Scottish Court of Session Decisions

Subject_1 USURY.

Robert Playfair,
v.
Richard Hotchkis, Trustee on the Sequestrated Estate of Bertram, Gardner, and Company

Date: 6 June 1797
Case No. No. 44.

Private bankers may charge commission on sums advantageous by them cash credit, without being guilty of usury; but if such commission exceed one half per cent the excess will be disallowed.

A banker is liable to repetition of the profit made from selling bills, payable at a more distant date than is warranted by the usual rate of exchange.

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Alexander Simpson held a cash-credit in the books of Bertram, Gardner, and Company, bankers in Edinburgh; and in the year 1791 there was a balance of upwards of £.800 due by him.

In the year 1792, Simpson applied for a further advance of £.200, which being refused, unless security was found for that sum, and also for £.200 of the balance, already owing, Robert Playfair joined with Simpson in two bills to Bertram, Gardner, and Company, for £.200 each; the one, payable at two, the other at four months date. These bills were immediately discounted by Bertram, Gardner, and Company, and their amount, deducting the discount, placed to Simpson's credit.

Both Simpson, and Bertram, Gardner, and Company, became bankrupt; and Mr. Hotchkis, the trustee for the creditors of the latter, having demanded payment from Playfair, he, in the year 1796, brought a reduction and declarator, founded on 12th Queen Anne, C. 16. for having them set aside on the head of usury, and himself found entitled to triple their amount.

His action was founded chiefly on the following allegations; 1st, That Bertram, Gardner, and Company, in their settlements with Simpson, had, besides the legal interest, charged commission on the sums advanced, which, particularly as it exceeded one half per cent. was usurious; 2dly, That in furnishing Simpson with bills on London, they had drawn at sixty and seventy days date, when the established par was only forty days.

The defender, besides denying that the commission charged by Bertram, Gardner, and Company, exeeded one half per cent.

Pleaded, 1st, The action being founded on a British statute, falls under the triennial prescription of penal actions, introduced by 31. Eliz. C. 5.; Ersk. B. 4. Tit. 4. § 110.; Bankton, B. 2. Tit. 12. § 22.; 13th January, 1747, Booksellers of London against Booksellers of Edinburgh and Glasgow, No. 341. p. p. 11143.

2dly, Mr. Playfair has no title to pursue. Even if the transactions of the Company with Simpson had been improper, nothing is demanded of Mr. Playfair but payment of his accepted bills, with the legal interest due upon them.

But, 3dly, There was no usury in these transactions. A banker, giving a cash-account, stands in a different situation from a mere money-lender. He must be at the expense of an office, books, and clerks;—he must have constantly by him a supply of money, yielding no interest, to answer the daily demands of his customers, and he must receive back the sums which he lends them, at whatever times, and in what proportions they chuse to pay it. It is reasonable, therefore, that he should charge commission, in order to indemnify himself; and he is not on that account guilty of usury; 1768, Pitcairn's Creditors against Foggo, No. 39. p. 16433.

And supposing it to be true, that Simpson took bills on London, at sixty, in place of forty days, the statute of Queen Anne will not apply. For, independently of there being no invariable rate of exchange, Mr. Simpson, in this way, only allowed his money to lie without interest, for a few days longer than he needed to have done, had he dealt with the established bankers. No London banker, indeed, allows interest for money deposited in his hands, although it should remain with him for years.

Answered, 1st, The statute of Elizabeth can no more regulate the duration of a penal action in Scotland than a Scots statute could have that effect in England.

2dly, The pursuer has a direct interest to pursue, as his plea goes to annul the very debt, in security of which his bills were granted. Besides, the action, on account of usury, is competent cuilibet e populo.

3dly, Every device, by which more than 5 per cent. is obtained for the use of money, falls under the denomination of usury. A banker is sufficiently rewarded for his trouble in various ways, such as the profit in discounting bills, and lending money at a higher interest than what he pays, without charging commission; and accordingly no such charge is made by any respectable private banker.

The Lord Ordinary sustained the defences, and found the pursuer liable in expenses.

On advising a reclaiming petition, with answers, replies, and duplies, the Court, without entering into the preliminary defences, considered it as fixed by the decision in the case of Foggo, that Mr. Playfair's allegations, although made out, did not amount to usury. It was observed, however, that if Bertram, Gardner, and Company, had charged more than one half per cent. of commission, ascertained by a report of bankers in the case of Foggo, to be the customary charge; or in selling London bills, had drawn them at longer dates than the usual par; their conduct in both respects had been exceptionable; and that the balance due by Simpson, in so far as it had arisen from these practices, should be disallowed.

The Lords “adhered.”

A similar judgment was pronounced in the case of Gilbert Grierson against Bertram, Gardner, and Company, 6th June, and 21st November, 1797.

Lord Ordinary, Glenlee. Act. Abercromby. Alt. Fraser Tytler. Clerk, Sinclair. Fac. Coll. No. 2. p. 3.