A shipbuilder entered into five contracts with an engineer whereby the latter agreed to supply and fit up engines, boilers, and other fittings in certain vessels which were being built or repaired by the former. In three of the contracts there were stipulations for payment by instalments at certain stages of the work, but in the others there was no such stipulation, and, in point of fact, the precise stipulations for payment by instalments were never conformed with, but in all the five contracts payments to account were made from time to time as the engineer required them, if the shipbuilder considered that sufficient work had been done to warrant such payment. Of the same date with the latest of the five contracts, the parties agreed, by a letter granted by the engineer and accepted by the shipbuilder, that with regard to all their contracts made or to be made, ‘on payment being made to account of any such contract, the portion of the subject thereof so far as constructed, and all materials laid down for constructing the same, shall become the absolute property’ of the shipbuilder, subject only to lien for payment of the price or any balance thereof remaining due. The engineer was in labouring circumstances at the date of the letter and this was known to the shipbuilder. He became bankrupt six months after its date, and his trustee claimed the unfinished engines, machinery, and materials lying in his yard at the date of sequestration, which constituted almost the whole of the assets in his possession. Held, in an action by the shipbuilder for declarator that he was proprietor of the engines, machinery, and materials in the engineers’ yard, intended for the contracts ( aff. judgment of Second Division) (1) that the articles in dispute, though intended for use in the contracts, were not in fact appropriated thereto, nor had they been accepted by the shipbuilder as in implement of the contract, and therefore not only had the property of them not passed to the shipbuilder by sale followed by a constructive delivery, but they had not even been the subjects of a personal contract of sale such as would be sufficient to pass the risk; (2) that the meaning of the letter of agreement (even assuming that it was not a fraudulent preference, and capable of receiving legal effect) was to give the shipowner the property of all materials brought to the engineers’ yard for use in the contracts, and it could therefore receive no effect, because by the law of Scotland property does not pass by a sale retente possessione, and separatim, that even if it were regarded as a security, it was invalid as being a latent security over goods which remained in the bankrupt’s possession. Held, therefore, that the trustee was entitled to the articles in dispute.
Judges:
Lord Halsbury, Lord Blackburn, Lord Watson, Lord Bramwell, and Lord Fitzgerald
Citations:
[1886] UKHL 495, 23 SLR 495
Links:
Jurisdiction:
Scotland
Contract
Updated: 03 July 2022; Ref: scu.637731