Scottish Court of Session Decisions

This was an action by William Ford & Sons, merchants, Leith, against Richard Stephenson, ironmonger, Duns, for payment of an account for goods supplied to the late Matthew Wilson, formerly grocer in Duns, for which the defender was said to be liable.

On 26th June 1866 the said Matthew Wilson, on the narrative that his affairs had become embarrassed, and that the defender had made advances to him, and was willing to undertake the

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management of his affairs for behoof of him and his creditors, executed a trust-deed whereby he made the following disposition:—“Therefore I do hereby dispone, assign, and convey to and in favour of the said Richard Stephenson, as trustee, for behoof of me and all my just and lawful creditors, my whole estate and effects, heritable and moveable, real and personal, presently belonging and owing to me, or which may belong and be owing to me, or to which I may acquire right during the subsistence of this trust, and particularly without prejudice to the said generality, my whole stock-in-trade, shop fittings, household furniture, and the whole debts due and owing to me, conform to list and inventory thereof hereunto annexed, with the whole writs, vouchers, and instructions thereof, and all that has followed or may follow thereupon, and my whole right and interest therein, present and future, excepting always from this trust the fore-said policies of life assurance; but declaring that these presents are granted by me and shall be accepted in trust for the uses, ends, and purposes, with the powers, and under the conditions, provisions, and declarations underwritten, namely Primo, That the said Richard Stephenson shall take the full management and control of my whole means and estate, and that I shall act as his sub-manager, and that the business of a grocer shall be carried on by the purchase and sale of spirits, porters, ales, groceries, and other such goods, and that for such time as shall seem expedient to the said Richard Stephenson—that is, until it shall seem to him that the business is in so healthy a condition as that he may restore the possession and management to me, and that he may with advantage to me and my creditors resign and upgive the present trust; it being hereby provided that I shall have the occupancy of the dwelling-house, and the use of the household furniture; and the prices and proceeds of sales, and all purchases of goods to supplement the stock shall be under the control and management of the said Richard Stephenson, he being bound to make such weekly allowance for my services as shall seem to him necessary and proper for the maintenance of my family: Secundo, All expenses attending the creation and execution and the management of the trust, including a suitable remuneration to the trustee, and payment to the trustee of all advances made, or obligations undertaken by him in execution of the trust, shall be paid out of the first and readiest of my means and estate.” By the third purpose Stevenson was empowered at his discretion alone to sell and dispose of the whole estate and effects disponed.

Wilson by a separate deed of assignation disponed and conveyed to the defender two life policies of assurance with the Life Association of Scotland, together for five hundred pounds, in part security of his advances in this present trust.

The pursuers were aware that the deed had been granted shortly after the constitution of the trust, and their knowledge of the general circumstances will appear from the following letter to them of 28th June 1866 from Mr W. K. Hunter, banker, Duns, to whom they had been referred by Wilson:—“Mr Wilson has now executed the trust-deed in favour of Mr Stephenson to which I alluded. The purpose of this trust is to carry on the business under Mr Stephenson's supervision, so that while the trust exists Mr Stephenson is the responsible party. He has opened an account here into which I understand all monies drawn are to be paid, and from which all accounts are to be paid. If, therefore, you have the sanction of Mr Stephenson for any orders you may execute, Mr Stephenson will take care that you are paid. In short, Mr Stephenson has taken the management, and is to carry on the business for behoof of Mr Wilson.” Hunter had prepared the trust-deed, but he was not Stephenson's private agent. Thereafter Stephenson met all the pursuers' business accounts by cheques upon the account alluded to by Hunter, which was known as “Stephenson No. 2 account.”

On 24th May 1870 the defender wrote to the pursuers:—“As I have entered on a lease of the farm of Chapel, and now reside there, I am not able to devote any of my time to his business, and I am anxious to bring the trust to a close; and I would be glad to consult with you as to the best mode of procedure, so as no interest should suffer by my withdrawal.” On 3rd June he again wrote:—“Since I saw you I am glad to say that a friend of Wilson's here has promised to try and negotiate a loan for him in the course of a month; and should he be successful, I hope it will place Wilson in a position to dispense with my services and the trust-deed.” On 14th June 1870 Wilson requested the pursuers to draw upon him at three months for the amount of his account, but the pursuers replied that such a course would be contrary to the present arrangement, and they therefore refused to accede to his request. On 16th June 1870 the defender wrote to the pursuers—“It was at my suggestion Mr Wilson wrote you to ask you to draw on him at three months for the amount now due to you, and he has this morning showed me your reply. His estate is now under advance to me of upwards £400, and I am not at this moment in a position to increase this sum; but, as I before stated, negotiations are in progress by some of his friends to raise a sum to relieve me of my advances; and so soon as this is completed it is his intention to revert to the usual plan of paying you monthly. I would be glad if you could accede to his wish to accommodate him at this time. If you cannot, the only thing for it that I can see is to bring his affairs to a standstill and advertise the business.” The pursuers replied that pending the completion of the said negotiations they would take Wilson's acceptances with the indorsation of one or more of his friends. They stated—“We would gladly take Wilson's acceptances countersigned by yourself.” On 23rd July 1870 the pursuers wrote to the defender pressing for payment of their account, and on 26th July 1870 they again wrote to the defender—“If you wish, as we understand, to withdraw from your present connection with him, and if he has no other security to offer us, then it can only remain to decide what steps should be adopted under the circumstances, and to enable us to judge of that we would like to know the precise nature of the deed under which you are connected with him.” The trust-deed was accordingly sent to them for examination. On 1st August 1870 the pursuers wrote to the defender—“We will be sorry if the matter cannot be arranged, but we think it right to intimate to

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you that we cannot allow it to remain beyond a day or two more in its present position. If we get sufficient security we would continue to supply Mr Wilson on our very best terms with goods to the amount of £400 or £500 as now; but if, say by Thursday, you find it is not likely to be provided, we trust that you will take immediate action to realise and pay our claim, and render unnecessary any steps we might think otherwise incumbent on us.” About the same time an order for grocery goods sent by Wilson to the pursuers was refused by them, as it was not accompanied by the defender's written instructions. Thereupon the defender wrote to the pursuers on 4th August 1870—“I wrote you this forenoon, but since Mr Wilson has shown me your telegram to him of this date. As it is of the utmost importance that the business should be kept in its present state of efficiency till some arrangement is carried through, I will undertake to see you paid for the sugar, which I understand has been ordered by Mr Wilson.” On 17th August 1870 the pursuers wrote to the defender—“We think it due to all parties to make you aware of the terms on which we are prepared to go on, and for Wilson's sake hope that they may meet the approval of his friends. First, we are willing to allow our claim to lie over on condition that we receive satisfactory security for its future payment. Second, that Wilson shall reduce the debt by a payment of fifty pounds every six months from this date, and pay interest on the unpaid-up amount at the rate of four per cent. per annum. Third, on this being arranged we agree to give him goods on one month's credit to the extent of £200 stg. It appears to us this is a very favourable arrangement for Wilson, and you will observe that while caring for ourselves we have also looked to the interest of his proposed securities, as in the first place the security is limited to our present debt; then by binding Wilson to reduce the debt, we thereby secure the gradual reduction of their risk; and further, by compelling Wilson to pay his goods by cash in one month he gets the discount of 2 or 2 1 2%, which you are aware makes an immense difference in the year's profit, thereby giving his securities considerable security that they will never be called on. We would also suggest that in order further to induce his friends to befriend him you should agree to continue the trust-deed, which would enable his securities through you to put a stopper at once on Wilson should he be found failing in any respect to implement his engagement, and enable you at any time to look into his affairs. We would also suggest that were his securities to be, say four in number, the risk would be very small indeed to each, especially seeing Wilson is at present £200 stg. above the world and in a good business.” Wilson at this time succeeded in arranging with certain parties, two in number, to become security for his debt to the pursuers, and the defender on 25th August 1870 intimated this to the pursuers, and added—“In the meantime send him what goods he may order, and I will see you paid until the arrangement is carried through.” On 8th September 1870 he again wrote as follows—“I was only able to-day to see the gentlemen who propose being security to you for Wilson's debt of £350. They propose that you should draw on Wilson in seven bills for the amount named, and at the six months' date. On that being completed, and on my undertaking to continue the trust until the bills are paid up, they will then grant you a letter of obligation to secure you in the due payment of the bills. I trust this will be satisfactory for you.” A bond and obligation was granted on 6th September 1870 by the said parties to the pursuers as cautioners along with the defender for the amount of his debt.

About this date it was suggested that the business should be sold, and the question was discussed between the pursuers and the defender, with Wilson's consent. However, no arrangements for this end were completed, and the idea was abandoned.

On 14th April 1882 the defender wrote to the pursuers—“I think it right that you should know from me the present state of Mr M. Wilson's affairs, especially as he intends seeing you tomorrow on the subject. You are aware that several years ago he was seriously embarrassed; at that time he executed a trust-deed in my favour, under which the business has been carried on, and I am glad to say that now he is perfectly solvent. The carrying on of the trust has involved me in raising, for the purpose of carrying on the business efficiently, a considerable sum of money, and I am anxious now to be relieved from this as well as the responsibility of the trust, but Wilson's difficulty seems to be in raising a sufficient capital to allow me to resign, and if this cannot be done, the only other alternative seems to me to dispose of the business. This on Wilson's account would be a serious matter, as the business is a good one, easily managed, and on the whole profitable; besides, the premises have now been bought and improved to suit the requirements of his trade. If you can suggest any way-out of the difficulty, perhaps you will communicate it to Wilson, who will call on you sometime tomorrow.” On 19th April 1882 he again wrote—“I have been seriously considering the matter as to which Mr Wilson called on you on Saturday. It appears to me the only way practicable under the circumstances is to try and get some-one who wishes to extend their business to take this one and retain Wilson as their manager, and give him either a share of the profits or a salary for his services. It's a nice tidy business, easily managed, with a most select connection, turning over about £4000 per annum, with good profits, and capable of great extension. He has a large and a growing trade of sending whisky to London and the south of England. It would take about £1000 to take the business in its present state, paying for stock and debts, and I must either arrange to let the premises on a long lease, or sell them, as it may be wished. If you know of anything likely to suit, kindly let me know, as well as your opinion as to this proposal.” The pursuers replied on the following day—“We are favoured with yours of yesterday. We would be very sorry if Mr Wilson has to give up his business, but we cannot be surprised you should wish to be free of your present responsibility.”

At this date efforts were again made for the sale of Wilson's premises, and inquirers were referred by the pursuers, from whom the advertisement proceeded, to the defender. The premises were not sold, and on 5th January 1883,

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the pursuers wrote to Wilson—“We have your order for sugar, which has been forwarded, but we must remind you of the request we made in our last that your orders in future should be countersigned by Mr Stephenson. Looking at late delays in payment, we think this arrangement is proper and necessary in the interest of Mr Stephenson, as well as in yours and our own. Don't forget this in sending future orders.”

After this date goods were supplied as before by the pursuers on Wilson's order, and were paid for by the defender's cheque, but the orders were not countersigned by the defender. Wilson died in September 1887, and his business was carried on for some months by his daughters, and finally given up. Latterly it had decayed, and the assets afforded about 10s. per £ to the creditors. The goods supplied by the pursuers had been paid for during the continuance of the trust by the defender, except those sent between 16th July and 19th September 1887, the price for which, amounting as restricted to the sum of £175, 17s. 7d., was the subject of this action.

The pursuers averred that in dealing with the business of Wilson they relied on the trust-deed as imposing liability on the defender, and further, that the whole of the account was incurred with the knowledge and approval of the defender, and on his behalf, in his conduct of the said business as trustee for Wilson, and on the order of himself or persons authorised by him. The defender averred that he procured the deed as a security for his advances, and in order that he might secure and enforce some supervision over Wilson's business. The trust-deed was not acted on to the effect of superseding Wilson in the conduct of his business, nor was that intended. The trust-deed was not intimated to creditors or published in any way. Of even date therewith Wilson granted to him, in further security of said advances and interest, an assignation in security of two policies of insurance on his life with the Life Association of Scotland for £200 and £300. His position was that of a secured creditor with some charge of the cash and banking transactions. Further, that no demand for payment of the price of goods supplied by the pursuers to Wilson was ever made to him, and that the pursuers were consulted as to the proposed sales of the business, because their interest as creditors was identical with that of the defender.

At the proof, the facts above narrated were established, and the correspondence produced, and the pursuers admitted that they had never informed the defender that they held him liable for their claims against Wilson.

The Lord Ordinary assoilzied the defender. He added this opinion—I think it quite clear that the defender and the late Matthew Wilson never stood towards each other in the relation of principal and agent, or master and servant, in connection with Wilson's business, and that therefore the decision in M'Phail's case, 15 R. 47, has no application to the present. On the other hand, I am unable to distinguish this case in principle from the cases of Eaglesham, 2 R. 960; Miller, 3 R. 548; Stott, 5 R. 1104; and Newcastle Chemical Company, 9 R. 110.

The trust-deed granted in favour of the defender was intended as a security to him for advances made; and although it authorises the defender to take the management of Mr Wilson's business, and to place Mr Wilson in the position of a sub-manager, the relations between the defender and Mr Wilson never took that shape. Wilson continued in the management of his business, as the pursuers knew. They corresponded with him on that footing. Even if the defender has assumed the position of manager of Wilson's business, that would not have inferred liability for Wilson's debts.

“The pursuers say that in sending the goods to Wilson, the price of which is now sued for, they relied on the defender being liable therefor. They had no good ground for so relying on the defender. They knew the terms of the trust-deed, and should have known that the trustee under such a deed was not personally liable for the debts of the truster. It is not pretended that the defender ever gave the pursuers any reason to suppose that he would be liable for Wilson's debts. On the contrary, the correspondence in process appears to me to establish that, while the pursuers relied on the defender taking a supervision of Wilson's business, they looked to Wilson alone as their debtor.”

The pursuers reclaimed, and argued—Wilson was completely divested of all interest in the business in favour of the trustee, and occupied the position of a servant. The deed had been acted upon in this view from the beginning. It might be that the manager of this business conducted personally the bulk of the transactions, but the defender was owner of the business as trustee and was responsible. Thus Wilson's orders were paid by the defender's cheques. The defender's special guarantees were given to orders in excess of the usual course of supplies, and only emphasised his position as security to the pursuers. The distinction between the present case and those cited by the Lord Ordinary was that in the latter the trust-deeds were executed only for a temporary and definite purpose, while here the trust was to subsist as long as the defender considered beneficial to the estate.

Argued for the defender—The real relation of the parties must be considered, and the terms of the trust-deed were insufficient of themselves to decide the question in the case. The deed was executed as a security to the defender over and above the assignations of the policies of assurance in his favour. The business belonged to Wilson, who, though nominally manager, conducted it for his own behoof. The defender had no right to, and enjoyed none of the profits of the business. His whole object was supervision for Wilson's benefit. The correspondence showed that the pursuers did not regard the defender as their security. They sometimes requested a special guarantee from him before fulfilling Wilson's orders— Eaglesham & Company v. Grant, July 15, 1875, 2 R. 960; Newcastle Chemical Manure Company v. Oliphant & Jamieson, November 15, 1881, 9 R. 110; Stott v. Fender & Crombie, July 20, 1878, 5 R. 1104; Miller v. Downie, March 4, 1876, 3 R. 548; Macphail & Sons v. Maclean's Trustees, November 16, 1887, 15 R. 47.

At advising—