CHAP XVII.

Supra.

CHAPTER XVII.

FORGERIES (2)-ADOPTION OR RATIFICATION (MARSHALL v. COLONIAL BANK)—

ESTOPPEL.

It has already been laid down as a first principle of law that a person only signs away his property with a willing or intending mind, and that the giving of a bill or cheque, or incurring any kind of liability upon such an instrument, is subject to the same rule.

An instance of this rule was given in last chapter in the case of the Imperial Bank of Canada v. the Bank of Hamilton. There, a bank had marked a cheque good for $5, and it was subsequently taken out of the bank and increased to $500, so that it appeared to be a marked cheque for that amount, and was dealt with by another bank as such, and yet it could only be enforced against the bank which marked it as a $5 cheque.

Another striking instance of this same proposition 1 C.L. R. 243. in law was the recent case of McLaughlin v. the "Daily Telegraph" Newspaper Co. McLaughlin had, while insane, given his wife a power of attorney to deal with his property, and she alienated it, but when he regained his sanity he proved that the power was given while his mind could not accompany the transaction. It followed that, upon this being satisfactorily shown, the power fell to the ground, and any disposition or giving or selling of his property depending upon that power fell with it. The Court ordered the property in question to be restored. But, being a Court of Equity, restoration

was only ordered subject to McLaughlin allowing credit CHAP. XVII. to the other side for the moneys realised of which he had actually received the benefit.

In the last chapter we considered the case of a bank being landed with an invalid instrument, which it has innocently paid, and the possibility of recovering the money from the party who received it.

Generally, if this is not possible, the bank must be the loser. But it was pointed out there are cases in which the drawer or other person liable may have so conducted himself as to be treated in law as having ratified or adopted the instrument in question as a valid obligation of his own.

The simplest illustration of this would be a case Unauthorised where a clerk, having no authority to draw cheques on signature. his master's account, but having a certain amount of discretion and confidence reposed in him by his master, in the absence of the latter concludes some transaction, and gives a cheque purporting to be signed on account of his master by himself as agent. In the ordinary case, the master is not bound by this cheque, and the bank cannot pay it at the master's expense; so far as the account of the employer is concerned, the cheque is waste paper.

But should the master discover what had been done, Express ratification. and decide to confirm the action of his clerk, his proper course would be to write to the bank and specially sanction the payment of that cheque; that would be an express ratification. Ratification may, of course, be either express or implied from the conduct of the apparent drawer. To illustrate an implied ratification, we will Implied take a simple case. Let us suppose that in the case ratification. of the master and his clerk, the transaction, for which the master's liability is in question, consisted in the purchase of material used in the master's business; that upon his return the master sees this material, which has

payee.

CHAP. XVII. been recently brought upon his premises, and which he knows is always bought for cheque on delivery; without asking any questions he allows the material to be used; also he has had access to his cheque book, and has seen, from his clerk's note in the butt of the book, that in his absence this cheque was drawn. Under these circumstances, he has adopted the contract for purchase of the material made by his clerk, and must pay for it; probably also his conduct, coupled with subsequent silence, Ratification amounts to a ratification of his clerk's assumption of of cheque to authority in drawing the cheque. It would be competent for a jury to find so; and in this case he must not only pay for the goods, but can be made to do so in the particular way of honouring that cheque. The bank, knowing nothing of this, would still have no authority to pay the cheque but, supposing it to have paid, and afterwards to be attacked by its customer for charging the cheque against him without authority, then the bank could, upon proving the facts which amounted to adoption, successfully defend itself, and it would not be fatal that the ratification of the clerk's signature had been made to the payee of the cheque only; for the bank which paid the cheque, or any holder in due course, subsequent to the payee, would be entitled to the benefit of the ratification.

Position of bank.

It should be noticed that, in point of law, the relief to the bank would not depend directly on the ratification, for as between the bank and the drawer the bank would be in a position different to any ordinary holder for value, inasmuch as, whatever clerk of the bank took or paid the cheque, the knowledge of the bank as to the proper signature for drawing upon that account would be imputed to it; therefore the bank would be a holder for value (bona fide, no doubt), but with notice of the defect in the cheque. But the position of the bank would be saved by the ratification indirectly, for, once given,

the ratification enures, not for the payee only, but for CHAP. XVII. the benefit of the subsequent holders to whom the cheque may be negotiated. Any of these could enforce the cheque against the drawer. If, then, he attempted to escape liability to the bank on the ground. that its knowledge of the defect in signature invalidated payment, the bank could reply by claiming an equal amount of money as paid for the use of the drawer, and to avoid circuity of action.

to bank.

The implied ratification of a signature, and a bank's Ratification justification for paying upon it, may depend, however, upon conduct which is directly within the notice of the bank. For instance, in the case described, we will suppose the bank to know that a great degree of confidence was placed in that clerk by that master, and to have paid. without question the first cheque of the kind presented, and that afterwards the master had his pass-book, and checked it, and made no demur, and then another cheque drawn in the same way was presented through the same channel. Under these circumstances, if the bank paid this cheque, it might fairly claim to be justified in assuming that the master by his previous conduct had in the first instance ratified the clerk's assumption of authority, and that implied authority for future similar transactions had been given.

Morris v.

In the language of a very great Judge, used in a case when a man had paid a bill improperly accepted in his name, and was thereafter sought to be charged with other and similar bills, "One who pays one bill which purports Per Willes, J. to bear his signature as acceptor thereby makes evidence Bethell, L. R. against himself that the person who wrote the acceptance 5 C.P. 47. did so with his authority; and if the bill is given in a course of business implying a continuance of such authority, it may be conclusive evidence." If, instead of the words italicised above, you read one who knowingly allows a cheque which purports to be his to be charged

CHAP. XVII. against his bank account, and complete the sentence as before, you will have a statement of law applicable to customer's current accounts.

Effect of

quære.

In the case, the jury found, and was held competent so to find, that by the adoption of the one forgery the seeming acceptor was not precluded from denying others of the same kind, on the principle that "one swallow does not make a summer," and there being no regular course of business in question, but a variety of separate business transactions.

Ratification implied from conduct is, of course, the ratification of some thing already transacted, and repeated ratifications, or perhaps the ratification of a single act done as in the ordinary course of business, are matters of conduct upon which implied authority for the future may be founded.

The question as to how far a customer's acceptance acquiescence of his pass-book and revision of it without demur constiin pass book tutes a ratification of payments charged against him, and shown therein, is fully discussed in Sir John Paget's book in the chapter on pass-books. It seems that a customer will not be allowed, as a rule, to re-open an account that he has not, after having the opportunity, demurred to; but that the English decisions on the point are not in complete harmony with each other, nor very helpful to the bank; and that the American decisions give the banker greater protection, and are besides more in accord with modern tendency.

Questions of adoption or ratification, and of implied authority, depend always upon the particular facts of each case. The cases present such varying facts that we cannot lay down general principles by which at once to distinguish a set of facts which amount to adoption from a set of facts which do not.

Relationship In determining any such question, the principal of parties. points to be considered are, Whether he whose signature