Nicol's Trustees v Sutherland

Section 100 of the Bills of Exchange Act 1882 permits parole evidence about the parties’ relations and other questions concerning liability on a subsisting bill. It does not permit parole evidence that payment or another event has extinguished the written obligation.

The apparently broad statutory language must be read in its legal and statutory context. A consolidating enactment will not be taken to overturn fundamental rules governing written obligations without sufficiently clear language. Accordingly, payment of a debt constituted by a bill must still be proved by writ or oath.

The respondents, as trustees of the deceased drawer of a £250 bill of exchange, sued its acceptor for payment. The acceptor alleged that he had already paid the drawer but had obtained neither the bill nor a receipt. He sought to prove payment by oral evidence.

The Sheriff-substitute rejected that proposed mode of proof. The First Division of the Court of Session unanimously affirmed his decision, following Robertson v Thomson, 3 F 5. The acceptor appealed to the House of Lords.

The central question was whether section 100 of the Bills of Exchange Act 1882 made parole evidence admissible to prove that liability under a bill had been extinguished by payment.

1. By a majority of three to two, the appeal was dismissed with costs. Lord Simonds, Lord Normand and Lord Reid concluded that section 100 of the Bills of Exchange Act 1882 did not permit the appellant to prove payment of the bill by parole evidence. Lord Morton of Henryton and Lord MacDermott dissented.

2. Per Lord Simonds, the section was capable of a restricted construction consistent with the established law of Scotland. It permitted parole evidence about matters such as the purpose of a bill, accommodation, consideration and the parties’ ultimate relations. It did not extend to proof that the bill had been discharged and had ceased to be a document of debt. Fundamental rules governing the discharge of written obligations were not to be treated as displaced without clear statutory language.

3. Per Lord Normand, section 100 concerned questions about liability on a subsisting obligation. Payment extinguished the obligation and therefore remained subject to the rule that a written obligation could be discharged only by proof of an equivalent formal character. This construction also avoided inconsistency with section 62(1), which required an unconditional renunciation of rights against an acceptor to be in writing unless the bill was delivered up. The proviso concerning sexennial prescription did not support the appellant’s wider construction because prescription governed proof without necessarily extinguishing the underlying debt.

4. Lord Normand considered Robertson v Thomson, 3 F 5, to follow necessarily from the earlier Scottish authorities. He stated that Drybrough & Co Ltd v Roy, which had allowed proof of an oral agreement to renew a bill, was irreconcilable with those authorities and should be overruled. Lord Reid likewise regarded the broader decisions as inconsistent with the predominant Scottish authority.

5. Lord Simonds and Lord Normand attached no interpretative weight to amendments of the 1882 Act which neither re-enacted section 100 nor addressed a cognate subject. Lord Reid additionally considered that the repeated Scottish decisions had settled a difficult question which the House should not reopen after so long an interval.

6. In dissent, Lord Morton, with whom Lord MacDermott agreed, considered the statutory words clear. Payment was naturally a fact relating to a bill and relevant to liability upon it. The appellant was seeking to prove discharge, not to contradict the written terms of the bargain. They would have overruled Robertson v Thomson and allowed the appeal.

1. House of Lords: By a majority of three to two, dismissed the defender’s appeal and affirmed the exclusion of parole evidence of payment.
2. First Division of the Court of Session: Unanimously affirmed the Sheriff-substitute’s decision and declined to remit the matter to a larger court for reconsideration of Robertson v Thomson, 3 F 5.
3. Sheriff Court of Perth and Angus: The Sheriff-substitute held that payment of the written debt could not be proved by parole evidence.