Creighton v. The Halifax Banking Co.

SUiREME COURT OF CANADA. [VOL. XVIII. SAMUEL CREIGHTON (DEFENDANT).. .APPLrANT; *Oct.

THE HALIFAX BANKING COM- RESPONDNTS. PANY (PLAINTIFFS)...................

APPEAL FROM THE SUPREllE COURT OF NOVA SCOTIA. SIR W. J. RITCHIE '. J.-We do not think it necessary to hear further argument in this case. I think the evidence and findings of the jury afford sufficient material to establish that Esson signed the note in question in the name of the firm of Creighton & Co. without the authority of his co-partners, that he endorsed it in the name of Esson & Co-whether with or without authority is not material-and that he took it to the bank and had it discounted, and I am of opinion that the bank had a fair intimation that Esson was using the name of the firm, of which Creighton was a partner, for his own private purposes, which was an illegal transaction; therefore, I think it should have put the bank on inquiry as to Esson's authority, and the facts shown threw on the plaintiffs the burthen of showing that the transaction was a right and proper one. Had they made the inquiries they should have made they would have seen that Esson was using the name of Creighton & Co. without authority, and that they should not have discounted the note.

Not havmade such inquiries the loss should not fall upon Creighton, the partner whose name was unlawfully used, but upon the bank.

The judgment of the learned Chief Justice at the trial rightly stated the law, and I cannot think there could be a doubt in anybody's mind as to its correctness. The appeal should be allowed with costs. J.-There were two firms with two partners common to each, the firm of Creighton & Company composed of Creighton (the present appellant) Esson and Anderson; this firm carried on business as lumber merchants at Liscomb; then there was the firm of Esson & Company, composed of Esson & Anderson, which carried on business as general merchants at Halifax. The circumstance that there were in the present case two partners instead of one common to each firm constitutes the only difference between this case and those of Leverson v. Lane and Re Riches in both of which the facts wore that the name of the firm was, in fraud of the partnership, attached by one partner to securities which he applied for his own individual benefit. The circumstances that there are here two partners who are members of each firm is, of course, wholly immaterial..

Esson made the note sued upon payable to Esson & Co. and signed to it the name of Creighton & Co. and endorsed it in the name of Esson & Co. The respondents then discounted it and placed the proceeds to the credit of Esson & Co. who kept an account with them

The law applicable to such a state of facts was laid down with great clearness by Lord Westbury L. C. in re Riches to be as follows

Such a transaction, Lord Justice Lindley says (Lindley on Partnership) (2).

See also Smith's Mercantile law (3); Leverson v. Lane ; re Riches (1).

The person who accepts the paper having, from the very nature of the transaction, primd facie notice that the partner in applying the security of the firm for his own private ends is acting beyond the scope of his authority as a partner, and is thus committing a fraud upon the other partners, is put upon inquiry, by which it is meant that he takes the paper at his peril and cannot afterwards protect himself by saying that he had not notice of the particulars of the fraud upon the firm. In other words, the party taking the bill or note has cast upon him the onus of establishing that no fraud was perpetrated by proving that the transaction was with the assent of the other partners or in some way for the benefit of the firm.

In the case of The Bank of Commerce v. Moul the bank when it took the note had no notice that the partner from whom it received it was using it for his own purposes, for it was found as a fact in that case that the manager of the bank did not know that Mc- Carthy, the fraudulent partner, was a member of the firm.

It is beyond doubt in the present case that the bank through its officers, Mr. Pitcaithly and Mr. McIntyre, had notice that the signature of Creighton & Co. to this note was signed by Esson.

They had had dealings with Esson and well knew his handwriting. ~ ~The case on that point of evidence is as strong as it possibly could be.

The bank must, therefore, when the proceeds of the discount were applied by placing them to the credit of Esson & Co., have been aware that the paper and credit -of Creighton & Co. were being used by Esson, one of the partners in that firm, for the benefit of Esson & Co., a firm in which, as they knew, Creighton had no concern or interest. The case is thus brought directly within the principles laid down by Lord Westbury and by the Court of Common Pleas in the authorities already quoted; it was, therefore, for the bauk, if they could, to shew that Creighton, the appellant, had assented to such a use of the name of his firm, or that the latter firm had reaped the benefit of the transaction, but this they have wholly failed to do.

The judgment of Mr. Justice Townshend in the court in bane and that of the Chief Justice of Nova Scotia at the trial were, consequently, in all respects right both as regards the conclusion arrived at and the reasons assigned.

Mr. Russell has argued the appeal with great ingenuity but he has, I think, failed to establish that the case is not covered by the English authorities befare referred to which, as appears from the work of Lord Justice Lindley as well from the late Edition Smith's Mercantile Law, are now universally recognised as having established a settled principle of commercial law.

Chief Justice at the trial restored with costs to the CREITON appellant in all the courts.

and JJ. Concurred.

J.-I also concur.

I read the case with some care before the argument and do not think there is any reason for delaying the judgment.

Appeal allowed with costs.