J. Pattison junior (Blincow's Trustee) - Solicitor General (Campbell - Wilson v. A. Allan and Company - Lord Advocate (Jeffrey - Sandford [1833] UKHL 7_WS_26

UKHL
J. Pattison junior (Blincow's Trustee) - Solicitor General (Campbell - Wilson v. A. Allan and Company - Lord Advocate (Jeffrey - Sandford
[1833] UKHL 7_WS_26 · 1833-08-28
Lords Newton and Moncreiff .

Subject_ Bankruptcy — Stat. 1696, c. 5. —

1. A party who acceded to a composition contract on condition that all the creditors to a certain amount should also accede within a limited time, held (affirming the judgment of the Court of Session) not bound, the conditions not being complied with. 2. Issue sent to be tried by a jury, whether certain payments, and indorsations of bills, by a debtor, within sixty days of his bankruptcy, to a banker, were made in the ordinary course of trade.

Subject_ Process. —

1. Observations on the form of preparing records. 2. A supplementary action of reduction, having reference to a transaction falling under the act 1696, c. 5., but not libelling the act, and containing no reductive conclusions, dismissed as inept.William and Henry Blincow, silk merchants in Glasgow, were in the custom of doing business with Allan and Company, bankers in Edinburgh. In July 1825 the Blincows stopped payment, and offered a composition of 5 s . in the pound, provided every creditor whose debt exceeded 20 l . should agree to it within a month. Allan and Co. were creditors for 500 l ., and acceded to the proposition; but it was alleged that the concurrence of all the other creditors had not been obtained, and

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William Blincow thereafter began business as a silk merchant in Edinburgh, under the firm of William Blincow and Co., but of which he was the sole partner. He opened two accounts with Allan and Co., the one being relative to the bond, and the other an ordinary account current. On this latter account he operated by putting the cash and the bills which he received in the course of his trade into the hands of Allan and Co., (who gave him credit for the amount, less the discount of the bills,) and by drawing out money by cheques.When the first instalment on the bond became due, on the 4th of October 1826, it was paid by a sum of 833 l . 6 s . 8 d . being transferred from the account current to the bond account. Early in 1827 Allan and Co. having declined discounting Blincow's bills to the extent which he wished without a guarantee, his brother Valentine bound himself, on the 25th of February, to see them paid to the extent of 500 l .The second instalment fell due on the 4th of April 1826, but was not paid; and on the 25th of that month

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An action of reduction was then brought by Pattison, first, of the bond to the extent of 375 l . (being the difference between the old debt of 500 l . and the composition), on the footing that Allan and Co. were bound by their accession to the composition arrangement; secondly, of the indorsation, by Wm. Blincow, of the bills and of the cheques granted by him between the 26th of April and the 7th of May 1827, whereby the second instalment had been paid, on the ground that they had been made and delivered within sixty days of the bankruptcy; and, thirdly, of the indorsations and cheque by Blincow, by which the last instalment had been paid. * These two latter conclusions were rested upon the act 1696, c. 5.; but although it was alleged that the indorsations and cheques had been given by Blincow to defraud his other creditors, and bestow a preference on Allan and Co., yet there was no allegation that Allan and Co. were either participant in the fraud, or were aware that he was in bankrupt circumstances.

Footnote

* In the summons the bill of 155 l . accepted by Blincow in favour of his brother Valentine, and indorsed by him, was erroneously described as accepted by Valentine in favour of Blincow, and indorsed by him to the respondents.

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Allan and Co. pleaded in defence, 1. That the appellant had no title to object to the bond having been granted for the debt of 500 l ., because the condition of the accession had not been complied with, and the whole arrangement had come to an end; and, 2. That as the bills had been indorsed to and discounted with them, and the cheques granted in the ordinary course of business as bankers, and as there was no allegation that these documents had been obtained for any fraudulent purpose, they did not fall under the act 1696; and at all events Allan and Co. were entitled to retain them in security and payment of the bond debt.The Lord Ordinary (Newton) reported the case, and at the same time issued this note:—the spirit of the act. It is said, however, by the defenders, that being his ordinary bankers they discounted the bills in question in the course of trade, and only applied the balance which stood in his favour on their running account to the payment of the instalments of the bond, in consequence of his order to that effect; that the pursuer has not averred on the record that they were in the knowledge of the impending bankruptcy, and is not entitled to assume in argument that they acted on such knowledge. exception to the rule of the statute. He has therefore thought it proper to report the case, that the opinion of the Court may be obtained.”
“The Lord Ordinary does not think the pursuer's claim for repetition of the 375 l . well founded. The agreement by the defenders to accept of the composition was clearly conditional, and the condition having failed it was not binding upon them; they were therefore at liberty to include their full debt in the bond they afterwards took.
The other question, arising from the payment of the second and third instalments of the bond, is attended with more difficulty, as these payments were in effect in a great measure made by the indorsation of bills, which were not payable for a considerable time afterwards. Had the defenders not been the bankrupt's ordinary bankers with whom he was in use to discount his bills, there would have been little doubt that the transaction, although in the form of a discounting of the bills, and an application of the proceeds, by order of the bankrupt, to the payment of his debt, would have been reducible, as falling under

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It is not necessary, however, to the operation of the act 1696, that the creditor shall be proved to have been in the knowledge of the impending bankruptcy, or guilty of fraud in accepting of the security. It is enough if the debtor intends to favour him, and to give him a preference over his other creditors. Now it seems, from the circumstances, pretty obvious that the debtor meant to give such a preference, if not through favour to the defenders, at least through favour to his own brothers, the cautioners in the bond; and that one of them, Valentine Blincow, who personally managed the transaction as to the payment of these instalments, was aware of his brother's situation, and transacted the whole business for the purpose of relieving himself and the other cautioner. Indeed, if they were able to fulfil their engagement under the bond, they had the real interest, and the effect of the payment was to secure them a preference. In such circumstances, and considering that the third instalment of the bond was not payable for some months afterwards, the Lord Ordinary thinks it questionable if the transactions can be said to be so clearly in the usual course of trade as to form an

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The Court (3d December 1828) pronounced this interlocutor:—

and manner as if the said order or cheque had never been granted; and decerned and declared accordingly: Further find that the defenders, besides being common creditors by bond, were also the ordinary bankers of William Blincow and Co.; that they transacted their business and discounted their bills in the ordinary way of trade, and that such transactions do not fall under the sanction of the statute 1696; and therefore assoilzie the defenders on that head, and decern; but find that they are bound to account to the trustee for the creditors of William Blincow and Co. for their intromissions in the ordinary way, reserving the rights of the defenders as ordinary creditors, and also the rights of all parties interested, as accords of the law: And for ascertaining the whole of said matters, remit to the Lord Ordinary to proceed and do further in the case as to his Lordship shall seem proper, reserving all questions of expenses until the final issue of the cause.” *
“Find that in the circumstances of the case it was legal for the defenders, Alexander Allan and Co., to take from William Blincow the bond dated the 28th day of September 1825 years, comprehending therein the sum of 500 l . sterling, being a debt acknowledged to have been formerly due by Henry Blincow; therefore sustain the same, and assoilzie the defenders from the claim of 375 l . sterling, made relative thereto: Also find that the payment on the 7th day of May 1827 of the sum of 833 l . 6 s . 8 d . sterling, and 45 l . 8 s . 4 d . sterling of interest thereon, made to account of the second instalment of the foresaid bond, the same being part due from the 4th day of April preceding, and in the way and manner stated, was a legal and valid payment; therefore sustain the same, and assoilzie the defenders from the claim relative thereto, and decern: But, in the circumstances of the case, particularly the situation of William Blincow, and the third instalment of the bond not becoming due till the 4th day of October 1827, find that the payment of 833 l . 6 s . 8 d ., and 5 l . 6 s . 8 d . sterling of interest accruing thereon, made on the 12th day of May 1827 years, by means of a cheque or order, was not legal, and is to be considered as an evasion of the statute 1696; therefore sustain the reasons of reduction quoad said payment, and reduce and set aside the said cheque or order, and find that the said sums are to be replaced to the account current between the parties, in the same way

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When the case came before the Lord Ordinary the respondents maintained that they were entitled to retain the above sums referred to in the concluding part of the interlocutor, in satisfaction of the debt due to them; and his Lordship, having doubts as to the meaning of part of the interlocutor, reported the case to the Court, with this note: —the ordinary way of trade, and that such transactions do not fall under the sanction of the act 1696; and therefore assoilzie the defenders under that head, and decern,” was meant to apply not only to the bills lodged in their hands previously to the 12th of May 1827, when the cheque which has been reduced was presented, and the bond delivered up, but also to the cash and bills delivered to the defenders by the bankrupt's brother, Valentine Blincow, on that day. If that cash and these particular bills are, under the interlocutor, to be held as received in the ordinary course of trade, and the only matter to be determined under the remit be, whether the defenders were or were not entitled to retain out of the balance thus in their hands what was required for payment of the third instalment of the bond, the Lord Ordinary considers it to be quite clear that they were so entitled, and that the pursuers can take nothing by the reduction of the cheque. does not appear so clear in itself to the Lord Ordinary as to enable him to say which is right, he has thought it advisable to report the matter on cases.”“The Lord Ordinary is doubtful whether that part of the interlocutor of the Court which finds, “that the defenders, besides being common creditors by bond, were also the ordinary bankers of William Blincow and Co.; that they transacted their business and discounted their bills in

Footnote

* 7 S. & D., 124.

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If, on the other hand, it is still open to him to consider whether these particular funds were or were not received in the ordinary course of trade, he is disposed to think it presumable, from the whole circumstances of the case, that they were placed in the defender's hands, not in the ordinary course of trade, but for the express purpose of being applied, through the medium of the cheque, to the extinction of the sum in the bond; and that unless this object had been in view they would not have been received at all.But as the parties differ as to what they conceive to have been the meaning of the Court in that part of the interlocutor which is above quoted, and it

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The Court thereupon (12th June 1829) “remitted to the Lord Ordinary to inquire and decide whether the funds in the defender's hands, against which the cheque for the amount of the third instalment of the bond was presented, were paid to the defenders in the fair and ordinary course of trade, or were deposited with the view and for the purpose of affording to them an undue preference over the other creditors of the bankrupt.” *The Lord Ordinary then remitted the case to the Jury Court; and an issue was sent for trial to a jury, “Whether, in terms of the interlocutor of the First Division of the Court of Session, dated 12th June 1829, the funds against which the said cheque was presented were not paid to the defenders in the fair and ordinary course of trade, but were deposited with the view and for the purpose of affording to the defenders an undue preference over the other creditors of the said William Blincow and Co.?” The jury found, “in respect of the matters proved before them, that the funds against which the cheque was presented were not paid to the defenders in the fair and ordinary course of trade, but were deposited with the view and for the purpose of affording to the defenders an undue preference over the other creditors of William Blincow and Co.”At the trial it appeared that the funds against which the cheque was presented had arisen from indorsations

Footnote

* 7 S. & D., 753.

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As the summons concluded only for reduction of indorsations of bills by Wm. Blincow, and for repetition of the contents of the bills so indorsed, (which it was thought could not apply to the bill indorsed by Valentine although both parties had hitherto acted on the footing that it was correctly described), the appellant raised a supplementary summons, setting forth the state of the original action, and the verdict of the jury, as establishing that the funds against which the last cheque was presented had been deposited in the respondents hands for the purpose of creating an undue preference; that, notwithstanding, the respondents intended to object to decree being pronounced against them, “in respect the pursuer in his libel only concludes for delivery of bills indorsed to the defenders, or for payment of their contents, but does not conclude for any sums of cash or money deposited by the bankrupt in order to meet the cheques, by means of which the full payment of the second and third instalments of the bond was to be made to the defenders.” The appellant therefore concluded, that in addition to the conclusions of the foresaid action, and as supplementary thereto, it should be declared, that the pursuer was entitled to repetition of any funds paid into the defender's hands within sixty days of the sequestration, and not in the fair and ordinary course of trade; that the funds against which the third cheque was presented had been so

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In defence it was maintained: —1. That as the record had been closed in the original action, and it had been terminated by a verdict, no amendment of the libel was competent, and therefore the supplementary action could not be conjoined with it; 2. That neither could the latter be sustained as an independent action, for although the transaction was challengeable only on the act 1696, yet it did not libel on that act, and there was no reductive conclusion; and 3. That it was not competent in the original action to decern for repetition of payments in cash or bills not indorsed by the bankrupt.In the original action, the Lord Ordinary (Moncreiff), pronounced this interlocutor:—pursuer is entitled to decree of reduction, and for payment to that amount; reduces, decerns, and declares accordingly, and decerns for payment of the said sums of 354 l . 4 s . 5 d ., with interest, at the usual rate then allowed by the banks, from and after the 14th day of May 1827, the date of presenting the cheque granted as the amount of the third instalment of the bond, till the date of the execution of the summons, and thereafter at the rate of five per cent. till paid: But in respect that there is a difficulty in applying the interlocutors of the Court, and the verdict of the jury, to the conclusions of the summons in this action, so as to give any decree to a greater extent, (which difficulty the pursuer has endeavoured to obviate by a supplementary action raised after the issue in this cause had been tried, and a verdict returned,) makes avizandum to the Court, with this process quoad ultra, and appoints the parties to lodge, print, and box short minutes of debate, explaining their several views as to this part of the cause.”
“Finds that the funds against which the cheque was presented were not paid to the defenders in the ordinary course of trade, but were deposited with the view and for the purpose of affording to the defenders an undue preference over the other creditors of William Blincow and Co.; that under the verdict, as applied to the summons in this action, there are termini liabiles for reducing the transaction by which bills enumerated in the summons were indorsed by William Blincow and Co. to the defenders, and funds were thereby deposited in their hands, against which the cheque in question was made and presented: Finds it sufficiently ascertained that there were funds in their hands, created by the indorsation of such bills, to the amount of 354 l . 4 s . 5 d ., and that the

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His Lordship added this note:—

imperfect, or at least of doubtful effect. After the cheque had been reduced, the question was, whether the pursuer could also, under the act 1696, reduce the transaction by which the funds were deposited, so as to bar the plea of retention; and having this in view, he had concluded in his summons for reduction of the indorsations of a great number of bills particularly enumerated. It now turned out that a considerable part of the funds in the hands of the defenders had not arisen from the indorsations of these bills by Blincow and Co., in so far as a sum “of 342 l . 8 s . 4 d . had been paid to the defenders in cash, and the last bill mentioned did not exist in the form stated, though a bill of the same amount, accepted by Blincow and Co., and drawn by Valentine “Blincow, who was no partner of the company, but one of the cautioners in the bond, had been indorsed by him to the defenders. But the summons contains no conclusions which can be applied to the transaction by which the funds were deposited, otherwise than as they were supposed to arise from the indorsations of the bills particularly stated by Blincow and Co. To supply this defect the pursuer raised a supplementary action, and moved that it should be conjoined with this action. The Lord Ordinary has seen difficulty in conjoining a new summons with an action which has already terminated in a verdict, and also thinks it impossible to make the summons in the original action effective to the extent of the terms of the verdict, without holding it to apply in a manner contrary to the admitted state of the fact. He has therefore thought it advisable to give decree, as far as the summons clearly admits of, and quoad ultra to report the case, in order that the Court may determine the effect of the verdict. If the Court should find the difficulty insuperable in this process, it will remain to be considered how far the case can be extricated under the supplementary action. There may be more doubt as to the application of the original summons to the bill for 155 l . than as to the cash payment; but, there being great difficulty in that also, the Lord Ordinary has thought it necessary to leave the point open.”
“The Court, by final interlocutors, sustained the defence as to the second instalment of the bond, but reduced the cheques drawn for the third instalment. But a question remained as to the right of the defenders to retain the funds in their hands, independent of the cheque or the payment of it. Holding this to be a separate case, the Court ordered an issue for trying it; and the issue, in conformity to the interlocutor, was so expressed as to apply to the whole funds against which the cheque was drawn. The verdict is in the same terms. After getting this verdict, the pursuer, on looking into his summons, thought it

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In the supplementary action the Lord Ordinary at the same time ordered minutes of debate for the information of the Court as to the state of the cause, particularly as to the conjunction of the processes.

His Lordship added this note:—

there would still be this separate difficulty in point of form, that the supplementary action contains no reductive conclusion; and this being a challenge depending entirely on the act 1696, it may be impossible to reach the act of paying or depositing the money within the sixty days, without such a reductive conclusion.”
“In a note to an interlocutor of the same date in the original process, the Lord Ordinary has adverted to the difficulties arising from the form of the summons in the original action, and the objection to conjoining them after verdict. If this supplementary summons should be considered entirely by itself, in so far as its object is not attained by the previous summons, the Court will then have to decide in what manner it ought to be proceeded in. It may be a question, whether the verdict in the other cause between the same parties might be held by the Court as conclusive evidence,— in point of fact, excluding the necessity of further proof,—and whether they might then consider the case of the money which was deposited in cash, and the bill indorsed by Valentine Blincow, as making a case of law to be judged of on the assumption of the finding of the jury in point of fact. This may be attended with difficulty. But supposing that difficulty to be overcome,

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Against the interlocutor in the original action the respondents reclaimed, stating that two of the bills falling under the first summons had been eventually dishonoured to the extent of 118 l . 19 s ., and that the decree by the Lord Ordinary for the sum of 354 1 . 4 s . 5 d . rested upon the erroneous supposition that these bills had been paid.To this it was answered, that as the allegation that the bills had been dishonoured was not res noviter veniens, it could not now be competently stated.The Court “sustained the objection to the supplementary summons, that it contains no reductive conclusion, dismissed the same, and decern, reserving to the pursuer to bring a new action of reduction and repetition, if otherwise competent;” but “remitted to the Lord Ordinary to hear parties on the defender's claim for deduction of the sum of 118 l . 19 s ., upon which they have not been heard before his Lordship; quoad ultra adhered to the interlocutor reclaimed against, and refused the desire of the note, and decerned, and allowed decree to go out, and be extracted, ad interim, for the sum decerned and found due in the Lord Ordinary's interlocutor, under deduction of the foresaid sum of 118 l . 19 s ., and corresponding interest; reserving all questions of expenses incurred in the Court of Session.” *

Footnote

* 9 S. & D., 317.

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Under this remit the appellant proposed to resume the discussion as to the bill for 155 l ., which was objected to by the respondents on the ground that the interlocutor exhausted the cause, except as to the 118 l . 19 s . The appellant answered, that no judgment had been pronounced by the Lord Ordinary in regard to the bill for 155 l .; that the interlocutor of the Court did not decide the question as to it, and therefore it must be held as embraced in the remit. The Lord Ordinary assoilzied the respondents from the claim of 118 l . 19 s .; “and, in respect that the interlocutor of the Court contains no remit as to any other matter, refused to allow any further discussion or investigation relative to the bill of 155 l . mentioned in the summons and pleadings, as demanded by the pursuer; and the Lord Ordinary, considering the merits of the case to be exhausted by the interlocutor of the Court, and this judgment on the remit, and having heard parties procurators on the question of expenses reserved by all the interlocutors, makes avizandum.”The appellant reclaimed, contending that the question relative to the 155 l . bill remained still to be disposed of; and the Court (19th May 1831) remitted to the Lord Ordinary to hear parties in regard to it. * Under this remit the Lord Ordinary found (1st June 1831), that the appellant was “not entitled to repetition of the amount of the bill for 155 l . as libelled in the present action; reserving his claim for said sum in any other action which he may be advised to raise,

Footnote

* 9 S. & D., 599.

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Pattison then appealed.Appellant .—1. The repondents acted unlawfully in stipulating, as a consideration for their advancing the sum of 2,000 l ., that the bankrupt should grant bond to them for the sum of 2,500 l ., so as to include the old debt of 500 l . due by the estate of William and Henry Blincow, and which the respondents had agreed to discharge on payment of a composition. The bond, therefore, ought to be reduced to the extent of 500 l ., or at all events to the extent of 375 l ., being the excess above the stipulated composition; and payment thereof having been obtained by the respondents from the estate of William Blincow and Co., who were not the proper debtors, the appellant, as trustee on that estate, is entitled to repetition for behoof of the creditors. *2. The second instalment of the bond having been past due when it was paid, on the 7th of May 1827 (which was within twenty-three days of the sequestration of William Blincow and Co.'s estate),and the indorsations of the bills, and the cheques presented against the proceeds thereof, being all made and granted within sixty days of the sequestration, by means of which the payment was accomplished, are reducible under the act 1696, as conferring an undue preference in securing payment to the respondents of their prior debt; and they are therefore

Footnote

* Junner v. Caddell , 15th Feb. 1822, 1 S. & D. p. 325, new ed. 301; Arrol v. Montgomery , 24th Feb. 1826, 4 S. & D. p. 499, new ed. p. 504.

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3. It being now finally established by the verdict of the jury in regard to the third instalment, “that the funds against which the cheque was presented were not paid to the defenders in the fair and ordinary course of trade, but were deposited with the view and for the purpose of affording to the defenders an undue preference over the other creditors of William Blincow and Co's.,” the appellant was entitled to decree for repetition of the full amount of the undue preference; or at all events, if it should be held that the conclusions of the action are too limited to authorize decree being pronounced for any sums, except the contents of the bills libelled in the summons, this defect was remedied by the supplementary action, which ought to have been conjoined with the original one, after which decree should have been pronounced in the conjoined actions for the full amount of the third instalments.The objection that the supplementary summons contains no reductive conclusion is unfounded, because the object of it was to supply an alleged defect in the original action by introducing a declaratory conclusion to have it found that the appellant was entitled to repetition from the respondents of any funds deposited in their hands by the bankrupt within sixty days of the sequestration, not in the fair and ordinary course of trade, but for the purpose of affording them an undue preference over the other creditors. Such a conclusion was proper, because the summons in the original action only concluded for repetition of funds created by the indorsation

Footnote

* Spier v. Dunlop , 30th May 1827, 5 S. & D. 729. (new ed. 680.)

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Neither is there any foundation for the objection that the supplementary action cannot be conjoined with the original one, in respect the record had been closed, and proof led before the supplementary summons was raised. At all events, if it be incompetent to conjoin them the appellant is entitled to obtain decree in the supplementary action for payment of such sums paid to or deposited in cash by the bankrupt with the respondents, not reached by the first action, as have been or may be still shown to have been so deposited for the purpose of giving the respondents an undue preference over the other creditors of the bankrupt.

Respondents .— 1. The summons, in so far as it concludes

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2. The payment of the second instalment of the bond is challenged exclusively as being contrary to the statute 1696. The bond is not alleged to be tainted with fraud, or to be anywise objectionable at common law; and the justice of the debt for which it was granted has never been disputed. But the respondents, besides being creditors to the amount of the bond by William

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If the act 1696 were to be held to apply to this case there is scarcely a transaction between bankers and their customers against which it would not strike. Where the debt is past due, if the payment be made by cash, or by means of drafts or indorsations of bills, without fraud or previous knowledge of impending bankruptcy, the act has been held not to apply; and, on the other hand, if the debt be merely contingent, as in a cautionary obligation, or if the creditor be not entitled at the time to demand payment, then, if in such circumstances money is impressed into his hands, it is not an extinction of the debt, but a provision in security of it, or a means of afterwards obtaining payment. *But the second instalment of the bond was past due on the 7th of May 1827, when an order on the account current was presented for the amount, and the debt to that extent discharged; and on the 14th there was a balance in Blincow's favour, in account with the respondents, of 848 l . 0 s . 11 d . Now, it is the same thing whether the payment was by a draft or by means of

Footnote

* Dickson, Langdale, and Co. v. Cowan , 7 S. & D., 132, Scales, 11th June 1829, 7 S. & D., 749.

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3. The interlocutor of the Court, which found that the appellant could not under the conclusion of his summons obtain decreet for the sum of 342 l . 8 s . 10 d . which had been paid to the respondents in cash, and not by the indorsations of the bills libelled on, or from their proceeds, and that the defect in the original summons could not be remedied by conjoining the supplementary action, is well founded. To have given decree against the respondents under the first summons for repetition of payments received by them in cash would have been ultra petita, and contrary to the grounds in law and fact on which the appellant's case was laid.Neither was this made competent by the supplementary action, because as a proof had been led and concluded, and judgment pronounced in part disposing of the cause, it could not be conjoined with the original action. It is equally unavailing as a separate and distinct action, because the written evidence of the payments made in cash by Blincow into his account current is not called for, and no payment of money exceeding in amount 100 l . Scots can be proved otherwise than by written evidence. Besides, the statute 1696 is not libelled on, as the law which alone confers on the appellant any title and interest to sue for the reduction of the alleged payments by Blincow to the respondents. And, lastly, the summons contains

Footnote

* Jamieson v. Ferrier , 23d Jan. 1810, Bell, vol. ii. pp. 217, 219; Watson v. Young , 1st March 1826, 4 S. D. p. 507. new ed. 515; Ferrier v. Newton , 2d June 1808, F. C.; Stewart v. Sir Wm. Forbes and Co ., 1st March 1791, Mor. 1142.

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Lord Chancellor .—My Lords, this was an action brought by the trustee under the sequestration of Messrs. William Blincow and Company, and of William Blincow, a partner in that house, against Messrs. Alexander Allan and Company, bankers in Edinburgh, and the individual partners in that house, the principal object of which action was to obtain repayment of certain sums which had been paid, as it was alleged, by the bankrupts, in contemplation of bankruptcy, out of the usual course of business, and for the purpose of giving a preference to one creditor over others. There was a supplementary suit; and the three points which are chiefly for the consideration of your Lordships, raised at the bar, are, first, the sum of 500 l . which was claimed to be repaid in the action, but from which claim the Court assoilzied the defender,—that 500 l . being the first instalment upon a bond of 2,500 l . granted by Blincow to Messrs. Allan, or at least 375 l ., part of that 500 l .; the 500 l . having been an old debt of William and Henry Blincow to the firm of Allan and Company, and that 500 l . having been included in the sum for which the bond was given. Under the circumstances which I have already alluded to, the Court below assoilzied the defender from this conclusion of the summons, and in my opinion, justly and well decided in so assoilzieing him. The condition of the offer of composition was, that every creditor whose debt exceeded 20 l . should

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We now come, therefore, to the next point, which refers to the repayment of the second instalment on

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However, although this mode of pleading, which has been here adopted, is by no means unusual in a condescendence in Scotland, and although it is subject to the remark I have now made, one thing is perfectly clear, that with a little trouble, and by comparing the two statements the one with the other, you do find that there are most important averments on the one side, not within the admissions on the other, but coming within the description of being a denial of the pursuer's statement “so far as they are inconsistent with the following statement,”—though there are matters in “the following statement” inconsistent with the pursuer's statement, in direct opposition to it, and which do raise a direct issue of fact. Thus, to go no farther than the last subdivision of that third head, “It is denied,” says the defender in his answer, “that the bills were discounted by the defenders, except in the usual course of business. It is denied that the indorsations were made with the view of granting them an undue preference in security.” Now, “the usual course of business,” and the “undue preference,” are of the utmost possible importance, in point of fact, to the decision of the whole question between the parties, as to the second instalment. The one party says it was not in the usual course of business, and the other says it was in the usual course of business;—the one says it was with a view to giving an undue preference; the other party says it was without the view of giving such a preference.

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Then come the pleas in law, which are stated by both sides; and if I have had much to observe upon the mode of pleading which has been adopted in the former stage—namely, that stage of which the peculiar province is to raise the issue of fact between the parties—I own I feel that I have still more right to observe upon the mode of pleading adopted in the second stage—namely, that which is to raise the issues in law between the parties. These pleas in law, as I understand, ought to consist of mere allegations of matters of law, and ought not to be mixed up with averments of matters of fact. Now, your Lordships will

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account.”

“The indorsations upon the bills sought to be reduced were granted in the course of trade, for bonâ fide considerations”— there is no authority for that in Mr. Bell, for that is matter of fact referring to the particular transactions between the Blincows and the Allans,—“the bills being regularly discounted, and the proceeds entered to the credit of William Blincow and Company, in the account current kept between them and the defenders. The cheques specially mentioned, were presented to the defenders in the usual course of business, and immediately entered to the debit of the parties cash

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That is all the rest of the third head of the pleas in law; and for that which is a pure statement of fact, from beginning to end, without a word of law in it—without any thing that can lead any body who reads it, to know what law is intended to be raised upon those facts—that is stated as the defenders third plea in law; and to give some colour to it, as matter of law, reference is made to Mr. Bell's work, and other text writers. Therefore it is quite clear, in no manner in which this can be viewed, can it be considered a matter of law.Now, my Lords, this is not only an observation upon such an incorrect manner of pleading, and which may be made more generally than necessary upon the pleadings in this case, but it goes very far to show into how entangled a situation the present question has been got; for I do maintain, that throughout there has been no due separation of the matters of law and of fact, and that the Court has had to give its judgment, in various stages of this case, without ever having the law separated from the fact, and consequently without having the facts ascertained. The facts are not admitted, they are disputed between the parties to this hour. The Court has proceeded upon a complicated view of the subject, and must have assumed, and gratuitously assumed, the facts to have been as stated in one way or the other, or they could never have come to a decision upon the matter in dispute. I do not mean to say that the Court has not the power of deciding without a jury, but I cannot help lamenting, that when they were sending one issue to be tried on one part of the case, which was most properly sent, and most properly tried, I cannot but greatly regret that they did not send an issue between the parties as to

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I have stated, that Lord Newton, with his usual discrimination, dealt with the parts of the case before him in the various stages through which it went. I will now call the attention of your Lordships to a very able note of that learned Judge, annexed to his interlocutor of the 12th November 1828, and this will illustrate the inconvenience of this mode of pleading. This was, of course, after the defences had been lodged, and the pleas in law and condescendences upon the facts had been closed. “It is said, however, by the defenders, that being his ordinary bankers, they discounted the bills in question in the course of trade, and only applied the balance which stood in his favour on their running account to the payment of the instalments of the bond, in consequence of his order to that effect; that the pursuer has not averred in the record, that they were in the knowledge of the impending bankruptcy,”—I have already stated to your Lordships, that I can find no such averment of fact—“and is not entitled to assume an argument, that they acted on such knowledge.” Then his Lordship goes on,—“It is not necessary, however, to the operation of the act of 1696, that the creditor shall be proved to have been in the knowledge of the impending bankruptcy, or guilty of fraud, in accepting of the security. It is enough if the debtor intends to favour him, and to give a preference over his other creditors. Now it seems,” says his Lordship, “from the circumstances,

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This brings me, my Lords, to the third and last head to which I have to call your attention, and that is, the question connected with the supplemental suit. I am of opinion, in the first place, that the Court below was right, for the reasons assigned by the Lord Ordinary, in not conjoining the two actions. I am, in the next place, of opinion, though that appears to have been held doubtful by the learned Judge to whom I have referred, that the verdict in the first action is evidence between the parties to the supplemental suit,—it is a verdict between the same parties, and in truth, upon the same subject matters;—it therefore is evidence, and might have been used in the second suit. But, thirdly,

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The House of Lords, in the appeal of the original action, pronounced this judgment:—It is ordered and adjudged, That the said petition and appeal be and is hereby dismissed this House, and that the interlocutors, so far as therein complained of, be and the same are hereby affirmed, except in so far as regards the second finding of the first interlocutor of the Court of the 3d December 1828 touching the second instalment: And it is further ordered, That the said cause be remitted back to the Court of Session in Scotland with directions to have an issue or issues tried upon the legality and validity of the payment of the said second instalment.In the appeal of the supplementary action their Lordships pronounced this judgment:—

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It is ordered and adjudged, That the said petition and appeal be and is hereby dismissed this House, and that the interlocutors therein complained of be and the same are hereby affirmed.Solicitors: Andrew M'Crae— Moncreiff, Webster, and Thomson, Solicitors.