Essay: Adam Fergusson

My name is Adam Fergusson. I am an advocate and landowner. I am seventy-three years of age. I make this statement on 31st October 1806.

Robert Burns and I enjoyed a mutual respect. In ‘The Author’s Earnest Cry and Prayer’, he described me as ‘aith detestin’ chaste Kilkerran’. I was flattered.

I knew William Burnes, the poet’s father, as my country estate, Kilkerran, lies not many miles distant from where he started his market garden in Alloway and his first farming business at Mount Oliphant. I am sorry to say that William Burnes chose a singularly inauspicious time to start his farming venture in 1765.

Around this time the economy of the County of Ayr started to undergo a change. Having been buoyant, with the manufacture of silk and carpet weaving predominant, a recession was starting to take effect. Those involved in agriculture were struggling to make ends meet, with prices for their produce being barely sufficient to cover costs. These problems were compounded as a result of the failure of a local bank.

Douglas, Heron & Company, with its head office at Ayr, had opened in 1769. It traded as the Ayr Bank. Soon afterwards, branches were opened in Edinburgh and other towns in Scotland. Although it was a company, it was actually a partnership, as the liability of shareholders, or partners, was not limited. If the bank failed, the personal assets of the partners would be called on to meet any deficit.

The original partners were from the top tier of Scottish society, but the board of directors, of which I was a member, contained no-one with any experience of banking.

Within a very short time, the Douglas Heron Bank had overextended itself by giving excessive loans to privileged customers ‘ in many cases to the partners themselves ‘ and had sought to conceal the perilous position it was in simply by borrowing more from external sources. In May 1772, the directors had tried to restore the position but in June of that year, the London banking house of Neale, James, Fordyce and Doune failed, putting several Scottish banks in difficulties. The Douglas Heron Bank struggled for just over a year to regain confidence, but other Scottish banks began to refuse to extend to Douglas Heron any further credit. In August 1773 a general meeting of the partners resolved on liquidation. The losses were already astronomic, and the partners were fearful that they might be obliged to pay in more than the amount of working capital for which they were liable under the partnership agreement.

As well as being a director, I myself was one of the partners, but happily I was able to meet my obligations. However, when those charged with winding up the affairs of the Douglas Heron Bank attempted to recover the large sums owed by several partners, bankruptcies ensued. The whole affair became a dreadful embarrassment to me personally. It demonstrated the wisdom of separating one’s business from one’s legal practice. In one case, my brother-in-law David Dalrymple, Lord Hailes, proposed to recuse himself (i.e. stand down) as the judge in a case brought by the Douglas Heron Bank against Baron Grant, a debtor of the Bank. He claimed that he was conflicted because I was a partner in, and therefore also in effect a debtor of, the Bank, but the court held that he could not decline to hear the case as there were over two hundred partners and most of the judiciary were related to them to some degree!

Two other cases illustrate how the liquidation of the Douglas Heron Bank became a plentiful source of work or ‘dripping roast’ for the legal profession. Captain John Blair was an original partner who held two shares of ??500 each, of which ??775 had been paid up. Captain Blair died in October 1772, just as the problems with the Ayr Bank were becoming apparent. Article seventeen of the partnership agreement for the Bank had provided that:2

. . . in the event of the death or insolvency of any of the partners, the heir, executor or assigns of the deceast, and the creditors of the insolvent partner, shall be obliged to receive and draw their share in the stock and profits thereof, as the same shall stand at the last preceding settlement of the company’s affairs, with interest thereon at 4 per cent from that settlement until payment is demanded, and the legal interest thereof afterward till complete payment.

David Blair had been appointed as his late brother’s executor, and brought an action against the Bank for payment of the value of the two shares and the profit due on them as at November 1771, the last date of settlement prior to the date of death. This was in the hope of avoiding the loss which every partner in the Bank would sustain from its total bankruptcy. David Blair’s case was argued by Robert Macqueen and Robert Blair. The Bank’s administrators were represented by Ilay Campbell and Alexander Murray. An impressive debate ensued, as reflected in the fact that all these advocates later became distinguished judges including Lords President (Ilay Campbell and Robert Blair), Lord Justice Clerk (Robert Macqueen) and Lord Henderland (Alexander Murray). The Court determined that as the Bank had become totally insolvent between November 1771 and October 1772, David Blair could not recover the apparent value of his late brother’s shares. He appealed to the House of Lords, but was unsuccessful.

As mentioned previously, in August 1773 the partners had passed a resolution3 that:

. . . from and after that date, the Company shall give over the business of banking in all its branches.

At subsequent meetings in 1776, it having become clear that the Bank had incurred a loss of ??70,000 over and above the subscribed capital, it was resolved that all partners should pay up not only any unpaid original capital but also a further sum of ??200 on each ??500 share.

An action was brought by the Bank’s administrators against Alexander Hair and his trustees, in whom his estate was vested. The defenders did not object to paying up the capital, but were refusing the call for the additional contribution of ??200 on Hair’s original ??500 share.

Clause 19 of the partnership agreement3 had provided that:

. . . nothing herein contained shall be understood to import a power in any general meeting whatever to compel any partner to pay or contribute anything more to the company-stock than the precise sum by him originally subscribed for.

Once again the Bank’s administrators were represented by Ilay Campbell. The advocate for Hair and his Trustees was David Rae (later Lord Eskgrove). Rae argued that the Clause meant that the meeting had no right to compel a contribution of this kind, but the Court found that the additional payment had to be made.

It might have seemed a little far-fetched to imagine that the plight of the partners in the Douglas Heron Bank would have an impact on the poet’s father. But around the time of the judgment in the Hair case (July 1778), William Burnes moved to become the tenant of Lochlie Farm near Tarbolton having given up Mount Oliphant in 1777 on the expiry of his lease. He became the tenant of an Ayr merchant called David McClure, a gentleman known to me as another partner in the Douglas Heron Bank. The fortunes of the Burns family were about to become enmeshed in what would transpire to be a web of financial manipulation and mismanagement.

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