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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Tyler v. Maxwell [1893] ScotLR 30_583 (1 November 1893)
URL: http://www.bailii.org/scot/cases/ScotCS/1893/30SLR0583.html
Cite as: [1893] ScotLR 30_583, [1893] SLR 30_583
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SCOTTISH_SLR_Court_of_Session
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Court of Session Outer House.
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v.
Facts:
Circumstances in which it was held that the indorsee of a cheque, granted for a gambling debt by a person in a state of intoxication, was not a holder in due course.
This was an action at the instance of John Benjamin Tyler, hotel proprietor, Savernake Forest Hotel, Marlborough, Wiltshire, against George Maxwell, Kenbridge, New Galloway, Kirkcudbrightshire, for payment of a sum of £5000, contained in a cheque dated the 15th February 1892, drawn by the defender on the British Linen Company Bank, Dumfries. The cheque in question was drawn by the defender in favour of the Marquis of Ailesbury, and was by him indorsed to the pursuer. The cheque, with the exception of the signature, was not in the defender's handwriting. The defender alleged in defence that when he granted the cheque he was so much under the influence of drink that he was not capable of understanding, and did not know the meaning or the nature of the obligation he incurred by signing his name, and that the cheque, if granted for any debt or obligation at all, was granted for a gambling debt. He further alleged that these defects in Lord Ailesbury's title were known to the pursuer, and that the pursuer gave no consideration for the cheque.
Authorities cited—Pollock on Contracts, 286; Pollok v. Burns, March 3, 1875, 2 R. 497; Coustin v. Miller, February 26, 1862, 24 D. 607.
A proof was led, the result of which appears from the opinion of the Lord Ordinary.
The Lord Ordinary (
“ Opinion.—The pursuer sues the defender for the sum of £5000, contained in a cheque payable to bearer, dated 15th February 1892, drawn by the defender upon the British Linen Company Bank, Dumfries. The pursuer alleges that he is the holder in due course of that cheque. The defender says that he is not. That is the question which I have to decide.
It is not disputed that the signature upon the cheque is the defender's signature. But he alleges in defence that it was obtained when he was intoxicated
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The defender further alleges that the pursuer when he took the cheque was well aware of the circumstances in which Lord Ailesbury obtained it, and therefore is not a holder in due course.
It will be convenient in the first place to state the view which I take of the law applicable to the case. The rights and position of a holder in due course of a bill or cheque are thus described in sections 29 and 30 of the Bills of Exchange Act 1882. By section 29 it is enacted—‘(1) A holder in due course is a holder who has taken a bill, complete and regular on the face of it, under the following conditions, namely—( a) That he became the holder of it before it was overdue, and without notice that it had been previously dishonoured, if such was the fact; (b) that he took the bill in good faith, and that at the time the bill was negotiated to him he had no notice of any defect in the title of the person who negotiated it. (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.’ And by section 30 it is enacted—‘(1) Every person whose signature appears on a bill is prima facie deemed to have become a party thereto for value. (2) Every holder of a bill is prima facie deemed to be a holder in due course; 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.’
From those sections it appears that if it is proved that a bill is affected with illegality, the holder of it, in order to secure the privileges of a holder in due course, must prove that he has given value for it in good faith—that is to say, he must prove both that he has given value, and that he had not notice of the illegality so proved and admitted. If his proof fails in either particular he cannot recover.
Now, in this case a twofold illegality is alleged. The first is that the cheque was granted for money lost by betting at cards. By the law of Scotland such betting and gambling is illegal at common law and by statute — see opinion of Lord Deas in O'Connell v. Russell, 3 Macph. 89, 93, and 94; and the opinion of Lord Justice-Clerk Moncreiff in Calder v. Stevens, 9 Macph. 1074 and 1077.
It has been doubted whether the Act 8 and 9 Vict. c. 109, applies to Scotland, but if it does the result is the same, as I shall show presently.
I have no reason to think that the law of England is different as to bills or notes granted for losses at cards. The transaction in question in this case being illegal according to the law of Scotland, the country in which it is sought to be enforced, it probably lay on the pursuer both to aver and prove that it was not illegal by the law of England; but there is no averment or proof of this.
I have however examined the English decisions and the statutes against gambling, and I am satisfied that as regards gambling at cards and other games or sports (in which horse racing is held to be included) the law of England is the same as that of Scotland.
In the case of Don v. Richardson, 16th June 1858, 20 D. 1138, which was not I think referred to in the argument, the bill sought to be suspended was said to have been granted for racing bets. The Lord Ordinary (Lord Neaves) before answer appointed the opinion of English counsel to be taken upon certain points, as the bill was granted in England and was drawn payable there. The counsel selected—Mr Lush, Q.C.—returned the following opinion (p. 1139):—‘I am of opinion as follows, viz., 1. That a bill granted without value is not void, but may be recovered by a bona fide onerous holder. 2. That such a bill cannot, however, be recovered by one who is not a holder for value. 3. That a bill granted for a gaming debt is not void, but may be recovered by a bona fide onerous holder, by which expression I intend a person who has given value for the bill without notice that it was given for a gaming debt. 4. That such a bill cannot be recovered by one who is not an onerous holder, or one who had notice and knowledge of its nature and origin. 5. That a debt arising out of bets on horse races is a gaming debt. 6. That a bill granted for a bet is held as granted for an illegal consideration, and is good in the hands of a bona fide indorsee for value.’
The pursuer's counsel founded upon the case of Fitch v. Jones, 5 Ellis & Blackburn, 238, decided in 1853, as an authority to the opposite effect. At first sight that case certainly appears to be inconsistent with some of Mr Lush's opinion. It would be strange if it was, because Mr Lush was counsel in the case. But I am satisfied that Fitch v. Jones is not inconsistent with the opinion given by Mr Lush in Don's case, because while the wager in Don's case was one struck at by the old Act of 9 Anne, c. 14, the wager in the case of Fitch v. Jones was a wager concerning the amount of hop-duty in a particular year, the year 1854—a kind of gambling not struck at by the Act of Queen Anne.
Under the statute of 9 Anne, c. 14, it is enacted that ‘all notes, bills, bonds, judgments, mortgages, or other securities or conveyances whatsoever, given, granted, drawn or entered into, or executed by any person or persons whatsoever, where the
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The enactment in 9 Anne, c. 14, was altered or modified by 5 and 6 Will. IV. c. 41, to this effect, that while the enactment that such instruments and securities should be absolutely null and void was repeated (to prevent the hardships consequent upon that penalty to persons who had acquired them for a valuable consideration without notice of the original consideration for which such securities or instruments were given), it was enacted that nevertheless every such note, bill, &c., should be deemed and taken to have been made, drawn, accepted, given, or executed for an illegal consideration.
Now, the Act of 8 and 9 Vict. c. 109, repeated the Act 9 Anne, c. 14, only in so far as it was not altered by 5 and 6 Will. IV. c. 41, and therefore bills or notes granted for money lost at cards, &c., still were held to be granted for an illegal consideration. The result of this is, that where it is proved that the consideration for a bill or note is within the matters struck at by the Act 9 Anne, c. 14, the holder of such a bill or note has to prove that he gave value without notice.
On the other hand, in the case of wagers which only fall under 8 and 9 Vict. c. 109, an indorsee—at least an indorsee without notice—was not called upon to prove that he had given value even if it was proved or admitted that the bill or note was originally granted for a gambling debt, because, although the note is void, the consideration is held not to be illegal.
I may refer in support of this statement of my understanding of the law of England to the cases of Hay v. Ayling, 1851, 16 Q.B. 423, and the argument in the recent case of Lilly v. Rankin, 1886, 56 L. J., Q.B. 248.
If I am right in holding that the cheque in this case was granted to Lord Ailesbury for an illegal consideration, the burden is on the pursuer to prove that he had no notice of the defect in Lord Ailesbury's title, and that he gave value in good faith for the cheque. If he has failed to prove that he did not know that the cheque was granted for a gambling debt, he cannot recover, and that alone would be sufficient for the decision of the case.
There is, however, another averment of illegality made by the defender upon which it is right that I should express an opinion.
The defender avers that the cheque was obtained from him by Lord Ailesbury while he was incapable from drink of understanding what he was doing or the meaning and effect of the document which he signed. This is not a defence to be received with favour, especially when put forward by the person who signed the document sued on, and in the present case it is impossible to feel the slightest sympathy with the defender, who first stupified himself with drink, and then resisted the efforts of his acquaintance Mr Coleman and his servant Price to dissuade him from going to Lord Ailesbury's rooms. But when I am asked to say whether when he signed the cheque he knew what he was about, I am bound to say, on the evidence before me, that he did not, and further, that his condition must have been apparent to Lord Ailesbury and the other persons in company with him.
It is said that in order to sustain such a defence the intoxication must be shown to have been total. This is true in a sense, but it is not necessary that the defender should be shown to have been insensible from drink, because if this were so, such cases as the present could not arise. In the present case the defender was not totally disabled by drink. He could stagger unassisted to Lord Ailesbury's room. He could speak, after a fashion; he could sit, and at least go through the form of betting at cards; he was able to sign his name when the paper was put before him; and when he was put to bed by his valet he was able at least to say that he had lost £3 ready money at cards. It is further to be noticed that his intoxication, at the outset at least, was entirely his own doing, and the most that can be said is that it was taken advantage of by those who played with him.
But when this is said, it is all that can be said in favour of Lord Ailesbury. It is proved to my satisfaction by the evidence of independent witnesses—Mr Coleman and the boots Johnston—that before the defender went to Lord Ailesbury's room at all he was so stupid through drink that he should have been put to bed instead. This must have been apparent to Lord Ailesbury, and yet he invited the defender to his sitting-room at midnight to have more drink and play cards, although he had never played cards with the defender in his life before.
As to what took place in that room we have only the evidence of Lord Ailesbury; not a single other person who was present was adduced, and in particular Dougall, who wrote out the body of the cheque, and is said to have kept the tally, was not put in the witness-box or, so far as I know, cited by the pursuer. We know so much, that these persons were sober, while the defender was drunk, and that the result of the three hours' play was that the defender left the room after putting his name to a cheque for £5000 which he was said to have lost at baccarat.
The defender says that when he awoke next morning he had no recollection of
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It is not suggested that the defender is a swindler, and I cannot believe that if he had recollected of having signed a cheque for such a large sum when he had not sufficient funds at his credit, he would, without communicating with his bankers, have granted further cheques. And I do not see any evidence such as there was in Pollok v. Burns, of the defender failing to repudiate the transaction at the first opportunity though aware of what he had done.
The transaction therefore being in my opinion doubly illegal, the pursuer must show that he took the cheque for value and in ignorance of the illegality.
It appears from the evidence, though not from the record, that Lord Ailesbury and the pursuer had been for years on terms of the closest intimacy. From 1884 to September 1887 the pursuer acted as Lord Ailesbury's trainer, and that connection was only terminated by their both being warned off the turf by the Jockey Club on the charge of having instructed Lord Ailesbury's jockey Martin to pull a horse. Although their racing connection was thus necessarily terminated in 1887, they have remained intimate down to the present time, Lord Ailesbury frequently residing for long periods at the inn kept by the pursuer. The pursuer was thoroughly aware of Lord Ailesbury's gambling and betting habits, and the two were frequently engaged in betting transactions, Lord Ailesbury making bets for the pursuer though the pursuer was apparently content to remain Lord Ailesbury's creditor for the money so won.
Now, I am asked to believe that when Lord Ailesbury got the cheque for £5000 he at once freely and voluntarily handed it over to the pursuer without any explanation being given or asked as to the means by which the cheque had been obtained, and that he agreed that the £5000 should be applied in or towards payment of a debt of upwards of £7000 which had been due to the pursuer for years. I do not believe this story.
Even if it were true that Lord Ailesbury intended that the £5000 should be applied in payment or towards reduction of his debt to the pursuer, I cannot believe that the pursuer was not told and did not presume to inquire or suspect that the cheque had been obtained by gambling.
But further, I do not believe that Lord Ailesbury ever intended that the £5000 or any substantial part of it should go into the pursuer's pocket. There is nothing in Lord Ailesbury's previous treatment of the pursuer, whom, according to his own statement, he left unpaid for seven or eight years, to countenance such a supposition. Even if Lord Ailesbury's alleged debt to the pursuer were proved to the full extent, it would by no means follow that that was the value given by the pursuer for the cheque.
The explanation suggested on behalf of the defender is much more probable. Lord Ailesbury was well aware that if, as was probable, looking to the circumstances in which the cheque was obtained, payment was refused, he could not himself enforce payment of it; and further, that if his receiver came to hear that he had recovered the proceeds of the cheque he might have to pay it over to the receiver. It was therefore necessary that if he was to obtain any benefit from the cheque, it must be enforced through some other person who could pose as a bona fide onerous holder. Now, the pursuer possessed the requisite qualities and qualifications for carrying such a scheme into effect. His discretion could be relied on, and as he was to some extent a creditor of Lord Ailesbury, the debt due to him could be pointed to as good value for the transference of the cheque. Therefore when Lord Ailesbury telegraphed for the pursuer to come to Brighton, it was presumably for the purpose of arranging with him as to the best means of enforcing payment of the defender's cheque.
It may be and probably was arranged that as a condition of his assisting, some part of the proceeds of the cheque should be retained by the pursuer. But when he asks me to believe that he was given the whole sum unconditionally, and that he was not told and did not know the circumstances in which the cheque was obtained, I must say that I do not believe him.
As the pursuer in my opinion has failed to discharge the burden which lay upon him, he is not entitled to be considered a holder of the cheque in due course.
In the view which I take of the case it is not necessary to inquire whether the pursuer has proved the debt alleged to be due by Lord Ailesbury to him. To a large extent the pursuer's claim is inadmissible or doubtful. I refer particularly to the claim for salary which the pursuer failed to earn in consequence of a fraud in which he was a participant, and to the claim for bets won by Lord Ailesbury but not paid over, as to which the proof does not seem satisfactory. These would strip off nearly £4000. As to the rest of the claim—while the inquiry has been made without any proper contradictor, Lord Ailesbury, who has no substantial interest to object, being willing to accept the whole accounts as correct without further investigation—I think that probably a substantial sum is due by Lord Ailesbury to the pursuer. But that, as I have explained in my opinion, does not affect the present case, for the double reason that the pursuer knew of the illegality connected with the obtaining of the cheque and that a discharge of Lord Ailesbury's debt was not given as value for the cheque. I should have said before that no
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It is also unnecessary to deal with the question as to the effect by the law of England of a receiving-order having been made and a receiver appointed in connection with Lord Ailesbury's affairs, as to which a good deal of evidence was given on both sides by counsel learned in the law of England. I must say that I have some difficulty in seeing how the receiver could have made use of the cheque if it had been handed to him. He could only sue in the name of Lord Ailesbury and Lord Ailesbury could not have recovered on that cheque.
But as I have said, it is unnecessary to consider that question. The pursuer has been shown not to be a holder in due course, and therefore the defender must be assoilzied.”
Counsel for the Pursuer—A. J. Young—Watt. Agents—Winchester & Nicolson, S.S.C.
Counsel for the Defenders—Sol. Gen. Asher, Q.C.— Dickson— Salvesen. Agents— Webster, Will, & Ritchie, S.S.C.