Scottish Court of Session Decisions

Thomas B. Campbell & Sons, metal merchants, Glasgow, lodged a claim with James Landells Selkirk, C.A., Glasgow, trustee on the sequestrated estate of the deceased James Wilson Stevenson, to be ranked as creditors for £192, 12s. 7d., and to draw a dividend from said estate.

The trustee having pronounced a deliverance rejecting the said claim, Messrs Campbell & Sons appealed to the Sheriff of Lanarkshire.

The appellants averred that the deceased Mr Stevenson, the bankrupt, was the senior partner of the firm of Stevenson & Lauder, house-factors; that he and his firm “financed” William Stark and his firm, builders in Shawlands; that the said William Stark was in 1892 and 1893 engaged in the erection of dwelling-houses in Shawlands; that the said Mr Stevenson and his firm gave the said William Stark and his firm sufficient money to pay the workmen engaged at said property; and made the other disbursements required for said erections and drew the advances from the superior.

The appellants further averred that William Stark had been under sequestration and obtained his discharge in 1892; that the appellants had sold lead and ironmongery goods to the said William Stark and the bankrupt's firm previous to the sale of the goods for which they now claimed to rank; that the said goods were paid for by Stevenson & Lauder; and that between January and August 1893 the appellants delivered to William Stark goods to the net value of £192, 6s. 7d. “The said goods were sold and delivered on the order and on the credit of William Stark, William Stark & Son, and Stevenson & Lauder, and the appellants looked, and in virtue of the said orders and previous course of dealing were entitled to look, to the said Stevenson & Lauder for payment, as well as the said William Stark & Son.”

The appellants went on to aver that in June 1893, in pursuance of the previous practice, they drew on William Stark & Sons for £84, 13s. 2d. on account of the then current account between the appellants and the bankrupt; that the said bill was duly endorsed by Stevenson & Lauder, who thus made themselves liable as obligants for the amount of said bill; that the bill was not met at maturity, though the appellants had continued to supply goods in reliance on Stevenson & Lauder; and that the total claim of the appellants, including fees of noting the bill, was £192, 12s. 7d.

The appellants pleaded—“(1) The appellants having sold and delivered the goods mentioned on the order and credit of the bankrupt's said firm, they are entitled to be ranked for the sum claimed.”

The trustee in bankruptcy denied that the said goods were sold and delivered on the order and on the credit of Stevenson & Lauder, and that the appellants were entitled to look to that firm for payment thereof.

The trustee pleaded—“(2) The account for the said goods not having been incurred or guaranteed by the bankrupt's said firm, the trustee's deliverance should be sustained, with expenses.”

The appellants produced detailed accounts of the goods supplied by them, from which it appeared that orders for items to the extent of £22, 1s. 10d. were initialed by Stevenson & Lauder.

A proof before answer was allowed, of which the following is a summary:—

Thomas Macfarlane Wallace, cashier to the appellants—“ … I told Mr Stevenson that we were not fond of giving Stark goods unless we had some security for the money. Mr Stevenson told me that Stark was doing work entirely for him. Mr Stevenson was a property speculator. It did not suit him to have the account in J. W. Stevenson's name, but he said his firm of Stevenson & Lauder would bind and oblige themselves to see us paid…. It was arranged that Mr Stark was to order the goods, and that we should render the accounts and draw on Stark, and Stevenson should endorse the bills. I looked to J. W. Stevenson as the party ordering the goods…. The endorsation, Stevenson & Lauder, was put on the bill founded on with the view of being an obligation to us for that account…. The bill was always in that form. The bills were always paid by Stevenson. Mr Stevenson died before the £84 bill became due. But for his death the open portion of the account would have been drawn in the same way…. We stopped Stark's account immediately we knew that Stevenson was dead…. Cross-examined—… Mr Stevenson told me that he would see me paid for what Stark ordered.”

Ebenezer Gilchrist, a partner of the dissolved firm of Stevenson & Lauder—“My firm acted as financial agents in connection with certain properties in Langside and Shawlands. Stark was carrying on the building operations in connection with these transactions. My firm drew all the advances in connection with the buildings, and paid Stark's wages and the material in connection with the work…. I had general instructions from Mr Stevenson that if Mr Stark presented the appellants any orders I was to sign or initial them. (Q) Did you not understand that Mr Stevenson had agreed to pay the material got from the appellants; was that not the footing on which you were dealing with them?—(A) It practically amounts to that.”

William Stark, builder—“I understood

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by my arrangement with Mr Stevenson that it was on his behalf that I was ordering that material…. Cross-examined—… I got my wages, and the stuff was guaranteed by Stevenson & Lauder…. The goods supplied by the appellants was not on my own account; it was for the properties I was completing. I had no credit, and Mr Stevenson was security.”

On 5th February 1896 the Sheriff-Substitute ( Erskine Murray) recalled the deliverance of the trustee, and appointed him to rank the appellants to the extent of £107, 1s.

Note.—“The evidence shews that the firm of Stevenson & Lauder were acting as financial agents between the proprietor of lands and the firm of Stark & Son, who were building thereon. Stark being impecunious received no more of the moneys except a good wage and the hope of a reversion. Stevenson & Lauder, as Stark could not get credit, he being bankrupt, endorsed the bills granted by his firm to T. B. Campbell & Sons for the necessary goods got from the appellants, and sometimes initialed orders for goods, the object being, as is admitted by the surviving partner of Stevenson & Lauder, to make themselves liable for the bills and for the orders. Stark's evidence is to the same effect.

At Stevenson's death the £84, 19s. 2d. bill was current with the endorsation of his firm thereon. An account for £192 was due for goods, among which items to the extent of £22, 1s. 10d. were initialed by Stevenson & Lauder. The endorsations and initialings therefore under the evidence, being intended to shew that the bankrupts (or at least the bankrupt Stevenson—for the appellants only claim against his personal estate) were to be liable in the light of a security, the Sheriff-Substitute considers that he is bound to hold that to the above extent the estate of Stevenson is liable. The bill being £81, 19s. 2d., the initialed orders amounting to £22, 1s. 10d., the total amount is £107, 1s., for which a ranking is given.

The appellants contend that they are entitled to the whole £192 forming Stark's account, on the ground that Stevenson was really the debtor. But this is not proved; all that is proved is that the endorsation and initialings were given to infer the liability of a security, and the Sheriff-Substitute cannot go beyond the indications thus given.” …

The trustee appealed to the Court of Session.

Argued for the appellant—Stark alone gave the orders for goods, and the accounts were rendered to him. At the most Stevenson was a cautioner for Stark, and such an obligation could not be proved by parole. Esto that Stevenson gave a verbal guarantee, the trustee could not give effect to a claim which might not have been enforceable. The mere fact that the orders were initialed did not infer cautionary obligation. [With regard to the bill, the appellant also submitted an argument based on section 100 of the Bills of Exchange Act 1882, and the case of Walker's Trustees v. M'Kinlay, June 14, 1880, 7 R. (H.L.) 85.]

Argued for the respondents—Stevenson had in effect said “I will see you paid,” and that constituted a primary and not a cautionary obligation— Morrison v. Harkness, October 20, 1870, 9 Macph. 35. The respondents were therefore entitled to rank on the bankrupt estate.

At advising—