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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Gibson's Trustees v. Gallaway [1896] ScotLR 33_322 (22 January 1896)
URL: http://www.bailii.org/scot/cases/ScotCS/1896/33SLR0322.html
Cite as: [1896] ScotLR 33_322, [1896] SLR 33_322
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SCOTTISH_SLR_Court_of_Session
Page: 322↓
Court of Session Inner House First Division.
v.
Facts:
Section 100 of the Bills of Exchange Act 1882 does not authorise the admission of parole evidence of an extrinsic agreement between the granter and payee of a promissory-note that the note should be renewed, subject to payment of interest, from time to time until the granter should be in a position to repay the principal sum, the effect of such evidence being to contradict the written obligation expressed in the note.
Opinion reserved, whether, if the agreement had been for a definite time, it would have been competent to prove it.
The late Mr Thomas Gibson of Bainfield advanced in loan to Mr William Harry Gallaway, merchant, Musselburgh. the sum of £200. In return for the loan Mr Gallaway granted a promissory-note in favour of Mr Gibson, which was renewed from time to time. On 1st June 1894 Mr Gallaway granted a renewal promissory-note in the following terms:—“9 Dock Place,“£200. Leith, 1st June 1894.
Three months after date, I, William Harry Gallaway, residing at Tusculum, Musselburgh, promise to pay Thomas Gibson, Esq., 35 Leamington Terrace, Edinburgh, the sum of two hundred pounds sterling, for value received.
(Signed) W. H. Gallaway.”
Mr Gibson died in October 1894, and an action was raised against Mr Gallaway by his testamentary trustees concluding for payment of the loan of £200 with interest.
The defender averred—“(Ans. 2) Explained that under an arrangement between the defender and the said deceased, made on 1st June 1894, the said loan was to bear interest at the rate of 5 per cent. per annum, and the said promissory-note was to be renewed when due, and from time to time thereafter, until the defender should be in a position to repay same without detriment to his business engagements. The defender was assured by the deceased that the date of repayment would be left to himself so long as interest was paid, and Mr Gibson further undertook that this arrangement would subsist even after his death. The defender has understood, since this arrangement was come to, that the contract could be terminated only on his initiative.”
The Lord Ordinary (
Kincairney ) on 27th November 1895 allowed the parties a proof of their averments.The pursuers reclaimed, and argued—There was no relevant defence. An agreement such as that averred by the defender that he was to pay when he pleased would altogether nullify the promissory-note. The effect would be to substitute a parole agreement directly contradictory of the written contract. Section 100 of the Bills of Exchange Act did not authorise such a substitution, and the written obligations could only be modified by writ— National Bank of Australasia v. Turnbull & Company, March 5, 1891, 18 R. 629, at p. 634.
Argued for respondent—The Lord Ordinary was right in allowing an inquiry quo animo the loan had been made and the promissory-note granted. The 100th section of the Bills of Exchange Act was specially directed to meet a case like this, and the facts, which the defender desired to prove, being essentially “relevant to any question of liability thereon,” might be proved by parole evidence. The opinions of Lord Adam and Lord Kinnear in The National Bank of Australia favoured this view.
At advising—
Page: 323↓
On the first hypothesis I think that the defence is irrelevant because it is contradictory of the defender's written obligation, and it is an established rule of pleading that a party cannot avoid his written obligation by merely averring and offering to prove that it was not binding on him. The second alternative amounts to this, that Mr Gibson was willing to give his debtor indulgence. But such an arrangement not reduced to writing, and especially when it is wholly inadequate as to time, is not binding on executors, whose duty is to ingather the estate which they are administering with the least possible delay.
To say that the arrangement was to bind the executors, and that the loan could only be terminated on the defender's initiative, is just another way of saying that the defender was not legally compellable to pay his bill, and for the reason stated I think that this is an inadmissible defence.
I do not think it is necessary to consider the provisions of the Bills of Exchange Act as to the admissibility of parole evidence to prove facts relevant to the defender's liability.
The question may hereafter arise whether it would be open to an obligant to prove a verbal agreement that a bill should be renewable for a definite time or that the debt should subsist for a definite time, the bill being treated as a mere security for its ultimate payment. I offer no opinion on the competency of proving such an agreement qualifying the obligation on the bill. But on the most liberal reading of the enactment it cannot be held to authorise the admission of proof to set aside the bill altogether, which, as I think, is the effect of this defence. I am accordingly of opinion that the Lord Ordinary's interlocutor allowing a proof should be recalled; that the defence should be repelled, and that decree should be granted in favour of the pursuer for the principal sum and interest at the rate of 5 per cent., no higher rate of interest being now asked.
The
Lord President,
The Court recalled the interlocutor of the Lord Ordinary, repelled the defences, and granted decree in favour of the pursuers.
Counsel for the Pursuers— Clyde. Agent— Andrew Gordon, Solicitor.
Counsel for the Defender— Anderson. Agent— G. Brown Tweedie, Solicitor.