North Western Bank Ltd v John Poynter, Son & Macdonalds
| Jurisdiction | England & Wales |
| Judgment Date | 16 November 1894 |
| Date | 16 November 1894 |
| Docket Number | No. 1. |
| Court | House of Lords |
Ld. Chancellor (Herschell), Lord Watson, Lord Macnaghten.
Right in Security—Pledge—Agent and Principal—Ship—Bill of Lading.—
Payment—Appropriation of payment—Adoption.—
By the law of Scotland, as well as by the law of England, the holder of a pledge with a power of sale does not lose possession of the pledge by delivering it to an agent for the purpose of sale, although the agent may be the owner of the pledge.
Page & Company obtained an advance from a bank, upon the security, by way of pledge, of certain merchandise then afloat, and handed the bill of lading to the bank, blank indorsed, it being agreed that the bank should have power of sale of the merchandise. Subsequently the bank returned the bill of lading to Page & Company, with a letter bearing that the bank transferred to Page & Company, as trustees for the bank, the bill of lading, and authorising Page & Company to obtain delivery of the merchandise on arrival and to sell it on the bank's behalf. Page & Company sold the merchandise upon a contract in their own name to Cross & Company, and handed them the bill of lading. Cross & Company having paid part of the price, Poynter & Company, as creditors of Page & Company, arrested the balance in the hands of Cross & Company.
In a competition between the bank and Poynter & Company for the balance of the price, held (rev. judgment of the Second Division) that the bank by delivering the bill of lading to Page & Company, as their agents, with instructions to sell for the bank, did not lose possession of the goods pledged, and that the price of the goods sold belonged to the bank, and was not subject to arrestment by the creditors of Page & Company.
A bank holding a bill of lading with power of sale in security of an advance of £5000 No. 7 made to A, delivered the bill of lading to A with instructions to sell the goods for the bank. A having received £1900 to account of the price paid it into the bank, but instead of placing it to account of advance No. 7, which would have extinguished the balance remaining due of that debt, paid it to account of advance No. 4.
In a competition for the balance of the price between the bank and B, a creditor of A, who had used arrestments in the hands of the purchaser, B alleged that the bank did not know at the time of the appropriation of the £1900 to advance No. 4, and that it fell to be imputed to advance No. 7, thereby extinguishing the security over the bill of lading.
Opinion (per Lord Chancellor) that the bank was entitled to adopt the appropriation of the payment of £1900 made by A and to retain the security.
(In the Court of Session, Feb. 2, 1894, 21 R. 513.)
On 1st April 1892 Charles Page & Company, merchants, Liverpool, applied to the North-Western Bank, Limited, Liverpool, for an advance of £5000 ‘upon security by way of pledge of 3455 tons phosphate rock’ then on board the ships ‘Cyprus’ and ‘Storra Lee,’ and represented to be of the net value of £6733.
The bank agreed to make the advance upon the following conditions, as embodied in a letter by them to Page & Company, dated 4th April:—‘We now beg to put in writing the conditions on which we advance to you the sum of £5000, say five thousand pounds, repayable by you on or before 1st June, on the security of the under-mentioned merchandise [the two cargoes], which you pledge to us and warehouse in our name.
‘It is distinctly agreed that we are to have immediate and absolute power of sale, and under that power we authorise and empower you to enter into contracts for the sale of the merchandise, on our behalf, in the ordinary course of business, and we expressly direct you to pay to us from time to time the proceeds of all such sales immediately and specifically as received by you, to be applied towards payment of the said advance, interest, commission, and all charges.
‘You are at any time at our request to give to us full authority to receive all sums due or to become due from any person or persons in respect of any sales of the merchandise so made by you on our behalf.
‘You are to insure the merchandise against all fire risks on our behalf, and you undertake to keep it fully covered, to hold the policy in trust on our account, and in case of loss, to collect and pay the insurance money to us in the same manner as proceeds of sale.’
Page & Company agreed to these conditions, and in pursuance of the agreement thus concluded sent the bills of lading for the phosphate rock to the bank blank indorsed.
The ‘Cyprus’ (to which alone the action to be mentioned related) was destined for Glasgow as her port of delivery, and was expected to arrive there on or about 12th April.
On 12th April the bank wrote to Page & Company,—‘In consideration of your undertaking to deal with the merchandise in the manner hereinafter specified, we transfer to you, as trustees for us, the bill of lading, &c., for 1629 tons phosphate rock per “Cyprus,” marked which we now hold as security for payment of the advance specified at foot, and we request you to obtain delivery on our account of the merchandise referred to in such bill of lading, and warehouse the same in our name, you paying the freight and expenses of discharge. We further authorise and empower you to enter into contracts for the sale of the merchandise on our behalf, in the ordinary course of business, and we expressly direct you to pay the proceeds of all such sales from time to time to us immediately on receipt thereof, in order to be applied towards retirement of such advance.’ The letter then concluded in terms identical with those of the two last paragraphs of the letter of 4th April above quoted.
Page & Company on the same day replied,—‘We have sold for you 1629 tons phosphate rock ex“Cyprus” in your name, and held by you by way of pledge for phosphate advance No. 7, for £5000, and for which b/lading has been handed to us for the purpose of enabling us to complete the sale which we have contracted for on your behalf with Messrs A. Cross & Sons, Glasgow; and in consideration thereof we hereby undertake to pay to you the proceeds of said sale, payment expected about 5th May, immediately and specifically as received, in accordance with the directions contained in your letter of April 4th.’
Some months prior to the arrangements with the bank for the advance Page & Company had agreed to sell to A. Cross & Sons, mentioned in the preceding letter, about 1600 tons of phosphate rock, almost the same quantity as that on board the ‘Cyprus’ (1629 tons). This contract was effected through John Poynter, Son, & Macdonalds, who had for several years been Page & Company's agents in Glasgow. The sale-notes, which were dated 23d September and 19th November 1891, and did not specify any particular lot of phosphate rock, bore that the sale was a sale to Cross & Sons by Page & Company ‘per John Poynter, Son, & Macdonalds.’
Immediately on receiving the bill of lading for the ‘Cyprus’ cargo back from the bank Page & Company forwarded it to Poynter, Son, & Macdonalds, with instructions to hand it to Cross & Sons on arrival of the vessel. This Poynter, Son, & Macdonalds did; and on the bill of lading and their contract of sale with Page & Company, Cross & Company took delivery of the cargo, and by cheque in favour of Page & Company, they paid £1900 to account of the price.
On 20th April Page & Company paid this sum into the bank, but instead of placing it to account of the £5000 advance No. 7 paid it to account of another advance No. 4. Poynter, Son, & Macdonalds, in the multiplepoinding after mentioned, alleged that the bank did not at the time know that this had been done.
On 3d May Poynter, Son, & Macdonalds arrested the balance of the price (£1039, 7s. 5d.) in the hands of Cross & Sons, on the dependence of an action by Poynter, Son, & Macdonalds against Page & Company, in which decree in absence for £2011, 10s. was subsequently pronounced.
On the same day, but after the arrestments had been laid on, the bank intimated to Cross & Sons that they claimed payment of the balance of the price, on the ground that the phosphate rock had before the sale been their property, and had been sold on their behalf.
The bank then raised a multiplepoinding in name of Cross & Sons in the Sheriff Court, Glasgow, the fund in medio being the balance of the price.
The bank and Poynter, Son, & Macdonalds each claimed the whole fund in medio.
The bank pleaded;—(1) The sale to Messrs Alexander Cross & Sons having been made by Messrs Charles Page & Company on behalf of the claimants, the claimants are entitled to be preferred in terms of their claim. (4) The transfer of the bill of lading to the claimants, the North-Western Bank, having operated a conveyance ex facie absolute to these claimants, they were entitled to retain the goods represented by the bill of lading till repayment of all advances by them to the common debtors at the date of the transfer of the bill of lading and subsequent thereto, and they are entitled to be preferred to the fund in medio as a surrogatum for said goods.
The bill of lading, as redelivered by the bank to Page & Company, bore no indication that the bank had any interest in it, and neither Cross & Sons nor Poynter, Son, & Macdonalds knew anything about the connection of the bank with the bill of lading until after the arrestment.
On 18th April 1893 the Sheriff-substitute (Guthrie), after a proof, ranked and preferred Poynter, Son, & Macdonalds to the fund in medio.
The bank appealed to the Court of Session.
On 2d February 1894 the Second Division (diss. Lord Young, absent Lord Rutherfurd Clark), were of opinion that the Sheriff-substitute's judgment should be affirmed, and the following interlocutor was pronounced:—‘Find in fact (1) that by sale-notes dated 23d September and 19th November 1891 Charles Page & Company, Liverpool, sold to Alexander Cross & Sons,...
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