Scottish Court of Session Decisions

You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Duncan v American Express Services Europe Ltd [2009] ScotCS CSIH_1 (13 January 2009)
URL: http://www.bailii.org/scot/cases/ScotCS/2009/CSIH_1.html
Cite as: [2009] ScotCS CSIH_1, 2009 SCLR 200, 2009 GWD 2-24, [2009] CSIH 1, 2009 SLT 112

[New search] [Help]

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

Lord Nimmo Smith

Lord Kingarth

Lady Dorrian

[2009] CSIH 1

XA1/07

OPINION OF THE COURT

delivered by LORD NIMMO SMITH

in the Appeal from the Sheriffdom of Glasgow and Strathkelvin at Glasgow

in the cause

JAMES J DUNCAN

Pursuer and Respondent;

against

AMERICAN EXPRESS SERVICES EUROPE LIMITED

Defenders and Appellants;

_______

Pursuer and Respondent; Currie, QC, Davies, Harper McLeod LLP

Defenders and Appellants; McNeill, QC, Fairley, Anderson Strathern

13 January 2009

Introduction

[1] For many years the pursuer held a charge card account ("the account") with the defenders ("Amex"). During 1993 Amex supplied to one Brian Stevenson ("Mr Stevenson") a supplementary charge card on the account. Between 11 September 1993 and 15 December 2004 Mr Stevenson used this card to charge items to the account, to the total value of £562,251.83. Payments, which were credited to the account with Amex, were made from the pursuer's account with the Clydesdale Bank Plc ("Clydesdale").

[2] The pursuer has raised an action in Glasgow Sheriff Court, under the rules applicable to commercial causes, in terms of which he seeks payment of the above sum. After sundry procedure, the sheriff allowed parties a preliminary proof before answer for determination of certain specified issues. By interlocutor dated 7 November 2006 the sheriff made findings in respect of these issues. Amex have now appealed to this Court against the interlocutor containing these findings.

The general features of credit card transactions

[3] Counsel were agreed that the general features of transactions on an account such as this were as described by Sir Nicolas Browne-Wilkinson V-C in In re Charge Card Services Limited [1989] 1Ch 197 (C.A.), at page 509. His Lordship set out what in his judgment were "the normal features of credit card or charge card transactions, there being no relevant distinction between charge cards and credit cards for present purposes." Under the heading "The general features of credit card transactions" he went on to say:

"(A) There is an underlying contractual scheme which predates the individual contracts of sale. Under such scheme, the suppliers have agreed to accept the card in payment of the price of goods purchased: the purchasers are entitled to use the credit card to commit the credit card company to pay the suppliers. (B) That underlying scheme is established by two separate contracts. The first is made between the credit company and the seller: the seller agrees to accept payment by use of the card from anyone holding the card and the credit company agrees to pay to the supplier the price of goods supplied less a discount. The second contract is between the credit company and the cardholder: the cardholder is provided with a card which enables him to pay the price by its use and in return agrees to pay the credit company the full amount of the price charged by the supplier. (C) The underlying scheme is designed primarily for use in over-the-counter sales, i.e., sales where the only connection between a particular seller and a particular buyer is one sale.

(D) The actual sale and purchase of the commodity is the subject of a third bilateral contract made between buyer and seller. In the majority of cases, this sale contract will be an oral, over-the-counter sale. Tendering and acceptance of the credit card in payment is made on the tacit assumption that the legal consequences will be regulated by the separate underlying contractual obligations between the seller and the credit company and the buyer and the credit company. (E) Because the transactions intended to be covered by the scheme would primarily be over-the-counter sales, the card does not carry the address of the cardholder and the supplier will have no record of his address. Therefore the seller has no obvious means of tracing the purchaser save through the credit company. (F) In the circumstances, credit cards have come to be regarded as substitutes for cash: they are frequently referred to as "plastic money." (G) The credit card scheme provides advantages to both seller and purchaser. The seller is able to attract custom by agreeing to accept credit card payment. The purchaser by using the card, minimises the need to carry cash and obtains at least a period of free credit during the period until payment to the card company is due."

The pursuer's averments of fact

[4] The preliminary proof before answer before the sheriff was conducted on the basis that most of the pursuer's averments on record were to be taken pro veritate at that stage. Evidence on a small number of matters of fact was led from one witness. What follows is therefore principally derived from the pursuer's pleadings, important aspects of which are denied by Amex.

[5] The pursuer is a businessman. He and his wife and children have interests in a number of companies. From about 1987 until December 2004 the companies employed Mr Stevenson in various capacities. The pursuer treated him as a close and trusted friend and employee. Mr Stevenson was responsible, amongst other matters, for administering the financial affairs of the pursuer and his family. He received and processed correspondence, bank statements, credit and charge card statements and personal invoices addressed to the pursuer and his family. He was responsible for the production of a regular summary of the pursuer's financial position on various personal accounts, including the account.

[6] The charge card issued to the pursuer by Amex was initially called a "Gold Card". Later it became a "Platinum Card" and then, at the invitation of Amex, a "Centurion Card". During 1993 the pursuer's daughters Angela Duncan and Linda Duncan became "cardmembers" on the account. This was done with the authority and knowledge of the pursuer. At the same time Amex issued a charge card on the account to Mr Stevenson. This, it is averred, was done without the authority or knowledge of the pursuer. Amex issued replacement cards to Mr Stevenson from time to time, again without the authority or knowledge of the pursuer. Mr Stevenson used these cards to conduct transactions on the account.

[7] As can be seen from the statements produced, the cards issued to the pursuer, his daughters and Mr Stevenson were used by each of them to conduct transactions on the account. Monthly statements were sent by Amex to the pursuer which clearly showed the nature and amount of each transaction and the name of the individual whose card had been used to conduct it. In addition, there were annual charges in respect of each of the cards, so that from 1993 onwards there were annual charges attributable not only to the card from time to time issued to the pursuer but to the cards issued to his daughters and to Mr Stevenson. Initially, Amex collected payment monthly by direct debit from the pursuer's account with Clydesdale. The pursuer was under the impression that this was how monthly payments to Amex continued to be made. In fact, Mr Stevenson took to making payments by cheque drawn on the pursuer's account with Clydesdale. These, it is averred, were "fraudulently completed and signed by Brian Stevenson and were not signed by or authorised by the pursuer." Whatever might otherwise be taken from this averment on its own, reference may also be made to a note by the sheriff appended to an interlocutor dated 22 June 2006, in which he recorded that counsel for the pursuer had stated: "The pursuer's position is that the cheques are not signed with the pretended signature of any authorised signatory, but rather were signed with Mr Stevenson's own signature, he having no mandate from the pursuer to draw cheques." It appears that Mr Stevenson did not merely use cheques drawn on the pursuer's account with Clydesdale for the purpose of making monthly payments to Amex, but he also drew further unauthorised cheques to make payments on his own behalf. This course of conduct continued until Mr Stevenson's dishonesty came to light in 2004.

[8] In addition to the present action, the pursuer made a separate claim against Clydesdale. In December 2005 a settlement agreement was entered into between Clydesdale and the pursuer, the terms of which are set out and discussed below.

[9] Mr Stevenson's dishonesty has not, we were told, gone unpunished. He was prosecuted for embezzlement in the High Court of Justiciary, and sentenced to a lengthy period of imprisonment.

[10] The witness who was called to give evidence was led by the pursuer. She was Mrs Marcia Holland, a certified public accountant qualified in the state of Florida, USA. Her evidence, which the Sheriff accepted, was to the following effect. On occasion incorrect transactions on the account had been reversed by re-crediting of the account. The account could stand at credit for a period of time, for example where certain other accounts as between the parties had been closed and the sum standing at credit in these other accounts had been transferred to the account, bringing it into credit. Where at any time the account had stood at credit, the credit balance could be employed to meet future debits on the account. In 2005 Amex credited the account in respect of unauthorised or fraudulent transactions amounting to £23,000 in the case of the pursuer and £50,707.65 in the case of the pursuer's wife. (The papers before us do not explain how these transactions were made, but it appears that they were separate from, and additional to, transactions made with the use of the cards issued to Mr Stevenson.) The credit balances generated by these entries were paid out to the pursuer. Mrs Holland had been able to identify all the charges to the account which were not legitimate transactions of the pursuer of his family, but rather unauthorised transactions by Mr Stevenson. The total of these is the sum sued for in the present action.

The settlement agreement with Clydesdale

[11] Some words have been redacted from the copy of the settlement agreement which has been lodged as a production. The parties were Clydesdale, the pursuer and, we assume, other members of his family. The legible dates are 22 and 30 December 2005. The terms of the agreement, with redacted passages, and other passages which it is unnecessary to quote, indicated by words in brackets, were as follows:

"WHEREAS

(a) the Bank provided and provides banking services to Mr Duncan [names omitted] (together known as the "Duncan Account Holders");

(b) the Duncan Account Holders have complained to the Bank alleging that the Bank has in breach of mandate and without authority permitted a Mr Brian Barrie Stevenson, whether by himself or through others acting on his instructions or on his behalf to effect transactions by various means, including by cheque, misuse of credit cards and card accounts and by electronic funds transfer, on bank and credit card accounts of the Duncan Account Holders with the Bank ("the Stevenson Transactions"); and

(c) the Bank and the Duncan Account Holders have agreed a compromise in respect of all differences and disputes between them concerning, relating to or arising out of the Stevenson Transactions.

NOW THEREFORE THE PARTIES HAVE AGREED AND DO HEREBY AGREE AS FOLLOWS:

1. The Bank has agreed, without admission of liability, to make payment of the sum of [figures and words omitted] ("the Payment") to the Duncan Account Holders, to be divided between and amongst the Duncan Account Holders as detailed in the schedule attached to this Agreement with reference to transactions which are Stevenson Transactions on the respective accounts of the Duncan Account Holders with the Bank and where the recipient of the funds so transacted was not the account holder, whether in respect of an account with the Bank or any other financial institution, in full and final settlement of any and all claims and rights of action which any one or more of the Duncan Account Holders may have against the Bank relating to, arising out of or connected with the Stevenson Transactions. The Payment will be made to Messrs. Harper Macleod Solicitors' Client Account [account details omitted] before 31 December 2005.

2. By their execution of this Agreement, each of the Duncan Account Holders releases, waives and discharges all claims and rights of action competent to them or any one or more of them, of any kind, howsoever arising and whether or not presently manifest or made, against the Bank in relation to, arising out of or connected with the Stevenson Transactions.

3. [confidentiality]

4 [non-disclosure]

5 [expenses]

6 This Agreement shall be governed by and construed solely in accordance with Scottish law and the parties hereby submit to the non-exclusive jurisdiction of Scottish Courts."

It can be seen from the schedule that £1,126,652.51 was paid by Clydesdale to Mr Duncan.

The issues to be determined at the preliminary proof

[12] The issues for determination at the preliminary proof took the form of six questions. Questions 1-4 were in terms agreed between the parties. Questions 5 and 6 were introduced upon the motion of Amex. This was initially opposed on behalf of the pursuer, but the opposition was withdrawn. The terms of the questions were as follows:

"1. What written terms from time to time formed part of the contract between the pursuer and defenders in relation to the operation of the pursuer's account as referred to in condescendence 2?

2. In circumstances where (i) the defenders issued a card and replacement cards on the pursuer's account to a third party; (ii) the third party used those cards to pay for goods and services; and (iii) the defenders charged sums to the pursuer's account in respect of the use of those card[s] by the third party, all without the knowledge or authority of the pursuer:

(a) whether or not the defenders would be entitled in terms of the contract as existing from time to time between the parties to charge said sums to the pursuer's account; AND, in any event,

(b) whether or not it was a term (express or implied) of the contract that the pursuer was liable to pay any sums so charged unless (i) he proved to the reasonable satisfaction of the defenders that those cards were being used by the third party without his permission, and (ii) he informed the defenders promptly of the unauthorised use of those cards; and

(i) following the issue of each relevant statement including charges arising from such unauthorised use; or (ii) when the cardholder in fact became aware of the unauthorised use; or (iii) ought with reasonable diligence to have become aware of the unauthorised use.

(d) Whether or not it was a term of such contract that the pursuer would inform the defenders promptly when he became aware of such unauthorised use of those cards?

3. If the term in 2 (c) applies, whether or not the pursuer would be entitled to have the sums charged to the pursuer's account as a result of the unauthorised use of those cards reimbursed to his account with the effect that there would be a credit balance on the pursuer's account?

4. Whether the pursuer's primary claim is properly characterised as

(i) payment of a balance due on an account or (ii) a series of separate claims in repetition for repayment of monies paid under the pursuer's mistaken belief that they were due?

5. Whether, on the pursuer's case that the cheques drawn on his account held at Clydesdale Bank and used to settle his account with the defenders were forged, the monies paid to the defenders were the monies paid by the Clydesdale Bank and not by the pursuer, so that the pursuer's sole remedy is against Clydesdale Bank for breach of mandate and not against the defenders?

6. Whether, on the assumption that the pursuer had potential claims against both Clydesdale Bank and the defenders, and on the true construction of the settlement agreement between the pursuer and Clydesdale Bank, the pursuer has by that settlement agreement precluded himself from bringing any claim against the defenders?"

[13] Before the preliminary proof before answer took place, the parties entered into a joint minute of admissions, by which they inter alia agreed that the terms of various issues of the American Express Cardmember Agreement formed part of the contract between the pursuer and Amex and that such terms were applicable to the operation of the account from the date of each issue until superseded by the next. The dates of the various issues covered by the joint minute were: May 1993, July 1993, September 1995, October 1997, April 1999, January 2000, October 2003, November 2003 and August 2004. Of these, all but the first were applicable from time to time during the period in which Mr Stevenson used the card issued to him, i.e. there were eight issues current from time to time during this eleven-year period.

The terms of the parties' contract

[14] As a result of the joint minute of admissions, it became unnecessary for the sheriff to answer question 1. It is convenient however to set out here such of the terms of the various issues of the cardmember agreement as are relevant for present purposes. It is noteworthy that before the sheriff, and again before us, counsel did not suggest that there was any material difference between these issues. It was not explained to us, in that case, what purpose was served by sending out so many new issues to cardmembers, other than to confuse them. Counsel chose, for whatever reason, to address us principally on the terms of the May 1993 and October 1997 issues. We now set out the relevant provisions of these issues.

The May 1993 issue

[15] Paragraph 2 provided various definitions. "Card" was defined as meaning "The Gold Card, either the Basic Card, the Additional Card or the Supplementary Card...". These expressions were defined as follows:

"(c) If you are the individual who asked us to issue one or more Cards, you are the Basic Cardmember and will have a Card Account with us. Any primary Card so issued is called the Basic Card. If, as the Basic Cardmember you ask for a further Card to be issued in your name for use in connection with the Card Account, that Card will be known as the Additional Card.

(d) If you have received this Card at the request of a Basic Cardmember for use in connection with a Basic Cardmember's Account you are a Supplementary Cardmember and the Card which you have received is called a Supplementary Card."

Paragraph 2(f) provided:

"All amounts charged to a Card Account, including all annual or other fees associated with Cardmembership, any late payment charges, and other sums owing to us and to our subsidiaries, are referred to as Charges."

Paragraph 2(h) defined the expression "Record of Charge" as the record made, whether or not signed by the cardmember, when the card was used to incur a charge at a "Service Establishment", i.e. a firm or other organisation accepting the card for goods and services.

[16] Other provisions were as follows:

"3. Card Use

(a) You are the only person who may use the Card bearing your name for Charges... . You will be liable to pay all Charges incurred by you on the Card Account whether or not a Record of Charge is signed at the time. ...

(b) The Basic Cardmember is liable for all Charges incurred on the Card Account including Charges incurred on any Additional Card or Supplementary Card issued on the Card Account. ...

4. Billing

(a) Card Account statements are sent to the Basic Cardmember. This includes all Charges made in connection with Supplementary Cards. ...

6. Payment

(a) All Charges are due for payment in full immediately on receipt of your statement. ...

8. Queries

(a) If you have any questions about the Charges appearing on your statement please tell us immediately. ...

10. Lost Cards

(a) You must tell us immediately if the Card is lost, stolen, mutilated or not received when due.

(b) You are liable for any unauthorised use of the Card issued to you to the extent permitted by law.

(c) But once you have told us of its theft, loss, or non-arrival, orally or in writing, your liability is automatically limited to a maximum of twenty pounds (£20.00) up to the moment of reporting, provided that the Card has not been used by a person who acquired possession of it with your consent, in which case you will be fully liable for all use made of the Card. ..."

The October 1997 issue

[17] The October 1997 issue contained definitions similar to those of the May 1993 issue. The only difference worth noting is that the expression "Supplementary card" was defined as "the card we issue to other people ... to use on your card account", with no reference to this being at the request of the basic cardmember. Counsel for Amex accepted, however, that such words would be implied, so that their omission made no difference to the parties' agreement. The words "on your request" reappeared in the equivalent definition in the November 2003 issue.

[18] Other provisions of the October 1997 issue were as follows:

"3 Using the card

a You are the only person entitled to use the card with your name on it. You must pay all charges made by you or any other cardmember on your card account and any other person using the card if he or she has your permission. We can charge to your charge account any amount owed to us arising from theses charges.

b You must pay all charges on the card account, including charges made with the additional card and any supplementary card. ...

4 Statements

a We will send card statements to you. The statement will include charges to all cards on your account, including charges made by any supplementary cardmember or other person using the card with your permission.

b You and the supplementary cardmembers are responsible for all charges made to your card account according to paragraph 3b above. ...

6 Payment

a You must pay all charges in full when you receive your card account statement. ...

7 Questions about charges, cancelling charges and accepting cards

a If you have any questions about charges on your card account, you must contact us immediately. ...

9 Liability for loss, theft and misuse of cards

a You must tell us immediately if the card is lost, stolen, damaged or does not arrive when it is due. You must also tell us if the card is being used by another person without your permission.

b As long as you have told us promptly, you will only have to pay us up to £20 for any loss you suffered, up to the time you have told us about the loss.

c If your card is used by another person with your permission, you will be responsible for all charges made on the card up to the time you tell us you have withdrawn your permission. ..."

The sheriff's interlocutor

[19] The interlocutor now appealed against, answering questions 2 to 6, was in the following terms:

"GLASGOW, 7^th November 2006. The Sheriff having resumed consideration, Makes the following findings:-

(1) in circumstances where (a) the defenders issued a card and replacement cards on the pursuer's account to Brian Stevenson (b) Brian Stevenson used those cards to pay for goods and services and (c) the defenders charged sums to the pursuer's account in respect of the use of those cards by Brian Stevenson, all without the knowledge or authority of the pursuer, the defenders would not be entitled in terms of the contract as existing from time to time between the parties to charge said sums to the pursuer's account;

(2) it was not a term, either express or implied, of the contract that the pursuer was liable to pay any sums charged by Brian Stevenson unless (a) he proved to the reasonable satisfaction of the defenders that those cards were being used by Brian Stevenson without his permission and (b) he informed the defenders promptly of Brian Stevenson's unauthorised use of those cards; and upon the hypotheses that such a term applied "promptly" did not mean following the issue of each relevant statement[;]

(3) that the pursuer is entitled to have sums charged to his account as a result of Brian Stevenson's unauthorised use of those cards reimbursed to his account with the effect that there would be a credit balance on his account;

(4) finds that the pursuer's primary claim is properly characterised as payment of a balance due on an account;

(5) finds in respect of monies paid to the defenders by way of forged cheques or cheques drawn in breach of mandate that the pursuer is not confined to a single remedy against Clydesdale Bank;

(6) finds that on a true construction of the settlement agreement between the pursuer and Clydesdale Bank the pursuer has not by that settlement agreement precluded himself from bringing any claim against the defenders; ... ."

The concluding part of the interlocutor fixed the holding of a case management conference inter alia to discuss further procedure.

Question 2: The effect of the contractual provisions

[20] Amex's grounds of appeal against the sheriff's decision on this question are as follows:

"(i) Upon a proper analysis of the terms and conditions applicable to the contract between the parties, Clause 9 is habile to cover cards issued by the defenders but not authorised by the pursuer.

(ii) In determining that obligations between the parties in respect of charges made on an unauthorised card were not affected by the failure of the cardholder to raise a query within some brief period following the issue of each statement, the Sheriff failed to give adequate weight to a comparison of the characteristics of a chargecard arrangement and those of a bank current account. In particular, having accepted ... (a) that, because of the separate contracts entered into with vendors and service providers, the chargecard issuer was in a peculiarly exposed position and (b) that the chargecard issuer was dependent upon the member to alert him if any transaction recorded on a statement was not genuine, the Sheriff failed to give due, or any, weight to the contrast between an application for payment in respect of a chargecard transaction and operation of a bank current account based upon the terms of the mandate between the customer and the banker."

As can be seen from these grounds of appeal, two points arise from the express terms of the parties' contract, as set out in the various issues of the cardmember agreement in force from time to time.

[21] The first point raised in the grounds of appeal requires us to consider whether "clause 9 is habile to cover cards issued by [Amex] but not authorised by the pursuer". As we understand it, this is a reference to paragraph 9 of the April 1999 issue, on which the sheriff was invited to focus more than we were. The provision in question also appeared as paragraph 9 of the October 1997 issue, the counterpart to which is paragraph 10 of the May 1993 issue. We find it impossible, on a proper construction of these provisions in the context of the contract as a whole, to conclude that the pursuer has contractual liability for sums arising from the use of cards issued to Mr Stevenson without the knowledge or authority of the pursuer. If, as was accepted by counsel for Amex (see paragraph [17] above), a supplementary card could only be issued on the account at the request of the pursuer as the basic cardmember, the cards issued by Amex to Mr Stevenson without the knowledge or authority of the pursuer could not be "cards" within the meaning of the agreement. It necessarily follows that the use by Mr Stevenson of the cards thus issued to him could not generate "charges" within the meaning of the agreement, since the only charges referred to therein are those incurred by the use of cards issued to or at the request of the cardmember.

[22] The second point may be put in this way: Even if Amex were not entitled to charge such sums to the pursuer's account, but nevertheless purported to do so, with the result that the debit entries were shown on the monthly statements sent to the pursuer, and if the pursuer failed to query the debit entries, did he become liable for payment of the purported charges? Central to the discussion before us was the decision of the Privy Council in Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd and Others [1986] AC 80 ("Tai Hing"). In this case, a company with current accounts at three banks authorised the banks to pay cheques drawn on behalf of the company signed by the managing director or nominated signatories. The express terms of the company's contracts with the banks included a requirement that the company should notify the banks within a specified time of any errors in its monthly bank statements. Over a period of several years an accounts clerk forged the managing director's signature on a large number of cheques purporting to be drawn by the company. The banks honoured the cheques on presentation and debited them against the company's accounts. The company's system of internal financial control was not adequate to prevent or detect forgery and so the forgeries were not discovered until later. The company then sought repayment of the sums in question. Having lost at first instance and in the Court of Appeal of Hong Kong, the company appealed to the Judicial Committee of the Privy Council, which allowed the appeal. The judgment of their Lordships was delivered by Lord Scarman. At page 101 he said:

"The question [of general principle] can be framed in two ways. If put in terms of the law's development, it is whether two House of Lords' decisions, one in 1918 and the other in 1933, represent the existing law. If put in terms of principle, the question is whether English law recognises today any duty of care owed by the customer to his bank in the operation of a current account beyond, first, a duty to refrain from drawing a cheque in such a manner as may facilitate fraud or forgery, and, secondly, a duty to inform the bank of any forgery of a cheque purportedly drawn on the account as soon as he, the customer, becomes aware of it. The first duty was clearly enunciated by the House of Lords in London Joint Stock Bank Ltd. v. Macmillan [1918] A.C. 777, and the second was laid down, also by the House of Lords, in Greenwood v. Martins Bank Ltd. [1933] A.C. 51."

At pages 105 to 106 Lord Scarman said, in discussing whether a wider duty must be implied into the contract:

"The relationship between banker and customer is a matter of contract. The classic, though not necessarily exhaustive, analysis of the incidents of the contract is to be found in the judgment of Atkin L.J. in Joachimson v. Swiss Bank Corporation [1921] 3 K.B. 110, 127:

'I think that there is only one contract made between the bank and its customer. The terms of that contract involve obligations on both sides and require careful statement. They appear upon consideration to include the following provisions. The bank undertakes to receive money and to collect bills for its customer's account. The proceeds so received are not to be held in trust for the customer, but the bank borrows the proceeds and undertakes to repay them. The promise to repay is to repay at the branch of the bank where the account is kept, and during banking hours. It includes a promise to repay any part of the amount due against the written order of the customer addressed to the bank at the branch, and as such written orders may be outstanding in the ordinary course of business for two or three days, it is a term of the contract that the bank will not cease to do business with the customer except upon reasonable notice. The customer on his part undertakes to exercise reasonable care in executing his written orders so as not to mislead the bank or to facilitate forgery.'

Atkin L.J. clearly felt no difficulty in analysing the relationship upon the basis of the limited duty enunciated in Macmillan's case. And in Macmillan's case itself the protracted discussion, which is now only of historical interest, as to the true ratio decidendi of Young v. Grote (1827) 4 Bing. 253 reveals vividly that the House was aware of the possibility of a wider duty but rejected it.

The argument for the banks is, when analysed, no more than that the obligations of care placed upon banks in the management of a customer's account which the courts have recognised have become with the development of banking business so burdensome that they should be met by a reciprocal increase of responsibility imposed upon the customer: and they cite Selangor United Rubber Estates Ltd. v. Cradock (No. 3) [1968] 1 W.L.R. 1555 (Ungoed-Thomas J.) and Karak Rubber Co. Ltd.v. Burden (No. 2) [1972] 1 W.L.R. 602 (Brightman J.). One can fully understand the comment of Cons J.A. that the banks must today look for protection. So be it. They can increase the severity of their terms of business, and they can use their influence, as they have in the past, to seek to persuade the legislature that they should be granted by statute further protection. But it does not follow that because they may need protection as their business expands the necessary incidents of their relationship with their customer must also change. The business of banking is the business not of the customer but of the bank. They offer a service, which is to honour their customer's cheques when drawn upon an account in credit or within an agreed overdraft limit. If they pay out upon cheques which are not his, they are acting outside their mandate and cannot plead his authority in justification of their debit to his account. This is a risk of the service which it is their business to offer. The limits set to the risk in the Macmillan [1918] A.C. 777 and Greenwood [1933] A.C. 51 cases can be seen to be plainly necessary incidents of the relationship. Offered such a service, a customer must obviously take care in the way he draws his cheque, and must obviously warn his bank as soon as he knows that a forger is operating the account. Counsel for the banks asked rhetorically why, once a duty of care was recognised, should it stop at the Macmillan and Greenwood limits. They submitted that there was no rational stopping place short of the wider duty for which they contended. With very great respect to the ingenious argument addressed to the Board their Lordships find in certain observations of Bray J. in Kepitigalla's case [1909] 2 KB 1010 a convincing statement of the formidable difficulties in the way of this submission. Bray J. said, at pp. 1025-1026:

'I think Mr. Scrutton's contention equally fails when it is considered apart from authority. It amounts to a contention on the part of the bank that its customers impliedly agreed to take precautions in the general course of carrying on their business to prevent forgeries on the part of their servants. Upon what is that based? It cannot be said to be necessary to make the contract effective. It cannot be said to have really been in the mind of the customer, or, indeed, of the bank, when the relationship of banker and customer was created. What is to be the standard of the extent or number of the precautions to be taken? Applying it to this case, can it be said to have been in the minds of the directors of the company that they were promising to have the pass-book and the cash-book examined at every board meeting, and to have a sufficient number of board meetings to prevent forgeries, or that the secretary should be supervised or watched by the chairman? If the bank desire that their customers should make these promises they must expressly stipulate that they shall. I am inclined to think that a banker who required such a stipulation would soon lose a number of his customers. The truth is that the number of cases where bankers sustain losses of this kind are infinitesimal in comparison with the large business they do, and the profits of banking are sufficient to compensate them for this very small risk. To the individual customer the loss would often be very serious; to the banker it is negligible.'

Their Lordships reject, therefore, the implied term submission."

[23] As to the express terms of business, Lord Scarman said at pages 109 to 110:

"Their Lordships agree with the views of the trial judge and Hunter J. as to the interpretation of these terms of business. They are contractual in effect, but in no case do they constitute what has come to be called 'conclusive evidence clauses.' Their terms are not such as to bring home to the customer either 'the intended importance of the inspection he is being expressly or impliedly invited to make,' or that they are intended to have conclusive effect against him if he raises no query, or fails to raise a query in time, upon his bank statements. If banks wish to impose upon their customers an express obligation to examine their monthly statements and to make those statements, in the absence of query, unchallengeable by the customer after expiry of a time limit, the burden of the objection and of the sanction imposed must be brought home to the customer. In their Lordships' view the provisions which they have set out above do not meet this undoubtedly rigorous test. The test is rigorous because the bankers would have their terms of business so construed as to exclude the rights which the customer would enjoy if they were not excluded by express agreement. It must be borne in mind that, in their Lordships' view, the true nature of the obligations of the customer to his bank where there is not express agreement is limited to the Macmillan and Greenwood duties. Clear and unambiguous provision is needed if the banks are to introduce into the contract a binding obligation upon the customer who does not query his bank statement to accept the statement as accurately setting out the debit items in the accounts."

[24] Counsel disagreed on the applicability of this decision to the present case. We did not understand counsel for Amex to argue that, if it is applicable, the result would not be as contended for by counsel for the pursuer. We accept that a credit account with a bank has features that are not the same as those of a charge card account: see the quotation from In re Charge Card Services Limited at paragraph [3] above. We also accept that a bank current account generally operates in credit, while the opposite applies to a charge card account. But what matters for present purposes is that in each case statements are sent to the account holder, who may or may not be in a position to read them and may or may not readily have the means to hand of checking the accuracy of the entries. As was held in Tai Hing, to make a statement, in the absence of query, unchallengeable by the customer after expiry of the time limit, the customer must be subject to a conclusive evidence clause expressed in sufficiently clear and unambiguous terms. All that the agreement provides in the present case (paragraph 8 of the May 1993 issue and paragraph 7 of the October 1997 issue) is that if the card holder has any questions about charges on the account he must tell or contact Amex immediately. Counsel for Amex were reduced to submitting that it was implicit in this that the customer will become liable for a debit entry in the account (which ex hypothesi ought not to have been made) unless he has both checked the statement and informed Amex promptly that his liability is disputed. We do not accept this approach. There is no good reason why such adverse consequences should be left to implication. Amex have gone to some lengths to set out the express terms and conditions applicable from time to time to the parties' contract. There is no good reason why, if they wish to do business on the terms now contended for, they should not make express provision to that effect. Tai Hing yields the proposition that a conclusive evidence clause in a contract relating to a current account or running account (as to which, see below) requires to be clear and unambiguous. There is no such clause in the present case.

[25] For these reasons, we are satisfied that the Sheriff answered question 2 (a) and (b) correctly. In the circumstances it is not necessary to proceed to consider question 2 (c) and (d).

Questions 3 and 4: Characterisation of the pursuer's claim

[26] The Sheriff thought it appropriate to consider these two questions together, and likewise before us the parties discussed them together. We shall do the same. The grounds of appeal for Amex against the sheriff's decision on these questions are as follows:

"The Sheriff erred in determining ... that a chargecard account was no different from a bank current account and that the relationship between the parties was simply that of debtor and creditor. In so doing, the Sheriff failed to give proper, or any, weight to (i) the fact that a chargecard agreement was not an agreement for the provision of banking facilities but, rather, an agreement whereby the chargecard issuer was entitled to make application for payment in respect of an apparent transaction, (ii) the fact that such applications had been made and (iii) the fact that payments had been made. Upon a proper analysis, any claims open to the pursuer were separate claims in repetition for repayment of monies paid under a mistaken belief that they were due and not a claim for payment of a credit balance due on an account."

[27] The discussion turned on the question whether the pursuer's Amex account is properly described as a running account. In that event, the pursuer contends that credits arising in his favour should be reflected in the account and that in the event of a credit balance arising Amex would stand in the relationship of debtor to him. In Wilson, Scottish Law of Debt (2nd ed.) the author states:

"A running account or account-current is one in which the intention of the parties was that the transactions should be set down on different sides of the account against each other and a balance struck at the end with periodical settlements."

There is a similar statement in Goode, Consumer Credit Law and Practice, paragraph 25.22c. One of the cases referred to by Goode is In re Charge Card Services Limited [1987] Ch 150, in which Millett J (whose judgment was affirmed in the Court of Appeal, [1989] 1 Ch 197, quoted above) said of credit card or charge card accounts at page 174:

"In my judgment, this is not a case of set off at all, for there are no mutual but independent obligations capable of being quantified and set off against each other. There are reciprocal obligations giving rise to credits and debits in a single running account, a single liability to pay the ultimate balance found due on taking the account, and provisions for retention and provisional payment in the meantime."

[28] Reference was also made to the definition of "running-account credit" in section 10 of the Consumer Credit Act 1974:

"(1) For the purposes of this Act-(a) running-account credit is a facility under a personal credit agreement whereby the debtor is enabled to receive from time to time (whether in his own person, or by another person) from the creditor or a third party cash, goods and services (or any of them) to an amount or value such that, taking into account payments made by or to the credit of the debtor, the credit limit (if any) is not at any time exceeded; ..."

By the Consumer Credit (Exempt Agreement) Order 1989 (SI 1989 No. 869), regulation 3, an agreement for a running-account credit which provides for the making of payments by the debtor in relation to specified periods and requires that the number of payments to be made by the debtor in repayment of the whole amount of the credit provided in each such period shall not exceed one, as in the present case, is exempted from regulation by the Act. Counsel for the pursuer nevertheless submitted that section 10 provides assistance in the matter of definition.

[29] Under reference to these authorities, the Sheriff concluded: "At bottom therefore a charge card account is no different from a bank current account and the relationship between the parties is simply that of debtor and creditor." This led him to the conclusion that it would be wholly inconsistent with the notion of a running account that the pursuer's remedy should be a series of separate claims in repetition in respect of individual incorrect entries on the account.

[30] Before us, counsel for Amex contended that the pursuer's remedy was for repetition of money paid in error. Although counsel accepted that the account might from time to time be in credit, as had happened in practice in the present case, they submitted that what made the pursuer's charge account with Amex different from a current account with a bank was that, firstly, it generally operated in debit and, secondly, the balance due by the pursuer was payable in full each month.

[31] In our opinion the Sheriff correctly concluded that the pursuer's primary remedy is for payment of a credit balance on account. The authorities referred to above fully support this view. The position adopted on behalf of Amex does not recognise that what is at issue here is not whether payments into the account were made (from the pursuer's Clydesdale account) "in error", but whether debit entries were made on the Amex account in circumstances where Amex were not contractually entitled to make such entries. If, as we have held, Amex were not entitled to debit from the account "charges" attributable to the use by Mr Stevenson of cards issued to him without the knowledge or authority of the pursuer, it would follow that on an accounting between the parties these debits should be re-credited to the account. The fact that a balance was struck and paid in full each month could not affect the pursuer's overall entitlement to a true accounting: these would be no more than "periodical settlements", of the kind contemplated in the passage quoted from Wilson, or provisional payments, in Millett J's expression. This was, in our opinion, a running account, with a single liability to pay the ultimate balance found due on a true accounting. This liability might just as well be that of the pursuer as that of Amex, depending on the circumstances; but in the circumstances of the present case the liability, after re-crediting the debits which they were not entitled to make, would be that of Amex.

Question 5: Remedy for forged cheques or cheques drawn in breach of mandate

[32] The grounds of appeal against the sheriff's decision on this question are as follows:

"(i) Upon the basis that any claim by the pursuer is for repayment of money paid in error, any money paid by way of forged cheques was not paid with the pursuer's own funds and, as a matter of law properly characterised, the pursuer's claim is against the bank which made payment upon the basis of the forged cheques.

(ii) Upon the assumption that the Sheriff was correct to conclude that the pursuer's primary remedy was for payment of a credit balance on an account, the Sheriff erred in determining ... that the defenders were not entitled to enquire into the source of those funds. Payments on forged cheques made into that account were payments, properly characterised, not of the pursuer's funds but of the paying bank's own funds."

[33] It is perhaps unfortunate that the word "forged" appears in this question. In relation to a cheque, it connotes the making of a fraudulent imitation of the signature of the bank's customer or other authorised signatory. But, as noted above at paragraph [7], the pursuer's position is that the cheques were not signed with the pretended signature of the pursuer or an authorised signatory, but rather were signed with Mr Stevenson's own signature, he having no mandate from the pursuer to draw cheques.

[34] Counsel for Amex, at whose instance the question was introduced, said that its terms had been necessitated by a lack of clarity in the pursuer's pleadings, and presented an argument on the basis that the word "forged" was to be given its normal meaning. Counsel referred to section 24 of the Bills of Exchange Act 1882, which is in these terms:

"Subject to the provisions of this Act, where a signature on a bill is forged or placed thereon without the authority of the person whose signature it purports to be, the forged or unauthorised signature is wholly inoperative, and no right to retain the bill or to give a discharge therefor or to enforce payment thereof against any party thereto can be acquired through or under that signature, unless the party against whom it is sought to retain or enforce payment of the bill is precluded from setting up the forgery or want of authority.

Provided that nothing in this section shall affect the ratification of an unauthorised signature not amounting to a forgery."

[35] Reference was also made to the discussion of this provision in Gloag and Henderson, The Law of Scotland, paragraph 20.34. Counsel also relied on Bank of England v Vagliano Brothers [1891] AC 107, in which Lord Watson said at page 131:

"The decision of the Queen's Bench in Robarts v. Tucker 16 QB 560 has, ever since its date, been accepted in mercantile practice as determining the obligations incumbent upon bankers who agree to retire acceptances on account of their customers. It casts upon them the whole duty of ascertaining the identity of the person to whom they make payment with the payee whose name is upon the bill. They may pay in good faith to the wrong person, in circumstances by which the acceptor himself or men of ordinary prudence might have been misled; but they cannot take credit for such a payment in any question with the acceptor. It has been said by one of the learned Judges that the rule is a harsh one, and it is possible that in some circumstances it may operate harshly; but it appears to me to be settled beyond dispute, and I see no reason for suggesting any doubt that it puts a reasonable construction upon the contract constituted by the agreement of the banker to pay his customers' acceptances when they fall due. In the absence of any special stipulations it construes the arrangement so constituted as importing that, on the one hand, the customer is to furnish or repay to the banker the funds necessary to meet his obligations as acceptor; and that, on the other hand, the banker undertakes to apply the money provided by the customer, or advanced on his account, so as to extinguish the liability created by his acceptance. Accordingly, no payment made by the banker which leaves the liability of the acceptor undischarged can be debited to the latter."

[36] In Bank of Scotland v MacLeod Paxton Woolard & Co 1998 SLT 258 Lord Coulsfield said at page 271:

"It is well established that when funds are paid into the hands of a bank, in an ordinary banking transaction, the bank become owners of the funds and entitled to retain them unless someone can demonstrate an obligation to pay the funds to them. The bank customer is a creditor of the bank and there is no question of any trust relationship between banker and customer, in ordinary circumstances....An ordinary cheque is an order on the bank to pay funds which the bank owes to its customer to another party, and the bank is, unless the cheque is guaranteed, obliged to meet it only if there are funds to do so or it has agreed to do so."

[37] On the basis of these authorities, counsel submitted that a banker who pays on a forged cheque and therefore without a mandate from his customer does so, not with the customer's money, but with his own money. In National Westminster Bank Limited v Barclays Bank International Limited &c [1975] 1Q P 654, Kerr J said at page 666:

"The common aphorism that a banker is under a duty to know his customer's signature is in fact incorrect even as between the banker and his customer. The principle is simply that a banker cannot debit his customer's account on the basis of a forged signature, since he has in that event no mandate from the customer for doing so."

The same applied if Mr Stevenson, not being an authorised signatory, signed cheques drawn on the pursuer's account. The payment was in any event still made by the bank from its own money and not from the pursuer's. In that event, the bank alone had the title and interest to pursue the money, and the pursuer had suffered no loss caused by Amex. The claim was one for repetition, and was properly at the instance of Clydesdale, not the pursuer, otherwise the result would be surprising.

[38] Counsel for the pursuer emphasised that it was not averred in the pursuer's pleadings that the cheques had been "forged", the averment was that they were "fraudulently completed and signed" by Mr Stevenson and "were not signed by or authorised by the pursuer". If the issue was what was the balance due to the pursuer on account with Amex, the exact source of the funds was not relevant.

[39] Of this question, the Sheriff said:

"I am inclined to agree with [senior counsel for Amex] that the distinction between a forged cheque and a cheque issued in breach of mandate, which has never subsequently been ratified, is indeed a distinction without a difference. It is, however, not a matter which I require to resolve, because I am in agreement with senior counsel for the pursuer in that the source of the funds used to pay these various statements does nothing to restrict the pursuer's right of action against the defenders."

The Sheriff went on to say that, since he had concluded that the pursuer's primary remedy was for payment of a credit balance on an account, then he could see no basis upon which Amex were entitled to enquire into the source of those funds. The mere fact that the pursuer might have a separate claim against a third party was no reason to deny him the right to payment of the credit balance due on his account with Amex. He did not see why Amex should escape liability in the period after Mr Stevenson's unexplained decision to switch from payment by way of direct debit to cheque.

[40] We agree with the sheriff's approach to answering this question. Given that the pursuer's primary claim is properly characterised as one for payment of a balance due on an account, that balance can only be arrived at once account is taken of all sums paid to credit of the account from time to time. Assuming for this purpose that, as averred by the pursuer, the payments were made by cheques drawn on the pursuer's account with Clydesdale fraudulently completed and signed by Mr Stevenson and not signed by or authorised by the pursuer and are to be treated in the same way as forged cheques, so that the sums credited came from Clydesdale's funds rather than the pursuer's, the sums nevertheless, so far as can be concluded from the pleadings, remain credited to the account. Moreover, if all had been conducted as it should have been, the pursuer and members of his family were conducting transactions on the pursuer's account with Amex, which required to be settled monthly by payments out of his account with Clydesdale. So what is truly at issue is the element of each monthly payment attributable to Mr Stevenson's transactions on the Amex account. Provided that Amex, in an accounting with the pursuer, have given him credit for these elements, the source of the credits is of no significance (and in any event the implication from the pursuer's pleadings is that the debit entries on the Clydesdale account remain). The situation might be different if Clydesdale, having reversed any debit entries on the pursuer's account, were seeking repayment from Amex, but that is not the subject of any averment by either party, so it must be assumed that the credits stand.

[41] Notwithstanding the foregoing, there is an interaction between questions 5 and 6, and for the reasons given in our discussion of question 6 we recognise that there may be an overlap between the pursuer's claim against Amex and the subject-matter of the settlement agreement with Clydesdale.

Question 6: Effect of the settlement agreement with Clydesdale

[42] The terms of this agreement are set out at paragraph [11] above. The grounds of appeal against the sheriff's decision on this question are as follows:

"(i) Whether or not the pursuer's claim in the present action is properly characterised as an action for payment of a credit balance due on an account with the defenders, the Sheriff erred in determining ... that the defenders and Clydesdale Bank could not be characterised either as concurrent wrongdoers or contract breakers.

(ii) The Sheriff failed to give adequate weight to the terms of the compromise agreement with Clydesdale Bank. In particular he failed to give adequate weight to the manifest anticipation that Clydesdale Bank would no longer have any exposure in respect of Stevenson transactions and that, in consequence, it was implicit in the agreement that the pursuer would no longer have any right to proceed against the present defenders.

(iii) In approaching a proper construction of the compromise agreement, the Sheriff gave inadequate weight to the point, which he accepted ..., that the potential claims against the two parties could be said to overlap.

(iv) The Sheriff erred in his construction of Clause 1 ... Properly construed, in the context of the agreement as a whole, Clause 1 identifies an important step in proceeding to allocate the payment to recipients. However, as far as the parties to the compromise agreement were concerned it is manifest that the payment was being made in full satisfaction of any claims which the pursuer might have had against the bank in respect of all the Stevenson transactions."

[43] Counsel for Amex drew attention to the third plea-in-law for the pursuer, in terms of which he seeks reparation from Amex for loss and damage suffered as a result of their breach of contract. Counsel submitted that if he received full satisfaction from Clydesdale for his loss, he was not entitled to recover from Amex a sum in excess of his loss: Erskine, Inst. III.i.15. The question was whether, on a proper construction, the effect of the settlement agreement was to extinguish his loss. Counsel accepted that in Steven v Broady Norman & Co. Ltd. 1928 S.C. 351 it was held that the fact that a decree has been obtained against one of a number of joint and several obligants does not preclude a fresh action being brought against the others, if satisfaction has not been got under the decree already obtained; and that the same would apply to the settlement agreement.

[44] Counsel relied on what was said by Lord Hope of Craighead in Jameson v Central Electricity Generating Board [2000] 1 AC 455, at pages 471 to 476:

"The basic rule is that a plaintiff cannot recover more by way of damages than the amount of his loss. The object of an award of damages is to place the injured party as nearly as possible in the same financial position as he or she would have been in but for the accident. ...

So the first question which arises on the facts of this case is whether satisfaction for this purpose is achieved where the plaintiff agrees to accept a sum from one of the alleged concurrent tortfeasors which is expressed to be in full and final settlement of his claim against that tortfeasor, if that sum is less than the amount which a judge would have held to be the amount of the damages which were due to him if the case had gone to trial and the defendant had been found liable. ...

[I]t is clear that an agreement reached between the plaintiff and one concurrent tortfeasor cannot extinguish the plaintiff's claim against the other concurrent tortfeasor if his claim for damages has still not been satisfied. The critical question, as Auld L.J. was right to point out [in the Court of Appeal [1998] Q.B. 323] at p. 342B, is whether the claim has in fact been satisfied. I think that the answer to it will be found by examining the terms of the agreement and comparing it with what has been claimed. The significance of the agreement is to be found in the effect which the parties intended to give to it. The fact that it has been entered into by way of a compromise in order to conclude a settlement forms part of the background. But the extent of the element of compromise will vary from case to case. The scope for litigation may have been reduced by agreement, for example on the question of liability. There may be little room for dispute as to the amount which a judge would award as damages. So one cannot assume that the figure which the parties are willing to accept is simply their assessment of the risks of litigation. The essential point is that the meaning which is to be given to the agreement will determine its effect.

I take as my starting point the fact that a claim of damages in tort is a claim for unliquidated damages. It remains unliquidated until the amount has been fixed either by the judgment of the court or by an agreement as to the amount which must be paid to satisfy the claim. ...

What then is the effect if the amount of the claim is fixed by agreement? Is the figure which the plaintiff has agreed to accept in full and final satisfaction of his claim from one concurrent tortfeasor open to review by the judge in a second action against the other concurrent tortfeasor on the ground that, despite the terms of his agreement, he has not in fact received the full value of his claim? Or is the fact that that figure was agreed to as the amount to be paid in full and final settlement of the first action to be taken as having fixed the amount of the claim in just the same way as if it had been fixed by a judgment, so that the claim must be held to have been extinguished as against all other concurrent tortfeasors?

As I have said, a claim of damages is a claim for a sum of money, the amount of which must necessarily remain unliquidated until something has been done to fix the amount. Where the claim is adjudicated upon by the court, the amount of the damages is fixed by the judgment which the court makes as to the sum required to make good to the plaintiff the full value of his loss. But it is well known that many claims are settled without the amount due as damages having been adjudicated by the court. They are settled by agreement between the parties. Were it not for the fact that most claims of damages are settled in this way, the parties would be exposed to greater expense and uncertainty and the burden of work on the courts would be intolerable. There is a strong element of public interest in facilitating the disposal of cases in this way.

In the typical case the plaintiff agrees to accept the sum which the defendant is willing to pay in full and final settlement of his claim. Such a settlement normally involves an element of compromise on both sides. Each side will have made concessions of one kind or another to reflect its assessment of the prospects of success if the case were to go to trial. The plaintiff will normally have made a discount from the amount which he regards as full compensation for his loss. He may have withdrawn some elements of his claim, reduced the amounts sought in settlement of others or accepted an overall reduction in the amount claimed. But, whatever the nature and extent of the compromise, one thing is common to all these cases. This is that the agreement brings to an end the plaintiff's cause of action against the defendant for the payment of damages. The agreed sum is a liquidated amount which replaces the claim for an illiquid sum. The effect of the compromise is to fix the amount of his claim in just the same way as if the case had gone to trial and he had obtained judgment. Once the agreed sum has been paid, his claim against the defendant will have been satisfied. Satisfaction discharges the tort and is a bar to any further action in respect of it: United Australia Ltd. v. Barclays Bank Ltd. [1941] A.C. 1, 21 per Viscount Simon L.C.; Kohnke v. Karger [1951] 2 K.B. 670, 675 per Lynskey J. I think that it follows that, if the claim was for the whole amount of the loss for which the defendant as one of the concurrent tortfeasors is liable to him in damages, satisfaction of the claim against him will have the effect of extinguishing the claim against the other concurrent tortfeasors.

There may be cases where the terms of the settlement, or the extent of the claim made against the tortfeasor with whom the plaintiff has entered into the settlement, will show that the parties have not treated the settlement as satisfaction for the full amount of the claim of damages. In the same way a judge, in awarding damages to the plaintiff in his action against one concurrent tortfeasor, may make it clear that he has restricted his award to a part only of the full value of the claim. That was the point which the sheriff, Sir Allan G. Walker Q.C., had to examine in Carrigan v. Duncan 1971 S.L.T. (Sh.Ct.) 33. In that case the pursuer who had accepted a sum from one wrongdoer in full satisfaction of his claim for loss and injury resulting from a road accident raised a fresh action against another alleged wrongdoer in an attempt to recover further damages. Auld L.J. said at p. 339B that this case did not support the submission that the answer to the question whether the claimant had received full satisfaction is to be found in the words of the settlement. I think that, on closer examination, it provides direct support for this submission on grounds which do not appear to be in conflict with any relevant English authority. It has been referred to and accepted as good authority in Australia: Ruffino v. Grace Brothers Pty. Ltd. [1980] 1 N.S.W.L.R. 732; Boyle v. State Rail Authority (N.S.W.) (1997) 14 N.S.W.C.C.R. 374.

In holding that the second action was incompetent the sheriff distinguished two previous cases where a second action to recover further damages had been held to be competent. The first was Dillon v. Napier, Shanks & Bell (1893) 30 S.L.R. 685, where the court examined the terms of the receipt and the correspondence regarding the settlement which showed that the pursuer's claim against the second wrongdoer was expressly reserved and the payment made was not a payment in full satisfaction of all possible claims for the injury. The second was Crawford v. Springfield Steel Co. Ltd., 18 July 1958 unreported, where Lord Cameron held that the obtaining of a decree against one employer did not debar a later claim against another employer because the judge in the first action had made it clear in his judgment that he had granted decree for only 10 per cent of the pursuer's total loss due to the disease which he had contracted on the footing that the defenders in that action were only 10 per cent to blame for the pursuer's incapacity. In Carrigan v. Duncan on the other hand the pursuer had brought his action against the defender in the first action on the basis that that defender was entirely to blame for the accident. It was said on his behalf that he did not intend the settlement of the earlier action to be in full satisfaction of his claim for loss and injury arising from the accident. But the pleadings and the terms of the settlement, looked at objectively, showed that the sum which he obtained under it had been accepted in full satisfaction of his claim.

In these circumstances the sheriff applied the decision of the Court of Session in Balfour v. Baird & Sons 1959 S.C. 64, where the judgment which the pursuer had obtained against one employer in the first action made it clear that the award of damages was for the whole of the damage which he had suffered as the result of his pneumoconiosis and the second action which had been raised against another employer was dismissed as incompetent. Relying on the principle which was explained in that case that the claim is extinguished against all the wrongdoers once the damages have been satisfied in an action against any one of them, the sheriff held that the claim had been satisfied by the settlement of the first action and that in this case also the second action was incompetent. He did not, as Auld L.J. noted at p. 339D, hear any evidence that the sum which had been accepted in settlement was less than the full amount of his loss. But it is clear from the sheriff's judgment that he would have held that evidence to that effect was excluded by the terms of the settlement.

I think that these cases demonstrate the limits of the inquiry which the judge may undertake in the event of a subsequent action being raised against another alleged concurrent tortfeasor. He may examine the statement of claim in the first action and the terms of the settlement in order to identify the subject matter of the claim and the extent to which the causes of action which were comprised in it have been included within the settlement. The purpose of doing so will be to see that all the plaintiff's claims were included in the settlement and that nothing was excluded from it which could properly form the basis for a further claim for damages against the other tortfeasors. The intention of the parties is to be found in the words of the settlement. The question is one as to the objective meaning of the words used by them in the context of what has been claimed.

What the judge may not do is allow the plaintiff to open up the question whether the amount which he has agreed to accept from the first concurrent tortfeasor under the settlement represents full value for what has been claimed. That kind of inquiry, if it were to be permitted, could lead to endless litigation as one concurrent tortfeasor after another was sued on the basis that the sums received by the plaintiff in his settlements with those previously sued were open to review by a judge in order to see whether or not the plaintiff had yet received full satisfaction for his loss. Different judges might arrive at different assessments of the amount of the damages. The court would then have to decide which of them was to be preferred as the basis for the apportionment between the various tortfeasors. I do not think that this can be regarded as acceptable. The principle of finality requires that there must be an end to litigation.

The question therefore is ... not whether the plaintiff has received the full value of his claim but whether the sum which he has received in settlement of it was intended to be in full satisfaction of the tort."

[45] Counsel submitted, in light of this passage, that Clydesdale and Amex were likewise concurrent wrongdoers, the loss caused to the pursuer by Clydesdale being larger than, and including, the loss allegedly caused by Amex. On the face of the settlement agreement, having regard to the commercial purpose behind it, its effect was to discharge both wrongdoers. Recital (b) in the preamble in particular supported this construction: it referred to funds paid to Amex out of the Clydesdale account as part of "the Stevenson Transactions", which were thus included in the compromise.

[46] Counsel went on to refer to Heaton and others v AXA Equity and Law Life Assurance Society plc and another [2002] 2 AC 329, in which it was held, distinguishing Jameson, that where a claimant had overlapping claims for successive breaches of contract against two defendants and had concluded a compromise agreement "in final settlement" with one defendant, the proper approach to the question whether he could pursue an action against the other defendant was to ascertain the intended effect of the compromise agreement by interpreting the words used in the context of the particular circumstances, and where the agreement had not fixed the full measure of the claimant's loss his action would not be precluded. Lord Bingham of Cornhill said, in paragraph 9:

"In considering whether a sum accepted under a compromise agreement should be taken to fix the full measure of A's loss, so as to preclude action against C in tort in respect of the same damage, and so as to restrict any action against C in contract in respect of the same damage to a claim for nominal damages, the terms of the settlement agreement between A and B must be the primary focus of attention, and the agreement must be construed in its appropriate factual context. In construing it various significant points must in my opinion be borne clearly in mind:

(1) The release of one concurrent tortfeasor does not have the effect in law of releasing another concurrent tortfeasor and the release of one contract-breaker does not have the effect in law of releasing a successive contract-breaker.

(2) An agreement made between A and B will not affect A's rights against C unless either (a) A agrees to forgo or waive rights which he would otherwise enjoy against C, in which case his agreement is enforceable by B, or (b) the agreement falls within that limited class of contracts which either at common law or by virtue of the Contracts (Rights of Third Parties) Act 1999 is enforceable by C as a third party.

(3) The use of clear and comprehensive language to preclude the pursuit of claims and cross-claims as between A and B has little bearing on the question whether the agreement represents the full measure of A's loss. The more inadequate the compensation agreed to be paid by B, the greater the need for B to protect himself against any possibility of further action by A to obtain a full measure of redress.

(4) While an express reservation by A of his right to sue C will fortify the inference that A is not treating the sum recovered from B as representing the full measure of his loss, the absence of such a reservation is of lesser and perhaps of no significance, since there is no need for A to reserve a right to do that which A is in the ordinary way fully entitled to do without any such reservation.

(5) If B, on compromising A's claim, wishes to protect himself against any claim against him by C claiming contribution, he may achieve that end either (a) by obtaining an enforceable undertaking by A not to pursue any claim against C relating to the subject matter of the compromise, or (b) by obtaining an indemnity from A against any liability to which B may become subject relating to the subject matter of the compromise."

Lord Mackay of Clashfern said, in paragraph 41:

"Whether a particular agreement has that effect is a question of construction of the words, in the light of all the relevant facts surrounding it."

Similar statements were made in the opinions of the other judges.

[47] Counsel submitted that the recipient of the funds was Amex, and that Clydesdale could not have intended, in respect of those funds, to leave an area of exposure not covered by the agreement. The context must be that which was immediately apparent, without proof of surrounding circumstances, unless proof was required for a particular reason, for example to resolve an ambiguity.

[48] Counsel for the pursuer submitted that the above authorities supported the argument that there were here two separate claims, the losses claimed from Clydesdale being entirely separate from those claimed from Amex. The sheriff had correctly held, in answering question 4, that the pursuer's claim in the present action was primarily for payment of a credit balance due on his account with Amex. This was not therefore a claim for damages. The claim against Clydesdale was also for payment of a balance due. Settlement of the claim against Clydesdale could not constitute settlement of the claim against Amex. There might be some overlap between the claims, but they were not identical. Counsel pointed out that Amex's pleadings contained no averments of such circumstances as might relevantly be proved to assist in the interpretation of the agreement. The sheriff had been invited by Amex to construe the agreement without recourse to evidence, and his approach should not be disturbed.

[49] It appears to us that the key to this issue is the proper construction of the expression "the Stevenson transactions" in recital (b) in the preamble to the agreement, which were given a definition in the narrative "that the Bank has in breach of mandate and without authority permitted [Mr] Stevenson, whether by himself or through others acting on his instructions or on his behalf to effect transactions by various means, including by cheque, misuse of credit cards and card accounts and by electronic funds transfer, on bank and credit card accounts of the Duncan Account Holders with the Bank." It is to be noticed at once that this definition does not extend in terms to the use (or misuse) by him of charge cards issued to him by Amex: such use was not, and could not have been, "permitted" by Clydesdale; and the transactions thereby effected were not "transactions ... on bank and credit card accounts ... with the Bank". The definition would be apt to extend to payments made to Amex out of such an account, including of course that of the pursuer, whether by cheque or other means, provided that they were made "in breach of mandate and without authority". But this then raises questions of fact, which are not expressly addressed in the agreement.

[50] What were the "mandate" and the "authority, presumably those granted by the pursuer to Clydesdale? The settlement only related to transactions "in breach of mandate and without authority". It appears from the pleadings for the pursuer, taken pro veritate, that it was within the scope of the direct debit mandate granted by him to Amex that payments were to be made from the pursuer's Clydesdale account in settlement of sums due to Amex in respect of charges incurred on the Amex account by the use by the pursuer and members of his family of the charge cards issued to them. The use by Mr Stevenson of cards issued to him without the authority or knowledge of the pursuer to conduct transactions on the pursuer's Amex account does not mean that payments made to Amex out of the pursuer's Clydesdale account by direct debit were "in breach of mandate and without authority": Clydesdale had no responsibility for operations on the Amex account. It is impossible to regard the direct debit payments, while they continued, as forming part of "the Stevenson transactions". Once the payments to Amex started to be made by cheques drawn by Mr Stevenson, without the authority of the pursuer, these would certainly have been "in breach of mandate and without authority". But even then the cheques were, it appears, in payment of the whole sums due to Amex each month, arising not only from Mr Stevenson's use of the cards issued to him, but also the use by the pursuer and his family of cards issued to them. The loss to the pursuer would then extend no further than to the corresponding gain to Mr Stevenson. There are thus clear reasons for thinking that, while there may well be an overlap between the claims against Amex and Clydesdale, the two are by no means identical.

[51] In the passages quoted above, Lord Hope said in Jameson v Central Electricity Generating Board that the answer would be found "by examining the terms of the agreement and comparing it with what has been claimed", and Lord Bingham in Heaton and others v AXA Equity and Law Life Assurance Society plc and another said that "the agreement must be construed in its appropriate factual context". These passages support the view we have come to, which is that it is not possible to construe the agreement in the present case without proof of its factual matrix, in particular the losses suffered by the pursuer on each of the Amex and the Clydesdale accounts, and the details of the claim made by him against Clydesdale, as referred to in recital (b) in the preamble to the agreement. We note that the pursuer avers:

"Payment has only been made by the Clydesdale Bank to the pursuer where the recipient account of the funds transacted was not an account of the pursuer whether in respect of an account with the Clydesdale Bank or any other financial institution. No payment has or will be made by the Clydesdale Bank to the pursuer in respect of any sums paid by unauthorised transactions from the Clydesdale Bank account of the pursuer to the defenders."

These averments are denied by Amex. It may be that the terms of the pursuer's initial claim against Clydesdale and any ensuing correspondence will serve to resolve this dispute.

[52] We can sympathise with the sheriff, who was asked by the parties, whose positions on this question were polarised, to decide it as a pure question of construction. Although there are, as he thought and as discussed above, indications that Amex's argument may not be without its difficulties, there are, in our view, sufficient uncertainties in relation to the background to suggest that evidence should be led before any answer could confidently be given. And, as we have indicated, it is not a question that necessarily admits of a straightforward answer of "yes" or "no"; the correct answer may lie between the two extremes, and it can only be determined after the leading of evidence. The sheriff should have deferred the giving of an answer to the question until after proof.

Result

[53] For all the foregoing reasons, we shall vary the sheriff's interlocutor of 7 November 2006 by deleting head (6) thereof and substituting: "(6) defers the giving of an answer to question 6 until after proof of the factual context of the settlement agreement, so far as relevant, and the details of the pursuer's claim against Clydesdale Bank;". Quoad ultra we shall refuse the appeal, adhere to the sheriff's interlocutor, and remit the case back to the sheriff to proceed as accords.