Scottish Court of Session Decisions

On 21st August 1903 the American Mortgage Company of Scotland, Limited, 36 Castle Street, Edinburgh, raised an action against L. B. Sidway and H. T. Sidway, 5300 Armour Avenue, Chicago, U.S.A. (against whom arrestments had been used ad fundandam jurisdictionem), in which they sought decree for £6364, 4s. 7d., conform to a judgment therefor obtained by the pursuers against the defenders in the Circuit Court of Cook County, Illinois, U.S.A., on 21st July 1903.

In order to found jurisdiction against the defenders, the pursuers on 21st August 1903 arrested in the hands of the Missouri Land and Live Stock Company, Limited, 16 Castle Street, Edinburgh, all debts, sums of money, &c., then in the hands of the arrestees and due by them to the defenders, including 755 shares of the said company, belonging to L. B. Sidway, and 22 shares of the said company belonging to H. T. Sidway, and registered in their names respectively.

The defenders, who were admittedly proprietors of these shares on 21st August 1903, the date of the arrestment, pleaded, inter alia, no jurisdiction.

On 26th December 1907 the Lord Ordinary ( Guthrie) found that the arrestment of the shares in question had founded jurisdiction against the defenders, and repelled the plea.

Opinion.—“The pursuers allege they have founded jurisdiction against the defenders, residents in the United States, by the arrestment of certain shares belonging to the defenders in the Missouri Land and Live Stock Company, Limited, which has its registered office in Edinburgh. The defenders are admitted to have been proprietors of these shares on 21st August 1903, the date of the alleged arrestment. But the defenders maintain that by the law of Scotland shares in limited joint stock companies are not arrestable, and therefore there is no warrant for proceeding against them in Scotland. At the date of arrestment, although dividend appears to have beep earned, no sum was actually payable to the defenders either in the shape of dividend or return of capital.

The general rule is thus enunciated by Lord Deas in Lindsay v. London and North-Western Railway Company, 1860, 22 D. 571, at page 596—‘All moveable and heritable property in Scotland is attachable in one way or other. We have poinding to attach what is in a man's own possession; arrestment to attach personal estate in the hands of another; and adjudication to attach heritable property and various other things which cannot be attached by either of the two former diligences.’ In the case of ordinary partnerships it is not disputed that, while the assets of the company are not arrestable for debt due by one of the partners, the share of that partner in any balance of the assets belonging to him is arrestable. See Erskine, iii, 3, 24; 2 Bell's Commentaries, 508, note 3, and 536 (i, 3); Parnell v. Walter, 1889, 16 R. 97, per Lord Kinnear, 924–5; Cassels v. Stewart, 1879, 6 R. 936, 8 R. (H.L.) 1, per Lord Gifford, 6 R. 956.

But the defenders deny that the rule regulating ordinary partnerships applies to shares in limited joint stock companies. They found on the principle enunciated in many English cases, such as that of in re George Newman, 1895, 1 Ch. 674, per Lord Justice Lindley at page 685—‘An incorporated company's assets are its property, and are not the property of the shareholders for the time being.’ From this they argue that no debt was due by the Missouri Land Company, Limited, to the defenders at the date of arrestment, and therefore their shares in that company could not be arrestable. This seems to me to involve a confusion of ideas. As Mr Bell put it ( 2 Com. p. 71)—‘It is the obligation to account which is the proper subject of attachment.’ That obligation exists here as between the defenders and the Missouri Company, and I see no reason, if the obligation

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is, as it seems to be, a present obligation, of more than nominal value, not alimentary, and not specially appropriated, why it should not form the subject of a valid arrestment, even although an accounting might be required to ascertain its value. The method of making it forthcoming is illustrated by the form of summons in Mr Graham Stewart's Law of Diligence, page 847, and the interlocutor in the undefended case of the Mallina Gold Company.

I think the question is decided by the case of Lindsay v. London and North-Western Railway Company, 1860, 22 D. 571, in the First Division, and by the case of Sinclair v. Staples, 1860, 22 D. 600, in the Second Division. No doubt in Lindsay's case, as the defenders pointed out, there were dividends payable on the shares, and also other moveable property, which would of themselves, apart from the shares, have formed sufficient ground for the arrestment, but each of the First Division Judges, the Lord President M'Neill, Lord Ivory, Lord Curriehill, and Lord Deas, expressly affirm the arrestability of shares in a joint stock company. In Sinclair's case, where only shares were involved, the defenders argued that the debate turned on whether the proper dilgence was arrestment or adjudication, rather than on the question of whether either was competent. This is true; but the pursuer in that case maintained that arrrestment was not a diligence applicable to a species of moveable property like shares in a joint stock company, and this argument was negatived by the Second Division.

The defenders contended that these cases were not applicable, first, because they were decided in regard to shares in companies under the Joint Stock Companies Act 1856, and the Missouri Land and Live Stock Company, Limited, was established under the Companies Act 1862; and second, because the Missouri Company is a limited company. In regard to the first point, I was not referred to any differences between the two Acts which would affect the question now under consideration. The second point disappears when it is observed that the shares of the company concerned in Sinclair's case were limited in liability.

It appears to me to be sufficient warrant for arrestment in this case that there are here shares in a joint stock company, of present ostensible value, belonging to the defenders, whose interest in them is not alimentary and not specially appropriated, which shares give the defenders a substantial interest in the company and its assets, and can be turned at any time into money.

The defenders also contended that it had not been proved that the shares possessed any value. The proof does not contain any direct statement on this point, but I think I am bound to assume that shares in a company which is regularly paying large dividends and in which there have been periodical returns of capital to the shareholders must possess substantial pecuniary value.”

The defenders reclaimed, and argued—Arrestment was not a competent diligence, for shares in a joint-stock company were not arrestable. Shares in a joint-stock company were in a different position from shares in an ordinary partnership. In the former case the shareholders had no right in the company's assets. These belonged to the company, not to the individual shareholders—Lindley on Companies (6th ed.), i, 544; Lee v. Neuchatel Asphalte Co., 1899, L.R., 41 Ch D 1, per Lindley, L.J., at p. 23; Foster & Sons, Limited v. Inland Revenue Commissioners, [1894] 1 QB 516, per, Kay, L.J., at 530; in re George Newman & Co., [1895] 1 Ch 674 at 685. There were four essentials of the competency of arrestment—(1) The arrestee must be debtor to the arrester's debtor under a direct obligation to pay or deliver the subject arrested. (2) The debt must be due at the date of the arrestment. (3) The arrestee must have possession of the subject arrested. (4) The subject must be capable of being made available in a furthcoming. There were two qualifications to these rules—( a) The Court had allowed a claim for an accounting to be arrested; and ( b) Joint property was not arrestable for the debt of one of the co-owners — Lucas's Trustees v. Campbell & Scott, June 22, 1894, 21 R. 1096, 31 S.L.R. 788. The authorities for these propositions were Ersk. Inst. iii, 6, secs. 6, 8, 15–17; Bell's Com. ii, 69, 71; North v. Stewart, July 14, 1890, 17 R. (H.L.) 60, per Lord Watson at p. 63–64, 28 S.L.R. 397; Heron v. Winfields, Limited, December 11, 1894, 22 R. 182, per Lord Kinnear at p. 185, 33 S.L.R. 137; Wyper v. Carr & Co., February 2, 1877, 4 R. 444, per Lord President Inglis at p. 446, 14 S.L.R. 299; Leggatt Brothers v. Moss Empires, Limited, November 5, 1907, 45 S.L.R. 67, per Lord President at p. 69 and Lord Kinnear at p. 72; Bell's Prin., sec. 2283. The arrestment of a share in a company was in the same position as the arrestment of a contingent claim. A person buying a share in a company bought a chance of sharing in the capital of the company in the event of the company being wound up, or the chance of a dividend in the event of profits being earned and a dividend being declared. There was no obligation which might be made furthcoming at the date of the arrestment. It was distinguished from a share in a partnership in this, that a partner was always entitled to call his copartners to account, and an accounting might be ordered at any time. That could not be done in a company. Therefore in a partnership there was an arrestable interest which did not exist in a company— Douglas v. Jones, June 30, 1831, 9 S. 856; Baines & Tait v. Compagnie Generale des Mines d'Asphalte, March 15, 1879, 6 R. 846, 16 S.L.R. 471; Napier, Shanks, & Bell v. Halvorsen, January 29, 1892, 19 R. 412, 29 S.L.R. 343; Lucas's Trustees v. Campbell & Scott, cit. sup., per Lord Kinnear at p. 1106. As to arrestment of current rents, reference was made to More's Stair, ii (Notes, p. 286). The cases of in re National Bank of Wales, [1897] 1 Chan. 298, and

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Lindsay v. London and North-Western Railway Co., Jan. 27, 1860, 22 D. 571, relied on by the respondents, did not affect the question either way, although in the latter case the Judges assumed that shares were arrestable. But in neither that case nor Sinclair v. Staples, Jan. 27, 1860, 22 D. 600, was the question argued. The proper and competent diligence against shares was adjudication, which extended to moveables when arrestment was not competent-Stair, iii, 2, 48; More's Notes, p. 299; Ersk. ii, 12, 48; Parker on Adjudications, p. 16; Barbour v. M'Minn, July 7, 1826, 4 S. 813; Morrison v. Harrison, February 3, 1876, 3 R. 406 ( per Lord Justice Clerk Moncreiff, at 409), 13 S.L.R. 275. Though the Court had allowed a claim for an accounting to be arrested, accountability was not a fair criterion of the competency of arrestment; there must be something actually due at the date of arrestment. The cases in which a liability to account had been the subject of arrestment, e.g., Douglas, cit. supra., Baines, cit. supra, depended on a different ratio, the Court holding that as there was a prima facie debt due, an inquiry at an inconvenient time should not be allowed. These cases accordingly were determined on the ratio of convenience.

Counsel for the respondents were not called on.

At advising—