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that it is impliedly represented not to exist." We cannot doubt but that previous acts of dishonesty by the servant in the same service known to the master would be such a fact, and if concealed from the surety would avoid the contract. Vide Story on Equity Jurisprudence, vol. i. p. 215. If, therefore, it is correct, as we think it is, on these authorities, to say that such a concealment as is here pleaded, if it had been practised at the time when the contract was first entered into, would have discharged the surety, we think, that in the case of a continuing guarantie a similar concealment made during the progress of the contract ought to have a similar effect as regards the future liability of the surety, unless his assent has been obtained (after knowledge of the dishonesty) that his guarantie should hold good during the subsequent

service.

One of the reasons usually given for holding that such a concealment as we are here considering would discharge the surety from his obligation, is, that it is only reasonable to suppose that such a fact, if known to him, must necessarily have influenced his judgment as to whe-, ther he would enter into the contract or not; and, in the same manner, it seems to us equally reasonable to suppose that it never could have entered into the contemplation of the parties that after the servant's dishonesty in the service had been discovered, the guarantie should continue to apply to his future conduct when the master chose for his own purposes to continue the servant in his employ without the knowledge or assent of the surety. If the obligation of the surety is continuing, we think the obligation of the creditor is equally so, and that the same representation and understanding on which the contract was originally founded continue to apply to it, during its continuance, and until its termination.

If the guarantie, at its inception, was founded, as suggested by Lord Eldon in Smith v. The Bank of Scotland (6), on the trustworthiness of the servant, so far as that was known to both parties, as soon as his dishonesty is discovered and becomes known to the master, the whole

foundation for the continuance of the contract, as regards the surety, fails, and it seems to us, in accordance with the plainest principles of equity and fair dealing, that the master should, on making such discovery, either dismiss the servant, or if he chooses to continue him in his employ without the knowledge or assent of the surety, that he must himself stand the risk of loss arising from any future dishonesty. "It is the clearest and most evident equity, says Lord Loughborough in Rees v. Berrington (3), not to carry on any transaction without the privity of him (the surety) who must necessarily have a concern in every transaction with the principal debtor. You cannot keep him bound and transact his affairs (for they are as much his as your own) without consulting him; you must let him judge whether he will give that indulgence contrary to the nature of his engagement.' Thus, in the present case, the conduct of the master in retaining the servant in his employ, when he might have discharged him for dishonesty, seems, in the words of Lord Loughborough, an indulgence granted to the servant without the assent of the surety, and contrary to the nature of his engagement. The time at which the surety will be discharged from further liability, in cases of this kind, will vary according to the circumstances of each case, but we intend our judgment to apply only to cases like the one now before the Court, where the master having the power of at once discharging the servant for dishonesty, deliberately continues him in his service after he becomes aware of the dishonesty, and without the assent or knowledge of the surety.

No case directly in point either in favour of this plea or against it has been cited before us. In Peel v. Tatlock (4) a question arose how far the concealment of the servant's embezzlement for three years after the termination of the service would affect the liability of the surety. No decision was, however, given on that point, and the case contains only a dictum of Eyre, C.J., that an industrious (by which we presume he meant an intentional or fraudulent) concealment might have an effect on the liability of the guarantor. In Smith v. The Bank of Scotland (6)

there is an observation of Lord Redesdale, made in the course of the argument at p. 287, which has a closer bearing on the present question. In that case Paterson, the bank agent, seems to have given security to the bank, apparently at the commencement of his service. Afterwards, and while the service continued, and after his accounts had been inspected and reported on by an officer of the bank, he was called on to give additional security, and Smith, the appellant, gave a bond as such additional security; Smith raised an action of reduction of this bond, and in that action insisted on his right to inspect the above report of the officer of the bank. On this Lord Redesdale observed-" Supposing the report shewed that Paterson was no longer trustworthy, and the bank had trusted him notwithstanding, upon decided cases the prior security would be discharged from all the consequences of subsequent transactions as contrary to the faith of the contract, and then it might be a question what bearing this circumstance might have on the new sureties."

The cases to which Lord Redesdale alludes are not mentioned, but it seems pretty clearly to have been his opinion that if the master discovers the dishonesty of his servant during the service, and afterwards continues to trust him notwithstanding, the surety for the servant would be discharged from all liability for subsequent losses. In the case of Shepherd v. Beecher (9), before Lord Chancellor King, a father, on binding his son apprentice, gave a bond for his fidelity. Some years afterwards the apprentice embezzled 2001. of the master's money, of which the master gave notice to the father, and demanded the money. The father paid the amount, but sent a letter requesting the master not to trust the apprentice with the cash in future, or at least to do so very sparingly. The apprentice continued afterwards with the master for several years, and committed further embezzlements, of which the father had no notice until two years after the expiration of the apprenticeship, when the bond was put in suit. The Lord Chancellor held that the father con

tinued bound, stating apparently as the ground of his judgment "that the father ought not to have satisfied himself with sending the letter and taking no further care of the matter, but should have endeavoured to make some end with the master, and to have got up the bond." This decision seems to us to rest on the fact that the father, instead of taking measures to have the bond delivered up, as he might have done, assented to continue bound after he had notice of the first embezzlement, and that the other embezzlements were not actually ascertained until after the expiration of the apprenticeship.

It is well established that a surety, after he has been discharged from his contract by the act of the creditor, may revive his liability by a subsequent promise or assent-Mayhew v. Crickett (21), Smith v. Winter (22). In the present plea it it alleged as a conclusion of law that by reason of the concealment the defendant was prevented from revoking the guarantie, and compelling Smith to pay the money for which the defendant was liable. The discharge of the surety in the present case seems to us to arise rather out of the nature and equity of the contract between the parties than upon any assumed right of revocation.

We think the surety is discharged unless he assents or agrees, after he has had knowledge of the dishonesty, that the guarantie shall hold good for the subsequent service; but, as a revocation of the guarantie as soon as the dishonesty has come to his knowledge, will be the best evidence of dissent, whether his discharge from the contract is founded on express revocation or want of assent after notice of the dishonesty, seems rather a question of words than of substance.

In Parsons on Contracts, vol. 2, p. 31, the rule as to the right to revoke a guarantie like the present is thus stated

"If the guarantie be to indemnify for misconduct of an officer or servant, this promise is revocable, provided the circumstances are such, that when it is re

(21) 2 Swanst. 93.

(22) 4 Mee. & W. 454; s. c. 8 Law J. Rep. (N.S.) Exch. 34.

voked, the promisee may dismiss the servant without injury to himself, on his failure to provide new and adequate sureties." No judicial authority is cited in support of this proposition, and, therefore, it can only be cited as the opinion of the writer. It will be seen that he confines the right of the surety to revoke his guarantie to those cases where the master may, on the revocation being made, dismiss the servant without injury to himself. The present case is distinctly within this limitation, and there can be no doubt but that the right of the master at once to discharge the servant on discovering his dishonesty, and so place himself in statu quo, is a most material ingredient in the consideration of the question.

Since the argument of this case, the judgment of the Vice-Chancellor Malins, in Burgess v. Eve (23), has been published. The chief question in that case was, whether the contract before the Court was or was not a continuing guarantie, but in the course of his judgment the Vice-Chancellor expresses an opinion which directly applies to the present case. "My opinion is (he says), and I have no hesitation in expressing it, that a person who gives a guarantie would have a right to say to the person taking it 'You will continue at your own peril to employ the person on whose behalf I gave the guarantie, provided that the clerk or other person has been guilty of embezzlement or gross misconduct, or has turned out to be unworthy of the confidence reposed in him by the person giving that guarantie for him.' If the employer under such circumstances refuse to give the guarantie up, the person giving it would have a right to file a bill in this Court, and in my opinion would succeed in the contest, because the Court would direct the bond to be delivered up to be cancelled;" and the same opinion is repeated in other parts of his judgment.

It may be said that this opinion was not necessary for the decision of the case before the Vice-Chancellor, and is not, therefore, a binding authority. That

(23) 41 Law J. Rep. (N.s.) Chanc. 515; s. c. Law Rep. 13 Eq. Cas. 450.

may be so, but the opinion seems to us to be founded on equity and good sense, and as such we adopt it, as directly applicable to the case now before us. For these reasons, we think that the third plea is good, and that the defendant is entitled to our judgment.

The learned judge then read the following judgment of

BLACKBURN, J.-This was a demurrer to a plea which was argued before my Lord and my brothers Lush, Quain and myself in last term, the decision of which involves a question of some difficulty. I have, with some hesitation, come to the same conclusion as the rest of the Court, but as I do not quite agree in all the reasons given by my brothers, I prefer stating my own reasons.

The declaration is on a contract of guarantie to the plaintiff to an amount not exceeding 501., as surety for one Smith, during the course and continuance of his employment by the plaintiff. I must first observe that I think on this declaration the defendant must be taken to have agreed to be surety during the employment, and cannot withdraw from his guarantie unless something new occurs to give him that right.

The defendant pays money into Court to cover Smith's defalcations up to a particular date, viz., the 20th of November, 1869; and as to the defalcations subsequent to that date, pleads, on equitable grounds, that on that date the plaintiff became aware that Smith had embezzled moneys, for which the defendant was responsible; that she, without informing the defendant of this, allowed Smith to continue in her service, and to pay off the amount of his defalcation, and that the defendant was wholly ignorant of Smith's guilt.

The plea then states, as conclusions of law, that owing to the non-disclosure of this fact by the plaintiff, the defendant was prevented from immediately revoking his guarantie, and, in consequence, is in equity discharged.

I think that the first question to be considered is, what would be the right of the surety on being informed that the servant had committed a fraud, for if his know

ledge of that fact would have given him no rights, the concealment could not prejudice him. I still adhere to the opinion that I expressed in Lee v. Jones (7), that if such a transaction as is alleged in the plea had taken place before the defendant entered into the contract of suretyship, and had been concealed from him, it would have furnished evidence of a false representation to the surety that no such thing existed, made by the plaintiff to the surety for the purpose of inducing him to enter into the contract of suretyship, and would, therefore, afford evidence in support of a plea of fraud. Further than this I am not prepared at present to go, and it is to be remembered that a respectable minority in the Exchequer Chamber refused to go so far; still, I act on that as being established law, but I cannot concur in the conclusion from these premises that therefore there is a condition implied by law in every contract of suretyship for a servant, that it shall become void if the servant afterwards commits a fraud, and the principal on hearing of it does not inform the surety of it. It is quite clear that misconduct of the servant does not, alone, put an end to the contract; for the very object of the suretyship is to afford protection against the misconduct of the person whose good conduct is guaranteed. And I find no authority for saying that there is such an implied condition. Shepherd v. Beecher (9) is a distinct authority that even in equity the effect is at most to render the contract voidable at the option of the surety, for it was there decided that the father, who, on becoming aware of the misconduct of his son, for whom he was surety, took no steps to get rid of the suretyship, remained liable. But there is a ground on which I think he may have a claim to be discharged in equity, which I will now state. surety, as soon as his principal makes default, has a right in equity to require the creditor to use for his benefit all his remedies against the debtor, and, as a consequence, if the creditor has by any act of his deprived the surety of the benefit of any of those remedies, the surety is discharged. The authorities for this, as far as known to me, are collected in the

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judgment in Bailey v. Edwards (24), and this equitable principle has at least, in the case where time has been given to the principal, without the consent of the surety, been adopted to some extent at least, although whether to its full extent has been doubted-Pooley v. Harradine (25), but it is not here material to decide that. Now the law gives the master the right to terminate the employment of a servant on his discovering that the servant is guilty of fraud. He is not bound to dismiss him, and if he elects, after knowledge of the fraud, to continue him in his service, he cannot, at any subsequent time, dismiss him on account of that which he has waived or condoned. This right the master may use for his own protection. If this right to terminate the employment is one of those remedies which the surety has a right to require to have exercised for the master's protection, it seems to follow that by waiving the forfeiture, and continuing the employment without consulting the surety, the principal has discharged him. It never has been determined, as far as I can find, in any case in equity that the surety has this right. There are dicta tending that way.

In Shepherd v. Beecher (9) Lord Chancellor King says, The surety "ought not to have satisfied himself with sending the letter, but should have endeavoured to have made some end with the master, and to have got up the bond; expressions which seem to shew that the Lord Chancellor thought he might have got up the bond.

In Smith v. The Bank of Scotland (6) Lord Redesdale is reported to have said, during the argument, when considering whether the appellant had, according to the law of Scotland, a right to inspect a report from the agent of the bank to the directors, "Supposing the report shewed that Paterson" (the person for whom the appellants became sureties) was no longer trustworthy, and the bank had trusted him notwithstanding, upon decided cases

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(24) 4 B. & S. 761; s. c. 34 Law J. Rep. (N.s.) Q.B. 41.

(25) 7 E. & B. 431; s. c. 26 Law J. Rep. (N.s.) Q.B. 156.

the prior security would be discharged from all the consequences of subsequent transactions, as contrary to the faith of the contract." But no such decided cases are now to be found, and the dictum is not again noticed in the judgments either of Lord Eldon or Lord Redesdale.

No other authority was cited during the argument, nor, as far as we are aware, was there any then in point, and at the close of the argument I was much inclined to say that no such equity was established. But, singularly enough, the case of Burgess v. Eve (23) has been published since the argument, and there Vice-Chancellor Malins says, "But if there is misconduct on the part of the person whose fidelity is guaranteed, for instance, if a man guarantees that a collecting clerk shall duly account for all moneys received by him, and that collecting clerk is found to have embezzled his employer's money, reason requires that the man who entered into the guarantie, because he believed the person to be of good character, when he finds he is not so, and not to be trusted, should have the power of saying, 'I now withdraw the guarantie I gave you; I give you full notice not to trust him any more.' Notwithstanding all that has been said, I am clearly of opinion that a person who has entered into such a guarantie, and who is therefore responsible for the person whose fidelity is guaranteed, has a right to withdraw from that guarantie, when that person has been proved guilty of dishonesty My opinion is, and I have no hesitation in expressing it, that a person, who gives a guarantie, would have a right to say to the person taking it, 'You will continue at your own peril to employ the person on whose behalf I gave the guarantie,' provided that the clerk or other person has been guilty of embezzlement or gross misconduct, or has turned out to be unworthy of the confidence reposed in him by the person giving the guarantie for him. If the employer, under such circumstances, refused to give the guarantie up, the person giving it would have a right to file a bill in this Court, and in my opinion would succeed in the contest, because the Court would direct the bond to be de

livered up to be cancelled. And I think that is only what good sense, propriety and fair dealing between man and man would dictate." These expressions are singularly closely in point. They, although by no means irrelevant to the point then before the Vice-Chancellor, were not part of his decision. What he says is not therefore perhaps strictly binding upon

us as a decision would be. But it seems to me consistent with justice, and without determining whether we should have ventured to lay down such an equity ourselves, I think we should follow the opinion of the Vice-Chancellor on a subject with which he is so much more conversant than we are. I, therefore, agree on this ground, and on this ground only, that judgment should be given for the defendant.

Judgment for defendant.

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Public Entertainment - Dancing - License for Music only-Penalty-25 Geo. 2. c. 36. s. 2.

Under 25 Geo. 2. c. 36. s. 2, which imposes a penalty upon every person keeping any house for public dancing, or other public entertainment of a like kind, in the cities of London and Westminster, without a license for that purpose, and empowers justices to grant such licenses as they in their discretion shall think proper, the justices are at liberty to grant a separate license for music without dancing, and the person who, having a license for music only, keeps open a house for public dancing, is liable to an action for the penalty.

[For the report of the above case, see 41 Law J. Rep. (N.S.) M.C. 166.]

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