Scottish Court of Session Decisions

This was an action by Robert Buchanan Stewart, merchant, West George Street, Glasgow, against M'Clure, Naismith, Brodie, & Macfarlane, writers, Glasgow, for payment of £5771 in name of damages for alleged neglect of professional duty.

The action was originally raised in October 1884, and the case of the pursuer as it then stood on record was—that he had employed the defenders as men of business to prepare an effectual deed of security whereby he was to receive a right and interest in certain letters-patent for improvements in anchors in security of a loan by him of £5000 out of a total sum of £10,000 which the patentees were borrowing thereon, and that in doing so he relied on the exercise of their professional skill and care on his behalf as lender; that it was their duty to satisfy themselves of the validity of the patent sought to be assigned, to inquire whether the alleged provisions for which the letters-patent were granted had been anticipated and disclosed in previous patents and specifications, and further, to have caused a search to be made in the indexes to specifications kept for inspection in terms of the Patent Law Amendment Act 1852, with a view of discovering whether any of the specifications there enumerated anticipated or affected the validity of the patent proposed to be assigned. He averred that the defenders failed in these duties, the performance of which would have disclosed that the patent was anticipated and not valuable, and that their failure constituted negligence or want of care, professional skill, and a failure in their duty to him as his law-agents. He then set forth the failure of the subject of the security from invalidity in consequence of anticipation, and the consequent loss of the money advanced, with the interest.

The defenders admittedly acted in the matter as law-agents both for the borrowers and lenders.

They explained that they expressly set forth the risks incident to the transaction to the lenders, who, they alleged, were quite capable of forming an opinion upon the matter before they entered into the transaction. They also averred that before completing the transaction they laid the letters-patent before a qualified patent agent in Glasgow, and that his report was submitted to the lenders, including the pursuer.

The pursuer pleaded, inter alia—“(2) The omission of the defenders to make, or cause to be made, any search or examination of the Register of Patents, or any inspection of the indexes of specifications, &c. of patents, or any examination of the specifications of patents appearing therein affecting the validity of the letters-patent assigned, amounted in the circumstances to gross negligence and failure of duty towards the pursuer, for the consequences of which the defenders are liable.”

The defenders pleaded, inter alia—“(1) The pursuer's averments are not relevant or sufficient to support the conclusions of the action. (5) The defender shaving fulfilled their duty as agents, and not having been guilty of any negligence in the matters libelled, they should be assoilzied.”

On 20th February 1885 the Lord Ordinary found, inter alia, that the facts stated did not constitute a case of neglect of professional duty on the part of the defenders, rendering them liable in damages, and assoilzied them from the conclusions of the summons.

“ Note.—…. It is alleged that it was the duty of the defenders to inquire whether the inventions for which the letters-patent were granted had been anticipated, and for that purpose to cause a search to be made of the indexes to specifications, and that if they had done so the defenders would have found no less than nine specifications, all of which are anticipations of the invention on which the pursuer lent his money. The question then arises, whether it is part of the duty undertaken by the defenders as law-agents, employed to prepare a deed of security, that they should search for possible anticipations of the invention for which the patent, which is the subject of the security, was granted. It is not alleged that the defenders expressly and specifically undertook this duty. The ground of action is, that being employed to prepare a security it was their duty to make a search as a part of the business of preparing a security. Various objections to this view of the defenders' obligation at once occur. In the first place, the kind of search which it is said the defenders ought to have instituted is entirely different from a search for incumbrances. There is no question here of any competing assignation or deed of security in relation to the particular patent. It is the patent itself, the subject of the security, which is said to be valueless. Neither is there any analogy between the suggested inquiry and the kind of inquiry which is often made by a law-agent employed to lend money on heritable security with reference to the value of the subject. In some cases, and especially where he is acting for trustees, it may be the duty of a law-agent to employ a professional valuator (of course at the client's expense) to give an opinion as to the value of the subject of the security. I am not prepared to affirm that this is a necessary and invariable part of the duty of a lender's agent. The lender may have satisfied himself on the question of value, or the agent may have good reasons for assuming that the lender has himself undertaken that part of the business.

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But again, I observe, there is here no question as to the value of the invention as an invention. The matter so be inquired into is whether the invention was anticipated. Now, the kind of inquiry which a conveyancer undertakes is regulated by usage, which necessarily varies with the nature of the business, and varies for different parts of the United Kingdom. In England, where there is no general register of titles, the inquiry to be prosecuted by the conveyancer must be different from that which is required in Scotland where there are public registers, and a recognised system of searching those registers. But an inquiry whether a particular invention has been anticipated appears to me to be a kind of investigation not falling within any established professional usage, and which is altogether outside the scope of the duties of a law-agent and conveyancer. It is not a kind of business which he is qualified professionally to undertake. It is not an inquiry which anyone dealing in patent rights would necessarily and as of course desire to institute, and I think the client might reasonably object to pay the cost of such an investigation if he had not ordered it. How then can it be said to be a part of the agent's professional duty to make or cause to be made such a search? But further, it is evident that a search of the indexes of specifications would not be sufficient to protect the lender against the risk of avoidance of the patent by anticipation. A specification of a previous patent may be anticipation, but it is not the only kind of anticipation. It would be necessary also to examine the literature of engineering and mechanical science to ascertain whether the invention had not been made and published otherwise than through the Patent Office. No such search could possibly be complete. What is wanted in such cases is not a search, but the opinion of an expert as to the originality of the invention, and the probability of the patent standing good when exposed to the test of an action at law. No doubt such inquiries are often made by people who invest their money in patented inventions, but they are made as matter of special arrangement, and are not understood to be comprehended in the employment of a law-agent. Everyone who has to do with patents is aware that patent rights are defeasible on certain grounds. But it is also well known that many patent rights of doubtful validity pass unchallenged because individuals are unwilling to incur the expense of contesting their validity. In the present case I have no doubt that the pursuer knew very well what he was doing when he agreed to lend the money at twelve per cent. on the security of a patented invention. If he wanted the opinion of a patent-agent or professional mechanician as to the originality of the invention, he ought to have instructed his agent to obtain it, and I cannot hold the defenders responsible as for negligence or want of skill because they failed to make an inquiry which I conceive they were not entitled to make without instructions.

It is unfortunate that in this case the defenders undertook the duty of agency for the two parties, the lender and borrower. An agent who does so exposes himself to such charges as are made in this record. I think it is much to be desired that the practice of double agency should be discontinued, because it is in all cases difficult, and in many cases impossible, that an agent should give his best advice to either of the parties consistently with his obligation to promote the interests of the other. I trust that through the intervention of the Court or the Legislature this erroneous practice may be corrected. But I do not think that in the present case it has resulted in any actual neglect of duty on the part of the defenders.”

The pursuer reclaimed.

In the course of the discussion the pursuer moved to be allowed to open up the record and to make certain amendments, which motion being granted, he averred that the defenders knew and recognised it to be their duty in his interest to see as to the existence of anticipations of the letters-patent proposed to be assigned, as he had no acquaintance with patent law, and that he left it to them to take all steps necessary for his protection, and that on 11th August 1877 they had sent the following letter to Mr Hunt, a well-known patent agent and expert in Glasgow:—“Edmund Hunt, Esq. Dear Sir,—It is proposed that the three patents noted on the other side should be assigned to clients of ours, but before the assignation is proceeded with we wish to ascertain, for the information and protection of our clients, that no prior assignation or other deeds affecting the patents have been granted, and that there are no other or competing patents for the same invention, or that would nullify the patents now proposed to be assigned; and it will be obliging if you will cause a search to be made in the Register of Patents with a view of ascertaining whether or not there is anything which would render it impracticable or inexpedient to proceed with the proposed assignation.—Yours faithfully, M'Clure, Naismith, Brodie, & Macfarlane.” [The letters-patent noted were those as to anchors proposed to be assigned by Martin, the borrower, and one for improvements in chain cables proposed to be assigned along with them.] “(Cond. 7) The said Edmund Hunt having made certain inquiries in pursuance of the said employment, handed or transmitted to the defenders prints of the specifications of the letters-patent referred to in the above letter, and also a print of the specification of certain other letters-patent in favour of the said Francois Martin, dated 21st October 1864, and sealed 28th February 1865; as also, a pamphlet issued by the patent office containing abridgments of anchor patents from 1796 to 1866. He also pointed out to the defenders, inter alia, that one of the patents proposed to be assigned, viz., that of 6th May 1864, as also the patent above mentioned of 21st October 1864, had been the subject of certain assignments which formed a bar to the assignation proposed. In these circumstances the said Edmund Hunt did not make any examination as to the novelty of the patents proposed to be assigned, but requested further instructions from the defenders before prosecuting his search. The defenders, however, although nothing had occurred to make the search which they had ordered unnecessary, took no further action on Mr Hunt's report. They gave him no further instructions, nor did they employ any other expert. On the contrary, they dropped the search which they had initiated, and they did so without any communication with

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the pursuer. The said specifications and pamphlets are produced, and held as repeated. Neither these documents, nor Mr Hunt's inquiries, nor the results of Mr Hunt's report, were communicated to the pursuer prior to the closing of the transaction.”

He further averred that from the information supplied to the defenders if they had made the slightest examination they would have discovered that there were patents in force which anticipated and rendered invalid those which were to be assigned to him.

He also averred that at a meeting held in the defenders' chambers on or about 20th August 1877, and before the transaction of loans was made, the proposal to consult an expert on the validity of the patents was fully discussed, with the result that the borrower, Claude Martin, procured the following letter from Tongue & Birkbeck, patent agents, who were, and were known by the defenders to be, Martin's own patent agents:—“Messrs C. Martin & Son. Gentlemen,—With regard to our opinion as to the validity of your patents for anchors and chain-cables, dated and numbered respectively, viz., anchors, 30th May 1872, No. 1632; chain-cable,31st August 1872, No. 2597—there can be no ground for supposing them to be otherwise, inasmuch as their extensive adoption by the Government for the British Navy and by the principal foreign States and by the Mercantile Navy proves their great value. The fact also that no attempt has ever been made to question their validity is the best proof you can have that they are valid, the patents having now been extensively worked for the last five years. We are also of opinion that no previous patents taken for improvements in the construction of anchors can affect in any way the validity of your patent of 1872, because the principles embodied in that patent we believe to be essentially novel.—We are, yours truly, Tongue & Birkbeck.”

He averred that this letter was procured not by the defenders but by Martin, the borrower, on his own application to Tongue & Birkbeck, that the defenders gave them no instructions to make a search, and that none was made, and that their letter was submitted by the defenders to him (pursuer), but he was not informed that it was written by the patent agents of the borrowers, nor was it pointed out to him that it was not equivalent to a report by an expert, and did not at all include the existence of anticipating patents.

The defenders gave a general denial to these amendments under reference to the document produced, and they also averred that the risks of such a transaction were fully before the pursuer, who was as able as they were to judge of them.

The pursuer also added the following plea, founded on the averments made by him in the amendment—“The defenders having, while acting as the agents of the pursuer, failed to disclose to him facts within their knowledge which were material to the question of his consenting to the said loan, are liable to him in damages as concluded for.

The Court after a discussion on the amendment remitted to the Lord Ordinary to allow a proof.

The proof was taken before Lord Trayner on 12th and 13th November 1885, and its import sufficiently appears from the opinion of the Lord Ordinary, and from that of their Lordships of the First Division.

On 17th November 1885, after the proof, Lord Trayner allowed the defenders to amend their record and the pursuers to answer, and of new closed the record.

The defenders in their amendment averred that the pursuer had sold to a company the patents originally assigned, and they pleaded that as the pursuer had at his own hand and without notice to them sold the patents in question, restitutio in integrum was now impossible.

The pursuer in answer admitted that the trustees for the various lenders on the security of the patents had sold them, that his share of the price was £1250, and that he was ready to deduct this sum from the amount sued for by him in name of damages.

On 12th December 1885 the Lord Ordinary assoilzied the defenders from the conclusions of the summons.

“ Opinion.—In March 1877 the defenders, acting as the agents for Mr Claude Martin, inserted in the Glasgow Herald the advertisement quoted in the condescendence. [This advertisement was:—“ Limited Partnership.—A very favourable opportunity presents itself to parties willing to contribute from £15,000 to £20,000, in sums of not less than £5000, for the development of a business in a highly remunerative patented article for which there is a large and yearly increasing demand. Apply to” the defenders.] In consequence of that advertisement they were waited upon by the pursuer, and after a variety of meetings and communings, which it is not necessary at present to detail, an agreement was ultimately arrived at, under which the pursuer agreed to lend to Mr Martin a sum of £5000 on the security of a patent for ‘improvements in anchors,’ dated in May 1872, and a patent for ‘improvements in the construction of chains for chain-cables and other purposes,’ dated in August 1872. This agreement was concluded by Mr Martin (and his son) executing an absolute assignation of the foresaid patents, dated 4th September 1877, in favour of the pursuer and certain other persons, who were lending money on the same security along with him; and by the execution of an agreement, also dated in September 1877, between Mr Martin and his son on the one hand, and the pursuer and the other lenders on the other hand, in which the terms and nature of the transaction, as well as the rights and obligations of the several parties thereto, were set out at length. The pursuer paid the £5000 he had agreed to advance on 5th September 1877 to the defenders firm, who acted in the transaction as law-agents both for the borrowers and lenders.

The stipulated interest on the advance was paid to the pursuer for the period from September 1877 till Whitsunday 1879; but no further interest being paid, the pursuer and his co-lenders, after notice to the Martins in terms of the agreement, entered into possession, and under the title of ‘Martin's Patent Anchor and Cable Factory,’ used and worked the patents which had been assigned to them. They did so until this year, when (in September 1885) they assigned, inter alia, the said patents and all their rights therein, to the persons named in the minute of agreement.

The validity of the anchor patent was challenged soon after the pursuer and his co-lenders began to work it, and the soundness of the challenge was practically admitted by the abandonment of an action which had been raised by the

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pursuer and his co-lenders against Wright & Company of Tipton, who were alleged to have invaded the patent right. I do not go into any detail with regard to the proceedings in the action between the pursuer and Wright & Company, and the subsequent proceedings adopted by the pursuer, as I am prepared to hold, on a consideration of the whole evidence, that at the date of the assignation to the pursuer in September 1877, when he advanced the said sum of £5000, the anchor patent was invalid and commercially of no value. It is right, however, to notice that after the practically successful challenge of the patent right by Wright & Company, the pursuer and his co-lenders took certain proceedings by way of proposed disclaimer, for the purpose of making their patent right free from challenge, which proceedings, in consequence of objections stated thereto, were not pressed but were in abeyance, although in dependence, at the date of the sale in September 1885. I am further prepared to hold it as established by the evidence, that the pursuer, through the invalidity of the patent and consequent worthlessness of his security, has lost the £5000 which he advanced.

In the present action the pursuer seeks decree against the defenders for the £5000 advanced as aforesaid, and for the interest due thereon in so far as not received at or prior to Whitsunday 1879. The total claim is for £5771, 7s. 5d.

The first and chief ground on which the pursuer bases his right to recover the sum sued for from the defenders is, that he has suffered loss to that extent through ‘the gross negligence or want of due skill, and failure on the part of the defenders in the performance of the duty incumbent on them as the pursuer's law-agents.’ The negligence and failure in duty alleged consists in this, that prior to the completion of the transaction in question the defenders failed to satisfy themselves of the validity of the anchor patent right, on the security of which the £5000 was advanced by the pursuer. I say the ‘anchor patent right’ because both in the proof and in the argument which followed no notice was taken of what I may call the ‘chain patent.’ The question then which falls to be decided first is this, Was it the duty of the defenders, as the law-agents of the pursuer in the transaction in question, to satisfy themselves, and thus assure the pursuer, of the validity of the patent right offered as security for the advance to be made by the pursuer? I regard this as a question of very considerable importance, not only because of the pecuniary liability depending upon it in the present case, but because it involves a large general question as to the duties and responsibilities of law-agents who are or may be called upon to act for clients in the purchase of patent rights, or in lending money upon their security. In endeavouring to solve this question it has to be remembered that the validity of a patent depends chiefly upon these four considerations, viz.—(1) Whether the subject-matter is patentable? (2) whether the patentee is the true inventor? (3) whether there has been prior use? and (4) whether besides being novel the invention is one of general utility? With regard to these four considerations it is clear enough that a law-agent is not bound to have, nor supposed to have, the skill which would enable him to advise as to the first and fourth, namely, whether the subject-matter was patentable, or whether the alleged invention was one of general utility. As concerns the third—prior use—it is not maintained by the pursuer (and could not in my opinion be maintained) that the defenders had either the means or the duty of satisfying themselves upon that head. There remains, therefore, only the second of the considerations I have referred to, and it is with reference to it and it only, as I understand, that the pursuer (on this branch of the case) now maintains there was failure in duty on the part of the defenders. The pursuer's averments on this subject amount to this, that the defenders failed to search, or cause to be searched, the Official Indices to Specifications, kept for inspection in terms of the Patent Law Amendment Act 1852, an examination of which would have disclosed the existence of prior patents fatal to or seriously affecting the validity of the patent in question. In point of fact some investigation was made as to the existence of prior patents, although not of the precise kind here specified by the pursuer, and the result of that investigation affects the decision of another part of this case. But on the matter now immediately under consideration I proceed on the footing that the defenders made no search whatever in the Official Index referred to. Were the defenders bound in fulfilment of their professional duty to the pursuer to make such a search? I confess that at one time the inclination of my mind was to hold that they were, but further consideration with the aid of a very able argument from the bar has satisfied me that they were not.

It was argued for the pursuer that it was the defenders' duty as the pursuer's law-agents to ascertain (1) that the right to the subject to be assigned in security was well constituted; and (2) that the borrowers were in a position to give a valid, free, and unencumbered title to that subject. No doubt has been raised upon this second head of the pursuer's argument. The defenders satisfied themselves that the borrowers were vested in the right they offered to assign in security, and that no previous assignment or mortgage limited their right or made the security less in value or extent than it was represented to be. It is on the first branch of the pursuer's argument that the difficulty arises. With regard to it, however, I must say that it appears to me to be ambiguous. In one view of it the pursuer's argument may be conceded, in another view of it it is unsound. If by the constitution of the right the pursuer meant the constitution of the right as appearing ex facie of the letters-patent, I think his argument is not open to any objection. The defenders were bound to see that the letters-patent were in due form, conform to statute, duly stamped, and so on. These were matters within the skill of the defenders as law-agents. But if the pursuer means (and that is what he does mean by his argument) that the defenders were bound as law-agents to go behind the letters-patent and inquire whether the right thereby conferred was one which, on grounds not appearing from the letters-patent, should never have been granted, or could now be set aside, I think his argument is unsound. The case of a proposed transmission of a feu-right was put in illustration, and it was said that the agents’ duty for a lender or purchaser was not

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merely to see that the borrower or seller had an unencumbered title under which he could validly transmit, but that he must also satisfy himself that the original grant was well constituted. This illustration is suitable enough, but the difficulty of applying it, if any, arises again from the ambiguity of the word ‘constituted.’ If the law-agent, in the case supposed, found that the feu-charter proceeding from the superior was valid in so far as appeared ex facie of that deed—that it had been duly registered so as to complete the vassal's feudal title, and that nothing appeared on the public records burdening the lands or limiting the vassal's right to convey them in security—what more is the agent bound to do? Must he, in fulfilment of his professional duty, go to the locality of the subjects proposed to be conveyed, and satisfy himself that the subjects described in the title-deeds really exist? If there was no subject, of course there was no well-constituted grant, but it is not the valid constitution of the grant in that sense of which the agent is bound to satisfy himself. Nor is it in the case of a patent right his duty to go behind the letters-patent to ascertain whether there was a good invention. In each case the question whether there exists a heritable subject as described, or a good invention as patented, is a proper subject for inquiry if any doubt is suggested or exists. But it is not the agents’ duty to make that inquiry unless he is specially desired or undertakes to make it. Of itself it does not fall within the known and recognised duty of a law-agent as such. The defenders' counsel suggested another illustration, which I think has an important bearing upon this question. Suppose a law-agent for a purchaser, in going over a progress, finds that the person proposing to sell certain lands has a title based upon a precept of clare constat, either in favour of himself or some of his authors within the prescriptive period. That precept sets out that the superior has been satisfied of the death of his last entered vassal, and therefore grants precept for the infeftment of the heir. Is the law-agent for the purchaser bound, as law-agent, to go behind the precept and inquire on what grounds the superior was satisfied of the death of his vassal, or to institute a separate inquiry to satisfy himself of the fact? And if he does not do so, is he to be personally responsible to his client if the vassal supposed and stated to be dead should after all prove to be alive? I think these questions can only be answered in the negative. The agent appears to me to discharge his duty if by examination of the titles and records he satisfies himself that, ex facie of both, the proposing seller or borrower has a good title to the subject which he offers to sell or convey in security. In the present case the defenders did what was equivalent to that. The letters-patent ex facie presented no flaw or invalidity, and the register of assignments shewed that the Martins were vested in the right, without limit or incumbrance, and were therefore in a position to give a good and free title to the pursuer and his co-lenders to the right which the letters-patent conferred. Whether that right was assailable, or was commercially valueless, was not the concern of the agents but of the parties.

The pursuer further argued that the defenders as law-agents knew, or should have known, that no patent right was valid or well constituted unless it fulfilled the four considerations or conditions to which I have already alluded, and that it was the defenders' duty, therefore, to see that the four conditions had been fulfilled or purified. But as I have already indicated, there are three out of the four conditions with which a lawyer's skill does not enable him to deal. I think it just as certain that he has not, and is not required to have, skill to deal with the fourth. An examination of the specification of preceding patents might shew him that a patent had been previously obtained for an anchor, or improvements in anchors, but would not enable him as a law-agent to say whether it was in any sense or to any extent an anticipation of the patent which he was called on to transfer. Such a search is not analogous to a search for incumbrances in a property register. The search in the Register of Assignments of Patents is analogous; and that search was made. At all events, no damage is alleged to have arisen from a failure to make such a search; is it not said that there was any previous assignment of the patent in question, or any mortgage or security affecting it.

I am therefore of opinion that there was no failure of duty on the part of the defenders, as law-agents for the pursuer, in the transaction in question in so far as concerns the matter I have been dealing with. The same view was reached by Lord M'Laren in deciding upon the relevancy of the pursuer's case, and I refer to the opinion delivered by his Lordship as affording additional grounds for the conclusion we have each arrived at. Nothing that was disclosed in the evidence led before me goes to affect in my judgment the opinion expressed by Lord M'Laren.

The case, however, does not end here. The pursuer refers to the letters written by the defenders on 11th August 1877 to Mr Hunt, a patent agent in Glasgow, quoted in the condescendence, as shewing what the defenders' views were of their duty at a time while the negotiations for the loan in question were still in progress. In that letter the defenders, ‘for the information and protection’ of their clients (the lenders), express their wish to ascertain (1) ‘that no prior or other deeds affecting the patents have been granted, and (2) that there ‘are no other or competing patents for the same invention, or that would nullify the patents proposed to be assigned,’ and with this view they requested Mr Hunt to cause a search to be made in the Register of Patents. I cannot regard this letter, written by the defenders, as acknowledging or recognising any duty upon them to search the Register of Patents. Indeed it is an acknowledgment on their part that they are not competent to make the search, or they would not have asked an expert to make it for them. It was a proper letter for the defenders to write, however, for they knew the dangers to which the validity of a patent was exposed, and against these dangers they desired so far as possible to guard their clients. This letter, however, whether in itself of so much importance as the pursuer attributes to it or not, acquires undoubted importance from what followed upon it, and this leads me to the second ground on which the pursuer seeks to impose liability on the defenders for the loss he has sustained. The pursuer maintains that whether the defenders were bound to make the search in the official index or not, yet in point of

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fact they became aware before the transaction was closed that the patent right in question was invalid, or at least of doubtful validity, that it was their duty to have disclosed all they knew or had reason to believe on this subject to the pursuer, who, if such disclosure had been made, would not have gone on with the transaction; that the defenders failed in their duty by not making this disclosure, hence the loss and the defenders' liability therefor.

On receipt of the defenders' letter of 11th August Mr Hunt wrote to his correspondents in London ‘to see if any assignment or other document is entered in register of proprietors relative ‘to the patents in question. The reply was to the effect that certain assignments were found affecting the patents of 1864, but none affecting the patents of 1872, and along with the reply there was sent to Mr Hunt a book titled ‘Abridgments of Specifications relating to Anchors.’ On receipt of this letter and book Mr Hunt saw Mr Brodie, but what took place between them on that occasion neither of them at this distance of time is able to recollect. Their want of memory, however, is not so material as it might otherwise have been, for from the entries in Mr Hunt's business-books made at the time, and from a letter written within a few days thereafter by Mr Brodie, a sufficiently detailed and, I have no doubt, accurate account can be obtained of what passed between Mr Hunt and Mr Brodie on the occasion referred to. Mr Hunt's account contains this entry, under date 14th August 1877——‘Attending Mr Brodie with notes of assignment, &c., received from London, and conferring with him as to the probable validity of the patents; also examining abridgments of patents relating to anchors, and acquainting Mr Brodie with the result.’ What that result was may be learned, at least to some extent, from Mr Hunt's evidence. He says—‘All the information which I got then as to the validity of the patents was simply from the glance through the abridgments. I would not say that that glance through the abridgments excited a doubt in my mind, but it excited in my mind a feeling that farther research was necessary. We never regard these abridgments as giving anything like an exhaustive search. (Q) Having so examined the abridgments you acquainted Mr Brodie with the result of that examination; what does that mean?—(A) All I can recollect with any certainty is that I stated I thought farther search should be made.’ This evidence is supplemented as I have said by a letter written by Mr Brodie. That letter is dated 20th August 1877, and is addressed to Mr J. R. Miller, one of the pursuer's co-lenders, and in it Mr Brodie not only states in substance what Mr Hunt had communicated, but also the effect of that communication on his own mind. Mr Brodie says—‘I have had a meeting with the patent agent. He has lent me an abridgment of patents on anchors. It would appear that an anchor on a similar principle was patented in 1821. It may be that there is nothing in this, but as the result of my interview I write to say that it will not be possible to be ready for Friday.’ (This Friday had previously been fixed as the day for settlement of the transaction). Mr Brodie concludes his letter thus—‘It occurs to me that it will be necessary to have a distinct report by the patent agent as to the validity of the patent before proceeding farther. This will require time, and will be attended with expense. The authority of Mr Martin must be obtained.’ There are some parts of this letter which I have not quoted on which some observations were made by the pursuer's counsel, but I notice this only for the purpose of saying that the interpretation of that part of the letter adverse to the defenders disappears before the explanation made by Mr Brodie.

In view of the evidence I have just referred to, I think it must be held as established (1) that Mr Brodie knew before the pursuer's money was lent or the patent rights assigned to him of the existence of at least one patent prior in date which might affect the validity of those intended to be transferred; (2) that in the opinion of the expert whom he had consulted a search was necessary of a more exhaustive kind than any that had been made before it would be safe to complete the transaction with the Martins or lend them the money; (3) that in the then state of his knowledge Mr Brodie was himself of opinion that before the transaction was completed ‘it would be necessary to have a distinct report by the patent agent as to the validity of the patent;’ and (4) that the settlement of the transaction was postponed in consequence of that opinion.

The pursuer maintains, as I have already stated, that Mr Brodie's knowledge and opinion being such as I have just described, he was bound to disclose both to his client, the pursuer, and that if he failed to do so, and proceeded to complete the transaction in which the pursuer was risking £5000 without obtaining the expert's report on the validity of the patents which he himself considered ‘necessary,’ or obtained from his client distinct authority to dispense with such a search after he had been fully made aware of the risk which by so doing he might incur, any loss arising which that search if made would have prevented must be borne by him. In short, Mr Brodie should either have insisted on an exhaustive search as recommended by Mr Hunt, or was bound to place the whole matter fully and clearly before his client, leaving with him the responsibility if a search was not made. I entirely agree with this argument, and adopt this view of Mr Brodie's duty. In my opinion the loss which the pursuer has suffered is directly attributable to the want of this ‘necessary’ search. It would have been as easily discovered in August 1877 that the patents of 1872 were invalid, as it was in 1881 when their validity was challenged by Wright & Company. Perhaps the prior use relied on by Wright & Company would not have been discovered, but at least enough could have been discovered to deter the pursuer from going further with the transaction. But the question of fact remains, Did the defender Mr Brodie fail to disclose to the pursuer the knowledge he had? or did the pursuer in the knowledge of all Mr Brodie knew agree to dispense with the search? It is on this part of the case that the proof is least satisfactory, for the recollection of all concerned as to what took place verbally at meetings which they had is very vague. Consequently any evidence derived from entries or notes made at the time comes to be of extreme value.

It appears from the entries in the defenders' books that after Mr Brodie had had his meeting

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with Mr Hunt on the 14th August he put himself in communication on the subject (I take it) of the required search with Mr Martin and his manager Mr Buckland, and on the 17th August a meeting was held in the defenders' chambers, at which the pursuer and others were present. With reference to that meeting there is the following entry—‘Meeting Mr Stewart, Mr Caird, and Mr Miller separately, and fully conferring on whole matter, and risks necessarily incident in connection with such a transaction.’ Immediately after that a meeting was held at which the three persons previously named seem to have been joined by the others interested, and particularly by Mr Martin and Mr Buckland, and at this meeting the defenders made ‘full explanations,’ and submitted the draft assignation and back-letter, ‘when it was finally arranged to meet again on Friday next ( i.e., 24th August) for settlement.’ Beyond these entries I think there is no reliable or satisfactory evidence of what took place at these meetings. The parties cannot charge their memories with what took place, but the pursuer says that Mr Hunt's name may have been mentioned ‘without exciting any attention,’ while he is certain that nothing was said ‘calculated in any degree to excite alarm.’ Whether Mr Hunt's name was mentioned or not I am disposed to hold that nothing was said at this meeting to the effect that Mr Hunt had recommended a search among the specifications of patents, because the letter written to Mr Miller by the defenders on the 20th (three days after the meeting) refers to what Mr Hunt had said, and as to the necessity of a search in such terms as to satisfy me that the communication made in the letter was then made to Mr Miller for the first time. Now, Mr Miller was present at both the meetings on the 17th, and if Mr Hunt's views had then been explained it is impossible to believe that the letter would not have made some reference to what had taken place at the meeting. It seems to me probable that Mr Brodie did not mention to the meetings of the 17th the result of his interview with Mr Hunt, because he was waiting to learn what Mr Martin was prepared to do in order to remove the difficulties suggested by the interview with Mr Hunt.

As has been seen already, Mr Miller was informed that the proposed settlement of the transaction on the 24th had been postponed. No such intimation had been given to Mr Stewart, who accordingly went to the defenders' chambers on that day; and the defenders' entry relative to that call is as follows:—‘Meeting Mr Stewart, explaining cause of delay in having matters arranged.’ On this occasion Mr Stewart saw Mr Morison, then a clerk, and now a partner, of the defenders' firm; but of what took place between them the pursuer has no recollection. He says (on cross-examination),—‘My recollection is quite a blank between 17th August and 3d September as regards these transactions.’ Mr Morison, however, is examined, and says that he was conversant with what was going on in reference to the transaction in question; he had read the letter of 20th August sent to Mr Miller; he met Mr Stewart on his call on the 24th. He adds,—‘I have no doubt I told Mr Stewart what Mr Brodie recommended to be done—that a separate and independent report should be got from a patent agent, and that it was desirable to postpone the settlement of the transaction till that was done.’ Mr Morison on cross-examination admits that he speaks so far from the terms of the entry I have quoted, but he is also pretty positive as to what he told the pursuer. I am disposed to hold on this evidence that the pursuer was informed by Mr Morison of the real cause of the postponement of the settlement, and that the statement made to him was practically a repetition of what had been told Mr Miller in the letter of 20th August. The pursuer had come for the purpose of settling, and would scarcely have been contented with the statement that the settlement had been postponed without any reason being assigned. If any reason was assigned, it is not suggested that any other than the true reason was given; and Mr Morison, who knew the true reason, had no interest in giving a false or withholding the true one. Besides, the entry made at the time bears that ‘the cause of delay’ was explained to the pursuer.

No further meeting between the pursuer and defenders took place till 3d September. In the interval Mr Martin had obtained the letter from Tongue & Birkbeck quoted in the condescendence, and handed it to the defenders, and the defenders had inquired through their London correspondents as to the respectability and standing of Tongue & Birkbeck. They had also been informed by Mr Martin (or on his behalf) that this letter must be accepted as sufficient, and that no farther search was to be made at his, Martin's, expense. On 3d September the parties met again in the defenders' chambers. The entry in their books relative to this meeting is as follows:—‘Long meeting of parties interested, going over draft agreement and draft assignment, and previously reporting fully as to what had taken place in regard to inquiries as to patents, and when it was resolved to accept report of patent agents in London as furnished—nearly three hours.’ It is obviously of the last importance to know what took place at that meeting. The pursuer scarcely recollects anything about it, but one thing he does remember,—‘I remember Mr Brodie at our last meeting saying, “Now, gentlemen, if you wish to withdraw, now is your time,” and then, I think, he again spoke of the risks incident to such transactions, &c. The defender Mr Brodie cannot charge his memory as to the details of what took place, but looking to the entry I have quoted, he has, ‘no doubt,’ he explained fully the position of matters. Mr Caird remembers nothing; neither does Mr James Miller. Mr John R. Miller, however, does remember something of what took place. He remembers the meeting of 3d September with ‘as distinct a recollection as I can have of things occurring so long ago.’ He remembers Tongue & Birkbeck's letter being read, and also the letter by the defenders' correspondent in relation to their respectability and standing. He further says,—‘I think one of the things discussed at the meeting was whether Tongue & Birkbeck's report was sufficient to close the transaction upon. At that meeting it was decided to close the transaction on the authority of Tongue & Birkbeck's letter.’ ‘I remember Mr Brodie distinctly warning us that patents were risky things. He did so at that meeting, and in the hearing of all.’ ‘The alternative was

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put before us—either a further investigation, or to take Tongue & Birkbeck's letter as sufficient, and we decided to accept Tongue & Birkbeck's letter. I think it must have been Mr Brodie who proposed a further investigation. I think we did absolve him from having any further investigation, and accepted Tongue & Birkbeck's letter. We accepted that letter as quite sufficient in the circumstances.’ It is quite true that on being further pressed he cannot recollect or be sure whether this (just quoted) took place at the meeting of 3d September or at some other meeting. But I am prepared to hold that it did take place at this meeting, and chiefly for this reason: There was no other meeting which the parties attended (so far, at least, as appears) at which the alternative of taking Tongue & Birkbeck's letter or insisting on further investigation could have been placed before them except this meeting of 3d September. It was plainly not the meeting of 17th August, for Tongue & Birkbeck's letter had not then been obtained; it was not at any meeting with Mr Miller and Mr Brodie alone, for the whole tenor of Mr Miller's evidence bears that it was at some meeting where the parties interested discussed the alternative, and the meeting of 3d September was the first meeting where all the parties met together after the date of Tongue & Birkbeck's letter—indeed after the meeting of 17th August.

I do not refer to Mr Drummond's evidence, for a reason to be afterwards given; but in my opinion the result of the evidence I have now gone over is this: That the defender Mr Brodie at the meeting of 3d September referred to the risk at all times attending transactions connected with the purchase or lending money on the security of patent rights; that he put before the pursuer and his co-lenders the alternative of accepting Tongue & Birkbeck's letter as to the validity of the patents, or of having a farther investigation made in reference to their validity, and that the lenders, including the pursuer (in the knowledge, as I believe, that Mr Martin had said that if Tongue & Birbeck's letter was not accepted as sufficient the transaction must go off) agreed to accept the letter before them as sufficient, and ‘did absolve’ Mr Brodie from having any further investigation made. The whole probabilities of the case seem to me to point in the same direction. In the first place, Mr Brodie had no interest whatever in concealing anything he knew or suspected or doubted in order to urge on a transaction which involved his clients in the loan of a large sum of money on doubtful or bad security. The pursuer was Mr Brodie's personal friend, had been his client, and might be so again, while Mr Martin, the borrower, was a mere chance client, for whom Mr Brodie had not before done business, and with whom in future he might have no business dealings. In such circumstances Mr Brodie's inclination would naturally be to protect the pursuer's interests rather than further the projects of Mr Martin. In the second place, Mr J. R. Miller and his friends were desirous of having the transaction carried through, as likely to lead to the extension of their business and increase of its profits in the larger manufacture than heretofore of an anchor in great demand. The pursuer was not adverse to a transaction in which he got £5000 invested at 12 per cent. interest.

I am unable to hold it proved that Mr Brodie, with knowledge of the invalidity of the patent in question, or reason to doubt its validity, or with reason for demanding further inquiry as to its validity, failed to disclose what he knew or doubted on this matter to his clients. On the contrary, I think Mr Brodie disclosed all he knew, and that the pursuer and his co-lenders accepted the responsibility of going on with the transaction at a time when Mr Brodie told them was the time to withdraw from it if they wished to do so.

It was submitted by the defenders that they should not be made to suffer for any want of recollection on the part of Mr Brodie or the other witnesses, and that if from this cause or any other the proof was defective the disadvantage thence arising should be borne by the pursuer. I agree with that observation. The pursuer founds his claim on the defenders' breach or neglect of duty; I think he must establish that by satisfactory evidence. The onus is on him. If he fails to discharge that onus that is his misfortune. But in the present case I think that perhaps more than ordinary indulgence is to be extended to the defenders. The transaction in question was completed in September 1877; the pursuer and his co-lenders entered into possession of the patent rights in April 1880; the validity of the patent was challenged in the same year; in 1881 the pursuer and others took steps by proposed disclaimer to have the objections to the patent obviated; and with several reports as to its defects received at different times they continued to work the patent down to December 1882 without making any complaint to the defenders that they had failed in their duty as law-agents. The present claim was not intimated before March 1884. If, therefore, in the interval between September 1877 and March 1884 any evidence has been lost, I think the pursuer is to blame. If he had brought forward his claim in 1880, when the validity of the patent right was challenged, the recollection of the parties would not have been so defective. It is as likely that through this cause the defenders have lost valuable evidence as the pursuer.

With regard to the parole evidence, I think it right to say that every one of the witnesses seemed to me perfectly honest and candid. But in the case of Mr Drummond, while I think he was as honest as the others, I place little reliance on his evidence, because he was rather rash in his answers, and seemed to me unable to distinguish between what he remembered of the events he spoke to and what he had heard about them since this question of liability was raised.

On the whole matter, I have come to the conclusion that the pursuer has failed to prove his case, and that my judgment must be in favour of the defenders. Viewing the case as I do, it is unnecessary for me to decide the questions raised by the defenders' third plea-in-law.”

The pursuer reclaimed, and argued that the defenders were liable in damages for breach of professional duty upon two grounds—(1) That being law-agents it was their duty as conveyancers to have examined the patent to see if it was free from doubt, and that had they done so they would have seen how matters stood, and could have advised their client (the pursuer) accordingly. (2) Whatever their duty was at

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common law in the present case the defenders specially undertook to see if the patent was good, and having failed in this duty they were liable in damages. In the third place, the defenders were liable through their failure to disclose to their client facts affecting the validity of the patent which were within their own knowledge. The defenders undertook the double agency, and they had sacrificed the interests of the pursuer to those of the defender. Looking to the fact that the pursuer was the only stranger to the whole matter [ see Lord President's opinion], his interests ought to have been specially looked to. The defenders had undertaken a duty of great delicacy in acting for both parties, and their failure to discharge that duty aright rendered them liable to the pursuer. On the question of the sale of the patent by the pursuer, he was not bound to hold the subject until the issue of the litigation— Campbell v. Clason, Dec. 20, 1838, 1 D. 270. Besides, the defenders could not instruct damage by the actings of the pursuer, as the price obtained was admittedly a full price—See Liquidators of City of Glasgow Bank v. Mackinnon, Feb. 3, 1882, 9 E. 535. Nor was the pursuer under any obligation to give notice to the defenders of this contemplated sale of the patent.

Replied for the respondent—It was not part of the professional duty of a law-agent to advise his client as to the validity of letters-patent. His duty was limited to seeing that they were ex facie regular. Besides, the defenders never undertook the duty of examining into the validity of the patent. A fair reading of the proof showed that the defenders made a full disclosure to the pursuer of all that they themselves knew about this patent. The pursuer was also shown the letter of the London patent agent, and that ought to have put him on his guard. There was nothing illegal in the defenders acting for both borrower and lender, and they discharged then-duty by making full disclosures to both parties, and could not therefore be made liable in damages. The pursuer's claim was barred because he sold the patent without notice to the defenders. By so doing he brought the case within the rule laid down in the case of Mackinnon ( supra). Here the pursuer disposed of the patent without notice to the defenders after the action had been raised.