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

COURT OF COMMON PLEAS.-MONDAY.

(Nisi Prius Sittingi at Guildhall, before Lord Chief
Justice JERVIS and a Special Jury.)
CLELAND AND ANOTHER V. THE UNITED GUARANTEE AND
LIFE ASSURANCE COMPANY.
This was an action on a policy of insurance, dated 17th
January, 1850, whereby the defendants guaranteed to the
extent of £2OOO, to make good within three months, after
reasonable proof thereof to the defendants; any loss what-
soever which the plaintiffs should sustain during the liability
of the defendants on that policy by reason of the want of
integrity, honesty, or fidelity of Frederick Savil Lee, arising
out of his employment by the plaintiffs as the London
manager of their business. The defendants pleaded that
the plaintiffs did not sustain loss by want of the integrity,
honesty, or fidelity of Lee as London manager of the plain-
tiffs ; that proof was not given to the reasonable satisfaction
of the directors of the loss ; that three calendar months
after such proof of loss had not elapsed before the com-
mencement of the action ; that the loss was. occasioned by
the plaintiffs having entrusted Lee with certain bills of
exchange drawn by the plaintiffs in blank, contrary to, mer-
cantile usage and a safe and respectable mode of earring on
business; to which, some time afterwards, was added a plea
that the defendants were induced to make the policy by the
fraud of the plaintiffs.
Mr. Serjeant Byles, Mr. Coiling, and Mr. W. Rose were
counsel for the plaintiffs; and Sir F. Thesiger, Q.C., Mr.
M. Chambers, Q.C., and Mr. Bovill for the defendants.
Mr: Serjeant Byles, in stating the plaintiffs' case, said
that the plaintiffs were citizens of , the United States of
America, who, some time ago, 'carried on business as mer-
chants at Boston. The defendants were a, joint-stock
company in London,' whose business it was to insure the
integrity and fidelity of persons employed towards their em-
ployers. The plaintiff, Mr. Cleland, was in England in the
spring of 1849, and whilst in London he resided in a house
in Surrey-street, Strand, where he became acqoainted with
an American gentleman, named Lee, who introduced him to
another gentleman of the same name, but not connected
with him—a Mr. Savil Lee. After the introduction Mr.
Savil Lee and Mr. Cleland went about London together,
and at length Mr. Cleland was led to believe that Mr. Lee
would be extremely serviceable to him in carrying out a pro-
ject he entertained of establishing a branch business in
London. Mr. Cleland was, howoyer, unwilling to do this
unless Mr. S. Lee would give him ample security for his in-
tegrity, and after Mr. Cleland returned to America a corres-
pondence ensued on this subject, the result of which was
that as the plaintiffs would have to send Mr. Lee letters of
credit on a house at Liverpool for £2,000, and also to allow
him to draw upon their credit, they required from
him a guarantee ,to the extent of £2,000. Mr. S.
Lee, therefore, applied to the defendants to know if they
would `guarantee his integrity as manager of the London
branch of the plaintiffs' business, and the defendants'
secretary then gave him a document containing a number
of questions, which he undertook to transmit to the plain-
tiffs at Boston, to be answered in a manner that should
meet the defendants' approbation. Amongst those ques-
tions were the following, which he would read, with the
plaintiffs' answers to them : " In what capacity do you
intend to employ the applicant ? and with reference to this
question will you state,, as far as circumstances will permit,
the nature of his intented duties and his responsibilities; the
amount which it is likely will at any time be entrusted to his
custody, and the probable period of its retention by him;
the checks which will be used to secure accuracy in his accounts ;
and the salary or emolument which will be paid to him, and
how and when it' will be paid ? " To this the answer was, ,
" He is to be manager of a branch of our house in London.
His duties will be, generally, to make advances on and
influence consignments of merchandise to our address in
America, and to dispose of goods consigned to him in Lon-
don. The amount entrusted to his custody will vary from'
£5OOO to £lO,OOO. There is no definitive period specified
for his remaining in our employment. Ile will regulary
advise us of his doings, and our accounts will be balanced
as often as once, and perhaps twice a year. Ile will get cer-
tain commissions on all the business transacted by our house
in London." Another question was, " Are you aware of any
reason why a guarantee of the applicant's intregity should
be considered more than usually hazardous ? " The answer
was "No reason whatever. On the contrary, we have full
confidence in his integrity, or we would not employ hint,'
On the basis of these questions and answers, the policy in
question was entered into on the 17th of, January, 1850,
but prevfausly, on the 18th, December, 1849, the plaintiffs
bad appointed Lee their agent to manage the .branch of
their business in London, on the terms that he was to have,
by way of salary, 50 per cent. on the profits, but • not to be
a partner. They also sent him the power of attorney, and
a letter of credit on Hamden and Co., of Liverpool, for
£2OOO, and blank forms of bills to be filled up by him and
used as might be required by the exigencies of business.
The annual premium to be, paid on the policy was £25 ; but
it was stipulated that any fraudulent misrepresentation should
render the policy void, and that the holder of the policy
should give notice of any acts resulting in the accrual of the
right to make a claim on the policy, and all particulars there-
of, within ten days, otherwise the policy and all existing
claims under it should be void. Moreover, although the
plaintiffs were not aware of it at the time, there was an-
other contEtitm attached, nudely, that the person whose
fidelity was guaranteed should insure his life, and that if
any claim was made upon the guarantee the life policy
should be forfeited. And this led him to make observa-
tions on the conduct of the defendants, which he regretted
to be obliged to make. The number of references ordi-
narily required by the society was three. Mr. Lee supplied
them with five. The defendants had -thrown the case into
Chancery, and thus delayed the trial of the cause for two
years ; and now, within the last few months, they had put
upon the record a plea of fraud, of which he would venture
to say that they would not be able to offer any evidence.
But the policy being effected, and the letter of credit and
the bills received, the first thing Lee did was to draw the
whole £2OOO from Harnden and Co., and place it in the
Royal British Bank to the credit of the plaintiffs. This was
not complained of; but what was complained of was, that,
having withdrawn this £2OOO, and a second sum of £2OOO,
for which another letter of credit was sent to him, he filled
up the blank bills which had been entrusted to him, drew
out the money, and misappropriated not only that, but also
a much larger sum to his own purpoSes. Having done this,
in consequence of speculations he had, engaged in which
turned out unsuccessful, he wrote the following letter to the
plaintiffs : •

" London, June 14, 1850.
" Messrs. Cleland and Day, Boston, U. S.
" Dear Sirs,—ln making to you the following communica-
tions, which are more painful to me thin to you, for two rea-
sons- namely, that 1 am in both respects the loser,.l have the
Consolation of having it in my power to make every atonement.
The simple case is, that I have met with heavy and unexpected
fosses, and was called upon to make payments when I did not
expect such would be the case, so that 1 was not prepared to do
so. To avoid the consequences, I availed myself of the means
ht hand, and those means were yours. Mind Ido not wish or
attempt to exculpate myself. I acted decidedly wrong, but a
man is not always master over:his actions. I, however, as 1
said above, can offer you sufficient atonement without being
Obliged to have recourse to the security I gave you. I have a
manufactory in this City (unknown to the trade, Its it was in-
ended as the bread for my wife and children, in case I were,
Unfortunate in business) worth more than I have lost. I cal-
culate the value at least at £2500, and dare say could obtain
more for it, as it is a monopoly in Great Britain, and greatly
improved of late. This' r offer to place in your hands. My
advice would be for you to keep the business, as it is (and will
be) a splendid paying concern ; and it could be easily managed
and worked to advantage in many ways.
" You must, however, know that payments of the drafts
will be made without your name or that of the house here
being compromised for a few weeks longer, but that then it would
became difficult to do so any length of time. I lost, and with
my money my head, my presence of mind, and raised money.
These bills became due in the middle of July. As I said before
T;c;,,,, try cyoncrty into your hands, but wish you to remit me
another letter of credit, to enable Me to-taxe up at Litt..)
£l5OO or £l6OO would be sufficient.

" I am glad Mr. Cleland is coming over, as he can decide
upon selling, or c9ntinuing the manufactory on your own
account.

" For your own sake remit me the above credit per return of
Post, _

"I have .been ill, and this is the first day I have attended a.
nu office since the Bth, and should not have come had it nol
been American post or mail.

" That I regret extremely having lost my money you can
easily conceive. but I regret much more the consequences.
Thank God ! you will not lose.

"Itisof na use making excuses. I acted wrong, and wish
to amend the wrong I have done by every means in my power.
I remain, dear Sir, yours respectfully,
" FREDER IC S. LEE."
To this letter the plaintiffs returned the folloWing answer:
" Frederick S. Lee; Esq., London.
" Boston, July 2, 1850.
‘, Dear Sir,—Yours of the 14th ult, is to band, and we are
perfectly astounded at the development which you .have therein
made, of having appropriated .£l5OO or £l6OO of our money
to your private uses. ,We cannot conceive why a person of
your standing and integrity should have allowed yourself to be
tempted in such a manner, and that too, to misappropriate the
money belonging to young men who had reposed such unlimited
confidence in your honesty. You speak of having some private
property to secure us, but you neither tell us what or where it
is, and we are perfectly in the dark as to the nature of the busi-
ness that is carried on in it. If it is so valuable as you say it is,
why do you not dispose of it at one° and make up the deficf-
ency of the account, and not allow of an exposure of this
,unplea
sant'affair? You are aware, that no matter how favourably we
may feel disposed toward you, yet the conditions of the,United
Guarantee and Life Assurance Company are such, that in case
we neglect to give them due notice of any delinquency which may
occur in the honesty of the person so insured, within ten days
after the development of this fact, the policy shall be void.
This being the case, we have notified them of the, deficiency,
with all the other information in our power in regard, to, that
unfortunate affair: We have also mentioned the matter in
n•co fidence to Jamei Scott, Esq., of your city, whom, together.
rwith the officer, we beg you will lose no time in calling upon,
and make such amends as are in your power to save all parties
concerned from any loss which may accrue from your unwar-
rantable conduct. , We, beg, at any fate, you Rill make such. .
„a ,
11=h-ora-tuts" Wn'your friends as to protect our'dratts until