Scottish Court of Session Decisions

Lord Hunter's OPINION.—[After the passage quoted above, and after finding that the defender did not act fraudulently but thought that he was only giving Fortune a certificate of character]—In my opinion I must construe the language used by the defender according to its natural meaning. So construing it, I think the letter means that the defender guarantees the accuracy of Fortune's statement that the latter's financial standing is all in order to the extent of from £1600 to £1800. Fortune had in reality no means whatever, and the defender had no sufficient ground for holding, far less for expressing, any opinion as to his financial standing. Fortune was a working man who seems to have dressed somewhat better than would be expected, and there was a local rumour that he had been left a fortune. Beyond these circumstances the defender knew nothing. I take it, however, that, if A guarantees B's financial position to C, he is liable if credit is given to B by C, no matter what A's grounds were for his belief in the statement which he has made.

In my opinion the pursuer is entitled to recover the amount sued for unless there is a good objection to the letter as a binding guarantee, or to his title to recover in whole or in part the amount sued for.

The defender maintained that the letter of guarantee did not comply with the requirements of section 6 of the Mercantile Law Amendment Act (Scotland) (19 and 20 Vict cap. 60), which provides that all guarantees and representations as to trade or dealings of any person for the purpose of enabling that person to obtain credit must be in writing and subscribed by the person giving the guarantee or making the representation. No authority was cited to me, and no argument was presented to me, different from that submitted in the Procedure Roll. In allowing proof I rejected this argument, and I think that the first branch of plea 5 for the defender falls to be repelled.

The circumstance that the letter of guarantee is not addressed to anyone appears to me to create much more difficulty. This point also I considered in the Procedure Roll. In the note which I then issued I refer to certain cases which were founded on by the pursuer. With reference to these cases, I may note that in Ewing v. Wright, 2nd June 1808, F. C., the fact that the address was filled in by the person to whom the letter was handed was not held to be a fatal objection. In Balfour, Junor, & Co. v. Russell, 8th March 1815, F. C., the writer of a letter testifying to financial position was held liable where the writer's correspondent produced the letter to another who was induced thereby to give credit, although the recipient of the letter had no authority to communicate it. The defender at the proof relied upon the case of Williams v. Lake, 29 L. J., Q. B. 1, where it was held that under the Statute of Frauds a letter of guarantee blank as to the name of the person in whose favour it was granted was invalid. Section 4 of that statute was construed to mean that the names of both contracting parties and the subject-matter must appear on the writ. The Statute of Frauds is not applicable to Scotland. As the evidence has established that the defender granted the letter to Fortune to show to the factor or proprietor of the farm for the tenancy of which he was negotiating, I think that I must repel this plea.

In the last place the defender maintained that the pursuer could not sue for the value both of the goods purchased at the auction and of the goods taken over by him at valuation. It appears that, of the amount for which the pursuer obtained decree against Fortune in the Sheriff Court, £200, 19s. 7d. was the value of the subjects taken over. All the goods, however, were in reality the property of Mr Rintoul, the proprietor of the farm Lahill Craig, and that gentleman has granted to the pursuer an assignation of his rights. It appears to me therefore that the plea to title of the pursuer also falls to be repelled. I therefore grant decree for the amount sued for.

Lord Justice-Clerk.—I think the Lord Ordinary has arrived at the right conclusion. When the case was formerly before us we thought it was desirable, before giving judgment upon the merits of the cause, that we should follow the course which the Lord Ordinary had taken, and allow the parties a proof before answer. Accordingly, while we repelled a preliminary plea, we adhered to the Lord Ordinary's interlocutor granting such a proof; and we have now the proof before us. There is no difference between the parties now upon the effect of the proof.

There were in the record averments of fraud against the defender. The Lord Ordinary has found that these averments have not been proved, but that on the contrary the defender seems to have been perfectly honest and straightforward in the matter, though mistaken in his view as to his legal position, and I entirely agree in that finding. In these circumstances we have to consider what the legal positions of the parties are.

Several points have been maintained for the defender. In the first place, it was said that this document is merely a testimonial, and that it is not in point of fact a guarantee or a cautionary document. I cannot accept that view. From the terms of the document itself it is, I think, plain, and if it were necessary to be made more plain I think the evidence makes it abundantly clear, that the defender, having given what was a perfectly good testimonial, was asked if he could not say something more, and he accordingly added the words “and guarantee that his financial standing is all in order in accordance with his statement to the extent of from sixteen to eighteen hundred pounds Stg.” I cannot read that as amounting to anything else than a very clear, distinct, and specific guarantee to the extent of from sixteen to eighteen hundred pounds. The suggestion that it merely meant that the would-be tenant had stated that he was worth that is futile, because, as was put to the defender in cross-examination, what would be the use of such a document as showing what the funds of Renton Fortune were or what he was worth. Obviously it would be of no use whatever. Therefore, upon the first question as to the construction of the document, I have no hesitation in agreeing with the Lord Ordinary.

Then it is said that the document should have been signed by the defender, Robert Young, whereas it is signed “James Tait & Coy.” It appears, however, that the defender was a partner of James Tait & Co., the other partner being a man named Tait. It is not suggested that this cautionary obligation was within the scope of the business of the firm; but, on the other hand, the document appears to be in the plural—it bears to run, “We have known” and “we guarantee.” Therefore, while I agree that, if it had been sought to make the firm or the partner other than the one who signed the firm-name liable, there might have been a good defence, I think it is no defence at all when an action is brought against the man who actually signed the firm-name. A partner who signs an obligatory document outwith the scope of his copartnery does not bind the firm, but he undoubtedly binds himself. Therefore in this case I think it is quite clear in law that the defender, while he did not bind his copartnery, did bind himself by signing this document. The document complies in every respect—as it seems to me—with the requirements of the Mercantile Law Amendment Act. It is a document in writing and it is subscribed by some one. The person who adhibited the signature to the document was the defender Young, and though it was signed in the name of the firm in my opinion that makes no difference.

Then it is said that the document does not bear the name of the creditor or the party entitled to found upon it, and therefore is bad. The only ground upon which that contention is supported is the construction of the English Statute of Frauds. In the first place, that statute does not apply to Scotland, and in the second place, the case of Williams v. Lake, which has been referred to, is based upon reasoning which does not apply in the present case at all, because this is not ex facie an agreement, it is a unilateral obligation, and apparently, so far as we can discover by a reference to the English cases on points arising under the statute, the contention would not have been sound there. Taking the law as it stands in Scotland, I think we have plenty of Scottish authority to show that a cautionary obligation such as this is quite good, although the name of the party who is entitled to found upon it does not appear on the document.

Two or three cases are referred to by the Lord Ordinary. The last of these, the recent case of Robinson, seems to me to apply in terms here. The only point which is not covered by that decision is that which Mr Moncrieff made, namely, that this is a document granted in the first place for behoof of the landlord, and that there is an attempt made to found upon it for two purposes, namely, first to save the landlord, and secondly, to save the factor who came in as cautioner in respect of the sale. But the document was granted, as the defender himself says in his evidence, because Renton Fortune wanted to get a farm in Fifeshire, and he, the defender, contemplated that the letter would be shown to the people who would be letting the farm to Renton Fortune. He says: “That was the purpose for which I wrote it.” He was asked: “In point of fact isn't it the truth that you knew perfectly well and wrote it for the purpose of its being shown to the factor? (A.) Oh, yes”; and later on he says: “I knew quite well that it was to be given to the factor. I also knew quite well that it was to be given to him so that he might know about Fortune's financial position.” Therefore, according to his statement there, it was given in order that the factor might know Fortune's financial position, and it is impossible to suggest that it was not also given that the landlord might know what the financial position was. I think the case falls within what Lord Loreburn said in the case of Robinson (at p. 155): “A subordinate point was raised in this case, namely, whether or not the respondent M'Arthur intended to induce, and did induce, the pursuer to act upon the incriminated letter. In my opinion that letter was intended to convey the opinion that the two Messrs Inglis were in good credit, and the writer meant to influence those persons who should be interested in providing the contemplated loan. The pursuer was such a person, and he was undoubtedly induced by the letter to give his name as surety. He was none the less induced by the letter that it was not in fact either addressed to or seen by him, for its effect was accurately stated to him in pursuance of the writer's intention, and he acted upon it.” In this case, while the pursuer was only the factor, the landlord was in the position of being landlord and occupant of the farm, and, of course, as is a matter of almost universal, if not entirely universal, practice in Scotland, when a farmer leaves his tenancy there is a waygoing sale, and there was that here. The landlord of the farm was therefore entitled to rely upon the terms of the letter so far as the rent was concerned; and, as he was also the owner of the stock and the crop, when he came to sell these, he was, in my opinion, entitled to rely upon that letter to the effect that the defender by signing it intimated to him that Renton Fortune, whether he was tenant or purchaser of the stock on the farm, was good up to £1600 or £1800. The factor who was the actual recipient of the document was also, I think, entitled to rely upon it. Therefore this latter point which Mr Moncrieff made also fails. I think the case is governed, so far as this liability is concerned, by what was said in the House of Lords in Robinson's case.

For these reasons, I think the Lord Ordinary's judgment is right, and his interlocutor should be adhered to.

Lord Dundas.—I agree with all that has been said by your lordship in the chair. I think it is impossible to read this letter as being a mere testimonial as to character. The first sentence no doubt is so, but what follows is plainly a guarantee. Nor can I read the letter as a mere intimation that Mr Fortune has stated to the writer that his financial standing is so-and-so. The letter I think is very clearly a guarantee that the financial standing of Mr Fortune is good to the extent of from £1600 to £1800.

As regards the point mainly argued for the defender to the effect that the letter does not bear to be addressed to anybody, I need only say that that point seems to fail, looking, in the first place, to the evidence led at the proof, and, in the second place, to what was said in the House of Lords in the recent case of Robinson.

Lord Guthrie.—I agree. On the first question of this letter being a mere testimonial, I think the evidence shows quite clearly what took place. The defender was only asked at first to grant a testimonial, and he did so. Then he was led on by Renton Fortune to add the clause, of which he did not, unfortunately, at the time appreciate the meaning and importance. But the mere fact of his bona fides in the matter will not affect the legal result.

As to the document not being signed by the defender, and therefore not being within the words of the Mercantile Law Amendment Act, it seems to me that he might have signed any other firm name or any individual name, say John Smith, and the result would have been the same. The document being signed by him, whatever name he chose to take, he is responsible for it.

As to its not being addressed to the pursuer, the Lord Ordinary's answer is sufficient—namely, that the defender knew that it was meant for the pursuer.

I agree with your Lordship that, even if the defender had not been so frank and had denied all knowledge of what was going to be done with the document, there is enough in the cases referred to by the Lord Ordinary, and especially in the case of Robinson, to dispose of that point. Robinson's case in the House of Lords directly raised the question, because their Lordships differed from the view taken by us in this Division. As to credit not being given on this letter, that is negatived by the evidence in regard to both sums, and the result is not affected by the pursuer's evident desire not only to have this guarantee but additional security, which is perfectly natural, for he knew nothing about the defender or his firm. Therefore I think the Lord Ordinary has come to the right conclusion.