Currie v Misa

(1875) L.R. 10 Exch. 153

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(Judgment by: Keating J (including background), Lush J, Quain J, Archibald J)

Between: Currie and Ors
And: Misa

Court:

Judges:
Keating J
Lush J
Quain J
Archibald JLord 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:
Keating J (including background)
Lush J
Quain J
Archibald J

The title of a creditor to a negotiable security given to him on account of a pre-existing debt, and received by him bonâ fide and without notice of any infirmity of title on the part of the debtor, is indefeasible, whether that security be payable at a future time or on demand.

Judgment of the Court below affirmed (Lord Coleridge, C.J., dissenting).

APPEAL by the defendant against the decision of the Court of Exchequer, refusing to grant a rule nisi to set aside the verdict entered for the plaintiffs, and to enter a verdict for the defendant, or a nonsuit.

The action was brought to recover 1999l. 3s. upon a cheque of the defendant and interest thereon.

The declaration stated that the defendant, on the 14th of February, 1873, by his cheque or order for the payment of money directed to Messrs. Barnetts, Hoares, Hanburys, & Lloyd, bankers, required them to pay to F. de Lizardi & Co., or bearer, 1999l. 3s., and that the plaintiffs became the bearers of the said cheque, and the same was duly presented for payment and was dishonoured, whereof the defendant had due notice, but did not pay the same.

Pleas:

1.

Denial that the plaintiffs became the bearers of the said cheque as alleged.

...

3.

That there never was any consideration for the making or payment of the cheque by the defendant, and that F. de Lizardi & Co. delivered the cheque to the plaintiffs to hold the same as the agents of and on account of F. de Lizardi & Co., and not as bearers or transferees thereof. And that the plaintiffs presented the cheque for payment to the defendant as such agents for and on account of F. de Lizardi & Co., and not as the bearers or transferees thereof. And that when the cheque was presented for payment to the defendant, and dishonoured by him, the plaintiffs had notice that there never was any consideration for the making or payment of the cheque by the defendant.

4.

That the defendant was induced to draw the cheque and to deliver the same to F. de Lizardi & Co. by the fraud of F. de Lizardi & Co., and that the plaintiffs were and are the bearers of the cheque, and have always held the same without giving any consideration for the same.

5.

That there never was any consideration for the defendant's making or paying the cheque, and that the plaintiffs became and are the bearers of the cheque, and have always held the same without having given any consideration for the same.

Issue and demurrer to third plea and joinder.

The cause was tried at the London sittings at Guildhall, after Michaelmas Term, 1873, before Kelly, C.B., when the following facts were proved:-

The plaintiffs are bankers, carrying on business in Lombard Street, London, under the firm of "Glyn, Mills, Currie, & Co." The defendant is a wholesale wine merchant, carrying on business in London and at Xerez, near Cadiz, in Spain. Joseph Javier de Lizardi was a general merchant, who was a partner of or traded under the firm of "F. de Lizardi & Co.," which was established in London, and carried on a very extensive business with East Spain and the Continent generally, and dealt largely in bills upon foreign countries. In the month of February, 1873, the plaintiffs were, and for more than thirty years previously had been, the bankers of F. de Lizardi & Co., whose credit was extremely high. They had two accounts with the plaintiffs, namely a loan account and a drawing account, and down to the month of December in that year usually had a considerable balance in the plaintiffs' hands. Early in 1873 Lizardi began to get into difficulties, and on the 3rd of February in that year he overdrew his drawing account with the plaintiffs, being then, and having for some time previously been, also indebted to them on his loan account. From the 3rd of February down to the 12th, 1873, he obtained large additional advances from the plaintiffs upon securities of various kinds deposited with them, and on the 12th of February, at the close of the day, Lizardi was indebted to the plaintiffs in the sum of 83,436l. 13s. 8d., of which 49,000l. was due on the loan account and 34,436l. 13s. 8d. upon the drawing account.

Early in February, 1873, the defendant was at Xerez, near Cadiz, in Spain, and on the 11th of February, being desirous of having a remittance of about 2000l. made from London to Cadiz, he on that day, by telegraph, instructed Mr. Pritchett, who had the general management of the defendant's business in London during his absence, to purchase from Lizardi drafts on Cadiz to about the sterling value of 2000l. Accordingly on the same day, Tuesday, the 11th of February, Mr. Pritchett instructed Mr. Goodban, the defendant's bill broker, to apply to Lizardi for drafts on Cadiz to the amount of about 2000l. Mr. Goodban thereupon, on the same Tuesday, effected a contract between Lizardi and the defendant for the sale or delivery by Lizardi to the defendant of drafts to the amount of about 2000l. sterling, at an agreed rate of exchange, from London to Cadiz, to be at 15 days' date, and delivered the usual contract notes to the respective parties.

In the afternoon of the same day, the 11th of February, in pursuance of the above-mentioned contract, a clerk in the employment of Lizardi left at the defendant's office in London four drafts dated on that day, drawn by Francisco Lizardi in the name of F. de Lizardi & Co., upon Mr. Manuel Paul, Cadiz, for an amount in Spanish money equivalent at the aforesaid rate of exchange to 1999l. 3s. These drafts were forwarded by the evening post of the same day to the defendant, at Xerez, near Cadiz.

It is customary in London to pay for drafts and bills on foreign countries, purchased or obtained through a bill broker, on the post day next after the day of the contract. There are two post days, namely, Tuesday and Friday, in each week; consequently, according to the usual course of business, the purchase or consideration money for the four drafts so contracted for on Tuesday, the 11th, was payable on Friday, the 14th of February.

After banking hours on the 12th of February, the plaintiff, Bertram Wodehouse Currie, who for many days previously had been urgently pressing Lizardi to reduce the amount of his indebtedness to the plaintiffs, and who on that day for the first time suspected (as the fact was) that some of the securities deposited with the plaintiffs were not genuine, had an interview with Lizardi, and represented to him that he had a suspicion that some of the securities were not genuine, and again pressed Lizardi to reduce his balance. Lizardi assured Bertram Wodehouse Currie that he was mistaken in his suspicions, and handed him a list of the securities, detailing their values, and shewing a large margin over the plaintiffs' advances. Bertram Wodehouse Currie still pressed Lizardi to reduce his debt.

In the course of Thursday, the 13th of February, Lizardi paid into the plaintiffs' bank, to the credit of his drawing account, the sum of 6925l. 5s. 8d., in two cheques for 425l. 5s. 8d., and 6500l.; and about two o'clock on that day he handed to Currie, in the plaintiffs' bank parlour, in Lombard Street, the following document, partly written and partly printed, impressed with a penny stamp:-

"London, 14th February, 1873.

"M. Misa, Esq., 41, Crutched Friars.

"Please to pay to Messrs. Glynn, Mills & Co., or bearer, the sum of Nineteen hundred and ninety pounds, three shillings, for bills negotiated to you last post.

"F. de Lizardi & Co.

"1999l. 3s."

The words in the document "for bills negotiated to you last post," refer to the four drafts previously mentioned. The plaintiffs, however, did not know by or upon whom the bills were drawn, but supposed that the money was due from the defendant to Lizardi for bills negotiated.

Bertram Wodehouse Currie deposed at the trial that it was usual for Lizardi to sell bills on the Exchange, and then to draw an order, like that above set out, on the purchaser of the bills, and that that is the course of business when bills are sold; and that such orders are sometimes accepted by writing "accepted" across them, that is, by the person on whom they are drawn writing his name across the paper, making it payable at his bankers.

In the course of the same day, Thursday, the 13th of February, cheques drawn and bills payable by Lizardi, to the amount of 8326l. 3s. 7d., were presented to the plaintiffs' clerk, at the bankers' clearing-house, in London, for payment, and were left in the ordinary course of business in his hands. Bankers do not after 4 p.m. receive any cheque or bill for presentation at the clearing house, but they have the option of refusing to pay any cheque or bill which may have been presented for payment during the day, and returning the same, unpaid, up to 5 p.m.

Shortly before 5 p.m. of the same Thursday, the plaintiffs gave orders to their clerk at the clearing-house not to pay the cheques or bills of Lizardi, which had been presented to the plaintiffs for payment in the course of the day, and thereupon the whole of them were returned unpaid, and Lizardi in this manner stopped payment. In fact the plaintiffs did not honour any cheques or bills of Lizardi, or pay anything on his account, after the 12th of February.

On Friday morning, the 14th of February, one of the plaintiffs' clerks left at the defendant's office in London a notice upon a printed form, of which the following is a copy:-

"Light gold cannot be received. A bill on [M. Misa] for [1999l. 3s. 0d.], drawn by [de Lizardi & Co.]* lies due at Messrs. Glyn, Mills, & Co., No. 67, Lombard Street. Please to call between two and four o'clock, and on Saturdays before three."

* The words and figures in brackets were written.

Between 2 p.m. and 3 p.m., of the same Friday, the plaintiffs sent one of their messengers to the defendant's office in London with the document dated February 14th, to inquire whether it would be paid. The messenger saw Mr. Pritchett, the defendant's manager, who stated that it would be paid; offered to give the messenger a cheque for the amount, and, with indignation, asked, "Why the question was asked?" The messenger replied that he did not know, and that he was not authorized to take the cheque. The messenger, taking back with him the document, then returned to the plaintiffs' bank, and there reported what had taken place at the defendant's office.

About an hour after the plaintiffs' messenger had left the defendant's office, Mr. Pritchett drew a cheque in the defendant's name upon his bankers, Barnetts, Hoares, Hanburys, & Lloyd, for the sum of 1999l. 3s., payable to F. de Lizardi & Co., or bearer, which is the cheque sued on, and sent the same to the plaintiffs' bank by a clerk, who, shortly before 4 p.m. of the same day, Friday, handed the cheque to a clerk in the plaintiffs' bank and received the document dated February 14th in exchange, and thereupon the amount of the cheque was entered in the plaintiffs' books to the credit of Lizardi.

The plaintiffs, upon receiving the defendant's cheque, sent the same to the clearing-house, where, about 4 p.m. on the same day, it was presented for payment, and handed to a clerk of Barnetts, Hoares, Hanburys, & Lloyd.

At the time Mr. Pritchett sent the defendant's cheque to the plaintiffs' bank he did not know that Lizardi had stopped payment, but being very soon afterwards informed of the fact, he at once instructed the defendant's bankers not to pay the defendant's cheque, and the same was accordingly refused payment and returned unpaid to the plaintiffs before 5 p.m. on the 14th February, and the amount thereof was, on the morning of the following day, entered in the plaintiffs' books to the debit of Lizardi.

Up to this time the plaintiffs did not know whether Lizardi was solvent or not. At an interview which the plaintiff, Bertram Wodehouse Currie, had with him on the said 14th of February, he protested that he was solvent. This statement was doubted by Bertram Wodehouse Currie.

Shortly after the 13th of February, when Lizardi stopped payment he absconded, and was subsequently adjudicated a bankrupt, his liabilities amounting to upwards of a million sterling, and his assets amounting to very little indeed.

The document dated February 14th has never been returned to nor demanded by the plaintiffs, and is still in the possession of the defendant.

The following admissions in writing were made by the parties before the trial, namely:- That the four drafts purchased by the defendant from Lizardi as afore-mentioned were duly presented for payment to Manuel Francisco Paul, at Cadiz, on whom they were respectively drawn by F. de Lizardi & Co. on the day they respectively became due, and that they were then and there respectively refused payment and were respectively dishonoured by Manuel Francisco Paul, and upon the grounds (but without admitting the truth of the grounds) stated in the protest of the 27th of February, 1873; and that the bills were then and there duly protested for non-payment; and that the above facts, as also the bills and protests, might be given in evidence without calling any witness or witnesses to prove them or any of them.

Some of the securities deposited by Lizardi with the plaintiffs were found to be forgeries, some worthless, and others cannot be realized. The plaintiffs have realized a portion of the said securities which were good, and taking into account the value of the residue, which cannot now be realized, the balance which will ultimately be due from Lizardi to the plaintiffs will be about 20,000l.

It was contended on behalf of the defendant at the trial that there was a total failure of consideration as between the defendant and Lizardi for the cheque sued on, and that the plaintiffs were not holders thereof for value; but the learned judge ruled upon the above facts (neither party desiring that any question should be left to the jury) that the plaintiffs were entitled to recover, and directed the jury to find a verdict for the plaintiffs for 2090l. the amount of the cheque and interest thereon, and a verdict for that amount was thereupon entered, with leave to move to enter a nonsuit.

In Hilary Term, 1874 (January 14th), the defendant moved the Court of Exchequer, pursuant to the leave reserved, for a rule calling upon the plaintiffs to shew cause why the verdict entered for them should not be set aside and the verdict entered for the defendant or a nonsuit.

The Court (Kelly, C.B., Pigott and Cleasby, BB.) refused a rule, and the defendant appealed.

The Court of Appeal is to be at liberty to draw inferences of fact from the facts above stated.

The question for the opinion of the Court of Appeal is whether a rule nisi ought to have been refused or granted.

Dec. 3, 1874. W. Williams, Q.C. (Cohen, Q.C., and Wood Hill with him), argued for the defendant.

J. Brown, Q.C. (Murray with him), for the plaintiff.

The course of the arguments sufficiently appears from the judgment.

The following cases were referred to:- Crofts v. Beale; ^[F1] Young v. Cole; ^[F2] Swift v. Tyson; ^[F3] Brandao v. Barnett; ^[F4] Percival v. Crampton; ^[F5] Poirier v. Morris; ^[F6] Watson v. Russell; ^[F7] Whistler v. Forster; ^[F8] Parsons on Notes and Bills, vol. i. p. 218.

Cur. adv. vult.

Feb. 11, 1875.

The judgment of the Court (Keating, Lush, Quain, and Archibald, JJ., Lord Coleridge, C.J., dissenting) was delivered by Lush, J.

This is an action on a cheque, dated the 14th of February, 1873, drawn by the defendant on Messrs. Barnett, Hoare, & Co., for payment of 1999l. 3s. to Lizardi & Co. or bearer. The material plea is the 5th, which alleges that there never was any consideration for the defendant's making or paying the cheque, and that the plaintiffs have always held the same without having given any consideration.

We think it must be assumed on the facts stated in the case that if the action had been brought by Lizardi, the defendant would have bad a good answer to it, on the ground either of fraud or failure of consideration, it matters not which. The only question therefore is whether, under the circumstances stated, the plaintiffs are to be considered the holders of the cheque for value.

The material facts bearing on this question may be briefly stated. The defendant had purchased of Lizardi & Co. bills on Cadiz, which were delivered to him on the 11th of February, and which, according to the usual course of business, were to be paid for on the next post day, the 14th. Lizardi was at this time largely indebted to the plaintiffs, who were his bankers, on both his drawing account and a loan account, and he had for several days previously to and again on the 12th of February been pressed for payment or further security. On the 13th he paid in various cheques on account of the balance, and at the same time handed to the plaintiffs the document set out in paragraph 13 of the case, which is designated a "bill."

On the morning of the 14th notice of this "bill," described as lying due at the plaintiffs', was left at the defendant's office, and shortly afterwards the cheque in question was paid in by the defendant to the plaintiffs' bank, and the "bill" given up to him in exchange for it. The amount of the cheque was, together with the other cheques paid in by Lizardi, entered to the credit of Lizardi's account, and a large balance still remained owing to the plaintiffs. Soon after paying in the cheque the defendant heard that Lizardi had stopped payment, and he at once instructed his bankers not to honour the cheque. In consequence of this the cheque was returned from the clearing-house in the after-part of the day, and on the following morning (the 15th) it was entered in the plaintiffs' books to the debit of Lizardi's account.

The Court below, in giving judgment for the plaintiffs, proceeded, partly at least, upon the special circumstance that the cheque was given to take up the so-called "bill," and considered that this of itself formed a sufficient consideration to entitle the plaintiffs to recover. The argument before us, however, was addressed almost entirely to the broader question, namely, whether an existing debt formed of itself a sufficient consideration for a negotiable security payable on demand, so as to constitute the creditor to whom it was paid a holder for value. As this is a question of great and general importance, and as our opinion upon it is in favour of the plaintiffs, we do not think it necessary to say more with reference to the special circumstance adverted to, than that we are not prepared to dissent from the view taken upon this question by the Court below.

It will, of course, be understood that our judgment is based upon what was admitted in the argument, namely, that the cheque was received by the plaintiffs bonâ fide, and without notice of any infirmity of title on the part of Lizardi. We, therefore, for the purpose of the argument, regard the so-called "bill" as merely an authority to the defendant to pay the amount to Lizardi's bankers, instead of paying it to him, and treat the transaction as if the cheque had been paid to Lizardi, and he had paid it to the plaintiffs, not in order that he might draw upon it, but that it should be applied pro tanto in discharge of his overdrawn account.

It was not disputed on the argument, nor could it be, that if instead of a cheque the security had been a bill or note payable at a subsequent date, however short, the plaintiffs' title would have been unimpeachable. This has been established by many authorities, both in this country and in the American Courts. It has been supposed to rest on the ground that the taking of a negotiable security payable at a future day implied an agreement by the creditor to suspend his remedies during that period, and that this constituted the true consideration which, it is alleged, the law requires in order to entitle the creditor to the absolute benefit of the security. The counsel for the defendant accordingly contended that where the security is a cheque payable on demand, inasmuch as this consideration is wanting, the holder gains no independent title of his own, and has no better right to the security than the debtor himself had.

We should be sorry if we were obliged to uphold a distinction so refined and technical, and one which we believe to be utterly at variance with the general understanding of mercantile men. And upon consideration we are of opinion that it has no foundation either in principle or upon authority.

Passing by for the present the consideration of what is the true ground on which the delivery or indorsement of a bill or note payable at a future date is held to give a valid title to a creditor in respect of a pre-existing debt, and assuming that it is the implied agreement to suspend, it does not follow that the legal element of consideration is entirely absent where the security is payable immediately. The giving time is only one of many kinds of what the law calls consideration. A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other: Com. Dig. Action on the Case, assumpsit , B. 1-15.

The holder of a cheque may either cash it immediately, or he may hold it over for a reasonable time. If he cashes it immediately he is safe. The maker of the cheque cannot afterwards repudiate, and claim back the proceeds any more than he could claim back gold or bank notes if the payment had been made in that way instead of by cheque. This was decided in Watson v. Russell, ^[F9] with which we entirely agree. In very many - perhaps in the great majority of cases - cheques are not presented till the following day, especially where they are crossed, and this usage is so far recognised by law that the drawer cannot complain of its not having been presented before, even though the banker stop payment in the interval. The loss in such a case falls on the drawer of the cheque, and not on the holder.

It cannot, we think, be said that a creditor who takes a cheque on account of a debt due to him, and pays it into his banker that it might be presented in the usual course instead of getting it cashed immediately, does not alter his position, and may not be greatly prejudiced if his title could then be questioned, or that the debtor does not, or may not, gain a benefit by the holding over. If this subject were worth pursuing it would not, we think, be difficult to shew that there is no sound distinction between the two kinds of securities of which we have been treating. In the course of the argument it was put to the learned counsel for the defendant whether a debtor who gave his own cheque in payment of a pre-existing debt could defend an action upon it on the ground that the creditor was not a holder for value, and Mr. Watkin Williams admitted that his argument must go to that extent, and yet it has always been the practice to sue in such a case on the cheque as well as on the original debt, and no such defence has, as far as we are aware, ever been attempted to be set up, certainly not successfully.

But it is useless to dilate on this point, for, in truth, the title of a creditor to a bill given on account of a pre-existing debt, and payable at a future day, does not rest upon the implied agreement to suspend his remedies. The true reason is that given by the Court of Common Pleas in Belshaw v. Bush ^[F10] as the foundation of the judgment in that case, namely, that a negotiable security given for such a purpose is a conditional payment of the debt, the condition being that the debt revives if the security is not realized.

This is precisely the effect which both parties intended the security to have, and the doctrine is as applicable to one species of negotiable security as to another; to a cheque payable on demand, as to a running bill or a promissory note payable to order or bearer, whether it be the note of a country bank which circulates as money, or the note of the debtor, or of any other person. The security is offered to the creditor, and taken by him as money's worth, and justice requires that it should be as truly his property as the money which it represents would have been his had the payment been made in gold or a Bank of England note. And, on the other hand, until it has proved unproductive, the creditor ought not to be allowed to treat it as a nullity, and to sue the debtor as if he had given no security. The books are not without authorities in favour of this view, although the point has not, as far as we are aware, been directly decided. Story lays it down in his work on Promissory Notes, s. 186, that a pre-existing debt is equally available as a consideration as is a present advance or value given for the note, without suggesting any distinction between a note payable after date and one payable on demand; and the cases of Poirier v. Morris, ^[F11] Watson v. Russell, ^[F12] before cited, Whistler v. Forster, ^[F13] and others, contain clear expressions of opinion the same way.

On the part of the defendant the case of Crofts v. Beal ^[F14] was strongly relied on, where it was held that a promissory note given by a surety for payment on demand without any new consideration was nudum pactum. It is sufficient to say of that case that the note was payable to the plaintiff, and not to order or bearer, and was not therefore a negotiable security. De la Chaumette v. Bank of England ^[F15] appears at first sight to be more in point, but there, although it appeared as between the plaintiff and O., by whom the bank note in question was remitted, that the state of account was in favour of the plaintiff, it is not really so, for the note had not been remitted in payment, but merely for collection as agent, and the Court held that under these circumstances the plaintiff had no better title than O. For these reasons we are of opinion that a creditor to whom a negotiable security is given on account of a pre-existing debt holds it by an indefeasible title, whether it be one payable at a future time or on demand, and that, therefore, the judgment of the Court below ought to be affirmed.

My Brother Quain, who concurs in the judgment, desires to add that he does not adopt all the reasoning as to consideration.