumstances long delay in bringing the action should be considered. The pursuer here had delayed bringing his action for ten years. The pursuer was a reckless litigant. He had had no fewer than sixteen litigations, in all of which he had been unsuccessful. The defenders had in the interval lost valuable evidence that would have been originally available. In these circumstances the pursuer should be ordained to find caution for expenses— Ritchie v. M'Intosh, June 2, 1881, 8 R. 747 ( per Lord Young), 18 S.L.R. 528; Clarke v. Muller, January 16, 1884, 11 R. 418, 21 S.L.R. 290; Collier v. Ritchie & Company, November 4, 1884, 12 R. 47, 22 S.L.R. 38; Teulon v. Seaton ( ut supra); Scott v. Roy, July 15, 1886, 13 R. 1173, 23 S.L.R. 855; Borthwick on Libel, p. 388.

The Court only called for a reply on the questions of Res judicata, Mora, and caution.

Argued for the pursuer— As to Res Judicata—A decree of dismissal could never be res judicata. The defenders had asked for a decree of dismissal, and had acquiesced in it. If a defender was content with and acquiesced in a decree of dismissal he could not afterwards raise it into a decree of absolvitor— Wilson v. Magistrates of Musselburgh, February 22, 1868, 6 Macph. 483; Stewart v. Greenock Harbour Trustees, June 26, 1868, 6 Macph. 954; Gow v. M'Ewan, January 26, 1897, 2 Adam 215, 34 S.L.R. 421. Except under the statute authorising abandonment a pursuer could not abandon by withdrawing a conclusion except on the footing that the defender got absolvitor— Earl of Ancaster v. Sandeman, November 7, 1893, 1 S.L.T. 291. Although a decree of absolvitor had been pronounced the Court would consider the grounds upon which it was granted, and if it were granted for failure to obey an order of Court, then it would not be res judicata

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— Millie v. Millie, November 27, 1801, M. 12,176, affd. March 18, 1807, 5 Pat. App. 160; Leith v. Leith, June 7, 1822, 1 S. 468; Clark v. Newmarch, November 17, 1825, 4 S. 182. It was only where the merits had been inquired into that the plea of res judicata would be sustained— Jenkins v. Robertson, April 5, 1867, 5 Macph. (H.L.) 27. But the Court could not competently go behind its own interlocutor. The cases cited on both sides showed that though the circumstances were similar, a decree of absolvitor had been pronounced in some and a decree of dismissal in others. There was therefore no inflexible rule. The case of Shirreff (cited supra) was a case of clerical error, and so not in point. 2. As to Mora—The pursuer was not an undischarged bankrupt. He was now discharged, and had also paid the expenses in which he had been found liable. As soon as he got his discharge he sought to recover the documents and papers necessary to enable him to raise an action, but the defenders refused to produce them, and he had to sue for them. Therefore it was solely due to the fault of the defenders that he had not brought the action sooner. Mora by itself was not a ground for throwing out an action— Moncrieff v. Waugh, January 11, 1859, 21 D. 216; Gourlay v. Wright, June 23, 1864, 2 Macph. 1284; Cuninghaine v. Boswell, May 29, 1868, 6 Macph. 890.

At advising—