Scottish Court of Session Decisions

Lords President, Balgray, Gillies, Corehouse, Fullerton, and Moncreiff.—“This is an action brought by the pursuer against ‘John Hare and Company, floor-cloth manufacturers, and oil and colourmen, in Bristol.’ The object of it is, to constitute a claim of damages against the defenders; and it proceeds upon an arrestment jurisdictionis fundandæ causa, used in the hands of persons who are said ‘to be debtors, or have the keeping or custody of effects belonging to the said defenders.’

“Against this action, defences are given in in the name of ‘Messrs John Hare and Company, floor-cloth manufacturers in Bristol.’ The defences contain no notice of the names of the individual partners who compose the company; and it is not denied that ‘the debts and effects arrested are the property of the defenders, situated locally within this country.’

“In these circumstances, two preliminary pleas are maintained by the defenders, 1st, That no ‘jurisdiction has been created by the pretended arrestment used by the pusuers for that purpose;’ and, 2dly, That ‘the action is incompetent, in respect it only calls and concludes against “John Hare and Company,” and does not call or conclude against the individual partners of the company.’

“In so far as the first objection rests upon the particular nature of the present action, as being raised for the establishment of a claim of damages, and as not being founded on any liquid ground of debt, we are of opinion that there is no ground for the distinction taken by the defenders. However ineffectual an arrestment jurisdictionis fundandæ causa may be, in regard to an action of declarator of marriage, as in the case of Scruton against Gray, there is no authority for questioning, in an action containing conclusions merely pecuniary, the rule laid down by Mr Erskine, that such arrestments ‘found a jurisdiction in our Supreme Court of Session, to judge in a personal action against the foreigner, proceeding upon an edictal citation, for constituting the debt due by him to the arrester, in order to pronounce a decree of furthcoming against those in whose bands arrestment was used.’

“When the objection to the jurisdiction is rested upon the particular form of the arrestment used on the present occasion, it involves the very question, which is raised in the second preliminary defence, and which we understand to be the only one occasioning any difficulty, viz. whether either the action or diligence can be sustained, inasmuch as both are directed merely against ‘John Hare and Company,’ without calling the individual partners of the company.

“Upon this point, too, we are of opinion that the plea of the defenders is illfounded. As a mercantile company is understood in the law of Scotland to be a separate person, capable of maintaining the relations of debtor and creditor, distinct from those held by the individual partners, and as the firm or company name forms the designation of that separate person, and of the whole individuals in their social character, under which name obligations are effectually contracted by and to the company, there does not appear to us to be any legal inconsistency or incongruity in allowing action or diligence either at the instance of, or directed against, a partnership by its firm. And the competency of such procedure has not only been very generally assumed in practice, but has been sustained by the Court. In one of the many actions at the instance of Messrs Douglas, Heron, and Company, viz. that against Mr Gordon of Culvenan, in 1792, the question was distinctly raised. The action was brought in the name of ‘Messrs Douglas, Heron, and Company, late bankers in Ayr, and by George Home of Branxton, their factor and manager, conform to factory and commission granted by a quorum of the committee named for winding up the affairs of the said company.’ The title was objected to, and, among other pleas, the defenders maintained the incompetency of sueing in the name of the firm, and without setting forth the names of the individual partners. In the pleadings in that case, the most positive allegations of the practice were made on the part of the pursuers; the practice was admitted by the defender; and ultimately the objection was disregarded both by the Court of Session and the House of Lords.

“It is true that, in that case, the summons proceeded in the name of one individual, George Home of Branxton, and that that circumstance was founded upon as a specialty by the pursuers, in addition to their argument on the general point. But when it is considered that the leading instance was that of the company, under the name of the firm, and that Mr Home appeared only as their ‘factor and manager, according to a factory and commission,’ it is difficult to see how the instance of the mandatory could be sustained, if that of the party had been considered bad. Indeed, any doubt upon that point may be held to be removed by the case of Scott against Napier, 23d February, 1827, one of those referred to in the present pleadings, in which the Court refused to sustain action against Mr Napier, as the manager ‘of the Galloway Banking Company,’ until all the partners were called. Upon comparing the judgment in this last case with that pronounced by the Court and the House of Lords in that of Douglas, Heron, and Company against Gordon, we consider ourselves warranted in the conclusion, that the distinction repeatedly made by the Court, as in the case of the Culcreuch Cotton Company, and other cases of the same kind, is well founded; and that, although action cannot be maintained at the instance of a ‘mere descriptive name or denomination,’ it may be maintained by a ‘mercantile company sueing under its proper firm by which it grants obligations.’

“But we must add, that, while the question as to the competency of an action in such form at the instance of a company, is little more than one of mere form, as they always have the means of specifying the names of the partners, the objection, if good on the part of the defenders, as it is urged in the present case, would involve the most serious consequences, not easily reconcilable with the generally recognised forms of procedure, in many branches of our practice.

“Thus, in order to make good a claim for an illiquid company debt agninst the individual partners, it is held indispensable that the debt should, in the first instance, be constituted against the company. According to the form of summons in such a case, even as referred to in the pleadings for the defenders, ‘the said C. D. and Co., as a company, and the said C and D, the individual partners thereof, are called upon to make payment: the will of the summons being, that on sight hereof ye pass, and, in our name and authority, lawfully summon, warn, and charge, the said C. D. and Co., as a company, at their usual place of business, and the said C. and D., the individual partners thereof, personally, or at their respective dwelling-places,’ &c. Here the individual partners called are to be cited in the common way; while C. D. and Company, as a company, are to be cited at ‘their usual place of business,’ Indeed, this form of citation is expressly recognised by statute; it being provided, by 54 Geo. III. c. 137, sect. 20, in regard to the sequestration of partnerships, that ‘it shall be sufficient to cite the partnership by leaving a copy at the house or shop where their business is or was carried on, or where any of their acting partners reside.’ Now it surely cannot be held that the conclusion against, and the citation of the company under the firm or company name is an empty form. On the contrary, it rather appears to us agreeably to the principle mentioned above, that, so far from the conclusion against the company being dependent on that directed against the individual partners, the conclusion against the individual partners is dependent for its validity and effect on that directed against the company by its firm. Accordingly, in the case of a decree obtained under a summons framed in the above-mentioned form, and executed at the ordinary place of business of the company, we should think that the debt must be held as constituted against the company, and that, in the event of the subsequent discovery of a partner, whose share in the concern had not been known at the time, it would be equally contrary to principle, and injurious in practice, to allow such partner to plead, that the decree of constitution against the company was invalid, because his name as an individual had not been included in the original summons.

“But again, it has been already noticed, that, in cases of sequestration, the statute expressly recognises the existence of the partnership as distinct from the individuals composing it, and points out the form in which that body, in its social character, shall be cited. Indeed, in many cases, this is unavoidable, as a partnership may be insolvent and sequestrated, while one or more of the partners remain solvent. The whole rules and authorities applicable to such cases seem to proceed on the assumption, that the sequestration of the company is to be directed against the firm, and if it should be held that such a procedure is not effectual, without directing it against the whole individual partners, we rather suspect it would be necessary to devise a now set of forms, very different from those which have been generally followed, and hitherto considered as unobjectionable.

“Lastly, It is only necessary to mention the practice in regard to bills and promissory-notes, which appears to us necessarily to imply the competency of procedure, either at the instance of, or directed against a company by its firm. In such cases, the registered protest has, by statute, the force of a decree. But it is evident that the terms of the bill or note afford necessarily the measure of the constructive decree obtained by the registration. In every case, then, of a bill protested, either at the instance of or against a company, effect is given to a decree at the instance of or against a firm, without mention of the individual partners. Such we understand to be the invariable practice, and indeed the principle involved in it has received effect to its full extent by the decision of Court, in the case of Thomson against Liddel and Company, 2d July, 1812, in which it was held ‘competent to charge the individual partners of a company upon letters of horning directed against the company firm.’

“Neither docs it appear to as to be of any importance, that, in that case, the letters of horning were directed against ‘the said John Liddel and Company, and the individual partners of that company.’ For, in the first place, if a company has not under its firm a persona standi, the objection surely cannot be remedied by the vague and unmeaning addition of ‘the individual partners of that company.’ 2dly, As the bill charged on was drawn by ‘John Liddel and Company,’ the letters of horning, in adding the words alluded to, were utterly unwarranted by the bill forming the ground-work of the diligence; unless on the supposition, that the firm does, by necessary legal implication, include the individual members of the company in their social character. And, 3dly, and lastly, The supposed specialty does not apply to one part of the procedure which was recognised by that decision. For although the letters of horning were directed against John Liddel and Company, and ‘the individual partners of the company,’ the charge was given not only to Andrew Liddel, but to ‘Andrew Liddel and Company,’ without any mention of the individual partners of this last Company, so that, in that very case, a charge against ‘Andrew Liddel and Company,’ without even the general mention of the individual partners, was sustained.

“On these grounds, we are of opinion, that the preliminary pleas of the defenders are ill-founded. It is not denied that the only designation under which the defenders dealt with the pursuer was that of ‘John Hare and Company.’ It is not denied that the effects arrested belong to ‘John Hare and Company,’ and no notice is given of the individual partners, nor requisition made to call them; and, in these circumstances, we think that the mens formal objection now maintained by the defenders could not be listened to, without bringing into question, the practice judicial as well as mercantile, hitherto followed in some of the most important and comprehensive classes of transactions.

“Further, in the case of defenders, it may often be impossible for the pursuer, in limine, to discover who are the individual partners of the company against which the action is raised. Whereas a company pursuing has it always in its power to specify the names of the partners—so that the ratio is stronger for sueing a company only by its firm.”

Lord Mackenzie.—“I concur in the above opinion, with this observation, that I do not wish to give any opinion whether the decision in the case of the Culcreuch Cotton Company, and other cases of the same kind, was well founded in principle or not. I think it enough to observe, that the only ground on which these decisions can be supported, viz. that the name of the company was not that in which they granted obligations or conveyances of right, has no existence in the present case.”

Lord Medwyn.—“This is a very important question, and deserves the most minute and anxious discussion.

“In the commercial states of Europe, the history of commerce shows, that while the traffic with the more distant quarters of the globe was carried on by regulated and joint stock companies, associations consisting of two or more individuals were formed for carrying on home trade and manufactures under a company firm. Scotland, following this example, adopted a similar plan, having both public and private associations of this kind in the seventeenth century. The first were encouraged by various acts of Parliament; see 1661, c. 40, 1681, c. 12, 1693, c. 32, 1695, c. 8. As to the latter, Erskine says, ‘According to our present practice, the partners in private companies generally assume to themselves a firm or name proper to their own company, by which they may be distinguished in their transactions; and in all deeds, subscribed by this name of distinction, every partner is, by the nature of the copartnery, understood to be intrusted with a power from the company of binding them.’

“A copartnery for trade using a social firm, under which contracts are made with the public, is a separate person (Bell's Principles, 357,) from any, or the whole individuals of which it consists, and is capable of maintaining the relation of debtor and creditor separate and distinct from the obligations of the partners as individuals (Bell on Bankruptcy, vol. ii. p. 619). It is a quasi corporation, possessing many, but not all the privileges which law confers upon a duly constituted corporation. A mercantile company can hold moveable property; it has even been adjudged that it can hold a lease of an heritable subject (Dennistoun, Macnayr and Company, February 16, 1808). A company binds itself by subscribing a personal bond or bill by its firm, and, in like manner, a bond or bill granted in its favour, is an available document of debt. ‘If a partner acquires a right in name of the company, the property is vested directly in the company’ (Ersk. iii. 3, § 20). One company may become a member or individual partner of another company (Bell, vol. ii. p. 627); of which instances will be found in Dewar against Miller, June 14, 1766, and in Thomson against Liddell and Company, July 2, 1812.

“It arises from thus viewing the company as a separate person from the individual partners, that it is incompetent to arrest a company debt for a debt of one of the copartners; that the company funds are, in the first instance, liable for company debts (Corrie and Son against Calder's Creditors, January 24, 1741); that a company creditor, after ranking on the company funds, may then rank on the individual estates of the partners (Creditors of Carlyle and Company against Dunlop's Trustees, August 8, 1776); and that the share of the company's funds due to a partner may be arrested in the hands of the company (Ersk. iii. t. 3, § 24).

“In Fraser Reid and Sons against Lancaster and Jamieson, January 14, 1795, although a very critical objection to an arrestment was stated and sustained, it never occurred to the parties that an arrestment used in the hands of a company as an individual, and under the social firm, was inept. The execution of arrestment, as appears from the report of the case, bore, ‘of which letters I left a just copy of arrestment for each of the said Michael Muirhead and Company, James Coats, Mitchel and Anderson, within each of their respective accounting houses in Glasgow, with each of their respective clerks, to be given to each of their respective masters, because after enquiry made by me for them there, I could not apprehend them personally.’

“By indorsing a bill granted to a company with the company firm, the property is transferred; the property of a moveable bond, or other moveables, will also be transferred by assignation subscribed by the company (Robb against Forrest, May 20, 1830); and the only effectual discharge of the one or the other, is in like manner by this company firm. When a company is creditor of a bankrupt, and concurs in his discharge, the discharge is subscribed by the firm (Bell, vol. ii. p. 472).

“Finally, a company may be rendered bankrupt under the act 1696, (Fairholmes, December 18, 1770); and may be sequestrated under the bankrupt act, § 20, which farther provides, that ‘it shall be sufficient to cite the partnership, by leaving a copy at the house or shop where their business is or was carried on, or where any of their acting partners reside.’

“The only limitation on the rights of a private company seem to be, that they cannot hold heritable property, as they cannot maintain the character of superior or vassal; and that a penal action cannot be directed against them ( Miles v. James Finlay and Company, November 16, 1830); neither can they be pursuers of such ( Aitken v. Renuie, December 10, 1810).

“Among the many improvements introduced into the law of Scotland during the presidency of Lord Stair, the act 1681, c. 20, was passed, which authorized summary diligence upon foreign bills of exchange duly protested against the acceptors and indorsers; and this privilege was extended to inland bills by 1696, c. 36. The form of protest of a bill is and was, according to mercantile usage, by commencing with a copy of the bill, stating the non-payment, and protesting against the acceptor by name, and the drawer and indorsers generally. Hence, whenever a company held any of these characters, this was a direct authority for raising diligence against a company, and at the instance of a company. Foreign bills would often be drawn and indorsed by a social firm, and although, among ourselves, there might then be comparatively few private mercantile partnerships using a social firm, they were not altogether unknown (See Menteith, January 9, 1672). Practice has fully sanctioned this interpretation of the above statutes. By 12 Geo. III. c. 72, the privilege was extended against drawers of bills; and as by this time the practice of charging companies on such documents was quite notorious, since no restriction is imposed as to this, it may be said to have been sanctioned by implication.

“The protest being registered, is the warrant for letters of horning; and if the protest is against a company for which alone the bill signed by the company gives warrant, so the letters of horning can only issue in name of a company or against a company. The form in the Juridical Styles, vol. ii. p. 541, edit. 1790, is thus, ‘that on sight thereof ye pass, and in our name and authority command and charge the said B and Company, personally, or at their respective dwelling-places, conjunctly and severally, to make payment, &c. Wherein if they fail, the said space being elapsed, that immediately thereafter ye denounce them our rebels, put them to the horn, &c. Attour, that ye lawfully fence, arrest, &c., all and sundry the said B and Company's whole readiest moveable goods, gear,’ &c.; and this note is added, ‘This horning ought to be executed against each individual known to be a partner of the company personally, or at his dwelling-place, in common form. It may also be executed by delivering a copy of the charge to any one of the partners for himself, and on account of the company, which we conceive to be a sufficient warrant for poinding or other procedure against the company funds. But if personal diligence be wanted, the former mode is preferable, as caption can only be obtained against such of the partners as are specially and individually charged.’

“This shows the practice more than forty years ago. What is stated on this subject in the latest edition is to the same import.

“The form given in the appendix to Thomson on Bills, differs from the above only in this, that after the company firm there is added, ‘as well as the individual partners thereof.’ But though the name of no individual is ever mentioned, the horning against the company is a sufficient warrant to charge any one or the whole partners, each partner being liable for the debts of the company in solidum. This has been repeatedly sanctioned ( Anderson v. Bolton and Barker, January 26, 1810); ( Thomson v. Liddle and Company, July 2, 1812). If any mistake has occurred in charging a person who is not partner, he is entitled to have the charge suspended without caution.

“When a charge is given to a company for payment of a bill on which they are obligants, if they have any defence to state against the claim, a bill of suspension is presented in their name, as being the party charged to pay. When passed, it is discussed in their name, and the letters are found orderly proceeded against the company, the person indebted and charged to pay, or they are suspended. If a company has thus a persona standi to obtain a suspension, can there be any reason why a company should not also pursue an ordinary action socio nomine?

“When the proceedings against a company commence by an ordinary action, it has been held that the company must be called; and it is not competent to pursue one or more of the individual partners without calling the company (Kilk, p. 518; Reid and M‘Call against Douglas, June 11, 1814); and the law is so laid down in the interlocutor M‘Tavish against Lady Saltoun, February 3, 1821, that in an action for a company debt, ‘it is necessary to call the company itself, and it will not be competent to insist against an individual partner, without calling the company.’

“If, then, a company may and must be defenders in a claim against them; if diligence may issue in their name, at their instance, or against them; if they may suspend socio nomine, it would be a singular anomaly if they could not also, when they can hold property, and sustain the relation of a creditor, raise action except in the name of their individual partners. Accordingly, it does not appear that any such doubt had over occurred till recently, when we have become more acquainted with the doctrines of the English law, which ‘on this point is peculiar.’ We cannot turn up a page in our reports without finding innumerable instances of companies, both pursuing and defending socio nomine; and, so far as I can see, without a doubt of the correctness of such a procedure, either in our courts or in the House of Lords. Thus, in Karnes's Decisions, there is Baynton and Shaw against Swinton, November 14, 1714. In Elchies’ Decisions, we have Ainslie against Arbuthnot and Company, June 5, 1739; John Coutts and Company against Ramsay and Stewart, January 10, 1749; Robertson against McIvill and Liddell, January 31, 1749, &c. In Falconer's Decisions, we find Wardrop against Fairholm and Arbuthnot, December 19, 1744; and the interlocutor ‘prefers Fairholm and Arbuthnot prime loco, and Arbuthnot and Company secundo loco.’ In Kilkerran, we find Forbes against Main and Company, February 25, 1752; Christie and Company against Fairholmes, December 7, 1748, &c.

“In Livingston against Gordon, January 17, 1755, a question occurred whether, Gutzmer and Sommervile acted as a company; and among the grounds for inferring that they did, it is argued, ‘3dly, it appears from evidence produced, that they both sued and were sued as a company.’

“Neither was the appearance of a company as pursuer or defender, under their company firm, admitted without question in our own courts only. When any such causes have been carried to the House of Lords by appeal, no objection seems in former times to have been raised on that ground (See Ainslie against Arbuthnot and Company, February 7, 1743; Cheap against Aiton and Company, December 11, 1772, the interlocutor in which bears, ‘Ordered that the aforesaid interlocutor, &c. be reversed, reserving to the respondents, the said Aiton and Company,’ &c.; Elliot against Wilson and Company, June 25, 1776; Alston against Campbell and Company, March 3, 1779; Douglas, Heron and Company against Gray, January 14, 1779, &c.)

“In Douglas, Heron and Company against Gordon, June 16, 1792, the point may be said to have been in terminis decided. The summons is raised at the instance of ‘Messrs Douglas, Heron and Company, late bankers in Ayr, and George Home of Branxholm, their factor and manager,’ concluding that Sir Alexander Gordon should be decerned ‘to make payment to the said Messrs Douglas, Heron and Company, and to the said George Home, their factor and manager,’ &c. The defence is,‘ that the pursuers had produced no title;’ and in support of this it is argued, that a firm of a private company or partnership, if it could in any shape maintain an action, could never maintain one like the present, after its dissolution, to the effect of compelling an individual partner to pay such sums as they chose to a gentleman described as their manager.

“The Lord Ordinary (Dreghorn), December 24, 1791, repelled the defender's objections to the title of the pursuers to insist in the action.

“A reclaiming petition was presented, which, among other things, prayed the Court ‘to sustain the objections to the title sued on, and dismiss the action simpliciter; or to find, 1. That the firm of Douglas, Heron and Company cannot be regarded as pursuers in the present libel, as not being a nomen juris; 2. That as Mr Home appears solely as factor for, and deriving his right from, this firm, the addition of his name does not obviate the objection.’

“The Court refused the petition.

“The case was appealed on this point of title chiefly. The judgment of the House of Lords, December 24, 1795, was, ‘It is ordered that the action do proceed in the Court below, between the appellant and respondent; and it is further ordered that an account be taken of alt the dealings,’ &c.

“These instances may suffice as to the practice of the courts formerly, and that it was without objection, and it may be only further noticed as to this matter, that in a practical work, published in 1804, is this statement; ‘When a mercantile company is pursuer, there can be no other change in the form of the summons than what arises from designing the company by the firm, as “our lovites A and Co.” In the other parts of the summons they are called pursuers. When the action is raised against a company, you will, in describing the debt, state that “B and Co. are justly indebted,” &c.; and the will ought to be expressed in these terms; “Our will is, therefore, that ye summon, warn, and charge the said B find Co.,” at their shop, or warehouse, &c. It is not necessary to cite the partners of the company individually; a company may sue and be sued, and the decree of an action against the company will bind the partners of that company.’ ^*

“The change which has been introduced into the last edition of the Juridical