Court allows claim where plaintiff proves receipt issued without payment despite defendant's parol evidence defense.

[*99] 1984 July 6

(MICHAEL IDES, D.J.)

IN THE DISTRICT COURT OF NICOSIA

Theodoros Stylianopoullos,

Plaintiff,

v.

Soteris N Kiliaris,

Defendant.

(Action No. 3697/83).

Evidence - Documents - Parol evidence - It is, in general, inadmissible to contradict, vary, add to or substact from the terms of the document - Exceptions to the rule - Informal documents - Receipts of money or of things - Except where the receipt amounts to a contract, it does not, even between the parties, unless amounting to estoppel, exclude extrinsic evidence to contradict the writing,

P. Solomonides, for the Plaintiff.

No appearance for the Defendant - called absent.

JUDGMENT

The following judgment was delivered by:-

MICHAEL IDES, D.J.:- The plaintiff in the present action is a physiotherapist. He met the defendant for the first time in 1978, when he paid a visit to his office for treatment, after having been referred to him by a doctor of the Nicosia General Hospital. Plaintiff and defendant agreed that the payment of the plaintiff’s fees would be made by the “insurance company” upon completion of the treatment. No specific amount was agreed. The treatment lasted from 1978 to 1980. [*100]

On 1.7.81, plaintiff issued to the defendant a receipt, copy of which-was produced and is exhibit 1 before the Court. It bears the serial No. 00008 and reads as follows:-

“I received from Mr. Soteris Kiliaris of Nicosia, “the amount of four hundred and fifty eight pounds “only, No. £458.000, in full settlement of his account “for treatment till the 31 st May, 1981.

“Dated 1.7.81”.

The receipt in question was issued in the presence of P.W.2 Kyriacos Constantinou. On giving the receipt, plaintiff continued, he said to the defendant:-

“You will get the receipt, you have not paid, “but I will request you to pay as soon as the “case is over, I am simply issuing the receipt in “order to help you with your insurance claims”,

Plaintiff demanded the money after the conclusion of defendant’s claim against his insurance company and, in his allegation, defendant promised to pay as. soon as possible,

The only question put to the plaintiff by the defendant in cross-examination was the following:-

“Q. I put it to you that I have paid you in cash “ and upon payment you issued the receipt.

“A. I have not received the money”.

Plaintiff’s second witness was Kyriacos Constantinou; He said that he was a friend and colleague of the defendant, in the sale promotion of medicines. On the defendant’s request [*101] he introduced him to the plaintiff. This witness said that he was present when the defendant told the plaintiff: “I will pay “you when I receive the money” (evidently meaning the insurance claim).

This witness added that he was present also when the above quoted receipt was issued. He saw that the defendant paid no money on receiving the receipt. Subsequently he met the defendant on many occasions and requested him to pay the plaintiff. Defendant promised to pay but failed to do so.

In cross-examination defendant put to this witness that they are not friends and that he was not present when he returned to the plaintiff the original of the receipt issued by him. The witness denied this.

The plaintiff’s last witness was advocate Theodoulos Montis. He was originally handling the case of the defendant against the insurance company. He referred remotely to an encounter with the defendant at the ground floor of the block of flats where his office is situated when he grasped the opportunity to inquire whether he paid the

plaintiff. . Mr. Montis recalled that he replied as follows:- “He gave me a receipt so as to be enabled to collect the money and I will pay him as soon as the case is settled”.

This witness could not remember the exact date on which this conversation took place. He added though that “a Government practitioner was treating the defendant privately and defendant also failed to pay him”. Witness Montis admitted that the defendant sent him a letter with which his services as his advocate were terminated. [*102]

Defendant. testified on oath. He ‘said that on the conclusion of the treatment, plaintiff demanded £458.-. He paid him and a-receipt was’ issued. The original was handed to Mr. Solomonides, plaintiff’s advocate, who was then defendant’s advocate. Defendant had gone to Mr... Solomonides’ office who gave him the insurance company’s cheque and claimed more money, for his services. Defendant declined to pay more and demanded the return of his file. Montis also returned the file but the original of the receipt from Stylianopoulos was missing. When defendant asked for its whereabouts, Solomonides replied that he had lost it and some days later sued” him’ with the present action. After a few more days, defendant continued, the following conversation took place between advocate Solomonides and himself.

Defendant: “What you are doing is not honest”.

Solomonides: You have not paid (Stylianopoulos).

Defendant: You know I have “paid” him.

Solomonides: If you have a receipt you can make a defence.

Defendant subsequently sent a letter to Solomonides. asking for the withdrawal of this action. It was not done, and the case proceeded to hearing. Defendant. concluded “I. swear, “that I have paid Stylianopoulos”.

In cross-examination defendant repeated that plaintiff issued the receipt upon payment of the money due. Defendant persistently denied that he got the receipt without paying. The payment, he said, .was made in cash on the date that the receipt was issued and nobody else was present. [*103]

Before making my findings, however, I consider it necessary to refer extensively to the law applicable to the facts of the present case.

The Law.

In Black’s Law Dictionary, 5th Edition p. 1140, a receipt is defined as follows;-

“Receipt is a written acknowledgment of the “receipt of money, or a thing of value, without “containing any affirmative delegation upon either “party to it; a mere admission of a fact in writing. “And being acknowledgment of payment, is subject to “parol explanation or contradiction”.

In the ordinary course of events, therefore, a receipt serves the purpose of acknowledging the receipt of money or goods and is commonly used in commercial and other transactions of daily life. The predominant view, as it has been shown by the stand of the defendant in the present case, is that a receipt is conclusive proof that money has been paid or goods delivered, the issuer of a receipt being unable to deny the facts stated in it.

The above view is not far from the general rule of the Law of Evidence which is stated concisely as follows in Phipson on Evidence, 11th Edition paragraph 1781 :-

“When a transaction has been reduced to, or “recorded in, writing either by requirement of “law, or agreement of the parties, extrinsic “evidence is, in general, inadmissible to contradict [*104] “vary, add to or substract from the terms of the “document”.

One may support the above statement

of the law with the following quotation from the judgment of Abbot C.J. in Queen Caroline’s case (1820) 2 Brd 8 B p.. 284 at p. 289.

“It is a rule of evidence as old as any part of “the Common Law of England that the contents of a “written instrument, if it be in existence, are to “be proved by that instrument itself and not by “parole evidence”.

To the above rule, as is usual with many rules of the Law of Evidence, there are exceptions.

The specific topic of receipts is one of them. It has been decided from very old times that receipts are in general only prima facie evidence of payment and cannot be contradicted by proof of various matters. Thus in Skaife v. Jackson (1824) 3 B & c 421 the extrinsic evidence was admitted in order to prove that the receipt was obtained by fraud. In Farrar v. Hutchinson

(1839) 9 Ad & E1 641 the evidence showed that the receipt was given in fraud of partners and in Bowes v. Foster (1858) 2 H & N 779 the evidence showed that the

receipt was given as part of a pretended sale. In Nathan v. Ogdem (1905)

94 LT 126 the evidence was admitted in order to show that the terms of the receipt did not accurately state the transaction.

Even where the receipt for money is contained in an instrument under seal, this is not conclusive that the money has in fact been paid and evidence can be given of [*105]

the non payment of the whole or part of it - see Burchell v. Thomson (1920) 2 K.B. 80 at ,p. 86.. See also Greer v. Kettee (1937)

4 All E.R. 396. The fact, however, that receipts are as a rule informal. documents, makes it possible for them to be varied

or contradicted by oral evidence e.g. that the money was in fact paid by another person as in Graves v. Key (1832) 3

B & Ad 313 or that the receipt wasgiven “without prejudice” as in Oliver v. Nautilus Steam Stripping Co. Ltd. (1903) 2 K.B.

639. At p.. 648, Vaughan Williams L.J. had these to say on the nature of receipts: -

“Then it seems to me the only difficulty remaining “is that which arises in respect of the first payment - that, is, the payment which was made upon “January 15., That was not made subject to any such “reservation as ‘without prejudice’. The real “question,’ then, is, ought we to treat the first “payment as having been made subject to the same “condition as the later payment? I think we ought, “and for the following reason. After all, a receipt “does not in itself create an estoppel of any sort ; “of kind. You are at liberty to take all the circum-“ stances surrounding it into consideration, and ask “yourself the question what was the real intention “of the parties when the receipt was given and “taken. One must not forget, although I am not “going to dispute Jelf J.’s findings, that this “man understood what he was doing when he gave the “receipt - understood, that

is, that he was “receiving a payment of compensation under the [*106] “Workmen’ s Compensation Act. I do not think it “would be a fair

inference to draw that this man “was at that moment in such a bodily health and “mind that he could really make any election as “to what would be the best course to pursue”.

Different considerations apply, however, in cases •where a receipt amounts to a contract and consequently the document is some things more than mere receipt and. their interpretation is made in accordance with the rules” pertaining to the construction of contracts. See Ellen v. Great Northern Rly Co. (1901) 17 T.L.R. 453 C.A. But apart from any question of contract, a receipt will not, even between the parties, unless amounting to estoppel exclude extrinsic evidence to contradict the writing. See Oliver v. Nautilus Co. S.Co. (1903) 2 K.B. 639 C.A., Lee v. Lanes Yorks Rly.L.R.6 Ch. 527. In Beckett v. Nurse (1948) 1 K.B. 535. At pp.

539 - Jenkins J. said: -

“The county court judge held that document amounted “to an agreement in writing, and accordingly held “that no oral evidence was admissible to contradict “or vary; it. The question for this court is whether “he was right in that view. The principles to be “applied are conveniently stated in Phipson on “Evidence (7th Ed.), Ch. 45, in the form of a rule “and an exception. The rule is thus stated (at “p. 552): ‘When a transaction has been reduced to, “or recorded in, writing either by requirement of “‘law, or agreement of the parties, extrinsic evidence [*107] “‘is, in general inadmissible to contradict, vary, “‘add to or substract from, the terms of the document’. Then comes the relevant exception - though “it is not the only one - (at p. 554), exception 2: “‘Private documents when (a) informal or (b) inter “‘alios’. (a) is here the material branch, and on “this the following is stated: Informal: Evidence “is, in general admissible to contradict or vary “any written document

intended by the parties to “operate merely as a collateral or informal memo“randum of a transaction and not as a contract or “other binding legal instrument. Thus, a receipt “will not,

even between the parties, unless “amounting to an estoppel, exclude extrinsic “evidence to contradict the writing. Various authorities, to some of which we have been referred, are “mentioned which appear to me to uphold that exception. “Applying those principles to the present case, the “question is whether the document of February 1, 1946, “was a written agreement or a reduction into writing “of all the terms of the bargain, or was merely a “collateral memorandum. In my judgment, it plainly “was not an agreement. It is described as a receipt “and its actual object was to operate as a receipt. “It is signed by one party only, that is to say, by “the recipient of the money, and it does not contain, “as part of the writing any consensus on the part “of the other party. It presupposes only, on the [*108] “face of it, an antecedent agreement pursuant to “which the sum acknowledged is paid”.

The legal effect of a receipt which is embodied in a contract of sale, stating that the purchase money had been paid was considered by the Supreme Court in the recent case of Polycarpou v. Savvas Polycarpou (1982) 1 C.L.R. 182,

Mr, Justice Stylianides after analysing the doctrine of consideration in the law of contract had these to say at P. 192:-

“In the light of the aforesaid

pronouncement a “vendor is not estopped by a statement in the contract “of sale that the purchase money had been paid. Parties “to a deed are not estopped as between themselves from “showing that the consideration had not in fact been “paid. It is open to a party, even where a document “states

what was the consideration, to prove that “there was no consideration or that it failed or “that it was paid in full or that it was no consideration or that it failed or that it was paid in “full or that it was other than that stated. “There Is another factor militating against the “appellant. Irrespective of any other consideration, “the said extrinsic evidence was adduced on her

“initiative in an effort to prove the payment of “the £1,000.-. (U. Drive Company Limited v. Panayi & “Another (1980) 1

C.L.R. 544, 548). [*109] “The trial Court rightly admitted parol evidence “on the issue of the consideration and the payment “of the £1,000.-”.

Mr. -Justice Pikis, on the other hand, had the following view of the law. At p. 196-197 he said:-

“I cannot subscribe to the proposition that, “whether the consideration given is made an issue “in the case, extrinsic evidence becomes automatically admissible to vary or contradict the terms “of a document on the subject. Such a wide exception “would neutralize the. rule against parol evidence “and would reduce the value of a written record as “an authentic guide to the terms of the transaction....

“In my judgment, it is permissible to allow extrinsic “evidence to vary or contradict written’ terms of an “agreement with regard to consideration, in either of “two cases:-

“(i) When consideration is presumed but not stated in the document, or

“(ii) Where evidence is adduced prima facie, casting doubts on the correctness of a written statement on the subject of consideration.

“I need not expand on this theme; but one or two “obvious examples will help to illustrate the “position. Parol evidence may be admitted in the “face of evidence that a document was

executed by “one or both of the contracting parties when in a [*110] “state of drunkenness or while labouring under a “mental

aberration. Such evidence would case “doubts on the correctness of the record; there fore, it would be both relevant and just to inquire “further into the correctness and accuracy of statements made therein”.

Even in actions between owners and consignees or indorsees, a receipt in a bill of lading is, unless expressed to be conclusive, usually only prima facie evidence of the shipment or description of the goods. See Smith v. Bedwin Co.

(1896) A.C. 70 Cox v. Bruce, 18 Q.B.D. 147, Parious v. New Zealand Co. (1901) 1 K.B. 548.

A case which is of particular importance to the facts under consideration is Ward & Co. v. Wallis (1900) 1 Q.B. 675 which is authority for the proposition that evidence may be given of the circumstances under which a receipt was given. In this case the plaintiffs sued the defendant for work and labour done. In the writ they by mistake credited the defendant with the payment of a sum oh account and claimed the balance. The defendant knowing that they had made a mistake paid the balance and obtained from them a receipt for the whole sum due from him to them. Subsequently, having discovered their mistake, the plaintiffs brought an action to recover from the defendant the sum wrongfully credited to him, as money had and received to their sue. It was held, that, although the receipt had been given under compulsion of legal process, the defendant could not rely upon it as a defence to the action since he had not acted [*111] bona fide, and that the plaintiffs were therefore entitled to recover the sum claimed.

At p. 678 Kennedy J. said:-

“It seems to me to appear from the notes to Marriot v. “Hampton that there must be bona fides on the part of “the party who has got the benefit of his opponent’s “payment in order to bring the principle laid down “in that case into force, and that if the person “enforcing a payment under legal process has therein “taken an unfair advantage or acted unconscientiously,

knowing that he had no right to the money, “the principle laid down in Marriot v. Hampton may “not prevent the defendant from

recovering the “money back. A similar limitation, as it seems to “me ought to apply to such a converse case as this, “where the plaintiff in an action has on the face of “the writ credited the defendant with the payment “of a sum of money on account which the defendant “must have known to have been so credited by a “mistake on the plaintiffs’ part. Now, as I have “said, it is perfectly plain to my mind that the “defendant .in the .present action was aware when he “received the writ in the former action, and when “he settled the claim by payment, that the sum of “751 with which he was credited, as paid by him “on account to the plaintiffs, had never been paid “by him at all. He has not thought fit to come “here and deny that he knew it; and in my opinion, [*112] “he did know it, and he was acting unconscientiously “in taking the receipt from the plaintiffs in full. “I think, therefore, that the settlement under legal “process was not “bona fide on his part, and that the “plaintiffs are entitled to reopen it.

“But then it is said that the plaintiffs cannot “recover this sum as money had and received to their “use because it was only credited by them to the “defendant, and was never actually paid into his “hands. That, I think, is not material. It is “well settled that an allowance in account is equivalent to a payment, and I think, therefore, that “as there was here an allowance in account made by “the plaintiffs to the defendant, and of which he “unfairly took advantage, the plaintiffs are entitled “to recover the amount of that account from the “defendant as monay had and received by him to “their use”.

The topic of receipts is analysed in full in Halsbury’s Laws of England, 4th Edition, Vol. 17 para. 219 Vol. 9, para. 497, Vol. 12 para. 1516.

In Chitty on Contracts 25th Edition, para. 1421 the following are mentioned -

“Proof of payment: receipts. A payment may be “proved by any evidence but the usual method of “proof is not conclusive but only prima facie “evidence that the money has been paid. Evidence [*113] “may be given of the intention with which it was “handed over and of the circumstances generally thus “a receipt given ‘in full discharge’ does not exclude “an implied agreement to pay interest not covered by “the receipt. Again, the effect of a receipt may “be “destroyed by proof that it was obtained by fraud “or under a mistake of fact, or that it formed part “of a transaction which was merely colourable, “because no money had in fact been paid.

“Where, however, a document containing a receipt “clause is relied on by third parties, different considerations prevail, and the person signing the document may be estopped, as against third parties, from “denying receipt of the money.

“A receipt may be in any form so long as the words “are express. A receipt for consideration money or “securities in the body of a deed is a sufficient “discharge for the same, without any further receipt “being indorsed on the deed. It is no longer necessary for a receipt to be stamped”.

In the light of the above authorities I must now evaluate the evidence adduced and in doing so I may have regard to the facts surrounding the issue of the receipt in question by the plaintiff.

Findings.

I have watched the demeanour of all the witnesses very carefully. The .plaintiff’s case is that he issued a receipt

containing a statement to the effect that he was paid, [*114] while in effect he was not. His allegation is that he did so for

the purpose of facilitating the defendant with the insurance company. This may be the case. But I cannot stop wondering why he issued a receipt and not an invoice? Nothing was placed before the Court by either side, to show that the insurance company would not pay on the production of an invoice. I find as a fact that the plaintiff issued the receipt as he alleges, a fact which was very foolish on his part. The evidence of advocate Montis despite its misgiving, as it was a bit vague without specific reference to facts or dates, was positive on the point that defendant admitted to him that the receipt was issued to him despite, the fact that he paid no money. ‘This evidence was not challenged.

The evidence of witness Kyriacos Constantinou was most convincing. He said the truth. He was the person who introduced the defendant, who was his friend, to the plaintiff and had an interest to see that plaintiff was paid. I believe him and I find that he was present when the plaintiff issued and delivered to the defendant the receipt without receiving any money, upon the promise of the defendant that he would pay on receiving the money from the insurance company.

Defendant, on the other hand made a very bad impression to the Court as a person who was not telling the truth. He lied to the Court and in my long experience I can say that his demeanour created to me no difficulty at all in reaching my findings. He appeared in person, and failed to challenge the evidence of the plaintiff and his witnesses

preferring instead to say merely that he paid and electing [*115] to hide behind the shield of the wrongly issued receipt. I do not

believe him and I make a positive finding that he lied to the Court. In

conclusion I say that the plaintiff proved that he issued the receipt without having been paid.

The curious thing in this action is that, no side considered it necessary to call evidence for proving the date on which the insurance company paid any amount and if so what, to the defendant. The defendant in addition to the above, avoided to explain the circumstances of the alleged payment, the time or the day or whether it was in £10 or £5 or £1 notes, who gave him these money, when and where.

For all the above reasons I find that the case has been proved and that the plaintiff is entitled to judgment in his favour.

In the result, judgment is given in favour of the plaintiff for £458.- with costs to be assessed by the Registrar of the Court.

Judgment in favour of plaintiff for £458 with costs.