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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Bryce v. Ehrmann [1904] ScotLR 42_23 (28 October 1904)
URL: http://www.bailii.org/scot/cases/ScotCS/1904/42SLR0023.html
Cite as: [1904] SLR 42_23, [1904] ScotLR 42_23
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SCOTTISH_SLR_Court_of_Session
Page: 23↓
Court of Session Inner House Second Division.
[Sheriff Court at Glasgow.
v.
Facts:
A, a wholesale jeweller in London, sent to B, a retail jeweller in Glasgow, a diamond necklace, in order that the latter might endeavour to sell it in terms of an approbation note, which specified the price to be paid by B to A in the event of a sale being effected, and contained a provision that the necklace should remain A's property till invoiced by him, B being in the meantime responsible for loss and damage, and the necklace while uninvoiced being returnable on demand. After receiving the necklace, B, without the knowledge or consent of A, pledged it to C, a pawnbroker acting in good faith, for a loan.
Subsequently A, while believing B's false representations that he was still negotiating a sale, but not induced by B's concealment of the truth, wrote to B, proposing that B himself should purchase the necklace and grant bills for the price. B agreed to this proposal, and on his granting bills to A, A invoiced the necklace to B. Thereafter the bills were dishonoured, and B became bankrupt.
Held that in respect of the terms of the contract between A and B, B was in a position to pledge the necklace, and had validly pledged it to C, and that C was entitled to retain the necklace till the amount he had advanced on it was repaid with interest.
Brown v. Marr, January 8, 1880, 7 R. 427, 17 S.L.R. 277, followed. Macdonald v. Westren, July 19, 1888, 15 R. 988, 25 S.L.R. 710, and Mitchell v. Heys & Sons, February 27, 1894, 21 R. 600, 31 S.L.R. 485, distinguished.
On 13th December 1902 Benzion Ehrmann, wholesale jeweller, London, sent a diamond necklace to Robert Anderson, retail jeweller, Glasgow, in order that he might endeavour to find a purchaser for it among his customers. The necklace was accompanied by an “approbation note,” which specified £110 as the price to be paid by Anderson to Ehrmann in the event of the former effecting a sale. The approbation note had the following heading:—
“18 Hatton Garden, London, E.C.
M … 190 … On Approbation from B. Ehrmann, Speciality: Diamond Merchant,
Gem work of Wholesale and Manufacturing every description Jeweller.
The goods specified below remain my property until invoiced by me, you in the meantime being responsible for loss or damage. All uninvoiced goods to be returned on demand.”
Anderson had been in the habit of dealing with Ehrmann on similar terms for a number of years.
On 18th December 1902 Anderson, without the knowledge of Ehrmann, pledged the necklace with Thomas L. Bryce, a licensed pawnbroker and money-lender, carrying on business at 67 Oswald Street, Glasgow, against a loan for £100. Between 18th December 1902 and 21st April 1903 a correspondence was carried on between Ehrmann and Anderson, in which the former repeatedly requested the return of the necklace and other jewellery, while the latter kept asking for delay on the ground that he had a customer for the necklace with whom he was on the point of concluding a bargain. On April 21st Ehrmann wrote the following letter to Anderson:—
“18 Hatton Garden,
“ London, E.C., April 21st, 1903.
“Dear Sir,—With reference to the two dd. necklaces, £64 and £110, and two pendants, £31 and £30 = £235 in all, which has been so long in abeyance, I have to make the following proposal to you—If you will accept invoice for these goods I am prepared to draw for the amount at 3, 4, 5, or 6 months. This will enable you to take your own chance with your customer. As far as I am concerned, I will on no account leave the matter longer in abeyance. If you cannot get your customer to decide forthwith, or are [not] willing to agree to the above terms, I must ask you to return my goods without further delay. Please also to send the promised post-dated cheque for the crescent. I await your reply.—Yours, &c.,
B. Ehrmann”
On April 22nd Anderson wrote to Ehrmann agreeing to his proposal. Bills were accepted by Ehrmann from Anderson in payment of the price, and on 23rd April the diamond necklace was, along with other goods, invoiced by Ehrmann to Anderson as his absolute property. The bills were dishonoured and remained unpaid. In July 1903 Anderson was sequestrated, and William Brodie Galbraith was appointed trustee on his estate.
In August 1903 an action of multiplepoinding was raised by Bryce in the Sheriff Court of Lanarkshire at Glasgow, the fund in medio in which was the diamond necklace. Claims were lodged by Ehrmann, Bryce, and Anderson's trustee in bankruptcy. Ehrmann claimed the necklace as his absolute property, or alternatively as his property on repaying to Bryce the amount advanced by him on security of the necklace, with interest. Bryce claimed to retain the necklace until repayment of the money he had advanced upon it, with interest. Anderson's trustee claimed that he was entitled to delivery of the necklace on repayment to Bryce of the amount of his advances, with interest.
A joint-minute of admissions, from which the facts above narrated are taken, was put in by parties.
On 19th February 1904 the Sheriff-Substitute ( Boyd) found the claimant Ehrmann entitled to a ranking on the subject in medio in terms of his alternative claim.
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Anderson's trustee appealed to the Sheriff ( Guthrie), and on 13th June 1904 the Sheriff recalled the Sheriff-Substitute's interlocutor, repelled the claims of Anderson's trustee and Bryce and preferred the claimant Ehrmann to the subject in medio absolutely. In the course of his note the Sheriff said—“I apprehend that Brown v. Marr, 7 R. 427, has not been authoritative since Macdonald v. Westren, 15 R. 988.” Bryce appealed. When the case was heard before the Second Division of the Court of Session no appearance was made on behalf of the claimant Anderson's trustee.
Argued for the appellant—The pledge was valid. Under the contract between Ehrmann and Anderson the former conferred on the latter such a right in the goods as enabled the latter to give a good title to a bona fide purchaser, and therefore a fortiori to a bona fide pledgee, the greater right implying the less. The contract was one of “sale and return,” and possessed all the features set forth as necessary to such contract in Brown v. Marr, January 8, 1880, 7 R. 427, 17 S.L.R. 277, which with Kirkham v. Attenborough [1897], 1 Q.B. 201, and Lee v. Butler [1893], 2 Q.B. 318, settled the law applicable to the present case. If the contract were looked upon as one of “sale on approbation,” Anderson signified his approbation by the act of pledging the necklace. Ehrmann's contention that the provision as to “invoicing” made it impossible for Anderson to confer a good title on a purchaser or pledgee without referring the matter to Erhmann was absurd and inconsistent with the obvious object of the arrangement. The purpose of the provision as to invoicing was merely to secure Ehrmann in his right of property as in a question with Anderson or Anderson's creditors so long as the goods were in Anderson's possession. The cases of Mitchell v. Heys & Sons, February 27, 1894, 21 R. 600, 31 S.L.R. 485; Macdonald v. Westren, July 19, 1888, 15 R. 988, 25 S.L.R. 710; and Helby v. Mathers [1895], A.C. 471, were all distinguishable from the present and the circumstances different. Moreover, apart altogether from the effect of the contract, it was settled that where one of two innocent parties must suffer through the wrongous act of a third party, he must suffer who puts the third party in a position to perpetrate the wrong— Brown v. Marr, supra; Henderson & Co. v. Williams [1895], 1 Q.B. 521; Farquharson & Co v. King [1901], 2 K.B. 697. Section 18, rule 4 (a), of the Sale of Goods Act 1893 was applicable to the present case. Anderson by pledging the goods “adopted the transaction,” and the property in the goods passed to him enabling him to give a good title to Bryce. But assuming that the title was originally bad, the goods were ultimately invoiced and paid for and became the property of Anderson, with the result that the pledgee's originally bad title was retroactively made good. It was said that Ehrmann's letter offering to invoice the goods to Anderson was induced by the fraudulent representations of the latter. As a matter of fact that was not the case, but even if it were, the sale that followed remained valid until reduced on the ground of fraud.
Argued for the claimant and respondent Ehrmann— Brown v. Marr and the other cases quoted by the appellant were all distinguishable. In them there was some document of title; here nothing except the possession of a corporeal moveable. The rule that the party who enables a wrongdoer to commit a wrong must suffer in a question with an innocent third party was indisputable, but it postulated some distinct act of carelessness such as would naturally lead to the deception of the third party. It was really a question of personal bar or estoppel— Mitchell v. Heys & Sons, supra; London Joint-Stock Bank v. Simmons [1892], A.C. 201. Here it would have to be shown that Ehrmann acted in such a way as to mislead Bryce as to Anderson's rights in the necklace. There was no such act upon the part of Ehrmann. Under the express contract of the parties there could be no effective sale until the goods were invoiced, and it followed there could be no effective pledge. This feature distinguished the present from the cases quoted, where a free hand was left to the persons receiving the goods to dispose of them. Section 18 of the Sale of Goods Act 1893 did not help the appellant, for the rules therein laid down for determining the time at which property passes are qualified by the words “unless a different intention appears,” and “a different intention” was clearly indicated here by the provision as to invoice. As to the effect of the invoicing of the goods, a pledge originally bad could not be made good by a fraudulent transaction, the doctrine of accretion being inapplicable to fraud— Watt v. Findlay and Hendrie, February 20, 1846, 8 D. 529; Molleson v. Challis, March 11, 1873, 11 Macph. 510; Bell's Com. (M'Laren's edition), vol. i, p. 263. It was owing to the fraudulent misrepresentations of Anderson that Ehrmann invoiced the goods.
At advising—
The contract in this case is peculiar, as Ehrmann in sending his goods to Anderson stipulated that the goods were to remain his property until invoiced by him, his purpose evidently being to keep up his right to them while they were in Anderson's
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The case seems to me to be practically on all fours with that of Brown v. Marr Anderson had by his possession a right to sell on his own account and for his own profit. Although Ehrmann put in his written conditions as between him and Anderson a special stipulation, the act which he did in handing over the goods to Anderson that he might sell them for his own profit placed Anderson in the position to do what he did—to do an act by which loss has been caused—and the loss must fall, not upon the innocent party who dealt with Anderson, but upon the party whose actions enabled him to do so. The Sheriff thinks that Brown v. Marr is no longer an authority, and refers to the case of Macdonald v. Westren as detracting from it. I do not so read the decision in that case. That was a case in which goods held by a person on sale or return, and who became bankrupt, and which were in his possession at the date of his bankruptcy, were claimed by his trustee as against the consignor, and it was held that they could not, the bankrupt never having dealt with the goods as his own, as he had not effected any sale to a third party, or done any other act by which it could be held that he became the purchaser liable for the price. That is a different case from Brown v. Marr, and the Lord Justice-Clerk gives an exposition in it of the grounds on which Brown v. Marr was decided, which are instructive in reference to the present case. He says—“I desire to say with reference to the case of Brown v. Marr that that decision did not turn on any question of property, but on the necessary inferences arising from the possession of the goods. There the retail dealer had possession, and he pawned the goods, and we hold that as it was through the act of the wholesale merchant in putting him in possession of the goods and allowing him to deal with them as his own that he was enabled to deceive the pawnbroker, the wholesale merchant and not the pawnbroker ought to stand the risk of loss.” And he added that that did not conflict with what had been said by Lord Young in giving the leading judgment.
Another case referred to by the Sheriff is the case of Mitchell v. Heys & Sons, but I am unable to see that there is any analogy between that case and the present one.
In the view I take of the case it is unnecessary to consider the effect of the invoicing of the goods to Anderson, which took place after the pawning, although had it been necessary I should have held that the invoicing to Anderson and the granting of the bills made the condition of Ehrmann untenable. My opinion is in accordance with that expressed by Lord Moncreiff in the case of Brown v. Marr which I see no ground for holding has been superseded by the subsequent decision.
I am therefore in favour of recalling the interlocutor of the Sheriff, and of finding that Ehrmann can only receive delivery of the goods in question which Bryce is willing to deliver up, on the condition which Bryce annexes, that the amount of his advance be made good to him.
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I do not regard the contract made between Mr Ehrmann and Mr Anderson as contract of sale and return, although it has some features in common with such a contract. Nor was it merely a transaction such as usually takes place where goods are sent by one person to another “on approbation.” When A sends goods to B on approbation, they are sent on the understanding that B if he approves of them may keep them at the price which is notified; if he does not approve he returns them to A. In such a transaction no other person's approval is asked or expected except the approval of B; no other person is or can be interested in the transaction but the sender and the receiver of the goods. But in this case, as is apparent from the correspondence produced, both Mr Ehrmann, the sender, and Mr Anderson, the receiver, intended something quite different. There was no expectation on the part of Mr Ehrmann that Anderson would take or keep the goods because he was pleased with them. He could, of course, have done so, but the primary purpose of both Ehrmann and Anderson was that the latter should be put in possession of goods which he might submit for the approval of purchasers from him, and to whom he might sell the goods at any price he pleased or could obtain. In order to carry out this purpose Ehrmann put Anderson in possession of the goods, with full liberty to sell them to anyone he pleased and at any price he might fix, the only consequence of such a sale being that Anderson would become liable for the price which Ehrmann had fixed, but not bound to account for the price he had received, however much it might exceed the price originally notified by Ehrmann. In these circumstances Ehrmann conferred on Anderson such a right in the goods sent as enabled the latter to give a good title to them to anyone who in good faith purchased them from him—a title which could not have been successfully challenged by Ehrmann. If, however, Anderson could have conferred such a title on a purchaser, I think he could equally confer the lesser title given to a pledgee who in good faith made advances on the security of the goods. If I am right so far, it follows that the appellant is entitled to hold the goods pledged with him by Anderson until his advances thereon are repaid.
The counsel for the respondent based their argument in support of the respondent's right on the terms of the approbation note sent by the respondent to Anderson with the goods in question. That note provides or stipulates that the goods should remain the property of the respondent until “invoiced by” him, and the effect of that, it was said, was to prevent any right of property passing from Ehrmann except in the way provided, namely, the invoicing of the goods by him to Anderson. I think the answer to this contention is twofold. In the first place, the provision was made to secure Ehrmann in his right of property as in a question with Anderson or Anderson's creditors, so long as the goods were in Anderson's possession. It was not intended to continue in Ehrmann a right of property preferably to any right granted by Anderson in favour of some third person, the granting of such a right being, in the contemplation of the parties, one which it was the primary purpose of the contract or transaction to enable Anderson to give. But, secondly, if the invoicing of the goods by Ehrmann to Anderson gave the latter a full right of property, that right was so given. In April 1903 the goods in question were invoiced by Ehrmann to Anderson. The Sheriff thinks this transference of property may be set aside on the ground that Ehrmann was induced to make it by the fraud of Anderson. I do not concur in that view. It appears to me that Anderson's repeated statements that he had a customer whom he expected to purchase the goods (statements I assume to be false) was not the inducing cause of the invoicing and transference. It will be observed that Anderson did not ask Ehrmann to invoice the goods to him—that was a proposal which emanated from Ehrmann. And what induced Ehrmann to invoice the goods was his own anxiety to have Anderson personally liable for their price. In effect what Ehrmann said to Anderson was this, Whether you have a customer to take the goods or not I must either have them back or you must take them yourself and become liable for their price, and for that price I will take your bill. Anderson's reply was, Very well I will accept your
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On the whole matter I am of opinion that the appellant is entitled to hold the goods in question so long as the advances he made on the security thereof remain unpaid. The trustee on Anderson's estates does not appear to contest the judgment by which his claim to the property as part of Anderson's estate has been negatived. As in a question between them, therefore, the right of property must be taken to be in Ehrmann. In these circumstances, the appellant not objecting, it will carry out my view if Ehrmann is preferred to the fund in medio in terms of his alternative claim. This is, in effect, a return to the interlocutor of the Sheriff-Substitute in all of whose findings I am not to be considered as concurring.
I understand that Anderson's trustee has acquiesced in this judgment, and he was not represented at the hearing before us. It is therefore only necessary for us to decide on the claims of Ehrmann and Bryce. In my opinion the judgment of the Sheriff is wrong. I think that the claimant Bryce, the pawnbroker, is entitled to retain the necklace until repaid the advances made by him to Anderson on the security of the necklace, and that the claim for Anderson's trustee now being out of the way, Ehrmann will be entitled to delivery of the subject on his repaying to Bryce the amount advanced to Anderson with interest.
The Sheriff's judgment proceeds in a great measure upon the assumption that the case of Brown v. Marr, 7 R. 427, is no longer law, and in particular that it was overruled by the subsequent case of M'Donald v. Westren, 15 R. 988. In this I think he is wrong. The facts in the case of M'Donald v. Westren were different in this respect, that at the date of the retail jeweller's bankruptcy the goods sent to him by Westren on a contract of sale or return were still in his possession. The question arose, not between the wholesale jeweller and some one to whom the retail jeweller, Fraser, had sold the goods, but between the wholesale jeweller and Fraser's trustee. In that case Fraser had not declared his option to buy, and had exercised no right of property in the goods by selling or pledging them. They were still in his possession, and on that ground the Court decided as in a question between Westren and Fraser's trustee that the property in the goods never passed to Fraser, and consequently had not passed from him to his trustee.
That was the true ground of judgment, and although at the close of his opinion Lord Young indicated some doubt of the judgment in Brown v. Marr, it is plain that his remarks were, and were intended to be, obiter.
On the other hand, the Lord Justice-Clerk (Lord Moncreiff), who took part in the judgment in Brown v. Marr, was at pains to distinguish the two cases.
Again, in the case of Mitchell v. Heys & Sons, February 27, 1894, 21 R. 600, Brown v. Marr was treated both by the Lord Ordinary and Lord Kinnear as still a binding authority. No better exposition of the ground of judgment in Brown v. Marr could be given than that of Lord Kinnear in distinguishing the judgment. He says (21 R. p. 613)—“The main ground of judgment was that by such a contract all the substantial rights of ownership pass to the buyer. He has an option to return goods within a stipulated time instead of paying the price. But whenever he exercises any right of property, as by selling or pledging the goods, the option ceases, and accordingly the title he may give to third persons dealing with him in good faith does not depend upon any authority derived from the vendor on sale and return, but upon his own absolute right of property.… The difficulty was that the contract had been obtained by fraud. But the answer is that contracts obtained by fraud are valid until they are rescinded, and therefore that they cannot be rescinded to the prejudice of rights and interests acquired by third parties in good faith and for value.”
In Mitchell v. Heys & Sons the goods came into the possession of Mitchell, Johnston, & Company, not under a contract of sale or return, but under a contract of hiring under which, of course, they had no power to appropriate or dispose of the rollers; and the Court held (I must assume rightly) that William Mitchell, from whom they hired the rollers, had done nothing to induce Heys & Sons, to whom Mitchell, Johnston, & Company had sent the rollers with cloth to be printed, to believe that the rollers were the property of Mitchell, Johnston, & Company. That is a very different case from the present and Brown v. Marr, in both of which the goods were placed in possession of the retail dealer in order that he might dispose of them in the ordinary course of his business, there being nothing to show an intending customer that the goods were held by the retail dealer under conditions which prevented him from disposing of them as his absolute property. It is new to me that a customer going into a jeweller's shop for the purpose of purchasing an article of jewellery is called upon to catechise the jeweller as to whether the goods are his absolute property and as to the conditions on which he is entitled to sell them. For the convenience of trade I think that the customer in such circumstances is entitled to assume that the jeweller has an absolute power of disposal whatever may be the latent conditions under which the retail dealer holds possession of the goods. I am
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If, then, Brown v. Marr has not been overruled, it must be followed if it applies to the present case, and we must therefore next consider whether this case can be distinguished from it. If the so-called approbation note were to be read literally we should perhaps be bound to hold that it was a condition of the contract that property in the goods should not pass until Ehrmann invoiced the goods to Anderson, although even then I should hold that a customer who did not know of the condition would be entitled to deal with Anderson on the assumption that he had full power of disposal. But when we look at the true nature of the transaction between Ehrmann and Anderson I think it is plain that the contract was one of sale or return. The purpose of the contract admittedly was not merely to give Anderson an opportunity of inspecting the goods and purchasing them himself, but in order that Anderson might endeavour to re-sell the goods. In point of fact the necklace in question was not in Ehrmann's possession, but remained with Anderson or with the pawnbroker from 13th December 1902 till 24th April 1903. Thus Anderson was clothed with the ostensible ownership of the goods, and the bona fides of the pawnbroker is not impugned. Anderson having thus exercised the right of ownership over the goods by pledging them, I think it is doubtful whether, had it been Ehrmann's interest to do so, he might not, if the fact of pledging had come to his knowledge, have refused to take the goods back and held Anderson liable in the agreed-on price on the ground that in the language of section 18, sub-section 4 ( a), of The Sale of Goods Act 1893, Anderson had done an act (viz., pledging) adopting the transaction, and that therefore the property had passed to Anderson to the effect of making him liable in the price.
It is right, however, to notice that ex facie of the contract the goods were to remain the property of Ehrmann until invoiced by him to Anderson. It seems to me that the only practical effect of that stipulation is that if (as in Brown v. Marr) Anderson did not dispose of the goods by selling or pledging them, Ehrmann should be entitled to have them returned notwithstanding the bankruptcy of Anderson.
In any other view no sale could have been effected until an invoice was obtained from London.
If it were necessary for the disposal of the case I should be prepared to hold that even if we read the contract literally Ehrmann did pass the property to Anderson on 24th April 1903 by invoicing the goods to him and taking bills for the price. This was not done at the request of Anderson, but on the initiative of Ehrmann, who was anxious to bring the thing to a point and fix Anderson with liability for the price of the goods. No doubt Anderson was anxious to conceal from Ehrmann that the necklace was in pawn, and that in his letters he falsely alleged that he was in treaty with a customer, but on the other hand it is plain from the correspondence that Ehrmann was indifferent whether Anderson got a customer or not, and pressed Anderson to take the goods over as his own property and grant bills for the price. On the effect to be given to such false statements as Anderson made, I may refer to the opinion of Lord Ormidale in Brown v. Marr, 7 R. pp. 443–4, and the cases which he there refers to.
On the whole matter I am of opinion that the interlocutors of both Sheriffs should be recalled and the claims of Bryce and Ehrmann sustained to the effect which I have already indicated.
The Court pronounced the following interlocutor:—
“Sustain the appeal: Recal the interlocutors of the Sheriff-Substitute and Sheriff, dated respectively 19th February and 13th June 1904: Find that on 13th December 1902 the claimant Ehrmann sent to Robert Anderson, jeweller, Glasgow, a diamond necklace, the subject in medio, on the terms specified in an approbation note which contained a provision that the said necklace should remain Ehrmann's property until invoiced by him, Anderson being in the meantime responsible for loss and damage, and the necklace while uninvoiced being returnable on demand; that it was the purpose of the said necklace being sent by Ehrmann to Anderson that Anderson should endeavour to effect a sale of the necklace, and that in the event of his doing so he should be liable to Ehrmann for the price specified in said approbation note: Find that on 18th December 1902 Anderson pledged the necklace to the claimant Bryce for a loan without the knowledge or consent of Ehrmann: Find that by letter dated 21st April 1903 Ehrmann proposed that Anderson should himself become the purchaser of the said necklace, and should grant bills in his favour for the price thereof: Find that Anderson agreed to said proposal and accepted bills for the price, whereupon said necklace was invoiced by Ehrmann to Anderson on 23rd April 1903: Find that said bills were subsequently dishonoured, and that Anderson became bankrupt on or about 9th July 1903: Find that Ehrmann was not induced to enter into the said transaction with Anderson on 23rd April 1903 for the sale of the necklace by Anderson's concealment of the fact that he had pledged the necklace to Bryce; but further find in respect of the terms of the contract between Ehrmann and Anderson that Anderson was in a position to pledge said necklace, and validly pledged the same to Bryce accordingly: Find that the claimant Galbraith not now insisting in his claim, the claimant Ehrmann is entitled to obtain delivery of the subject pledged upon repayment to Bryce of the amount advanced by him
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Counsel for the Claimant and Appellant Bryce—Salvesen, K.C.— Macmillan. Agent— D. Hill Murray, S.S.C.
Counsel for the Claimant and Respondent Ehrmann—Kincaid Mackenzie, K.C.— M'Clure. Agents— Cumming & Duff, S.S.C.