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Colonial Cases

Adams v. Nicholls, 1875

[insolvency]

Adams v. Nicholls


Judicial Committee of the Privy Council
3 March 1875
Source: The Times, 4 March 1875

LAW REPORT.
JUDICIAL COMMITTEE OF THE PRIVY COUNCIL, March 3.
(Present - Sir James Colville, Sir Montague Smith, Sir Robert Collier, and Sir Henry Keating.)
ADAMS AND ANOTHER v. NICHOLLS AND ANOTHER.
  This was an appeal from a judgment of the Supreme Court of the Cape of Good Hope, by which the appellants were ordered to pay to the respondents a sum of £2,000 and the costs of the suit.
  Mr. Miller, Q.C., and Mr. Boome were counsel for the appellants; Mr. But, Q.C., and Mr. W. D. Griffith for the respondents.
  The appellants are Messrs. W. J. and A. W. Adams, merchants in London and at the Cape; and the respondents are the official liquidators of the Frontier Commercial and Agricultural Bank of Grahamstown, now being wound up. The suit was brought to recover damages for the alleged breach of an agreement executed in January, 1870, by which the firm entered into certain undertakings with the liquidators, in consideration of a compromise then effected between them and a person largely indebted to the bank.
  The arguments were unfinished when the Court rose, and a detailed report is therefore reserved.

Source: The Times, 5 March 1875.

  The original suit was brought by Mr. Nicholls and Mr. Black, the official liquidators of the Frontier Commercial and Agricultural Bank, at Grahamstown, against Messrs. W, J. and A. W. Adams, merchants in London, for the breach of an agreement entered into by them upon a compromise between the bank and Mr. Locke, one of the customers. Mr. Locke was a merchant in the Cape Colony, and between him and Messrs. Adams there had been large commercial transactions. At the time of the alleged agreement Mr. Locke was indebted to the Frontier Bank in the sum of about 34,000, and to Messrs. Adams to the extent of £62,000. In 1869 the Frontier Bank was wound up, and Mr. Locke, who found himself unable to pay the amount of his liability, suggested that a compromise of his debt should be effected. Mr. W. J. Adams, one of the firm of Messrs. W. J. and A. W. Adams, happened then to be at the Cape, and with the consent of both Mr. Locke and the official liquidators, he, on the part of his firm, entered into an agreement that the goods then under order for Mr. Locke, amounting to £10,000 Sterling, and such further goods as might be ordered within a year should be delivered without their demanding any preferential security; that the firm would not withdraw their support from Mr. Locke for the same period, and that they would be contingently responsible for the payment of the premiums on Mr. Locke's Life policy, which had been handed as  security to the bank.
  That agreement was sanctioned by the Court and ratified two days later by Mr. Adams, on behalf of the firm.  In consideration of that undertaking the liquidators accepted certain terms of compromise on the part of Mr. Locke, including, among others, the payment, at intervals of six months, of four promissory notes for £1,250 each.  It afterwards turned out that so far from £10,000 worth of goods, as stated both in the agreement and in the subsequent ratification, being then under order from Messrs. Adams to Mr. Locke, the value of the consignment was not more than half. The later transactions between the firm and Locke only amounted to an additional sum of £3,000.
  The liquidators in the action at the Cape, alleged that, notwithstanding the agreements in question, the goods then under order were never delivered to Mr. Locke, but were, on the contrary, taken possession of by the defendants; that they did not continue their support to him, but on the contrary withdrew it, and caused his estate to be sequestered; and that they took from him preferential security to a large amount.  In consequence of their proceedings, the promissory notes given by Locke to the bank, with one exception, were unpaid. The Supreme Court at the Cape held that there had been a breach of the agreement on each of these points, and ordered Messrs. Adams to pay to the liquidators, as damages, the sum of £2,000 and costs.  Against that decision the present appeal was instituted.
  On the part of the Appellants, that the compromise had not been effected by false representations, that the support which they undertook to give to Locke extended only to the supply of goods in the ordinary course of trade and not to the advance of money, or the guaranteeing of any payment; and that, in any view of the case, the damages awarded were excessive.
  Sir Montague Smith, after reciting the facts and reviewing the evidence at much length, said their Lordships would humbly advise Her Majesty to affirm the decision of the Court below, and to dismiss the appeal, with costs.

Published by Centre for Comparative Law, History and Governance at Macquarie Law School