Scottish Court of Session Decisions

On 17th June 1908 Miss Elizabeth J. Scotland, 89 Magdalen Green, Dundee, brought an action against her brother John Scotland, spirit merchant, Abernethy, for repayment of an alleged loan of £100. She averred—“(Cond. 2) On thel4th January 1895 … the pursuer advanced on loan to the defender the sum of £100 by cheque drawn by her in favour of defender on the Commercial Bank of Scotland, Dundee. The cheque was dated 14th January 1895, and was handed to the defender on said date, and was thereafter cashed by or for him.… (Cond. 3) In exchange for said cheque the defender gave pursuer his I O U for said sum at the time when he got the cheque. The pursuer handed the I O U to her mother to keep for her, but after her

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mother's death in 1900 the pursuer was unable to recover same. She asked the defender to give her a duplicate, but he refused to do so.”

The defender denied the loan, and pleaded, inter alia—“2. The pursuer not having produced the defender's writ in proof of the alleged loan, proof should be restricted to a reference to the defender's oath.”

In support of her averment the pursuer produced the following document—

“£100. Dundee, January 14th 1895.

The Commercial Bank of Scotland, Limited, Dundee.

Pay to John Scotland, Esq. or Bearer One hundred pounds.

(Sgd) E. J. Scotland.

[ The words “or Bearer” were deleted in the cheque.]

No. U 5716 (Stamped) C.B. of S. Ltd.

Dundee Paid.

Endorsed— John Scotland.

Endorsed— A. M. M. Shepherd.”

On 8th October 1908 the Sheriff-Substitute ( Sym) pronounced the following interlocutor—“Refuses the pursuer's motion for decree de piano, and refuses her motion for a proof before answer: Finds that the action is for payment of an alleged loan: Finds that no writing inferring loan has so far been produced: Finds that the pursuer's averments can only be established by the writ or by the oath of the defender.”

The pursuer appealed to the Sheriff ( Johnston), who on 22nd December 1908 affirmed his Substitute's interlocutor.

Note.—“It is well settled that—(1) Loan cannot be proved by parole. (2) Evidence by writ simply that money passed does not instruct loan— Haldane v. Speirs, 10 Macph. 537. The law rejects the view indicated by Lord Cowan in Fraser v. Bruce, 20 D. 115, and repudiated by the same Judge in Haldane v. Speirs that it is ‘a settled principle that when the money of one party is proved to have been given to or received by another, the receiver must, in dubio, show that he received it on some footing other than under an obligation to repay.’ (3) A simple receipt for money paid given to the person who pays prima facie instructs loan— Gill v. Gill, 1907 S.C. 532, and cases there collected. The rule is stated by Lord Cowan in Haldane v. Speirs—‘When a document or writing admitting the receipt of money is given to the party advancing the amount by the party who receives it, it will be presumed that an obligation to repay is thereby constituted.’ This is one of the doctrines of our law which causes real pain. That the mere proof that money passed should not prima facie import loan is intelligible, but it is hard to understand why it should make a difference in favour of loan that a document is produced which, according to ordinary experience, is not of the kind that is employed when loan is made and evidence of loan is desired to be retained. It is a matter of everyday occurrence that a person making payment of a sum he is due is content with a simple receipt for the money without troubling to require further particulars on the receipt. On the other hand, it must be matter of the rarest possible occurrence that a party requiring documentary evidence of a loan takes it in the form of a simple receipt. Such a document is much more appropriate and more common as an acknowledgment of a loan repaid than as an acknowledgment of a loan made. As Lord Young states in the case of Paterson, 25 R. 144, a simple receipt for money is a document of discharge, not of obligation. The cases are too hard, however, to allow of any effect being given to such reasoning.

Such then being the rules to be applied, how do they meet the case of a cheque to order? It was decided in Haldane v. Speirs that loan was not instructed scripto by an indorsation upon a cheque. The writing founded upon in the present case is the indorsation upon a cheque. The difference between this case and Haldane v. Speirs, which is insisted in, is that in this case the cheque was not as in Haldane v. Speirs a cheque payable to bearer, the indorsation upon which was a superfluity, but was a cheque payable to order, and therefore the granter was careful to make indorsation a condition of payment. In this view the case was likened to Fraser v. Bruce, 20 D. 115. Gill v. Gill, 1907 S.C. 532, was not referred to, but it also is very much in point. In Fraser there was a signature by the alleged borrower in a payable-to-bearer bank pass-book of the alleged lender. The case is not a satisfactory one, for it was complicated by certain admissions, and it is doubted by the Lord President in Haldane v. Speirs, but it was followed in the case of Gill. In this latter case the alleged lender gave to the borrower an order on a savings bank to pay to bearer £47, 10s. on production of a deposit-book. Across the back of the order the bearer wrote and signed, ‘Received the sum of £48, 11s.’ It will be observed that in this case the cheque or order was a bearer one, and the distinction between this case and Haldane v. Speirs is certainly very narrow. There are no doubt the words ‘received the sum of,’ but these words might have been supposed to be implied in bare indorsation of a cheque presented at a bank. There is also the circumstance noted by one of the Judges that interest was added and paid to the holder of the cheque or order. As the orders or cheques were to bearer in both cases, the case of Gill does not seem to meet what has more than once been described as the determining factor in Haldane v. Speirs that the acknowledgment was given to the bank as its voucher, not to the alleged lender as his voucher ( per Lord Kyllachy in Paterson, 25 R. 176, top).

On the cases the question does not appear to me to be foreclosed of the effect of a bare indorsation upon an ordinary cheque to order as prima facie evidence of loan. The circumstance that the cheque was to bearer is referred to in Haldane v. Speirs, but I do not think that it can be affirmed that the decision of the majority was dependent upon that factor. On the other and, in subsequent cases Haldane v. Speirs has been referred to as an authority for the general proposition that an indorsation

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upon a cheque is not prima facie proof scripto of loan, and that on the ground that a cheque is the ordinary mode of payment of debt.

I do not feel that I should be warranted in extending one iota beyond what is matter of decision, a rule the reasonability of which I am unfortunately unable to appreciate. That evidence scripto that money has passed should be sufficient to let in parole in proof of loan would be a rule which might have much to commend it. The law, however, negatives this. There must be written evidence, not merely that the money passed but that the money was given on loan. So far there is no difficulty, but when the law goes on further to affirm that a mere receipt acknowledging that money passed is prima facie proof that the transaction was loan, it humbly appears to me that this is a presumption which contradicts experience. The great majority of cheques are, I believe, ‘to order,’ and in the case of a person using such a cheque book he would, if the indorsation is equivalent to a receipt given to himself, on getting his bundle of cheques at the end of the banking year, be at once armed with it may be a hundred documents, every one of which would be prima facie proof of loan against the indorser. It would, I apprehend, be exceedingly inconvenient if every person who cashes an order cheque thereby placed himself or his executors under the onus of proving that he did not get the proceeds on loan. The person who has granted a simple receipt and who maintains that it was in payment of a debt may perhaps be held to have been himself to blame for not specifying this on the receipt, but such specification on the indorsement of a cheque is unusual, if not unknown.”

The pursuer appealed.

The appellant's argument sufficiently appears from the opinion ( infra) of the Lord President.

Counsel for the respondent were not called on.