1900.

ests as to mine, for if it once becomes known to our opponents that I am financially unable to further carry on Judgment. the litigation, they will quickly press it on and so easily KILLAM, C.J. vanquish us, in which case not only would I be ruined, but after all my efforts and sacrifices in your behalf, you also would get nothing."

Admittedly it was untrue that Nugent had paid out $12,000 or any sum approaching that amount in connec tion with the Charlebois judgment. He explains this as including his estimated losses through having to pay interest on moneys borrowed, redeeming property sold for taxes or otherwise losing property or money for want of the moneys disbursed. This interpretation would not naturally be placed upon the language by one reading it even in connection with the complaints about the losses. It does not appear to me that Preston's evidence shows that he so understood the letter.

The accounts were not made up, even approximately, before or at the time of making the agreement. The solicitor himself had no accurate idea of the amount owing. But he understood, upon his own evidence, that the sum and proportion fixed upon for his remuneration were so fixed, not merely as a fair and proper return for his past and prospective services on behalf of his clients, but partially in recompense for expense and losses for which the clients were not legally bound to recompense him. It would certainly have been fair and reasonable that, after the connection had ceased, the clients should generously reward a solicitor who had undoubtedly sacrificed his own interests in the attempt to serve theirs. But any such reward should be their voluntary and independent act.

Both Macdonald and Preston were so interested in the Charlebois judgment that the statement of the amount disbursed in connection with it was very material. The correspondence to which I have referred was directly caltulated to make the clients feel that they must satisfy the

1900. solicitor in order to secure a continuance of his cordial Judgment. efforts on their behalf. He was not merely the solicitor KILLAM,C.J but also a trustee who held the judgment and in whose

power the clients must have felt themselves peculiarly. He had such a knowledge of the position as it would be difficult for another solicitor to acquire, at any rate without a delay which might be ruinous. Indeed, in this respect, it was hardly possible that he and his clients should be equally in a position to estimate the value of the judgment. I do not impute to Mr. Nugent an intentional misstatement of the amount of his disbursements for the purpose of procuring such an arrangement as that now in question. Probably the letter of December, 1896, was directed solely to the procuring of a cash payment, for which purpose it was worded strongly, without careful weighing of the exact import of the words. In the subsequent negotiations its terms may have been forgotten by the writer. But as the statements were material we are not obliged to inquire how far they operated to bring about the agreement of March, 1897.

It may well be, too, that the solicitor did not intend to hold out the prospect of the loss of the claim as a threat for the purpose of securing an undue advantage, but the whole position and his strong representation of it must have contributed, even more than the confidential relations of solicitor and client, trustee and cestui que trust, to render the clients incapable of acting independently.

It is impossible for a court of equity to uphold an agree ment of this kind made under such circumstances.

Neither the partial settlement in 1898 nor the delay in repudiating the contract appears to evidence an election. not to avoid it or, on any other ground, sufficient to preclude the plaintiff from now rescinding. The confidential relation continued until after the settlement, and there was no material delay after a new solicitor had been retained and fully instructed.

1900.

There will be judgment avoiding the contract of March, 1897, affirming that of May, 1893, and directing an ac- Judgment.

count.

The solicitor must pay the costs up to and including the hearing. Further directions and subsequent costs to be reserved.

KILLAM, C.J.

Judgment for plaintiff.

THE GLOBE SAVINGS AND LOAN COMPANY

V.

THE EMPLOYERS' LIABILITY ASSURANCE CORPORATION.

Before KILLAM, C.J.

Principal and surety - Guarantee insurance-Conditions of insurance-Stipulation that insured shall furnish proof to the satisfaction of insurer-Expenses of prosecuting employee at request of insurer-Notice of loss-Waiver of conditions.

One of the conditions of the guarantee policy sued on required the employer, immediately after the discovery of any fraud or dishonesty on the part of the employee, to give notice thereof in writing to the insurer stating the cause, nature and extent of the loss; no formal notice, fully complying with this condition, was ever given, but information of the loss was promptly communicated to the defendants and they took steps themselves to ascertain the facts fully.

Held, that defendants could waive strict performance of this condition and had in fact waived it.

The policy had been issued on the faith of the statements and answers to questions contained in the written application or proposal for the insurance signed on behalf of the plaintiffs and contained the condition that "if any suppression, mis-statement or material omission shall have been made by the employer in his proposal, or at any time whatever, of any fact affecting the risk of the corporation or in any claim made under this agreement, this agreement shall be null and void."

1901.

As to the proofs of claim for a loss, the stipulations were that the employer should furnish his claim, with such full particulars thereof as should prove to the satisfaction of the insurer the cause, nature and extent of the loss and the correctness of the claim. and that the particulars furnished should include all reasonable verification of the statements made in the proposal and of the compliance therewith, and should be verified by affidavits duly certified if required by the insurer.

Two of the answers in the proposal were found to have been incorrect and the evidence showed that the plaintiffs had failed to carry out the promises or undertakings implied in them, namely: (1) that the employee's receipts of money were to be entered in receipt pass-books furnished to borrowers and subscribers for shares, which pass-books would be checked monthly by the head office list, and (2) that the bank pass-book would be inspected and checked monthly by the head office.

After furnishing certain proofs of the loss the plaintiffs' manager, in response to demands made on behalf of the defendants, sent in several statutory declarations intended to verify the correctness of the answers set forth in the proposal and to prove compliance, but the trial Judge found as a fact that the proofs furnished were inaccurate and untrue in respect of the two statements last referred to.

Held, (1) The condition requiring the furnishing of proof to the satisfaction of defendants should not be so construed as to compel the employer to establish to the satisfaction of the guarantor the absolute liability of the latter and the absence of any defence. (2) The condition requiring "all reasonable verification of the statements in the proposal and of the compliance therewith " meant subsequent compliance with the indicated future course of conducting the business.

(3) That defendants were entitled to rely on the two statements in the answers as to the receipt pass-books and the monthly examinations of the bank pass-book as indicating and promising the existence of safeguards against loss by embezzlement which in fact never existed; that the plaintiffs had failed to furnish "reasonable verification" of the statements made in the proposal or of the compliance therewith" in respect to matters which were conditions of the liability of defendants under the policy; and · that, upon principles of equity, the surety should be considered as discharged from his liability by a departure from the course of business indicated by the answers, whether or not the incorporation of the application in the policy should be treated as creating a warranty that the employer would adhere to the indicated

course.

Lawrence v. Walmsley, (1862) 12 C. B. N. S. 799, followed.

The plaintiffs had, after being requested so to do by defendants in pursuance of a condition of the policy, prosecuted the employee to conviction for the embezzlement of the various sums of money which he had taken, and they claimed payment of the expenses of the prosecution in addition to their other claim.

Held, that defendants were only liable for such expenses so far as said prosecution related to the offences committed before they received notice of the defalcations, but that liability was not dependent upon their liability under the policy.

Plaintiffs to pay defendants' costs of contesting the liability for the loss, and defendants to pay plaintiffs' costs of establishing their claim for the expenses of the prosecution.

ARGUED 10th November, 1900.

DECIDED: 24th April, 1901.

1901.

ACTION upon a guaranty policy by which the defend- Statement. ants engaged, subject to certain conditions, to reimburse the plaintiffs for any pecuniary loss, to the amount of $3,000, sustained by the plaintiffs by any fraud or dishonesty of one Young, a local agent of the plaintiffs, which should amount to larceny or embezzlement. The main defences were that some of the conditions precedent to the liability of the defendants had not been fulfilled, or were not proved to have been fulfilled, and that by certain acts and omissions on the part of the plaintiffs or their officers the policy became void as against the defendants. The facts are fully set forth in the judgment.

II. M. Howell, Q. C., and W. Redford Mulock, Q. C., for plaintiffs. The policy is very onerous upon plaintiff company and should be construed as much as possible in plaintiff's favor. The Court should endeavor to find a reasonable contract, binding on defendants. By the contract the conditions are conditions precedent. They are: (1) Immediate notice by plaintiffs to defendants on discovery of any defalcation on the part of Young. (The number of the policy is unimportant). (2) To prove the