United Kingdom House of Lords Decisions

Their Lordships then delivered judgment as follows

Earl Loreburn—This is an action for false and fraudulent representation. In such an action the pursuer cannot succeed unless he proves dishonesty. There is another kind of action known to the law, namely, for some breach of duty arising out of the relations between the parties, as, for instance, where a solicitor is sued for failure to exercise diligence. That class of case was referred to in Nocton v. Lord Ashburton, [1914] AC 932. It is, however, quite a different proceeding and has nothing to do with fraud, though at one time the word “fraud” was used occasionally in regard to that form of action also. It is to be hoped that so grave an expression will be confined to cases where the charge involves moral delinquency.

I may say a very little about a subordinate point that was raised in this case, namely, whether or not the respondent M'Arthur intended to induce and did induce the pursuer to act upon the incriminated letter. In my opinion that letter was intended to convey the opinion that the two Messrs Inglis were in good credit, and the writer meant to influence those persons who should be interested in providing the contemplated loan. The pursuer was such a person, and he was undoubtedly induced by the letter to give his name as surety. He was none the less induced by the letter that it was not in fact seen by him, for its effect was accurately stated to him in pursuance of the writer's intention and he acted upon it.

All therefore depends upon the question whether the letter was dishonest and conveyed what was in fact false. Taking what it said and what it omitted to say together, any ordinary person would understand it to mean that these two gentlemen, the Messrs Inglis, were in good credit. That is the general impression that this letter would undoubtedly convey, though it imposed a limit upon the sum for which they could be safely trusted. Coming from the general effect of the letter to its particular contents there are two features of it which require notice. The first is a statement that the Bank was collecting certain dividends for these two gentlemen, which was not true. The second feature is that, while purporting to deal with the credit of the Messrs Inglis, it withheld the fact that the Messrs Inglis were overdrawn at the respondent Bank. Now if Mr M'Arthur knew that the statement about the dividends was untrue, or if (which is the same thing) he had no knowledge whatever on the subject, and took upon himself to make the assertion knowing that he had no foundation for it, that would be dishonest; but if he believed it, however foolishly, then the withholding of the fact that the Messrs Inglis' accounts were overdrawn would not be reprehensible, for in the circumstances of this case he might naturally consider them still to be solvent people. It is quite a possible view to take on the evidence that Mr M'Arthur though culpably careless was not fraudulent. That was the view taken by the learned Judge at the trial. I attach great importance to the opinion of the learned Judge who saw the witness in cases like this where conduct and motive are in question. I accept his opinion. It seems to me that M'Arthur believed the loan would be repaid and could be repaid out of the resources of the sons, that he relied upon the statements they made to him, and that he accepted, though without proper inquiry, what the previous bank manager had told him in regard to the dividends collected by the Bank for their accounts. As I have already said, I believe that the respondent Bank estimated accurately Mr M'Arthur's conduct in their letter of November 14. That is a frank letter, very honourable to the Bank. It is all the more honourable to them that they were not only just in their description of his conduct, but also merciful towards the man who had made the mistake.

At the same time it is impossible not to feel that though the pursuer has no remedy in law he has been ill-treated. I think it is hard upon him that he has not been recompensed. In my opinion this House ought to mark its sense of this by saying that there should be no costs on either side from the issue of the writ onwards. This course is, I am aware, exceptional. It is a course that your Lordships would not, I am sure, entertain if the appeal were merely an appeal as to costs, but only in cases where there is a substantial and meritorious ground of appeal though unsuccessful, and where there is a marked case of hardship. In my opinion this is such a case. Accordingly I move that the appeal be dismissed, but that there be no costs on either side of this action from its commencement.

Viscount Haldane—I entirely agree with what has fallen from my noble and learned friend on the Woolsack. As to the costs I will only say this, that, as he does, I regard what your Lordships have intimated about costs as arising out of the view which we have taken of the merits in an appeal in which we have all the materials before us in the same fashion as the Courts below had these materials before them. But for this I should be unwilling to make a modification in the order which might be said to operate as though this appeal were one for costs only. I think it is more than that, and is really a question of the merits, and for that reason I concur with the view that has been expressed.

There is only one other point about which I wish to say anything, and that is the question which was argued by the appellant, as to there being a special duty of care under the circumstances here. I think the case of Derry v. Peek (1889), L.R., 14 A.C. 337, in this House has finally settled, in Scotland as well as in England and Ireland, the conclusion that in a case like this no duty to be careful is established. There is the general duty of common honesty, and that duty of course applies to the circumstances of this case as it applies to all other circumstances. But when a mere inquiry is made

Page: 392↓