Scottish Court of Session Decisions

Alexander Paton, manufacturer, Dairy, in return for an advance assigned a certain policy of insurance to the extent of one-half to Henry Shaw Macpherson, and to the extent of one-fourth to William Alexander Smith. In terms of a verbal arrangement between the parties the premiums were paid by Macpherson to the insurance company, and Paton and Smith on each occasion either provided him beforehand with their respective proportions of the premium or thereafter repaid same to him.

Smith became bankrupt, and his estates were sequestrated in 1888, and John Gourlay was appointed trustee. Gourlay resolved to realise the one-fourth of the policy assigned to Smith before payment of next premium, which was payable on 1st December 1888. Both Paton and Macpherson were desirous of purchasing the share, and accordingly Gourlay wrote to them both on 6th December 1888. The letter to Paton was as follows—“Dear Sir,—As another premium is now due, I must bring the matter of the life policy to a close, and as Macpherson seems desirous to have it, and you also wish it, I have decided to intimate, as I now do, that I will receive sealed offers for my interest in said policy as trustee on Mr Smith's estate on or before Tuesday the 11th inst., at 12 o'clock noon, at which hour I will open the sealed offers and accept the highest offer if it is above £690, and payable in cash. Offerers may be present if they so desire.” The letter of the same date to Macpherson was mutatis mutandis in identical terms. Macpherson intimated to Gourlay on the 7th December that he had paid the whole premium due on 1st December 1888, and that the share thereof applicable to the share of the policy vested in him as trustee foresaid was £53, 3s. 4d., of which he requested payment.

On the 13th December Paton and Mr Macpherson junior, as representing his father, went to Gourlay's office, and the offers were opened. Prior to opening the offers Gourlay stated that in order to avoid any mistakes he would, before opening the offers, write down the conditions upon which he was selling the policy. He accordingly wrote down, signed, and showed to the pursuer and Mr Macpherson junior the following “conditions of sale”:—“2nd. The premium due 1st December to be paid the purchaser. 3rd. The highest offerer to be the purchaser.” It appeared that Paton offered £751, 11s. 7d., and Macpherson £763, 6s. 8d. The latter was accordingly declared to be the purchaser, and Gourlay wrote to him on the following day accepting the offer.

An assignation by Gourlay in favour of Macpherson was thereafter prepared, the price stated therein being the sum of £763, 6s. 8d. Macpherson in exchange granted a cheque for the sum of £704, 5s. 9d. only, being the sum contained in his offer less, inter alia, the sum of £53, 3s. 4d., being the proportion of the total premium paid by Macpherson effeiring to the share of the policy. He stated that his offer was made upon the footing of the proportion of the premium being held as part payment of the price offered. Gourlay refused to accept the cheque granted by Macpherson as a settlement of the transaction, and called upon him to pay the difference between the sum in the cheque and that in the offer. Macpherson, however, refused to do so, and he retained the assignation which was intimated to the Life Association.

In these circumstances Paton raised an action against Macpherson and Gourlay to reduce the said offer and acceptance, and the said assignation and intimation thereof, on the ground that he was truly the higher offerer, and that in terms of the conditions of sale he was the purchaser, and was entitled to the share of the policy. He averred that at various meetings previous to the sale Gourlay had informed Macpherson and the pursuer that the buyer of the share must pay the premium then due upon it, and that the offers must be made upon that footing. He stated that Macpherson refused to give lip the assignation, and maintained that he was entitled to the share of the policy at the price for which he granted the cheque. Gourlay had not taken action in the matter, and thus the present action had been rendered necessary.

The defender Macpherson denied that the defender Gourlay ever informed him that the purchaser of his interest in the said policy would have to pay the premium then due upon it, or that the offers were to be made on that footing. He intimated to Gourlay on 7th December that he had paid the whole premium due on 1st December, and that the share thereof applicable to the share of the policy vested in him as trustee was £53, 3s. 4d., of which he requested payment, and Gourlay admitted that he was responsible therefor. He explained that he paid the premium due on 1st December 1888 in terms of the agreement which had been acted on with reference to all the premiums since the parties had acquired the policy down to and including the premium due at 1st June 1888. The share of the premium due at 1st June 1888 applicable to the share of the said policy vested in the defender Gourlay, as trustee, was repaid to him by Gourlay. He further explained that the defender Gourlay had taken no action for the recovery of the sum of £53, 3s. 4d., alleged to be underpaid at settlement of the transaction. In the event of its being found that he was entitled thereto, or that the sale proceeded upon the footing that said sum fell to be paid by Macpherson in addition to the full purchase of £763, 6s. 8d., he was willing at once to make payment to Gourlay of the sum of £53, 3s. 4d. He averred that the pursuer had no interest in the arrangements for settlement entered into between Macpherson and Gourlay.

The defender Gourlay explained that he wrote the letter of 14th December to Macpherson accepting his offer on the footing of the conditions of sale, and in the belief

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that under Macpherson's offer the purchaser was to say the proportion of premium due on 1st December. If that had not been his belief, he would never have accepted the offes as it would have been much less than the amnount of the pursuer's offer for the share in the policy, and he would rather have held the policy till the six months covered by the premium had nearly expired… . on his understanding of the transaction the defender Macpherson's offer was the higher; but if Macpherson made his offer on a different basis there was really no contract between the parties, and he and Smith to'ore still the owners of the share in the policy. He did pot object to the conclusions of the summons for the reduction of the offer by the defender Macpherson acceptance thereof, assignation and intimation thereof, nor to the conclusion for declarator that the assignation was never validly delivered to Macpherson, but he declined to” deliver to the pursuer a valid assignation of said share in the policy on payment only of £751,11s. 7d., and maintained that the whole transaction was void on account of essential error.

The pursuer pleaded—“(2) The pursuer's offer having been truly higher than that of the defender Henry Shaw Macpherson, he was purchaser of Mr Gourlay's share of and interest in the said policy, and is entitled thereto

The defender Macpherson pleaded—“(1) No title and no interest to sue. (2) No relevant case.”

The defender Gourlay pleaded—“(1) In respect that the transaction of sale libelled is void on the ground of essential error, decree ought to be pronounced only in terms of the reductive conclusions of the summons. (2) In respect that the pursuer was not the highest Offerer for the share of the policy in question, he is not entitled to decree of declarator, and for delivery as libelled.”

On 6th July 1889 the Lord Ordinary ( M'Laren) allowed the parties a proof of their averments.

“ Opinion.—The conclusion I have come to upon this interesting case is, that I am not in a position to give a definite decision until there had been an inquiry into the averments to this effect, that any doubt regarding the conditions Of the sale was removed in consequence of Gourlay, the exposer, having made verbal explanations to both parties to the same effect as the three conditions which he wrote down on the day of the sale. If these conditions Were verbally explained to. both parties to fee included in the written offer, then it appears to me not to be material that Macpnerson was not personally present at the exposure, because he could not, at any time thereafter, represent these as new conditions, when they were nothing more than what had been previously understood and S'agreed to. I have a strong impression that, whatever may be the result of the inquiry, the equity of the case is in favour of the pursuer, because I think the defender is here in a dilemma. Either he never made a real offer for the property meeting the conditions of the sale, in which case the pursuer being the only offerer, would be entitled to be preferred, or, on the other hand, if the defender, Knowing the terms on which alone his offer could be received, put in an offer for the policy, which he interpreted as meaning the sum mentioned under deduction of the premium already paid, then that was an offer of a smaller sum than the pursuer offered, and in that view also the offer of the pursuer was preferable. In the first alternatif of the dilemma the pursuer succeeds because he is the only offerer; in the second alternative, the pursuer succeeds because he is the higher offerer of the two. Still it is a thing of questionable advantage, the giving of a legal decision which may be the subject of review on alternative views of the facts. I rather think that, in the ordinary course of judicial procedure, it is the function of the Judge to ascertain the facts, and to give a decision based if possible upon the evidence in fact. There is no great object to be gained in this case by avoiding a proof, as it will be of the simplest kind, and need not involve an expensive preparatory inquiry. While I am not quite clear that the case might not be disposed of without a proof, my feeling is that I ought not to do so, as I think that, according to the practice founded on decisions of the Inner House in all cases of doubt as to the course of procedure, a preference is given to making the first order one of inquiry into the facts. That order will unavoidably delay this case a little, because the proof cannot take place until October.”

The defender Macpherson reclaimed.

In the Inner House the discussion was confined to the question of relevancy.

Argued for the reclaimer—The pursuer's averments were irrelevant. The reclaimer stood on the “conditions of sale” which regulated; the contract between him and the trustee; he disputed all verbal communings which could not control the agreement. Any misunderstanding between him and the trustee arising after the contract was completed fell to be settled between them, and was not a matter in which the pursuer had any interest. The reclaimer was, in any way in which the transaction might be viewed, the higher offerer, for if the defender was not bound to pay the premium on this policy, neither was the pursuer. No dispute between the defender and the trustee, even if it terminated the agreement, could rear up any contract between him and the pursuer, or give any ground for an action between the pursuer and defender— Shiellv. Guthrie's Trustees, June 26, 1874, 1 R. 1083.

Argued for the respondent—What was offered for sale was the policy with the burden of the premium for the year. If the defender was to be allowed to deduct the amount which he claimed from the sum Which he promised to pay, the effect would be to make his offer considerably below that the pursuer. The question between the parties was, what were the true conditions of sale? This could only be cleared up by proof, after which the question would still remain, which was the higher offer. The

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pursuer had a substantial interest in the present question, as if the contract between the trustee and the defender terminated his offer still subsisted, and he would be entitled to the policy— Anderson v. Wilson, November 13, 1856, 19 D. 39; The Scottish Amicable Association v. The Northern Assurance Company, December 11, 1883, 11 R. 287.

At advising—