SCRUTTON L.J. In this case the learned Commissioner on the Northern Circuit has given judgment against Martins Bank, Ld., on a claim against them by one Greenwood for 410l., being the amount of forty-four forged cheques which he alleged to have been wrongfully debited to his account. The Bank had contended that Greenwood’s conduct had estopped him from alleging that the cheques were forgeries. The judge, however, held that the circumstance did not raise such an estoppels. The Bank appeals.
The facts are hardly in dispute. The husband and wife had in March, 1926, a joint account, cheques on which were to be signed by both. On that account we not know twenty-one cheques were drawn with genuine signatures; but to eleven cheques the wife forged her husband’s signature. Some of these eleven signatures were very suspicious to anyone who looked at the genuine signature of the husband, which the Bank had. In November, 1928, this joint account was closed by a cheque signed by the wife alone, a most irregular proceeding. A new account was opened in November, 1928, in the husband’s name alone. On this account the husband drew nineteen genuine cheques, but forty-four forged cheques were drawn by the wife. Again, some of the husband’s forged signatures were very suspicious, and the Commissioner, after examining the cheques and hearing the evidence of the Bank officials, found that the forty-four signatures were not merely not genuine, but were honoured through carelessness of the Bank officials. The legal effect of this, for it has a legal effect supported by the highest authority, I deal with later.
In October, 1929, the husband, wanting to draw 20l. out of the account, asked the wife for his cheque book. I will read his evidence:-
“(Q.) Tell my Lord what passed between you and your wife. (A.) In October, 1929, I came home at dinner time and said to my wife: “Well, Emma,’ – that was my wife – I said, ‘I could just do with 20l. out of my account. Would you mind fetching a cheque downstairs’. (The Commissioner). Did you say which account? (A.) My own account, private account. I used to call that the saving account. (Q.) Did you say which Bank? (a.) Yes, Martins Bank. So she says: ‘There is none in, Bert’. (Q.) You asked her to fetch a cheque down? (A.) Yes, I asked her to fetch a cheque down, and of course she says there is no money in. I say: ‘No money in the Bank’. I says: ‘Why’, I says, ‘where is it?’ ‘Well’, she says, she had had it for their Olive – their Olive had had it to fight a case for a house; and then of course I said: ‘Well who authorized you to get the money out of the Bank?’ I said: ‘Who has forged my name to get it?’ And she would never tell who forged the name. Then of course I said: ‘I am going to the Bank to see about it’. My wife pleaded hard with me. She said: ‘Don’t go to the Bank until this case is finished’. Well, of course there was a row between me and her, and she went down on her knees and wanted me not to go and this, that, and the other, until this action had been on. I naturally believed her. Of course I did not go to the Bank. (Q.) When you say you believed her, what did you believe? (A.) I believd there was a case. (Q.) And that you would get the money back? (A.) And that I would get the money back”.
No signatures were forged after October, 1929, but the husband did not tell the Bank of the previous forgeries, partly not wishing to expose his wife, partly hoping that the money would come back as a result of the alleged action. On June 5 matter came to a climax.
[The Lord Justice read this further evidence: --]
“(Q.) Between October and June 5 were there conversations about going to the Bank between you and your wife? (A.) Yes; of course there were rows every time she wanted money to fight the case with; there was always rowing over the Bank, I was always telling her I was going to see. (Q.) You were always telling her you were going to see? (A.) I was always wanting to go to the Bank, and of course you have to ease a bit with your wife when she is your wife, have not you, to a certain extent? (Q.) Just before she shot herself, what brought things to a head? (A.) It was because I found out there was nothing; that she had been false and deceived me, and I said I was going right away to the Bank. When I came home at night she just sauntered down the stairs and said: ‘Is that you?’ I said: ‘Yes’. She told me supper was on the table, and the next thing I heard was the shot, and of course I found her there”. The husband then claimed on the Bank.
Counsel for the Bank argue: (1.) that the husband by his silence had ratified or adopted the forged cheques as his own; (2.) that he was estopped by his silence from alleging the signatures were forgeries. Disputing both allegations counsel for the plaintiff argued that the negligence of the Bank in carelessly honouring the signatures prevented any question of estoppels from arising. The argument starts with forged signatures which cannot authorize the Bank to honour the cheques, whether or not they could by reasonable care have detected the forgeries. I do not think “ratification” has any applicability to a forged signature. For ratification to be effective the act ratified must purport to be done by an agent for the person who ratifies: Keighley, Maxsted and Co. v. Durant (1). It is true that Lord Blackburn in M’Kenzie v. British Linen Co. (2), a Scotch case, says that in civil cases a man may ratify a forgery, but in Brook v. Hook (3), the majority of the Court pointed out that a forgery which does not profess to be executed by a person as agent cannot be ratified by the alleged principal, and in my opinion this is the correct view of the law. A forgery can however be adopted. The supported signer any say, “I will recognize this signature as my own; you may debit my account with these cheques”, and in that case the Bank which has acted on this statement could successfully object to the customer’s endeavouring to withdraw his adoption.
I see no evidence in this case that the husband ever adopted these cheques as his own. He delayed in telling the Bank they were forged, but never said they were his. He never had a passbook for this account. This, however, is getting near to the defence of estoppels. Estoppels is a rule of evidence which prevents the person estopped from telling the truth, or from proving a state of things inconsistent with a previous statement or attitude of his own. The classic exposition of the principle of estoppels is that given by Parke B. in delivering the judgment of the Court in Freeman v. Cooke. (4) He cites the rule in Pickard v. Sears (5): “That, where one, by his words or conduct, willfully causes another to believe in the existence of a certain state of things, and induces him to act on that belief, or to alter (6) his own previous position, the former is concluded from averring against the latter a different state of things as existing at the same time”. And continues, “The principle is stated more broadly by Lord Denman, in the case of Gregg v. Wells (7), where his Lordship says, that a party who negligently or culpably stands by and allows another to contract on the faith of a fact which he can contracted, cannot afterwards dispute that fact in an action against the person whom he has himself assisted in deceiving. Whether that rule has been correctly acted upon by the jury in all the reported cases in which it has been applied, is not now the question; but the proposition contained in the rule itself, as above laid down in the case of Pickanl v. Sears (1), must be considered as established. By the term ‘willfully’, however, in that rule, we must understand, if not that the party represents that to be true which he knows to be untrue, at least, that he means his representation to be acted upon, and that it is acted upon accordingly; and if, whatever a man’s real intention may be, he so conducts himself that a reasonable man would take the representation to be true and believe that it was meant that he should act upon it, and did act upon it as true, the party making the representation would be equally precluded from contesting its truth; “--- now comes the relevant passage - “and conduct, by negligence or omission, where there is a duty cast upon a person, by usage of trade or otherwise, to disclose the truth, may often have the same effect”. I doubt whether the silence here amounts to a statement by conduct especially when made to a person who is ignorant of the facts, i.e., the forgeries, to which the statement might have relevance. But the passage concludes with a reference to conduct by negligence or omission where there is a duty to disclose the truth. This passage is cited with approval by Lord Haldane in London Joint Stock Bank v. Macmillan. (2)
Now Macmillan’s case (3) has laid stress on the relations of banker and customer as giver and executor of mandate, and the duties, which are I think mutual, to use reasonable care in the execution of the mandate. The customer is held bound to use reasonable care in drawing the cheque so that the banker may not be misled. But the relation does not merely refer to one cheque; it is a continuing relation in which the customer may draw cheques from time to time, and the banker is under a continuing duty to honour mandates. This, in my view, involves a continuing duty on either side to act with reasonable care to ensure the proper working of the account. It seems to me that the banker, if a cheque was presented to him which he rejected as forget, would be under a duty to report this to the customer to enable him to inquire into and protect himself against the circumstances of the forgery. This, I think, would involve a corresponding duty on the customer, if he became aware that forged cheques were being presented to his banker, to inform his banker in order that the banker might avoid loss in the future. If this is correct there was in the present case silence, a breach of a duty to disclose, which may give rise to an estoppels.
But then comes the point at which I think the Commissioner fell into error. It is not every breach of duty, or every carelessness, which will found an estoppels. Blackburn J., in Swan v. North British Autralasian Co. (1), state the principle with great precision: “What I consider the fallacy of my brother Wilde’s judgment is this: he lays down the rule in general terms ‘that if one had led others into the belief of a certain state of facts by conduct of culpable neglect calculated to have that result, and they have acted on that belief to their prejudice, he shall not be heard afterwards, as against such persons to show that state of facts did not exist’. This is very nearly right, but in my opinion not quite, as he omits to qualify it by saying that the neglect must be in the transaction itself, and be the proximate cause of the leading the party into that mistake; and also, as I think, that it must be the neglect of some duty that is owing to the person led into that belief, or, what comes to the same thing, to the general public of whom the person is one, and not merely neglect of what would be prudent in respect to the party himself, or even of some duty owing to third persons, with whom those seeking to set up the estoppels are not privy; and these distinctions make in the present case all the difference”. The same position is stated by Parke B. in giving the unanimous answer of the judges to the House of Lords in Bank of Ireland v. Evan’s Trustees (2) (where the negligence complained of was negligent keeping of the seal, a negligence similar to neglect in custody of the passbook), in these words: “The present case is entirely different. If there was negligence in the custody of the seal, it was very remotely connected with the act of transfer. The transfer was not the necessary or ordinary or likely result of that negligence. It never would have been, but for the occurrence of a very extraordinary event, that persons should be found either so dishonest or so careless as to testify on the face of the instrument that they had seen the seal duly affixed. It is quite impossible that the bankers could have maintained an action for the negligence of the trustees, and recovered the damages they had sustained by reason of their having made the transfer. If such negligence could disentitle the plaintiffs, to what extent is to go? If a man should lose his cheque book, or neglect to look the desk in which it is kept, and a servant or stranger should take it up, it is impossible in our opinion to contend that a banker paying his forged cheque would be entitled to charge his customer with that payment. Would it be contended that if he kept his goods so negligently that a servant took them and sold them, he must be considered as having concurred in the sale, and so be disentitled to sue for their conversion on a demand and refusal? It is clear, we think, that the negligence in the present case, if there be any, is much too remote to affect the transfer itself, and to cause the trustees to be parties to misleading the Bank in making the transfer on the forged power of attorney”.
Now in the present case, applying these principles, if the Bank were simply relying on the respondent’s silence as having induced them to honour the forged cheques, it is obvious that the silence of the customer was not “the proximate cause of leading the Bank into the mistake”. All the cheques were forged and paid before the silence; no cheques were forged after the silence. The silence could not be the proximate cause of the Bank’s mistake. What the Bank must rely on is that the silence or failure to disclose prevented the Bank from suing the forger, for when the truth was disclosed the forged was dead. The Bank has by the silence lost its opportunity of suing the forged and her husband. The position is a curious one. The husband would be liable for his wife’s tort: Edwards v. Porter (1). But the death of the wife even after action brought would cause the action to abate: Capel v. Powell (2). Whether in view of the possibility of the wife’s committing suicide, if disclosure took place, as in fact happened later, the Bank really lost a valuable asset may be doubtful.
In my view, the result is accurately stated by Lord Watson in M’Kenzie v. British Linen Co. (3) in these words: “The only reasonable rule which I can conceive to be applicable in such circumstances is that which is expressed in carefully chosen language by Lord Wensleydale in the case of Freeman v. Cooke (4). It would be a most unreasonable thing to permit a man who knew the bank were relying upon his forged signature to a bill, to lie by and not to divulge the fact until he saw that the position of the bank was altered for the worse. But it appears to me that it would be equally contrary to justice to hold him responsible for the bill because he did not tell the bank of the forgery at once, if he did actually give the information, and if when he did so, the bank was in no worse position that it was at the time when it was first within his power to give the information”. Apply this to the present case. The customer is not made liable by silence for the forged cheques, because the payment of the forged cheques preceded and was not caused by the silence. The customer would not be liable for his silence, if the Bank had not lost any right of action thereby. But if the silence of the customer has caused the Bank to lose its right of action, the customer is estopped from alleging the fact which he ought to have disclosed – namely, that the cheques were forged. If the claim of the Bank were for damages for failure to disclose, it might be that the improbabilities of recovering anything in the action might be taken into account; but the authorities show that in a question of estoppel, where the question is whether the customer is estopped from alleging that certain bills are forgeries, if the bank has lost something, the value of that something is not the measuring of its claim, but, the customer being estopped from proving the bills forgeries, the bank gains by the amount of the bills. The customer here relies on two passages in Paget on Banking, 4th ed., pp. 330 and 345, to the effect that neither estoppels nor adoption can be relied on if the banker’s negligence has in part contributed to the loss. He cites no English authority for this. The American authority is explained by the fact that the United States law has gone much further than the English as to the mutual duties of banker and customer. But in the present case while the carelessness of the Bank was a proximate cause of the Bank’s loss in praying the forged cheques, it was not the proximate cause of the Bank’s losing its right of action against the forger. This was caused by the failure of the husband to inform the Bank of the forgery till his wife was dead and the cause of action was lost.
The appeal must be allowed, the judgment for the plaintiff set aside and judgment entered for the defendants with costs here and below.
GREER L.J. The is the defendants’ appeal against the judgment of Mr. Du Pareq, K.C., Commissioner of Assize at Manchester, whereby he decided that the plaintiff was entitled to a declaration that the sum of 410l. 6s. had been wrongfully and without his authority debited by the defendants to his accounts, and that he was entitled to be credited by the defendants therewith. The said sum was made up of a number of debits that had been entered in the plaintiff’s account with the defendants in respect of payments of various cheques to which the plaintiff’s name had been forged as drawer by his wife. The defendant Bank admitted that the cheques were forged, but said that the plaintiff was disentitled to succeed in the action because: (1.) he had ratified the act of his wife in putting his name to the cheques, or (2.) he had adopted that act, or (3.) he was estopped by his negligence from alleging that the signature was not his.
The facts were peculiar. The forgeries were committed between November 15, 1928, and October, 1929. In October, 1929, the plaintiff, who was desirous of drawing some money from his account, asked his wife to bring him a cheque in order that he might sign the same. She told him there was no money in the Bank, as it had all been draw out to pay moneys to her sister to enable her to fight a case about a house. She declined to say who had forged his name, but she persuaded him not to go to the Bank until her sister’s case was finished. He consented not to do so for the time being in the expectation that as the result of the trial of the sister’s case he might receive the amount of the forgeries, and would not therefore need to dispute the Bank’s right to debit him with the amount. Nothing more happened for eight months, when he again raised the question in June, 1930. He seems to have come to the conclusion that his wife had probably not told him the truth about her sister’s case, and therefore said he would go to the Bank. He told his wife he was going to do so. She thereupon shot herself. He informed the Bank, and, after ascertaining the position of his account, brought this action by writ dated August 19, 1930.
As it appears to me, the only question which it is necessary to determine is whether the learned Commissioner ought to have held that the plaintiff was estopped by his conduct from alleging that the signatures were not his and were unauthorized. It is well established by a number of cases that where one person makes a contract without intending or purporting to make it on behalf of another, the contract is incapable in law of being ratified: see Kelner v. Baxter (1); In re Empress Engineering Co. (2); In Re Northumberland Avenue Hotel Co. (3) in the Court of Appeal. On these ground it was decided in Brook v. Hook (4) that a forged signature to a joint and several promissory note was incapable of ratification. Notwithstanding the great authority of any opinion expressed by Lord Blackburn, I think it must be held that his dictum to the contrary effect in M’Kenzie v. British Linen Co. (5) cannot be regarded as authoritative, Lord Blackburn’s opinion is only a dictum, inasmuch as the House of Lords decided that no facts were proved which would amount to ratification if ratification were possible in law. As regards adoption, there was no evidence in the present case on which it could be held that the plaintiff had adopted the transaction in the sense that he had entered into a contract to be bound by his wife’s unauthorized drawings. I have, however, come to the conclusion that the plea of estoppels ought to have prevailed. In the case of M’Kenzie v. British Linen Co. (1) the House of Lords decided that M’Kenzie’s silence for a fortnight after he had discovered the forgery had not occasioned any detriment to the British Linen Company, and that they were not entitled to succeed on the ground of estoppels. Lord Blackburn uses these works (2): “I agree that though he did not ratify the act of Fraser, yet he may preclude himself, bar himself, bar himself, by a personal exception from averring against the bank that the signature was not genuine. Lord Deas says ‘that a duty lies upon a party whose name is forged not to do or say anything that may so far deceive a bank as to enable a forger to escape from justice, and thereby, for anything that he can tell, prevent the bank from recovering from him full indemnity. He is not entitled to speculate upon the consequences that may ensure if the bank is prevented from going immediately against the forger. He is bound to take for granted that the result will be to prevent them from recovering on the bill which otherwise they would’. I agree that if he thus leads the bank to believe in the genuineness of the signature till it has lost some opportunity of recovering on the bill which if the bank had known of the forgery they might have used, it would be a sufficient alteration in the bank’s position to preclude him as against the bank”. Later on (3) he points out that if M’Kenzie had known of the second forgery his silence would certainly prejudice the bank, and would afford very strong evidence indeed that M’Kenzie thus ratified Fraser’s act for a time. I think in this passage Lord Blackburn is per incuriam suggesting that the true ground is ratification instead of estoppels. This appears from a later passage in the learned Lord’s speech where he says(1): “Certainly I think that his not telling the bank on July 15 nor till July 20 that it was a forgery, and so letting them continue in the belief that it was genuine, if he had not induced it, could not so preclude him if, as I think was clearly the fact here, the bank neither gave fresh credit in the interval nor lost any remedy which if the information had been given earlier they might have made available”. I infer from this that Lord Blackburn meant that if as a result of the silence of the man whose name had been forged the Bank lost a remedy which, if the information had been given to them, might have been available, this would be sufficient to establish a plea of estoppels. It seems to me that Lord Waston gives expression to the same opinion when he says (2): “The only reasonable rule which I can conceive to be applicable in such circumstances is that which is expressed in carefully chosen language by Lord Wensleydale in the case of Freeman v. Cooke (3). It would be a most unreasonable thing to permit a man who knew the bank were relying upon his forged signature to a bill, to lie by and not to divulge the fact until he saw that the position of the bank was altered for the worse. But it appears to me that it would be equally contrary to justice to hold him responsible for the bill because he did not tell the bank of the forgery at once, if he did actually give the information, and if when he did so, the bank was in no worse position than it was at the time when it was first within his power to give the information”.
In my judgment, in the present case the Bank was in a worse position when the plaintiff did inform them of the forgeries than it was when he first knew of the forgeries. They had allowed the debits to remain on their books as valid debts, whereas they might have taken steps against the plaintiff’s wife, adding him as a defendant, and it is quite impossible to say with any degree of certainty that the taking of those steps would have been of no value to the Bank. It does not necessarily follow that because eight months later Mrs. Greenwood committed suicide her mental condition would have been the same, and that its result would have been the same if the Bank had been informed eight months earlier that they were. I gather that the learned Commissioner would have given judgment for the defendants but for his acceptance of the statement contained in Paget on Banking, 4th ed., p.345, which is in these words: “The banker cannot, of course, set up estoppels or adoption when the loss is attributable, even in part, to his own negligence; as where he has failed to detect an obvious forgery or alteration: cf. Critten v. Chemical National Bank of New York” (1). I fail to understand the logical cogency of this view, which has no English authority to support it. Whether the bank were or were not negligent in paying the cheques, they were in law disentitled to debit the plaintiff’s account with the amount of the cheques. The effect of the estoppels is to preclude the plaintiff from setting up against the bank the fact that he had not signed the cheques. If the plaintiff had misled the bank by saying in so many words “you need not worry about those cheques, the signatures are mine”, there would be a clear estoppels, and it would not matter whether the cheques had or had not been negligently paid in the first instance. Estoppels by negligence is representation of fact by conduct, and if it is right to infer representation from conduct, it must have the same effect as representation by direct statement. In the case of London Joint Stock Bank v. Macmillan (2) Lord Haldane, in the course of his speech, treats the case as analogous to the case of a customer remaining silent when it is duty to make a communication to his banker. I cannot myself conceive a stronger case for saying that there is a duty required of the customer by “the rules of fair dealing between man and man” (3) to inform the Bank of the existence of forged cheques when he knows that the Bank are relying on the validity of the forged cheques. This view of the case is supported by the advice given by Lord Waston to the Crown in Ogilvie v. West Australian Mortgage and Agency Corporation (1), to the effect that if a customer being in exclusive knowledge of the forgery withheld that knowledge from the bank until its chance of recovery from the forger had been materially prejudiced, the customer would be estopped from complaining of the payment of the forged cheques. The Privy Council, accepting that principle, only failed to apply it to the facts of the case because the customer had kept silence by the request of the accredited agent of the bank. It seems clear that otherwise they would have held that the customer was estopped.
In my judgment the plea of estoppels ought to have succeeded in this case. The appeal must be allowed, the judgment of the Commissioner reversed, and judgment entered for the defendants with costs.
ROMER L.J. The facts of this case, so far at any rate as they are relevant to the decision of this appeal, are not in dispute. It is quite plain that, when the plaintiff was first made aware of the forgeries committed by his wife, he deliberately refrained from informing the Bank of what had taken place, in order to protect her from any action that the Bank might take. The plaintiff in cross-examination said that he knew that if he went to the Bank he would get his wife into difficulty, and that, with that knowledge in his mind, he never went near the Bank until his wife died. According to the evidence of the Branch Manager and the cashier, evidence that was accepted by the learned Commissioner, when the plaintiff did at last go to the Bank, he told them that he did not want any bother, that he did not want to give his wife away, and that that was the reason why he had held his hand. The plaintiff, in other words, intended the Bank to believe that the signatures to the cheques were his. The Bank continued so to believe until after the death of the wife, with the result that they lost the opportunity which otherwise they would have had of taking proceedings against the wife and the plaintiff as her husband for the recovery of the money that she had wrongfully extracted from the Bank. In so acting the plaintiff was, in my judgment and for the reasons that have been given by Scrutton L.J., committing a breach of the duty that he owed to the Bank.
In these circumstances it would seem to be in accordance with the established principle of estoppels that the plaintiff should not be allowed to allege as against the Bank in this action that the signatures to the cheques are not his: M’Kenzie v. British Linen Co.(1); Ogilvie v. West Australian Mortgage and Agency Corporation. (2) This is in accordance with what the learned Commissioner would himself have decided, had he not come to the conclusion that the Bank had been guilty of negligence in not having themselves detected the forgeries at an earlier date. But, having arrived at that conclusion, he held that the Bank was thereby prevented from relying upon the estoppels, and accordingly gave judgment for the plaintiff. The argument on behalf of the plaintiff that was accepted by the learned Commissioner seems to have been as follows: “The Bank cannot rely upon estoppels by negligence unless that negligence of which they complain was the proximate cause of the loss that they have suffered, whereas in truth and in fact the proximate cause of the Bank’s loss was the negligence of the Bank”. The fallacy that seems to me to lie at the root of this argument is that the loss referred to where that word is used first used I not the loss referred to where the word is used for the second time. The loss that the Bank suffered by reason of the plaintiff’s conduct was the loss of their opportunity of taking proceedings for recovery of the money extracted from them by the plaintiff’s wife. The loss that was due to their own negligence was the loss of the money in the first instance. Had the Bank taken civil proceedings in respect of the wife’s tort, the negligence on their part in cashing the cheques would not have been an answer. Why, then, should they be debarred by that negligence from complaining of the loss of that remedy? The plaintiff’s argument, when analysed, comes to this: “It is true that by my conduct I led you to believe that the signature to the cheques were mine. But had you taken reasonable care, you would have known that the signatures were forgeries, and you would not have acted to your detriment as in fact you did in reliance upon the belief that I induced”. It is, however, well settled that it is no answer to a person who has in fact been misled by an untrue representation to say that he had the means of ascertaining the truth for himself and did not avail himself of those means.
In the present case it is, of course, obvious that if the Bank had not been guilty of the negligence attributed to them by the learned Commissioner, the cheques, or some of them, would never have been cashed at all, and the occasion for the plaintiff’s conduct that is complained of would never have arisen. But the cheques having in fact been cashed, and the Bank’s remedy having in fact arisen, I cannot see why the Bank’s negligence should deprive them of their right to complain of the conduct on the plaintiff’s part which resulted, in fact, in the remedy being lost.
For these reasons the appeal should in my judgment be allowed with costs here and below.