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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Davis & Primrose, Ltd v. The Clyde Shipbuilding and Engineering Co., Ltd, and Others [1918] ScotLR 24 (16 October 1918)
URL: http://www.bailii.org/scot/cases/ScotCS/1918/56SLR0024.html
Cite as: [1918] ScotLR 24, [1918] SLR 24
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SCOTTISH_SLR_Court_of_Session
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Court of Session Inner House First Division.
[
v.
Contract — Sale — Price Payable by Instalments — Contract Becoming Illegal before Completion of Goods — Arrestment of Instalments of Price Paid to Manufacturers.
Facts:
A contract between a British firm and an Austrian firm, for the purchase by the latter of goods to be manufactured, provided for an extension of time for delivery if delay should occur owing to causes beyond the control of the sellers. The price was payable by instalments, of which £4620 was paid to account of the whole when war broke out and it became illegal to implement the contract. None of the goods had at that time been delivered. Thereafter the goods were completed and sold in Great Britain at an enhanced price. Third parties having obtained a decree against the purchasers of the goods arrested money in the hands of the sellers of the goods. Following Ferguson v. Brown & Tawse, 1918, 55 S.L.R. 437, the First Division of consent sisted the cause upon the arrestees finding caution.
Held, per Lord Dewar, Ordinary, (1) that the contract was dissolved, not merely suspended, by the outbreak of war; (2) that the sum paid to account of the price of the goods belonged to the buyers and was validly arrested in the hands of the sellers.
Davis & Primrose, Limited, Etna Iron Works, Leith, pursuers, brought an action of furthcoming against the Clyde Shipbuilding and Engineering Company, Limited, Port Glasgow, arrestees, and Stablimento Tecnico Triestino, Linz and Trieste, Austria, principal debtors, concluding for decree for payment by the arrestees of the sum of £300 or such other sum or sums as might be owing by them to the principal debtors and arrested in their hands upon 4th August 1916, and also upon 15th November 1916, at the instance of the pursuers, at least of such part thereof as should satisfy and pay the pursuers the principal sum of £266, 10s., with interest thereof from 7th August 1916 until payment, and £8, 17s. 6d., with 18s. as the dues of extract, all contained in a decree against the principal debtors dated 27th October 1916.
The contract between the arrestees and the principal debtors, dated 4th May 1914, which was for the supply by the former to the latter of two sets of triple expansion
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surface condensing screw marine engines, contained the following provisions:—. . 7. The whole of the work which from time to time may be in hand under this agreement shall become the absolute property of the purchasers [principal debtors], subject only to the lien which the contractors [arrestees] shall have upon it for unpaid money.… 9. In consideration of the said contractors [arrestees] supplying the engines and their appurtenances entirely in accordance with the terms of this agreement, and the annexed specification, the purchasers [principal debtors] shall pay the sum of £11,550 sterling (say Eleven thousand five hundred and fifty pounds sterling) for each set which shall be paid in the manner following:—By cash in London—20 per cent on signing contract, 20 per cent. when the cylinders are cast and boiler plates are in contractors' premises. 20 per cent when the boilers are tested and engine assembled. 30 per cent. nett cash in London in exchange for signed bills of lading and policies to cover insurance. 10 per cent. after reception of engine and boilers and satisfactory trials. … 13. It is further agreed, should any delay occur in the completion and delivery of the engine referred to in this contract owing to strike, lock-outs, labour disputes, combination of workmen, fire, tempest, accidents, or any causes beyond the control of the contractors [arrestees], a period of time corresponding to that lost by all or any of the above causes shall be allowed to the contractors [arrestees] for the completion of their work, and the date of delivery and completion named in the contract shall be (if necessary) correspondingly deferred. It is understood that the contractors [arrestees] shall at once give notice to the purchasers [principal debtors] of any case of force majeure which may occur during construction of the machinery.” The pursuers pleaded—“1. The sums condescended on having been duly arrested in the hands of the arrestees, decree should be pronounced as craved. 2. The contract referred to on record not having been cancelled, but merely suspended by the outbreak of war, the defenders by selling the partly completed engines committed a breach of their contract with the said Stablimento Tecnico Triestino; and the latter having thereby suffered loss and damage as condescended on, and that greatly in excess of the sums due to the pursuers, the pursuers are entitled to decree in terms of the conclusions of the summons. 3. Esto that said contract was cancelled by the outbreak of war, the partly completed engines remained the property of the principal debtors, and the [arrestees] are under obligation to account to the principal debtors for said engines or the proceeds of the sale thereof; or otherwise, the [arrestees] were and are bound to return to the principal debtors the instalments paid, viz., £4620 in all.”
The arrestees pleaded, inter alia—“1. The pursuers' averments being irrelevant the action should be dismissed. 2. The pursuers not being in titulo to propound or constitute a claim of damages in respect of alleged breach of the contract condescended on, the action should be dismissed. 3. The [arrestees] in respect of the dissolution of said contract being under no liability to account to the common debtor, they should be assoilzied from the conclusions of the action. 4. The pursuers not having attached any sum in the hands of the [arrestees] the action should be dismissed.”
On 16th May 1917 the Lord Ordinary (
Opinion, from which the facts of the case appear:—“The pursuers in this action of furthcoming are Messrs Davis & Primrose, Limited, Etna Iron Works, Leith. The defenders are the Clyde Shipbuilding and Engineering Company, Limited, as arrestees, and an Austrian firm—Stablimento Tecnico Triestino—are the common debtors.
In August 1916 the pursuers raised an action in the Court of Session against the common debtors using arrestments to found jurisdiction, and in October 1916 they obtained decree for £266, 10s., with interest and expenses.
Following on the said decree the pursuers arrested in the hands of the Clyde Shipbuilding and Engineering Company, Limited, the sum of £300 which they alleged to be due to the common debtors. The said firm declined to make payment on the ground that there was no property belonging to the common debtors in their hands.
The pursuers have now brought this action to recover payment. The material facts are not in dispute. In May 1914 the defenders entered into a contract with the common debtors for the construction and delivery of two sets of engines, the first set to be delivered not later than 28th February and the second not later than March 1915. The price to be paid was £11,550 for each set, and it was stipulated that twenty per cent. of the purchase price should be paid in London when the contract was signed. The contract was signed on 4th May 1914, and two sums of £2310 each were paid to the defenders. The first set of engines was completed in December 1915, but as war had been declared in August 1914 and the common debtors are an enemy alien firm, it became impossible for the defenders to deliver the goods. They accordingly sold the first set of engines for £22,750 to a Glasgow firm. The second set was not completed, but the material was sold in January 1916 for £1250.
In these circumstances the defenders maintain that nothing was attached by the arrestments, as there were no goods or money in their hands belonging to the common debtors when the arrestments were laid on. They admit that they obtained for the engines from Scotch firms sums largely in excess of the amount stipulated for under the contract, and that the common debtors have received no equivalent for the £4620 they paid in terms of the contract. But they maintain that on the outbreak of war in August 1914 the contract was dissolved and all obligations arising thereunder were finally determined, and that the £4620
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The pursuers on the other hand contend (1) that the contract was not dissolved but only suspended, and (2), and in any event, the defenders have property belonging to the common debtors in their hands and are bound to account for it.
It was not, I think, disputed that when a party to a contract becomes an alien enemy, if anything requires to be done beyond mere payment, the contract becomes illegal and is dissolved. But the pursuers founded on article 13 of the contract and argued that the effect of it was to suspend the operation of the contract during the continuance of the war, and that there was therefore no ground for its dissolution. Article 13 provides that should any delay occur in the completion and delivery of the engines owing to strike, lock-outs, labour disputes, combination of workmen, fire, tempest, accidents, ‘or any causes beyond the control of the contractors,’ they shall be allowed a period of time corresponding to that lost for the completion of the work, and the date of delivery (if necessary) shall be correspondingly deferred. And it is further provided that the contractors shall at once give notice of ‘any case of force majeure which may occur during the construction of the machinery.’
This clause does not appear to me to provide for the ‘suspension’ of the contract. On the contrary, it assumes the continued existence of the contract, and merely provides for an extension of time for delivery if delay should occur through any cause—such as strikes, lock-outs, &c.—which are beyond the control of the contractors. To suspend the contract is one thing, and to extend the time for delivery of the goods is another and quite different thing. Even if there were delay in delivery the contract was still to be in operation—thus by article 4 the purchasers have the right to send an inspector into the contractors' premises ‘at all times.’ And by article 15 the contractors agree to keep the machinery insured at all times and to forward the policies to the purchasers. And article 17 provides that if the contractors become bankrupt the purchasers have the right to use the contractors' premises, workshops, tools, and machinery free of cost. I think it is clear from those and other clauses that it was not the intention of parties to ‘suspend’ the contract—it was to remain in existence until the goods were delivered—although they might be delayed. Besides I do not think parties contemplated the outbreak of war or provided for such a contingency. If they had I should have expected some direct reference to it. The words force majeure are not apt words for war, and the contract shows that they were not used in that sense. I am of opinion that parties did not stipulate that the contract should be suspended during war. It was, I think, dissolved when war broke out. (See Zinc Corporation (Limited) v. Hirsch and Others, and Distington Hematite Iron Company, Limited v. Possehl & Company, 1916, 1 K.B. pp. 541 and 811.).
If I am right in this view the next question is whether the defenders are right in their contention that they are not under obligation to account? I do not think so.
The pursuers founded on article 7 of the contract, which provides that ‘The whole of the work which from time to time may be in hand under this agreement shall become the absolute property of the purchasers subject only to the lien which the contractors may have upon it for unpaid money.’ They argued that it was the intention of parties that the property should pass, and that such a stipulation was competent under the Sale of Goods Act, sections 17 and 18, Rule 5, and I was referred to the case of Barclay, Curie, & Company, 1908 S.C. 82, 45 S.L.R. 87. Alternatively they argued that even if in the circumstances the property cannot be said to have passed, still the defenders are under obligation to account for the instalments of the price which they received and for which they have given nothing in return.
In the view I take of the case I do not require to consider the pursuers' first alternative argument, because I am of opinion that the second is well founded.
It is, I think, an established rule of the law of Scotland that when one party to a mutual contract pays a sum of money to the other party on condition that something shall be paid or done in return for it, and that consideration fails, the money paid may be recovered. In the case of Watson v. Shankland, 1871, 10 Macph. 142, 9 S.L.R. 114. Lord President Inglis said—‘There is no rule of the civil law, as adopted into all modern municipal codes and systems, better understood than this—that if money is advanced to one party to a mutual contract, on the condition and stipulation that something shall be afterwards paid or performed by the other party, and the latter party fails in performing his part of the contract, the former is entitled to repayment of his advance, on the ground of failure of consideration. … If a person contract to build me a house, and stipulate that I shall advance him a certain portion of the price before he begins to bring his materials to the ground, or to perform any part of the work, the money so advanced may certainly be recovered back if he never performs any part, or any available part, of his contract.…’
That principle appears to me to rule this case. The defenders stipulated that the common debtors should advance a portion of the price. They did so, and have received nothing in return. The defenders do not say that they have earned the £4620 or any part of it. They do not state, so far as I could discover, any equitable claim to it. Their case is that the money vested in them absolutely by operation of a rule of law, to the exclusion of all other claims, when the contract was dissolved, and I was referred to two of the Coronation cases, Krell v. Henry (1903), 2 K.B. 740, and Chandler v. Webster (1904), 1 K.B. 493, and also to the Anglo-Egyptian Navigation Company v. Rennie, 10 C.P. 271. I doubt whether these cases support the defenders' contention.
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As the defenders admitted at the Bar that the subjects arrested exceeded in value the amount of the pursuers' claim, I am of opinion that the pursuers are entitled to decree as concluded for.”
The arrestees reclaimed.
At the calling of the case counsel for the arrestees moved that the case be sisted following the decision in Ferguson & Company v. Brown & Tawse, 1918, 55 S.L.R. 437, and stated that his clients were prepared to find caution. No objection was taken for the pursuers (respondents).
The Court sisted the cause upon caution being found by the arrestees.
Counsel for the Pursuers— Constable, K.C.— J. H. Millar. Agents— Wallace & Pennell, S.S.C.
Counsel for the Arrestees— Moncrieff, K.C.— W. T. Watson. Agents— Webster, Will, & Co., W.S.