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Cite as: [1889] SLR 26_753, [1889] ScotLR 26_753

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SCOTTISH_SLR_Court_of_Session

Page: 753

Court of Session Inner House First Division.

Friday, July 19. 1889.

[ Lord Fraser, Ordinary.

26 SLR 753

Dominion Bank of Toronto

v.

Bank of Scotland.

(Dominion Bank v. Anderson & Company, February 10, 1888, ante, vol. xxv., p. 324.)


Subject_1Bill — Liability of Agents Employed to Collect Bill — Unauthorised Cancellation — Proof of Loss — Onus.
Facts:

A bill having been protested for non-payment was afterwards forwarded to a bank agent who offered to try and obtain payment of it. The acceptors expressed their willingness to pay the amount of the bill and the protest charges on condition that they were freed from any claim for interest and expenses, and this condition was communicated to the holders. Without waiting for their reply the bank agent took payment of the amount of the bill and the protest charges, marked the bill “paid,” and handed it over to the acceptors who deleted their signatures. The holders refused to agree to the condition mentioned, returned the money tendered to them in payment of the bill, and received back the cancelled bill. They then raised an action against the acceptors, in which they obtained decree for the amount of the bill and interest thereon, and for the expenses of the action. Before this decree could be enforced by summary diligence the acceptors were sequestrated.

In an action by the holders against the bank, whose agent had cancelled the bill, for payment of the bill, the interest thereon, and the expenses of the action against the acceptors— held (1) ( diss Lord Mure) that the defenders were liable, it being proved that but for the cancellation of the bill, which was unauthorised, payment would have been recovered by summary diligence against the acceptors; and (2) that the defenders were not bound to proceed against the drawers before proceeding against the defenders, though the latter might be entitled to an assignation to enable them to proceed against the drawers.

Opinion ( per Lord Mure) that the onus lay upon the pursuers to prove that payment could have been recovered by summary diligence on the bill against the acceptors; and opinions ( per Lord Shand and Lord Adam) that the onus was on the defenders to prove the contrary.

Headnote:

The Dominion Bank, Toronto, were holders for value of a bill for £2939, 9s. 6d., dated 28th September 1886, drawn by the M'Arthur Brothers, Limited, upon and accepted by William Anderson & Company, merchants, Grangemouth. The Dominion Bank transmitted the bill to the National Bank of Scotland, Limited, London, for collection, and the latter bank presented it for payment on 7th May 1887 at the Bank of Scotland in London, where the same was payable, but payment was refused, and it was protested for non-payment.

Page: 754

On 16th May 1887 Mr Mackenzie, agent for the Bank of Scotland at Grangemouth, wrote to the National Bank of Scotland, London, in these terms:—“An acceptance of Messrs Wm. Anderson & Company of this town p. £2939, 9s. 6d. was presented at our London office, and payment refused on account of there being a dispute between the merchants who drew the bill and themselves. If the matter be now adjusted, you might send forward the document for collection.”

On 21st May Mr Mackenzie again wrote to the National Bank in these terms:—“With reference to my letter of 16th inst., if the bills p. £2939, 9s. 6d. be sent on here for collection, it will in all likelihood be paid, but not the expenses, as the fault was not on Messrs W. Anderson & Company's side, at least so they say.”

On 28th May Mr Mackenzie again wrote to the National Bank enclosing a letter which he had received from the acceptors, Messrs Anderson & Company, which was to the following effect:—“Confirming our former instructions to you, it just now occurs to us that immediate payment might be made provided the National Bank, London, gave a guarantee to hand over the bill to you on its return, and hold us scatheless in event of its miscarriage in any way whatever, also freeing us of expenses and interest. On hearing you have received such guarantee we will instruct you to pay.”

The National Bank having received the bill from Canada, to which country they had remitted it when payment was refused in London, wrote to Mr Mackenzie on the 7th June as follows:—“Referring to your letter of 21st ulto., we now enclose for collection and remittance through your London office (bill being accepted payable in London) Anderson £2939, 9s. 6d. Should the acceptors decline to pay protest charges, 12s. 6d., please return protest to us. Acceptors will of course pay the remitting charge. We presented the bill to-day at your London office, but they state that they are still without instructions regarding it.”

On 9th June Mr Mackenzie replied in these terms:—“With reference to your letter of 7th inst., I enclose herewith a communication received from W. Anderson & Company, from which you will observe that they would pay the 12s. 6d., together with the remitting charge, re the bill, on condition that they were held free of further responsibility. Please favour me with your instructions. P.S.—As Mr Anderson is presently living at Callander, and may not be here till Monday morning, we retain the bill till that day if we have not contrary instructions from you.”

The enclosed letter was to this effect:—“We have yours stating the National Bank, London, will take payment of this bill, but we would like you to get a letter from them freeing us of interest and expenses as asked in ours of 28th ulto. The way we have been treated in the past is our excuse for being somewhat particular now.”

On 13th June Mr Mackenzie having received no reply to his letter of 9th June, took payment from the acceptors of £2940, 2s., being the amount of the bill and 12s. 6d. of protest charges, and delivered up to them the bill perforated “paid.” On the same day he sent a draft for the above sum to the National Bank accompanied by the following letter:—“I beg to enclose draft for £2940, 2s., being amount of W. Anderson & Company's acceptance referred to in your letter of 7th inst., with 12s. 6d. of protest charges. Of course you distinctly understand, in accordance with Messrs Anderson & Company's letter herewith enclosed, that so far as that firm is concerned the draft is accepted by you in settlement of the transaction without any reservation.”

The enclosed letter was in these terms:—“Confirming our former respects we hand you payment of this bill on the distinct understanding that we are freed from all responsibility for interest, expenses, &c.”

The National Bank then cabled the Dominion Bank for instructions whether or not they should agree to take payment of the bill on the conditions imposed by the above letter, and on 18th June they returned the draft for £2940, 2s. to Mr Mackenzie, with a note to the effect that they were not authorised to take payment of the acceptance on the conditions on which it was tendered, and requesting that the bill and protest should be returned to them. When the bill was returned to them it was found that not only had it been perforated “paid,” but that Messrs Anderson & Company had deleted their name as acceptors.

The holders, the Dominion Bank, considering that they were unable to do summary diligence upon the bill in its altered state, raised an action against the acceptors on 12th July 1887. After hearing evidence the Lord Ordinary gave decree against the acceptors for the amount of the bill, with interest thereon from 7th May 1887, and found them liable in the expenses of the action. A reclaiming-note having been presented, the First Division on 10th February 1888 adhered to the Lord Ordinary's interlocutor with additional expenses.

The Dominion Bank then charged the acceptors for the sum due under the decree, but failed to obtain payment as Messrs Anderson & Company's estates were sequestrated on 15th March 1888.

The present action was raised by the Dominion Bank against the Bank of Scotland for payment of the amount of the bill, with interest thereon from 7th May 1887, and the expenses of the action and diligence against the acceptors.

The pursuers averred—“Inconsequence of the defenders, or their agent at Grangemouth, for whom they are responsible, having wrongfully and without the authority of the pursuers, delivered up the foresaid bill to the acceptors, and cancelled it in the manner before mentioned, and in consequence of the delay thereby caused, and proceedings which were rendered necessary by the defenders' fault and negligence, the pursuers have sustained loss and damage to the extent of the sum in the said bill, and interest due thereon, and expenses as sued for in the summons.”

The defenders in answer denied these averments, and explained that any loss which the defenders might have sustained was caused by their own actings or those of their agents, the National Bank.

The pursuers pleaded, inter alia—“(1) The pursuers having, by the defenders' breach of duty and wrongful conduct, sustained loss, all as condescended on, the pursuers are entitled to decree in terms of one or other of the alternative conclusions of the summons.”

Page: 755

Proof was led before the Lord Ordinary ( Fraser) on 14th November 1888. The following evidence was given on the question whether Messrs Anderson & Company were solvent, and could have met the bill and the interest thereon if it had been possible to charge on it in July 1887:—Mr Spens, writer, Glasgow, the agent for the pursuers in the litigation with the acceptors, deponed—“The bill was placed in our hands first, I think, on 6th July 1887.… When I was first consulted, I asked the bill to be sent so that I might do summary diligence, but when I found it was cancelled, and that I could not do summary diligence, I instructed an ordinary action.… My impression is that we put warrants of arrestment in the summons in the action against Anderson; I am satisfied that we arrested in the hands of the Bank of Scotland. At that time Anderson & Company, I believe, were engaged in considerable trade. (Q) Did you try to find any other money?—(A) I did—I mean I made inquiries with reference to whether I could get money due to Anderson, and I was informed I could not. I did not get anything by arrestment in the hands of the Bank of Scotland.” Mr Horsbrugh, trustee on the sequestrated estates of Anderson & Company, deponed—“From June 1887 to the date of their sequestration they were carrying on their business in the way they had been doing it for some time. They appeared to have met their current bills as they became due. Between the dates I have mentioned they met bills to the amount of £10,195, exclusive of the one in question. They were met and paid at their due dates. The bankrupts were also paying freights and other liabilities during the same period. They paid freights to the amount of £1406, besides other debts. I find Mr Anderson did a considerable amount of business in discounting bills for other people, but excluding these, I am of opinion that in order to meet his own bills and make payments in connection with his own business he must have paid between 13th June 1887 and the date of sequestration over £18,000. Cross-examined.—I endeavoured to ascertain where he got the money, and I find he discounted bills of other people with different banks to the amount of about £12,000, that he collected book-debts to the amount of £5000 or £6000, and he got in other sums making up just about £18,000. The difficulty I had was to distinguish what were his bills and what were other people's. At 25th June 1887 he was due the Bank of Scotland £344, and the Clydesdale Bank £3613—together £3958, and there was due to him by the Union Bank, £5, 19s. 7d., so that his total indebtedness to his three bankers was £3952. The book-debts were ordinary trade debts due to him by parties to whom he actually sold timber. Those parties were mostly in Scotland, I understand. The draft in question was applied as follows—Lodged on deposit-receipt in name of Mr Anderson's son, £2846, 11s. 5d.; sent to Mr Anderson's law-agents, £95—together £2941, the sum which he got back. The deposit-receipt stood in the son's name until 4th July. It was then uplifted and applied thus—In payment in cash to Dow & Company to enable them to retire some bills on 4th July, £862; in retiring bills of his own firm, £298, 12s. 7d.; and paid into current account of his firm with the Clydesdale Bank, £1685. The £862 paid to Dow & Company was to enable them to retire bills on which they were ostensibly the primary debtor; there were cross bills. The deposit-receipts were with the Bank of Scotland, I think, but I can hardly state distinctly. Re-examined.—Dow & Company and Anderson & Company were, I think, accommodating each other with their names. I think the bills could be traced to their ultimate liability.” Evidence was also led to the effect that the drawers were persons in quite solvent circumstances.

The Lord Ordinary on 28th November 1888 gave decree against the defenders for the amount of the bill, with interest thereon from 7th May 1887, and for the expenses of the action and diligence against the acceptors, under deduction of £161, 0s. 3d., being the amount of dividend received by the pursuers as claimants in the sequestration of Messrs Anderson & Company.

Opinion.—This is an action of damages brought by the Dominion Bank, Toronto, against the Bank of Scotland by reason of the latter having failed to collect the contents of a bill which was entrusted to them for that purpose. The bill was drawn by the M'Arthur Brothers, Limited, of Toronto, upon and accepted by William Anderson & Company, merchants, Grangemouth, for £2939, 9s. 6d., and dated 28th September 1886. It was made payable at the Bank of Scotland, London, at 180 days' sight from 5th November 1886, and therefore was due on 7th May 1887. It was indorsed by the drawers to the Dominion Bank, Toronto, and they are now the holders of it for value. The Dominion Bank sent the bill to the National Bank of Scotland, London, for collection, and the latter bank presented it for payment at the Bank of Scotland in London, when payment was refused, and protest taken. The agent for the defenders at Grangemouth did the banking business for the drawees William Anderson &Company, and hearing of the presentment of the bill for payment at the defenders' London branch, wrote on the 16th of May 1887, a letter to the National Bank of Scotland, London, in the following terms:—‘An acceptance of Messrs Wm. Anderson & Company of this town, p. £2939, 9s. 6d., was presented at our London office, and payment refused on account of there being a dispute between the merchants who drew the bill and themselves. If the matter be now adjusted you might send forward the document for collection.’ That is to say, the defenders, through their agents, intimated to the pursuers that they would collect the money. In the meantime, however, and before this letter was received in London, the pursuers had returned the bill to Toronto in order to preserve recourse against the indorsers, and intimated this; but it was added that ‘if you remit us the amount and charges we shall have pleasure in recalling the bill by cablegram.’ The history of what followed will be found in the opinion of the Lord President in the case of The Dominion Bank v. Anderson & Company, February 11, 1888, 15 R. 414, and it is unnecessary to do more in the way of narrative than to refer to that opinion. It was held in that case that by reason of the mistake (or the acting without authority) of Mr Mackenzie, the agent for the defenders at Grangemouth, the signature to the bill was cancelled and the bill marked paid. The result of this was that although the pursuers obtained re-delivery of the bill (which had been

Page: 756

sent on to the defenders' branch at Grangemouth), summary diligence could not be done upon it because ex facie it was cancelled. An ordinary action was rendered necessary at the instance of the pursuers against Anderson & Company in which the latter firm pleaded that they could not be sued upon the bill because of the cancellation, while at the same time they had got possession of the timber for which the bill had been granted without paying for it. Shortly after decree was obtained in this action Anderson & Company became bankrupt.

Now, it is proved that if due diligence had been shown by Mackenzie, the defenders' agent, the bill would have been retired by Anderson & Company. Mr Horsbrugh, the trustee in their sequestration, which took place on 15th March 1888, proves that between 13th June 1887, when the bill was concelled, and the date of sequestration in March 1888, Anderson & Company were carrying on business to a large amount, and paid away to merchants with whom they dealt over £18,000. The money which had been sent to London in payment of the bill, and which was returned to Grangemouth, was lodged in bank on deposit-receipt in name of Anderson's son to the amount of £2846, lls. 5d., where it remained until the 4th of July, when it was uplifted and applied by Anderson and Company to other purposes.

A proof was led in the present action, and Mr Mackenzie was again examined as a witness. He repeated his former evidence with one unimportant variation, and gave his construction of the letters which passed between him and the National Bank in London in the same way in which he gave it in the former action, and in regard to which the Court held him to be quite wrong. He justified now, as he justified before, the delivering up of the bill for cancellation; but there was nothing new either in his evidence or in the evidence of other two witnesses to alter the opinion given effect to by the judgment of the Court—that he acted without authority. The variation from his former evidence consisted in this, that whereas he formerly said, ‘If I had known that the bank did not agree to the conditions expressed in the letter of 9th, I would certainly not have given up the bill.’ But now he says in answer to the question, ‘If you had known that the bank did not agree to the conditions expressed in your and Mr Anderson's letters of 9th June, would you have given up the bill in exchange for the payment that you got,’ he answers, ‘On the 13th, certainly.’ And he states that he was misreported on the former occasion, and now says that he would have delivered up the bill to Anderson & Company to be cancelled on the 13th of June, although he had known that the bank did not agree to the conditions expressed in Anderson & Company's letter of the 9th. This is a strange statement to make, coming from an agent whose duty it was to collect a sum of money, and who took payment upon conditions that he knew his principals had not agreed to.

According to the evidence of Mr Horsbrugh, the sequestrated estate of Anderson & Company will not yield more than 1s. 6d. in the £—1s. per £ of this dividend has been paid, and the remaining 6d. it is anticipated may be soon obtained. Thus the Dominion Bank have obtained very little benefit from the decree against Anderson & Company, and they now make their claim against the Bank of Scotland on account of the laches of that bank's agent. No defence is here stated to the effect that Mr Mackenzie in what he did, did not represent the defenders. But the defence as stated by their counsel consisted of three parts—first, that there was no contract of agency proved. This is clearly negatived by the letters which have been produced, the analysis of which has been given by the Lord President, and the conclusion come to is thus stated in his opinion—‘From that time (7th June) I apprehend that Mackenzie was acting for both parties. He did not give up the position of acting for the acceptors, but he undertook the additional duty of collecting for the National Bank, and in that character he goes on to correspond with the National Bank.’

In the next place, it is said that although there might be a breach of duty the damages should be nominal, because the pursuers may have recourse against the indorsers who are proved by a witness adduced for the defenders (Malcolm Carswell, a timber broker in Glasgow) to be persons in solvent circumstances. This is no good answer for the defenders' breach of duty. Whether a good claim could now be made against the indorsers will depend upon the view taken by a Canadian Court as to whether recourse against them has not been lost, and the pursuers stated that they were quite willing to assign over to the defenders any claim that they may have against the drawers and indorsers.

It is next said that in any view the damages claimable must be limited to the interest upon the bill from the time at which it fell due—a defence founded upon this, that the pursuers having got hold of the money when it was sent up to them in London ought to have kept it, and not returned it to Grangemouth. This defence, however, overlooks the fact that the money was sent up under a strict condition that no expenses or other charges for telegrams or commission should be exacted from Anderson & Company. If the money had been kept, it must have been kept under that condition which was the subject of controversy between the parties, and which condition the pursuers had rejected. The result of the whole matter is that the defenders must be found liable in the loss which the pursuers have sustained. It is proved that if Mackenzie had done his duty payment would have been obtained in the month of June. The amount of this damage consists of the principal sum in the bill and interest thereon, and of the expenses incurred to the pursuers in the former action.

In regard to the expenses of the former action, the only point disputed was a sum of £86, 13s. 5d. of extra-judical expenses, for which decree was not obtained. A person who is damnified by the neglect of duty of another is entitled to full relief, and although these extrajudicial expenses could not be recovered as between party and party according to the rules applicable to costs, yet they were expenses to which the pursuers were put. Lord Kames in reporting the case of Hogg v. Kennedy and Maclean, 1754, M. 10,098, says—‘I take it to be a general rule in all other affairs as well as in commerce that neglect of duty subjects the party to every risk and to every damage, except what he

Page: 757

can show must necessarily have happened though he had done his duty.’ The account for the extra-judicial expenses does not require to be taxed, as parties have agreed upon a sum without taxation. Credit must be given for the dividend obtained (£161, 0s. 3d.) from Anderson & Company's estate. The amount of damage therefore would stand as follows:—

1. Principal sum in bill referred to in this action and in the decree in the action The Dominion Bank v. Anderson & Company, £2939, 9s. 6d., with interest thereon at five per cent. from 7th May 1887 till payment.

2. Expenses incurred by the pursuers:—

(1) Amount of expenses incurred by pursuers in action The Dominion Bank v. Anderson & Company as taxed and decerned for per account No. 117 of process …

£164

16

6

(2) Amount of additional expenses, being extra-judicial expenses incurred to pursuers' agents as adjusted .

40

0

0

(3) Amount of expenses of diligence on decree in said action per claim in sequestration … .

1

3

8

£206

0

2

Deduct the amount of the dividend of 1s. per £ received by the pursuers on their claim in Anderson & Son's sequestration

161

0

3

£44

19

11”

The defenders reclaimed, and argued—Payment had really been taken by Mackenzie upon the terms of the letter of 7th June from the pursuers' agents, the National Bank. The liability of the defenders should at all events be limited to interest and expenses, as the pursuers' agents should not have parted with the draft which they received in payment of the bill. Further, the pursuers had not lost recourse against the drawers. All that they lost owing to the cancellation of the bill was that they could not do summary diligence upon it. They were therefore bound to proceed against the drawers before suing the defenders— Muir v. Crawford, May 4, 1875, 2 R. (H. of L.) 148; Chitty on Bills, 299; Bell's Prin. 342; Bell's Comm. (7th ed.) ii. 431, note; Van Wart v. Woolley, 3 B. & C. 439; Bills of Exchange Act 1882 (45 and 46 Vict. cap. 61), sec. 52. The pursuers were not entitled to sue the defenders for the whole amount of the bill, interest and expenses. To take the case of a law-agent, there was no authority for the view that a law-agent who had made an unsafe investment for a client was liable to be saddled with the debt plus an assignation of the security. When the Court had ordered the assignation of the security, that had been done in the interests of the law-agent to avoid a forced sale. This was not even the case of a law-agent, but only of one person being employed by another to collect money for him. All that the defenders could be held liable for was the loss ultimately ascertained to be due to their fault— Potter v. Muirhead, January 21, 1847, 9 D. 519; Campbell v. Clason, &c., December 20, 1838, 1 D. 270; Urquhart v. Grigor, June 12, 1857, 19 D. 853. There was, further, no evidence that the conduct of the defenders bad caused any loss to the pursuers, as it was not proved that Anderson & Company would have been able to meet the bill if charged on it in July 1887.

The pursuers and respondents argued—The pursuers' agents could not have retained the draft, as payment had been tendered on certain conditions only. Mackenzie had had no authority for cancelling the bill, and it was due to his action in so doing that summary diligence could not be used upon it, and the money recovered from the acceptors. The defenders therefore, whose agent he was, were liable—Bell's Prin. 337. They must accordingly be held to occupy the acceptors place. The pursuers were not bound to proceed against the drawers first, from whom their might be a difficulty in recovering the money on a cancelled bill—45 and 46 Vict. cap. 61, sec. 64. The cases which had been decided with regard to analogous claims against messengers-at-arms and law-agents confirmed this view. The first class of cases referred to messengers-at-arms— King v. Stevenson, December 3, 1807, Hume, 344; Chatto v. Marshall, January 17, 1811, F.C.; Campbell v. Clason, December 20, 1853, 1 D. 270, per Lord Fullerton; Murray v. Darno, December 6, 1797, Hume, 323; Dougan v. Smith, July 3, 1819, Hume, 356; Highgate v. Boyle, February 12, 1823, 2 S. 204; Davidson v. Mackenzie, December 20, 1856, 19 D.; M'Millan v. Gray, March 2, 1820, F.C. In the analogous cases of actions against law-agents for insufficient investments the principle on which the Court acted was that the agents were found liable for the whole debt and the security assigned to them— Sim v. Clark, December 2, 1831, 10 S. 85; Ronaldson v. Drummond & Reid, June 7. 1881, 8 R. 767, per Lord Craighill; Guild v. Glasgow Educational Endowments Board, July 16, 1887, 14 R. 944; M'Lean v. Soady's Trustees, July 19, 1888, 15 R. 966; Black v. Curror & Cowper, June 27, 1885, 12 R. 990. It was clear from the evidence that had the pursuers been able to charge the acceptors on the bill in July 1887 they would have obtained payment.

At advising—

Judgment:

Lord President—The history of the bill which is the subject of the present action is known to us from the inquiry in the previous case of The Dominion Bank v. Anderson & Company, who were the acceptors of the bill, and it is not necessary to detain the Court over these circumstances for the decision of the present case.

There is no doubt that Mr Mackenzie, the agent for the defenders at Grangemouth, became the agent of the Dominion Bank of Canada in collecting this bill, and it is not alleged that he was acting beyond his powers as the agent of the defenders, the Bank of Scotland. On the contrary, they accept the responsibility for what he did.

The bill had been protested for non-payment, and the reason of the non-payment seems to have been some dispute as to the quality of the cargo for which it had been granted. After that the bill was sent out to Canada in order to secure recourse against the drawers, and in these circumstances Mr Mackenzie came forward and

Page: 758

offered to collect the bill for the National Bank, who are the agents in this country of the Dominion Bank of Canada. The bill was accordingly brought back to this country, and sent to Mackenzie at Grangemouth, who wrote to the National Bank of London a letter on 9th June in which he says—“With reference to your letter of 7th inst., I enclose herewith a communication received from W. Anderson & Company, from which you will observe that they would pay the 12s. 6d., together with the remitting charge, re the bill, on condition that they were held free of further responsibility.” And the enclosed letter was in these terms—“We have yours stating the National Bank, London, will take payment of this bill, but we would like to get a letter from them freeing us of interest and expenses as asked in ours of 28th ulto.”

The question therefore between the parties at that time was, whether Anderson & Company were liable for interest and expenses in consequence of non-payment of the bill on presentation, or were to be relieved of that charge. Everything else seems to have been arranged.

Now, the National Bank were acting merely as agents for the pursuers, and they communicated with them as to the conditions contained in the letter of Anderson & Company, and replied that they were not authorised to take payment upon these conditions. Mackenzie in the meantime, without waiting for an answer to his letter of the 9th June, and with no authority for so doing took payment for the bill under deduction of the charges for interest and expenses, except the 12s. 6d. for protest charges, and having so taken payment he marked the bill as paid, and delivered it over to the acceptors. The question then arose whether the National Bank would take payment of the amount of the bill under deduction of interest and expenses, and they adhered to the instructions which they had received from the pursuer, and declined to do so.

Now, there was a serious responsibility on Mackenzie's part in acting as he did. He had sent on 13th June to the National Bank a draft of the amount paid by Anderson & Company, but accompanied by a letter to this effect—“Of course you distinctly understand … that … the draft is accepted by you in settlement of the transaction without any reservation.” The National Bank, acting on the instruction of the pursuers, were forced to return the draft, saying that they could not take it on that condition, and in so doing they acted quite rightly. The money accordingly was sent back and handed over to the acceptors, but the bill was cancelled, and a great difficulty arose in obtaining payment of it, and indeed it might have been impossible to do so if it had not been for the provision of the Bills of Exchange Act 1882, sec. 63, sub-sec. (3), which enacts that “a cancellation made unintentionally, or under a mistake, or without the authority of the holder, is inoperative, but where a bill or any signature thereon appears to have been cancelled, the burden of proof lies on the party who alleges that the cancellation was made unintentionally, or under a mistake, or without authority.” The position of the pursuers and their agents accordingly was that while they could not charge on the bill, they were enabled to raise an action to recover the amount of the bill, founding on the above section of the Bills of Exchange Act, and proving that it was cancelled without authority. The pursuers were successful in their action against Anderson & Company after a protracted litigation. Evidence was led, and the case was brought here on a reclaiming-note, and the final judgment was pronounced on 10th February 1888. Unfortunately before that decree could be put in force against the acceptors they had become bankrupt—that is, in March following.

The present action is brought against the Bank of Scotland to recover the loss sustained by the pursuers by reason of the cancellation of the bill. The Lord Ordinary has found the Bank of Scotland liable on the ground, as I understand his Lordship, that owing to the cancellation of the bill, which was unauthorised and improper, the pursuers, the holders, were unable to charge upon it, and that if they had been able to give a charge at the date of the action against Anderson & Company there is no doubt that they would have recovered payment, the bill being liable to no objection on the face of it till it was cancelled; if any dispute had arisen as to the sum due under it, and the acceptors had brought a suspension of the charge, there is just as little doubt that the bill of suspension would not have been passed without consignation, and so the pursuers would have been safe, because at that time it is not disputed that the acceptors' business was perfectly sound and able to meet its liabilities. That seems to me a good ground of decision, and I agree with his Lordship. The damage sustained by the Dominion Bank resulted from the wrongful act of Mackenzie, the agent for the Bank of Scotland, and therefore the Bank of Scotland is liable, and I hold that the question of their liability is not affected by the fact that other parties may be liable against whom the pursuers may have recourse, namely, the drawers, M'Arthur Brothers. We do not know much about the question whether recourse has been reserved against them, or whether they may or may not be good for the money. In the meantime the loss has been incurred directly from the fault of the defenders or their agent, and I do not think it is a good answer to the pursuers' claim that possibly they may recover from someone else. The rule of law rather is that when by the fault of a party a document of debt has been rendered inoperative or ineffectual the party in fault is liable to make good the loss thereby incurred, and cannot say to the loser that he may recover from someone else. On the other hand, I am disposed to say that the Bank of Scotland may have an equitable right to an assignation to enable them to proceed against the drawers.

Lord Mure—When the first question raised with reference to this bill came before the Court in the action against the acceptors, I concurred with your Lordship in holding that the arrangement come to between the agent for the present defenders at Grangemouth and the acceptors relative to the payment of the bill, and under which it was given up to the acceptors and cancelled by them, had resulted in a cancellation which was made by mistake, and without the authority of the holder of the bill, in the sense of the 63rd section of the Act 45 and 40 Vict. c.

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61, and that the bill was therefore one on which the acceptors were still liable to be proceeded against. In that action decree was pronounced against the acceptors, who were charged on the decree. They, however, failed to pay the bill, and having thereafter been sequestrated, a dividend of 1s. in the £ has been declared on the estate; and it seems to be expected that an additional dividend of 6d. in the £ at most may be paid.

In these circumstances the present action has been brought against the defenders for payment of the bill, on the ground that the pursuers had failed to obtain payment of it through the fault of the defenders' agent at Grangemouth. The fault is said to have consisted in this—That the agent accepted payment of the bill on conditions which the pursuers had not authorised, and were not bound to accede to, and then gave up the bill to the acceptors who cancelled their signature, and thereby prevented the pursuers from doing summary diligence on the bill. The action is therefore not only substantially but expressly one of damages for loss said to have been caused by the defenders; and it is distinctly alleged in the record (Cond. 12) that in consequence of the delay which resulted from the pursuers being obliged to have recourse to an ordinary action instead of summary diligence, and from proceedings “which were thus rendered necessary by the defenders' fault and negligence, the pursuers have sustained loss and damage to the extent of the sum in the bill, and interest thereon,” as sued for in the summons.

The Lord Ordinary has given effect to this contention, and decerned against the defenders for payment of the bill and interest, and for a further sum as the balance of an account of expenses brought out after crediting the defenders with the dividend received from the acceptor's estate.

I am of opinion with the Lord Ordinary that if it could be proved that the loss and damage here claimed were occasioned through the delay which occurred in taking proceedings upon the bill, and, in particular, in consequence of the pursuers having been prevented from doing summary diligence, owing to the bill having been cancelled with the knowledge and permission of the defenders' agent at Grangemouth, the damage would be of a description for which the defenders would be liable in law. But after repeated consideration of the evidence, I have been unable, the onus being, as I conceive, upon the pursuers to prove their case as laid in the record, to come to the conclusion, in the circumstances of this case, that if the pursuers had been able to do summary diligence at the time they resolved to proceed against the acceptors in July 1887 they would have succeeded in recovering the amount of the bill.

In dealing with this matter, the time at which the pursuers gave instructions that proceedings should be taken is of importance. As I read the evidence, that was not till the beginning of July 1887, as shown by the letter from the National Bank, London, of the 5th of July of that year, and by the evidence of Mr Spens, one of the firm to whom that letter was addressed, who says—“The bill was placed in our hands on the 6th of July 1887. When I was first instructed, I asked the bill to be sent that I might dc summary diligence, but when I found it was cancelled I instructed an ordinary action.” The main question therefore to be considered upon the evidence under the present action is, whether the pursuers have proved that they failed to obtain payment of the bill, in consequence of the delay occasioned by their having recourse to an ordinary action against the acceptors, instead of proceeding by summary diligence; and this I apprehend they must do by some clear and distinct direct evidence, and not by mere presumptions or inferences to be deduced from the circumstances of the case, even if these presumptions were in their favour.

Having regard, however, to the fact that the acceptors' estate did not admit of more than a dividend of 1s. 6d. in the £ in March 1888, the presumptions are, I think, much against the probability of the acceptors being able, under a six days' charge, to meet a demand for about £3000, if they had been charged for payment at the time Mr Spens received instructions to proceed, and the evidence, as I read it, tends to strengthen these presumptions. Mr Spens is questioned on the subject of arrestments on the dependence, and he says—“My impression is that we put warrants of arrestment in the summons in the action against Anderson. I am satisfied that we arrested in the hands of the Bank of Scotland. At that time Anderson & Company, I believe, were engaged in considerable trade. Did you try to find any other money?—I did; I mean I made inquiries with reference to whether I could get money due to Anderson, and I was informed I could not. I did not get anything by arrestment in the hands of the Bank of Scotland.”

Mr Horsbrugh, the trustee on the sequestrated estate, is also examined, and he says that at the 25th of June 1887 the bankrupts were due to their three bankers about £3950; and with reference to the money which had been remitted to London to pay the bill, but returned, he says—“The draft in question was applied as follows—Lodged on deposit-receipt in name of Mr Anderson's son, £2846, 11s. 5d.; sent to Mr Anderson's law-agents, £95—together, £2941, the sum which he got back. The deposit-receipt stood in the son's name until 4th July. It was then uplifted, and applied thus—In payment in cash to Dow & Company to enable them to retire some bills on 4th July, £862; in retiring bills of his own firm, £298, 12s. 7d.; and paid into current account of his firm with the Clydesdale Bank, £1685. The £862 paid to Dow & Company was to enable them to retire bills on which they were ostensibly the primary debtors. There were cross-bills. The deposit-receipts were with the Bank of Scotland, I think, but I can hardly state distinctly. Dow & Company and Anderson & Company were, I think, accommodating each other with their names.”

There being therefore, according to this evidence, no money to be heard of that could be secured by arrestment, when Mr Spens was instructed to proceed against the acceptors, and a large sum due to the banks with whom the acceptors dealt, it is difficult to see where the money was to come from which would have been required to meet a charge on summary diligence for so large a sum on or after the 6th of July 1887. There is plainly no direct evidence either that there was or that there would have been any

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such sum available to pay the bill.

All therefore that the pursuers would have got by using summary diligence would have been a warrant to poind the acceptors' goods and effects. But there is no evidence as to what those goods and effects were, or as to what might be their value. And it must be borne in mind that it is no longer competent to imprison for non-payment of a civil debt; so that summary diligence as a means of enforcing payment of a civil debt has lost what was formerly its chief compulsitor. It is now substantially nothing more than a warrant to poind and arrest. But it is proved that there was no money to arrest, and it is not proved that there was anything to poind. Had there been funds which could have been attached by arrestment, or effects which admitted of being poinded in July 1887, these facts might, as I conceive, have been proved by Anderson and his son. But neither of these parties were examined by the pursuers, who have thus failed to clear up a matter which, in the view I take of it, was of great importance in the case, and should have been cleared up to entitle the pursuers to recover under the present action.

Does the fact, then, spoken to by Mr Horsbrugh of the bankrupts' firm having from time to time made payments to the amount of £18,000 in connection with their business between the month of June 1887 and the date of their bankruptcy, being at the rate of about £2000 a month, lead necessarily to the inference that if summary diligence, as it is now restricted, had been used the bill would have been paid? I have not been able to see my way to that conclusion. It is plain, I think, from Mr Horsbrugh's evidence that a good deal of the business of the firm was carried on by means of cross and accommodation bills, and there is no evidence to show that they were at any time possessed of any realised capital. The money which had been reurned from London, and deposited in the bank, had all been drawn out by the 4th of July, and applied in payment of other debts, and it does not appear from Mr Horsbrugh's statement that the firm ever had any money at their credit in the bank after that date. And that being so, my strong impression upon the evidence as it stands is, that if the pursuers had been in a position to proceed by summary diligence on the 6th of July 1887, instead of by ordinary action, and had done so on a bill of so large an amount, the same result would in all probability have followed as that which followed the charge given in 1888, viz., the sequestration of the acceptors' firm, and the offer of a small dividend to the creditors. For the acceptors do not appear to have been parties who had any large amount of funds at their command. The bill in question was due on the 7th of May, but had been dishonoured and protested for non-payment, and sent out to Canada by the pursuers' agent in this country for instructions, from whence it was not returned till towards the middle of June, and it was not till then that the acceptors appear to have been able to get together money enough to meet the bill, and to make the conditional offer of payment which was refused.

In these circumstances I am unable to arrive at the conclusion that the pursuers have proved that the loss sustained was caused by the cancellation of the bill, and their consequent inability to proceed by summary diligence. On the evidence as it stands the loss arose from the inability of the acceptors to pay their ordinary debts; and the pursuers have not in my opinion proved, as they undertook to do, that the acceptors would have been able to pay the bill had they been charged to do so on or after the 6th of July 1887, or that the amount of the bill would then have been recovered under a warrant to poind and arrest, which is all they would have got under summary diligence, as that remedy is now restricted under the operation of the Act abolishing imprisonment for debt.

I am therefore of opinion that the interlocutor of the Lord Ordinary should be recalled, and the defenders assoilzied from the conclusions of the action.

Lord Shand—The question in the case is one of very considerable hardship to the defenders, because it is intended to make them liable for a bill for nearly £3000, which originally they had no connection with except as collectors, and from which they could scarcely have obtained any profit. At the same time, I agree with your Lordships that the responsibility undertaken in connection with this bill attaches to the Bank of Scotland, and I cannot agree with Lord Mure that it is not proved that the pursuers have sustained loss owing to the cancellation of the bill.

The Dominion Bank being the holders of the bill, and having sent it to London to the National Bank for collection, it was presented at the place of payment and dishonoured. The National Bank then returned it to Canada that the pursuers might take recourse against the drawers. When the bill was on its way out, Mackenzie, an agent of the defenders' bank at Grangemouth, intimated that if it were still in this country the bill would be paid. The result was that the National Bank on getting this intimation telegraphed for the bill, and having received it on 7th June 1887 they sent definite instructions to the Bank of Scotland with reference to the collection of the contents of the bill in these terms—“Referring to your letter of 21st ulto., we now enclose for collection and remittance through your London office (bill being accepted payable in London) Anderson, £2939, 9s. 6d. Should the acceptors decline to pay protest charges please return protest to us. Acceptors will of course pay the remitting charge.” That was an authority to the Bank of Scotland to give up the bill on obtaining payment of the sum mentioned, 12s. 6d. of protest charges, and the remitting charge. On the 25th of June the National Bank got the bill back again, but not in the same state in which it was sent. In the meantime the acceptors' names had been deleted, and it had been perforated as “paid” with the Bank of Scotland's usual mark.

Now, what had occurred was this. The acceptors being in funds to meet the bill, remitted the amount of the bill to the Bank of Scotland, and they remitted it to London, and if the remittance had not been clogged with a condition there would have been an end of the transaction, as the National Bank got all it stipulated for. But Mr Mackenzie in sending the draft sent it subject to a condition expressed as follows—“Of course you distinctly understand, in accordance with Messrs Anderson & Company's letter herewith enclosed, that so far as that firm is

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concerned, the draft is accepted by you in settlement of the transaction without any reservation.” The letter enclosed was in these terms—“Confirming our former respects, we hand you payment of this bill on the distinct understanding that we are freed from all responsibility for interest, expenses, &c.” An indefinite amount of interest had run on the bill, and the National Bank had no authority to give up the Dominion Bank's claim for interest and expenses. They were quite willing to take the draft, but not to say that they abandoned their claim for interest and expenses. Accordingly, they returned the draft rejecting the conditions and requiring the bill to be sent. When the bill arrived it had been cancelled, because the Bank of Scotland chose to give up the bill under the arrangement that the acceptors should be free of all further claims.

One thing, I should say, is clear, that as the bill was cancelled in the way I have explained, there is liability on the part of the bank for what had occurred, and as to the amount of the liability I confess I have no doubt that it was the legal right of the Dominion Bank to get the bill as it was sent, and as it was not a proper bill which was sent to them I think they were therefore entitled to return it, and refuse to take it as a document of debt which might or might not be successfully founded on. On the question of liability I have accordingly no doubt. The pursuers might have taken that course. They appeared anxious, however, to avoid inflicting loss upon the Bank of Scotland, who were making scarcely any profit by the transaction, and had interfered with the view of helping their correspondents, the National Bank. The vital fact comes in that had the bill not been cancelled, proceedings would have been taken to enforce payment by summary diligence founded on the bill, and the charge would have expired by 4th July 1887, and it appears to me the holders would have had no difficulty in getting their money; but it appears from the letters of the agents printed in the case that they considered the question whether they could do summary diligence on the bill, and came to the conclusion that they could not. If they could have done summary diligence they would have obtained payment or consignation of the sum due on the bill as the acceptors had no answer on the merits, and could only have litigated the case by consigning the money. The agents of the pursuers having been advised that they could not do summary diligence had then to get instructions from Canada, and so early as July 12 an action was raised and litigated on the ground that the bill had been improperly cancelled. The Bank of Scotland consented to what was being done, and that the bill would not sustain diligence. Within a month of decree being obtained the acceptors were bankrupt. It appears from the evidence in the case that the agents of the pursuers intimated to the Bank of Scotland all that they were doing, who could have said that they would take the responsibility upon themselves, but, on the contrary, they allowed the Dominion Bank to go on.

As regards the liability of the defenders, is it not proved that damage was sustained? In the first place, my impression is that the onus would lie on the Bank of Scotland of proving that no damage was sustained owing to their action. I think the Dominion Bank would have been entitled to say—“Take and keep the bill, and pay us the amount of it.” But, however the question as to onus might be, there has been a proof in the case, and I think that but for the cancellation summary diligence could have been done on the bill early in July 1887. The position of the acceptors at that time was that they were carrying on business as usual. They remitted a draft for the amount to London, and had the sum lying in Bank, and finding that the matter was not arranged, they uplifted the amount in July. The evidence all points clearly to this, that if a charge had been made on the bill in July the money would have been either consigned or secured. Time went on, and in March 1888 the acceptors were sequestrated. What is the evidence as to the intervening period? We find from the evidence of Mr Horsbrugh, the trustee in the sequestration, that “they were carrying on their business in the way they had been doing it for some time. They appear to have met their current bills when they became due. Between the dates I have mentioned they met bills to the amount of £10,195, exclusive of the one in question. They were met and paid at their due dates. The bankrupts were also paying freights and other liabilities during the same period. They paid freights to the amount of £1406, besides other debts.” The acceptors had a going business, and surely it is to be presumed in that state of matters that the charge would have produced money. And although it appears also that the pursuers made inquiry about getting funds to arrest, and found that the Andersons had an overdraft at the bank, I think there is no reason to infer that they would not have got payment.

On the whole case, I think the onus was on the Bank of Scotland to show that the Andersons had no funds to meet the bill, and, on the contrary, that the proof has shown that there were funds, and further, I think that the Bank of Scotland should have called Anderson in order to discharge the onus upon them. And so I agree in holding that the defenders are liable, and I concur also in the view that the pursuers are not bound to go on and adopt further procedure against the drawers, who perhaps have an unanswerable objection to the bill if presented in its present state.

Lord Adam—I am disposed to think that the Dominion Bank would have been within its right to have refused to take the cancelled bill and to have claimed the full amount from the Bank of Scotland, leaving the Bank of Scotland to recover the amount of the bill. I rather think that would have been the proper course, and all questions would have been avoided as to what might have been recovered. There was, however, nothing wrong in the course which was followed, namely, to raise an action against the acceptors in their own names. I am clearly of opinion that it was impossible to charge the acceptors on the cancelled bill. Then if that be so, what followed? The litigation went on for a year, at the end of which time the acceptors became bankrupt. These facts, I think, show, unless they are redargued, that the loss which the bank suffered by the cancellation of the bill, and

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their inability to charge upon it, was just the difference between the amount due on the bill and the dividend they have received from the acceptors' estate. There is, I think, no presumption after so long that the Dominion Bank would have been no more successful in securing payment at the date the bill was cancelled than a year after. No doubt it is quite relevant for the Bank of Scotland to aver and offer to prove that the Andersons were insolvent at that date, and that no loss resulted from the inability to charge on the bill. The onus is, I think, on the Bank of Scotland to prove that, and I am accordingly of opinion that if it is matter of doubt whether the Andersons were able to pay at the date of the cancellation, any evil which has resulted must fall on the Bank of Scotland.

If, then, I concurred with Lord Mure as to the doubtful nature of the evidence, I should still have held the Bank of Scotland liable. On the contrary, however, I agree with the Lord President and Lord Shand on the evidence in the case, that if the holders had been in a position to charge on the bill they would have recovered the amount due on the bill. And I also agree that if the loss has arisen from the cancellation of the bill, it is no answer to say that it is possible that some other persons might have been able to pay. The Bank of Scotland is on the other hand, I think, entitled to get an assignation to the bill, and to recover if it can.

The Court adhered.

Counsel:

Counsel for the Pursuers— Gloag— C. S. Dickson. Agents— Mackenzie, Innes, & Logan, W.S.

Counsel for the Defenders— Sir C. Pearson— Graham Murray. Agents— Tods, Murray, & Jamieson, W.S.

1889


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