Roy Palmer examined the historical background to this song in an article in English Dance and Song (vol. 51 no. 3, 1989); it's a true story, more or less.  There's also a set in the Greig-Duncan collection, noted from one T.S. Towers, probably around 1906, which is very close to the Orkney set in the DT.

It's certainly the kind of song that MacColl would have relished, and he wouldn't even have needed to produce a hitherto unknown tune for it from "family sources"...