The Northern Daily Times.
Liverpool, Merseyside, England, 1853-12-22 00:00:00

our Mr. Cleland arrives in London per next steamer. W 6
could not for a moment think of forwarding you a letter of
credit under existing circumstances ; and we do not wish you
to use any. more (if you have not done so already) of the cre,
dit ou Harnden and Co. We trust you will, at least, show
in this matter a disposition to do all in your power to make
restitution for the evil which you have already ,
com-
mitted, and protect our interests and that of the insurance
company to the utmost of your ability.--" We remain, dear sir,
yours truly,

" CLELAND and DAY.
" P.S. We wish you to hand over to Mr. Scott the power of
attorney and the instrument of our agreement."
By the same mail the plaintiffs wrote to the defendants on
the subject of Lee's letter, and by the next mail they sent
the defendants a copy of the letter, and they also sent over
a gentleman named Brigham with a power of attorney to
act for them, but two late, for Mr. Brigham found that Lee
had not only drawn out and misappropriated the two sums
of 20001., but that he had in several instances placed the
plaintiffs' names to bills without their authority, and that
altogether they were losers by him to the amount of between
50001. and 60001. Under these circumstances they called
upon the defendants to make good the loss to the extent of
their guarantee, and upon the defendants refusing to do so
they commenced the present action; but the defendants
applied to the Court of Chancery for an injunction, which.'
however was dissolved by the Vice Chancellor without cal-
ling , upon the plaintiffs' counsel to reply. The defendants
then applied for a second injunction to stay execution in case
the verdict , should go against them, and at last they added
the plea of fraud, as to which he frankly confessed he did
not know what it meant, for he believed, if they ventured
to put their secretary into the box, he should be able to
show that Lee's agreement with the plaintiffs, their letter of,
credit, and power of attorney, were all made known to him!
before the policy was effected. This being the plaintiffs'
case, he thought the only question would-be the amount of
their loss, and if there was any difficulty in that question,
which he did not anticipate, he was quite ready to refer it
to arbitration.
Mr. W. Swain, formerly in the employ of Harnden and
Co., of Liverpool, Boston, and New York, deposed that Lee
called on Hamden and Co., January 17, 1850. He brought
a bill drawn in blank by plaintiffs, which was filled up in
our office for £1,750, and Harnden and Coe accepted it. It
is endorsed by F. S. Lee and Co., and Barned and Co. A
second bill was brought for £950 by Lee, and dealt with in
the same manner. The first was made payable to F. S. Lee
and Co. ; the second to Cleland and Co., and endorsed by
-Lee by procuration. Afterwards, June 27, a second bill of
credit came, and Lee came with a bill for £1,076, drawn in
favour of F. S. Lee, Esq., at sight ; it is endorsed F. S.
Lee, and Barned and Co. He also brought a second bill
for £429, drawn and accepted in the same manner. After-
wards, July 8, he brought a bill for £495, drawn in favour
of Mr. F. S. Lee, which we accepted, payable November
11, 1850.
Cross-examined : I left Harnden and Co. in May, 1851.
It was a branch of the houses in Boston and New York.
It had been for years conducted by one of the firm, At the
time the first bill of credit came, Mr. Osgood, a partner; was
managing the Liverpool betas ess ; when the second came, a
gentleman nailed Barnes. They were merchants, ship-
brokers, passage-brokers, and bankers. They were in the
habit of giving bills to a small extent to emigrants. Taking
the average of sight bills at £5 each, it did not exceed £lO
a month. The business done in remitting money from
emigrants to this country was gigantic, amounting to
£176,000 a year. They failed, and I have not heard they
have paid ls. in the pound. I did not know Mr. Lee except
in this business.
Mr. Baines : I was manager of Harnden and Co.'s busi-
ness from February, 1850, to September, 1851. I believe
all the bills were paid by .Harnden and Co.
Cross-examined : I believe Hamden and Co, suspended
payment in the month of October. The amount of the lia-
bilities of the Liverpool branch was 30,0001. or 40,000/.
Perhaps about 10,000/. was drawn in favor of emigrants, but
a large portion was paid in full. There was not ls. in the
pound paid by the Liverpool branch, but I know that all
the emigrant notes issued in New York were paid in full.
'The claims of the London creditors were remitted to the
States, and I do not know what became of them.
Sir F. Thesiger : Probably they were repudiated.
_ Mr. Serjeant Byles : That is not a fortunate phrase from
you, for we are here in consequence of youi clients' repudia
tion

Witness : We received the money to answer these bills
from Boston, and we did so.
Evidence Was then given of the .discounting of the bills
by Earned and Co. and the Royal British bank; of loss sus-
tained by the plaintiffs; and of demand upon, and refusal
by, the defendants to compensate the plaintiffs.
Mr. Samuel Cleland, one of the plaintiffs : I carried on
business with Mr. Day in Boston. I was in England in
1849, and lived with a Mrs. Morgan, in Surrey-street,
Strand. Frederick Saville Lee and his wife and family were
also residing there. We became introduced. He took me
to several houses. There was a negotiation as to his becom-
ing manager of a conttriplated Loudon business. He re-
presented himself to be agent for several foreign houses. I
afterwards went on the continent, and made inquiry at those
houses about him. Afterwards he became the manager of
our London business.
A discussion ensued as to the amount the plaintiffs had
lost by Lee, and a suggestion was made that it should be
referred to arbitration, in consequence of which the exami-
nation in chief was closed.
Cross-examined : When I employed Lee he was- only
acting as agent for;houses on the continent. He was carrying
on that agency business under the name of F. S. Lee and
Co., in Little Tower-street. I knew that Lee and Co., in
fact, was Mr. Lee. I did not know before the proposal was
sent to the defendant, that Overend, Gurney, and Co. had
refused, to discount .the bills of Harnden and Co. I did not
know their credit was bad before the date of the policy.
I received the letter produced from Lee. Harnden and Co.
failed in Boston. We also failed in August, 1850. We
commenced business in 1847. lam now carrying on busi-
ness slightly. Mr. Day is clerk in a house in New York.
Some of our creditors were paid 10s. in the pound, others
not so much. Our American liabilities were 60,000 or
79,000 dollars, or about 12,0001. Ido not know the amount
of our liabilities in this. country. Lee first proposed our
sending blank bills. That was not proposed to us before
the 4th December. It was not intended to be entirely a
colisgnment business, but Lee was to make advances on
consignments. The amount of consignments which Lee
influenced in six months was a little over 2251. The amount
consigned from America was eleven or twelve hundred'
dollars for lard sent before the policy, but received afterwards.
Re. examined : We from time to time urged him to con-
sign to us. We gave him orders to send us goods, which he
did not do. He purchased goods for us to the extent of
12231. ss. Amongst that was 100 tons of Welsh bar iron,
5271. 195., which he sold again. We never received the
money for that iron. Our failure was in consequence of
Lee's
.delinquencies. We lost about 50001. altogether by
him.

Cross-examined again by Sir F. Thesiger.—We drew
several bills upon Lee and Co., which have been paid, to the
amount of £1497 4s. 7d. Those bills were drawn for money
he had in our hands. I mean on the let ter of credit. There
were 11 bills altogether drawn on Lee and Co., exclusive of
the lard, eight of which were drawn by us, and three by
other persons.
Cross-examined upon this additional evidence.—We drew
these bills because we could not get consignments, and the
money was lying idle. We sold the bills in the Boston
money market. We provided the money for the first
£2OOO letter of credit ; when the second letter of credit
became due we had stopped payment.
Sir F. Thesiger here addressed the jury for the defen-
dents, and contended that notwithstanding the odium and
loss they might incdr by doing so, it was the duty of the
defendants to resist this action—at least until the circum-
stances under which the policy had been effected had been
fully investigated by a jury. Great complaint had been
made that the defendants had put a plea of fraud upon the
record; but he would explain to the jury why that was
'iuu., and glgo why it was not done sooner. When the
plaintiffs' demand was first mane up tho dofouclante they
were very desirous of seeing the correspondence
between the plaintiffs and their agent Lee, but they were
only allowed to see extracts, and when they proposed to
compare those extracts with the originals, the application to
do so was refused. Under these circumstances they were
driven to file a bill in Chancery, and it was not until
March last,-when all the correspondence was brought into
the Record and Writ Office, that the defendants had an
opportunity of perusing it. Up to that time they did not
know but that the business had been carried on in the usual
mercantile manner, but upon perusing the correspondence
they found that such was not the case. The jury would re-
member the questions put to the plaintiff's before the policy
was effected, and the plaintiffs' answers to them. Would
they have conjectured from those questions and answers that
instead of being a business for thepurpose of effecting consign-
ments, that it was to be a business carried on by a system of
accommodation bills, byletters of credit upon an insolvent
firm, and by bills sent to Lee in blank, without even a stamp
to limit the amount of them ? He would read to the jury
some extracts from the correspondence between the plaintiffs'
and Mr. Lee, their agent. On the 9th of October, 1849,
the plaintiffs wrote :—" In looking over the papers we per-
ceive you limit the branch in London to influencing con-
signments from America, and that it should do no
business on its own account. This would be objec-
tionable, for why should it not do all the
profitable business it could from the Continent find other
places as well as from America'?" On the 26th of October
Lee wrote to plaintiffs :—" The second grand object in
jour having a branch hors would be an open or blank
credit to any amount." On the 6th of November plaintiffs
wrote to Lee :—" We should have preferred that you would
Dave acted as our agent in obtaining consignments of goods
to begin with, and after a while we might have made other
satisfactory arrangements. We could then have increased
the facilities, and have given you not only the credit for
42000, but could also have made it nearly double in other
ways which is now unnecessary to mention. It is rather
difficult for us to draw all the time on our own house in
London—such bills are always looked upon with suspicion,
as a kind of kiting business, but if you were always acting
for us under your own name we could draw on you at all
times on 90 days, and send you bills on 60 days, which, you
,could get discounted, and thus be flush iu fends for advnnees
all the time. In our present arrangements with Hamden