Swan, - Appellant; The Governor and Company of the Bank of Scotland-Respondent

Judgment Date01 January 1836
Date01 January 1836
CourtCourt of Session

English Reports Citation: 6 E.R. 231


The Governor and Company of the Bank of Scotland-Respondent

Mews' Dig. iv. 150, 224; xiii. 1919. S. C. 2 Mont, and Ayr. 656.

SWAN V. BANK OF SCOTLAND [1836] X BLIGH N.S. [627] SCOTLAND. (CouBT of session.) SWAN,-Appellant; The GOVERNOR and COMPANY of the BANK of SCOTLAND-Respondent. [Mews' Dig. iv. 150, 224; xiii. 1919. S. C. 2 Mont, and Ayr. 656.] M. with S. and others, were joint obligors in a bond conditioned to answer for any balance which might become due from M. to a bank in Scotland, with whom he had obtained a credit according to' the Scotch system of banking. M. in the course of his dealings, drew upon the bank by written orders for sums made payable to bearer, and issued at a place more than ten miles distant from the bank ; but dated (contrary to the fact) at a place within that distance, and also post dated; being in both respects contrary to the statute 55 Geo. 3. c. 1^4. s. 13. which not only imposes a, penalty upon the parties to such drafts, but makes the transaction void. The mode of drawing was known by the bankers. M. having over-drawn the bank to the amount of £4378; an action upon the bond was brought against S. by the bank, to recover the amount. Held that no debt had been incurred, and therefore that the parties were not liable upon the bond. Lord Brougham : The Scottish banks, both public and private, have for more than a century past been in the practice of granting accommodation to their customers by way of what is called cash credits-a mode of conducting business which may almost be said to have become classical from the description and commendation given of it by Mr. Hume, in one of his most celebrated poli-[628]-tical essays. It consists in the opening an account to a certain limited amount with the customer on his finding good security for any balance which may at any time of settlement be found due. Upon this credit he operates by drafts o n the bank, and these are honoured up to the specified amount during the whole period of the party's occasion for this accommodation. Interest is charged on the sums drawn, and thus the party only pays for what he actually uses, while he runs no risk of keeping money by him beyond the occasions of the day; and the bank runs little or no risk, because, beside the surety's liability, it has constant means of knowing the nature of the customer's dealings, and of inferring from thence the state of his circumstances. These credits are used not only by traders, but by persons in any other occupation or profession requiring supplies of money to a moderate amount, as cattle-dealers, agents, a,nd writers; and sometimes even by private individuals living on their means. W. Martin, writer, of Lockerbie, obtained a credit of this description with the Bank of Scotland, in June, 1819, and gave a bond for securing the latter, in which he was joined by Mr. Swan, the present Appellant, and others, formally and nominally as principal co-obligors, but, in reality, as his sureties. In September, 1825, this was extended to' £10,000, and the sureties joined in a second bond, whereby they became liable in the same manner with W. Martin, but to the extent of £5000 for " all such money as should be drawn out from the said bank, or its agency-office at Dumfries, or as may be resting over, due, paid, payable, or [629] claimable, on any drafts, orders, bills, notes, receipts, guarantees, letters, documents, or obligations whatever, drawn, accepted, granted, indorsed, or any how signed by W. Martin, or by procuration, or liable on him by any legal construction, and chargeable to' the said account." And it was further stipulated by the bank, that any " account or certificate signed by their principal accountant, or by their agent at Dumfries, should be sufficient to ascertain, specify, and constitute the sums or balance to be due on principal and interest, and should warrant all execution of law against the obligors, jointly and severally, for such sums and balances." W. Martin continued to operate upon this credit until he became insolvent, and was sequestered, when a balance of £4378 Os. lid. principal, and £326 10s. 2d. interest, was due upon the account. The sureties or cautioners were sued upon the 231 X BLIGH N.S. SWAN V. BANK OF SCOTLAND [1836] bond, and it was stated in the defence thdt the manner of drawing had been chiefly in two ways. W. M. had sometimes sent letters from Lockerbie, where he resided, to the bank agent at Dumfries, directing him to send him money to a specified amount by the bearer; and sometimes he had discounted bills, and entered into other transactions with various persons at Lockerbie, and given them drafts on the bank, or bank agent. In...

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  • Banking Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2007, December 2007
    • 1 December 2007
    ...is liable to a creditor. This proposition is firmly established in Singapore, Malaysia and England. Thus, in Swan v Bank of Scotland(1836) 10 Bligh NS 627, the House of Lords decided that a guarantor was not liable if a creditor and principal debtor contract was null and void in law. Simila......

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