Scottish Court of Session Decisions

Section 100 of the Bills of Exchange Act 1882 enacts—“In any judicial proceeding in Scotland any fact relating to a bill of exchange, bank cheque, or promissory-note, which is relevant to any question of liability thereon, may be proved by parole evidence.” …

In February 1904 Messrs Viani & Company, bankers, Pallanza, Italy, raised an action against Messrs Gunn & Company, marble merchants, 130 George Street, Edinburgh, for payment of £45, being the amount contained in a bill of exchange dated 20th December 1902 and due on 20th May 1903, drawn by the Della Casa Granite Quarries of Italy, Limited, and accepted by the defenders, with the interest thereof at

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the rate of £5 per centum per annum from 23rd May 1903 until payment. The bill of which the pursuers were indorsees was accepted by the defenders “payable at 130 George Street, Edinburgh.”

The pursuers averred that they were holders of the bill for value, and that when it was presented at the place of payment to the defenders' manager on 23rd May 1903 with a demand for payment, payment was refused.

The defenders, while admitting that the bill had not been paid by them, denied that it had been presented to their manager, and explained that the pursuers were not the holders in due course. They gave the following account of the transaction:—“(Stat. 1) The questions arising in the present action have arisen out of the connection of the pursuers and defenders with the Della Casa Granite Quarries of Italy, Limited. That company was incorporated ten years ago, and was registered in Scotland”. The company was formed for the purpose of purchasing and working certain granite quarries on Lake Maggiore, in Italy. After the formation of the company the purchase of these quarries was duly carried out, and the company commenced to work the said quarries, and according to the law of Italy the company had also to he registered in that country. Although the company has done a large amount of work, it has not been financially a success, and from time to time during the last ten years Mr Walter William Gunn, the senior partner of the defenders' firm, acting on the instructions of the directors of the company, visited the quarries with the view of improving the management and business of the company. The defenders also acted as agents for the company, and at the present time large sums are due by the Della Casa Granite Quarries of Italy, Limited, to Messrs Gunn & Company for the expenses of Mr Gunn's visits to Italy, and in respect of commissions due. (Stat. 2) The company incurred large liabilities in Italy to banks and others, and among the company's creditors are the pursuers, of whose firm Mr Agostino Viani is the sole partner. During Mr Gunn's various visits to Italy he met the said Agostino Viani, who for some time undertook a general supervision over the company's affairs. At these meetings, and also by letters to Mr Gunn, the said Agostino Viani pointed out how necessary it was for him that the company should continue business, so that he might ultimately get payment of the large sums due to him by the company, and said that in the event of the company being unable to pay him it meant ruin to him. (Stat. 3) In December 1902 Mr Gunn was in Italy, and had various meetings with Agostino Viani as to the position of the company's affairs. At this time MrChicherio, the company's manager on the quarries and works, became very dissatisfied with his position, and was constantly threatening to resign. Both he Agostino Viani told Mr Gunn that he had absolutely no money to go on with for his own private uses, and Agostino Viani told Mr Gunn that the credit of the company was such that no more money could be raised in Italy, and begged Mr Gunn to help Chicherio personally. Mr Gunn was present at a meeting between Agostino Viani and Chicherio, when the former in a very excited manner pressed the latter not to resign. This took place on or about the 20th of December 1902, when the bill in question was granted. It was at Agostino Viani's urgent request that Mr Gunn consented to sign the bill, which was to be for only £40, and he signed the bill blank, believing that the stamp did not carry more than £40. (Stat. 4) The translation of the printed notice on the face of the bill is as follows—‘Complete price 2·50 lira, for bills and other commercial drafts from 1000 lira to 2000 lira, with currency up to six months, or from 600 lira to 1000 lira, currency over six months.’ It was agreed between Mr Gunn and Agostino Viani that the currency of the bill in question was to be for more than six months, so that the stamp would not carry more than 1000 lira, which is equal to £40. Upon signing the bill Mr Gunn handed it to Chicherio, and the arrangement was, that in the event of the latter discounting the bill—which was purely an accommodation bill—he would retire it himself on its coming to maturity. Agostino Viani was aware of this arrangement, and agreed that in the event of the bill being either in his own hands or in the hands of Chicherio at maturity, the defenders would not be called upon to retire it. (Stat. 5) The bill was, as matter of fact, an accommodation to Agostino Viani. The arrangement was that the bill was to be drawn by Chicherio on the defenders' firm, and not, as has been done, by the Della Casa Granite Quarries of Italy, Limited. Agostino Viani was aware of this, and acquiesced in it. (Stat. 6) In or about the month of September last year Mr Gunn was in correspondence with Agostino Viani, when he represented to Mr Gunn that arrangements were in course of being made in Italy for the formation of a new company to take over the property of the Della Casa Granite Quarries of Italy, Limited, and to purchase various other quarries in the neighbourhood, and that the result of this arrangement would be that the creditors of the late company would be fully paid. Agostino Viani employed Mr Gunn to go to Italy, and to meet him there for the purpose of giving certain information which he possessed, and which was necessary for the formation of the new company. Mr Gunn consented to go to Italy, and went on the understanding that he would only be required for a few days. When Mr Gunn got to Italy he found that the position of matters had been entirely misrepresented to him by Agostino Viani, and Mr Gunn was kept in Italy for fifteen weeks without any company being formed. Instead of assisting in the formation of a company, Agostino Viani, while Mr Gunn was in Italy, applied to the Italian Courts and succeeded in getting a liquidation order against the company, and although meeting Mr Gunn while in Italy, he never

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mentioned that he was sending instructions to England to proceed against defenders in respect of the said bill. The bill was mentioned by Agostino Viani to Mr Gunn, and the former requested the latter to renew the bill on the same footing as that on which the former bill was granted. The bill was not then shown to Mr Gunn, and it was not until his return from Italy, and after the present action had been raised, that Mr Gunn ever saw the bill as completed.”

In answer to the defenders' statements the pursuers explained “that on or about 3rd January 1903 the bill was discounted by the drawers, the Della Casa Granite Quarries of Italy, Limited, with the pursuers, and that the drawers received payment from the pursuers of the sum of £39, 18s., being the full value of the bill, viz., £45, less £5, 2s., the expenses of discounting and collection. The pursuers believed the bill to be an ordinary bill of exchange, and in discounting it they were acting in good faith and in the usual course of their business as bankers, and relied upon the acceptance of the defenders. Neither the pursuers nor Mr Agostino Viani had any share in or knowledge of the creation of the bill, nor were they present when it was signed. Further, neither the pursuers nor Mr Agostino Viani were parties to, nor were they aware at the time when the bill was discounted, nor are they now aware of, any qualifications or arrangements in connection with the bill such as are alleged by the defenders. The pursuers also deny that any such arrangements were ever made.”

The pursuers pleaded—“(1) The defenders being due and resting owing to the pursuers the sum sued for decree ought to be pronounced therefor, with expenses, as concluded for. (2) No relevant defence.”

The defenders pleaded—“(1) No title to sue. (2) The defenders not being due and resting owing to the pursuers in the sum sued for, decree of absolvitor should be granted with expenses. (3) The pursuers not being holders in due course of said bill the defenders are entitled to absolvitor with expenses. (4) The said bill having been granted for the accommodation of the pursuers, and the pursuers having agreed with the defenders to retire it at maturity, the defenders are entitled to absolvitor.”

Mandataries for the pursuers were sisted before the record was closed.

On 11th June 1904 the Lord Ordinary ( Pearson) allowed the parties a proof before answers of their averments, the defenders to lead in the proof.

Note.—“The question is, whether the pursuers, as holders of the bill, are now entitled to decree, or whether the defenders have made averments regarding their liability on the bill which are relevant to be remitted to proof. I think that is a narrow question. The defenders' averments are neither very precise, nor very consistent. But it being averred that Mr Viani is the sole partner of the pursuers' firm, my opinion is that the defenders' averments, and particularly his averments in statement 4, disclose a case for inquiry.

I therefore allow the parties a proof before answer of their averments, the defenders to lead in the proof.”

The pursuers reclaimed, and argued—In this case the pursuers were on the face of the bill the creditors, and the defenders the debtors under the bill, and what the defenders proposed to do was to prove by parole that they were not liable at all under the bill and to set aside the bill altogether. To hold that such a course was permissible under section 100 of the Bills of Exchange Act 1882 was to go further than the Court had ever gone, even in the case of Dryborough & Company, Limited v. Roy, March 17, 1903, 5 F. 665, 40 S.L.R. 594, and was opposed to the decisions in National Bank of Australasia v. Turnbull & Company, March 5, 1891, 18 R. 629, 28 S.L.R. 500; opinions of Lord President Inglis, 634 and 504, and of Lord M'Laren, 638 and 506; Gibson's Trustees v. Galloway, January 22, 1896, 23 R. 414, 33 S.L.R. 322; opinion of Lord M'Laren, 416 and 323; and Robertson v. Thomson, October 19, 1900, 3 F. 5, 38 S.L.R. 3. The case of Semple v Kyle, January 14, 1900, 4 F. 421, 39 S.L.R. 304, did not apply, as in that case the pursuer was admittedly not a holder in due course. In the present case the pursuers were the bankers who had discounted the bill and thus become the indorsees and holders of the bill for value. Further, the averments of the defenders was irrelevant, because indefinite and wanting in precision.

Counsel for the defenders and respondents was not called upon.