Scottish Court of Session Decisions

On 19th December 1893 Messrs Younger & Monteith, grain merchants, Edinburgh, received instructions from Andrew Tait Monteith, Vancouver, British Columbia, to purchase for him a cargo of Californian wheat. The order was given in a telegram dated 18th December 1893, in the following terms:—“Buy cargo Californian wheat well forward immediately remittance ready telegraph.”

Mr Younger, the sole partner of Younger & Monteith, was in London at the time, and the telegram was repeated to him from Edinburgh. On the same day, 18th December 1893, he instructed Messrs Dowker & Company, corn brokers, to buy the required cargo of wheat. Messrs Dowker & Company through another broker purchased a cargo of wheat at the price of £11,803, the property of Messrs Girvin, Roper, & Company, grain merchants, London.

The contract note was headed:—

“The Liverpool Corn Trade Association, Limited.

“ London, Dec. 19 th 1893.

“Bought of Messrs Girvin, Roper, & Co., London, for a/c of Messrs Younger & Monteith, Edinburgh, through Messrs A. Dowker & Co., London, on the printed conditions and rules endorsed on this contract, a cargo of Californian wheat.…”

It contained the following stipulation:—“Buyer and seller agree that, for the purpose of proceedings either legal or by arbitration, this contract shall be deemed to have been made in England, to be performed there, any correspondence in reference to the offer, the acceptance, the place of payment or otherwise notwithstanding, and the courts of England or arbitrators appointed in England, as the case may be, shall, except for the purpose of enforcing any award made in pursuance of the arbitration clause hereof, have exclusive jurisdiction over all disputes which may arise under this contract. Such disputes shall be settled according to the law of England, whatever the domicile of the parties to this contract may be or become.”

The cargo was deliverable at any safe port in the United Kingdom with an option to the purchaser to send the ship to certain ports on the Continent. The price was to be paid by cash in London in exchange for shipping documents, or at the seller's option by buyer's acceptance of shipper's or seller's “drafts, domiciled in London,” with documents attached as usual.

Before signing the contract, Girvin, Roper, & Company made inquiries about Younger & Monteith, and as the result of these inquiries their name was accepted and inserted in the contract as apparent principals. The sellers knew that Younger & Monteith were acting for a foreign principal, though the name of the principal was neither asked nor given.

The sellers took a bill from Younger & Monteith for the price, and the shipping documents were made out in their favour. On the arrival of the cargo Younger & Monteith failed to take up the documents and to meet their acceptance.

Messrs Girvin, Roper, & Company accordingly took over the cargo, and paid over the contract price. They then re-sold at a loss of £2100, which they called upon Messrs Younger & Monteith to make good. On their failure to do so, and having ascertained the name of the foreign principal, Girvin, Roper, & Company, after founding jurisdiction by arrestment, raised an action against him concluding for payment of £2100, being the difference in the price paid, and that realised by them for the cargo.

The defender pleaded—“(4) The defender having given no authority to Messrs Younger & Monteith to pledge his credit, and the

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contract having been entered into with them as principals, according to the custom in the foreign trade and the law of England, the defender is not liable to be sued thereon by the pursuers.”

On 31st October the Lord Ordinary ( Stormonth Darling) allowed a proof, the result of which is sufficiently indicated above and in his Lordship's opinion.

On 3rd April the Lord Ordinary sustained the defender's fourth plea-in-law, and assoilzied him from the conclusions of the summons.

Note.—… [ After stating the facts]—“There is no dispute as to the breach of contract, nor as to the measure of damages, but the defence is that the defender gave no express authority to Younger & Monteith to pledge his credit to the pursuers; that without such authority (he being a foreign principal) his credit was not and could not be pledged; and therefore that by the law of England (which the defender says must rule) the pursuers have no recourse or action against him.

The first question thus comes to be, whether the law of England is to rule? If in this, as in so many branches of the law merchant, the laws of England and Scotland were identical, the question would be one of merely academic interest. But I am by no means satisfied that they are. After a careful examination of the dicta in Miller v. Mitchell, 22 D. 833, and of the judgment of the First Division in Bennett v. Inveresk Paper Company, 18 R. 975, it rather seems to me that the law of Scotland admits to a very modified extent the presumption which exists in England, that the credit of a foreign principal is not pledged in a contract made by an agent at home. The latter case in particular (as I read it) practically comes to this, that the presumption (if it exists at all) is displaced by evidence of the mere fact of agency. It therefore becomes a question of practical importance to determine which law is to be applied.

Now, the written contract of 19th December 1893 provides that for the purpose of proceedings, either legal or by arbitration, the contract shall be deemed to have been made in England, and to be performed there; that the Courts of England shall have exclusive jurisdiction over all disputes which may arise under it, and that such disputes shall be settled according to the law of England whatever the domicile of the parties to the contract may be or become. Is this then a dispute arising under the contract? If it is, the pursuers themselves have stipulated that it shall be settled according to the law of England. I cannot doubt that it is. The pursuers' right of action depends on the contract; they have no other. It is said that the question is not one as to the interpretation of the contract, but one depending on the collateral contract of agency between the defender and Younger & Monteith. No doubt the contract of agency must be examined, hut only for the purpose of determining whether the defender is liable on the contract of sale, and the results derived from an examination of the one contract must be applied to the other before any conclusion can be reached. I am unable to hold that the question who is liable on a contract can ever be anything but a dispute arising under that contract. But the pursuer urges another argument against the applicability of English law. He says—‘Be it that this is a dispute arising under the contract, it is a question depending for its solution upon a presumption, and presumptions being truly a part of the law of evidence, are to be determined by the lex fori.’ Now, nobody doubts that when the courts of one country are called upon to adjudicate upon a contract made in another, they must be guided by their own rules of procedure and of proof. The well-known case of Don v. Lippman ( 2 Sh. & Macl. 682) settled that these rules include local laws relating to prescription. But that is on the ground that whatever relates to the remedy, as distinguished from the substance of the obligation itself, is to be governed by the lex fori; and Lord Brougham was at pains to show (pp. 728, 729) that the parties could not at the time of making the contract have had the remedy in view, because in that case they would have been contemplating, not the performance of the contract, but the breach of it. Even as regards prescription, the rule would seem to be different where the set period, as in the case of the septennial limitation of cautionary obligation, is of the essence of the contract— Alexander v. Badenoch, 1843, 6 D. 322. Now, it seems to me that the question whether a foreign principal, known to exist though undisclosed as to identity, has rendered himself liable under a contract, is a question which relates not to the remedy but to the nature of the obligation; and, moreover, is one which the parties must have had in view as among those which they agreed should be determined according to the lex loci contractus. In resorting to that law this Court is not called upon to violate any of its own curial rules, any more than the House of Lords did in Hamlyn v. Talisker Distillery Company, L.R., 1894, App. Cas. 202, when effect was given to an English clause of reference to arbiters unnamed. All it has to do is to inquire according to its own rules, and by evidence satisfactory to itself, whether a presumption existing in the law by which the parties contracted has or has not been overcome. I therefore hold that the law of England must be applied.

I was favoured with some interesting evidence on that law, which, of course, I am hound to treat as a question of fact. The result seems to me to be this, that a presumption exists in that law against the credit of a foreign principal being pledged in any contract made by his agent in this country, and that the presumption can only be overcome by evidence of authority to do so. I refrain from saying express authority, though that phrase has the high authority of Lord Blackburn, because Mr Boyd, the pursuers' skilled witness, demurred to it, and certainly he adduced, in the course of his very able review of the cases, strong reasons for holding that the authority may be implied either from the terms of employment

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as agent or from a course of dealing. But I think it is plain that the authority, if not express, must be implied from something much more direct than the mere fact of agency. I am not concerned to inquire what the origin of the presumption was. Some lawyers have referred it to the improbability of the English merchant giving credit to the foreigner. Others have viewed it rather from the foreigners' standpoint. Perhaps it partakes of both elements, but whatever may have been the original motive, the rule has come to tell quite as much in favour of the foreigner as of the merchant at home.

“Has the presumption, then, been overcome in this case? On that point I am simply exercising the functions of a jury, subject to what I think would be the direction of an English judge, viz., that it cannot be overcome merely by the fact of agency. There was here no general appointment and no course of dealing. There was simply the telegram instructing the particular purchase. In the case of Hutton v. Bulloch, L.R., 9 Q.B. 576, Lord Esher (then Mr Justice Brett) says—‘It is now settled that it is not in ordinary course for the foreign merchant to authorise the English merchant to bind him to the English contract.’ Can I imply from the words in the telegram, ‘Remittance ready,’ that the defender, contrary to ‘ordinary course,’ authorised Younger & Monteith to pledge his credit to the pursuers? I think not. I regard these words as merely an assurance to the agent that the price (or the difference in case of loss on a re-sale) would be forthcoming. Such an assurance might make the agent more ready to undertake the liabilities of a principal (as in point of fact he did), but it did not, I think, express or imply any willingness on the part of the foreign principal to establish privity of contract with the English seller.

That, I think, is sufficient for the decision of the case in favour of the defender. If Younger & Monteith had had authority to pledge the defender's credit, I do not think it would have been necessary to show that they did in fact pledge it by express words …

I would only add that the question here is much more than a technicality. The defender is undoubtedly liable to Younger & Monteith, but he has claims against them which, so far as I see, he could not plead against the pursuers, because the law of England seems to be that a plaintiff suing an undisclosed principal is not liable to have the state of accounts between the principal and the agent pleaded against him unless he has by his conduct induced the principal to alter his position prejudicially by payments made subsequent to the contract. Here the payments were all antecedent to the contract, and were in no way affected by any action on the part of the pursuers.

I am therefore of opinion that the defender is entitled to absolvitor with expenses.”

The pursuers reclaimed, and argued—1. Assuming that the rule of English law was correctly stated by the Lord Ordinary, there was sufficient in this case to show that the defenders had authorised Messrs Younger & Monteith to pledge their credit. This might be inferred from the terms of the telegram, and from the fact that it was used as an inducement to sellers. This was the effect of the words “remittance ready” in the telegram. 2. But the law of England did not rule this question. The question does not arise in the interpretation or effect of the contract of sale, but depended upon the contract of agency between the defenders and Messrs Younger & Monteith. It must therefore be decided by the law of Scotland, Scotland being the domicile of the agents— Mastons y Hermano v. Mildred, 1882, 9 QBD 530; Piercy v. Young, 1879, 14 Ch. Div. 200; Westlake's Private International Law, sec. 224. The question was as to the extent of the mandate given to the agent, and it had nothing to do with the contract of sale. 3. Assuming that the law of Scotland governed, the rule that the undisclosed principal was liable if the fact of agency were proved applied to a foreign principal as well as to others— Millar v Mitchell, 1860, 22 D. 833; Bennett v. Inveresh Paper Company, 1891, 18 R. 975.

Argued for the defenders—1. The law of England was applicable for the reasons stated by the Lord Ordinary. 2. By the law of England there was a presumption in law against the liability of a foreign principal, which could only be rebutted by evidence of authority to pledge his credit having been given. Even if Lord Blackburn were wrong in saying the authority must be express, the authority must be implied from something much more direct than the mere fact of agency— Hutton v. Bulloch, June 13, 1879, L.R., 9 Q.B. 572, at 576; Elbinger Company v. Claye, April 18, 1873, L.R., 8 Q.B. 313. The general terms of the telegram were not sufficient to prove that authority had been given. 3. Even if the law of Scotland applied, the presumption against the liability of a foreign principal existed there too, though perhaps to a more modified extent than it did in England, and the presumption had not been rebutted by the evidence.

At advising—