Negotiable Instruments and Banking Law

At the Time the Bill was Negotiated to him

Jones, Ltd. v. Waring & Gillow, Ltd. [1926] A. C. 670.

In this case B, indebted to the defendants in the sum of £5000, and having no means of
paying, fraudulently persuaded the plaintiff corporation to sign an agree- ment making it
agent for the sale of motor cars and requiring a £5000 deposit. On objection by the plaintiff
to paying this sum to B, the latter told the plaintiff that the defendants were his principals
and suggested that the money be paid to the defendants. Checks for £2000 and £3000 were
drawn by plaintiff, delivered to B, who in turn delivered to the de- fendants in payment of his
debt. Subsequently the plaintiff gave a check for £5000 directly to the defendants in
exchange for the others. The de- fendants, without notice of the fraud, cashed the check,
and returned to B goods which they held as security. On discovery of the fraud the plaintiff
sued to recover the £5000. A judgment for the plaintiff in the King's Bench Division was
reversed by the Court of Appeal. On appeal by the plaintiff to the House of Lords, held, all
the Law Lords concurring on point, that as defendants were payees they could not be
holders in due course