1876 May 5.

CHARLES AND ANOTHER v. BLACKWELL AND ANOTHER.

Principal and Agent-Agent's Authority to receive Cheques-Absence of Authority to indorse-16 & 17 Vict. c. 59, s. 19-Indorsement "per Procuration” or "as Agent."

An indorsement of a cheque "per procuration" or "as agent," purports to be an indorsement by the payee within 16 & 17 Vict. c. 59, s. 19, so as to protect the banker who has paid it, though the person by whom such indorsement is actually made has no authority to indorse.

K., an agent of the plaintiffs, having authority to sell goods for them and to receive payment in cash or by cheque, but having no authority to indorse cheques, received from the defendants a cheque on their bankers drawn payable to "S. & Co. (the name of the plaintiffs' firm) or order," and fraudulently indorsed it "S. & Co., per S. K., agent," and misappropriated the proceeds. The bankers having paid the cheque and returned it to the defendants and charged the amount to their account :

Held, that such payment by the bankers was a payment within the protection of the statute, and that the plaintiffs could not sue the defendants either for the price of the goods or for an alleged conversion of the cheque.

ACTION for the conversion of a cheque, with a count upon the cheque, and a count for goods sold, &c.

Pleas, amongst others, not guilty.

The cause was tried before Lord Coleridge, C.J., at the London Michaelmas sittings, 1875. The facts were as follows:-The plaintiffs carried on business in Milk Street, London, under the name of Charles & Co. They also started a separate business in Jewin Street under the name of Smith & Co., in the conduct of which one Samuel Kingsford acted as their agent. In November, 1874, the defendants bought goods of the plaintiffs through their agent Kingsford, receiving from him invoices headed "Bought of Smith & Co., merchants, London," with the following words in the margin, "Agent, S. Kingsford, Jewin Street." These invoices were made out by the plaintiffs and forwarded to the defendants by Kingsford. In due course the plaintiffs applied to the defendants for payment for the goods, when they found that Kingsford had obtained from the defendants two cheques, for 350l. and 1501. respectively, drawn by the defendants upon the London and County Bank payable to "Smith & Co. or order." Kingsford never accounted to the plaintiffs for these cheques, but obtained payment of the money from the bank by indorsing them "Smith

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& Co., per S. Kingsford, agent," and consequently the cheques got back into the hands of the defendants, the drawers. The plain- CHARLES tiffs in reality only sought to recover a sum of 2627., the extent of Kingsford's defalcation in respect of this transaction. It was admitted that Kingsford had authority to receive payment for goods on account of the plaintiffs in cash or by cheque, but that he had no authority to indorse cheques.

Upon these facts, his Lordship directed a nonsuit.

Herschell, Q.C., obtained an order nisi for a new trial, on the ground of misdirection.

May 5. Murphy, Q.C., and Channell shewed cause. The first question is whether the indorsement of this cheque was an indorsement within s. 19 of 16 & 17 Vict. c. 59, so as to justify the bank in paying the amount to Kingsford. The section is as follows:" Provided always that any draft or order drawn upon a banker for a sum of money payable to order on demand, which shall when presented for payment purport to be indorsed by the person to whom the same shall be drawn payable, shall be a sufficient authority to such banker to pay the amount of such draft or order to the bearer thereof; and it shall not be incumbent on such banker to prove that such indorsement or any subsequent indorsement was made by or under the direction or authority of the person to whom the said draft or order was or is made payable either by the drawer or any indorser thereof." The banker is supposed to know his customer's signature, but he cannot know that of the indorser. Kingsford was the general agent of the plaintiffs: he was authorized to sell goods for them and to receive payment for them in money or by cheque. If this cheque had been indorsed simply "Smith & Co.," no question could have arisen: the bank would have been justified in paying it. But it will be said that an indorsement "per procuration" (which the indorsement here amounts to) is not within the statute, inasmuch as it does not purport to be an indorsement "by the person to whom the cheque is drawn payable." There is no decided case in banc upon the subject: but there is an unreported nisi prius case of Cooper v. Bank of England, cited in Hare v.

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Copland (1), where Martin, B., ruled that an indorsement in this form, "Jackson & Co., per proc. J. Holmes, Agent," was a sufficient indorsement within the statute to warrant the bank in paying a cheque drawn payable to "Jackson & Co. or order," though it was admitted at the trial that Holmes had no authority to indorse cheques for Jackson & Co., his employers; and that ruling was not questioned. (2) The defendants here have ratified the act of their bankers in paying the draft; therefore, as between them and the plaintiffs, the goods have been paid for to an agent authorized by the latter to receive the money. A payment upon an indorsement in this form is quite as much within the mischief which the statute intended to meet as a signature without the words "per procuration" or "agent." Assuming that to be so, the defendants' money has reached the hands of an agent authorized to receive it for the plaintiffs, and they cannot now have recourse to the defendants either for the cheque or for the price of the goods.

Herschell, Q.C., and Lumley Smith, in support of the order. Consider the case apart from Kingsford's authority. The cheque was drawn payable to "Smith & Co. or order," a mode of drawing adopted for the purpose of insuring the proceeds reaching the hands of the payees. Before 16 & 17 Vict. c. 59, if the indorsement was forged, and the bankers paid the cheque upon that forged indorsement, they could not have charged their customers with the payment. Now, there can be no ratification of a forged indorsement, or of a payment made upon a forged indorsement: Brook v. Hook. (3) As against the plaintiffs, therefore, the payment was not a good payment, consequently the cheque remains their property, and they are entitled to recover it from the defendants into whose hands it has improperly passed, in order that they may present it at the bank with a proper indorsement. The enactment in 16 & 17 Vict. c. 59 makes no difference. The cheque does not "purport to be indorsed by the person in whose favor it is drawn." An indorsement "per procuration " is not an indorse(1) 13 Ir. C. L. Rep. 426, 450.

(2) Mr. Justice Christian, at p. 439, referring to the source from which the information as to that case was obtained, viz. a short-hand writer's note

of it furnished by the solicitors of the Bank of England, says,—“ Really, after having stooped so low for an authority, we are but ill rewarded for our humility."

(3) Law Rep. 6 Ex. 89.

ment by the person to whom the instrument is drawn payable :
and this is not even an indorsement per procuration; it is in a
singular and unusual form. The acceptance or indorsement of a
bill of exchange expressed to be "per procuration " is a notice to
the indorsee that the party so accepting or indorsing professes to
act under an authority from some principal, and imposes upon the
indorsee the duty of ascertaining that the party so accepting or
indorsing is acting within the terms of such authority: 1 Parsons
on Bills, pp. 119, 120, citing Attwood v. Munnings (1) and Alexander
v. Mackenzie. (2) The same rule applies to the indorsement of
cheques. But little reliance can be placed upon the case supposed
to have been decided by Martin, B., at the sittings at Guildhall in
Hilary Term, 1860; and it was evidently received with very little
favor by one eminent member of the Irish bench in Hale v. Cop-
land. (3) Kingsford here is just in the same position that the
plaintiff's traveller Montgomery was in Hogarth v. Wherley. (4)
There, M., the plaintiffs' traveller, having received an order for
goods from the defendant, a customer, the plaintiffs wrote to M.
expressing their unwillingness to execute the order until a former
account was settled, adding, "We should like to draw upon him
(the customer) for the former," mentioning the amount. M.
shewed this letter to the defendant, and obtained from him an
acceptance at three months' date payable to "my order," with a
blank for a drawer's name. This bill was paid at maturity, but
not to the plaintiffs, M. having filled up the blank with his own
name, and fraudulently negotiated the bill. In an action to
recover the price of the goods for which the bill had been given,
it was proved that upon one occasion at least the defendant had
accepted a bill drawn by M. in blank, which had been received by
the plaintiffs as payment; but there was no evidence to shew the
form of that bill. It was held (Grove, J., doubting) that neither
the letter nor the former dealing was any evidence of authority in
M. to draw the bill in question, so as to sustain a plea of payment.

BRETT, J. I am of opinion that this order should be discharged.
The plaintiffs were creditors of the defendants upon orders given

(1) 7 B. & C. 278.
(2) 6 C. B. 766.

(3) 13 Ir. C. L. Rep. 426, 439.
(4) Law Rep. 10 C. P. 630.

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to Kingsford, the agent of the plaintiffs. As between the plaintiffs and the defendants, I think it must be taken that Kingsford had authority in the first place to receive in payment a cheque drawn payable to the order of the plaintiffs. But, as between the plaintiffs and the defendants, Kingsford had no authority to indorse the cheque. He did, however, indorse it without the authority or knowledge of the plaintiffs, and in this form,-"Smith & Co., per S. Kingsford, agent;" and the defendants' bankers paid the cheque as if the indorsement had been a genuine indorsement by Smith & Co., and charged the defendants with the payment. Kingsford, having negotiated the cheque in this way, may be assumed to have misappropriated the money, or part of it: and the plaintiffs now sue the defendants, first, in trover for the cheque which had thus got back to the defendants' hands; and, secondly, for goods sold and delivered and for money had and received. The answer on the part of the defendants is, that they are entitled to the cheque, and that they have paid for the goods. It was argued on the part of the plaintiffs that this case must be decided upon the footing that the indorsement was not within s. 19 of 16 & 17 Vict. c. 59, and as if that Act had never been passed; and that, although the defendants did give the cheque to Kingsford, and Kingsford had authority to receive it, yet, inasmuch as he had no authority to indorse for Smith & Co., the indorsement was a fraud upon his employers, and therefore the bankers, who were only authorized to pay the cheque upon the indorsement of Smith & Co., have paid it in an unauthorized manner, and consequently the defendants have a right to say to them, "We authorized you to pay a cheque indorsed by Smith & Co.; you have paid it without such an indorsement, and therefore you have not paid money of ours:" and, the defendants having that right, it is urged that the plaintiffs have an equal right to say to them, "You have not paid us for the goods we sold you." It was further argued that, as the cheque had been held by Kingsford for the plaintiffs, it remained constructively in their possession, the perty in the cheque was in them, and the unauthorized indorsement by Kingsford did not take that property out of them: and consequently that, the cheque having come to the hands of the defendants, the plaintiffs have a right to demand it from them, in

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