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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Miller (Trustee of Allan & Co.) v. Gunn & Co [1883] ScotLR 20_677 (20 June 1883)
URL: http://www.bailii.org/scot/cases/ScotCS/1883/20SLR0677.html
Cite as: [1883] ScotLR 20_677, [1883] SLR 20_677
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SCOTTISH_SLR_Court_of_Session
Page: 677↓
Court of Session Inner House Second Division.
[Sheriff of the Lothians.
v.
Facts:
A merchant, in consideration of an advance of £100, granted in favour of the person making the advance a document bearing to be a receipt for that sum as the price of certain goods there and then sold, but “to be returned to me upon repayment of the above amount.” Thereafter he became bankrupt, and was sequestrated, and the goods which had remained in his possession till after the sequestration were removed by the creditor. In an action against him by the trustee for delivery of the goods as falling under the sequestration— held that the transaction was a sale with a right of pre-emption in the seller's favour, and that the goods did not fall under the sequestration.
On 13th December 1880 Mr Allan, sole partner of Allan & Co., boat-builders in Leith, granted the following document in favour of Mr Gunn of William Gunn & Co., shipping agents, Granton—
“Leith, December 13th, 1880.
I have this day sold William Gunn, of Granton, sixty-nine nets, buoys, and fittings now lying in store in St Ninian's Church building, for the sum of One hundred pounds stg., say £100. The said nets, buoys, and materials to be returned to me upon repayment of the above amount.” £100
“Received the above amt. D. Allan
13·12·1880.”
Allan & Co. had previously been receiving considerable advances from Gunn & Co. to assist them in completing vessels which they were building. The nets were allowed to lie in the premises named in the document quoted above, which were rented by Messrs Allan & Co. On 19th October 1881 the estates of Allan & Co. were sequestrated, and the pursuer Hugh Miller, C.A., was subsequently appointed trustee thereon. On the 20th October, the day following the sequestration, Gunn & Co. sent for and removed the nets. The trustee raised this action against William Gunn & Co. for the purpose of having them ordained to deliver up to him, as trustee, the nets as belonging to the sequestrated estates.
He pleaded —“The nets, buoys, and fittings having been the property and in possession of D. Allan & Co. at the date of their sequestration, and having been illegally taken possession of by the defenders thereafter, decree should be granted ordaining the defenders to deliver them to the pursuer.”
The defenders averred that as they required nets in six months' time they had agreed to buy them for £100 from Allan & Co.; that Mr Allan had asked a larger sum, but that they had refused to give more, but had agreed that should the amount be repaid before they might come to use the nets, they should be returned, and this understanding
Page: 678↓
was given effect to in the concluding clause of the above receipt. They pleaded—“The nets, buoys, and fittings not having been the property of D. Allan & Co. at the date of their sequestration, but, on the contrary, having been the property of the defenders, the present application ought to be dismissed.”
Proof was taken in which David Allan deponed that the sum of £100 was an advance or loan on the nets, and that Gunn & Co. were not given possession of the nets either by delivery of the key to them or otherwise. He also deponed that the last clause was put into the receipt to show that the transaction was a loan. William Gunn on the other hand deponed as follows—“About the time of the transaction in question I was advancing Mr Allan cash on ships that were being built by his firm. One of these ships—‘The Sea Queen’—was sold. On 13th December 1880, when I went to Mr Allan's place, he wanted another advance, which I was not willing to give, because I had already advanced more than the stipulated sum on each vessel. I declined to give him any more advances. I knew about the nets being in the place, and I said, ‘I will pay you £100 for your nets if you will sell them. He said ‘I don't care about doing that unless you give me the option of getting them back.’ They were not to be required for about six months, and I did not make any objection to that. He said he thought they were worth more than I was paying for them. I took the key and looked at the nets. I brought back the key to Mr Allan's office, as there were other goods in the store besides those nets. After I came back I paid the money in the office. I am now shown the receipt which I got. We were not contemplating having to use the nets until the month of June or July, and the option mentioned was given on that account.”
The Mercantile Law Amendment (Scotland) Act 1856 (19 and 20 Vict. c. 60) provides (sec. 1)—“From and after the passing of this Act, where goods have been sold, but the same have not been delivered to the purchaser, and have been allowed to remain in the custody of the seller, it shall not be competent for any creditor of such seller, after the date of such sale, to attach such goods as belonging to the seller by any diligence or process of law, including sequestration, to the effect of preventing the purchaser or others in his right from enforcing delivery of the same, and the right of the purchaser to demand delivery of such goods, shall from and after the date of such sale be attachable by or transferable to the creditor of the purchaser.”
The Sheriff-Substitute ( Hamilton) found it proved that the nets did not form part of the sequestrated estate of D. Allan & Co., on which the pursuer was trustee, but were the property of the defenders—therefore dismissed the petition.
“ Note.—The Sheriff-Substitute reads the receipt dated 13th December 1880 as importing a sale to the defenders of the articles therein mentioned, which are those here in question, at the price of £100, with a right of pre-emption in favour of the sellers, D. Allan & Co., upon payment of the same amount. At the date of the sequestration of D. Allan & Co.'s estate this right of pre-emption had not been exercised, and though the articles still remained in the possession of the bankrupts, that circumstance did not affect the defenders’ right to demand and enforce delivery—Mercantile Law Amendment Act 1856, sec. 1.”
The pursuer appealed, and argued—He was entitled to challenge the removal of the nets as being a fraud on the bankrupt's creditors. The document under consideration was in no sense one of sale. It was nothing more than an attempt to create a security over moveables without possession. The onus lay on the defenders of showing that they were in right of the nets in virtue of a contract of sale.
Authorities— Miller's Trustee v. Shield, March 19, 1862, 24 D. 821; Stiven v. Scott & Lowson, June 30, 1871, 9 Macph. 923.
The defenders replied—The receipt imported a sale to them of the nets with a right of pre-emption in favour of the sellers on payment of the same amount. At the date of the sequestration this right had not been exercised, and though the articles still remained in the bankrupt's possession, under the provisions of the Mercantile Law Amendment Act 1856, sec. 1, they had a right to demand and enforce delivery.
Authority— M'Bain v. Wallace & Co, January 7, 1881, 8 R. 360— aff. July 27, 1881, 8 R (H.L.) 107.
At advising—
Now, I think on the face of that document, the transaction is one of sale and nothing else. The nets remained in the proprietors’ warehouses, and at the date of the sequestration the right of pre-emption had not been exercised. The question then arises, is the trustee in the sequestration entitled to set aside the transaction in respect that the sale was not completed by delivery? It is said that being a sale no delivery was necessary under the provisions of the Mercantile Law Amendment Act, and so the Sheriff has held. Now, I see no reason for doubting that the document expresses the reality of the transaction, for the money was actually paid. It is said the clause of pre-emption reduces it to a security. I do not think so. It is of no moment whatever, and in my opinion it does not destroy the character of the sale. On the contrary, I am of opinion that there was nothing whatever to prevent the buyer from removing the nets when he chose. In the case of M'Bain v. Wallace, in which our judgment was affirmed by the House of Lords, it was said there was a collateral obligation in regard to the amount for which the vessel might sell. But we considered it doubtful if such an obligation ever existed, and the House of Lords adopted our view. I need not, however, go into the facts of that case, because I am of opinion that a clause like this does not affect the character of the transaction as a proper transaction of sale.
Page: 679↓
I do not think, however, after what has been said by your Lordship, and after the case of M'Bain v. Wallace, that I can differ. I confess I have a strong feeling that this was nothing more or less than an attempt to get security for the money lent, but I do not think, having regard to the case of Wallace, that it is proved, and therefore I assume the transaction was a true sale and conveyance.
The Court dismissed the appeal and affirmed the judgment.
Counsel for Appellant— Salvesen. Agent— William Lowson, Solicitor.
Counsel for Respondent— W. C. Smith. Agent— Beveridge, Sutherland, & Smith, S.S.C.