Scottish Court of Session Decisions

The Court of Session Consignations (Scotland) Act 1895 (58 and 59 Vict. cap. 19) enacts—Section 2—“In this Act the expression ‘consignation’ shall extend and apply to any sum of money consigned or deposited in any bank under orders of the Court, or in virtue of the provisions of any Act of Parliament, and shall include any sum of money, or any bank deposit-receipt, security, or other voucher for a sum of money received by the Accountant of Court … or by any of the clerks of court, as the case may be, for deposit or consignation, in any cause or proceeding whether by order of court or otherwise, and any sum of money lodged by way of caution or security in corroboration of any bond, and also any unclaimed dividends, or special deposits, or unapplied balances in any sequestration or cessio, deposited in any bank in terms of the Bankruptcy (Scotland) Act 1856 or otherwise.” Section 16—“Every person having any legal claim to the moneys to be paid over in terms of this Act or any part of them shall have such and the like claim thereto and such and the like right to demand and recover the same from the Queen's and Lord Treasurer's Remembrancer, after payment hereof to the Remembrancer, as from the person or persons having possession of such moneys before payment to the said Remembrancer.”

William Paterson Scott, C.A., as trustee on the sequestrated estates of Bertram, Gardner, & Company, pursuer, brought an action against Sir Kenneth Mackenzie, Bart., King's and Lord Treasurer's Remembrancer, as such and as an individual, defender, concluding as follows—“It ought and should be found and declared by decree of the Lords of our Council and Session—(1) That the pursuer, as trustee in the sequestrated estates foresaid, is in right of and entitled to payment of the proceeds of a deposit-receipt for £585, 10s. 4d. granted by the Royal Bank of Scotland to the late David Thomson, W.S., on or about 31st March 1834 and quoted in the condescendence annexed hereto; (2) that the proceeds of said deposit-receipt amounting to £2589, 18s. Id. were on or about 8th May 1896 paid over by said Royal Bank of Scotland to the defender then (who discharged the said bank of said deposit-receipt), and are at present held by and retained by him; (3) that the defender is liable to account for and to make over to the pursuer the said sum of £2589, 18s. Id., together with all profit and interest accrued or that may accrue thereon from the date of the receipt thereof by the defender until payment to the pursuer, but always under deduction of such sums of expenses of process or of administration as the defender may qualify against the said sum of £2589, 18s. Id. and profits or interest accrued or that may accrue thereon in his hands,” and with conclusions in ordinary terms for an accounting and failing an accounting for £4000.

The facts of the case were—Bertram, Gardner, & Company were sequestrated on 10th December 1793, Richard Hotchkiss, W.S., being appointed trustee in the sequestration. James Ramsay, Accountant-General of Excise, one of the debtors of the sequestrated firm, had executed a trust deed for creditors, upon which David Thomson, W.S., had been appointed trustee in 1792. In 1820 a first dividend of 3s. in the £1 was paid from Ramsay's estate by Thomson to Hotchkiss. Hotchkiss died in 1824 without having been discharged, and the sequestration remained in abeyance until the appointment of the pursuer on 24th November 1917. In 1832 a further and final dividend of 3s. Id. in the £1 was payable out of Ramsay's estate. Bertram, Gardner, & Company's share of that dividend was £585, 10s. 4d. As there was no trustee in the sequestration then in office, Thomson deposited the money in the Royal Bank of Scotland, and took from the bank a deposit-receipt in the following terms:—“ Edinburgh, 31st March 1834.—Received from David Thomson, Esq., Writer to the Signet, trustee for James Ramsay, Esq., Accountant-General of Excise, deceased, and his creditors, five hundred and seventy pounds, fourteen shillings and sevenpence sterling as a dividend, payable conform to scheme of division as at first December Eighteen hundred and thirty-two years, on a debt due by the said James Ramsay to the late company of Bertram, Gardner, & Company, bankers in Edinburgh, together with fifteen pounds, three shillings and threepence as the interest thereon from that date to the date hereof, amounting the said two sums, after deducting seven shillings and sixpence for stamp for this receipt, to five hundred and eighty-five pounds, ten shillings and fourpence, which sum is deposited by the said David Thomson for behoof of all concerned in respect there has been no trustee named on the sequestrated estate of Bertram, Gardner, & Company since the death of Richard Hotchkiss, Writer to the Signet, the original trustee on the said estate, which sum is placed to the said David Thomson's credit with the Royal Bank of Scotland for behoof foresaid.

£585, 10s. 4d. (Intd.) A. B.

For the Royal Bank of Scotland,

John Thomson, Cashier.”

On the payment of the final dividend Thomson was duly discharged qua Ramsay's trustee. In 1895, on the passing of the Court of Session Consignations (Scotland) Act 1895, the defender's predecessor in office claimed the sum so deposited with accumulated interest, in all £2589, 18s. 1d., and on 17th March 1896 Lord Moncreiff, then Lord Ordinary in Exchequer Causes, pronounced an interlocutor in terms of section 7 of the 1895 Act, under which the defender's predecessor obtained possession of the money in question. It so happened that David Thomson (Ramsay's trustee) was the son of an Alexander Thomson of the Excise, who was a creditor of Bertram, Gardner, & Company as an individual for £317, 2s. 4d., along with Hugh Scott of Harden, afterwards Lord Polwarth, upon a promissory-note payable to them or either of them for £2151, 9s. 7d.,

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jointly with Alexander Alison upon current account for £1706, 12s. 5d. Dividends in respect of those debts were paid in 1796, 1799, and 1807, the last being paid to David Thomson, who was a partner in the firm of Thomson & Fleming, W.S., which firm acted for Alexander Thomson's heirs, Alexander Thomson apparently being dead at that date. The inventory of Alexander Thomson's estate included as assets claims against Hugh Scott and A. Alison, and a claim in the sequestration of Bertram, Gardner, & Company, and David Thomson and his two sisters were Alexander Thomson's residuary legatees. Thomson & Fleming also acted for other two creditors of Bertram, Gardner, & Company, viz., John Fowler, brewer, Prestonpans, and Cullen's representatives. In 1819 David Thomson's son, Alexander Thomson junior, was assumed a partner. On David Thomson's death the inventory of his estate was sworn to by Alexander Thomson junior, but it contained no reference to any debts due to him from the estates of Bertram, Gardner, & Company or James Ramsay, or any claim by him on those estates The firm of Thomson & Fleming underwent various changes of name. From 1860 it was known as Thomson, Elder, & Bruce to 30th April 1863, when Alexander Thomson junior, being indebted in substantial sums to the firm, retired from it, and the. name was altered to Elder & Bruce. At that date Hugh Scott and Cullen's representatives were still clients of the firm. David Thomson's deposit-receipt remained in the custody of the firm till the death of Bruce in 1892, which it passed to his successor in the business. Between 1841 and 1856 the deposit-receipt was taken to the bank on eight separate occasions when the interest accrued was noted on the deposit-receipt and added to the principal, and the additions were initialled by the servants of the bank. In 1862 Bruce again sent the deposit-receipt to the bank to have the interest calculated, but the bank did not on that occasion initial it. On 3rd January 1863 Bruce wrote to the bank asking repayment of the deposit-receipt to Alexander Thomson junior as forming part of the estate of David Thomson. On 6th January the bank wrote refusing to recognise any right in Alexander Thomson junior to represent his father as trustee in Ramsay's sequestration. On 21st March 1863 Bruce again wrote demanding payment on the ground that Alexander Thomson junior was a creditor of Bertram, Gardner, & Company through his grandfather Alexander Thomson senior, and that the firm represented other creditors of the company. The bank refused payment on the ground that Alexander Thomson junior could not grant a valid discharge. In the bank's books interest continued to be accumulated regularly at the end of each year.

The pursuer pleaded, inter alia—“1. The sum sued for being an asset of the estate in charge of the pursuer, decree of declarator and accounting should be granted as concluded for. 2. The defender being in possession of the fund sued for, and the same being vested in the pursuer, decree should be granted as concluded for. 4. The bank having in 1863, and also in 1896, acknowledged indebtedness in respect of the deposit-receipt founded on, the plea of negative prescription is unfounded and falls to be repelled.”

The defender pleaded—“1. The pursuer's averments being irrelevant and insufficient to support the conclusions of the summons, the action should be dismissed. 2. All claims founded on the deposit-receipt having prescribed, the defender should be assoilzied.”

On 19th November 1918 the Lord Ordinary ( Blackburn) sustained the second plea-in-law for the defender and assoilzied him.

Opinion.—[ After narrating the facts averred]—“Under these circumstances the pursuer sues the defender for payment of the sum of £2589, 18s. 1d., with all profit and interest that may have accrued thereon in the defender's hands from the date of his receipt of the money until payment. The defender pleads the negative prescription as having extinguished all claims based by the pursuer on the deposit-recipt, and, though I do not think the plea deserves any favour in the circumstances under which it is put forward, I do not see my way to repel it.

Had the claim been made against the bank subsequent to 1874, and while the money was still in their hands, I do not think it doubtful that they would have been entitled to plead that the claim had been extinguished by prescription. The deposit of money with a bank merely creates the relation of debtor and creditor between the bank and the depositor or the person in whose name the deposit-receipt is taken. The law is so stated by Professor Bell in his Commentaries, vol. i, p. 277, where he distinguishes between the deposit of a specific article, e.g., a plate chest, as a case of proper deposit where the right of property remains with the depositor, and the deposit of money as a case of improper deposit where the only obligation on the depositary is to repay a corresponding sum on demand.

Accordingly, had this plea been put forward by the bank, the pursuer in order to meet it would have required to prove that there had been interruption of the running of prescription by the ‘taking of document’ upon the debt within the forty years. There is no averment upon record of interruption of prescription either by the endorsations on the back of the deposit-receipt or by any other writing. It was argued for the pursuer that the bank only had right to the money qua trustee for the creditors in the sequestration, but a claim against a trustee not pursued for forty years is extinguished as effectually by negative prescription as a claim against any other debtor. It was further maintained that the fact that the money had been paid over to the defender's predecessor in 1896 was an admission by the bank that it still held the money at that date, not in its own right but for behoof of the creditors. This, it was said, barred the defender from pleading that prescription began to run before 1896. I think this argument proceeded on the assumption that the loss by the creditors in Bertram's sequestration

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of their right to sue for payment of the debt would establish in the bank a valid title to the money. This does not necessarily follow, even though it may be difficult to find anyone else who could establish a title to it. The decision in the case of Air v. Royal Bank, 13 R. 734, 23 S.L.R. 508, which dealt with a sum of money consigned as in the present case prior to the Bankruptcy Act of 1839, apparently excludes any claim to the money by the creditors or representatives of James Ramsay, which would appear to exhaust all possible claimants. The same situation resulted in the case of Air and is referred to in the opinion of the Lord President, but he does not suggest that the apparent extinction of all possible claims to the fund other than that of the bank gave the bank a good and valid title. I think that the fact that the bank paid over the money after the Consignations Act was passed amounts to no more than an admission that the bank had not itself a good title to the money, and I do not see how it can possibly be construed as an admission that they were still the debtors of persons whose legal claims to the money had long been extinguished. In any event the admission was not made to Bertram's creditors, in whose right the pursuer now stands, which in my opinion would have been essential as an interruption to prescription

I was informed by counsel for the defender that in practice it is unnecessary for a creditor in a deposit-receipt with a bank to take steps to interrupt the running of prescription, since as a matter of business banks never plead that such a debt has prescribed provided the person claiming payment can show an otherwise good title to the debt. If this statement is correct, which I have no reason to doubt, it may be unfortunate for the pursuer that he has to deal with the defender instead of with the bank, but it cannot in my opinion affect the pursuer's plea. He is in possession of the money in virtue of an Act of Parliament, and his rights are regulated by the Act. By section 16 of the Consignations Act it is provided that ‘every person having any legal claim to the moneys to be paid over in terms of this Act … shall have such and the like claims thereto and such and the like right to demand and recover the same from the King's and Lord Treasurer's Remembrancer, after payment thereof to the said Remembrancer, as from the person or persons having possession of such moneys before payment to the said Remembrancer.’

Now if the bank before they parted with the money could have pleaded successfully that the claim of Bertram's creditors had been extinguished by the negative prescription, it follows that the creditors had at the date of payment to the defender's predecessor no legal claim or right to demand and recover payment which they could have enforced against the bank, and on this ground I think that the defender is legally entitled to repudiate liability to the pursuer. The fact that the bank might ex gratia have waived the plea of prescription and paid the debt does not in law compel him to follow the same course. I accordingly propose to sustain the second plea-in-law for the defender and to assoilzie him from the conclusions of the summons.”

The pursuer reclaimed, and, after amendment of the record had been allowed, the First Division recalled the interlocutor of the Lord Ordinary, and remitted the cause to him to allow the parties a proof before answer.

On 21st February 1920 the Lord Ordinary, after the proof, of new sustained the second plea-in-law for the defender and assoilzied him.

Opinion.—[ After narrating the facts as disclosed at the proof]—“I do not think it is clearly proved that Alexander Thomson junior was entitled to any part of the debt due to his grandfather by Bertram, Gardner, & Company, or that the clients of the firm in 1863 who represented Hugh Scott of Harden and others were in right of the debts of those creditors of Bertram, Gardner, & Company, but they may have been. It is settled apparently that an acknowledgment by a debtor to one who is merely a putative creditor justifies the real creditor in pleading interruption of prescription—Napier on Prescription, p. 676; Miller, pp. 111–112. Accordingly I think the pursuer is entitled to found on the acknowledgments by the bank to the firm of law agents acting on behalf of persons who were at least putative creditors, as interrupting the running of prescription down to 27th March 1863.

Accordingly when the money was paid by the bank to the King's and Lord Treasurer's Remembrancer in 1896, the debt had not prescribed in their hands and would not have done so until 27th March 1903. No claim was made against the King's and Lord Treasurer's Remembrancer until 1918, and the question arises whether on the construction of section 16 of the Consignations Act he is entitled to plead that the negative prescription has been running since 1863. The pursuer maintains that he has the same right to demand payment to-day from the defender as he would have had against the bank when the money was handed over to the defender, and that as the debt had not prescribed then the defender cannot plead prescription against him now. The logical result of this argument is that the terms of the section exclude the extinction of any debt paid over to the King's and Lord Treasurer's Remembrancer no matter how many years may elapse before payment is claimed, provided only that the debt had not prescribed before payment was made to the King's and Lord Treasurer's Remembrancer. I cannot think that a construction leading to such a result is the true construction, and in my judgment the meaning of the section is that the person having a legal claim to moneys in the hands of the King's and Lord Treasurer's Remembrancer shall have the like right to demand and recover the moneys from him as he would have had against the persons who previously possessed the money had they not paid it over to the King's and Lord Treasurer's Remembrancer. This construction receives support from the terms of section 9, which deals with money

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consigned in Court. The result is that, in my opinion, I must again sustain the defender's second plea-in-law.”

The pursuer reclaimed, and argued—The Lord Ordinary's interlocutor should be recalled and accounts ordered. The Lord Ordinary had held that the claim against the bank had not prescribed in 1863, as the running of prescription had been elided. When the money passed to the defender in 1896, forty years had not elapsed since 1863, and the claim against the bank was still good in 1896 and the defender had so treated it, for he had taken interest to that date. The person who was in possession previous to the transfer to the defender was David Thomson or his representatives; in 1896 the pursuer would have had a valid claim against them and that was not affected by the transfer of 1896. That transfer was carried out by mistake, and the interlocutor of Lord Moncreiff could not prejudice the pursuer for he was not a party to the process. But assuming that the Court of Session Consignations (Scotland) Act 1895 (58 and 59 Vict. cap. 19) applied, section 16 stereotyped matters in 1896 and gave to the pursuer the same rights against the defender as he would have had against David Thomson or his representatives. David Thomson was a mere trustee and could not plead prescription, neither could the defender for the same reason. The bank did not found on prescription, and if David Thomson was entitled to get the money from the bank, then the pursuer was entitled to get it from him or from the defender. Briggs v. Swan's Executors, 1854, 16 D. 385, and Jamieson v. Clark, 1872, 10 Macph. 399, 9 S.L.R. 233, were referred to.

Argued for the defender—There had been no valid interruption of prescription in the period prior to 1896. At that date the right to the money in the deposit-receipt had been wiped out by the negative prescription. If not, then the action was wrongly laid against the present defender. If the money in the deposit-receipt was wrongly paid to the defender's predecessor, the pursuer should have sued the bank, who would have obtained redress from the defender under guarantees given to the bank. The defender's title on which he obtained the money was purely statutory, and there was nothing in the Act of 1895 to give the pursuer a title to sue him. If, however, the pursuer could sue the defender, then he did so on the footing that the defender came in place of the bank, and if so, forty years from 1863 had run without any interruption of prescription and accordingly the debt was now extinguished. The following were referred to—Act 1469, cap. 28; Ersk. iii, 7, 8, 15, and 41; Bell's Comm. i, 352; Millar on Prescription, pp. 79 and 89; Jamieson's case ( cit.) at p. 405; Barns v. Barns' Trustees, 1857, 19 D. 626; Kermack v. Kermack, 1874, 2 R. 156, 12 S.L.R. 105; Napier v. Campbell, 1703 M. 10, 656.

At advising—