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Nicol's Trustees Vs. Sutherland - Court Judgment

LegalCrystal Citation
CourtHouse of Lords
Decided On
Case NumberNo.
Judge
AppellantNicol's Trustees
RespondentSutherland
Excerpt:
lord president(cooper).—section 100 of the bills of exchange act is a provision which there have been none to love and very few to praise. the learned draftsman of the statute in his well-known commentary dismisses it with the significant remark :— "this section was added in committee." so far as the courts are concerned, there is a whole series of decisions in scotland in which the courts have evinced a resolute determination not to read the section too literally or too widely, for the obvious reason that to do so would produce an anomalous situation not conform either to the common law of scotland or to the common law of england, and might have a most disturbing effect upon mercantile practice. in particular, in the case of robertson v. thomson, 3 f. 5, it was decided that.....
Judgment:

LORD PRESIDENT(Cooper).—Section 100 of the Bills of Exchange Act is a provision which there have been none to love and very few to praise. The learned draftsman of the statute in his well-known commentary dismisses it with the significant remark :—

"This section was added in committee."

So far as the Courts are concerned, there is a whole series of decisions in Scotland in which the Courts have evinced a resolute determination not to read the section too literally or too widely, for the obvious reason that to do so would produce an anomalous situation not conform either to the common law of Scotland or to the common law of England, and might have a most disturbing effect upon mercantile practice. In particular, in the case of Robertson v. Thomson, 3 F. 5, it was decided that section 100 did not make parole proof of payment of a bill competent.

To-day we have been asked to remit this appeal to a larger Court for the purpose of reconsidering the decision in Robertson v. Thomson, the assumption of the argument being that, so long as that case stands on the books, the appeal cannot succeed. I am not in favour of the course proposed. The decision has stood unchallenged and uncriticised for nearly fifty years. It is cited in all the textbooks which have since been published dealing with this subject. It has been followed in the Sheriff Court; and, in the interval since the decision was pronounced, there have been at least three amendments of the Bills of Exchange Act, none of which has touched section 100 or the decision in Robertson v. Thomson . On that account alone I should be averse to disturbing what must now be regarded as a settled rule of law; but, independently of that, I am by no means satisfied that, if Robertson v. Thomson were now to be reversed, it would be possible to substitute for the decision in that case (and inferentially for the decisions in a number of related cases) any rule which would not produce dangerous anomalies in our law relating to bills of exchange.

On these grounds I move your Lordships that the appeal must fail.

LORD CARMONT.—I agree. However strange the decision in Robertson v. Thomson may look, I think we have heard to-day no reason for sending the case to a higher Court for reconsideration.

LORD RUSSELL.—I concur with your Lordships.

LORD KEITH.—I would not like to think that the case of Robertson v. Thomson evinced any departure from the literal language of section 100. I think, myself, that section 100 contains a certain ambiguity of language which raises a doubt as to its precise scope, and I am quite satisfied to take Robertson v. Thomson as a decision resolving at least one ambiguity in section 100, by determining that the language is not so clear as to overturn the settled rule of law that payment of a written obligation cannot be proved by parole.

The defender appealed to the House of Lords, and the case was heard on 6th and 7th December 1950.

At delivering judgment on 7th February 1951,—

LORD SIMONDS.—This appeal raises a question as to the meaning and effect of section 100 of the Bills of Exchange Act, 1882, the relevant part of which is as follows :—

"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."

Fifty years ago in Robertson v. Thomson, it was held that this section did not make parole proof of payment of a bill of exchange competent. This is in effect an appeal from that decision.

The facts are not in dispute. The respondents claim from the appellant the sum of £250 the amount ex facie due from him upon a Sutherland. bill dated 6th March 1946, drawn by one David Nicol deceased and Lord accepted by him. The appellant denies that that sum is due from him, alleging that he repaid it on 18th May 1946. This he seeks to prove by parole evidence. He could not have done so before the Bills of Exchange Act, 1882, came into operation. The question is whether section 100 of that Act now permits him to do so. The learned Sheriff-substitute before whom the matter first came and the learned Judges of the First Division of the Court of Session are agreed in thinking that it does not. The Lord President, in declining to remit the appeal to a larger Court for the purpose of reviewing the decision in Robertson v. Thomson, was influenced by the fact that that authority had stood unchallenged for fifty years and by the further fact that during that period there had been at least three statutory amendments of the Bills of Exchange Act, none of which touched section 100 or the decision in Robertson v. Thomson .He was therefore averse to disturbing what must be regarded as a settled rule of law; but, independently of that, he was by no means satisfied that, if Robertson v. Thomson were now to be reversed, it would be possible to substitute for a decision in that case (and inferentially for the decisions in a number of related cases) any rule which would not produce dangerous anomalies in the law relating to bills of exchange.

I should myself attach little weight to the fact that on at least three occasions the Legislature had thought fit to amend the Act of 1882 upon isolated and independent matters without touching upon section 100. I cannot regard this as being in any measure a legislative sanction of a judicial interpretation. It might no doubt be otherwise, if the section, having received such interpretation, was re-enacted in the same language. But that is not the case here. Nor is this the class of case in which this House would be disposed to abrogate its own judgment on the ground of inveterate opinion alone. If it be true, as the respondents allege, that for a generation lawyers, bankers, merchants and business men have learned that this is the law and have regulated their business dealings accordingly, yet no title is built upon it and the lesson that has been learned can be unlearned without harm to any man.

But, though I am little moved by those considerations which weighed with the learned Lord President, I cannot but approach the construction of this section with a sense of the great authority which has already been brought to bear upon it. That authority is unanimous in thinking that the wider, perhaps the prima facie, meaning for which the appellant here contends cannot be given to the section.

The Act of 1882, though directed mainly to a codification of the existing laws, yet effected some amendment. This is clear from section 100 itself, which, whatever its true construction, altered in some respects the law of Scotland in regard to proof. But I would bear in mind the principle which is fairly stated in Maxwell, Interpretation of Statutes, (9th ed.) at p. 85, that it is in the last degree improbable that the Legislature would overthrow fundamental principles, infringe rights or depart from the general system of law without expressing its intention with irresistible clearness. The distinguished Judges who have had to consider section 100 of the Act leave me in no doubt that it would be indeed a revolutionary measure to alter the law of Scotland as to the modes in which payment of a debt may be proved. The general rule unumquodque eodem modo dissolvitur quo colligatur is not to be lightly broken. Why should it be broken in the case of a bill of exchange, bank cheque or promissory note No reason has been suggested. On the other hand, good reason can be shown for an alteration of the law in another respect. In Ferguson, Davidson and Co. v. Jolly's Trustee, decided in 1880, two years before the passing of the Act of 1882, Lord President Inglis had pointed out that the Legislature in passing the Mercantile Law Amendment Act, Scotland, 1856, had declined to adopt the recommendation of the Mercantile Laws Commission of 1854 that the absence of consideration should be made provable by parole. Here there was scope for amendment of the law in regard to proof by parole evidence without impinging arbitrarily and indeed capriciously upon a general rule of law which might be regarded as having a special importance in the case of a negotiable instrument.

It is with this background of the law of Scotland that section 100 falls to be construed. And though, as Mr Thomson in an able argument for the appellant pointed out, there has been some different expression of view upon its precise scope, there has been a consensus of opinion that it is not wide enough to cover parole proof of payment. I need only name Lord President Inglis, Lord M'Laren and Lord Kinnear in National Bank of Australasia v. Turnbull and Co., Lord M'Laren again in Gibson's Trustees v. Galloway, and again with Lord President Balfour and Lord Kinnear in Robertson v. Thomson, and finally Lord President Dunedin in Stagg and Robson, Limited v. Stirling .These are great names in the law of Scotland. But they would be invoked in vain if it could not be shown that the section is fairly susceptible of a meaning which excludes proof by parole of payment of a bill. I have no doubt that such a meaning can be given to it. If I approached the section with no previous knowledge of the law of Scotland, I should perhaps conclude that the fact that it had been paid was within the meaning of the section a fact relating to a bill of exchange which was relevant to a question of liability thereon. For the question, "Is anyone liable on the bill?" and the answer, "No one is liable, for it has been paid off," relate to the bill and are relevant to the question of liability on it. But there is another wide area of inquiry which relates, not to the question whether the bill has been discharged so that there is no liability on it, but to such questions as might arise upon a dispute whether or not the bill was an accommodation bill or who as between A and B was primarily or ultimately liable, questions which assume a subsisting bill or, if the bill has been discharged, subsisting disputes as to final liability. Some breach in respect of such questions as these had already been made in the law of proof, as appears from Lord Mure's observations in Ferguson's case already cited. I see no difficulty in so construing section 100 as to admit parole proof of facts within this area while excluding from it proof that the bill has been discharged, which is in effect proof that a document at large and, it may be, in the hands of a holder in due course has ceased altogether to be a document of debt. This is the view which has been taken by great Judges conversant with the law of Scotland and I would follow in their steps.

I would only add that I concur in the observations which my noble and learned friend Lord Normand will make upon the final words of the section.

I would move that the appeal be dismissed with costs.

LORD NORMAND.—The appeal depends on the construction of section 100 of the Bills of Exchange Act, 1882.

The facts are simple. On the death of David Nicol there was found among his papers a bill of exchange, dated 6th March 1946, for £250 payable twelve months after date drawn by Nicol and accepted by the appellant. The trustees of Nicol raised an action in the Sheriff Court of Perth and Angus for payment. The appellant in his defence averred that the sum of £250, with interest, due under the bill had been paid on 18th May 1946, but that no receipt was given and that the payment would be proved by parole evidence.

Before the passing of the Bills of Exchange Act proof of payment of a bill by parole evidence was incompetent, but the appellant maintained that section 100 of the Act altered the law in this respect. The learned Sheriff-substitute, following Robertson v. Thomson, held that section 100 had not had that effect, and his judgment was unanimously affirmed on appeal by the First Division of the Court of Session. The question is whether the Court of Session erred in construing section 100 as it was construed in Robertson v. Thomson by Lord President Balfour (as he then was), Lord Adam, Lord M'Laren and Lord Kinnear. The ground of their decision was the simple assertion that section 100 did not alter the rule as to the mode of proving payment of the sum due under a bill.

The appellant's counsel submitted that the enacting words of the section are clear and unambiguous and that they leave no room for construction; he also founded on the concluding sentence or proviso as lending support to his argument. The enacting words are "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." The payment of a bill, it was said, is certainly a fact relating to a bill and not less certainly relevant to a question of liability. The concluding proviso runs :—

"This section shall not apply to any case where the bill of exchange, bank cheque, or promissory note has undergone the sesennial prescription."

It was said that this proviso was only necessary if the enacting words were given the wide construction which, according to the argument, they naturally bear. Clear as the enacting words may-seem when they are read in isolation, they lose something of their clarity when they are considered in their relation to the Act as a whole, to section 62 in particular and to the mischief at which they were aimed. The Act is a consolidating Act, and it is not to be presumed that a section of a consolidating Act alters the entire law of evidence as affecting bills, cheques and promissory notes. It is always relevant in construing an Act to consider the mischief at which it is aimed, and there can be little doubt that the mischief aimed at was the rule of Scots law that the presumption that bills and notes import consideration could not be rebutted otherwise than by writ or oath. Attention had been called to the injustice which might result from this rule in Ferguson, Davidson and Co. v. Jolly's Trustee, only two years before the passing of the Act. The terms of the section, if they are read literally, are inconsistent with the provision of section 62 (1), that when the holder of a bill at or after its maturity absolutely and unconditionally renounces his rights against the acceptor the bill is discharged, but that this renunciation must be in writing unless the bill is delivered up to the acceptor. It is not surprising, therefore, that from 1891, when the section for the first time had to be construed by the Inner House of the Court of Session, a restricted interpretation has been placed upon it. In National Bank of Australasia v. Turnbull the bank, having discounted a bill which had not been accepted by the drawees, sued the drawers on the bill. The defence was that the defenders had drawn the bill as agents for the drawees and that the pursuers were well aware that the drawees were alone to be responsible on any bills discounted by them. This defence, it was argued, came within the literal terms of section 100; it averred a fact relating to a bill and relevant to the defenders’ liability thereon. The defenders sought to prove their averments by parole. The First Division held that such a proof was incompetent. Lord President Inglis said (at p. 634) that the verbal contract averred "would involve a delegation, by which the creditor in the unaccepted draft consented to accept a new debtor in place of the drawer his original debtor. But the original obligation being in writing, no delegation can be effectual which is not also in writing. Delegation is a discharge of the original debtor, but to such discharge the rule must apply, Eodem modo dissolvitur quo colligatur." Assuredly if delegation is a discharge, payment is a discharge and therefore on the ratio of the Lord President's judgment payment must still be proved scripto vel juramento. The decision in Robertson v. Thomson was in truth no more than a necessary consequence of the National Bank of Australasiacase, but it can be deduced more generally from the judgment of Lord President Inglis that section 100 applies to a subsisting obligation and that it cannot be used in order to prove extinction of the obligation by parole evidence. The words of the enactment themselves suggest such a limitation, for on the appellant's construction, the words "relevant to any question of liability" are otiose. It is no undue stretch of judicial interpretation to read in the word "continuing" or "subsisting" as qualifying "liability." Of the other Judges who heard the case Lord Adam alone found difficulty in agreeing with the Lord President, a difficulty which I think he overcame in later cases, as in Robertson v. Thomson for example. Lord M'Laren, having said that section 100 contained evidence that it was intended to apply to cases in which the Scots law of evidence differed from that of England, defined the limits of the section's operation thus (at p. 638) :

"Under the common law of Scotland facts relevant to a question of liability on a bill or note were in general only capable of being proved by the writ or oath of the holder of the instrument. There can be no doubt that one of the objects of the 100th section was to alter this rule of evidence, and to allow questions as to value, and questions as to the the purposes for which bills were endorsed or delivered, to be investigated by parole evidence. The language of the enactment does not suggest to my mind that anything more than this was intended."

Lord Kinnear drew a distinction between an averment of a fact or agreement going to vary or modify the apparent liability of parties on the face of the bill and an averment of a fact or agreement going to extinguish the liability altogether, and held that section 100 did not enable an averment of the latter kind to be proved by parole evidence. In another case—Viani and Co. v. Gunn and Co. —it was averred that the bill sued upon had been granted for the accommodation of the pursuer and that he was not a holder in due course. The Lord Ordinary allowed a proof before answer, and his interlocutor was affirmed by the Second Division. The decision is not of great importance because the allowance of proof seems to have intended to reserve for ultimate decision the effect of the proof and the defenders’ pleas in law. But the decision is plainly consistent with the limitation on the scope of section 100 which Lord President Inglis had explained and recognised in National Bank of Australasia v. Turnbull, for what was put in issue by the defenders’ averment was the enforceability of the obligation under the bill, not its extinction. I pass over a group of decisions, to which I shall return, and come to a case in which Lord President Dunedin, Lord M'Laren and Lord Kinnear considered the section and dealt with its construction. In Stagg and Robson, Limited v. Stirling two parties to a written agreement stipulated that payment for certain goods should be made by guaranteed bills. Certain of the bills were not met and the holders sued the guarantors. In the defences a verbal agreement between the parties was averred, that the bills were to be renewed at maturity if the goods had not been delivered, and it was also averred that delivery of all the goods had not been accepted. This defence therefore rested on "a fact relating to a bill of exchange and relevant to a question of liability thereon," if the appellant's construction of section 100 is well founded. The First Division, however, held that parole evidence to prove the verbal agreement was incompetent. Lord President Dunedin, as he then was, said (at p. 679) :

"The meaning of the provision (i.e., section 100), I think, was clear enough to allow you to prove by parole, what the rules of law might not allow to be proved by parole, namely, the true relations to each other of the parties upon the bill; that is to say, that the indebtedness which, prima facie on the bill, is upon the acceptor, might be shown to be not really upon the acceptor; or, in other words, that the true position of the names on the bill might be proved. But I do not think that that section has anything to do with the general rule of law, which is that you cannot alter a written agreement by parole evidence."

Lord M'Laren said (at p. 679) :

"Any question relative to the consideration of the bill may under the statute be proved by parole evidence."

Lord Kinnear agreed with the Lord President. He added (at p. 680) :

"The old rule of our law, which has been displaced by the 100th section of the Bills of Exchange Act, created a presumption of onerosity so strong that, although it might be contradicted, it was not allowed to be disproved except by the writ of the party seeking to enforce liability on the bill, or else by a reference to his deposition on oath. That rule was supposed to be supported by favour to trade, but in comparatively recent times it was seen that it might operate very unjustly, and yet the rule was so well settled that the Court could not disregard it. Now, I apprehend that the main purpose of the section in question was to remedy that injustice, but I think it is extremely probable that the language of the clause went somewhat beyond what was required to remedy the particular mischief to which I have referred, and it may be that it would allow parole evidence being admitted with reference to other questions of liability than those which depend on mere presumption of onerosity."

The judgments of these learned Judges reinforce the opinion of Lord President Inglis that the section was only enlarging the mode of proving a defence not involving the discharge of the liability under the bill. In an earlier case—Drybrough and Co., v. Roy Limited —the Second Division had held that parole evidence was competent to prove an averment of a verbal agreement whereby the pursuers undertook to renew the bill from time to time. The case was distinguished from a case—Gibson's Trustees v. Galloway —in which it had been held by the First Division, Lord M'Laren delivering the judgment of the Court which included Lord President Robertson, Lord Adam and Lord Kinnear, that an averment that the sum due under the bill should only be repaid when convenient to the debtor could not competently be proved by parole evidence. In a subsequent case—Manchester and Liverpool District Banking Co., Limited v. Ferguson and Co. —Lord Kyllachy, delivering the judgment of the Second Division, said (at p. 869) :

"Some of the cases on this subject have gone very far, but in this case we are asked to go further than has ever yet been proposed. We are asked to send to proof an averment of a mere verbal agreement to the effect that under a certain bill, expressed in the usual terms, no liability of any kind should arise, until ‘sufficient’ working capital should be raised by certain limited companies. It is not said what was the amount of the working capital which was to be raised, or to be held sufficient; nor, as regards the time within which it was to be raised, is there any mention of limit. For all that appears the time might be the Greek Kalends. Now, that is not, in my opinion, a kind of averment which could have been remitted to probation by writ or oath under the old law, or which in any view of the meaning of the 100th section of the Bills of Exchange Act can be remitted to proof now."

That case shows that an averment which is inconsistent with liability under the bill was, in the view of Lord Kyllachy, the Lord Justice-Clerk, Lord Kincairney and Lord Stormonth-Darling, not within section 100, and that the change brought about by the section was by no means as great as the appellant's submission requires. There is the overwhelming authority of Judges of the highest eminence that section 100 does not authorise parole proof of averments amounting to a denial or discharge of liability under a bill. Robertson v. Thomson does not stand alone; if it is to be held to have been wrongly decided a number of other decisions will fall with it.

Drybrough and Co., Limited v. Royis, in my opinion, irreconcilable with the other decisions on this branch of the law, and it should be overruled. I make two comments upon it, first that it infringed the rule that parole evidence is inadmissible to contradict the terms of a written contract, and second that it introduced for the first time a divergence between the law of Scotland and the law of England which has no rational justification. Both these comments can be driven home by a consideration of New London Credit Syndicate v. Neale . In that case the Court of Appeal had to consider much the same point as was considered in Drybrough and Co., Limited v. Roy and came to the opposite decision from that at which the Second Division arrived. The Court held that an agreement to renew a bill could not be proved by parole evidence. The plaintiffs in that case argued, as the appellant here has argued, that the wording of the 1882 Act was too clear to admit of doubt that parole evidence was admissible. They said that under section 29 (2) it was plainly competent to prove that the bill had been negotiated contrary to a verbal agreement and therefore in bad faith. A. L. Smith, L.J., answered this contention by saying (at p. 490) :

"I do not think that it was intended … to alter the general law of evidence which renders parole evidence inadmissible for the purpose of contradicting the terms of a written document."

With that reasoning I humbly agree, as I agree also with the similar reasoning of the Scottish Courts.

The proviso in the last two lines of section 100, in my opinion, creates no difficulty for the respondents. Their case is that the enacting part of the section deals with bills the liability on which subsists. Now it is not necessary to construe the Act by which the sexennial prescription of bills was introduced—12 Geo. III, cap. 72, section 37. It is enough to say that the Courts have taken the view that the prescription did not extinguish the debt but only enacted certain specific and imperative rules on the subject of probation—Darnley v. Kirkwood, Lord Fullerton at p. 600—and, further, that the prescribed bill itself was a subsisting document of debt which could be sued on as the foundation of an action for payment—Milne's Trustees v. Ormiston's Trustees, per Lord Rutherford Clark at p. 531. In practice it was libelled on in the summons as a liquid document of debt in accordance with the Court of Session Act, 1850. In these circumstances the provision allowing parole proof of any fact relating to a bill of exchange and relevant to any question of subsisting liability thereon would almost certainly have been thought to allow parole proof that the debt was resting-owing after the sexennial period had run, and so it was essential that there should be a proviso that section 100 should not apply when the bill had undergone the sexennial prescription. The insertion of the proviso lends no support to the appellant's construction of the section.

I repeat that, in my opinion, the section has been correctly construed by the Courts in Scotland in all the cases to which I have referred, with the exception of Drybrough and Co., Limited v. Roy . A construction which commended itself to Lord President Inglis, Lord Robertson, Lord Kinross and Lord Dunedin, to Lord Kinnear, Lord Kyllachy and Lord M'Laren could only be rejected if on consideration by this House it appeared an inescapable conclusion that the words of the statute were plain beyond doubt and that they had been repeatedly misunderstood by Judges who were not usually prone to such errors. If I had been of another opinion, I would not have felt able to affirm an erroneous construction of the section merely because it is now half a century since Robertson v. Thomson was decided. This is not a case in which dispositions of property or contracts with a long tract of future time have come into being on the faith of a wrong decision by the Court, and the mere passage of time is irrelevant. Nor can I attach any importance to the circumstances that there have been three Acts amending the Bills of Exchange Act in which no attempt was made to overrule the decision in Robertson v. Thomson . The amending Acts did not repeat the provisions of the section, nor did they deal with any matter cognate to its subject-matter. They are not, so far as this section goes, of interpretative value.

The appellant comes before us in the character of a victim of his own misplaced trustfulness. He avers that he was satisfied that his creditor, who was his intimate friend, would destroy the bill when it was paid. The averments may provoke commiseration, but they ought not to sway judgment. If the appellant is to lose his case, it is because the maxim still holds good vigilantibus non dormientibus leges subveniunt. Nothing was easier than to require that the bill should be delivered when the debt was satisfied. If the appellant chose to neglect so obvious a precaution, he must impute the consequences to his own voluntary acceptance of an obvious risk. In my opinion the appeal should be dismissed.

LORD MORTON OF HENRYTON.—On 6th March 1946 the appellant, John Sutherland, accepted a bill of exchange for £250 and interest, payable twelve months after date, drawn upon him by David Nicol. On 14th January 1948 David Nicol died, and the respondents are a majority and quorum of his testamentary trustees. The bill of exchange in question was found among David Nicol's papers after his death, and the respondents brought a suit against the appellant claiming payment of £250 and interest. The appellant, by his answers, averred that the said sum and interest was repaid by him to David Nicol on 18th May 1946, and that this repayment would be proved by oral evidence. The Sheriff-substitute held that parole proof of payment of a debt is incompetent, and on appeal the First Division affirmed this decision.

The appellant relies in your Lordships’ House, as he relied in the Courts below, on section 100 of the Bills of Exchange Act, 1882, and in particular upon the opening words of section 100. "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." These are ordinary English words without any technical meaning, and surely, if they are given their ordinary meaning, the appellant is entitled to succeed. He seeks to prove one fact only, that the sum originally due upon a bill of exchange has been paid. Mr Clyde conceded— and the concession is not surprising—that this fact was a fact "relating; to a bill of exchange" within the section. Is it then a fact "which is relevant to any question of liability thereon"? Apart from authority, I should feel no shadow of doubt that it was. The question arises as to whether a man is or is not liable on a bill of exchange. If he has paid the sum due he is not liable thereon. How, then, can it be said that the fact of payment is not relevant to the question of liability I find it difficult to imagine any fact which is more relevant. It was suggested by counsel for the respondents that the word "thereon pointed to a" subsisting liability on the bill. No doubt it does, but this fact in no way assists their case. In the present case, and indeed in every action based on a bill of exchange, the pursuer says to the defender, "You are under a subsisting liability on this bill," and the defender avers, "I am not under a subsisting liability." That averment may be supported in a number of ways; but, if the defence happens to be payment, surely the fact of payment is relevant to the question whether there is or is not a subsisting liability on the bill. These words seem to me so plain as to require no assistance for their interpretation from any other part of the section or of the Act. Mr Thomson, for the appellant, suggested that the latter part of section 100 lent support to his argument, and I agree that this is so. Mr Clyde suggested that section 62 assisted him, but I cannot find in that section a "context" which should affect the construction of the simple opening words which I have already quoted.

It is said, however, that there are authorities which should lead your Lordships to arrive at a different conclusion, and I must now examine these authorities. The only decision which is directly in point is Robertson v. Thomson, a decision of the First Division in 1900. I cannot regard this as a satisfactory decision. Lord Adam's reasons are expressed as follows (at p. 6) :

"In my opinion it was not the intention of that section"

(i.e.,section 100 of the Bills of Exchange Act, 1882) "to alter the rules of the law of Scotland as to the modes in which payment of a debt may be proved. By the ordinary rule of the law of Scotland payment of a debt constituted in writing cannot be proved by parole, and I do not think that section 100 was intended to alter that rule."I would say that the intention of the section can only be gathered from the words used, and Lord Adam does not suggest that the words used, in their ordinary meaning, do not enable proof of payment to be given by parole. Lord M'Laren in concurring said (at p. 6) :

"I should have preferred not to give an opinion in a case of this kind on the construction of section 100 of the Bills of Exchange Act, 1882, a section which has already given rise to difficulties, and which may come before us again for construction. This, much I may say, that a defence of payment would not usually or properly be described as a ‘fact relating to a bill of exchange’ relevant to a question of liability thereon."

Pausing there, I find this a most

surprising statement. I cannot agree with it, and I do not think that any of the learned Judges in the Court of Session in the present case agreed with it. The Lord President (Lord Cooper) described Robertson v. Thomson as an illustration of a resolute determination, evinced by the Courts in Scotland, not to read section 100 "too literally or too widely." The italics are mine. It is also interesting to observe that prior to the decision in Robertson v. Thomson the textbook writers in Scotland did not doubt that the fact of payment was a fact covered by the opening words of section 100. See, for instance, the 10th (1899) edition of Bell's Principles of the Law of Scotland, at section 333B.

To return to Lord M'Laren's judgment. He continued "If that is so, I think section 100 does not apply to the present case. I agree as to the necessity of enforcing the rule that, subject to known exceptions, payment in pursuance of a written obligation must be proved by the writ or oath of the creditor." I would observe, with all respect to Lord M'Laren, that this last sentence is heretical; their Lordships were not sitting to enforce a rule of the common law of Scotland, or to fit the statute into the common law, but to decide whether a statute, on its fair interpretation, did or did not alter the common law. Lord President Balfour and Lord Kinnear concurred without giving any reasons, and I cannot help noting the singular absence of any close examination of the wording of section 100 in any judgment delivered in that case. In the present case Lord Carmont began his opinion by saying :

"However strange the decision in Robertson v. Thomson may look."

To me it looks strange indeed, and I think it should be overruled. It is true that fifty years have elapsed since the case was decided, but lapse of time is not of itself a convincing reason for failing to overrule an incorrect decision, and I can find no other convincing reason in the present case. The only result of the decision has been that for fifty years in Scotland the acceptor of a bill of exchange has been precluded, wrongly, as I think, from proving by parole evidence that his liability has been discharged by payment.

There are, however, other authorities upon which Mr Clyde relied, though no one of them is directly in point. Two of these cases were decided in the interval between the passing of the Act of 1882 and the decision in Robertson v. Thomson . They are National Bank of Australasia v. Turnbull and Co. and Gibson's Trustees v. Galloway . In each of these cases a party to the bill was seeking to contradict by parole the legal effect of his contract upon the face of the bill, while in the present case the appellant is not seeking to do any such thing. He seeks to say, "I do not deny that the terms of the bargain are exactly as stated in writing, but I have discharged my liability by payment." As I read the judgments, no Judge in either of these cases addressed his mind to the question now before your Lordships. Indeed, I find indications in the judgments in the former case that, if the evidence

tendered had been evidence of payment, the decision would have been in favour of admitting it. For instance, Lord M'Laren said (National Bank of Australasia, at p. 638) :

"The operation of the enactment is confined to Scotland, and the section, as I think, contains internal evidence that it was intended to apply to cases in which the law of evidence as administered in Scotland was different from that of other parts of the United Kingdom."

Now I am not aware that by the law of England the acceptor of a bill has ever been precluded from proving by oral evidence that he has already paid the sum named in the bill. Therefore, on Lord M'Laren's reasoning just quoted, if the defenders had been seeking to give oral evidence of payment, he would have admitted it. For these reasons, I cannot regard the two cases just cited as decisions adverse to the appellant's argument in the present case.

Next in order of date comes Robertson v. Thomson, on which I have already commented. Then comes Drybrough and Co., Limited v. Roy .That was a case in which a firm of brewers, drawers of a bill accepted by a public-house keeper, which had been noted for non-payment, brought an action on the bill against the acceptor. The bill was a renewal of one granted previously and renewed by the parties from time to time. The defender did not deny that he had received the amount in the bill as a loan to enable him to acquire and carry on his business, but averred that the pursuers had no present right to enforce payment, by reason of a verbal agreement entered into at the time when the bill was originally renewed. Lord Trayner analysed the cases of National Bank of Australasia and Gibson's Trustees in a judgment with which the Lord Justice-Clerk and Lord Moncreiff entirely agreed, and said (at p. 667) :

"I consider this a relevant defence to the pursuer's claim, and the question is, how can that defence be proved Prior to the passing of the Bills of Exchange Act, 1882, it is certain that such a defence could only have been proved by the writ or oath of the pursuers, but the defender maintains that he can now prove it by parole. I think he is right."

His Lordship then read the opening words of section 100 and continued :

"The facts averred in regard to the alleged agreement are relevant to the question of the liability upon the bill of exchange founded on, and may therefore be proved by parole. It was said that the statute did not apply here, because the defender did not deny his liability on the bill. It is true he does not deny the debt, nor his ultimate liability to pay the same. But he does deny his liability to make payment of it now, and that is the question now to be determined. It is a question of present liability, and the statute is not confined to questions of ultimate liability. It provides for the proving of any fact relevant to (that is, bearing upon) ‘any question of liability.’"

It is to be observed that notwithstanding the case of Robertson v. Thomson, which does not appear to have been cited, Lord Trayner thought it clear that the statute covered questions of ultimate liability, but was not confined to them. Drybrough and Co., Limited v. Roy was approved of and followed in Viani and Co.Four years later came Stagg and Robson, Limited v. Stirling . The facts of that case were far indeed from the facts of the present case, and it necessary to state them in order to show the context in which the Lord President (Lord Dunedin) made certain observations which were strongly relied on by Mr Clyde. The pursuers had raised an action against the defenders for the price of goods supplied, and that action was settled upon terms which were embodied in written heads of settlement. These heads provided, inter alia, that the defenders were to pay the pursuers the sum of £2250 in the following manner :—£250 in cash, £500 by bill at one month, and three other bills for a like sum of £500 at three, four and five months respectively. The bills as they became due were not all honoured and the pursuers raised an action to recover the amount unpaid. The Lord Ordinary, relying upon section 100 of the Bills of Exchange Act, 1882, and upon the decision in Drybrough and Co., Limited v. Roy, allowed a proof of averment that there was a verbal agreement between the parties that the bills should be renewed when they fell due. On appeal the Lord President (Lord Dunedin) read the opening words of section 100 and continued (at p. 679) :

"I am bound to say that I do not think that that provision of the statute has any application to the matter in hand. It does not mean that there is a sort of magic in the word ‘bill,’ and that the moment you allege anything with regard to a bill you at once upset the whole law of evidence. The meaning of the provision, I think, was clear enough to allow you to prove by parole, what the rules of law might not allow to be proved by parole, namely, the true relations to each other of the parties upon the bill; that is to say, that the indebtedness which, prima facie on the bill, is upon the acceptor, might be shown to be not really upon the acceptor; or, in other words, that the true position of the names on the bill might be proved. But I do not think that that section has anything to do with the general rule of law, which is that you cannot alter a written agreement by parole evidence."

The Lord President was of opinion that there was no relevant defence to the action and with this opinion Lord Place and Lord Kinnear agreed. It is not necessary for me to express an opinion as to the correctness of this decision, although I would point out that it can hardly be reconciled with the decision in Drybrough and Co., Limited v. Roy, which was cited in argument but was not mentioned in any of the judgments. Nor am I concerned to comment upon the Lord President's view that the section had nothing to do with the general rule of law that you cannot alter a written agreement by parole evidence, for the appellant in the present case does not seek to do this. As to the sentence which I have already quoted, beginning :

"The meaning of the provision …,"

I would at once agree that section 100 enables a party to prove by parole the true relations to each other of the parties upon the bill; but if Lord Dunedin is to be understood as stating there that section 100 has no other effect, this dictum was unnecessary for the decision of the case of before him. I do not myself understand Lord Dunedin as making any such assertion, but, if he is to be so understood, I must respectfully disagree.

Mr Clyde drew our attention to the fact that since 1900 the Legislature had thrice amended the Act of 1882—see the Bills of Exchange (Crossed Cheques) Act, 1906, the Bills of Exchange (Time of Noting) Act, 1917, and the Bills of Exchange Act (1882) Amendment Act, 1932—and had not seen fit to amend section 100 so as to get rid of the decision in Robertson v. Thomson . If section 100 had at any time been re-enacted unaltered since 1900 that fact might afford ground for inferring that the decision in Robertson v. Thomson carried out the intention of the Legislature; but no such inference can be drawn from the passing of the three amending Acts just mentioned. Each of them dealt with topics remote from the matter dealt with in section 100, and I see no reason for thinking that the attention of the Legislature was directed to section 100 on any of these three occasions.

Mr Clyde claimed that the cases of National Bank of Australasia v.Turnbull and Co., Gibson's Trustees v. Galloway and Stagg and Robson, Limited v. Stirling, together with the cases of New London Credit Syndicate v. Neale and Manchester and Liverpool District Banking Co., Limited v. Ferguson and Co., cited in the course of the argument, constituted a formidable body of authority against the appellant's contention. In my opinion this claim is ill-founded. I summarise the position as to the authorities as follows :—(1) In no one of the five cases just mentioned had the Court to decide whether parole evidence of payment of a bill came within the opening words of section 100. In other words, the Court had not to decide the only question before your Lordships in the present case. The question whether parole evidence can be allowed to contradict or vary the terms of a document is, of course, quite a different question. (2) Not one of the learned Judges who decided these cases ever said, even by way of dictum, that proof of payment of a bill is not within the opening words of section 100. I can find no indication that the mind of any one of these Judges was directed to the question as to proof of payment. It is significant that in none of the judgments is there any mention of Robertson v. Thomson; this must surely indicate that the Judges who decided cases later in date than Robertson v. Thomson either thought that the question as to proof of payment was in no way germane to the matters before them or were not entirely satisfied with the decision in the last-mentioned case. (3) Robertson v. Thomson is the only case in which the present question was decided. The Judges in that case did not supply any reason why payment was not a "fact relating to a bill of exchange which is relevant to any question of liability thereon," and I have already explained why I cannot agree with their decision. (4) In the present case it is impossible to say what the First Division would have decided if Robertson v. Thomson had been out of the way. The Lord President said :

"So far as the Courts are concerned, there is a whole series of decisions in Scotland in which the Courts have evinced a resolute determination not to read the section too literally or too widely, for the obvious reason that to do so would produce an anomalous situation not conform either to the common law of Scotland or to the common law of England, and might have a most disturbing effect upon mercantile practice."

This reason may well explain some of the cases cited to this House, but it does not, I think, explain Robertson v. Thomson So far as I am aware, the common law of England did not forbid parole evidence to be given of payment of a bill of exchange, and the rule which in Scotland forbade such evidence to be given was surely a rule of procedure in the Courts, and not a matter of mercantile practice.

The result is that I can find nothing in the authorities which should lead your Lordships to hold that the fact of payment is not "a fact relating to a bill of exchange which is relevant to any question of liability thereon." In my opinion, it is such a fact. In forming that opinion I have striven to adhere to the principles, in regard to the construction of statutes, which have been so often laid down in this House, and never more clearly than by Lord Halsbury, L.C. (quoting Tindal, C.J.) in Pemsel's case (at p. 543) :

"‘If the words of the statute are in themselves precise and unambiguous, then no more can be necessary than to expound those words in their natural and ordinary sense. The words themselves alone do in such case best declare the intention of the lawgiver.’"

I would allow the appeal.

LORD MACDERMOTT.—I would allow this appeal. In my opinion, a defence of payment comes clearly within the natural and ordinary meaning of the opening words of section 100 of the Bills of Exchange Act, 1882, and I am unable to find anything in the rest of that Act to justify a different conclusion. I need not detain your Lordships by elaborating this view or referring to the authorities cited in argument. I have had the advantage of reading in print the opinion of my noble and learned friend Lord Morton of Henryton and I agree so fully with what he has said that there is nothing I can usefully add.

LORD REID.—The appellant in this case invites your Lordships to reconsider and reverse the decision in Robertson v. Thomson . This decision has stood unchallenged for fifty years. Nevertheless, it is not a decision which on that account alone I should be averse from reconsidering. It is not a decision in reliance on which it may be supposed that people have entered into arrangements which are still subsisting; if that were so it would, I think, require reasons of an exceptional character to justify reconsideration after so long an interval. But if it could be shown in this case that the decision in Robertson v. Thomson stands by itself and is clearly wrong, that would, I think, be enough. I do not however regard this decision as standing by itself. It is true that it is the only decision on the particular question whether payment of a sum due under a bill of exchange can be proved by parole evidence. But it is only one of a series of at least six cases in which the meaning and effect of the first part of section 100 of the Bills of Exchange Act, 1882,have been considered in the Inner House.

Section 100 of the Act of 1882 enacts that "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." Before the passing of that Act there had been much criticism of the law of Scotland on this matter. In Ferguson, Davidson and Co. v. Jolly's Trustee, decided in 1880, Lord Shand had said (at p. 505) :

"I know nothing more unsatisfactory in the law of this country than the rules of evidence—for I cannot call them principles—which are applied in cases of this class relating to bills of exchange."

Reference was made to the Report of the Mercantile Law Commission of 1854 and to the deliberate omission by Parliament to adopt certain recommendations in that report when passing the Mercantile Law Amendment Act, Scotland, 1856. It seems clear that these matters had a close connexion with the incorporation of section 100 in the Act of 1882. But the points of criticism and the recommendations did not relate to fundamental and general rules. It had not been urged for example that such general rules as that payment of a sum due under an obligation in writing cannot be proved by parole evidence, or that the terms of a written agreement cannot be altered by a parole agreement should cease to apply to bills of exchange. Of course Parliament may have seen fit to make a much more far-reaching change in the law than was necessary to deal with the mischief which led to the change, but nevertheless the circumstances antecedent to the change are not without importance.

The first case in which full consideration was given to section 100 appears to have been National Bank of Australasia v. Turnbull and Co . decided in 1891. The decision of that case did not turn on the interpretation of section 100, but opinions as to its effect were expressed at some length by Lord President Inglis, Lord Adam and Lord M'Laren.

The view of Lord Adam was in effect that for which the appellant now contends. The question then under consideration was, not whether with regard to bills of exchange the section had changed the general rule as to proof of payment, but whether it had changed the equally general rule against changing a written obligation by proof by parole of an agreement inconsistent with it. Lord Adam said (at p. 637):

"It is certainly very anomalous, and against all principle, so far as I can see, that the effect of the written contract on the face of a bill, or of any other written contract, should be taken away by parole evidence, but I cannot get over the fact that the Act of Parliament seems to me to say so."

But the Lord President and Lord M'Laren thought that the words of the section have a narrowed meaning. The Lord President said (at p. 634) :

"If we were to entertain the contention of the defenders, and their averments were proved, we should then be asked not to limit the liability of some person ex facie liable on the bill, but to deny all effect to the written contract contained in the bill, and to substitute therefor a parole agreement directly contradictory of the written contract,"

and Lord M'Laren said (at p. 638) :

"This amounts to a subversion of a fundamental rule of jurisprudence, that a written agreement may not be contradicted by parole evidence; and the proposed interpretation of the section in my judgment involves a large and wholly inadmissible extension of the 100th section, which, as I think, does not relate to any questions of liability except questions depending on extrinsic and relevant facts. Under the common law of Scotland facts relevant to a question of liability on a bill or note were in general only capable of being proved by the writ or oath of the holder of the instrument. There can be no doubt that one of the objects of the 100th section was to alter this rule of evidence, and to allow questions as to value, and questions as to the purposes for which bills were indorsed or delivered, to be investigated by parole evidence. The language of the enactment does not suggest to my mind that anything more than this was intended."

The next case was Gibson's Trustees v. Galloway, where the other Judges of the First Division concurred in an opinion of Lord M'Laren in which he said with regard to section 100 (at p. 416) :

"On the most liberal reading of the enactment, it cannot be held to authorise the admission of proof to set aside the bill altogether."

Then came Robertson v. Thomson, in which in defence to an action for payment of the balance due under a bill the defender offered to prove by parole that he had made certain payments to account. He was not allowed to do so. The leading opinion was given by Lord Adam, who took a rather different view with regard to section 100 from that which he had expressed in National Bank of Australasia v. Turnbull and Co. He gave no reason for his change of view but merely said (at p. 6) :

"In my opinion it was not the intention of that section to alter the rules of the law of Scotland as to the modes in which payment of a debt may be proved. By the ordinary rule of the law of Scotland payment of a debt constituted in writing cannot be proved by parole, and I do not think that section 100 was intended to alter that rule."

Lord M'Laren's opinion was in line with his opinion in the earlier cases. He said (at p. 6) :

"A defence of payment would not usually or properly be described as a ‘fact relating to a bill of exchange’ relevant to a question of liability thereon. If that is so, I think section 100 does not apply to the present case."

Lord President Kinross and Lord Kinnear concurred.

The next case—Drybrough and Co., Limited v. Roy —was decided by the Second Division. In that case the defender was held entitled by virtue of section 100 to prove in defence to an action on a bill an oral agreement that subject to certain conditions which had been fulfilled the bill would be renewed from time to time. The earlier cases were distinguished. Lord Trayner said (at p. 668) :

"The facts averred in regard to the alleged agreement are relevant to the question of the liability upon the bill of exchange founded on, and may therefore be proved by parole. It was said that the statute did not apply here, because the defender did not deny his liability on the bill. It is true he does not deny the debt, nor his ultimate liability to pay the same. But he does not deny his liability to make payment of it now, and that is the question now to be determined. It is a question of present liability, and the statute is not confined to questions of ultimate liability. It provides for the proving of any fact relevant to (that is, bearing upon) ‘any question of liability.’…I notice that in the cases I have referred to it is made subject of remark that to allow the apparent obligant on a bill of exchange by parole to contradict the writ on which he appeared as obligant, would be to allow a proof by parole to contradict or modify his written obligation. In the ordinary case that would not be allowed. But the Bills of Exchange Act has, in my opinion, introduced an exception to that general rule, where the question involved is one of liability on a bill of exchange."

Lord Moncreiff gave an opinion to the same effect and the Lord JusticeClerk concurred. A year later a similar decision was reached by the same Division in Viani and Co. v. Gunn and Co., but Lord Young, who had not taken part in the earlier case, dissented.

Finally, in Stagg Robson v. Stirling the First Division, in circumstances not unlike but distinguishable from those in Drybrough and Co., Limited v. Roy and Viani and Co. v. Gunn and Co., refused to allow proof by parole. Lord President Dunedin said with regard to section 100 (at p. 679) :

"I am bound to say that I do not think that that provision of the statute has any application to the matter in hand. It does not mean that there is a sort of magic in the word ‘bill,’ and that the moment you allege anything with regard to a bill you at once upset the whole law of evidence. The meaning of the provision, I think, was clear enough to allow you to prove by parole, what the

rules of law might not allow to be proved by parole, namely, the true relations to each other of the parties upon the bill; that is to say, that the indebtedness which, prima facie on the bill, is upon the acceptor, might be shown to be not really upon the acceptor; or, in other words, that the true position of the names on the bill might be proved. But I do not think that that section has anything to do with the general rule of law, which is that you cannot alter a written agreement by parole evidence."

It appears to me from an examination of these cases that, though there has been considerable difference of opinion, there is in the end a clear preponderance of judicial opinion to the effect that section 100 does not authorise proof by parole of an agreement which would nullify the written contract in a bill of exchange, but that the section must be read so that the making of such an agreement is not "a fact relating to a bill of exchange which is relevant to any question of liability thereon."If that is so, I do not see on what principle the making of a payment which extinguishes liability under the bill can be distinguished and held to be such a fact.

As regards the cases of Drybrough and Co., Limited v. Roy and Viani and Co. v. Gunn and Co . I do not think that these decisions are consistent with the grounds of decision in the other cases which I have cited; and, in my opinion, the weight of the authority of those other cases is such that if a case like Drybrough and Co. or Viani and Co.had arisen after 1908 the Court of Session would not have followed these decisions.

If I had to decide the present question without the assistance of authority, I should regard it as a difficult question. I do not think that it is easy to define what is meant by a "fact relating to a bill of exchange." It may well be that I would think that payment of a sum due under a bill is a fact relevant to a question of liability thereon, but even that is not quite obvious, and in any case that is not enough to satisfy the section. It must also be a fact relating to the bill, and the form of the section would seem to indicate that that was intended to mean something different from a fact relevant to a question of liability thereon. And I would certainly think that, if the words of the section are reasonably capable of having the narrower meaning, there is every reason to decide that that is their true meaning. The interpretation of section 100 is not only a difficult matter, it is also a matter which affects a wide variety of cases. In a matter of this character, if the Court of Session after repeated consideration comes to a decision which is final so far as that Court is concerned, there must, in my opinion, come a time when it would no longer be proper for this House to reopen the matter. The principle that questions which have not been considered in this House but have apparently been settled by decisions of lower Courts should not be reopened after a lapse of time cannot, in my judgment, be confined to cases when people may be presumed to have made contracts or other arrangements in reliance on those decisions. In cases of this character the reasons against reconsideration are stronger than in other cases; but there are also other and more general reasons against unsettling what is apparently settled law—as indeed this House has recognised in deciding that it will not reverse any of its own decisions. In my judgment the circumstances of this case are such that this House should not reopen the question under appeal, and for that reason I am of opinion that this appeal should be dismissed.


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