Scottish Court of Session Decisions

The late Dr Charles Fyffe, surgeon, H. E. I. C. S., had an account with the Company of Fergusson and Fairlie, afterwards Fairlie, Reid, and Co., of Calcutta, which continued from 1786 to 1793, when Dr Fyffe became affected with insanity. The account was balanced annually on 30th April; and in 1793, the balance in his favour, in account with the Company, was 4207 sicca rupees. In 1793, John Hutchison Fergusson, of Trochrigg and Monkwood, became a partner of the Company. On 30th April, 1795, one of the partners withdrew, another partner was assumed, and the business was carried on by the new Company under the firm of Fairlie, Gilmore, and Co. On 30th April, 1810, another change of some of the partners took place, and the new Company carried on the business under the firm of Fairlie, Fergusson, and Co., till 30th April, 1818, when a similar change occurred, and the new firm was Fergusson, Clark, and Co., which continued till 30th April, 1820. At that date, John Hutchinson Fergusson, who had been a partner of all the firms since 1793, retired, and the business was subsequently carried on under the firm of Fergusson and Co.

Dr Fyffe died on May 9, 1810. In 1812, James Fyffe, residing in Glasgow, a near relation of his, applied to the late William Fairlie, one of the partners of Fairlie, Fergusson, and Co., and of the previous firms, for a state of the account of Dr Fyffe with the Company. James Fyffe alleged that he received an answer, dated March 23, 1812, stating—“I beg that you will inform the relations of Mr Charles Fyffe, that the balance of his account, with Messrs Fairlie, Fergusson, and Company, upon the 30th of April, 1810, was sicca rupees 17,346.5. They will continue to advise me how this balance may stand with them. The interest of money has fallen greatly in Bengal, and seven per cent is now the highest rate which is allowed.” This letter was not produced, and Fergusson did not admit it. On July 5, Fairlie. furnished a state of the account of Dr Fyffe, which had been obtained from India, and was made up from the Company's books. He at the same time wrote to James Fyffe—“I now enclose you Mr Charles Fyffe's account from its commencement, which I received some time ago from Calcutta; the balance, on the 30th April, 1810, was rupees 17, 346.5, chiefly arising, you will observe, from the high rate of interest allowed upon it.” It did not appear that the death of Dr Fyffe was, at this time, known to any of the parties.

The account went back to 1786, and was stated on the footing of annually accumulating the interest with the principal, and carrying forward the joint amount as a capital bearing interest in next year's account. This was done under deduction of one per cent per annum, in name of commission. The same mode of making up the account was continued after the period of Dr Fyffe's insanity, as before it; but the whole details of the account came then to consist merely of an annual accumulation of interest with principal, as no operations were made on it by any party for Dr Fyffe. The rate of interest for several years after the period of Dr Fyffe's insanity was nine per cent; but from 1799, till the last entry of the account in 1810, the rate was ten per cent. The account stopped at 30th April, 1810. The account bore a docquet in these terms:—“To balance in his favour with Fairlie, Fergusson, and Company, to bear interest at nine per cent per annum, sicca rupees 17, 346, 5.” The whole was signed by the firm of Fairlie, Fergusson, and Company.

In 1833, David Fyffe of Smithfield, and Mrs Fyffe or Kerr, who were decerned executors-dative qua next of kin of the deceased Dr Fyffe, and alleged they were also interested under a holograph will left by him, raised an action against John Hutchinson Fergusson, as a partner of the firm of Fairlie, Fergusson, and Co., and liable for their obligations. The summons, as amended, concluded for payment of the balance stated as due by that firm in the above account, the same being converted into a sum of money, “sterling, at such rate of conversion as should be determined in the course of the process; “together with interest at the rate of nine per cent on the foresaid sum from 30th April, 1810, till paid.” The defender alleged that the word “nine,” as denoting the rate of interest in the docquet at the account, was written on an erasure, and could make no faith; and independently of this, he pleaded inter alia, that there was no sufficient evidence of the debt being due by Fairlie, Fergusson, and Co.; that the debt being illiquid, it was necessary to call the representatives of all the partners of that firm ¹ before the action could proceed against the defender; and that the debt, if it had even been due, was cut off by the English statute of limitations. To these pleas the pursuers answered, that the docqueted account, signed by Fairlie, Fergusson, and Co., and the relative letter by a partner of the firm, amounted to an actual liquidation, and written constitution of the debt, and proved Fairlie, Fergusson, and Co. to be directly bound for the amount; that, the debt being constituted, it was not necessary to call any other partner or his representatives; ² and that the English statute of limitations did not apply.

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¹ A. v. B., Feb. 26, 1741 (14560)—Reid, June 11, 1814 (F. C.)—Geddes, June 2, 1827 (ante V. 747; or 697, new ed.)—Dewar, Feb. 23, 1831 (ante IX, 487).

² Stark on Partnership, 229, 230, and authorities there referred to.

The Lord Ordinary, on November 26, 1835, “repelled the defences; found that the pursuers are entitled to the sum of 17, 346.5 sicca rupees, contained in the docqueted account of the 1st of May, 1810, converted, at the present rate of exchange, into sterling money, with interest at the rate of nine per cent on said sum of sicca rupees, as so converted, from the 30th day of April, 1810, till decree; and decerned for the same accordingly, with the legal interest on the sum so decerned for, until payment; and ordained the pursuers, within fourteen days, to give in a state of their claim, made up in terms of this interlocutor; and found the pursuers entitled to expenses.”

In the state which was given in, under this interlocutor, the pursuers, who stated the debt due at 30th April, 1810, at little more than £1700, now claimed a sum of £15,732, as having arisen out of annual accumulations of interest, which they alleged to be allowed according to the practice in such accounts, as was exemplified in this account itself from the commencement of it in 1786. The defenders not only denied the practice, as to such an account as the present, but pleaded that both the summons and the record were so prepared as to embrace no conclusion or plea except for simple interest, and to contain no averment as to practice.

The Lord Ordinary, “in respect that the interlocutor of the 26th of November last, decerned for the interest only, without accumulations, and that it is incompetent for the Lord Ordinary to alter that interlocutor; refused the claim so made, and appointed the state to be rectified accordingly.” ^*

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* “ Note.—The summons in this case was amended in regard to the article of interest, and as so amended, it concludes for interest at nine per cent from the date of the docqueted account, without any mention of accumulations. The condescendence neither claims accumulations from that date, nor does it aver the facts, such as the practice of India, &c., on which, as it now appears, the claim rests. Nothing was said on the point at the debate. The Lord Ordinary, in pronouncing the interlocutor on avizandum, certainly intended to confine the deceraiture to the interest, without accumulations; and the state was ordered only for the purpose of enabling the parties to adjust the rate of exchange, by which the sum in sterling money was to be finally ascertained. Indeed, as the interlocutor was originally written out, blanks were left for the rate of exchange, and the special sums to be decerned for, without any order for a ‘state.’ In these circumstances, and whatever may be the competency in the general case of enforcing such a claim under a summons, and a record framed like the present, of which the Lord Ordinary, notwithstanding the cases referred to, entertains great doubt, he holds himself to be absolutely foreclosed by his own interlocutor, construed agreeably to the meaning which he intended it to bear, from entertaining any further question on the subject.”

The defender reclaimed against the first of these interlocutors, and the pursuers reclaimed against them both, in so far as refusing to allow annual accumulations of interest. The pursuers also raised a supplementary summons, which expressly concluded for a balance, computed on the principle of annual accumulations of interest. This action was reported to the Court. A case was then allowed to be laid before English counsel, whose opinion instructed, inter alia, that the English statute of limitations did not, in the circumstances, apply; and that the account and docquet, signed by Fairlie, Fergusson, and Co., together with the letter of William Fairlie, dated July 5, were sufficient to establish, by the law of England, “that the firm of Fairlie, Fergusson, and Co., became directly bound to Dr Fyffe, and his representatives, to pay to them the debt therein mentioned.”

The Court afterwards “conjoined the original and supplementary actions, and appointed mutual cases to be prepared on the points not embraced in the opinion of English counsel.”

In these cases, the chief point argued related to the accumulation of interest. The pursuers stated they were not aware of the death of Dr Fyffe until recently before raising their action. The defender stated that the firm of Fairlie, Fergusson, and Co. were not aware of Dr Fyffe's death, and had no occasion to be so.

In the case for the pursuers, they referred to various decisions as being completely in point, ¹ and as containing evidence of the practice of allowing accumulated interest.

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¹ Palmer and Co.'s Assignees, January 24, 1835 (ante XIII., 309), and Session papers in said case, Minutes for Pursuer, p. 13; for defender, p. 15 and 19—Keble, July 21, 1820 (4 W. and S., Appeals, 166).

The defender pleaded (1.) that the present case was different from any of those referred to. Dr Fyffe died on May 9, 1810, a few days after the firm of Fairlie, Fergusson, and Co. was formed. His account had ceased to be an operative or current account from the date of his insanity in 1793. Whatever might be the practice as to current accounts, where an annual balance was necessarily struck, which, of course, included interest, the case was different where there was merely a dead balance allowed to lie in the hands of a Company. In these circumstances, the intimation contained in the docquet, which was added to the account ending 30th April, 1810, should be viewed as tantamount to a statement that the balance there set forth should in future bear simple interest, just as if a bond of corroboration had, of that date, been granted by the Company. ¹

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¹ Wilkinson, June 28, 1821 (ante I., 90; or 91, new ed.)—Maxwell, Hislop, and Co., June 16, 1824 (2 Shaw's Appeals, 451)—Keble, July 21, 1820 (4 W. and S., Appeals, 166.)

This view was strengthened by the circumstance, that although the account was rendered by William Fairlie as late as 5th July, 1812, it did not contain any accumulation of interest subsequent to 30th April, 1810, nor did the communication of the parties then refer to any such accumulation. (2.) At least the rate of interest, so far as allowed on accumulations of interest, should not be so high as nine per cent, but should only be at the fluctuating rate of the Indian market for the time, which was lower. (3.) The word “nine” in the docquet, stating the rate of interest to be “nine per cent,” was written on an erasure; and although that docquet was intended to state a fixed rate of interest, it was some rate lower than nine, such as seven or five; as the market rate subsequently fell as low as these, and it appeared from the alleged letter of William Fairlie, dated 23d March, 1812, and quoted by the pursuers, that interest had then fallen greatly, and “seven per cent is now the highest rate which is allowed.” But whatever word might originally have been there, the word nine, which was there, was written on an erasure; it could make no faith, but must be held pro non scripto, and the common market-rate of Indian interest, as it fluctuated from time to time since the date of the docquet, was all that should be allowed. (4.) That, separatim, when the defender withdrew from the company of Fergusson, Clark, and Company, in 1820, he had quitted India, and had since lived in Great Britain. From that date, therefore, the debt, if due by him, was not an Indian debt, bearing Indian interest, but a British debt, bearing British interest. (5.) The debt should bear only British interest from the date of citation in the present action: at least all accumulation of interest should cease from that date.

The pursuers answered (1.) that the cases referred to were parallel with the present. In particular, the circumstance that the account had not been actively operated on, did not affect the question, as it had ceased to be so from 1793, and yet the account was regularly carried down by Fairley, Fergusson, and Company, and the previous firms to 30th April, 1810, accumulating interest annually. And although no accumulation was stated of a subsequent date, when the account was rendered on 5th July, 1812, that was because the account had been sent from India before the 30th April, 1811, had arrived, as appeared from the copy of the letter of Fairley of 23d March, 1812, which was founded on by the defender, if it could be at all regarded, as that letter stated that he had then received the account. (2.) The same rate of interest ought to be allowed on the accumulations of interest, as on any other part of the account. If accumulation was allowed at all, it necessarily amalgamated past interest and l principal into one capital, all bearing interest alike. This was according to the practice; and in the previous statement of this same account by the defender's firm, that principle had been adopted. (3.) The erasure in the word “nine” was not admitted; and the account (the pursuers alleged) was in the same state as when it was rendered;—but the effect of the erasure was not material, even if there was an erasure. In particular, as the market rate, down to the date when that account ended, was never lower than nine per cent, no lower figure could have been intended to stand there. (4.) The defender's removal to this country did not liberate him from his obligations, or modify them. (5.) The rate of interest must continue to be nine per cent till the date of decree in this action; but it was admitted that farther accumulation of interest must cease from the date of citation.

It was agreed by the parties that the just expense of remitting the balance to this country was to be deducted by the defender, in terms of the case of Keble, in settling with the pursuers.

When the consideration of the cause was resumed, the pursuers urged, viva voce, at the bar, that as the defender must have had an opportunity of ascertaining the state of the whole company books in India, as to this account, since the action was raised, he should have been ready to condescend on what rate of interest was meant to be inserted in the docquet in place of “nine,” if there had been any different rate, and also whether the account had ever been made up at a lower rate than nine per cent since 1810.