Scottish Court of Session Decisions

Mrs Agnes Crawford or Bryan, Glasgow, wife of James Bryan who was lately a partner of Butters Brothers, machinery merchants, Glasgow, sued the firm and the remaining partner Butters for payment of £102, 12s. 10d., the amount of a loan of £100 advanced by her out of her private means to the firm on 29th October 1886, and interest from April to November 1890. Mrs Bryan and her husband separated in August 1890 under a written contract of separation.

The pursuer produced the following receipt signed by the cashier of the firm:—

“ Glasgow, 29th Oct. 1886.

From Butters Brothers,

Contractors' Engineers.

Received from Mrs J. W. F. Bryan, by the hands of Mr J. W. F. Bryan, the sum of one hundred pounds sterling (£100), on temporary loan, for which we are obliged.

“ p.p. Butters Bros.

John Gibson.

£100

29/10/86.”

She averred that she received interest at the rate of 5 per cent down to 29th April 1890, and that the defenders knew that the sum of £100 had been advanced by her. The defender Butters averred that on the date mentioned the pursuer's husband had handed the sum of £100 to the cashier of the firm with instructions to place it to the credit of his private account, which was done; that the cashier Gibson had no power to borrow money for the firm, and that such a receipt could not bind the firm in payment to any other than the creditor in the books; and that the sum had been repaid to Bryan.

The pursuer pleaded—“(1) The sum sued for having been advanced by the pursuer out of her own proper funds and estate, and not having been repaid to her, or to any one authorised by her, is still due and resting-owing by the defenders to her, and she is entitled to decree as concluded for, with expenses.”

The defender pleaded—“(2) The alleged loan can only be proved by writ or oath of the defenders. (3) The sum sued for having been received from the pursuer's husband, and placed to his private account with the firm, and having been repaid to him, they are not indebted therefor, and these defenders should be assoilzied from the conclusions of the summons with expenses. (4) The said receipt having been ultra vires of Mr Gibson, does not bind the firm to any creditor other than the true creditor, as appears in their books.”

Upon 10th January 1891 the Lord Ordinary allowed the parties a proof of their averments before answer. It appeared that upon 29th October Bryan asked his wife to lend the firm £100, which she agreed to do, expressly stipulating that he should bring the firm's acknowledgment for the money. On the same day Bryan took the money to the cashier and told him to put it to the credit of his private account, not to the credit of the firm. He ordered the clerk to write out, and the cashier to sign, the above receipt. The money was then paid in to the firm's credit at the bank in the usual way. There was a press copy of the receipt made in the “financial letter book” of the firm. Bryan paid the pursuer 5 per cent. interest until April 1890. He did not repay the principal.

Gibson deponed—“I was in the habit of granting and subscribing receipts for the firm. (Q) Did it not occur to you that it was wrong to grant a receipt for the firm when Mr Bryan asked you to put the £100 into his private account?—(A) I was always acting under his instructions in connection with the firm, and did exactly what I was told. … I never repaid the £100 to Mrs Bryan directly, but it was paid through Mr Bryan…. On 5th November he drew out £100, which he told me was to repay Mrs Bryan, and I debited his private account with that sum on that date. Towards the end of the month he asked for an additional £5, and asked me to make it one transaction, so I erased the entry of 5th November and made it a debit of £105. I did not get back the receipt that I had signed. He was the chief party in the whole transaction, and was acting I understood for his wife, and I had full confidence in him, and did not think more about it. Cross.—The receipts which I usually granted on behalf of the firm were for the money I was receiving from day to day. I had no authority to borrow money for the firm, and I never did so that I am aware of. I never paid interest to Mrs Bryan. The

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receipt is in the handwriting of Andrew Barclay, who was a clerk with the firm. The terms of the receipt were dictated by Mr Bryan to him on the date it bears.”

The defender Butters denied all knowledge of the loan by Mrs Bryan to the firm until payment of the interest was demanded. The partnership was dissolved in October 1890.

Upon 13th June 1891 the Lord Ordinary ( Kyllachy) pronounced this judgment—“Having considered the cause, decerns against the defenders in terms of the conclusions of the summons.”

“ Opinion.—The facts of this case do not present any difficulty. The pursuer is the wife of a late partner of the defenders' firm, and on 29th October 1886 she lent to her husband, out of her separate funds, as she understood for the firm's purposes, a sum of £100, stipulating that she should receive in exchange the firm's acknowledgment of the loan. I have no doubt of the pursuer's good faith, and that the account which she gives of the transaction is entirely true. Her husband took the money to the cashier of the firm, and it was paid into the firm's bank account, and applied to the firm's purposes, and acting on the husband's instructions the cashier, who appears to have had the charge of the firm's financial transactions, granted to the pursuer the acknowledgment which is quoted in the record. This acknowledgment was written out by a clerk, signed by the cashier, booked in the firm's private letter book, and delivered through her husband to the pursuer. The money, however, although applied to the firm's purposes was, it now appears, put to the credit of the pursuer's husband in the books of the firm, and it is said that he shortly afterwards drew it out, and that the firm is now dissolved, and that there is no sum now at his credit in the firm's books.

In these circumstances the pursuer sues the firm and the remaining partner (her husband and she having apparently separated) for repayment of the loan, and, as I indicated at the close of the proof, I have no doubt of her right to recover provided the loan is proved by competent evidence. That is to say, I hold it to be sufficiently clear that it was within the authority of the husband, as a partner of the defenders' firm, if not also within the authority of the firm's cashier, to borrow money on the firm's credit, and that the credit of the firm was in fact pledged by both of those parties for the amount of the loan. I have delayed, however, disposing of the case because of the averment and plea proposed to be added by the defender to the effect that the acknowledgment produced is neither holograph nor tested, and that therefore the alleged loan is not instructed by legal evidence.

The question thus raised appeared to me to require a careful examination of the authorities—the point being sharply taken that the loan of money, according to our law, cannot be proved except by a probative writing unless, which is not the case here, the transaction falls within the exception of res mercatoria.

The result has been to satisfy me not only that the contract of loan, like other consensual contracts, may be constituted without writing—in other words, that writing is not required as matter of solemnity, but also that where writing is required not as matter of solemnity but only by way of proof, the writing need not be probative, but is sufficient if it be shown to be genuine.

On principle I confess I should not have much doubt that this must be the law. The question depends after all upon the construction of the old Scots statutes regulating the authentication of deeds, and these statutes, in my opinion, relate not to writings produced in modum probationis, but only to operative writings—writings founded on as constituting a title or constituting an obligation. An improbative obligation, at least if within the class to which the statutes apply, is no doubt inoperative—that is to say, it cannot (except in res mercatoria or where there is rei interventus) form the substantive vinculum on which action may be raised. Possibly also—although the distinctions here run into subtlety—an improbative obligation cannot be received even in evidence of an antecedent obligation lying behind it, and such antecedent obligation may require to be proved by competent evidence aliunde. But while that is the law with respect to obligatory writings, I can find nothing in the statutes or in the principles of our law of evidence to require that all writings put in evidence shall be per se probative. The constitution of obligations is one thing. Their proof is another; and where—as in the case of loan—the obligation may be constituted verbally, and may be proved either by writ or by oath, it would require, I think, some positive rule of law to make more necessary than that the writ, if writ is adduced, shall be genuine.

An examination of the authorities leads, I think, to the same result. There are no doubt some dicta to be found in the books which are incautiously expressed, and have given rise to misapprehension. But certain points are established by decisions which are, I think, quite conclusive of the principle. Thus, it is settled that in the proof of trust (where by statute writ or oath is necessary), any writ of the truster proved to be genuine is sufficient—Bell's Prin. 1995; Bathie v. Wharncliffe, 11 Macph. 490; Thoms v. Thoms, 6 Macph. 174; Ross v. Fidler, November 24, 1809; Fraser v. Bruce, 20 D. 115; M'Laren v. Howie, 8 Macph. 106. So in the case of leases and other contracts relative to land where there has been rei interventus, and writing is only required by way of proof, the writ requisite may be any genuine writing, and may even be a writing which is not subscribed. So also in the case of acknowledgments of the receipt of money paid, and in the case of acknowledgments granted to rebut the presumptions arising on bills of exchange.

These are all cases, I think, quite in pari

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casu with loan. But even in the case of loan itself the authorities are numerous—Ersk. iv. 2, 4. Thus entries in a debtor's books, although in the handwriting of a clerk, have been held sufficient. So also have indorsations or signatures appended to accounts, e.g., in the books of a bank. So also, at least in some cases, have writings in the handwriting of the creditor but found in the debtor's possession, and so dealt with as to be constructively the debtor's writ. In all these cases loan of money has been held sufficiently instructed by improbative writings.

The only decision the other way which was cited, or which I have been able to discover, is that of Stewart v. Syme, December 12, 1815, F.C., which is said to derive importance from being referred to without disapproval by the Lord President in the case of Haldane v. Speirs, 10 Macph. 539. I am bound to say that I think the judgment in that case does appear to require explanation, but the case was one of a rather special character, arising on a bill of exchange, and where the acknowledgment of indebtedness founded on was not only not probative, but was, as the Court held, not sufficiently connected with the bill to which it was sought to be applied. I cannot think that this case is an authority for the proposition that loan must always be proved by a probative writ, and I am satisfied that in citing the case, which he did for another purpose, the Lord President did not intend to affirm that proposition.

Therefore, both on principle and authority, I think an acknowledgment proved to be the writ of the debtor is sufficient evidence of the loan, and it may be proper to observe that in the case of loan there is this additional consideration. It is elementary law, that even where writing is required by way of solemnity, the solemnities of execution are dispensed with where the circumstances exclude locus poenitentioe. In other words, where there has been rei inter ventus, an improbative obligation is as good as one that is probative. And if this be so—and it is not disputed—I confess I do not see how any question as to the statutory solemnities can arise under the contract of loan, where, from the nature of the case, there can be no locus poenitentioe, or, to put it otherwise, where there must always be rei interventus. Having borrowed money, you cannot—money having passed—resile from your contract, or if you do resile, you can only do so on the footing of restoring matters, which just means repayment of the money. I do not speak of contracts to make a loan or to take a loan. There writing is probably required as matter of solemnity, and there being no rei interventus the writing probably must be probative. But in the case of an obligation granted as here in exchange for money borrowed, I do not at present see how any question of the improbativeness of the document of debt can well arise.

On the whole, I think the pursuer is entitled to decree, with expenses.”

The defender reclaimed, and argued—The pursuer's husband had no power to borrow money for the firm. It was not part of a partner's duty to do so unless the borrowing of money was part of the firm's business—Lindley on Partnership, 126, 5th ed. It could not be said that Bryan had borrowed money as necessary for the firm's business, nor was it borrowed in the way of business at all. Even assuming the right of Bryan to borrow money for the use of the firm without acquainting his partner with the details of the matter, he could not delegate his right to bind the firm to the cashier. It was the cashier's signature only that appeared upon the receipt. But the receipt itself was useless for the purpose to which the pursuer wished to put it. It was not a probative document. The law of Scotland required that proof of loan could be only by writ or oath. If the question was referred to the debtor's oath nothing was looked at but the oath itself. In the same way, if loan was to be proved by writ, then nothing but the writ could be looked at, and this was not the probative writ of the firm— Christie's Trustees v. Muirhead, February 1, 1870, 8 Macph. 461; Hamilton's Executors v. Struthers, December 2, 1858, 21 D. 51; Smith v. Smith, December 4, 1869, 8 Macph. 239; Haldane v. Spiers, March 17, 1872, 10 Macph. 537.

The respondent argued—The first question was whether one partner had power to borrow money and bind the firm in repayment although the other partners did not know of the transaction. That he had such a power was undoubted, and had been recognised— The Bank of Australasia v. Breillat, December 14, 1847, 6 Moore's Privy Council Reps. 152, 193–194. The principle had also been recognised in Scotland, although it had been held that an agent had not power to bind his principal in fraudulent transactions. The firm here were in difficulties, and the money might have been necessary to carry on the business— Sinclair, Moorhead, & Company v. Wallace & Company, June 4, 1880, 7 R. 874, Lord Young, 877, 878. A case very similar to this had been decided in England in favour of the plaintiff— Okell & Eaton v. Okell, November 4, 1874, 31 Law Times Reps. 330. Assuming that the partner had power to borrow money, had he bound the firm by the receipt given? It was true it was signed by the cashier, but it was so signed by order of a partner of the firm, and was therefore the signature of the firm. The pursuer did not sue upon the receipt as sufficient to make the firm liable in itself, but as a piece of real evidence. It was not necessary that it should be a probative document; all that was necessary was to prove that the signature was genuine— Neilson's Trustees v. Neilson's Trustees, November 17, 1883, 11 R. 119. Here they had proved it was the signature of a partner, and therefore the firm was liable to repay the money to the pursuer.

At advising—