Bunbury v The Hibernian Bank, Ltd

• Jurisdiction: Ireland
• Judge: Ross, J.
• Judgment Date: 21 January 1908
• Court: Chancery Division (Ireland)
• Docket Number: (1907. No. 368.)
• Date: 21 January 1908

Bunbury

and

The Hibernian Bank, Limited.

Ross, J.

(1907. No. 368.)

CASES

DETERMINED BY

THE CHANCERY DIVISION

OF

THE HIGH COURT OF JUSTICE IN IRELAND,

AND BY

THE IRISH LAND COMMISSION,

AND ON APPEAL THEREFROM IN

THE COURT OF APPEAL.

1908.

Purchase for valuable consideration without notice — Constructive notice — Fraud — Principal and agent — Bill of exchange — Bills of Exchange Act, 1882 (45 & 46 Vict. c. 61), s. 30.

Held, that the plaintiff was entitled to the declaration sought, on the grounds—(1) that the Bank were, by the circumstances of the transaction, put on inquiry, and not having made inquiry, were affected with notice of the invalidity of the transaction, and could not rely on the defence of purchase for value without notice; (2) that the Bank made K. their agent for the purposes of the transaction; and that K.'s knowledge must, therefore, be imputed to the Bank, who must stand or fall with K.

Trial of Action.

The action was transferred for hearing before Mr. Justice Ross. There were no pleadings. The writ of summons claimed an order for the recovery from the defendants of the original scrip for two sums of £169 4 per cent. debenture stock of the Alliance Gas Company, and £214 4 per cent. debenture stock of the Great Northern Railway Company, Ireland, both registered in the name of the plaintiff; and also that the defendants do deliver up to the Registrar in Lunacy, to be cancelled, the two blank transfers executed by the plaintiff of the said sums of stock; and for a declaration that the deposit of the said scrip did not create any valid equitable mortgages of the said stocks, and that the said blank transfers were invalid, and that the plaintiff or her estate, was not liable on foot of the two bills or promissory notes signed by her in December, 1903, for £160, and in December, 1904, for £250 or the renewals thereof.

The facts are fully stated in the judgment of Ross, J.

Serjeant O'Connor, K.C. (with him Matheson, K.C., and J. B. Burke), for the plaintiff:—

It is enough for the plaintiff to prove that the Bank were put on inquiry into the real circumstances, and that, if they had inquired, they would have found out the relations between the plaintiff and Kenny. It is enough if we prove that she was under the influence and control of Kenny, unduly exercised, and that, from whatever motive, she would do anything Kenny asked her to do, and that the Bank, if they had inquired, could have ascertained these facts. Though a creditor may not, in every case, be bound to inquire into the circumstances under which a third person becomes surety to him, he is so when the dealings between the parties are such as to lead to a suspicion of fraud: Owen and Gutch v. Homan(1). The Bank cannot shelter themselves behind the fact that they made no inquiry when they were put on inquiry: Oliver v. Hinton(2).

Henry, K.C. (with him H. Wilson, K.C., and W. G. Gibson), for the Hibernian Bank:—

The plaintiff's incompetence has not been established. Assuming she was incompetent, she signed bills of exchange. Before they became due the Bank became bona fide holders for value of these bills, and are protected by law. There was no antecedent liability by Kenny to the Bank. The Bank paid the £160 money down across the counter; and the manager on the same date made a report to the head office. If the manager acted honestly, the Bank is protected. Neither negligence nor stupidity is sufficient; the plaintiff must prove mala fides, in other words, a criminal conspiracy

between Kenny and the Bank: London Joint Stock Bank v. Simmons(1). Gross negligence is only evidence of mala fides, but is not mala fides: Goodman v. Harvey(2). The Bank are protected by sect. 30 of the Bills of Exchange Act, 1882 (45 & 46 Vict. c. 61): Tatam v. Haslar(3); Jones v. Gordon(4); Raphael v. Bank of England(5).

H. Wilson, K.C.:—

The equitable doctrine of constructive notice does not apply to mercantile transactions: Manchester Trust v. Furness(6). Assuming that there was an onus, under sect. 30 of the Bills of Exchange Act, on the Bank to give evidence that they gave value in good faith, the Bank have given such evidence.

Matheson, K.C., in reply:—

None of the cases cited was between original parties to a bill. They were all concerning holders who had taken them as indorsees by negotiability, and do not apply to the case of an original holder of a bill. This case is not a simple bill of exchange case, nor an ordinary banking transaction. Once the Bank manager had notice that Kenny was in a fiduciary capacity to the plaintiff, they were put on inquiry. The mere fact that the lady left her home, and went to live with Kenny, was enough to show the Bank that she was under Kenny's influence: Aldritt v Maconchy(7).

B., a widow of intemperate habits, under the influence and control of K., a widower, with whom she for some time lived, was, by fraud and undue pressure, induced by K. to deliver to K. certain scrip, to be lodged by K. with...