Scottish Court of Session Decisions

The pursuer and the defender Lundy carried on business in Leith, as partners, under the firm of the North British Colour Company. In 1867 they agreed to dissolve partnership. By this agreement Lundy was to pay Sim £6000, and the other defender, Blanshard, became cautioner for the payment of this sum. The offer by Lundy, which was accepted by Sim, contained the following clause, viz.:—“The £6000 referred to, to be paid as follows, viz., £5000 in four equal instalments by bills at three, six, nine, and twelve months, and the remaining £1000 in cash by two equal instalments at six and twelve months. Any debts owing by the North British Colour Company not appearing in the statements and balance books at 31st December 1866, you will have to pay to me your share of, the above offer being made upon the assumption that the balances at 31st December 1866 are correct in the ledgers and balance books, &c.”

Bills were granted for the £5000, which were paid; but when the first instalment of the remaining £1000 became due on 10th December 1867 the defenders refused payment, and this action was raised. The defence was, that the defenders were entitled to withhold payment until the amount of the debts owing by the Company at 31st December 1866. and referred to in the offer, was ascertained. For this purpose a counter action is in dependence. The pursuer replied that the sum sued for was liquid, and that the defenders were not entitled to plead compensation or retention in respect of the other claim, which was illiquid and disputed. He offered, however, to find caution if required, but this off er was not accepted.

The Lord Ordinary (ORMIDALE) repelled the defences, and decerned in terms of the libel.

He added the following note:—“It is not disputed that the defender came under an obligation to pay the pursuer the £500 now decerned for. The only defence set up is rested on an alleged counter claim which it is said affords to the defender a right of compensation or retention, sufficient to meet the pursuer's claim. The Lord Ordinary does not think this plea of compensation or retention well founded. The pursuer's claim is liquid, and in itself indisputably resting-owing; but the defender's counter claim is illiquid and disputed. He has raised an action to have it constituted, and that action is now in dependence. What may be the result of it cannot at present be foretold or anticipated; but it is obvious enough that no result at all can be arrived at without a count and reckoning and inquiry, which must take up a considerable time. As, therefore, the defender's counter claim is neither liquid nor capable of being immediately made liquid, the Lord Ordinary is unable to see

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how the pursuer's claim, which is in itself liquid and undisputed, can be resisted or defended on the ground of compensation. Neither can the Lord Ordinary, having regard to the defender'sobligation, in virtue of which the pursuer's claim arises, see how the defender can resist or oppose it on the ground of retention. By that obligation the defender expressly binds himself to pay the £600 in question to the pursuer, in cash, at a specified time, which was come and bygone before the present action was raised. There are, no doubt, other stipulations in the agreement, one being to the effect that the pursuer undertakes to pay to the defender a proportion of certain debts, but this undertaking is made dependent and contingent on circumstances about which the parties are not only not agreed, but are now in litigation with each other; and the defender does not say that the pursuer is bankrupt, or vergens ad inopiam, or that his circumstances and responsibility are different now from what they were when the agreement was entered into.

The result is, that according to the Lord Ordinary's reading of the agreement of the parties, the defender came under a direct and unqualified obligation to pay, within six months of its delivery to the pursuer, the £500 now sued for, irrespective of any disputes or questions that might arise in regard to the other stipulations on which the defender now founds. And it was not unreasonable that this should be so, as the defender came at once, in virtue of the agreement, into the full and exclusive possession of the copartnery business, with power to collect the copartnery debts. The Lord Ordinary, therefore, does not think that the terms of the agreement are sufficient in themselves to afford to the defender a right of compensation or retention. Nor does he think that the defender has made any allegations otherwise relevant and sufficient to found either of these rights.”

The defenders reclaimed.

ASHER was heard for them.

MILLAR, Q.C., and BURNET, for the pursuer, were not called on.

The Court adhered; the pursuer to find caution as offered by him. It was observed by the Judges that it was of the utmost importance to the law to preserve the distinction betwixt liquid and illiquid claims. The only exception to the rule that a liquid claim could not be compensated by one which was illiquid was where the party suing for the liquid claim is vergens ad inopiam; but there was no room for saying so in this case, because the pursuer had offered to find caution.