Scottish Court of Session Decisions

This was an action raised at the instance of the trustees and executors of the deceased John Neilson, engineer and ironfounder, Oakbank Foundry, Glasgow, acting under his trust-disposition and settlement, against the accepting and acting trustees and executors of William Neilson, iron and coal master, Mossend, son of John Neilson. The pursuers concluded for payment of £1798, 10s. 4 1 2d., sterling, with interest thereon at the rate of 5 per cent. per annum from 23d April 1843 till payment.

The action was raised in the following circumstances:—From the year 1843 till the year 1852 the said John Neilson and the said William Neilson were sole partners of the Mossend Iron Company, and carried on business as iron and coal masters in Glasgow and elsewhere. When the partnership was arranged on 28th April 1843 each partner was, under the contract, to put £2000 into the business. William Neilson at that date granted to his father the following letter, which was founded on by the pursuers in this action:—“John Neilson, Esquire, engineer, Glasgow. My dear father, I, William Neilson, engineer, residing at Bellshill, referring to the contract and agreement betwixt us and others interested, and subscribed by me this day, as to the transfer of the stock and assets of the business at Mossend, carried on by me, to the new company called the ‘Mossend Iron Company,’ whereof we are partners, under which contract the cumulo sums standing at your and my credit in the balance-sheet of the old concern are agreed to be carried, and accordingly are carried, after making certain deductions therefrom, to account of our input capitals of Two thousand pounds each in the said new company, Do hereby acknowledge and declare that, although it thus appears in the books of said Company that we have respectively advanced said sums of input stock, yet the fact is that the sum actually advanced by me was Two hundred and one pounds nine shillings and seven pence 1 2d. sterling, and I am consequently indebted and owing to you the difference between said capital at my credit as aforesaid and the sum actually advanced by me as aforesaid, namely, the sum of One thousand seven hundred and ninety-eight pounds 10/4 1 2 sterling.”—[ Here followed a testing clause.]

In 1852 this partnership was dissolved as from 31st May 1851, and in view of arrangements for the constitution of a new partnership, an agreement, dated 22d September 1852, was entered into between John, William, Walter, and Hugh Neilson, the two persons last named being other sons of John Neilson. In the fifth article of this said agreement this provision was made:—“It is hereby mutually agreed that the said Mossend Iron Company, consisting of

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Walter Neilson, William Neilson, and Hugh Neilson, shall immediately, if not already done, bring the books of the said old company to a balance as at the date of the said dissolution on the said 31st day of May 1851, and shall cause a valuation of the whole of the capital, stock, assets, and all other property of the company, to be made as at that date, and upon this being done the said John Neilson shall be credited by the saids Walter Neilson, William Neilson, and Hugh Neilson, in the books of the said new Mossend Iron Company, with the sum of £417, 1s. 5d., as the agreed-on worth and value of his right to and interest in the stock, property, and assets of the said old Mossend Iron Company, and the said John Neilson shall thereafter have no other claim whatever against the said company, or his partner William Neilson, or the said new company and the partners thereof; the said sum of £417, 1s. 5d. being hereby held and agreed to be in full of all claim and demand competent to the said John Neilson for and in respect of his interest in said old company.” The eighth article was in the following terms:—“As the said John Neilson sometime ago negotiated with the Bank of Scotland a loan to the extent of £7500 to enable the business of the Mossend Iron Company (of which he and the said William Neilson were then the sole partners) to be carried on, and in security of the repayment of which he conveyed his property of Oakbank and another heritable property, it is hereby specially provided and agreed upon that on the death of the said John Neilson, or as soon as possible thereafter, the value of the share or shares falling payable to his said sons Walter, William, and Hugh, under his, the deceased's, estate shall be ascertained, and thereupon the said Walter, William, and Hugh Neilson shall be allowed credit therefor, and be bound to pay over to the said John Neilson's trustees, or others representing him, the balance or difference only between the amount of such share or shares and the said sum due under said bond, the said parties coming in right of the said John Neilson being bound to make up the remainder: But declaring in like manner that the said balance or difference shall not be exigible from the saids Walter, William, and Hugh Neilsons for the like period of five years from the decease of the said John Neilson.”

John Neilson died in 1855, leaving a settlement dated in 1849, and having codicils thereto, one of which was dated in 1853. This settlement contained no reference to the acknowledgment of 1843, or the debt therein referred to. His trustees (the pursuers) thereupon entered on the management and realisation of his estate, and William Neilson received about £3000 as beneficiary under his father's settlement. William Neilson died in 1882, leaving a settlement by which he appointed his widow and certain others, to be defenders in this action, his trustees. After his death disputes arose between the pursuers and Mrs Neilson, widow of William Neilson, as one of the trustees on his estate, in regard to his interest in the Mossend Iron Company. It was after these disputes had arisen that the pursuers first intimated their present claim, founding on the acknowledgment for £1798, 10s. 4 1 2d. of 1843, which they averred they had only discovered after the death of William Neilson.

Separate defences were lodged for William Neilson's widow and for the other trustees.

The defenders averred that the whole accounts between John and William Neilson arising out of their partnership from 1843 to 1852 had been settled and adjusted at the making of the agreement in 1852.

The pursuers pleaded, inter alia, “the extinction of the obligation founded on can be proved only by writ or oath.”

The defenders William Neilson's trustees (other than Mrs Neilson) pleaded—“ (1) Mora. (3) In the circumstances stated, the document founded on not being sufficient to instruct the alleged debt, or to impose liability therefor against the said William Neilson's trustees, decree of absolvitor ought to pass in their favour, with costs. (4) The sum sued for not being resting-owing, the said trustees and executors, including these defenders, are entitled to absolvitor with costs.”

Mrs Neilson pleaded, inter alia—“The present claim is discharged by said agreement, dated 22d September 1852.”

On the 23d May 1883 the Sheriff-Substitute ( Spens) pronounced the following interlocutor:— “Finds that by letter of acknowledgment, dated 25th April 1843, the deceased William Neilson acknowledged his indebtedness to his father, the deceased John Neilson, to the extent of £1798 odds, said sum being the difference between the amount of capital appearing in the books of the Mossend Iron Company as advanced by the said William Neilson and the sum actually advanced by him: Finds that in 1852 the partnership between John Neilson and William Neilson was dissolved as on 31st May 1851; and on 22d September 1852 a new contract of copartnery was entered into between Walter, William, and Hugh Neilson; and of the same date the agreement was entered into by the said John Neilson, Walter Neilson, William Neilson, and Hugh Neilson: Finds, under reference to note, that if, as at said last mentioned date the claim for the debt acknowledged in 1843 by the said William Neilson still subsisted, it was discharged by the said John Neilson: Sustains accordingly the fourth plea-in-law stated for Mrs Neilson, as also the fourth plea-in-law stated for James Rodger Thomson and James Neilson [William Nelson's trustees]: Finds it unnecessary to consider the other defences, and assoilzies the defenders from the craving of the petition: Finds the defenders entitled to expenses, &c.

“ Note.—This case involves questions of importance as well as a large sum of money. But if I am right in the view I have taken, a single point is decisive of the case. I adopt the construction which is put upon the fifth article of the agreement by the agent for Mrs Neilson. That article is in these terms:—[ His Lordship here quoted the article, ut supra.] At 22d September 1852 William Neilson had been in partnership with his father for a good many years. At this date the father proposed, or it was previously arranged, that William, Walter, and Hugh Neilson should carry on the Mossend Iron Company. In 1843 I assume (though this is not admitted by defenders) that the letter of acknowledgment was duly delivered by William Neilson to his father. Prior to 1852 William may or may not have diminished this debt, but at the

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date of the agreement referred to there is in my opinion nothing at all extraordinary in the father agreeing with his son William, when the arrangement was made that the father should retire, and that other two sons should be taken into the business, to discharge any claim which he might have in connection with capital appearing in the books to be advanced by the son, but which in reality had been contributed by the father. The letter of acknowledgment was a back-letter to the father with reference to the real position of the capital appearing in the Mossend Iron Company's books to the credit of William Neilson. The contention of the pursuers’ agent is that the agreement referred to is solely with reference to the Mossend Iron Company and the state of matters as disclosed in the books of that company; but that the debt admitted in the letter of acknowledgment is one solely of a private character, and absolutely distinct from questions connected with the business. I am bound to say that I cannot adopt this construction. A certain amount of capital was standing in William's name in the books; the real position was, if pursuer was right, that at that date that capital appearing in William Neilson's name had been chiefly contributed by John Neilson, and had not since the letter of acknowledgment in any way or to any extent been affected by payment of any sum. It seems to me that it was unquestionably a company affair. I observe that Hugh Neilson is one of the pursuers; and I suppose that he is the Hugh Neilson who was taken into partnership on 22d September 1852. It may be the case that his father said nothing to him about this claim. Possibly enough both father and son may not have wished the other two sons and brothers to know that the father intended to give up the claim in question. If, however, the claim then still subsisted, I agree with Mrs Neilson's agent that no apter words could have been conceived (unless there had been an unequivocal reference to the subject) than those which are used in the agreement in question to discharge the claim he had against William in connection with the capital stock appearing at William's name, but really contributed by himself—‘the said John Neilson shall thereafter have no other claim whatever against the said company or his partner William Neilson.’ John Neilson admittedly died in 1855, leaving a trust-disposition and settlement. It is true that that settlement is dated in 1849, but according to pursuer's statement there are codicils subsequent to John Neilson's retiral from business, one of them being 31st August 1853. The pursuer's title is derived from that trust-settlement. It is only now, after a lapse of twenty-eight years, that the letter of acknowledgment has turned up. The settlement of the deceased is not produced, but it is not disputed that no reference whatever was made in it (either in the body or in codicils) to the debt in question, otherwise the matter would have been settled long ago, and, at all events, would have been founded upon by the pursuers in this case. The debt of £1798, with twelve years’ interest, would have amounted to a sum of at least £3000 in 1855. It is most unlikely, to say the least of it, that unless John Neilson had intended to discharge the claim, and understood that he had done so, it should not have been referred to in the will, or at all events in a codicil after his retiral from business. Further, it is not practically disputed that at John Neilson's death a certain amount of succession came to William and was paid by the pursuers or their predecessors, as trustees of the deceased John Neilson. If William Neilson took payment of this money, keeping back the fact that he was really due the estate a considerable sum, he was guilty of fraudulent conduct. Fraud is not to be presumed, and I prefer to construe the agreement not only in the way which seems to me the natural one, but in a way which is consistent with the good faith of a dead man.”

The pursuers appealed to the Court of Session.

Argued for them—It was sufficient for them to show their document in order to entitle them to decree. It acknowledged a debt, and in the absence of any discharge competently proved, that debt must be held still subsisting. The clause founded on by the defenders in the agreement dealt with the partners qua partners, and did not apply to this private debt.

Argued for the defenders— Here there was sufficient for a discharge supported by corroborative circumstances. The clause in the agreement dealt with copartnery matters; but the only partners were father and son. It was thus reduced to a family arrangement.

Authorities— Cuninghame v. Boswell, May 29, 1868, 6 Macph. 890; Haldane v. Speirs, March 7, 1872, 10 Macph. 537.