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Decisions of the Superior Courts of New South Wales, 1788-1899

Campbell v. Cox [1822] NSWKR 8; [1822] NSWSupC 8

promissory notes - insolvency

Supreme Court
Field J., 16 December 1822
Source: Sydney Gazette, 20 December 1822[1] 
 

This day the following judgement of the Court was delivered by Mr. Justice Field:
This is an action brought by a merchant to recover from the late Paymaster of the102nd Regiment a balance of five shillings in the pound on a small book debt, on two sums of money paid for the defendant: on a large quantity of Paymasters promissory notes; on three bills of exchange for £526 16s. 4d, £1000, and £990 15s ; and on four other bills of exchange for £700, £500, £400, and £1000, all drawn by the defendant, on Messrs Cox and Greenwood; and, it being admitted on the one side, that 15 shillings in the pound have been received by the plaintiff on all these items (except the £400); and, on the other side, that the remaining five shillings, on all but the last four bills of exchange (except the £400) are due to him, the question for the Court is, who is the holder of these four bills? It appears that, in the year 1803, the defendant became insolvent, and assigned all his effects to trustees here for the benefit of his creditors, among them the plaintiff received the before mentioned dividend, as to the last three bills of exchange, upon producing the protests only the bills themselves not being returned. Upon the defendants going to England, to settle with his creditors there, a deed dated 31st July 1809, was executed between him and Messrs David Scott and Co, which recited that Messrs D. Scott and Co. were the holders of said four bills of exchange; and, as such holders, claimed to be creditors in England of Mr. Cox for £2600; but in consequence of three of the bills having been protested for non-payment, and the protests sent out to New South Wales, said trustees had (as said Mr. Cox alleged) paid to Mr. Campbell fifteen shillings in the pound upon £2200; and it was also alleged that the said three bills had been retired, or taken up, by the house of Campbell and Co. in India; but, on the other hand, the said D. Scott and Co. alleged that the said dividend had not been paid to the plaintiff on their account, nor had any of the bills been retired or paid by Campbell and Co, or by them to D. Scott and Co, or their agents in India; and then Messrs. D. Scott and Co. covenanted, in consideration of there being paid an equal dividend with the rest of the English creditors, namely 12s. 6d. in the pound upon the said £2600, that, in case the dividend of 15 shillings in the pound on the £2200, should thereafter be remitted by the plaintiff to them, or it should appear that the bills had been retired or taken out by Campbell and Co. in India, and the amounts paid to the agents of D. Scott and Co. they would refund to the defendant, for the benefit of his English creditors, the dividend upon the £2300 received under that deed. The plaintiff is no party to this deed, and would not therefore be precluded from recovering the remaining five shillings in the pound on these three bills, provided the condition upon which D. Scott and Co. covenanted to repay the 12s 6d to the defendant, for the benefit of his English creditors, had been performed; namely, provided the bills had been retired by Campbell and Co, and the amount paid to the agents of D. Scott and Co. The question therefore is, Have their bills been retired by Campbell and Co; and has the plaintiff got them back as the present holder? And upon my pointing out the documents in the cause, the Members, who are accustomed to mercantile transactions, are clearly persuaded that the plaintiff is not holder of these bills, but that Messrs. D. Scott and Co. are the bona fide and unquestionable holders of all four bills, amounting to £2600. The first, in point of time, is the bill for £700. Of this neither the first, second, or third parts are produced; and it is acknowledged by the plaintiff never to have been returned; but he produces a notarial copy of it, and protests for non-payment, from which appears to have been specially endorsed by the plaintiff to D. Scott and Co who have never thought proper to return it. The next bill, for £500, the third part only is produced, endorsed by the plaintiff to Campbell and Co; but the endorsation is erased. The protest contains a copy of the first part, which appears to have been endorsed by Campbell and Co. to D. Scott and Co. It should thus seem that there was notice of dishonour of the first part, before the plaintiff had remitted the third. This, therefore, instead of being a returned bill, had never passed out of the plaintiff's hand. If it had been a returned bill, it would have contained the endorsation of Campbell and Co. to D. Scott and Co. To the next bill, for £1000, the same observations strictly apply. The last bill, for £400, is not produced; but one part of it is proved to have been stolen out of the office of the plaintiff's Solicitor. Upon the notorial copy, with the protest for non-payment, the following endorsements: Larra, the payee, to Robert Campbell; Robert Campbell to Campbell and Co; Campbell and Co. to Fairlie Gilmour, and Co; and Fairlie, Gilmour, and Co. to David Scott and Co. The Court have no doubt that the part stolen was also a third part, and not a returned bill; and that D. Scott and Co. are the bona fide holders of it, as is recited by the before-mentioned deed. This is the first time the plaintiff has made any claim upon this bill, upon which he received no dividend. Of this bill he is not the payee, but Larra, who has as much right to sue the defendant upon it as the plaintiff. How different from these documents are the bills and protests produced, of which the plaintiff is admitted to be the bona fide holder! One of these is a first part; and the two others, which are thirds, bear all the regular endorsements and obliterations back to the plaintiff, and prevent the most unequivocal proofs of having been really returned to him.
Under these circumstances, believing as the Court do, that such of the four bills as are produced are not returned bills, but merely the thirds which had never passed out of the plaintiff's hands; and that Messrs. D Scott and Co. are the real holders of them, and have lost their remedy upon them against the plaintiff and endorser, by compounding with the defendant as drawer, we have struck them out of the account current we have framed between the parties; and allowing interest to this day on all the items on both sides, including the plaintiff's book debt of £53 10s. and the defendants £657 10s 3 ½ d. for the plaintiff's purchases at the defendant's sale, which latter's sum is partly composed of a dividend of 10s. in the pound upon the former book debt; and allowing the plaintiff £5 per cent, for exchange and re-exchange upon the admitted bills of exchange, we have struck a balance of £656 5s 3d against the plaintiff; and therefore we give judgement for the defendant, with costs.

Note

[1] As well as being the builder of the road across the Blue Mountains, William Cox was one of the most prominent debtors in early New South Wales.
At the beginning of the nineteenth century, English law had two separate systems for dealing with those who were unable to pay their debts, insolvency and bankruptcy. Bankruptcy was available to traders only, and allowed the complete discharge of debts after an assignment of property to the creditors. Unlike insolvency, it did not require a previous period of imprisonment for debt. Insolvency was not restricted to traders, but was designed merely for relief from debtor's prison. After a general assignment to the creditors, insolvency led to release from prison but not from the debt obligation itself. However it was assumed, and later held formally, that the insolvency and bankruptcy laws of England did not apply in New South Wales. (Ex parte Lyons, in re Wilson (1839) 1 Legge 140.) Eventually, a temporary provision of imperial law allowed insolvency or bankruptcy in the colony, under (1823) 4 Geo. 4 c.83, ss 22 and 23, followed by colonial legislation especially that of 1841.)
Cox failed financially in 1803. In the absence of insolvency and bankruptcy at that time, the Judge Advocate and litigants had to make the best arrangement they could. Cox assigned his property to five trustees for the benefit of all of his creditors, a process analogous to bankruptcy. His trustees were among the most active litigants in the Court of Civil Jurisdiction in 1805 and 1806, suing to get in the debts owed to Cox. He had paid 15 shillings in the pound by 1806. Now 16 years later it was time for the final dividend of 5 shillings to be paid.
In the Court of Appeal, the Governor confirmed the decision: see Minute Books (Court of Appeals), 16 June 1817-20 April 1824, State Records N.S.W., 4/6604 at 80, 82, 83.
See B. Kercher, Debt Seduction and Other Disasters: the Birth of Civil Law in Convict NSW, Federation Press, 1996, 204-205. B. Kercher, Unruly Child: a History of Law in Australia, Allen and Unwin, 1995, 55, 57, 72, 92, 113, 116; C.H. Currey, Sir Francis Forbes, Angus and Robertson, 1968, chapter 32.

Published by the Division of Law, Macquarie University