Scottish Court of Session Decisions

In November 1884 an action was raised in the Court of Session by David Littlejohn advocate in Aberdeen, as assignee of James Garvie & Sons, painters, &c., there, and of a number of other persons, creditors of John Ingram Wilson and William Alexander Fraser, against Fraser and also against Littlejohn himself, as trustee on the estate of Wilson, who had been sequestrated in January 1884, concluding against the defenders, “conjunctly and severally, or severally,” for payment to the pursuer as such assignee of the sums to which Fraser and Wilson were said to be indebted to these creditors.

Fraser had carried on business as a baker and confectioner in Aberdeen, and Wilson had been employed as his foreman baker. In the action it was alleged that a transaction by which an apparent transfer had been made by Fraser to Wilson of his business, stock, and plant for a sum of £1196 was merely simulate, and a device to escape the proceedings of his creditors, and that Fraser had never ceased really to conduct the business and to be the true owner; that there had been also a building speculation entered into by Fraser in name of Wilson as feuar from him (Fraser), but really in his own interest, under which the tradesmen whose claims were now represented by the pursuer as assignee had large claims against Fraser as the true principal in the transactions.

The pursuer pleaded—“The said John Ingram Wilson being merely agent, and the defender W. A. Fraser being the true principal in the transactions giving rise to the accounts sued for, the pursuer is entitled to decree against the defender Fraser as concluded for.”

Decree in absence passed against the defenders. Thereafter Alexander Stronach junior, advocate, Aberdeen, became assignee to the creditors' claims and to the decree in place of Littlejohn.

After decree had passed in absence it was opened up by way of suspension by Fraser, who maintained that the transactions between him and Wilson were real transactions, and that he was not thereafter, as alleged, the true principal in the bakery business; that he feued the ground he had acquired to Wilson, and had no interest except as a superior in the matter, and was not a partner with him, nor engaged in a joint-adventure with him, nor was he the true principal in the transaction.

The pursuer maintained in the suspension his averments in the condescendence as above mentioned, and pleaded—“The complainer [Fraser] having been truly the principal, or party substantially interested in the transactions which gave to the debts for which the said decree was granted, the said decree was just and reasonable, and ought not to be suspended.”

This suspension went to proof before Lord M'Laren, Ordinary. His Lordship repelled the reasons of suspension, stating in a note his opinion that Fraser, the complainer, really was the principal in the transactions. He founded his opinion (as to the bakery) on the improbability that Fraser would make over his business to his fore man on the terms alleged; on the fact that at the time Fraser was alarmed at the result of an action which had been brought against him, and had given this at the time as a reason for the transference; on the fact that after the transfer Fraser continued to act in the business as before; and lastly, on the admissions of Wilson. As to the heritable property transaction, his Lordship held the evidence to be of the same nature. He found that Fraser had given the orders as to the erection of the buildings to the architect, and that the tradesmen had supplied the goods on his credit, and Wilson did not pretend that it was a real transaction. “I have no doubt whatever that it was unreal, and that the intention was that if the building speculation succeeded” Fraser “should be retrocessed, but if it failed, that the defender [Fraser] should deny liability to the builders, and then attach the property for his feu-duties.” This judgment became final.

Fraser was sequestrated, and John Macqueen Barr, accountant, Glasgow, was appointed trustee on his estate.

In January 1881 Alexander Stronach junior, as trustee on the estate of Wilson, to which office also he had on 31st January 1885 been appointed in succession to Littlejohn, raised an action in the Sheriff Court at Aberdeen against Barr, as Fraser's trustee, for declarator that certain articles (which were of the value of less than £1000) were the exclusive property of the pursuer as Wilson's trustee, and for warrant to him to dispose of them as he might see fit. The articles in question were a number of articles which had been ordered in the name of Wilson for the building speculation above mentioned, and consisted of ironmongery, shop fittings, and timber. These had been stored by Wilson's trustee, but were claimed by the defender as Fraser's trustee. The pursuer stated that the tradesmen who supplied these articles were claiming in respect of them on Wilson's estate. The defender referred to the suspension before Lord M'Laren, in which the present pursuer had pleaded that Wilson was merely an agent and Fraser the true principal in the transactions relating to the articles in question. He stated that the articles in question had been really ordered on behalf of Fraser, and founded on the decision of Lord M'Laren in that process holding it proved that they had been supplied on Fraser's order and credit, and that he was the true debtor therefor. In respect of that decree he pleaded res judicata.

The Sheriff-Substitute ( Brown) sustained that plea and assoilzied the defender.

“ Note.—On the merits of the case the first point that calls for remark is that the position of the pleadings would not seem without proof to justify a final judgment, but the argument before me proceeded on the assumption on both sides that matters were ripe for the disposal of all questions of law, and particularly on the admission—and I feel that it is a foundation on which which a judgment may be laid—that the subjects in dispute are the same as those claims in respect of which occasioned the litigation in the Court of Session on the result of which the defender's plea of res judicata is based. Starting with that fact, the main question at issue really involves a competition

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between the two trustees as to which of them, and to what set of creditors, is to distribute the bankrupt estate, and I apprehend the fundamental point to be decided is, where the right of property lies. Now, leaving out of view for a moment the plea of res judicata, it appears to me that that is just the question which Lord M'Laren decided in the Court of Session. Mr Littlejohn, in the action that was there raised, as the assignee of certain creditors, primarily sued the bankrupt William Alexander Fraser for the price of the articles which are now in dispute. He did so on the ground that the transfer of his business by Fraser to Wilson was collusive, that the latter was a mere dummy, and at best an agent, that Fraser was the true owner, and that the goods for the price of which decree was sought, although supplied in the name of Wilson, were really furnished on the credit of Fraser. The latter of these considerations is probably the most important, and it is distinctly emphasised in article 3 of the condescendence annexed to the Court of Session summons, where it is stated that ‘the creditors who supplied knew that Fraser was either sole owner or the larger owner of the business, and it was mainly on his credit that they supplied them.’ A long proof was led in that action, the relations of parties being fully gone into, and the Lord Ordinary decided the case precisely on the grounds in fact and law which the pursuer maintained. No doubt Mr Littlejohn also directed the action against himself as trustee on Wilson's estate, and no person had an interest to open up the decree in absence thus obtained, but liability was ultimately distinctly placed on Fraser on the ground that he was the true debtor in the several obligations. It may be that the creditors of Wilson, as a party to the collusive transfer, and as the purchaser nominally of the goods, may also have a claim to be ranked on his estate, but I think it is clear that in determining who the primary obligant was the Lord Ordinary decided where the right of property lay, and that that being in Fraser it passes to his trustee. The judgment of the Court of Session is all the more emphatic that it was pronounced in the face of a plea that the creditors had already selected Wilson as their debtor, and it may be added that the Lord Ordinary gives no countenance to the idea of anything like a partnership between Fraser and Wilson.

“It is said, however, that the pursuer has never been in Court as Wilson's trustee, and therefore that the parties not being the same one of the fundamental requisites of the plea of res judicata is wanting. In point of fact Wilson's trustee was in the action raised by himself, although in the somewhat anomalous position of defender, but in the case of Gray v. M'Hardy and Others, June 4, 1862, 24 D. 1043 [it was held], that representation of identical interests validated the plea of res judicata, and I do not doubt that in the action in the Court of Session, which determined the question of property, the pursuer suing qua assignee of Wilson's creditors, all interests which are in the field now were fully represented. The Lord Ordinary does not enter into any question as to the relative obligations of the respective creditors, nor, I apprehend, is that question strictly hujus loci, but having distinctly found that Fraser was liable as a principal on Wilson's undertakings, the interest of the defender as Fraser's trustee in the articles in question is thereby established, and therefore I do not see how the prayer of the petition that the pursuer has the sole right to them can be otherwise than refused.

“If I am right in holding that there has already been one trial of the question at issue among all the parties interested, it seems to me that a judgment in favour of Wilson's trustee on the ground of reputed ownership would directly contradict the judgment against Fraser as the true owner, and all the substantial averments made by the pursuer in the action in the Court of Session, and that in any event such a result could not in law follow. Since the case of Duncanson, however (March 4, 1881, 8 R. 563), and other recent cases, it has generally been understood that the operation of the principle of reputed ownership has been much circumscribed, but apart from that I do not see how Wilson's creditors can take their stand on this doctrine, for they are not in a position, and do not pretend to be able to allege that he was ever recognised as uncontrolled in his right to dispose of, or even in the possession of the subjects. I only think it necessary to add that in the actions which pended in this Court there is nothing to touch this question, the claim there having been made on different articles and through entirely different medio concludendi.”

On appeal the Sheriff ( Guthrie Smith) recalled that interlocutor, and found that Wilson's trustee was entitled to retain possession of the goods, and to realise and distribute the same as part of his sequestrated estate.

“ Note.—[ After stating the facts already detailed]—In his evidence in the Court of Session action Wilson deponed—‘The headings of the accounts were changed to my name … I paid the accounts to the millers; I continued to act as practical baker just as before … The bank account was altered to my name. Fraser drew the money from the bank. I signed the cheques under his direction. I also paid cheques myself when people had to call.’

He was thus simply an agent trading suo nomine, and as such personally liable for the goods ordered in his name, but Fraser as the undisclosed principal was also liable, and when an action was raised in the Court of Session by the different persons who furnished the goods, to have it declared that their liability was joint and several, this was the conclusion which, after a proof and a patient investigation of all the circumstances by Lord M'Laren, was ultimately reached.

It is of course the duty of this Court to give effect to that judgment, which is conclusive of the question of the liability of both Wilson and Fraser to the creditors claiming on Wilson's estate. But the Lord Ordinary did not decide as the Sheriff-Substitute seems to have thought, that because the property was in reality Fraser's he was entitled to have the goods handed over to him in a question with Wilson.

It is an appropriate close to this singular history that Fraser is also now bankrupt, and a competition has arisen between his trustee and Wilson's trustee as to which of them is entitled to have the distribution of the goods. If the judgment of the Sheriff-Substitute stands Wilson's estate will yield nothing, and the creditors who furnished the goods naturally object to their

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going to Fraser's creditors, even although, they are included in the number.

The claim which is stated by Fraser's trustee ignores the fact that the relation of principal and agent always involves a contract of indemnity. An agent having the principal's goods in his possession is entitled to decline to part with them until he is relieved of all costs, charges, and liabilities which he may have incurred in connection therewith in the execution of his agency. Suppose, for instance, both parties were still solvent, and Fraser were here claiming the goods from his agent Wilson, the latter might justly say, ‘These goods are not yet paid for; I mean to sell them to pay the tradesmen, and you cannot ask me to give them up except on condition of your either paying the tradesmen yourself or relieving me of all responsibility in connection with them.’

If that be so, the rights of the respective trustees are precisely the same. Fraser's trustee may have the goods, but not without first paying for them. And as confessedly he has not the means of doing so, the law and justice of the case will be satisfied by Wilson's trustee being allowed to sell them and distribute the proceeds as far as they will go in payment of the different persons by whom they were furnished.”

The defender appealed to the Court of Session.

At advising—