payable on said policy of insurance; and (c) £13, 10s., the price of a safe supplied by pursuers to M'Gillivray.

"(1) M'Gillivray's headquarters remained throughout at Colchester, and the whole business was worked from there as centre, although after 1904 a proportion of the goods were sent by pursuers direct to Ipswich and Sudbury. After 1904 he extended the area of his business, and employed more canvassers or travellers, and for convenience he had depots at Ipswich and Sudbury. On the construction of the guarantee I do not see any ground for limiting its scope, as proposed by defender, or I should rather say by defender's counsel, for defender in his evidence did not take this point. The object of the guarantee was to enable M'Gillivray to start business. The goods supplied by pursuers continued to be invoiced to Colchester, and the extent of the district round which they were sold was no concern either of pursuers or defender.

"(2) In July 1907 M'Gillivray_instructed Mr Cairns, an accountant in London, to sell his book debts, and he authorised Cairns to pay the proceeds to pursuers. Defender contends that those proceeds must be attributed pro rata towards extinguishing any liability resting on him under the guarantee, which would wipe out the defender's alleged indebtedness to pursuers. He contends that the case must be treated as if M'Gillivray had been sequestrated, and he founded on the following admissions in Mr Olley's cross-examination-(Q) Can you suggest any greater advantage that you would have had on realising the business, or any more control you would have had over it, had a receiver in bankruptcy been appointed, than you did have in point of fact through Mr Cairns?-(A) I don't think the debts would have fetched nearly so much in bankruptcy. (Q) Can you suggest any more control you would have had over the estate had there been a receiver than you did have in the actual event which did occur? (A) We should have had no more control certainly.' I reject this contention, first, because M'Gillivray never was sequestrated, and for aught that appears, may, since his disappearance, have made a fortune, and, second, because I construe defender's obligation as a guarantee of the whole debt, with a limitation on his liability. On both grounds the following cases, which were cited, do not apply-Ellis v. Emmanuel, 1876, 1 Ex. Div. 157; Harvie's Trustee v. Bank of Scotland, 1885, 12 R. 1141; and Veitch v. National Bank of Scotland, 1907 S.C. 554 (Trust-Deed for Creditors).

"(3) Defender next maintained that in a question with him, M'Gillivray's estate must be treated as if it included the surrender value of a policy of insurance on M'Gillivray's life, which he handed to pursuers in security of his indebtedness about 5th March 1907, but which he never formally assigned to them. . . [This was admitted in the Inner House].

...

"(4) Defender proposes to deduct from the amount of M'Gillivray's indebtedness to pursuers as in a question with him, the guarantor, (a) the interest at 5 per cent. charged against M'Gillivray on amounts not paid within the usual term of credit, namely, six months. The charge in question, amounting to £149, 13s. 11d., is proved to have been made in accordance with custom of trade, to have been agreed upon between M'Gillivray and pursuers, and, when regularly debited by pursuers in the statements periodically sent to M'Gillivray, to have been allowed by M'Gillivray. On the one hand, he was debited with this interest, and on the other hand, he was credited with a bonus, which pursuers' firm allow when a customer's annual purchases amount to over a certain sum. In these circumstances it seems to me a proper charge not only against M'Gillivray, but also as on a question with the defender, M'Gillivray's guarantor. Defender also proposes to deduct (b) the premiums payable on the policy of insurance. If the defender were to get the benefit of the policy of insurance, he could not fairly object to this charge, so far as payment of premium is concerned, up to the date when, if an assignment had been duly got, the surrender value would have been obtained. The last deduction proposed by defender is (c) the sum of £13, 10s., being the price of a safe sold by pursuers to M'Gillivray on 14th March 1907. I think this item cannot enter into the accounting between pursuers and M'Gillivray, for the balance on which, up to £200, the defender is liable. That accounting has to do with goods supplied to M'Gillivray in the way of trade. Such an article as a safe cannot have been in contemplation of parties at the date of the guarantee, any more than office fittings, or any other articles necessary for carrying on any trade, as distinguished from special articles necessary for the particular trade." The pursuers reclaimed.

[The defender having died on 26th August 1910 his trustees were on 14th March 1911 sisted as defenders and respondents.]

Counsel for the reclaimers having opened the case and read the evidence the Court called on counsel for the respondents.

Argued for respondents-(1) The pursuers must prove the debt apart from the admission of the principal debtor - De Colyar's Guarantees (3rd ed.), 207; ex parte Young, (1881) L.R., 17 C.D. 668. This the pursuers had failed to do. (2) The pursuers' actings had discharged the cautioner, for a creditor was not entitled after having taken the management and realisation of his debtor's estate into his own hands to call on the cautioner under the guaranteeStory's Equity Jurisprudence, 325; Polak v. Everett, (1876) L. R., 1 Q.B.D. 669; Ward v. National Bank of New Zealand, (1883) L.R., 8 A.C. 755, at pp. 765-6; Brown & Company v. Brown, (1876) 35 L.T., 4 S. 54: Murray v. Lee, July 5, 1882, 9 R. 1040, 19 S.L.R. 778. (3) Esto, however, that the defender was liable under his guarantee, he was not liable for the whole sum guaranteed.

& Co. v.

22, 1911

This was not a guarantee for the whole debt with a limitation of the cautioner's liability to £200, but a guarantee of part of the debt only-Hobson v. Bass, (1871) L.R., 6 Ch. App. 792. Where the meaning of a guarantee was doubtful it should be construed in favour of the cautioner-Ellis v. Emmanuel, (1876) L.R., 1 Ex. Div. 157; Baird v. Corbett, November 21, 1835, 14 S. 41. So construing it the defender was entitled to a pro rata share of the assets realised by the pursuers. The evidence showed that the pursuers had disposed at their own hand of all the debtor's effects at a time when they knew him to be insolvent. That being so they were bound to give the cautioner the equities he would have got on insolvency, for they were in the position of trustees for the whole body of creditors-Bell's Com., ii, 226; Crawford v. Black, December 2, 1829, 8 S. 158; Šligo v. Menzies, July 18, 1840, 2 D. 1478; Hamil ton v. Watson, March 11, 1845, 4 Bell's App. 67, at p. 103; Harvie's Trustees v. Bank of Scotland, June 19, 1885, 12 R. 1141, 22 S.L.R. 758; Veitch v. National Bank of Scotland, 1907 S.C. 554, 44 S.L.R. 394; Smart & Company v. Stewart, March 10, 1911, 48 S.L.R. 595; Ellis (cit. sup.); in re Sass, [1896] 2 Q.B. 12; ex parte Rushforth, (1805) 10 Vesey 409; Watts v. Shuttleworth, (1860) 29 L.J. Ex. 229. (4) The pursuers had failed to perfect the security given them, viz., the policy of insurance, and that being so it ought to be credited to the assets available. [Counsel for the reclaimers admitted the defender's right to a pro rata share of the surrender value of the policy.]

Argued for reclaimers-[The Court having called for a reply as to the construction of the guarantee and the equities claimed](1) The guarantee was one of the whole debt limited to £200, and not a guarantee of part of the debt. That being so, the creditor was entitled to full payment of his debt before the cautioner could receive any share of the debtor's assets. (2) The pursuers were not entitled to the equities claimed, for there was no bankruptcy. Neither was there insolvency or even a trust deed for creditors. Even assuming the debtor was insolvent, the pursuers were entitled in law to act as they did, for a creditor was entitled to do diligence for his debt. The evidence showed that the pursuers had not taken the management of the debtor's estates or realised them at their own hand.

At advising

LORD MACKENZIE This is an action upon a guarantee at the instance of F. W. Harmer & Company, wholesale clothiers, Norwich, against James Gibb, designed as residing at 14 Traquair Park, Corstorphine. The defender died during the course of the proceedings, and his trustees have been sisted as parties.

The guarantee is dated 26th October 1895, and was for the benefit of the defender's nephew John M'Gillivray, a draper in Colchester. Its terms are as follows [quoted supra). The pursuers thereafter supplied M'Gillivray with goods to the value of

several thousand pounds.

On 13th Feb

ruary 1907 the defender intimated to the pursuers his decision to withdraw the security. Letters then passed between the pursuers and the defender, the result of which was that the defender agreed to continue the guarantee.

The Lord Ordinary has dismissed the action, on the ground that the letters which passed at this time gave the defender a right to have no material change made in the existing relations between the pursuers and M'Gillivray, with regard to M'Gillivray's business, until another balance-sheet was made up, without communicating the proposed change to the defender. The first question is whether the correspondence contains any such undertaking on the part of the pursuers. The Lord Ordinary's view was that such an undertaking was necessarily implied in the contract for the continuance of the defender's guarantee. I am unable so to construe the letters. The reply of the pursuers to the defender's letter of 13th February was dated the 22nd. In it they inform the defender that they had discussed the matter with M'Gillivray, that his payments to them were considerably behind hand, and that at their suggestion he had consulted a chartered accountant in Norwich in order that he might have a proper balance-sheet got out. They added that they had seen the books and the balancesheet, and were quite satisfied that Mr M'Gillivray was in a substantial position at that time. The letter ended as follows

"Should you, after this letter, decide to call in your guarantee, we shall have no alternative but to ask you to send us a cheque for £200 to pay part of the overdue account, but if on consideration you should decide to continue the guarantee until the next balance-sheet is got out we are of opinion that Mr M'Gillivray ought to have by that time very much improved his position." The defender wrote on the 25th he was pleased to know that the pursuers were under the impression that Mr M'Gillivray's affairs were in a good condition, and said "In the circumstances I shall wait until the next balance-sheet is made up." On 1st March the pursuers wrote to the defender that they were glad to know he had decided to continue his guarantee of £200 to Mr M'Gillivray until further notice.

The effect of these letters, as it appears to me, was that Mr Gibb withdrew his letter of the 13th of February-that is to say, that he withdrew his withdrawal of his security. The contract between the parties continued to be regulated by the terms of the guarantee itself. No new term was introduced into it by the correspondence. I am therefore unable to agree with the Lord Ordinary's judgment.

It appears from the Lord Ordinary's opinion that an argument was submitted in the Outer House that the cancellation of the withdrawal was induced by the pursuers' fraudulent misrepresentation and concealment. This point was, however, not opened upon the reclaiming note.

What was pressed by the defender's counsel in the debate in the Inner House was a view of the case which involves two points, the first of which arises on the proper construction to be put upon the guarantee. According to the defender's contention, it means that Gibb was to be liable for £200 of the amount which M'Gillivray should owe Harmer & Companynot that Gibb was to be liable for the amount which M'Gillivray should owe Harmer & Company, subject to the limitation that he was not to be called upon to pay more than £200. If the defender is right in regard to this, the second point arises. The defender's argument upon it is that Gibb, having guaranteed only a limited portion of the debt, if he pays that portion he has in respect of it all the rights of a creditor. He then goes on to maintain that Harmer & Company after March 1907, in the knowledge that M'Gillivray was insolvent, effected what was a complete realisation of his estate, and that therefore, although there was not actual bankruptcy, Gibb is entitled to the same equities as if there had been bankruptcy. This would mean that the defender is entitled to a rateable proportion of what Harmer & Company had been paid in respect of the whole debt. First, as regards the construction of the guarantee, I am of opinion that the defender is right. What is guaranteed is payment of and for all such goods, i.e., goods sold in the way of trade, as Harmer & Company may from time to time sell and deliver to M'Gillivray or to his order up to the value of £200. The natural anteIcedent of the word "value" is the immediately preceding word "goods," which points to a guarantee for a supply of goods of that value and no more. The language does not seem to me to be appropriate to cover a guarantee for the whole debt subject to a limitation in the amount.

If that

had been what was meant, one would have expected some such expression as "amount" to be used instead of "value," which would have referred back, not to the immediate antecedent" goods," but to the word "payment" which precedes. Such a document should be construed contra preferentem. The matter is no doubt very much one of impression, and the Lord Ordinary has arrived at a different conclusion in regard to it. The question is one which depends on the construction of the particular guarantee, but the terms of the guarantee in the case of Hobson v. Bass, L. R., 2 Ch. App. 792, were so similar to the present that the judgment of the Lord Chancellor (Hatherley) is authority for the view now taken.

Although the defender succeeds as regards the first step he has to take, I am of opinion that he fails as regards the second. As the Lord Ordinary points out on this branch of the case, there was here no bankruptcy. The facts upon which the defender founds as producing a state of matters which he says should be regarded as equivalent to bankruptcy are as follows: He says that the pursuers knew, at anyrate in the beginning of 1907, that M‘Gillivray was insolvent; that he had been in arrear with his pay.

ments for a considerable time and that the guarantor wished to withdraw; that Harmer & Company knew he was neglecting his business, and that his credit was so low with the bank that by June he could not draw a cheque for more than £15; that in July he was summoned by one of the partners of Harmer & Company to attend a meeting in regard to his indebtedness to them, which appears to have been over £1000; that during August and September M'Gillivray was constantly in touch with Harmer & Company with regard to the disposal of his business; and that this resulted in an arrangement by which his book debts were to be realised by auction by Mr Cairns, an auctioneer and accountant in London who was in the way of realising the assets of such a business as M'Gillivray had. The business was sold in November to a Mr Frew, who was, as the pursuers explained to Mr Cairns in one of their letters, a very good customer of theirs, and that they would be pleased to accept his bills without guarantee. On 29th November Mr Cairns wrote to the pursuers that he had Mr M'Gillivray's instructions in a letter dated 22nd October to pay over the proceeds of the sale to them, and that no money or bills would be passed through his hands without their instructions. From the letter of 28th January 1908 it appears that the pursuers were willing to allow the purchaser a long period of credit, and were willing to take his bills on this footing. The defender contended that the pursuers were thus in as advantageous a position as if there had been bankruptcy. He therefore argued that the principle contained in such cases as Crawford v. Black, 8 S. 158, should be applied, and that under it he is entitled to rely on his rights as an ordinary creditor to share in the estate of an insolvent which had been taken possession of by certain of the creditors. He also founded on his right as guarantor to the benefit of the proceeds of every portion of the estate realised out of the ordinary course of business on the principle laid down in Ellis v. Emmanuel, 1876, 1 Ex. Div. 157.

In my opinion the defender's case here fails upon the facts. The sale was arranged by M'Gillivray with Cairns without the intervention of the pursuers. It appears to have been the best thing that could have been done in the circumstances, and was therefore in the interests of the defender as well as of the pursuers. If the pursuers had chosen to do diligence and recover their debt in this way the debtor could have done nothing to stop them. If the debtor chose voluntarily to realise his effects it appears to me the pursuers were entitled to accept payment of their debt out of the proceeds of their sale without ulterior consequences as regards the guarantor. The Lord Ordinary animadverts, probably with good reason, on the want of candour in the pursuers' correspondence and in their pleadings. It is not necessary, however, to discuss the grounds of that opinion. There is no doubt that they did not communicate with the guarantor until

July 22, 1911.

March 1908, the reason then being that they learned M'Gillivray was making away with some of his effects, the proceeds of which were apparently not to be paid to them. In the circumstances I am unable to see that there was any obligation upon Harmer & Company to communicate with Mr Gibb. What was done was not equivalent to a distribution of the estate in bankruptcy, and the pursuers had no security which they realised. If they had held a security for the debt guaranteed, then on realisation the guarantor would be entitled to the equities thence arising. There is, however, no such case here. The principles, therefore, laid down by Blackburn, J., in Ellis v. Emmanuel have no application. I am therefore of opinion that this ground of defence fails.

The amount of the debt now remaining due according to the pursuer's evidence is £299, 17s. 2d. The defender says that the pursuers have not proved what sum, if any, is due to them by M'Gillivray. Mr Christie's argument was that it had been proved that cheques for upwards of £400 had been received during the period covered by the account, and that the pursuers had failed to prove the debit entries which these cheques were applied to extinguish. This point appears to me to be purely technical, and to be sufficiently met by the evidence of Mr Olley, the pursuers' manager, and of Mr Fowler, one of their bookkeepers. If the defender's counsel had intended to make a substantial point of this it would have been necessary to have carried the matter much further by an examination of the pursuers' ledgers.

Another point argued by the defender was that the interest debited against M'Gillivray on amounts not paid within the usual period of credit should be struck out as in a question with the guarantor. The Lord Ordinary has disposed of this matter adversely to the defender, and to what is said in his opinion I have nothing to add.

The remaining matter relates to the policy of insurance on M'Gillivray's life which was held by the pursuers, who, however, had neglected to perfect the security. It was conceded by the pursuers' counsel that in accounting with the defender they must be treated as if the security had been completed. The result of this is that the surrender value, which was stated amount to some £116, is held by the pursuers as security for their whole debt of £299, 17s. 2d. The defender is entitled to the proportionate value of the policy which £200 bears to the total amount of the debt.

to

An interlocutor will be pronounced with a finding giving effect to this view, after which decree will be pronounced for the amount brought out.

LORD PRESIDENT-I concur.
LORD KINNEAR-I also agree.
LORD JOHNSTON was absent.

The Court pronounced this interlocutor"Recal said interlocutor: Find that

VOL. XLVIII.

under the guarantee sued upon the defender is bound to pay to the pursuers for goods supplied by them in the way of trade to John M'Gillivray up to the value of £200, under deduction of the proportion of the value of the policy of insurance on the life of John M'Gillivray held by the pursuers which £200 bears to the total amount of the debt due by the said John M'Gillivray to the pursuers: Remit to the Lord Ordinary to proceed as accords: Find the pursuers entitled to expenses in the Outer House, and to expenses modified to one half in the Inner House, and remit," &c.

Counsel for Pursuers (Reclaimers) Munro, K.C. - Dallas. Agents-Auld & Macdonald, W.S.

FIRST DIVISION.

[Sheriff Court at Glasgow. WILKIE v. KING.

Trade Union-Trade Union Act 1871 (34 and 35 Vict. cap. 31), sec. 4—Action for Refund of Accident Bonus Benefit Paid to Member-Competency.

The rules of a trade union provided that any member permanently disabled by accident should receive an accident bonus benefit, which he should be obliged to refund in the event of his resuming work at his trade. It was further provided that at the time of receiving the benefit he should sign an agreement binding himself to refund.

Held (diss. Lord Johnston) that an action by a trade union to recover from a workman accident bonus benefit was competent and did not come within sec. 4 of the Trade Union Act of 1871.

Baker v. Ingall, [1911] 2 K.B. 132, approved.

The Trades Union Act 1871 (34 and 35 Vict. cap. 17) enacts-Section 3-"The purposes of any trade union shall not by reason merely that they are in restraint of trade be unlawful so as to render void or voidable any agreement or trust." Section 4-"Nothing in this Act shall enable any Court to entertain any legal proceeding instituted with the object of directly enforcing or recovering damages for the breach of any of the following agreements, namely-1. Any agreement between members of a trade union as such concerning the conditions on which any members for the time being of such trade union shall or shall not sell their goods, transact business, employ, or be employed. 2. Any agreement for the payment by any person of any subscription or penalty to a trade union. 3. Any agreement for the application of the funds

NO. LXVII.

of a trade union-(a) To provide benefits to members; or (b) to furnish contributions to any employer or workman not a member of such trade union in consideration of such employer or workman acting in conformity with the rules or resolutions of such trade union; or (c) to discharge any fine imposed upon any person by sentence of a court of justice. Or 4. Any agreement made between one trade union and another. Or (5) Any bond to secure the performance of any of the above-mentioned agreements. But nothing in this section shall be deemed to constitute any of the above-mentioned agreements unlawful."

Alexander Wilkie, Newcastle-on-Tyne, as General Secretary of and as representing the Trade Union entituled, prior to 1st January 1908, "The Associated Shipwrights' Society," and since said date "The Shipconstructive and Shipwrights' Associa tion," having its registered offices at Newcastle-on-Tyne, pursuer, brought an action in the Sheriff Court at Glasgow against Alexander King, shipwright, Saltcoats, defender, in which he claimed repayment of the sum of £100 paid by the pursuer to the defender on 6th September 1905, the repayment being claimed in virtue of a memorandum of agreement between the parties of the above-mentioned date.

The memorandum of agreement was, inter alia, in the following terms:"Whereas by the 45th rule of the Associated Shipwrights' Society (hereinafter called the Society') it is provided amongst other things that any free member (meaning thereby a member of the Society) in benefit and in full compliance with rule at the time of receiving injury by accident which permanently disables him from following his employment... shall receive the sum of one hundred pounds. Members resuming work at the trade . . . shall be required to refund the amount received, and, if necessary, proceedings shall be taken to recover the same. Members at the time of receiving this benefit must sign an agreement that if they at any time resume work at the trade they will return the money thus received under such circumstances. . . And whereas the sum of £100 has been paid to Alexander King by the Society in pursuance of the 45th rule of the said Society, on condition of his executing the agreement hereinafter contained.... Now these presents witness that in further pursuance of the said rule, and in consideration of the premises, the said Alexander King . . . hereby agrees with the said Alexander Wilkie, being the Society's respresentative. That in

the case the said Alexander King shall at any time hereafter resume work as a shipwright the said Alexander King. shall forthwith repay to the Society the said sum of £100 so paid to him as aforesaid...

The 45th rule of the Society above referred to was in the following terms:"1. Any member of this Association in benefit and in full compliance with rule

at the time of receiving injury by accident which permanently disables him from following his employment... shall receive the accident bonus benefit on a basis as hereinafter given to be raised by levy throughout the whole Association.... Members resuming work at the trade as foremen or workmen shall be required to refund the amount received, and if necessary proceedings shall be taken to recover the same. Members at the time of receiving this benefit must sign an agreement that if they at any time resume work at the trade they will return the money thus received."

The defender pleaded, inter alia—“(1) The action is irrelevant and incompetent. (2) No title to sue. (3) The agreement founded on being ultra vires of the pursuer, the defender should be assoilzied, with expenses."

On 9th August 1910 the Sheriff-Substitute (A. O. M. MACKENZIE) sustained the first plea-in-law for the defender and dismissed the action.

The pursuer appealed, and argued-Rule 45 showed (1) an agreement between the Union and the defender for the receipt of a benefit, and (2) a stipulation that if he resumed work as a shipwright he should be bound to repay £100. (1) Could not be enforced in law; (2) could, because it was not founded on the rules of the Society but on a special contract. Section 4 of the Trades Union Act 1871 (34 and 35 Vict. c. 31) had been framed for the purpose of eliminating from the statute those agreements which, though not per se illegal, the Legislature considered should not be enforced in courts of law, and the effect of decisions on the section was that this category was to be strictly construed. In construing the section great force had been laid on the word "directly"- Wolfe v. Mathews, 21 Ch. D. 194; Rigby v. Connol, 14 Ch. D. 482: Cope v. Crossingham, [1909] 2 Ch. 148; Yorkshire Miners' Association v. Howden, [1905] A. C. 256, per Lord Halsbury, p. 261, and in the Court of Appeal, [1903] Î K.B. 308. The present action clearly did not fall under 4 (1). Neither was it an action for a subscription or a penalty in the sense of 4 (2). A subscription was a personal payment and a penalty was a fine. To bring it within 4 (3) (a) the respondents must make it an action for the purpose of directly enforcing the application of funds to provide a benefit to the member, and the present case did not fall within those terms. 4(3)(b) and (c) and 4 (4) were clearly excluded, and in order to be under 4 (5) the case must fall under one of the preceding sections. What the Union founded on in the present case was not the rules but the condition in the agreement, which was a completely separate matter-Wilson v. Connolly, 1910, 27 T. L. R. 7 and 212; Hyams v. Stuart King, [1908] 2 K.B. 696. If the construction and effect of the rules was not the basis of the action, then the aid of the Courts might be invoked. The Union had not paid the £100 by any process of law, but on condition that the defender executed