Scottish Court of Session Decisions

The Bills of Exchange Act 1882 (45 and 46 Vict. cap. 61) enacts, section 100—“In any judicial proceeding in Scotland, any fact relating to a bill of exchange … which is relevant to any question of liability thereon, may be proved by parole evidence.” …

An action was raised in the Sheriff Court at Glasgow by the Manchester and Liverpool District Banking Company, Limited, against Alexander Ferguson & Company, 106 and 108 West Regent Street, Glasgow, and Alexander Ferguson and W. Bruce Mount, the partners thereof, as such partners and as individuals, in which the pursuers sought to recover a balance due, after deducting certain payments to account, under a bill of exchange for £500, dated 15th February 1904, drawn by Alexander Ferguson and accepted by Alexander Ferguson & Company, payable three months after date. The bill had been endorsed by the drawer to the Industries Development Company, by whom it was endorsed to the pursuers.

The defenders in their statement of facts, as amended in the Court of Session, averred—“(Stat. 1) The bill for £500 condescended upon is part of an original bill, dated 28th January 1902, amounting to £2500, drawn by The Industries Development Company, Limited, London, on and accepted by the defender Alexander Ferguson in connection with an advance believed to have been made by the pursuers to” (a certain limited company owning a gold mining property) “to enable it to pay off a debt. The arrangement made at the time the advance was given was that the advance was to be repaid from the working capital which said company were to raise so soon as the state of the mining market would allow of their doing so successfully. This company, however, was not successful in raising said working capital, and its assets and debts were subsequently taken over by The Industries Development Company, Limited, aforesaid. This latter company having failed also to raise sufficient working capital to repay said advance, an agreement was come to between the pursuers, the Industries Development Company Limited, and the defender Alexander Ferguson, that the last-mentioned defender should give his guarantee to the pursuers in connection with said advance, which it was arranged should not be enforced until said working capital had been raised.… (Stat. 2) The said original bill for £2500 was in terms of said agreement renewed from time to time until the beginning of 1903, when the pursuers asked for an additional name to said bill by way of further security, and the said defenders Alexander Ferguson & Company agreed to give two bills dated 3rd February 1903 for £2000 and £500 respectively, which were to be renewed from time to time on the condition, agreed to by the pursuers, that payment of said advance was not to be demandable until said working capital had been raised to pay off same. The bill of which the sum now sued for is part was the last renewal so granted on 15th February 1904 for £500. The bills so far as cancelled, and a statement showing the whole bill transactions, are produced. Said agreement above condescended on was made on or about 3rd February 1903 at the pursuer's London office between Thomas Ferguson, their London manager, and Mr David Philip, S.S.C., on behalf of the defenders.”

The pursuers denied the alleged agreement, and pleaded—“(1) The defenders' statements in answer are irrelevant.”

The defenders pleaded—“(4) The bill founded on having been accepted by the pursuers on condition that they were not to ask payment until working capital had been raised by the Industries Development Company Limited, and that capital not having been raised, the defenders should be assoilzied.”

On 2nd February 1905 the Sheriff-Substitute ( Balfour) repelled the defences as irrelevant, and granted decree in terms of the prayer of the petition.

Note.—…“The defenders founded upon

the 100th section of the Bills of Exchange Act, providing that any fact relating to a bill of exchange which is relevant to any question of liability thereon may be proved by parole evidence. The cases which have been decided with reference to the construction of that section are The National Bank of Australasia v. Turnbull & Company ( 18 R. 629), Gibson's Trustees v. Galloway (23 R. 414), and Drybrough & Company v. Roy (5 F. 665). It is unnecessary to go into the details of these three cases, but the outcome of them is this, that where the defender makes an averment that the bill was to be renewed when due, and from time to time thereafter until he should be in a position

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to repay it, the defender was not entitled to a proof of the averment, for if the agreement meant that the defender was not bound to pay the principal sum but an annuity, it contradicted the written obligation; but, on the other hand, it was held in Drybrough's case that if the defender averred that the bill was to be renewable for a definite time, it was a relevant defence under the 100th section of the Bills of Exchange Act. In the present case it is not averred that the bill was to be renewed for any definite time.” …

On appeal the Sheriff ( Guthrie) adhered on 28th March 1905.

The defenders appealed to the Court of Session, and argued—The intention of parties to the agreement condescended on was that liability should emerge only if no working capital was ever raised. The defenders were entitled to an opportunity of proving their averments—Bills of Exchange Act 1882, section 100; Drybrough & Company, Limited v. Roy, March 17, 1903, 5 F. 665, 40 S.L.R. 594; Viani & Company v. Gunn & Company, July 14, 1904, 6 F. 989, 41 S.L.R. 822. The case of Gibson's Trustees v. Galloway, January 22, 1896, 23 R. 414, 33 S.L.R. 322, did not affect the present question. Even an averment that there was to be no liability might be proved— National Bank of Australasia v. Turn-bull & Company, March 5, 1891, 18 R. 629, 28 S.L.R. 500.

Argued for the respondents—The defenders' averments were irrelevant; they could not have been proved by writ or oath prior to the passing of the Act of 1882, and they could not be proved by parole evidence under section 100 of that Act— Gibson's Trustees v. Galloway, cit. sup.