Scottish Court of Session Decisions

This was an action by the Dundee and Newcastle Steam Shipping Company (Limited) against the National Guarantee and Suretyship Association (Limited) to enforce their guarantee of £500 for the fidelity of W. D. Doeg, the pursuer's agent. The pursuers had vessels trading between Dundee, Newcastle, and Middlesborough, and from about the year 1861 till the 23d December 1879 Doeg acted as their agent in the two last-mentioned towns, his principal duty being to collect the freights payable to the pursuers by their customers in and around those places. Monthly statements of the freights to be collected were sent by the pursuers to Doeg as they became due. Whenever these were forwarded to him, the amount of them was entered in the pursuers' books in Dundee to his debit. After deducting his disbursements he remitted to the pursuers the balance of the sum at his debit so far as collected by him. He was not bound to make good any portion of the debit which he failed to recover, unless the failure was owing to his own default, nor was he bound to remit the amount of freights collected until the end of the second month after the month to which they were applicable. For example, the freights for January, so far as collected by him, were payable to the pursuers in the end of March, and those for February in the end of April. Any part which he was unable to recover within the period stated he was in use to remit as soon as received. It was thus usual for him to have in hand sums of money of varying amount belonging to the pursuers between the dates when the freights collected by him were paid by the parties and the time agreed upon for his remitting the same to the pursuers. Towards the end of 1878 the pursuers resolved to require Doeg to furnish them with caution for his intromissions on their account. Doeg offered the pursuers the cautionary obligation or guarantee of the defenders,

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and a proposal for guarantee was signed by Doeg and the pursuers on 10th December 1878 and submitted to the defenders. The proposal was a printed form containing several questions to be answered by the employer and employed, and in the completed bond of guarantee the proposal containing these questions and answers was expressly declared to be the basis of the contract between the pursuers and defenders. The important questions contained in the proposal and answers were as follows:—“(5) Amount of salary at which the applicant is to be engaged, and other allowances, if any?—(A) £100 salary per annum and two per cent. commission on gross freights earned by the company. (6) If such salary or allowance is subject to any deductions on account of bad debts or otherwise, state the nature and amount of them.—(A) No. (7) Nature of applicant's duties and responsibility generally. If there is a written agreement with employer, produce a copy.—(A) Agent for the company in Newcastle and Middlesbro', and responsible for the collection of freights payable in these places. (8) State the largest sum at any time likely to be held in hand, and for how long a time.—(A) £500. (9) How often will the employers balance the applicant's accounts, and what checks will he use to secure accuracy? (A) The accounts are balanced monthly. (11) Are his accounts correct and his balances ascertained and settled to date of this proposal?—(A) Yes.” On receipt of the proposal and answers, Mr Chiene, the defenders' manager, wrote to Mr Plenderleath, the pursuers' manager, on 11th December 1878, requiring further information, which was given by Mr Plenderleath on 13th December. Mr Chiene asked him to say—“(2) What your arrangements with him are for remittances of money received by him on your behalf? Does he remit whenever he has a certain sum in hand, or how? I observe he may have £500 in hand, but you do not say for how long.” The answer was—“The arrangements for remittances are that Messrs Doeg & Company remit the debit at the end of any one month by the end of second month thereafter, so that in this way they might have £500 in hand if the freights payable in the intermediate months were heavy. (3) Are the accounts checked by you monthly as rendered, and does the agent then pay over the balance due by him on the account?—(A) I check the accounts rendered by them. Monthly balances are payable as above. (5) I observe your agent is responsible for the collection of freights in Newcastle and Middlesbro.’ Please say if I am correct in understanding that he is liable to make good the freights in these places whether he is able to collect them or not, or, in other words, if he is liable for bad debts arising therefrom?—(A) Our agents are not responsible for bona fide bad debts; unless they may have been neglected, and so lost to the company, we would not hold them liable for them.” Upon these statements the bond of guarantee was granted by the defenders for the sum of £500, to take effect as from 17th December 1878.

Towards the end of December 1879 Doeg got into difficulties and resigned his employment, and it was then ascertained that he had uplifted and failed to account for a large number of freights due to the pursuers—the deficiency exceeding £500—and the present action was raised to enforce the guarantee against the defenders.

The defenders pleaded, inter alia—“(1) The agreement being void in respect of an erroneous statement by the pursuers in the proposal, the defenders are entitled to absolvitor. (3) The precautions for securing accuracy of account and limiting the amount of moneys intrusted to Doeg not having been observed by the pursuers, the defenders are entitled to absolvitor.”