Page images

8 29.

“ holder in due course respectively, see sect. 38, post, p. 121. As to “negotiation," see sect. 31, post, p. 102; and as to overdue or dishonoured bills, see sect. 36, post, p. 115. As to defects in title, see sub-sect. (2), post, p. 92, and pp. 97—101.

The Act has substituted the term “holder in due course for the cumbrous equivalent “ bonâ fide holder for value without notice,” and its synonyms“ bonâ fide holder," "innocent indorsee," &c. The Indian Act (sect. 9) has adopted the same term. The French equivalent “tiers porteur de bonne foi,” i.e., third party holder in good faith,

is expressive. Notice.

Notice” means actual, though not formal notice, that is to say, either knowledge of the facts, or a suspicion of something wrong, combined with a wilful disregard of the means of knowledge. As to “good faith” and the tests thereof, see sect. 90, post, p. 272, and notes thereto, where the subject is fully discussed.

Principal and agent. —As regards the parties affected with notice, the ordinary rules of law apply to bills and notes. Notice to the principal is notice to the agent; and notice to the agent is notice to the principal, subject to the proviso (1) that when the agent is himself a party to a fraud he is not to be taken to have disclosed it to his principal ; 3 and (2) where a bill is negotiated to an agent, and notice is given to the principal, or vice verså, there

must be a reasonable time for communication.* Bill must be The rights of a holder in due course can only be complete and acquired by a person who takes a bill before it is overdue, regular.

and which is complete and regular on the face of it.” If the bill itself conveys a warning, caveat emptor. The holder, however honest, can acquire no better title than the person from whom he took it had. Thus, if the holder takes a blank acceptance, or a bill wanting in any material particular, he takes it at his peril ; • so alsó if the

Raphael v. Bank of England (1885), 17 C. B. at p. 174, per Willes, J. ; cf. Ex parte Snowbali (1872), L. R. 7 Ch. at p. 549. A person may be proved to have had notice of an act of bankruptcy either by proof that he had received formal notice, or by proof that he knew facts which were sufficient to inform bim that an act of bankruptcy had been committed."

2 Cf. Collinson v. Lister (1855), 7 De G. M. & G. at p. 637, branch bank.
3 Ex parte Oriental Bank (1870), L. R. 5 Ch. 358.
* Cf. Willis v. Bank of England (1835), 4 A. & E. at p. 39.

Awde v. Dixon (1851), 6 Exch. 869, and cases cited in note to sect. 20, ante, pp. 50–52.

§ 29.

holder takes a bill which has been torn and the pieces pasted together, if the tears appear to show an intention to cancel it."

In the United States the rule is the same. A recent American judgment puts the point clearly. Some negotiable county bonds, which had been indorsed in blank by the payee, were stolen. The thief erased the payee's indorsement, personated the payee himself, and sold the bonds to a person who purchased them in perfect good faith. It was held that the purchaser acquired no title, and that the erasure, at any rate, ought to have put him on his guard. In the judgment it is said : ? “He did not rely upon anything that appeared upon the bonds. He relied on the representations of the thief, and was deceived by them. Against such deception the laws applicable to negotiable paper were not intended to guard. It is their purpose to facilitate the circulation of paper, fair and regular upon its face, and to protect the bona fide purchasers of such paper.. Suppose a thief should erase the name of the maker of a note, and then forge the same signature, could he give a bonâ fide purchaser for value title to the paper? I am clearly of opinion he could not. The paper is not fair upon its face. There is a forgery, and although the purchaser may be ignorant of it, the law merchant does not protect him against such ignorance. He must know at his peril that the signatures are genuine. We are asked, suppose the name of the payee, indorsed upon negotiable paper, fades out so as to be invisible, does it affect the negotiable character of the paper? Most certainly it does. The title and rights of the owner remain the same as before, but a thief could give no title to such a paper to any one Lecause he cannot be the apparent thereof, and there is nothing on the face of the paper to induce the belief that he is the owner."

The fact that a cheque is post-dated does not make it irregular within the meaning of this section.3


i Ingham v. Primrose (1859), 7 C. B. N. S. 82 ; 28 L. J. C. P. 294 ; cf. Scholey v. Ramsbottom (1810), 2 Camp. 485 ; Redmayne v. Burton (1860), 2 L. T. N. S. 324.

2 Colson v. Arnot (1874), 54 New York R. 253, at p. 260 ; cf. Angle v. N. W. Ins. Co. (1875), 2 Otto, at p. 342, Sup. Ct. U. 8.

3 Hitchcock v. Edwards (1889), 60 L. T. N. S. 636 ; and see ante,

§ 29.

Defects of title.

(2) In particular the title of a person who negotiates a bill is defective within the meaning of this Act when he obtained the bill, or the acceptance thereof, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud.

This list of defects in title may not be exhaustive. A person whose title is defective must be distinguished from a person who has no title at all, and who can give none; as, for instance, a person making title to a bill through a forged indorsement: see sect. 24, ante, p. 71, and see “holder" defined in sect. 2, ante, p. 5.

The words “ force and fear,” were inserted in committee as the equivalent of the English technical term duress, which is unknown to Scotch law. See Bell's Principles, 9th ed., 12.


Holder claim.

(3) A holder (whether for value or not) who ing under holder in due derives his title to a bill through a holder in due

course, and who is not himself a party to any fraud or illegality affecting it, has all the rights of that holder in due course as regards the acceptor and all parties to the bill prior to that holder.

ILLUSTRATIONS. 1. A partner in a firm fraudulently indorses a firm bill to D. in payment of a private debt. F. is cognizant of the fraud, but is not a party to it. D. indorses the bill to E., who takes it for value and without notice. E. indorses it to F. F. acquires E.'s rights. If he gave value to E., he can sue all the parties to the bill; if he did not give value, he can sue all parties except E.?

2. C., by fraud, induces B. to make a note in his favour. C. in

May v. Chapman (1847), 16 M. & W. 355, at p. 361; Masters v. Ibberson (1849), 8 C. B. 100 ; Marion County v. Clark (1876), 4 Otto, 278, Sup. Ct. U. S.

May v. Chapman (1847), 16 M. & W. 355.


$ 29.

dorses the note to D., who takes it for value and without notice. Subsequently D. indorses the note for value back to C. C. cannot sue B.

30. (1) Every party whose signature appears Presumption on a bill is primâ facie deemed to have become a good faith. party thereto for value.2

(2) Every holder of a bill is primâ facie deemed to be a holder in due course ; 3 but if in an action on a bill it is admitted or proved that the acceptance, issue, or subsequent negotiation of the bill is affected with fraud, duress, or force and fear, or illegality, the burden of proof is shifted, unless and until the holder proves that, subsequent to the alleged fraud or illegality, value has in good faith been given for the bill.5

ILLUSTRATIONS. 1. A. draws a bill on B. and indorses it to C. C. sues B. It is shown that B. accepted it for A.'s accommodation. C. is not called on to prove that he gave value; he can recover without so doing.

2. B. makes a note payable to C. C. indorses it to D., who sues B. If it appears that B. made the note for an illegal consideration, D. must prove that he gave value in good faith.

3. The holder of a bill indorses it to D. to get it discounted. D. fraudulently negotiates it to E., who negotiates it to F. F. sues the acceptor. Évidence is given of D.'s fraud. F. must prove that he is an honest holder for value.8

4. B. makes a note payable to C., the consideration for which is a wager, i.e a consideration void by statute, but not prohibited

1 Cf. Sawyer v. Wisewell (1864), 91 Massachusetts R. at p. 42.

2 Cf. Hatch v. Trayes (1840), 11 A. & E. 702 ; Foster v. Dawber (1851), 6 Exch. at p. 853.

3 King v. Milsom (1809), 2 Camp. 6.

* Evidence to go to a jury was the old test : Hall v. Featherstone (1858), 3 H. & N. at p. 286 ; 27 L. J. Ex. at p. 311; and the Act bas not altered this : Tatam v. Haslar (1889), 23 Q. B. D. 345, at pp. 348, 349.

5 See Jones v. Gordon (1877), 2 App. Cas. at pp. 627, 628, per Lord Blackburn.

6 Mills v. Barber (1836), 1 M. & W. 425.
7 Bailey v. Bidwell (1844), 13 M. & W. 73.

& Cf. Smith v. Braine (1851), 16 Q. B. 244; Berry v. Alderman (1853), 14 C. B. 95 ; Tatam r. Haslar (1889), 23 Q. B. D. 535.

§ 30.

under a penalty. C. indorses it to D., who sues the maker. Evidence is given of these facts. D. is not called on to prove that he

gave value.

5. Action against the maker of a note payable to bearer. It is shown to have been stolen from the true owner. It lies on the holder to prove that he gave value in good faith.?

6. An acceptance is given in renewal of a bill which turns out to be a forgery. The genuine bill is negotiated, and the holder sues the acceptor. Evidence is given of these facts. It lies on the holder to prove that he is an honest holder for value.3

7. A partner accepts a bill in the firm's name for a private debt and in fraud of his co-partners. The bill is negotiated. The holder sues the firm as acceptors. As soon as it appears that the bill was given for a private debt, the holder is called upon to prove that he is an honest holder for value. 4

“ At the time of the passing of the Act of 1882,” says Charles, J., “it was uncertain how much the plaintiff had to prove in cases of this kind where evidence of fraud had been given. Lord Blackburn, in Jones v. Gordon, says, • The language of the quotation from Baron Parke would seem to show that the onus as to both is shifted, but I do not think that has ever been decided, nor do I think it is necessary to decide it in the present case.' The learned judge who tried this case took the view that the onus was shifted only to the extent of making the plaintiff prove that value was in fact given, not that it was also given bona fide. Upon this construction of the Act, I respectfully differ from him. The plaintiff was bound to satisfy the jury that he gave value, and that he gave it in good faith. The Act has settled the law in accordance with the opinion expressed by Parke, B.” 5

The section does not affect the practice of the Chancery Division, according to which security must be given when it is sought to restrain the negotiation of a bili alleged to have been obtained by fraud.

“Force and fear" is the Scotch equivalent of the English

1 Pitch v. Jones (1855), 5 E. & B. 238 ; Belfast Banking Co. v. Doherty (1879), 4 Ir. L. R. Q. B. D. 124.

2 Raphael v. Bank of England (1855), 17 C. B. 161.
3 Mather v. Maidstone (1856), 18 C. B. 273 ; 25 L. J. C. P. 310.
* Hogg v. Skeen (1865), 18 C. B. N. S. 426 ; 34 L. J. C. P. 153.

5 Tatam v. Haslar (1889), 23 Q. B. D. 345, at p. 349 ; cf. Jones v. Gordon (1877), 2 App. Cas. p. 28 ; and Bailey v. Bidwell (1844), 13 M. & W. 73, at p. 76, per Parke, B.

6 Hawkins v. Ward, W. N. 1890, p. 203.

« PreviousContinue »