Scottish Court of Session Decisions

This was an appeal from the judgment of the Sheriff of Lanarkshire, in an action raised before him at the instance of Moncrieff Mitchell, C.A., the trustee under a trust-disposition and assignation, for behoof of creditors, of Messrs M'Gregor, Buchan & Co., grain merchants, Glasgow, against John Wright, tea merchant there. The summons sought to have the defender ordained to return or deliver to the pursuer, as trustee foresaid, forty-six half-chests of tea, or alternatively to pay the value of the same, on the grounds, that by means of a delivery order, granted by P. C. M'Gregor in name of the firm, dated 28th March 1867, and addressed to James Smellie, Montreal, to whom the said teas had been consigned by M'Gregor, Buchan & Co. for sale on their account, the defender had obtained transference and delivery of the said teas at a time when he was a creditor of the firm of M'Gregor, Buchan & Co., which was rendered not our brankrupt upon 12th April 1867; that said transference and delivery bad been made for the defender's farther satisfaction and security, in preference to the other creditors of the said firm, and bad been fraudulently taken by the defender in the knowledge of the firm's insolvency; and were therefore null and void in terms of the Act 1696, c. 5.

The pursuer stated, “that on or about the 2d day of March 1867, the said M'Gregor, Buchan & Co. bought from defender forty-six half-chests Hyson tea, ex ‘Onsuri,’ containing 2352 lbs., at 1s. 5 1 2d. per lb., or at a slump price of £171, 10s., as per invoice. The tea was at the date of sale in London, and the conditions of the sale were, that it should be delivered free on board at Liverpool for Montreal, and that the price should be payable in four months thereafter; that shortly after the

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date of the said purchase, the said defender, as agreed on at the time of sale, forwarded the tea from London to Liverpool, and on or about the 13tlr March 1867 delivered the said tea, by order and on account of. the said M'Gregor, Buchan & Co., on board of the ship or vessel ‘Nestorian,’ then about to sail from Liverpool to Portland, United States of America; and by the directions of the said M'Gregor, Buchan & Co. he took bills of lading from the master of the said ship or vessel in favour of James Smellie, commission-merchant in Montreal, to whom M'Gregor, Buchan & Co. meant to send the tea, to be disposed of on their account. The defender sent the bills of lading so made out to the said M'Gregor, Buchan & Co., and they forwarded them to Smellie for the purpose of enabling him to receive and dispose of the tea on their account upon its arrival. The tea went to Montreal in the said vessel, which sailed from Liverpool on the 14th March 1867. The ‘Nestorian’ arrived at Portland on 25th March 1867, and on or about that date the tea was forwarded by the shipmaster or ship's agents at Portland by railway to Montreal, where it was received by the said James Smellie, and entered in bond by him in his own name on 9th April 1867. That soon after the said sale the said M'Gregor, Buchan & Co. unexpectedly found themselves obliged to suspend payments; and the defender, on calling at their office to ask them for a bill he had drawn on them at four months for the price of the tea, was informed by them that they had been obliged to suspend payment. Upon learning this the defender, on or about the 22d March 1867, wrote to Allan Brothers & Co., Liverpool, the agents of the ‘Nestorian,’ desiring them to request their agents at Portland to detain the tea, or to prevent it getting into Smellie's hands. He added, that if necessary he would instruct them to telegraph on his account on Monday. On the 25th he wrote them again, stating that he did not think he need be at the expense of a telegram, adding, ‘I am getting the senders here to give me an order on Smellie for them (the chests of tea);’ and on 28th March he again wrote Messrs Allan Brothers & Co. that since writing them last he had succeeded in getting from Messrs M'Gregor, Buchan & Co. an order on Smellie, Montreal, for the forty-six half-chests tea; so ‘as this puts all right,’ he requests them to undo the order previously sent as to holding them at Portland. In point of fact, the defender, on or about the said 28th March 1867, induced the said M'Gregor, Buchan & Co., or rather the said Peter Comrie M'Gregor, to grant, and the said Peter Comrie M'Gregor did accordingly, on or about the said date, grant and deliver to the defender, an order signed by him in the firm's name, and addressed to the said James Smellie, Montreal, desiring Smellie to deliver the said forty-six half-chests of tea to the defender. This order was given and received with the intention that the tea should be received by the defender in acquittal and satisfaction or in security of his claim against the firm for the price of the tea.”

That the tea having been received by Smellie before the delivery order had been given to the defender, or at any rate before any intimation of it had been made to Smellie, was upon presentation of the said delivery order, upon 6th May 1867, removed from bond, and delivered over to the defender or some one on his behalf, and disposed of on his account. That M'Gregor, Buchan & Co were rendered not our bankrupt upon 12th April 1867. That they were insolvent at the time the said delivery order was granted to the defender. That he was aware of this, and fraudulently obtained said order, and got back the tea in payment and satisfaction of the price thereof due by M'Gregor, Buchan & Co. to him, and in farther security of the same, to the prejudice of the other creditors.

The pursuer pleaded, inter alia,—“The said delivery-order having been granted by M'Gregor, Buchan, & Company, or by the said Peter Comrie M'Gregor, to the defender, then a creditor of the firm, and the tea having been transferred and delivered by them or the said Peter Comrie M'Gregor to defender, directly or indirectly, for his satisfaction or further security, in preference to the other creditors of the said firm, at or after their becoming bankrupt, or in the space of sixty days before the date of their bankruptcy, the said delivery-order and the said transference and delivery of the tea were illegal and null and void, in terms of the Act 1696, c. 5; and the pursuer is entitled to re-delivery of the tea, or to payment of the value thereof, as concluded for. Farther (1) The defender has stated no relevant case of stoppage in transitu. (2) The defender's attempt to stop was too late. (8) The competency of stoppage by the vendor, and rejection by the vendee, depend on the same principles, and are exerciseable only within the same limits; and as the defender was too late to stop, the insolvents were too late to reject. (9) The sale was so far completed by delivery, and the property so vested in the vendees, that the seller had no longer right to stop, and the insolvents had no more power to give the seller security or satisfaction or other benefit from these goods than from any other in their possession.”

The defender pleaded—“(2) It having been a condition of the sale of the tea by the defender to M'Gregor, Buchan, & Company that the defender should receive an accepted bill of exchange by the vendees in return for the bill of lading for the tea, and the vendees having failed to perform this condition, the contract of sale was never completed. (3) The vendees being in insolvent circumstances at the date of the intended sale, or at all events at the date of the transmission to them of the bill of lading, and being aware of their inability to pay the price of the tea, they were justified in granting, before actual bankruptcy, the order in the defender's favour referred to in the proceedings.”

In support of these pleas, while admitting most of the facts stated above, the defender alleged that the condition of the sale of tea on March 2d, with respect to payment, was that the price was to be paid by bill at four months' date, in exchange for the bill of lading; that the defender sent the bill of lading to M'Gregor, Buchan, & Co., accompanied by a bill of exchange, payable at four months' date, for the price, and a letter, in which he requested that the bill of exchange should be returned to him accepted “in course,” meaning thereby in course of that day; that, not having received back the bill of exchange accepted in due course, he called next day, and repeatedly for several days afterwards at the office of Messrs M'Gregor, Buchan, & Co., but did not succeed in finding either of the partners there; that, becoming doubtful of M'Gregor, Buchan, & Co.'s circumstances, he wrote on 22d March to the agents of the ship ‘Nestorian,’ stopping delivery of the tea in transitu; that, on or about 24th March, he met Mr M'Gregor, the senior partner of the firm of

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M'Gregor, Buchan, & Co., for the first time after the tea was shipped, and Mr M'Gregor then stated that he had sent the bill of lading to Smellie, but that, as his firm had suspended payments, he did not consider himself justified in accepting the bill of exchange or in claiming the tea. He gave to the defender an order upon the consignee for the delivery of the tea, and lie returned the bill of exchange unaccepted, stating at the same time that he had not considered the transaction concluded. When the defender received the order on Smellie as above-mentioned, the tea was still in transitu. The order was transmitted to Montreal on or about the 28th day of March, and was intimated to Smellie early in April; and the tea, which had in the interval been landed by Smellie, was there-upon delivered to the defender.

The Sheriff-Substitute ( Galbraith) found for the pursuer, and the Sheriff ( Glassford Bell), upon appeal, adhered to his Substitute's interlocutor, and found in point of law—“(1) That the Sheriff-Substitute has correctly held that there are no sufficient grounds for believing that, as regards the purchase of teas on 2d March, fraus dedit causam contractus, or that the vendees knew themselves to be in such circumstances that they would be unable to pay the price, it being, on the contrary, shown that they were at said date carrying on their business as usual, that they believed themselves to be solvent, and that they met their liabilities on that and one or two subsequent days; (2) That it is not proved that the acceptance of a bill of exchange for the price was a condition suspensive of the sale, it being not even satisfactorily established that anything was said about a bill at all, or that the terms were other than four months' credit; but even if it was understood that an acceptance was to be given, there is no evidence that this was to be done unico contextu with delivery of the bills of lading, and as a condition of receiving them, for all the defender himself depones on the subject is, that ‘the tea was sold at four months' bill from date,’ and it is proved that in a previous transaction he had with the same vendees they did not grant their acceptance till ‘a few days after the bill of lading was got;’ (3) That the power of rejecting the goods, or of giving an order for their re-delivery to the vendor, could not exist after the goods ceased to be in transitu; and (4) That the transitus was at an end as soon as the teas were shipped at Liverpool in the vendees' name, and bills of lading taken for them as shipped, which bills of lading were handed over to and accepted by them, the teas being then entirely under the control of the vendees, to whom they had been constructively delivered, and by whom they were forwarded to the Canadian market, with a view to their disposal there for their behoof.”

Against this interlocutor the defender appealed to the Court of Session.

Hall for him.

J. M'Laren for the (respondent) pursuer.

At advising—