Scottish Court of Session Decisions

In February 1886 John Wilson, a bleacher at Touch, near Dunfermline, was in embarrassed circumstances. His bleach-works were fully burdened, and he was therefore unable to borrow further sums over them. He was the proprietor of certain pipes for carrying water to his works, which pipes were laid in the public road leading from Dunfermline. His brother-in-law Adam Darling, and his son-in-law William Wood Waddell, expressed their willingness to assist him if he could give them some security, and they applied to Mr William Beveridge, solicitor, Dunfermline, for advice as to whether the security of these pipes which he offered them was adequate. Mr Beveridge advised them that no security could, without possession, be effected over moveable property like the pipes in question, and that the only form in which security could be given was by a sate to them of the pipes. The form in which the transaction was carried through was that Darling and Waddell became bound, conjunctly and severally, along with Wilson, in a cash-credit bond for £400, dated 1st February 1886, to the National Bank, to be operated upon by Wilson. Of even date with this a minute of sale was entered into between Wilson of the first part, and Darling and Waddel of the second part, in the following terms:—“Whereas the second parties have advanced to and for my behoof the sum of £400 sterling, and in consideration thereof the first party has sold, and hereby sells and conveys and makes over, to the second parties and their respective heirs, executors, and assignees whomsoever, absolutely, All and whole the cast-iron pipes for the conveyance of water from the town of Dunfermline to the said Touch Bleach-works, laid by me in the public road at my own expense, with my whole right, title, and interest, present and future, in the said pipes, with full power to the second parties to use the said pipes, and sell and dispose of the same in such way and manner as they may think proper, and that as fully and freely in every respect as I could have done myself before the granting of these presents: Declaring that the first party shall be entitled to the use of the said pipes for his said bleach-works so long as the second parties may consider proper, upon payment to the second parties or their foresaids of the sum of £20 sterling yearly in name of rent or hire.”

On 5th August 1886 Wilson executed a trust-deed for behoof of his creditors in favour of John Ross, solicitor, Dunfermline, who claimed the pipes as part of Wilson's estate.

Darling and Waddell raised this action against Ross to have it declared that they were absolute proprietors of the pipes, and to have him interdicted from interfering with them. They averred that they had bought and paid for the pipes in terms of the minute of sale, and that Wilson subsequently possessed the pipes solely under the provision in the agreement by which the pipes were to be leased to him for £20 a-year.

The defender replied that the minute did not embody any bona fide transaction, no money being paid; that if the transaction was a sale it was a simulate one; that the pipes never became the property of the pursuers, the minute of sale being an attempt to obtain a security over moveables which still remained in the seller's possession; and that there was no delivery of the pipes.

The pursuers pleaded—“(1) The pursuers having validly acquired an absolute and exclusive right to the said water-pipes, are entitled to decree of declarator and interdict, with expenses as concluded for.”

The defender pleaded—“(2) The said deed founded on by the pursuers being a simulate sale for the purpose of creating a security to the prejudice of prior creditors of the insolvent, the pursuers did not thereby acquire any right in the said pipes, and the defender is entitled to absolvitor. (3) The transaction contained in the said minute being an attempt to create a security over moveables remaining in the possession and under the control of the seller, the pursuers are not entitled to found thereon. (4) The said pipes being a part of the estate conveyed to and under the management of the defender, the defender is entitled to be assoilzied.”

Proof was led, from which it appeared that Wilson drew out the whole sum of £400 from the bank, and that the pursuers ultimately repaid this sum. The import of the proof otherwise appears from the Lord Ordinary's note and the Judge's opinions.

The Lord Ordinary ( Fraser) on 7th July 1887 found, decerned, and declared against Ross in terms of the conclusions of the summons and granted interdict as concluded for against him.

“ Opinion.—… The question in the case is whether or not there was a valid sale. A minute of agreement of sale in writing was entered into between Wilson and the pursuers in February 1886, by which, upon the narrative that the pursuers had advanced to Wilson £400, he sold, ‘and hereby sells, and conveys, and makes over,’ to the pursuers ‘the cast-iron pipes for the conveyance of water from the town of Dunfermline to the said Touch Bleach-works,’ but it was declared that Wilson should be entitled to the use of the pipes for his bleach-works so long as the pursuers might consider proper on payment to them of ‘£20 sterling yearly in name of rent or hire.’

Now this is declared by the defender to be ‘a

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simulate sale for the purpose of attempting to create a security,’ and that it was no sale at all. The Lord Ordinary is of opinion that this position taken up by the defender is not well founded. The difficulties in the way of creating a security over moveable property were clearly foreseen and explained by Mr Beveridge, and with the view of avoiding these difficulties it was agreed that there should be an absolute sale. There was nothing at all illegal or improper in this, even although Wilson had been insolvent. He was perfectly entitled to sell for an adequate price the moveable property which belonged to him. He wanted to get money to carry on his business, which was a very legitimate thing to do, and Jus brother-in-law and son-in-law were perfectly willing to help him. They paid no doubt what according to the evidence appears to be more than what the pipes were worth, or at least what they cost to lay down. They were willing to make this sacrifice on behalf of their relative. They did not wish to drive a hard bargain, and the fact that they paid more for the pipes (if these were considered as simply old iron) than they were worth does not in any way detract from the fact that there was here a bona fide sale. As to the good faith of the transaction the Lord Ordinary has no doubt whatever. All the persons who were examined—Beveridge, Wilson, Darling, and Waddell—state that it was intended to make a bona fide sale, that being the only mode in which the transaction could be carried out with the view of giving to Darling and Waddell some kind of return for the money they advanced.

The case falls within the decision of Taylor (Orr's Trustee) v. Tullis, July 2, 1870, 8 Macph. 936.”

The defenders reclaimed, and argued—The transaction embodied in the minute of agreement was in no sense a bona fide sale. (1) The pipes which were said to have been delivered in respect of the advance of £400 were only worth £200. (2) The £400 was not paid down at once. (3) There was in point of fact no delivery. The only possible constructive delivery was by the document containing the minute of agreement, and it did not set forth what actually took place. The transaction was nothing more than a simulate sale in order to attempt to create a security. The case of Orr's Trustee v. Tullis, July 2, 1870, 8 Macph. 936, relied on by the Lord Ordinary was not applicable, for in it, first, the person disputing the validity of the sale had previously acted in a manner inconsistent with the contention that the sale was invalid; second, bona fides was established on the proof; and third, payment of the money took place at once. This case fell under the same category as the cases of The Heritable Security Investment Association (Limited) v. Wingate & Company, July 8, 1880, 7 B. 1094, and Seath & Company v. Campbell's Trustees, December 9, 1884, 12 B. 260. The case of M'Bain v. Wallace & Company, January 7, 1881, 8 B. 360—aff. July 27, 1881, 8 B. (H. of L.) 106, was distinguishable from this case, because here bona fides was not established.

The pursuers replied—This case was on all fours with the case of M'Bain v. Wallace & Company, vide Lord Selborne, 8 R. p. 167. It had all the elements of a bona fide sale, except that the pipes were never lifted up from the ground and delivered into the hands of the buyer. Such an absurdity was not necessary according to the law of Scotland.

At advising—