v. Walker

, 1891

tion came too late. Like any other objection to a step of procedure as not being conform to Acts of Sederunt, it must be taken in the Single Bills, otherwise the party making it will be held to have waived it. But (2) the judgment of 19th June, in which the Sheriff declared the interdict perpetual, was really a judgment disposing "of the whole subject-matter of the cause' in the sense of section 53 of the Court of Session Act of 1868 (31 and 32 Vict. c. 100). By it the real question between the parties, viz., as to usage of trade, had been decided. Under section 68 of the Act the defender had six months to appeal. The subsequent interlocutor pronounced by the SheriffSubstitute on 23rd June fell to be regarded pro non scripto. It merely referred back to the interlocutor of April 3rd allowing proof of the damage sustained by the pur

suer.

At advising

LORD PRESIDENT-The last point which was argued to us for the appellant is completely untenable. So long as there is a conclusion standing in the summons for £200 which is insisted in by the pursuer, and regarding which the parties have joined issue, it is impossible to say that the merits are exhausted by an interlocutor which so far from disposing of that pecuniary conclusion prescribes further procedure for its determination.

With regard to the appealability of the interlocutor allowing a proof, I think all the points raised are concluded by authority. Whether the fifteen days are to be computed from the 3rd of April, the date of the Sheriff-Substitute's interlocutor which allowed the proof, or from the 19th of June, the date of the interlocutor by which the allowance of proof was affirmed by the Sheriff-Principal, the appeal comes too late, and the case of Davidson, to which we were referred, is a decision in point.

It has been pointed out that this objection to the competency comes at an inappropriate stage. Here again I am bound to say that I cannot get over the case of Shirra v. Robertson, in which what turned out to be an incompetent appeal was sent by interlocutor to the roll, and only objected to when the case came out for hearing. The Court held that they were bound to determine the question of competency when that was raised, even when this was only done at the stage at which the merits were to be discussed.

I think that we have here to do with an appeal which arises in pari casu with that in the case of Shirra, and that we must follow its authority all the more, as I observe that the Lord President delivered the judgment of the Court after consultation with the Judges of the other Division. I think, therefore, that we ought to sustain the objections to the competency of this appeal.

LORD ADAM concurred.

LORD M'LAREN-I agree with your Lordship that under the authority of the case of Shirra this appeal is incompetent. I

should like, however, to add that I could not regard the circumstances of that case as constituting a precedent for extending the principle there applied to all other cases. There are undoubtedly conditions of procedure depending on the provisions of Acts of Sederunt which may be waived by parties, especially with reference to the time of lodging of papers, and according to our practice such conditions the Court will not seek to enforce if parties are agreed in dispensing with them.

As a general rule, when objection is to be taken to a step of procedure as not being taken within the time prescribed by an Act of Sederunt, the objection ought to be taken in limine. If it is not taken when the case appears in the Single Bills, the objection may be held to be waived, so that it cannot be revived after the case has been sent to the roll. That principle has not been applied to the case of appeals from Sheriff Courts, and it is desirable that we should not disturb the existing rule of practice.

If the point were open, I must say I cannot see why parties should not be allowed if they please to waive difficulties of the kind, or why if a respondent has not discovered that he is injured by such an informality, he should be treated as if he were injured by it when the case comes on for hearing on the merits.

LORD KINNEAR-I concur with your Lordship.

The Court sustained the objection to the competency of the appeal.

FIRST DIVISION.

[Lord Kyllachy, Ordinary. WALKER (PATERSON'S TRUSTEE) v. COYLE AND OTHERS. Bankruptcy-Lease - Illegal PreferenceAct 1696, c. 5.

By agreements purporting to be "minutes of lease," entered into in 1879 and 1880, the trustees of J. P. "let" to J. S. P. certain premises, and the pawnbroking stock therein, J. S. P. being bound to pay a rent of a fixed amount for the premises, and 5 per cent. on the value of the stock handed over to him. It was provided that J. S. P. should keep books showing his intromissions with the business, and that in the event of the stock falling below the value at which it had been handed over to him, the trustees should have a right to enter into possession of the premises and stock, and

By agreement purporting to be a "minute of lease" entered into by Michael Coyle and others, the testamentary trustees of James Paterson, as first party, and his grandson James Somerville Paterson as second party, dated 30th December 1878 and 14th May 1879, the trustees "let in lease" to James Somerville Paterson, and his heirs and successors, the premises situated at No. 2 and 4 Richmond Place, Edinburgh, "together with the pawnbroking business stock therein of the value of £1100 sterling," belonging to the trustees, from December 1878 to Martinmas 1885, at a yearly rent for the premises of £50, payable half-yearly, "and the said James Somerville Paterson and his foresaids paying in respect of the said lease of said business stock therein interest on the said sum of £1100 at the rate of 5 per cent. per annum,' payable also half-yearly, and it was declared that the premises should be used and possessed by the second party for carrying on the pawnbroking business then carried on there, and for no other purpose whatever. By the second clause it was provided that so long as the sum of £1100, or any part thereof, belonging to the trustees should be allowed to remain in the business, and not be paid out as thereinafter provided for, the second party should be bound to keep regular books showing his intromissions with the business, and that the first party should have free access at all times to such books, and to inspect the stock of pledges in the premises, and that the second party should make up a balancesheet every half-year, to be exhibited to the first party, showing the position of the business at the time. The clause then proceeded-" And with full power to the said first party and their foresaids during the currency hereof, at any time they may think proper, in the event of the stock of pledges at the time being found to be under the amount or value of said sum of £1100, if not paid out, to enter into and resume possession of the premises, business, and stock of pledges and others therein, and to intromit with, sell, and dispose of, and realise the same in such manner as they may think proper, without any other warrant from the second party or his fore

13, 1891

saids than this agreement, in which case the said second party binds and obliges himself and his foresaids peaceably to cede possession of the said premises, business, goods and effects to the said first party or their foresaids on receiving fourteen days' previous notice in writing of their intention so to do: Declaring that the said second party or his foresaids shall not be entitled to object to the said first party or their foresaids entering to the possession, management, and disposal of the said premises, business, goods and effects on any ground or pretence whatever, but shall only be entitled to retain possession on instantly making payment to the said first party or their foresaids, or consigning in bank in their names, the said sum of £Ï100, with interest thereon at the foresaid rate, and rent of premises that may be due at that time, and any expenses that may have been incurred; but declaring that the said first party or their foresaids shall be bound to hold just count and reckoning with the said second party or his foresaids for his intromissions with the said goods and effects, and to pay to him or his foresaids any balance that may remain after deducting all claims at the instance of the said first party for the said sum of £1100 sterling, interest thereon, rent, and expenses." In the third clause the second party bound himself to keep the stock of pledges up to the value of £1100 so long as the sum of £1100 remained in the business, and it was provided that the stock of pledges should be insured in the name of the first party, the second party being bound to repay The them the premiums of insurance. fourth clause provided that on the termination of the lease the whole stock of pledges, with the exception of forfeited pledges, which should be sold by auction, should be inventoried and valued by neutral parties. If the valuation exceeded the sum of £1100, and that sum were not paid out, the second party was to be paid the excess; if it fell short of £1100, he was to make good the deficiency, the whole stock then becoming the property of the first party. The fifth clause empowered the second party to remove the stock to other premises, and declared that in that event the stock should still remain the property of the first party. Under the sixth article the second party was entitled to pay out the sum of £1100, in which case only the premises and fixtures would remain the property of the first party.

A similar agreement was entered into in 1880 between the same parties with regard to premises situated at No. 21 Greenside Row, Edinburgh, and the pawnbroking stock therein, the only differences being that the rent of these latter premises was fixed at £25, and the value of the stock was stated to be £800.

In pursuance of these agreements James Somerville Paterson entered into possession of the premises and stock at Nos. 2 and 4 Richmond Place and 21 Greenside Row, but in the year 1881 he removed the stock at the Greenside Row premises to the other premises belonging to the trustees at 3 Catherine Street, Edinburgh.

Tr. v. Coyle

13, 1891

In 1884 the trustees, at J. S. Paterson's request, advanced to him sums amounting in all to £350, the receipts granted by him bearing that the money advanced was "to be expended in increasing the stock of goods farmed" by him, in the proportion of £300 to the Catherine Street shop and £50 to the shop in Richmond Place.

After the termination of the agreements in 1885 they were renewed from year to year by tacit relocation. In the year 1888 J. S. Paterson's affairs had become much involved, and he was in arrear with the rent and interest due by him to the trustees. The trustees accordingly in March of that year employed Mr George Russell to report on the value of the pledges in the two shops. On 20th April Mr Russell reported that the stock of pledges in Richmond Place amounted to £989, 18s. 2d., and in Catherine Street to £1115, 8s. 74d., and that to these sums should be added 10 per cent. interest over all, £210, 10s. 8d.-total value of the pledges, £2315, 17s. 54d.

On 24th April 1888, J. S. Paterson, without having received the fourteen days' notice to which he was entitled under the agreements, executed renunciations of both leases in favour of the trustees, who at once entered into possession of the premises and stock of pledges therein. Four days afterwards, on 28th April, J. S. Paterson's estates were sequestrated.

This action was raised by the trustee in J. S. Paterson's sequestration against James Paterson's trustees, and concluded for payment of £2250, with interest from 24th April 1888, or otherwise for decree ordaining the defenders to account for their intromissions with the bankrupt's estate, and for payment of the sum which should be found due.

The pursuer pleaded-"(1) The transfer of said pledges being made and granted within sixty days of bankruptcy, and at the time when the bankrupt was known by the defenders to be insolvent, was an alienation struck at by the Statute 1696, cap. 5, and a fraud against the bankrupt's creditors at common law."

The defenders pleaded-" (5) The said deeds not being invalid either at common law or by statute, the defenders should be assoilzied. (6) The actings complained of having been lawful and in conformity with the contracts under which James Somerville Paterson possessed the pawnbroking business in question for many years, the defenders should be assoilzied."

Proof was allowed, from which it appeared, in addition to the facts already narrated, that the amount realised by the trustees from the sale of the pledges delivered to them by the bankrupt was £2430, 1s. 6d. The further results of the proof were immaterial to the ground on which the case was decided.

On 25th July 1891 the Lord Ordinary (KYLLACHY) pronounced this interlocutor: "Finds that the deeds libelled, dated 24th April 1888, were granted by the bankrupt in contravention of the Act 1696 c. 5, and are therefore ineffectual: Finds that the defenders are bound to count and reckon

with the pursuer for the proceeds of the bankrupt's property received by them under the said deeds: Finds of consent that the said proceeds amount to £2153, 10s. 3d. as brought out in the state No. 220 of process: Allows interest on the said sum at the rate of 4 per cent. from 1st September 1888 until payment, and decerns against the defenders accordingly, &c.

"Opinion.-The view which I take of this case is perhaps a narrow one, but it is, I think, sufficient for the decision. I hold that the stock-in-trade, which was the subject of the deeds challenged, was in law the property of the bankrupt. I further hold that the bankrupt was under no legal obligation to execute the deeds challenged except after fourteen days' notice. And that being so, I hold that the deeds challenged being executed immediately upon demand, and within four days of sequestration must be held to have been voluntary deeds granted in satisfaction of a prior debt within the period of constructive bankruptcy, and so to be reducible under the Act 1696, c. 5.

The

"I am not able to accept the defenders' views of the bankrupt's position. They represent him as having been merely tenant of the two businesses, and of the pledges which formed their stock-in-trade. businesses, they say, belong to them, the defenders, and they say that the pledges were their property. Or if the right which a pawnbroker has in his pledges is not correctly described as a right of property, they say alternatively that they are the true creditors in the contracts of pledge made by the bankrupt, he being merely their agent in making those advances, and being bound on the termination of his agency to transfer everything to them subject only to certain pecuniary claims arising hinc inde in the event of the value of the contracts being found to be above or below a particular sum.

"I do not think that either of those views is tenable. It is not, I think, possible to treat a pawnbroker's pledges as an ordinary stock of goods. But if it were so, the law of Scotland does not, as I understand it, enable an owner of goods to retain the property of such goods after he has hired them out on the footing that the hirer shall dispose of the goods on his own account, and be merely bound to replace them with other goods of equal value. other words, the contract of steelbow, while recognised out of favour to agriculture as between landlord and tenant in agricultural or pastoral farms, has never, so far as I know, been extended, e.g., to goods let or attempted to be let with the shop.

In

"Neither do I think it is possible to treat the bankrupt as being merely the defenders' agent. It is plain, I think, upon the agreements that he was conducting the two businesses for himself; that the contracts which he made were his contracts truly as well as nominally, and that in substance he was the owner for the time of the two businesses and their stock-in-trade, subject only to an obligation of divestiture on certain terms after the lapse of a certain

period or upon the occurrence of certain events.

"It is not therefore I think doubtful that the deeds under challenge were alienations of the bankrupt's property in favour of prior creditors. The question is, whether being so, and being executed within sixty days of bankruptcy, there is anything to exclude the operation of the Act 1696, c. 5. "That question I think depends entirely on this whether they were voluntary

66

I cannot

deeds in the sense of that statute. doubt that they were deeds in favour of prior creditors in the sense of the statute. The defenders were not, it is true, creditors in a pecuniary debt. It is probably correct to say that they were only creditors in an obligation ad factum præstandum. But I cannot agree with defenders' argument that the statute only applies to pecuniary debts. The case of Gourlay v. Hodge, 2 R. 738, is indeed an authority to the contrary. Were, then, the two deeds in question voluntary? I have come to be satisfied that they were. Had the obligation in the two agreements been to divest and cede possession immediately on the ascertainment in the prescribed manner of a deficiency in the stock of pledges, there would have been room for the argument that the bankrupt did no more than fulfil exactly and literally a previous obligation, which he was legally bound to fulfil, and to fulfil there and then. And I confess that notwithstanding some apparent authority to the contrary, I should have had great difficulty, had the facts raised it, in rejecting that argument. But I have not been able to see any good answer to the pursuer's point, that in any view of his position the bankrupt was not boundthat is to say, could not have been compelled-to execute the deeds in question at the time he did, or at any other time prior to the sequestration. He was entitled under the agreements to fourteen days' written notice. He waived that notice, and executed the deeds on demand. The result was that the deeds were executed and possession given four days before the sequestration, whereas if he had stood (in the interest of his general creditors) on his legal rights, the sequestration would have supervened before the deeds were executed. I think for these reasons that the deeds must be held to have been, in the sense of the statute, voluntary,' and must accordingly be set aside.

I

"As to the amount for which decree shall be pronounced, I understand that the parties are agreed that the sum of £2153, 10s. 3d. brought out by Mr Craig, C.A., in the state No. 220 of process, is correct. shall accordingly decern for that sum, with interest at 4 per cent. from 1st September 1888, being, I think, a fair date to take as the average date of realisation."

The defenders reclaimed, and argued1. The agreements entered into between the bankrupt and the defenders purported to be minutes of lease, and there was nothing impossible in the idea of letting a group of things. It was done in the case of cattle, manure, &c., in the case of steelbow-Hunter on Landlord and Tenant,

i. 312-and there was a strong resemblance to the present contracts in a class of agricultural leases common in some of the northern counties where the tenants were taken bound to keep the fences, mills, &c., up to the heritors' standard. If the relation between the bankrupt and the defenders was not that of landlord and tenant, then the bankrupt must be looked upon as the defenders' mandatory, put in by them to manage the business, and the profits which he made after paying the 5 per cent. to the trustees must be looked upon as commission. The provisions in the second clause binding the bankrupt to keep books showing his intromissions, and giving the defenders a right of re-entry in the event of the stock of pledges falling below a certain value, and the provision that the insurances were to be taken in the defenders' name, all favoured the view that the bankrupt was a lessee, mandatory, or agent. Whatever the nature of the contract might be, there was at anyrate no assignment to the bankrupt of the pledges, or of such right of property as the defenders had in them. They were handed over to him to " "farm." Further, the second article of the agreements gave the defenders an immediate right of re-entry on it being ascertained that the stock of pledges had fallen below the stipulated value. The fourteen days' notice did not refer to their right of re-entry, but to the tenant's obligation to cede possession. The Act 1696, c. 5, therefore did not apply in respect that (1) no right of property was transferred by the defenders to the bankrupt, and the trustee's right could not be greater than that of the bankrupt; (2) the deeds of renunciation were unnecessary, as the defenders had an immediate right of reentry after it was ascertained that the stock of pledges had fallen below the stipulated value; and (3) the deeds of renunciation were granted in fulfilment of an obligation from which the bankrupt could not escape-Bell's Comm. (7th ed.) ii. 211; Taylor v. Farrie, March 8, 1855, 17 D. 639 (opinion of consulted Judges, p. 649). 2. The event which gave the trustees a right of re-entry had occurred. Interest should not be added to the sums advanced in the pledges, for according to the proof that had not been done when the agreements between the bankrupt and the defenders were entered into. 3. The £350 advanced by the defenders had been advanced to increase the "stock of goods farmed" by the bankrupt, and therefore that sum must be added to the value of the stock originally handed over to them in considering whether he had or had not fulfilled his obligation with regard to the up-keep of the stock.

The pursuer argued 1. Whatever the contract might be called, the agreements in effect gave the bankrupt authority to take possession of the pledges and uplift the money paid to redeem them. Though there was no obligation to repay cash, there was an obligation to repay in a more convenient form by handing over the stock of pledges. The contract was therefore