Scottish Court of Session Decisions

In October 1868 Mr Ainslie entered into a contract with Andrew M'Intosh & Son, contractors, Redcastle, for carpenter and other work to be executed on the farm-house and steading of Muirton. The contract price was £235, 10s. 6d. On the 11th January 1867, at the request of the contractors, Mr Ainslie sent them a cheque for £120 in payment to account of the contract price. They received payment of the contents of the cheque. On the 7th May 1867 they requested a second instalment of £60, and in answer he desired them to apply to Mr M'Lennan, Hilton, his factor, who would pay this second sum to account. M'Lennan had then in his hands funds belonging to Mr Ainslie amounting to £137, 12s. 10d. Of this M'Intosh & Son were ignorant. M'Lennan represented that he had not funds of Mr Ainslie's in his hands to the requisite amount, and induced them, after

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some delay, to accept £20 in cash, and his promissory-note for the balance of £40. The note was in the following terms:—

“Hilton, 6th July 1869.

“£40, 0. 0.

One month after date, I promise to pay to the order of Messrs M'Intosh, contractors, Redcastle, within the Caledonian Bank in Dingwall, Forty pounds stg., for value received in account of Mr Ainslie of Muirton. D.

M'Lennan.”

On the 6th July Messrs M'Intosh wrote to Mr Ainslie in the following terms:—

“ Redcastle, by Inverness, 6th July 1869.

R. Ainslie, Esq. of Elvingston.

Sir,—Having completed the works at Muirton last week, we will feel much obliged by your remitting to us at your convenience balance of contract (viz., £55, 10s. 6d).

Amt. of Contract for works at Muirton,	£230	0	0
Do. do. at Chapelton,	5	10	6
	£235	10	6

Cr. Jany. 14, 1869. Cash, per cheque, £120 0 0 Do., p. D. M'Lennan, 60 0 0	180	0	0
Balance still due,	£55	10	6

“ We are, &c., Andw. M'Inthose & Son.” Mr Ainslie replied that M'Lennan would pay them the balance of their account, and wrote to M'Lennan directing him to pay them. M'Lennan again assured them that he had not funds of Mr Ainslie's, although it has since appeared that he had amply sufficient. He gave them 10s. 6d. in cash, and on the 16th July a promissory-note for £55, “for value received in balance of account for carpenter work executed at Muirton Mains, square of offices and dwelling-house.”

On the 20th September, after the promissory-note became due, it was renewed in the form of a bill at four months.

Meanwhile, the note of 6th July fell due on 9th August, and as M'Lennan failed to retire it, and became insolvent, the bank who had discounted it required Messrs M'Intosh to pay it. The same happened with regard to the bill of 20th September.

On the 27th November 1869 M'Intosh & Son, through their agents, acquainted Mr Ainslie with what had passed, and required him to indemnify them. Mr Ainslie having refused, the present action was ultimately brought to recover the unpaid balance of £90.

The defender pleaded—

“2. The defender should be assoilzied, with expenses, in respect that the pursuers accepted M'Lennan's promissory-note and bill in lieu and satisfaction of the debt due to them by the defender, and that said debt is thus extinguished by delegation.

3. In any view, the pursuers have failed to follow the defender's instructions as to receiving payment of the sums of £60 and £55, 10s. 6d. from M'Lennan, and having failed to inform the defender that payment had been applied for and had not been obtained, having taken M'Lennan's note and bill without the knowledge or authority of the defender, and having thus prevented the defender from realising the funds then belonging to him in the hands of M'Lennan, they cannot now claim payment from the defender, who should therefore be assoilzied, with expenses.

4. The pursuers having, in the state of accounts rendered by them in July 1869, given the defender credit for the sums of £120 and £60, as paid in cash to account of the contract-price of the works, are not entitled now to claim payment of any part of the sums so paid, and their claim cannot, in any view, exceed the balance of £55, 10s. 6d., under deduction of the sum of £5, 10s. 6d., admittedly paid to account thereof.”

The Lord Ordinary ( Gifford), after a proof, found that it had been sufficiently established that the defender was still due and resting owing the balance sued for, and decerned in terms of the conclusions of the summons.

“ Note.—There is no dispute between the parties as to the work done by the pursuers for the defender, or as to the contract price due therefore. The total contract price earned by the pursuers under the two contracts was £235, 10s. 6d.

Neither is there any dispute that the pursuers, to account of this contract price, received certain sums, for which they give credit in the present action.

The only question is, whether the pursuers are bound in addition to give credit for certain other sums contained in bills or promissory-notes which the pursuers took from Mr Donald M'Lennan, the defender's factor, but which bills or notes Mr M'Lennan has failed to pay, or to retire. The defender's plea is, that he furnished Mr M'Lennan with sufficient funds to pay the pursuers in cash; that he told the pursuers to apply to M'Lennan for payment: and as the pursuers, without the defender's consent, and without notice to the defender, have chosen to take bills from Mr M'Lennan instead of cash, they have, by so doing, taken M'Lennan as their sole debtor, and have discharged the defender to the extent of these bills. Mr M'Lennan has become insolvent, with considerable funds of the defender's in his hands.

There is a good deal of force in an equitable point of view in the defender's plea; but, after full consideration, the Lord Ordinary has found himself unable to give it effect as operating in law as a discharge to the defender of the debt which he was admittedly owing to the pursuers.

(1.) In substance, the defender's plea is, that the acceptance of Mr M'Lennan's bills amounted to delegation—that is, to the substitution of Mr M'Lennan as the full and only debtor instead of defender, and to the entire and final discharge of the defender. Now, delegation is never to be presumed; in dubio, a new obligant will be held as corroborative of the original obligant, and not as being substituted for him. Even novation, which is a mere change of obligation,—the obligant remaining the same,—is never presumed, and there is a still stronger presumption against delegation, which requires more elements to complete, and to instruct it.

In the present case there is really nothing to instruct delegation beyond the bills themselves. There was no discharge granted by the pursuers when they took the bills, not even a receipt for the amount thereof. There was no delivering up of any document of debt; there was no letter or any document whatever expressing or implying that Mr M'Lennan was to come in place of the defender.

The terms of the bills or notes themselves do not imply discharge of the defender, for they expressly bear that they are granted as for work done for the defender, and for which the defender is directly liable.

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It is quite fixed that, taking a new obligation or document of debt from a debtor himself,—for example, a bill, note, or bond,—does not innovate the old debt or obligation. It is thought that the circumstance that the bill is granted by the debtor's factor cannot per se have the effect of liberating the debtor.

(2.) The Lord Ordinary holds it to be proved that the defender's factor, Mr M'Lennan, had no power to grant bills in the defender's name, or binding the defender, and that the bills in question were granted without the defender's authority. But this does not make the case stronger for delegation, but rather weaker. The defender can hardly say that he is discharged of his admitted and just debt by an act done without his authority, and without his knowledge or consent. The bills, it appears, were granted because the pursuers were pressing Mr M'Lennan for the money. Mr M'Lennan ought to have paid the money; but he said he had it not, and the bills were granted as an interim accommodation to the pursuers, who might raise money by discounting them. But it would be very strong to hold that this operates as a final discharge to the defender, the admitted debtor, whether the accommodation bills were paid or not. This is not an action upon the bills, which do not in the least bind the defender, but it is an action upon the defender's original and admitted debt, which has never been discharged.

(3.) Indeed it was almost admitted in the argument by the Counsel for the defender, that the mere granting of the bills would not by itself be enough, but that it must be taken along with the fact that, at the time of granting the bills, M'Lennan, the defender's factor, had sufficient funds of the defender to pay in cash, but chose rather to pay in bills.

Now, if it be once admitted, as it must be, that the granting of the bills would not have constituted delegation if M'Lennan had had no funds, it is difficult to see how his having funds should make a difference. For the pursuers did not know or suspect that M'Lennan had funds. This seems quite established. M'Lennan assured the pursuers that he had no funds, and for this reason he proposed a bill. The pursuers had no reason to doubt M'Lennan's word, and the defender is not entitled to say that he, the defender, is to profit by M'Lennan's fraud. Delegation is a question of intention, and the state of mind of the pursuers, who believed M'Lennan to have no funds, is far more important than the latent and unknown fact that he really had funds.

But even the defender himself did not know that his factor had funds—he merely guessed or supposed it,—for it was not till long after that the factor's accounts were rendered. The Lord Ordinary knows of no authority for holding that the fact of delegation or no delegation, may be dependent upon the result of an accounting, of which the creditor, who is said to have taken a new debtor, was not cognisant, and with which he had nothing to do.

(4.) The only remaining view urged by the defender was a sort of personal bar against the pursuers. The defender argued that the pursuers were told to get payment from the factor, their taking bills or notes without notice to the defender was said to be an act of bad faith, which precluded them from making any claim upon the defender, whether the notes were paid or not.

Without denying that there may be some foundation for this complaint, it is thought to be insufficient as an answer to the pursuers' admitted and proved debt.

The Lord Ordinary really cannot blame the pursuers very much for believing the statements of the defender's own factor, and taking the bills as interim accommodation. There was nothing to make them suspect fraud or unfair dealing. To intimate to the defender would imply that they doubted his factor's word, and would have been really putting the pursuers in a worse position than that they now occupy.

Then it is not said or proved that the defender has discharged his factor, or settled with him on the footing that the payments were made in cash and not in bills. On the contrary, the factor's accounts were not rendered to the defender till after 30th November 1869; and this was after the defender had got notice from the pursuers' agents, that they claimed the sums in these bills as still due by the defender. The defender cannot say that he has lost anything, or discharged any debt, or parted with any security by reason of his factor having granted the bills. On the contrary, he was told of the bills, and that he was still held liable for the amount before he knew how his accounts with his factor stood.

On the whole, the original debt due by the defender to the pursuers having been fully established and constituted, the Lord Ordinary thinks that the entire onus lies upon the defender to show that the balance of that debt has been discharged, and that the defender has been discharged of all liability therefore. He thinks that the defender has failed to show this; and, accordingly, the defender is still liable in the balance of the pursuers' account, which is admittedly due and unpaid.

The only thing approaching a discharge on which the defender can found is the pursuers' letter of 6th July 1869, in the note annexed to which they give credit for £60,—£40 of which turns out to have been M'Lennan's first bill granted that very day. The answer seems to be satisfactory, that this cannot be founded upon as a receipt, for it is unstamped, and was not intended as such; that the pursuers have sufficiently explained the entry, by disclosing the facts about the bills, which were ultimately dishonoured and unpaid, and that the defender cannot qualify any loss or prejudice which he has sustained by reason of the pursuers' conduct. The defender himself must be primarily liable for his own factor's dishonesty or bankruptcy.”

The defender reclaimed.

Marshall and Johnstone, for him, argued—The pursuers were directed by the defender to take cash from M'Lennan, instead of which they chose to take promissory-notes from him, and never intimated this to the defender. They must therefore be held to have taken M'Lennan for their debtor. In any view, the pursuers have barred themselves from recovering the £40 mentioned in their letter of 6th July. They there state that they had received the whole £60 in cash from D. M'Lennan, whereas they had only received £20 in cash. Had the defender been told that his factor was giving promissory-notes to creditors, instead of paying them out of the funds in his hands, he would at once have called the factor to account. As it was, he was kept in ignorance by the pursuers' mis-statement, till M'Lennan became insolvent, and the money was no longer recoverable,

Authorities— Buchanan v. Somerville, Feb. 19,

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1779, M. 3402; Chiene v. Western Bank, July 20, 1848. 1 D. 1523.

Solicitor-General and Balfour in reply— Pattie, Dec. 23, 1843, 6 D. 350; Wilson & Corse v. Gardner, Nov. 26, 1807, Hume, p. 247; Muir v. Dickson, May 16, 1860, 22 D. 1070; Williams & Co. v. Newlands, July 20, 1861, 23 D. 1861; Pollock & Co., Nov. 6.1863, 2 Macph. 14; Pothier on Obligations, part iii, c. 2, art. 6, see. 1, (vol. i, p. 392, English ed.).

At advising—