Scottish Court of Session Decisions

This was an action at the instance of H. T. Van Laun & Company, merchants and freight contractors, 1 St Helen's Place, Bishopsgate Within, London, of which firm Henry Theodore Van Laun was the sole partner, against Messrs Neilson, Reid, & Company, Messrs Dubs & Company, and Messrs Sharpe, Stewart, & Company, Limited, all engineers in Glasgow, concluding for payment of £34,207 in name of commission for services rendered in connection with the amalgamation of these firms.

The pursuers averred that in November 1899 they wrote to each of the defenders asking if they would be disposed to considera proposal for amalgamation of their business with a firm whose business was analogous in character, and pointing out the advantages of such amalgamation. Letters passed between the parties, and some meetings took place, and Messrs Van Laun & Company and the partner of that firm averred that they were instructed by each of the said three firms to arrange for an amalgamation of their different businesses, and they undertook the work. The terms upon which “they” were employed by the said firms were contained in a memorandum of agreement, copy of which was handed to and approved by each of the said firms. Said agreement is as follows:—“The undersigned firms agree that they will enter into a proper legal contract, when prepared, with Messrs H. T. Van Laun & Company for the purpose of placing in their hands the conduct of the amalgamation of their businesses, the basis of the amalgamation being—… ‘(3) That the undersigned firms undertake, in the event of the amalgamation being carried out, that Messrs H. T. Van Laun & Company shall be paid 2 1 2 per cent. on the total amount paid to the vendors for their services in the matter, subject to deduction of the reasonable costs of advertising the new company. (4) Any capital which is necessary to be found shall be left to Messrs Van Laun & Company to negotiate, underwrite, or find subscribers for, it being understood that any commission which may have to be paid on this capital will have to be paid out of the capital of the amalgamated company, and not from the 2 1 2 per cent. commission above referred to. (5) The payment of the commission

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of 2 1 2 per cent. is only payable in the event of the amalgamation going through.’” They and the three firms “acted upon this agreement, which was treated by all parties as binding upon them.”

This memorandum of agreement was not signed and no formal contract as stipulated for by it was ever prepared. In January 1900 the three firms intimated that they did not see their way to amalgamate.

On 12th February 1903 the North British Locomotive Company, Limited, was incorporated, and acquired the businesses of the three firms, who were paid £1,368,311.

The defenders pleaded that the pursuers' averments were irrelevant, and upon 19th November 1903 the Lord Ordinary ( Low) issued an interlocutor sustaining this plea and dismissing the action.

The pursuers reclaimed, and before the hearing made amendments upon their record. They averred—“(4) Prior to said agreement [v. sup.] the pursuer Van Laun had brought the different firms together through their representatives. … In or about January 1900 the defenders, the said firms, intimated to the pursuers that they did not see their way to amalgamate. … Notwithstanding the said intimation to the pursuers, the defenders availed themselves of the services rendered by the pursuers, and have now effected an amalgamation. … (6) The amalgamation of the defenders' firms is the direct result of the efforts of the pursuer Mr Van Laun. It has been carried out on the lines suggested by him. But for the pursuer's intervention, the said firms, which were extremely jealous of each other, would not have proposed amalgamation. The said pursuer has always been ready and willing to give any further services required of him in terms of the agreement founded upon, but the defenders did not require from him such services. On the contrary, they did not even communicate to him the fact that his services had been successful in bringing about an amalgamation, and so endeavoured to deprive him of his commission. The defenders refrained from communicating with the pursuers with a view to benefiting by the services already rendered and avoiding paying the commission agreed upon. The defenders knew that the pursuers were willing, if called upon, to render any further services that might be required of them under the agreement. The pursuers have called on the defenders to pay the commission earned, but as they refuse to do so the present action has been rendered necessary. Alternatively, … In any event, the pursuers are entitled to a quantum meruit in respect of the services rendered by them to the defenders. Looking to the fact that the pursuers' services initiated and ultimately led to the successful amalgamation of the defenders, the sum sued for is reasonable. The services so rendered were on the employment of the defenders.”

They also added the following plea-in-law:—“(5) In any event the pursuers are entitled to quantum meruit.”

Argued for the reclaimers—The services rendered to the defenders were alleged to have been very valuable. It was averred they had brought about the amalgamation and that it was only owing to the bad faith of the defenders that the transaction had not followed its natural course leading to the earning of the commission. In such circumstances the Court would allow inquiry— Walker, Donald, & Company v. Birrell, Stenhouse, & Company, December 21, 1883, 11 R. 369, 21 S.L.R. 252; Kennedy v. Glass, July 31, 1890, 17 R. 1085, 27 S.L.R. 838; Menzies, Bruce-Low, & Thomson v. M'Lennan, January 25, 1895, 22. R. 299, 32 S.L.R. 231.

Argued for the respondents—The action was irrelevant. Quantum meruit was only known ( a) where there had been an express contract and employment had followed it, but as the terms of the contract did not meet the circumstances which had arisen, it failed; or then ( b) where there had been employment upon an implied contract, when the employment must be in some recognised business, e.g., that of a broker— Harrison v. James, 1862, 7 Hurlstone & Norman, 804; Smith's Leading Cases, 11th ed., vol. 2, p. 23; and cases cit. sup. Here there was no contract, express or implied, and no employment, for the pursuers' actings were at his own instance.