Scottish Court of Session Decisions

By section 27 of the Bills of Exchange Act 1882 (45 and 46 Vict. c. 61) it is enacted (subsection 1)—Valuable consideration for a bill may be constituted by ( a) any consideration sufficient to support a simple contract, (b) an antecedent debt or liability. 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

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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 for value, 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 the 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 fraud. (3) A holder (whether for value or not) who 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.

The following statement of the facts of the present ease is taken from the opinion of the Lord Justice-Clerk—In November 1891 Mrs Marion Brackenridge, who kept a restaurant in Ayr, was in pecuniary difficulty. She applied to Mr Joshua Buchanan, as agent for Messrs Guild & Wyllie, brewers, Inverness, stating that she was unable to meet premium payments due on policies, and that she wished to ask for a loan of £100 from them. What she proposed was that she should take all her beer from them, should assign to them her furniture and fittings, and endorse to them the licence of the premises. She informed Mr Buchanan that on one of the life policies £143 had been borrowed. Messrs Guild & Wyllie agreed to make the advance on these terms, and on their receiving a bill for £100 from Mrs Brackenridge. Before the money was obtained Mr Buchanan, as representing the Messrs Guild & Wyllie, came to know that the licence, although for the benefit of Mrs Brackenridge, was in her brother's name, the reason for this being that Mrs Brackenridge did not wish her husband to have anything to do with the licence, and being a married woman she could not hold one in her own name. Thereafter the assignation was drawn out without any mention of the licence, as Mr Buchanan considered that the security for the loan was sufficient without this, and according to his evidence he accepted Mrs Brackenridge's assurance that she would send the certificate to Messrs Guild & Wyllie within seven weeks. Accordingly on 23rd November 1891 Mr Buchanan handed a cheque for £98, 15s. 6d., signed by Messrs Guild & Wyllie, to Mrs Brackenridge, which was the balance of the advance of £100 after deducting discount of the bill.

Mrs Brackenridge having received the cheque endeavoured to obtain cash for it, but found difficulty, the cheque being drawn on a bank in Inverness while she was in Ayr, and had no bank account at all, and being probably not herself in good financial repute. She endeavoured to get several friends to endorse it and obtain the money for her, and ultimately her brother Daniel Wright, baker, Ayr, to whom she owed an account of over £13, endorsed the cheque, and received the contents from his own bank. It does not appear that previous to the cheque being sent to him, he knew anything of the history of the transaction which resulted in the granting of the cheque. He handed over at the time a sum of £55, and proposed to take payment of his own debt of £13 odds. The final settlement between them was put off till next day, when he and Mrs Brackenridge were to square accounts. Before this could take place he was informed by his bank that the cheque had been countermanded. Accordingly he had to repay the amount contained in it to his own bank. He claimed the amount from the granters of the cheque, and they refused to recoup him.

In these circumstances Daniel Wright raised an action against Messrs Guild & Wyllie for the amount of the cheque—£95, 15s. 6d.—with interest from 24th November 1891, the date on which the cheque was countermanded.

The pursuer pleaded—“The pursuer being onerous holder of the said draft or cheque for full value, and the defenders having stopped payment of the same to his prejudice, decree should be granted as craved, with expenses.”

The defenders lodged defences, in which they averred “that in consequence of fraudulent representations made by Mrs Marion Brackenridge (who is a sister of the pursuer) to Mr Joshua Buchanan, Glasgow, the defenders' representative, defenders were induced to lend to Mrs Brackenridge the sum of £100 on a bill granted by her for that amount at a currency of three months from the 19th of November 1891, and the cheque in question was for the proceeds of said bill after payment of the bank discount thereon. On 24th November 1891 defenders discovered the fraudulent representations made by Mrs Brackenridge, and countermanded payment of said cheque. The pursuer was cognisant of said representations.”

The defenders pleaded—“The pursuer is not an onerous holder of said cheque for full value, and the defenders being in the circumstances entitled to countermand payment of the said cheque, they should be assoilzied, with expenses.”

A proof was led before the Sheriff-Substitute ( Blair) at Inverness, which brought out the facts above narrated. It was proved that Mrs Brackenridge's furniture at the date of the assignation to Messrs Guild & Wyllie was sequestrated for rent, and that Mrs Brackenridge did not tell this to Mr Buchanan. Mrs Brackenridge, however, deponed that with part of the £55 received from her brother as the proceeds of the cheque she paid the landlord his rent.

On 10th April 1893 the Sheriff-Substitute pronounced the following interlocutor:—“Finds that the pursuer was aware that there was a defect in Mrs Brackenridge's

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title to the cheque, and is not entitled to be considered a holder of the cheque in due course; and further, that he acted only as the hand or agent of Mrs Brackenridge, and that he was not, as he alleges, the onerous holder of the said cheque for full value: Therefore assoilzies the defenders from the conclusions of the action, and decerns.”

The pursuer reclaimed, and argued—(1) The cheque was handed to Mrs Brackenridge in due course of business. Value had been given for it by her; it was a negotiable instrument in carrying out a fairly onerous transaction. Mrs Brackenridge was therefore herself an onerous holder. There was no breach of faith on her part. As regards the sequestration of the furniture, £30 out of the £55 obtained by Mrs Brackenridge had been paid by her to her landlord as the full amount of his rent, and thus the furniture was cleared of the sequestration and made available as security under the assignation. (2) The pursuer gave actual value for the cheque, and was entitled to be dealt with as an onerous holder for a valuable consideration.

Argued for the defenders—The decision of the Sheriff was right. (1) In a question with Mrs Brackenridge they were entitled to countermand the cheque because she made fraudulent representations to them in so far as ( a) she represented that the licence was in her own name, and ( b) she had not revealed that the furniture was sequestrated for rent. (2) The pursuer was not a holder at all, or, at any rate, he was not an onerous holder. He had merely acted as agent for his sister, and had not acted in good faith.

At advising—