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[1899 J. 1799.] [1899 J. 2053.]

1902 Jan. 21, 23; March 3.


(1902) 1 Ch 816.







Neville, K.C., Butcher, K.C., and A. L. Morris – for the defendants/Appellants

Upjohn, K.C., and Johnston Edwards – for the plaintiff/Respondents

Solicitors: Hollams, Sons, Coward & Hawksley; Robinson & Stannard



COMMERCIAL/BUSINESS LAW: Principal and Agent – Power of Attorney – Construction – General Words – Ejusdem generis – Borrowing by Agent – Representation of Authority – Excess of Authority – Money paid into Banking Account of Principal – Money in Possession of Principal – Money had and received to Use of Principal – Misappropriation by Agent – Liability of Principal to Lender – Conduct – Constructive Notice – Estoppel.



The plaintiff carried on business as a tobacco merchant in Melbourne, Australia, under a firm name. He also had a London office bearing the firm name, at which the business of purchasing and paying for goods in London and shipping them to Melbourne was carried on. While absent in Australia he appointed an agent at the London office under a power of attorney, describing him (the plaintiff) as of Melbourne trading as a tobacco merchant under the firm name, and authorizing the agent for him (the plaintiff) and in his name, or in his trading name, “to purchase and to make any contract for the purchase of any goods in connection with the business carried on by me as aforesaid,” and to make such purchase either for cash or on credit, with power to modify or cancel the contracts for purchase, and “where necessary in connection with any purchase made on my behalf as aforesaid, or in connection with my said business,” to make, draw, sign, accept, or indorse any bills of exchange or promissory notes which should be requisite or proper in the premises, and to sign the plaintiff’s name or his trading name to any cheques on his banking account in London.


The agent, purporting to act under the power of attorney, obtained a loan of 4000l. from the defendants, a firm of cigar merchants in London who had previously had frequent business dealings, including loan transactions, with the plaintiff. On applying for the loan the agent, who was well known to the defendants, represented that the power of attorney authorized him to borrow money, and that the loan was required for the purposes of the plaintiff’s business. At the same time he produced to them the power itself, but, being satisfied with his assurances, they did not read it. On receiving the 4000l. the agent handed to the defendants as security bills of exchange for the amount accepted in his own name per pro the plaintiff’s firm. He then paid the 4000l. into the plaintiff’s London banking account, drew it out by cheques drawn by him under the power, and applied it to his own use.


The plaintiff, being at that time in Australia, had no knowledge of the loan transaction. In an action by him against the defendants to restrain them from negotiating the bills upon the ground that they had been accepted without his authority, and upon a counter-claim by the defendants against the plaintiff for the 4000l. as money had and received by him to their use:-

Held, (1.) upon the construction of the power of attorney, that it gave the agent power to purchase only, with such powers as were necessarily implied by the appointment of the agent as purchasing agent, and did not confer authority to borrow; and (2.) that the primary cause of the loss of the 4000l. was the neglect by the defendants of ordinary business precautions when lending the money to the agent, and that they were therefore estopped by this neglect, and also by constructive notice that the agent had no power to borrow, from claiming it as money had and received by the plaintiff to their use.


Quære, per Vaughan Williams L.J., whether the circumstances were such as to entitle the plaintiff to plead ignorance or absence of means of knowledge of the transaction as constituting by itself a sufficient answer to the defendants’ claim as for money had and received.


Marsh v. Keating, (1834) 1 Bing. N. C. 198; 2 Cl. & F. 250; 37 R. R. 75, discussed.


Decision of Farwell J., [1901] 1 Ch. 261, affirmed.


APPEAL against the decision of Farwell J. (1)

In 1888 the plaintiff, Louis Jacobs, became a partner in an old-established firm of tobacco and cigar merchants carrying on business in Melbourne, Australia, under the name of Jacobs, Hart & Co.


The defendants, Morris & Morris, were a firm consisting of three partners, Arthur Morris, William Morris, and Walter Morris, carrying on business as cigar merchants at 4, Cullum Street, in the City of London. They had had business dealings with the plaintiff’s firm since 1889.


In 1898 the plaintiff became the sole owner of the business of Jacobs, Hart & Co. Since 1882, and to enable the plaintiff’s firm to transact necessary business in connection with buying and paying for goods, principally cigars, and shipping them to Melbourne, they had had an office in London, No. 120, London Wall. The name of the plaintiff’s firm was over the office door, and the firm’s name appeared on the letter-paper and in all business documents used in carrying on the office business. In 1888 the then partners in the firm, the plaintiff and his father, both of whom had at that time charge of the London office, went to Australia, leaving a representative or agent in charge.

(1) [1901] 1 Ch. 261.


In 1893 or 1894 the plaintiff’s brother, Leslie Jacobs, who was then carrying on in London the general business of a commission agent on his own account, became the firm’s representative or agent at the London office, and on January 24, 1899, the plaintiff, who was then in Melbourne, executed a power of attorney – which described him as of Melbourne, “trading as a tobacco merchant and manufacturer under the style of ‘Jacobs, Hart & Co.'” – appointing Leslie Jacobs, therein described as “commercial agent,” attorney, “in and throughout the United States and the continents of America and Europe and all other parts of the world other than Australasia and New Zealand for me and in my name, or in my said trading name, to purchase and to make and enter into, sign and execute any contract or agreement with any persons, firm, company or companies for the purchase of any goods or merchandise in connection with the business carried on by me as aforesaid, or for the purchase or acquisition by me of any patent rights or the right to the exclusive or partial use of any patent or invention, or for the purchase or acquisition of the right to act as the sole or partial agent of any person, firm or company, and to make any such purchase or acquisition, either for cash or on credit, or partly for cash and partly on credit, as my said attorney shall in his discretion think advisable.” Then there was a power to modify or vary the terms and conditions of such contracts, or wholly cancel the same, upon such terms as the attorney might deem advisable, and to demand and recover all moneys and things belonging to him, Louis Jacobs, trading as aforesaid, and to settle accounts. Then it continued: “And for me and on my behalf, and where necessary, in connection with any purchases made on my behalf as aforesaid, or in connection with my said business, to make, draw, sign, accept or indorse any bill or bills of exchange, promissory note or promissory notes, notes of hand or bills of lading which shall be requisite or proper in the premises, and to sign my name or my said trading name to any cheques or orders for the payment of money on my banking account in London, England.” A banking account had been kept with the London and Westminster Bank in the name of the firm continuously since 1882, but since 1893 it had been operated upon exclusively by Leslie Jacobs under the power of attorney, and it appeared that he had used it partly for the plaintiff’s purposes and partly for his own. The office expenses were paid by himself, and he was paid for his services to the firm solely by commission.


The defendants, Messrs. Morris, were well acquainted with Leslie Jacobs, and were aware that he was acting for the plaintiff’s firm under a power of attorney.


In 1898 and the early part of 1899 Messrs. Morris advanced considerable sums, to the total amount of some 3000l., on loan to Leslie Jacobs, who purported to act for the plaintiff’s firm, upon the security of bills of exchange accepted by him in the firm’s name, all of which were duly met at maturity.


In June, 1899, Leslie Jacobs applied to Messrs. Morris for a fresh loan of 4000l., which he represented that he was authorized to borrow on behalf of the plaintiff’s firm, and this loan he eventually obtained. The circumstances under which the loan was so applied for and obtained were stated in detail by Arthur Morris, the senior member of the firm of Messrs. Morris, in his evidence in chief at the trial. His statement was to the following effect. He said that he was aware that loans to a considerable amount had from time to time been made by his firm to the plaintiff’s firm, it being a common practice with them, Messrs. Morris, to make loans to customers. Leslie Jacobs having informed him that the plaintiff’s firm contemplated pushing their business by buying a cigarette manufactory, and wanted cash for that purpose, and also for purchasing the necessary machinery and leaf tobacco, proposals for a loan were then discussed, and eventually, early in June, 1899, an interview between Arthur Morris and Leslie Jacobs took place at the latter’s office, when there was a further conversation about the proposed loan. Arthur Morris’s version of the conversation was as follows: “Leslie Jacobs said, ‘If you do oblige us in this way, it will be a very good thing for you. We will introduce and push your proprietary brands in Australia.’ I said, ‘All right.’ I was very pleased to hear it. I was very strongly desirous of having our proprietary brands that were owned by us introduced on to the market by a pushing and long-established house, and so we agreed to do it. He (Leslie Jacobs) said, ‘Of course I have got full power to borrow money.’ I said, ‘I know you have.’ He said, ‘Here is my power of attorney’; and he produced it. I said, ‘It is not necessary; I will take your word in a case like this: it is good enough for me.’ But he produced the power of attorney, and said, ‘Oh, look at it – read it.’ I read a few lines, and said, ‘I do not understand this sort of thing; besides, if you tell me you have power to borrow the money’ – and I remembered that we had actually advanced the firm money – ‘that is good enough.’ He said, ‘If you are not quite sure about my power’ – though I had assured him that I was – ‘I will cable my people in Melbourne to cable to you that we actually require that loan.’ I said, ‘It is absurd; it is quite unnecessary.’ In fact, I thought it would have been offensive: it would have appeared as if I doubted his word, which I had no reason to do at that time.” A few days afterwards, on June 12, 1899, an interview took place between Arthur Morris and Leslie Jacobs at the office of the former, when Leslie Jacobs again referred to the request he had made at the previous interview that Messrs. Morris should lend the plaintiff’s firm 4000l., and the result was that on the same day it was arranged verbally that Messrs. Morris should lend the plaintiff’s firm the sum of 4000l., at 4 per cent. interest, upon the security of bills of exchange, to be accepted by the plaintiff’s firm, whereupon Messrs. Morris handed to Leslie Jacobs two cheques for 2000l. each drawn to the order of the plaintiff’s firm, one being dated June 12 and the other June 20, 1899. In exchange for the cheques Messrs. Morris received from Leslie Jacobs four bills for 1000l. each, with interest added, all dated June 12, 1899, and respectively payable three, six, nine, and twelve months after date, each bill being accepted by Leslie Jacobs as follows: “Per pro Jacobs, Hart & Co. Leslie Jacobs.” It was also arranged between Arthur Morris and Leslie Jacobs at the interview on June 12, 1899, that as a condition of the loan the plaintiff’s firm should push Messrs. Morris’s proprietary brands of cigars in Australia.


The two cheques for 2000l. each were paid by Leslie Jacobs, on June 13 and 20 respectively, into the account of the plaintiff’s firm with the London and Westminster Bank, each being indorsed “Jacobs, Hart & Co. pp. Leslie Jacobs.”


On June 12, the date on which the first cheque for 2000l. was handed to Leslie Jacobs, a sum of 25l. only was standing to the credit of the plaintiff’s firm at the London and Westminster Bank, and the whole 4000l. was drawn out within some eighteen days afterwards, that is, before July 1, by Leslie Jacobs by means of cheques drawn by him in the name of the plaintiff’s firm. The money so drawn out, or the greater part thereof, was applied by Leslie Jacobs to his own purposes. Both he and the plaintiff were examined and cross-examined, and each stated that the plaintiff himself received no benefit from the 4000l. paid into his banking account, Leslie Jacobs stating positively that he had used the whole for his own purposes; but the pass-book contained entries leading, apparently, to the inference that some portion at least of the money had gone in payment of debts due from the plaintiff’s firm. During the whole of these transactions the plaintiff was absent in Australia.

The course of business in the case of purchases of goods in London on account of the plaintiff’s firm was this. For the purpose of putting the firm’s London representative or agent in funds to pay for the goods, an arrangement was come to between the firm and their Australian bankers, who had a branch in London, to make advances in the following manner: When Leslie Jacobs bought goods for the firm, he took the invoice and the shipping documents to the London branch of the Australian bank, together with a bill of exchange drawn by him in the name of the firm upon the firm itself. Upon these documents the London branch handed him a cheque for the net amount of the invoice under a letter of credit given by the Australian bank to the firm, and sent by the firm to Leslie Jacobs. Leslie Jacobs then paid the money into the firm’s account at the London and Westminster Bank, and paid for the goods by a cheque drawn in favour of the sellers on the same account. The plaintiff had no knowledge of any borrowing under the power of attorney for the general purposes of the business, and, owing to his absence in Australia, he had no knowledge of the particular transactions in question in the present case until after the money had been misappropriated by Leslie Jacobs. In November, 1899, Leslie Jacobs became insolvent. The particulars of the loan transaction then came to the knowledge of the plaintiff, who thereupon commenced this action against Messrs. Morris and Leslie Jacobs, claiming (amongst other relief) an injunction to restrain them from negotiating, amongst others, the bills for the 4000l., upon the ground that Leslie Jacobs had no authority, either express or implied, to borrow the money or to accept the bills upon his, the plaintiff’s, behalf. Messrs. Morris counter-claimed against the plaintiff and Leslie Jacobs for payment of the sums due on the bills with interest thereon at 4 per cent., and alternatively for the 4000l. as money had and received by the plaintiff to the use of Messrs. Morris. At the trial of the action, the defendant, Leslie Jacobs, submitted to judgment, as stated in the report below. Upon the questions at issue between the plaintiff and the defendants Messrs. Morris, several witnesses were called, including the plaintiff himself, and Leslie Jacobs, as already stated, and also Messrs. Arthur and William Morris.


In delivering judgment Farwell J. held (1.) that Leslie Jacobs had no authority under the power of attorney to borrow the 4000l., and his Lordship accordingly ordered Messrs. Morris to deliver up to the plaintiff the four bills for that amount; and (2.) with regard to Messrs. Morris’s counter-claim against the plaintiff for the 4000l. as money had and received by him to their use, his Lordship held that the money did actually come into the possession of the plaintiff, because it went into his banking account, but that, as he had at the time no means of knowledge of the facts, he was not liable as for money had and received.


The defendants, Messrs. Morris, appealed.


The appeal was heard on January 21 and 23, 1902.


Neville, K.C., Butcher, K.C., and A. L. Morris, for the defendants/Appellants, Messrs. Morris:


The first point is as to the construction of the power of attorney – whether it includes a power to borrow. Such a power, though not expressed, ought, we submit, to be implied from the nature and object of the instrument. The object of the instrument is to enable the attorney to purchase and pay for goods on behalf of the plaintiff, and for that purpose it authorizes the attorney “in connection with any purchases made on my behalf as aforesaid, or in connection with my said business,” to accept bills, &c., and we submit that the loan transaction now in question is covered by those words, especially the words “in connection with my said business,” or otherwise they would be superfluous. The learned judge has held, upon the authorities, that those general words are to be limited to matters ejusdem generis with those already stated, and are not to be read by way of enlargement; but the authorities he cites do not bear out that view. In Harper v. Godsell (1) the decision rested, as Lord Blackburn points out, on the use of “unrestricted” words. Here we have not unrestricted words but specific words – “in connection with my said business”; so that the present case is distinguishable from that. It is not necessary for us to say that there is a general borrowing power: it is sufficient to say that there is a power to borrow in connection with the business. Then Attwood v. Munnings (2) is a similar case to Harper v. Godsell (1) The power to buy for cash or on credit implied a power to borrow.


Upon the second point, as to our claim to the 4000l. as money had and received by the plaintiff to our use, the question arises, Which of two innocent parties, ourselves and the plaintiff, should suffer? We submit that of the two the plaintiff should be the one to suffer, for he was the party who, by giving his agent a wide authority to act for him, provided the opportunity which led to the loss. It is said that there is an equity against our getting back the money in that the plaintiff did not know and had no means of knowing that the money had been paid into his London banking account; but if he had taken ordinary business precautions and not neglected to make inquiries into the state of his banking account, this fraud by Leslie Jacobs might have been rendered impossible. Surely this neglect on the plaintiff’s part raises a strong equity in our favour, for he cannot, under such circumstances, plead ignorance or want of knowledge as exonerating him from liability. Moreover, the business in London was in reality a branch of the Melbourne firm.

(1) (1870) L. R. 5 Q. B. 422, 427.

(2) (1827) 7 B. & C. 278; 31 R. R. 194.


The office bore the firm name, which was also used in all letters and other documents issued from that office, and in the London banking account; so that the money which was paid into the banking account of the plaintiff by his firm name should be regarded as having come into his possession, that is, under his control: Marsh v. Keating. (1) Such a claim as this has always been favourably considered by the Court, for it is an equitable claim to recover back money which ought not in justice to be kept; it is for money which ex æquo et bono the party charged ought to refund: Moses v. Macferlan. (2)


Upjohn, K.C., and Johnston Edwards, for the plaintiff/Respondent:


The evidence does not establish that the London office was a branch of the Melbourne firm. The London business was not a branch of the Melbourne business; it was solely a buying business. The real relation of the London agent to the Melbourne firm was that of a buying agent, remunerated by commission – nothing more; the agent having to pay the office expenses himself. The truth is that Leslie Jacobs, the London agent, was not exclusively the agent to the plaintiff’s firm. The power of attorney describes him simply as “commercial agent”; and in fact he had other commission agencies besides the plaintiff’s, and he used the firm banking account in such a manner as to make it his own. With regard to the construction of the power, the word “borrow” or “loan” is not mentioned from beginning to end. The power is simply to purchase and make contracts to purchase goods. That is its leading object, and that does not lead to the necessary implication that the attorney is to have power to borrow.

(1) 1 Bing. N. C. 198, 219; 2 Cl. & F. 250; 37 R. R. 75.

(2) (1760) 2 Burr. 1005, 1012.


This is a very carefully limited power of attorney – limited, that is, to doing certain specified things; and it must be construed strictly: Bryant, Powis & Bryant, Limited v. La Banque du Peuple. (1)


As to the claim for money had and received, we contend (1.) that the plaintiff never had the 4000l. in his possession or under his control; and (2.) that if laches are to be attributed to either party as enabling the London agent to commit the fraud, they should be attributed to Messrs. Morris, and not to the plaintiff, for it was their conduct in neglecting ordinary business precautions, especially in waiving the reading of the power of attorney when offered to them, that led to the fraud. Then the circumstances shew that, as between the London agent and the Melbourne firm, the banking account was in reality that of the agent. The question is, Did the person in whose name the banking account stood get the benefit of the money that was paid into it; or, if not, did it come under his control in such a manner that he might have had the benefit of it? When the money got into what should be regarded as the agent’s banking account on June 13 and 20, 1899, the plaintiff had not the slightest knowledge of its being there. To make a man liable for money had and received it must be shewn that he had the money, or that it was under his control. Reliance is placed on Marsh v. Keating (2) as supporting the view that the payment of the money and the source from which it was derived might have been discovered if the plaintiff had used the ordinary diligence of men of business; but here the money was paid in on June 13 and 20, and the whole was drawn out before July 1st. It is clear that he had not any idea or suspicion, much less knowledge, of the loan transaction at the time. In order to throw the loss upon the plaintiff, it is necessary that Messrs. Morris should establish culpability on his part, but this they fail to do. Again, although the 2000l. cheques were given to Leslie Jacobs, Messrs. Morris have not shewn that the payments by him into the banking account were within the authority conferred on him by the plaintiff, assuming, that is, for this purpose, that he had no general authority to borrow money. The propositions 3 and 4 laid down in Lindley on Partnership, 6th ed. p. 166, apply, namely, “(3.) The firm cannot be treated as receiving what one partner receives otherwise than as its real or ostensible agent, unless the money actually comes into the possession or under the control of the other partners. (4.) Agency being excluded in such a case as the last, the money cannot be considered as in the possession or under the control of the innocent partners, unless they know that it is so, or unless they are culpably ignorant of the fact.” There is no evidence that the plaintiff knew or could have known that the money was paid to his account. The plaintiff is in no way estopped from denying the authority of Leslie. Leslie did not receive the money in the course of the business of the firm; and this distinguishes the present case from Marsh v. Keating (1); see also Lindley on Partnership, 6th ed. p. 170.

(1) [1893] A. C. 170, 177, 179.

(2) 1 Bing. N. C. 198; 2 Cl. & F. 250; 37 R. R. 75.



[COZENS-HARDY L.J. referred to the observations of Collins J. in Reid v. Rigby & Co. (2)]


In that case the principal had had the benefit of the money. That is not so here.


[VAUGHAN WILLIAMS L.J. It is by reason of the authorized act of Leslie that the money is not in the bank to the plaintiff’s credit.]


Knowledge by the principal is essential to make him liable. In Cleather v. Twisden (3), Bowen L.J. said that the Court must inquire whether, if the principals neither expressly authorized nor ratified the acts of the agent, “they consented that he should have general authority to act without their knowing what he did.” In the present case the defendants chose to assume that Leslie had a general authority to manage the business of the firm, though the power of attorney shewed that he had no authority to borrow money. The acts done by the plaintiff and known to the defendants shewed that Leslie had no power to borrow money for the firm. There can be no estoppel as against the plaintiff. No duty is imposed on the plaintiff beyond the written limited authority which he has given.

(1) 1 Bing. N. C. 198; 2 Cl. & F. 250; 37 R. R. 75.

(2) [1894] 2 Q. B. 40, 44.

(3) (1884) 28 Ch. D. 340, 350.


Neville, K.C., in reply. Upon the evidence non constat that the whole of the 4000l. was not applied for the benefit of the plaintiff’s firm.


The proximate cause of the loss of the money was the authority which the plaintiff gave to Leslie to draw cheques on the account of the firm.


The acceptance of a bill of exchange in connection with the business of the plaintiff’s firm was within the power of attorney. It does not signify whether the bills of exchange were accepted by Leslie: they were drawn by him, and he was authorized to draw bills. The money was advanced on the drawing of the bills, the shipping documents being attached. The issue to be tried is the same as that which arose in Montaignac v. Shitta (1), namely, was the particular mode of borrowing clearly outside the purposes of the business – outside the ordinary course of dealing? If it was not, the principal is bound by the acts of his agent.




March 3.


I am of opinion that the judgment of Farwell J. ought to be affirmed. The first question is as to the construction of the power of attorney. Does it include a power to borrow money? It contains no express power to borrow. [His Lordship read the power as above quoted, and, with reference to the latter clause of it, said:-]


This latter clause contains no express power to borrow, but it is said that the power to borrow arises by necessary implication from the words “in connection with my said business,” to make, draw, sign, accept, or indorse any bill of exchange, promissory note, &c. It is said that these words, unless they have no effect, must authorize something more than accepting or making bills of exchange in connection with any purchases, because express power to do this is given just above in the earlier words of this clause. This argument seems to me well founded; but it still remains to consider what is the authority to accept bills or give promissory notes which is given by these words beyond the power to do so in connection with purchases. It is a power to accept bills and make notes in connection with “my said business,” that is, the business of a tobacco merchant and manufacturer carried on by the donor of the power under the style of “Jacobs, Hart & Co.” at Melbourne. Now, in my judgment, this authority cannot extend beyond the powers, express or implied, given to Leslie Jacobs by his appointment contained in the power of attorney.

(1) (1890) 15 App. Cas. 357.


The power of attorney does not contain any express power, except the power to purchase and do certain particularised things in connection with such purchases. In other words, the power of attorney appoints Leslie Jacobs the purchasing agent for the business carried on by Louis Jacobs, and gives him certain particularised powers in connection with purchases, and then goes on to give him this power of accepting bills and making notes in connection with the said business. In my judgment the later words are intended merely to cover such powers beyond the mere power to purchase, which is expressly given, as are necessarily implied by the appointment of Leslie Jacobs as purchasing agent. Let us test it in this way. Suppose the authority, whether given by word of mouth or in writing, had been limited or expressed in some such words as these: “I hereby appoint Leslie Jacobs as the purchasing agent in Europe and America for the business of tobacco merchant and manufacturer which I carry on at Melbourne, in Victoria.” Would such an appointment create by necessary implication a power in Leslie Jacobs to borrow money? I think not. The implied powers of an agent appointed by a trader are very different from the implied powers of a partner in a similar business. Primâ facie, an agent cannot borrow unless he has express authority, as is explained by the judgments in Hawtayne v. Bourne. (1) And the distinction between the case of an agent and the case of a partner is well illustrated by the judgments in Brown v. Kidger. (2) But it may be urged that if power to accept bills and give promissory notes in cases other than purchases does not apply to borrowing, there is nothing else to which it could apply. I cannot agree. I can quite conceive many debts which might arise in the business of the firm by reason of acts clearly falling within the authority of the agent other than purchases. For instance, the agent might incur a debt for costs to a solicitor, or a debt to an accountant in respect of the examination and adjustment of a trading account; or, to take the case which I understand Farwell J. to put, of an agreed sum payable to the vendor of goods on a contract which the agent has thought it advisable to pay money to be allowed to rescind. In all these cases it seems to me there is money payable which is not in connection with a purchase; and the words “in connection with my said business” seem to give a necessary authority to accept a bill or give a promissory note in such cases; and I therefore cannot agree that there is nothing but “borrowing” which these words can cover. I think that the power of attorney contains no authority to borrow.

(1) (1841) 7 M. & W. 595.

(2) (1858) 3 H. & N. 853.


I must mention one other argument, which is, as I understand it, this – that the actual practice in the business of this firm shews that the power to borrow is essential to the performance of the duty in England of a purchasing agent acting for an Australian firm, because the business was in fact mainly conducted, if not entirely, by the method of the agent, when he bought goods, taking the invoice and the shipping documents to the London branch of the Australian bank, together with the bill of exchange drawn by him in the name of the firm upon the firm itself; and upon these documents the London branch handed him a cheque for the net amount of the invoice, under a letter of credit given by the Australian bank to the firm and sent by the firm to Leslie Jacobs; and Leslie Jacobs then paid the money into the firm’s account in the London and Westminster Bank, and paid for the goods by a cheque in favour of the sellers. I cannot see that this practice shews that a general power to borrow was in any way essential to the conduct of the business. All it shews is that the firm had opened a credit with an Australian bank, who authorized their London branch to advance to Leslie Jacobs the invoice price of exported goods against the shipping documents. This was an advance made under the special direction of the principal in Australia, who opened the credit to be operated upon against shipping documents of goods exported to the firm. This practice seems to me to negative rather than to affirm a general power to borrow for the purposes of the business. If Leslie Jacobs had no right to borrow money on behalf of Louis Jacobs, this disposes of the counter-claim so far as it relates to the bills of exchange given in consideration of the loan, but it still leaves the claim, as money had and received to the use of Messrs. Morris, for the 4000l. obtained by the cheques of Messrs. Morris which were paid into the account of Louis Jacobs at the London and Westminster Bank. Here, again, I agree with the conclusion at which Farwell J. has arrived.


I agree that Messrs. Morris cannot recover the 4000l. as “money had and received” by Louis Jacobs; but I do not base my conclusion, as Farwell J. seems to do, on the ignorance or want of means of knowledge of Louis Jacobs, while the 4000l. remained to his account at the London and Westminster Bank, of the fact that it had been paid in to his credit. I prefer to base my decision on the estoppel arising against Messrs. Morris by reason that they had constructive notice, when they lent the money, that Leslie Jacobs had no authority to borrow on behalf of Louis Jacobs, and that it was their conduct in lending the money which enabled Leslie Jacobs to pass the 4000l. through Louis Jacobs’s account without his knowledge. I am not sure that in Marsh v. Keating (1) either the House of Lords or the judges whose opinion was taken meant to decide either that ignorance and want of means of knowledge will exonerate a person through whose account a sum of money has passed from responsibility, or that knowledge of the fact is essential to liability. Nothing more seems to me to have been decided than that there the defendants could not rely upon ignorance if they had the means of knowledge. Park J., in delivering the opinion of the judges, says (2): “If they had not the actual knowledge, they had all the means of knowledge; and there is no principle of law upon which they can succeed in protecting themselves from responsibility in a case wherein, if actual knowledge was necessary, they might have acquired it by using the ordinary diligence which their calling requires.” The opinion does not say that knowledge was necessary. The ignorance in such a case seems evidence of negligence, or of the wide limits of actual authority given to an agent appointed by the principal to deal with strangers.

(1) 1 Bing. N. C. 198; 2 Cl. & F. 250; 37 R. R. 75.

(2) 2 Cl. & F. 289, 290.


I have no doubt myself that the onus in such a case is on the person through whose account the money passed; but, whatever may have been the intention of the decision in Marsh v. Keating (1) I am not prepared to gay that a man who places his account at a bank under the absolute control of an agent, giving him the power to indorse cheques payable to his order, including cheques crossed with the name of his bankers, and to sign cheques drawn on his account, had not the means of knowledge, at all events after a lapse of time, of what was being paid into and paid out of his account by his agent. I see nothing to prevent, in this case, such an audit in London, to say nothing of accounts rendered to Melbourne, as would have rendered these frauds, as I must call them, by Leslie Jacobs impossible. This is sufficient to constitute liability whatever view is taken of the decision in Marsh v. Keating (1) and this liability arises in the present case, if at all, from the fact that Leslie Jacobs was in fact acting under the general authority actually given by Louis Jacobs when he indorsed Messrs. Morris’s cheque, and thus authorized its presentation on behalf of Louis Jacobs by the London and Westminster Bank with whose name it was crossed, and the payment of it to the London and Westminster Bank by the bank on whom Messrs. Morris had drawn the cheque. It seems to me that Louis Jacobs, by so doing, himself lent the proceeds of the cheque to the London and Westminster Bank. It seems to me that that which was done was done under an actual authority; and I doubt whether one need resort to ostensible authority or estoppel to found a charge against Mr. Louis Jacobs. But in my judgment Mr. Louis Jacobs is not liable for this 4000l. in an action “for money had and received” to the use of Messrs. Morris, because they cannot be heard to say that they did not know that Leslie Jacobs was receiving from them their cheque in favour of Louis Jacobs for a purpose foreign to that for which Louis Jacobs had given authority to Leslie Jacobs to indorse and to pay into Louis Jacobs’s account. If this is so, the loss of Messrs. Morris’s money was not caused by an act of Louis Jacobs, but by their own act. It was their own act which enabled Leslie Jacobs to commit the fraud. The only doubt which I have had has arisen from the fact of the prior loans by Messrs. Morris to Leslie Jacobs, which loans (amounting in all, I think, to 3000l.) had been discharged in due course by or on account of Louis Jacobs. Messrs. Morris might well say that their course of business, notwithstanding the limits of the power of attorney, held out Leslie Jacobs as an agent of Louis Jacobs with authority to borrow; but I think that the evidence shews that Messrs. Morris doubted the authority of Leslie Jacobs to borrow, and were not in fact misled by any ostensible authority in him arising out of previous transactions. Of course, if Louis Jacobs had received the benefit of the money by its being used to pay his debts, he would pro tanto have adopted the loan and so be liable. Farwell J., however, has found that Louis Jacobs received no benefit from the 4000l., and there is a general statement by both Louis and Leslie Jacobs to this effect, and they were not cross-examined. I suppose, therefore, that this must be taken to be the fact, although an examination of the pass-book seems to me to lead to a contrary conclusion.

(1) 1 Bing. N. C. 198; 2 Cl. & F. 250; 37 R. R. 75.




I am of the same opinion. I do not think that I can add anything to what has been said by Farwell J. and by Vaughan Williams L.J. on the question as to what is the true construction of the power of attorney which was given by the plaintiff to the defendant Leslie Jacobs; but I think it is right to state how, as it seems to me, the case as to whether the defendants, Messrs. Morris, are entitled on their counter-claim, regarded as an action for money had and received, ought to be treated. [His Lordship then stated the facts as to the payment of the 4000l. into the banking account of the plaintiff’s firm with the London and Westminster Bank, laying particular stress upon Arthur Morris’s evidence of the conversation above set out between himself and Leslie Jacobs with reference to the proposed loan of the 4000l., and upon the fact that Messrs. Morris, without any further inquiry, agreed to grant the loan on the security of bills accepted by Leslie Jacobs in the name of the plaintiff’s firm. His Lordship then proceeded:-]


Farwell J. has found that the plaintiff never was aware of any borrowing by the defendant Leslie Jacobs, and that he never got the benefit of it. If Messrs. Morris had read the power of attorney they would have known that it contained no power to borrow; and also that Leslie Jacobs had power to indorse cheques or draw on the banking account, though only in connection with matters of which the alleged purpose was not one. If, then, the question be, Is it ex æquo et bono that the loss occasioned by the fraudulent act of Leslie Jacobs should be borne by the plaintiff? – it seems to me that it is not. The primary cause of that loss is not anything done or omitted to be done by the plaintiff, but the neglect of ordinary business precautions by the defendants, Messrs. Morris. It is said, however, that the case falls within the decision in Marsh v. Keating (1) Farwell J. has held that the principle involved in the opinion given by the judges who advised the House of Lords in that case requires that two things should be established, first, that Messrs. Morris’s money went into the plaintiff’s account, and, secondly, that the plaintiff knew or had the means of knowledge, while it remained to the credit of that account, that it was the money of the defendants, Messrs. Morris. I agree with Farwell J. in taking this view of Marsh v. Keating (1), and I also agree with him in thinking that the defendants, Messrs. Morris, have failed in establishing the second point. I think, therefore, that the decision of the learned judge ought to be affirmed.



I agree that Farwell J.’s judgment ought to be affirmed; and it might be sufficient to say that

(1) 1 Bing. N. C. 198; 2 Cl. & F. 250; 37 R. R. 75.


I accept the reasons assigned by him for his conclusion. But, as I have had the opportunity of reading the judgment of Vaughan Williams L.J., I desire to say that I adopt his view as to the construction of the power of attorney; and I hold that it did not confer a general power of borrowing.


With respect to the 4000l. which was paid into the plaintiff’s account at a London bank by the attorney, Leslie Jacobs, it seems that it was all drawn out by Leslie and applied for his own purposes before the plaintiff, who was resident in Australia, knew, or could in ordinary course of business have known, anything about the transaction. Under these circumstances I think the plaintiff cannot be held liable for the sum as money had and received for the use of Messrs. Morris. The truth is that Messrs. Morris must be taken to have had full notice of the terms of the power of attorney, and that it did not authorize the borrowing of this 4000l. They advanced the money on the attorney’s statement that the power did authorize it. Their omission to read the power was the proximate cause of the loss. As between them and the plaintiff, I think they are more to blame; and it would not be just to hold the plaintiff liable for an act done by his attorney beyond the scope of his authority in favour of Messrs. Morris, who knew the limits of the authority.



  1. I. F. C.


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