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that it is impliedly represented not to foundation for the continuance of the exist." We cannot doubt but that pre- contract, as regards the surety, fails, and vious acts of dishonesty by the servant in it seems to us, in accordance with the the same service known to the master plainest principles of equity and fair dealwould be such a fact, and if concealed ing, that the mastershould, on making such from the surety would avoid the contract. discovery, either dismiss the servant, or Vide Story on Equity Jurisprudence, if he chooses to continue him in his employ vol. i. p. 215. If, therefore, it is correct, without the knowledge or assent of the as we think it is, on these authorities, to surety, that he must himself stand the say that such a concealment as is here risk of loss arising from any future displeaded, if it had been practised at the honesty. “It is the clearest and most time when the contract was first entered evident equity, says Lord Loughborough into, would have discharged the surety, in Rees v. Berrington (3), not to carry on we think, that in the case of a continuing any transaction without the privity of guarantie a similar concealment made him (the surety) who must necessarily during the progress of the contract ought have a concern in every transaction with to have a similar effect as regards the the principal debtor. You cannot keep future liability of the surety, unless his him bound and transact his affairs (for assent has been obtained (after knowledge they are as much his as your own) withof the dishonesty) that his guarantie out consulting him ; you must let him should hold good during the subsequent judge whether he will give that indulgence service.

contrary to the nature of his engagement." One of the reasons usually given for Thus, in the present case, the conduct of holding that such a concealment as we the master in retaining the servant in his are here considering would discharge the employ, when he might have discharged surety from his obligation, is, that it is him for dishonesty, seems, in the words only reasonable to suppose that such a of Lord Loughborough, an indulgence fact, if known to him, must necessarily granted to the servant without the assent have influenced his judgment as to whe-, of the surety, and contrary to the nature ther he would enter into the contract or of his engagement. The time at which not; and, in the same manner, it seems the surety will be discharged from further to us equally reasonable to suppose that liability, in cases of this kind, will vary it never could have entered into the con- according to the circumstances of each templation of the parties that after the case, but we intend our judgment to apply servant's dishonesty in the service had only to cases like the one now before the been discovered, the guarantie should Court, where the master having the continue to apply to his future conduct power of at once discharging the servant when the master chose for his own pur- for dishonesty, deliberately continues him poses to continue the servant in his in his service after he becomes aware of employ without the knowledge or assent the dishonesty, and without the assent or of the surety. If the obligation of the knowledge of the surety. surety is continuing, we think the obli

No case directly in point either in gation of the creditor is equally so, and favour of this plea or against it has been that the same representation and under- cited before us. In Peel v. Tatlock (4) a standing on which the contract was question arose how far the concealment originally founded continue to apply to it, of the servant's embezzlement for three during its continuance, and until its

years after the termination of the service termination.

would affect the liability of the surety. If the guarantie, at its inception, was No decision was, however, given on that founded, as suggested by Lord Eldon in point, and the case contains only a dictum Smith v. The Bank of Scotland (6), on the of Eyre, C.J., that an industrious (by trustworthiness of the servant, so far as which we presume he meant an intentional that was known to both parties, as soon or fraudulent) concealment might bave as his dishonesty is discovered and an effect on the liability of the guarantor. becomes known to the master, the whole In Smith v. The Bank of Scotland (6)

there is an observation of Lord Redesdale, tinued bound, stating apparently as the made in the course of the argument at ground of his judgment "that the father p. 287, which has a closer bearing on the ought not to have satisfied himself with present question. In that case Paterson, sending the letter and taking no further the bank agent, seems to have given care of the matter, but should have ensecurity to the bank, apparently at the deavoured to make some end with the commencement of his service. After

master, and to have got up the bond.” wards, and while the service continued, This decision seems to us to rest on the and after his accounts had been in fact that the father, instead of taking spected and reported on by an officer of

measures to have the bond delivered up, the. bank, he was called on to give as he might have done, assented to conadditional security, and Smith, the appel tinne bound after he had notice of the lant, gave a bond as such additional se first embezzlement, and that the other carity ; Smith raised an action of reduc embezzlements were not actually ascertion of this bond, and in that action tained until after the expiration of the insisted on his right to inspect the above apprenticeship. report of the officer of the bank. On It is well established that a surety, this Lord Redesdale observed—“Sup after he has been discharged from his posing the report shewed that Paterson contract by the act of the creditor, may was no longer trustworthy, and the bank revive his liability by a subsequent prohad trusted him notwithstanding, upon mise or assent-Mayhew v. Crickett (21), decided cases the prior security would be Smith v. Winter (22). In the present plea discharged from all the consequences of it it alleged as a conclusion of law that by subsequent transactions as contrary to reason of the concealment the defendant the faith of the contract, and then it was prevented from revoking the guaranmight be a question what bearing this tie, and compelling Smith to pay the circumstance might have on the new money for which the defendant was sureties.”

liable. The discharge of the surety in The cases to which Lord Redesdale the present case seems to us to arise allades are not mentioned, but it seems rather out of the nature and equity of pretty clearly to have been his opinion the contract between the parties tban that if the master discovers the dishonesty upon any assumed right of revocation. of his servant during the service, and We think the surety is discharged un. afterwards continues to trust him not less he assents or agrees, after he has had withstanding, the surety for the servant kuowledge of the dishonesty, that the would be discharged from all liability for guarantie shall hold good for the subsubsequent losses. In the case of Shepherd sequent service; but, as a revocation of v. Beecher (9), before Lord Chancellor the guarantie as soon as the dishonesty King, a father, on binding his son ap has come to his knowledge, will be the prentice, gave a bond for his fidelity. best evidence of dissent, whether his disSome years afterwards the apprentice charge from the contract is founded on embezzled 2001. of the master's money, express revocation or want of assent after of which the master gave notice to the notice of the dishonesty, seems rather a father, and demanded the money. The question of words than of substance. father paid the amount, but sent a letter In Parsons on Contracts, vol. 2, p. 31, requesting the master not to trust the the rule as to the right to revoke a apprentice with the cash in future, or at guarantie like the present is thus stated least to do so very sparingly. The ap —“If the guarantie be to indemnify for prentice continued afterwards with the misconduct of an officer or servant, this master for several years, and committed promise is revocable, provided the cirfurther embezzlements, of which the cumstances are such, that when it is refather had no notice until two years after the expiration of the apprenticeship,

(21) 2 Swanst. 93. when the bond was put in suit. The

(22) 4 Mee. & W. 454 ; s. c. 8 Law J. Rep. Lord Chancellor held that the father con. (n.s.) Exch. 34.

voked, the promisee may dismiss the may be so, but the opinion seems to us servant without injury to himself, on his to be founded on equity and good sense, failure to provide new and adequate and as such we adopt it, as directly apsureties. No judicial authority is cited plicable to the case now before us. For in support of this proposition, and, there. these reasons, we think that the third fore, it can only be cited as the opinion of plea is good, and that the defendant is the writer. It will be seen that he con- entitled to our judgment. fines the right of the surety to revoke The learned judge then read the followhis guarantie to those cases where the ing judgment of inaster may, on the revocation being made, dismiss the servant without injury to him

BLACKBURN, J.-This was a demurrer self. The present case is distinctly within to a plea which was argued before 'my this limitation, and there can be no doubt Lord and my brothers Lush, Quain and mybut that the right of the master at once self in last term, the decision of which to discharge the servant on discovering involves a question of some difficulty. I his dishonesty, and so place himself in have, with some hesitation, come to the statu quo, is a most material ingredient in same conclusion as the rest of the Court, the consideration of the question.

but as I do not quite agree in all the Since the argument of this case, the reasons given by my brothers, I prefer judgment of the Vice-Chancellor Malins, stating my own reasons. in Burgess v. Eve (23), has been pub- The declaration is on a contract of lished. The chief question in that case guarantie to the plaintiff to an amount was, whether the contract before the not exceeding 501., as surety for one Court was or was not a continuing guar- Smith, during the course and continuance antie, but in the course of his judgment of his employment by the plaintiff. I the Vice-Chancellor expresses an opinion

must first observe that I think on this which directly applies to the present case.

declaration the defendant must be taken My opinion is (he says), and I have to have agreed to be surety during the no hesitation in expressing it, that a employment, and cannot withdraw from person who gives a guarantie would his guarantie unless something new ochave a right to say to the person curs

to give him that right. taking it – You will continue at your The defendant pays money into Court own peril to employ the person on whose to cover Smith's defalcations up to a parbehalf I gave the guarantie, provided ticular date, viz., the 20th of November, that the clerk or other person has been 1869; and as to the defalcations subseguilty of embezzlement or gross mis- quent to that date, pleads, on equitable conduct, or has turned out to be un. grounds, that on that date the plaintiff worthy of the confidence reposed in him became aware that Smith had embezzled by the person giving that guarantie for moneys,

for which the defendant was rehim.' If the employer under such cir- sponsible; that she, without informing cumstances refuse to give the guarantie the defendant of this, allowed Smith to up, the

person giving it would have a continue in her service, and to pay off right to file a bill in this Court, and in the amount of his defalcation, and that my opinion would succeed in the contest, the defendant was wholly ignorant of because the Court would direct the bond Smith's guilt. to be delivered up to be cancelled ;” and The plea then states, as conclusions of the same opinion is repeated in other law, that owing to the non-disclosure of parts of his judgment.

this fact by the plaintiff, the defendant It may be said that this opinion was was prevented from immediately revoking not necessary for the decision of the case his guarantie, and, in consequence, is in before the Vice-Chancellor, and is not,

not, equity discharged. therefore, a binding authority. That I think that the first question to be con

sidered is, what would be the right of the (23) 41 Law J. Rep. (N.s.) Chanc. 515; s. c. surety on being informed that the servant Law Rep. 13 Eq. Cas. 450.

had committed a fraud, for if his know

ledge of that fact would have given him judgment in Bailey v. Edwards (24), and no rights, the concealment could not pre this equitable principle has at least, in the judice him. I still adhere to the opinion case where time has been given to the that I expressed in Lee v. Jones (7), that principal, without the consent of the if such a transaction as is alleged in the surety, been adopted to some extent at least, plea had taken place before the defendant although whether to its full extent has been entered into the contract of suretyship, doubted-Pooley v. Harradine (25), but and had been concealed from him, it it is not here material to decide that. would have furnished evidence of a false Now the law gives the master the right representation to the surety that no such to terminate the employment of a servant thing existed, made by the plaintiff to the on his discovering that the servant is surety for the purpose of inducing him guilty of fraud. He is not bound to disto enter into the contract of suretyship, miss him, and if he elects, after knowand would, therefore, afford evidence in ledge of the fraud, to continue him in his support of a plea of fraud. Further service, he cannot, at any subsequent than this I am not prepared at present to time, dismiss him on account of that go, and it is to be remembered that which he has waived or condoned. This a respectable minority in the Ex right the master may use for his own prochequer Chamber refused to go so far; tection. If this right to terminate the still, I act on that as being established employment is one of those remedies law, but I cannot concur in the con which the surety has a right to require clasion from these premises that there to have exercised for the master's protecfore there is a condition implied by tion, it seems to follow that by waiv. law in every contract of suretyship for a ing the forfeiture, and continuing the servant, that it shall become void if the employment without consulting the surety, servant afterwards commits a fraud, and the principal has discharged him. It the principal on hearing of it does not never has been determined, as far as I inform the surety of it. It is quite clear can find, in any case in equity that the that misconduct of the servant does not, surety has this right. There are dicta alone, put an end to the contract; for the tending that way. very object of the suretyship is to afford In Shepherd v. Beecher (9) Lord Chan. protection against the misconduct of the cellor King says, The surety “ought not person whose good conduct is guaranteed. to have satisfied himself with sending the And I find no authority for saying that letter, but should have endeavoured to there is such an implied condition. Shep have made some end with the master, and herd v. Beecher (9) is a distinct authority to have got up the bond ;” expressions that even in equity the effect is at most which seem to shew that the Lord Chanto render the contract voidable at the cellor thought he might have got up the option of the surety, for it was there de bond. cided that the father, who, on becoming In Smith v. The Bank of Scotland (6) Lord aware of the misconduct of his son, for Redesdale is reported to have said, during whom he was surety, took no steps to get the argument, when considering whether rid of the suretyship, remained liable. But the appellant had, according to the law there is a ground on which I think he of Scotland, a right to inspect a report may have a claim to be discharged from the agent of the bank to the direcin equity, which I will now state. A

tors, “ Supposing the report shewed that surety, as soon as his principal makes de Paterson ” (the person for whom the apfault, has a right in equity to require the pellants became sureties) “was no longer creditor to use for his benefit all his re trustworthy, and the bank had trusted medies against the debtor, and, as a con him notwithstanding, upon decided cases sequence, if the creditor has by any act of his deprived the surety of the benefit of any of those remedies, the surety is

(24) 4 B. & S. 761; 8. C. 34 Law J. Rep. (N.s.)

Q.B. 41. discharged. The authorities for this, as (25) 7 E. & B. 431 ; s. c. 26 Law J. Rep. (p.s.) far as known to me, are collected in the Q.B. 156.



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the prior security would be discharged livered up to be cancelled. And I think from all the consequences of subsequent that is only what good sense, propriety transactions, as contrary to the faith of and fair dealing

between man and man the contract.” But no such decided cases would dictate.” These expressions are sin. are now to be found, and the dictum is gularly closely in point. They, although not again noticed in the judgments either by no means irrelevant to the point then of Lord Eldon or Lord Redesdale.

before the Vice-Chancellor, were not part No other authority was cited during of his decision. What he says is not the argument, nor, as far as

therefore perhaps strictly binding upon aware, was there any then in point, and at us as a decision would be. But it seems the close of the argument I was much to me consistent with justice, and withinclined to say that no such equity was out determining whether we should have established. But, singularly enough, the ventured to lay down such an equity case of Burgess v. Eve (23) has been ourselves, I think we should follow the published since the argument, and there opinion of the Vice-Chancellor on Vice-Chancellor Malins says, “But if subject with which he is so much more there is misconduct on the part of the conversant than we I, therefore, person whose fidelity is guaranteed, for agree on this ground, and on this ground instance, if a man guarantees that a col only, that judgment should be given for lecting clerk shall duly account for all the defendant. moneys received by him, and that col

Judgment for defendant. lecting clerk is found to have embezzled his employer's money, reason requires

Attorneys— Travers, Smith & De Gex, for plaintiff; that the man who entered into the gua

Merriman & Powell, for defendant, rantie, 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 ; (IN THE EXCHEQUER CHAMBER.] give you full notice not to trust him any (Appeal from the Court of Queen's Bench.) more. Notwithstanding all that has been

1872. said, I am clearly of opinion that a person


June 13, 14. who has entered into such a guarantie, and who is therefore responsible for the Public Entertainment Dancing - Liperson whose fidelity is guaranteed, has cense for Music only-Penalty-25 Geo. 2. a right to withdraw from that guarantie, c. 36. s. 2. when that person has been proved guilty

Under 25 Geo. 2. c. 36. 8. 2, which imof dishonesty : My opinion is, and I have no hesitation in expressing

poses a penalty upon every person keeping it, that a person, who gives a guarantie,

any house for public dancing, or other public would have a right to say to the person

entertainment of a like kind, in the cities of

London and Westminster, without a license taking it, “You will continue at your own

for that purpose, and empowers justices to peril to employ the person on whose be

grant such licenses as they in their discrehalf I gave the guarantie,' provided that

tion shall think proper, the justices are at the clerk or other person has been guilty liberty to grant a separate license for music of embezzlement or gross misconduct, or without dancing, and the person who, having has turned out to be unworthy of the confidence reposed in him by the person for public dancing, is liable to an action

a license for music only, keeps open a house giving the guarantie for him. If the

for the penalty. employer, under such circumstances, refused to give the guarantie up, the per [For the report of the above case, see son giving it would have a right to file a 41 Law J. Rep. (N.s.) M.C. 166.] bill in this Court, and in my opinion would succeed in the contest, because the Court would direct the bond to be de


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