1 31 X. fi 3*0.
Delivered by LORD ATKIN.—Adaikappa Chettiar v. Thos. Cook & Son. 445
to Peiris’ account of a credit entry “ Cash ex selves, 17,000 ”, and made afictitious entry in the Bank’s Till book “ Safe, 17,000,” which served toavoid discovery of what had taken place.
This was obviously but a temporary device and measures had to betaken to give a better appearance of regularity to the transaction. OnDecember 29, 1925, Peiris entered into the first of a series of transactionswith the appellant which culminated in January, 1928, in the negotiationof the documents in suit. Peiris asked the appellant to cash a cheque ofDon Philip & Co. drawn on the bank; the appellant refused, but on beingtold on a later occasion that the bank would agree to pay the cheque ona future date, he agreed. Accordingly Peiris gave the appellant a chequedated December 29, 1925, for Rs. 20,000, drawn in the name of DonPhilip & Co. on the bank, endorsed “ Good for payment on January 12,1926, per pro Thos. Cook & Son (Bankers), Ltd., John Davis”. In returnthe appellant gave to Peiris a cheque of even date in favour of Don Philip& Co., which was cleared through the Bank. Davis gave to the appellantat the same time a memorandum, “ Received for credit of Don Philip &Co. cheque on National Bank of India for Rs. 20,000, ” with the'samesignature as to the indorsement. Rs. 3,000 was placed to the credit ofDon Philip; the balance was used to put the Bank books in. order bycancelling the fictitious entry of “ 17,000 in safe.” On January 12 theDon Philip account was not in sufficient credit to meet the guaranteedcheque. Another fictitious entry had to be made, until January 21, 1926,.when another similar cheque transaction was entered into for Rs. 37,500,with a bank guarantee for payment on February 4. This was further metby a third cheque transaction on February 4 for Rs. 18,000, payable onMarch 5.
So the transactions went on month by month: sometimes the chequesbeing plainly renewals in whole or in part: sometimes constituting1 freshadvances; in all cases where there was not immediate renewal the accountof Don Philip was kept in credit by a fictitious entry until the necessarycheque arrived of the appellant.
Some of the apparent increase in advances no doubt representedinterest; in other cases the interest charges were paid by separate chequesof Don Philip & Co. Between December 29, 1925, and January 3, 1928,.75 cheques had been exchanged, varying in a?nount from Rs. 5,000 toRs. 75,000. In May, 1927, the appellant changed the system and thence-forth drew his cheques in favour of Thos. Cook & Son, crossing them“ Account payee only ”. This seems to have been the result of a local casein which a person who received cheques drawn in favour of his employersand so crossed was held to be unable to negotiate them so as to make thedrawer liable. The effect, if any, of this change of procedure will beconsidered later. • In September, 1927, Peiris came to the appellant with arequest that he would not present the cheques indorsed by Davis, butwould take in substitution a cheque drawn by Don Philip bearing the duedate, and on payment of such cheque would return the indorsed cheque.The story told by Peiris was that in this manner he would escape paying
446 Delivered by LORD ATKIN.—Adaikappa Chettiar v. Thos. Cook & Son.
commission to the Bank. Davis, on being applied to, confirmed thisremarkable explanation, and the appellant acceded to the request. Wenow come to the final stage of these transactions.
On January 3, 1928; there were outstanding in the appellant’s possessionthree cheques of Don Philip indorsed by the Bank for payment on variousdays: —
December 17, 1927, for Rs. 35,000, payable by the Bank on January
16, 1928.
December 23, 1927, for Rs. 50,000, payable by the Bank on January
7, 1928.
December 23, 1927, for Rs. 50,000, payable by the Bank on January
21, 1928.
But Davis had ceased to enjoy the Bank’s confidence. Some inquiryinto his alleged practice of giving guarantees on behalf of the Bank hadbeen made in October, though nothing had been done. But on December'29, 1927, Mr. Humphreys learned that Davis had written a letter toanother Bank guaranteering the production of certain shipping documents(apparently a completely genuine transaction). He suspended Davis andthere and then revoked his power of attorney, marking it as cancelled.
On January 3 the balance of Don Philip's account was only Rs. 652.The outstanding cheques would have to be met. The appellant waswilling to renew and even to make a fresh advance on receiving the usualBank guarantee. January 3 was a bank holiday. The appellant’smanager, Somasunderam, met Peiris and Davis at Peiris’ warehouse.Somasunderam received four cheques drawn by Don Philip in favour ofthe appellant and dated January 3, 1928, for Rs. 35,000, Rs. 50,000,Rs. 35,000, and Rs. 50,000, each indorsed respectively. “ Payment of thischeque on March 5 (6, 7, and 8)* 1928, guaranteed, per pro Thos. Cook &Son (Bankers), Ltd., John Davis. ” In return Somasunderam gave toDavis or Peiris cheques dated January 3, 1928, for Rs. 35,000, Rs. 50,000,Rs. 50,000, and Rs. 20,000 drawn in favour of Thomas Cook & Son(Bankers), Ltd., or order, crossed.“Not negotiable, payee’s accountonly,” and a fifth cheque drawn as open cheque to Don Philipv& Co. forRs. 15,000, as Peiris said he desired that amount of cash. In respect ofthe cheque for Rs. 20,000 and the open cheque fc^r Rs. 15,000, Davis, atSomasunderam’s request gave a receipt, “ Received to our credit the sumof Rs. 35,000 as per reverse, per pro Thpmas Cook & Son (Bankers), Ltd.,John Davis ”, and on the reverse—
“Rs. 1{U)00 cash
20jl^0 cheque balance
Rs. 35,000. ”
On January^ 4, 1928, Peiris or someone bn ^his. behalf paid into DonPhilip’s account witlT' the Bank the four chequesmaking Rs. 155,000.No one seems to have thought it unusual that he shouldN be paying incheques drawn to the order of the Bank. The cheques were stamped on
Delivered by LORD ATKIN.—Adaikappa Chettiar v. Thos. Cook & Son. 447
the face with Thomas Cook’s stamp, apparently at the Clearing House orfor Clearing House purposes, and were credited to Don Philip's accountand served to meet the outstanding cheques falling due in January, forwhich, as before, the unendorsed cheques of Don Philip were substituted.In March the cheques for Rs. 155,000 were presented, but were returned“Account closed”. On January 27, 1928, the Bank had closed DonPhilip’s account and had paid over the then credit balance of Rs. 825.
In proceeding to discuss the liability of the Bank, it has to beremembered that the Courts have negatived any lack of good faith on thepart of the appellants, and that Davis was not cross-examined to suggestthat he derived any personal advantage from his proceedings. A specificissue as to whether the plaintiff or his agents had knowledge of a conspiracyby Davis and Peiris to defraud the Bank was negatived by the trial Judge.
The case against the Bank was made under two heads: —
The Bank were liable on the contract contained in the cheques
because Davis had actual authority to make such a contract,
If no such contract was in fact made, then the Bank were liable in
the amount of the cheques for money had and received either asmoney paid for no consideration, or on a consideration whichhad wholly failed, or for money paid under a mistake of fact.
The first question to determine is what was the contract made betweenthe parties. The plaintiff alleged that he lent the money to the Bank.In support of this view he relied on the fact that his later cheques, includingthose that he gave on the transaction in question, were drawn in favourof the Bank,, marked “ Not negotiable ” and “Payee’s account only”.Their Lordships, however, are clearly of opinion that the moneythroughout was lent to Peiris. He drew the cheque in repayment, andhe paid the interest. The plain business was that money was lent toPeiris and purported to be guaranteed by the Bank. Had then Davisactual authority to guarantee payriient of these loans by Peiris? . Thisdepends primarily upon the construction of the power of attorney, thoughit is also possible that beyond the express powers of the power of attorneythere might be actual implied authority necessarily arising from theservice of Davis as acting manager of the Bank. The plaintiff faintlysuggested such an authority, but mainly relied on the express words ofthe power of attorney. Oddly enough, both parties contended that thewords on the cheques were an acceptance of the cheque. The plaintiffssought to read the word “ accept ” into clause 4 of the power of attorney,suggesting that it had been omitted by a copyist's error in copying theclause from the power of attorney given to Mr. Humphreys on August 1,1924. Though this construction found favour with the District Judge, itappears to their Lordships quite inadmissible. There is no principle ofconstruction which permits a document contrary to its actual wording tobe read as though it followed a proposed precedent unless between theparties it has been rectified or at least is such as would by the Court berectified. In the present case, however, there seems to be little doubtthat the omission was intentional. The defendants, relying upon theomission, seek to make the promise an acceptance in order to place it .
448 Delivered by LORD ATKIN.—Adaikappa Chettiar v. Thos. Cook & Son.
outside the authority given by the document. They say that the writingwas in the terms of section 17 (1) of the Bills of Exchange Act, the signifi-cation by the drawee of his assent to the order of the drawer, and thatas by section 19 an acceptance may be qualified as to time, all therequirements of a valid acceptance are present. So far as is relevant tothis point the statutory provisions in force in Ceylon at the material dateswere equivalent to those of the Bills of Exchange Act, 1882. No doubt asbetween the immediate parties to a bill an acceptance may express onlya contract of guarantee, which in reality, as has been said, this was. Nodoubt also a cheque may be accepted, however unusual such a transactionis. Anything less like the ordinary business conception of an acceptancein form and intention than this contract it would perhaps be difficult tofind. Their Lordships find it unnecessary to decide whether this wasan acceptance orwnot, for whatever it be called it appears to them not tobe within any of the express powers given by the power of attorney. Itwas said to be an exercise of the power to “ endorse ”. In their Lordships’view, this power of attorney should not be construed as giving Davis thepower to sign otherwise than as drawer or acceptor or holder so as tocause the Bank to “ incur ” the liabilities of an indorser ” under section 5&of the Bills of Exchange Act. It never was intended that the Bankservant should “ back ” bills on behalf of the Bank. Equally un-warranted is the suggestion that the' power to “ pay ” cheques, &c.,involves the power to promise to pay. The general words in clauses 9 and10 must be read with the special powers given in the earlier clauses, andcannot be construed so as to enlarge the restricted powers there mentioned.It follows that Davis had no actual authority given him by the power ofattorney to guarantee payment of these loans by Peiris. Their Lordshipsare also quite satisfied that his position in the Bank was not such as tomake it necessary to imply the power to enter into these transactions onthe part of the Bank. They appear on the evidence and according toordinary banking usuage to be quite outside a manager’s general authority.This last consideration would dispose of any question of ostensibleauthority; but as the plaintiff twice examined the power of attorney andplainly relied only on the evidence of actual authority, any reliance onostensible authority was properly negatived in the Courts below, and wasnot pressed before their Lordships.
It remains, therefore, to consider the question of the plaintiff’s rightsif any, on the footing that no contract was in fact made between him andthe Bank. If, as the plaintiff contended, the apparent contract was thatthe money had been lent to th^ Bank, or that the Bank otherwise was tohave the disposition of the money, there could be no doubt as to theplaintiff’s right. He would have performed his part of the contract,relying upon a supposed effective promise of the Bank to repay. Onproof that such promise was not made he could recover the money ashaving been paid without consideration. . Whether he could recover itas money paid under a mistake of fact is not so clear. It is necessaryto establish this cause of action that the mistake should be as to some.fact causing a liability to pay. Cash handed over under a voluntary
Delivered by LORD ATKIN.—Adaikappa Chettiar v. Thos. Cook & Sorts. 449
contract hardly comes within that description. It was ingeniouslycontended by Counsel for the plaintiff that while plaintiff’s chequemay not have been handed over under any mistaken belief that hewas bound to part with it, payment of his cheque was made under themistaken belief that he was bound to honour it under a binding contractwith the. Bank. It seems unnecessary to discuss this refinement, for ifthe Bank received the money at their own disposal under a mistake bythe plaintiff as to the supposed agent’s authority, they would have toreturn it. But, in fact, the Bank received the money on the terms that itshould be placed to Peiris’ credit. The transaction was one by which thesupposed contract as between the three parties required that the moneyrepresented by the cheque drawn in favour of the Bank should be madeavailable to Peiris in his account kept with the Bank. In no other wayin the circumstances could Peiris fairly become indebted to the plaintiffso as to be liable on the cheque which Peiris drew and the Bank guaranteedor become liable to pay interest, as in fact he did. In no other way couldthe cheques of the plaintiff serve to effect a renewal (as undoubtedly wasintended) of the outstanding cheques for Rs. 135,000 replaced in accordancewith the practice of the parties by the cheques of Peiris alone. The Bankdealt with the plaintiff’s cheques precisely as they were intended to dealwith them under the supposed contract. They collected them for Peiris’account, placed the entire proceeds to Peiris’ credit, and out of the proceedsthe outstanding cheques in favour of the plaintiff were met. The Bankare in the position of a mandatory who has fully performed his mandate,before any mistake has been discovered. In these circumstances theBank are not liable to repay money to the plaintiff which they havedisposed of according to the plaintiff’s wishes in accordance with thesupposed contract.
As a final bit of salvage, Counsel for the plaintiff contended that at anyrate as the result of the series of transactions the Bank received, from theplaintiff’s money, payment of the original Rs. 17,000 which in December,1925, they had paid to Ramachandra. The answer to this is that thatadvance had long before been repaid to the Bank by Peiris by thenumerous credit payments which he had made since that date in accordancewith the ordinary principles applicable to appropriation of payments.
The simple result is that the plaintiff is found to have advanced moneyto Peiris on an invalid security, and that he and not the Bank must bearthe loss. Their Lordships will humbly advise His Majesty that this appealshould be dismissed. The appellant must pay the costs.
Appeal dismissed.