On 1st April 1892, Page and Company, merchants in Liverpool, obtained an advance of pounds 5000 from a bank in Liverpool upon the security by way of pledge of a cargo of phosphate rock, then afloat, and handed the bill of lading to the bank. It was agreed that the bank should have immediate and absolute power of sale over the cargo, and under this power the bank authorised Page and Company to enter into contracts for sale of the phosphate rock on their behalf. pounds 3826 of the loan was paid off.
On 12th April the bank, in consideration of Page and Company undertaking to sell the cargo on their behalf, returned the bill of lading to Page and Company ‘as trustees,’ requesting them to obtain delivery of the merchandise, and sell it on account of the bank, and pay the proceeds towards retirement of the advance.
Some months previously Page and Company had sold a similar quantity of phosphate rock through their agents, Poynter, Son, and Macdonalds, to Cross and Sons, merchants in Glasgow, and when they received the bill of lading they forwarded it to Poynter, Son, and Macdonalds, to hand to Cross and Sons in implement of their contract with them. This was done, and Cross and Sons took delivery of the cargo, and in part payment of the price sent a cheque for pounds 1900 to Page and Company, who paid it to the bank to the credit, not of the advance of pounds 5000, but of another advance which they had received from the bank, the bankers not being aware at the time that this cheque was part of the price of the cargo of phosphate. Thereafter, Poynter, Son, and Macdonalds, who were creditors of Page and Company for pounds 2011, arrested the balance of the price (pounds 1039, 7s. 6d.) in the hands of Cross and Sons. The bank also claimed this balance, and Cross and Sons raised an action of multiple-poinding to have these competing claims determined.
Held (rev. the decision of the Second Division) (1) that the bank had not lost their real security over the merchandise by returning the bill of lading to Page and Company, but that Page and Company sold as their agents and on their behalf; (2) that the bank were not bound to attribute the cheque for pounds 1900 to account of the advance of pounds 5000; (3) that in this action Poynter, Son, and Macdonalds were not entitled to claim the amount of their commission and charges in connection with the sale; and therefore (4) that the bank must be preferred to the whole fund in medio.
Judges:
Lord Chancellor (Herschell) and Lords Watson and Macnaghten
Citations:
[1894] UKHL 245, 32 SLR 245
Links:
Jurisdiction:
Scotland
Banking, Contract
Updated: 27 April 2022; Ref: scu.634090