Teacher v Calder
| Jurisdiction | Scotland |
| Judgment Date | 11 January 1900 |
| Date | 11 January 1900 |
| Docket Number | No. 100.,No. 80. |
| Court | Court of Session |
Lord M'Laren, Lord Adam, Lord Kinnear, Lord President.
ExpensesPetition to Apply Judgment of House of LordsDivided Success.
In a case in which there had been divided success the House of Lords declared that neither party was entitled to the expenses incurred in the Court of Session, but ordered the respondent to pay the costs of the appeal.
In a petition by the appellant to apply the judgment of the House of Lords, held that neither party was entitled to expenses in the petition.
(Ante, Feb. 25, 1898, 25 R. 661, July 24,1899, 1 F., H. L., 39.)
The trustees of Adam Teacher (pursuers in the action and appellants in the House of Lords) petitioned the Court to apply the judgment of the House of Lords, and to find the appellant entitled to the expenses of the petition and the procedure therein.
The respondents submitted that, as the case was one of divided success, no expenses should be allowed.
Lord M'Laren.I think the key to the solution of this question as to the expenses of the petition to apply the judgment is to be found in the judgment itself. According to this test the case is shewn to be one of divided success, because the order is that neither of the parties is entitled to decree for the expenses of process incurred in the Court of Session. Now, it is necessary that one of the parties should present a petition to apply the judgment of the House of Lords, and that the other should appear in order to see that everything is in order. No doubt the former will be subjected to the small extra expense of printing the petition, but I think that this is a proper case for allowing no expenses to either party.
Lord Adam, Lord Kinnear, and the Lord President concurred.
The Court applied the judgment, and found neither party entitled to the expenses of the petition.
Lord Low, Lord President, Lord Adam, Lord M'Laren.
Contract Agreement to abide by Audit Audit in ignorance of agreement.
ContractBreach Loan to a particular business Agreement for a share of the profits Diversion of capital from that business Damages.
A advanced 15,000 to B to be used in the business of the latter for five years, in return for which A was to receive, besides interest, 371/2 per cent of the profits of B's business. In the agreement it was stipulated that there should be an annual audit of B's books by the firm of M & Co., accountants, and that their certificate as to the amount of profits should be binding on both parties. B's books were audited by G, a member of the firm of M & Co., for four years. Subsequently A raised an action against B for a judicial accounting, on the ground that the audit had not been in terms of the agreement, in respect that G did not know of the agreement, and did not know that his estimate of the profits was to be binding on. A and B.
In a proof, G deponed that he did not know of the agreement, and that if he had known that his audit was to be binding on the parties he would have analysed the allocation between capital and revenue somewhat differently. He further deponed that he knew from B's books that A was entitled to a large share of the profits, and had therefore an adverse interest to B, and that the estimate of profits he had made was correct.
Held (aff. judgment of Lord Low, diss. Lord Adam) that the audit had been made in terms of the agreement, and that the certificates as to profits were binding on the parties.
A lent B 15,000 to be used in his business of timber-merchant, under an agreement to last for five years. The agreement did not make A a partner, but gave him a share of the profits. It also provided that B should always keep at least 15,000 of his own capital in the business. In violation of the agreement, B reduced his capital in the business much below the stipulated amount by withdrawing large sums; these he employed in a distillery business, where large profits were earned.
Held that the rule between partners, and between trustees and beneficiaries, was inapplicable, and that A was not entitled to have the damages for B's breach of contract assessed on a computation of the profits earned by the diverted capital in the distillery business, but that the appropriate basis of assessment was a calculation of the extra profits which might have been earned in the timber business by employment therein of the diverted capital.
Adam Teacher, wine and spirit-merchant, Glasgow, agreed to lend 15,000 to James Calder, to be used in his business of timber-merchant in Glasgow, and to become cautioner to the bank for an advance of 20,000 to Calder for the same purpose, on condition of receiving interest on the loan and 371/2 per cent of the profits of the business. The profits were to be fixed annually by an audit conducted by M'Clelland, MacKinnon, & Blyth, chartered accountants, Glasgow, and Calder was taken bound to keep capital of his own in the business to the amount of 15,000.* The agreement was to last for five years.
The agreement was executed in duplicate on 11th April 1889, and in terms of it Teacher advanced Calder the sum of 15,000, and became security to the bank for a credit of 20,000. For the first four years of the agreement the books of the firm of Calder & Company were audited by Mr Gairdner, of the firm of M'Clelland, MacKinnon, & Blyth, and certificates of the amount of the profits of the business were granted annually by him. 371/2 per cent of the profits so fixed were paid to Teacher.
In 1894 differences arose between the parties as to items in the balance-sheet for the last year of the agreement, and in 1896 Teacher raised an action against Calder, concluding (1) for decree ordaining the defender to render an account of the profits of the business of Calder & Company for the five years beginning April 30, 1889, and to pay the pursuer the sum of 10,000 as the amount of the additional interest, equal to 371/2 per cent of the net profits still due to him; and (2) for payment of 15,000, and, if necessary to decree being pronounced in terms of the foregoing conclusions, for reduction of the certificates granted by Mr Gairdner.
The pursuer made averments to the effect that Mr Gairdner had not audited the books under the agreement; that the defender, in a variety of ways (of which details were given), had fraudulently manipulated the books and accounts so as to make the profits earned during the currency of the agreement appear less than they actually were. He also averred that the defender had, in breach of the agreement, diverted his own capital from the business, whereby the pursuer had sustained loss amounting to 15,000.
The defender pleaded;(2) The profits of the firm payable to the pursuer having been fixed and ascertained by the certificates of the auditors in terms of the minute of agreement, the pursuer is not entitled to the accounting now sought for. (4) The defender not having failed to implement his obligation, et separatim, the pursuer
having suffered no loss, injury, or damage in consequence of such failure, the defender should be assoilzied from the conclusion for damages.
A proof was allowed. The material results of the evidence were as follows:The pursuer's averments of fraud by the defender were proved to be without foundation. As regarded the employment of Gairdner to audit the books of Calder & Company under the agreement, the facts were these:Messrs M'Clelland, MacKinnon, & Blyth, acted as the pursuer's men of business, the partner who usually attended to the pursuer's affairs being MacKinnon. At the time when the agreement was entered into MacKinnon was ill, and the pursuer accordingly took the agreement to Blyth, who made an abstract of it. On MacKinnon's return to business Blyth handed him the abstract agreement, but MacKinnon (who died in 1891) apparently forgot to communicate the matter to Gairdner, to whom it fell, in the ordinary course of the business of the firm, to make the audit, for Gairdner deponed that he did not know of the agreement until after the audit of 1893. He also deponed that if he had known of the agreement he would have analysed the allocation between capital and revenue somewhat differently. At the same time he admitted that he knew from the books that the pursuer had lent the defender 15,000, and was to receive five per cent interest upon the loan, and also a share of the profits equal to 371/2 per cent. The material passages in Gairdner's evidence are quoted in the opinion of Lord Adam on pp. 674-5. The audit was conducted at the defender's place of business, and the defender gave any explanations as to entries in the books which Gairdner required. The pursuer also had meetings every year with Gairdner, and ascertained what his share of the profits was.
With regard to the claim of damages the evidence shewed that the defender had withdrawn capital from the business of Calder & Company in breach of his obligation under the agreement to keep 15,000 of his own capital in the business. The sums so withdrawn amounted during every year of the agreement to thousands of pounds and were used by the defender in a distillery business, in which he was interested, and in which profits of over 11 per cent were earned. Interest at the rate of 5 per cent was paid to Calder & Company on the capital so withdrawn from that business. In answer to the pursuer's claim of damages for this breach of contract, the defender deponed that the business of Calder & Company had been in no way injured by the withdrawal of capital, as the capital withdrawn had not been required for the purposes of that business, and could not have been profitably employed in it, and no contract had been refused. There was evidence that during the period of the agreement profits at the rate of 8 per cent were being earned in the timber trade. The details of the evidence on this part of the case sufficiently appear from the opinion of the Lord President...
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Index
...s. 7, 356–63 s. 8, 356–63 s. 9, 356–63 s. 10, 147, 350 s. 10(2)(b), 372 s. 10(2)(c), 378 s. 10(2)(d), 377 s. 10(2)(e), 361, 377, 583 s. 10(2)(f), 372 s. 10(2)(g), 372 s. 10(3), 377 s. 10(4), 362, 378 s. 10(5)(a), 379 s. 10(5)(b), 380 s. 10(6), 355 s. 11, 157, 350, 374 s. 12, 153, 350, 374 s......