Scottish Court of Session Decisions

This was an action of reduction, delivery, and payment, at the instance of John Gourlay, chartered accountant in Glasgow, trustee on the sequestrated estate of James Pinkerton & Son, merchants in Glasgow, against William Hodge, brickmaker and contractor there. The following were the circumstances of the case:—

The estates of Messrs Pinkerton & Son were sequestrated on 25th June 1874, and thereafter the pursuer was elected trustee. Previous to the sequestration, and on 16th May 1874, the bankrupts received from the defender the sum of £500, granting at the same time a letter in the following terms:—“Dear Sir,—We have this day received from you the sum of (£500) five hundred pounds sterling, and we hereby promise to give you, within one month from this date, delivery-orders on stores in Glasgow for wheat, oats, beans, or Ind. corn, to the full value, viz., £500.” Thereafter, at various dates between 22d May and 8th June, the defender received from the bankrupts various quantities of peas, oats, and beans, of the value of £238, 5s. The defender did not pay for the grain so delivered, but the deliveries were taken as in implement of the obligation entered into in the letter of 16th May. The pursuer required the defender to pay the price of the grain delivered, but he refused to do so, and this action was brought to reduce the account and deliveries of the grain, for declarator that such portion of the grain as was still in the defender's possession belonged to the pursuer as trustee, and for payment of £238, 5s.

The pursuer pleaded—“(1) The pursuer, as representing the creditors of said sequestrated estate, and as trustee thereon, is entitled to insist in this action. (2) The oats, beans, and peas specified in the foresaid account having been given in security of or satisfaction of a prior debt within sixty days of bankruptcy, contrary to the terms of the statute 1696, c. 5, the pursuer is entitled to have the transaction reduced and set aside as concluded for. (3) The parties being conjunct and confident, and delivery having been given without any just, true, and necessary cause, the transaction is null and reducible. (4) The defender being indebted in the value of the said oats, beans, and peas, the pursuer is entitled to decree for the same.”

The defender pleaded—“(1) The pursuer's averments are not relevant, or sufficient in law to support the conclusions of the summons. (2) The goods in question having been delivered in partial implement of a contract of sale, under which the price had been paid by the defender, the action is untenable. (3) The action, so far as founded on the statute 1696, cap. 5, cannot be maintained, in respect the deliveries were made not in satisfaction or security of a prior debt, but in fulfilment pro tanto of the bankrupts' obligations under the contract of 16th May 1874, which were the counterpart of the payment then made to them by the defender. (4) The deliveries not having been made to a conjunct or confident person, without a just, true, or necessary cause, to the prejudice of prior creditors, they are not challengeable under the Act 1621, c. 18. (5) The defender having under the transaction in question paid the sum of £500 to the bankrupts within sixty days of bankruptcy, in consideration and on the faith of performance of their counter obligations as to delivery, and the deliveries made in pursuance of the contract having been of much less value than the said sum, the defender ought to be assoilzied. (6) The pursuer's material allegations being unfounded in fact, the defender is entitled to absolvitor, with expenses.”

The Lord Ordinary allowed a proof, of which the following are the important portions:—

The defender deponed:—“The transaction came about in this way: My son-in-law called upon me. I had intimated to him that I would give him no more accommodation bills, and that at any time I had money beside me I could purchase grain, so far as I pleased, for my horses. My son-in-law did not want accommodation at that time, and did not propose it. He inquired if I stood in need of grain, and said he was a little tight for money for the following day. I agreed to give him £500, and he was to give me grain at the market price as I required it for feeding purposes. … I had never had any transaction of the same kind with the bankrupts previously. I had been in the habit of getting grain from them—sometimes less and sometimes more—but I did not get one-third from them of the total grain I required. I generally paid for it within the month. I called at the bankrupts' office shortly afterwards, in order to begin to get the grain according to the arrangement. I pressed them for it, because I required it. I called on or before 22d May. At that time I had not the slightest knowledge that the bankrupts were insolvent—quite the opposite; and nothing had occurred to excite my suspicion. I

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did not know of their insolvency until immediately before the sequestration. I only knew of it when it became public; I had no previous knowledge… . My horses consume at the rate of about 9 3 4 bolls of oats per week. I gave Pinkerton a cheque for £500 on my bank account with the City of Glasgow Bank.”

James Pinkerton, jun. (his father being dead), deponed—“Prior to May 1874 my father-in-law told me he would not grant us any further accommodation in the way of bills, but that he would help us if we needed it by advancing money against grain to be afterwards delivered. It was in consequence of that I proposed this mode of accommodation on 16th May. It was understood between my father-in-law and me at the time that in return for the £500 he should receive delivery-orders from us for grain to be consumed by himself in the course of his business. The delivery-orders we gave him were in pursuance of that bargain.”

The Lord Ordinary ( Young) pronounced this interlocutor:—

“7 th January 1875.—The Lord Ordinary having heard counsel for the parties, and considered the proof, record, and cause—Finds that the deliveries of the goods referred to in the summons and in the record were not in contravention of the Act 1696, c. 5: Therefore assoilzies the defender from the conclusions of the summons, and decerns: Finds the pursuer liable in expenses, and remits the account thereof, when lodged, to the Auditor to tax and report.”

The pursuer reclaimed.

Argued for him—The loan was made to the bankrupts on the ground that they required accommodation, and on that ground alone. There was no contract for delivery of a specific subject, but of a quantity of grain. Thus the bankrupts were not by their obligation bound to give the defender any one of the parcels of grain delivered by them, and on making these deliveries they were voluntarily giving satisfaction of a prior debt, in preference to other creditors within the meaning of the statute.

Argued for the defender—There was nothing to show that the defender knew that he was dealing with a firm on the eve of bankruptcy, although he made the advance for their accommodation. This did not belong to the class of transactions struck at by the Act, but was simply the implementing of a contract of sale entered into by the letter of 16th May.

Authorities— Taylor v. Parry, Mar. 8, 1855, 7 D. 630; Miller v. Shiell, Mar. 19, 1862, 24 D. 821; Young v. Johnston, 1783, M. 1141; Steven v. Scott, June 30, 1871, 9 Macph. 923; Gibson v. Forbes, June 9, 1833, 11 S. 916.

At advising—