Scottish Court of Session Decisions

In March 1888 the Bessbrook Spinning Company, Armagh, Ireland, sold to Martinez y Gomez, merchants, Valencia, Spain, a case of linen goods, and sent it for transport to David Dorward Bain, Dundee, the agent of the buyers. Bain instead of forwarding the case deposited it with the Ladywell Callendering Company in Dundee.

On 23d December 1887 James Allison & Sons, rope and sail makers, Dundee, drew a bill for £82 at three months, which Bain accepted, which was discounted, and of which he received the whole proceeds. When the bill fell due on 26th March 1888 Bain could not meet it, and it was taken up by Allison & Sons. This payment was made by them in consideration of the case of goods above mentioned being transferred from Bain's name to their name and order in the books of the Callendering Company, as security for repayment of the said £82.

Decree of cessio was granted against Bain, and a trustee was appointed on his bankrupt estate on 7th June 1888. He thereafter absconded.

In October 1888 Martinez y Gomez brought an action against Allison &Sons for recovery of this bale of goods pledged to them.

The defenders pleaded—“(5) The defenders having obtained possession of said case of goods in security for a debt which has become due and is still unpaid, are entitled to retain said case until payment is made, and ought to be assoilzied with expenses. (6) The defenders being in possession of said case, and having acquired possession in bona fide and in security of a debt which is resting-owing, the pursuers are bound to prove a preferable title to said case.”

The Factors Act 1842 (5 and 6 Vict. cap. 39), sec. 1, provides—“From and after the passing of this Act any agent who shall thereafter be entrusted with the possession of goods, or of the documents of titles to goods, shall be deemed and taken to be owner of such goods and documents so far as to give validity to any contract or agreement by way of pledge, lien, or security bona fide made by any person with such agent so entrusted as aforesaid, as well for any original loan, advance, or payment made upon the security of such goods or

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documents, as also for any further or continuing advance in respect thereof, and such contract or agreement shall be binding upon and good against the owner of such goods and all other persons interested therein.” Section 3—“… And nothing herein contained shall be construed to extend to or protect any lien or pledge for or in respect of any antecedent debt owing from any agent to any person with or to whom such lien or pledge shall be given.”

Upon 14th February 1889 the Sheriff-Substitute ( Campbell Smith) pronounced this interlocutor — … “Finds in law that Bain's act was an act of fraud injurious either to pursuers or defenders, and that the power to commit this fraud was derived by Bain from the pursuers: Therefore finds that the burden of Bain's fraud must be borne by the pursuers, and that the goods in question are lawfully pledged to the defenders.”

On appeal the Sheriff ( Comrie Thomson) adhered.

The pursuers appealed, and argued—There was no doubt that a person who had a right of property in goods could pledge them to bona fide and onerous pledgees, although the goods did not belong to him in the ordinary sense of the word— Brown v. Muir, Barclay, & Company, January 8, 1880, 7 R. 427; Macdonald v. Westren, July 19, 1888, 15 R. 988. But this case differed from those. In the first place, the evidence showed that Allison was not in bona fide when he accepted this case of goods as he knew, or at least had good reason to expect, that Bain was in insolvent circumstances. It was not an onerous pledge. Bain pledged the goods in security of a prior debt for £82, 10s. It was void by the Act of 1696, as granted within 60 days of bankruptcy. The Factors Act 1842 (5 and 6 vict. cap. 39), did not avail the defenders. (1) The pledge was given in security of an antecedent debt. Thirdly, it had been decided by the courts in England considering the provisions that the only agent who could be considered a factor in the sense of the statute was a general agent. Bain did not possess this character, but was employed merely for the purpose of forwarding the goods from the makers to the buyers—Smith's Leading Cases, 815 et seq.;, M'Nee v. Girst, June 26, 1867, L.R., 4 Eq. 315; Storey on Agency, 126; Bell's Com., 516, 517.

The respondent argued—The Factors Act 1842 applied even although it was true that Bain's only duty was to forward the goods to the buyers. There was no evidence that the Allisons were not in bona fide when they accepted the security of these goods. The goods were not pledged in security of a prior debt. A bill had been granted for a loan by the defenders to Bain. Bain had failed to meet it and the defenders had paid the debt to the bank; that had wiped off the old debt, and security given after that was for a new not for an antecedent debt— Vickers v. Hertz, March 20, 1871, 9 Macph. 65; Hamilton v. Western Bank of Scotland, December 13, 1856, 19 D. 152; Monkv. Whitternbury, May 28, 1831, 2 Barn. and Adolph. (2) Bain was entitled to pledge these goodsatcommon-law— Pochin & Company v. Robinson & Marjoribanks, March 11, 1869, 7 Macph. 623; Rose v. Spavens, June 15, 1880, 7 R. 925; Badcock v. Lawson, June 10, 1879, L.R., 4 Q.B.D. 394; Bell's Com., i. 306.

At advising—