OFFICIAL TRANSCRIPT:

[HOUSE OF LORDS JOURNALS, 1903.]

H. L. (E.) 1903 March 9.

H. L. (E.) STARKEY . . . . APPELLANT;

AND

BANK OF ENGLAND . . . . RESPONDENTS.

Principal and Agent - Bank of England - Transfer of Stock - Power of Attorney - Implied Warranty of Authority - Innocent Misrepresentation - Forged Power - Liability of Agent.

The principle of Collen v. Wright, (1857) 8 E. & B. 647, 657, is not confined to cases where the transaction with the person representing himself to be an agent results in a contract.

A broker applied to the Bank of England for a power of attorney for the sale of Consols believing himself to be instructed by the stockholder, and bona fide induced the bank to transfer the Consols to a purchaser upon a power of attorney to which the stockholder's signature was forged:-

Held, that the broker must be taken to have given an implied warranty that he had authority, and that he was therefore liable to indemnify the bank against the claim of the stockholder for restitution.

Decisions of Kekewich J., [1901] 1 Ch. 652, and the Court of Appeal, reported as Oliver v. Bank of England, [1902] 1 Ch. 610, affirmed.

IN December, 1897, a sum of Consols was standing in the joint names of F. W. Oliver and his brother Edgar in trust for others.  F.W Oliver wrote to a firm of stockbrokers of which the appellant was a member, inclosing an application to the Bank of England to issue a power of attorney from F.W and Edgar Oliver to the appellant and his partner to transfer the Consols, and requesting the brokers to lodge the application with the bank. The appellant having lodged it, the bank issued to the brokers a power of attorney to sell and transfer, and sent notices to F.W and Edgar Oliver at the addresses given in the application that a power had been applied for.  No notice reached Edgar Oliver.  The brokers forwarded the power to F.W Oliver, who returned it to the brokers executed by him, and purporting to be executed by Edgar.  The brokers, believing that all was right, sold the Consols, and the power was lodged at the bank by the appellant, who afterwards signed the "demand to act" indorsed on the power and executed the transfer to the purchaser.  A similar transaction afterwards took place with regard to a transfer of bank stock.  After F.W Oliver's death in 1899 it was discovered that the signatures of Edgar Oliver to the powers of attorney were forgeries and that he knew nothing of the transactions.  Edgar Oliver having brought an action against the bank for restitution the appellant was made a third party upon a claim of indemnity by the bank.  The action was tried before Kekewich J., whose judgment declared that the transfers were invalid, and ordered the bank to place equivalent amounts of Consols and bank stock in the name of Edgar Oliver in the bank books and to pay him a sum equal to the dividends which had accrued since the transfers; and also ordered the appellant to indemnify the bank by similar transfers and payment to the bank. (1) This decision was affirmed by the Court of Appeal. (2)

March 6, 9. Upjohn, K.C., and Rufus Isaacs, K.C. (Stewart-Smith, K.C., and Stamp with them), for the appellant, contended that no action lies for an innocent misrepresentation, nor even for a false statement made through carelessness but in the honest belief that it was true though without reasonable ground: Derry v. Peek (3) ; that the exception from this absolute rule established by Collen v. Wright (4) applies only to transactions resulting in contract; that there was no decision in favour of the contrary view; that dicta, of Lord Esher M.R. in Firbank's Executors v. Humphreys (5) were unsound; and that they and any similar dicta elsewhere as well as Collen v. Wright (4) might be, and if necessary should be, overruled in this House.  They also carefully examined the authorities and developed the arguments which are clearly and fully set forth in the reports of the decisions below.

H. D. Greene, K.C., Latham, K.C., and Howard Wright, for the respondents, were not heard.

(1) [1901] 1 Ch. 652.     (3) (1889) 14 App. Cas.337.

(2) [1902] 1 Ch. 610.     (4) 8 E. & B. 647, 657.

(5) (1886) 18 Q. B. 1). 51, 60.

EARL OF HALSBURY L.C. My Lords, I confess I have been puzzled to think how I should have argued this case on the part of the appellant if I had had the duty of doing it.  The two learned counsel have very ingeniously occupied a considerable time in endeavouring to solve the difficulty I should, have had.  I entertain no doubt upon the question: it seems to me that there never has really been any doubt.  Taking the, original judgment in Collen v. Wright (1), I will just read three passages from it.  Lord Campbell says: "There can be no doubt that the testator asserted that he had authority to let the property on the terms to which he agreed.  That is a, promise and a warranty.  Might he not then have been sued on the warranty, although he believed it to be true?  If he induced the plaintiff to act upon it, he was bound.  It is broken since the testator had not authority." Wightman J. says: "If a man makes a contract as agent he does promise that he is what he represents himself to be, and he must answer for any damage which directly results from confidence being given to the representation."  Crompton J. says: "I am of the same opinion.  The first question is, Whether an action lies on the contract of a person representing himself to have authority, there being good consideration for such contract."  Those three statements seem to me to cover the whole ground.  And those statements are corroborated by the full Court of Exchequer.  The whole number, therefore, of the judges who held both of those principles to be part of the law of England was nine judges, and it was nearly fifty years ago.  That seems to me to render this case free from doubt.

I do not seek to go into the principles upon which that law may be supposed to rest.  It is enough for me to say that, at any rate upon the grounds there stated, it has been the law for fifty years, enunciated by judges of the highest authority.  I have not the least notion how that state of the law is supposed to have been shaken by the decision in Derry v. Peck. (2)  We have more than once been informed that Derry v. Peck (2) is supposed to have altered the law.  I do not think Derry v. Peck (2) has anything to do with it. Derry v. Peek (2) was an action for deceit, and this House held that where it was an action for deceit you must prove deceit, and you must prove mala fides on the part of the person who deceived the other.

(1) 7 E. & B. 301 ; 8 E. & B. 647, 657.  (2) 14 App. Cas. 337.

I suppose that was no new law: the application of that law to the particular case became a question of fact, and purely of fact.  Some of us thought - I myself did - that the facts were rather in favour of the view that there was intentional deceit; but that was a question of fact, and it was disposed of by the Court below.  The House was unanimous in affirming that the Court below was right in coming to the conclusion that therewas in fact no real deceit.

But what has that to do with the present case?  Here is a formal document intended to be acted upon, which, upon the face of it, purports to be a representation of authority by the persons whose signatures purport to be appended' thereto.  Upon the facts I should have thought it was impossible 'to doubt that that was a representation of authority on the part of those two persons whose signatures purport to be to it, and the person who presents the authority and demands to act upon it is himself asserting that he has authority to do the thing he is doing.  He had no such authority.  The result is that the bank have transferred a quantity of Consols standing in the names of two persons when only one person gave the authority.

That appears to me to come within the decision to which I have referred, and I do not think it is necessary to go through the eaten& of cases upon that subject.  It is said that this case is extending the principle of Collen v. Wright. (1) I do not think it is.  It seems to me as a matter of principle to fall exactly within Collen v. Wright. (1) I am not able, and I never have been able, from the beginning to the end of the argument, to understand what is meant by saying that there is a distinction which makes it an extension of Collen v.

Wright (1), because the consequence in Collen v. Wright (1) was a contract, but here no such consequence follows.  I think that is absolutely immaterial.  The argument arises from a confusion as to whether the facts made a contract between the plaintiff and the defendants, and the difference of whether or not a contract

(1) 7 E. & B. 301; 8 E. &B. 647, 657.

follows in consequence of the representation made; that seems to me an absolutely illogical and unintelligible distinction.  That which does enforce the liability is this-that under the circumstances of this document being presented to the bank for the purpose of being acted upon, and being acted upon on the representation that the agent had the authority of the principal, which he had not, that does import an obligation-the contract being for good consideration-an undertaking on the part of the agent that the thing which he represented to be genuine was genuine.  That contains every element of warranty.

The result is, I think, that this appeal should be dismissed with costs, and I move your Lordships accordingly.

LORD ASHBOURNE.  My Lords, I entirely concur.  I do not think that any of your Lordships have had any doubt at any period during the argument as to the proper conclusion to be arrived at.

LORD MACNAGHTEN.  My Lords, I entirely agree.

LORD DAVEY.  My Lords, I also agree.  The point made by Mr. Rufus Isaacs seems to be this - that Collen v. Wright (1) was an exception from the rule that an innocent misrepresentation gives no cause of action, and as an exception is confined to the particular case in which it was laid down ; and that Collen v. Wright (1) having been a case in which a supposed agent induced a third party to enter into a contract with him, it must be confined to the cases where the transaction entered into with the supposed agent was in the nature of a contract.  I think that would be {I very narrow construction to put upon the rule laid down, and not in accordance with the statement of it by other learned judges.  I will not trouble your Lordships by reading what Lord Bramwell said in Dickson V. Reuter's Telegram Co. (2), but he pointed out that it was a, fallacy to treat it as an exception from the law relating to actions of deceit, that it really and truly was a separate and independent rule of law.

(1) 8 E. & B. 617, 657.    (2) (1877) 3 C. P. D. 1.

As a separate and independent rule of law it is not confined to the bare case where the transaction is simply one of contract, but it extends, to every transaction of business into which a third party is induced to enter by a representation that the person with whom lie is doing business has the authority of some other person.

Mr. Upjohn's argument addressed to us to-day took a different line.  As I understand it, the whole stress of his argument has been to shew that this case is not an exception from the rule as to actions of deceit, and that the rule as laid down in Collen v. Wright (1), and other cases which need not be enumerated, does not extend to cases where the supposed agent did not know that he had no authority and had not the means of finding out.

It  is  sufficient to take the earliest cases in which the rule is stated, and I will take for example a case older than Collen v. Wright (1), Lewis v. Nicholson (2), in which Lord Campbell states the doctrine thus.  After saying that " in no case where it appears that a man did not intend to bind himself, but only to make a contract for a principal, can he be sued as principal, merely because there was no authority," he says: "He is liable, if there was any fraud, in an action for deceit, and, in my opinion, as at present advised, on an implied contract that he had authority, whether there was fraud or not."

Other cases might be cited to the same effect, and I am of opinion that it is utterly immaterial for the purpose of the application of this branch of the law whether the supposed agent knew of the defect of his authority or not, and indeed that is the very doctrine which is asserted by Story J. in the first edition as well as in subsequent editions of his work on Agency to which a reference has been made. (3) The same point was also, as I understand the case, dealt with in Cherry v. Colonial Bank of Australasia. (4)

LORD ROBERTSON.  My Lords, I concur.

LORD LINDLEY.  My Lords, this is the first time I ever heard Collen v. Wright (1) disputed. It is good law,

(1) 8 E. & B. 647, 657.   (2) (1852) 18 Q. B. 503.

(3) Story on Agency, s. 264 (ed. 1839, p. 226).    (4) (1869) L. R. 3 P. C. 24.

and according to Story J. it was law long before that case. I do not quite understand the observation made by Cockburn C.J. that there was nothing in Story against the view which he took. Whatever may be said of other cases, Collen v. Wright (1) is sound, Firbank's Executors v. Humphreys (2) is sound, and so is this decision.

(1) 8 E. & B. 617, 657.  (2) 18 QBD 54, 60 

Judgment of Kekewich J. and order of Court of Appeal affirmed and appeal dismissed with costs.

Lords' Journals, March 9, 1903.

Solictors:  Morley, Shirreff & Co.; Freshfields

 Source: House of Lords and Privy Council Volumes, 1903, Exeter Law Library, (copied Oct 2006)