Scottish Court of Session Decisions

This was an action at the instance of James Borland Hamilton, iron merchant, Glasgow, against the firm carrying on business at Calder and Govan under the name of “William Dixon,” and the pursuer concluded for delivery of 750 tons of pig-iron, together with £500 in name of damages, caused by failure to deliver the same in May 1866; or otherwise for £2500. From 1849 to 1866 Mr Dixon's business was carried on

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by trustees for his creditors, and since 1866 the testamentary trustees under Mr Dixon's trust-disposition and settlement have conducted it in the interests of the beneficiaries. During the subsistence of the trusts neither Mr Dixon nor his son took any active part in the business. The managing clerk of “William Dixon,” who conducted the sales of Calder and Govan pig-iron, was a Mr John Campbell, who entered the service of the firm in 1826, and who from 1839 to 1866 was exclusively entrusted with the commercial department of the pig-iron business.

The pursuer averred (Cond. 11)—“During the whole of the said period the said John Campbell signed the firm of ‘William Dixon’ in the manner aftermentioned, with the authority, or at all events the sanction and assent, of the said William Dixon, the said William Smith Dixon, the said William Johnston, and the said Walter Mackenzie, and the said testamentary trustees, and the documents so signed by him were honoured by the firm without any question whether they were onerous or gratuitous. It was universally believed by all persons engaged in the trade, and was the fact, that the said John Campbell had authority to sign the said firm as he did. (Cond. 12) Accordingly, down to 1866, the said John Campbell continued, with the full knowledge and sanction of the said William Dixon, during his life, and thereafter of his said trustees and of William Smith Dixon, to do every act and exercise every power connected with the commercial department of the said business as fully as could have been done by themselves. In particular, the said John Campbell did everything which required to be done in connection with the disposal and delivery of the Govan and Calder pig-iron made at the said works, and he alone granted all documents required by the usage of the trade in connection therewith, including the writing of letters, the making out of invoices, the indorsing and granting of delivery orders, and makers' obligations for delivery of pig-iron, and the raising of money by pledging iron warrants, all which were uniformly signed by him on. behalf of the firm of ‘William Dixon.’ His mode of signature was ‘ for William Dixon, John Campbell,’ and this was the only signature known, at all events since the year 1841, to purchasers of or dealers in iron in Glasgow. The pursuer believes and avers the trade never once saw the signature of William Dixon, William Smith Dixon, William Johnston, Walter Mackenzie, or any of the said testamentary trustees, to any document or letter relating to business transactions in pig-iron. When persons called at the counting-house in Glasgow with reference to pig-iron contracts the said John Campbell was generally the only person whom they saw, or if either the said William Dixon or his trustees, or his son, the said William Smith Dixon, were found there, they invariably referred to the said John Campbell as the person alone authorised to transact business in such iron. The defenders truly withdrew from the superintendence and control of the commercial department of the business, and delegated the same exclusively to the said John Campbell, with all the powers and authorities which they themselves possessed.”

The defenders, in answer to these statements, admitted that John Campbell was in the employment of William Dixon as cashier and salesman of pig-iron in Dixon Street, with authority to sell pig-iron, and that he had granted obligations for the delivery of iron sold, which were honoured by his employers.

The pursuers set forth (Conds. 13, 14, and 15) the usage of the iron trade as to the purchase and transfer of iron as follows:—“On a sale being completed the ironmaster either at once transfers the iron in his books to the credit of the purchaser, or at least does so when the price is paid. If the purchaser wishes to have immediate delivery he passes an order of delivery on the ironmaster in favour of a third person, in the form of an order or request to deliver to such third person, or his order, the quantity specified in the order, and, in accordance with the usage of trade during said period, the ironmasters have uniformly given effect to such delivery orders. When immediate delivery is not required by the purchaser, but he wishes to have a voucher which he may use with his banker or otherwise, he obtains from the ironmaster documents, called in the trade makers' obligations or pig-iron scrip, expressed in the following or similar terms, viz.:—“( Place and date) I hold at the credit of … . and will deliver to his order on demand, free on board, at … ( quantity) tons ( quality and brand) pig-iron.” The obligations in this form bear the signature of the ironmaster, and both delivery orders and obligations are and have for many years been known to and recognised by the trade as importing that the price of the iron has been paid or settled for to the satisfaction of the granter. For many years past, according to the universal usage and custom of the trade, such obligations, indorsed by the purchaser or grantee, have, in the knowledge of the defenders and the others persons who from time to time constituted the firm of ‘William Dixon,’ been dealt with as giving to the holder right to the iron therein mentioned. On such indorsed obligation or such indorsed delivery order being intimated to the ironmaster, the iron has, in the knowledge of the defenders and others foresaid, been in use to be delivered; and if immediate delivery is not required by the person lodging the document, as is most frequently the case, the iron has been in use to be transferred to his credit in the ironmasters' books. Prior to the year 1850, and for a period of several years, the said firm of ‘William Dixon’ was in use to grant makers' obligations undertaking to deliver iron to the person holding the document. These documents were invariably signed ‘for William Dixon, John Campbell.’ After that date, and it is believed in consequence of a litigation which arose as to the effect of obligations in favour of the bearer, the said firm discontinued to issue such documents. Towards the end of 1865, however, the iron market throughout Great Britain became unusually active, and the defenders' said firm of ‘William Dixon,’ as a part of their ordinary business transactions, issued makers' obligations for iron in the terms specified in the preceding article; and throughout that year the said firm thus issued makers' obligations for many thousands of tons of iron, and the. trade had large and important transactions on the faith of such obligations granted by the defenders' firm for the delivery of the iron. During this period the defenders' firm were in use to grant acknowledgments or obligations for delivery of pig-iron in favour of third parties, to whom the original holder of the firm's obligation had transferred his right thereto by indorsation or delivery order. The defenders, as ironmasters, knew that, according to the usage of

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trade and the invariable practice followed in the conduct of their own business, the delivery orders and the obligations for delivery granted by the said John Campbell for their behoof as aforesaid, imported to all persons dealing with them that the price of such iron had, previous to the issue of the documents, been paid or settled for to the satisfaction of the granters. Accordingly, the documents so signed were taken and recognised by the trade as proving that the price of the said iron had been already paid or settled for, and the said documents were afterwards uniformly given effect to by the defenders, and the obligations therein expressed fulfilled by them down to the date of the failure of ‘Campbell Brothers' after mentioned.”

All these statements the defenders denied.

In the year 1858 a business was established in Glasgow by David Campbell, iron-broker there, and John Campbell junior, merchant in London, both sons of John Campbell. This new concern was a branch of a house previously established in London by the same persons. The firm was “Campbell Brothers,” and their business consisted in the buying and selling of iron. This firm failed in May 1866, and were sequestrated. The pursuer averred that—(Cond. 17) Campbell Brothers had an unlimited credit with “William Dixon” for the purchase of pig-iron, and were in the habit of receiving from the firm of “William Dixon,” through John Campbell, obligations or scrip notes in the form of that given to the pursuer for iron which had not been paid for by them, for the purpose of obtaining loans thereon, it being understood between the firms of “William Dixon” and “Campbell Brothers” that all such obligations or scrip notes should be binding on the firm of “William Dixon,” and should be carried into the general account between the firms. The practice of granting these obligations or scrip notes was in fact resorted to by the firm of “William Dixon” as a mode of supplying Campbell Brothers with funds, and maintaining their credit without themselves advancing money, and was adopted with the knowledge and sanction of the defenders.”

All this the defenders denied, and they explained that subsequent to the sequestration, and after a litigation which resulted in their favour, they “agreed to bear a portion of the loss which the parties had sustained through the fraud of John Campbell and Campbell Brothers, but, at the same time, it was expressly stipulated that the pursuer should not be entitled to the benefit of this agreement except upon the condition therein mentioned, with which condition he has hitherto failed to comply, the defenders throughout having declined to acknowledge any liability under the pretended obligations referred to.”

The pursuers further averred (Cond. 24)—“In the beginning of May 1866 Campbell Brothers applied to the pursuer, through David Campbell, for an advance or loan on 750 tons of pig-iron, mixed numbers, belonging to them in the hands of “William Dixon,” and offered as security the makers' scrip, or obligation for that amount, in favour of the pursuer. The amount of the loan asked for was £1875, being at the rate of 50s. per ton, while the market value of such iron at that date was 56s. per ton. The actual cost of making a ton of iron at that time was about 50s. or 51s. perton. (Cond. 25) The said David Campbell, in requesting the said loan on behalf of his said firm, distinctly stated to the pursuer that the sum was required for two days only, and that if it should not then be taken up by his firm he had arranged for its being taken up by the makers, the said ‘William Dixon,’ themselves. In reliance upon these statements, and in the knowledge of the connection and course of dealing between ‘William Dixon’ and Campbell Brothers above explained, the pursuer agreed to grant the said loan; and accordingly, on 11th May 1866, he handed to the said David Campbell, for behoof of his said firm, the sum of £1875, and received in exchange therefor the scrip note or obligation of ‘William Dixon’ in favour of his own firm for 750 tons of pig-iron. The said scrip note or obligation is in the following terms, viz.:—‘Glasgow, 11th May 1866. I hold at the credit of Messrs J. B. Hamilton and Crawford, and will deliver to their order on demand, seven hundred and fifty tons pig-iron, mixed numbers, Calder or Govan brand, in my option. For William Dixon, John Campbell.’ (Cond. 26) In granting the said loan the pursuer acted in bona fide, and in reliance and in the belief that, in conformity with the invariable usage and understanding of the trade, such scrip or makers' obligations as that which he obtained were only issued for and as representing iron, the value of which had already been paid to the makers, or for which they had otherwise obtained an onerous consideration. In fact, the said obligation or scrip note was one of those which had been issued by the firm of ‘William Dixon’ for the purpose of enabling Campbell Brothers to obtain an advance of money on it, and it has been taken into account in the settlement of accounts between the two firms.”

The defenders “denied that there ever was any business connection of any kind between the firm of William Dixon and Campbell Brothers, except as sellers and purchasers of iron. Denied that the document founded on was issued by the firm of “William Dixon” for the purpose of enabling Campbell Brothers to obtain an advance of money on it, or for any other purpose.”

The pursuers further averred (Cond. 27) “Campbell Brothers stopped payment on 18th May 1866, and on 28th May of that year their estates were sequestrated. (Cond. 28) After the stoppage of Campbell Brothers it was ascertained that they had obtained advances from a large number of iron merchants in Glasgow, as well as from one or more of the banks, on the security of delivery orders and makers' obligations for Calder and Govan iron; and it was alleged by the defenders that the said obligations did not appear in their books, and that no money had been granted therefor. They also gave intimation that until the facts could be fully ascertained and their legal position known, they would decline fulfilment of any of the delivery orders tendered to them, and even of the makers' obligations granted by ‘John Campbell, for William Dixon.’

The defenders “admitted that none of the obligations referred to were entered in the defenders' books, none such having been undertaken by the defenders, and that the defenders declined to acknowledge the same.”

The pursuer maintained, that in consequence of the loan not having been repaid by Campbell Brothers, he was entitled to delivery of the 750 tons of pig-iron, and to sell the same, and apply the proceeds thereof in extinction of the amount of the loan. The defenders refused either to deliver

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the iron or to pay the amount demanded, and explained that they had no transaction with the pursuer or his firm of Hamilton and Crawford, and that the pretended obligation founded on was not granted by them or issued in implement of any sale of pig-iron, or of any transaction between the pursuer's firm and themselves, but that it was signed by John Campbell, and delivered by him to Campbell Brothers fraudulently, and without value to the defenders, and without their authority.

The pursuer pleaded. “(1) The defenders, the firm of ‘William Dixon,’ and the defenders the sole partners of that firm, are bound to implement the obligation above libelled and undertaken by the firm as aforesaid. (2) The said John Campbell having granted the said obligation within the scope of his employment, the defenders are bound to implement the same. (3) The said John Campbell having granted the obligations libelled on behalf of the defenders, and with their authority, the defenders are bound to implement the same. (4) The defenders having acknowledged and fulfilled numerous similar obligations granted on their behalf by the said John Campbell, and having thus led the trade, and in particular the pursuer, to believe that the said John Campbell had authority to grant such obligations, the defenders are not entitled to repudiate the same. (5) The defenders having withdrawn from the superintendence and control of the commercial department of the business, and delegated the same to the said John Campbell, are not entitled to repudiate obligations such as that libelled, granted by him while occupying that position. (6) The defenders having, in breach of their obligation, refused to deliver the iron in question, the pursuer is entitled to any loss and damage which he may sustain if the iron when delivered shall be below the price requisite to satisfy and pay his said loan. (7) Failing the defenders making delivery of the said iron, the pursuer is entitled to have decree for the whole loss and damage thereby occasioned to him, with interest and expenses as libelled.”

The defenders pleaded “(1) The pursuer's averments are not relevant or sufficient in law to support the conclusions of the action. (2) The defenders not being in fact under any contract with or obligation to deliver iron to the pursuer or his firm, the action is unfounded. (3) The document libelled as importing a contract or obligation, implement of which is sought, or otherwise for breach of which damages are demanded, having been granted by John Campbell without authority, and gratuitously and fraudulently, does not bind the defenders, and affords no action to the pursuer against them. (4) The pursuer has no good cause of action against the defenders, and they are entitled to absolvitor. (5) The defenders are only answerable qua trustees, and not personally, for any liability which may attach to them in the premises.”

The Lord Ordinary pronounced the following interlocutor and note:—

“ Edinburgh, 14 th June 1873.—The Lord Ordinary having heard the counsel for the parties and considered the closed record, before answer allows the parties a proof of their respective averments, and to the pursuer a conjunct probation: Grants diligence to both parties to cite witnesses; and appoints the proof to be led before the Lord Ordinary on a day to be afterwards fixed.

Note.—The defenders plead that the averments of the pursuer are not relevant or sufficient in law to support the conclusions of the summons; and they maintain that there is no real difference between the averments of the pursuer in the present record and those which were found irrelevant in the case of Colvin v. William Dixon, 5 Macph. 603. The Lord Ordinary has not been able to take that view of the pursuer's averments, and he considers that these averments are materially different from those made by Mr Colvin in his action against the defenders. The defect in Colvin's case was that he did not aver that there was any onerous con-, tract or consideration on the part of the firm of ‘William Dixon,’ in respect of which the obligation or pig-iron scrip held by him was granted, and which he was entitled to enforce; and that there was no sufficiently specific averments that the manager of that firm, by whom the obligation bore to be subscribed for the firm, granted it within the scope of his authority, express or implied, so that it was obligatory upon the firm.

“In the present case the averments of the pursuer are not only much more specific and extensive than those in the case of Colvin, but they are materially different. He avers that none of the partners of William Dixon from 1849 to 1866 ever took any part in the management of the commercial business of the firm; and that the same was exclusively entrusted to their managing clerk, John Campbell, who was the general and sole representative of the firm in their pig-iron business, and who signed for the firm, with the authority or sanction and assent of the partners. The pursuer further avers (Cond. 12) that, accordingly, John Campbell, down to the year 1866, continued, with the full knowledge and sanction of William Dixon. and thereafter of his trustees, to do every act and exercise every power connected with the commercial department of the business as fully as could have been done by themselves; and, in particular, that he did everything in connection with the disposal and delivery of the pig-iron made at the works; and, alone, granted all documents required by the usage of trade in connection therewith, including makers' obligation or scrip, and the raising of money by pledging iron warrants, all which were uniformly signed by him on behalf of the firm of “William Dixon.”’ It is also averred that the defenders delegated the superintendence and control of the commercial department of the business to Campbell, with all the powers and authorities which they themselves possessed. It is also averred (Cond. 13), that obligations and delivery orders for iron have for many years been known to and recognised by the trade as importing that the price of the iron has been paid or settled to the satisfaction of the granter; that ‘for many years past, according to the universal usage and custom of the trade, such obligations, indorsed by the purchaser or grantee, have, in the knowledge of the defenders, and the other persons who from time to time constituted the firm of “William Dixon,” been dealt with as giving to the holder right to the iron therein mentioned;’ and (Cond. 15) that the defenders knew that, according to the usage of trade and the invariable practice followed in the conduct of their own business, the delivery orders and obligations granted by Campbell for their behoof imported to all persons dealing with them that the price of such iron had, previous to the issue of the documents, been paid or settled to the satisfaction of the granters. The pursuer further

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avers (Cond. 17), that the firm of Campbell Brothers, through whom he acquired the obligation libelled on, was intimately connected with the firm of William Dixon, with whom they had an unlimited credit for the purchase of pig-iron, and from whom, through John Campbell, they were in the habit of receiving obligations or scrip notes similar to that founded on by the pursuer, ‘for iron which had not been paid for by them, for the purpose of enabling them to obtain loans thereon, it being understood between the firms of William Dixon and Campbell Brothers that all such obligations or scrip notes should be binding on the firm of “William Dixon,” and should be carried into the general account between that firm and Campbell Brothers. The practice of granting these obligations or scrip notes was, in fact, resorted to by the firm of “William Dixon,” as a mode of supplying Campbell Brothers with funds, and maintaining their credit without themselves advancing money, and was adopted with the knowledge and sanction of the defenders.’

The pursuer also states (Cond. 23) that he had many transactions with Campbell Brothers, and that he was cognisant that they were supported by the firm of ‘William Dixon,’ and were in the habit of holding and issuing obligations or scrip notes of William Dixon, which that firm had always honoured. He avers (Conds. 24 and 25) that in the knowledge of the connection and course of dealing between William Dixon and Campbell Brothers, above explained, he, on the application of Campbell Brothers, lent them £1875 on 750 tons of pig-iron in the hands of William Dixon, and belonging, as alleged, to Campbell Brothers, and that he received from them in security the obligation or scrip note libelled on: And in the 26th article of his Condescendence the pursuer makes the following averment: ‘In granting the said loan, the pursuer acted in bona fide and in reliance and in the belief that, in conformity with the invariable usage and understanding of the trade, such scrip or makers' obligations as that which he obtained were only issued for and as representing iron the value of which had already been paid to the makers, or for which they had otherwise obtained an onerous consideration—in fact, the said obligation or scrip note was one of those which had been issued by the firm of “William Dixon” for the purpose of enabling Campbell Brothers to obtain an advance of money on it, and it has been taken into account in the settlement of accounts between the two firms.’

These averments are so different from those made in Colvin v. William Dixon that the Lord Ordinary is unable to give effect to the argument of the defenders that there is no difference between that case and the present, and to their plea on the authority of that case that the pursuer's averments are irrelevant. According to the view which he takes of these averments, as at present advised, the action cannot be thrown out as irrelevant. He does not think it expedient to give any opinion at this stage of the cause upon the relevancy of each of the various grounds of action therein set forth and above referred to, and he considers that the proper course is to allow a proof before answer, which will reserve the full effect of the defenders' plea of irrelevancy until the case comes to be advised on the proof. When the facts are ascertained, the question as to their relevancy to support the conclusions of the summons will then more properly arise for disposal than it does at present.”

The defenders reclaimed.

Argued for them—The averments here are made certainly more distinct that in Colvin v. Dixon, but they are not sufficient. [Quotes Lord Deas' opinion in Colvin v. Dixon.] Suppose the manager of a shop who has full authority to control and carry on the whole business were to give as a present to his son a valuable gem, it would require a most distinct averment of knowledge and consent on the part of the principal to such a transaction in order to make him liable. There would be no difference in the case of an obligation to deliver the gem. Such a case is prima facie theft. The answer, and the only answer, is, “you authorised it,” but of this there must be a distinct personal averment.

The pursuer (respondent) argued—We have made our averments much more specific than they were in Colvin v. Dixon. [Lord Neaves—Are you suing ex contractu?—Yes. What contract? or have you succeeded to another's contract, if so assignatus utitur jure auctoris?] We were led to believe that there was something really existing between the parties, and in the Condescendence the course of dealing is set forth. If these acts belong to a class of acts which are authorised, they are binding in a question between an external person and the mandant; ( Barwick v. English Joint Stock Bank and opinion of Willes, J. there, p. 265.) As to the authority of a partner, consult Bell's Com. and Union Bank case. In a question of the amount of authority given to a clerk, a proof before answer was allowed; ( Galloway v. Grant.)

Authorities— Colvin v. Dixon, 5 Macph. 603; Barwick v. English Joint Stock Bank, 2 Exch. L, R. 259, May 18, 1867; Union Bank v. Maclin & Sons, 10 Scot. Law Rep. 301, March 7, 1873; Galloway v. Grant, 19 D. 865 and 20 D. 320; Orr & Barber v. Union Bank, 1 Macq. 513; Bell's Com. i. 483, ii. 611; Smith (Merc. Law) 125, 7th ed.; Ersk. 3, 3, 39; Kingsford v. Merry, 1 H. and N. 503.

At advising—