The case of Hawker v. Hallewell[[63]] is a good illustration of cases where the transferee will not be held to have taken with notice, and also of cases where the transferor by his conduct estops himself from alleging the illegality of the original consideration. |Assignee of bond.| In Hawker v. Hallewell[[63]] the plaintiff gave a bond in 1841 to one Jenkins to secure repayment of a betting debt; at least, this was assumed for the purposes of argument, though the evidence did pot prove it. Jenkins assigned the bond and a policy of assurance to a bank. Plaintiff, in June, 1848, made a proposal to the bank that the bond and policy should be given up, and that the existing debt, together with a further advance, should be secured by mortgage on some reversionary property of the plaintiff. The plaintiff alleged that he had given notice to the bank that the bond was given for a gaming debt. The plaintiff, in 1853, assigned all his property to trustees for the benefit of his creditors, and now filed a bill to administer the trusts. The Chief Clerk disallowed the claim of the bank. The plaintiff contended that the bond was void under 9 Anne, c. 14, which had not been repealed by 5 & 6 William IV., so far as regards bonds. 8 & 9 Vict., c. 109, which repealed so much of the Statute of Anne as was not repealed by 5 & 6 William IV., was not retrospective. The Vice-Chancellor decided on the facts that the bank had taken the bond without notice of the original consideration. He also held that, although the operative part of the Statute of William IV. only applied to negotiable securities, yet the recitals included bonds and securities of every kind; so that an obligee was within the equity of the statute, and that, on the principle of Equity follows the Law, a bonâ fide assignee of a bond for valuable consideration would be treated in the same way as a bonâ fide holder of a bill of exchange. But there was a further ground on which his honour decided in favour of the |Estoppel of obligor.| bank—that the plaintiff by his proposal in 1848 had held out to the bank that the bond was a valid security and that on the principle of Pickard v. Seears[[64]] he could not be heard to set up its invalidity. This latter point seems to be the same as that on which Edwards v. Dick[[65]] was decided, viz., the ordinary principle of estoppel—that if one person by his acts or representations induces another person to believe in the existence of a certain state of facts, and acting on such belief to enter into a contract with him, he cannot be heard to say that those facts do not exist.
Pleading illegality.
Of course, the burden of proving the illegality of the consideration lies on the person who sets it up, on the principle that he who alleges the affirmative must prove it. This was clearly recognised by the Court in Fitch v. Jones.[[66]] By the Rules of Court, 1883, facts showing illegality either by Statute or Common Law must be specially pleaded. It seems, too, at any rate under the old system of pleading, that it was not sufficient for defendant to plead a fact showing illegality, but he must also aver that plaintiff gave no value for the bill, although the illegality once established would raise a presumption to that effect.[[67]]
Admission in pleadings enough to shift burden of proof.
It seems that in order to throw the burden of proof on to the shoulders of an indorsee, it was not sufficient that the illegality should be admitted on the pleadings; it must be proved in evidence. Thus in Edmunds v. Grove[[68]] in an action by the indorsee against the maker of a note. Plea, that the note was made for a gaming debt, and indorsed to plaintiff without consideration and with notice. To this plaintiff replied denying the notice and absence of consideration without denying the illegality. Held, that although the pleadings by not putting in issue the illegality admitted it, still that had not the effect of throwing the burden of proof on to the plaintiff that he took without notice and for good consideration. Presumptions or inferences of fact could only be drawn by the jury from facts proved before them. The issues only, and not the pleadings, were before the jury. But now by the Bill of Exchange Act, s. 30 (2) it is sufficient that the illegality should be admitted or proved.
The exact nature of the consideration should be stated.
It is always advisable, particularly where a plea of illegality is set up, to state fully the circumstances under which the contract or security is affected with illegality. Thus in Bolton v. Coghlan[[69]] plaintiff sued as indorsee of a note made by defendant. The latter pleaded that it was made for money lost at play.
The evidence showed that defendant lost money at play to one Aldridge, and accepted a bill for the amount drawn by Aldridge. Aldridge indorsed to Knight. It was then agreed between defendant and Aldridge that defendant should in substitution for the bill give Knight his note of hand for the amount Knight indorsed to plaintiff.
Held that as the plea implied that the note was originally given for a gaming debt, whereas it was really only a substituted agreement, the defendant should not be allowed to take plaintiff by surprise and go into evidence of the subsequent agreement.
But under the Rules of Court the judge at the trial has power to allow amendments in the pleadings upon terms as to costs or otherwise.[[70]]