Commercial Banking Company of Scotland .Sugde - Lushington v. John Pollock's Trustees - Ada - Stevens [1829] UKHL 3_WS_430

UKHL
Commercial Banking Company of Scotland .Sugde - Lushington v. John Pollock's Trustees - Ada - Stevens
[1829] UKHL 3_WS_430
Where it was stipulated in the contract of a Banking Company, that the manager should be removable by two-thirds of the joint committee of management;—Held, 1. (affirming the judgment of the Court of Session), That the Company were entitled, by a resolution of two-thirds of the Committee, to remove a manager who was named and appointed in the contract; and, 2. (reversing the judgment), That the Company were not bound to shew proper cause for having done so, or liable in damages if they could not do so.

Page: 431 ↓

In the year 1810, several persons resolved to establish a bank in Edinburgh by a joint stock subscription, under the firm of the Commercial Banking Company of Scotland. At this time John Pollock, (the constituent of the appellants), was a partner of Mr John Campbell, W. S. having been educated to the profession of the law. He was employed to prepare the articles and contract of copartnery, and a request was at the same time made, that he would take shares, and accept of the office of manager, and abandon his occupation as a writer. He agreed to do so; and the draft of a contract was prepared by him, in which it was required that the manager should hold at least forty shares of L.500 each, and by which he was nominated manager with a salary of L.1000 a-year; after which followed this clause:
“And as the said John Pollock has been invited to relinquish his professional connection and prospects to accept of the said situation, he shall, in case of his removal or resignation, receive from the Company, during his lifetime, such annuity or annual allowance as the committee of management for the first year, or any succeeding years, shall fix by a minute in the sederunt-book; and when so fixed, the same shall be equally binding. And the said John Pollock shall not be removable from the said situation, unless the whole other members of the ordinary committee of management for the time being shall concur in a motion for his removal.”
Several share-holders having objected to the contract, it was at first proposed to make certain alterations upon it; but it was thought better to make out a new one. In regard to this subject one of the partners, Mr Sandeman, wrote, that “a new contract is certainly a radical cure for all irregularities and misunderstandings, and, though troublesome, need not be very tedious. In a new contract, all the objectionable articles can be omitted, and the useful only retained.” A new deed was accordingly prepared and executed in place of the former, and in which Mr Pollock was named as manager; but it was declared, that on his removal, resignation, or death, all future managers should be named by the committee of management:
“And no manager shall be removable, unless two-third parts of the ordinary committee of management for the time being shall concur in a motion for his removal.”
The provision of an annuity to Mr Pollock, in case of removal, was annulled.He entered on the performance of his duty; but very soon he and the committee became dissatisfied with each other, and various proceedings, unnecessary to be noticed, took place, with

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The case having afterwards come before Lord Pitmilly, he found, “that the dismissal of the pursuer from the situation of manager of the Commercial Bank is sufficiently instructed, and cannot be objected to by the pursuer upon the ground of want of power in the defenders to dismiss or remove the manager of

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Against this judgment the Bank appealed, so far as it found that they were bound to shew cause for the removal; and Pollock's trustees appealed, in so far as it found that the Bank had power to remove, and also in so far as his allegations relative to a conspiracy had not been admitted to proof.The preliminary point as to parties (ante, page 365.) having been decided, the case came on for discussion on the merits.Appellants , (the Bank).—The contract, as originally prepared, provided, that Pollock's annual salary, to whatever extent it might be raised, should at no time be less than L.1000; and that, on his removal or resignation, he should continue to receive, during life, the same salary as if he had remained in office. But by the regulating contract it is expressly provided, that the salary shall be fixed by the committee of management; and no allowance is to follow removal or resignation. Again, by the former, Pollock was not to be removable, unless the whole members of the committee concurred in a motion to that effect. But

Page: 436 ↓

Page: 437 ↓

Respondents , (Pollock's trustees).—Pollock, while enjoying the advantages of a lucrative and confidential situation, was induced, by the persuasion of the projectors of the Banking Company, to accept the office of manager. Looking to the prosperity he was enjoying, and the prospects he abandoned, and to the avowed high opinion entertained of him by the appellants, it is impossible that any of the parties could have contemplated that he was about to embark in a profession from which he might be driven in a moment, at the caprice and will of individuals over whom he retained no controul. Indeed, these very circumstances import a right to demand, and imply an agreement to give, an adequate consideration; and if he be removed, what more adequate consideration can be given than the damage he has sustained? But, in fact, Pollock's interests had been protected by the appellants in the first contract; and these stipulations never were intended to be infringed on or impaired by the terms of the second contract. This is a very special case; because Pollock was not merely manager,—he was the managing partner; and it formed one of the conditions of the contract that he should be so. The distinction between power and right is well known, and of everyday occurrence. A man may make a promise, and yet, without cause, may refuse to fulfil his engagement. He has the power to resile; but he must pay damages. In like manner, the appellants may have had power (supposing the second contract to be taken as the contractus regulans) to remove their manager; but if they had, by holding out views of permanent employment, induced him to sacrifice a lucrative profession, they must give, in the shape of damages, a remuneration equal to what the circumstances demand;—and that is precisely a question for a jury. As to the cross appeal, a relevant condescendence of facts has been made, sufficient to infer a corrupt combination or conspiracy to deprive Pollock of the office; and a proof of these allegations ought to have been allowed.The House of Lords found, (in regard to the interlocutor of the 15th May 1822, complained of in the said original appeal), that the defenders had authority, at their discretion, to remove the manager from his office, and that they were justified in law in doing so; and it is therefore ordered and adjudged, that the

Page: 438 ↓

Lord Chancellor .—My Lords, There was a case argued some time since at your Lordships' Bar, on appeal from the Court of Session in Scotland, between a person of the name of Pollock and a society that is well known by the name of the “Commercial Bank of Scotland.” The facts of the case are shortly these:—In the year 1810 a number of persons associated themselves together, for the purpose of forming a Bank at Edinburgh; which Bank was distinguished by the name of the ‘Commercial Bank of Scotland.’ They applied to Mr Pollock, (who was at the time a writer to the signet, carrying on business in partnership with a person of the name of Campbell, as law-agents in Edinburgh), to assist them in forming this establishment, and to hold the office of manager when the establishment should be complete. Mr Pollock assented to the proposal. He acted in the formation of this Company; and a treaty was carried on for the purpose of ascertaining and fixing the nature of the office he was to hold in the establishment, and the amount and extent of remuneration he was to receive. A contract was finally entered into, which contract was drawn by Mr Pollock himself. That contract formed the articles of partnership which were intended to be entered into.That part of the contract which related to Mr Pollock's situation, so far as it is necessary to be stated with reference to the present question, was in these terms:—[His Lordship then read the clause quoted ante, p. 431.]—That was the article contained in the original deed of partnership which was drawn up by him, or under his advice, and under his direction. That instrument, however, was not signed by all the partners; but Mr Campbell having been consulted, and his advice having been taken, many objections were made as to parts of this partnership deed; and in particular it appears, by a letter of Mr Sandeman's, stated in the appellants' case, that that part of it which related to Mr Pollock was a subject of consideration and discussion. Many alterations were proposed, and it was suggested by Mr Campbell, that those alterations should be made, and that a deed of ratification of the instrument so altered should be signed by the persons who had already executed the original instrument; and that the instrument so altered should be signed by the rest of the parties. That plan was, however, ultimately abandoned; and instead

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That part of the new partnership deed which relates to Mr Pollock's situation and remuneration, is in these terms:—
“The manager must be possessed of at least forty shares of the capital stock of the Company, and shall receive such yearly salary or allowance from the Company as shall be fixed and regulated by the committee of management for the time being; and the said John Pollock is hereby appointed first manager. That on the removal, or resignation, or death of the said John Pollock, all future managers shall be nominated and appointed by the ordinary committee of management for the time being;”
and then a stipulation is made as to the amount of shares that any future manager is to hold. It then goes on thus:—
“And no manager shall be removable, unless two-third parts of the ordinary committee of management for the time shall concur in a motion for his removal.”
This was the contract of partnership, which was completed and executed by all the partners, and among the rest by Mr Pollock, the manager.Mr Pollock, in pursuance of this agreement, entered into the discharge of the duties of his office, and continued for some time to perform them. The committee of management, however, were not satisfied entirely with his conduct, and, after some difference between them, the committee of management at length removed him. There is no doubt that he was removed with the concurrence of two-thirds of the committee of management; and this was approved of by the proprietors in general.Mr Pollock contends, in the first place, that they had no power or authority to remove him; and, in the next place, that, if they did remove him, they were bound to make him compensation for the loss and injury which he thereby sustained. Now it is quite obvious that this must depend upon the terms of the contract. He was the servant of the Company, and in order to ascertain whether or not he was liable to be removed by the Company, and if so, under what circumstances, and upon what terms, we must refer to the contract.It appears to me absolutely impossible for a moment to assert, that the Company had not a right to remove him; because, even in the first contract, to which I have adverted, and which was drawn by Mr Pollock himself, it is expressly provided, “That the said John Pollock shall not be removable from the said situation, unless the whole other members of the ordinary committee of management for the time being shall concur in a motion for his removal.” He was therefore removable under the first contract, provided all the members of the committee of management concurred in the propriety of his removal. Under the second contract, so far as related to his removal, the only alteration that was introduced was this,—“And no manager shall be removable unless two-third parts of the ordinary committee of management for the time being shall concur in a motion for his

Page: 440 ↓

The next question is, whether he is entitled to any compensation in consequence of his having been removed? That must depend upon the terms of the contract. I do not find in the contract any definite stipulation in this respect, except what is contained in the article of the original deed of contract. There I find, that “in case of his removal or resignation, he shall receive from the Company, for his lifetime, such annuity or pecuniary annual allowance as the committee of management for the first year, or any succeeding year, shall fix by a minute in their sederunt-book.” This was an article prepared by Mr Pollock himself, who was at that time acting as the adviser of the Company, who assisted in forming these articles of partnership; and undoubtedly, if they had continued to be the subsisting contract between these parties, Mr Pollock would have been entitled, in the event of his being removed from the office, to call upon the committee of management to hold a meeting for the purpose of fixing the amount of the remuneration he was to receive in the shape of retiring provision; but that contract was entirely done away with in consequence of the subsequent contract to which I have referred.I have already stated, that it appears, by a letter of Mr Sandeman's, contained in the case of the appellant, that the situation and circumstances of the office held by Mr Pollock were a subject of consideration at the time when objections were made to the original contract;— a new contract was formed, and in the article relating to Mr Pollock, where it is stated no manager shall be removed unless two-third parts of the ordinary committee of management for the time being shall concur in the measure of his removal, I find no stipulation whatever,—no clause whatever,—entitling Mr Pollock to the benefit of any compensation, or any retiring provision, in the event of his being removed. I find, therefore, no subsisting contract which entitles Mr Pollock to a compensation. In the absence of any subsisting contract, it appears to me that he can have no claim in point of law to any compensation, if he is removed by the committee of management.Taking, then, the whole of these circumstances together, and considering what the nature of the contract was between these parties, it appears to me clear that the committee of management had an absolute discretion to remove Mr Pollock when they thought proper,—that they were not responsible for the manner in which they exercised that discretion,—and that they were not bound to make any compensation or remuneration to Mr Pollock for the loss he sustained in consequence of that removal. Mr Pollock appears to have placed himself at their

Page: 441 ↓

It is the more important to advert to what appears upon the articles of partnership, from the consideration that this was a company the shares of which were assignable, and any person purchasing a share would look at the articles of partnership, for the purpose of knowing in what situation he stood, and what were his obligations; and therefore it was natural to expect, indeed it was proper, for the purpose of guarding against imposition and fraud, that the precise terms of the stipulation should appear on the partnership deed, and such appears to have been the understanding between these parties.I am of opinion, therefore, that the judgment of the Court below was correct, as far as relates to the decision that this gentleman, Mr Pollock, was removable at the discretion of two-thirds of the committee of management; but I think that they went too far in stating, that it was their opinion that Mr Pollock was entitled to compensation in the event of his removal. I am therefore of opinion, as far as relates to the former part of the judgment, that it should be affirmed, and that it should be reversed as far as relates to the latter.With regard to the cross appeal in this case, Lord Pitmilly was of opinion that there was not sufficient ground to sustain the charge, or to make out a prima facie case. With respect to the charge, as far as related to a supposed conspiracy, I have looked through the papers, and I am quite satisfied that there is no sufficient ground to make out that charge, which relates to the merits of the cross appeal; and that decides the whole case.Solicitors: Moncreiff, Webster, and Thompson— Richardson and Connell,—Solicitors.