Scottish Court of Session Decisions

Lord President.—This is a multiplepoinding, and the subjects in medio

are certain bags of flour within the store of one Hayman, who is the pursuer and nominal raiser. He has no interest in the matter whatsoever, and the question arises upon a competition for these bags. Now, the course of dealing out of which the question arose was this: There was a miller in America called Seymour Carter, and there was a firm of flour merchants in Glasgow of the name of John M'Nairn & Company, the sole partner of which firm was John Stevenson, and they had business relations with Seymour Carter. The course of business was this—(Here followed the passage above quoted, p. 937).

What happened on one occasion was this, that M'Nairn & Company being short of money went to a Mr Stevenson, who was an uncle of the sole partner of M'Nairn & Company, and asked him if he would give them an advance; and they proposed to give him in security some of the flour which was coming. Stevenson consented to give them an advance of a certain sum, and he gave them a cheque upon his bank, the Commercial

Bank, for that amount. With the proceeds of that cheque M'Nairn & Company went to James Findlay & Company and got the bills of lading of a certain cargo of flour, and they then handed the bills of lading blank indorsed to the Commercial Bank to hold for Stevenson. The flour was then deposited in Hayman's store in ship's name. Stevenson did nothing after that, and while the flour was still in Hayman's store M'Nairn & Company went bankrupt. Now, the state of affairs when M'Nairn & Company went bankrupt was that Hayman had a good many bags of flour in his store, more a good deal than would satisfy the number of bags which were specified in the bills of lading that had been handed to Stevenson. Taking Stevenson's case, the competition arises between him, as in right of these bags in virtue of the bills of lading and the delivery-order which he got from the shipping company afterwards, and the trustee.

I take Stevenson's case first, because it seems to me to come logically first. Upon this state of the facts we had an excessively ingenious argument from Mr Murray, which was really founded, I think, entirely upon the case of Sewell v. Burdick in the House of Lords, where a shipowner sued the holder of a bill of lading for freight. Whether he was liable as upon the contract of freight depended on the terms of the Bills of Lading Act; and the terms of the Bills of Lading Act which deal with the point are that the person is to be liable if he has the property in the goods. Now Sewell v. Burdick determined—it was an English case—that according to the law of England the question of whether the holder of a bill of lading in security was the holder of the property or was merely a pledgee was in each case a question of fact; but in this case they held that he was a pledgee, and that according to the law of England a pledgee in those circumstances had not the property in the goods in the sense of the Bills of Lading Act, but had only a property known to the law of England as a special property. Mr Murray, commenting on that case, suddenly so to speak, assumed that the law of Scotland was the same as the law of England, for, he said, in this case the property of the goods was not in the pledgee or holder of the security, Stevenson, but was still in the bankrupt, and that, accordingly, the property being in the bankrupt, the result obviously followed that Stevenson could only have a dividend, and could not have the actual goods.

I am afraid that though that is ingenious it is too ingenious, and the fallacy rests in suddenly turning an English term to use in Scots law, and assuming that it is the same. There is no such thing in Scots law as the term special property, and there cannot be according to the law of Scotland a distinction between the property and a special property. But the form of security effectuated by what in the law of England is called a special property is perfectly well known in the law of Scotland. There is a very well-known leading authority upon the matter, namely, the case of Hamilton v. Western Bank . I take it to be clear beyond all doubt that when a person gives a document which transfers moveable property he can make a perfectly good security, and that, whatever the law of England may be, the law of Scotland is certainly this, that the condition of affairs in which a pledgee may lose his rights by losing possession applies only to the proper case of corporeal moveables. It is very often a confusion of ideas or quibble of words to talk of losing possession where what is given to you is not the property itself but documents which transfer the property. You cannot lose possession of the moveables unless you lose the document, and the puzzle which Mr Murray attempted to create about the loss of the possession of the bags is really no puzzle at all, because Mr Stevenson had never lost possession of the bill of lading, and therefore, upon Hamilton v. Western Bank, he holds a perfectly good security.

Mr Murray's senior, the Solicitor-General, really remembering that this was a nautical case, jettisoned his junior's argument entirely; and he put the case upon perfectly separate grounds. He admitted that there was quite a good security in Mr Stevenson's hands, but then he said that the security was in the circumstances of no use to him, and for this reason, that these bags of flour were in no way distinguishable, you could not tell one bag from another, and no one could say to what particular 500 bags in the store Stevenson's bills of lading applied. Therefore, said the Solicitor-General, the property is now all immixed, and being immixed it is mine. That is really a sort of new form of alluvium in the person of the trustee which I have never heard of before, and the fallacy of it, I think, can be easily tested by supposing for a moment that Stevenson instead of being a security-holder had been merely a third party. There is the bankruptcy, during which Hayman's store is filled with bags apparently belonging to the bankrupt and bags apparently belonging to this third person; and these bags are so immixed that no one can tell which bags belong to each. If the storekeeper is not in a position to fulfil his contract, that is to say, if he has not bags enough to satisfy his obligation to deliver bags to both the bankrupt and third party, no doubt then a position of some difficulty may arise. But here there is no such difficulty. It is admitted that Hayman has bags enough to satisfy both the claims of the trustee and of Stevenson, and, in the circumstances, I prefigured, what would have happened would be that the bags all being the same, a number corresponding to the number held by the third party would be handed to him, and the rest handed to the trustee. I do not think that anyone could suppose that there was any difficulty in that situation. If that is the situation what difference does it make if, instead of being a third party, Stevenson is a person who holds a security over the goods provided that security has been well constituted? Therefore I think the argument of the Solicitor-General is not so ingenious as that of his junior, and is equally unsound. Upon this matter the conclusion that the Lord Ordinary has come to is perfectly right; and that disposes of the matter so far as Mr Stevenson is concerned.

But there were other claimants, Moorhead, Watson, & Company, who are for all practical purposes in precisely the same position as Stevenson, except that the bills of lading were transferred after the cargo was put in the store. In the view I have taken that distinction makes no difference,

and therefore Moorhead, Watson, & Company's case follows that of Stevenson, and that disposes of these two cases.

That leaves 424 bags in the hands of the trustee as representing the bankrupt, and upon these 424 bags arises a subsequent question with persons of the name of M'Connell & Reid and J. K. Stewart. The question arises out of this, that after the bankrupt had got the flour into the store he entered into a contract of sale of certain of these bags in favour of these parties. There is no question as to the contract of sale of the flour lying in the store; but before anything was done in the way of separating the bags, there came the bankruptcy. The trustee in the bankruptcy appeals simply to the 16th section of the Sale of Goods Act, which specially provides that where there is a sale of unascertained goods the property shall not pass until the goods shall have been ascertained. Here nothing was done to ascertain the goods. These flour bags were not separately marked, and although, doubtless, if the buyer here had gone to the storekeeper and had got him to put aside the sacks or mark them, or put them into another room, that would have passed the property, yet, as he did none of those things the property, it seems to me, did not pass. It is not enough merely to get an acknowledgment in general terms that so many of those bags belonging to the bankrupt are held for him.

I think, therefore, that there again the Lord Ordinary has taken an entirely right view. It is a perfectly simple question, arising solely on the terms of the Act. I am therefore for adhering to the judgment of the Lord Ordinary.

Lord M'Laren.—This is a somewhat involved case, and if I had had any doubt about the result I should have wished to take time to consider it and to unravel its details; but I am satisfied that the Lord Ordinary has decided the various points correctly, and in accordance with settled law.

With regard to the sacks of flour which were represented by the bills of lading at the time of M'Nairn & Company's bankruptcy, various objections were raised to the right of Mr Stevenson as holder of these bills. In the first place, it was said that the goods were landed, and that Stevenson, the transferee of a bill of lading, was in no better position as owner of the goods than the holder of a delivery-order, which would not in all circumstances suffice to pass the property. It may be that at one time the effect of the transference of bills of lading was too rigorously limited to the case of goods which were on board a ship at sea. If Mr Stevenson had advanced the money upon the security of a bill of lading while the goods were actually at sea, although he might have taken the bills in security only, I think no one who was conversant with mercantile law would dispute that Mr Stevenson had a good security upon his bills of lading to the extent of his advances. But I think the later law has settled that the question as to the effect of a bill of lading does not depend upon the arrival, or even the unloading, of the ship, and that a bill of lading must be taken to be an effective document of title representing the goods until these have been actually delivered to the person in right of the bill.

There are some advantages, and there may also be disadvantages, in the rule, as I have stated it, where the storage of the goods has extended over a considerable time; but since the case of Barber v. Meyerstein (and until that case has been further considered by a higher authority), I think it must be taken as settled that, although the goods are stored, the delivery of the bills of lading has effect in all respects, whether as a title of property or whether as a security to the person to whom it has been indorsed or delivered, exactly as if the goods were on board the ship.

If that principle is once admitted, it again disposes of the next argument, which was founded upon the analogy of the delivery-order. It is perfectly true that a delivery-order is worthless as passing specific property until the goods have been ascertained, but that is exactly the distinction between the effect of a delivery-order for goods on shore and a bill of lading. Bills of lading have been long in use, and as far back as we have any knowledge of their use they were held to be negotiable. Such bills, expressed to be for so many bags of flour or quarters of grain on board a particular ship, would pass by blank indorsation from hand to hand while the ship was at sea. How is it possible, consistently with such a state of the law, that the goods could be specifically ascertained, or that the various persons who took such bills of lading could examine and verify the goods while the ship was in mid-ocean? We know that bills of lading are granted for portions of cargo in bulk which cannot, of course, be ascertained; and where bills of lading are granted in these circumstances they must operate as a transfer of an unascertained quantity of goods on board the ship, until delivery is made in terms of the obligation. Delivery had not been made here, and therefore Mr Stevenson's right to these undelivered goods was as effectual as if they were identified by marks and numbers.

The question as to the right to certain other bags of flour, which had been delivered from the Allan Line and were held by the storekeeper, was argued on behalf of another competitor in this case, I think, M'Connell & Reid. With regard to that point, I think it depends upon the law as laid down by the late Lord President M'Neill in Hamilton v. Western Bank, which has always been considered a leading case. The result of that decision is that where documents of title were taken in security of advances, the contract to be inferred was not strictly a contract of pledge, but the transference of a proprietary right, under which the bank was held entitled to retain the goods until the advances were repaid. Under the Roman law of pledge there must be actual perception of the subject of the pledge; but then, I think the Lord President puts the nature of the banker's right in terms which identify it in all substantial qualities with the right of a holder of a security over heritable property constituted by ex facie absolute disposition. Then the documents of title transferred to the bank were held to constitute a title in the bank against all the world, except the person who had pledged the goods and who was entitled to have them restored on repayment of the advances. But in order that this right may be effectually constituted, it is necessary that the goods should be specifically ascertained and identified; and I agree with the Lord Ordinary that as the sacks of flour were neither numbered, nor marked, nor put into receptacles, nor ascertained in such a way as to distinguish them from other flour in the warehouse, no effectual right of security was constituted by the delivery-order. I am of opinion, therefore, that on both points the Lord Ordinary's judgment should be adhered to.

Lord Kinnear.—I am of the same opinion as your Lordship on both points.

Lord Pearson.—I also am of the same opinion.