Scottish Court of Session Decisions

By minute of agreement between William Scott and C. J. Alexander, dated 1st and 19th December 1870, on a narrative that the parties were joint-tenants of a colliery at Jawcraig belonging to the Earl of Zetland, that Scott was proprietor of the whole plant, machinery, buildings, and fittings on the colliery, and that Alexander had undertaken, or was about to undertake, certain obligations for behoof of Scott, and to pay certain of his debts and liabilities, and was to work the colliery on the terms contained in the agreement, it was provided that the parties were to hold the colliery, machinery, plant, and lease for behoof of themselves and each other for their respective rights under the agreement, and that the whole machinery and plant was to be purchased by Alexander from Scott at a price to be fixed by valuators, which was, when fixed, to be paid by instalments of at least £500 yearly, making the first payment at Martinmas 1871. Alexander was to pay the rent and implement the other obligations incumbent on the tenants under the lease; to pay interest at five per cent. on the price of the machinery and plant, or on such part as might be unpaid, until paid; also to pay certain royalties on out-put, and a sum of £40 as rent of certain colliers' cottages. The surplus was then to belong to Alexander. By the fifth article it was agreed that the machinery should absolutely vest in the said Charles Jameson Alexander as purchaser at and only on payment of the price, or proportionately and partially to the extent to which the same might be paid, and upon the whole price and interest due thereon at the time being paid by him to Scott, the whole machinery, working plant, and others foresaid should become the absolute property of Alexander, subject to his relieving Scott of his obligations under the agreement. It was also declared that “on the complete payment” by Alexander of the price or value of the machinery, working plant, and others foresaid, Alexander should be deemed the sole party in right of the colliery and lease thereof foresaid. It was also provided that Alexander having undertaken to provide for certain of Scott's debts and obligations, in order to provide for such payment Scott should draw under the agreement a sum of not more than £200 a-year till the same should be paid off, the remainder to be applied by Alexander to these obligations, and Alexander, in order to put him in funds to

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pay these debts, being entitled to uplift accounts due to Scott. The ninth article provided that the agreement should, in the option of Scott, fall and become void in the event of the insolvency or notour bankruptcy of Alexander, and, in the option of Scott, the agreement should cease and be at an end whenever Alexander should fail to implement his part thereof. The Commissioners of Lord Zetland concurred in the agreement.

A supplementary agreement fixed the value of the machinery and other plant at £4091, 14s. 4d.

Scott died in 1873 leaving a settlement by which he gave to certain trustees, of whom Alex. Coubrough, Alexander, and two others accepted office, his whole heritable and moveable estate. These trustees were the pursuers of this action.

Various payments were made to account of the price of the machinery, plant, and others, by Alexander to Scott during his lifetime, and to the pursuers as his trustees after his death.

Alexander was sequestrated in November 1882, and F. W. Carter, C.A., the defender, was appointed his trustee.

In May 1883 the pursuers lodged a claim in the sequestration for a preferable ranking for £1062, 11s. 5d., which they alleged to be the balance of the price of the machinery, &c., still due to them under the agreement. Their affidavit stated that the payments to account were made conform to account therewith produced and referred to, bringing out a balance, at the date of the sequestration, of £1062, 11s. 5d. The affidavit deponed that the trustees held the machinery, &c., referred to in the minute of agreement, “as their property, and in security of the said debt.”

The account referred to in the affidavit was in the usual form of accounts-current, having debit entries on the left-hand side of the sheet and credit entries on the right-hand side. It was entitled, “Account-Current between the said Charles Jameson Alexander and his trustees (the pursuers), from 30th November 1870 to 15th November 1882, referred to in said affidavit and claim.” It was headed, “Charles J. Alexander in account with William Scott.” The first entries were—

Dr. 1870—Nov. 30. To Debts due by Wm. Scott so far as they have been ascertained, hereby taken over by C. J. Alexander and held as part payment of plant, viz.:
The Bank of Scotland	£21,819	17	4
Royal Bank	520	0	0
Russell & Aitken	83	1	7

Cr 1870—Nov. 80. By Colliery Plant, as per Inventory	£4,091	14	4
By Debts due to W. Scott and collected by C. J. Alexander, and hereby added to plant, viz.:
A. Cunningham	137	11	0

The debit entries all through the account consisted principally of such payments; but there were also, in and after 1874, and till May 1878, entries of half-yearly payments in advance of £125 each of annuity to Mrs Scott, mother of the deceased William Scott, an entry of January 13, 1880, of £385 “to Mr Scott's trustees,” and some other entries of payments to certain other parties who were not business creditors. It showed at May 1882 a balance due to the pursuers of £1056, 13s, Id., while at the date of Alexander's sequestration the balance was, as stated in the oath above referred to, £1062, 11s. 5d. If, however, the payments to Mrs Scott, and that of £385 to Scott's trustees, just mentioned, were appropriated in their order to Alexander's obligation to pay the price of the machinery, &c., being the first item on the other side, the result was that the payments by Alexander were sufficient, long before the date when the account closed, to pay off that item of £4091, 14s. 4d.

In June 1883 the defender, as Alexander's trustee, having proposed to sell the machinery and plant, the pursuers (Scott's trustees) raised this action for declarator that, in virtue of the minute and supplementary minute of agreement entered into between their author Scott and Alexander, “the whole machinery,” &c, “all as described or referred to in the said minute of agreement and supplementary minute of agreement, and thereby ascertained to be of the price or value of £4091, 14s. 4d. sterling, in so far as the same are still extant, belong to and are the sole property of the pursuers, or at least that the pursuers are entitled to a joint property in the same along with the defender to an extent corresponding to the sum of £1062, 11s. 5d., … being the amount of the said price or value thereof still unpaid;” and in the event of the machinery, &c., having been sold, for declarator that the pursuers were entitled to the whole proceeds thereof, or at least to the proportion of the same corresponding to the said sum of £1062, 11s. 5d. They also concluded for interdict against the defender selling or otherwise disposing of the said machinery, &c, or exercising any right of property over the same without the express consent and concurrence of the pursuers.

The pursuers pleaded—“(1) The whole price or value of the said machinery and others agreed to be sold by the said William Scott to the said Charles Jameson Alexander not being fully paid, the said machinery and others are still the property of the pursuers, and they are therefore entitled to decree of declarator and interdict as concluded for. (2) In any view, the pursuers have a right of joint property in the said machinery and others, and the defender is not entitled to dispose of the same without the pursuers' consent.”

The defender denied that a sum of £1062, 11s. 5d., or any sum whatever, was due by the said Charles Jameson Alexander to the pursuers at the date of his sequestration. “Explained that the pursuers on 15th May 1883 lodged a claim for that sum in the sequestration … which claim will be duly disposed of by the defender. … The affidavit and claim and relative account-current are referred to for their terms, and it is explained that they instruct the sum in the valuation to have been all paid by the bankrupt at or shortly after the commencement of the account, except £307, 13s., or thereby, which latter sum was extinguished by subsequent payment by Alexander. Explained that the said C. J. Alexander duly paid the price or value of the different articles of machinery and plant enumerated in the inventory annexed to the supplementary minute of agreement.”

He pleaded, inter alia—“(6) The bankrupt having been put by the pursuers or the deceased William Scott in ostensible possession of the plant and others libelled, and having been allowed so to continue down to the date of his sequestration, the pursuers are not entitled to vindicate the property of the plant or any portion thereof in a question with the defender. (7) On

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a sound construction of the minutes of agreement and other documents libelled, the pursuers have been fully paid for the plant and others referred to, and in any view they are not entitled to decree except as to so much of the plant, &c, as may be held not to have been paid for by the bankrupt.”

The Lord Ordinary found that the subjects libelled were not the property of the pursuers, and therefore assoilzied the defenders.

“ Note.—This is an action to make effectual a claim of preference against the trustee in bankruptcy. The pursuers' author sold the machinery and plant in question to the bankrupt under an agreement that a right of property therein should vest in the bankrupt as payments should be made to account of the price, and the pursuers are now claiming the property under their right of retention for the price. Giving the pursuers the benefit of the assumption that this was an effectual agreement (a point on which I am not expressing an opinion), it is plain that the right of the sellers to the property libelled would cease as soon as the price was fully paid.

The pursuers have lodged a claim in the sequestration for a balance due to them in account with the bankrupt amounting to £1062, 11s. 5d., the same sum which in their action they allege to be due to them.

On referring to the account given in by the pursuers in support of their claim, it appears that the account embraces a number of other transactions in addition to the settlement of the plant and the machinery. The account begins under date November 30, 1870, by crediting the pursuers' author with the value of the machinery and plant, and debiting him with the value of debts taken over. By the effect of these two entries the balance due to the pursuers' author is reduced to £317 or thereby, and are subsequent payments by the bankrupt on account of the pursuers' author which go to extinguish this balance. It is not alleged on record that any of the payments were specifically appropriated before Alexander's bankruptcy. That being so, I am of opinion that the payments here appropriated by the operation of bankruptcy, in conformity with the general law of appropriation that all the items on the credit side of the account must be appropriated in their order so far as necessary to the extinction of the first item on the debit side, videlicet, the price of the plant and machinery. That operation being performed, the pursuers' right of retention (which was only for the price of the chattels) will necessarily disappear, and I must hold their action to enforce that right is not well founded. I need scarcely add that my decision in no way invalidates the claim of the pursuers to a dividend in bankruptcy.”

The pursuers reclaimed, and argued—This was not an ordinary account-current, to which the rule of appropriation of payments in their order was to be applied, and therefore the pursuers or their author were entitled to appropriate the indefinite payments of the bankrupt to what debts they thought best. The result was to leave part of the price still unpaid, and they had therefore a property title in the machinery under the agreement till the whole price was paid. Devaynes' case, relied on by the defender, was one of a banking account and did not apply here. None of the cases applied the rule to such an account as the present.

Authorities.— Campbell v. Dent, 2 Moore's Privy Council Rep. 292; Bell's Com. ii. 535; Devaynes v. Noble, 1 Merivale, 605; Lang v. Brown, Dec. 2, 1859, 22 D. 113; Pollock & Co. v. Murray & Spence, Nov. 6, 1863, 2 Macph. 14.

The defender replied—The real question here was, whether the full price must be held to have been paid or not. If it must be held to have been paid, then the property—the machinery—had passed, and the pursuer had no case, and it must be so held, for the pursuers had themselves, in support of their claim, produced an account which was no more than an ordinary account-current, and to which therefore the ordinary rule as to appropriation of indefinite payments must be applied.

At advising—