Scottish Court of Session Decisions

Arthur Drummond, C.A., Edinburgh, as trustee on the sequestrated estates of James F. Waldie & Company, coal merhants and exporters, Glasgow, and of James Francis Waldie and George Kirk Goalen, the individual partners thereof, conform to act and warrant of the Sheriff-Substitute of Lanark dated 18th February 1898, raised an action against James Muirhead and John Guthrie Smith, as trustees for their firm of Muirhead & Guthrie Smith, writers, Glasgow, in which he asked the Court to declare that at the date of granting, or at least

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sixty days after the registration of a bond and disposition for £410 granted by James Francis Waldie in favour of the defenders, dated 18th and recorded 21st January 1898, James Francis Waldie was insolvent and notour bankrupt, and to reduce the said deed, and further, to declare that the defenders had no right of lien, hypothec, or retention over the title—deeds of 16 Lilybank Gardens, Govan.

The statements of the pursuer and defenders on record disclosed the following facts:—James F. Waldie purchased 16 Lilybank Gardens in 1893. The defenders acted as his agents. At the time of the purchase he borrowed, on the security of the subjects, £925 from a body of trustees, for whom the defenders also acted as agents. He granted to the lenders a bond and disposition in security dated 12th and recorded 16th May 1893. The clause of assignation of writs contained in the said bond and disposition in security was in the following terms:—“And I assign the writs, and have delivered numbers eleven to sixteen inclusive of the inventory of writs annexed and signed as relative hereto.” After the transaction the sellers delivered the disposition and title-deeds of the subjects to the defenders, and the deeds remained thereafter in their possession.

The defenders stated that in January 1898 J. F. Waldie and his company were due to them accounts for professional services amounting to £514, 6s. 11d. and £198, 12s, 8d. On 18th January J. F. Waldie granted a further bond and disposition in security for £410 in favour of the defenders over 16 Lilybank Gardens, and in return therefor they granted the following receipt:—“21 st January 1898.—Received from James F. Waldie, Esquire, bond and disposition in security for £410 (Four hundred and ten pounds sterling), in full of our claims to 31st December 1896, and of Mr Goff, C.A., Glasgow, for professional services against him and his firm of James F. Waldie & Company, under reservation in the event of the said bond and disposition in security being found to be reducible of our right to full payment of our accounts, and to our right of hypothec over the title-deeds of the above property, and other papers in our possession. Muirhead & Guthrie Smith.”

On 21st January 1898 the estates of James F. Waldie & Company and of J. F. Waldie and G. K. Goalen, the partners, were sequestrated, and on 18th February the pursuer was appointed trustee.

The defenders maintained that they had a lien over the titles till the debt due to them was paid. They admitted that if their lien was bad they could not resist reduction of the bond.

The pursuer pleaded, inter alia—“(3) The writs or title—deeds of the property in questionhaving been unreservedly delivered to the first bondholders, the defenders hold the same for them, and have themselves no right of lien, hypothec, or retention on the same as against the pursuer, and decree of declarator, as concluded for, ought therefore to be pronounced, with expenses.”

The defenders pleaded, inter alia—“(3) The defenders should be assoilzied from the declaratory conclusion, in respect they have a good and valid lien or hypothec over the documents in question for their claims against the bankrupt.”

On 25th July 1899 the Lord Ordinary ( Kincairney) repelled the third plea-in-law for the pursuer, and appointed the cause to be put to the roll for further procedure.

Note.—“The pursuer is trustee on the sequestrated estates of Waldie & Company and of the partners of that company, one of whom is J. F. Waldie. The defenders are law-agents in Glasgow, and state that at the date of the sequestration J. F. Waldie and the company were due them accounts for professional services amounting to £514, 6s. 11d. and £198, 12s. 8d. On 18th January 1898 they took from J. F. Waldie, immediately before his bankruptcy, a bond and disposition in security for £410 over his heritable property 16 Lilybank, Gardens, Govan, and in return for that disposition they granted a receipt, which bears that the disposition is accepted in full of all their claims, but ‘under reservation, in the event of the said bond and disposition in security being found to be reducible, of our right to full payment of our accounts, and of our right of hypothec over the title-deeds of the above property.’

The action has two conclusions—first, for reduction of this bond, and secondly for declarator that the defenders have no right of lien, hypothec, or retention over title-deeds of that property

The defenders do not maintain that they have right to claim both on the bond and the lien. They admit that the bond if allowed to exist supersedes the lien. They do not dispute that the bond would be reducible but for the lien, but they say that the pursuer has no interest to reduce it, because he would thereby rehabilitate the lien. But if the lien were held to be bad, then the defenders do not dispute that they cannot resist reduction of the bond.

The pursuer no doubt denies that the reduction of the bond would restore the lien if it existed. He maintains that whether the lien was good or bad it was lost when the defenders took the bond which is under reduction. He maintained this on the view—not very intelligible in its application to this case—that restitution does not take place in reductions in bankruptcy. He referred to Lenning v. Douglas, June 27, 1821, 1 S. 88, which seems against him; and to Taylor, 1891, L.R., 1 Ch. 199. But looking to the terms of the receipt granted by the defenders in exchange for the bond, I do not understand how it can be argued that if the bond be reduced, the right to plead a lien would not necessarily revive. The question—at least the main question—about the lien is whether it existed before the bond was granted. It is not maintained that it exists now because of the bond.

It seems convenient to consider first the question, which is the only difficult question, whether the defenders had the right of lien they claim before they granted the receipt. The state of the facts is this, that Waldie purchased the property in question in 1893, and the defenders acted as his agents in the

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purchase; that at the date of the purchase he borrowed £925, and granted a bond and disposition in security to the lenders, who have taken no part, and I suppose (being adequately secured) have no interest, in this question. The defenders acted as law-agents for both Waldie, the borrower, and the lenders. The clause of assignation in this deed bore—‘I assign the writs, and have delivered Nos. 11 to 16 inclusive of the inventory of writs annexed.’ The argument, I think, was taken as if the writs Nos. 11 to 16 were the writs to which this case relates, and the argument of the pursuer was that the effect of this transaction, and especially of the terms of the assignation of writs, was that the defenders thereby lost their right to possess the title-deeds as Waldie's agents, and therefore lost their lien.

Seeing that the defenders were agents for both parties, it is not said that any change in their possession of the titles was outwardly manifest or apparent. They simply continued to hold them, and the question is in what capacity did they hold them?

It is, I think, settled law that as a general rule the lien of the law-agent of an owner of property prevails over every heritable creditor of the owner. This was decided in the Ranking of the Creditors of Provanhill, August 9, 1781, M. 6253, and has since been confirmed beyond question—see Bell's Comm. ii. 108—so that it is not necessary to quote the authorities for that proposition.

An exception, however, has been admitted to that rule in the case (which is the present case) where an agent acts for both borrower and lender, and I think, after considering the able arguments of counsel on this point, and the cases quoted, that the exception comes to this, that a law-agent will not be allowed to plead his lien so as to defeat the rights of the heritable creditor for whom he has acted, but that the general rule that a law-agent will prevail over a heritable creditor is not affected to any greater extent. The cases quoted on this point were Campbell v. Clason & Goldie, Nov. 15, 1822, 2 S. 16; Wilson v. Lumsdaine, June 24, 1837, 15 S. 1211; Allan v. Sawers, July 3, 1842, 4 D. 1356; Paterson v. Currie, July 3, 1846, 8 D. 1005; and Graham v. Graham, Aug. 14, 1855, 2 Macq 435, and 27 Scot. Jur. 621. These cases seem to show that the right of a law-agent is not affected by the circumstance that he acts for both lenders and borrower except in a question with the lenders. If this were a question with the lenders the exception to the rule would apply. But it is not; the lenders, as I have noticed, take no interest in it at all. It is with the borrower's trustee, which is the same thing as if it had been the borrower.

The pursuer quoted an English case which seems to go further, and indeed would seem to support his case altogether— in re Nicolson, December 10, 1883, 53 L.J., Ch. 302, in which it certainly seems to have been held by Bacon, C.-J., that ‘A solicitor acting for mortgagee as well as for mortgagor in the preparation of a mortgage thereby loses his lien on the title-deeds in his possession for costs due to him from the mortgagor’—a judgment which goes further than any Scottish case of which I am aware. The defenders, on the other hand, quoted in re Messenger, July 10, 1876, L.R., 3 Ch. Div. 317, which I regret to be able to distinguish, in which the decision (by the same Judge) was or seems to have been the reverse. In that state of the English authorities I think I must follow what seems the principle of the Scotch cases.

The pursuer rested a good deal on the terms of the assignation, which, he said, showed that the defenders had parted absolutely with the possession of the titles, and therefore with their lien. I do not think that is so, or that it would be consistent with the Scotch cases to hold it so. A proprietor does not lose his interest in his land or his title-deeds by granting a bond and disposition in security, and I see no reason why a law-agent should not hold the title-deeds for both owner and lender if they desire it or do not object. The pursuer seems to make a case on record to the effect that the defenders never held the titles at all as agents for Waldie, but received them as agents for the bondholders directly from the seller. But I do not see how this can be held consistently with the fact that the disposition to the bondholders is granted by Waldie as proprietor.

I have said that the case seems the same as if this action were with Waldie himself. The pursuer, his trustee, seems in this question to be in no better position. Now, could it be contended that Waldie could, immediately after the bond and disposition in security was executed, have demanded delivery of the title-deeds without paying the defenders' account ? I think not. The only persons who could so insist would have been the heritable creditors. If they had been insisting the case would have been utterly different, and Waldie seems to have no title to insist on the defenders delivering the writs to the heritable creditors, and if Waldie would have no title to make that demand the pursuer, his trustee, can have none.

In these circumstances I do not think it necessary to order a proof as to the slight and immaterial differences as to fact which the record shows, but think that I am in a position to affirm that the defenders had a good right of lien over the title-deeds before the bond and disposition was granted, and to repel the pursuer's third plea. I do not seem to be in a position to go further as to that matter.

“I have already expressed the opinion that if the bond under reduction were reduced—and it may be that the pursuer has right to insist on reduction if he chooses—the right of lien would revive. But perhaps it is better that I should decide no more at present than I have done in order that if this interlocutor be allowed to stand, the pursuer may consider whether he has an interest to press for reduction, and that the defenders may also consider whether they, on the other hand, have any

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interest to resist reduction.”

The pursuer reclaimed, and argued—The defenders held the titles as agents for the heritable creditors, not as the agents for Waldie. The assignation of writs in the bond and disposition in security in direct terms assigned the titles to the heritable creditors, and these titles were delivered to the defenders, who were the agents of the latter and must be held to have taken delivery in that capacity. The decision of the Lord Ordinary carried the principle of a law-agent's lien a step further than it had ever been carried before. No case in the Scottish courts had carried it so far, and it had been held that the bounds of law-agent's lien should not be extended to a case not included within the principle of existing decisions— Renny & Webster v. Myles & Murray, February 8, 1847, 9 D. 619, opinion of Lord President Boyle, 624. The Lord Ordinary's proposition was sound in a case where the heritable creditor or his agent did not get possession of the titles. But where the same agent acted for both proprietor and lender he was in no better position as regards lien over the titles than if he acted for the heritable creditor alone. The English cases cited by the Lord Ordinary were decisions which contradicted each other, and as they were both pronounced by the same Judge (Chief-Justice Bacon), the latter, which favoured their argument, must be held to be the maturer judgment. In any event, when the defenders took the bond of 18th January 1898 they must be held to have given up their lien. The insertion in their receipt reserving their right of hypothec over the titles was not agreed to by Waldie, and even if agreed to it was not binding where other persons were concerned.

Argued for defenders—The decision of the Lord Ordinary was sound. So far as necessary for upholding the rights of the heritable creditor they held the titles for him, but so far as the titles were not required for that purpose they were effectual to uphold the defenders' right of lien against the proprietor. This was the result of the series of Scots decisions referred to by the Lord Ordinary. Much could not be made of the English cases, as the one contradicted the other, but the deed which was the subject of the first in date of these decisions seemed to be the more analogous to the Scottish bond and disposition in security. With regard to the bond of 18th January 1898, the receipt in terms reserved the right of lien if the bond was reduced, and in doing so the receipt merely gave effect to the law on the subject, which provided that a reduction is to be accompanied by a restitutio in integrum.