delivery confer a good title upon another who receives it Chap. XII. honestly" (f). The decisions as to the negotiability of certain instruments "proceed upon the nature of the property, viz., money, to which such instruments give the right, and which is itself current; and the effect of the instruments, which either give to their holders, merely as such, the right to receive the money, or specify them as the persons entitled to receive it” (g). "In the case of goods, the property, except in market overt, can only be transferred by the owner, or some person having either an express or implied authority from him; and no one can, by his contract or delivery, transfer more than his own right, or the right of him under whose authority he acts. But the Courts have considered these instruments-either promises or orders for the payment of money, or instruments entitling the holder to a sum of money-as being appendages to money and following in the nature of their principal" (h). "The holder bonâ fide and for a valuable consideration of a bank note or bill of exchange has a good title against all the world; because in the case of bank notes, they are considered as money and pass as such, and it is essential for the purposes of trade that delivery should give a perfect title; and because, in the case of bills of exchange, this is the law and custom of merchants" (i). -how The quality of negotiability must be derived either from the law Negotiability merchant-the recognised custom of merchants or from some created. statute of the realm (k). And a negotiable instrument may be made payable to order of a named person, or to the bearer (1). defined. "A negotiable instrument payable to bearer is one which, by the Negotiable custom of trade, passes from hand to hand by delivery, and the instrument holder of which for the time being, if he is a bonâ fide holder for value without notice, has a good title notwithstanding any defect of title in the person from whom he took it. A contractual document, in other words, may be such that, by virtue of its delivery, all the rights of the transferor are transferred to and can be enforced by the transferee against the original contracting party, but it may yet fall short of being a completely negotiable instrument because the transferee acquires by mere delivery no better title than his transferor" (m). Negotiable instruments therefore form an exception to the rule Test of negotiability. "Nemo dat quod non habet:" and it is the capability of con (f) Campbell on Sale, 2nd ed. p. 86; see per Lord Mansfield, in Miller v. Race, 1 Burr. 452; 1 Sm. L. C. 463. (g) Per Holroyd, J., Wookey v. Pole, 4 B. & Ald. 11; 22 R. R. 594. (h) Per Holroyd, J., Id. p. 10. (i) Per Bayley, J., Id. p. 15. (m) Simmons v. London Bank, Chap. XII. ferring on a bonâ fide holder for value a better title than that of his transferor which would appear to be the real test of negotiability. They also possess the characteristic that the transferee can (and could before the Judicature Act) maintain an action at law upon them in his own name. These two characteristics are distinct (n), and an instrument is not negotiable unless it possesses them both. Bond fide holder. "It may be laid down as a safe rule that, where an instrument is by the custom of trade transferable, like cash, by delivery, and is also capable of being sued upon by the person holding it pro tempore, there it is entitled to the name of a negotiable instrument, and the property in it passes to a bonâ fide transferee for value, though the transfer may not have taken place in market overt. But that if either of the above requisites be wanting, i.e., if it be either not accustomably transferable, or, though it be accustomably transferable, yet if its nature be such as to render it incapable of being put in suit by the party holding it pro tempore, it is not a negotiable instrument, nor (apart from the question of estoppel) will delivery of it pass the property of it to a vendee, however bonâ fide, if the transferor himself have not a good title to it and the transfer be made out of market overt " (0). Therefore (for example) though a bill of lading can be transferred so as to give the transferee a right to sue at law in his own. name (p), it is not "negotiable," because the transferee acquires no better title than his transferor had (q); and the same is true of policies of assurance (r) and of other instruments made transferable at law by statute (s). By a "bonâ fide holder" is meant a person who takes the instrument for value and honestly without notice or knowledge of any defect in the title of the transferor (t); and "notice or knowledge" means "not merely express notice, but knowledge, or the means of knowledge, to which the party wilfully shuts his eyesa suspicion in the mind of the party, and the means of knowledge (n) Crouch v. Crédit Foncier, L. R. 8 Q. B. 381. (0) Note to Miller v. Race, in 1 Sm. L. C. 473, cited per Blackburn, J., in Crouch v. Crédit Foncier, sup.; per Manisty, J., London and County Bank v. London and River Plate Bank, 20 Q. B. D. 239; Jones v. Coventry, [1909] 2 K. B. 1029. (p) 18 & 19 Vict. c. 111. Ante, P. 72. (q) Gurney v. Behrend, 3 E. & B. 622; see notes to Lickbarrow V. Mason, 1 Sm. L. C. 693, 759. (r) 30 & 31 Vict. c. 144; British Equitable Insur. v. G. W. Ry. Co., 38 L. J. Ch. 132. (s) See ante, p. 138. (t) See post, p. 202. in his power wilfully disregarded" (u). It was formerly held Chap. XII. that mere negligence or want of due caution in a party taking a negotiable instrument would fix him with the defective title of the party passing it to him (x), but this doctrine is now exploded, and it is settled law that even gross negligence is not a sufficient, defence where the plaintiff has given consideration, though it may be evidence of dishonesty or mala fides (y). Wilful and fraudulent abstention from inquiry, if it arise from a suspicion or belief that inquiry would disclose a defect of title, may amount to notice (z); but it is not enough to show that there was carelessness, negligence, or foolishness, in not suspecting the defect of title (a). usage. In order to be negotiable by custom, an instrument must be By custom. accustomably transferable in this country, like cash, by delivery (b). In the case of English instruments, it has been held Modern that they cannot become negotiable by custom and usage except by the ancient law merchant, and that modern usage cannot make an instrument negotiable (b). The authority of this case, however, has been much shaken (c); and it has now been decided that debenture bonds payable to bearer have by modern usage become negotiable instruments (d). instruments. With regard to foreign instruments, it must be shown that they Foreign are, by the custom of merchants, negotiable in this country (e), and it is not sufficient to show that they are negotiable in the foreign country (f). Probably they must be negotiable in the foreign country also, but this can be inferred from the fact that they are negotiable in this country (f). (u) Per Willes, J., Raphael v. Bank of England, 17 C. B. 161, 174. (x) Gill v. Cubitt, 3 B. & C. 466. (y) Goodman v. Harvey, 4 A. & E. 870; 43 R. R. 507; Raphael v. Bank of England, 17 C. B. 161. See per Byles, J., Swan v. North British Australasian Co., 2 H. & C. 184; London Joint Stock Bank v. Simmons, [1892] A. C. 201. (z) Jones v. Gordon, 2 App. Cas. 616, 625. (a) Id. 628, per Lord Blackburn. See Tatam v. Haslar, 23 Q. B. D. 345; and the notes to Miller v. Race, in 1 Sm. L. C. 485, where the cases are discussed. (b) Crouch v. Crédit Foncier, sup. (c) Goodwin v. Robarts, L. R. 10 Ex. 355; 1 App. Cas. 476; Rumball v. Metrop. Bank, 2 Q. B. D. 194. (d) Bechuanaland Co. v. London Trading Bank, [1898] 2 Q. B. 658; Edelstein v. Schuler, [1902] 2 K. B. 144. (e) Gorgier v. Mieville, 3 B. & C. 45; 27 R. R. 290; A.-G. v. Bouwens, 4 M. & W. 171; 51 R. R. 517; Goodwin v. Robarts, sup. ; Crouch v. Crédit Foncier, sup.; Venables v. Baring, [1892] 3 Ch. 527. (f) Picker v. London Bank, 18 Q. B. D. 515. Chap. XII. Instruments on their face not negotiable. Negotiability by estoppel. If it appears upon the face of an instrument that the right to recover thereon is limited to one particular individual, or that it is not to be transferable by delivery, usage or custom cannot make it negotiable (g). A debtor may contract in such a way as to prevent himself from setting up equities against the holder of an instrument. Under the doctrine of "negotiability by estoppel," it has been held that the true owner may, by his own conduct and having regard to the nature of the instrument in question, be precluded from asserting his title as against a bonâ fide holder for value. Thus where the plaintiff, the owner of a document containing a representation that the bearer of it would be entitled to receive a bond, left the document in the hands of his broker, who fraudulently deposited it with the defendants, it was held that the plaintiff could not recover, on the ground that the document was a representation to any one taking it a representation which the plaintiff must be taken to have made, or to have been a party to that, if it were taken in good faith and for value, the person taking it would stand to all intents and purposes in the place of the previous holder; and the plaintiff had put it in the power of his agent to hand over the document with this representation to those who were induced to alter their position on the faith of the representation so made (h). But this doctrine depends on an estoppel raised against the true owner by his own conduct, and the effect is to make the instrument quasi negotiable as against him, but not to make it negotiable in the strict sense. If (for example), without any default on the part of the owner of such an instrument, it were stolen from him, no title could, it is apprehended, be made through the thief (i). (g) Glyn v. Baker, 13 East, 509; 12 R. R. 414; Partridge v. Bank of England, 9 Q. B. 396, 425; London and County Bank v. London, &c. Bank, 20 Q. B. D. 232; 21 Id. 535; Colonial Bank v. Cady, 15 App. Cas. 267. As to bills, cheques and notes, see s. 8 of Bills of Exchange Act, 1882. (h) Goodwin v. Robarts, 1 App. Cas. 476. See Rumball v. Metrop. Bank, 2 Q. B. D. 194; France v. Clark, 26 Ch. D. 257; Bentinck v. London Joint (i) See Colonial Bank v. Cady, 38 Ch. D. 388; 15 App. Cas. 267; Colonial Bank v. Hepworth, 36 Ch. D. 36; Baxendale v. Bennett, 3 Q. B. D. 525; Scholfield v. Londesborough, [1896] A. C. 514. BILLS OF EXCHANGE. Chap. XII. The law as to bills of exchange, promissory notes, and cheques, is contained in the Bills of Exchange Act, 1882 (k), which embodies the pre-existing law with but slight modifications (1). Prior to the passing of the Act, bills of exchange were nego- Bills of tiable by the law merchant (m); promissory notes by statute (n); negotiable. cheques on bankers, which are bills of exchange payable on demand (0), by the law merchant. exchange are It must, however, be remembered that a negotiable instrument Effect of assignment is a chose in action, and that therefore it can be transferred by separate (formerly in equity only) under the general law (p). The ques- instrument. tion therefore arises-What is the effect of a transfer for value of a bill of exchange made in the manner generally adopted for the transfer of choses in action, i.e., by assignment to A. (without delivery of the bill) by a separate instrument, of which assignment notice is given to the debtor, followed by a transfer for value made according to the law applicable to negotiable instruments to another transferee, B., who had no notice of the prior transfer? In such a case, if the transaction took place before the Judicature Act, 1873, the transfer to A. operated in equity only, and therefore the legal title of B. necessarily prevailed. If the transaction took place after the Act, so that the first transferee could obtain a legal title, still, if he neglected to obtain delivery and to keep possession of the instrument, and thus by his laches enabled the second transfer to be made, he would probably be postponed for this reason to the second transferee (q). Before we proceed to discuss the law as to bills of exchange, it will be convenient to state the meaning of the terms employed. A bill of exchange may be in the form following: £10,000. LONDON, 1st April, 1891. Two months after date pay to Mr. John Jones or order Ten Thousand Pounds for value received. To Mr. ROBERT ROBINSON, Merchant, Liverpool. (k) 45 & 46 Vict. c. 61. (1) As to the origin and history of bills of exchange and other negotiable instruments, see per Cockburn, C.J., Goodwin v. Robarts, L. R. 10 Ex. 346. As to the modifications introduced by the Act of 1882, see Chalmers on Bills of Exchange, 2. (m) Goodwin v. Robarts, sup. BENJAMIN BROWN. (n) Post, p. 212. (0) Grant v. Vaughan, 3 Burr. 1516. See 45 & 46 Vict. c. 61, s. 73. (p) Re Barrington, 2 Sch. & Lef. 112; 9 R. R. 61; Richardson v. Richardson, 3 Eq. 686. (q) See Chalmers on Bills of Exchange, 143. Form of bill of exchange. |