Act: Thomson, Harper Macleod LLP

Alt: Party

15 November 2013

[1] This is an appeal against a decision of the Sheriff Principal of South Strathclyde, Dumfries and Galloway at Airdrie whereby his Lordship sustained a judgment of the sheriff dated 1 June 2012.

[2] The background to the appeal is as follows. On 5 December 2007 a liability order was made against the appellant in terms of section 33(3) of the Child Support Act 1995, at Airdrie Sheriff Court, for payment of £211.48 of Child Support Maintenance arrears together with expenses of £58.04. The respondents sought to recover the amount due, under the order, by serving a charge on the appellant on 26 February 2008 and by inhibiting the appellant by letters of an inhibition executed on 27 February 2008. Further expenses were incurred by the respondents in these attempts to recover the sums due.

[3] On 1 February 2010 the respondents wrote to the appellant advising him that, unless payment was made in respect of the liability order, proceedings would be raised for its enforcement. No payment was made in response to that letter and the present proceedings, by way of summary application, were raised. After a hearing, which commenced on 22 May 2010, the sheriff found in fact and law that:

"(1) The defender has wilfully refused to pay the sums due under the Liability Order;

(2) The defender is accordingly liable to be imprisoned or to be disqualified;

(3) It is appropriate that the defender be disqualified from holding or obtaining a driving licence for a period of 18 months."

The sheriff went on to hold that, on the ascertainment of any expenses due by the appellant, the appellant should be disqualified from holding or obtaining a driving licence for a period of 18 months, and that the appellant should be liable to the respondents in the expense of the application, as taxed.

[4] At the hearing before the sheriff, the respondents' representative had set out the history of the matter, in particular the various efforts that had been made to recover the money due under the order. The appellant did not cross-examine the respondents' representative on any of the matters to which she spoke. The respondents' representative brought to the sheriff's attention that the appellant had been banned from driving on three previous separate occasions in respect of previous failures to pay in respect of other liability orders. The total period of disqualification, imposed in respect of these three separate failures, amounted to two and a half years. She moved the court to grant warrant to imprison the appellant given the past history.

[5] The appellant informed the sheriff that he had offered the respondents satisfaction of the debt by means of a promissory note, granted by him, and that he was prepared to work for the respondent at his normal hourly rate. The hearing had apparently required to be continued from 22 May and the appellant had made an offer to pay the respondents £15,000 in the form of his own promissory note during the time the hearing had been adjourned. In discussion before the sheriff, however, it had become clear to the sheriff that the appellant did not intend to pay the sum in question. The appellant's position appeared to be that the note was as good as cash. The appellant suggested that, in the event of default by him on the note, it would be dealt with in the same way as a default by the Bank of England and his promissory note might become part of the national debt.

[6] The sheriff, at paragraph 11 of his note, said that he considered that the appellant's submission in relation to the offer of a promissory note was without merit. He referred to Gloag and Henderson's Introduction to Law of Scotland (13^th ed) at paragraph 3.28 and went on to say: "The creditor is entitled to insist on payment by legal tender." He also recorded that the appellant had informed him that he had found it difficult to carry out his employment, on the previous occasions he was disqualified from driving. The sheriff, notwithstanding the appellant's past failures to pay sums due in respect of other liability orders, reached the conclusion, with some hesitation, that he could deal with the matter by way of a further period of disqualification rather than imprisonment and that a period of 18 months disqualification would be appropriate.

[7] Before the Sheriff Principal both parties lodged written submissions. The appellant took various objections to the propriety and competence of the procedure which were repelled by the Sheriff Principal. The Sheriff Principal identified that the nub of the appellant's appeal was that the sheriff had been wrong in fact and in law in not accepting the appellant's submission that a promissory note tendered by him to the respondents and not rejected, in an appropriate way, by the respondents discharged his liability in terms of the liability order. The appellant also attacked the propriety of his disqualification from driving for 18 months as in some way involving an infringement of the Human Rights Act.

[8] The Sheriff Principal held that the appellant had not advanced any basis for disturbing the sheriff's findings in fact and law. At paragraph 12 of his note the Sheriff Principal stated:

"The appellant's defence based on promissory note proceeds on the premise that he is entitled to dictate to the respondent that they accept his note as a method of payment. I find nothing in the appellant's submissions by reference to agreement, authority or statute that supports that premise. I agree with the sheriff that a creditor is entitled to insist on payment by legal tender; or, put another way, the debtor is not entitled unilaterally to insist upon payment by promissory note."

This ground of appeal was accordingly misconceived and failed. The Sheriff Principal also dismissed, as without merit, the appellant's attack on the sheriff's imposition of a period of disqualification.

[9] Before this court, the appellant lodged detailed written grounds of appeal which he supplemented with clearly expressed oral submissions. After raising some preliminary concerns regarding the need for impartiality on the part of the bench, the appellant's argument focused on the issue of whether or not his offer of a promissory note as satisfaction of his liabilities to the respondents should have been accepted or, indeed, as he appeared to contend at one point, had been accepted by them by virtue of his having sent the offer by post, in satisfaction of the debt due to them. The appellant made his submissions under reference to various legal authorities, particularly with regard to the nature and effect of bills of exchange, in general, and of promissory notes, in particular. Reference was made to the provisions of the Bills of Exchange Act 1882, Currie &c v Misa 1875 [1874-75] LR 10 EX 153, Metropolitan Asylum District Managers v Hill (No 2) (1881) 6 App.Cas. 193, Fielding and Platt Ltd v Selim Najjar [1969] 1 WLR 357, Chalmers Bills of Exchange Act at page 13 and Chitty on Contract Volume I, General Principles (31^st ed), paragraphs 1-001. None of these authorities, in our judgment, give the appellant any support at all for the propositions he made.

[10] A promissory note is not legal tender. As defined, it is:

"An unconditional promise in writing made by one person to another, signed by the maker, engaging to pay, on demand, or at a fixed or determinable future time, a sum certain in money, to, or to the order of, a specified person or to bearer." (Section 83(1) of the Bills of Exchange Act 1882.)

As a means of extinguishing an existing debt, it can only perform that function if the creditor in the debt has agreed to that being the case. That was clearly the position in the case of Fielding and Platt Ltd, cited supra, and which was heavily relied upon by the appellant, in particular for the dictum of Lord Denning MR at page 361 to the effect:

"We have repeatedly said in this court that a bill of exchange or a promissory note is to be treated as cash. It is to be honoured unless there is some good reason to the contrary."

That dictum was uttered in a case where the agreed contractual basis for payment of the creditor was by way of a number of promissory notes. That is clear from what the Master of the Rolls says at the commencement of his judgment, at page 36:

"Payment was to be made by six promissory notes given by the managing director of the Lebanese company Mr Selim Najjar personally; and he deposited shares of his own property as security for the due payment of the promissory notes."

The point in that case was that the grantors of the promissory note were failing to perform their promises in terms thereof; and their defence for doing so was held by the court to be without merit.

[11] Promissory notes, in modern times at least, are not commonly agreed by creditors to be the way in which their debts will be extinguished. Their role, perhaps, is to be found more in mercantile transactions of a certain class. But, in any event, the creditor cannot be obliged to agree to a promissory note being the method of extinguishing a debt due to him, in the absence of any prior agreement to that effect. It is clear that the respondents in the present case never, at any time, agreed to have the appellant's debt extinguished by virtue of the tender of a promissory note by the appellant. The position is correctly stated by Gloag and Henderson in the present edition at paragraph 3.28: "A creditor, in the absence of any agreement to the contrary, is entitled to insist on payment in legal tender." (Emphasis is added.) The creditors, in the present case, the respondents, were prepared to substitute for legal tender, as that is strictly defined in the Coinage Act 1971 payment by cheque, standing order, direct debit, banker's draft or bank transfer - see the letter of 18 December 2012 to the appellant from the respondents' in the papers before us. It is not uncommon for creditors not to insist on payment by legal tender but to accept payment by such alternative means. On the other hand, it is not uncommon, particularly in the case of tradesmen and shopkeepers, for creditors to refuse payment for their goods or services, otherwise than by cash. But the basic point is that creditors are not, absent agreement by them, bound to accept payment by means other than legal tender and, in particular, are not bound to accept satisfaction of their debts by way of promissory notes. At no time did the respondents agree to accept payment by such means. That puts paid to the basis of the appellant's main submission to this court, but, as counsel for the respondents' submitted, matters go further. There is no doubt that the debt remained unpaid at the time the matter came before the sheriff. If there had been any question of appropriate payment having been made by the appellant, subsequent to that time, then the appropriate course for him to follow would have been to make an application to the court for a revocation of the disqualification order in terms of section 40D(5) of the Child Support Act 1991. It seems clear to us that the debt remains unpaid even as at this date. The sheriff, indeed, noted that before him the appellant informed him that he did not intend to honour any promise contained in any promissory note. The sheriff's finding in fact six "The defender has made no payment towards this liability order" remains undisturbed and the order which he pronounced, in the circumstances, of disqualification of the appellant from driving for 18 months was valid.

[12] For all these reasons the appeal falls to be refused.