Scottish Court of Session Decisions

On these questions the Lord Ordinary is of opinion that the pursuer has established his averments on record.

On the 2d October 1872 Messrs James Annan & Co., who became bankrupt on the 18th of the same month, were under obligation to the pursuer to deliver him 980 spindles of yarn, being part of a quantity of 2000 spindles purchased in August previously, to be delivered when required. The pursuer, who had granted his acceptance for the price, had repeatedly demanded delivery of the yarn. He had before the 2d October received two delivery orders, one upon the North British Railway Company at Dundee, and the other upon Mr James Guthrie, commission broker there, both of which had turned out worthless, as neither of these parties held yarn belonging to Annan & Co. On that day he called at Annan & Co.'s premises, pressing for delivery, and insisted that they should give him a quantity of yarn, which he saw they had in their warehouse. The defender, who is connected by marriage with both parties, was therefore waited on by Mr Annan, and after some conversation it is proved, in the opinion of the Lord Ordinary, that he became a party to the arrangement, which the Lord Ordinary has found by the preceding interlocutor was entered into, and that in consequence the pursuer refrained from taking any legal steps against Annan. There is a conflict between the evidence of the pursuer and defender, who are the only persons able to speak to what took place at the meeting on the 2d October, (Mr Annan having become insane) but on the whole the Lord Ordinary is satisfied that the pursuer was more accurate in his recollection of what occurred, and he is completely corroborated by the documents written on the day of the meeting, and which refer to the arrangement made, and were received by the defender without any observation to the effect that they were not in accordance with what had been agreed to. The agreement was, not that the pursuer should accept the tow to be held by the defender as a substitute for the yarn which he had purchased, but that the tow should be held for the pursuer's account until Mr Annan should deliver the yarn, or pay its price or value to the pursuer. The defender got the delivery order and the pursuer's letter on the 3d of October. His place of business is about a mile from Dairsie Station, and the order might have been intimated to the station-master at once, but it was never intimated at all, and in consequence Annan & Co. were enabled without any impediment to obtain delivery of the tow which was forwarded between the 3d and 8th October, and improperly applied for and took delivery of it. The Lord Ordinary is of opinion that the defender's failure to intimate the delivery order was a breach of his undertaking to the pursuer, and that if the order had been duly intimated in fulfilment of the defender's obligation the station-master would have been able to retain either the whole of the tow or a large part of it, and would have been bound to do so. It was pleaded for the defender that Annan & Co. having at once taken delivery in the course of the 4th October of a great part of the tow forwarded immediately after its arrival on that day, the intimation of the delivery order would have been of no avail, but the Lord Ordinary is of opinion that the defender was bound under his undertaking to have intimated the delivery order on the morning of the 4th October, in which case he would have detained all the tow, and it is clear that intimation even between that date and the 7th would have laid an embargo on a considerable quantity of the goods.

The remaining question is, whether the pursuer has suffered damage from the defender's failure to fulfil his undertaking? On this point it was argued for the defender, that even if he had detained and taken possession of the tow, the pursuer would in the end have been no gainer, for Annan & Co.'s bankruptcy having followed within sixty days, the tow could not have been retained for the pursuer's security, but must have been given up to their creditors, or to any one of them (the defender himself being one) who might challenge the transaction as a preference contrary to the Act 1696, and that the transaction was truly the giving of security for a prior debt, to the prejudice of other creditors. The Lord Ordinary deems it unnecessary to form a definite conclusion on the question whether, if the goods had been detained and held by the defender till Annan & Co.'s bankruptcy occurred, the pursuer could have retained them in the security of his claim or debt in a question with that firm's creditors. His opinion rather is that the creditors could have insisted on the goods being given up to them. But it is not the pursuer's case that he wished or expected as the result of the fulfilment by the defender of his obligation that the goods should be kept even for the time which elapsed before the sequestration. His object was to put a pressure on Annan & Co. which would induce them immediately to fulfil in its terms their obligation to him, by delivering the remainder of the yarn they had purchased, or paying him its value; and if either of these things had been done, no question of illegal preference could have occurred. The goods were to be held by the defender till delivery of the yarn, or payment therefor, and the defender himself states that he expected delivery would be made without any delay. It is obviously, in Annan & Co.'s circumstances, a powerful spur or incentive to make such delivery that by doing so they would remove an embargo on a valuable parcel of goods to be used in their manufacture; and the probability is that if the defender had fulfilled his undertaking and detained the goods, the pursuer would have got delivery of his yarn or payment of its price from this cause. The security given by Annan & Co. on the 2d October was not at its date an illegal preference, for the bankrupts were then carrying on business as before, and, though in difficulties, did not contemplate bankruptcy, and when the defender, founding on the fact that bankruptcy occurred within sixty days after, maintained that thereby the security became a preference, it is, in the Lord Ordinary's opinion, a complete answer, that in the meantime, if the defender had fulfilled his obligation, the pursuer might, and probably would, have had his contract duly fulfilled, and Annan & Co. would have obtained delivery of the tow given as security. The Lord Ordinary is therefore of opinion that the pursuer sustained loss and damage to the amount claimed through the defender's failure to fulfil his obligation. There is some evidence about a quantity of tow held for the pursuer by the bankrupt's brother, but it appears to the Lord Ordinary that the pursuer never made any agreement to take this tow, and that he is not bound to do so. He must, of course, give to the defender any rights he may have to this or any other security against the bankrupt's estate on receiving payment of his present claim.”

The defender reclaimed.

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