Scottish Court of Session Decisions

Michael Douglas Dawson, brewer in Glasgow, was the owner of heritable subjects situated at 361–369 Argyle Street, and 80–84 James Watt Street, Glasgow. Miss Elizabeth Liddell MacBrayne, Mr John Burns MacBrayne, and Mrs Dawson, wife of Michael Douglas Dawson, held bonds over this property for £9500, £3900, and £2500 respectively, ranking in the order named, all dated 19th and recorded 30th December 1892, and all containing assignations to rents in common form. Stevenson, Lauder, & Gilchrist, house-factors, Glasgow, were the factors of the property. When the property was purchased by Mr Dawson in September 1892, to enable the transaction to be carried through, a sum of £196, 12s. was advanced to him by Messrs Stevenson & Lauder, a firm which was dissolved in August 1893 by the death of Mr Stevenson, and whose business was carried on subsequently by the firm of Stevenson, Lauder, & Gilchrist. This sum was the nett proceeds of a bill drawn by Stevenson & Lauder, accepted by Dawson, and discounted with the Union Bank. The debt was reduced to £100 by a payment withheld out of the rents due at Whitsunday 1893, and a new bill for that amount was drawn, accepted, and discounted in the same way as the original bill. This bill was due on 26th November 1893. After the dissolution of the firm of Stevenson & Lauder, Stevenson, Lauder, & Gilchrist continued to act as factors of the property without demur from Mr Dawson.

On 8th November an application was presented for the sequestration of Michael Douglas Dawson's estates, and thereafter on 22nd November Mr John Berrie Brown, accountant, Glasgow, was appointed trustee. On 11th November Stevenson, Lauder, & Gilchrist collected the Martinmas rents. While they still held them, the agents for Miss MacBrayne and Mr MacBrayne wrote requiring them to pay the rents to the bondholders, and meantime to place them in bank. The rents were placed in bank accordingly. At this date the bondholders were not in possession under decree of maills and duties. A multiplepoinding was then brought in the Sheriff Court of Lanarkshire at Glasgow in name of Stevenson, Lauder, & Gilchrist as nominal raisers, John Burns MacBrayne being a defender and real raiser, and Miss MacBrayne, Dawson's trustee, and Mrs Dawson being defenders. The pursuers and nominal raisers lodged a condescendence of the fund in medio in which they stated that the balance due by the pursuers amounted to £129, 14s. 8d. This sum was consigned in Court, less consignation dues, on 20th December 1893. A statement was produced by the nominal raisers from which it appeared that £419, 5s. of rents had been collected, which, with a return on gas deposit and a balance brought down from last account, amounted to £436, 17s. 11d. Rates, repairs, and sundries brought down, and factorage, reduced this sum to £260, 16s. 8d. Deducting from that amount £31, 1s. 11 1 2d. due for repairs during the current year, and £100 due on the bill above referred to, there remained £129, 14s. 8d., the sum consigned. The trustee admitted that this was the true fund in medio, but the bondholders denied that this was so.

By interlocutor dated 15th January the Sheriff-Substitute ( Guthrie) reserved all questions as to the condescendence of the fund in medio, and meantime allowed claims and answers thereto to be lodged. Claims were lodged for the trustee and for the bondholders, the latter claiming to be ranked preferably according to the priority of their bonds for the interest due thereon. The Sheriff-Substitute, by interlocutor dated 10th March 1894, held the fund in medio correctly stated in the condescendence of the fund, exonered and discharged the nominal raisers, and preferred the trustee to the fund in medio. The bondholders appealed to the Sheriff, who on 29th June 1894 recalled the interlocutor appealed against, preferred the bondholders to the fund in medio as it might be ascertained, and in respect the bondholders did not admit the fund to be correctly stated, remitted to the Sheriff-Substitute to ascertain the amount of the fund.

Meantime the property had been sold, and the claims of Miss MacBrayne and Mr MacBrayne satisfied out of the proceeds, and they accordingly assigned their rights to Mrs Dawson.

Mr Dawson's sequestration was brought to an end, and he was discharged and retrocessed in his estates, on 19th November 1894.

Thereafter objections to the condescendence of the fund were put in by Mrs Dawson, and answers thereto by the nominal raisers. By interlocutor dated 27th February 1895 the Sheriff-Substitute allowed a proof before answer.

The bondholders appealed to the Sheriff, but on 8th April 1895 he adhered. The proof was taken, and on 24th July the Sheriff-Substitute issued the following interlocutor :—“Having heard parties' procurators on objections to the condescendence of the fund in medio, and answers, proof, and productions, Finds that the nominal raisers are not entitled to retain against the objectors any part of the rents collected by them as factors at Martinmas 1893, in respect of the advances

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made by them to the proprietor of the subjects over which the objectors held bonds and dispositions in security, but that the nominal raisers were liable to tradesmen employed by them or their predecessors, Stevenson & Lauder, for accounts for work on the property in question, amounting to £31, 1s. 11d., which they are entitled to be repaid before parting with the rents in their hands: Finds that the fund in medio properly consists of the sum consigned by the nominal raisers, and in addition thereto the sum of £100 collected by them and retained in respect of the alleged advances set forth in the answers to objections, and in the statement No. 8 of process: Therefore sustains the objections No. 21 of process to this extent, and finds that the fund in medio consists of the sum of £229, 14s. 8d.: On the nominal raisers consigning the additional sum of £100 above mentioned in the hands of the Clerk of Court within eight days from this date, exoners and discharges the nominal raisers of all claims under this action, and decerns : Finds the nominal raisers liable to the parties, Elizabeth Liddell MacBrayne, John Burns MacBrayne, and Mrs Jessie Anne Hutcheson or Dawson, in expenses since the 20th day of December 1894,” &c.

Note.—“There is no doubt as to the right of the bondholders to be preferred to the factors for the rents collected at Martinmas 1893, of which only £131, 1s. 11d. is now in dispute. The factor's right of retention or of security, if it exists, was subject in its very inception to the assignation of rents already made in the bonds, the law as to which will be found in Bell's Comm. vol. i. p. 757 (793 ed. M'L.)

With regard to the tradesmen's accounts I do not think that a general rule can be laid down that a house factor ordering work to be done on a house which he manages is personally liable to the tradesman; but where it appears, as it does here, and very often is the case, that the tradesmen know nothing of the proprietor, and take the employment solely on the credit of the factor, it is not doubtful that they may proceed against him for their accounts, unless they have accepted the landlord as their debtor and liberated the factor. So far as the evidence goes, the factors here must pay these tradesmen, and I think must be allowed to recoup themselves in the usual course out of the rents in their hands.”

The pursuers and nominal raisers appealed to the Sheriff, who on 12th November adhered, appending to his interlocutor the following note.

Note.—“I agree in the view expressed by the Sheriff-Substitute that any right of retention on the part of the factors is subordinate to the rights of the bondholders in virtue of their bonds. In the present case the appellants, Messrs Stevenson, Lauder & Gilchrist, have to face the difficulty that they are a different firm from the previous firm of Stevenson & Lauder, against whose liability as the drawers of a bill for £100 it is claimed that the appellants are entitled to retain that amount. But apart from that speciality, I am of opinion that the claim, which is founded on an arrangement said to have been made in December 1892, to cover liability undertaken in connection with the purchase of the property, cannot prevail against the bondholders, and that the fund in medio is properly stated at the sum mentioned in the Sheriff-Substitute's note.”

On 3rd December the nominal raisers consigned in Court £100, less consignation dues, and thereafter a claim in the multiplepoinding was lodged for Stevenson & Lauder and answers thereto for the bondholders and Mr Dawson. These claimants claimed to be ranked and preferred to the sum of £92, 9s. 10d., being £100 less a dividend of £7, 10s. 2d. paid to the bank as holders of the bill out of Dawson's estate. Dawson had also meantime put in a claim in which he stated that he was willing that the bondholders should be ranked and preferred to the whole fund, but that in the event of their not being found entitled to the whole sum, he claimed the whole or balance thereof in respect that he was now entitled to take up his estate unburdened by any debts due by him at the date of his sequestration.

Upon these claims and answers the Sheriff-Substitute pronounced an interlocutor preferring the bondholders to the whole fund in medio, and added the following note:—“There has been a very able and careful debate on both sides on the merits, but I think the points raised are practically excluded, so far as I am concerned, by the previous judgments in the case. If these judgments contain errors they must be corrected elsewhere.”

The nominal raisers, pursuers, and the claimants Stevenson & Lauder, appealed to the Court of Session, and argued—The appellants collected the rents in due course of business under their mandate from Dawson, which was not revoked by his sequestration—Bell's Prin. 228 ( h); Broughton v. Stewart, Primrose, & Company, F.C., December 17, 1814, and they were entitled to retain them to meet the bankrupt's debt to them in a question either (1) with Dawson, now retrocessed, or (2) with the bondholders. For (1) as against Dawson, the sequestration did not affect their rights, because if it took effect on 8th November 1893, they held for the trustee, who was content that they should retain the amount of their debt, and a retrocessed bankrupt could not be heard to repugn the actings of the trustee in his sequestration; if, on the other hand, it did not, then it could have no effect on the question whatever. Apart from the specialty of sequestration, there could be no doubt that the house factors were entitled to retain as against their debtor. (2) As in a question with the bondholders—The assignation to rents in their bonds, without decree of maills and duties following thereon, was not sufficient to give them any preference over the rents collected—Duff's Feudal Conveyancing, 274; Bell's Prin. 561; see also the interpretation of the clause of assignation to rents in a bond and disposition in security in the Titles to Land Consolidation (Scotland) Act 1868, section 119. The case

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of Brown v. Virtue, January 19, 1893, 20 R. 257, must be considered along with Elmslie v. Grant, December 15, 1830, 9 S. 200, from which it appeared that there was a distinction as regards right to set off a debt against rent between rents due before and after action of maills and duties was brought.

Argued for the respondents—(1) For the bondholders. They had a preferable claim over the rents in virtue of the assignation to rents in their bonds recorded. The creditor in an annual rent had been held entitled to obtain payment of arrears of annual rent from any intromitter with the rents— Guthrie v. Earl of Galloway, M. 567. It might be that bondholders had no right without decree of maills and duties to obtain a second payment of rent from a tenant who had paid in bona fide to his landlord, and this was all that Duff, loc. cit., had said, but before payment they could demand that the tenant should pay to them, and their right was preferable to that of any other assignee—Bell's Com. i. 757 (ed. M'L. 793); Brown v. Virtue, cit. In that case the debt due to the tenant was incurred before action of maills and duties was brought, and therefore the case of the bondholders rested not on the action of maills and duties but on the assignation to rents. In Elmslie v. Grant, cit., the question was whether a special stipulation in a lease was to transmit against a singular successor. Under the Bankruptcy Act 1856, section 111, all Acts done after sequestration with the effect of creating a preference were null and void, and consequently the collection of the rents by the factors could not give them any preference over the rents collected. (2) For the retrocessed bankrupt. He was not barred by anything which his trustee had done in this matter, because the trustee had never formally decided the question on a claim in the sequestration. The factors were not entitled to retain the rents as against the trustee, and they were not now entitled to retain them as against Dawson, who came now in the trustee's place.

At advising—