APPENDIX

HEDLEY BYRNE & CO LTD v HELLER & PARTNERS LIMITED

High Court, Queen's Bench Division

No. 14

Transcript of Judgment of McNair J, dated 20th December 1960

MR JUSTICE MCNAIR: This case raised certain interesting questions of law as to the liability of bankers giving references as to the credit-worthiness of their customers.

In these circumstances, though the Plaintiffs in their Statement of Claim alleged that the references were not honestly given (which claim was abandoned before me), they seek to recover the damages which they have suffered on the allegation that the references were given negligently and without any or any reasonable care in that the expressions of opinion contained in the references were not justified by the facts as known to the Defendants. The claim as so put raises in a neat form the question whether, in circumstances such as these, a person who has acted on a banker's reference so given can succeed short of proving fraud.

The facts and circumstances disclosed by oral and documentary evidence adduced at the hearing I find to be as follows. The Plaintiff Company carry on business at 140 Park Lane, London, as advertising agents. The Chairman and Managing Director is one J O Hedley, who was called before me. There was also called before me a Mr C E Gaunt, described as the accounts executive of the Plaintiff Company, and Mr Draycott, the Secretary. The Plaintiffs' bankers were the Piccadilly Branch of the National Provincial Bank, of which Mr Webber was at the material time the Assistant Manager. It appears that under arrangements with the Newspaper Proprietors Association, and I think also the television com­panies, only recognised advertising agents who have satisfied these bodies as to their standing and financial resources are at liberty to place orders for advertising space or time with those bodies, and then only on terms that they assume personal responsibility for the payment of the accounts. They in effect act as del credere agents for their customers. The Plaintiffs were such recognised advertising agents.

Easipower Limited was incorporated some years ago by a Mr F A Williams and developed a successful business in the manufacture of a range of domestic elec­trical appliances. Before the matters in issue in this action arise, the whole of its share capital had been taken over by Pena Industries Limited, the parent company of a group of companies carrying out various industrial activities. Amongst these companies was a Company known as Concor Limited, who acted as bankers for the group.

Heller & Partners Limited was formed in 1953 to take over a partnership known as Heller & Partners which had theretofor carried on business as merchant bankers. Mr Lipman Heller joined the business in 1945, and at all material times was a direc­tor of the Company.

Early in 1957, Mr Hedley and Mr Gaunt had a meeting with a Mr Greenwood, who told them that he had formed a company known as Applied & Marketing Advertising Limited, which was not a recognised advertising agency, and that he had been approached by a Mr Carling, the Chairman of Pena Industries Limited, to act as consultant in all the Pena group advertising activities, including those of Easipower Limited. As the result of this approach, towards the end of 1957 the Plaintiffs, on behalf of Easipower Limited, placed some small orders for advertis­ing worth £1,000 or so. Later the same year, Mr Greenwood outlined proposals for a very extensive advertising programme involving the expenditure of £100,000 on behalf of Easipower Limited and certain associated companies.

The reference relating to Easipower Limited was given by Martin's Bank Limited, who reported as follows:

A respectably constituted Company whose trading connection is expanding speedily. We consider the Company to be quite good for its engagements. A transaction of the nature and magnitude indicated in your letter is larger than we normally expect the Company to undertake but it enjoys substantial and responsible support and we feel confident that they would not undertake a commitment on that scale unless they could arrange to fulfil it satisfactorily. There is a debenture in favour of the Bank.

It does not appear that at that time Heller & Partner Limited were asked for a reference as to Easipower Limited, though they did give a reference in relation to Enganor Finance Limited, apparently one of the Pena Group. Nothing however came of this proposal at the time. By April or May, 1958, it became known to Mr Hedley that Pena Industries Limited were thought to be in financial difficulties.

On 18th August (that is, after the bulk of the orders had been placed) Mr Draycott, on the instructions of Mr Hedley, telephoned to Mr Webber asking for a reference as to the ability of Easipower Limited to meet a debt of £8,000 to £9,000, this being the figure that Mr Hedley estimated would be at risk at any one time. Mr Webber telephoned the City office of the National Provincial Bank, who in turn made a telephone inquiry of the Defendants. The account of the inquiries and the reply as given by Mr Lipman Heller was recorded in a Minute dictated by Mr Heller at the time. This Minute was accepted by the parties before me as being accurate. It is in the following terms:

Heller & Partners Limited. Minute of telephone conversation National Provincial Bank Ltd. Call from 15, Bishopsgate, EC2. Date 18.8.58. Person called, L Heller. re Easipower Ltd. They wanted to know in confidence and without responsibility on our part, the respectability and standing of Easipower Limited and whether they would be good for an advertising contract for £8/9,000.

On 21st August Mr Webber sent to the Plaintiffs the following reply:

Confirmation of our telephoned reply. 21st August, 1958. Confidential. For your private use and without responsibility on the part of this Bank or the Manager. Hedley Byrne & Co Ltd. Dear Sir, In reply to your telephone inquiry of 18th August Bankers say: ‘The sub­ject recently opened an account with us. It is a respectably constituted Company and is considered good for business engagements. It is a subsidiary of Pena Industries Limited, which is in liquidation, but we understand that Mr Williams the Managing Director of E Ltd, is endeavouring to buy the shares of E Ltd from the liquidators. We feel the subject Company would not undertake commitments it could not Iiilfill.' Yours faithfully.

That is signed by Mr Webber, the Assistant Manager. For completeness I should add that there is a contemporary note in the handwriting of Mr Draycott's secretary which purports to record the summary of a telephone conversation on 18th May as follows: ‘August 18th. ‘phoned Bank who gave a fair but guarded report upon future credit angle of new set-up', but as neither Mr Draycott nor Mr Webber was able to confirm this conversation I make no finding as to its accuracy.

I now turn to the facts as known to Mr Lipman Heller or to his brother Isadore Heller whom he consulted before giving the reference above referred to. Early in 1958, Concor Limited, who as previously stated acted as bankers for the Pena Group, and were responsible for making financial inquiries on behalf of the other companies of the group, approached the Defendants to see whether they would grant financial assistance to the group including Easipower Limited.

The second scheme, known as stock finance, provides as follows: The borrower sells the goods in advance of any sale to its customer to City Merchants Limited, for 75 per cent of their eventual sale price payable forthwith in cash, the goods remaining meanwhile on the premises of Easipower Limited, in a store the key of which is under the control of City Merchants Limited. When Easipower Lim­ited finally effect a sale to a genuine customer, they buy the goods back from City Merchants Limited at an enhanced price, the percentage of the increase depending upon the length of time between the initial purchase by City Merchants Limited and the eventual resale.

Both these schemes are admittedly schemes intended in effect to provide advances on the security of goods in such a way as to avoid the operation of the Bills of Sale Acts; but it is unnecessary for me to express any opinion as to their legal validity.

While these discussions initiated by Concor Limited through, I think, Mr Williams were proceeding, it became apparent that Pena Industries Limited were in financial difficulties and were unable to continue financing Easipower Limited, which they had been doing through Concor Limited, to the extent of £45,000. In these circumstances, Mr Williams, in whose capacity and integrity the Hellers had complete faith, conceived the scheme of buying back from Pena Industries Limited the shares in Easipower himself. This project, however, depended on two factors, (1) that Pena Industries Limited, or their liquidator, were prepared to sell the shares and (2) that the Defendants were prepared to grant financial assistance to Easipower Limited, whether by sales finance or stock finance or otherwise, at any rate sufficient to keep Easipower Limited going until the Autumn when it might be expected that the sales of electric blankets, on the production of which Easipower were concentrating, would be substantial.

Mr Edwards put before Mr Heller an elaborate series of financial estimates in support of his argument which the Hellers accepted, that by November, 1958, Easipower Limited would on their trading account show a profit of over £46,000. During the early summer of 1958, as a result of these discussions, the following transaction was entered into by the Defendants. (1) On 9th May they took from Concor Limited, who were customers of the Defendants and were being pressed for a reduction of their overdraft, an assignment of a debt of £45,730 due from Easipower Limited to Concor Limited. (2) In May or June they agreed in principle to grant sales finance and stock finance to Easipower Limited on terms designed to secure that out of the money received from City Merchants Limited, the debt of £45,730 taken over from Concor Limited, would be liquidated—as it was by 9th July, 1958. The formal agreements to this effect were executed on 14th July, 1958. (3) The Defendants having been informed, as was the fact, that Martins Bank Limited, to which Easipower Limited were indebted on overdraft to the extent of £15,164 18s 3d secured by a debenture creating a floating charge on the undertak­ing and property of Easipower Limited, were unwilling to continue the overdraft owing to the fact that certain cheques had been improperly drawn by those in charge of Easipower Limited (in the absence of Mr Williams abroad) for purposes other than those permitted by the overdraft, on or about 13th May, 1950, took over from Martins Bank Limited Easipower Limited's debt of £15,164 18s 3d together with the debenture and agreed on 23rd May, 1958, to grant to them an overdraft up to the limit of £50,000.

As part of these arrangements, Mr Williams deposited with the Defendants as his personal collateral security transfers for securities of substantial value, together with a life policy for £20,000, and continued with his negotiations with the liqui­dator for the repurchase of the shares of Easipower Limited.

It soon, however, became apparent that even with the overdraft facilities of £50,000, Easipower Limited were unable to pay their current liabilities as they fell due, and they were only kept afloat by the action of the Defendants in extending the limit of the overdraft temporarily until the end of August by £5,000. Through­out this period Easipower Limited were only able to keep their creditors at bay by paying off the most pressing creditors many months after their debts fell due for payment quite apart from being faced with substantial inter-company indebted­ness, which it is true to say was in dispute. If not insolvent, as I suspect they were, they were showing all the signs of early insolvency. On August 18th the overdraft stood at £53,865.

All the facts mentioned above were within the knowledge of the Defendants on 18th August. In my judgment at that date neither Mr Lipman Heller nor Mr Isadore Heller, who was in charge of the Easipower Limited Account, had any reasonable ground for supposing that the overdraft would be reduced below £55,000 by the end of August. I accept without reservation the concession made by the Plaintiffs during the course of the hearing that the reference given by Mr Lipman Heller on 18 th August was honestly given.

I now turn to the question whether in fact Mr Lipman Heller was negligent in giving the reference as set out above and for the purpose of this inquiry I assume that he was under a duty to exercise reasonable care in giving his reply. Mr Heller in his evidence stated that he regarded the reference which was given after con­sultation with Mr Isadore Heller as a very guarded reference, and stated that it contained three red lights or warnings. First, that the statement that ‘the Com­pany recently opened an account with us' meant that he could only speak from a short experience of the account; secondly, that the expression ‘good for its normal business engagements', unqualified by the words ‘including your figures' indicated that no expression of opinion was made as to its creditworthiness for £8,000 or £9,000. It was conceded that the omission of the word ‘normal' when the reference was passed on to the Plaintiffs is immaterial. Thirdly, that the statement that ‘ the Company is a subsidiary of Pena Industries Limited which is in liquidation' was a warning to make further inquiries before giving extended credit, because the liq­uidator could put the Company into liquidation at any moment. Mr Heller agreed that the qualifying phrase introduced by the word ‘but' was a balancing factor, though he stated that the light was still glowing red. At the conclusion of his evi­dence, I stated that I would infer that he would give the most favourable reference he could for his clients and that accordingly this was the best reference which he could honestly give on the information available to him. Mr Heller agreed that this was the correct inference. Mr Hedley stated that he regarded the answer given as satisfactory for the modified sum for which he was inquiring, that is to say, £8,000 to £9,000, and that, if it had been unsatisfactory, he would have gone to Easipower Limited and requested them to pre-pay their accounts, and that if this request was not complied with he would have taken immediate steps to cancel the outstanding orders so far as he could.

In my judgment, whatever may be the meaning which certain expressions in the reference may be understood to have as between bankers—and on this the evidence was not very precise—the reference as a whole and the particular expres­sions relied upon cannot as a matter of construction reasonably be held to bear the interpretation which Mr Heller seeks to place upon it or them. As a matter of construction, I would regard the reference, as Mr Hedley did, as a favourable ref­erence for £8,000 to £9,000 without any real qualification, and that it meant that Easipower Limited could safely be granted credit for that sum.

On the assumption stated above as to the existence of the duty, I have no hesita­tion in holding (1) that Mr Heller was guilty of negligence in giving such a reference without making plain as he did not that it was intended to be a very guarded refer­ence, and (2) that properly understood according to its ordinary and natural meaning the reference was not justified by facts known to Mr Heller. Amongst these facts was the vital fact that the survival of Easipower Limited as a trading concern depended upon the uncertain contingency that Mr Williams would be successful in purchasing

the shares of Easipower Limited which he had been unsuccessfully attempting to do since May.

I continue with my chronological findings. A letter from Mr Williams to the Defendants dated 24th October, 1958, shows that Easipower Limited was still months in arrears in paying off its trade creditors and would still be in arrears in November even excluding the monthly invoices from the Plaintiffs which would be falling due from 5th November onwards.

On 4th November, Mr Draycott, in the absence of Mr Hedley abroad, caused a further inquiry to be made by Mr Webber as to the financial structure and status of Easipower Limited, and in response to an inquiry from the National Provincial Bank as to whether the Defendants considered Easipower Limited ‘trustworthy in the way of business to the extent of £100,000 per annum advertising contract', the Defendants, by one of their directors, Mr Fairburn, after consulting Mr Isadore Heller replied in writing on 4th November as follows:

Heller & Partners Limited. Confidential. For your private use and without responsibility on the part of this Bank or its officials. To the Manager, City Office, National Provincial Bank Limited. Dear Sir, in reply to your letter of 7th instant we beg to advise: Re E Ltd. Respectably constituted Company, considered good for its ordinary business engage­ments. Your figures are larger than we are accustomed to see. Yours faithfully, per pro Heller & Partners Limited.

This was passed on in the same form by the Bank to the Plaintiffs on the 14th November.

Though it is true that this reference gives a somewhat guarded warning as to the amount for which Easipower Limited were considered creditworthy, it seems to me clear that in view of the facts above enumerated and the further fact that by this time it had become clear that Mr Williams' estimates made in May as to the Company's financial position in November had been wholly falsified and that Mr Williams had still failed to purchase the Easipower shares, this was a refer­ence which could not have been given by a person exercising reasonable care, and I accordingly hold (on the assumption stated above as to the existence of the duty) that in respect of this reference also the Defendants were guilty of negligence.

The remaining facts may be shortly stated. On 20th November, the Defendants gave Mr Williams formal notice that the overdraft must be reduced to £40,000 by the end of the month. This demand was not complied with. On 27th Novem­ber Easipower Limited gave instructions to the Plaintiffs to cancel all outstanding commitments. This instruction was complied with, but there remained liabilities amounting to £17,661 ls 4d in respect of commitments which the Plaintiffs were unable to cancel.

On 2nd December the Defendants declined to honour a cheque for £2,711 in favour of the Plaintiffs drawn by Easipower Limited. Some time in January, 1959, the Defendants appointed a Receiver under their debenture and Easipower Limited was forced into liquidation. In this liquidation the Defendants as secured creditors received payment of their overdraft and interest in full. The Plaintiffs proved in the liquidation for their unsecured debt and have received as a dividend the sum of £2,207 14s l0d, being a dividend at the rate of 2s 6d in the £, and it is anticipated that a further payment of the like amount will be paid in due course.

The first question of law to be decided is as to the extent of the duty, if any, owed by the Defendants to the Plaintiffs in the circumstances set out above. Apart from authority there would be much to be said for the view that a person who answers an inquiry as to the creditworthiness of another, knowing that the inquirer will probably act upon the answer, should be held to be under a duty to exercise reasonable care in giving the answer and to be answerable in damages if the answer proves to have been given negligently. But the question is not free from author­ity. On behalf of the Defendants, the broad proposition was submitted as follows. Where Bank A asks another Bank B, either on its own account or on behalf of its customer, for a reference as to the credit of C a customer of Bank B, the only duty Bank B owes either to Bank A or to the customer of Bank A is to give an honest answer. This limitation, it was argued, was implicit in the reasoning of a long series of authorities from Derry v Peek (1889) LR 14 AC 337 onwards, and was finally determined to be correct by the House of Lords in Robinson v National Provincial Bank, 1916, 53 Scottish Law Reporter, page 390, House of Lords.

The facts of that case were shortly these. Bank A at the request of the Appellant, one of three guarantors for a loan granted by an insurance company, applied to Bank B (the Respondent) for a reference as to the trustworthiness in carrying on business of the other two guarantors who were customers of Bank B. The agent of Bank B gave an honest but negligent and misleading reply. Lord Loreburn, pref­acing his speech by the observation that it was an action for false and fraudulent representation, took the view that the action of the agent though culpably careless was not fraudulent and that the action failed. He distinguished cases of a breach of duty arising out of special relations between the parties such as solicitor and client. Lord Haldane used the following language:

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. Peak (1889) L.R. 14 A.C. 337, in this House has finally settled, in Scotland as well as 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 applied to all other circumstances. But when a mere inquiry is made by one banker of another who stands in no special relation to him, then in the absence of special circumstances from which a contract to be careful can be inferred, I think there is no duty excepting the duty of common honesty, to which I have referred. In saying that I wish emphatically to repeat what I said in advising this House in the case of Nocton v. Lord Ashburton (1914 Appeal Cases, page 932) that it is a great mistake to suppose that because the principle in Derry v. Peak clearly covers all cases of the class to which I have referred, therefore the freedom of action of the Courts in recognising special duties arising out of other kinds of relationship which they find established by the evidence is in any way affected. I think, as I said in Nocton’s case, that an exaggerated view was taken by a good many people of the scope of the decision in Derry v. Peak. The whole of the doctrines of fiduciary relationships, as to the duty of care arising from other special relationships which the Courts may find to exist in particular cases still remains, and I should be very sorry if any word fell from me which should suggest that the Courts are in any way hampered in recognizing that the duty of care may be established when such cases really occur.

It is true that so far as I can follow the account of the proceedings as reported in the Court of Session at page 163, no cause of action founded on negligence was alleged and these expressions of opinion may be said strictly to be obiter in so far as they deal with negligence, but they are clearly expressions of opinion of the highest authority which I ought to follow. Low v Bouverie, 1891 3 Chancery, page 82, and Nocton v Lord Ashburton, 1914 Appeal Cases, page 932, in which Low v Bouverie was approved at page 972, are relevant in this connection.

In Parsons v Barclay & Co, 1910, 26 Times Law Reports, page 28, the Court of Appeal reversed a judgment against a Bank on a banker's reference on the ground that there was no evidence to support the Jury's finding that the reference was given without an honest belief that the statements contained therein were true. In the course of the judgment, Sir Henry Cozens-Hardy, Master of the Rolls, said:

His Lordship wished emphatically to repudiate the suggestion that, when a banker was asked for a reference of this kind, it was any part of his duty to make inquiries outside as to the solvency or otherwise of the person asked about, or to do anything more than answer the- question honestly from what he knew from the books and accounts before him.

Finally, in Candler v Crane Christmas & Co, 1951, 2 King's Bench Division, page 169 (a case dealing with accounts prepared by the Company's accountants for the purpose of a potential investor in the Company), the Court of Appeal, Lords Justices Cohen and Asquith, as they then were, Lord Justice Denning, as he then was, dissenting, held that a false but not fraudulent statement made by one person to another, although acted upon by that other to his detriment, was not actionable in the absence of any contractual or fiduciary relationship between the parties and that this principle had in no way been qualified by the decision of the majority of the House of Lords in Donoghue v Stevenson, 1932 Appeal Cases, page 562. Lord Justice Asquith, at page 192, tersely sums up Lord Haldane's view in Nocton v Ashburton in the words: ‘He affirms that liability for negligence in word has in material respects developed in our law differently from negligence in act.' Lord Justice Cohen, at page 201, refers to the view expressed by Winfield on Torts, Fourth Edition at pages 386 to 387, deploring the fact that decisions in the Court of Appeal were definitely against the existence of any action in tort for negligent statements but expressing the opinion that it was open to the House of Lords to take the contrary view. Like Lord Justice Cohen, I express no view on this point.

I am accordingly driven to the conclusion by authority binding upon me that no such action lies in the absence of contract or fiduciary relationship. On the facts before me there is clearly no contract, nor can I find a fiduciary relationship. It was urged on behalf of the Plaintiff that the fact that Easipower Limited were heavily indebted to the Defendants and that the Defendants might benefit from the advertising campaign financed by the Plaintiffs, were facts from which a spe­cial duty to exercise care might be inferred. In my judgment, however, these facts, though clearly relevant on the question of honesty if this had been in issue, are not sufficient to establish any special relationship involving a duty of care even if it was open to me to extend the sphere of special relationship beyond that of contract and fiduciary relationship.

For completeness, I should add that the only authority to the contrary to which I have been referred is the decision of Mr Justice Avory in Batts Combe Quarry Company v Barclays Bank, 1931, 48 Times Law Reports, where Mr Justice Avory is reported to have said that he thought that the authorities showed that the only duty, if any (of the Bank giving a reference) was a duty not to be negligent. It is clear, however, that the learned Judge had accepted the argument on behalf of counsel for the Bank that the only duty was to answer honestly, and I am satis­fied that in the passage to which I refer the learned Judge has been misreported. I would, however, mention that in Halsbury, Third Edition, Volume 2, at page 241, this case is cited as authority for the proposition that an action can be brought on the ground of negligence in the making by a Bank of a representation as to a customer's financial standing. In my judgment this action fails on this point of law.

Two further points taken on behalf of the Defendant should be mentioned. First it was submitted that (assuming that the action in negligence lies) on the facts here that the Plaintiff had not established any damage recoverable in law inasmuch as they could not have cancelled their commitments to the advertisers without a breach of their contract with the Defendants. As to this, seeing that Mr Hedley was not cross-examined as to his statement that he would have asked for prepayment if the references had been unsatisfactory and the circumstances surrounding the making of the contract were not sufficiently examined before me so as to enable me to form any opinion as to whether Mr Hedley would have a valid legal ground for demanding prepayment, I am content to say that this defence, even if sound in law, was not established on the facts.

Secondly, counsel on behalf of the Defendants desired to keep open the point that Lord Tenderden's Act would furnish a complete defence to any action framed in negligence on the ground that the first reference was purely oral and the second reference was not in the writing of the Defendants as it was not under seal. (See Hurst v West Riding Union Banking Co Ltd 1901, 2, King's Bench Division at page 560.) I express no opinion on this submission, except to say that if (contrary to the view which I have adopted) an action in negligence lies, there are strong expres­sions of opinion in B anbury v Bank of Montreal, 1918, Appeal Cases, page 626, to the effect that Lord Tenderden's Act only applies to fraudulent representations. Indeed, this decision is strongly relied upon by counsel for the Defendants in support of his argument that no action in negligence lies.

MR SHAW: Before I ask for Judgment, may I draw your Lordship's attention to one small point on the facts as your Lordship found them? Your Lordship, in dealing with the sales finance scheme, referred to the fact that City Merchants buy for 75 per cent and sell again to the sales company. Your Lordship did not mention that the other 25 per cent found its way back to the parent Company. It does give rather a misleading picture.

MR JUSTICE McNAIR: I think I mentioned that later, when I said that the debt of £45,000 taken over from Concor was liquidated out of these payments.

MR SHAW: That is not quite the point, my Lord. Quite apart from the Concor transaction, your Lordship was dealing with sales finance as a method—not the application of the Concor debt—and your Lordship was shown the set of docu­ments. I think they were put in at one time. The other 25 per cent, after the debts have been paid off to the sales company, goes back to the parent company, so City Merchants or the Defendants only get their charges, or what your Lordship referred to as the interest on the advances. From the account it does sound as if they are making 25 per cent out of the system.

MR JUSTICE McNAIR: What I have said is that City Merchants buy for 75 per cent and resell for 75 per cent plus.

MR SHAW: That is correct, my Lord, but there is the other 25 per cent which must go to somebody, apart from the charges. It is quite correct what your Lordship has said, that they sell for 75 per cent plus, but when the customer ultimately pays there is the remaining 25 per cent which goes back to the parent company under the master agreement. So City Merchants have made their charges or interest on their advance, but they do not get the other 25 per cent.

MR JUSTICE McNAIR: Are you dealing with stock or sales finance?

MR SHAW: Both, my Lord. City Merchants buy and sell for 75 or 77 per cent, whatever their charge may be, but the remaining 23 per cent must go to somebody, and it does not go to the Defendants.

MR JUSTICE McNAIR: If you can agree between you that my precise statement of the fact of sales finance is wrong, you may alter my Judgment, but I do not think it is.

MR LOWE: Might I mention two matters, my Lord? One is a possible slip, or else I misheard your Lordship. Your Lordship said, when quoting the terms of the second inquiry in November, that the inquiry was about creditworthiness to the extent of £1,000 per annum.

MR JUSTICE McNAIR: The second inquiry, ‘ trustworthy in the way of business to the extent of £100,000.'

MR LOWE: That is correct, and I misheard your Lordship. The other matter is this. Your Lordship will perhaps appreciate—I hope I may say this respectfully—that my clients wish to consider your Lordship's Judgment and take the matter further. In that event, and in a certain other event, it might be helpful if your Lordship would assess the damages which your Lordship has not done. I suppose it would be the difference between the amount pleaded—

MR JUSTICE McNAIR: I have stated the necessary facts, namely, that there remain liabilities amounting to £17,661 18s 4d in respect of commitments which the Plaintiffs were unable to cancel. I have also stated the fact that they received a dividend on the liquidation of £2,274 14s l0d. The damages recoverable would be the difference between those two sums, and if the matter had been in my hands I should also have awarded interest at the rate of 4 per cent per annum from the 18th August, 1958.

MR LOWE: If your Lordship pleases.

MR SHAW: The Plaintiffs have not paid since the date—

MR JUSTICE McNAIR: Not the 18th, the date of reference, the 21st August.

MR SHAW: The Plaintiffs had not paid the money at that time when they placed the orders. It is a minor point, my Lord. Orders were placed in August, but there is no evidence as to whether the Plaintiffs actually paid. The interest could only run from when the Plaintiffs had paid or when, under the terms of credit, they should have paid.

MR LOWE: My clients are content to accept the award of interest as from the end of December, 1958.

MR JUSTICE McNAIR: Very well, I think that is probably right. From 1st January, 1959.

MR LOWE: I suspect there is another slip in your Lordship's figures as regard the amount of the dividend, because the letter on page 122 recites a different figure from that mentioned by your Lordship. It is the letter from the liquidators to my clients of the 17th November, 1959, and at the foot the figure for the dividend is given as £2,207.

MR JUSTICE McNAIR: I took the figure given to me, and not from this letter, as I had not been referred to it. It must be corrected to £2,207 14s 10d.

MR LOWE: I am much obliged, my Lord.

MR SHAW: I ask for Judgment for the Defendants with costs.

MR JUSTICE McNAIR: So be it.

MR SHAW: My learned friend has raised the question of damages. Your Lordship has not taken into account the further dividend which is anticipated. It must be taken into account in some form.

MR JUSTICE McNAIR: I do not take that view. As regards the further dividend, I take the view that if it is paid—

MR SHAW: It will be another £2,000.

MR JUSTICE McNAIR: No. I take the view that as regards the further dividend, if it is paid the Defendants would be subrogated.

MR SHAW: Then one way or the other the Defendants get the benefit.

MR JUSTICE McNAIR: But at this date it would not go in reduction of damages.

MR SHAW: If your Lordship pleases. It comes to the same thing.

MR LOWE: May I say one word on the matter of costs, my Lord? Your Lordship was about to grant costs to my learned friend on the basis that he has succeeded. Your Lordship recalls what the House of Lords did in Robinsons case, where they obviously felt sympathy for the Plaintiff who failed, and they directed no costs to either side. I was wondering whether your Lordship might not take the same view here. Your Lordship has found negligence against the Defendants, but has been constrained by the law to find against the Plaintiffs in the end.

MR JUSTICE McNAIR: I feel tempted to do so, but I do not think it would be right. I do not think there has been any misconduct by the Defendants in the conduct of the proceedings which would justify me departing from the ordinary order as to costs.

MR LOWE: If your Lordship pleases.