Scottish Court of Session Decisions

Hamilton Garden, merchant in Glasgow, on whose sequestrated estate the defender Smith had been appointed trustee, was indebted in certain business accounts to Robert Dunlop, W.S., whose claim was preferable, in consequence of his hypothec over the title-deeds of the bankrupt. The amount of the debt being disputed, Messrs Dundas and Wilson, W.S. of Edinburgh, were employed as the medium of communication between the parties; and eventually, by letter of 14th May, 1831, a remittance of £200 was made by Smith, who resided in Glasgow, through Messrs M'Grigor, Murray, and M'Grigor, his agents there, to these gentlemen, to be applied in discharging Dunlop's claim in the manner they should think proper. On the 19th May the pursuer Laidlaw, a creditor of Dunlop, executed an arrestment at the dwelling-house of Smith, as Garden's trustee, and indebted to Dunlop; Smith having quitted Glasgow and gone to the country prior to the execution of arrestment, without leaving any instructions as to the disposal of letters or papers which might be left at his house.

At this time (several small payments to account having been made) £130 of the sum considered by Dundas and Wilson as the just amount of Dunlop's debt, remained unpaid. On the 19th these parties wrote to M'Grigors and Murray, as to the amount of the sum they proposed to pay, and received on the 21st, in answer, a letter dated the 20th, authorizing the settlement to be made on the footing proposed, but without farther mention of Dunlop. On the 21st, which was a Saturday, Dundas and Wilson wrote to M'Grigors and Murray, mentioning that, two days before, Dunlop had spoken of an arrestment having been used against him, and that he seemed to think it possible it might be for the purpose of arresting the fund in question, and they asked for an answer by Monday morning. On the same day, after this letter had been despatched, the wife of Dunlop came to Dundas and Wilson, bringing a letter, which she had received from Dunlop, from Glasgow, dated the 20th, in which it was stated that he had been with one of the partners of M'Grigors and Murray, who had heard nothing of any arrestment, and that he had now no fears on that account, and requesting her to go immediately to Dundas and Wilson and get payment of the £130, which was still due to him. Thereupon Dundas and Wilson paid the money to Mrs Dunlop, without waiting for an answer to the letter they had sent enquiring as to the arrestment. In this way the money was paid two days after the arrestment had been executed at the dwelling-house of the arrestee Smith, who did not return to Glasgow till the evening of the 21st May, and too late to stop the payment in Edinburgh.

In these circumstances Laidlaw raised action against Smith, and Dunlop for his interest, concluding to have the defenders ordained to make furthcoming the sum which had been owing by Garden to Dunlop.

In defence against this action, Smith stated various pleas on the merits, but the only one requiring to be reported is the first, viz.:—“There are no grounds on which the defender can be made liable as in breach of arrestment, the defender having before the diligence was raised, remitted to the place of the creditor's residence funds specifically appropriated for the discharge of the debt; the debt having been paid and extinguished in ignorance of the arrestment, and in the due execution of the arrangement under which that remittance was made, and the defender, without any blame imputable to him, having had no personal knowledge of the arrestment till the creditor had actually received payment of the debt.”

The Lord Ordinary “sustained the defence set forth in the first plea in law for the defender,” and assoilzied him with expenses, adding the subjoined note. ^*

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^* “This case appears to the Lord Ordinary to be much more nice than the counsel on either side were willing to admit; and though he thinks it, on the whole, a special case, in which the defence must prevail, care must be taken that the general principles of the law shall not be supposed to be trenched upon, or loosened.

“Mr Erskine, in a passage not referred to in the debate—3, 6, 14—speaking of the arrestee's liability for the civil consequences of breach of arrestment, under the statute 1581, c. 18, says expressly, ‘This doctrine holds also in the case of arrestments served against the arrestee only at his dwelling-house, though in fact the execution should not have been notified to him; for the admitting pretences of ignorance might evacuate the lawful diligence of creditors.’ The Lord Ordinary does not find, that any other institutional writer has laid down precisely the same doctrine, or that there is any reported decision to this effect; and, if it were taken in its broadest sense, as importing that, wherever an arrestment had been duly executed at the dwelling-house, breach of arrestment must be incurred, simply by the fact of payment being made after the time of the execution, without regard to the circumstances of ignorance under which the payment might be made, the Lord Ordinary should entertain great doubt of the soundness of it in its application to many cases which may easily be figured. For example, a merchant leaves his dwelling-house in the morning, and, at his counting-house, pays a debt at twelve or one o'clock, and it turns out that, unknown to him, an execution of arrestment had been left at his house soon after he had quitted it. A farmer leaves his house to attend a market at a distance, meets with his creditor, and pays the debt; and finds, on returning home, that an arrestment had been used before he made the payment. A trader empowers his traveller to pay a debt to a creditor at a distance, and the instruction is obeyed; while, in the mean-time, an arrestment had been laid in the interval at the trader's domicile. In such cases, it would be a very hard law, which should say, that the debtor, so in bona fide paying his lawful debt, must be answerable, as for breach of arrestment, to pay it a second time; and it would be peculiarly severe so to construe a statute like that of 1581, seeing that, under the very same enacting words, the party might have been prosecuted criminally, and have suffered escheat of goods, and even corporal pains. This could never be held; and, therefore, Mr Erskine's position must be understood with considerable modification.

“Nevertheless, the authority is of weight; and the Lord Ordinary does not doubt, that thus far the doctrine may be well founded, that the mere fact of the debtor having no personal notice or knowledge of the arrestment will not liberate him from the civil consequences of paying in the face of it, if, before he paid, he was in such circumstances that he ought to have known of it, and so must be presumed to have known it. Any other rule would certainly give occasion to pretences for evacuating the diligence of creditors.

“The case here is, 1. That, before any arrestment had been used, the money—or all but a trifle—had been actually remitted to Messrs Dundas and Wilson in Edinburgh, and they had been, without any limitation, authorized to settle and pay the debt. 2. That, after having so remitted and instructed them, Mr Smith, still before any arrestment, had left his house in Glasgow, and gone to a distance in the country. 3. That, on the 19th May, 1828, while he was still absent, the arrestment was executed at his dwelling-house in Glasgow. 4. That, on the 21st, the debt was paid by Messrs Dundas and Wilson in Edinburgh, they being then in ignorance that any arrestment existed, and so paying in bona fide. There are some intermediate facts, of some importance, which are founded on by the pursuer as making a special case against the defence. But, in so far as there is any general question of law raised, the facts above enumerated seem to constitute the case.

“In this view of it, it appears to the Lord Ordinary, 1. That the arrestment was competently laid on, notwithstanding the remittance to Dundas and Wilson—and that the case of Ballandene, February 6, 1834, was decided essentially on the fact that the proper debtor stood actually discharged: But, 2. That the remittance having been made, and unlimited instructions given, before arrestment, the payment made in bona fide by the Edinburgh agents, before notice of any arrestment, does not constitute a breach of arrestment to render Mr Smith liable in second payment to the arrester, unless it appeared, which it does not on this record, that Mr Smith had returned to his dwelling-house, or at least to Glasgow, in such time that he might have stopt the payment. The important specialty is, that, before the arrestment, the debt and the discretion in paying it were in fact out of his hands, and committed to Dundas and Wilson—and, therefore, it appears to the Lord Ordinary, that, as Mr Smith did nothing after the arrestment, there is no ground for any presumption against him to infer liability for second payment, unless a special case of negligence by him or others can be made out.

“The precise state of the other facts requires attention. Messrs Dundas and Wilson having made up their minds as to the sum which should be paid to Dunlop, wrote to this effect, to Messrs M'Gregor and Murray, on the 19th May. On the 20th, M'Gregor and Murray wrote a short letter, distinctly authorizing the settlement to be made on the footing stated. But it is very material to observe, that, in that letter, there was no notice of the circumstance of which Dundas and Wilson were afterwards informed, that Mr Dunlop had been with Messrs M'Gregor and Murray at the time, or recently before it was written. Messrs Dundas and Wilson, getting the letter on the 21st, write their letter of that date—Saturday—in which they mention, that, two days before, Mr Dunlop had spoken of arrestment having been raised against him, and seemed to think it possible that it might be for the purpose of arresting the fund in question, and asked for an answer by Monday morning. But, on the same day, after that letter had been written and despatched, Mrs Dunlop came to Messrs Dundas and Wilson, bringing a letter from Dunlop himself, dated the 20th May, the words of which are quoted in Mr Wilson's letter of 24th May, From that it appeared that Mr Dunlop had been with Mr Murray, specially enquiring whether there was an arrestment at the time when the letter of Messrs M'Gregor and Murray, of the same date, the 20th, was dictated. It is not surprising, that, on receiving this, Messrs Dundas and Wilson did not hesitate to pay the money to Mrs Dunlop on the Saturday, without waiting for an answer to their letter of that date, seeing that their only ground of apprehension about an arrestment, derived from Dunlop himself, was removed by his letter, joined with that of Messrs M'Gregor and Murray, written at the same time, and making no mention of such a thing. There can be no doubt of their bona fides in so doing. But, even in the strictest legal view, there was really nothing before them to make them refuse payment.

“Then the question is, Whether there was any negligence on the part of Mr Smith, or of persons for whom he might be answerable at Glasgow, in not warning Messrs Dundas and Wilson between the 19th and the 21st? Though Mr Dunlop speaks of calling on Mr Smith on the 20th, this must probably be understood to mean that he had called at his counting-house—for it is not averred in the record that Mr Smith himself was then in Glasgow. The question therefore is, Whether there was any neglect on the part of other persons for whom he may be answerable? The members of his family might, no doubt, have made the arrestment known to his clerks, or his agents, But here the peculiarity comes in, that the matter had been previously committed to Messrs Dundas and Wilson, and that this could not naturally be known to the family, who might reasonably suppose that Mr Smith would only have to keep the money after he saw the arrestment. The matter is then reduced to this narrow point, Whether it must be held that there is breach of arrestment, because Messrs M'Gregor and Murray did not enquire at the dwelling-house whether there was any arrestment, before writing the letter of the 20th May? The Lord Ordinary thinks, that there is in this something to raise a doubt whether the legal presumption of knowledge may not take effect. But, on the whole, he is inclined to think, that a mere negative of this kind, on the part of agents, acting perfectly in bona fide, and having no actual knowledge, is not sufficient to infer so serious a responsibility against a debtor who had, long before the arrestment, authorized the payment of the debt in another place.

“The Lord Ordinary is aware, that the pursuer has not exactly admitted the fact averred by the defender, that he was absent from Glasgow on the 19th, 20th, and till the evening of the 21st May, and did not come to the knowledge of the arrestment till this last time. If the pursuer had asked an issue upon that question of fact, the Lord Ordinary would probably have thought it necessary to grant it. But, seeing that he has not specifically denied the averment—which he might have known by enquiry—and has not averred the contrary, and that the cause was pleaded as a case of law, without any demand for such an enquiry, the Lord Ordinary has thought that there are sufficient data on which to decide it.

“The judgment, on the first plea in law, renders it unnecessary to go into the disputed matter regarding the debt of the arresting creditor.”

Laidlaw reclaimed, whereupon the Court (Nov. 17, 1836) ordered minutes of debate.

In support of the action it was maintained;—

The arrestment in question having been regularly and legally used on the 19th of May, and the arrestee, being then debtor to the common debtor, having paid the debt to him on the 21st of May, which was prima facie a payment in breach of arrestment, the pursuer's case is made out. The onus lies on the defender to establish that the arrestment was not binding on him, and that he was entitled to make payment in defiance of it. The want of personal knowledge on the part of the arrestee, even though not arising from any blameable act of his own, is not a relevant allegation to void the effect of the diligence. The diligence having been duly executed, the creditor has done every thing which the law declared to be necessary in order to attach the subject and put the arrestee upon his guard. For that reason the law has prescribed certain forms for the due execution of arrestments, and has required that the arrestment shall be used at the dwelling-house, if the arrestee is not personally certiorated. Having pointed out the means to be taken by the arrester to bring the arrestment to the knowledge of the arrestee, the law necessarily pronounces that they are sufficient for the purpose, because it is precisely on account of their sufficiency that it has declared them to be essential. ¹ In the case of an edictal arrestment, so firmly was it fixed that an arrestee to whose knowledge the arrestment had never come was yet not safe in paying after it had been used, that the law required to be expressly altered by section third of the Bankrupt Act, providing “that an arrestment executed at the market-cross of Edinburgh, and pier and shore of Leith, to attach the effects of a debtor as in the hands of a person out of Scotland, should not be held to have interpelled such person from paying to the original creditor, unless proof be made that he or his agents were previously in the knowledge of such arrestment having been so used.” But even assuming the defender's allegation of ignorance to be well founded, his case, on his own showing, is one of neglect sufficient to infer liability. If he found it necessary or convenient to leave his domicile for some days, he could not thereby disappoint the legal diligence of others; and it was his duty, as concerned in complicated affairs of business, such as Garden's sequestration, to have left behind him some person charged to attend to his interests, and to the interests of those who might be connected therewith. Looking to the circumstances under which the payment was made in Edinburgh, and to the correspondence thereanent, it was so made with culpable negligence on the part of all concerned, and is therefore a payment for which the defender, and not the innocent pursuer, ought to be responsible.

For the defender it was contended—

The question is, whether a party paying in bona fide what he owes to his debtor, while in ignorance of any arrestment having either been laid or intended to be laid in his hands, can be held to have been guilty of breach of arrestment, and compelled to pay, a second time, to an arresting creditor for no better reason than that, in his absence, and subsequently to his having left home for some days, a copy of arrestment has been left at his dwelling-house. It is not enough to show that the bare technical form of arrestment was gone through, in order to subject such an arrestee

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¹ Erskine, III. 6, 14, and Blackwood, there cited.

to consequences so serious. The presumption arising from this form having been gone through, is clearly redarguable. To break down the effect thereof, the principle of bona fide payment comes in, a principle acknowledged in its application to various legal questions. The rule deduceable from the text-writers and from precedents is “that no form of notice or intimation is of the least avail against the debtor, as a valid act of interpellation, unless it be such as to put him in mala fide.” This principle is more peculiarly applicable to the present case, in which the ground of liability sought to be created is substantially rested upon the assumption of delinquency or legal wrong; the medium concludendi in the summons being, that the defender has been guilty of “breach of arrestment,” which in the sense of law is nomen juris for a known offence. ¹ No doubt the breach of arrestment which the law recognizes may be visited both civilly and criminally; but in both cases the fundamental nature of the offence is identical. Viewing it in this light, it cannot be supposed that the defender could be held to have been guilty of breach of arrestment in the criminal sense of the term; and if so, neither ought he to be visited penally in a civil court by being found liable under the conclusions of the present action. In regard to authority, the passage in Erskine, referred to by the Lord Ordinary, and the case of Blackwood, in their true meaning and intent, do not carry the matter the length which the pursuer has found it necessary to do. But the weight of authority on the point of the effect of bona fide payment in such a case as the present is with the defender; ² the case of Scott v. Fludyer, March 8, 1770, being directly in point. Finally there are no grounds in the circumstances or correspondence for making out a case of neglect against either the defender or his agents. The idea that the defender ought to have left proper instructions at his house would entail a responsibility upon mercantile men to which there could be no reasonable limit. Besides, this idea assumes that messengers, in leaving copies of citation or arrestments for absent parties, make it a rule to explain to the servant or other person in whose hands such copies are left, the nature of their business and the effect of the legal proceeding which thus, in the eye of the law, receives its formal completion,—an assumption contrary to the fact. ³

The cause was this day put out for advising.