McPherson v Watt
| Jurisdiction | England & Wales |
| Judgment Date | 03 December 1877 |
| Date | 03 December 1877 |
| Docket Number | No. 2. |
| Court | House of Lords |
Disguised Purchase by a Solicitor from his own Clients.
An advocate in Aberdeen is the same as an attorney or solicitor elsewhere.
Hence when an Aberdeen advocate purchased, nominally for his brother, but really for himself, certain houses, the property of two ladies for whom he was agent, concealing from them the fact that he was buying for himself:—
Held (reversing the decision appealed from), that the purchase could not be enforced.
Per THE LORD CHANCELLORF1:— Assuming that in every respect this was a sale which might have been supported had the ladies been told that their agent was himself the purchaser, it cannot be supported, that fact not having been disclosed.
IN November, 1875, Mr. John Watt, Jun., an advocate in Aberdeen, not disclosing his interest, purchased, in the name of his brother, Dr. Watt, from the Appellants certain houses of which they were trustees.
In October, 1875, a brother of the Appellants, Mr. Hugh McPherson, who appeared to act in the executory business of the trust, desiring an investment for a sum of trust money, called upon John Watt, Jun, for advice. At this interview John Watt, Jun., advised Hugh McPherson not to advertise the houses in question for sale, promising to endeavour to obtain a purchaser. A few days afterwards John Watt, Jun., presented his brother, Dr. Thomas Watt, as a purchaser, whose offer of £1900 was accepted by the trustees, Miss Ann and Miss Jessie McPherson, the above Appellants, they believing that Dr. Watt was the only and true purchaser, and that John Watt, Jun., was acting in the matter as their solicitor; whereas, in fact, John Watt, Jun., had previously arranged with his brother that he should have, at half the price, two of the houses, which he afterwards disposed of at a profit.
On the 6th of March, 1876, the Appellants brought an action in the Court of Session to have the sale set aside on the ground that John Watt, Jun., was at the time their agent and excluded from the purchase, except with their consent in full knowledge of his interest in the contract. The Lord OrdinaryF2, on the 4th of July, 1876, set aside the sale. But, on the 2nd of March, 1877, the First Division (Lord Shand dissenting) recalled the Lord Ordinary's interlocutor and repelled the reasons of reductionF3. On appeal to the House,
Mr. E. E. Kay, Q.C., and Mr. Herschell, Q.C., for the Appellants, maintained that if in a transaction between principal and agent there has been any underhand dealing by the agent, however fair the transaction may be in substance, it has no validity: Murphy v. O'SheaF4; Lewis v. Hillman.F5; Charter v. TrevelyanF6. An agent is bound to disclose to his principal the exact nature of his interests and all material information: Dunne v. EnglishF7; Tate v. WilliamsonF8. Even if John Watt, Jun., was not actually an agent, he was in some degree of confidence, and took advantage of that confidence: Gibson v. JeyesF9; Smith v. KayF10; Billage v. SoutheeF11. The whole sale was tainted, and therefore could not be sustained.
Mr. Horace Davey, Q.C., and Mr. Rhind (of the Scotch Bar), for the Respondents, argued that the decision of the Court below was correctF3. John Watt, Jun., was not the agent either for this sale or for the trust property generally. But even admitting that he had acted previously as attorney to different members of the McPherson family, an attorney may deal with a client as a stranger, where he is not under the duty of advising him: Holman v. LoynesF12: Cane v. AllenF13. In Gibson v. JeyesF9 Lord Eldon was alluding to an attorney actually engaged in the transaction. But here John Watt, Jun., was not the attorney in hac re. The relation of solicitor and client may exist in one transaction, and therefore personal influence or ascendency may operate in another, yet the relation not existing in hac re, the rule against an attorney purchasing, except he acts with his client on an equal footing, does not apply: Edwards v. MeyrickF14; Montesquieu v. SandysF15. John Watt, Jun., was only guilty of an inadvertence in not disclosing his intention to purchase to the trustees. If the decision of the Court below was reversed it would carry the dealing between attorney and client to an extent which was not now the law of England or Scotland.
At the conclusion of the arguments on behalf of the Respondents their Lordships delivered the following opinions, disclosing fully the facts of the case, as well as the grounds of the ultimate decision:—
THE LORD CHANCELLORF16:—
My Lords, in this case two separate proceedings originated in the Court of Session. One of these was a proceeding for the purpose of implementing, or, as we should say in this country, of obtaining the specific performance of, a contract for the sale by the Appellants to the Respondent, Dr. Watt, of four houses in Aberdeen. The other proceeding commenced with a summons for reducing the documents and letters which constitute the contract for the sale of those houses. In those two proceedings taken together, an interlocutor was pronounced by the Lord Ordinary, which, in substance, assoilzied the Defenders from the proceeding for obtaining specific performance and reduced the contract for the sale. Against that interlocutor there was a reclaiming note to the First Division of the Court of Session, and there, a difference of opinion arose between the Judges: Lord Shand holding, with the Lord OrdinaryF17, that the contract should be set aside. On the other hand, the Lord President, with Lord Deas and Lord Mure, decided that an interlocutor should be pronounced in accordance with the conclusions of the summons for implement of the contract; and against that interlocutor so pronounced by the First Division of the Court of Session the present appeal is brought before your Lordships.
My Lords, there is happily no serious controversy with regard to the facts of the case; and as I understand the opinions of the learned Judges below, there is no controversy between them as regards the general principles of law which should be applied. The only question is a question which arises unfortunately in many cases, namely, how these principles should be applied to the facts of the particular case.
The Appellants are two ladies in Aberdeen, who are the trustees of the testamentary property of their father. Included in that testamentary property were the four houses in question; and it was right according to the provisions of the trust that these four houses should be sold. These ladies appear in the management of their executory business to have acted principally by their brother, Mr. Hugh McPherson, who himself had some interest in his father's property. He appears to have been a manufacturer at Aberdeen and a man of shrewdness and intelligence in his general business affairs; it was natural, therefore, that the sisters should act to a great extent through their brother, he having the qualifications which I have described. The Respondent, Mr. John Watt, Jun., is “an advocate of Aberdeen,” a phrase which represents what is called “a writer” in other parts of Scotland, and would be called in this country “an attorney,” or “a solicitor.”
The main question of fact in the case is what was the precise relationship in which this Mr. John Watt, Jun., the Respondent, stood towards the Appellants, both generally, and also in the particular matter of the sale of these houses; because it appears that in the sale, which was made nominally to Dr. Watt, of Darlington, of the whole of the four houses, this Mr. John Watt, Jun., was interested to the extent of two of the houses. He, as to two of the houses, and not Dr. Watt, was the real purchaser; and it is also not a matter in controversy that this fact was not known at the time of the contract either to the two Appellants, the Misses McPherson, or to their brother Mr. Hugh McPherson. The question therefore to a great extent depends upon the real position which was filled by John Watt, Jun., because the learned Judges in the Court below, although they differ in their conclusions, agree about this, that if John Watt, Jun., had been the general lawyer, writer, or advocate for the trust, he could not maintain a purchase made of two of the houses for himself; and the learned Judges also appear to me not to differ upon this, that if the fact were established that John Watt, Jun., had been the law agent entrusted with the sale of these particular houses, neither in that case could he have maintained a purchase made by himself of two of the houses without the knowledge of his principals.
Now, my Lords, what was the real position of John Watt, Jun. His only connection with any members of the McPherson family, his only intercourse with them which can be traced in the evidence, was as a legal adviser in particular matters. Putting aside the transaction which is the subject of this suit, the particular matters in which he acted as the law adviser to the McPherson family are summed up by Lord Shand in his judgment, and with one or two qualifications that summing-up may be accepted, as it seems to me, as a correct exposition of the evidence in the case. Lord Shand saysF18:
The proof shews that an intimate business relation subsisted between Watt and the various members of the family who had the beneficial interest in the houses. He was law agent for every member of this family personally.
These words appear to me to be too large; the family appear to have been very numerous, for the testator was married twice and had children by each marriage — they amounted to seven or eight, and he certainly, so far as we see, does not appear to have been the law agent for every member of the family:
His relation to them individually is, I think, of importance in ascertaining his...
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