Scottish Court of Session Decisions

On 11th April 1911 Walter Bowie, farmer, Paisley, and others, testamentary trustees of the late William Bowie, farmer, Black-byres, Paisley, pursuers, brought an action against (1) William Goudie, New Jersey, U.8.A., and (2) Mrs E. H. Watson, wife of Thomas Watson, Craignair, Bridge of Weir, and the said Thomas Watson as

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her curator and administrator-in-law, defenders, for reduction of a pretended discharge of a bond and disposition in security in which they (the pursuers) were creditors, and for delivery of the corpus of the bond, then in the possession of the defender Mrs Watson, the purchaser of the subjects comprised in the bond.

The defenders Mr and Mrs Watson, who alone entered appearance, pleaded, inter alia—“(3) The defender Mrs Watson having paid the said sum of £650 conditionally upon receiving a valid disposition to Craignair, and in addition the said bond and disposition in security and a discharge thereof, and having received said deeds in good faith, is entitled to retain the said bond and disposition in security and discharge until repaid the said sum of £500. (4) Separation, the pursuers having entrusted the custody of said bond and disposition in security to the said William Bowie, are barred from obtaining redelivery thereof from these defenders, who received the same bona fide and for value, until they repay to the pursuers the said sum of £500.”

The facts are given in the opinion (infra) of the Lord Ordinary ( Ormidale), who on 11th January 1912 decerned against the defender Mrs Watson for delivery of the bond.

Opinion—“The pursuers of this action are testamentary trustees. In the course of administering their trust they lent at Whitsunday 1904 the sum of £500 to the defender William Goudie, receiving in security of their loan a bond and disposition in security over certain heritable property.

William Bowie, a writer in Paisley, was agent for both parties in the transaction.

The pursuers aver—and the argument proceeded on the footing—that William Bowie was the agent in the trust, and that the bond and disposition in security, with the other trust papers, were retained by him in that capacity. The interest on the loan was regularly accounted for by him to the pursuers down to Whitsunday 1910.

Mr Bowie died in September 1910.

At Whitsunday 1909 the defender William Goudie sold and disponed the property which formed the subject of the security to the defender Mrs Watson for £650, William Bowie acting as his agent in the matter. Mrs Watson employed another agent to represent her, and through him paid the £650 to William Bowie. Along with the disposition of the property Mrs Watson received, and now has in her possession, a discharge of the bond bearing to be signed by the pursuers, and the bond itself.

It is not now disputed that the signatures of the pursuers to the discharge are forged, and that the whole of the £500 was embezzled by William Bowie.

The pursuers have raised the present action for reduction of the discharge and for the delivery to them of the bond and disposition in security. Defences have been lodged by Mrs Watson and her husband, who state that they are willing to hand over the bond on receiving in exchange therefor £500.

No defences were lodged for William Goudie.

By interlocutor dated 13th June 1911 the Lord Ordinary, on the motion of the pursuers, the compearing defenders not opposing, decerned against them in terms of the reductive conclusions of the summons.

I have now to decide by which of two perfectly innocent parties the loss brought about by the fraudulent conduct of William Bowie is to be borne.

The law agent of the pursuers, William Bowie, had no implied authority either to call up the bond or to accept repayment of the loan, and it is not averred that they had given him any special authority to do either the one or the other—I am unable, therefore, to say that they were in any sense blameworthy or negligent in allowing William Bowie to retain possession of the bond— Peden v. Graham, 1907, 15 S.L.T. 143.

And, on the other hand, I cannot see how the purchaser of the property could have carried through the sale in any other way than she did. It is not suggested that William Bowie was otherwise than a reputable agent at the time of the transaction. Mrs Watson paid a full price for the subjects, and she was entitled to obtain a clear title. She took the usual steps for doing so, and she only paid the price on obtaining what purported to be a clear title.

But the discharge which was handed to her, and which bears that the amount of the loan had been received from her by the creditors in the bond, has been reduced, the deed being admittedly a nullity. She has not, in fact, paid the creditors anything, and they have not, in fact, granted to her any discharge of the bond. What she did do was to pay to William Bowie, as agent for William Goudie, the seller of the property, £650, and William Bowie embezzled £500 of that sum, took the bond from the repositories of the pursuers in his office, and along with what purported to be a discharge of the bond, but which was no discharge, handed it to the purchaser. He had no authority to deal with the bond in connection with the sale of the security subjects, and it seems to me that the legal position as in a question with the purchaser was just the same as if he had picked the bond from the pocket of the pursuers. He had no right or title to hand it to the purchaser, and in my judgment the purchaser has, now that the signatures to the discharge have been ascertained to be forged, no right or title to retain it— Wallace's Trustees v. Port Glasgow Harbour Trustees, 1880, 7 R. 645. She received it in absolute good faith, having, as she honestly thought, paid full value for it to the creditors in it; but none the less was the delivery to her of the bond tainted with fraud, just as the discharge which was handed to her along with the bond was tainted with the vice of forgery.

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Without a discharge or other evidence of repayment to the creditors, the purchaser had no right to take the bond, and obviously she would have declined to accept the mere possession of the writ as of itself equivalent along with the disposition of the property as a clear title. It appears to me that the bond in this case is in the same position as the cow in the case of Morrison—Morrison v. Robertson, 1908 SC 332.

The defender Mrs Watson maintained that the forgery of the discharge was something entirely independent of her contract with William Goudie for the purchase of the property, and that the security writ having been handed to her in implement of that transaction, which it is not proposed to set aside, and which was not in any way tainted with fraud, she is entitled to retain it. She is not, she says, concerned with the forged discharge, and is not seeking to take any advantage or benefit from it. She is simply claiming a right to retain possession, for what it is worth, of a writ which in due course came into her hands in fulfilment of the contract of sale and purchase. In my opinion she' is taking advantage from the forged document, for she received the bond simply and solely because the bond was falsely said to be discharged by the receipt of her money, not by William Goudie the seller, but by the pursuers.

The position which was brought about by the fraud of William Bowie here seems to me to be entirely different to that disclosed in the case of Brocklesby v. Temperance Building Society, A.G. 1895, 183, on which the defender based her contention.

That case was decided on the ground that the pursuer, though himself innocent of fraud, had put it in the power of another to commit the fraud by clothing him with authority to intromit with certain deeds, with the result that these deeds came to be in the possession of the defenders on a perfectly good title irrespective altogether of any forged documents. The forgery of further documents, executed in order to serve ulterior purposes of the fraudulent agent, was not in any way necessary to establish the defenders' right to hold the deeds. In Brocklesby's case the forgery was not ancillary to the main transaction; in the present case it is.

It is a very hard case for the defender Mrs Watson, but in my opinion the loss occasioned by the fraudulent conduct of William Bowie must be borne by her.

“I shall decern against her for the delivery of the bond and disposition in security to the pursuers.”

The defenders reclaimed, and argued—(1) The defender was entitled to the bond in virtue of the assignation of writs in the disposition of the subjects, the bond being one of the titles to the property; (2) the pursuer's agent (Bowie) had implied authority to discharge the bond in return for a full price, and that being so the defender was entitled to retain it— Robinson v. Montgomeryshire Brewery Company, [1896] 2 Oh. 841; Bourton v. Williams, (1870) L.B., 5 Ch. App. 655. If the pursuers' agent embezzled the money his clients ought to bear the loss and not the defender, who had paid the full sum in the bond and had not done anything to facilitate the fraud— Cordon v. James, (1885) L.R., 30 ChD 249; Brocklesby v. Temperance Building Society, [1895] A C 173. The case of Morrison v. Robertson, 1908 SC 332, 45 S.L.R. 264, was distinguishable, for in that case there was no agency at all.

Counsel for the respondents were not called on to reply.