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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Thomas Vickers, and Another v. Theodore Hertz [1871] UKHL 2_Paterson_1891 (20 March 1871)
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Cite as: [1871] UKHL 2_Paterson_1891
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SCOTTISH_HoL
Page: 1891↓
(1871) 2 Paterson 1891
REPORTS OF SCOTCH APPEALS IN THE HOUSE OF LORDS.
No. 113
v.
Subject_Sale — Delivery Order — Transfer — Fraud by Factor — Factors Act —
V. having purchased iron from the Carr on Company, which the Company were under obligation to deliver to him on demand, on being informed by his agent, C., that purchasers had been found, sent to C. delivery orders signed in these terms: “ Please deliver to C. as per,” and addressed to Carron Company. C. acted fraudulently, having no purchasers in view, and took the delivery orders and pledged them for value, and indorsed them to H., and afterwards stopped payment. V., on hearing of C.'s bankruptcy, countermanded the orders.
Held (affirming judgment), That the case was within the Factors Act, and that C. having received an order for the delivery of goods, H. was protected as a mortgagee who had advanced money on such goods.
The Factors Act is not confined to orders for specific goods, or to factors for sale: an agent entrusted with the document of title, to complete a sale already made, is equally within the Acts. 1
This was an appeal from a judgment of the First Division of the Court of Session. The action began in the Sheriff Court of Lanarkshire, and concluded, that the defender Hertz should deliver to the pursuer Vickers 800 tons of No. 1 Carron pig iron, and that damages should be recovered for the unlawful possession of the property. In 1856, Mr. Vickers being anxious to sell some parcels of pig iron, employed Campbell Brothers, who were iron merchants in Glasgow, to dispose of them. The parcels had been ordered by Mr. Vickers from the Carron Company, and were to be delivered to him on demand. Messrs. Campbell having sold some of the parcels, and there being about 800 tons still on hand, Mr. Vickers authorized them to sell the same at 67 s. 6 d. per ton, and sent the delivery orders, which were in the usual form, authorizing the delivery to Campbell Brothers. Those gentlemen took the delivery orders to Mr. Hertz, who advanced them £2400 on such orders being endorsed to the Carron Company by Messrs. Campbell. The Carron Company placed the iron to the credit of Mr. Hertz, and Messrs. Campbell stopped payment. Since then Mr. Hertz had sold the iron at a loss. Mr. Vickers, in the present action, claimed the iron, or its price, and the profits made on it, on the ground, that Messrs. Campbell had fraudulently disposed of it, and such pledge was invalid. Mr. Hertz, in defence, said he acted bonâ fide, and was entitled to sell the iron to reimburse the money advanced on security of the delivery orders. The Court of Session having assoilzied the defender, the pursuer now appealed.
The Lord Advocate (Young),
Brown Q.C., and
Dicey, for the appellants.—The interlocutors were wrong. The appellants' contract with the Carron Company was never effectually assigned to the respondent, and therefore the respondent was not entitled to delivery of the iron under that contract for his own use. The contract is to be distinguished from the delivery orders; neither of them refer to any specific iron, and there had been no separation of specific goods down to the bankruptcy of Campbell when the order was stopped. The appellants' claim against the Carron Company was thus a simple contract debt. There is no analogy between this case and that of the transference of goods in the hands of warehouse keepers. The personal right of the purchaser under the contract may be assigned by a proper deed of assignation, but the possession of the goods while in the hands of the seller cannot be affected by any deed or order given by the purchaser in favour of another, without actual delivery. The order to the Carron Company to deliver to Campbell was not an assignment by the law of Scotland, there being no clear intention to transfer the right to the iron—Stair, iii. 1, 4. There was nothing given to Campbell but a naked power or authority to receive and hold for Vickers. A delivery note has not the effect of an assignation—
M'Ewan v. Smith,
6 Bell, Ap. C. 340;
Arbuthnot v. Paterson,
M. 14,220. The appellant did not invest Campbell with the ostensible ownership. Mere possession does not imply ownership where the nature of the possession is obscure, and negatives that inference—1 Bell's Com. 250 (5 ed.); nor can it be said, that it was owing to any fault or representation of the appellant, that Campbell fraudulently made use of the goods, and so he is not estopped from now claiming the goods—
Swan v. North British Australasian Company,
2 H. & C. 175. The appellants lost no time in countermanding the order upon the Carron Company
_________________ Footnote _________________
1 See previous reports,
Pochin v. Robinows;
7 Macph. 622:
41 Sc. Jur. 334.
S. C. L. R. 2 Sc. Ap. 113;
9 Macph. H. L. 65;
43 Sc. Jur. 346.
Page: 1892↓
Sir R. Palmer Q.C., and Jessel Q.C., for the respondent, were not called upon.
Page: 1893↓
The Lord Advocate, in his argument on behalf of the appellant, relied mainly on the character of the instrument being such as simply to indicate, that Campbell Brothers were only mandatories of Vickers, for the purpose of obtaining delivery of the iron, of which Vickers was the purchaser. But there was nothing on the face of the document given to Campbell Brothers, shewing it to be simply of that character. The Lord Advocate urged, that it was not a transfer, but simply a document which entitled them to demand delivery of the iron in question from the Carron Company, and by means of which they were, as the agents of Vickers, to dispose of the iron to a purchaser on terms arranged between themselves. He contended, that it did not appear on the face of the note whether they were purchasers or owners, or whether they were agents, or, as he called it, mandatories; and that any party who received this document from Campbell Brothers, seeing it so imperfect and not conclusive on the face of it, would not be entitled to derive any other right from the possession of the instrument than that which Campbell Brothers themselves possessed; and that inasmuch as no higher or greater right was expressed on the face of the instrument, than that which might accompany an order given to a mandatory to obtain the delivery of iron of which Vickers was the purchaser, Hertz could not make a title through Campbell Brothers to the property in question. Further than that, it was argued, that inasmuch as the document was not an order for the delivery of any specific iron, but only an engagement entered into for the delivery of so much iron of which the Carron Company were large manufacturers, it was nothing more than an assignation of a right to demand the iron, no right to the iron itself, but only a right to require the delivery of the iron when the person should be minded to demand the fulfilment of his contract. But I think it is clear, in the state of circumstances we have before us, that Campbell Brothers would be entitled to claim the delivery.
But really the Factors Acts have disposed of the whole question. The Factors Act of the 5 and 6 Vict. required, that justice should be administered between persons trusting each other, as all persons are obliged to trust each other in the course of trade, on this principle, that when one person arms another with a symbol of property, as a means of acquiring the actual possession of the property—a symbol which to all the world is liable to confusion with the actual right of property—he should be the sufferer when a fraud of this kind takes place, rather than the person who gives credit to that which appears to include a right to the property, and is misled by the position in which the person is placed who is trusted by the owner of the property, and by that means is enabled to commit a fraud. Originally it was thought right, that factors, who were entrusted with the right of selling goods for others, if they chose to make sales on their own account, should be dealt with as competent to make a title to the goods. That was extended by the second Act to a power of mortgage, but in each of the first two Acts there was a proviso, that the person who so dealt with the factor must have dealt with him not knowing that he occupied the position of factor, because if he knew that he occupied that position, he was not to be entitled to have the benefit of those Acts.
Then at last came the 5 and 6 Vict. c. 39, by which a person dealing with a factor is protected in the manner there described. How is he protected? It is there enacted, that after the passing of this Act, any agent entrusted with the possession of goods, or of the documents of title to
Page: 1894↓
It appears to me, that these documents come expressly within the terms of that section. They are orders for the delivery of the goods. The document is an authority to Hertz to receive the goods which Vickers has transferred to Campbell Brothers, as his authority to receive the goods on his part. It seems to me to come plainly within the words of the Factors Act as a document on which Hertz advanced his money, and as the result of which he obtained the goods by virtue of it, and that he is therefore protected by the 5 and 6 Victoria in his title to these goods as mortgagee. An argument was pressed by Mr. Brown, that this Act applies all through to actually specified goods, and that it does not apply to a case, where there is a mere contract to make and deliver goods for the benefit of the party to the contract. In the first place, I should doubt very much the application of that argument to the facts before us, because these were goods of the Carron Company deliverable on demand. It is not a case of having goods manufactured specially for the purpose of the contract, for the Carron Company at all times have large quantities of iron at their disposal ready for any demand that may arise, and one of your Lordships put the case of a delivery order for 100 hogsheads of wine or 100 tons of coal in a particular ship. Is it to be said, that because each 100 tons cannot be delivered specifically, the matter would be withdrawn altogether from the operation of the Act? I apprehend, that would be narrowing most materially the operation of this Act, which was intended for the best interests of commerce, and for the benefit of all engaged in trade. I apprehend, that these are plain and distinct delivery orders for so many tons of iron, and that Campbell Brothers appeared to be in full possession of control over these orders for the delivery of so many tons, and that they passed them over by way of mortgage to Hertz, and that consequently they come necessarily within the 4th section of the Act, and I think that the decision of the Court below was right: that decision ought therefore to be affirmed, and the appeal dismissed with costs.
My difficulty throughout the argument has been to understand exactly what was the effect of the endorsement to Campbell Brothers of the delivery orders by the agents of the Carron Company. Those indorsements (with one exception) are in these terms: “Carron Co. Please deliver Messrs. Campbell Bros, as per order.” Now the order referred to is—“Please deliver on account of order No. 65 to the order of Thomas Vickers 200 tons of No. 1 Carron pig iron.” If the words “as per order” refer to the order of Vickers, to whom or to whose order the iron was to be delivered, then the endorsement restrained the delivery to Campbell Brothers for the account, and on the behalf of Vickers. If this were the case, the endorsements to Hertz by Campbell Brothers would have been a diversion from the object for which the endorsements were made to them. In that case Hertz would have received documents which shewed him the limited right possessed by Campbell Brothers to receive the iron for Vickers, and he could not be regarded as a bonâ fide holder of delivery orders transferring to him a right to the delivery of the iron. If, then, with a knowledge of the limited authority given to Campbell Brothers, Hertz used documents which gave him no just ground for believing, that they had any authority to indorse the delivery orders to him, and obtained the iron from the Carron Company, even if the company were excusable for delivering it to him upon the documents, he would be wrongfully possessed of the iron and answerable to the appellants.
But I am disposed to think, that the words “as per order” in the endorsements of the delivery orders to Campbell Brothers do not apply to the order of Vickers, by which the delivery of the iron was to be directed by him, but to the order No. 65, which, although there is no copy of it before us, must have been the original contract with the Carron Company, by which the iron was sold to Vickers. If this is so, then the endorsements to Campbell Brothers as per order would have given them an authority over the contract, and have enabled Hertz, with perfect bona fides, to advance his money upon the security of the documents of title, and under these circumstances Hertz would have had a perfect defence to the action of the appellants.
But I entertain no doubt, that Hertz has a complete answer to the action under the Factors Acts by the endorsement of the delivery orders by Campbell Brothers to him.
It was objected, that the delivery orders were not within the Acts, because there were no specific goods to which they were applicable, and because Campbell Brothers were not entrusted with the delivery orders for sale of the goods to which they related. There appears to me to be
Page: 1895↓
With respect to the objection, that Campbell Brothers were not entrusted with the delivery orders, for the purpose of sale of the iron, it appears to me, that it is founded upon the erroneous notion that in order to bring a dealing with a delivery order within the Factors Act, it should be placed in a factor's hands, before any sale of the goods to which it relates has been effected, and in order to enable him to make such sale. But surely if a factor has sold his principal's goods, and the principal sends him the delivery order for the purpose of completing the sale by the delivery of the goods, this may, without doing any violence to language, be called an entrusting of the factor with the delivery order for the sale of the goods. In the present case Vickers was cheated out of the delivery order by Campbell Brothers, but that is not material. He was told, and believed it, that Campbell Brothers had sold his iron, and he sent the orders to them, and so entrusted them with them for the express purpose of carrying out the supposed sale. I agree then with my noble and learned friend on the woolsack that the interlocutor must be affirmed.
An ingenious argument was presented to the House by Mr. Brown, which is divisible into two parts. Mr. Brown contended, that any delivery order for goods must specify on the face of it the particular goods included in the order, and that they must be shewn to have a specific existence —to be earmarked as it were for the purpose of the order, and he illustrated that argument by reference to a principle of English law, namely, that a bill of sale or an instrument purporting to be a transfer of goods which shews on the face of it that the goods are not in existence does not amount to an assignment, but amounts only to a contract for future delivery; as, for example, if I purport to transfer a hundred sacks of wheat, the produce of a crop which is now growing, that on the face of it is a transfer of goods not in existence but to come into existence, and it will not have validity by common law as a transfer, but it will only be a contract. Whether that argument be sound in Scotch law, I need not stop to inquire, because it is perfectly clear, that it has no application to the facts before us. The facts as found are simply these: That Vickers had contracted with the Iron Company for the purchase of 800 tons of iron; that he employed Campbell Brothers to sell them; that they informed him, that they were able to effect a sale, and that he accordingly sent to Messrs. Campbell an order directing the immediate delivery of the iron, which must be treated as being duly delivered in pursuance of that order.
Then the second argument of Mr. Brown was this, that the agent, the factor within the meaning of the Act, must be an agent for sale, and that Campbell Brothers did not answer that description, seeing that they had contracted to sell previously to their receiving the delivery order. That argument was founded on some passage that was read, I think, from a judgment of Mr. Justice Willes, who said that the factor mentioned in the Act must be deemed to be a factor for the sale. What is stated in the Act is this, that a factor who is entrusted with the goods, or with a document of title to the goods, shall be authorized to deal with the goods in a particular manner, and then the 4th section goes on to define what is meant by a document of title, and the definition given is one which will include these orders. What we have to inquire, therefore, in the case is, whether the factor was entrusted by the owner with the possession of a document of title entitling the factor to give possession of the goods. That undoubtedly he was. If the words of the Act had been factor for sale, I should have been of opinion, undoubtedly, that that meant one who has contracted to sell, but has not completed the sale, but has received from his principal a document of title in order to complete the sale, and who, as the recipient of that order, is an agent for the sale within the meaning of those words. Those words, however, are not found in the Act, and the question simply is this: Were Campbell Brothers entrusted with the possession of a document of title? Undoubtedly they were, and, therefore, they were authorized to deal with the document in favour of Hertz in the manner they have done.
The only question that remains is, whether Hertz dealt with them bonâ fide. At first there seemed to be some possibility of doubt as to that by reason of the form of the indorsement, but upon looking more minutely into the Act, that is proved to be immaterial, for it is perfectly clear, that Campbell Brothers would answer the description of a factor entrusted with a document of title, although not entitling them on the face of it to transfer it by indorsement. The power to deal with the document is a power derived from the enabling clauses in the Act, and does not require for that purpose any particular form of indorsement beyond that which enables them to be designated as persons entrusted with the possession of a document of title.
Page: 1896↓
On every ground, therefore, it must be regretted, that a matter of this kind resting purely on two or three very bad subtleties should have been brought up to your Lordships' bar. I therefore concur that the appeal ought to be dismissed with costs.
Interlocutors appealed from affirmed, and appeal dismissed with costs.
Solicitors: Appellants' Agents, A. K. Morison, S.S.C.; Simson and Wakeford, Westminster.— Respondent's Agents, Hamilton, Kinnear, and Beatson, W.S.; Grahames and Wardlaw, Westminster.