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Colonial Cases

Trustee of Thorburn and Hargreaves v. Chartered Bank, 1871

[sale of goods]

Trustee of Thorburn and Hargreaves v. Chartered Bank of India, Australia, and China

Supreme Court of China and Japan
9 February 1871
Source: The North-China Herald, 15 February 1871

 

LAW REPORTS

H.B.M. SUPREME COURT.

Shanghai, February 9th, 1871.

Before C. W. GOODWIN, Esq., Acting Chief Judge.

Between the Trustee of the property of R. F. Thorburn a debtor, and Wm. Hargreaves a Bankrupt, Plaintiffs;

and

The Chartered Bank of India, Australia, and China, Defendants.

 

   This is a claim by the Trustee of the Estate of R. F. Thorburn and William Hargreaves the plaintiffs, against the Chartered Bank of India Australia and China for Tls. 7,768.32, the proceeds of certain goods, hereinafter mentioned, received by the defendants, and claimed by the plaintiff to belong to him as the Trustee of the said Estate; and by the consent of the parties, and by order of the Acting-Chief Judge, dated the 27th day of January, 1871, the following case has been stated for the opinion of the Court under the 6th Rule of procedure without any pleading.

1st.  From the year 18677, to the month of may, 1870, the said R. F. Thorburn and William Hargreaves, carried on business as Merchants and Commission Agents at Shanghai in copartnership, under the style of "R. F. Thorburn," the said William Hargreaves having a three-fifths share and the said R. F. Thorburn a two-fifths interest in the  said copartnership business.

2nd.  The said firm of R. F. Thorburn was in the habit of obtaining loans from the Chartered Bank of India Australia and China (and other banks,) upon goods, giving to the said Bank a promissory note in the following form:-

 

No. ..................................

Date....................................

Taels ..............................

Shanghai, ------------------------ 18........

 

One month after date fixed, I promise to pay to the Chartered Bank of India Australia and China or order, within the office of said bank here, Taels Shanghai currency:

Value received.

 

   And a hypothecation note in the form following:-

Chartered Bank of India, Australia, and China,         

Security for loan Shanghai Tls.                                Due

To the Chartered Bank of India, Australia, and China     IS

   I hereby acknowledge to have deposited with the Chartered Bank of India, Australia, and China the property documents and securities for property or money hereunder mentioned, as collateral security for the due payment of a Promissory Note to the said Bank dated this ............... day of ........................ 18 ....... For the sum of taels (Shanghai Currency)  ................. as well as interest at the rate of ..... per cent per annum and all charges to be made by said Bank in connection therewith, and also for the costs and charges of keeping thje said property as a security, and hereby authorize and empower the said Bank, or any recognized agent thereof, to make sale and absolutely dispose of the said property and securities in such manner as they or he may think most advisable, without any reference to me the undersigned, or consent on my part, in case ......... ................. shall make default in paying the said sum of taels Shanghai currency ........ on the ........... day of ................... 18 ....  according to the tenor of said Promissory Note to said Bank for the same ...................  Further hereby authorize said Bank to reimburse itself out of the proceeds of said property and all costs and charges and expenses of keeping and selling the property, but so that said Bank shall not be responsible for any loss from or through any Broker or Auctioneer employed in the sale of said property or in any other manner whatever, in respect of the said property, and  said Bank shall also reimburse itself in the amount of  said Promissory Note and all interest and charges thereon, and should any balance remain over authorize the  said Bank to place the amount against all such sums as may be at the time of said  sale be due or owing by or from me to the  said Bank, upon or in respect of any other Promissory Note, Bill of Exchange or other engagement, although it shall happen that such sum or sum of money shall not be due at the time of such  sale and ............. Further engage to pay to the said Bank the balance, if any, remaining unsatisfied, and without benefit of discussion to grant such further documents as may be found necessary effectually to vest in the said Bank said property documents and security for property or money to the effect of selling or transferring the same and to keep up the value of said security as under mentioned to the full amount of Taels (Shanghai currency) ........................ according to the marker rate of the day, either by paying the difference of above stated sums in money to credit at the request of the Manager at the time being of the Chartered Bank of India, Australia, and China, or at his request to deposit goods equivalent in value to the market deterioration.  And in the event of my failing to comply with the said request ........................ hereby authorize the bank to sell, at any time before the maturity of the said promissory Note and charges as agreed on.  And all fresh security added is to be subject to the same conditions as hereinbefore stated or stipulated for ......................further agree and engage not to revoke or make void power of Attorney or other Authority which ........... have given or may give said Bank to enable it to sell and transfer the said property documents and securities for properly or money and ............... agree that the said Bank shall not be answerable or responsible for any damage or depreciation which the said goods or property may suffer while in its possession under this Agreement.

Shanghai, ................. 18 ....

3rd. The said Promissory Notes and hypothecation notes were signed by the said William Hargreaves in the following manner:

"per pro R. F. Thorburn, William Hargreaves;"

and with the consent of the defendants and the knowledge and approbation of the  said R. F. Thorburn the goods mentioned in the hypothecation notes were usually stored in the godowns belonging to the said partnership business at Shanghai aforesaid, and the said William Hargreaves gave his personal receipt and understanding to account for the same to the defendants.

4th. - About the 4th day of April 1870, the said R. F. Thorburn informed the defendants and other banks that he had reason to think some of the securities hypothecated to them by the firm of R. F. Thorburn were missing, and he advised the defendant and the other Banks to take steps to protect themselves.

5th. On thr 4th of April 1870, the defendants held several unpaid Promissory Notes and hypothecation notes of the said firm of R. F. Thorburn in the form and signed as aforesaid, and they likewise held several receipts of the said Williams Hargreaves for various goods and merchandise described in the said hypothecation notes, and forming security for certain Loans represented by the said unpaid Promissory Notes and hypothecation notes, granted by them to the  said firm of R. F. Thorburn, and which said goods and merchandise had been deposited for safe custody in the godowns of the said copartnership, and the Manager of the defendants found on the 6th say of Aperil, 1870, upon demanding delivery by the said William Hargreaves of the said goods and merchandize forming such security as aforesaid, that several portions thereof had been wrongfully sold and delivered by the said William Hargreaves, and thereupon the defendants' said Manager wrote the said William Hargreaves a letter in the words and figures following:-

 

6th April, 1870.

WILLIAM HARGREAVES, Esq.,

DEAR SIR, - Please deliver to the order of Messrs. Maclean, Thorburn & Co., all the goods now in your Godowns, the same being held under lien to the Chartered Bank of India, Australia, and China.  They will be duly endorsed on your Godown Order after delivery.

Yours truly, M. M. WALKER.

 

Which said letter was counter-signed by the said William Hargreaves as an authority to deliver the goods mentioned in such letter to Messrs. MacLean Thorburn & Co.

6th. - At the time the Manager of the defendant's Bank wrote the said order of the 6th April, 1870, set pout in the foregoing paragraph, the said William Hargreaves was indebted to defendants on his own account, and so was the firm of R. F. Thorburn; and the said William Hargreaves was responsible to the defendants as warehouseman for the goods and merchandize forming the security for loans by the defendants to the firm of R. F. Thorburn and deposited with him for safe custody.

7th. As the defendants held as security by far the largest share of goods in the godowns of the said partnership, it was proposed by the Manager of the Chartered Mercantile Bank to the Manager of the defendants' Bank, on the 4th day of April 1870, in the presence of the said R. F. Thorburn, that the other Banks should remove their goods first, as the balance would belong to the defendants; and in pursuance of the said order, all the rest of the goods in the godowns of the said partnership were taken delivery of by Messrs. Maclean, Thornurnb & Co., in purusance opf the Order of the 6th day of April 1870, for the accoun6 of the defendants, under the impression of the said firm of R. F. Thorburn and ofg the defendante that the same were under lien to the defendants.

8.  It was subsequently discovered that the following goods, the property of the said firm of R. F. Thorburn & Co., that is to say:- (Here follows a list giving the marks, numbers, particulars and contents of 120 packages merchandise) which were delivered to the said Messrs. Maclean Thorburn & Co., on the said 6th day of April,. 1870, for the account of the s aid defendants, and which subsequently realised the sum of Tls. 7768.32, had not, in fact, been specially hypothecated to the defendants, and the said R. F. Thorburn thereupon requested defendants to deliver to him all goods of his firm not under lien to the defendants.

9. - It is also admitted and agreed that the proceeds of 8 bales of T-Cloths amounting to Tls. 1308.73, at present in the hands of Plaintiff as Trustee of the estate of R. F. Thorburn stand in the  same position as the proceeds of goods described above.

10. - On the 12th day of May 1870, the said William Hargreaves was adjudicated a bankrupt, under the provisions of the Bankruptcy Act 1869, by the Supreme Court for China and Japan, his act of bankruptcy being the non-payment and neglect to secure a compound for by the  said William Hargreaves of a sum exceeding L. 50, in respect of which he had been served in the prescribed manner with a Debtor's Summons under the 6th subsection of the 6th Section of the Bankruptcy Act 1869, and which summons was returnable on the 30th day of April 1870, and the said plaintiff has been duly appointed to be Trustee of the property of the said William Hargreaves.

11. - On the 6th day of September 1870, the said R. F. Thorburn filed a petition under the 125th section of the Bankruptcy Act 1869, for the liquidation by arrangement of his affairs; and the first meeting of his creditors was held on the 30th day of September 1870, at which a resolution for such liquidation was duly passed and afterwards duly registered, and the said plaintiff has been duly appointed to be Trustee of his property under the liquidation of his affairs by arrangement.

12. - The goods mentioned in the 8th and 9th paragraphs of this case were delivered to the said Messrs. Maclean Thorburn & Co., for and on behalf of the defendants, on the 6th day of April 1870, and were subsequently realized by the defendants as follows:-

   (Here follows a description of the goods, date of sale, and amounts realised - for the 120 cases particularized in section 8th, the aggregate result being as above stated Tls. 7,768.32.)

   The question for the opinion of the Court is:-

   Whether, under the circumstances above stated, the plaintiff, as Trustee, is entitled to recover from defendants the proceeds of the goods mentioned in the 8th and 9th paragraphs of this lease, or any and what part thereof.

   If the Court shall be of opinion that the plaintiff is entitled to recover them, judgment shall be entered up for the said plaintiff, for the amount of such proceeds as the Court shall determine, less the usual charges for storage, insurance, commission on  sale, &c., of the said goods.  And if the opinion of the Court shall be that the plaintiff is not entitled to recover them, judgment shall be entered up for the defendants, in respect of the said goods, and for the sum of Tls. 1,308.72 mentioned in the 9th paragraph of the case.

We agree to the above case.

(Signed)

WM. HARWOOD, Solicitor for the Plaintiff, A. ROBINSON, Solicitor for the Defendant.\

Shanghai, 27th January, 1871.

JUDGMENT.

   The plaintiff in this case is trustee of a bankrupt estate, and the defendants are creditors of the bankrupt who seek to set up a lien upon certain goods of the bankrupt which came into their hands, as shown by the case submitted by agreement of the parties, by a mistake. 

   The general doctrine in such cases is plain.  Lucas v. Dorrien (7 Taunton 202) is an express authority that chattels of a debtor which are by mistake or accident in the creditor's hands are not subject to lien, and this is in accordance with the views taken of the nature and principle of lien in many other cases.  The learned counsel for the defendants, however, relied upon a decision of Lord Ellenborough in a case Madden v. Kempster (1 Campbell 12) as proving that a creditor, who by innocent means happens to have property of a debtor in his hands, is entitled to claim a general lien upon it.  In that case the learned judge remarked,

"the plaintiff is entitled to recover this sum of money, the defendant having obtained it by misrepresentation.  He mentioned nothing of the acceptances; he obtained it as a balance, when no such balance was due to him.  He therefore cannot set up the lien, to which he might otherwise have been entitled."

I see nothing in these words to contravene the doctrine of Lucas v. Dorrien.  Lord Ellenborough does not say that misrepresentation was the only ground upon which a claim of lien was inadmissible - mistake might have been as good a ground.  The learned judge says "he might but for the misrepresentation" have been entitled, but not that he would in any case have been so. 

   The other main point of the learned counsel's argument rested on the terms of the agreement (or various agreements, for they are all in the same form) under which goods were from time to time hypothecated by the bankrupt to the defendants.  This agreement contains, after the power of sale, the following words:-

"further engages to pay to the said Bank the Balance if any remaining unsatisfied, and without benefit of discussion to grant such further documents as may be found necessary effectually to vest in said Bank said property documents and security for property or money to the effect of selling or transferring the same, and to keep up the value of said security as undermentioned to the amount of Taels (Shanghai currency) .... According to the market rate of the day, either by paying the difference of above stated sums in money to ... credit at the request of the manager for the time being of the Chartered Bank of India Australia's and China, or at his request to deposit goods equivalent in value to the market deterioration."

   It was contended that the defendants having by accident got certain goods of the bankrupt, not expressly hypothecated, into their possession, and having refused to restore them when requested, had virtually availed themselves of the above clause, and that they were entitled to do so.  In my opinioon, however, the case which has arisen was one never contemplated by this clause, which was directed solely to the event of the deterioration in market value of the goods hypothecated, nor do I think that equity will give to this elaborate and rather stringent stipulation an extension beyond what the words properly bear.  It might have been reasonable enough for the defendants to call upon the bankrupt to replace the missing securities, but I do not think that this stipulation gives them any better position than they would have had without it.

   I come to the conclusion, therefore, that there is nothing in the case to take it our of the principle acted upon in Lucas v. Dorrien, and that the goods having come into the possession of the Bank through a mistake, shared by both parties, no general lien thereon can be claimed.

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