principal

and the recognition of a right in the transferee to sue in his own name and the presumption of value in his favour were probably a part of that support and encouragement. At all events I shall ask you to bear in mind as the two principal ingredients in negoti- Its two ability (1) transferability, either by endorsement and delivery or ingredients. by mere delivery (according as the document purports to be payable to order or to bearer), and (2) an indefeasible title got by honest acquisition for value. The impairing of one or other of these qualities will come before you at two later stages of our inquiry, viz., when we are considering negotiation, in the sense of transfer, and the effect of taking an over-due bill, and again when, in discussing crossed cheques, we consider the meaning and effect of the words "not negotiable.'

Now the object of the Courts in upholding negotiability is to facilitate the diligent and honest transaction of business. But Considerwherever fraud, injustice or hardship in connection with a bill can aton be thwarted or redressed without injury to the honest and diligent holder for value, the Courts will give effect to all those principles of justice which regulate ordinary contracts. It is this struggle between the maintenance of negotiability, in favour of the holder in due course, and the endeavour to give effect to all just claims and defences between the immediate parties concerned, that affords a clue to most of the learning on consideration, holder, holder Holder for value, and holder in due course. With regard to holder, holder for value, holder in due course, you of course understand that there can only be one holder (whether a person or body of persons) at the same time, and that the proportion of cases is small in which it becomes material to enquire the circumstances under which the holder acquired the bill. "Holder" suffices for all those provisions in which the possession of certain qualities does not come into question, and the special terms holder for value, holder in due course, are only wanted for those provisions where certain rights are only conceded in the event of a greater or less number of qualities combining in the same individual. Now in all those provisions which deal with the ordinary routine transactions on a bill you have nothing whatever to do with holder for value or holder in due course.

These distinctions arise when something has gone wrong about the bill; when some one is sued who got no value, or when some -party, other than the holder, claims to be the true owner of the bill or to have been wronged by its issue or transfer. In some of these cases the law maintains the paramount claims of the holder, in spite of hardship to one of the immediate parties to some irregularity. In others it allows the hardship to be redressed.

This brings us to the distinction between immediate and remote Immediate parties to a bill. The immediate parties are those between whom and remote the issue, or any particular transfer, of the bill takes place. When

parties.

Holder for value.

a further transfer has taken place, the party to whom it is made, and any subsequent transferee, are remote parties with regard to any issuer or transferor prior to such further transfer. But in such further transfers if any transferee gets the bill for nothing, i.e. without value (e.g., if he is the mere agent for collection, or a mere donee to whom the bill is given as a present) he is identified with the party who so transferred it to him without value. So that any objection whether on the ground of want of value received by the party sued, or of defective title in the transferor, is available against a person to whom such transferor has passed it for collection or otherwise transferred it without value. Now whether the holder need only be a holder for value, in which case the presumption is in his favour, or whether he must take upon himself to prove that he is a holder in due course, depends upon whether the person whom he is claiming against relies upon mere absence of consideration or says he has been fraudulently, forcibly or illegally induced to part with the bill. The mere fact of having given value formerly put a holder in a stronger position in a court of law than it does now because it affected the burthen of proof in these disputes. Formerly, when the party sued set up and established that the bill had been fraudulently or illegally obtained or negotiated, the holder had to prove that he, or some one through whom he claimed, gave substantial value for the bill after the fraud, &c., was committed. And as soon as he proved he was a holder for value, it was presumed in his favour that he had no notice of the fraud, &c. But a recent case of Tatum v. Haslar has decided that the Act of 1882, section 30 (2), has cast on him, as soon as his title is impeached for fraud, duress or illegality, the burthen of proving that he, or some one through whom he claims, gave value for the bill since the fraud, &c., and moreover that such value was honestly given.

Before reading you the definition of holder in due course, however, it may be well to remind you that the variety of circumstances which might create suspicion of the soundness of the transferor's title is almost infinite, but two circumstances have been laid hold of and made equivalent to notice, or, at least, deemed sufficient to put the holder on the alert and deprive him of any legal sympathy if another claimant to the bill or its contents should appear. The circumstances in question exist (1) if the bill is not complete and regular on the face of it, and(2) if the bill is overdue. Of course, if a bill is incomplete, e.g., a blank acceptance, or has been torn into pieces as if to cancel it, when the holder takes it, there is the obvious question, Why is it going about in this condition? If it is overdue, the natural enquiry is, Why has not the bill been presented for payment? or, if presented for payment, why not paid? or, if paid, what business has the transferor to negotiate the bill? So, that being

understood, we will now see the definition of holder in due course Holder in in section 29 (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, viz :-"

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due course S. 29 (1).

(a) That he became the holder of it before it was overdue, (a) "and without notice that it had been previously dishonoured if "such was the fact.

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(b) That he took the bill in good faith and for value, and (5) "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."

I think the best way of bringing before you what is the combined effect of these sections as to absence of consideration, fraud, illegality, holder for value, and the holder in due course, will be by a diagram.

Let A be the drawer, B the drawee, and let the bill circulate from A to C, C to D, D to E; E presents it to B for acceptance and it is dishonoured; E thereupon gives notice of dishonour to all the parties whose names are on the bill, right back to the drawer, and has his remedy against any or all of them.

Now, suppose we start two bills and make them follow the same course from A to C and C to D, and, at this point, make them diverge from D through two different channels X and Y, passing to the former, i.e., X, without consideration, and to the latter, Y, under circumstances amounting to a fraud on the part of Y. Let X and Y each indorse and deliver the respective bills to E for value, and let E present them to B, who dishonours them by nonacceptance.

The diagram will then stand thus

Now suppose that E having sent notice of dishonour to all the parties, including X and Y, finds X not worth powder and shot,

and is unable to find Y at all. He resolves to sue D. D objects to pay on either bill, because he received no value from X for the one, and he was defrauded by Y of the other. If D can manage to show that E gave no value to X he will succeed on that bill; but if he cannot prove this, value being presumed, E will succeed; and it is immaterial whether E knew or did not know that X received it without value from D. A simple V therefore will serve as a symbol of the value which is sufficient to entitle E to succeed against D or any of the prior parties on the bill.

Upon the bill which came to E through Y, however, different considerations arise. Here D's defence is fraud, which is a "defect of title" in Y. Accordingly upon proof by D of the fraud, E is put to prove not only that he gave value to Y for the bill, but that he did so in good faith and without suspicion of the fraud, so that we must place a different symbol of some sort to represent the value in good faith passing between E and Y in order to entitle E to recover against D through Y's indorsement.

Let us now suppose that X, on receiving notice of dishonour, took up the bill from E. What would be the position of X? He could not recover against D because (as between immediate parties) want of consideration is an answer to the claim. But X can sue either C or A, and it is no defence for either of them to say that D passed the bill to X without value. It would be a defence for C to set up that he, C, received no value because X being a mere donee is identified with D for the purpose of any defence available against D. But it would be no defence for A to set up that he, A, received no value from C, unless he could go further and show that C received no value from D. If D gave value to C, then X, as D's donee, is entitled to recover from anyone whom D could have successfully sued.

Suppose once more that X were suing A, and A set up that he had been defrauded of the bill by C, then, upon proof of that fraud, X would have to show not only that D gave value, after the fraud, to C, but that such value was given in good faith, which means honestly, and therefore (as decided in Tatam v. Haslar) without notice or suspicion of the fraud.

If Y, upon receiving notice of dishonour, took up the bill from E, and sought to recover against prior parties, the defective title resulting from his fraud would be an answer to any claim by him, not only against the immediate party, D, whom he defrauded, but also against either of the prior parties C or A. But there would be this nice distinction to be borne in mind: if the fraud of Y was a downright larceny, or an obtaining of the bill without any intention on the part of D to part with the property in it to Y, no further proof beyond the fraud itself would be necessary to defeat Y's claim. But if D had intended to negotiate the bill to Y and the fraud consisted in deceitfully inducing D so to negotiate it,

then, if A or C were being sued by Y, they would have to prove, not only the fraud, but that D had repudiated the negotiation on the ground of its having been induced by the fraud.

Holder for value, besides his importance under that portion of the Act which is devoted to consideration, claims attention under section 31 (4), which entitles him, if a bill, payable to his transferor's order, has been transferred to him without indorsement, to compel the indorsement of his transferor. And he re-appears in section 58 (3) which provides that the transferor by delivery of a bill payable to bearer, while incurring no liability on the bill, nevertheless warrants to his immediate transferee, being a holder for value, three matters, on failure of which the transferee can recover damages.

Accommodation bills

An accommodation party is defined in section 28 (1) as a person who has signed a bill as drawer, acceptor, or indorser without and receiving value therefor, and for the purpose of lending his name to some other person.

The marginal note to that section leads one to expect a definition of an "accommodation bill" as well as of an accommodation party. But neither in that section nor in any other part of the Act is there any definition of an accommodation bill, though by section 59 (3) we are told that "where an accommodation bill is paid in due course by the party accommodated the bill is discharged." What then is an accommodation bill? I have looked in my library, and the earliest copy of "Byles on Bills" I can find is that which the writer presented to Baron Martin in 1847, and bears the inscription "To Samuel Martin, Esq., Q.C., from the Author." It is the fifth edition, and at page 94 there is this definition of an accommodation bill:

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"An accommodation bill is a bill to which the acceptor, drawer, or indorser, as the case may be, has put his name without "consideration for the purpose of benefiting or accommodating some other party who is to provide for the bill when due," and that definition remained in all the succeeding seven or eight editions which were revised by that most learned and accurate writer down to the time of his death, and all its parts are preserved in later editions, together with every other line which has not been superseded or altered by judicial decision or legislative enactment. It is much to be regretted that as section 59 (3) deals with the discharge of an accommodation bill, no definition of accommodation bill is given. I do not understand the definition in Byles to mean that if the bill, in its inception, is an ordinary bill for value as between the original parties, whether drawer and payee, or drawer and acceptor, any gratuitous indorsement, say the fifth or the tenth in a series, would render it an accommodation bill. I understand Byles's definition to refer to the inception of the bill, because he speaks of the accommodated party being the one bound

accommodation

parties.