Scottish Court of Session Decisions

Subject_1 BANK.

John M'Gilchrist
v.
Thomas Arthur

Date: 16 January 1794
Case No. No 4.

When a person grants a draught on his banker, payable to the bearer, or his order, on demand, he cannot, in a question with an onerous holder of it, plead compensation upon a debt due to him by the person to whom the draught was originally delivered.

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James Fife granted to Archibald Macausland the following order:

“Port-Glasgow, 23d February 1793. Pay the bearer on demand, or his order, One hundred pounds Sterling, and debit my account with the branch of the Bank of Scotland, Greenock. To Messrs Wilson and Arthur their agents.”

This order, Fife afterwards alleged, was granted without value, and on promise of repayment on or before the 26th February 1793.

Macausland stopt payment on the 5th March following. On the 12th of that month, Fife received a charge of horning upon this draught, at the instance of John Macgilchrist, who had got it as a payment from Macausland on the 24th of February, but had not presented it at the Bank till the 5th of March, when Fife having by that time withdrawn his money out of their hands, payment was refused, and a protest immediately taken.

Fife raised a suspension of this charge, which, upon his bankruptcy, was conducted by Thomas Arthur, the trustee for his creditors. The competency of a summary charge upon such a note having been disputed, the Lord Ordinary turned the charge into a libel, and found the defender liable in the sum contained in the draught, with interest.

In a reclaiming petition, Arthur contended, That if Macausland had immediately, upon receiving the draught, carried it to the Bank, as he ought to have done, and got payment of it, Fife would have made the promise of re-payment on the 26th February effectual, as Macausland continued solvent till the 5th of March; and that as Macausland himself could not, so no person in his right could now demand payment of it; and farther

Pleaded: Draughts like the present are very frequently granted by creditors on their debtors, whether bankers or individuals; and when paid by the drawee, they operate as a discharge in his favour, upon whatever terms the bearer may have got possession of them. But they have not the same privilege of negociation with bills or promissory notes. When transferred to a third party, all objections competent against the cedent may also be proponed against the assignee, as in the case of a bond or other personal security; Erskine, b. 3. tit. 5. § 6. 10.; Bacon's New Abridgment, v. 3. p. 603. 609. Indeed, there being no fixed rules for their negociation, as there are with regard to bills, great hardship would arise from giving them the same privileges.

They were evidently considered by the Legislature as having effect only in favour of the first holder, and not transferable like bills, otherwise it would not have exempted from the stamp duties, orders on bankers, drawn by persons residing within a certain distance of the banking-house, while it expressly declared all orders not payable to the bearer, liable to these duties; 23d Geo. III. c. 49. § 4.; 24th Geo. III. ses. 1. c. 7. § 3. Indeed, on the contrary supposition, the tax might be evaded in all bills payable on demand.

Besides, bills payable to the bearer are null, as falling under the statute 1696, c. 25.; 8th January 1730, Walkinshaw's Executors, voce Blank Writ.

Observed on the Bench: The draught in question is transferable like a bill of exchange. It is equally free from compensation with a bank-note. It falls under the class of ‘notes of trading companies,’ which are exempted from the enactments of the act 1696. Besides, the drawer having issued his order in these terms, is barred, personali exceptione, from objecting to the negociability of it, and the trustee for his creditors cannot be in a better situation.

The Lords unanimously ‘refused the petition,’ without answers. See Compensation.

Lord Ordinary, Justice-Clerk. For the Petitioner, John Clerk. Clerk, Sinclair. Fac. Col. No 89. p. 200.

See Davidson against Elcherson, Fac. Col. 13th January 1778, No 1. p. 1. regarding the situs of bank notes, voce Foreign.

July 1801. There is at present in dependence, this question, Whether an extraordinary dividend, termed a bonus, declared by a Bank, belongs to the liferenter or the fiar of bank-stock ? Irvine, &c. against Houston; which will be reported under the title Liferenter.