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Scottish Court of Session Decisions

You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> International Banking Corp v Ferguson Shaw [1909] ScotCS CSIH_6 (03 December 1909)
Cite as: [1909] ScotCS CSIH_6, 1909 2 SLT 377, 1910 SC 182

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03 December 1909

International Banking Corporation
Ferguson, Shaw, & Sons.

Lord Low.—It is not disputed that the oil to which this action relates, so long as it existed in forma specifica, remained the property of the pursuers, and that if they had found it in the possession of the defenders they could have demanded restitution. On the other hand, it is conceded that if the defenders had, in good faith, sold the oil, the pursuers could not have claimed from them the value thereof, but only the profit which they made by the sale.

What actually occurred was that the defenders by mixing the oil with some other substance or substances produced an article known as “lard compound,” which they sold. In so doing, it is admitted that the defenders acted in good faith and in ignorance of any defect in their title to the oil. The Sheriff-substitute has held that the pursuers are entitled to the profit which the defenders made upon the sale of the lard compound, but to nothing more, while the Sheriff has found that the pursuers are entitled to the value of the oil.

The defenders have appealed against the judgment of the Sheriff, and their argument was to the following effect. The reason why a person in the bona fide possession of the goods of another is bound to restore them to that other is that the possessor has power to dispose of the goods, and is bound to exercise that power for the purpose of restoring them. If, therefore, the possessor, in good faith, exercises his power as possessor in such a way that it is no longer possible for him to restore the goods to the true owner, the latter has no claim for the value, but only for any profits which the possessor may have made. It is admitted that that would be the result if the possessor, in good faith, sold or otherwise transferred the article in forma specifica to a third party, and it makes no difference if the impossibility of restoring arises from the way in which the possessor has, in good faith, dealt with the goods while still in his possession. The right of the true owner (apart from the question of profits, which depends on a different principle), is limited to a demand for restitution of the goods themselves, and if the person against whom the demand is made has, in the bona fide exercise of his right as possessor, put it out of his power to restore the goods, the owner has no claim against him.

It seems to me that the fallacy of that argument is that it disregards the vital distinction which there is between the sale or transfer of goods in forma specifica, and the dealing with goods in such a way that they no longer exist as separate or separable goods of a particular kind. In the former case it is only the possession of the goods which is changed; the property still remaining in the true owner, and he being entitled to follow the goods and demand restitution into whosesoever hands they may come. In the latter case, on the other hand, there is a change in the property of the goods, which may become in their new form either wholly the property of the possessor, or the joint property of him and the true owner. In this case I think that the lard compound, of which the pursuers' oil was one of the ingredients, became wholly the property of the defenders, and if that be the case, the pursuers' right is to demand payment of the value of the oil. My reason for saying that the lard became wholly the property of the defenders is that after it was compounded it was plainly impossible again to separate the oil from the other substances of which it was composed. Erskine states the law applicable to such a case thus—“When by the mixing together of two or more substances of different kinds, belonging to different proprietors, a new species is formed, which cannot be brought back again to the first condition of these substances, the mixer, whether he be one of the proprietors or a third party, must, as the maker of the new species, become the sole proprietor of the subjects mixed.”

In like manner Mr Bell in his Principles says—“Specification is the forming of a new species from materials belonging to another; a change being produced on the substance … The rules are, that if the materials as a separate existence be destroyed in bona fide, the property is with the workman, the owner of the materials having a personal claim for a like quantity and quality, or for the price of the materials.” In the same paragraph, when treating of “Confusion of Liquids and Commixtion of Solids,” Mr Bell says:—“If the union be of substances different, so as to create a tertium quid, the property is (according to the rule in specification) with the owner of the materials, or with the manufacturer, according to the possibility or impossibility of restoring the original substances.”

I am accordingly of opinion that the Sheriff was right in holding that the pursuers are entitled to claim from the defenders the value of the oil. That view appears to me to be in accordance with principles in regard to which all the institutional writers from Stair to Bell are agreed. Unfortunately, there is singularly little judicial authority on this question, the only case cited to us, in which the circumstances were at all analogous to the present, being that of Oliver & Boyd, in which Lord Stormonth-Darling's judgment in the Outer-House (which was acquiesced in) was in accordance with the opinion which I have formed. We were also referred to various English decisions, but although these decisions do seem to me to favour the pursuers' contention, the English law on the subject appears to differ in material respects from that of Scotland, and therefore I am not sure how far it would be safe to rely upon the English authorities.

For these reasons I am of opinion that the interlocutor of the Sheriff should be affirmed.

Lord Ardwall.—I agree with the opinion which has just been delivered by my brother Lord Low. I concur with him in thinking that the present case must be decided in accordance with the well-established doctrine of specification. It is admitted by both parties that when the oil referred to on record came into the hands of the defenders it was the property of the pursuers, and remained so up to the time that it was mixed by the defenders with other substances, and thereby converted into a totally new substance commonly known as “lard compound.” Having been so converted, the oil ceased to exist, and, consequently, the pursuers' right to restitution thereof ceased also. But the right remained to them, under the doctrine of specification, to recover the value of the goods belonging to them which were used by the defenders in forming this new substance. That value is admitted to be £156, 3s. 2d., and for this sum the pursuers are entitled to decree. In this view of the case it is unnecessary for me to go into any discussion of the interesting questions which are dealt with in the notes of the Sheriff-substitute and the Sheriff.

With regard to the ground of the Sheriff's judgment as explained in his note, I wish to make it clear that, so far as I am concerned, I am not disposed to concur in the view that the ground of the defenders' liability in this case is that the pursuers have been deprived of their right to vindicate their property by the action of the defenders however innocent, and that, therefore, as in a question with the pursuers, the defenders should bear the loss; nor do I desire to express any opinion with regard to the judgment of Lord Stormonth-Darling in the case of Oliver & Boyd v. Marr Type-founding Company, the circumstances of which were very special.

I further wish to say that I do not consider that the English decisions which have been referred to by the Sheriffs and by counsel for the parties can be relied on as safe guides in a case which must be decided according to Scots law. These decisions all proceeded upon the doctrine, or perhaps I should rather say the form of action, formerly known as “trover,” and now as “conversion,” a doctrine and process peculiar to the law of England, and which, so far as I understand it, is in some applications of it at variance with the principles of Scots law.

Subject to these remarks, I am of opinion that the interlocutor of the Sheriff ought to be adhered to.

Lord Justice-Clerk.—In this case the defenders, when in possession of the oil in question, were so without a title. The pursuers, without doubt, could have vindicated their proprietary right and enforced delivery, unless the defenders could shew that they had in honest course of dealing parted with the goods to another. For if the goods were not in possession of the defenders, the only right of the true owner being to get delivery of the goods, he could not make it good.

Here the case is peculiar, for the oil which belonged to the pursuers was used by the defenders to make what is called a “lard compound.” This created a new species, and in such form that separation was no longer possible. In these circumstances the question is whether the law of specificatio applies.

I agree with your Lordships that it does.

It is unfortunate that in the conduct of the case the pursuers, down to a late period, placed their case on their right to get delivery of the oil. Accordingly.

the pleas they state do not set forth specificatio as a ground of claim, and it appears that this ground was not brought forward in the case as conducted before the Sheriff-substitute. But I have come to the conclusion that the case may be disposed of as one of specificatio. My brother Lord Dundas, whose opinion I am about to read, deals with this matter fully, and I content myself with expressing my concurrence with his opinion on that matter.

Lord Dundas (whose opinion in his absence was read by the Lord Justice-Clerk).—This is an interesting and a rather peculiar case, and we had a very good argument upon it. Two points seem to be clear, and, indeed, were treated as matters of common ground by parties' counsel at the discussion. On the one hand, it was conceded that if at the time when the pursuers claimed delivery the defenders had had in their possesion the subjects claimed, viz., certain barrels of oil, the defenders could have made no good answer to the demand. On the other hand, it was conceded that if before any claim for delivery the defenders had in bona fide sold and parted with the barrels, the pursuers' demand must have failed, though, in that event, they would have been entitled to exact from the defenders any profit which the latter had made upon their sale. But the peculiarity of this case is that neither of these situations has in fact arisen; because the defenders, prior to any demand upon them by the pursuers, used the oil in the course of their business, and acting in perfect good faith, for the manufacture of lard compound (which I understand to be a composition of oil and other material of the nature of suet), and sold and delivered this compound to third parties. In this state of matters it seems to me that the case is a pure type for the application of the Roman doctrine of specificatio. The oil at the date of the pursuers' claim no longer existed in its original and proper form; a new species had been created, of which the oil was an ingredient, but of which the component parts could not after the creation be again resolved into their original elements. The doctrine of specificatio is undoubtedly part of the law of Scotland. It is so recognised by all our institutional writers. The result accordingly in this case is, in my opinion, that the defenders became the sole proprietors of the lard compound, and that the pursuers have a good claim against them for the value of the oil.

But the defenders' counsel made a serious attack upon the state of the pursuers' pleadings, which I think deserves consideration. It seems clear enough that when the action was raised the pursuers' advisers had not apprehended the true strength of their position in law. The principal conclusion of their petition was for delivery of the oil. The whole theory of their averments and pleas in law was that the pursuers were still the true owners of the subjects they sought to recover; and this theory appears to have continued as the basis of their case until after the parties had adjusted a joint minute of admissions upon which they renounced further probation, and had debated the cause before the Sheriff-substitute. The defenders upon record (ans. 8) “explained that restoration is impossible, the defenders having used the same” (i.e., the oil) “in the manufacture of lard compound, which has since been sold.” To this the pursuers made (cond. 8) a cautious counter-statement, not admitting that the oil had been used as stated, and averring that, in any event, it was not received and used by the defenders in bona fide, but they knew, or should have known, that they were not entitled to receive and use the oil. No one of the pursuers' pleas in law raises the argument based upon the doctrine of specificatio. It seems to have been only when the case came before the learned Sheriff that the pursuers' position was maintained upon more dexterous lines. But the petition does contain a crave, as alternative to that for specific delivery, for payment of a sum restricted to £156, 3s. 2d., which is explained (cond. 7) to be the value of the oil at the date when the defenders received it; and one finds in the joint minute an admission that the total value of the oil at the said date was represented by the figure above mentioned. I do not think that the defenders' counsel made out that their case has been materially prejudiced by the pursuers' resourceful though tardy development of their legal argument; and it seems to me that we may safely give decree for the sum sued for under the alternative conclusion of the petition (as restricted) as the admitted value of the oil. I am therefore of opinion that the interlocutor of the learned Sheriff should be affirmed.

[1910] SC 182

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