Scottish Court of Session Decisions

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This was an action brought in the sheriff Court at Glasgow by John Wishart, accountant, Glasgow, trustee on the sequestrated estates of William Kennedy, farmer, Cathcart, against Hamilton & Manson, hay, straw, and grain merchants, Glasgow.

The case arose out of a transaction between the defenders and Kennedy for the disposal of hay belonging to him. The pursuer originally maintained that this transaction ought to be set aside as having been entered into within sixty days of Kennedy's bankruptcy, when he was insolvent, with the view of securing payment to the defenders of a prior debt said to be due to them, and to the prejudice of Kennedy's other creditors. The pursuer also originally claimed payment of the value of all the hay of which the defenders obtained possession under this arrangement.

On appeal, however, it was not disputed that the transaction in question was a contract of sale duly concluded in the ordinary course of business, and the pursuer ultimately only claimed payment of the value of a part of the hay which had been removed by the defenders from Kennedy's farm without the consent of Kennedy or the pursuer, after Kennedy had granted a trust-deed in the pursuer's favour for behoof of his creditors.

The question ultimately came to depend upon whether the property in the hay passed to the defenders at the date of the contract, or whether the passing of the property was postponed till the date of delivery.

The pursuer maintained that what was sold to the defenders was 90 to 100 tons of rye grass and timothy hay in good condition at the price of £2, 10s. a ton, that they had no right to remove the hay at their own hand after Kennedy had granted a trust-deed for behoof of his creditors, and that they were not entitled to set off the value of the hay so removed against any sums due by the bankrupt to them.

The defenders, on the other hand, maintained that Kennedy had sold to them his whole crop of rye grass and timothy hay, estimated at between 90 and 100 tons, that they had a right to remove the hay when they did as being their own property, and that they were entitled to set off the sum due for the hay so removed against debts due to them by Kennedy.

By interlocutor dated 23rd November 1896 the Sheriff-Substitute ( Spens) allowed a proof before answer. The facts may be summarised as follows:—Kennedy and the defenders had had business transactions for several years before the date of the transaction in question. In July 1896 Mr Hamilton, of the defenders' firm, had an interview with Kennedy, when the sale of his hay for 1896 was discussed, but no arrangement was come to. On 13th July the defenders wrote to Kennedy—“We shall be glad to have the matter of your hay fixed one way or the other, as we want to begin now to take some for baling, and if we are not going to get yours we have other lots to start to.” Thereafter Mr Hamilton had another interview with Kennedy, but no final agreement was arrived at. On 6th August the defenders wrote to Kennedy—“We confirm conversation with you today on your call here, and would ask you to make us a definite offer in writing of your hay, both as to quality, quantity, and delivery.” On 10th August Kennedy wrote to the defenders—“I beg to acknowledge the receipt of yours of date 6/8/96. Referring to sale of my hay, I have to state that I expect to be able to deliver to you between 90 and 100 tons of rye grass and timothy hay in good condition. Price £2, 10s. per ton, to be delivered out of rick, before 1st October 1896, or stacked and taken delivery of before 1st December 1896. Conditions of payment that I receive from you the sum of £200 stg. to account on or before the 15th August /96. This, I expect, you quite understand. I will call and see you on Tuesday.” On the same day the defenders replied—“Your letter of to-day's date offering us your hay duly to hand. We agree to take 90 to 100 tons of rye grass and timothy hay in good condition at £2, 10s. per ton, to be delivered to us out of rick before 1st October 1896, or stacked and taken delivery of up till the end of this year at the same price. Whatever remains over after 1st January 1897 to be charged 2s. 6d. per ton more. The financing to be arranged when you call to see us to-morrow.”

On 13th August Kennedy had an interview with Mr Hamilton. He still wanted to get an advance of £200 out of the price which would be payable for the hay, but he ultimately agreed to accept £150. Hamilton & Manson drew two bills each for £75 at three months' date, which were accepted by Kennedy and discounted by the defenders, who handed the proceeds to Kennedy, and debited him with the charges on the bills and the bill stamps. These bills had ultimately to be taken up by the defenders. Hamilton & Manson also took a receipt from Kennedy for £150, “being to account of hay sold to them.”

Between 15th August and 18th September 1896, both inclusive, Kennedy delivered to the defenders 31 tons, 2 cwts., 1 qr. of hay.

On 19th August 1896 the defenders wrote to Kennedy—“We have a serious complaint to-day from Mr Steven that the hay you are delivering to him is in very bad order. We gave you special instructions that this was for baling, and told you the quality was to be Al. Be good enough when loading this to see that you lay aside all that is damaged, otherwise there will be trouble.” On 3rd September the defenders wrote to Kennedy—“We understand you have been delivering some hay beyond us. As we bought all your hay we hope this is not the case, and shall be glad to have your explanation.” … Kennedy did not answer this letter nor did he call to explain. On 8th September the defenders wrote to Kennedy—“To enable you to send us the weight tickets for all the hay delivered to us by you we enclose you a stamped addressed envelope.” On 17th September the defenders wrote to Kennedy

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—“Please send us weight tickets per return of post for all hay delivered by you.”

On 17th September 1896 a meeting of Kennedy's creditors took place, when he offered a composition which was not accepted, and on 23rd September he granted a trust-deed for behoof of his creditors in favour of the pursuer. The defenders refused to accede to this trust-deed, and on 8th October 1896 Kennedy's estates were sequestrated. On 19th October the pursuer was elected trustee, and was duly confirmed as such on the following day.

After Kennedy had called a meeting of his creditors, he refused to deliver any more hay to the defenders. Between 18th September and 18th October they took possession of the balance of Kennedy's crop of hay amounting to 50 tons, 1 cwt., and 3 quarters. This was done contrary to the wishes of Kennedy and without the consent of the pursuer. The defenders carted the hay to Glasgow themselves.

At the date of Kennedy's sequestration he was owing the defenders £50, being the sum due on a bill accepted by him. This bill represented the amount due by the defender for goods supplied to him by the defenders. Kennedy had also prior to his bankruptcy been supplied by the defenders with goods, for which he had not paid, to the value of £10.

It was the understanding that Kennedy was to deliver the hay.

There was originally some dispute as to what deduction should be allowed to the defenders on the sum due as the price of the hay which they removed themselves for carting it into Glasgow, but it was ultimately admitted that if this question required to be considered £15 was a fair allowance.

Kennedy deponed—“I had several fields of hay, but I did not arrange to deliver particular fields of hay. I did not intend to deliver all my hay to defenders. I required a considerable quantity of hay for my own use during the winter as I expected.… Mr Hamilton was quite aware I required a rick of Hay for my own horses, and at that time I told him I required one rick, and that he might leave a rick to do me up to the term. I knew the position I was in, and I wanted as little hay kept as possible. He would not leave the one rick; it was taken away loose on a lorry. I expect the hay would be weighed, but they baled it and took it away to the city. I had all the weights of the hay I delivered with my own carts. In taking the hay away they left a considerable quantity of it lying loose all over the fields.” …

Archibald Henderson, a man with whom Kennedy had been negotiating before be sold the hay to the defenders, deponed—“It was the whole of his hay he was proposing to sell to me.… When I say the whole hay, of course it would be understood he was quite entitled to keep any quantity of the hay he liked for his own horses and cattle.”

William Bowman Cochran, buyer and salesman in the defenders' employment, who was present at the interview with Kennedy prior to the conclusion of the contract, deponed—“When we were out at his (Kennedy's) farm, it was the whole of his hay he wanted to sell. He said whoever bought the hay would require to buy it all.”

Mr Hamilton deponed—“We reckoned he would have about 80 tons of hay, and at 50s. a ton we were giving him 75 per cent. of an advance on the whole thing.… We would not advance the full amount of a purchase until it was actually weighed over. Roughly speaking, I calculated the quantity of hay on his farm would be about 80 tons.… We thought £150 was a very large proportion of the speculative amount of the hay.”

The Sale of Goods Act 1893 (56 and 57 Vict. cap. 71) enacts as follows:—Section 16. Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained. Section 17 (1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties, and the circumstances of the case. Section 18. Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. Rule 1. Where there is an unconditional contract for the sale of specific goods, in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, be postponed. Rule 2. Where there is a contract for the sale of specific goods, and the seller is bound to do something to the goods, for the purpose of putting them into a deliverable state, the property does not pass until such thing be done, and the buyer has notice thereof. Rule 3. Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test, or do some other act or thing with reference to the goods, for the purpose of ascertaining the price, the property does not pass until such act or thing be done, and the buyer has notice thereof. Section 62. (1) In this Act, unless the context or subject-matter otherwise requires.… “Specific goods” mean goods identified and agreed upon at the time a contract of sale is made.… (4) Goods are in a “deliverable state” within the meaning of this Act when they are in such a state that the buyer would, under the contract, be bound to take delivery of them.

On 31st December 1896 the Sheriff-Substitute issued the following interlocutor—“Having heard parties' procurators and the evidence, and made avizandum, finds the transaction between William Kennedy

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and the defenders, on or about 13th August 1896, which was within sixty days of the bankruptcy of the said William Kennedy, and which is here sought to be set aside by the trustee on his sequestrated estate, was in the regular course of business: Finds, as matter of law, it is not reducible under the Act 1696, cap. 5, and the Bankruptcy Statutes: Quoad ultra, with regard to the craving for payment of a certain sum under the final craving of the petition, Finds any obligations of the defenders to Kennedy at the date of the bankruptcy are extinguished concursu debiti et crediti: Therefore sustains the defences and assoilzies the defenders: Finds pursuer liable in expenses,” &c.

Note.—[ After dealing with the pursuer's first craving]—“This view of the law disposes of the principal craving of the petition; but what is the position with regard to the final money prayer? At the date of the transaction Kennedy was unquestionably owing defenders a bill for £50. Before Kennedy's bankruptcy, thirty-one tons of hay, two cwts and one qr., had been delivered, amounting in value to £77, 15s. 7 1 2d., according to the contract of sale. Since bankruptcy, forty-nine tons, one cwt., and three qrs., have been taken possession of by defenders. Their money value, according to the contract price, would be £125, 4s. 4d., but from this defenders claim there should be a very considerable deduction, in respect Kennedy was bound to deliver to them, and defenders had to cart into Glasgow. There is a dispute as to the precise amount of fair carting rates, but, at. all events, I think that £15 is not an excessive sum to allow as the fair expense of cartage to Glasgow. Making this allowance, the defenders have got hay, broadly speaking, to the value of £188. I am of opinion that defenders were entitled to get delivery of ninety to a hundred tons contracted for, although bankruptcy had supervened. Under the Sale of Goods Act the property had passed to defenders. I think the question therefore comes to be simply an adjustment of debit and credit, as between pursuer as representing Kennedy, and the defenders as at the date of Kennedy's bankruptcy. Prior to bankruptcy, defenders had supplied Kennedy with feeding stuffs to the value of £10. So, putting the hay at £188, and deducting the £150 advanced therefor, the £50 bill and the £10 for feeding stuffs, concursu debiti et crediti, at the date of bankruptcy, defenders owed Kennedy nothing. I am therefore of opinion that defenders are entitled to absolvitor.”

The pursuer appealed to the Sheriff ( Berry), who on 10th July 1897 issued the following interlocutor:— “Having beard parties' procurators and considered the case, Finds that the transaction of August 1896, between the defenders and William Kennedy, which is challenged, was not out of the ordinary course of business: Therefore adheres to the interlocutor appealed against in so far as it finds that, that transaction is not reducible, and assoilzies the defenders from the first conclusion of the petition: Quoad, ultra recals the said interlocutor, and in regard to the craving for payment, Finds that Kennedy was rendered notour bankrupt on 11th September 1896, and that after he had called a meeting of his creditors, and on 23rd September executed a trust-deed, to which the defenders did not accede, his estates were sequestrated on 8th October, and the pursuer was appointed trustee in the sequestration: Finds that without the consent of Kennedy, or of the pursuer as trustee, the defenders at various times, from 30th September to 17th October, carried off from Kennedy's farm and appropriated to their own use a quantity of hay belonging to Kennedy's estate of the value of £125, 4s. 4 1 2d.: Finds in law that they were not justified in doing so, and that they are not entitled to set off against the value of the hay so carried off any debts alleged to be due to them by Kennedy: Therefore decerns against the defenders for payment to the pursuer as trustee aforesaid of the said sum of £125, 4s. 4 1 2d. sterling, with interest as craved; reserving to the defenders to claim in the sequestration process for any sum or sums which they allege to be owing to them by Kennedy, and to the pursuer to meet such claim by any counterclaim he as trustee may have in respect of hay weighed and delivered to the defenders by Kennedy under the contract of August 1896 or otherwise: Finds the defenders liable to the pursuer in expenses, modified at one-half of the taxed amount,” &c.

Note.—[ After dealing with the pursuer's first craving]—“There remains, however, a further question, which arises under the conclusion for a money payment. It appears from the letters of 10th August between the parties, taken along with the proof, that the transaction for the purchase of hay was with reference to between 90 and 100 tons of rye grass and timothy hay in good condition, price £2, 10s. per ton. In Kennedy's offer it was stated that the hay was to be delivered out of rick before 1st October 1896, or stacked and taken delivery of before 1st December 1896. In their reply the defenders stated the conditions regarding delivery of the hay as ‘to be delivered to us out of rick before 1st October 1896, or stacked and taken delivery of up to the end of this year at the same price; whatever remains over after 1st January 1897 to be charged 2s. 6d. per ton more.’ Apart from the conditions as to the ‘financing’ which defenders added, their reply was not a simple acceptance of Kennedy's offer, and it must have been partly at all events by means of verbal communings that a concluded bargain was made. Still the letters are of value as throwing light upon some of the terms of the contract. It cannot be doubted that it was for much the larger portion of Kennedy's hay crop that the defenders contracted, but it is not proved, and I do not think that in fact it was for his entire crop. The subject-matter of the contract is certainly not so described in the letters. Kennedy says that he required a certain quantity for his own use during the winter, and that that was not included. In support of there having been a reservation of this kind, there is the evidence of Henderson,

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with whom he had previously negotiated for a sale of the same hay, and who speaks of it as understood that ‘he was quite entitled to keep any quantity of the hay he liked for his own horses and cattle.’ In other words, it was only what Kennedy could spare from what was required for the farm that the defenders purchased. Kennedy also says that the bargain did not relate to the hay of any particular fields.

Under a contract of that kind the hay which was to be delivered to the defenders was not ascertained. Even the quantity sold was left indefinite. If we take the letters, it was estimated at from 90 to 100 tons, while the estimate of Mr Hamilton when he visited the farm is stated by him at from 80 to 90 tons. The hay the defenders were to get had to be weighed and delivered by Kennedy, the seller. That was necessary both to appropriate it to the contract and to ascertain the price. The proof is silent as to what was ultimately agreed regarding the time of delivery.

Kennedy was rendered notour bankrupt on 11th September. He called a meeting of creditors for the 17th of that month, and on the 23rd he executed a trust deed, to which, however, the defenders did not accede, and sequestration in bankruptcy followed on 8th October. Before the end of August he had delivered to the defenders in all over thirty-one tons of hay of the value of £77, 15s. 7 1 2d., but after executing the trust-deed he refused, although pressed by the defenders, to make further deliveries. Thereupon at their own hand they entered his farm and took delivery at different times, from 30th September to 15th October, of quantities amounting in all to fifty tons, 1 cwt. and 3 qrs., carting it away themselves. He says that they even disregarded his request that they would leave a rick for his horses, and took it away loose in a lorry. I think they went beyond their rights as purchasers of an unascertained and indefinite quantity of hay in so doing. Their action is said to be justified on the ground that the property in the hay had passed to them by the contract of purchase under the leading provision in section 18 of the Sale of Goods Act. The hay purchased was not, in my opinion, so specific as to bring the case within that provision, and even if it were more specific than I think it was, it seems to me that rule 3 of section 18 would apply, to the effect that where in a contract for the sale of specific goods the seller is bound to weigh, measure, test, or do some other act with reference to the goods for the purpose of ascertaining the price, the property does not pass until that act has been done. Here no portion of the hay, beyond thirty-one tons which Kennedy had weighed and delivered to the defenders, had been weighed by him so as to ascertain the price. He was no doubt under contract to deliver a further quantity of somewhere about sixty tons, but the defenders were not, in my opinion, entitled to deal with any undelivered and unascertained quantity of the hay as already their property, and to take possession of it and carry it off as they did.

My conclusion is that the defenders must make good to the trustee the price of the quantity so carried away, which at £2, 10s. per ton amounts to £125, 4s. 4 1 2d., and that they are not entitled to compensate that sum with any debts due to them by the bankrupt. They are also due the price of the hay delivered to them by Kennedy, but the claim for that may properly be disposed of in the sequestration, in which I have by the interlocutor reserved to the defenders the right to claim for the debt they say is owing to them.”

The defenders appealed, and argued—The defenders bought the whole of Kennedy's hay crop, estimated at between 90 and 100 tons. This was a sale of specific goods in a deliverable state, and it was the intention of the parties that the property should pass. The property in the hay therefore passed to the defenders at the date of the sale— Sale of Goods Act 1893, secs. 17, 18 (Rule 1), and 62 (1) ( sub voce “Specific Goods”) and (4). There was nothing in the terms of the contract, the conduct of the parties, or the circumstances of the case to prevent the property passing at that date. On the other hand, there was here an out-and-out sale and part-payment of the price, and these circumstances indicated an intention that the property should pass. The presumption in the case of such a sale was that the parties intended the property to pass. The onus of rebutting that presumption lay upon the pursuer, and that onus had not been discharged. The law of Scotland on this subject had now been assimilated to the law of England, and the English cases might therefore be referred to. These authorities were favourable to the defender's contention. See Martineau v. Kitching (1872), L.R., 7 Q.B. 436, per Cockburn, C.-J., at page 449, and Blackburn, J., at p. 454; and Gilmour v. Supple (1858), 11 Moore P.C. 551.

Argued for the pursuer and respondent—This was a sale of an unascertained part of a whole. The case of Martineau v. Kitching, cit., was therefore distinguished from the present, for there the particular goods sold were finally ascertained, although the weight was not, except approximately. What was really intended here was a sale of from 90 to 100 tons of hay, or at least it was understood that part was to be retained for use on the farm. This was not therefore a sale of specific or ascertained goods within the meaning of the Sale of Goods Act 1893, sec. 17 (1). It was a sale of unascertained goods, and the property did not pass until the goods were ascertained.—Sale of Goods Act 1893, sec. 16. Sec. 18, rule 1, did not apply, because the goods were not specific goods in a deliverable state. It was also stipulated that the hay was to be in good condition. This must refer to the date of delivery, and the condition of the hay at that date could not be ascertained until delivery took place. The defenders considered themselves entitled to object to the condition of the hay when delivered, and to take the best only when they removed it after the seller's bankruptcy. Even supposing that this was a

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sale of specific goods, something required to be done to the nay for the purpose of putting it into a deliverable state within the meaning of that expression as defined in the Sale of Goods Act 1893, section 62 (4), and the property did not pass until that was done. Moreover, here it was the duty of the seller to weigh the goods, and weighing was necessary to ascertain the price. This prevented the property passing at the date of the contract when the hay was not weighed—Sale of Goods Act 1893, sec. 18, rule 3. The risk under this contract remained with the seller. What was intended was that the property should not pass until delivery, when the weight and condition of the goods were known. This contract was an agreement to sell, but it was not such a contract of sale as passed the property in the goods sold to the buyer immediately on the conclusion of the contract.

At advising—