City Discount v McLean: CCP 16 Jun 1874

The plaintiffs, a discount company, were in the habit of discounting bills for S. In consideration that the plaintiffs would advance money to a certain amount to S on the deposit of a lease of S’s premises, the defendant guaranteed any part of the money so advanced that might remain due after the realisation of the leasehold security, the guarantee to last for a period not exceeding two years. Advances were made to S by the plaintiffs in accordance with the guarantee, and a great number of other transactions by way of further advance upon the discount of bills by the plaintiffs for S. took place in the usual course of business between them. Within two years from the date of the guarantee, S failed, owing to the plaintiffs an amount exceeding the sum guaranteed. A long debtor and creditor account was kept by the plaintiffs of their transactions with S during such time, including the advances made under the guarantee. The aggregate of the items on both sides of the account very largely exceeded the amount of the sum guaranteed. In this account the practice was to credit S with the amount of the bills discounted, less discount and commission, and debit him with the amount of the bills if they were dishonoured. Many of the bills discounted were renewed at maturity, and the same system of crediting and debiting applied to the renewals. The account was balanced on several occasions before S failed, and shewed balances against S of much less amount than the sums advanced under the guarantee, but these balances were arrived at by crediting S with the amount of outstanding bills, many of which were not paid at maturity, and were included in the ultimate balance against S. Bills were discounted with the plaintiffs by S to cover advances made under the guarantee, and were from time to time renewed but never were paid. Bills, discounted by S with the plaintiffs after the advances under the guarantee, had been paid to an amount exceeding the sum guaranteed, but it did not appear that in point of fact the balance really due from S to the plaintiffs after the date of the guarantee was ever less than the sum guaranteed. In an action on the guarantee to recover the moneys advanced under it.
Held: Under the circumstances of the case, it could not have been the intention of the plaintiffs and S, by the mode in which the account between them was kept, that the advance under the guarantee should be considered as satisfied by the items of credit therein, and consequently that the action was maintainable.
The rule in Clayton’s Case that payments are credited against the first item shown debited can be displaced by evidence of a contrary intention.
(1874) LR 9 CP 692, [1874] UKLawRpCP 60
Commonlii
England and Wales
Citing:
CitedDevaynes v Noble; Baring v Noble, Clayton’s Case CA 1816
A partner in a banking firm died. The surviving partners continued to trade without making any changes. They later fell into bankruptcy. Creditors of the bank at the date of the death still traded with the bank with varying changes in their banking . .

Lists of cited by and citing cases may be incomplete.
Updated: 16 October 2021; Ref: scu.229292