Scottish Court of Session Decisions

This was an actiou in the Sheriff Court at Dingwall, at the instance of James Alexander Robertson, chartered accountant, Edinburgh, and James Anderson, solicitor in Inverness, trustees acting under a trust-disposition and conveyance in their favour, dated 19th June 1886, by Sir James Dixon Mackenzie, Bart., of Findon and Mountgerald, in the county of Ross, against David Ross, bank agent, Dingwall, who had been, prior to the granting of the trust-disposition, factor for Sir James Mackenzie. The purpose of the action was to obtain delivery of the writs, titles, books, leases, plans, documents, papers, and evidents of every description in the defender's possession which belonged to Sir James Mackenzie, or related to his estates of Findon and Mountgerald, in the county of Ross.

In defence it was pleaded—“(1) The defender having acquired actual possession of the writs, books, and documents referred to, from the owner thereof, is entitled to retain possession of them until paid the amount due to him under his contract.”

From the accounts as finally stated it appeared that the defender's claim was for a sum of £477, 13s. 9d., in respect of outlays in connection with drainage on the estates, and a further sum of £1661,19s. 9d. in respect of a balance on general factorial outlays, being in all £2139, 13s. 6d.

After the defender's accounts had been lodged, the pursuers added these pleas—“(1) The defender as factor having admittedly received rents sufficient to meet his advances as factor, was bound to discharge all burdens affecting the estate out of such rents before making cash advances to the truster. (2) The defender having made cash advances to the truster while there were burdens undischarged, must be held to have made them on his own personal responsibility.” The facts which raise these pleas are stated in the notes of the Sheriff-Substitute and Sheriff, of date 21st March and 8th April 1887, quoted infra.

On 8th November 1886 the Sheriff-Substitute ( Crawfurd Hill) found that the defender was in law entitled to retain the writs, books, and documents in his possession as factor until he was paid the balance due on his intromissions.

“ Note.—That a factor has a lien over money or property of his principal, which may have come into his hands in the course of his employment, in security of what may be due to him by the principal, is undoubted. Bell, in his Commentaries (7th ed. vol. 2, p. 109) says, ‘Both in England and in this country a general lien has been allowed to factors for the balance due on their general accounts with the principal.… A lien is allowed to factors not only for their advances in the course of their employment, but also for their engagements and advances of cash to the principal. This is established by a number of decisions.’ But it is maintained by the pursuers that there is no authority for saying that a factor on a land estate, as the defender was, is entitled to retain writs and documents belonging to the principal which may have come into his hands as factor. That, it is said, is a right which belongs only to a law-agent. The point does not appear to have been ever expressly decided in regard to a factor, but there seems to be no ground for making a distinction between the two. The foundation of all, then, is agreement, express or implied, and there is nothing peculiar in the relation of a law-agent towards his employer which should be held to create such implied agreement, and confer on him the right to retain papers which does not apply with at least equal force to the relation of a land-factor towards his principal. Both get into their hands papers belonging to their employer essential for conducting the business in which they are employed, and the one no less than the other is, the Sheriff-Substitute thinks, entitled to retain such papers till his business account is settled. Of course, the books or documents must be only such as the factor qua factor is entitled to have, and the right of retention will cover only such intromissions as were properly within the province of the factor. Both these requisites are satisfied here, and the Sheriff-Substitute has no hesitation in holding that the defender is entitled to retain possession of the books and papers in his hands till paid the balance found to be due on his account as factor. In the case of Meikle and Wilson v. Pollard, Nov. 6, 1880, 8 R. p. 69, in circumstances similar to the present, a firm of accountants was held entitled to retain documents till paid their business account on the ground of implied contract, and the opinions expressed by the Judges there seem to be quite applicable to the present case.”

On appeal the Sheriff ( Cheyne), on 11th December 1886, pronounced this interlocutor—“Recals

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the interlocutor of 8th November last: Finds, as regards the defender's first plea, that the defender is entitled to retain all books and documents that came into his possession in his capacity of factor on the truster's heritable estates until any salary due to him as factor has been paid, and his reasonable factorial outlays have been made good, but that he is not entitled to retain said books and documents in security of cash advances made by him to the truster; and with these findings remits to the Sheriff-Substitute to proceed with the cause as may be just.

“ Note.—I cannot assent to the pursuers' contention that writs and documents cannot be retained in any circumstances by anyone except a law-agent, to whom the law has, on grounds of expediency, allowed a lien of a well-defined character. On the contrary, it appears to me that where writs and documents have been put into a person's possession for the purposes of a particular contract or employment, they may—at least in a question with the employer or his voluntary trustees, who can plead no higher right—be retained by the possessor until his claims under the contract or employment are satisfied. This proceeds upon a familiar principle of law, of the application of which a recent illustration is furnished by the case of Meikle & Wilson v. Pollard, 9th November 1880, 8 R. 69, referred to by the Sheriff-Substitute. Obviously, however, the principle will not justify retention for anything not falling within the lines of the particular contract or employment. Now, as I understand the mutual obligations of the contract on which the defender's claim is founded, they are simply these: On the one hand, the factor undertakes to manage the estate for the principal—to collect the rents, to pay all charges, to keep regular rental-books and cash-books, to account for his intromissions, and to return all writs and documents put into his hands in connection with, and to assist him in, the management. On the other hand, the principal undertakes to homologate all the actings of the factor within the scope of his commission, to pay him the agreed-on or a reasonable salary, and to reimburse him in all reasonable outlays made by him in the course of his management. It is, however, I apprehend, no part of the contract that the factor is to make cash advances to the principal; and if he does make such cash advances, he does so, in my opinion, in his individual character, and not qua factor. If I am right in that view, it follows, in the present case, that the Sheriff-Substitute has gone too far in holding that the defender is entitled to retain the documents in his hands for the whole balance appearing in the account No. 5 of process—that balance being to a large extent composed of cash advances, and that further, inquiry must take place before the extent of the defender's right of retention can be determined.”

On 21st March 1887 the Sheriff-Substitute sustained the pursuers' second additional plea in law, and decerned against the defender.

“ Note.—It has been already decided that the defender would be entitled to retain the books and documents in question in security of his proper factorial outlays, but not of cash advances. The question now is, whether certain payments for which credit is taken in the account are or are not cash advances? The accounts produced bear out the correctness of the defender's statement that accounts, with the exception of the drainage account No. of process, were settled between him and the truster as at the end of February 1885, by a cheque granted by the truster for the amount of the balance at that date, viz., £1838, 18s. 3d., so that it is only with subsequent transactions and the drainage account we have to deal. The defender claims retention of the books and documents in respect of outlays in connection with drainage, amounting to £477, 13s. 9d., and in respect of a balance on general factorial outlays of £1661, 19s. 9d.; together, £2139, 13s. 6d. Assuming that the accounts are correct, there is no doubt that that balance consists of proper factorial outlays, and that the defender would be entitled to retain the books, &c., in respect of it if there was nothing else in the account. But it cannot be left out of view that between the end of February 1885, when the accounts were squared, and the close of the account, the defender, as factor, received rents of the estate to a large amount. The accounts show that during that period he had received upwards of £2600 of rents, more than sufficient therefore to meet all the above outlays. Had they been applied as they came in to payment of the factorial outlays, there would have been no balance now due to the factor. But not a penny of these rents was so applied. The whole was paid as soon as received to the credit of the truster's bank account, as appears from the numerous entries on the credit side of the accounts produced. The Sheriff-Substitute has been unable to come to any other conclusion but that these payments to the truster, made in the face of a growing balance on the other side, can be regarded only as cash advances, and that the defender is not entitled to retention of the books and documents in respect of a balance which would not have existed had these cash advances not been made.”

On appeal the Sheriff, on 8th April 1887, pronounced this interlocutor—“Recals the Sheriff-Substitute's interlocutor of date 2lst March last: Finds that on a proper statement of accounts there is no balance due to the defender qua factor on the truster's heritable estates, though the truster is largely indebted to him in respect of cash advances; and having regard to this finding, and to the findings in the interlocutor of 11th December 1886, decerns against the defender in terms of the prayer of the petition, &c.

“ Note.—The account prefixed to the affidavit No. 5 of process, and therein described as an account-current between Sir James Dixon Mackenzie and the deponent (defender), as his factor on the estates of Findon and Mountgerald, undoubtedly bears out the defender's statement, that the rents received by him during the period embraced by it were (with few exceptions) paid by him on the day they were received, or within a day or two thereafter, into Sir James' private bank account; but it also shows that he regularly debited himself with them as received, and then took credit for the same sums on the other side as payments to his constituent. What he now proposes to do is to remodel his factorial account by striking these sums out of both sides of it, treating them in effect as if they had been paid directly to Sir James by the tenants. In my opinion he is not entitled so to do. The rents

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received must stand in the factorial account as against the factorial outlays; and as there was at the date when the payments to Sir James were made a large unsettled and growing balance of factorial outlays due to the defender, these payments must in my judgment be regarded as advances of cash made to Sir James by the defender in his private capacity. This view warrants the finding in the above interlocutor, and is in accordance with the opinion of the Sheriff-Substitute, whose interlocutor I have, however, thought it necessary formally to recal, as it sustains a plea which is not happily expressed.”

The defender appealed, and argued—According to the case of Meikle & Wilson v. Pollard, Nov. 6, 1880, 8 R. 69, the factor was entitled to retain the documents. They had come into his hands to enable him to do his work as factor, and until he received the amount due to him under his contract he was entitled to retain them. There had been no cash advances here. What had been done by the factor was merely to pay over the rents as they were collected, instead of applying them to pay off the amounts due to him as factor.

The respondents argued—The factor had here no right to retain the documents until his factorial account was paid. The factor's lien known to the law of Scotland extended only to property and effects, but not to documents, which were extra commercium— York Buildings Company v. Dalrymple, 1738, Elchies' Hypothec, No.9; Largue v. Urquhart, July 17, 1883, 10 R. 1229. The only person who had a lien over documents was a law-agent, and the reason of that right of retention was to encourage him to give his professional services to a poor client. Documents were extra commercium, not valuable in themselves, but merely as a means of putting pressure upon the debtor—Bell's Prin. 1438; Christie v. Baxter, June 27, 1862, 24 D. 1182. Even if it should be held that a factor had a right to retain the documents of his constituent, he had no more claim than a law-agent to retain them for money advances. Here the factor had practically made advances. When he had collected the rents, then instead of paying off the amount of the account due to himself, and paying over the balance, he had handed over the whole amount to Sir James Mackenzie. In so far as he had handed over more than the balance, after deducting the amount due himself, he had made cash advances to Sir James. The case of Meikle was to be referred to the category of cases of artificers who were entitled to retain goods made by them until they were paid for. Here the factor was claiming the right of retention for disbursements, not even for payment of a salary.

At advising—