Ferrier v Stewart [1912] HCA 47

Held, that the indorsements were in the order in which they were inte by C. to appear, and that C. was estopped from denying either that she an indorser, or that B. was a holder in due course.

Held, therefore, that C. was liable to B. either as an indorser or under 57 of the Instruments Act 1890, which provides that '* Where a person | a bill otherwise than as drawer or acceptor he thereby incurs the aiabily an indorser to a holder in due course."

Semble, per Grifith C.J., the promissory note was 'a bill wanting a material particular," which the persons in possession of it were entit fill up under sec. 21 of the Instruments Act 1890.

Decision of the Supreme Court of Victoria (Hodges J.) affirmed.

An action was brought in the Supreme Court by John Gordon Stewart, as surviving partner of the firm of Gummow & Stewart, or, alternatively, by him and Hester Ann Gummow, as executrix of Frederic Forbes Lewis Gummow, against Agnes Ferrier and Joseph Ferrier, on five promissory notes, dated 18th March 1909, alleged to have been made by Joseph Ferrier in favour of the firm of Gummow & Stewart, or order, and indorsed by Agnes Ferrier, to have been made payable at the Bank of Victoria and to have been indorsed without recourse by the firm of Gummow & Stewart. It was alleged that each of the promissory notes was duly presented for payment and was dishonoured, that notice of dishonour was duly given, and that the plaintiff Stewart, or, alternatively, the plaintiffs Stewart and Gummow, were the holder, or holders, or alternatively the holder or holders in due course.

The facts are sufficiently stated in the judgments hereunder.

The action was heard by Hudyes J., who gave judgment for the plaintiffs against the defendant Agnes Ferrier.

From this decision the defendant Agnes Ferrier appealed to the High Court on the following grounds (inter alia) : -

"3, That the appellant was not liable as an indorser of the said promissory notes.

_ "4, That the appellant did not incur the liability of an indorser on the said promissory notes.

"5. That the respondents were not the holders of the said promissory notes.

"6. That the appellant was not liable on the said promissory notes by reason of any estoppel, agreement or otherwise."

Starke, for the appellant. The appellant was not an indorser of the notes. An indorser is » person who has title and gives title by delivery, and this was not the position of the appellant. A promissory note is not complete until it has been transferred to the payee, and there can be no indorsement which will make

4. C. or A. the indorser liable as such until the note is complete and unless

it is transferred to the indorser. Gummow & Stewart we "holders in due course" of the notes, within the meaning o: 57 of the Instruments Act 1890, so far as any title was given te them by the appellant. That section does not alter the law |

(1); Moss vy. Wilson (2). The obligation which that se contemplates is an obligation not to parties to a bill but to sub quent holders. He referred to Jenkins « Sons v. Coomber (: Singer v. Elliott (4); Robinson v. Mann (5); Chalmers' Bills Exchange, 6th ed, p. 191; Byles on Bills, 17th ed., p. 176; Macdonald vy. Whitfield (6); Lewis vy. Clay (7); Herdman vy. Wheeler (8); Lloyd's Bank Ltd. v. Cooke (9); Glenie v. B Smith (10).

Brothers (11).] If there was any agreement by the appellant to pay the no it is unenforceable by reason of the Statute of Frauds. evidence does not show an agreement that Gummow & Ste should indorse the notes to the appellant without recourse that she should indorse back to them, but only an agreement that she would guarantee the payment of the notes. 'The si tures on the back of the notes were only for the purpose of facilitating further dealings with the notes. He also referred to the Instruments Act 1890, sees. 53, 56, 90 (2).

Irvine K.C. and Davis, for the respondents, The only ii ence to be drawn from the facts was that the appellant author Gummow & Stewart to complete the note by putting their as payees before her indorsement. If her signature was prior point of time but subsequent in position she was liable to tl as an indorser. The intention of the parties was exactly car out by the form which the note took. 'That is independent sec. 57 of the Instruments Act 1890. As to that section th

Aa pp. 5: (7) 67 L.J.Q.B., 224. 2 2 1808) V.1it., 140, at p. 167; 29 (8) (1902) 1°K.B,, 361.

A, 208, (9) (1907) LKB) 794. ? (10) (1907) 2 -K.B., 507; (or K.B., 263.

appellant cannot be in a better position than if the signature H.C. or A.

"Gummow & Stewart without recourse" were struck out. Then if she had never signed the note Gummow & Stewart would have been holders in due course within sec. 57. Then the effect of her signature is under that section that she is liable to a holder in due course, that is in this case to Gummow & Stewart. In Steele y. M'Kinlay (1) and the other cases referred to on the same point there was no agreement between the parties and no evidence of the intention with which the person whose name was upon the bill put his name there. Glenie v. Bruce Smith (2) is directly in the respondents' favour. Gummow & Stewart were holders in due course because they bond jide gave value for the notes: Talbot vy. Von Boris (3). As to what constitutes indorsement they referred to Byles on Bills, 17th ed., p. 175; Castrique v. Buttigieg (4).

{Isaacs J. referred to Smith v. Commercial Banking Co. of Sydney (5).]

Grirrita C.J. read tle following judgment: - This was an action brought by the respondents against the appellant as indorser of five promissory notes, each of which was drawn by Joseph Ferrier, the defendant's husband, in favour of the firm of Gummow & Stewart. Each of them, when produced, appeared to be indorsed as follows: - "Gummow & Stewart without recourse," " Agnes Ferrier," "Gummow & Stewart," in that order.

The plaintiffs were the surviving member of the firm of Gum- mow & Stewart and the executrix of a deceased member. On the face of the documents, therefore, the plaintitts' title was complete, and it was for the defendant to displace it. This she

: sought to do by showing that her signature was placed upon the notes before the first signature of Gummow & Stewart. It is admitted that the order of time in which successive indorsements are made upon a negotiable instrument is not material if they

(1) 5 App. Cas., (2) (1908) 1 K.B., 263. . (3) (1911) LK.B., 854, at p. 865.

H.C. or A. appear in the order of succession intended by the parties (see p

Lord Watson in Steele v. M'Kinlay (1), and per Fletcher Moul LJ. in Glenie v. Bruce Smith (2) ). The plaintiffs offered ev dence to show that the signatures as appearing on the notes were. in the order intended by the parties. 'They proved that #l defendant took the notes, which had been already signed by her - husband as maker, and were intended to be used by way of renewal of previous promissory notes made and indorsed in the same manner, to Gummow & Stewart, who refused to take them unless she herself indorsed them. She accordingly did so, and delivered the notes to them with the intention of making hersel liable upon the notes. If, then, the law be that she would not be liable unless the notes bore an indorsement by the payee above her own, it follows, in my opinion, that by putting her | indorsement upon them and delivering them to Gummow & Stewart with that intention she authorized them to do the on act without which her intention could not be effectuated. In - this view the indorsements as they now appear are in the order in which they were intended to appear, and the primd facie effect of them as they stand is not displaced. This conclusion does not depend upon the provisions of the Bills of Eachange Ai but follows from the application of the ordinary rules relating to implied authority. In the cases of Steele v. M'Kinlay (3); Singer y. Elliott (4); and Jenkins & Sons vy. Coomber (5), relied upon by the appellant, the notes did not bear the indorsement of the payee above that of the defendants. . The facts which I have stated are, in my opinion, sufficient 0 dispose of the case. a If regard is had to the Instrwments Act 1890 (No. 1103) (Victoria) the same result will follow. I will cite the sections by - the numbers of the sections of the English Bills of Hachange Act 1882, of which they are a transcript. = Sec. 54 defines the obligations of an acceptor of a bill of exchange, and sec. 55 the obligations of a drawer and of an

indorser. Sec. 56 is as follows: - " Where a person signs a yal () 5 App. Cas., 754, at p. 779. (4) 4T.L.R., 524, at (2) (1908) 1 K.B., 263, (5) (1898) 2 Q.B., 168. (3) 5 App. Cas., 754.

otherwise than as drawer or acceptor he thereby incurs the H. ©. or A.

liabilities of an indorser to a holder in due course."

Mr. Starke contends that this section did not alter the law as declared in Steele v. M'Kinluy (1). I do not think it material to discuss that question. I prefer to follow the rule laid down by Lord Herschell in the well known case of Bunk of England v. Vagliano Brothers (2), and to inquire what the law now is as declared by the Statute, ir Statute. By sec. 89 the provisions of the Act relating to bills of exchange apply with the necessary modifications to promissory notes, and in particular the maker of a note is deemed to corres-

• pond with the acceptor of a bill, and the first indorser of a note is deemed to correspond with the drawer of an accepted bill pay- able to the drawer's order. Applying sec. 56 to the present case, Joseph Ferrier is to be regarded as the acceptor, and Gummow & Stewart, whose indorsement was necessary in order to make the note negotiable, as the drawers. The appellant is neither one nor the other, and is therefore within the literal words of see. 56. It is to be noticed that sec. 56, read by the light of sec. 89, assumes the existence of a first indorser, to whom the person incurring the liabilities of an indorser must necessarily be sub- sequent. It seems to me to follow, by the mere effect of the section, that when a person indorses a promissory note not already indorsed by the payee, he ipso facto authorizes the payee to place his indorsement above his own, if actual indorsement by the payee

is necessary. Interesting arguments were addressed to us on the question whether the payee of a note can be called a holder in due course, and whether the delivery of a note by the maker to the payee can be called negotiation, but I do not think it necessary to deal with them at length. The liabilities of an indorser as detined by sec. 55 are necessarily liabilities to subsequent holders of the note, and not to prior holders as such. As between them, therefore, a payee is not, gud payee, a holder in due course in a relevant sense, but there is no reason why a payee should not afterwards become a holder subsequent to the indorsement. 'This is, indeed, expressly recognized by sec. 37, and is not contested.

T have, so far, dealt with the case on the assumption that a formal indorsement by the payee above that of the indorser is essential, as appears to have been held in Singer v. Elliott (1) a Jenkin Sons v. Coomber (2). The contrary view seems to have been taken by the Court of Appeal in Glenie v. Smith (3) as to one of the notes sued upon in that case, but I am not sure. 7

Upon a literal construction of sec. 55, however, such an indorse- ment would not seem to be necessary. The terms of the secti are absolute. The person who signs the note otherwise than as drawer or indorser incurs (sec. 56) the liabilities of un indorser. Those liabilities, as declared by sec. 55, include (a) that he engages that on due presentment the note shall be paid according to # tenor, (c) that he is precluded from denying to his immediate or any subsequent indorser that the note was at the time of his indors ment a valid and subsisting note and that he had then a good title to it. The term " indorsement " by see. 2 means indorsei completed by delivery. It follows that the appellant, who wro her name on the back of the notes and delivered them to Gum- mow & Stewart, is precluded from denying to them that the notes were then valid and subsisting notes, and that she had then a good title to them. If in point of form her title depended upon the writing above her own signature of that of Gummow & | Stewart, which, as I have shown, is assumed by see. 89 to

estopped by the Statute from setting up the formal defect if it be one.

In my opinion, therefore, the notes were, as between the partit regular on their face within the meaning of sec. 29, and the ti of the appellant when she negotiated them was not defecti within the meaning of that section. 'The respondents are, ther fore, holders in due course, and the case falls within sec. 56.

Tam disposed, also, to think that a promissory note which has been indorsed by a stranger before it has been indorsed by the

payee is a bill "wanting in a material particular" within the H.C. or A.

meaning of see. 20, and that the person in possession of it has a primd facie authority to fill up or procure the filling up of the omission by any person who can do so without the unauthorized use of another person's signature. Gummow & Stewart were clearly such persons.

For all these reasons I am of opinion that the defendant is liable to the plaintiffs upon her indorsements, and that the appeal fails.

Barton J. I agree with the conclusion at which the Chief Justice has arrived and with his reasoning, but I have a few words to add.

From what is the entire contract of an indorser to be deduced? On that question there is an extremely pertinent passage in the judgment of the Privy Council delivered by Sir William Maule in Castrique v. Buttigiey (1). He said: - "'The liability of an indorser to his immediate indorsee arises out of a contract between them, and this contract in no case consists exclusively in the writing popularly called an indorsement, and which is indeed necessary to the existence of the contract in question, but that contract arises out of the written indorsement itself, the delivery of the bill to the indorsee, and the intention with which that delivery was made and accepted, as evinced by the words, either spoken or written, of the parties, and the circumstances (such as the usage at the place, the course of dealing between the parties and their relative situations) under which the delivery takes place."

As to the course of dealing, there were five antecedent promis- sory notes maturing on the day the notes now in question were executed, and they were all in the same form and indorsed by three successive indorsements : - '* Gummow & Stewart, without. recourse," "Agnes Ferrier,' and "Gummow & Stewart." This state of their dealings must be borne in mind in considering the conversation between the appellant and Stewart at his office when the previous notes were near maturity. It is clear that before indorsing the appellant understood that, if the maturing

H.C. or A. notes were not replaced by new ones similarly indorsed, she

liable to be sued on her indorsements signed on 15th Septemb 1908. She knew therefore that she was being asked to uni c take, by indorsing the new notes, a liability to be substituted that then existing; and for the valuable consideration that her liability on the old notes would be extinguished she did un take the substituted liability. Having regard to the previo transactions between her, her husband and the firm, the conyer-_ sation between her and the respondent Stewart was clear as to the form she understood her liability was to take under the new indorsements, I think all this is clear evidence that she authorized the firm of Gummow & Stewart to place their indorse- ment without recourse before her own, and to place their sig' ture also below her general indorsement. 'There was no menti of any other sort of liability than that which was then impending and no suggestion that it was to be evidenced in any diffe form. She simply undertook a substituted liability to avoid action against which she by words and conduct admitted th was no defence. What could that mean except that with the view of making herself liable she made a contract on all fours with that which she admitted to be binding on her under the previous series of notes identical in form? Does this conversa-_ tion, added to which is the evidence of the contract afforded by the instrument itself and the previous dealings, alter the relations - between the parties to be inferred from the instrument as it stands? So far from doing so it appears to me to confirm them. | She knew that Gummow & Stewart had indorsed the old notes: "without recourse " to make them negotiable but without under- taking any liability to her. She knew also that she had indorsed the old notes by way of incurring a liability to Gammow Stewart. This was clearly to be a similar transaction, so that - the order of the signatures as they appear on the notes expre the agreement between the parties.

It may be objected that where a promissory note is negotiated - back to the prior indorser, though he may re-issue the note and further negotiate it, he cannot enforce payment of it against a party whose indorsement intervenes between his prior and his_ subsequent indorsements. That is so where the prior indorsement -

is unqualified. The liability of the intervening to the subsequent H. C. or A.

indorser is cancelled by his liability to the same person under his own first indorsement. But in this case the objection is met by the form in which Gummow & Stewart made their first indorse- ment, namely, "without recourse." Sec. 38 of the Instruments Act 1890 (see. 37 of the English Bills of Exchange Act 1882) is in these words : - " Where a bill is negotiated back to the drawer or to a prior indorser or to the acceptor, such party may subject to the provisions of this Part of this Act re-issue and further negotiate the bill, but he is not entitled to enforce payment of the bill against any intervening party to whom he was previously liable." That is the state of things here, with this exception, that the previous liability does not exist owing to the first indorsement being " without recourse." The inference from sec. 38 seems to me to be that, where a subsequent indorser has not made himself in respect of his prior indorsement liable to the intervening indorser, he may enforce payment against the latter. If that inference is correct, as I think it is, there can be no defence founded on the fact that Gummow & Stewart are both prior and subsequent indorsers.

While I agree with what the Chief Justice has said as to the construction of sec. 57 of the Instruments Act 1890 I think the oral evidence completely establishes the liability of the appellant, even if sec. 57 does not alter the law as stated in Steele v. M'Kin- lay (1). I think, therefore, that the appeal should be dismissed.

Isaacs J. read the following judgment : - The appellant's case rests finally upon two positions of fact: first, that Mrs. Ferrier did not authorize Gummow & Stewart to write their name above hers; and next, that even if that be determined against her, they did not deliver the note to her, with their name so written, so as to "indorse " it to her. And so, it is said for her, it cannot be said she was an indorser of the note to the respondents within the meaning of the Act; whatever might have been her liability to a subsequent holder under the doctrine of an aval.

The respondents rely, to begin with, on sec. 57, which gives to "a holder in due course" the same rights against any person who

H.C. or A. signs a bill otherwise than as drawer or acceptor as he wo

have against a person strictly indorsing. Two competing views have been expressed by high judi authority in England. The opinion of Lord Russell of Killo

The later observations by members of the Court of Appeal Talbot y. Von Boris (3) ave by no means decisive of the questi in favour of the opinion of Fletcher Moulton LJ. above refer to. That opinion apparently rests ultimately on the meaning the word "transferred." It is not necessary in this ease to pro- nounce definitely upon the question, but the point has be argued, and I am not at all persuaded that Lord Russell wrong. Among other enactments of the Statute see. 32 (3) lool in the direction of his view. Herdman v. Wheeler (4) is oppos

tury and a half by which the subject has been developed, notion of the " holder in due course" appears to have assumed a fairly definite shape. No doubt where a point is specificall

words alone, in their natural meaning govern the question, a without any assumption of intention to leave unaltered the | as it existed before. Vagliano's Cuse (5) so decides, and Herschell's observations were adopted by Lord Macnaghien the Privy Council in Norrendro Nath Sorear v. Kamalaba Dusi (6). But where terms and expressions are not expr defined, then, unless inconsistent with the context, common decisions, and the common signification of these terms and exp sions are material guides. Especially is this so, since sec. 1 preserves the rules of common law, including the law merchant, | where not inconsistent with the express provisions of the A t There being no express definition of " transfer," and no collocati (1) 67 L.J.Q.B., 224; 77 L.T., 653. (4) (1902) 1 K.B., 361.

(2) (1907) 1 '94. (5) (1891) A C., 107 (3) (1911) 1 KB, 854, (6) L.R, 23 Ind. App., 18.

clearly applying it in any special sense, the way in which it has H.C. or A.

been hitherto understood is material. Without expressing a final opinion on this point, I may say that my strong impression is that the "transfer" of a promissory note connotes its previous complete issue, which involves its having already reached the hands of the payee and so become a contractual obligation: See Chitty on Bills, 11th ed., p. 157. This would leave the word "course" in the phrase "in due course" practically a short but comprehensive substitute for the expression " course of business " or "course of trade" so commonly met with. Among the earliest forms of expressions are "the course of trade" (Lord Holt in Anon. (1)):; "the general course of business" and "the usual course of business" (Lord Mansfield in Miller v. Race (2) ); "in the course of trade" (Lord Mansfield in Peacock v. Rhodes (3) ), and "fairly and bond fide in the course of trade" (Wilmot J. in Grant v. Vaughan (4) ); "the regular and proper course of busi- ness" (Abbott C.J. in Snow v. Leatham (5) ). Late instances are found in London Joint Stock Bank v. Simmons (6), where we find "the ordinary course of business" (Lord Halsbury L.C. (7), Lord Watson (8), and Lord Herschell(9)); and " proper course of business" (Lord Selborne in Vagliano's Case (10) ). Sec. 30 on this basis appears to assume that the bill in a complete and fully issued form was taken from the first " holder,' in the course of dealing with it, and the real force, or at all events the main force, of the section consists in defining in an explicit way what is a "due" course of dealing, having regard to time, good faith, value and notice. It may not be unprofitable to observe the marked departure in form of the English legislation in sec. 29 (Victorian sec. 30) from that in the Indian Negotiable Instru- ments Act 1881, in sec. 9 of which, dealing with the "holder in due course," the bearer of a note payable to bearer and a payee of a note payable to or to his order, were expressly included. If the result depended on the construction of sec. 57 I should have great difficulty in seeing any escape from the view con- tended for by Mr. Starke.

But there is what I regard as a more serious obstacle in his way. The facts establish beyond question that Mrs. Ferrier di physically write her name as, and with the intention of becoming an indorser of the note. And what is most material, she did so intending and agreeing to become liable as indorser to the respondent firm. It must therefore be taken that Mrs. Ferri authorized Gunmow & Stewart, when making use of that note for any effective object, to write their name above hers, and i the circumstances without recourse. This they did - as if they

the note to her. They would not receive it at all until after sh had signed and delivered it to them. After receipt of it b them, they retained it, and so it is claimed there never was in fact delivery to the appellant, and so no indorsement. 'Thus it is urged a necessary link is wanting to complete her liability.

T agree that if it be held as a fact there was that defect in respect of the completion of indorsement, the appellant's argu- ment so far as this branch of the case is concerned should prey, beeause the express provisions of the Statute cannot be ignored. - The true answer, however, in my opinion, is found in this, that the appellant is estopped from alleging that want of delivery. In Low v. Bouverie (1) it was laid down by Lindley and Bowen LJJ., and in Lloyd's Bank Ltd. v. Cooke (2) by Cozens-Hardy LJ. that estoppel is only a rule of evidence; and so, if } a Ferrier's conduct precludes her from relying on evidence of the actual fact, she cannot rely on the fact itself.

No doubt estoppel has reference to an existing fact, and not a promise de futuro, which must rest, if at all, on contract. Ido not see my way to put my judgment upon any enforeeabl contract as such. But a person's conduct has reference to an existing fact, if a given state of things is taken as the assumed. basis on which another is induced to act; and, if that other does so act to his prejudice, the first is estopped from denying the | accuracy of the fact assumed. 'The real ground of estoppel is the injustice of allowing repudiation in such a case, even though the

(1) (1891) 3 Ch., 82, at pp. 101, 105. (2) (1907) 1 K.B., 794, at p. S04.

inducement was given under an innocent misapprehension. The H.C. or A.

matter is to be regarded from the standpoint of the person who acted on the assumption upon which the other intended he should act.

An instance very much in point where this principle was applied is found in the case of Morton v. Woods (1). There a mortgagor executed a mortgage of premises to the defendant in which he recited a prior mortgage still outstanding, and attorned as tenant at a yearly rent. The defendant distrained, and was sued on the ground that a landlord who has not the legal rever- sion cannot lawfully distrain, and it appeared on the face of the mortgage itself that by reason of the prior mortgage the defend- ant had not and could not have the legal reversion. But the action failed notwithstanding, Cockburn C.J. observing (2) that the Court was "able to carry out the intention of the parties, and do what is but justice, without contravening any rule of law." And the way that end was reached was thus stated by Blackburn J. (3): - * When one party is let into possession by the other under an agreement that the one shall be tenant and the other landlord, both parties are estopped as between themselves from denying the other's title. But in answer to that, it is said that in the present case it is disclosed on the face of the instrument evidencing the agreement of the parties, that the mortgagor had not the legal estate; but I do not see, on principle, why that should make any difference. The principle is, that if it is agreed that one shall be tenant to the other, both are estopped from disputing the other's title as landlord, and even though it be expressly stated that the landlord has no legal estate, still if they agree that the relation of landlord and tenant shall be created, and this agreement is carried out by the one being let into possession, as between them the relation of landlord and tenant is created, and they are just as much estopped as if there had been no such statement."

And so in the present case, the signature of Mrs. Ferrier and her delivery of the note to the respondent firm as and for an indorsement, satistied the Statute if the respondents' signature

(1) LR 3 QB., 658 ; affirmed, L.R. (2) LR. 3Q.B., 658, at p. 666. 4Q.B., 293. (3) LR. 3 Q.B., 658, at p. 669.

when written preceded hers in point of time, and if the note we in fact previously: delivered by them to her. This state of thi was the conventional basis on which the parties acted, and so far. they are concerned it must be taken to be the true one. If so is, for the purposes of this case, an indorser within the m of the Statute.

For this reason, the judgment of Hodges J. should be affirmed,

Solicitors, for the appellant, D. H. Herald & Son for A. Palmer &: Son, Hamilton.

THE ATTORNEY-GENERAL OF QUEENS- a APPELLANT; LAND : ; . tile } z

HOLLAND. i A s ' é 5 RESPOND) ON APPEAL FROM THE SUPREME COURT OF QUEENSLAND.

Divorce - Costs - Collusion - Intervention - Liability of Crown for costs - Mat monial Causes Jurisdiction Act 1864 (Qd.) (28 Vict. No. 29), secs, 22, Matrimonial Causes Act 1875 (Qd.) (39 Vict. No. 13), sec. 7.

for dissolution of marriage, and sec. 7 of the Act of 1875 (Qd.) amending Matrimonial Causes Jurisdiction Act 1864, provides that any person may any time during the progress of the cause or before tie decree is made absol give information to the Attorney-General of any matter material to the and that the Attorney-General may thereupon intervene.