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Henry McKellar v John Wallace and John Spence (India) | [1853 ...
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Henry Mckellar v. John Wallace And John Spence (Privy Council)
No. | 20-06-1853
The Right Hon. T. Pemberton Leigh
During the progress of this appeal, we have had an opportunity of looking very carefully through the whole of the papers in the case, and after the extremely clear and able manner in which the case has been argued at the bar, we feel ourselves in a situation to dispose of it at once, and we think it better to do so now, than to put the parties to any further delay.
The law in cases of this kind I apprehend to be perfectly clear. Parties having accounts between them, may meet and agree to settle those accounts by the ascertainment of the exact balance; and, if they mean to ascertain the exact balance, it may be necessary for that purpose, and probably is necessary in most cases, that vouchers should be produced, and that all the information which is possessed on one side and the other, should be furnished in the settlement of those accounts; and, if it afterwards turn out that there are errors in the account, it is a sufficient ground for opening the account and for setting it right in a Court of Equity.
If, one the other hand, persons meet and agree, not to ascertain the exact balance, but agree to take a gross sum as the balance; a sum which one is willing to pay, and the other is content to receive as the result of those accounts; it is obvious, that the production of vouchers is entirely out of the question, and errors in the account are so also, for the very object of the parties is to avoid the necessity for producing those vouchers, upon the assumption that there are or may be errors in the account so settled, therefore, it is either an account stated and settled, in the formal sense of that expression, or, it is the case of a settlement by compromise.
In either case it may be vitiated by fraud; in either case it is good for nothing, if, either from the collusion of the parties, upon the circumstances under which the settlement takes place, it is proved in a Court of Equity, that the transaction was not so fairly and so fully understood between the parties, either from the confusion in which it was involved, or from misrepresentations made on the one side or the other, as it ought to have been, and that injustice has been done to either side.
Now, that being the general law of the case, it appears to us very clear that the settlement which took place here was in the nature of a compromise; an acceptance by one party, and a consent to pay by the other a gross sum in satisfaction of a disputed account.
Whether the circumstances under which that settlement took place are such as to induce a Court of Equity to set aside the transaction, and direct a general or specific account, must depend on the particular facts of this case, which makes it necessary for us to go into those facts a little more in detail than we should otherwise have done.
Now, the facts appear to be these:
Previous to 1831, the Appellant carried on business as a merchant tailor and clothier in Calcutta, under the name or firm of "Robert Gibson & Co." In the month of January, 1831, he agreed to admit into partnership with him two persons of the names of Wallace and Leslie, who had previously been his assistants in the business, a circumstance not wholly immaterial, because it shows that those persons were probably well aware of the nature of the business, and the mode in which the transactions of that business were carried on both by the London and Calcutta houses.
The terms of that partnership were not reduced into writing at the time it commenced, and it was not until May, 1832, that articles of partnership were executed. By those articles of partnership, (after reciting the agreement which had been made for a partnership to commence at the beginning of 1831,) it was stated, that a valuation had been made of the shares, of which these new partners were to have one-fourth each, and that a joint and several Bond had been given with the consent of the Appellant, Henry McKellar, for the amount which was due in respect of those two fourth shares, and a period of four years was to be allowed for the payment of the sum, amounting altogether to Rs. 112,500.
It further appears from this deed, that the Appellant contemplated retiring from the partnership, and introducing his brother, Thomas McKellar, into the concern, and going himself to England; and there was power reserved by the dead for the Appellant to make that arrangement; and it was further agreed, that in the event of H. McKellar disposing of his share and interest in the co-partnership, and proceeding to England, he should be the agent of the firm of "Gibson, McKellar & Co." in Europe, and that all sum or sums of money that should be remitted to any agent or agents in England should be remitted to him. But no stipulations were introduced into the deed either in respect of the remuneration which H. McKellar was to receive, or the duties he was to perform.
It seems that in November, 1832, Thomas McKellar did go out from England, when the Appellant's share in the partnership was transferred to him, and, in the same year, the Appellant returned to England.
Now, it appears from the old account, No. 1, which is in evidence, that previous to leaving Calcutta the Appellant settled with Wallace and Leslie the amount which was due to him, between himself and his partners, and at that time a balance was shown to be due of about Rs. 228,941.
On coming to England, the Appellant acted, as he had agreed to do, as the agent for the new firm at Calcutta, and not only selected the goods that were to be sent to the Calcutta firm, but he himself paid for those goods, and it appears from the accounts, which are not disputed that the advances he made in that respect were so large, that at the end of the year 1833 they amounted to 11,676, and at the end of 1834 they amounted to 20,685, and at the end of 1835 to about 29,000.
Now, during the whole of that time invoices were sent of the goods hat were thus furnished to the Respondents; invoices would, of course, be sent by the parties who supplied the goods, and, with a single exception, all those goods were supplied by the firm of "A. McKellar & Co." in London. Now, those invoices would, of course, show to the Respondents the amount of the goods which they were alleged to have received, and the amount of the invoice prices which were represented to have been paid for those goods.
On the other hand, they would not show what charges the Appellant was supposed to make for the agency he performed on their behalf in England, or the allowances which he might make in respect of the sums that were charged in the invoice account. But, in the autumn of 1836, an account current was sent of all the dealings and transactions which had taken place in respect of that agency from the beginning; to what date does not distinctly appear; but at all events, it must have been up to the end of the year 1835. Now, that account would necessarily show everything; it would show what charges he made; it would show what allowances be made; it would show at what rate interest was charged, and at what rate commission was charged; and, as far as I can find in the course of these proceedings, no observation was made on the account so rendered, either in the shape of approbation or disapprobation, until a period which I am about to mention.
The parties go on in that way; H. McKellar continues to purchase goods, and to send them out, paying for those goods, until the month of January, 1838, and probably until a subsequent period; but it is only to the month of January, 1838, that it is necessary for us to apply our attention.
In 1838, according to the account made out by the Appellant, there was due to him on the old account, Rs. 228,941, and on the new account, or the purchase account, the sum of 36,169. These accounts were sent out to Greenaway, his agent at Calcutta, with directions to obtain a settlement, and with power to give a discharge for anything which might be paid in respect of them.
With these accounts the Appellant sent a letter addressed to the Respondents, on which much reliance has been placed by the Respondents in their argument. It is to be observed, that in the account current there was this distinction; up to the month of June, 1836, and during part of that month, there is an allowance made by the Appellant for discount in all these accounts.
What the distinct rate was, is not, perhaps, in all cases, very clear; we will take it at two-and-a-half per cent., as the Respondents allege that it was. But, from the end of June, 1836, there was no allowance for discount at all. Therefore, there was a difference in the discount allowed; up to June, 1836, a discount allowed, and no discount allowed after June, 1836.
In 1838, Greenaway receives the accounts, accompanied by this letter to the Respondents, which contained this passage. "I have now the pleasure to forward copy of your account current, to which I do not anticipate any objection." It is clear, therefore, that there had been some previous correspondence and discussion between these parties with respect to the result of these accounts.
With respect to this dealing, he says, he sends these accounts, and the letter then goes on to say that, "the discounts have been shown where allowed in the account rendered. You will observe from the last shipment, in June, 1836, no discount has been allowed, the whole of the goods having been purchased for cash, and consequently none allowed, as also in the account of Brickwell & Moore, enclosed in mine to you of last month."
Now, it is said that this is an incorrect representation by the Appellant, and is in fact equivalent to saying, You will find in this account the whole amount which I have received for discounts allowed. Why, it is quite obvious that it is no such thing. The character of that statement is this, as has been urged by the Respondents' counsel. In part of the account there is discount allowed, in another part of the account discount is not allowed; where discount is allowed you will sell it in the account, and where none is allowed, it is stated that he had received none.
These accounts, together with a letter dated the 26th of April, 1838, are sent by Greenaway to the Respondents; a letter proposing and urging a settlement, and offering to correct any errors or omissions that may be found in them.
Now, what takes place upon this? The Respondents had known in 1836, or in the beginning of 1837, when they received this account current, the principle upon which this gentleman was making out his account, the amount on which he charged interest; the rate at which he charged interest; the rate at which he charged commission, and the rate at which he allowed discount.
It is very true they did not know by that account, either in 1836 or in 1838, what the amount of discount was which the Appellant himself had received; but having these accounts rendered to them, they object; and what is their objection?
Why, at first it did not very distinctly appear what the particular grounds of their objection were; but Greenaway says, Well, if you are dissatisfied with this account, render me an account as you say it should be made out; an account with the items which you say it ought to contain. They do make out what they say the account ought to be, and they charge the Appellant, and debit the account with discount at seven-and-a-half per cent. upon every purchase, introducing into the account the corrections that would result from that deduction. It is perfectly true that the effect of that would be to alter every single item in the account and that seems to have been the difficulty which was pressed upon the Court below, namely, that they could not consider it in any sense a settlement, when not only the balance might have been altered, but, when there was not one single item in the account which would not be altered, if the defence of the Respondents prevailed.
Then what is the result of that account as made out by themselves? The result is this; that there is due on that account, instead 36,000, a sum of 32,000 or 33,000, making, therefore, a difference of 3,000; and then how is that matter treated by these parties? Why, they say this, Here is a balance which we must admit to be due from us, at all events, to the amount of Rs. 491,695, and if you will give us time for the payment, we will consent, not only to admit that balance, but we will pay down Rs. 29,000 at once, and we will give security, by our Bond, for the payment of Rs. 400,000 by instalments, in four years, by a lac of rupees in each year.
Well, it is said, this is not a compromise but a settlement. It is not very material which; the language, however, of the Bond, would rather seem as if it were in some sort a compromise, for it states, that in consideration that time shall be allowed the Respondents for the payment of that balance, it is agreed, to admit that Rs. 491,695 are due by them, but at the same time they say, that "whereas they have examined and investigated the several accounts of the said Henry McKellar with the said firm of Gibson, McKellar & Co., rendered by or on behalf of the said Henry McKellar, up to the 31st day of January last, and the said Henry McKellar having agreed to grant such time for payment a in the condition hereunto written, the said William Leslie and John Wallace have admitted the sum of Company's Rs. 491,695 14a. 3p." (showing the exteme minuteness with which they had made the examination), "to have been due and owing by the said firm of Gibson, McKellar & Co. to the said Henry McKellar, on the 31st day of January last, but have refused to admit the further sum of 3,757 15s. 1 d. sterling of lawful money of Great Britain, claimed as due to the said McKellar until satisfied on further investigation and examination."
Now, is it possible that there could be a more solemn adjustment of an account, as far as that adjustment went? The account begins with an account in 1836; a subsequent account in March, 1838; a discussion for nearly six months on those accounts; a final admission of Rs. 491,695 being due, and an express reservation of an item of 3,757, not as a disallowed item, but as an item which at that moment had not been ascertained, but which might be ascertained, and would be ascertained by further investigation and examination. Well, this Bond was given, and the amount, as it appears, paid.
Now, not very long after, namely, in the year 1839, Leslie, one of the partners, comes over to England. It appears that he brought with him a power of attorney for the settlement of the account; that it was partnership matter that he had authority to deal with when he came to England, and which accordingly he did deal with.
Now, observe, when he came to England, in what position those parties stood toward each other? There had been the fullest investigation and examination of these accounts, and the fullest time in respect of considering them in every point except one, and that point is one which cannot be cleared up at Calcutta, where Greenaway is the agent; it must be cleared up in England, unless the vouchers relating to those payments are sent over to India.
Leslie comes over; he sees the Appellant, and no doubt he had the right then to say, Before I pay you a shilling of this 3,757, or give security for it, you, who are my agent, are bound to give me the whole of the information you possess; you are bound to produce the vouchers which show what discounts you have received; I shall then claim that I am entitled to be allowed upon the Indian account all the discounts you have received, which are larger than are credited, and, therefore, to have the account corrected, by reducing each and every item of the account, according to that reduction.
That was his right, no doubt; but, on the other hand, if he thought fit, instead of insisting upon that right, he might say, Instead of going through these accounts; instead of comparing them; instead of ascertaining the balance which may increase of diminish that 3,757; if you are willing to strike off 1,200, and to accept the balance in full of all demands, I, on behalf of myself and my partner, am content to pay that sum, and I will give you may acceptance for the amount so reduced, and there will be an end of the transaction between us.
Now, is it possible to conceive a more fair settlement of an account than this, as far as it had gone? A Bill of exchange at eighteen months is accepted, allowing abundant time for the partners in Calcutta, if they objected to the settlement, to object to it, and if they could set it aside, to set it aside. Leslie goes out to India again in the beginning of the year 1840, and what is the evidence? When he is communicating with his partner, Wallace, does Wallace say he had no authority to make that settlement? Does Leslie say, I was coerced; I was under apprehension; I was misled by the representations of the Appellant, and, therefore, the settlement is not to stand?
Wallace is proved distinctly to have said, on more than one occasion. This is a settlement which has been made, a Bill of exchange has been given in respect of that settlement. If I had been dealing with you, Mr. Greenaway, I think I could have made a better settlement; that is, if I had been dealing with you, who have not the vouchers, I could have made a better settlement than with the Appellant, who has the vouchers; but a settlement has been made, and I suppose the Bill must be paid.
But it does not rest here. The Bill being given on the 31st of August, 1839, does not become due until the 3rd of March, 1841. In the interval, these parties, who had previously been on the best terms appear to have quarrelled. Of course, we know nothing of this case except from what appears upon the facts and correspondence. They appear to have been under great obligation to the Appellant.
Whatever their feelings previously had been, it is plain that a rupture had taken place, and feelings of the greatest hostility, to judge by the language or their letters, were entertained by the Respondents or by Wallace, the surviving partner, towards the Appellant. Independent of the account to which I have referred, the Calcutta firm had acted as the agents of the Appellant in collecting and getting in the debts due to him as representing the preceding partnership, and he makes repeated applications for an account of their receipts, in respect of that collection.
In October, 1840, more than twelve months after that Bill had been given, they write him a letter in which they say, "We will not render you any account at all; we will not give you one shilling we have received from you, until you settle our outstanding claim against you." Greenaway writes, "What have you, as agents, collected? Do give me a notion." That is, what is due to the Appellant. They send him a letter enclosing a rough note of their claims, and neither in that letter, nor in the rough note from beginning to end, is there the slightest allusion to the settlement which had taken place in England.
The Bill becomes due in March, 1841; it is dishonoured, and an action is brought on the 14th of March, 1841. Now, what is the course the Respondents take? They defend the action at law; they obtain a commission for the examination of witnesses in England, and by that means they suspend that action from the month of March, 1841, to the month of February, 1842.
That commission was never returned, an application was made with success to set down the cause for trial, and a verdict was then obtained in 1843, which the Plaintiff was manifestly entitled to in 1841; and then a few days afterwards they resort to what used to be, and I presume still is, the resource of desperate debtors; namely, having failed at law, they file a bill in equity, imputing all manner of fraud in the accounts or in the settlement of the accounts, and in obtaining the Bill of exchange by the Appellant, and they pray for a general account, for an injunction, and for the delivery up of the Bill of exchange to be cancelled.
To that bill the Appellant put in his answer; and what is the result of that answer? It has been read very fairly on both sides; there is no question upon the facts, but there was no evidence in favour of the Respondents, except upon that answer; and the result of it is this: the mode in which I have stated this account is, that from 1833 to 1834, I received no discount; from 1834 to 1836, I received discounts at rates varying from five per cent. to two-and-a-half per cent.; from 1836, I received no discount at all, in the name of discount; but I received a del credere commission at the rate of two-and-a-half per cent.
Now, he says, I insist upon this, that not only according to mercantile usage, these were fair and reasonable charges, such as I was entitled to make, but if the accounts had been made out according to ordinary mercantile usage is such cases; if I had drawn upon you for the purchasers instead of supplying you for four years, at least, with the whole amount of capital by which your business was carried on; instead of being in your favour, I believe the account would have been 8,000 or 10,000 more against you than it is.
Then it is said, that this is a case in which the transaction whereby the account was settled by the delivery of the Bill of exchange for Rs. 30,744 is to be set aside. On what possible ground is it, that this transaction is to be impeached? As I understand the judgment in the Court below, the Chief Justice, at the original hearing, or rather the rehearing, seems to have entertained this opinion. He says, this cannot be a settled account, because one item was reserved for subsequent verification. (And if he took it on the Bond, so it was, but if he took on the Bond and the Bill of exchange together, then is it not a statement?)
I ascertain the amount to the extent of Rs. 491,695; there is another item which I cannot ascertain - I am content, both parties are content - not to have that, but that one party shall make an allowance, and the other party shall accept an allowance, and, accordingly, it is settled on that footing.
I confess, therefore, I cannot understand exactly upon what ground it was that the Court held that these accounts between the parties were not closed. The Chief Justice, in the note which he has sent of the grounds of his judgment on the re-hearing, states only the objection which arises from the nature of the Bond, as well as from the nature of the settlement, which is succeeded by the Bond, but he does not advert to the Bill of exchange at all.
When Mr. Justice Colvile comes to give what I quite agree with the Respondents in saying is such a judgment which, as far as clearness in expressing the grounds upon which it rests is concerned, one would expect from him, he overrules the exceptions; but when he comes to deal with it, he seems to feel a little embarrassed by the form of the decree.
It is not necessary for us to consider that further, because we are clearly of opinion, that the transactions here are closed, the settlement being such as in our opinion was conclusive against all parties concerned, and the result being such, this bill cannot stand, and the Court, instead of making either of the decrees it made, ought to have regarded those accounts as settled, and ought to have dismissed the bill with costs, as far as it sought any account of the transaction included in those accounts, and so far as it sought to have the Bill of exchange delivered up to be cancelled.
The only point on which we have entertained some doubt, if any arises, is this: it is quite clear, that if the Appellant was right at the re-hearing, the second decree could not have been justified in our view of the case, any more than the decree which was made at the original hearing; and, therefore, up to that time he must have the costs, so far as they relate to that proceeding.
But then comes the question as to the costs of the proceedings in the Master's office? Now, we are by no means bound to hold, that in all cases where the Defendant succeeds, he is to have the costs of the hearing; provided that the judgment is only to dismiss the bill.
The Court directs an inquiry, by means of which inquiry the Plaintiff thinks by further evidence he can succeed in substantiating his case, and accordingly he goes into the Master's office and produces that further evidence. Of course a vast deal of expense will necessarily attend the operation, and the consequence is, that usually we are by no means disposed to hold that the Defendant is to be compelled to pay costs because he should in a doubtful case have appealed to this Court and have succeeded in an appeal against the original decree.
But this case is very peculiar in its circumstances. The objection which the Court seems to have taken was not to the nature of the evidence, but it was an objection which, if it prevailed at all, could not be removed in the Master's office.
If it be decided that there was not a settlement of the accounts after the execution of the Bond, I think the Chief Justice was right in thinking, that the accounts could only be settled by the verification and ascertainment of each particular item: therefore, nothing that was done in the Master's office could ever remove that objection, and, consequently, it was not a case in which the Appellant could say, I have got, I think, a very good case, but I can make it better by going into the Master's office.
If he had got a case that was good at all, it was as good at the hearing as it ever could be made.
But there is this; and we very much agree with Mr.
Justice Colvile in his luminous judgment on that point, that even if the accounts had been gone through in the Master's office, they would probably have been the same, or (if we can form a conjecture) rather more in favour of the Appellant than at present; because it is clear, those accounts must be taken as proof of the goods delivered and the invoices had for them, and as proof of everything, except the item which, it is said, remained outstanding, and the amount of which would possible increase the claim on the other side, beyond the Rs.
491,695. Now, it appeared to the Appellant to be more to his advantage to adopt the course of getting the account settled under the Decree, whether right or wrong, and he, therefore, goes in before the Master. He first gets a separate report, which probably it would have been difficult for the Master to have made in favour of the Appellant, having regard to what had been done by the Decree; but the Court having overruled the exceptions to that report, and told him that probably the result in the Master's office would be the same, he proceeds again under that Decree; but instead of working it out to the end, and trying what the result would be in that view of the case, in the middle of those proceedings he turns round and says, No, I do not think this is taking a favourable course; at all events there will be great delay and great expense; and now I will appeal against the Order made on the exceptions, and against the original Decree; and he makes a substantive application to this Court for that purpose.
Now, it appears to us, under these circumstances, he had one of two courses to pursue - either to proceed under the Decree and work it out in the Master's office, or to appeal against the Decree, which if wrong at all, was wrong altogether.
Upon the whole, therefore, it is not necessary to refer to the cases which have been alluded to, where, without granting the specific relief, a Court of Equity granted a relief, which, it was admitted, if applied to another state of circumstances, would be wholly improper.
The Order we shall humbly advise Her Majesty to make, will be, to vary the original Decree, by declaring that the accounts referred to, and included in the Appendix to the case, were settled by means of a Bond and the Bill of exchange, and ought not to be disturbed; and, that the bill, so far as it seeks an account in respect of such transactions, and that the Bill of exchange should be given up, should be dismissed with costs, such costs to include the costs of the re-hearing; but that the Appellant ought to pay the costs of the proceedings in the Master's office with respect to the portions of the bill so ordered to be dismissed. No costs of the appeal.
The report of their Lordships, which was confirmed by Her Majesty in Council, was as follows:-
"The decree of the Supreme Court of Judicature at Calcutta, dated the 22nd of February, 1848, ought to be varied by omitting therefrom that part thereof whereby it was referred to William Peter Grant, Esquire, the Master of the Court, to take an account of the dealings and transactions between the parties in the original and cross suits, and whereby it was directed, if, on taking such account he should find any settled account or accounts, to take the account on the footing of such settlement, with liberty to either party to surcharge and falsify such settled accounts, and whereby it was directed, that if it should appear that any balance of the accounts prayed by the original bill was carried forward into any account subsequently settled, then that he might take the account prayed for by the original bill, on the footing of such settlement, with the like liberty to either party to surcharge and falsify, and that in lieu thereof it ought to be declared and decree as follows (that is to say), that the accounts, included in the documents, No. 1, 2 & 3, delivered by Greenaway to Gibson & Co., were settled by the Bond and Bill of exchange in the pleadings mentioned, and that the accounts ought not to be disturbed, and that it ought to be referred to the Master to take an account of the dealings and transactions between the parties in the original and cross suits, having regard to their Lordships' declaration.
And, that it ought to be further ordered, that the bill filed by Wallace and Spence, as far as it seeks relief in respect of the transactions comprised in the accounts No. 1, 2 & 3, and so far as it sought that the Bill of exchange ought to be cancelled, and so far as it sought an injunction in respect of the same, be dismissed with costs, including therein the costs of the re-hearing, and it appearing that the Appellant has proceeded in the Master's office, under the Decree in respect of the matters included in the accounts, their Lordships recommend that the Appellant under the special circumstances of this case, be ordered to pay the costs of such proceedings; and the costs payable to the Appellant, and the costs payable by him, are to be set off, the one against the other, and the balance to be paid to the party entitled to the same; and their Lordships do further recommend that the case be remitted to the Supreme Court of Judicature at Calcutta, to give effect to the foregoing declaration, and that both parties bear their own costs of the appeal to your Majesty in Council."
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