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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Sommerville & Son v. The Same [1883] ScotLR 20_689 (21 June 1883) URL: http://www.bailii.org/scot/cases/ScotCS/1883/20SLR0689.html Cite as: [1883] SLR 20_689, [1883] ScotLR 20_689 |
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B. R. & Co. having purchased a cargo abroad, arranged with their bankers in this country that the latter should accept bills drawn by the seller for the price, receiving in security the bills of lading for the cargo blank endorsed. On the arrival of the cargo B. R. & Co. effected sales in their own name, the arrangement between them and the bank being that the bank, as holders of the bills of lading, would authorise delivery to be made on receiving letters from the purchasers engaging to pay the price direct to the bank. In two cases the bank authorised delivery before obtaining such letters, on the undertaking of B. R. & Co. that they would be sent by the purchasers. After delivery had been made, creditors of B. R. & Co. used
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arrestments in the hands of the purchasers to attach the price. Held, in a multiplepoinding to determine the right to the price, that B. R. & Co. were the radical owners, and had sold for themselves; that the bank being merely security-holders, had by authorising delivery released their right of security; and that therefore the arresters should be ranked and preferred to the price.
In January 1882 Messrs Bryant, Ridley, & Co. esparto grass merchants, Newcastle-on-Tyne, chartered the vessel “Newcastle” to convey a cargo of esparto from Spain to be delivered at Leith. The Merchant Banking Company (Limited), London, their bankers, arranged to undertake liability on their account on condition of the bills of lading being endorsed and forwarded to them, and this arrangement was intimated to Mr Oyarzabal, the seller, by letter from the Merchant Bank dated 11th January 1882—“By request and for account of Messrs Bryant, Ridley, & Co. we are prepared to accept your drafts on us at 90 days’ date, for cost of about 250 to 280 tons esparto, to be shipped per ‘Newcastle’ to the Tyne or a Scotch port, on receipt of the entire set of b lading. The price not to exceed £8 (eight pounds) per ton.” The bills of lading were accordingly blank endorsed to the Merchant Banking Company, who accepted Mr Oyarzabal's drafts for £2440, which amount was placed by the Merchant Banking Company to Bryant, Ridley, & Co.'s debit. The “Newcastle” arrived in Leith on 1st March 1882, and notice of this was sent to the Merchant Bank by Bryant, Ridley, & Co. On the same day the bank forwarded the bills of lading to Messrs Britcha & Co., their agents in Leith, with the following letter:—“By request of Messrs Bryant, Ridley, & Co., of Newcastle-on-Tyne, we hand herewith a bill of lading for 305 tons esparto p. ‘Newcastle,’ @ Malaga, arrived at your port. The goods are to be held subject to our order, which please confirm to us, and the above firm will arrange for payment of freight and charges as before.” Britcha & Co. answered on 2d March acknowledging receipt of the letter, and agreeing to hold the cargo to the orders of the Merchant Banking Company. They also promised in the event of it becoming necessary to land any of the cargo, to telegraph immediately to the Merchant Banking Company. Bryant, Ridley, & Co. then proceeded to get orders for the esparto, it being expressly stipulated by them with the Merchant Banking Company that letters of guarantee should be sent by the purchasers to the bank before they would allow delivery to be made of the quantities sold. On 3d March 1882 a contract was concluded with Messrs Tod & Son, papermakers, St Leonard's Mill, Lasswade, in the following terms:—“Sold to Messrs Wm. Tod & Son about 50 tons, say fifty tons esparto, ‘Lorings’ best Malaga bales, with usual quantity of loose, if any. Delivery ex ‘Newcastle,’ now at Leith. Price £9 (nine pounds) per ton, c.i.f., Leith. Payment by our draft at 4 months’ date from date of delivery, adding 3 month's interest at 5
% p. an., payable in London. Any dispute arising under this contract to be settled by arbitration in the usual manner, the contract not being void on account thereof.— Bryant, Ridley, & Co. Draft to be remitted to Merchant Banking Co., London.” Messrs Tod sent this letter to the Merchant Bank on 4th March:—“We have purchased esparto to the value of about £450 from Messrs Bryant, Ridley, & Co., of Newcastle, and will remit our acceptance to you of the amount (at 4 mos.) on recpt. and checking off the deliveries as desired by Messrs Bryant, Ridley, & Co.” And on 6th March the bank wrote to Brichta & Co.—“You may deliver fifty (50) tons esparto ex ‘Newcastle’ to the order of Messrs William Tod & Son, of Lasswade.” A second contract was then made between Tod & Son and Bryant, Ridley, & Co., the terms of which are embodied in a letter from the former to the latter of 7th March:—“Your telegram from Edinburgh as follows:—‘Simply to save warehousing, will send 30/40 tons more Lorings esparto at £8, 17s. 6d., c.i.f., Leith. Reply Post Office, Edinburgh. Reply paid.’ We replied—‘You may send on 30/40 tons more Lorings if at £8, 15s., c.i.f., Leith, but not unless.’ In farther reference, we do not require grass for three months, and will have to store at considerable inconvenience, and will be quite as well pleased should you decline our offer as if you accept it.” Bryant, Ridley, & Co. then wrote to the Merchant Bank on 7th March:—“We have just heard (our principal having left business) that Messrs Wm. Tod & Son, St Leonard's Mills, Lasswade, N.B., take 40 tons more esparto, and Messrs Wm. Sommerville & Son, Dalmore Mills, Miltonbridge, N.B., take 20 tons esparto; all ex ‘Newcastle.’ Letters have been sent for signature, and will be sent you in due course. In the meantime perhaps you would telegraph Messrs Brichta & Co. to-morrow giving them orders as over. This would greatly expedite the discharge, and we will undertake that you receive the letters in order.” On 8th March the Merchant Bank telegraphed to Brichta & Co.:—“Deliver 40 tons more to Tod, Lasswade… Bryant says all this week to discharge.” And on the same day they wrote to Bryant, Ridley, & Co.:—“We wrote you 4th instant, and have now before us your favour of yesterday requesting us to wire F. Brichta & Co. to deliver 40 tons more esparto to W. Tod & Son, and 20 tons to Wm. Sommerville & Son, both lots ex ‘Newcastle,’ which we have done, noting that you undertake that we shall receive in due course letters of engagement from the buyers. Please wire us early to-morrow as to fire insurance on whatever is landed and not sold ex both vessels.” Bryant, Ridley, & Co. on 8th March wrote to Tod & Son:—“We enclose contract-notes, and should you not have sent a few lines to Merchant Bank as usual, may we ask you to do so at once.” In accordance with the instructions of the Merchant Bank in their telegram of 8th March, confirmed by letter of the same date, Brichta & Co. forwarded the 40 tons sold to Tod & Son on 8th March, and it was delivered to them on the 9th without any letter being granted by them to the bank. Owing to a misunderstanding on the part of Brichta & Co. as to who was to pay freight a delay was occasioned, and therefore it was not until the 10th that Tod & Son wrote to Bryant, Ridley, & Co. as follows — “We enclose accepted contract for 40 tons ex ‘Newcastle,’ having altered the terms to correspond with former contract. Please do not draw for this until we have weight checked, and see the proportion of loose. We refer to another matter in a separate letter, but as it affects this 40 tons very materially, we ask 1 2 Page: 691↓
you to notice that no ‘Merchant Banking Coy.’ clause is added, and we have not written them about this 40 tons.” The document enclosed was— “ Lasswade, 8th March 1882.
Bought of Messrs Bryant, Ridley, & Co. about 40 tons, say forty tons, esparto, ‘Lorings’ best Malaga bales, with usual quantity of loose, if any. Delivery p. ‘Newcastle,’ cost, freight, and insurance price eight pounds fifteen shillings p. ton, say (£8, 15s. p. ton). Payment by our acceptance at 4 months from date of delivery, payable in London, with 3 months’ interest added at 5
p. cent. p. annum. 1 2 “Any dispute arising under this contract to be settled by arbitration in the usual manner, the contract not being void on account thereof.”
“ William Tod & Son.”
The matter to which reference was made in this letter was that on 10th March, the day on which it was written, arrestments to found jurisdiction in an action at the instance of Messrs James Brown & Co. against Bryant, Ridley, & Co., concluding for payment of £325, the summons in which was signeted the same day, had been used in the hands of Tod & Son. On 11th March arrestments on the dependence were also executed at the instance of Brown & Co. in the hands of Tod & Son. Decree in this action was pronounced on 18th July, 31st October, and 14th November 1882, against Bryant, Ridley, & Co., decerning for payment of £325 in name of damages, and £134, 3s. 10d. of expenses. Arrestments were also used on same dates in the hands of Messrs Sommerville & Son, Dalmore Mills, Milton Bridge, to whom 20 tons of esparto had been sold on the same terms as the sales to Messrs Tod & Son, the price being £182, 13s. 9d., no letter having been granted to the Merchant Banking Company.
A question having arisen between the Merchant Bank and Brown & Co. as to which of them was entitled to the price of the esparto arrested in Messrs Tod & Son's and Messrs Sommerville & Son's hands, actions of multiplepoinding were raised in name of Messrs Tod & Son and Messrs Sommerville & Son to have the rights of parties determined, the Merchant Banking Company being the real raisers.
In Tod's case the Merchant Banking Company pleaded—“(1) The said esparto having been the property of the claimants, by whom the same was sold to Messrs William Tod & Son, they have exclusive right to the price thereof. (3) In any event, the right to the said price having been validly transferred to the claimants prior to the said arrestment, the said price was not attached or affected by the said arrestment.”
James Brown & Company pleaded—“(1) The fund in medio being due by the nominal raisers Messrs William Tod & Son to Messrs Bryant, Ridley, & Co., and having been legally and effectually arrested by Messrs James Brown & Co., on the dependence of their said action against Messrs Bryant, Ridley, & Co., Messrs James Brown & Co., the claimants, are entitled to be ranked and preferred in terms of their claim. (2) Or else the said esparto, being the property of Messrs Bryant, Ridley, & Co., and having been delivered to Messrs William Tod & Son prior to the date of the said arrestment at the claimant's instance, was validly attached thereby; and the claimants are entitled to be preferred to the fund in medio, being the price, as the surrogatum therefor.”
In Sommerville's case the same pleas, mutatis mutandis, were stated for both parties.
The Lord Ordinary ( M'Laren) on 19th December 1882 pronounced this interlocutor:— …. “Ranks and prefers the claimants James Brown & Co. primo loco on the fund in medio in terms of their claim, under deduction of whatever sum they may recover under the arrestments used in the hands of William Sommerville & Son: Ranks and prefers the claimants the Merchant Banking Company of London, Limited, upon the balance of said fund, after satisfying the claim of James Brown & Co., and decerns: Finds the claimants the Merchant Banking Company liable in expenses to the claimants James Brown & Co. Allows an account, &c.
“ Opinion.—In this case I must sustain the claim of James Brown & Co. to a preference over the fund in medio, consisting of the price of esparto sold by Bryant, Ridley, & Co., but really the property of the competing claimants the Merchant Banking Company of London, Limited.
I assume that the Merchant Banking Company under the bill of lading had a title of property to the esparto, with an equity in Bryant, Ridley, & Co. to reduce that right to a security on a settlement of accounts between them and their bankers. That being assumed in favour of the Merchant Banking Company, I am notwithstanding of opinion that Bryant, Ridley, & Co. sold to Messrs Tod in their own name; that the unpaid price was a debt due to Bryant, Ridley, & Co., and that it was arrestable in the hands of the purchaser by Bryant's creditors. It is true that the Merchant Banking Company had employed a separate representative to take charge of the cargo at Leith, and intended that deliveries should only be given against obligations to pay to themselves. If they had adhered to that practice in this case, they would have defeated the arrestments, because an obligation to pay to them would have been a novation of the contract by substituting the Banking Company as creditors in place of Bryant & Co. But unfortunately for their claim, the Merchant Banking Company were prevailed on to grant delivery-orders in anticipation of the obligatory letters which they expected to receive; and the intervention of the arrestments made novation impossible, or at least limited its effect to the surplus remaining after payment of the arresting creditor.
This result might have been obviated if the Merchant Banking Company had instructed Bryant to sell in their name; but they evidently did not wish to do so. They are not esparto merchants, but bankers, and most probably it would not have suited the requirements of their business to become vendors of papermaking material. In so doing they might have incurred liability to purchasers for defects in the quality of the goods supplied, such as constitute the ground of action of Messrs Brown, the arresting creditors in this action. At all events I am satisfied that in this case the sellers to Messrs Tod, the arrestees, were Bryant, Ridley, & Co., and not the Merchant Banking Company.
The case of Sommerville must, in my opinion, be ruled by the present case.”
The Merchant Banking Company reclaimed, and argued—That in making sales Bryant, Ridley,
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Argued for James Brown & Co.—The Merchant Banking Company were merely security-holders who consented to the radical owners selling as for themselves, and by doing so they released their security and got no obligation in return.— Arthur v. Hastie & Jameson, M. 14,209, rev. 2 Paton's App. 251; Fox & Another v. Nott, 6 H. and N. 630; Benjamin on Sale, p. 721; Barber v. Meyerstein, L.R., 4 E. &Ir. App. 317; Gibbs v. British Linen Co., June 23, 1875, 4 R. 630; Bills of Lading Act 1855 (18 and 19 Vict. c. 111).
At advising—
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It is needless to go into the separate action of multiplepoinding in which Sommerville is concerned, because that case differs in no material respect from the case of Tod, except perhaps in this, that Tod had got to know in his previous transaction with Bryant, Ridley, & Co. that the Merchant Bank had an interest to receive the proceeds or prices of the goods, whereas Mr Sommerville knew nothing whatever of that. He was asked to send a letter to the Merchant Bank of London, but that he declined to do, and I rather think that in the circumstances he was well advised not to do so. I am not sure what the effect in law would have been if he had sent the letter in the terms desired, supposing an arresting creditor had come in with his diligence before the money was actually paid or a bill granted and had arrested the price in his hands. I cannot help thinking he acted very wisely in declining to write the letter; at all events he did decline, and so in that respect his case stands just the same as Mr Tod's.
I am for adhering to the Lord Ordinary's interlocutor.
In the first place, in regard to the ownership of the goods, the whole actings of the parties to the sale which I have already noticed point to the ownership being in Messrs Bryant, Ridley, & Co., but when we trace the history of the goods in this case I think the question of ownership is put beyond all dispute. Undoubtedly Bryant, Ridley, & Co. purchased this esparto in Spain. The bank who made the advances on the cargo corresponded with Messrs Bryant, Ridley, & Co. as owners of it, and I see there is a correspondence about the insurance of the cargo which undoubtedly was done in the interests of Bryant, Ridley, & Co., who are the persons who paid the premiums and had to be consulted about the terms of the insurance. It is quite clear that whatever was to be the outcome of that cargo—profit or loss—the profit or loss was to accrue, not to the bank, but to the true owners of the cargo, Bryant, Ridley, & Co. It is true that the bank in agreeing to give an advance on the security of this cargo took a title—the best they could possibly have—a title of property to it, which would enable them to dispose of the property itself, or at all events to keep the property entirely under their control. I think they were secured of payment of its full value. But although that was a title of property, it was nevertheless a security-title. The bank never meant to secure that property out-and-out with the view of selling it themselves, as a matter out of which they were to make a profit or a loss. That being the state of matters, it appears to me that when the cargo arrived at Leith what occurred was simply this, that Bryant, Ridley, & Co. sold their own property in the terms in which they did to the esparto buyers whose names have been mentioned in these proceedings, and it being so sold, the company from time to time consented to waive the security they held by agreeing to the delivery of parcels of these goods from time to time. The bank undoubtedly had their security in such a shape that they might have refused to allow delivery of the goods until they got bills or else obligations for the price. They had it in their power, undoubtedly, to secure themselves in repayment of their advance, and to insist on the prices of the cargo coming to them, and to withhold delivery-orders for those particular portions of the cargo until they got bills or obligations by the persons who bought them, and to whom they were invoiced, and they were not bound to sign delivery-orders before they got the bills or obligations. Having done so, they were simply in the position of having parted with their security over the goods which had been sold by the owners, with the result that the price of the goods due to Bryant, Ridley, & Co., the owners of them, was properly arrested in the hands of Messrs Tod & Son.
I had occasion to consider, as has been observed in the course of the argument, a case of the same class as this, viz., the case of Gibb v. The British Linen Bank, and in the opinion or judgment I there delivered I think that I have illustrated this class of case by referring to other questions that may and do arise in practice—for example, the owner of an heritable property borrowing money upon it, the lender insists upon having an absolute
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I presume all I have said in the case of Messrs Tod to be applicable to the case of Messrs Sommerville. They had been asked to grant an obligation in the same terms as that which Messrs Tod did when they purchased the first lot of grass, but they decline to do so; they are therefore in the same position as Messrs Tod. They granted no obligation or undertaking that they would pay the price to the Merchant Banking Co. If I assume now all that I have said in Tod's case as applicable to Sommerville's case, I come to the conclusion that the arrestment in their case is effectual. So much for the argument upon the question of property. I hold it is quite clear that these goods were in no sense the property of the bank, and that the bank were not the true sellers.
The other point which has been maintained is one upon which the bank equally fails. It is said there was a term in this contract of sale of this second parcel of esparto by which the purchaser Tod has now become liable to pay the price of the esparto to the Merchant Banking Company. I do not think that was a term of the contract. There was a letter accompanying the contract-note in which Messrs Bryant, Ridley, & Company no doubt said “You will send a letter of obligation to the Merchant Banking Company, just as you did before,” and if Tod & Son had complied with that request the arrestment would have been futile. But they did not comply with it, and in the meantime arrestments were used. What was the state of matters then? It was not that the Merchant Banking Company had acquired any right directly to themselves to the price of this esparto; there was simply a request by Bryant, Ridley, & Company, the owners of these goods, that the price should be paid to a particular creditor of theirs. But that did not vest that creditor with a right that could not be defeated. The Merchant Banking Company had no invoice. There had been no document passed between them and Messrs Tod & Son so as to create an obligation on them to pay the price to the bank. And in that state of matters, although no doubt the sellers of the esparto did request the buyers of it to pay the price to the Merchant Banking Company, a creditor intervening and arresting that price would be enabled to destroy that direction and to attach the price which was in the hands of the debtor, and therefore, holding as I do that the argument on behalf of the Merchant Banking Company fails, I am of opinion that the interlocutor of the Lord Ordinary should be affirmed.
The Court adhered.
Counsel for the Merchant Banking Company— Guthrie Smith— Strachan. Agent— T. F. Weir, S.S.C.
Counsel for James Brown & Co— Mackintosh— H. Johnston. Agents— Hagart & Burn Murdoch W.S.
