Page: 628↓
[
Facts:
Held per Lord Pearson (1) that the ordinary members of a social club, in the absence of special circumstances, are not liable for goods supplied to the club on the orders of the clubmaster; but (2) that the members of the committee, which passed the accounts for payment in ordinary course, and whose members had general knowledge that the supplies necessary for the club's existence were being given by the particular tradesman, were liable; and (3) that such liability was not pro rata but joint and several.
On 26th February 1904 Thomson & Gillespie, wine merchants, Edinburgh, and Alexander Scott Cairns, sole partner of that firm, raised an action against (1) the Victoria Eighty Club, 25 Dundas Street, Edinburgh, (2) Robert G. Armstrong and others, the members of the committee of the Club, and (3) the said Robert G. Armstrong and others, the known members of the Club, in which they sought to recover £165 (subsequently restricted owing to a payment to £120), the balance due to them on account of liquor supplied to the Club. Seventeen of the members called appeared to defend, including R. W. Millar, who was a member of committee. No appearance was entered or defences lodged for the Club or the Committee of Management. The conclusion of the summons against the Club was not insisted in, as it had apparently no funds.
The pursuers pleaded—“(1) The account sued for having been incurred for behoof of the members of the Victoria Eighty Club, and being due and resting-owing to the pursuers, and the second defenders being at present the committee having the management of the affairs of the said Club, the pursuers are entitled to decree in terms of the first conclusion of the summons with interest and expenses. (2) Such of the third defenders, the members of said Club, as were members of committee during the currency of said account, are conjunctly and severally, or severally, or in any view pro rata, liable as individuals in payment of
Page: 629↓
said account in respect that ( a) they ordered and contracted to pay for the goods, ( b) they procured the said goods on credit in knowledge of the insufficiency of the Club funds. (3) The third defenders, the members of said Club, having authorised and delegated to the committee the ordering of the goods in question, and separatim having acquiesced in said goods being got on credit notwithstanding the insufficiency of the Club funds, are conjunctly and severally, or severally, or in any view in equal shares and proportions, liable for payment of the price of said goods.” The facts of the case and the arguments of parties sufficiently appear from the Lord Ordinary's opinion.
He calls three sets of defenders, namely, (1) the Club itself; (2) the office-bearers and other members of the committee of the Club as at the date of raising the action, as such committee, and as representing the Club; and (3) the whole members of the Club (some 98 in number including the pursuer himself), so far as known to the pursuer, as such members and as individuals.
There are two alternative conclusions for payment. The first is directed against the first and second sets of defenders, and is for payment of the account out of the funds of the Club. The second alternative is directed against the third set of defenders as members of the Club, and as individuals, and decree is asked against them ‘conjunctly and severally, or severally, or otherwise pro rata and in equal shares.’ The Club having admittedly no funds, the pursuer chooses the second alternative, and moves for decree accordingly, and this jointly and severally, which he maintains is the true character of their liability. Further, it is to be noted that while the defenders called in the third place are called expressly ‘as members of the said Club and as individuals,’ the pursuer's pleas-in-law draw a distinction between the members of the Club generally and such of them as were committee-men during the currency of the account sued on. This distinction is not expressed in the summons, but as the conclusion is for payment by them not only as members of the Club, but also as individuals, I think it may be held competent to treat it as including a conclusion for individual liability against the members of committee. I understand that of the 98 defenders called in the third place, eighteen were members of committee, and the rest were ordinary members, and that of the seventeen compearing defenders one (R. W. Millar) was a committee-man and the rest ordinary members.
Stated briefly, the material facts as to the Club and the pursuer's connection with it are as follows. It wag formed on 31st May 1899, the entry-money being 5s. (afterwards raised to 10s.), and the annual subscription 5s. At the close of the first year there were one hundred and seventy members. In pursuance of the rules, there was a committee of twenty-one, consisting of the three office-bearers and eighteen members, one-third retiring annually. The committee had the management of the whole affairs of the Club, with full power to provide and alter the furnishings, to provide periodicals, and to purchase liquors. They had power to appoint sub-committees. The pursuer supplied liquors to the Club from about March 1900. As he had friends in the Club and was getting orders from it, he became a member of it sometime in 1902, and so continued for about six months, when he sent in his resignation, which does not appear to have been formally accepted. He did not use the Club; but he got the printed report and balance-sheet of May 1902, from which he says he saw that the Club was going back and was practically insolvent.
The account now sued on is for liquor supplied between 6th September 1902 and 8th August 1903, under deduction of certain payments to account. About two years previously, when he began supplying the Club, he gave one-month's credit, and was for a short time punctually paid. But the period was gradually extended, and he kept on sending supplies, believing (as he was assured by the clubmaster Angus M'Leod) that all the members were liable, or (as the pursuer puts it) that the committee gave M'Leod orders and that the Club were responsible. All the orders were given through the clubmaster personally, and were upon a printed form and signed by him. It does not appear what the precise form of order was. In so ordering supplies the clubmaster acted upon the instructions of the committee to this extent, that they told him what tradesmen to employ, and instructed him to order supplies as necessary; and the invoices from the tradesmen were laid before the committee, who passed them for payment, the cheques being signed by two of the office-bearers. When the account fell into arrear, the pursuer, though not pressing, wrote several times for payment, and succeeded iu getting certain payments to account, which are now credited.
I consider first the claim made against the ordinary members. This is an action on contract for the price of goods sold and delivered by the pursuer, and the question is, who the other contracting party was. The question who is in law liable to pay for supplies furnished to a club has not been much canvassed in Scotland. The course of the English decisions, of which there are now a good many, shows the necessity of having careful regard to the circumstances of each case, including the rules of the particular club. But subject to this (which I shall consider presently) they have also resulted in establishing what I may call the prima facie legal view of such contracts as are here in question, as determined by
Page: 630↓
But it is said that the special circumstances of the present case as disclosed in the proof are sufficient to fix the Club members as such with responsibility. The pursuer has devoted a large part of the proof to an attempt to show that they are liable as having authorised and approved of the committee ordering liquors from the pursuer on credit, when it was well known to all the members that the revenue of the Club was insufficient to pay for the supplies, and that there were not Club funds available for paying the account. In my opinion the pursuer has entirely failed to make good this ground of action. An attempt is made in the first place to show that the members generally must have known, and that some of them did in fact know, that the club could not subsist except on credit, inasmuch as the profits on the drink, which were necessary for carrying it on, could not be realised until some time after the drink was delivered, and even then were speculative, depending on the amount of the drawings. There is, however, no direct evidence of any ordinary member, as such, having either antecedently authorised or subsequently approved the dealing on credit, and even if they had, it would not follow that they stood committed to the pledging of their own credit. The evidence taken as a whole really amounts to no more than this, that the witnesses had an impression that the members in general recognised a responsibility, either legal or moral, to make good the payments. Nor can I hold that the pursuer's argument upon the yearly reports and balance-sheets of the club is well founded. It is said that the ordinary members knew or ought to have known from these that the Club was truly insolvent. I cannot hold that they had any duty to inquire; and therefore the question is whether they in fact knew. But it is not proved that they knew it in fact; and even those who are fixed with the knowledge of the balance sheets say, and say (as I believe) truly, that they drew no such inference. If that was what the balance sheet was intended by the committee to represent, it was most misleading. The auditors' docquet prima facie represented the very reverse; and if, as the account seems to represent, the Club could clear its liabilities even upon the depreciated or break-up value of the furnishings, much more would it be able to do so if it were to carry on successfully, as everyone concerned assumed it would be able to do. It may be observed that the pursuer, himself a member, says he regarded the balance sheet as an indication of insolvency. Perhaps not very much can be made of the circumstance that he was a member of the Club; but this at least follows from it, that he ought to have made himself acquainted with the rules, and that if he thought insolvency impending he ought to have made the more sure as to who his debtor was, and have resorted to the obvious course of calling a halt, and moving for an investigation into the propriety of continuing the Club. The view I take on the merits renders it unnecessary either to discuss the still more favourable position in which some of the ordinary members are placed by reason of special circumstances, or to dispose of the preliminary pleas taken by these defenders. They say that all those who were members of the Club during the period covered by the account have not been called as defenders; and that it results from this either that the
Page: 631↓
The pursuer pleads alternatively that in any event those who were members of the managing committee during the currency of the account cannot escape liability. As I have said, eighteen of the defenders called are alleged to be in that position; and of these, seventeen have not appeared to defend the action. The remaining one, the defender Robert W. Millar, is, of course, quite entitled to raise the question of his liability as a committee-man. The material facts as disclosed in the proof are these. Mr Millar was a member of the Club from nearly the beginning. He was elected a member of the Committee at the annual general meeting of the Club on 26th June 1900, at which he was present; and in the normal course he would be one of the committee-men retiring in July 1903. It appears that he gave attendance more or less regularly at the committee meetings until November 1902. According to his evidence he desired to have done with the Club and ceased to use it about February 1903. By non-payment of his annual subscription in May 1903 he assumed that he ceased to be a member in July of that year, it having been (as is alleged) the practice of the committee to score out the names of members after two months' default in subscription. But according to the rules there is in that state of things no ipso facto demission of membership, but merely a power to the committee to strike the names of defaulters off the roll, which so far as appears was not done in the case of Mr Millar. He received circulars after May 1903 to attend committee meetings. The general meeting summoned in July 1903, when his membership of committee should have run out subject to re-election, proved abortive for want of a quorum, and the Club went on (as I take it) with the existing state of things, summoning a special general meeting in December 1903, which likewise failed for want of a quorum. He says it was then he first heard of the pursuer's account, and he was one of those who subscribed to the levy then made of 30s. per member to raise money to pay that account. He did not send in his resignation as member of the Club until March 1904, after this action was raised. As to the financial position of the Club, he says that he had no reason to doubt its solvency, and that from the balance sheet of May 1902 he thought it was in a very fair way. As to the practice of the committee, his evidence is that the Club was worked on one month's credit. There was a refreshment sub-committee of which he was not a member; but the accounts due by the Club were laid before the committee and passed for payment every month; and usually the committee had submitted to them a comparative statement of the Club drawings from liquors for the month or quarter just ended compared with the corresponding period of the preceding year. These in the autumn of 1902 showed a great falling off as compared with the previous year. This of itself showed a serious position of matters; for obviously it was to the profit on the sale of liquors that those in the management of the Club had to look for payment of the tradesmen. Mr Millar now says that if he had realised the situation he would have called a general meeting of the members to consider the position, and that he did not do so only because he did not consider it at the time. All this time the weekly supplies were being obtained from the pursuer; and although Mr Millar says he was not aware of the particular orders or of their amount, he was aware generally that fresh orders were being given and that the Club could not be kept open unless fresh supplies of liquor were got. I cannot doubt that all this implies liability on the part of the members of committee to see the account paid, and that on the facts the clubmaster gave the orders as their agent. It is no sufficient answer to point to the pursuer's evidence as showing that he thought the Club and all its members were liable to him, and that it was on their credit that he relied. It is, of course, of some importance to ascertain who it was to whom the pursuer thought he was giving credit. But the mistake made by the pursuer was in a sense a mistake in law and does not alter the facts. The true principal can be sued when he is discovered, notwithstanding that credit was erroneously given to another—see the opinions of Lord Esher and Lord Justice Lopes on this point in Steele v. Gourlay (1887, 3 T.L.R. 772). No doubt there are cases in which certain selected committeemen have been found liable on grounds special to themselves, e.g., the personal giving of orders or the signing of cheques for payment of specific accounts to the same merchant. But it does not follow that where no such specialty exists the members of committee are not liable as such. That depends upon the course of dealing and the practice of the committee of which they are members. If the system of orders and payments adopted by the committee is such as to fix the members of committee with the general knowledge that supplies necessary to the existence of the Club were being obtained from a particular tradesman, and his accounts were passed by the committee for payment as part of their ordinary business, then I hold that the committee-men are liable, with such relief as they can obtain from the Club funds, or from the members by way of contribution. Nor do I think that there is room (in such a case of continuous weekly supplies) for distinguishing between those committeemen who were present and those who were absent from any particular meeting, as if only those who attended a meeting were liable for the accounts passed at that meeting. Then it is suggested that Mr Millar's membership of the Club or of the
Page: 632↓
This interlocutor was pronounced:—
“The Lord Ordinary having considered the cause, in respect the pursuers do not insist for decree in terms of the first alternative conclusion of the summons, dismisses the same, and decerns; and as regards the second alternative conclusion, decerns against the defender Robert W. Millar for payment to the pursuers of the sum of one hundred and twenty pounds and sixpence sterling with interest at the rate of 5 per cent. per annum from the date of citation, reserving to the said defender any right of relief which may be competent to him: Assoilzies the other compearing defenders from the said last-mentioned conclusion (other than the defender William Hill who has already been assoilzied), and decerns,” &c.
Counsel for the Pursuers— M'Lennan, K.C.—Armit. Agent— George Matthew-son, S.S.C.
Counsel for the Defenders (James Anderson and Others)— A. M. Anderson. Agent— W. P. Crow, Solicitor.
Counsel for the Defenders (A. M. Cruik-shank, R. W. Millar, and Others)— Munro. Agents— Reid & Crow, Solicitors.
Counsel for the Defenders (William Hill and Harry Raw son)—Lippe. Agents— Dalgleish & Dobbie, W.S.
Counsel for the Defender (J. G. Reid)— Munro. Agents— Reid & Crow, Solicitors.