Lockhart v. Wilson

Lockhart v. Wilson

Where promissory notes are procured by fraud and the purchaser discounts them while harbouring suspicion that the proceeds belonged to the company and makes no inquiry into the sellers' right to apply the proceeds, the purchaser lacks the required good faith and cannot recover as a holder in due course.

Citation
(1907) 39 SCR 541
Parties
Defendant Appellant: Thomas Lockhart; Plaintiff Respondent: Albert J. Wilson
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
13 December 1907
Procedural Posture
Contract (promissory Notes / Bills of Exchange) / Appeal to Supreme Court of Canada From Court of Appeal for Ontario
Outcome
Appeals allowed; judgments of trial judge dismissing actions restored.
Legal Topics
Promissory Note, Fraud in Procurement, Holder in Due Course, Good Faith, Discounting Notes, Notice and Inquiry
Source Language
English
Contract Negotiable Instruments Company Law Promissory Note Fraud in Procurement Holder in Due Course Good Faith Discounting Notes +1 more

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Parties

Thomas Lockhart

Defendant Appellant

Albert J. Wilson

Plaintiff Respondent

Procedural Posture

Contract (promissory Notes / Bills of Exchange) / Appeal to Supreme Court of Canada From Court of Appeal for Ontario

Legal Issues

  1. 1 Whether promissory notes procured by fraud can be enforced by a purchaser who discounted them
  2. 2 Whether the purchaser acted in good faith and became a holder in due course under the Bills of Exchange Act (s.56)
  3. 3 Whether suspicion that proceeds belonged to the company, without inquiry, defeats good faith

Ratio Decidendi

Where promissory notes are procured by fraud and the purchaser discounts them while harbouring suspicion that the proceeds belonged to the company and makes no inquiry into the sellers' right to apply the proceeds, the purchaser lacks the required good faith and cannot recover as a holder in due course.

Court Disposition

Appeals allowed; judgments of trial judge dismissing actions restored.

Orders

  • Appeals allowed with costs to the appellants here and in the court below.
  • Trial judge's judgments dismissing the plaintiff's actions with costs are restored.