Frederick Gye and Company - Sir William Follett. v. Samuel James Hallam - Blackburn - Bailey [1835] UKHL 1_SM_747

UKHL
Frederick Gye and Company - Sir William Follett. v. Samuel James Hallam - Blackburn - Bailey
[1835] UKHL 1_SM_747 · 1835-05-15
An action of count and reckoning, concluding for 500 l ., or such other sum as should be found to be the balance due, was judicially referred, with a declaration that the referee should ordain the losing party to pay all costs; and the referee found the pursuers entitled to 4 l . 3 s . 11 ½ d . as the balance unaccounted for on transactions to the amount of 45,542 l ., but declared the pursuers to be the losing parties, and liable in expenses. Held (affirming the judgment of the Court of Session) that the award was not ultra vires; but declaration added (by the House of Lords), that the judgment should not be drawn into a precedent on the general meaning of the words “losing party.”In April 1821 the respondent Hallam was engaged as a shopman to Messrs. Bish and Gye, tea-dealers in London, in whose employment he remained till June 1825. The present firm of Frederick Gye and Company having resolved to open some branch establishments, a proposal was made to the respondent of appointing him to be manager of one of them.The respondent was in July 1827 sent to Edinburgh to take the management of a shop in Waterloo Place,

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Gye and Co. also sent from London three or four shopmen, in whose appointment the respondent had no voice. Early in the year 1829, a misunderstanding took place between him and one of these young men, in consequence of which the respondent wrote to Mr. Gye stating the circumstances, and mentioning that if this young man should not be removed, he would be obliged to leave his situation, as he could not remain with him. Mr. Gye removed this young man; but at the same time hinted that the respondent was taking too much upon him, and that he ought to consider all the shopmen as upon an equal footing with himself.While matters remained on this footing, the establishment in Edinburgh more than realized the expectations of the appellants. It was more prosperous than any of their other branch establishments throughout Scotland, and they addressed many letters to the respondent, expressing their satisfaction with his conduct and success.About the end of September 1829 Mr. Gye came to Scotland for the avowed purpose of making a general

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In consequence of the control which the respondent had assumed over the other shopmen, complaints were made to Mr. Gye, who drew out a paper of instructions, the object of which was to put all the shopmen upon an equality; to deprive the respondent of the authority which he had previously exercised; and by dividing the responsibility among all, to make them a check upon each other.

These instructions set forth—

“That it does not appear that the management of the concern was by any means placed on a proper foundation at the commencement, either as regards that satisfactory account which the principals ought to command at any moment, and to obtain without difficulty, or in respect to the internal arrangements with all those employed.”
It was also directed that the books, invoices, and papers should be open to all; that the invoices should be examined by any two of them; that the chests, when wanted, should be moved to the counter and marked off as such in the invoice; that the letters from London should be opened by any one who might happen to be in the way; and that the invoices and all letters, except such as were marked “private,” should be accessible to all. And finally, “the term ‘manager’ not to be used by any person in the establishment, and to be not in

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The proper duty assigned to the respondent was that of book-keeper or cashier. The sales were conducted by the other shopmen, who put the money received at the counter into the till; it was then taken out by the respondent in presence of one or more of them, and its amount was entered by him in the books of the company, after which he became answerable for it. The whole goods in the shop were open to all the shopmen alike. Each of them acted on the principle of the instructions, that he was a manager in his own department.This led to misunderstandings; and a quarrel having taken place between one of these young men and the respondent, a letter seems to have been written to Mr. Gye on the subject, in which the respondent was charged with having violated the rules which Mr. Gye had prescribed. Mr. Gye wrote to the respondent on the 26th November 1829, intimating that a Mr. Tress was sent down to “take the command” from him, and requiring him immediately to deliver to Mr. Tress the keys of his desk and iron safe, with all their contents. He was farther required to take the stock with Mr. Tress, and to employ, at least, one of the young men to check it. Mr. Gye added, in his letter, “if you can point out any situation in our establishments likely to suit you, we shall be happy to hear from you, and to promote your interest in any shape in our power, except at Waterloo Place.”

The respondent conformed at once to all the

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It appeared that the amount of goods which passed through the hands of the establishment since its commencement in 1827 was 45,500 l .The appellants then raised an action of count and reckoning against the respondent, embracing a general accounting for his whole transactions from August 1827 till November 1829.

After the usual procedure an issue was directed in the following terms:—

“It being admitted that during the years 1827,1828, and 1829, the pursuers, Gye and Company, tea merchants in London, transmitted to Edinburgh certain quantities of tea, and employed the defender, along with certain other persons, to sell the same; and that the defender was employed to keep and did keep books, and did receive certain sums of money for the pursuers.
Whether the defender is indebted and resting owing to the pursuers in the sum of 120 l ., or any part thereof, as the value of stock not accounted for by him, or of monies received by him on account of the pursuers, and not accounted for ?”This issue was tried by a jury on the 24th March 1832, and the following verdict returned:—
“Find for the pursuers to the extent of 84 l . 19 s . 3 d ., being the amount of errors or omissions up to 30th September 1829.” 1

Footnote

1 10 S., D., & B. p. 512.

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The respondent being dissatisfied with this verdict, made an application to the Court of Session to set aside the verdict: and on the 26th June a new trial was granted. 1 Soon after it had commenced, upon the suggestion of the Court, a minute of reference was entered into by the parties, in these terms:
“ Gye v. Hallam .—The parties agree to withdraw a juror, and to refer the case to Mr. James Brown, accountant, whom failing, to Mr. Thomas Robertson, accountant; it being understood that the referee is not only to ascertain the balance due by the defender to the pursuers, if any, but also to settle all questions of liability and that the losing party is to be ordered by the referee to pay all the costs.”

The referee, on the 17th January 1834, pronounced the following award:—

under his charge, and which he has failed to explain to my satisfaction, amounting the said articles to 4 l . 3 s . 11 ½ d . sterling, on which sum I consider interest to be due since the 30th day of November, 1829 years. I think it fair to add that, keeping in view the extent and magnitude of the business under the defender's charge, the errors and omissions above alluded to are less in my opinion than might reasonably have been anticipated; and considering on the whole matter the pursuers to be the losing party, I order them to pay all the costs.”
“I, James Brown, accountant in Edinburgh, having accepted of the foregoing judicial reference, and having heard counsel for the parties at different times, and considered the parole proof adduced on behalf of the pursuers, with the whole written evidence for both parties, the account-books, and whole process, and having at different times issued notes and additional notes, and minutes containing my views on the various points brought under discussion, and having also considered the various pleadings, statements, and explanations given in for the parties respectively, and in answer to each other in the course of the reference, with the relative documents, am of opinion that the defender is liable to the pursuers for certain immaterial errors or omissions in the books which were

Footnote

1 10 S., D., B. & p. 710.

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The respondent having moved the Court to interpone their authority to the award, (which was opposed by the appellants in so far as related to the finding them liable in costs,) the Court (Second Division) pronounced this judgment:—
“18th January 1834.—The Lords interpone their authority to the award pronounced by James Brown, accountant in Edinburgh, the judicial referee in this case, and decern in terms thereof, and appoint the defender to lodge an account of expenses, and remit to the auditor to tax the same, and report.” 1
Thereafter, the 15th February 1834, the expenses were reported to amount to 693 l . 16 s . 8 d ., for which, with the expense of extracting the decree, their Lordships decerned.Against these interlocutors Gye and Co. appealed.Appellants .—The parties are at issue upon a question as to the meaning of the reference in regard to expenses,

Footnote

1 12 S., D., & B. p. 311.

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But the minute of reference clearly constitutes the measure of the referee's powers. It is a judicial contract between the parties, and it was ultra vires of the referee to exercise any power not specially conferred on him by that contract.The question of accounting is referred generally; but that of expenses is not so. The minute expressly bears “that the losing party is to be ordered by the referee to pay all the costs.” Thus nothing is left to the discretion of the referee. Expenses are to follow his judgment on the merits, and the party against whom that judgment goes forth is to be ordered to pay expenses. Whether this was a wise or a prudent arrangement is not the question, but whether such an agreement was truly entered into by the parties. They were at issue upon a matter of accounting, which might afford ground for protracted litigation. To prevent this, the parties agreed to take away all discretion from the referee upon the subject of expenses; and this was done by

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But while the referee has, upon the question of accounting, or, more properly, the issue of resting owing, returned a verdict for the appellants, finding that the respondent is indebted to them in the sum of 4 l . 3 s . 11 ½ d . with interest from the 30th November 1829, he has found the party against whom the issue of resting owing has been decided, and who consequently is the losing party, entitled to full expenses. The referee assumes that he had power to decide who was to be considered the losing party, without regard to the fact that decree has been issued against the respondent for a particular sum, with interest, as due to the appellants. Accordingly the ratio of the judgment appears to be, that, as upon the whole the appellants will gain so little by their decree, they must be held substantially to have lost their cause. On the same principle the referee might have held that where 120 l . was demanded, an award for 30 l . or 40 l . was not sufficient to make the appellants the gaining party, to the effect of entitling them, under the reference, to an order upon the respondent to pay costs. But this would be an exercise of that discretion on the part of the referee which it was the purpose of the reference to take away. The parties agreed that expenses should follow a judgment in favour of either of them, without regard to the amount to be recovered by the appellants, and in order to give effect to this agreement the condition was inserted in the reference requiring the referee to order the losing party to pay all the costs.

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If, then, the referee has exceeded his powers in ordering the appellants to pay costs, it follows necessarily that the judgments appealed from, interponing the authority of the Court to the award, and decerning for a large sum of expenses against the appellants, must be reversed.Respondent. —It was not only the object of the reference that the whole points on the merits in dispute between the parties should be exhausted, but that the question of expenses should be disposed of by him. He was “to settle all questions of liability;” after which there follows the provision, “that the losing party is to be ordered by the referee to pay all the costs.” It is therefore undoubted that the question as to liability for expenses was embraced by the reference, and consequently it cannot be maintained that the referee has exceeded his powers in disposing of that question.Assuming this to be clear, it necessarily follows that the referee was fully empowered to determine who should be considered the “losing party.” To maintain that this power was not vested in him is to maintain the absurdity that the referee should order the party to pay the costs, not whom he himself, after a due investigation of the claims should hold to be the losing party, but whom the Court of Session or this House should ultimately determine to be so.The present discussion thus resolves itself simply into a question as to his power to say who was the losing party. If it was within his power to fix who was the losing party, the mode in which he has exercised that

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Indeed, if the construction attempted to be put on the minute by the appellants is well founded, it would not have been competent for the referee to award expenses against the respondent, even if he had seen cause to do so. In that case the respondent would have been entitled to contend that he was not the losing party, and that the referee had arrogated a jurisdiction to himself which the parties had never conferred on him. Such a plea, if sound, would be just as available to the one party as to the other. Yet it cannot be available to both, except on the notion that the jurisdiction of the referee was absolutely and intentionally excluded, a proposition which cannot be maintained.

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No doubt the terms “the losing party,” are vague and general, but they are sufficiently explicit to express the meaning of the parties. The referee was not entitled to take an intermediate course, by finding neither party liable in expenses to the other. He was bound to consider who was to be held the losing party, with reference to the whole proceedings from their commencement to their close. Let, then, the relative claims of the parties be looked at in this light. The appellants raised a general action of count and reckoning—they condescended on certain large claims against the respondent, which they altered at the different stages of the proceedings; and, finally, they obtained a decree for a sum which, comparatively speaking, is trifling and insignificant; and which was even below what was originally offered to them for a compromise. Their action therefore was, in the first place, unnecessary and uncalled for; and, in the next, they have failed to establish the leading points of their claim.

Lord Brougham :—My Lords, it will be a most unfortunate thing indeed, if, upon further considering the proceedings in this case, which took place in the Court below, I should be of opinion that I ought to advise your lordships to send this case back to the Court below,—that is, that the judgment of that Court should be reversed, which interposes the authority of the Court, in order to give validity to the decision of the arbitrator, because it cannot end here, but the dispute will continue between the parties, and the inevitable result must be that which I will point out (it is impossible to be otherwise). The argument of the appellant here is, that the arbitrator had not the power

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Lord Brougham on a subsequent day said:—My lords, I would call the attention of your lordships to the case of Gye v. Hallam ; one of as great perplexity in one respect, and of as much hardship on the part of the respondent, if your lordships should be under the necessity of reversing the judgment, as I think I have ever seen in this House; because it is perfectly clear that there was an oversight in the submission or reference. It is quite clear that the arbitrator intended to find that Hallam was the winning party, and that Gye was the losing party; and it is equally clear that the Court

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The House of Lords ordered and adjudged, That the said petition and appeal be, and is hereby dismissed this House, and that the interlocutors therein complained of be, and the same are hereby affirmed: But this House thinks fit to declare, That this order is made upon consideration

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Solicitors: Tilsons, Squance, and Tilsons— James Patten—Solicitors.