W. D. P. DE SILVA, Appellant and P. B. Molligoda, Respondent

018-NLR-NLR-V-78-W.-D.-P.-DE-SILVA-Appellant-and-P.-B.-Molligoda-Respondent.pdf


SAMERAWICKRAME J.—F. J. C. De Mel (2nd Suspect)
Thelma De Mel (3rd Suspect)
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Present: Pathirana, J., and Sirimane, J.W. D. P. DE SILVA, Appellant and P. B. Molligoda,Respondent
S.C. 14/68 D. C. Galle, 3549/M
Cheque,—Lost in transit in post—Alteration and erasure of endorse-ments thereon—Action based on unjust enrichment and formoney had and received—Maintainability of su'ch action—Titleto cheque—Effect of endorsement by payee—Bills of ExchangeOrdinance, Sections 2, 31.
The Plaintiff was the Superintendent of the estate of which hisfather, was the proprietor. The plaintiff sold the rubber belongingto his father and received payment by the cheque in question. Thecheque was drawn in the name of the plaintiff and was crossed.The plaintiff endorsed the cheque, put the franked seal “ to thecredit of Ellawatte Estate A/c, ” wrote the account number andsigned as superintendent. The plaintiff posted the cheque to theChartered Bank, Colombo to have the cheque credited to theaccount of Ellawatte Estate. The cheque was stolen in transit inthe post and endorsements thereon were erased and altered. One‘ S’ had taken the cheque to the defendant who cashes chequesfor commission. The plaintiff sued the defendant for the recoveryof the proceeds of the cheque which had been credited to the‘ account of the defendant in the Bank of Ceylon, Galle.
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It was contended on behalf of the defendant-appellant that—
the action either for money had and received or on the basisof unjust enrichment could not be maintained as the plaintiff hadfailed to prove ‘ dolus ’ or' culpa ’ on the part of the defendant;
the plaintiff had no title to the cheque inasmuch as he hadreceived it as agent for his father, the proprietor of EllawatteEstate ; (c) the moment the payee endorsed the cheque in favourof Ellawatte estate account as superintendent the cheque was‘ negotiated ’ within the meaning of Section 31 of the Bills ofExchange Ordinance.
Held,—(a) the action for money had and received is part of ourlaw and is governed by English principles. The liability on thepart of the defendant is to make restitution ;
it was a cheque on which the payee was the plaintiff andthe plaintiff had title to the cheque ;
that the defendant who was a holder of a cheque (wherethe endorsement was erased and altered without authority) froma spoliator with the knowledge or suspicion that the transaction istainted with some illegality or fraud is precluded from taking upthe plea that the cheque had been “ negotiated ” and “ delivered ”to the indorsee.
“The unauthorised indorsement which in fact appears on thereverse of the cheque had been fraudulently made and is in lawvitiated. In this situation the property in the cheque remainswhere it was before any indorsement was made. The plaintiff,therefore, remains the true owner of the cheque and he has titleto the cheque despite the erasures and alterations in the cheque. ”
Don Cornells and another Vs. De Soysa and Co Ltd., 68 N.L.R.161, followed.
APPEAL from a judgement of the District Court, Galle.
C. Ranganathan, with M. S. M. Nazeem, and S. Ruthira-moorty, for Defendant-Appellant.
E. B. Wikremanayake, with K. Thevarajah, and N. R. M,Daluwatte, for Plaintiff-Respondent.
Cur. adv. vult.
November 9, 1973. Pathirana, J.—
The plaintiff-respondent as payee of a cheque for a sum ofRs. 5581.89 sued the defendent-appellant for the recovery of thissum being the proceeds of the said cheque which had been paidto the credit of the defendant to his account in the Bank of
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Ceylon, Galle. The action was based on two grounds. Firstly,that the defendant obtained money belonging to the plaintiffwithout the plaintiff’s knowledge or consent on the ground ofunjust enrichment. Secondly, that the defendant received thesaid sum which was money had and received by the defendantfor the use of the plaintiff. It is, therefore, clear that the actionwas not based on the doctrine of conversion and for consequen-tial damages. Judgment was entered for the plaintiff as prayedfor with costs.
The facts briefly are as follows:The plaintiff was the
Superintendent of Ellawatta Estate of which his father was theproprietor. The plaintiff sold the rubber belonging to his fatherfrom the said Estate to Ruhunu Trading Co. Ltd., Galle who paidfor the rubber by the cheque in question. The cheque dated26.2.1966 payable to order was drawn on the Bank of Ceylon,Galle, in the name of the plaintiff, P. B. Molligoda, as payee andcrossed with the abbreviation “ & Co., ”. The plaintiff indorsedthis cheque by writing his name and signing on it. Thereafterhe put the franked seal “ To the credit of Ellawatte Estate A/C ”and wrote the account number in ink and signed as Superinten-dent. The word “ Superintendent ” is franked and the signatureis on the franked dotted line. The plaintiff then sent the chequeby the ordinary post on the same day he received it with acovering letter to the Chartered Bank, Colombo, to have thecheque credited to the account of Ellawatte Estate. As the plain-tiff did not get an acknowledgement for the cheque from theChartered Bank, Colombo, the plaintiff wrote to the Bank butwas informed that the bank had not received this cheque. Sub-sequently he discovered that the account of Ruhunu Trading Co.Ltd., in the Bank of Ceylon, Galle, had been debited with theamount on this cheque. The cheque had been stolen in transit inthe post. Certain erasures had been made on the reverse of thecheque in respect of the indorsements made by the plaintiffbefore he posted the cheque. The franked words “ To the creditof” had been erased. So were the letters “ A/C ” in the frankedwords “ Ellawatte Estates A/C ”. The account number whichwas written in ink had also been erased. The words “ EllawatteEstate, Elpitiya ” had been substituted in ink over the erasedwords. One Somapala had taken this cheque to the defendant,
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.a trader in Galle, who said that he used to cash cheques for com-jnission. Somapala was unknown to the defendant. Somapala hadendorsed the cheque with the signature in English. The defen-dant said in evidence that he did not give Somapala the moneyimmediately as he told him that he would do so only when thecheque was realised to his account. After the cheque was realisedseven days later he says he paid Somapala the value of thecheque. It is, therefore, clear that Somapala paid no value on thischeque either to the plaintiff or to Ellawatte Estate. The where-abouts of Somapala were not known and he was not availableas a witness at the trial.
The defendant pleaded that he received the cheque bona fide,innocently and without fraud on his part in the ordinary courseof his business and that he became the holder in due course. Hepresented this cheque to his bank for realisation. He pleadedthat the plaintiff could not maintain this action on the basis ofunjust enrichment or on the ground of money had and receivedfor the use of the plaintiff. He further pleaded that the plaintiffwas estopped by reason of negligence and/or his conduct frommaintaining this action.
The learned District Judge held against the defendant on thisissue of estoppel and this aspect was not canvassed in appeal.The District Judge, however, held that the defendant did notreceive the said cheque (a) bona fide, (b) for valuable considera-tion and that the defendant was not a holder in due course. Hefurther held that he could not say “ that the defendant cashedthe cheque innocently. ”
I shall first deal with the contention put forward by Mr. Ran-ganathan that in the absence of dolus or culpa the defendantcould only be liable on the doctrine of conversion which is notknown to the Roman-Dutch Law. The argument proceeded onthe basis that the Roman-Dutch Law and not the English Law ofconversion applied to the plaintiff’s claim. He further submittedthat the action either for money had and received or on unjustenrichment could not be maintained as the plaintiff had failed toprove dolus or culpa on the part of the defendant. Mr. Rangana-than relied on the case of Daniel Silva vs. Johanis Appuhamy67 N. L. R. 457—judgment of a Bench of three Judges—which
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decided that on the pleadings it was manifest that the defendantwas sued in respect of the English tort of conversion and theplaint did not disclose a cause of action against the defendant.The action being one founded on a delict the Roman Dutch Lawapplied. The tort of conversion is unknown to the Roman-Dutch Law. This decision so far as it deals with the English Lawof conversion does not apply to the facts of this case, as thisaction is not based on the English doctrine of conversion.
The action for money had and received by the defendant forthe use of the plaintiff is now part of our law. In Don Cornellsvs. de Soysa and Co. Ltd. 68 N.L.R. 161 Sansoni C.J.—(Sirimane,
J.agreeing) disagreed with Tambiah, J. who alone in DanielSilva v Johanis Appuhamy 67 N.L.R.—457, expressed the viewthat the action for money had and received was unknown to ourlaw. After referring to the recognition given to this action underSection 7 of the Prescription Ordinance Sansoni C.J., said :
“ The principle underlying the action is that the moneywhich in justice and equity belonged to the plaintiff has beenreceived by the defendant under circumstances which ren-dered its receipt, a receipt by the defendant for the use ofthe plaintiff ”.
He cited the following passage of Lord Sumner in Sinclair vs.Brougham 1914 A.C. 398 :
“ it is clear that all ideas of natural justice are againstallowing A to keep the property of B which has some-howgot into A’s possession without any intention on the part ofB to make a gift to A ”.
Sansoni C. J., next referred to the case of Kiriri Cotton Co.,Ltd. vs. Dewani i960 A.C. 192 where Lord Denning referred tothe action of money had and received :
“ it is simply an action for restitution of money which thedefendant has received but which the law says he ought toreturn to the plaintiff
Sansoni C. J., also refers to the case of Dodwell & Co. Ltd., vs.John 20 N.L.R. 206 a decision of the Privy Council and also thecase of Saibo vs. The Attorney General 25 N.L.R. 321 in whichBertram C. J., referred to the action for money had and receivedand said that the English Law on the subject may be treated as
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identical with the law of Ceylon. He also said that the rulesapplicable to claims to money had and received and for restitu-tion are closely connected with the doctrine of unjust enrich-ment which proceeds on the basis that the defendant has receivedsome property of the plaintiff or some benefit from the plaintifffor which it is just that he should make restitution. He agreedwith the view of Tambiah J-, in Peiris vs. Municipal CouncilGalle, 65 N.L.R. 555 that the doctrine of unjust enrichment ispart of our law.
In Dodwell & Co. Ltd. vs. John 20 N.L.R. at 211 ViscountHaldane observed :
“ For under principles which have always obtained inCeylon, Law and equity have been administered by the sameCourts as aspects of a single system, and it could never havebeen difficult to treat an action analogous to that for moneyhad and received as maintainable in all cases “ where thedefendant has received money which ex aequo et bono heought to refund ”. If, as in Ceylon, there is no necessity tofind an actual contract or to impute the fiction of a contract,in as much as every court can treat the question as one notmerely of contract, but of trust fund where necessary, thereis no difficulty in extending the remedy to all the casescovered by the words just quoted ”,
In Saibo vs- The Attorney-General 25 N.L.R. 321 at 324 Bert-ram CJ, having referred to the action known as condictio inde-biti under the Roman-Dutch Law and to the action known inEnglish Law as an action for money had and received, cited theclassical exposition of the principles of the action for money hadand received in the judgment of Lord Mansfield in Moses vs.Macjerlan. Bertram CJ, makes this very important comment;
“ It has been shown by William David Evans in an interesting appendix to his translation of Pothier’s Law of Obliga-tion (Edition of 1806, vol. II., p. 378) that for every materialphrase of this passage Lord Mansfield has the authority ofan expressed provision of the Civil Law, so that the EnglishLaw on the subject may be treated as identical with the Lawof this Colony ”.
Sansoni CJ, in de Soysa’s case was of the same view as to thenature of the two actions : —
“ It follows that there is no inconsistency in applying theprinciple of the action for money had and received, which isfounded on the same principle of equity as the Roman-Dutch
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Law action of condictio indebiti, and is “ a liberal action,founded upon large principles of equity, where the defen-dant cannot conscientiously hold the money ”—see the judg-ment of Schneider J, in the Imperial Bank of India vs. Abey-singhe. “ There is no principle of equity which appears morefrequently in Roman Law, and in more diverse connexions,than the prohibition of unjust enrichment at the expense ofanother. He who has come into possession of property not hisown, even though the acquisition might have been madeaccidentally or by mistake and without deliberate fraud, isunder a strict obligation to return it or its value to the trueowner. This was the foundation of the important action ofcondictio indebiti and in the main of the praetors’ wide dis-cretionary remedy of in integrum restitutio ”
The decision in de Soysa’s case was approved in de Costa vs.Bank of Ceylon 72 N.L.R. 457. Sirimane, J. who had earlier con-curred with Sansoni CJ, in de Soysa’s case at page 485 observed :
“ After that case, the question came up again for decisionbefore Chief Justice Sansoni and myself in Don Cornells vs.de Soysa & Co. Ltd., and we were of the view that such anaction is maintainable in Ceylon. I do not wish to repeat herethe reasons for our view which have been so lucidly set outin the judgment of the learned Chief Justice. I am still ofthat view, and only wish to add that the action for moneyhad and received has been filed and relief obtained by par-ties in all parts of our Island from the very inception of ourCourts. Nothing that was urged at the argument has led meto think that for the last hundred years or more our Courtshave granted a remedy where none existed. Section 7 of thePrescription Ordinance (Chapter 68) which laid down theprescriptive period for a claim “ for money received by thedefendant for the use of the plaintiff” was enacted in 1872”.
The action for money had and received is therefore part of ourlaw and the English principles governing the matter apply to theaction.
The facts in the case of Don Cornells vs. de Soysa and Co. Ltd.have a useful bearing on the facts of the case before me. Theplaintiff company sued the defendants who were carrying onbusiness in partnership to recover a sum of Rs. 7,962/12 ontwenty-two causes of action. In respect of each cause of actionthe plaintiff pleaded that it had drawn a cheque crossed andmarked “ Not negotiable ”. Instead of being delivered to thepayee, the cheque was stolen and the payee’s indorsement
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forged- The defendants thereafter though they had no title to thecheque, sent it for collection to their bank, which credited theiraccounts with the amount of the cheque while the plaintiff s-Bank correspondingly debited their account. The plaintiff com-pany claimed the money credited to the defendant’s account inrespect of each cheque as money had and received by the defen-dant to the use of the plaintiff which theplaintiff ' was entitled to recover. The defendant pleadedthat he had merely cashed this cheque on therequest of one Francis who was a clerk of the plaintiff’sestate department. He never asked Francis how he got chequesdrawn in favour of the plaintiff. It was held that the chequeswere never the property of Francis who probably stole themfrom the plaintiff who could not give the defendant any title tothem. Although the defendants obtained amounts of the chequesfrom their banks which collected the amount from the plaintiff’sbank, the defendants had no right to these monies. In the resultthe defendant obtained monies belonging to the plaintiff with-out the plaintiff’s consent or even knowledge. Sansoni CJ, ob-served that on the facts proved the defendants were under aduty to make restitution of all the proceeds of the twentycheques which bore forged indorsements. A holder under aforged indorsement, if paid, must make restitution either to thepayer or to the true owner. Liability did not depend in thesecases on the innocence of the defendant who may be a purchaserin good faith but had dealt with the goods without the owner’sauthority or consent.
Sansoni CJ., made this very relevant observation ;
“ It was urged for the defendants that in the absence ofproof of dolus or culpa they would not be liable. This is toconfuse their delictual liability with their liability to makerestitution. “ Restitution ”, as Lord Wright has said atpage 36 of the same work, “ is not concerned with damage*,or compensation for breach of contract or for torts, butwith remedies for what, if not remedied, would constitutean unjust benefit or advantage to the defendant at theexpense of the plaintiff”.
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There is a positive finding by the learned District Judge inthe instant case that the defendant did not cash the cheque inquestion innocently. This can only mean that the defendanttook the cheque under circumstances fairly warranting theinference that he knew or believed or thought that the chequewas tainted with illegality or fraud. He had cashed the chequefor Somapala who was a total stranger to him. I can evenunderstand if he had cashed it for such a person for somearticles purchased by him. The learned District Judge hasfound, that he did not give cash in the first instance as he saidthat he sent the cheque to the bank and waited as he fearedthat if he found that there was not sufficient money in the bankdifficulties would arise and that he thought of giving the moneyafter the cheque was realised. This alone shows that he wason his guard and that till the cheque was realised he refusedto give the money. Somapala was not available as a witnessnor was he available at the address which he gave thedefendant. The learned District Judge has held that in hisopinion the erasures were difficult to detect unless it was knownearlier but that the hand-written words “ Ellawatte Estate,Elpitiya” were out of place in view of the fact that the words“Ellawatte Estate” had been franked and that this was notice-able by anyone. In regard to that matter the defendant saidthat he was not sure whether the words ‘ Ellawatte Estate,Elpitiya ’ were there and that if they were there he would nothave cashed it because he knew English and he knew thedifference. The defendant cannot say that the words ‘ EllawatteEstate, Elpitiya ’ were not there on the cheque because thereverse of the cheque clearly shows these words and this chequehad been produced from the custody of the Magistrate’s Courtwhere it was kept as a production in the connected criminalcase. This admission of the defendant is itself a circumstancewhich should have put the defendant on inquiry. On theevidence he made no such inquiry. All issues raised by thedefendant of negligence and estoppel against the plaintiff havebeen answered in the plaintiff’s favour. I am, therefore, of the-view that the learned District Judge had come to the correctconclusion when he held that neither Somapala nor the defen-dant was a holder in due course. He further held that the
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defendant did not receive the cheque (a) bona fide, (b) foxvaluable consideration. No cogent reasons have been adducedbefore us to disturb the findings of fact on which the learnedJudge arrived at this decision.
Section 29 (1) of the Bills of Exchange Ordinance (Chap. 82)defines a holder in due course: —
“ A holder in due course is a holder who has taken a bill,complete and regular on the face of it, under the followingconditions, namely :
that he became the holder of it before it was overdue,.
and without notice that it had been previously dis-honoured, if such was the fact;
that he took the bill in good faith and for value, and
that at the time the bill was negotiated to him he hadno notice of any defect in the title of the person whcnegotiated it. ”
Every holder of a bill is prima facie deemed to be a holder indue course and there is a presumption of value and good faith.But if fraud is proved at any stage of the transaction then thebui'den of proof is shifted unless and until the holder proves thatsubsequent to the alleged fraud or illegality value has in goodfaith been given for the bill—Section 30 of the Bills of ExchangeOrdinance. Devlin J. in Baker vs. Barclay’s Bank Ltd. 1955 (2)A.E.R- 580 at 581 observed :
“ It is, I think, clear, both from the wording of sub-section
(of Section 30) itself and from the authorities that weredecided before 1882 that if fraud is proved at any stage ofthe transaction then the burden is shifted”.
It is clear, therefore, where there is an illegality or fraudshown in a previous holder a presumption that there is no consi-deration for the indorsement does arise ; for the person who isguilty of illegality, or fraud, and knows that he cannot sue forhimself is likely to hand over the instrument to some other per-son to sue for him. The plaintiff who normally has to prove thatthere was no consideration has by proving fraud or illegalityin the former holder raised a prima facie presumption that therewas no consideration, unless that presumption was rebutted(vide the observations of Lord Campbell C. J. in Fitch vs. Jones(1855 5 E. and B 238) quoted by Devlin J., in Baker vs. Barclay’sBank Ltd. at page 581—(this case was decided before the Bills ofExchange Act, of 1882).
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The evidence in the case leads to the irresistible conclusionthat Somapala came by this cheque either illegally or frau-dulently or with such knowledge and that he paid no valueeither to the plaintiff or to Ellawatte Estate.
Applying the principles laid down by Sansoni C. J., in DonCornells vs. de Soysa and Co. Ltd., I am of the view that theplaintiff is entitled to succeed in this action against the defendanton the ground that the defendant is liable on the ground ofmoney had and received for the use of the plaintiff. The liabilityon the part of the defendant is to make restitution and in myview in accordance with a dictum of Sansoni CJ, the defendantis liable even in the absence of dolus or culpa. The indorsementsin the cheque have been materially altered without the consentof the parties liable on the cheque. According to the DistrictJudge’s finding this alteration is noticeable by anyone. He hasalso noted that, that the letters ELLE in the word “ Ellewatta ”are somewhat smudged having been written over the erasures.This material alteration therefore avoids the cheque—vide sec-tion 64 of the Bills of Exchange Ordinance. The defendant hadno lawful justification to receive the proceeds of this chequewithout the consent of the plaintiff. As I have pointed out theevidence in this case, however, clearly shows that there werecircumstances fairly warranting an inference that the defendantknew or believed or thought that the cheque was tainted withillegality or fraud and this was something that should have putthe defendant on inquiry. This the defendant failed to do and inmy view he was also guilty of culpa.
Mr. Ranganathan next submitted that there was no enrich-ment as the defendant claims that he paid value on the cheque.On this question the learned District Judge has held that novaluable consideration was paid by the defendant. I see no rea-son to distrub this finding of the learned District Judge. In asimilar argument that was urged in the case of Don Cornells vs.de Soysa & Co. Ltd., Sansoni C. J. held that he did not considerthis a valid argument.
Two other contentions were put forward by Mr. Ranganathan.as to why the plaintiff cannot succeed in this action. He submittedfirstly, that the plaintiff had no title to the cheque and secondly,.
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that the moment the payee indorsed the cheque in favour of El-lawatte estate account as Superintendent he held the cheque as .agent of the indorsee who is therefore the person who canmaintain the action but not the plaintiff. Mr. Wikra'manayakefor the plaintiff-respondent rightly complained that this conten-.tion was never put forward at the trial and that this was a newground that was urged in appeal. I have examined the answersof the defendant, the opening submissions made by the defen-dant’s counsel, the evidence in the case and also the submissionsmade at the address stage by defendant’s counsel. I find that atno stage was the position taken up by the defendant that theplaintiff did not have title or property in the said cheque. Thetrial had proceeded on the basis or assumption that the plaintiffhad title to this cheque. We would, therefore, have been justifiedin not taking these two grounds into consideration and dismiss-ing the appeal. But as Mr. Ranganathan has stated that thematters have been raised in the petition of appeal and he hadtaken pains to argue this matter, I propose to consider these twogrounds also.
The first ground is that the plaintiff, although the payee on thecheque, had received it as agent for his father, the proprietorof Ellawatte Estate, for the rubber supplied to the RuhunuTrading Co. Ltd., as such he had no title to this cheque. I do notagree with this contention. If the plaintiff had an account in abank he could have sent this cheque to the bank and credited itto his account. No doubt, he had certain obligations to accountfor the proceeds of the cheque to his principal but that is quitedifferent from saying that he had no rights at all to the cheque.It was a cheque in which the payee was the plaintiff and in myview the plaintiff had title to the cheque.
On the second ground urged by Mr. Ranganathan he main-tained that the moment the plaintiff endorsed the cheque to thecredit of Ellawatte Estate account and signed as Superintendentthe cheque was negotiated within the meaning of Section 31 ofthe Bills of Exchange Ordinance. Section 31 (1) reads asfollows :
“ A bill is negotiated when it is transferred from oneperson to another iri such a manner as to constitute thetransferee the holder of the bill ”.
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Section 31 (3) reads as follows :
“ A bill payable to order is negotiated by the indorsementof the holder completed by delivery
Delivery is defined in Section 2 and it means transfer ofpossession actual or constructive from one person to another.Mr. Ranganathan submits on the facts of this case there wasindorsement and delivery to Ellawatte Estate account construc-tively. He justifies this position on two grounds. Firstly, he saysthat moment the plaintiff indorsed the cheque and signed asthe Superintendent he held the cheque no longer on his accountbut as the agent of the indorsee. He cited illustration No. 9 atpage 53 Chalmers “Bills of Exchange” 11th Edition which readsas follows :
“ A firm is indebted to D. X who is a partner in the firm,and also agent for D, writes the firm’s indorsement on a billheld by the firm, and puts the bill with some other papersof D’s of which he has the custody. This is delivery and soa valid indorsement by the firm, and the property in thebill passes to D ”.
The same illustration is found in Byles on Bills of Exchange22nd Edition at page 92. Halsbury’s Laws of England, 3rdEdition, Volume 3, page 145 at the foot-note gives threeexamples of constructive transfer. They are : (1) Where anagent holding a bill on his own account subsequently holds itas agent for another.
Where having held it as agent for one subsequently holdsit as agent for another.
Where having held it as agent for another he subsequentlyholds it on his own account. Mr. Ranganathan seeks to bringhis case under the example No. 1 namely where an agent holdinga bill on his own account subsequently holds it as agent foranother there is constructive delivery. He, therefore, submitsthat the bill had been negotiated by delivery as such theplaintiff had no title to this cheque. He re-inforces his argumentby submitting that once the plaintiff had posted the cheque, thecheque as soon as it is posted became the property of theindorsee—in Re Deveze, Ex parte Cote (1873), 9 Ch. App. 27.
I am not in disagreement with Mr. Ranganathan on his verylucid exposition of the law regarding negotiation of a bill byindorsement and constructive delivery. The principle he hascorrectly set out, is, in ari appropriate case, certainly the law.
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For example, if the indorsee in this case namely the proprietorof the Ellawatte Estate sued the indorser, the plaintiff, thelatter can plead indorsement and constructive delivery and takeup the position that he no longer has title to this cheque.Likewise, .if the proprietor of the estate sues the RuhunuTrading Co. Ltd., for payment for the rubber supplied, thecompany could take up the defence that they had paid the moneyby cheque to the agent and the agent had delivered the chequeconstructively to the proprietor of the estate.
But can a spoliator, for example, a person who steals a crossedcheque payable to order while in transit in the post, who erasesthe indorsement in the cheque, then alters the indorsementwithout any authority and then negotiates it, can he when suedby a person who had made the last indorsement, like theplaintiff in this case, take up the plea that by reason of hisindorsement and posting of the cheque, the indorser hadnegotiated it and delivered it and therefore ceased to haveproperty in the cheque ? Whatever notion of constructivedelivery could have been attributed to the act of the indorserin making the indorsement on the cheque and posting it, thecheque in fact had not been “ completed by delivery ” as dueto the act of the spoliator the cheque had in fact not beendelivered to the indorsee. The spoliator’s conduct amounts tofraud, he therefore, cannot take up the plea that there has beenan indorsement completed by delivery and that the indorsercannot maintain the action against him for the value of thecheque because to his own knowledge and by his own act thebill had not been completed by delivery. No person can takeadvantage of his own fraud. A person who becomes a holder ofsuch a cheque from a spoliator with the knowledge orsuspicion that the transaction is tainted with some illegality orfraud, or from circumstances fairly warranting such aninference is in no better position than the actual spoliator. He.too is precluded from taking up the plea that the cheque hadbeen completed by delivery to the indorsee. The legal notionof constructive delivery can never be attributed to a situationlike in the present case when the facts clearly and definitelyestablish that delivery intended by the indorser had not takenplace. It is common knowledge today in this country thatcheques and other valuable documents are stolen in transit inthe post. The frequency is so high that a Court can even takejudicial notice of pilfering of such articles in the post. Besideswhen a spoliator erases the original indorsement without theauthority of the parties concerned, and makes a fraudulentindorsement as in this case and obtains the benefit of it, he
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cannot fall back on the original indorsement which no longerexists and take up the plea that by reason of the earlier indorse-ment (which no longer exists) the cheque had been negotiatedand delivered, when in fact the original indorsement no longerappears on the rev .rse of the cheque. The unauthorisedindorsement which in. fact appears on the reverse of the chequehad been fraudulently made and is in law vitiated. In thissituation the property in the cheque remains where it wasbefore any indorsement was made. The plaintiff, therefore,remains the true owner of the cheque and he has title to thecheque despite the erasures and alterations in the cheque.
A complete answer to all the contentions in the submissionsmade by Mr. Ranganathan is found in the case of Arnold vs.The Cheque Bank (1876) Common Pleas Division 578. The factsof this case are as follows :
The plaintiffs, merchants at New York, desiring to transmit.£ 1000 in payment to their correspondents, Messrs. E. G.Williams & Co., of Bradford, England, purchased fromStewart & Co., in New York, the draft in question, which wasdated the 21st of August, 1874, and drawn by Stewart & Co. onSmith, Payne and Co. bankers in London for £ 1000, payableto the order of D. R. Arnold & Co., on demand. The plaintiffshaving thus obtained the draft, a special indorsement toMessrs. Williams & Co. was written upon it, and it was inclosedby the plaintiffs in a letter to Messrs. Williams'& Co., for thepurpose of transmission. The letter was then placed, withothers, at the office of the plaintiffs, in a box on the outside ofwhich were painted the words ‘ Letter Box ’ and which wasthe place in which letters for the post were usually deposited.The envelope was addressed to Messrs. E. G. Williams & Co.,Bradford, and had the name “ Celitic ” written on it, that beingthe name of the steamer sailing the next day, by which the-mail was sent.
Instead, however, of the letter having gone through the postto Messrs. William & Co-, it was abstracted by some person whohad means of access to it, and the draft was stolen ; but thesefacts did not become known to the plaintiffs until after paymentof the draft had been obtained by the defendants.
On the 10th of September, 1874, a Mrs. Chandler called at thedefendants’ bank with the draft in question. It then bore on ita forged special indorsement by Messrs. E. G. Williams & Co.,io “D. H. Chandler, or order,'’ and a blank indorsement by
96
PATHIRANA J.—De Silva v. Molligoda
“ D. H. Chandler Mrs. Chandler came to the defendantswithout introduction. She was a middle-aged lady of respectableappearance, and said she was from America. She inquired a* tcthe manner in which the defendants conducted their business,and asked if the defendants would receive the draft. She wasanswered that they would, but that it must first be realisedbefore they could give an equivalent in cheques. She stated thatshe did not wish to go to the city that day, and inquired whetherthe defendants had any one they could send, as it was a draftpayable to bearer. The defendants informed her that they hadmessengers going continually to the city, and would send forher, and then took the draft, and, after stamping it with thename of the Cheque Bank, sent it to Smith, Payne, & Co., andreceived the amount. The bank on receiving the money openedan account with Mrs. Chandler, crediting her with £ 1000, andMrs. Chandler received cheque-books, by means of which shedrew out the whole amount with the exception of £ 106.
The question was raised whether under the circumstances themoney received by the defendants in payment of the draft wasreceived to the use of the plaintiffs. Lord Coleridge, C.Janswered the question as follows :
“ As regards the first question, it is clear that the propertyin the draft had never in fact passed out of the plaintiffs ;for, indorsement consists not merely of the writtenindorsement on the draft, but there must also be a deliverywith intention to transfer the property ; Marston vs. Allen.
8 M. & W. 494. In this case there was no delivery of thedraft to the indorsee and therefore, unless the plaintiffs areestopped from setting up as against the defendants theforgery of the indorsement of Williams & Co., the billremained their property when it reached the hands of thedefendants, and they are entitled to the draft ”.
therefore, hold that all contentions raised by Mr. Ranganathan fail. I dismiss the appeal with costs.
Sirimane, J.—I agree.
Appeal dismissed