Messrs. Robert Scott Moncrieff, and David Dale, Cashiers of the Royal Bank of Scotland, and Wm. Simpson, Cashier at the said Bank, Edinburgh v. Jas dunlop, Merchant in Glasgow, Andrew Houston of Jordanhill, Jas. Gammell, Merchant in Greenock, and Jas. Macdowall, Merchant in Glasgow, Bankers in Greenock, trading under the Firm of Dunlop, Houston, Gammell and Company [1797] UKHL 3_Paton_595

UKHL
Messrs. Robert Scott Moncrieff, and David Dale, Cashiers of the Royal Bank of Scotland, and Wm. Simpson, Cashier at the said Bank, Edinburgh v. Jas dunlop, Merchant in Glasgow, Andrew Houston of Jordanhill, Jas. Gammell, Merchant in Greenock, and Jas. Macdowall, Merchant in Glasgow, Bankers in Greenock, trading under the Firm of Dunlop, Houston, Gammell and Company
[1797] UKHL 3_Paton_595 · 1797-07-17
Messrs. Robert Scott Moncrieff , and David Dale , Cashiers of the Royal Bank of Scotland, and Wm. Simpson , Cashier at the said Bank, Edinburgh, Appellants v. Jas dunlop , Merchant in Glasgow, Andrew Houston of Jordanhill, Jas. Gammell , Merchant in Greenock, and Jas. Macdowall , Merchant in Glasgow, Bankers in Greenock, trading under the Firm of Dunlop, Houston, Gammell and Company, RespondentsHouse of Lords, 17th July 1797 .

Subject_ Banking Co. — Agent — Partner — Powers to Bind Company. —

The Greenock Banking Company had an agent in Glasgow, Mr. Dunlop. It being necessary to enter into arrangements with the several banks to receive their notes, this was done through means of their agent. Afterwards Mr. Dunlop entered into a new transaction by which this object was to be carried on more to the satisfaction of both parties. Held, on the failure of Dunlop, that, from the terms of the transaction gone into, the bank was not sufficiently bound by the acts of their agent and partner.The respondents having opened a bank in Greenock, the Company affairs were managed by Mr. Gammell in Greenock, and by Mr. Dunlop in Glasgow.

Desirous to establish their credit, they entered into the usual

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“ Greenock , 28 th July 1785,—Scott Moncrieff, Esq.,—Sir, Messrs. Dunlop, Houston, Gammell, and Co., having opened a bank here, and appointed me their cashier, I have to inform you, that Mr. James Dunlop of Garnkirk will exchange with you regularly once a-week, what of this Company's notes may come into your hands, and upon your advising me what day of the week is most convenient for you to exchange notes, I will give Mr. Dunlop notice thereof. I am, &c., (Signed) Jas. Millar .”

Messrs. Scott Moncrieff and Dale answered in these words: —

“ Royal Bank Office, Glasgow, 1st August 1785.—Sir, We duly received your favour of the 28th past, and, agreeable to your proposal, shall make a weekly exchange of notes with your Company, and give or take a bill on Edinburgh, at one day's date, for the balance, as is our practice with the other banks here. If not attended with any inconvenience to you, we would propose to make the exchange on the Tuesday morning at eight o'clock, when we settle with the other banks. Of this you will be pleased to acquaint Mr. Dunlop.—We are, &c.

(Signed) Scott Moncrieff & Dale .”

It was alleged by the respondents that these letters were all that ever passed between their office at Greenock and the appellants.The parties entered on the transaction as thus arranged; but it was not long until the Royal Bank found, that from the great flow of their paper into their hands, which lay dead until the day of exchange, considerable loss was sustained, and they therefore entered into a new arrangement with Mr. Dunlop, to have the exchange of notes twice a week; and a bill granted at one day's date for any balance that may be found in their favour. This arrangement, it seems, was gone into verbally with Mr. Dunlop, but it was proved by the following letter, that Mr. Dunlop communicated this alteration to Mr. Gammell at Greenock:—2 d July 1789,— “I have settled with the Royal Bank that we shall exchange with them every Saturday morning, which I expect to manage, so that it shall make no alteration in the operations of the Greenock Bank, but shall come all under the Tuesday's exchange with me. On considering the matter, I thought it better to make the communication to Mr. Scott

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“I am favoured with your letter of yesterday's date, with the enclosure, which is perfectly satisfactory. I am pleased that you have informed Mr. Scott Moncrieff that you are to exchange with him twice a week, and the mode you propose I think will be attended with no loss to the bank, at same time it pleases them.—I am,” &c.
Notwithstanding this arrangement, repeated complaints were made by the Royal Bank, in consequence of the overflow of the Greenock Bank notes into their bank, which no sooner were exchanged the one moment than they were returned back upon them the next, until they were obliged to remonstrate, which gave rise to the transaction or agreement out of which the present action arises. This agreement was prefaced by a correspondence, which complained generally of the mode of conducting the exchange, and the daily loss of interest sustained by the Royal Bank, and proposed, “that in future Mr. Dunlop should keep an account with us like any other man, on such credit as should be agreed on, and that on every second day (Tuesdays, Thursdays, and Saturdays) we should pack up all the Greenock notes we had, and deliver them over to him, for which he should give us an order on his account with us.”Some of the complaints were made to Mr. Gammell, but the greater part to Mr. Dunlop.Accordingly, a draft of the letter of agreement was sent by Mr. Scott Moncrieff to Mr. Dunlop ( Vide below). Mr. Dunlop

Footnote

Drasft proposed by Mr. Scott Moncrieff .
“ Gentlemen ,—In the management of the business of the Greenock Banking Company, and that I may be enabled to take up their notes from you in a manner more convenient for us both than hitherto, I shall be glad to open a cash-account with you , as cashiers of the Royal Bank here, to be kept in the name of James Dunlop, for the Greenock Banking Company ; and I propose that my operations upon the account shall be as follows:—I shall, three times in the week, viz. upon Tuesdays, Thursdays, and Saturdays, take up such of the notes of the Greenock Banking Company as may come into your hands, by giving an order on my account with you for the amount; and I shall make payment to you upon said account on your receipts in the manner most convenient for myself, either by notes of

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see the effect of this arrangement, I cannot say exactly what extent of credit I may require upon this account; but it will always be in your power to limit it; and I shall moncrieff, at any time, upon six weeks notice, pay up such balance as may be due to you. It is further understood, that as this account is proposed to be opened for our mutual conveniency, it shall at all times be in the power of either of us to close it when we shall think that purpose not answered by it.—I am, &c.
“ Glasgow , 1 st Jan . 1793. Gentlemen ,—As agent for the Greenock Banking Company, and that their notes may be exchanged with you in manner more convenient for both you and me than hitherto, I am very well pleased to open a cash-account with you, as cashiers of the Royal Bank here, to be kept in the name of James Dunlop, agent for the Greenock Banking Company ; and propose that my operations on that account shall be as follow:—I shall, three times in the week, take up such of the notes of the Greenock Banking Company as they come into your hands, by giving you what Royal Bank notes I may have, and an order on my account with you for the balance; and I shall make payment on said account, on your receipt, in manner most convenient for myself, either by the notes of other Banking Companies bills on Edinburgh or London, it being understood that you are to take such bills from me upon the same terms you do from others. The account shall be settled once a year, or oftener, if either party require it; the interest to be charged against me at five per cent., and you are to allow me four per cent. on such sums as I may occasionally overlodge with you. Until I

Footnote

other Banking-companies bills on Edinburgh or London, it being understood that you are to take such bills from me upon the same terms that you do from others. The account shall be settled at least once a year, or oftener, if either party desire it; the interest to be then charged against me at five per cent, and you are to allow me four per cent. upon such sums as I may occasionally overlodge with you. Until I see the effect of the arrangement, I cannot say exactly what extent of credit I may require upon this account; but it will always be in your power to limit it; and I shall at any time, upon three or four weeks warning, pay up such balance as may be due to you. It is further understood, that as this account is proposed to be opened for our mutual conveniency, it shall at all times be in the power of either of us to close it, when we think that purpose is not answered by it.”Form of Order annexed .£ Glasgow ,Pay the bearer pounds, which place to the debit of my account. For Greenock Banking Company.J. D.

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(Signed) James Dunlop .”

Copy order sent .Pay to the bearer £2226. 19s., and charge the same to account of Ja. Dunlop .Jan. 1, 1793.

Of this date, Mr. Scott Moncrieff wrote Mr. Simpson as Jan. l, 1793. follows:—

“I met Mr. Dunlop last night, and carried with me the scroll of a letter which I thought it would be necessary for him to write to us, as the foundation of the proposed account, and that we might clearly understand each other. He approved of it, and brought here his letter this morning accordingly, with some trifling alterations. You have annexed an exact copy of it. I mean, if you approve of it, to make out another copy, and send it to him, saying at the foot of it, that we agree.” “ I think the Banking Company is sufficiently bound, the account being opened with him, their agent ,”
Accordingly, the letter, approving of this letter, was written to Dunlop, and the transaction closed; and, immediately thereafter, the account was opened. The new arrangement was communicated to Gammell, the acting partner of the Greenock Bank, by Dunlop, as follows:—
“The Royal Bank have been complaining very much of late, and perhaps with some reason, of the number of notes that were thrown in upon them, especially on the Saturdays; and, two or three days ago, Mr. Scott Moncrieff called, and told me that he had orders from the directors at Edinburgh, either to refuse our notes altogether, or to send them to Greenock on purpose every day, which, he said, would be much cheaper to them than the way they are in at present; which, indeed, I believe may be true. I said, if such measures as those were resorted to, I believe we could procure as many of their notes as they could do ours. He said, however that might

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Mr. Gammell's answer to Mr. Dunlop was as follows:—

“1st January 1793.—I am glad you have settled matters with Mr. Scott Moncreiff, and that upon such a plan as will prevent our notes from going to Edinburgh, which was troublesome to all parties concerned.”
Mar. 1, 1793.Sometime after the operations were entered on, and in consequence of the public state of credit, the Royal Bank found it necessary to restrict their advances, and to give orders to close this account in the beginning of March 1793. Accordingly, Mr. Scott Moncrieff wrote to Mr. Dunlop, calling up the balance owing; but these applications had produced no result, when, on the 21st March, Dunlop failed. This event was first communicated to the Royal Bank by Mr. Gammell, who at same time intimated, that as the transaction was one with Mr. Dunlop alone, the Greenock Bank did not hold themselves liable for the balance due of their notes delivered to Mr. Dunlop. Upon denying their liability, the present action was raised against the Greenock Bank, under the firm of Dunlop, Houston, Gammell & Co., for payment of the balance due, amounting to £9100. of principal, and £82. 2s. 11d. of interest.In defence the respondents pleaded,— “That the partners of the Company of Dunlop, Houston, Gammell, & Co.,

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Nov. 14, 1794.The Lord Ordinary reported the case to the Court, and this interlocutor was pronounced:—
“Upon report of Lord Craig, and having advised the mutual informations for both parties, with minutes of debate, the Lords sustain the defence, assoilzie the defenders as a Company, and decern; but remit to the Lord Ordinary to hear parties how far any of the partners of the Company are liable as individuals, and to do as he shall see cause.”
This reservation in the interlocutor was occasioned by its appearing to the Court, that though there seemed to be a defect of evidence to charge the Company, or whole partners of the Greenock bank; yet there was a distinction as to Mr. Gammell, who appeared to be apprized of the transaction, and approved of it.Jan. 19, 1796.The appellants reclaimed, and prayed to alter, or to allow evidence to be given in upon a variety of points. And the proof asked being allowed, the Court finally pronounced this interlocutor:—
“The Lords having advised this petition, and additional petition, with the answers thereto, and proof adduced, they adhere to the former interlocutor reclaimed against.”
Against these interlocutors the Royal Bank brought the present appeal to the House of Lords.Pleaded for the Appellants .—The debt is proved to have arisen from the value of the notes issued by the respondents as a banking Company, and which the appellants, for their accommodation, took from the public as payments in money; the respondents were therefore bound in law and in justice, and in fair dealing, to retire these notes from the appellants, so as no loss might arise to them from the outlay and want of interest, or in any other shape. To accomplish this, they by the letter from their cashier, of the 28th July 1785, accredited Mr. Dunlop, one of their own number, with general and unlimited powers, to exchange or retire these notes. The notes having accordingly been delivered over by the appellants to Mr. Dunlop, it is for the respondents to show, either that value was given for them, or that, in delivering them to Mr. Dunlop, the appellants expressly and unequivocally

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“ I shall, three times in the week, take up such of the notes of the Greenock Company as may come into your hands, by giving you what Royal Bank notes I may have, and an order on my account for the balance; and I shall make payment on said account, on your receipt, in the manner most convenient for myself, either by notes of other Banking companies' bills in Edinburgh or London, &c. The accounts shall be settled once a year, or oftener, if either party requires it.”
The respondents have attempted to assimilate this to a common cash credit to Mr. Dunlop, and with those ignorant of the nature of bank transactions, they might be listened to, as the operations that were to follow were, no doubt, to be all in cash; and Mr. Dunlop was to get the command of all the Company's notes. But could the respondents hold such language to a banker? Would they be hearkened to one moment, in saying that an account, in which nothing was to pass but the amount of their notes, delivered to their partner or agent, was of the nature of an ordinary cash credit? Or is it fit for, belief, that a national bank, whose great advantage is the issuing and circulation of their own notes, would give a cash credit to an individual, and make the whole advances upon it in the notes of a private provincial company, in order that they might be thrown into the cricle? There is no countenance for such a proposition, either in law or principle. 2d. The arrangement in question, and the operations consequent thereon, were for the benefit and advantage

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“The Royal Bank have been complaining very much,”

and informs him of the arrangement made for the benefit of the bank. In answer, Mr. Gammell writes:—
“I am glad you have settled matters amicably with Mr. Scott Moncrieff, and that upon such a plan as will prevent our notes from going to Edinburgh, which was troublesome to all parties.”
Other letters were also written to the same effect.Hence it was clear that this arrangement had a twofold object, 1st. To prevent the Greenock Company's notes being refused at the Royal Bank office, or sent down from thence to Greenock for payment; and, 2d. To prevent those notes from going to Edinburgh, which occasioned great expense and trouble to the Greenock Company. All these objects were completely and effectually accomplished by the arrangement gone into. 3d. And even though this arrangement of January 1793 were to be held a new obligation come under by Dunlop, and that loss had arisen upon it to his Company, yet the respondents must be liable to make it good; because Dunlop had the sole direction and management of this branch of the extensive banking business in Glasgow, and, in particular, he had been publicly announced by the letter of 28th July 1785, to the appellants, as entrusted with the exchange or retirement of their notes. His powers, therefore, to bind the Company in any transaction relating to the concerns confided to his management were inherent and indispensable, and he accordingly did pledge the security of the Company, in the transaction in question.Pleaded for the Respondents .—If the present case admitted of the general question, “How far James Dunlop, as a partner of the Greenock Banking Company, had power to bind the Company?” it would be matter of no great difficulty to show that he could not, as such, have affected the Company by the agreement or transaction in question. It is true that a partner, who is seen publicly and generally to act in that character, may by transactions in the common and ordinary course of their business , and signing the firm of their company, bind the partnership to those who have so transacted with him, to any extent, and without any regard to all private and secret articles of agreement among the

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After heaving counsel,

Lord Chancellor Loughborough said,—

“ My Lords ,
Though I concur in this case with the judgment given by the Court of Session, I think it proper to state the ground upon which my opinion is formed, lest an idea should be entertained that we went upon this reason, that a partner, in circumstances similar to those in the present case, could not by his own transaction bind the partnership. It is not upon that ground that I have formed my opinion.It is founded upon this, that from the written document, which is the basis of the transaction now in question, the letter of the 1st of January 1793, it would be impossible in this country to raise a cause of action against the respondents in this matter. The whole of the difficulty in the present case lies upon the evidence in the cause —the letter of Mr. Scott Moncrieff and Mr. Simpson; though these were not evidence of themselves, they were made so by the parties. Nothing positive with regard to the transaction appears from Dunlop's letters; but, on the other hand, we have his deposition after his bankruptcy, that this was a private transaction of his own, and all the entries in his books state it as his own private account.This is a case in which I have changed my opinion more than once or twice. There appears to me to be nothing in the cause to fix upon Mr. Gammell in the smallest degree—the double part which Dunlop appears to have acted. The other partners were inactive. I am sorry for the manner in which Mr. Scott Moncrieff appears in the business, as, from the character given of him, he is a man of respectability and integrity; but too much confidence was reposed in the supposed responsibility of Dunlop. It is

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Kenyon.Under the circumstances of the present case, I thought it proper not to rest upon my own opinion alone. I would willingly have rested on the opinion of those whom I respected, had that opinion been uniform on either side. I requested the assistance of a noble Lord now near me, and after reading the case, his Lordship formed an opinion different from what I have now given; he, however, now concurs with me in opinion to affirm the judgment of the Court of Session.Supposed to be Butler and Laurence.Two judges also, of much acuteness, and great experience in such questions, were applied to; they differed in opinion, and after having had a conference together on the subject, they parted still holding different opinions.Under all the circumstances of this case, I think the judgment of the Court of Session is not founded on error, and ought to be affirmed. The decision of your Lordships, if in this way, will also have a good effect. It will give a lesson to the Royal Bank to be more circumspect, and to pay a greater attention to accuracy in their future transactions.”Accordingly it was Ordered and adjudged that the interlocutors complained of be affirmed.Counsel: For Appellants, Sir John Scott, Ro. Dundas, W. Grant. For Respondents, Robert Dallas, Wm. Tait.