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the Mercantile Bank of India in Kandy. In accordance with aruie of the bank that Chetties and others who cannot sign theirnames in English should sign their cheques before the agentand have them initialled by him, the defendant so signed acumber of blank cheques and left his cheque book, as was hiswont, with his kanakapulle to be filled up and issued as occasionarises. The cheque in question was the last of several cheques sosigned, and was with its counterfoil abstracted from the chequebook. There is no proof by whom it was abstracted.
" The cheque book was always kept by the kanakapulle in acash box locked. Some person tore the cheque and counterfoilout of the book unknown to the kanakapulle. It is dated 21stJanuary, 1899, and is in favour of K. Abdul Rakimun Saibo, ororder. It was endorsed by the payee and delivered on 21stJanuary to the plaintiff, who cashed it and received Its. 13 as hiscommission. I do not believe that Abdul Rahiman Saibo receivedthe cheque from the defendant’s kanakapulle Kanapadi for theIts. 2,800 he had given him on lOtli December, 1898, for safe-keep-ing. Abdul Rahiman Saibo received the cheque post-dated. Itwas given to him, he says, on the 20 h January. The plaintiff hadno account in any bank in Kandy. Not wishing to pay commissionon it, he delivered it to a firm in Kandy on 22nd January. Thecheque was presented for payment at the bank in Kandy on the24th January and was dishonoured. When it was presented, Mr.Bishop, the Agent of the Bank, sent for the defendant to ask himto place his account in funds to meet the cheque. Kanapadithereupon went to the bank and was shown the cheque. Hereturned and informed the defendant, and both of them returnedto the bank with the cheque book and informed the agent thecheque had not been issued by the defendant. The cheque bookwas shown to Mr. Bishop, who found the counterfoil missing.
“ It is pleaded that the defendant is not liable because he hadno notice of dishonour. Notice was, in the circumstances,unnecessary. The drawer had not sufficient funds in the bank tomeet the cheque. Further, he countermanded payment. He toldthe agent of the bank that the cheque had not been issued by him.It was unnecessary to give him notice of his own act.
“ I have now to consider in the light of my findings w’hich ofthe two innocent persons is to bear the loss. The plaintiff is aholder in due course. A holder in due course is a holder who hastaken a bill complete and regular on the face of it under thefollowing circumstances, namely, (a) that he became theholder of it before it was overdue, and without notice that it hadbeen previously dishonoured, if such was the fact; (b) that he
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took the bill in good faith and for value, and that at the timethe bill was negotiated to him he had no notice of any defect inthe title of the person who negotiated it (section 29 (1), Bills ofExchange Act, 1882). The cheque was good in every respect onthe face of it when plaintiff received it. It was not stale. It wasthe act of the defendant in signing blank cheques and keepingthem which has led to the loss. He must bear it.
" I give the plaintiff judgment as claimed and costs.”
Defendant appealed.
Wendt, Acting A.-G., for appellant.—The cheque sued' uponwas post-dated. By Ordinance No. 3 of 1890, section 20 (4), it isprovided that if any person issue a cheque which shall bear datesubsequent to the date on which it has been issued without beingduly stamped as a bill or note, the person issuing shall forfeit asum of money not exceeding Bs. 200; and that no person whoknowingly takes such a cheque shall be entitled to recover anymoney thereon. Plaintiff’s action must therefore fail. Thecheque is proved to have been stolen, and defendant cannot bemade liable thereon (Baxendale v Bennett, L. R. 3 Q. B. D. 525).Defendant is nob estopped by any negligence from disclaimingresponsibility (Scholfield v. The Earl of Londesborough, L. R. 1Q. B. D. 536). Defendant did not authorize any person to put thecheque in circulation. The cheque book was in his drawer, andthe cheque now in suit was abstracted, filled in, and passed on toAbdul Bahiman. He endorsed it to plaintiff. The DistrictJudge believes that defendant’s kanakapulle did not hand thecheque to Abdul Bahiman. In these circumstances, the principleconceded in the London and South Western Bank v. Wentworth(L. R. 5 Exch. Div. 96) applies, and discharges the defendant.
Sampayo, for respondent.—According to the evidence on recordthe cheque book was handed with the signatures duly put on bythe defendant to his kanakapulle. There is nothing to show thatthe cheque was stolen, though the kanakapulle may suggest it forreasons best known to him. The proper verdict on this part of thecase should be that Abdul Bahiman received it from the kanaka-pulle. But supposing the cheque was stolen, the question is,which of two innocent parties should suffer. In Young v. Grote(4 Bing. 253) it was held that that party who led the third partyinto mistake must sustain the loss. In ex parte Swan, L. J. 30G. P. 113, the ruling in Young v. Grote was extended to joint stockshares. Defendant is liable for the negligence of his kanakapulle.
Wendt, Acting A.-G., replied.
Cut. adv. vult.
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16th October, 1900. Bonser, C.J.—
This is an appeal which raises an interesting question as to therights and liabilities of drawers and holders of cheques. Thefacts as found by the District Judge are as follows:—
The plaintiff is a Chetty who resides and carries on business inColombo. The defendant is also a Chetty, and he resides andcarries on business in Kandy. The defendant had an accountwith the branch of the Mercantile Bank of India at Kandy, andas it is difficult for bank managers to recognize the signatures oftheir customers when they are written in Tamil characters, apractice has sprung up of the customers signing blank cheques inthe cheque book in the presence of the manager, who then initialsthe signatures, so that there is no difficulty when a cheque drawnby a customer is presented in its being recognized as a chequesigned by that customer. The defendant had an account withthis bank and signed a number of cheques in blank. The chequebook was given by him into the custody of his kanakapulle,Kanapadipulle. That kanakapulle kept the cheque book in a boxin the boutique at Kandy, the key of which was kept by himself,or in his absence from the shop by his fellow-kanakapuJle. Thekanakapulle, had authority from defendant to fill in these blankcheques if it was necessary to do so, and to pay moneys on accountof an estate which belonged to the defendant. On the 21st January,1899, a man named Abdul Rahiman Saibo presented himself atthe plaintiff’s boutique in Colombo with a cheque which waspayable to himself, or order, for the sum of Rs. 2,800. This chequewas one out of the defendant’s cheque book, which had beensigned by him in blank. The man was unknown to the plaintiff,but the plaintiff cashed the cheque for him taking the commissionof Rs. 13 for so doing. Fortunately for the defendant, when thecheque was presented at the bank at Kandy, there were not suffi-cient assets in the bank to meet the cheque. This necessitated areference to the defendant. The defendant was communicatedwith, and it was ascertained that this cheque 'had been abstractedfrom the defendant’s cheque book in a way which showed thatthe intention of the person who abstracted it was to conceal, hisact. The last signed cheque was abstracted, and not only was thefoil taken, but the counterfoil also, so that on a cursory inspectionof the book the fact that a cheque had been abstracted would notbe noticed. The cheque had not been filled up by defendant orthe kanakapulle, who had authority to fill it up, nor was it filledup directly or indirectly with the knowledge or approval of thedefendant or his kanakapulle. So that the person who filled this
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cheque in with the date and amount committed the crime offorgery in doing so.
The question is whether, in the circumstances, the defendantis liable to the plaintiff upon this cheque. Now it seems to methat the case is governed by the principles laid down in the case ofBaxendale v. Bennett, which was decided by the Court of Appealin England in 1878 (3 Q. B. D. 525). The very case is put inargument by Lord Justice Bramwell, and he answers it in thenegative. He puts this question: “ Suppose the defendant had“ signed a blank cheque with no payee or date or amount and it“ was stolen, would he be liable or accountable not merely to his“ banker the drawee, but to a holder?” He answers that in thenegative, as I have said. He says that the cases of Young v.Grote, 4 Bing. 253, and Ingham v. Primrose, 28 L. J. C. P. 294,went a long way to support the affirmative answer to the question,but held that Ingham v. Primrose ought not to be followed—itwas bad law—and that Young v. Grote only applied to casesbetween bankers and customers.
In the present case, if there had been sufficient assets in thebank to meet the cheque and the banker had cashed it, the positionof affairs would have been different, and the case might have comewithin the principles of Young v. Grote. But it appears to methat in this case the defendant has done nothing to estop him frompleading the fact that the cheque was not filled in by his authority,direct or indirect. It seems to me that the fact that the chequebook was in the custody of his servant makes no difference. Thecustody of the servant is the custody of the master, and if it bethe fact—as in this case it is—that- the cheque was stolen from theservant, it is just the same as if it was stolen from the masterdirect. That being so, I am of opinion that the judgment of theCourt below is wrong and should be reversed.
Browne, A.J.—
When a cheque, which was undoubtedly signed by thedefendant in the first instance, is found in circulation, Iwould consider that the onus lies on the defendant to show thathe is not liable thereon to a bond fide holder for value and with-out notice. As, however, it- is contemplated of cheques that theyshall be speedily presented for payment and so should not formpart of the currency of the country like other bills of exchange,that onus may be of lesser degree than would be necessary in thecase, if any other bill of exchange; i.c., the Court in any case whenthere had been delay in presenting the cheque for payment orany other element of suspicion—e.g., reckless discounting for
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persons unknown—might question the holder ns to his bond fides 1900.when he took what for any such cause would have made him act
with caution, rather than require the strictest proof by the drawer .*
that he had not made nor issued it, as the primary essential in the Browns,A JT.
proof. The learned District Judge in the present case 'has in the
conflict of evidence between the employees of defendant who had
signed blank cheques in their charge and the person who cashed
this cheque with plaintiff, preferred the evidence of the former
that they had not issued the cheque, but that it must have been
purloined from the cheque book by another employee, Meyandi,
who would appear to have made himself scarce thereafter, or else
by the plaintiff’s endorser.
I cannot say the District Judge was wrong, for though I wouldhave desired more evidence as to when it could have been possiblefor either of those two men or any other to get access to thecheque book, which was kept locked up in the custodian’s strongbox, still the incidents that the counterfoil also was removed fromthe book and that the one removed was the last in the bookof those which had been signed beforehand for issue whennecessary, so that- the chances pf detection might be lessened,prove to me that there was a criminal act which, and notnegligence, was the proximate and effective cause of the fraud.
(Baxendale v. Bennett, 1878, 3 Q. B. D. 525).
On the one hand, I would consider this case as not withinYoung v. Grote, 4 Bing. 254, for that decision depended on thecontract between the customer and banker. On the other hand,a cheque not being, as I have said, so absolutely part of thecurrency of the country as an ordinary bill of exchange, I regardthe principles of London and Southern Western Bank v. Went-worth (1889), 5 Exch. Div. 99, to be inapplicable in all theirstrictness.
The question of fact arises as in Baxendale v. Bennett—did thedefendant issue this cheque intending it to be used? To make himliable, I would consider that intention must have been constant andabsolute in 'him from the time he signed it, which is here dis-proved by, as the learned District Judge believes, first, theentrusting of it to his agents for a limited purpose; and secondly,the criminal abstraction of it from them. There is nothing inmy judgment proved against him, no estoppel by negligence of thethree-fold character specified in Arnold v. Cheque and City Bank(1876), 1 C. P. D. 579, viz., (1) in the transaction itself, (2) theproximate cause of leading the third party into mistake, and (3)the neglect of some duty owing to the third party or the public.
Not negligence, but criminality, as I have said, was the proximate
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cause. If there were negligence anywhere, I would say it wasrather to be attributed to plaintiff, who for the. discount profit hegained thereby discounted the cheque for a person previouslyunknown to him without inquiry of or guarantee by any otherperson. He took the risk of the discounter’s right and title asholder, and in my judgment he must bear that risk and have hisaction dismissed with all costs.