[DIVISIONAL COURT]

REID v. RIGBY & CO.

Principal and Agent - Liability of Principal - Unauthorized Borrowing by Agent - Money applied for Benefit of Principal - Claim by Lender for Money received - Cheque signed by Procuration - Limited Authority to sign - Bills of Exchange Act, 1882 (45 & 46 Vict. c. 61), s. 25.

The defendants' manager, who had authority to draw on the defendants' banking account for the purposes of their business, but had no authority to overdraw the account, or to borrow money on behalf of the defendants, borrowed 20l. from the plaintiff, stating that he wanted the money to pay the wages of the defendants' workmen, and gave as security a cheque signed in his own name by procuration for the defendants. The manager had overdrawn the defendants' banking account, and he borrowed the money for his own purposes, to replace money of the defendants which he had abstracted, but he paid the money in to the defendants' account at their bank, and used it to pay the wages of the defendants' workmen.

In an action on the cheque, and to recover the amount as money received to the use of the plaintiff:-

Held, first, that as, by virtue of s. 25 of the Bills of Exchange Act, 1882, the plaintiff must be taken to have had notice that the agent had but a limited authority to sign, and the defendants could only be bound if the agent acted within the limits of his authority, the claim on the cheque must fail:

Held, secondly, that, as the money had found its way into the defendants' possession, and had been employed for their benefit, it was money received by them to the use of the plaintiff, and, although the defendants had not been aware that their manager had borrowed the money, the plaintiff was entitled to recover.

Marsh v. Keating (1 Bing. N. C. 198) followed.

APPEAL by the plaintiff from the decision of the judge of the Westminster County Court, in favour of the defendants, in an action brought by the plaintiff, first, to recover 20l. on a cheque, and, secondly, to recover the same sum as money received by the defendants to the use of the plaintiff.

The cheque in question was signed "Rigby & Co. per procuration of J. Allport, manager," and was drawn on May 21, 1892. The claim was made after Allport's death. It was found by the county court judge that Allport had been the manager of the defendants' firm, and had authority to draw on their banking account for the purposes of their business, but had no authority to overdraw their account, which he had overdrawn, or to borrow money on their behalf. It was also found that

Allport had borrowed this sum of 20l. for his own purposes, in order to replace money of the defendants which he himself had abstracted. The evidence shewed that Allport had obtained the amount of the cheque from the plaintiff by a statement that he was short of money, and wanted the money to pay the wages of the defendants' workmen, and it was shewn that he had paid the money into the defendants' account at their bank, and had used it to pay the wages of their workmen.

Le Riche, for the plaintiff, in support of the appeal. As to the claim on the cheque, Allport had authority to draw cheques. As to the second point, money obtained by the fraud of an agent, which finds its way into the possession of that agent's principal is money received by the principal to the use of the person from whom it was obtained, and can be recovered as such, although the principal was innocent and ignorant of the fraud. That this is so is established by the cases of Marsh v. Keating (1) and Calland v. Loyd (2), for it is clear under such circumstances that the money can be followed: In re Hallett's Estate, Knatchbull v. Hallett (3); Collins v. Stimson. (4) So far as the claim for money received is concerned, the plaintiff had no notice of any limitation of Allport's authority. [He also cited Barwick v. English Joint Stock Bank. (5)]

Herbert Smith, for the defendants. By the Bills of Exchange Act, 1882 (45 & 46 Vict. c. 61), s. 25, "A signature by procuration operates as notice that the agent has but a limited authority to sign, and the principal is only bound by such signature if the agent in so signing was acting within the actual limits of his authority." That is fatal to the claim on the cheque. As to the claim for money received, the findings in the Court below dispose of the plaintiff's claim. In Marsh v. Keating (6), Park, J., in delivering the opinion of the judges in the House of Lords, said: "But it is objected thirdly that the proceeds of the sale of the stock never came into the hands of the defendants, so as to be money received by them to the use

(1) 1 Bing. N. C. 198.

(2) 6 M. & W. 26.

(3) 13 Ch. D. 696.

(4) 11 Q. B. D. 142.

(5) Law Rep. 2 Ex. 259.

(6) 1 Bing. N. C. at p. 219.

of the plaintiff; and the consideration of this objection involves two questions:- First, did the money actually come into the possession of the defendants? Secondly, if it ever was in their possession, had the defendants the means of knowledge, whilst it remained in their hands, that it was the money of the plaintiff, and not the money of Fauntleroy?" Here the evidence does not shew that the money came into the hands of the defendants; but, if it did, there is no evidence that the defendants had the means of knowing of the plaintiff's claim while the money was in their hands. In Marsh v. Keating (1), Fauntleroy had the authority of a partner, and in the other cases the money was ear-marked.

Le Riche, was not heard in reply.

CHARLES, J. This action is brought in a twofold form: first, on a cheque given by Allport, the defendants' manager, to Reid, the plaintiff, as security for a sum of 20l. borrowed by Allport from the plaintiff in the name of the defendants; and, secondly, for the same sum of 20l. as money received to the use of the plaintiff. As to the claim on the cheque, it appears that Allport was the general manager of the defendants, and as such had express authority to draw on their banking account for the purposes of their business, and he had also a general authority to pay money in to the bank to their account. No question arose as to any special authority. Allport told the plaintiff that he was short of cash and wanted money to pay the workmen's wages, and he gave a cheque signed per procuration for Rigby & Co., the defendants. On the face of it that cheque conveyed an intimation to the plaintiff that Allport, as the agent of the defendants, had only a limited authority to sign. This is expressly provided by the Bills of Exchange Act, 1882 (45 & 46 Vict. c. 61), s. 25. As a matter of fact, the defendants' banking account was at that time overdrawn, and the county court judge has found that Allport had no authority to overdraw that account; and he has also found - and we must accept his finding on this point as correct - that Allport had no authority to borrow money for the defendants. But he did

(1) 1 Bing. N. C. 198.

borrow money, and having got the money he paid it in to the defendants' banking account. I say that this is so because the cash-book, which I have carefully examined, leaves no doubt in my mind that the 20l. found its way into the defendants' banking account. It appears that a sum of 38l. 2s. was paid in, which enabled Allport to draw a cheque for 30l. in order to discharge the workmen's wages. Therefore Allport paid the money for the purpose of the business. In my opinion, the true inference is that the money which was borrowed for wages was paid in to the defendants' banking account, and was applied in payment of wages. The question is whether the plaintiff can recover that money from the defendants. It is contended on behalf of the defendants that he cannot, on the findings of the county court judge to which I have referred, and also on a further finding, that Allport borrowed the money for his own purposes, in order to replace money belonging to the defendants which he had abstracted. I was at first somewhat embarrassed by that finding; but on consideration I have come to the conclusion that it does not affect the legal position of the parties. Allport has paid the money in to the defendants' banking account; and either it is there now or it has been paid in wages to the defendants' workmen. The latter, I think, is the true inference; but in either case I think the result is the same. Suppose that Allport had paid the money direct to the workmen, and had asked the defendants to repay him, could the defendants have refused? It seems to me, that if the wages had been so paid, then, when the defendants had discovered the fact of payment, they must have either repudiated such payment or adopted it. By accepting the benefit of the payment they would adopt it. It comes to this, that either the workmen have been paid or they have not. If they have been paid, the money so paid was in contemplation of law money received by the defendants to the use of the plaintiff; for either they have ratified the payment, or, if the money is still in their bank, it is the money of the plaintiff. I am of opinion that the decision in Marsh v. Keating (1) supports this view. In that case the money sought to be recovered was the proceeds

(1) 1 Bing. N. C. 198.

of the fraud of Fauntleroy. The defendants, who had been Fauntleroy's partners, knew nothing of the fraud; but the judges who advised the House of Lords expressed a unanimous opinion that it must be treated as money received by the defendants to the use of the plaintiff, because it came into the possession of the defendants. The same view applies to the present case. Further than this, the defendants have since had an opportunity of finding out that the money had been paid in to their account. For these reasons I am of opinion that this sum of 20l. was money received by the defendants to the use of the plaintiff: I will not say what the result might have been if the money had been paid in to the bank under some binding contract between Allport and the defendants. However it was paid in, it has found its way into the possession of the defendants, and therefore it was money received to the use of the plaintiff, which he is entitled to recover, and the appeal must be allowed.

COLLINS, J. I am of the same opinion. I need hardly say that I should not differ from the view taken by the learned county court judge without full consideration; but in this case I am satisfied that the judgment is wrong. The money in question was obtained from the plaintiff on the security of a cheque signed by Allport per procuration for the defendants, Rigby & Co. By the terms of s. 25 of the Bills of Exchange Act, 1882, it was apparent on the face of the cheque that the authority of the person signing the cheque was limited. I can entertain no doubt, on examination of the account, that this sum of 20l. found its way to the credit of the defendants' account at the bank. The question for our determination is whether the plaintiff can maintain an action to recover that sum. If, instead of giving a cheque, Allport had asked the plaintiff to pay the workmen, and the plaintiff had done so, could not the plaintiff have maintained an action against the defendants to recover what he had paid? I am of opinion that he could; for what he did would have been a payment of the defendants' debt. On that state of facts, therefore, the plaintiff would be entitled to recover. Then does it make any difference that the money went into the bank? I

think not; for the effect of the transaction could only be rendered different if the money were paid in by virtue of some contract which was binding as between Allport and the defendants; but there was no such contract, and there had been no change of position before the defendants knew the facts. The question is whether, now that they have found out Allport's defalcations, the defendants can keep the plaintiff's money. I am of opinion that the cases which have been referred to in argument, Marsh v. Keating (1) and Calland v. Loyd (2), go the full length of shewing that they cannot, and, in my opinion, the present is an ˆ fortiori case.

Solicitor for plaintiff: C. T. Foster.

Solicitors for defendants: Eisdell & Thompson.

P. B. H.

(1) 1 Bing. N. C. 198.

(2) 6 M. & W. 26.