We shall now proceed to consider how far a debenture under seal can What charac be endowed with these characteristics : teristics of negotiable in Can be made 1. A debenture may unquestionably be made transferable free from strument can equities subsisting between the company and the original or any inter- be annexed. mediate holder. This may be effected (a) by the insertion of an express assignable free stipulation in the debenture, or by so framing it (b) that such a stipula- from equities. tion will be implied, or (c) that the company will be estopped from setting up such equities. As to (a)—“ I am of opinion that there is nothing inequitable in allowing the debtor in an obligation to contract with his creditor that he will not avail himself of such equities." Per Rolt, L. J., In re Blakely Ordnance Co., 3 Ch. 159. As to (b) "generally speaking, a chose in action assignable only in equity must be assigned subject to the equities existing between the original parties to the contract; but this is a rule which must yield when it appears from the nature or terms of the contract that it must have been intended to be assignable free from and unaffected by such equities," per Cairns, L. J., In re Agra and Masterman's Bank, ex parte Asiatic Banking Corporation, 2 Ch. 397. And it appears that such an intention will probably be implied from the mere fact that the debenture is "to bearer." See In re Blakely Ordnance Co., ubi supra, and Natal Investment Co., 3 C. 361. But in such case the debenture should be simply "to bearer," not "to A., his executors, administrators, or assigns, or to the bearer"; for the additional words may be held to neutralise the force of the words “to bearer." Natal Investment Co., ubi supra. from setting As to (c)-In the case of In re Imperial Land Co. of Marseilles, ex When comparte Colborne and Strawbridge, 11 Eq. 487, the debentures were in the pany estopped form of a declaration or representation that the company "hereby bind up equities. themselves and their successors to pay to the bearer." They did not contain any express stipulation as to equities. Malins, V.-C., held that the holder could prove in the winding-up of the company free from equities subsisting between the company and the person to whom they were originally issued. His Honour's judgment contained the following passages: "Are they then promissory notes or debentures? or does it make any difference which they are in the result? My opinion is that, whichever they are, the result is the same, because they in any case make a contract by which the company have bound themselves to pay not to any particular person, but to any person who may be the bearer, the sum appearing to be due upon their face. . . . But suppose the instrument not to be a promissory note, but a bond or debenture, or anything else, it is equally binding on the company because it is a representation by the company to all the world, that they will, at the expiration of six years, pay the sum for which it is given to the holder, together with interest half yearly in the meantime. And it would be contrary to principle, and fatal to the existence of such instruments in this and all other companies, if in the hands of every person taking them they Estoppel. Pickard v. Goodwin v. Judgment of were subject to the equities between the company and the original holder..." So too in the case of the General Estates Co., 3 C. 762, Page-Wood, L. J., said that "the authorities go to this, that where there is a distinct promise held out by a company, informing all the world that they will pay to the order of the person named [and of course equally so if 'to bearer'], it is not competent for that company afterwards to set up equities of their own and say that because the person who makes the order is indebted to them they will not pay." The principle on which these cases were decided is well settled, viz., that a person making a representation with the intention that it shall be acted upon is estopped from denying its truth as against any person acting on it. The leading cases in point are Pickard v. Sears, 6 Adol. & El. 469; Freeman v. Cooke, 2 Ex. 654; 18 L. J. Ex. 114 ; In re Bahia & San Francisco Ry. Co., L. R. 3 Q. B. 594; Webb v. Herne Bay Coms., L. R. 5 Q. B. 642; In re Agra and Masterman's Bank, 2 C. 396; Goodwin v. Robarts, 1 App. Cas. 476. In the case last mentioned, scrip of a Russian loan had been purchased by the plaintiff and left in the hands of his broker, who had wrongfully pledged the same to the defendants. The defendants had sold it, and the plaintiff brought his action for the proceeds. The scrip was, so far as material, as follows: "Received the sum of 201., being the first instalment of 20 per cent. upon 1007. stock, and on payment of the remaining instalments the bearer will be entitled to receive a definitive bond for 1007." The defence was that the scrip was negotiable by mercantile usage, and that the defendants had taken it bonâ fide for valuable consideration. Judgment was given for the defendant by the Exchequer Chamber, L. R. 10 Ex. 337 (affirming the judgment of the Court of Exchequer), on the ground that the scrip had in fact become negotiable by mercantile usage and custom, and the House of Lords affirmed this decision. Lord Cairns's judgment in the House of Lords contained the following passage: "The question argued in the courts below was the negotiability of the scrip of a foreign loan, like that in the present case; but there appears to me to be a prior consideration as to the title of the plaintiff which would alone be sufficient to dispose of his claim. The plaintiff bought in the market scrip which, from the form in which it was prepared, virtually represented that the paper would pass from hand to hand by delivery only, and that any one who became bonâ fide the holder might claim for his own benefit the fulfilment of its terms from the foreign government. The appellant might have kept this scrip in his own possession, and if he had done so, no question like the present could have arisen. He preferred, however, to place it in the possession, and under the control, of his broker or agent, and although it is stated that it remained in the agent's hands for disposal or to be exchanged for bonds when issued, as the appellant should direct, those into whose hands the scrip would come would know nothing of the title of the appellant, or of any private instructions he might have given to his agent. The scrip itself would be a representation to any one taking it—a representation which the appellant must be taken to have made, or to have been a party to-that, if this scrip were taken in good faith, and for value, the person taking it would stand to all intents and purposes in the place of the previous holder. Let it be assumed for the moment that the instrument was not negotiable, that no right of action was transferred by the delivery: and that no legal claim could be made by the taker in his own name against the foreign government: still the appellant is in the position of a person who had made a representation in the face of his scrip, that it would pass with a good title to any one taking it in good faith aud for value, and who had put it in the power of his agent to hand over the scrip with this representation to those who are induced to alter their position on the faith of the representations so made. My Lords, I am of opinion that, on doctrines well established, of which Pickard v. Sears [6 Ad. & E. 469. p. 474] might be taken as an example, the appellant cannot be allowed to defeat the title which the respondents have thus acquired. . . .” The same construction appears to be applicable to a debenture which Company bound by restates that " The company will pay to the bearer, &c." Of such an presentation. instrument it may equally be said that it "virtually represents that the paper will pass from hand to hand by delivery, and that any one who becomes bonâ fide the holder will be entitled to claim for his own benefit the fulfilment of its terms from the " [company]. If the bearer of such an instrument can be, as in Lord Cairns's opinion he ought in some cases to be, treated as having adopted, and being bound by this representation, à fortiori the representation is binding on the company, and if so the company is at any rate estopped from setting. up as against the bearer any equities between it and the person to whom the debenture was issued. See Agra, &c., Bank, 2 C. 595. 2. A debenture may be so framed that the bearer will become entitled to payment of the monies secured thereby without any assignment in writing. be made assignable without This may be effected (a) by express stipulation inserted in the deben- Debenture may ture, but this is never done; or by so framing the debenture (b) that the stipulation will be implied, or (c) that the company will be bound transfer in by estoppel to pay to the bearer. As to (a)-"I am of opinion that there is nothing inequitable in allowing the debtor, in an obligation, to contract with his creditor that he will . . . . pay the amount due on the obligation to the assignee of the creditor (whether he be such assignee by instrument in writing, or by mere delivery of the obligation) Per Rolt, L. J., In re Blakely Ordnance Co., 3 C. 159. As to (b)-In the case In re Natal Investment Co. (ubi supra) Lord Cairns said, "As I understand these words [or to the holder, for the time being, of this debenture '], they do nothing more than this: in order to save the trouble and expense of assignments by deed, they provide that the company will recognise any person who holds the debenture to be in as good a position as if he had become the assignee by deed, and will not insist upon his proving his title by producing a formal assignment, &c." There appears to be no difference, in substance, between the words referred to by Lord Cairns and the following: "the bearer for the time being, of this debenture"; or "the bearer hereof "; or "the bearer"; and it seems to follow that the bearer of a debenture, issued "to bearer," will stand in the same position as if the stipulation were expressly inserted. writing. It may be so framed that receipt of bearer good discharge to company. How far receipt clause protects company. As to (c)-If a debenture is in the form of a representation, that "the company will pay to the bearer," the company would appear to be bound, upon the principles stated above (p. 220), to make good this representation, and pay the bearer, without requiring him to show his title. See, in particular, In re Agra, &c., Bank, 2 C. 595. 3. A debenture may be so framed that the receipt of the bearer will be a good discharge to the company for the monies secured thereby. This may be effected by the insertion of an express stipulation in the debenture, or by so framing it that such a stipulation will be implied. Thus in Crouch v. Credit Foncier of England, L. R. 8 Q. B. 385, the Court said: "If Macken [from whom a debenture, in the form of a 'promise to pay the bearer,' had been stolen] had sued them [i.e. the company], a plea that they had paid the money to the bearer, without notice that he was not entitled to it, would be good, if, on the true construction of the instrument, it is stipulated that the receipt of the bearer giving up the instrument shall be a sufficient discharge for the company; for they were quite competent to stipulate to that effect." This goes to show not only that such a stipulation is lawful, but that it will be effectual if expressed or capable of being implied, and that the mere fact that a debenture is "to bearer," is perhaps sufficient to imply it. Upon the same principles there can be no doubt that a provision that the delivery of a debenture or coupon shall be a good discharge, is valid and effectual. It will be borne in mind that such a stipulation "is not a proviso for the benefit of either the assignee or the holder of the debenture; it is a proviso for the benefit of the company itself, in order to absolve the company from the burden of having to look into the title of any person who might present the debenture to them for payment. It does not oblige them to pay to any person who presents the debenture, it merely absolves them from subsequent liability if they do, in point of fact, pay to a person who presents the debenture." Per Lord Cairns, L. C., In re Natal Investment Co., 3 C. 361. And it would seem effectually to protect the company in all cases, not only where the person to whom payment is made has a good, but where he has a defective title (e.g., has stolen the debenture or derived one through a thief), provided, of course, that the company has not notice of the defect in his title. This, of course, is a matter of great importance to a company issuing debentures to bearer, for it would be impossible in all cases to require the bearer to prove his title; yet, if the above stipulation is not effectual in all cases, nothing short of this would protect the company from the liability of having to pay twice over if it paid to a person having a defective title. That where the company pays, without notice, to a person having a defective title the stipulation protects it against any claim by the person to whom the debenture was originally issued, is quite clear. Crouch v. Credit Foncier, ubi supra. The only question is whether it protects the company in such cases against the claims of every intermediate holder. Thus let it be supposed that a debenture to bearer, containing an express stipulation that the receipt of the bearer shall be a good discharge to the company, is issued to A., who sells it to B., that it is stolen from B., and that the company pays the thief without notice of his defect in title. Could B. successfully sue the company on the debenture? It is submitted that he could not, for the company would be entitled to rely on the well-established principle that a man cannot at once claim the benefit of a contract and repudiate one of the terms of it. Qui sentit commodum sentire debet et onus. The case of Macdonald v. Law Union Insurance Co., L. R. 9 Q. B. 328, affords a recent application of the principle. bearer of coupon. The proviso as to the receipt of the bearer being a good discharge to Receipt of the company, is generally extended so as to render the delivery of a coupon a good discharge for the interest therein specified, and it would appear to be effectual. For the coupon contains no contract; it is a mere token. Enthoven v. Hoyle, 13 C. B. 373. If the company pays to the bearer of a coupon who has a defective title, and the real owner sues the company for the interest represented by the coupon, he must sue on the contract contained in the debenture, and if so, he must give effect to the proviso. Of course, if the coupons are so framed as to be independent promissory notes to bearer, no receipt clause as to them is necessary, for being negotiable, the holder can by law give a good discharge. See supra, p. 218. transferee of 4. Where a debenture is in the form of a representation that the Whether company will pay "to the bearer," it would seem that the transferee of debenture to the debenture need not give notice of the transfer to the company in bearer ought order to perfect his title against other assignees, for by acting on the to give notice representation he acquires an independent, legal right against the company. See the cases cited supra, p. 220. to company. so framed that purchaser will title from a vendor having no title. 5. A debenture may probably be so framed that a person taking it Whether debonâ fide, and for value, would acquire a good title thereto, notwith-benture can be standing a defect of title in the person from whom he takes it. This is one of the most important incidents of a negotiable instru- acquire good ment. It much promotes facility of transfer, for it relieves a purchaser from the necessity of inquiring into the title of his vendor, and though the title of the latter be defective the title of the purchaser cannot be subsequently impeached, provided that he gives valuable consideration for the instrument, and has not notice of the defect of title. But it appears that it is impossible by express stipulation to annex this incident to a debenture. Thus in Crouch v. Credit Foncier of England, L. R. 8 Q. B. 375, the Court said that the plaintiff was obliged to contend that the Credit Foncier had power to declare that those who might become holders of the instrument" should, contrary to the general rule of law, hold their property on a precarious title liable to be divested if a thief or finder could find a bonâ fide purchaser for the debentures. No authority has |