Scottish Court of Session Decisions

This was an action for the amount of a business account, due by the appellants Mrs Morrison and her sister to Mr Wilson, solicitor in Dumfries, in the following circumstances:—The appellants, who were creditors in two bonds and dispositions in security over certain property in Dumfries, employed Mr Wilson to call up the said bonds, and if necessary to sell the subjects to pay the amounts contained in them. The respondent Mr Harkness was agent for the trustee on the sequestrated estate of one of the debtors, while Mr Gun was trustee on the estate of the other debtor.

On 17th May 1869 the agent of the appellants, Mr Wilson, met with the respondent, and received from him the amount of the debt, with interest; he tendered at the same time his business account. Mr Harkness, the respondent, thereupon granted an obligation in the following terms:—“I will see the above account settled when taxed, reserving Mr Gun's plea.— Chr. Harkness.”

The appellants accordingly brought an action in the Sheriff-court of Dumfries against Mr Harkness for the amount of the account.

Harkness pleaded—“The account being disputed by one of the principals, viz., Mr Gun, trustee for John Henderson, it was necessary, in the first instance, to constitute the debt against the principals along with the defender, the cautioner, and it is incompetent to prosecute the defender alone, in respect, in the cautionary obligation libelled, the plea of Mr Gun was specially reserved—that condition

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is not yet purged, and the only mode of having it discussed was to have called him as a party to the action. Whatever claim the pursuers may have against the debtors in the said bonds for expenses incurred by their agent thereanent, being primarily due by the Hendersons or their trustees, and the defender having undertaken the obligation libelled on simply as their agent and cautioner, and the principals not having been called, the action ought to be dismissed, with expenses.”

The Sheriff-Substitute ( Hope) pronounced this interlocutor:—

“ Dumfries, 14 th December 1869.—Having resumed consideration of the preliminary pleas and whole process, finds that the action is laid for payment of an account incurred by the pursuers to Mr Robert Wilson, solicitor, Dumfries, and which it is averred that the defender bound himself to pay when taxed, conform to his holograph obligation, dated the 17th day of May last, and other documents referred to in the Summons: Finds that the persons primarily liable in payment of the account referred to were Mr Thomas Tait, writer in Moffat, the trustee on the sequestrated estate of James Henderson, shoemaker in Moffat, and Mr William Gun, writer in Dumfries, as trustee for the creditors of John Henderson, shoemaker in Moffat, but that they have not been called as parties to this action: Finds that the said William Gun, long before the raising of this action, and before the date of most of the items in said account, intimated to the said Robert Wilson that he objected to the greater part of said account being incurred, and repudiated liability therefor: Finds that the obligation granted by the defender, and founded on in the summons, is in the following terms:—‘I will see the above account settled when taxed, reserving Mr Gun's plea:’ Finds that the defender was when he signed said obligation, and still is, agent for the said Thomas Tait, as trustee foresaid: Finds, in law, that the obligation granted by the defender as aforesaid was only a cautionary obligation, and that therefore the pursuers were bound to have called and discussed the principal debtors: Finds, therefore, that the action is incompetently laid against the defender alone; therefore sustains the third preliminary plea for the defender, and dismisses the action: Finds the pursuers liable in expenses; allows an account thereof to be given in, and remits the same, when lodged, to the auditor to tax and report; and decerns.

Note.—The Sheriff-Substitute is of opinion that the document, 2 1 of process, contains only a cautionary obligation on the part of the defender. The summons is incorrect when it sets forth that by that document, he ‘bound himself to pay the account when taxed,’ the words being ‘I will see the above account settled when taxed,’ or, in other words, ‘I undertake that my client and the other debtor shall pay the account, but if they do not, I will, in some way or other, get it paid.’

This is clearly a cautionary obligation, or else the defender would have said, ‘I will pay the account.’ The expression ‘ see the account paid,’ clearly means that some one else was to do it, but that the obligant was to get it done. The case of Hume v. Lockhart (M. p. 2072) is strongly in favour of this view. But all doubt is removed by the words that follow, ‘reserving Mr Gun's plea.’ Mr Gun was one of the parties liable (officially) for the account, or rather whom Mr Wilson was seeking to make liable, because he had protested against most of the business being done which is charged for in the account. The introduction of this reservation shows that the defender only meant to be a cautioner, and that he meant the estates of the two Hendersons to pay the claim. Hence his care to keep John Henderson's trustee unprejudiced by his obligation, and, at the same time, his own cautionary obligation limited to the amount that might be found due after Mr Gun's plea was disposed of.

Even if this action had been rightly brought against the present defender alone, the pursuer could not prevail to any extent until the matter raised by Mr Gun has been disposed of, because they must take the obligations as a whole, and it reserves the plea. Mr Gun should therefore have been called, and also Mr Tait; and if this had been done the defender might have been cited as a cautioner in the same action. There does not appear to have ever been any objection on the part of the real debtors to pay whatever part of the account should be found to be a good charge against the estates of James and John Henderson, but Mr Wilson appears to have objected to this being ascertained in any of the ways proposed by the trustees. The way which he has chosen to adopt does not seem the best, and neither in this nor in any other way can he avoid facing the objections which Mr Gun may have to state to his account.

The Sheriff-Substitute does not think it necessary to dispose of the objections contained in the first preliminary plea, and he is relieved at not having to do so, because, if they be good ones, they were very technical. His impression is, that the objection to the amount of the account should only be sustained to the effect of cutting down the account libelled to the state in which it was when the obligation was granted. The taxing, however, might have enlarged instead of diminished it. The objection to the heading of the account is more difficult, but it is very technical, for there is no doubt that the accounts refer to the same business, and that Miss Newall was concerned in it.”

The Sheriff adhered; and the pursuer appealed.

Johnstone, for him, pleaded that if the document constituted a cautionary obligation, the Sheriff-Substitute had overlooked the enactment contained in section 8 of the Mercantile Law Amendment Act. That section is as follows:—“Where any person shall, after the passing of this Act, become bound as cautioner for any principal debtor, it shall not be necessary for the creditor to whom such cautionary obligation shall be granted, before calling on the cautioner for payment of the debt to which such cautionary obligation refers, to discuss or do diligence against the principal debtor as now required by law; but it shall be competent to such creditor to proceed against the principal debtor and the said cautioner, or against either of them, to use all action or diligence against both or either of them, which is competent according to the law of Scotland.”

He further pleaded that the document constituted a direct and primary obligation against Harkness; Galloway, 1st July 1823, 4 S. 132.

Millar, Q.C., and M'Kie, for the respondent, answered, that notwithstanding the terms of the above quoted section, the debt must be constituted against the principal before the cautioner could be sued.

The Court unanimously recalled the Sheriff's interlocutor, and remitted to the auditor of Court to tax the account sued for, and consider the objection of Mr Gun, reserved in the obligation granted by

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Mr Harkness. They were of opinion that, whether the obligation was a direct obligation or a cautionary one, there was at common law, and under the terms of section 8 of the Mercantile Law Amendment Act, a competent action against Mr Harkness, without the necessity of discussing or doing diligence against any other person. They indicated an opinion that, on the authority of the case of Galloway ( supra), such a writing as the present constituted a direct and primary obligation against the granter. The consideration for which Mr Harkness granted the obligation was the delivery of the discharges; without it, Mr Wilson would not have given these up.