Scottish Court of Session Decisions

Alfred Brown, pursuer, brought an action of furthcoming against Willock, Reid, & Company, Limited, arrestees, and the Skoda Works, Pilsen, Limited, Pilsen, Austria, against whom arrestments ad fundandam jurisdictionem had been used, defenders, concluding for decree for £1042, being the amount of a debt due by the arrestees to the defenders and arrested in their hands both on the dependence and in execution.

Answers were lodged by the arrestees, who pleaded, inter alia—“1. The action is incompetent ( a) in respect that the liability to pay the debt in question is superseded by war, and ( b) in respect of the terms of the Trading with the Enemy Amendment Act 1914.”

On 29th January 1918 the Lord Ordinary

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( Hunter) repelled the first plea-in-law for the arrestees and continued the cause, and granted leave to reclaim.

Opinion, from which the facts of the case appear:—“The pursuer in this action of furthcoming, a merchant in England, seeks to recover payment from Glasgow merchants of a debt due by them to an Austrian firm. Both these firms are parties to the action, but the former firm alone have lodged defences.

“Prior to the outbreak of war with Austria, both the pursuer and the arrestees had business dealings with the Austrian firm. It is said that when business relations between the two countries ceased owing to the war, the Austrian firm were owing to the pursuer the sum of £1366, 3s. 4d. On the other hand, the Glasgow firm are said to have been due to the Austrian firm for goods supplied to them before the war the sum of £1042.

The pursuer having founded jurisdiction in the Court of Session against the Austrian firm, by arrestment in the hands of the Glasgow firm, obtained a decree in absence against the former firm for the sum of £1366, 3s. 4d., with interest at five per cent. per annum from 18th July 1917 until payment, and expenses as taxed.

On 19th July 1917 the pursuer used an arrestment on the dependence of his action against the Austrian firm, in the hands of the Glasgow firm, to the extent of £1042. He now seeks payment of this sum, which is admittedly less than the amount for which he holds a decree against the Austrian firm.

The plea upon which I mainly heard argument was the defenders' first plea, which is in these terms—‘The action is incompetent ( a) in respect that the liability to pay the debt in question is superseded by war, and ( b) in respect of the terms of the Trading with the Enemy Amendment Act 1914.’ This plea was only insisted in to the effect that the action should be sisted until the termination of the war. It was maintained that the case of Fergusson & Company v. Brown & Tawse, 1917 S.C. 570, 54 S.L.R. 485, recently decided by the First Division of the Court, was an authority for this course being followed. According to the rubric of the report of that case, it was held that as the arrestee was not liable to make payment to the enemy alien during the continuance of the war, and as he could put forward against the arrester all defences competent against the common debtor, the action fell to be sisted. If the decision was necessarily an authority for the general proposition contained in the rubric, I think that the case would be in favour of the defenders' contention. Consideration however of the opinions delivered, and of the decision, leads me to the conclusion that the question was not settled but is still open.

In the case of Fergusson & Company the debt which the arrestee was liable to pay to the German firm was not payable until twelve days after the outbreak of war. The price was payable in marks, and at the date of payment there was therefore no rate of exchange between this country and Germany. All the judges, in the opinions delivered, found upon the circumstance that the date of payment to the German firm was after the war. Both Lord Johnston and Lord Skerrington seem to indicate that but for this circumstance they would have been in favour of the pursuers obtaining decree. I think that the case merely decided that in view of the special circumstances referred to in the opinions delivered the action should be sisted.

Under war legislation a British debtor is not liable or entitled to make payment to an enemy alien of a debt due to him. The defenders maintain that they are entitled in a furthcoming to plead this disability against a British creditor arresting in their hands in respect of their indebtedness to an enemy alien, in virtue of the rule stated in Erskine, iii, 6, 16, where the following passage occurs:—‘As the arrester affects by his diligence the subject arrested, tantum et tale as it stood in his debtor, with all its burdens, therefore if the arrestee, whose condition ought not to be made worse by the diligence of creditors, has any just defence against the debt, whether of payment, compensation, &c., which would be relevant against the common debtor, the same defence ought to stand good against the arrester, who has no claim but in the common debtors' right.’ It does not appear to me that this passage supports the defender's contention. The disability imposed upon the arrestee to make payment to the enemy creditor does not affect the debt, but only prevents the creditor from personally receiving payment during the period of hostilities. The rule laid down in Erskine is intended to prevent the arrestee from suffering prejudice by having to pay his creditor's creditor, where he himself has an unsatisfied claim. No such suggestion of prejudice is made or can be made in the present case. The pursuer is merely completing and making effectual a step of diligence which he had lawfully taken against an enemy alien who is his debtor. Section 1, sub-section 7, of the Courts (Emergency Powers) Act 1914 (4 and 5 Geo. V, cap. 78), which empowers the Court to defer execution in certain cases, provides that ‘Nothing in this Act shall … give any power to stay execution or defer the operation of any remedies of a creditor in the case of a sum of money payable by or recoverable from the subject of a Sovereign or State at war with His Majesty.’ I propose therefore to repel the first plea-in-law for the defenders.”

The arrestees reclaimed, and argued—The case should be sisted— Fergusson & Company v. Brown & Tawse, 1918, 55 S.L.R. 437. That was the only reasonable course, for it was known that enemy countries were appropriating the funds of British subjects in their dominions to pay debts due to their subjects by British subjects, and the debt due by the arrestees to the defenders might therefore have been paid. If that was correct the ultimate balancing of accounts could only take place at the end of the war. That displaced the reasoning of the Lord Ordinary, and so did the reasoning in Fergusson's case ( cit.).

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Argued for the pursuer— Fergusson's case ( cit.) was distinguished, for here the debt was mature before the outbreak of war. Further, the reason for the sist in that case was that there were a number of questions, e.g., of exchange, which had not been dealt with in the Court of Session, and that had led to the sist. The debt in question had to be returned to the Custodian as enemy property, and the Court could have ordered it to be vested in the Custodian—Trading with the Enemy Amendment Act 1914 (5 Geo. V, cap. 12), sections 3 and 4. Upon the order of the Court such money vested in the Custodian and could be made available to satisfy the claims of British subjects against enemy subjects (section 5 (2)). The debt here had not been vested in the Custodian, but it was unreasonable to hold that the pursuer's right to get payment of it was any the less because of that. The only impediment to recovery was that leave to proceed to execution must be obtained—Courts (Emergency Powers) Act (4 and 5 Geo. V, cap. 78), section 1—and there was nothing to prevent British subjects from recovering from enemy subjects (section 1 (7)). The Trading with the Enemy Proclamation, No. 2, dated September 9, 1914, Article 5, was referred to (Manual of Emergency Legislation, vol. i, p. 378) as showing what was forbidden. There was no suggestion of a defence available against the defenders, so that Ersk. Inst. iii, 6, 16, did not apply.

At advising—