Scottish Court of Session Decisions

Mrs Jessie Stuart Rainnie or Stewart, residing at Polnoon Street, Eaglesham, Renfrewshire, pursuer, brought an action against M'Lean, Baird, & Neilson, writers, West George Street, Glasgow, and James Alexander M'Lean, William Baird, and Robert Thomson Neilson, the individual partners of the firm, as such partners and as individuals, defenders, for, inter alia, payment of £750, being the loss which the pursuer averred she had sustained through the purchase of certain heritable property on the advice of the defender William Baird acting as her law agent.

The pursuer averred—“(Cond. 2) The pursuer was a personal friend of the defender William Baird, who had known her since she was a girl, and she was in the habit of visiting at his house before and after his marriage. In the end of the year 1898 or in the beginning of January 1899 the pursuer, while visiting at the house of the defender, the said William Baird, mentioned to him that she had £200 for which she desired an investment, and asked his advice on the matter. The pursuer stated that she had no idea of what kind of investment to select, and that she was entirely ignorant of and did not understand investment and financial matters, but suggested lending the money to the Corporation of Glasgow. The defender, the said William Baird, then advised the pursuer to invest the said £200 in the purchase of heritable property, and stated that he had a property in Govan for sale belonging to a lady friend of his who desired her money as she was getting married. The defender William Baird advised the pursuer to purchase this property. He repeatedly assured the pursuer that there was no risk whatever, and that the investment was a safe and sound one. He further stated that the property would give her a return of 10 per cent. The said defender further assured the pursuer that she would be able to get back her money whenever she wanted it. Relying upon the advice and assurances of the said defender the pursuer agreed to purchase the said property. The pursuer accordingly on 6th January 1899 paid to the defenders M'Lean, Baird, & Neilson the said sum of £200, to be invested in the purchase of said property. The said William Baird was informed by the pursuer, and he was well aware, that at that time the pursuer had no means or estate other than the said sum of £200.… Cond (4) … The price of the subjects … was £1500, £420 being paid in cash and a bond and disposition in security for the sum of £1080 over said subjects being taken over in gremio of the conveyance. The said sum of £200 formed part of the said sum of £420 and the remainder thereof, £220, was advanced by the defender, the said William Baird, on second bond over the said subjects. When the defender, the said William Baird, lent the said sum of £220 he was aware that the pursuer would eventually succeed either to heritable or moveable estate on the death of certain relatives for whom he acted as law agent. (Cond. 5) The defender, the said William Baird, when he led and induced the pursuer to go into the said purchase did

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not explain to her that she was to become personally liable under the said bonds for the sums of £1080 and £220. No valuation was shown to the pursuer at the time the property was purchased by the said M'Lean, Baird, & Neilson.… (Cond. 11) In investing the said £200 in said property the pursuer acted upon the advice of the defender William Baird. The pursuer had no knowledge with regard to the nature and liabilities of such investment, and had no business training or experience enabling her to acquire such knowledge. The said defender was aware of the nature of the proposed investment and held himself out as being in a position to advise, and did in fact advise, the pursuer with regard to the suitability and soundness of said investment. The said investment was not a safe or suitable investment and the defenders were aware of this.… In view of the price of said subjects, £1500, and the sum the pursuer had to invest, £200, and the personal liability under the said bonds amounting to £1300, and the feu-duty of £25 and other burdens, the said transaction is one which no prudent person would advise as a safe and sound investment.”

The pursuer pleaded—“(1) The pursuer having suffered loss, injury, and damage through (1) the fault, (2) the negligence, and (3) the breach of duty of the defenders is entitled to reparation.”

On 10th January 1912 the Lord Ordinary ( Cullen) assoilzied the defenders from the first conclusion of the summons.

The pursuer reclaimed, and on 30th November 1912 the Second Division recalled the interlocutor of the Lord Ordinary and remitted to him to allowa proof before answer.

On 10th June 1913 the Lord Ordinary, after a proof the import of which sufficiently appears from his opinion, again assoilzied the defenders from the first conclusion of the summons.

Opinion.—“The proof allowed by the interlocutor of the Second Division, dated 30th November 1912, has now been taken. As the result of it certain matters bearing on the case are put beyond dispute.

In the first place, there is no foundation for the pursuer's allegation that the defender Mr Baird had a personal interest in the sale to her of the tenement No. 6 Hutton Drive, Govan. It is unfortunate that the pursuer should have conceived the suspicion that Mr Baird did have such an interest, because in that suspicion there is, I think, mainly to be found the genesis of her complaints against the defenders and of the present action.

In the next place, it is clear, and is conceded, that the purchase of the tenement on its merits, as between seller and buyer, was a fair and proper transaction. The property was a new one, well built, and in a desirable neighbourhood. It was worth at least the price of £1500 paid for it. The pursuer in exchange for this price became the owner of a property of equivalent value. She was not, therefore, immediately damnified by the transaction. And for several years thereafter the property maintained its value and yielded a good return, in respect of which the defender received from the pursuer repeated expressions of gratitude. Then came bad years, when he was denounced by the pursuer as the author of her ruin.

In the next place, it is, I think, clear enough that while the property was worth its price when bought, there were no circumstances attending it calculated to give rise, in the mind of a person of reasonable prudence and foresight, to the apprehension that it was not likely to maintain its value. It was, as I have said, new, well built, and in an eligible neighbourhood. It was fully let. It maintained its value for several years. The depreciation which ultimately ensued was due to no vice in the property itself but to general causes. These were that Govan became overbuilt for its needs in this class of property, and that there came a general ‘slump’ or depression—indeed stagnation—in the property market, which has not, unfortunately, been confined to Govan, but has equally affected Glasgow and many other towns.

In the next place, the defender Mr Baird acted in perfect good faith towards the pursuer. She was an old friend. He was kindly disposed towards her and desired to do her a good turn. He lent her £220 to enable her to make the purchase, for which she gave him a second bond ranking after the first bond for £1080.

In these circumstances the pursuer's case does not rest on any negligence or breach of duty on the defender's part in the selection of the particular property which she purchased. It was an eligible property as a subject for the kind of investment which was made of her money.

The pursuer's case, however, is that Mr Baird should not have allowed her, so to speak, to embark her money in that kind of investment at all, no matter how sound in itself was the purchase of the property which formed the subject of it. And the ground she advances comes, I think, to this, that in the event of a depreciation from unforeseen causes of the value of the property, the pursuer stood exposed to the risk of not only losing her £200, but of being called on to make good the personal obligations under the bonds. She says that it was the duty of Mr Baird to bring under her notice the matter of her personal liability on the bonds, and that he failed to do so.

That the pursuer must have realised well enough that she might, through a fall in the value of the property, lose part or all of her £200 goes without saying. She was purchasing a heritable property, and the risk of depreciation in its market value was an inherent and obvious one. She charges the defender Mr Baird with having told her that the purchase was a safe and sound one. This expressed Mr Baird's opinion that the purchase was a sound one on its merits, which was justified. The pursuer's apparent view that Mr Baird meant by so expressing himself to guarantee her against any possible loss is a merely feminine one.

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The pursuer's claim must be founded on some distinct failure of professional duty towards her on the part of the defenders. And the failure of duty on which the pursuer's counsel rested his case was failure on the part of the defender Mr Baird to explain to the pursuer the nature of the investment which she was making, and in particular that she was becoming personally liable for the bonds. There is a conflict between the evidence of the pursuer and Mr Baird on this matter. I accept the evidence of Mr Baird, which impressed me as truthful and reliable. He had no end of his own to serve by getting the pursuer to invest her money as she did. He says that when she consulted him as a friend regarding an investment he told her that he was conversant only with investments in heritable property—in which region his professional practice lies—and that there were three modes of investment, namely—(1) to lend on first bond at a small rate of interest with a correspondingly good security; (2) to lend on a postponed bond at a higher rate of interest with a correspondingly inferior security; and (3) to buy a property with the aid of money borrowed on bond, and with the prospect of a much higher return, if the property were well purchased, than could be obtained by lending on either a first or second bond, but with a greater risk. He further says that the pursuer, after consideration, pronounced in favour of the third mode of investment, and that thereafter he proposed to her the purchase of the tenement No. 6 Hutton Drive, Govan, as a suitable subject for such an investment, as in fact it was. I believe Mr Baird's evidence.

The pursuer, however, maintains, as I have said, that Mr Baird did not explain to her that in purchasing the property on the footing she did she undertook personal liability for the bonds. Mr Baird says that he did.

Now it is the evidence of both the pursuer and Mr Baird that the latter read over and explained to the pursuer the deeds which she signed. These were (1) the second bond for £220 granted by the pursuer to Mr Baird, and (2) the disposition by the seller in favour of the pursuer which contained, in gremio, a clause, conform to section 47 of the Conveyancing Act of 1874, whereby the pursuer undertook personal liability under the first bond for £1080. Now as Mr Baird was acting in perfect good faith it seems to me quite clear that his motive in reading over and explaining the deeds must have been, as he says, that the pursuer might understand clearly what she was doing. The pursuer did not ask him for any additional explanations, and she appeared to him to fully understand the purport of the transactions. If she did not, I do not think that was his fault. It may perhaps be that the pursuer being convinced in her own mind that Mr Baird was doing his best for her lent an inattentive ear to the terms of the deeds and his explanations, while appearing to be quite satisfied and asking no questions. I cannot, however, think that Mr Baird can be responsible for this, if he gave such explanations as were calculated to inform the mind of any intelligent person paying the attention to them which he was entitled to expect would be given. He depones that he was satisfied that the pursuer understood what she was doing. And I believe that he is speaking the truth.

On the whole matter I am of opinion that the pursuer has not shown that the defender Mr Baird was guilty of any breach of professional duty towards her in connection with her investment, which has proved unfortunate through causes for which he is not responsible, and that accordingly the defenders are entitled to absolvitor.”

The pursuer reclaimed, and argued—On the evidence it was the defender and not the pursuer who selected the investment, but where a client relied on an agent to select an investment for him, the agent was bound to exercise reasonable care that the investment was a safe and proper one. If the law agent held himself out as competent to advise as to investments, he had the liabilities of a trustee. The defender in the present case had not exercised reasonable care and was in fault in not pointing out the disadvantages of the security which he ought to have been aware of, and which his client could not be expected to know— Rae v. Meek, July 19, 1888, 15 R. 1033, 25 S.L.R. 737, August 8, 1889, 16 R. (H.L.) 31, per Lord Shand, at pp. 1051–1052, on the liabilities of law agents, 27 S.L.R. 8; Oastler v. Dill, Smillie, & Wilson, October 29, 1886, 14 R. 12, 24 S.L.R. 18; Cleland v. Brownlie, Watson, & Beckett, November 30, 1892, 20 R. 152, 30 S.L.R. 149.

Counsel for the respondents were not called on.