Scottish Court of Session Decisions

The Bills of Exchange Act 1882 (45 and 46 Vict. cap. 61), sec. 100, enacts—“In any judicial proceeding in Scotland any fact relating to a bill of exchange, bank cheque, or promissory-note, which is relevant to any question of liability thereon, may be proved by parole evidence.…”

On September 30, 1907, Stagg & Robson, Limited, van and waggon makers, Selby, Yorkshire, raised an action against John Stirling, Brookdene, Twickenham, and two others, with a conclusion against them jointly and severally for payment of “( First) the sum of £400, with interest thereon at the rate of five per centum per annum from 20th August 1907 until payment; ( Second) the sum of £500, with interest thereon at said rate from 20th September 1907 until payment; and ( Third) the sum of £500, with interest thereon at said rate from 20th October until payment, being the amounts past due to the pursuers under a guarantee dated 27th July 1907, granted by the defenders in favour of the pursuers.” The sum first sued for was the balance of the amount contained in a bill, and the other two sums were the amounts contained in two other bills, all granted by Scott, Stirling, & Company, Limited, carriage builders, Hamilton, in favour of the pursuers, and guaranteed by the defenders, who were the managing and two other directors of that company.

The defenders pleaded, inter alia,—“(2) The sums sued for not being due by the said Scott, Stirling, & Company under said bills, the pursuers are not liable therefor under said guarantee. (3) The pursuers being bound to renew said bills are not entitled to decree for the sums sued for.”

The facts of the case and the nature of the defenders' averments are, so far as necessary for this report, given in the opinion of the Lord Ordinary ( Dundas) who on 22nd November 1907, before answer, allowed parties a proof—defenders to lead therein.

Opinion.—“The pursuers, van and waggon makers at Selby in Yorkshire, sue the defenders, who carry on business as carriage builders, etc., at Hamilton, for payment of various sums of money contained in bills drawn by the pursuers upon and accepted by the defenders, which the pursuers say are overdue. The case is the sequel of a former action which the pursuers raised against the defenders on 28th January 1907 for payment of a sum of money as the balance due in respect of goods supplied to the defenders in connection with certain double-decked motor

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omnibuses. A few days before the diet appointed for proof in that action the managing directors of the parties respectively met and arranged terms of settlement, and a written agreement entitled ‘heads of settlement’ was subscribed by them, which is produced in this action. It provided, inter alia, that the defenders should ‘pay’ to the pursuers ‘the sum of £2250 in the following manner:—By £250 cash forthwith. £500 bill at one month. £500 bill at three months. £500 bill at four months. £500 bill at five months; that each of the bills should be guaranteed personally by (named individually) the managing director and two other directors of the defenders' company; and that ‘on payment of the £250 cash three of the bodies are to be delivered; the remainder of the bodies undelivered are to be delivered, if required, to Scott, Stirling, & Company, Limited, when the first bill for £500 is met.’ In accordance with these ‘heads of settlement’ the pursuers received from the defenders their cheque for £250 and four bills of £500 each at one, three, four, and five months date respectively; and the case was taken out of Court by joint minute. The first bill was duly honoured by the defenders; the second to the extent of £100 only; and the sums now sued for are the £400 balance of that bill and the sums of £500 contained in each of the third and fourth bills (which were dishonoured when presented), all which sums the defenders decline to pay. The defenders explain that the account sued on in the former action included the price of certain omnibuses and other goods which had not been delivered by the pursuers to the defenders, and which the pursuers alleged, and the defenders denied, the latter were bound to accept and pay for. The defenders say they were willing to purchase said goods as they required them in the ordinary course of business. Their account of what passed at the meeting when the ‘heads of settlement’ were drawn up and signed is that ‘it was agreed that the defenders should take delivery of said goods as they require them, and that they should grant the bills now sued on. It was further agreed that the bills should be renewed at maturity in the event of the defenders not having taken delivery of goods to the amount of the cash paid by the defenders and of the bills which had fallen due,’ and the defenders say that the whole goods of which they have taken delivery are covered by the sums of £250, £500, and £100 already paid by them to the pursuers; and that the latter, being bound to renew the bills in terms of the agreement above set forth, are not entitled to decree for the sum sued for. The defenders moved for a proof of their averments. They claimed that they are entitled to prove by parole evidence the verbal terms of agreement which they allege, in virtue of section 100 of the Bills of Exchange Act 1882 (45 and 46 Vict. cap. 61). [ Quotes sec. 100, ut. sup.] Now this action is a ‘judicial proceeding in Scotland,’ and the facts which the defenders allege appear prima facie to be quite relevant to the question of their liability under the bills mentioned in the summons. I may refer to two recent decisions as illustrating the wide scope and effect which section 100 has been held to possess. The first of these ( Drybrough & Company, Limited, 1903, 5 F. 665) has features strongly resembling the present case. The defender there was allowed parole proof of an alleged verbal agreement to the effect that the bill on which he was being sued would be renewed from time to time by the pursuers subject to certain conditions which the defender said he had fulfilled. This decision was approved and followed in Viani & Company, 1904, 6 F. 989, where the defender was allowed a proof that the pursuer (indorsee and holder of the bill) had verbally agreed that if the bill was in his hands at maturity he would not call upon the defender (the acceptor) to retire it. At the discussion in the Procedure Roll I heard a forcible argument by the pursuers' counsel to the effect that while he fully accepted the authority of the decisions, the proof sought by the defenders should not be allowed because the language of the written ‘heads of settlement’ is unambiguous and absolutely inconsistent with the terms of agreement which the defenders allege to have been verbally adjected; that the defenders' averments, therefore, were, in face of the written agreement, palpably irrelevant; and that nothing in the Bills of Exchange Act warranted an attempt to contradict by parole proof the written agreement of parties as evidenced not by the bills themselves but by the ‘heads of settlement.’ I do not think these contentions are sound. I do not consider that the language of the ‘heads of settlement’ is such as necessarily to exclude or negative the defenders' statement of the agreement as a whole. It certainly seems singular, if the latter is true, that no allusion to renewal is made either in the ‘heads’ themselves or in the separate guarantee which was granted in pursuance thereof. But the idea of renewal is not expressly negatived; and the fourth paragraph ( v. infra) of the ‘heads of settlement’ seems to square in some measure with the defenders' averment about taking delivery of the goods only as they required them. It is also to be observed that the written agreement does not provide that the pursuers are to receive certain payments at stipulated times, and that bills are to be granted for these; but only that the defender shall ‘pay’ the pursuers ‘in the following manner,’ viz., by a payment in cash (which was duly made), and granting four bills at such and such dates (which were duly granted). It seems, therefore, that the pursuers' action must rest not on the ‘heads of settlement’ but on the bills themselves; and it is in fact so laid. Upon the whole matter, I think I must allow a proof before answer, the defenders to lead.”

The fourth paragraph of the “heads of the agreement,” referred to by the Lord Ordinary, was—“On payment of the £250 cash three of the bodies are to be delivered; the remainder of the bodies undelivered are to be delivered if required, to Scott Stirling

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& Co., Ltd., when the first bill for £500 is met. The bodies to be finished in accordance with Scott Stirling & Co., Ltd.'s order and specification, in first class style, subject to ordinary storage depreciation.”

The pursuers reclaimed, and argued—The heads of settlement” fixed a definite date of payment for each bill, which was inconsistent with an agreement, as alleged, for their renewal. These “heads of settlement” embodied the whole terms on which the original action was to be settled, and the guarantee there stipulated for would be useless if the alleged verbal obligation to renew the bills was established. Such a verbal agreement could not be allowed to alter the terms of a completed written agreement, and the averment of such was not a “relevant” averment in terms of the Bills of Exchange Act, sec. 100. Proof should not be allowed.

Argued for the defenders (respondents)—Under section 100 it was competent to prove an agreement to renew a bill by parole evidence— Drybrough & Company, Limited v. Roy, March 17, 1903, 5 F. 665, 40 S.L.R. 591. Viani & Company v. Gunn & Company, July 14, 1904, 6 F. 989, 41 S.L.R. 822, went even further. The National Bank of Australasia v. Turnbull & Company, March 5, 1891, 18 R. 629, 28 S.L.R. 500, and Gibson's Trustees v. Galloway, January 22, 1896, 23 R. 414, 33 S.L.R. 322, were distinguishable because the agreements there averred would, if proved, have freed the defenders from all liability on the bills. The existence of the “heads of settlement” was immaterial. A bill mentioned in a written agreement was subject to the operation of section 100, and it was therefore a bill one of whose characteristics was that an agreement to renew it might be proved by parole. The terms of the guarantee were wide enough to include renewed bills, and not inconsistent with the agreement averred. A proof should be allowed.

At advising—