Scottish Court of Session Decisions

In this action Laurence Henderson, Sons, & Company, Limited, in liquidation, and James Craig, C.A., Edinburgh, liquidator thereof, claimed to be freed and relieved by the defenders Wallace & Pennell, W.S., Leith, and the partners of that firm, of all claims at the instance of the National Bank of Scotland under an overdraft granted upon a certain cheque signed by Wallace & Pennell, Laurence Henderson, formerly managing director of the Company and the Company.

The pursuers concluded (1) for declarator that the defenders were bound to so free and relieve them, and (2) for payment of all sums drawn by the Bank as dividends in the liquidation upon their said claims, and in particular of a sum of £704, being a dividend so drawn by the Bank.

The question in the case was whether the cheque, in which the name of the payee was left blank, was a bill of exchange, and whether the drawers were liable to the bank, who continued to hold the cheque, singuli in solidum or only pro rata.

The cheque upon which the Bank made the claims from which the pursuers now sought to be freed and relieved was as follows:—

123 Leith Walk, Leith, 2 6th November 1898.

No. 519.

The National Bank of Scotland, Limited (Leith Walk Branch).

(Stamp Id.)

Pay to or order,

Three thousand five hundred pounds stg. which charge to the account of (Stamped.)

The National Bank of Scotland, Limited, Leith Walk, Leith.

Paid £3,500

7th Dec. 1898.

Wallace & Pennell.

Laurence Henderson.

For Laurence Henderson, Sons, &Co., Ltd.

Laurence Henderson,

Managing Director.

M. C, Grant, Director.

Rich. W. Huie, Director.

David Callender. Secretary.

Note.—This Cheque is watermarked—Laurence Henderson, Sons, & Co., Limited, Leith, Glasgow, and Carluke.

This cheque had been presented to the Bank by Wallace & Pennell, who received the sum of £3500 thereon from the Bank. This sum Wallace & Pennell paid into their own account with the Royal Bank. On the same day they drew a cheque for £3500 upon their own account in favour of Laurence Henderson, Sons, & Company, Limited, and this sum was put to the credit of the Company's account. Upon the same day the Bank also opened a new account in name of the Company, Laurence Henderson, and Wallace & Pennell, which they debited with £3500, the sum in the cheque. The sum at the debit of this account at the date when the Company went into liquidation, being the sum upon which the Bank claimed, was £3524.

Wallace & Pennell lodged defences, in which, while not disputing that by reason of certain transactions, which it is unnecessary to specify, they were liable to relieve the liquidator of any sum in which the Company was indebted to the Bank, they maintained that the Company was only liable in a question with the Bank for one-third of the sum advanced.

They pleaded, inter alia—“(2) The pursuers not being liable to the National Bank for more than their pro rata share of the loan advanced by the Bank, the conclusions for relief against the defenders should be restricted to that extent.”

On 7th February 1902 the Lord Ordinary ( Low) pronounced the following interlocutor:—“Finds,

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decerns, and declares, and Finds, decerns, and ordains, in terms of the conclusions of the summons.”

Note.—[After a statement of the facts]—“The question therefore is whether the three parties who drew the cheque are liable to the Bank jointly and severally or only pro rata. [His Lordship then dealt with certain matters not relevant to the present report.]

“Now, what was the effect of the cheque granted by all the three obligants? A cheque is a bill of exchange drawn upon the banker, and, with certain exceptions which do not affect the present question, is subject to the same rules as other bills of exchange. Now, according to the law of Scotland, drawers or acceptors of a bill of exchange are liable jointly and severally—Bell's Prin., sec. 61; 1 Bell's Com., 362; Ersk. iii. 3, 74; and I see no reason why that rule should not apply in this case as between the granters of the cheque and the Bank.

The defenders argued that the cheque, being blank in the name of the payee, was not a bill. But a bill blank in the name of the payee may be completed by anyone having express or implied authority to do so, and in this case the Bank was requested to pay the cheque to Wallace & Pennell, and were thereby authorised to complete the bill by filling in their name as payee.

I therefore do not think that it can be successfully maintained that the cheque in question was not a bill of exchange, and upon the whole matter I have come to the conclusion that the defenders were jointly and severally with the other obligants liable to the Bank for the sum advanced.

The defenders reclaimed, and argued—The real question in the case was—Were the parties who signed the cheque liable singuli in solidum jointly and severally or only pro rata. The ordinary presumption was that the liability of a co-obligant was pro rata—Bell's Prin., sec. 51; Ersk. iii. 3, 74; Campbell v. Farquhar, 1724, M. 14626. But the other side contended that this cheque was a bill of exchange. That was not so. The bank had never filled in the name of the payees. The definition of a bill of exchange in section 3 of the Bills of Exchange Act 1882 necessarily required a payee to be named in the bill. A cheque left blank did not fall within the definition. Further, the bank were in the position of acceptors of a bill. Sections 54 and 55 of the Act set forth the obligations enforceable under a bill. The present action did not deal with any such obligation. This was not a case of liability between a drawer or acceptor of a bill and the payee. The question of liability was one between the acceptor and the drawer. Such liability did not rest on the bill alone, and the law always allowed evidence of the relations between a drawer and acceptor.

Argued for the pursuers—Each of the parties signing the cheque authorised payment of the cheque. This cheque was a bill of exchange, and the obligants under it were liable singuli in solidum—Bell's Prin., sec. 61. It was of no significance that the name of the payee was not filled in. If necessary it could be filled in by the holder at any time.

At ad vising—