Scottish Court of Session Decisions

Subject_1 DECISIONS of the LORDS OF COUNCIL AND SESSION, reported by SIR DAVID DALRYMPLE, LORD HAILES.
Subject_2 SOCIETY - COMPENSATION.
Subject_3 Whether retention is competent, at common law, to one partner of another partner's share of the companies' stock, in payment of debts due to him by that partner, in a competition with his creditors?

Whether, in such competition, the partner-creditor can claim a preference on that share, in virtue of an assignment in the contract of copartnership.

William Goldie
v.
William Gray

Date: 16 June 1774

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[Faculty Collection, VI. 297; Dictionary, 14,598.]

Monboddo. A company, and the particular members of a company, are perfectly distinct: the debt due by one member cannot be compensated by a debt due to the company. The only difference between a private company and a corporation is, that, in the first, all must be called; in the second, only the managers.

As to the second point, the whole difficulty is in the manner of intimating the assignation. I am of opinion, that if this assignation had not been in the contract of copartnery, intimation would have been necessary. Here, the same deed which constitutes the debt, makes the assignation.

Justice-Clerk. That might be very good as to debts actually existing. It would shake loose the bonds of society, if this sort of hypothec were to be established. This would be anomalous in the law, and exceedingly dangerous.

Gardenston. It would be dangerous to grant a preference on such an uncertain and eventual assignation. I doubt how far this could be remedied even by an assignation, which, to be good against a creditor, must be onerous. It must be intimated to the debtor; but who is the debtor? It may be the company, it may be the debtor of the company.

Coalston. Of the opinion given as to both points. As to the first, there must be a mutual concourse to establish compensation and retention. As to the second, if a special sum had been assigned in security of a special debt, no intimation would have been necessary. The defect is as to the validity of the debt itself: here is an assignation of a nonens. In security of a nonens, a debt conditional, or of which the term of payment is not come, may be assigned: but that is not the case here.

Pitfour. Mr M'Queen is pretty tenacious of principles of law. I was therefore surprised at his argument.

Kaimes. A contract of copartnery establishes a body, though not a corporation; yet the debt may be held by retention, though not pleaded against by compensation.

On the 16th June 1774, “The Lords preferred Goldie;” adhering to Lord Hailes's interlocutor.

Act. A. Rolland. Alt. R. M'Queen.

Diss. Monboddo, Kaimes. Pitfour doubted at last.

1774. July 27.—Pitfour. The answers are as clear a demonstration in law as ever I read.

Monboddo. I wish to see on what this demonstration is founded. The answers, I admit, do support the principle that no retention can take place here; but, with respect to the particularity in this case, arising from the tenor of the assignation, I think that the plea of retention is well founded. Each of the partners has a jus quæsitum clogged with a condition: it will be good against every arrester. It has been observed, that this would be a great incumbrance on the credit of partners: that is true; but I cannot therefore vacate a lawful and an expedient paction. Before the Act 1696, an heritable security might have been given on a nonens.

Pitfour. If the funds of a trading company could be vested in such a way as to give a hypothec to the partners, there would be an end of commerce altogether.

[He spoke at considerable length, but with so low a voice that it was impossible to collect his argument.]

Gardenston. This is a judgment of great moment in point of precedent. No assignation can be effectual where the sum is blank; that is truly the case here. Were this to be sanctioned, innumerable frauds would arise. What can you intimate to the debtor?—that some time or other you may chance to become a creditor for some extent or other?

Kaimes. An assignation must always be in security of some debt. Can I assign a sum in security for any debt which I may hereafter contract?

Alemore. No clause in a copartnery can be good contra communes juris regulas. This is an assignation of a possible sum in security of a possible debt.

Justice-Clerk. I am glad to hear that there are so few instances of such a clause. I did not think that there could have been any. If such clauses were held effectual, there would be an end of all commerce. It would at one stroke ruin the credit of the country. No man would contract with the partner of a company.

President. The clause is contrary to all ideas that I ever heard of in mercantile business. I am sorry to see new clauses introduced into copartneries. Under it, it would not be safe to contract with any man who was of a company, nor indeed with any man who might be of a company. All men in labouring circumstances would go into copartneries to save themselves and cut out their creditors.

On 27th July 1774, “the Lords preferred Goldie;” adhering to their interlocutor of 16th June 1774, and to Lord Hailes's interlocutor.

Act. A. Rolland, Ilay Campbell. Alt. R. M'Queen, H. Dundas.

Diss. Monboddo.

The writings of the lawyers on both sides received great and just commendation.