Scottish Court of Session Decisions

On 18th January 1909 Messrs A. W. Gamage, Limited, general outfitters, London, brought an action in the Sheriff Court at Dingwall against Miss Violet May Gordon Charlesworth, Flowerburn House, Ross-shire, for declarator that certain articles of furniture purchased by her in July 1908 were obtained by fraud, and that the pursuers were entitled to rescind and had rescinded the sale. There were also conclusions for redelivery of the articles sold, and for interdict against their sale or disposal. The defender's estates were sequestrated on 30th January 1909, and a trustee, Munro, appointed, who was duly sisted as defender. No appearance was made for Miss Charlesworth.

The facts were narrated thus by Lord Johnston—“… Messrs Gamage Limited, who are general outfitters in Holborn, London, sold certain articles of household plenishing to a Miss Charlesworth in July 1908. They now seek to rescind the sale and to recover the articles, on the ground that the sale was induced by Miss Charlesworth's fraud. The conclusions of their summons were to have it declared that the pretended sale of said articles by them to Miss Charlesworth on or about 24th or 25th July 1908 was induced by her fraud; that the pursuers were entitled to rescind, and had validly rescinded, said pretended sale; further, to have her ordained to redeliver the articles, which were described as “presently in Flowerburn House, Ross-shire,” to them; and failing her doing so, to authorise them to remove the said articles from Flowerburn House, and meantime to interdict her selling or disposing thereof.

“The action was raised on 18th January 1909, and I do not find it alleged that the pursuers had done anything prior to that date to rescind the contract of sale. The rescission they found on is merely the adoption of the present proceedings, and therefore does not date back beyond 18th January 1909, or six months after the sale. Interim interdict was granted on 18th January 1909 along with warrant to cite, and service was made on the 19th January. There is no information on the record or in the evidence indicating when Miss Charlesworth became notour bankrupt, or when proceedings for her sequestration were commenced. But from No. 22 of process, which is a certified copy of Lord Skerrington's interlocutor of 22nd June 1909 recalling the sequestration, in respect that it was superseded by the English bankruptcy, I gather that the first order in the petition for sequestration

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was dated 22nd January 1909, and that sequestration was awarded on 30th January 1909. There is also a statement in the reclaiming petition for the trustee in the sequesrration to the effect that Miss Charlesworth was pressed by creditors and was notour bankrupt on 19th January 1909, ‘as can be ascertained from the sequestration process which has been produced in the case,’ and from the inventory of process, the process of sequestration appears as No. 17 of process. It has, however, been withdrawn from process and I am unable to refer to it. The statement to which I have referred is in itself an ex parte statement, and, moreover, does not indicate either when or how Miss Charlesworth became notour bankrupt, and as I do not know on whose application she was sequestrated I cannot judicially accept the fact that she necessarily was notour bankrupt, though doubtless she was pressed by creditors prior to her sequestration. So far, however, as my judgment is concerned, it is enough that the rescission of the contract involved in the raising of this action and the sequestration occurred almost unico contextu, and, from what we know otherwise, that total and hopeless insolvency had preceded both. The present proceedings therefore are virtually an attempt on the part of one creditor to obtain an advantage in a question with the estate and the creditors generally.

Sequestration having been granted on 30th January, Mr C. J. Munro, C.A., Edinburgh, as trustee on Miss Charlesworth's sequestrated estate, was on 26th February sisted as a party defender in the case, and the summons was shortly afterwards amended so as to direct its conclusions against him as well as against the bankrupt. The Scots sequestration has been superseded by an English commission in bankruptcy, and the English trustee has since been sisted in room of Mr Munro. But for the purposes of this case this change has been treated as immaterial.…

I think it would be waste of time to consider the grounds of action as stated in the summons, and that it is better to go directly to the evidence to ascertain not what is alleged but what is proved. The species facti are that Miss Violet May Gordon Charlesworth was a young lady of twenty-four, who had no means and no rational expectations. She had, under what circumstances are not disclosed, managed in the summer of 1908 to obtain a lease—I believe for seven years—of Flowerburn House and shootings in the Black Isle, Ross-shire, the rent of which she had no means of paying, and one of her first operations was to negotiate with Messrs Gamage for a supply of certain articles, rather of luxury than of necessity for the purpose of supplementing its furnishing to her taste. She had had one previous transaction with Messrs Gamage, from whom she had obtained credit in October 1907 to the extent of £75. The account had remained unpaid for nine months, and £70 was by some means or another—probably out of advances made to her by a certain Welsh doctor—paid, but only on 13th July 1908. How Messrs Gamage regarded this transaction we are not told. The fact of the transaction, of the delay in payment, and of the ultimate payment to account, only comes out incidentally, and I should say that, if considered at all, the circumstances of such prior transaction must have cut two ways in the estimation of Messrs Gamage in determining whether to give Miss Charlesworth further credit. But we are left entirely in the dark as to whether this prior transaction was considered at all, or even whether Miss Charlesworth was recognised as the same person who was engaged in it. It was certainly entirely unknown to the two employees of the firm most closely concerned with the new transaction of July 1908.

What then occurred was this—On 24th July 1908 Miss Charlesworth called at Messrs Gamage's establishment in Holborn, and ordered a large portion of the articles afterwards forwarded to her at Flowerburn, but no contract of sale was then concluded as the order was not complete. By arrangement, Mr Dennis and Mr Hampton, one of the assistant counting house managers, and the other the managing furniture salesman with Messrs Gamage, called on Miss Charlesworth at the Inns of Court Hotel, London, to exhibit to her some valuable skin rugs, and as Mr Dennis says, ‘to see about payment.’ ‘When the rugs had been selected,’ Mr Dennis proceeds, ‘I explained the object of my visit to Miss Charlesworth. I asked Miss Charlesworth to let me have a cheque, as our business terms were cash. Miss Charlesworth told me it was not convenient to give me a cheque on that day. She then proposed that on delivery of the goods at Flowerburn she would forward me a cheque for half the amount, which at that moment we thought would be about £100, and that the remaining half would be paid at the end of September when she was entitled to a large sum of money. These were her exact words according to my recollection.’

The fraudulent induction of the contract of sale is, when the whole case for the Messrs Gamage is carefully considered, based entirely upon the falsity of the representation that at the end of September Miss Charlesworth was entitled to a large sum of money. Mr Dennis is not very strongly corroborated by his colleague Mr Hampton, but I cannot do better for Messrs Gamage than take his statement at its highest. But there are one or two other incidentals bearing upon the question of inducement. Miss Charlesworth made it a point that the goods should be delivered to her at Flowerburn before the 12th of August, and Mr Dennis adds that she told him, as her reason, that she was having a shooting party at Flowerburn on the 12th. I think it is also admitted by Mr Dennis that he was impressed by Miss Charlesworth's appearance and manner, and he certainly adds ‘We occasionally have credit customers, and it is part of my business to gauge their responsibility from their appearance and from what they say.’

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At a date unknown, as the letter is undated, Miss Charlesworth subsequently wrote from Flowerburn, Fortrose, Rossshire, N.B., the letter addressed to Messrs Gamage:—‘Dear Sir—I beg to confirm my promise to your counting house manager, namely, that upon delivery of goods ordered to me at my house I will forward cheque for £100, the remainder to stand over until my end of Sep. quarter. Please see that goods leave London not later than Wednesday next, so as to be unpacked and placed in their position before the 12th August.—Yours truly, V.. Gordon Charlesworth.’ It is not proved that this letter was received in time to be considered, or was considered by Messrs Gamage, when they determined to accept Miss Charlesworth's order, and instructed the forwarding of the goods. I think the contrary is to be inferred, and certainly Mr Dennis does not found upon it as in itself a representation inducing to the contract. That he should not do so raises my opinion of the fairness of his evidence. But the letter, if not a direct inducing representation, is a very strong corroboration of the evidence of Messrs Dennis and Hampton, and satisfied me that they truly state that Miss Charlesworth represented that she was entitled to a sum of money coming to her in the end of September, and that the reason for her urgency in obtaining delivery of the goods was the approach of the 12th of August, when she wished to be prepared to receive a shooting party. Needless to say there was no money coming to Miss Charlesworth at the end of September. Neither was there any shooting party for the 12th. Before leaving this letter I may add a bearing on another aspect of the case, that its receipt ought to have awakened Messrs Gamage's suspicion. It is not actually illiterate. But the handwriting and whole appearance of the letter betokens a half-educated person.

Mr Dennis next states that he told Miss Charlesworth that he must report her proposals to his principals; that he believed absolutely that Miss Charlesworth was telling the truth when she said she was coming into a large sum of money in September. ‘If I had not done so I would not have executed the order. Had I not relied upon the statement I need not have advised Gamages to execute the order. Had it not been for my belief in her statement the transaction would have fallen through there and then.’ Mr Dennis and Mr Hampton on their return to Messrs Gamage saw Mr Gamage, the managing director, and impressed on him the expediency of passing the transaction. Mr Hampton explains his position thus — ‘Because I thought the money would be all right. I had little doubt that the money was right. (Q) Upon what was your freedom from doubt based?—( A.) I was rather impressed by the style of the lady herself, by the fact that she was living in a good house in the north, by the hotel where she was then residing, and the whole circumstances of the case. (Q) Did you place much importance upon the statement that she was entitled to receive a sum of money in September?—(A) I believe every importance was placed on that statement. I myself made a strong point of that in placing the matter before Mr Gamage.’

But the difficulty is that neither Mr Dennis nor Mr Hampton can say what passed in the mind of Mr Gamage, and Mr Gamage himself is not called to state what really induced him to accept Miss Charlesworth's order, and so conclude the contract of sale and instruct delivery to be made. I am, however, unwilling, having regard to what I understand are the views of one of your Lordships, to proceed upon this defect in the proof, although to my own mind it is sufficient for the disposal of the case. I prefer to deal with the question on broader grounds.”

The pursuers pleaded, inter alia—“(2) The sale to the defender Charlesworth having been induced by false and fraudulent representations, is void, or at any rate is voidable, ab initio. (3) The defenders having determined, upon the true position of matters becoming known to them, to rescind the contract, and having done so by adopting the present proceedings, they are entitled to delivery of the goods in question, and to their expenses. (5) The defenders are not entitled to found upon the sale and delivery of the said goods to the prejudice of the pursuers, and without paying the price, in respect that the said sale and delivery were fraudulently procured. (6) The sale having been rescinded prior to the defender Charlesworth's bankruptcy, the property in the goods did not pass to the defender Munro. (7) Separatim, the defender Munro, as representing the general creditors on the sequestrated estate, has no higher or better right than the bankrupt.”

The defender (the trustee), inter alia, pleaded—“(2) The action is irrelevant as stated. (5) The alleged misrepresentations and others not being material, and not forming the inductive cause of the contract, cannot support an action for rescission thereof. (6) Esto that the contract is rescindable on the ground of fraud, the pursuers having failed to exercise their right to rescind within a reasonable time, the action should be dismissed, with expenses. (7) The estates of the defender Charlesworth being sequestrated, the pursuers are harred by the Bankruptcy Acts from taking or insisting in these proceedings, and must claim in the sequestration.”

On 21st May 1909 the Sheriff-Substitute ( MacWatt) found in law that the delivery of the articles in question having been induced by a false representation on the part of Miss Charlesworth, her trustee took them tantum et tale as they stood in her, and that the pursuers were entitled accordingly to rescind the sale and recover them from the trustee.

The defender appealed to the Sheriff ( Reid), who on 11th September 1909 recalled his Substitute's interlocutor, found that the pursuers had failed to prove that the sale of the articles in question had been induced

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by the false and fraudulent representations of Miss Charlesworth, and assoilzied her trustee from the conclusions of the action.

The pursuers appealed, and argued—The Sheriff-Substitute was right. The evidence showed that the statements made by Miss Charlesworth were false in fact, that they were known by her to be false, and that they were the inducing cause of the contract. But for her representation that she was entitled to money which was coming to her in ordinary course and at a definite time, the goods would not have been sent her. But for her fraud the contract would not have been entered into, and the pursuers therefore were entitled to recover the goods delivered—Bell's Com. i, 261, et seq.; Watt v. Findlay, February 20, 1846, 8 D. 529; Muir v. Rankin and Others, May 23, 1905, 13 S.L.T. 60; Laird & Sons v. The Bank of Scotland, [1909] 2 S.L.T. 247; Clough v. London and North-Western Railway Company, L.R., 7 Ex. 26, at pp. 34–5; in re Eastgate, [1905] 1 KB 465. The case of Richmond v. Railton, January 26, 1854, 16 D. 403, relied on by the respondents was distinguishable, for there the purchaser had already become bankrupt before the action for rescission was raised, and the property therefore had passed to his creditors. Moreover, in that case there was novation of the original contract, for the purchaser had taken a bill for the price. In the present case no third parties had acquired interests in the goods when the pursuers' action was brought, for the act of bankruptcy was subsequent to and not prior to the raising of the action. On 18th January, when the warrant to cite was granted, Miss Charlesworth had full control of the goods in question, and the first embargo laid on them was the pursuers' interim interdict. Reference was also made to M'Dowall and Neilson's Trustee v. J. B. Snowball & Company, Limited, November 8, 1904, 8 F. 35, 42 S.L.R. 56.

Argued for respondent—The Sheriff was right. This was a sale on credit, and if the appellants relied on the statements made to them, sibi imputent. The case was ruled by Richmond ( cit. supra). Esto that in Richmond an act of bankruptcy had occurred prior to the raising of the action, the ratio decidendi was that delivery of the goods had been attained by deceit. In the present case fraud had not been proved, and without proof of fraud the pursuers could not succeed—Bell's Com., i, 264 et seq.; Campbell, &c. v. Shepherd, &c., 2 Paton's App. 399. Esto that there was a promise to pay and of ability to pay, that was not sufficient to justify rescission of the contract—Bell's Com., i, 265–6. Neither was a general representation by a buyer that he was in good circumstances— Richmond ( cit. supra), at p. 405. In Watt v. Findlay ( cit. sup.), relied on by the appellants, the buyer was insolvent at the time he obtained delivery of the goods. It was not proved that Miss Charlesworth's statements were false, for the appellants had failed to show that she had no reasonable grounds for her statements. There could be no action of deceit for the statement of an opinion honestly entertained—Kerr on Fraud, 3rd ed., pp. 46–7—although it would be otherwise were the statement false and dishonest. Esto that a misrepresentation as to the state of a man's mind was a misstatement of fact— Edgington v. Fitzmaurice, L. R., 29 C.D. 459, per Bowen, L.J., at p. 483—the misrepresentation had not been proved. Even if misrepresentations had been proved that was not enough, for they must be shown to have been the inducing cause of the contract— Smith v. Chadwick, L.R., 9 A.C. 187, per Lord Blackburn at p. 196. This the appellants had failed to do. The wish to do business, and the fact that credit had been given before, were all elements in inducing the appellants to make the contract. The act of bankruptcy was a bar to recovery— Tennent v. City of Glasgow Bank, January 22, 1879, 6 R. 554, 22 S.L.R. 238. [ Lord Kinnear referred to Oakes v. Turquand, L.R., 2 Eng. & Ir. App. 325.] The rule that property acquired by the fraud or deceit of the bankrupt could not be retained by the trustee—Goudy on Bankruptcy, 3rd ed., 275—only applied where the fraud had occurred during sequestration. It was so in the cases cited by Goudy, viz., Douglas, Heron, & Company, 1786, M. 10,229; Watt v. Findlay ( cit. supra); Molleson v. Challis, March 11, 1873, 11 Macph. 510, 10 S.L.R. 315. The fraud alleged to exist if proved, and if material to the contract, was antecedent to the bankruptcy, and the rule therefore did not apply.

At advising—