William Brandt's Sons & Co v Dunlop Rubber Co Ltd

Lorp Macnacuten. My Lords, owing to the singular mode
in which the respondents choose to conduct their business there
is a little confusion about the transaction which led to the pre-
sent controversy. But the material facts are plain enough,
and the case, as it seems to me, is free from difficulty.

The appellants, William Brandt's Sons & Co., whom I will
call Brandts, are bankers in London. Kramrisch & Co., who
are now bankrupt, were rubber merchants in Liverpool. Their
business was "financed," as it is called, by Brandts, and also
by another firm of bankers trading as Kleinwort & Co. ~The
arrangement was precisely the same in both cases. When
Kramrisch & Co. made a purchase at home or abroad approved
by the bankers, it became the duty of the bankers to provide
the necessary funds, and by way of security they took deli-
very of the goods to themselves. Then when Kramrisch &
Co. found a purchaser approved by the bankers they released
the goods and gave Kramrisch & Co. a delivery order, relying
on a written undertaking in each case that the price should be
paid direct to them, and receiving an engagement in writing
that in the meantime Kramrisch & Co. would hold the goods
and the proceeds in trust on their behalf, and grant them "' the
sole and absolute lien on said goods and their proceeds"' until
they obtained full payment of the advance, together with their
charges. Every transaction was to be dealt with separately
and kept distinct.

In accordance with this arrangement Kramrisch & Gr Aa
towards the end of the year 1902, bought a parcel of rubber
which they sold to the respondents, the Dunlop Rubber Com-~
pany, on December 30,1902. In connection with this purchase
Brandts had advanced 3430/7. The goods were delivered to the
Dunlops on January 5, 1903, at their mills in Birmingham
known as Para Mills. With the goods there was sent an
invoice on which there was stamped a note requesting the
Dunlops to remit the amount of the invoice to Brandts. There
was a mistake of a few shillings in the figures. The invoice
was returned to Kramrisch & Co. for correction. The figures
had originally been 3263/. 16s. 4d.; the amount as corrected

was 3263]. 4s, 2d. After some conrespondence Kramrisch & Co.
Su. (2ete2

455

H. L. (BB)
1905

—_~
WILLIAM
BRANDT'S

Sons & Co.
an
Donor
RUBBER
Company.

456

H. L. (E.)
1905

—~
WILLIAM
BRANDT'S

Sons & Co.

v.
DunLoPe
RUBBER

Company.

Lord
Macnaghten.

HOUSE OF LORDS [1905}

sent the Dunlops a corrected invoice for that amount, but the
stamped direction for remittance to Brandts did not appear om
the corrected invoice ; and apparently the clerk at Para Mills,
whose duty it was to attend to the correspondence, did not.
keep a copy of the original invoice or take note of the direction
as to payment.

When the goods were delivered at Para Mills, Kramrisch &.
Co. sent to Brandts a printed form consisting of two parts—
(1.) a letter addressed by Kramrisch & Co. to the Dunlops, and
(2.) a letter intended to be signed by or on behalf of the
Dunlops, and to be returned by them direct to Brandts. This
letter, which is referred to by Brandts as '' the counterpart,"
was printed on the same sheet side by side with letter No. 1,
but was readily detachable from it.

The printed form as filled up in writing with the corrected
figures, but without signature by or on behalf of the Dunlops,
was as follows: '' Kramrisch & Co., Liverpool, 6th January,
1903. Messrs. the Dunlop Rubber Company, Ltd. Dear
Sirs,—We should thank you to kindly sign the attached letter
and forward same to Messrs. Wm. Brandt's Sons & Co.,
London, E.C. Yours very truly, Kramrisch & Co." The
attached letter was this: '' Para Mills, Birmingham,—January,
1908. Messrs. Wm. Brandt's Sons & Co., 4, Fenchurch
Avenue, London, H.C. Dear Sirs,—Herewith we beg to con-
firm that we shall remit, subject to approval of goods, the
amount of invoice—

£369 2s. 10d. for 8
£3263 4s, Qd. for 75 t Packages raw rubber,

received to-day from Messrs. Kramrisch & Co., Liverpool, when
due, direct to your good selves for account of Messrs. Kramrisch
& Co. Yours faithfully." Brandts sent on this form entire
inclosed in the following letter: '"'Dated London, 7th January,
1903. Dear Sirs,—Inclosed we beg to hand you a' letter
received from Messrs. Kramrisch & Co., Liverpool, referring to
8 packages India-rubber, amounting to 369/. 2s. 10d.; 75 pack-
ages India rubber, amounting to 3268/. 16s. 4d., which Messrs.
Kramrisch & Co. advise having forwarded to you. We request

|

A. C. AND PRIVY COUNCIL.

you to kindly return to us the counterpart duly signed by your
good selves. And remain, dear Sirs, yours truly, (Signed)
Wm. Brandt's Sons & Co. The Dunlop Rubber Company,
Lid., Para Mills, Birmingham."

The '8 packages India-rubber, amounting to 3691. 2s. 10d.,"
were the subject of a separate transaction. They may be left
out of consideration in the present case. There was no mistake
about that parcel, and the price was duly remitted to Brandts.

The clerk at Para Mills, who had charge of the correspond-
ence there, was one A. G. Paterson, who was an assistant
under Gooding, the manager at Para Mills. He was entrusted
with the company's rubber-stamp, which bore upon it the
words "' For the Dunlop Rubber Company, Ltd., Para Mills,
John Gooding."" When Paterson used the stamp he added his
mitials, A: GP.

Paterson in due course received and opened Brandts' letter
of January 7 addressed to the Dunlop Rubber Company. He
corrected the figures in the counterpart letter inclosed in it,
and advised Kramrisch & Co. that he had made the correction.
He signed the counterpart with the company's rubber-stamp,
adding his own initials, and returned the counterpart so signed
to Brandts. But he did not send a copy of the correspondence
to the head office in London, from which all cheques were)
issued. Nor did he inform the head office of what he had
done. He merely sent up the corrected invoice. The con-
sequence was that instead of remitting the sum of 32631. 4s. 2d.
to Brandts, as specially directed by Kramrisch & Co., the
Dunlop Rubber Company, in compliance with a previous
general order from Kramrisch & Co., paid the amount by
cheque to Kleinwort & Co., who had not financed this par-
ticular transaction, and had nothing whatever to do with it.
Ultimately Brandts wrote to the Dunlops pressing for the
remittance, which was then overdue. They replied on Feb-
ruary 9, 1908, that the amount had been paid, and added that
they held Kramrisch & Co.'s receipt for it.

Then this action was brought by Brandts in the Commercial
Court against Dunlops to recover the amount due. Walton J.
decided in favour of the plaintiffs. The Court of Appeal,

457

H. L. (E.)
1905

—~
WILLIAM
BRanpDvt's

Sons & Co.
%
DuNLOP
RUBBER
Company.

Lord
Macnaghten.

458

H. 1. (E.)
1905

—~
WILLIAM
BRANDT'S

Sons & Co.
vw.
DunLor
RUBBER
CoMPANY.

Macnaghten,

HOUSE OF LORDS [1905}

however (Lord Alverstone C.J., Collins M.R., and Romer L.J.),
reversed his judgment, and dismissed the action with costs.

It was contended at your Lordships' bar that there was no
evidence that a note directing the remittance to be made to
Brandts was stamped on the original invoice which had been
lost. Your Lordships thought it right to send for Kramrisch
& Co.'s press copy letter-book. On inspection of this book
it appeared that the original invoice contained the note in
question. Walton J. found as a fact that it was there, and I
think he was right. However, it does not seem to me to be a
necessary or material part of the plaintiffs' case, and I will
assume in favour of the sci that the original invoice
did not bear this note.

Then it was contended that neither Gooding nor Paterson—
Gooding seems to have been abroad at the time—had authority
to put the company's rubber-stamp on the counterpart letter of
January 8, 1903. This again seems to me not to be a necessary
or material part of the plaintiffs' case. I will assume, as the
Court of Appeal held, and as Walton J. appears to have
thought, that neither Gooding nor Paterson had real or
apparent authority to commit the company to a direct engage-
ment with Brandts. But, speaking for myself, I am not so
clear upon the point. Brandts write to the company a letter
addressed to the company at their works, asking the company,.
in accordance with the request of their creditors, Kramrisch
& Co., for remittance of the money which was due to Kram-
risch & Co. The expression '' we beg to confirm that we shall
remit'' in letter No. 2 obviously, as I think, was intended to
refer, and must have been understood by Paterson as referring,
to the note or direction as to remittance, which, according
to the company's evidence, was invariably stamped on the
invoice.

The Court of Appeal say that neither Gooding nor Paterson
had authority to bind the company to a new contract—to "a
fresh bargain." But was it a fresh bargain? The company
receive a notice which prevents them from paying the debt due
to Kramrisch & Co. to anybody but Brandts. An engagement
to do what they were bound to do, and what they might do

A.C. AND PRIVY COUNCIL.

with perfect safety, is hardly a fresh bargain. If the company,
or Paterson on behalf of the company, had replied that the
required assurance would not be given, or had failed to answer
Brandts' request, an injunction would no doubt have been
applied for and granted at once, and the company would have
had to pay the costs of the action. It was almost a matter of
course to give the required assurance. As Mr. Du Cros, the
company's managing director, said in cross-examination, if
they had been told to pay Brandts they would do so in the
ordinary course of business. ''It doesn't cost us anything,"
he added. When Brandts, in answer to a request addressed
to the company, received a letter from the company's office
purporting to be an answer on behalf of the company—and the
only answer that could have been sent without provoking
immediate litigation—Brandts would have been justified, I
should have thought, in accepting the reply as authentic and
sufficient. Surely it was no concern of theirs to inquire how
the routine business of the company was distributed in the
company's office. However, I will not pursue the matter
further. I put out of consideration both the note on the
original invoice and the signature, which purports to be a
signature on behalf of the company to the counterpart letter of
January 8.

The whole question, then, depends on the meaning and effect
of Brandts' letter of January 7, 1903, and its inclosures. Were
these documents, sent as they were to the company and received
by the company, notice that Brandts were interested in the
money, or what was their meaning? Does a business man
who merely wants his debtor to pay the amount of the debt
into his bank employ such elaborate machinery as this? Did
anybody ever hear of such a complicated process, if that was
all that was meant? At any rate, the company's secretary,
My. Bergin, admits that he never heard of such a thing. The
strangest part of this case is that nobody seems to have had
the slightest doubt as to the meaning of these documents.
"That was notice to Dunlops," says Walton J., '' and, in fact,
- was more than notice. It was notice to Dunlops that Messrs.
Kramrisch had made over to Brandts the right to receive this

459

H. L. (E.)
1905

—~
WILLIAM
BRanvt's

Sons & Co.

CoMPANY.

Lord
Macnaghten,

460

HOUSE OF LORDS [1905]

H.L.(E.) {sum of money, and had given to Brandts power to give a

1905

aw
WILLIAM
BranpT's

Sons & Co.

ua.
DuNnLOP
RUBBER
Company.

Lord
Macnaghten,

q

perfectly good receipt and discharge for it. It is more than
notice of course. It is notice plus a request that the bank"
(2 company) "' would acknowledge that notice by undertaking
to pay."

The Lord Chief Justice does not seem.to have taken a
different view on this point. Although he dismissed the action'
on the ground that the documents did not amount to an abso-
lute assignment within the section of the Judicature Act on
which reliance was placed, and were therefore not a legal or
equitable assignment, he thought '' the notice would have been
a good notice if the assignment had been an absolute assign-
ment," and he thought the documents were '' an authority to
the Dunlop Company to pay the money over on Kramrisch's
behalf to Brandts."" Then I would ask your Lordships to turn
to the evidence of Mr. Bergin, who was one of the secretaries
of the company, and, as the learned counsel for the company
said, 'a great deal more than secretary," for, as the learned
counsel told the Court, ''he managed the whole business."'
Mr. Bergin was asked in cross-examination this question:
**(Q.) Supposing that you had received that direction sent on
,by the Brandts, you would have thought, would you not, that
Brandts had a charge or were interested in this money ?—
(A.) I think I would. I would have thought that there was
some such arrangement."

That, my Lords, is the whole case. Itis difficult to conceive
a plainer case of an equitable assignment or a clearer case of
notice to the debtor. As between Kramrisch & Co. and
Brandis the case was complete, and more than complete,
without Brandts' letter of January 7 and its inclosures. There
was an undertaking that the money should be paid direct to
Brandts. There was besides a declaration of trust. There
was an engagement to give Brandts " @ sole and absolute lien,"
hat is, sole and absolute control and dominion over the pro-
eeds of the goods. Then the Dunlops receive through

randts a notice which no man of business could mistake,
jtelling them, on Kramrisch & Co.'s express authority, that
hihey are oe pay to Brandts the money which they owe their

A. C. AND PRIVY COUNCIL. 461

creditors, Kramrisch & Co. What more could be required? H.L.(E.)
Dunlops disregard that notice, and pay the wrong people. 1905

They must pay the money over again, and pay it to the right wyrray
person. BRANDT's
; Sons & Co.
With the utmost deference to the Court of Appeal, I have ec %8
UNLOP

great difficulty in following their reasoning. The plaintiffs' Rvsexr
case was put in two ways. It was presented as a case within be palate
sub-s. 6 of s. 25 of the Judicature Act. It was also presented eae.
as a simple case of equitable assignment perfected by notice.
Unfortunately, the stress of the argument was laid on the
Judicature Act. The Court of Appeal devoted almost the
whole of their attention to it. The substantial question—the
only question worth considering—was all but ignored. It was
treated as subordinate to the question on the statute and bound '
up with it. The Lord Chief Justice, with whom the other
members of the Court agree, says: '' I come to the conclusion
that this document "—that is Brandts' letter of January 7 and
its inclosures—" does not fulfil that which is necessary in order
to entitle the plaintiff to sue, whether suing as equitable or as {|
legal assignee, on the ground 'that it is not an absolute
assignment or an assignment at all within that section."

Why that which would have been a good equitable assign- '
ment before the statute should now be invalid and inoperative |
because it fails to come up to the requirements of the statute,
I confess I do not understand. The statute does not forbid or |
destroy equitable assignments or impair their efficacy in the
slightest degree. Where the rules of equity and the rules of
the common law conflict, the rules of equity are to prevail.
Before the statute there was a conflict as regards assignments
of debts and other choses in action. At law it was considered };
necessary that the debtor should enter into some engagement
with the assignee. That was never the rule in equity. It ''is |
certainly not the doctrine of this Court,'' said Lord Eldon,,
sitting in Chancery in Hx parte South. (1) In certain cases
the Judicature Act places the assignee in a better position
than he was before. Whether the present case falls within
the favoured class may perhaps be doubted. At any rate, it is

(1) (1818) 3 Swans. 392; 19 R. R. 227.

462 HOUSE OF LORDS [1905]

H.L.(E.) wholly immaterial for the plaintiffs' success in this action.

195 But, says the Lord Chief Justice, ''the document does not, on
Wim the face of it, purport to be an assignment nor use the language
a Sap of an assignment." ¢An equitable assignment does not alway

oer take that form. It may be addressed to the debtor. It ma
Russer be couched in the language of command. It may be

ComPANY. courteous request. It may assume the form of mere permis
acnaenten, sion. The language is immaterial if the meaning is plain. —All
that is necessary is that the debtor should be given to under-/|
stand that the debt has been made over by the creditor to/
some third person. If the debtor ignores such a notice, he

does so at his peril. , If the assignment 'be for valuable con- j |

sideration and communicated to the third person, it cannot be/

revoked by the creditor or safely disregarded by the debtor." t

think that the documents which passed between Brandts an

the company would of themselves, and apart from Kramrisch

& Co.'s undertaking and engagement given to Brandts, have

constituted a good equitable assignment. "But the real ques-
|| tion is, were they notice to the company that Brandts were
interested in the money? As between Kramrisch & Co. and
Brandts the assignment was, as I have already us perfect
without them.

In a case like this it would, I think, be pcanlerat to refer to
authorities. But as a good many cases appear to have been
cited in the Courts below, I may perhaps be forgiven if I
venture to mention, though only by name, such well-known
cases as Hx parte South (1); Jones v. Farrell (2); Diplock v
Hanvmond. (8) i |

Strictly speaking, Kramrisch & Co., or their trustee in bank-
ruptcy, should have been brought before the Court. But no
action is now dismissed for want of parties, and the trustee in
bankruptcy had really no interest in the matter. At your
Lordships' bar the Dunlops disclaimed any wish to have him
present, and in both Courts below they claimed to retain for
their own use any balance that might remain after satisfying
Brandts.

(1) 3 Swans. 392; 19 R. R. 227, (2) (1857) 1D. F. & J. 208.
(3) (1854) 5 D. M. & G. 320

eee

A. C. AND PRIVY COUNCIL.

It is quite plain how the error in this case arose. It was all
due to the mode in which the Dunlops conduct their business.
At Para Mills, where they have a large establishment and
employ between 1000 and 1500 workmen, they have a manager
who attends to the practical part of the business. The
manager, Mr. Gooding, was called, but he could give very little
information. He was abroad when the important letters came
to the office. If he had been at home he would have known
nothing about the matter. He was 'not interested,' as he
says, ''in these things at all." He only saw the letters which
Paterson chose to shew him. Everything really depended upon
Paterson. Paterson was not called. It was hardly to be
expected that the company would wish to see him in the box.
He seems to hold a very delicate and responsible position. He
opens all the correspondence that comes to Para Mills, and
deals with it apparently just as he thinks fit. Some letters he
lays before Gooding, some he sends to the head office, and
some he puts aside. Unfortunately he did not think it worth

while to send to the head office Brandts' letter of January 7, .

1903, and its inclosures. The head office, therefore, knew
nothing about this equitable assignment, and they paid the
money to the wrong man because Kramrisch on a former
occasion had given them a general direction to pay Kleinwort
& Co. The difficulty, as Mr. Bergin admitted, was "' owing to
the neglect of duty at Birmingham." It would be unreasonable
to make Brandts suffer for that. ;

I think the appeal must be allowed, and the judgment of
Walton J. restored with costs here and below.

My noble and learned friend Lord Lindley desires me to
say that he has read this judgment and concurs in it.

Lorp Jamses. My Lords, agreeing as I do with the result
of the judgment already delivered by my noble and learned
friend Lord Macnaghten, I do not propose repeating a detailed
statement of the facts of this case.

For the reasons stated by my noble and learned friend
Lord Macnaghten, I concur in the view that an equitable
assignment of the debt sought to be recovered is established,

463

H. L. (B)
1905

—~
WILLIAM
BRANDT'S

Sons & Co.
v

DunLor
RUBBER
Company.

Lord
Macnaghten,

464

H..L..(E.)
1905

a
WILLIAM
BRANDT'S

Sons & Co.

uv.
DuNLoP
RUBBER
CoMPANY.

Lord James.

HOUSE OF LORDS [1905]

and that the judgment of the Court below erred in dealing
with the question as arising under the Judicature Act only.
The defect in the parties to the suit can be remedied. But for
myself I go further, and think the plaintiffs are entitled to
recover upon the ground that Dunlops undertook to pay them
the amount in question. It seems to me that when the
plaintiffs received the letter from the defendants of January 8,
1908, signed by Gooding, they were entitled to rely and act
upon it.

In respect to this question the controlling facts appear to be
as follows: The defendants carry on business at two mills, the
Para Rubber Mills and the Manor Rubber Mills; their head
office is in London. At the Para Mills a Mr. Gooding was the
manager, apparently for all purposes—at least there was no
other manager. But the course of business between him and
his employers, the defendants' company, seems to have been
that in matters relating to the general financial business of the
concern, so far as they had to pass through the Para Mills,
Mr. Gooding by himself or a subordinate would seek instruc-
tions from the London office, and the result of the evidence is,
I think, that he ought to have so done in respect of the
transactions under consideration.

But in regard to those who were dealing with the Para Mills,
the question presents a different aspect: they would know
nothing of the internal arrangements of the company; they
would know nothing probably of the London office. Apparently
the course of business was that communications to corre-
spondents in respect of finance would be made from the Para
Mills under Gooding's signature. I gather this from the
document of December 4, 1902, and from the evidence given
by Mr. Du Cros, which was as follows: '' (Q.) A person writes
a business letter to the Dunlop Rubber Company at the Para
Mills. Whom would that letter be brought before in the
ordinary course of business ?—(A.) The manager, Mr. Gooding.
(Q.) Would Mr. Gooding be the person authorized by the head
office to affix the signature to the answer to that letter ?—
(A.) All letters, even the Para Mills letters, are signed by the
name of the company, and Mr. Gooding's signature as manager.

A. C. AND PRIVY COUNCIL.

(Q.) Therefore a letter addressed to. the Para Mills, Birming-
ham, would be answered by a letter bearing Mr. Gooding's
signature or stamp ?—(4.) Whether dictated by him or not,
it would be signed by the stamp of the company with his
name."

Now when the plaintiffs communicated with the defendants
on January 6 and 7, they wrote to the right place and to
the right body—the company. Those communications were,
according to the business arrangements of the company,
received and opened by the agents authorized by the company
to receive and deal with them. And when the reply was sent
on January 8, it was in due form signed by the manager,
who, subject to receiving authority from the London office,
ought in due course so to have signed the reply.

Thus the correspondent, making an inquiry to the right
office, receives in due course a reply from the person whose
duty it was to receive and reply to such communication.

In the case we are considering the manager, Gooding, having
failed to inform the London office of the undertaking of
January 8, given by him to the plaintiffs, payment of the larger
sum of 3263/7. was made in pursuance of previous direction
to make payments to another firm, and the company, having
done so, repudiate Gooding's undertaking, and refuse to pay
the amount in question twice over.

If this point stood alone it would be for your Lordships to
determine which of the parties to the litigation should bear
such loss. In my opinion the loss ought to fall upon the
defendants. Gooding was the person authorized by the defend-
ants to deal with their correspondence—to receive and reply
to letters ; that he neglected his alleged duty when he omitted
to seek specific orders from London may be the case, but the
neglect was that of the defendants' agent, and it is more
reasonable that the result of it should be borne by his employers
than by those who could know nothing of the existence of the
alleged duty, or of the omission to fulfil it.

But this determination of liability depends upon the view
that Gooding was held out by the defendants as a person upon
whose communications the plaintiffs were entitled to rely. To

465

H. L. (E.)
1905

—~
WILLIAM
Branpv's

Sons & Co.
wY
DuN.Lop
RuBBER
CoMPANY.

Lord James.:

466 HOUSE OF LORDS [1905]

H.L.(E.) hold otherwise would, I think, tend to encourage a want of
1905 confidence in commercial transactions to an extent which

Wim Would be most undesirable.

BranDY' i i i
Sousa Co. _ verefore think that this appeal must be allowed with

a ae costs.
Raeeee Order of the Court of Appeal reversed and judg-
a ment of Walton J. restored with costs here
and below: cause remitted to the King's
Bench Division.
Lords' Journals, August 3, 1905.