Scottish Court of Session Decisions

Malcolm M'Intyre, tenant of the farm of Kilkeddan, Campbeltown, died in 1878, leaving a last will and testament by which he conveyed his whole estate, real and personal, to John M'Intyre, farmer, North Moile, and Lachlan M'Intyre, agent of the Royal Bank at Campbeltown, in trust for certain purposes, and more particularly he directed his trustees to carry on the farm of Kilkeddan till the expiry of the then current lease. He further directed that Lachlan M'Intyre should have the management of the farm. Both trustees accepted office, and Lachlan M'Intyre entered on the management of the farm, and continued the management till January 1881, when his affairs having become embarrassed he executed a trust-deed for behoof of his creditors and left the country. John M'Intyre never took any. part in the management of the estate. In the course of the year 1881 both the M'Intyres were removed by the Court from the office of trustee on the estate, and the defender D. M. Maxtone was appointed judicial factor thereon.

The present action was raised against him as such judicial factor in the Sheriff Court of Argyllshire at Campbeltown, by John Ralston, grocer in Campbeltown, for the sum of £275, 10s. 1d. alleged to be due to the pursuer in the circumstances thus explained in the note of the Sheriff-Substitute:—“During Lachlan's management he was in the habit of dealing with Ralston for the necessary supplies of seed and such-like for the farm of Kilkeddan, and Ralston, on the other hand, was in the habit of buying the farm produce from M'Intyre. Their dealings, so far as appears, were carried on exclusively on the footing of M'Intyre's trusteeship, as is shown by the heading of Ralston's account, of which a copy is produced.

“In December 1880, at the request of M'Intyre, Ralston accepted a bill for £300, which was discounted by the Royal Bank. The bill is produced. On its face there is a marking in pencil after Lachlan M'Intyre's signature, ‘Trustee of M. M'Intyre,’ and it is indorsed in ink ‘Lach. M'Intyre, managing trustee of M. M'Intyre, Kilkeddan.’ There is of course nothing to show when these markings were put upon the bill, nor whether Ralston ever saw or was cognisant of them, but there is also produced a holograph writing by Lachlan M'Intyre whereby he binds himself ‘to have goods from the farm of Kilkeddan in his (Ralston's) hands to meet the bill when due, and if not quite sufficient goods, then money.’ This document is of even date with the bill. Its authenticity is not denied, and the only doubt thrown upon it is in Answer 4 for the defender, ‘Not known that it was granted of the date it bears.’

“The bill became due, and not having been provided for by M'Intyre, was retired by Ralston, who now seeks repayment from the trust-estate. This claim is resisted by the defender on the ground that the bill was drawn by M'Intyre, and accepted by Ralston, for the accommodation of the former in his private capacity, and that the trust-estate is not liable.”

The pursuer pleaded—“(1) The pursuer having (as above explained) undertaken the obligation on the bill to the said Lachlan M'Intyre in his character as trustee foresaid, the trust-estate is liable in the sums concluded for.”

The defender pleaded, inter alia—“(1) The bill referred to having been drawn by the said Lachlan M'Intyre as an individual, and so accepted by the pursuer, no liability attaches to the trust-estate of the said Malcolm M'Intyre therefor. (2) The contents of said bill having been applied by the said Lachlan M'Intyre to his own purposes, and not for the benefit of said trust-estate, the pursuer is not entitled to the decree sought. (3) That the contents of said bill were applied for the benefit of the trust-estate can be proved only by the writ or oath of the defender.”

The Sheriff-Substitute ( Dundas) found the pursuer entitled to decree as craved.

“ Note—[After the narrative above given]—The contention of the defender appears to the Sheriff-Substitute to be not well founded. It seems to him quite clear that the parties had all along been dealing on the footing of M'Intyre's

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trusteeship, and that Ralston when he accepted the bill did all that a prudent man could do in taking from Mr M'Intyre the holograph acknowledgment above referred to, of the genuineness of which the Sheriff-Substitute feels no doubt. It certainly appears to him that the defender's second plea-in-law, to the effect that M'Intyre applied the contents of the bill to his own purposes, is wholly irrelevant. If he as trustee obtained money from Ralston for the purposes of the trust, and then put the money in his own pocket, how can Ralston be held responsible for this dishonesty? He was dealing with a man who at the time was supposed to be honest, and who held a situation of trust, and it appears to the Sheriff-Substitute that Ralston was quite entitled to accept his word even without the written guarantee which was given, and there can be no question that M'Intyre had ample power to pledge the credit of the trust-estate.

“The third plea-in-law also seems to the Sheriff-Substitute to be irrelevant, for the reason already given, that the bill was accepted by Ralston in bona fide, and that he had neither the right nor the power to trace the money after it came into M'Intyre's hands.

“The other pleas-in-law seem to the Sheriff-Substitute to be also founded on a misconception. Ralston does not in the least dispute his liability to take up the bill; on the contrary, he has retired it long ago. His case is, that he advanced money to the trust-estate which was to be paid back in three months' time either in goods or in cash, and as this was not done his claim is still unsatisfied. He bought goods deliverable in three months, and paid for them in advance, and he is clearly entitled either to his money or the goods. If the Sheriff-Substitute is right in the view he takes, it does not in the least signify in what form Ralston paid the money, whether it was by bill or in bank-notes, nor does it matter to him whether M'Intyre when he got the money embezzled it or applied it to its legitimate purpose.

“On the whole matter the Sheriff-Substitute is strongly of opinion that M'Intyre pledged the credit of the trust-estate, as he had a right to do, and that Ralston having advanced money on the faith of that credit, is entitled to repayment in full, not only of his actual advance, but also of all expenses to which he has been put by M'Intyre's failure to keep his engagement.”

The defender appealed to the Sheriff ( Forbes Irvine), who found that the bill was drawn by M'Intyre as an individual, and not as trustee, and to that extent sustained the pleas of the defender, but allowed a proof by writ or oath of the defender that the proceeds of the bill were applied to the benefit of the trust, and remitted the cause to the Sheriff-Substitute for further procedure.

He added the following note:—“The main question here at issue is, whether the bill was drawn by Lachlan M'Intyre in his individual capacity or as managing trustee on the farm of Kilkeddan?

“The law on this subject is clearly expressed by Professor Bell, Commentaries, 3, 2, section 3, edit, by M'Laren, vol. i. p. 421—‘When one draws a bill in a representative character as factor or otherwise, he must, in order to be free from personal liability, limit his draft to that character, for the law holds that the act of drawing the bill affords legal evidence of an obligation against the drawer in his own person, and that recourse according to a general rule, and without distinction, must be competent upon all bills which do not ex facie bear the exception.’

“The law is laid down in terms equally distinct in Thomson on Bills, Wilson's ed., pp. 146 and 154.

“Reference is made to the decisions in Connell v. M'Lelland, 1782, M. 1485; Douglas v. Lord Dunmore, 1800, M. App. Bill of Exch. No. 11; Webster v. M'Calman, June 3, 1848, 10 D. 1133; Chiene v. Western Bank, July 20, 1848, 10 D. 1523.

“These authorities, and others that might be noticed, seem amply to bear out the general principle that where a person signs a bill as drawer, indorser, or acceptor he will not be exempt from personal liability by reason only that he adds words to his signature describing himself as agent for a principal named or unnamed, or as signing in a representative character; the repudiation of liability must be express.

“If these propositions are well founded, they seem to be decisive of the present question. Neither (1) the pencil marking on the face of the bill, of which the date and the writer are alike uncertain, nor (2) the indorsation, which at best is merely descriptive of the indorser's representative character, nor (3) the document, which is entirely apart from and extraneous to the bill, nor indeed all these taken together, can, in the opinion of the Sheriff, have the effect of altering the exclusively personal nature of the liability constituted by the bill itself.

“It appears, however, to the Sheriff that it is still competent to the pursuer to establish habili modo that the proceeds of the bill were wholly or in part applied for the purposes of the trust, and a proof to that effect has therefore been allowed.”

On the case coming again before the Sheriff-Substitute the pursuer lodged a minute declining to proceed with proof by writ or oath, in respect whereof his Lordship assoilzied the defender from the conclusions of the action.

The pursuer then appealed to the Second Division of the Court of Session.

The arguments of parties appear from the opinions of the Judges.

Authorities—1 Bell's Comm. 509; Edmunds v. Bushell, 1 L.R., Q.B. 97; Haldane v. Speirs, March 7, 1870, 10 Macph. 537; Sinclair v. Wallace, June 4, 1880, 7 R. 874; Cameron v. Young, June 2, 1871, 9 Macph. 786.