Currie v Misa

(1875) L.R. 10 Exch. 153

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(Judgment by: Lord Coleridge CJ)

Between: Currie and Ors
And: Misa

Court:

Judges: Keating J
Lush J
Quain J
Archibald J

Lord Coleridge CJ

Subject References:
PRE-EXISTING DEBT
Cheque given on Account of
Negotiable Security payable on Demand

Judgment date: 11 February 1875

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Judgment by:
Lord Coleridge CJ

In this case I am unable to assent to the conclusion at which the other members of the Court have arrived. I am painfully conscious of the great weight of authority against me, but as at last I remain unconvinced, it is my duty to say so, and also shortly to say why.

I need not repeat, because I entirely assent, and cannot add to the statement of the facts of the case, with which the judgment prepared by my Brother Lush sets out.

I proceed to consider the law, assuming the perfect correctness of the facts as stated by him, and being of opinion that on those facts the fifth plea is made out, and that the defendant is entitled to our judgment.

It is important to state what I understand to be the exact proposition contended for by the defendant, and, as I think, contended for rightly. It is this:- If the drawer of a cheque pay it into a banker to the account of a third person, and the consideration as between the person to the credit of whose account the cheque has been paid and the drawer of the cheque wholly fails, so that as between those two parties the drawer would have a perfect answer to any action on the cheque, then the drawer may stop payment of, and has an answer to any action on, the cheque, as against the bankers who have received it, unless in the meantime they have in some way given some value for it; as by paying money, or giving credit or some other advantage, to the customer to whose account it has been paid in, or by altering their own position in some way in consequence of having received the cheque and on the faith of its being paid.

Now, it is too late to dispute that a pre-existing debt due to the transferee of a bill entitles him to all the rights of a holder for value. But it seems equally clear that this is an exception to general rules, an extraordinary protection given to such a holder on grounds of commercial policy only, and in order to favour the unrestricted use as currency of negotiable instruments. "It is," says Chancellor Kent, in the well-known case of Bay v. Coddington, ^[F16]

"the credit given to the paper, and the consideration bonâ fide paid on receiving it, that entitles the holder, on grounds of commercial policy, to such extraordinary protection, even in cases of the most palpable fraud. It is an exception to the general rule of law, and ought not to be carried beyond the necessity that created it."

Mr. Justice Willes uses language very much the same in Whistler v. Forster. ^[F17]

"The general rule of law is undoubted, that no one can transfer a better title than he himself possesses: Nemo dat quod non habet. To this there are some exceptions, one of which arises out of the law merchant as to negotiable instruments. These being part of the currency are subject to the same rule as money, and if such an instrument be transferred in good faith for value before it is overdue, it becomes available in the hands of the holder, notwithstanding fraud, which would have rendered it unavailable in the hands of a previous holder."

It would be wasting time to quote other authorities to the same effect: these are sufficient to shew the grounds of sense and substance on which the law as to bills is supported. Nor, if it be necessary to have recourse to it, is the technical element of consideration wanting between the transferor and the transferee of such an instrument. Whether the true view be that adopted by Sir John Byles (Byles on Bills, 10th ed., p. 39), that a bill or note payable at a future day suspends until its maturity the remedy for the antecedent debt; or that adopted by my Brother Lush, from the judgment of the Court of Common Pleas in Belshaw v. Bush, ^[F18] that it is a conditional payment of the debt, the debt reviving if the security is not realised; in either view there is consideration which may enter into but is not the whole reason for the protection given to the bonâ fide holder of such an instrument. The whole reason certainly does not apply to the case of a cheque, and the true question, with deference, appears to me to be whether, apart from the reasons which protect the bonâ fide holder of bills payable at a future day, which do not apply, there are any reasons or authorities which do apply to protect the bonâ fide holders of cheques given under such circumstances as the cheque was given in this case.

As to authority, no case has been cited in which this point has been decided, yet it is certain that a case would have been cited if it could be found. There is, indeed, a dictum of the Lord Chief Justice of the Queen's Bench, in Watson v. Russell, ^[F19] to the effect that there is no difference between a bill and a cheque in the hands of a holder for value. But that dictum must be taken with the facts of that case, in which neither was the plaintiff a banker, nor was the consideration for the cheque an antecedent debt. No authority, as I have said, has been cited on which the point has been decided. Yet it surely needs one. The doctrine as to bills of exchange has been established after many disputes and much resistance; is it likely that in the case of cheques no one who has been defrauded has ever resisted payment until now, but that everyone has so felt the sense and reason of the rule contended for, that it has been acquiesced in without a struggle? I think not, and I cannot find, on the best information I have been able to get, that the general understanding is what my Brother Lush believes it to be.

On the contrary, my impression is that the opinions of men of business are much divided on this subject, and that if the Court were to decide, as I think it ought, in favour of the defendant, the consequences to mercantile transactions would be by no means so serious as it has been too much taken for granted they would be. And even if the matter of fact were clearer than it is, the understanding of mercantile men, though on such a subject entitled to deference, cannot and ought not to determine the question.

Apart, then, from authority, which is wanting, how stands the thing in sense? I take a case of gross and direct fraud, for to such a case the argument, if it is good for anything, must extend. A man is cheated out of a cheque for a large sum in favour of A.; A., who has cheated him, pays the cheque into his bankers, between whom and himself there have have been large dealings greatly to the bankers' advantage. At the moment when the cheque is paid in, A. is overdrawn, and thereupon, nothing more happening, the banker claims the value of the cheque against the cheated drawer, and denies the drawer's right to protect himself against the fraud of A. by stopping his cheque, simply and solely on the ground that the fraudulent man has been allowed by the banker to overdraw his account. I can see no reason or justice in this. If either the drawer or the banker must suffer to the extent of the value of the cheque, it seems to me much more reasonable and just that he should suffer who, with his eyes open, and to a person he knows, has gone on making advances, than he who has been directly defrauded, often in a first and single transaction, and also has often no means whatever of protecting himself against fraud. To me the rule seems hard in the case of money, but it is well settled. It seems hard in the case of bills due at a future date, which are said to be like money, and to stand upon the same foot; but that is also well settled. But cheques are not money; no rule, as far as I can find, either of practice or of law, is settled with regard to them, and I am not willing to make a rule as to cheques in favour of bankers which is not just in itself, and which is not defensible, at least upon the grounds on which the rules as to money and as to bills are defended.

It is said that the distinction between a bill and a cheque is a refined one, but it is to be observed, first, that where a line is drawn, cases close to this line, but on different sides of it, must needs be separated by a distinction which is refined; and next, that we are here dealing with an exception to a general rule, and the burden of proof and stress of argument seem to me to lie rather on those who say, than on those who deny, that it is within the exception. It is for those who assert it to make it out, and the absence of direct affirmative authority in such a case is, to my mind, strong authority in the negative.

It has, however, been argued that the legal element of consideration is not entirely absent where a cheque is given, because it is payable immediately; and my Brother Lush has put together, from Comyns's Digest, Action on the Case, assumpsit , B. 1-15, a definition or description of consideration, to the accuracy of which I entirely assent. It is sought to draw from this definition the conclusion that the practice, by no means uniform or binding, of allowing twenty-four hours to elapse between the drawing or receipt and presentment of a cheque constitutes a new consideration as between the drawer and the payee. I cannot assent to this view. It assumes the substantial identity of a cheque with other instruments from which it differs.

"A cheque,"

says Mr. Justice Story, Promissory Notes, 6th ed. p. 674,

"is an absolute appropriation of so much money in the hands of a banker to the holder of the cheque, and there it ought to remain until called for. In truth,"

he goes on,

"a cheque is an instrument sui generis, and is construed exactly as the parties intend it. It is supposed to be drawn upon funds in the hands of the banker as banker, and it appropriates the amount to the holder of the cheque."

To the same effect is the judgment of Sir John Byles in Keene v. Beard: ^[F20]

"A cheque is an appropriation of so much money of the drawer in the hands of the banker upon whom it is drawn, for the purpose of discharging a debt or liability of the drawer to a third person;"

and in commenting on De la Chaumette v. Bank of England, ^[F21] the same learned person draws the very distinction which is insisted upon here in the defendant's favour.

"It would seem to follow,"

says he (Byles on Bills, 10th ed. p. 39),

"as a general rule, that whenever a bill or note payable on demand is remitted to a creditor in liquidation of an existing debt only, and no fresh credit is given or advances made by the creditor on the faith of the instrument, he may be treated by the parties liable on it as the agent of the debtor from whom he received it: a doctrine which, while it cannot injure the creditor (for if he cannot recover, still he is but where he was before he received the remittance), would no doubt tend to prevent gratuitous, fraudulent, or felonious holders of paper from obtaining its value by paying it away to their creditors; but it is conceived that in general a preexisting debt due to the transferee of a bill entitles him to all the rights of a holder for value."

And in a note to this passage he observes:

"It is to be recollected that a bill or note payable at a future day suspends till its maturity the remedy for the antecedent debt. There may, therefore, in this respect be a difference between an instrument payable on demand and one payable at a future day."

There is, therefore, nothing to bind a banker not to present a cheque paid in till the next day. In practice, I believe it happens constantly that they are presented at once. Although, therefore, there may be an expectation of forbearance for twenty-four hours upon the giving of the cheque, the giving of it is no consideration to forbear, and it is fallacious to confuse things in their nature different.

There are not, as we have seen, any cases directly upon cheques, but there are some upon the subject of bank notes, to which it may be proper to advert. In Solomons v. Bank of England, which is reported in a note to Lowndes v. Anderson, ^[F22] the plaintiffs were London merchants in advance to foreign correspondents. A note had been fraudulently obtained, and had been stopped at the bank by the person defrauded, The plaintiffs were innocent of the fraud, and had received the note to be applied in diminution of an existing debt. There was evidence to connect the foreign correspondents with the fraud; and Lord Kenyon held, at nisi prius, and the King's Bench afterwards supported the ruling, that the London merchants had given no consideration; that they were, therefore, mere agents to receive the amount of the note from the bank; that they could be in no better position than their principals; and, as Mr. Justice Buller expressed it in banco, "they must stand or fall by the title of their foreign correspondents." This case was decided in 1791, and it came under the consideration of the King's Bench in 1829, in the case of De la Chaumette v. Bank of England. ^[F23] In that case two bank notes had been fraudulently obtained, and were remitted from abroad to the plaintiff, an English merchant, who was, at the time he received them, largely in advance to the foreign remitter. It was held by Lord Tenterden and the Court of King's Bench, that the plaintiff could only recover on the title of the foreign sender.

"It appeared,"

says Lord Tenterden, giving the judgment of the Court,

"that at the time when the note was remitted to the plaintiff the balance as between him and Odier & Co., the foreign senders, was 7000l. in favour of the plaintiff; but he did not, in consequence of having received the note, make any further advance or give any further credit to Odier & Co., than he would have done if the note had not been transmitted. Unless, therefore, we were to lay down a rule that a party who holds a note, however obtained, may, by merely remitting it to a person to whom he is indebted, enable him to sue, we must say that the plaintiff must be considered as representing Odier & Co., and that, if he can recover at all, it must be upon their right."

A Bank of England note is not a cheque, no doubt, but neither is a cheque an unmatured bill. To hold that the plaintiffs cannot recover in this case, except on Lizardi's title, and that they were his agents to receive the defendant's cheque, is not in conflict with any of the cases which have been decided on bills of exchange, while it is, I think, in accordance with the principles of the two cases I have last mentioned, as well as with real justice.

I am not aware that these cases at all interfered with the negotiability of bank notes; and I do not think that the negotiability of cheques will be injured if this case were decided as I should wish to decide it.

There remains the smaller question whether the special circumstance that a so-called "bill" was given up on receipt of the cheque formed of itself a sufficient consideration to entitle the plaintiffs to recover? I need say no more than that I think it did not. The so-called bill was not a bill, it was a mere memorandum and inchoate, and its relinquishment was the giving up of nothing which can be called a consideration. For these reasons I am of opinion that the judgment of the Court below should be reversed.

Judgment affirmed.

Attorneys for plaintiffs: Murray, Hutchins, & Co.

Attorneys for defendant: Dawes & Son.