International Banking Corporation v Ferguson, Shaw, & Sons
| Jurisdiction | Scotland |
| Judgment Date | 03 December 1909 |
| Date | 03 December 1909 |
| Docket Number | No. 34. |
| Court | Court of Session |
Lord Low, Lord Ardwall, Lord Justice-Clerk, Lord Dundas.
Restitution—Recompense—Goods converted into new substance—Restitution of value—Property—Accession—Specificatio.
A purchased bona fide from B oil which B had no right to sell, as it belonged to C. A paid for the oil, and obtained delivery. With the oil and other materials A manufactured lard, which was sold in the ordinary course of business to customers.
In an action by C against A for delivery of the oil or payment of its value, held that the defender, by creating in the process of manufacture a new species which could not be again resolved into its original elements, became (under the doctrine of specificatio) proprietor of the substance manufactured, and was bound to pay to the pursuer a sum representing the value of the oil.
The International Banking Corporation, with consent of Messrs Maclay & M'Intyre, shipowners, Glasgow, and Messrs Maclay & M'Intyre for their interest, brought an action in the Sheriff Court at Glasgow against Ferguson, Shaw, & Sons, oil merchants, Glasgow, in which they prayed the Court ‘to ordain the defenders to deliver to the pursuers, the International Banking Corporation, one hundred and three barrels of refined cotton-seed oil belonging to the pursuers, the said International Banking Corporation, formerly stored in Messrs Thomas Hayman & Son's store in Commerce Street, Glasgow, and failing delivery, or alternatively, to pay to the pursuers, the said International Banking Corporation, the sum of £450 sterling, with interest thereon at the rate of 5 per cent per annum from the 9th day of January 1905 till paid.’
The facts of the case, which were the subject of a joint minute of admissions, are sufficiently set forth in the following findings made by the Sheriff-substitute (Fyfe) in his interlocutor of 10th August 1908, and repeated by the Sheriff (Gardner Millar) and the Second Division:—‘(1) That the pursuers are a banking corporation organised and existing under and by virtue of the laws of the State of Connecticut in the United States of America, having its principal office in New York, and that they are entitled according to the laws of the said state to raise and defend actions at law, and that they carry on business at 31 Bishopsgate Street, London; (2) that the concurring pursuers are shipowners in Glasgow, and are the managing owners of the steamship “Fashoda”; (3) that the defenders are oil-merchants carrying on business at 130 Bishop Street, Glasgow; (4) that on or about 21st November 1904, 53 barrels of oil, which form the subject of the present action, were shipped by the Maclay-Prentice line on board s.s.“Fashoda” at New Orleans by the Union Oil Company, consigned to their order at the Port of Glasgow, upon bill of lading in the terms of No. 7/1 of process; (5) that the vessel having arrived at Glasgow on or about 26th December 1904, but the bill of lading not being presented, the shipowners warehoused the oil in the public store of Hayman & Son at Commerce Street, Glasgow, in terms of powers to that effect contained in the bill of lading, and obtained from the storekeepers a receipt in the terms of No. 7/4 of process; (6) that the oil had been purchased from the American Cotton Oil Company by John M'Nairn & Company, merchants in Glasgow, conform to letters Nos. 8/4 and 8/5 of process, and invoices Nos. 8/6 and 8/7 of process: (7) that the sellers drew upon the purchasers for the price of the oil; (8) that the sellers sold the draft to the pursuers in terms of letters of hypothecation Nos. 7/7 and 7/8 of process; (9) that the bills of lading, endorsed blank, were attached to the bank draft and handed to the pursuers as collateral security for payment of the drafts; (10) that the bank drafts were duly accepted by the purchasers, but were not paid; (11) that, in terms of the arrangement the purchasers, M'Nairn & Company, had no proper right in or title to the goods until they had paid the drafts and received delivery from the pursuers of the bills of lading—neither of which events occurred; (12) that nevertheless the said M'Nairn & Company, not as agents for the American Oil Company but as principals, sold the oil to the defenders; (13) that the defenders had no knowledge of the nature of the transactions between the American Oil Company and M'Nairn & Company; (14) that the defenders received from M'Nairn & Company a delivery-order upon Hayman & Son, the storekeepers; (15) that, notwithstanding the said delivery-order was not granted with the concurrence of the shipowners who had stored the oil, the storekeepers, without any intimation to the defenders as to the circumstances under which it had been stored, honoured the delivery-order granted by M'Nairn & Company, and delivered the oil to defenders: (16) that the oil was removed from store by the defenders early in February 1905;* (17) that the defenders used the oil in the ordinary course of their business for the manufacture of a lard compound, the whole of which they had sold and delivered to their customers in good faith, and before they had any knowledge of any defect in M'Nairn & Company's title to the goods; (18) that the value of the
oil at Glasgow in February 1905, when the defenders received it out of the store, was £156, 3s. 2d.; (19) that the profit made by the defenders out of the manufacture of the oil into lard amounted to £6, 4s.; (20) that in this process the defenders have tendered to the pursuers this sum of £6, 4s., with expenses, in full satisfaction of pursuers' claim; (21) that pursuers have refused the said tender.’
The pursuers pleaded, inter alia;—(4) The defenders having acquired the said oil under a pretended sale by the said John M'Nairn & Company, who had no title thereto, were not the owners thereof, and did not sell with the authority or consent of the owners thereof, or the holders of the title thereto, they obtained no right to said oil, and are bound to make repetition thereof to the first-named pursuers. (8) The said John M'Nairn & Company never having had any right or title to said oil, they can and never could give any right or title therein to defenders, who are consequently bound to restore said oil to the owners, the first-named pursuers, or alternatively to pay pursuers the value thereof as concluded for. (9) Esto that the defenders have used or disposed of the oil in question, they are liable to make reparation to the pursuers for the loss the pursuers have sustained.
The defenders pleaded, inter alia;—(7) The defenders having without notice of any defect in the title of John M'Nairn & Company and in bona fide purchased and paid for the oil in question, and not now being in possession thereof, are entitled to absolvitor, with expenses.
Neither the pursuers nor the defenders stated any plea dealing with the question on which the case ultimately turned, viz,, specificatio, and no such case was indicated in any way upon the record.
On 10th August 1908 the Sheriff-substitute (Fyfe) issued the following interlocutor:—(After the findings in fact already given):—‘Finds in law that in respect the defenders innocently acquired the oil in question by purchase in the ordinary course of business, and converted it in the ordinary course of business, and disposed of the converted article in the ordinary course of business, without any notice of defect in their sellers' title, they are not liable to pursuers in restitution or for the value of the oil, but are only liable in indemnification to pursuers to the extent of £6, 4s., being the extent to which they benefited by the conversion of the oil: Therefore decerns against defenders for payment to pursuers of £6, 4s., but in respect this sum was tendered to pursuers, finds defenders entitled to expenses …’*
The pursuer appealed to the Sheriff (Millar), who, on 9th January 1909, issued the following interlocutor:—‘Recalls the interlocutor of 10th August last: Finds in terms of the findings in fact therein:
Finds in law that the defenders, although innocently, but without title, having converted the oil in question belonging to the pursuers, or to which they had right, into a new species, namely, lard, which
they have sold, are liable to the pursuers in compensation for the value thereof: Therefore decerns against the defenders for payment to the pursuers of the sum of £156, 3s. 2d. sterling: Finds the pursuers entitled to expenses,’ &c.*
The defenders appealed. The case was heard before the Second Division on 27th and 28th October 1909.
Argued for the appellants;—The only remedy given to the true owner of stolen goods by the law of Scotland (apart, of course, from an action against the thief) was the rei vindicatio of the Roman law,1i.e., a right to demand the goods from any person in whose possession he found them. The true owner's rights against a third party were founded solely on the latter's possession of the goods, and all that the third party was bound to do was to exercise the power of disposal, inherent in every possessor, in favour of the true owner if such exercise were possible. If such exercise were no longer possible, either because the third party had himself parted with possession, or because while in possession of the goods he had dealt with them in such a way as to render delivery impossible, the true owner had no rights against him, provided always he had acted in bona fide and was prepared
to hand over to the true owner any profits he had made out of the transaction.1 While in possession of the goods the third party was entitled to exercise all the rights of a possessor, and there was no logical distinction between impossibility of restoration due to the fact that the goods had been passed on to another in their original form, and that due to some operation on the goods which rendered the restoration a physical impossibility. The present case might be...
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