James M'Gavin, (Trustee on John Stewart and Company's Estate) - Lushingto - Hunter v. James Stewart - Kea - Jarvi - Shaw [1830] UKHL 4_WS_184

UKHL
James M'Gavin, (Trustee on John Stewart and Company's Estate) - Lushingto - Hunter v. James Stewart - Kea - Jarvi - Shaw
[1830] UKHL 4_WS_184
Lords Gillies and Meadowbank .

Subject_ Process — Proof. —

1. Circumstances in which it was held, (reversing the judgment of the Court of Session), that a question, whether a Company had been dissolved and goods sold to a partner or not, should be submitted to a jury, and the parties examined before the Jury Court, notwithstanding that the dissolution had been publicly advertised, and the invoices and bills of lading set forth that the goods were the property of the partner.

Subject_ 2. Pactum Illicitum. —

Question raised, whether a commercial transaction between parties in Great Britain and America, pending war, or on the eve of war between these countries, was pactum illicitum?In 1803 the respondent, James Stewart, entered into partnership with his brother John, and James White, as manufacturers of cotton goods in Paisley, under the firm of James and John Stewart and Company. He had previously been in the United States of America, and soon thereafter returned to that country. The Company shipped goods to him there for their joint behoof,—the invoices stating them to have been shipped by the Company ‘on account of Mr James Stewart, merchant there.’ During his residence in that country, he obtained the privilege of an American citizen, with the view, as he stated, to the protection of his person in the event of war taking place with Britain, which was threatened in consequence of the Orders in Council. Although the invoices were expressed in the above terms, the bills of lading granted by the masters of the ships frequently bore,

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He returned to Scotland in 1807, when a missive of partnership regulating the rights of the parties was executed; and in the course of the same year he again went to the United States, where he remained till April 1809, when, in consequence of the Non-intercourse Act, (which had the effect to exclude all British goods, to whomsoever belonging, from the American market), he returned to Scotland. He remained in this country till July 1812, during which period the commercial operations of the house were, as he alleged, greatly embarrassed by the exclusion from the American market. The goods which they had on hand, he stated, were, from their nature, rapidly depreciating in value, and it appeared probable, unless means could be obtained of converting them into money, that the Company must announce an insolvency.At this period the political relations of America and Britain stood in a peculiar situation. The Non-intercourse Act was still in force, and indications of war very strong, while, on the other hand, the American Government had announced, that so soon as the Orders in Council were recalled, the Non-intercourse Act would be withdrawn. Proceedings had taken place in Parliament with a view to the recall of these orders, and they were recalled on the 23d of June 1812. Under these circumstances, the respondent stated, that an arrangement was made between him and his partners, by which it was agreed that the Company should be dissolved, but that the public announcement of the dissolution should not be made till after the debts had been paid off;—that he should purchase the stock of the Company and carry it to America, (for which market it had been manufactured);—that it was his intention, if he found, on arriving on the coast of the United Suites, that the Non-intercourse Act was still in force, (which applied equally to American and British subjects), to proceed to the British port of Halifax, and there await the announcement of the recall of the Orders in Council, and consequent withdrawal of the Non-intercourse Act; and that, on the other hand, if he found that the Act had ceased to be in operation, but that war had taken place, he would land in the United States, as his rights of a citizen entitled him to do, and there dispose of his property.

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In entering into this arrangement, he stated, that the leading object of all parties was the payment of the debts of the Company, for which he was to make remittances from America; but that the goods were bona fide sold to him, and the whole risk of loss was imposed upon him, while, if there was profit, it was to belong to him exclusively.The invoices, which were delivered and subscribed by the Company, bore, that the goods were “on the proper account and risk of Mr James Stewart, merchant, New York,” and the bills of lading were expressed in the same terms. The policies of insurance were taken subject to a qualification, that the insurer should not be liable in the event of American capture; an exemption from liability which the respondent alleged was introduced because the goods were his property, and that, as he was an American citizen, he would be entitled to vindicate them. Previous to his departure, the books of the Company were balanced.On his arrival on the coast of the United States, he found that the Non-intercourse Act was still in operation, and that war had been declared. The crew of the ship (which was American) refused to proceed to Halifax; and the goods on board of her were seized, under the Non-intercourse Act, by an American revenue cutter. Subsequent shipments were made by the Company; the invoices and bills of lading bearing, that the goods were shipped on the proper account and risk of the respondent. These goods were captured by an American vessel as prize of war, on the allegation that they were truly the property of British subjects, and so liable (independent of the Non-intercourse Act) to capture. After certain judicial proceedings in the Courts of America, (in the course of which the respondent made oath that the goods were truly his property), and after granting bond for their value in the event of it being discovered that they belonged to British subjects, he made sales, sent remittances of part of the proceeds to the Company, and required the public announcement of the dissolution. His partners in Scotland accordingly advertised in the Gazette, and in the local newspapers, that “James Stewart ceased to be a partner of J. and J. Stewart and Company, merchants and manufacturers in Paisley, on the 2d of July 1812.”After disposing of all the goods, and remitting the proceeds to his former partners, to be held, as he alleged, (after deduction of the debts of the Company prior to the date of the dissolution), for his behoof, he returned to Scotland in 1814. The Company (which now assumed the firm of John Stewart and Company) then rendered him an account, in which they debited themselves

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In the meanwhile, the estates of John Stewart and Company had been sequestrated under the Bankrupt Act, and the appellant, M'Gavin, was appointed trustee. In this character he brought an action of count and reckoning against the respondent, before the Court of Session, in which, after libelling on the missive of partnership, he set forth the grounds of his action as follows:—delicacy and danger which attended an open communication with the pursuers, his partners; and therefore, during the period subsequent to the month of July 1812, while he remained in America managing the concerns of the Company, he cautiously observed, and enjoined the pursuers, his partners, to observe the greatest secrecy in their concerns, and to obey his instructions in conducting the business of the Company, and holding him ostensibly and publicly as the purchaser of the goods shipped by the said Company, and to regard and consider him as a citizen of the United States, and to hold out that he was noways connected with the said Company; (of which he was, nevertheless, a partner, and had been sent to the United States for the sole purposes of executing and managing the affairs of the said Company in that quarter). That, with the view of more effectually securing the property of the said James and John Stewart and Company, and for the better security in carrying on the said business in future, the said James Stewart directed, that the pursuers, as his partners in the foresaid concern, should insert in the Edinburgh Gazette an advertisement or notice importing a dissolution of the said Company, and to forward to him copies of the said Gazette, to the effect, and exclusively for the purpose of more easily securing the property of the said Company, which had been captured as belonging to a British subject, and of affording a protection to any continuation of the consignment of goods by the pursuers as his partners; to the end that the goods might be brought to a safe and advantageous market, for the behoof of the Company. That, in compliance with the directions of the said James Stewart, the pursuers followed his instructions, from a conviction on their part that they were furthering their own interest, as well as that of the defender himself; and they accordingly inserted the following notice in the Edinburgh Gazette:—the advertisement was then quoted.) That the defender, the said James Stewart, did not subscribe this advertisement; but the said John Stewart adhibited the name ‘James Stewart’ to it, in compliance with his advice and desire, and for the sole purpose of fulfilling the object and intention so anxiously recommended by him, in order to save the goods, or to redeem certain bonds that might have been granted for the relief and delivers thereof. That this notice was inserted in terms of the request of the said James Stewart, and exclusively for the special purposes aforesaid; but the pursuers, nevertheless, kept their books, and carried on the business of the said concern, in the same name, and under the same firm of James and John Stewart and Company, in terms of, and agreeable to the original missive of agreement before quoted. That the whole business was conducted by the pursuers from and in the belief and conviction, on their part, that the said James Stewart was to receive a rateable and full proportion of the profits of the said concern, agreeable to the share which he held in the Company's business, notwithstanding these acts and deeds; and they held and believed, that they were entitled to, and would be furnished with, the accompts of sales of the goods of the Company so sent to him, and to receive their proportionable share of the profits and proceeds of such sales.”
“That, in terms of this agreement, the pursuers and the said James Stewart carried on business as partners and copartners in trade, under the aforesaid firm of James and John Stewart and Company; and, in order the better to manage the said business, the said James Stewart, as had been originally provided for in the said agreement, went to America, to conduct the concerns of the Company, as often as circumstances required. That in the month of July 1812, when the said James Stewart was going to America, and during the period that he was there, subsequent to that date, and down till the month of February 1814, the said James and John Stewart and Company consigned to the said James Stewart various parcels of goods, for the purpose of his disposing of the same, as one of the partners of the said Company, and for the general behoof of the concern. That to enable the said James Stewart to dispose of the said goods, and to secure the same against seizure and otherwise, in the course of the year 1807 he obtained himself entered as a citizen of the United States; and it became necessary that the said James and John Stewart and Company, of which concern the said James Stewart was one of the individual partners as aforesaid, should make out the invoices in the name of the said James Stewart, as the purchaser from the said James and John Stewart and Company. That in the month of July 1812 the Non-intercourse Act between America and Great Britain was in force, and the greatest caution and prudence was necessary on the part of British merchants, as well to secure the property which they had in that country, as to carry on the business in which they had previously been engaged. That the said James Stewart, defender, was fully aware of the

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In defence the respondent stated,—1. That the goods had been bona fide sold to him, and the Company dissolved; and in support of this he founded (independent of other evidence) upon the terms of the invoices and bills of lading as conclusive in his favour, unless redargued by his writ or oath; and, 2. That, assuming the allegations set forth in the summons to be true, (but which he pointedly denied), he maintained, that the Court could not sustain such a summons, because it set forth a contract or agreement to carry on trade by secret and fraudulent means during war, which was contrary to the public policy and law of the country.Lord Gillies in the advocation remitted simpliciter; but thereafter recalled this interlocutor, and granted diligence for recovery of writs in both actions. After a great deal of procedure, Lord Meadowbank (who succeeded Lord Gillies) repelled the defences, and ordained the respondent to lodge an account of the proceeds of the goods. Against this judgment the respondent reclaimed to the Inner-House; and their Lordships found, “that in the event of the petitioner (James Stewart) being found ultimately liable to account for any part of the goods sent to America, the pursuers are bound to guarantee him against any bonds which he may have granted, or responsibility which he may have incurred, to the American Government, as captors, for the value of the goods now claimed by the pursuers;” and remitted to an accountant to investigate the books, and report. The accountant having reported in favour of the respondent, the Court, after ordering condescendences by the parties, and advising them, altered, and in the action of count and reckoning assoilzied the respondent, and in the advocation decerned in terms of the libel, and found him entitled to expenses in both actions. *M'Gavin appealed.

Footnote

* 6. Shaw and Dunlop, 738.—In the meanwhile, both John Stewart and James White had died.

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Appellant .—There are two questions of fact on which the parties are at issue:—1. Whether the Company was dissolved in July 1812? and, 2. Whether the goods shipped to America were the property of the respondent or of the Company? Both of these questions ought to have been submitted to a jury, whereas the Court of Session have assumed the functions of that tribunal, and allowed their judgment to be regulated by the opinion of an accountant. But if the evidence be inquired into it will appear, from the documents in process, that although ex facie there was a dissolution, and the goods were ostensibly the property of the respondent, yet this was merely assumed in consequence of existing political circumstances; and, in point of fact, there was no dissolution till 1814, the goods belonged to the Company, and on that footing remittances were made to them by the respondent.The pleas which he has maintained in defence are both unjust and unfounded. He pleads, that the transactions were of an illegal character, and therefore, (while it is thus conceded that the goods belonged to the Company), founding on his own turpitude, he attempts to withhold the profits. But in truth the transactions were not illegal; for although the goods were shipped in Scotland posterior to the declaration of war by America, yet the existence of that declaration was not then known in Britain. Besides, the respondent himself landed the goods in the United States after he was aware of the declaration of war, although it had been arranged that in that event they should be carried to Halifax; and therefore he cannot maintain his present plea. Neither is his other defence better founded. He says, that he is entitled to the privileges and character of a trustee, or at least that the trust must be established by his writ or oath. If this were correct, then no commercial transactions between consigner and consignees could safely be carried on. But the documents existing anterior to those in question shew, that the latter were mere simulate papers. It was by means of such documents that the greater part of the commerce of Britain was transacted during the war.Respondent .—1. The pleas imputed to the respondent are entirely misrepresented. He does not plead, that in point of fact the transaction was of an illegal nature. On the contrary, his defence is, that it was a legal transaction—the goods having been bona fide sold to him before he sailed from Scotland. His preliminary plea is rested entirely on the terms of the summons of the appellant. It is there set forth, that an arrangement was entered into between

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His other defence is equally misrepresented. He does not maintain that he is a trustee. On the contrary, he avers that the goods were actually sold to him; and in evidence of this he refers to the bills of sale or invoices, which form the proper writ of the Company, and which prove that they sold the goods to him. To elide the effect of these documents, the appellant alleges that the respondent held the goods in trust; so that the averment that he is a trustee is that of the appellant, and not of the respondent. His answer to this allegation is a denial of the fact, and a reference to the statute 1696, c. 5. by which it is enacted, that an allegation of this nature can only be established by writ or oath,—a rule which was enforced in regard to bills of lading, in the case of Wilson v. Keay , 26th February 1787.Neither is this a case which required to be submitted to a jury; for where there are written documents which can only be overcome by the writ or oath of party, it never has been the practice of the Court of Session, nor does the statute require that such a case should be sent for trial by jury. The investigation in the Court below was properly confined to an inquiry into the books of the parties; and it is customary in such cases to avail themselves of the assistance of an accountant.2. But in truth neither the Company nor the appellant have any proper title or interest to insist in this action; and at all events they are bound, ante omnia, to relieve the respondent of any claim under the bonds granted to the American Government. It is not true that the goods were placed within the power of that Government by the act of the respondent, or that it was arranged that he was to carry them to Halifax in the event of war. He made a provision with the insurers for liberty to go to Halifax; but this was with reference to the possibility of the Non-intercourse Act

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Lord Wynford .—My Lords, This is an action of account and reckoning, which was brought by the appellant in the Court of Session in Scotland against the respondent. The judgment pronounced in the Court of Session was in favour of the respondent. I have to state to your Lordships, however, that the decision was not unanimous, but the judgment was pronounced by a majority of the Court. The pursuer sought to recover, by that action, the profits of a partnership from 1812 to 1814. It was admitted, that up to 1812 a partnership existed; but it was insisted by the respondent that it was determined in that year, and that the pursuer was not entitled to any account of profits from that year to the year 1814. The respondent also set up the unrighteous defence, that the partnership in which he had been concerned was illegal, and therefore that no action could be maintained against him by his partners to recover any thing that had become due to him on account of such partnership. If the business in which these parties were engaged was illegal, or against the acknowledged policy of the law of Scotland, however ungracious such an objection might be, coming from one of the partners, I should feel myself bound to tell your Lordships that it must prevail. No Court of justice can assist a party who has been engaged in a transaction which the law does not allow. But with respect to some of the transactions out of which this cause arises, there is no pretence for saying that they are illegal. These parties are Scotch manufacturers, who had been in practice of exporting their goods to America. The respondent resided in America, to conduct the sale of these goods. He had in 1809 returned to Scotland, and in the year 1812 he left Scotland for America, taking with him a considerable quantity of goods on account of the copartnership. This country was then, in consequence of the recall of the Orders in Council, at peace with America. But when the respondent arrived on the coast of America, he found that war had been declared between Great Britain and America; and he doubted whether, although he had taken the certificate of an American citizen, and the property appeared as American property, he should be safe in landing the goods in the United States, and thought of taking them

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Another objection, not more entitled to your Lordships' favourable consideration than the last, has been taken by the respondent, namely, that the respondent is a trustee, and that he has not declared, either in writing or on oath, for whom he is a trustee. If this objection were to prevail, it would destroy the import trade of Scotland. Upon bills of lading it generally appears as if the goods actually belonged to the consignee, although they are to be held by him on account of some other person. If the true owner could not get goods, or the proceeds of goods, out of the hands of a consignee, to whom they are sent under a bill of loading in the form that is used all over Europe, who would send his goods to a Scotch market? But there is, besides the bill of loading, an invoice, which is sent with the goods, and under which the consignee takes the goods. Now, it appears from the invoices in this case, that the goods were not on account of the consignee solely, but on account of the firm to which both these parties belonged. These two papers must be taken together; and then it clearly appears, in a writing which came to the respondent with the goods, to whom these goods belong. This paper is in the handwriting of one of the partners.

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The last question is a question of fact. Did the partnership, which it is admitted once existed between these parties, terminate in 1812 or 1814?—(Lord Wynford here gave reasons why he thought that this question ought to be submitted to a Jury, before whom the parties should be examined; but as his observations on this part of the case was applied to matters of fact only, we have not reported them.)—His Lordship concluded by moving, That the judgment be reversed;—that the case be remitted to the Court of Session in Scotland, with a direction to submit it to a Special Jury;—and with a direction that the parties in this cause should be examined before such Jury.The House of Lords accordingly ordered and adjudged, “that the interlocutors complained of be reversed: And it is farther ordered, that the cause be remitted back to the Court of Session, with directions to submit the question of facts to a Special Jury, and that it be an instruction to the Jury Court to examine the parties viva voce before them.” *Appellant's Authority .—Brown, June 24. 1823; 2. Shaw's Ap. Cases, 373. Respondent's Authorities .—Bynk. Quest. Jur. Pub. lib. 1. c. 3.; 1. Robertson's Reports, 196.; 1696, c. 5. Abercrombie, Dec. 17. 1667, (12,313.) Wilson, Feb. 26. 1787, (12,353).Solicitors: A. Dobie— A. Mundell,—Solicitors.

Footnote

* When this judgment came to be applied in the Court of Session, a difficulty arose as to the practicability of doing so according to the established forms of that and of the Jury Court, and from the circumstance of all the original parties being dead except the respondent. After consulting all the Judges, the Court superseded the matter till a communication should be made with the House of Lords. See 9. S. & D. p. 17. In consequence, a bill was brought into Parliament, (Oct. 1831), to set aside the judgment, and rehear the parties, but was afterwards withdrawn; and, on a search of precedents as to the competency of amending the judgment, the House ordered the instruction to examine the parties to be struck out.