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In Re: Bombay Saw Mills Company Limited and Co.'s (11.02.1889 - BOMHC) - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMumbai
Decided On
Judge
Reported in(1889)ILR13Bom314
AppellantIn Re: Bombay Saw Mills Company Limited and Co.'s
Excerpt:
principal and agent - joint stock company--'secretaries and treasurers'--advances and disbursements to, and on behalf of the company--lien on company's property--contract act ix of 1872, sections 171, 217, 222. - - the firm now says it is in possession of the whole of the property of the company, and claims, under sections 217 and 221 of the contract act, to be entitled to retain all monies, goods, papers and other property, whether moveable or immoveable, received by his firm, until the amount due to them has been satisfied. , who are the unsuccessful litigants, should pay costs, but only one set of costs. but the creditors really were the resisting party and most essential to the matter, and they must have their costs, one set, against the unsuccessful claimants......in the trade in which the lien is claimed. liens are of two kinds: general and particular. a general lien is the right to retain the property for a general balance of accounts. a particular lien is a right to retain property for a charge on account of labour employed or expenses bestowed upon the identical property detained. (smith's mercantile law, chapter on lien.) whilst particular liens are favoured, general liens are regarded with jealousy by the law, because they encroach upon the common law, and destroy the equal distribution of the debtor's estate among his creditors--rushforth v. hadfield 7 east 224.4. in the first place the lien claimed in this case is a general, not a particular lien. it does not arise out of the identical property retained. the advances were made, not.....
Judgment:

Scott, J.

1. The claim of Messrs. Ewart, Latham & Co. is set out in the affidavit of Mr. Greaves, partner in the firm, dated the 17th January last, and raises a question of considerable commercial importance. He says that his firm was, at the time of the liquidation of the company and for several years previously, agents of the company, and in possession, as agents, of goods, papers, and other property of the company, both moveable and immoveable; that as agents they have made advances and disbursements, and incurred expenses on behalf of the company in conducting the business, or for the purposes of the business. In a previous affidavit (August 27), he states that in excess of the money they have advanced, they (the agents) gave their personal guarantee, as such, in order to enable the concern to borrow money which was urgently required for the purpose of the company. All the advances made by the firm, and all the guarantees given by the firm, he says, were made with the sanction of the directors of the company. The firm now says it is in possession of the whole of the property of the company, and claims, under Sections 217 and 221 of the Contract Act, to be entitled to retain all monies, goods, papers and other property, whether moveable or immoveable, received by his firm, until the amount due to them has been satisfied.

2. The question for my consideration may be put in the words

of Lord Hardwicke in the leading case of Khuger v. Wilcox Amb. 252 at p. 253: 'This is a case of bankruptcy, in which this Court always inclines to equality: yet if any person has a specific lien, or a special property in goods, which is clear and plain, it shall be reserved to him notwithstanding the bankruptcy. 'The question is twofold: (a) Have Messrs. Ewart, Latham & Co. the requisite possesion of the property? and (b) have they the right to retain it?

3. Before I deal with the question of the alleged possession, I will consider their right to a lien on the assumption that they are in possession as they allege. For the sake of clearness, I must state the ordinary rules as regards this right of retainer or lion. A lien can only arise in one of three ways: (1) by common law; (12) by express or implied contract; and (3) by the general course of dealing in the trade in which the lien is claimed. Liens are of two kinds: general and particular. A general lien is the right to retain the property for a general balance of accounts. A particular lien is a right to retain property for a charge on account of labour employed or expenses bestowed upon the identical property detained. (Smith's Mercantile Law, Chapter on Lien.) Whilst particular liens are favoured, general liens are regarded with jealousy by the law, because they encroach upon the common law, and destroy the equal distribution of the debtor's estate among his creditors--Rushforth v. Hadfield 7 East 224.

4. In the first place the lien claimed in this case is a general, not a particular lien. It does not arise out of the identical property retained. The advances were made, not to the specific use of the mill, or the machinery, or the books or the papers detained, but they were made, as Mr. Greaves says 'on behalf of the company for the general purposes of the business.' The firm, as agents of this company, did what is often done by agents of companies in Bombay. They furnished the current capital. They financed business. Without their aid the company would have probably closed its doors for want of funds. Messrs. Ewart, Latham & Co., claim, then, a general lien for the amount of their debt. Is such a lien created by implication of law in the relations of principal and agent? According to English law, the answer must be in the negative. The right of general lien does not exist by the common law. It must arise out of general usage, ox by agreement. The onus of proving it lies upon him who claims it--Rushforth v. Hadfield 7 East. 224; Holderness v. Collinson 2 DeG. F. & J. 443. Lord Chancellor Campbell in Bock v. Garrison 7 B. &C.; 212 says: 'I do not think that a general lien can be claimed according to any general law of principal and agent. The law of England does not favour general liens, and I apprehend that a general lien can only be claimed as arising from dealings in a particular trade or line of business, such as wharfingers, factors and bankers, in which the custom of a general lien has been judicially proved and acknowledged, or upon express evidence being given that, according to the established custom in some other trade or line of business, a general lien is claimed and allowed.' There are exceptions as in the case of factors and bankers, and I might instance the usage which obtained as regards consignees or managers of West Indian estates, who were given a general lien on the estate, in respect of the balance due to them for the costs of management because the estate would become valueless if it was not maintained in cultivation, But Lord Westbury in the last of the cases on the point expressly says in his judgment In re Leith's Estate L.R. 1 P.C. 305 : 'The right of the consignee, as it is supposed to be established by decisions, giving him a lien on the plantation in respect of the balance due to him, is an exception to the general rule which applies to principal and agent.'

5. Foxcraft v. Wood 4 Russ. 487 was relied upon. But that case was expressly decided on the principle 'that a factor, who became surety for his principal, had a lien on the prices of the goods sold by him as such factor, to the amount of the sum for which he was surety.' In the present case the claimants are not factors. A factor is an agent employed to sell goods or merchandise consigned or delivered to him by his principal; he is entrusted with the possession, management, control and disposal of the goods and may buy and sell in his own name (Wharton's Law Lexicon). The claimants do not come within this definition of Law. No general lien then exists by implication. In the present case no usage was set up, still less proved. It is also admitted that no special agreement was made as regards the advances. In fact, Messrs. T Ewart, Latham & Co. wholly rely on Sections 217 and 221 of the Contract Act, which, if they give a lien in this case, differ from the general English law.

6. The first of these sections runs as follows: Section 217.--'An agent may retain, out of any sums received on account of the principal in the business of the agency, all monies due to himself in respect of advances made or expenses properly incurred by him in conducting such business, and also such remuneration as may be payable to him for acting as agent.' This section merely declares the English law. Adding the words concerning remuneration to the following passage from Story on Agency (pl. 350) the two statements of the rights of an agent would be almost identical: 'An agent may insist upon deducting all his advances, expenses, disbursements, and losses, arising in the course of his agency from the pecuniary funds in his hands belonging to his principal.' But in the present case it does not appear that at the time of the liquidation there were any monies of the company in the hands of the agent: monies received subsequent to the liquidation belong to the liquidation. So that the Section 217 does not apply to the circumstances of the case.

7. Section 221 runs as follows: 'In the absence of any contract to the contrary, an agent is entitled to retain goods, papers, and other property, whether moveable or immoveable, of the principal received by him (the agent), until the amount due to himself for commission, disbursements and services in respect of the same, has been paid or accounted for to him.' This section also has its parallel in the English law. Story on Agency (pl. 373) says: 'In cases of agency there generally exists a particular right of lien in the agent for all his commissions, expenditures, advances, and services in and about the property or thing entrusted to his agency.' With Section 221 must be read Section 171 of the Contract Act, which limits the right to a general lien,--that is to say, the right of parties to retain all goods in their possession as a security for a general balance of account, to 'bankers, factors, wharfingers, attorneys, and policy-brokers,' and the section further declares that 'no other person has such a right unless there is a special contract.'

8. Both English and Indian law, therefore, confine the lien claimable in this case to commission, disbursements, and services in respect of certain specific property or things. I have already said the advances now claimed cannot be held to be disbursements or services in respect of either the goods or the papers or the mill of the company. They were 'loans made on behalf of this company,' and for the purposes of the whole concern, not specially assigned to the mill or other property. There is, therefore, no lien. In the absence of any special agreement the claimants can only rank as ordinary creditors for these advances, and & fortiori for money paid on the guarantees given.

9. In this view of the case, I need not consider the question of possession, which would be difficult to decide without oral evidence, as the affidavits {e.g. the last of Mr. Ryrie) throw a doubt on its continuous character. The claim of lien must be dismissed.

10. As regards the costs, I think Messrs. Ewart, Latham & Co., who are the unsuccessful litigants, should pay costs, but only one set of costs. If the liquidators had attended the hearing and actively resisted the claim, I would have thrown their costs on the claimants, and would have left the creditors to have borne the expense of all unnecessary appearance. But the creditors really were the resisting party and most essential to the matter, and they must have their costs, one set, against the unsuccessful claimants. The liquidators' costs arising out of this motion must come out of the estate.


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