[IN THE COURT OF APPEAL.]

MORISON v. LONDON COUNTY AND WESTMINSTER BANK, LIMITED.

[1912 M. 446.]

Bill of Exchange - Banker and Customer - Cheque - Authority to sign per pro. - Misuse of Authority - Forgery - Forgery Act, 1861 (24 & 25 Vict. c. 98), s. 24 - Crossed Cheque - Bank in Good Faith receiving Payment for Customer - Negligence - Ratification - Bills of Exchange Act, 1882 (45 & 46 Vict. c. 61), ss. 25, 82.

A banker who in good faith collects a cheque signed per pro. is not negligent within the meaning of s. 82 of the Bills of Exchange Act, 1882, merely because he does not inquire into the drawer's authority.

Sects. 25 and 82 of the Bills of Exchange Act, 1882, are distinct from one another and have reference to different states of things, s. 25 to rights and liabilities while a bill is current, and s. 82 to rights and liabilities after it has been discharged.

A cheque signed per pro. by a person having authority so to sign cheques for specified purposes is not a forgery within s. 24 of the Forgery Act, 1861, because it is drawn for purposes outside and in fraud of the authority.

Reg. v. White (1847) 1 Den. C. C. 208 distinguished.

A., having authority to draw and sign cheques per pro. for the purposes of the plaintiff's business, paid in cheques so signed, for his own purposes and in fraud of the plaintiff, during a number of years, to his own account with the defendants, who, in good faith and without objection by the plaintiff, collected them in ordinary course and placed the proceeds to A.'s credit. The plaintiff sued the defendants for the amount of the cheques as damages for conversion or, alternatively, as money had and received:-

Held, that, in regard to crossed cheques collected after the first year or two, the defendants, having during one or two years collected cheques for A. without any protest from the plaintiff, were justified in assuming that A. was acting within his authority, and were protected by s. 82 of the Bills of Exchange Act, 1882, as having acted without negligence.

Held, also, upon the facts, that in regard to cheques collected during the first year or two the defendants were not liable because the plaintiff had subsequently, either himself or through his accountants, ratified the acts of A.

Decision of Lord Coleridge J. [1913] W. N. 84 reversed.

APPEAL from a decision of Lord Coleridge J. (1)

The plaintiff carried on business as an insurance broker in the

(1) [1913] W. N. 84.

name of Bruce Morison & Co. In 1888 he gave authority to one Abbott to draw cheques for the purposes of the business on the banking account of Bruce Morison & Co. at the National Provincial Bank, and to sign them in his (Abbott's) name "per pro. Bruce Morison & Co."; and he gave directions to the National Provincial Bank to honour cheques so drawn. In 1900 he appointed Abbott manager of his business in the city of London.

In 1905 Abbott opened a private banking account for his own purposes with the defendants without the plaintiff's knowledge, and from May, 1907, to November, 1911, paid into that account cheques, fifty in number and amounting to 1885l. 3s. 9d., which he had drawn and, when necessary, indorsed by means of the "per pro." signature in fraud of the plaintiff. The cheques, with the exception of two open ones, were crossed either specially to the defendants or generally. They were collected in the ordinary way by the defendants and the proceeds placed to the credit of Abbott's account. About the beginning of 1912 the plaintiff discovered, and the defendants were first made aware, that Abbott had fraudulently drawn and applied the cheques for his own purposes. The plaintiff brought this action against the defendants for the 1885l. 3s. 9d. as damages for conversion of the cheques or, alternatively, as money had and received to the use of the plaintiff.

At the trial without a jury Lord Coleridge J. gave judgment for the plaintiff. The defendants appealed.

Sir R. Finlay, K.C., and R. A. Wright, for the appellants. The plaintiff based his claim in this action against the defendants upon s. 25 of the Bills of Exchange Act, 1882. (1)

(1) 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."

Sect. 82: "Where a banker in good faith and without negligence receives payment for a customer of a cheque crossed generally or specially to himself, and the customer has no title or a defective title thereto, the banker shall not incur any liability to the true owner of the cheque by reason only of having received such payment."

But that section cannot be read without reference to s. 82. Lord Coleridge J. thought that the defendants had been guilty of negligence in their dealings with the cheques, as the signature per pro. should have put them upon inquiry as to the extent of Abbott's authority. But the answer is that they have acted in good faith and without negligence within the meaning of s. 82, and that section is a complete answer to the main part of the plaintiff's claim: Bissell v. Fox (1); Hannan's Lake View Central v. Armstrong (2); Gompertz v. Cook (3); Bevan v. National Bank (4); Morison v. Kemp (5); Crumplin v. London Joint Stock Bank (6); Stagg v. Elliott (7); Reid v. Rigby. (8)

If a bank in the case of a cheque signed by an agent per pro. has to inquire whether it was drawn within the limits of the authority of the agent, a banker's business could not be carried on under such conditions. [They referred to and discussed on this point Morison v. Kemp (5); Attwood v. Munnings (9); Smith v. Prosser (10); Bissell v. Fox (1); Hannan's Lake View Central v. Armstrong (2); and Gompertz v. Cook. (3)]

Upon the facts, it is impossible to say that there was any negligence on the part of the defendants in collecting without inquiry cheques paid in by Abbott. There would be no negligence even if there had been only one isolated transaction. But more than that. In 1909 the plaintiff condoned former irregularities of Abbott without informing the appellants. He had full means of knowing what was being done, he adopted and ratified the acts of Abbott, he gave no notice to the appellants, and the doctrine of estoppel applies; Freeman v. Cook (11); M'Kenzie v. British Linen Co. (12); Morris v. Bethell (13); Barber v. Gingell (14); Bank of England v. Vagliano Brothers. (15) If

(1) (1885) 53 L. T. 193.

(2) (1900) 5 Com. Cas. 188.

(3) (1903) 20 Times L. R. 106.

(4) (1906) 23 Times L. R. 65.

(5) (1912) 29 Times L. R. 70.

(6) (1913) 19 Com. Cas. 69.

(7) (1862) 12 C. B. (N.S.) 373; 31 L. J. (C.P.) 260.

(8) [1894] 2 Q. B. 40.

(9) (1827) 7 B. & C. 278.

(10) [1907] 2 K. B. 735.

(11) (1848) 2 Ex. 654.

(12) (1881) 6 App. Cas. 82.

(13) (1869) L. R. 5 C. P. 47.

(14) (1799) 3 Esp. 60.

(15) [1891] A. C. 107.

the plaintiff did not personally know the facts, his accountants must have known them. (1)

The plaintiff had no right of action at all, as he was not the drawer or true owner of the cheques within the meaning of s. 82. If he was the owner and had the right of action, s. 82 is a complete answer to his claim, in regard to the later crossed cheques, as there was no negligence on the appellants' part.

Sect. 82 does not apply to the two uncrossed cheques. But as to those and the five early crossed cheques of 1907 and 1908 the plaintiff adopted and ratified the acts of Abbott and is effectually precluded by the doctrine of estoppel.

F. A. Greer, K.C., E. R. Bartley Denniss, and H. A. H. Christie, for the plaintiff. The plaintiff is only estopped as against his own bank, the National Provincial Bank, from saying that the cheques were paid without authority. Abbott had no general authority to draw cheques per pro. It was not within the authority given to him that he should draw cheques for his own purposes and not for the purposes of the business. The moment he drew cheques to pay gambling debts he was acting without authority. He could give no good title to the appellants. As against the appellants the drawing of the cheques was unauthorized. The Forgery Act, 1861 (2), makes the cheques forgeries, s. 24 having been enacted for the purpose of meeting the case of cheques fraudulently drawn by procuration. That Act makes the cheques statutory forgeries, and the drawing of them a criminal act, included as such in the Forgery Consolidation Act, 1913.

[PHILLIMORE L.J. The Act of 1861 was passed in consequence of Reg. v. White. (3)]

On the facts there has been conversion of the plaintiff's property by the appellants. As regards the two open or uncrossed cheques, as to which s. 82 offers no protection, there was clear conversion and there is no defence. The plaintiff has been deprived of fifty valuable pieces of paper which are his property. Damages can be given for such wrongful conversion. The

(1) The facts on the question of ratification are fully set out in the judgments.

(2) 24 & 25 Vict. c. 98, s. 24.

(3) 1 Den. C. C. 208.

damages are the face value of the instruments: Kleinwort v. Comptoir National d'Escompte de Paris (1); Lacave & Co. v. CrŽdit Lyonnais (2); Arnold v. Cheque Bank (3); Bavins v. London and South Western Bank (4); Bobbett v. Pinkett (5); Macbeth v. North and South Wales Bank (6); Great Western Railway v. London and County Banking Co. (7); Fine Art Society v. Union Bank of London (8); Capital and Counties Bank v. Gordon (9); Ogden v. Benas. (10)

In the alternative, the appellants have had the plaintiff's money and he is entitled to sue them for money had and received.

Sect. 25 of the Bills of Exchange Act deals only with the question of a signature by procuration, and such a signature puts the person to whom the cheque is handed upon inquiry, and is notice that the authority to sign it is limited. It prevents the bank from becoming a bona fide holder without notice. Assuming, however, that the case does come within the purview of s. 82, the bank must still satisfy the Court that they have received payment for their customer without negligence. With regard to the six earlier cheques in 1907 and 1908 there was clear negligence, and there was negligence also with regard to all the other cheques: Bissell v. Fox (11); Gordon v. London City and Midland Bank. (12)

As to the alleged ratification by the plaintiff, the acts relied upon do not amount to ratification and, even assuming they did, there was not the knowledge which the law requires. The plaintiff's accountant was not an agent and his knowledge is not that of the plaintiff: Kepitigalla Rubber Estates v. National Bank of India (13); Walker v. Manchester and Liverpool District Banking Co. (14); Kelly v. Solari. (15) [They also referred to Swan v. North British Australasian Co. (16); Lewes Sanitary

(1) [1894] 2 Q. B. 157.

(2) [1897] 1 Q. B. 148.

(3) (1876) 1 C. P. D. 578.

(4) [1900] 1 Q. B. 270.

(5) (1876) 1 Ex. D. 368.

(6) [1908] 1 K. B. 13; affirmed [1908] A. C. 137.

(7) [1901] A. C. 414.

(8) (1886) 17 Q. B. D. 705.

(9) [1903] A. C. 240.

(10) (1874) L. R. 9 C. P. 513.

(11) 53 L. T. 193.

(12) [1902] 1 K. B. 242, 264, 275.

(13) [1909] 2 K. B. 1010.

(14) (1913) 108 L. T. 728.

(15) (1841) 11 L. J. (Ex.) 10.

(16) (1863) 2 H. & C. 175.

Steam Laundry v. Barclay, Bevan & Co. (1); Carlisle and Cumberland Banking Co. v. Bragg (2); Russo-Chinese Bank v. Li Yau Sam (3); and Smith v. Prosser. (4)]

Sir R. Finlay, K.C., in reply. This is not a case of forgery but of abuse of authority.

There was ratification by the plaintiff within the authorities; he had a general knowledge of what was going on, and it was his fault if he did not go into details: M'Kenzie v. British Linen Co. (5); Howard v. Duncan (6); Union Bank v. Middlebrook (7); Brook v. Hook. (8)

Sect. 25 of the Bills of Exchange Act only operates to give the party to the instrument a defence to the action on the instrument in certain events and has no application where the instrument has been paid. It is here attempted to extend the section, and to do so would have extraordinary consequences.

There was no conversion by the appellants. The claim for conversion is unsustainable on the facts. Where a cheque has been cashed and it is sought to recover the money, the claim must be made promptly: London and River Plate Bank v. Bank of Liverpool (9); Imperial Bank of Canada v. Bank of Hamilton (10); Holland v. Russell. (11) The plaintiff was not the owner of the cheques, and even if he was he cannot get their face value as damages for conversion.

Nor can the alternative claim for money had and received be sustained. Money which an agent has, in good faith and without notice of anything being wrong, paid over to his principal cannot be recovered from the agent: Newall v. Tomlinson (12); Bavins v. London and South Western Bank. (13)

The defendants, in indorsing a cheque drawn in favour of themselves "or order," were not exercising any dominion over it and making it their own, but were only doing what was

(1) (1906) 11 Com. Cas. 255.

(2) [1911] 1 K. B. 489.

(3) [1910] A. C. 174.

(4) [1907] 2 K. B. 735.

(5) 6 App. Cas. 82.

(6) (1870) 3 Lansing's New York Rep. 174.

(7) (1865) 33 Connecticut Rep. 95.

(8) (1871) L. R. 6 Ex. 89.

(9) [1896] 1 Q. B. 7.

(10) [1903] A. C. 49.

(11) (1863) 4 B. & S. 14.

(12) (1871) L. R. 6 C. P. 405.

(13) [1900] 1 Q. B. 270.

incidental to the main object of collection: Gordon v. London City and Midland Bank. (1)

[PHILLIOMRE L.J. Either they were cheques and the plaintiff was the true owner, or they were not cheques and the defendants were getting money on forged documents and could not retain it, but must replace it if claimed in due time. There is the dilemma.]

Mere presentation of a negotiable instrument is no warranty of the genuineness of the signature: Starkey v. Bank of England (2); Collen v. Wright (3); Bank of England v. Cutler (4); Imperial Bank of Canada v. Bank of Hamilton. (5)

[LORD READING C.J. referred to Sheffield Corporation v. Barclay. (6)]

1914. April 8. LORD READING C.J. The plaintiff brought his action to recover 1885l. 3s. 9d. damages for the conversion of fifty cheques drawn upon and honoured by the National Provincial Bank for his account, or alternatively for the same amount as money had and received by the defendants to his use. At the trial of the action without a jury, Lord Coleridge J. gave judgment for the plaintiff against the defendants for the amount claimed, and the defendants appeal from that judgment.

The plaintiff carried on business as an insurance broker in the city of London in the name of Bruce Morison & Co. In 1888 he gave authority to one Harry Abbott, who had been some years in his employment, to draw cheques for the purpose of the plaintiff's business on the banking account of Bruce Morison & Co. at the National Provincial Bank, and to sign them "per pro. Bruce Morison & Co., H. Abbott," and the plaintiff gave written directions and authority to such bank to honour for his account all cheques so signed by Abbott. From 1888 until the end of 1911 Abbott signed cheques per procuration for the plaintiff which were duly honoured. In 1900 the plaintiff, who continued

(1) [1902] 1 K. B. 242, 275, 276.

(2) [1903] A. C. 114.

(3) (1857) 8 E. & B. 647.

(4) [1907] 1 K. B. 889; affirmed [1908] 2 K. B. 208.

(5) [1903] A. C. 49.

(6) [1905] A. C. 392.

to have implicit confidence in Abbott, appointed him manager of his business in the City, and thenceforward until the end of 1911 Abbott acted as manager of such business. About January, 1912, the plaintiff discovered that Abbott by means of the "per pro." signature had drawn a number of cheques on the plaintiff's aforesaid banking account, and had fraudulently applied the same to his own use. In June, 1905, Abbott had opened a banking account in his own name for his own private purposes and without the knowledge of the plaintiff at the Euston branch of the defendant bank. He was introduced to the defendants by one of their staff as the manager of a firm of insurance brokers. He continued to draw cheques upon and pay cheques into this account with the defendants until the beginning of 1912, when the defendants were first made aware that Abbott had grossly abused the plaintiff's confidence, and had by means of the "per pro." signature drawn a number of cheques for his own purposes on the plaintiff's account at the National Provincial Bank, which had been duly honoured. It appeared that from May 29, 1907, until November 23, 1911, fifty cheques so drawn, and when necessary so indorsed, for sums amounting, in the aggregate, to 1885l. 3s. 9d. had been paid by Abbott into the defendants' bank at Euston for collection by the defendants on his behalf. All the said cheques were crossed, with the exception of two open or uncrossed cheques; forty-six were crossed generally, and two were crossed to the defendants. The said sums were collected in the ordinary way by the defendants during the said period from the National Provincial Bank, and the plaintiff's account was duly debited with the same. The plaintiff makes no complaint against the National Provincial Bank. It is clear that they were bound in pursuance of the directions and authority given in 1888 to honour the said cheques on his account. The defendants placed the amount of such cheques to the credit of Abbott's account with their branch as and when they were paid in, and Abbott drew against them when the cheques had been cleared. During the currency of his banking account with the defendants Abbott paid in other moneys and cheques. It was, as the manager said, not a very active account, but a satisfactory account from the bank's point of view. Abbott drew cheques

against his credit balance with the defendants which were in the ordinary course duly honoured by them.

Upon these facts the plaintiff, in my judgment, is entitled, prima facie, to recover the sum claimed, either as damages for conversion or as money had and received. Lord Ellenborough in M'Combie v. Davies (1) said: "A man is guilty of a conversion who takes my property by assignment from another who has no authority to dispose of it; for what is that but assisting that other in carrying his wrongful act into effect." This principle has been frequently applied in actions to recover the proceeds of cheques or other negotiable instruments for the payment of money, collected by a bank without authority. (See Gordon v. London City and Midland Bank (2) and Fine Art Society v. Union Bank of London (3) and cases therein cited.) In the present case the defendants were not mere intermediaries but became the holders of the cheques when these were issued to them by Abbott. It is not disputed that the defendants received them in good faith, but it is contended that they received them from a person who had no authority to draw them or to issue them to the defendants and could give no title, or only a defective title, to the defendants. The cheques were at all times, until issued, the property of the plaintiff. They never were the property of Abbott, who had no title to them. The defendants, having received the cheques for collection on behalf of Abbott, presented them, and obtained the proceeds from the plaintiff's bank, and applied the same to the credit of Abbott's account. Abbott had no account at the National Provincial Bank, and was only in possession of the cheque forms as manager for the plaintiff. When he had filled up the forms and signed them "per pro. Bruce Morison & Co." the plaintiff was the true owner of the instruments, and Abbott had no authority to dispose of the cheques for his own purposes, or to pay them into his own banking account. They came into existence as cheques on the plaintiff's banking account by the fraud of Abbott and were issued by him to the defendants in fraud of the plaintiff. The defendants collected the proceeds, and their right to retain the money so collected

(1) (1805) 6 East, 538, at p. 540.

(2) [1902] 1 K. B. 242, at pp. 264, 265.

(3) 17 Q. B. D. 705.

must depend upon the validity of Abbott's title to the cheques, and, if such title was invalid, upon the protection of s. 82 of the Bills of Exchange Act, 1882. In my judgment the defendant's title to such cheques was defective as Abbott issued them to the defendants in fraud of the plaintiff. The defendants dealt with them in a manner inconsistent with the rights of the plaintiff, who was the true owner, and are liable to him for the conversion of his property.

Damages for such conversion may be, and in my opinion are, in this case the face value of the instruments. The plaintiff is entitled to compensation for the loss he has sustained by reason of the conversion, and that loss is the equivalent of the amounts paid to the defendants by the National Provincial Bank and debited to the plaintiff's banking account. The defendants have wrongfully obtained money on valuable instruments of the plaintiff, and his banking account at the National Provincial Bank has been depleted to the amounts paid on the cheques. The plaintiff has lost the sums which the defendants have wrongfully received, and the plaintiff is therefore entitled to recover such sums as damages for the conversion. That such damages may be given for the conversion of a cheque or bill of exchange has been decided in many cases. (See Bobbett v. Pinkett (1); Fine Art Society v. Union Bank of London (2); Kleinwort v. Comptoir National d'Escompte de Paris (3); Bavins v. London and South Western Bank (4); Capital and Counties Bank v. Gordon (5); Macbeth v. North and South Wales Bank (6).)

The same result would be reached by the plaintiff upon the alternative claim for money had and received. The plaintiff is entitled to waive the tort and sue for the same amount as money had and received to his use: Hollins v. Fowler. (7) In this case, as he is clearly entitled to recover on the claim for conversion, he need not rely upon the alternative count. It may be that the claim in trover of the cheque is a somewhat artificial and cumbrous way of arriving at the remedy, but it is well established

(1) 1 Ex. D. 368.

(2) 17 Q. B. D. 705.

(3) [1894] 2 Q. B. 157.

(4) [1900] 1 Q. B. 270.

(5) [1903] A. C. 240.

(6) [1908] 1 K. B. 13; affirmed [1908] A. C. 137.

(7) (1875) L. R. 7 H. L. 757.

by a long series of authorities. The law regards the substance of the transaction and gives an adequate remedy for the wrong.

The plaintiff further contended that the signatures per procuration by Abbott to the cheques were forgeries, and that therefore the instruments were nullities and the defendants could not retain the proceeds obtained by means of forged instruments. In fact the signature was the genuine signature of Abbott in the form authorized by the plaintiff. The forgery was, as alleged by the plaintiff, in the misuse of his authority to sign cheques per procuration, as this amounted to the making of a bill per procuration without lawful authority or excuse and with intent to defraud, and it was contended that all the necessary elements of a statutory forgery under 24 & 25 Vict. c. 98, s. 24, were thus present. I cannot accept this contention. The National Provincial Bank, the plaintiff's bankers, were admittedly bound to honour the cheques so signed by Abbott under the direction or authority given to them by the plaintiff in 1888. The cheques bore genuine signatures by Abbott, notwithstanding that these were made by Abbott with the intention of misapplying the cheques and the proceeds. If, as is admitted, the National Provincial Bank were entitled and indeed bound to honour cheques so signed, these were valid instruments for that purpose, and if so they cannot be forgeries in the hands of the defendants. The signature to a cheque cannot be a valid signature in the hands of one person and a forgery in the hands of another; it cannot be valid to-day and a forgery to-morrow, although in some circumstances by the application of the doctrine of estoppel a person whose money has been wrongfully obtained by a forgery might be precluded from setting it up. In my judgment, the statute mentioned does not make it a forgery if a genuine signature is affixed by a person who indicates on the face of the document that he signs per procuration on behalf of another, notwithstanding that the authority so to sign has been misused and fraudulently used. Sect. 24 was passed to meet the difficulty created by the decision in Reg. v. White (1), where it was held that a person who signed the name of another per procuration could not be convicted under s. 39 of the statute 11 Geo. 4 &

(1) 1 Den. C. C. 208.

1 Will. 4, c. 66. The recent case of Rex v. Holden (1) does not assist the plaintiff. It decides that a partner who had no authority to sign the firm name to a bill and makes and issues a bill signed with his partner's name without authority and also with his own name is guilty of forgery. The question we are considering is whether Abbott in so drawing and issuing the cheques had committed the crime of forgery, and not whether he had committed a criminal offence.

To the claim thus prima facie established by the plaintiff, the defendants set up a defence based upon the protection afforded by s. 82 of the Bills of Exchange Act, 1882, to bankers who collect payment of cheques for their customers, if the bankers have acted in good faith and without negligence. The defendants' good faith is not questioned, but it is contended that they did not act without negligence. Lord Coleridge J., being of opinion that s. 25 of the Bills of Exchange Act, 1882, must be read with s. 82, came to the conclusion that the defendants were put upon inquiry by the mere fact that the cheques bore a signature per procuration, and that, as the defendants failed to make inquiry, they cannot be held to have acted without negligence. I do not agree with this view of the effect of s. 25. Sect. 82 only comes into operation when a banker receives payment of the proceeds for his customer and therefore when the cheque has been honoured. The effect of s. 25 is that, notwithstanding the negotiable character of the instrument and the obligations upon the signatory to such an instrument to holders and more particularly to a holder in due course, and notwithstanding the authority given by the principal to the agent to sign negotiable instruments per procuration so as to bind the principal, the principal is not liable upon the instrument, even to a holder in due course, if the agent in so signing the cheque has exceeded the actual limits of his authority. The principal in such circumstances and before the instrument is honoured could refuse to pay the cheque or bill upon presentation, and would have a good defence to a claim, even when made by a holder in due course, upon the cheque or bill. I agree with Lord Coleridge J. that this section is declaratory of the common law (see Stagg v. Elliott (2)), but it does not, in my

(1) [1912] 1 K. B. 483.

(2) 31 L. J. (C.P.) 260; 12 C. B. (N.S.) 373.

judgment, extend beyond it or alter it. When a bill so signed in excess of authority has been honoured, s. 25 does not confer a right to recover the proceeds. If such a right exists in the particular case it must be found elsewhere. Nevertheless, the fact that the signature to the cheques is made per procuration, and is not the signature of the principal, is not to be entirely disregarded. In my opinion, when considering whether the bank has acted without negligence, it is to be borne in mind with other facts and circumstances. It is also to be observed that Lord Coleridge J. did not rely exclusively upon his view of s. 25 as bearing upon s. 82, for in a later part of his judgment he refers to the payment in of these cheques by the agent to his private account at another bank as another circumstance which should have caused the bank to make inquiries. Whether or not the evidence establishes that the bank did not act without negligence is a question of fact, and in strictness should be determined separately with regard to each of the fifty cheques signed by Abbott.

With reference to the earlier transactions, limited to the years 1907 and 1908, I agree with the decision of Lord Coleridge J., that the defendants did not act without negligence. The proceeds of six cheques were collected in these two years for Abbott by the defendants. The first was an open or uncrossed cheque to which s. 82 does not apply. The next three were drawn to "selves or order" and indorsed by Abbott per procuration. The other two were made payable to "Abbott or order" and were indorsed by Abbott. The defendants knew that Abbott was manager to a firm of insurance brokers, and the signature on the cheques was express notice to them that he was purporting to act in the signing and indorsing of these cheques as agent. The most cursory examination would have shewn the defendants that they were collecting payment for their customer of cheques drawn by him as agent upon the account of his principal at another bank, and that the first three of these crossed cheques were made payable on the face of the instruments to the principal or order and issued to the bank by means of the indorsement of the agent purporting to act for the principal. For a firm to pay salary or commission or any debt to a manager by cheques made payable to the firm or order, and for a manager to pay cheques so drawn to his own

private banking account after himself indorsing them as agent for the payees, appear to me transactions so out of the ordinary course that they ought to have aroused doubts in the defendants' mind and caused them to make inquiry. Sir Robert Finlay argued that the Courts had only deprived bankers of the immunity afforded to them by s. 82 when the cheques collected by the bank were signed by third persons in favour of the principal, and he sought thus to distinguish this case from Bissell v. Fox (1), Hannan's Lake View Central v. Armstrong (2), Gompertz v. Cook (3), Bevan v. National Bank (4), and other such cases, but I can see no distinction in principle between these authorities and the present case. They are merely instances of the application of the principle of law to the facts and circumstances of particular cases.

Different considerations apply, however, to the collection of the later cheques issued in 1909, 1910, and 1911. No question had been raised in reference to the cheques paid in to Abbott's account in the preceding two years, and any doubt or suspicion which the defendants ought to have had of these earlier transactions would have disappeared by this time. I cannot think that the defendants were guilty of negligence in not making inquiries in reference to these cheques after their experience of Abbott's transactions with them in the preceding two years. It is true that the plaintiff owed no duty to the defendants to examine his pass-books or check his accounts with them or with Abbott, but, when we are asked to find as a fact that the defendants were negligent, it is necessary to consider all the circumstances, and in my judgment, as these transactions were only repetitions of those of the previous years which had passed unchallenged, the defendants should not be deprived of the protection of the statute. During these later years the defendants collected for Abbott's account the proceeds of forty-four cheques signed by him per procuration for the plaintiff, most of which were drawn to the defendants or bearer, as appears from the following list: One dated August 27, 1909, not crossed and therefore not within s. 82; five were drawn to "selves or order";

(1) 53 L. T. 193.

(2) 5 Com. Cas. 188.

(3) 20 Times L. R. 106.

(4) 23 Times L. R. 65.

four to "Abbott or order"; one to "defendants or order"; one to "bearer"; one to "selves or bearer"; one to "Abbott or bearer"; and thirty to "defendants or bearer." It is argued by the plaintiff that, as the amounts so collected increased yearly, this was an additional circumstance which established the negligence of the defendants. By reference to Abbott's banking account with the defendants it will be seen that the cheques of the plaintiff paid in by Abbott to the credit of his account had increased in number and amounts every year since 1907. The summary is as follows: 1907, two cheques, 82l.; 1908, four cheques, 188l. 17s. 6d.; 1909, nine cheques, 260l.; 1910, twelve cheques, 591l. 6s. 3d.; 1911, twenty-three cheques, 763l., making a total of fifty cheques of the value of 1885l. 3s. 9d. This yearly increase would not of itself arouse doubt or suspicion. Abbott's salary or commission or share of profits might easily have risen in amount, and as each year passed there would appear to be less and not more reason for inquiry. In my judgment, therefore, the defendants are entitled to the protection of s. 82 and are not liable to the plaintiff in this action in respect of the forty-three crossed cheques during the three later years.

I have now further to consider the position of the parties in reference to the earlier crossed cheques and the two uncrossed cheques. For the defendants it was contended that upon the facts proved, and even assuming that they had been negligent in not making inquiry, they were not liable in this action because the plaintiff had ratified the acts of Abbott.

The main additional facts necessary for the determination of this point are as follows: It was the practice of the plaintiff to have a yearly balance-sheet prepared and presented to him by his accountants, Messrs. Blakemore & Co. In 1908 it was discovered that there was a considerable deficiency in the capital of the firm, and in August, 1908, Abbott admitted that he was responsible for the shortage and explained that he had lost it by speculating in the name of the firm. The plaintiff was not satisfied with the explanation and thereupon determined to have a thorough investigation of the affairs of the firm by his accountants. According to his statement, having given

these instructions to them, he left himself entirely in their hands. By a letter of August 12, 1908, to the accountants the plaintiff pointed out that "surely the losses should be proved by cheques that must have been drawn." In the end, and at some time in 1908, it was agreed that the deficiency then ascertained at 5929l. should be dealt with for the year 1907 by debiting Abbott in the balance-sheet for that year with 2929l. and goodwill account with 3000l. It is plain that the mere examination of the cheques and the most rudimentary investigation into the accounts and pass-books of the plaintiff's firm and Abbott's private account with the firm would have shewn that Abbott for his own purposes had drawn the two cheques on the plaintiff's banking account which are the earliest in date of the fifty now in issue. When in 1909 the balance-sheet was being drawn up for 1908 it was discovered that there was a debit balance in Abbott's private account for that year with the plaintiff's firm of 306l. 0s. 4d., and again the most elementary examination of the vouchers and accounts would have disclosed Abbott's wrongful dealings with the cheques, and that three out of the four cheques in 1908 involved in this action appeared in that account, and that the other would be found in an account called the exchange cheque account in the plaintiff's books. The plaintiff has stated, and the learned judge has found, that the plaintiff personally had no knowledge that Abbott was paying cheques signed per procuration into his own private banking account, but it must, in my judgment, be assumed that the accountants in whose hands he had left the whole matter had such knowledge. The accountants were in Court, but were not called to give evidence. In my opinion, as the duty was entrusted to them of investigating the accounts and of preparing, and drawing the balance-sheets for 1907 and 1908, and as those wrongful drawings by Abbott appeared upon the surface of the accounts, and must have been discovered by any accountants who did their duty, it must be assumed that they did discover these transactions and had knowledge of Abbott's wrongful dealing with these cheques. For the plaintiff Mr. Greer contended that this assumption could not be made without imputing to the accountants that they were parties

to Abbott's frauds. I do not agree with that contention and do not come to any such conclusion, but I think the Court must assume, in the absence of evidence to the contrary, and upon the plaintiff's evidence that he was not aware that they had been negligent, that they did their duty and not that they failed to do it, and therefore that they must have ascertained that these cheques were being drawn on the plaintiff's banking account and paid by Abbott into his account with the defendants for his own purposes. In my opinion, although the plaintiff did not himself know that Abbott had been paying these moneys into his private account with the defendants, the persons to whom the plaintiff had entrusted the matter did know it. The plaintiff undoubtedly was aware on September 30, 1909, that Abbott had defrauded him by drawing cheques on the plaintiff's banking account and applying them to his own purposes. He had received the balance-sheet for the year 1908 on September 28, 1909, and had become aware that Abbott was debited in that balance-sheet for cheques wrongfully drawn and used by him in 1908. The plaintiff then knew that there was a private account with Abbott in the books of the plaintiff's firm and that items representing cheques wrongfully drawn by Abbott on the plaintiff's banking account, including cheques drawn in 1909, appeared in such private account. The plaintiff at this time knew of the repeated dishonesty of his servant, but thought in his own words "that Abbott was not dishonest at heart and would go straight after a severe lesson and would retrieve his position." If the plaintiff did not know all the details of the dishonesty it was because he was content to leave them to the accountants. In consequence of the discovery of the dishonesty of Abbott a new agreement between the plaintiff and Abbott was drawn up dated November 16, 1909, "inter alia" to regulate drawings in the future by Abbott. Abbott thereby agreed not to draw any moneys except as specified in the agreement, or to incur any liabilities without the plaintiff's previous sanction except in the ordinary business transactions of the firm, and it was further agreed that the balance-sheet issued by the accountants of December 31, 1908, was to be the basis of the accounts between Abbott and the plaintiff. The cheques representing the 306l. 0s. 4d. were treated for the purpose of the

accounts as drawn upon the plaintiff's account at the National Provincial Bank and as items to be debited to Abbott in the accounts of the plaintiff's firm, and I come to the conclusion upon these facts that the plaintiff must be held to have ratified these transactions of Abbott, and therefore that the plaintiff's claim in respect of the cheques for 1907 and 1908 and the uncrossed cheque for 1909 fails.

As I am clearly of opinion that the plaintiff is entitled to maintain his action for damages for conversion of the cheques and is not driven to rely upon the alternative count for money had and received to the plaintiff's use, it is unnecessary to deal in detail with the points raised by Sir Robert Finlay in answer to the alternative claim. They would, in my judgment, in themselves form no answer to the alternative claim. I content myself with expressing my view that the principle in London and River Plate Bank v. Bank of Liverpool (1) and not that in Holland v. Russell (2) governs this case.

The addition of the words "not negotiable" and in some cases "not negotiable account payee" to some of the crossed cheques under consideration has, in my opinion, no bearing upon the matters to be decided in this case. The protection of s. 82 is afforded to crossed cheques marked "not negotiable" as well as to cheques not so marked. It is certainly not conclusive evidence of negligence against a banker who collects crossed cheques so marked (see Gordon v. Capital and Counties Bank (3)). Even if I assume that the taking of a crossed cheque bearing these words would be some evidence of negligence, it could not affect my decision upon the later cheques, as the other considerations to which I have referred would outweigh any value I could attribute to such evidence.

The words "account payee" never appear upon any of the crossed cheques made payable to "selves or order" or to "selves or bearer." They are only to be found on the crossed cheques made payable to "Abbott or order," "Abbott or bearer," defendants "or bearer," and defendants "or order." The words "account payee" are a direction to the bankers collecting payment that

(1) [1896] 1 Q. B. 7.

(2) 4 B. & S. 14.

(3) [1902] 1 K. B. 242, at p. 275.

the proceeds when collected are to be applied to the credit of the account of the payee designated on the face of the cheque. They do not, on the facts of this case, afford any evidence of negligence, for if, as the defendants thought, Abbott was entitled to issue the cheques to the defendants for collection, the directions to them by the addition of these words would be quite natural and correct. In one case (January 27, 1911) a cheque so marked was made payable to the defendants "or order" and was indorsed by their manager per procuration for them, and the proceeds, when collected, were credited to Abbott's account. It was argued that this indorsement was a wrongful dealing by the defendants with the cheque outside the protection of s. 82, but in my view the indorsement by the defendants was made in the ordinary course and merely for the purpose of collecting the proceeds. It was unobjectionable if, as they thought, Abbott was entitled to issue the cheque to them, and the plaintiff's claim on this cheque stands or falls with the other cheques.

I am of opinion, therefore, that this appeal should be allowed with costs, and that judgment should be entered for the defendants with costs.

BUCKLEY L.J. I am also of opinion that this appeal succeeds. As we are differing with the learned judge from whom this appeal is brought, I add a few words of my own upon some of the points which have been argued before us.

The authority which Morison gave to the National Provincial Bank of England on April 7, 1888, was in general terms. There is no question but that, as between Morison and the National Provincial Bank of England, the cheques signed per pro. by Abbott were effectual, and the bank were entitled and bound to pay them. Under these circumstances it is impossible to say that the instrument was not a cheque. As between Morison and the National Provincial Bank of England, it was a cheque and not a forged instrument. A document cannot be a forged instrument as between certain persons and not as between others. The decision in Rex v. Holden (1) does not, I think, apply. The

(1) [1912] 1 K. B. 483.

instruments were Morison's cheques, and none the less because they were cheques drawn in fraud of Morison.

The next question is whether Morison was the true owner of the cheques. If he was not, the defendants cannot be liable in conversion. If he was, then s. 82 of the Bills of Exchange Act, 1882, applies, unless the words "true owner" in that section bear some meaning different from that which they bear when the subject under consideration is conversion. Having regard to what Lord Halsbury said in Great Western Railway v. London and County Banking Co. (1) it seems to me that I ought not to draw a distinction between the title to the cheque itself and the title to the money obtained or represented by it. In the case referred to the cheque was one drawn by the appellants, the Great Western Railway Company. The bank were held liable to them for the amount of the cheque. In Ogden v. Benas (2) the plaintiff was again the drawer, and he recovered upon the footing that the money paid was money of the plaintiff which the defendant had no right to receive, and that consequently the plaintiff was entitled to recover it back.

Next, treating the plaintiff as true owner of the cheque within s. 82, does s. 25 apply to a case in which the instrument has served its purpose and the money has been paid under it? Can the principal then claim to recover the money on the ground, in the words of s. 25, that he is not bound by the signature because the agent was not acting within the limits of his authority? Sir Robert Finlay has argued, and I think his argument is sound, that s. 25 is not addressed to that case. In any action brought upon the instrument s. 25 applies. But to such a case as the present it has no application. The section is found as one of a group of sections dealing with the capacity and authority of the parties as persons concurring in the instrument. It goes, I think, to the validity of the instrument as an instrument. It does not deal with the case of rights arising in respect of the disposition of the proceeds when the instrument has served its purpose and the amount has been paid. In considering, therefore, s. 82 as a defence, I think s. 25 may be set out of consideration.

(1) [1901] A. C. 414, at p. 418.

(2) L. R. 9 C. P. 513.

There remain those which are to my mind the important points of this case, namely, the questions, first, whether there was negligence; secondly, whether there was ratification; and thirdly, whether Morison, with the knowledge which he had, can render the defendants liable for the loss which he sustained by continuing to employ a dishonest agent. For convenience I collect the main significant dates upon these points. The first agreement of employment was on November 2, 1900. Abbott's account with the defendants was opened in June, 1905; the first relevant cheque was on May 29, 1907, 26l. The second was on June 10, 1907, 56l. The balance-sheet of December 31, 1907, disclosed the 5929l., of which 2929l. was debited to Abbott and 3000l. to goodwill. On August 12, 1908, Morison wrote a letter of that date to the accountants, from which it is plain that he knew that Abbott had lost money (as he said) in speculation. By that letter Morison urged that the losses should be proved by cheques which must, he said, have been drawn, and added that he ought to know that the money lost was actually lost in speculation and not used for any other purposes. The two cheques of 26l. and 56l. must, of course, have formed items in arriving at that balance-sheet. The balance-sheet further contained under the head of "Sundries, 3l. 1s. 9d.," that which was at December 31, 1907, the balance of the exchange cheques account. The balance-sheet to December, 1907, was prepared subsequently to the date of that letter, namely, in September, 1908. These two cheques, as to which there must have existed in the possession of Morison at his office every means of knowledge, either were not traced, which was wrong, or were traced and the defendants were not informed of it, which was worse. On September 28, 1909 (as the evidence shews), Morison received the balance-sheet of the following year, namely, to December 31, 1908. That brought forward as a debit to Abbott the 2929l. of the previous balance-sheet and further debited him with 306l. 0s. 4d., which was on December 31, 1908, the debit of his private account in Morison's books. On September 30, 1909, Morison wrote to the accountants about the deficit in Abbott's name, and the balance on the wrong side. On October 1, 1909, the accountants sent him a copy of Abbott's rivate account as appearing in the firm's books from January 1

to December 31, 1908, and from January 1 to May 22, 1909. Under these circumstances Morison, with all this knowledge and means of knowledge, on November 16, 1909, affirmed Abbott's engagement as his manager upon the terms stated in the letter of that date. The engagement was for the period of their joint lives and ten years after Morison's death during the remainder of Abbott's life, until determined by notice as there mentioned, with a stipulation that Abbott should not incur any liabilities without his previous sanction, except in the ordinary business transactions of the firm, and should not bet, gamble, or speculate, either in his own name, or that of the firm, or otherwise. The balance-sheet of December 31, 1908, was thereby agreed as a basis of the accounts between the parties. Down to the end of 1908, the total of the funds misappropriated which it is sought to recover in this action was 270l. 17s. 6d. After the end of 1908, Abbott misappropriated a further sum of 1614l. 6s. 3d., and for all these the plaintiff seeks to make the defendants liable.

Quite shortly it seems to me that, assuming as I do that when the cheques, say, in 1907, two in number, were dealt with by the defendants there was enough to put them upon inquiry, the position after (say) the end of 1907 was such that any suspicion which they ought to have had would have been lulled to sleep by the action of Morison himself. Such a sufficient time had then elapsed during which the customer had received back his passbook and his cheques, and had raised no question as to the validity of the cheques, as that the defendants were entitled to assume that there was no cause for suspicion or inquiry. As from that time no negligence is to be imputed to the defendants because they did not inquire whether the cheques were justified or not. As regards the earlier cheques of a date before such time had elapsed it seems to me that the plaintiff's action was such as to adopt and ratify Abbott's acts in the matter. The fact is that after these proceedings Morison, whose fault or misfortune it is that he has employed a dishonest agent, is seeking to throw the consequences of his dishonesty upon the persons who are not in any way responsible for that dishonesty, persons who dealt with the cheques in the ordinary course of business and, as is admitted, in perfect good faith.

The principle of Cocks v. Masterman (1) and of London and River Plate Bank v. Bank of Liverpool (2) is, I think, applicable. The principle is larger than that in Holland v. Russell. (3) It is, I think, the case that the bank are not here to be treated simply as agents who paid money to Abbott as their principal before the bank received notice not to pay it. The money here has been received by the defendants in good faith and paid to their customer, Abbott, in good faith. Since its receipt they have altogether altered their position in that they have in good faith paid the money away to Abbott. Under these circumstances, I think the principle of Cocks v. Masterman (1) applies, and that the defendants cannot be rendered liable for it to Morison.

On these grounds I think this appeal succeeds.

PHILLIMORE L.J. The plaintiff, in my judgment, has made out a prima facie case for recovering in trover against the defendant bank for the conversion of his cheques and to obtain as damages the face value of the cheques. I say his cheques, and I make out his right in the following manner. The cheques as originally drawn were instruments whereby the plaintiff, or a person to whom the plaintiff was bound or desired to pay money, could obtain, out of the moneys standing to the plaintiff's credit with his bank, the sum specified on the face of the cheque. The cheques were the plaintiff's instruments till he chose - or till Abbott on his behalf chose - to issue them to some outside person. As regards two of the cheques, which were open ones and drawn to "bearer," they need never have been further issued than by presenting them to the plaintiff's bank and getting them cashed. As regards the others, no doubt it was in contemplation that they should be issued to the extent of passing through another bank, because they were crossed. And one cheque would require further negotiation, because it was drawn to the order of somebody outside, to wit, the defendant bank. But all of them, till issued, remained the plaintiff's property. Till Abbott took them to the defendant bank they had not

(1) (1829) 9 B. & C. 902.

(2) [1896] 1 Q. B. 7.

(3) 4 B. & S. 14.

been issued. In Abbott's hands they were still his employer's property and Abbott could not, and did not, give to the defendant bank any title in them. Therefore, they were the plaintiff's cheques at the time when they came into the possession of the defendant bank. The defendant bank, as the collecting bank, presented them to the plaintiff's bank and collected the proceeds, and did not do this as a bare messenger. The defendant bank was the holder of the cheques which, with the exception of the one of which I have already spoken, were, by the time they reached it, bearer cheques, and it collected the proceeds in its own right, probably settled for them in account with the paying bank, very likely through the Clearing House, and gave its receipt. Therefore, the defendant bank converted the cheques. That the damages for such conversion are (at any rate where the drawer has sufficient funds to his credit and the drawee bank is solvent) the face value of the cheques is established in a series of cases, such as Bobbett v. Pinkett (1), Fine Art Society v. Union Bank of London (2), Bavins v. London and South Western Bank (3), and Macbeth v. North and South Wales Bank (4): so well established that it is not necessary to inquire into the principle which may underlie the authority. But the principle probably is that, though the plaintiff might at any moment destroy the cheques while they remained in his possession, they are potential instruments whereby the sums they represent may be drawn from his bankers, and, if they get into any other hands than his, he will be the loser to the extent of the sums which they represent. It may be also that any one who has obtained its value by presenting a cheque is estopped from asserting that it has only a nominal value.

Having got so far as determining that the plaintiff has made out a prima facie case, I have now to consider the several defences raised by the defendant bank. But before I enter upon these, there is a preliminary point raised by the plaintiff which, if established, would destroy or seriously affect several of these defences. He contends that these cheques are forgeries - statutory forgeries, as one of his counsel put it. Apart from the statute which I will consider in a minute, this contention cannot

(1) 1 Ex. D. 368.

(2) 17 Q. B. D. 705.

(3) [1900] 1 Q. B. 270.

(4) [1908] 1 K. B. 13.

be supported. These cheques are real documents which, when they reach their destination, will be honoured and properly honoured by the plaintiff's bank. They have been created for an improper purpose and in fraud of the plaintiff, but they have been created by a person whom the plaintiff had put in his place to create them. How, as was observed in the course of the case, they can be no forgeries when they reach their destination and yet be treated as forgeries while in the hands of other parties during the course of their journey, I fail to see. But it is said that the statute 24 & 25 Vict. c. 98, s. 24, makes it forgery to sign with intent to defraud any bill of exchange by procuration or otherwise for or in the name of or on the account of any other person without lawful authority or excuse, and that this enactment covers the case where a man having authority to sign uses his authority for an improper and fraudulent purpose to the detriment of his principal. This again, I think, is an error. The reason why the words "by procuration or otherwise" were inserted in this statute is well known. It was always forgery to counterfeit a man's signature to certain important documents, unless indeed you had the man's authority to write his name for him; but it was a different thing to append a man's signature with a statement shewing that you were not claiming that it was his hand, but that you signed for him under a supposed power. The point seems to have been mooted in one or two cases, and it was finally decided in White's Case (1) not to be a forgery under the law as it then stood, the argument which prevailed being thus summarized by counsel for the prisoner: "The prisoner has counterfeited nothing; the writing is not made as the writing of another, but avowedly as that of the prisoner himself; and though he may have committed fraud in saying that he was authorised to make the indorsement, that is not a forgery, but a mere false pretence." (2) In White's Case (1) the prisoner, though at one time a clerk of the man in whose name he signed, had not and never had authority to sign for him. To meet this the section I have quoted was passed. And it has no further application. It does not extend the law to cases where a man, having authority to sign the name of another per pro.,

(1) 1 Den. C. C. 208.

(2) 1 Den. C. C. at p. 212.

misuses his authority, just as, I think under the old law, if a man had authority to sign the name of another and misused that authority, he would not be indictable for forgery. I have not, in stating these various propositions, added the phrase "with intent to defraud" which is always an ingredient in the charge of the crime. The words are used to meet the possible though rare case of an innocent forgery; for example, for a wager, or for a joke as suggested by Walton J. in Rex v. Muirhead (1), where the analogous subject of false pretences was being discussed. I merely say this to guard my propositions. Rex v. Holden (2) does not decide anything to the contrary of what I have said. There are partnerships which, from the nature of their business, imply an authority in each partner to sign the firm's name to bills, &c. There are others where no such authority is to be implied, and unless it is given in express terms the partner has not got it. Avory J. stated, for the purposes of the point on which the opinion of the Court was to be taken, that the prisoner had no authority, meaning, I take it, no general authority as partner, and then, to stop a possible hole, took the opinion of the jury as to whether or not a particular authority had been given to him. That there was no suggestion that the prisoner had such general authority as partner, or under the partnership articles, appears from the argument of his counsel. They take no such point, but rely upon the general right of a partner to trade in the firm's name, and refer to Banks v. Gibson (3), and decisions in Chancery to that effect. The Lord Chief Justice has sent for all the papers in the case and a perusal of them confirms this view of the case. The Court, therefore, in Rex v. Holden. (2) only decided that the prisoner, having no authority to sign the name of his firm to bills, could not ride off on the fact that his firm's name was a partnership asset. It comes back to the same principle. Where there is power to sign per pro., a document so signed is not a forgery to the party to whom it is addressed, and who can, or a fortiori must, act upon it, and therefore is not a forgery at all. The misuse by an agent of his power of writing his principal's

(1) (1908) 1 Cohen, C. A. R. 189, at p. 190.

(2) [1912] 1 K. B. 483.

(3) (1865) 34 Beav. 566.

name either as a simple signature, or by signing per pro., may, however, be indictable as some form of fraud.

I now come to the defences; and the first defence raised is under s. 82 of the Bills of Exchange Act, 1882, which protects the bank which collects a crossed cheque and receives payment for its customer in good faith and without negligence from incurring a liability to the true owner of the cheque. As the plaintiff sues as owner, and as these cheques are not forgeries, the section applies. The good faith of the defendant bank is not questioned. The point left for decision is whether it has received payment for its customer Abbott without negligence.

The learned judge has held that there was negligence. In the appropriate part of his judgment he seems to have rested that negligence on one ground only, namely, that the collecting bank, seeing that the signature was per pro., had thereby notice, under s. 25 of the Act, that the agent had but a limited authority to sign, and was therefore bound at its peril to make due inquiries as to the extent of the authority, and that it made none. A conclusion so sweeping would make cheques signed per pro. and crossed either useless or mere incentives to gambling. I think the true answer is that s. 25 is without relevancy to s. 82. Under s. 25, he who takes a negotiable instrument signed per pro. has notice that he may, when he comes to present it for payment, or when some one else to whom he has negotiated it presents it for payment, find that he or his transferee may fail to get payment because the limited authority of the agent may have been exceeded. It is a question of infirmity of title. But when once the instrument has been discharged by payment, neither the presenter nor his predecessors or successors in title are put under a liability to repay because he or they had originally notice that they might not get their money. If it were otherwise, there would be two objections be the point as a point in favour of the plaintiff: one is that the only person who could avail himself of the right to recover would be the man who discharged the instrument - that is, the plaintiff's bank, not the plaintiff; the other, that if the plaintiff's bank sought to do it, the special rule as to prompt recovery of money wrongly paid to discharge a negotiable instrument laid down in such cases as London and River Plate

Bank v. Bank of Liverpool (1) and Imperial Bank of Canada v. Bank of Hamilton (2) would apply. I should here perhaps add that the cases cited in the judgment of the learned judge as authority for the duty of the collecting bank to inquire when it deals with cheques with per pro. signatures are cases of cheques not drawn for the principal by the dishonest agent signing per pro., but cases of cheques in favour of the principal indorsed by the agent per pro., and then paid by him into his own account, a most suspicious proceeding. But though, in the appropriate part of his judgment, the learned judge has apparently relied upon the bare fact of the signature being per pro. as sufficient to make the collecting bank negligent for non-inquiry, he has in another part of his judgment taken another fact into consideration, a fact which, we are told by counsel, he mentioned as impressing him during the course of the trial; and I think we must take this fact into consideration, as it certainly arises upon the evidence. Abbott was a customer of the collecting bank, well recommended, no doubt, but known to be an employee and a manager; and, being a manager and having the power of signing per pro. for his employer, he was placing cheques which he drew for his employer to his private account. If this happened often enough, and with regard to sufficiently large sums, I think it ought to give rise to some suspicion in the breast of the bank manager or the cashier. If it were material, I do not think that I should be prepared to dissent from the conclusion at which, I think, the learned judge intended to arrive - that there was negligence in cashing some of the earlier cheques, cashing them and paying them to Abbott's account without, at least, some inquiry. But as regards all the middle and later cheques, a suspicion which might have been reasonably entertained would with at least equal reason be lulled to sleep. No business man need anticipate that a series of cheques ranging over more than a twelvemonth, for appreciable sums, occasionally large ones, would pass unnoticed, if they had been improperly drawn by an employee. The plaintiff may be under no duty to the defendant bank to examine his pass-book, or check his accounts, or have them vouched or examined; but the defendant bank was entitled to act as a reasonable man of

(1) [1896] 1 Q. B. 7.

(2) [1903] A. C. 49.

business would, and to assume that - duty or not - the employer would in no very great length of time discover that he was being robbed in a mode so easily capable of detection. While inclining, therefore, against the collecting bank as to the few earlier cheques, I decide as far as I am concerned that the collecting bank without negligence collected and recovered payment for Abbott of the bulk of the crossed cheques which are the subject-matter of this action.

I am not impressed by the points made as to special cheques which were drawn to London County and Westminster Bank or bearer, and crossed generally, with the addition of the words "not negotiable account payee," or as to the one cheque which was drawn to defendant bank or order, the cheque forms used being forms with the word "order" printed, and in the one case the word "bearer" not having been substituted. On the assumption that Abbott was justified in paying these cheques to his account, there was nothing objectionable in his bank being the nominal payee; and in the order case the indorsement by the bank would be merely what is called "the necessary dealing with the instrument" in the language of Sir R. Henn Collins M.R. in Gordon v. London City and Midland Bank. (1)

There are two cheques not crossed. As to these the defence of s. 82 does not apply, and the defendant bank is driven back upon its next line of defence, which, if sound, covers them and the earlier crossed cheques, as to which there may have been negligence, and the later cheques to the end of 1908. It is the defence that the plaintiff ratified the drawing and cashing of these dishonest but genuine cheques. As to this defence, counsel for the plaintiff make two answers. They deny that in fact there was ratification, and they say - and truly say - as the learned judge in the Court below has said, that there can be no ratification without knowledge of what you are ratifying, and they contend that the plaintiff had no knowledge. On the first point, some time in the year 1908, when the balance-sheet for 1907 was being prepared by the accountant, it appeared that Abbott was short of a sum of 5929l. odd, for which he gave no account. The plaintiff said he put the matter wholly in the hands of his

(1) [1902] 1 K. B. 242, at p. 276.

accountant, and that he only knew generally from the accountant that this was so, and that Abbott gave some excuse as to unfortunate speculations in the name and on behalf of the plaintiff. The accountant was not called as a witness. In the result, after conference between the plaintiff and the accountant, the shortage was treated in this way: 3000l. was debited to goodwill, and for the balance Abbott was treated as a debtor, the item being carried into the balance-sheet as a debt due from Abbott, with some understanding that Abbott was to replace it at some undefined time or times, being warned not to do such a thing again. In 1909 there was a similar shortage of 306l. on the balance-sheet of 1908, and it was carried into the balance-sheet as a debt of Abbott's. The amounts collected by the cheques in suit in 1907 and 1908 form part of, or contribute to, Abbott's deficiencies. As the figures shew, they were by no means all. The deficiencies in each year were treated in the lump and debited and dealt with in the way I have mentioned. In my view there was ratification of those acts of Abbott's which depleted the plaintiff's banking account by the use of the cheques in question, as well as of other acts of Abbott which must have swelled the depletion. The plaintiff's remedy against Abbott for his misappropriation was abandoned; as to part without any quid pro quo, except the continuance of Abbott's services; as to the rest by converting him into an ordinary debtor with certain terms as to repayment. And this, I think, makes ratification. As to knowledge, it is unnecessary to decide what inference should be drawn when a principal knows so much that it is a policy of an ostrich to know no more. I am not sure that in that case we can altogether rely upon the doctrine that for this purpose means of knowledge are not the same as knowledge. It is unnecessary to decide this; for here the plaintiff put the accountant in his place, and we really cannot believe that the accountant did not know that Abbott had been passing per pro. cheques to his private account. Each cheque so passed would bear the stamp of the collecting bank and would either, according to modern practice, be returned by the paying bank to the customer, or would be available at any moment if the customer or his accountant demanded it. Ratification, therefore, covers a gap in

the defences quoad the uncrossed cheques and any of the early cheques, as to which there may have been negligence. It is not wanted for the later crossed cheques, and on the whole the defendant bank succeeds.

I have not thought it necessary to determine upon the defence of estoppel by negligence, which involves considerations of some difficulty.

I have only to add that two further defences raised for the defendant bank by counsel's speech in reply before us do not seem to me to help it. The doctrine with regard to prompt notice and demand where a negotiable instrument has been discharged in error only applies, as I have already incidentally said, where it is the payer of the instrument who seeks to recover back. And the doctrine that an agent who has in good faith paid to his principal money to which it is subsequently discovered the principal had no right cannot be required to return money which he has so paid over only applies where the action is for money had and received to the plaintiff's use, an action which assumes that there was no wrongful act in receiving the money. In such a case the plaintiff's licence to receive the money is presumed; and therefore the plaintiff cannot complain if it is properly paid over before the licence is revoked. In the present case the plaintiff, though he has in the alternative shaped his case as for money had and received, has a right to sue in trover for the conversion of his cheques, and accordingly would not be defeated by the fact that the defendant whom he sues for the misuse of his temporary dominion of the property claims to be an agent for some one else.

I agree that the appeal must be allowed.

Solicitors: Donald McMillan & Mott; Fraser & Christian.

A. L.